THE PHILIPPINE

BANKING WITH THE

BANGKO SENTRAL NG
PILIPINAS (BSP)
INTENDED LEARNING OUTCOMES
1. Name and correlate the components of the
Philippine Financial System.

2. Simulate and explain the BSP’s role in the

Philippine Banking System.
 BSP Vision
The BSP aims to be recognized globally
as the monetary authority and primary
financial system supervisor that
supports a strong economy and
promotes a high quality of life for all
Filipinos.
 BSP Vision
Naghahangad ang BSP na makilala sa
buong mundo bilang pangunahing
tagapamahala ng sistema at
kaayusan ng pananalapi at
ekonomiya upang maitaguyod ang
mataas na antas ng kabuhayan para
sa lahat ng Pilipino.
 BSP Mission
To promote and maintain price
stability, a strong financial system,
and a safe and efficient payments
system conducive to an inclusive and
sustainable growth of the economy.
 BSP Mission
Itaguyod at panatilihin ang katatagan
ng presyo ng mga bilihin at ng
sistemang pinansyal, at ng mahusay,
ligtas at maaasahang pamamaraan ng
pagbabayad upang makatulong sa
patuloy na paglago ng ekonomiya at
pag-angat ng kabuhayan ng lahat ng
mga Filipino.
 BSP Core Values
• Excellence – Consistently doing our best to master our
craft, continually improving our competencies, and
learning new things in pursuit of the organizational
goals, comparable to the best practices of other central
banks
• Patriotism – Selfless commitment to the service of the
Filipino people and the country
• Integrity – Performing mandate with sincerity, honesty,
and uprightness, worthy of respect and emulation from
others
• Solidarity – Performing with team spirit; acting and
thinking as one in the pursuit of common goals and
objectives
• Accountability – Taking full responsibility for one’s or
group’s actions
 Responsibilities of the BSP
It shall be the responsibility of the BSP:

1. To provide policy direction in the areas of

money, banking, and credit;
2. To supervise the operations of the banks and
to exercise such regulatory and examination
powers as provided under Republic Act No.
7653 (The New Central Bank Act), as amended
by Republic Act 11211, and other pertinent
laws over the quasi-banking operations of
non-bank financial institutions; and
 Responsibilities of the BSP
It shall be the responsibility of the BSP:

3. To exercise regulatory and examination

powers over money service businesses, credit
granting businesses, and payment system
operators.
 Primary Objective of the BSP

Its primary objective is to maintain price stability

conducive to a balanced and sustainable
growth of the economy and employment.
 Primary Objective of the BSP
It shall also:

1. Promote and maintain monetary stability and

the convertibility of the peso;
2. Promote financial stability and closely work
with the National Government, including, but
not limited to, the Department of Finance,
the Securities and Exchange Commission, the
Insurance Commission, and the Philippine
Deposit Insurance Corporation;
 Primary Objective of the BSP
It shall also:

3. Oversee the payments and settlement systems in

the Philippines, including critical financial market
infrastructures, in order to promote sound and
prudent practices consistent with the
maintenance of financial stability; and
4. Promote broad and convenient access to high
quality financial services and consider the
interest of the general public.
 Governance of the Bank​​
• The Monetary Board exercises the powers
and functions of the BSP, such as the conduct
of monetary policy and supervision of the
financial system.
• Its chairman is the BSP Governor, with five
full-time members from the private sector and
one member from the Cabinet.
 Governance of the Bank​​
• The Governor ​is the chief executive officer of
the BSP and is required to direct and supervise
the operations and internal administration of
the BSP.
• A deputy governor (or a Senior Assistant
Governor in the case of the Currency
Management Sect​or) heads each of the BSP's
operating sector as follows:
 Governance of the Bank​​
❖ Monetary and Economics Sector (MES)

– mainly responsible for the

operations/activities related to monetary policy
formulation, implementation, and assessment
 Governance of the Bank​​
❖ Financial Supervision Sector (FSS)

– mainly responsible for the regulation of

banks and other BSP-supervised financial
institutions
 Governance of the Bank​​
❖ Corporate Services Sector (CSS)

– mainly responsible for the effective

management of BSP’s human, financial, and
physical resources to support the BSP’s core
functions.
 Governance of the Bank​​
❖ Payments and Currency Management Sector
(PCMS)

– mainly responsible for maintaining the

safety and integrity of the Philippine currency
and ensuring a well-functioning payments and
cash ecosystem that facilitates the economic
activity and supports long-run economic growth.
 Governance of the Bank​​
❖ Regional Operations and Advocacy Sector

- mainly responsible for overseeing the

operations of the Financial Inclusion Office,
Economic and Financial Learning Office,
Consumer Protection and Market Conduct
Office, Strategic Communication and Advocacy,
New Clark City – Program Management Office,
and Regional Operations.
 Organization
Structure
of the
Bangko Sentral
ng Pilipinas
BSP TOP MANAGEMENT
 ESTABLISHMENT OF
BANKING INSTITUTIONS
INTENDED LEARNING OUTCOMES
1. Enumerate the process of establishment and
evaluate the organization of banks in the
Philippines.
ESTABLISHMENT AND ORGANIZATION
OF BANKS
• A new banking organization must have
suitable/fit shareholders, adequate financial
strength, a legal structure in line with its
operational structure, a management with
sufficient expertise and integrity to operate
the bank in a sound and prudent manner.
• (See Appendix 37-38 to 33-34)
Application and license fees for new
domestic banks
 Application and license fees for new
domestic banks
• The application fee shall be non- refundable
and shall be paid upon filing of the written
application to establish a bank.
• The license fee, net of the application fee,
shall be paid after the Monetary Board has
approved said application.
• The aforementioned fees shall also apply to
existing domestic and foreign banks that are
upgrading to the next higher bank category.
Certificate of Authority to Register
The SEC shall not register the articles of
incorporation of any bank, or any amendment
thereto, unless accompanied by a certificate of
authority issued by the Monetary Board, under its
seal. The certificate shall not be issued unless the
Monetary Board is satisfied from the evidence
submitted that:
a. All requirements of existing laws and regulations
to engage in the business for which the applicant is
proposed to be incorporated have been complied with;
Certificate of Authority to Register
b. The public interest and economic conditions,
both general and local, justify the authorization; and

c. The amount of capital, the financing,

organization, direction and administration, as well as
the integrity and responsibility of the organizers and
administrators reasonably assure the safety of
deposits and the public interest.
 Business Name
a. UBs/KBs. Only a bank that is granted
universal/commercial banking authority may
represent itself to the public as such in connection
with its business name.
b. TBs. TBs may be allowed to adopt and use
any name: Provided, That the words A Thrift Bank,
A Savings Bank, A Private Development Bank or A
Stock Savings and Loan Association, as the case
may be, are affixed after its business name.
 Business Name
c. RBs/Coop Banks. RBs/Coop Banks may
adopt a corporate name or use a business
name/style with the word Rural or Coop, as the
case may be. Said banks may also adopt a name
without such words: Provided, That the identifying
phrase, A Cooperative Bank or A Rural Bank, as the
case may be, is affixed after its business name:
Provided, further, that where the name of the bank
is shown on letterheads, billboards and other
advertising materials, the size of the letters of such
phrase shall be at least one-half (½) the size of the
business name.
CAPITAL REQUIREMENTS
OF BANKS
 Minimum Required Capital
The term capital shall be synonymous to
unimpaired capital and surplus, combined
capital accounts and net worth and shall refer
to the total of the unimpaired paid-in capital,
surplus and undivided profits, less:

a. Unbooked valuation reserves and other capital

adjustments as may be required by the Bangko
Sentral;
 Minimum Required Capital
b. Total outstanding unsecured credit
accommodations, both direct and indirect, to
directors, officers, stockholders, and their related
interests (DOSRI) granted by the bank proper;

c. Total outstanding unsecured loans, other

credit accommodations and guarantees granted to
subsidiaries;
 Minimum Required Capital
d. Total outstanding loans, other credit
accommodations and guarantees granted to related
parties that are not at arm’s length terms as
determined by the appropriate supervising
department of the Bangko Sentral;
e. Deferred income tax;
f. Appraisal increment reserve (revaluation
reserve) as a result of appreciation or an increase in
the book value of bank assets;
 Minimum Required Capital
g. Equity investment of a bank in another bank or
enterprise, whether foreign or domestic, if the other
bank or enterprise has a reciprocal equity
investment in the investing bank, in which case, the
investment of the bank or the reciprocal investment
of the other bank or enterprises, whichever is lower;
and
h. In the case of RBs/Coop Banks, the
government counterpart equity, except those arising
from conversion of arrearages under the Bangko
Sentral rehabilitation program.
 Minimum Capitalization
as per Circular No. 854 Series of 2014
Bank Category Required Minimum Capitalization

UBs

Head Office Only P3.00 billion

Up to 10 branches 6.00 billion
11 to 100 branches 15.00 billion
More than 100 branches 20.00 billion

KBs

Head Office Only P2.00 billion

Up to 10 branches 4.00 billion
11 to 100 branches 10.00 billion
More than 100 branches 15.00 billion
 Minimum Capitalization
as per Circular No. 854 Series of 2014
Bank Category Required Minimum Capitalization

TBs
Head Office in National Capital Region (NCR)

Head Office Only P500 million

Up to 10 branches 750 million
11 to 50 branches 1.00 billion
More than 50 branches 2.00 billion

Head Office in all Other Areas Outside NCR

Head Office Only P200 million

Up to 10 branches 300 million
11 to 50 branches 400 million
More than 50 branches P800 million
 Minimum Capitalization
as per Circular No. 854 Series of 2014
Bank Category Required Minimum Capitalization
RBs and Coop Banks
Head Office in NCR
Head Office Only P50 million
5 branches* 50 million*
Up to 10 branches (6-10 branches)* 75 million (120 million)*
11 to 50 branches 100 million
More than 50 branches (10 branches)* 200 million*
Head Office in All Other Areas Outside NCR
(All Cities up to 3rd class municipalities)
Head Office Only P20 million
Up to 10 branches 30 million
11 to 50 branches 40 million
More than 50 branches 80 million

*BSP Circular 1151 dated 24 August 2022

 Minimum Capitalization
as per Circular No. 854 Series of 2014
Bank Category Required Minimum Capitalization

RBs and Coop Banks

Head Office in All Other Areas Outside NCR

(4th class to 6th class municipalities)

Head Office Only P10 million

Up to 10 branches 15 million
11 to 50 branches 20 million
More than 50 branches 40 million
 FINANCIAL
INSTITUTIONS
STRUCTURE
INTENDED LEARNING OUTCOMES
1. Cite structure of banks, plan on how to
transact with banks, and conduct business to
its key personnel.
2. Explain and differentiate mergers and
consolidation.
3. Formulate ideas towards adopting merger
and consolidation.
 BANKING OFFICES
• Branch shall refer to any permanent office or
place of business in the Philippines other than
the head office where a bank may perform
activities and provide products and services
that are within the scope of its authority and
relevant licenses. In this respect, a complete
set of books and records shall be maintained
in each branch.
 MINIMUM CAPITAL REQUIREMENT
TO ESTABLISH A BRANCH
The bank must have combined capital accounts
of:
• At least P10 billion for a UB/KB
• At least P3 billion for a TB
• RBs & CBs not lower than P10 million
BRANCH PROCESSING FEES
SPECIAL LICENSING FEES
 BANKING OFFICES
• Extension office shall refer to any permanent
office or place of business in the Philippines other
than the head office or a branch, where deposits
are accepted and/ or withdrawals are serviced by
tellers or other authorized personnel.
• It does not maintain a complete set of books of
accounts as its transactions are taken-up directly
in the books of the head office or a branch to
which it is attached.
 OTHER BANKING OFFICE
• Other banking office (OBO) shall refer to any
permanent office or place of business in the
Philippines other than the head office, branch
or extension office, which engages in any or all
of the following non-transactional banking-
related activities:
a. Market loans, deposits and other bank
products and services;
 OTHER BANKING OFFICE
b. Accept loan applications and conduct
preliminary credit evaluation as well as perform
credit administration support services;
c. Host on-site automated teller machines
(ATMs);
d. Perform customer care services; and
e. Perform customer identification.
 BANKING OFFICES
• BRANCH LITE UNIT shall refer to any
permanent office or place of business of a
bank, other than its head office or a branch.
• A branch-lite unit performs limited banking
activities and records its transactions in the
books of the head office or the branch to
which it is annexed.
PROCESSING FEE
SPECIAL LICENSING FEE
 REGISTERED NUMBER OF BANK
OFFICES
I. BSP SUPERVISED/REGULATED FIs
II. NON-BANK FINANCIAL INSTITUTIONS WITH
QUASI BANKING FUNCTION
III. NON-BANK FINANCIAL INSTITUTIONS
WITHOUT QUASI BANKING FUNCTIONS
IV. OFFSHORE BANKING UNITS
 BANKING DAYS AND HOURS
Banks and/or their branches or branch-lite units,
doing business in the Philippines, shall observe for the
conduct of their business a regular banking week of five
(5) days, except when such days are non-working
holidays, including local holidays, declared by
Presidential Proclamations.
The regular banking week should fall on
Mondays to Fridays unless otherwise authorized by the
Bangko Sentral in the interest of the banking public. On
these days, said institution shall transact business for at
least six (6) hours each day.
 MERGERS
AND
CONSOLIDATION
 MERGERS & CONSOLIDATIONS
• The Bangko Sentral ng Pilipinas (BSP) signed a
memorandum of agreement (MOA) with the
state-run Philippine Deposit Insurance Corp.
(PDIC), Securities and Exchange Commission
(SEC), Cooperative Development Authority
(CDA), and the Philippine Competition
Commission (PCC) in October last year to
streamline the procedures for applications of
mergers, consolidations and acquisitions of
banks. – Philstar Global (7 March 2022)
 WHY MERGE?
• Respond to the changing competitive
environment.
• Seek to improve income from services.
• This is part of the government’s thrust to
promote ease of doing business in the country
to attract more foreign investors.
 MERGER AND CONSOLIDATION
a. Merger - is the absorption of one (1) or more
corporations by another existing corporation,
which retains its identity and takes over the
rights, privileges, franchises, and properties, and
assumes all the liabilities and obligations of the
absorbed corporation(s) in the same manner as
if it had itself incurred such liabilities or
obligations.
The absorbing corporation continues its
existence while the life or lives of the other
corporation(s) is/are terminated.
 Based on Wikipedia’s list, there are more
than twenty(20) Philippine merged banks.
Here is a list of them and the company that
acquired some of them:

Philnews, 3 April 2019

 Mergers of Banks
• Acme Savings Bank (acquired by the Sy Group
of Companies and renamed Banco De Oro)
• International Exchange Bank (acquired by and
merged with Union Bank of the Philippines)
• Insular Bank of Asia and America (merged
with Philippine Commercial International
Bank)
• Mindanao Development Bank (merged with
Equitable PCI Bank)
 Mergers of Banks
• Family Savings Bank (acquired by BPI;
renamed to BPI Family Savings Bank)
• AIG Philam Savings Bank (merged with East
West Banking Corporation)
• Keppel Bank (acquired by GE Capital Finance)
• Equitable PCI Bank (merged with PCI Bank
forming it and now merged with Banco de
Oro)
 Mergers of Banks
• Philippine Commercial International Bank
(merged with Equitable PCI Bank and now
merged with Banco De Oro)
• Urban Bank (forced to close then merged with
Export and Industry Bank)
• Allied Bank (merged with Philippine National
Bank)
• Capitol Development Bank (acquired by RCBC and
became RCBC Savings Bank)
• American Express Bank (renamed BDO Elite
Savings Bank)
 Mergers of Banks
• American Express Bank (renamed BDO Elite
Savings Bank)
• Banco Santander Central Hispano (Philippine
subsidiary acquired by Banco De Oro and
renamed BDO Private Bank)
• Dao Heng Bank (acquired by Banco de Oro)
• 1st E Bank (Philippine Branches acquired by
Banco de Oro)
• United Overseas Bank (66 out of 67 Branches
merged with Banco de Oro)
 Mergers of Banks
• GE Money Bank (acquired by Banco de Oro)
• Green Bank of CARAGA (acquired by EastWest
Banking Corporation alongside FinMan Rural
Bank, Inc. in 2013 and became EastWest Rural
Bank, Inc.)
• Orient Commercial Banking Corporation (forced
to close; Allied Bank took over 52 branches)
• Standard Chartered Bank Philippines (Philippine
retail banking business was acquired by East West
Banking Corporation in 2016)
 Mergers of Banks
• Standard Chartered Bank Philippines (Philippine
retail banking business was acquired by East West
Banking Corporation in 2016)
• Philippine Resources Savings Bank (PR Savings
Bank; acquired by CitySavings Bank in 2018)
• Philippine Postal Savings Bank (PostBank;
acquired by Landbank in 2018 and became
Overseas Filipino Bank)
• Planters Development Bank (merged with
Chinabank)
 Mergers of Banks
• The proposed merger between state-owned
banks Landbank and Development Bank of
the Philippines (DBP) was approved by
President Aquino on February 4, 2016 through
Executive Order No. 198.
The merger is subject to approval by the BSP,
according to BSP Deputy Governor Nestor
Espenilla Jr.
 Mergers of Banks
• The proposed merger between state-owned
banks Landbank and Development Bank of
the Philippines (DBP) was approved by
President Aquino on February 4, 2016 through
Executive Order No. 198.
The merger is subject to approval by the BSP,
according to BSP Deputy Governor Nestor
Espenilla Jr.
 Mergers of Banks
• United Coconut Planters Bank (UCPB) and
Land Bank of the Philippines (LANDBANK)
 Mergers of Banks
• pursuant to Executive Order No. 142 signed by
President Rodrigo Duterte on 25 June 2021

• to form a better capitalized and more resilient

institution that will play a principal role in the National
Government’s development and financial inclusion
agenda

• effectively advancing the ongoing fusion of the two

government banks into a unified and stronger
institution for promoting inclusive and sustainable
development.
 Mergers of Banks
• Landbank (Land Bank of the Philippines) and the
United Coconut Planters Bank (UCPB) have
fabricated the second-biggest lender, through a
merger, with assets estimated at PHP 3 trillion
(USD 0.059 trillion).
• The merger took effect last March 1,
2022. Landbank is the predominant brand.
• Landbank also possesses the Overseas Filipino
Bank (OFBank), the Philippines’ foremost digital-
only bank licensed by the central bank.
 Mergers of Banks

Ayala and Gokongwei groups, two of the Philippines' most powerful conglomerates, have
agreed to merge their respective banking units. – Nikkei Asia 30 Sept 2022
 MERGER AND CONSOLIDATION
b. Consolidation - is the union of two (2) or more
corporations into a single new corporation, called
the consolidated corporation, all the constituent
corporations thereby ceasing to exist as separate
entities.
The consolidated corporation shall thereupon
and thereafter possess all the rights, privileges,
immunities, franchises and properties, and
assume all the liabilities and obligations of each
of the constituent corporations in the same
manner as if it had itself incurred such liabilities
or obligations.
 ACQUISITIONS
• Refer to acquisition transactions between
banks involving the purchase of recorded
assets and assumption of recorded liabilities
(P&A), subject to the provisions of existing
and applicable laws.