A PROJECT OF:

IN COLLABORATION WITH:

Overview

The CG ScorecardThe Process for the CG Scorecard InitiativeThe Coverage

- Commercial and Universal BanksThe Questionnaire and Weights UsedOver - All resultsSummary and Recommendations

The CG Scorecard

A Corporate Governance (CG) Scorecard is already available for Publicly-Listed Companies (PLCs) since 2005.

The CGSC has become a joint undertaking involving ICD, SEC and PSE since 2007.

It has become a useful tool for raising the standards of compliance with CG rules and regulations

The CG Scorecard

An econometric study that the PSE commissioned clearly shows that high CG scores relate positively with firm valuation.

Does observance of good corporate governance practices matter; and does it make a difference in the share price of corporations listed on the exchange?

The answer is a straightforward “yes”.

Commercial Banks

- commercial banks provide the predominant bulk of external corporate finance in the Philippines- corporations in the Philippines do rely much more---and predominantly so---on commercial banks for their external finance than on the stock exchange

Therefore:

There is a felt demand from the CG reform advocates in the Philippines such as the Fellows of ICD for a more specific

focus on commercial banks.

The CG Scorecard for Commercial Banks

Initiated with the Bangko Sentral ng Pilipinas (BSP)

BSP has tapped ICD as its institutional partner in this specialized CG undertaking

At the 2008 annual Woking Session in Palawan, a group of ICD Fellows with the participation of the BSP Officers was organized and agreed to prepare a preliminary questionnaire that would be the basis of such a specialized CG Scorecard.

Approved by the BSP Governor and the Monetary Board in July 2009

The CG Scorecard for Commercial Banks

The Questionnaire

Self rating Validation process

Analysis of Scores

The Process

“Person on the Street”approach takes the side of an ordinary investor, with no special access to any privileged information.

Self Rating

Evaluator A Evaluator B

Evaluator C

ICD Project Director(Identification of

Issues)

ICD Fellows(Issue Resolution)

Validation Process

Validator A and B

UA & P 5th year Management Students

Validator C

Institute of Internal Auditors (IIA-P) members

13 Universal Banks

7 Commercial Banks

Out of 20 Banks Encouraged to Participate: All Responded 100% PARTICIPATION

Number of Participants

Results

Universal Banks1 Allied Banking Corporation2 Banco De Oro Unibank3 Bank of the Philippine Islands4 China Banking Corporation5 Development Bank of the Philippines6 Land Bank of the Phil.7

Metropolitan Bank and Trust Company

8 Philippine National Bank9 Philippine Trust Company

10Rizal Commercial Banking Corporation

11 Security Bank Corporation12 Union Bank of the Philippines13 United Coconut Planters Bank

Commercial Banks

1Asia United Bank Corporation

2 Bank of Commerce3 BDO Private Bank

4East West Banking Corporation

5 Export and Industry Bank

6Philippine Bank of Communication

7 Philippine Veterans Bank

List of Covered BanksResults

The CG Scorecard for BanksWeights Used in the Questionnaire

OECD Principles For PLCs For BanksI. Rights of Shareholders 20% 15% II. Equitable Treatment of Shareholders

20% 10%

III. Role of Stakeholders 10% 10%IV. Control Environment and Processes

----- 20%

V. Disclosure & Transparency 25% 20%VI. Board Responsibilities 25% 25%

Aggregate Score for Commercial and Universal Banks

Universal and Commercial Banks Aggregate Score

Commercial Banks 76 %

84%Universal Banks 88%

Results

2008 CG Scorecard for PLCs Aggregate Score

Publicly-Listed Companies 72%

Universal and Commercial BanksCategories Weight

AVERAGE

I The Right of Shareholders 15% 82%II Equitable Treatment of Shareholders 10% 86%III The Role of Stakeholders in CG 10% 82%IV Control Environment and Processes 20% 89%V Disclosure and Transparency 20% 83%VI Board Responsibility 25% 83%

TOTAL 100% 84%

Results

Per Category Scores

Aggregate Score for Commercial and Universal banks

Results

89%

82%

84%

Universal & Commercial Banks Difference

Top 3 94%28Bottom 3 66%

Universal & Commercial Banks Difference

Highest 96%33Lowest 63%

Results

Lowest and Highest

Top 3 and Bottom 3

Universal Banks Difference

Top 3 94%15Bottom 3 79%

Universal Banks Difference

Highest 96%29Lowest 67%

Results

Lowest and Highest

Top 3 and Bottom 3

Results

Per Category Scores

Universal BanksCategories Weight

AVERAGE

I The Right of Shareholders 15% 87%

IIEquitable Treatment of Shareholders 10% 90%

III The Role of Stakeholders in CG 10% 87%

IVControl Environment and Processes 20% 91%

V Disclosure and Transparency 20% 86%VI Board Responsibility 25% 86%

TOTAL 100% 88%

Commercial Banks Difference

Top 3 85%15Bottom 3 70%

Commercial Banks Difference

Highest 90%27Lowest 63%

Results

Lowest and Highest

Top 3 and Bottom 3

Commercial BanksCategories Weight

AVERAGE

I The Right of Shareholders 15% 73%II

Equitable Treatment of Shareholders 10% 80%

III The Role of Stakeholders in CG 10% 70%IV

Control Environment and Processes 20% 86%

V Disclosure and Transparency 20% 75%VI Board Responsibility 25% 76%

TOTAL 100% 76%

Results

Per Category Scores

Summary and Recommendations

1. The objective of having a benchmark result, we now have:

1. The average score for all universal and other commercial banks

b. The average score for all universal banks separately from the average score for the other commercial banks.

c. The “per category scores” for the 6 CG categories included in the CG scorecard questionnaire.

d. The difference between the average scores of the three top-rated and the three lowest-rated for both Universal and Commercial Banks.

Summary and Recommendations

2. While all the figures reported as averages for all universal and other commercial banks are available as benchmarks for the corresponding figures for individual banks, we believe that at this stage, it is productive and proper to release ONLY the average figures as benchmarks.

3. As in the case of the PLCs, we recommend that a sufficient period of time should be allowed for universal and commercial banks to improve their CG scores and raise their standards of compliance.

Thank you