BANKING

REGULATIONS
IN THE
PHILIPPINES
 WHAT DOES GENERAL
BANKING LAW GOVERNS?
• Banks shall be classified into:
(a) Universal banks;
(b) Commercial banks;
(c) Thrift banks, composed of: (i) Savings and mortgage banks, (ii) Stock savings and
loan associations, and (iii) Private development banks
(d) Rural banks,
(e) Cooperative banks,
(f) Islamic banks
(g) Other classifications of banks as determined by the Monetary Board of the Bangko
Sentral ng Pilipinas.
 BANKING REGULATIONS
• As to authority to engage
No person or entity shall engage in banking operations or quasi-banking functions
without authority from the Bangko Sentral.
• As to organization
The Monetary Board may authorize the organization of a bank or quasi-bank
subject to the following conditions:
a) That the entity is a stock corporation
b) That its funds are obtained from the public, which shall mean twenty (20) or more
persons
c) That the minimum capital requirements prescribed by the Monetary Board for
each category of banks are satisfied.
 BANKING REGULATIONS
• As to issuance of stocks
 That banks shall issue par value stocks only.
• As to treasury stocks
 No bank shall purchase or acquire shares of its own capital stock or
accept its own shares as a security for a loan, except when authorized by
the Monetary Board.
• As to foreign stockholdings
 Foreign individuals and non-bank corporations may own or control up to
forty percent (40%) of the voting stock of a domestic bank. This rule shall
apply to Filipinos and domestic non-bank corporations.
 BANKING REGULATIONS
• As to board of directors
 There shall be at least five (5), and a maximum of fifteen (15) members of the
board of directors of bank, two (2) of whom shall be independent directors.
• As to compensation and other benefits of directors and
officers
 Monetary Board may regulate the payment by the bank to its directors and
officers of compensation, allowance, fees, bonuses, stock options, profit
sharing and fringe benefits only in exceptional cases and when the
circumstances warrant.
 BANKING REGULATIONS
• As to bank branches
 Universal or commercial banks may open branches or other offices
within or outside the Philippines upon prior approval of the Bangko
Sentral.
• As to powers of Universal Banks
 A universal bank shall have the authority to exercise, in addition to the
powers authorized for a commercial bank in Section 29, the powers of
an investment house as provided in existing laws and the power to
invest in non-allied enterprises
 BANKING REGULATIONS
• As to equity investments of Universal Banks
EQUITY INVESTMENTS PERCENTAGE CAN OWN UP
Financial Allied Enterprises 100%
Non-Financial Allied 100%
Enterprises
Non-Allied Enterprises not exceed thirty-five percent
(35%) of the total equity in that
enterprise nor shall it exceed
thirty-five percent (35%) of the
voting stock in that enterprise
Quasi-Banks 40%
 BANKING REGULATIONS
• As to powers of Commercial Banks
 A commercial bank shall have, in addition to the general powers incident to corporations, all
such powers as may be necessary to carry on the business of commercial banking such as:
i. accepting drafts and issuing letters of credit;
ii. discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences
of debt;
iii. accepting or creating demand deposits;
iv. receiving other types of deposits and deposit substitutes;
v. buying and selling foreign exchange and gold or silver bullion;
vi. acquiring marketable bonds and other debt securities
vii. extending credit
 BANKING REGULATIONS
• As to equity investments of Commercial Banks

EQUITY INVESTMENT PERCENTAGE CAN OWN UP

Financial Allied Enterprises 100%

Non-Financial Allied
100%
Enterprises
 BANKING REGULATIONS
• Key foundation of the banking system's strength
 Pursuit of proactive reforms on risk management practices,
capital build-up, corporate governance, financial inclusion,
financial literacy and consumer protection.
 Implements a comprehensive risk-based approach that is
aligned with international best practices.
 Focused on assuring the financial public of the safety and
soundness of individual banks.
 BANKING REGULATIONS
• Safety and Soundness Regulation
 Well-trained (onsite) bank examiners and (offsite) bank supervisors
periodically assess whether banks have the requisite overall
governance framework to manage emerging risks.
 Take appropriate enforcement actions against individual banks and
their personnel for violation of banking laws and regulations as well
as non-compliance with minimum regulatory standards on
governance, risk management and market conduct.
 BANKING REGULATIONS
• Safety and Soundness Regulation
 Established a Financial Stability Committee made up of senior
officials while the Financial Stability Coordination Council is made up
of the Securities and Exchange Commission, the Insurance
Commission, the Philippine Deposit Insurance Corporation, the
Department of Finance, the Bureau of Treasury, and the BSP.
• Monetary Policy Regulation
 Reduction in the reserve requirement ratio.
 BANKING REGULATIONS
• Monetary Policy Regulation
Universal/Commercial Banks 14%

Non-Bank Financial Institutions and

14%
Quasi-Banking Functions

Thrift Banks 4%
GUIDELINES ON THE
ESTABLISHMENT OF
BANKS
 ESTABLISHMENT OF
DOMESTIC BANKS
• Two-Phased Approach of the grant of new domestic
banking licenses
 Phase 1: Liberalization, the grant of new universal/commercial
banking license shall be allowed in connection with the upgrading of
an existing domestic thrift bank.
 Phase 2: Moratorium on the establishment of new domestic banks
shall be fully lifted and locational restrictions shall be fully liberalized
starting on January 2018.
 ESTABLISHMENT OF
DOMESTIC BANKS
• Application fees and License fees
BANK CATEGORY APPLICATION FEE LICENSE FEE
Universal Banks ₱500,000 ₱25 Million
Commercial Banks ₱400,000 ₱20 Million
Thrift Banks
• Head office in NCR ₱100,000 ₱5 Million
• Head office in all
Other Areas Outside ₱40,000 ₱2 Million
NCR
 ESTABLISHMENT OF
DOMESTIC
BANK CATEGORY
BANKS
APPLICATION FEE LICENSE FEE
Rural and Cooperative
Banks
• Head Office in NCR ₱10,000 ₱500,000
• Head Office Outside
NCR (Cities up to
₱4,000 ₱200,000
3rd class
municipalities)
• Head Office Outside
NCR (Cities up to
₱2,000 ₱100,000
4th-6th class
municipalities
 ESTABLISHMENT OF
DOMESTIC BANKS
• Minimum Capital Requirements
BANK CATEGORY REQUIRED CAPITAL
Universal Banks
• Head Office Only ₱3 Billion
• Up to 10 branches ₱6 Billion
• 11-100 branches ₱15 Billion
• More than 100 branches ₱20 Billion
Commercial Banks
• Head Office Only ₱2 Billion
• Up to 10 branches ₱4 Billion
• 11-100 branches ₱10 Billion
• More than 100 branches ₱15 Billion
 ESTABLISHMENT OF
DOMESTIC BANKS
• Minimum Capital Requirements
BANK CATEGORY REQUIRED CAPITAL
Thrift Banks (NCR)
• Head Office Only ₱500 Million
• Up to 10 branches ₱750 Million
• 11-50 branches ₱1 Billion
• More than 50 branches ₱2 Billion
Thrift Banks (Outside NCR)
• Head Office Only ₱200 Million
• Up to 10 branches ₱300 Million
• 11-50 branches ₱400 Million
• More than 50 branches ₱800 Million
 ESTABLISHMENT OF
DOMESTIC BANKS
• Minimum Capital Requirements
BANK CATEGORY REQUIRED CAPITAL
Rural and Cooperative Banks (NCR)
• Head Office Only ₱50 Million
• Up to 10 branches ₱75 Million
• 11-50 branches ₱100 Million
• More than 50 branches ₱200 Million
Rural and Cooperative Banks
(Outside NCR 3rd Class
Municipalities) ₱20 Million
• Head Office Only ₱30 Million
• Up to 10 branches ₱40 Million
• 11-50 branches ₱80 Million
• More than 50 branches
 ESTABLISHMENT OF
DOMESTIC BANKS
• Minimum Capital Requirements
BANK CATEGORY REQUIRED CAPITAL
Rural and Cooperative Banks
(Outside NCR 4TH-6th Class
Municipalities
₱10 Million
• Head Office Only
₱15 Million
• Up to 10 branches
₱20 Million
• 11-50 branches
₱40 Million
• More than 50 branches
ESTABLISHMENT OF FOREIGN
BANKS
• Foreign banks may operate in the Philippines through any
one (1) of the following modes of entry:
Mode 1: By acquiring, purchasing or owning up to 100% of
the voting stock of an existing domestic bank.
Mode 2:By investing in up to 100% of the voting stock of a
new banking subsidiary incorporated in the Philippines.
Mode 3:By establishing branches with full banking authority.
ESTABLISHMENT OF FOREIGN
BANKS
BEFORE R.A. NO. 10641
Acquisition of 60% of the voting
stocks in a domestic bank
Investment in up to 60% of the voting
stocks in new banking subsidiary
Establishment of foreign bank
branch with full banking authority
UNDER R.A. NO. 10641
Acquisition of 100% of the voting
stocks in a domestic bank
Investment in up to 100% of the
voting stocks in new banking
subsidiary
Establishment of foreign bank
branch with full banking authority
ESTABLISHMENT OF FOREIGN
BANKS
• What are the applicable fees in establishing
presence in the Philippines
 Foreign bank applicant shall pay a non-refundable fee of ₱500,000.
 Pay a license fee of ₱25 Million, net of the previously paid ₱500,000.
 ESTABLISHMENT OF FOREIGN
BANKS
• Capital Requirements
MINIMUM CAPITAL MINIMUM CAPITAL

TIER UNIVERSAL BANKS COMMERCIAL BANKS

Head Office only ₱3 billion ₱2 billion

Up to 10 branches ₱6 billion ₱4 billion

11-100 branches ₱15 billion ₱10 billion

More than 100 branches ₱20 billion ₱15 billion

ESTABLISHMENT OF FOREIGN
BANKS
• Risk-based capital adequacy ratio
 10% CAR
 6% Common Equity Tier 1
 7.5% Tier 1 Capital Ratios
RISK-BASED
CAPITAL
ADEQUACY
FRAMEWORK
 Implementation of Basel I
 Basel I
 Named the 1988 basel accord. The main purpose of basel
accord is to regulate the provision of capital in order to
recuperate losses from credit risks (are risks that a
borrower of money may not make payment/s for loan
acquired). Basel accord I is concerned with the regulating
of credit risks in banking.
 Implementation of Basel II
 Basel II
 For further improvements of basel I, basel II is introduced. Its main
purpose is to regulate banks to maintain capital for banking risks,
that are: Credit risks, market risks, and operational risks.
• Credit - Non-payment of borrowers of loan.
• Market - losses originating from investments due to factors in the
financial markets.
• Operational - risks from, system errors, human interference, change
in organization structure, and other factors.
 Implementation of Basel III
 Basel III
Lastest improvement in the basel accord. This is to ensure
that banks can improve in coping up with losses. It has also
been added here that banks need to provide capital
conversation buffer which is to conserve a bank's capital by
having capital buffer (additional capital aside from other
capital requirements.
 REGULATORS
OF THE BANKS
IN THE
PHILIPPINES
 WHICH REGULATORY AUTHORITIES ARE PRIMARILY
RESPONSIBLE FOR OVERSEEING BANKS?

• Bangko Sentral ng Pilipinas (BSP)

• Philippine Deposit Insurance Corporation
(PDIC)
1. BANGKO SENTRAL NG PILIPINAS
(BSP)
• The BSP is the specialized government agency that
provides policy directions in the areas of money, banking,
and credit. It supervises the operations of banks and
regulates the operation of finance companies and non-
bank financial institutions performing quasi-banking
functions and those performing similar functions.
1. BANGKO SENTRAL NG PILIPINAS
(BSP)
• The fundamental roles of the BSP are:
(a) as central monetary authority;
(b) as banker and adviser of the national government, and
(c) as the banker of banks.
• The BSP acts through the Monetary Board, which is composed of seven members,
five of whom are from the private sector and the other two from the government.
• The BSP Governor, the chief executive of the BSP, acts through three Deputy
Governors, one for each of the three sectors of the BSP – the Monetary Stability
Sector, the Supervision and Examination Sector, and the Resource Management
Sector.
2. PHILIPPINE DEPOSIT INSURANCE
CORPORATION
(PDIC)
• PDIC is a government instrumentality created in 1963 by
virtue of Republic Act 3591 to insure the deposits of all
banks. PDIC exists to protect depositors by providing
deposit insurance coverage for the depositing public and
help promote financial stability.
 THANK YOU☺
Prepared By:
Figueroa, Brian
Calong, Agnes
Fonte, Emerlyn Charlotte