Mod 8.

Regulations & Supervisions of Financial Instructions

The services of financial institution are for sale to the public. They employ various
forms of promotions in their efforts to acquire more customers and are selling services
which have more significant effects on the economy and the buyers of such services. In the
event that anomalies may arise from their operations, it may result to inflation, collapse of
the financial system and loss in money of depositor and investors.

` The business of financial institutions and the like is imbued with public trust and
public confidence. This is the main reason why the government, through the Bangko Sentral
ng Pilipinas and other government agencies is concerned with the viability these institutions.
Thus their activities are closely monitored by the BSP

The Bangko Sentral has supervision over the operations of banks and exercises such
regulatory powers as provided in the New Central Bank Act and other pertinent laws over
the operations of finance companies and non-bank financial institutions performing quasi-
banking functions.

Banking Institutions

The Manual of Regulations for Banks (MORB) is the primary source of regulations governing
entities supervised by the Bangko Sentral ng Pilipinas. It provides the rules and policy issuances that
implement the broader provisions of Republic Act No. 8791, also known as the General Banking Law
of 2000, as well a s other pertinent banking laws- updated as of December 2020

The Manual of Regulations for Banks (the “Manual”) is divided into eleven (11) parts
covering the following topics:
1. Organization, Management and Administration
2. Deposits, Borrowings and Other Liabilities
3. Loans, Investments and Special Credits
4. Trust, Other Fiduciary Business and Investment Management
Activities
5. Manual of Regulations on Foreign Exchange Transactions
6. Treasury and Money Market Operations
7. Electronic Banking Services and Operations
8. Regulations on Payment Systems
9. Anti‐Money Laundering Regulations
10. Financial Consumer Protection
11. Other Banking Regulations

Types of Bank
A. Universal and commercial banks (U/KBs)
B. Thrift banks (TBs)
C. Rural banks and cooperative banks (RBs/Coop Banks)
A. Universal/ Commercial banking

Universal banking is a system in which banks provide a wide variety of

comprehensive financial services, including those tailored to retail, commercial, and
investment services. 

 Universal banking is a term for banks that offer a variety of comprehensive

financial services, including both commercial banking and investment banking
services.

Universal banks may offer credit, loans, deposits, asset management, investment

advisory, payment processing, securities transactions, underwriting, and financial analysis.
While a universal banking system allows banks to offer a multitude of services, it does not
require them to do so. Banks in a universal system may still choose to specialize in a subset of
banking services.

Universal banking combines the services of a commercial bank and an investment

bank, providing all services from within one entity. The services can include deposit accounts,
a variety of investment services, and may even provide insurance services. Deposit accounts
within a universal bank may include savings and checking.
Example of Universal Banks in the Philippines

1.    Al-Amanah Islamic Investment Bank of the Philippines

2.    ANZ Banking Group Ltd.
3.    Asia United Bank Corp. (AUB)
4.    Bank of the Philippine Islands (BPI)
5.    BDO Unibank, Inc. (BDO)
6.    China Banking Corp. (Chinabank)
7.    Deutsche Bank AG
8.    Development Bank of the Philippines (DBP)
9.    East West Banking Corp. (Eastwest)
10.  The Hongkong & Shanghai Banking Corp. (HSBC)
11.  ING Bank NV
12.  Land Bank of the Philippines (Landbank)
13.  Metropolitan Bank & Trust Co. (Metrobank)
14.  Mizuho Bank, Ltd. – Manila Branch
15.  Philippine National Bank (PNB)
16.  Philippine Trust Co. (Philtrust)
17.  Rizal Commercial Banking Corp. (RCBC)
18.  Security Bank Corp. (SBC)
19.  Standard Chartered Bank (Standard)
20.  Union Bank of the Philippines (Unionbank)
21.  United Coconut Planters Bank (UCPB)

Commercial Banking. The term commercial bank refers to a financial institution that

accepts deposits, offers checking account services, makes various loans, (including mortgages
and auto loans) and offers basic financial products like certificates of deposit (CDs) and
savings accounts to individuals and small businesses. A commercial bank is where most
people do their banking.

Commercial banks make money by providing and earning interest from loans such as
mortgages, auto loans, business loans, and personal loans. Customer deposits provide banks
with the capital to make these loans.

Examples of Commercial Banks in the Philippines

1. Asia United Bank Corp.

2. Bangkok Bank Public Co. Ltd.
3. Bank of America, N.A.
4. Bank of China Ltd. – Manila
5. Bank of Commerce
6. Bank of Tokyo-Mitsubishi UFJ, Ltd.
7. BDO Private Bank, Inc.
8. Chinatrust (Phils.) Commercial Bank Corp.
9. Citibank, N.A.
10. JP Morgan Chase Bank, N.A.
11. Korea Exchange Bank
12. Maybank Philippines, Inc.
13. Mega International Commercial Bank Co., Ltd.
14. Philippine Bank of Communications
15. Philippine Veterans Bank
16. Robinsons Bank Corp.

B. Thrift Banks
A thrift bank–also just called a thrift–is a type of financial institution that specializes in
offering savings accounts and originating home mortgages for consumers. Thrift banks are
also sometimes referred to as Savings and Loan Associations (S&Ls). Thrift banks differ from
larger commercial banks, because they usually offer higher yields on savings accounts and
provide limited lending services to businesses.

While a thrifts' core offerings are traditional savings accounts and home
loan origination, these institutions also offer checking accounts, personal and car loans, and
credit cards for consumers. However, they give primary attention to home financing for
single-family residences. Thrifts are structured either as corporate entities that are owned by
their shareholders, or they are mutually-owned, i.e. owned by their borrowers and
depositors.

Types of thrift banks

1. Savings Bank- These banks generate funds from selling savings to customers and
investing in mortgage loans.
2. Private Development Bank- These banks are formed to support government
policies.
3. Stock Savings and Loan Associations- A locally or privately managed financial
banking institution that takes long-term deposits to provide amortized home
loans.

Examples of Thrift Banks in the Philippines

1. Allied Savings Bank (Now PNB Savings Bank)

2. City Savings Bank
3. Business and Consumers Bank (A Development Bank)
4. Citystate Savings Bank
5. Bank One Savings and Trust Corporation
6. Legazpi Savings Bank, Inc.
7. Luzon Development Bank
8. Dumaguete City Development Bank
9. EIB Savings Bank, Inc.
10. LBC Development Bank
11. Lemery Savings and Loan Bank, Inc.
12. Cordillera Savings Bank, Inc.
13. Sampaguita Savings Bank, Inc.
14. GSIS Family Bank
15. Liberty Savings Bank Inc.
16. BDO Elite Savings Bank, Inc.
17. Inter-Asia Development Bank
18. ISLA Bank, Inc.
19. Life Savings Bank, Inc.
C. Rural banks and cooperative banks

Rural Banks . These are government-sponsored/assisted banks which are privately

managed and largely privately owned that provide credit facilities to farmers and merchants,
or to cooperatives of such farmers or merchants at reasonable terms and in general, to the
people of the rural community. 

The establishment of a rural banking system designed to provide credit facilities to

farmers, fishermen, merchants, their cooperatives, small business enterprises and to rural
communities in general . Rural banks shall operate under the authority of a Certificate from
the Monetary Board of the Central Bank, and are to be organized in the form of stock
corporations

Rural banks are government partners in countryside development, these banks fill an
important niche in the rural economy with rural borrowers forming the grassroots of the
social class. These banks help stimulate rural development by catering to the needs of local
communities where access to credit through commercial banks seems impossible.

Examples of Rural Banks

1. Agribusiness Rural Bank, Inc.

2. Aliaga Farmers Rural Bank, Inc.
3. ASPAC Rural Bank, Inc.
4. AuroraBank, a microfinance-oriented rural bank
5. Balanga Rural Bank, Inc.
6. Banco Dipolog (acquired by Producers Savings Bank Corporation)
7. Banco Laguna, Inc. (a rural bank since 1965)
8. Banco Mabuhay (a rural bank)
9. Banco Mexico, Inc. (a rural bank in Mexico, Pampanga since 1962)
10. Bankways, Inc. (a rural bank)
11. BDO Network Bank (formerly One Network Bank, a subsidiary of BDO Unibank, Inc.)
12. BHF Rural Bank, Inc.
13. BOF, Inc. (a rural bank)
14. Camalig Bank, Inc. (a rural bank)
15. Cantilan Bank, Inc. (a rural bank)
16. CARD Bank, Inc. (a microfinance rural bank)
17. Cavite United Rural Bank Corporation (a subsidiary of Asia United Bank Corporation)
18. Cebuana Lhuillier Rural Bank, Inc.
19. Common Wealth Rural Bank, Inc.
20. Community Rural Bank of Catmon (Cebu) Inc.
21. Community Rural Bank of Dapitan City, Inc.
22. Community Rural Bank of San Felipe (Zambales) Inc.
23. Cooperative Bank of Bohol
24. Cooperative Bank of Cotabato
25. Cooperative Bank of Nueva Vizcaya
26. Cooperative Bank of Quezon Province
27. Consolidated Cooperative Bank
28. Country Builders Bank, Inc. (a rural bank)
29. D' Asian Hills Bank, Inc. (a rural bank)
30. Dumaguete Rural Bank, Inc. (DRBI)
31. EastWest Rural Bank, Inc. (a subsidiary of EastWest Bank)
32. Entrepreneur Rural Bank, Inc.
33. First Agro-Industrial Rural Bank, Inc. / FAIRBANK Inc.
34. First Isabela Cooperative Bank (FICO Bank)
35. First Tagum Rural Bank, Inc.
36. GM Bank of Luzon, Inc. (a rural bank)
37. Guagua Rural Bank, Inc.
38. Highland Rural Bank, Inc.
39. Imus Rural Bank, Inc.
40. Innovative Bank, Inc. (a rural bank)
41. Insular Savers Bank, Inc. (a rural bank)
42. Katipunan Bank, Inc. (a rural bank)
43. Laguna Prestige Banking Corporation (a rural bank)
44. Liberty Bank (a rural bank)
45. LifeBank (a rural bank)
46. Mactan Rural Bank (Lapu-Lapu City) Inc.
47. Malarayat Rural Bank, Inc.
48. Mallig Plains Rural Bank (ISA) Inc.
49. Marayo Bank, Inc. (a rural bank)
50. Metro South Cooperative Bank
51. Mount Makiling Rural Bank, Inc.
52. MVSM Bank (a rural bank since 1953) Inc.
53. Network Consolidated Cooperative Bank
54. New Rural Bank of San Leonardo (N.E.) Inc.
55. Opportunity Kauswagan Inc. (a microfinance rural bank)
56. People’s Rural Bank (Gen. Santos City) Inc.
57. PlanBank (Rural Bank of Canlubang Planters, Inc.)
58. Quezon Capital Rural Bank, Inc.
59. Rang-ay Bank, Inc. (a rural bank)
60. RBG Imperial Bank, Inc. (a rural bank)
61. RBT Bank, Inc. (a rural bank)
62. Rizal Bank (a microfinance rural bank)
63. Rural Bank of Angeles, Inc. (a subsidiary of Asia United Bank Corporation)
64. Rural Bank of Bagabag (N.V.) Inc.
65. Rural Bank of Bambang (Nueva Vizcaya) Inc.
66. Rural Bank of Barili (Cebu) Inc.
67. Rural Bank of Bauang, Inc.
68. Rural Bank of Bayombong, Inc.
69. Rural Bank of Calbayog City, Inc.
70. Rural Bank of Cardona (Rizal) Inc.
71. Rural Bank of Cauayan, Inc.
72. Rural Bank of Central Pangasinan (Bayambang) Inc.
73. Rural Bank of Digos, Inc.
 74. Rural Bank of Dolores (Quezon) Inc.
75. Rural Bank of Dumangas, Inc.
76. Rural Bank of Gattaran (Cagayan) Inc.
77. Rural Bank of General Trias, Inc.
78. Rural Bank of Guinobatan, Inc.
79. Rural Bank of Itogon (Benguet) Inc.
80. Rural Bank of Jaen, Inc.
81. Rural Bank of Lebak (Sultan Kudarat) Inc.
82. Rural Bank of Mabalacat, Inc.
83. Rural Bank of Magdalena (Laguna) Inc.
84. Rural Bank of Mangaldan
85. Rural Bank of Maragondon, Inc.
86. Rural Bank of Maria Aurora (Aurora) Inc.
87. Rural Bank of Mexico (Pampanga since 1962)
88. Rural Bank of Montalban, Inc.
89. Rural Bank of Pandi (Bulacan) Inc.
90. Rural Bank of Paracale (Camarines Norte) Inc.
91. Rural Bank of Pilar (Bataan) Inc.
92. Rural Bank of Pilar (Sor) Inc.
93. Rural Bank of Pola (Oriental Mindoro)
94. Rural Bank of Rizal (Zamboanga del Norte) Inc.
95. Rural Bank of Rosario (La Union) Inc.
96. Rural Bank of San Antonio, Inc.
97. Rural Bank of San Mateo (Isabela) Inc.
98. Rural Bank of San Narciso, Inc.
99. Rural Bank of San Pascual (Obando, Bulacan) Inc.
100. Rural Bank of Solano (Nueva Vizcaya) Inc.
101. Rural Bank of Sta. Ignacia, Inc.
102. Rural Bank of Tandag (Surigao Del Sur) Inc.
103. Rural Bank of Tangub City (Misamis Occidental) Inc.
104. Rural Bank of Taal, Inc
105. Saviour Rural Bank, Inc.
106. Sta. Maria Rural Bank, Inc.
107. Sugbuanon Rural Bank, Inc.
108. Summit Bank (rural bank of Tublay, Inc.)
109. Valiant Bank, Inc. (a rural bank)
110. Rural Bank of Cuenca Inc.

Cooperative Banks. A Coop Bank is one organized for the primary purpose of
providing a wide range of financial services to cooperatives and their members. It shall be
organized only by cooperative organizations that are duly established and registered under
the Philippine Cooperative Code of 2008 (R.A. No. 9520).

A cooperative organization is a duly registered association of persons with a common

bond of interest, who have voluntarily joined together to achieve their social, economic and
cultural needs and aspirations by making equitable contributions to the capital required
patronizing their products and services and accepting a fair share of the risks and benefits of
the undertaking in accordance with universally-accepted cooperative principles
 It is likewise, be considered a cooperative that should be registered with the
Cooperative Development Authority (CDA), subject to the requirements and requisite
authorization of the Bangko Sentral.

Cooperative Banks provide banking, financial and credit services mainly to

cooperatives and their members. They may also provide services to non-members, but their
focus is on cooperatives and members. Sometimes they’re also called Cooperative Rural
Banks because they’re authorized to provide all services offered by rural banks.

 Grant loans to farmers, fishermen, farm families, cooperatives, merchants, and

private and public employees
 Accept savings and time deposits
 Act as correspondent of other financial institutions
 Rediscount paper with the LBP, DBP or any other bank, including bank branches
and
agencies
 Act as collection agent
 Acquire readily marketable bonds and other debt securities
 Buy and sell foreign exchange
 Offer other banking services as provided in Section 53 of RA No. 8791 (The
General Banking Law of 2000):

Example of Cooperative Banks in the Philippines

1. BANCO COOPERATIVE DE ZAMBOANGA

2. BATAAN COOPERATIVE BANK
3. CONSOLIDATED COOPERATIVE BANK
4. COOPERATIVE BANK OF BENGUET (CBB)
5. COOPERATIVE BANK OF BOHOL
6. COOPERATIVE BANK OF CAGAYAN
7. COOPERATIVE BANK OF CEBU
8. COOPERATIVE BANK OF COTABATO
9. COOPERATIVE BANK OF LA UNION
10. COOPERATIVE BANK OF MT. PROVINCE
11. COOPERATIVE BANK OF NEGROS ORIENTAL
12. COOPERATIVE BANK OF NUEVA VIZCAYA
13. COOPERATIVE BANK OF PALAWAN
14. COOPERATIVE BANK OF QUEZON PROVINCE
15. COOPERATIVE BANK OF ZAMBALES
16. FIRST ISABELA COOPERATIVE BANK, INC. (FICOBANK)
17. ILOCOS CONSOLIDATED COOPERATIVE BANK
18. MINDANAO CONSOLIDATED COOPERATIVE BANK
19. NATIONAL TEACHERS & EMPLOYEES COOPERATIVE BANK
20. NEGROS COOPERATIVE BANK
21. NETWORK CONSOLIDATED COOPERATIVE BANK
22. OCCIDENTAL MINDORO COOPERATIVE BANK (OMCB)
23. ZAMBOANGA DEL NORTE COOPERATIVE BANK
 Non- bank Financial Institutions

1. Manual of Regulations for Non-Bank Financial Institutions (MORNBFI) updated as of

December 2020,

The Manual of Regulations for Non-Bank Financial Institutions (MORNBFI)

codifies and logically organizes Bangko Sentral rules and policy issuances
governing non-bank financial institutions supervised by, or are under the regulatory
am of the Bangko Sentral such as quasi-banks, investment houses, non-stock
savings and loan associations, pawnshops and trust corporations in the country.

The MORNBFI serves two fundamental objectives: one, a convenient

reference for operators and regulators regarding the implementation of domestic
laws and their pertinent rules and regulations governing said financial
intermediaries; and two, a useful guide for all individuals, organizations, and
agencies with interest in the country’s non-bank financial institutions.

The  Manual  of  Regulations  for  Non‐Bank  Financial  Institutions  (the  “Manual”)  cover
s: 

a. Regulations  Governing  NBFIs  Performing  Quasi‐Banking  Functions

b. Regulations  Governing  Non‐Stock  Savings  and  Loan  Associations
c. Regulations Governing Pawnshops
d. Regulations  Governing  Trust  Corporations
e. Regulations Governing Other NBFIs

Type of Non‐Bank Financial Institution  
1. Q  Quasi‐Banking 
2. S  Non‐Stock Savings and Loan Associations (NSSLAs)
3. P  Pawnshops
4 N  Other Non‐Bank Financial Institutions
5. T  Trust Corporations
6. CC  Non‐Bank Credit Card Issuers

2. Manual of Regulations on Foreign Exchange Transactions  (updated as of July 2022)

The Manual of Regulations on Foreign Exchange Transactions, hereinafter referred to as

the “FX Manual”, is a consolidation of all regulations governing foreign exchange
transactions. This Manual replaces Circular No. 1389 dated 13 April 1993, as amended,
which was the first consolidation of foreign exchange regulations

Types of Examinations
 The BSP uses three types of examination in supervising banking institutions.

1. General or regular examination.

This is undertaken once a year that covers the verification of assets, liabilities and capital
accounts such as loans or deposits. This is an examination to follow-up the findings in a previous
examination to determine whether the institution has implemented the recommendations of the
BSP or whether the errors have been corrected as suggested by the BSP examiners.

2. Special Investigation.

Although this is not an examination, its procedure sometimes involves some steps of what are
being done in a regular and special examinations. This is conducted when a complaint is received
by the BSP from a borrower, stockholder, depositor or an employee or even anybody regarding the
operation of a financial institution.

Supervision and Regulations

Article III SEC. 25. Supervision and Examination. _ The Bangko Sentral shall have
supervision over, and conduct periodic or special examinations of, banking institutions
and quasi-banks, including their subsidiaries and affiliates engaged in allied activities.
(New Central Bank Act)

Supervision is the overseeing of operation of a financial institution and the issuance of

ruled and regulations. This is to ascertain that such rule and regulations are complied with, it also
includes examination and investigation.

Regulation refers to the issuance of rules and conduct or the establishment of modes or
standard of operation from uniform application to all financial institutions or functions covered. It
is also undertaken through review and analysis of reports submitted by a financial institution to a
government agency concerned.

Supervision and regulation financial institution are being undertaken by the government
for the following purposes:

1. To ensure full compliance with laws, rules and regulations affecting the operation and
activities of financial institutions.
2. To ensure that the financial institutions being supervised and regulated are operating
on
a sound financial basis (that is they are solvent and stable), so that their stockholders
are
assured of a fair return on their capital investments.
3. To act as guardian of depositors and money make investors in order to ensure that
they
get only the interest payments but also their deposits and placements.
4. To protect the interest of other creditors of financial institutions.
5. To protect the interest of the investments of the government
 6. To ensure the stability, solvency and safety of our financial system towards the
economic
development of urban and rural areas.

Effectiveness and Benefits of Supervision and Regulation

The supervisory and regulatory agencies of the government such as the Bangko Sentral ng
Pilipinas and the Securities and Exchange Commission ( SEC ) and other officers, perform functions on a
continuing basis. This is a way to have close supervision and controllership on bank and NBFIs to drive
these institutions away from mismanagement and fraud in their operations.

Security and Exchange Commission (SEC)

The Securities and Exchange Commission (SEC) or the Commission is the national
government regulatory agency charged with supervision over the corporate
sector, the capital market participants, and the securities and investment
instruments market, and the protection of the investing public. Created on October 26, 1936
by Commonwealth Act (CA) 83 also known as The Securities Act, the Commission was tasked
to regulate the sale and registration of securities, exchanges, brokers, dealers and
salesmen.

SEC is the registrar and overseer of the Philippine corporate sector; it supervises
more than 600,000 active corporations and evaluates the financial statements
(FS) filed by all corporations registered with it. SEC also develops and regulates the capital
market, a crucial component of the Philippine financial system and economy. As it
carries out its mandate, SEC contributes significantly to government revenues.

The SEC supervises and regulates financing companies. It also has the power to
place them under receivership to protect the interest of creditors and
stockholders.

Receivership means:

 A receivership is a court-appointed tool that can assist creditors to recover funds in

default and can help troubled companies to avoid bankruptcy.

 The goal of a receivership is to return companies to profitability.

 In a receivership, the court appoints an independent "receiver"—or trustee—who

effectively manages all aspects of a troubled company's business.

 For the duration of a receivership, the company's principals remain in place (but they
have little authority over the company).

In case of financing companies under the supervision and regulation of the SEC,
the latter issues cease and decease order to stop operation of erring financial institutions or
lending institutions. Its operations will resume if errors have been corrected or
improved operations.
 Putting a bank or a NBFI is just like starting another business. These business will not be allowed to
operate if its existence will not contribute to public interest or improvement of economic conditions in the
community. The government also imposes laws and regulations to reduce competition.

The supervision of the banking system by the BSP is designed to protect public interest as well as
the banking system. The benefits of bank supervision must surpass the cost of controls. The major benefits
of bank control are:

1. Prevention of over-expansion or under-expansion of money and credit through a system wide

monopoly or through excessive competition.

2. Elimination of monopoly

3. Protection of depositors against the consequences of bank failures

Supervision an Examinations of Banking Institutions

The BSP, through Supervision and Examination Sector/Department, conducts supervision and
examinations of banking institutions by means of:

1. Examining the books, documents and records of banking institutions operating within the
Philippines, including all government credit institutions and non-bank financial intermediaries and
all their affiliates and its subsidiaries.

2. The heads and the examiners of the supervising or examining departments are authorized to
administer oaths to any director, officer or employee of the banking institution under their
respective supervision or subject to their investigation.

3. Compel the presentation of all books, document, paper or records necessary to ascertain as well
as the books and records of persons and entities in connection with the operations, activities or
transactions of the concerned institutions.

4. No restraining order or injunction is to be issued by the court enjoining the BSP from examining
any institution subject to the supervision and / or examination by the BSP, unless there is a
convincing proof that the action of the BSP is arbitrary and made in bad faith.

5. Department head and examined are authorized by the Monetary Board to examine, inquire and
look into all the deposits of whatever nature with banking institutions in the Philippines, including
investments in debt instruments issued by the national government, its political subdivision and its
instrumentality, after being satisfied that there is reasonable ground to believe that a bank fraud
or serious irregularity has been committed and that is necessary to look into the deposits to
establish such fraud or irregularity.

Sources :

https://www.bsp.gov.ph/Regulations/Issuances/2020/m005.pdf
https://www.bsp.gov.ph/Regulations/MORB/2018MORNBFI.pdf
https://www.sec.gov.ph/about-us/power-and-functions/
Central Banking by Feliciano R. Fajardo & Manuel M. Manansala, Revised Edition
https://www.investopedia.com/terms/u/universalbanking.asp
https://prezi.com/pta2xo5vansi/rural-banks-in-the-philippines/#:~:text=%2D%20government
%2Dsponsored%2Fassisted%20banks,people%20of%20the%20rural%20community.
https://www.bsp.gov.ph/Media_And_Research/Publications/BS11_A3.pdf
https://morb.bsp.gov.ph/appendix-34/#:~:text=A%20Coop%20Bank%20is%20one,9520).
https://www.banksphilippines.com/2014/04/list-of-universal-banks-in-philippines.html
https://www.wallstreetmojo.com/thrift-bank/
https://www.banksphilippines.com/2021/09/cooperative-banks-philippines.html