Law Summary
Responsibilities and Primary Objectives
- Provide policy directions on money, banking, and credit
- Supervise banks and quasi-banks, and regulate non-bank financial institutions, money service businesses, credit granting businesses, and payment operators
- Authorize entities/persons to engage in money service businesses
- Primary objective: maintain price stability conducive to balanced and sustainable economic growth and employment
- Promote monetary stability, peso convertibility, and financial stability
- Collaborate with government agencies like Department of Finance, SEC, Insurance Commission, PDIC
- Oversee payment and settlement systems and financial market infrastructures
- Promote broad access to high-quality financial services considering public interest
Monetary Board Meetings and Decision-Making
- Meet at least once weekly; called by Governor or two members
- Quorum: four members including Governor or alternate
- Decisions require concurrence of at least four members
- Maintain complete records including stenographic notes
- Meetings may be held via tele/videoconferencing
Indemnification of BSP Officials
- Indemnify members and officials against costs from civil/criminal actions unless found liable for willful violation, bad faith, or gross negligence
- Indemnification covers settlements advised by external counsel
- Expenses may be advanced with undertakings to repay if indemnity not applicable
Liability and Confidentiality
- Liability of Monetary Board members and personnel governed by Administrative Code rules
- Confidential information protected unless disclosed with authorization or for official functions
- Misuse of confidential information penalized
- Protection from liability unless willful violation or gross negligence proven, with indemnification
Appointment and Role 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 if Governor absent
- Deputies may participate and vote in government councils on Governor's behalf
Authority to Obtain Data
- Bangko Sentral may require data from persons/entities including government offices and corporations
- May issue subpoenas to compel production of records for statistical and policy purposes
- Failure to comply punishable as contempt
- Data on individuals and firms generally confidential, with disclosures only under court order or Monetary Board prescription
Supervision and Examination of Banks and Quasi-Banks
- Conduct regular and special examinations of banks, quasi-banks, subsidiaries, and affiliates
- Define subsidiaries ( >50% ownership/control) and affiliates (≤50% ownership/related)
- Establish independent mechanism reporting to Monetary Board for examination issues
- Authorized to administer oaths and compel production of books and records
- Court injunctions restraining examinations generally prohibited unless action is arbitrary and bad faith, with bond requirements
Approval for Transfer of Significant Shares
- Transfers/acquisitions of at least 10% voting shares require prior Bangko Sentral approval
- Approval considers integrity, reputation, and financial capacity of incoming stockholders
- Unauthorized transfers have no legal effect and incur liability
- Transfer of actual control without approval triggers penalties
- Information sharing with PDIC permitted
Prohibitions on Bangko Sentral Personnel Borrowing
- Personnel prohibited from borrowing from supervised institutions unless arm's length, disclosed, and compliant with rules
Examination and Supervision Fees
- Supervising department conducts examinations with at least 12 months interval between regular exams
- Monetary Board may authorize special examination by five member vote
- Institutions must grant full examination access
- Non-publication of exam reports unless necessary for prosecution
- Annual supervision fees payable by supervised institutions by May 31
Prior Consultation for License Suspension or Revocation
- Suspension or revocation of government licenses for BSP-supervised entities only after consulting Bangko Sentral
Receivership and Liquidation
- Monetary Board may summarily prohibit bank/quasi-bank from doing business upon certain conditions (closure, insolvency, cessation, cease & desist violations)
- Designate PDIC as receiver for banks, or competent receiver for quasi-banks and savings and loan associations
- Monetary Board actions final and executory except via certiorari for jurisdictional abuse
- Conservator appointment not required prior to receivership
Penalties for Refusal to Report or Allow Examination
- Fine of ₱50,000 - ₱2,000,000 or imprisonment of 1 - 5 years or both for intentional refusal to comply with written requirements
- Applies also to affiliated companies subject to examination
Penalties for False Statements
- Fine of ₱100,000 - ₱2,000,000 or imprisonment up to 5 years or both for willful false or misleading material statements
Penalties for Willful Violations of Banking Laws
- Banks, quasi-banks, affiliates, or persons violating laws/orders face fines ₱50,000 - ₱2,000,000 or imprisonment 2 - 10 years or both
- Continued unlawful operations may lead to receivership
- Informer's rewards up to ₱1,000,000, excluding BSP staff and relatives, with guidelines issued by Monetary Board
Administrative Sanctions on Supervised Entities
- Monetary Board may impose fines (up to ₱1,000,000 per transaction or ₱100,000 per day continuous violation), suspensions (credit facilities, lending, foreign exchange, clearing), and license suspension/revocation
- Sanctions apply to institutions and personnel for various willful violations
- Preventive suspension of personnel possible, with reinstatement if not decided within 120 days
- Cease and desist orders may be issued and become final if no hearing requested
- Governor can impose fines up to ₱100,000 per transaction without Monetary Board approval
Restrictions on Court Injunctive Relief Against BSP
- Only Court of Appeals and Supreme Court may issue injunctive relief against Bangko Sentral actions
- Other courts' restraining orders/injunctions are null and void
Reporting and Publication Requirements
- Monthly general balance sheet published within 90 days
- Quarterly, semi-annual and annual reports to President and Congress on economic and financial conditions
- Reports include analysis of abnormal price movements and remedial actions
Annual Report
- Published before end of June annually
- Includes review of policies, financial condition, economic circumstances, and statistical appendix with extensive economic and financial data
- Layman version of report also published
Computation of BSP Profits
- Determined within 60 days after year-end
- Net profits determined after expenses, allowances, and contingencies per prudent financial management
Reserve Fund Establishment
- BSP establishes reserve fund from surplus/income to mitigate future risks and contingencies
- Comprises fluctuation reserve, contingency reserve, and others as determined by Monetary Board
Treatment of Revaluation Profits and Losses
- Unrealized foreign currency revaluation gains/losses excluded from annual profits computation
- Recorded in Revaluation of International Reserve (RIR) account
- Adjusted upon sale/conversion of foreign assets or maturity of derivatives
Price Stability Policy
- Monetary Board to regularly assess inflationary pressures and use policy instruments to maintain price stability
- Detailed and periodic reports to President and Congress on abnormal price movements and remedial measures
Composition of International Reserves
- Reserves include gold and various foreign currency assets (deposits, securities, notes)
- Held in freely convertible currencies
- Monetary Board regulates qualifications of assets included
Rediscounts, Discounts, Loans and Advances
- Credits extended to banks used to control credit volume consistent with price and financial stability
Emergency Loans and Advances
- Grantable during emergencies or financial panic, with Monetary Board approval
- Limits on amounts and collateral requirements detailed
- Principal stockholders may be required to indemnify conservator
- Prohibitions on collateral acceptance lifted during emergencies
Protection of Collaterals
- Collateral for BSP loans exempt from attachment, execution, or court restrictions
Deputization in Foreclosure Proceedings
- BSP authorized to deputize its lawyers as special sheriffs or auctioneers in foreclosures
- Court bonds required before enjoining Foreclosure proceedings
Redemption Rights on Foreclosed Properties
- Right to redeem within one year for natural persons, within specified periods for juridical persons
- Redemption covers all outstanding principal, interest, charges, and costs
- BSP entitled to possession and fruits of property during redemption without posting bond
Preference of Unsecured BSP Claims
- Unsecured claims of BSP treated as preferred credits similar to taxes
Financial Facilities for Islamic Banks
- BSP may issue regulations for financial facilities to Islamic banks considering their characteristics
Loans to PDIC
- BSP authorized to lend funds to PDIC for insurance and financial assistance purposes
- Monetary Board prescribes terms including interest
Issue and Negotiation of BSP Obligations
- BSP may issue negotiable evidences of indebtedness for open market operations
- Terms including interest rates and currency denomination set by Monetary Board
- BSP may buyback and retire obligations before maturity
Definition of Deposit Substitutes
- Instruments other than deposits obtained from public (≥20 lenders) for relending or receivables purchase
- Includes bankers acceptances, promissory notes, participations, certificates of assignment, repurchase agreements
- Deposit substitutes of non-financial companies for own financing excluded
Reserve Deficiencies and Penalties
- Banks with reserve deficiencies pay penalties, with offsetting allowed within a week
- Repeated deficiency may limit le