CHAPTER 3

BANK MANAGEMENT

Board of directors – composed of a number agreed upon as contained in the by-laws. It is

headed by a chairman whose duty is to preside over the meetings of the board.

Qualifications:
1. Every Director shall own at least one (1) share of the capital stock of the
corporation.
a. Educational Attainment
b. Adequate competency and understanding of business
c. Age requirement
d. Integrity, probity
e. Assiduousness

2. At least two thirds of the members of the board of directors shall be Filipino Citizen.

3. The proposed director of a bank shall be subject to qualifications and other

requirements of existing law, rules and regulations of the Bangko Sentral.

Responsibilities:

Firstly – They are duty bound to adopt measures that shall safeguard the depositor’s
interest.

Secondly – They must make sure to compensate the stockholders fairly enough in
exchange for the risk they undertake and capital they invest.

Thirdly – The directors are responsible to the regulatory and supervisory agencies who
keep surveillance over the management of the bank’s affairs to allow maximum safety
to depositors.

Standing Committees:

1. The Executive Committee – deals with administrative matters; often prepares the
groundwork for board meetings.
2. Loans and discount committee – all matters pertaining to loans and discounts, to
lines of credit and other related to the loaning function of the bank.
3. Investment committee – concern with the banks investment portfolio; passed
judgment on what securities the bank should purchase and in what amounts.
4. Trust committee – fiduciary function of the bank; how funds will be invested; how
much to charge clients, and how to administer trust agreements.
5. Examination committee – improvised methods to conduct such internal examination.

Liabilities of the Board of Directors – arise in their incompetence and negligence in the
discharged of their duties.

Limitations- Sec.55. Prohibited Transactions

a. Make false entries in the bank reports or participate in fraudulent transactions.

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b. Disclose to any unauthorized person any information relative to the funds or
properties in the custody of the bank.
c. Accept gifts, fees, commission in connection with the approval of a loan.
d. Overvalue security for the purpose of influencing in any way the actions of the bank.
e. Outscore inherent banking functions.

Bank Officers:
 President – presides board meetings if he is also the chairman. Implements policies
promulgated by the board. He is the court of last resort when the board is in session.
 Vice-President – acts in behalf of the president if the president is absent.
 Cashier – cash custodian.
 Comptroller – takes care of all accounting and statistical work of the bank.
 Auditor – verifies the accounts resulting from banking transactions.

Bank Operation:

 Executive Function – a banker must of necessity be faced with the policy-making,

with establishing harmonious relations with customers in order to get business,
with gathering facts and figures about the depositors and debtors, with recruiting
personnel to do the minor operations and with similar duties involving the caliber
of an executive.
 Teller Function – he must then act as teller I manifold ways. He accepts deposit,
changes checks for cash, changes big bills with smaller denominations, releases
checks or cash representing loans, receives payment for loans and other teller
functions.
 Bookkeeping Function – keep faithful record of the events and accounts passing
through his hands. He may also be called upon to summarize and interpret the facts
and figures.

Personal and Educational Qualities of a Banker

-A potentially efficient banker must possess a character above suspicion and integrity of
the highest order:
 He should be patient, understanding, cordial and respectful.
 He should be well versed in banking principles and practices.
 He should a good command of the medium of communication.
 He should have a working knowledge of law, economics, accounting, management,
public relations, and business psychology

Qualifications of a director:
A director shall have the following minimum qualifications:
1. He shall be at least twenty-five (25) years of age at the time of his election or
appointment;
2. He shall be at least a college graduate or have at least five (5) years experience in
business;
3. He must have attended a special seminar on corporate governance for board of
directors conducted by the BSP or by seminar providers accredited by the BSP not
later than six (6) months from the date of his election, and
4. He must be fit and proper for the position of a director of the bank/quasi-
bank/trust entity. In determining whether a person is fit and proper for the position
of a director, the following matters must be considered:
- integrity/probity;
- competence;

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- education;
- diligence; and
- experience/training.

Qualifications of an officer.
An officer shall have the following minimum qualifications:
1. He shall be at least twenty-one (21) years of age;

2. He shall be at least a college graduate, or have at least five (5) years experience
in banking or trust operations or related activities or in a field related to his
position and responsibilities, or have undergone training in banking or trust
operations acceptable to the appropriate supervising and examining department
of the BSP: Provided, however, That trust officers shall have at least two (2) years
of actual experience or training in trust operations or fund management or other
related fields;

3. He must be fit and proper for the position he is being proposed/appointed to. In
determining whether a person is fit and proper for a particular position, the
following matters must be considered:
- integrity/probity;
- competence;
- education;
- diligence; and
- experience/training.

For commercial banks, the President must, in addition to the abovementioned minimum
qualifications, have at least two (2) years experience in banking and/or finance. For thrift
banks and rural banks, any one of the President, Chief Operating Officer or General Manager
must, in addition to the abovementioned minimum qualifications, have at least two (2)
years experience in banking and/or finance. The foregoing qualifications for officers shall
be in addition to those already required or prescribed under existing laws.

Disqualifications of a director. Without prejudice to specific provisions of law

prescribing disqualifications for directors, the following are disqualified from becoming
directors:

a. Permanently disqualified
Directors/officers/employees permanently disqualified by the Monetary Board
from holding a director position:

1. Persons who have been convicted by final judgement of the court for offenses
involving dishonesty or breach of trust such as, but not limited to, estafa,
embezzlement, extortion, forgery, malversation, swindling and theft, robbery,
falsification, bribery, violation of B.P. Blg. 22, Violation of Anti-Graft and Corrupt
Practices Act and Prohibited Acts and Transactions Under Section 7 of R. A. No. 6713
(Code of Conduct and Ethical Standards for Public Officials and Employees);

2. Persons who have been convicted by final judgement of a court sentencing them
to serve a maximum term imprisonment of more than six (6) years;

3. Persons who have been convicted by final judgment of the court for violation of
banking laws, rules and regulations;

4. Persons who have been judicially declared insolvent, spendthrift or incapacitated

to contract;

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5. Directors, officers or employees of closed banks/quasi-banks/trust entities who
were found to be culpable for such institution’s closure as determined by the
Monetary Board.

b. Temporarily disqualified

Directors/officers/employees disqualified by the Monetary Board from holding a

director position for a specific/indefinite period of time. Included are:

1. Persons who refuse to fully disclose the extent of their business interest or any
material information to the appropriate supervising and examining department
when required pursuant to a provision of law or of a circular, memorandum or rule
or regulation of the BSP. This disqualification shall be in effect as long as the refusal
persists;

2. Directors who have been absent or who have not participated for whatever
reasons in more than fifty percent (50%) of all meetings, both regular and special, of
the board of directors during their incumbency, or any twelve (12) month period
during said incumbency.

3. Persons who are delinquent in the payment of their obligations as defined

hereunder:
a. Delinquency in the payment of obligations means that an obligation of a
person with a bank/quasi bank/trust entity where he/she is a director or
officer, or at least two obligations with other banks/financial institution,
under different credit lines or loan contracts, are past due pursuant to Secs.
X306 and 4308Q of the Manual of Regulations;

b. Obligations shall include all borrowings from abank/quasi bank obtained

by:
i. A director or officer for his own account or as the representative or
agent of others or where he/she acts as a guarantor, indorser, or
surety for loans from such financial institutions;

ii. The spouse or child under the parental authority of the director or
officer;

iii. Any person whose borrowings or loan proceeds were credited to

the account of, or used for the benefit of a director or officer;

iv. A partnership of which a director or officer, or his/her spouse is

the managing partner or a general partner owning a controlling
interest in the partnership; and

v. A corporation, association or firm wholly-owned or majority of the

capital of which is owned by any or a group of persons mentioned in
the foregoing Items (i), (ii) and (iv);

This disqualification shall be in effect as long as the delinquency persists.

4. Persons convicted for offenses involving dishonesty, breach of trust or violation of

banking laws but whose conviction has not yet become final and
executory;

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5. Directors and officers of closed banks/quasibanks/ trust entities pending their
clearance by the Monetary Board;

6. Directors disqualified for failure to observe/discharge their duties and

responsibilities prescribed under existing regulations. This disqualification applies
until the lapse of the specific period of disqualification or upon approval by the
Monetary Board on recommendation by the appropriate supervising and examining
department of such directors’ election/reelection;

7. Directors who failed to attend the special seminar for board of directors required
under Item 3 of Sub secs. X141.2/4141Q.2. This disqualification applies until the
director concerned had attended such seminar;

8. Persons dismissed/terminated from employment for cause. This disqualification

shall be in effect until they have cleared themselves of involvement in the alleged
irregularity or upon clearance on their request from the Monetary Board after
showing good and justifiable reasons;

9. Those under preventive suspension; or

10. Persons with derogatory records with the National Bureau of Investigation
(NBI), court, police, Interpol and monetary authority (central bank) of other
countries (for foreign directors and officers) involving violation of any law, rule or
regulation of the Government or any of its instrumentalities adversely affecting the
integrity and/or ability to discharge the duties of a bank/quasi bank/trust entity
director/officer. This disqualification applies until they have cleared themselves of
involvement in the alleged irregularity.

Disqualifications of an Officer

1. The disqualifications for directors mentioned in Sub secs. X143.1 and 4143Q.1
shall likewise apply to officers, except that stated in Items b.2 and b.7.

2. Except as may be authorized by the Monetary Board or the Governor, the spouse
or a relative within the second degree of consanguinity or affinity of any person
holding the position of Chairman, President, Executive Vice President or any
position of equivalent rank, General Manager, Treasurer, Chief Cashier or Chief
Accountant is disqualified from holding or being elected or appointed to any of said
positions in the same bank/quasi-bank; and the spouse or relative within the second
degree of consanguinity or affinity of any person holding the position of Manager,
Cashier, or Accountant of a branch or office of a bank/quasi-bank/trust entity is
disqualified from holding or being appointed to any of said positions in the same
branch or office.

3. In the case of Universal Banks, Commercial Banks, and Thrift Banks, any
appointive or elective official whether full time or part time, except in cases where
such service is incident to financial assistance provided by the government or
government-owned or controlled corporations or in cases allowed under existing
law.

4. In the case of Cooperative Banks, any officer or employee of the Cooperative

Development Authority or any elective public official, except a barangay official.

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5. Except as may otherwise be allowed under C.A. No. 108, otherwise known as “The
Anti-Dummy Law”, as amended, foreigners cannot be officers or employees of
banks.

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Make life as beautiful as your heart.

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