Philippine Laws Platform

[ CIRCULAR NO. 890, November 12, 2015 ]

AMENDMENTS TO THE MANUAL OF REGULATIONS FOR BANKS AND MANUAL OF REGULATIONS FOR NON-BANK FINANCIAL INSTITUTIONS

Adopted: 02 November 2015
Date Filed: 12 November 2015

The Monetary Board, in its Resolution No. 1541 dated 08 October 2015, approved the following amendments to the Manual of Regulations for Banks

(MORB) and Manual of Regulations for Non-Bank Financial Institutions
(MORNBFI).

Section 1.The following provisions of Circular No. 829 dated 13 March 2014 [Amendments to Consolidated Rules and Regulations on Currency Notes and Coins (BSP Circular No. 61, Series of 1995)] are numbered as follows to align with existing sections/subsections of the MORB/MORNBFI:

Portionofthe Circular	Title	MORBSection/ Subsections	MORNBFI Section
	PhilippineandForeignCurrencyand Notes	X950	4950Q/ 4650S/ 4650P/ 4650N
Definitionof Terms	DefinitionofTerms	X950.1	4950Q.1
ChapterI	Treatmentanddispositionof counterfeitPhilippineandforeigncurrencynotesandcoins	X950.2	4950Q.2
ChapterII	Reproductionand/oruseof facsimilesoflegaltenderPhilippinecurrencynotes	X950.3	4950Q.3
ChapterIII	Reproductionand/oruseof facsimilesoflegaltenderPhilippinecurrencycoins	X950.4	4950Q.4
ChapterIV	Cleannoteandcoinpolicy	X950.5	-
ChapterV	Replacementandredemptionof legaltenderPhilippinecurrency notesandcoinsconsideredmutilatedorunfitforcirculation	X950.6	4950Q.6
ChapterVI	Treatmentanddispositionof Philippinecurrencynotesandcoinscalledin forreplacement	X950.7	4950Q.7
ChapterVII	Penalties	X950.8	4950Q.8

Section 2.The following subsection/appendices of the MORB are assigned to the provisions of Circular No. 850 dated 08 September 2014 (Report on Cross- Border Financial Position of Banks):

Portionofthe Circular	Title	NewSubsection/ Appendices
2nd par	ReportonCross-borderFinancialPosition	X192.13
Item2	ReportonCross-BorderFinancialPositions	App.6
AnnexA	GuidelinesontheCompletionoftheReportonCross-BorderFinancialPositions	App.106

Section 3. The attachment (Framework for Dealing with Domestic Systemically Important Banks) to Circular No. 856 dated 29 October 2014 (Implementing Guidelines on the Framework for Dealing with Domestic Systemically Important Banks Under Basel III) is appended to the MORB / MORNBFI, as follows:

Portionofthe

Circular

Title

Appendices

Attachment

FrameworkforDealingwithDomestic

SystemicallyImportantBanks

App.6

App.107

App.Q-3

App.Q-62

References to the above appendices are added to Subsections X115.5 and
4115Q.5 of the MORB and MORNBFI, respectively.

Section 4.The attachment (Guidelines on EMV Implementation) to Circular No. 859 dated 24 November 2014 [Europay, MasterCard and Visa (EMV) Implementation Guidelines] is appended to MORB as follows:

Portionofthe

Circular

Title

NewAppendix

Attachment

Europay,MastercardandVisa(EMV)

ImplementationGuidelines

App.108

Reference to the above appendix is added to Subsection X177.7 of the
MORB.

Section 5.The following sections/subsections of the MORB/MORNBFI are assigned to the provisions of Circular No. 860 dated 23 November 2014 [Guidelines on the Qualification/Accreditation Requirements of Personal Equity and Retirement Account (PERA) Market Participants and PERA Investment products)]:

Portionofthe Circular	Title	NewSection/ Subsections
Introduction	PersonalEquityandRetirementAccount (PERA)MarketParticipantsandPERA InvestmentProducts.	X960 4960Q 4460N
Section1	Applicability	X960.1 4960Q.1
Section2	EligibilityCriteria	X960.2 4960Q.2
Section3	Qualifications/AccreditationRequirements	X960.3 4960Q.3
Section4	Applicationforqualification/accreditation	X960.4 4960Q.4
Section5	Securityforthefaithfulperformanceofadministrators	X960.5 4960Q.5
Section6	Groundsforsuspensionorrevocationofqualification/accreditationofadministrator, investmentmanagerorcustodian.	X960.6 4960Q.6
Section7	Penalty	X960.7 4960Q.7
Section8	ReportorialRequirements	X960.8 4960Q.8

Section 6.References used in the following Circulars are renumbered for consistency with the MORB/MORNBFI numbering:

Circular No.	CircularReference	MORB/MORNBFISections/Subsections/ SubsectionItem/Appendices
826	App.Q-46b	App.Q-46
855	4306Q.1– Item“h”	4306Q.1– Item“i”
857	Part 9 Banks and Q-Regulations	X1001 4403S X1001.1-X1001.2 4403S.1-4403S.2 X1002 4401P X1002.1-X1002.5 4401P.1-4401P.2 X1003 4402P X1003.1-X1003.2 4402P.1-4402P.5 41001Q 4403P 41001Q.1-41001.Q.2 4403P.1-4403P.2 41002Q 4701N 41002Q.1-41002Q.5 4701N.1-4701N.2 41003Q 4702N 41003Q.1-41003Q.2 4702N.1-4702N.5 4401S 4703N 4401S.1-4401S.2 4703N.1-4703N.2 4402S App.110 4402S.1–4402S.5 App.Q-04

Section 7.The Transitory Provisions of the following Circulars are footnoted in the sections/subsections of the MORB/MORNBFI.

CircularNo.	Sections/Subsections
823	X181.2
824	X233.9
830	X253.1,X405.5,4235Q,4405Q.5
832	X253.1,X405.5,4235Q,4405Q.5
844	X172

The    Transitory    Provisions   of    the    following    subsections    in    the
MORB/MORNBFI that have already expired are transferred as footnotes:

1.    X303.5
2.    X304.10
3.    4409Q.17

Section 8.The following Memoranda to Banks are incorporated to create/update the following sections/subsections/ appendices of the MORB/ MORNBFI:

MemorandumNo.	Sections/Subsections
002	X111.4
003	X108.4App.94a
006	X192.2,X257,X269.6,X269.8,X302,X306,X338,App. 18,App.89
007	X190.6
009	X191.2,App.6,App.77
010	App.6
014	X901.1,App.88,4901Q.1,App.51
015	App.6
017	App.6
019	App.6,App.Q-3
020	App.6,App.Q-3
021	X954
023	X233.9

024	App.6
025	App.6
026	App.6
031	X192.2,x257,X269.6,X269.8,X302,X306,X338,App. 18,App.89
032	App.6
034	X233.9
035	App.6
039	X192.2,X257,X269.6,X269.8,X302,X306,X338,App. 18,App.89
044	App.6
045	X960,App.109,4960Q,App.Q-63
046	App.6

Section 9.The following sections/subsections of the MORB/MORNBFI are modified for consistency and shall read as follows:

1.ItemIofSection1397

RealEstateLoonLimit.TotalrealestateloansofUB/KBs,excludingItems“a”to“d”

below,shallnotexceedtwentypercent(20%)ofthetotalloanportfolio,netofinterbankloans:

xxxxxxxxx

2.Item1.d.of1397

Loanstotheextentcollateralizedbynon-riskassetsunderexistingregulations.xxxxxxxxx

3.Item2ofSection1397

RealEstateStressTest(REST)Limits. Aprudentiallimitissetforrealestateexposures

andotherrealestatepropertyofUBs/KBs.Realestateexposuresshallreferto:

a.Realestateloans(RELs),whichshallconsistof:

(1)Residentialrealestateloanstoindividualhouseholdsforoccupancy;and

(2)Commercialrealestateloans,whichshallrefertoloansgrantedtothefollowing:

(a)individuals;

(b)landdevelopers/constructioncompanies;and

(c)otherborrowers,suchas

(i)realestatebrokers;(ii)realestatelessors;

(iii)propertymanagementcompanies;

(iv)holdingcompanies;and

(v)others,includingothercorporateborrowers;

forpurposesoffinancingrealestateactivities;

b.Investmentsindebtsecuritiesissuedbylanddevelopers/constructioncompaniesand othercorporateborrowers,suchasrealestatebrokers,realestatelessors,propertymanagementcompaniesandholdingcompanies,forpurposesoffinancingrealestateactivities;and

c.Investmentsinequitysecuritiesissuedbylanddevelopers/constructioncompaniesandothercorporateborrowers,suchasrealestatebrokers,realestatelessorsand propertymanagementcompanies, forpurposesoffinancingrealestateactivities.Equitysecuritiesissuedbyholdingcompaniesarelikewisecovered,ifproceedsfromtheissue shallbe/hasbeeninvestedbytheholdingcompanyinitssubsidiarycorporation/s that is/areengagedinrealestateactivities.

Realestateexposuresshallnotincludeloansandinvestments indebtandequitysecuritiesforconstructionofhighways,streets,bridges,tunnels,railways,andother infrastructureforpublicuse.

xxxxxxxxx

4.Section2397

Sec.2397LimitsonRealEstateExposuresandOtherRealEstatePropertyofTBs.

Aprudentiallimit isset forrealestateexposuresasdefinedunderItem“2”Section1397,andotherrealestatepropertyofTBs.OtherrealestatepropertyshallincludethoserecordedunderRealandOtherPropertiesAcquiredandNon-CurrentAssetsHeldforSale.Forthispurpose,astresstestwillbeundertakenonaTB’sREEsandotherrealestatepropertyunderanassumedwrite-offrateoftwentyfivepercent(25%).

xxxxxxxxx

1TBsthatarenotsubsidiariesofUBsandKBs.

5.Section2172

Sec.2172Marketing,SaleandServicingofMicroinsuranceProductsbyThrift

Banks.Inordertobetterservemicrofinanceclientspursuanttothefinancialinclusion

thrustofNationalStrategyandRegulatoryFrameworkforMicroinsurance, aTB, includingitsauthorizedbranch/es,extensionoffice/sandotherbankingoffices(OBOs),canpresent,marketandsellmicroinsuranceproductsasdefinedundertheInsurance Commission’sMemorandumCircular(lMC)No.1-2010x,providedthatthemicroinsuranceproductisdulyapprovedbytheInsuranceCommission.

Thepresentation,marketingandsaleofmicroinsuranceproductsbyTBshasbeen determinedtobeanecessaryandcomplementarycomponentof theprimarybusinessof

TBsconsideringtherelationshipofthelatterwiththeirmicrofinanceclients.Forthispurpose,theMonetaryBoardhasdefinedthatforTBs,microinsuranceproductsas definedunderIMCNo.9-2006xx and1-2010xxx shallserveasa“financialproductofanalliedundertaking”underSection20oftheGeneralBankingLaw.

xxxxxxxxx

5.Bank’slicensefromtheInsuranceCommissionasamicroinsuranceagentorbroker,asmaybeapplicablexxxx.

6.Certificationfromthebankpresidentxxx xxxxxxxxx

(CircularNo.683dated23February2010,M-2011-015dated18March2011)

----------------

xDated29January2010xx Dated25October2006xxx Dated29January2010

xxxx Toactasamicroinsuranceagentofanauthorizedinsuranceprovider,abankneedstoacquire the appropriatelicensefromthe lC. The requirementsfor suchapplicationconsistof: (i)attendancein

prescribedmicroinsurancetrainingcourseandpassingthequalifyingexaminationattheendofthe

course;and(ii)amendingabank’sarticlesofincorporation (AOl).Inviewofthelatterrequirement, applicant banks shall amend their AOl by including a secondary purpose of acting as amicroinsuranceagent,andshallsubmitsimultaneouslytheamendedAOItotheappropriateBSP officeandthelC.(SeelCMemoCircularNo.6-2011dated15February2011)

6.Subsection2361.8

§2361.8Marketing,saleandservicingofmicroinsuranceproductsbythriftbanks.

ATBincludingitsauthorizedbranch/es,extensionoffice/sandOBOsshallcomplywith

Sec.2172forthepresentation,marketingandsaleofmicroinsuranceproducts.

7.Subsection3361.8

§3361.8Marketing,saleandservicingofmicroinsuranceproductsbyruralandcooperativebanks.AnRB/coopbanksincludingitsauthorizedbranch/es,extensionoffice/sandOBOsshallcomplywithSec.3172forthepresentation,marketingandsale

ofmicroinsuranceproducts.

8.SubsectionsX806Q.2.i/4806Q.2.i

§X806.2.i/4806Q.2.iFund/Wiretransfer.Becauseoftheriskxxx

xxxxxxxxx

(4)Wheneverpossible,manuallyinitiatedfundtransfer(MIFT)instructionsshouldnotbe theprimarydeliverymethod.Everyeffortshallbemadetoprovideclientwithanelectronicbankingsolution.However,whereMIFTisutilized,thefollowingvalidation proceduresshallapply:

(i) Priortothebankaccepting fromacustomeramanuallyinitiatedfundstransferrequest,thecustomermustexecuteandsignanagreementwhichpreferablyispartof the account opening documentation, wherein are outlined the manual instruction

procedureswithrelatedsecurityproceduresincludingcustomeragreement toaccept responsibilityforfraudulentorerroneousinstructionsprovidedthebankhascompliedwiththestatedsecurityprocedures.

(ii)ItismandatorythatwrittenMIFTinstructionsaresignatureverified.Inaddition,one

(1)ofthefollowingprimarysecurityproceduresmustbeapplied:arecordedcallbackto

thecustomertoconfirmthetransactioninstructions,ortestwordarrangement/verification.Thecallbackortestwordrequirementmaybesubstitutedbyanyofthefollowingvaliditychecks:useofacontrolledPINorotherpre-establishedcode; sequentialnumberingcontrolofmessages;pre-establishedverifiableforms;sameas priortransmissions;standing/pre-definedinstructions;orvalueforvaluetransactions.

(iii)It is mandatorythatfaxedMIFTinstructionsaresignatureverifiedandthefax

machinebelocatedinasecuredenvironmentwithlimitedandcontrolledstaffaccesswhichpermitsvisualmonitoring.Ifmonitoringisnotpossible,theequipmentmustbesecuredorprogrammedtoreceivemessagesintoapasswordprotectedmemory.

FaxedMIFTtransactionsbelowacertainthreshold(approvedbythe President/CountryManager(forbranchesofforeignbanks)orBusinessRiskManager)maybeprocessedwiththemandatoryproceduredescribedaboveandanenhancedsecurityproceduresuchas(a)arecordedcallbacktothecustomer toconfirmthe transaction instructions and/or (b) test word arrangement/verification, and/or (c)utilizationofsecuredformsthatincorporateverifiablesecurityproceduressuchaswatermarksorcodes,and/or(d)transmissionencryption.

(iv)Telephonecallbacknumbersandcontactsmustbesecurelycontrolled.Theconfirmationcallbackistoberecordedandmadetothesignatory/(ies)ofthecustomer’s

individualaccount(s).Forcommercialandcompanyaccountsthecallbackwillbemadetothesignatory/(ies)oftheaccountor,ifsoauthorized,anotherpersondesignatedby thecustomer intheMIFTagreement.Thepartycalledistobedocumentedonthe instructions.Thecallbackmustbemadebysomeoneotherthan(a)thepersonreceiving theoriginalinstructionsand(b)effectingthesignatureverification.

xxxxxxxxx

Section 10.Circular No. 827 deleted Section X116, Subsections X116.1 to X116.7, and Appendix 63a of the MORB. The following subsections/appendices of the MORB contain references pertaining to the deleted section/subsections/ appendix. References to the deleted section/subsections/appendix are changed to “under applicable and existing capital adequacy framework”.

Subsection	Title
X119.4	Publicissuanceofunsecuredsubordinateddebt
X119.5	Privateornegotiatedissuanceofunsecuredsubordinateddebt
X119.9	Accountingtreatment
X126.5	Issuanceofredeemableshares:conditions;certificationandreport; sanctions
X151.2	Prerequisitesforthegrantofauthoritytoestablishabranch
X190.4	Disclosure requirement in the notes to the audited financialstatements
X192.9	Publication/Postingofbalancesheet
X256.5	GuidelinesincalculatingandreportingtotheBangkoSentraltherequiredreservesondepositsubstitutesevidencedbyrepurchase agreementscoveringgovernmentsecurities
X268.3	Approval/Renewaloftheline
X301.6	Largeexposuresandcreditriskconcentrations
X303.1	Definitionofterms
X1628.3	CapitaltreatmentofinvestmentsinCLNs
App.16	Implementing Guidelines of the Countryside Financial Institutions Enhancementprogram
App.46	Guidelines to Incorporate Market Risk in the Risk-Based Capital AdequacyFramework
App.46b	Instructionsfor Accomplishingthe Report on Computationof the AdjustedRisk-BasedCapitalAdequacyRatioCoveringCombinedCreditRiskandMarketRisk(ForUniversalBanksandCommercialBanksWithExpandedDerivativesAuthority)
App.46c	Instructionsfor Accomplishingthe Report on Computationof the

	AdjustedRisk-BasedCapitalAdequacyRatio CoveringCombined CreditRiskandMarketRisk(ForUniversalBanksandCommercial Banks with Expanded Derivatives Authority but Without Options Transactions)
App.46d	Instructionsfor Accomplishingthe Report on Computationof the AdjustedRisk-BasedCapitalAdequacyRatioCoveringCombinedCreditRiskandMarketRisk(ForUniversalBanksandCommercialBanksWithoutExpandedDerivativesAuthority)
App.55	SmallandMediumEnterpriseUnifiedLendingOpportunities forNationalGrowthBankAccreditationApplicationforRuralandThriftBanksEligibilityandDocumentaryRequirements
App.56a	Accounting Guidelines on the Sale of Non-Performing Assets to SpecialPurposeVehiclesandtoQualifiedIndividualsforHousing Under“TheSpecialPurposeVehicleActof2002”
App.63	ImplementationPlansUndertheNewInternationalCapitalStandardsas Contained in the Basel Committee on Banking Supervision DocumentInternationalConvergenceofCapitalMeasurementand CapitalStandards
App.63b	Risk-BasedCapitalAdequacyFrameworkforthePhilippineBanking System
App.63b-1	GuidelinesontheCapitalTreatmentofBanks’HoldingsofRepublicofthePhilippinesGlobalBondsPairedwithWarrants
App.63b-2	GuidelinesontheUseoftheStandardizedApproachinComputing theCapitalChargeforOperationalRisks
App.63d	Risk-Based Capital Adequacy Framework for the Banks on the DefinitionofQualifyingCapitalInstruments

Section 11. The word “issued” in the second paragraph of Item “d” in Subsection X178.13 under Circular No. 855 dated 29 October 2014 is hereby changed to “is used”.

FOR THE MONETARY BOARD:

(SGD) AMANDO M. TETANGCO, JR.
Governor