REDEEMABLE SHARES

Pursuant to Monetary Board Resolution No. 576 dated April 7, 2000,
Subsection X126.5 of the New Manual of Regulations for Banks is hereby
amended to read as follows:

“Subsection X126.5.           Issuance of Redeemable shares: conditions; certification and report; sanctions

a.      Conditions. Banks may issue redeemable shares subject to the following conditions:

(1)     The applicant bank prior to the approval of the amendment
of articles of incorporation to issue redeemable preferred shares, has
complied with the requirements under Items B1 to B6, Appendix 5.

The articles of incorporation of an applicant bank shall
incorporate the conditions in items a (3)(a), (b), (c) and (d) of this
Subsection.

(2)     The applicant bank prior to the issuance of redeemable
shares shall comply with, in addition to the conditions in Item (1)
above, the requirements under Items B7, 8, and 12 to 16, Appendix 5.

(3)     The applicant bank after the issuance of redeemable shares shall comply with the following:

(a)     Redemption of shares shall be allowed at the specific
dates or periods fixed for redemption only upon prior approval of the
BSP and only if the shares redeemed are replaced with at least an
equivalent amount of newly paid-in shares so that the total paid-in
capital stock is maintained at the same level immediately prior to
redemption: Provided, That the redemption shall not be earlier than five
(5) years after the date of issuance: Provided further, That such
redemption may not be made where the bank is insolvent or if such
redemption will cause insolvency, impairment of capital or inability of
the bank to meet its debts as they mature;

(b)     A sinking fund for the redemption of preferred shares is
to be created upon their issuance. This is to be effected by the
transfer of free surplus to a restricted surplus account. The fund shall
not be available for dividends.

(c)     The issuing bank shall not treat in any way redeemable
preferred shares as time deposit, deposit substitute or other form of
borrowings.

(d)     No dividend shall be declared or paid on redeemable
shares in the absence of sufficient undivided profits, free surplus and
approval of the BSP.

(e)     The issuing bank shall execute within ten (10) days
after the first issuance a Deed of Undertaking (pro-forma attached), to
be signed by its directors and principal officers, binding them to
comply with the requisites and conditions set forth in items (a) to (d)
above.

(f)      The conditions in items (3)(a), (b), (c) and (d) above shall be incorporated in the certificates of stock.

b.         Certification and Report. The bank
shall submit within fifteen (15) days after every issuance of at least
twenty percent (20%) of the redeemable shares whether issued in series
or at one time, a certification signed by its President/Chairman under
oath, stating that the requirements under item a(1) and (2) above,
including all other conditions that the BSP may impose, have been
complied with.

The applicant bank shall, not later than ten (10) banking days
from the end of reference year, submit a yearly report of issuances of
preferred shares to the appropriate supervising and examining department
of the Bangko Sentral Ng Pilipinas (BSP) indicating therein the name/s
of the subscriber/s, the date the shares were issued and the
number/amount of shares issued.

c.         Sanctions. Any violation of the foregoing provisions shall be subject to the following sanctions:

(1)       On the Bank:

(a)     For failure to comply with items a(3)(a) to (d) above:

i. Suspension of branching privilege;
ii.            Prohibition against granting of new unsecured loans to DOSRI;
iii            Prohibition against declaration of dividends;
iv.           Denial of access to BSP rediscounting facilities;
v.            Revocation of authority to accept government
deposits and to handle government funds as a result of agency agreements
with the BIR, SSS, etc.

(b)     For failure to infuse capital in an amount at least
equivalent to amount of redeemed shares as required in Item a(3)(a):

i. Sanctions in item (a) above;
ii.            No new loans and investments, except in government securities;
iii.           P1,000 fine per banking day until the required infusion is made.

(c)     If the certification submitted by the bank required in
these guidelines is found to be false, suspension of authority to issue
preferred shares for one (1) year.

(d)     For failure to submit report of issuance of redeemable
preferred shares, a fine of P1,200 for EKBs/KBs; P600 for TBs; and P180
for RBs/Coop Banks per banking day of default until the report is
submitted.

(2)       On the Directors and Officers:

(a)     For violation of any of the terms of the Deed of
Undertaking, the following shall be imposed against the officers and
directors of the bank who signed the deed:

i.        First Offense – A fine of P500 per day for each
violation from the time the violation was committed or up to the time
the violation is corrected;

ii.       Second and subsequent offenses – A fine of P5,000 per
day from the time the violation was committed up to the time the
violation is corrected.

(b)     If the certification submitted by the bank as required in
these guidelines is found to be false, a fine of P5,000 per day from the
time the certification was made up to the time the certification was
found to be false, shall be imposed against the certifying officer.

This Circular shall take effect fifteen (15) days after its publication in a newspaper of general circulation.

Adopted: 27 April 2000

(SGD.) RAFAEL B. BUENAVENTURA
Governor