Divestment of Equity Investments

BANGKO SENTRAL NG PILIPINAS OFFICe OF tHe GOVerNOr

Circular nO. 1199

Series of 2024

Subject: Divestment of Equity Investments

the amendments to the Manual of Regulations for Banks (MORB) on divestment of equity investments which are not allowed under applicable laws or which do not comply with applicable regulations. The Monetary Board, in its Resolution No. 805 dated 11 July 2024, approved

Section 1. Section 379 of the MORB is hereby amended to read, as follows:

379 SANCTIONS

applicable laws cr which dc not compiy with apriicable regulations shalz be divested. Equity investment transactions which are not allowed under

Fcr rurreses cf -his Seeticn,

restea the etntrel ceeherctina sharesce ercer instruments into voting shares of stock, and (z) such act, natural or juridical; er (b: is vested rhe right to vcte or l: subscription/issuarce, Furchase/sale, and cr transfer voting shares, or conversion of preferred {a} acauires votina shares cf stock from one contract TrarSactiCn agreement * arrangement invesemenr wnar-by shaii persen, shares reier wnetner bank: dett C

equity. or disposing the Eank's investment in ancther astment" shall reter e: the Marner or ssreme of selling companys

not allowed under applicable iaws or which do nct comply with The period within which to divest eauity investments which are applicable regulations are as fsliows:

G: For cransactions not allcked under applicabie laws. Equity

Bangko Sentral. Divestment may be divested immediately and vithout the need of notice from the transaction or, in case of divisible transactions, on the portion not ailcwed under applicakls laws. nestments not allcwea under applicable iaws shall be made for ths whole

b. For transactiens Phich de no- etisting agreements in relation to the ertension cf Financial for which nc reguest fer approval was submitted to the Bangko ailowed cr failed tc meet the eonditions fcr approval assistance te che bank by rhe Philippine Peposit Insurance regulations, ineiuding thcse which were disarrroved by or comrliant with the arriicable reguiations: cr (3) enterea inrg Sentral for reascns,suchasthcseuhichare(i) reguirements comply with appiicable C reaulaticns: ir vioiation of 2) under nDt

portion which does not comply with applicable regulations. applicable regulations shall be divested within a period not exceeding six (6) months from receipt of notice from the Bangko Sentral. Divestment transaction or, in case of divisible transactions, on the Corporation. Eguity may be made for the whole which do not comply with

applicable regulations-made-without-prior Monetary Board approval, The following sanctions shall be imposed for equity investments which are not allowed under applicable laws or which do not comply with without prejudice to the imposition of other enforcement actions under Section o02 (e.g., for delay in divestment):

a First offense -- if the investment--is--not allowable---under--existing

regulations, ddivestment of the investment within the recaiiec

officer/director who recommended/approved the investment. timeline set forth in this Section and reprimand on

b. Subseguent offense --

be determined hy the Monetary Board to be appropriate, but in no case to exceed Pi.o million for each investment. regulations--ddivestment of the investment within the reguired timeline set forth in this Section, and fine in amount as may On the Bank. ff the-investment-is not allowable under existing

investment. On the director/officer who recommended/approved the

2. Fine of P20,000 for each investment made I. Reprimand; and

board and---the executive.---officers---who recommended/ if the subsequent offense is an investment in a non-allied approved the investment per investment. The fine shalland te be shouldered personally by the officer/director: Provided, That enterprise, the fine shall be P40,000. to be imposed on the executive officers and members of the OO

A bank which has been directed to divest specific equity Bangko Sentral, a divestment plan duly approved by the Board of or status report/s of the said divestment plan. For monitoring shall submit the following to the appropriate supervising unit/department of the Bangko Sentral for review: (l) within fifteen' (is) calendar days from receipt of notice from the Directors, together with Board resolution or Secretary's minimum, the activities, persons responsible, and timeline; and purposes, the said status reports shall be noted by the bank's Board. Certificate. investments which do not comply with appiicable regulatiors Certificate approving the same which should contain, at (2) within five (s) calendar days from end of quarter, a progress as documented in a Board resolution or"Secretary's

Page 2 of 4

Section 2. Section 374 of the MORB is hereby amended to read, as follows:

374 INVESTMENTS IN VENTURE CAPITAL CORPORATIONS

X X X

period not to exceed five(5) years from the date of acquisition thereof. provided in this Section which have not-been previously confirmed-by-the Monetary-Board-shall-seek-confirmatier--of--the Monetary Board-of such acguisition not later than ninety (90) banking days from 20 December 2009: condition-that-such-shares-of-stock-shall be-disposed-of-within-a-reasonable Provided That-said-confirmation shall be subiect, among-others, to the investments in a VCC are shown in Appendix 843. The guidelines in determining compliance with ceilings on equity Banks with acquired shares--of.stock of VcCs in excess-of-limits

Equity investments of venture of capital corporations. x x x

Section 3. Appendix 83 of the MORB is hereby amended to read, as follows:

INVESTMENTS (Appendix to Secs.373.374,375,376-A and 378) CuIdELInES In dEtErMInInG COMPLIANCE WItH CEILInGS ON eQUItY

X X X

b. Shares of stock acquired in settiement of loans. Shares of stock of another required in the foliowing cases within thirty (30) days from the date of acquisition thereof: corporation acquired in settlement of loans shall be excluded from total prescribed ceilings on equity investments under Secs. 373, 374, 375, 376-A and 378: Provided. That confirmation of the Monetary Board shall be equity investments for purposes of determining compliance with the

(1) x X X

X X X

a reasonable period not to exceed five three (5 3) years from the date of acquisition thereof. others, to the condition that such shares of stock shall be disposed of within Provided. further, That said confirmation shall be subject, among

Board of Directors, together with Board resolution or Secretary's Certificate approving the same which should contain, at purposes, the said status reports shall be noted by the bank's investments shall submit the following to the appropriate from the Bangko Sentral, a divestment plan duly approved by the minimum, the activities, persons responsible, and timeiine; and or status report/s of the said divestment plan. For monitoring supervising unit/department of the Bangko Sentral for review: (b) within five (5) calendar days from end of quarter, a progress Board. (a) within fifteen (ls) calendar days from A bank which has been directed to divest specific equity aS documented in a Board resolution or receipt of notice Secretary' s Certificate

X X x

Page 3 of 4

incorporated as a footnote to Section 379 of the MORB. Section 4. Transitory Provision. The following provision shall be

ninety (90) calendar days following the effectivity of this Circular. Circular but have not fully complied with such shall divest said investment within Banks directed to divest equity investment prior to the effectivity of this

following its publication either in the Official Gazette or in a newspaper of general circulation. Section 5. Effectivity. This Circular shall take effect fifteen (15) calendar days

FOR THE MONETARY BOARD:

EL M. REMOLONA, JR. Governor

8 August 2024

Page 4 of 4