QuestionsQuestions (CIRCULAR NO. 987)
Circular No. 987 rationalizes prudential requirements on banking offices and issues guidelines on establishing “branch-lite units,” amending relevant provisions of the Manual of Regulations for Banks (MORB), particularly Section X151 and related sections.
A branch is any permanent office or place of business in the Philippines (other than the head office) where a bank performs activities and provides products/services within its authority and relevant licenses, with a complete set of books and records maintained in each branch.
A branch-lite unit is any permanent office/place of business of a bank other than its head office or a branch; it performs limited banking activities and records transactions in the books of the head office or the branch to which it is annexed.
A branch-lite unit may perform any activities/products/services that a branch may perform, except those suited only to sophisticated clients with aggressive risk tolerance.
The bank’s board must approve the defined range of activities/services consistent with the bank’s business model; ensure adequate personnel/internal controls/facilities/security/information systems; ensure branch-lite units are included in capital adequacy assessment and planning; ensure timely accounting/reporting to the annexed head office/branch; and ensure the bank’s risk management, compliance, and internal audit programs cover the branch-lite unit.
Banks may establish subject to prudential criteria under Subsec. X1101.2; any approved but unopened branches at the time of application are considered in meeting minimum capitalization; and banks cannot establish or transact outside the premises of the authorized principal office/head office without prior BSP approval.
An application letter by the CEO/officer of equivalent rank indicating number of branches/branch-lite units and proposed locations (and the range of activities/services for branch-lite units to a defined market/sector); a Secretary’s Certificate showing board approval; and a certification/undertaking by the CEO/officer of equivalent rank that the bank is compliant or will comply with Subsec. X151.2 pre-requisites.
Banks are generally allowed to establish branches/branch-lite units anywhere in the Philippines, including cities previously considered as restricted areas.
If TBs/RBs establish branches in cities/municipalities of higher classification than their head office, the applicable minimum required capital is increased to that of the higher-class city/municipality, regardless of where the head office is located.
A Coop Bank may set up branches/branch-lite units anywhere within its province subject to applicable rules; Coop Banks from other provinces may set up branches/branch-lite units in cities/municipalities of another province where there are no other Coop Bank head office/branch/branch-lite units.
There is a processing fee per approved branch/branch-lite unit based on banking unit and bank category; branch/branch-lite units to be established in unbanked cities/municipalities are exempt from the processing fee. There is also a special licensing fee for applications in cities previously considered as restricted areas.
It must be opened within one (1) year from the date of approval, subject to extension case-by-case, but the total period from approval to the requested extension cannot exceed three (3) years. Failure to open within the period results in forfeiture of the bank’s right to open and forfeiture of all fees paid to the BSP related to the application.
Relocation of approved but not yet opened branches/branch-lite units requires prior approval by the Deputy Governor, SES, with justification and valid reasons, and resubmission of application documents under Subsec. X151.3. Relocation into cities previously considered as restricted areas triggers the special licensing fee upon approval of relocation.
Not later than five (5) banking days from opening, the bank must (1) write-notify the appropriate BSP department of the actual opening date; (2) submit a certification on compliance with adequacy of personnel/internal controls/facilities/information systems/security (including disability accessibility requirements where applicable), posting of required notices for lending/deposit operations, availability of accounting/reporting and communication facilities between units, and compliance with the pre-requisites under Subsec. X151.2 as of opening; and (3) if microfinance-oriented, certify additional microfinance-specific requirements.
It must refrain from opening the branch/branch-lite unit on that date until it complies with all requirements under Subsec. X151.2, while observing the opening-date rules in Subsec. X151.7.
A foreign bank may open up to five (5) sub-branches as approved by the Monetary Board; a branch-lite unit is considered a sub-branch for purposes of complying with the numerical limit set under R.A. No. 7721 as amended by R.A. No. 10641.
EOs, OBOs, and microfinance-oriented OBOs/MBOs are referred to as branch-lite units unless the bank plans to convert them into branches under existing regulations. Banks have six (6) months from effectivity to convert existing offices into branch-lite units, with a requirement to notify the BSP five (5) banking days before conversion, including board-approved activity range, compliance with Subsec. X151.1 conditions, and other relevant conversion information.
It takes effect fifteen (15) calendar days following its publication in the Official Gazette or a newspaper of general circulation. Banks then have the six-month window to convert existing EOs/OBOs/MBOs into branch-lite units (unless converting them into branches), subject to the required BSP notifications.