Regulations on Revised Non-Stock Savings and Loan Associations

Law Summary

Organizational and Registration Requirements

Articles of Incorporation and By-laws require Monetary Board approval before SEC registration.
Submission must include detailed organizational and financial information plus a filing fee.
Monetary Board can deny applications based on unsound financial programs, legitimacy of purpose, or existing service coverage.
NSSLAs need a certificate of authority from the Monetary Board before conducting business.
Certificates can be suspended or revoked for insolvency, irregularities, or regulatory violations.

Membership Requirements

Limited to employees, officers, trustees of one company, government employees within the same office or department, and immediate family up to second degree of consanguinity or affinity.
Pre-existing NSSLAs may maintain broader or narrower membership if previously approved.
Entrance fees capped at 1% of member contributions.

Capitalization Rules

Minimum initial member capital contribution is ₱1,000.
Members may increase capital or open deposit accounts.
Partial withdrawals allowed unless bylaws say otherwise, but cannot reduce capital contribution below ₱1,000.
Profit participation is based on capital contributions.
Revaluation surplus applies to capital adjustments for retiring or new members.

Capital to Risk Assets Ratio

Capital accounts must be at least 10% of risk assets (total assets minus specified non-risk assets like cash, government securities, depreciated equipment).
Monetary Board regulates asset calculation and can restrict dividends, investments, and require capital increases if ratio falls below prescribed levels.

Reserves and Surplus Provisions

Withdrawable Share Reserve: 2% of total capital contributions, invested in government securities.
Surplus Reserve for Ledger Discrepancies: set aside from profits to cover accounting differences; employees responsible may be dismissed.
Reserve for Office Premises and Equipment: 5% of yearly net profits until reaching 5% of total assets, but can be waived if premises and equipment are sufficient.

Dividend Limitations

Dividends only distributed if withdrawable share reserve requirements and capital-to-risk assets ratio are met.
Surplus reserves held for ledger discrepancies cannot be distributed until discrepancies are fully accounted for.

Trustees, Officers, Employees, and Agents

Trustees must be members of good standing, at least 21 years old, and at least high school graduates or with relevant experience/training.
Officers include President, VP, General Manager, Secretary, Treasurer, etc., with similar qualifications.
Disqualifications include criminal convictions involving moral turpitude, insolvency, non-compliance with Monetary Board regulations, excessive absences, delinquency in payments, and close relationships within senior management.
Bio-data of trustees and officers must be submitted annually and after any changes.
Compensation must not be based on loan volume or interest collected but may include salaries, commissions to agents, and profit-based bonuses.
Unauthorized loans or investments not permitted by law subject liable trustees, officers, or employees to personal liability.
Agents require Monetary Board licensing except collectors, who must have written authorization.
Officers and employees with cash handling duties must be bonded with approved bonds.

Branch and Office Regulations

Prior BSP authority required before opening branches or extension offices.
Applications must include location sketches, financial projections, service descriptions, and member certifications.
Criteria for application acceptance include profitability, capital size (≥ ₱100 million), and minimum served members (≥ 500).
Branches must implement internal safeguards and can only operate after BSP permits.

Business Days and Hours

NSSLAs may set business days and hours with prior BSP approval.
Must remain open during business hours except in extraordinary circumstances.
Business hours must be conspicuously posted.

Reporting Requirements and Penalties

NSSLAs must submit periodic reports and incident reports on crimes and material damages within prescribed deadlines.
Failure to timely report results in fines: ₱180 per business day for major reports, ₱60 for minor reports.
Procedures include filing reports in person or by mail with proof of timely submission.
Non-payment of fines triggers administrative sanctions.
Designated officials must sign reports; unauthorized signatories result in rejection and sanctions.

Internal Controls and Audits

NSSLAs with resources over ₱10 million must conduct annual independent audits by certified public accountants.
Must adopt uniform accounting systems and comply with Financial Accounting Standards unless BSP regulations differ.

Publication and Business Name Requirements

Annual financial statements must be furnished to the Monetary Board and posted conspicuously.
Names must include "Savings and Loan Association" and display authorization sign.
Unauthorized use of business names or misrepresentation as banks or trust companies is prohibited.

Sanctions

Violations subject to sanctions under provisions of Republic Act No. 7653, including fines and penalties as applicable.

Deposit Operations: Definitions and Rules

Savings deposits evidenced by passbooks, minimum opening deposit ₱100.
Withdrawals require passbook and withdrawal slip; prior written notice up to 30 days may be required.
Minimum three withdrawals monthly allowed; service charges may apply for excess withdrawals.
Dormant savings (no transactions for 2 years) may be charged maintenance fees.
Time deposits must be at least 30 days; minimum ₱1,000 deposit; withdrawn only on or after maturity.
No minimum limits for interest rates on deposits; no ceilings.
Multiple deposit accounts allowed per member in different capacities.
Identification required; signature cards with specimen signatures mandatory.
Deposits via checks accepted but withdrawals only after collection.
Checking accounts or demand drafts prohibited.

Borrowing and Loans

NSSLAs may borrow up to 20% of total assets from approved institutions; possible increase to 30% by Monetary Board approval.
NSSLAs formed by employees may borrow from their entity but not vice versa.
Loans limited to member’s deposit plus 12 months' salary/pension or 70% of collateral value.
Total loans to any member capped at 15% of NSSLA’s unimpaired capital and surplus.
Loan maturities generally capped at 5 years; housing and agricultural loans extended to 25 years.
Loans cannot require deposit of proceeds; withdrawals on deposits post-loan are not restricted.

Interest and Charges on Loans

Default interest rate is 12% per annum if contract silent.
Agreements may include escalation clauses linked to Monetary Board changes.
No interest accrual on past due loans until payments are made.
Loans may be extended or renewed with conditions including partial prior payment.
Write-offs of loans require proper procedures and approvals, especially for large loans or those to trustees/officers.

Truth in Lending Disclosure

Strict adherence to RA 3765 required.
Clear written statements on loan cost must be provided before consummation.
Information includes cash price, down payment, total financed, finance charges, and annual percentage rate.
Contracts must include disclosure or appended document.
Penalties apply for non-disclosure, including fines and possible imprisonment.

Loan Application and Approval Process

Applications must state loan purpose and other required information.
Credit investigation mandatory except for permanent employees borrowing within limits.
Credit and collateral files must be maintained.
Board or authorized officers approve loans.
Mortgage loans require lien inscription before release.

Loan Repayment Mechanism

Employer treasurers or cashiers must deduct loan repayments from salaries and remit to NSSLA.
May collect service fees as authorized by Monetary Board.

Secured Loans

Acceptable securities: registered real estate mortgages, chattel mortgages on crops/livestock/tools, assignment of quedans, deposits, pledged bonds or securities, land transfer certificates up to 60% value.
Other securities require Monetary Board approval.

Loans to Trustees, Officers, and Related Parties

Loans to trustees or officers require majority trustee approval excluding the concerned party.
Loans to trustees/officers capped at 20% of total capital contributions.
Approval records must be reported to BSP within 20 business days.
Violations lead to immediate vacancy of office and imprisonment with fines.

Investment of Funds

NSSLAs may invest up to 10% of total assets in bonds/securities; above 10% requires BSP approval.
Real property investments capped at 5% of total assets.
Office fixtures and equipment capped at 10% of total capital contributions.

Confidentiality and Examination

Information on member-borrowers and operations is confidential, with limited exceptions requiring BSP or court authorization.
BSP conducts annual and ad hoc examinations, with powers to inspect and take custody of records.
Refusal to allow examination results in daily fines.
False statements during examination penalized accordingly.

Fees, Dissolution, and Miscellaneous Provisions

Annual fees computed based on average assessable assets, capped at ₱100,000.
Dissolution requires 30 days’ written notice to Monetary Board.
Other applicable rules for thrift institutions apply as compatible.
The Revised NSSLAs Act (RA 8367) is the primary governing statute for organization and operations.

Summary of Sanctions

Violations subject to fines, imprisonment, suspension, or revocation as determined by RA 7653 and RA 8367, and Monetary Board rules.