QuestionsQuestions (Republic Act No. 7653)
RA 7653 declares that the State shall maintain a central monetary authority that functions as an independent and accountable body corporate. Although government-owned, the BSP is granted fiscal and administrative autonomy in discharging its responsibilities on money, banking, and credit.
The BSP is established as an independent central monetary authority, a body corporate. Its capital is P50,000,000,000 fully subscribed by the Government: P10,000,000,000 fully paid upon effectivity, and the balance paid within two (2) years from effectivity in the manner determined by the Secretary of Finance and the Secretary of Budget and Management.
The primary objective is to maintain price stability conducive to balanced and sustainable growth. It also promotes and maintains monetary stability and the convertibility of the peso.
The BSP may adopt and use a corporate seal; enter into contracts; lease or own and sell/dispose of real and personal property; sue and be sued; and generally do acts necessary or proper to carry out the Act’s purposes. It may acquire assets/incur liabilities essential to authorized operations and may compromise/condone/release claims or liabilities under Monetary Board-prescribed terms.
The Monetary Board has seven (7) members appointed by the President for six (6)-year terms: (1) the BSP Governor (Chairman, subject to Commission on Appointments confirmation), (2) a Cabinet member designated by the President, and (3) five (5) members from the private sector serving full-time. Of the first private sector appointees, three serve six years and two serve three years. No member may be reappointed more than once.
They are disqualified from being directors, officers, employees, consultants, lawyers, agents, or stockholders of any BSP-supervised institution, and must resign/divest before assuming office. Private sector members cannot hold other public office during tenure. They cannot have been connected directly with multilateral banking/financial institutions or have substantial interest in a private Philippine bank within one year prior to appointment. They also cannot be employed in such institutions within two years after term expiration, except as official government representative.
Removal may be done if: (a) the member is subsequently disqualified; (b) physically or mentally incapacitated for more than six months; (c) guilty of fraudulent or illegal acts or acts manifestly opposed to BSP aims/interests; or (d) no longer possesses the qualifications in Section 8.
Quorum requires the presence of four (4) members, with the Governor or his duly designated alternate always included. Decisions require concurrence of at least four (4) members unless otherwise provided. Under Section 14, if a member has personal/pecuniary interest in an agenda matter, he must disclose, retire from the meeting when taken up, and the decision must be made public and reflected in minutes.
In emergencies where time is insufficient to call a Monetary Board meeting, the Governor, with concurrence of two (2) other members, may decide/take any matter within Board authority. The Governor must submit a report to the President and Congress within 72 hours, and call a meeting at the soonest possible time for ratification.
The BSP supervises and conducts periodic or special examinations of banking institutions and quasi-banks (including subsidiaries and affiliates). Department heads and examiners can administer oaths and compel production of records, subject to secrecy/confidentiality rules for deposits and private investments. Courts cannot issue TRO/injunction enjoining BSP examination unless there is convincing proof the action is plainly arbitrary and made in bad faith, and the petitioner posts a bond.
If a director/officer/stockholder, together with related interest, contracts a loan/financial accommodation from (1) his bank or (2) certain related banks as defined, in excess of 5% of capital and surplus or the maximum permitted by law (whichever lower), the lending bank must require waiver of secrecy of the insider’s deposits in all banks in the Philippines. Exam results are confidential and can be used only for supervisory/examination responsibility or in appropriate legal action by BSP.
They are prohibited from: (1) being officers/directors/lawyers/agents/employees/consultants/stockholders of BSP-supervised institutions (with exceptions for non-stock savings and loan associations and provident funds exclusively for BSP employees, and as otherwise provided); (2) requesting or receiving gifts/benefits from supervised institutions; (3) revealing confidential information except under lawful authority; and (4) borrowing from supervised institutions unless adequately secured, fully disclosed to the Monetary Board, and subject to further rules—while supervising/examining department personnel are also prohibited from borrowing from banks under their supervision/examination.
Heads of supervising/examining departments examine books of every banking institution once every 12 months (and at other times as the Monetary Board may deem expedient with proper voting), with at least 12 months interval between annual examinations. Banks/quasi-banks pay an annual fee within the first 30 days of each year equal to a percentage prescribed by the Monetary Board of their average total assets in the preceding year based on end-of-month balance sheets, after deducting cash on hand and amounts due from banks including BSP and banks abroad.
A conservator may be appointed if the Monetary Board finds a bank/quasi-bank in continuing inability or unwillingness to maintain liquidity adequate to protect depositors/creditors. The conservatorship may include taking charge of assets/liabilities and management, reorganizing management, collecting monies/debts, and overriding previous management. It cannot exceed one (1) year.
Conservatorship is for liquidity inadequacy and restoration of viability, intended to take over and reorganize to restore the institution; it lasts up to one year. Receivership/liquidation is triggered when the institution: (a) cannot pay liabilities as they become due (excluding panic-induced extraordinary demands), (b) has insufficient realizable assets, (c) cannot continue without probable losses to depositors/creditors, or (d) committed willful violation of a final cease-and-desist order involving fraud or dissipation—then the Monetary Board designates PDIC as receiver (for banks) or another competent person for quasi-banks, with court assistance for liquidation.