Revised Guidelines on the Imposition of Monetary Penalties on BSFIs, and/or their Directors/Trustees, Officers and/or Employees for Violations with Sanctions Falling under Section 37 of R.A. No. 7653 (The New Central Bank Act), as Amended

BANGKO SENTRAL NG PILIPINAS clRcuLAR NO. ll25 Series of 20.21 OFFICE OFTHE GOVERNOR Subfect : Revised Guidellnes on the lmposition of Monetary Penalties on Bangko Sentral ng Plllplnas-Supervised Flnanclal lnstltutlons, and/or their Directors/frustGes, Officers and/or Employees for Violatlons of Benking and Other Applicable Laws wlth Sanetions Falling under Section 3l ol Republic Act No. 7653 [The Neur Central Bank Actl, as Amended The Monetary Board, in its Resolutlon No. lO63 dated 12 August 2021, approved the revised guidelines on the imposition of monetary penalties on Bangko Sentral-Supervised Financial Institutions (BSFlsI andlor their directorsrtrustees, officers and/or employees fior violations of banking and other applicable laws whose sanctions fiall under Section 37 of Republic Act (RAl No. 7653 Ohe New Central Bank Act), as amended, except those instances where specific monetary penalties have been provided under applicable laws or other Bangko Sentral rules and regulations, including reporting violations (i.e., erroneous/delayed and unsubmitted regulatory reports) for which specific monetary penalties are provided under the regulations. Section I. Sec. OO4 of the Manual of Regulations for Banks (MORB), and Secs. o(X-Qloo4-sloo3-P/oo3-Nloo4-Tloot€C of the Manual of Regulations for Non-Bank Financial Institutions (MORNBFI) are hereby added to read as follows; oo4loo44loo4-s/oo3-p/oo3-N/oo4-T/oor-cc MoNETARY PENAtflES oN HSFIs, ANDIOR TI{EIR DIREGTORS/TRUSTEES, OFFICERS AND/OR EMPTOYEES The Bangko Sentral recognizes the need to impose monetary penalties as one of the possible administrative sanctions to hold BSFls, and/or their directorsltrustees, officers and/or employees accountable for their conduct, deter future commission of violations. and achieve the overarching supervisory objectives of changed behavior and mitigated risks. P.gel of4

Pursuant to Section 37 of R.A. No. 7653. as amended, banks, and/or their directors, officers and/or employees may be imposed a maximum monetary penalty of Pl million for each transactional violation or ?lOO thousand per calendar day for violations of a continuing nature. In case profit is gained or loss is avoided as a result of the violation, the Bangko Sentral may also impose a fine of no more than three [3] times the profit gained or loss avoided. To ensure fairness, consistency and reasonableness in the imposition of monetary penalties. the Bangko Sentral takes into consideration the attendant circumstances of each case, such as the nature and gravity of the violation or irregularitlr and the size of the financial institution, including other aggravating and mitigating factors. Further, in accordance with Sec. oo2lo o2-Qloo2-sloo2-P lool -N/ooz-T, the Bang ko Sentra I may im pose monetary penalties, singly or in combination with non-monetary sanctions, if appropriate. The guidelines on the imposltion of monetary penalties for violations in which sanctions fall under Section 37 of Republic Act (R.A.) No. 7653 ffhe New Central Bank Actl as amended, and other applicable laws are in A p p e nd ix 2 a/g - 2 6E - | 8/P I zlN 2 o/r- 6/cc 4. - - Section 2. Appendix24 of the MORB is hereby retitled and amended as shown in Annex A" The guidelines under Annex A shall likewise apply to non-bank financial institutions (NBFls) and shall be codified as Appendices Q-26, S-18, P-12, N-zO, T-6 and CC-4 with some amendments. as follows: a) For all Appendices: 1) Refurences to the term -bank/s'and TBs, RBs or Coop banks'shall be replaced with quasi-bank/s (QB/sVnon-stock savings and loan associations (NSSl..A,/sVnon-bank fi nancia I institutions (N BFI/s)ft rust corpo ration/s/cred it ca rd ssu ers/pawnshop/s, as a ppl ica b le. i 2) Section ll ltem "c.0f shall read €s: lorx For QBsf.l55pq5/pawnshops/ NBFlsltrust corporations/credit card issuers which maintain a demand deposit account (DDA) with the Bangko Sentral, the amount of the penalty/ies that remain unpaid shall be automatically debited from their DDA after the lapse of the fifteen 0S)-calendar day period within which to paythe monetary penalties. xpr" 3) Section ll ltem 'c.Ff shall read as: 'ln the absence of DDA with the Bangko Sentral. penalties shall be paid through any acceptable means of palrment and in accordance with the provisions of sec. r r o2-Q1811 -S n OrP | 806- N/4O2-Tn A -CC". 4) Section ll ltem ?.(6f. cross reference to Sec. llo2 shall be replaced with Sec.11O2-Q, 81t-S,7Ol-P, 8O5-N, r+O2-T, and l2l-CC, as applicable. b) For Appendices S-18 and P-12, references to the term "directors- shall be replaced with "trustees', as applicable. Pegc2of4

c) For Section I ltems t' and ?' of Appendix S-18, the phrase 'conducting business in an unsafe or unsound manner" shall be replaced with tonducting business in an unsafe ot unsound manner and/or performing acts, practices or omissions considered prejudicial to the interest of members-. d) ForAppendixQ-26,Section ll ltem t-shall read as: 'c. Payment of Monetary Penalties/Hnes. QBs, and/or their directors, officers andlor employees shall pay the monetary penaltiesflnes for reserve deficiency, reportorial delay/deficiency, refusal to permit examination, or failure to comply with, or violation of, any law or any order, instruction or regulation issued by the Monetary Board. or any order, instruction or ruling by the Governor, within fifteen 05) calendar days ftom receipt of the notice of the decision of the Governor imposing said monetary penalties, and payment thereof shall not be suspended by the filing of an appeal to the Monetary Board. xxx" Section 3. Sec. llO2 of the MORB and Sec. lt0z-Q of the MORNBFI are hereby retitled as Qther Payrnents of BanksAlBFls". Further, the provisions in the first paragraph and the €uidelines on the imposition of monetary penalties' under the said Sections are hereby deleted. The provision on thec(demand draft payments to the Bangko Sentral' is hereby amended to read, as follows: ?aymenB to thc hngko &ntnl Banks shall make payments for transactions, including penalties and other charges, other than those required to be paid through the banks' DDA, in accordance with the manner of payment provided in the billing notice, or through any such acceptable means of payment as may be provided in pertinent advisories issued by the Bangko Sentral. xxx' Sestion 4. The provisions in Section ?Ol-P, and the first paragraph and the luidelines on the imposition of monetary penalties' under Sections 8lI-S, 8O6-N, and 4O2-T of the MORNBFI are hereby deleted, and the amended provisions of Section llO2-Q of the MORNBFI, as provided in Section 3 of this Circular, shall be adopted with amendment on the reference to the applicable type of BSFI. sectfon 5. Afl references to sec. 1lo2ll1o2-QJ8fi-snolPlBo6-N/4o2-T shall hereby add reference to App. 2alQ-26lS-18/P-l2N-2OlT-6. Further, the following Section of CC regulations shall be amended as follows Sectlon Exlstlns Drcvision Anended provlslon Item b-of xxx their directors xxx and/or their directors, officers and/or Sec.l2l-CC and officers no( employees xxx Item ?.i-of xxx Sec. IIO2-Q xxx Sec. IIO2-Q (Other PaymenB of NBFIs) and Sec.I2l-CC (Guidetines on thi Appendix CC-4 [Guidelines on the lmposition lmposition of of Monetary Penalties on BSFls, and/or thelf P4e lof 4

Sectlon Exlstlm prordslon Amended provlslon Moneta4f Directors, Officers and/or Employees for Penalties)vxx Violations falling under Section 37 of Republic Act No. 7653 Fhe New Central Bank Act), as amended, and Other Applicable Lawsl XXX ftem Z.ii' xxx Sec. llO2-Q xxx Sec. llO2-Q (Other PaltmenB of NBFIs). of Sec. l2l- (Guidelins on the Appendix CC-4 [Guidelines on the lmposition cc lmposition of of Monetary Penalties on BSFls, and/or their Monetary Directors, Officers and/or Employees for tunalties) Viofations falling under Section 37 of Republic Act No. 7653 Cfhe New Central Bank Act), as amended, and Other Applicable Lawsl, Sec.lOl-Q no< Section 6. This Circular shall be of suppletory application to Circular No. IOl2, series of 2018, or to the amendments thereof. Sectlon 7. This Circular shall take effect fifteen 051days following its publication on the Official Gazette or in a newspaper of general circulation. FOR THE MONETARY BOARD: c ('- c. BENtAttllN E. DIOKNO Governor jlAusust 2o2I Pcge tof4

ANNEX A Appendix 24 GUIDEIINES ON THE IMFOSITION OF MONETARY PENALTIES ON BATIIKS, AND/OR THEIR DIRECTORS, OFFICERS ANDIOR EMPLOYEES FOR VIOLATIONS OF BANKING AND OTHER APPLICABLE LAWSWITH SANCTIONS FALTING UNDER SECTK)N 37 OF REruBLrc ACT NO. 765'3 ITHE NEW CE TTRAL BANK ACT}, AS AMENDED (Appendix to Sec. OO4 on Monehry Penalties on Banks and/or their Dirstorc, officerc, a nd/or Employes ) The following are the guidelines on the imposition of monetary penalties on banks, and/or their directors, officers and/or employees. l. Defrnition of Terms For purposes of this Appendix, the following definitions shall apply: Transactional violation refers to an act or omission constituting a violation of any applicable law or any order, instruction/directive or regulation issued by the Monetary Board, or any order, instruction/directive or ruling by the Governor which is consummated and concluded in a single instance/ occasion. For licensing-related violations, transactionalviolation refers to the failure to obtain approval prior to engaging in an activity which the institution is qualified to undertake at the onset, based on eligibility test and assessment of compliance with the prudential criteria set forth under existing Bangko Sentral rules and regulations. b. Continuing violation refers to an act or omission constituting a violation of any applicable law or any order, instructionldirective or regulation issued by the Monetary Board, or any order, instruction/directive or ruling by the Governor in which the violation persists or lingers over time from the instant the particular act was committed or omitted until the violation is stopped. For licensing-related violations, continuing violation refers to an act which the institution is not qualified to undertake at the onset based on eligibility test and assessment of compliance with the prudential criteria set forth under existing Bangko Sentral rules and regulations. lf . lmpsition and Payment of Monetaryt Penalties. a. In accordance with Section 57 of R.A. No. 7653, as amended, monetary penalties may be imposed against banks andlor their directors, officers andloremployees foranywillfulviolation of its charteror bylaws;willfuldelay in the submission of reports or publications thereof as required by law rules and regulations; any refusal to permit examination into the affairs of the institution; any willful making of a false or misleading statement to the Monetary Board or the appropriate supervising and examining department or its examiners; anV willful failure or refusal to comply with, or violation of, any banking law or any order, instruction or regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor; or any commission of irregularities, and/or conducting business in an unsafe or unsound manner as may be determined by the Monetary Board. P.g.l of4

ANNEX A In the absence of specific provision under other applicable laws or Bangko Sentral rules and regulations prescribing the imposable monetary penalty for the above-mentioned violations/offenses, banks, and/or their directors, officers and/or employees may be imposed a maximum monetary penalty of Fl million for each transactionalviolation oTFIOO thousand per calendar day for violations of a continuing nature as provided under Section 37 of R.A. No. 7653, as amended. Further, in case profit is gained or loss is avoided as a result of the violation, the Bangko Sentral may impose a fine of no more than three (3) times the profit gained or loss avoided on top of the aforementioned monetary penaltlr. The Bangko Sentral considers the attendant circumstances of the case, including aggravating and mitigating factors, in the guided exercise of supervisory discretion to reach a reasonable and proportionate monetary penalty that best achieve the Bangko Sentral's supervisory objectives. These factors include the: (l) nature, gravity and seriousness of the violation or irregularity; (2) financial and/or non-financial impact of the violation or irregularitlr to the bank. its industry and/or the financial system; (3) intentionality, frequency and duration of the violation or irregularigr; and (4) measures undertaken to stop or correct the violation or irregularigr. The appropriate department of the Bangko Sentral shall notiff the bank, and/or director, officer and/or employee concerned of the violation, together with a directive for the bank, and/or director, offtcer and/or employee concerned to show cause within fifteen 05) banking da)ls from receipt of the fetter why no monetary penalty under Section 37 of RA No. 7653, as amended, should be imposed. The recommendation to impose monetary penalties shall be approved by the Governor or the Monetary Board, as the case may be, pursuant to Section3T of R.A No.765.3, as amendedz Prouidd, That monetary penalties against directors, officers andlor employees shall be approved only by the Monetary Board. The decision of the GovernorA4onetary Board shall be communicated to the bank, and/or director, officer and/or employee concerned. However, the Bangko Sentral is not precluded from imposing non-monetary sanctions along with monetary penalties if circumstances so warrant. Basis for the computation of the period or duration of pnal$t The computation of the period or duration of all penalties shall be based on calendar days. For this purpose the terms ler banking daf, 'per business daf, ler daf and/or b daf as used in this Manual, and other Bangko Sentral rules and regulations shall mean -per calendar daf and/or talendar daf as the case may be. c. Payment of Monetary Penalties Banks, andlor their directorg officers and/or employees shall pay the monetary penalties within fifteen 051calendar days from receipt of the notice of the decision of the Governor imposing said monetary penalties, and payment thereof shall not be suspended by the filing of an appeal to the Monetary Board. Pe9s2oll

AI{NEX A Monetary penalties imposed by original decisions of the Monetary Board shall be paid within ftfteen 05) calendar days from the last day to file a motion for reconsideration where none has been filed or within fifteen 05) calendar days from receipt of the notice of the decision of the Monetary Board affirming the decision on motion for reconsideration, as the case may be. For uniform implementation of the above regulation, the following procedural guidelines shall be observed: 0) xxx. The amount of the penalty/ies that remain unpaid shall be automatically debited from the bank's demand deposit account (DDA) with the Bangko Sentral after the lapse of the fifteen flS)-calendar day period within which to paythe monetary penalties. xxx. (2) xxx. (3) xxx. (4) xxx. (5) Payment by banks of penalty, plus the additional charge, if any, through anysuch acceptable means of payment shall be made in accordance with the provislons of Sec.IlO2. (6) In the case of penaltyles lmposed on bank dlrectors, officers and/or employees, the employer bank and said dlrectorc, officers and/or employees shall be advised by the appropriate department of the Bangko Sentral that the employer bank's DDA with the Bangko Sentral shall be debited for the amount of the penalty as advance payment on behalf of the director, officer and/or employee whose penalty/ies remain unpaid after the lapse of fifteen 05) calendar days within which to pay the monetary penalty. In case the director, officer and/or employee is no longer connected with the bank payment thereof shall be fiorthe account of the director. officer and/or employee wtro shall pay directly to the Bangko Sentral through any such acceptable means of payment in accordance with the provisions of Sec.ll02. The procedures under ltems 2',3'and ?'hereof shall likewise apply. lll. Appeal or Motion br Rsonsideration. The imposition of monetary penalties by the Governor shall be final and executory until reversed, modified or lifted by the Monetary Board on appeal. The appeal shall be filed within fifteen (15) calendar da1rc from receipt of the notlce of the declslon, copy furnlshed the approprlate department of the Bangko Sentral. No motlon for reconslderatlon of the declslon of the Governor or of the Monetary Board on appealshall be allowed. Original decisions of the Monetary Board imposing monetary penalties shall become final and executory after fifteen 05) calendar days ftom receipt of the Monetary Board decision, unless a motion for reconsideration is timely filed, copy furnished the appropriate department of the Bangko Sentral. PrgaSofa

AIIIEX A Theapporl orthemotlon br rcconsldcratlon shall be Inwrldng and shallspcdff the findlngs or conchrsloru In the declglon whlch arc not supported by the evlderrce or which are contrary to lav, making exprcss mftrence to the evldence or to the prwiCons of law allcacd to be contrery b qrch fi ndings or conclusions. A pro forrrrtappcel or moUon fur raconsideration shrll be dcnlcd otttdght and shall not prwcnt the decislon hom attlinlng llnality. Dipada