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Single Borrowers Limit - is the rule that the total amount of loans that may be extended by a bank to anyperson or entity shall at no time exceed 20% of the net worth of such bank.

In Circular 425 of 2004 of BSP, the SBL was increased to 25%

Exceptions to SBL:(1) MB may otherwise prescribe for reasons of national interest(2) Deposit of rural banks with GOC financial institutions such as LB, DBP and PNB

Basis for determining SBL is the total credit commitment of bank to borrower.

The limit maybe increased by 10% provided the additional loans are secured.

SBL should include:(1) Direct liability of the maker of paper sold or discounted with the bank(2) If the borrower owns majority interest in a corporation, the liabilities of(3) said corporation is included(4) Liabilities of subsidiaries of a corporation who is borrowing from the bank(5) In case of partnership or association, the liabilities of the members thereof

SBL should exclude:(1) Loans secured by the BSP or government. (State is always solvent).(2) Loans and credit accommodations guaranteed by government(3) Loans covered by assignment of deposits maintained in the bank(4) Loans under letters of credit covered by margin deposits(5) Loans specified as non-risk items

In municipalities where there are no government banks, deposits of rural and coop banks in private banksshall not be subject to SBL

Deposit in private depository bank used by thrift, rural and coop banks, with authority to accept demanddeposits, after being cleared, shall be exempted from SBL.

ViolationsMonetary penalties 1/10 of 1% of excess over the ceiling but not exceed 30k per dayIf bank resource is less than 50M, then only a max penalty of P500 shall be imposedThere will also be reprimand to directors/officersIn subsequent offense, a 1k fine shall be imposed on the directors who approved itThere can also be suspension of banks branching privilege and rediscounting facility of BSP

CAPITAL REQUIREMENTS:

RULES ON TREASURY SALESGBL provides that NO bank shall:

(1) Purchase or acquire shares of its own capital stock(2) accept own shares as security for loan

Except if it approved by MB and will be returned in 6 months

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Reason: if banks were allowed to have a lien in their own stocks for indebtedness of stockholders, prohibitionagainst granting loans or discounts upon security would become ineffective.

FIT AND PROPER RULEPowers of MB against directors:

a) Review qualifications and DQs of directorsb) After due notice, may disqualify, suspend or remove directorc) Fit and proper rule shall be determine by - integrity, experience, education, training, competence of the

director

Disqualifications of directors:a) Convicted of final judgment involving dishonesty or breach of trustb) Persons convicted of final judgment with a maximum imprisonment term of more than 6 yearsc) Convicts of banking lawsd) Persons judicially declared insolvente) Culpable of banks closuref) Administratively liable for violation of banking laws with penalty of removal from officeg) Found unfit for position

There can be also temporary disqualifications and shall exist until DQ is gone

Under CC (Corporation Code) disqualification is only with (1) imprisonment more than 6 years or (2) violationof code committed within 5 years

NCBA also provides DQ for members of MB that is connected with bank under supervision or examination ofBSP

Public officials cannot also be an officer of any private bank unless position is incidental to office

Rural Banks Act public official may be director (exception)

PDIC conviction of any criminal offenses involving breach of trust.

DEPOSIT SUBSTITUTE (QUASI-BANKING FUNCTION)Deposit substitutes alternative form of obtaining funds from the public through the issuance, endorsement oracceptance of debt instruments for borrowers own accounts for the purpose of relending receivables

The following are some deposit substitutes:(1) Bankers acceptance(2) Promissory notes

(3) Participations(4) Certification of assignment(5) Repurchase agreements

MB shall determine what instruments are considered as deposit substitutes

Deposit substitutes of commercial, industrial and non-financial companies for the limited purpose of financingtheir own needs shall not be considered deposit substitutes

Essential Elements of quasi-banking are:(1) Borrowing funds for the borrowers account(2) Twenty or more lenders at any one time(3) Methods of borrowing are issuance, endorsement or acceptance of debt instruments(4) Purpose is for relending and purchasing receivables

Borrowing all forms of obtaining or raising funds

For the borrowers own account assumption of liability in ones own capacity Relending refer to the extension of loans by an institution with antecedent borrowing transactions

Restriction on Bank Exposure to Directors, Officers, Stockholder and related interests (DOSRI)

No DOSRI can directly or indirectly borrow from such bank or become a guarantor, indorser or surety forloan.

Exception is when there is a written approval of the majority of all directors of the bank excluding the DOSRIconcerned

Such approval is not required if it is under a fringe benefit plan approved by BSP

Directors include those named in incorporations, elected or filled

Officers shall include any person who performs function of management

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Corporations where the above mentioned owns 20% of subscribed capital, then the prohibition shall apply

Can also be less than 50% if the DOS sits as representative of the bank in the board of such corporation

Arms Length Rule-Dealings with DOSRI shall be upon terms not less favorable to the bank

Directors:(1) Names in the articles of incorporation(2) Elected in meetings of the stockholders(3) Elected to fill vacancies

Officers:

(1) Pres, VP, EVP, Sr. VP, GM, Secretary, Treasurer, Trust Officer(2) Chairman, vice-chairman or any other position who performs functions of management

Stockholder- stockholder or record in the books of the bankIncludes:

a. Spouse and/or relative within the 1st degree or consanguinity or affinityb. Corporation owned by the stockholder or his wife

Related Interestsa. Spouse and/or relative within the 1st degree or consanguinity or affinityb. partnership where DOSRI of those in a) above are general partnersc. co-owner with a DOSRI or those in a) of a property used as a securityd. Corporation or association where the DOSRI or those in a) are is also a directore. Corporation wholly or majority owned or owned by at least 20% by the DOSRI

Effect of Violation- after due notice, the office of the person violating shall be declared vacant and shall besubject to the penal provisions of NCBA.

Limit on loans: MB can limit the valid loan given to DOSRI provided that it shall be based on theirunencumbered deposits and book value of their paid in capital contribution

Exclusion to the Limit(1) Loans and credit accommodations considered as non-risk(2) Loans and credit accommodations to officers in for of fringe benefits(3) Limit on loans and credit accommodations shall not apply on those extended by coop bank to its coop

shareholders

Applicability of DOSRI rules and regulation to government borrowing: Circular 547 of 2006 provides that DOSRI rules shall also apply to loans and credit accommodations

granted to RP, subdivisions, instrumentalities and GOCCs

Exceptions would be:(1) Loans and credit accommodations that are non-risk and not subject to ceiling(2) Those made by BSP(3) LGU due to full autonomy in their propriety function(4) Director who acts as government representative

Note: Yung mga iba naitanong na sa atin kaya di ko na inilagay. Aralin pa rin po natin yung Chapters 1-5 kasibaka hindi lang ito yung ito yung mga itanong. ENJOY!