Law Summary
Credit Limit on Directors, Officers, Stockholders, and Related Interests (DOSRI)
- Lending companies must ensure total credit exposure to DOSRI does not exceed 15% of the company's net worth.
- "Related interests" include:
- Spouse or first-degree relatives (by blood, affinity, or legal adoption) of DOSRI persons.
- Partnerships with DOSRI persons or their related spouses/relatives as general partners.
- Corporations where DOSRI persons or their related spouses/relatives hold director or officer positions.
- Corporations where DOSRI persons or their related spouses/relatives own more than 20% of subscribed capital stock.
- Corporations wholly or majority owned/controlled by entities described above.
Single Borrower Limit (SBL) on Credit Exposure
- Total credit extended to any single person, company, corporation, or firm shall not exceed 30% of the lending company’s net worth.
Penalties for Non-Compliance
- Violations of the DOSRI credit limit (exceeding 15%) or SBL (exceeding 30%) are subject to escalating penalties:
- 1st Offense: Fine of ₱10,000 plus ₱100 per day of continued violation.
- 2nd Offense: Fine of ₱10,000 plus ₱200 per day.
- 3rd Offense: Fine of ₱10,000 plus ₱300 per day.
- 4th Offense: Possible suspension or revocation of the lending company’s Certificate of Authority after due process.
Publication and Effectivity
- The memorandum circular mandating these amendments shall be published in two newspapers of general circulation in the Philippines.
- The provisions take effect 15 days after the date of publication.
Key Legal Concepts and Implications
- The regulations impose prudent lending limits to mitigate related-party risks and concentration risk in lending companies.
- Related-party definitions ensure that indirect credit extensions to relatives and associated entities are regulated under DOSRI rules.
- Escalating penalties incentivize compliance and protect the financial integrity of lending companies and their stakeholders.
- Mandatory public notice and due process requirements for enforcement uphold principles of transparency and fairness.