Law Summary

Introduction

This document summarizes Circular No. 317, issued by the Monetary Board on January 29, 2002, which amends Section X380 of the Manual of Regulations for Banks in accordance with Republic Act No. 8791. It delineates the conditions under which banks may engage in non-financial allied undertakings.

Amendments to Non-Financial Allied Undertakings

• Legal Principle/Provision: The Circular allows banks to acquire up to 100% equity in non-financial allied undertakings, which are defined primarily based on the corporation's stated objectives in its articles of incorporation and the volume of its principal business.

• Key Definitions:

  • Non-Financial Allied Undertakings: Corporations that engage in activities not classified as traditional banking but related to it as specified.

• Important Requirements/Procedures:

  • Banks classified as Universal Banks (UBs), Commercial Banks (KBs), and Thrift Banks (TBs) are permitted to invest in a list of specified non-financial allied undertakings.
  • The Circular explicitly outlines the types of companies that qualify as non-financial allied undertakings eligible for investment.

• Relevant Timeframes: The Circular takes effect immediately upon adoption on January 29, 2002.

• Penalties, Liabilities, or Consequences: Previous circulars inconsistent with this provision are superseded, suggesting the need for compliance with the new regulations.

Eligible Non-Financial Allied Undertakings

• Investment Opportunities for Banks:

  • UBs, KBs, and TBs may invest in the following:
    • Warehousing, storage, and safe deposit box companies.
    • Companies managing mutual funds and similar management corporations.
    • Entities providing computer services.
    • Insurance agencies and brokerages.
    • Companies involved in home building and development.
    • Facilities for drying and milling agricultural products.
    • Service Bureaus performing outsourced services for banks and financial institutions, with a cap of 40% equity for data processing companies.
    • Philippine Clearing House Corporation (PCHC) and Philippine Central Depository, Inc. (PDIC).
    • Additional activities as defined by the Monetary Board.

• Special Provisions:

  • UBs may also invest in Health Maintenance Organizations (HMOs).
  • TBs have additional investment opportunities as specified in Item b of Section X380.

Supersession of Prior Circulars

• Legal Principle: All previous circulars inconsistent with the provisions of this Circular are deemed null and void.

• Consequences of Non-compliance: Financial institutions must adhere to the new guidelines as outlined in Circular No. 317 to avoid penalties associated with the non-compliance of previous directives.

Key Takeaways

• Banks are now permitted to invest extensively in non-financial allied undertakings, enhancing their operational scope beyond traditional banking services.
• The definition of eligible investments is clearly articulated, allowing banks to understand their new investment landscape.
• Immediate effectivity of the Circular places urgency on banks to align with the new regulations.
• Prior inconsistent circulars are invalidated, necessitating banks to review and comply with this updated directive.