Loan Function:
B. Consistent with safe and sound C. Ascertainment of Borrower’s Capacity
banking/business practice, a bank quasi bank, or non-
bank financial institutions shall grant loads or other
credit accommodations
1. only in amounts and for the periods of time
2. Essential for the effective completion of the
operation to be financed.
Before granting the loans, banks/QB/NBFI is
required to ascertain that the borrower, comaker,
endorser, surety and/or guarantor are financially
capable of fulfilling their commitments to the
bank/QB/NBF. A bank/QB/NBFI shall obtain adequate
information on his/their credit standing and financial
capacities.
Additional requirements to be ascertained by the
banks/QB/NBFI from the borrower:
1. Usual information sheet about the
borrower;
2. ANNUAL SUBMISSION – as long as the loan
and/or credit accommodation is outstanding:
a. A copy of the latest Income Tax
Return (ITR) of the borrower and his co-maker,
if applicable, duly stamped as received by the
Bureau of Internal Revenue (BIR);
b. Except as otherwise provided by
law and in other regulations, if the borrower is
engaged in business, a copy of the borrower's
latest financial statements as submitted for
taxation purposes to the BIR; and
3. NEED NOT BE SUBMITTED ANNUALLY - once
submitted these documents remain valid unless
revoked. a. A waiver of confidentiality of client
information and/or an authority of the bank/QB/NBFI
to conduct random verification with the BIR in order
to establish authenticity of the ITR and accompanying
financial statements submitted by the client.
Suppose the bank finds that the proceeds of
the loan or other credit accommodation have been
employed, without its approval, for purposes other
than those agreed upon with the bank, the bank is
given the right to terminate the loan and demand
repayment of obligation.
Sec. 40, GBL - Requirement for Grant of Loans or Other
Credit Accommodations
Before granting a loan or other credit accommodation,
a bank is required to ascertain that the debtor is
capable of fulfilling his commitments to the bank.
To enable the bank to properly evaluate the credit
application, the following are required from the credit
applicant:
1. A statement of their assets and liabilities
and of their income and expenditures and
2. Such information as may be prescribed by
law or by rules and regulations of Monetary
Board 3. Corresponding financial statements
submitted for taxation purposes to the Bureau
of Internal Revenue.
Should such statements prove to be false or incorrect
in any material detail, the bank may:
1. Terminate any loan or other credit accommodation
granted on the basis of said statements; and
2. Shall have the right to demand immediate
repayment or liquidation of the obligation.
Contract of guaranty:
By guaranty, a person, called the guarantor,
binds himself to the creditor to fulfill the obligation of
the principal debtor in case the latter should fail to do
so. Q. What is a
Suretyship contract
refers to an agreement where under one
person, the surety, engages to be answerable for the
debt, default, or miscarriage of another known as the
principal.
Distinction between a guarantor and a surety
1. A surety is an insurer of debt, whereas a
guarantor is an insurer of the solvency of the
debtor. 2. A suretyship is an undertaking that
the debt shall be paid.
 3. Stated differently, a surety promises to pay
the principal’s debt if the principal will not pay, while a
guarantor agrees that the creditor, after proceeding
against the principal, may proceed against the
guarantor if the principal is unable to pay.
4. A surety binds himself to perform if the
principal does not, without regard to his ability to do
so.
5. In other words, a surety undertakes directly
for the payment and is so responsible at once if the
principal debtor makes default.
6. A creditor’s right to proceed against the
surety exists independently of his right to proceed
against the principal.
7. Under Article 1216 of the Civil Code, the
creditor may proceed against any one of the solidary
debtors or some or all of them simultaneously.
Guaranty Suretyship
Guarantor is subsidiarily Surety is primarily liable
liable
Guarantor binds himself Surety binds himself to
to pay if the principal pay if the principal debtor
debtor cannot pay does not pay
Insurer of the Solvency of Insurer of debt
the debtor
The benefit of excussion is a right granted to the
guarantor and, therefore, only he may invoke it at his
discretion. The benefit of excussion, as well as the
requirement of consent to extensions of payment, is a
protective device pertaining to and conferred on the
guarantor. These may be invoked by the guarantor
against the creditor as defenses to bar the
unwarranted enforcement of the guarantee.
The benefit of excussion can be invoked if:
1. The benefit of excussion may only be invoked after
legal remedies against the principal debtor have been
expanded.
2. Thus, it was held that the creditor must be first
obtain a judgment against the principal debtor before
assuming to run after the alleged guarantor, “for
obviously the ‘exhaustion of the principal’s property’
cannot even begin to take place before judgment has
been obtained”.
3. The law imposes conditions precedent for the
invocation of the defense.
4. Thus, in order that the guarantor may make use of
the benefit of excussion, he must set it up against the
creditor upon the latter’s demand for payment and
point out to the creditor available property of the
debtor within the Philippines sufficient to cover the
amount of the debt.
2 KINDS OF PIERCING THE VEIL OF
CORPORATE FICTION
As held in the U.S. Case, C.F. Trust, Inc., v. First
Flight Limited Partnership, "in a traditional veil-
piercing action, a court disregards the existence of the
corporate entity so a claimant can reach the assets of
a corporate insider. In a reverse piercing action,
however, the plaintiff seeks to reach the assets of a
corporation to satisfy claims against a corporate
insider." (from corporate insider)
"Reverse-piercing flows in the opposite
direction (of traditional corporate veil-piercing) and
makes the corporation liable for the debt of the
shareholders." (From the properties of the
corporation)
D. SECURED LOAN V UNSECURED LOANS AND OTHER
CREDIT ACCOMODATION:
Secured loan, borrowing or other credit
accommodation shall refer to any loan, or credit
accommodation or portion thereof referred to in
Section X327 which is secured by:
(1) Real estate mortgage, chattel mortgage on
tangible assets, and pledge of jewelry, precious stones
and other valuable articles
(2) Assignment of intangible assets such as
patents, trademarks, trade names and copyrights
(3) Unconditional payment guarantees such as
standby letters of credit and letter of indemnity issued
by banks/multilateral financial institutions
(4) Assignment of, or hold-out on, deposits or
deposit substitutes maintained in the lending bank
 (5) Cash margin deposits; or assignment or
pledge of government securities or readily marketable
bonds and other high-grade debt securities and “blue
chip” stocks, except those issued by the lending entity,
and subject to the additional provision that the issuer
corporation has a net worth of at least P1billion and
with a record of at least 5 consecutive years earnings
reckoned from the immediately preceding 5 years
(6) Customer's liability under import bills
outstanding for not more than thirty (30) days from
date of original entry
(7) Sales contract receivables arising from sale
of real property on credit where title to the property is
retained by the bank
(8) Customer's liability-import bills under trust
receipts outstanding for not more than thirty (30) days
from date of booking: Provided, That the booking
under trust receipts shall have been made not later
than the thirty-first day from the date of original entry
referred to in Item (6) above
UNSECURED LOAN:
Unsecured loan, borrowing or other credit
accommodation shall refer to any loan, or other credit
accommodation or portion thereof referred in Section
X327 which is not secured in accordance with Item k
above.
NOTES:
1. A borrower’s loan may be classified as secured or
unsecured loan.
2. Secured loan is one which has an offered collateral
or offered security.
Different kinds of security: 1. real estate mortgage 2.
chattel mortgage 3. Pledge
E. BRIDGE FINANCING
1. Temporary loan being extended by a lender bank,
quasi-bank, non-bank financing institution in favor of a
borrower pending the approval of the loan negotiated
by the borrower
2. An interim loan
3. It fills in the gap; it connects something; Bridge
financing is a form of temporary financing intended to
cover a borrower’s shortterm costs until the moment
when regular long-term financing is secured.
Bridge financing is a form of temporary financing
intended to cover a borrower’s shortterm costs until
the moment when regular long-term financing is
secured. Thus, it is named as bridge financing since it
is like a bridge that connects a company to debt
capital through short-term borrowings.
F. Fixed v. Floating Interest Rate and Escalation
Clauses
Interest rate is the payment for the use of money. The
Basis of interest rate is that people by nature is
impatient that is why the lender collects interest.
A fixed interest rate is a rate predetermined or pre-
agreed interest rate from the start of the repayment
until the entire repayment of the loan. It is a pegged
interest rate throughout the entire repayment of the
loan. It is an interest rate that is pre-determined
throughout the term of the loan
Floating interest rate
1. Variable interest rate
2. It is a flexible interest rate
3. Interest rate varies throughout the entire
repayment of the loan
4. Interest may go up or down depending on the
parameters provided by the BSP
5. Maybe subjected to escalation clause
Escalation clause:
Interest will go up. It is a floating interest rate,
depending on the interest rate set by the BSP.
Escalation clauses are not void per se.
However, one which grants the creditor an unbridled
right to adjust the interest independently and
upwardly, completely depriving the debtor of the right
to assent to an important modification in the
agreement is void. Clauses of that nature violate the
principle of mutuality of contracts. Article 1308 of the
Civil Code holds that a contract must bind both
contracting parties; its validity or compliance cannot
be left to the will of one of them.
 A valid escalation clause provides: 1. that the
rate of interest will only be increased if the applicable
maximum rate of interest is increased by law or by the
Monetary Board; and 2. that the stipulated rate of
interest will be reduced if the applicable maximum
rate of interest is reduced by law or by the Monetary
Board (de-escalation clause).
When the parties agreed for a variable or
floating interest rate, that agreement is valid. If it is
subject to escalation clause, it is valid as such subject
only to the requirement that there must be a
corresponding de-escalation clause
G. Risk Based Capital
The monetary board is required to prescribe
the minimum ratio which the net worth of a bank
must bear to its total risk assets which may include
contingent accounts.
The Monetary Board may require such ratio be
determined on the:
1. Basis of the net worth and
2. Risk assets of a bank and its subsidiaries, financial
or otherwise,
3. As well as prescribe the composition and the
manner of determining the net worth and total risk
assets of banks and their subsidiaries
In case a bank does not comply with the prescribed
minimum ratio, the Monetary Board may:
1. Limit or prohibit the distribution of net
profits by such bank and
2. Require that part or all of the net profits be
used to increase the capital accounts of the bank until
the minimum requirement has been met.
3. Restrict or prohibit the acquisition of major
assets and the making of new investments by the
bank, until the minimum required capital ratio has
been restored.
- EXCEPTION: purchases of: i. readily marketable
evidences of indebtedness of the Republic of the
Philippines and of the Bangko Sentral and ii. any other
evidences of indebtedness or obligations the servicing
and repayment of which are fully guaranteed by the
Republic of the Philippines.
In case of a bank merger or consolidation, or when a
bank is under rehabilitation under a program
approved by the Bangko Sentral, The Monetary Board
may temporarily relieve the surviving bank,
consolidated bank, or constituent bank or
corporations under rehabilitation from full compliance
with the required capital ratio under such conditions
as it may prescribe.
Risk based capital is simply the ratio which the net
worth of the bank must bear to its total assets. The
MB may provide for the minimum ratio which the net
worth of a bank must bear to its total risk-based
assets.
Net worth of the bank = equity of the bank. It shall
refer to the total of the unimpaired paid-in capital,
surplus, retained earnings and undivided profits.
Risk asset, in so far as the banking industry is
concerned, refers to the asset owned by the bank that
is subject to a frequent fluctuation of changes brought
about by: 1. interest rate, 2. credit quality or 3.
repayment risk.
There are 2 exceptions wherein a bank will not comply
to the minimum ratio of risk-based capital:
1. The purchase of readily marketable evidence of
indebtedness of the Republic of the Philippines and of
the Bangko Sentral and any other evidences of
indebtedness or obligations the servicing and
repayment of which are fully guaranteed by the
Republic of the Philippines, until the minimum
required capital ratio has been restored.
2. In case of bank merger or consolidation, or when a
bank is under rehabilitation under a program
approved by the Bangko Sentral, the Monetary Board
may temporarily relieve the surviving bank,
consolidated bank, or constituent bank or
corporations under rehabilitation from full compliance
with the required capital ratio under such conditions
as it may prescribe.
The following are the consequences whenever a bank
failed to comply with the risk based capital:
1. The BSP through the Monetary Board may
limit or prohibit the distribution of net profits
by such bank
 2. The BSP may require that part or all of the net
profits be used to increase the capital
accounts of the bank until the minimum
requirement has been met.
H. Limitation on the borrowing from Government-
owned or controlled bank
NO LOAN, guaranty, or other form of financial
accommodation for any business purpose MAY BE
GRANTED, directly or indirectly, BY ANY
GOVERNMENT-OWNED OR CONTROLLED BANK OR
FINANCIAL INSTITUTION (DBP and LBP) TO THE: 1.
President, the 2. Vice-President, the 3. Members of
the Cabinet, the 4. Congress, the 5. Supreme Court,
and the 6. Constitutional Commissions, the 7.
Ombudsman, or 8. to any firm or entity in which they
have controlling interest, during their tenure (Sec. 16,
Art XI of the 1987 Constitution)
Any Government-owned or controlled bank
financial institution cannot extend a loan in favor of
the public officers mentioned and they cannot borrow
from any government-owned or controlled bank.
Sec. 35.1, GBL in relation to Sec. X303 Manual
of Regulations for Banks (MORB)
Q. What is the percentage of SBL - Single Borrower’s
Limit?
A. 25% of the net worth of such bank.
Q. What is the Limit on Loans, Credit Accommodations
and Guarantees?
A. Except as the Monetary Board may otherwise
prescribe for reasons of national interest: The total
amount of loans, credit accommodations and
guarantees as may be defined by the Monetary Board
that may be extended by a bank to any person,
partnership, association, corporation or other entity
shall at no time exceed twenty percent (20%) of the
net worth of such bank (raised to 25% pursuant to the
MORB 2016) (Sec. 35.1, GBL).
Q. What is the basis for determining compliance with
single-borrower limit?
A. The total credit commitment of the bank to the
borrower (Sec. 35.1, GBL). 1. Exception
Q. What is the exception to the limit on Loans, Credit
Accommodations and Guarantees? OR When can a
bank increase?
A. Unless the Monetary Board prescribes otherwise,
the total amount of loans, credit accommodations and
guarantees prescribed may be increased by an
additional ten percent (10%) of the net worth of such
bank.
Provided the additional liabilities of any borrower are
adequately secured by (memorize) [TSWORN]:
1. trust receipts,
2. shipping documents,
3. 3. warehouse receipts or
4. 4. other similar documents transferring or
securing title covering:
a. readily marketable,
b. non-perishable goods which must be
fully covered by insurance (Sec. 35.2,
GBL).
Can the bank increase the 25% extended to a single
borrower? A. Yes NOTE: 1. may go as high as 35%
J. Inclusions to SBL
1. ALL LIABILITIES TO SUCH BANK OF:
a. MAKER OR ACCEPTOR of paper discounted
with or sold to such bank;
b. GENERAL INDORSER, DRAWER OR
GUARANTOR who obtains a loan or other credit
accommodation from or discounts paper with or sells
papers to such bank;
c. INDIVIDUAL who owns or controls a
MAJORITY INTEREST IN A CORPORATION,
PARTNERSHIP, ASSOCIATION or any other entity;
NOTE: Shareholdings is more than 50% - 51% d.
CORPORATION, who OWNS OR CONTROLS MAJORITY
INTEREST OF ALL SUBSIDIARIES; and e. MEMBERS OF
PARTNERSHIP, ASSOCIATION OR OTHER ENTITY (Sec.
35.3, GBL).
K. Exclusions from SBL
The exclusions are LOANS AND OTHER CREDIT
ACCOMODATIONS:
 1. Secured by obligations of the BANGKO
SENTRAL OR OF THE PHILIPPINE GOVERNMENT;
2. Fully guaranteed by the GOVERNMENT as to
the payment of principal and interest;
3. Surety for loans from such bank to others,
4. in any manner, be an Obligor, or
5. incur any contractual Liability to the bank.

3. Secured by U.S. TREASURY NOTES and other As an exception (WRS),

securities issued by central governments and central
1. with the WRITTEN APPROVAL OF THE
banks of foreign countries with the highest credit
MAJORITY OF ALL THE DIRECTORS OF THE BANK,
quality given by any two internationally accepted
excluding the director concerned.
rating agencies;
2. The required approval shall be entered
4. to the extent covered by the hold-out on or
upon the records of the bank and
assignment of, deposits maintained in the lending
bank and held in the Philippines; - ALSO CALLED AS 3. A copy of such entry shall be transmitted
DEPOSIT WITHHOLD OUT 5. under letters of credit to forthwith to the appropriate supervising and
the extent covered by margin deposits; and examining department (SED) of the Bangko Sentral.
6. Which the Monetary Board may from time
to time specify as non-risk items (Sec. 35.3, GBL).
Q. What happens if a bank director or officer violates
this provision of the Sec. 36 of the GBL?

A. After due notice to the board of directors of the

L. DOSRI Accounts
Q. What is a Subsidiary Corporation?
A. A corporation more than 50% of the voting stock of
which is owned or controlled, directly or indirectly,
through one or more intermediaries by another
corporation, which thereby become a parent
corporation.
Q. What is an affiliate corporation?
A. Is one where total government ownership
comprising less than the majority of its outstanding
capital stock and its outstanding voting capital stock.
Q. What does DOSRI mean? A. Directors, officers,
stockholders and their related interest.
bank, the office of any bank director or officer who
violates the provisions of this Section may be:
1. declared vacant; and
2. The director or officer shall be subject to
the penal provisions of the New Central Bank Act.
Q. Who is a director? A. The following: (AES)
1. one named as such in the Articles of
Incorporation (first set of directors)
2. director who is duly elected by the
stockholders
3. a person who succeeded to any vacancy in a
seat in the BOD (Board of Directors)
Q. Who is an officer of a Bank?

A. Officers shall include the:

Are directors or officers of any bank directly or
indirectly allowed to borrow from such bank? 1. President,
(MEMORIZE)
2. Executive Vice President,
A. NO. As a general rule, NO. Representative, director
or officer of any bank shall borrow (directly or 3. Senior Vice-President,
indirectly, for himself or as agent of others) from such
4. Vice President,
bank nor shall he become:
5. General Manager,
1. Guarantor,
6. Treasurer,
2. Indorser,
7. Secretary,
8. Trust Officer and
9. Others mentioned as officers of the bank/quasi-
bank/trust entity, or
10. Those WHOSE DUTIES AS SUCH ARE DEFINED IN
THE BY-LAWS, or
11.are generally known to be the officers of the
bank/quasi-bank/trust entity (or any of its branches
and officers other than the head office) either through
announcement, representation, publication or any
kind of communication made by the bank/quasi-
bank/trust entity (Subsection X142.1 and Section
4142Q Definition of Officers)
WHEN DOSRI ACCOUNTS ALLOWED UNDER GBL,
REQUISITES WUE-AIW****
1. Procedural requirement: Written approval of
majority of ALL the directors of the bank
(excluding the borrowing director concerned.)
 Not merely a majority of a quorum
 The majority required here is a majority of ALL
directors excluding D concerned
2. Arms-length rule: The account should be upon
terms not less favorable to the bank than
those offered to others  company of which both his bank and the lending
3. Reportorial requirement: The approval shall
be entered upon the records of the bank and a
copy of such entry shall be transmitted to the
supervising and examining department of BSP
4. Aggregate ceilings: MB may regulate the
amount of loans that may be extended,
directly or indirectly, by a bank to DOSRI, as
well as investments of such bank in
enterprises owned or controlled by said DOSRI
(Under the MORB, the aggregate ceiling is 15%
of the total loan portfolio of the bank or 100%
of the combined capital accounts, whichever is
lower. Provided, That in no case shall the total
unsecured loans to said DOSRI exceed 30% of
the aggregate ceiling or the outstanding loans,
other credit accommodations and guarantees,
whichever is lower)
5. Individual ceilings: The outstanding loans
which a bank may extend to each DOSRI shall
be limited to an amount equivalent to their
respective unencumbered deposits and book
value of their paid-in capital contribution in
the bank (MORB: Unsecured loans, other
credit accommodations and guarantees to
each of the bank’s DOSRI shall not exceed 30%
of their respective total loans, other credit
accommodations and guarantees)
6. Waiver of secrecy of deposits of whatever
nature in all banks in PH (NCBA)
EXEMPTED FROM DOSRI RULE*****
1. Loans granted to officers under a fringe
benefit plan approved by BSP
 E.g. Car plan, car loan, housing loan
2. DOS is a credit card holder – DOS may use the
credit card
Q. What are the elements of DOSRI borrowing?
(MEMORIZE THIS)
A. The FOLLOWING ELEMENTS MUST
CONCUR:
1. The borrower is a DOS (director, officer or
stockholder) of a bank;
2. He contracts a loan or any form of financial
accommodation;
3. The loan or financial accommodation is from:
a. his bank or
b. a bank that is a subsidiary of a bank holding
bank are subsidiaries, or
c. a bank in which a controlling proportion of the
shares is owned by the same interest that owns a
controlling proportion of the shares of his bank;
and
4. The loan or financial accommodation of the
DOSRI, is:
a. WHICHEVER IS LOWER between:
i. excess of 5% of the capital and surplus of the
lending bank or
ii. maximum amount permitted by law, (Item No.
2, BSP Circular 170).
What are the requirements?
A. The following are the requirements:
1. must be a DOSRI.
2. Written consent of the majority of all the BOD
excluding the director who is requesting for a loan
3. Transaction approving should be recorded in the
corporation’s books.
4. There must be reposting with the SED
(Supervision and Examination Department) of the
BSP
5. There must be execution of a waiver of the
confidentiality of bank deposits
6. Arm’s length rule: the dealings of the bank with
the DOSRI should be under the terms not less
favorable to the bank as compared to those offered
to third persons.
7. The amount of loan should be limited to the
unencumbered deposits or to the paid in capital
contribution of the DOSRI.
DOSRI RESTRICTIONS UNDER NCBA (WAIVER
REQUIREMENT)*
1. Borrower (including DOSRI) is required by
lending bank to waive secrecy of his deposits
of whatever nature in all banks in PH
(Including trust accounts – Estrada v
Sandiganbayan. But note in PDIC Law, trust
accounts are not considered as deposits so as
to be covered by the insurance coverage)
2. The accounts are subject to examination but
any info obtained from an examination of his
deposits shall be held strictly confidential and
may be used by:  equity of which is owned by such fam
a. Examiners only in connection with their
supervisory and examination responsibility
or
b. BSP in an appropriate legal action it may
initiate involving the deposit account
BANKS FROM WHICH DOS RESTRICTED FROM
BORROWING OSS*****
1. His bank – DOS bank
2. A bank that is a subsidiary of a bank holding
company of which both his bank and lending
bank are subsidiaries
3. A bank in which a controlling proportion of the
shares is owned by the same interest that
owns a controlling proportion of the shares of
his bank
REQUISITES FOR NCBA WAIVER RULE TO APPLY TO
DOSRI ACCOUNTS*
1. Borrower is a DOSRI  MORB, now 30% due to BSP Memo until Dec
2. DOSRI contracts a loan or any form or financial
accommodation
 “Loan or financial accommodation”: Refers to
transactions which involve the grant, renewal
or extension or increase of any loan, discount,
credit or advance in any form whatsoever
3. The loan is from:
a. His bank
b. A bank that is a subsidiary of a bank
holding company of which both his bank
and lending bank are subsidiaries
 Illustration of 3(b): A Bank and B Bank are
subsidiaries of C Holding Company. D is a
director of A Bank. If D borrows from B Bank,
he should waive the secrecy of deposits
because A and B banks are subsidiaries of C
Holding Company.
c. A bank in which a controlling proportion
of the shares is owned by the same
interest that owns a controlling proportion
of the shares of his bank
 “Controlling interest”: Ownership of more
than 50% of the voting stock or subscribed CS
of the bank
 “Same interest”: refers to any of the ff – NJFB
i. Same natural person
ii. Same corp, pp or entity
iii. Same family group – persons related to
each other within the 3 degree of C/A,
rd
including any corp majority or all of the
group
iv. Same business group – group of persons
whose stockholdings altogether constitute
a majority or control in one or more
enterprises
 Illustration of 3(c): Controlling shares of A
Bank and B Bank belong to the “same
interest.” C is a director of A Bank. If C
borrows from B Bank, he should waive secrecy
of his bank deposits
4. The loan of DOS, singly or with that of his RI, is
in excess of: 
a. 5% of the capital and surplus of the lending
bank; or 
b. In the maximum amount permitted by law –
SBL 25% of bank’s NW (Whichever is lower)
 “Maximum amount permitted by law”: Limit
on loans that may be extended to DOS under
the GBL (This refers to SBL which is 20% of
bank’s NW under the GBL, 25% under the
2021)
WHAT ARE RELATED INTERESTS (MORB 2018)*
1. Spouse, relative within the 1st degree of C/A
or relative by legal adoption (SRR), of a DOS of
the BSP Supervised Financial Institution (BSFI)
2. Partnership of which a DOS of a BSFI or his
SRR, is a general partner
3. Co-owner with the DOS of a BSFI or his SRR, of d. Power to cast the majority votes at meetings
the property or interest or right mortgaged, of the board of directors or equivalent
pledged or assigned to secure the loans or governing body
other credit accommodations, except when e. Any other arrangement similar to any of the
the mortgage, pledge or assignment covers above.
only said co-owner’s undivided interest  Control is presumed to exist if there is
4. Corporation, association or firm of which any ownership or holding, whether direct or
or a group of DOS of a BSFI or his SRR, hold or indirect, of at least 20% of a class of voting
own at least 20% of the subscribed capital of shares of a company.
such corporation, or of the equity of such 8. NGOs or foundations that are engaged in retail
association or firm  microfinance operations which are
5. Corporation, association or firm wholly or incorporated by any of the DOS or related
majority-owned or controlled by any related BSFIs
entity or a group of related entities mentioned
in Items 2 and 4 above (Partnership or
corp/assoc/firm)
6. Corporation, association or firm which owns or
controls directly or indirectly whether singly or
as part of a group of related interest at least
20% of the subscribed capital of a substantial
stockholder of the BSFI or which controls
majority interest of the BSFI
 Substantial stockholder: A person, or group of
persons whether natural or juridical –
1. Owning such number of shares that will
allow such person or group to elect at
least 1 member of the BOD of a BSFI; or 
2. Who is directly or indirectly the registered
or beneficial owner of more than 10% of
any class of its equity security
7. Corporation, association or firm which has an
existing management contract or any similar
arrangement with the parent of the BSFI
pursuant to Item “g” of Sec. 362 (Definition of
terms)
 The term “control of majority interest” shall
be synonymous to “controlling interest” and
exists when the parent owns directly or
indirectly through subsidiaries more than 50%
of the voting power of an enterprise unless, in
exceptional circumstance, it can be clearly
demonstrated that such ownership does not
constitute control. Control of majority interest
may also exist even when the parent owns
one-half or less of the voting power of an
enterprise when there is: OGACO
a. Power over more than 50% of the voting rights
by virtue of an agreement with other investors
b. Power to govern the financial and operating
policies of the enterprise under a statute or an
agreement
c. Power to appoint or remove the majority
members of the board of directors or
equivalent governing body