Bangko Sentral creation and capitalization
- Section 2 establishes an independent central monetary authority as a body corporate known as the Bangko Sentral ng Pilipinas (Bangko Sentral).
- The capital of the Bangko Sentral is PHP 200,000,000,000, fully subscribed by the Government of the Republic of the Philippines.
- Any increase in capitalization must be funded solely from the declared dividends of the Bangko Sentral in favor of the National Government.
- Declared dividends earmarked for capitalization increase must be deposited in a special account in the General Fund and released/disbursed immediately and continue until the increase in capitalization is fully paid (Section 2).
Objectives, policy direction, and stability roles
- The Bangko Sentral must provide policy directions in money, banking, and credit and has supervision over bank operations and regulatory/examination powers under Republic Act No. 7653 and other laws (Section 3).
- The Monetary Board is empowered to authorize entities or persons to engage in money service businesses (Section 3).
- The primary objective of the Bangko Sentral is to maintain price stability conducive to balanced and sustainable growth and employment.
- The Bangko Sentral must promote and maintain monetary stability and the convertibility of the peso (Section 3).
- The Bangko Sentral must promote financial stability and closely work with the National Government, including the Department of Finance, Securities and Exchange Commission, Insurance Commission, and Philippine Deposit Insurance Corporation (Section 3).
- The Bangko Sentral must oversee the payment and settlement systems in the Philippines, including critical financial market infrastructures, to promote sound and prudent practices consistent with financial stability (Section 3).
- The Bangko Sentral must promote broad and convenient access to high quality financial services and consider the interests of the general public (Section 3).
Monetary Board meetings and voting requirements
- The Monetary Board must meet at least once a week (Section 11).
- Meetings may be called by the Governor or by two (2) other members of the Board (Section 11).
- The presence of four (4) members constitutes a quorum, with the Governor or his duly designated alternate among those four (Section 11).
- Unless otherwise provided in the Act, Monetary Board decisions require the concurrence of at least four (4) members (Section 11).
- The Bangko Sentral must maintain and preserve a complete record of Monetary Board proceedings and deliberations, including tapes/transcripts, in original form or microfilm (Section 11).
- Monetary Board meetings may be conducted through modern technologies such as teleconferencing and videoconferencing (Section 11).
Legal authority, indemnification, responsibility rules
- The Monetary Board must indemnify its members and other Bangko Sentral officials and personnel performing supervision/examination functions against costs and expenses in civil/criminal actions arising from performance of functions, unless finally adjudged liable for willful violation, evident bad faith, or gross negligence (Section 15(e)).
- In settlements/compromises, indemnification applies only to matters covered by the settlement where external counsel advises that the person did not commit willful violation, evident bad faith, or gross negligence (Section 15(e)).
- Defending costs may be paid in advance upon receipt of an undertaking to repay if ultimately determined the person is not entitled to indemnification (Section 15(e)).
- The liability framework for public officers applies to Monetary Board members and other Bangko Sentral personnel under the general rule/exception in the Revised Administrative Code of 1987 (Section 16).
- Section 16 subjects Monetary Board members and other personnel to responsibility for:
- disclosure of confidential information, Monetary Board discussions/resolutions, or confidential Bangko Sentral operations without connection to official functions or without prior authorization; and
- use of such information for personal gain or to the detriment of the Government, the Bangko Sentral, or third parties (Section 16).
- Data or information required to be submitted to the President and/or Congress, or published under the Act, is not treated as confidential (Section 16).
- Persons are held free and harmless to the fullest extent permitted by law and must be indemnified for liabilities, losses, claims, demands, damages, deficiencies, costs, and expenses arising from exercise of powers/performance of duties unless finally adjudged to be in willful violation, evident bad faith, or gross negligence (Section 16).
Deputy Governors and acting authority
- The Governor, with approval of the Monetary Board, appoints not more than five (5) Deputy Governors (Section 21).
- A designated Deputy Governor acts as chief executive and exercises the powers and duties of the Governor in the Governor’s absence (Section 21).
- When the Governor cannot attend meetings of government boards/councils where the Governor is an ex officio member under special laws, a Deputy Governor designated by the Governor may participate and vote in such meetings (Section 21).
Data authority, subpoenas, and confidentiality limits
- The Bangko Sentral may require any person or entity, including government offices/instrumentalities and GOCCs, to provide data for statistical and policy development purposes related to the proper discharge of its functions (Section 23).
- Disaggregated data gathered are subject to prevailing confidentiality laws (Section 23).
- The Second Governor through him, or a duly authorized representative in his absence, may issue a subpoena requiring production of books and records for these purposes (Section 23).
- Those who refuse a subpoena without justifiable cause or refuse to supply required data are subject to punishment for contempt under the Rules of Court (Section 23).
- The Bangko Sentral’s authority to require data from banks continues to be exercised under its supervisory powers under the Act and other applicable laws (Section 23).
- Data on individuals and firms gathered from non-bank entities are not made available to any person or entity outside the Bangko Sentral except under court order or under conditions prescribed by the Monetary Board (Section 23).
- Collective data on firms may be released to interested persons or entities (Section 23).
- In the case of bank data, Section 27 of the Act applies (Section 23).
Supervision, examination, and injunction limits
- The Bangko Sentral supervises and conducts regular or special examinations of banking institutions and quasi-banks, including their subsidiaries and affiliates engaged in allied activities (Section 25).
- “Subsidiary” means a corporation with more than 50% of voting stock directly or indirectly owned/controlled/held with power to vote by a bank or quasi-bank (Section 25).
- “Affiliate” means a corporation with voting stock 50% or less, owned by a bank/quasi-bank, or related/linked directly or indirectly through common stockholders or factors determined by the Monetary Board (Section 25).
- The Bangko Sentral has regulatory authority over and conducts regular or special examinations of entities under the Act or special laws subject to its jurisdiction (Section 25).
- The Bangko Sentral establishes an examination mechanism independent and reporting directly to the Monetary Board, without prejudice to enforcement and supervisory actions against supervised entities (Section 25).
- Department heads and examiners may administer oaths to directors, officers, or employees of institutions under supervision/examination and may compel presentation of books, documents, papers, or records necessary to ascertain facts about the true condition of an institution and relevant records of persons/entities connected to the institution’s operations/transactions (Section 25).
- Examination authority is subject to existing laws protecting/safeguarding secrecy/confidentiality of bank deposits and investments of private persons in Government debt instruments (Section 25).
- No court issues a restraining order or injunction enjoining the Bangko Sentral from examining an institution subject to supervision/examination unless there is convincing proof the action is plainly arbitrary and made in bad faith, and the petitioner/plaintiff files a bond in favor of the Bangko Sentral in an amount fixed by the court (Section 25).
- The issuance/dissolution of the restraining order or injunction follows Rule 58 of the New Rules of Court insofar as applicable and not inconsistent (Section 25).
Share transfer approvals and legal effect
- Transfers or acquisitions, or series thereof, of at least 10% of the voting shares in banks or quasi-banks require prior approval of the Bangko Sentral (Section 25-A).
- The selling or conveying stockholder must submit the transfer/acquisition for approval within a period prescribed by the Monetary Board (Section 25-A).
- Approval must consider the fitness of incoming stockholders based on integrity, reputation, and financial capacity (Section 25-A).
- Without Bangko Sentral approval, the transfer or acquisition has no legal effect, is not recognized in the institution’s books, and is not recognized by any government agency; the transferor/transferee remains accountable and responsible (Section 25-A).
- Transfer of actual control/management to new stockholders or their representatives before Bangko Sentral approval makes the transfer, the transferee, and any person responsible liable under Sections 36 and 37 of the Act (Section 25-A).
- The Bangko Sentral may share with the PDIC information it obtains pertaining to transfer or acquisition of shares in banks and quasi-banks (Section 25-A).
Prohibitions on BSP personnel lending
- Bangko Sentral personnel are prohibited from borrowing from any institution subject to the Bangko Sentral’s supervision or examination unless the borrowing is on an arm’s length basis, fully disclosed to the Monetary Board, and subject to rules and regulations prescribed by the Monetary Board (Section 27(d)).
- These prohibitions operate in addition to prohibitions found in Republic Act Nos. 3019 and 6713 (Section 27(d)).
Examination intervals and annual supervision fees
- The supervising and examining department head personally or by deputy must examine every bank and quasi-bank, including subsidiaries and affiliates in allied activities, and other entities subject to Bangko Sentral supervision under the Act or special laws (Section 28).
- Regular examinations must be separated by at least twelve (12) months (Section 28).
- The Monetary Board may authorize a special examination by an affirmative vote of at least five (5) members when circumstances warrant (Section 28).
- The institution must provide the department head and authorized deputies full opportunity to examine books and records, cash and assets, and general condition and to review systems and procedures during business hours when requested (Section 28).
- None of the reports and other papers on examinations are open to public inspection except as publicity is incidental to authorized proceedings or necessary to prosecute violations connected to such institutions’ business (Section 28).
- Supervised institutions must pay to the Bangko Sentral an annual supervision fee no later than May 31 of each year, as prescribed by the Monetary Board (Section 28).
- In determining the annual supervision fee, the Monetary Board must consider the costs of supervision (Section 28).
Coordination with license suspension/revocation
- Suspension or revocation of any government license necessary for the operation of a Bangko Sentral-supervised entity must be done only with prior consultation with the Bangko Sentral (Section 28-A).
Receivership and liquidation powers
- The Monetary Board may find a bank or quasi-bank proper for action when it:
- has notified the Bangko Sentral or publicly announced a unilateral closure, has been dormant for at least sixty (60) days, has suspended payment of deposit/deposit substitute liabilities, or is unable to pay liabilities as they become due in ordinary course of business, excluding inability due to extraordinary demands induced by financial panic in the banking community (Section 30(a)); or
- has insufficient realizable assets to meet liabilities as determined by the Bangko Sentral (Section 30(b)); or
- cannot continue in business without probable losses to depositors or creditors (Section 30(c)); or
- has willfully violated a cease and desist order under Section 37 that has become final, involving acts/transactions amounting to fraud or dissipation of assets (Section 30(d)).
- When grounds exist, the Monetary Board may summarily and without prior hearing forbid the institution from doing business in the Philippines and designate:
- PDIC as receiver for banks; and
- PDIC to proceed with liquidation of the closed bank pursuant to Section 30 and the relevant provisions of Republic Act No. 3591, as amended (Section 30).
- The Monetary Board must notify in writing, through the receiver, the board of directors of the closed bank of its decision (Section 30).
- Actions taken under Section 30 or Section 29 are final and executory and cannot be restrained or set aside by court except via petition for certiorari on ground of excess of jurisdiction or grave abuse of discretion amounting to lack or excess of jurisdiction (Section 30).
- The certiorari petition may be filed only by stockholders of record representing the majority of the capital stock within ten (10) days from receipt by the institution’s board of directors of the order directing receivership, liquidation, or conservatorship (Section 30).
- Appointment of a conservator under Section 29 or a receiver under Section 30 is vested exclusively in the Monetary Board; conservatorship is not a precondition to receivership (Section 30).
- The summary power to forbid business also applies to non-stock savings and loan associations based on the same grounds; for quasi-banks and non-stock savings and loan associations, a person of recognized competence in banking/credit/finance may be designated as receiver by the Bangko Sentral (Section 30).
Deleting former sections and record/report penalties
- Section 14 deletes Section 31 of Republic Act No. 7653.
- Section 15 deletes Section 32 of Republic Act No. 7653.
Refusal to report or allow examination penalties
- Any officer, owner, agent, manager, director, or officer-in-charge of an institution who, being required in writing by the Monetary Board or by the head of the supervising and examining department, willfully refuses to file required reports or permit lawful examination is punished by:
- a fine of not less than PHP 50,000 nor more than PHP 2,000,000, or
- imprisonment of not less than one (1) year nor more than five (5) years, or both, at the discretion of the court (Section 34).
- The penalty also applies to the officer, owner, agent, manager, director, or officer-in-charge of affiliate company/companies whose transactions are subject to examination under the Act (Section 34).
False statements to BSP penalties
- Willful making of a false or misleading statement on a material fact to the Monetary Board or to Bangko Sentral examiners is punished by:
- a fine of not less than PHP 100,000 nor more than PHP 2,000,000, or
- imprisonment of not more than five (5) years, or both, at the discretion of the court (Section 35).
Criminal/penal enforcement and informer rewards
- Willful violation by any bank/quasi-bank (including subsidiaries and affiliates engaged in allied activities) or by any other supervised entity, or by any person or entity, of the Act or other pertinent banking laws enforced or implemented by the Bangko Sentral, or of any order/instruction/rule/regulation of the Monetary Board, is punished by:
- a fine of not less than PHP 50,000 nor more than PHP 2,000,000, or
- imprisonment of not less than two (2) years nor more than ten (10) years, or both, at the discretion of the court (Section 36).
- If an entity under Bangko Sentral supervision persists in carrying on business in an unlawful or unsafe manner, the Monetary Board may take action under Section 30 without prejudice to criminal penalties under Section 36 and administrative sanctions under Section 37 (Section 36).
- The Bangko Sentral may grant an informer’s reward to any person other than an officer or employee of the Bangko Sentral or of any intelligence or law enforcement agency, including relatives within the fourth degree of consanguinity or affinity of such officer/employee (Section 36).
- The informer must voluntarily give definite information not yet in the Bangko Sentral’s possession leading to:
- arrest of bank directors/officers and/or BSP personnel for violation of the Act or banking/laws implemented/enforced by the Bangko Sentral, or violation of other penal laws committed in connection with their employment/functions; or
- filing of criminal charges against any person for violation of Section 50 (Section 36).
- The Monetary Board may promulgate implementing guidelines for informer’s rewards with rules on qualifications/disqualifications and form/minimum content, and the guidelines must set a cap such that informer rewards in no case exceed PHP 1,000,000 (Section 36).
- Informers’ cash rewards are subject to applicable withholding taxes (Section 36).
Administrative sanctions and cease-and-desist procedure
- Administrative sanctions must be fair, consistent, and reasonable and are imposed by the Monetary Board without prejudice to criminal sanctions under Sections 34, 35, and 36 (Section 37).
- The Monetary Board may impose administrative sanctions on banks/quasi-banks (including subsidiaries and affiliates engaged in allied activities) and other supervised entities, and/or their directors, officers, or employees, for willful violations of the charter/bylaws, willful delay in submission of required reports/publications, refusal to permit examination, willful false/misleading statements, willful failure/refusal to comply with or violation of banking laws, Monetary Board orders/instructions/regulations, Governor orders/instructions/rulings, or irregularities and/or conducting business in an unsafe/unsound manner determined by the Monetary Board (Section 37).
- For transactional violations, administrative fines are determined by the Monetary Board but cannot exceed PHP 1,000,000 per transactional violation.
- For continuing violations, administrative fines cannot exceed PHP 100,000 per calendar day, considering attendant circumstances, the nature and gravity of violation/irregularity, and size of the institution (Section 37).
- If profit is gained or loss avoided as a result of the violation, the fine may be imposed up to three (3) times the profit gained or loss avoided (Section 37).
- Administrative sanctions include:
- suspension of rediscounting privileges or access to Bangko Sentral credit facilities (Section 37);
- suspension of lending or foreign exchange operations or authority to accept new deposits or make new investments (Section 37);
- suspension of interbank clearing privileges (Section 37);
- suspension or revocation of quasi-banking or other special licenses (Section 37).
- Resignation or termination from office does not exempt a director/officer/employee from administrative or criminal sanctions (Section 37).
- The Monetary Board may preventively suspend any director/officer/employee pending investigation (Section 37).
- Preventive suspension lasts unless the case is not finally decided by the Bangko Sentral within one hundred twenty (120) days from the date of suspension, in which case the suspended person is reinstated; delays due to the fault, negligence, or petition of the director/officer are excluded from the period (Section 37).
- The sanctions need not be applied in order of severity (Section 37).
- If the institution and/or concerned persons continue or persist in the practice/violation, the Monetary Board may issue an order requiring a cease and desist and may order immediate corrective action; the cease and desist order is immediately effective upon service (Section 37).
- The respondents are entitled to a hearing before the Monetary Board or a committee chaired by any Monetary Board member created for the purpose if respondents request it within five (5) days from receipt of the order; if no request is made within the period, the order is final; if a hearing is conducted, issues are decided on records and the Monetary Board may reconsider or make the order final (Section 37).
- The Governor may impose additional fines for failure to comply with law/BSP regulations and policies and/or instructions/orders, with fines not exceeding PHP 100,000 per transactional violation or PHP 30,000 per calendar day for continuing violations; these Governor-imposed fines remain final and executory until reversed, modified, or lifted by the Monetary Board on appeal (Section 37).
Injunctive relief against Bangko Sentral actions
- No court other than the Court of Appeals and the Supreme Court may issue a temporary restraining order, preliminary injunction, or preliminary mandatory injunction against the Bangko Sentral for any action under the Act (Section 38-A).
- Any restraining order or injunction issued in violation of this rule is void and of no force and effect (Section 38-A).
- Rules of Court govern issuance/dissolution of injunctions against the Bangko Sentral insofar as applicable and not inconsistent (Section 38-A).
Reports, publications, budgets, and periodic analyses
- The Bangko Sentral must publish a general balance sheet showing volume/composition of assets and liabilities as of the last working day of the month within ninety (90) days after end of each month, subject to reasonable extension by the Bangko Sentral (Section 39).
- The Monetary Board must publish and submit to the President and Congress:
- within ninety (90) days after end of each quarter: an analysis of economic and financial developments, including condition of net international reserves and monetary aggregates (Section 39(a));
- within ninety (90) days after end of the year (reasonably extendable): the preceding year’s budget and profit and loss statement showing results of operations in reasonable detail (Section 39(b));
- one hundred twenty (120) days after end of each semester: a review of the state of the financial system (Section 39(c));
- as soon as practicable, abnormal movements in monetary aggregates and general price level, and no later than seventy-two (72) hours after they are taken, remedial measures in response (Section 39(d)).
- Before end of June each year, the Bangko Sentral must publish and submit to the President and Congress an annual report on the condition of the Bangko Sentral, including review of policies/measures adopted by the Monetary Board during the past year and analysis of economic/financial circumstances that gave rise to the policies/measures (Section 40).
- The annual report must include a statement of financial condition and statistical appendix presenting, at minimum:
- monthly movement of monetary aggregates and components (Section 40(a));
- monthly movement of purchases/sales of foreign exchange and international reserves of the Bangko Sentral (Section 40(b));
- balance of payments of the Philippines (Section 40(c));
- monthly indices of consumer prices and import/export prices (Section 40(d));
- monthly movement of exports/imports by volume and value (Section 40(e));
- monthly movement of accounts of the Bangko Sentral and other banks (Section 40(f));
- principal data on government receipts/expenditures and status of public debt, domestic and foreign (Section 40(g));
- texts of major legal and administrative measures adopted by Government and Monetary Board during the year relating to Bangko Sentral functions/operations or the financial system (Section 40(h)).
- The Bangko Sentral must publish another version of the annual report understandable to the layman (Section 40).
Profits, reserve fund, and revaluation treatment
- Within the first sixty (60) days after end of each year, the Bangko Sentral determines its net profits or losses (Section 43).
- Net profit is determined after allowing expenses of operation, adequate allowances and provisions for bad/doubtful debts, depreciation, and allowances/provisions for contingencies or other purposes as the Monetary Board determines under prudent financial management and effective central banking operations (Section 43).
- The Bangko Sentral must establish a reserve fund whenever it has income or positive surplus to mitigate future risks including foreign exchange and price fluctuations and address other contingencies inherent in mandated central banking functions (Section 43-A).
- The reserve fund consists of fluctuation reserve, contingency reserve, and other reserves the Monetary Board deems prudent/necessary (Section 43-A).
- Unrealized profits/losses from revaluation of Bangko Sentral assets, liabilities, or foreign-currency derivative instruments due to price/exchange rate movements from third currencies to Philippine peso are excluded from computation of annual profits and losses (Section 45).
- Profits/losses from these revaluations must be offset by amounts owed by the Philippines to international/regional intergovernmental financial institutions (or owed to Philippines by them) as a consequence of revaluations (Section 45).
- Remaining unrealized profit/loss must be carried in an account named “Revaluation of International Reserve (RIR)”, appearing among liabilities or assets depending on net profits or net losses (Section 45).
- The RIR is credited/debited for periodic revaluation and corresponding adjustment from changes reducing net foreign assets or liabilities and foreign-currency-denominated derivatives (Section 45).
- The RIR is adjusted/recognized in income statement upon sale of gold and foreign securities, repatriation of foreign currency to local currency, use to pay foreign obligations, or maturity of