Law Summary
Responsibilities and Primary Objectives
- Provides policy directions on money, banking, and credit.
- Supervises banks, quasi-banks, money service businesses, credit granting businesses, payment system operators.
- Exercises regulatory and examination powers as set by the Monetary Board.
- Primary objective: maintain price stability conducive to balanced and sustainable economic growth and employment.
- Also promotes monetary stability, peso convertibility, and financial stability.
- Coordinates with government agencies like Department of Finance, SEC, Insurance Commission, PDIC.
- Oversees payment and settlement systems to promote prudent financial practices.
- Promotes public access to high-quality financial services considering the general public's interest.
Monetary Board Meetings
- Meets at least once weekly.
- Meeting called by the Governor or two other members.
- Four members constitute a quorum, including the Governor or alternate.
- Decisions require concurrence of at least four members unless stated otherwise.
- Maintains full records including tapes and transcripts.
- May conduct meetings via teleconferencing or videoconferencing.
Indemnification for Monetary Board and BSP Personnel
- Indemnifies members and officials from costs related to civil or criminal proceedings unless final liability for willful violation, bad faith, or gross negligence.
- Indemnification extended to cases settled with external counsel's advice.
- Defense costs may be advanced upon undertaking to repay if indemnification is denied.
Liability and Confidentiality Obligations
- Public officers' liabilities governed by existing laws.
- Monetary Board members and BSP personnel responsible for unauthorized disclosure or misuse of confidential information.
- Data submitted to President or Congress or published under law are not confidential.
- Protected from liability unless willful violation, bad faith, or gross negligence.
- Indemnified for all losses, liabilities, and claims arising from official duties.
Appointment and Roles of Deputy Governors
- Governor appoints up to five Deputy Governors with Monetary Board approval.
- Deputy Governors perform duties assigned by Governor and Board.
- A designated Deputy Governor acts as chief executive and voting member when Governor is absent.
Authority to Obtain Data and Enforce Compliance
- BSP may require data from any person, entity, or government agency for statistical and policy purposes.
- Data confidentiality protected under law.
- Issuance of subpoenas authorized for production of books and records.
- Refusal without justifiable cause penalized as contempt.
- Supervisory data from banks handled under specific regulations.
- Disclosure outside BSP only by court order or Monetary Board conditions; collective firm data may be released.
Supervision and Examination Powers
- BSP supervises and regularly or specially examines banks, quasi-banks, subsidiaries, affiliates.
- Defines subsidiaries (over 50% ownership/control) and affiliates (50% or less ownership or related).
- Regulatory jurisdiction extends to entities as prescribed by law.
- Establishes independent mechanisms for examination issues reporting directly to Monetary Board.
- Supervisors and examiners authorized to administer oaths and compel documents.
- Court injunctions against BSP examinations generally prohibited unless arbitrariness and bond posted.
Approval Requirement for Bank Share Transfers
- Transfers/acquisitions of at least 10% voting shares in banks or quasi-banks require BSP approval.
- Selling stockholders must submit transfers for approval within prescribed period.
- BSP evaluates fitness based on integrity, reputation, financial capacity.
- Unapproved transfers have no legal effect and responsible parties liable.
- Premature control transfer exposes parties to criminal liability.
- Information sharing with PDIC allowed.
Prohibitions on Borrowing by BSP Personnel
- BSP personnel prohibited from borrowing from supervised institutions unless arm's length, fully disclosed to Monetary Board, and under prescribed regulations.
Examination Procedures and Fees
- Supervising department heads conduct examinations at least annually; special exams authorized by 5-member vote.
- Institutions must allow full access to books, cash, assets, systems for exams during business hours.
- Examination reports confidential, except for prosecution or authorized publicity.
- Supervised institutions pay annual supervisory fee by May 31 based on supervision costs.
Coordination on License Suspension or Revocation
- Any suspension or revocation of licenses necessary for BSP-supervised entities must be done only with prior BSP consultation.
Receivership and Liquidation Proceedings
- Monetary Board may summarily forbid bank/quasi-bank from doing business if it: a) Suspends payments, dormant for 60+ days, or unable to pay liabilities (excluding panic-induced). b) Has insufficient realizable assets. c) Cannot continue business without losses to depositors/creditors. d) Willfully violates final cease and desist order involving fraud or asset dissipation.
- PDIC designated receiver for banks; other qualified persons for quasi-banks.
- Monetary Board decisions final and not subject to injunction; certiorari only for jurisdictional excess or grave abuse.
- Petition only by majority stockholders within 10 days.
Penalties for Refusal to Report or Permit Examination
- Willful refusal to file reports or permit examination punishable by fine (P50,000 to P2,000,000), imprisonment (1 to 5 years), or both.
- Applies equally to officers/owners of affiliates subject to examination.
Penalties for False or Misleading Statements
- Willful false or misleading material statements to Monetary Board or examiners punishable by fine (P100,000 to P2,000,000), imprisonment (up to 5 years), or both.
Enforcement Proceedings and Rewards
- Violations of BSP supervision laws subject to fines (P50,000 to P2 million), imprisonment (2 to 10 years), or both.
- Persistent unlawful or unsafe business may lead to coercive action including closure.
- Informer’s reward up to P1 million for information leading to arrests or charges (excluding BSP employees/relatives).
- Monetary Board sets guidelines; rewards subject to withholding tax.
Administrative Sanctions
- Monetary Board may impose fines up to P1 million per transactional violation or P100,000 daily for continuing violations.
- May suspend credit or foreign exchange privileges, interbank clearing rights, or revoke licenses.
- Sanctions apply despite resignation or termination.
- Preventive suspension of officials allowed; reinstatement if no decision within 120 days.
- Cease and desist orders effective immediately; hearings upon request within 5 days.
- Governor may impose fines not exceeding P100,000 per transaction or P30,000 daily pending appeal.
Injunctive Relief Restrictions
- Only Court of Appeals or Supreme Court can issue injunctions against BSP actions.
- Any contrary restraining orders or injunctions are void.
- Rules of Court apply unless inconsistent.
Publication and Reporting Obligations
- Monthly general balance sheet published within 90 days after month-end.
- Quarterly economic and financial development report to President and Congress (within 90 days).
- Annual budget and profit/loss statement published yearly (within 90 days).
- Biannual review of financial system published (within 120 days).
- Immediate report and remedial measures for abnormal monetary or price movements.
Annual Report Content
- Annual report submitted before June summarizing BSP condition, policies, economic environment.
- Includes monthly monetary aggregates, foreign exchange activity, balance of payments, price indices, government receipts/expenditures, public debt, and legal/administrative measures.
- Layman’s version of report also published.
Profit and Loss Computation
- Net profits calculated within 60 days after year-end.
- Allowed deductions for operation expenses, bad debts, asset depreciation, contingencies as per prudent financial management.
Reserve Fund Establishment
- BSP shall create reserve funds from income/surplus to mitigate risks (foreign exchange, price fluctuations) and contingencies.
- Fund comprises fluctuation reserve, contingency reserve, and other Monetary Board-designated reserves.
Treatment of Revaluation Profits and Losses
- Unrealized foreign currency revaluation gains/losses excluded from annual profit/loss calculations.
- Offsets with amounts owed to/from international institutions.
- Net unrealized amounts recorded in a separate account (Revaluation of International Reserve).
- Recognized in income statement upon disposal or repatriation.
Price Stability Principles and Monitoring
- Monetary Board regularly assesses inflation and uses policy instruments to maintain price stability.
Response to Abnormal Price Movements
- Monetary Board must take remedial measures and submit detailed public reports to President and Congress.
- Reports analyze causes, effects on economy and recommend monetary/fiscal actions.
- Must report if cost of living index rises >10% year-on-year or if circumstances warrant.
- Continuous reporting until situation stabilizes.
Composition of International Reserves
- Can include gold, foreign currency assets, government securities, foreign deposits, foreign banknotes/coins.
- Monetary Board aims to hold reserves in freely convertible currencies.
- Regulations will define asset qualifications.
- BSP can convert reserve assets freely among authorized types.
Credit Policy Principles
- Credit extended via rediscounts, loans, advances to influence credit volume aligned with price and financial stability.
Emergency Lending Provisions
- Monetary Board may authorize emergency loans (up to 50% of deposits) to banks in dire situations upon 5-member vote.
- Conditions include adequate collateral, restrictions on loan/investment expansions.
- First tranche capped at 25%; subsequent tranches require additional assurances.
- Foreclosure on collaterals allowed; BSP to dispose of acquired shares within one year.