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The Monetary Board, in its Resolution No. 1247 dated October 25, 1995, approved the guidelines to govern the establishment of additional branches of foreign banks in the Philippines pursuant to R.A. No. 7721. Accordingly, the Manual of Regulations for Banks and Other Financial Intermediaries (Book I) is hereby amended as follows:

SECTION 1. A new section is hereby added after Section 1152 of the Manual of Regulations to read as follows:

"SEC. 1153. Establishment of Additional Branches of Foreign Banks - The following guidelines shall govern the establishment of additional branches of foreign banks in the Philippines pursuant to R.A. No. 7721."

For purposes of this Section, the term 'bank' shall refer to the existing branches of the applicant bank in the Philippines reckoned as a single unit."

SECTION 2. A new subsection is hereby added after Section 1153 to read as follows:

"Subsec. 1153.1 Application for Authority to Establish Additional Branch - An application for authority to establish additional branch or branches shall be signed by the Country Manager or the highest ranking officer in the Philippines of the applicant foreign bank, and shall be accompanied, as a minimum, by the following information/documents:

a. Certified true copy of the resolution of the bank's board of directors authorizing the establishment of the additional branch/es and indicating its proposed site/s, and/or authority of the bank's Country Manager or highest ranking officer in the Philippines to apply for authority to establish additional branch/es and represent the bank in connection therewith;

b. Banking facilities and services to be offered;

c. Organizational set-up of the proposed branch/es showing the proposed staffing pattern; and

d. Certification signed by the bank's Country Manager that the bank's existing branches in the Philippines, reckoned as a single unit, have complied with all the requirements enumerated under Subsection 1153.2".

SECTION 3. A new subsection is hereby added after Subsection 1153.1 to read as follows:

"Subsec. 1153.2 Requirements for Establishment of Additional Branch - The requirements for establishment of additional branches of foreign banks are as follows:

a. The bank has complied with the requirements prescribed in Sections 5 and 7 of BSP Circular No. 51 dated October 14, 1994, as follows:

"Section 5. Capital Requirements

a. x x x

b. For Foreign Bank Branches with Full Banking Authority. A foreign bank authorized to establish branches with full banking authority in the Philippines shall inwardly remit and convert into Philippine currency, as permanently assigned capital, the U.S. Dollar equivalent of Two Hundred Ten Million Pesos (P210,000,000.00) at the exchange rate prevailing on June 5, 1994 (the date of effectivity of R.A. No. 7721), i.e., P26.979 to US$1.00. The foreign bank shall thereby be entitled to establish three (3) branches in locations of its choice.

The same foreign bank may open three (3) additional branches in locations designated by the Monetary Board by inwardly remitting and converting into Philippine currency, as additional permanently assigned capital the U.S. Dollar equivalent of Thirty-Five Million Pesos (P35,000,000.00) for every additional branch, computed at the same exchange rate of P26.979 to US$1.00. x x x.

c. For Foreign Banks with Existing Branches in the Philippines.

(i) A foreign bank with existing branch or branches in the Philippines upon the effectivity of R.A. No. 7721 shall comply with the required permanently assigned capital by inwardly remitting and converting into Philippine currency the U.S. Dollar equivalent of Two Hundred Ten Million Pesos (P210,000,000.00), computed at the same exchange rate of P26.979 to US$1.00, within a period of one and one-half (1½) years from the said effectivity date.

The said foreign bank may establish up to six (6) branches in addition to its branch or branches existing as of the effectivity date of R.A. No. 7721, the first three (3) additional branches in locations of its choice, and the next three (3) additional branches in locations designated by the Monetary Board: Provided, That upon establishing any additional branch, the bank shall comply immediately with the permanently assigned capital mentioned in the next preceding paragraph: Provided, further, That the said permanently assigned capital shall be the capital for the bank's first three (3) additional branches, including its existing branch or branches, and for each branch established in addition thereto, the U.S. Dollar equivalent of Thirty-Five Million Pesos (P35,000,000.00) computed at the same exchange rate of P26.979 to US$1.00, shall be inwardly remitted and converted into Philippine currency.

If the permanently assigned capital of the existing branch/es of said foreign bank that has been converted to Philippine currency is sufficient to cover the abovementioned amount of assigned capital required for the additional branches, no additional assigned capital shall be required; otherwise, the foreign bank shall comply immediately with the capital requirements under the above paragraphs.

(ii) Foreign banks with existing branches in the Philippines on the effectivity date of R.A. No. 7721 shall have a period of one and one-half (1½) years from said effectivity date within which to comply with the ratio between the assigned capital and the net due to head office, branches, subsidiaries (more than fifty percent [50%] owned by the foreign bank) and offices outside the Philippines prescribed in Section 7 of this Circular: Provided, That upon establishing any additional branch pursuant to the provisions of this Circular, the bank shall comply immediately with the aforesaid ratio."

"Section 7. Prescribed Ratio for 'Net Due to' to Permanently Assigned Capital

The amount of 'net due to' which may be added to permanently assigned capital for purposes of determining compliance with capital ratios prescribed in laws/regulations shall not exceed the equivalent of four (4) times the amount of permanently assigned capital. At least fifteen percent (15%) of the 'net due to' required to comply with prescribed capital ratios shall be inwardly remitted and converted into Philippine currency: Provided, That amounts invested in productive enterprises or utilized by Philippine companies for export activities, including foreign currency denominated loans granted to Philippine exporters and loans for productive purposes such as the following: agriculture, fisheries and forestry; manufacturing, mining, public utilities; construction; and home building, need not be subject to conversion into Philippine currency.

If there is non-compliance with the prescribed fifteen percent (15%) of 'net due to' required to be inwardly remitted and converted to pesos, the bank shall immediately inwardly remit and convert to Philippine currency the amount of deficiency.

Branches of foreign banks shall submit such reports as may be prescribed by the Bangko Sentral ng Pilipinas to show compliance with the requirement that at least fifteen percent (15%) of its 'net due to' shall be inwardly remitted and converted into Philippine currency."

b. The bank during the last sixty (60) days immediately preceding the date of application has:

1) Not been deficient in its capital-to-risk assets ratio; and

2) Complied with the ceilings on credit accommodations to officers and their related interests;

c. The bank has no net weekly reserve deficiency against deposit liabilities and deposit substitutes during the last eight (8) weeks immediately preceding the date of application;

d. The bank has complied with the loans-to-deposits ratio for one (1) quarter immediately preceding the date of application;

e. The bank does not have float items outstanding for more than sixty (60) calendar days in the "Due From/To Head Office/Branches/Offices" accounts and the "Due from Bangko Sentral" account exceeding one percent (1%) of the total resources as of date of application;

f. The bank's total past due loans does not exceed 20% of total loan portfolio as of date of application;

g. The bank has conducted its business in a safe and sound manner during the last six (6) months immediately preceding the date of application;

h. The bank's total investment in real estate and improvements thereon including bank equipment do not exceed 50% of its networth as of date of application; and

i. The bank has corrected as of date of application any major violations noted in its latest examination related to (a) single borrower's loan limit, and (b) investment in bank premises and other fixed assets, and

j. For each additional branch to be established by a foreign bank, a time delay device shall be installed in the cash vault or safe; provided that for branches which have already been established, the same mechanism shall be installed not later than December 4, 1995."

SECTION 4. A new subsection is hereby added after Subsection 1153.2 to read as follows:

"Subsec. 1153.3 Date of Opening - Approved banking offices shall be opened within six (6) months from the date of approval thereof: Provided, that an applicant bank may be given a final extension of another six (6) months by the Deputy Governor of the Supervision and Examination Sector subject to presentation of justification and valid reason for the bank's failure to open within the six (6) month period and proof that said banking office can be opened within the succeeding six (6) month period:"

SECTION 5. A new subsection is hereby added after Subsection 1153.3 to read as follows:

"Subsec. 1153.4 Requirements for Opening Approved Additional Branch - After a bank's application to establish additional branch or branches has been approved, it may open such additional branch/es subject to the following conditions:

a. Submission by the applicant bank of a written notice at least thirty (30) days prior to the intended date of opening, accompanied by the following:

1. Proof or evidence of inward remittance needed to meet the requirements of Sections 5 and 7 of BSP Circular No. 51, cited in item a of Subsection 1153.2, as may be applicable;

2. List of principal and junior officers of the proposed branch/es and their respective designations and salaries;

3. Personal information sheet (Bio-data) for each of the officers to enable the BSP to evaluate their qualifications as officers; and

4. A certification signed by bank's Philippine Country Manager that the requirements enumerated in Subsection 1153.2 have been complied with up to the date of the aforementioned written notice.

A bank that fails to continuously comply with the requirements in Subsection 1153.2 shall be given an extension of time to open such banking office after it has shown compliance for another test period of the same duration required of each requirement in Subsection 1153.2: Provided, That the provisions of Subsection 1153.3 shall be observed if the banking office cannot open within six (6) months from the date of approval thereof: Provided, further, That before such banking office opens for business, the bank shall submit to the Bangko Sentral the immediately preceding requirements under Subsection 1153.4(a) with the certification to the effect that the bank has complied within the time period prescribed with each requirement under Subsection 1153.2 up to the date of the written notice.

b. The foreign bank branch has adequate staff, equipment, and other facilities to meet the needs of its commercial banking operations; that the bank's premises, vault and office equipment, after inspection by representatives of the Supervision and Examination Sector of the Bangko Sentral shall have been found to be substantially in compliance with specifications on security standards and ready for use by the bank; and

c. Issuance by the Governor of the permit to open and operate the approved branch/es.

Banks shall submit a written notice to the appropriate supervising and examining department of the Bangko Sentral of the actual date of opening of their branches not later than ten (10) banking days from such opening."

SECTION 6. A new subsection is hereby added after Subsection 1153.4 to read as follows:

"Subsec. 1153.5 Choice of Locations for Establishment of Branch -

a. A foreign bank authorized to establish branches in the Philippines pursuant to the provisions of R.A. No. 7721 may open its first three (3) branches in locations of its choice.

b. The same foreign bank may open its next three (3) additional branches only in locations designated by the Monetary Board to ensure balanced economic development in all the regions."

SECTION 7. A new subsection is hereby added after Subsection 1153.5 to read as follows:

"Subsec. 1153.6 Sanctions - If any part of the certifications submitted as required in these guidelines is found to be false, the following sanctions shall be imposed:

1. On the bank

Suspension for one (1) year of the privilege to establish and/or open approved branches

2. On the Certifying Officer

A fine of P5,000.00 per day from the time the certification was made up to the time the certification was found to be false for each branch opened

without prejudice to the sanctions under Section 35 of R.A. No. 7653."

This Circular shall take effect immediately.

Adopted: 30 Oct. 1995

(SGD.) ANDRE NAVATO
Officer-in-Charge