Question & AnswerQ&A (BSP CIRCULAR NO. 797)
BSP Circular No. 797 enforces actions on banks that release borrowings within the Philippines by the Government or its political subdivisions or instrumentalities without the submission of the Monetary Board's opinion as required under Section 123 of Republic Act No. 7653.
Section 123 of Republic Act No. 7653 is referred to in BSP Circular No. 797.
The borrower must submit the Monetary Board's opinion on the probable effects of the proposed borrowings on monetary aggregates, the price level, and the balance of payments.
The first offense results in a monetary penalty computed in accordance with Appendix 67 of the Manual of Regulations for Banks, accompanied by a stern warning that subsequent offenses will face stiffer non-monetary sanctions.
For a second offense, the bank’s lending operations to the Government or its political subdivisions or instrumentalities are suspended for 6 months, and a written reprimand is issued to the officers or members of the loan approval committee or Board of Directors involved.
The penalty for a third offense is the suspension of the lending operations of the bank to the Government or its political subdivisions or instrumentalities for one year.
The Monetary Board approved the enforcement actions as stated in its Resolution No. 494 dated March 21, 2013.
The enforcement actions are pursuant to Section 37 of Republic Act No. 7653 (The New Central Bank Act).
The scope covers lending operations of banks to the Government or any of its political subdivisions or instrumentalities within the Philippines.
BSP Circular No. 797 took effect within 15 days from its publication in a newspaper of general circulation.