Enhanced Corporate Governance Guidelines for BSP-Supervised Financial Institutions Amending the Manual of Regulations for Non-Bank Financial Institutions

BANGKO SENTRAL NG PILIPINAS OFFICE OF THE GOVERNOR ctRcut-AR No. _920_ Series of 2017 Subject: Enhanced Corporate Governance cuideline5 for 8Sp-Supervised Financial Institutions Amending the Manual of Regulations for Non-Bank Financial Institutions The Monetary Board, in its Resolution No. 1326 dated 3 August 2017, approved the revisions to guidelines in strengthening corporate governance in 85P Supervised Financial lnstitutions amending relevant provisions of the Manual of Regulations for Non-gank Financial Institutions {MORNBFI) as follows: Section 1. Section 4002Q is herebv amended to read as follows: Sec. 4002q Definition of Terms, For purposes of these regulations, the following definitions shall apply: a. Affilidte shall refer to an entity linked directly or indirectly to a Bangko Sentral- Supervised Financial Institutions {BSFI) by means of: (1) Ownership, control as defined under ltem 't" of this Section, or power to vote of at least twenty percent (20yo) of the outstanding voting stock of the entity, or vice-versa; (2) lnterlocking directorship or offic€rship, where the concerned direcror or officer concerned owns, controls, as defined under ltem 't" of this Section, or has the power to vote, at least twenty percent (20%) of the outstanding voting stock of the entity; {3) Common ownership, whereby the common stockholders own-at leasr ren percent (10%) of the outstanding voting stock of the BSFt and at least twenty percent (20%)ofthe outstanding voting stock ofthe entity; (4) Management contract or any arrangement granting power to the BSFI to di.ect or cause the direction of management and policies of the entity; or (5) Permanent proxy or voting trusts in favor of the BSFI constituting at least twenty percent (20%) of the outstanding voting stock of the entity, or vice versa, Close family members shall refer to persons related to the BSFt's djrectors, officers and stockholders (DOS) within the second degree of consanguinity or affinitv, legitimate or commonjaw. These shall include the spouse, parent, child, brother,

sister, grandparent, grandchild, parent-in-law, son-/daughter-in-law, brother/sister-in-law, grandparent-in-law, and grandchild-inlaw ofthe BSFt,s DOS. Cortrol of an enterprise exists when there is: {1) Power over more than one-half of the voting rights by virtue of an agreement with other stockholders; or (2) Power to govern the financial and operating policies ofthe enterprise under a statute or an agreement; or (3) Power to appoint or remove the majority of the members of the board of directors or equivalent governing body; or (4) Power to cast the majority votes at meetings of the board of directors or equivalent governing body; or (5) Any other arrangement similar to any of the above. Control is presumed to exist if there is ownership or holding, whether direct or indirect, oftwenty percent (20%) or more of a class of voting shares of a company. Should the BSFI choose to disclaim or rebut the presumption, it should provide facts sufficient to show that there is indeed no control. Further, the BSFI shall submit a written commitment that: (a) shares owned or held are exclusively for investment purposes; (b) the BsFlstockholder will not serve on the board of diredors and will not nominate any candidate to serve on the board of directors or otherwise seek board representation; (c) the gsFfstockholder will have only limited contads with BSFI management that are customary for interested shareholders; (d) the BsF|-stockholder will engage only in normal and customary transadions with the enterprise; and (e) the BSFI will not pledge the shares acquired to secure a loan with any institution. Corresponding persons in offilioted componies shall refer to the DOS of rne affiliated companies and their close familV members. e. DrTecto.s. Directors shall include: (1) directors who are named as such in the articles of incorporation; (2) directors duly eleded in subsequent meetings of the stockholde.s or those appointed by virtue ofthe chaner of government-owned BSFIs; and {3) those elected to fill vacancies in the board of directors. f. Finonciol qllied undertokings. This shall refer to enterprises or firms with homogeneous or similar activities/business/function with the financial intermediary and may include, but not limited to, leasing companies, banks, investment houses, financin8 companies, credit card operations, Fls addressed/catering to small and medium scale industries, and such other similar adivities as the Monetary Board may declare as appropriate from time to time. lndependent dhectors. An independent director shall refer to a person who - (1) is not or was not a director, officer or employee of the BSFI, its subsidiaries, affiliates or related interests during the past three (3) years counted from the date of his election/appointment;

(2) as not or was not a director, officer, or emplovee of the BSFfs substantial stockholders and their related companies during the past three (3) years counted from the date of his election/appointment; (3) is not an owner of more than two percent (2%) of the outstanding shares or a stockholder with shares of stock sufficient to elect one (1) seat in the board of diredors of the institution, or in any of its .elated companies or of its majority corporate shareholders; (4) is not a close family member of any director, officer or stockholder holding shares of stock suffcient to elect one (1) seat in the board of the BSFI or any of its related companies or of any of its substantial stockholders; (s) is not ading as a nominee or representative of any director or substantial shareholder of the gSFl, any of its related companies or anv of its substantial shareholders; (6) as not or was not retained as professional adviser, consultant, agent or counsel of the BSFI, any of its related companies o. any of its substantial shareholders, either in his personal capacity or through his firm during the past three (3) years counted from the date of his election; t7) is independent of management and free from any business or other relationship, has not engaged and does not engage in any transaction wjth the BSFI or with any of its related companies o. with 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 arm,s length and could not materially interfere with or influence the exercise of his judgment; (8) was not appointed in the BSFI, its subsidiaries, aftiliates or related interests as Chairman "Eme.itus", "Ex-Officio", Directors/Officers or Members of any Advisory Board, or otherwise appointed in a capacity to assist the board of directors in the performance of its duties and responsibilities during the past three (3) years counted from the date of his appointment; (s) is not affiliated with any non-profit organization that receives significant funding from the ESF| or any of its related companies or substantial shareholders; and (10) is not employed as an executive officer of another company where any of the BSFI's executives serve as di.ectors. h. Mojority stockholder ot mojodty shoreholdet shall refer to a person, whether natural or juridical, owning more than fifty percent (50%) of the voting stock of a BSFI. Non-executive directors shall refer to those who are not part of the day to day mana8ement of operations and shall include the independent directors. However, not all non-executive directors are considered independent directors. t. Non-finonciol ollied undertokings, Non-financial allied undertakings may include, but not limited to, but not limited to, warehousing companies, storage companres, safe deposit box companies, companies engaged in the management of murual funds but not in the mutual funds themselves, management corporations engateo

or to be engaged in activities similar to the management of mutual funos, Insurance agencies, companies engaged in home building and home development and companies providing drying and/or including facilities for agricultural crops such as rice and corn, companies engaged in merchant acquiring business and such other similar activities as the Monetary Board may declare as appropriate from time to time. Officers shall include the Chief Executive Officer (CEO)1, executive vice president, senior vice-president, vice president, general manager, treasurer, secretary, t.ust officer and others mentioned as officers ofthe 8SFl, or those whose duties as 5uch are defined in the by-laws, or are generally known to be the officers of the BSFI (or any of its branches and offices other than the head office) either through announcement, representation, publication or any kind of communication made bv lhe BSFII Provided, That a person holding the position of chairman or vice- chairman of the board of directors or another position in the board of directors shall not be considered as an officer unless the duties of his position in the boaro of directors include functions of management such as those ordinarily performed by regular olfice5t Provided, furtheL fhat members of a group or commiree, including sub-groups or subcommittees, whose duties include functions of management such as those ordinarily performed by regular officers, and are not purely recommendatory or advisory, shall likewise be considered as officers. v Shall also refer to the President or any other title refering to the top manaSement post in the BSFI t. Porent shall refer to a corporation which has control over another corDorauon directlyor indiredly through one (1)or more intermediaries. m. Reloted compony shall refer to another companv which is: (1) lts parent or holding company; (2) lts subsidiary or affiliate; or (3) A corporation where a BSFI or its majority stockholder own such number of shares that will allovenable such person or group to elect at least one (1) member of the board of directors or a partnership where such majority stockholder is a partner. n. Reloted interest shall refer to any ofthe following: (1) Spouse or relatjve within the first degree of consanguinity or afinity, or relative by le8al adoption, of a diredor, officer or stockholder of the BSFt; (2) Partnership of which a director, offcer, or stockholder of a BSF| or his spouse or relative within the first degree of consanguinity or affinity, or relative oy legal adoption, is a general partner; (3) Co-owner with the director, officer, stockholder or his soouse or relative within the first degree of consanSuinity or affinity, or relative by legal adoption, ofthe property o. interest or right mortgaged, pledged or assigned to secure the loans or other credit accommodations, except when the mortgage, pledge or assignment covers only said co-owner's undivioeo InIelest;

(4) Corporation, association or firm of which any or a group of directors, officers, stockholders of the BSFI and/or their spouses or relatives within the first degree of consanguinity or affinity, or relative by legal adoption, hold or own at least twenty percent (20%) of the subscribed capital of such corporation, orofthe equityofsuch association or firm; (5) Corporation, association or firm wholly or majority-owned or controlleo oy any related entity or a group of related entities mentioned in ltem s "n(2)"and "/',14J" of this Section; (6) Corporation, association or firm which owns or controls direstly or indirectly whether singly or as pan of a group of related interest at least twenty percent (20%) of the subscribed capital of a substantial stockholder of the BSFI or which controls majority interest of the BSF| pursuant ro Subsec. X303.1(g); (7) Corporation, association or firm which has an existing management contract or any simila. arrangement with the parent ofthe BSFI; and (8) Non-governmental organizations (NGOS)/ foundations that are engaged in retail microfinance operations which are incorporated by any of the stockholders and/or directors and/or officers or related BSFls. The general principles and standards that will Sovern the business relationships between BSFIs and their related NGOsfoundations engaged in retaif microfinance are found in Appendix 2Tofthe MOR8. Reloted pofties shall cover the BSFI's subsidiaries as well as affiliates and any party (including their subsidiaries, affiliates and special purpose entities) that the BSFI exerts direct/indired control over or that exerts direct/indirect control over the ESFl; the BSFI's directors, officers, stockholders, and its related interests (DOSRI), and their close family members, as well as corresponding persons in affiliated companies. This shall also include such other person/juridical entity whose interests may pose potential conflict with the interest of the BSFI, hence, is identified as a related pany. The above definition shall also include dlrect or indirect linkages to a BSFI identified as follows: (1) Ownership, control or power to vote, of ten percent (10%) to less than twenty percent (20%) ofthe outstanding voting stock of the borrowing entity, or vtce versa; (2) Interlocking directorship or officership, except in cases involving independent directors as defined under existing regulations or di.ectors holding nominal share in the borrowing corporation; (3) Common stockholders owning at least ten percent (10%) of the outstanding voting stock of the BSFI and ten percent (10%) to less than twenty percent (20%) ofthe outstanding voting stock ofthe borrowing entity; or {4) Permanent proxy or votint trusts in favor of the BSF| constituting ten percent (10%) to less than twenty percent (20%) of the outstanding voting stock of the borrowing entity, or vice versa.

p. Reloted potty trcnsoctions lRPtsl shall refer to transactions or dealings with related parties of the 8SFl, including its trust department regardless of whether or not a price is charged. These shall include, but not limited, to the following: (1) On- and off-balance sheet credit exposures and claims and write-offs; (2) Investments and/or subscriptions for debt/equity issuances; (3) Consulting, professional, agency and other seruice arrangements/contracts; (4) Purchases and sales of assets, including transfer of technology and intangible items (e.9., .esearch and development, trademarks and license agreements); (5) Construction arrangements/contracts; (6) L€asearrangem€nts/contrads; (7) Trading and derivative transadions; {8) Eorrowings, commitments, fund transfers and guarantees; {9) sale, purchase or supply of any goods or materials; and (10) Establishment ofjoint venture entitie5. RPTs shall be interpreted broadly to include not only transactions that are entereo into with .elated parties but also outstanding transactions that were entered into with an unrelated party that subsequently becomes a related party. Risk oppetite stotement shall refer to the articulation in written form of the aggregate level and types of risk that a BSF| is willing to accept, or to avoid, in order to achieve its business objectives. lt includes qualitative statements as well as quantitative meagures expressed relative to earnings, capital, risk measures, liquidity and other relevant measures as appropriate. r, Risk govemonce fromework shall refer to the framework through which the board of directors and management establish the BSFI'5 strategy; articulate and monttor adherence to risk appetite and risk limits; and identify, measure, and manage risks. s. R,:5k /imits shall refer to the allocation of the 85Fl's risk appetite statement to: specific risk cateSories (e.9., credit, market, liquidity, operational); the business unit or platform level (e.8., retail, capital markets); lines of business or product level [e.9., concentration, value-at-risk (VaR), or other limits]; and other levels, as appaopnate. t. Stockholder shall refer to any stockholder of record in the books ofthe 85Ft, acting personally, or through an attorney-in-fact; or any other person duly authorized by him or through a trustee designated pursuant to a proxy or voting trust or other similar contrads, whose stockholdings in the BSFt, individual and/or collectively with the stockholdings of: (1) his spouse and/or relative within the first degree by consanguinity or affinity or legal adoption; {2) a padnership in which the stockholder and/or the spouse and/or any of the aforementioned relatives is a general partner; and (3) corporation, association or firm of which the stockholder and/or his spouse and/or the aforementioned relatives own more than fifw percent (50%) of the total subscribed capital stock of such corporation, association or firm, amount to one percent (1%) or more of the total subscribed capital srocK ofthe 8SFl.

u. Substontiol stockholder shall refer to a person, or group of persons whether natural or juridical, owning such number of shares that will allow such person or group to eled at least one (1) member of the board of directors of a BSFI or who is di.ectly or indirectly the registered or beneficial owner of more than ten percent (10%) of any class of its equity security, v. Subsidiory shall rcfer to a corporation or firm mo.ethan fifty percent (50%) ofthe outstanding votinB stock of which is directly or indirectly owned, controlled or held with power to vote by its parent corporation. Sedion 2. Chapter H ofQ Regulations of the MORNBFT is hereby retitled as ,,Corporate Governance Guidelines". Sectlon 3. Section 4141Q is amended, and Subsections 4141e.1 to 4141e.4 and Subsections 41410,9 to 4141Q.10 are deleted, to read as follows: Sec, 4141Q Policy Statement. lt is the thrust of the Bangko Sentral to continuouslv strengthen corporate governance in its supervised financial institutions (BSFls) cognizant that this is central in sustaining the resiliency and stability of the financial system. In this light, the Bangko Sentral is aligning its existing regulations with the Code of Corporate Governance issued by the Securities and Exchange Commission as well as with best practices and standards issued by globally recognized standard setting bodies. Sedlon 4. Subsections 4141q.3 ltem "a", 4141e.2 ttem ,,a,,, and 4141e,1 ltems ..b,,to "e" are amended and transferred to Section 4142Q and Subsections 4142e.1 to 4142e.5, to read as follows: S€c. 4142Q Board of Directors. Subsec. 4'42Q,l PoweB/Corporote powers of the boord o, dircctors. The corporate powers of an institution shall be exercised, its business conducted, and all trs resources controlled through its board of directors. The powers of the board of directors as conferred by law are original and cannot be revoked bv the stockholders. The directors shall hold their office charged with the duty to exercise sound and objective judgment for the best interest ofthe institution. Subsec.4l42Q.2 Compositlon of the boord ol dhectort. a. Pursuant to Sections 15 and 17 of R.A. No. 8791, there shall be at least five (5), and a maximum of fifteen (15) members of the boafd of directors of a eB/trust entitv: Provided, fhat in case of a eB/trust entity merger or consolidation, the number of directors may be increased up to the total number of the members of board of directors of the merging or consolidating eB/trust entity as provided for in thei. respective articles of incorporation, but in no case to exceed twenty-one (21). The board of directors shall determine the appropriate number of its members to ensure thatthe numberthereof is commensurate to the size and complexity ofthe BSFI's operations.

To the extent pradicable, the members of the board of directors shall be selecteo from a broad pool of qualified candidates. Non-executive directors, who shall include independent directors, shall comprise at least majority of the board of direqtors to promote the independent oversight of management by the board of directors. c. At least one-third (V3) but not less than two (2) members of the board of directors shall be independent directots]. Provided, That any fractional result from applying the required minimum proportion, i.e., one-third (1/3), shall be rounded up to the nearest whole number. d. Non-Filipino citizens may become members of the board of directors of a BSFI to the extent of the foreign participation in the equity of said BSF|: provided, That pursuant to Section 23 of the Corporation Code of the philippines (Bp Blg. 68), a majority ofthe directors must be residents ofthe Philippines. Subsec. 4t42Q3 Qudlilkqtions of a dhedor. a. A director shall have the following minimum qualifications: (1) Hemustbefitandproperforthepositionofadirector. In determining whether a person is fit and proper for the position of a director, the following matters must be considered: integrity/probity, physical/mental fitness; relevant education/financial literacy/ training; possession of competencies relevant to the job, such as knowledge and experience, skills, diligence and independence of mind; and sufficiency of time to fully carry out responsibilities. In assessing a diredor's integrity/probity, consideration shall be given to the directo/s market reputation, observed conduct and behavior, as well as his ability to continuously comply with company policies and applicable laws and regulations, including market conduct rules, and the relevant requirements and standards of any regulatory body, professional bod, clearing house or exchange, or government and any of its insftumentalities/agencies. An elected director has the burden to prove that he possesses all the foregoing minimum qualifications and none of the cases mentioned under Subsection 4150Q.1. A director shall submit to the Bangko Sentral the required certifications and other documentary proof ofsuch qualification s usinl Appendix Q-57 as guide within twenty (20) banking days from the date of election. Non- submission of complete documentary requirements within the prescribed period shall be construed as his failure to establish his oualifications for the position and results in his removal from the board of directors. The Bangko Sentral shall also consider its own records in determining the qualification of a di.ector. The members of the board of directors shall possess the foregoing qualifications in addition to those required or prescribed under R.A. No. 8791 and other applicable laws and regulations.

(2) He must have attended a seminar on corporate governance for board of directors. A director shall submit to the BanSko Sentral a certification of compliance with the Bangko Sentral-prescribed syllabus on on- boardin&/orientation program for first time directors: provided, That Ihe following persons are exempted from complying with the aforementioned reourremenl: {a) Filipino citizens with recognized stature, influence and reputation in the banking community and whose business practices stand as testimontes ro good corporate gove.nanc€ (b) Distinguished Filipino and foreign nationals who served as senior officials in central banks and/or financial regulatory agencies, including former Monetary Eoard members; or (c) Former Chief Justices and Associate lustices of the philippine Supreme Court: Provided, furtheL That this exemption shall not apply to the annual training requirements for the members ofthe board of directors. b, lndependent ond non-executive dircctors In selecting independent and non-executive directors, the number and types of entities where the candidate is likewise eleded as such, shall be considereo ro ensure that he will be able to devote sufficient time to effectively carry out his duties and responsibilities. In this regard, the following shall apply: (1) A non-executive director may concurrently serve as director in a maximum of live (5) publicly listed companies. In applying this provision to concu.renr directorship in entities within a conglomerate, each entitv where the non- executive director is concurrently serving as director shall be separately considered in assessing compliance with this requi.ement; and (2) An independent director of a BSFI mav only serve as such for a maximum cumulative term of nine (9) years. After which, the indep€ndent director shall be perpetually barred from serving as independent director in the same BSFI, but may continue to serve as regular director. The nine (9) year maximum cumulative term for independent di.ectors shall be reckoned from 2012. c. Members of the board of directors shall not be appointed as Corporate Secretary or Chief Compliance Officer. Subs€c, 4142q.4 Crrdrrpe6on ol the bootd of dtrcctoE. a. Rolesofthe Choirpeson ofthe boord ol d,Tectofs. The Chairperson oftheboardof directors shall provide leadership in the board of directors. He shall ensure effective fundioning of the board of directors, including maintaining a relationship oftrust with board members. He shall: (1) ensure that the meeting agenda focuses on strategic matters including discussion on risk appetites, and key governance concerns; (2) ensure a sound decision making process; (3) encourage and promote critical discussion; (4) ensure that dissenting views can be expressed and discussed within the decision-making process; (5) ensure that members of the board of directors receives accurate, timely, and relevant information; (5) ensure the

conduqt of proper orientation for first time directors and provide training opportunities for all directors; and (7) ensure conduct of performance evaluation ofthe board of directorc at least once a vear. b. Quolificotions of the Choirperson of the boord of directors, fo promote checks and balances, the Chairperson of the board of directors shall be a non-executive regular director or an independent director, and must not have served as CEO of the BSFI within the past three (3) years. The positions of Chairperson and CEO shall not be held by one person. In exceptional cases where the position of Chairperson of the board of diredors and CEO is allowed to be held by one (1) person as approved by the Monetary Board, a lead independent director shall be appointed. For this purpose, the board of directors shall detine the responsibilities ofthe lead independent director, which shall be documented in the corporate governance manual. The board of diredors shall ensure that the lead independent directo. functions in an environment that allows him to effectively challenge the CEO as circumstances may warrant. The lead independent director shall perform a more enhanced function over the other independent directors and shall: (1) lead the independent directors at board of directors meetings in raising que.ies and pursuing matters; and {2) lead meetings of independent directors, without the presence of the executive directors. Subsec. 4141Q,5 Bootd of dircctots meetingr BSFts shall include in their byjaws a provision that meetings of their board of directors shall be hetd only within the Philippines, except in the case of BSFts with head office located outside the Philippines, which may be held in their respective places of business. a. Full boord of directors meetings The meetings of the board of directors may be conducted through mooern technologies such as, but not limited to, teleconferencing and video conferencing as long as the director who is taking part in said meetings can actively participate in the defiberations on matters taken up thereini Provided,fhat every member of the board of directors shall participate in at least fifty percent (50%) and shall physically attend at least twenty-five percent (25%) of all meetings of the board of directors every year: P/ovided, furtheL fhatthe absence of a director in more than fifty percent (50%) of all regular and special meetings of the board of directo.s during his incumbency is a ground for disqualification in the succeeding election. b, BoodJevel committee meetings Board-level committees shall meet as prescribed in their respective charters. Participation of committee members may likewise be in person or through mooern technofogies. Provided, fhat the attendance and participation of members in committee meetings shall be considered in the assessment of continuing fitness and propriety of each director as member of board-level committees and the board of diredors.

Section 5. Subsection 4141Q.3 is amended and transferred to Section 4143Q and Subsections 4143Q.1 to 4143Q.2, to read as follows: Sec.4143q Duties and responsibilities of the board of diredors/dlrectors, Subsec. 4143Q.1 Specific duties dnd rcsponslbilities ol the boord ol dhectors.Ihe board of directors is primarily responsible for defining the BSFI'S vision and mission. The board of directors has the fiduciary responsibility to the BSFI and all its shareholders including minority shareholders. lt shall approve and oversee the implementation of strategies to achieve corporate objectives. lt shall also approve and oversee the implementation of the risk governance framework and the systems of checks and balances. lt shall establish a sound corporate governance framework. The board of directors shall approve the seledion of the CEO and key members of senior management and controlfundions and oversee their performance. The boord ol directors sholl define the BSFI'S coryorqte culture ond volues. lt shall establish a code of conduct and ethical standards in the BSFI and shall institutionalize a system that will allow reporting of concerns or violations to an appropriate body. In this regard, the board of directors shall: (1) Approve a code of conduct or code of ethics, which shall articulate acceptable and unacceptable activities, transactions and behaviors that could result or potentially result in conflid of interest, personal gain at the expense of the BSFI as well as the corresponding disciplinary actions and sanctions. The code of condud shall explicitly provide that diredors, officers, and all personnel are expected to condud themselves ethically and perform their job with skill, due care, and diligence in addition to complying with laws, regulations, and company policies. (2) Consistently conduct the affairs of the gSFl with a high degree of integrity and play a lead role in establishinS the BSFI'5 corporate culture and values. The board of diredors shall establish, actively promote, and communicate a culture of strong governance in the BSFI, through adopted policies and displayed practices. The board of directors shall ensure that the CEO and executive team champion the desired values and conduct, and that they face material consequences if there are persistent or high profile conduct and value breaches. (3) Oversee the integrity, independence, and effectiveness of BSFI's policies and procedures for whistleblowing. lt shall allow employees to communicate, with protection from reprisal, legitimate concerns about illegal, unethical or questionable practices directly to the board of directors or to any independent unit. Policies shall likewise be set on how such concerns shall be investigated and addressed, for example, by an internal control fundion, an objective external party, senior management and/or the board of diredors itself. ltshall preventthe use ofthe facilities ofthe BSFI in the furtherance of criminal and other imp.oper or illegal activities, such as but not limited to financial misreporting, money laundering, fraud, bribery or corruption. b. The boord of directors sholl be responsible fot opproving gsFl's objectives ond strotegies ond in overseeing monogement's implementotion thereot In this

re8ard, the board of directo.s shall: (1) Ensure that the BSFI has beneficial influence on the economy by continuously providing services and facilities which will be supportive of the natronal economv. (2) Approve the BSFI'5 strateSic objectives and business plans. These shall take into account the BSFI's long-term financial interests, its level of risk tolerance, and ability to manage risks effectively. In this respect, the board of directors shall establish a system for measuring performance against plans. (3) Actively engage in the affairs of the BSFI and keep up with material changes in the BSFI'S business and regulatory environment as well as act in a timely manner to protect the long term interests ofthe BSFI. {4) Approve and oversee the implementation of policies governing major areas of the BSFI's operations. The board of directors shall regularly review these policies, as well as evaluate cont.ol fundions (e.9., internal audit, risk management and compliance) with senior management to determine areas for improvement as well as to promptly identify and address significant risks and issues. The boord of diectots sholl be rcsponsible for the oppointment/selection ol key members of senior monogement ond heods of control functions ond for the opprovol of o sound remunerotion ond othet incentives policy for perconnel.lnthis regard, the board ofdirectors shall: (1) Oversee seledion ofthe CEO and other key personnel, including members of senior management and heads of control functions based on the applica on of fit and proper standards. Integrity, technical expertise, and expe.ience in the BSFI's business, either current or planned, shall be the key considerations in the selection process. Moreover, since mutual trust and a close working relationship are important, the members of senior management shall uphold the general operating philosophy, vision and core values ofthe BSFI. (2) Approve and oversee the implementation of performance standards as well as remune.ation and other incentives policy. The policy should be consistent with the long-term strategic objectives and financial soundness of the BSFI and should promote good performance, convey acceptable risk-taking behavior, and reinforce the BSFI's operating and risk culture. (3) Oversee the performance of senior management and heads of control functions: (a) The board of directors shall regularly monitor and assess the performance of the management team and heads of control functaons based on approved performance standa.ds. (b) The board of directors shall hold members of senior management accountable for their actions and enumerate the possible consequences if those actions a.e not aligned with the board of directors' performance expectations. These expectations shall include adherence to the BSFI'S values, risk appetite and risk culture, under all circumstances. (c) The board of directors shall regularly meet with senior management to engage in discussions, question, and critically review the reports and information provided bv the latter.

(d) Non-executive board members shall meet regularly, other than in meetings ofthe audit, risk oversight, corporate governance, and related party transactions committees, in the absence of senior management, with the external auditor and heads of the internal audit, compliance and risk management functions, (4) Engage in succession planning for the CEO and other critical positions, as appropriate. In this respect, the board of directors shall establish an effective succession planning program. The program should include a system for identifying and developing potential successors for the CEO and other critical positions. {5) Ensu.e that personnel's expertise and knowledge remain relevant. The board of directors shall provide its personnel with regular training oppo.tunities as part of a professional development program to enhance their competencies and stay abreast ofdevelopments relevant to their areas of responsibility. (6) Ensure that employee pension funds are fully funded or the corresponding liability appropriately recognized in the books of the BSFI at all times, and that all transadions involving the pension fund are conducted at arm,s length terms. d. The boord oJ directots sholl be responsible for opproving ond overseeing implementotion of the BSFI'S corporcte govemonce fromework,In this regard, the board of directors shall: (1) Define appropriate governance struc-ture and practices for its own work, and ensure that such practices are followed and periodically reviewed: (a) The board of diredo.s shall structure itself in a wa, including in terms of size and frequencrT of meetings, so as to promote efficiency, critical discussion of issues, and thorough review of matters. The board of directors shall meet regularly to properly discharge its functions, ano likewise have discussions on values, conduct, and behaviors. {b) The board of directors shall c.eate committees to increase efficiency and allow deeper focus in specific areas. The number and nature of board- level committees would depend on the size of the BSFI and the board of directors, the BSFI'5 complexity of operations, as well as the board of diredors' long-term strategies and risk tolerance. (c) The board of diredors shall regularly review the structure, srze ano composition of the board of directors and boardlevel committees with the end in view of having a balanced membership. Towards this end, a system and procedure for evaluation of the structure, size ano composition of the board of diredors and boardjevel committees shall be adopted which shall include, but not limited to, benchmark and peer group analysis. The results of assessment shall form part ofthe ongoing improvement efforts ofthe board of directors. (d) The board of directors shall adopt policies aimed at ensuring that members of the board of directors are able to commit to effectively discharge their responsibilities, which shall include policy on the number of directorship positions and/or other internal/external professional commitments that a director may have, commensurate with the responsibilities placed on the dlrector, as well as the nature, scale and

complexity of the BsFl's operations. (e) The board of directors shall ensure that individual members of the board of diredors and the shareholders are accurately and timelv informed ol a comprehensive and understandable assessment of the ESFl's performance, financial condition and risk exposures. All members of the board of diredors shall have reasonable access to any information about the gSFl at all times. The board of diredors shall also ensure that adequate and appropriate information flows internally and to the public. (f) The board of directors shall assess at least annuallv its performance and effediveness as a body, as well as its various committees, the CEO, the individual directors, and the BSFI itself, which may be facilitated by the corporate governance committee or external facilitators. This exercise shall cover the assessment of the ongoing suitability of each board member taking into account his or her performance in the board of directors and board-level committees. (g) The board of directors shall maintain appropriate records (e.9. meeting minutes or summaries of matters reviewed, recommendations made, decisions taken and dissenting opinions) of its deliberations and decisions. The board of directors shall also ensure that independent views in meetings of the board of directors shall be given fu consideration and all such meetings shall be duly minuted. (2) Develop a remuneration and other incentives policy for directors that shall be submitted for approval of the stockholde15. The board of directors shall ensure that the policy is consistent with the long-term interest of the BSFI, does not encourage excessive risk-takin& and is not in conflid with the director's fi ducia.y responsibilities. (3) Adopt a policy on retirement for directors and officers, as part ofthe succession plan, to promote dynamism and avoid pe.petuation in power. (4) Conduct and maintain the affairs of the BSFI within the scope of its authority as prescribed in its charter and in existing laws, rules and regulations. lt shall ensure effective compliance with the latter, which include prudential reporting obligations. Serious weaknesses in adhering to these duties and responsibilities may be considered as unsafe and unsound practice. {5) Maintain, and periodically update, organjzational rules, by-laws, or other similar documents setting out its or8anization, rights, responsibilities and key activities. The board of diredors shall ensure that the BSFI'S organizational structure facilitates effective decision making and good governance. This includes clear definition and delineation of the lines of responsibility and accountability. (6) Oversee the development, approve, and monitor implementation of corporate governance policies. The board of directors shall ensure that corporate governance policies are followed and periodically reviewed for ongoing rmpaovemenl. (7) Approve an overarching policy on the handling of RPTS to ensure that there is effective compliance with existing laws, rules and regulations at all times, that these are conducted on an arm's length basis, and that no stakeholder is unduly disadvantaged.

e. The bootd of dhectors shall be rcsponsible for opptoving BSFI'' risk governonce fromework and overseeing monagement's implementotion thereof. In this regaro, the board of directors shall: (1) Define the BSFI'5 risk appetite, In setting the risk appetite, the board of directors shall take into account the business environment, regulatory landscape, and the BSFI's long term interests and ability to manage risk. t2) Approve and oversee adherence to the risk appetite statement (RAS), risk policy, and risk limits. (3) Oversee the development of, approve, and oversee the implementation of policies and procedures relating to the management of risks throughout the B5FI. (4) Define organizational responsibilities following the three lines of defense framework. The business line functions will represent the first line of defense, the risk management and compliance functions for the second line of defense, and the intefnal audit function for the third line of defense. tn this regard: (a) The board of directors shall ensure that the risk management, compliance and internal audit functions have proper stature in the organization, have adequate staff and resources, and carry out their responsibilities independently, objectively and effectively. (b) The board of directors shall ensure that non-executive board members meet regularly, with the external auditor and heads ofthe internal audit, compliance and risk management functions otherthan in meetings ofthe audit and risk oversight committees, in the absence of senior manaSement. Subsec. 4143q.2 Specttc duties ond rcsponsibilities ol o dircctor. The position of a director is a position of trust. A director assumes cenain responsibilities to different constituencies or stakeholders, r.e., the BSFI itself, its stockholders, its depositors and other creditors, its management and employees, the regulators, deposit insurer and the public at la.ge. These constituencies or stakeholders have the right to expect that the institution js being run in a prudent and sound manner. The members ofthe board of directors should exercise their "duty of care" and "duty of loyalty' to the institution. a. To rcmoin fit ond prcper for the position for the durution of his term. x x x b. To conduct foir business tronsoctions with the BSF| ond to ensurc thot perconol interest does not bios boord decisions. x x x c. To oct honestly and in good fqith, with loyalty ond in the best interest of the institution, its stockholders, rcgardless of the omount of theit stockholdings, ond other stakeholderc such os its depositors, investors, borrcwers, other clients and the genercl public. x x x d. To devote time ond ottention necessory to Woperly dischorge their duties ond rcsponsibilities. x x x Toactjudiciously,xxx f. To contibute significontly to the decision-moking process of the bootd. x x x To exercise independent judgment. x x x h. To hove o working knowledge of the stotutory ond regulotory requirements olfecting the institution, including the content of its orticles of incorporction ond

by-lows, the requhements of the Bongko Sentrol ond where opplicoble, the requircments of other regulotory ogencies. x x x i. To obseNe confidentiolity. x x x BSFI5 shall furnish all of their first-time directors within a BSF| with a copy of the specific duties and responsibilities of the board of directors and as an individual director prescribed under Subsections 4143Q.1 and 4143Q.2, upon election. The BSFI must keep on file certification under oath of the directors concerned that thev have received copies of such specific duties and responsibilities and that they fully understand and accept the same. Section 5. Subsection 4141Q,3 ltem "d" are amended and transferred to Section 4144Qand Subsections 4144q,1to 4144Q,3, to read as follows: Sec.4144Q Boardievel committees. The board of diredors may delegate some of its functions, but not its responsibilities, to board-level committees. ln this regard, the board of directors shall: a. Approve, review, and update, at least annually or whenever there are significant changes therein, the respective charters of each committee or other documenrs that set out its mandate, scope and working procedures. Said documents shall articulate how the committee will report to the full board of directors, what ts expeded of the committee members, and tenure limits for serving on the committee. The board of directors shall also consider occasional rotation of committee members and chairs to avoid undue concent.ation of power ano promote fresh perspective. b. Appoint members of the committees taking into account the optimal mix of skills and experience to allow the board of directors, through the committees, to fully understand and objectively evaluate the relevant issues. In order to p.omote objectivity, the board of directors shall appoint independent directors and nonexecutive members of the board of directors to the greatest extent possible. Towards this end, an independent director who is a member of any committee that exercises executive o. management functions that can potentially impair such director's independence cannot accept membership in committees that perform independent oversight/control fundions such as the Audit, Risk Oversight and Corporate Governance, Related Party Transactions committees, without prior approval of the Monetary Board. Ensure that each committee shall maintain appropriate records (e.g., minutes of meetings or summary of matters reviewed and decisions taken) of their deliberations and decisions. Such records shall document the committee s fulfillment of its responsibilities and facilitate the assessment of the effecttve performance of its functions. d. Constitute, at a minimum, the following committees: (1)Audit Committee; (2) Risk Oversight Committee, and (3) Corporate Governance Committee: prcvided, That simple or non-complex ESFls performing quasi-banking functions shall, at a

minimum, constitute only the Audit Committee unless directed by the Bangko Sentral to create other board-level committeesi Provided lurther, That the board of directors shall discuss risk management and corporate governance matters in the meetings of the board of directors, with the views of the independent directors duly considered and minuted. For this purpose, a gSFl performing quasi-banking function shall be deemed simple or non-complex, unless declared as complex by the Bangko Sentral and therefore necessitates complete compliance with the aforementioned requirements. Simple or non-complex BSFIs that shall adopt the reduced minimum requirement under this Subsection shall submit the following to the appropriate department of the SES: {1) A secretary's certificate attesting the approval of the board of directors to create only the audit committee/dissolve and other boardlevel committees if and when approved by the Bangko Sentral; and (2) A letter signed by the president/chief executive officer requesting approval for creating/maintaining only the audit committee. Subsec. 41rEq.1 Audit committee. a, Composition ond Choirpe6on. fhe audit committee shall be composed of at least three (3) members of the board of directors, who shall all be non-executive diredors, majority of whom shall be independent diredors, including the Chairperson: Provided, That the Chairperson of the audit committee shall not be the Chairperson ofthe board ofdirectors or of any other boardlevel committees. The audit committee shall have accountin& auditin& or related financial management expertise or experience commensurate with the size, complexity of operations and risk profile of the BsFl. lt shall have access to independent experts to assist them in carrying out its responsibilities. b. Duties ond rcsponsibilities of the oudit committee. The audit committee shall: lll OveBee the finonciol reporting fromewolk. The committee shall oversee the financial reporting process, praciices, and controls. lt shall ensure that the reporting framework enables the generation and preparation of accurate and comprehensive information and r€ports. l2l Monitor ond evoluote the odequocy ond elfediveness of the internol control systerr. The committee shall oversee the implementation of internal control policies and activities. lt shall also ensure that periodic assessment of the internal control system is conducted to identify the weaknesses and evaluate its robustness considering the BSFI's risk profile and strategic diredion. (31 oversee the intemol oudit function, The committee shall be responsible for the appointment/selection, remuneration, and dismissal of internal auditor. It shall review and approve the audit scope and frequency. The committee shall ensure that the scope covers the review of the effectiveness of the BSFI's internal controls, including financial, operational and compliance controls, and risk management system. The committee shall fundionally meet with the head of internal audit and such meetings shall be duly minuted

and adequately documented. In this regard, the audit committee shall review and approve the performance and compensation ot the head of internal audit, and budget ofthe internal audit tunction. (4) Oversee the external audit function. The committee shall be responsible for the appointment, fees, and replacement of external auditor. lt shall review and approve the engagement contract and ensure that the scope of audit likewise cover areas specifically prescribed by the Bangko Sentral and other reSuralors. (s) Ove6ee implementotion of cotective octions, The committee shall receive key audit reports, and ensure that senior management is taking necessary corrective actions in a timely manner to address the weaknesses, non- compliance with policies, laws, and regulations and other issues identified by auditors and other control functions. {6) lnvestigote significont issueskoncems rcised. The committee shall have explicit authority to investigate any matter within its terms of reference, have full access to and cooperation by management, and have full discretion to invite any director or executive officer to attend its meetings. l7) Estoblish whistle blowing mechonism. The committee shall establish and maintain mechanisms by which officers and staff shall, in confidence, raise concerns about possible improprieties or malpractices in matters of financial reporting, internal control, auditing or other issues to persons o. entities that have the power to take corrective action. lt shall ensure that arrangements are in place for the independent investigation, appropriate follow-up action, and subseouent resolution of comolaints. Subsec. 4144Q.2 Ris* oveEight commiftee (ROC) a, Composition ond choirpeBon. The committee shall be composed of at least three (3) members of the board of diredors, majority of whom shall be independent directors, including the chairperson. The ROC'S chairperson shall not be the chairperson of the board of directors, or anv other boardlevel committee. The risk oversight committee shall possess a range of expenise and adequate knowledge on risk management issues and practices. lt shall have access to independent experts to assist it in discharging its responsibilities. b. Duties ond responsibilities of the ROC, The ROC shall advise the board of directors on the gsFl's overall current and future risk appetite, oversee senior management's adherence to the risk appetite statement, and report on the state of risk culture of the BSFt. TheROCshall: lLl Oversee the risk monogement frcmewo*. The committee shall oversee the enterprise risk management framework and ensure that there is periodic review of the effectiveness of the risk management systems and recovery plans. lt shall ensure that corrective actions are promptly implemented to address risk management concerns. l2l Oversee odherence to risk oppetite. The committee shall ensure that the current and emerging risk exposures are consistent with the BSFI's strategic di.ection and overall risk aooetite. lt shall assess the overall status of adherence to the risk appetite based on the quality of compliance with the

limit structure, policies, and procedures relating to risk management and control, and performance of management, among others. (3) Oversee the sk monogement function. "lhe committee shall be responsible for the appointment/seledion, remuneration, and dismissal of the Chief Risk Officer (CRO). lt shall also ensure that the risk management function has adequate resources and effectively oversees the risk taking activities of the BSFI. Subsec. 4144Q.3 Corporote governqnce commit?€e. a. Composition. The committee shall be composed of at least three (3) members of the board of diredors who shall all be non-executive directors, majority of whom shall be independent directors, including the chairperson. b. Outies ond responsibilities of the Corporote Governonce Committee. The Corporate Governance Committee shall assist the board of directors in fulfilling its corporate governance responsibilities. In this regard, the Corporate Governance Committee shall: l1l Oversee the nominotion process for members of the boord of directoi-s dnd for positions oppointed by the boord of directors. The committee shall review and evaluate the qualifications of all persons nominated to the board of directors as well as those nominated to other positions requiring appointment by the board of diredors. The committee shall recommend to the board of directors matters pertaining to the assignment to board committees, as well as succession plan for the members of the board of directors and senior management. l2l OveRee the continuing educotion progrom fot the bootd of diredorc. The committee shall ensure allocation of sufficient time, budget and other resources for the continuing education of directors, and draw on external expertise as needed. The committee shall establish and ensure effective implementation of policy for on-boardjng/orientation program for first time directors and annual continuinS education for all directors. For this purpose, the orientation program for first time directors shall be for at least eight (8) hours, while the annual continuing training shall be at least for four hours. The training programs should cover topics relevant in carrying out their duties and responsibilities as directors. (31 Oversee the pedormonce evoluotion prgcess. The committee shall oversee the periodic evaluation of contribution and performance (e.9., competence, candor, attendance, preparedness and participation) of the board of directors, board-level committees, and senior management. Internal guidelines shall be adopted that address the competing time commitments of directors serving on multiole boards. l4l Oversee the design ond operution of the rcmunerction ond other incentives polrcy. The committee shall ensure that the remuneration and other incentives policy is aligned with operating and risk culture as w€ll as with the strategic and financial interest of BSFI, promotes good performance and conveys acceptable risk-taking behavior defined under its Code of Ethics, and complies with legal

and regulatory requirements. lt shall work closely with the BSFl,s risk oversight committee in evaluating the incentives created by the remuneration system. In particular, the risk oversight committee shall examine whether incentives provided by the remuneration system take into consideration risk, capital, and the likelihood and timing of earnings. Moreover, it shall monitor and review the remuneration and other incentives policy including plans, processes and outcomes to ensure that it operates and achieves the objectives as intended, Sectiqn 7. Section 4142Q is amended and transferred to Subsection 41450,1, the provisions of Subsection 4142Q,3 is transfe.red to Subsection 4145e.2, and new Subsection 4145Q.3 is herebv added, to read as follows: Sec, 4145Q Officers. Subsec. 4145Q.1 Qudlilicotions ol an officer. An officer must be fit and proper for the position he is being appointed to. In determining whether a person is fit and proper for a particular position, the following matters must be considered: integrity/probity, education/trainin& and possession of competencies relevant to the function such as knowledge and experience, skills and diligence. In assessing an officer's integrity/ probity, consideration shall be given to the officer,s market reputation, observed conduct and behavior, as well as his ability to continuously comply with company policies and applicable laws and regulations, including market conduct rules, and the relevant requirements and standards of anv regulatory body, professional body, clearing house or exchange, or government and any of its instrumentalities/agencies. An appointed officer has the burden to prove that he possesses all the foregoing minimum qualifications and none of the cases mentjoned under Subsection 4150e.2. An officer shall submit to the Bangko Sentral the required certifications and other documentary p.oof of such qualifications usinEAppendix e-57 as guide within twenty (20) banking days from the date of meeting of the board of directors in which the officer is appointed/promoted. Non-submission of complete documentary requirements within the prescribed period shall be construed as his/ her failure to establish his qualifications forthe position and resultsto his removal therefrom. The Bangko sentral shall also consider its own records in determining the qualifications of an officer. The foregoing qualifications for officers shall be in addition to those required or prescribed under R.A. No. 8791and other applicable laws and regulations. Subsec.4145Q,2 Dt t es dnd responslbllftles ol officerc: a. To set the tone of good governonce from the top.,, x b. To oversee the doy-to-doy monogement of the BSFI. ,,, c. To ensure thot duties ore effectively delegoted to the stolf ond to estoblish o mdnogement structurc thot promotes occountobility ond trohsporency. ,,, d. To promote ond strengthen check ond bolonces system in the BSFI. xxx

Subsec. 4145Q.3 Ciiet Executive Offlcet (CEOI The CEo shall be the overall-in-charge for the management of the business and affairs of the ESF| governed by the strategic diredion and risk appetite approved by the board of directors. He shall be primarily accountable to the board of diredors in championing the desired condud and behavior, implementing strategies, and in promoting the long-term interest of the BSFI. Section 8, The entire provisions of Sections 4146Q and 4147Q are transferred to Subsections 41460,1 and 414603, respectively, and new Section 4146Q and Subseqtion 4146Q.2 are added, to read as follows: Sec. 4146q Remuneration and Other Incentlves. The board of directors shall aoorove a remuneration and other incentives policy that is appropriate and consistent with the BSFI's operating and risk culture, long-term business and risk appetite, performance, and control environment. Said policy shall cover all employees and should be designed to encourage good performance that supports the interest ofthe BSFI and its stakeholders. lt shall be aligned with prudent risk taking and explicitly discourage excessive risk taking as defined by internal policies. The board of directors or a board- level committee (e.9., Corporate Governance Committee) shall monitor and review the remuneration and other incentives policy including plans, processes and outcomes, at least annually, to ensure that it operates and achieves the objectives as intended. gsFls shall consider the following in the design of the remuneration and other incentives oolicv: a. The remuneration and incentives package shall take into account the employee's position, role, responsibilities and activities in the BSFI. lt shall also consider the risks that the employee takes on behalf ofthe BSFI. In this regard, it should be sensitive to prospective risks and .isk outcomes that have been realized and considers the overall performance ofthe BSFI. b. Remuneration and incentive pay-out schedule should be sensitive to the time- horizon of risk. The policy may include provisions that defer payment until risk outcomes are better known or orovisions under which remuneration and incentives may be reduced or reversed if new facts emerge showing that the remuneration and incentives paid was based on erroneous assumptions, such as misreportinS, or if it is discovered that the employee has failed to comply with internal policies or legal requirements. c. Remuneration of employees in risk control fundions (i.e., lnternal Audit, Compliance, and Risk Management Functions)shallbe based on the achievement of their objectives and shall be independent of the business lines which they oversee. Subsec. 4146Q.1 Prolt shoring proEroms, Profit sha.ing programs adopted in favor of directors/trustees/officers and employees shall be refleded in the by-laws of 8SFls, xxx

Subsec. 4145Q.2 loans, odvqnces, ond other qedit qccommodotions to olficers, gSFl may grant loans, advances, or any other forms of credit accommodations to their officers as part of a board-approved remuneration and incentive program. The board of diredors shall ensure that these credit accommodations are granted for legitimate purposes, such as among others, financlng the housing, transportation, and personal needs of the officers. In this regard, the board of directors shall identifo specific purposes eligible for said credit accommodations to officers to promote good performance and acceptable risk-taking behavior consistent with the BSFI's operating and risk culture, long-term business and risk appetite, performance, and control environment. BSFIs shall submit the board-approved purposes for the grant of loans, advances, or any other forms of credit accommodations to officers for approval of the Eangko Sentral. The guidelines and contractual provisions implementing said defined purposes, and any subsequent changes thereto, shall on the other hand, be approved by the board of directors or a board-level committee. Tronsitory prcvision. Existing financing programs for olficers that have been approved bythe Bangko Sentral need not be resubmit1.edi Provided,fhat BSFts that shallchange any of the provisions ofthe earlier approved program shall submit for approval ofthe Eangko Sentral the board-approved purposes for the grant of loans, advances, or any other forms ofcredit accommodations to officers. Subsec. 41/t5q,3. Compensdtion qnd Other benelits of Dircctorsnrustees dnd Olflcerc, 10 protect the funds of depositors and creditors, the Monetary Board mav reSulate/redrict the payment by the QB/trust entity of compensation, allowances, fees, bonuses, stock options, profit sharing, and fringe benefits to its direcors ano officers in exceptional cases and when the circumstances warrant, such as, but not limited to the followinS: XXX Sectlon 9. Sections/Subsections 4141e.4, 4144e, and 4145e are amended and transferred to Subsections 4148Q.1 to 4148Q.4, and Subsection 4145e.1 is transferred to 4148Q.3, to read as follows: Sec, 4148Q Conffrmation of the Eledion/Appointment of Dlrectors and Offlcerg Blo- data of Directors and Officers, Interlocking Diredorships and/or OfffceEhips, Rules of Procedures on Administrative Cases Involvint Directors and Officers of BSFts. Subsec. 41/t8Q.1 Cort rrr stlon ol electlon/appointment of dlrcctors/olflcers. Confirmation of the election/appointment of directors/officers shall be covereo ov Subsection X148.1 of the MORB. Subsec. 4148Q.2 aioJotu ol Dirccto5 qnd Olfices a. BSFI5 with trust authority shall submit to the approp.iate department of the SES a bio-data with lD pidure of their (1) directors and officers who are subject to confirmation under Subsection 4148e.1, (2) officers below the rank of Senior Vice President (SVP) requiring a different set of minimum qualifications or, {3) officers whose appointment requires prior lvlonetary Board approval upon every election/re-election/appointment/promotion, in a prescribed form, and for first-

time directors/officers within a panicular BSFI with trust authority/group wnose election/appointment requires Monetary Board/SES Committee confirmation, the duly notarized authorization form per Appendix Q-45, within twenty {20) business days from the date of election/reelection of the di.ectors/meeting of the board of directors in which the officers are appointed/promoted in accordance with Appendix Q-3. The bio-data shall be updated and submitted in cases of change of name due to change in civil status and change of residential address, within twenty (20) banking days from the date the change occurred, and in cases of .equests for prior Monetary Board approval of interlocks. For other officers below the rank ofSVP other than the Treasurer, trust officer, and heads of internal audit, risk management, and compliance functions regardless of rank, the BSFI with trust authority shall not be required to submit their bio-data to the BanSko Sentral. Subsec. 41/8q.3 rrterr$king Dhecto6hlps ond/ot Otffce6hips. In orde. to safeguard against the excessive concentration of economic power x x x c. lnterlockingofficerships A concurrent officershiD in different Fls x x x As a general rule, there shall be no concur.ent officerships between QBs or, between a QB and a bank or between a QB and an NBFtr. However, subject to prior approvalofthe Monetary 8oard, concurrent officerships, may be allowed in the following cases: x x x lofficers, who concurrently held officership position or other positions that caused them to be involved in the daily microllnance operetions of related NGOS/ foundations, were given up to 30 September 2011to relinquish such officer position. d. Secondment A BSFI may second or transfer its employee to another entity for temporary assignment: Proyided, That it has a board-approved policy on secondment and that the transfer of the employee is approved by the appropriate authority of the BSFI: Provided, further, That the secondee or the transferred employee shall relinquish all his duties, responsibllities, and authorities in the 8SFl, and shall recerve remuneration and other incentives from the host entity. BSFIS shall submit a notice within ten (10) banking days from the approval of secondments of employees to the appropriate supervising department of the SES, e. Representatives of government The provisions ofthis Sedion shall applyto persons appointed to such x xx

Subsec. 41/8Q.4 Rures ol Prccedures on Admlnlstrotive Coses tnvolving Dhealorc and Wcers ol gSFIs. The rules of procedure on administrative cases involving directors and officers of BSFIs arc shown in Appendix Q-35. Section 10, Sedion 4185Q of the MORNBFI on internal audit function is herebv amended to read as follows: Sec.4186Q Internal audit functlon, An effective and efficient internal audit function constitutes the third line of defense in the system of internal control. Internal audit is an independent, objective assurance and consulting function x x x Secilon 11, Section 4406Q.10 of the MORNBFI on confirmation of the appointment/designation of trust officer and independent professional of Chapter A of Part Four of the Trust, Other Fiduciary Business and Investment Activities is hereby amenoeo as follows: PART FOUR - TRUST, OTHER FIDUCIARY BUSINESS AND INVESTMENT MANAGEMENT ACTIVITIES A, TRUST AND OTHER FIDUCIARY BUSINESS Sec. 4/Ut6Q Organization and Management. Subsec. 4406Q.10 Confrmqtion ol the oppointmentldesigndtiott ol trust olficer qnd i n d ep e n de nt p rcf essi o nd I xxx The appointment or designation of independent professional and trust officer shall be subject to confirmation by the SES Committee. x x x Sectlon 12. The Sections/Subsedions of the MORNBFI are renumbered/deleted as follows: Old S€dlon/ Title/Description New/Deleted Subsection Section/Subsection 4141Q.9 Certifi cations required Deleted. Covered bv 4143Q.2 4141Q.10 Sanctions Deleted. Covered by 5upervisory Enforcement Framework under Sec. X009 4143Q Djsqualification of Directors/Trustees 4150Q and ofllcers 4143Q.1 Persons disqualified to become 4150Q.1 directors/trustees 4143Q.2 Persons di5oualified to become officers 4150Q.2 4143Q.3 Effect of non-possession of 4150Q.3 qualifications or possession of disqualilications 4143q.4 Disaualification orocedures 4150Q.4 4143Q.5 watchlisting 4150Q.s

Old S€ction/ Title/Descriptlon NeVDeleted Subsection Section/Subs€ction 4143Q.6 Prohibition against foreign 4150Q.6 ofllcertemployees of fi nancing companies 4149Q.9 Sanctions Deleted. Covered by Supervisory Enforcement Framework under Sec. X009 Section 13. Considering the renumbering of the provisions in the above Sections/Subsections, .eferences to the renumbered Provisions aae corresPondingly amended/deleted as shown below: Section/ wlth cross- on the: New Section/ Subsectlon reference toi Subsection 4146Q.3 4146Q Profit sharing program 4146q.1 4150q.1 4141Q.2 Directo rs/trustee specia I sem ina r for 4142Q.3 boad ofdirectors 4150Q.2 4143q.1except Disqualification of directors, applicable 4150Q.1 b(2)and b(7) to officers 4150q.3 4L4lQ.2 Qualifications of a director 4142Q.3 4742Q qualifications of an Officer 4145Q.1 4141Q.3 4141Q.4 Confirmation ofthe 4148Q.1 election/appointment of directors and officers 4150q.4 4143Q.1and Grounds for di5qualifications 4150Q.1and 4150Q.3 4143Q.2 (directors/officers) 4150Q.2 4150Q.3 4143Q.4 Disqualification procedures 4150Q.4 4150Q.s 4179q.2 4141Q.3 Duties and responsibilities of the 4143Q.1 4180Q.s Board of Directors 4185Q.1 it405Q.4 4602q.1 4180Q.4 4142Q Qualifi cations of offi cers 4145q.1 4185Q.1 4142Q.3 Duties ofOfficers 4145Q.2 4192Q 4141Q.1 Definition of Independent Director 4002Q(c) 4301Q.6 4141q.2e Definition ofcontrol 4002Q(c) 4326.r 4141Q Definition ofdirecto15 4002Q{e) 4142Q Deflnition of officers 4002a(k) 4,!06Q.2 4141Q.1 0efi nition of non-executive directors 4002a(D (footnote) Defi nition of independent directors 40024(c) 4141Q.2 Definition of officers 4002q(k) (footnote) 4142Q App Q-3 4141Q.9 Certification on receipt ofcopy of 4143Q.2 dutie5 and responsibilitles of the board ofdirectors and directoas App Q-3 4141Q.4 Notice of Election/Appointment of 4148Q.1 Members of Board of Directors and Committees

sectlon/ wth caoss- On the: New Section/ Subsection reference to: Subsection App Q-3 4143Q.4 Report on disqualification of 4150Q.3 directors/oflicers App Q-3 4144Q Bio8ra ph ica I Data of Directors/Officers 4148Q.2 with lD picture App Q-3 4141Q.2 Certification under oath of the 4002e(s) independent directors that he/she is an independent director App Q-3 4144Q List of Members ofthe Eoard of 4148Q.2(c) App Q-57b Directors/Officers App Q{5 4143Q.5 Querying on Eangko Sentral Watchlist 4150Q.5 Files forScreening Applicants/conf irming appointments of Oirectors/Officials App Q-59a 4141Q.3 Powers/responsibilities and duties of 4144Q.1 directors: Audit Committee 41417 4141Q Defi nition; Qualifi cations; Powers, 4002Q 4142q responsibilitles and Duties of Board of 4143Q Directors 474!f,2 4141q.2 Qualifications of a director 4142Q.3 4141T.3 4141q.3 Powers/responsibilities and duties of 4143Q.1 board of directors 4L42r 4L42Q Defi nitions, aualifications and Duties 4002q 414sQ and Responsibilities of Ofticers 4142T.3 4142Q.3 Duties and ResDonsibilities of Officers 4745Q.2 4743f 4143Q Disqualifi cation of Directors 4150Q 4143Q.1 Disqualification of Offi cers 4150Q.1 4143Q.2 4150Q.2 4l$r 4I44Q Bio-data of Directors and Officers 4148Q.2(c) 43267 4141Q.3 Definition of related parties 4002Q(o) (footnote) App T-3 4144Q Biographical Data of DirectorVOffi cers 4148Q.2 with l0 picture List of Members ofthe Board and 4148Q.2(c) Officers Duly accomplished and notarized 4150Q.4 authorization form for querying the Eangko Sentral watchlist fi les App T-3 414LQ.4 Notice of Election/Appointments of 4148Q.1 Members of Eoard of Directors and Committees App T-3 4143Q.4 Report on Disqualification of 4150q.4 Director/Office r App T-3 4141Q.9 Certification under oath of 4143Q.1and directors/ofUcers that he/she has all 4143q.2 the qualifications and none ofthe disqualiflcations App. T-3 414LQ.2 Certification under oath of 4002a(s) independent directors that he/she is an independent diredor as defined

Sectlon 14, Effectivity. This Circular shall take effect fifteen (15) calendar days following its publication either in the Official Gazette or in a newspaper of general circulation. FOR THE MONETARY BOARD: [*awr TESTOR A. ESPENILTA, JR' Governor ?_LAuSust 2017

Appendk q-5t of the MoRNBFI Required Certifiaations and Examples ofSupportins Documents for the Confimation of Election/Appointment of Directors/Officers ol Bangko Sentrdl nt piliplnas S!pewlsed Financial Institutlons (BSFtslr (Appendlx to Subsecs. 4t4Ae,L 4tAOe.3 ond 4qneJo) Requiring Bangko Sentral Confi rmation2 Not Requiring Bangko Sentral Conflrmation Oirectors Chief Exe.utive Offlcer and OtheJ Officers Officers belowthe rank ofSenioa Vlce President enumerated In Subsea. X148.1r requiaing a different set of mlnimum oualifications4 Letter-request for Bangko Sentralconfirmation . Letter-request for Bangko Sentral confirmation siSned by authorized officed with an signed by authorized officer with an affirmative affirmative statement that the institution has statement that the institution has conducted a conducted a fit and proper test on the fitand proper test on the officer/s concerned director/s concerned Secretary's Certificate attesting to the . Secretary,s Certificate attesting to the resolution resolution of the stockholders or board of of the board of directors approving the directors approving the election appointment Bio-data with a photograph (2" x 2") taken Bio data with a photograph 12" x 2") taken . Bio-data with a phototraph (2,, x 2,,) taken within within the last six (6) months within the last six (6) months the tast six (6) months . Certification undea oath of the director . Certification under oath of the officer concerned concerned that he/she possesses all the that he/she possesses all the qualifications and qualifications and noneofthe disqualifications none of the disqualifications to become an - To be submitted within twenty (20) business days from date of electlon/re election/appointment/promotion to the appropriate sup€rvising department ofthe SEs. For interlocks .equiring Monetary Board approval, the following shall be submitted: (a) Letterrequest for Monetary Board approval with justification; and (b) Bio-data. _ Includin8 those exempted from the required Bangko Sentrat confirmation as provided in Subsecs. 4148e.1 a nd 4406e.10. ' E.g, Treasurer, trust officer, heads of internalaudit, risk management, and compliance functions, and oth€r officers wlth rank ofSeniorVice president and above 'E 8., Security Officer, Head/ln_Charge ofElFCoU Operations, and Head/ln-CharSe oflmport and Export Financing Operations (forTBs) -Authorized siSnatory is the ChiefExecutive Offlcer (CEO)of the institution, except for appointment ofCEO, in which casethe authorized siSnator shallbe the Chairman of the Corporate Governance Committee or ofthe Board of Directors, as may be applicable. For those exempted from the required Bangko Sentralconfirmation as provided in Subsec. 148.t, submit statement that the institution has conducted a fit and propertest on the dkector/officer concerned. Page L of3

Appendix Q-57 ot the MORNSFI Required Certifietions and Examples ofSupporting Documents forthe Confirmation of Election/Appointment of Directo6/Officers of Ean8lo S€ntral ng Plliplnas Supervlsed Flnanciallnstitutions (BSFls)! (Appendlx to Subtecs. 47/AQ.t, 4t8oQ.3 ond tt/to6Q.7o) Requiring BanSko Sentral Contirmation' Not Requiring Bangko Sentral Confirmation Dircctors Chlet Executlve Offlcer and OtheJ Officers Otli.e6 below the Enkofs€niorvice President enumerated In Subsec. X1i8.1t requiring a different s€l ot minimum qualifications' to become a director officer . For lirst-time directors in a particular . For first-time officers to be subject to BanSko bank/banking group as delined in Subsec. Sentral confirmation in a panicular bank with x148.1 trust authority/trust corporation/bankint group as defined in Subsec. X148.1 a.Certification under oath of compliance with a.Duly accomplished and notarized authorization the Ean8ko Sentrafprescr;bed syllabus on form for querying the Ban8ko Sentral watchlist on-boardin&/orientation program file from the officer concerned b.Certification under oath that the director has received copies of the general responsibility and specific duties and responsibilities of the board of directors and of a director and that he/she fully understands and accepts the same c. Dulv accomplished and notarized authodzation form for querying the 8an8ko Sentral watchlist file from the director concerneo Page 2 of3

Appendlx q-57 of the MORNBFI Required cenlllcations and Examples ofsupporting Documents for the confirmation of Election/Appointment ot Dlrcdors/Otticers of Bangko Sentral ng pillplnas Supe is€d Fin.ncial Institutlons (BSFtslr (Appendix to Subse6, 4ti8eL 4tAOe.3 ond ttlr06e.t0) Requiaing Ean8ko Sentral Confi ]matlon2 Not Req!irint Bangko Sentral Confirmation OirectoF Chief Executive Ofticer and Other Ofticers Oftlcers below the rank of Senior Vice President enumeftrted in Subsec. X148.1t rcqulring a dlfterent set of minlmum qualificationsa For independent directors, certification under . Brief description of his/her duties and . Erief description of his/her duties and oath that he/she is an independent director asresponsibilities resoonsibilities defined in BSP regulations For re-elected directors, Secretary's Certificate . Alien Employment Permit issued by the on the attendance by the director concerned Department of Labor and Emplovment for to the board meetings held for the last tweNe foreigners appointed as officers (12) months covering the term of service, indicating percentage of attendance to boaro meet|ngs Page 3 ot 3