Question & AnswerQ&A (BSP CIRCULAR NO. 695)
The main subject is the definition of 'related interest' for purposes of DOSRI (Directors, Officers, Stockholders, and Related Interests) ceilings under the Manual of Regulations for Banks (MORB).
It refers to any corporation, association, or firm where a director or officer of the bank, or his spouse is also a director or officer of such entity, subject to specific exceptions detailed in the Circular.
Exceptions include: (a) if the corporation's securities are listed and traded in Philippine stock exchanges and less than 50% ownership is held by one person or related persons within first degree consanguinity or affinity; (b) if the bank director or officer sits as a bank representative on the board with minimum shares required by law and no other equity interest; (c) if the corporation is 99% owned by a non-stock corporation financing hospitals or medical services with fully secured loans.
The bank representative should not have any equity interest in the borrowing corporation except for the minimum shares legally or by the corporation's by-laws required; this helps avoid classifying it as a related interest unless otherwise specified.
A non-stock corporation as defined in Section 87 of the Philippine Corporation Code, especially when financing hospitals and other medical services, with the loan fully secured.
Fifty percent (50%) ownership of voting stock by one person or related persons within the first degree of consanguinity or affinity is the threshold.
It takes effect fifteen (15) days following its publication either in the Official Gazette or in a newspaper of general circulation.
Because the loans are fully secured and the corporations are largely owned by non-stock corporations, facilitating financing of essential health services without strict application of related interest ceilings.
If a borrowing corporation is classified under these items, it is excluded from the exceptions in Sections ae(4)(a), (b), and (c), meaning related interest rules apply without those exceptions.