Quasi-Banking License Philippines: What NBQBs Are and How They Are Regulated

A quasi-banking license in the Philippines is authority from the Bangko Sentral ng Pilipinas (BSP) for a non-bank institution to engage in quasi-banking functions — principally borrowing funds from the public through the issuance, endorsement, or acceptance of debt instruments. Institutions that hold this license are called non-banks with quasi-banking functions, or NBQBs. Under BSP Circular No. 719, the term covers investment houses and financing companies. Because NBQBs deal with public funds, the BSP supervises them closely and may place them under receivership or liquidation if they fail or conduct business unsafely.

What is a quasi-banking license?

A quasi-banking license is the BSP authorization that allows a non-bank to operate as an NBQB. The license matters because it brings the institution within the BSP's supervision and examination framework and subjects it to the same resolution tools used for banks — receivership and liquidation.

Under BSP Circular No. 719, the institutions covered by the receivership and liquidation guidelines are non-banks with quasi-banking licenses, expressly described as investment houses and financing companies, and trust entities.

Who needs one and what does it cover?

An institution that wants to fund itself by borrowing from the public — rather than only from banks or a small group of investors — needs quasi-banking authority. The license is what separates an NBQB from an ordinary non-bank lender.

The practical consequence is regulatory: once licensed, the institution's solvency, asset quality, and management are subject to BSP examination, and its failure is resolved under the BSP's own rules rather than through an ordinary corporate dissolution.

When can the BSP place an NBQB under receivership?

Receivership is the condition when the Monetary Board designates a Receiver to take over the institution and administer and hold its assets in trust for creditors and stockholders.

Under Section 30 of R.A. No. 7653, as reproduced in BSP Circular No. 719, the Monetary Board may place an NBQB under receivership when it finds that the institution:

1. Is unable to pay its liabilities as they become due in the ordinary course of business — but not where the inability is caused by extraordinary demands induced by financial panic in the banking community;
2. Has insufficient realizable assets, as determined by the Bangko Sentral, to meet its liabilities;
3. Cannot continue in business without involving probable losses to its depositors or creditors; or
4. Has willfully violated a cease and desist order under Section 37 that has become final, involving acts or transactions amounting to fraud or a dissipation of the institution's assets.

Separately, under Section 53 of R.A. No. 8791, if an NBQB notifies the Bangko Sentral or publicly announces a bank holiday, or in any manner suspends payment of its deposit liabilities for more than thirty (30) days, the Monetary Board may summarily and without need for prior hearing close the institution and place it under receivership.

The appointment of a receiver is vested exclusively in the Monetary Board.

What happens during receivership?

Once the receiver takes over, the receiver must determine as soon as possible — but not later than ninety (90) days from takeover — whether the institution may be rehabilitated or should be liquidated. Any determination to allow the institution to resume business is subject to the prior approval of the Monetary Board.

During the actual takeover, operations are suspended except for collections of loans and receivables. The receiver posts a public notice of receivership, secures the premises, notifies depository banks not to honor withdrawals without the receiver's written approval, takes inventory of assets and records, and notifies employees of the suspension of their employment contracts. Within fifteen (15) days after completing the takeover, the receiver submits a report to the Monetary Board.

A receiver may be a juridical person, provided it designates natural persons who meet the minimum qualifications, and both the entity and its representatives are solidarily accountable.

What happens during liquidation?

Liquidation is the process by which all the assets of the NBQB are converted into cash to pay the claims of creditors, with any remaining balance distributed to stockholders. It is a proceeding in rem, so all interested persons — whether known to the parties or not — may be bound.

Where the receiver determines that the institution cannot be rehabilitated, the Monetary Board notifies the board of directors in writing and directs the receiver to proceed with liquidation. Under Section 30 of R.A. No. 7653, the receiver files an ex parte petition for assistance in the liquidation of the institution with the proper Regional Trial Court, pursuant to a liquidation plan adopted by the Monetary Board for quasi-banks.

The liquidator converts assets to money and disposes of them to creditors in accordance with the rules on concurrence and preference of credit under the Civil Code. From the moment the institution is placed under receivership or liquidation, its assets are deemed in custodia legis and are exempt from garnishment, levy, attachment, or execution.

Can the Monetary Board's actions be challenged?

The actions of the Monetary Board taken under Section 30 are final and executory and may not be restrained or set aside by the court, except on a petition for certiorari on the ground that the action was taken in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction.

The petition may be filed only by stockholders of record representing the majority of the capital stock, within ten (10) days from receipt by the board of directors of the order directing receivership.

Frequently asked questions

What is a quasi-bank in the Philippines? A quasi-bank is a non-bank institution licensed by the BSP to perform quasi-banking functions. Under BSP Circular No. 719, non-banks with quasi-banking licenses include investment houses and financing companies.

What happens when a quasi-bank fails? The Monetary Board may place it under receivership. The receiver has ninety (90) days from takeover to determine whether it can be rehabilitated or must be liquidated, subject to the Monetary Board's approval.

Can a quasi-bank's closure be stopped by the courts? Generally no. The Monetary Board's actions are final and executory and may only be challenged by a petition for certiorari filed by majority stockholders within ten (10) days from receipt of the order.

Practical takeaways

• A quasi-banking license lets a non-bank borrow from the public; under BSP Circular No. 719, covered NBQBs are investment houses and financing companies.
• Grounds for receivership under Section 30 of R.A. No. 7653 include inability to pay liabilities as they fall due, insufficient realizable assets, probable losses to creditors, and willful violation of a final cease and desist order involving fraud or asset dissipation.
• The receiver has ninety (90) days from takeover to determine rehabilitation or liquidation, subject to Monetary Board approval.
• Assets under receivership or liquidation are in custodia legis and exempt from garnishment, levy, attachment, or execution.
• Monetary Board actions are final and executory; only majority stockholders may file a certiorari petition, within ten (10) days from receipt of the order.

Primary sources

The rules discussed above are drawn from the following issuances, embedded here in full for your reference.

Guidelines on Receivership and Liquidation Proceedings of Non-Banks with Quasi-Banking Functions (NBQBs) and Trust EntitiesOpen in Law LibraryDownload PDF

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.