April 16, 2018 T O : All Clearing Banks/Institutions R E : UNIFORM INTERPRETATION OF DATE ON CHECKS 1. In connection with issues/concerns raised by Clearing Participants arising from the non- uniformity of their interpretations of the dates on Checks presented for clearing, there is a need to adopt a uniform rule of reading the dates, especially those indicated purely in numerals. Consequently, current account clients have to be advised by their respective banks on how the dates indicated on their checks are to be construed. 2. Corollarily, the Clearing Participants shall inform their clients that the issue date of Checks for clearing should be indicated/written in any of the following formats/styles: Format Example Fully written November 03, 2018 Abbreviated Month (First three letters) Nov. 3, 2018 Numeric style (with full year) 11032018 Numeric style (with last 2-digit year) 110318 Numeric with '/" partition (full year) 11/03/2018 Numeric with '/" partition (shortened year) 11/03/18 Numeric with '-' partition (full year) 11-03-2018 Numeric with '-' partition (shortened year) 11-03-18 Numeric with '.' partition (full year) 11.03.2018 Numeric with '.' partition (shortened year) 11.03.18 3. Pursuant to this standardization, a bank which will present a Check with issue date written entirely in numerals (without clear indication which numerals refer to the month of issue) is deemed to warrant to the Drawee Bank that the Check is neither "stale" nor "postdated." 4. To give ample time for banks to inform their respective clients/customers, the foregoing manner of writing dates will be effective July 1, 2018. 5. In the meantime and for advance information of all, there will be upcoming revisions in the Check Design Standards. This will be released soon for gradual/phase-in implementation of clearing participants. The revisions include the date line with the objective of enabling Check issuers observe a standard when writing dates. 6. We count on the full support of member banks on this uniform date-interpretation initiative.

September 25, 2017 T O : All Clearing Banks/Institutions R E : INCORRECT AMOUNT ENCODING IN THE ELECTRONIC PAYMENT INFORMATION (EPI) 1. The Drawee Bank shall return a Regular Clearing Item (RCI) within the Prescribed Period if the EPI transmitted to it shows an incorrect ("over or under encoded) Check Amount. 1.1. In case of such return, the Drawee Bank is entitled to collect from the Presenting Bank a penalty charge of P1,000.00 or the amount of discrepancy multiplied by the Average IBCL Rate for the day whichever is higher. 1.2. The Drawee Bank shall collect the penalty from the Presenting Bank via the usual Charge Slip within five (5) banking days from date of the RCI transmission. 2. However, if the Drawee Bank is unable to return the RCI within the Prescribed Period, it may settle the clearing discrepancy with the Presenting Bank via Charge Slip without penalty. 3. For your guidance and compliance.

Memo Circular No. 3519 March 20, 2019 TO : All PESONet Participant Banks/lnstitutions RE : PARTICIPATION OF DUNGGANON BANK, INC. IN THE PESONET 1. We are pleased to announce the participation of Dungganon Bank, Inc. in the Phil. EFT System Operation Network (PESONet) ACH effective Monday, March 25, 2019. 2. Dungganon Bank, Inc. is a Microfinance Rural Bank located in Bacolod City, Negros Occidental and shall be the first Rural Bank to participate in PESONet. 3. The Bank will use its BIC: DUMTPHMIXXX and has an assigned BRSTN 04902-001-2. 4. For information and guidance.

Memo Circular No. 3519 March 20, 2019 TO : All PESONet Participant Banks/lnstitutions RE : PARTICIPATION OF DUNGGANON BANK, INC. IN THE PESONET 1. We are pleased to announce the participation of Dungganon Bank, Inc. in the Phil. EFT System Operation Network (PESONet) ACH effective Monday, March 25, 2019. 2. Dungganon Bank, Inc. is a Microfinance Rural Bank located in Bacolod City, Negros Occidental and shall be the first Rural Bank to participate in PESONet. 3. The Bank will use its BIC: DUMTPHMIXXX and has an assigned BRSTN 04902-001-2. 4. For information and guidance.

TO : All Clearing Banks/lnstitutions RE : NEW CLEARING PARTICIPANTS/BRSTN REGISTER UPDATES With reference to various request letters/notices received from the clearing participant banks, we enumerate hereunder the following updates to the PCHC clearing participant banks/BRSTN Register and Operating Parameter, viz: 1.1 New Clearing Participants BANK/BRANCH BRSTN ADDRESS BPI - CUBAO P. TUAZON 01004-478-4 P. Tuazon Cubao, Quezon City METRO - PALAWAN - EL NIDO 35026-004-0 El Nido Sea Shell Hotel Rizal St. and Real St., Brgy. Buena Suerte, El Nido, Palawan BDO - SULTAN KUDARAT - PRIMARK TACURONG 74053-003-4 GIO, G/F, Primark Town Center, Magsaysay Avenue corner Bonifacio St. Purok 1, Brgy. Poblacion, Tacurong City, Sultan Kudarat RBC - ZAMBOANGA CITY 09107-001-0 G/F The Grand Astoria Hotel, Mayor Jaldon Street, Zamboanga CityONB - ZAMBALES - OLONGAPO CITY 28118-001-1 2nd Floor, #2361 Rizal Avenue, West Bajac Bajac, Olongapo City, Zambales 1.2 Relocation/Change in Branch Name and/or Address BRSTN BANK/BRANCH NAME FROM TO 01004-001-8 BPI Main - 6795 Ayala Avenue, Makati Main - Makati Makati City Stock Exchange Building, Ayala Avenue, Makati City 01004-252-4 BPI - Legaspi Gamboa G/F Asian Reinsurance 223 Salcedo Bldg., 223 Cond. Corp. Novartis, cor. Salcedo Street corner Gamboa and Salcedo Sts., Gamboa Street, Brgy. San Lorenzo, Makati City 1.3 Inclusion of the following branches in the list of BIR AABs BRANCH NAME BRSTN RCBC - PADRE PIO RADA 01028-035-7 LBP - CATANAUAN (QUEZON) 14035-009-2 IBP - KAPATAGAN LANAO DEL NORTE 18035-005-2 LBP - KIDAPAWAN AMAS 54035-002-9 2. Pursuant to CICS 0M No, 17-004 dated 18 January 2017 the aforementioned updates will be implemented effective 18 March 2019. 3. For your information and guidance.

13 September 2017 T O : All Clearing Banks/Institutions R E : REPLACEMENT OF CICS OM NO 17-017 DATED 01 AUGUST 2017 (RE: NON-ACCEPTANCE OF CHECKS WITH TECHNICAL DEFECTS) 1. In response to comments and suggestions of Clearing Officers of banks, we are replacing CICS OM No. 17-017 with this Operating Memo to: a) remove “Over or Under encoding” from the list of technical defects on Checks that render them non-acceptable for clearing; and b) add to such list, the following technical defect: “amount in words and in figures differ”. It is to be noted that in the case of “Over or Under encoding”, the technical defect can occur only after acceptance of a Check and generation of Electronic Payment Information (EPI) by the Presenting Bank. The defect of “Over or Under encoding” or “erroneous amount” is on the EPI and not on the Check so it does not belong among those enumerated in CICS 17-017. It shall therefore be covered by another Operating Memo that we will issue. 2. As provided in our earlier issuance, a Check with one or more of the technical defects enumerated below (“Technically Defective Check”) : 2.1. No date, out of date/invalid date (i.e. Feb. 30, 2017) 2.2. Post-dated or Stale dated 2.3. No payee indicated 2.4. Payee line indicated: 2.4.1. Customer Name and Cash 2.4.2. Customer Name and/or Cash 2.4.3. Business Name or Cash 2.4.4. Business Name and/or Cash 2.5. No amount in figures 2.6. No amount in words 2.7. Amount in words and in figures differ 2.8. No signature or missing signature of the Drawer 2.9. Old Format Checks (except those stamped warehoused PDCs accepted prior to January 2017) is not acceptable for clearing. 3. In the event a Presenting Bank transmits a Regular Clearing Item (RCI) covering a Technically Defective Check and the Drawee Bank automatically returns/dishonors the RCI for the defect/s, a penalty of ₱1,000.00 per item/day or amount of the item multiplied by the average IBCL rate for the day whichever is higher, shall be imposed on the Presenting Bank, to be collected by the Drawee Bank, in accordance with the following rules: 3.1. It shall be incumbent upon the Drawee Bank to automatically return/ dishonor an RCI covering a Technically Defective Check; otherwise, it shall lose its right to collect the Penalty from the Presenting Bank. 3.2. The Penalty shall be collected by the Drawee Bank from the Presenting Bank via the usual Charge Slip within 5 banking days from date of the RCI transmission. 4. Please take note that since Checks with ‘amount in words and in figures differ’ are no longer acceptable and the corresponding RCI will be automatically returned if transmitted to the Drawee Bank, it will now be listed as among those return reasons exempted from the ₱2,000.00 Service Charge (Sec 24.1 of the CICS RR). In this regard, PCHC shall update the Transaction code for Return Reason Code ‘D’ from ’14’ (as indicated in the earlier released CICS OM 17-018) to ‘24’. 5. Clearing Banks must observe due diligence when accepting Checks for deposit. Presenting Banks should not transmit RCIs covering Technically Defective Checks. 6. For your guidance and strict compliance.

15 August 2017 T O : All Member/Participant Banks R E : UPDATED CICS OPERATING GUIDELINES 1. In view of recent changes in the guidelines which include additional codes listed in the Return Reasons table, we are updating the Operating Guidelines for the Check Image Clearing System (CICS), to wit: Sec. 1 – INTRODUCTION This document describes the operating guidelines primarily for the use of all Member/Participant Banks’ personnel who are responsible for the preparation and submission/transmission of all outward check transactions to the CICS as well as the processing of inward clearing items. Similarly, this document also covers the preparation and submission/transmission of outward returns to the CICS and processing of incoming return transactions. 1.1. Coverage CICS’ nationwide implementation covers the Greater Manila Area, all cities, provinces formerly defined under the Integrated and Regional Local Exchange (RLX) Clearing Centers. The Member/Participant Banks/branches located in these areas will truncate checks deposited with them or issued in their favor that need to be cleared in accordance with the provisions of Sec. 3 of these Operating Guidelines. 1.2. Clearing Session CICS supports different categories of clearing transactions. These clearing transactions will have separate clearing windows and are basically of the following types: 1.2.1. Regular Presentment or Forward Window - for the submission/transmission by the Presenting Bank of its demand to the Drawee Bank for payment of a Regular Clearing Item (RCI), i.e., Check deposited with or issued to the Presenting Bank to be cleared by presentation of its electronic image and data via the CICS; On any clearing day, cut-off time for the Regular Presentment Session is at 4:30 PM of that day. All RCIs received by the CICS within this cut-off time will be included in the settlement for the day. RCIs received by the CICS after this cut-off time will automatically be included in the Regular Presentment Session of the Next Clearing Day (i.e. the clearing day immediately following Day 1). PAGE 2 Special clearing of RCIs that do not meet the 4:30 PM netting cut-off is unnecessary as such items will automatically be included in the Regular Presentment Session of the Next Clearing Day. 1.2.2. Returns Presentment or Returns Window - for the transmission by the Drawee Bank to the Presenting Bank via the CICS of an RCI that is dishonored or unpaid. Returns Presentment Session is the period immediately after the 4:30 PM Regular Presentment Session and will end at the prescribed cutoff time of the Next Clearing Day. Any RCI received by the Drawee Bank within the regular presentment window however, may be returned by it prior to the day’s 4:30 PM cut-off time. Though it will have zero effect on the Netting Results, such item will form part of the Session’s transactions and will be included in the usual processing reports. For the Presenting Bank, RCI will appear on the list of Regular Outward Items as well as on the list of Return Inward Items. Consequently, the same item will be included in the list of Regular Inward Items of the Drawee Bank as well as on the list of Return Outward Items. All return transactions received by the CICS on or before the prescribed Return Presentment Cutoff 2 time will be value-dated Day 1. The PBM will reject Return Items that do not meet the Returns Presentment Cut-off Time and as such, the Drawee Bank may opt to present them directly (special clearing) to the Presenting Bank Central Clearing Unit on or before the prescribed Special Clearing delivery cut-off of same day pursuant to Section 20 of the CICS RR. Settlement of Special Clearing of Returns shall be thru Clearing Receipt/Charge Slip (CR/CS). Details such as Presenting Bank/Branch Name, BRSTN, check number, amount of the Check/Item to be returned and the reason for dishonor must be clearly indicated or written on the CR/CS to serve as reference. The CR/CS should be accompanied by Special Return Check Advice (SRCA) with the image of the item to be returned and a covering letter (see Annex A for the suggested format of the letter) to document the manual exchange. 1.2.3. Express Presentment - for the submission/transmission by the Presenting Bank of its demand to the Drawee Bank for immediate payment of an RCI. Initial implementation of CICS however, will be for local currency only and will not yet include express clearing. Sec. 2 - CLEARING REQUISITES UNDER IMAGING AND TRUNCATION 2.1. Sending Bank/Receiving Point A Member/Participant Bank may have multiple points of capture but will only have one main single point of connection to the CICS which will be termed as “sending/receiving point.” ____________________ 2- Return Presentment Cut-off is the deadline set by the BSP and implemented by PCHC for the banks to submit dishonored items via CICS. Returns Cut-off time is 7:30 AM of the next clearing day (with reference to DAY 1). Page 3 Member/Participant Banks may opt to have additional sending points (but not additional receiving points) by allowing one or any of its branches to have additional PBM. Additional PBM will enable the Head Office to have back-up server that can be used simultaneously with the primary PBM and transmit directly to the CICS or a branch in a certain location to act as the lead branch where all the transactions of the other branches are transmitted to the Head Office or directly to PCHC. 2.2. Digital Signatures Security of data and image is a primary consideration in CICS operation. The implementation of the Public Key Infrastructure (PKI) shall ensure data authenticity, integrity and non-repudiation. The PBM of the Presenting Bank will encrypt every Image Cash Letter (ICL) File and affix digital signature on it before its transmission to the CICS. The image and data must be secured using the PKI throughout the entire transmission cycle between the Presenting Bank, PCHC and the Drawee Bank. All images of clearing items shall include a hash using the SHA256 algorithm and this must be included in the ICL File. The purpose of this hash is for the Drawee Bank to validate whether the Images received are not altered. It is the responsibility of the Presenting and Drawee Banks to ensure that the movement of electronic files from their host capturing systems to the PBM is secured. Access to the bank’s PBM must be limited to authorized personnel only. 2.3. Management of Digital Certificates PCHC shall be the entity to manage the issuance, revocation, and maintenance of the digital certificates that will be installed in all the Member/Participant Banks’ PBM servers. All PBMs must be installed with a Hardware Security Module (HSM) component and corresponding digital certificates that will be used for the digital signing and encryption of the ICL Files. The validity of the digital certificates was set to five (5) years and it will be up to the participant bank to coordinate with PCHC for the renewal of these certificates at any time. 2.4. Use of Secure Network All the generated ICL Files duly validated, encrypted & digitally signed, will travel over a secure communication link between the connecting Member/Participant Bank to the CICS. All acknowledgement messages will be transmitted via the same link. Banks may connect to the CICS via the Internet IP/VPN or leased line. 2.5. Settlement Transactions settlement in every clearing Session shall be made on the basis of the electronic Check data. 2.6. Storage/Archive and Retrieval Original paid Checks (captured items) must be stored for 180 days from the date of their payment (“Payment Date”) through the CICS. PCHC will archive the images and data in its original ICL form. These electronic records will be made available online to the Member/Participant Banks for twelve Page 4 (12) months from their respective Payment Dates. Only authorized personnel of Member/Participant Banks will have access to the PCHC storage and archiving system. Images and data archived by PCHC beyond the said 12-month period will be stored in hard disks and other storage media for future reference. PCHC shall keep Archived images and data for a period of ten (10) years from Payment Date. Request for retrieval/copies of these archived records must be duly signed by authorized bank officer. 2.7. Scanning Standard Scanning of the item transactions must conform to the prescribed image standards: 2.7.1. Front and Rear CCITT G4 Format (200 DPI) 2.7.2. Front Image JPEG Format (100DPI) 2.7.3. Front UV Image (Inverted CCITT G4 Format 200 DPI) High-value items (500,000.00 and above) will be transmitted to PCHC with corresponding UV Image. If dishonored with service charge however, the resulting reduction in the amount (below 500,000.00) will no longer require sending of the UV Image. Member/Participant Banks must ensure that their equipment meets the requirements of the Image Quality Assurance (IQA) standards. The 1st level IQA should be at the point of capture for immediate detection of exceptions. The PBM shall perform 2nd level IQA tests to validate all captured images transmitted by the banks. Sec. 3 – PREPARATION OF OUTWARD CLEARING ITEMS 3.1. Presenting Bank’s Due Diligence Requirements Clearing and settlement will be done on the basis of image and electronic payment information. Hence, it is the responsibility of the Presenting Bank to ensure that captured images of the Checks meet the Image Usability Requirement. This is necessary for the Drawee Bank to exercise ‘Pay’ and ‘No Pay’ decision. Likewise, it may help the Drawee Bank to detect any fraud, forgery or tampering apparent on the face of the instrument that can be verified with due diligence and ordinary care. Member/Participant Banks must enforce strict KYC (Know Your Customer) standards and procedures in order to protect the integrity of the image-based Check clearing system. The banks should observe all precautions. e.g. to check the minimum security standards set in the Check paper, apparent tenor of the instrument, physical feel of the instrument, any tampering visible to the naked eye with reasonable care, etc. For enhanced attention, based on exceptions, the banks may employ suitable risk management techniques like scrutiny of high value transactions; limit-based checking by officials, new accounts alerts, etc. The Presenting Bank takes full responsibility for collecting on behalf of the intended payee and exercises due diligence in accordance with the conditions set forth in the CICS Rules and Regulations (CICS RR) and accompanying guidelines. 3.2. Physical Check/ Instrument Capture Image and MICR code line of a Physical Check/Instrument when captured by scanners/devices must meet the Image Usability Requirement. Page 5 3.3. Unique Identification Code (UIC) UIC must be generated and printed at the back of the Check/ instrument or electronically imposed on the dorsal image of the Check. UIC information will be included in the ICL File that will be transmitted by the Presenting Bank to the CICS. 3.4. Data Entry The Front-end solution of the Presenting Bank shall have the capability of amount data entry and correction/completion of MICR details misreads. All items with corrected MICR details must be properly tagged in the ICL File by the Front-end solution to alert the Drawee Bank of the corrections effected manually during capture on the MICR details. 3.5. Re-clearing of Checks Any Check that is eligible for re-deposit can be re-cleared once with the original Presenting Bank under the same depository account. The Front-end solution of the Presenting Bank should be able to likewise tag this item in the ICL File for the information of the Drawee Bank. 3.6. BRSTN Register Updating The BRSTN master table shall be automatically updated by PCHC in the Bank’s PBM. Member/Participant Banks shall update its Front-end/capture system accordingly. 3.7. Preparation and Submission of Outward Transactions The Presenting Bank shall ensure that: 3.7.1. The Checks are compliant with the minimum security standards prescribed under the amended Check Design Standards and Specifications as well as other internal/security controls prior to acceptance. 3.7.2. The account number of the depositor/payee is legibly written on the portion below the depositor’s signature/payee’s endorsement on the dorsal portion of the Check. 3.7.3. The said account number is correct and tallies with the depository account number. 3.7.4. The account number is not obscured by any markings/stamp affixed on the Check’s dorsal side. 3.7.5. The UIC appears on the dorsal side of the Check or electronically imposed on the dorsal images of the check 3.7.6. If a returned Check is sent for re-clearing, a 2nd presentment stamp shall be affixed by the Presenting Bank on the dorsal portion of the physical Check Page 6 3.7.7. Outgoing items to be captured should be classified and batched accordingly, to wit: 3.7.7.1. Regular CICS items 3.7.7.2. Checks payable to the BIR 3.7.7.3. Checks payable to the BOC 3.7.7.4. Checks for re-clearing 3.7.7.5. IQA Failed Items 3.7.8. Batch size in an ICL File shall be limited to 100 items or less 3.7.9. The front and rear images of the Check and the MICR code line data are captured within groupings referred to as batches. 3.7.10. At the point of Check processing and scanning of the rear of each document, the Presenting Bank’s capture device will print an endorsement line i.e. Unique Identification Code (UIC). Such info shall also be included in the electronic Check data to be transmitted to the CICS. 3.7.11. The Front-end system of the Presenting Bank shall perform the Image Quality Assurance (IQA) Tests to all the captured images in order to assure its usability. 3.7.12. All outward batches presented to the CICS are balanced. The MICR Code line correction must have been carried out to ensure that all MICR data are present and amount entry made to assign an amount electronically to each Check. Any correction done on the pre-qualified MICR Code Line must be tagged to caution the Drawee Bank. 3.7.13. Once balanced, batches are converted into its equivalent ICL File in accordance with the published standard as defined in the recently released PBM Technical Specifications prior to their transmission/ submission to the CICS. A batch can contain a maximum of 100 items. 3.7.14. The Presenting Bank Front-end solution must observe the rules for the generation of ICL Files, i.e. ICL File can contain multiple batches at a maximum of 200 items. 3.7.15. The Front-end system will submit the generated outward ICL File to the Participant Bank Module (PBM) embedded within its own system for preliminary validation and transmission. 3.8. Frequency of Submission It is recommended that Member/Participant Banks submit ICL Files to the CICS every so often in order not to clog the lines particularly in the last hour before cutoff. 3.9. Alternative Delivery Media Page 7 For contingency, the files in the PBM that fail to be transmitted to CICS can be copied to an alternative media such as a CD, USB or any type of removable disks. Files delivered by a bank to PCHC thru the use of storage media for uploading shall be accepted subject to the same acceptance criteria as those for files received via a communications link. This contingency procedure requires previous confirmed notification with PCHC and similarly subject to the usual 4:30 PM cut-off. 3.10. Image Cash Letter (ICL) Files accepted by the CICS ICL Files received at the CICS will be initially validated by the Clearing House Module (CHM), an equivalent version of the PBM at the PCHC’s back-end. Each ICL File will have its digital signature validated and decrypted if valid. This module will carry out structure and content validation and continue to accept and process when there is no exception. Accepted files are passed to the CICS where they are converted into inward ICL files for distribution to the Drawee Banks. When CICS accepts an outward ICL File, an acknowledgement file is automatically generated and sent to the originating PBM. If the Primary PBM of the Drawee Bank is unavailable to receive Inward files, the Drawee Bank shall use the bank’s Secondary PBM upon request for reconfiguration. Outward Return ICLs and Inward Return ICLs are similarly handled as described above. 3.11. Item/s not Accepted by the CICS If an item fails validation at the Presenting Bank’s PBM for any reason, that item will be rejected but remaining valid items will continue to be processed. The acknowledgment file generated will include the details of the rejected items and the reason for rejection thus the need for the Presenting Bank to verify the acknowledgment message. If an item fails validation at the Drawee Bank’s PBM, it will be automatically returned to the Presenting Bank, i.e. Duplicate Item detected by PBM. If all items are rejected, the ICL File will not be accepted. 3.12. Balancing and Reconciliation Member/Participant Banks should document the process flow and ensure establishment of control mechanisms. Special care and adequate quality controls should be in place during rescanning and re-clearing of Checks. The banks must have internal control reports at the end of each Regular/ Returns Presentment window to effectively reconcile the presentation made against the total credit in the clearing result for the day. Similar control should also be observed in validating inward transactions received against the total debit. Reports showing the Total (count and values) Outward and Inward Clearing transactions are available at the PCHC web portal for reference. In case of discrepancy, the same should be resolved immediately. CICS Rules and Regulations as well as CICS Operating Memos provide mechanism to settle clearing discrepancy if needed. The service branches of the banks following distributed-outward model should refer to the branch clearing control reports for verification of actual credit received from PCHC. SEC. 4 – PROCESSING AT THE PARTICIPATING BANKS MODULE: OUTWARD 4.1. Participating Bank Module (PBM) Page 8 The CICS PBM server provides ICL Files validation and provides an interface for sending and receiving ICL Files from and to the CICS. 4.2. Checking of Duplicate ICL Any duplicate ICL File that is detected by PBM will be rejected in its entirety. An ICL File is considered a duplicate if the filename of the ICL File matches that of a previously processed ICL File. In case of item duplication however, only the duplicate item/s detected during CICS processing will be rejected. The rest of the items in the ICL File will be accepted and processed. 4.3. Receiving Outward Presentment The PBM will receive the duly balanced Outward clearing files containing Check image and electronic data from the Front-end system of the bank and will perform the required validations of the files prior to transmission to the CICS. 4.4. Image Quality Assurance and Failure Handling All images of the items in the Outward ICL Files are subjected to Image Quality Assurance (IQA) by the Presenting Bank PBM. Any image failing validation will result in the rejection of the item with the reject details included in the acknowledgement file. The bank may rescan and resubmit as many times as necessary to meet the IQA requirements. 4.5. Item Processing The Outward Files presented by the capture system are validated by the PBM against the validations indicated in the PBM Specifications. After validation, the PBM generates acknowledgement files which contain information related to acceptance or rejection of each file and the items present in each file with appropriate reason codes. 4.6. Reconciliation of Outward presentation At the end of each Presentment Session (Regular and Return) at the PCHC, it shall be the responsibility of the Sending Bank to reconcile its total outward transactions vs. items processed by the CICS as listed in the web portal. 4.7. Dishonored Checks/Re-clearing The Presenting Bank safe-keeps all original paid Checks for 180 days from Payment Date. In case of return or dishonor, the Presenting Bank shall return the original unpaid Check to its client. The returned check shall be supported by a Return Check Advice (RCA) bearing images of the Check. (Suggested RCA form can be found in Annex B). 4.7.1. The Presenting Bank shall, as presently being practiced, affix a Return Stamp (format below) on the dishonored Check before it is released to the client. REASON FOR RETURN INITIAL DATE (1st return) 1. (2nd return) 2. Page 9 4.7.2. When the dishonored Check is re-deposited, a 2nd presentment stamp shall be affixed by the Presenting Bank at the dorsal side of the Check before it is captured and stored for safe-keeping. A second line UIC will either be printed on Check’s dorsal portion or electronically imposed by the Presenting Bank’s Front-end system on the dorsal image of the Check. SEC. 5 – PROCESSING AT PARTICIPATING BANK MODULE: INWARD 5.1. Receipt of Inward Data/Images The inward processing deals with accepting data and images of Incoming Items from the CICS for onward push to the Drawee Bank’s PBM. The process also includes providing data in the form of files for use within the Drawee Bank’s inclearing system. The Drawee Bank’s PBM will receive digitally signed inward electronic data and image exchange files from the CICS in the form of ICL. 5.2. Validation The Primary PBM of the Drawee Bank shall authenticate and load the exchange file data into the system. The PBM will send an acknowledgement exchange file to the CICS if the inward electronic data and image exchange files are accepted. 5.3. Balancing and Reconciliation The Drawee Bank should verify that all the items in the Inward ICL Files are received to ensure that there is no data loss in the transmission from the CICS to its PBM. The Drawee Bank will not be able to generate posting files unless all the inward items are actually received at the Primary PBM. If any file is lost in transmission, the Drawee Bank may request PCHC for retransmission of images/data of the lost/missing file. 5.4. Generation of Posting File (Magtape Transaction File) With the decommissioning of ECCS, banks may either use the inward ICL Files in uploading data into their CASA or make use of the Magtape Transaction File (MTF) generated at the PBM. MTF generated from CICS has the same file structure with the previously ECCS-generated file except that it is bank-level and unfiltered (regular and return transactions are merged). 5.5. Digital Certificate Validation PBM of the Drawee Bank shall verify the digital certificate of PCHC. 5.6. Payment Processing The Drawee Bank shall do the payment processing based on the image and electronic data information of the Checks following all the prudent practices including signature verification, imaged Check security features, account balance verification, verification of endorsements etc. 5.7. Dishonored Checks Items that are not honored must be returned to the CICS in electronic format within the prescribed period as set by PCHC and announced to the banks (Prescribed Page 10 Period). For return items, the images are also included in the return ICL File (front and rear CCITT, front JPEG, and for high-value items, the UV image). Return items are to be marked with the appropriate return reason (code) as mentioned in the CICS Rules and Regulations Section 18. Return Image Cash Letters (ICLs) are to be transmitted to the CICS via the Drawee Bank’s PBM where the files will be validated, encrypted and digitally signed and sent to the CICS provided they meet the necessary validation criteria. Invalid items will be rejected by the Drawee Bank’s PBM for its correction. Return ICLs received by the CICS will be validated and an acknowledgment shall be issued to the generating Drawee Bank indicating their acceptance or rejection. Return items accepted by the CICS will be passed to the Presenting Bank‘s Primary PBM in an Inward Return ICL and an appropriate posting made to the settlement system. Any return item not received by the CICS within the Prescribed Period will be treated as an honored item and accordingly the settlement files will be prepared and posted. SEC. 6 – SPECIFICATIONS FOR ELECTRONIC EXCHANGE OF CHEQUES The following section describes the types of Image Cash Letter (ICL) Files. All items in an ICL File must be of the same type: outward items; return items; or archive-only items. Items in an ICL File must not be co-mingled. ICL File must contain items of the same currency: Philippine Pesos or U.S. Dollars (when local US Dollar Clearing becomes available). In addition, the items within the ICL File must have valid work types for the type of ICL. The valid items within an ICL File are: ICL Type Currency Item Work Types Allowed Regular or Philippine Peso CICS (normal, BIR or BOC) Return non-CICS (normal, BIR or BOC) IQA Fail Items ________________________________________________________ Archive-Only Philippine Peso CICS (normal) non-CICS (normal) IQA Fail Items Note 1: Normal indicates Checks that are not BIR or BOC. Note 2: Archive-Only batches are batches containing On-us items sent in an ICL File for archive only; they are not distributed to other banks, so are not returned, and are not included in settlement totals. 6.1. Regular ICLs Each Outward ICL File that is accepted by the CICS is assigned a settlement session, date and window by the CICS. The settlement window is always set to ‘Forward’. The settlement session is set to 1 and the settlement date is set as follows: 6.1.1. ICL Files received before the cut-off time of the Regular Presentment Session (4:30 PM of Day 1) will be processed for settlement within Day 1 (i.e., included in the 4:30 PM Netting Summary to be sent to BSP for Settlement on Day 1). Page 11 6.1.2. ICL Files received after the cut-off time of the Regular Presentment Session (4:30 PM of Day 1) will be processed for settlement on the Next Clearing Day (These Inward ICLs, which shall be pushed to the Drawee Bank PBM on Day 1, shall bear the Regular Presentment Session date of the Next Clearing Day and they shall not be included in the 4:30 PM Netting Summary of Day 1 to be sent to BSP). Each item in an Outward ICL File is assigned a Return Presentment Cut-off. This is used by the CICS to validate and accept returns only if they are received prior to the cut-off time for the corresponding settlement date. 6.2. Return ICLs Each Outward Return ICL File that is accepted by the CICS is processed for settlement as follows: 6.2.1. ICL Files received before the cut-off time of the Regular Presentment Session (4:30 PM of Day 1) will be processed for settlement within Day 1. They shall have zero effect and thus have no impact on the 4:30 PM Netting Summary of Day 1 to be sent to BSP for Settlement; 6.2.2. ICL Files received after the cut-off time of the Regular Presentment Session (4:30 PM of Day 1) but before the Returns Presentment Cut-off on the Next Clearing Day will be processed with settlement back valued Day 1. Each item in a Return ICL File is validated by the CICS to ensure that it is received prior to the cut-off time pertaining to the presented Regular Item. 6.3. Archive Only ICLs Member/Participant Banks may submit to PCHC On-us checks/ICLs for Archive-Only. PCHC will issue separate operating memo for this service. 6.4. Additional Work Type for all ICL Types The additional Work Type 7 provides means for exception items failing the IQA test for all ICL types like foreign drafts and rejected BIR payments to be processed and pass through the workflow of CICS thus giving the paying bank an opportunity to exercise Pay or No Pay decision. Sec. 7 – Return Reason Codes A Return Item may be re-cleared if the Re-presentable column = ‘R’; an item may not be represented if the Re-Presentable column of the table below = ‘N’. Return Reason Description Tran Code Re-Presentable Code 1 Drawn against insufficient funds 14 R 2 Drawn against uncollected deposit 14 R 3 Drawn against a closed account 24 N 4 Account is non-existent 24 N 5 Payment thereof has been stopped -Funded 14 N 6 Payment thereof has been stopped-Unfunded 14 N 7 Invalid Image Hash Value 24 R 8 Post-dated check 24 R 9 Stale-dated check 24 N A Out-of-date 24 N B Counterfeit check 24 N C 3rd presentment and subsequent dishonor 24 N D Amount in words and in figures differs 24 N E Documentary Stamp Missing (for foreign checks converted to Peso) 24 R F Account under garnishment or covered by Hold/Freeze Order 24 R G Validity Restricted 24 N H Deceased Depositor 24 N I Previously Negotiated Check/Cancelled Check 24 N J Bank has declared a self-imposed holiday 24 R K Fortuitous Event/Civil Disturbance/Bank Strike 24 R L Refer to Drawer/Issuer: Merged bank/Conduit Agreement Terminated 24 N M Untagged BIR/BOC Check 24 R N Miscleared 24 R O No Advice on File 24 R P Differs from Advice (Payee, Date, Serial Number or Amount) 24 R Q Mismatched Image and Data 24 R R Refer to Issuer: Old Format Check 24 N S Duplicate Check Detected by PBM 24 N T Image Usability Failure 24 R U Piggy Back Image 24 R V With Alteration-date 24 N W With Alteration-payee 24 N X With Alteration-amount in figures 24 N Y With Alteration-amount in words 24 N Z With Alteration-signature 24 N a With Alteration-account name 24 N b With Alteration-account number 24 N c With Alteration-check number 24 N d With Alteration-pre-qualified MICR characters 24 N e Missing Date 24 R f Missing Payee 24 R g No Amount in Figures 24 R h No Amount in Words 24 R i Missing Signature of Drawer 24 R j Lack of Signature (Number of signatures required) 24 R k Bears forged signature of the drawer (s) 24 N l Unauthorized drawer’s signature 24 N Page 12 m Signature differs 24 N n Exceeds authority limit 14 N o DAIF/DAUD-1 Thousand Pesos and below 24 R p Payment Stopped-funded-1 Thousand Pesos and below 24 N q Payment Stopped-unfunded-1 Thousand Pesos and below 24 N r Amount in Words and Figures differ-1 Thousand Pesos and below 24 N s Other Technicalities-1 Thousand Pesos and below 24 N t Per Instruction of BSP 24 R u Indicated Payee Company or Person includes a combined ‘Pay To Cash’ option, i.e. Payee Name/Cash, Payee Name or Cash 24 N v Over-encoding of Amount w Under-encoding of Amount x Re-clearing of a Check by a bank other than the original presenting bank 24 N y Penalty Charges Cancelled 24 R z Others 24 R Revisions in Section 7 (Return Reason Code) of this Operating Memo shall require corresponding updates to the PBM Specs to be deployed to servers. 2. Should you need further clarification, feel free to call our Service Help Desk at 523-0315 (look for Erick Garcia or Hector Lasaleta) or 886-1344 to 47 (look for Anthony Manongas). 3. This memo supersedes CICS OM No. 17-001 dated 16 January 2017.

01 August 2017 T O : All Clearing Banks/Institutions R E : NON-ACCEPTANCE OF CHECKS WITH TECHNICAL DEFECTS 1. As approved by the PCHC Board in its meeting of 27 July 2017, please be informed that effective 01 September 2017, any Presenting Bank transmitting any Regular Clearing Item (RCI) that bears the following exceptions/technical defects shall be subject to a penalty of Php1,000.00 per item/day or amount of the item multiplied by the average IBCL rate for the day whichever is higher, viz: 1.1 No date, out of date/invalid date (i.e. Feb. 30, 2017) 1.2 Post-dated or Stale dated 1.3 No payee specified 1.4 Payee’s line indicated: 1.4.1 Customer Name and Cash* 1.4.2 Customer Name and/or Cash* 1.4.3 Business Name or Cash* 1.4.4 Business Name and/or Cash* 1.5 No amount in figures 1.6 No amount in words 1.7 Over or under encoding 1.8 No signature or missing signature of the Drawer 1.9 Old format Checks (except those stamped warehoused PDCs accepted prior to 01 Jan 2017) * Additional return reason code/s will be published in a separate Operating Memo 2. It shall be the responsibility of the Drawee Bank to automatically dishonor/return any inward RCI that shows any of the above exception/technicalities; otherwise, it shall lose its right to collect from the Presenting Bank the corresponding penalty charge. 3. The penalty shall be collected by the Drawee Bank from the Presenting Bank via the usual Clearing Receipt/Charge Slip within 5 banking days from date of the RCI transmission to the Drawee Bank. 4. It should be noted that under BSP Circular 924, Clearing Items covering Checks with technical defects/reasons must be returned not later than 7:30 AM. 5. In order to avoid being penalized, Clearing Banks must observe due diligence when accepting Checks for deposit. As a general rule, Presenting Banks should not transmit RCIs covering Checks bearing the above exceptions. 6. This issuance supersedes certain penalty provisions under CICS OM No. 17-011. 7. For proper guidance and strict compliance.

Memo Circular No. 3517 March 13 2019 TO : ALL PESONET PARTICIPATING BANKS/INSTITUTIONS RE : PESONET AUTO RETURNS PROCESS IMPLEMENTATION 1 . Upon recommendation of its Operations Committee, the PESONet ACH Steering Committee (Steerco) in its meeting today, approved the implementation of PESONET AUTOMATED (AUTO) RETURNS PROCESS on 01 April 2019 instead of the earlier announced roll-out date of March 15, 2019. 2. The deferment is to provide additional time to internalize new reports that is to be generated by the auto returns process and at the same time allow more time for other participant banks/financial institutions to complete their respective testing. 3. Also approved during the Steerco meeting was the exclusion of AM21 (Limit exceeded) status code from the chargeable returns leaving only the following as chargeable returns effective May 2, 2019, to wit: 4. Notwithstanding the exclusion of AM21 status code, we wish it noted that the business rules defined in Memo Circular 3497 dated 1 7 December 2018 shall continue to be observed. 5. The existing environment for UAT (https://pesonetuat.pchc.com.ph) will be available for banks/Fls needing to perform testing/enhancement in accordance with established conventions. 6. The Parallel Run environment (https://pesonet.pchc.com.ph) on the other hand will be available for testing until 27 March 2019. This environment shall become the Production environment for PESONet starting 01 April 2019. 7. We count on your full cooperation to meet the stated final timeline.

Memo Circular No. 3517 March 13 2019 TO : ALL PESONET PARTICIPATING BANKS/INSTITUTIONS RE : PESONET AUTO RETURNS PROCESS IMPLEMENTATION 1 . Upon recommendation of its Operations Committee, the PESONet ACH Steering Committee (Steerco) in its meeting today, approved the implementation of PESONET AUTOMATED (AUTO) RETURNS PROCESS on 01 April 2019 instead of the earlier announced roll-out date of March 15, 2019. 2. The deferment is to provide additional time to internalize new reports that is to be generated by the auto returns process and at the same time allow more time for other participant banks/financial institutions to complete their respective testing. 3. Also approved during the Steerco meeting was the exclusion of AM21 (Limit exceeded) status code from the chargeable returns leaving only the following as chargeable returns effective May 2, 2019, to wit: 4. Notwithstanding the exclusion of AM21 status code, we wish it noted that the business rules defined in Memo Circular 3497 dated 1 7 December 2018 shall continue to be observed. 5. The existing environment for UAT (https://pesonetuat.pchc.com.ph) will be available for banks/Fls needing to perform testing/enhancement in accordance with established conventions. 6. The Parallel Run environment (https://pesonet.pchc.com.ph) on the other hand will be available for testing until 27 March 2019. This environment shall become the Production environment for PESONet starting 01 April 2019. 7. We count on your full cooperation to meet the stated final timeline.