Date Issued: 09.17.

2001
Number: 0296

CIRCULAR NO. 296

Series of 2001

Pursuant to Monetary Board Resolution No. 994 dated 28 June 2001, the provisions of the Manual of
Regulations for Banks and for Non-bank Financial Institutions are hereby amended as follows:

Section 1. Sec. X141 of the Manual of Regulations for Banks and Sec. 4141Q of the Manual of
Regulations for Non-Bank Financial Institutions together with their Subsections are hereby amended to
read as follows:

Secs. X141 and 4141Q. Definition of directors.  Directors shall include :(1) directors who are named as
such in the articles of incorporation; (2) directors duly elected in subsequent meetings of the
stockholders; and (3) those elected to fill vacancies in the board of directors.

SUBSECS. X141.1 and 4141Q.1  Limits on the number of the members of the board of directors.

Pursuant to Sections 15 and 17 of R.A. No. 8791, there shall be at least five (5), and a maximum of
fifteen (15) members of the board of directors of a bank/quasi-bank/trust entity two (2) of whom shall be
independent directors: Provided, That in case of a bank/quasi-bank/trust entity merger or consolidation,
the number of directors may be increased up to twenty-one (21).

An independent director shall mean a person who –

Is not or has not been an officer or employee of the bank/quasi-bank/trust entity, its subsidiaries or
affiliates or related interests during the past three (3) years counted from the date of his election;

Is not a director or officer of the related companies of the institution’s majority stockholder;    

Is not a majority shareholder of the institution, any of its related companies, or of its majority
shareholder;   

Is not a relative within the fourth degree of consanguinity or affinity, legitimate or common-law of any
director, officer or majority shareholder of the bank/quasi-bank/ trust entity, or any of its related
companies;   

Is not acting as a nominee or representative of any director or substantial shareholder of the bank/quasi-
bank/trust entity, any of its related companies or any of its substantial shareholders; and,   

Is free from any business or other relationship with the institution or any of its major stockholders which
could materially interfere with the exercise of his judgment, i.e., has not engaged and does not engage in
any transaction with the institution, any of its related companies or any of its substantial shareholders,
whether by himself or with other persons or through a firm of which he is a partner or a company of which
he is a director or substantial shareholder, other than transactions which are conducted at arms length
and could not materially interfere or influence with the exercise of his judgments. 

Non-Filipino citizens may become members of the board of directors of a bank/quasi-bank/ trust entity to
the extent of the foreign participation in the equity of said bank/quasi-bank/ trust entity:  Provided, That
pursuant to Section 23 of the Corporation Code of the Philippines (BP Blg. 68), a majority of the directors
must be residents of the Philippines. 

The meetings of the board of directors may be conducted through modern technologies such as, but not
limited to, teleconferencing and video-conferencing as long as the director who is taking part in said
meetings can actively participate in the deliberations on matters taken up therein: Provided, That every
member of the board shall be physically present in at least fifty percent of all board meetings in every
year.   

Subsecs. X141.2 and 4141Q.2    Qualifications of a director 

A director shall have the following minimum qualifications:

He shall be at least twenty-five (25) years of age at the time of his election or appointment;

He shall be at least a college graduate or have at least five(5) years experience in business;

He must have attended a special seminar for board of directors conducted or accredited by the BSP: 
Provided, That incumbent directors as well as those who will be elected after the approval of this circular
must attend said seminar within a period of six (6) months from the date of this circular or from the date of
their election, as the case may be; and    

He must be fit and proper for the position of a director of the bank/quasi-bank/trust entity.  In determining
whether a person is fit and proper for the position of a director, the following matters must be considered: 

 integrity/probity;
 competence;
 education;
 diligence; and
 experience/training.  

The foregoing qualifications for directors shall be in addition to those required or prescribed under R.A.
No. 8791 and other existing applicable laws and regulations. 

Section 2.  Subsec. X142.2 of the Manual of Regulations for Banks and the last paragraph of Sec. 4142Q
of the Manual of Regulations for Non-Bank Financial Institutions are hereby amended to read as
follows:           

Qualifications of an officer 

An officer shall have the following minimum qualifications: 

He shall be at least twenty-one (21) years of age;   

He shall be at least a college graduate, or have at least five (5) years experience in banking or trust
operations or related activities or in a field related to his position and responsibilities, or have undergone
training in banking or trust operations acceptable to the appropriate supervising and examining
department of the BSP: Provided, however, That trust officers shall have at least two (2) years of actual
experience or training in trust operations or fund management or other related fields; and   

He must be fit and proper for the position he is being proposed/appointed to.  In determining whether a
person is fit and proper for a particular position, the following matters must be considered: 

 integrity/probity;
 competence;
 education;
 diligence; and
 experience/training. 

The foregoing qualifications for officers shall be in addition to those required or prescribed under R.A. No.
8791 and other existing applicable laws and regulations. 

Section 3.  Sections X143 and 4143Q of the Manual of Regulations together with their Subsections are
hereby amended to read as follows: 

Secs. X143 and 4143Q.  Disqualification of directors and officers.     The following regulations shall
govern the disqualification of bank/quasi-bank/trust entity directors and officers. 

Subsecs. X143.1 and 4143Q.1  Persons disqualified to become directors.   Without prejudice to specific
provisions of law prescribing disqualifications for directors, the following are disqualified from becoming
directors:

a.  Permanently disqualified 

Directors/officers/employees permanently disqualified by the Monetary Board from holding a director

position: 

Persons who have been convicted by final judgement of the court for offenses involving dishonesty or
breach of trust such as estafa, embezzlement, extortion, forgery, malversation, swindling and theft;

Persons who have been convicted by final judgement of the court for violation of banking laws;

Persons who have been judicially declared insolvent, spendthrift or incapacitated to contract; or

Directors, officers or employees of closed banks/quasi-banks/trust entities who were responsible for such
institution’s closure as determined by the Monetary Board.

b. Temporarily disqualified  

Directors/officers/employees disqualified by the Monetary Board from holding a director position for a
specific/indefinite period of time.

Persons who refuse to fully disclose the extent of their business interest to the appropriate supervising
and examining department when required pursuant to a provision of law or of a circular, memorandum or
rule or regulation of the BSP.  This disqualification shall be in effect as long as the refusal persists;   

Directors who have been absent or who have not participated for whatever reasons in more than fifty
percent (50%) of all meetings, both regular and special, of the board of directors during their incumbency,
or any twelve (12) month period during said incumbency. This disqualification applies for purposes of the
succeeding election;   
Persons who are delinquent in the payment of their obligations as defined hereunder:   

Delinquency in the  payment of obligations means that an obligation of a person with a bank/quasi
bank/trust entity where he/she is a director or officer, or at least two obligations with other banks/financial
institution, under different credit lines or loan contracts, are past due pursuant to Secs. X306 and 4308Q
of the Manual of Regulations;   

Obligations shall include all borrowings from a bank/quasi bank obtained by:   

A director or officer for his own account or as the  representative or agent of others or where he/she acts
as a guarantor, indorser, or surety for loans from such financial institutions;   

The spouse or child under the parental authority of the director  or officer;   

Any person whose borrowings or loan proceeds were credited to the account of, or used for the benefit of
a director or officer;   

A partnership of which a director or officer, or his/her spouse is  the managing partner or a general
partner owning a controlling interest in the partnership; and   

A corporation, association or firm wholly-owned or majority of the capital of which is owned by any or a
group of persons mentioned in the foregoing Items (i),(ii) and (iv);

This disqualification shall be in effect as long as the delinquency persists.

Persons convicted for offenses involving dishonesty, breach of trust or violation of banking laws but
whose conviction has not yet become final and executory;

Directors and officers of closed banks/quasi-banks/trust entities pending their clearance by the Monetary
Board;

Directors disqualified for failure to observe/discharge their duties and responsibilities prescribed under
existing regulations. This disqualification applies until the lapse of the specific period of disqualification or
upon approval by the Monetary Board on recommendation by the appropriate supervising and examining
department of such directors’ election/reelection;

Directors who failed to attend the special seminar for board of directors required under item 3 of subsecs.
X141.2/4141Q.2. This disqualification applies until the director concerned had attended such seminar;

Persons dismissed/terminated from employment for cause. This disqualification shall be in effect until
they have cleared themselves of involvement in the alleged irregularity;

Those under preventive suspension; or

Persons with derogatory records with the National Bureau of Investigation (NBI), court, police, interpol
and monetary authority (central bank) of other countries (for foreign directors and officers) involving
violation of any law, rule or regulation of the Government or any of its instrumentalities adversely affecting
the integrity and/or ability to discharge the duties of a bank/quasi bank/trust entity director/officer. This
disqualification applies until they have cleared themselves of involvement in the alleged irregularity.
Subsecs. X143.2 and 4143Q.2 Persons disqualified to become officers.

The disqualifications for directors mentioned in Subsecs. X143.1 and 4143Q.1 shall likewise apply to
officers, except that stated in Items b.2 and b.7.

Except as may be authorized by the Monetary Board o the Governor, the spouse or a relative within the
second degree of consanguinity or affinity of any person holding the position of Chairman, President,
Executive Vice President or any position of equivalent rank, General Manager, Treasurer, Chief Cashier
or Chief Accountant is disqualified from holding or being elected or appointed to any of said positions in
the same bank/quasi-bank; and the spouse or relative within the second degree of consanguinity or
affinity of any person holding the position of Manager, Cashier, or Accountant of a branch or office of a
bank/quasi-bank/trust entity is disqualified from holding or being appointed to any of said positions in the
same branch or office.   

In the case of Universal Banks, Commercial Banks, and Thrift Banks, any appointive or elective officials
whether full time or part time, except in cases where such service is incident to financial assistance
provided by the government or government-owned or controlled corporations or in cases allowed under
existing law.

In the case of Cooperative Banks, any officer or employee of the Cooperative Development Authority or
any elective public official, except a barangay official.

Except as may otherwise be allowed under C.A. No. 108, otherwise known as “The Anti-Dummy Law”, as
amended, foreigners cannot be officers or employees of banks.

Subsecs. X143.3 and 4143Q.3 Disqualification procedures

Upon the establishment of any of the grounds for disqualification mentioned in Subsecs. X143.1/4143Q.1
and X143.2/4143Q.2, the office of the disqualified director or officer shall immediately become vacant,
except in the case of delinquency in the payment of obligations wherein the director or officer concerned
shall be given a grace period of thirty (30) days after such ground for disqualification has been
established.

All cases of disqualification shall be immediately reported to the Board of Directors of the institution
concerned. If the ground for disqualification is delinquency in the payment of obligations, the report shall
be made at the expiry of the thirty-day grace period mentioned in Item “1” above.

The Board shall act on the report not later than the following Board meeting. Within seventy-two (72)
hours thereafter, the corporate secretary shall report to the Governor of the BSP through the appropriate
supervising and examining department the name of the director or officer involved, the ground for his
disqualification and the action taken by the Board.

When the ground for disqualification ceases to exist, the director or officer concerned shall be eligible to
become director or officer of any bank, quasi-bank or trust entity only upon prior approval by the
Monetary Board.

Subsecs. X143.4 and 4143Q.4 Effect of non-possession of qualification or possession of

disqualifications.

Directors/officers elected or appointed without possessing the qualifications above-mentioned or

possessing any of the disqualifications as enumerated herein, shall vacate their respective positions
immediately.”

Subsecs. X143.5 and 4143Q.5 Confirmation of the election/ appointments of directors and officers.

The election/appointment of directors and officers of banks/quasi-banks shall be subject to confirmation

by the:

Position Level
Confirming Authority
a. Monetary Board Directors, Senior Vice President and above of universal
banks and commercial banks, as well as Directors,
President, Chief Executive Officer, Chief Operating
Officer or equivalent rank of thrift banks, Islamic banks,
rural banks, cooperative banks, quasi-banks and trust
entities with total assets of at least P1 billion. 
b.  A Committee to be composed of: Directors, Senior Vice President and above or
equivalent rank of thrift banks, Islamic banks, rural
 The Deputy Governor-SES banks, cooperative banks, quasi-banks and trust entities
 Managing Directors of SE I with total assets of less than P1 billion.
and II
 Directors of the concerned
supervising and examining
department of SES

It is, however, understood that all cases of disqualification shall be elevated to the Monetary Board.

If after evaluation, the Monetary Board shall find grounds for disqualification, the director/officer so
elected/ appointed may be removed from office even if he/she has assumed the position to which he/she
was elected.

The election/appointment of all incumbent directors and officers of all types of banks and quasi-banks as
of (date of this Circular) not previously approved/confirmed by the Monetary Board shall be submitted to
the BSP, through the appropriate supervising and examining departments for confirmation.

Subsections X143.6 and 4143Q.6   Watchlisting.

To provide the BSP with a central information file to be used as reference in passing upon and reviewing
the qualifications of persons elected or appointed as director or officer of a bank, quasi bank or trust
entity, the Supervision and Examination Sector shall maintain a watchlist of disqualified bank/quasi
bank /trust entity directors/officers under the following procedures:

1. Watchlist categories.  Watchlisting shall be categorized as follows:

a. Disqualification File “A” (Permanent) – Directors/officers/employees permanently disqualified by

the Monetary Board from holding a director/officer position.     
b. Disqualification File “B” (Temporary) – Directors/officers/employees  temporarily disqualified by
the Monetary Board from holding a director/officer position.  

2.  Inclusion of directors/officers/employees in the watchlist.  Upon  recommendation by the Supervision

and Examination Sector, the inclusion of directors/officers/ employees in watchlist disqualification files “A”
and “B” on the basis of decisions, actions or reports of the courts, banks, quasi banks, Bangko Sentral,
National Bureau of Investigation or any other administrative agencies shall first be approved by the
Monetary Board.   

3.  Notification of directors/officers/employees.  Upon approval by the Monetary Board, the concerned
director/officer/employee shall be informed through registered mail, with registry return receipt card, at
his/her last known address of his/her inclusion in the masterlist of watchlisted persons disqualified to be a
director/officer in any financial institution under the supervision of the BSP.   

4.  Confidentiality.  Watchlisting shall be for internal use  only and may not be accessed or queried upon
by outside parties including banks, quasi banks and trust entities except with the authority of the person
concerned and with the approval of the Deputy Governor, SES, the Governor, or the Monetary Board.

5.  Delisting.  All delistings shall be approved by the Monetary Board upon   recommendation  of the
operating departments of SES except in cases of persons  known to be dead where delisting shall be
automatic upon proof of death and need not be elevated to the Monetary Board.  Delisting may be
approved by the Monetary Board in the following cases:

 Watchlist  - Disqualification File “B” (Temporary)  -  

i. After the lapse of the specific period of  disqualification;    

ii. When the conviction by the court for crimes involving dishonesty, breach of trust and/or violation
of banking laws becomes final and executory, in which case the director/ officer/employee is re-
listed to Watchlist – Disqualification File “A”  (Permanent);    
iii. Upon favorable decision or clearance by the appropriate body, i.e., court, NBI, bank, quasi bank,
trust entity or such other agency/body where the concerned individual had derogatory record; 

Directors/officers/employees delisted from the Watchlist – Disqualification File “B” other than those
upgraded to Watchlist – Disqualification File “A” shall be eligible for reemployment with any bank, quasi
bank or trust entity. 

Section 4.  Subsec. 4143Q.3 of the Manual of Regulations for Non-Bank Financial Institutions is hereby
renumbered as Subsection 4143Q.7. 

This Circular shall take effect immediately.

FOR THE MONETARY BOARD:

  RAFAEL B. BUENAVENTURA
               Governor

 Download Signed Document