CHAPTER 7: Bangko Sentral ng Pilipinas as are essential to the proper conduct of such

operations.
I. Creation, Responsibilities, and Corporate Powers
 COMPROMISE, CONDONE or RELEASE in
of the Bangko Sentral
whole or in part any claim of or settled
liability to the BSP regardless of the amount
A. Creation: (NCBA)
involved, under such terms and conditions as
 There is hereby established an independent
may be prescribed by the monetary board
central monetary authority, which shall be a
body corporate known as the Bangko Sentral
D. Power to Prosecute
ng Pilipinas, hereafter referred to as the
 Although BSP and its officials may have the
Bangko Sentral
duty under the law to cause the prosecution
 The capital of the BSP shall be 50 Billion
of those who violate the banking laws, yet it
pesos. (Section 2)
does not say in said laws that imposes a clear,
 The BSP shall have its principal place of
specific duty on the former to do the actual
business in Metro Manila, but may maintain
prosecution of the latter.
branches, agencies and correspondents in
 BSP is a government corporation created
such other places as the proper conduct of its
principally to administer the monetary and
business may require.
banking system of the republic, not a
prosecution agency like the fiscal’s office.
B. Responsibility and Primary Objective of the BSP
 Being an artificial person, BSP is limited to its
 Responsibility is TO PROVIDE policy
statutory powers and the nearest power to
directions in the areas of MONEY, BANKING
which prosecution of violators of banking
and CREDIT.
laws may be attributed is its power to sue and
 It shall have SUPERVISION over the
be sued. This refers to CIVIL CASES ONLY.
operations of banks.
 Prosecution of alleged violations of banking
 It shall exercise REGULATORY POWERS over
laws constitute a public offense which is a
the operations of finance companies and
matter of public interest hence ANYONE not
non-bank financial institutions performing
only BSP or its officials can denounce such
quasi-banking functions
violations before prosecuting authorities.
 PRIMARY OBJECTIVE is to maintain price
stability conducive to a balances and *Mandamus for this purpose against BSP is improper.
sustainable growth of the economy.
 PROMOTE and MAINTAIN monetary stability
E. Estoppel
and convertibility of the peso.
 BSP Circulars/Memoranda must be
implemented in a manner that would
C. Corporate Powers (SCP-SPAL)
safeguard or harmonize them with
 ADOPT, ALTER and USE a corporate seal
government programs designed to uplift or
which shall be judicially notices
promote the country’s level of production
 ENTER into contracts
and employment, and also avoid irreparable
 LEASE or OWN real and personal property and
or grave prejudice to participants of said
to sell or otherwise dispose of the same.
program.
 SUE and be sued  In case banks or banking institutions
 Do and PERFORM any and all things necessary already faithfully complied with BSP’s
or proper to carry out the purposes of the directives, BSP is estopped from
NCBA enforcing circulars that would deny
 ACQUIRE and HOLD such assets and incure banks or banking institutions of their
liabilities in connection with its operations rights.
authorized by the provisions of the NCBA or
II. Authority of the BSP
A. Supervisory Powers of BSP
The operations and activities of banks shall be subject to
the supervision of the BSP and shall include: (REO-ISC)
 ISSUE OF RULES OF CONDUCT or the
establish standards of operation for uniform
application to all institutions or functions
covered, taking into consideration the
distinctive character of the operations of
institutions and the substantive similarities of
specific functions to which such rules, modes
or standards are to be applied.
 CONDUCT EXAMINATION to determine
compliance with laws and regulations if the
circumstances so warrant as determined by
the MB
 OVERSEE to ascertain that laws and
regulations are complied with.
 REGULAR INVESTIGATION which shall not be
oftener than once a year from the last date
of examination to determine whether an
institution is conducting it business on a safe
or sound basis.
 Deficiencies or irregularities found by or
discovered by an audit shall be addressed
immediately.
 INQUIRING INTTO THE SOLVENCY AND
LIQUIDITY of the institution.
 ENFORCING prompt corrective action
The BSP shall also have supervision over the operations of
and exercise regulator powers over:
a. Quasi-Banks
b. Trust Entities
c. Other Financial Institutions which under special
laws are subject to BSP Supervision
B. Phase Out of BSP over Building and Loan
Associations
 Within a period of 3 years from the effectivity
of the GBL, the BSP shall phase out and
transfer its supervising and regulatory
powers over building and loan associations to
the Home Insurance and Guaranty
Corporation which shall assume the same.
C. Policy Direction; Ratios, Ceilings and Limitations
 The BSP shall provide policy direction in the
areas of money, banking and credit.
 MB may prescribe ratios, ceilings, limitations
or other forms of regulation on the different
types of accounts and practices of banks and
quasi-banks which shall, to the extent
feasible, conform to internationally accepted
standards, including those of the Bank for
International Settlements
 The MB may exempt particular categories of
transactions from such ratios, ceilings and
limitations, but not limited to exceptional
cases or to enable a bank or quasi-bank
under rehabilitation or during a merger or
consolidation to continue in business with
safety to its creditor, depositors and the
general public.
III. Monetary Board
A. Composition
 The MB is composed of 7 members
appointed by the president for a term of 6
years
 Governor of the BSP who shall be the
chairman of the MB (Subject to CoA)
 Member of the cabinet to be designated
by the president
 5 members who shall come from private
sector who shall serve full time. (no more
than 1 reappointment)
B. Vacancies
 Any vacancy in the MB created by DEATH,
RESIGNATION or REMOVAL of any member
shall be filled by the appointment of a new
member to complete the unexpired period of
the term of the member concerned.
C. Qualifications (CA-CIPE)
 Natural Born Citizens
 35 years of age except for the governor who
must be 40
 Of good moral character
 Unquestionable Integrity
 Known Probity and Patriotism
 With Recognized Competence in Social and
Economic Disciplines.
D. Disqualifications (DDE-CSE)
 Disqualifications Imposed by RA 6713
 Disqualified from being a Director, Officer,
Employee, Consultant, Lawyer, Agent or
 Stockholder of any bank, quasi-bank or any
other institution which is subject to
supervision or examination by BSP. (if so he
shall resign from that job before assuming
role in MB)
 Members from the private sector cannot
hold any other public office or public
employment during their tenure.
 Has been connected directly with any
multilateral banking or financial institution
 Has substantial interest in any private bank in
the Philippines within 1 year prior to his
appointment
 A member of the MB cannot be employed in
any institution within 2 years after the
expiration of his term EXCEPT when he serves
as an official representative of the Philippine
Government
E. Grounds for Removal (SIGN)
 If the member is subsequently disqualified
under the provisions of Section 9 of the NCBA
Any member of the MB with person or pecuniary interest
 He is physically or mentally incapacitated that
in any matter in the agenda of the MB shall:
he cannot properly discharge his duties and
responsibilities and such incapacity has
lasted for more than 6 months
 Member is guilty of acts or operations which
are of fraudulent or illegal Character or which
are manifestly opposed to the aims and
interests of the BSP
 If the member no longer possesses the
qualifications specified in Section 8 of the
NCBA
F. Meetings, Quorum, Decisions and Proceedings
 MB shall meet a least once a week. It may be
called to a meeting by the Governor of the
BSP or by 2 other members of the board.
 Presence of 4 members shall constituted a
quorum PROVIDED in all cased the Governor
or his duly designated alternate is among the
4.
 Unless otherwise provided in the NCBA, all
decisions of the monetary board shall require
the concurrence of at least 4 members
*Cases where vote of 5 is required:
 In period of national and/or local emergency or
of imminent panic which directly threaten
monetary and banking stability, the MB by at
least 5 votes in special cases and upon application
of the bank, quasi-bank or trust entity MAY
ALLOW such bank, quasi-bank or trust entity to
defer for a stated period of time the publication
of the statement of financial condition required.
(Section 61 GBL)
 Examination of books of every banking institution
once every 12 months and such other times the
MB may deem expedient by a vote of at least 5
(Section 28, NCBA)
 Section 72 of NCBA
 Section 84 of NCBA
G. Deputy Governors May Attend MB Meetings
H. Salaries of the Governor and Members of the MB
 Fixed by the president at a sum
commensurate to the importance and
responsibility attached to the position.
I. Personal or Pecuniary Interest (DR-PR)
 Disclose such Interest
 Retire from meeting when matter is taken up
 Decision on such matter shall be made public
 Minutes shall reflect the disclosure made and
the retirement of the member concerned
from the meeting.
J. Scope of Authority (IDEA-I)
 ISSUE rules and regulation it considers
necessary for the for the effective discharge
of the responsibilities and exercise of the
powers vested upon the monetary board and
BSP (It shall be reported to the president and
congress within 15 days from date of
issuance)
 DIRECT the management, operations and
administration of the BSP, reorganize its
personnel and issue rules and regulations it
deems necessary or convenient for this
purpose.
 ESTABLISH a HRM system which shall govern
selection, hiring, appointment, transfer,
promotion or dismissal of all personnel.
 ADOPT an annual budget for and authorize
such expenditures by the BSP as are in the
 interest of the effective administration and
operations of the BSP
 INDEMNIFY its members and other officials
of the BSP including personnel of the
departments performing supervision and
examination functions against all costs and
expenses reasonable incurred by such person
in connection with any civil or criminal action,
suit or proceeding to which he may be or is
made a party by reason of the performance
of his function or duties UNLESS he is liable
for negligence or misconduct
K. Responsibility of Members of the MB, Officials,
Examiners, and Employees of the BSP
 Willful violation of the NCBA, negligence,
abuse, malfeasance or misfeasance, failure to
exercise EOD in the performance of his duty
shall be held liable for any loss or injury
suffered by the BSP or ether baking
institution. (VNAMMF)
 DISCLOSURE of any information of a
confidential nature or on the discussions or
resolutions of the MB or about confidential
operations of the BSP UNLESS it is in
connection with the performance of official
functions with the BSP or with prior
authorization of the MB or governor
 USE of such information for personal gain or
to the detriment of the government, BSP or
third parties. (Data/Information required to
be submitted to the president and/congress
or to be published under the NCBA is not
confidential.)
IV. The Governor and Deputy Governors of the BSP
A. Powers and Duties of the Governor (CEO:
PEDARE)
The governor shall be CEO of the BSP with the following
powers and duties:
 PREPARE the agenda for the meetings of the MB
and to SUBMIT for the consideration of the board
the policies and measures necessary to carry out
the purposes and provisions of the NCBA
 EXECUTE and ADMINISTER the policies and
measures approved by the MB
 DIRECT and SUPERVISE the operations and
internal administration of the BSP
 APPOINT and FIX the remunerations and other
emoluments of personnel below the rank of a
department head in accordance with the position
and composition plans approved by the MB as
well as to impose disciplinary measures upon
personnel of the BSP subject to the provisions of
section 15(c) of NCBA, provided that removal of
personnel shall be with the approval of the MB
 RENDER opinions, decisions or rulings which shall
be final and executory until reversed or modified
by the MB on matters regarding application or
enforcement of laws pertaining to institutions
supervised by the BSP and laws pertaining to
quasi-banks, as well as regulations, policies or
instructions issued by the MB and the
implementation thereof
 EXERCISE such other powers as may be vested in
him by the MB
B. Powers of the Governor as Representative of MB
and BSP (BS-RD)
 REPRESENT the MB and the BSP in all dealings
with other offices, agencies and
instrumentalities of the government and all
other persons or entities, public or private,
whether domestic, foreign or international.
 SIGN contracts entered into by the BSP, notes
and securities issued by the BSP, all reports,
balance sheets, profit and loss statements,
correspondence and other documents.
 REPRESENT the BSP, either personally or
through counsel, including private counsel,
as may be authorized by the MB in any legal
proceedings, action or specialized legal
studies.
 DELEGATE his power to represent the BSP
C. Emergencies (CRM)
 In case of emergencies where time is
sufficient to call a meeting of the MB, the
governor of the BSP with the CONCURRENCE
of 2 other members of the MB, may decide
any matter or take any action within the
authority of the board.
 Governor shall SUBMIT A REPORT to the
president and congress within 72 hours after
the action has been taken.
  At the soonest possible time, the governor
shall CALL A MEETING of the MB to submit his
action for ratification
D. Limitations on Outside Interests of the Governor
and the Full-Time Members of the Board
 LIMIT their professional activities to those
pertaining directly to their positions with the
BSP.
 NOT ACCEPT any other employment whether
public or private, remunerated or ad
honorem with the exception of positions in
eleemosynary, civic, cultural or religious
organizations or whenever by designation of
the president, the governor or the full-time
member is tasked to represent the interest of
the government or other government
agencies in matters connected with or
affecting the economy or the financial
system of the country.
E. Number and Functions of Deputy Governors
 The governor of the BSP with approval of the
MB shall appoint not more than 3 Deputy
Governors who hall perform duties as may be
assigned to them by the governor and the
board.
 Act as CEO of BSP and shall exercise the
powers and perform the duties of the
governor.
V. Operations of the BSP
A. Research and Statistics of the BSP
 BSP shall prepare data and conduct economic
research for the guidance of the MB in the
formulation and implementation of its
policies.
B. Scope of Authority of BSP to Obtain Data and
Information
 To request from government offices and
instrumentalities or GOCCs any data which it
may require for the proper discharge of its
functions and responsibilities.
 BSP through the governor or its
representative has power to issue a
subpoena for the production of the books
and records for aforesaid purpose.
(Unjustifiable refusal  contempt)
 Data on individual firms, other than banks,
gathered by the Department of Economic
Research and other departments or units of
the BSP shall not be made available to any
person or entity outside of the BSP whether
public or private except under order of the
court or under conditions as may be
prescribed by the MB
C. Training of Technical Personnel
 BSP shall promote and sponsor the training of
technical personnel in the field of money and
banking. Therefore BSP is authorized to
defray the costs of study, at home or abroad,
of qualified employees of the BSP of
promising university graduates or of any
other qualified persons who shall be
determined by proper competitive
examinations.
D. Scope of Supervision and Examination by the BSP
 The BSP shall have supervision over and
conduct periodic or special examinations of,
banking institutions and quasi-banks,
including their subsidiaries and affiliates
engaged in allied activities.
SUBSIDIARY: a corporation more than 50% of the voting
of which is owned by a bank or quasi-bank
AFFILIATE: a corporation the voting stock of which to the
extent of 50% or less, is owned by a bank or quasi-bank,
or which is related or linked such institution or
intermediary through common stockholders or such
other factors as may be determined by the MB
 The department heads and the examiners of
the supervising and/or examining
departments are authorized to:
 ADMINISTER oaths to any director,
officer or employee of any institution
under their respective supervision or
subject to their examination.
 COMPEL the presentation of all books,
documents, papers, or records necessary
in their judgment to ascertain the facts
relative to the true condition of any
institution as well as the books and
 records of persons and entities relative **Any information obtained from an examination of his
to or in connection with the operations, deposit shall be held strictly confidential and may be used
activities or transactions of the by the examiners only in connection with their
institution under examination subject to supervisory and examination responsibility or by BSP in an
the provision of existing laws protecting appropriate legal action it initiated involving the deposit
or safeguarding the secrecy or account.
confidentiality of bank deposits as well as
B. Prohibitions Against Personnel of the BSP (P-
investments of private persons, natural
ORRB)
or juridical in debt instrument issued by
 Being an officer, director, lawyer or agent,
the government.
employee, consultant or stockholder, directly
or indirectly of any institution subject to
E. Restraining Order of Injunction
examination or supervision by the BSP
 No restraining order or injunction shall be
EXCEPT non-stock savings and loan
issued by the court enjoining the BSP from
associations and provident funds organized
examining any institution subject to
exclusively for employees of BSP
supervision or examination by the BSP
 Directly or indirectly requesting or receiving
UNLESS there is convincing proof that the
any gift, present or pecuniary or material
action of BSP is plainly arbitrary and made in
benefit for himself or for another from any
bad faith and the petitioner or plaintiff files
institution subject to the supervision or
with the clerk or judge of the court where the
examination of BSP
action is pending a bon executed in favor of
BSP  REVEALING in any manner except under
orders of the court, the congress or any
 Rule 58 of the rules of court re: preliminary
government office or agency authorized by
injunction applies.
law or under such conditions as ay be
prescribed by the MB, INFORMATION
VI. DOSRI
relating to the condition or business of any
institution.
A. Contracting Loans
 BORROWING from any institution subject to
 Any Director, Officer, or stockholder who
supervision or examination by the BSP shall
together with his related interest, contracts a
be prohibited UNLESS said borrowings are
loan or any form of financial accommodation
adequately secured, fully disclosed to the MB
from:
and shall be subject to such further rules and
 His Bank
regulations as the MB may prescribe,
 From a bank which:
provided however, that personnel of the
o Is a subsidiary of a bank holding
supervising and examining departments are
company of which both his bank and
prohibited from borrowing from a bank
the lending bank are subsidiaries
under their supervision or examination.
o A controlling proportion of the
shares is owned by the same interest
VII. Examination of Banking Institutions
that own a controlling proportion of
the shares of his bank, in excess of
A. Frequency of Examination
5% of the capital and surplus of the
bank or in the maximum amount  The supervising and examining department
permitted by law (whichever is head, personally or by deputy, shall examine
lower) the books of every banking institution once in
every 12 months and other times as the MB
 Shall be required by the lending bank to
by an affirmative vote of five members may
waive the secrecy of his deposits of whatever
deem expedient and to make a report on the
nature in all banks in the Philippines.
same to the MB PROVIDED that there shall
 be an interval of at least 12 months between
annual examinations. A. Fiscal Year
B. Computation of Profits and Losses
B. Affording Opportunity Examine C. Distribution of Net Profits
 The bank concerned shall afford to the head D. Revaluation Profits and Losses
of the appropriate supervising and examining E. The Auditor
departments and to his authorized deputies
full opportunity to examine its books, cash X. Penalty for Violation
and available assets and general condition at
any time during banking hours when A. Penalty for Refusal to Make Reports or Permit
requested to do so by BSP. PROVIDED none Examination
of the reports and other papers relative to B. Penalty for Willful Making of a False or Misleading
such examinations shall be open to Statement on a Material Fact
inspection by the public except insofar as C. Proceedings Upon and Penalty for Violations of
such publicity is incidental to the hereinafter NCBA and other Banking Law, Rules, Regulations
proceedings authorized or is necessary for Orders or Instruction
the prosecution of violations in connection D. Administrative Sanctions on Banks and Quasi-
with the business of such institutions Banks (Administrative Violations: CDR-FLIB)
1. Administrative Violations and Penalties:
C. Service Fees 2. Administrative Proceedings
 Banking and Quasi-Banking institutions which
are subject to examination by the BSP shall
pay to the BSP within the first 30 days of each
year, an annual fee in an amount equal to
percentage as may be prescribed by the MB
of its average total assets during the
preceding year as shown on its end-of-month
balance sheets, after deducting cash on hand
and amounts due from banks, including the
BSP and banks abroad.

VIII. Administration

A. Operating Departments of the BSP

 The MB shall in accordance with its authority
under the NCBA, determine and provide for
such operating departments and other
offices, including a public information office
of the BSP as it deems convenient for the
proper and efficient conduct of the
operations and the accomplishment of the
objectives of the BSP.

B. Required Reports and Publications of BSP


C. Annual Report of the BSP
D. Signatures on Statements

IX. Profits Losses, and Special Accounts