Under the Bank’s Policy, transactions with a related party are considered as reportable related party transactions, whether or not a price is charged. The Bank has adopted an expanded definition of related parties to include not only directors, officers, stockholders and related interests (DOSRI) as defined under relevant regulations, but also advisory board members and consultants of the Bank, entities within the conglomerate of which the Bank is a member, and subsidiaries of related parties.
Account officers are mandated to notify the appropriate Related Party Transactions Committee of any potential related party transaction as soon as they become aware of it. If a transaction is determined to be a reportable Related Party Transaction, the transaction along with relevant information shall be submitted for analysis and evaluation to the RPT Committee. The Committee shall determine whether or not the Related Party Transaction is on terms no less favorable to the Bank than terms available to any unconnected third party under the same or similar circumstances.
Transactions with amounts of at least Ten Million Pesos or transactions requiring Board approval, i.e., DOSRI loans and cross-selling agreements, are considered as material related party transactions. The Related Party Transactions Committee is a board committee composed of at least three (3) members of the Board of Directors, entirely consisting of non-executive directors, majority of which are independent, including the chairman. The RPT Committee’s mandate is to review material RPTs to determine whether the terms are at arm’s length.
The transaction, if endorsed, shall thereafter be presented to the Board for approval. Any member of the Board who has an interest in the transaction under discussion shall not participate in discussions and shall abstain from voting on the approval of the Related Party Transaction.
Mergers and acquisitions, divestitures and transactions of a similar nature which are not in the normal course of business as may be determined by the RPT Committee and where the amount involved is at least one percent (1%) of the unimpaired capital of the Bank, which are presented to the Board for approval, shall be accompanied by a fairness opinion issued by an independent adviser as well as other reports as the RPT Committee may deem necessary.
The Board has delegated the review and approval of related party transactions below the materiality threshold to the RPT Management Committee composed of members of senior management. Pursuant to BSP Circular No. 969 and the Bank's Corporate Governance Manual, the Bank's stockholders have confirmed by majority vote, in the last annual stockholders meeting, the bank's significant transactions with its DOSRI and other related parties. Review of related party transactions is part of compliance testing of the Compliance Office as well as audit work program of the Internal Audit Group.