The Monetary Board, in its Resolution No. 1923 dated 16 November 2017, approved  the Revised  Guidelines  on the Imposition  of Monetary  Penalties  on Bangko  Sentral Supervised  Financial  Institutions  (BSFIs),  their Directors/ Trustees  and/or  Officers  (DTOs)  for  Violations  with  Sanctions  Falling  under Section  37 of Republic  Act (R.A.)  No. 7653  (The New  Central  Bank  Act) and Other Applicable Laws.

This   Circular   covers   the   imposition   of  monetary   penalties   on   BSFIs, particularly,   banks   and  quasi-banks   (QBs)  including   their  subsidiaries   and affiliates engaged in allied activities^[1] , non-stock savings and loan associations (NSSLAs)^[2] , other non-bank institutions with trust license, and/or their DTOs, for violations falling under Section 3l of R.A. No. 7653 and other applicable laws and Bangko Sentral regulations. It does not apply to those instances where specific monetary penalties have been provided under applicable laws or other Bangko Sentral rules and regulations.

This Circular also covers guidelines on appeal/request for reconsideration, collection and payment of monetary penalties arising from all types of violations including those covered by specific monetary penalties found in applicable laws or other Bangko Sentral rules and regulations.

Section  1. Section  X902  of the  Manual  of Regulations  for  Banks  (MORB)  is hereby amended as follows:

œSec. X902 Payment of Monetary Penalties and Other Charges. The following regulations shall govern the payment of monetary penalties and other charges by banks, and/or their directors and/or officers. 

Section 2. Subsection X902.1 of the MORB is hereby amended as follows:

œSubsec. X902.1 Guidelines on the imposition of monetary penalties.

a.     Statement of Policy

The Bangko Sentral recognizes  the need to impose monetary  penalties  as one  of the possible  sanctions  to hold  banks,  and/or  their  directors  and/or officers accountable for their conduct and to deter the future commission of violations.

This  Subsection  sets  forth  the  guidelines  in  the  imposition  of  monetary penalties  as  may  be  warranted  under  the  circumstances   based  on  the following general principles laid down in the Bangko Sentral Supervisory Enforcement Policy provided under Section X009 of the MORB taking into consideration their impact on the bank ™s financial condition:

(1)  Root cause diagnosis;

(2) Consistently  matching  the  severity  of  enforcement  action  to  the supervisory issue;

(3)  Successive or simultaneous deployment of enforcement actions; (4)  Monitorability and follow-through; and

(5)  Escalation of enforcement actions.

Accordingly, the Bangko Sentral may impose monetary penalties, singly or together with non-monetary sanctions, if appropriate, even at the outset or as an escalated sanction.

b.     The following are the guidelines on the imposition of monetary penalties on banks,  and/or  their  directors  and/or  officers  and  the  payment  of  such monetary penalties and other charges:

(1)  Banks,   and/or  their  directors   and/or  officers   shall  be  imposed   the monetary penalties prescribed under applicable laws or other Bangko Sentral rules and regulations.

In the absence of provision on monetary penalty for the violation/offense, banks and/or their directors and/or officers may be imposed a maximum monetary  penalty  of  P30,000.00  per  calendar  day  for  each  violation/ offense in accordance with the following schedule:

Asset Size

U p to  P20 0  million

Above  P200
  million but not xceeding P500 million

Above  P500
million but not exceeding P1 billion

Above P1 billion
but not exceeding P10 billion

Abov e P1 0
billion but not exceedi ng P50
billi on

Above  P50  billion

Penalty
Leve l ^[3]

High

5 ,000

10,000

15,000

20,000

25 , 000

30 ,000

Low

2,500

5 ,000

7 , 500

10,000

12 , 500

15.000

The Bangko Sentral may use a penalty rate prescribed  under the next higher range of asset size after considering the following attendant circumstances:  (a)  the  harm  caused  or  potential  harm  caused  to  the bank and/or its stakeholders; (b) the seriousness of the violation or irregularity; and (c) the intentionality and frequency; Provided, That the resulting penalty will have no adverse impact on the BSFI ™s operations, liquidity and/or capitalization.

lf the monetary penalty is less than the gain derived or loss avoided by the bank and/or director and/or officer in committing the violation/s, the Bangko  Sentral  may assess  total monetary  penalties  equivalent  to the gain derived or loss avoided.

The appropriate supervising department shall notify the bank/director or officer  concerned  of  the  violation  and  the  corresponding   amount  of monetary penalty, together with a directive for the bank/director or officer concerned  to  explain  within  fifteen  (15)  banking/business   days  from receipt of the letter why the assessed monetary penalty should not be imposed against it/him/her. The recommendation to impose monetary penalties shall be approved by the Governor or the Monetary Board, as the case may be. The decision of the Governor/Monetary  Board shall be communicated to the bank/director or officer concerned.

However,  the  Bangko  Sentral  is  not  precluded  from  imposing  non- monetary sanctions along with monetary penalties if circumstances so warrant.

(2)  Basis for the computation of the period or duration of penalty. xxx

(3)  Request for Reconsideration  or Appeal. A request for reconsideration on the  monetary  penalty  approved  by  the  Governor/Monetary   Board  is allowed.  The bank/director  or officer concerned  shall be notified  of thedecision of the Governor/Monetary Board thereon. An appeal from the decision  of  the  Governor  on  the  request  for  reconsideration  may  be made to the Monetary Board.

A request for reconsideration or appeal shall be filed within fifteen (15) calendar days from receipt of the notice of the decision of the Governor/Monetary  Board.

(4)  Payment  of  Monetary  Penalties.  Banks,  and/or  their  directors  and/or officers shall pay the monetary penalties within fifteen (15) calendar days from receipt of the notice of the decision of the Governor/Monetary  Board or receipt of the notice of the decision denying the appeal or request for reconsideration, where applicable.

In the case of banks, penalties which remain unpaid after due date shall be automatically debited against their corresponding demand deposit account (DDA) with the Bangko Sentral.

In  the  case  of  directors   and/or  officers,  their  employer   bank  shall advance the payment of the penalty to the Bangko Sentral in their behalf on  or  before  due  date  through  automatic  debit  of  its  DDA  with  the Bangko Sentral. In case the director and/or officer is no longer connected with the bank, payment  thereof shall be for the account of the director and/or officer who shall pay directly to the Bangko Sentral in the form of cash or check or such other acceptable means of payment and in accordance with the provisions of Subsec. X902.4.

For uniform implementation of the above regulations, the procedural guidelines embodied in Appendix 29, MORB shall be observed.

(5)  Additional Charge for Late Payment of Monetary Penalty. Late payment of  monetary  penalty  shall  be  subject  to  an  additional  charge  of  six percent (6%) per annum to be computed from the time said penalty becomes due and payable up to the time of actual payment.

Section 3. Applicability to non-bank financial institutions (NBFls). The provisions under Sections 1 and 2 above shall likewise apply to QBs, NSSLAs, and other NBFIs with trust license as follows:

1. The amendment to Section X902 of the MORB under Section 1 above shall also  be  adopted  under  Sections  4902Q  of the  Manual  of Regulations  for Non-Bank Financial Institutions (MORNBFI).

2. The amendment to Subsection X902.1 of the MORB under Section 2 above shall be adopted under Subsections 4601S.1 and 4902Q.1 of the MORNBFI, taking into consideration the following modifications:

a)   Subsections   4601S.1  and  4902Q.1  of  the  MORNBFI  shall  cite  the reference  of  the  Bangko  Sentral  Supervisory  Enforcement  Policy  to Section 4009Q of the MORNBFI instead of Section X009 of the MORB;

b)   Subsection  4501S.1  of  the  MORNBFI  shall  use  the  term  œtrustees  instead of œdirectors ;

c)   Subsection 4601S.1c of the MORNBFI shall cite that monetary penalties are approved only by the Monetary Board;

d)   Subsection 4902Q.ld shall cite that QBs shall, within fifteen (15) calendar days  from  receipt  of  the  notice  of  decision  of  the  Governor/Monetary Board, pay the fines for reserve deficiency, reportorial delay/deficiency, refusal to permit examination, or failure to comply with, or violation of any law or any order, instruction or regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor;

e)   Subsection 4601S.1d shall cite that all NSSLAs and their trustees and/or officers shall pay the penalties in the form of cash or check or such other acceptable means of payment and in accordance with the provisions of Subsection 4902Q.4 of the MORNBFI; and

f)     subsections  4601S.1d  and  4902Q.1d  shall  cite  the  reference  of  the procedural guidelines to Appendix Q-22 of the MORNBFI instead of Appendix 29 of the MORB.

Section 4. Item 6 of Appendix 29 of the MORB and Q-22 of the MORNBFI are hereby amended as follows:

œFor uniform implementation of the regulations on payment of monetary penalties from banks/QBs and/or their directors and/or officers, the following procedures shall be observed:

xxx

œ6.  In the case of penalty/ies imposed on bank/QB directors and/or officers, the employer bank/QB and said directors and/or officers shall be advised by the appropriate supervising department concerned that the employer bank/QB ™s DDA with  the  Bangko  Sentral  shall  be  debited  for  the  amount  of  the  penalty  as advance  payment  in  behalf  of  the  director  and/or  officer  within  fifteen  (15) calendar days from receipt of the notice of the decision of the Governor/Monetary Board.  In  case  the  director  and/or  officer  is  no  longer  connected  with  the bank/QB, payment thereof shall be for the account of the director and/or officer who shall pay directly to the Bangko Sentral in the form of cash or check or such other acceptable means of payment and in accordance with the provisions of Subsec. X902.4/4902Q.4  of the MORB/MORNBFI.  The procedures under Items œ2 , œ3  and œ4  hereof shall likewise apply. 

Section 5. Subsections X902.2 of the MORB and 4902Q.2 of the MORNBFI are hereby deleted.

Section     6.     In     addition,     the     following     Sections/Subsections     of     the
MORB/MORNBFI are hereby amended:

a.     Sections X199, X299, X399, X699, X799 and X999 of the MORB, as follows:

œExcept  as otherwise  indicated,  any violation  of the provisions  of this Part shall be subject to Sections 36 and 37 of Republic Act No. 7553.

The guidelines for the imposition of sanctions falling under Section 37 of Republic  Act No. 7653 on banks, and/or their directors  and/or officers  are shown in Section X009 and Subsection X902.1of the MORB. 

b.    Sections 4199Q, 4299Q, 4399Q, 4599Q, 4699Q, 4799Q and 4999Q of the MORNBFI, as follows:

œExcept  as otherwise  indicated,  any violation  of the provisions  of this Part shall be subject to Sections 36 and 37 of Republic Act No. 7653.

The guidelines for the imposition of sanctions falling under Section 37 of Republic  Act  No.  7653  on  QBs,  and/or  their  directors  and/or  officers  are shown in Section 4009Q and Subsection 4902Q.1 of the MORNBFI. 

Section 7. Appendices  67 of the MORB, Q-39, T-2 and T-2a of the MORNBFI are  hereby  deleted.  However,  the  guidelines  in  the  imposition  of  monetary penalties  under  Circular  No.  496  dated  29  September  2005  shall  continue  to apply insofar as pawnshops are concerned.

Section  8. Considering  the deletion  of the appendices  mentioned  in Section  7 above, the phrases in certain provisions of the MORB and MORNBFI making reference to the deleted appendices are amended/deleted  accordingly as shown in Annex 1.

Section 9. Effectivity

This Circular shall take effect after fifteen (15) days following its publication on the Official Gazette or in a newspaper of general circulation.

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^[1] Section 25, R.A. No. 7653

^[2] Section 28 of R.A. No. 8367 and Memorandum to All NSSLAs dated 30 March 2006 noting
Department of Justice Opinion No. 34 dated 10 August 2005 affirming Bangko Sentral ™s administrative authority over NSSLAs, specifically the imposition of other administrative sanctions under Section 37 of R.A. No. 7653 on NSSLAs and/or their erring officers/trustees.

^[3] œHigh  penalty level is generally imposed on serious offenses/ violations such as unsafe or unsound practices; fraudulent acts; and major acts or omissions defined as the bank ™s/individual ™s failure to comply with the requirements of banking laws, rules and regulations, as well as Monetary Board directives/instructions which have/may have a material adverse impact on bank ™s solvency, liquidity or profitability. This penalty level may also be imposed as an escalated monetary penalty to violations previously meted with œlow  penalty level.

œLow  penalty level is imposed on all other acts or omissions that cannot be classified under serious offenses/violations as described above.