UNIVERSAL AND COMMERCIAL BANKS

Prepared by: Kevin Buyco, Joefrey Uy, Enna Trivilegio LlB III-B
CAPITAL REQUIREMENTS

What is Universal Bank?

Are large commercial banks licensed by the Bangko Sentral ng
Pilipinas(BSP) to do both commercial and investment bank.

UNIVERSAL BANKS --------- 4,950.0 In million pesos

COMMERCIAL BANKS ------ 2, 400.0 in million pesos

What are the powers of Universal Bank?

At least 25% of the total authorized capital stock shall be
subscribed by the subscribers of the proposed bank, and at
least 25% of such subscription shall be paid up, provided that in
no case shall be paid-up capital be less than the minimum
required capital stated above.

1. The power authorized for a commercial bank;

2. The powers of an investment house as provided in existing
laws; and
3. The power to invest in non-allied enterprise.

What are the powers of Commercial Banks?

INCORPORATORS and SUBSCRIBERS

1. The general powers incident to corporations,

1. Must be persons of integrity and of good credit standing in the

business community.

2. All such powers as may be necessary to carry on the business of

commercial banking, such as,
a) accepting drafts and issuing letters of credit;

2. Must have adequate financial strength to pay for their

proposed subscription in the bank.

b) discounting and negotiating promissory notes, drafts , bills

of exchange, and other evidences of debt;

3. Must not have been convicted of any crime involving moral

turpitude.

c) accepting and creating demand deposits;

4. Those person charged with the supervision of, or the granting

of loans to banks.

d) receiving other types of deposits and deposit substitutes;

5. May organized with not less than 5 nor more than 15

incorporators.

e) buying and selling foreign exchange and gold or silver

bullion; acquiring marketable bonds and other debt
securities; and
f) extending credit, subject to such rules as the Monetary
Board may promulgate.

BANK BRANCHES
Universal and commercial banks may open branches or other offices
within or outside the Philippines upon PRIOR approval of Bangko
Sentral.

g) determination of bonds and other debt securities eligible

for investment, the maturities and aggregate amount of
such investments,

A bank may, subject to prior approval of the Monetary Board, use

any or all its branches as outlets fo the presentation and/or sale of
the financial products of its allied undertaking or of its investment
house units.

ORGANIZATION
The Monetary Board may authorize the organization of a bank or
quasi-banking subject to the following conditions:

A bank and its branches and offices shall be treated as one unit.

1. The entity is a STOCK corporation

BOARD OF DIRECTORS

The Monetary Board may prescribe rules and regulation on

the types of stock a bank may issue, including the terms
thereof and rights appurtenant thereto to determine
compliancewith laws and regulations governing capital and
equity structure of banks.

There shall be atleast 5 and a maximum of 15 members of the board

of directors of bank, 2 of whom shall be independent directors.
In case of merged or consolidated banks, they shall not exceed 21
members.

2. FUNDS are obtained from the public, which shall mean 20 or

more persons

Non-Filipino Citizens may become members of the board of

directors of a bank to the extent of the foreign participation in the
equity of the said bank. SEC 7, RA 7721

3. That the minimum CAPITAL requirements prescribed by the

Monetary Board for each category of banks are satisfied.

Independent director means a person other than an officer or

employee of the bank, its subsidiaries or affiliates or related
interests.

CAPABILITIES
The Monetary Board shall take into considerations their capabilities
in terms of their financial resources and technical expertise and
integrity.

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1. Not an officer or employee of the bank for the past 3years from
the date of his election.
2. Not a director or officer of related company.

UNIVERSAL AND COMMERCIAL BANKS

Prepared by: Kevin Buyco, Joefrey Uy, Enna Trivilegio LlB III-B
th

3. Not a relative within 4 civil degree of consanguinity or affinity

of any director, officer or majority of stockholder.

Equity Investment of UB in Non Allied Enterprises

4. Not acting as nominee or representative of any director or

officer

1. Shall not exceed35% of the total equity in that

enterprise nor

5. Free from any business or other relationships with the

institution or any of its major stockholders which could
materially interfere with the exercise of his judgment.

CAPITAL REQUIREMENTS
UNIVERSAL BANK (UB)

COMMERCIAL BANK (CB)

P 4, 950,000, 000

P 2, 400,000, 000

2. Shall it exceed35% of the voting stock in that

enterprise.
Net Worth Total unimpaired capital paid in capital including paid
in surplus, retained earnings and undivided profits, net valuation
reserves and other adjustments as may be required by BSP.

Allied Enterprises:
a. Leasing companies including leasing of stalls and spaces in a
commercial establishment; Provided, that bank investment
in/acquisition of shares of such leasing company shall be
limited/applicable only in cases of conversion of outstanding
loan obligations into equity.

EQUITY INVESTMENT
UNIVERSAL BANK (UB)

COMMERCIAL BANK
(CB)

Allied (Financial or Non-Financial)

or Non-Allied Enterprises.

Allied (Financial or
Non-Financial)
Enterprises

Total investment in Equities shall

not exceed 50% of the net worth
of the bank.

Shall not exceed 35%

of the net worth of the
bank.

Equity investment in any one of

the enterprise shall not exceed
25% of the net worth of the bank.

Same.

Subject to approval of Monetary

Board

Same.

c. Investment houses;
d. Financing companies;
e. Credit card companies;
f. Financial institutions catering to small and medium scale
industries including venture capital corporations;
g. Companies engaged in stockbrokerage/securities dealership;
and
h. Companies engaged in foreign exchange dealership/brokerage

Quasi-banks (QB)

Financial Allied Enterprises

UB

b. Banks;

- refer to entities engaged in the borrowing of funds through the

issuance, endorsement or assignment with recourse or
acceptance of deposit substitutes (as defined in Sec. 95 RA
7653, the New Central Bank Act) for purposes of relending or
purchasing of receivables and other obligations. (last par. of
Sec. 4)

CB

Can own up to 100% equity of:

Thrift Bank

Thrift Bank

Rural Bank

Rural Bank

Financial Allied
Enterprises

Financial Allied Enterprises (If

such equity is in another CB such
investment shall remain a
minority holding.)

RESTRICTION ON BANK EXPOSURE TO DOSRI

Gen. Rule: A director or officer of any bank shall neither:

May own up to 100% of voting of Another UB or CB.

Provided, the former is publicly listed.

1. Directly or indirectly, for himself or asthe representative or

agent of others,borrow from such bank; nor

Non-Financial Allied Enterprises

2. Become a guarantor, indorser or suretyfor loans from such

bank to others, orin any manner be an obligor or incurany
contractual liability to the bank.

May own up to 100% equity.

Exception
except with the written approval of the majority of all the
directors of the bank, excluding the director concerned. The
required approval shall be entered upon the records of the
bank and a copy of such entry shall be transmitted forthwith to
the appropriate supervising and examining department of the
BSP.

Equity Investments in Quasi-Banks

To promote Competitive conditions in financial markets,
the Monetary Board may further limit to 40% equity
investments of UB and CB in Quasi-Banks

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UNIVERSAL AND COMMERCIAL BANKS

Prepared by: Kevin Buyco, Joefrey Uy, Enna Trivilegio LlB III-B
Note:
Such written approval shall not be required for loans, other
credit accommodations and advances granted to officers under a
fringe benefit plan approved by the BSP.

In the case of UniBanks in the Philippines, such as the Philippine

National Bank, those who are eligible to open an account are as
follows:

Dealings of a bank with any of its directors, officers or

stockholders and their related interests shall be upon terms not
less favorable to the bank than those offered to others.

Eligible to open an account (PNB)

SAVINGS (Individual/Joint accounts)
Citizens and Resident Aliens
o Persons at least 12 years old
o Below 12 years old ITF (In Trust For) by parent, legal
guardian, trustee, administrator
Non-Resident Aliens
o Peso Savings Accounts - single account only
o Dollar Savings Accounts - individual and joint
accounts
CHECKING (Peso account)
Citizens/ Resident Aliens/Non-Resident Aliens
o Person of legal age (at least 18 years old)
For walk-in applicants:
o Maintenance of savings account for at least six (6)
months before he can open a checking account
TIME DEPOSIT Peso and FX Currency
Individual/Joint Account
Citizens and Resident Aliens
o Person of legal age (at least 18 years old)
o Below 18 years old ITF by a parent, legal guardian,
trustee administrator
Non-Resident Aliens
o FX Current Deposit only

After due notice to the board of directors of the bank, the office
of any bank director or officer who violates the provisions of this
Section may be declared vacant and the director or officer shall
be subject to the penal provisions of the NCBA.
The MB may regulate the amount of loans, credit
accommodations and guarantees that may be extended, directly
or indirectly, by a bank to its DOSRI, as well as investments of
such bank in enterprises owned or controlled by said directors,
officers, stockholders and their related interests.
The outstanding loans, credit accommodations and guarantees
which a bank may extend to each of its DOSRI, shall be limited to
an amount equivalent to their respective unencumbered
deposits and book value of their paid-in capital contribution in
the bank.
The loans, credit accommodations and guarantees secured by
assets considered as non-risk by the MB shall be excluded from
such limit.
The loans, credit accommodations and advances to officers in
the form of fringe benefits granted in accordance with rules as
may be prescribed by the Monetary Board shall not be subject to
the individual limit.

MINORS DEPOSITORS
General Rule: Minors cannot engage in commerce
exceptions:

Insurance Deposits for Foreign Accounts

PDIC Insurance Deposits for Peso Accounts and Dollar
Accounts

o to continue business of deceased parents through guardian

o court authorizes guardian to place minor and property in
business
o minor is an alien and his national law allows him to be a
merchant
Minor depositors are also allowed in the case of Banco De Oro or
BDO with their Junior Savers Program.

BDO - JUNIOR SAVERS

A savings account for your children 12 years and
younger. Build up their savings and at the same time
enjoy perks and privileges from selected store
affiliates.
The parents may also open the account for their kids
(7 years and below) via an "In Trust For" account
since these younger kids can't sign yet on their own.
With the JSC variant, opening a kiddie savings
account and the opportunity of saving is now more
accessible to both kids and parents.

Foreign Currency Deposit System.

The foreign currency deposit operations of banks under R.A. No.
6426, as amended, shall be governed by the following rules and
regulations.

Qualification requirements
KBs/UBs may be authorized to operate an FCDU or EFCDU: Provided,
That they meet the minimum capital requirements.

Under the Manual of Regulations or Banks of BSP (2008

edition)
Currency composition of the cover.

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FCDUs of TBs shall maintain the foreign currency cover in the

same currency as that of the corresponding foreign currency
deposit liability. FCDUs/EFCDUs of KBs/UBs shall maintain

UNIVERSAL AND COMMERCIAL BANKS

Prepared by: Kevin Buyco, Joefrey Uy, Enna Trivilegio LlB III-B
not less than 70% of the foreign currency cover in the same
currency as that of the liability and 30% or less, at the option
of the FCDU/EFCDU, may be denominated.

REPUBLIC ACT NO. 3591, as amended:

AN ACT ESTABLISHING THE PHILIPPINE DEPOSIT INSURANCE
CORPORATION, DEFINING ITS POWERS AND DUTIES AND
FOR OTHER PURPOSES

SECTION 5. The deposit liabilities of any bank or banking

institution, which is engaged in the business of receiving
deposits as herein defined on the effective date of this Act,
or which thereafter may engage in the business of receiving
deposits, shall be insured with the Corporation. (As amended
by R.A. 6037, 04 August 1969; renumbered from Sec. 4 by
R.A. 9302, 12 August 2004)

Philippine banks with branches outside the country

PDIC Charter provides that the deposits in branches and subsidiaries

of foreign banks licensed by the Bangko Sentral ng Pilipinas (BSP) to
perform banking functions in the Philippines are insured by the
PDIC.
Foreign currency deposits are also insured by PDIC pursuant to RA
6426 (An act instituting a foreign currency deposit system in the
Philippines, and for other purposes) and Central Bank (CB) Circular
No. 1389.

PDIC Insurance Deposits

Whenever an insured bank shall have been closed by the Monetary

Board

Section 4 of R.A. 9576 effective June 1, 2009, the

maximum deposit insurance coverage is P500,000 per
depositor shall be paid by the Corporation. All deposit
accounts by a depositor in a closed bank maintained in the
same right and capacity shall be added together.

Deposits of all
commercial banks

savings and mortgage banks

rural banks

private development banks

cooperative banks

savings and loan associations

branches and agencies in the Philippines of foreign banks

and

all other corporations authorized to perform banking

functions in the Philippines,

are insured with PDIC.

Exclusions from deposit insurance coverage as stipulated in

R.A. No. 9576:

Depositors may receive payment in the same currency in

which the insured deposit is denominated.

Insurance coverage.

Types of Deposits Insured b PDIC

RA 9576 stipulates that subject to the approval of the

Board of Directors, any insured bank with branch outside
the Philippines may elect to include for insurance its
deposit obligations payable at such branch.

Investment products such as bonds, securities and trust

accounts;
Deposit accounts which are unfunded, fictitious or
fraudulent;
Deposit products constituting or emanating from unsafe
and unsound banking practices;
Deposits that are determined to be proceeds of an unlawful
activity as defined under the Anti-Money Laundering Law.

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Foreign currency deposits shall be insured under the

provisions of R.A. No. 3591, as amended.
Depositors are entitled to receive payment in the same
currency in which the insured deposits are denominated.