135 REMUNERATION AND OTHER INCENTIVES
a. The remuneration and incentives package shall take into account the employee’s position, role, responsibilities and activities in the BSFI. It shall also consider the risks that the employee takes on behalf of the BSFI. In this regard, it should be sensitive to prospective risks and risk outcomes that have been realized and considers the overall performance of the 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 provisions 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 misreporting 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 functions (i.e., internal audit, compliance, and risk management functions) shall be based on the achievement of their objectives and shall be independent of the business lines which they oversee.
a. The base in any profit sharing program shall be the net income for the year of the bank as shown in its Consolidated Statement of Income and Expenses for the year, net of the following:
(1) All cumulative dividends accruing to preferred stock to the extent not covered by earned surplus;
(2) Accrued interest receivable credited to income but not yet collected, net of reserves already set up for uncollected interest on loans;
(3) Unbooked allowance for credit losses on loans or the amount required to update allowance for credit losses in accordance with the schedule approved by the Monetary Board, as well as all amortizations due on deferred charges;
(4) Provisions for current year’s taxes;
(5) Income tax deferred for the year: Provided, however, That in case of reversal of deferred income taxes which were deducted from net income in computing for profit sharing of previous years, the deferred income tax reversed to expense shall be added back to net income to arrive at the base for profit sharing for the year during which the reversal is made; and
(6) Accumulated profits not yet received but already recorded by a bank representing its share in profits of its subsidiaries under the equity method of accounting;
b. The bank may provide in its by-laws for other priorities in the computation of net profits for purposes of profit sharing: Provided, That in no case shall profit sharing take precedence over any of the items in the preceding paragraph; and
c. Prior approval of the Monetary Board shall be necessary before a bank which has received financial assistance from the Bangko Sentral may implement its profit sharing program. Financial assistance shall refer to emergency loans and advances and such other forms of credit accommodations which are intended to provide banks with liquidity in times of need.
a. Funding by foreign banks. In the case of local branches of foreign banks, financial assistance for their officers and employees may be funded, through any of the following means:
(1) Through a local affiliate by special arrangement with the head office abroad in any of the following forms:
(a) Inward remittance from the head office of the affiliate; or
(b) Assignment to the affiliate of equivalent amounts of profits otherwise remittable abroad under existing regulations; or
(c) Direct loans by the foreign bank to the affiliate; or
(2) Through the local branch itself by:
(a) Segregation or transfer of undivided profits normally remitted to the head office abroad equivalent to the loans to officers and employees which shall be lodged under “Other Liabilities-Head Office Accounts”. This account shall at all times have a balance equivalent to the outstanding loans to officers/employees financed under this scheme; or
(b) Inward remittance; or
(3) Through the local branch from local sources without earmarking an equivalent amount of undivided profits: Provided, That the aggregate ceilings on such loans as provided under existing regulations shall apply.
b. Other conditions/limitations.
(1) The investment by a bank in equipment and other chattels under its fringe benefits program for officers and employees shall be included in determining the extent of the investment of the bank in real estate and equipment for purposes of Section 51 of R.A. No. 8791.
(2) The investment by a bank in equipment and other chattels contemplated under these guidelines shall not be for the purpose of profits in the course of business for the bank.
(3) The aggregate outstanding loans and other credit accommodations granted under the bank’s fringe benefits program, inclusive of those granted to officers in the nature of lease with option to purchase, shall not exceed five percent (5%) of the bank’s total loan portfolio.
a. When the bank is under controllership, conservatorship or when it has outstanding emergency loans and advances and such other forms of credit accommodation from the Bangko Sentral which are intended to provide it with liquidity in times of need;
b. When the institution is found by the Monetary Board to be conducting business in an unsafe or unsound manner;
c. When it is found by the Monetary Board to be in an unsatisfactory financial condition such as, but not limited to, the following cases:
(1) Its capital is impaired;
(2) It has suffered continuous losses from operations for the past three (3) years;
(3) Its composite CAMEL(S) rating in the latest examination is below “3”; and
(4) It is under rehabilitation by the Bangko Sentral/PDIC which rehabilitation may include debt-to-equity conversion, etc.
a. In the case of profit sharing, the provision of Sec. 135 (Profit sharing programs) shall be observed except that for purposes of this Section, the total amount of unbooked valuation reserves and deferred charges shall be deducted from the net income.
b. Except for the financial assistance to meet expenses for the medical, maternity, education and other emergency needs of the directors or officers or their immediate family, the other forms of financial assistance may be suspended.
c. When the total compensation package including salaries, allowances, fees and bonuses of directors and officers are significantly excessive as compared with peer group averages, the Monetary Board may order their reduction to reasonable levels: Provided, That even if a bank is in financial trouble, it may nevertheless be allowed to grant relatively higher salary packages in order to attract competent officers and quality staff as part of its rehabilitation program.