Seventeenth Congress
Second Regular Session

HOUSE BILL No. 6466

Introduced by Representative Ma. Lourdes Acosta-Alba

EXPLANATORY NOTE

This bill requires bank directors and officers to undergo training on
banking and good governance to ensure the safe and sound administration of
banks.

Banks play a vital role in the country’s financial system and economic
development. They stimulate savings and investments and provide capital for
enterprises. They provide funds to help people buy their cars, homes and start
businesses through loans. Banks are also depositaries of people’s hard earned
money, thus, it is imperative for these institutions to be effectively governed by
qualified individuals.

In the Philippines, the board of directors is responsible for the corporate
governance of the bank. It establishes strategic objectives, policies and
procedures that guide and direct the activities of the bank and the means to
attain the same including the mechanism for monitoring management’s
performance. While the management of the day-to-day affairs of the institution
is the responsibility of the management team, the board of directors is, however,
responsible for monitoring and overseeing management action. Bank directors
are required to establish and review business plans, formulate clear policies on
risk management, establish framework on internal control and ensure the
appropriate performance and review of internal audit.

Given the importance of bank directors and officers and their
responsibility in overseeing the successful operations of banks, it is but fitting
that bank directors and officers be required to undergo training on banking and


good governance so that they may adequately understand and discharge their
duties properly as directors and officers of the bank.

In the report of Adrian Cadbury, published in December 1992 in London
entitled “Report of the Committee on the Financial Aspects of Corporate
Governance,” the importance of the director’s training to good governance was
also emphasized, to wit:

“The weight of responsibility carried by all directors and

the increasing commitment, which their duties require, emphasize

the importance of the way in which they prepare themselves for

their posts. Given the varying backgrounds, qualifications and

experience of directors, it is highly desirable that they should all

undertake some form of internal or external training. This is

particularly important for directors, whether executive or non-

executive, with no previous board experience. Newly appointed

board members are also entitled to expect a proper process of

induction into the company’s affairs. It is then up to individual

directors to keep abreast of their legislative and broader

responsibilities.”

This bill aims to increase the capability of bank directors and officers to
promote the safety and soundness of banks and banking system and protect the
right of depositors and consumers of financial services.

In view of the foregoing, approval of this bill is earnestly sought.

testa «oats LBA


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> Republic ofthe Philippines
) House of Representatives

kor
(we) Quezon City, Metro Manila

Seventeenth Congress
Second Regular Session

HOUSE BILL No. 6466

Introduced by Representative Ma. Lourdes Acosta-Alba

AN ACT
REQUIRING BANK DIRECTORS AND OFFICERS TO UNDERGO TRAINING
ON BANKING AND GOOD GOVERNANCE FOR SAFE AND SOUND
ADMINISTRATION OF BANKS, AMENDING FOR THE PURPOSE REPUBLIC
ACT NO. 8791, AS AMENDED, OTHERWISE KNOWN AS “THE GENERAL
BANKING LAW OF 2000”

Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled:

SECTION 1. Section 16 of Republic Act No. 8791, as amended, is hereby further
amended to read as follows:

“SEC. 16. Fit and Proper Rule. — To maintain the quality of bank
management and afford a better protection to depositors and the public in
general, the Monetary Board shall prescribe, pass upon and review the
qualifications and disqualifications of individuals elected or appointed bank
directors or officers and disqualify those found unfit.

After due notice to the board of directors of the bank, the Monetary
Board may disqualify, suspend or remove any bank director or officer who

commits or omits an act which render him unfit for the position.


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In determining whether the individual is fit and proper to hold the
position of a director or officer of a bank, regard shall be given to his
integrity, experience, education, training, and competence.

BEFORE ASSUMING THE POSITION OF BANK DIRECTOR OR
OFFICER, THE ELECTED OR APPOINTED NOMINEE MUST
COMPLETE THE TRAINING ON BANKING AND GOOD
GOVERNANCE AND PASS THE QUALIFYING EXAMINATION
CONDUCTED BY THE BSP OR TRAINING CENTER ACCREDITED
BY THE BSP WHICH INCLUDES:

A) GOOD GOVERNANCE;

B) BANKING RULES AND REGULATIONS;

C) BANK COMPLIANCE;

D) RISK MANAGEMENT AND OVERSIGHT; AND

E) INTERNAL AUDIT.

EACH BANK MUST ALSO REQUIRE INCUMBENT
DIRECTORS OR OFFICERS TO ATTEND THE TRAINING
PERIODICALLY TO ADVANCE THEIR SKILLS.

BANKS MUST ESTABLISH AND MAINTAIN A POLICY FOR
THE TRAINING OF BANK DIRECTORS OR OFFICERS INCLUDING
ITS IMPLEMENTING PROCEDURES. THE POLICY MAY IDENTIFY
AND INCLUDE OTHER TRAINING AREAS THAT ENHANCE THE

CAPABILITY OF BANK DIRECTORS OR OFFICERS.”


SEC. 2. Within sixty (60) days from the effectivity of this Act, the Governor of
Bangko Sentral, in consultation with the Secretary of Finance, shall issue the necessary
rules and regulations for the effective implementation of this Act.

SEC. 3. This Act shall take effect fifteen (15) days after its publication in the
Official Gazette or in a newspaper of general circulation.

Approved,