RCBC’s Principle on Corporate Governance

Whistleblower Policy

RCBC's Open Communication Policy

The Whistleblowing Policy of Rizal Commercial Banking Corporation (the “Bank”) is a key element in safeguarding the Bank’s integrity. It aims to enhance the Bank’s transparency and system for combating practices that might damage its activities and reputation. Protecting the integrity and reputation of the Bank requires the active support of its stakeholders, particularly its employees.

To give all employees and third parties the confidence to raise concerns about any behavior or practice and to mitigate risks and losses through the early discovery of irregular activities, the Bank commits itself to break down communication barriers and provide a safe internal communication channel for all concerned parties to express their concerns through the enactment of the Policy, which allows for confidential disclosures and the protection of informants from sanctions under specific conditions.

Conflict of Interest Policy

Insider Trading Policy

Use of Inside Information

There are laws that prohibit the use of inside information when buying, sellingor trading publicly traded securities, including RCBC securities. Inside information can take many forms, but always includes information which is not available to the public and which might influence an investor's decision to buy, sell or hold securities in a company.

Employees should not buy, sell or trade RCBC securities or the securities of other companies about which employees have inside information, until that information becomes public. In addition, this information should not be shared with anyone else, including family members or friends or anyone about trading in any securities based on this information.

Because inside information is extremely valuable, it must be handled just as like the way other RCBC proprietary information is handled. Employees do not discuss it with family, friends or anyone else; do not talk about it in public places; do not fax it to unattended machines; and not tell others at RCBC unless they must know for legitimate business reasons.

Related Party Transactions Policy

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.

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.

Policy and Data Relating to Health, Safety and Welfare of Employees

Learning and Development

RCBC is committed to provide a strong learning and development platform for all employees across all job levels. HRG continued to strengthen the talent pipeline and brought further competencies on the job by facilitating various training programs and seminars benefiting 5,640 employees addressing the competencies of Leadership, Customer Service, Sales Planning and Management, Product Knowledge, Risk Management and Technical Skills while, a total of 195 employees were enrolled in a number of specialized/IT external training programs. HRG also conducted Coaching workshops as we promote a coaching culture across the organization.

The Bank's effort to provide careers to new graduates and to ensure an effective talent development resulted to deployment of 12 Officers Development Program (ODP) graduates to junior officer positions across the Bank. In June 2014, the 6th batch of ODP commenced with 13 selected trainees. On the same month, HRG in partnership rcbc | 2014 annual report 19 with Operations Group commenced with the fourth batch of the General Operations Learning and Development (GOLD) Program with 5 selected trainees. The 6-month program aims to develop a pool of junior officers with strong operations background and risk orientation.

HRG in collaboration with management continues to subscribe to the Bank's Succession Planning Program. This is to ascertain that the organization has a deep bench of internal candidates ready to assume higher leadership responsibilities. We continue to provide follow through training programs for the graduates of the Leadership Development Program (LDP), an internal training program which aims to develop highly competent, effective and performance-driven leaders for the Bank. The LDP was designed in partnership with John Clements Consultants, Inc. and Harvard Business Publishing.

To further deepen the leadership bench, the third batch of the Middle Management Development Program (MMDP) was conducted. This is a 6-month internal training program which aims to accelerate the development of our next generation of leaders. The MMDP was designed in partnership with the De La Salle University, Center for Professional Development in Business and Economics (CPDBE).

The Retail Bank Learning Academy on its 4th run aims to develop highly competent, credible and productive Retail bankers and leaders. This will allow a sustainable supply of branch personnel, equipped and trained to provide quality service.

Health, Safety and Welfare

RCBC is committed to maintain a safe and healthy working environment. Procedures are in place to protect all associates from generally recognized workplace hazards such as fire, earthquake, robberies and other natural and man-made calamities. The Bank likewise has various substance abuse and health & safety policies, as well as inspection and search procedures.

Substance Abuse and Health and Safety Policies

Employees who work while under the influence of drugs or alcohol present a safety and operational hazard to themselves and their colleagues as well as pose a risk to the trustworthy and professional image of the Bank. The Bank also promotes the health and safety of its employees and their families, through the following policies: RCBC's Drug-Free Workplace Policy and Programs, Policy Against Alcohol Abuse, Policy on Off-Duty Substance Abuse, Family Welfare Policy, TB Workplace Program, HIV/AIDS Workplace Program

Inspection and Search Procedures

Employees are mandated to notify security personnel if they see anything suspicious, including the presence of strangers and unattended bags or packages on the premises.

Employees are likewise mandated to subject themselves, their personal belongings and the Bank assets under Bank custody to intensive inspection and search procedures by security personnel, upon entering, while within and upon leaving Bank premises.

Bank premises include parking lots, whether owned or leased by the Bank. Personal belongings shall pockets, bags, storage media, cars and any other personal property that may be used as repository of cash, jewelry, documents, keys, data and other valuable items.

Employee Welfare and Well-Being

In 2014, the Human Resources Group has undertaken the following activities to continuously promote the health, safety and welfare of RCBC employees.

• Achieved full compliance of the mandatory requirements set by DOLE regarding Occupational and Safety Health Standards.
• Maintained its partnership with Maxicare, the Bank’s HMO provider, in giving health and medical services in accordance to the benefits being enjoyed by employees. Services provided include:
  • Hospitalization and emergency care with 1,184 availments for employees and 2,367 availments for dependents;
  • Executive Check-Up for employees with total cost of over Php21 Million;
  • Outpatient consultation services for employees with 5,885 availments;
  • In addition, employees and dependents availed of free check-up and consultation in various clinics and Primary Care Facilities located in major cities such as Makati, Ortigas, Alabang, Manila and Quezon City. For provincial business centers, employees and their dependents enjoyed the services of Maxicare accredited clinics and hospitals.
• The Bank also partnered with Sunlife Grepa Financial Inc. in utilizing the clinic located at the RCBC Plaza to service more than 1,100 employees based at the Head Office. Moreover, a clinic, with regular visiting doctors, was set-up at the RSB Corporate Center in BGC to give free check-up and consultation services to more than 500 employees at said location.
• The Bank also provided the following benefits to employees:
  • Corporate wellness activities and bulletins on various health and medical topics aligned with trending issues, DOH and DOLE Programs;
  • First aid, safety and life support trainings, fire and earthquake seminars for employees;
  • Purified water, refrigerator and microwave oven in all floors of the Head Office and RSB Corporate Center, as well as the business centers;
  • Pre-employment physical and medical examination for new hires;
  • Random drug testing for employees;
  • Vaccination – Requisitioned 936 flu and 93 cervical cancer vaccines for employees' consumption;
  • Post disaster support teams – Provided group coaching to 21 employees based in Tacloban and Ormoc, to help them psychologically and emotionally recuperate and positively progress from the Yolanda catastrophe; provided immediate relocation to affected employees in Tacloban.
  • Sports and wellness – To promote physical fitness, the Bank sponsored various sports activities participated by employees from Head Office and Metro Manila business centers. The Bank funded the intercolor basketball in April, badminton in May, bowling in June, and volleyball in December. Sporting events were also sponsored for provincial business centers nationwide.
  • Precautionary measures – Since Management recognizes the precarious situation of employees in areas affected by natural calamities and manmade adversities, it has always been keen on immediately issuing work suspension orders in such perilous areas during fortuitous events.
• Lastly, Management has always recognized that people are its most important asset. Hence, the Bank budgeted Php95 million or 36% of the total HR Budget in 2014 for employee health benefits alone, a clear indication of its paramount commitment in maintaining employee welfare and well-being.

Awards

Updates

RCBC spearheads Corporate Governance Seminar

The Corporate Governance Department spearheaded "Creating Advantage through Corporate Governance", a Corporate Governance training program conducted by SGV & Co. on March 22, 2014 at the De Las Alas Executive Lounge.

The program covered significant global strategic topics in Corporate Governance including key developments, roles and responsibilities, leading practices, Related Party Transactions, effective Corporate Governance Model, Regulatory framework supporting Corporate Governance Reforms, and actual cases and case studies, to name a few. It also covered regional topics such as the ASEAN Corporate Governance Scorecard, key provisions, PSE Corporate Guidelines, SEC Corporate Governance Survey, and the Annual Corporate Governance Report.

The seminar was conducted for members of the Board of Directors, Senior Vice Presidents and other key officers, the Compliance Office, and the Corporate Secretariat Unit Head of the Bank as well as directors and key officers of the Bank's subsidiaries and affiliates.

The program was conducted to ensure that the Bank remains abreast with changes in Corporate Governance, and to maintain and continuously improve the quality of Corporate Governance, in line with the Bank's commitment in conducting its business with utmost integrity, commitment, and excellence.

RCBC Launches Continuing Education Program for Directors

In August of this year 2013, RCBC launched its continuing education program for the Board of Directors.

The continuing education program is in line with the Bank's commitment to good corporate governance and ensuring that the Board of Directors are informed of the latest developments and regulatory changes in the banking industry. The lecture/seminars are held every month shortly before the regular board meeting, and attended by the members of the Board of Directors, Advisory Board, as well as senior management.

The topics covered and speakers from August to November of this year were as follows:

2013 Comprehensive Compliance Lecture for Business Center officers

The Compliance Office successfully launched its first Comprehensive Compliance Lecture sessions last month at the De Las Alas Executive Lounge. The lecture provided the participants with various information on regulatory and compliance awareness as well as operational processes on Customer Relationship Management (CRM). The lecture sessios covered topics on Compliance Program, Corporate Governance and AMLA conducted by speaker-facilitators from the Testing and Monitoring Department, Corporate Governance Department and AMLA Department, respectively.

For Corporate Governance in particular, Atty. Queenie Oyales-Rama, Corporate Governance Department Head, stressed the importance of good corporate governance as well as the extent of its impact when overlooked. Atty. Oyales-Rama discussed the corporate governance regulatory framework, the Bank's corporate governance framework with emphasis on the policies like the Code of Conduct, the Open Communication Policy, as well as the Bank's policy on related party transactions.

The lecture is conducted for Business Managers (BM), Senior Customer Relationship Officers (SCRO), Customer Relationship Officers / Assistants (CRO/CRA), Customer Service Heads (CSH) and CSA-Tellers. The 2nd, 3rd and 4th sessions were held on July 9, 17, and 23, 2013, respectively. Other sessions will be conducted in August 2013. The Compliance Office, committed to maintaining a high level of regulatory compliance, implements a compliance program which contributes to the attainment of the Bank's mission of conducting its business with utmost integrity, commitment and excellence.

Overview

The United States (U.S.) Congress enacted the Foreign Account Tax Compliance Act (FATCA) on March 18, 2010. The law requires Foreign¹ Financial Institutions (FFIs), like RCBC, that hold U.S. persons’ accounts to report certain information² to the U.S. Internal Revenue Service (IRS).

In particular, FFIs are required to identify U.S. accounts as part of their client on-boarding procedures. Once such a process is in place, they are further required to identify current accounts with U.S. indicia, including but not limited to incorporating a process that monitors account changes for indicia of U.S. status.

On July 13, 2015, the governments of the Philippines and the U.S entered into an Inter-Governmental Agreement to implement FATCA. Under the IGA, the reporting of U.S. reportable accounts will be coursed through the Bureau of Internal Revenue (BIR), which would in turn submit the reports of all covered Philippine financial institutions to the IRS.

1. Foreign means on-U.S.

2. Account name, address, income received, year-end account balance, U.S. TIN, account number.

RCBC FATCA Compliance

How RCBC identifies U.S. Person Accountholders

Pre-IGA

RCBC sent letters and due diligence forms to pre-existing clients to obtain their FATCA status and waiver of bank secrecy laws. RCBC also revised its account opening forms to capture U.S. indicia at the outset. Procedures for on-boarding of new clients were enhanced to equip client-facing personnel the skills required to identify U.S. persons. RCBC likewise enhanced its IT system to capture the required FATCA information and documents from new clients beginning July 1, 2014.

IGA Regime

The IGA provides the manner and level of due diligence required of FFIs to identify U.S. persons. In compliance thereof, the Bank implemented a number of measures, including but are not limited to:

• Enhanced due diligence for high value accounts that included: electronic record search of financial accounts for US indicia; paper record search of financial accounts for US indicia; and inquiries with relationship managers.
• RCBC also participated in submission testing conducted by the IRS.
• RCBC rolled out a new self-certification form for non-U.S. entity clients. This form replaced the U.S. IRS Form (W-8BEN-E) to give its clients a more comprehensible form that covers all mandatory information required under FATCA. The FATCA status tags in the Bank’s core system are likewise updated to comply with the reporting requirements of the IGA.

Forms

Listed below are the U.S. IRS forms submitted by clients to RCBC. The client should however, consult with their branch of account or tax advisor as to the appropriate U.S. IRS form/s to be submitted.

• W-9 – to confirm that the individual or entity is a U.S. person
• W-8BEN – to confirm that the individual is a Non U.S. person
• W-8BEN-E or RCBC self-certification form – to confirm the FATCA status of the entity
• DS-4083 – to confirm that the U.S. citizenship is being relinquished

Frequently Asked Questions

1. What is FATCA?

   The Foreign Account Tax Compliance Act (FATCA) is a U.S. tax law enacted on March 18, 2010 to deter U.S. taxpayers from avoiding U.S. tax on their income through reporting by non-U.S. financial institutions to the U.S. Internal revenue Service (IRS) of certain information.

   The FATCA due diligence procedures for new accounts in RCBC became effective on July 1, 2014.

   The Intergovernmental Agreement (IGA) between the U.S. and the Philippines was signed on July 13, 2015. At present, RCBC is a Philippine Financial Institution that is reporting under the Model 1 IGA.

2. What is a Foreign Financial Institution (FFI)?

   An FFI is a foreign financial institution, which is any non-U.S. entity that:

   • Accepts deposits in the ordinary course of a banking or similar business (e.g., bank);
   • Holds, as a substantial part of its business, financial assets for the accounts of others (e.g., custodian, broker-dealers, U.S trust companies, clearing organizations);
   • Is engaged primarily in the business of investing, reinvesting, or trading in securities, partnership interests, commodities, or any interest in such securities, partnership interests, or commodities (e.g., hedge funds, private equity funds, investment managers, SPVs); or
   • Is an insurance company that issues annuities or cash value insurance policies.

    

3. What should RCBC do in order to comply with FATCA?

   To comply with FATCA, RCBC must accomplish the following:

   • Identify if new clients (by virtue of the determination date that is 30 November 2014) are U.S. Persons and require them to submit necessary forms and documents;
   • Conduct certain identification and due diligence procedures with respect to its pre-existing account holders in accordance with the rules under the IGA;
   • Report to the BIR certain information relating to the accounts held by account holders who are U.S. persons.

    

4. Who is a US person?

   A United States Person as defined by the IGA means:

   • For Individuals-
     1. U.S. citizen (including a dual citizen);
     2. U.S. resident alien for tax purposes; or
     3. A person who has substantial presence in the U.S.. Substantial presence is defined as 31 days during the current year and 183 days during the 3-year period that includes the current year and the 2 years immediately before that counting:
        • all the days you were present in the current year, and
        • 1/3 of the days you were present in the first year before the current year, and
        • 1/6 of the days you were present in the second year before the current year.
   • For Juridical Entities-
     1. A domestic corporation, partnership, or association created or organized in the U.S. or under the laws of the U.S.;
     2. A U.S. domestic trust;
     3. A U.S. estate; or
     4. A company that has a U.S. substantial ownership of at least 10%.

5. What is a U.S. Indicium?

   A U.S. indicium is an information or datum that serves as an indicator that identifies an account holder as a potential U.S. person.

6. What are the US indicia under FATCA?

   • • For Individuals-

       1. Designation of the account holder as a U.S. citizen or resident;
       2. U.S. place of birth

     • For Juridical Entities-

       1. Classification of an account holder as a U.S. resident in the withholding agent’s customer files (this means that the entity was incorporated/established /organized under U.S. laws)

     For Both Individual & Juridical Entities-

     1. A current U.S. residence address or U.S. mailing address (including a U.S. post office box)
     2. A current U.S. telephone number
     3. Standing instructions to pay amounts to a U.S. address or an account maintained in the U.S.
     4. A current power of attorney or signatory authority granted to a person with a U.S. address
     5. An "in care of" address or “hold mail address” that is the sole address provided

      

    

7. What is the impact of FATCA?

   At the outset, FFIs were required to register online with the U.S.IRS to enter into an FFI agreement with the U.S. Treasury Department / U.S. IRS. FFIs that do not enter into an FFI agreement with the U.S. Treasury Department / U.S. IRS will be sanctioned with a 30% withholding tax against their U.S. source income. FFIs that entered into an FFI agreement with the U.S. IRS became "participating FFIs." In the same way, FFIs were required to disclose to the U.S. IRS certain account information of their account holders who are U.S. persons.

   To address the conflict between FATCA and other domestic laws, the U.S. has entered and continues to enter into a number of IGAs with different countries/jurisdictions. The Philippines entered into an IGA with the U.S. on July 13, 2015. By virtue of this IGA, all participating Philippine Financial Institutions are deemed reporting financial institutions under the Model 1 IGA. Philippine FIs are now mandated to report to the BIR all required information under the IGA and the BIR will, in turn, coordinate with and forward these reports to the U.S. IRS.

8. When will the FATCA regulations be implemented?

   RCBC began its implementation on July 1, 2014 as this was the original determination date under the FATCA Rules and Regulations. All new clients are required to disclose their FATCA statuses and submit their documentary requirements for validation.

9. What information with regard to account holders will be reported by virtue of FATCA?

   1. For Individual Account Holders / Entities / Non-U.S. Entity with Controlling Specified U.S. Persons

      1. the name,
      2. address, and
      3. U.S. TIN
      4. the account number (CIF);
      5. the account balance or value as of:
         • the end of the relevant calendar year or
         • other appropriate reporting period or,
         • if the account was closed during such year, immediately before closure;

       

   2. For Custodial Account Holders:

      1. the total gross amount of:
         • interest,
         • dividends,
         • other income generated with respect to the assets held in the account, in each case paid or credited to the account (or with respect to the account) during the calendar year or other appropriate reporting period; and
      2. the total gross proceeds from the sale or redemption of property paid or credited to the account during the calendar year or other appropriate reporting period with respect to which the Reporting Philippine Financial Institution acted as custodian, broker, nominee, or otherwise as an agent for the Account Holder;

       

   3. For Depository Account Holders: the total gross amount of interest paid or credited to the account during the calendar year or other appropriate reporting period; and

      Any account that is not a depository or custodial account - the total gross amount paid or credited to the Account Holder, including the aggregate amount of any redemption payments made to the Account Holder, with respect to the account during the calendar year or other appropriate reporting period with respect to which the Reporting Philippine Financial Institution is the obligor or debtor.

Additional Information

RCBC is a part of the FFI List issued by IRS that includes all financial institutions and branches that have submitted a registration and have been assigned a Global Intermediary Identification Number (GIIN) at the time the list was compiled. This is due to the fact that prior to the execution of the IGA between the U.S. and the Philippines, RCBC registered with the IRS in compliance with the FATCA Rules and Regulations. RCBC has the following details by virtue of this registration:

For specific FATCA-related questions including implications to your tax filing with the U.S. IRS, please contact the U.S. IRS directly or consult with your tax advisor. To contact the U.S. IRS, please visit their website or you may Use the link below:

1. www.irs.gov/fatca
2. www.irs.gov/contact