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

July 11, 1975 MANUAL OF REGULATIONS ON THE SUPERVISION OF FINANCIAL INTERMEDIARIES IMPORTANT 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. 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 July 11, 1975 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. 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. 211 Capitalization 211.1 Minimum paid-up capital requirement 211.2 Net worth to risk assets ratio 211.21 Definition/clarification of terms and phrases 211.22 Exemption from compliance with prescribed ratio 211.23 Sanctions in case of capital deficiency 211.24 Required report/records SEC. 212 Stock and Stockholders 212.1 Acquisition of banks' shares of stock 212.11 Ceilings on voting equity 212.12 Transfers of shares 212.13 Determination of relationship within the third degree of consanguinity or affinity, and a "family group" subject to the twenty per cent ceiling 212.2 Convertibility of preferred stock to common stock 212.3 Equity investments by foreigners in domestic banking institutions SEC. 213 Dividends 213.1 Declaration of dividends 213.11 Definition of terms 213.12 Accrued interest 213.13 Amount available as dividends 213.14 Reporting and verification 213.15 Recording of dividends 213.16 Sanctions 213.17 Limitation on declaration of dividends by stock savings and loan associations SEC. 214 Establishment/Transfer/Lease of Banking Offices 214.1 Establishment of banking offices (other than money shops and savings agencies) 214.11 Basic requirement: prior Monetary Board approval 214.12 Minimum requirements 214.13 Other requirements/factors to be considered 214.14 Conditions precluding acceptance of application 214.15 Conditions precluding processing of application 214.16 Priority in processing 214.17 Date of opening 214.2 Establishment and operation of money shops 214.21 Guidelines on establishment 214.22 Operational guidelines 214.3 Establishment and operation of savings agencies 214.31 Guidelines on establishment 214.32 Operational guidelines 214.33 Other requirements 214.4 Transfer/relocation of banking premises 214.5 Documentary requirements for the establishment/relocation of banking offices 214.51 Establishment of additional banking offices by savings and mortgage banks 214.52 Establishment of additional banking offices by stock savings and loan associations 214.53 Transfer or relocation of banking offices (except head offices) by thrift banks 214.9 Miscellaneous provisions 214.91 On branch offices and agencies of stock savings and loan associations 214.92 On lease/transfer of office premises by stock savings and loan association 214.93 Lease expenses prior to authorization of branch 214.94 Reportorial requirements from certain extension offices SEC. 215 Articles of Incorporation and By-Laws 215.1 Place of board of directors' meetings 215.2 Voting requirements with respect to certain corporate transactions SEC. 219 Sundry Provisions 219.1 On stock savings and loan associations 219.11 Definition of stock savings and loan association 219.12 Form of organization; citizenship requirements 219.13 Prior approval by the Monetary Board of Articles of Incorporation and By-Laws or amendments thereto 219.14 Application for approval 219.15 Grounds for disapproval of application 219.16 Certificate of authority to operate; revocation or suspension thereof 219.17 Filing fees 219.18 Business name Appendix A Guidelines on Increased Capitalization of Savings and Mortgage Banks of Stock Savings and Loan Associations Missing pages (XIII-XIV) Appendix D Chart of Accounts for Reporting Purposes for Savings and Mortgage Banks and Development Banks Appendix E Category B Reports of Thrift Banks Appendix F Format of Resolution for Signatories of A-1 Report of Thrift Banks Appendix G Format of Resolution for Signatories of A-2 Reports of Thrift Banks Appendix H Format of Resolution for Signatories of Category B Reports of Thrift Banks Appendix I Information Required Under CB Memorandum to All Banks and Non-Bank Financial Intermediaries dated October 28, 1975 Appendix J Documents/Information Required Under Circular Letter dated October 18, 1976 Appendix K Minimum Internal Control Standards for Banks Appendix L Rules and Regulations on Bank Protection Attachment 1 Format Certification on Compliance with Rules and Regulations on Bank Protection Appendix M Procedures on Collection of Fines from Banks PART 3 LENDING OPERATIONS SEC. 231 Loans in General 231.1 Loan limits 231.11 Loan limits to a single borrower 231.12 Loan limits to allied undertakings 231.13 Definition of terms 231.14 Determination of total loans to a single borrower 231.2 Loan proceeds 231.21 Derivative/compensating deposits 231.22 Prohibition against requiring purchase of lending bank's preferred stock out of loan proceeds 231.23 Utilization of loan proceeds 231.3 Interest and other charges 231.31 Interest 231.32 Miscellaneous charges 231.33 Accrual of interest earned on loans 231.4 Past due accounts 231.41 Definition 231.42 Accounts considered past due 231.43 Demand loans 231.44 Accruals of interest income 231.45 Renewals/extensions 231.46 Reporting requirements 231.47 Restructuring or refinancing of loans 231.48 Writing off of loans as bad debts 231.5 Truth in Lending Act disclosure requirements 231.51 Requirement of disclosure 231.52 Definitions of terms 231.53 Scope of requirements 231.55 Information sheets and other reports to be submitted to the Central Bank 231.56 Posters 231.57 Offices authorized to enforce rules and regulations 231.58 Penal provision SEC. 232 Unsecured Loans 232.1 Loans against personal security 232.11 General guidelines 232.12 Proof of financial capacity of borrower 232.13 Amounts and terms of credit accommodations; renewals 232.14 Signatories 232.15 Collateral requirement 232.16 Sanctions 232.2 Clean loans for personal and household finance 232.21 Purpose 232.22 Borrowers' and co-makers' signatures 232.23 Maturity 232.24 Maximum amount 232.25 Renewal or extension 232.26 Records 232.27 Sanctions SEC. 233 Secured Loans 233.1 Loans secured by government securities 233.2 Insurance on real estate improvements 233.3 Real estate mortgage loans 233.4 Collaterals acceptable to stock savings and loan associations 233.5 Increased loan values of collaterals in special cases 233.6 Secured loans for personal and household finance 233.61 Purpose 233.62 Maturity 233.63 Collateral requirement 233.64 Aggregate ceiling 233.65 Renewal or extension 233.66 Records 233.67 Sanctions SEC. 234 Loans/Credit Accommodations to Directors, Officers and Stockholders 234.1 Definition of terms 234.2 Transactions not covered 234.3 Direct/indirect borrowings 234.4 Individual/aggregate ceiling 234.5 Transitory period for compliance 234.6 Reporting requirements 234.7 Sanctions in case of refusal to comply with or willful violation of regulations 234.8 Financial assistance to officers and employees under the fringe benefit program 234.81 Types/purposes of financial assistance 234.82 Mechanics of financing plan 234.83 Forms of financial assistance 234.84 Preconditions/limitations on fringe benefit programs 234.85 Other requirements 234.86 Financing plans not covered by fringe benefits programs 234.87 Sanctions SEC. 235 Specific Types/Classes of Loans 235.1 Agrarian reform credit and agricultural credit 235.11 Definition of terms 235.12 Required allocation for agrarian reform credit and agricultural credit in general 235.13 Qualified borrowers under agrarian reform credit/agricultural credit in general 235.14 Securities for loans 235.15 Syndicated type of agrarian reform credit/agricultural credit 235.16 Interest and other charges 235.17 Submission of reports 235.18 Sanctions 235.19 Computation of loanable funds 235.2 IGLF loans 235.3 Loans to rural banks 235.4 Loans for economic development purposes 235.41 Nature of loans 235.42 Definition of "loanable funds" 235.5 Special loans 235.51 Third CB-IBRD fund 235.52 Agricultural guarantee fund 235.53 Special time deposits 235.7 Crop loans 235.8 Supervised credit 235.81 Masagana 99 and Masaganang Maisan loans 235.9 Peso borrowings by foreign firms SEC. 236 Other Specific Types/Classes of Loans 236.1 Grains Quedan Financing Program 236.11 Objectives of the program 236.12 Legal bases 236.13 Terminology 236.14 Statement of policies 236.15 Responsibilities of participating agencies 236.2 Livestock Financing and Loans for Agricultural Inputs 236.21 Livestock Financing 236.22 Loans for Agricultural Inputs 236.3 Cooperative Finance System 236.31 Purpose 236.32 Definition of terms 236.33 General credit policies 236.34 Types of financing 236.35 Authorized lenders 236.36 Eligible borrowers 236.37 Other credit policies 236.4 Lending program under the Cottage Industry Fund 236.41 Definition of terms 236.42 Participating financing institutions 236.43 Loans extended by participating financing institutions to borrowers 236.44 Special Time Deposit (STD) 236.45 Rediscounting 236.5 Interbank loan transactions 236.6 Special Cotton Financing Program 236.61 Cotton Supervised Credit Financing Program 236.62 Medium term financing under the Special Cotton Financing Program SEC. 237 Discounting of Receivables 237.1 Regulations on discounting of receivables 237.2 Discounting of notes and other credit instruments by stock savings and loan association SEC. 239 Sundry Provisions 239.1 Investment-deposit ratio 239.11 Statement of policy 239.12 Methods of compliance 239.13 Government securities as eligible investments 239.14 Clarifications 239.15 Reporting requirements 239.16 Sanctions for non-compliance 239.17 Grace period 239.2 Assets acquired in settlement of loans 239.3 Credit policies of government-owned corporations 239.4 Miscellaneous provisions on the credit operations of savings and loan associations 239.41 Power of association to prescribe rules on credit operations 239.42 Maximum loan maturity 239.43 Basic requirements in granting loans 239.44 Extensions/renewals of loans 239.45 Limitations on lending authority Appendix A Credit Priority Classification Appendix B Procedural Requirements: Direct/Indirect Borrowings of Bank Directors, Officers or Stockholders Appendix C Prescribed Forms for Transfer Tickets Appendix D Format-Disclosure Statement on Loan/Credit Transaction Appendix E Format-Abstract of "Truth in Lending Act" Appendix F Rules and Regulations Governing the Implementation of the Industrial Guarantee and Loan Fund (IGLF) Accreditation System Appendix G Financing of Small Industries Under the IGLF Program Attachment 1 List of Potential Small Industries for IGLF Financing Appendix H Regional Groupings of Provinces and Cities for Purposes of the Required Investment-Deposit Ratio of Thrift Banks in a Region Appendix J Guidelines Governing the Agricultural Supervised Credit Operations of Thrift Banks for Masagana 99 and Masaganang Maisan Loans 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 Rules and Regulations on the Guarantee Coverage by the Agricultural Guarantee Fund on Medium and Long-Term Loans Granted under the 4th CB: IBRD Rural Credit Project Appendix O Rules and Regulations on the Guarantee Coverage by the Agricultural Guarantee Fund (AGF) of Loans Under Supervised Credit for Vegetable Production Appendix P Rules and Regulations Governing the Guarantee Coverage of Grains Quedan Pursuant to Letter of Instruction No. 704 Appendix Q Sample Information Sheet for Borrowers Under the Cottage Industry Fund Appendix R Illustrative Examples/Formulas for the Computation of Proceeds/Discount Rates of Loans Appendix S Rules and Regulations on the Guarantee Coverage of the Agricultural Guarantee Fund (AGF) of Loans Under Supervised Credit for Cotton Production PART 4 INVESTMENT OPERATIONS SEC. 241 Investment in Equities of Allied Undertakings 241.1 Approved allied undertakings 241.2 Banks disqualified from investing in allied undertakings 241.3 Ceilings on equity investments in allied undertakings 241.4 Interlocking directors and/or officers in banks and allied undertakings SEC. 242 Investment in Other Enterprises 242.1 Investment in high-grade evidences of indebtedness 242.2 Investment in subsidiaries/affiliates 242.21 Submission of periodic reports 242.3 Authorized investments of stock savings and loan associations 242.4 Deposits made by stock savings and loan associations SEC. 243 Other Operations 243.1 Security dealership Appendix A Rules and Regulations Governing the Buying and Selling of Government Securities in the Open Market PART 5 DEPOSIT OPERATIONS SEC. 251 Savings Deposits 251.1 Definition 251.2 Interest on savings deposits 251.3 Required reserves against savings deposits 251.4 Minimum size of savings deposits 251.5 Receiving and paying deposits outside bank premises 251.51 Solicitation of deposits under the TIPID Movement 251.52 Solicitation of deposits under the Barangay Savings Movement 251.6 Deposits to/withdrawals from savings accounts 251.61 Special savings deposits of farmer-borrowers 251.7 Service or maintenance fees on dormant or inactive savings account 251.8 "NOW" accounts 251.81 Definition of "NOW" accounts 251.82 Procedural requirements 251.83 Minimum qualification requirements 251.84 Limitations and restrictions 251.85 Minimum operation and control requirements 251.86 Other requirements 251.87 Penal provisions SEC. 252 Time Deposits 252.1 Definition 252.2 Interest on time deposits 252.3 Required reserves against time deposits 252.4 Term of time deposits 252.5 Minimum size of time deposit 252.6 Special time deposits from the Agrarian Reform Fund Commission 252.7 Withdrawal of time deposit SEC. 253 Demand Deposits 253.1 Interest on demand deposits 253.2 Required reserves against demand deposits 253.3 Grant of authority to thrift banks to accept or create demand deposits 253.31 Procedural requirements 253.32 Minimum qualification requirements 253.33 Limitations and restrictions 253.34 Procedures and internal control system 253.35 Miscellaneous requirements 253.36 Penal clause 253.4 Issuance of checks without sufficient funds or credit SEC. 254 Government Deposits 254.1 General prohibition 254.2 Banks which may be authorized to accept government deposits/funds 254.3 Liquidity floor 254.4 Exempt transactions 254.5 Application for authority to accept 254.6 Sanctions SEC. 255 Reserve Requirements against Deposit Liabilities 255.1 Accounts subject to reserve requirements; exceptions 255.2 Composition of reserves 255.21 Deposit with Central Bank as reserves 255.22 Government securities authorized as reserves 255.3 Computation of reserve position 255.4 Reserve deficiencies 255.41 Penalty in case of reserve deficiency; offset privilege 255.42 Chronic reserve deficiency; penalties 255.43 Unpaid fines 255.44 Reporting requirements 255.45 Call by depositors for repayment of their deposits resulting in reduction of reserves below required minimum (Section 38 of Republic Act No. 337, as amended) SEC. 256 Schemes to Attract Deposits 256.1 Raffles and lotteries 256.2 Gifts or giveaways 256.3 Other promotional schemes 256.4 Sanctions SEC. 257 Interest on Bank Deposits 257.1 Maximum interest rate on bank deposits 257.11 Demand deposits 257.12 Savings deposits 257.13 Time deposits 257.2 Number of days comprising a year in the computation of interest 257.3 Payment of interest in kind 257.4 Disclosure of effective rates of interest SEC. 259 Sundry Provisions on Deposit Operations 259.1 Signature card 259.2 Employees' provident fund contributions 259.4 Unclaimed balances 259.5 Certification on deposit 259.6 Basic provisions on opening and operation of deposit accounts 259.61 Who may open deposit accounts 259.62 Identification of depositors 259.63 Number of deposit accounts 259.64 Passbook and certificate of time deposit 259.65 Deposit in checks and other cash items 259.66 Deposit insurance 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 Governing Solicitation of Deposits under the Barangay Savings Movement Appendix D SEC Prescribed Format for Certification on Deposit Appendix E Clarification on Computation of Reserves Against Deposit Liabilities Appendix F Proforma Order of Withdrawal for "NOW" Accounts PART 6 BORROWING OPERATIONS SEC. 261 Borrowings from the Government 261.1 By private development banks SEC. 262 Loans and Advances/Rediscounts from the Central Bank in General 262.1 Basic terms and conditions 262.11 Ceilings 262.12 Eligibility of papers 262.13 Loan values 262.14 Rediscount/interest rates and other charges 262.15 Maturities 262.2 Other terms and conditions 262.21 Repayments 262.22 Additional loan/advance 262.23 Default and other violations by the borrowing banks 262.24 Liquidated damages 262.3 Recording and reporting of discounting and/or rediscounting transactions SEC. 263 Specific Rediscounting/Loan Transactions 263.1 Rediscounting of papers pertaining to Agrarian Reform Credit relative to Presidential Decree No. 717 263.11 Eligibility of papers 263.12 Loan values 263.13 Rediscount/interest rates 263.14 Maturities 263.15 Credit limit 263.16 Repayments 263.2 Rediscounting under the Masagana 99 and Masaganang Maisan Programs 263.3 Central Bank loans to long-term lending institutions SEC. 264 Additional Qualifications for Availment of Central Bank Credit Facilities SEC. 269 Sundry Provisions 269.1 Authority of stock savings and loan associations to borrow from banks and other lending institutions 269.2 Registration requirements of commercial papers; sanctions 269.3 Issuance of mortgage and mortgage certificates Appendix A Documentary Requirements in Support of Application for Loan, Advance or Rediscount with the Central Bank Appendix B SEC Rules on Registration of Commercial Papers Appendix C Maximum Maturity of Loans from the Central Bank to Institutional Borrowers Appendix D SEC Rules on Registration of Long-Term Commercial Papers and Bonds Appendix E Rediscounting Privileges under the Supervised Credit Program PART 7 TRUST OPERATIONS SEC. 271 Pre-requisite for the Exercise of Trust Functions 271.1 Deposit of securities for the faithful performance of trust duties SEC. 272 Trust Accounts 272.1 Trust accounts treated as ordinary deposits SEC. 273 Trust Agreements SEC. 274 Trust Transactions 274.1 Prohibited trust transactions; exceptions SEC. 279 Sundry Provisions 279.1 Fund borrowings from trust departments Appendix A Procedural Requirements Regarding Deposit of Securities for the Faithful Performance of Trust Duties PART 8 (RESERVED) PART 9 MISCELLANEOUS PROVISIONS SEC. 291 Other Operations 291.1 Sale of government securities 291.2 Consignee of PNB bank money orders 291.3 Collection of internal revenue taxes 291.4 Clearing operations 291.5 Private development banks as collection agencies of the Development Bank of the Philippines (DBP) 291.6 Depository relationship arrangement SEC. 292 Bank Advertisements SEC. 293 Assessment Fees on Banks SEC. 294 Bank Premises and Other Fixed Assets 294.1 Expansion of bank premises 294.2 Appreciation or increase in book value 294.3 Ceiling on total investments 294.4 Sub-lease of bank premises SEC. 298 Other Miscellaneous Provisions 298.1 Cash dispensers 298.2 Armored cars 298.3 Reproduction and use of facsimiles of government securities 298.4 Premyo Savings Bond Agency 298.41 Procedure for payment of cash prize claims for service agency holders of winning bonds 298.5 Loss of confirmation receipts 298.6 Restrictions on stock savings and loan associations 298.7 Reserve for losses 298.8 Surplus reserve 298.9 Dissolution of association SEC. 299 Sanctions in General Appendix A Gist of Agreement Between the Philippine National Bank and Stock Savings and Loan Associations as Consignee of PNB Bank Money Orders Appendix B Procedural Guidelines for the Reproduction and Use of Facsimiles of Government Securities Appendix C Tax Collection Procedures for National Internal Revenue Taxes Attachment 1 List of National Internal Revenue Taxes Payable Through Authorized Agent Banks Appendix D Clearing Regulations Attachment 1 Designated Clearing Areas Attachment 2 Clearing of Treasury Warrants Attachment 3 Inter-Regional Clearing in Visayas and Mindanao Appendix E Sample Format of Notice of Loss of Confirmation Receipts Index Guide to Abbreviations PART 1 Organization and Operations in General SECTION 211. Capitalization . SUBSECTION 211.1 Minimum paid-up capital requirement . The required. minimum paid-up capital of savings and mortgage banks, private development banks and stock savings and loan associations are as follows: For existing savings and mortgage banks with head offices located: Within the Greater Manila Area and fringes thereof P10 million Within other chartered cities. 5 million Outside the Greater Manila Area and fringes thereof and chartered cities 2 million [MB Res. 2078 11-9-73, as amended by CL 2-6-74] For private development banks located: Within the Greater Manila Area and fringes and first class A cities P 4 million Within first class B and C, second and third class cities 3 million Fourth and fifth class cities and in other places 2 million [CL 1-22-74; CL 10-22-74, as amended by CL 4-18-78] For stock savings and loan associations located: Within Greater Manila Area and fringes and First class A chartered cities P 4 million Within first class B and C chartered second and third class cities 3 million Other places 2 million [Memorandum to All SSLAs 5-28-79, as amended by Circular 691 8-13-79] For purposes of the foregoing classifications of private development banks and stock savings and loan associations, Sections 1 and 3 of Presidential Decree No. 465 shall apply. (See 1. Appendix I for excerpts.) [CL 4-18-78 and Memorandum to All SSLAs 5-28-79, as amended by Circular 691 8-13-79] The deadline for the submission of programs for capital build-up for savings and mortgage banks and private development banks is April 30, 1974 and the deadline for compliance with the increased capitalization program is October 31, 1976 for savings and mortgage banks and October 31, 1977 for private development banks. [CL 1-22-74, as amended by CL 10-22-74; CL 2-6-74 and CL 2-17-77] [The Guidelines on Increased Capitalization of Savings Banks, Private Development Banks and Savings and Loan Associations are embodied in 1. Appendices A, B, and C.) SUBSECTION 211.2 Net worth to risk assets ratio a. The combined capital accounts of each savings bank and development bank (including DBP) 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: 1) Cash on hand; 2) Amount due from the Central Bank; 3) Evidences of indebtedness of the Republic of the Philippines and of the Central Bank, and any other evidences of indebtedness or obligations the servicing and repayment of which are fully guaranteed by the Republic of the Philippines: 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; 4) Loans to the extent covered by holdout on, or assignment of, deposits maintained in the lending bank and held in the Philippines; 5) Bank premises, depreciated; 6) Furniture, fixtures and equipment, depreciated; 7) 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; [Circular 355 1-8-73, as amended by Circular 603 4-18-78] 8) Portions of special time deposit loans covered by Industrial Guarantee and Loan Fund (IGLF) guarantee; and [CL 1-6-75] 9) Real estate mortgage loans insured by the Home Financing Commission are considered as non-risk assets to the extent of the amount of the insurance. [MB Res. 506 3-8-74] b. The combined capital accounts of each stock savings and loan association shall not be less than an amount equal to ten per cent (10%) of its risk assets which is defined as its total assets minus the following assets: 1) Cash on hand; 2) Amount due from the Central Bank; 3) Evidences of indebtedness of the Republic of the Philippines and of the Central Bank, and any other evidences of indebtedness or obligations the servicing and repayment of which are fully guaranteed by the Republic of the Philippines; 4) Loans to the extent covered by holdout on, or assignment of, deposits maintained in the lending association and held in the Philippines; 5) Office premises, depreciated; 6) Furniture, fixtures and equipment, depreciated; 7) Balances maintained with the Philippine National Bank or any of its branches arising from checks drawn on banks located in places not serviced by Central Bank clearing offices; 8) Special time deposit loans to the extent covered by Industrial Guarantee and Loan Fund (IGLF) guarantee; and 9) Real estate mortgage loans insured by the Home Financing Commission to the extent of the amount of the insurance. [Circular 691 8-13-79] SUBSECTION 211.21 Definition/clarification of terms and phrases . For purposes of Subsec. 211.2 (a), 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; and 3) 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. 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 hold-out on, 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. 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. g. 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. SUBSECTION 211.22 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 211.23 Sanctions in case of capital deficiency . The Monetary Board, upon recommendation of the appropriate supervising and examining department 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 30 of Republic Act. No. 337, as amended. [Circular 355 1-8-73] d. Central Bank management, upon recommendation of the appropriate supervising and examining department of the Central Bank, is authorized to impose sanctions on any bank if the required periodic Statement of Capital Required and Capital Accounts contain material errors/inaccuracies. [MAB 10-30-72] e. The Monetary Board may limit or prohibit the distribution of net profits and may require that part or all of net profits be used to increase the capital account of a stock savings and loan association until the minimum requirement has been met. It may also restrict or prohibit the making of new investments with the exception of purchases of evidences of indebtedness included under Subsec. 211.2 (b) (3). [Circular 349 10-31-72] 211.24 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, in a prescribed form (CBP 7-16-07) to the Department of Commercial and Savings Banks. cdlex Banks are enjoined to maintain suitable records to facilitate verification of the required capital accounts. [Circular 355 1-8-73] SECTION 212. Stock and Stockholders . SUBSECTION 212.1 Acquisition of banks' shares of stock . 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 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] No officer, director, or employee of any stock savings and loan association shall acquire any certificate or share of stock issued by the association he is connected with by a method other than investing his funds directly with the association, or by gift, bequest, or descent, or purchase in any amount not exceeding three thousand pesos (P3,000.00), at any one time, unless such other mode of acquisition has the prior approval of the Monetary Board, and the Auditor of the Central Bank. [Circular 691 8-13-79] SUBSECTION 212.11 Ceilings on voting equity a. Individual/family group/corporate ceiling Except as provided for in Item (b) of this subsection, the stockholdings in any bank of any of the following shall not exceed twenty per cent (20%) of the voting stock of the bank: 1) Any natural person; or 2) Persons related to each other within the third degree of consanguinity or affinity, herein termed a family group; or 3) Any corporation/s which are wholly owned or a majority of the voting stock of which are owned by a natural person such as in (a) above, or by a family group such as in (b) above, including their wholly or majority-owned subsidiaries; Provided , That, where (c) together with (a) or (b) 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 R.A. 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. Stockholders falling under categories (1) or (2) of Item (a) above who are presently allowed to own up to thirty-five per cent of the voting stock in a newly organized thrift bank shall also be covered by this rule. SUBSECTION 212.12 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 stock 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 mentioned in Item (a) of Subsec. 212.11. 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 Item (b) of Subsec. 212.11. 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. SUBSECTION 212.13 Determination of relationship within the third degree of consanguinity or affinity, and a "family group" subject to the twenty per cent ceiling . Relationship of persons to each other 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. For purposes of this subsection, 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 20% 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 212.2 Convertibility of preferred stock to common stock . Out of the preferred shares of stock which savings banks may henceforth be authorized to issue, at least fifty per cent (50%) of each such issue of preferred stock shall be convertible into common stock at the option of the holders thereof after five years from date of issue: Provided, however , That: a. The bank concerned may, if it so desires, allow the conversion of such preferred stock into common stock even before the lapse of five years from date of issue. b. At the time of the sale of the preferred stock, both classes thereof (one with convertibility feature and the other without convertibility feature) shall be offered to the purchasers, with the purchasers having the option to acquire either or both classes of preferred stock. [MCSB 6-15-67] c. Preferred shares of stock with a cumulative feature issued by savings banks shall automatically be convertible into common shares of stock at the option of the holders thereof whenever the rights as may be acquired by the holders by virtue of such cumulative feature are not satisfied by the bank within a period of three years from date of issue. [MCSB 6-30-67] SUBSECTION 212.4 Equity investments by foreigners in domestic banking institutions . The following guidelines shall be observed in allowing equity investments in domestic banks: a. The prior authority of the Monetary Board shall be obtained by foreign banking institutions, including their wholly or majority-owned subsidiaries and their holding companies having majority holdings in such foreign banking institutions, whenever acquiring shares of domestic banking institutions including foreign-owned shares outstanding and foreign-held as of April 27, 1973 and which continued to be held by the foreign stockholder up to the date of the acquisition by the foreign banking institution. b. If the foreign investor in the equity of a domestic banking institution is (i) an individual, (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 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. e. Only foreign-owned shares directly funded by inward remittance of foreign exchange sold to the local banking system are qualified for registration with the Central Bank (thru the Management of External Debt and Investment Accounts Department) for capital repatriation and remittance of profits/dividends privileges, in accordance with existing Central Bank regulations. [Circular 520 5-25-76 as amended by Circular 526 6-22-76] SECTION 213. Dividends SUBSECTION 213.1 Declaration of 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 cash dividend declaration by banks shall govern. SUBSECTION 213.11 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. 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 213.12 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 dividends declaration. SUBSECTION 213.13 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 213.14 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 the 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 213.15 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 213.16 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 213.17 Limitation on declaration of dividends by stock savings and loan associations a. Whenever a stock savings and loan association has a discrepancy between its general ledger accounts and their respective subsidiary ledgers, the board of directors of the association shall set up from the net profits of the association, if any, a surplus reserve in an amount equivalent to the amount of the discrepancy, and this reserve shall not be available for distribution as dividends or for any other purpose unless and until the discrepancy is accounted for. The board of directors shall also direct the employee responsible for the discrepancy to account for said discrepancy: Provided , That the failure of the employee to do so shall be a ground for his dismissal. Associations shall report such discrepancies to the appropriate supervising and examining department of the Central Bank, within fifteen (15) days from discovery. (See also Subsec. 298.8) [Circular 691 8-13-79] b. Compliance with the approved build-up program (see Subsec. 211.1) shall be a pre-requisite before any stock savings and loan association can declare any cash dividend. [MCSSLA 77-14 1-31-77] SECTION 214. Establishment/Transfer/Lease of Banking Offices . SUBSECTION 214.1 Establishment of banking offices (other than money shops and savings agencies) SUBSECTION 214.11 Basic requirement : prior Monetary Board approval . No thrift bank shall establish, open or operate branches and other banking offices, 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. SUBSECTION 214.12 Minimum requirements a. Citizenship requirements A bank applying for authority to establish additional banking offices must comply with the following requirements: 1. At least seventy per cent (70%) of the voting stock shall be owned by Filipinos except when such required minimum percentage is reduced to sixty per cent (60%) pursuant to law; and 2. At least two-thirds (2/3) of the members of the board of directors shall be Filipinos: Provided , That in the case of private development banks, all board members shall be Filipinos. b. Capital Requirements . The applicant bank shall comply with the required minimum paid-in capital as follows: 1) For savings and mortgage banks with head offices located within The Greater Manila Area and fringes thereof P10 million Other Places 5 million 2) For private development banks and stock savings and loan associations located within The Greater Manila Area and fringes thereof or First Class A cities P4 million First Class B and C, Second and Third Class cities 3 million Fourth and Fifth Class cities and in other places 2 million or show compliance with an approved capital build-up program or plan to increase its paid-in capital in accordance with the foregoing minimum capital requirements. For this purpose, Sections 1 and 3 of Presidential Decree No. 465 shall govern the classification of cities. (See 1. Appendix I for excerpts.) Stock savings and loan associations which have not fully complied with the minimum paid-in capital requirement shall put up additional capital in an amount determined by the appropriate supervising and examining department of the Central Bank in accordance with the prescribed formula on adequacy of bank capital for every additional unit regardless of whether the banking offices are to be established in the Greater Manila Area or fringes thereof or in other areas until such time as the required minimum capital is reached: Provided , That an association wishing to establish a banking office in an area of a higher classification than that of the area where its head office is located shall also be required to contribute the difference between the minimum paid-in capital it is required to meet under its approved build-up program and that capital required of banks in the area of its proposed banking office. The additional capital required in this paragraph shall have been contributed prior to the issuance of the Certificate of Authority to operate the banking office. A bank which has fully complied with the minimum paid-in capital requirement shall put up additional capital as may be required in accordance with the prescribed formula on capital adequacy: Provided , That a bank wishing to establish a banking office in an area of a higher classification than that of the area where its head office is located shall also be required to contribute immediately the difference between its existing paid-in capital and the required minimum capital for banks whose head offices are located in such higher class area. SUBSECTION 214.13 Other requirements/factors to be considered . Other requirements/factors to be considered are the following: a. The applicant's general compliance with laws, rules, regulations and policies of the Central Bank such as: 1) Capital adequacy and solvency; 2) Profitability and capacity to absorb losses; 3) Reserve and liquidity position; and 4) Qualifications of the proposed officers of the banking office; b. The "service area" of the proposed banking office is not overbanked and shows economic growth or reasonable prospects thereof. "Service area" is defined as a pocket of concentrated economic activity, not necessarily a geographical area. The service area is overbanked if (1) the rates of return are so depressed by an excess of banks in the area that adequate banking performance for the customers' benefit is threatened in the long run; and (2) the level of deposits of banks in the area or their growth indicates no reasonable prospects that the situation in (1) above will be reversed in the short run; c. A certification under oath by the bank's Executive Vice President or any officer of equivalent rank to the effect that applicant bank has no float items in its Due From/To Head Office/Branches/Offices accounts as well as its Due From Central Bank account which are outstanding for more than sixty (60) calendar days exceeding one per cent (1%) of its total resources as of the end-of-month nearest to application date shall be submitted; d. Proposed banking offices shall be at least ten meters away from any existing bank/branch or from any approved but not yet opened bank/branch except where they are separated by a street; e. Proposed banking offices shall not be allowed in premises purchased, acquired or leased to the disadvantage of another bank under circumstances attended by bad faith or abuse of economic power; and f. Applicant bank shall submit a written declaration under oath of (1) the manner of occupancy/acquisition of the premises and the consideration for the lease, purchase or acquisition of such premises; and (2) the name of the previous owner, lessor and lessee, indicating the banking institutions, if any, which had previously occupied such premises. SUBSECTION 214.14 Conditions precluding acceptance of application . The application for the establishment of additional offices shall not be accepted by the Central Bank from an applicant 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 shall not have authorized but unopened offices in excess of the limitations herein prescribed. The prescribed ceiling on applications 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 banking offices within a reasonable time. SUBSECTION 214.15 Conditions precluding processing of application . The existence of any of the following conditions shall preclude/suspend processing of the application: a. The applicant's operation during the year immediately preceding the filing of application was unprofitable; b. The applicant has failed to comply with its approved program of increase in paid-in capital; c. The applicant has not complied with the ceilings on credit accommodations to directors, officers, and/or stockholders; d. The combined capital accounts of the applicant are found to be deficient for five (5) or more times within a thirty (30) day period during the last six (6) months immediately preceding the date the application was received, in which case its privilege to establish banking offices shall be suspended for the next sixty (60) calendar days without prejudice to the resubmission of its application after said period; e. The combined capital accounts of the applicant are found to be deficient continuously for a period of thirty (30) days or more during the last twelve (12) months immediately preceding the date the application was received, in which case its privilege to establish banking offices shall be suspended for the next twelve (12) months without prejudice to the resubmission of its application after said period; f. The applicant has incurred net deficiencies in reserves against deposit liabilities, in which case its application shall be processed only after it shall have had no net reserve deficiencies for eight (8) consecutive weeks: Provided , That in case the applicant had incurred net deficiencies in reserves for eight (8) consecutive weeks during the last twelve (12) months immediately preceding the date the application was received, its privilege to establish banking offices shall be suspended for the next twelve (12) months without prejudice to the resubmission of its application after said period; g. The applicant has transferred the location of banking offices without Central Bank authority, in which case the receipt/processing of applications shall be suspended for a period of at least six (6), months from date of knowledge of the Central Bank; or h. The bank has not complied with the investment-deposit ratio for four (4) consecutive quarters immediately preceding the date the application was received. SUBSECTION 214.16 Priority in processing a. Only applications complete with the minimum documents required by the supervising and examining department concerned shall be accepted for any area on a first-come, first-served basis, regardless of whether or not there are approved but unopened banking offices in the area: 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. b. The mere filing or pendency of an application for the establishment of a banking office in a particular area shall not give an applicant priority over other applicants with respect to such area. Preference shall be given to the application which satisfies all Central Bank requirements. If two or more applications satisfy all Central Bank requirements, the application which was filed first shall be given preferential consideration. SUBSECTION 214.17 Date of opening a. Approved banking offices shall be opened within six (6) months from date of approval thereof: Provided , That an applicant bank may be given a final extension of another three (3) months subject to presentation of justification and valid reason for the bank's failure to open within the six (6) month period and proof that said banking office can be opened within the succeeding three (3) month period. b. Any bank which exceeds 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. c. Offices authorized to be established under the second paragraph of Subsec. 214.14 hereof shall have no extension of the prescribed date for their opening. [Circular 678 5-28-79] SUBSECTION 214.2 Establishment and operation of money shops SUBSECTION 214.21 Guidelines in establishment 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, except in the case of private development banks where all the members should be 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 7-26-77] 4) A maximum of three (3) money shops may be attached to a mother unit and for thrift banks, only the head office or a branch may be a mother unit of a money shop. [Circular 567 5-4-77] e. Others . 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] SUBSECTION 214.22 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 loans 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 days/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 six (6) days a week for thrift 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 appropriate supervising and examining department of the Central Bank 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 appropriate supervising department of the Central Bank 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. SUBSECTION 214.23 Sanctions Without prejudice to other sanctions provided for by law or regulations, noncompliance with any provision of Subsec. 214.2 shall subject the offender to the administrative sanctions provided for under Section 34-A of Republic Act No. 265, as amended. [Circular 551 1-17-77, as amended by Circular 620 7-26-78] SUBSECTION 214.3 Establishment and operation of savings agencies SUBSECTION 214.31 Guidelines in establishment Savings agencies may 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 seventy per cent (70%) of the voting stock of a thrift bank shall be owned by Filipinos except when such required minimum percentage is reduced to sixty per cent (60%), pursuant to law, in the case of savings banks and private development banks. 2. At least two-thirds (2/3) of the members of the board of directors shall be Filipinos: Provided , That in the case of private development banks all board members shall be Filipinos. b. Conditions precluding acceptance/processing of application . The application for the establishment of a savings agency shall not be accepted 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. The application for the establishment of a savings agency shall not be processed in any of the following cases: 1) The applicant bank's operation during the year preceding the filing of application was unprofitable. 2) The combined capital accounts of the applicant bank are found to be deficient for five (5) or more times within a thirty (30) day period during the last six (6) months immediately preceding the date the application was received, in which case the bank's privilege to establish savings agencies shall be suspended for the next sixty (60) days without prejudice to the resubmission of its application after said period. 3) The combined capital accounts of the applicant bank are found to be deficient continuously for a period of thirty (30) days or more during the last twelve (12) months immediately preceding the date the application was received, in which case the bank's privilege to establish savings agencies shall be suspended for the next twelve (12) months without prejudice to the resubmission of its application after said period. 4) The applicant bank has incurred net deficiencies in reserves against deposit liabilities, in which case its application shall be processed only after it shall have had no net reserve deficiencies for eight (8) consecutive weeks: Provided , That in case the bank had incurred net deficiencies in reserves for eight (8) consecutive weeks during the last twelve (12) months immediately preceding the date the application was received, the bank's privilege to establish banking offices shall be suspended for the next twelve months without prejudice to the resubmission of its application after said period. 5) There are two (2) or more approved but unopened banking offices in the same area or locality, irrespective of type and category, (excluding head offices, and other banking offices not opened within the extension period granted). Nevertheless, the Central Bank may consider the establishment of a savings agency 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 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. 6) The applicant bank has not complied with the investment-deposit ratio for four (4) consecutive quarters. 7) Applicant thrift bank shall submit a certification, under oath by the bank's Executive Vice-President or any officer of equivalent rank, to the effect that it has no float items outstanding for more than sixty (60) calendar days exceeding one per cent (1%) of its total resources as of the end-of-month nearest to application date. 8) Such other conditions as the Monetary Board may determine. c. Priorities . In cases where there are two or more applications of banks for authority to establish savings agencies in the same area or vicinity, on the assumption that both applicant banks have met all Central Bank requirements, the following priorities shall govern: 1. First priority Banks which have already achieved the required minimum paid-in capital; 2. Second priority Banks which have approved programs or plans to increase their paid-in capital with accelerated installments on build-up of paid-in capital in accordance with the banks' approved program; 3. Third priority Banks which have approved programs or plans to increase their paid-in capital, installments on capital build-up of which are not yet due or with up-dated build-up of paid-in capital in accordance with the banks' approved program; and 4. Fourth priority Banks which have approved programs or plans to increase their paid-in capital, installments on which are not up-to-date. In any of the priority levels, the "first-come, first-served basis" shall apply, meaning that whenever two (2) or more applications are received in any given day for the same area/vicinity and the applicants fall under the same priority level, the application which was filed first shall be given preference. SUBSECTION 214.32 Operational guidelines a. Scope of operations . A savings agency shall be established primarily to service deposits in areas not adequately serviced by other types of banking offices. It may grant loans fully secured by holdout on deposits maintained in the agency. b. Record keeping 1) All transactions of the savings agency shall be taken up and recorded daily by its mother office. 2) Records pertaining to loans secured by holdout on deposits maintained in the lending savings agency including, but not limited to, the original of the holdout agreement and the passbook/certificate of deposit left by the borrower with the agency, shall be kept under the custody and control of an officer of the savings agency. 3) The amount of holdout shall be indicated in the depositor's ledger and in the savings passbook or certificate of time deposit of the depositor-borrower. c. Banking hours . A savings agency shall observe banking hours and banking days similar to, or within the banking hours of, its mother office. SUBSECTION 214.33 Other requirements a. An application for the establishment of a savings agency inside a market shall be considered as an application to establish a money shop and shall be subject to the guidelines and criteria on the establishment of money shops. b. The location of an authorized savings agency shall be at least 10 meters from an existing or previously approved but still unopened banking office except where they are separated by a street. c. A savings agency shall open for business within six (6) months from date notice of approval was received by the applicant bank: 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 savings agency can be opened within this period. [Circular 654 2-5-79] d. For purposes of establishment of bank offices, a savings agency shall refer to a mini-extension office of an existing branch or the head office of a thrift bank. e. No savings agency shall be established within the Greater Manila Area. A savings agency shall be located within a radius of thirty (30) kilometers from its mother unit. [Circular 653 2-5-79] SUBSECTION 214.4 Transfer/relocation of banking premises . All stock savings and loan associations shall first advise the Department of Rural Banks and Savings and Loan Associations of any intention or plan to transfer their office premises to another location before taking any step whatsoever towards this end. Consequently, in the meantime that written approval of the Department is not given, they should not negotiate for an option or contract to lease or construct/renovate a building for the purpose. [CL 72-2 1-28-72] SUBSECTION 214.5 Documentary requirements for the establishment/relocation 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 papers/documents/information specified hereunder. SUBSECTION 214.51 Establishment of additional banking offices by savings and mortgage banks a. Certified true copy of the resolution of the bank's board of directors authorizing the application for the establishment of the additional banking office. b. Sketch of the area to be served showing the following information: 1) Proposed site of the banking office to be established. 2) Names and location of existing banking offices in the area, if any, and approximate distance from the proposed banking office. 3) Distance from head office or mother branch in case the additional banking office applied for is a savings agency or money shop. 4) Distance from market, in case of money shop. c. Banking facilities and services to be offered. d. Business or economic justification stating facts and figures (such as population and growth of population, number and names of the principal industrial, commercial and other establishments within the effective area of operations, deposit and loaning potentials, traffic flow and other information) tending to show that the establishment of the proposed 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. e. Projected Statement of Condition at the end of the first and second semesters of operations of the proposed branch. f. Statement of Estimated Earnings and Expenses for the first 12 months of operations. g. 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. h. Bank premises and initial outlay. i. 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] SUBSECTION 214.52 Establishment of additional banking offices by stock savings and loan associations a. Sworn certification by the corporate secretary attesting that: 1) At least 70% of the voting stock of the association is owned by Filipinos; and 2) The cumulative method of voting is used in electing the members of its board of directors; b. Certified true copy of the resolution of the Board of Directors, duly signed by the directors and attested by the corporate secretary, authorizing the association to negotiate for the establishment of additional banking office and designating the officer(s) authorized: c. Latest financial statements of the association's main office certified to by its president/manager; d. Sketch of the area to be served showing the following information: 1) Proposed site of the banking office to be established; 2) Names and location of existing banking offices in the area, if any, and approximate distance from the proposed banking office; 3) Distance from the supervising head office/branch in case the additional banking office applied for is a savings agency or money shop; and 4) Distance from the market, in case of money shop; e. Banking facilities and services to be offered; f. Business or economic justification stating facts and figures (such as population and growth of the population, number and names of the principal industrial, commercial and other establishments within the effective area of operations, deposit and loaning potentials, traffic flow and other information) tending to show that the establishment of the proposed branch, extension office or savings agency is justified on the basis of need therefore and that there is economic growth or reasonable prospects thereof in the area to be served; g. Projected statement of condition of the proposed branch or extension office as of the end of the first year; h. Itemized statement of the estimated receipts and expenditures of the proposed branch or extension office for the first year which shall include: 1) List of equipment, furniture and fixtures and leasehold improvements and estimated outlay therefor; and 2) Proposed plantilla of personnel and salary scale; i. Proposed banking hours; j. Name and bio-data of proposed Manager/Officer-In-Charge of the branch, extension office, savings agency or money shop; k. Certification from market administrator as to the total number of stallowners in the market in case the additional banking office applied for is a money shop; l. Other information (state such additional information/papers which may be submitted to help in the expeditious evaluation of the application, i.e., if building is to be constructed, plans and specifications; if buildings is to leased, option to lease or contract of lease of premises); and m. Xerox copy of Central Bank official receipt evidencing payment of P50.00 as filing fee. No application shall be accepted/processed by the Department of Rural Banks and Savings and Loan Associations unless all the minimum requirements accompany the corresponding application. [MSSLA 78-1 2-22-78] SUBSECTION 214.53 Transfer or relocation of banking offices (except head offices) by thrift banks . Applications for authority to transfer/relocate banking offices (except head offices) shall be accompanied by the following information/papers/documents: a. Certified true copy of the resolution of the bank's board of directors authorizing the transfer/relocation; b. Sketch of the area of operations showing the present location and the new location and the approximate distance between the two as well as from other banking offices; c. Reasons/justifications for the transfer/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 and MSSLA 78-1 2-22-78] SUBSECTION 214.9 Miscellaneous provisions SUBSECTION 214.91 On branch offices and agencies of stock savings and loan associations . a. No stock savings and loan association shall open, maintain or operate a branch, agency, money shop, or savings agency without first applying for, and obtaining from, the Monetary Board, through the appropriate supervising and examining department of the Central Bank, a certificate of authority to operate such branch, agency, money shop or savings agency. The term "branch offices and agencies" shall include extension offices and any other office outside the main office where operations or transactions, or any phase thereof, are conducted by a stock savings and loan association. b. The application to establish a branch or agency shall be in such form as the Monetary Board shall require, and shall include, among other things, an itemized statement of the estimated receipts and expenditures of the association in connection with such branch or agency for the first year or such longer period as the Monetary Board requires, and a showing that public convenience and advantage will be promoted by the operation of such branch or agency. c. If after examination and/or investigation made by the appropriate supervising and examining department of the Central Bank it is shown that the operation of the proposed branch or agency is in the interest of such association and that the area where the proposed branch or agency is to be located is not adequately served by one or more existing associations, that public convenience and advantage will be promoted by the operation of such branch or agency, and that public interest and economic conditions, both general and local, justify the authorization, a certificate of authority to operate the proposed branch or agency shall be issued. d. In addition to (b) and (c) above, applications for the establishment of branches, money shops or savings agencies, etc., shall be processed in accordance with the guidelines established by the Central Bank. SUBSECTION 214.92 On lease/transfer of office premises by stock savings and loan associations . No stock savings and loan association shall negotiate a contract of lease or sublease to third persons any portion or portions of their office premises without securing prior approval of the appropriate supervising and examining department of the Central Bank. Stock savings and loan associations contemplating to transfer their office premises to another location shall apply for prior approval of the Central Bank. In the meantime that written approval is not given, associations shall not negotiate for an option or contract to lease or construct/renovate a building for the purpose. [Circular 691 8-13-79] SUBSECTION 214.93 Lease expenses prior to authorization of branch . 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] SUBSECTION 214.94 Reportorial requirements from certain extension offices . Extension offices of banks which maintain separate books of accounts shall be subject to all reporting requirements of a regular branch. Extension offices of banks whose record of transactions/accounts are consolidated daily with its mother unit shall submit only "Selected Financial Accounts" form. (See 2. Appendix C for CBP 7-16-02SB-A for savings and mortgage banks and CBP 7-16-02 PDB-A for private development banks.) [Memorandum to All Banks Concerned 5-7-79] SECTION 215. Articles of Incorporation and By-Laws . SUBSECTION 215.1 Place of board of directors' meetings . Domestic banking institutions shall include in their by-laws to be adopted or amended, a provision that meetings of their board of directors shall be held only within the Philippines. [CL 12-4-74] SUBSECTION 215.2 Voting requirements with respect to certain corporate transactions . No certificate of authority required under Sections 9 and 10 of Republic Act No. 337, as amended, shall be issued to any bank which has a provision in its by-laws requiring the concurrence of one or two directors, not constituting a majority in a quorum, for any decision of the board of directors, or a provision vesting a veto power in the hands of one or two directors, not constituting a majority in a quorum, for any decision of the board. [MB Res. 1182 5-31-74] SECTION 219. Sundry Provisions . SUBSECTION 219.1 On stock savings and loan associations SUBSECTION 219.11 Definition of stock savings and loan association . A "stock savings and loan association" shall include any corporation engaged in the business of accumulating the savings of depositors and using such accumulations, together with its capital for loans and/or for investment in the securities of productive enterprises or in securities of the Government, or any of its political subdivisions, instrumentalities or corporations: Provided , That they shall be primarily engaged in servicing the needs of households by providing personal finance and long-term financing for home building and development. SUBSECTION 219.12 Form of organization; citizenship requirements a. Stock savings and loan associations shall be organized in the form of stock corporations which in no case shall issue no par value stock. b. The Monetary Board shall fix the minimum paid-up capital of a stock savings and loan association in such amount as said Board may consider necessary for the safe and sound operation of such association: Provided, however , That in no case shall such paid-up capital be less than one hundred thousand pesos (P100,000.00) (See Subsec. 211.1 for present capital requirements): Provided, further , That at least seventy per cent (70%) of the voting stock of a stock savings and loan association which may be established after the approval of Presidential Decree No. 113 shall be owned by citizens of the Philippines, except where a new association is established as a result of the consolidation of existing associations in which there are foreign-owned voting stock at the time of consolidation: Provided, furthermore , That the percentage of foreign-owned voting stock in stock savings and loan associations existing upon the effectivity of Presidential Decree No. 113, if such percentage is in excess of thirty per cent (30%) of the voting stock of the association, shall not be increased, but may be reduced, and once reduced, shall not be increased thereafter beyond thirty per cent (30%) of the voting stock of the association. The percentage of foreign-owned voting stock in an association shall be determined by the citizenship of the individual stockholders in that association. In the case of corporations owning shares in the association, the citizenship of each stockholder in that corporation shall be the basis of computing the percentage. Such association is authorized to receive deposits from and extend loans to the general public. SUBSECTION 219.13 Prior approval by the Monetary Board of Articles of Incorporation and By-Laws or amendments thereto . The articles of incorporation or by-laws of a proposed stock savings and loan association, or any amendment thereto, shall not be registered with the Securities and Exchange Commission unless accompanied by a certificate of approval from the Monetary Board. SUBSECTION 219.14 Application for approval . The proposed articles of incorporation and by-laws of a stock savings and loan association, both accomplished in the prescribed forms, shall be submitted to the Monetary Board through the appropriate supervising and examining department of the Central Bank together with a covering application for the approval thereof and such other necessary documents signed by a majority of the members of the board of directors of the association and verified by one of them. The same procedure shall be observed in case of amendments of the articles of incorporation and by-laws of the association. SUBSECTION 219.15 Grounds for disapproval of application . The application of a proposed stock savings and loan association shall be disapproved, if upon examination and/or investigation made by the appropriate supervising and examining department of the Central Bank, it is found that: a. The association is to be formed for any business other than the legitimate savings and loan business; b. The association's financial program is unsound; c. The area where the association is to be located is adequately served by one or more existing associations; d. Any of the director or principal officers of the association does not possess the integrity or competence to manage a savings and loan association; or e. There exist other reasons which the Monetary Board may consider as sufficient ground for such disapproval. SUBSECTION 219.16 Certificate of authority to operate; revocation or suspension thereof . All stock savings and loan associations, prior to transacting any business, shall procure a certificate of authority to transact business from the Monetary Board. After due notice, the Monetary Board may revoke or suspend for such period as it determines, the certificate of authority of any association, the solvency of which is imperiled by losses or irregularities or of any association which willfully violates any provisions of Republic Act No. 3779, as amended, these rules or any pertinent law or regulation. SUBSECTION 219.17 Filing fees . A stock savings and loan association shall pay to the appropriate supervising and examining department of the Central Bank a filing fee of two hundred pesos (P200.00) for each application for approval of proposed articles of incorporation and by-laws and a fee of fifty pesos (P50.00) for each application to operate a branch, agency, money shop or savings agency. SUBSECTION 219.18 Business name . Stock savings and loan associations organized or operating under Republic Act No. 3779, as amended, and licensed by the Central Bank shall include in their names the term "Savings and Loan Association". Such associations shall display in a conspicuous place at their principal offices and branches and agencies, if any, a sign including, among other things, the following words: "Authorized by the Central Bank of the Philippines". Effective June 30, 1980, a stock savings and loan association which has fully complied with the prescribed minimum paid-up capital requirement may use the term "savings and loan bank" or "savings and loan thrift bank" in its corporate or business name: Provided , That the prior approval of the Monetary Board has been obtained and that any of said terms has been duly incorporated in the corporate or business name of the association as it appears in its articles of incorporation: Provided, further , That a stock savings and loan association which has not fully complied with the prescribed minimum capital requirement may use in connection with its corporate or business name only the term "A Thrift Bank" (the size of which shall not be more than three-fourths (3/4) of the size of the name of the association), preferably enclosed in parenthesis directly under its name. No person, association, partnership or corporation shall do business or hold itself out as doing business as a savings and loan association, or shall use the term "Savings and Loan Association" or any other title or name tending to give the public the impression that it is engaged in the operations and activities of a savings and loan association unless so authorized under Republic Act No. 3779, as amended, and these regulations. The use by an association of any other name or title or combination of names and titles or any other deviation from the requirements of this subsection shall not be authorized except upon prior approval of the Monetary Board. The term "Bangko ng Bayan" and words of similar import shall not be used in connection with the business name of stock savings and loan associations. Any violation or non-compliance with the requirements of this subsection shall be subject to an administrative fine of one hundred pesos (P100.00) a day for every day that the violation or non-compliance continues. cdlex [Circular 691 8-13-79] APPENDIX A (Book II, Part I) GUIDELINES ON INCREASED CAPITALIZATION OF SAVINGS AND MORTGAGE BANKS 1. To increase capital base and to promote stability: a. Existing savings and mortgage banks with head offices located in the Greater Manila Area and fringes thereof shall have a minimum paid-up capital of P10 million each within three (3) years; * b. Savings and mortgage banks with head offices located in other chartered cities shall have a minimum paid-up capital of P5 million each within three (3) years; * and c. Other existing savings and mortgage banks (i.e., savings and mortgage banks not located within the Greater Manila Area and fringes thereof, and in chartered cities) shall have a minimum paid-up capital of P2 million each within three (3) years. * 2. The capital increase shall consist of purely local capital from private sources. 3. The program of capital build-up shall be maintained for a period of three years or up to October 31, 1976: Provided , however , That the deadlines for submission of programs shall be extended up to April 30, 1974. [MASMB 7-13-73, as amended by MB Res. 2078 11-9-73 and 2375 12-21-73; CL 2-6-74, as amended by Circular 567 5-4-77] For purposes of the increased capitalization program of savings banks, the eligibility of 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) may be considered as among the properties that may be transferred to a bank in payment of domestic subscription to capital stock, subject to procedures on valuation which shall be determined by the Central Bank and to pertinent provisions of Section 31 of Republic Act No. 337, as amended, restricting the amount which a bank may invest in such evidences of indebtedness. The fixed assets that may be put up in exchange for bank shares to increase the paid-in capital of a savings bank shall be limited only to bank premises and improvements, including bank equipment, subject to the limitations provided for in Section 34 of Republic Act No. 337, as amended. [MB Res. 255 1-31-75] Footnotes * Up to October 31, 1976 APPENDIX B (Book II, Part I) GUIDELINES ON INCREASED CAPITALIZATION OF PRIVATE DEVELOPMENT BANKS To increase capital base and to promote stability, the private sector shall take appropriate steps to effect the desired increase as follows: 1. Existing private development banks located within the Greater Manila Area and fringes thereof as well as in Class A chartered cities shall have a minimum paid-up capital of P4 million each within three years. * 2. Existing private development banks in Class B and C chartered cities shall have a minimum paid-in capital of P3 million each within three years. * 3. Other existing private development banks (i.e., private development banks not located within the Greater Manila Area and fringes thereof, and in Class A, B, and C chartered cities) shall have a minimum paid-up capital of P2 million each within three years. * 4. Equity investment of the Development Bank of the Philippines to match the private sector's paid-up capital may be counted for purposes of the increased capitalization program. cdlex The program of capital build-up for a period of three years, or up to October 31, 1976 * as approved above, shall be submitted not later than April 30, 1974. Sources: Circular Letter 1-22-74 as amended by Circular Letters 10-22-74 and 2-17-77. Footnotes * The original deadline of October 31, 1976 was reset to October 31, 1977 per CL 2-17-77 APPENDIX C (Book II, Part I) GUIDELINES ON INCREASED CAPITALIZATION OF STOCK SAVINGS AND LOAN ASSOCIATIONS 1. Stock savings and loan associations located in second and third class cities which do not meet the prescribed minimum capital requirements shall submit by September 30, 1979 a realistic capital build-up program under which they would achieve the required paid-in capital by December 31, 1981. 2. The program for increasing paid-in capital may consider (a) local capital from private sources, (b) merger or consolidation, and (c) surplus declared or committed to be declared as stock dividends at an indicated time. 3. The capital build-up program shall include as a minimum the following features: a) The program shall consist of a maximum of six (6) semestral periods of capital build-up meeting the required paid-in capital by June 30, 1980. b) The periodic capital build-up required for each semester shall be the capital gap divided into equal amounts for the six (6) scheduled dates, which may be met through: (1) Conversion of surplus (net of reserves), surplus reserves and undivided profits outstanding as of December 31, 1976, into paid-in capital, hereinafter to be described as converted capital; (2) Transfer and exchange of ownership to an association of (i) 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); and (ii) real estate, subject to procedures on valuation which shall be determined by the Central Bank and to pertinent provisions of Sections 5 and 21 of R.A. No. 3779, as amended; and (3) The input of fresh capital which, for this purpose, shall include new capital contribution consisting of purely local capital from private sources. c) The proportion of permissible converted capital to the periodic capital build-up for each scheduled date shall not exceed the proportion which the amount of surplus, surplus reserves and undivided profits as of December 31, 1976 bears to the capital gap existing as of December 31, 1976, to be computed in accordance with the following formula: Permissible Surplus, Surplus Reserves Amount of and Undivided Profits Periodical Capital Converted = x Capital Capital Gap Build-up Required d) Capital gap as used herein for each stock SLA is defined as the minimum paid-in capital less the unimpaired paid-in capital and paid-in surplus which is not returnable to stockholders as of December 31, 1976. 4. The merger or consolidation among stock SLAs shall be encouraged for those unable to meet the increased capital requirements. In effecting a merger or consolidation, the basic policies implemented under the guidelines enumerated in Attachment 1 shall apply, subject to such terms and conditions, including incentives, as may be determined on a case-to-case basis. 5. In case the increased paid-in capitalization will necessitate an increase in authorized paid-in capital, the stock SLA shall cause the corresponding amendments to its articles of incorporation, and thereafter submit to the Central Bank its amended articles of incorporation together with the capital build-up program. 6. Participating stock SLAs in a proposed merger/consolidation shall submit together on or before June 30, 1977 their program for increasing paid-in capital with appropriate documentation indicating the stage of merger or consolidation which should, as a minimum, be beyond mere expression of intent. 7. Compliance with the above or with the scheduled build-up of additional capitalization shall be a prerequisite before any stock SLA can: a) participate in Special Financing Programs; and b) declare any cash dividend. Such disqualification shall be lifted by the Governor or the Senior Deputy Governor only upon certification by the Department of Rural Banks and Savings and Loan Associations that the stock SLA has an approved capital build-up program and/or an approved merger or consolidation proposal, or has complied with the scheduled capital build-up. 8. Stock SLAs that do not meet the herein prescribed minimum capital requirements shall not be allowed to establish branches/extension offices/savings agencies/money shops until they shall have satisfactorily complied therewith. [Source: Memorandum Circular to All Stock Savings and Loan Associations 77-14 dated 1-31-77, as amended by Memorandum to all SSLAs 5-28-79] APPENDIX D (Book II, Part I) GUIDELINES ON THE ESTABLISHMENT OF BANKING OFFICES (EXCEPT MONEY SHOPS AND SAVINGS AGENCIES) OF SAVINGS AND MORTGAGE 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. The applicant savings bank shall have a minimum paid-in capital of P10 million for those whose head offices are situated in Greater Manila Area and fringes thereof, P5 million for those whose head offices are situated in other chartered cities, and P2 million for those whose head offices are situated in other places; or an approved program/plan to increase the paid-in capital to P10 million, P5 million or P2 million, as the case may be, within three (3) ** years. [MB Res. 2078 11-9-73, as amended by CL 2-6-74] 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 Banks in accordance with the prescribed formula on adequacy of bank capital, or the following, whichever is higher: a. P1 million additional capital for every additional unit to be established in the Greater Manila Area or fringes thereof, or b. P0.5 million for every additional unit to be established other than (a) above. Provided , however , That any 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 in accordance 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; and 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 6(c)(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 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 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; [MB Res. 885 3-18-73] 7. 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 banking offices or permit to operate new banking offices, regardless of type or category, in or out of the Greater Manila area; and [Circular 571 7-12-77] 8. 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 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 (see Subsec. 234.4); 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 re-submit 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 re-submit 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 re-submit 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. [Circular 567 5-4-77, as amended by Circular 634 10-3-78] 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 exceeds 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; and 10. 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. [Circular 567 5-4-77, as amended by Circular 590 12-28-77] 11. 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 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] 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 a minimum 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 effective area 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 semesters 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] Footnotes * Except where 60% had been allowed pursuant to law. ** Up to October 31, 1976. APPENDIX E (Book II, Part I) GUIDELINES ON THE ESTABLISHMENT OF BANKING OFFICES (EXCEPT MONEY SHOPS AND SAVINGS AGENCIES) OF PRIVATE DEVELOPMENT BANKS A. Minimum requirements applicant bank must meet 1. At least 70% of the voting stock is owned by Filipinos; 2. All 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. Existing private development banks located within the Greater Manila Area and fringes thereof as well as those in first class A cities shall have a minimum paid-up capital of P4 million each; those in first class B and C, second and third class cities shall have a minimum paid-up capital of P3 million each; while those in fourth and fifth class cities and in other places shall have a minimum paid-up capital of P2 million each. [CL 1-22-74, as amended by CL 10-22-74 and CL 4-18-78] 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 Banks in accordance with the prescribed formula on adequacy of bank capital, or P250,000 additional capital for every additional unit regardless of whether it is to be established in the Greater Manila Area or fringes thereof or in other places; whichever is higher: Provided , however , That any 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 in accordance 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; and 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 customer's 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 6(c)(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 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 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; f) A private development bank may be allowed to establish branches/extension offices within 30-kilometer radius reckoned from the territorial boundaries of the province where its head office is located, provided that the credit needs of the areas covered by its existing sphere of operation have been amply served; [ Note : This shall not preclude private development banks from establishing branches on a nationwide basis, subject to such other conditions which Central Bank management may further prescribe in the future.] [MB Res. 885 5-18-73] 7. 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 banking offices or permit to operate new banking offices, regardless of type or category, in or out of the Greater Manila Area; and [Circular 571 7-12-77] 8. 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 (see Subsec. 234.4); 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 re-submit 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 re-submit its application after said period; 6. Applications of banks for authority to establish branches shall not be processed until the banks 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 of application was received, the bank's privilege to establish branches shall be suspended for the next twelve months, in which case, the bank may re-submit 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. [Circular 567 5-4-77, as amended by Circular 634 10-3-78] 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 exceeds 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; 10. 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; and [Circular 567 5-4-77, as amended by Circular 590 12-28-77] 11. 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 office 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] 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. cdlex [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 (except head offices) shall be accompanied, as minimum requirements, by the papers/documents/information specified in Section D of 1. Appendix D (Documentary Requirements for the Establishment of Banking Offices). [CL 1-31-78] APPENDIX F (Book II, Part I) GUIDELINES ON THE ESTABLISHMENT OF BANKING OFFICES (EXCEPT MONEY SHOPS AND SAVINGS AGENCIES) OF STOCK SAVINGS AND LOAN ASSOCIATIONS A. Minimum requirements applicant association must meet 1. At least 70% of the voting stock is owned by Filipinos except where 60% has been allowed pursuant to law; [MCSSLA 14 1-31-77] 2. The cumulative method of voting shall be used in electing the members of the board; [MSSLA 7 1-29-74] 3. It shall have a minimum paid-in capital of P4 million for those within the Greater Manila Area and fringes and First Class A chartered cities, P3 million for those within the First Class B and C chartered cities, P2 million for other places; or an approved build-up program, the schedule of which is being complied with. [MCSSLA 14 1-31-77] Additional capital shall be put up by any association which has not fully complied with the minimum paid-in capital requirement in an amount determined by the Department of Rural Banks and Savings and Loan Associations in accordance with the prescribed formula on adequacy of bank capital, or P250,000 for every additional unit regardless of whether it is to be established in the Greater Manila Area or fringes thereof or in other places, whichever is higher: Provided , however , That any association which has fully complied with the minimum paid-in capital requirement shall put up additional capital as may be required in accordance 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 association; 2. Profitability and capacity of applicant association to absorb losses; 3. Reserve and liquidity position of applicant association; 4. Applicant association must have substantially corrected the deficiencies and exceptions noted in its operations; 5. Area to be served by the proposed branch of applicant association shall show that public convenience and advantage will be promoted by the operation of said branch and that at least 75% of the deposits accumulated from said area shall be invested therein as a means of developing such area; 6. Applicant association has complied with other laws, rules and regulations and policies of the Central Bank; 7. Criteria on overbanking among stock savings and loan associations; 8. Location of the proposed branch shall be at least ten meters away from any existing bank/branch or from any approved but not yet opened bank/branch except where they are separated by a street; [MSSLA 7 1-29-74] C. Conditions precluding processing of the application 1. That the applicant association has not completed one year of profitable operations from the date it opened for business; 2. That the applicant association has failed to comply with its approved program of increase in paid-in capital; 3. That the applicant association has not complied with the ceiling on credit accommodations to directors, officers and/or stockholders (see Subsec. 234.4); 4. That in case the combined capital accounts of the applicant association 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 association's privilege to establish branches shall be suspended for the next twelve months: Provided , That the association may re-submit its application after said period; 5. That in case the combined capital accounts of an association are found to be deficient for five or more times within a 30-day period, but not continuously for a period of 30 days (reckoned during the last six months immediately preceding the date the application was received), the association's privilege to establish branches shall be suspended for the next sixty days: Provided , That the association may re-submit its application after said period; and 6. That applications of associations for authority to establish branches shall not be processed until the association concerned, having incurred net deficiencies in reserves against deposit liabilities, shall have had no net reserve deficiencies for eight consecutive weeks: and Provided , That in case the association incurred net deficiencies in reserves for eight consecutive weeks during the last twelve months immediately preceding the date the application was received, the association's privilege to establish branches shall be suspended for the next twelve months in which case, the association may re-submit its application after said period. [MSSLA 7 1-29-74] 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. [Circular 567 5-4-77, as amended by Circular 634 10-3-78] 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 exceeds 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. 10. 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 limit: Provided , however , That for offices authorized under this paragraph, no extension shall be allowed of the prescribed date for their opening. [Circular 567 5-4-77] 11. 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 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] 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. Conditions to approval of applications 1. That the applicant association shall submit a waiver to the effect that it shall not interpose any opposition to the establishment of a new association in the area where the branch is to be established: Provided , however , That it shall have a preferential right to convert such branch into an entirely independent unit, i.e., as another association; 2. That the applicant association shall permanently assign to the branch not less than P250,000 as working capital which assignment shall be evidenced by a certification sworn to by the association's treasurer; 3. That the branch shall commence operation within six months from the date of receipt of approval of the application; and [MSSLA 7 1-29-74] 4. 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 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] E. Documentary Requirements for the Establishment of Banking Offices Application for authority to establish additional banking offices by stock savings and loan associations (branch, extension office, savings agency or money shop) shall be accompanied, as minimum requirements, by the papers/documents/information specified hereunder: 1. Sworn certification by the corporate secretary attesting that: a) At least 70% of the voting stock of the association is owned by Filipinos; and b) The cumulative method of voting is used in electing the members of its board of directors; 2. Certified true copy of the resolution of the Board of Directors, duly signed by the directors and attested by the corporate secretary, authorizing the association to negotiate for the establishment of additional banking office and designating the officer(s) authorized; 3. Latest financial statements of the association's main office certified to by its President/manager; 4. 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 the supervising head office/branch in case the additional banking office applied for is a savings agency or money shop; and d) Distance from the market, in case of money shop; 5. Banking facilities and services to be offered; 6. Business or economic justification stating facts and figures (such as population and growth of the population, number and names of the principal industrial, commercial and other establishments within the effective area of operations, deposit and loaning potentials, traffic flow and other information) tending to show that the establishment of the proposed branch, extension office or savings agency is justified on the basis of need therefor and that there is economic growth or reasonable prospects thereof in the area to be served; 7. Projected statement of condition of the proposed branch or extension office as of the end of the first year; 8. Itemized statement of the estimated receipts and expenditures of the proposed branch or extension office for the first year which shall include: a) List of equipment, furniture and fixtures and leasehold improvements and estimated outlay therefor; and b) Proposed plantilla of personnel and salary scale; 9. Proposed banking hours; 10. Name and bio-data of proposed Manager/Officer-in-Charge of the branch, extension office, savings agency or money shop; 11. Certification from market administrator as to the total number of stallowners in the market in case the additional banking office applied for is a money shop; 12. Other information (state such additional information/papers which may be submitted to help in the expeditious evaluation of the application, i.e., if building is to be constructed, plans and specifications; if buildings is to be leased, option to lease or contract of lease of premises); and 13. Xerox copy of Central Bank official receipt evidencing payment of P50.00 as filing fee. No application shall be accepted/processed by the Department of Rural Banks and Savings and Loan Associations unless all the minimum requirements accompany the corresponding application. [MSSLA 78-1 2-22-78] APPENDIX G (Book II, 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, except in the case of private development banks where all the members should be 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 for thrift banks, 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 Loans 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. F. Banking Hours 1. Money shops authorized to be established shall observe banking hours for not less than six hours a day, for six days a week, between 4:30 A.M. and 8:00 P.M., the opening and closing hours and the banking days to be determined by banking institutions depending upon the conditions prevailing in each individual market/locality. 2. Any change in money shop banking hours and days will be reported in writing (i.e., need not require prior approval) to the appropriate supervising and examining department of the Central Bank 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 appropriate supervising department of the Central Bank an updated lasting of the names of stall/store owners within 100 meters from the market perimeter and such other reports as may be required. III. Sanctions Without prejudice to other sanctions provided for by law or regulations, non-compliance with any provision of this Appendix shall subject the offender to the administrative sanctions provided for under Section 34-A of Republic Act No. 265, as amended. [Circular 551 1-17-77, as amended by Circular 620 7-26-78] IV. Documentary Requirements for the Establishment of Money Shops Application of thrift 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.Appendices C and E and Section E of 1.Appendix F (Documentary Requirements for the Establishment of Banking Offices). dctai [CL 1-31-78 and MCSSLA 78-1 2-22-78] APPENDIX H (Book II, Part 1) GUIDELINES/CRITERIA ON THE ESTABLISHMENT OF SAVINGS AGENCIES I. Basic Pre-Conditions a. At least 70% of the voting stock of the bank shall be owned by Filipinos except where 60% has been allowed pursuant to law. b. At least 2/3 of the members of its board of directors shall be Filipinos except in the case of private development banks where members of the board of directors should all be Filipinos. c. The bank must have completed one year of profitable operations from the date it opened for business/must have shown one year of profitable operations immediately preceding the date it filed its application. II. Other Factors To Be Considered a. Savings agencies shall be allowed to be established only upon prior approval by the Central Bank. A thrift bank desiring to establish a savings agency shall file a letter of application with the Central Bank through the appropriate supervising and examining department which may require the submission of a feasibility study or justification and a sketch of the proposed vicinity or service area to be served indicating therein the location of the proposed savings agency as well as all existing banks in said area. [MATB 5-12-75] b. The location of an authorized savings agency shall be at least ten (10) meters from an existing or previously approved but still unopened banking office, except where they are separated by a street. [Memorandum 9-4-78] c. No savings agency shall be established within the Greater Manila Area. d. A savings agency shall be located within a radius of thirty (30) kilometers from its mother unit and for thrift banks, only the head office or a branch may be a mother unit of a savings agency. [Circular 567 5-4-77] e. If an application is for the establishment of a savings agency inside a market, said application shall be considered as an application for a "money shop" and shall be subject to the guidelines/criteria on the establishment of money shops under 1.Appendix G. f. General compliance with other laws, rules, regulations and policies of the Central Bank. g. Qualifications of proposed officers/staff of the proposed savings agency. h. 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. [M.B. Res. 1295 8-10-70] i. Effective January 13, 1978, compliance with the investment-deposit ratio for four (4) consecutive quarters shall be one of the conditions for the approval of any application or request for authority to establish new savings agencies or permit to operate new savings agencies. [Circular 571 7-12-77] III. Priorities In cases where there are two or more applications of banks for authority to establish savings agencies in the same area/vicinity, the following priorities shall govern (on the assumption that both applicant banks meet satisfactorily, in general, the other criteria): a. First priority Banks which have already achieved the required minimum paid-in capital; b. Second priority Banks which have approved programs or plans to increase their paid-in capital with accelerated installments on build-up of paid-in capital in accordance with the bank's approved program; c. Third priority Banks which have approved programs or plans to increase their paid-in capital, installments on capital build-up of which are not yet due or with up-dated build-up of paid in capital in accordance with the bank's approved program; and d. Fourth priority Banks which have approved programs or plans to increase their paid-in capital, installments, on which are not up-to-date. In any of the priority levels, the "first-come, first-served basis" shall apply, meaning that whenever two or more applications are received in any given day for the same area/vicinity and the applicants fall under the same priority level, the earlier application shall be considered. A savings agency shall open for business within six months from date notice of approval was received by the applicant bank; otherwise, the approval is automatically revoked and applications of other thrift banks shall be given due course. No additional applications shall be processed by the appropriate supervising and examining department if the applicant bank has five or more savings agencies approved but not yet opened. Application to establish a savings agency inside a market shall be considered as an application for a "money shop", and shall be subject to the guidelines/criteria embodied in 1.Appendix G. IV. Conditions Precluding Processing of Application a. In case the combined capital accounts of the applicant bank are found to be deficient for five or more times within a 30-day period during the last six months immediately preceding the date the application was received, the privilege to establish savings agencies shall be suspended for the next sixty days thus giving due course to the applications of other thrift banks; the bank may resubmit its application after said period of suspension: Provided , That no application of other thrift banks in the same area/vicinity is being processed when the subject bank resubmits its application. If the deficiency is continuous for a period of thirty days or more during the last twelve months immediately preceding the date the application was received, the privilege to establish savings agencies shall be suspended for the next twelve months thus giving due course to the applications of other thrift banks; the bank may re-submit its application after said period of suspension: Provided , That no application of other thrift banks in the same area/vicinity is being processed when the subject bank re-submits its application. b. Applications of banks for authority to establish savings agencies 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 privilege to establish savings agencies shall be suspended for the next twelve months thus giving due course to the applications of other thrift banks; the bank may re-submit its application after said period of suspension: Provided , That no application of other thrift banks in the same area/vicinity is being processed when the subject bank re-submits its application. [MATB 5-12-75] c. 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. [Circular 567 5-4-77, as amended by Circular 634 10-3-78] d. 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. e. Any bank which exceeds 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. f. 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. [Circular 567 5-4-77, as amended by Circular 590 12-28-77] g. 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 savings agencies or permit to operate new savings agencies. [Circular 571 7-12-77] h. 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] V. Documentary Requirements for the Establishment of Money Shops Applications of thrift 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.Appendices D and E and Section E of 1.Appendix F (Documentary Requirements for the Establishment of Banking Offices). [CL 1-31-78 and MCSSLA 78-1 2-22-78] APPENDIX I (Book II, Part 1) EXCERPTS OF PRESIDENTIAL DECREE NO. 465 For purposes of classification of cities, Sections 1 and 3 of Presidential Decree No. 465 dated May 20, 1974 shall be followed, thus: "SECTION 1. Classification of Provinces and Cities . xxx xxx xxx (a) First Class The provinces and cities that have obtained an average total revenue of three million pesos or more per annum; (b) Second Class The provinces and cities that have obtained an average total revenue of one million five hundred thousand pesos or more but less than three million pesos per annum; (c) Third Class The provinces and cities that have obtained an average total revenue of one million pesos or more but less than one million five hundred thousand pesos per annum; (d) Fourth Class The provinces and cities that have obtained an average total revenue of five hundred thousand pesos or more but less than one million pesos per annum; and (e) Fifth Class The provinces and cities that have obtained an average total revenue of less than five hundred thousand pesos per annum. "SECTION 3. Sub-classification of first class provinces and cities . xxx xxx xxx (a) First Class-A. The provinces and cities that have obtained an average total revenue of seven million pesos or more per annum; (b) First Class-B. The Provinces and cities that have obtained an average total revenue of five million pesos or more but less than seven million pesos per annum. (c) First Class-C. The provinces and cities that have obtained an average total revenue of three million pesos or more but less than five million pesos per annum." [Source: Circular Letter dated 4-18-78] PART 2 Management and Administration SECTION 221. Directors . SUBSECTION 221.1 Definition of terms . For purposes of this section, the following terms shall have the meaning indicated unless the context clearly indicates otherwise: 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 stockholders, 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 or 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 221.2 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 appropriate supervising and examining department of the Central Bank. 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 221.3 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, spendthrift, 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 interests to the appropriate supervising and examining department of the Central Bank, when required for the proper implementation of a provision of law or of a circular, memorandum or rule or regulation of the Central Bank. This disqualifications 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. 221.1 (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; and 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 221.31 Disqualification procedures a. Upon the establishment of any of the grounds for disqualification mentioned in Subsec. 221.3 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 appropriate supervising and examining department the name of the director or officer involved, the ground for his disqualification and the action taken by the Board. c. When the ground for disqualification ceases to exist, the director or officer concerned shall be eligible to become director or officer of any institution regulated or supervised by the Central Bank only upon prior approval of the Governor of the Central Bank. [CL 3-1-78] SUBSECTION 221.4 Effect of non-possession of qualifications or possession of disqualifications Unless otherwise provided, directors elected or appointed without possessing the qualifications above mentioned or possessed of any of the disqualifications as enumerated herein, shall vacate their respective positions immediately. SUBSECTION 221.5 Bio-data of directors a. All banks shall submit to the appropriate supervising and examining department 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 appropriate supervising and examining department. [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 C (see CBP-7-16-18 SB/PDB and CBP-7-16-42 SLA) 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 deadline for submission shall be within seven (7) banking days after election or appointment. In case of transfers to other banks, the director need 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. LLphil c. 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 221.6 Interlocking directorates SUBSECTION 221.61 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. 221.1 (a) and 222.1 (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. LLphil 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 221.62 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 an investment house: Provided , however , That in no event shall a person be concurrently an officer of 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 the purpose shall be those as defined in Subsecs. 221.1 (a) and 222.1 (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 as 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: and 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] SUBSECTION 221.7 Additional qualifications required for directors of stock savings and loan associations . No person shall be eligible as director of a stock savings and loan association unless he is an owner in his own right of stock in the association with an aggregate par value of at least five thousand pesos (P5,000.00): Provided , That at least two-thirds of the members of the board of directors of any stock savings and loan association which may be established after the approval of Republic Act No. 3779, as amended, shall be citizens of the Philippines: Provided , however , That no full-time appointive or elective public official shall at the same time serve as officer, director, legal counsel or consultant of any stock savings and loan association, except in cases where such service is incident to financial assistance provided by the government or a government owned or controlled corporation to such association: Provided , further , That in the case of a merger or consolidation of stock savings and loan associations duly approved by the Monetary Board, the limitation on the maximum number of directors in a corporation, as provided for in Section 28 of the Corporation Law (Act No. 1459), shall not be applied so that membership in the new board may include up to the total number of directors provided for in the respective articles of incorporation of the merging or consolidating associations. SUBSECTION 221.8 Compensation of directors . No director of a stock savings and loan association shall receive from such association, and no association shall pay to any director of such association, any commission, emolument, gratuity or reward based on the volume or number of loans made, or based on the interest or fees collected thereon. Nothing in this subsection, however, prohibits or limits any of the following: a. Receipt or payment of salaries of directors, officers and employees; b. Receipts or payment of commissions to agents, whether or not based on the volume or number of loans or on the interest or fees collected thereon; and c. Receipt or payment of bonuses to directors, officers or employees if such bonuses are based on the profits and not on the volume or number of loans made or on the interest or fees collected thereon. SUBSECTION 221.9 Prohibition on disclosure of confidential information . No director, officer, employee or agent of a stock savings and loan association or of the Central Bank shall disclose any information relating to borrowers and their applications or to the operation of the association unless permitted by the Monetary Board of the Central Bank. Likewise, all deposits of whatever nature with stock savings and loan associations in the Philippines are hereby considered as absolutely confidential in nature and may not be examined, inquired or looked into by any person, government official, bureau or office, except when the examination is conducted by the Monetary Board or the official of the appropriate supervising and examining department of the Central Bank or his deputies pursuant to the provisions of Republic Act No. 3779, as amended, or upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation. LLphil It shall be unlawful for any official or employee of a stock savings and loan association to disclose to any person any information concerning said deposits, except in the cases mentioned in the preceding paragraph of this subsection. [Circular 691 8-13-79] SECTION 222. Office and Employees . SUBSECTION 222.1 Definition of terms . For purposes of this section, the following terms shall have the meaning indicated unless the context clearly 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. 221.1 (b). c. Obligations Please see Subsec. 221.1 (c). SUBSECTION 222.2 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 appropriate supervising and examining department of the Central Bank: Provided , however , That trust officers shall have at least two (2) years of actual experience or training in trust operations or fund management or other related fields. The foregoing Qualifications for officers shall be in addition to those already required or prescribed by Republic Act No. 337, as amended, and other existing applicable laws and regulations. SUBSECTION 222.3 Persons disqualified to become officers . a. The disqualifications for directors mentioned in Subsec. 221.3 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 of any person holding the position of Chairman, President, Executive Vice-President or any position of equivalent rank, General Manager, Treasurer, Chief Cashier, or Chief Accountant is disqualified from holding or being elected or appointed to any of said positions in the same bank; and the spouse or a relative within the second degree of consanguinity or affinity of any person holding the position 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 Secretary of justice, foreigners cannot be officers or employees of thrift 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 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 222.31 Disqualification procedures . The guidelines provided in Subsec. 221.31 shall likewise apply to officers of thrift banks. [CL 3-1-78] SUBSECTION 222.4 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 222.5 Bio-data of officers . The guidelines on the submission of bio-data by directors as provided under Subsec. 221.5 shall likewise apply to officers of thrift banks. [Circular 643 12-27-78 and Memorandum 2-21-79] SUBSECTION 222.6 Interlocking officerships . The regulations on interlocking directorates embodied in Subsec. 221.5 and 241.4 shall also govern interlocking officerships. [Circulars 591 and 592 1-18-78, as amended by Circulars 718 and 719 2-18-80] SUBSECTION 222.7 Miscellaneous provisions for officers and employees of stock savings and loan associations SUBSECTION 222.71 Additional qualification required for officers and employees . The qualifications required under Subsec. 221.7 likewise apply to Officers, legal counsel or consultant of a savings and loan association. SUBSECTION 222.72 Bond of officers and employees . All officers and employees of a stock savings and loan association who have access to money, or negotiable securities of the association or who issue stock or shares of the association, in the regular discharge of their duties shall, before entering upon their duties, furnish to the employing association a good and sufficient bond, indemnifying the association against loss of money or securities, by reason of their dishonesty and loss arising from their dishonest issue of stock or shares. The bond of the cashier, assistant cashier, treasurer, tellers, agents, salesmen, solicitors, collectors and other employees of the association with money accountability, shall be equivalent to, or not less than, their average daily cash accountability. The corporate secretary of a stock savings and loan association shall furnish a bond in an amount to be determined by the association's board of directors but in no case shall such bond be less than one thousand pesos (P1,000.00). The bonds must be issued by a reputable bonding company approved by the Central Bank (See 2.Appendix A for list of insurance companies accredited by the Central Bank). A cash bond may also be allowed provided such bond is deposited with a bank or stock savings and loan association other than where such officer or employee is employed. The average daily cash accountability of an officer or employee of an association shall be computed by adding the amount of actual cash which he handles each day for a year, the total of which shall be divided by the number of days of the year said officer or employee receives or handles such cash. Checks or other cash items shall not be included in the computation of the average daily cash accountability: Provided , That proper and adequate safeguards, as prescribed by the appropriate supervising and examining department of the Central Bank (see 2.Appendix B) are adopted by the association. Stock savings and loan associations are prohibited from signing as co-makers of the bonds for their accountable officers/employees. SUBSECTION 222.73 Compensation of officers and employees . The regulations on compensation of directors embodied in Subsec. 221.8 shall also govern compensation of officers and employees. SUBSECTION 222.74 Liability of officers for loans contrary to law . No stock savings and loan association shall make or purchase any loan or investment not authorized or permitted under these regulations or Republic Act No. 3779, as amended, and any director, officer or employee who, on behalf of any such association, knowingly makes or purchases any such loan or investment or who knowingly consents thereto shall be personally liable to the association for the full amount of any such loan or investment. LLphil SUBSECTION 222.75 Agents, salesmen and collectors . No person, whether natural or juridical, shall act as an agent or salesman of a stock savings and loan association or operate any agency thereof without obtaining a license from the Monetary Board. No license is required for a collector of an association but no person shall hold himself out or act as a collector unless he is authorized, in writing, by such association: Provided , however , That no person who has been convicted of estafa or any other crime involving dishonesty may be authorized as a collector of an association. SUBSECTION 222.76 External auditor . All stock savings and loan associations shall engage the services of a reputable independent certified public accountant to audit their books of accounts at least once a year, or as often as necessary. SUBSECTION 222.77 Prohibition on disclosure of confidential information . The regulations on disclosure of confidential information by directors embodied in Subsec. 221.9 shall likewise apply to officers, employees or agents of stock savings and loan association or of the Central Bank. [Circular 691 8-13-79] SECTION 223. Banking Days and Hours . SUBSECTION 223.1 Banking days . Except as provided in Item (f) of Subsec. 214.22 (Banking Days of Money Shops), thrift banks, as defined in Section 6-A of Republic Act No. 337, as amended, including their branches, agencies and extension offices, doing business in the Philippines shall observe a six-day banking week Monday thru Saturday, with option to open on Sundays. Banks shall also have the option to open on local or national holidays: Provided , That the options granted under this section may be availed of by giving the notice prescribed in Subsec. 223.6. SUBSECTION 223.2 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. 223.1 banks may transact business for less than six (6) hours. SUBSECTION 223.3 Banking hours beyond the minimum . For purposes of servicing deposits and withdrawals, banks may, at their discretion and after prior written notice to the appropriate supervising and examining department of the Central Bank, 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 223.4 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 appropriate supervising and examining department of the Central Bank. Banks may change the banking days and hours previously reported to the Central Bank by giving prior written notice to the appropriate supervising and examining department of the Central Bank: Provided , That except in emergencies, changes in banking days or hours shall not be made oftener than once every thirty (30) days. SUBSECTION 223.5 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. 223.6 except when such closing or opening is due to an emergency as herein defined. For purposes of this section, emergency shall mean (a) a condition of an area or locality proclaimed by the President of the Philippines as in a state of emergency, or (b) an event or occasion or a combination of circumstances equivalent to a public calamity resulting from fire, flood, or like disaster, or through some unusual occurrence or pressing necessity, not reasonably subject to anticipation calling for immediate action or remedy. SUBSECTION 223.6 Reporting requirements . The prior written notice to the Central Bank on changes in banking days and hours as required in this section 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 223.61 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. 223.6. 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 under the same subsection. [Memorandum 7-5-79] SUBSECTION 223.7 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 223.8 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 224. Internal Procedures . SUBSECTION 224.1 Recording of transactions a. All banking institutions shall have a true and accurate account, record or statement of their daily transactions, particularly those referring to their deposit liabilities. The commission of any false entry or the omission to make an entry on any such transactions shall be a ground for the Monetary Board to order the removal from office of any officer, director, agent or employee responsible therefor, without prejudice to their criminal liability under Sections 33 and 34 of Republic Act No. 265, as amended, and/or applicable provisions of the Revised Penal Code. [Circular 307 8-3-70] b. The prescribed system of accounting for stock savings and loan associations is the ticket system of accounting. [MSLA 5 11-29-65] c. Commercial banks, thrift banks and specialized government banks shall observe the regulations embodied in Subsec. 259.7 concerning the booking of deposits and withdrawals. [Circular 730 4-18-80] SUBSECTION 224.2 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 and 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.Appendices C and D) required for submission to the appropriate supervising and examining department. [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] The following penalties/sanctions, whenever applicable, shall be imposed upon any thrift bank for failure or refusal to adopt the prescribed Uniform System or any of the applicable accounts contained therein or for using/adopting any general ledger account not specified in the said Uniform System without prior written approval of the Governor of the Central Bank: a. Penalties prescribed under Sections 34 and 34-A of Republic Act No. 265, as amended; b. Suspension or revocation of the authority to engage in quasi-banking functions; and c. Such other penalties/sanctions authorized by law. [Circular 522 6-7-76] SUBSECTION 224.21 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/statements (such as report on required and available reserves against deposit liabilities, annual statement of condition) required of a banking institution to be submitted to the Central Bank periodically or within a specified period. 2) Wilful delay in submission of reports shall refer to the failure of any banking institution to submit on time the report defined in number (1) above. Failure to submit a report on time due to fortuitous events, such as fire and other natural calamities, and public disorders shall not be considered as wilful delay. 3) Examination shall include, but need not be limited to, the verification, review, audit, investigation and inspection of the books and records of 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 that shall willfully delay the submission of reports as defined above within the periods prescribed for each particular report, shall pay a fine in accordance with the following schedule: P50 per banking day of default for the first five banking days of default; P75 per banking day of default for the next five successive banking days of default; P100 per banking day of default for the succeeding days of default. In the implementation of the foregoing rules, delay or default shall start to run on the day following the last day required for submission of the reports. However, should the last day of filing fall on a non-working day in the locality where the reporting bank is situated, delay or default shall start to run on the day following the next working day. 2) Manner of filing . The submission of the reports shall be effected by filing them personally with the appropriate departments 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 of the Central Bank. In the first case, the date of acknowledgment by the appropriate departments/Regional Offices of the Central Bank appearing on the copies of such reports filed or submitted, and in the second case, the date of mailing postmarked on the envelope or the registry receipt, shall be considered as the date of filing. [Circular 514 4-20-76] 3) Manner of payment or collection of fines . The following regulations shall govern the collection of fines imposed on banks for wilful failure or refusal to comply with, or violation of, any banking law or any order, instruction or regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor: a) Banks shall, within thirty (30) calendar days from receipt of the statement of account from the Central Bank, pay the fines imposed thereon for willful failure or refusal to comply with, or violation of, any banking law or any order, instruction or regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor. b) For banks which maintain demand deposit 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 section, "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 or 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 M 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 head of the appropriate department of the Central Bank, who shall forthwith make a written demand upon the banking institution concerned for such examination. If the banking institution continues to refuse said examination without any satisfactory explanation therefor, the Central Bank officer/examiner/employee concerned shall submit a report to that effect to the appropriate department head. (ii) The fine shall be imposed starting on the day following the receipt by the appropriate department of the written report submitted by the Central Bank officer/examiner/employee concerned regarding the continued refusal of the banking institution to permit the desired examination. (iii) Manner of payment or collection of fine. The same procedures as in item (b) (3) 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 appropriate department of the Central Bank imposing a fine. [Circular 514 4-20-76] SUBSECTION 224.22 Signatories on required bank reports . For purposes of designating the signatories thereto, certain weekly, monthly, quarterly, semi-annual and annual statements/reports required to be submitted to the Central Bank are hereby grouped into Category A-1, Category A-2, and Category B, as follows: a. Categories of reports 1) Category A-1 reports are the quarterly published statements of condition (CBP-16-03; 03-B & 3B-1 (for DBP only) of thrift banks except savings and loan associations, and the condensed statements of condition of savings and loan associations (CBP-7-19-08B). 2) Category A-2 reports are the consolidated monthly statements of condition; quarterly statements of conditions of thrift banks except savings and loan associations (CBP-7-16-05; CBP-7-16-02 and 02.1 & 2); and the consolidated statements of condition of savings and loan associations (CBP-7-19-04B). 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 E hereof. b. Authorized signatories 1) Category A-1 reports shall be signed by the institution's president or the senior executive vice-president and 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 in 2. Appendix F). 2) Category A-2 reports of head offices of financial intermediaries shall be signed by the institution's president or the senior executive vice-president. Reports of offices/units (such as branch, sub-branch, agency, etc.) in this category shall be signed by its respective manager/officer-in-charge. Likewise, the signing authority in this category shall be contained in a resolution approved by the board of directors (sample of resolution is shown in 2.Appendix G). 3) Category B reports shall be signed by officers or their alternates who shall be duly designated by the board of directors. A copy of the board resolution (sample form is shown in 2. Appendix H) covering the initial designation and subsequent change(s) in signatories as well as specimen signatures of the signatories and alternates, shall be submitted to the appropriate supervising and examining department of the Central Bank 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 supervising and examining department shall refuse to acknowledge the report as valid or consider the report as not having been submitted at all. If such a report is not re-submitted by the institution under the signature of a duly authorized signing officer, administrative sanctions/penalties shall be imposed on the erring institution for late reporting or failure to submit the required reports, as the case may be. [CL 12-3-75] SUBSECTION 224.23 Submission of certain information required . All thrift banks (savings and mortgage banks, stock savings and loan associations and private development banks) shall submit to the appropriate supervising and examining department of the Central Bank 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 I. Any changes in any of the required information submitted, after the initial submission, shall be reported to the appropriate supervising and examining department immediately. [MAB-NBFI 10-28-75] All thrift banks shall likewise submit to the same 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 J. [CL 10-18-76] SUBSECTION 224.24 Submission of report 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 reports are embodied in Item 3 of 2. Attachment C. 1. [Memorandum to All Banks, NSLAs, BLAs 1-25-79] SUBSECTION 224.5 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 over-all 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 as amended by Circular 676 5-17-79] The board of directors of each bank shall submit, before the start of the audit, to the appropriate supervisory and examining department of the Central Bank, for its approval, an audit program. The audit program should indicate in detail, using as basis the requirements provided in Subsecs. 224.52 and 224.53, 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 224.51 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 224.52 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 224.53 Minimum contents of report . 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 weakness 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. 2) A descriptive statement of relationships with subsidiaries, affiliated entities, holding companies, if any, and plans with respect to the 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 aspect of the operations/management audit report described under Item (c) above will be required only when any or all of the following conditions or circumstances exist in the operations of the bank as may be determined by the appropriate supervising and examining department: a) Deterioration of financial condition; b) Existence of liquidity and solvency problems; c) Decreasing profits or incurrence of losses; d) Existence of management problems; e) Over extension 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 appropriate supervising and examining department of the Central Bank, at its discretion, shall specify the conditions and coverage of individual bank's operations/management audit report in certain instances where specific problem areas are identifiable. [Circular 558 3-8-77] SUBSECTION 224.54 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/operation performance, policies and practices and its systems and procedures. [Circular 676 5-17-79] SUBSECTION 224.55 Exemption . The Governor of the Central Bank may waive the operations/management audit requirement upon request of the institution with the concurrence of the appropriate supervising and examining department: Provided , That the request of the institution is justified and supported by a showing of managerial capability and a sound and stable financial condition. [Circular 558 3-8-77] SUBSECTION 224.7 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 K. 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; and 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. 234.1 should be maintained. The internal control procedures for dormant/inactive accounts are likewise embodied in 2.Appendix K. [CL 11-29-76; CL 9-8-78, as amended by CL 2-5-79] SUBSECTION 224.8 Bank protection . All thrift banks are required to observe the rules and regulations on bank protection against robberies embodied in 2.Appendix L. [Circular 566 4-27-77] SECTION 229. Miscellaneous Provisions . SUBSECTION 229.1 Annual reports . Every stock savings and loan association shall, within sixty (60) days after the close of its fiscal year, furnish the Monetary Board and mail to each of its stockholders, a copy of its financial statement certified by the external auditor provided for in Subsec. 222.76, showing, in such form and detail as the Monetary Board shall require, the amount and character of the assets and liabilities of the association at the end of the preceding fiscal year. Any association may, in lieu of mailing, publish such financial statement verified under oath, in any newspaper of general circulation in the city or town in which its principal and branch offices are located. The Monetary Board may, in addition to the foregoing, require the publication of such other information as it shall deem necessary for the protection of the investors in these associations. SUBSECTION 229.2 Forms and accounting system . Credit, legal, accounting and other forms to be used by stock savings and loan associations as well as the accounting system and classification of accounts, shall be prescribed by the Monetary Board of the Central Bank. SUBSECTION 229.3 Yearly examination and reporting requirements . The director of the appropriate supervising and examining department of the Central Bank, personally or by deputy, shall make at least once a year and at such times as he or the Monetary Board may deem necessary and expedient, an examination, inspection or investigation of the books and records, business affairs, administration, and financial condition of stock savings and loan associations. Stock savings and loan associations shall submit to the appropriate supervising and examining department of the Central Bank reports which may be required by said supervising and examining department. [Circular 691 8-13-79] APPENDIX A LIST OF INSURANCE COMPANIES ACCREDITED BY THE CENTRAL BANK ADMINISTRATIVE COMPANY ORDER NO . DATE ISSUED 1. Agricultural Fire Insurance & Surety Co., Inc. 241 May 6, 1957 2. Allied Guarantee Insurance Company, Inc. 90 Feb. 2, 1964 3. Alpha Insurance & Surety Company, Inc. 244 May 31, 1957 4. Amalgamated Insurance Corporation 6 Mar. 28, 1966 5. Bankers & Manufacturers Assurance Corporation 154 Dec. 3, 1955 6. Belfast Surety & Insurance Company, Inc. 358 July 7, 1961 7. CCC Insurance Corporation 311 Oct. 6, 1959 8. Central Surety & Insurance Company, Inc. 23 Nov. 23, 1945 9. Citizens Surety & Insurance Company, Inc. 52 Aug. 8, 1954 10. Commonwealth Insurance Company 28 Dec. 8, 1945 11. Communication Insurance Company, Inc. 351 May 31, 1961 12. Consolidated Insurance Company, Inc. 69 July 24, 1963 13. Country Bankers Insurance & Surety Company, Inc. 366 Sept. 12, 1961 14. Development Insurance & Surety Corporation 55 Mar. 12, 1963 15. Domestic Insurance Company of the Philippines 189 Aug. 9, 1952 16. Eastern Assurance & Surety Corporation 30 Nov. 16, 1962 17. Empire Insurance Company 110 Feb. 28, 1950 18. Equitable Insurance Corporation 231 Dec. 21, 1953 19. Federal Insurance Company, Inc. 297 Apr. 21, 1959 20. FGU Insurance Corporation 61 June 6, 1963 21. Filipino Merchants Insurance Company, Inc. 350 May 18, 1961 22. Filriters Guaranty Assurance Corporation 106 Feb. 13, 1968 Certificate of authority issued subject to the condition that the company shall dispose of the real estate properties located at Pamplona, Las Pias, Rizal and Tagaytay City not later than December 31, 1974. To submit to this Commission a satisfactory business plan not later than September 30, 1974 showing its estimated receipts and disbursements for the next succeeding three years and the basis therefor. 23. First Continental Assurance Company, Inc. 360 July 31, 1961 24. First Integrated Bonding & Insurance Company 112 Nov. 24, 1964 25. First National Surety & Assurance Company, Inc. 117 May 1, 1950 26. First Quezon City Insurance Company, Inc. 314 Dec. 22, 1959 27. Fortune Insurance & Surety Company, Inc. 339 Dec. 25, 1960 28. General Insurance & Surety Corporation 156 June 1, 1951 29. Industrial Insurance Company, Inc. 274 July 24, 1958 30. Insurance Corporation of the Philippines 164 Dec. 16, 1965 31. Liberty Insurance Corporation 3 Jan. 13, 1954 32. Luzon Surety Company, Inc. 17 Aug. 11, 1945 33. Mabuhay Insurance & Guaranty Company, Inc. 344 Feb. 26, 1961 34. Malayan Insurance Company, Inc. 85 May 4, 1949 35. Manila Insurance Company, Inc. 59 June 14, 1948 36. Manila Surety & Fidelity Company, Inc. 14 Aug. 10, 1945 37. Manila Underwriters Insurance Company, Inc. 108 Jan. 6, 1950 38. Mercantile Insurance Company, Inc. 87 Feb. 1, 1964 39. Meridian Assurance Corporation 367 Sept. 12, 1961 40. Metropolitan Insurance Company 22 Nov. 12, 1945 41. Midland Insurance Corporation 86 Feb. 1, 1964 42. Mutual Security Insurance Corporation 126 July 18, 1955 43. Northwest Insurance & Surety Company, Inc. 302 July 31, 1959 44. Oriental Assurance Corporation 32 Dec. 11, 1962 45. Overseas Insurance Corporation 153 Dec. 3, 1965 Certificate of authority issued subject to the condition that the property and affairs of the company shall be managed by Pioneer Insurance & Surety Corporation, the administrator appointed by this Commission pursuant to the provisions of Section 175 of the Insurance Act, as amended by Presidential Decree No. 63. The company's paid-up capital stock of P2,000,000 is impaired to the extent of P2,001,821.44. As of September 11, 1974, company is required to desist from taking new risks of any kind or character unless and until the said capital impairment is fully covered. 46. Pacific Union Insurance Company 11 July 21, 1945 47. Pan-Malayan Insurance Corporation 121-A Apr. 27, 1965 48. Paramount Surety & Insurance Company, Inc. 122 July 5, 1950 49. People's Surety & Insurance Company, Inc. 120 June 6, 19 50 50. Philippine American Accident Insurance Co., Inc. 107 Aug. 14, 1964 51. Philippine American Assurance Company, Inc. 42 Dec. 28, 1962 52. Philippine American Gen. Insurance Co., Inc. 173 Dec. 7, 1951 53. Philippine British Assurance Company, Inc. 60 May 25, 1962 54. Philippine Guaranty Company, Inc. 15 Aug. 10, 1945 55. Philippine Home Assurance Corporation 340 Dec. 5, 1960 56. Philippine Phoenix Surety & Insurance Co., Inc. 196 Oct. 29, 1952 57. Pioneer Insurance & Surety Corporation 46 July 13, 1954 58. Premier Insurance & Surety Corporation 131 Aug. 9, 1965 59. Provident Insurance Company of the Philippines 21 Sept. 10, 1945 60. R & B Surety & Insurance Company, Inc. 301 June 3, 1959 61. Reliance Surety & Insurance Company, Inc. 197 Oct. 29, 1952 62. Republic Surety & Insurance Company, Inc. 64 July 29, 1948 63. Rico General Insurance Corporation 118 Apr. 4, 1965 Certificate of authority issued subject to the condition that the accounts of Justice C. G. Alvendia and Mr. F. A. Alvendia in the amounts of P1,156,785.65 and P55,000.00, respectively, shall be liquidated: 10% upon release of the certificate of authority; 40% on or before September 30, 1974 and 50% on or before December 31, 1974. 64. Rizal Surety & Insurance Company, Inc. 25 Dec. 3, 1945 65. Sentinel Insurance Company, Inc. 266 Apr. 25, 1958 66. Sincere Insurance Company, Inc. 41 Dec. 28, 1962 67. Solid Guaranty, Incorporated 113 Nov. 24, 1964 68. South Sea Surety & Insurance Company, Inc. 49 Feb. 28, 1948 69. Standard Insurance Company, Inc. 280 Sept. 24, 1958 70. State Bonding & Insurance Company, Inc. 107 Jan. 6, 1950 71. Summit Guaranty & Insurance Company, Inc. 173 Dec. 22, 1965 Certificate of authority issued subject to the condition that the company's affairs and property shall be managed by Mr. Frisco San Juan, the administrator appointed by this Commission pursuant to Section 175 of the Insurance Act, as amended by Presidential Decree No. 63, dated November 20, 1972. 72. Tabacalera Insurance Company 43 June 2, 1946 73. Times Surety & Insurance Company, Inc. 370 Nov. 5, 1961 74. Towers Assurance Corporation 50 Feb. 25, 1962 75. Traders Insurance & Surety Company, Inc. 34 Apr. 2, 1946 76. Travellers Multi-Indemnity Corporation 119 Apr. 4, 1965 77. Trust Insurance Corporation 33 Dec. 11, 1962 78. United Insurance Company, Inc. 174 Dec. 11, 1951 79. Universal Reinsurance Corporation 84 Apr. 30, 1949 80. Utility Assurance & Surety Company, Inc. 296 Apr. 21, 1959 81. Visayan Surety & Insurance Corporation 32 Feb. 18, 1946 82. Workmen's Insurance Company, Inc. 37 Dec. 27, 1962 Certificate of authority issued subject to the condition that the services of the Philippine Reinsurance Corporation shall be maintained for the purpose of assisting the company in its operation. The company's paid-up capital stock of P2,400,000 is impaired to the extent of P692,089.37. As of August 30, 1974 company is required to desist from taking new risks of any kind or character unless and until the said capital impairment is fully covered. 83. Worldwide Insurance & Surety Company, Inc. 123 July 7, 1950 84. Zenith Insurance Corporation 35 Dec. 21, 1962 [MB Res. 2520 11-22-74] APPENDIX B SAFEGUARDS IN CONNECTION WITH BONDING OF ACCOUNTABLE OFFICERS AND EMPLOYEES OF STOCK SAVINGS AND LOAN ASSOCIATIONS 1. The Teller . He should not be allowed to accumulate more than a specific maximum amount to be determined by the association but in no case to exceed P10,000 in cash at any given time while in the performance of his duties. The procedures in this regard are as follows: a. Cash . All cash in excess of the maximum amount determined by the association shall be turned in to the cashier. When deposits received by a teller will increase his cash in excess of the maximum limit, the teller will immediately make a cash turn-in of, at least, the excess. Thus, although his transactions during the day may total more than the maximum limit, the amount of money directly in his custody at any given time will never exceed the limit. b. Checks and Other Cash Items . All COCI received by a teller should be stamped as "NON-NEGOTIABLE". The stamping should be made diagonally on the face of the check. Thus, all checks that are received by the tellers lose their further negotiability. There should, however, be an agreement with the association's depository banks whereby they will accept for deposit only to the account of the association the COCI previously stamped by the tellers as "NON-NEGOTIABLE". Therefore, only the association and nobody else can further negotiate these checks and only the association's depository bank will accept them and solely for deposit to its account. Thus, even in the remote possibility that someone presents a COCI stolen from the association to one of its depository banks, it will not be accepted for encashment. 2. The COCI Clerk . In view of the fact that all COCI received by the tellers are stamped "NON-NEGOTIABLE" as detailed above, the COCI clerk who records and processes these checks carries no accountabilities whatsoever. From the moment that a check is received up to the moment that it is deposited to the account of the association with one of its depository banks, that check is just a piece of paper to be processed and recorded. It will only reassume its negotiability upon its receipt by the association's depository bank. In. cases, however, where checks are received by mail, the COCI clerk shall be charged with the duty of stamping the checks as "NON-NEGOTIABLE". 3. As an added precautionary measure, the manager/accountant/loan officer should check from time to time whether all COCI items received are stamped "NON-NEGOTIABLE". In the event that a COCI is not so stamped and results in financial loss on the part of the association, the employee charged with the duty to stamp and who failed to do so, shall be held personally responsible, together with the manager/accountant/loan officer, for the loss. [MCRBSLA 74-28 5-15-74] APPENDIX C (Book II, Part 2) REPORTS REQUIRED OF THRIFT BANKS A. Required of Savings and Mortgage Banks and Private Development Banks New Form No. Subject of Report Frequency Deadline Issuance CBP-7-16-01 Consolidated Report of Weekly Four banking days from CL 8-4-77 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 reference week end of CBP-7-16-01.2 Special Time Deposits Weekly Four banking days from CL 8-4-77 and Reserves Against end of reference week Them (Consolidated) CBP-7-16-01.3 Supporting Schedules Weekly Four banking days from CL 8-4-77 of Item 3.a in end of reference week CBP-7-16-01 CBP-7-16-01-A Report of Changes in the As changes Two banking days Circular Composition of Securities occur following the day of 456 3-19-75 (except Premyo Savings change Bonds) Held as Reserves for Deposit Liabilities CBP 17-16-01-B Report of Changes in the As changes Four banking days after Circular Composition of Premyo occur end of week of change 456 3-19-75 Savings Bonds Held as Reserves for Deposit Liabilities CBP-7-16-01-C * Consolidated Report of Weekly Four banking days from CL 8-4-77 Required and Available reference week Reserves Against Deposit Liabilities CBP-7-16-01-C.1 * Report of Cash on Hand Weekly Four banking days from CL 8-4-77 reference week CBP-7-16-02-SB) Statement of Condition Quarterly Ten banking days after CL 8-4-77; CBP-7-16-02 PDB * ) end of quarter Memo 1-16-79; Memo 3-11-80 CBP-7-16-02SB-A Selected Financial Part I-Quarterly Ten banking days after Memo 1-16-79, CBP-7-16-02PDB-A * ) Accounts ** Part II- end of quarter Memo 5-7-79 Semestrally CBP-7-16-02 SB.1) Breakdown of Due Part I-Quarterly Ten banking days after Memo 1-6-79 CBP-7-16-02 from/Due to Local Part II- end or quarter PDB.1 * ) Banks and Domestic Semestrally Deposit Liabilities CBP-7-16-03-SB * ) Consolidated Statement of Part I-Quarterly The original and published CL 8-4-77, as CBP-7-16-03- PDB * ) Condition (Published) Part II reports within 12 and 20 amended by Semestrally banking days, respectively, Memo 11-15-79 from receipt of call to the and Memo bank by the DCSB Director 12-23-79 CBP-7-16-04 Consolidated Report of Annually Twenty banking days after CL 84-77 Income Expenses, Undivided end of calendar year Profits and Surplus CBP-7-16-04SB * Consolidated Report of Semestral Twentieth banking Memo 4-28-80 Income, Expenses and day after end of Surplus (Free) calendar semester/year Memo 4-28-80 CBP-7-16-04A SB * Report of Income and Semestral Ten banking days after Memo 4-28-80 Expenses end of calendar semester/year CBP-7-16-05 Consolidated Statement of Monthly Seven banking days after CL 8-4-77 Condition end of month CBP-7-16-05-B ** Consolidated Statement of Monthly Seven banking days after CL 8-4-77 as Condition end of month amended by Memo 8-6-79 CBP-7-16-05.1 Breakdown of Due from/Due Monthly Seven banking days after CL 8-4-77 as to Local Banks and Domestic end of month amended by Deposit Liabilities-Banks Memo 7-23-79 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/Funds Monthly Seven banking days after CL 8-4-77 Obtained end of month CBP-7-16-05.4 Computation of Quarterly Seven banking days after CL 8-4-77, as Investment-Deposit Ratio end of quarter amended by MACTB 3-30-79 CBP-7-16-05.5 Monthly Seven banking days after CL 8-4-77 end of month CBP-7-16-05.6 Breakdown of Private Loans Monthly Seven banking days after CL 8-4-77 and Investments in Bonds end of month| and Other Debt Instruments CBP-7-16-05.7 Breakdown of Bills Payable Monthly Seven banking days after CL 8-4-77, as and Deposit Substitutes end of month amended by Contingent Memo 8-23-79 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 Items Quarterly Fifteen banking days after CL 8-4-77 Lodged in Due From/Due to end of quarter Head Office, Branches and Agencies CBP-7-16-05.10 Breakdown of Loan Portfolio Monthly Seven banking days after CL 8-4-77, as and Investment Accounts end of month amended by Classified as to Type of Memo 7-23-79 Borrowers CBP-7-16-05.11 Breakdown of Deposit Liabilities Monthly Seven banking days after CL 8-4-77 of Private Residents of the end of month Philippines CBP-7-16-05.12 Breakdown of Other Assets and Monthly Seven banking days after CL 8-4-77 Liabilities end of month CBP-7-16-05.13 Miscellaneous Monthly Seven banking days after CL 8-4-77 end of month CBP-7-16-05.14 Additional Information for Monthly Seven banking days after CL 8-4-77 Agricultural Credit Loan-P.D. 717 end of month CBP-7-16-06 Consolidated Report of Monthly Seven banking days from CL 8-4-77, as Investment in Bonds and reference month amended by Other Debt Instruments and Memo 7-23-79 Selected Trading Account Securities CBP-7-16-07 * Statement of Capital Required Weekly Four banking days after CL 8-4-77; and Capital Accounts under end of week Memo 3-11-80 See. 22 or 30 of R.A. 337, as amended CBP-7-16-07-A Daily Report on Compliance Weekly Four banking days after CL 10-31-77 with Aggregate Ceiling on end of week Direct/Indirect Credit Accommodations to Directors/Officers Stockholders/Related Interests (DOSRIs) 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 Direct end of week Credit Accommodations to Directors/Officers/Stockholders CBP-7-16-08 Report on Government Funds Monthly Three banking days after MACSDB Held (Consolidated) end of month 11-24-76 CBP-7-16-08.1 Breakdown of Government Funds Monthly Three banking days after MACSDB Held in the Form of Deposit end of month 11-24-76 Liabilities CBP-7-16-08.2 Breakdown of Government Monthly Three banking days after MACSDB Funds Held in the Form end of month 11-24-76 of Non-Deposit Liabilities CBP-7-16-11 List of Stockholders and Their Complete Complete list-twelve banking Cir. 449 2-3-75; Stockholdings list-yearly days from beginning of year CL 7-5-74; Changes-quarterly Changes-seven banking Memo 8-27-79 days after end of quarter CBP-7-16-12 Report on Dividends Declared On every Ten banking days after date Cir. 323 declaration of dividend declaration 11-18-71, Memo 12-28-79 CBP-7-16-13 Consolidated Report on Semi-annually Fifteen banking days after CL 10-31-77 Compliance with Aggregate end of semester Ceiling on Credit Accommodations to Directors/Officers/Stockholders/ Related Interests (DOSRIs) CBP-7-16-13-A Report on Stockholdings of Banks Semi-annually Fifteen banking days after CL 10-31-77 Directors/Officers/Stockholders/ end of semester Relatives in Borrowing Corporation/Association/Firm CBP-7-16-15 Consolidated Report on Semi-annually Fifteen banking days after CL 10-31-77 Compliance with Individual Ceiling end of semester on Credit Accommodation to Directors/Officers/Stockholders CBP-7-16-15.A Report on Financing Plan for Semi-annually Fifteen banking days after CL 7-19-77 Officers end of semester CBP-7-16-15.B Report on Financing Plan for Semi-annually Fifteen banking days after CL 7-19-77 Employees end of semester CBP-7-16-15.C Contingent Accounts of Semi-annually Fifteen banking days after CL 10-31-77 Directors/Officers/Stockholders/ end of semester Related Interests (DOSRIs) CBP-7-16-16 Schedule of Banking Hours As changes Seven banking days prior to Cir. 608 4-20-78 and Days occur effectively of change CBP-7-16-17 Report of Loans Granted Under As loan is Fifteen banking days from CL 7-5-74 Sec. 83 of R.A. 337, as amended approved date of approval of loan, whether direct or indirect, granted to any bank director or officer CBP-7-16-18 SB) Biographical Data of Annually Within twenty-five Memo CBP-7-16-18 PDB) Directors/Officers banking days after 11-15-78, as end of calendar year amended by Memo 12-8-78 CBP-7-16-19 Report on Compliance with Quarterly After end of quarter MAB 9-27-72 the Obligation to Withhold the Tax on Interest Income of Non-Resident Foreign Individuals or Corporations Not Engaged in Trade or Business in the Philippines CBP-7-16-20 Report on Crimes/Losses As crime or Within forty-eight hours CL 3-10-78 incident occurs from knowledge of crime or incident CBP-7-16-21 Notice/Application for As write-off Twenty-five banking days MCSDSB Write-off of Loans and occurs prior to the intended date 11-24-76 Advances of write-off CBP-7-16-22 Consolidated Report of Weekly Four banking days after CL 10-1 7-78 Required and Available end of reference week Reserves against Deposit Substitutes and Interbank Loans CBP-7-16-25 Sworn Statement on Monthly Twelve banking days after CL 12-18-78 Quasi-Banking Operations end of reference month CBP-7-16-27 Consolidated Report on the Monthly Twelve banking days after CL 8-4-77, as Utilization of Loanable Funds end of reference month amended Set Aside for Agrarian Reform by CL 3-1-78 Credit/Agricultural Credit and MAB 4-19-79 CBP-7-16-27-A Consolidated Report on Monthly Twelve banking days after CL 7-19-76 Existing Eligible Government end of reference month Securities Held for Temporary Investment CBP-7-16-29 Application for the Temporary As application Not later than the banking CL 7-5-74 Use of CBCIs and Other is made day immediately following Government Securities with the day when the bank Remaining Maturities of Less incurred a reserve deficiency Than Two (2) Years, Not Otherwise Eligible as Reserves Against Deposit Liabilities CBP-7-16-31 Sworn Statement on Real Estate As transaction Ten banking days after CL 2-11-75; Transaction is approved approval of transaction CL 5-5-75 CBP-7-16-32 Loans/Credits Granted to Builders Monthly Five banking days after CL 7-31-75; or Purchasers of Units/Shares in end of month CL 8-29-75 Condominium Projects, Country Clubs, Sports Clubs and Other Real Property Developments Unnumbered (No. Information Required Under As changes occur Immediately after change MAB-NBFI prescribed form) Memorandum to All Banks and 10-28-75 Non-Bank Financial Intermediaries dated October 28, 1975 Unnumbered Reconciliation Statement Yearly January 31st of the Circular 503 Between Head Office and following year 2-2-76 Branch Transactions Unnumbered List of Unresponded or As Within 30 days after Circular 503 Outstanding Items for More necessary six-month period 2-2-76 than Six Months in Monthly Reconciliation Statements of Head Office and Branch Transactions B. Required of Stock Savings and Loan Associations CBP-7-19-01-A Weekly Report on Required and Weekly Thursday following Memo Available Reserves Against reference week 7-23-79 Deposit Liabilities CBP-7-19-01-B Consolidated Weekly Reports Weekly Thursday following MCRBSLA on Required and Available reference week 74-63B 8-30-74, Reserves Against Deposit amended by Liabilities Memo 7-23-79 CBP-7-19-02-B *** Statement of Capital Required Weekly Four banking days after Memo 3-11-80 and Capital Accounts reference week CBP-7-19-04-B Consolidated Monthly Monthly On or before the 10th Memo 3-11-80 Statement of Condition of the month CBP-7-19-04-B.1 Consolidated Monthly Schedule Monthly On or before the 10th Memo 3-11-80 of Savings and Time Deposit of the month CBP-7-19-04-B.4 * Statement of Condition Quarterly 10th day after end of MSLA 3 5-11-65 reference quarter CBP-7-19-05-B Consolidated Semi-Annual Semi-annually On or before the 30th MCRBSLA Report of Earning, Expenses, day after the close of 74-63B 8-30-74 Surplus and Dividends every semester CBP-7-19-05-B.1 * Statement of Income and Quarterly 10th day after end of Expenses reference quarter CBP-7-19-06-B Consolidated Report of Monthly On or before the 10th MCRBSLA Investments in Loans and of the month 74-78 10-21-74 Discounts CBP-7-19-07-B Consolidated Cash Flow Monthly On or before the 10th MCRBSLA 74-63B 8-30-74 CBP-7-19-08-B Consolidated Condensed Annually On or before the 60th day Statement of Condition after December 31 CBP-7-19-09-B Consolidated Report on the Annually Within 12 days after the Circular 408 Utilization of Loanable Funds end of applicable month 5-31-74 Set Aside for Agricultural Credit MCRBSLA 74-37 6-21-74 CBP-7-19-10-B.2 ** Report on Beneficiaries Loan Quarterly On or before the 10th MCRBSLA (Sub-loan Application) day after each quarter 74-67 9-18-74 CBP-7-19-10-B.2.1 ** Consolidated Report on Monthly 12 banking days after CL 7-19-77 Existing Eligible Government end of reference month Securities Held for Temporary Investment CBP-7-19-10-B.6 ** Quarter-end Status of Monthly 12 banking days after CL 7-19-77 Overdue Loan Principal end of reference month and Interest CBP-7-19-12B Report on Financing Plan Semi-annually 15 banking days after end CL 7-19-77 for Officers of reference semester CBP-7-19-12B.1 Report on Financing Plan for Semi-annually 15 banking days after end CL 7-19-77 Employees of reference semester CBP-7-19-41-B Plantilla of Organization Annually and January 31 of every year MCRBSLA whenever and ten days after any 74-93 12-16-74 changes occur change CBP-7-19-42 SLA Biographical Data of Annually Within 25 banking days Memo Directors/Officers after end of calendar year 11-15-78, as amended by Memo 12-8-78 CBP-7-19-45-B Application for Availment of Everytime Not Later than the MCRBSLA the Privilege to Use CBCIs an application banking day immediately 74-32 5-17-74 and Other Government is made following the day when Securities with Remaining the bank incurred a Maturities of Less Than Two reserve deficiency Years Not Otherwise Eligible as Reserves Against Deposit Liabilities CBP-7-19-45-B.1 Investment in Securities Everytime Tuesday following MCRBSLA (to accompany an application reference week 74-32 5-17-74 CBP-7-19-45-B) is made CBP-7-19-46.B Sworn Statement on Real As transaction 10 banking days after CL 7-15-75 Estate Transaction is approved approval of transaction CBP-7-19-50B Report on Crimes/Losses As crime Within 48 hours from CL 3-10-78; or incident knowledge of the Memo 1-25-79 occurs crime/incident Unnumbered Serial Number of Time Deposits Everytime a new Circular 278 (No prescribed set of certificates 7-30-69 form) is printed Specimen Signature of Signing Annually Upon assumption of office MSLA 11 2-5-69 Officers/Directors Report of Change of As changes Within 10 days after any MSLA 22 Director/Principal Officer occur such change 2-12-71, as amended by MAD-NBFI 10-28-75 Bonding of Accountable As necessary Before assumption Cir. 404 5-15-74 Officers and Employees of office Audit Engagement Contract Annually Upon consummation of MSLA 21 of an Independent CPA contract 2-11-71 Affidavit of the Publication or Annually Within 2 weeks after CL 72-8 Mailing of Year-End Financial publication or mailing 4-28-72 Statements Notice/Application for As write-off 30 days prior to the Cir. Write-off of occurs intended date of write-off 372-6-25-73 Report on CB:IBRD Arrearages Monthly On or before the 10th of MCRBSLA the month following the 75-5 1-27-75 reference month or every CB:IBRD application whichever is less frequent Information Required Under As changes Immediately after change MAB-NBFI Memorandum to All Banks occur 10-28-75 and Non-Bank Financial Intermediaries dated October 28, 1975 Loans/Credits Granted to Builders Monthly Five banking days after CL 7-31-75 or Purchasers of Units/Shares in end of month Condominium Projects, Country Clubs, Sports Clubs and Other Real Property Developments Reconciliation of Head Office and Yearly January 31st of the Circular 503 Branch Transactions following year 2-2-76 List of Unresponded or As Within 30 days after Circular 503 Outstanding Items for More than necessary six-month period 2-2-76 Six Months in Monthly Reconciliation Statements of Head Office and Branch Transactions Copy of the Written Approval of Everytime a loan Immediately after any Loan Granted to Officers is granted to any approval of the loan and/or Directors director and/or officer Report of Discrepancies of Everytime a Within 15 days from MSLA 19 Accounts discrepancy discovery of discrepancy 10-8-70 occurs Certification as to the Last Annually Five days after the close MSLA 16 Number of Board Resolution of the year 7-24-70 Adopted Duplicate of Board Every meeting Within 5 days after MSLA 16 Resolutions adoption or approval 7-24-70 Footnotes * For private development banks only ** To be submitted in lieu of CBP 7-16-02SB and CBP 7-16-04A by each extention office/savings agency/sub-branch/money shop under the supervision of reporting branch/office. * For savings banks only. ** For private development banks only. * For banks which are not participating in CDRC Program * Applicable only to stock SLAs with branches ** Applicable only to participating stock SLAs in the CB: IBRD Third Rural Credit Project *** For banks which are not participating in CDRC Program ** Applicable only to participating stock SLAs in the CB: IBRD Third Rural Credit Project ATTACHMENT 1 (Book II, Part 2) INSTRUCTIONS ON ACCOMPLISHMENT AND SUBMISSION OF REPORTS REQUIRED OF SAVINGS AND MORTGAGE BANKS AND DEVELOPMENT BANKS 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 deposit (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. [MAB-DG 12-8-69] d. 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 Published Statement of Condition (CBP-7-16-03) Item 20 Bills Payable (CBP-7-16-03) and Item 12 Domestic Borrowings (CBP-7-16-03) and Item 12 Domestic Borrowings (CBP-7-16-03-B) in the published statement of condition shall be broken down into: a. Deposit Substitutes; and b. Others. The account "Deposit Substitutes" refers to Item 21(e) of CBP-7-16-05 (Consolidated Statement of Condition). [CL 3-19-75] 3. Report 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 their property when the amount involved in each crime is 1) Savings banks P4,000 or more 2) Private development banks P2,000 or more 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. b. Incidents involving material loss, destruction or damage to the institution's property/facilities, other than that arising from a crime, when the amount involved per incident is 1) Savings banks P20,000 or more 2) Private development banks P10,000 or more 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 mail or by the date received, if hand-carried to the appropriate supervising and examining department, Manila, or, in applicable cases, to the unit of the supervising and examining department, in any of the Regional Offices of the Central Bank. d. Violations of these regulations shall be punishable under Section 34-A of Republic Act No. 265, as amended. [Memorandum to All Banks, NSLAs, BLAs 1-25-79] 4. 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: a. Report to the Monetary Board any real estate transaction (such as, but not limited to rentals or leases, purchase and sales, or foreclosed assets) by and between the bank and its director/s, officer/s, stockholder/s owning at least two per cent (2%) of the bank's subscribed capital stock or any firm substantially owned (in the aggregate of at least twenty per cent (20%) of the paid-in capital of such firm) by one or more of such directors/officers/stockholders; and b. Certify to the Monetary Board that such transaction has been thoroughly reviewed and verified as having been entered into in the best interest of the bank. [CL 2-11-75] 5. Reconciliation of Head Office and Branch Transactions All savings and mortgage banks and private development banks 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 date shall be reported, with explanations/reasons for their being outstanding to the Department of Commercial and Savings Bank within the next fifteen (15) days after the aforementioned deadline. The reconciliation statement shall be made available to any duly authorized bank examiner for inspection/examination without need of advance notice. A copy of the year-end reconciliation statement covering transactions between a bank's head office and all its branches shall be furnished the Department of Commercial and Savings Banks not later than the end of January of the following year. [Circular 503 2-2-76] 6. Statement of Capital Required and Capital Accounts (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 Republic Act No. 337, as amended: LLjur 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 568 5-4-77] 7. List of Stockholders and Their Stock holdings (CBP 7-16-11) . The following guidelines are adopted so as to facilitate the preparation and submission of report form CBP 7-16-11: 1. Banks shall submit in duplicate to the Department of Commercial and Savings Banks annually a complete list of stockholders and their stockholdings and all other relevant information called for in the report form CBP 7-16-11 within twelve (12) banking days from the beginning of each calendar year. 2. Any change (either by replacement, addition or cancellation) in the above original list shall be reported quarterly to the Department of Commercial and Savings Banks not later than seven (7) banking days after the end of each quarter, specifying therein the name(s) and/or stockholdings involved which is/are to be cancelled or replaced, and the new name(s) and/or stockholdings which shall be included for that quarter. In case no change(s) occurred during a particular quarter, the report shall provide a notation, viz: "No change(s) since last report submitted for the quarter ended ___________,19 ____" [Memorandum 8-27-79] B. Central Bank Offices Where Reports Are Submitted Submission of Department of Commercial and Savings Banks' periodic/call reports shall be as follows: 1. 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 2. All banking offices located in Cebu City and Davao City shall submit both the original and duplicate of required reports direct to the respective CB Regional Offices located in said cities. 3. Where a particular report form calls for distribution of copies to other Departments of the Central Bank, the bank concerned shall furnish said copies of the report direct to the respective Departments of the Central Bank. [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 offices; 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 (see 2.Appendix C), both periodic and non-periodic, which are being submitted/to be submitted by banks to the Department of Commercial and Savings Banks of the Central Bank, are hereby amended such that the period within which to submit said reports shall be reckoned on the basis of banking days instead of calendar days. For this purpose, banking days shall be understood to mean Monday thru Friday and/or banking days of the Central Bank. [CL 2-28-75] ATTACHMENT C-2 INSTRUCTIONS ON THE ACCOMPLISHMENT AND SUBMISSION OF REPORTS REQUIRED OF STOCK SAVINGS AND LOAN ASSOCIATIONS A. Nature and Contents of Reports For the information and guidance of all concerned, specific instructions for the accomplishment of each report and the corresponding definitions of the terms as used therein are provided hereunder: 1. Consolidated Weekly Reports on Required Available Reserves Against Deposit Liabilities [CBP 7-19-01 B] must be accomplished weekly (including Saturdays & Sundays, if the association or any of its branches is open for business on Saturdays & Sundays), in triplicate, the original and duplicate copies of which should be submitted/mailed to the Department of Rural Banks and Savings and Loan Associations, Central Bank, not later than every Tuesday of the week following that for which the report is made. LLjur Definition of Terms a. Deposit liabilities all savings and time deposits received by the association. Savings deposit is subject to an indeterminate time at the will of the depositor, who may, therefore, withdraw the same at his pleasure, unless notice is reserved by the depository savings and loan association. Time deposit is subject to a definite time of maturity and, therefore, cannot be withdrawn by the depositor until its maturity date arrives, unless the depository association waives its right to the term (Section 18, Circular No. 157 as amended). b. Required reserves against deposit liabilities the amount required to be maintained as reserves against the total deposit (savings and time) liabilities of the association. c. Available reserves the amount set aside and/or earmarked by the association to cover the required reserves against deposit liabilities and may consist of the following: (1) Cash deposited with Central Bank and/or the Philippine National Bank for the account of the Central Bank. (2) Holdings of eligible Philippine securities and total cash on hand. The term eligible "Philippine securities" refers to free or unencumbered bonds or securities held by the association, the servicing or repayment of which is guaranteed by the Republic of the Philippines and supported by the CB. d. Potential reserves the total cash deposited in banks other than those deposited with the Central Bank of the Philippines or Philippine National Bank (for account of the Central Bank) which is not reflected as available reserves; and the amount of eligible Philippine securities which is not included or reflected as available reserves. 2. Consolidated Monthly Statement of Condition [CBP 7-19-04 B] must be accomplished in triplicate, the original and duplicate copies of which should be submitted/mailed to the Department of Rural Banks and Savings and Loan Associations, Central Bank, on or before the 10th of the month following that for which the report is made. Definition of Terms (1) Cash on hand the total of all currency, both notes and coins, in the possession of the association. (2) Checks and other cash items the total value of checks and other cash items such as treasury warrants, postal money orders, bond coupons and the like, on hand or in the possession of the association. (3) Cash in banks - the total amount deposited in banking institutions. (4) Loans, discounts and advances the total outstanding balances of loans or cash advances granted to persons or firms, and the amount or face value of the receivables of other persons or firms discounted with recourse by the association. (5) Current notes the outstanding balance of loans, discounts and advances not yet due and payable. (6) Past due notes the total balances of all loans, discounts and advances not paid or still outstanding after the maturity date. (7) Items in litigation all past due loans, discounts, and advances for the collection of which court actions have been instituted by the associations. (8) Investment in securities the total amount of bonds and/or stocks acquired by the association for the purpose of generating income. These bonds or stocks must be government bonds or stocks of non-speculative private enterprises. (9) Other investments all other funds invested by the association for the purpose of generating income not included in No. 8 above. (10) Due from branches the outstanding balance of the association's investments and/or advances for the operation of its branches. (11) Accounts receivable the total of all accounts due to the association not arising from loans nor from investments in bonds or securities, including advances to employees, receivables from customers arising from collections, collection charges and fees for miscellaneous services rendered by the association. (12) Deferred charges the balance of prepayments made by the association on expenses applicable to future periods, such as organization expenses, insurance premiums, stationery and supplies, premium on fidelity bonds, etc. (13) Building or office premises the book value of the land and building which are owned and being used by the association in its operation, less depreciation. (14) Leasehold improvements the book value of improvements on properties held under lease by the association, less depreciation. (15) Furniture, fixture and equipment the book value of furniture, fixtures and equipment which are owned and being used by the association in its operation, less depreciation. (16) Assets acquired in settlement of loans the book value of real or personal properties acquired through foreclosures or forfeitures. (17) Other assets the net book value of assets other than those mentioned in Nos. 1 to 16. (18) Borrowings the outstanding balance of loans obtained by the association from any public or private lending institutions, in accordance with Sec. 5(c) and (f) of Republic Act No. 3779, as amended, and Sec. 50 of Circular No. 157, as amended. (19) Due to branches the outstanding balance of obligations of the association to its branches. (20) Accounts payable the outstanding balance of the association's obligations other than those arising from receipt of deposits and direct borrowings. (21) Accrued expenses the outstanding balances of expenses which are due but not yet paid by the association. (22) Unearned interest and discounts the unrealized portion of all interest or discounts collected in advance in connection with the granting of loans and discounting of commercial papers. (23) Other deferred credits all other unearned income collected in advance aside from those mentioned in No. 22. (24) Other liabilities all other obligations of the association not otherwise mentioned from Nos. 18 to 22 hereof. (25) Capital stock paid-in the amount paid in by the stockholders on stocks subscribed. (26) Surplus the aggregate amount of profits earned or realized by the association which are retained in the business to strengthen its capital structure. (271) Surplus reserves the portion of profits realized or earned by the association, appropriated by the board of directors for specific purposes. Such surplus reserves are not available for dividend declarations. (28) Undivided profits the accumulated amount of profits earned or realized by the association not earmarked or appropriated for any specific purpose. [MSLA 3 5-11-65, as amended by MCSLA 74-63B 8-30-74] 3. Consolidated Monthly Schedule of Savings and Time Deposits (CBP 7-19-04 0 . 1) This must be accomplished in triplicate, the original and duplicate copies of which should be submitted/mailed to the Department of Rural Banks and Savings and Loan Associations on or before the 10th of the following month for which the report is made. End of month balances of savings and time deposits should tally with the controlling accounts as reflected in the financial condition as of the same date. LLjur [Circular 278 6-30-69] 4. Consolidated Report of Investment in Loans and Discounts (CBP 7-19-06 B) This should be accomplished in triplicate, the original and duplicate copies of which should be submitted/mailed to the Department of Rural Banks and Savings and Loan Associations, Central Bank, on or before the 10th day of the month following that for which the report is made. a) Loans, discounts and advances the amount of loans, discounts, and advances granted by the association. The column "Amount Granted During the Month" covers only the funds released during the month. The column "Outstanding at the End of the Month" covers only the total balances of loans, discounts and advances. b) Consumption loans loans the proceeds of which are used to purchase goods or services for the immediate consumption of the borrowers, such as automobiles, house-hold furniture and fixtures, electrical appliances, etc. They also include those granted to entities rendering personal services (except for capital investment purposes) such as hospitals, clinics, restaurants, hotels, recreational establishments, educational institutions and professional service establishments, and also those granted to consumers, finance companies, insurance companies, acceptance corporations, pawnshops and the like. c) Real estate loans loans the proceeds of which are used to finance or partly finance the purchase of residential lots or the construction, reconstruction, repair and improvement of buildings. The use of real estate as security for the loan does not make it a real estate loan. d) Industrial loans loans the proceeds of which are used to finance the purchase of industrial machinery and equipment or of raw materials or the payment of salaries or other current operating expenses of industrial establishments. The mining industry, cottage industry and other light manufacturing firms engaged in food processing are included in this category. For example, sugar refining is industrial while sugar cane growing is agricultural. e) Commercial loans loans the proceeds of which are used to finance the distribution of finished goods, either in storage or in transit, to the final market, whether foreign or domestic. These loans must be distinguished from loans intended to finance the productive operations of an agricultural or industrial firm. "Commercial Loans" as a category is confined to the process of marketing or distribution, whether wholesale or retail, import or export. Thus, loans to finance the export of sugar are treated as commercial, not agricultural. f) Agricultural loans loans the proceeds of which are used to finance the purchase of agricultural machinery and equipment, fertilizers, seeds, work and breeding animals and/or to meet operating expenses, such as irrigation fees, wages of agricultural workers, and the like. LLjur g) Other loans loans the proceeds of which are used for purposes other than those mentioned in (c) to (g). Loans for capital investments of hospitals, clinics, and the like should be classified under this account. 5. Consolidated Semi-Annual Report of Earnings, Expenses, Surpluses and Dividends (CBP 7-19-05 B) This shows all the transactions in the capital accounts during the six month period for which the report is made, should be accomplished in triplicate, the original and duplicate copies of which should be submitted/mailed to the Department of Rural Banks and Savings and Loan Associations, within thirty days after the close of every semester. Dividends declared must be reported to the Department of Rural Banks and Savings and Loan Associations in writing within ten days after the date of declaration. 6. Consolidated Condensed Statement of Condition (CBP 7-19-08 B) This should be accomplished in triplicate, the original and duplicate copies of which should be submitted/mailed to the Department of Rural Banks and Savings and Loan Associations, within sixty days after December 31 of every year. [MSLA 3 5-11-65, as amended by MCSLA 74-63B 8-30-74] 7. Resolutions of Board of Directors and/or of Stockholders/Members of Savings and Loan Associations All savings and loan associations are hereby required to submit to the Department of Rural Banks and Savings and Loan Associations, copies of all resolutions of the board of directors and/or of the stockholders/members of said associations. The board of directors of each association shall see to it that said resolutions are prepared and filed in accordance with the following guidelines: a. All resolutions for each year adopted or approved by the board of directors or by the stockholders/members of the association shall be numbered consecutively, indicating the year and number thereof. However, the resolutions of the board and the resolutions of the stockholders should be numbered independently of each other, thus: Resolutions of Board of Directors Board Resolution No. 1970 1 Board Resolution No. 1970 2, etc. Resolutions of Stockholders/Members Resolution No. 1970 1 Resolution No. 1970 2, etc. No alphabetical insertion shall be allowed, and a certification as to the last number of the resolutions for the year, signed by the secretary and attested by the chairman of the board, shall be made and submitted to the Department within five days after the close of the year. b. Duplicate copies of the resolutions of the board of directors or of stockholders, duly signed by the required number or attested by the proper officers, shall be submitted to the Department either by personal delivery or by registered mail with return card within five days after the adoption or approval of said resolutions. Strict compliance with this requirement is enjoined and any violation hereof shall be dealt with in accordance with the provisions of Section 29(c) of the Savings and Loan Association Act (R.A. 3779, as amended). [MSLA 16 7-24-70] 8. Report on Crimes/Losses (CBP 7-19-50 B) 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 their property when the amount involved for stock savings and loan associations in each crime is P2,000 or more. Crimes involving bank personnel, even if the amount involved is less than those above specified, shall likewise be reported to the Central Bank whenever the bank initiates judicial or extrajudicial action, or imposes sanctions against such bank personnel. 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 stock savings and loan associations is P10,000 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 7-19-50 B: 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 mail, or by the date received, if hand carried to the appropriate supervising and examining department, Manila, or, in applicable cases, to the unit of the supervising and examining department in any of the Regional offices of the Central Bank. d. 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] 9. 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 Rural Banks and Savings and Loan Associations of the Central Bank: a. Report to the Monetary Board any real estate transaction (such as, but not limited to, rentals or leases, purchase and sales, or foreclosed assets) by and between the bank and its director/s, officer/s, stockholder/s owning at least two per cent (2%) of the bank's subscribed capital stock or any firm substantially owned (in the aggregate of at least twenty per cent (20%) of the paid-in capital of such firm) by one or more of such directors/officers/stockholders; and b. Certify to the Monetary Board that such transaction has been thoroughly reviewed and verified as having been entered into in the best interest of the bank. [CL 2-11-75] 10. Reconciliation of Head Office and Branch Transactions All stock savings and loan associations shall prepare monthly reconciliation statements covering transactions between the head office and all its branches within fifteen (15) days after the end of each month. All items which are unresponded or outstanding in the reconciliation statement for more than six (6) months as of reconciliation statement date shall be reported, with explanations/reasons for their being outstanding to the Department of Rural Banks and Savings and Loan Associations within the next fifteen (15) days after the aforementioned deadline. The reconciliation statement shall be made available to any duly authorized bank examiner for inspection/examination without need of advance notice. A copy of the year-end reconciliation statement covering transactions between a bank's head office and all its branches shall be furnished the Department of Rural Banks and Savings and Loan Associations not later than the end of January of the following year. LLjur [Circular 503 2-2-76] 11. Statement of Capital Required and Capital Accounts (CBP-7-19-02B) 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 568 5-4-77] B. Manner of Filing The submission of the reports shall be effected by filing them personally with the Department of Rural Banks and Savings and Loan Associations or with the Central Bank Regional Offices, or by sending them by registered mad or special delivery, unless otherwise specified on the circular or memorandum of the Monetary Board or the Central Bank. Some banks/associations submit their reports to the Department through service companies like the LBC Air Cargo, JRS and Cimexco Messengerial Services. To enable this office to determine the date of filing of such reports, all savings and loan associations availing of the facilities of the above service firms and the like, are hereby required to include in their reports, proofs of deposit/mailing showing the date of submission to, and acknowledgment of, the service companies. [MC 29, Series of 1973] C. Publication and Notice to Stockholders All savings and loan associations are also hereby enjoined to furnish the Department of Rural Banks and Savings and Loan Associations an affidavit of their respective authorized officer attesting to the fact that a copy of the financial statement showing the amount and character of the assets and liabilities of the association at the end of the preceding year was mailed to each of the association's stockholders/members or the affidavit of publication executed by an authorized personnel of the publisher of the newspaper where such financial statement was published, as the case may be. The affidavit shall be submitted to the Department within two weeks after compliance with the requirement of mailing or publication which is sixty days after the close of its fiscal year. LLjur [CL 72-8 4-28-72] APPENDIX D (Book II, Part 2) CHART OF ACCOUNTS FOR REPORTING PURPOSES FOR SAVINGS AND MORTGAGE BANKS AND DEVELOPMENT BANKS For the purpose of achieving uniformity in report 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. LLjur [MAB-GOV. 11-18-70] a. Cash . 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. DO NOT INCLUDE in this item, foreign currency held by the bank not acceptable as part of international reserves and petty cash fund being maintained for petty expenses, which should be reported in item j, Other Assets. [Circular 355 1-8-73] 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 regional clearing offices of the Central Bank. (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 of the Philippines. Credit balance or the overdrawing on this account should be reported in item n, Bills account should be reported in item n, Bills Payable. 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) Debit balances of accounts maintained by the reporting bank with other local banks for direct settlement of inter-bank claims. The account should be reflected at gross amount and any credit balances or over-drawings of the account should be shown in item n, 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 [MAB-G 3-2-71] extended to person or firms, including banking institutions; (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-DCSB 10-23-63] The loans and discounts, bills purchased, acceptances and other accounts affected by such discounting and/or rediscounting transactions shall remain as part of the bank's loan portfolio. A footnote in the financial statement shall indicate the outstanding balances of the discounted and/or rediscounted loans. [MAB 1-30-76] (2) 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. 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: LLjur (1) National Government Direct Issues : (a) Treasury Bills (b) Treasury Notes (c) Capital Treasury Notes (d) Treasury Certificates of Indebtedness (e) Public Works and Economic Development Bonds (f) Socio-Economic Bonds (g) Republic of the Philippines 6-1/2% 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-DSE 9-27-72] Classification of items on CBP-7-16-05 should tally with that on CBP-7-16-06. [CL-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(i), Loans and Discounts, or item e (2), Bills Purchased. g. Due from Head Office, Branches and Agencies . Total balances due from head office, branches and agencies of the reporting bank. h. Bank Premises, Furniture acid 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, leasehold improvements, vaults, fixed machinery, and 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 improvement 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 us foreign currencies not acceptable as part of international reserves, petty cash, accounts receivable, deferred charges, shortages, etc. [Circular 355 1-8-73] 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. Deposit shall be grouped into the following: LLjur (1) Demand deposits All demand deposits of individuals and firms (excluding banking institutions) subject to withdrawals by checks; (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; and (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 of government-owned and/or controlled corporations. DO NOT INCLUDE collections of internal revenue taxes and stabilization taxes, customs duties, etc. which should be reported under item o, Other Liabilities. Where the peso equivalents of the foreign currency deposits under Circular No. 304 are to be shown, said peso equivalents shall be compared 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. l. Due to Head Office, Branches and Agencies . Total balances due to head office, branches and agencies of the reporting bank. m. Cashier's, Manager's 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; and (3) Such checks sold to other customers. n. 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, and (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 (MAB 1-30-73); and (3) bank's liability for discounted and/or rediscounted papers "with recourse" with the Central Bank and/or financial intermediaries. [MAB 1-30-76] DO NOT INCLUDE contingent or secondary liability for rediscount with or sale to the Central Bank or other banks of eligible paper, which should be shown in the account "Rediscounts" under Contingent Accounts. o. 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, "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 2-6-76] p. Unearned Income and Other Deferred Credits . The unearned portion of items of income received or collected in advance. q. 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 o, Other Liabilities. r. Assigned Capital . Total capital assigned by a foreign bank to its Philippine branch. To be filled only by Philippine branches of foreign banks. s. Surplus . Includes amounts formally transferred to the surplus account usually derived from undistributed earnings. t. 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. u. Undivided Profits . The portion of undistributed earnings, including the balances of the profit and loss account as of date of the report, which have not been transferred to surplus. v. Contingent Accounts. When denominated in foreign currency, Contingent Accounts shall be converted into pesos at the guiding rate on reporting date. (1) Inward bills for collection . Domestic foreign bills drafts or checks received for collection by the reporting bank. LLjur (2) 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. (3) Items held for safekeeping . Share of stock, 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 to record such securities for control purposes; all other which the bank may hold for safekeeping for its customers which cannot be included properly under Trust Department accounts. (4) Trust Department accounts . All accounts administered by, standing to the credit of, the Trust Department of the bank. (5) 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/rediscounted papers "with recourse" with the Central Bank and/or other financial intermediaries. The outstanding balances of the discounted/rediscounted loans shall however be indicated in a foot note in the financial statement. [MAB 1-30-76] (6) Others (specify) . All other accounts which are contingent in nature and cannot be properly classified under any of the preceding accounts. [MAB-G 11-18-70] 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 CBCIs held by banks on consignment basis are lodged under contingent accounts, and amount of CBCIs, if any, should be shown by footnote on CBP-7-16-05. [MAB-DSE 11-5-70] APPENDIX E CATEGORY B REPORTS OF THRIFT BANKS Thrift Banks (except SLAs) Consolidated Report of Required and Available Reserve vs. Dep. Liab. CBP-7-16-01 Report of Cash in Bank's Vault CBP-7-16-01.1 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 Cap. Required & Cap. Accounts under Sec. 22 or 30 of R.A. 337, as amended CBP-7-16-07 Report on Gov't. Deposits (Consolidated) CBP-7-16-08 Breakdown of Gov't. Deposits CBP-7-16-08.1 Consolidated Report of Extent of Utilization of Loanable Funds CBP-7-16-10 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' D/O/S and their wife/husband/minor children in Borrowing Corp./Association/Firm CBP-7-16-13A Consolidated Report on Compliance with Individual Ceiling on Credit Accom. to D/O/S 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 w/ Obligation to Withhold Tax on Int. Income of Non- Resident Foreign Individuals or Corp. 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 LLjur and Advances CBP-7-16-21 Consolidated Report of Required & Available Reserve Vs. Deposit Substitutes CBP-7-16-22 Sworn Statement of Quasi-banking Operation CBP-7-16-25 Consolidated Report on the Utilization of Loanable Funds set aside for Agric. Credit CBP-7-16-27 Application for Temporary Use of CBCIs & other Gov't. Sec. with Rem. Maturities of Less than Two (2) Years, Not otherwise Eligible as Res. Against Dep. Liab. CBP-7-16-29 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 Savings and Loan Associations Consolidated Weekly Report on Required and Available Reserves Against Deposit Liabilities CBP-7-19-01B Statement of Capital Required and Capital Accounts (Stock) CBP-7-19-02B Statement of Condition (Stock head office/ branches) CBP-7-19-04B.4 Consolidated Semi-Annual Report of Earnings, Expenses, Surplus, and Dividends CBP-7-19-05B Statement of Income and Expenses CBP-7-19-05B.1 Consolidated Report of Investment in Loans and Discounts (Stock) CBP-7-19-06B Consolidated Report of Investment in Loans and Discounts (Non-Stock) CBP-7-19-06B.1 Consolidated Cash Flow Statement CBP-7-19-07B Consolidated Report on the Utilization of Loanable Funds Generated which were set aside for Agrarian Reform Credit/Agricultural Credit CBP-7-19-10B.2 Quarterly Report on CB: IBRD Lending Operation CBP-7-19-10B.2 to CBP-7-19-10B.6 Monthly Report of Arrearages on CB: IBRD Loans CBP-7-19-10B.7 Loans/Credits Granted to Builders or Purchasers of Units/Shares in Condominium Projects, Country Clubs, Sports Clubs, and Other Real Property Developments CBP-7-19-11B [Source: CL 12-3-75] APPENDIX F FORMAT OF RESOLUTION FOR SIGNATORIES OF A-1 REPORTS OF THRIFT 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; LLjur Whereas, we, the members of the board of Directors of ( Name of institution ) ________________________ are conscious that, in designating the officials who would sign said Category A-1 reports, we are actually empowering and authorizing said officers to represent and act for or in behalf of the Board of Directors in particular and ( Name of institution ) _____________________ in general; Whereas, this Board has full faith and confidence in the institution's President (or the senior vice president, etc., as the case may be) and its Chief Finance Officer (Controller or Chief Accountant) and, therefore, assumes responsibility for all the acts which may be performed by aforesaid officers under its delegated authority; Now, therefore, we, the members of the Board of Directors, resolve, as it is hereby resolved that: 1. Mr. _________________________, President _________________________ Specimen Signature or 2. Mr. _________________________, Senior 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 LLjur 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 FORMAT OF RESOLUTION FOR SIGNATORIES OF A-2 REPORTS OF THRIFT 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; LLjur Whereas, this Board has full faith and confidence in the institution's President (or the senior vice president, etc., as the case may be) and, therefore, assumes responsibility for all the acts which may be performed by aforesaid officers under its delegated authority; Now, therefore, we, the members of the Board of Directors, resolve, as it is hereby resolved that: Name of Specimen Position Name of Report Officer Signature Title Banking Office No . (For Consolidated Statement and H. O. Quarterly Statement of Condition) 1. Mr. ___________________ ________________ President or Senior Exec. Mr. ___________________ ___________________ Vice-Pres. (For reports of Banking Office/Unit other than Head Office) 2. ___________________ ___________________ Manager/Officer- in-Charge etc. are hereby authorized to sign Category 2-A 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 H FORMAT OF RESOLUTION FOR SIGNATORIES OF B REPORTS OF THRIFT 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 signatory or alternate/equivalent positions for 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 signatory or alternate 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 I INFORMATION REQUIRED UNDER CB MEMORANDUM TO ALL BANKS 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, savings and mortgage banks, private development banks, DBP, Land Bank and Amanah Bank, include from President to Department Heads f. For investment houses, financing companies, investment companies and security dealers/brokers, include from President to Vice-President g. For rural banks, stock savings and loan associations, non-stock savings and loan associations and building and loan associations, include from President to Accountant h. For lending investors, include only the two highest officers 7. Branches, agencies and extension offices: a. Name of branch, agency or extension office, e.g., Quiapo Branch or Makati Agency b. Address c. Names and telephone numbers of: (1) Manager (2) Cashier (3) Accountant d. For agencies and extension offices, indicate name of mother branch. LLjur [Source: MAB-NBFI 10-28-75] APPENDIX J (Book II, Part 2) INFORMATION REQUIRED UNDER CIRCULAR LETTER DATED OCTOBER 18, 1976 1. Chart of the firm's organizational structure or any substitute therefor; 2. Name of departments/units/offices with their respective functions and responsibilities; 3. Designation of positions in each department/unit/office with the respective duties and responsibilities; 4. Manual of Instructions or the like embodying the operating policies/procedures of each department/unit/office, covering such areas as: a) Signing/delegated authority; b) Procedure/flow of paper work; and 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 admitted to the Central Bank; and 7. Such other documents/information which may be required from time to time by the supervisory/regulatory department concerned. [Source: Circular Letter dated 10-18-76] APPENDIX K (Book II, 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. LLjur 3. All tickets should bear official approval and should be initiated 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 independent balancing procedures which should be adopted are the following: a. Monthly reconcilement of general ledger balances against their respective subsidiary and supporting records and documentations by someone other than the bookkeeper 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 custodians; 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 posts 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 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 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 LLjur 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 1. Signing authorities for the different levels of officers to sign for and in behalf of the institutions should be approved by the board of directors and the extent of each level of authority should be clearly defined. These signing authorities should include but need not be limited to the following: a. Lending b. Investment c. Approval of expenses d. Various supervisory reports e. Bank drafts, manager's/cashier's checks, bank money orders and certificate of time deposits 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/transaction 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 predetermined amount, by which, one senior officer could sign checks or telegraphic transfers, subject to appropriate control measures. LLjur b. Certificate of Time Deposit All certificate 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 closed accounts. LLjur 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. 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 customers. e. All banks should have a sound recruitment policy since internal control begins from point of hiring. XII. Internal Control Procedures 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 (1) year. b. Savings accounts showing no activity (deposit or withdrawal) for a period of two (2) years. 2. Procedure for Classification a. Initially review all deposit ledgers and segregate accounts that fall under item 1(a) and (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. LLjur 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 L (Book II, Part 2) RULES AND REGULATIONS ON BANK PROTECTION SECTION 1. Objectives . These regulations are designed to: a) Insure maximum protection of lives and property against bank robberies; LLjur 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 money shop. 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. 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 designated 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 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. LLjur 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 appropriate supervising and examining department of the Central Bank a statement certifying to its compliance with the requirements of the Central Bank rules and regulations on bank protection in accordance with the attached format (2. Attachment L. 1). SECTION 7. Corrective Action . The Governor of the Central Bank shall designate a 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 this Appendix 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 this Appendix 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 II, 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 4-27-77, 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 Circular. LLjur _______________ President or Authorized Officer ________________ Date [Source: Circular 566 dated 4-27-77] APPENDIX M (Book II, 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. 224.21, the following procedures should be observed: LLjur 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 the balance of said 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 231. Loans in General . * SUBSECTION 231.1 Loan Limits SUBSECTION 231.11 Loan limits to a single borrower a. Basic ceiling 1) In savings and mortgage banks and in private development banks . Except as the Monetary Board may otherwise prescribe and subject to the exclusions and other conditions provided in Section 32 of Republic Act No. 337, as amended, the direct indebtedness to a savings and mortgage bank and to a private development bank of any person, company, corporation or firm, including in the indebtedness of the company or firm the indebtedness of the several members thereof, for money borrowed, shall at no time exceed fifteen per cent (15%) of the unimpaired capital and surplus of the bank. [Section 32, Republic Act No. 337, as amended, and Section 3, Republic Act No. 4093, as amended] cdpr 2) In stock savings and loan associations . A stock savings and loan association may grant loans not exceeding the amount deposited by the borrower plus his four (4) months salary or regular income in the case of permanent employee or wage earner, or seventy per cent (70%) of the fair market value of any property acceptable as collateral on first mortgage that he may put up by way of security: Provided , That the direct indebtedness to a stock savings and loan association of any person, company, corporation or firm, including in the indebtedness of the company or firm the indebtedness of the several members thereof for money borrowed and excluding (a) loans secured by obligations of the Central Bank or of the Philippine Government, (b) loans fully guaranteed by the government as to the payment of principal and interest, (c) loans to the extent covered by hold-out on, or assignment of, deposits maintained in the lending association, and (d) other loans or credits as the Monetary Board may, from time to time, specify as non-risk assets, shall at no time exceed fifteen per cent (15%) of the unimpaired capital and surplus of the association. For clean loans, the maximum amount to a non-salaried person who is permanently employed as an entrepreneur or otherwise is self-employed shall be computed on the same basis as that applying to a person who is "permanently employed or wage earner". For this purpose, average monthly income shall be used in lieu of monthly salary or regular income which applies to wage earners. [Circular 691 8-13-79] b. Additional amount allowed in excess of basic ceiling . The total indebtedness of any borrower to a thrift bank may amount to a further fifteen per cent (15%) of the unimpaired capital and surplus of such bank: Provided , That 1) the additional indebtedness is for the purpose of financing subdivision and/or housing projects for the low and middle-income families; 2) the subdivision/housing projects have been approved by the proper authorities; and 3) the loans to subdivision and housing developers shall be secured by a mortgage on real estate, title of which is in the name of the borrower or mortgagor. [Circular 629 8-21-78 and Circular 691 8-13-79] SUBSECTION 231.12 Loan limits to allied undertakings . The total loans which the 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 stock of the borrowing company/firm. [Circular 480 9-24-75] SUBSECTION 231.13 Definition of terms . For the purpose of implementing Item 1 of Subsec. 231.11(a), the following definitions of terms and phrases shall serve as guide: 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 hold 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. [Regulation A 7-8-54] SUBSECTION 231.14 Determination of total loans to a single borrower . 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 32 of Republic Act No. 337, as amended, until such papers are paid by the borrowers. [MAB 3-17-64] The portion of the special time deposit loans covered by IGLF guarantee shall be excluded in the determination of the maximum aggregate loans which a savings bank may grant to a person, company, corporation or firm. [MB Res. 371 2-22-74] SUBSECTION 231.2 Loan proceeds SUBSECTION 231.21 Derivative/compensating deposits . 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 deposit. 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 hold-out 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. [Circular 516 5-19-76 and Circular 691 8-13-79] 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 231.22 Prohibition against requiring 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 231.23 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 officers(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 to 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 231.3 Interest and other charges SUBSECTION 231.31 Interest a. Maximum interest rate 1) The effective rate of interest, excluding commissions, premiums, fees and other charges on loan transactions with maturities of seven hundred thirty (730) days or less, that may be charged or received by all banks or by non-bank financial intermediaries authorized to engage in quasi-banking functions shall not exceed sixteen per cent (16%) per annum for unsecured loans and fourteen per cent (14%) 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 provisions of Subsec. 231.32. 2) The effective rate of interest, including commissions, premiums, fees and other charges, on loan transactions with maturities of more than seven hundred thirty (730) days, that may be charged or received by all banks or by non-bank financial intermediaries authorized to engage in quasi-banking functions shall not exceed twenty-one per cent (21%) 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 expensed as a percentage, on an annual basis, of the amount actually received. In case the principal is amortized, the rate shall be computed on the basis of the outstanding balance. The computation assumes that interest is paid at maturity, or at the end of one (1) year, if the maturity of the loan exceeds one (1) year. 4) Except as provided for in this subsection and Subsec. 252.1, 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. 231.31(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. 3655, 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/others credit accommodations, the number of days comprising a year shall be based on the following: a) when the term is one (1) year or more, a year shall mean 365 days; and b) 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 R 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 escalation/deceleration of interest. [CL-3-19-80] [For maximum interest rates on interbank loan transactions, please see Subsec. 236.5] 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] c. Discounting of interest . Only ordinary loans (those not under supervised credit program) can be discounted by savings and loan associations and the interest to be collected in advance should not exceed one year interest. To facilitate the accounting of the earned portion of the unearned interest and discount to be transferred to income, savings and loan associations should maintain sub-control ledgers/records of discounted loans showing the respective daily balances of outstanding loans discounted for 365 days, for 360 days, for 270 days, etc. [MCRBSLA 78-16 3-22-78] d. Interest rebates . Should the borrower elect to pay the outstanding balance of his loan before maturity, a savings and loan association may charge interest corresponding to the unused term of the loan, subject to a prior agreement to that effect between the association and the borrower. [Circular 691 8-13-79] SUBSECTION 231.32 Miscellaneous charges a. Maximum charges . The following regulations shall govern the maximum charges, including commissions, premiums, fees, other than pure interest that banking institution and non-bank financial intermediaries authorized to engage in quasi-banking functions may collect on loans with a maturity of 730 days or less: 1) Thrift banks and rural banks shall be allowed to collect fees and other charges on a per annum basis on the loan principal or the outstanding balance thereof, whichever is lower, not exceeding the rates provided below and/or to collect the minimum charge of P20.00 per annum for loans below P1,000.00, pursuant to Item 2 below: Maximum Rate Amount 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% 2) 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. [Circular 504 2-6-76, as amended by Circular 727 4-8-80] In the case of a credit line and other similar credit accommodations, the charges shall be computed on the amount of each availment. All charges accruing to the government shall be for the account of the borrower. Charges under this subsection shall include commissions, premiums, fees, such as commitment fees, and other similar charges, but it 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 lending entity, its affiliates/subsidiaries, and their personnel. Charges on loans with a maturity of more than seven hundred thirty (730) days shall be governed by Subsec. 231.31 (a) (2). [Circular 504 2-6-76] Banks and other financial institutions may, upon release of each loan to beneficiaries of land reform, collect, exclusive of interest on such loan, service fees and other charges not exceeding two per cent (2%) or P150 per annum whichever is lower. [Circular 436 10-22-74] b. Additional charges for payments effected through payroll deductions . In the case of a borrower who is a permanent employee or wage-earner, the treasurer, cashier or paymaster of the office employing him is authorized pursuant to Republic Act No. 3779, as amended, to make deductions from his salary, wage or income in accordance with the terms of his loan and to remit such deductions to the stock savings and loan association. For this service, a fee of one peso (P1.00) or of 1% of the amount of the loan but in no case to exceed ten pesos (P10.00), may be collected by such treasurer, cashier or paymaster: Provided , however , That the association shall not collect from the borrower any other amount for collection charges except in cases of nonpayment for reasons beyond the control of the treasurer, cashier or paymaster, in which even Item(c) of this subsection shall apply. c. Collection fees for loans not paid upon maturity . If the loan is not paid upon maturity, a savings and loan association may charge a collection fee of one peso (P1.00) or one-half () of one per cent (1%) of the outstanding loan, whichever is higher: Provided , however , That should an association be compelled to institute court action for the recovery of the loan granted, it may, in addition, collect reasonable charges as attorney's fees. [Circular 691 8-13-79] SUBSECTION 231.33 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. 231.4. 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 231.4 Past due accounts SUBSECTION 231.41 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, which are not paid at maturity. dctai SUBSECTION 231.42 Accounts considered past due . The following shall be considered past due: a. A loan or receivable payable on demand not paid upon written demand as required under Subsec. 231.43 or within one (1) year from date of grant or renewal, whichever comes earlier; b. A temporary overdraft when such over-drawing or any charge or item lodged under TOD is not cleared within fifteen (15) days from date of grant; c. 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 d. Any due and unpaid loan installment or portion thereof, from the time the obligor defaults, for the purpose of determining delinquency in the payment of obligations as defined in Subsecs. 221.1 and 521.1 of Book V of this Manual; and e. All items in litigation as defined in the Manuals of Accounts. SUBSECTION 231.43 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 231.44 Accrual 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 231.45 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 231.46 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. 231.42 (c), and for those using the accrual basis of accounting, the accrued interests thereon, subject to Subsec, 231.44 hereof. [Circular 645 12-27-78] SUBSECTION 231.47 Restructuring or refinancing of loans . Restructuring/refinancing of a loan or an advance may be favorably considered when the arrearages thereon, including accrued interest and other charges, amount to less than twenty per cent (20%) of the total outstanding obligation, including interest and other charges: Provided , That (1) 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 (2) that 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 231.48 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 or application for write off of loans and advances shall be submitted, on the prescribed form, to the appropriate supervising and examining department of the Central Bank 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 or 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. 234.3; and; 2) The head of the appropriate supervising and examining department of the Central Bank subject to confirmation by the Monetary Board, in the case of loans and advances other than those mentioned in Item (1) above. [Circular 358 1-22-73] SUBSECTION 231.5 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 231.51 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, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to 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 to be financed, expressed as a simple annual rate on the outstanding unpaid balance of the obligation. The contract governing 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. [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 231.52 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 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 0-29-63] 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 0-2-74] 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 or presents the amount of money received by the debtor upon consummation of the credit transaction, net of finance charges, collected at the time the credit is extended (if any). d. Down payment represents the amount paid by the debtor at the time of the transaction in partial payment for the property or service purchased. e. Trade-in represents the value of an asset, agreed upon by the creditor and debtor, given at the time of the transaction in partial payment for the property or service purchased. f. Non-finance charges correspond to the amounts advanced by the creditor for items normally associated with the ownership of the property or of the availment of the service purchased which are not incident to the extension of credit. For example, in the case of the purchase of an automobile on credit, the creditor may advance the insurance premium as well as the registration fee for the account of the debtor. g. Amount to be financed consists of the cash price plus non-finance charges less the amount of the down payment and value of the trade-in. h. Finance charge represents the amount to be paid by the debtor incident to the extension of credit such as interest or discounts, collection fees, credit investigation fees, attorney's fees and other services charges. The total finance charge represents the difference between (1) the aggregate consideration (down payment plus installments) on the part of the debtor, and (2) the sum of the cash price and non-finance charges. i. Simple annual rate is the uniform percentage which represents the ratio, on an annual basis, between the finance charges and the amount to be financed. In the case of a single payment upon maturity, the simple annual rate in per cent is determined by the following method: (finance charge) 12 R = x x 100% (amount to be (maturity period in financed) months) In the case of the normal installment type of credit of at least one year in duration, where installment payments of equal amounts 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 in (finance charge) a year R = 2x x x 100% (amount to be (total no. of financed) payments plus one) In cases where the credit matures in less than one year (e.g., installment payments are required every month for six months), the same formula will apply, except that the number of payments in a year would refer to the number of installment periods, as defined in the credit contract, if the credit matures in one year. For example, if the number of payments in a year would be twelve for this purpose in cases where six monthly installment payments are called for in the credit transactions. 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 charge shall, however, be indicated in the credit contract. SUBSECTION 231.53 Scope of requirements . The above 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: 1) Credit transactions which do not involve the payment of any finance charge by the debtor; and 2) 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 231.54 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 respective directors of the appropriate supervising and examining departments of the Central Bank or their duly authorized deputies. In case the seven items of information mentioned in Subsec. 231.51 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. [Circular 431 9-2-74] SUBSECTION 231.55 Information sheets and other reports to be submitted to the Central Bank . Every creditor shall file with the appropriate supervising and examining departments of the Central Bank an information sheet and such other reports as the respective directors of the said departments may require, in the form or forms to be prescribed by the Monetary Board, regarding credit transactions entered into by such creditor. SUBSECTION 231.56 Posters . Every creditor shall post in conspicuous places 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 cm. wide and 75 cm. long. [Circular 431 9-2-74 and Circular 485 10-30-75] SUBSECTION 231.57 Offices 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 appropriate supervising and examining department of the Central Bank. The head of the appropriate supervising and examining department 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 231.58 Penal provision . The provisions of Section 6 of Republic Act No. 3765 shall apply in case 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 creditor concerned to such administrative sanctions as the Monetary Board shall impose. [Circular 158 10-29.63 and Circular 485 10-30-75] SECTION 232. Unsecured Loans SUBSECTION 232.1 Loans against personal security SUBSECTION 232.11 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 232.12 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 232.13 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. 231.45. SUBSECTION 232.14 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 232.15 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 subsection. SUBSECTION 232.16 Sanctions . The appropriate supervising and examining department of the Central Bank may recommend to the Monetary Board, for a violation of the provisions of this subsection, 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 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] SUBSECTION 232.2 Clean loans for personal and household finance . For purposes of implementing the provisions of Section 31(a) of Republic Act No. 337, as amended, and Section 5(a) of Republic Act No. 3779, as amended, the following regulations governing clean loans for personal and household finance shall be adopted by thrift banks. SUBSECTION 232.21 Purpose . Loans for personal and household finance, whether clean or secured, shall include, but need not be limited to, household appliance loans, car loans, house and car repair loans, educational loans, loans for medical expenses, loans for the payment of income taxes, and loans for working capital or inventory financing of market stallholders. In any case, the purpose of all loans shall be stated in the contract between the bank and the borrower or shall be set forth in a statement signed by the borrower. SUBSECTION 232.22 Borrowers' and co-makers' signatures . Clean loans for personal and household finance shall require the signatures of the borrower and a co-maker(s) whose salary or regular income is at least equal to that of the borrower. In the case of a borrower whose responsibility and financial capacity are unquestionable as determined by the bank, the signature of the borrower alone may suffice. Banks shall require the borrowers and co-makers to submit a certification from their employers of their monthly salary or regular income. In case the borrower is self-employed, a certification by the borrower of the source and amount of his regular income shall be required. In all cases, the certification shall be under oath. LLpr SUBSECTION 232.23 Maturity . Clean loans for personal and household finance shall have a maturity of not more than three (3) years. SUBSECTION 232.24 Maximum amount . The maximum amount of clean loans to persons who are self-employed shall be computed on the same basis as that applying to permanent employees or wage earners. For this purpose, regular income of persons who are self-employed shall be their average monthly income during the 12-month period immediately preceding the date of loan application. SUBSECTION 232.25 Renewal or extension . Extension beyond the original maturity date of the outstanding balance of clean loans for personal and household finance may be allowed under the following circumstances: a. For loans for medical expenses, the extension may be for the same duration as the original period: Provided , That thirty per cent (30%) of the loan shall have been paid. b. For other loans mentioned in Subsec. 232.21, the extension shall not exceed one-half of the original period: Provided , That fifty per cent (50%) of the loan shall have been paid. Clean loans for personal and household finance may be renewed for any amount not exceeding the original amount thereof: Provided , That at least fifty per cent (50%) of said original amount shall have been paid. SUBSECTION 232.26 Records . Banks shall maintain adequate and accurate credit files of their respective borrowers. [Circular 630 8-21-78] In addition, stock savings and loan association shall require the borrowers and co-makers to submit a certificate from their employers of their monthly salary or regular income. In case the borrower is not employed, a certification by the borrower of his source of regular income should be required. In all cases, the certification shall be under oath. [Circular 691 8-13-79] SUBSECTION 232.27 Sanctions . The appropriate supervising and examining department of the Central Bank may recommend to the Monetary Board, for a violation of the provisions of this subsection, 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 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 630 8-21-78] For secured loans for personal and household finance, please see Subsec. 233.6. SECTION 233. Secured Loans . SUBSECTION 233.1 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 233.2 Insurance on real estate improvements . 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 233.3 Real estate mortgage loans. a. Real estate mortgage loans granted by savings and mortgage banks shall not have maturities exceeding twenty years and loan values exceeding seventy per cent (70%) of the appraised value of the real estate securities even if insured by the Home Financing Commission. [MB Res. 506 3-8-74] b. Private development banks are authorized to grant real estate mortgage loans with maturities of not more than twenty years for purposes (economic activities) falling under Priority 1 (establishment, rehabilitation and expansion of, and for investment in, agricultural, industrial, manufacturing, commercial and other economic enterprises) of the Central Bank Credit Priority System (See 3.Appendix A), in addition to the purposes specified in Section 31(d) of Republic Act No. 337, as amended. [MAPDB 6-7-71] SUBSECTION 233.4 Collaterals acceptable to stock savings and loan associations . Security for loans granted by stock savings and loan associations may be in any or all of the following forms: a. Real estate mortgages; b. Chattel mortgages on harvested or stored crops of non-perishable character; c. Chattel mortgages on livestock, tools, equipment or machinery, supplies and materials, merchandise, and such other property which may have been purchased or acquired out of the proceeds of the loan; d. Assignment of quedans which give the association the right of disposal of readily marketable products; e. Time and savings deposits; f. Pledge of bonds, stocks, and other securities of agricultural, industrial or commercial enterprises that are non-speculative in nature. g. Land Transfer Certificates issued by the Government to tenant-farmers, under Presidential Decree No. 27 to the extent of sixty per cent (60%) of the value of the farm holdings: Provided , That a certification shall be first secured from the offices of the Register of Deeds to the effect that the Land Transfer Certificate being presented is valid; and h. All other securities as may be approved by the Monetary Board. [Circular 691 8-13-79] SUBSECTION 233.5 Increased loan values of collaterals in special cases . Pursuant to the third paragraph of Section 78 of Republic Act No. 337, as amended, the following collaterals shall have increased loan values in the following special cases: 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] SUBSECTION 233.6 Secured loans for personal and household finance . For purposes of implementing the provisions of Section 31 (a) of Republic Act No. 337, as amended, and Section 5(a) of Republic Act No. 3779, as amended, the following regulations governing secured loans for personal and household finance shall be adopted by thrift banks. SUBSECTION 233.61 Purpose . Loans for personal and household finance, whether clean or secured, shall include, but need not be limited to, household appliance loans, car loans, house and car repair loans, educational loans, loans for medical expenses, loans for the payment of income taxes and loans for working capital or inventory financing of market stallholders. In any case, the purpose of all loans shall be stated in the contract between the bank and the borrower or shall be set forth in a statement signed by the borrower. SUBSECTION 233.62 Maturity . Loans for personal and household finance secured by real estate or chattel mortgage shall have a maturity of not more than five (5) years. SUBSECTION 233.63 Collateral requirement . Loans for personal and household finance may be granted on the security of real estate or chattel mortgage, or savings and time deposits specified in Section 31(a) of Republic Act No. 337, as amended, including pledges and assignments of government securities. Secured loans obtained for the purpose of acquiring durable consumer goods shall have as principal security a lien on such goods being acquired, the bank being empowered, however, to require as additional security a lien or mortgage on other properties of the debtor; Provided , That the lien on the goods being acquired out of the proceeds of the loan need not be constituted if the borrower executes a mortgage on real estate property, seventy per cent (70%) of the appraised value of which equals or exceeds the amount of the loan granted. SUBSECTION 233.64 Aggregate ceiling . The aggregate outstanding loans for personal and household finance secured by real estate or chattel mortgage shall not exceed ten per cent (10%) of the total assets of the bank. SUBSECTION 233.65 Renewal or extension . The maturity of secured loans for personal and household finance may be extended: Provided , That such extension shall not exceed the duration of the original period: Provided , further , That all accrued interest receivable and other charges have been paid to the bank before such extension is made. Secured loans for personal and household finance may be renewed for any amount not exceeding the original amount thereof or the loan value of the collaterals thereof, whichever is lower: Provided , That all accrued interest receivable and other charges have been paid to the bank before such renewal is made. SUBSECTION 233.66 Records . Banks shall maintain adequate and accurate credit files of their respective borrowers. SUBSECTION 233.67 Sanctions . The appropriate supervising and examining department of the Central Bank may recommend to the Monetary Board, for a violation of the provisions of this subsection, 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 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 630 8-21-78] For clean loans for personal and household finance, please see Subsec. 232.2. SECTION 234. Loans/Credit Accommodations to Directors, Officers, and Stockholders . As a general policy, with respect to loans or credit accommodations, dealings of a bank with any of its directors, officers or stockholders shall 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 234.1 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. 234.3 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 Sec. 83 of Republic Act 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 cash item, vale, etc.; 2) 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; 3) Any advance of unearned salary or other unearned compensation for periods in excess of thirty days; 4) Any other transactions 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 5) The increase of an existing indebtedness or credit line. [Circular 357 1-22-73] e. Delinquency in the payment of obligations. See Subsec. 221.1(b). SUBSECTION 234.2 Transactions not covered . The terms "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 interests 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 ceiling under Subsec. 234.4 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. 234.4 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] SUBSECTION 234.3 Direct/indirect borrowings . A director, officer or stockholder is directly/indirectly a party to a loan/credit accommodation extended by a bank in any of the following capacities/instances: a. If the director, officer or stockholder is a party to any of the transactions enumerated in Subsec. 234.1 (d) 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; and b. If in any of the credit transactions in Subsec. 234.1 (d) 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, pledged or assigned to secure the loans or credit accommodations; except when the mortgage, pledge or assignment covers only said co-owner's undivided interest; 4) Corporation, association, or firm of which a director or officer of the 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; 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; 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), (3), (4), (5) and (6) of this subsection. [Circular 357 1-22-73, as amended by Circular 568 5-4-77] (Please see 3.Appendix B 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. 234.1) SUBSECTION 234.4 Individual/aggregate ceilings . a. Individual Ceiling . The total outstanding direct credit accommodations to each of the bank's directors, officers 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 stockholders. '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. 234.3(a) and (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 appropriate supervising and examining department: 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 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" refers 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. c. 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. 234.3; 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 of 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 234.5 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 234.6 Reporting requirements . Thrift banks shall submit to the appropriate supervising and examining department within sixty days from May 4, 1977 their respective reduction programs in attaining compliance with the prescribed ceiling 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 other than those enumerated above 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 appropriate supervising and examining department 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] SUBSECTION 234.7 Sanctions in case of refusal to comply with or wilful violation of regulations . The appropriate Central Bank supervising department 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 appropriate Central Bank supervising department 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 ceilings 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; and f. Other administrative and/or penal sanctions including sanctions under Section 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 234.8 Financial assistance to officers and employees under the fringe benefit program . The following regulations governing financial assistance by banks to their officers and employees as part of their fringe benefit program shall govern. SUBSECTION 234.81 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 appliances 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 234.82 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 officer's 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. cdlex 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 Republic Act No. 337, as amended, and Subsec. 234.4. The aggregate outstanding loans and credit accommodations to bank employees, (i.e., excluding "officers" as the term is defined in Subsec. 234.1) under the bank's fringe benefit program shall not exceed five per cent (5%) of the bank's total loan portfolio. SUBSECTION 234.83 Forms of financial assistance . 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. SUBSECTION 234.84 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 o f 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 234.85 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 appropriate supervising and examining department of the Central Bank may require the banks concerned to submit a regular report monitoring the various transactions under the bank's financing plans for officers/employees. SUBSECTION 234.86 Financing plans not covered by fringe benefits program . Loans on 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 Sec. 234 of this Manual. SUBSECTION 234.87 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 Section 34 and 34-A of Republic Act No. 265, as amended. [Circular 561 dated 3-28-77, as amended by Circular 622 8-11-78 and Circular 689 7-23-79] SECTION 235. Specific Types/Classes of Loans . SUBSECTION 235.1 Agrarian reform credit and agricultural credit . SUBSECTION 235.11 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. 235.19 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 235.12 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 required in Subsec. 235.14. [Circular 687 7-20-79] SUBSECTION 235.13 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. b. 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 235.14 Securities for loans a. For agrarian reform credit loans granted under this 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 projects; 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 farmer's cooperative, no co-maker shall be required; and/or 6) Other collaterals acceptable to the bank, such as, but not limited to standing crops, livestock or work animal, etc. b. For agricultural credit in general loans granted under this credit shall be secured by the usual collaterals required by banks. SUBSECTION 235.15 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 transaction shall follow existing practices and regulations applicable both 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 235.16 Interest and other charges . Interest, service fees and other charges shall be governed by existing rules and regulations thereon. SUBSECTION 235.17 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 composition of government securities and commercial papers held as temporary investments for agrarian reform credit and agricultural credit in general, respectively. SUBSECTION 235.18 Sanctions . Violations of Subsecs. 235.11 to 235.12, 235.16 and 235.17 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 235.19 Computation of loanable funds . Loanable funds shall refer to the net increase in funds from date of effectivity of Presidential Decree 717 to date of the report of the individual accounts, which represent the following: the total bank's funds consisting deposits (demands, 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 exports. [MAB 7-28-75, as amended by MAB 4-19-79] SUBSECTION 235.2 IGLF loans . SUBSECTION 235.21 IGLF Accreditation System . The rules and regulations governing the implementation of the accreditation scheme for commercial and thrift banks and non-bank financial intermediaries which may participate in the Industrial Guarantee and Loan Fund Program (IGLF) are shown in 3. Appendix F. [Memorandum Circular 8-10-76] The guidelines governing the availment by duly accredited commercial and thrift banks and non-bank financial intermediaries as well as qualified rural banks under the IGLF Program for the financing of small and medium scale industries are shown in 3 Appendices G and M, respectively. [Memorandum Circular 10-25-76, as amended by MC 10-28-77; MC 10-28-77] SUBSECTION 235.22 IGLF Sponsorship Scheme . Stock savings and loan associations may be allowed to participate under the sponsorship scheme of the Industrial Guarantee and Loan Fund (IGLF) Program, subject to the following conditions: a. The savings and loan association must be in operation for at least two (2) years. b. The association, based on the regular and special examinations has been operating in accordance with existing laws, rules and regulations as well as requirements of the Monetary Board and that there are no serious exceptions or violations in its operations. c. The savings and loan association must have complied with the minimum paid-in capital requirement. d. The savings and loan association must have no past due and/or restructured loans with the Central Bank and no plan of payment on its arrearages with this Bank. Its past due ratio shall not exceed 15% of the total outstanding loans. e. The maximum amount of IGLF financing through savings and loan associations shall be P150,000 per application. f. At least a staff of three (3) who are competent and qualified to evaluate loan applications. [Memorandum Circular CB-IGLF 80-14-21-80] SUBSECTION 235.3 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, savings and mortgage banks are enjoined not to extend a loan to any rural bank in the absence of such approval of the Monetary Board. [MACSMB 5-8-61] SUBSECTION 235.4 Loans for economic development purposes. SUBSECTION 235.41 Nature of loans . All loans of private development banks shall be limited to loans for economic development purposes. For the meaning of the phrase "economic development purposes," the interpretation of the National Economic and Development Authority has been adopted and is as follows: "If the proceeds of the loan are utilized directly and in some cases indirectly for producing commodities and services or in other words assisting in the expansion of the productive capacity of the country, then these types of loans could be considered economic development in nature. If, however, uses to which the loans are put do not in any way, whether directly or indirectly, help in increasing national production such as buying automobile (for use not related to a productive activity), a refrigerator, jewelry, and similar consumption goods, then the loan is not developmental in character." [MPDB-DSE 1-24-61] Real estate mortgage loans with maturities of not more than twenty years may be granted for purposes (economic activities) falling under Priority I of the Central Bank Credit Priority System (3. Appendix A) in addition to the purposes specified in Section 31(d) of Republic Act No. 337, as amended. [MPDB-DSE 6-7-71] SUBSECTION 235.42 Definition of "loanable funds" . For purposes of Section 5 of Republic Act No. 4093, as amended (Private Development Banks Act), the term "loanable funds" is defined as follows: "The total bank funds [deposit (including deposits of banks); bills payable (including borrowings from banks); and capital accounts (consisting of paid-in capital, surplus, surplus reserves and undivided profits) ] minus the total deductible accounts [banking house, furniture and equipment (net book value); other real and chattel property owned (representing properties acquired in satisfaction of debts previously contracted); other assets (asset accounts not otherwise includable in other asset accounts); and provision for liquidity 15%) of the total of deposits and demand liabilities] equals loanable funds." [MPDB-DSE 8-4-66] SUBSECTION 235.5 Special loans. SUBSECTION 235.51 CB IBRD Rural Credit Project . Shown in 3. Appendix V is the Amended Rules and Regulations No. 4 governing the implementation of the Fourth CB: IBRD Rural Credit Project. Included also as Attachment 1 to the same Appendix is an annuity table for calculating loan amortization at various repayment intervals and interest rates. [CLRBSLA 80-9 2-21-80] SUBSECTION 235.52 Agricultural guarantee fund . Stock savings and loan associations may avail themselves of the guarantee coverage of eligible loans under the Agricultural Guarantee Fund created under Republic Act No. 6390, as amended by Presidential Decree No. 435, and administered by the Land Bank, in accordance with the rules and regulations governing such fund. [MCRBSLA 74-42 8-30-74] a. Guarantee coverage to 4th CB : IBRD loans . The rules and regulations governing the extension of guarantee coverage to medium and long-term loans granted under the 4th CB: IBRD Rural Credit Project are embodied in 3.Appendix N. [MCRBSLA 77-104 11-9-77] b. Guarantee coverage to loan under the Gulayan ng Kalusugan Program . The guarantee coverage of Agricultural Guarantee Fund includes loans under supervised credit for the production of vegetables in the Gulayan ng Kalusugan Program. The vegetables covered under this program are tomato, cabbage, Irish potato, garlic, onion, pale sitao, mecon pea, cowpea, sweet pea, Baguio beans, peanut, mongo, sweet potato, sweet and green corn, melon. watermelon and squash. A copy of the subject rules and regulations are embodied in 3. Appendix O. [MCRBSLA 78-14 3-16-78] c. Guarantee coverage to loans under supervised credit for Cotton Production . The Board of Directors of the Land Bank of the Philippines and the Agricultural Guarantee Fund Board approved on August 3, 1978 the proposal to expand the guarantee coverage of the Agricultural Guarantee Fund (AGF-R.A. 6390) pursuant to the request of the Philippine Cotton Corporation to include loans under supervised credit for the production of cotton, and its pertinent rules and regulations. The full text of the rules and regulations are embodied in 3.Appendix S. [CLRBSSLA 79-3 1-10-79] SUBSECTION 235.53 Special time deposits . The funds for the special financing program shall be deposited with the participating stock savings and loan association to be utilized for extending agricultural production and commodity loans to eligible borrowers. Such special time deposits shall be placed in the stock savings and loan association for a period of three years or as may be determined by the Monetary Board, subject to recall at any time in case the stock savings and loan association violates any of the terms and conditions in the grant of said deposit or any provision of law or the rules, regulations and instructions promulgated by the Monetary Board. Stock savings and loan associations shall pay interest on special time deposits at the rate prescribed by the Monetary Board. aisadc a. A penalty of five per cent (5%) per annum shall be imposed on all outstanding past due Special Time Deposits of stock savings and loan associations unremitted to the Central Bank. In the event of natural calamities, however, the Central Bank may suspend the imposition of the 5% penalty on past due Special Time Deposits: Provided , That: 1) The Special Time Deposits affected were used by the savings and loan association to finance loans guaranteed or those in the process of restructuring; and 2) The savings and loan association files a notice in writing with the Department of Rural Banks and Savings and Loan Associations within ten (10) days after the occurrence of the calamity and the extent of its damages on crops financed, etc. [MC 7-22-77] b. Checks in payment of special time deposits or rediscounting obligations . Checks representing remittances of stock savings and loan associations for the payment of (1) Special Time Deposits (STDs) or (2) rediscounting obligations with the Department of Loans and Credit, Central Bank, shall be clearly marked as follows: 1) For special time deposits The phrase "FOR PAYMENT OF STD No. ___ dated ____." shall be typewritten at the lefthand corner of the check; and 2) For rediscounting obligations with DLC The phrase "FOR PAYMENT OF REDISCOUNTING OBLIGATIONS, DLC" shall also be typewritten as stated above. All remittances to pay STDs shall be addressed directly to the Director, Department of Rural Banks and Savings and Loan Associations, while those made to pay rediscounting obligations shall be addressed to the Director, Department of Loans and Credit, Central Bank of the Philippines Manila. [MCRBSLA 74-69 9-30-74] SUBSECTION 235.7 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 the sugarcane planters. [CL 10-19-76 as amended by CL 10-24-77] SUBSECTION 235.8 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 235.81 Masagana 99 and Masaganang Maisan loans . Thrift banks participating in the Masagana 99 and Masaganang Maisan food production programs shall observe the guidelines embodied in 3. Appendix J 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 E). [CL 3-28-77] SUBSECTION 235.9 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 or 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 borrower to obtain a renewed certification within thirty (30) days after the expiry date thereof shall make the outstanding balance of the loan due and demandable. Foreign firms with peso loans maturing beyond the expiry dates of their 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) partnerships, 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 non-Filipino citizens; and g. The following sanctions shall be imposed for violation this subsection and the guidelines embodied in 3.Appendix K: 1) Any wilful violation of the provisions of Subsec. 235.9 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. 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 above provisions 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 236. Other Specific Types/Classes of Loans SUBSECTION 236.1 Grains Quedan Financing Program . In accordance with the pertinent provisions of LOI 704 dated June 9, 1978, the following guidelines on Grains Quedan Financing Program shall govern. SUBSECTION 236.11 O bjectives of the program a. To augment the operating capital of grains businessmen and Area Marketing Cooperatives and encourage their active participation in the local procurement of grains; b. To increase the direct involvement of private commercial banks in agricultural credit in compliance with P.D. 717; c. To strengthen further the integrity and acceptability of the grains quedan as collateral for loan availment; d. To enhance further the grains price stabilization program of the government; and e. To support the Masagana 99 Program. SUBSECTION 236.12 Legal bases a. 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; b. Letter of Instruction No. 704, dated June 9, 1978, establishing a Quedan Guarantee Fund and constituting the Quedan Guarantee Fund Board; c. Presidential Decree No. 4 dated September 26, 1972, as amended by P.D. 1485 dated June 11, 1978 creating the NGA and prescribing its functions, powers and authorities. SUBSECTION 236.13 Terminology a. 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. b. 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. c. 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. d. Bonded Stocks shall refer to palay stocks stored in a bonded warehouse. e. 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. f. 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. g. 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. h. National Grains Authority (NGA) a body corporate organized and existing under and by virtue of PD No. 4, as amended, for the integrated growth and development of the grains industry. i. CONFED Confederation of Filipino Rice and Corn Association, Inc. j. Masagana Creditor (MC) shall refer to the financial institutions which granted production loans to farmer-borrowers under the Masagana 99 program. k. 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. l. Authority to Collect (AC) is a certification by MC that the GB is duly authorized to collect from named Masagana farmers. SUBSECTION 236.14 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; 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 the General Banking Act, as amended. 3) Loan value . The loan values 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 the Central Bank up to 100 percent of the loan at the rate of 4 percent 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 attached Rules and Regulations (See 3.Appendix P) governing the guarantee coverage of grains quedan. 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. SUBSECTION 236.15 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. Rural Banks, 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 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 Cooperatives 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). [Circular 624 dated 8-11-78, as amended by Circular 680 6-4-79] SUBSECTION 236.2 Livestock financing and loans for agricultural inputs . The following regulations shall be adopted by thrift banks for the purpose of implementing the provisions of Subsections (b) (1) and (b) (3) of Section 31 of Republic Act No. 337, as amended, and Section 5(a) of Republic Act No. 3779, as amended. SUBSECTION 236.21 Livestock financing a. Livestock financing shall refer to loans granted to encourage the breeding, raising and/or production of livestock, including but not limited to cattle, carabao, goats and pigs, as well as of poultry. b. Such loans shall have a maturity of not more than three (3) years: Provided , That the portion of the livestock loans utilized for capital expenditures may have a maturity of not more than five (5) years: Provided, further , That maturities of livestock loans funded under special financing programs shall be subject to the rules of such special financing programs. SUBSECTION 236.22 Loans for agricultural inputs a. Agricultural inputs shall refer to seeds, feeds, fertilizers, nutrients, chemicals, pesticides, herbicides, rodenticides and other similar items necessary to directly sustain the growth of an agricultural product. In the case of loans to end-users directly engaged in agricultural production, other items/services necessary to directly sustain the growth of an agricultural product shall also be considered as agricultural inputs. b. Loans for the acquisition of agricultural inputs may be granted to end-users directly engaged in agricultural production, as well as to persons and entities engaged in the processing, storage, marketing or distribution of agricultural inputs, secured by any of the following collaterals: 1) Real estate mortgage; 2) Chattel mortgage on farm machinery and equipment, or on work animals, or on growing/standing crops, or on stored crops in bonded warehouses, in the case of end-users; 3) Chattel mortgage on properties used in the business of the borrower; 4) Government securities; and 5) Other acceptable collaterals. c. Loans to end-users directly engaged in agricultural production shall have a maturity of not more than three (3) years or one (1) crop season, whichever is shorter. Loans to persons or entities engaged in the processing, storage, marketing or distribution of agricultural inputs shall have a maturity of not more than three (3) years. [Circular 626 3-21-78] SUBSECTION 236.3 Cooperative Finance System SUBSECTION 236.31 Purpose . 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). SUBSECTION 236.32 Definition of terms . Unless otherwise specified, the following terms used in these rules and regulations shall mean: a. 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. b. 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. c. 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. d. 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). e. Loan Fund . That portion of USAID loan and Philippine Government Counterpart funds earmarked for lending to AMCs and CMSP. f. Trust Fund for AMCs . That portion of USAID loan earmarked for the purpose of expanding the equity base of AMCs. g. 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. h. 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. i. Debt-Equity Ratio . Refers to the ratio of liability to the net worth. j. Special Time Deposit (STD) . Funds made available to accredited CRB/Lender to backstop the financial assistance extended to a cooperative by CFG. h. 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. SUBSECTION 236.33 General credit policies a. 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. b. 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. c. Applicant cooperative must have capital contributions sufficient to meet the debt-equity ratio prescribed under this guidelines. d. Terms 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. e. 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: 1) The amortizations of the term loan component must be repaid from disposable earnings of the cooperative; and 2) 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. f. 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 Guaranteed 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. SUBSECTION 236.34 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: a. Loans, Purposes 1) Seasonal operating capital and commodity loans may be extended to finance increase in inventories and receivables within a period of twelve months. 2) 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. 3) 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. b. Joint or Split Financing A number of cooperatives which have loans outstanding to the Cooperative Development Loan Fund (CDLF) 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. c. 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. SUBSECTION 236.35 Authorized lenders . Any cooperative rural bank/lender that meets all the following requirements may be allowed to participate under this program: a. Cooperative Rural Bank 1) It must be operating substantially in accordance with laws, rules and regulations and directives of the Monetary Board; 2) Its ratio of past due loans to total loans outstanding does not exceed 25% at the time of application; 3) Its risk asset ratio should not fall below the 10% minimum requirement with the grant of the AMC loan being applied for; and 4) There must be no directive either from the Governor/Monetary Board prohibiting it from receiving financial assistance from the Central Bank. b. Other financing institution not under the supervision of the Department of Rural Banks and Savings and Loan Associations 1) 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; and 2) The applicable requirements under Item (a) (1), (2) and (3). SUBSECTION 236.36 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: a. Cooperatives, particularly AMCs (as defined in Section 1), which meets/agrees to meet all the following requirements: 1) Those registered or re-registered with the Bureau of Cooperative Development; 2) The main business activities are: a) The supply of certified seeds, fertilizers, farm inputs to members; b) The buying, storing, transporting, processing and marketing the produce of their cooperative members; and c) A combination of the supply of farm inputs and the marketing of the produce of members. 3) At least 50% of the total business of the AMC must be with its members. 4) Share capital shall earn interest at rates prescribed by the Ministry of Local Government and Community Development. 5) All declaration of cash interests on share capital and patronage refunds shall be made only after prior approval by the CFG. b. The Cooperative Marketing System of the Philippines (CMSP) subject to the following: 1) 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. 2) Total loan availments will not exceed the limitation provided in the CMP Loan Agreement. SUBSECTION 236.37 Other credit policies a. 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: 1) Management . A cooperative seeking or obtaining credit should have responsible, competent and cooperative management and board of directors. 2) 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. 3) 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 cooperatives' 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 capital position margining or supporting the loan. c) 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 evidenced 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. d) 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. b. 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 these 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. c. Loan periods ; extension periods 1) 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. 2) 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. d. 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 but it should nevertheless be sufficient to provide the lender reasonable protection from loss in the case of adversity. 1) 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 document 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. 2) 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. e. Interest rates 1) 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 charge are allowed to be collected. 2) 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. f. 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 borrowers highest income or when the principal income of the borrower is available. g. Lending procedures 1) 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 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/Lender board resolution endorsing the cooperative's application for financial assistance; ii. CRB/Lender's application for Special Time Deposits for the loan component; iii. CRB/Lender's latest financial statements. 2) 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. 3) 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 21, 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. 4) 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. h. Use of funds borrowed ; diversion . The proceeds of a loan shall be used only for the purposes for which it was granted; if used to 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. i. Application of payments ; remittance to CB-CFG 1) 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. 2) 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 per cent (1%) per month on the amount due as liquidated damages in addition to the interest rates prescribed under Section 10. j. 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 estate /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. [Circular 674 dated 5-11-79] SUBSECTION 236.4 Lending program under the Cottage Industry Fund (CIF) . The following rules and regulations (hereinafter called Rules and Regulations Governing the Lending Program under the Cottage Industry Fund), are hereby prescribed to govern this credit program to be carried out through the lending facilities of the rural banks, private development banks and stock savings and loan associations under the supervision of the Central Bank for the financing of working capital of small cottage industries duly accredited by NACIDA utilizing the Cottage Industry Fund (CIF) from NACIDA. SUBSECTION 236.41 Definition of terms . Unless otherwise specified, the following terms have the following meaning whenever used in these rules and regulations governing the lending program under the Cottage Industry Fund: a. CB the Central Bank of the Philippines. b. DRBSLA the Department of Rural Banks and Savings and Loan Associations. c. DLC the Department of Loans and Credit. d. Financing Institution rural banks, private development banks and stock savings and loan associations qualified to participate in this credit program in accordance with Item (a) of Subsec. 236.4. e. STD Special time deposit extended by CB to rural banks, private development banks and stock savings and loan associations for financing loan applications. f. Loan the loan extended by financing institution to a borrower. g. Borrower recipient of a loan from financing institution. h. NACIDA the National Cottage Industry Development Authority. i. Cottage Industry an economic activity carried on in the homes or in other places for profit, with a capitalization not exceeding P100,000 at the time of registration and/or accreditation with NACIDA. SUBSECTION 236.42 Participating financing institutions a. Eligibility requirements . CB shall determine the financing institution through its Department of Rural Banks and Savings and Loan Associations, taking into account the following: 1) Period of operation . The financing institution must have been in profitable operation for not less than one year. 2) All rural banks, private development banks and stock savings and loan associations which are eligible to avail themselves of the special time deposits and rediscounting facilities of the Central Bank are qualified to participate under this program. b. Whenever there are established standard or criteria by way of ratios, percentages or otherwise in any law, decree, general order, rule, regulation, or other directive in force, in relation to the factors enumerated in item (a) above, such standards or criteria shall be deemed applicable for the purpose of conducting an evaluation of the credit worthiness under aforesaid Item. SUBSECTION 236.43 Loan extended by participating financing institution to borrowers a. Purpose of loan . Raw materials, labor, light machinery and equipment to be used on viable cottage industries where the potential for increased production is clearly established, or where the potential for satisfying domestic demand or exportation of the excesses over domestic consumption, will be eligible for financing. The cost of machineries and equipment must not exceed 50% of the loan. The cottage industry shall include economic activities carried on by students of public and private schools, within school premises, as a cooperative effort, under supervision of a teacher or other person approved by and acting under the supervision and control of school authorities, either as part of or in addition to ordinary vocational training, provided all profits shall accrue to the students working therein. It shall include the following: 1) Fibercrafts , such as making of abaca ropes and twines, buntal fiber extracting and buri leaf braiding; 2) Woodcraft , such as making of wooden shoes, wooden fans, walking sticks (canes) and woodcarving; 3) Hat Weaving , such as calasiao, buri, raffia, korogomoy, buntal and bamboo hats, salakot and helmet; 4) Mat Weaving , such as doormats, sleeping mats, made of buri, pandan, balilan, sakutan and other similar materials; 5) Metalcraft , such as making of jewelries, knives, boloes, scissors, razors, silverwares, and brassworks; 6) Ceramics , such as making of potteries, hollow-blocks, tiles, firebricks, clay stoves and other ceramic products; 7) Shellcraft , such as making of sea shell buttons and coconut shell products; 8) Bamboo and Rattan craft , such as making of hammocks, basketry, making of sawali and other bamboo and rattan furniture and articles; 9) Small Agricultural Hand Tools , such as plow points; 10) Toycraft , such as making of dolls and toys; 11) Embroidery, Dressmaking and Tailoring Industries ; 12) Needlecraft (including knitting and crocheting); 13) Loom Weaving , such as making of fishnets, making of mosquito nets, weaving of Ilocano cloth, Igorot weaving, pia (Barong Pilipino) jusi and sinamay; 14) Machine Parts manufacture , such as wheels and stone mortars; 15) Poultry , including Duck Raising and "Balut" making; 16) Piggery , 17) Home cigar making ; 18) Food Preservation and Canning , including the making of vinegar, wine, lambanog, pili or peanuts confectionery or coconut candy (bucayo); 19) Other related crafts , such as making of brooms, pandan, nito and buri bags, "Korogomoy" bags bead making, guitar and other manual instruments; 20) Leather products ; 21) Rubber products ; and 22) Such other industries done in the home with the aid of electrical gadgets and/or by hand manipulations. b. Eligibility of borrowers . Cottage Industries of the applicant must be duly registered/accredited with the NACIDA, having capitalization of not more than P100,000 at the time of the application of the loan. c. Security 1) Unsecured loan with a co-maker. 2) Loans may be secured by chattel mortgage on movable property, like machineries and equipment and inventory on finished goods and raw materials including those which are subject of financing. d. Loan limits . The loan ceiling shall be as prescribed under Section 23 of General Banking Act, as amended, and it shall in no case exceed Twenty Thousand (P20,000.00) Pesos. e. Maturity of loans . Loan maturities shall not exceed one year. f. Interest rate . The loan shall bear an effective interest rate of not more than 9% per annum plus bank charge not exceeding 1% per annum. g. Penalty for nonpayment . A penalty rate of 5% per annum shall accrue, over and above the interest rate specified in Item (f) hereof, on any amount of the loan not paid on due date. h. Loan application and processing 1) Application for loan shall be filed with the qualified financing institution nearest the project to be financed and must be accompanied by the information sheet shown in 3.Appendix Q and the recommendation of the NACIDA Regional Manager or his duly authorized representative in the area. 2) The financing institution shall process and approve/disapprove the application. If approved, the financing institution shall apply for Special Time Deposit with the Department of Rural Banks and Savings and Loan Associations, attaching therewith STD Certificate for the loans approved and submitted for funding with the Central Bank. i. Loans in litigation . In case of a suit for collection of the unpaid balance of a loan, there shall be collected from the borrower, in addition to the interest and penalty interest on the loan imposed under Items (f) and (g) hereof, an attorney's fee equivalent to ten percent (10%) of the unpaid balance, and costs of the suit. SUBSECTION 236.44 Special Time Deposit (STD) a. Special Time Deposits application . The Central Bank shall extend special time deposit with interest rate of 4% per annum to financing institution to finance 50% of the loans to be extended by them to applicants in accordance with these rules and regulations. At any time, the financing institution may submit to CB-DRBSLA its application for special time deposit supported by the following documents: 1) The list of borrowers with the corresponding project to be financed and the amount of approved loans. 2) Corresponding certificates of registration/accreditation with NACIDA. 3) Duly signed Certificate of Special Time Deposit issued by the financing institution which will be filled-up with the amount of the STD that will be approved by CB-DRBSLA. 4) Latest Statement of Financial Condition and Statement of Income and Expenses. 5) Reports of required and available reserves against deposit liabilities for the past four weeks immediately preceding the date of application. b. Term of STD . The STD shall be issued for a term of 60 days. Within 30 days from the receipt of STD, the participating financing institution must either release the same to the end-user or refund the unreleased portion to the CB-DRBSLA if not released after 30 days from receipt. Failure on the part of the financing institution to refund the unreleased portion of the STD shall subject the financing institution to a penalty of 14% per annum over and above the 4% interest on the STD. SUBSECTION 236.45 Rediscounting a. Rediscounting application 1) Loans granted under this program shall be rediscounted with the CB-DLC within 60 days from date of release of STD to the borrowers. 2) The application for rediscounting shall be supported by the following: a) Duly accomplished rediscount schedule; b) Borrowers' promissory notes duly endorsed by the financing institution together with the corresponding certificate of registration/accreditation with the NACIDA and any or all collateral documents securing said loans. c) The financing institution's advice to CB-DLC to remit rediscounting proceeds to the CB-DRBSLA to be applied in payment of the outstanding STD of the applicant financing institution; d) The financing institution's signed promissory note in favor of the Central Bank; e) Resolution of the board of directors authorizing the financing institution to negotiate for the loan with the Central Bank and designating the officers authorized to endorse the promissory notes and sign all papers pertaining to the loan; f) Latest Statement of Financial Condition and Statement of Income and Expenses; g) Latest report on required and available reserves together with a certification that the financing institution has not incurred net reserve deficiencies for four consecutive weeks immediately preceding the date of its application, and h) Report on average monthly savings and time deposits during the past four months immediately preceding the date of its application. b. Rate and term of rediscounting . The CB-DLC shall rediscount eligible loans granted under this program at 100% of the loan at the rate of 3% per annum for a maximum term of 360 days provided that the paper presented for rediscounting bears an effective interest rate of 9% per annum plus bank charge not exceeding 1% per annum. c. Repayment of rediscounting obligations . Repayment of rediscounting obligations must be in accordance with the existing rules and regulations. [Circular 701 11-5-79] SUBSECTION 236.5 Interbank loan transactions . The following regulations governing interbank loan transactions of commercial and thrift banks shall be adopted: a. 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. b. The Central Bank Accounting Department shall not accept or give due course to interbank loan transfer tickets unless the following are complied with: 1) Form a) For granting of loans . "Interbank loan advice 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. b) 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. 2) Transfer tickets (prescribed forms shown in 3. Appendix C) shall have a standard size of 4 3/4" x 8 1/2" and shall contain the following minimum data or information: a) Date of grant (white and green tickets) or date of repayment (yellow and pink tickets) of loan; b) The rate of interest or yield, including service charges, if any, shall be shown on the lending tickets (white and green). The actual computation of the said interest must be shown on the repayment tickets (yellow and pink); and c) Repayment tickets (yellow and pink) shall make reference to the date of the corresponding tickets recording grant of the loan. 3) Transfer tickets shall be signed or authenticated by officers whose names and specimen signatures are in the bank's list or book of Authorized Specimen Signatures, a copy of which shall be submitted to the Central Bank Accounting Department. 4) 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. c. 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. d. 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%). e. 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 appropriate supervising department. [For computation of balance of "Due from Central Bank of the Philippines" account, see Subsec. 255.21] f. 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. g. Any director or officer of a bank who authorizes or knowingly allows the commission of acts in violation of the provisions of this subsection shall be liable to the penal sanctions of Section 34 and 34-A of Republic Act No. 265, as amended. [Memorandum 8-17-79, as amended by Circular 732 5-5-80] SUBSECTION 236.6 Special Cotton Financing Program . The following implementing guidelines shall govern the special cotton financing program granted by stock savings and loan associations. SUBSECTION 236.61 Cotton Supervised Credit Financing Program a. Introduction In December 22, 1973, President Marcos signed P.D. 350 which was later amended by P.D. 1063 entrusting the Philippine Cotton Corporation the responsibility of undertaking and coordinating a Cotton Production Program in the country. To ensure success of the program, the Philippine Cotton Corporation, in cooperation with the agencies of the government and private, is providing credit with the package of technology to the farmers. The Cotton Financing Program is to be administered by the CB-DRBSLA through rural banks, stock savings and loan associations and other financial institutions under the Supervised Credit Program whereby adequate credit and competent technical assistance are timely extended to cotton-farmer-borrowers. Under this scheme, the farmer-borrowers agree in writing that he will apply improved practices necessary to conserve the land, improve its fertility and increase its production and abide by the approved farm plan and budget jointly prepared by him and the Philippine Cotton Corporation production technician. b. Objectives 1) General To attain self-sufficiency in cotton within the shortest possible time. 2) Specific a) To increase the production and farm income of farmers. b) To reduce our foreign exchange expenditures. c) To generate employment particularly in the rural areas. c. Strategy of Implementation 1) Funding The Philippine Cotton Corporation deposited the amount of P5M with the CB-DRBSLA under a Special Time Deposit to augment the initial deposit made by the National Food and Agriculture Council for cotton financing, which is to be utilized as seed starter fund by rural banks, savings and loan associations and other financial institutions for granting production loans to cotton farmers. 2) "Seed" STD Funding and Procedures a) The PhilCotton production technicians assist farmer-borrowers in the preparation of their farm plans and budgets. These are submitted to the Bank/SLA together with the other required documents. b) The Bank/SLA prepares an STD application based on the target areas prepared by the Philippine Cotton Corporation which will be the basis for granting STD's by the CB-DRBSLA. c) The Bank/SLA submits the STD application to CB-DRBSLA, the application shall be supported by the required number of blank STD certificates, the latest statement of financial condition and other CB requirements. d) CB-DRBSLA processes and approves the STD application of the Bank/SLA. e) CB-DRBSLA furnishes CB-DLC two copies of the approved application which shall be the basis of rediscounting of the Bank/SLA concerned. The latter in turn furnishes CB-DLC regional office a copy of the same which shall be the basis of subsequent rediscounting of the Bank/SLA. f) CB-DRBSLA fills up the STD certificates and releases the STD to the Bank/SLA by credit advice or telegraphic transfer to participating Bank/SLA depository bank. 3) Additional STD Funding and Procedures a) In addition to the provisions on the use of the COTTON LOAN FUND as a starter fund, the CB-DRBSLA shall be authorized to grant additional STDs to participating Bank/SLA which may be unable to get additional funds for release to cotton farmers through rediscounting. b) Initial STDs amounting to 50% of the total credit requirements per hectare of cotton financed shall be issued under this special CSCP. This shall have a term of 90 days. In cases where subsequently, additional STD funding is provided, the initial STD term shall be extended by 120 days. STDs issued in addition to the original releases shall mature 210 days from the date of initial STD. Second and third STD releases shall not exceed 25% of the total credit requirements per hectare per release and shall be made 8 and 12 weeks, respectively, after the first STD releases. 4) Rediscounting CB-DLC rediscounts at 100% all eligible papers of participating Bank/SLA for short-term production at a preferential rate of one (1) per cent. a) Bank/SLA rediscounts the promissory note with CB-DLC submitting with the re-discounting schedule a copy of the borrowers application and promissory note and Farm Plan and Budget. b) Upon approval of Bank/SLA application, CB-DLC automatically credits 50% of the rediscounting proceeds to the Bank's/SLA's STD account with CB-DRBSLA and the remaining 50% to the Bank/SLA depository bank and the Bank/SLA is notified by telegram. 5) Policies and Procedures a) Project Areas The project areas shall be those determined by the PCC as suitable for cotton production. These include the following current and expansion areas: Area I Ilocos Norte, Ilocos Sur, Abra Area II La Union, Pangasinan, Zambales Area III Cagayan, Kalinga-Apayao Area IV Isabela, Nueva Vizcaya Area V Nueva Ecija, Bulacan, Pampanga, Tarlac Area VI Mindoro, Laguna, Batangas, Cavite Area VII Negros Occ., Antique, Capiz Area VIII Cotabato b) Eligibility i) Eligible Borrowers . Farmers identified by PhilCotton eligible under the Rural Banks Act/Savings and Loans Associations Act/Commercial Banks Act, as the case may be. ii) Eligible Banks/SLAs . Banks/SLAs eligible to participate shall have the following qualifications: It must be located within or adjacent to a municipality certified by PhilCotton and priority target area for the year; It must be willing to finance a minimum of 20 hectares; It must be in a position to grant minimum of P50,000 in cotton loans for the crop year based on the financial statements as of the close of the proceeding Calendar Year; It must be willing to execute a written commitment duly authorized by its Board of Directors to participate in the cotton program not later than May 15, of each crop season or as otherwise prescribed by the CB-DRBSLA, in no case later than July 31, of each crop year. c) Requirements i) The farmer should get a certification from the barangay leader/captain attesting that he is a bona-fide farmer in the barangay or NFAC Identification Card. Cotton production technicians before hand must already possess the masterlist of farmers which should indicate the area of landholding to be financed. ii) The farmer assisted by the production technician prepares his farm plan and budget in accordance with his actual credit needs. d) Loan Per Hectare . The amount of the loan shall be as follows i) For farmers applying for cotton loans for two (2) hectares or less, a maximum amount of P3,000 per hectare shall be granted. ii) For farmers applying for cotton loan for more than two (2) hectares, a maximum amount of P4,300 per hectare shall be granted. iii) For farmers who may need to purchase sprayers, an additional loan of up to P700 per hectare shall be granted. The proceeds of the loan shall be budgeted as shown in 3.Appendix T. e) Loan Releases i) Upon approval of the loan, the whole loan proceeds shall be released and automatically credited to the Special Savings Deposit (SSD) account in the name of the farmer-borrower. This SSD shall earn an interest of 10% per annum, or at such rate as may be prescribed by the Central Bank. ii) Loan releases shall be based on the farm plan and budget upon the recommendation of the PhilCotton production technician. f) Security of the Loan i) Seldas/Damayans shall be jointly and severally liable for the loan or ii) Two solvent co-makers who are acceptable to the Bank/SLA or iii) Real estate/chattel mortgage sufficient to cover the loan amount. g) Maturity of the Loan . All loans shall mature within a period of seven (7) months or 210 days. h) Interest and other charges . Loans granted under the program shall bear an interest of 10% per annum or at such a rate as may be prescribed by the CB, and shall not be deducted in advance. Service fees and other charges for every loan granted under the program shall not exceed 2% for agrarian reform beneficiaries and 3% for non-agrarian reform beneficiaries per annum. A penalty interest consistent with CB policies on this matter shall be charged in addition to the regular interest. i) SSD Withdrawals and Purchase of Inputs i) All cash withdrawals from the SSD must be in accordance with the farm plan and budget. ii) Purchase of needed production inputs like seeds, fertilizer, sprayer and chemicals shall be done through the chit system or purchase order. Based on the actual needs of the crop, the production technician issues the chit indicating the name of the farmer, effective date of chit, input/amount needed and infestation that should be prevented or controlled. The technician issues financial institutions and dealer's copies to the farmer and retains the stub for references. Before a farmer-borrower can make use of chits, he must first have it validated. Farmer takes accomplished chit to the lending financial institutions. Bank/SLA verifies the schedule of input releases and the corresponding amount to be withdrawn against the SSD. Farmer accomplished withdrawal slip from the SSD. Bank/SLA stamps its seal on both copies and returns dealer's copy to the farmer. A validated chit is good only for fifteen days. Hence, the farmer-borrower must withdraw his inputs from the accredited dealer within the indicated term. If, however, the farmer fails to get his inputs from the dealer within the specified span of time, he could revalidate his expired chits, subject to the approval of the technician and the Bank/SLA involved. Farmer brings validated chit to an accredited dealer. Dealer issues the input with an invoice receipt indicating clearly the name, quantity and price of the inputs. 6) Supervision . CB-DRBSLA shall assign an Agricultural Credit Supervisor to coordinate with the participating Banks/SLAs. 7) Loan Repayment and Marketing Strategy a) At the start of the cropping season, the Philippine Cotton Corporation guarantees a floor price and market for the farmer-borrowers involved in the cotton financing program. b) At the time of harvest, farmers shall deliver their produce to PhilCotton collection centers where they will be issued receipts indicating the quantity and amount of harvest delivered. c) PhilCotton shall pay the cotton deliveries of the farmer-borrowers through the lending Bank/SLA. d) The lending Bank/SLA immediately credits the amounts to the farmer's account to offset his loan. Any excess amount is given to the farmer. e) The production technician shall see to it that farmer-borrowers do not divert their produce. Projected harvest per farmer established two weeks before the start of the harvesting will help as a check for possible diversion of produce. 8) Restructuring Participating Banks/SLA's shall be allowed to restructure the loans granted under this program in case of force majeure or fortuitous events upon certification by Area Production Technician, duly attested by his Area Supervisor and subject to verification by the CB Agricultural Credit Supervisor. 9) Guarantee Feature . For a premium of 1% of the loan amount, the LBP guarantee up to 85% of the loss that may be incurred by all participating lending institutions due to non-collection of the loans granted to farmer-borrowers under the cotton program caused by force majeure and/or fortuitous event except man-made calamities. The provision and procedures on loan guarantees are prescribed in the implementing guidelines set forth by the LBP. 10) Evaluation of Farm Projects After the End of the Crop Year . The technician evaluates the projects after the end of the crop season to determine the problems encountered by the farmer-borrowers in order to formulate recommendations and solutions to improve the farmers future farming operations. d. Implementing Agencies and their Responsibilities 1) Philippine Cotton Corporation (PhilCotton) a) Deposit seed fund with CB-DRBSLA to be utilized for STDS with participating banks. b) Deposit to the Cotton Loan Fund (CLF), an amount equal to 50% of the total cotton credit requirement of its farmer-cooperators, (computed at P3,000 for two hectares or less or P4,300 for more than the (2) hectares, as the case may be for Crop Year 1980-81) or at such an amount that may be jointly prescribed by PhilCotton and DRBSLA. c) Provide a production technician for every cluster of cotton farmers. d) Guarantee the floor price and market for all farmer-borrowers. e) Submit to the CB-DRBSLA and the CB-DLC the planting and loan release schedules per participating Bank/SLA. f) Submit to the CB-DRBSLA the priority target hectarage for each crop year on a municipality basis. g) Pay the produce of all farmer-borrowers through the lending financial institutions. h) Assist banks in the collection effort. 2) Central Bank of the Philippines (CBP) a) Department of Rural Banks and Savings and Loan Associations (DRBSLA) Administer the seed fund intended for STD's Identify which Banks/SLAs shall service the priority target areas indicated by PhilCotton Deposit with participating financial institution STDs equivalent to 50% of the total credit requirement per hectare and ensure availability of funds to participating financial institutions for subsequent releases of its registered cooperators, consistent with above paragraph Screen preliminary estimates of cotton farmers to be financed per financial institution, process bank's/SLA's application for STDs Provide supervising personnel to coordinate program implementation. Encourage RBs/SLAs and other financial institutions to participate actively in the implementation of the program. Conduct comprehensive training as may be required. b) Department of Loans and Credit (DLC) Rediscount all eligible papers under the program at a preferential rate of rediscounting given to loans granted under the program. 3) National Food and Agricultural Council a) Provide adequate funds for training production technician/farmers under the cotton program. b) Ensure availability of additional cotton loan fund for the cotton program, to be drawn from the IAF, should the need for such arise. c) Provide additional support as may be required during the implementation of the program. 4) Rural Banks/SLAs/Other Financial Institutions a) Grant production loans under this program. b) Facilitate withdrawals of required inputs. c) Abide with the reporting procedures. d) Undertake the principal responsibilities in the collection of loans with the assistance of PhilCotton Technicians. e) Submit a written commitment to participate in the special CSCP indicating number of hectares to be financed, preferences on likely location of areas (barrio/municipality level) and amount involved on or before May 15, of each crop year or as otherwise set by the CB-DRBSLA. f) Submit to CB-DRBSLA together with application for STDs a list of registered cotton farmer-cooperators to be financed, duly certified by the PhilCotton technician or Area Supervisor assigned. g) Effect loan releases to farmers only upon the certification by PhilCotton technician assigned on the prescribed form. h) Furnish CB-DRBSLA and PhilCotton the required periodic report (See 3.Appendix U) 5) Land Bank of the Philippines (LBP) Guarantee up to 85% of the loss that may be incurred by all participating lending institutions due to non-collection loans granted to farmer-borrowers under the cotton program caused by force majeure or fortuitous event except man-made calamities. SUBSECTION 236.62 Medium term financing under the special cotton financing program a. Introduction . The supervised credit medium term financing under the Special Cotton Financing Program supports the program for the short-term cotton production loans of farmer-borrowers. The program provides financing for the acquisition of irrigation and farm equipment/facilities needed for cotton production. With this scheme, it is expected that production yields of cotton farmers will increase which will eventually improve and uplift the socio-economic life of the farmers. b. Objective . To increase the production yield and farm income of farmers by providing them with the means of increasing and facilitating their productive capacities. c. Strategy of Implementation 1) Funding . The fund availment of financial institution from CB-DRBSLA in the form of Special Time Deposits (STDs) shall depend on the criteria worked out by the Bank. The STDs extended to financial institutions are subject to the existing rules being followed in the implementation of the Cotton Financing Program. 2) Policies and procedures a) Loan purposes . The following types of financing may be obtained under the medium term program: i) Acquisition of irrigation equipment/facilities ii) Acquisition of power sprayers iii) Other farm equipment/facilities needed for cotton production. b) Eligible borrowers . Farmers identified by PhilCotton eligible under the Rural Banks Act/Savings and Loan Act/Commercial Banks Act, as the case may be. c) Amount of Loan . The amount of the loan shall be based on the actual cost of the object of financing as shown in the project plan and the feasibility study. d) Loan release . Loan releases will be based on the project plan, subject to the recommendations of the PhilCotton technicians and as validated by the bank management. e) Security of the loan i) Real estate mortgages ii) Chattel mortgage of the project or related properties iii) Two co-makers acceptable to the bank iv) Seldas/damayans jointly and severally liable f) Maturity of the loan . Loan maturity shall be based on the economic life span of the project to be financed. In all cases, loans shall have a maximum maturity period of not more than five (5) years. g) Interest and other charges . Loans granted under the program shall bear an interest of 12% per annum or at such a rate as may be prescribed by the CB and shall not be deducted in advance. Service and other charges shall not exceed 2% for agrarian reform beneficiaries and 3% for non-agrarian reform beneficiaries. h) Loan repayment . Repayment shall be scheduled in approximately equal installments of principal interest, annually, semi-annually or of a shorter period, except in cases where deferred plan of payments have been granted, so arranged as it falls due on the approximate period of highest borrower's income or when the principal income of the borrower is normally available. d. Loan availments 1) Loan paper requirements a) The farmer together with the PhilCotton technician accomplishes the technical and economic feasibility study of the project form. b) After determining the fixed capital requirements of the project, the PhilCotton technician assists the farmer in filling up the loan application form. Evidence of ownership of security being offered as collateral and other important documents/paper such as Certification of Identity, Tax Account Number (TAN), Residence Certificate A and Guarantee Agreement are attached to the application form. 2) Loan processing . The Bank summarizes the total credit needed by the farmer-borrowers and applies the corresponding STD with CB-DRBSLA by accomplishing the application for medium term loans and application for Special Time Deposit. [CLRBSSLA 79-44 8-28-70, as amended by CLRBSSLA 80-34 5-30-80] SECTION 237. Discounting of Receivables . SUBSECTION 237.1 Regulations on discounting of receivables . The following regulations were approved for the purpose of implementing Section 31(e) of Republic Act No. 337, as amended, and Section 5(c) of Republic Act No. 3779, as amended: LLjur a. Accounts receivable arising from the sale by duly licensed dealers or distributors of (1) durable consumer goods and (2) instruments, machineries and other equipment, and goods for the production, processing, transformation, handling or transportation of consumer, agricultural and industrial products may be discounted or assigned to the bank with recourse against such dealers or distributors: Provided , That such accounts receivable with original maturity of more than one year discounted or assigned with recourse shall cover only good sold by such dealers or distributors under a contract of sale with chattel mortgage or under a contract of sale with reservation of title. The dealers or distributors shall endorse or assign said accounts receivable, contracts and documents in favor of the bank. b. 1) Accounts receivable of real estate developers from the sale of subdivision lots and/or houses and lots, title to which has been transferred to individual lot and/or house and lot buyer against the security of a first mortgage on the property subject of the sale, may be discounted by such real estate developer with thrift bank: Provided , That the bank shall have recourse against the developer who shall be required to assign to the bank the first mortgage executed by the buyer in favor of the developer: Provided , further , That the property is located in a subdivision or housing project primarily for low and middle income families. 2) Accounts receivable of real estate developers from individual lot and/or house and lot buyers may be discounted by such real estate developers with the same thrift bank from which the buyer has obtained a loan against the security of a first mortgage on the property subject of the sale, title to which has been transferred to the buyer by the developer for the purpose of obtaining the bank loan to finance a portion of the purchase price of the property and/or improvements thereon: Provided , That the bank shall have recourse against the developer who shall be required to assign to the bank the second mortgage executed by the buyer in favor of the developer: Provided further , That the property is located in a subdivision or housing project primarily for low and middle income families. The aggregate amount received by the real estate developer for the account receivable discounted, and/or the loan granted by the bank to the lot and/or house and lot buyer, in Items b (1) and b (2) above, shall in no case exceed the statutory loan value of the subject property mortgaged. c. The effective rate of yield, including commissions, premiums, fees and other charges, from the discount of evidences of indebtedness and accounts receivable with remaining maturities of seven hundred thirty (730) days or less, that may be charged or received by thrift banks, whether or not authorized to engage in quasi-banking functions, shall not exceed eighteen per cent (18%) per annum. The effective rate of yield including commissions, premiums, fees and other charges that may be charged or received from the discount of evidences of indebtedness and accounts receivable with remaining maturities of more than seven hundred thirty (730) days, whether or not the bank is authorized to engage in quasi-banking functions, shall not exceed twenty-one per cent (21%) per annum. The aggregate exposure in (a) high-grade bonds and other high-grade evidences of indebtedness [other than government securities mentioned in Subsec. 242.2(b)], (b) discounted evidences of indebtedness referred to in Subsec. 242.2(c), and (c) accounts receivable arising from the sale by duly licensed dealers or distributors of durable consumer goods discounted as mentioned in Item 237 (a)(1) of this section, shall not exceed fifteen per cent (15%) of total assets of thrift banks: Provided , That the total exposure of thrift banks on accounts receivable arising from the sale by duly licensed dealers or distributors of durable consumer goods shall not exceed one-third of the fifteen per cent (15%) ceiling prescribed in this paragraph. (See also Subsec 242.2) [Circular 661 3-15-79, as amended by Circular 724 4-8-80] SUBSECTION 237.2 Discounting of notes and other credit instruments by stock savings and loan associations . Subject to pertinent regulations governing quasi-banking functions, a stock savings and loan association may discount, with recourse, bills, acceptances, promissory notes and other credit instruments. [Circular 691 8-13-79] SECTION 239. Sundry Provisions . SUBSECTION 239.1 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 thrift banks. SUBSECTION 239.11 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 H shall be used for purposes of determining the regional retention of deposits. LLjur [Circular 536 7-22-76] SUBSECTION 239.12 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 239.13 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 credits or loans and discounts to the private sector shall not fall below 50% of total deposits. [Circular 536 7-22-76, as amended by CL 9-13-76] SUBSECTION 239.14 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 239.15 Reporting requirements . A report on the "Computation of Investment Deposit Ratio of Branches, etc. and/or Head Offices of Thrift Banks in the Provinces" shall be made as accompanying schedule to the banks' "Statement of Condition (Consolidated)" every quarter. LLjur [Circular 536 7-22-76] SUBSECTION 239.16 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 Republic Act No. 265, as amended. [Circular 571 7-12-77] SUBSECTION 239.17 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 239.2 Assets acquired in settlement of loans . All thrift 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 34 of Republic Act No. 337, as amended, to dispose of such acquired assets. [CL 6-20-78] SUBSECTION 239.3 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 3.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] SUBSECTION 239.4 Miscellaneous provisions on the credit operations of savings and loan associations SUBSECTION 239.41 Power of association to prescribe rules on credit operations . The board of directors of a stock savings and loan association shall prescribe its own rules and regulations governing credit transactions and loan operations of the association within the framework of existing rules and regulations. LLjur SUBSECTION 239.42 Maximum loan maturity . No loan granted by a stock savings and loan association shall have a maturity date of more than five (5) years, except loans on the security of unencumbered real estate for the purpose of home building and home development which may be granted with maturities not exceeding thirty (30) years, and medium or long-term loans to finance agricultural projects, subject to regulations prescribed by the Monetary Board: Provided , That extensions or renewals of loans may be allowed in accordance with Subsec. 239.44. SUBSECTION 239.43 Basic requirements in granting loans a. Application . A prospective borrower must submit an application stating the purpose of the loan and such other information as may be required by the association. The loan application and other required information shall form part of the credit information file of the borrower in the association. b. Credit investigation . No loan shall be approved unless prior investigation has been made to determine the credit standing of the applicant and/or the fair value of the property offered as security and the report thereon is submitted and made part of the loan application: Provided , however , That this requirement may be waived by an association in the case of a permanent employee or wage earner who is borrowing an amount not exceeding his deposit plus his four months' salary or regular income. c. Credit information file/collateral file . An association shall be required to maintain a credit information file for each of its borrowers which must contain, among other things, the borrower's application, the credit investigation reports, financial and such other information relative to the borrower's credit standing. A collateral file for each borrower shall also be maintained which must contain, among other things, the collateral documents pertaining to the loan, mortgage/pledge contracts, copies of approval, promissory notes and such other information relative to the security of the loans. d. Loan approvals . Loans shall be approved by the association's board of directors or if approved by a body or officers duly authorized by the board, such loans must be confirmed by the board of directors. e. Loan agreements . For each loan granted by a stock savings and loan association, a promissory note must be executed by the borrower in favor of the association expressing such particulars as the amount of loan, date granted, due date, interest rate and other similar information. f. Inscription of lien . In the case of mortgage loans, no release against an approved loan shall be made before the inscription of the mortgage. SUBSECTION 239.44 Extensions/renewals of loans . Extension of the period of payment of loans may be allowed under the following circumstances: a. For productive loans, the extension shall not exceed one-half of the original period: Provided , That thirty per cent (30%) of the loan shall have been paid. A second extension may also be allowed: Provided , That the same shall not exceed one-half of the period of the first extension. b. For consumer loans, the extension shall not exceed one-half of the original period: Provided , That fifty per cent (50%) of the loan shall have been paid. LLjur c. For loans for medical purposes, the extension may be for the same duration as the original period: Provided , That thirty per cent (30%) of the loan shall have been paid. Loans payable in periodical installments may be renewed for the full amount of the loan: Provided , That at least fifty per cent (50%) of the loan shall have been paid. Extension or renewal of clean loans for personal and household finance shall be governed by the provisions of Subsec. 232.25. SUBSECTION 239.45 Limitations of lending authority a. An association shall not commit itself to make any loans for amounts in excess of the total of the following: 1) Amount of cash available for loan purposes; 2) Amount of cash which can be readily realized upon the sale or redemption of permissible investments made by the association; and 3) Amount of credit available for loan purposes from government or private financing institutions. b. No association shall directly or indirectly make any loans to any director or officer of such association, either for himself or as an agent or as partner of another, except with the written approval of the majority of the directors of the association, excluding the director concerned: Provided , That the Monetary Board may regulate the amount of credit that the association may extend, directly or indirectly, to its directors, officers or stockholders. In any case, and event, the outstanding credit accommodations which a stock association may extend to its stockholders owning two per cent (2%) or more of the subscribed capital stock, its directors or officers shall be limited to an amount equivalent to their respective outstanding deposits and book value of the paid-in capital contribution in the association. Total direct and indirect borrowings of directors, officers and stockholders of stock savings and loan associations and their related interests shall not exceed fifteen per cent (15%) of the total loan portfolio of the association or 100% of combined capital accounts net of valuation reserves as approved by the Central Bank, whichever is lower: Provided , That an association may exceed its aggregate ceiling with the prior approval of the Monetary Board upon recommendation of the appropriate supervising and examining department of the Central Bank: Provided , however , That in no case shall the total unsecured direct/indirect loans to directors, officers and stockholders exceed thirty per cent (30%) of such aggregate ceiling or the outstanding direct/indirect loans thereto, whichever is lower. In all cases of credit accommodations granted to directors, officers or stockholders under this subsection, the written approval of the majority of the directors of the association, excluding the director concerned, shall be entered upon the records of the association and a copy of such entry shall be transmitted forthwith to the appropriate supervising and examining department of the Central Bank. The office of any director or officer of an association who violates the provisions of this subsection shall immediately become vacant and the director or officer shall be punished by imprisonment of not less than one year nor more than ten years and by a fine of not less than one thousand pesos (P1,000.00), nor more than ten thousand pesos (P10,000.00). c. No association shall make any loan to any corporation of which a majority of the stock is owned or controlled directly or indirectly, by any one or more of the directors or officers of such association collectively except with the written approval of the majority of the directors of the association excluding the director or directors concerned. Any such approval shall be entered upon the records of the association and a copy of such entry shall be transmitted forthwith to the appropriate supervising and examining department of the Central Bank. The Monetary Board may regulate the amount of credit that an association may extend to a corporation referred to in this subsection in the same manner as it may regulate credit accommodations to directors and officers of the association. LLjur [Circular 691 8-13-79] Footnotes * For lending operations of money shops, please refer to Subsec. 214.2 1. This can be determined by dividing twelve, the number of months in a year, by the number or fraction of months between installment payments. APPENDIX A (Book II, Part 3) 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 overcrowded and are necessary to support the production and distribution of Priority I goods or to satisfy basic wants. f. Other services which are not overcrowded 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. Agriculture 1) Abaca 2) Cassava 3) Cattle and dairy farms 4) Coconut 5) Coffee and cocoa 6) Corn 7) Palay or rice 8) Piggery 9) Poultry 10) Ramie 11) Rubber plantation 12) Sugar a 13) Other fruits and vegetables b. Fisheries 1) Fishponds and inland fishing 2) Marine fishing c. Forest 1) Forest nurseries and reforestation projects 2. Mining and Quarrying a. Metal Mining 1) Chromite 2) Copper 3) Iron 4) Lead 5) Manganese 6) Mercury and quicksilver 7) Nickel 8) Zinc b. Non-Metallic Mining 1) Asbestos 2) Sulphur 3) Coal 4) Gypsum 3. Manufacturing a. Basic Metal Industries 1) Blast furnaces, steel work and rolling mills 2) Iron and steel basic industries 3) Iron and steel foundries 4) Non-ferrous metal basic industries b. Chemical and Chemical Products 1) Basic chemicals 2) Drugs and other pharmaceutical preparations 3) Fertilizer c. Coconut Products and their Preparation 1) Coconut oil, edible 2) Coconut oil, inedible 3) Copra meal and cake d. Electrical Machinery, Apparatus and Appliances 1) Transmissions and distribution equipment e. Food Manufacturing 1) Canning and preserving of fish and other sea foods a) Fish canning 2) Canning and preserving of fruits and vegetables a) Canning, drying, brining, pickling or otherwise preserving or preparing vegetables b) Canning, drying or otherwise preparing and preserving fruits 3) Slaughtering, preparation and preserving of meat 4) Sugar factories and refineries a) Sugar refining plants a 5) Miscellaneous food preparation a) Prepared feeds for animals and fowls f. Furniture and Fixtures Manufacture 1) Rattan and bamboo furniture g. Leather and Leather Products 1) Tanning and finishing h. Lumber and Wood Products 1) Veneer, plywood and prefabricated products i. Machinery, Equipment, Accessories and Parts 1) Agricultural machinery 2) Engines and turbines 3) Industrial, construction and mining machinery j. Non-Metallic Products 1) Cement k. Paper and 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 1 B. Economic Activities Eligible for Credits up to Sixty Per Cent (60%) of the Loan Value of the Credit Instrument * 1. Agriculture, Fisheries and Forestry a. Agriculture 1) Citrus 2) Cotton 3) Salt farming 4) Soybean 5) Other root crops 2. Mining and Quarrying a. Metal Mining 1) Gold 2) Silver b. Non-Metallic Mining 1) Asphalt 2) Marble 3. Manufacturing a. Chemical and Chemical Products 1) Dyeing and tanning materials 2) Explosives (excluding firecrackers) b. Coconut Products and their Preparations 1) 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) Railroads and railway companies 4) Steamboats and steamship lines b. Communication 1) Telecommunication (cable, mail and express, telegraph, telephone) c. Electricity, Gas and Steam 1) Electric, light, heat and power d. Water Supply and Sanitary Services 1) Garbage, sewerage and disposal system 6. Services a. Business and Professional Services 1) Engineering and technical services b. Educational Services 1) Private vocational 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 operation of first class hotels which cater to the needs of the tourist industry ). C. Economic Activities Eligible for Credits up to Sixty Per Cent (60%) of the Loan Value of the Credit Instrument * 1. Agriculture, Fisheries and Forestry a. Agriculture 1) Pineapple 2) Tobacco, native b. Fisheries 1) Fishery services 2) Pearl fishing and culture, shell gathering and other marine products c. Forestry 1) Forest services 2) Timber tracts 2. Mining and Quarrying a. Non-Metallic Mining 1) Mineral salt 2) Silica 3. Manufacturing a. Apparel and Other Finished Products Made from Fabrics and Similar Materials 1) Embroidery shops 2) Wearing apparel b. Chemicals and Chemical Products 1) Paints, varnishes and lacquers 2) Soaps and other cleansing preparations c. Coconut Products and their Preparation 1) Copra d. Electrical Machinery, Apparatus and Appliances 1) Electric lamps 2) Household appliances 3) Radios, televisions, telephone receiving sets, electronic tubes and components e. Food Manufacturing 1) Canning and preserving of fish and other sea foods a) Fish sauce (patis) manufacture b) Shellfish curing, smoking, salting or pickling, n.e.c. 2) Cocoa, chocolate and sugar confectionery a) Cocoa and chocolate processing factories 3) Grain mill products a) Corn mills b) Rice mills c) Tuber flour mills d) Wheat flour 4) Miscellaneous food preparations a) Salt manufacture b) Starch and its products c) Vegetable lard and margarine manufacture d) Vermicelli and noodles manufacture f. Lumber and Wood Products 1) Creosoting and other wood treating g. Metal Industries 1) Fabricated wire products 2) Metal stamping, coating and engraving h. Non-Metallic Products 1) Plastic products 2) Pottery, china, earthenware 3) Concrete aggregates 4) Concrete products i. Paper and Paper Products 1) Coated and glazed paper products j. Printing, Publishing and Allied Industries 1) Book publishing and printing 2) Newspaper and periodical publishing k. Tobacco 1) Cigar and cigarette factories (native) l. 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 1 b. Recreation Services 1) Motion picture production 7. Financial a. Banks 1) Commercial banks 2) Savings and mortgage banks 8. Commerce a. Exports 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, and Circular 610 5-19-78 Footnotes a. Authorized up to December 31, 1979 (Circular 444) 1. To follow rating of economic activities included in this list * List 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%. APPENDIX B 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 stockholder is a party, directly or indirectly, as described in Subsec. 234.3, to any of the transactions enumerated in Item (d) of Subsec. 234.1: (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. 234.1 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 appropriate Central Bank supervising department 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 a 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 appropriate Central Bank supervising department 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 appropriate Central Bank supervising department 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 C Prescribed Forms for Transfer Ticket APPENDIX D FORMAT OF DISCLOSURE STATEMENT ON LOAN/CREDIT TRANSACTION _______________________________ (Business Name of Creditor) DISCLOSURE STATEMENT ON LOAN/CREDIT TRANSACTION (As Required under R.A. 3765, Truth in Lending Act) NAME OF BORROWER ________________________________________________ ADDRESS ___________________________________________________________ 1. LOAN GRANTED (Amount to be financed) P _______ (A) 2. FINANCE CHARGES: Not Deducted Deducted From From Proceeds of Loan a. Interest ___ % p.a. from ___ to ___ P _______ P _______ ( ) Simple ( ) Monthly ( ) Compound ( ) Quarterly ( ) Semi-Annual ( ) Annual b. Non-Interest charges _______ _______ c. Commitment fee _______ _______ d. Guarantee fee _______ _______ e. Other charges incidental to the extension of credit (Specify): __________________________ _______ _______ __________________________ _______ _______ Total finance charges P P (B) ======= ======= 3. NON-FINANCE CHARGES a. Insurance Premium P _______ P _______ b. Taxes _______ _______ c. Documentary/Science Stamps _______ _______ d. Notarial fees _______ _______ e. Others (Specify): __________________________ _______ _______ __________________________ _______ _______ Total non-finance charges P P (C) ======= ======= 4. TOTAL DEDUCTIONS FROM PROCEEDS OF LOAN (B plus C) P _______ (D) 5. NET PROCEEDS OF LOAN (A less D) P ======= 6. PERCENTAGE OF FINANCE CHARGES TO TOTAL AMOUNT FINANCED (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 10-30-75 APPENDIX E FORMAT OF ABSTRACT OF "TRUTH IN LENDING ACT" ABSTRACT OF "TRUTH IN LENDING ACT" (Republic Act No. 3765) SECTION 1. This Act shall be known as the "Truth in Lending Act." SECTION 2. Declaration of Policy . It is hereby declared to be the policy of the State to protect its citizens from a lack of awareness of the true cost of credit to the user by assuring a full disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of the national economy. xxx xxx xxx SECTION 3. As used in this Act, the term xxx xxx xxx (3) "Finance charge" includes interest, fees, service charges discounts, and such other charges incident to the extension of credit as the Board may by regulation prescribe. xxx xxx xxx SECTION 4. Any creditor shall furnish to each person to whom credit is extended, prior to the consummation of the transaction, a clear statement in writing setting forth, to the extent applicable and in accordance with rules and regulations prescribed by the Board, the following information: (1) the cash price or delivered price of the property or service to be acquired; (2) the amounts, if any, to be credited as down payment and/or trade-in; (3) the difference between the amounts set forth under clauses (1) and (2); (4) the charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit; (5) the total amount to be financed; (6) the finance charge expressed in terms of pesos and centavos; and (7) the percentage that the finance charge bears to the total amount to be financed expressed as a 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. APPENDIX F (Book II, Part 3) RULES AND REGULATIONS GOVERNING THE IMPLEMENTATION OF THE INDUSTRIAL GUARANTEE AND LOAN FUND (IGLF) ACCREDITATION SYSTEM A. General Procedure 1. Thrift 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 thrift bank the action taken by the Governor/Senior Deputy Governor on its application for accreditation, copy furnished NEDA. B. Accreditation Criteria for Thrift Banks . The accreditation criteria for participating banks under the IGLF scheme consist of compliance with the following requirements in addition to the Central Bank's normal criteria for credit availment: 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; 5. Non-arrearages with the Central Bank/IGLF. 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 for banks 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 II, Part 3) FINANCING OF SMALL INDUSTRIES UNDER THE IGLF PROGRAM The following rules and regulations shall govern the availment by duly accredited thrift 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 3.Att. G.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; c) 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 certification may be issued by the agencies or may be in the form of a sworn statement executed by the aforementioned parties; g) Certification of Time Deposit 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 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 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 firms. 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, 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 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. 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 1-1/2% 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 P100.00 P100,000 and below P 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. O. Effectivity . These rules and regulations shall take effect immediately, and any memorandum-circulars and/or orders inconsistent herewith shall be deemed as amended and/or revoked. Source: Memorandum Circular dated 10-25-76, as amended by Memorandum Circular dated 10-28-77 ATTACHMENT 1 (Book II, Part 3) LIST OF POTENTIAL SMALL INDUSTRIES FOR IGLF FINANCING Food Products 1. Processed meat and seafoods including canned 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, hands and pedal, carpet underlay made of rubber. 12. Rubber toys and sporting goods 13. Rubber belts Chemicals and Chemical Products 1. Almaciga resin (processed) 2. Silica gel 3. Iron oxide 4. Enzymes (from substantially domestic sources) 5. Glazing putty 6. Ink 7. Cosmetics, perfumery 8. Wax and wax products 9. Glues 10. Photographic chemicals 11. Mosquito coils 12. Modified hard resins 13. Chemical solvents 14. Charcoal 15. Refined glycerine 16. Alcohol 17. Blowing agents from rubber and plastic compound 18. Essential oils 19. Disposable hypodermic needle and syringe 20. Fiber-tipped pens 21. Chemical gypsum 22. Organic fertilizer Pharmaceutical Products 1. Pharmaceuticals 2. Wadding, gauze, bandages, adhesives, similar articles 3. Dentures and fillings Textile Products 1. Fabrics of abaca, sinamay, burlap, jusi, pineapple and other bast fibers 2. Specialty garments such as laces, garters, band, towels 3. Embroideries 4. Non-woven fabrics and articles thereof 5. Other made-up articles of textiles, plastic, rubber and leather 6. Garments (at least 70% of production must be exported) only for Mindanao 7. Tablecloths 8. Mosquito nets 9. Processed abaca fiber Non-Metallic Products 1. Marble slabs, tile chips and curios 2. Cement additives 3. Asphalt batching 4. Reinforced fiber glass products 5. Processed marble blocks 6. Cement floor tiles 7. Asbestos tiles 8. Pipes and tubes, asbestos cement 9. Roofing tiles and fire bricks 10. Clay products such as pottery roofing tiled and paste frits 11. Ceramic products such as tiles (glazed, vitrified), sanitary ware sinks, bidets, etc., except dinnerware 12. Safety glass 13. Asbestos fibers 14. Coal, limestone, clay, marble 15. Silicon metal 16. Silicon carbide 17. Hollow blocks Metallic Products 1. Pyrite (roasted and unroasted) 2. Pyrite cinders or iron sulfite 3. Manganese concentrates 4. Silver concentrates and bars 5. Prefabricated and fabricated structural products made of iron and steel and cement and other materials (except ordinary hollow blocks) 6. Steel drums 7. Pails 8. Bolts and nuts 9. Household utensils made of metal including enamelled utensils 10. Kitchen appliances and tools hand-operated such as meat grinders, coconut graters 11. Cutlery such as scissors, blades, tailor's shears, shovels, spades, rakes, saws, knives 12. Razor blades 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 placed 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 catches 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 product, such as light diffusers, footwear, containers, sheets, raincoat, 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, place mats, shellcraft, hats, household utensils, toys and sporting goods 7. Umbrellas 8. Jewelry (except precious stones) 9. Pins 10. Clasps, hooks, eyes buckles, etc. of base metal 11. Musical instruments and parts 12. Buttons 13. Zippers 14. School and office supplies such as fasteners, pencils folders, paper clips, pens and holders, bookbinders, rulers, desk pieces, etc. 15. Waste recycling 16. Threads of cotton or synthetic fiber 17. Cufflinks 18. Plaques and trophies Source: Memorandum Circular to All Commercial, Thrift Banks and Non-Bank Financial Intermediaries and Rural Banks dated 10-25-76 APPENDIX H (Book II, Part 3) REGIONAL GROUPINGS OF PROVINCES AND CITIES FOR PURPOSES OF THE REQUIRED INVESTMENT DEPOSIT RATIO OF THRIFT BANKS IN A REGION Region No. 1 Ilocos Region 1. Ilocos Norte 2. Ilocos Sur 3. Abra 4. La Union 5. Benguet 6. Mountain Province 7. Pangasinan 8. Baguio City 9. Laoag City 10. Dagupan City 11. San Carlos City Region No. II Cagayan Valley Region 1. Batanes 2. Cagayan 3. Isabela 4. Nueva Vizcaya 5. Quirino 6. Ifugao 7. Kalinga-Apayao Region No. III Central Luzon Region 1. Tarlac 2. Nueva Ecija 3. Pampanga 4. Zambales 5. Bulacan * 6. Bataan 7. Angeles City 8. Cabanatuan City 9. Olongapo City 10. 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 6. Mandaluyong 7. San Juan 8. Las Pias 9. Malabon 10. Navotas 11. Pasig 12. Pateros 13. Paraaque 14. Marikina 15. Muntinlupa 16. Taguig 17. Valenzuela Region No. IV-A Southern Tagalog Region 1. Towns of Rizal not included in Metropolitan Manila Area 2. Cavite 3. Laguna 4. Batangas 5. Quezon 6. Aurora (sub-province) 7. Marinduque 8. Mindoro Oriental 9. Mindoro Occidental 10. Romblon 11. Palawan 12. Batangas City 13. Lipa City 14. Cavite City 15. Lucena City 16. San Pablo City 17. Tagaytay City 18. Trece Martires City 19. Puerto Princesa City Region No. V Bicol Region 1. Camarines Norte 2. Camarines Sur 3. Albay 4. Catanduanes 5. Masbate 6. Sorsogon 7. Iriga City 8. Legaspi City 9. Naga City Region No. VI Western Visayas Region 1. Negros Occidental 2. Iloilo 3. Guimaras (sub-province) 4. Antique 5. Aklan 6. Capiz 7. Bacolod City 8. Bago City 9. Cadiz City 10. Iloilo City 11. La Carlota City 12. Roxas City 13. San Carlos City 14. Silay City Region No. VII Central Visayas Region 1. Negros Oriental 2. Siquijor 3. Cebu 4. Bohol 5. Bais City 6. Canlaon City 7. Cebu City 8. Danao City 9. Dumaguete City 10. Lapu-Lapu City 11. Mandaue City 12. Tagbilaran City 13. Toledo City Region No. VIII Eastern Visayas Region 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 1. Zamboanga Del Norte 2. Zamboanga Del Sur 3. Basilan 4. Sulu 5. Tawi-Tawi 6. Dapitan City 7. Dipolog City 8. Pagadian City 9. Zamboanga City Region No. X Northern Mindanao Region 1. Camiguin 2. Misamis Oriental 3. Misamis Occidental 4. Bukidnon 5. Agusan del Norte 6. Agusan del Sur 7. Surigao del Norte 8. Cagayan de Oro City 9. Gingoog City 10. Oroquieta City 11. Ozamis City 12. Tangub City 13. Surigao City 14. Butuan City Region No. XI Southern Mindanao 1. Davao del Norte 2. Davao Oriental 3. Davao del Sur 4. South Cotabato 5. Surigao del Sur 6. Davao City 7. General Santos City Region No. XII Central Mindanao Region 1. Lanao del Norte 2. Lanao del Sur 3. Maguindanao 4. North Cotabato 5. Sultan Kudarat 6. Iligan City 7. Marawi City 8. Cotabato City Source: MACB 3-17-76, as amended by Circular 536 7-22-76 Footnotes * Excluding the town of Valenzuela which is included in Region IV Metropolitan Manila Area pursuant to PD 824. APPENDIX I (Book II, Part 3) REGULATIONS ON FINANCING PLANS FOR BANK OFFICERS/EMPLOYEES A. 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: cdti 1. 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. 2. Equipment for the purchase of transportation vehicles, household equipment and appliances for the personal use of the officer or employee. 3. Personal to defray expenses for medical, maternity, education and emergency needs of the officer or employee or his family. B. Mechanics of Financing Plan 1. Eligibility Only full time and permanent officers and employees shall be eligible to participate under fringe benefit financing plans. 2. 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 3. 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 basic salary 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: Maximum Purpose Amount Real Estate P300,000 Car 70,000 Other Equipment/Chattel 10,000 Personal Loan An amount equivalent to 3 months of basic salary 4. Repayment a. Total monthly amortization shall not exceed 25% of the basic monthly salary of the officer or employee, which amount the bank shall deduct from the salary of the officer or employee. b. 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. 5. 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 Republic Act No. 337, as amended, and Subsec. 234.4. The aggregate outstanding loans and credit accommodations to bank employees, (i.e., excluding "officers" as the term is defined in Subsec. 234.1) under the bank's fringe benefit program shall not exceed five per cent (5%) of the bank's total loan portfolio. LLjur C. Forms of Financial Assistance 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. D. Preconditions/Limitations on Fringe Benefit Programs 1. 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. 2. 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. 3. 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. 4. The applicable contract shall incorporate mortgage and insurance clauses, whenever applicable, in favor of the bank. 5. 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. 6. 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. E. Other, Requirements 1. 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. 2. 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 appropriate supervising and examining department of the Central Bank may require the banks concerned to submit a regular report monitoring the various transactions under the bank's financing plans for officers/employees. F. Financing Plans not Covered by Fringe Benefit Program Loans on 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 Sec. 234 of this Manual. LibLex Source: Circular 561 dated 3-28-77, as amended by Circular 622 8-11-78 APPENDIX J (Book II, Part 3) GUIDELINES GOVERNING THE AGRICULTURAL SUPERVISED CREDIT OPERATIONS OF THRIFT 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: LLphil 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 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 blank 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 Mayor 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 term are as follows: a. Rice production; and b. White corn and feed grains 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; LLpr d. Co-makers acceptable to the bank e. Selda/damayan members as co-makers and f. Other collaterals 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. No fees or charges shall be collected from agrarian reform except a service charge of two per cent (2%) per annum or P150 whichever is lower upon release of the loan. Thrift banks may, however, collect a service charge of three per cent (3%) per annum in case the borrowers are not agrarian reform beneficiaries. 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 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 which 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 members 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. prLL 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. 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. cdll [Source: Circular Letter dated 3-28-77] APPENDIX K (Book II, Part 3) GUIDELINES ON DOMESTIC BORROWINGS 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 3.Att.K.1. llcd 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 3.Att. K.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 a) has not declared/distributed dividends or profits and/or has not partially withdrawn capital after July 1, 1978 and b) 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. 235.9 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 farms from the requirements of Sec. 235.9 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 borrowing" shall refer to credit in Philippine currency obtained from banks and other financial institutions. Any renewal or extension of peso borrowings and shall be considered new peso borrowings and shall, therefore, be subject to the requirements of Sec. 235.9 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 existing Central Bank rules and 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. 235.9 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. 235.9 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. 235.9 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; and 6) In the case of foreign firms whose total debt/equity ratio exceeds the ratio prescribed by the Inter-Agency Committee: (1) evidence that applicant firm has not distributed profits/earnings, declared dividends and/or has not withdrawn capital after July 1, 1978; and (2) undertaking that applicant firm shall not distribute profits/earnings, or withdraw capital during the validity of the certification or until such time when the prescribed debt/equity ratio is attained. 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 11-3-77, Circular 601 dated 3-31-78, Circular 616 dated 7-5-78, Circular 686 7-18-79 and Circular 709 12-18-79] cdta ATTACHMENT 1 (Book II, 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). cdtech (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. llcd ATTACHMENT 2 (Book II, Part 3) SUGGESTED ANNUAL BUILD-UP PROGRAM OF BORROWING FOREIGN FIRMS CATEGORY (AS CLASSIFIED AT THE END AT THE END AT THE END IN 3.ATT. K.1) OF 1ST YEAR OF 2ND YEAR OF 3RD YEAR Group A Total debt-to- equity ratio of 80:20 70:30 60:40 Group B Total debt-to- equity ratio of 75:25 65:35 55:45 Group C Total debt-to- equity ratio of 70:30 60:40 50:50 APPENDIX L (Book II, 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: LexLib 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 program, 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 gains 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 borrowers, 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 of P500,000 per borrower which ever 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 Sub-committee 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 trade-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 Certification 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. prcd H. Philippine National Bank (PNB) Development 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 applications. 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 borrower 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 obligations 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). cdpr 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 19 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 collection/remittances mentioned in No. 10, 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 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 the 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 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 Certificate 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 above is met. Processes loan application based on the TBs' 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 a 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. cdpr 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 farmers 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 the 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 Control Portion of the Quedan every Friday 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 of PNB/RB/ACA on or before the maturity date of the loan. Note: In case trader-borrower opts to secure additional Glancing 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. cdta Source: Circular Letter 8-12-77 APPENDIX M (Book II, Part 3) GUIDELINES GRANTING IGLF LOANS TO MEDIUM SCALE INDUSTRIES All duly accredited thrift 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) 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; and 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: 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: a. 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 1-1/2% P250,000 and below 1% b. On the second year and every year thereafter, and for as long as the loan or any portion thereof remains unpaid, a service fee on the outstanding balance may likewise be collected in accordance with the following schedules: Over P250,000 P200,00 Over 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, we 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 II, Part 3) RULES AND REGULATIONS ON THE GUARANTEE COVERAGE BY THE AGRICULTURAL GUARANTEE ON MEDIUM AND LONG-TERM LOANS GRANTED UNDER THE 4TH CB: IBRD RURAL CREDIT PROJECT The Board of Directors of the Land Bank of the Philippines and the Agricultural Guarantee Fund hereby promulgate the following rules and regulations governing the extension of guarantee coverage to medium and long-term loans granted under the 4th CB: IBRD Rural Credit Project. SECTION 1. Scope . These rules and regulations shall cover the extension by the Agricultural Guarantee Fund, through the Lank Bank of the Philippines as Administrator of said Fund, of guarantee coverage on the unsecured portions of medium and long-term loans granted under the 4th CB: IBRD Rural Credit Project by financing institutions to agrarian reform beneficiaries as defined herein and small fishermen/fishing boat operators to finance the acquisition/establishment of the following: a. Farm Mechanization. 1. Tractors, not exceeding 80 Hp, including implements and associated equipment 2. Power tillers, including attachments 3. Portable threshers not exceeding 13 tons per day 4. Private irrigation facilities including pumps 5. Other farm equipment b. Light Transportation Light trucks not exceeding 2,500 kg. gross vehicle weight: Provided, however, That financing of light trucks shall be limited to areas outside Metro-Manila. c. Fisheries Development 1. Fishing boats up to 40 gross tons capacity, including fishing gear and equipment. 2. Fishponds and fishpens, and initial stocks. d. Small-Scale Livestock Development Facilities including initial stocks and permanent working capital for the following projects: 1. Poultry 2. Swine 3. Backyard cattle breeding/fattening e. Cottage and Agro-Industries Manufacturing facilities including permanent working capital but excluding cost of land, for the following projects: Provided, however, That projects previously financed by IBRD loans through CB, the DBP or the Industrial Guarantee and Loan Fund shall be excluded: and Provided, further, That the total project investment, of which the loan shall constitute a part, shall not exceed P350,000 but shall not be less than P10,000 including permanent working capital and cost of land. 1. Rice Mills 2. Farm implements 3. Woodworking 4. Concrete products 5. Handicraft 6. Others designated by CB The amount of loan to be granted under the project shall depend upon the cost of the agricultural/fisheries development plan to be financed, the actual need of the borrower, the borrower's repayment capacity but shall in no case exceed 90% of the total project cost. SECTION 2. Definition of terms . Unless otherwise specified, the following terms, as used in these rules and regulations, shall mean: a. Land Bank the Land Bank of the Philippines, a body corporate organized and existing under and by virtue of Republic Act No. 3844, as amended, with office address located at Intramuros, Manila. b. Fund - The Agricultural Guarantee Fund as constituted under Republic Act No. 6390, as amended. c. Financing Institution . a rural bank or stock savings and loan association organized and existing under the laws of the Republic of the Philippines and duly authorized by the Central Bank of the Philippines (CBP) to participate in the 4th CB: IBRD Rural Credit Program. d. Medium-Term Loan . a financing arrangement between a financing institution and a borrower whereby the former lends the latter sum of money repayable over a period of more than one (1) year but not exceeding five (5) years for the purpose of financing any of the projects specified in Section 1 hereof. e. Long-Term . a financing arrangement between a financing institution and a borrower whereby the former lends the latter sum of money repayable over a period of more than five (5) years but not exceeding ten (10) years for the purpose of financing any of the projects specified in Section 1 hereof. f. Guarantee . the subsidiary undertaking of the Fund to pay a financing institution up to 80% of the guaranteed portion of a loan in the event of loss arising from failure of the borrower to pay the loan in full upon maturity and after compliance with requirements herein setforth. g. Guaranteed portion of a loan . the unsecured portion of a loan accepted for guarantee coverage, which coverage shall in no case exceed 50% of the total amount of the loan. h. Guarantor . the Agricultural Guarantee Fund represented by the Land Bank of the Philippines. i. Loss . the balance of the principal amount of a loan plus accrued interest thereon and reasonable "out-of-pocket" expenses (attorney's fees, sheriff's fees, mailing cost, publication fee) outstanding after the lapse of the maturity period of the loan and after the institution of foreclosure proceedings and application on the loan of the proceeds of the sale of the foreclosed property. j. Collateral . the property, whether movable or immovable, given as security for the payment of a loan. k. Borrower . the recipient of loan from a financing institution under this Credit Program to finance any of the projects mentioned in Section 1 hereof. l. Agrarian Reform Beneficiary . means a tiller, tenant-farmer, settler, agricultural lessee, amortizing owner or owner-cultivator, who is cultivating not more than six (6) hectares of land. m. Small Fishermen/Fishing Boat Operator . one who owns or leases and operates a fishing enterprise consisting of not more than 5 hectares of fishponds or fishpens or of not more than one fishing vessel, such vessel not to exceed 5 tons. SECTION 4. Loans Eligible for Guarantee Coverage . Only medium and long-term loans granted to agrarian reform beneficiaries and small fishermen/fishing boat operators as defined herein, financed under the Fourth CB: IBRD Rural Credit Project shall be eligible for guarantee coverage: Provided , however , That only the unsecured portion of such loan shall be covered by guarantee: Provided : further , That the unsecured portion of such loan shall be covered by a chattel mortgage on all standing and/or future crops of the land tilled by the farmer-borrower notwithstanding a prior mortgage on the standing and/or future crops: and Provided finally , That the guaranteed portion of the loan shall in no case exceed fifty percent (50%) of the total amount of the loan. SECTION 5. Extent of Liability of the Fund . The Fund's liability to the financing institution shall extend to an amount equal to 80% of the loss and which in no case shall exceed 80% of the guaranteed portion of the loan. SECTION 6. Requirements for Guarantee Application . In order to avail itself of the guarantee coverage, a financing institution shall, within 30 days from the date of initial release of the loan , submit to the Land Bank for consideration of an application in the prescribed form, together with the following documents: a. A copy of the loan application to be covered by guarantee duly indorsed by the Central Bank; b. Copy of project study; and c. Proof that the loan applicant is an agrarian reform beneficiary or fishing boat operator as the case may be. Upon approval by the Land Bank of the application for guarantee, a covering Guarantee Agreement shall be executed by and between the financing institution and the Land Bank setting forth the terms and conditions of the coverage. The guarantee coverage shall take effect upon signing of the Guarantee Agreement and upon payment to the Land Bank by the financing institution of the corresponding guarantee fee referred to in Section 7 hereof. SECTION 7. Guarantee fee . A financing institution desiring to avail itself of the guarantee coverage shall pay the Land Bank upon signing of the corresponding Guarantee Agreement and every anniversary year thereafter during the existence of the loan covered by the Agreement a guarantee fee equal to two percent (2%) of the amount representing the guaranteed portion of the loan outstanding at the time of payment of the guarantee fee. Payment of the guarantee fees after the first year shall be made not later than the 30th day after each anniversary date. Failure of the financing institution to effect a payment of the guarantee fee within the period specified above may constitute a ground for cancellation of the guarantee coverage and/or no-payment of any claim against the guarantee. Guarantee fees paid in accordance with these rules and regulations are not refundable. SECTION 8. Commitments of the Financing Institutions by Reasons of the Guarantee . Upon approval by the Land Bank of the application for guarantee, the financing institution shall commit itself to: a. Continue to exert the same diligent efforts in collecting the loan and exhaust all avenues open to it as it might have exercised and availed of if no guarantee had been extended by the Fund; b. Adopt, after consultation with the Land Bank, such measures as may be recommended by the Land Bank to facilitate collection on the guaranteed portion of the loan; c. Keep the Land Bank posted on the status of the loans and/or outstanding loan balances at least once every semester or as often as may be necessary; and d. Allow the Land Bank or any of its authorized representatives to inspect or call for copies of its books of accounts and other records relating to the guaranteed loans. SECTION 9. Filing of Claims for Guarantee Payment . Before filing any claim for guarantee payment on an unpaid loan, the financing institution shall first restructure the loan or extend its maturity period, if the same is feasible under the rules and regulations of the Central Bank implementing the 4th CB: IBRD Rural Credit Project; otherwise, it shall institute foreclosure proceedings. Only when the proceeds from the foreclosure sale are insufficient to pay the total obligation may the financing institute file a claim for guarantee payment. LLjur SECTION 10. Payment of Claim . Unless a loan is restructured or its maturity period extended in accordance with the rules and regulations implementing the 4th CB: IBRD Rural Credit Project, or unless a claim for guarantee payment is disapproved, the Fund shall pay the claim to the extent allowed under Section 5 hereof: Provided, however, That before effecting such payment, the financing institution shall execute a deed authorizing the subrogation of the Land Bank to the right of the financing institution to collect from the borrower the unpaid portion of the loan which may be undertaken by the Land Bank or through the financing institution. Any amount recovered or collected from the borrower shall be applied in payment of the loan on the basis of 80% to the Fund and 20% to the financing institution. In case the financing institution undertakes the collection, the collected amount due the Fund shall, without necessity of demand, be remitted to the Land Bank within seven (7) days from date of collection, otherwise, the financing institution shall pay an amount equivalent to one percent (1%) per month on the amount due as liquidated damages and another one percent (1%) per month as interest thereon computed from the date of collection up to the date of remittance. In addition, such violation shall constitute a ground for disapproval of future applications for guarantee coverage. SECTION 11. Restructured loan ; Mechanics of Coverage and Payment of Claim . A restructured loan shall be deemed covered by the guarantee provided the Land Bank is duly notified in writing of the restructuring and the corresponding guarantee fee thereon has been paid in accordance with Section 7 hereof. Should any balance remain unpaid after the due date of the loan as restructured, the same may be subject of a claim for guarantee payment to be made by the Fund in the manner described under Section 10 above. SECTION 12. Reports on Recoveries . Within thirty (30) days after every calendar quarter, each financing institution shall submit to the Land Bank a status report in the prescribed form showing, among others, the names and addresses of borrowers, original amounts of loans granted, the outstanding balances of the loans, amounts and dates of payment of claims by the Fund, and collections thereon. No unpaid loans which are subject of guarantee payment by the Fund shall be written off without prior approval of the Land Bank. SECTION 13. Grounds for Cancellation or Extinguishment of Guarantee Coverage . The following shall constitute grounds for cancellation or extinguishment of guarantee coverage and/or non-payment of guarantee claims: a. Where the financing institution has allowed the borrower to deviate from the approved project and/or divert the proceeds of his loan to purposes other than those for which it was granted; b. Where there was collusion between the borrower and the financing institution 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 financing institution enter into an agreement for fraudulent purposes or whenever said parties conspire to defraud the Fund; c. Where the loan was already overdue at the time the guarantee agreement was executed; d. Where the financing institution made any material false statement, misrepresentation, omission, or concealment in the reports submitted to, and/or in the claims filed with, the Land Bank; and e. Where the financing institution violated any of the provisions of these rules and regulations. Provided , That the above shall not preclude the Land Bank from cancelling or extinguishing its guarantee coverage for other causes or reasons evidencing fraud, bad faith or other machinations. SECTION 14. 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 or criminal cases as may be warranted by circumstances. SECTION 15. Amendments . These rules and regulations may be amended motu proprio by the Agricultural Guarantee Fund Board. SECTION 16. Effectivity . These rules and regulations shall take effect upon approval. (Approved on October 3, 1977). [Source: Memorandum Circular to all Rural Banks and Stock Savings and Loan Associations 77-104 dated 11-9-77.] APPENDIX O (Book II, Part 3) Rules and Regulations on the Guarantee Coverage by the Agricultural Guarantee Fund (AGF) of Loans Under Supervised Credit for Vegetable Production The following rules and regulations on the guarantee coverage by the Agricultural Guarantee Fund (R.A. 6390) of loans under supervised credit for vegetable production are hereby promulgated: SECTION 1. Scope . These rules and regulations shall govern the extension by the Agricultural Guarantee Fund (R.A. 6390, as amended), thru the Land Bank of the Philippines, of guarantee coverage of loans under supervised credit for the production of vegetables granted by financing institutions as defined herein. SECTION 2. Definition of Terms . Unless otherwise specified, the following terms, as used in these rules and regulations, shall mean: a) Fund . Agricultural Guarantee Fund created under R.A. No. 6390, as amended by P.D. No. 435. b) Land Bank . A body corporate organized and existing under and by virtue of R.A. 3844, as amended, and the administrator of all Agricultural Guarantee Funds pursuant to P.D. No. 251. c) Financing Institution . Any commercial bank, development bank, rural bank or stock savings and loan association granting production loans as defined under these rules and regulations. d) Guarantee . A collateral undertaking of the Fund to indemnify in part, a financing institution from non-payment of vegetable production loan due to production loss suffered by the borrower. e) Production Loan . Sum of money extended by a financing institution to a borrower tilling not more than six (6) hectares, to finance the production under supervised credit of vegetable crops, repayable over a period of not more than one (1) year. f) Supervised credit . A system of lending wherein the farmer-borrower agrees in writing that he will apply proven farm practices necessary to conserve the land, improve the fertility and increase its production, and abide by the approved farm plan and budget prepared by an accredited supervised credit technician. 1 g) Borrower . Any person or entity granted a production loan by a financing institution. h) Production Loss . Damage to vegetable crop financed by a production loan caused by pests, diseases and natural calamities (typhoon, flood, drought, volcanic eruption, earthquake and such other fortuitous events) which are beyond the control of the borrower and not traceable to any contributory fault or negligence on his part. i) Restructuring of Loan . Extending the maturity period of the production loan granted by a financing institution to a borrower who suffered production loss to not more than three (3) years from date of restructuring, together with a commitment from the financing institution to grant the borrower a new production loan to enable him to replant and thus generate funds from subsequent vegetable harvests to repay the restructured loan. j) Production Period . The period starting with land preparation and extending up to fifteen (15) days after harvest of crops financed by the production loan. SECTION 3. Loans Eligible for Guarantee Coverage . Only production loans as defined herein are eligible for guarantee coverage. SECTION 4. Extent of Guarantee . The guarantee undertaking of the fund shall be equivalent to 85% of the outstanding balance of the loan exclusive of interest, or 85% of the production loss, whichever is lower: Provided , however , That the production loss occurred within the production period. SECTION 5. Requisites for Guarantee Coverage . A financing institution desiring to avail itself of the guarantee coverage for its production loans must comply with the following requirements: 5.1 Execute a continuing guarantee agreement with the Land Bank in the prescribed form. 5.2 Upon effectivity of the continuing guarantee agreement, and as long as the same is in full force and effect, submit to the Land Bank for guarantee coverage all eligible production loans. These production loans shall be listed in the prescribed form which must be submitted to the Land Bank (LB) within 15 days from the date of initial release of such loans by the financing institution. Submission of the list may be effected directly to the LB either thru personal delivery or by mail. The date of submission of the list shall be determined by the date of acknowledgment by any authorized representative of the LB appearing on the copies of the list submitted, if the list is submitted by personal delivery, or by the date of mailing postmarked on the envelope or the registry receipt, if list is sent by mail. 5.3. Pay to the LB a guarantee fee of one per cent (1%) of the amount of production loans granted. The check/draft representing payment of the guarantee fee shall be remitted together with the list or production loans submitted for guarantee coverage. Said guarantee fee shall be non-refundable. 5.4. Submit a copy of the marketing contract between the FTI trading post or any reputable or accredited vegetable trader in the area and the farmer-borrower. Failure on the part of the financing institution to submit the list of production loans and to remit the corresponding guarantee fee to the LB within the prescribed period shall render the loan ineligible for guarantee coverage. SECTION 6. Authority of Land Bank to Inspect Records of Financing Institution . For as long as the continuing guarantee agreement between the LB and the financing institution is in force it shall be incumbent upon the latter to allow the LB, through its duly authorized representative(s), to inspect its books of accounts and other records relating to any loan covered by guarantee. SECTION 7. Filing of Notice of Possible Production Loss It shall be the responsibility of the financing institution to notify the LB of possible production loss suffered by its borrowers. For this purpose, the following guidelines shall be followed: 7.1. Where the cause of production loss is of general knowledge in the community such that it cannot possibly escape the attention of the management of the financing institution, the financing institution must notify the LB in writing or by telegram of possible production loss suffered by its borrowers within ten (10) days from the date of the occurrence of the cause. 7.2. Where the cause of production loss is not of general knowledge, the financing institution must notify the LB in writing or by telegram of possible production loss sure by its borrower within ten (10) days from its receipt of the report of the Production Technician who shall, for this purpose, notify the financing institution within the period specified in the guidelines for the notification of crop damage set forth by the National Food and Agriculture Council, which guidelines are made an integral part of these rules and regulations. 7.3. Failure of the financing institution to notify the LB of the possible loss in the manner specified above shall render its guarantee claim resulting from such losses ineligible for payment unless otherwise allowed by the LB Board of Directors under certain exceptions and meritorious case. SECTION 8. Filing of Claim for Guarantee Payment After having notified the LB of possible production loss suffered by its borrowers in accordance with Section 7 hereof, the financing institution, in filing a claim for guarantee payment shall: 8.1. Restructure the loan it had granted to the borrowers who sustained production loss in accordance with the Central Bank guidelines for restructuring of loans. 8.2. Commit itself to, among other things, grant new production loans to the farmer-borrowers who sustained production loss so as to enable them to generate funds to repay their loans. 8.3. Submit to the LB its claim for guarantee payment in the prescribed form not later than six (6) months from the occurrence of the cause of the production loss, duly supported by the following documents: 8.3.1. Affidavit of Loss 8.3.2. List of Probable Losses on Loans under Guarantee Coverage 8.3.3. Production Technician's Report on Probable Production Loss/Damage 8.3.4. Adjuster's Verification Report 8.3.5. List of Restructured Loans duly certified to by an authorized officer of the financing institution indicating the names and addresses of the borrowers as well as the amounts and terms of the loans; and 8.3.6. Such other documents as may be required by the Land Bank. SECTION 9. Advance Against the Claim . Upon receipt of all documents duly and properly accomplished supporting a claim, the LB shall, unless the claim is disapproved or is defective, or unless the financing institution refuses to sign the commitments mentioned in Sections 8 and 10 hereof, make an advance equivalent to 85% of the outstanding balance of the loan or 85% of the production loss, whichever is lower, which shall be documented as a special time deposit (STD) with a term that will be co-terminus with the term of the loan as restructured. 9.1. In the event the loan has been restructured for a period shorter than three (3) years, the financing institution may, in meritorious cases and in accordance with Central Bank guidelines, again extend the restructuring period: Provided , That the total of the restructuring periods shall not be more than the maximum of three (3) years from the date of original maturity of the loan. In such a case the corresponding maturity of the STD is likewise extended to be co-terminus with the new term of the restructured loan, upon receipt of a written advice of extension from the financing institution. 9.2. Under certain circumstances and whenever the financing institution may require immediate financial assistance in order to refinance its farmer-borrowers who suffered production loss, said financing institution may be allowed to draw up to 60% of the amount to be advanced in the form of an STD as mentioned above notwithstanding deficiencies in the documentation of the claim, provided the following requirements are met: 9.2.1. Filing of a written request relative thereto by the financing institution at the offices of the LB. 9.2.2. Submission of at least the following documents: Claim for losses under Continuing Guarantee Agreement Affidavit of Loss List of Probable Losses on Loans under Guarantee Coverage duly concurred in by the Provincial Program Officer (PPO) or by his duly authorized representative(s). 9.2.3. Execution of a deed of undertaking showing, among other matters, that the financing institution shall: comply with all the requirements of Sections 8 and 10 thereof; submit all documents in support of the claim within six (6) months from occurrence of the loss; and be liable to the attendant penalties in case of non-compliance thereof. SECTION 10. Commitment of the Financing Institution as a Pre-Condition of an Advance Against the Claim . The advance referred to in the preceding section shall not be made unless the financing institution, in addition to the commitment referred to in Section 8.2, makes a commitment to: 10.1. Continue to exert the same diligent efforts in collecting the loans which are the subject of the claim and exhaust all avenues open to it as it might have exercised and availed of if no guarantee had been furnished by the Fund; 10.2. Adopt, after consultation with the LB, such measures as may be recommended by the LB to facilitate collection of the guaranteed loan; and 10.3. Keep the LB posted on the status of the unpaid production loans at least once every semester or as often as necessary by accomplishing and submitting a report in the prescribed form. SECTION 11. Collection on Restructured Loan . As installment or payments on the restructured loans are received from borrowers, the financing institution shall, within seven (7) days from receipt hereof, remit 85% of said installment or payments to the LB as partial liquidation of the STD. Should it fail to effect such remittance within the prescribed period, the financing institution shall pay an amount equivalent to one per cent (1%) per month as liquidated damages in addition to payment of interest at the rate of one per cent (1%) per month from the date of collection up to the date of remittance. Remittances of said collection shall be without necessity of demand. In addition, such failure may constitute a ground for the cancellation of the guarantee agreement. SECTION 12. Application of Special Time Deposit as Guarantee Payment and Collection Effected after Maturity of Restructured Loans . Upon maturity of a structured loan or in case it has been extended in accordance with Section 9 hereof, and upon the lapse of the final maturity period of the restructured loan as extended, the remaining balance of the STD shall be applied as payment for losses arising from non-collection of such restructured loan: Provided , however , That before effecting such application, the financing institution shall furnish the LB with a list of restructured loans that have matured for purposes of adjudicating payment in the manner specified above: and Provided , further , That the financing institution shall execute a deed of subrogation and undertaking subrogating its rights in favor of the LB to the extent of 85% of the unpaid balance of the production loan; continue effecting collection of the unpaid balance, and remit the same to the LB in the manner and subject to the penalties prescribed under Section 11 hereof. 12.1. In applying the STD as guarantee payment, the financing institution shall indicate in the subsidiary loan record of the farm-borrower concerned the particular entry that the farmer-borrower's obligation to the extent of the outstanding balance shown therein plus the guarantee payment still subsist. 12.2. Subsidiary loan records for unpaid loans of which guarantee payments had been duly adjudicated by the LB shall be maintained by the financing institution for a period of at least five (5) years from the date said loans were originally granted and shall not be disposed of without prior approval of the LB. SECTION 13. Reports on Recoveries . Starting from the final adjudication of payment, the financing institution shall submit to the LB within thirty (30) days after each semester of status report in the prescribed form showing, among others, the names and addresses of the borrowers, original amounts of loans, the outstanding balances of loans, amounts and dates of payment of the loans, amounts and dates of payment of claims by the LB, and collection thereon. SECTION 14. Grounds for Cancellation of Guarantee Coverage . The following shall constitute grounds for cancellation of guarantee coverage and non-payment of guarantee claim: 14.1. Where the financing institution has allowed the borrower to deviate from the approved project/farm plan and budget and/or divert the proceeds of his loan to purposes other than those for which it was granted. 14.2. Where there was collusion between the borrower and the financing institution in the extension of credit to the prejudice of the LB. A collusion exists whenever the borrower and official(s), and/or employee(s) of the financing institution enter into an agreement for a fraudulent purpose or whenever said parties conspire to defraud the LB. 14.3. Where the financing institution granted additional loans to the borrower without the favorable recommendation of the supervised credit technician. 14.4. Where the loan was already overdue at the time the guarantee agreement was executed. 14.5. Where the financing institution made any material false statement, misrepresentation, omission, or concealment in the reports submitted to, and/or in the claim filed with the LB. 14.6. Where the financing institution did not remit within the prescribed period, the 85% share of the fund on collections of loans which were subject of advance/guarantee payments and/or violated any of the provisions of these rules and regulations. SECTION 15. Applicability of Other Penalties . The penalties provided for in these rules and regulations shall not preclude the application, or shall be without prejudice to the imposition of other administrative sanction as well as the filing of criminal cases, as may be warranted by the circumstances. SECTION 16. Effectivity . These rules and regulations shall take effect upon approval thereof. (Approved on February 24, 1978). [Source: MCRBSSLA 78-14 3-16-78.] Footnotes 1. Source: Circular 474 dated 6-30-75 APPENDIX P (Book II, 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 P.D. 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 P.D. 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. LibLex 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 PD 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; 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 the 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 the Central Bank up to 100 percent of the loan at the rate of 4 percent 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 attached Rules and Regulations (See 3. Attachment P. 1) governing the guarantee coverage of grains quedan. 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. Rural Banks, 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 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 Cooperatives 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 6-4-79.] ATTACHMENT 1 (Book II, 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; LLjur 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 the 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. LLjur 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. LLjur 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 proceed 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 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. LLjur 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 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 aid 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 propio by the Board. SECTION 18. Effectivity These Rules and Regulations shall take effect upon approval. [Source: Circular 624 dated 8-11-78] APPENDIX Q (Book II, 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. LLjur 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 01. 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. LLjur 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 02. 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: LLjur (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 Guaranteed 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 03. 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 (CDLF) 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. LLjur 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 04. 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; and (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 and 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; and (b) The applicable requirements under 4.01 (b), (c) and (d). SECTION 05. 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 06. 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. LLjur 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 cooperatives 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 capital position margining or supporting the loan. 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 evidenced 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 07. Amount of Loan . The amount or size of loan/financial assistant 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 08. 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. LLjur 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 09. 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 but 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 document or lien and by assigned current accounts receivable when arising from sale of pledged commodities. LLjur (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 charge 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 borrowers 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 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 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/Lender board resolution endorsing the cooperative's application for financial assistance; ii. CRB/Lender's application for Special Time Deposits for the loan component; iii. CRB/Lender's latest financial statements. LLjur 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 prescribed the terms and conditions of the covering loan agreements. Pursuant to Monetary Board Resolution No. 657, dated April 21, 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 to 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] SAMPLE INFORMATION SHEET FOR BORROWERS UNDER THE COTTAGE INDUSTRY FUND (To be submitted in quadruplicate) NACIDA Accredited/Registered Small/Cottage Industry Questionnaire 1. Trade Name ______________________________________________________ 2. Address: Office _____________________ Factory _______________________ 3. NACIDA Reg. No. __________________ Date _________________________ NACIDA Accreditation No. ___________ Date _________________________ 4. Manufacturing process (describe very briefly): ___________________________ _______________________________________________________________ _______________________________________________________________ a) Raw materials used: ___________________________________________ b) Sources of raw materials: _______________________________________ c) Machineries & equipment used: __________________________________ d) Finished products: 1) Products presently manufactured ____________________________ 2) Products proposed to be manufactured: _______________________ e) Number of workers: __________________________________________ 5. Marketing of Products: a) Briefly described marketing practices: ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ b) Prices of products: ____________________________________________ c) Methods of distributions: _______________________________________ d) Area of distribution: ___________________________________________ e) User/consumer of products: _____________________________________ I hereby certify that the information herein is true to the best of my knowledge and belief. Signature: _________________________ NAME: ___________________________ (Please Print) NOTE: Please attach any additional information in connection with this questionnaire that you may wish to present. [Source: Circular 701 dated 11-5-79] APPENDIX R (Book II, 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 at the Effective Rates of 12 and 14 percent. Basis: 36-day Year A. FORMULA (for the computation of B. FORMULA (For the computation of proceeds of a loan): d, discount rate): D P = n L - P 1 + (i) d = x 100 365 n L() 365 Where P Proceeds of the loan l Face Value of the loan i Effective rate of interest n Term in days EXAMPLE 1 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 - P904.98 n = 270 days P = = P904.98 d = x 100 = 12.669% 270 270 1 + (.14) 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 - P943.58 n = 180 days P = = P943.58 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 1 1 1 + (.12) [1 + (.12) ] 2 [1 + (.12) ] 4 4 4 4 4 1,000 - 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 1 1 + (.12) [1 + (.12) ] 2 [1 + (.12) ] 12 12 12 12 1,000 - 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 II. 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 B. FORMULA (For the computation of proceeds of a loan): d, discount rate): L P = n L - P 1 + (i) d = x 100 360 n L() 360 Where P Proceeds of the loan L Face Value of the loan i Effective rate of interest n Term in days EXAMPLE 1 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 - P925.45 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 1 1 1 + (.14) [1 + (.14) ] 2 [1 + (.14) ] 4 4 4 4 4 1,000 - 918.27 Therefore d = x 100 = 8.173% 360 1,000 () 360 1 - 8.193 360 and P = 1,000 x = P918.27 100 360 To check the results of the foregoing computations: Outstanding Installment Payments to Principal Interest cover 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 for the loan are computed as follows if the effective rate is 14%: P = 1,000/12 1,000/12 1,000/12 + + . . . + = P928.17 1 1 1 1 + (.14) [1 + (.14) ] 2 [1 + (.14) ] 12 12 12 12 1,000 - 928.17 Therefore d = x 100 = 7.183% 3% 360 1,000 360 - 7.183 360 also P = 1,000 1. x = P928.17 100 360 APPENDIX S (Book II, Part 3) RULES AND REGULATIONS ON THE GUARANTEE COVERAGE OF THE AGRICULTURAL GUARANTEE FUND (AGF) OF LOANS UNDER SUPERVISED CREDIT FOR COTTON PRODUCTION The following rules and regulations on the guarantee coverage by the Agricultural Guarantee Fund (RA 6390) of loans, under supervised credit for cotton production are hereby promulgated: SECTION 1. Scope . These rules and regulations shall govern the extension of guarantee coverage on cotton production loans as defined herein. LLphil SECTION 2. Definition of Terms . Unless otherwise specified, the following definitions of terms, shall be used in these rules and regulations: 2.1 Guarantee Fund This term shall refer to the Agricultural Guarantee Fund created under Republic Act No. 6390 (which is being used to cover cotton production loans and shall be known hereafter as the AGF); 2.2. Land Bank A body corporate organized and existing under and by virtue of Republic Act No. 3844, as amended, and the Administrator of all Agricultural Guarantee Funds pursuant to Presidential Decree No. 251. 2.3. Banking Institution Any commercial bank, savings and mortgage bank, development bank, rural bank, or stock savings and loan association granting production loans under these rules and regulations. 2.4. Guarantee A collateral undertaking of the Guarantee Funds to indemnify in part, a banking institution from non-payment of production loan due to production loss suffered by the borrower. 2.5. Production Loan Sum of money extended by a banking institution to a borrower, repayable over a period of not more than one (1) year, for the purpose of financing the production under supervised credit of cotton and granted to borrowers each tilling not more than six (6) hectares of irrigated land. 2.6. Supervised Credit A system of lending wherein the farmer-borrower agrees in writing that he will apply proven farm practices necessary to conserve the land, improve its fertility and increase its production, and abide by the approved farm plan and budget prepared by an accredited supervised credit technician. 1 2.7. Borrower Any person or entity granted a production loan by a banking institution. 2.8. Production Loss Damage to crop financed by a production loan caused by pests, diseases and natural calamities (typhoon, flood, drought, volcanic eruption, earthquake and such other fortuitous events) which are beyond the control of the borrower and not traceable to any contributory fault or negligence on his part. LLphil 2.9. Restructuring of Loan Extending the maturity period of the production loan granted by a banking institution to a borrower who suffered production loss to not more than three (3) years from date of restructuring, together with a commitment from the banking institution to grant the borrower a new production loan to enable him to replant and thus generate funds from subsequent plant harvests to repay the restructured loan. SECTION 3. Loans Eligible for Guarantee Coverage . Only production loans as defined herein are eligible for the guarantee coverage. SECTION 4. Extent of Guarantee . The guarantee undertaking of the funds shall be equivalent to 85% of the outstanding balance of the loan exclusive of interest, or 85% of the production loss, whichever is lower: Provided , however , That the production loss occurred within the term of the loan. SECTION 5. Requisites for Guarantee Coverage . A banking institution desiring to avail of the guarantee coverage for its production loans must comply with the following requirements: 5.1. It must execute a continuing guarantee agreement with the Land Bank in the prescribed form (LBP 02-141-2). 5.2. Upon effectivity of the continuing guarantee agreement, and for as long as the same is in full force and effect, the banking institution shall submit to the Land Bank for guarantee coverage all eligible production loans. These production loan shall be listed in the prescribed forms (LBP 02-142-2) which must be submitted to the Land Bank within twenty (20) days from the date of initial release of such loans by the banking institution, but not later than the date of planting. LLphil 5.3. Submission of the list may be effected directly to the Land Bank either through personal delivery or by mail. The date of submission of the list shall be determined by the date of acknowledgment by any authorized representative of the Land Bank appearing on the copies of the list submitted, if the list is submitted by personal delivery, or by the date of mailing postmarked on the envelope or the registry receipt, if list is sent by mail. 5.4. A guarantee fee of one percent (1%) of the amount of production loans granted shall be paid by the banking institution to the Land Bank. The check/draft representing payment of the corresponding guarantee fee shall be remitted to the Land Bank together with the list of production loans submitted for guarantee coverage. Said guarantee fee shall be non-refundable, except the amount pertaining to ineligible loans. 5.5. Failure on the part of the banking institution to submit the list of production loans and to remit the corresponding guarantee fee to the Land Bank within the prescribed period shall render the loan ineligible for guarantee coverage. SECTION 6. Authority of Land Bank to Inspect Records of Banking Institution . For as long as the continuing guarantee agreement between the Land Bank and the banking institution is in force, it shall be incumbent upon the banking institution to allow the Land Bank, through its, duly authorized representative, to inspect the banking institution's books of accounts and other records relating to any loan covered by guarantee. SECTION 7. Filing of Notice of Possible Production Loss . It shall be the responsibility of the banking institution to notify the Land Bank of possible production loss suffered by its borrowers. For this purpose, the following guidelines shall be followed: 7.1 Where the cause of production loss is of general knowledge in the community such that it cannot possibly escape the attention of the management of the banking institution, the banking institution must notify the Land Bank in writing or by telegram of possible production loss suffered by its borrowers within ten (10) days from the date of occurrence of the cause. 7.2 Where the cause of production loss is not of general knowledge, the banking institution must notify the Land Bank in writing or by telegram of possible production loss suffered by its borrowers within ten (10) days from its receipt of the report of the Production Technician concerned. The Production Technician shall, for this purpose, notify the banking institution, as follows: 7.2.1. In Case of Flood 7.2.1.1 Running flood water . The production technician (including production technicians privately-hired by lending institutions) shall notify the lending institution concerned of the possible crop damage not more than five (5) days after water recession. In case the duration of the flood exceeds more than one (1) week, complete damage on rice/cotton can be presumed regardless of plant stage. On the other hand, should flood water last for more than three (3) days, complete damage on cotton, corn, sorghum and soybean shall be presumed. 7.2.1.2 Stagnant flood water . The production technician (including production technician privately-hired by lending institutions) shall notify the bank concerned of the possible crop damage not more than five (5) days after water recession. In case the duration of the flood exceeds more than one (1) week, estimates on damage to rice/cotton shall be based on plant stage. On the other hand, should flood water last more than three (3) days, complete damage on cotton, corn, sorghum and soybean shall be presumed. 7.2.2. In Case of Drought . If a 30 day-dry spell prevails in the area, the production technician (including production technicians privately-hired by lending institutions) shall notify the lending institution concerned of the possible crop damage not more than five (5) days after the 30th day. In case substantial rain occurs within/after the investigation period, re-assessment of the estimate on crop damage shall be done within ten (10) days immediately a week after the rain occurs. Estimates on damage to cotton, rice, corn and soybeans shall be based on the critical stage of the plant ranging from day-old to seventy five day-old (seedling vegetative to flowering/heading stage). However, for sorghum which has some degree of tolerance except at seedling stage, notification of the possible crop damage shall be made not more than five (5) days after the 40th day. 7.2.3 In Case of Plant Pests and Diseases The production technician (including production technicians privately-hired by lending institutions) shall notify the lending institution concerned of the possible crop damage not more than five (5) days after the outbreak of the plant disease/infestation and shall copy furnish any BPI/UPCA/IRRI crop protection specialist present in the area. The BPI/UPCA/IRRI crop protection specialist shall furnish the Committee of Government Adjusters a certification on said plant infection/infestation not more than five (5) days from receipt of the production technician's notification. 7.3. Failure of the banking institution to notify the Land Bank of the possible loss in the manner specified above shall render its guarantee claim resulting from such losses, ineligible for payment unless otherwise allowed by the Land Bank Board of Directors under certain exceptions and meritorious cases. LLphil SECTION 8. Filing of Claim for Guarantee Payment . After having notified the Land Bank of possible production loss suffered by its borrowers in accordance with Section 7 hereof, the banking institution, in filing, a claim for guarantee payment, shall: 8.1. Restructure the loans it had granted to the borrowers who sustained production loss in accordance with the Central Bank guidelines for restructuring of loans. 8.2. Commit itself (LBP 02-145-2) to, among other things, grant new production loans to the farmer-borrowers who sustained production loss so as to enable them to generate funds to repay their loans. 8.3. Submit to the Land Bank its claim for guarantee payment in the prescribed form (LBP 02-143-2) not later than six (6) months from the occurrence of the cause of the production loss, duly supported by the following documents: 8.3.1. Affidavit of Loss (LBP 02-143A-2); 8.3.2. List of Probable Losses on Loans under Guarantee Coverage (LBP 02-143B-2); 8.3.3. Production Technician's Report on Probable Production Loss/Damage (LBP 02-143C-2); 8.3.4. Adjuster's Verification Report (LBP 02-143D-2); 8.3.5. List of Restructured Loans duly certified to by an authorized officer of the banking institution indicating the names and addresses of the borrowers as well as the amounts and terms of the loans (LBP 02-143E-2); and 8.3.6. Such other documents as may be required by the Land Bank. SECTION 9. Advance Against the Claim Upon receipt of all documents duly and properly accomplished supporting a claim, the Land Bank shall, unless the claim is disapproved or is defective, or unless the banking institution refuses to sign the commitment mentioned in Sections 8 and 10 hereof, make an advance equivalent to 85% of the outstanding balance of the loan or 85% of the production loss, whichever is lower, which shall be documented as a special time deposit with a term that will be co-terminus with the term of the loan as restructured. 9.1. In the event the loan has been restructured for a period shorter than three (3) years, the banking institution may, in meritorious cases and in accordance with Central Bank guidelines, again extend the restructuring period provided that the total of the restructuring periods shall not be more than the maximum of three (3) years from the date of original maturity of the loan. In such a case the corresponding maturity of the special time deposit is likewise extended to be co-terminus with the new term of the restructured loan, upon receipt of a written advice of extension from the banking institution. 9.2. Under certain circumstances and whenever the banking institution may require immediate financial assistance in order to refinance its farmer-borrowers who suffered production loss, said banking institution may be allowed to draw up to 60% of the amount to be advanced in the form of a special time deposit as mentioned above notwithstanding deficiencies in the documentation of the claim provided the following requirements are met: 9.2.1. Filing of a written request relative thereto by the banking institution at the offices of the Land Bank. 9.2.2. Submission of at least the following basic documents: Claim for losses under Continuing Guarantee Agreement (LBP 02-143-2); Affidavit of Loss (LBP 02-143A-2); List of Probable Losses on Loans under Guarantee Coverage (LBP 02-143B-2) duly concurred in by the Philcotton Production Technician. 9.2.3. Execution of a deed of undertaking (LBP 02-145-A-2) showing, among other matters, that the banking institution shall: Comply with all the requirements of Sections 8 and 10 thereof; Submit all documents in support of the claim within six (6) months from occurrence of the loss; and Be liable to the attendant penalties in case of non-compliance thereof. SECTION 10. Commitment of the Banking Institution as a Pre-Condition of an Advance Against the Claim . The Advance referred to in the preceding section shall not be made unless the banking institution, in addition to the commitment referred to in Section 8.2, makes a commitment (LBP 02-145-2) to: 10.1. Continue to exert the same diligent efforts in collecting the loans which are the subject of the claim and exhaust all avenues open to it as it might have exercised and availed of if no guarantee had been furnished by the Fund; 10.2. Adopt, after consultation with the Land Bank, such measures as may be recommended by the Land Bank to facilitate collection of the guaranteed loan; and 10.3. Keep the Land Bank posted on the status of unpaid production loans at least once every semester or as often as necessary by accomplishing and submitting LBP 02-144-2. SECTION 11. Collection on Restructured Loans . As installment or payments on the restructured loans are received from borrowers, the banking institution shall, within ten (10) days from receipt hereof, remit 85% of said installment or payments to the Land Bank as partial liquidation of the special time deposit. Should it fail to effect such remittance within the prescribed period, the banking institution shall pay an amount equivalent to one percent (1%) per month as liquidated damages in addition to payment of interest at the rate of one percent (1%) per month, from the date of collection up to the date of remittance. Remittances of said collection shall be without necessity of demand. In addition, such failure may constitute a ground for the cancellation of the guarantee agreement. SECTION 12. Application of Special Time Deposit as Guarantee Payment and Collections Effected after Maturity of Restructured Loans . Upon maturity of a restructured loan or in case it has been extended in accordance with Section 9 hereof, and upon the lapse of the final maturity period of the restructured loan as extended, the remaining balance of the special time deposit shall be applied as payment for losses arising from non-collection of such restructured loan: Provided , however , That before effecting such application, the banking institution shall furnish the Land Bank with a list of restructured loans that have matured for purposes of adjudicating payment in the manner specified above; and Provided , further , That the banking institution shall execute a deed of subrogation and undertaking (LBP 02-146-2) subrogating its rights in favor of the Land Bank to the extent of 85% of the unpaid balance of the production loan; continue effecting collection of the unpaid balance, and remit the same to the Land Bank in the manner and subject to the penalties prescribed under Section 11 hereof. 12.1. In applying the special time deposit as guarantee payment, the banking institution shall indicate in the subsidiary loan record of the farmer-borrower concerned the particular entry as guarantee payment of the Land Bank and a memorandum entry that the farmer-borrower's obligation to the extent of the outstanding balance shown therein plus the guarantee payment still subsist. 12.2. Subsidiary loan records for unpaid loans of which guarantee payments had been duly adjudicated by the Land Bank shall be maintained by the banking institution for a period of at least five (5) years from the date said loans were originally granted and shall not be disposed of without prior approval of the Land Bank. SECTION 13. Reports on Recoveries Starting from the final adjudication of payment, the banking institution shall submit to the Land Bank within thirty (30) days after each semester a status report in the Prescribed form (LBP 02-144-2) showing, among others, the names and addresses of the borrowers, original amounts of loans, the outstanding balances of the loans, amounts and dates of payment of claims by the Land Bank, and collection thereon. LLphil SECTION 14. Grounds for Cancellation of Guarantee Coverage . The following shall constitute grounds for cancellation of guarantee coverage and non-payment of guarantee claim: 14.1. Where the banking institution has allowed the borrower to deviate from the approved project/farm plan and budget and/or divert the proceeds of his loan to purposes other than those for which it was granted. 14.2. Where there was collusion between the borrower and the banking institution in the extension of credit to the prejudice of the Land Bank. A collusion exist whenever the borrower and officials, and/or employees of the banking institution enter into an agreement for a fraudulent purpose or whenever said parties conspire to defraud the Land Bank. 14.3. Where the banking institution granted additional loans to the borrower without the favorable recommendation of the supervised credit technician. 14.4. Where the loan was already overdue at the time the guarantee agreement was executed. 14.5. Where the banking institution made any material false statement, misrepresentation, omission, or concealment in reports submitted to, and/or in the claims filed with the Land Bank. 14.6. Where the banking institution did not remit within the prescribed period, the 85% share of the Fund on collections of loans which were subject of advance/guarantee payments, and/or violated any of the provisions of these rules and regulations. SECTION 15. Applicability of Other Penalties . The penalties provided for in these rules and regulations shall not preclude the application, or shall be without prejudice to the imposition of other administrative sanctions as well as the filing of criminal cases as may be warranted by the circumstances. LLphil SECTION 16. Effectivity . These rules and regulations shall take effect upon approval thereof. (Approved on August 3, 1978.) [Source: Land Bank of the Philippines Circular Letter No. 54, disseminated under Circular Letter to All Rural Banks and Stock Savings and Loans Association 79-3-dated 1-10-79.] Footnotes 1. Source: CB Circular No. 474 dated June 30, 1975. APPENDIX T (Book II, Part 3) PROPOSED FARM BUDGET FOR PROCEEDS OF LOAN OBTAINED UNDER THE SPECIAL COTTON FINANCING PROGRAM (One-Hectare Cotton Farm) FIRST RELEASE (15-20 days before planting) Land preparation (Cash) P400 Seeds (Chit) 60 P460 SECOND RELEASE (1-7 days before planting) Fertilizer 1 (Chit) 370 Chemicals 2 (Chit) 40 Irrigation fee/rental/gasoline 3 (Chit) 105 Labor 4 (Planting, fertilizing, irrigation) (Cash) 450 965 THIRD RELEASE (7-14 days after emergence) Chemicals (Chit) 160 Labor (spraying, spot weeding, off-baring) (Cash) 100 260 FOURTH RELEASE (21-35 days after emergence) Fertilizer (Chit) 380 Chemicals (Chit) 270 Irrigation fee/rental/gasoline (Chit) 105 Labor (fertilizing, spraying, irrigating, spot weeding, hilling up) (Cash) 225 980 FIFTH AND SUBSEQUENT RELEASES (61-110 days after emergence) (Based on the actual needs of the farmer as certified by the cotton production technician) Chemicals 480 Irrigation fee/rental/ gasoline 100 Transportations 5 120 Labor (spraying, spot weeding, irrigating) 200 Harvesting 450 Others 6 125 Contingency 160 1,635 SUB-TOTAL 4,300 7 ====== LESS: Non Cash Labor Expenses/Contingency 1,300 TOTAL P3,000 ====== Footnotes 1. Assuming a 15% increase in prevailing market prices. Fertilizer budget is computed for late planting using ammonium sulfate. For early planting and if urea is used, fertilizer is much, much lower. 2. Assuming a 15% increase in prevailing market price. 3. Pump-irrigated. 4. At P15 per day. Assuming 122-man-days. 5. At P0.10/kg. within a 30 km. radius assuming a 1.2 ton yield. 6. Include drying, storing, packaging, delivery. 7. Maximum amount for farmer cultivating more than two (2) hectares. Assuming 100% hired labor. 8. Maximum amount for farmer cultivating two (2) hectares or less. Assuming 80% farmer's equity, 20% hired labor. 9. Based on technical Recommendation for CY 1979-80. 10. For farmers who may need to buy sprayers, a maximum amount of P700 will be provided in addition to the farm budget per hectare. APPENDIX U (Book II, Part 3) MONTHLY PROGRESS REPORT ON COTTON FINANCING PROGRAM For the Month Ended ______________, 19 ______ SUBMISSION Original DRBSLA Duplicate PhilCotton DEADLINE 10th day after end of reference month _________________________ Name of Rural Bank _________________________ (Address) I. LENDING OPERATION No . of Borrowers No . of Selda Selda Total Hectares Amount A. Pending Loan Application Beginning _____ _____ _____ ______ ______ B. New Loan Application _____ _____ _____ ______ ______ This Month _____ _____ _____ ______ ______ C. Total Under Process During Month (A + B) _____ _____ _____ ______ ______ D. Deduct: LOANS APPROVED DURING MONTH _____ _____ _____ ______ ______ E. Not Pending Loan Applications End (C-D) _____ _____ _____ ______ ______ F. LOANS APPROVED PRIOR MONTHS _____ _____ _____ ______ ______ G. TOTAL APPROVED TO DATE (D + F) ==== ==== ==== ===== ===== 1. Current _____ _____ _____ ______ ______ 2. Past Due _____ _____ _____ ______ ______ 3. Loans in Litigation _____ _____ _____ ______ ______ 4. Restructured _____ _____ _____ ______ ______ 5. Repayments _____ _____ _____ ______ ______ II. FUNDING OF OPERATION A. Funds Received from Central Bank 1. Special Time Deposit (STD) P _______ 2. Rediscounting P _______ P _______ B. Funds Received During the Month 1. Special Time Deposits (STD) P _______ 2. Rediscounting _______ P _______ C. Total Funds Received From Central Bank D. Release Disbursements from II-C above, During Month 1. Cash portion of releases during month P _______ 2. Input portion of releases during month _______ 3. SSD portion of releases during month _______ 4. Repayment of STD to DRBSLA _______ 5. Repayment of Rediscounting _______ 6. Others (specify) _________ _______ E. Balance of Funds Received from CB (if positive, fill in details below) 1. Special Time Deposit (STD) P _______ P _______ 2. Rediscounting _______ F. SSD Unreleased End of Month 1. SSD Balance End of Month P _______ 2. Add: SSD Balance this Month _______ 3. Total SSD Balance _______ 4. Deduct Release during the Month _______ P _______ CERTIFIED CORRECT: __________________________________ (Signature of Authorized Officer Over Printed Name) MANAGER (Designation) INSTRUCTIONS FOR FILLING UP: 1. The original and duplicate copies must be submitted to the reporting center designated by the Central Bank Agricultural Credit Supervisor (ACS) assigned in the area where the reporting rural bank is situated. 2. Round-up amounts to the nearest peso. 3. Areas financed should be reported in the actual hectarage. 4. Selda refers to borrowers who do not belong to any selda. [Source: CLRBSSLA 80-34 dated 5-30-80] APPENDIX V (Book II, Part 3) PHILIPPINE FOURTH RURAL CREDIT PROJECT Rules and Regulations No. 4 (Amended) Preliminary Statement 1. Loan funds for financing the expansion of the medium-and long-term lending activities of Rural Banks, Stock Savings and Loan Associations, and Private Development Banks will be made available utilizing the funds from a Fourth Central Bank Credit Line with the International Bank for Reconstruction and Development (IBRD). dctai 2. The following rules and regulations (hereinafter called Amended Rules and Regulations No. 4) are hereby prescribed by the Monetary Board and will govern this credit program to be carried out through the lending facilities of Rural Banks, Stock Savings and Loan Associations and Private Development Banks under the supervision of the Central Bank, for agricultural and industrial development. 3. Unless otherwise specified, the following terms have the following meanings whenever used in these Amended Rules and Regulations No. 4: (a) CB the Central Bank of the Philippines; (b) Financing Institution a Rural Bank (RB), a Stock Savings and Loan Association (SSLA) or Private Development Bank (PDB) selected by CB to participate in this credit program in accordance with Section 1; (c) Loan the Loan extended by CB to a Financing Institution; (d) Subloan the Loan extended by a Financing Institution to a Borrower; (e) Borrower the recipient of a Sub-loan from a Financing Institution; (f) STD a special time deposit of CB for financing of Loans to a Financing Institution; and (g) IBRD the International Bank for Reconstruction and Development. I. Participating Rural Banks, Stock Savings and Loan Associations and Private Development Banks SECTION 1. Eligibility Requirements . CB shall select the Financing Institutions through its Department of Rural Banks and Savings and Loan Associations, taking into account the following: (a) Period of Operation . A Financing Institution must have been in operation for not less than one (1) year prior to making an application for a loan. (b) Liquidity Position . A Financing Institution must: (i) have sufficient working capital to meet its obligations to creditors and depositors, taking into account local conditions and past performances; and (ii) have sufficient available legal reserves against deposit liabilities; (iii) Amount of Arrearages a. Past due loans of Financing Institutions shall not exceed twenty-five percent (25%) in relation to total loan portfolio: Provided , however , That Masagana 99 loans in litigation shall not be included in the calculation of the past due ratio; b. If the accumulated arrears of principal and interest, in excess of 60 days, on medium-and long-term loans made by Financing Institution shall exceed twenty percent (20%) of the sum of all amounts falling due on such accounts from the beginning of the immediately preceding twelve (12) month period, such Financing Institution shall not be eligible to participate or continue to participate in this credit program (as a Financing Institution) until it shall have improved its collections to reach such level; c. If any Financing Institution shall exceed such applicable levels of arrears mentioned in (a) or (b), it shall cease to participate in this credit program and CB shall not extend to it any further loans until its collection performance shall have improved and reached such levels, and d. The Financing Institution shall submit to CB evidence that it qualifies or continues to qualify under this paragraph (iii). (c) Investment Position (i) Soundness of loan investments as to viability of projects, sufficiency of collateral, capacity to pay and character of Borrowers; and (ii) In the case of a Rural Bank, adherence to the objectives of the Rural Bank as to purpose of Loans, actual requirements and eligibility of borrowers. (d) Credit Standing (i) Its established credit regulation; and (ii) Character, capacity, competence and integrity of its officers. (e) Net Worth (i) Results of operation; and (ii) Ratio of unimpaired capital and surplus to risk assets. (f) Management Competence to Handle the Program (i) Qualifications, training and experience of members of the Board of Directors and its principal officers, as prescribed by the Monetary Board; and (ii) Adherence to laws, decrees and general orders and instructions of CB, by its Board of Directors and its principal officers. (g) Compliance . Compliance with circulars and memoranda embodying or implementing pertinent and applicable laws, decrees, general orders, rules and regulations. SECTION 2. Whenever there are established in any law, decree, general order, rule, regulations, or other directive in force, standards or criteria by way of ratios, percentages, or otherwise, in relation to the factors enumerated in Section 1, such standards or criteria shall be deemed applicable for the purpose of conducting an evaluation of creditworthiness under said Section 1: Provided , however , That the provisions of Sections 114 to 118 (Term Loans) of the rules and regulations governing Rural Banks in the Philippines shall not hereto apply: and Provided , further , That grant of term loans by Stock Savings and Loan Associations and Rural Banks shall be limited to a maximum of fifty percent (50%) of their outstanding portfolio or two hundred percent (200%) of their networth plus one hundred per cent (100%) of their savings and time deposits, whichever is higher. cdlex For Private Development Banks, the following additional specific eligibility requirements shall apply: (a) The bank shall not be in arrears on its loan or advances from DBP, and shall have operated profitably in the most recent fiscal year to the extent that net income before taxes shall have been equivalent to at least two and one-half percent (2.5%) of average total assets for that period; (b) Only sub-loans for which the project site is outside Metro Manila shall be considered eligible for support under the project; and (c) The total of STD's extended under the project and the loans and advances received from DBP shall not exceed four times the bank's networth minus all non-deposit liabilities. (For purposes of this calculation, STD's shall be considered as non-deposit liabilities). The total of STD's extended under the project shall not exceed twenty-five percent (25%) of total resources of the bank. II. Subloans Extended by Participating Rural Banks, Stock Savings and Loan Associations or Private Development Bank Borrowers SECTION 3. Purpose of Subloans . Only viable subprojects where the potential for increased production, employment or value added is clearly established, or where the potential for satisfying domestic demand or exportation of the excesses over domestic consumption, will be eligible for financing. Investments eligible to be financed under Subloans shall include: (a) Farm Mechanization (i) Tractors, including implements and associated equipment not exceeding 68 HP; (ii) Power tillers, including attachments; (iii) Portable threshers not exceeding 13 tons per day; (iv) Private irrigation facilities including pumps; (v) Mechanical Rice Threshers and Dryers; (vi) Abaca, Coffee, Cacao, Citrus, and Ipil-ipil Processing and Marketing Facilities : a. Storage; b. Transport; c. Stripping; and d. Baling Press (vii) Chain Saws (b) Transportation (i) Light trucks not exceeding 5,000 kgs. GVW; and (ii) Trucks, primarily for the transport of agricultural produce, not exceeding 16 tons GVW: Provided , however , That the financing of such vehicles shall be limited to areas outside of Metro Manila, and to not more than three vehicles per borrower. (c) Fisheries Development (i) Fishing boats of up to 40 gross tons capacity, including fishing gear and equipment and initial working capital; and (ii) Fishponds and fishpens, and initial working capital (d) Small-Scale Livestock Development . Facilities and initial working capital for the following subprojects: (i) Poultry; (ii) Swine; (iii) Backyard cattle breeding/fattening; and (iv) Draft animals and implements (e) Plantation Crop Development (i) Development and rehabilitation plantation of the following: (a) Abaca; (b) Coffee; (c) Citrus; and (d) Ipil-ipil (f) Cottage and Agro-Industries . Manufacturing facilities including initial working capital, but excluding cost of land. for the following subprojects: Provided , however , That projects previously financed by IBRD loans through CB, the Development Bank of the Philippines or the Industrial Guarantee and Loan Fund shall be excluded, and: Provided , further , That the total sub-project investment, of which the Subloan shall constitute a part, shall not exceed P500,000 but shall not be less than P10,000, including initial working capital, but excluding the cost of land: (i) Rice mills; (ii) Farm implements and manufacturing; (iii) Woodworking; (iv) Concrete products; and (v) Handicrafts. (g) Other Projects as may be approved by CB . The CB shall determine the feasibility of financing other categories and include them under this program without prior approval of the World Bank: Provided , That the credit requirement does not exceed P500,000 as required under Section 5 (a) of this rules and regulations. SECTION 4. Eligibility of Borrowers . The following are eligible to borrow under the program: (a) A farmer owning or cultivating not more than 50 hectares of arable land devoted to agricultural production; (b) An operator engaging or intending to engage in a cottage or agro-industry or eligible transportation enterprise with a pre-project capital investment of not more than P300,000, excluding land; (c) A person engaging or intending to engage in the development of a poultry, swine, or cattle breeding/fattening enterprise; (d) A person engaging or intending to engage in the development of plantation crops or other agricultural enterprise as set out in Section 3; (e) A person engaging or intending to engage in fishpond/fishpen development or coastal fishing having a pre-project capital investment, excluding land, of not more than P300,000; and (f) Agricultural cooperatives constituted only of members who qualify under the preceding paragraphs. SECTION 5. Subloan Limits . (a) For the interests of continued attention to small enterprises, the maximum loan that may be extended under the project shall not exceed P500,000. Loans in excess of such amount may be waived by the Bank in specific areas of economic merit, i.e., employment effect: Provided , That such waiver shall be based on the submission by the Central Bank to the World Bank of an evaluation of the individual proposal in question. (b) The amount of the Subloan shall depend upon the cost of the development plan to be financed, the actual need of the borrower, the collateral offered, the borrower's repayment capacity including net proceeds of the project to be financed by the proposed Subloan and other factors bearing on the borrower's creditworthiness, and it shall in no case exceed ninety per cent (90%) of the total project cost. The balance of total project cost shall be contributed by the borrower in the form of. (i) cash; (ii) material, to be appraised at reasonable replacement cost; (iii) labor of the borrower or other unpaid labor, to be valued at the locally-prevailing rate; and (iv) unencumbered land where, and to the extent that, such land shall become an inseparable part of the project. (In cases where such land is to serve as equity, total project cost shall be deemed to include the appraised value of such land and the appraised value shall constitute borrower equity). (c) The amount of the Subloan shall not exceed seventy per cent (70%) of the appraised value of the immovable property offered as security if titled, and shall not exceed fifty percent (50%) of such value, if the property is untitled. The appraised value shall be reasonably determined by the Financing Institution; (d) The amount of the Subloan secured by a chattel mortgage or pledge shall not exceed fifty percent (50%) of the appraised value of the object offered as security; and where such object is new, fifty percent (50%) of the price in the bill of sale; and (e) The amount of Subloan guaranteed by the "Agricultural Guarantee Fund", for agrarian reform beneficiaries and small fishing boat operators, shall be within the extent it is not secured otherwise under paragraphs (c) and (d) above. SECTION 6. Creditworthiness . Each Financing Institution shall decide on the creditworthiness of the Borrowers applying to it for Subloans. SECTION 7. Maturity of Subloans . Subloan maturities shall be based on the economic life span of the MAJOR object to be financed and the projected cash-flow to be derived from the project, and in each case shall not exceed; (a) Farm implements with four-wheel tractors and power tillers as prime mover; (i) With prime mover the loan term applicable to the prime mover; (ii) Without prime mover four (4) years; and (iii) With prime mover purchased at an earlier date four (4) years or the remaining term of any loan received for its purpose of financing the said loan term of the prime mover, whichever is greater. (b) Other farm implements four (4) years; (c) Light machineries up to 20 HP four (4) years; (d) Heavy machineries over 20 HP seven (7) years; (e) Light/heavy trucks four (4) years; (f) Irrigation pumps and engines five (5) years; (g) Complete development of an irrigation system ten (10) years; (h) Piggery project seven (7) years with appropriate grace period; (i) Poultry project seven (7) years with appropriate grace period; (j) Cattle breeding/fattening project seven (7) years with appropriate grace period; (k) Complete development of fishpond ten (10) years with appropriate grace period; (l) Fishpen financing three (3) years; (m) Fishing boats up to 40 gross tons ten (10) years; (n) Fishing gear and equipment: (i) With fishing boat ten (10) years; and (ii) Without fishing boat seven (7) years. (o) Rice mill ten (10) years with appropriate grace period; (p) Manufacture of farm implements ten (10) years with appropriate grace period; (q) Woodworking five (5) years with appropriate grace period; (r) Manufacture of concrete products five (5) years with appropriate grace period; (s) Handicraft five (5) years with appropriate grace period; (t) Permanent working capital five (5) years with appropriate grace period; (u) Other cottage and agro-industries ten (10) years with appropriate grace period to be decided by CB; (v) Development of plantation crops up to eight (8) years inclusive of the appropriate grace period; (w) Plantation crop processing and marketing facilities; (i) Storage facilities up to ten (10) years; (ii) Transportation up to four (4) years; (iii) Stripping machine up to three (3) years; and (iv) Baling Press up to ten (10) years. (x) Other items to be determined by CB SECTION 8. Loan Repayment . Repayments shall be scheduled in approximately equal installment of principal and interest, annually, semi-annually, or of a shorter period, except in cases where deferred payment plans have been granted, so arranged as to fall due on the approximate periods of highest borrower's income or when the principal income of the Borrower is normally available. However, Financing Institutions shall encourage Borrowers to make deposits for amortization of Subloans on an agreed interval in order to assure payment as they become due. SECTION 9. Grace Period . Subloans may include a grace period not exceeding two (2) years for fixed assets and six (6) months for permanent working capital when justified. Such deferred payment shall only apply to the principal of the Subloan and the total repayment period prescribed in Section 7 hereof shall not be extended on account of such grace period. SECTION 10. Interest Rates . Subloans shall accrue interest at the rate of fourteen per cent (14%) per annum on the principal amount outstanding from time to time or such higher rate as may be prescribed by the Monetary Board, except for agrarian reform beneficiaries who shall be charged twelve percent (12%) per annum, and an additional fee to be charged separately in accordance with CB regulations. Such interest shall not be collected in advance. SECTION 11. Collateral . (a) Subloans may be secured by a first mortgage on titled or untitled immovable property and/or chattel mortgage on movable property. In cases of livestock and fisheries development, the production stock may be mortgaged. Subloans for agrarian reform beneficiaries and small fishing boat operators may be secured with a guarantee by the "Agricultural Guarantee Fund" to the extent they are not secured otherwise; (b) Government bonds and other securities issued by its agencies and instrumentalities guaranteed by the Republic of the Philippines may be accepted as collateral; (c) The Financing Institution shall require the presentation of the yearly real estate tax receipts and insurance premium receipts, as they fall due, and shall forward them to the loan officer concerned; and (d) The Financing Institution may advance the property tax due on real estate and insurance premium on the objects offered as collateral, such advances to be charged to the account of the Borrower subject to prior notice. Such advances shall not be financed out of the proceeds of loans. SECTION 12. Subloan Application and Processing . (a) Applications for Subloans shall be in the form prescribed by CB and, except as CB shall otherwise agree, shall be filed with the Financing Institution nearest either the residence of the Borrower or the site of the subproject to be financed to ensure effective supervision and control; (b) Financing Institutions employing a supervised credit technician may process Subloan applications in lieu of processing by a CB Agricultural Credit Supervisor or Loan Evaluator of CB Loan Team: Provided , however , That each corresponding loan application shall be subject to the final approval of the CB Loan Officer; and (c) Notwithstanding (a) and (b) above, Financing Institutions who have developed sufficient capability to appraise Subloan applications may be granted full authority by CB to process, approve and thereafter supervise Subloans falling within the limitations of the granted authority. The approval under the granted authority shall be final and the corresponding checks covering loans to such Financing Institutions shall be issued after the submission of the required supporting documents to the CB Loan Team: Provided , however , That based on post-audit, the Authority to approve Subloan applications may be revoked by CB if the required standard of appraisal work is not maintained and the Financing Institutions fail to improve the quality of appraisal within a reasonable period prescribed by CB. SECTION 13. Release of Subloan Proceeds . Upon receipts of Loan proceeds from CB, the Financing Institution shall deposit the same in a special account with its depository bank or disburse forthwith to the Borrower/dealer/contractor/supplier. Failure to disburse Loan proceeds within thirty (30) days of receipt shall subject the Financing Institution to a penalty of fourteen percent (14%) per annum until the same is disbursed or returned to CB. SECTION 14. Penalty for Non-Payment . A penal rate of interest of five percent (5%) per annum shall accrue over and above the interest rate specified in Section 9 hereof, on any part of the principal of any Subloan amortization not paid at its due date. SECTION 15. Extension Periods . In cases of default on the service of Subloans arising from fortuitous events of force majeure, or in other cases clearly justified in the opinion of the CB, the Financing Institution may grant the Borrower a reasonable extension period subject to the approval of CB. In such cases, CB may, at its entire discretion, grant the Financing Institution the same extension period on the corresponding Loan. SECTION 16. Subloans in Litigation . In case of a suit for collection of the unpaid balance of a Subloan, there shall be collected from the Borrower, in addition to the interest and penal interest on the Subloan imposed under Sections 10 and 14 hereof, an attorney's fee equivalent to ten percent (10%) of the unpaid balance, and costs of the suit. SECTION 17. Procurement . (a) Procurement of agricultural machinery and equipment shall be limited to dealers who agree to provide the necessary training in the proper operation, care and upkeep of the machinery and equipment purchased, and who shall have immediately available spare parts and technical men and service shops at strategic places to repair and replenish the agricultural machinery and equipment sold by them and who are able to comply with CB requirements on participating dealers; (b) The Financing Institution shall ensure that procurement be effected prudently and that the prices paid by the borrowers for agricultural machinery and equipment shall not exceed the maximum prices determined by the CB's Department of Rural Banks and Savings and Loan Associations; and (c) Subloan applications in excess of P10,000 shall be supported by at least three (3) price quotations except in remote areas where dealer representation is insufficient, in which case, a certified statement by the Financing Institutions to that effect shall be required. III. Loans by the Central Bank to the Participating Rural Banks, Savings and Loan Associations and Private Development Banks SECTION 18. Credit Line Agreement . Each Financing Institution shall enter into a Credit Line Agreement with CB for purposes of obtaining loans from CB. For this purpose, they shall submit the following documents to CB: (a) Board Resolution authorizing the Financing Institution to participate in the credit program obtaining loans from CB and making Subloans; and (b) Evidence of the powers and specimen signatures of the officers duly authorized to represent the Financing Institution in all matters related to Loans. SECTION 19. Consortium of Financing Institutions . In order to cushion the impact of price increases in machinery, equipment and construction materials and to pave the way for the absorption of bigger Subloans as envisioned under this Program, two or more Financing Institutions preferably situated within the same region may be allowed to undertake the financing of a single project, in an amount not to exceed fifteen percent (15%) of the total combined net worth of such participating Financing Institutions: Provided , That the contribution to the Sub-loan by each participating Financing Institution shall not exceed 15% of its own net worth. Under this arrangement, the "CONSORTIUM" shall designate a lead or "Managing" Financing Institution which shall administer such Loans in the same manner as CB: IBRD loans are normally administered, and in accordance with existing rules and regulations prescribed by the Central Bank. Privileges and responsibilities assigned in these Rules and Regulations to Financing Institutions shall be, in the event of financing by a "CONSORTIUM", or the lead Financing Institution of the "CONSORTIUM". SECTION 20. Purpose of Loan . The CB shall extend Loans to Financing Institutions to finance Subloans to be extended by them to Borrowers in accordance with these Rules and Regulations No. 4 (as amended). SECTION 21. Loan Limit . Not less than ten percent (10%) of each subproject total costs shall be financed by the Financing Institution out of its own resources, except that Rural Banks which have been in operation for less than three years and have a net worth not exceeding P500,000 (or such lower amounts as may be determined by CB from time to time) shall be required to contribute not less than five percent (5%) of such amount out of their own resources: Provided , That in the aggregate such contribution of all Financing Institutions to the sum of all Subloans shall be not less than ten percent (10%). SECTION 22. Maturity . The schedule of repayments of each Loan shall approximately correspond to the schedule of repayments of the Subloans to be financed by such Loan. SECTION 23. Interest Rates . Loans shall accrue interest at a rate not less than nine percent (9%) per annum on the principal amount of the loan outstanding from time to time except for loans covering Subloans for agrarian reform beneficiaries, which shall accrue interest at seven percent (7%) per annum. Such interest shall not be collected in advance. LLjur SECTION 24. Credit Risk . The Financing Institution is fully liable for the service of any Loan, whether or not the Subloan financed by the corresponding Loan is timely serviced or not. SECTION 25. Documentation . The Financing Institution shall execute and deliver to CB a promissory note in respect, and in the amount, of each Loan extended to it. SECTION 26. Security . As security for each Loan, the Financing Institution shall endorse in favor of CB, the promissory notes received from the corresponding Borrower referred to in Section 4 hereof, covering the total amount of the Subloan to be financed. SECTION 27. Processing of Loan Applications . (a) Applications for Subloans, together with the Loan Application, shall be submitted to the Loan Officer of the Department of Rural Banks and Savings and Loan Associations covering the particular area, for final approval or disapproval, with the exception of those Financing Institutions duly authorized to approve Subloan applications by CB which shall submit their approved Subloans to the Loan Officer for the preparation of covering checks; and (b) In order to be processed, Loan applications must be presented in the prescribed manner and supported by documentary evidence and other requirements that CB shall determine from time to time and set forth in appropriate instructions. SECTION 28. Release of Loan Proceeds . CB checks covering Loan proceeds to Financing Institutions shall be released by the Loan Officer after submission of all required documents to perfect documentation of the Loan and Subloan. SECTION 29. Prepayment of Loans . The Financing Institution shall, to the extent any Subloan shall be prepared, prepay the corresponding amount of the Loan obtained on account of such Subloan within ten days of receipt of such prepayment. SECTION 30. Penal Provisions . A penal rate of interest of five percent (5%) per annum shall accrue over and above the interest rate specified in Section 23 hereof, on any part of the principal of any Loan not paid within 15 days of its maturity. SECTION 31. Loans in Litigation . In case of suit for collection of the unpaid balance of a Loan, there shall be collected from the Financing Institution in default, in addition to the interest and penal interest on the Loan imposed under Sections 23 and 30 hereof, an attorney's fee equivalent to ten percent (10%) of the unpaid balance, which shall in no case be less than one hundred pesos (P100), and costs of the suit. IV. Audits and Reports from the Participating Rural Banks, Stock Savings and Loan Associations and Private Development Banks SECTION 32. Subloan Audit . Subloan documents of Financing Institutions shall be subject to audit by designated staff of CB for compliance on Rules and Regulations. SECTION 33. Audit . CB shall audit or cause to be audited, at least once a year, the accounts of the Financing Institutions which, for this purpose, shall make available to the CB's representatives or the auditors designated by CB all relevant documents. SECTION 34. Monitoring . The Financing Institutions shall furnish to CB all reports and other information CB may reasonably request regarding this credit program. [Source: CLRBSLA 80-9 2-21-80] Period Payment Necessary to Pay Off PART 4 Investment Operations SECTION 241. Investment in Equities of Allied Undertakings . Thrift banks may invest in equities of allied undertakings provided an application to this effect is filed with the appropriate supervising department of the Central Bank. The investing bank shall make a full disclosure of the operational/functional/financial details of the company or firm in which it wishes to make an equity investment. SUBSECTION 241.1 Approved allied undertakings . Except as provided in Subsec. 241.2 below, thrift banks may invest in equities of the following allied undertakings/enterprises: a. Warehousing companies b. Storage companies c. Safe deposit boxes d. Banks other than rural banks e. Companies engaged in home building and home development: Provided , That the volume of business of the above-listed companies/corporations indicates that they are principally engaged in the business for which they were primarily established. SUBSECTION 241.2 Banks disqualified from investing in allied undertakings . Thrift banks in the following situations shall not be allowed to invest in equities of allied undertakings: a. Capital impairment, whether by actual losses or valuation reserves recommended by the Central Bank; b. Lending operations under suspension on account of reserve or capital deficiency any time, until such suspension shall have been lifted for at least one year and sufficient reserves or capital shall have been maintained; c. Losses incurred from operation during the preceding year; d. Whenever the required valuation reserves as recommended by the Central Bank have not been fully booked; e. Whenever the individual/aggregate ceilings on credit accommodations to directors/officers and/or stockholders under Sec. 234 have been exceeded; and f. Whenever past due loans exceed reasonable or acceptable level. SUBSECTION 241.3 Ceilings on equity investments in allied undertakings a. The total investment of a thrift bank in the equity of a borrowing company/firm shall, unless otherwise allowed by the Monetary Board, be limited to an amount equal to 15% of the investing bank's networth, less the total loans outstanding of the bank to such company/firm. [Circular 480 9-24-75] 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 holdout 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 in any single allied enterprise shall not be more than 40% of the outstanding stock of such enterprise but shall not exceed 15% of the investing bank's networth. c. The Monetary Board may require, upon reasonable notice, a thrift bank to reduce/dispose its equity investments in an allied undertaking if the financial position of the bank becomes precarious, as determined by the Monetary Board. [Circular 480 9-24-75] SUBSECTION 241.4 Interlocking directors and/or officers in banks and allied undertakings The following regulations shall govern interlocking 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 this purpose, shall be those as defined in Subsecs. 221.1(a) and 222.1 (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 this prohibition against interlocks among directors, a husband and his wife shall be considered as one person; and 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 Subsec. 221.52] SECTION 242. Investment in Other Enterprises SUBSECTION 242.1 Investment in high-grade evidences of indebtedness . The following regulations were approved for the purpose of implementing Section 31 (e) of Republic Act No. 337, as amended, and Section 5(c) of Republic Act No. 3779, as amended. a. Thrift banks may invest in high-grade bonds and other high grade evidences of indebtedness and grant loans against such obligations. As a general rule, "high-grade" bonds and other "high-grade evidences of indebtedness" are those which possess the ultimate degree of protection as to principal and income and the maximum potential for long-term growth in value: Provided , That such bonds and other evidences of indebtedness shall have complied with the Rules on Registration of Commercial Papers issued by the Securities and Exchange Commission (See 6.Appendix B): Provided , further, That such bonds and other evidences of indebtedness with original maturity of more than four (4) years shall be covered by mortgage trust indenture. It shall be the responsibility of management of the bank investing in such instruments to undertake the necessary investigation to satisfy itself with regard to the particular security in accordance with guidelines set by the Supervision and Examination Sector. b. Evidences of indebtedness of the Republic of the Philippines and of the Central Bank, and any other evidences of indebtedness or obligations the servicing and repayment of which are fully guaranteed by the Republic of the Philippines, are eligible forms of investment under Section 31 (c) of Republic Act No. 337, as amended. c. Evidences of indebtedness which are not eligible investment under Item (a) above, may be discounted: Provided , That such evidences of indebtedness have complied with the Rules on Registration of Commercial Papers issued by the Securities and Exchange Commission: Provided , further , That these evidences of indebtedness shall be discounted with recourse against a bank, or non-bank financial intermediary performing quasi-banking functions. The aggregate exposure in (a) high-grade bonds and other high-grade evidences of indebtedness [other than government securities mentioned in Item (b) above], (b) discounted evidences of indebtedness referred to in Item (c) above, and (c) accounts receivable arising from the sale by duly licensed dealers or distributors of durable consumer goods discounted as mentioned in Subsec. 237(a)(1), shall not exceed fifteen per cent (15%) of total assets of thrift banks: Provided , That the total exposure of thrift banks on accounts receivable arising from the sale by duly licensed dealers or distributors of durable consumer goods shall not exceed one-third of the fifteen per cent (15%) ceiling prescribed in this paragraph. (See also Section 237) [Circular 661 3-15-79] SUBSECTION 242.2 Investment in subsidiaries/affiliates SUBSECTION 242.21 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. It is understood that the conditions on the submission of periodic reports previously set by the Monetary Board on the approval of equity investments abroad for domestic banks shall be deemed amended accordingly. [MAB 7-18-79] SUBSECTION 242.3 Authorized investments of stock savings and loan associations . A stock savings and loan association may invest its funds in any or all of the following: a. In sound non-speculative enterprises, as well as in bonds, securities, and other obligations issued by the Government of the Philippines or any of its political subdivisions, instrumentalities or corporations including government-owned or controlled corporations, subject to such rules and regulations as the Monetary Board may provide, in an aggregate amount of ten per cent (10%) of the total assets of such association: Provided , That such association may invest in equities of allied undertakings authorized in Section 241 and in such other allied undertakings as may be approved by the Central Bank for thrift banks: Provided , further , That (a) the total investment in equities shall not exceed twenty-five per cent (25%) of the net worth of the association; (b) the equity investment in any single enterprise shall be limited to fifteen per cent (15%) of the net worth of the association; (c) the total equity investment of the association in any single enterprise shall remain a minority holding in that enterprise, except where the enterprise is not financial intermediary; and (d) the equity investment in other banks, if allowed by the Monetary Board, shall be subject to the same-limitations imposed on similar investments of commercial banks and shall be deducted from the investing stock savings and loan association's net worth for purposes of computing the prescribed ratio of net worth to risk assets. Equity investment shall not be permitted in non-related activities. Where the allied undertaking is a wholly or majority-owned subsidiary of the investing association, it may be subject to examination by the Central Bank. b. No stock savings and loan association, at any one time shall have an investment in real estate and improvements thereon, including equipment, in an aggregate amount in excess of fifty per cent (50%) of its net worth: Provided , That real estate used for the stock savings and loan association's purposes owned by another corporation in which that association owns equity shall be considered as part of the association's total investment in real estate. SUBSECTION 242.4 Deposits made by stock savings and loan associations . Stock savings and loan associations may maintain deposits with banks: Provided , That the amount of such deposits shall be subject to the loan limit to a single borrower as prescribed herein or by other special laws or regulations. [Circular 691 8-13-79] SUBSECTION 242.5 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 242.51 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 in Section 234.4, 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. For purposes of this section, 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 242.52 Authorized investments of VCC . 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 242.53 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 242.54 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 242.55 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 242.56 Sanctions . Violation of this 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] SECTION 243. Other Operations SUBSECTION 243.1 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] Footnotes * Implementation deferred by M.B. Resolution No. 2157 dated 11-11-77. APPENDIX A (Book II, 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 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 1/2 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 10% 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 re-purchase 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 1/2 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 Footnotes * Implementation deferred by M.B. Resolution No. 2157 dated 11-11-77. PART 5 Deposit Operations SECTION 251. Savings Deposits . SUBSECTION 251.1 Definition . Savings deposits are deposits evidenced by a passbook consisting of funds deposited to the credit of one or more individuals or corporations with respect to which the depositor may withdraw at any time, unless prior notice in writing of an intended withdrawal is required by the stock savings and loan association. LexLib [Circular 691 8-13-79] SUBSECTION 251.2 Interest on savings deposits . The maximum rate of interest on savings deposits in thrift banks is shown in Subsec. 257.12. [Circular 679 5-28-79, as amended by Circular 696 7-26-79 and Circular 706 12-1-79] SUBSECTION 251.3 Required reserves against savings deposits . The required reserves against savings deposit liabilities in local currency of thrift banks is eight per cent (8%) of such deposit liabilities (See also Section 255). [Circular 552 1-17-77, as amended by Circular 628 8-21-78 and Circular 697 9-26-79] SUBSECTION 251.4 Minimum size of savings deposits . Savings deposits may be opened with stock savings and loan associations with a minimum deposit of one peso (P1.00). [Circular 691 8-13-79] SUBSECTION 251.5 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 shall be clearly defined; b. Solicitation on deposits shall 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 (see 5.Appendix A); and d. The appropriate supervising and examining department shall certify that the financial condition of the bank applying for authority to solicit and collect savings deposits outside its bank premises is sound and that the operations and the quality of the management thereof could reasonably assure the safety of the funds which may be entrusted to its deposit collectors and/or solicitors. [MCRBSLA 7-29-73] SUBSECTION 251.51 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 effective 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. [MAB 2-23-79] SUBSECTION 251.52 Solicitation of deposits under the Barangay Savings Movement . Banks in the province of Batangas and 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 251.6 Deposits to/withdrawals from savings accounts a. From banks, in general . 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] b. From stock savings and loan associations . Withdrawals from a savings deposit shall be made through the presentation to the stock savings and loan association of a duly accomplished withdrawal slip together with the depositor's passbook. Withdrawal through an agent or representative who has been authorized in writing shall also be allowed. An association shall reserve the right to require the depositor to give prior written notice of withdrawal of not more than thirty (30) days before withdrawals may be made. An association may limit the number of withdrawals: Provided , That the number of withdrawals allowed shall not be less than three times a month. A service charge of twenty-five centavos (P0.25) may be charged by the association for every withdrawal made in excess of the maximum number allowed in any month. [Circular 691 8-13-79] SUBSECTION 251.61 Special savings deposits of farmer-borrowers . Only the balance of loans granted under the supervised credit program shall be deposited in the special savings deposit of farmer-borrowers, as an exception to the provisions of Subsec. 231.21. Withdrawals against special savings deposits of farmer-borrowers under the supervised credit program, 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. 251.1. [MB Res. 775 54-73] SUBSECTION 251.7 Service or maintenance fees on dormant or inactive savings accounts . Thrift banks may impose service or maintenance fees on dormant or inactive savings account 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 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 251.8 "NOW" accounts . The following rules and regulations shall govern the grant of authority to thrift banks to accept "NOW" accounts. SUBSECTION 251.81 Definition of "NOW" accounts . "NOW" accounts are savings accounts from which funds may be withdrawn by means of negotiable orders of withdrawal. They shall be kept and maintained separately from the regular savings deposits subject to withdrawal thru the presentation of withdrawal slips and passbooks. SUBSECTION 251.82 Procedural requirements . Any thrift bank desiring to offer "NOW" accounts shall submit an application in the form of a letter-request addressed to the Monetary Board thru the appropriate supervising and examining department of the Central Bank which shall evaluate the same, taking into consideration, among other things, (a) the capital, financial condition and profitability or earning capacity of the applicant bank; (b) existing systems and procedures and internal control safeguards of the applicant bank; (c) the ability of the bank's personnel to handle "NOW" accounts; and (d) the general compliance by the applicant bank with banking laws, rules and policies, and all other orders or instructions of the Monetary Board and/or Central Bank Management. SUBSECTION 251.83 Minimum qualification requirements . The authority to offer "NOW" accounts shall be granted only to thrift banks which meet the following requirements: a. Capitalization 1) An applicant thrift bank shall have adequate capital pursuant to law and shall have complied fully with the minimum paid-in capital required of savings and mortgage banks, private development banks and stock savings and loan associations under existing increased capitalization program of the Central Bank. 2) The term paid-in capital as used herein shall include paid-in surplus and shall be unimpaired by valuation reserves or adjustments to capital accounts as may be required by the Central Bank, whether booked or unbooked, or whether or not the setting up and/or booking of such valuation reserves has been allowed on a staggered basis. b. Financial Condition 1) The bank shall not have incurred any capital deficiency computed under Section 30 of R.A. No. 337, as amended, and pertinent rules and regulations, on any day during the six-month period immediately preceding the filing of its application, up to the day before "NOW" accounts are offered or extended to the public. 2) The applicant bank shall not have incurred any net deficiency in reserves against deposit liabilities/deposit substitutes in any week during the six-month period immediately preceding the filing of its application, up to the day before "NOW" accounts are offered or extended to the public. 3) The applicant bank shall have had profitable operations during the last three (3) calendar years prior to the filing of the application. SUBSECTION 251.84 Limitations and restrictions . The authority to accept "NOW" accounts shall be subject to the following limitations/restrictions and conditions: a. A bank may accept "NOW" accounts only after a permit has been issued by the Governor upon the recommendation of the appropriate supervising and examining department of the Central Bank, which permit shall be issued only after the thrift bank shall have presented satisfactory proof that its personnel possess the necessary training and/or experience and its facilities are adequate to operate and/or service "NOW" accounts; that it has adopted appropriate and adequate systems and procedures and internal control safeguards; that it has complied with all the conditions imposed on the approval of its application to accept "NOW" accounts; and that it has satisfactorily complied with all other conditions/requirements imposed in this subsection. b. Only natural persons shall be eligible to maintain "NOW" accounts. c. A bank may be permitted to accept or offer only either demand deposits or "NOW" accounts, but not both. d. The order of withdrawal form shall have a size of three (3) inches by six and three eight (6-3/8) inches, and shall be printed on security/check paper. It shall contain as a minimum the features contained in the pro-forma order of withdrawal shown in 5.Appendix F. e. As stated in the reverse side of the pro-forma order of withdrawal shown in (d) above, only the payee can encash the order of withdrawal with the drawee bank. However, the order of withdrawal can also be deposited to his account with the drawee bank or with any other bank. f. Any order of withdrawal which may be deposited with a bank other than the drawee bank shall be presented by the depository bank to the drawee bank for payment and shall not be included among the clearing items sent by said depository bank to the Central Bank clearing office. g. Advertisements on the grant of authority to any thrift bank to offer "NOW" accounts that tend to prejudice other banks not given similar authority shall not be allowed. SUBSECTION 251.85 Minimum operation and control procedures a. The order of withdrawal shall be pre-numbered and shall be treated as an accountable form of thrift banks. b. Opening of Account 1) The depositor shall be informed in writing of the terms and conditions governing "NOW" accounts. 2) The bank shall require the depositor to present appropriate identification, the acceptability and validity of which shall be determined by the bank officer authorized to approve the opening of the account. 3) The depositor shall fill up information and signature cards. 4) The bank shall adopt other measures to ensure that only desirable accounts are accepted. c. Deposits 1) The depositor shall fill up a Deposit Slip at least in duplicate, or a deposit slip with a stub, to be presented to the bank, together with the cash and/or checks to be deposited. 2) The bank shall validate and initial the verified deposit slip to acknowledge receipt of deposits and return one validated copy of the deposit slip or the validated stub to the depositor. d. Withdrawals 1) The depositor shall fill up or issue an order of withdrawal, pro-forma of which is shown in 5.Appendix F. 2) The bank shall examine the order of withdrawal presented for payment to determine the authenticity or genuineness of the depositor's signature. 3) Every withdrawal shall be approved by an authorized bank officer. e. Monthly Bank Statement 1) A Bank statement shall be sent to each depositor at the end of each month for confirmation of balances. 2) Paid orders of withdrawal shall be retained by the bank for future reference. 3) Any complaint or exception of depositors received by the bank shall be referred to the Auditor of the drawee bank. SUBSECTION 251.86 Other requirements . The officers and employees involved in the operation of "NOW" accounts should be men of integrity, technically competent and shall be adequately bonded and/or covered by adequate blanket insurance coverage. SUBSECTION 251.87 Penal provisions . Any violation of these rules and regulations shall subject the bank concerned, its officers, and/or employees responsible for such violation, to the corresponding sanctions provided under Sections 34 and 34-A of R.A. No. 265, as amended, whenever applicable, without prejudice to such criminal action as may be warranted under the circumstances. [Circular 695 9-26-79] SUBSECTION 251.9 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 lessees 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.App. K 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 252. Time Deposits . SUBSECTION 252.1 Definition . Time deposits are evidenced by a negotiable or non-negotiable instrument which provides on its face that the amount of such deposit is payable on a fixed date or at the expiration of a certain specified time. SUBSECTION 252.2 Interest on time deposits . The maximum rates of interest on time deposits of 730 days or less shall be paid according to the schedule shown in Subsec. 257.13. [Circular 679 5-28-79, as amended by Circular 696 7-26-79 and 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, or a deposit substitute issued, 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. [Circular 585 12-24-77] SUBSECTION 252.3 Required reserves against time deposit . The required reserves against time deposit liabilities in local currency of thrift banks is eight per cent (8%) of such deposit liabilities. (See also Section 255). [Circular 552 1-17-77, as amended by Circular 628 8-21-78 and Circular 697 9-26-79] SUBSECTION 252.4 Minimum term of time deposits No time deposits shall be accepted for a term of less than ninety (90) days. SUBSECTION 252.5 Minimum size of deposit . Banks should not impose a minimum amount of time deposit greater than P100.00. [Circular 679 5-28-79; Circular 691 8-13-79] SUBSECTION 252.6 Special time deposits from the Agrarian Reform Fund Commission . Authority shall be automatically granted to any accredited banking institution which may participate in the supervised credit program to accept special time deposits from the Agrarian Reform Fund Commission (ARFC) with interest lower than the rate allowed on time deposits accepted from the general public. Such deposit shall be exempt from the legal reserve requirement, as an exception to existing regulations. [MB Res. 775 5-4-73] SUBSECTION 252.7 Withdrawal of time deposit . The withdrawal of a time deposit shall be made through the presentation of the certificate covering such deposit. If the time deposit is withdrawn before maturity date, and the association waives its right to the term, the deposit shall earn interest in accordance with regulations prescribed by the Monetary Board. If a time deposit is not withdrawn or renewed on its due date, it shall be treated as a savings deposit and shall earn interest as such from date of maturity to date of actual withdrawal or renewal. SECTION 253. Demand Deposits . SUBSECTION 253.1 Interest on demand deposits . No interest shall be paid on demand deposits. (See also Subsec. 257.11.) [Circular 679 5-28-79] SUBSECTION 253.2 Required reserves against demand deposits . The required reserves against demand deposit liabilities of thrift banks is twenty per cent (20%) of such deposit liabilities. (See also Section 255.) [Circular 628 8-21-78, as amended by Circular 697 9-26-79] SUBSECTION 253.3 Grant of authority to thrift banks to accept or create demand deposits SUBSECTION 253.31 Procedural requirements . Any thrift bank desiring to accept or create demand deposits shall submit an application therefor in the form of a letter-request addressed to the Monetary Board which shall be evaluated by the appropriate supervising and examining department of the Central Bank, taking into account, among other things, (a) the capital, financial condition, and profitability or earning capacity of the applicant bank; (b) existing procedures and internal control system of the applicant bank; (c) the ability of the bank's personnel to handle checking accounts; and (d) the general compliance by the applicant bank with banking laws, rules and policies, and all orders or instructions of the Monetary Board and/or the Central Bank Management. cdpr SUBSECTION 253.32 Minimum qualification requirements . The authority to accept or create demand deposits shall be granted only to banks which meet the following requirements: a. Capitalization 1) The applicant bank, regardless of its type and location, shall have a minimum paid-in capital of P12.5 million, including the minimum paid-in capital required under the existing increased capitalization programs, for an authority to accept or create demand deposits from all types of depositors, including corporate depositors; or a minimum paid-in capital of P6.0 million, including the minimum paid-in capital required under the existing increased capitalization programs, for an authority to accept or create demand deposits from natural persons only. 2) The term "paid-in capital" as used herein shall include paid-in surplus and shall be unimpaired by valuation reserves or adjustments to capital accounts as may be required by the Central Bank, whether booked or unbooked, or whether or not the setting up and/or booking of such valuation reserves has been allowed on a staggered basis. 3) Stock dividends shall be considered accretions to paid-in capital only if there is an actual declaration and issuance of stock dividends in accordance with applicable laws and regulations. 4) The conversion of earned surplus/undivided profits to paid-in surplus to cover premiums on stock dividends declared shall not be permitted. b. Financial Condition 1) The bank shall not have incurred any capital deficiency in any day computed under Section 30 of Republic Act No. 337, as amended, and the corresponding implementing rules and regulations of said provision of law, during the six (6) months period immediately preceding the filing of its application, and/or any capital deficiency from the date of grant of authority to the day before checking account services are offered or extended to the public. 2) The applicant bank shall not have incurred any net deficiency in reserves against deposit liabilities/deposit substitutes in any week during the six (6) months period immediately prior to the filing of its application and/or any net reserve deficiency from grant of authority to the day before checking account services are offered or extended to the public. 3) The applicant bank shall have had profitable operations during the last three (3) years prior to the filing of its application. SUBSECTION 253.33 Limitations and restrictions . The authority to accept demand deposits shall be subject to the following limitations and restrictions: a. Checking account facilities may be extended to natural persons only, or to all types of depositors, including corporate depositors, as the case may be, depending on the paid-in capital of the bank as prescribed in Item (1) of Subsec. 253.32(a). However, a bank authorized to extend checking account facilities to natural persons only, which subsequently meets the paid-in capital of P12.5 million and desires to extend demand deposit liabilities to all types of depositors, shall submit an application therefor and be subject to the same procedural requirements specified in Subsec. 253.31. b. Banks may accept demand deposits only after a permit therefor has been issued by the Governor upon the recommendation of the appropriate supervising and examining department, which permit shall be issued only after the bank shall have presented satisfactory proofs that its personnel possess the necessary training and/or experience and its facilities are adequate to operate and/or service demand deposits, that it has adopted appropriate and adequate systems, procedures and internal control systems as herein required, and that it has satisfactorily complied with all other conditions/requirements imposed in this section. For purposes of the required training and/or experience, attendance at appropriate seminars, workshops, on-the-job training and/or experience of an officer/employee designated to handle the demand deposit operations for at least six (6) months may be considered. c. To maintain the stability of the thrift banking system, advertisement on the grant of authority to any thrift bank to accept or create demand deposits subject to withdrawal by check that tends to prejudice the thrift banks not yet given similar authority shall not be allowed. d. The provisions of existing rules and regulations governing demand deposits or checking accounts, such as those prohibiting bank officers and employees from opening or maintaining demand deposit accounts with the banking office in which they are employed/assigned (See Subsec. 153.5 of Book I of this Manual) and those prohibiting temporary overdrawings against demand deposits (See Subsec. 153.3 of Book I of this Manual) shall apply the thrift banks authorized to accept or create demand deposits. SUBSECTION 253.34 Procedures and internal control system . Thrift banks that may be authorized to accept checking accounts shall adopt appropriate systems and procedures and adequate internal control systems to enhance their efficiency, as well as to prevent or deter the commission of fraud and to assure satisfactory experience with the demand deposit accounts. As minimum requirements insofar as internal controls are concerned, said banks shall adopt the "Minimum Control Standards" for deposit accounts prescribed under 2.Appendix K. SUBSECTION 253.35 Miscellaneous requirements . Officers and employees involved in demand deposit operations shall be bonded adequately and/or covered by adequate blanket insurance coverage. Any thrift bank authorized to accept demand deposits may participate in the Central Bank clearing operations and shall comply with all applicable rules and regulations governing Central Bank clearing operations. (See Subsec. 291.4.) SUBSECTION 253.36 Penal Clause . Any violation of these rules shall subject the bank concerned, the officers and/or employees responsible for such violation to the sanctions provided under Sections 34 and 34-A of Republic Act No. 265, as amended, without prejudice to such criminal action as may be warranted under the circumstances. [Circular 631 8-21-78] SUBSECTION 253.4 Issuance of checks without sufficient funds or credit . Pursuant to its authority under Republic Act No. 265, as amended, and 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 checks 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. e. For local exchanges, a check dishonored by reason of insufficiency of funds or credit shall be returned by the drawee bank to the negotiating bank not later than the next regular clearing. For out-of-town exchanges, a check so dishonored shall be returned by the drawee bank to the negotiating bank within the period specified in the Central Bank issuance announcing the opening of clearing facilities in each of the authorized regional clearing centers. prcd A check dishonored by reason by 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 253.5 Drawings against uncollected deposits . As a matter of policy, drawing against uncollected deposits shall be prohibited effective July 1, 1980, 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 254. Government Deposits . SUBSECTION 254.1 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 254.2 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 254.3 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 254.4 Exempt transactions . Compliance with the provisions of Subsec. 254.1 to 254.3 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. Proceeds of DBP bonds sold by DBP accredited sales and service agencies for the bond marketing operations of DBP; d. Funds received by private development banks as collecting agents of DBP pursuant to Subsec. 291.5; 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, 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: and i. Any other form of deposits and/or borrowings specifically authorized by law or exempted by the Monetary Board. SUBSECTION 254.5 Application for authority to accept . 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 254.6 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. LLpr [Circular 673 4-17-79] SECTION 255. Reserve Requirements Against Deposit Liabilities . SUBSECTION 255.1 Required reserves ; accounts subject to reserves ; exceptions . The required reserves against deposit liabilities in local currency of thrift banks shall be as follows: Against demand deposits 20% Against "NOW" accounts 12% Against time and savings deposits other than "NOW" accounts 8% [Circular 552 1-17-77, as amended by Circular 628 8-21-78 and Circular 697 9-26-79] Included among deposits (demand, savings and time) subject to reserve requirements are proceeds from sales of DBP Progress Bonds. Exempt from reserve requirements are (a) retained proceeds (20%) of sale of CBCIs which shall be held for the Central Bank in a special account not considered a deposit; (b) all collections credited to the Special Account "Due to Central Bank Internal Revenue Account (Other Cities and Municipalities)"; (c) special time deposits from the Agrarian Reform Fund Commission and special savings deposits from farmer-borrowers; (d) deposits/deposit substitutes with remaining maturities of more than 730 days; and (e) 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." SUBSECTION 255.2 Composition of reserves . The required reserves against deposit liabilities in local currency of thrift banks, including the Development Bank of the Philippines, shall be held in the form of deposit balances with the Central Bank equivalent to at least ten percent (10%) of the required reserve. The remaining portion of the reserve may be held in the form of cash in vaults and/or government securities or evidences of indebtedness of the Republic of the Philippines and/or its instrumentalities and subdivisions specified in the first paragraph of Subsec. 255.22. (See 5. Appendix E. for clarification on computation of reserves against deposit liabilities by stock savings and loan associations). [Circular 552 1-17-77] To expedite action on various requests of stock savings and loan associations for the purchase or encashment of government securities or partial withdrawal or conversion of the Central Bank demand deposits to government securities, which would reduce the amount or change the composition of their reserves against deposit liabilities, any such request shall be accompanied by the latest report on required and available reserves against deposit liabilities. [MCRBSLA 74-38 6-27-74] SUBSECTION 255.21 Deposit with Central Bank as reserves . For purposes of computing the total available reserves against deposit 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 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. In the 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. [Circular 552 1-17-77] Bank reserves on deposit with the Central Bank 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] 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] The balance of the "Due from Central Bank of the Philippines" account when used in the computation of a. available reserves against a) marginal deposits on import letters of credit, b) deposit substitutes/interbank loans and c) 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 CBP 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 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 private development banks and CBP 7-19-01-B for stock savings and loan associations) 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] SUBSECTION 255.22 Government securities authorized as reserves . Government securities eligible as reserves against deposit and deposit substitute liabilities of banks and non-bank financial intermediaries with quasi-banking functions 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: a. 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 b. The instrument must expressly state in its face the amount, maturity date and interest rate of the obligations. 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. prLL 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 first paragraph of this subsection: Provided , further , That the bank notifies the Central Bank of any such change in the prescribed forms. Securities counted as reserves may not be hypothecated or encumbered in any way or earmarked for any other purpose without automatically losing their eligibility as reserves. [Circular 552 1-17-77, as amended by Circular 638 11-8-78] Government securities with Central Bank support which are purchased under certain terms/conditions and restrictions are considered hypothecated and, therefore, may not be used as reserves against deposit liabilities of banks. [MB Res. 1699 10-12-71] Likewise, any request by a stock savings and loan association to encash or withdraw government securities held as legal reserve shall be accompanied by a copy of the resolution of its board of directors authorizing one of its responsible officers to encash or withdraw said government securities. To expedite such encashment or withdrawal and for the convenience of stock savings and loan associations, they may, instead, submit a copy of the resolution of their board of directors authorizing the Director, Department of Rural Banks and Savings and Loan Associations, or his authorized representative, to undertake such encashment or withdrawal. [MCRBSLA 74-98 6-27-74] SUBSECTION 255.3 Computation of reserve position . Each bank shall calculate at the close of each banking day 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. SUBSECTION 255.4 Reserve Deficiencies SUBSECTION 255.41 Penalty in case of reserve deficiency; offset privilege . Whenever the reserve position of any bank computed in the manner specified in Subsec. 255.3 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. [See. 5. Appendix E for clarification on computation of reserves against deposit liabilities by stock savings and loan associations] SUBSECTION 255.42 Chronic reserve deficiency; penalties . In cases where the bank chronically has reserve deficiency in deposit liabilities, the bank shall be denied the credit facilities of the Central Bank; and the Monetary Board may: (a) limit or prohibit the making of new loans or investments by the bank; and (b) require that all or part of the net profit of the bank be assigned to surplus. The board of directors of said bank shall be notified of such chronic reserve deficiency and the penalties therefor, and be required to immediately correct the reserve position of the bank. 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 this subsection, "chronic reserve deficiency" shall mean having a net reserve deficiency for four consecutive weeks. SUBSECTION 255.43 Unpaid fines . The manner of payment or collection of fines under Item (b) (3) of Subsec. 224.21 shall apply. SUBSECTION 255.44 Reporting requirements . Every bank shall make a weekly report to the Central Bank of its daily required and available reserves on deposit 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. [Circular 552 1-17-77, as amended by Circular 728 4-10-80] SUBSECTION 255.45 Call by depositors for repayment of their deposits resulting in reduction of reserves below required minimum ( Section 38 of Republic Act No . 337 , as amended ) a. Presumption of call by depositors . Any reduction in the bank's legal reserves against its deposit liabilities below the minimum amount required by the Monetary Board, computed in the manner specified in Section 105 of Republic Act No. 265, as amended, shall be considered due to a "call by depositors for repayment of their deposits" if the bank incurs a deficiency in its reserve position at the close of business for the day during which withdrawals from deposit accounts were paid by the bank. b. Inhibitions on banks . Whenever the bank's legal reserves are reduced below the required minimum due to a "call by depositors for repayment of their deposits" as defined above, as of the close of business on the previous day, starting on the next working day: 1) The bank concerned shall automatically inhibit itself from making any new loans or investments, except investments in government securities eligible as reserves against deposit liabilities; 2) The bank concerned shall not release all or any part of approved loans; and 3) The bank concerned shall not grant any extension or renewal unless twenty per cent (20%) of the outstanding balance of the loan has been repaid or liquidated by the borrower. The restrictions enumerated above shall be automatically lifted when the bank's legal reserves have been restored to the required minimum. c. Provision in loan agreements . The bank concerned shall incorporate in the loan agreement to be entered into by and between the bank and its borrowers the condition that whenever the bank's legal reserves are reduced below the amount required by the Monetary Board due to a call by depositors for repayment of their deposits, no release of all or any part of the approved loans shall be made until the bank's legal reserves have been restored to the required minimum. d. Sanctions . Any officer or director of a savings and mortgage bank who makes or causes to be made any loan or investment of funds of depositors or of the earnings of such funds in violation of this subsection shall be punished by imprisonment for not less than one year nor more than ten years and by a fine of not less than P1,000 nor more than P10,000. [Circular 280 10-4-69] SECTION 256. Schemes to Attract Deposits Thrift banks shall observe the rules embodied in this Section in their promotional and other campaigns designed to attract deposits. SUBSECTION 256.1 Raffles and lotteries . Any raffle or lottery conducted by any thrift 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; (c) The disqualification of savings accounts inactive for two years shall be clearly indicated in all announcements, promotions or advertisement concerning the raffle/lottery; (d) Each deposit account shall be entitled to only one prize; (e) 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; (f) 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; (g) The results 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 (h) The results of such raffle/lottery shall be attested to by two authorized bank officers and reported to the appropriate supervising department 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: (a) The date and place of the raffle/lottery, (b) The list and value of each prize, (c) Other essential features (requirements for qualification, the determination of the winners, etc.) of the raffle/lottery. SUBSECTION 256.2 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 banking institutions shall conform with the following guidelines: cdta (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) or (ii) shall require prior Central Bank approval. (b) No cash, or checks, 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: (a) The period and manner of distribution, (b) The value and type, or form, of the gift or "giveaway". (c) 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. 256.2(a) provided, however, that all the other requirements of Sec. 256 shall be complied with. [CL 4-30-76] SUBSECTION 256.3 Other promotional schemes Other plans, contests, or campaigns designed to attract deposits not falling under the provisions of Subsecs. 256.1 and 256.2 shall be subject to prior approval by the Central Bank. To provide sufficient time for consideration thereof, 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. SUBSECTION 256.4 Sanctions Non-compliance with the foregoing provisions 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 257. Interest on Bank Deposits SUBSECTION 257.1 Maximum interest rate on bank deposits . The following regulations shall govern the payment of interest on deposits in all banking institutions. SUBSECTION 257.11 Demand deposits . No interest shall be paid on demand deposits. SUBSECTION 257.12 Savings deposits a. Banks authorized to accept demand 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. b. Banks not authorized to accept demand deposits 1) The maximum rate of interest on savings deposits, except "NOW" accounts, in banks not authorized to accept demand deposits, shall be nine and one-half per cent (9-%) per annum which may be compounded daily, monthly or quarterly, on the basis of either the average or actual daily balance. 2) The maximum rate of interest on "NOW" accounts in banks not authorized to accept demand deposits shall be seven per cent (7%) per annum which may be compounded daily, monthly or quarterly, on the basis of either the average or actual daily balance. c. Banks shall not compute interest on savings deposits and on "NOW" accounts on the basis of the lowest monthly balance or any other method not mentioned above. d. Where interests are computed daily/monthly/quarterly, banks shall use a 360-day year. SUBSECTION 257.13 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 shall be according to the following schedule: 1) Banks authorized to accept demand deposits 90-179 days 10-% 180-359 days 11% 360-539 days 12% 540-729 days 13% 730 days 14% 2) Banks not authorized to accept demand deposits 90-179 days 11% 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 thrift banks shall be as follows: Original Maturity Interest Rate Per Annum Based on Period Holding Period after Placement 1-89 90-179 180-359 360-539 540-729 90-179 days 6% 6-% - - - 180-359 days 6% 6-% 7-% - - 350-539 days 6% 6-% 7-% 8-% 540-729 days 6% 6-% 7-% 8-% 9-% 730 days 6% 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 90- 180- 360- 540- 730 or 1-89 179 359 539 729 over 6% 6-% 7-% 8-% 9-% 10-12% Provided , That if interest has been paid in advance, the corresponding rebate shall be charged against the principal of the time deposit. SUBSECTION 257.2 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 696 7-26-79 and Circular 706 12-1-79] SUBSECTION 257.3 Payment of interest in kind . Banking institutions shall not pay interest in kind on deposits and deposit substitutes. [Circular 460 4-21-75] SUBSECTION 257.4 Disclosure of effective rates of interest . Effective January 3, 1977, all banks are required to disclose to depositors the following information on interest computation and payment on their savings and time deposits: a. Type/kind of deposit; b. Normal rate of interest and period covered; c. Manner of interest payment, i.e., whether credited in advance or otherwise; d. Basis of interest payment, i.e., whether based on average daily balance compounded quarterly or otherwise; e. Effective rate of interest expressed as a simple annual rate, on the basis of the information above given and indicating the formula used to arrive at the effective rate of interest; and f. Illustration of basis of computing interest on a hypothetical deposit account. cdti 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 CLs 8-2-76 and 9-27-76] SECTION 259. Sundry Provisions SUBSECTION 259.1 Signature card . All banking institutions including savings banks, development banks and stock savings and loan associations, 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 259.2 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 259.4 Unclaimed balances . All unclaimed balances, which include credits or deposits of money, bullion, securities or other evidences of indebtedness of any kind, and interest thereon, already reported to the Treasurer of the Philippines in accordance with the Unclaimed Balances Act (Act No. 3936, as amended by Presidential Decree No. 679 dated April 2, 1975) shall be transferred/reclassified from the deposit liability/other credits accounts to the liability account, "Due to the Treasurer of the Philippines," until they are deposited with or turned over to the Treasurer of the Philippines upon order of the court that the same have been escheated in favor of the government of the Republic of the Philippines and, as such, the unclaimed balances-deposit liabilities shall no longer be covered by reserves required of deposit liabilities. (See also Subsec. 255.1 and Item (o) of 2. Appendix D.) [MAB 2-6-76] SUBSECTION 259.5 Certification on deposit . Banks are required to use the prescribed form embodied 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 259.6 Basic provisions on opening and operation of deposit accounts SUBSECTION 251.61 Who may open deposit accounts . Natural or juridical persons may open savings or time deposits with stock savings and loan associations, subject to pertinent provisions of law and regulations. Minors who are at least seven years of age, are able to read and write, have sufficient discretion and are not otherwise disqualified by any other incapacity, have 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 interests thereon from stock savings and loan associations, without the assistance of their parents or guardians. Parents may nevertheless deposit for their minor children and guardians for their wards. Any natural person lacking capacity to contract may open savings or time deposits for himself provided he has sufficient discretion. However, he cannot make withdrawals from his account except through or with the assistance of a guardian authorized to act for him. In case the depositor is a juridical person, the stock savings and loan association shall require the depositor to submit written proof of its juridical capacity and its authorization to its agents to deal with the association, with facsimiles or sample signatures of its authorized signatories, and such other documents necessary for the proper operation of the account. Notwithstanding the provisions of the preceding paragraphs, the cashier, bookkeeper, their assistants and other officers and employers of the association whose duties entail the handling of cash or checks and other cash items are prohibited from opening deposit accounts with the head office/branch of the association in which they are assigned. SUBSECTION 259.62 Identification of depositors . A stock savings and loan association shall be responsible for the proper identification of its depositors or persons intending to open a deposit. SUBSECTION 259.63 Number of deposit accounts . A depositor may open and have more than one savings deposit in his own name in the same capacity, and he may open and have various deposits in different capacities, such as guardian, agent or trustee. SUBSECTION 259.64 Passbook and certificate of time deposit . A savings deposit passbooks, signed by the receiving teller and an authorized officer, shall be issued to a savings depositor showing, among other things, his name and address, account number, date, amount of deposit, interest credits and balance In the case of a time deposit, a certificate of time deposit, signed by two authorized officers, shall be issued to the depositor containing, among other things, the depositor's name, amount of the deposit, date when the deposit was made, its due date and interest rate. Stock savings and loan associations shall pre-number their savings deposit passbooks and shall submit the serial numbers of the printed certificate of time deposits to the appropriate supervising and examining department of the Central Bank. SUBSECTION 259.65 Deposits in checks and other cash items . Checks and other cash items may be accepted for deposit by stock savings and loan associations: Provided , That withdrawals from such deposit shall not be allowed until the check or cash items is collected. SUBSECTION 259.66 Deposit insurance . Deposits in savings and loan associations shall be eligible for insurance coverage under Republic Act No. 3591, otherwise known as an Act Establishing the Philippine Deposit Insurance Corporation. [Circular 691 8-13-79] SUBSECTION 259.7 Booking of deposits and withdrawals . The following regulations for commercial banks, thrift banks and specialized government banks shall govern the booking of deposits and withdrawals. SUBSECTION 259.71 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 (3-1/2) 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 259.72 Definition . As used in this sub-section, the following terms shall have the following meanings: a. "Regular banking hours" shall refer to the banking hours reported to the Central Bank pursuant to Subsec. 223.2, including the extended banking hours reported for servicing deposits and withdrawals; and LLphil 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. For thrift banks which do not participate in the clearing operations, "clearing cut-off time" shall refer to the bank's closing time for the acceptance of deposits in the form of checks, bills and other demand items which will be deposited with their depository banks for clearing. SUBSECTION 259.73 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 259.74 Booking of non-cash deposits . Deposits of checks including "on us" checks, managers/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 259.75 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 259.76 Other records required . For record and control purposes, banks shall prepare a daily abstract of deposit transactions treated as contingent accounts. SUBSECTION 259.77 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 259.78 Reports required . Banks shall submit a written notice on the selected clearing cut-off time of all their offices to the appropriate supervising and examining department of the Central Bank 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 259.79 Sanctions . Violation of any of the provisions of this section shall be subject to the penalties provided in Sections 34 and 34-A of Republic Act No. 265, as amended. SUBSECTION 259.8 Withholding tax on deposits of foreign diplomatic establishments . For information and guidance on interest income on bank deposits of foreign diplomatic establishments and their individual diplomatic and nondiplomatic staff members, see opinion of Acting Commissioner, Bureau of Internal Revenue, embodied in 5. Appendix G. [CLRBSSLA 80-17 3-24-80] APPENDIX A MINIMUM SAFEGUARDS REQUIRED TO BE INSTITUTED AND MAINTAINED BY BANKS APPLYING TO SOLICIT AND ACCEPT DEPOSITS OUTSIDE THEIR PREMISES Banks applying to solicit and accept deposits outside their 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; LLjur 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. cdll [Source: MB Res. No. 1177 6-29-73] APPENDIX B (Book II, 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. llcd 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 newspaper, 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 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 Sec. 256.2 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 distributions 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. B. Solicitation The depository bank is authorized to solicit deposits of students within the premises of the school. Whenever practicable or within its means, therefore, the depository bank should send a solicitor to the school to service deposits and withdrawals of the students. The following shall be observed by the solicitor when servicing deposits and withdrawals: 1. The authorized solicitor who shall be properly bonded, shall present a letter of introduction addressed to the head of the school, together with the bank's prescribed identification card which the solicitor shall wear at all times during the solicitation. 2. Depositors shall be required to accomplish "Signature Cards" when opening an account. 3. Pre-numbered deposit slips, in duplicate, shall be used. The duplicate shall be given to the depositor and the original retained to serve as posting medium. 4. With proper safeguards, withdrawals may also be effected through the bank solicitor. 5. At the close of every solicitation day, a Report of Deposit Collection shall be accomplished in triplicate (original to bank, and a copy each to solicitor and school) by the solicitor. Inclusive number of used deposit slips, accomplished withdrawal and collection slips as shown in the report shall be turned over to and acknowledged by the cashier. 6. Passbooks shall be returned to the depositors not later than the following soliciting day. A copy of the Report of Deposit Collection of the last soliciting day shall be submitted to the head of 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 a counts 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. cdtech [Source: Circular Letter dated 5-11-77] APPENDIX C (Book II, Part 5) RULES AND REGULATIONS GOVERNING 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 black-listed 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. aisadc 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. [Sources: Circular Letter dated 1-11-79; Circular Letter dated 7-25-79] APPENDIX D (Book II, 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: aisadc _________________________ (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] APPENDIX E (Book II, Part 5) CLARIFICATION ON COMPUTATION OF RESERVES AGAINST DEPOSIT LIABILITIES BY STOCK SAVINGS AND LOAN ASSOCIATIONS For the information and guidance of stock savings and loan associations in the computation of reserves against deposit liabilities as required under Section 255 and in the preparation of the consolidated weekly report thereon (CBP 7-19-01B), the following clarifications are issued: 1. On Subsec. 255.2 The composition and the allowable amount of each form of available reserves against deposit liabilities in local currency shall be: a. Of the total required reserves, at least 10% for thrift banks shall be held in deposits with Central Bank. There is no upper limit to the amount which may be considered and reported as available reserves. Holdings in excess of this required minimum which are not otherwise needed to make up the total required reserves (as when the total available cash in vault/government securities/regular CBCIs will not add up to the allowable maximum 90% for thrift banks) shall be reported as excess reserves. It will be noted that excess reserves invariably come only from deposits with the Central Bank. b. In addition to deposits with Central Bank, any one of the following items or combination thereof may be considered as available reserves to the extent of the amount indicated, expressed as a percentage of required reserves: Thrift Banks Regular CBCIs Items Used Not Used a. Cash in vault and/or ) b. Government securities ) 72% 90% other than regular CBCIs c. Regular CBCIs 18 Total 90% 90% Thus, with respect to the above-cited alternative forms of reserves, the amounts that need be reported as available reserves should not exceed the prescribed percentages. If regular CBCIs will not be utilized, the whole 90% of the required reserves for thrift banks, may be in the form of cash in vault and/or other eligible government securities. Holdings of any or all of these items of reserves which are in excess of the prescribed percentages shall be reported as potential reserves . 2. On Subsec. 255.41. The penalty on reserve deficiencies shall be computed as follows: a. For each banking day of the week, the difference between the total available reserves and the total required reserves is determined. A reserve deficiency is incurred if available reserves are less than required reserves. Conversely, excess reserves result if available reserves are more than required reserves. b. In the exercise of the privilege of off-setting, if the total of daily excess reserves exceeds the total of daily reserves deficiencies during a given week, the result would be net excess for the week, in which case no penalty is imposed. A bank loses the privilege of offsetting in case of abuse (i.e., incurring reserve deficiencies for 3 or more days during a given week for 4 consecutive weeks, whether or not resulting in net weekly excess reserves) until such time that the bank maintains its daily reserve position at the required minimum for at least 4 consecutive weeks. c. In the event of a net reserve deficiency position for a given week, the penalty to be imposed is arrived at by multiplying the amount of the resulting net weekly reserve deficiency (i.e., the excess of total daily reserves deficiencies over total daily excess reserves for that week) by the prescribed penalty rate of 1/10 of 1%. cdtech Source: CLRBSSLA dated 7-2-79 APPENDIX F (Book II, Part 5) PRO-FORMA ORDER OF WITHDRAWAL FOR "NOW" ACCOUNTS Source: Circular 695 9-26-79 APPENDIX G (Book II, Part 5) INTEREST INCOME ON BANK DEPOSITS OF FOREIGN GOVERNMENTS ". . . I have the honor to inform you that being an interest income on bank deposits of foreign governments, the interest income on bank deposits of foreign diplomatic establishments are exempt from income tax under Section 29(b) (8) (A) of the National Internal Revenue Code, as amended, and consequently, from the 15% withholding tax prescribed by Section 53(e) of the same Code. Although under Article 34 of the Vienna Convention on Diplomatic Relations, diplomatic staff members are exempt from all types of taxes, except taxes on private income having its source in the receiving State, so that income earned by the diplomatic official in the performance of his duties are exempt from income tax, such exemption does not, however, extend to the interest earnings accruing to said income which are deposited in banks in the Philippines. Consequently, the interest income on bank deposits of diplomatic staff members are subject to income tax and therefore, to the 15% withholding tax. Non-diplomatic staff members enjoy privileges and immunities of diplomatic officials if they are not nationals of or permanent residents in the receiving State. (Article 37, Vienna Convention supra ) Accordingly, if said non-diplomatic staff members are neither Filipino citizens nor permanent residents of the Philippines, income earned by them in the performance of their duties are, likewise, exempt from income tax. However, the interest income on their bank deposits in the Philippines are subject to income tax, and consequently, to the 15% withholding tax." [Source: Letter of Acting Commissioner, Bureau of Internal Revenue, to the Italian Embassy, disseminated under CLRBSSLA 80-17 dated 3-24-80] cdpr PART 6 Borrowing Operations SECTION 261. Borrowings from the Government . As a corollary to the withdrawal from all previously authorized depository banks of authority to accept government deposits nor 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] SUBSECTION 261.1 By private development banks . Authorized private development banks may rediscount with the Land Bank of the Philippines (LBP); provided, that in case of rediscounting or placement of special time deposits by LBP, a private development bank shall have no arrearages in its loans, advances/rediscounting with, and as certified by, the Development Bank of the Philippines. LLjur [CL 7-11-75] SECTION 262. Loans and Advances/Rediscounts from the Central Bank in General . SUBSECTION 262.1 Basic terms and conditions SUBSECTION 262.11 Ceilings . The ceiling on all loans or advances/rediscounts to thrift banks shall be 100% of the applicant bank's paid-up capital as of the end of the quarter immediately preceding the date of application for Central Bank refinancing. SUBSECTION 262.12 Eligibility of papers . Credit instruments offered as collaterals shall be subject to the eligibility requirements provided under Sections 87 and 88 of Republic Act No. 265, as amended. [Circular 442 12-12-74] As regards commercial credits, the maturity date of said credit instruments shall not exceed 180 days from date of rediscount, while for production credits, it shall not exceed 360 days from the date of rediscount or acquisition by the Central Bank. [MC-DLC 2 24-75] SUBSECTION 262.13 Loan values . Paper offered as collateral for loans or advances to thrift banks under Section 87 of Republic Act No. 265, as amended, shall be assigned loan values equal to: a. Eligible Paper with One Year Maturity Or Less Loan Value 1. Supervised Credits: Masagana 99 Rice Production and 100% Masaganang Maisan Programs other than Agrarian Reform Agrarian Reform 100% Others 100% 2. Non Supervised Credits: Agrarian Reform 80% Others 80% 3. Production of rice and 100% 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 (For Masagana 99/Masaganang Maisan, Agrarian Reform and other supervised credits, the provisions of Item 1 shall apply.) 4. Priority I-A: Grains Quedan 100% Financing Palay 100% Economic activities listed under 3.Appendix A 5. Small-scale/cottage industries excluding 80% those mentioned below Export-oriented small 100% scale/cottage industries involving accounts not exceeding P1 million Non-export oriented small 80% scale/cottage industries under Priority I-B and C (see 3.Appendix A) 6. Copper, chromite, nickel 80% metal and nickel and cobalt in mixed sulphides 7. Priority I-B and C (see 3. Appendix A) 60% excluding those mentioned in Item 5 a. Eligible Paper with More than One Year Maturity Pledge or assignment of payments, 70% installments or amortizations of long-term lending institutions In addition, loans or advances to thrift banks under Section 88 of Republic Act No. 265, as amended, shall not exceed forty per cent (40%) of the total value of the payments, installments or amortizations offered as security. SUBSECTION 262.14 Rediscount/interest rules and other charges . The rates of interest to be assessed by the Central Bank on loans or advances to thrift banks and the maximum interest rates charged by the lending banks including other charges on such loans shall be as follows: CB Maximum Rediscount Bank Rate Lending Rate (per annum) (per annum) a. Eligible Paper with One Year Maturity Or Less 1. Supervised Credits: Masagana 99 Rice Production 1% 10% (plus service and Masaganang Maisan and bank charges Programs other than Agrarian not exceeding 3%) 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%) 14% (unsecured) 3. Production of rice and corn, 3% 9% (plus bank poultry and piggery, fishing, charge not feed grains and sorghum, exceeding 1%) 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 credits, the provisions of Item 1 shall apply.) 4. Priority I-A: Grains Quedan 4% 9% (plus bank Financing-Palay charge not exceeding 1% Economic activities 4% 9% (plus bank listed under charge 3.Appendix A not exceeding 1% 5. Small-scale/cottage 4% 9% (plus bank industries excluding charge not those mentioned exceeding 1%) below Export-oriented small 3% 9% (plus bank scale/cottage industries charge not involving accounts not exceeding 1%) exceeding P1 million Non-export oriented 6% 10% (plus bank small scale/cottage charge not industries under exceeding 1%) Priority I-B and C (see 3.Appendix A) 6. Copper, chromite, nickel 4% 6% (plus bank metal and nickel and charge not cobalt in mixed sulphides exceeding 2%) 7. Priority I-B and C 11%) 12% (secured) (see 3.Appendix A) 14% (unsecured) excluding those mentioned in Item 5 b. Eligible Paper With More Than One Year Maturity Pledge or assignment 8% Maturity up to 730 of payments, installment days: 12% (secured) or amortizations of long 14% (unsecured) term lending institutions [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 thrift 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 262.15 Maturities . The maturity of Central Bank loans or advances/rediscounts for commercial credit shall not exceed 180 days from the date the proceeds of such loans or advances/rediscounts are released to the applicant bank while those for production credit shall not exceed 360 days from the date the proceeds for such loans or advances/rediscounts are released to the applicant bank. Furthermore, advances against Treasury Bills shall not exceed sixty days from the date of rediscount, while those advances against other government eligible securities shall not be more than 180 days from the date of rediscount. [Circular 442 12-12-74] For loans or advances other than commercial or production credits but falling under Section 88-A of Republic Act No. 265, as amended, the maturity dates shall not exceed one year from the date the proceeds of such loans or advances are released to the applicant bank. SUBSECTION 262.2 Other terms and conditions SUBSECTION 262.21 Repayments . The borrowing bank shall remit immediately to the Central Bank the corresponding loan value, plus accrued interest, of the collaterals as they mature, securing availments under Section 88-A and/or collections received before maturity thereof and at least forty per cent (40%) of the total assigned payments, installments or amortizations collected and/or due during the month, plus accrued interest, not later than the tenth (10th) day of the month following where such availments had been extended by the Central Bank under Section 88-A of Republic Act No. 265, as amended. Loans or advances/rediscounts shall always be a direct obligation of the borrowing bank to the Central Bank and the latter shall look forward to the settlement of such obligations when they mature without prejudice to acceleration of payment irrespective of whatever rights it may have or the mortgages assigned to the Central Bank. LLphil SUBSECTION 262.22 Additional loan/advance . No additional loan or advance/rediscount shall be made to any applicant bank if an existing loan or advance/rediscount is delinquent or if it fails to effect the corresponding remittance to the Central Bank of the collections referred to in Subsec. 262.21 hereof. In case delinquencies arise from natural calamities, such delinquent accounts shall be covered by duly approved plans of payments, the terms and conditions of which shall be fully complied with. SUBSECTION 262.23 Default and other violations by the borrowing banks . A borrowing bank becomes in default when, upon expiration of the maturity period of its promissory note with the Central Bank, it has not fully liquidated the note. In case of default or failure to comply with the requirements of Subsec. 262.21 hereof, the demand deposit account with the Central Bank of the borrowing bank shall be debited for the amount in default plus accrued interests and liquidated damages. SUBSECTION 262.24 Liquidated damages . In case of default, liquidated damages of seven per cent (7%) per annum shall be charged on such amount in default over and above the interest rate at which such loan was originally secured from the Central Bank. [MC DLC-2 2-4-75] SUBSECTION 262.3 Recording and reporting of discounting and/or rediscounting transactions . 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 Central Bank. The loans and discounts, bills purchased, acceptances and other accounts affected by 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 262.4 Documentary requirements covering reserve and capital positions . 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: Form No . Title of Report For commercial banks, savings and mortgage banks, and private development banks: CBP 7-16-01 Consolidated Report of Required and Available Reserves Against Deposit Liabilities CBP 7-16-07 Statement of Capital Required and Capital Accounts Under Section 22 or 30 of R.A. 337, as Amended. For stock savings and loan association: CBP 7-19-01B Consolidated Report of Required and Available Reserves Against Deposit Liabilities CBP 7-19-02B 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 CB, SMBs, PDBs and SSLAs, Series of 1980, re-issued under CLSSLA 80-32 5-7-80] SECTION 263. Specific Rediscounting/Loan Transactions . SUBSECTION 263.1 Rediscounting of papers pertaining to Agrarian Reform Credit relative to Presidential Decree No . 717 SUBSECTION 263.11 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 263.12 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 one hundred percent (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 263.13 Rediscount/interest rate . The Central Bank shall charge rediscount or interest rates on agrarian reform credit as follows: a. Eligible credit instruments under a supervised credit program one per cent (1%) per annum; and b. Other eligible credit instrument 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] SUBSECTION 263.14 Maturities . The maximum periods for rediscounting 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. 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. It is understood that the terms of the loans granted by institutional borrowers shall be synchronized with the maximum maturities of their own loans from the Central Bank as outlined in 6.Appendix C hereof. SUBSECTION 263.15 Credit limit . The ceilings on all loans and advances/rediscounts to thrift banks, inclusive of agrarian reform credit papers, shall be 100% of the applicant bank's paid-up capital as of the end of the quarter immediately preceding the date of application for Central Bank refinancing. 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 for Masagana 99; P500 for corn and sorghum and P650.00 for soybeans. SUBSECTION 263.16 Repayments . The loan value, plus accrued interest, of collections received before maturity shall be immediately remitted to the Central Bank. [MCRTB-DLC 3 9-5-75] SUBSECTION 263.2 Rediscounting under the Masagana 99 and Masaganang Maisan Programs . The guidelines on rediscounting privilege under the supervised credit programs of Masagana 99 and Masaganang Maisan are embodied in 6. Appendix E. [CL 3-28-77] SUBSECTION 263.3 Central Bank Loans to long-term lending institutions . Loan availments under Section 88-A of Republic Act 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 per cent 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. 262.14 shall continue to be applicable. [Circular 664 3-19-79] SUBSECTION 263.4 Interbank loan transactions . The regulations embodied in Subsec. 236.5 shall govern interbank loan transactions of commercial and thrift banks. SECTION 264. Additional Qualifications for Availment of Central Bank Credit Facilities . The additional qualifications for availment by thrift banks of the privilege of access to the credit facilities of the Central Bank shall be as follows: (a) The thrift bank must be operating in accordance with pertinent laws and existing rules and regulations governing thrift institutions. (b) It must have a duly approved program of payment to meet the minimum capital requirements and that it has complied with its approved program of capital build-up. (c) The ratio of past-due direct and indirect loans to its own stockholders, directors and officers to the aggregate past due loans must not exceed ten per cent (10%) based on the latest examination by the appropriate supervising department. (d) The thrift bank has no net deficiency in reserves against deposit liabilities for the past four consecutive weeks based on the latest required reports. (e) The combined capital accounts of a thrift bank have not been deficient continuously for a period of thirty days on the basis of the required reports of the Central Bank. (f) Required reports are being submitted to the Central Bank on or before their respective deadlines. [MC-DLC 1 2-4-75] (g) Whenever the total direct accommodations of a bank to its directors, officers, stockholders and other parties mentioned in Subsec. 234.3 reach 50% of the prescribed aggregate ceiling and the bank is applying for a loan or advance with the Central Bank, the Monetary Board may, upon the recommendation of the appropriate supervising and examining department, require as a condition for the extension of the credit facility the designation of a comptroller in the bank to protect the interests of the Central Bank. [Circular 568 5-4-77] (h) Effective January 13, 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 to avail of Central Bank credit facilities, except as may be allowed under Sec. 90 of Republic Act No. 265, as amended. [Circular 571 7-12-77] Thrift banks which desire to avail themselves of the rediscounting privilege of the Central Bank must submit the documents mentioned in 6. Appendix A. SECTION 269. Sundry Provisions . SUBSECTION 269.1 Authority of stock savings and loan associations to borrow from borrow from banks and other lending institutions . An association may borrow money or incur such obligation up to not more than twenty per centum (20%) of the total assets of the association, from any public lending institution, such as the Development Bank of the Philippines, the Philippine National Bank, the Government Service Insurance System, the Social Security System, and from private banking institutions, and such other private lending institutions as may be approved by the Monetary Board. The Monetary Board may, in meritorious cases, raise the ceiling on the borrowing capacity of a stock savings and loan association to not more than thirty per centum (30%) of its total assets. The proceeds of the loan to be acquired shall be used exclusively to meet the normal credit requirements of the community where the association is situated: absolutely no part of the proceeds thereof shall be used for creation or acquisition of any fixed or capital assets or for operational expenses. A savings and loan association may, subject to such rules as the Monetary Board may promulgate, also borrow from or rediscount notes, bills of exchange and other commercial papers with the Central Bank, under the provisions of Sections 87 and 88-A of Republic Act No. 265, as amended. The rate of interest on such obligations or borrowings of such associations shall not be more than that charged rural banks. [Circular 691 8-13-79] SUBSECTION 269.2 Registration requirements of commercial papers ; sanctions . 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 SEC (See 6.Appendix B). [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 Monetary Board (See 6.Appendix D). [Circular 545 11-22-76] When the issuance of commercial papers amounts to the performance of quasi-banking functions, the issuer shall first obtain a certificate of authority from the Central Bank in accordance with the regulations pertinent thereto, which is found under Subsec. 519.3 of Book V of this Manual. Violations or non-compliance with the rules and regulations mentioned in this subsection shall subject said bank 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] SUBSECTION 269.3 Issuance of mortgage and mortgage certificates . Savings and mortgage banks and private development banks which are authorized to engage in quasi-banking functions may issue mortgage and chattel mortgage certificates, buy and sell them for their own account or for the account of others, or accept and receive them in payment or as amortization of their loans as provided in Section 33 of Republic Act No. 337, as amended. The issuance of mortgage and chattel mortgage certificates shall be under the terms and conditions mentioned in Subsec. 568.2. Savings and mortgage banks and private development banks desirous of availing this privilege shall submit their application with the Department of Commercial and Savings Banks. [Circular 700 10-30-79] APPENDIX A DOCUMENTARY REQUIREMENTS IN SUPPORT OF APPLICATION FOR LOAN, ADVANCE OR REDISCOUNT WITH CENTRAL BANK Thrift banks (private development banks, savings and mortgage banks and stock savings and loan associations) may apply for a loan, advance or rediscount with the Central Bank specifically under Sections 87 and 88-A of Republic Act No. 265, as amended, for normal credit operations and special credit operations, respectively. To avail itself of the rediscounting privilege of the Central Bank, the thrift bank 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. In the case of agrarian reform credit papers, the nature of the loan or advance (whether supervised or non-supervised credit) which must be supported by the following: a. Credit instruments, duly endorsed, together with the corresponding schedule and/or schedule of amortizations offered as collateral for loan or advance from the central Bank; b. Resolution of the bank's board of directors authorizing the application for credit accommodation and designating the officer/s to act for the applicant bank; and c. Copy of the latest financial statements/reports (statements of condition, income and expenses and report of required and available reserves against deposit liabilities). [MC DLC 2 2-4-75] For applications under the supervised credit, agrarian reform credit scheme, the following papers shall be submitted in addition to the above: (1) Duly accomplished farm plan and budget, which shall be prepared by an accredited technician who should be knowledgeable about the project being financed; and (2) Certification by a government technician that the papers being rediscounted cover loans granted to beneficiaries of agrarian reform In case the collateral offered pertains to amortization payments which, in effect, is an application for availment under Section 88-A of Republic Act No. 265, as amended, the following shall be submitted: 1. Deed of Assignment covering the payments, installments or amortizations offered as security for the loan or advance as well as the mortgage contracts of the respective borrowers; and 2. Certification of the authorized officer/s of the applicant bank to the effect that the payments, installments or amortizations to be pledged or assigned to the Central Bank are in no case currently in arrears and that they are related to credit operations which in every case are adequately secured by first mortgages and other collaterals authorized under existing laws, rules and regulations. [Source: MC-DLC 2 2-4-75 and MCRTB 9-5-75] APPENDIX B (Book II, 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 performing 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 participations, trust certificates and/or similar instruments. dctai (b) Interbank Call Loan is a loan extended by a bank to another bank, demandable within 24 hours, and evidenced by an inter-bank call loan advice form, in accordance with the provisions of Subsec. 135.5, Book I. (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 is a concern linked directly or indirectly to another by means of; (1) Ownership, control and power to vote, of 10% or more of the outstanding voting securities; (2) Interlocking directorship/officership; (3) Common major stockholders; i.e. owning 10% or more of the outstanding voting securities; (4) Management contract or any arrangement granting power to direct or cause the direction of management and policies; (5) Voting trustee holding 10% or more of the outstanding voting securities; (6) Permanent proxy constituting 10% or more of the outstanding voting securities. (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. (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; (3) A copy of any prosperous, 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 Act, as prescribed by the Commission. (See 6. Appendix D) (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 Sec. 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 Sec. 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 paper with maturities of one year or less, determined and authorized by its Board of Directors and disclosed in the registration statements. 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 40-day period. (2) During this period, the Commission shall review the registrants 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 the registrant is available at the Commission. (b) The Commission may, at some future date, 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% of 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 Sec. 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 [Source: Circular 489 12-15-75] APPENDIX C MAXIMUM MATURITY OF LOANS FROM THE CENTRAL BANK TO INSTITUTIONAL BORROWERS I. Farm Crops A. 150 days White Corn B. 180 days Sorghum Soybean Yellow Corn C. 210 days Citrus * Mango * Rice *** D. 240 days Atis * Chico E. 270 days Cotton F. 360 days Abaca ** Ginger Banana ** Papaya * Cassava Pineapple * Coconut * Sugar * Coffee * II. Poultry, Fish and Livestock A. 90 days Poultry: Broiler B. 120 days Fish C. 180 days Poultry: Duck raising (Production, day old-4 mos.) Livestock: Rabbit D. 210 days Livestock: Goats E. 270 days Poultry: Duck raising (Duck egg Production 4 mos. old stock) Livestock: Hog Raising Fattening (2 mos. old stock) F. 360 days Poultry: Egg production (ready to lay pullets) Livestock: Cara beef (yearling stock); Cattle Raising Cattle fattening 270-360 days (1-1 & yrs. old stock) Hog Raising Fattening (2 mos. old stock) III. Vegetables A. 90 days Mustard Pechay B. 130 days Sweet green corn C. 150 days Cabbage Giant Pepper Carrot Sweet potato Cauliflower D. 180 days Beans (red, Baguio, Bongo Navy) Cowpea Okra Cucumber Peanut Garlic Peas Irish potato Sitao Melon E. 210 days Ampalaya Tomato Eggplant F. 270 days Onion G. 300 days Lima (patani) Squash Sequidillas Upo H. 360 days Chayote Footnotes * Financing starts on established and fruit-bearing age crop ** Financing starts six months after planning *** Maximum maturity of loans to finance non-high yielding, traditional varieties 270 days APPENDIX D (Book II, 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: (a) Financial intermediaries, banks and non-banks performing quasi-banking functions; (b) Other corporate issuers of long term commercial papers and bonds the aggregate amount to be issued or the outstanding issue of which is P1 million or more: (i) Which will be negotiated to any number of persons; or (ii) Which will be primarily issued to twenty (20) or more lenders/investors No commercial papers with face maturities of 366 days or more and bonds shall be issued or negotiated unless the same have been registered or are exempt pursuant to these rules. It is understood that any corporation performing quasi-banking functions shall, in addition to the registration requirement of these rules, be subject to the provisions of 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; (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; and 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 issue. Nothing herein shall authorize financial intermediaries engaged in quasi-banking functions to preterminate their commercial paper issue in violation of applicable Central Bank regulations. SECTION 5. Notice and Hearing . (a) For applicants which have commercial papers with maturities of 366 days or more and bonds outstanding prior to the effectivity of these rules: 1. Upon submission and receipt of the registration statement duly accomplished together with all the required annexes and supporting documents, the Commission shall publish once at the expense of the applicant, such fact of filing in a newspaper of general circulation in the Philippines reciting that a registration statement for the sale of such commercial papers and bonds has been filed with it, and that the said Registration Statement, as well as all the 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-days 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 to a closed-door conference-hearing; LLpr 3. After the Commission issues the registration authority, the applicant shall publish notice thereof ONCE in a newspaper of general circulation throughout the Philippines, in such size, form and content as prescribed by the Commission. c) The Commission shall return any application for registration, if: 1. The requirements of applicable laws and regulations governing the issuance of long term commercial papers and bonds have not been complied with; 2. The issuance of the long term commercial papers and bonds will be in conflict with public interest and national policies; 3. Not all information necessary for a proper evaluation of the worthiness of the long term commercial papers and bonds have been disclosed in the registration statement; and 4. The information disclosed by the applicant in its application for registration is erroneous or may result in a misleading conclusion. SECTION 6. Exemption from registration . The following need not be registered under these rules: a) Loans and advances of the Central Bank under its open market and/or rediscounting operations; b) Long-term commercial papers and bonds issued by the National and Local Governments, Central Bank of the Philippines, Philippine National Bank, Development Bank of the Philippines, Land Bank of the Philippines, Government Service Insurance System, Social Security System; c) Long-term commercial papers and bonds issued by such other government financial entities as may be determined by the Commission upon the recommendation of the Central Bank; and d) Commercial papers with face maturities of 366 days or more and bonds issued by corporate issuers other than financial intermediaries, banks or non-banks performing quasi-banking functions, the total amount to be issued or the outstanding amount of which is less than a million or P1 million or more but is neither negotiated to any number of persons, nor primarily issued to twenty (20) or more lenders: Provided, however, the said corporate issuers shall, prior to issuance of its long-term commercial papers and bonds, file an information statement (LT-40) which 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 agency function is retained and other off-balance sheet items serviced: A. CP Form M-2-3-01 for financial intermediaries engaged in quasi-banking functions covered by LT 20 (A) and LT 30 (A); B. CP Form M-101 or CP Form M-102 for other issuers covered by LT 10, LT 20 (B) and LT 30 (B). II Quarterly Report signed under oath by the President or any other officer duly authorized to do so by the Board of Directors, specifying any change in the original registration statement or information statement of the corporations: A. CP Form Q-2-3-01 for financial intermediaries covered by LT 20 (A) and LT 30 (A); B. CP Form Q-1 for all registered 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. LLphil 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 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 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 [Source:Circular 545 dated 11-22-76] APPENDIX E (Book II, Part 6) REDISCOUNTING PRIVILEGES UNDER THE SUPERVISED CREDIT PROGRAM Thrift 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 J. The borrowers/projects financed by these loans shall be reviewed from time to time by agricultural credit supervisors of the Central Bank to determine their compliance with these guidelines. b. All unsecured loans shall be covered by guarantee under the Land Bank "Agricultural Guarantee Fund". c. An interest reduction of two per cent (2%) per annum shall be granted to farmer borrowers who fully liquidate their loans on or before maturity in which case the interest collected shall not exceed ten 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 as provided for under Subsec. 262.11. Access to the Central Bank Credit Facilities . The qualifications for availment by thrift banks of the credit facilities of the Central Bank are provided for under Section 264. Maturity Period . The maturity of Central Bank loans or advances secured by eligible Masagana 99 and Masaganang Maisan papers covering production credits shall not exceed 210 days and 150 days, respectively. Loan Documentation Required . All banks applying for a loan with the Central Bank shall submit to the Department of Loans and Credit the following papers: a. Loan application in duplicate, duly accomplished and signed by two (2) duly authorized officers of the bank; b. Original and two (2) copies of the bank's promissory note in favor of the Central Bank, also duly signed by the authorized officers of the bank; c. Certifications Certifications by the bank technician(s) that the loans listed in the rediscount schedules were granted under the supervised credit scheme, and by the bank president/manager that the unsecured loans pertaining to "Masagana 99 and Masaganang Maisan" are covered by the Agricultural Guarantee Fund; d. Rediscount schedule supported by: 1. Farmer-borrowers' promissory notes, duly endorsed by two (2) authorized officers of the bank; 2. Farmer-borrowers' applications and farm plans and budgets consolidated in one sheet (back to back); 3. Certification by barangay captains as to identity of Masagana 99 or Masaganang Maisan farmer-borrower; that such borrower is a bona fide member of a selda of his barangay and cultivating a certain hectarage of riceland or cornland; 4. Real estate mortgage or chattel mortgage duly registered, if the loans are covered by a mortgage on real estate or personal properties; 5. Co-maker's statement in the absence of real estate mortgage or chattel mortgage. [Source: Circular Letter dated 3-28-77.] Footnotes * Financing starts on established and fruit-bearing age crop ** Financing starts six months after planting *** Maximum maturity of loans to finance non-high yielding, traditional varieties 270 days PART 7 Trust Operations SECTION 271. Pre-requisite for the Exercise of Trust Functions SUBSECTION 271.1 Deposit of securities for the faithful performance of trust duties . The Monetary Board delegated to the Governor or Senior Deputy Governor 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 with the procedures outlined in Appendix A hereof. [MACB 6-24-59 and 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 * P 35.500 below P 250,000 35.501 to P 71.000 500,000 71.001 to 106.600 750,000 106.501 to 142.000 1,000,000 etc. etc. The required trust deposit with the Central Bank as prescribed above shall be complied with by the banks/trust companies concerned within sixty days from receipt of notice thereof. [MACB-DSE 2-17-70] SECTION 272. Trust Accounts . SUBSECTION 272.1 Trust accounts treated as ordinary deposits . Certain trust accounts maintained by certain government agencies with savings and private developments 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-G 7-19-65] SECTION 273. 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 appropriate supervising and examining department of the Central Bank. cdlex [Circular 354 12-29-72] SECTION 274. Trust Transactions . SUBSECTION 274.1 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 purchases or acquires property from: 1) Any of the departments, directors, officers, employees of the trust company or bank; 2) The wife, husband or relative within the third degree of consanguinity or affinity of such director, officer, employee; 3) 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) 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) 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; or 6) 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 274.2 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 be obtained where the trust funds are to be lent to the trust company or trustee bank 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 234 for loans granted to bank directors/officers/stockholders/related interests; and 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. 274.1, 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. 234.4, 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] SECTION 279. Sundry Provisions . SUBSECTION 279.1 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 of Book V of this Manual; 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. [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. APPENDIX A PROCEDURAL REQUIREMENTS REGARDING DEPOSIT OF SECURITIES FOR THE FAITHFUL PERFORMANCE OF TRUST DUTIES 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, 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. [MACB 6-24-59] 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 shall be accomplished in the prescribed form. dctai 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. [MACB 9-14-59] PART 8 (Reserved) PART 9 Miscellaneous Provisions SECTION 291. Other Operations SUBSECTION 291.1 Sale of government securities . 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: LLjur "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 291.2 Consignee of PNB bank money orders . Stock savings and loan associations are authorized to sell Bank Money Orders (BMOs) of the Philippine National Bank (PNB), subject to the terms and conditions contained in the agreement to be entered into by and between the Philippine National Bank and the stock savings and loan associations concerned, the gist of which agreement is embodied in 9. Appendix A. [MSLA No. 14 3-31-69] SUBSECTION 291.3 Collection of internal revenue taxes a. Procedures for collection . The President of the Philippines, under Executive Order No. 206 dated January 9, 1970, as amended by Executive Order No. 339 dated September 9, 1971, and Presidential Decree No. 1045 dated November 5, 1976, directed the Central Bank to receive payment of national internal revenue taxes enumerated in 9. Attachment C.1 through its authorized agent banks in accordance with the procedures embodied in 9. Appendix C. [Circular 554 2-3-77] 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 40 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 291.4 Clearing operations . Any thrift bank authorized to accept demand deposits may participate in the Central Bank clearing operations and shall comply with all applicable rules and regulations governing Central Bank clearing operations. (See 9. Appendix D for the pertinent rules and regulations.) [Circular 631 8-21-78] SUBSECTION 291.5 Private development banks as collection agencies of the Development Bank of the Philippines (DBP) . DBP is authorized to deposit with private development banks proceeds of collections effected by them subject to the following conditions: a. The private development banks shall not receive any commission as such collection agencies of DBP; b. DBP shall place as savings deposit with these private development banks all proceeds of collections effected by them which savings deposits shall earn interest at the going rate; c. At the end of each month, one-third (1/3) of the balance of such savings deposits shall be placed in a one-year time deposit with interest at the going rate, while two-thirds (2/3) of the balance shall be retained in the savings deposit; and d. Withdrawals by DBP shall be effected only from, and shall not exceed, the savings deposit balance. Such deposits are exempted from the liquidity floor requirement (see Subsec. 254.4 [d] ): Provided , however , That they shall be subject to the reserve requirement on deposits. [MB Res. 1223 6-30-72] SUBSECTION 291.6 Depository relationship arrangement . Savings banks authorized to accept demand deposits may act as depositary of rediscounting proceeds of rural banks situated outside the 50-kilometer radius from Manila, to be designated by the borrowing rural bank. The contemplated depository 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 savings bank showing such depositary relationship which must indicate the requirements enumerated under Subsec. 363.85 of Book III. LLjur [MC to All Commercial and Rural Banks 3-1-71, as amended by Circular 710 12-26-79] SECTION 292. Bank Advertisements The following rules and regulations governing bank advertisements are hereby promulgated: (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; LLjur (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 advertisement or publication of the termination of benefits previously advertised or publicized; (f) Banks shall discontinue any advertisement whenever the same is deemed unethical/unwarranted or violative of these regulations 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 shall 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. 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 293. Assessment Fees on Banks (a) The par value of CBCIs held by banks on consignment basis and which are lodged under contingent accounts shall be excluded in determining total assets for purposes of computing the assessment fees chargeable against banks under Section 28 of Republic Act No. 265, as amended. [MB Res. 1603 10-6-70] (b) Annual assessment fees of stock savings and loan associations to defray the cost of maintaining the Department of Rural Banks and Savings and Loan Associations as contemplated in Section 28, Paragraph (c) of Republic Act No. 3779 (Savings and Loan Association Act), as amended by Presidential Decree No. 113, dated January 29, 1973, shall be collected as follows: (1) Where the stock savings and loan association maintains a deposit account with the Central Bank, its deposit account shall be debited by the Central Bank Accounting Department upon receipt of the notice of the assessment from the Department of Rural Banks and Savings and Loan Associations. The association shall be advised accordingly. LLjur (2) Where the association does not maintain a deposit account with the Central Bank or where its deposit account is insufficient to cover the assessment fee, the Accounting Department shall bill said association for the full amount of the fee or for the balance thereof not covered by its deposit account, as the case may be. Within thirty days from receipt of the bill, the association shall make the corresponding remittance to the Central Bank Accounting Department. Failure to pay the bill within the prescribed period shall subject the association to administrative sanction. [Circular 424 8-12-74] SECTION 294. Bank Premises and Other Fixed Assets SUBSECTION 294.1 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 appropriate supervising and examining department, 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 294.2 Appreciation or increase in book value . As a general rule, appreciation or increase in stock 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 shall 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 6-30-70] SUBSECTION 294.3 Ceiling on total investments . The following guidelines shall be observed for purposes of determining compliance by thrift 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 34 of Republic Act No. 337, as amended, Section 3 of Republic Act No. 4093, as amended, and Section 21 (d) of Republic Act No. 3779, as amended. LLjur 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) (i) 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 the portion of the property being leased, or (ii) 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 estate used for the bank's purpose. 2) The lower of (i) 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 (ii) 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] SUBSECTION 294.4 Sub-lease of bank premises . No stock savings and loan association shall negotiate a contract to lease or sublease to third persons any portion or portions of their office premises without securing prior approval of the Department of Rural Bank's and Savings and Loan Associations. [CL 72-2 1-28-72] SECTION 298. Other Miscellaneous Provisions SUBSECTION 298.1 Cash dispensers . Banks may operate/install cash dispensing machines without prior approval from the Central Bank, subject to the following conditions: LLjur a. The bank shall install the machines in its own premises and shall provide/put up adequate security measures for the bank and its depositors; b. The bank shall assure the Central Bank that this banking service shall not allow the grant of any gift, promotional offer/give-away or any additional compensation for deposits to be maintained except that which normally accrues to savings deposits; and c. The bank shall submit to the appropriate supervising and examining department for its information/records, a copy each of all brochures/pamphlets/ literatures dealing with this banking service. [MB Res. 1701 8-9-74] SUBSECTION 298.2 Armored cars . Banks may freely use armored cars to afford security in collecting and/or delivering cash/securities and other valuables from/to their clients, branch/extension offices or the Central Bank, provided, such armored cars are not operated as mobile banks. [MAB-G 8-8-66] SUBSECTION 298.3 Reproduction and use of facsimiles of government securities . In addition to those mentioned in Sections 98, 115 and 122 of Republic Act No. 265, as amended, the following rules and regulations shall govern the reproduction and use of facsimiles of government securities: a. No person or entity shall design, engrave, print, make or execute in any other manner, or issue, distribute, circulate or use any handbill, advertising, placard, circular, card or object whatsoever bearing the likeness or similitude of any government securities issued by and/or through the Central Bank of the Philippines, or any part thereof, whether in black and white or any color or combination of colors, without prior written authority therefor having been secured from the Governor of the Central Bank. b. The reproduction and use of facsimiles of government securities referred to in the foregoing paragraph may be authorized by the Governor of the Central Bank for printed illustrations in articles, books, journals, newspapers, or other similar materials, and for numismatic, educational, historical, 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. The procedural guidelines for filing applications for reproduction and use of facsimiles of government securities are embodied in 9. Appendix B. c. Any violation of the aforementioned rules and regulations shall subject the offender to the penal provisions of Section 34 of Republic Act No. 265, as amended. [Circular 482 10-13-75, as amended by Circular 565 4-21-77] SUBSECTION 298.4 Premyo Savings Bond Agency SUBSECTION 298.41 Procedure for payment of cash prize claims to service agency holders of winning bonds . In implementation of Ministry Order No. 4-79, series of 1979, providing for the payment of prizes of winning Premyo Savings Bonds "Biglang-Bahay" series, in the form of cash at the option of the Human Settlements Development Corporation (HSDC) if the holder thereof is a service agency, the following procedure shall be observed: 1. The service agency shall prepare the usual prize claim for Premyo Savings Bonds. 2. The prize claim shall be forwarded to the HSDC with the request that payment be made in the form of cash. 3. On the basis of the above prize claim, the service agency bank shall debit the account "Due to CB-PSBs" (20% retention). 4. 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] SUBSECTION 298.5 Loss of confirmation receipts . 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 9. Appendix E is the sample format of the Notice of Loss. [CL 9-28-79] SUBSECTION 298.6 Restrictions on stock savings and loan associations a. Stock savings and loan associations may accept or create demand deposits upon prior approval of the Monetary Board, upon recommendation of the appropriate supervising and examining department of the Central Bank, pursuant to P.D. No. 1317 and Subsec. 253.3. b. No stock savings and loan association shall issue, publish or cause or permit to be issued or published, any advertisement that it is doing or permitted to do any business which is prohibited by law to an association, or which misrepresents its shares of stock, investment certificates, or the rights of investors or depositors in respect thereto. c. No stock savings and loan association shall loan any of its funds upon the security of its own capital stock, nor be the purchaser or holder of any such shares, unless such security or purchase be necessary to prevent loss upon a debt previously contracted in good faith, and the stock so purchased or acquired for any other reason in the course of its operations shall within six (6) months from the time of its purchase or acquisition be sold or disposed of at a public or private sale or in default thereof, a receiver shall be appointed to close the business of the association in accordance with law. SUBSECTION 298.7 Reserve for losses . Five per centum (5%) of the net earnings of a stock savings and loan association shall be credited to a reserve account until the reserve equals five per centum (5%) of the total assets of the association and shall be available for meeting losses incurred by the association. SUBSECTION 298.8 Surplus reserve . Whenever a stock savings and loan association has a discrepancy between its general ledger accounts and their respective subsidiary ledgers, the board of directors of the association shall set up from the net profits of the association, if any, a surplus reserve in an amount equivalent to the amount of the discrepancy, and this reserve shall not be available for distribution as dividends or for any other purpose unless and until the discrepancy is accounted for. The board of directors shall also direct the employee responsible for the discrepancy to account for said discrepancy: Provided , That the failure of the employee to do so shall be a ground for his dismissal. LLjur Associations shall report such discrepancies to the appropriate supervising and examining department of the Central Bank, within fifteen (15) days from discovery. (See also Subsec. 213.17) SUBSECTION 298.9 Dissolution of association . Any stock savings and loan association contemplating to dissolve shall give written notice thereof to the Monetary Board through the appropriate supervising and examining department of the Central Bank, at least thirty (30) days before taking steps to effect dissolution. [Circular 691 8-13-79] SECTION 299. Sanctions in General Any violation of these regulations governing thrift 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, and Section 29 of Republic Act No. 3779, as amended. LLjur As a general rule, any bank that violates directives/prohibitions 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 GIST OF AGREEMENT BETWEEN PHILIPPINE NATIONAL BANK AND STOCK SAVINGS AND LOAN ASSOCIATIONS AS CONSIGNEE OF PNB BANK MONEY ORDERS 1. The Philippine National Bank will deliver to a savings and loan association, as consignee, bank money orders which the latter will sell and dispose to the public; 2. The consignee association will collect fees from purchasers, and the fees will be shared by the PNB and the consignee on a fifty-fifty basis; LLjur 3. The consignee association will remit to the PNB at a designated period the proceeds of sales for the past week, together with the latter's corresponding share of the fees collected; 4. The consignee association will maintain either a savings or current account with the PNB from which the PNB may reimburse itself of any amount due from the consignee; 5. The consignee association may encash or accept for deposit or payment bank money orders, and reimbursement may be made through clearing or by depositing the cashed bank money orders with its savings or current account with the PNB; any stock savings and loan association that enters into this consignment agreement with PNB shall, however, furnish the appropriate supervising and examining department of the Central Bank with a copy of said agreement, duly signed by the parties. [MSLA No. 14 3-31-69] APPENDIX B PROCEDURAL GUIDELINES FOR THE REPRODUCTION AND USE OF FACSIMILES OF GOVERNMENT SECURITIES The following guidelines shall be observed in the filing of applications for reproduction and use of facsimiles of government securities: 1. All applications/requests for authority to reproduce and use facsimiles of government securities issued by and/or through the Central Bank shall be submitted to the Office of the Governor through the Securities Marketing Department. To provide sufficient time for the processing thereof, applications/requests must be submitted at least thirty (30) days before the scheduled date of reproduction of the facsimile of the pertinent government security/ies LLjur 2. The application/request must contain, among other things, the following: a. Name of person or entity b. Address c. Purpose /intended use d. Name of printer and address e. Undertaking that applicant shall furnish within five (5) days from the date of reproduction of the facsimile of the corresponding government security/ies, the Securities Marketing Department, Central Bank of the Philippines, for record purposes, with a copy of the facsimile thereof. 3. The Securities Marketing Department shall advise as soon as possible the applicant of the action taken thereon by the Governor. [Source: Guidelines-Governor 10-22-75] APPENDIX C (Book II, Part 9) TAX COLLECTION PROCEDURES FOR 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 savings and mortgage banks, stock savings and loan associations and development banks: 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. LLjur For purposes of this Appendix, Greater Manila Area shall comprise the cities of Manila, Caloocan, Quezon and Pasay and the municipalities of Las Pias, Navotas, 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 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 2. However, in case of documentary, science and strip stamps, payment thereof 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 Central Bank 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: LLjur 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. 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 collections of internal revenue taxes collected 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 Receipts (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 (RCRU) not later than seven (7) days following the date of collection. 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 the RCRU are due. 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 be forwarded 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. LLjur 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 and 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 amount 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. 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 within seven (7) days from their receipt of such amount 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 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 for internal Revenue Taxes shall be kept distinct and separate from each other as it is presently done. Branch Offices of the authorized agent banks in San Fernando, La Union, shall furnish the Revenue Collection Regional Unit, the Regional Director, Bureau of Internal Revenue with the names and specimen signatures of the offices authorized to sign the Central Bank confirmation receipts. They shall also provide their authorized representatives with proper identification cards. LLjur 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 of the Philippines. 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 purposes of this Appendix and in order to facilitate filing of tax returns and payments of the corresponding taxes due thereon during the rush period, 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 provisions mentioned in Item 3 hereunder. [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] 3. Any banking institution, authorized to collect internal revenue taxes which shall willfully delay the submission of reports 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 a report a collection Per banking day of P10 plus 1/30 of 1% on the default for the first amount of delayed 5 banking days of remittance default Per banking day of P15 plus l/15 of 1% on the default for the next amount of delayed 5 banking days of remittance default Per banking day of P20 plus 1/10 of 1% on the default for the amount of delayed succeeding banking remittance days of 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 under Item (b) (3) of Subsec. 224.21 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 Section 34 of Republic Act No. 265, as amended. [Circular 550 12-13-76, as amended by Circular 728 4-10-80] 4. 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 account accountability of confirmation receipts. Shown in Attachment 3 is the format of the "Notice of Loss". [CL 9-28-79] Attachment I (Book II. 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 Licences 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 Transactions Property Transfer Tax 4.5.0 10. Compensating Tax General Sales Turn-Over or Value 5.1.0 Added Taxes 11. Percentage Tax on Gross Receipts Selective Taxes on Services 5.4.0 of Night Clubs, Cabarets, Jai-Alai 12. Annual Graduated Fixed Tax Business & Professional Licenses 5.5.1 13. Percentage on Insurance Premiums Selective Taxes on Services 5.4.0 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 Adm. Fees & Charges 8.3.0 19. Rental of Forest Lands Other: Property Income 8.2.2 20. Fees of Weights & Measures Adm. Fees & Charges 8.3.0 21. Firearms Tax Business & Professional Licenses 5.5.1 22. Firearms Initial & Annual Fees Adm. Fees & Charges 8.3.0 23. Annual Hunting Permit Adm. Fees & Charges 8.3.0 24. Radio Fees Adm. Fees & Charges 8.3.0 25. Tobacco Inspection Fees Adm. Fees & Charges 8.3.0 26. Water Rentals Adm. Fees & Charges 8.3.0 27. Large Power Development Tax Adm. Fees & Charges 8.3.0 28. Tax on Timber: UP Information Adm. Fees & Charges 8.3.0 Fund 29. Wood Conservation Fee Adm. Fees & Charges 8.3.0 (FORPRIDECOM Fund) 30. Special Franchise Tax, Manila Selective Taxes on Services 5.4.0 Jockey & Phil. Racing Club 31. Greater Manila Flood Tax Selective Taxes on Services 5.4.0 32. Taxes under Sugar Adjustment Act General Sales Turn-Over or Value 5.1.0 Added Tax 33. Documentary & Science Stamps Stamp Tax 7.2.0 (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 (Book II, Part 9) SAMPLE FORM 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 of Month NO . OF OFFICIAL RECEIPTS SERIAL NO . IN PADS IN SETS ____________________ _________________________ ____________________ _________________________ ____________________ _________________________ 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 SERIAL NO . NO . OF OFFICIAL RECEIPTS 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 IV) ================= CERTIFIED CORRECT: __________________ Authorized Signature Attachment 3 (Book II, 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 ____________________________________________________________________ (Name of Bank and Address) at the time of loss, have been cancelled and invalidated and payments purportedly covered by them shall be dishonored. ____________ (Name of Bank) By: (Sgd.) Name of President or Senior Bank Official Designation APPENDIX D (Book II, 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. LLjur 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 represented by one or more (but not exceeding six) competent clerks/representatives to deliver and receive the items to be exchanged. The facsimile signatures and NBI clearances of representatives shall be submitted to the Accounting Department. All representatives shall be issued their respective ID cards which shall be presented for admission in the clearing office or regional clearing units. 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 the 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 of the Philippines. The Clearing Office/Unit of the Central Bank of the Philippines 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 of the Philippines. 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 their respective clearing representatives. The original and duplicate shall be shipped to or retained in the Manila Clearing Office, as the case may be. Out-of-town demands presented in a clearing center against a bank without any branch in that particular clearing area shall be delivered to the Clearing Officer who shall prepare a debit advice (Clearing Form No. 4-B) for the head office of the drawee bank/branch concerned in the Manila clearing area. LLjur 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 banks/branches in each clearing center shall sign the shipping manifest. These clearing office statements and/or the debit advice/s shall serve as bases for the head offices in the Manila clearing area to record the results of out-of-town exchanges in their books on the date of receipt. 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, institution or entity not later than 5:30 P.M. on the same day. LLjur 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 embodied in Attachment 3. ATTACHMENT 1 (Book II, 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 Caloocan, City, San Juan, Building Mandaluyong Makati, Paraaque, Navotas, Malabon, Marikina, Pasig, Metro Manila Angeles City Ground Floor, Rizal Dau (Mabalacat), Guagua, MAAB No. 55 5-14-74, as Theater Bldg. Rizal San Fernando-Pampanga amended by CL 7-30-79 St., Angles City Bacolod City Pacific Bank Bldg., MAAB Unnumbered 5-11-67 Araneta Ave. Bacolod City 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 2-29-79 Corporation Building, P. Burgos St. cor. D. Silang St., Batangas City Cabanatuan City 3rd Floor, Liwag Bldg., P. MAAB No. 79 10-17-77 Burgos Ave., Cabanatuan City Cagayan de Oro City 2nd Floor, Travellers Life MAAB No. 93 8-27-74 Bldg., Cagayan de Oro City Cebu City Ground Floor, SSS Bldg., Mandaue-Cebu MAAB Unnumbered 1-4-66 Jones Ave., Cebu City Dagupan City 2nd Floor, R. Villamil Bldg. Urdaneta-Pangasinan MAAB No. 53 5-14-74, as Perez Blvd. cor. Burgos St. amended by CL 2-5-80 Dagupan City Davao City C.B. Regional Office Panabo MAAB Unnumbered 2-22-67 amended by CL 11-12-79 Dumaguete City 3rd Floor, Uymatiao Building Dumaguete City Circular Letter 4-20-79 San Jose Street, Dumaguete City Iligan City 2nd Floor, Dy Pico Bldg., Iligan City Circular Letter 11-28-78 Quezon Ave., Corner Echiverri St., Iligan City Iloilo City Pacific Bank Bldg., Iznart St. MAAB No. 63 6-19-74 Iloilo City Laoag City 3rd Floor, Philippine Batac-Ilocos Norte MAAB No. 29 4-11-78 Veterans' 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 and Bldg. II J. P. Rizal St., Circular 580 9-19-77, as Legaspi City 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., Iriga-Camarines Sur MAAB No. 54-5-14-74 and Gen. Luna St., Naga City Circular 580 9-19-77 San Fernando 3rd Floor, CB Regional MAAB No. 23-3-21-77 and La Union Office Bldg., Quezon Ave., Circular 580 9-19-77, as San Fernando, La Union amended by MAAB No. 78 10-17-77 Tacloban City Uytingkoc Bldg., Gen. Enage St. MAAB No. 42 7-6-76 and Tacloban City Circular 580 9-19-77 Tarlac 2nd Floor, T.N. Asiaten Bldg. CL 3-7-80 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 Sultana Bldg. MAAB No. 62 6-19-74 and Pilar St., Zamboanga City Circular 580 9-19-77 ATTACHMENT 2 (Book II, 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. LLjur 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 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. LLjur 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 AM. 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 dated 10-28-77] ATTACHMENT 3 (Book II, Part 9) INTER-REGIONAL CLEARING 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 D. In accordance with the schedule of delivery, pick-up and returns, implementation shall be made in three (3) phases as follows: LLjur 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 " Cebu City Mandaue Davao City None Iloilo City " Tacloban City " Zamboanga City " 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: LLjur Regional Clearing Color Unit Bacolod Green Cagayan de Oro White Cebu Blue Davao Red Iloilo Violet Tacloban Royal Blue Zamboanga Gray All participating banks shall keep photocopies/microfilms of checks presented for clearing. Any loss or damage arising from theft, pilferage, or other causes affecting items in transit shall be for the account bank/branch, institution or entity concerned. 4. Guidelines for Inter-Regional Cleaning 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 regional destination. These shall be posted as Debits (Items Received) in their respective Clearing Statements to be prepared in six (6) copies for distribution, as follows: Original Deposit Liabilities & Reconciliation Division, Accounting Department, Manila Duplicate Sending bank Triplicate Head Office of drawee Bank/Branch Quadruplicate Drawee Bank/Branch Quintuplicate Receiving CB Clearing Unit Sixtuplicate File of Sending Clearing Unit c. The Regional Clearing Officer shall sort according to bank/branch and regional 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 five (5) copies for distribution, as follows: Original Head Office of Drawee Bank/Branch Duplicate DLRD, Accounting Department, Manila Triplicate Drawee Bank/Branch Quadruplicate Receiving CB Clearing Unit Quintuplicate Sending CB Clearing Unit d. The quadruplicate and quintuplicate copies of the Clearing Statements and the triplicate and quadruplicate copies 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 drawee banks/branches at destination shall sign these copies of the clearing statement or debit statement as the case may be. e. In the Regional Clearing Unit where the demands are presented, the clearing statements and debit statements shall be summarized in a Clearing Advice (Form 4-B(a)). Together with triplicates of the clearing statements and originals of the debit statements, the original of the Clearing Advice shall be forwarded to Head Office of the Drawee Bank/Branch thru the Clearing Operations Division, Manila. Upon receipt, the Clearing Advice shall be the basis for entries in the respective books of accounts of the banks concerned. The duplicate shall be forwarded to the Deposit Liabilities and Reconciliation Division and the third copy shall be retained by the Regional Clearing Unit. f. The daily results of both local 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 transferred into the condensed Clearing Form 4-C(a). Any exception or observation which requires immediate attention shall be explained in the memorandum portion. g. In case of delay/cancellation of flights as confirmed by the PAL Office and/or non-arrival of clearing pouches according to schedule, the clearing unit concerned shall immediately notify the sending clearing unit by telephone subject to confirmation in writing on the following day. The sending clearing unit concerned shall advise the demanding banks of such delay/cancellation/non-arrival of clearing pouch and that the prescribed schedule for returns shall be extended accordingly. k. All shipments of demand envelopes shall be accompanied by the usual check list and manifest. LLjur ATTACHMENT 4 (Book II, Part 9) CLEARING OPERATIONS BETWEEN REGIONAL CLEARING CENTERS AND THE MANILA CLEARING CENTER (TARLAC, TARLAC USED AS SAMPLE) 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. 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. LLjur 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. APPENDIX E (Book II, 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 ____________________________________________________________________ (Name of Bank and Address) at the time of loss, have been cancelled and invalidated and payments purportedly covered by them shall be dishonored. ________________________ (Name of Bank) By: (SGD.) Name of President or Senior Bank Official Designation SUBJECT INDEX (References are to Sections/Subsections/Appendices) Accounts receivable discounting of, 237 Accrual of interest earned on loans, 213.12;231.33 Advertisements regulations on, 292 Agents and salesmen disqualification for SSLAs, 222.72 Agrarian reform credit allocation required for, 235.12 alternative investment 235.12(a) beneficiaries of, 235.11(d) borrowers qualified under, 235.11(c) definition, 235.11(b) interest and other charges, 235.16 rediscounting of papers, 263.1 reporting requirements, 235.17; sanctions, 235.18 securities acceptable for, 235.14(a) syndicated type of, 235.15 Agricultural credit, in general allocation required for, 235.12 alternative investments, 235.12(b) borrowers qualified for, 235.11(d) crop loan, 235.7 definition, 235.11(c) interest and other charges, 235.16 loanable funds for, 235.11(a); 235.19 reporting requirements, 235.17 sanctions, 235.18 securities acceptable for, 235.14(b) syndicated type of, 235.15 Agricultural Guarantee Fund coverage of loans under supervised credit for vegetable production, II.3.App. O coverage of loans under supervised credit for Cotton Production, 235.52(c); II.3. App. S guarantee coverage under the 4th CB: IBRD Program, 235.52(a); II.3. App. N who may avail of coverage, 235.52 Allied undertakings approved undertakings, 241.1 banks, disqualified from investing in, 241.2 ceiling on investments, 241.3 ceilings on loans to, 231.1(b) interlocking directorship/officership between bank and, 241.4 Armored cars use of, 298.2 Articles of Incorporation approval necessary prior to SEC registration, 219.13; 215.3 submission for approval to CB, 219.14 provision on voting requirements on certain corporate transactions, 215.2 Assets acquired in settlement of loans, 239.2 appreciation/increase in book value, 294.2 risk, 211.2(a) total, 211.21(a) Audit by external auditor of SLA, 222.73 operations/management/financial audits (see Operations audit) submission of audit program, 224.5 Auditor external, for SLAs, 222.73 Bad debts definition, 213.11(a) Bangko ng Bayan prohibition on use in business name of SLAs, 219.1 Banking days and hours banking days, 223.1 banking hours, hours beyond minimum, 223.2; 223.3 existing authorizations and notifications on, 223.7 notice of changes in, when notice not required, 223.4; 223.5 posting of schedule of, 223.8 reports on, 223.6 Banking offices application for conditions precluding acceptance, 214.14 conditions precluding processing, 214.15 priority in processing, 214.15 date of opening, 214.17 extension offices, reportorial requirements, 214.94 lease prior approval necessary, 214.92 expenses prior to authorization, 214.92 miscellaneous provisions on branches and agencies of SSLAs, 214.91 money shops, 214.2 requirements for establishment of banking offices (other than money shops and savings agencies) basic requirement, 215.11 minimum requirements, 214.12 other requirements, 214.13 documentary requirements (including money shops and savings agencies), 214.52 savings agencies, 214.3 transfer/relocation of bank premises prior approval required, 214.4 documentary requirements, 214.53 Bank Money Orders (BMO ) gist of agency agreement, II.9.App. A sale of PNB BMO, 291.2 Bank premises appreciation/increase in book value, 294.2 ceiling on total investments, 294.3 depreciated, definition, 211.21(g) expansion of, 294.1 lease expenses prior to authorizations, 214.92 sub-lease of, 294.4 Bank protection rules and regulations on, 224.8; II.2.App. L designation of security officer, II.2.App. L form of security program, ib. installation of security devices, ib. reportorial requirements, ib.; II.2.Att.L. 1 sanctions for non-compliance with regulations, II.2.App. L Barangay Savings Movement rules on solicitation of deposits, 251.52; II.5.App. C Bio-data of directors, 221.5 of officers, 222.5 Board of Directors place of meetings, 215.1 Bonding of accountable officers and employees, 222.71 safeguards on, SSLAs, II.2.App. B Borrowings commercial papers, issue of (see Commercial papers) direct/indirect by directors, officers, stockholders, procedural requirements (see Loan/s) from banks and other institutions by SLAs, 269.1 from the government, 261.1 from trust departments, 279.1 issuance of mortgage and mortgage certificates, 269.3 of foreign firms from domestic banks (see Loan/s) rediscounts (see Rediscounting) Branches/Branching guidelines for establishment of branches (see Banking Offices) Business name of SSLAs, 219.18 use of "Bangko ng Bayan", prohibition on, 219.18 By-laws amendment of, SSLAs, 215.3 provision on board meetings, 215.1 provision on voting requirements on certain corporate transactions, 215.2 Capital accounts, combined definition, 211.21(b) exemption from minimum requirement, 211.22 minimum requirement computation for savings and development banks, 211.2(a) computation for SLAs, 211.2(b) sanctions for deficiency in, 211.23 Capitalization guidelines on increase for PDBs, II.1.App.B for SSLAs, II.1.App.C for SMBs, II.1.App.A minimum paid-up capital requirement for thrift banks, 211.1 private development banks, guidelines for classification of cities, II.1.App. I recording/reporting requirements, 211.24 Capital stock acquisition by financing companies, 212.1 by foreigners, 212.4 by family group, 212.33 as security for SLA loans, 233.4; 212.1 ceilings on voting equity, 212.11 convertibility of preferred to common, 212.2 properties eligible as payment for subscription to, 211.1 transfers of shares within family group, 212.12(a) to new investors, 212.12(b) Cars armored, 298.2 car loans (see Financing plans) Cash on hand definition/computation, 211.21(c) Cash price definition, 231.52(c) Categories of reports authorized signatories to, formats of resolution designating signatories to, 224.22 (b); II.2.Apps. F, G, H categories of, 224.22(a) list of Category B reports, II.2.App. E sanctions for submission of reports under unauthorized signatures, 224.22(c) CBCI as payment for bank stocks, 211.1 as security for loans, 211.21(f) sale under Service Agency Agreement, 291.1 CB : IBRD Program amended rules and regulations governing the fourth credit line, 235.51, II.3 App. V Ceilings on loans to allied undertakings, 231.12 on loans to directors, officers, stockholders aggregate ceilings, 234.4(b) individual ceilings, 234.4(a) on loans to a single borrower basic ceiling in SMBs and PDBs, 231.11(a) basic ceiling in SSLAs, 23 1.11 (a) additional amount allowed in excess of basic ceiling, 231.11(b) determination of total loans to a single borrower, 231.14 on investments in bank premises and equipment, 294.3 in allied undertakings, 241.3 on rediscounting, 262.11 on secured loans for personal and household finance, 233.64 on voting equity, 212.11 transitory period for compliance of ceilings on loans, 234.5 Certificate mortgage certificates, issuance of, 269.3 of authority to operate, 219.16 of time deposit of SSLAs, 252.4 on deposit for SEC registration purposes, required format, 259.5; II.5.App.D Charges finance, 231.52(h) miscellaneous (see Miscellaneous charges) non-finance, 231.52(f) Chartering (see Establishment) Chart of accounts definition/description of accounts for reporting purposes. II.2.App.D Checks (see Demand Deposit) Clearing operations procedural guidelines, II.9.App. D clearing operations between regional clearing centers and Manila clearing center, II.9.App. D.4 designated clearing areas, II.9.Att. D.1 for treasury warrants, II.9.Att. D. 2 inter-regional clearing, II.9.Att. D.3 Clean loans (see Unsecured loans) Collaterals insurance on, 233.2 Collection PDBs as collection agencies of DBP, 291.5 Commercial papers registration requirements long term, 269.2; II.6.App.D short term, 269.2; II.6.App. B sanctions for violation of regulations on issue of, 269.2 Compensating deposits prohibition on, 231.21 Confirmation receipts loss of, II. 9 App. C (D) (4) sample format for notice of loss of, II.9. App. C. 1 sample form for inventory report of II.9 App. C, 2 Consolidation (see Merger) Conversion of preferred to common stock, 212.2 Cooperative Finance System rules and regulations on, 236.3 Corporate forming program eligibility under agrarian reform credit, 235.11(b); 235.12 Cottage Industry Fund lending program under, 236.4 sample information sheet for borrowers under the, II.3.App. Q Cotton Financing Program (see Special Cotton Financing Program) Credit supervised (see Supervised credit) to directors, officers stockholders (see Loan/s) policies of government-owned corporations, 239.3 power of SSLA to prescribe rules on credit operations, 239.41 priority classification Priority I, II.6.App. A Priority II, ib. Creditor definition, 231.52 Crimes/Losses submission of report on, 224.24; II.2.Att.C.1 Crop loans requirement in grant of, 235.7 Current accounts (see Demand deposits) DBP Progress Bonds banks as agents of, 254.1 (b) Debts bad, 213.11 (a) in process of collection, 213.11(c) well-secured, 213.11(b) Delinquency in payment of obligation, 221.1(b); 222.1 (b) Demand deposits checks without sufficient funds or credit, issuance of, 253.4 limitations/restrictions on banks accepting, 253.33 interest on, 257.11;253.1 prohibition on officers and employees on maintenance of, 253.5(d) reserves on, 253.2 requirements on banks accepting demand deposits minimum qualifications, 253.32 miscellaneous requirements, 253.35 procedural, 253.31 on procedures and internal control system, 253.34 sanctions, 253.36 temporary overdrawings, prohibition on, 253.5(d) Depository relationship arrangement savings banks as depository of rediscounting proceeds, 291.6 Deposit/s Accounts who may open, 259.61 number of, 259.63 as security for loans, 211.21 (e) booking of, 259.7 certification on deposits of proposed corporations, prescribed format, 259.5; II.5.App. D compensating/derivative, 231.21 demand (see Demand deposits) depositors, identification of, 259.62 government (see Government deposits) in checks and other cash items, 259.65 insurance of, 259.66 interest on (see Interest) minors as depositors, II.5.App.B of farmer-borrowers under supervised credit, 231.21; 251.52 of SSLAs in banks, 242.4 opening/operations of accounts, basic provisions, 259.1 receiving/paying outside bank premises, 251.4 savings (see Savings deposits) schemes to attract (see Promotional schemes) signature card, accomplishment of, 259.1 solicitation of (see Solicitation) time (see Time deposits) unclaimed balances, 259.4 withholding tax on deposits of foreign diplomatic establishment, 259.8 Directors bio-data, submission of 221.4 compensation of, 221.8 ceilings on loans to, 234.4 definition, 221.1(a); 234.1(a) delinquency in payment of obligations, 221.1(b) direct/indirect borrowing of (see Loan/s) disqualifications effect of possession of, 221.4 persons disqualified to become directors, 221.3 procedures for, 221.31 interlocking directorates, 221.6; 241.4 obligations of, defined, 221.1(c) prohibition on disclosure of confidential information, 221.9 qualifications of, 221.2; 221.7 Directory of banks submission of certain information, 224.23; II.2.App.1 Disclosure format of statement of loan transactions, 231.51; II.3.App.D of confidential information, prohibition for SLAs, 221.9 of effective rates of interest on deposits, 257.4 requirements of Truth in Lending Act, 231.5 Discounting of receivables, regulations on, 237.1 of notes and other credit instruments by SSLAs, 237.2 Discrepancies between general and subsidiary ledgers, 213.15; 222.64 Dispensers installation of cash dispensing machines, 298.1 Dissolution contemplated by SLAs, 298.3 Dividends amount eligible as, 213.13 limitation on SSLA on declaration of, 213.17 recording of, 213.15 reporting and verification, 213.14 sanctions, 213.16 Dormant accounts definition of, II.2.App. K (XII) maintenance fees on, 251.6 internal control procedures for, II.2.App. K(XII) Down payment definition, 231.52 Drawings Against Uncollected Deposits ( DAUDS ) prohibition on, 253.5 Due from CB definition/computation, 211.21(d) Employees agents and salesmen, 222.75 auditor, external, 222.76 bonding of, 222.72 financing plans for (see Financing plans) prohibition on opening of deposit accounts, 259.3 disclosure of confidential information, 222.77 Establishment of bank offices (other than money shops and savings agencies), 214.1 of money shops, 214.2 of savings agencies, 214.3 Examination definition, 224.21(a) refusal to permit examination definition, 224.21(a) fines for, 224.21(c) yearly examination by CB, 229.2 Extension of loans (see Renewal of loans) Extension offices reporting requirements, 214.93 Family group determination of, 212.35 transfer/acquisition of shares within group, 212.33 Fees annual assessment fees, 293 filing fees for SSLAs, 219.17 on dormant accounts, 251.6 service and other fees, 231.32 Financial audit (see Operations Audit) forms of, 234.83 mechanics, 234.82 other requirements, 234.85 plans not covered by fringe benefit programs, 234.85 preconditions/limitations, 234.84 types of, 234.81 Financing plans for bank officers and employees, regulations on, 234.8; II.3.App. 1 Fines for refusal to permit examination, 224.21 (c) for reserve deficiencies, 255.41 for wilful delay in submission of reports, 224.21(b) for wilful failure to comply with banking laws, 224.21(c) Format of board resolution for signatories of A-1 reports, II.2.App.F of board resolution for signatories of A-2 reports, II.2.App.G of board resolution for signatories of B reports, II.2.App. H of certification on compliance with regulations on bank protection, II.2.Att. L.I of disclosure statement on loan transaction, II.3.App. D SEC prescribed for certification on deposit, II.5.App. D Fringe benefit program financial assistance to officers and employees (see Financing plans) Furniture, fixtures and equipment depreciated, definition, 211.21 (h) Giveaways guidelines on distribution, 256.2 Government deposits acceptance of application for authority to accept, 254.5 banks authorized to accept, 254.2 general prohibitions on, 254.1 liquidity floor requirements on, 254.3 sanctions for violation of rules on, 254.6 transactions exempt from regulations on, 254.4 Government securities as alternative investments to investment- deposit ratio requirement, 239.23 as collateral for loans, 233.1 as investment outlets for agrarian reform credit, 235.13 dealership in, 243.1 reproduction and use of facsimiles, procedural guidelines, 298.3; II.9.App.B rules on buying and selling in the open market, II.4.App.A sale under the Service Agency Agreement, 291.1 securities authorized as reserves, 255.22 Grains Quedan Financing Program guidelines on, 236.1 guarantee coverage of; II.3.App.P IGLF Program accreditation system, 235.21; II.3.App.F medium-scale industries, regulations for financing under the, II.3.App. M implementing regulations for financing small-scale industries under the, II.3 App. G list of potential small industries for financing, II.3.Att. G.I sponsorship scheme under the, 235.22 Insurance companies accredited by the CB, II.2 App. A on real estate improvements used as collaterals, 233.2 Interbank loans regulations on, 236.5; 263.4 prescribed forms for transfer tickets, II.3,.App.C Interest on loans acceleration/deceleration of, 231.3(8) accrual of interest earned on loans, 213.12; 231.33 applicability of the Usury Law, 231.31(a) contra-account for uncollected interest receivable, 231.33 disclosure requirements in Truth in Lending Act, 231.5 discounting by SLAs, 231.31(c) in absence of stipulation, 231.31(b) on agrarian reform/agricultural credit, 235.15 rate, maximum 231.31 (a) rebates on, 235.31(d) rediscounting rates (see Rediscounting) Interest on deposits days in a year, 257.2 disclosure of effective rates on deposits, 257.4 maximum rates on demand deposits, 257.11 on savings deposits, 257.12 on time deposits, 257.13 on provident fund contributions, 259.2 on reserves deposited with CB, 255.21 interest received by foreign diplomatic establishments, 259.8 payment in kind, 257.3 sanctions for violation of rules on, 257.5 Interlocks interlocking directorates, 221.6; 241.4 interlocking officerships, 222.6; 241.4 Internal Control minimum standards, 224.7; II.2.App.K for dormant/inactive accounts, II.2.App. I(XII) for thrift banks authorized to accept demand deposit, 253.6 Investment authorized investments for SSLAs, 242.3 in allied undertakings (see Allied under- takings) in domestic banks by foreigners, 212.4 in high grade bonds and other evidences of indebtedness, 242.1 in real estate and bank equipment, 294.3 in subsidiaries/affiliates, 242.2 Investment-deposit ratio clarifications to policy, 239.14 compliance grace period for, 239.7 methods of, 239.12 eligible alternative investments, 239.13 policy statement, 239.11 regional groupings, 239.1; II.3.App.H reporting requirements, 239.15 sanctions for non-compliance of, 239.16 Lease of bank premises prior to authorization, 214.92 sub-lease of bank premises, 294.4 Liabilities definition, 231.11(a) Livestock financing guidelines on, 236.21 Liquidity floor on government deposits amount required as, 254.3 exempt transactions from 254.4 sanctions for deficiency in, 254.6 Loan/s accruals of interest on, 213.12; 231.33 ceilings on (see Ceilings) charges on (see Charges) crop loans, 235.7 definition, exclusions from definition, 234.1(d); 234.2 demand loans, when due, 231.43 discount rates, illustrative examples, 231.31(a); II.3.Appr.R extension of (see Renewal) grant of, basic requirements for SSLAs, 239.43 for economic development purposes, 235.4 for financing of agricultural and export industries, 239.2 interbank (see Interbank Loans) interest rates on, 231.31(a) limits on lending authority of SSLAs, 239.45 maturity of, maximum for SSLAs, 239.42 past due accounts (see Past due accounts) peso borrowings of foreign firms rules and regulations on, 235.9; II.3.App.K suggested debt-to-equity ratio, II.3 Att.K.1 suggested annual build-up program, II.3.Att. K.2 proceeds of (see Loan proceeds) renewal of (see Renewal) restructuring/refinancing, 231.47 secured (see Secured loans) to directors/officers/stockholders transactions covered by regulations, on, 234.1(d) transactions not covered by regulations on, 234.2 determination of direct/indirect borrowings, 234.2 individual/aggregate ceilings on, 234.4 transitory period for compliance with regulations on, 234.5 real estate transactions, 234.6 reporting requirements on, 234.6 sanctions for non-compliance with regulations on, 234.7 procedural requirements, II.3.App.B to rural banks, 235.3 types of, 231.42 under the fringe benefit program (see Financing plans) under IGLF Program (see IGLF Program) unsecured/clean (see Unsecured loans) writing off, 231.48 Loans and advances definition, for write-off purposes, 231.48 Loans for Agricultural Inputs guidelines on, 236.22 Loanable funds computation of for purposes of agricultural credit in general/agrarian reform credit, 235.11(a); 235.15 for economic development purposes, 235.42 Loan limits (see Ceilings) Loan proceeds prohibited uses of, 231.21; 231.22 utilization of, 231.23 Lotteries guidelines on holding of, 256.1 Management audit (see Operations audit) Masaganang Maisan Program guidelines on credit operations, 235.81; II.3.App. J rediscount rates/privileges under the, II.6.App. E Masagana 99 Program guidelines on credit operations, 235.81; II.3.App. J rediscount rates/privileges under the, II.6.App. E Meeting place of meetings of Board of Directors, 215.1 Merger guidelines for SSLAs, II.1.Att. C.1 Miscellaneous charges collection fees for past-due loans with SLAs, 231.32(c) definition, 231.32 for payments thru payroll deductions, 231.32(b) maximum amount allowed for loans, 231.32(a) Money borrowed definition, 231.11(b) 234.1(d) Moneyshops establishment guidelines, 214.21 operational guidelines, 214.22 Mortgage issuance of mortgage and chattel mortgage certificates, 269.3 NOW Accounts control/operation, procedures, 251.85 definition, 251.8 limitations and restrictions on, 251.84 requirements for procedural, 251.82 qualification, 251.83 others, 251.86 withdrawal form for, features 251.84, II.5.App. F Obligations of directors/officers, defined, 221.1(c); 222.1(c) Officers bio-data, submission of, 222.5 bonding of officers, 222.72 ceilings on loans to (see Ceilings) compensation of, 222.73 definition, 221.1(a); 234.1(b) direct/indirect borrowings of (see Loan/s) disqualifications effect of possession, 222.4 persons disqualified to become officers, 222.3 procedures for, 222.31 financing plans for (see Financing Plans) interlocking officership, 222.6; 241.4 liability for loans contrary to law, 222.74 prohibition on opening of deposit accounts, 259.3 qualifications of, 222.2; 222.71 Open market operations rules and regulations on, 243.1; II.4.App. A Operations audit exemption from 224.55 contents, minimum, 224.53 coverage, minimum, 224.52 need for audit program, 224.5 procedural guidelines, 224.54 who may conduct, 224.51 Palay Marketing Credit Program considered as agricultural credit, 235.12 rules and regulations on, II.3.App.L Past due accounts accrual of interest income, 231.44 criteria for, 231.42 definition, 231.41 demand loans, 231.43 renewals/extensions, 231.45 reporting requirements, 231.46 restructuring/refinancing, 231.47 writing off, 231.48 Posting of abstract of Truth in Lending Act, 231.56 of banking hours and days, 223.2 Preferred stock conversion into common stock, 212.2 purchase out of loan proceeds, 231.22 with cumulative feature, 212.2(c) Premises, bank (see Bank premises) Premyo Savings Bonds procedure for payment of cash prize claims to service agency holders, 298.41 Price cash or delivered price, 231.52(c) Promotional schemes gifts/giveaways, guidelines on distribution, 256.2 other schemes, 256.3 raffles/lotteries, guidelines on holding of, 256.1 sanctions for non-compliance with regulations on, 256.4 Protection, bank (see Bank protection) Provident fund exemption from interest rate regulations, 259.2 Raffles guidelines on holding of, 256.1 Rate of interest on deposits (see Interest) of interest on loans (see Interest) simple annual rate, 231.52(i) Ratio investment-deposit, 239.2 networth to risk assets, 211.2 debt-to-equity ratio for borrowing foreign II.3.App. K.1 Recording discrepancies between general and subsidiary ledgers, 213.1; 222.64 of daily transactions, 224.1(a) prescribed system for SSLAs, 224.1(b) Rediscounting and CB Advances additional loan/advance, 262.22 availment, additional qualifications required for, 264 basic terms and conditions ceilings, 262.11 eligibility of papers, 262.12 loan values, 262.13 interest rate and other charges, 262.14 maturities, 262.15 by PDBs with LBP, 261.1 default in payment, 262.23; 262.24 depositary relationship arrangement with savings banks, 291.6 documentation requirements on, II.6.App. A loans to long-term lending institutions, 263.3 processing of applications for banks using CDRC, 262.4 recording/reporting of transactions, 262.3 repayment of loans, 262.21; 263.16 under the agrarian reform credit, 263.1; II.6.App. C under the supervised credit programs (Masagana 99 and Masaganang Maisan), 263.2;II.6.App. E Refinancing of loans, when allowed, 231.47 Refusal to permit examination amount of fines, collection, computation, 224.21(c) definition, 224.21 Relocation (see Transfer) Renewal when allowed in SSLAs, 239.44 Rental deposits (see Savings Deposits) Report/s annual, 229.1 categories of (see Categories of reports) Chart of Accounts for reporting purposes, II.2.App. D deadlines for submission of, II.1.App. A definition, 224.21(a) forms prescribed for, 224.2 of extension offices, 214.4 on agrarian/agricultural credit, 235.18 on bank protection, II.2.App. L on capitalization requirements, 211.24 on certain information bank directory, 224.23; II.2.App.I organizational structure, 224.23; II.2. App. J on changes in banking days and hours, 223.4 on credit transactions of creditors, 231.55 on crimes/losses, 224.24; II.2.Att. C.1 on investment-deposit ratio, 239.25 on loans to directors/officers/stockholders, 234.6 on past due accounts, 231.46 on required and available reserves, 255.44 on TIPID Movement, II.5.App. B required of SLAs, accomplishment procedures, II.2.Apps. C and C.1 required of SMBs and PDBs, accomplishment procedures, II.2.Apps. C and C.1 sanctions for submission under unauthorized signatures, 224.22(c) signatories to, format of resolution for signatories to, 224.22; II.2.Apps.F, G, H Uniform System of Accounts, 224.2 wilful delay in submission of (see Wilful delay Reserves accounts subject to reserves, exceptions, 255.1 against demand deposits, 253.2 against losses of SSLAs, 298.7 against savings deposits, 251.2 against time deposits, 252.2 composition of, 255.2; II.5.App. E computation of position, 255.3 deficiency in reserves offset privilege, 255.41 chronic deficiency, 255.42 penalties for, 255.41; 255.42; II.5.App. E unpaid fines, 255.43 deposit with CB as, 255.21 interest on CB deposits, 255.21 prohibitions on savings banks with reserves below required minimum, 255.45(b) reduction by savings banks below required minimum, 255.45(a) reporting requirements, 255.44 surplus reserves of SSLAs, 298.8 Restructuring of loans, when allowed, 231.47 Risk assets definition/computation, 211.2 Sabog-Tanim Program limit on loans under the, 235.16 Sanctions for capital deficiency, 211.23 for failure/refusal to adopt Uniform System of Accounts, 224.2 for non-compliance with rules and regulations on bank protection, II.2.App. L for non-compliance with Truth in Lending Act and its implementing rules and regulations, 231.58 for refusal to permit examination, 224.21 (c) and (d) for submission of reports under unauthorized signatures, 224.22 for violation of maximum lending rates, 231.31(a) for violation of registration requirements of commercial papers, 269.2 for violation of regulations on clean/ secured loans for personal and household finance, 232.27; 233.67 for violation of regulations on government deposits, 254.6 for violation of regulations on loans to directors/officers/stockholders, 234.7 for violation of regulations on promotional schemes, 256.4 for wilful delay in submission of reports, 224.21(b) and (d) in general, 299 Savings agencies establishment guidelines, 214.31 operational guidelines, 214.32 other requirements for establishment of, 214.33 Savings deposit definition of, 251.1 dormant accounts, maintenance fees on, 251.7 in checks and other cash items with SLAs, 251.53 interest rate, 251.1, 257.12 minimum size of, 251.4 notice of withdrawals for SLAs, 152.54 Now accounts (see NOW Accounts) of farmer-borrowers under the supervised credit program, 231.21; 251.61 passbook, issuance of, 259.64 receiving/paying outside bank premises, 251.5 rental deposits of lessees under the Rental Control Law, 251.9 reserves on, 251.3 rules on deposits/withdrawals on, 251.6 solicitation under TIPID Movement, 251.51 under Barangay Savings Movement, 251.52 withdrawal authority slips, 251.51 Secured loans by certificates of Land Transfer, 235.14 by government securities, 233.1 by hold-out on or assignment of deposit, 211.21(e) by machinery and equipment, 233.5(b) by real estate mortgage, 233.3; 233.5(a) by SLA's own stock, 233.4 collaterals acceptable to SLAs, 233.4 for personal and household finance purpose, 233.61 maturity, 233.62 ceiling on, 233.64 collateral requirement, 233.63 extension/renewal, 263.65 records required, 233.66 sanctions for violation of regulations on, 233.67 insurance requirements on collaterals, 233.2 maturity/term of, 233.3(a) and (b) Service Agency Agreement on sale of CBCI (see CBCI) Solicitation of deposits conditions for solicitation outside premises, 251.4 minimum safeguards for, II.5.App. A under TIPID Movement, 251.41 under Barangay Savings Movement, 251.42; II.5.App. C Special Time Deposits (STDs ) payment of, 235.53 penalty on past due STDs, 235.53 Special Cotton Financing Program Cotton Supervised Credit Financing Program, rules on, 236.61 Medium Term Financing under the, 236.62 Monthly progress report on, II.3.App. U Proposed form budget for, II.3.App. T Stock (see Capital stock) Stock savings and loan association application to establish submission for approval, 219.14 grounds for disapproval, 219.15 articles of incorporation of, 219.13; 219.14 business name of, 219.18 by-laws of, 219.13; 219.14 certificate of authority to operate, 219.16 citizenship requirements for, 219.12 definition of, 219.11 dissolution of, 298.9 organization of form, 219.12 filing fees, 219.12 reserve for losses, 298.7 restrictions on, 298.6 Stockholders ceilings on loans to (see Ceilings) definition, 234.1(d) direct/indirect borrowings of (see Loan/s) Supervised credit concept, 235.8 guidelines on credit operations, 235.81; II.3.App. J Masagana 99/Masaganang Maisan (see Masagana 99 or Masaganang Maisan) rediscounting privileges, II.6.App. E Taxes National Internal Revenue taxes collection procedures, 291.3; II.9 App. C list payable through banks, II.9, Att. C. 1 interest on revenue collections in excess of ceilings, 291.3(b) Third degree of consanguinity or affinity determination of relationship, 212.13 Ticket system of accounting prescribed for SLAs, 224.1(b) Time deposit certificate, issuance in SSLAs, 259.64 from the Agrarian Reform Fund Commission, 252.6 interest basis for computation of, 257.2 rates, 257.13(b); 252.1 time of payments, 257.13(a) matured time deposits, 257.13(c) reserves on, 252.2 size, minimum, 252.4 withdrawals before maturity date, 251.13(d) term of, 252.3 TIPID Movement manual of operations, II.5.App. B minors as depositors, ib. reporting requirements, ib. segregation of TIPID accounts, 251.41(a) solicitation of deposits under the, 251.41 Trade-in definition, 231.52 Transactions recording of, 224.1 corporate, 215.2 Transfer of banking offices (except head offices), 214.4; 214.53 of bank shares to new investors, 212.34 within a family group, 212.33 Trust accounts treated as ordinary deposits, 272.1 additional regulations on trust operations, 274.2 deposits for faithful performance of duties; procedural requirements, 271.1; II.7.App.A fund borrowing from trust departments, 279.1 non-trust agreements, 273 prohibited transactions, exceptions, 274.1 Truth in Lending Act disclosure requirements, 231.5 implementing rules and regulations, 231.51 to 231.58 posting requirement of abstract, format, 231.56; II.3.App.E Unclaimed balances treatment of, 259.4 Uniform System of Accounts adoption/implementation, 224.2 sanctions for non-compliance, 224.2 Unimpaired capital and surplus definition, 231.11 Unsecured loans clean loans for personal and household finance, 232.2 amount, maximum, 232.24 extension/renewal, 232.25 maturity, 232.23 purpose, 232.21 record required, 232.26 sanctions for violation of regulations on, 232.27 signatures required, 232.22 extension/renewal, 232.24 loans against personal security general guidelines, 232.11 requirement for proof of financial capacity of borrower, 232.12 amount of credit, 232.13 maturity/term, 232.13 renewals, 232.13 signatures required, 232.14 collateral requirement, 232.15 sanctions, 232.16 Usury Law applicability, 231.31(d) Venture capital corporations authorized investments of, 242.52 business name, 242.53 examination by CB, 242.54 interlocks in, 242.55 reportorial requirements, 242.54 requirement for investors in, 242.51 sanctions, 242.56 Voting requirements on certain corporate transactions, 215.2 Well-secured debt definition, 213.12(b) Wilful delay amount of fines; collection, computation, 224.21(b) in submission of reports, defined, 224.21 (a) Withholding tax on deposits of foreign diplomatic establishments, 259.8 on taxable government bonds and securities, 298.5 Write-off of loans as bad debts, frequency, procedural requirements, 131.48