Law Summary

Introduction

This document summarizes the amendments to Section X380 of the Manual of Regulations for Banks, approved by the Monetary Board under Resolution No. 1939 dated December 6, 2001, and effective immediately as of January 29, 2002.

Amendments Overview

• The resolution permits banks to acquire up to 100% of the equity in non-financial allied undertakings.
• The classification of a corporation as a non-financial allied undertaking is determined based on its primary purpose as stated in its articles of incorporation and the volume of its principal business.

Eligible Non-Financial Allied Undertakings

• Universal Banks (UBs), Commercial Banks (KBs), and Thrift Banks (TBs) may invest in the following:

  1. Warehousing companies
  2. Storage companies
  3. Safe deposit box companies
  4. Companies primarily engaged in managing mutual funds (not the funds themselves)
  5. Management corporations similar to mutual fund management
  6. Companies providing computer services
  7. Insurance agencies and brokerages
  8. Home building and development companies
  9. Companies providing drying/milling facilities for agricultural products (e.g., rice, corn)
  10. Service Bureaus for banks and non-bank financial institutions (data processing companies may invest up to 40% in these)
  11. Philippine Clearing House Corporation (PCHC) and Philippine Central Depository, Inc. (PDIC)
  12. Other activities deemed as non-financial allied undertakings by the Monetary Board

• UBs are additionally permitted to invest in Health Maintenance Organizations (HMOs).

Supersession of Previous Circulars

• All prior Circulars inconsistent with the provisions of this Circular are explicitly superseded.

Implementation

• The Circular took effect immediately upon its adoption on January 29, 2002.

Key Definitions

• Non-Financial Allied Undertakings: Corporations primarily engaged in activities as described in the eligible undertakings section.
• Equity Investment: The ownership interest in a corporation, expressed as a percentage of total ownership.

Important Requirements

• The determination of whether a corporation qualifies as a non-financial allied undertaking must refer to its articles of incorporation and the nature of its business operations.
• Investments must comply with the specified categories and restrictions outlined above.

Key Takeaways

• Banks can invest significantly in non-financial allied undertakings, expanding their operational scope.
• The specific types of companies eligible for investment are clearly enumerated, emphasizing the regulatory framework guiding such investments.
• Immediate effectivity of this Circular means banks should be prepared to comply with these amendments without delay.
• The Circular ensures clarity by superseding any conflicting previous regulations, thus providing a coherent policy direction.

This summary encapsulates the salient points of Circular No. 317, S. 2002, ensuring clarity on the guidelines for banks regarding investments in non-financial allied undertakings.