December 10, 1982

CENTRAL BANK CIRCULAR NO. 905

The Monetary Board, in its Resolution No. 2224 dated December 3, 1982,
approved the following regulations governing interest rates on loans or forbearance of
money, goods or credit and the amendment of Books I to IV of the Manual of
Regulations for Banks and Other Financial Intermediaries:
General Provisions
SECTION 1. The rate of interest, including commissions, premiums, fees and
other charges, on a loan or forbearance of any money, goods, or credits, regardless of
maturity and whether secured or unsecured, that may be charged or collected by any
person, whether natural or juridical, shall not be subject to any ceiling prescribed under
or pursuant to the Usury Law, as amended.
SECTION 2. The rate of interest for the loan or forbearance of any money,
goods or credits and the rate allowed in judgments, in the absence of express contract
as to such rate of interest, shall continue to be twelve per cent (12%) per annum.
SECTION 3. Loans denominated or payable in a foreign currency shall
continue to be subject to Central Bank regulations on foreign borrowings.
BOOK I
Commercial Banks
SECTION 4. Subsection 1254.3 of the Manual of Regulations is hereby
deleted.
SECTION 5. Section 1303 of the Manual of Regulations is hereby amended to
read as follows:
"SECTION 1303. Interest and Other Charges. — The rate of interest,
including commissions, premiums, fees and other charges, on any loan, or
forbearance of any money, goods or credits, regardless of maturity and whether
secured or unsecured, shall not be subject to any ceiling prescribed under or
pursuant to the Usury Law, as amended."

SECTION 6. Subsection 1303.3 of the Manual of Regulations is hereby

deleted.
SECTION 7. The rst paragraph of Subsection 1303.4 of the Manual of
Regulations is hereby amended to read as follows
"The rate of interest on a oating rate loan during each interest period shall be
stated on the basis of a reference rate plus a margin as may be agreed upon by the
parties."
SECTION 8. Subsection 1303.6 of the Manual of Regulations is hereby
amended to read as follows:
"Subsection 1303.6. Short-term prime rate. — Expanded commercial
banks, commercial banks and specialized government banks shall post their
respective short-term prime rates in a conspicuous place in their principal o ces,
branches and other banking o ces. Expanded commercial banks and the Land
Bank of the Philippines shall publish every other Monday their respective
prevailing short-term prime rates in at least one daily newspaper of general
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 circulation throughout the Philippines and on the effective date of any change of
at least one-half per cent ( ½ %) per annum from the last published rate, in at least
one daily newspaper of general circulation throughout the Philippines. For
purposes of this subsection, the short-term prime rate shall be the lowest effective
rate which a bank will charge on advancements of P500,000.00 and above with a
maturity of 90 days, more or less, against credit lines of the bank's more
established clients, provided that such availments are not eligible for
rediscounting with the Central Bank at preferential rates and that the borrowers
are not directors, o cers and stockholders, including their related interest, of the
lending bank.

Likewise, for purposes of this subsection, "more established clients" is

de ned as a client who has been availing himself of the facilities of the bank for
a number of years, by maintaining substantial deposit balances, utilizing foreign
exchange facilities such as exports, imports and remittances on a regular basis,
or availing himself of other fee-based services.

"For statistical and monitoring purposes, banks shall report these rates
monthly to the Department of Economic Research, Domestic, Central Bank of the
Philippines. Changes in these rates shall also be reported to said Department on
the day the changes are to be effective.

"Banks shall report monthly to the Department of Economic Research-

Domestic the volume and interest rates of availments of P500,000.00 and above
with a maturity of 90 days, more or less, against credit lines of their clients.'

SECTION 9. Item "d" of Section 1349 of the Manual of Regulations is hereby

amended to read as follows:
"d. Terms, interest and charges . — The maximum term of loans money
shops may grant shall in no case exceed 180 days and the rate of interest on
such loans, inclusive of commissions, premiums, fees and other charges, shall
not be subject to any ceilings prescribed under or pursuant to the Usury Law, as
amended "

SECTION 10. Subsection 1388.1 of the Manual of Regulations is hereby

amended to read as follows
"The rate of yield, including commissions, premiums, fees and other
charges, from the purchase of receivables and other obligations, regardless of
maturity, that may be charged or received by banks authorized to engage in quasi-
banking functions or by non-bank nancial intermediaries authorized to engage
in quasi-banking functions, shall not be subject to any regulatory ceiling.

"Data on the volume and interest rates of domestic loans and discounts
with original maturities of more than 365 days shall be reported by expanded
commercial banks and commercial banks to the Department of Economic
Research, Domestic, Central Bank of the Philippines, not later than the 15th
banking day after end of reference month "

BOOK II
Thrift Banks
SECTION 11. Subsection 2254.3 of the Manual of Regulations is hereby
deleted.
SECTION 12. Section 2303 of the Manual of Regulations is hereby amended
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 to read as follows
"SECTION 2303. Interest and other Charges. — The rate of interest,
including commissions, premiums, fees and other charges, on a loan or
forbearance of any money, goods or credits, regardless of maturity, and whether
secured or unsecured, shall not be subject to any ceiling prescribed under or
pursuant to the Usury Law. as amended."

SECTION 13. Subsection 2303.3 of the Manual of Regulations is hereby

deleted
SECTION 14. The rst paragraph of Subsection 2303.4 of the Manual of
Regulations is hereby amended to read as follows:
"The rate of interest on a oating rate loan during each interest period shall
be stated on the basis of a reference rate plus a margin as may be agreed upon
by the parties.:"

SECTION 15. The last paragraph of Subsection 2303.4 of the Manual of

Regulations is hereby amended to read as follows:
"Where the loan agreement provides for a oating interest rate, the interest
period, which shall be such period of time for which the rate of interest is xed,
shall be such period as may be agreed upon by the parties."

SECTION 16. The rst paragraph of Subsection 2303.6 of the Manual of

Regulations is hereby deleted.
SECTION 17. Item "c" of Section 2349 of the Manual of Regulations is hereby
amended to read as follows
"C. Terms, interest and charges. — The maximum term of loans money
shops may grant shall in no case exceed 180 days and the rate of interest on
such loans, inclusive of commission, premiums, fees and other charges, shall not
be subject to any ceiling prescribed under or pursuant to the Usury Law as
amended."

SECTION 18. Subsection 2388.1 of the Manual of Regulations is hereby

amended to read as follows:
"Subsection 2388.1. Yields on purchases of receivables. — The rate of
yield, including commissions, premiums, fees and other charges, from the
purchase of receivables and other obligations, regardless of maturity, that may be
charged or received by banks authorized to engage in quasi-banking functions or
by non-bank nancial intermediaries authorized to engage in quasi-banking
functions, shall not be subject to any regulatory ceiling."

BOOK III
Rural Banks
SECTION 19. Item "c" of Subsection 3152.3 of the Manual of Regulations is
hereby amended to read as follows
"c. Terms, interest and charges . — The maximum term of loans money
shops may grant shall in no case exceed 180 days and the rate of interest on
such loans, inclusive of commissions, premiums, fees and other charges, shall
not be subject to any ceiling prescribed under or pursuant to the Usury Law, as
amended."
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 SECTION 20. Subsection 3254.2 of the Manual of Regulations is hereby
deleted.
SECTION 21. Paragraph "a" of Subsection 3303.1 of the Manual of Relations
is hereby amended to read as follows
"a. Interest rate. — The rate of interest, including commissions,
premiums, fees and other charges, on a loan or forbearance of any money, goods,
or credits, regardless of maturity and whether secured or unsecured, shall not be
subject to any ceiling prescribed under or pursuant to the Usury Law, as
amended."

SECTION 22. Item "b" of Subsection 3303.1 of the Manual of Regulations is

hereby deleted and Items "c", "d", "f" and "g" of the same Subsection are hereby
relettered as items "b", "c", "d" and "e", respectively.
SECTION 23. The rst paragraph of Subsection 3303.2 of the Manual of
Regulations is hereby deleted.
SECTION 24. Subsection 3303.5 of the Manual of Regulations is hereby
amended to read as follows:
"Subsection 3303.5. Floating rates of interest. — The rate of interest on
a oating rate loan during each interest period shall be stated on the basis of a
reference rate plus a margin as may be agreed upon by the parties.
"Reference rates for various interest periods shall be determined and
announced by the Central Bank every week and shall be based-on the weighted
average of the interest rates paid during the immediately preceding week by the
ten (10) commercial banks with the highest levels of outstanding deposit
substitutes on promissory notes issued by such banks, with maturities
corresponding to the interest periods for which such reference rates are being
determined. The commercial banks to be included for purposes of computing the
reference rates shall be reviewed and determined at the beginning of every
calendar semester on the basis of the levels of their outstanding deposit
substitutes as of May 31 or November 30, as the case may be.

"The rate of interest on oating rate loans, existing and outstanding as of

April 2, 1982 shall continue to be determined on the basis of the reference rate
obtained from the weighted average of the interest rates paid by the ve banks
with the largest volume of business transacted during the immediately preceding
thirty (30) days, on time deposits with maturities of more than seven hundred
thirty (730) days, which shall be announced by the Central Bank every month for
as long as such loans are existing and outstanding: Provided, however, That the
parties to such existing oating rate loans agreements are not precluded from
amending or modifying their loan agreements by adopting a oating rate of
interest determined on the basis of the reference rate mentioned in the preceding
paragraph.

"Where the loan agreement provides for a oating interest rate, the interest
period, which shall be such period of time for which the rate of interest is xed,
shall be such period as may be agreed upon by the parties."

BOOK IV
Non-Bank Financial Intermediaries
SECTION 25. The last paragraph of Subsection 4283Q.1 of the Manual of
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 Regulations is hereby amended to read as follows:
"Procedures for demand deposits of NBQBs with the Central Bank as
provided in Appendix 14 shall be followed."

SECTION 26. Subsection 4303Q1 to 4303Q.9 of the Manual of Regulations

are hereby amended to read as follows
"Subsection 4303Q.1. Purchase of Receivables. — The rate of yield,
including commissions, premiums, fees and other charges, from the purchase of
receivables and other obligations, regardless of maturity, that may be charged or
received by NBQBs shall not be subject to any regulatory ceiling.

"Receivables and other obligations shall include claims collectible in

money of any amount and maturity from domestic and foreign sources. The
Monetary Board shall determine in doubtful cases whether a particular claim is
included within said phrase."
"Subsection 4303Q.2. Loans. — The rate of interest, including
commissions, premiums, fees and other charges, on loan transactions, regardless
of maturity and whether secured or unsecured, shall not be subject to any ceiling
prescribed under or pursuant to the Usury Law, as amended."
"Subsection 4303Q.3. Floating rate of interest. — The rate of interest
on a floating rate loan during each interest period shall be stated on the basis of a
reference rate plus a margin as may be agreed upon by the parties.

"Reference rates for various interest periods shall be determined and

announced by the Central Bank every week and shall be based on the weighted
average of the interest rates paid during the immediately preceding week by the
ten (10) commercial banks with the highest levels of outstanding deposit
substitutes on promissory notes issued by such banks, with maturities
corresponding to the interest periods for which such references rates are being
determined The commercial banks to be included for purposes of computing the
reference rates shall be reviewed and determined at the beginning of every
calendar semester on the basis of the levels of their outstanding deposit
substitutes as of May 31 or November 30, as the case may be."
"The rate of interest on oating rate loans, existing and outstanding as of
April 2, 1982 shall continue to be determined on the basis of the reference rate
obtained from the weighted average of the interest rates paid by the ve banks
with the largest volume of business transacted during the immediately preceding
thirty (30) days, on time deposits with maturities of more than seven hundred
thirty (730) days, which shall be announced by the Central Bank every month for
as long as such loans are existing and outstanding: Provided, however, That the
parties to such existing oating rate loan agreements are not precluded from
amending or modifying their loan agreements by adopting a oating rate of
interest determined on the basis of the reference rate mentioned in the next
preceding paragraph.

"Where the loan agreement provides for a oating interest rate, the interest
period, which shall be such period of time for which the rate of interest is xed,
shall be such period as may be agreed upon by the parties."
"Subsection 4303Q.4. Effect of prepayment. — If there is no agreement
on the rebate of interest in the event of prepayment of the loan, the creditor is not
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 under any legal obligation to return the interest corresponding to the period from
date of prepayment to the stipulated maturity date of the loan. Any prepayment
made by the debtor should not, therefore, affect the computation of the effective
rate stipulated in the loan contract."

SECTION 27. Subsections 4303Q10 and 4303Q11 of the Manual of

Regulations are hereby renumbered as Subsections 4303Q5, and 4303Q.6,
respectively.
SECTION 28. Subsection 4303N.1 of the Manual of Regulations is hereby
amended to read as follows:
"Subsection 4303N.1. Interest Rates. — The rate of interest including
commissions, premiums, fees and other charges on loans and forbearance of
money, regardless of maturity and whether secured or unsecured, shall not be
subject to any ceilings prescribed under or pursuant to the Usury Law, as
amended "

SECTION 29. Subsections 4303N.2, 4303N.4 and 4303N.5 of the Manual of

Regulations are hereby deleted, and Subsections 4303N.3, 4303N.6, and 4303 N.7
thereof are hereby renumbered as Subsections 4303N.2 4303N.3 and 4303N.4,
respectively.
SECTION 30. Section 4303P of the Manual of Regulations is hereby amended
to read as follows:
"SECTION 4303P. Interest, Fees and Other Charges. — The rate of
interest including commissions, premiums, fees and other charges on any loan or
forbearance of money extended by a pawnshop, pawnbroker or pawnbroker's
agent, regardless of maturity, shall not be subject to any ceiling prescribed under
or pursuant to the Usury Law, as amended
"No pawnshop shall collect interest on loans in advance for a period of
more than a year."

SECTION 31. Subsection 4303P.1 of the Manual of Regulations is hereby

deleted.
SECTION 32. Whenever any person or entity violated any of the provisions of
this Circular, the person or entity responsible for such violation shall be subject to the
penalties prescribed in the rst paragraph of Section 34 of Republic Act No. 265, as
amended, and/or the penalties prescribed in Section 10 of Act No. 2655, without
prejudice to the imposition of administrative sanctions under Section 34-A and 34-B of
Republic Act No. 265, as amended.
SECTION 33. This Circular shall take effect on January 1, 1983.

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