Regulations on Revised Non-Stock Savings and Loan Associations

Legal framework and governing authority

NSSLAs are regulated under R.A. No. 8367 through implementing regulations contained in the circular’s Book IV and its parts on organization, deposit operations, loans, and related rules.
Republic Act No. 8367 governs the core statutory authority for non-stock savings and loans associations.
The sanctions mechanism for violations of the circular’s Part provisions is linked to Republic Act No. 7653, including Sections 34, 35, 36 and 37 when applicable and Section 37 for violations of Part Two.
Monetary Board authority includes approval, disapproval, and supervisory actions affecting NSSLAs, including certificates of authority and limits on activities when capital requirements are deficient.

Purpose, policy, and scope

The circular’s rules establish the operating framework for NSSLAs, including membership limitation, capitalization, profit distribution restraints, governance qualifications, and deposit and lending practices.
NSSLAs are organized as non-stock, non-profit corporations engaged in accepting savings of members and using such savings for loans to members to serve household needs through long-term financing for home building and development and for personal finance.
An NSSLA may engage in a death benefit program meant exclusively for the benefit of its members.
NSSLAs must operate within the circular’s limits on membership, capital structure, reserves, dividends, governance, loan operations, and required disclosures and reports.

Core definitions and membership limits

A “Non-stock Savings and Loan Association” (NSSLA) includes any non-stock, non-profit corporation engaged in accumulating members’ savings and using them for loans to members for household and personal finance needs, and it may maintain a death benefit program exclusively for members.
NSSLAs must issue a certificate of membership to every qualified member and must maintain a registry of its members.
NSSLAs must confine membership to a well-defined group of persons and must not transact business with the general public.
A “well-defined group” includes:
- Employees, officers, and trustees of one company, including member-retirees;
- Government employees belonging to the same office, branch, or department, including member-retirees; and
- Immediate members of the families up to the second degree of consanguinity or affinity of persons under the first two groups.
NSSLAs that had articles and by-laws approved and registered prior to the effectivity of Republic Act No. 8367 and that limit or allow membership coverage broader or narrower than the “well-defined group” definition are allowed to continue as such.
The Monetary Board may require affected NSSLAs to amend their by-laws to comply with the “well-defined group.”
Entrance fees are capped: the total amount of entrance fees shall not exceed 1% of the amount contributed or otherwise paid by the particular member; for new members, the fee is based on contributions computed in accordance with revaluation of the NSSLA’s assets.
The circular reserves Sections 4103S-4105S and 4115S-4115S and multiple other numbering ranges that are not reproduced as operative rules in this Part.

Organization, authority, and governance controls

Articles of incorporation and by-laws of a proposed NSSLA, or amendments, shall not be registered with the Securities and Exchange Commission unless accompanied by a certificate of approval from the Monetary Board.
The proposed articles and by-laws must be submitted to the Monetary Board through BSP’s appropriate supervising and examining department in prescribed forms, with:
- A covering application for approval signed by a majority of the Board of Trustees and verified by one of them.
- The application must include:
  - The proposed articles and by-laws plus the names and addresses of incorporators, trustees and officers, with a statement of their character, experience, and general fitness to engage in the non-stock savings and loan business;
  - An itemized statement of estimated receipts and expenditures for the first year;
  - A filing fee of PHP 1,000.00;
  - Such other information as the Monetary Board may require.
The Monetary Board may disapprove the application if it finds:
- The NSSLA is being organized for any purpose other than to engage in business of a legitimate NSSLA;
- The NSSLA’s financial program is unsound;
- Proposed members are adequately served by one or more existing NSSLAs; or
- Other reasons sufficient for disapproval.
Certificate of authority to operate: all NSSLAs must procure a certificate of authority to transact business from the Monetary Board before transacting business.
The Monetary Board may revoke or suspend a certificate of authority after due notice and hearing if solvency is imperiled by losses or irregularities or if the NSSLA willfully violates Republic Act No. 8367, the rules, or any pertinent law or regulation.
Trustee eligibility and qualifications:
- Trustees include those named in the articles, those duly elected later, and those elected to fill vacancies.
- No person is eligible unless a member of good standing and having required qualifications with no disqualifications under pertinent laws and BSP rules.
- Minimum trustee qualifications:
  - At least 21 years of age at election; and
  - At least a high school graduate or one year experience in a related field, or BSP training in banking operations.
Officers include President, Vice President, General Manager, Corporate Secretary, Treasurer, and others named in by-laws; officers must meet the same minimum qualifications as trustees.
Disqualification of trustees and officers includes:
- Judicial or administrative conviction of an offense involving moral turpitude, or judicial declaration of insolvency, spendthrift status, or incapacity to contract;
- Monetary Board finding of willful failure to comply with law, BSP order, instruction, or regulation, or commission of irregularities, or unlawful, unsafe, or unsound conduct in a BSP-supervised institution;
- Absence from more than 50% of regular board meetings for a two-year period from election date (disqualification applies for the immediately succeeding election);
- Delinquency in obligations, operative as long as delinquency persists, where “delinquency” means:
  - An obligation with an NSSLA where the person is a trustee or officer, or where the person may be elected or appointed; or
  - At least two obligations with banks and other non-banks with quasi-banking functions under different credit lines or loan contracts,
    are past due for at least 3 months.
- Spouse/relative within the second degree of consanguinity or affinity of specified senior positions (President, Executive Vice-President, General Manager, Treasurer, Chief Cashier, Chief Accountant) is disqualified from holding or being elected/appointed to any of those positions in the same association, subject to an exception for persons already serving as of August 11, 1975, which applies only while they continue uninterruptedly.
Biographical submission: every NSSLA must submit to DTBNBFI a bio-data of incumbent trustees and officers in the prescribed form within 30 days after calendar year-end or 15 days after creation or filling of a vacancy in the Board of Trustees, sub-bodies, or managerial staff.
Compensation restrictions:
- No trustee, officer, or employee may receive, and the NSSLA may not pay, any commission, emolument, gratuity or reward based on the volume or number of loans or based on interest or fees collected.
- This does not bar:
  - Salaries of trustees, officers and employees;
  - Commissions to agents (whether or not based on loan volume or on interest and fees collected);
  - Bonuses based on profits and not on loan volume or interest/fees collected.
- Any compensation increase of trustees and trustee-officers exceeding 10% per annum requires BSP approval.
Loan/investment liability for unlawful acts:
- No NSSLA shall make or purchase any loan or investment not authorized under R.A. No. 8367.
- Any trustee, officer, or employee who knowingly makes or purchases such unauthorized loan/investment or knowingly consents is personally liable to the NSSLA for the full amount of that loan or investment.
Agents and representatives:
- Acting as an agent or sales representative or operating an agency requires a license from the Monetary Board.
- A license is not required for a collector, but no one may hold himself out as, or act as, a collector unless authorized in writing by the NSSLA.
Bonding requirement:
- Officers and employees with access to money or negotiable securities must furnish a good and sufficient bond for indemnity against loss due to dishonesty before entering duties.
- Bond for cashier, assistant cashier, treasurer, and money-accountability employees must not be less than average daily accountability.
- The bond must be issued by a reputable bonding company licensed by the Insurance Commission and approved by the BSP.
- Capital contribution or a cash bond deposited with the NSSLA or a bank may also be allowed.
Branches/extension offices:
- Prior BSP authority is required before operating any branch or other office.
- A branch application (per BSP prescribed form) must include minimum requirements such as sketch of location within the mother firm’s branch compound, itemized estimated receipts/expenses, description of service facilities, financial statements for the immediately preceding year, certification of number of members to be serviced, and an undertaking to service only NSSLA members.
- The BSP shall not accept or process the application if, among others:
  - The applicant NSSLA’s operation in the year immediately preceding filing was unprofitable;
  - Total capital accounts are less than PHP 100 million as of filing;
  - Proposed members to be served is less than 500; or
  - The applicant is non-compliant with pertinent banking laws, BSP rules, regulations, and policies.
- An internal safeguards and control measures system must be submitted to BSP.
- Actual operation may commence only after a BSP permit to operate is issued.

Capital, reserves, and dividend restrictions

Minimum capital to risk assets ratio:
- Combined capital accounts of each NSSLA must not be less than an amount equal to 10% of its risk assets.
- Risk assets are defined as total assets minus specifically listed deductions:
  - Cash on hand;
  - Evidences of indebtedness of the Republic of the Philippines and the BSP and any other evidences of indebtedness/obligations fully guaranteed by the Republic of the Philippines;
  - Loans to the extent covered by holdout on, or assignment of, deposits maintained in the lending NSSLA and held in the Philippines;
  - Office premises, furniture, fixtures and equipment, and real estate mortgage loans insured by the Home Insurance Guarantee Corporation to the extent of the insurance (with office premises and equipment depreciated);
  - Other non-risk items authorized by the Monetary Board for deduction from total assets.
- The Monetary Board prescribes how total assets are determined for this section, and contingent accounts are not included among total assets.
Deficiency consequences:
- If capital accounts are deficient:
  - The Monetary Board may limit or prohibit distribution of net profits and require net profits be used to increase capital accounts until the minimum requirement is met.
  - The Monetary Board may restrict or prohibit new investments of any sort (except purchases of evidences of indebtedness included under the fully-guaranteed category) until the minimum capital ratio is restored.
Withdrawable share reserve:
- Every NSSLA must create a withdrawable share reserve equal to 2% of total capital contributions of members.
- The reserve must be set up and invested in:
  - Bonds or evidences of indebtedness of the Republic of the Philippines or its subdivisions/agencies/instrumentalities fully guaranteed by the Republic; and
  - Evidences of indebtedness of the BSP.
- Guidelines require funding in a manner described: from profits with cash deposited as a separate account and/or an allowed investment; adjustments occur monthly if capital contribution increases; reserve must be adjusted first before dividends are declared and paid.
Surplus reserve for ledger discrepancies:
- When there is a discrepancy between general ledger accounts and their respective subsidiary ledgers, the board of trustees must set up a surplus reserve equivalent to the discrepancy from net profits (if any).
- This reserve is not available for distribution as dividends or any other purpose unless and until the discrepancy is accounted for.
- The employee responsible must be directed to account; failure constitutes ground for dismissal if serious or recurring.
- NSSLAs must report discrepancies to BSP within 15 days from discovery.
Office/furnishing/building reserve:
- NSSLAs must set aside 5% of yearly net profits until it amounts to at least 5% of total assets as a reserve for a building fund covering office premises construction or acquisition and purchase of office furniture, fixtures and equipment.
- An NSSLA with adequate office premises and necessary furniture/fixtures/equipment need not set up the reserve, provided its board certifies this in a resolution submitted to BSP for verification and approval; if exempted, reserves previously set up may revert to free surplus.
Dividend limitations:
- Members participate in profits on the basis of capital contributions on the date dividends are declared.
- NSSLAs may not pay dividends or distribute profits if:
  - The withdrawable share reserve required under the circular is less than, or would be reduced below, the required amount.
  - The capital-to-risk assets ratio is below the required level.
  - The surplus reserve for ledger discrepancies would be reverted for distribution as dividends unless the discrepancy ceases to exist.

Deposit operations: savings and time deposits

Savings deposits definition:
- Savings deposits are evidenced by a passbook and represent funds deposited to the credit of one or more individuals.
- The depositor may withdraw anytime, unless prior written notice of intended withdrawal is required by the NSSLA.
Minimum savings deposit:
- Savings deposits may be opened with a minimum deposit of PHP 100.00.
Savings withdrawals:
- Withdrawals are made by presentation of a duly accomplished withdrawal slip and the depositor’s passbook.
- An NSSLA may require prior written notice of withdrawal of not more than 30 days.
- An NSSLA may limit withdrawals per month, but withdrawals cannot be less than 3 times a month.
- A service charge approved by the BSP may be charged for every withdrawal made in excess of the maximum allowed in any one month.
Dormant savings deposits:
- An NSSLA may charge a dormancy fee approved by BSP for maintaining dormant savings deposits.
- A savings deposit is dormant if no deposit or withdrawal has been made for the last 2 years.
Time deposits minimum terms and size:
- No time deposit may be accepted for a term of less than 30 days.
- NSSLAs must not require a minimum amount greater than PHP 1,000.00 for time deposits.
Time deposit withdrawals:
- Time deposit withdrawal requires presentation of the certificate of time deposit on the day of or after its maturity.
Interest on deposits:
- Savings deposits are not subject to any interest rate ceiling.
- Time deposits are not subject to any interest rate ceiling.
- Interest on time deposits may be paid at maturity or upon withdrawal or in advance, but interest paid in advance cannot exceed the interest for one (1) year.
- A time deposit not withdrawn or renewed on its due date is treated as a savings deposit and earns interest from maturity to actual withdrawal or renewal at the rate applicable to savings deposits.
Opening and operation rules for deposit accounts:
- Only members may open deposit accounts with NSSLAs.
- A natural person lacking capacity to contract may open savings or time deposit accounts for himself with restrictions on withdrawal: withdrawal only through or with assistance of a guardian authorized to act.
- Parents may deposit for minor children; guardians may deposit for wards.
- The cashier, bookkeeper, their assistants, and other employees whose duties entail handling cash or checks are prohibited from opening savings deposit accounts in the head office or branch where assigned.
- NSSLAs must properly identify member-depositors.
- A member-depositor may open more than one savings deposit in his own name in the same capacity and may open multiple deposits in different capacities (guardian, agent, trustee).
- A signature card with at least three (3) specimen signatures is required upon opening an account.
- A savings deposit passbook, signed by the receiving teller and an authorized officer, must be issued and must show details including name and address, account number, date, amount of deposit, interest credits, and balance; passbooks must be pre-numbered.
- For time deposits, a certificate of time deposit signed by two authorized officers is issued showing name, amount, date deposited, due date, and interest rate.
- Checks and other cash items may be accepted for deposit, but withdrawals from such deposits cannot be made until the check or cash item is collected.
- NSSLAs may not carry on their books any demand, commercial, or checking account or allow any credit withdrawable upon presentation of any negotiable check or draft for any person.
Borrowing by NSSLAs:
- An NSSLA may borrow money or incur obligations up to not more than 20% of its total assets from public lending institutions, private banking institutions, and private lending institutions approved by the Monetary Board.
- The proceeds must be used exclusively to meet normal credit requirements of members.
- The Monetary Board may raise the borrowing ceiling to not more than 30% of total assets in meritorious cases.
- NSSLAs organized by employees of an entity or corporation may borrow funds from that entity or corporation, but not vice-versa.

Loans and investments rules

The board of trustees prescribes internal credit-operation rules within the framework of loan terms and limits in this circular.
Loan limit to a single borrower:
- An NSSLA may grant loans not exceeding:
  - The amount deposited and/or contributed by the member-borrower plus his 12 months salary or retirement pension; or
  - Up to 70% of the fair market value of collateral acceptable as first mortgage.
- Direct indebtedness to the NSSLA of the member-borrower for money borrowed (with stated exceptions including borrowings against obligations of the BSP or Philippine Government, or those with full guarantee of the Philippine Government for principal and interest) must not exceed 15% of the unimpaired capital and surplus of the NSSLA.
- For self-employed borrowers, regular income means average monthly income during the 12-month period immediately preceding loan application.
Lending commitment limits:
- An NSSLA must not commit to make loans beyond the combined limits of:
  - Cash available for loan purposes;
  - Cash readily realizable upon sale or redemption of permissible investments;
  - Credit available for loan purposes from government or private financing institutions.
Loan maturity limits:
- No loan may have maturity more than 5 years, except:
  - Loans for home building and home development secured by unencumbered real estate may be up to 25 years; and
  - Medium or long-term loans to finance agricultural projects.
No compulsion to deposit part of loan proceeds:
- NSSLAs may not require member-borrowers to deposit any portion of loan proceeds as savings or time deposits.
- New deposit accounts or additional deposits after release of loan proceeds cannot be covered by stipulations prohibiting or limiting withdrawal of new deposits while new portion of loans are outstanding, except in loans secured by a holdout on deposits to the extent of the unencumbered amount of the deposit at time of filing the loan application.
Interest and charges:
- In absence of express contract, interest rate for the loan/forbearance and rate allowed in judgment is 12% per annum.
- Escalation clauses are allowable only if:
  - The agreement allows increase when applicable maximum interest rate is increased by the Monetary Board; and
  - The agreement also reduces the rate when the maximum rate is reduced by law or by the Monetary Board; and
  - Adjustments take effect on or after the effectivity of the maximum rate increase or decrease.
Extension, renewal, and past-due interest accrual:
- Extension of loan payment may be allowed:
  - Productive loans: not exceeding one-half of the original period, provided 30% of the loan has been paid; and a second extension not exceeding one-half of the first extension’s period.
  - Consumer loans: not exceeding one-half of original period, provided 30% of the loan has been paid.
  - Loans payable in periodical installments: may be renewed for the full amount, provided at least 30% has been paid.
- NSSLAs must not accrue interest income on loans already past due or on installments in arrears, regardless of secured or unsecured status.
- Interest on past due loans or installments in arrears is taken up as income only upon actual payment received.
- Loans are “past due” when they fall under any of the defined categories, including:
  - A demand loan not paid upon written demand within the earlier of required demand timeline and one (1) year from loan grant/renewal date;
  - Installment balances in arrears under specified installment-mode schedules; and when arrearages reach 20% of total outstanding balance (or 10% for modes other than those listed), the entire outstanding balance becomes past due regardless of number of installments in arrears;
  - Any due and unpaid installment or portion from default for the purposes of obligations defined under the trustees/officers disqualification delinquency provisions;
  - All items in litigation as defined in the Manual of Accounts for NSSLAs.
Write-off of loans as bad debts:
- Loan writing-off is aimed at protecting members and is governed by Monetary Board regulations.
- Loans may be written off not more than twice a year by the board of trustees.
- Notice/application must be submitted in the prescribed form to DTBNBFI at least 30 days prior to intended write-off.
- No loans with aggregate outstanding amount of PHP 15,000.00 or more (as certified in the notice/application) may be written off without prior approval:
  - The Monetary Board for loans to trustees and officers of the NSSLA, direct or indirect; or
  - The head of DTBNBFI subject to Monetary Board confirmation for loans other than those to trustees and officers.
Truth in Lending Act disclosure requirements:
- NSSLAs must comply with Republic Act No. 3765 and must make the true and effective cost of borrowing an integral part of every loan contract.
- Creditors must give each borrower, prior to consummation, a written clear statement containing:
  - Cash price/delivered price;
  - Down payment and/or trade-in amounts (if any);
  - Difference between (cash price and down payment/trade-in amounts);
  - Individually itemized charges paid or to be paid not incident to extension of credit;
  - Total amount to be financed;
  - Finance charges in pesos and centavos;
  - Percentage that finance charges bear to the amount financed as a simple annual rate on the outstanding unpaid balance.
- The loan contract or signing document must indicate the seven items above and must specify additional charges if certain contractual stipulations are not met by the debtor.
- If the seven items are not disclosed in the main contract, they must be disclosed in another document (Appendix S-4) in the Monetary Board form, signed by the debtor and appended to the main contract, and a copy must be furnished to the borrower.
- The rules define creditor, person, and key terms including cash price/delivered price, down payment, trade-in, non-finance charges, amount to be financed, finance charge, and simple annual rate.
- Simple annual rate computations follow specified formula rules for:
  - Single payment upon maturity; and
  - Installment type credit at least one year in duration with equal installments spaced no more than one year apart;
  - Credits maturing in less than one year using the same formula with payment periods treated as if maturing in one year.
- Premium/penalty charges for timeliness do not affect the disclosed annual rate for regular payments, but must be indicated in the credit contract.
- Disclosure requirements apply to enumerated credit transaction types such as loans, mortgages, advances, discounts, conditional sales contracts, contracts to sell, demands, liens, pledges, purchases or acquisitions on credit security, and transactions with similar purpose/effect.
- The rules require inspection availability of contracts to BSP’s directors or authorized deputies.
- Creditors must post a RA 3765 abstract (in the prescribed format) sized 60 cm wide and 75 cm long in conspicuous places.
- Penal provisions apply:
  - Failure to disclose required information results in liability to the person in PHP 100 or twice the finance charge, whichever is greater, capped at PHP 2,000 per credit transaction, recoverable within one year from occurrence of violation; attorney’s fees and court costs may be awarded.
  - Willful violation is punishable by fine of not less than PHP 1,000 nor more than PHP 5,000, and/or imprisonment of not less than 6 months nor more than one year, or both.
  - No punishment applies to the Philippine Government or any agency or political subdivision.
Loan application basic requirement:
- A member-borrower applying for a loan must submit an application stating the purpose of the loan and such other required information; the loan application and other required documents become part of the member-borrower’s credit information file.
- No loan is approved unless prior investigation is conducted to determine the credit standing of the applicant and/or fair market value of property offered as security, and the report is made part of the loan application.
Numbered provisions continue beyond this point in the circular, including reserved sections and additional subsections beyond the visible text.

Administrative reports, publication, and sanctions

Reports and information required:
- NSSLAs submit required reports in prescribed form listed in App. S-2 to the BSP’s appropriate supervising and examining department.
- NSSLAs must report to BSP:
  - Crimes against property/facilities (e.g., robbery, theft, swindling/estafa, forgery and other deceits) and other crimes involving loss/destruction of property/facilities when amount involved in each crime is PHP 20,000 or more.
  - Crimes involving personnel must also be reported whenever the NSSLA initiates judicial or extrajudicial action or imposes sanctions against such personnel (even if amount is less than the PHP 20,000 threshold).
  - Incidents involving material loss, destruction, or damage to the institution’s property/facilities other than arising from a crime when the amount involved per incident is PHP 100,000 or more.
Reporting deadlines and form:
- Reports are prepared in two (2) copies and submitted within 5 days from knowledge of the crime or incident:
  - Original to the appropriate supervising department; duplicate to BSP Security Coordinator through the Director