Central Bank of the Philippines Establishment

Mandate, objectives, and responsibilities

Section 2 requires the Central Bank to administer the monetary and banking system of the Republic.
Section 2 directs the Central Bank to use its powers to achieve:
- (a) maintenance of monetary stability in the Philippines;
- (b) preservation of the international value of the peso and its convertibility into other freely convertible currencies; and
- (c) promotion of a rising level of production, employment, and real income in the Philippines.

Monetary Board: composition, meetings, voting

Section 5 vests the Central Bank’s powers and functions in a Monetary Board of seven (7) members.
Section 5(a) makes the Secretary of Finance the presiding officer; the Undersecretary of Finance acts as alternate when the Secretary is unable to attend, but does not preside.
Section 5(b) makes the Governor of the Central Bank preside in the absence of the Secretary of Finance; the Governor has a six-year term, appointed by the President with the consent of the Commission on Appointments, and a ranking deputy-governor acts when the Governor cannot attend.
Section 5(c) makes the President of the Philippine National Bank a member, with the senior vice-president as alternate.
Section 5(d) makes the Chairman of the Board of Governors of the Rehabilitation Finance Corporation a member, with the ranking governor as alternate.
Section 5(e) provides for three (3) other members appointed by the President with the consent of the Commission on Appointments for six-year terms; the first appointees under this subsection have terms of two, four, and six years, respectively.
Section 5 requires the President, in appointments, to give due regard to fair representation of financial, agricultural, industrial, and commercial interests.
Section 6 requires vacancies (death, resignation, or removal) among appointive members to be filled to complete the unexpired portion of the term.
Section 7 requires Monetary Board members and deputy-governors to be of good moral character, unquestionable integrity and responsibility, and recognized competence in economics of banking, finance, commerce, agriculture, or industry; the Governor and deputy-governors must have recognized competence in banking; the Governor and Monetary Board members must be natural-born Filipino citizens.
Section 8 disqualifies (except for ex-officio members and their alternates) Monetary Board membership or deputy-governorship from:
- persons holding any public position by election or appointment (except academic positions); and
- directors, officers, or employees of other banking institutions.
Section 9 allows the President to remove a Monetary Board member for:
- disqualification under Section 8;
- fraudulent/illegal acts or operations, or acts manifestly opposed to the Central Bank’s aims and interests; or
- failure to possess the qualifications in Section 7.
Section 10 requires the Monetary Board to meet at least once every two weeks, as frequently as necessary, convoked by either the Secretary of Finance or the Governor.
Section 10 sets four (4) members as quorum.
Section 10 requires Monetary Board decisions to have concurrence of at least four (4) members, except where other sections require a greater majority.
Section 11 requires the ranking deputy-governor and the chief of the Department of Economic Research to attend meetings with right to be heard but without vote.

Appointments, conflicts, authority, and liability

Section 12 grants Monetary Board members (except the Governor and the ranking deputy-governor) and their substitutes a per diem for attending meetings, set by the President but not exceeding P50 per meeting and not exceeding P500 for any single month.
Section 13 bars a person attending meetings who has a personal interest (or whose business associates or relatives within fourth degree of consanguinity or second degree of affinity) from participating in the discussion or resolution; the person must retire during deliberations, and the minutes must note the withdrawal.
Section 14 requires the Monetary Board, to exercise authority under the Act, to:
- (a) prepare and issue rules and regulations necessary for effective discharge of its responsibilities and powers;
- (b) direct management, operations, and administration of the Central Bank and issue necessary rules and regulations;
- (c) upon recommendation of the Governor, appoint officers (except the Governor), fix remunerations, and remove officers and employees; and
- (d) authorize Central Bank expenditures in the interest of effective administration and operation.
Section 15 holds Monetary Board members and Central Bank officers/employees liable for any loss or injury suffered by the Bank from willful violation of the Act or gross negligence, and also for violations involving disclosure of confidential information of Monetary Board discussions/resolutions or Central Bank operations, and for use of such information for personal gain or to the detriment of the Government, the Bank, or third parties.

Governor and deputy-governors

Section 16 designates the Governor as the chief executive of the Central Bank and imposes duties to:
- prepare Monetary Board agendas and submit policy measures he believes necessary;
- execute and administer approved policies and measures;
- direct and supervise Central Bank operations and internal administration (with delegation subject to Monetary Board rules); and
- exercise other powers vested by the Monetary Board.
Section 17 designates the Governor as the principal representative of the Monetary Board and the Central Bank, empowering him to:
- represent them in dealings with government offices and instrumentalities and all persons/entities, domestic or foreign;
- authorize contracts, issue notes and securities (by signature), and sign/authorize annual reports, balance sheets, profit and loss statements, correspondence, and other documents, including use of facsimile signatures where appropriate;
- represent the Central Bank in legal proceedings; and
- delegate representation to other officers upon the Governor’s responsibility.
Section 18 authorizes emergency action: in war or other emergencies needing immediate action with insufficient time to call a Monetary Board meeting, the Governor may decide matters or take actions within the Board’s authority and suspend Board resolutions, with concurrence of the Secretary of Finance or, if absent, concurrence of any two other Monetary Board members; the Governor must call a meeting as soon as possible to explain action and reasons, and the Board may then confirm, revoke, or modify the action.
Section 19 requires the Governor to limit professional activities to those directly pertaining to his position; the Governor may not accept other employment public or private, remunerated or ad honorem, except academic positions and public commissions related to formation, direction, or implementation of monetary, banking, or general economic policies concerning national interest of the Philippines.
Section 20 fixes the Governor’s salary: it is set by the Monetary Board with approval of the President, but must not exceed P30,000 per annum.
Section 21 provides for appointment of one deputy-governor by the Governor with Monetary Board approval; the deputy-governor performs assigned duties, and in the Governor’s absence becomes chief executive exercising the Governor’s powers and duties.

Central Bank departments and supervisory powers

Section 22 mandates the establishment of a Department of Economic Research to prepare data and conduct research to guide the Monetary Board in policy formulation and implementation, including forecasts of the balance of payments, statistics on monthly movement of money supply and prices, and other useful statistical series and studies; the Monetary Board sets the scope of other functions.
Section 23 grants the Department of Economic Research authority to request required data from any person or entity, including government offices and instrumentalities; the Central Bank may issue a subpoena for production of books and records; willful refusal without justifiable cause to supply data requested or required by subpoena subjects the person to penalties under Section 32.
Section 24 authorizes training and study: the Central Bank promotes training in money and banking and may defray costs of study (in the Philippines or abroad) for outstanding employees, promising university graduates, or other qualified persons chosen via proper competitive examinations conducted by the Commissioner of Civil Service; the chief of Economic Research prepares and supervises the training program subject to Monetary Board rules.
Section 25 creates a Department of Supervision and Examination to assure observance of the Act and Monetary Board rules, charging it with supervision and periodic examination of all banking institutions operating in the Philippines, including all government credit institutions; it functions under Monetary Board instructions, and its chief is the Superintendent of Banks.
Section 25 authorizes the Superintendent of Banks and examiners to administer oaths and compel presentation of books, documents, papers, or records necessary to ascertain the true condition of any supervised institution.
Section 26 requires the Superintendent to have recognized probity and competence in accounting, auditing, and banking practice.
Section 27 prohibits the Superintendent and all Department employees from: holding office or employment as directors/officers/employees/stockholders (directly or indirectly) of supervised institutions; receiving any loan, advance, gift, or thing of value from such institutions or their officers/directors/employees; and revealing institution condition/business information except under court orders, with an exception allowing disclosure to the Monetary Board or Governor or persons authorized by either in writing to receive such information.
Section 28 requires examinations: the Superintendent must examine books of every banking institution within the purview of the Act at least once every twelve months and at other times deemed expedient; each institution must afford full opportunity to examine books, cash, available assets, and general condition when requested.
Section 28 closes public access limits: examination reports and related papers are not open to public inspection except to the extent publicity is incidental to authorized proceedings or necessary for prosecution of violations related to such institutions.
Section 28 imposes cost reimbursement: each examined institution must pay the Central Bank an annual fee within the first thirty days of each year; the Monetary Board determines the fee amount under the section’s method.
Section 28 sets the fee formula and cap: the fee equals a prescribed percentage of the institution’s average total assets during the preceding year as shown in end-of-month balance sheets after deducting cash on hand and amounts due from banks (including the Central Bank and banks abroad); the percentage may not exceed one twentieth of one per cent (1/20 of 1%); if maximum fees are insufficient, the Central Bank bears the difference.
Section 29 governs insolvency and closure: if examination discloses insolvency or probable loss to depositors/creditors if it continues, the Superintendent must promptly inform the Monetary Board in writing; if the Board finds the Superintendent correct, it forbids the institution from doing business in the Philippines and takes charge of assets and proceeds according to law.
Section 29 requires a Board decision on reorganization: within thirty (30) days, the Monetary Board determines whether the institution may be reorganized or otherwise placed in a condition allowing safe resumption and prescribes conditions for resumption; expenses and fees of administration are determined by the Board and paid to the Central Bank out of the institution’s assets.
Section 29 provides a court challenge: within ten (10) days after the Monetary Board takes charge, the institution may apply to the Court of First Instance for an order requiring the Monetary Board to show cause why it should not be enjoined from further charge; the court may order the Board to refrain and surrender the charge.
Section 29 requires liquidation steps if resumption is unsafe: if the institution cannot resume with safety, the Board, through the Solicitor General, files a petition in the Court of First Instance reciting proceedings and praying for court assistance and supervision in liquidation; upon court order, the Superintendent converts assets to money with convenient speed under court supervision.
Section 30 mandates asset distribution in liquidation: after payment of costs of proceedings, including reasonable Central Bank expenses and fees allowed by the court, the Central Bank pays debts under court order according to legal priority.
Section 31 directs fees/comissions disposition: costs and fees earned in winding up and administering assets are used to pay salaries of necessary clerks and other employees and additional expenses; the remaining balance after paying all expenses is for the account of the Central Bank.
Section 32 penalizes refusal to report or permit examination: willful refusal by any owner, agent, manager, or officer required in writing by the Monetary Board or Superintendent to file required reports or permit examination is punishable by a fine not more than PHP 10,000, or imprisonment not more than one year, or both, in the court’s discretion.
Section 33 penalizes false statements: willful making of a false statement to the Monetary Board, Superintendent, or examiners is punishable by a fine not exceeding PHP 15,000, or imprisonment not exceeding two years, or both, in the court’s discretion.
Section 34 penalizes violations and authorizes court enforcement:
- willful violation of the Act or any Monetary Board order/instruction/rule/regulation is punishable by a fine not more than PHP 20,000 and imprisonment not more than five years;
- persistent violations by a banking institution of its charter/by-laws or any law or persistent unlawful/unsafe conduct empowers the Monetary Board (via Solicitor General) to file a petition in the Court of First Instance seeking court assistance to compel discontinuance; with court approval, the court may compel discontinuance, and if necessary the Board may, by court order, direct liquidation of the institution.
Section 35 authorizes organizing additional departments: the Monetary Board organizes a foreign exchange department, a credit department, and any other departments it deems convenient; department powers and duties are determined by the Monetary Board within its authority.

Reports, publications, fiscal operations, and profits

Section 36 requires monthly publication: within the first eight days of each month, the Central Bank publishes a general balance sheet showing the volume and composition of assets and liabilities as of the last working day of the preceding month.
Section 37 requires an annual report and specific contents: before the end of March each year, the Central Bank submits an annual report on the condition of the Bank and a review of Monetary Board policies/measures during the past year, and publishes it; the annual report goes to the President (through the President’s office), to the Senate (through its President), and to the House of Representatives (through its Speaker).
Section 37 requires a minimum statistical appendix including:
- monthly movement of the money supply distinguishing currency and deposit money;
- monthly movement of purchases and sales of exchange and the international reserve;
- balance of payments of the Philippines;
- monthly indices of wages, cost of living, and import and export prices;
- monthly exports and imports (by volume and value);
- monthly movement of accounts of the Central Bank and other banks by groupings/classifications determined by the chief of Economic Research in agreement with the Superintendent of Banks;
- principal data on Government receipts and expenditures and status of public debt (domestic and foreign); and
- texts of major legal and administrative measures adopted by the Government and the Monetary Board during the year related to Central Bank functions/operations or banking institutions operating in the Philippines.
Section 38 requires signatures: balance sheets and other financial statements must be signed by officers responsible for preparation, by the Governor, and by the auditor of the Bank.
Section 39 sets the fiscal year as January 1 to December 31 each year.
Section 40 requires profit/loss computation within thirty (30) days after fiscal year end; net profit computation must include adequate allowances or reserves for bad and doubtful accounts.
Section 41 requires profit distribution within sixty (60) days after fiscal year end and mandates distribution sequence:
- (a) 25% carried to surplus until total capital accounts reach at least 10% of total assets less assets in gold and foreign currencies;
- (b) remaining net profits used to increase resources of the Securities Stabilization Fund until Fund volume and liquidity are ample for likely open market operations;
- (c) remaining profits used to reduce the Account to Secure the Coinage or the Monetary Adjustment Account until those accounts are liquidated; the Monetary Board determines the distribution between them; and
- (d) any remaining profits may be transferred to surplus, used to liquidate Government obligations to the Central Bank, or paid into the General Fund of the Government, as determined by the Monetary Board.
Section 42 provides for losses: net losses are first debited to surplus; if surplus is inadequate, the balance is debited to capital.
Section 43 allows exclusion of specified extraordinary currency/monetary stabilization expenses from annual profit/loss computation when the Monetary Board deems it advisable, including: extraordinary printing/minting costs; extraordinary expenditures arising from suit and service of the evidences of indebtedness referenced in Section 98; and interest paid on bank reserves exceeding 50% of bank deposits in conformity with Section 101, last paragraph; excluded amounts are entered in a suspense account called the “Monetary Adjustment Account”; the Monetary Board must amortize them over a period not exceeding five years, at a rate based on adequacy of Bank surplus and resources of the Securities Stabilization Fund.
Section 44 excludes revaluation profits/losses: revaluation profits or losses under Sections 77 and 83 are not included in annual profit/loss computation; offsets apply for amounts owed to or owed by the Philippines with the International Monetary Fund and the International Bank for Reconstruction and Development; remaining balance goes to a special frozen account called “Revaluation of International Reserve” and appears in liabilities or assets depending on net result; the account cannot be credited or debited for purposes other than those authorized by this section or Section 45.
Section 45 allocates profits from recoinage/reduction in currency liabilities: profits from remitting coins or reducing Central Bank currency liabilities due to loss, destruction, or demonetization of notes/coins are not included in annual profit computation and instead reduce the Monetary Adjustment Account, Account to Secure the Coinage, or Revaluation of International Reserve, with distribution determined by the Monetary Board; if none of those accounts exists, such profits increase the Securities Stabilization Fund.

Unit, par value, and foreign exchange legalities

Section 47 establishes the peso as the unit of monetary value in the Philippines, represented by the sign “₱”; the peso is divided into 100 equal parts called centavos, represented by the letter “c.”
Section 48 sets par value (gold value) of the peso as 7-13/21 grains of gold, nine-tenths (0.900) fine, equivalent to the United States dollar parity provided in Section 6 of Commonwealth Act No. 699.
Section 49 requires par value changes only upon specified circumstances:
- when existing par value makes impossible maintaining a high level of production, employment, and real income without (1) depletion of the Central Bank’s international reserve; (2) chronic use of restrictions on convertibility or transferability abroad; or (3) undue Government intervention/restriction of international flow of goods and services;
- when uniform proportionate changes are made by International Monetary Fund member countries; or
- when an executive or international agreement party to the Republic of the Philippines requires alteration in gold value of the peso.
Section 49 mandates that modifications in the gold/dollar value be in conformity with all executive and international agreements subscribed to and ratified by the Republic of the Philippines, and made only by the President upon proposal of the Monetary Board with approval of Congress; Monetary Board proposal requires concurrence of at least five (5) members.
Section 49 provides an emergency exception: if the President deems an emergency so grave and so urgent as to require immediate action, the President may modify par value without prior Congress approval, but must report to Congress at the earliest opportunity.
Section 50 defines legal parties of foreign currencies with respect to the peso:
- IMF member country currencies have parities based on IMF-announced par values; if not announced, parity is based on exchange rates in foreign markets, and if divergence exists, the Monetary Board selects which rates to employ;
- non-IMF member currencies have parities based on gold or United States dollar equivalents if freely and effectively convertible, otherwise based on exchange rates in foreign markets, with divergence handled by Monetary Board selection.
Section 50 requires the Central Bank to determine and regularly publish legal parities of foreign currencies of importance in international transactions; it may specify parity for any foreign currency not in the published list, and published or specified parities are recognized as legal parities for all purposes.

Issue of currency and deposit money

Section 51 defines “currency” for the Act as all Philippine notes and coins issued or circulating under the Act.
Section 52 vests sole issuance power in the Central Bank within the Philippines: no other person or entity may put into circulation notes, coins, or other objects/documents that, in the opinion of the Monetary Board, might circulate as currency.
Section 52 authorizes Monetary Board regulations to prevent circulation of foreign currency or currency substitutes.
Section 53 makes Central Bank-issued notes and coins liabilities of the Bank, issued only against and in amounts not exceeding the assets of the Bank, and imposes a first and paramount lien on all assets of the Central Bank.
Section 53 excludes the Central Bank’s holdings of its own notes and coins from being treated as part of currency issue and from being part of the Bank’s currency assets or liabilities.
Section 54 requires that all Central Bank notes and coins are fully guaranteed by the Government and are legal tender in the Philippines for all debts, both public and private.
Section 55 requires Monetary Board (with President approval) prescriptions for note and coin characteristics: notes must state they are liabilities of the Central Bank and fully guaranteed by the Government, and bear facsimile signatures of the President and Governor; coins require prescription of weight, fineness, designs, denominations, and other characteristics, with full consideration to availability of suitable metals and relative prices and cost of minting.
Section 56 authorizes the Monetary Board to prescribe amounts of notes and coins to be printed/minted and the conditions of printing/minting, and to contract institutions, mints, or firms; printing and minting expenses are for the Central Bank’s account.
Section 57 mandates inter-convertibility: the Central Bank must exchange, on demand and without charge, Philippine currency of any denomination for Philippine notes and coins of any other requested denomination; if temporarily unable to provide requested denominations, it must deliver denominations that most nearly approximate those requested.
Section 58 requires withdrawal and replacement of unfit currency: the Central Bank must withdraw from circulation and demonetize notes and coins unfit for circulation and replace them with adequate notes/coins, but must not replace notes/coins whose identification is impossible, coins showing filing/clipping/perforation signs, and notes lost more than two-fifths of their surface or all their signatures; mutilated condition currency is withdrawn and demonetized without compensation unless it is proven to the Central Bank that unfitness resulted from accidental causes or forces beyond control, in which case replacement must be made.
Section 59 governs retirement and replacement of old series: the Central Bank may call in replacement notes (series or denominations) more than five years old and coins more than ten years old; called-in notes/coins remain legal tender for one year from the call date; for the following three years, or longer as the Monetary Board determines, they may be exchanged at par and without charge at the Central Bank and by duly authorized agents; after expiration, unexchanged notes/coins cease to be a liability and are demonetized; the Central Bank also demonetizes notes/coins called in and replaced.
Section 61 defines “deposit money” as liabilities of the Central Bank and other banks denominated in Philippine currency and subject to payment in legal tender upon demand upon presentation of checks.
Section 62 limits deposit money creation: only duly authorized banks may accept funds or create liabilities payable in pesos upon demand by check presentation, and such operations are subject to Monetary Board control under the Act.
Section 63 states that checks representing deposit money have no legal tender power and creditors may accept them or not in payment of debts, public and private.

Monetary stabilization principles and reporting triggers

Section 64 directs the Monetary Board to endeavor to control expansion/contraction in the money supply or rise/fall in prices that, in the Board’s opinion, prejudices attainment or maintenance of high production, employment, and real income.
Section 64 requires due regard for policy effects on availability and cost of money to particular sectors and on the economy as a whole, and effects on relationship of domestic prices/costs to world prices/costs.
Section 65 defines money supply as all holdings of domestic currency and deposit money (excluding holdings by the Government and by banks with checking deposit liabilities in domestic currency) and directs that statistics be based on this definition to the extent data permit.
Section 66 requires action and reporting when abnormal money supply or price movements threaten stability of the Philippine economy or important sectors:
- the Monetary Board must take remedial measures within its powers; and
- it must submit to the President and Congress and make public a detailed report describing and analyzing: causes; reflected changes on output/employment/wages/economic activity and significance; and measures taken plus other recommended monetary/fiscal/administrative measures.
Section 66 mandates report triggers when money supply changes by more than 15% or cost of living index increases by more than 10% (relative to the level at the end of the corresponding month of the preceding year), requiring a statement on whether the changes represent a threat, and periodic reports until disturbances disappear or are adequately controlled.

International stabilization and reserve management

Section 67 requires the Central Bank to exercise its powers to maintain