Policy statement and intent
- The Decree states that monetary, banking and credit policies should be more responsive and more attuned to economic development.
- The Decree requires greater flexibility for the Central Bank of the Philippines in administering the monetary, banking and credit system and in providing policy direction in money, banking, and credit.
Confidentiality of firm data
- Section 1 amends the second paragraph of Section 23 of Republic Act No. 265 on confidential data gathered by the Central Bank.
- Data on individual firms, other than banks, gathered by the Department of Economic Research and other departments or units of the Central Bank must not be made available to any person or entity outside the Central Bank, whether public or private.
- Data on individual firms may be disclosed only under an order of the court or under such conditions as may be prescribed by the Monetary Board.
- Collective data on firms may be released to interested persons or entities.
- For data on banks, Section 27 of the Central Bank Act governs.
Conservatorship: appointment and powers
- Section 2 amends Section 28-A (first paragraph) on the appointment of a conservator.
- When the Monetary Board finds, based on a report from the appropriate supervising or examining department, that a bank or a non-bank financial intermediary performing quasi-banking functions is in a state of continuing inability or unwillingness to maintain liquidity adequate to protect depositors and creditors, the Monetary Board may appoint a conservator.
- The conservator takes charge of the institution’s assets, liabilities, and management.
- The conservator may collect all monies and debts due to the institution.
- The conservator must exercise all powers necessary to preserve assets, reorganize management, and restore viability.
- The conservator is empowered to overrule or revoke the actions of the previous management and board of directors, notwithstanding any contrary provision of law, and other powers may be exercised as deemed necessary by the Monetary Board.
Monetary Board actions: finality and injunction limits
- Section 3 amends Section 29 (fourth paragraph) on the finality and judicial review of Monetary Board actions.
- The actions of the Monetary Board under this Section, Section 28-A, and the second paragraph of Section 34 are final and executory.
- A court may set aside these actions only if there is convincing proof that the action is plainly arbitrary and made in bad faith.
- Any challenge must be raised in an appropriate pleading filed before the proper court within ten (10) days:
- from the date the conservator or receiver takes charge of assets and liabilities; or
- if there is liquidation, within ten (10) days from receipt of notice of the liquidation order.
- No restraining order or injunction may be issued enjoining the Central Bank from implementing its actions under these provisions unless there is convincing proof of plainly arbitrary, bad-faith action.
- A petitioner or plaintiff seeking injunctive relief must file with the clerk or judge a bond executed in favor of the Central Bank, with an amount fixed by the court.
- If a restraining order or injunction is granted, it is refused or dissolved upon filing by the Central Bank of a bond in the form of cash or Central Bank cashier’s check:
- the bond must be twice the amount of the petitioner/plaintiff’s bond, conditioned to pay damages that the petitioner/plaintiff may suffer by the refusal or dissolution of the injunction.
- Rule 58 of the New Rules of Court governs issuance and dissolution of the restraining order or injunction insofar as applicable and not inconsistent.
Insolvency definition
- Section 4 amends Section 29 (fifth paragraph) to define insolvency under the Act.
- Insolvency exists when the realizable assets of a bank or non-bank financial intermediary performing quasi-banking functions, as determined by the Central Bank, are insufficient to meet liabilities.
Administrative fines and disqualification (banks)
- Section 5 amends Section 34-A (Subparagraph (a) of the first paragraph) on fines for violations involving banks.
- Fines may be in amounts determined by the Monetary Board to be appropriate.
- No fine may exceed five thousand pesos a day for each type of violation.
- In determining fines, the Monetary Board must consider attendant circumstances such as:
- the nature and gravity of the violation or irregularity; and
- the size of the bank.
- Section 6 amends Section 34-A by adding a paragraph after the second paragraph on disqualification for directors or officers.
- A director or officer may be declared disqualified by the Monetary Board from becoming a director or officer, or holding any position (elective, appointive, or consultancy basis) in any financial institution subject to Central Bank supervision or regulation.
- Disqualification applies when the director or officer:
- resigned from or ceased to be connected with the bank after being found to have been involved in specified acts and was required to explain; and
- before formal administrative proceedings are taken; or
- resigned from or ceased to be connected with the bank during the pendency of administrative proceedings.
- Disqualification continues until, after appropriate proceedings, the Monetary Board declares the director or officer qualified to hold such positions.
Administrative fines and disqualification (non-banks)
- Section 7 amends Section 34-B (Subparagraph (a) of the first paragraph) to set fines for violations involving non-bank financial intermediaries performing quasi-banking functions.
- Fines may be in amounts determined by the Monetary Board to be appropriate.
- No fine may exceed five thousand pesos a day for each type of violation, considering:
- the nature and gravity of the violation or irregularity; and
- the size of the financial intermediary.
- Section 8 amends Section 34-B by adding a paragraph after the second paragraph on disqualification for directors or officers of non-bank financial intermediaries performing quasi-banking functions.
- A director or officer may be declared disqualified by the Monetary Board from becoming a director or officer, or holding any position (elective, appointive, or consultancy basis) in any financial institution subject to Central Bank supervision or regulation.
- Disqualification applies when the director or officer:
- resigned from or ceased to be connected with the intermediary after being found to have been involved in specified acts and was required to explain; and
- before formal administrative proceedings are taken; or
- resigned from or ceased to be connected with the intermediary during the pendency of administrative proceedings.
- Disqualification continues until the Monetary Board, after appropriate proceedings, declares the director or officer qualified.
Allocation of net profits among accounts
- Section 9 amends Section 41 (Paragraph (c)) regarding use of net profits.
- Any net profits remaining after fulfilling conditions under subsections (a) and (b) of Section 41 must be used to reduce the Account to secure the Coinage or the Monetary Adjustment Account of the Exchange Stabilization Adjustment Account, until those accounts are liquidated.
- The Monetary Board determines the distribution among these three accounts.
Extraordinary expenses: suspense and amortization
- Section 10 amends Section 43 on extraordinary expenses of currency issue and monetary stabilization.
- The Monetary Board may exclude from computation of annual profits and losses of a fiscal year all or part of the following extraordinary expenses incurred during that year whenever the Monetary Board deems it advisable.
- Extraordinary expenses that may be excluded include:
- (a) extraordinary costs of printing notes or minting coins;
- (b) extraordinary expenditures arising from the issue and service of the evidences of indebtedness referenced in Section 98;
- (c) interests paid on bank reserves which exceed fifty percent (50%) of bank deposits, in conformity with Section 101, last paragraph, and interest on deposits maintained with the Central Bank under Section 121, second paragraph; and
- (d) other expenses the Monetary Board specifies or declares as extraordinary.
- Amounts excluded must be entered in a suspense account called the “Monetary Adjustment Account.”
- The Monetary Board must amortize such excluded expenses over a period at a rate based on the adequacy of the Bank’s profit.
Exchange Stabilization Adjustment Account
- Section 11 adds Section 43-A creating the Exchange Stabilization Adjustment Account.
- The Exchange Stabilization Adjustment Account must lodge specific expenses incurred or yet to be incurred:
- (a) interest expenses and commitment fees on foreign loans and other foreign obligations; and
- (b) documentation and other expenses incurred in connection with negotiations, securing, and servicing foreign obligations.
- These enumerated expenses are excluded from computation of the Bank’s annual profits and losses of any given fiscal year.
- The Monetary Board must amortize such expenses over a period at a rate based on the adequacy of the Bank’s profit.
Foreign exchange cover via wholly-owned corporation
- Section 12 adds Section 73-A.
- The Central Bank may establish a wholly-owned corporation to provide foreign exchange cover for foreign or external debt.
- The corporation may obtain foreign borrowings and exercise other powers necessary to accomplish its objective.
- Establishment of the corporation does not preclude the Central Bank from extending foreign exchange cover directly.
Revaluation profits and losses on gold/foreign exchange
- Section 13 amends Section 83 on revaluation profits and losses for banks’ gold and foreign exchange holdings.
- Consistent with monetary policy and international agreements, the Monetary Board may declare revaluation profits or losses realized by banks on their net assets or liabilities in gold or freely convertible foreign currencies as a result of:
- changes in the par value of the peso;
- changes in the legal parities between the Philippine peso and such foreign currencies; and/or
- changes in the Central Bank’s exchange rates for such currencies; or
- other causes.
- Declared revaluation profits or losses are for the account of the Central Bank until the Bank gives notice to the contrary.
- The Bank must communicate notice to banks at least eight days before the date on which the revaluation risks cease to be for the account of the Central Bank.
- The notice applies only to acquisitions of the specified foreign currency subsequent to the effective date.
- The Monetary Board must issue appropriate regulations to restrain banks from increasing their holdings of the specified currency during the period from the notice date to the effective date.
- The Monetary Board issues rules and regulations to administer Section 83.
Collateral waiver and treatment of overdrafts
- Section 14 amends Section 90 to modify collateral requirements for certain loans.
- The Monetary Board may, with the concurrent vote of at least five of its members, waive the collateral requirement under Section 90 and subsections A and B of Section 83 for loans to banking institutions whose all or majority capital stock is owned by the Government or a government financial institution.
- Loans to Government-owned or Government-controlled banking institutions must be guaranteed by the Government.
- Loans to banking institutions owned by a government financial institution must be guaranteed by that government financial institution.
- Section 14 further adds an additional paragraph after the last paragraph of Section 90 on overdrafts.
- When a financial institution or the Government incurs an overdraft in its account with the Central Bank, the overdraft must be eliminated within the period prescribed by Central Bank regulations.
- At the discretion of the Monetary Board, the overdraft may be converted into an emergency loan or advance.
- Converted overdrafts are governed by Section 90 of the Central Bank Act in the case of the Government.
Reserve deposits: exemption from process
- Section 15 adds Section 167-A on deposits maintained by banks with the Central Bank as part of reserve requirements.
- Such reserve deposits are exempt from attachment, garnishment, or any other order or process of any court, government agency, or any other administrative body.
- The exemption covers processes issued to satisfy claims of a party other than the Government, or its political subdivisions or instrumentalities.
Interest on Government and bank deposits
- Section 16 amends Section 121 (second paragraph) on interest payments on deposits.
- The Bank may pay interest on deposits of the Government or its political subdivisions and instrumentalities.
- The Bank may also pay interest on deposits of banks with the Central Bank.
Effectivity
- Section 18 provides that the Decree takes effect immediately.
Repealing and modification clause
- Section 17 revokes or modifies any laws, acts, decrees, orders, instructions and rules and regulations, or parts thereof, that are inconsistent with the Decree.