Rules and regulations implementing Section 39 of the General Banking Law of 2000
CIRCULAR NO. 350 Series of 2002
Pursuant to the Monetary Board Resolution No. 1241 dated August 29, 2002, the following rules and regulations are hereby issued to implement Section 39 of Republic Act No. 8791, the General Banking Law of 2000.
The provisions of Section X304 of the Manual of Regulations for Banks and its Subsections are hereby amended, to read as follows:
Section X304. Grant of Loans and Other Credit Accommodations.
The following regulations shall be observed in the grant of loans and other credit accommodations:
Subsec. X304.1. General Guidelines
Banks shall grant loans and other credit accommodations only in amounts and for the periods of time essential for the effective completion of the operation to be financed. Such grant of loans and other credit accommodations shall be consistent with safe and sound banking practices.
Subsec. X304.2. Purpose of Loans and Other Credit Accommodations
Before granting a loan or other credit accommodation, banks shall ascertain the purpose of the loan or other credit accommodation which shall be clearly stated in the application and in the contract between the bank and borrower. The proceeds of a loan or other credit accommodation shall be utilized only for the purpose(s) stated in the application and contract; otherwise, the bank may terminate the loan or other credit accommodation and demand immediate repayment of the obligation. Notwithstanding the preceding sentence, the proceeds of a loan or other credit accommodation may be utilized by the borrower for a purpose(s) other than that originally stated in the application and contract, provided that such other purpose(s) is/are among those for which the lending bank may grant loans and other credit accommodations under existing laws and regulations: Provided, That such utilization shall be with prior written approval of duly authorized officer(s)/ committee/board of directors of the lending bank and such written approval shall form part of the contract between the bank and the borrower.
Subsec. X304.3. Prohibited use of loan proceeds.
Banks are prohibited from requiring their borrowers to acquire shares of stock of the lending bank out of the loan or other credit accommodation proceeds from the same bank.
This Circular shall take effect immediately.
FOR THE MONETARY BOARD:
RAFAEL B. BUENAVENTURA Governor
More in BSP Circulars
- Approval of the guidelines on technology risk management ainmed at ensuring effective management of technology-related risks by FIs(BSP Circular No. 511)
- To approve the guidelines for the recognition of positions arising from banks' foreign currency (FX) options in the computation of the net open foreign exchange position(BSP Circular No. 445)
- Amendments to Circular No. 521 on Guidelines on Living Trust Accounts(BSP Circular No. 553)
- Amendment to the Guidelines on the BSP Rediscounting Facility(BSP Circular No. 679)
- Risk-based Recalibration of Enhanced Due Diligence (EDD) Threshold for Large Value Cash Transactions(BSP Circular No. 1230)
- Guidelines on the Independent Review Mechanism for Resolution of Issues Arising from Bank Examinations(BSP Circular No. 1225)
- Revised Features of Monetary Operations under the Interest Rate Corridor (IRC)(BSP Circular No. 913)
- Guidelines for the Distribution of Unit Investment Trust Funds (UITFs) of Trust Corporations; and Amendments to the Regulations Governing the Establishment of Branches and Marketing Offices of Trust Corporations(BSP Circular No. 1097)
Want an analysis of this document?
Ask ASG Legal AI to summarize it, compare it with other rulings, or explain how it applies to your situation — it researches from this same library.