Core definitions and key terms
- “Administrative Fine” means the monetary penalty imposed against a bank and/or its directors, officers, employees, or agents for committing administrative offenses under this issuance.
- “Deposit Records” include subsidiary ledgers of deposit liabilities, duplicate copies of time certificates of deposit, deposit agreements, signature cards, registers or logbooks for new deposit accounts, individual depositor files, computer systems and databases (including system documentation/manuals) relating to deposit operations, deposit liabilities control ledgers in the bank’s General Ledger, deposit/withdrawal slips, debit/credit memos, and other records relevant to deposit liabilities.
- “Directive to Cease and Desist (DCD)” is a PDIC directive prohibiting, among others, a bank and/or its personnel from offering, marketing, or promoting, or continuing to offer, market, or promote deposit accounts/products or transactions that constitute and/or emanate from an Unsafe and/or Unsound Banking Practice, and from representing to the public that the deposit products/accounts/transactions are insured by PDIC.
- “False Information/Statement” means untrue, incorrect, inaccurate, erroneous, or misleading information/statement in required documents, reports, or supporting schedules/attachments, including forged, altered, or tampered materials.
- “Splitting of Deposits” occurs when deposit accounts with an outstanding balance of more than the statutory maximum insured deposit are broken down and transferred into two or more accounts in names of natural or juridical persons/entities with no beneficial ownership, within one hundred twenty (120) days immediately preceding or during a bank-declared bank holiday, or immediately preceding a Monetary Board closure order by the Bangko Sentral ng Pilipinas (BSP) for availing of maximum deposit insurance coverage.
- “Unsafe and/or Unsound Banking Practices” refers to activities, transactions, or omissions defined under PDIC Regulatory Issuance No. 2011-01 (Unsafe and/or Unsound Banking Practices).
- “Willful Refusal” means unjustified failure or avoidance or delay to perform an obligation imposed upon a bank and/or its directors/officers/employees/agents under PDIC orders, regulations, or directives.
Administrative offenses and prohibited conduct
- A bank and/or its directors, officers, employees, or agents commit an Administrative Offense by:
- Willfully refusing to submit reports to PDIC as required by law, rules, and regulations.
- Unjustifiably refusing to permit PDIC examination and audit of deposit records or the institution’s affairs.
- Willfully making a false statement or entry in any bank report or document required by PDIC.
- Submitting false material information in connection with or relation to any financial assistance of PDIC extended to the bank.
- Splitting deposits or creating fictitious loans or deposit accounts.
- Refusing to allow PDIC, its officers, employees, and/or agents to take over the affairs, assets, liabilities, and administration of a closed bank placed under its receivership, or obstructing such takeover.
- Refusing to turn over to PDIC, or destroying or tampering with, bank records.
- Fraudulently disposing, transferring, or concealing any asset, property, or liability of the closed bank under PDIC receivership.
- Violating the exemption from garnishment, levy, attachment, or execution under the PDIC Charter and Republic Act No. 7653 (New Central Bank Act), and causing any person to violate that exemption.
- Willfully failing or refusing to comply with, or violating, any provision of the PDIC Charter, this Regulatory Issuance, any PDIC order/rule/regulation, or any irregularities, and/or conducting business in an unsafe or unsound manner as determined by the PDIC Board of Directors and/or the BSP.
Administrative fines and limits
- When no specific fine is imposed by PDIC for acts covered under Section 2, PDIC imposes the following Administrative Fines on a bank and/or its directors/officers/employees/agents:
- For offenses mentioned in Section 2 (a), (b), (c), (d), (f), (g), (i) and (j): a fine as determined by the PDIC Board of Directors but not exceeding PHP 300,000.00 for each banking day of violation.
- For offenses mentioned in Section 2 (e): a fine as determined by the PDIC Board of Directors but not exceeding 100% of the total amount split or fictitious loan created.
- For offenses mentioned in Section 2 (h): a fine as determined by the PDIC Board of Directors but not exceeding the fair market value of the asset disposed/transferred/concealed or the amount of liability concealed.
- PDIC imposes an overall cap: the Administrative Fine imposed in no case exceeds three (3) times the amount of the damages or costs caused by the fraudulent, irregular, and/or anomalous transactions for each day the violation subsists, considering attendant circumstances such as the nature and gravity of the violation or irregularity and the size of the bank.
- The “damages or costs” includes financial benefit or gain to the bank or its directors/officers/employees/agents resulting from the fraudulent, irregular, and/or anomalous transaction.
- If the directors/officers/employees/agents derive any financial gain as a result of the fraudulent, irregular, and/or anomalous transaction, an additional fine equivalent to the amount of such financial benefit or gain is imposed.
Deposit insurance exclusion consequence
- Deposit accounts or transactions constituting and/or emanating from an Unsafe and/or Unsound Banking Practice under Section 2 (j) are excluded from deposit insurance coverage under PDIC Regulatory Issuance No. 2011-02 (Rules and Regulations Governing Deposit Accounts of Transactions Excluded from the Coverage of Deposit Insurance).
Scope and general investigation rules
- The rules apply to administrative investigations against:
- Any operating or closed bank, and
- The bank’s directors, officers, employees, or agents charged with violations of administrative offenses listed in Section 2.
- Administrative investigations proceed in a summary manner under due process and without strictly adhering to technical rules of procedure and evidence applicable to judicial proceedings, which apply only suppletorily.
- Administrative investigations conducted under this issuance are confidential in nature except when disclosure is required by any provision of law or by this issuance.
Filing, evaluation, and administrative charges
- Reports or information alleging a possible violation of Section 2 are filed with the Office of the General Counsel (OGC) of PDIC.
- The report/information must be in writing, state the facts alleged to constitute the acts/transactions/omissions complained of, and include the name of the bank and the name of the director/officer/employee/agent involved.
- Upon receipt, the OGC may conduct a preliminary evaluation on its own or refer the matter to the Investigation Department for preliminary evaluation.
- After preliminary evaluation, PDIC may:
- Institute administrative charges against the bank and/or its personnel, subject to authorization of the proper approving authority.
- Conduct a fact-finding investigation under PDIC Regulatory Issuance No. 2005-02 (Rules on Fact-Finding Investigation of Fraud, Irregularities and Anomalies Committed in Banks).
- Refer the report/information to the appropriate PDIC department or government agency.
- Require the source of the report/information to submit additional documents within thirty (30) calendar days from receipt of notice if the report/information is insufficient in substance on its face.
- Administrative charges are filed with the OGC in writing, clearly stating the administrative offense(s) and the names/designations/addresses of the persons charged, and including relevant documentary and other evidence if any.
- The Monetary Board is furnished with a copy of the administrative charge filed with the OGC.
Administrative hearing process and timelines
- Upon receipt of the administrative charge, the OGC immediately convenes an Administrative Hearing Committee (AHC).
- Within ten (10) calendar days after the AHC has been convened, the AHC issues a notice requiring respondents to explain why they should not be held liable for the administrative offense and corresponding penalty.
- The notice includes:
- A copy of the administrative charge, and
- Supporting documents.
- When the charge involves personal liability of a director/officer/employee/agent, a copy of the notice is furnished to the Office of the President/Chief Executive Officer (CEO) of the bank.
- Respondents file a verified answer with the AHC within ten (10) calendar days from receipt of the notice and serve a copy to the complaining witness, if any, attaching original or certified true copies of all documentary and other evidence supporting the case.
- If a respondent fails to file a verified answer within the allowed period, the AHC issues an order declaring the respondent in default.
- The AHC may proceed to receive evidence and then render a report on findings of facts and conclusions of law with appropriate recommendations to the PDIC Board of Directors.
- If an answer is filed, the AHC may:
- Determine the case is ready for a report based on evidence submitted, or
- Set the case for hearing for reception of further evidence.
- The hearing for further evidence includes:
- Admission or stipulation of facts and due execution and authenticity of documents;
- Simplification of issues;
- Identification and marking of evidence;
- Cross-examination of affiant/s, if any; and
- Other matters that aid prompt and just resolution.
- The AHC may require position papers within ten (10) calendar days after termination of the hearing, and any evidence not presented and identified during the hearing is no longer admitted.
Case submission, AHC report, and Board action
- Within ten (10) calendar days from receipt of the verified answer or from the default declaration, or immediately upon termination of the hearing, or after lapse of the period to submit position papers, the AHC issues an order informing parties the case is submitted for preparation of the report.
- The AHC renders its report within thirty (30) calendar days from submission of the case for preparation of the report and submits the report to the PDIC Board of Directors for proper action.
- When the charge involves deposit accounts or transactions constituting or emanating from an Unsafe and/or Unsound Banking Practice, the AHC report may include a recommendation for issuance of a DCD.
- The PDIC Board of Directors may adopt, reverse, or modify AHC recommendations.
- When the charge involves deposit accounts or transactions constituting or emanating from an Unsafe and/or Unsound Banking Practice, the PDIC Board of Directors, in consultation with the BSP, may order issuance of a DCD against the bank.
Notice, finality, and reconsideration limits
- The PDIC Board of Directors notifies the bank and/or charged personnel (through the AHC) and the complaining witness, where applicable, of the Board’s decision.
- The Monetary Board and/or the BSP Governor are furnished a copy of the decision whenever required under the PDIC Charter.
- A PDIC Board resolution becomes final and executory after ten (10) calendar days from receipt by the parties unless the aggrieved party files a motion for reconsideration under the succeeding sections.
- A request for reconsideration filed out of time is not entertained and does not stall the running of the finality period.
- Reconsideration may be requested on grounds of:
- Discovery of new evidence that materially affects the resolution; or
- Errors of fact or law or irregularities prejudicial to the aggrieved party.
- Only verified reconsideration requests comply with requirements to be entertained:
- The request must be addressed to the PDIC Board of Directors through the Office of the PDIC Corporate Secretary.
- The request must be accompanied by affidavit(s) and other documents supporting the stated ground.
- A bank’s reconsideration request is filed by a person authorized by the bank’s Board of Directors in a resolution specifically for that purpose; for foreign bank branches, it is filed by a person appointed by the bank’s country officer in an equivalent document.
- The PDIC Board’s resolution on reconsideration is immediately executory upon issuance.
- No second motion for reconsideration is entertained.
Enforcement of fines and allowed bonds
- No appeal stays immediate enforcement and satisfaction of the administrative fine unless restrained by the Court of Appeals or the Supreme Court in accordance with Section 22 of the PDIC Charter.
- The PDIC Board resolution is immediately executory unless the aggrieved party/parties post a cash bond equivalent to the fine or a surety bond from a reputable bonding company acceptable to PDIC in double the amount of the fine imposed.
- Payment of any Administrative Fine must be made in manager’s or cashier’s check payable to PDIC and sent by personal delivery or registered mail with return card addressed to the Treasury Department of PDIC.
Prohibited pleadings and separability
- The following pleadings, motions, or petitions are not allowed in cases covered by this issuance:
- Motion to dismiss except on jurisdictional grounds;
- Motion for Bill of Particulars;
- Motion for New Trial;
- Petition for Relief from Judgment;
- Interventions;
- Third Party Complaints; and
- Any dilatory motions or pleadings.
- If any provision of this issuance is invalid, only the invalidated provision(s) have no force and effect.
Repeals and effect on prior PDIC rules
- This issuance repeals PDIC Regulatory Issuance No. 2005-03.
- All PDIC regulatory issuances, rules, and other PDIC issuances inconsistent with the provisions of this issuance are repealed, amended, or modified accordingly.