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(NAR) VOL. 7 NO. 2 / APRIL-JUNE 1996
[ BSP CIRCULAR NO. 110, June 14, 1996 ]
GUIDELINES ACCEPTANCE BY BANKS OF DEPOSITS OF THE GOVERNMENT, ITS POLITICAL SUBDIVISIONS AND INSTRUMENTALITIES
The Monetary Board, in its Resolution No. 578 dated June 13, 1996 approved the following guidelines to implement various legal provisions governing the acceptance by banks of deposits of the Government, its political subdivisions and instrumentalities, as well as of Government-owned or controlled corporations:
SECTION 1. Legal provisions. — The relevant legal provisions on the acceptance by banks of deposits of the Government, its political subdivisions and instrumentalities, as well as of Government-owned or controlled corporations are as follows:
1. Republic Act No. 7845 ("General Appropriations Act of 1995")
SECTION 4. Prior Monetary Board Approval. — No private bank shall, without prior approval of the Monetary Board, accept, as depository, any fund or money from the Government, its political subdivisions and instrumentalities, and Government-owned or controlled corporations; nor shall a private bank borrow any fund or money therefrom, through the issuance or sale of its acceptances, notes or other evidences of indebtedness.
SECTION 5. Banks Which May Accept Government Funds.
1. Banks, the majority of the capital of which is owned by the Government, may act as depository of funds of the Government, its political subdivision and instrumentalities, and Government-owned or controlled corporations.
2. Private banks incorporated in the Philippines may act as depository of government funds only with the prior approval of the Bangko Sentral. Local government units may maintain depository accounts preferably in Government banks and, in exceptional cases and with the prior approval of the Monetary Board, in the name of their respective government units in private banks located in or nearest to their respective areas of jurisdiction but the depository bank(s) must also seek the prior approval of the Bangko Sentral; Provided, That a private thrift, rural and cooperative bank may only act as official depository of government funds pursuant to Republic Act Nos. 7906, 7353 and 6938, as follows:
a. a thrift bank may only act as official depository of national agencies, and of municipal, city or provincial funds in the municipality, city or province where the thrift bank is located;
b. a rural bank may only act as official depository of municipal, city or provincial funds in the municipality, city or province where the rural bank is located; and
c. a cooperative bank may accept deposits of all government departments, agencies and units of the national and local governments including government-owned or controlled corporations.
3. Where there is no Government bank or Bangko Sentral office in the province and the nearest Government bank or Bangko Sentral office is inaccessible by ordinary transportation, or transporting/withdrawing the government deposits to and from the said office is impractical or risky, the province, as well as cities and municipalities located therein, may seek approval of the Monetary Board to consider all their funds eligible for deposits with a qualified private depository bank within the province, city or municipality, as the case may be.
4. Banks acting as official depository of Government funds may accept demand, savings or time deposits.
5. The authority of a bank to accept Government deposits does not obligate the Government, its subdivisions and instrumentalities and Government-owned or controlled corporations to deposit with that bank. Thus, even if a thrift or rural bank is authorized by the Monetary Board to accept Government deposits, a municipality is not obligated to deposit with that thrift or rural bank. Similarly a bank which is authorized to accept deposits of the Government or a Government corporation because of outstanding loans granted by the bank cannot demand as a matter of right that the Government or Government corporation make deposits unless there is a stipulation in the loan agreement.
SECTION 6. Limits on funds of the Government and government entities that may be deposited with banks.
1. Funds of the Government, its subdivisions and instrumentalities, and Government-owned or controlled corporations, deposited with banks authorized to receive deposits shall be limited to the minimum working balance of the depositor.
With prior Monetary Board approval, Government or private banks may be authorized to accept amounts in excess of minimum working balances if the Government or government entity making the deposit has outstanding loan obligations to the depository bank but such amounts shall not exceed the amount of its outstanding loan obligations to the depository bank. The amount of non-transferable and non-negotiable Government securities with market or below market interest rate at the time of issue, issued by the National Government to the depository bank shall be considered as "outstanding loans" of the National Government to said bank within the meaning of Section 113 of Republic Act No. 7653.
2. The aggregate amount of government funds which a private bank can hold at any given time shall not exceed 200% of the bank's networth.
3. Where any director, officer or stockholder of a private bank, as defined under Subsec. — 326.1 of the Manual of Regulations, is also an elective or appointive official of a municipality, city or province, said bank is prohibited from accepting deposits from said municipality city or province unless it is the only bank existing therein: Provided, That this provision shall not be construed as a grant of authority to such elective or appointive public official to act as director or officer of a private bank.
SECTION 7. Definition of Terms. — For purposes of these Guidelines, the following terms shall have the meaning indicated unless the contents clearly indicate otherwise:
1. The term "government-owned or controlled corporations" shall refer to government-owned or controlled corporations which are created by special laws. It shall exclude government financial institutions such as the Development Bank of the Philippines, Land Bank of the Philippines and Al-Amanah Islamic Investment Bank of the Philippines, corporations which are created corporation under the provisions of Act 1459, as amended, or the new Corporation Code and private corporations which are taken over by government-owned or controlled corporations.
2. The term "minimum working balances" represents the minimum amounts necessary to enable the government instrumentality/political unit making the deposit to transact business efficiently and effectively which shall be determined by the Department of Finance.
SECTION 8. Application for authority.
1. An application for authority to accept government deposits shall be signed by the President of the bank and shall be filed with the appropriate supervising and examining department of the Bangko Sentral. The application shall be accompanied by a certification by the bank president or executive vice president that the bank has complied with all the requirements enumerated under Section 8.
2. Banks authorized to accept government funds as depository shall continuously comply with the conditions enumerated under Section 8 even after the authority to accept government deposits has been granted during the period while the banks actually hold government deposits, otherwise, any violations may be a basis for the imposition of sanctions against the bank, its directors and officers, or revocation of the authority to accept government deposits.
3. Deposits maintained by the Government, its subdivisions and instrumentalities and Government-owned or controlled corporations shall be supported by the following documents whenever applicable:
a. The bank, during the last sixty (60) days immediately preceding the date of application, has:
c. It had not incurred losses during the last six (6) months prior to the date of application;
d. It had not incurred net weekly reserve deficiency against deposit liabilities and deposit substitutes during the last eight (8) weeks immediately preceding the date of application;
e. It has complied with the loans-to-deposits ratio during the quarter immediately preceding the date of application.
f. It has no float items outstanding for more than sixty (60) calendar days in the "Due From/To Head Office/Branches/Other Officer" accounts and the "Due from Bangko Sentral" account exceeding one percent (1%) of the total resources as of date of application;
g. Its total past due loans does not exceed 20% of the total loan portfolio as of date of application;
h. It has conducted its business in a safe and sound manner during the last six (6) months immediately preceding the date of application;
i. It has corrected as off date of application the violations noted in its last examination related to (1) single borrower's loan limit; and (2) investment in bank premises and other fixed assets;
j. The Bank's accounting records are satisfactorily maintained and adequate internal control measures are in place;
k. It has no past due obligation with the Bangko Sentral or with any government financial institution; and
l. It is a member of the Philippine Deposit Insurance Corporation in good standing.
SECTION 10. Reports. — Banks shall submit a quarterly report of their Government deposits from all sources in the aggregate in the form to be prescribed by the Bangko Sentral. The report shall be submitted to the appropriate department of the Supervision and Examination Sector of the Bangko Sentral within five (5) banking days after the end of every reference month.
SECTION 11. Sanctions. — Any violation of these regulations shall be a ground for the imposition of the following sanctions:
1. The deposit account with the Bangko Sentral of the bank concerned shall be debited by the Accounting Department of the Bangko Sentral in the amount of the unauthorized deposit or borrowing upon receipt of a report or notice from the appropriate supervising and examining department of the Bangko Sentral and the deposit account of a government bank with Bangko Sentral shall be credited for the same amount. A copy of said report or notice of the supervising and examining department shall be furnished each to the bank concerned and the government bank whose deposit account was credited.
2. The withdrawal of previously granted authority to accept government funds;
3. Without prejudice to the sanctions under Sections 35 of Republic Act No. 7653, the following administrative sanctions shall be imposed if any part of the certification as required in this regulation is found to be false or misleading;
This Circular shall take effect fifteen (15) days after publication in a newspaper of general circulation.
Adopted: 14 June 1996
(SGD.) GABRIEL C. SINGSON
Governor
SECTION 1. Legal provisions. — The relevant legal provisions on the acceptance by banks of deposits of the Government, its political subdivisions and instrumentalities, as well as of Government-owned or controlled corporations are as follows:
1. Republic Act No. 7845 ("General Appropriations Act of 1995")
"Section 14. Restrictions on the Use of Government Funds. — No government funds shall be utilized for the following purposes:2. Republic Act No. 7653 ("The New Central Bank Act")xxx xxx xxx
5. To be invested in non-government securities, money market placements and similar investments or deposited in private banking institutions.
"The provisions of this section shall apply to local government units, political subdivisions and government-owned and/or controlled corporation. . . ."
"Section 113. Official Deposits. — The Bangko Sentral shall be the official depository of the Government, its political subdivisions and instrumentalities as well as of Government-owned or controlled corporations and, as a general policy, their cash balances should be deposited with the Bangko Sentral, with only minimum working balances to be held by government-owned banks and such other banks incorporated in the Philippines as the Monetary Board may designate, subject to such rules and regulations as the Board may prescribe: Provided, that such banks may hold deposits of the political subdivisions and instrumentalities of the Government beyond their minimum working balances whenever such subdivisions and instrumentalities have outstanding loans with such banks."3. Republic Act No. 7160 ("Local Government Code of 1991")
"Section 311. Depository Accounts. — Local treasurers shall maintain depository accounts in the name of their respective local government units with banks, preferably government-owned located in, or nearest to their respective areas of jurisdiction. Earnings of each depository account shall accrue exclusively thereto."4. Republic Act No. 7906 ("Thrift Banks Act of 1995")
"Section 10. Powers of Thrift Banks. — In addition to powers granted it by this Act and existing laws, any thrift bank may":5. Republic Act No. 7353 ("Rural Banks Act of 1992")xxx xxx xxx
(e) Act as official depository of national agencies and of municipal, city or provincial funds in the municipality, city or province where the thrift bank is located, subject to such guidelines as may be established by the Monetary Board."
"Section 12. In addition to the operations specifically authorized in this Act any rural bank may:6. Republic Act No. 6938 ("Cooperative Code of the Philippines")xxx xxx xxx
(e) Act as official depository of municipal, city or provincial funds in the municipality, city or province where it is located, subject to such guidelines as may be established by the Monetary Board".
"Article 108. Privileges — Cooperative banks shall have the following privileges subject to the approval of the Central Bank and compliance with applicable banking laws, rules and regulations:7. Republic Act No. 3844 (Code of Agrarian Reform)xxx xxx xxx
(2) To act as a depository of government funds. — For this purpose, all government departments, agencies and units of the national and local governments, including government-owned and controlled corporations are hereby authorized to deposit their funds in any cooperative bank."
Section 75. Powers in General. — The Land Bank of the Philippines shall have the power:8. Republic Act No. 6848 (Al-Amanah Islamic Investment Bank Charter).xxx xxx xxx
"(12) to act as an official depository with full authority to maintain deposits of the Government, its branches, subdivisions and instrumentalities, and of government-owned or controlled corporations which deposits shall be subject to liquidity floor and/or reserve requirements as may be imposed by the Monetary Board upon other commercial banks".
Section 6. Islamic Bank's Powers. — The Al-Amanah Islamic Bank of the Philippines, upon its organization, shall be a body corporate and shall have the power:9. Republic Act No. 7169xxx xxx xxx
"(8) to act as an official government depository, or its branches, subdivisions and instrumentalities and of government-owned or controlled corporations, particularly those doing business in the autonomous regions".
"Section 6. Veterans Bank as a Government Depository. — The Secretary of Finance, the National Treasurer and his authorized representatives, city and municipal treasurers, as well as custodians of public funds or those belonging to government-owned or controlled-corporations, are hereby authorized if they so desire to make and actually maintain deposits of any government or corporate funds with the Veterans Bank, which is hereby declared to be a government depository."SECTION 2. Opinion of the Secretary of Justice. — The Secretary of Justice in his Opinion No. 57 dated May 29, 1995, ruled that:
". . . harmonization of all the abovementioned laws is possible and the rules of harmonization may be stated as follows:SECTION 3. Statement of Policy. — As a general policy, cash balances of the Government, its political subdivisions and instrumentalities as well as of Government-owned or controlled corporations shall be deposited with the Bangko Sentral, with only minimum working balances to be held by Government-owned banks and such other banks incorporated in the Philippines as the Monetary Board may designate pursuant to this Circular: Provided, that such banks may be authorized by the Monetary Board to hold deposits of the political subdivisions and instrumentalities of the Government beyond their minimum working balances whenever such subdivisions and instrumentalities have outstanding loans with said banks.
"The general prohibition under Section 14(5) of the GAA stays — no government funds shall be deposited in private banking institutions.
"By way of exception, the Monetary Board may approve, subject to such guidelines as it may establish, a request for the deposit of government funds, whether pertaining to national or local agencies or government-owned or controlled corporations, in any rural bank pursuant to R.A. No. 7353, or any cooperative bank pursuant to R.A. No. 6938 or any thrift bank pursuant to R.A No. 7906, or in any private bank designated by the Monetary Board pursuant to R.A. No. 7653.
"It should be stressed that unless the Monetary Board approves it, government funds shall not be deposited in any private banking institution in view of the general prohibition in Section 14(5) of the GAA."
SECTION 4. Prior Monetary Board Approval. — No private bank shall, without prior approval of the Monetary Board, accept, as depository, any fund or money from the Government, its political subdivisions and instrumentalities, and Government-owned or controlled corporations; nor shall a private bank borrow any fund or money therefrom, through the issuance or sale of its acceptances, notes or other evidences of indebtedness.
SECTION 5. Banks Which May Accept Government Funds.
1. Banks, the majority of the capital of which is owned by the Government, may act as depository of funds of the Government, its political subdivision and instrumentalities, and Government-owned or controlled corporations.
2. Private banks incorporated in the Philippines may act as depository of government funds only with the prior approval of the Bangko Sentral. Local government units may maintain depository accounts preferably in Government banks and, in exceptional cases and with the prior approval of the Monetary Board, in the name of their respective government units in private banks located in or nearest to their respective areas of jurisdiction but the depository bank(s) must also seek the prior approval of the Bangko Sentral; Provided, That a private thrift, rural and cooperative bank may only act as official depository of government funds pursuant to Republic Act Nos. 7906, 7353 and 6938, as follows:
a. a thrift bank may only act as official depository of national agencies, and of municipal, city or provincial funds in the municipality, city or province where the thrift bank is located;
b. a rural bank may only act as official depository of municipal, city or provincial funds in the municipality, city or province where the rural bank is located; and
c. a cooperative bank may accept deposits of all government departments, agencies and units of the national and local governments including government-owned or controlled corporations.
3. Where there is no Government bank or Bangko Sentral office in the province and the nearest Government bank or Bangko Sentral office is inaccessible by ordinary transportation, or transporting/withdrawing the government deposits to and from the said office is impractical or risky, the province, as well as cities and municipalities located therein, may seek approval of the Monetary Board to consider all their funds eligible for deposits with a qualified private depository bank within the province, city or municipality, as the case may be.
4. Banks acting as official depository of Government funds may accept demand, savings or time deposits.
5. The authority of a bank to accept Government deposits does not obligate the Government, its subdivisions and instrumentalities and Government-owned or controlled corporations to deposit with that bank. Thus, even if a thrift or rural bank is authorized by the Monetary Board to accept Government deposits, a municipality is not obligated to deposit with that thrift or rural bank. Similarly a bank which is authorized to accept deposits of the Government or a Government corporation because of outstanding loans granted by the bank cannot demand as a matter of right that the Government or Government corporation make deposits unless there is a stipulation in the loan agreement.
SECTION 6. Limits on funds of the Government and government entities that may be deposited with banks.
1. Funds of the Government, its subdivisions and instrumentalities, and Government-owned or controlled corporations, deposited with banks authorized to receive deposits shall be limited to the minimum working balance of the depositor.
With prior Monetary Board approval, Government or private banks may be authorized to accept amounts in excess of minimum working balances if the Government or government entity making the deposit has outstanding loan obligations to the depository bank but such amounts shall not exceed the amount of its outstanding loan obligations to the depository bank. The amount of non-transferable and non-negotiable Government securities with market or below market interest rate at the time of issue, issued by the National Government to the depository bank shall be considered as "outstanding loans" of the National Government to said bank within the meaning of Section 113 of Republic Act No. 7653.
2. The aggregate amount of government funds which a private bank can hold at any given time shall not exceed 200% of the bank's networth.
3. Where any director, officer or stockholder of a private bank, as defined under Subsec. — 326.1 of the Manual of Regulations, is also an elective or appointive official of a municipality, city or province, said bank is prohibited from accepting deposits from said municipality city or province unless it is the only bank existing therein: Provided, That this provision shall not be construed as a grant of authority to such elective or appointive public official to act as director or officer of a private bank.
SECTION 7. Definition of Terms. — For purposes of these Guidelines, the following terms shall have the meaning indicated unless the contents clearly indicate otherwise:
1. The term "government-owned or controlled corporations" shall refer to government-owned or controlled corporations which are created by special laws. It shall exclude government financial institutions such as the Development Bank of the Philippines, Land Bank of the Philippines and Al-Amanah Islamic Investment Bank of the Philippines, corporations which are created corporation under the provisions of Act 1459, as amended, or the new Corporation Code and private corporations which are taken over by government-owned or controlled corporations.
2. The term "minimum working balances" represents the minimum amounts necessary to enable the government instrumentality/political unit making the deposit to transact business efficiently and effectively which shall be determined by the Department of Finance.
SECTION 8. Application for authority.
1. An application for authority to accept government deposits shall be signed by the President of the bank and shall be filed with the appropriate supervising and examining department of the Bangko Sentral. The application shall be accompanied by a certification by the bank president or executive vice president that the bank has complied with all the requirements enumerated under Section 8.
2. Banks authorized to accept government funds as depository shall continuously comply with the conditions enumerated under Section 8 even after the authority to accept government deposits has been granted during the period while the banks actually hold government deposits, otherwise, any violations may be a basis for the imposition of sanctions against the bank, its directors and officers, or revocation of the authority to accept government deposits.
3. Deposits maintained by the Government, its subdivisions and instrumentalities and Government-owned or controlled corporations shall be supported by the following documents whenever applicable:
a. A copy of the resolution of the barangay, municipal or city council (Sangguniang Bayan/Panglungsod) or the provincial board (Sangguniang Panlalawigan) authorizing the deposit of municipal, city or provincial funds;SECTION 9. Pre-requisites for the grant of authority to accept deposits from the Government and government entities. — Private banks applying for authority to accept deposits from the Government, its subdivisions and instrumentalities and Government-owned or controlled corporations and Government banks applying for authority to accept Government deposits in excess of minimum working balances must comply with the following conditions:
b. A copy of the resolutions of the board of directors of the government-owned or controlled corporations authorizing the deposit of funds of said corporations; or
c. In case of the National Government, its unincorporated branches, agencies and instrumentalities, a written authority to deposit government funds signed by the duly authorized official of the department, agency, office or unit making the deposit. The resolution or authority should state the name and location of the depository bank; type and terms of the deposit; and that the amount to be deposited represents working balances.
a. The bank, during the last sixty (60) days immediately preceding the date of application, has:
1. Not been deficient in its networth-to-risk assets ratio; andb. It has complied with the minimum capital required under existing regulations;
2. Complied with the ceilings on credit accommodations to directors, officers stockholder and/or their related interests (DOSRI);
c. It had not incurred losses during the last six (6) months prior to the date of application;
d. It had not incurred net weekly reserve deficiency against deposit liabilities and deposit substitutes during the last eight (8) weeks immediately preceding the date of application;
e. It has complied with the loans-to-deposits ratio during the quarter immediately preceding the date of application.
f. It has no float items outstanding for more than sixty (60) calendar days in the "Due From/To Head Office/Branches/Other Officer" accounts and the "Due from Bangko Sentral" account exceeding one percent (1%) of the total resources as of date of application;
g. Its total past due loans does not exceed 20% of the total loan portfolio as of date of application;
h. It has conducted its business in a safe and sound manner during the last six (6) months immediately preceding the date of application;
i. It has corrected as off date of application the violations noted in its last examination related to (1) single borrower's loan limit; and (2) investment in bank premises and other fixed assets;
j. The Bank's accounting records are satisfactorily maintained and adequate internal control measures are in place;
k. It has no past due obligation with the Bangko Sentral or with any government financial institution; and
l. It is a member of the Philippine Deposit Insurance Corporation in good standing.
SECTION 10. Reports. — Banks shall submit a quarterly report of their Government deposits from all sources in the aggregate in the form to be prescribed by the Bangko Sentral. The report shall be submitted to the appropriate department of the Supervision and Examination Sector of the Bangko Sentral within five (5) banking days after the end of every reference month.
SECTION 11. Sanctions. — Any violation of these regulations shall be a ground for the imposition of the following sanctions:
1. The deposit account with the Bangko Sentral of the bank concerned shall be debited by the Accounting Department of the Bangko Sentral in the amount of the unauthorized deposit or borrowing upon receipt of a report or notice from the appropriate supervising and examining department of the Bangko Sentral and the deposit account of a government bank with Bangko Sentral shall be credited for the same amount. A copy of said report or notice of the supervising and examining department shall be furnished each to the bank concerned and the government bank whose deposit account was credited.
2. The withdrawal of previously granted authority to accept government funds;
3. Without prejudice to the sanctions under Sections 35 of Republic Act No. 7653, the following administrative sanctions shall be imposed if any part of the certification as required in this regulation is found to be false or misleading;
a. On the BankSECTION 12. Nothing in this Circular shall be interpreted as amending or repealing any rules or regulations of the National Government in accordance with law on the placement and terms of placement of government cash balances. The existing provisions of the Manual of Regulations for Banks and Other Financial Intermediaries on liquidity floor and required reports remain in force and effect.
Cancellation of the authority to accept government deposits if one has already been granted and/or disqualification to act as a government depository for not more than one (1) year.
b. On the Certifying Officer
A fine of P5,000 per day from the time the certification was made up to the time the certification was found to be false, for each application filed with the Bangko Sentral.
This Circular shall take effect fifteen (15) days after publication in a newspaper of general circulation.
Adopted: 14 June 1996
Governor