The Monetary Board, in its Resolution No. 160 dated February 15, 1995, approved the following amendments to Books I and II of the Manual of Regulations for Banks and Other Financial Intermediaries:

SECTION 1. The provisions of Subsec. 1106.1 (Book I) are hereby amended to read, as follows:

"Minimum capital for expanded commercial banks. All expanded commercial banks, including those already in operation as well as those to be established hereafter, shall have capital accounts of at least P2.5 billion each."

Expanded commercial banks which are existing, or which are newly authorized but not yet operating, or banks from which completed applications to operate under an expanded commercial banking authority have been received as of the date of this Circular but pending action by the Bangko Sentral ng Pilipinas (BSP) are hereby granted one (1) year from the date of this Circular within which to meet the above minimum capital requirement: Provided, That they shall submit to the BSP a capital build-up program for this purpose within three (3) months from the date of this Circular."

SECTION 2. The provisions of Subsec. 1106.2 (Book I) are hereby amended to read, as follows:

"Minimum capital for commercial banks. All commercial banks, including those already in operation, as well as those to be established hereafter, shall have capital accounts of at least P1.25 billion each.

Commercial banks which are existing, or which are newly authorized but not yet operating, or persons from whom completed applications to establish commercial banks have been received as of the date of this Circular but pending action by the Bangko Sentral ng Pilipinas (BSP) are hereby granted one (1) year from the date of this Circular within which to meet the above minimum capital requirement: Provided, That they shall submit to the BSP a capital build-up program for this purpose within three (3) months from the date of this Circular."

SECTION 3. The provisions of Subsec. 1106.3 (Book I) are hereby amended to read, as follows:

"Consolidation of net worth of commercial bank and subsidiary investment house. For purposes of meeting the minimum capitalization requirement for expanded commercial banking authority, a commercial bank may be allowed to acquire up to 100% of the equity of an investment house and their combined capital shall be considered for purposes of the minimum capital requirement for expanded commercial banking authority: Provided, That the bank acquires at least seventy per cent (70%) of the paid-in capital and at least seventy per cent (70%) of the voting stock of the investment house: Provided, further, That the amount of the net worth of the investment house which may be consolidated with that of the commercial bank shall be limited to the amount equal to the percentage that the investment of the bank bears to the total net worth of the investment house."

SECTION 4. Subsec. 1106.5 (Book I) of the Manual of Regulations is hereby amended to read, as follows:

"Subsec. 1106.5 Sanctions

a. If an expanded commercial bank fails to meet and/or maintain its required minimum capital after having been required by the Monetary Board to do so, the Monetary Board may withdraw the expanded commercial banking authority granted to such bank or suspend certain aspects of such authority: Provided, That this is without prejudice to the imposition of such other sanctions which may include but need not be limited to those enumerated in Paragraph b hereof, as the Monetary Board may consider warranted under the circumstances: Provided, further, That where the bank concerned is one which was able to comply with the minimum capital required by virtue of the provisions of Subsec. 1106.3, both the bank and subsidiary investment house shall be subject to the appropriate sanctions.

b. Any or all of the following sanctions, among others, may be applied on any private commercial bank (i) which fails to comply with Subsec. 1106.2 until it attains the minimum capital requirement or (ii) having complied, shall fail to maintain thereafter such minimum capital requirement:

1. Suspension of branching privilege;
2. Prohibition against granting of new unsecured loans to DOSRI;
3. Prohibition against declaration of cash dividends;
4. Denial of access to the Bangko Sentral's rediscounting facilities; and
5. Revocation of the authority to accept government deposits and to handle government funds as a result of agency agreements with government agencies such as the Bureau of Internal Revenue (BIR), Bureau of Customs (BOC). The Social Security System (SSS), etc."

SECTION 5. The provisions of Subsec. 2106 (Book II) are hereby amended to read, as follows:

"Minimum capitalization. A thrift bank shall have minimum capital accounts, as follows:

a. With head office within Metro Manila - P150 million

b. With head office outside Metro Manila - P40 million"

SECTION 6. The provisions of Subsec. 2106.1 (Book II) are hereby amended to read, as follows:

"Determination of minimum capital. Each thrift bank shall have minimum combined capital accounts in the amounts stated in Section 2106 hereof. The total of paid-in capital (including government counterpart capital, if any, and paid-in surplus), earned surplus and undivided profits, net of (a) such unbooked valuation reserves and other capital adjustments as may be required by the Bangko Sentral and (b) total outstanding unsecured credit accommodations, both direct and indirect, to directors, officers, all stockholders, and their related interests (DOSRI), shall not be less than the amounts stated in said Section 2106. Any appraisal surplus or appreciation credit as a result of appreciation or an increase in book value of bank assets shall be executed.

SECTION 7. The provisions of Subsec. 2106.2 (Book II) are hereby amended to read, as follows:

"Capital build-up program for thrift banks not meeting the required minimum capital accounts.

a. Thrift banks which are existing, or which are newly authorized but not yet operating, or persons from whom completed applications to establish thrift banks have been received as of the date of this Circular but pending action by the Bangko Sentral ng Pilipinas (BSP) are hereby granted one and a half (1-1/2) years from the date of this Circular within which to meet the above minimum capital requirement: Provided, That they shall submit to the BSP a capital build-up program for this purpose within six (6) months from the date of this Circular."

b. If the prescribed minimum capital accounts will necessitate an increase in the authorized capital stock, the thrift bank shall cause the corresponding amendments to its articles of incorporation, and submit the same to the Bangko Sentral together with its capital build-up program.

c. It shall be the responsibility of the thrift bank's board of directors and senior management to ensure full compliance with the bank's capital build-up program. Any or all of the following sanctions, among others, may be applied on any thrift bank (1) which fails to comply with the minimum capital required under Section 2106 or having complied, shall fail to maintain thereafter such minimum capital requirement or (ii) which fails to submit its capital build-up program within the prescribed deadline or to comply with its approved capital build-up program:

1. Suspension of branching privilege;

2. Prohibition against granting of new unsecured loans to DOSRI;

3. Prohibition against declaration of cash dividends;

4. Denial of access to the Bangko Sentral's rediscounting facilities;

5. Revocation of the authority to accept government deposits and to handle government funds as a result of agency agreements with government agencies such as the Bureau of Internal Revenue (BIR), Bureau of Customs (BOC). The Social Security System (SSS), etc.; and

6. Revocation of the authority to accept or create demand deposits."

SECTION 8. The provisions of Section 2201 (Book II) of the Manual of Regulations are hereby amended to read, as follows:

"Authority to Accept or Create Demand Deposits. Thrift banks which have complied with the minimum capital required under Section 2106 hereof may be authorized to accept or create demand deposits upon submission of application to the Bangko Sentral through the appropriate supervising and examining department.

The total of paid-up capital (including government counterpart capital, if any, and paid-in surplus), earned surplus and undivided profits, net of (a) such unbooked valuation reserves and other capital adjustments as may be required by the Bangko Sentral and (b) total outstanding unsecured credit accommodations, both direct and indirect, to directors, officers, all stockholders, and their related interests (DOSRI), shall not be less than the amount prescribed under Section 2106 hereof. Any appraisal surplus or appreciation credit as a result of appreciation or an increase in book value of bank assets shall be excluded."

This Circular shall take effect immediately.

Adopted: 22 Feb. 1995

(SGD.) GABRIEL C. SINGSON
Governor