The Monetary Board in its Resolution No. 285 dated 16 February 2001, approved the following guidelines on the adoption in the Philippines of the risk-based capital adequacy framework pursuant to Section 34 of the General Banking Law of 2000.  The guidelines shall initially cover only capital requirements for credit risks pending issuance of supplementary guidelines to incorporate market risk.  Upon effectivity, the guidelines shall replace the existing provisions of Section X116 and its subsections of the Manual of Regulations for Banks, which are hereby revised to read, as follows.

"Sec. X116 Minimum Ratio - The risk-based capital ratio of a bank, expressed as a percentage of qualifying capital to risk-weighted assets, shall not be less than ten percent (10%) for both solo basis (head office plus branches) and consolidated basis (parent bank plus subsidiary financial allied undertakings, but excluding insurance companies).

The ratio shall be maintained daily

X 116 1 Qualifying Capital - The qualifying capital shall be the sum of --

a. Tier 1 (core) capital -

1. Paid-up common stock;
   
2. Paid-up perpetual and non-cumulative preferred stock;
   
3. Common stock dividends distributable;
   
4. Perpetual and non-cumulative preferred stock dividends distributable;
   
5. Surplus;
   
6. Surplus reserves;
   
7. Undivided profits (for domestic banks only); and
   
8. Minority interest in the equity of subsidiary financial allied undertakings which are less than wholly-owned: Provided, That a bank shall not use minority interests in the equity accounts of consolidated subsidiaries as avenue for introducing into its capital structure elements that might not otherwise qualify as Tier 1 capital or that would, in effect, result in an excessive reliance on preferred stock within Tier 1:

Provided, further, That the following items shall be deducted from the total of Tier 1 capital:

1. Common stock treasury shares,
   
2. Perpetual and non-cumulative preferred stock treasury shares;
   
3. Net unrealized losses on underwritten listed equity securities purchased;
   
4. Unbooked valuation reserves and other capital adjustments based on the latest report of examination as approved by the Monetary Board;
   
5. Total outstanding unsecured credit accommodations, both direct and indirect, to directors, officers, stockholders and their related interests (DOSRI);
   
6. Deferred income tax; and
   
7. Goodwill; and

b. Tier 2 (supplementary) capital which shall be the sum of-

b. 1 Upper Tier 2 capital-

1. Paid-up perpetual and cumulative preferred stock;
   
2. Paid-up limited life redeemable preferred stock;
   
3. Perpetual and cumulative preferred stock dividends distributable.
   
4. Limited life redeemable preferred stock dividends distributable,
   
5. Appraisal increment reserve - bank premises, as authorized by the Monetary Board;
   
6. Net unrealized gains on underwritten listed equity securities purchased. Provided, That the amount thereof that may be included in upper Tier 2 capital shall be subject to a 55% discount,
   
7. General loan loss provision Provided.  That the amount thereof that may be included in upper Tier 2 capital shall be limited to a maximum of 1 25% of gross risk-weighted assets and any amount in excess thereof shall be deducted from the total risk weighted assets in computing the denominator of the risk-based capital ratio;
   
8. With prior BSP approval, unsecured subordinated debt with a minimum original maturity of at least ten (10) years, subject to the following conditions

i. It must not be secured nor covered by a guarantee of the issuer or related party

ii. It must be subordinated in the right of payment of principal and interest to all depositors and other creditors of the bank, except those creditors expressed to rank equally with, or behind holders of the debt.  Subordinated creditors must waive their right to set off any amounts they owe the bank against subordinated amounts owed to them by the bank.  The issue documentation must clearly state that the debt is subordinated;

iii. It must be fully paid-up.  Only the net proceeds actually received from debt issues can be included as capital.  If the debt is issued at a premium, the premium cannot be counted as part of capital,

iv. It must not be redeemable at the initiative of the holder;

v. It must not contain any clause which requires acceleration of payment of principal, except in the event of insolvency;

vi. It must not be repayable prior to maturity without the prior consent of the BSP; Provided, that repayment may be allowed only if --

- The bank's capital ratio is at least equal to the required minimum capital ratio; and

- The debt is simultaneously replaced with issues of new capital which is neither smaller in size nor of lower quality than the original issue;

vii. It may allow a moderate step-up in the interest rate in conjunction with a call option, only if the step-up occurs at a minimum of five (5) years after the issue date and if it results in an increase over the initial rate that is not more than 100 basis points or 50% of the initial credit spread, provided that only one (1) rate step up shall be allowed over the life of the instrument;

viii. It must provide for possible conversion into common shares or preferred shares or possible deferral of payment of principal and interest if bank's capital ratio becomes less than the required minimum capital ratio;

ix. It must provide for the principal and interest on the debt to absorb losses where the bank would not otherwise be solvent',

x. it must allow deferment of interest payment on the debt in the event of, and at the same time as, the elimination of dividends on all outstanding common or preferred stock of the issuer.  It is acceptable for the deferred interest to bear interest, but the interest rate payable on deferred interest should not exceed market rates;

xi It must be underwritten by a third party not related to the issuer bank nor acting in reciprocity for and in behalf of the issuer bank;

xii. It must be issued in minimum denominations of at least five hundred thousand pesos (P500.000 00) or its equivalent: and

xiii. It must clearly state on its face that it is not a deposit and is not insured by the Philippine Deposit Insurance Corporation (PDIC); "

Provided, that it shall be subject to a cumulative discount factor of 20% per year during the last five (5) years to maturity (i.e., 20% if the remaining life is 3 years to less than 40% if the remaining life is 3 years to less than 4 years, etc.): Provided, further, That where it is denominated in a foreign currency, it shall be revalued periodically (at least monthly) in Philippine peso at prevailing exchange rate using the same exchange rate used for revaluation of foreign currency-denominated assets, liabilities and forward contracts under existing regulations: Provided, furthermore, That, for purposes of reserve requirement regulation, it shall not be treated as time deposit liability, deposit substitute liability or other forms of borrowings;

9.      Deposit for common stock subscription; and

10.    Deposit for perpetual and non-cumulative preferred stock subscription;

Provided, That the following items shall be deducted from the total of upper Tier 2 capital:

1.      Perpetual and cumulative preferred stock treasury shares;
2.      Limited life redeemable preferred stock treasury shares; and
3.      Sinking fund for redemption of limited life redeemable preferred stock; and

b.2 Lower Tier 2 capital -

1. Unsecured subordinated debt with a minimum original maturity of at least five (5) years, subject to the following conditions;

i. It must not be secured nor covered by a guarantee of the issuer or related party;

ii. It must be subordinated in the right of payment of principal and interest to all depositors and other creditors of the bank, except those creditors expressed to rank equally with, or behind holders of the debt Subordinated creditors must waive their right to set off any amounts they owe the bank against subordinated amounts owed to them by the bank.  The issue documentation must clearly state that the debt is subordinated;

iii. It must be fully paid-up.  Only the net proceeds actually received from debt issues can be included as capital.  If the debt is issued at a premium, the premium cannot be counted as part of capital;

iv. It must not be redeemable at the initiative of the holder;

v. It must not contain any clause which requires acceleration of payment of principal, except in the event of insolvency;

vi. It must not be repayable prior to maturity without the prior consent of the BSP: Provided, That repayment may be allowed only if --

- The bank's capital ratio is at least equal to the required minimum capital ratio;

and

- The debt is simultaneously replaced with issue of new capital which is neither smaller in size nor of lower quality than the original issue;

vii. It may allow a moderate step-up in the interest rate in conjunction with a call option, only if the step-up occurs at a minimum of five (5) years after the issue date and if it results in an increase over the initial rate that is not more than 100 basis points or 50% of the initial credit spread, provided that only one (1) rate step up shall be allowed over the life of the instrument;

viii. It must be underwritten by a third party not related to the issuer bank nor .acting in reciprocity for and in behalf of the issuer bank;

ix. lt must be issued in minimum denominations of at least five hundred thousand  pesos (P500.000.00) or its equivalent; and

x. it must clearly state on its face that it is not a deposit and is not insured by the -Philippine Deposit Insurance Corporation (PDIC):

Provided, further. That it shall be subject to a cumulative discount factor of 20% per year during the last five (5) years to maturity (i.e., 20% if the remaining life is 4 years to less than 5 years, 40% if the remaining life is 3 years to less than 4 years, etc): Provided, furthermore, That where it is denominated in a foreign Currency, it shall be revalued periodically (at least monthly) in Philippine peso using the same exchange rate used for revaluation of foreign currency-denominated assets, liabilities and forward contracts under existing regulations; Provided, furthermore, That, for purposes of reserve requirement regulation, it not be treated as equivalent to a time deposit liability, deposit substitute or other forms of borrowings;

2. Deposit for perpetual and cumulative preferred stock subscription; and
3. Deposit for limited life redeemable preferred stock subscription;

Provided, That the total amount of lower Tier 2 capital that may be included in the Tier 2 capita! shall be limited to a maximum of 25% of total Tier 1 capital (net of deductions therefrom): Provided, further, That the total amount of upper and lower Tier 2 capital that may be included in the qualifying capital shall be limited to a maximum of 50% of total Tier 1 capital (net of deductions therefrom);

c. Less deductions from the total of Tier 1 and Tier 2 capital, as follows:

1. Investments in equity of unconsolidated subsidiary banks and other financial allied undertakings, but excluding insurance companies;

2. Investments in debt capital instruments of unconsolidated subsidiary banks;

3. Investments in equity of subsidiary insurance companies and non-financial allied undertakings; and

4. Reciprocal investments in equity and debt capital instruments of other banks ' enterprises:

Provided, That any asset deducted from the qualifying capital in computing the numerator of the risk-based capital ratio shall not be included in the risk-weighted assets in computing the denominator of the ratio.

For foreign bank branches, Tier 1 capital elements shall consist of -

1. Assigned capital; and
2. Net due "to" head office, branches, subsidiaries and other offices outside the Philippines (inclusive of earnings not remitted to head office per Subsec X121.5.C), less the same deductions from Tier 1 capital of domestic banks: Provided, That the amount of "Net due to account" shall be limited to an amount prescribed under Subsec. X121.6: Provided, further, That should there be any "Net due from account", the same shall be deducted from the Tier 1 capital."

X116.2 Risk-Weighted Assets - The risk-weighted assets shall be determined by assigning risk weights to amounts of on-balance sheet assets and to credit equivalent amounts of off-balance sheet items (inclusive of derivative contracts): Provided, That the following shall be deducted from the total risk-weighted assets:

1. General loan loss provision (in excess of the amount permitted to be included in upper Tier 2 capital); and

2. Unbooked valuation reserves and other capital adjustments affecting asset accounts based on the latest report of examination as approved by the Monetary Board.

a. For on-balance sheet assets, the risk-weighted amount shall be the product of the book value of asset multiplied by the risk weight associated with that asset, as follows:

0% risk weight -

1. Cash on hand;
2 Claims on or portions of claims guaranteed by or collateralized by securities issued by

i. Philippine national government and BSP; and
ii Central governments and central banks of foreign countries with the highest credit quality as defined in Subsec. X116.3;

3. Loans to the extent covered by hold-out on, or assignment of deposits/deposit substitutes maintained with lending bank;

4. Loans or acceptances under letters of credit to the extent covered by margin deposits,

5. Portions of special time deposit loans covered by Industrial Guarantee and Loan Fund (IGLF) guarantee,

6. Real estate mortgage loans to the extent guaranteed by the Home Guaranty Corporation (HGC);

7. Loans to the extent guaranteed by the Trade and Investment Development Corporation of the Philippines (TIDCORP).

8. Loans to exporters to the extent guaranteed by the Government Fund for Small and Medium Enterprises (GFSME),

9       Foreign currency notes and coins on hand acceptable as international reserves: and

10     .Gold bullion held either in own vaults, or in another s vaults on an allocated basis, to the extent it is offset by gold bullion liabilities;

20% risk weight -

1. Checks and other cash items,
2. Claims on or portions of claims guaranteed by or collateralized by securities issued by non-central government public sector entities of foreign countries with the highest credit quality as defined in Subsec. X116.3;
3. Claims on or portions of claims guaranteed by Philippine incorporated banks/quasi-banks with the highest credit quality as defined in Subsec. X116.3;
4. Claims on or portions of claims guaranteed by foreign incorporated banks with the highest credit quality as defined in Subsec. X116.3;
5. Claims on or portions of claims guaranteed by or collateralized by securities issued by multilateral development banks,
6. Loans to exporters to the extent guaranteed by Small Business Guarantee and Finance Corporation (SBGFC); and
7. Foreign currency checks and other cash items denominated in currencies acceptable as international reserves;

50% risk weight -

1       Loans for housing purpose, fully secured by first mortgage on residential property that is or will be occupied or leased out by the borrower, and

100% risk weight--

All other assets including, among others, the following

b. For off-balance sheet items, the risk-weighted amount shall be calculated using a two-step process.  First, the credit equivalent amount of an off-balance sheet item shall be determined by multiplying its notional principal amount by the appropriate credit conversion 1 factor, as follows:

100% credit conversion factor -

This shall apply to direct credit substitutes, e.g., general guarantees of indebtedness (including standby letters of credit serving as financial guarantees for loans and securities) and acceptances (including endorsements with the character of acceptances), and shall include:


This shall also apply to sale and repurchase agreements and asset sales with recourse where the credit risk remains with the bank (to the extent not included in the balance sheet), as welt as to forward asset purchases, forward forward deposits and partly-paid shares and securities which represent commitments with certain drawdown: Provided, That these items shad be weighted according to the type of counterparty with whom the transaction has been entered into

50% credit conversion factor -

This shad apply to certain transaction-related contingent items, eg , performance bonds, bid bonds, warranties and standby letters of credit related to particular transactions, and shall include -


20% credit conversion factor -

This shall apply to commitments with an original maturity of up to one (1) year, or which can be unconditionally cancelled at any time, and shall include -

1. Committed credit line for commercial paper issues.

This shall also apply to those not involving credit risk, and shall include -

1. Inward bills for collection,
   
2. Outward bills for collection;
   
3. Items held for safekeeping/custodianship;
   
4. Trust department accounts
   
5. Late deposits/payments received
   
6. Items held as collaterals;
   
7. Traveler's checks; etc

Second, the credit equivalent amount shall be treated like any on-balance sheet asset and shall be assigned the appropriate risk weight, i.e., according to the obligor, or if relevant, the qualified guarantor or the nature of collateral.

c. For derivative contracts, the credit equivalent amount shall be the sum of the current credit exposure (or replacement cost) and an estimate of the potential future credit exposure (or add-on): Provided, That the following shall not be included in the computation:

1. Instruments which are traded on exchange where they are subject to daily receipt and payment of cash variation margin, and
   
   
2. Exchange rate contracts with original maturity of 14 calendar days or less

The current credit exposure shall be the positive mark-to-market value of the contract (or zero if the mark -to-market value is zero or negative) The potential future credit exposure shall be the product of the notional principal amount of contract multiplied by the appropriate potential future credit conversion factor, as indicated below

Residual Maturity

Interest Rate Contract

Exchange Rate Contract

One (1) year or less

0.0%

1 0%

Over one (1) year to five (5) years

0.5%

5.0%

Over five (5) years

1.5%

7.5%

Provided, That for contracts with multiple exchanges of principal, the factors are to be multiplied by the number of remaining payments in the contract: Provided, further, That for contracts that are structured to settle outstanding exposure following specified payment dates and where the terms are reset such that the market value of the contract is zero on these specified dates, the residual maturity would be set equal to the time until the next reset date, and in the case of interest rate contracts with remaining maturities of more than one (1) year that meet these criteria, the potential future credit conversion factor is subject to a floor of five tenths percent (0.5%): Provided, furthermore, That no potential future credit exposure shall be calculated for single currency floating/floating interest rate swaps, i.e., the credit exposure on these contracts would be evaluated solely on the basis of their mark-to-market value.

The credit equivalent amount shall be treated like any on-balance sheet asset, and shall be assigned the appropriate risk weight, i.e., according to the obligor, or if relevant, the qualified guarantor or the nature of collateral: Provided, That a 50% risk weight shall be applied in respect of obligors which would otherwise attract a 100% risk weight
The extent to which a claim is guaranteed/collaterafized shall be determined by the amount of guarantee coverage/current market value of securities pledged, in comparison with the book value of the on-balance sheet asset or the notional principal amount of the off-balance sheet exposure, except for derivative contracts for which determination is generally made in relation to credit equivalent amount."

X116.3 Definitions -

a.  Amount due from the BSP - This refers to all deposits of the reporting bank with the BSP.

b.  Appraisal increment reserve -This shall form part of capital only if authorized by the Monetary Board.

c.  Bank premises, furniture, fixtures and equipment net of depreciation - This refers to the cost of land and improvements used as bank premises, and furniture, fixtures and equipment owned by the bank.

d.  Cash on hand - This refers to total cash held by the bank consisting of both notes and coins in Philippine Currency.

e.  Central government of a foreign country - This refers to the central government which is regarded as such by a recognized banking supervisory authority in that country.

f.   Claims - This refer to loans or debt obligations of the entity on whom the claim is held, and shall include, but shall not be limited to, the following accounts, inclusive of accumulated market gains/flosses) and accumulated bond discount /(premium amortization), and net of specific allowance for probable losses:

1. Due from BSP;
   
2. Due from other banks;
   
3. Interbank loans receivable;
   
4. Loans and discounts;
   
5. Agrarian reform and other agricultural credit loans - P.O. 717;
   
6. Development incentive loans;
   
7. Bills purchased;
   
8. Customer's liability on bills/drafts under LCs/TRs;
   
9. Customer's liability for this bank's acceptance outstanding;
   
10. Restructured loans;
    
11. Trading account securities - loans;
    
12. Underwriting accounts - debt securities (for UBs);
    
13. Underwriting accounts - equity securities (for UBs);
    
14. Trading account securities - investments;
    
15.  Trading account securities - equity (for UBs),
    
16. Available for sale securities - equity (for UBs);
    
17. Investments in bonds and other debt instruments; and
    
18. Others, e.g., accounts receivable and accrued interest receivable.

Accruals on a claim shall be classified and risk weighted in the same way as the claim. Bills purchased shall be classified as claims on the drawee banks.

g. Consolidated basis - This refers to combined statement of condition of parent bank and subsidiary financial allied undertakings, but excluding insurance companies.

h. Debt capital instruments - This refers to unsecured subordinated term debt instruments qualifying as capital of banks.

i. Equity investments - This refers to investments in capital stock of companies, firms or enterprises, made for purposes of control, affiliation or other continuing business advantage.

j. Exchange rate contracts - This includes cross-currency interest rate swaps, forward foreign exchange contracts, currency futures, currency options purchased and similar instruments.

k. Financial allied undertakings - This refers to enterprises or firms with homogenous or similar activities/business/functions with the financial intermediary and may include but not limited to leasing companies, banks, investment houses, financing companies, credit card companies, financial institutions catering to small and medium scale industries (including venture capital corporations), companies engaged in stock brokerage/securities dealership, companies (for UBs) and such other similar activities as the Monetary Board may declare as appropriate from time to time, but excluding insurance companies.

l. Foreign country/foreign incorporated bank and Philippine Incorporated bank/quasi-ban/c with the highest credit quality - This refers to a foreign country/foreign incorporated bank and Philippine incorporated bank/quasi-bank given the highest credit rating of any two (2) of the following internationally accepted rating agencies:

Rating Agency	Highest Rating
1. Moody's	œAa3" and above
2. Standard and Poor's	œAA- œ and above
3. Fitch IBCA	œAA- œ and above
4. Others as may be approved by the Monetary Board

m. Forward asset purchases - This refers to a commitment to purchase a loan, secu rity or other asset at a specified future date, usually on pre-arranged terms.

n. Forward forward deposits - This refers to an agreement between two (2) parties whereby one will pay and the other will receive an agreed rate of interest on a deposit to be placed by one party with the other at some predetermined date in the future.

o. Gold bullion held in another's vault on an allocated basis - This refers to gold bullion held by others to the order to the bank, and which is separately ascertain able.

p. Goodwill - This refers to an intangible asset that represents the excess of the purchase price over the fair market value of identifiable assets acquired less liabilities assumed in acquisitions accounted for under the purchase method of accounting.

q. Interest rate contracts - This includes single-currency interest rate swaps, basis swaps, forward rate agreements, interest rate futures, interest rate options purchased and similar instruments.

r. Loans for housing purpose, fully secured by first mortgage on residential property that is or will be occupied or leased out by the borrower - This shall not include loans to companies engaged in speculative residential building or property development.

s. Loans or acceptances under letters of credit to the extent covered by margin deposits - This shall not include the unnegotiated letters of credit or unutilized portion thereof, or other items booked against under contingent accounts.  This shall also not include margin deposits against loans or acceptance accounts which are fully liquidated.

t. Loans to the extent covered by hold-out on, or assignment of, deposits or deposit substitutes maintained in the lending bank.  A loan shall be considered as secured by a holdout on, or assignment of deposit or deposit substitute only if such deposit or deposit substitute account is covered by a hold-out agreement or deed of assignment signed by the depositor or investor/placer in favor of the bank.  This shall not include loans transferred to/ carried by the bank's trust department secured by deposit hold-out/assignment.

u. Multilateral development banks - This refers to International Bank for Reconstruction and Development, Inter-American Development Bank, Asian Development Bank, African Development Bank, European Investment Bank and European Bank for Reconstruction and Development.

v. Non-central government public sector entity of a foreign country - This refers to entities which are regarded as such by a recognized banking supervisory authority in the country in which they are incorporated.

w. Note issuance facilities and revolving underwriting facilities - This refers to an arrangement whereby a borrower may draw down funds up to a prescribed limit over an extended period by repeated issues to the market of promissory notes which the bank committed to underwrite.

x. Other commitments - This includes undrawn portion of any binding arrangements which obligate the bank to provide funds at some future date.

y. Other commitments with an original maturity of up to one (1) year - This includes any revolving or undated open-ended commitments, e.g., overdrafts or unused credit lines, providing that they can be unconditionally cancelled at any time and subject to credit revi sion at least annually.

z. Partly-paid shares and securities - This arises where only a part of the issue price or nominal face value of a security purchased has been subscribed and the issuer may call for the outstanding balance (or a further installment) , either on a date predetermined at the -lime of issue, or at an unspecified future date.

aa. Perpetual preferred stock - This refers to preferred stock that does not have a maturity date, that cannot redeemed at the option of the holder of the instrument, and that has no provision that will require future redemption of the issue. Consistent with these provisions, any perpetual preferred stock with a feature permitting redemption at the option of the issuer may qualify as capital only if the redemption is subject to prior approval of the BSP.

bb. Philippine local government units - This refers to the Philippine government units below the level of national government, such as city, provincial, and municipal governments.

cc. Philippine national government - This shall refer to the Philippine national government and their agencies such as departments, bureaus, offices, and instrumentalities, but excluding government-owned or controlled commercial corporations.

dd. Private sector - This refers to entities other than banks and governments.  This shall also include commercial companies owned by the public sector, such as government-owned or controlled commercial corporations.

ee. Redeemable preferred stock - This refers to preferred stock which under existing regulation may be redeemed at the specific dates or periods fixed for redemption, only upon prior approval of the BSP and only if the shares redeemed are replaced with at least an equivalent amount of newly paid-in shares so that the total paid-in capital stock is maintained at the same level immediately prior to redemption' Provided, That redemption shall not be earlier than five (5) years after the date of issuance: Provided, further, That such redemption may not be made where the bank is insolvent if such redemption will cause insolvency, impairment of capital or inability of the bank to meet its debts as they mature.

ff. Sale and repurchase agreements and asset sales with recourse - This refers to arrangements whereby a bank sells a loan, security or fixed asset to a third party with a Commitment to repurchase the asset after a certain time, or in the event to a certain contingency.

gg. Solo basis - This refers to combined statement of condition of head office and | branches.

hh. Subsidiary- This refers to a corporation or firm more than 50% of the outstanding voting stock of which is directly or indirectly owned, controlled or held with the power to vote by a bank.

ii. Treasury shares - This refers to shares of the parent bank held by a subsidiary financial allied undertaking in a consolidated statement of condition."

X116.4 Required Reports - Banks shall submit a report of their risk-based capital ratio on a solo basis (head office plus branches) monthly and on a consolidated basis (parent bank plus subsidiary financial allied undertakings, but excluding insurance companies) quarterly to the appropriate supervising and examining department of the BSP in the attached prescribed forms within the deadlines, i.e., 15 banking days after end of reference month and 30 banking days after the end of the reference quarter, respectively.

X116.5 Sanctions - Whenever the capital accounts of a bank are deficient with respect to the prescribed net worth to risk assets ratio, the Monetary Board after considering a report of the appropriate supervising and examining department of the BSP on the state of solvency of the institution concerned, shall limit or prohibit the distribution of the net profits and shall require that part or all of net profits be used to increase the capital accounts of the bank until the minimum requirement has been met.  The Monetary Board may restrict or prohibit the making of new investments of any sort by the bank, with the exception of purchases of readily marketable evidences of indebtedness issued by the Philippine national government and BSP included in Item a(2) i of Subsec. X116.2, until the minimum requirement capital ratio has been restored."

X116.6 Temporary Relief - In case of a bank merger, or consolidation, or when a bank is under rehabilitation under a program approved by the BSP, 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 for a maximum period of one (1) year."

This Circular shall take effect on 1 July 2001. Banks shall, however, be required to submit trial reports using the new report format commencing on end-April 2001 report until the effectivity of this Circular.

Adopted: 29 March 2001

(SGD.) RAFAEL B. BUENAVENTURA
Governor