- Is a medium of exchange for goods and services used as a measure of their values on the market.
Functions of Money
1. a medium of exchange
2. common measure of value
3. means of payment (legal tender)
4. standard for deferred payments
5. store of value
6. unit of account
a. savings account
b. checking account
c. money market
d. time deposit
f. certificate of deposit
- expressed in coins, debit card, credit card, bills, notes, gold, silver, jewelries and other staff of significant value (antiques, land, house and lot, leather, jacket, promissory note)
- the exchange of products and/or services without the use of money.
- also called exchange
- is a type of trade in which goods and services are directly exchanged for other goods and/or services which can be by lateral or multi-lateral and exists parallel to monetary systems and most developed countries.
- usually replaces money as a method of exchange in times of monetary crisis.
From time past up to modern era, money has played an important role. Money is an item or commodity that is agreed to be accepted in trade over the years. People had used a variety of items. Money, gold and silver were the most significant. Coins containing precious metals are an example of “commodity money.”
The Chinese were the first to use paper money beginning in the T’ang Dynasty (618-907 AD) backed-up by the Emperor’s seal and the signatures of the treasurer, the thing that give its value. In the same token, “representative money” are token or pieces of paper that are not intrinsically valuable themselves but can be exchange by other commodities such as gold or silver. America wherein gold during those times, they sent men to the moon and many other prestige then.
People who informed us about commodity money are the historians and archeologists.
Early causes of the Development of Money
Money is originated very largely from non-economic causes
1. from tribute taxes as well as from trade
2. from blood money and bride money
3. from barter
4. from ceremonial and religious rights
5. from commerce
- People paying taxes for its own operation and leading people from blood money to bride money.
- The money that you pay for a crime.
Bride Money (dowry money)
- it is the exchange of products or services without the use of money
- the invention of banking and coinage
The invention of banking was before coinage. Banking is originated in Mesopotamia wherein the royal palaces and temple secure places for the safe keeping of grain and other commodities. Receipts came to be used for transfer not only to the original depositors but also to the third parties. Eventually, private houses in Mesopotamia got involved to this banking operation regulating them in the code of Hammurabi.
What is a bank?
How do people start banks?
How did banking begin?
Why are there so many different types of banks?
How do I choose a bank?
What types of accounts do banks offer?
Is it difficult to open a bank account?
What happens to money after you deposit it?
What happens when you apply for a loan?
What are checks, and how do they work?
What is electronic banking?
Credit cards, debit cards, stored valued cards: What’s the difference?
today look more like spaceships or cartoon characters.
In any case, the same problem arises. Sooner or later, the piggy bank or jelly jar fills up, and you
have to make a decision: Should I spend the money or continue to save? And if I continue to
save, should I open a bank account or just find a bigger jar?
Maybe you’ve had to face such a decision yourself. If you decide to keep your money at home, it
will just sit there and won’t earn any extra money for you. You also run the risk that a burglar,
a fire, or some other disaster will wipe out your savings in the wink of an eye.
Then again, if you open a bank account, you can’t “visit” your money as easily as you can when
it sits in your dresser drawer. You can’t just walk into a bank in the middle of the night to count
your cash. You can’t run the coins through your fingers or toss the bills in the air and let them
rain down on your head.
Opening a bank account is a big step because you are putting your money in someone else’s
hands. You’re counting on someone else to handle your money responsibly. Before you do
that, it might be a good idea to understand how banks operate.
That’s the purpose of this study. It won’t tell you everything there is to know about banks
and banking, but we hope it will be a good basic introduction.
A bank is a business. But unlike some businesses, banks don’t manufacture products or extract
natural resources from the earth. Banks sell financial services such as car loans, home mortgage
loans, business loans, checking accounts, credit card services, certificates of deposit, and
individual retirement accounts.
Some people go to banks in search of a safe place to keep their money. Others are seeking to
borrow money to buy a house or a car, start a business, expand a farm, pay for college, or do
other things that require borrowing money.
Where do banks get the money to lend? They get it from people who open accounts. Banks act
as go-betweens for people who save and people who want to borrow. If savers didn’t put their
money in banks, the banks would have little or no money to lend.
Your savings are combined with the savings of others to form a big pool of money, and the
bank uses that money to make loans. The money doesn’t belong to the bank’s president, board
of directors, or stockholders. It belongs to you and the other depositors. That’s why bankers
have a special obligation not to take big risks when they make loans.
A. GUIDING PRINCIPLE
The new banking organization must have suitable shareholders,
adequate financial strength, a legal structure in line with its operational
structure, and a management with sufficient expertise and integrity to
operate the bank in a sound and prudent manner. Where the proposed
owner or parent organization is a foreign bank, the prior consent of its home
country supervisor should be obtained.
B. THE APPLICATION
1. The Application for Authority to Establish a Bank (For m No. 1) shall
be accomplished in triplicate. The original copy and duplicate copy
shall be submitted to the Office of Supervisory Policy Development,
Bangko Sentral ng Pilipinas (BSP). The third copy shall be retained
by the organizers.
2. The required papers/documents and other information in support of
the application are, as follows:
a. “Agreement to Organize a Bank” (Form No. 2).
b. Accomplished bio-data sheet of each of the incorporators,
proposed directors and officers, and subscribers (Form No. 3).
1/ Except those to be established under R.A. No. 7721 which shall continue to be governed by Circular No.
51 dated 14 October 1994, as amended. The authority to operate as an expanded commercial bank, on the
other hand, may be granted only to a non -expanded commercial bank with satisfactory performance for the
last two (2) years preceding its application for such authority.
c. Evidence of Filipino citizenship of each of the incorporators,
proposed directors and officers, and subscribers if he/she
claims to be a Filipino citizen.
1) In case of a natural-born Filipino citizen, original or
certified true copy of birth certificate from issuing
office. In case the birth certificate cannot be produced
by reason of destruction or otherwise, an affidavit to
that effect by the civil registrar concerned should be
submitted accompanied by an affidavit of the
incorporator, director, officer or subscriber himself
stating, among other things, the date and place of his
birth and the names of his parents and their citizenship
at the time of the affiant’s birth; and joint affidavit of
two (2) disinterested/unrelated persons stating, among
other things, the date and place of the subject’s birth
and the names of his parents and their citizenship at the
time of the subject’s birth; or
2) In case of a naturalized citizen of the Philippines, the
naturalization certificate, certificate of registration
thereof with the civil registrar and other pertinent
3) In the absence of the abovementioned documents, a
photocopy of the passport (with original to be presented
d. Statement of Assets and Liabilities as of a date not earlier than
ninety (90) days prior to the filing of application of each of the
subscribers, sworn to by the subscriber himself and duly
notarized, or certified by a Certified Public Accountant, with
supporting schedules showing the following information:
1) In the case of cash in banks: (a) name of depository
bank, (b) nature of deposit, and (c) amount of deposit
with each bank as of balance sheet date;
2) In the case of securities: (a) name and address of
issuing corporation/entity, (b) number of shares owned
as of bal ance sheet date, (c) par value, (d) date and cost
of acquisition, and (e) information as to whether the
securities are actively traded in the stock market and, if
so, their current market price;
3) In the case of land: (a) description (agricultural, etc);
(b) area; (c) location; (d) date and cost of acquisition;
(e) transfer certificate of title or tax declaration
number; (f) amount of encumbrance or lien, if any; (g)
assessed value; and (h) current market value (state
basis of valuation);
4) In the case of real estate improvements: (a) description
of improvement (residential house, etc.) (b) location;
(c) date and cost of acquisition/construction; (d)
assessed value; and (e) current market value (state
basis of valuation);
5) In the case of accounts receivable, state the name and
address of each debtor and the amount due from each;
6) In the case of accounts payable or other liabilities, state
the name and address of each creditor and the amount
owed to each.
(Evidences of asset ownership such as bank
certification/statement, savings passbook, certificate of time
deposit, bond or stock certificate, transfer certificate of title, tax
declaration, etc. and waiver of rights under Republic Act. No.
1405, as amended, shall be submitted/presented for verification).
e. Statement of Income and Expense for the last three (3)
calendar years of each of the subscribers, sworn to by the
subscriber himself and duly notarized, or certified by a
Certified Public Accountant.
f. Certified photocopies of Income Tax Returns for the last three
(3) calendar years of each of the incorporators, proposed
directors and officers, and subscribers.
g. Clearances from the National Bureau of Investigation (NBI)
and Bureau of Internal Revenue (BIR) of each of the
incorporators, proposed directors and officers, and
h. For corporate subscribers:
1) Copy of the Board Resolution authorizing the
corporation to invest in such bank; and designating the
person who will represent the corporation in connection
2) Copy of the latest Articles of Incorporation and By-
3) List of directors and principal officers;
4) List of major stockholders, indicating the citizenship
and the number, amount and percentage of the voting
and non-voting shares held by them;
5) A copy of the corporation’s audited financial statements
for the last two (2) years prior to the filing of
6) A copy of the corporation’s annual report to the
stockholders for the year immediately preceding the
date of filing of application;
7) Certified photocopies of Income Tax Returns for the
last two (2) calendar years; and
i. For foreign bank subscribers:
1) A copy of the Board Resolution authorizing the bank to
invest in a bank in the Philippines, and designating the
person who will represent the bank in connection
2) Historical background of the bank, as follows:
a) Date and place of incorporation;
b) List of domestic branches, agencies, other offices,
subsidiaries and affiliates and their line of
business (if different from banking) in the home
c) List of foreign branches, agencies, other offices,
subsidiaries and affiliates, and their location and
line of business (if different from banking);
d) Range of banking services offered; and
e) Financial and commercial relationship with the
Philippine Government, local banks, business
entities and residents, past or present;
3) A copy each of the bank’s latest Amended Articles of
Incorporation and By-Laws;
4) List of the bank’s directors and their citizenship;
5) List of principal officers of the bank’s head office;
6) List of major stockholders, indicating the citizenship
and the number, amount and percentage of the voting
and non-voting shares held by them;
7) A copy of the bank’s audited financial statements for
the last two (2) years prior to the filing of application;
A copy of the bank’s annual report to the stockholders
for the year immediately preceding the date of filing of
9) A certification from the bank’s home country
supervisory authority that the bank’s home country
supervisory authority has no objection to the bank’s
investment in a bank in the Philippines, and that
adequate information on the bank and its subsidiaries
will be provided to the Bangko Sentral ng Pilipinas to
the extent allowed under existing laws.
j. Detailed Plan of Operation and Economic Justification for
Establishing the Bank.
The plan of operation should :
1) Describe and analyze the market area from which the
bank expects to draw the majority of its business and
establish a strategy for the bank’s ongoing operations;
2) Describe how the bank would be organized and
3) Include a brief discussion about the credit program,
systems and prcoedures as envisioned by the organizers.
The economic justification for establishing the bank
should provide information on the economic profile of the
region, e.g., population, agricultural/industrial/service projects
to be financed).
k. Projected monthly financial statements for the first three (3)
years of operations, together with reasonable assumptio ns.(The
financial projections should be consistent and realistic in
relation to the bank’s proposed strategic plan, and should show
sufficient capital to support the bank’s strategy, specially in the
light of start-up costs and possible operational losses in the early
stages. Also the projections should be supported by reasonable
assumptions and should include a plantilla of organization, the
salaries and allowances of the officers and employees as well as
the members of the board of directors, a schedule of proposed
banking premises, furniture, fixtures and equipment indicating
their estimated cost and monthly depreciation and such other
information as may be necessary. See suggested forms.)
l. Proposal by each of the subscribers on how they will raise the
amount to pay for their proposed paid-up capitalization in the
3. The application shall be considered filed on a first-come, first-served
basis, provided all the required documents are complete and properly
4. Pursuant to Section 26 of R.A. No. 7653, approval of application shall
be subject, among others, to the condition that any director, officer or
stockholder who, together with his related interest, contracts a loan or
any form of financial accommodation from: (1) his bank; or (2) from
a bank (a) which is a subsidiary of a bank holding company of which
both his bank and the lending bank are subsidiaries or (b) in which a
controlling proportion of the shares is owned by the same interest that
owns a controlling proportion of the share s of his bank, in excess of
five percent (5%) of the capital and surplus of the bank, or in the
maximum amount permitted by law, whichever is lower, shall be
required by the lending bank to waive the secrecy of his deposits of
whatever nature in all banks in the Philippines. Any information
obtained from an examination of his deposits shall be held in strict
confidence and may be used by the examiners only in connection with
their supervisory and examination responsibility or by the Bangko
Sentral in an appropriate legal action it has initiated involving the
5. Prescribed application form, together with other forms, is available at
the Office of Supervisory Policy Delopment Studies and Chartering
Group, Supervisory Reports and Studies Office.
C. CAPITAL REQUIREMENT/STOCKHOLDINGS
1. Banks to be established shall comply with the required minimum
capital enumerated below or as may be prescribed by the Monetary
Type of Bank Amounts
(In Million Pesos)
a. Universal Banks 4,950.0
b. Commercial Banks 2,400.0
c. Thrift Banks
- With head office within Metro Manila 325.0
- With head office outside Metro Manila 52.0
d. Rural Banks
- within Metro Manila 26.0
- Cities of Cebu and Davao 13.0
- In 1st, 2nd & 3rd class cities and 1st class
- In 4th, 5th & 6th class cities and in 2nd, 3rd
& 4th class municipalities 3.9
- In 5th & 6th class municipalities 2.6
2. 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 the paidup
capital be less than the minimum required capital stated in Item 1
3. The Stockholdings of an individual, family, corporate or business
group in any bank shall be subject to the following limits:
a. Foreign individuals and non-bank corporations may own or
control up to forty percent (40%) of the voting stock of a domestic
bank: Provided, That the aggregate foreign-voting stocks owned
by the foreign individuals and non-bank corporations in a
domestic bank shall not exceed forty percent (40%) of the
outstanding voting stock of the bank. The percentage of foreignowned
voting stock in a bank shall be determined by the
citizenship of the individual stockholders in that bank.
b. A Filipino individual and a domestic non-bank corporation may
each own up to forty percent (40%) of the voting stock of a
domestic bank. There shall be no aggregate ceiling on the
ownership by such individuals and corporations in a domestic
c. The citizenship of the corporation which is a stockholder of a bank
shall follow the citizenship of the controlling stockholders of the
corporation, irrespective of the place of incorporation. For
purposes hereof, the term “controlling stockholders” shall refer to
individuals holding more than fifty percent (50%) of the voting
stock of the corporate stockholders of the bank.
4. At least 60% of voting stock of any commercial bank shall be owned
by Filipino citizens. For any thrift bank, at least 40% of its voting
stock shall be owned by Filipino citizens. Subject to Section 4 of
Republic Act. No. 7353, all of the capital stock of any rural bank shall
be fully owned and held, directly or indirectly, by Filipino citizens or
corporations, associations or cooperatives qualified under Philippine
laws to own and hold such capital stock.
D. INCORPORATORS/SUBSCRIBERS, DIRECTORS AND OFFICERS
1. The incorporators /subscribers and proposed directors and officers
must be persons of integrity and of good credit standing in the
business community. The subscribers must have adequate financial
strength to pay for their proposed subscriptions in the bank.
2. The incorporators/subscribers and proposed directors and officers
must not have been convicted of any crime involving moral turpitude,
and unless otherwise allowed under the provisions of existing laws are
not officers and employees of a government agency, instrumentality,
department or office charged with the supervision of, or the granting
of loans to banks.
3. A bank may be organized with not less than five (5) nor more than
fifteen (15) incorporators. In case there are more than fifteen (15)
persons initially interested in organizing and investing in the proposed
bank, the excess may be listed among the original subscribers in the
Articles of Incorporation.
4. The number of members of the board of directors of the bank shall
not be less than five (5) nor more than fifteen (15) and shall always be
in odd numbers and at least two (2) of the directors are “independent
directors”. An independent director shall mean a person who –
a. Is not or has not been an officer or employee of the bank/quasibank/
trust entity, its subsidiaries or affiiliates or related interests
during the past three (3) years counted from the date of his
b. Is not a director or officer of the related companies of the
institution’s majority stockholder;
c. Is not a majority shareholder of the institution, any of its related
companies, or of its majority shareholder;
d. 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;
e. 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,
f. 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 judgement, i.e., has not engaged and does
not engage in any transaction with the instituion, 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.
5. At least two-thirds (2/3) of the members of the board of directors of
any commercial bank shall be Filipino citizens; at least a majority of
the members of the board of directors of any thrift bank shall be
Filipino citizens; and all members of the board of directors of a rural
bank shall be Filipino citizens.
6. No appointive or elective public official, whether full-time or parttime
shall at the same time serve as officer of a commercial bank or a
thrift bank except in cases where such service is incident to financial
assistance provided by the government or a government-owned or –
controlled corporation to the Bank.
7. The proposed directors and officers of the bank shall be subje ct to
qualifications and other requirements of existing laws, rules and
regulations of the BSP, as follows:
a. Qualifications of a director. A director shall have the following
1. He shall be at least twenty-five (25) years of age at the
time of his election or appointment;
2. He shall be at least a college graduate or have at least
five (5) years experience in business;
3. 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
4. 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:
- diligence; and
- experience/training .
For thrift banks and rural banks, at least one (1)
of the members of the Board of Directors must, in
addition to the abovementioned minimum
qualifications, have at least one (1) year experience in
banking and/or finance, provided that this requirement
may be waived if the thrift bank or rural bank is to be
established in a municipality or city where there is no
The foregoing qualifications for directors shall
be in addition to those already required or prescribed
under existing laws.
b. Qualifications of an officer. An officer shall have the following
1. He shall be at least twenty-one (21) years of age;
2. 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
3. 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:
- diligence; and
For commercial banks, the President mus t, in
addition to the abovementioned minimum
qualifications, have at least two (2) years experience in
banking and/or finance. For thrift banks and rural
banks, any one of the President, Chief Operating Officer
or General Manager must, in addition to the
abovementioned minimum qualifications, have at least
two (2) years experience in banking and/or finance.
The foregoing qualifications for officers shall be
in addition to those already required or prescribed
under existing laws.
c. Disqualifications of a director. 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:
1. 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;
2. Persons who have been convicted by final
judgement of the court for violation of banking
3. Persons who have been judicially declared
insolvent, spendthrift or incapacitated to contract;
4. 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. Included are:
1. 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;
2. 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;
3. Persons who are delinquent in the payment of their
obligations as defined hereunder:
a. 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;
b. Obligations shall include all borrowings from a
bank/quasi bank obtained by:
i. 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;
ii. The spouse or child under the parental
authority of the director or officer;
iii. Any person whose borrowings or loan
proceeds were credited to the account of,
or used for the benefit of a director or
iv. 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;
v. A corporation, association or firm whollyowned
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.
4. Persons convicted for offenses involving dishonesty,
breach of trust or violation of banking laws but
whose conviction has not yet become final and
5. Directors and officers of closed banks/quasibanks/
trust entities pending their clearance by the
6. 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;
7. 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
8. Persons dismissed/terminated from employment for
cause. This disqualification shall be in effect until
they have cleared themselves of involvement in the
9 . Those under preventive suspension; or
10 . 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.
d. Disqualifications of an Officer
1. 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.
2. Except as may be authorized by the Monetary Board or
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.
3. 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.
4. In the case of Cooperative Banks, any officer or employee
of the Cooperative Development Authority or any
elective public official, except a barangay official.
5. 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
The foregoing disqualifications for officers shall
be in addition to those already required or prescribed
under existing laws.
E. REQUIREMENTS FOR THE ISSUANCE OF AUTHORITY TO
1. Within sixty (60) days from receipt of advice of approval by the
Monetary Board/Governor of their application for authority to
establish the bank, the organizers shall:
a. Submit the Articles of Incorporation, Treasurer’s Sworn
Statement and By Laws in seven (7) copies; and
b. Deposit with any commercial bank (for commercial ba nks and
thrift banks) and any bank (for rural banks) the initial paid-up
capital of the proposed bank.
2. Within thirty (30) days after the Articles of Incorporation and By
Laws had been passed upon by the Office of the General Counsel and
the corresponding certificates of Authority to Register had been
issued, the organizers shall effect the filing and registration of said
documents with the Securities and Exchange Commission.
3. Within six (6) months (for commercial banks and thrift banks) and
eight ( months (for rural banks) from receipt of advice of approval
by the Monetary Board/Governor of their application for authority to
establish the bank, the organizers shall:
a. Complete the construction and furnishing of the bank building,
which shall be equipped with vault and appropriate security
devices such as lighting system, time delay device, tamperresistant
locks, alarm systems, etc., and provided with
furniture, fixtures, equipment and bank forms;
b. Effect and complete the recruitment and hiring of officers and
employees of the bank;
c. Submit the following documentary requirements at least thirty
(30) days before the scheduled start of operations:
1) Proof of registration of Articles of Incorporation and
2) Certification of compliance with the conditions of
approval duly signed by the incorporators;
3) List of principals and junior officers and their
respective designations and salaries;
4) Bio-data sheet, evidence of citizenship and NBI and BIR
clearances of each of the officers (who have not had the
previous approval of the Monetary Board/Governor)
which are needed for the evaluation of their
qualifications as officers;
5) Chart of Organization (The chart should show the
names of departments/units/offices with their respective
functions and responsibilities, and the designations of
positions in each department/unit/office with their
respective duties and responsibilities. The internal
organization should provide for a management structure
with clear accountability, a board of directors with ability
to provide independent check on management, and
independent audit and compliance functions, and should
follow the “four eyes” principle, e.g., segregation of
various functions cross-checking, dual control of assets,
double signatures, etc.);
6) Manual of Operations embodying the policies and
operating procedures of each department/ unit/office,
covering such areas as signing/delegated authorities, etc.
(for commercial banks and thrift banks);
7) Plantilla showing the positions with corresponding
salaries, the total of which should more or less conform
with the amount of salaries shown in the submitted
projected statement of earnings and expenses;
Two (2) sets of specimens of principal bank accounting
and other forms;
9) Bond policy on officers and custodial employees;
10) Insurance policy on bank properties required to be
11) Blueprint of floor layout of bank premises;
12) Contract of lease on bank’s premises, if the same are to
13) Excerpts of the minutes of the organizational meetings
confirming all organizational and pre-opening
transactions relative to activities undertaken to prepare
the bank to operate (such as appointment of officers,
contract of lease, etc.);
14) An alphabetical list of stockholders with the number
and percentage of voting stocks owned by them;
15) A separate list containing the names of persons who
own voting stocks in banks and who are related to each
other within the 3rd degree of consanguinity or affinity,
with proper indication of the combined percentage of
voting stocks held by them in the particular bank, as
well as corporations which are wholly-owned or a
majority of the stock of which is owned by any of such
persons, including their wholly or majority-owned
16) Certification by the President that no person who is the
spouse or relative within the 2nd 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 will be
appointed to any of said positions in the bank;
17) Appointment of an officer of the proposed bank who
shall have undergone orientation on the reportorial
requirements with the Department of Thrift Banks and
Non-Bank Financial Institutions (DTBNBFI), and a
certification by the Manager that he is fully aware of
said reportorial requirements and the respective
deadlines for submission to the BSP (for thrift banks);
18) Other documents/papers which may be required; and
d. File with Supervisory Reports and Studies Office a request for
ocular inspection of the bank premises at least thirty (30) days
before the scheduled start of operation.
F. INAUGURATION/OPENING OF THE BANK FOR BUSINESS
AFTER THE CERTIFICATE OF AUTHORITY TO OPERATE
HAS BEEN ISSUED.
G. REQUIREMENTS WITHIN 30 DAYS AFTER FIRST
DAY OF OPERATIONS
1. Inform the BSP of the first day of operation and the banking
hours and days; and
2. Submit a Statement of Condition as of the first day of
H. REVOCATION OF AUTHORITY TO ESTABLISH A BANK
The authority to establish a bank shall be automatically
revoked if the bank is not organized and opened for business within
six (6) months (for commercial banks and thrift banks) and eight (
months (for rural banks) after receipt by the organizers of the notice
of approval by the Monetary Board/Governor of their application.
Extension may be granted upon presentation of justifiable reason for
failure to open the bank within the prescribed period, and proof that
the bank can be opened within the extension period.
living by sailing to distant ports with boatloads of olive oil and spices. If all goes well, you will be
paid for your cargo when you reach your destination, but before you set sail you need money
to outfit your ship. And you find it by seeking out people who have extra money sitting idle.
They agree to put up the money for your voyage in exchange for a share of your profits when
you return . . . if you return.
The people with the extra money are among the world’s first lenders, and you are among the
world’s first borrowers. You complain that they’re demanding too large a share of the profits.
They reply that your voyage is perilous, and they run a risk of losing their entire investment.
Lenders and borrowers have carried on this debate ever since.
Today, people usually borrow from banks rather than wealthy individuals. But one thing hasn’t
changed: Lenders don’t let you have their money for nothing.
Lenders have no guarantee that they will get their money back. So why do they take the risk?
Because lending presents an opportunity to make even more money.
For example, if a bank lends P350,000 to a borrower, it is not satisfied just to get its P350,000
back. In order to make a profit, the bank charges interest on the loan. Interest is the price borrowers
pay for using someone else’s money. If a loan seems risky, the lender will charge more
interest to offset the risk. (If you take a bigger chance, you want a bigger pay-off.)
But the opportunity to earn lots of interest won’t count for much if a borrower fails to repay
a loan. That’s why banks often refuse to make loans that seem too risky. Before lending you
money, they look at:
• how much and what types of credit you use, such as credit cards, auto loans, or other
• whether or not you have a history of repaying your loans, and
• how promptly you pay your bills.
Banks also use interest to attract savers. After all, if you have extra money you don’t have to
put it in the bank. You have lots of other choices:
• You can bury it in the backyard or stuff it in a mattress. But if you do that, the money will
just sit there. It won’t increase in value, and it won’t earn interest.
• You can buy land or invest in real estate. But if the real estate market weakens, buildings
and land can take a long time to sell. And there’s always the risk that real estate will drop
• You can invest in the stock market. But like real estate, stocks can also drop in value, and
the share price might be low when you need to sell.
• You can buy gold or invest in collectibles such as jewelries and antics, but gold and collectibles
fluctuate in value. Who knows what the value will be when it’s time to sell?
Or you can put the money in a bank, where it will be safe and earn interest. Many types of bank
accounts also offer quick access to your money.
Not all banks are exactly the same. There are commercial banks, savings banks, savings and loan
associations (S&Ls), cooperative banks, and credit unions. Today they offer many of the same
services, but at one time, they were very different from one another.
Commercial banks originally concentrated on meeting the needs of businesses. They served
as places where a business could safely deposit its funds or borrow money when necessary.
Many commercial banks also made loans and offered accounts to individuals, but they put most
of their effort into serving business (commercial) customers.
Savings banks, S&Ls, cooperative banks, and credit unions are classified as thrift institutions
or “thrifts,” rather than banks. Originally, they concentrated on serving people whose
banking needs were ignored or unmet by commercial banks.
The first savings banks were founded in the early 1800s to give blue-collar workers, clerks,
and domestic workers a secure place to save for a “rainy day.” They were started by publicspirited
citizens who wanted to encourage efforts at saving among people who did not earn
Savings and loan associations and cooperative banks were established during the 1800s
to help factory workers and other wage earners become homeowners. S&Ls accepted savings
deposits and used the money to make loans to home buyers. Most of the loans went to people
who did not make enough money to be welcome at traditional banks.
Credit unions began as a 19th-century solution to the emergency needs of people who
were unable to borrow money from traditional lenders. Before the opening of credit unions,
ordinary citizens had no place to turn when they faced unexpected home repairs, medical
expenses, or other emergencies. Credit unions were started by people who shared a common
bond such as working in the same factory, belonging to the same house of worship, or farming
in the same community. Members pooled their savings and used the money to make small loans
to one another.
Although there are still differences between banks and thrifts, they now offer many of the same
banking services to their customers. Most commercial banks now compete to make car loans.
Many thrift institutions have begun to make commercial loans, and some credit unions make
loans to home buyers.
Back in the 1950s, banks often gave away toasters to new depositors, and that made choosing
a bank simpler. You went to the one that gave away the best toaster.
Today banks rarely give away toasters, and choosing a bank is a little more complicated. For
starters, you should shop around to find out which banks offer the best services and the lowest
fees. Some banks charge a monthly fee if your account falls below a certain level, and that
fee can be higher than the interest your account earns. Other banks may charge fees for many
types of transactions. You don’t want that.
Other things you might want to consider:
1. Does your bank pay depositors a competitive interest rate?
2. Is the bank in a convenient location and are its business hours convenient for you?
3. Is your deposit insured by the PDIC (Philippine Deposit Insurance Corporation)?
4. Is the bank a good corporate citizen? Does it invest in your neighborhood?
5. And last, but certainly not least, does your bank provide courteous and
Before you open an account, ask a few people if they are happy with their bank. And do some
comparison shopping because all banks are not the same.
borrow. Some need to manage their household finances; others need to manage a business.
Banks help their customers meet those needs by offering a variety of accounts.
Savings accounts are for people who want to keep their money in a safe place and earn
interest at the same time. You don’t need a lot of money to open a savings account, and you
can withdraw your money easily.
Certificates of deposit (CDs) are savings deposits that require you to keep a certain amount
of money in the bank for a fixed period of time (example: P10,000 for two years). As a rule, you
earn a higher rate of interest if you agree to keep your money on deposit longer, and there is
usually a penalty if you withdraw your money early.
Individual retirement accounts are savings deposits that offer an excellent way to
save for your later years. But there is often a significant penalty if you withdraw your funds before you
reach a specified age (usually 59 or older).
Checking accounts offer safety and convenience. You keep your money in the account and
write a check when you want to pay a bill or transfer some of your money to someone else.
If your checkbook is lost or stolen, all you need to do is close your account and open a new
one so that nobody can use your old checks. (When cash is lost or stolen, you rarely see it
again.) Another attractive feature of a checking account is that your bank sends you a monthly
record of the checks you have written, and you can use that record if ever need to prove that
you’ve made a payment. Banks sometimes charge a fee for checking accounts, because check
processing is costly.
Many banks also offer no-fee checking and checking accounts that earn interest if you agree to
keep a certain amount of money—a minimum balance—in the account. But these accounts
are limited to non-business customers. Banking laws almost always require businesses to use
regular checking accounts that do not pay interest.
Money market deposit accounts are similar to checking accounts that earn interest, except
that they usually pay a higher rate of interest and require a higher minimum balance. They also limit the number of checks you can write per month.
Finally, banks do not always call their accounts by the same names. Often, they choose distinctive
names in hopes of attracting customers. But there can be a real difference between one
bank’s accounts and another’s, so shop around.
You’ve finally decided to take the plunge. With your cash tucked deep in your pocket, you walk
into the bank and ask to open a savings account.
The bank’s receptionist directs you to a desk where a customer service representative
will help you with the paperwork. To your surprise, the only form you need to fill out is a
signature card, which requires you to sign your name and then print your name, address,
telephone number, date of birth, social security number, and your mother’s maiden name (as
a means of further identification). After you complete the signature card, you receive a bank
book (sometimes called a passbook) that lists your account balance (the total amount of money
in your account).
Whenever you make a deposit (put money in) or a withdrawal (take money out), the
transaction is recorded in your bank book. It is very important for you to keep track of the
activity in your account.
You don’t need lots of money to start a savings account. Some banks let you open one with as
little as P500. Others need P5,000.00 and some, P10,000.00. It depends on bank rules! Nor do you need to wait until you are 18 years old. In most cases, you can open a savings account as soon as you are old enough to sign your name, or even earlier than that if you open the account with a parent or guardian.
What happens to a P5,000.00 bill after you deposit it in your savings account? Does the bank teller
take it to a vault and put it into a separate compartment or cubbyhole marked with your name
and account number? No.
The bank begins by adding P5,000.00 to the amount that is already in your account (your existing
balance). Your P5,000.00 deposit and your new balance are then recorded in your bank book and
in the bank’s computer system. The P5,000.00 bill you deposited is mixed in with all the other cash
your bank receives that day.
When you and other customers deposit money in a bank, the bank “puts most of it to work.”
Part of the money is set aside and held in reserve, but much of the rest is loaned to people
who need to borrow money in order to buy a house or a car, expand a business, buy farm
equipment, or do any of the other things that require people to borrow money.
Of course, banks do not lend money just to provide a service. They do it to make money.
Here’s how it works.
When you keep your savings in a bank, the bank pays you extra money, which is called interest.
The interest is added to your account on a regular basis, usually once a month.
Let’s say a bank pays its depositors interest of 3 percent a year on their savings. In simple terms,
that means if you keep P100 in your savings account, the bank will add P3 to your account
balance during the course of a year.