Bukidnon State University

City of Malaybalay
College of Business
FM103 (Banking and Financial Institutions)

CHAPTER 3
BANK MANAGEMENT

Board of directors – composed of a number agreed upon as contained in the by-laws. It is headed by a
chairman whose duty is to preside over the meetings of the board.

Qualifications:
1. Every Director shall own at least one (1) share of the capital stock of the corporation.
a. Educational Attainment
b. Adequate competency and understanding of business
c. Age requirement
d. Integrity, probity
e. Assiduousness

2. At least two thirds of the members of the board of directors shall be Filipino Citizen.

3. The proposed director of a bank shall be subject to qualifications and other requirements of
existing law, rules and regulations of the Bangko Sentral.

Responsibilities:

Firstly – They are duty bound to adopt measures that shall safeguard the depositor’s interest.

Secondly – They must make sure to compensate the stockholders fairly enough in exchange for the
risk they undertake and capital they invest.

Thirdly – The directors are responsible to the regulatory and supervisory agencies who keep
surveillance over the management of the bank’s affairs to allow maximum safety to depositors.

Standing Committees:

1. The Executive Committee – deals with administrative matters; often prepares the groundwork
for board meetings.
2. Loans and discount committee – all matters pertaining to loans and discounts, to lines of credit
and other related to the loaning function of the bank.
3. Investment committee – concern with the banks investment portfolio; passed judgment on what
securities the bank should purchase and in what amounts.
4. Trust committee – fiduciary function of the bank; how funds will be invested; how much to
charge clients, and how to administer trust agreements.
5. Examination committee – improvised methods to conduct such internal examination.

Page | 1
Liabilities of the Board of Directors – arise in their incompetence and negligence in the discharged
of their duties.

Limitations- Sec.55. Prohibited Transactions

a. Make false entries in the bank reports or participate in fraudulent transactions.

b. Disclose to any unauthorized person any information relative to the funds or properties in the
custody of the bank.
c. Accept gifts, fees, commission in connection with the approval of a loan.
d. Overvalue security for the purpose of influencing in any way the actions of the bank.
e. Outscore inherent banking functions.

Bank Officers:
 President – presides board meetings if he is also the chairman. Implements policies
promulgated by the board. He is the court of last resort when the board is in session.
 Vice-President – acts in behalf of the president if the president is absent.
 Cashier – cash custodian.
 Comptroller – takes care of all accounting and statistical work of the bank.
 Auditor – verifies the accounts resulting from banking transactions.

Bank Operation:

 Executive Function – a banker must of necessity be faced with the policy-making, with
establishing harmonious relations with customers in order to get business, with gathering facts
and figures about the depositors and debtors, with recruiting personnel to do the minor
operations and with similar duties involving the caliber of an executive.
 Teller Function – he must then act as teller I manifold ways. He accepts deposit, changes check
for cash, changes big bills with smaller denominations, releases checks or cash representing
loans, receives payment for loans and other teller functions.
 Bookkeeping Function – keep faithful record of the events and accounts passing through his
hands. He may also be called upon to summarize and interpret the facts and figures.

Personal and Educational Qualities of a Banker

-A potentially efficient banker must possess a character above suspicion and integrity of the
highest order:
 He should be patient, understanding, cordial and respectful.
 He should be well versed in banking principles and practices.
 He should a good command of the medium of communication.
 He should have a working knowledge of law, economics, accounting, management, public
relations, and business psychology

Qualifications of a director:
A director shall have the following minimum qualifications:
1. He shall be at least twenty-five (25) years of age at the time of his election or appointment;
2. He shall be at least a college graduate or have at least five (5) years experience in business;
3. He must have attended a special seminar on corporate governance for board of directors
conducted by the BSP or by seminar providers accredited by the BSP not later than six (6)
months from the date of his election, and
4. He must be fit and proper for the position of a director of the bank/quasi-bank/trust entity.
In determining whether a person is fit and proper for the position of a director, the following
matters must be considered:

Page | 2
 - integrity/probity;
- competence;
- education;
- diligence; and
- experience/training.

Qualifications of an officer.
An officer shall have the following minimum qualifications:
1. He shall be at least twenty-one (21) years of age;

2. 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 BSP: 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;

3. He must be fit and proper for the position he is being proposed/appointed to. In
determining whether a person is fit and proper for a particular position, the following
matters must be considered:
- integrity/probity;
- competence;
- education;
- diligence; and
- experience/training.

For commercial banks, the President must, in addition to the abovementioned minimum qualifications,
have at least two (2) years experience in banking and/or finance. For thrift banks and rural banks, any
one of the President, Chief Operating Officer or General Manager must, in addition to the
abovementioned minimum qualifications, have at least two (2) years experience in banking and/or
finance. The foregoing qualifications for officers shall be in addition to those already required or
prescribed under existing laws.

Disqualifications of a director. Without prejudice to specific provisions of law prescribing

disqualifications for directors, the following are disqualified from becoming directors:

a. Permanently disqualified
Directors/officers/employees permanently disqualified by the Monetary Board from holding a
director position:

1. Persons who have been convicted by final judgement of the court for offenses involving
dishonesty or breach of trust such as, but not limited to, estafa, embezzlement, extortion,
forgery, malversation, swindling and theft, robbery, falsification, bribery, violation of B.P. Blg.
22, Violation of Anti-Graft and Corrupt Practices Act and Prohibited Acts and Transactions
Under Section 7 of R. A. No. 6713 (Code of Conduct and Ethical Standards for Public Officials
and Employees);

2. Persons who have been convicted by final judgement of a court sentencing them to serve a
maximum term imprisonment of more than six (6) years;

3. Persons who have been convicted by final judgment of the court for violation of banking
laws, rules and regulations;

Page | 3
4. Persons who have been judicially declared insolvent, spendthrift or incapacitated to
contract;

5. Directors, officers or employees of closed banks/quasi-banks/trust entities who were found

to be culpable for such institution’s closure as determined by the Monetary Board.

b. Temporarily disqualified

Directors/officers/employees disqualified by the Monetary Board from holding a director

position for a specific/indefinite period of time. Included are:

1. Persons who refuse to fully disclose the extent of their business interest or any material
information to the appropriate supervising and examining department when required
pursuant to a provision of law or of a circular, memorandum or rule or regulation of the BSP.
This disqualification shall be in effect as long as the refusal persists;

2. Directors who have been absent or who have not participated for whatever reasons in more
than fifty percent (50%) of all meetings, both regular and special, of the board of directors
during their incumbency, or any twelve (12) month period during said incumbency.

3. Persons who are delinquent in the payment of their obligations as defined hereunder:
a. Delinquency in the payment of obligations means that an obligation of a person with a
bank/quasi bank/trust entity where he/she is a director or officer, or at least two
obligations with other banks/financial institution, under different credit lines or loan
contracts, are past due pursuant to Secs. X306 and 4308Q of the Manual of Regulations;

b. Obligations shall include all borrowings from abank/quasi bank obtained by:
i. A director or officer for his own account or as the representative or agent of
others or where he/she acts as a guarantor, indorser, or surety for loans from
such financial institutions;

ii. The spouse or child under the parental authority of the director or officer;

iii. Any person whose borrowings or loan proceeds were credited to the account
of, or used for the benefit of a director or officer;

iv. A partnership of which a director or officer, or his/her spouse is the managing

partner or a general partner owning a controlling interest in the partnership;
and

v. 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
(i), (ii) and (iv);

This disqualification shall be in effect as long as the delinquency persists.

4. Persons convicted for offenses involving dishonesty, breach of trust or violation of banking
laws but whose conviction has not yet become final and
executory;

5. Directors and officers of closed banks/quasibanks/ trust entities pending their clearance by
the Monetary Board;

Page | 4
 6. Directors disqualified for failure to observe/discharge their duties and responsibilities
prescribed under existing regulations. This disqualification applies until the lapse of the
specific period of disqualification or upon approval by the Monetary Board on
recommendation by the appropriate supervising and examining department of such directors’
election/reelection;

7. Directors who failed to attend the special seminar for board of directors required under Item
3 of Sub secs. X141.2/4141Q.2. This disqualification applies until the director concerned had
attended such seminar;

8. Persons dismissed/terminated from employment for cause. This disqualification shall be in

effect until they have cleared themselves of involvement in the alleged irregularity or upon
clearance on their request from the Monetary Board after showing good and justifiable
reasons;

9. Those under preventive suspension; or

10. Persons with derogatory records with the National Bureau of Investigation (NBI), court,
police, Interpol and monetary authority (central bank) of other countries (for foreign directors
and officers) involving violation of any law, rule or regulation of the Government or any of its
instrumentalities adversely affecting the integrity and/or ability to discharge the duties of a
bank/quasi bank/trust entity director/officer. This disqualification applies until they have
cleared themselves of involvement in the alleged irregularity.

Disqualifications of an Officer

1. The disqualifications for directors mentioned in Sub secs. X143.1 and 4143Q.1 shall likewise
apply to officers, except that stated in Items b.2 and b.7.

2. 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/quasi-bank; and the
spouse or relative within the second degree of consanguinity or affinity of any person holding
the position of Manager, Cashier, or Accountant of a branch or office of a
bank/quasi-bank/trust entity is disqualified from holding or being appointed to any of said
positions in the same branch or office.

3. In the case of Universal Banks, Commercial Banks, and Thrift Banks, any appointive or
elective official whether full time or part time, except in cases where such service is incident to
financial assistance provided by the government or government-owned or controlled
corporations or in cases allowed under existing law.

4. In the case of Cooperative Banks, any officer or employee of the Cooperative Development
Authority or any elective public official, except a barangay official.

5. Except as may otherwise be allowed under C.A. No. 108, otherwise known as “The Anti-
Dummy Law”, as amended, foreigners cannot be officers or employees of banks.

Page | 5
When you inspire others to LIVE, LEARN, LAUGH, and LOVE, you do the same for yourself……..

What you can get out of life comes from what you put into it.

Make life as beautiful as your heart.

Page | 6