Legal basis and rule amended
- BSP Circular No. 695 is issued pursuant to Monetary Board Resolution No. 1425 dated 08 October 2010.
- BSP Circular No. 695 amends the MORB provision governing definitions used for DOSRI ceilings.
- The amendment specifically revises the definition of “Related interest” under Section X326.1 (Definitions), Subsection X326.1.e.
Purpose and coverage of “related interest”
- Subsection X326.1.e defines “Related interest” for purposes of DOSRI ceilings.
- Related interest includes an interest connection where specified bank persons (and their spouse) also serve as directors or officers in another corporation, association, or firm.
- Related interest operates as a definitional threshold for determining when an exposure falls within DOSRI limits.
Updated definition: who creates related interest
- Subsection X326.1.e(4) states that “Related interest” refers to a corporation, association, or firm of which a director or officer of the bank, or the director/officer’s spouse, is also a director or officer of that corporation, association, or firm.
- This relationship-based coverage applies except when the listed conditions allow the relationship to be treated outside the Related interest category for DOSRI ceilings purposes.
Exceptions: board-related cases
- The definition excludes the covered relationship when the securities of the corporation, association, or firm are listed and traded in the big board or commercial and industrial board of domestic stock exchanges.
- The definition excludes the covered relationship when less than 50% of the voting stock** is owned by any one (1) person or by persons related to each other within the first degree of consanguinity or affinity.
- The definition excludes the covered relationship when the director, officer, or stockholder of the bank sits as a representative of the bank in the board of directors of the corporation, and the proviso is satisfied:
- the bank representative shall not have any equity interest in the borrower corporation except for the minimum shares required by law, rules and regulations, or by the by-laws of the corporation.
Exceptions: high-ownership non-stock corporation
- The definition excludes the covered relationship when the corporation is at least 99%‑owned by a non-stock corporation as defined in Section 87 of the Corporation Code of the Philippines.
- The loan purpose condition must be met: the purpose of the loan is to finance hospitals and other medical services.
- The security condition must be met: the loan is fully secured.
Additional restriction for Items (a), (b), and (c)
- For exceptions that apply to Items (a), (b), and (c), the definition excludes the relationship only if the borrowing corporation is not among those mentioned in Items a e(5), a e(6), a e(7) and a e(8) of this Section.
- The condition on the borrowing corporation functions as an additional gate for the applicability of the stated exceptions.
Transitory and implementation clause
- BSP Circular No. 695 includes an effectivity rule that is tied to publication, requiring 15 days after publication in either the Official Gazette or a newspaper of general circulation.
- The amendment takes effect automatically upon satisfaction of the publication-and-wait period requirement described above.