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REGULATORY ISSUANCES   

REGULATORY ISSUANCE NO. 2012-01
TO :Member Banks
SUBJECT :Revised Rules on Administrative Offenses, Fines, and Procedure in Administrative Investigations

Pursuant to Section 21 (g) of Republic Act No. 3591, as amended (the “PDIC Charter”), the Board of Directors of PDIC, by virtue of Resolution No. 2011-12-259 dated December 9, 2011, approved the promulgation of the revised PDIC Rules on Administrative Offenses, Fines and Procedure in Administrative Investigations.

PART I - Administrative Offenses, Fines, and Consequences

Section 1. Definition of Terms. – For purposes of this Regulatory Issuance, the following terms shall mean:

  1. Administrative Fine – refers to the monetary penalty imposed against a bank and/or any of its directors, officers, employees or agents for committing any of the administrative offenses defined in this Regulatory Issuance.

  2. Deposit Records – include, but is not limited to, subsidiary ledgers of deposit liabilities, duplicate copies of time certificates of deposits, deposit agreements, signature cards, registers or logbooks used in connection with the issuance of new deposit accounts, individual files maintained by the bank for depositors, if any, computer systems and databases (including system documentation/manuals) pertaining to deposit operations, the deposit liabilities control ledgers which are part of the General Ledger of the bank, deposit/withdrawal slips, debit/credit memos, and other similar bank records relevant to deposit liabilities.

  3. Directive to Cease and Desist (DCD) – refers to a directive issued by PDIC prohibiting, among others, a bank and/or its directors, officers, employees or agents from offering, marketing or promoting, or continuing to offer, market or promote deposit accounts/products or transactions, which constitute and/or emanate from an Unsafe and/or Unsound Banking Practice, and representing to the public that the said deposit products or accounts, or transactions, are insured by PDIC.

  4. False Information/Statement – refers to untrue, incorrect, inaccurate, erroneous, or misleading information/statement alleged or stated in the documents, reports or supporting schedules/attachments, including those that are forged, altered or tampered.

  5. Splitting of Deposits – occurs whenever a deposit account/s with an outstanding balance of more than the statutory maximum amount of insured deposit maintained under the name of a natural or juridical person/s is/are broken down and transferred into two or more accounts in the name/s of natural or juridical person/s or entity/entities who have no beneficial ownership on transferred deposits in their names within one hundred twenty (120) days immediately preceding or during a bank-declared bank holiday, or immediately preceding a closure order issued by the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) for the purpose of availing of the maximum deposit insurance coverage.

  6. Unsafe and/or Unsound Banking Practices – refers to the activities, transactions, or omissions as defined under PDIC Regulatory Issuance No. 2011-01 (Unsafe and/or Unsound Banking Practices).

  7. "Willful Refusal" - means the unjustified failure or avoidance or delay to perform an obligation imposed upon a bank and/or any of its director(s), officer(s), employee(s) or agents under any order, regulation or directive issued by PDIC.

Section 2. Administrative Offenses. – The following acts or omissions shall constitute an Administrative Offense:

  1. Any willful refusal to submit reports to PDIC as required by law, rules, and regulations;

  2. Any unjustified refusal to permit PDIC examination and audit of the deposit records or the affairs of the institution;

  3. Any willful making of a false statement or entry in any bank report or document required by PDIC;

  4. Submission of false material information in connection with or in relation to any financial assistance of PDIC extended to the bank;

  5. Splitting of deposits or creation of fictitious loans or deposit accounts;

  6. Refusal to allow PDIC, its officers, employees and/or agents to take over the affairs, assets, liabilities and administration of a closed bank placed under its receivership or obstructing such action of PDIC;

  7. Refusal to turn over to PDIC, or destroying or tampering, bank records;

  8. Fraudulent disposal, transfer or concealment of any asset, property or liability of the closed bank under receivership of PDIC;

  9. Violation of, or causing any person to violate the exemption from garnishment, levy, attachment or execution provided under the PDIC Charter, and Republic Act No. 7653, otherwise known as the New Central Bank Act;

  10. Any willful failure or refusal to comply with, or violation of any provision of the PDIC Charter, this Regulatory Issuance or any PDIC order, rule or regulation or commission of any other irregularities, and/or conducting business in an unsafe or unsound manner as may be determined by the Board of Directors of PDIC and/or the BSP.

Section 3. Administrative Fines. – In the absence of any specific fine imposed by PDIC for any of the acts or omissions specified under Section 2, the following Administrative Fines shall be imposed on any bank and/or any of its director(s), officer(s), employee(s) or agent(s):

  1. For offenses mentioned in section 2 (a), (b), (c), (d), (f), (g), (i) and (j), a fine as may be determined by the PDIC Board of Directors but in no case to exceed P300,000.00 for each banking day of violation;

  2. For offenses mentioned in section 2 (e), a fine as may be determined by the PDIC Board of Directors but in no case to exceed 100% of the total amount split or fictitious loan created;

  3. For offenses mentioned in section 2 (h), a fine as may be determined by the PDIC Board of Directors but in no case to exceed the fair market value of the asset disposed, transferred or concealed or the amount of liability concealed;

Provided, that, the Administrative Fine imposed on a bank or any of its director(s), officer(s), employee(s) or agent(s) shall in no case exceed three times the amount of the damages or costs caused by the fraudulent, irregular and/or anomalous transactions for each day that the violation subsists, taking into consideration the attendant circumstances, such as the nature and gravity of the violation or irregularity and size of the bank.

The damage or cost mentioned in the immediately preceding paragraph shall include financial benefit or gain to the bank or any of its director(s), officer(s), employee(s) or agent(s) as a result of the fraudulent, irregular, and/or anomalous transaction committed.

Should the director(s), officer(s), employee(s) or agent(s) of the bank derive any financial gain as a result of the fraudulent, irregular, and/or anomalous transaction, an additional fine equivalent to the amount of such financial benefit or gain shall be imposed.

Section 4. Exclusion From Deposit Insurance as a Consequence of Deposit - Related Unsafe and/or Unsound Banking Practices. – Deposit accounts or transactions or transactions that constitute and/or emanate from an Unsafe and/or Unsound Banking Practice under Section 2 (j) of this Regulatory Issuance shall be excluded from deposit insurance coverage pursuant to PDIC Regulatory Issuance No. 2011-02 (Rules and Regulations Governing Deposit Accounts of Transactions Excluded from the Coverage of Deposit Insurance).

PART II – General Principles in Administrative Investigations

Section 5. Applicability. – These rules shall apply to administrative investigations conducted against any operating or closed bank and/or any of its director(s), officer(s), employee(s) or agent(s) charged with violation of any of the administrative offenses enumerated in Section 2 hereof.

Section 6. Nature of Proceedings. – Subject to the requirements of due process, the administrative investigation contemplated herein shall be conducted in a summary manner without strictly adhering to the technical rules of procedure and evidence applicable to judicial proceedings, which shall only be suppletory.

Section 7. Confidentiality. – The administrative investigation conducted under this Regulatory Issuance shall be confidential in nature except when disclosure thereof is required under any provision of law or this Regulatory Issuance.

PART III – Rules of Procedure in Administrative Investigations

Section 8. Report or Information.

  1. Where referred. All reports or information from depositors, departments of the PDIC, other government agencies, and the general public alleging a possible violation of Section 2 of this Regulatory Issuance shall be filed with the Office of the General Counsel (OGC) of the PDIC. The report or information must be in writing, stating the facts alleged to constitute the acts, transactions, or omissions complained of and the name of the bank and/or the name of the director, officer, employee or agent of the bank involved.

  2. Preliminary Evaluation. – Upon receipt of the report or information, the OGC may, on its own, conduct a preliminary evaluation or refer the same to the Investigation Department for the conduct of a preliminary evaluation. After such preliminary evaluation, the following acts may be taken:

    1. The institution of administrative charge/s against the bank concerned and/or its director(s), officer(s), employee(s) or agent(s), subject to the authorization of the proper approving authority;

    2. The conduct of a fact-finding investigation in accordance with the procedures under PDIC Regulatory Issuance No. 2005-02 (Rules on Fact-Finding Investigation of Fraud, Irregularities and Anomalies Committed in Banks);

    3. The referral of the report or information to the appropriate PDIC department or government agency;

    4. Advise the source of the report or information to submit additional documents to support the same within thirty (30) calendar days from receipt of notice, if the report or information, on its face, is insufficient in substance.

Section 9. Administrative Charges. – Administrative charge/s resulting from the actions taken under Section 8 of this Regulatory Issuance against a bank and/or its director(s), officer(s), employee(s), or agent(s) shall be filed with the OGC. The administrative charge shall be in writing, stating clearly and sufficiently the administrative offense/s complained of and the names of the person/s charged, their designation and respective addresses. It shall include relevant documentary and other evidence, if any.

The Monetary Board shall also be furnished with a copy of the Administrative charge filed with the OGC.

Section 10. Rules of Procedure in Administrative Hearings. – The following procedures shall apply to investigations involving administrative offenses committed by a bank and/or its director(s), officer(s), employee(s), or agent(s):

  1. Upon receipt of the administrative charge, the OGC shall immediately convene an Administrative Hearing Committee (AHC) to hear the charge.

  2. Within ten calendar (10) days after the AHC has been convened, the AHC shall cause the issuance of a notice to the bank and/or to any of its director(s), officer(s), employee(s), or agent(s) charged with an administrative offense (‘respondents’) requiring them to explain why they should not be held liable for the administrative offense and the corresponding penalty thereon.

    1. The notice shall include a copy of the administrative charge together with the supporting documents.

    2. When the charge involves the personal liability of a director, officer, employee or agent, a copy of the notice shall be furnished the Office of the President/Chief Executive Officer (CEO) of the bank.

  3. Within ten (10) calendar days from receipt of the notice, the respondent/s shall file a verified answer with the AHC and serve a copy thereof to the complaining witness, if any, attaching thereto the original or certified true copies of all documentary and other evidence in support of its case.

    1. Should any respondent fail to file a verified answer within the period allowed by the AHC, the latter shall issue an order declaring the respondent in default.

    2. The AHC may proceed to receive evidence and thereafter render a report on its findings of facts and conclusions of law, with the appropriate recommendation to the PDIC Board of Directors.

  4. Should an answer be filed, the AHC may, upon receipt of the respondent’s verified answer, and after evaluation of the evidence submitted by the parties:

    1. Consider the matter ready for the preparation of a report, based on the evidence submitted by the parties; or

    2. Set the case for hearing for reception of further evidence.

  5. The hearing referred to in paragraph (d)(2) may include:

    1. Admission or stipulation of facts and due execution and authenticity of documents;

    2. Simplification of issues;

    3. Identification and marking of evidence;

    4. Cross-examination of affiant/s, if any; and

    5. Such other matters as may aid in the prompt and just resolution of the case.

  6. The AHC may require the parties to submit their respective position papers within ten (10) calendar days after the termination of the hearing. Any evidence not presented and identified during the hearing shall no longer be admitted in evidence.

Section 11. Submission of Case for Preparation of Report. – Within ten (10) calendar days from receipt of the verified answer or from the declaration of respondents in default, or immediately upon the termination of the hearing on the case, or after the lapse of the period within which to submit the position paper, the AHC shall issue an order informing the parties that the case is deemed submitted for preparation of the report.

Section 12. AHC Report. – The AHC shall render a report within thirty (30) calendar days from the submission of the case for preparation of the report and submit its report to the PDIC Board of Directors for proper action. If the charge involves deposit accounts or transactions constituting or emanating from an Unsafe and/or Unsound Banking Practice/s, the report of the AHC may include a recommendation for the issuance of a DCD against the bank.

Section 13. Resolution of the PDIC Board of Directors. – The PDIC Board of Directors may adopt, reverse, or modify the recommendations of the AHC; provided, that, if the charge involves deposit accounts or transactions constituting or emanating from an Unsafe and/or Unsound Banking Practice/s, the PDIC Board of Directors, in consultation with the BSP, may order the issuance of a DCD against the bank.

Section 14. Notice of the Resolution of the Board. – The PDIC Board of Directors, through the AHC, shall notify the bank and/or any of its director(s), officer(s), employee(s) or agent(s) charged with an administrative offense and the complaining witness, where applicable, of the Decision of the PDIC Board of Directors. The Monetary Board and/or the BSP Governor, as the case may be, shall likewise be furnished a copy of the Decision of the PDIC Board of Directors whenever required under the PDIC Charter.

Section 15. Finality of Resolution. – The resolution of the PDIC Board of Directors shall become final and executory after ten (10) calendar days from receipt thereof by the parties, unless the aggrieved party files a motion for reconsideration in accordance with the succeeding sections. A request for reconsideration that is filed out of time shall not be entertained and will not stall the running of the period for the finality of the resolution.

Section 16. Grounds for Reconsideration of the PDIC Board Resolution. – The aggrieved party may file a request for reconsideration on any of the following grounds:

  1. Discovery of new evidence which materially affects the resolution; and

  2. Errors of fact or law or irregularities have been committed prejudicial to the interest of the aggrieved party.

Section 17. Requisites for Request for Reconsideration. – Only requests for reconsideration that comply with the following requirements shall be entertained:

  1. The request must be verified and addressed to the PDIC Board of Directors through the Office of the PDIC Corporate Secretary.

  2. The request shall be accompanied by affidavit/s and other document/s in support of the stated ground for reconsideration. A request for reconsideration by a bank shall be filed by a person authorized by the bank’s Board of Directors in a resolution issued specifically for that purpose, or in the case of foreign bank branches, by a person appointed by the bank’s country officer in an equivalent document.

  3. The resolution of the PDIC Board of Directors on the request for reconsideration shall be immediately executory upon its issuance.

Section 18. Second Motion for Reconsideration. – No second motion for reconsideration shall be entertained.

Section 19. Enforcement of the Administrative Fine.

  1. In no case shall an appeal stay the immediate enforcement and satisfaction of the administrative fine unless otherwise restrained by the Court of Appeals or the Supreme Court in accordance with Section 22 of the PDIC Charter.

  2. The resolution of the PDIC Board of Directors shall be immediately executory unless the aggrieved party/parties posts a cash bond equivalent to the amount of the fine imposed, or a surety bond from a reputable bonding company acceptable to the PDIC, in double the amount of the fine imposed.

  3. The payment of any Administrative Fine must be made in manager's or cashier's check payable to the PDIC and shall be sent by personal delivery or registered mail with return card addressed to the Treasury Department of the PDIC.

Section 20. Prohibited Motions/Pleadings. – The following pleadings, motions, or petitions shall not be allowed in cases covered by this Regulatory Issuance:

  1. Motion to Dismiss except on jurisdictional grounds;

  2. Motion for Bill of Particulars;

  3. Motion for New Trial;

  4. Petition for Relief from Judgment;

  5. Interventions;

  6. Third Party Complaints; and

  7. Any dilatory motions or pleadings.

Section 21. Separability Clause. – In the event of invalidity of any of the provisions of this Regulatory Issuance, only the provision/s so invalidated shall have no force and effect.

Section 22. Repealing Clause. – This Regulatory Issuance repeals PDIC Regulatory Issuance No. 2005-03. In the same manner, all regulatory issuances, rules, and other PDIC issuances which are inconsistent with the provisions of this Regulatory Issuance are hereby repealed, amended, or modified accordingly.

Section 23. Effectivity. – This Regulatory Issuance shall take effect fifteen (15) days after publication in a newspaper of general circulation.

For your guidance and strict compliance.



(Sgd.) VALENTIN A. ARANETA
President



Published in the Manila Bulletin on January 10, 2012

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