dealers/brokers whether on a firm, standby or best efforts basis shall be counted on the basis of the number of purchasers thereof and shall not be treated as having been issued solely to the underwriter or trader: Provided, however, That in case of unsold debt instruments in a firm commitment underwriting, the underwriter shall be counted as a lender. e. Each buyer, assignee, and/or indorsee shall be counted in determining the number of lenders/placers of funds mobilized through sale, assignment, and/or indorsement of securities, or receivables on a without recourse basis, whenever the terms and/or attendant documentation, practice, or circumstances indicate that the sale, assignment, and/or indorsement thereof legally obligates the non-bank financial intermediary to repurchase or reacquire the securities/receivables sold, assigned, indorsed or to pay the buyer, assignee, or indorsee at some subsequent time. f. Funds obtained by way of advances from stockholders, directors, officers, regardless of nature, shall be considered borrowed funds or funds mobilized and such stockholders, directors or officers shall be counted in determining the number of lenders/placers. §4101Q.3 Transactions not considered quasi-banking. The following shall not constitute quasi-banking: a. Borrowing by commercial, industrial and other non-financial companies, through the means listed in Sec. 4101Q for the limited purpose of financing their own needs or the needs of their agents or dealers; and b. The mere buying and selling without recourse of instruments mentioned in Sec. 4101Q: Provided, That: (1) The institution selling without recourse shall indicate or stamp in conspicuous print on the instrument/s, as well §§ 41010.2 - 41020 96.12.31 as on the confirmation of sale, the phrase without recourse or sans recourse and the following statement: (Name of non-bank) assumes (2) In the absence of the phrase without recourse or sans recourse and the aboverequired accompanying statement, the instrument so issued, endorsed or accepted shall automatically be considered as falling within the purview of the rules on quasibanking. Provided, further, That any of the following practices or practices similar and/ or tantamount thereto in connection with a without recourse transaction renders such transaction as with recourse and within the purview of the rules on quasi-banking. i. Issuance of postdated checks by a financial intermediary, whether for its own account or as an agent of the debt instrument issuer, in payment of the debt instrument sold, assigned or transferred without recourse; ii. Issuance by a financial intermediary of any form of guaranty on sale transactions or on negotiations or assignment of debt instruments without recourse; or iii. Payment with the funds of the financial intermediary which assigned, sold or transferred the debt instrument without recourse, unless the financial intermediary can show that the issuer has with the said financial intermediary funds corresponding to the amount of the obligation. Any investment house violating the provisions of this Subsection shall be subject to the sanctions provided in Sections 12 and 16 of P.D. No. 129, as amended. Sec. 4102Q Preconditions for the Exercise of Quasi-Banking Functions. Only a duly incorporated financial intermediary organized as a stock corporation may Manual of Regulations for Non-Bank Financial Institutions Q Regulations §§ 41020 - 41040 96.12.31 undertake or perform quasi-banking functions as defined in Sec. 4101Q: Provided, That the following preconditions are complied with. § 4102Q.1 Minimum paid-in capital The financial intermediary shall comply with the rules on minimum capitalization prescribed in Sec. 4106Q. § 4102Q.2 Citizenship requirements At least a majority of the voting stock in an investment house and at least sixty percent (60%) of the voting stock in other non-bank financial intermediaries authorized to engage in quasi-banking functions (NBQBs), shall be owned by citizens of the Philippines. In determining the percentage of foreign-owned voting stocks in an NBQB, the basis for the computation shall be the citizenship of each stockholder and, with respect to corporate owners of voting stock, the citizenship of the individual owners of voting stock in the corporation holding shares in the applicant NBQB shall be the basis of computing the percentage. At least a majority of the members of the board of directors shall be citizens of the Philippines, except in the case of financing companies wherein at least two-thirds (2/3) of the members of the board shall be Filipinos. § 4102Q.3 Managerial expertise. The managerial staff shall possess the integrity, experience and expertise which provide reasonable assurance that the operations of the financial intermediary are being conducted with financial prudence. The board members and managerial staff must be actually elected/appointed or at least firmly designated before it can be granted a certificate of authority to engage in quasibanking functions. Sec. 4103Q Documentary Requirements for Applications. Duly incorporated stock corporations possessing the foregoing qualifications and desiring to engage in quasibanking functions shall first obtain a Certificate of Authority from the Bangko Sentral ng Pilipinas (BSP) by filing: a. An information sheet; b. Individual bio-data of directors and members of the managerial staff, signed by them under oath; and c. An indicative borrowing-investment program for one (1) year, which should include, whenever applicable, planned distribution of portfolio as to Q Regulations Manual of Regulations for Non-Bank Financial Institutions ১ certificate shall be issued to the new corporation. The Certificate of Authority of the absorbed corporation in a merger and the certificates of the consolidated corporations in a consolidation shall be surrendered to the appropriate department of the BSP. Sec. 4105Q Licensing of an Investment House. Applications for license as an investment house referred to the BSP by the Securities and Exchange Commission (SEC) pursuant to P.D. No. 129 shall be evaluated in accordance with the Guidelines to Evaluate Investment Houses prescribed in Appendix Q-1. B. CAPITALIZATION Sec. 4106Q Minimum Capitalization. An NBQB shall have a minimum combined capital accounts of P50 million. Combined capital accounts shall mean the total of capital stock, retained earnings and profit and loss summary, net of (a) such unbooked valuation reserves and other capital adjustments as may be required by the BSP and (b) total outstanding unsecured credit accommodations, both direct and indirect, to directors, officers, all stockholders and their related interests (DOSRI). With respect to Item (b) hereof, the provisions of Sec. 4356Q shall apply except that in the definition of stockholders in said Section, the qualification that his stockholdings, individually and/or together with his related interests in the lending NBQB, amount to ten percent (10%) or more of the total subscribed capital stock of the NBQB, shall not apply for purposes of this Item. Any appraisal surplus or appreciation credit as a result of appreciation or an increase in book value of the assets of the NBQB shall be excluded. Any foreign equity shall be registered with and approved by the Board of Investments and the appropriate department of the BSP. §§ 41040 - 41110 96.12.31 Sec. 4107Q Minimum Capital of Investment House. The minimum paid-in capital requirement for an investment house to be established in Metro Manila shall be P200 million. Those to be established outside Metro Manila shall have a minimum initial paid-in capital of 100 million. However, when any branch is set up in Metro Manila, the P200 million minimum paid-in capital for Metro Manila must be complied with. Investment houses which are existing shall each have a minimum combined capital accounts as defined in Sec. 4106Q of P200 million or 100 million, depending on location. Sec. 4108Q Sanctions. Any or all of the following sanctions may be imposed on any NBQB which fails to maintain at least the applicable minimum capital under Secs. 4106Q and 4107Q: (1) Suspension of authority to engage in quasi-banking functions; (2) Suspension of authority to engage in trust/investment management activities (in the case of an investment house); (3) Cease-and-desist order (in the case of an investment house); (4) No new/renewal/extension of credit accommodations to DOSRI; (5) Prohibition against declaration of cash dividends; (6) Suspension of the privilege to establish and/or open approved branches, agencies, offices, etc.; and (7) Other sanctions, as may be imposed by the Monetary Board. Secs. 4109Q - 4110Q (Reserved) C. MERGER OR CONSOLIDATION Sec. 4111Q. Merger or Consolidation Involving Quasi-Banks. The merger or consolidation of NBQBs is encouraged to Manual of Regulations for Non-Bank Financial Institutions Q Regulations §§ 41110 - 4116Q 96.12.31 meet minimum capital requirements and to develop larger and stronger financial institutions. NBQBs which are investment houses are likewise encouraged to merge with banks to obtain authority to perform expanded commercial banking functions. Mergers or consolidations involving NBQBs shall comply with the provisions of applicable law and shall be subject to approval by the BSP. Sec. 4112Q Merger or Consolidation Incentives. Participants in mergers and consolidations of NBQBs may, subject to BSP approval, avail of any or all of the following: a. Revaluation of premises, improvements and equipment of the institutions: Provided, That such revaluation shall be based on fair valuation of the property which shall be subject to review and approval by the BSP; b. Conversion or upgrading of the existing head offices, branches and/or other offices of the merged or absorbed institutions into branches of the new or surviving financial institution; c. Condonation of liquidated damages and/or penalties on loan arrearages to the BSP of rural banks which are parties to the merger or consolidation: Provided, That loan arrearages of rural banks to the BSP are paid in full or covered by a plan of payment payable on an equal monthly amortization schedule over a period not exceeding ten (10) years; d. Relocation of branches/offices may be allowed within one (1) year from date of merger or consolidation in cases where the merger or consolidation resulted in duplication of branches/offices in a city or municipality subject to such conditions as the Monetary Board may prescribe; e. Outstanding penalties in legal reserve deficiencies and interest on overdrafts with the BSP as of the date of merger or consolidation may be paid in installments over a period of one (1) year; f. Unbooked valuation reserves and other capital adjustments resulting from the merger or consolidation based upon the BSP examination may be booked on staggered basis over a maximum period of five (5) years; g. If, in the process of merger or consolidation, the resulting NBQB is unable to comply fully with the net worth-to-risk assets ratio prescribed under these regulations, the Monetary Board may, at its discretion, suspend the application of the required ratio; and h. Any right or privilege granted a merging bank under a rehabilitation program previously approved by the Monetary Board or under any special authority previously granted by the Monetary Board shall continue to be in effect. Secs. 4113Q-4115Q (Reserved) D. NET WORTH-TO-RISK ASSETS RATIO Sec. 4116Q Minimum Ratio. The net worth (or combined capital accounts) of each NBQB shall not be less than an amount equal to ten percent (10%) of its risk assets, which term is defined as total assets minus the following items: a. Cash on hand and in banks; b. Amounts due from the BSP; c. Evidences of indebtedness of the Republic of the Philippines and of the BSP, and any other evidences of indebtedness or obligations, including the earned portion of any interest or discount, the servicing and repayment of which are fully guaranteed by the Republic of the Philippines: Provided, That such evidences of indebtedness or obligations subject of repurchase or resale agreements may be deducted by both the selling/borrowing and buying/lending financial intermediaries; d. NBQB premises, depreciated; e. Furniture, fixtures, and equipment, depreciated; Q Regulations Manual of Regulations for Non-Bank Financial Institutions Manual of Regulations for Non-Bank Financial Institutions f. Loans to the extent covered by holdout on, or assignment of, deposit substitutes maintained with the lending NBQB; g. Loans or acceptances under domestic letters of credit to the extent covered by margin deposits as may be required by the NBQB; h. Loans to the extent covered by Industrial Guarantee and Loan Fund (IGLF) guarantee; i. Amounts due from foreign banks representing normal working balances in currencies eligible as part of the international reserve (and not maintained in the form of savings, time or fixed deposits), but not to exceed thirty percent (30%) of outstanding regular sight letters of credit; j. Real estate mortgage loans and related financing insured by the Home Insurance and Guaranty Corporation to the extent of the amount of the insurance or the outstanding loan, whichever is lower; k. Loans to the extent secured by assets listed in Item c above; 1. Lease contracts receivable to the extent covered by guaranty deposits (for financing companies only); m. Deferred income tax; and n. Other items which the Monetary Board may from time to time declare as nonrisk assets and authorize to be deducted from total assets. § 4116Q.1 Definition of terms a. Total assets refers to the amount appearing in the balance sheet, excluding (1) all trust department accounts; (2) unutilized portions of letters of credit; and (3) all contingent accounts. b. Net worth (or combined capital accounts) shall mean the total of capital stock, retained earnings and profit and loss summary, net of deferred income tax, and such unbooked valuation reserves and other capital adjustments as may be required by the BSP; and excluding any appraisal surplus as a result of appreciation or an increase in §§ 41160 - 4116Q.1 96.12.31 the book value of assets of the NBQB, except in such cases as may be authorized by the Monetary Board. c. Cash on hand and in banks refers to total cash held and/or deposited in, banking institutions by the NBQB consisting of both notes and coins in Philippine currency and, in accordance with BSP regulations, such foreign currencies acceptable as part of the international reserves. d. Amounts due from the BSP refers to all deposits of the reporting NBQB with the BSP. e. Loans to the extent covered by holdout on, or assignment of, deposit substitutes maintained in the lending NBQB shall be considered as secured by hold-out on, or assignment of, deposit substitute, only if such deposit substitute is covered by a hold-out agreement or deed of assignment signed by the investor-borrower in favor of the NBQB, and maintained in the lending NBQB. The. amount deductible from total assets shall be . the outstanding balance of the loan to the extent covered by the corresponding holdout on, or assignment of, deposit substitutes. Loans transferred to/carried by the NBQB's trust department which are secured by deposit substitute hold-out/assignment are not deductible items. f. Loans or acceptance under domestic letters of credit to the extent covered by margin deposits as may be required by the NBQB refers to (1) unnegotiated letters of credit or the unutilized portion thereof, or other items booked under contingent accounts are not deductible items. Only the amount of loans or acceptances (real account) negotiated under letters of credit to the extent covered by the corresponding margin deposits shall be considered as a deductible item; and (2) margin deposits against loan or acceptance accounts which are fully liquidated shall not be deductible items. g. NBQB premises, depreciated refers to the cost of NBQB premises, including land Q Regulations |