The Monetary Board, in its Resolution No. 2093 dated 15 December 2017, approved the rationalization of prudential requirements on banking offices and guidelines on the establishment of branch-lite units amending relevant provisions of the Manual of Regulations for Banks (MORB).

Section  1.  Section  X151  and  its  Subsections  of  the  MORB  are  hereby amended to read as follows:

Sec. X151 Establishment/Relocation/voluntary closure/sale of Branches/ Branch-lite  Units.  The  Bangko  Sentral  aims  to  promote  greater  access  to efficient and competitive banking services through the adoption of proportionate regulatory   framework   that   provides   banks   with   flexibility   to   execute   their strategies and enables them to innovate in line with their business model. This is premised on the expectation that banks have effective governance and risk management systems as well as adequate capital to support the implementation of their strategies.

Toward this end, the following guidelines shall govern the establishment, relocation,  voluntary  closure  and  sale  of  local  branches/branch-lite   units  of domestic banks, including locally incorporated subsidiaries of foreign banks. The establishment of branches of foreign banks in the Philippines, on the other hand, shall continue to be governed by the provisions of Sec. X105 on liberalized entry and scope  of operations  of foreign  banks  and Sec. X153  on establishment  of sub-branches of foreign bank branches.

For purposes  of this Section  and its Subsections,  the following  definitions shall apply:

A 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.

A 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.

Subsec.  X151.1  Allowable  activities  of a branch-lite  unit. A branch-lite  unit may  perform  activities  and  provide  any  of  the  products  and  services  that  a branch may perform or provide except those suited only to sophisticated  clients with aggressive risk tolerance^[1] ; Provided, That:

a. The  board  of  directors  shall  approve  the  defined  range  of  activities  and services  that  shall  be  carried  out  in a branch-lite  unit  consistent  with  the bank's business model in providing financial services to a specifically defined market or sector;

b. The board  of directors  shall ensure  that the branch-lite  unit has adequate personnel,  internal  control  measures,  physical  facilities,  security arrangements  and  information  systems  commensurate  with  the  extent  of banking activities undertaken and services offered by the branch-lite unit;

c. Management shall ensure that branch-lite units are considered in the bank's capital   adequacy   assessment   and   planning   exercises   considering   the potentially high operational risk exposures of said units;

d. Management  shall ensure  the timely  accounting  and reporting  of activities and transactions of the branch-lite unit to the head office/branch to which it is annexed; and

e. The bank’s risk management system, compliance and interna audit programs shall cover the branch-lite unit.

Subsec. X151.2 Pre-requisites for the grant of authority to establish a branch/branch-lite  unit.  Banks  may  establish  a  branch  or  a  branch-lite  unit subject to the prudential criteria provided in Subsec. X1101.2. Any approved but unopened branch/es at the time of application shall be taken into account in determining compliance with the minimum capitalization requirement. No bank operating  in  the  Philippines  shall  establish  a  branch  or  a  branch-lite  unit  or transact business outside the premises  of its duly authorized  principal office or head office without prior approval of the Bangko Sentral.

Subsec.  X151.3 Application  for authority  to establish  a branch/branch-lite unit. Banks seeking to establish a branch or branch-lite unit shall submit the following documents to the appropriate department of the SES:

a.     Application letter signed by the chief executive officer or officer of equivalent rank which shall indicate the number of branch/es or branch-lite units to be established and their proposed location/s. In this respect, application for the establishment of branch-lite units shall include the range of activities that will be performed and services that will be offered by the branch-lite unit to a specifically defined market or sector;

b.     Secretary’s  Certificate  which indicates  the approval  of the bank’s  board of directors of the establishment of branch/es or branch-lite units; and

c.     Certification/Undertaking   signed  by the chief  executive  officer  or officer  of equivalent rank that the bank is compliant or will comply, as the case maybe, with  the  pre-requisites  for the  grant  of authority  to establish  branch/es  or branch-lite units provided under Subsec. X151.2.

Subsec.  X151.4  Location  of branches/branch-lite  units.  As a general  rule, banks shall be allowed to establish branch/es or branch-lite units anywhere in the Philippines,   including   in  cities  previously   considered   as  restricted   areas^[2]: Provided,  That,  if TBs/RBs  will  establish  branches  in cities/municipalities  of a higher  classification  than  their  head  office,  the  applicable  minimum  required capital under Subsec. X111.1 shall be increased to that of the city/municipality of the higher classification, regardless of where the head office is located.

In addition, the following guidelines shall apply to Coop Banks:

a.     The  Coop  Bank  of  the  province  may  set  up  branches/branch-lite   units anywhere within the province subject to compliance with the applicable branching rules and regulations as provided in Sec. X151.

b.     Coop Banks from other provinces  may set up branches/branch-lite  units in cities or municipalities  of another  province  where there are no other Coop Bank head office/branch/branch-lite  units.

Subsec. X151.5 Processing and special licensing fees.

a. Processing fee.

The  bank  shall  be  immediately   charged   with  the  total  processing   fee computed for all branches/branch-lite units approved, in accordance with the following:

Banking Unit and Bank Category	Processing Fee Per Branch/ Branch-Lite Unit
	Metro Manila cities of Cebu and Davao, All Other Cities, 1st to 2nd Class Municipalities	3rd to 6th Class Municipalities
a . Branch
(1 ) UBs / KBs/ Affili at ed TBs	P200 , 00 0	P100 , 000
(2 ) Non-affili at ed TBs	100 , 000	50 , 000
(3 ) RBs/ Coop Banks	25 , 000	12 , 500
b . Branch-lite unit	10 , 000	5 , 000

Provided,  That  branches/branch-lite   units  to  be  established  in  unbanked cities and municipalities shall be exempted from the processing fee.

b.     Special licensing fee.

For applications to establish branches/branch-lite units in cities previously considered  as restricted  areas as defined under Subsec. X151.4, the applicant bank shall upon acceptance of said applications pay a special licensing fee per branch/branch-lite unit depending on the bank's category, as follows:

Ban k Category	Licensin g Fee Per Branch	Proposed Licensi ng Fee Per Branch- lite Unit
UB / KB	P2 0 million	P 5 million
TB	1 5 million	3 million
RB / Coop Bank	1 .5 million	300 thousand

Subsec.  X151.6  Establishment  of  other  banking  offices.  (Deleted  by  this Circular)

Subsec. X151.7 Opening  of branches/branch-lite  units. Approved  branches/ branch-lite units shall be opened, as follows:

Approved  branches/branch-lite  units  shall  be  opened,  within  one  (1)  year from the date of approval thereof, subject to extension on a case by case basis; Provided,  That: the entire period from date of approval of the establishment  of the branch/branch-lite  unit up to the requested extension shall not exceed three (3) years.^[3]

The opening of approved branches/branch-lite units may, however, be suspended or revoked by the appropriate department of the SES upon approval of the Deputy Governor x x x

Failure to open the approved branches/branch-lite units within the period provided shall result in the forfeiture of the bank’s right to open such branches/branch-lite  units and of all fees paid to the Bangko Sentral in relation to such application.

Approved  but not yet opened  branches/branch-lite  units may be relocated upon prior approval by the Deputy Governor, SES, subject to the presentation of justification and valid reason for the relocation, and resubmission of the information/documents enumerated in Subsec.   X151.3   on   application   for authority to establish a branch/branch-lite  unit: Provided, That branches/branch- lite units located outside the cities previously considered as restricted areas as defined under Subsec. X151.4 which will be relocated therein shall be subject to the special licensing fee under Subsec. X151.5 upon approval of the relocation: Provided, further, That the opening of the relocated branch/branch-lite  unit shall be made within the prescribed period mentioned above from date of approval of its establishment.

As an incentive to merger/consolidation of banks or purchase/acquisition of majority  or all of the outstanding  shares  of stock  of a distressed  bank for the purpose of rehabilitating the same, opening or relocation of approved but not yet opened branches/branch-lite  units may be allowed within two (2) years from date of   merger/consolidation    or   purchase/acquisition    of   majority   or   all   of   the outstanding shares of stock of a distressed bank for the purpose of rehabilitating the same.

Subsec.  X151.8  Requirements  for  opening  a  branch/branch-lite  unit.  Not later than five (5) banking days from the date of opening, the bank, through its chief compliance officer and the head of the branch banking operations, shall:

a. Notify in writing the appropriate department of the SES of the actual date of opening of the branch/branch-lite unit;

b. Submit a certification on compliance with the following, as applicable:

(1) Adequacy of personnel, internal control measures, physical facilities, information systems and security arrangements, including the installation of security devices and accessibility to persons with disability as required under Subsecs. X181.5 and X160.10, respectively;

(2)  Posting in conspicuous  places in the premises of the branch/branch-lite unit of the required notices, schedules and other relevant information pertaining to lending and deposit operations activities; 

3)  Availability of efficient means of accounting and reporting as well as communication facilities (to be specified) between the head office, branches, and branch-lite units; and

(4)  The requirements  enumerated  under Subsec. X151.2 as of the time of actual opening.

A bank that fails to comply with any of the requirements under Subsec. X151.2 on the pre-requisites for the grant of authority to establish a branch/branch-lite unit as of the date of the intended opening of the branch/branch-lite  unit shall refrain from opening the branch/branch-lite  unit on such date until it has complied with all the requirements under Subsec. X151.2:  Provided,  That  the  provisions  of  Subsec.  X151.7  on  the  date  of opening of branch/branch-lite unit shall be observed; and

c.    In the case of microfinance-oriented  branch&, certify that the branch has:

(1)  a manual of operations on micro-financing  duly approved by the bank’s board of directors;

(2) an adequate loan tracking system that allows daily monitoring of loan releases,  collections  and  arrearages,  and  any  restructuring  and refinancing arrangements;

(3) is managed by a person with adequate experience in microfinancing activities; and

(4)  at   least   seventy   percent   (70%)   of   deposits   lent   out   to   qualified microfinance,  including  BMBE  borrowers,  and  the  microfinance/BMBE loans of said branch shall at all times be at least fifty percent (50%) of its gross loan portfolio.

Subsec.   X151.9   Relocation   of  branches/branch-lite   units.  Relocation   of existing branches/branch-lite  units, whether to be opened at the new site on the next banking day or within one (1) year from the date of closure of the branch/ branch-lite unit, shall be allowed in accordance with the following procedures:

a. x x x

b. x x x

c. x x x

d. x x x that the bank has complied with Items “b” and “c” of Subsec. X151.8 on the requirements  for opening a branch/branch-lite  unit shall be submitted to the appropriate department of the SES. x x x

e.    Branches/branch-lite   units  may  be  relocated   anywhere:   Provided,   That
branches/branch-lite  units located outside the cities previously considered as restricted  areas  as defined  under  Subsec.  X151.4  which  will be relocated therein  shall be subject  to the special  licensing  fee under Subsec.  Xl51.5; and

f.     Relocation  of branch/branch-lite  unit beyond one (1) year from the date of closure shall be deemed as permanent  closure and surrender of license of the   branch/branch-lite unit at   the   old   site, and   the   opening   of   abranch/branch-lite  unit at the new site shall be deemed as an establishment of a new branch/branch-lite unit subject to the provisions of Subsec. X151.2.

Subsec. X151.10 Temporary closure, permanent closure and surrender of branch/branch-lite  unit license, and sale/acquisition of branches/branch-lite units

a.    x x x

(1)  x x x

(2)  x x x

(3)  x x x

(4)  Within   five   (5)   banking   days   from   the   date   of  reopening   of  the branch/branch-lite unit, a notice of such reopening together with a certification signed by the CCO and the head of the branch banking operations with the rank of vice president or its equivalent or by a higher ranking  officer  that  the  bank  has  complied  with  Items  “b”  and  “c”  of Subsec.  X151.8  on  the  requirements  for  opening  a branch/branch-lite unit shall be submitted to the appropriate department of the SES.

Temporary  closure  of branches/branch-lite  units beyond  one (1) year shall be deemed  as permanent  closure and surrender  of license of the branch/branch-lite unit, and re-opening thereof shall be deemed as an establishment of a new branch/branch-lite unit, subject to the provisions of Subsec. X151.2.

b.     x x x x x x

c.     Sale/acquisition   of  branches/branch-lite   unit.  Sale/acquisition   of  existing/ operating branches/branch-lite  unit may be allowed with prior approval of the Monetary Board in accordance with the following procedures:

(1)  x x x

(2)  x x x

(3)  x x x

(4)  x x x

(5)  Request for Monetary Board approval to acquire the branch/ branch-lite unit signed by the president of the bank or officer of equivalent rank, together with a certified true copy of the resolution of the bank's board of directors authorizing  the acquisition  shall be submitted by the acquiring bank to the appropriate department of the SES. The acquiring bank shall likewise  comply  with  the  pre-requisites   on  the  grant  of  authority  to establish a branch/branch-lite  unit under Subsec. X151.2 and the ceiling on total investments of a bank in real estate and improvements thereon, including bank equipment under Subsec. X160.2.

A bank may purchase/acquire  branches/branch-lite  unit anywhere, including  in  Metro  Manila  subject  to  compliance  with  the  applicable minimum capital requirement under Subsec. X111.1.

(6)  x x x

(7) Within five (5) banking days from the date of opening of the acquired branch/branch-lite   unit,  a  notice   of  such   opening,   together   with  a certification signed by the CCO and the head of the branch banking operations with the rank of vice president or its equivalent or by a higher ranking  officer  that  the  bank  has  complied  with  Items  “b”  and  “c”  of Subsec.  X151.8  on  the  requirements  for  opening  a branch/branch-lite unit  shall   be  submitted   by  the  acquiring   bank   to  the  appropriate department of the SES.

x x x

Subsec. X151.11 Relocation/Transfer of branch/branch-lite unit licenses of closed  banks.  Buyers  of  closed  banks  shall  be  allowed  to  relocate/transfer acquired branches/branch-lite  units subject to the conditions stated under Items “d” and “e” of the first paragraph of Subsec. X151.9 on relocation of branches/branch-lite  units.

Subsec. X151.12 Supervisory Enforcement.  The Bangko Sentral reserves the right  to  deploy  any  of  its  supervisory   tools  to  promote  adherence   to  the requirements  set forth in the foregoing  rules and bring about  timely  corrective actions and compliance with the Bangko Sentral directives.

For this purpose, the Bangko Sentral may among others, limit the banking activities and services offered by a branch/branch-lite unit or revoke the franchise and close any branch/branch-lite  unit. If any part of the certification submitted by the bank as required in this Section is found to be false, the Bangko Sentral may also, among others, suspend the privilege to establish and/or open approved branches/branch-lite units and/or relocate branches/branch-lite units and impose sanctions on the certifying officers concerned.

Subsec. X151.13 - X151.18 (Reserved)

Subsec. X151.19  Tellering booths. x x x

Section  2.  Section  X152 on the relocation of head offices is  hereby amended to read as follows.

Sec. X152 Relocation of Head Offices. xxx a. xxx
xxx

b.     xxx

xxx

c.    xxx

A bank’s head office may be relocated anywhere it is allowed to establish branches  as  provided  in  Subsec.  X151.4  on  location  of  branches/branch-lite units:   Provided,   That   head   offices   located   outside   the   cities   previously considered  as restricted  areas as defined  under Subsec.  X151.4  which will be relocated  therein  shall  be  subject  to  the  special  licensing  fee  under  Subsec. X151.5 upon approval of the relocation.

xxx

Subsec.  X153.5  Limitations  on establishment  of sub-branches  of foreign bank   branches.   A  foreign   bank   authorized   to  establish   branches   in  the Philippines pursuant to the provisions of R.A. No. 7721, as amended by R.A. No. 10641,  may  open  up  to  five  (5)  sub-branches  as  may  be  approved  by  the Monetary Board. A foreign bank shall also be allowed to establish branch-lite unit subject to the provisions of Section X151. In this regard, a branch-lite unit shall be considered as a sub-branch for purposes of complying with the numerical limit set forth under R.A. No. 7721, as amended by R.A. No. 10641.

Subsec. X153.6 Supervisory  Enforcement.  The Bangko Sentral reserves  the right  to  deploy  any  of  its  supervisory   tools  to  promote  adherence   to  the requirements set forth in Section X153. Non-compliance  therein shall subject the foreign bank to supervisory enforcement action, including those mentioned under Subsec. X151.12.

Section   4.   Subsection   X102.5   of   the   MORB   on   the   conversion   of microfinance-oriented  thrift banks/rural banks is hereby amended as follows:

Subsec.   X102.5   Conversion   of  microfinance-oriented   thrift   banks/rural banks.
a.    xxx
 
xxx

b.     Microfinance-oriented  branches may convert into regular branches subject to the submission of the following:

(1)  Certification signed by the president or officer of equivalent rank that:

(a)   At least seventy percent (70%) of deposits generated by the branch shall be lent out to microfinance borrowers;

xxx

Section  5. Subsection  X111.1  of the MORB  on minimum  capitalization  is hereby amended to read as follows:

Subsec. X111.1 Minimum capitalization.  The minimum capitalization  of banks shall be as follows:

xxx

For  purposes  of  compliance  with  this  Subsection,  the  term  branch  shall exclude the branch-lite units of banks.

The above shall also be the required minimum capitalization upon x x x.

xxx

Section  6.  The  terms  “extension  office/s  (EOs)”  and/or  “other  banking office/s (OBOs)”  mentioned  in the following  sections/subsections/appendices  of the MORB shall be replaced with the term “branch-lite unit/s”:

FOR THE MONETARY BOARD:

(SGD) NESTOR A. ESPENILLA, JR.
Governor