STRICTLY FOR INTERNAL USE ONLY(Within the MBTC Group Only)

PSBANK CORPORATE

GOVERNANCE (CG)MANUAL

Updated 29 October 2015

PSBank Compliance Office17/F PSBank Center

Paseo de Roxas-Sedeno Sts., Makati CityTel. No. 885-8208 Local 8468

INITIATION OF CHANGES

Role Name Signature DatePreparedby

ATTY. LILIAN E. ROQUESM & General Compliance Officer

Reviewedby

GILBERT L. NUNAGVP & Chief Compliance Officer

CORPORATE GOVERNANCE COMMITTEE (CGC)ENDORSEMENT SHEET

Role Name Signature DateEndorsedby

JEANNE FRANCES T. CHUADirector & CGC Member

Endorsedby

JOSE T. PARDOBOD Chairman & CGC Member

Endorsedby

SAMSON C. LIMDirector & CGC Chairperson

BOARD OF DIRECTORS (BOD)APPROVAL

Board Resolution Number:

2015-170

Date:

29 October 2015Please see attached duly notarized Secretary’s Certificate.

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SUMMARY OF CHANGES AND THEIR RATIONALE

Key changes effected to the previous Corporate Governance Manual(CGM) (December 2014 version) are as follows:# Changes/Updates Reasons Page(s)1 Changed frequency of holding

Executive Sessions with Independent Directors from “semestrally” to “at least annually”

To just align with the ASEAN standard of “at least once during the year”

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2 Incorporated the necessary updates/changes per BSP Circular No. 887 dated 07 October 2015 re: Amended Regulations on the Approval/Confirmation of the Election/Appointment of Directors/Officers, includingrevised deadlines in the submission of pertinent requirements

To reflect the BSP’snew rules regarding the completeness & timeliness in the submission of pertinent requirements within the new/longer deadline of 20 (from10) banking days

21, 33,43, 46,

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3 Incorporated the necessary updates/changes per BSP Circular No. 889 dated 02 November 2015 October 2015 re: Enhancements to Fit & Proper Rules

To reflect the BSP’snew fit & proper rules for directors & officers

22, 44

4 Included the following provisions under Directors:

To align with parent-MBTC’s CG Manual updated as ofJune 2015 and to be more comprehensive

Voting Procedures 16 Dissenter’s Right of

Appraisal Procedures18

Disqualification Procedures 28 Removal Procedures 30 Vacancies in the Board of

Directors31

Election of Directors & Nomination Procedures

32

Orientation & Continuing Education

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3 Added and provided gist for the following matters:

To make this CG Manual the central point of reference for these related key policies that are required to be disclosed by the SECpursuant to the ASEAN CG Scorecard (ACGS)

Disclosure & Transparency 52 Dividends Policy 52 Whistle-blowing Policy 53 Related Party Transactions

Policy53

Policy Against Insider Trading

53

Conflict of Interest Policy 53 Learning & Development

Policy53

Employee Health, Safety & Welfare Policy

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TABLE OF CONTENTS

Contents Pages

PART I – INTRODUCTION 7

PART II – GOVERNANCE STRUCTURE 8SECTION 1. BOARD OVERSIGHT

A. Board of Directors1. Composition of the Board2. Powers, Responsibilities and Duties of the Board3. Stockholders’ Rights and Protection of Minority

Stockholders’ Interests4. Conduct of Board Meetings and Quorum Requirements

B. Directors1. Qualifications of a Director2. Independent Directors3. Limits for Independent Directors4. Disqualifications of Directors5. Disqualification Procedures for Directors6. Removal Procedures for Directors7. Vacancies in the Office of the Board of Directors8. Interlocking Directorships9. Interlocking Directorships and Officerships10. Election of Directors11. Confirmation of Election of Directors12. Multiple Board Seats13. Specific Duties and Responsibilities of a Director14. Orientation and Continuing Education

C. Chairman of the Board, Vice-Chairman, President and the Corporate Secretary1. Chairman of the Board2. Vice-Chairman3. President4. Corporate Secretary

D. Board Committees1. Executive Committee2. Audit Committee3. Risk Oversight Committee4. Corporate Governance Committee5. Nominations Committee6. Compensation and Remuneration Committee7. Related Party Transactions Committee8. Trust Committee9. Anti-Money Laundering Oversight Committee

SECTION 2. SENIOR MANAGEMENT OVERSIGHTA. Senior ManagementB. Management Committees

1. Assets and Liabilities Committee2. Credit Committee3. Anti-Money Laundering Compliance Committee4. Outsourcing Oversight Committee5. IT Steering Committee6. Emergency Committee7. Policy Committee8. Personnel Committee9. Retirement Commitment

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TABLE OF CONTENTS

Contents Pages

B. Officers1. Qualifications of an Officer2. Disqualifications of Officers3. Interlocking Officerships4. Confirmation of Appointment of Officers5. Duties and Responsibilities of Officers

SECTION 3. COMPLIANCE SYSTEM, RISK MANAGEMENT AND INDEPENDENT ASSURANCE

A. Compliance System1. Bank Compliance Program2. Chief Compliance Officer3. Compliance Charter

B. Risk Management1. Risk Management Function2. Chief Risk Officer

C. Internal Controls and Independent Assurance1. Chief Audit Executive2. External Auditor

SECTION 4. CODE OF CONDUCTSECTION 5. REMUNERATION POLICYSECTION 6. DISCLOSURE & TRANSPARENCYSECTION 7. DIVIDENDS POLICYSECTION 8. WHISTLE-BLOWING POLICYSECTION 9. RELATED PARTY TRANSACTIONS POLICYSECTION 10. POLICY AGAINST INSIDER TRADINGSECTION 11. CONFLICT OF INTEREST POLICYSECTION 12. LEARNING & DEVELOPMENT POLICYSECTION 13. EMPLOYEE HEALTH, SAFETY AND WELFARE POLICY

PART III- REPORTORIAL REQUIREMENTS 54

PART IV- PERFORMANCE EVALUATION 59

A. Annual Performance Self-Assessment1. Board of Directors2. Management

B. Other Corporate Governance Scorecards

PART V – COMPLIANCE MONITORING AND SANCTIONS 60

PART VI – POLICY REVIEW AND UPDATING 60

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PART I - INTRODUCTION

Corporate Governance is the Bank’s framework of rules, systemsand processes that governs the performance of the Board ofDirectors and Management of their respective duties andresponsibilities to stockholders and other stakeholders whichinclude, among others, its customers, employees, suppliers,financiers, government and the community in which it operates. 1

This Manual shall be known as the “PSBank Corporate Governance(CG) Manual”.

It shall serve as reference2 or guide for the Bank for theimplementation of Bangko Sentral ng Pilipinas (BSP) CircularNos. 749 and 757 re: Guidelines in Strengthening CorporateGovernance in BSP-Supervised Financial Institutions; the“Revised Code of Corporate Governance” issued by the Securitiesand Exchange Commission (SEC), applicable provisions in the BSPManual of Regulations for Banks (MORB) and other relevantreferences.

The Board of Directors (the Board), Management, Officers andStaff of the Bank hereby commit themselves to the principles andpractices contained in this Manual and acknowledge that the samewill guide them in the development and achievement of the Bank’scorporate goals.

To enjoin Bank-wide compliance, this Manual is posted andavailable in the Bank’s InfoChannel specifically underCompliance for easy access of all employees, officers anddirectors of the Bank. This Manual is also posted in the Bank’scorporate website for ready access by all stakeholders of theBank.

OUR GOVERNANCE CULTUREWe see our compliance with applicable laws, rules andregulations as a minimum requirement. Going beyond such minimumis the true essence of good corporate governance.

We always aim to continually build up the trust and confidenceof our stakeholders by running our business in a prudent andsound manner, being fair and transparent in all our dealings,providing reliable and better service in response to the ever-growing expectations of our customers, and working withintegrity and accountability.

1 SEC Memo Cir. No. 9, s20142 SEC Memo Cir. No. 6, s2009

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PART II – GOVERNANCE STRUCTURE

SECTION 1. BOARD OVERSIGHT

A. Board of DirectorsCompliance with the principles of good corporate governanceshall start with the Board of Directors.

1. Composition of the Board3

a. Pursuant to Sec. 15 of R.A. 8791 “The General Banking Lawof 2000”, there shall be at least five (5), and a maximumof fifteen (15) members of the Board. The Board shalldetermine the appropriate number of its members to ensurethat the number is commensurate with the size andcomplexity of the Bank’s operations.

To the extent practicable, the members of the Board shallbe selected from a broad pool of qualified candidates. Asufficient number of qualified non-executive membersshall be elected to promote the Independence of the Boardfrom the views of senior management. For this purpose,non-executive members of the Board shall refer to thosewho are not part of the day-to-day management of bankingoperations and shall include the independent directors.

b. At least twenty percent (20%) but not less than two (2)members of the Board shall be independent directors:Provided, That any fractional result from applying therequired minimum proportion, i.e., 20 percent (20%),shall be rounded-up to the nearest whole number.

c. Non-Filipino citizens may become members of the Board tothe extent of the foreign participation in the equity ofthe Bank: Provided, That pursuant to Section 23 of theCorporation Code of the Philippines (BP BIg. 68), amajority of the directors must be residents of thePhilippines.

2. Powers, Responsibilities and Duties of the Board4

a. Powers of the Board -The corporate powers of the Bank shall be exercised, itsbusiness conducted and all its property controlled andheld, by its Board. The powers of the Board as conferredby law are original and cannot be revoked by thestockholders. The directors hold their office chargedwith the duty to exercise sound and objective judgmentfor the best interest of the Bank.

b. General Responsibility of the Board -The position of a Bank director is a position of trust. Adirector assumes certain responsibilities to differentconstituencies or stakeholders, i.e., the Bank itself,its stockholders, its depositors and other creditors, its

3 Sec. 1 BSP Cir. No. 7494 Sec. 2 BSP Cir. No. 749

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management and employees, the regulators, deposit insurerand the public at large. These constituencies orstakeholder have the right to expect that the institutionis being run in a prudent and sound manner.

It is the responsibility of the Board to foster the long-term success of the Bank and to sustain itscompetitiveness and profitability in a manner consistentwith its corporate objectives and the best interests ofits stockholders and other stakeholders.5

The Board is primarily responsible for approving andoverseeing the implementation of the Bank’s strategicobjectives, risk strategy, corporate governance andcorporate values. Further, the Board is also responsiblefor monitoring and overseeing the performance of seniormanagement as the latter manages the day-to-day affairsof the Bank.

c. Specific Duties and Responsibilities of the Board -To ensure a high standard of best practice for the Bankand its stockholders and other stakeholders6, the Boardshould conduct itself with honesty and integrity in theperformance of, among others, the following duties andresponsibilities:

1) Approve and monitor the implementation of strategicobjectivesConsistent with the Bank’s strategic objectives,business plans shall be established for the Bankincluding its trust operations, and initiativesthereto shall be implemented with clearly definedresponsibilities and accountabilities. These shalltake into account the Bank’s long-term financialinterests, its level of risk tolerance and its abilityto manage risks effectively. The Board shall establisha system for measuring performance against plansthrough regular monitoring and reviews, withcorrective action taken as needed.

The Board shall likewise ensure that the Bank hasbeneficial influence on the economy by continuouslyproviding services and facilities which will besupportive of the national economy.

2) Approve and oversee the implementation of policiesgoverning major areas of banking operationsThe Board shall approve policies on all major businessactivities, e.g., investments, loans, asset andliability management, trust, business planning andbudgeting. The Board shall accordingly define theBank’s level of risk tolerance in respect of saidactivities. A mechanism to ensure compliance with saidpolicies shall also be provided.

5 SEC Memo Cir. 9, s20146 SEC Memo Cir. 9, s2014

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The Board shall set out matters and authoritiesreserved to it for decision, which include, amongothers major capital expenditures, equity investmentsand divestments. The Board shall also establish thelimits of the discretionary powers of each officer,committee, sub-committee and such other groups forpurposes of lending, investing or any other financialundertaking that exposes the Bank to significant risks.

3) Approve and oversee the Implementation of riskmanagement policies The Board shall be responsible for defining the Bank’slevel of risk tolerance and for the approval andoversight of the implementation of policies andprocedures relating to the management of risksthroughout the institution, including its trustoperations. The risk management policy shall include:

(a) A comprehensive risk management approach;(b) A detailed structure of limits , guidelines, and

other parameters used togovern risk-taking;

(c) A clear delineation of lines of responsibilitiesfor managing risk;

(d) An adequate system for measuring risk; and(e) Effective internal controls and a comprehensive

risk-reporting process. The Board of Directorsshall ensure that a robust internal reportingsystem is in place that shall enable eachemployee to contribute to the appreciation of theBank’s overall risk exposures.

The Board shall ensure that the risk managementfunction is given adequate resources to enable it toeffectively perform its functions. The risk managementfunction shall be afforded with adequate personnel,access to information technology systems and systemsdevelopment resources, and support and access tointernal information.

4) Oversee selection and performance of senior management It is the primary responsibility of the Board toappoint competent management team at all times,monitor and assess the performance of the managementteam based on established performance standards thatare consistent with the Bank’s strategic objectives,and conduct regular review of Bank’s policies with themanagement team.

(a) The Board shall apply fit and proper standards onkey personnel. Integrity, technical expertise andexperience in the Bank’s business, either currentor planned, shall be the key considerations inthe selection process. The Board shall replacemembers of senior management, when necessary, andhave in place an appropriate plan of succession.

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(b) The Board shall regularly monitor the actions ofsenior management and ensure that these areconsistent with the policies that it hasapproved. It shall put in place formalperformance standards to be able to effectivelyassess the performance of senior management.

(c) The Board shall regularly meet with seniormanagement to engage in discussions, question andcritically review the reports and informationprovided by the latter. The Board shall set thefrequency of meeting with senior managementtaking into account the size, complexity ofoperations and risk profile of the Bank.

(d) The Board shall regularly review policies,internal controls and self-assessment functions(e.g., internal audit, risk management andcompliance) with senior management to determineareas for improvement as well as to promptlyidentify and address significant risks andissues. The Board shall set the frequency ofreview taking into account the size, complexityof operations and risk profile of the Bank.

(e) The Board shall ensure that senior management’sexpertise and knowledge shall remain relevantgiven the Bank’s strategic objectives, complexityof operations and risk profile.

5) Consistently conduct the affairs of the Bank with ahigh degree of integrityThe Board shall lead in establishing the tone of goodgovernance from the top and in setting corporatevalues, codes of conduct and other standards ofappropriate behavior for itself, the senior managementand other employees. The Board shall:

(a) Articulate clear policies on the handling of anytransaction with DOSRI and other related partiesensuring that there is effective compliance withexisting laws, rules and regulations at all timesand no stakeholder is unduly disadvantaged. Inthis regard, the Board shall define “relatedparty transaction”, which is expected to cover awider definition than DOSRI under existingregulations and a broader spectrum oftransactions (i.e., not limited to creditexposures), such that relevant transactions thatcould pose material risk or potential abuse tothe Bank and its stakeholders are captured.

(b) Require the Bank’s stockholders to confirm bymajority vote, in the annual stockholders’meeting, the Bank’s significant transactions withits DOSRI and other related parties.

(c) Articulate acceptable and unacceptableactivities, transactions and behaviors that couldresult or potentially result in conflict ofinterest, personal gain at the expense of theBank, or unethical conduct.

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(d) Articulate policies that will prevent the use ofthe facilities of the Bank in furtherance ofcriminal and other improper or illegalactivities, such as but not limited to financialmisreporting, money laundering, fraud, bribery orcorruption.

(e) Explicitly discourage the taking of excessiverisks as defined by internal policies andestablish an employees’ compensation schemeeffectively aligned with prudent risk-taking. Thecompensation scheme shall be adjusted for alltypes of risk and sensitive to the time horizonof risk. Further, the grant of compensation informs other than cash shall be consistent withthe overall risk alignment of the Bank. The Boardshall regularly monitor and review thecompensation scheme to ensure that it operatesand achieves the objectives as intended.

(f) Ensure that employee pension funds are fullyfunded or the corresponding liabilityappropriately recognized in the books of the Bankat all times. Further, the Board shall ensurethat all transactions involving the pension fundare conducted at arm’s length terms.

(g) Allow employees to communicate, with protectionfrom reprisal, legitimate concerns about illegal,unethical or questionable practices directly tothe Board or to any independent unit. Policiesshall likewise be set on how such concerns shallbe investigated and addressed, for example, by aninternal control function, an objective externalparty, senior management and/or the Board itself.

(h) Articulate policies in communicating corporatevalues, codes of conduct and other standards inthe Bank as well as the means to confidentiallyreport concerns or violations to an appropriatebody.

6) Define appropriate governance policies and practicesfor the Bank and for its own work and to establishmeans to ensure that such are followed andperiodically reviewed for ongoing improvementThe Board, through policies and its own practices,shall establish and actively promote, communicate andrecognize sound governance principles and practices toreflect a culture of strong governance in the Bank asseen by both internal and external stakeholders.

(a) The Board shall ensure that the Bank’sorganizational structure facilitates effectivedecision-making and good governance. Thisincludes clear definition and delineation of thelines of responsibility and accountability,especially between the roles of the Chairman ofthe Board and President.

(b) The Board shall maintain, and periodicallyupdate, organizational rules, by-laws, or other

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similar documents setting out its organization,rights, responsibilities and key activities.

(c) The Board shall structure itself in a way,including in terms of size, frequency of meetingsand the use of committees, so as to promoteefficiency, critical discussion of issues andthorough review of matters.

(d) The Board shall conduct and maintain the affairsof the Bank within the scope of its authority asprescribed in its charter and in existing laws,rules and regulations. It shall ensure effectivecompliance with the latter, which includeprudential reporting obligations. The Board shallappoint a compliance officer who shall beresponsible for coordinating, monitoring andfacilitating compliance with existing laws, rulesand regulations. The compliance officer shall bevested with appropriate authority and providedwith appropriate support and resources.

(e) The Board shall establish a system of checks andbalances which applies in the first instance tothe Board itself. Among the members of the Board,an effective system of checks and balances mustexist. The system shall also provide a mechanismfor effective check and control by the Board overthe chief executive officer and key managers andby the latter over the line officers of the Bank.Checks and balances in the Board shall beenhanced by appointing a Chairman who is a non-executive, whenever possible.

(f) The Board shall assess at least annually itsperformance and effectiveness as a body, as wellas its various Committees, the President, theIndividual Directors, and the Bank itself, whichmay be facilitated by the Corporate GovernanceCommittee (CGC) or external facilitators. Thecomposition of the Board shall also be reviewedregularly with the end in view of having abalanced membership. Towards this end, a systemand procedure for evaluation shall be adoptedwhich shall include, but not limited to, thesetting of benchmark and peer group analysis.

(g) The Board shall ensure that individual members ofthe Board and the shareholders are accurately andtimely informed. It shall provide all its membersand to the shareholders a comprehensive andunderstandable assessment of the Bank’sperformance, financial condition and riskexposures. All members of the Board shall havereasonable access to any information about theBank at all times. It shall also provideappropriate information that flows internally andto the public.

7) Constitute committees to increase efficiency and allowdeeper focus in specific areasThe Board shall create committees, the number andnature of which would depend on the size of the Bank

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and the Board, the complexity of operations, long-termstrategies and risk tolerance level of the Bank.

(a) The Board shall approve, review and update atleast annually or whenever there are significantchanges therein, the respective charters of eachcommittee or other documents that set out itsmandate, scope and working procedures.

(b) The Board shall appoint members of the committeestaking into account the optimal mix of skillsarid experience to allow the members to fullyunderstand, be critical and objectively evaluatethe issues. In order to promote objectivity, theBoard, shall appoint independent directors andnon-executive members of the Board to thegreatest extent possible while ensuring that suchmix will not impair the collective skills,experience, and effectiveness of the committees.Towards this end, an independent director who isa member of any committee that exercisesexecutive or management functions that canpotentially impair such director’s independencecannot accept membership in committees thatperform independent oversight/control functionssuch as the Audit, Risk Management and CorporateGovernance Committees, without prior approval ofthe Monetary Board.7

(c) The Board shall ensure that each committee shallmaintain appropriate records (e.g., minutes ofmeetings or summary of matters reviewed anddecisions taken) of their deliberations anddecisions. Such records shall document thecommittee’s fulfillment of its responsibilitiesand facilitate the assessment of the effectiveperformance of its functions.

(d) The Board shall constitute, at a minimum, theAudit Committee, Risk Oversight Committee and theCorporate Governance Committee.

8) Effectively utilize the work conducted by the internalaudit, risk management and compliance functions andthe external auditorsThe Board shall recognize and acknowledge theimportance of the assessment of the independent,competent and qualified Internal and External Auditorsas well as the Risk and Compliance Officers inensuring the safety and soundness of the operations ofthe Bank on a going-concern basis and communicate thesame through-out the Bank. This shall be displayed byundertaking timely and effective actions on issuesidentified.

Further, non-executive Board members shall meetregularly, other than in meetings of the Audit andRisk Oversight Committees, in the absence of seniormanagement, with the External Auditor and Heads of the

7 As amended by BSP Cir. No. 757

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internal audit, compliance and risk managementfunctions.

(a) As such, periodic Executive Sessions withIndependent Directors (ESI) shall be held jointlyby the Bank’s Chief Compliance Officer (CCO),Chief Risk Officer (CRO), Chief Audit Executive(CAE) and External Auditor at least annually andas needed in order to discuss significant issuesthat may warrant closer attention.

(b) The CCO or his designated officer shall serve asSecretary to these executive sessions and shalltherefore coordinate with the CRO and the CAE forthe agenda/items for discussion and record suchdialogues in minutes of meeting.

9) Have the overall responsibility for defining anappropriate corporate governance framework that shallcontribute to the effective oversight over entities inthe groupTowards this end, the Board shall ensure consistentadoption of corporate governance policies and systemsacross the group and shall carry-out the followingduties and responsibilities:

(a) To define and approve appropriate governancepolicies, practices and structure that willenable effective oversight of the entire group,taking into account nature and complexity ofoperations, size and the types of risks to whichthe Bank and its subsidiaries are exposed. TheBoard shall also establish means to ensure thatsuch policies, practices and systems remainappropriate in light of the growth, increasedcomplexity and geographical expansion of thegroup. Further, it shall ensure that the policiesinclude the commitment from the entities in thegroup to meet all governance requirements.

(b) To define the level of risk tolerance for thegroup, which shall be linked to the process ofdetermining the adequacy of capital of the group.

(c) To ensure that adequate resources are availablefor all the entities in the group to effectivelyimplement and meet the governance policies,practices and systems.

(d) To establish a system for monitoring complianceof each entity in the group with all applicablepolicies, practices and systems.

(e) To define and approve policies and clearstrategies for the establishment of newstructures.

(f) To understand the roles, the relationships orinteractions of each entity in the group with oneanother and with the Bank. The Board shallunderstand the legal and operational implicationsof the group structure and how the various typesof risk exposures affect the group’s capital,

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risk profile and funding under normal andcontingent circumstances.

(g) To develop sound and effective systems forgeneration and sharing of information within thegroup, management of risks and effectivesupervision of the group.

(h) To require the risk management, compliancefunction and internal audit group to conduct aperiodic formal review of the group structure,their controls and activities to assessconsistency with the Board approved policies,practices and strategies and to require saidgroups to report the results of their assessmentdirectly to the Board.

(i) To disclose to the BSP all entities in the group(e.g., owned directly or indirectly by Bankand/or its subsidiaries/affiliates includingspecial purpose entities (SPEs), and otherentities that the Bank exerts control over orthose that exert control over the Bank, or thosethat are related to the Bank and/or itssubsidiaries/affiliates either through commonownership/ directorship/ officership) as well asall significant transactions between entities inthe group involving any BSP regulated entity. Forthis purpose, significant shall refer totransactions that would require Board approvalbased on the Bank’s internal policies or asprovided under existing regulations: Provided,that the Bank shall continue to submit any reportrequired under existing regulations coveringtransactions between companies within the group.

10) Identify the Bank’s stakeholders in the community inwhich it operates or are directly affected by itsoperations and formulate a clear policy of accurate,timely and effective communication with them.8

3. Stockholders’ Rights and Protection of MinorityStockholders’ Interests9

a. The Board shall respect the rights of the stockholders asprovided for in the Corporation Code, namely:

1) Right to vote on all matters that require theirconsent or approval. Stockholders shall have theright to elect, remove and replace directors and voteon certain corporate acts in accordance with theCorporation Code. A director shall not be removedwithout cause if it will deny minority shareholdersrepresentation in the Board.Voting Procedures 10:Every stockholder entitled to vote on a particularquestion or matter involved shall be entitled to one(1) vote for each share of stock in his name.

8 SEC Memo Cir. 9, s20149 SEC Memo Cir. 6, s200910 2014 PSBank Definitive Information Statement (SEC Form 20-IS)

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Cumulative voting is allowed provided that the totalvotes cast by a stockholder shall not exceed thenumber of shares registered in his name as of therecord date multiplied by the number of directors tobe elected. Matters submitted to stockholders for theratification shall be decided by the required vote ofstockholders present in person or by proxy.

Majority vote is required for the following: o Approval of the minutes of the Annual Meeting of the

Stockholders;o Ratification of corporate acts i.e. confirmation of

all acts of the Board of Directors, the ExecutiveCommittee and the Management;

o Election of a member of the Board of Directors –nominees receiving the highest number of votes shallbe declared elected following the provisions of theCorporate Code; and

o Election of external auditors.

All votes shall be counted by the Corporate Secretaryto be assisted by the Bank’s stock & transfer agent.

2) Pre-emptive right to all stock issuances of the Bank.All stockholders shall have pre-emptive rights, unlessthe same is denied in the articles of incorporation oran amendment thereto. They shall have the right tosubscribe to the capital stock of the Bank. Thearticles of incorporation shall lay down the specificrights and powers of stockholders with respect to theparticular shares they hold, all of which shall beprotected by law so long as they shall not be inconflict with the Corporation Code.

3) Right to inspect books and records of the Bank. Allstockholders shall be allowed to inspect corporatebooks and records including minutes of Board meetingsand stock registries in accordance with theCorporation Code and shall be furnished with annualreports, including financial statements, without costor restrictions.

4) Right to information. The stockholders shall beprovided, upon request, with periodic reports whichdisclose personal and professional information aboutthe directors and officers and certain other matterssuch as their holdings of the Bank’s shares, dealingswith the Bank, relationships among directors and keyofficers, and the aggregate compensation of directorsand officers.

5) Right to dividends. Stockholders shall have the rightto receive dividends subject to the discretion of theBoard. The Bank shall be compelled to declaredividends when its retained earnings shall be inexcess of 100% of its paid- in capital stock, except:a) when justified by definite expansion projects orprograms approved by the Board or b) when the Bank is

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prohibited under any loan agreement with any financialinstitution or creditor, whether local or foreign,from declaring dividends without its consent, and suchconsent has not been secured; or c) when it can beclearly shown that such retention is necessary underspecial circumstances, such as when there is a needfor special reserve for probable contingencies.

6) Appraisal right. The stockholders’ shall haveappraisal right or the right to dissent and demandpayment of the fair value of their shares in themanner provided for under Section 82 of theCorporation Code of the Philippines, under any of thefollowing circumstances: In case any amendment to the articles of

incorporation has the effect of changing orrestricting the rights of any stockholder or classof shares, or of authorizing preferences in anyrespect superior to those of outstanding shares ofany class, or of extending or shortening the term ofcorporate existence;

In case of sale, lease, exchange, transfer,mortgage, pledge or other disposition of all orsubstantially all of the corporate property andassets as provided in the Corporation Code; and

In case of merger or consolidation.Dissenter’s Right of Appraisal Procedures 11:On the above instances, the appraisal right may beexercised by any stockholder who shall have votedagainst the proposed corporate action by making awritten demand on the corporation for payment of thefair value of his shares within thirty (30) days afterthe date on which the vote was taken: Provided, thatfailure to make the demand within such period shall bedeemed a waiver of the appraisal right. If theproposed corporate action is implemented or effected,the corporation shall pay to such stockholder, uponsurrender of the certificate(s) of stock representinghis shares, the fair value thereof as of the day priorto the date on which the vote was taken, excluding anyappreciation or depreciation in anticipation of suchcorporate action. If within a period of sixty (60)days after the date the corporate action was approvedby the stockholders, the withdrawing stockholder andthe corporation cannot agree on the fair value of theshares, it shall be determined and appraised by three(3) disinterested persons one (1) of whom shall benamed by the stockholder, another by the corporationand the third by the two thus chosen. The findings ofthe majority of the appraisers shall be final andtheir award shall be paid by the corporation withinthirty (30) days after such award is made: Provided,that no payment shall be made to any dissentingstockholder unless the corporation has unrestrictedretained earnings in its books to cover such payment:and Provided, further, that upon payment by the

11 2014 PSBank Definitive Information Statement (SEC Form 20-IS)

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corporation of the agreed awarded price, thestockholder shall forthwith transfer his shares to thecorporation.

b. The Board shall be transparent and fair in the conduct ofthe annual and special stockholders’ meetings of theBank. The Bank shall encourage the stockholders topersonally attend such meetings. If they cannot attend,they shall be apprised ahead of time of their right toappoint a proxy. Subject to the requirements of the By-Laws, the exercise of the right shall not be undulyrestricted and any doubt about the validity of a proxyshould be resolved in the stockholder’s favor.

c. The Board shall promote the rights of the stockholders,remove impediments to the exercise of those rights andprovide an adequate avenue for them to seek timelyredress for breach of their rights. They shall encouragethe exercise of stockholders’ voting rights and thesolution of collective action problems throughappropriate mechanisms. They shall be instrumental inremoving excessive costs and other administrative orpractical impediments to stockholders participating inmeetings and/or voting in person. The directors shallpave the way for the electronic filing and distributionof shareholder information necessary to make informeddecisions subject to legal constraints.

d. The Board shall make available to the stockholdersaccurate and timely information to enable the latter tomake a sound judgment on all matters brought to theirattention for consideration or approval.

e. Although all stockholders should be treated equally orwithout discrimination, the Board should give minoritystockholders the right to propose the holding of meetingsand the items for discussion in the agenda that relatedirectly to the business of the corporation. The Boardshall also provide the minority stockholders access toany and all information relating to matters for which themanagement is accountable for and to those relating tomatters for which the management shall include suchinformation and, if not included, then the minoritystockholders shall be allowed to propose to include suchmatters in the agenda of stockholders’ meeting, beingwithin the definition of “legitimate purposes”.

f. Minority stockholders shall also be allowed to nominatecandidates to the Board of Directors.

4. Conduct of Board Meetings and Quorum RequirementsThe directors shall act only as a Board, and the individualdirectors shall have no power as such. A majority of theBoard shall constitute a quorum for the transaction ofbusiness and the vote of a majority of the quorum of theBoard shall always be needed to decide any action. It shallmeet regularly to properly discharge its functions. Itshall also ensure that independent views in Board meetings

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shall be given full consideration and all such meetingsshall be duly minuted.12

The members of the Board should attend its regular andspecial meetings in person or through teleconferencing.Independent directors should always attend Board meetings.13

The meetings of the Board may be conducted through moderntechnologies such as, but not limited to, teleconferencingand video conferencing as long as the director who istaking part in said meetings can actively participate inthe deliberations on matters taken up therein: Provided,that every member of the Board shall participate in atleast fifty percent (50%) and shall physically attend atleast twenty five percent (25%) of all Board meetings everyyear: Provided, further, that in the case of a director whois unable to physically attend or participate in Boardmeetings via teleconferencing or video conferencing, thecorporate secretary shall execute a notarized certificationattesting that said director was given the agenda materialsprior to the meeting and that his/her comments/decisionsthereon were submitted for deliberation/discussion and weretaken up in the actual Board meeting, and that thesubmission of said certification shall be consideredcompliance with the required fifty percent (50%) minimumattendance in Board meetings.14

The Bank shall submit to SEC, on or before January 5 of thefollowing year, an Advisement Letter on the directors’attendance in Board meetings and update the pertinentportion of the Annual Corporate Governance Report (ACGR).15

Meetings of the Board may be held at any place within thePhilippines.

As far as practicable, materials for the Board meetingshould be provided at least 3 banking days before themeeting16.

B. Directors

1. Qualifications of a Director17

A director shall have the following minimumqualifications:

a. He shall be at least twenty-five (25) years of age atthe time of his election or appointment;

b. He shall be at least a college graduate or have atleast five (5) years experience in business;

c. He must have attended a special seminar on corporategovernance for board of directors conducted oraccredited by the BSP: Provided, That incumbent

12 Sec. 2 BSP Cir. No. 74913 SEC Memo Cir. No. 6 s200914 Sec. 1 BSP Cir. No. 749; MORB Sec. x141.115 SEC Memorandum Circular No. 1 s201416 PSBank ASEAN Corporate Governance Scorecard (ACGS)17 Sec. 1 BSP Cir. No. 749; MORB Sec. x141.2

20

directors as well as those elected after 17 September2001 must attend said seminar on or before 30 June2003 or within a period of six (6) months from date ofelection for those elected after 30 June 2003, as thecase may be, Provided further that the followingpersons are exempted from attending said seminar18:1) Foreign nationals who have attended corporate

governance training covering core topics in the BSP-recommended syllabus and certified by the CorporateSecretary as having been made aware of the generalresponsibility and specific duties andresponsibilities of the Board of Directors andspecific duties and responsibilities of a director;

2) Filipino citizens with recognized stature, influenceand reputation in the banking community and whosebusiness practices stand as testimonies to goodcorporate governance;

3) Distinguished Filipino and foreign nationals whoserved as senior officials in central banks and/orfinancial regulatory bodies, including formerMonetary Board members; or

4) Former Chief Justices of the Philippine SupremeCourt.

d. He must be fit and proper for the position of adirector of the Bank. In determining whether a personis fit and proper for the position of a director, thefollowing matters must be considered:Integrity/probity; physical/mental fitness; relevanteducation/financial literacy/training; possession ofcompetencies relevant to the job, such as knowledgeand experience, skills, diligence and independence ofmind; and sufficiency of time to fully carry outresponsibilities.

In assessing a director’s integrity/probity,consideration shall be given to the director’s marketreputation, observed conduct and behavior, as well as hisability to continuously comply with company policies andapplicable laws and regulations, including market conductrules, and the relevant requirements and standards of anyregulatory body, professional body, clearing house orexchange, or government and any of itsinstrumentalities/agencies19.

The members of the Board shall possess the foregoingqualifications for directors in addition to thoserequired or prescribed under R.A. No. 8791 and otherexisting applicable laws and regulations.

An elected director has the burden to prove that he/shepossesses all the foregoing minimum qualifications andnone of the disqualifications by submitting thedocumentary requirements. Non-submission of completedocumentary requirements within the prescribed period (asherein enumerated under Part III – Reportorial

18 BSP Cir. No. 84019 BSP Cir. No. 889 dated 2 November 2015

21

Requirements)shall be construed as his/her failure toestablish his/her qualifications for the position andresult in his/her removal from the Board20.

2. Independent Directors21

An independent director shall refer to a person who –

a. is not or has not been an officer or employee of theBank, its subsidiaries or affiliates or relatedinterests during the past five (5) years counted fromthe date of his election;

b. is not a director or officer of the related companiesof the Bank’s majority stockholder;

c. is not a stockholder owning more than two percent (2%)or with shares of stock sufficient to elect one seatin the Board, or in any of its related companies or ofits majority corporate shareholders;

d. is not a relative, legitimate or common-law of anydirector, officer or majority shareholder of the Bankor any of its related companies. For this purpose,relatives refer to the spouse, parent, child, brother,sister, parent-in-law, son-/daughter-in-law,brother-/sister-in-law22;

e. is not acting as a nominee or representative of anydirector or substantial shareholder of the hank, anyof its related companies or any of its substantialshareholders; and

f. is not retained as professional adviser, consultant,agent or counsel of the institution, any of Itsrelated companies or any of its substantialshareholders, either in his personal capacity orthrough his firm; is independent of management andfree from any business or other relationship, has notengaged and does not engage in any transaction withthe institution or with any of its related companiesor with any of its substantial shareholders, whetherby himself or with other persons or through a firm ofwhich he is a partner or a company of which he is adirector or substantial shareholder, other thantransactions which are conducted at arms-length andcould not materially interfere with or influence theexercise of his judgment.

A regular director who resigns or whose term ends on theday of the election shall only qualify for nomination andelection as an Independent Director after a two (2) year“cooling off period”. Persons appointed as Chairman“Emeritus”, “Ex-Officio” Directors/Officers or members ofany Executive Advisory Board, or otherwise appointed in acapacity to assist the Board in the performance of itsduties and responsibilities shall be subject to a one (1)year “cooling-off period” prior to his qualification asan Independent Director.23

20 BSP Cir. No. 887 dated 07 October 201521 Sec. 1 BSP Cir. No. 749, as amended by BSP Cir. No. 757/Sec. 38 SRC IRR22 BSP Cir. No. 793 dated 08 April 201323 SEC Memo Cir. No. 9 S2009

22

3. Limits for Independent Directors24

In selecting independent directors, the number and typesof entities where the candidate is likewise elected assuch, shall be considered to ensure that he will be ableto devote sufficient time to effectively carry-out hisduties and responsibilities.

a. There shall be no limit in the number of coveredcompanies that a person may be elected as IndependentDirector (ID), except in business conglomerates wherean ID can be elected to only five (5) companies of theconglomerate, i.e. parent company, subsidiary oraffiliate;

b. ID can serve as such for five (5) consecutive years,provided that service for a period of at least six (6)months shall be equivalent to one (1) year, regardlessof the manner by which the ID was relinquished orterminated;

c. After completion of the 5-year service period, an IDshall be ineligible for election as such in the samecompany unless the ID has undergone a “cooling off”period of two (2) years, provided, that during suchperiod, the ID concerned has not engaged in anyactivity that under existing rules disqualifies aperson from being elected as ID in the same company;

d. An ID re-elected as such in the same company after the“cooling off” period can serve for another five (5)consecutive years;

e. After serving as ID for ten (10) years, the ID shallbe perpetually barred from being elected as such inthe same company, without prejudice to being electedas ID in other companies outside of the businessconglomerate.

4. Disqualifications of Directors25

Without prejudice to specific provisions of lawprescribing disqualifications for directors, thefollowing are disqualified from becoming directors:

a. Permanent Disqualification

1) Persons who have been convicted by final judgment ofa court for offenses involving dishonesty or breachof trust such as, but not limited to, estafa,embezzlement, extortion, forgery, malversation,swindling, theft, robbery, falsification, bribery,violation of B.P. Blg. 22, violation of Anti-Graftand Corrupt Practices Act and prohibited acts andtransactions under Section 7 of R.A. No. 6713 (Codeof Conduct and Ethical Standards for PublicOfficials and Employees);

2) Persons who have been convicted by final judgment ofa court sentencing them to serve a maximum term ofimprisonment of more than six (6) years;

24 SEC Memo Cir. No. 9 S2011, as included in Sec. 1 BSP Cir. No. 74925 MORB Sec. x143

23

3) Persons who have been convicted by final judgment ofthe court for violation of banking laws, rules andregulations;

4) Persons who have been judicially declared insolvent,spendthrift or incapacitated to contract;

5) Directors, officers or employees of closed Banks whowere found to be culpable for such institution’sclosure as determined by the Monetary Board;

6) Directors and officers of Banks found by theMonetary Board as administratively liable forviolation of banking laws, rules and regulationswhere a penalty of removal from office is imposed,and which finding of the Monetary Board has becomefinal and executory; or

7) Directors and officers of Banks or any person foundby the Monetary Board to be unfit for the positionof directors or officers because they were foundadministratively liable by another government agencyfor violation of banking laws, rules and regulationsor any offense/violation involving dishonesty orbreach of trust, and which finding of saidgovernment agency has become final and executory.

The following are additional disqualifications underArticle 3.E.1 of SEC Memo No. 6 S2009:

1) Any person convicted by final judgment or order by acompetent judicial or administrative body of anycrime that (a) involves the purchase or sale ofsecurities, as defined in the Securities RegulationCode; (b) arises out of the person’s conduct as anunderwriter, broker, dealer, investment adviser,principal distributor, mutual fund dealer, futurescommission merchant commodity trading advisor, orfloor broker; (c) arises out of his fiduciaryrelationship with a bank, quasi-bank, trust company,investment house or as affiliated person of any ofthem;

2) Any person who, by reason of misconduct, afterhearing, is permanently enjoined by a final judgmentor order of the Commission or any court oradministrative body of competent jurisdiction from:(a) acting as underwriter, broker, dealer,investment adviser, principal distributor, mutualfund dealer, futures commission merchant, commoditytrading advisor, or floor broker; (b) acting asdirector or officer of a bank, quasi-bank, trustcompany, investment house, or investment company;(c) engaging in or continuing any conduct orpractice in any of the capacities mentioned in sub-paragraphs (a) and (b) above, or willfully violatingthe laws that govern securities and bankingactivities. The disqualification shall also apply ifsuch person is currently the subject of an order ofthe Commission or any court or administrative bodydenying, revoking or suspending any registration,license or permit issued to him under theCorporation Code, Securities Regulation Code or any

24

other law administered by the Commission or BangkoSentral ng Pilipinas (BSP), or under any rule orregulation issued by the Commission or BSP, or hasotherwise been restrained to engage in any activityinvolving securities and banking; or such person iscurrently the subject of an effective order or aself-regulatory organization or association with amember or participant of the organization.

3) Any person convicted by final judgment or order by acourt or competent administrative body of an offenseinvolving moral turpitude, fraud, embezzlement,theft, estafa, counterfeiting, misappropriation,forger, bribery, false affirmation, perjury or otherfraudulent acts;

4) Any person who has been adjudged by final judgmentor order of the Commission, court, or competentadministrative body to have willfully violated, orwillfully aided, abetted, counseled, induced orproduced the violation of any provision of theCorporation Code, Securities Regulation Code or anyother law administered by the Commission or BSP, orany of its rule, regulation or order.

5) Any person earlier elected as independent directorwho becomes an officer, employee or consultant ofthe Bank;

6) Any person found guilty by final judgment or orderor a foreign court or equivalent financialregulatory authority of acts, violations ormisconduct similar to any of the acts, violations ormisconduct enumerated in paragraphs 1) to 5) above;

7) Conviction by final judgment of an offensepunishable by imprisonment for more than six (6)years, or a violation of the Corporation Codecommitted within five (5) years prior to the date ofhis election or appointment.

b. Temporary Disqualification

1) Persons who refuse to fully disclose the extentof their business interest or any materialinformation to BSP when required pursuant to aprovision of law or of a circular, memorandum,rule or regulation of the BSP. Thisdisqualification shall be in effect as long asthe refusal persists;

2) Directors who have been absent or who have notparticipated for whatever reasons in more thanfifty percent (50%) of all meetings, both regularand special, of the Board during theirincumbency, and directors who failed tophysically attend for whatever reasons in atleast twenty-five percent (25%) of all Boardmeetings in any year, except that when anotarized certification executed by the corporatesecretary has been submitted attesting that saiddirectors were given the agenda materials priorto the meeting and that their comments/decisionsthereon were submitted for

25

deliberation/discussion and were taken up in theactual Board meeting, said directors shall beconsidered present in the Board meeting. Thisdisqualification applies only for purposes of theimmediately succeeding election;

3) Persons who are delinquent in the payment oftheir obligations as defined hereunder:(a) Delinquency in the payment of obligations

means that an obligation of a person with aBank where he/she is a director or officer,or at least two (2) obligations with otherBanks/FIs, under different credit lines orloan contracts, are past due pursuant toMORB Sec. X306;

(b) Obligations shall include all borrowingsfrom a bank obtained by:i. A director or officer for his own

account or as the representative oragent of others or where he/she acts asa guarantor, endorser or surety forloans from such FIs;

ii. The spouse or child under the parentalauthority of the director or officer;

iii. Any person whose borrowings or loanproceeds were credited to the accountof, or used for the benefit of adirector or officer;

iv. A partnership of which a director orofficer, or his/her spouse is themanaging partner or a general partnerowning a controlling interest in thepartnership; and

v. A corporation, association or firmwholly-owned or majority of the capitalof which is owned by any or a group ofpersons mentioned in the foregoingItems “i”, “ii” and “iv”.

This disqualification shall be in effect as longas the delinquency persists.

4) Persons who have been convicted by a court foroffenses involving dishonesty or breach of trustsuch as, but not limited to, estafa,embezzlement, extortion, forgery, malversation,swindling, theft, robbery, falsification,bribery, violation of B.P. Blg. 22, violation ofAnti-Graft and Corrupt Practices Act andprohibited acts and transactions under Section 7of R.A. No. 6713, violation of banking laws,rules and regulations or those sentenced to servea maximum term of imprisonment of more than six(6) years but whose conviction has not yet becomefinal and executory;

5) Directors and officers of closed Banks pendingtheir clearance by the Monetary Board;

6) Directors disqualified for failure toobserve/discharge their duties and

26

responsibilities prescribed under existingregulations. This disqualification applies untilthe lapse of the specific period ofdisqualification or upon approval by the MonetaryBoard;

7) Directors who failed to attend the requiredspecial seminar on corporate governance for Boardof directors conducted or accredited by BSP. Thisdisqualification applies until the directorconcerned had attended such seminar;

8) Persons dismissed/terminated from employment forcause. This disqualification shall be in effectuntil they have cleared themselves of involvementin the alleged irregularity or upon clearance, ontheir request, from the Monetary Board aftershowing good and justifiable reasons, or afterthe lapse of five (5) years from the time theywere officially advised by the appropriatedepartment of the SES of their disqualification;

9) Those under preventive suspension;10) Persons with derogatory records as certified by,

or on the official files of, the judiciary, NBI,Philippine National Police (PNP), quasi-judicialbodies, other government agencies, internationalpolice, monetary authorities and similar agenciesor authorities of foreign countries forirregularities or violations of any law, rulesand regulations that would adversely affect theintegrity of the director/officer or the abilityto effectively discharge his duties. Thisdisqualification applies until they have clearedthemselves of the allegedirregularities/violations or after a lapse offive (5) years from the time the complaint, whichwas the basis of the derogatory record, wasinitiated;

11) Directors and officers of Banks found by theMonetary Board as administratively liable forviolation of banking laws, rules and regulationswhere a penalty of removal from office isimposed, and which finding of the Monetary Boardis pending appeal before the appellate court,unless execution or enforcement thereof isrestrained by the court;

12) Directors and officers of Banks or any personfound by the Monetary Board to be unfit for theposition of director or officer because they werefound administratively liable by anothergovernment agency for violation of banking laws,rules and regulations or any offense/violationinvolving dishonesty or breach of trust, andwhich finding of said government agency ispending appeal before the appellate court, unlessexecution or enforcement thereof is restrained bythe court; and

13) Directors and officers of Banks found by theMonetary Board as administratively liable forviolation of banking laws, rules and regulations

27

where a penalty of suspension from office or fineis imposed, regardless whether the finding of theMonetary Board is final and executory or pendingappeal before the appellate court, unlessexecution or enforcement thereof is restrained bythe court. The disqualification shall be ineffect during the period of suspension or so longas the fine is not fully paid.

The following are additional temporarydisqualifications under Article 3.E.2 of SEC Memo No.6 S2009:

1) Refusal to fully disclose the extent of his businessinterest as required under the Securities RegulationCode and its Implementing Rules and Regulations.This disqualification shall be in effect as long ashis refusal persists.

2) Absence in more than fifty (50) percent of allregular and special meetings of the Board during hisincumbency, or any twelve (12) month period duringthe said incumbency, unless absence is due toillness, death in the immediate family or seriousaccident. The disqualification shall apply forpurposes of the succeeding election;

3) Dismissal or termination for cause as director ofany corporation covered by the Revised Code ofCorporate Governance. The disqualification shall bein effect until he has cleared himself from anyinvolvement in the cause that gave rise to hisdismissal or termination.

4) If the beneficial equity ownership of an independentdirector in the corporation or its subsidiaries andaffiliates exceeds two percent of its subscribedcapital stock. This disqualification shall be liftedif the limit is later complied with.

5) If any of the judgments or orders cited in thegrounds for permanent disqualification has not yetbecome final.

A temporarily disqualified director shall within sixty(60) business days from such disqualification, takethe appropriate action to remedy or correct thedisqualification. If he fails to do so for unjustifiedreasons, the disqualification shall become permanent.

5. Disqualification Procedures for Directors26

a. The Board and Management shall be responsible fordetermining the existence of the ground fordisqualification of a director and for reporting thesame to BSP. While the Bank may conduct its owninvestigation and impose appropriate sanction/s as areallowable, this shall be without prejudice to theauthority of the Monetary Board to disqualify adirector from being elected as director. Grounds for

26 Sec. X143.4 BSP MORB

28

disqualification made known to the Bank, shall bereported to the appropriate department of the SESwithin seventy-two (72) hours from knowledge thereof.

b. On the basis of knowledge and evidence on theexistence of any of the grounds for disqualification,the director concerned shall be notified in writingeither by personal service or through registered mailwith registry return receipt card at his/her lastknown address by BSP of the existence of the groundfor his/her disqualification and shall be allowed tosubmit within fifteen (15) calendar days from receiptof such notice an explanation on why he/she should notbe disqualified and included in the watch-listed file,together with the evidence in support of his/herposition. BSP may allow an extension on meritoriousground.

c. Upon receipt of the reply explanation of the directorconcerned, BSP shall proceed to evaluate the case. Thedirector concerned shall be afforded the opportunityto defend/clear himself/herself.

d. If no reply has been received from the directorconcerned upon the expiration of the period prescribedunder Item “b” above, said failure to reply shall bedeemed a waiver and BSP shall proceed to evaluate thecase based on available records/evidence.

e. If the ground for disqualification is delinquency inthe payment of obligation, the concerned directorshall be given a period of thirty (30) calendar dayswithin which to settle said obligation or, restore itto its current status or, to explain why he/she shouldnot be disqualified and included in the watch-listedfile, before the evaluation on his disqualificationand watch-listing is elevated to the Monetary Board.

f. If the disqualification is based on dismissal forcause, BSP shall, as much as practicable, endeavor toestablish the specific acts or omissions constitutingthe offense or the ultimate facts which resulted inthe dismissal to be able to determine if thedisqualification of the director concerned iswarranted or not. The evaluation of the case shall bemade for the purpose of determining ifdisqualification would be appropriate and not for thepurpose of passing judgment on the findings anddecision of the entity concerned. BSP may decide torecommend to the Monetary Board a penalty lower thandisqualification (e.g., reprimand, suspension, etc.)if, in its judgment the act committed or omitted bythe director concerned does not warrantdisqualification.

g. All other cases of disqualification, whether permanentor temporary shall be elevated to the Monetary Board

29

for approval and shall be subject to the proceduresprovided in Items “a”,”b”,”c” and “d” above.

h. Upon approval by the Monetary Board, the concerneddirector shall be informed by BSP in writing either bypersonal service or through registered mail withregistry return receipt card, at his/her last knownaddress of his/her disqualification from being electedas director in any financial institution under thesupervision of BSP and/or of his/her inclusion in themasterlist of watch-listed persons so disqualified.

i. The Board shall be immediately informed of cases ofdisqualification approved by the Monetary Board andshall be directed to act thereon not later than thefollowing Board meeting. Within seventy two (72) hoursthereafter, the corporate secretary shall report tothe BSP Governor the action taken by the Board on thedirector involved.

j. Persons who are elected as director in any of the BSP-supervised institutions for the first time but aresubject to any of the grounds for disqualification,shall be afforded the procedural due processprescribed above.

k. Whenever a director is cleared in the processmentioned under Item “c” above or, when the ground fordisqualification ceases to exist, he/she would beeligible to become director of any bank, QB, trustentity or any institution under the supervision of theBSP only upon prior approval by the Monetary Board. Itshall be the responsibility of BSP to elevate to theMonetary Board the lifting of the disqualification ofthe concerned director/officer and his/her delistingfrom the masterlist of watch-listed persons.

6. Removal Procedures for Directors27

a. A director may be removed from office by a vote of thestockholders holding or representing at least two-thirds (2/3) of the outstanding capital stock.

b. The removal shall take place either at the regularstockholder’s meeting or at a special meeting calledfor the purpose, and in either case, after previousnotice to stockholders of the intention to proposesuch removal at the meeting.

c. The Corporate Secretary shall call a special meeting,on order of the President or on the written demand ofthe stockholders representing or holding at least amajority of the outstanding capital stock for thepurpose of removal of a director. Should the CorporateSecretary fail or refuse to call the special meetingupon such demand or fail or refuse to give the notice,

27 Sec. 28 of the Corporation Code of the Philippines

30

or if there is no secretary, the call for the meetingshall be addressed directly to the stockholders by anystockholder signing the demand. Notice of the time andplace of such meeting, as well as of the intention topropose such removal, must be given by publication orby written notice prescribed in the Corporation Codeof the Philippines. Removal may be with or withoutcause: provided that removal without cause may not beused to deprive minority stockholders the right ofrepresentation to which they may be entitled underSection 24 of the Corporation Code of the Philippines.

d. A director removed from office is not eligible to seekre-election and/or be reappointed to the Board unlessa written consent is obtained from stockholdersholding or representing at least two thirds (2/3) ofthe outstanding capital stock.

7. Vacancies in the Office of the Board of Director28

Any vacancy occurring in the board of directors otherthan by removal by the stockholders or members or byexpiration of term, may be filled by the vote of at leasta majority of the remaining directors, if stillconstituting a quorum; otherwise, said vacancies must befilled by the stockholders in a regular or specialmeeting called for that purpose. A director so elected tofill a vacancy shall be elected only for the unexpiredterm of his predecessor in office.

A directorship to be filled by reason of an increase inthe number of directors shall be filled only by anelection at a regular or at a special meeting ofstockholders duly called for the purpose, or in the samemeeting authorizing the increase of directors if sostated in the notice of the meeting.

8. Interlocking Directorships29

There shall be no concurrent directorships between Banksor between a Bank and a Quasi-Banks (QB) or a non-Bankfinancial institutions (NBFI), except as may beauthorized by the Monetary Board.

Without the need for prior approval of the MonetaryBoard, concurrent directorships between entities notinvolving an investment house shall be allowed in thefollowing cases:

a. Banks not belonging to the same category: Provided,That not more than one (1) Bank shall have quasi-banking functions;

b. A Bank and an NBFI;c. A Bank without quasi-banking functions and a QB; andd. A Bank and one (1) or more of its subsidiary Bank/s,

QB/s and NBFI/s.

28 Sec. 29 of the Corporation Code29 MORB Sec. x145

31

For purposes of the foregoing, a husband and his wifeshall be considered as one (1) person.

9. Interlocking directorships and officerships30

Except as may be authorized by the Monetary Board or asotherwise provided hereunder, there shall be noconcurrent directorship and officership between Banks orbetween a Bank and a QB or an NBFI.

Without the need for prior approval of the MonetaryBoard, concurrent directorship and officership between aBank and one (1) or more of its subsidiary Bank/s, QB/sand NBFI/s, other than investment house/s, shall beallowed.

10. Election of DirectorsThe directors shall be elected by the vote of the holdersof common stock of the Bank in accordance with Section 24of the Corporation Code or pertinent applicable law atthe annual meeting of the stockholders.

Nomination Procedures 31:

a. Any stockholder may submit nominations for directorialpositions to the Nominations Committee (NomCom).

b. The nominating stockholder shall submit his proposednomination in writing to the NomCom, together with theBio-data, acceptance and conformity of the would-benominee. In the case of a nominee for the position ofan independent director, the would-be nominee is alsorequired to submit a Certification that he/she has allthe qualifications and none of the disqualificationsto become an independent director.

c. The NomCom shall screen the nominations of directorsprior to the submission of the Definitive InformationStatement (DIS) and come up with a Final List ofCandidates.

d. Only nominees whose names appear in the Final List ofCandidates shall be eligible for election as director.

11. Confirmation of Election of Directors32

The election of directors of the Bank shall be subject toconfirmation by the Monetary Board. Confirmation by theMonetary Board shall not be required in the followingcases:

a. Re-election of a director (as a director) in the samebank or election of the same director in another bank,QB, NBFI with trust authority or trust corporationwithin a banking group; and

b. Re-election of an independent director (as anindependent director or not) in the same bank orelection of the same director (as an independent

30 MORB Sec. x14531 PSBank’s Amended By-laws32 BSP Cir. No. 758

32

director or not) in another bank, QB, NBFI with trustauthority or trust corporation within a banking group.

Provided, that the director concerned has been previouslyconfirmed or his/her re-election requires the same levelof confirming authority as provided: provided, further,that said director has had continuous service within thesame bank or banking group.

The election shall be deemed to have been confirmed byBSP, if after sixty (60) banking days from receipt of thecomplete required reports (as herein enumerated underPart III – Reportorial Requirements), no advice againstsaid election has been received by the Bank.

A director whose election was not confirmed for failureto submit the complete documentary requirements shall bedeemed removed from office after due notice to the boardof directors of the bank, even if he/she has assumed theposition to which he/she was elected, pursuant to Section16 of R.A. No. 879133.

12. Multiple Board Seats34

The Board may adopt guidelines on the number ofdirectorships that its members can hold in othercorporations. The Board shall take into consideration thecapacity of a director to diligently and efficientlyperform his duties and responsibilities and thelimitations on concurrent directorship between Banks orbetween a Bank and a quasi-Bank under existingregulations.

The President and other executive directors may becovered by a lower indicative limit for membership inother Boards. A similar limit may apply to independent ornon-executive directors who, at the same time, serve asfull-time executives in other corporations. In any case,the capacity of the directors to diligently andefficiently perform their duties and responsibilities ofthe Boards they serve shall not be compromised.

13. Specific Duties and Responsibilities of a Director35

a. Remain fit and proper for the position for the duration of his termA director is expected to remain fit and proper forthe position for the duration of his term. He shouldpossess unquestionable credibility to make decisionsobjectively and resist undue influence. He shall treatBoard directorship as a profession and shall have aclear understanding of his duties and responsibilitiesas well as his role in promoting good governance.Hence, he shall maintain his professional integrityand continuously seek to enhance his skills, knowledgeand understanding of the activities that the Bank is

33 BSP Cir. No. 887 dated 07 October 201534 SEC Memo. Cir. No. 6 S200935 Sec. 2 BSP Cir. No. 749

33

engaged in or intends to pursue as well as thedevelopments in the banking industry includingregulatory changes through continuing education ortraining.

b. Conduct fair business transactions with the Bank andto ensure that personal interest does not bias BoarddecisionsDirectors should, whenever possible, avoid situationsthat would give rise to a conflict of interest. Iftransactions with the Bank cannot be avoided, itshould be done in the regular course of business andupon terms not less favorable to the Bank than thoseoffered to others. The basic principle to be observedis that a director should not use his position to makeprofit or to acquire benefit or advantage for himselfand/or his related interests. He should avoidsituations that would compromise his impartiality.

c. Act honestly and in good faith, with loyalty and inthe best interest of the Bank, its stockholders,regardless of the amount of their Stockholdings, andother stakeholders such as its depositors, investors,borrowers, other clients and the general publicA director must always act in good faith, with thecare which an ordinarily prudent man would exerciseunder similar circumstances. While a director shouldalways strive to promote the interest of allstockholders, he should also give due regard to therights and interests of other stakeholders.

d. Devote time and attention necessary to properlydischarge their duties and responsibilitiesDirectors should devote sufficient time to familiarizethemselves with the Bank’s business. They must beconstantly aware of the Bank’s condition and beknowledgeable enough to contribute meaningfully to theBoard’s work. They must attend and activelyparticipate in Board and committee meetings, requestand review meeting materials, ask questions, andrequest explanations. If a person cannot givesufficient time and attention to the affairs of theBank, he should neither accept his nomination nor runfor election as member of the Board.

e. Act judiciouslyBefore deciding on any matter brought before theBoard, every director should thoroughly evaluate theissues, ask questions and seek clarifications whennecessary.

f. Contribute significantly to the decision-makingprocess of the BoardDirectors should actively participate and exerciseobjective independent judgment on corporate affairsrequiring the decision or approval of such Board.

g. Exercise independent judgment

34

A director should view each problem/situationobjectively. When a disagreement with others occurs,he should carefully evaluate the situation and statehis position. He should not be afraid to take aposition even though it might be unpopular. Corollary,he should support plans and ideas that he thinks willbe beneficial to the Bank.

h. Have a working knowledge of the statutory andregulatory requirements affecting the Bank, includingthe content of its articles of incorporation and by-laws, the requirements of the BSP and whereapplicable, the requirements of other regulatoryagenciesA director should also keep himself informed of theindustry developments and business trends in order tosafeguard the Bank’s competitiveness.

i. Observe confidentialityDirectors must observe the confidentiality of non-public information acquired by reason of theirposition as directors. They may not disclose saidinformation to any other person without the authorityof the Board.

14. Orientation and Continuing Education

a. Orientation for First-Time Director It is critical that new directors receive the trainingthey need in order to be an effective member of theBoard and help lead the organization in the rightdirection. Orientation for first-time directors willbegin immediately after they are selected and beforetheir first Board meeting. In compliance with BSPCircular No. 758, the Bank shall furnish all itsfirst-time directors with a copy of the generalresponsibility and specific duties andresponsibilities of the board of directors and of adirector. The directors shall submit under oath acertification that they have received copies of suchgeneral responsibility and specific duties andresponsibilities and that they fully understand andaccept the same. The Bank shall submit thecertification to the appropriate department of theBSP-Supervision and Examination Sector, together witha copy of Certificate of Attendance in CorporateGovernance (CG) seminar.

b. Continuing Education ProgramThe Board as a group and as individual directorsshould have sufficient knowledge relevant to theBank’s activities to provide effective governance andoversight. The Corporate Governance Committee (CGC) ismandated, among others, to make recommendations to theBoard regarding the continuing education of directors. In this regard, the Chief Compliance Officer (CCO)shall liaise with internal and/or external trainingproviders for the training and seminars of directors.

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Unless otherwise exempted by existing regulations, alldirectors and key officers are required to attend fora minimum of four (4) hours of training every year, aprogram on Corporate Governance conducted by trainingproviders duly accredited by the SEC or through anSEC-approved in-house corporate governance training,covering all the mandated topics including financialreporting and auditing. Key officers, for purposes ofthis requirement, refer to all officers with the rankof Senior Vice President (SVP) & up and those officersnamed in the Bank’s By-Laws, the Chief Audit Executive(CAE) and the Chief Compliance Officer (CCO).

C. Chairman of the Board, Vice-Chairman, President and theCorporate SecretaryThe roles of the Chairman/Vice-Chairman of the Board and thePresident shall, as much as practicable, be separate to fosteran appropriate balance of power, increased accountability andbetter capacity for independent decision-making by the Board.Their respective powers and duties are delineated in theBank’s By-Laws.36

1. Chairman of the BoardWhile the specific powers, duties and responsibilities ofthe Chairman of the Board are embodied in the Bank’s By-Laws, the following are his/her general duties andresponsibilities:

(1) To provide leadership in the Board of Directors. TheChairman of the Board shall ensure effectivefunctioning of the Board, including maintaining arelationship of trust with Board members.

(2) To ensure that the Board takes an informed decision.The Chairman of the Board shall ensure a sounddecision-making process and he/she should encourageand promote critical discussions and ensure thatdissenting views can be expressed and discussed withinthe decision-making process.37

2. Vice-ChairmanIn the absence of the Chairman, the Vice-Chairmandesignated by the Board shall act in his stead and shallperform any and all such duties pertaining to the office ofthe Chairman. The Vice-Chairman shall also perform suchduties as the Board may prescribe.

36 SEC Memo. Cir. 6, s200937 Sec. 3 BSP Cir. No 749

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3. PresidentThe President, on the other hand, shall be the ChiefExecutive Officer (CEO) of the Bank. He shall have theprimary responsibility of carrying out the policies andimplementing strategies in order to meet the objectivesapproved by the Board. He is ultimately responsible formanaging and implementing the Bank’s business strategiesand day-to-day operations. His detailed powers, duties andresponsibilities are outlined in the Bank’s By-Laws.

4. Corporate SecretaryBased on the Bank’s By-Laws, the Corporate Secretary shallhave the following duties:

a. To keep accurate minutes of all meetings of thestockholders and of the Board and to attend to the givingof all notices required under the By-Laws to be given;

b. To be the custodian of the corporate seal, stockcertificate books, stock and transfer books, records,documents and papers of the Bank, prepare ballots for theannual election and keep a complete and up-to-date listof stockholders and their addresses;

c. To perform such other duties as may be assigned to himfrom time to time by the Board, Chairman or President andsuch other duties incidental to his office;

d. To sign with the President all contracts, deeds, licensesand other instruments when so ordered by the President orby the Board; and

e. To prepare such reports and statements required by theBoard and/or the Chairman or the President.

In addition to the foregoing, the Corporate Secretary shallalso have the following responsibilities:38

a. Safekeep and preserve the integrity of the meetings ofthe Board committees, as well as other official recordsof the Bank;

b. Be loyal to the mission, vision and objectives of theBank;

c. Work fairly and objectively with the Board, management,stockholders and other stakeholders39;

d. Have appropriate administrative and interpersonal skills;e. If he is not at the same time the Bank’s legal counsel,

be aware of the laws, rules and regulations necessary inthe performance of his duties and responsibilities;

f. Have a working knowledge of the operations of the Bank;g. Inform members of the Board, in accordance with the By-

Laws, of the agenda for their meetings and ensure thatthe directors have before them accurate information thatwill enable them to arrive at intelligent decisions onmatters that require their approval;

h. Ensure that all Board procedures, rules and regulationsare strictly followed by the directors;

38 SEC Memo. Cir. 6, S200939 SEC Memo Cir. 9, s2014

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i. And other duties and responsibilities as prescribed byrelevant regulations.

D. Board CommitteesTo aid the Board in its various tasks, increase efficiency andprovide greater focus in its oversight and other functions ondifferent key areas, the following Board-level committees,among others, have been created:

1. Executive Committee (ExCom)This committee regularly reviews and approves creditproposals within its limits. It recommends additionalconditions and requirements on loan applications for Boardapproval. It may also act, by majority vote of all itsmember-directors, on such other specific matters within thecompetence of the Board as may be delegated to it in theBank’s By-Laws or by a majority vote of the Board exceptfor matters exclusive to the Board.

Its membership composition, standing/authority, specificduties and responsibilities are embodied in the ExComCharter (see Annex “A”) that is being maintained by theBank’s Credit Administration Group (CAG).

2. Audit Committee (AuditCom)This committee provides independent oversight of internalcontrols and financial reporting, risk management, ethicalenvironment, compliance with laws and regulations, and theinternal and external audit activities. This is the Board-level committee reporting line of the Bank’s Internal AuditGroup (IAG) headed by the Chief Audit Executive (CAE).

Its membership composition, standing/authority, specificduties and responsibilities are embodied in the AuditComCharter (see Annex “B”) that is being maintained by theBank’s Internal Audit Group (IAG).

3. Risk Oversight Committee (ROC)This committee is responsible for the development andoversight of the Bank and its trust unit’s Risk ManagementProgram. It oversees a system of limits to discretionaryauthority that the Board delegates to management, ensuresthat the system remains effective, the limits are observedand immediate corrective actions are taken whenever limitsare breached. This is the Board-level committee reportingline of the Bank’s Risk Management Office (RMO) headed bythe Chief Risk Officer (CRO).

Its membership composition, standing/authority, specificduties and responsibilities are embodied in the ROC Charter(see Annex “C”) that is being maintained by the Bank’s RiskManagement Office (RMO).

4. Corporate Governance Committee (CGC)This committee assists the Board in fulfilling its dutiesand responsibilities, monitoring the Bank’s adherence tothe corporate governance principles and guidelines setforth in this Manual, and overseeing the development and

38

effective implementation of the Bank’s Compliance System.This is the Board-level committee reporting line of theBank’s Compliance Office (CO) headed by the ChiefCompliance Officer (CCO).

Its membership composition, standing/authority, specificduties and responsibilities are embodied in the CGC Charter(see Annex “D”) that is being maintained by the Bank’sCompliance Office (CO).

5. Nominations Committee (NomCom)This committee reviews and evaluates all nominees to theBoard. It pre-screens and shortlists all candidatesnominated to become a member of the Board in accordancewith the required minimum qualifications anddisqualifications.

Its membership composition, standing/authority, specificduties and responsibilities are embodied in the NomComCharter (see Annex “E”) that is being maintained by Bank’sCorporate Affairs Division (CAD).

6. Compensation and Remuneration Committee (RemCom)This committee establishes, reviews and maintains a formaland transparent procedure for developing a policy onexecutive remuneration and for fixing the remunerationpackages of the Bank’s officers and directors. It shallalso provide oversight over remuneration of seniormanagement and other key personnel ensuring thatcompensation is consistent with the corporate culture,strategy and control environment.

Its membership composition, standing/authority, specificduties and responsibilities are embodied in the RemComCharter (see Annex “F”) that is being maintained by theBank’s Human Resources Group (HRG).

7. Related Party Transactions Committee (RPTC)This committee assists the Board in reviewing and ensuringthat transactions with related parties are conducted atarms-length, appropriate restrictions are followed, andcorporate resources are judiciously used.

Its membership composition, standing/authority, specificduties and responsibilities are embodied in the RPTCCharter (see Annex “G”) that is being maintained by theBank’s Compliance Office (CO).

8. Trust Committee (TrustCom)This is a special committee that reports directly to theBoard and is primarily responsible for overseeing theoperations of trust and other fiduciary and investmentmanagement activities of the Bank. It shall ensure anappropriate degree of independence between the activitiesof the Bank proper and its Trust Division.40

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Its membership composition, standing/authority, specificduties and responsibilities are embodied in the Bank’sTrust Manual and in the TrustCom Charter (see Annex “H”)that are being maintained by the Bank’s Trust Division (TD).

9. Anti-Money Laundering Oversight Committee (AMLOC) This committee is tasked to assist the Board of Directorsin fulfilling its oversight responsibility over the Bank’scompliance management to make sure that the Bank complieswith the provisions of the AMLA, as amended, its RevisedImplementing Rules and Regulations (RIRRs) and BSP AMLregulations to the end that the Bank shall not be used as avehicle to legitimize the proceeds of unlawful activity orto facilitate or finance terrorism.

Its membership composition, standing/authority, specificduties and responsibilities are embodied in the AMLOCCharter (see Annex “I”) that is being maintained by theBank’s Compliance Office (CO).

SECTION 2. SENIOR MANAGEMENT OVERSIGHT

A. Senior Management Senior Management, headed by the President, consists of a coregroup of senior officers responsible for overseeing the Bank’sday-to-day operations. They have the necessary skills tomanage businesses under their supervision, as well as imposeappropriate control over key individuals in these areas. Theycontribute to good governance by supervising line managers inspecific business areas consistent with Board-approvedpolicies and procedures.

B. Management CommitteesTo assist Senior Management in overseeing the Bank’s day-to-day operations, increase efficiency and provide greater focuson various key areas of operations, the following Management-level committees, among others, have been created by theBoard:

1. Assets and Liabilities Committee (ALCO)This committee is tasked to manage the Bank’s assets andliabilities consistent with the Bank’s liquidity, capitaladequacy, growth, risk tolerance & appetite andprofitability goals.

Its membership composition, standing/authority, specificduties and responsibilities are embodied in the ALCO Charter(see Annex “J”) that is being maintained by the Bank’sTreasury Group (TG).

2. Credit Committee (CreCom)This committee regularly reviews and approves creditproposals within the authority and limits provided by theBoard to it to decide on consumer or commercial loanproposals. In addition to such limits, these approversshall be given authority to decide on certain exceptions tostandard product parameters or policy criteria.

40

Its membership composition, standing/authority, specificduties and responsibilities are embodied in the CreComCharter (see Annex “K”) that is being maintained by theBank’s Credit Administration Group (CAG).

3. Anti-Money Laundering Compliance Committee (AMLCC)This committee is designated by the Board to receive,evaluate and decide whether or not a Suspicious TransactionReport (STR) and/or Report on Crimes and Losses (RCL) shallbe filed with the Anti-Money Laundering Council Secretariat(AMLCS) and/or with Bangko Sentral ng Pilipinas (BSP) forcases/incidents elevated/reported by variousbusiness/operating units of the Bank. It also providessupport to the Bank’s Compliance Office in terms of AMLpolicy review/development and addressing AMLdeficiencies/adverse findings.

Its membership composition, standing/authority, specificduties and responsibilities are embodied in the AMLCCCharter (see Annex “L”) that is being maintained by theBank’s Compliance Office (CO).

4. Outsourcing Oversight Committee (OOC)This committee is tasked to oversee the accreditation ofservice providers, performance monitoring, post-implementation reviews and contract renewals.

Its membership composition, standing/authority, specificduties and responsibilities are embodied in the Bank’sOutsourcing Policy & Procedures and the OOC Charter (seeAnnex “M”) that is being maintained by the Bank’sCompliance Office (CO).

5. IT Steering Committee (ITSC)41

This committee is tasked to cohesively monitor ITperformance and institute appropriate actions to ensureachievement of desired results. It is accountable fordesigning and implementing the Board-approved InformationTechnology Risk Management System (ITRMS).

Its membership composition, standing/authority, specificduties and responsibilities are embodied in the ITSC Charter(see Annex “N”) that is being maintained by the Bank’sInformation Technology Division (ITD).

6. Emergency Committee (EMCOM)This committee is tasked to manage and monitor theeffective implementation of the Bank’s Business ContinuityPlan (BCP). It aims to provide the Bank the capability tocontinue its critical functions and processes byidentifying, assessing and managing emergency scenarios andother business interruptions.

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Its membership composition, standing/authority, specificduties and responsibilities are embodied in the Bank’s BCPGeneral Guidelines and EMCOM Charter (see Annex “O”) thatare being maintained by the Bank’s Process ManagementDivision (PMD)/EMCOM Secretariat.

7. Policy Committee (POLCOM)This committee is tasked to resolve policy-related issueswhich require escalation or cross-functional discussion forresolution.

Its membership composition, standing/authority, specificduties and responsibilities are embodied in the Bank’sProcess Management Policy and POLCOM Charter (see Annex“P”) that are being maintained by the Bank’s ProcessManagement Division (PMD).

8. Personnel Committee (PERCOM)This committee is tasked to assist Senior Management inevaluating the performance and career growth/advancement ofthe Bank’s employees, deciding on grave/major employeeoffenses/administrative cases, reviewing employee benefitsother than those in the CBA and maintaining personnelpolicies and procedures including the Bank’s Code ofConduct.

Its membership composition, standing/authority, specificduties and responsibilities are embodied in the PERCOMCharter (see Annex “Q”) that is being maintained by theBank’s Human Resources Group (HRG).

9. Retirement Committee (RETCOM)This committee is exclusively tasked to administer theBank’s Gratuity and Retirement Benefit Plan for itsemployees.

Its membership composition, standing/authority, specificduties and responsibilities are embodied in the RETCOMCharter (see Annex “R”) that is being maintained by theBank’s Trust Division (TD).

C. OfficersThe Bank’s By-Laws enumerated the various officers of the Bankand defined their respective duties and responsibilities.Other officers may be appointed and their duties defined bythe Board as the exigencies of the service may require.

Each officer shall contribute his share in the pursuit of goodcorporate governance. His service shall be characterized byhonesty and integrity, diligence and dedication, efficiencyand effectiveness, loyalty and fidelity, adherence to soundbanking practices and the rule of law, as well as fairness andequity to all depositors and clients constituting the bankingpublic; his peers and colleagues in the Bank and the bankingcommunity, the Board and senior officers, and the public ingeneral.

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1. Qualifications of an Officer42

An officer shall have the following minimum qualifications:

a. He shall be at least twenty-one (21) years of age; andb. He shall be at least a college graduate, or have at least

five (5) years experience in banking or trust operationsor related activities or in a field related to hisposition and responsibilities, or have undergone trainingin banking or trust operations acceptable to theappropriate department of the SES: Provided, however,That trust officers shall have at least five (5) years ofactual experience in trust operations, or at least three(3) years of actual experience in trust operations andcompleted at least one (1) year training program in trustoperations acceptable to the BSP, or at least five (5)years of actual experience as officer of a Bank orrelated activities and completed at least one (1) yeartraining program in trust operations acceptable to theBSP; and

c. He must be fit and proper for the position he is beingproposed/appointed to. In determining whether a person isfit and proper for a particular position, the followingmatters must be considered: integrity/probity,education/training, and possession of competenciesrelevant to the function such as knowledge andexperience, skills and diligence.

In assessing an officer’s integrity/probity, considerationshall be given to the officer’s market reputation, observedconduct and behavior, as well as his ability tocontinuously comply with company policies and applicablelaws and regulations, including market conduct rules, andthe relevant requirements and standards of any regulatorybody, professional body, clearing house or exchange, orgovernment and any of its instrumentalities/agencies43.

The foregoing qualifications for officers shall be inaddition to those required or prescribed under R.A. No.8791 and other existing applicable laws and regulations.

An appointed officer has the burden to prove that he/shepossesses all the foregoing minimum qualifications and noneof the disqualifications by submitting the documentaryrequirements. Non-submission of complete documentaryrequirements within the prescribed period shall beconstrued as his/her failure to establish his/herqualifications for the position and result in his/herremoval therefrom44.

The Bank must submit to BSP a certification under oath ofthe officer with rank of senior vice president and above,and officers whose appointment requires prior MonetaryBoard approval, that he/she has all the prescribedqualifications and none of the disqualifications within

42 MORB Sec. x142.243 BSP Cir. No. 889 dated 02 November 201544 BSP Cir. No. 887 dated 07 October 2015

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twenty (20)45 banking days from the date of meeting of theBoard in which the officers are appointed/promoted.46

2. Disqualifications of Officers47

a. The disqualifications for directors and disqualificationprocedures for directors shall likewise apply toofficers, except those stated in items “b.(2)” and “b.(7)”.

b. The spouses or relatives within the second degree ofconsanguinity or affinity are prohibited from holdingofficership positions across the following functionalcategories within a Bank:

1) Decision making and senior management function, e.g.,chairman, president, chief executive officer (CEO),chief operating officer (COO), general manager, andchief financial officer (CFO) other than the treasureror controller;

2) Treasury function, e.g., Treasurer and Vice President– Treasury;

3) Recordkeeping and financial reporting functions, e.g.,controller and chief accountant;

4) Safekeeping of assets, e.g., chief cashier;5) Risk management function, e.g., chief risk officer;6) Compliance function, e.g., compliance officer; and7) Internal audit function, e.g., internal auditor.

The spouse or a relative within the second degree ofconsanguinity or affinity of any person holding theposition of manager, cashier, or accountant of a branchor extension office of a Bank or their respectiveequivalent positions is disqualified from holding orbeing appointed to any of said positions in the samebranch or extension office.

3. Interlocking Officerships48

A concurrent officership in different financialinstitutions may present more serious problems of self-dealing and conflict of interest. Multiple positions mayresult in poor governance or unfair competitive advantage.Considering the full-time nature of officer positions, thedifficulties of serving two (2) offices at the same time,and the need for effective and efficient management, thefollowing rules shall be observed:

As a general rule, there shall be no concurrentofficerships, including secondments, between Banks or,between a Bank and a QB or an NBFI. For this purpose,secondment shall refer to the transfer/detachment of aperson from his regular organization for temporaryassignment elsewhere where the seconded employee remains

45 As amended by BSP Cir. No. 887 dated 07 October 201546 Sec. 2 BSP Cir. No. 75847 MORB Sec. x143.248 MORB Sec. x145

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the employee of the home employer although his salaries andother remuneration may be borne by the host organization.

However, subject to prior approval of the Monetary Board,concurrent officerships, including secondments, may beallowed in the following cases:

a. Between a Bank and not more than two (2) of itssubsidiary Bank/s, QB/s, and NBFI/s, other thaninvestment house/s; or

b. Between a Bank and not more than two (2) of itssubsidiary QB/s and NBFI/s; or

c. Between two (2) Banks, or between a Bank and a QB or anNBFI, other than an investment house: Provided, That atleast twenty percent (20%) of the equity of each of theBanks, QBs or NBFIs is owned by a holding company or aBank/QB and the interlocking arrangement is necessary forthe holding company or the Bank/QB to provide technicalexpertise or managerial assistance to itssubsidiaries/affiliates.

Aforementioned concurrent officerships may be allowed,subject to the following conditions:

1) that the positions do not involve any functionalconflict of interests;

2) that any officer holding the positions of president,chief executive officer, chief operating officer orchief financial officer or their equivalent may not beconcurrently appointed to any of said positions ortheir equivalent;

3) that the officer involved, or his spouse or any of hisrelatives within the first degree of consanguinity oraffinity or by legal adoption, or a corporation,association or firm wholly- or majority-owned orcontrolled by such officer or his relatives enumeratedabove, does not own in his/its own capacity more thantwenty percent (20%) of the subscribed capital stockof the entities in which the Bank has equityinvestments; and

4) that where any of the positions involved is held onfull-time basis, adequate justification shall besubmitted to the Monetary Board; or

d. Concurrent officership positions in the same capacitywhich do not involve management functions, i.e., internalauditor, corporate secretary, assistant corporatesecretary and security officer, between a Bank and one ormore of its subsidiary QB/s and NBFI/s, or betweenBank/s, QB/s and NBFI/s, other than investment house/s:Provided, That at least twenty percent (20%) of theequity of each of the Banks, QBs and NBFIs is owned by aholding company or by any of the Banks/ QBs within thegroup.

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4. Confirmation of Appointment of Officers49

The appointment of officers with rank of Senior VicePresident (SVP) & up of the Bank shall be subject toconfirmation by the Monetary Board.

Confirmation by the Monetary Board shall not be required incases of promotion, other than to that which requires (i)prior Monetary Board approval or (ii) a different set ofminimum qualifications or (iii) a different level ofconfirming authority as provided, in the same bank orappointment/transfer to another bank, QB, NBFI with trustauthority or trust corporation within a banking group,Provided, that: the officer concerned has been previouslyconfirmed or in the case of a compliance officer or trustofficer who will be promoted to the rank of SVP or above(or equivalent rank), previously approved by the MonetaryBoard, his/her promotion / transfer requires the same levelof confirming authority as provided: provided, further,that said officer has had continuous service within thesame bank or banking group.

The appointment of the Compliance Officer and Trust Officerregardless of rank shall be subject to prior Monetary Boardapproval.

The appointment shall be deemed to have been confirmed byBSP, if after sixty (60) banking days from receipt of thecomplete required reports(as herein enumerated under PartIII – Reportorial Requirements), no advice against saidappointment has been received by the Bank.

An officer whose appointment was not confirmed for failureto submit the complete documentary requirements shall bedeemed removed from office after due notice to the boardof directors of the bank, even if he/she has assumed theposition to which he/she was appointed, pursuant to Section16 of R.A. No. 879150.

5. Duties and Responsibilities of Officers51

Duties and responsibilities of officers shall include amongothers the following:

a. To set the tone the good governance from the top. Bankofficers shall promote the good governance practiceswithin the Bank by ensuring that policies on governanceas approved by the Board are consistently adopted acrossthe Bank.

b. To oversee the day-to-day management of the Bank. Bankofficers shall ensure that Bank’s activities andoperations are consistent with the Bank’s strategicobjectives, risk strategy, corporate values and policiesas approved by the Board. They shall establish a Bank-wide characterized by strategically aligned and mutually

49 BSP Cir. No. 75850 BSP Cir. No. 887 dated 07 October 201551 Sec. 4 BSP Cir. No. 749

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reinforcing performance standards across theorganization.

c. To ensure that duties are effectively delegated to thestaff and to establish a management structure thatpromotes accountability and transparency. Bank officersshall establish measurable standards, initiatives andspecific responsibilities and accountabilities for eachBank personnel. Bank officers shall oversee theperformance of these delegated duties andresponsibilities and shall ultimately be responsible tothe Board for the performance of the Bank.

d. To promote and strengthen checks and balances systems inthe Bank. Bank officers shall promote sound internalcontrols and avoid activities that shall compromise theeffective dispense of their functions. Further, theyshall ensure that they give due recognition to theimportance of the internal audit, compliance and externalaudit functions.

SECTION 3. COMPLIANCE SYSTEM, RISK MANAGEMENT ANDINDEPENDENT ASSURANCE

A. Compliance System52

1. Bank Compliance ProgramThe Board shall ensure that a Bank Compliance Program,which is being maintained by the Bank’s Compliance Office,is defined for the Bank and that compliance issues areresolved expeditiously.

a. The Compliance Program shall be distinguished from theRisk Program and the Internal Audit Program.

b. The Compliance Program shall take into account the sizeand complexity of operations of the Bank. It must clearlyidentity the avenues through which business risks mayoccur and correspondingly, compliance of the Bank inorder to mitigate said business risks shall beinstitutionalized.

c. An appropriate organizational structure must be in placeto manage the Compliance Program. The compliance functionshall be manned by full-time officers/ staff eitherembedded in operating departments, or in a departmentoperating on its own. Coordination with the respectivedepartment heads shall be the responsibility of theCompliance Officer.

d. In addition to the organizational structure, the dutiesand responsibilities of the Compliance Officer and otherpersonnel involved in the compliance function must bedefined explicitly.

e. A compliance system which does not consistently ensurethe integrity and the accuracy of documentary submissionsshall be deemed as a basis to assess a Bank as involvedin unsafe and unsound practices.

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The President and the Compliance Officer shall execute anaffidavit, under oath, that the compliance system has beenapproved by the Board and that the Compliance Programreflects said approved system.

The program shall be updated at least annually toincorporate changing responses to evolving internal andexternal conditions.

2. Chief Compliance Officer (CCO)The Bank shall appoint a full-time Chief Compliance Officerto manage the Compliance Program. Given the importance ofthe compliance function, the Chief Compliance Officer is asenior officer functionally reporting to the CorporateGovernance Committee and to the Board. Suchappointment/designation shall require prior approval of theMonetary Board.

The Compliance Officer is the lead senior officer forpurposes of administering the Compliance Program andinteracting with the regulatory agencies on compliance-related issues. The principal function of the ComplianceOfficer is to oversee the design of an appropriatecompliance system, promote its effective implementation andaddress breaches that may arise. He/she shall also beresponsible for ensuring the integrity and accuracy of alldocumentary submissions to BSP.

In relation to Corporate Governance, the Compliance Officershall have the following duties and responsibilities:53

a. Monitor compliance by the Bank with this Manual and therules and regulations of regulatory agencies and, if anyviolations are found, report the matter to the Board andrecommend imposition of appropriate disciplinary actionon the responsible parties and the adoption of measuresto prevent a repetition of the violation.

b. Appear before the SEC when summoned in relation tocompliance with this Manual.

c. Report to the President and the Board through theCorporate Governance Committee (CGC), significantcompliance issues, the general status of Bank’s level ofcompliance and also the relevant regulations, updates &other compliance matters.

3. Compliance Charter This Compliance Charter, which is being maintained by theBank’s Compliance Office, establishes and sets forth thefundamental principles of the Bank’s Compliance Functionand defines the standing, authority, independence, dutiesand responsibilities of the Compliance Office aspromulgated by the Board of Directors in accordance withthe rules and regulations of the Bangko Sentral ngPilipinas (BSP). This Charter is being maintained by theBank’s Compliance Office (CO).

53 SEC Memo Cir. 6, S2009

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The Bank’s Compliance Function, through its ComplianceOffice, also exercises specific statutory responsibilitye.g. compliance with Anti-Money Laundering laws, rules &regulations as defined in the Bank’s Money Laundering &Terrorism Financing Prevention Program (MLTFPP).

B. Risk Management54

1. Risk Management FunctionThe risk management function is generally responsible for:

a. Identifying the key risk exposures and assessing andmeasuring the extent of risk exposures of the bank andits trust operations;

b. Monitoring the risk exposures and determining thecorresponding capital requirement in accordance with theBasel capital adequacy framework and based on the bank’sinternal capital adequacy assessment on an on-goingbasis;

c. Monitoring and assessing decisions to accept particularrisks whether these are consistent with board approvedpolicies on risk tolerance and the effectiveness of thecorresponding risk mitigation measures; and

d. Reporting on a regular basis to senior management and tothe board of directors of the results of assessment andmonitoring.

Risk management personnel shall possess sufficientexperience and qualifications, including knowledge on thebanking business, the developments in the market, industryand product lines, as well as mastery of risk disciplines.They shall have the ability and willingness to challengebusiness lines regarding all aspects of risk arising fromthe bank’s activities.

2. Chief Risk Officer (CRO)The Bank shall appoint a Chief Risk Officer (CRO) who shallbe independent from executive functions and business lineresponsibilities, operations and revenue-generatingfunctions. Without any impediment, the CRO shall havedirect access to the Board and the Risk Oversight Committee(ROC). As the CRO’s direct reporting line, the ROC shall bethe one to rate his performance.

The CRO shall have sufficient stature, authority andseniority within the Bank. This will be assessed based onthe ability of the CRO to influence decisions that affectthe Bank’s exposure to risk. The CRO shall have theability, without compromising his independence, to engagein discussions with the Board, President and other seniormanagement on key risk issues and to access suchinformation as he deems necessary to form his or herjudgment. The CRO shall meet with the Board/Risk OversightCommittee on a regular basis and such meetings shall beduly minuted and adequately documented.

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The CRO shall be appointed and replaced with prior approvalof the Board. In cases, when the CRO will be replaced, theBank shall report the same to BSP within five (5) days fromthe time it has been approved by the Board.

C. Internal Controls and Independent AssuranceThe minimum internal control mechanisms for Management’soperational responsibility shall center on the President beingultimately accountable for the Bank’s organizational andprocedural controls. The Bank should have an effective systemof internal control that will ensure the integrity of itsfinancial reports and protection of its assets for the benefitof all stockholders and other stakeholders.55

The scope and particulars of a system of effectiveorganizational and procedural controls shall be based on thefollowing factors:

Nature and complexity of business and the business culture; Volume, size and complexity of transactions; Degree of risk; Degree of centralization and delegation of authority; Extent and effectiveness of information technology; Extent and effectiveness of information technology; and Extent of regulatory compliance.

The Bank shall have in place an independent internal auditfunction through which its Board, Senior Management andstockholders shall be provided with an independent andreasonable assurance that its key organizational andprocedural controls are effective, appropriate, and compliedwith.

1. Chief Audit Executive (CAE)The Bank’s Internal Audit group shall be headed by theChief Audit Executive (CAE) who is senior officerfunctionally reporting to the Audit Committee and to theBoard.

The CAE shall have the following duties, in addition tothose which may be prescribed by the Board, to wit:

a. Review, appraise and report on the soundness, adequacyand application of accounting, financial and otheroperating controls;

b. Determine the extent of compliance with establishedpolicies, plans, procedures and applicable laws;

c. Determine the extent to which assets are accounted forand safeguarded from loss;

d. Tract progress of compliance with regulatory requirementsand recommendations;

e. Promote an effective system of control at a reasonablecost;

f. Recommend alternative measures to correct controldeficiencies;

55 SEC Memo Cir. 9, s2014

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g. Develop and maintain an effective program for theindependent evaluation of the fiscal and operationalsoundness of the Bank;

h. Prevent and detect frauds, defalcations, or otherdeficiencies having an effect on financial or operationalcondition; and

i. Evaluate the validity of financial reports, conformitywith policy requirements and adherence to applicable lawsand regulations.

2. External AuditorAn independent External Auditor shall be selected andappointed by the stockholders upon the recommendation ofthe Audit Committee. The External Auditor shall not at thesame time provide the services of an internal auditor tothe same client. The Bank shall ensure that other non-auditwork shall not be in conflict with the functions of theExternal Auditor.

The Bank’s external auditor shall be rotated or thehandling partner shall be changed every five (5) years orearlier.

If an external auditor believes that the statements made inthe Bank’s annual report, information statement or proxystatement filed during his engagement is incorrect orincomplete, he shall present his views in said reports.

The reason/s for the resignation, dismissal or cessationfrom service and the date thereof of an external auditorshall be reported in the company’s annual and currentreports. Said report shall include a discussion of anydisagreement with said former external auditor on anymatter of accounting principles or practices, financialstatement disclosure or auditing scope or procedure.

SECTION 4. CODE OF CONDUCT56

The Bank’s Code of Conduct defines standards that the Bank’sofficers and staff must follow in all their business dealingsand relationships.

The Code includes the following provisions:

A discussion on the disciplinary process; General policies to establish a professional working

environment and secure a favorable reputation for the Bank; Corrective measures for unacceptable behavior or failure to

comply with the Bank’s rules, policies and procedures; and Schedule of penalties for attendance and punctuality, attire

requirements, conduct and behavior, dishonesty, health, safetyand security, reporting of violations, and informationsecurity.

The Code also includes provisions on management of personalfinances, conflict of interest, anti-sexual harassment, non-disclosure of information, and insider information.

56 PSBank Annual Report

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SECTION 5. REMUNERATION POLICY57

The Bank aims to provide the Board and its officers with anindustry-competitive compensation package to attract, motivateand retain highly qualified people.

The salary scales of its officers are generally based on theirpositions and ranks. These are reviewed annually and adjusted asneeded, based on performance. The Bank also grants fixedbonuses including a 13th-month pay, in accordance with law. TheBoard sees to it that this remuneration strategy is regularlyreviewed. This ensures that the policy is commensurate withcorporate and individual performance and benchmarked against theBank’s industry peers and other market considerations while alsomaintaining internal equity.

Each director receives a monthly professional fee for attendingBoard and committee meetings. This is also in consideration oftheir valuable contributions in the formulation of the Bank’soverall strategy. The Bank’s remuneration policy for itsdirectors indicates that the Chairman, Vice Chairman and each ofthe Directors receive reasonable per diems for attendance at anyBoard meeting.

SECTION 6. DISCLOSURE & TRANSPARENCYThe essence of corporate governance is transparency. It istherefore essential that all material information about the Bankwhich could adversely affect its viability or the interests ofthe stockholders and other stakeholders should be publicly andtimely disclosed. Such information should include, among others,earnings results, acquisition or disposition of assets, offbalance sheet transactions, related party transactions, anddirect and indirect remuneration of members of the Board andManagement.

The Board shall therefore commit at all times to full disclosureof material information dealings. It shall cause the filing ofall required information through the appropriate Exchangemechanisms for listed companies and submissions to the SEC forthe interest of its stockholders and other stakeholders58.

Likewise, the minimum information required to be posted on thecompany’s website, arranged under SEC-recommended topicheadings, shall be retained for a period of five (5) years. Anyitems in the required website template prescribed by the SECcould be added or removed any time as the need arises59.

SECTION 7. DIVIDENDS POLICYDividends shall be declared and paid by the Bank at such timesand in such percentages as the Board may determine, Provided:they are declared and paid out of the Bank’s unrestrictedretained earnings and subject to compliance with therequirements of the applicable laws, rules & regulations of theBSP, SEC, PSE and of the Bank’s pertinent policies.

57 PSBank Annual Report58 SEC Memo Cir. No. 9, s2014 59 SEC Memo Cir. No. 11, s2014

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SECTION 8. WHISTLE-BLOWING POLICYThe Bank requires all its employees to immediately report anynoted impropriety or malpractice committed by a co-employee(s)to their Group Heads or directly to the Human Resources GroupHead or to the Chief Audit Executive/Internal Audit Group Headfor investigation purposes, the concealment or non-reporting ofwhich is considered as an impropriety or malpractice in itself.The policy likewise requires the due protection of informants,i.e., employees reporting such incidents in good faith from anyform of harassment and thus considers any attempt to determinetheir identities as a breach of confidentiality subject todisciplinary sanctions.

SECTION 9. RELATED PARTY TRANSACTIONS POLICYThe Bank has a policy that provides for specific guidelines andhandling procedures to ensure that dealings with related partiesare made in the regular course of business and upon terms notless favorable to the Bank than those offered to others i.e. atarms-length and that Bank’s resources are not misappropriated.

SECTION 10. POLICY AGAINST INSIDER TRADINGUnder this policy, reporting insiders are required to disclosetheir and their associates’ initial beneficial ownership in theBank’s shares and any changes thereof within two (2) tradingdays after their election/appointment in office and from date ofsaid changes, respectively. They are likewise prohibited fromselling or buying Bank’s shares during “black-out periods” i.e.upon obtaining material non-public information up to two (2)trading days after such information is disclosed.

SECTION 11. CONFLICT OF INTEREST POLICYTo ensure that the Bank’s interests are duly safeguarded, thispolicy requires all employees to make sure that their personalinterests and those of their affiliates do not conflict with theduties which they perform for the Bank or with the duties whichthe Bank perform for its clients. This policy prohibitsemployees from venturing into certain conflict of interestsituations and mandates disclosure procedures in case ofpossible/potential conflict of interest scenarios.

SECTION 12. LEARNING & DEVELOPMENT POLICYThe Bank maintains a policy on the continuous learning anddevelopment of its employees as it aims to continuously improvethe products and services it offers and provides to itscustomers. As such, the Bank provides for certain training anddevelopment programs.

SECTION 13. EMPLOYEE HEALTH, SAFETY AND WELFARE POLICYThe Bank advocates a work environment free of work hazards andconducive to the well-being and professional development of itsemployees. As such, the Bank has instituted certain programsand policies pertaining to employees’ health/wellness and familywelfare as well as occupational health and safety. The Bank alsocomplies with relevant laws & regulations on the protection ofrights in the workplace and the control of infectious diseases.

PART III- REPORTORIAL REQUIREMENTS

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# Reportorial Requirements To DeadlineA. Certifications60

1. Certification under oath ofthe 1st-time/newly-electeddirectors concerned thatthey have received copiesof such generalresponsibility andspecific duties andresponsibilities and thatthey fully understand andaccept the same

BSP Within twenty (20) banking days from date of election

2. Certification under oath ofthe director, officers withrank of SVP & up, andofficers whose appointmentrequires prior MonetaryBoard approval, that he/shehas all the prescribedqualifications and none ofthe disqualifications.

BSP Within twenty(20) banking days from thedate of election/re-election of the directors/meeting of the Board in which the officers are appointed/promoted

3. Certification by anIndependent Director61

under oath that he/she isan independent director asdefined under theregulations and that allthe information he suppliedare true and correct –accompanying his/her Bio-Data.

BSP Within twenty (20) banking days from date of election/re-election of the directors

B. Bio-Data62 - with ID picture ofthe (i) directors/officerswith rank of SVP & up (ii)officers below the rank of SVPrequiring a different set ofminimum qualifications e.g.Internal Auditor, SecurityOfficer, etc. or (iii)officers whose appointmentrequires prior Monetary Boardapproval i.e. CCO and TrustOfficer upon everyelection/re-election/appointment/promotionin a prescribed form.

The bio-data shall be updatedand submitted (i) in case ofchange of name due to changein civil status, within twenty(20) banking days from thedate of change occurred and(ii) in cases of requests for

BSP Within twenty (20) banking days from date of election/re-election of the directors/meeting of the Board in which the officers are appointed/promoted

60 MORB Sec x141.9, Sec. 6 BSP Cir. No. 749 & Sec. 2 of BSP Cir. No. 75861 MORB Sec. x144, as amended by BSP Cir. No. 75862 Sec. 6 BSP Cir. No. 758

54

prior Monetary Board approvalof interlocks.

For other officers below therank of SVP, the Bank shallnot be required to submittheir bio-data to BSP. TheBank shall keep a completerecord of the bio-data of allits directors and officers andshall maintain a system ofupdating said records whichshall be made available duringon-site examination or whenrequired by the BSP forsubmission for offsiteexamination.

C. Certificate of 1st-time/newlyelected director’s Attendanceto Corporate Governance (CG)Seminar held by BSP-accreditedCG training provider

BSP Within twenty (20) banking days from date of election

D. Notarized Authorization Formto Query in BSP Watch-listFile63 - duly notarized for1st-time directors/1st-timeofficers with rank of SVP & upsubject to BSP confirmationand officers whose appointmentrequires MB approval

The said authorization must beobtained on an individualbasis.

BSP Within twenty (20) banking days from date of election of director/s or meetingof the Board in whichthe officers are appointed/promoted

E. Election/Appointment of Directors/Officers with rank of SVP &up – In addition to the required items under “A”, “B”, “C” and “D” above, the following shall likewise be submitted:1. Letter to BSP of Bank’s

Elected Directors/Appointed Officers with rank of SVP & up; Request for MB Approval of Newly Elected Director(s)/Appointed Officers with rank of SVP & up/Appointed officers requiring MB approval i.e.CCO and Trust Officer; and Affirmative Statement as regards the conduct of Fit & Proper test on the director/officer concerned signed by the President (orthe Chairman in the case ofthe President’s election/appointment)

BSP Within twenty (20) banking days from date of election/re-election of the directors/Annual Stockholders’ Meeting(ASM) or meeting of the Board in which the officers are appointed/promoted

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2. List of incumbent Directors64 and Officers- duly notarized list of the incumbent members of the Board and officers after the annual election of the Board as provided in the By-laws.

BSP Within twenty (20) banking days from theannual election of the Board of Directors/Annual Stockholders’ Meeting(ASM)

3. Brief Description of Dutiesand Responsibilities - for appointed officers with rank of SVP & up, officers below the rank of SVP requiring a different set of minimum qualifications and officers whose appointment requires prior Monetary Board approval.

BSP Within twenty(20) banking days from date of meeting of the Board in which the officers are appointed/promoted

4. Secretary’s Certificates:(a) Attesting to the resolution

of the Stockholders/Board of Directors approving the election of directors and appointment/promotion of officers with rank of SVP & up and officers requiring MB approval; and

BSP Within twenty (20) banking days from date of election/re-election of the directors/Annual Stockholders’ Meeting(ASM) or meeting of the Board in which the officers are appointed/promoted

(b) On the attendance by the Director(s) concerned to the Board meetings held forthe last 12 months coveringthe term of service indicating percentage of attendance to Board meetings for re-elected directors only.

BSP Within twenty (20) banking days from date of re-election of the directors/Annual Stockholders’ Meeting(ASM)

F. Report on Group Structures65

1. Annual Report disclosingall entities in the groupstructure where the Bankbelongs either as a parentcompany bank orsubsidiary/affiliatecompany

BSPthruMBTC

Within 30 calendar days after the end ofevery calendar year starting with the year ending 31 December 2011

2. Quarterly Report onsignificant transactionsbetween entities in thegroup and involving any-BSPregulated entity

BSPthruMBTC

Within 20 calendar days after the end ofthe reference quarterstarting with the quarter ending 31 March 2012

G. Annual Report (AR) andaccompanying Annual ReportAssessment Checklist (ARAC)66

BSP Within 180 calendar days after the close of the year or on or

64 Sec. 6 BSP Cir. No. 75865 Sec. 6 BSP Cir. No. 749, as amended by Cir. 757

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before June 30H. Annual Corporate Governance Report (ACGR)67

1. Initial submission andwebsite posting coveringthe 1st year i.e. 2012

SEC On or before May 30, 2013 (done) and everyfive (5) years thereafter

2. In between 2nd and 4th years- any material change inthe facts set forth in thereport occurring within theyear shall be handled asfollows:68

a. If reportable under Sec.17 of the SRC, file SECForm 17-C of which coverpage shall be indicated as"Amendment to the ACGR"and update pertinentportion in website-postedACGR.

b. If not reportable underSec. 17 of the SRC, filean Advisement Letter dulysigned by the CorporateSecretary and the ChiefCompliance Officer andupdate pertinent portionin website-posted ACGR.

c. For the Directors’Attendance to BoardMeetings during the yearsubject of reporting,likewise file anAdvisement Letter dulysigned by the CorporateSecretary and the ChiefCompliance Officer andupdate pertinent portionin website-posted ACGR.

d. For all changes made andupdates effected to theACGR for the whole year,consolidate in a filelabeled “ConsolidatedChanges in the ACGR for(year)” and likewise postin the website

The notarized page of the ACGRshall not be amended for theupdates and changes posted in

SEC

Within 5 calendar days after occurrenceof material change(s)to the ACGR being reported

Within 5 calendar days after occurrenceof material change(s)to the ACGR being reported

Within 5 calendar days from end of Bank’s fiscal year

Within ten (10) days from the end of the second (2nd) to fourth (4th) year

66 BSP Memo. No. M-2014-00767 SEC Memo Cirs. 5 & 9, S201368 SEC Memo Cir. 1, S2014

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the website. In lieu of thenotarized page, the ConsolidatedChanges in the ACGR shall beaccompanied by a Secretary’sCertificate regarding saidupdates and changes in the ACGR.

e. The ACGR submitted on the fifth (5th) year from initial submission shall be notarized and signed byall five (5) required signatories namely: the Chairman of the Board, President, two (2) Independent Directors and Compliance Officer

3. The following reports shallbe disclosed to thePhilippine Stock Exchange(PSE) via PSE EDGE usingthe PSE Disclosure FormACGR-2 (Update on AnnualCorporate GovernanceReport)69:

o SEC Form 17-C or Advisement Letter regarding changes or updates on the ACGR

o Consolidated Changes in the ACGR [for (year)].

PSE Same deadlines with SEC above

I. PSE CG Guidelines DisclosureTemplate

PSE On or before March 31of every year

J. Certificate of Attendance toCG Trainings70 – for all keyofficers and members of theBoard of PLCs to attend atleast annually a program oncorporate governance conductedby training providers dulyaccredited by the SEC

SEC Within 10 days from the completion of CG training program

K. Other Reportorial/DisclosureRequirements - It is likewiseessential that all materialinformation about the Bank whichcould adversely affect itsviability or the interest of itsstockholders and otherstakeholders should be publiclyand timely disclosed. Suchinformation should include, amongothers, earnings results,acquisition or disposition ofassets, off-balance sheet

SEC &PSE

Within the submissiondeadline set forth under existing PSE and SEC rules and regulations

69 PSE Memo dated 08 July 2015 70 SEC Memo Cir. 20, S2013

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transactions, related partytransactions and direct andindirect remuneration of membersof the Board and Management. TheBoard shall therefore commit atall times to full disclosure ofmaterial information dealings.It shall cause the filing of allrequired information through theappropriate exchange mechanismsand submission of requiredreports to the SEC (e.g. SECForms 17-C, 17-Q, 17-A, etc.) forthe interest of its stockholdersand other stakeholders.71

PART IV- PERFORMANCE EVALUATION

A. Annual Performance Self-AssessmentThe Board has created an internal performance evaluation/self-rating system to determine and measure compliance of the Boardas a body, each of its directors and its committees, thePresident and the various management committees with thisManual.

These exercises shall be conducted on an annual basis withinthe first quarter of the following year for which resultsshall be submitted to the Bank’s Compliance Office for theCorporate Governance Committee’s review and endorsement to theBoard for notation during the following month’s Board Meeting. 1. Board of Directors

The Board, each of its directors and its respectiveoversight and other committees shall conduct an annualperformance evaluation/assessment to check their compliancewith this Manual and determine areas of improvements forthe following:

a. Board as a Body (see Exhibit 1)b. Each of the Directors (see Exhibit 2)c. Each of the Board’s Oversight Committees, as follows:

Risk Oversight Committee (see Exhibit 3) Related Party Transactions Committee (see Exhibit 4) Trust Committee (see Exhibit 5) Audit Committee (see Exhibit 6) Corporate Governance Committee (see Exhibit 7) Anti-Money Laundering Oversight Committee (see Exhibit

8)d. Each of the Board’s Other Committees, as follows:

Executive Committee (see Exhibit 9) Nominations Committee (see Exhibit 10) Compensation and Remuneration Committee (see Exhibit

11)e. President c/o the Corporate Governance Committee (see

Exhibit 12)

2. Management

71 SEC Memo Cir. 9, s2014

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A similar annual performance evaluation system shalllikewise be undertaken to also gauge the performance andeffectiveness of all Management-level committees vis-à-visset performance standards that are consistent with theBank’s strategic objectives and business plans, as follows:

Assets and Liabilities Committee (see Exhibit 13) Credit Committee (see Exhibit 14) Anti-Money Laundering Compliance Committee (see Exhibit

15) Outsourcing Oversight Committee (see Exhibit 16) IT Steering Committee (see Exhibit 17) Emergency Committee (see Exhibit 18) Policy Committee (see Exhibit 19) Personnel Committee (see Exhibit 20) Retirement Committee (see Exhibit 21)

B. Other Corporate Governance ScorecardsIn accordance with the Revised Code of Corporate Governance,SEC may require the Bank to accomplish annually a scorecard.72

Additionally, BSP, PSE and other institutions such as theInstitute of Corporate Directors (ICD), may require the Bankto participate in their own corporate governance surveythrough a scorecard for Banks.

PART V – COMPLIANCE MONITORING AND SANCTIONSThe Bank’s Chief Compliance Officer (CCO) shall monitorcompliance with this Manual and related laws, rules &regulations of the SEC, PSE and BSP. If any significant ormajor violations are found, he/she shall report the matter tothe Corporate Governance Committee (CGC) for evaluation. TheCGC shall, if deemed proper after due process of notice andhearing, recommend to the Chairman of the Board the imposablepenalty/appropriate disciplinary action(s) on the responsibleparties including the adoption of measures to preventrecurrence, for further review and approval of the Board ofDirectors.

PART VI – POLICY REVIEW AND UPDATINGThis Manual shall be reviewed by the Bank’s Chief ComplianceOfficer (CCO) at least annually and as soon as necessary toincorporate relevant regulatory updates and industry bestpractices. Any further changes to be effected herein in linewith said review or updating shall be subject to the review andendorsement of the Corporate Governance Committee (CGC) forapproval of the Board of Directors (BOD).

72 SEC Memo Cir. 6, S2009

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