Authority, manuals amended, coverage
- BSP Circular No. 514 inserts Subsec. X 337.1 into the MORB.
- BSP Circular 514’s bank rules also apply through the Dosri rules framework found in Section X326 to Section X337 of the MORB.
- BSP Circular No. 514 extends the rules to quasi-banks and other non-bank financial institutions.
- The Circular adds the corresponding provisions to the Q-Regulations and N-Regulations of the MORNBFI.
Applicability of Dosri rules to government borrowing
- BSP Circular No. 514 states that the provisions of Section X326 to Section X337 of the MORB shall also apply to loans, other credit accommodations, and guarantees granted to:
- the National Government or Republic of the Philippines (ROP), its political subdivisions and instrumentalities, and
- government-owned or controlled corporations (GOCCs),
- subject to specified clarifications.
Clarifications on risk, ceilings, and related-interest treatment
- Loans, other credit accommodations, and guarantees to the ROP and/or its agencies/department/bureaus must be treated as:
- (a) non-risk, and
- (b) not subject to any ceiling.
- Loans, other credit accommodations, and guarantees to GOCCs, and to corporations where the ROP, its agencies/departments/bureaus, and/or GOCCs own at least twenty percent (20%) of the subscribed capital stock, must be treated as:
- indirect borrowings of the ROP, and
- required to form part of the individual ceiling and the aggregate ceiling.
- BSP Circular No. 514 clarifies that, due to:
- fiscal autonomy under Republic Act No. 7653, and
- constitutional independence,
- the BSP is an independent entity and not a related interest of the ROP and/or its agencies/departments/bureaus.
- Loans, other credit accommodations, and guarantees of the BSP must be treated as:
- (a) non-risk, and
- (b) not subject to any ceiling.
- Local Government Units (LGUs) must be treated as separate from the ROP, other government entities, and from one another because of full autonomy over proprietary functions and management of economic enterprises under the Local Government Code of the Philippines, subject to limitations provided by law.
- Loans, other credit accommodations, and guarantees to an LGU are governed by the related-interest framework reflecting LGU separation from the ROP and other government entities.
Board participation rules for government-related lending
- For loans, other credit accommodations, and guarantees to the ROP and/or its agencies/department/bureaus, a director who acts as a government representative in the lending institution must not be excluded from:
- deliberation, and
- the determination of the majority of the directors.
- For loans, other credit accommodations, and guarantees to a borrowing government entity other than the ROP, its agencies, departments or bureaus where the director is also a director, officer or stockholder under existing DOSRI regulations, the director of the lending institution must be excluded from:
- deliberation, and
- the determination of the majority of the directors.
Final operational effect and implementation mechanism
- BSP Circular No. 514 operates by adding the bank rule through MORB Subsec. X 337.1.
- BSP Circular No. 514 applies the same approach to non-bank financial institutions by placing the provisions within the Q-Regulations and N-Regulations of the MORNBFI.
- The Circular’s effectivity is triggered only after the required publication and expiration of 15 days from publication in the Official Gazette or a newspaper of general circulation.