The directive covers all types of banks authorized to perform trust and other fiduciary business. Prior to 348, these institutions did not need a minimum capital requirement.
The BSP circular states that "banks… whose capital accounts are lower than the prescribed minimum shall, before declaring any dividend, carry to surplus at least 50 percent of their net income from all operations."
The Monetary Board, or the highest governing body of the BSP, also included a portion of the manual of regulations for banks previously issued circulars on trust operations.
Under Circular 348, which amends Sec. X404 of the manual, banks that want to go into the trust business must have complied with central bank rules in the last two preceding examinations prior to the application date.
Specifically, banks must have complied with ceilings on credit accommodations to directors, officers, stockholders and related interests (DOSRI).
Applicant-banks must also have met liquidity floor requirements for government deposits as well as the rules on single borrower’s loan limit.
Moreover, banks must maintain adequate provisions for probable losses commensurate to the quality of its asset portfolio but not lower than the required valuation reserve as determined by the BSP.
Before operating a trust business, a bank must not have past due obligations with the central bank or with any government financial institutions.
It also must have established a risk management system appropriate to its operations. The system must provide for clear delineation of responsibility for risk management, adequate risk measurement systems, appropriately structured risk limits, effective internal controls complete, timely and efficient risk reporting system.
The bank must likewise have a CAMELS composite rating of at least three in the last regular examination and a management rating of not lower than three.
Before actually engaging in operations, a bank must submit to the BSP government securities worth P500,000 (roughly $9,598) as minimum basic security deposit for the faithful performance of trust and other fiduciary duties. The bank must also submit an organization chart of the trust unit and the names of the key officers.