Capitalization rule for rural banks amended
- Section 1 amends Subsec. X111.1 (Minimum capitalization) of the MORB to state that the required minimum capitalization applies to a rural bank in specified situations.
- The required minimum capitalization applies upon: (a) establishment of a new bank; (b) conversion of an existing bank from a lower to a higher category bank and vice versa; (c) relocation of the head office of a TB/RB to an area of higher classification; and (d) when majority of an RB’s total assets and/or majority of its total deposit liabilities are regularly accounted for by branches in areas of higher classification under Subsec. X151.4 on branching guidelines.
- The required minimum capitalization is set by bank category as follows:
- UBs: P 4.95 billion
- KBs: P 2.4 billion
- TBs with Head Office in:
- Metro Manila: P 325 million
- Outside Metro Manila: P 52 million
- RBs with Head Office in:
- Metro Manila: P 100 million
- Cities of Cebu and Davao: 50 million
- All other cities: 25 million
- 1st to 4th class Municipalities: 10 million
- 5th to 6th class Municipalities: 5 million
- Coop Banks: P 10 million
- For the grant of special banking authorities, the required minimum capital is the higher of (a) the required minimum capital under Subsection X111.1 at the time of application, or (b) the amount specified in the applicable Sections/Subsections for the grant of special banking authorities, and must be complied with on a continuing basis.
Special banking authorities—capital must match
- Section 1 lists special banking authorities for which the higher required minimum capital rule applies, including:
- Quasi-banking functions for TBs.
- Trust and other fiduciary business for U/KBs and TBs.
- Limited trust for TBs and RBs/Coop Banks.
- FCDU/EFCDU operation (foreign currency deposit unit/expanded foreign currency deposit unit).
- Issuance of foreign letters of credit (LCs) for TBs.
- Acceptance of demand deposit and NOW accounts for TBs and RBs/Coop Banks.
- Acting as third party securities custodian/registry.
- The required minimum capital for these special authorities must be the higher of the minimum capitalization at application time or the amount in the specific special-authority provisions, and must continue to be maintained.
Transitional treatment for approved rural banks
- Section 1 provides a transitory rule stating that approved but not yet operating RBs, and pending and complete applications for:
- establishment of a new RB; or
- conversion of an existing bank from a higher category to an RB; or
- the grant of special banking authorities,
as of the effectivity of the implementing circular are not covered by the new minimum capital requirement for RBs.
Branching guidelines and capital compliance
- Section 2 amends Subsec. X151.4 (Branching guidelines) for branches established by banks.
- As a general rule, banks may establish branches anywhere in the Philippines except in the cities of Makati, Mandaluyong, Manila, Parañaque, Pasay, Pasig, Quezon and San Juan (restricted areas).
- RBs/Coop Banks are prohibited from establishing branches in Metro Manila.
- An RB with combined capital accounts of at least P10.0 million may establish branches in cities/municipalities of higher classification except in Metro Manila, subject to restrictions.
- If majority of an RB’s total assets and/or majority of its total deposit liabilities are regularly accounted for by branches located in higher-classification cities/municipalities, the RB must comply with the required minimum capital under Subsection X111.1 for the city/municipality of the highest classification within one (1) year from the BSP finding.
Demand deposits—minimum capital prerequisite
- Section 3 amends Subsec. X201.1 (Prerequisites to accept or create demand deposits for Thrift Banks/Rural Banks/Cooperative Banks).
- In addition to the Standard Pre-qualification Requirements enumerated in Appendix 5, a TB/RB/Coop Bank applying for authority to accept or create demand deposits must comply with the following:
- the applicant TB/RB/Coop Bank must have complied with the minimum capital required under Subsec. X111.1.
- The terms capital and net assets have the same meaning as in Sec. X111.
Foreign currency deposit units—capital requirement
- Section 4 amends Subsec. X501.2 (Qualification requirements) for FCDU/EFCDU operations.
- RBs/Coop Banks may operate an FCDU only subject to prior Monetary Board approval.
- To operate an FCDU, RBs/Coop Banks must meet the minimum capital under Subsec. X111.1 or P20.0 million, whichever is higher.
Deletions and removal of capital build-up rules
- Section 5 deletes Subsection X111.2 on capital build-up program and Subsection X111.3 on Memorandum of Understanding, prompt corrective action program and sanctions.
Monetary Board adoption and implementation
- The amendments are implemented by amending the MORB provisions stated in Sections 1 to 4, and by deleting the provisions stated in Section 5.
- The Governor of the BSP Monetary Board signs the circular, authorizing compliance with the revised MORB capitalization and qualifying prerequisites upon the circular’s effectivity.