The  Monetary  Board,  in  its  Resolution  No.  20.A  dated  5 January 2018, approved the amendments to the Manual of Regulations for Non-Bank Financial Institutions applicable to Non-stock savings and Loan Association (MORNBFI-S), as follows:

Section 1. Section 4391S is hereby amended to read as follows:

œSection 4391S Fund Investments. Consistent with the policies under the NSSLA   Law  (Republic   Act  No.  8367), NSSLAs shall  primarily   utilize   the accumulated  savings  of its members  for loans  to service  household  needs  of such members.  However,  temporary  excess  funds may be placed  in safe and liquid investment outlets pending their deployment to support core operations. Excess  funds  generated  from  deposits  and  withdrawable  capital  contributions which  the  NSSLAs  are  unable  to utilize  for prudent  lending  activities  may  be returned to their contributing members at the discretion of the Board of Trustees, provided that, the Association, thereafter, remains compliant with the required capital-to-risk  assets ratio and two percent (2%) withdrawable  share reserve on total capital contributions.

The  responsibility  for  supervising  the  NSSLAs  investment  account  rests solely with the board of trustees. They have a fiduciary duty to the members and depositors, and are charged with an implied trust to use funds only for permitted purposes. They should ensure that risks in the investment portfolio should be minimized to ensure that liquidity and marketability are maintained. They must recognize  that  the  investment  account  is  primarily  a  secondary  reserve  for liquidity rather than a vehicle to generate speculative profits.

It is therefore imperative that the board of trustees adopt policies that clearly define  the  investment  strategy  and  provide  guidance  to  management  on  the direction  and  the  level  of  risk  the  NSSLA  is  prepared  to  assume  over  its investments. It is through established objectives, strategies and policies that the board  can  actively  monitor  the  appropriateness   of  NSSLA ™s  risk  profile  and perform overall oversight function over its investment activities.

A written investment policy duly approved by the Board shall contain at the minimum, the following:

a. An explicit statement that outlines the investment objectives, which shall be consistent with applicable law;

b. Types  of permissible  investments  taking  into consideration  the safety  and liquidity of such investments;

c. Approval authorities (placement and termination) and corresponding limits;
 
d. Concentration limits;

e. Procedures on monitoring  the status  of investments  and the frequency  of reporting to the Board of Trustees;

f. Procedures to safekeep all relevant   records   and   documents   of   the investment; and

g. Periodic review and updating of the investment policy.

An NSSLA may invest its funds in any or all of the following:

a. In sound  non-speculative  enterprises,  as well as in bonds,  securities,  and other obligations issued by the Government of the Philippines, or any of its political   subdivisions,   instrumentalities, or corporations including government-owned or controlled corporations (hereinafter referred to as the œGovernment ), subject to the following conditions:

(1)  The credit needs of the members shall be served/satisfied first;

(2)  Investment  other  than  those  bonds,  securities,  and  other  obligations issued by the Government should meet all of the following criteria:

(a)   Safe. The value of the investment  is protected  and/or guaranteed, i.e., the full amount invested can be collected with certainty;

(b)   Readily marketable. The security is quoted in an active market and can  readily  be  bought  and  sold.  It  can  readily  be  converted  into cash, or exchanged with ease in the market;

(c)   High grade. The security must have the highest credit rating^[2]   given by a reputable credit rating agency recognized by Bangko Sentra1^[2] ; and

(d) Locally-issued. Peso-denominated and issued by corporations created or organized in the Philippines under its laws; and

(3)  The total aggregate amount of investment shall not exceed ten percent (10%) of the NSSLA ™s total assets. Investments in excess of ten percent (10%) shall require prior approval of the Bangko Sentral.

Transitory Provision. NSSLAs with outstanding investments that: (1) exceed the  aggregate  allowable  limit  except  those  previously  authorized  by  Bangko Sentral;  and/or  (2) are not compliant  with  any of the conditions/provisions  set forth above, shall be given ninety (90) days from the effectivity of this Circular to propose an action plan duly approved by the Board of Trustees to achieve full compliance.

The action plan, which is subject to monitoring by the Bangko Sentral, shall provide for the details of the outstanding investments of the NSSLAs with corresponding divestment timelines for those which are not compliant with any of the  conditions/provisions  of this  circular.  Non-compliance  with  the  action  plan without  justifiable  cause/reason  shall subject  the Association  and/or the responsible trustees/officers to applicable sanction/s.

Section 2. Effectivity.  This Circular shall take effect fifteen (15) days following its publication in the Official Gazette or in any newspaper of general circulation in the Philippines.

For the Monetary Board:

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^[2] With credit rating of œAaa  or its equivalent for long-term issuances and 1 (Best grade) or its equivalent for short-term issuances.

^[2] The provisions of subsections X931.6 and X932.1 of the Manual of Regulations for Banks (MORB), shall apply for purposes of identifying reputable credit rating agencies recognized by Bangko Sentral.