May 23, 2000

AN ACT PROVIDING FOR THE REGULATION OF THE ORGANIZATION AND OPERATIONS OF BANKS, QUASI-BANKS, TRUST ENTITIES AND FOR OTHER PURPOSES

CHAPTER I Title and Classification of Banks

SECTION 1. Title. — The short title of this Act shall be "The General Banking Law of 2000." (1a)

SECTION 2. Declaration of Policy. — The State recognizes the vital role of banks in providing an environment conducive to the sustained development of the national economy and the fiduciary nature of banking that requires high standards of integrity and performance. In furtherance thereof, the State shall promote and maintain a stable and efficient banking and financial system that is globally competitive, dynamic and responsive to the demands of a developing economy. (n)

SECTION 3. Definition and Classification of Banks. —

3.1. "Banks" shall refer to entities engaged in the lending of funds obtained in the form of deposits. (2a)

3.2. Banks shall be classified into:

(a) Universal banks;

(b) Commercial banks;

(c) Thrift banks, composed of: (i) Savings and mortgage banks, (ii) Stock savings and loan associations, and (iii) Private development banks, as defined in Republic Act No. 7906 (hereafter the "Thrift Banks Act");

(d) Rural banks, as defined in Republic Act No. 7353 (hereafter the "Rural Banks Act");

(e) Cooperative banks, as defined in Republic Act No. 6938 (hereafter the "Cooperative Code");

(f) Islamic banks as defined in Republic Act No. 6848, otherwise known as the "Charter of Al Amanah Islamic Investment Bank of the Philippines"; and

(g) Other classifications of banks as determined by the Monetary Board of the Bangko Sentral ng Pilipinas. (6-Aa)

CHAPTER II Authority of the Bangko Sentral

SECTION 4. Supervisory Powers. — The operations and activities of banks shall be subject to supervision of the Bangko Sentral. "Supervision" shall include the following:

4.1. The issuance of rules of conduct or the establishment of standards of operation for uniform application to all institutions or functions covered, taking into consideration the distinctive character of the operations of institutions and the substantive similarities of specific functions to which such rules, modes or standards are to be applied;

4.2. The conduct of examination to determine compliance with laws and regulations if the circumstances so warrant as determined by the Monetary Board;

4.3. Overseeing to ascertain that laws and regulations are complied with;

4.4. Regular investigation which shall not be oftener than once a year from the last date of examination to determine whether an institution is conducting its business on a safe or sound basis: Provided, That the deficiencies/ irregularities found by or discovered by an audit shall be immediately addressed;

4.5. Inquiring into the solvency and liquidity of the institution (2-D); or

4.6. Enforcing prompt corrective action. (n)

The Bangko Sentral shall also have supervision over the operations of and exercise regulatory powers over quasi-banks, trust entities and other financial institutions which under special laws are subject to Bangko Sentral supervision. (2-Ca)

For the purposes of this Act, "quasi-banks" shall refer to entities engaged in the borrowing of funds through the issuance, endorsement or assignment with recourse or acceptance of deposit substitutes as defined in Section 95 of Republic Act No. 7653 (hereafter the "New Central Bank Act") for purposes of relending or purchasing of receivables and other obligations. (2-Da)

SECTION 5. Policy Direction; Ratios, Ceilings and Limitations. — The Bangko Sentral shall provide policy direction in the areas of money, banking and credit. (n)

For this purpose, the Monetary Board may prescribe ratios, ceilings, limitations, or other forms of regulation on the different types of accounts and practices of banks and quasi-banks which shall, to the extent feasible, conform to internationally accepted standards, including those of the Bank for International Settlements (BIS). The Monetary Board may exempt particular categories of transactions from such ratios, ceilings and limitations, but not limited to exceptional cases or to enable a bank or quasi-bank under rehabilitation or during a merger or consolidation to continue in business with safety to its creditors, depositors and the general public. (2-Ca)

SECTION 6. Authority to Engage in Banking and Quasi-Banking Functions. — No person or entity shall engage in banking operations or quasi-banking functions without authority from the Bangko Sentral: Provided, however, That an entity authorized by the Bangko Sentral to perform universal or commercial banking functions shall likewise have the authority to engage in quasi-banking functions.

The determination of whether a person or entity is performing banking or quasi-banking functions without Bangko Sentral authority shall be decided by the Monetary Board. To resolve such issue, the Monetary Board may, through the appropriate supervising and examining department of the Bangko Sentral, examine, inspect or investigate the books and records of such person or entity. Upon issuance of this authority, such person or entity may commence to engage in banking operations or quasi-banking functions and shall continue to do so unless such authority is sooner surrendered, revoked, suspended or annulled by the Bangko Sentral in accordance with this Act or other special laws.

The department head and the examiners of the appropriate supervising and examining department are hereby authorized to administer oaths to any such person, employee, officer, or director of any such entity and to compel the presentation or production of such books, documents, papers or records that are reasonably necessary to ascertain the facts relative to the true functions and operations of such person or entity. Failure or refusal to comply with the required presentation or production of such books, documents, papers or records within a reasonable time shall subject the persons responsible therefor to the penal sanctions provided under the New Central Bank Act.

Persons or entities found to be performing banking or quasi-banking functions without authority from the Bangko Sentral shall be subject to appropriate sanctions under the New Central Bank Act and other applicable laws. (4a)

SECTION 7. Examination by the Bangko Sentral. — The Bangko Sentral shall, when examining a bank, have the authority to examine an enterprise which is wholly or majority-owned or controlled by the bank. (21-Ba)

CHAPTER III Organization, Management and Administration of Banks, Quasi-Banks and Trust Entities

SECTION 8. Organization. — The Monetary Board may authorize the organization of a bank or quasi-bank subject to the following conditions:

8.1. That the entity is a stock corporation (7);

8.2. That its funds are obtained from the public, which shall mean twenty (20) or more persons (2-Da); and

8.3. That the minimum capital requirements prescribed by the Monetary Board for each category of banks are satisfied. (n)

No new commercial bank shall be established within three (3) years from the effectivity of this Act. In the exercise of the authority granted herein, the Monetary Board shall take into consideration their capability in terms of their financial resources and technical expertise and integrity. The bank licensing process shall incorporate an assessment of the bank's ownership structure, directors and senior management, its operating plan and internal controls as well as its projected financial condition and capital base.

SECTION 9. Issuance of Stocks. — The Monetary Board may prescribe rules and regulations on the types of stock a bank may issue, including the terms thereof and rights appurtenant thereto to determine compliance with laws and regulations governing capital and equity structure of banks: Provided, That banks shall issue par value stocks only.

SECTION 10. Treasury Stocks. — No bank shall purchase or acquire shares of its own capital stock or accept its own shares as a security for a loan, except when authorized by the Monetary Board: Provided, That in every case the stock so purchased or acquired shall, within six (6) months from the time of its purchase or acquisition, be sold or disposed of at a public or private sale. (24a)

SECTION 11. Foreign Stockholdings. — Foreign individuals and non-bank corporations may own or control up to forty percent (40%) of the voting stock of a domestic bank. This rule shall apply to Filipinos and domestic non-bank corporations. (12a; 12-Aa)

The percentage of foreign-owned voting stocks in a bank shall be determined by the citizenship of the individual stockholders in that bank. The citizenship of the corporation which is a stockholder in a bank shall follow the citizenship of the controlling stockholders of the corporation, irrespective of the place of incorporation. (n)

SECTION 12. Stockholdings of Family Groups or Related Interests. — Stockholdings of individuals related to each other within the fourth degree of consanguinity or affinity, legitimate or common-law, shall be considered family groups or related interests and must be fully disclosed in all transactions by such an individual with the bank. (12-Da)

SECTION 13. Corporate Stockholdings. — Two or more corporations owned or controlled by the same family group or same group of persons shall be considered related interests and must be fully disclosed in all transactions by such corporations or related groups of persons with the bank. (12-Ba)

SECTION 14. Certificate of Authority to Register. — The Securities and Exchange Commission shall not register the articles of incorporation of any bank, or any amendment thereto, unless accompanied by a certificate of authority issued by the Monetary Board, under its seal. Such certificate shall not be issued unless the Monetary Board is satisfied from the evidence submitted to it:

14.1. That all requirements of existing laws and regulations to engage in the business for which the applicant is proposed to be incorporated have been complied with;

14.2. That the public interest and economic conditions, both general and local, justify the authorization; and

14.3. That the amount of capital, the financing, organization, direction and administration, as well as the integrity and responsibility of the organizers and administrators reasonably assure the safety of deposits and the public interest. (9)

The Securities and Exchange Commission shall not register the by-laws of any bank, or any amendment thereto, unless accompanied by a certificate of authority from the Bangko Sentral. (10)

SECTION 15. Board of Directors. — The provisions of the Corporation Code to the contrary notwithstanding, there shall be at least five (5), and a maximum of fifteen (15) members of the board of directors of a bank, two (2) of whom shall be independent directors. An "independent director" shall mean a person other than an officer or employee of the bank, its subsidiaries or affiliates or related interests. (n)

Non-Filipino citizens may become members of the board of directors of a bank to the extent of the foreign participation in the equity of said bank. (Sec. 7, RA 7721)

The meetings of the board of directors may be conducted through modern technologies such as, but not limited to, teleconferencing and video-conferencing. (n)

SECTION 16. Fit and Proper Rule. — To maintain the quality of bank management and afford better protection to depositors and the public in general, the Monetary Board shall prescribe, pass upon and review the qualifications and disqualifications of individuals elected or appointed bank directors or officers and disqualify those found unfit.

After due notice to the board of directors of the bank, the Monetary Board may disqualify, suspend or remove any bank director or officer who commits or omits an act which render him unfit for the position.

In determining whether an individual is fit and proper to hold the position of a director or officer of a bank, regard shall be given to his integrity, experience, education, training, and competence. (9-Aa)

SECTION 17. Directors of Merged or Consolidated Banks. — In the case of a bank merger or consolidation, the number of directors shall not exceed twenty-one (21). (13a)

SECTION 18. Compensation and Other Benefits of Directors and Officers. — To protect the funds of depositors and creditors, the Monetary Board may regulate the payment by the bank to its directors and officers of compensation, allowance, fees, bonuses, stock options, profit sharing and fringe benefits only in exceptional cases and when the circumstances warrant, such as but not limited to the following:

18.1. When a bank is under comptrollership or conservatorship; or

18.2. When a bank is found by the Monetary Board to be conducting business in an unsafe or unsound manner; or

18.3. When a bank is found by the Monetary Board to be in an unsatisfactory financial condition. (n)

SECTION 19. Prohibition on Public Officials. — Except as otherwise provided in the Rural Banks Act, no appointive or elective public official, whether full-time or part-time shall at the same time serve as officer of any private bank, save in cases where such service is incident to financial assistance provided by the government or a government-owned or controlled corporation to the bank or unless otherwise provided under existing laws. (13)

SECTION 20. Bank Branches. — Universal or commercial banks may open branches or other offices within or outside the Philippines upon prior approval of the Bangko Sentral.

Branching by all other banks shall be governed by pertinent laws.

A bank may, subject to prior approval of the Monetary Board, use any or all of its branches as outlets for the presentation and/or sale of the financial products of its allied undertaking or of its investment house units.

A bank authorized to establish branches or other offices shall be responsible for all business conducted in such branches and offices to the same extent and in the same manner as though such business had all been conducted in the head office. A bank and its branches and offices shall be treated as one unit. (6-B; 27)

SECTION 21. Banking Days and Hours. — Unless otherwise authorized by the Bangko Sentral in the interest of the banking public, all banks including their branches and offices shall transact business on all working days for at least six (6) hours a day. In addition, banks or any of their branches or offices may open for business on Saturdays, Sundays or holidays for at least three (3) hours a day: Provided, That banks which opt to open on days other than working days shall report to the Bangko Sentral the additional days during which they or their branches or offices shall transact business.

For purposes of this Section, working days shall mean Mondays to Fridays, except if such days are holidays. (6-Ca)

SECTION 22. Strikes and Lockouts. — The banking industry is hereby declared as indispensable to the national interest and, notwithstanding the provisions of any law to the contrary, any strike or lockout involving banks, if unsettled after seven (7) calendar days shall be reported by the Bangko Sentral to the Secretary of Labor who may assume jurisdiction over the dispute or decide it or certify the same to the National Labor Relations Commission for compulsory arbitration. However, the President of the Philippines may at any time intervene and assume jurisdiction over such labor dispute in order to settle or terminate the same. (6-E)

CHAPTER IV Deposits, Loans and Other Operations

ARTICLE I Operations of Universal Banks

SECTION 23. Powers of a Universal Bank. — A universal bank shall have the authority to exercise, in addition to the powers authorized for a commercial bank in Section 29, the powers of an investment house as provided in existing laws and the power to invest in non-allied enterprises as provided in this Act. (21-B)

SECTION 24. Equity Investments of a Universal Bank. — A universal bank may, subject to the conditions stated in the succeeding paragraph, invest in the equities of allied and non-allied enterprises as may be determined by the Monetary Board. Allied enterprises may either be financial or non-financial.

Except as the Monetary Board may otherwise prescribe:

24.1. The total investment in equities of allied and non-allied enterprises shall not exceed fifty percent (50%) of the net worth of the bank; and

24.2. The equity investment in any one enterprise, whether allied or non-allied, shall not exceed twenty-five percent (25%) of the net worth of the bank.

As used in this Act, "net worth" shall mean the total of the unimpaired paid-in capital including paid-in surplus, retained earnings and undivided profit, net of valuation reserves and other adjustments as may be required by the Bangko Sentral.

The acquisition of such equity or equities is subject to the prior approval of the Monetary Board which shall promulgate appropriate guidelines to govern such investments. (21-Ba)

SECTION 25. Equity Investments of a Universal Bank in Financial Allied Enterprises. — A universal bank can own up to one hundred percent (100%) of the equity in a thrift bank, a rural bank or a financial allied enterprise.

A publicly-listed universal or commercial bank may own up to one hundred percent (100%) of the voting stock of only one other universal or commercial bank. (21-B; 21-Ca)

SECTION 26. Equity Investments of a Universal Bank in Non-Financial Allied Enterprises. — A universal bank may own up to one hundred percent (100%) of the equity in a non-financial allied enterprise. (21-Ba)

SECTION 27. Equity Investments of a Universal Bank in Non-Allied Enterprises. — The equity investment of a universal bank, or of its wholly or majority-owned subsidiaries, in a single non-allied enterprise shall not exceed thirty-five percent (35%) of the total equity in that enterprise nor shall it exceed thirty-five percent (35%) of the voting stock in that enterprise. (21-B)

SECTION 28. Equity Investments in Quasi-Banks. — To promote competitive conditions in financial markets, the Monetary Board may further limit to forty percent (40%) equity investments of universal banks in quasi-banks. This rule shall also apply in the case of commercial banks. (12-E)

ARTICLE II Operations of Commercial Banks

SECTION 29. Powers of a Commercial Bank. — A commercial bank shall have, in addition to the general powers incident to corporations, all such powers as may be necessary to carry on the business of commercial banking, such as accepting drafts and issuing letters of credit; discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; accepting or creating demand deposits; receiving other types of deposits and deposit substitutes; buying and selling foreign exchange and gold or silver bullion; acquiring marketable bonds and other debt securities; and extending credit, subject to such rules as the Monetary Board may promulgate. These rules may include the determination of bonds and other debt securities eligible for investment, the maturities and aggregate amount of such investment. (21a)

SECTION 30. Equity Investments of a Commercial Bank. — A commercial bank may, subject to the conditions stated in the succeeding paragraphs, invest only in the equities of allied enterprises as may be determined by the Monetary Board. Allied enterprises may either be financial or non-financial.

Except as the Monetary Board may otherwise prescribe:

30.1. The total investment in equities of allied enterprises shall not exceed thirty-five percent (35%) of the net worth of the bank; and

30.2. The equity investment in any one enterprise shall not exceed twenty-five percent (25%) of the net worth of the bank.

The acquisition of such equity or equities is subject to the prior approval of the Monetary Board which shall promulgate appropriate guidelines to govern such investments. (21A-a; 21-Ca)

SECTION 31. Equity Investments of a Commercial Bank in Financial Allied Enterprises. — A commercial bank may own up to one hundred percent (100%) of the equity of a thrift bank or a rural bank.

Where the equity investment of a commercial bank is in other financial allied enterprises, including another commercial bank, such investment shall remain a minority holding in that enterprise. (21-Aa; 21-Ca)

SECTION 32. Equity Investments of a Commercial Bank in Non-Financial Allied Enterprises. — A commercial bank may own up to one hundred percent (100%) of the equity in a non-financial allied enterprise. (21-Aa)

ARTICLE III Provisions Applicable to All Banks, Quasi-Banks, and Trust Entities

SECTION 33. Acceptance of Demand Deposits. — A bank other than a universal or commercial bank cannot accept or create demand deposits except upon prior approval of, and subject to such conditions and rules as may be prescribed by the Monetary Board. (72-Aa)

SECTION 34. Risk-Based Capital. — The Monetary Board shall prescribe the minimum ratio which the net worth of a bank must bear to its total risk assets which may include contingent accounts.

For purposes of this Section, the Monetary Board may require that such ratio be determined on the basis of the net worth and risk assets of a bank and its subsidiaries, financial or otherwise, as well as prescribe the composition and the manner of determining the net worth and total risk assets of banks and their subsidiaries: Provided, That in the exercise of this authority, the Monetary Board shall, to the extent feasible, conform to internationally accepted standards, including those of the Bank for International Settlements (BIS), relating to risk-based capital requirements: Provided, further, That it may alter or suspend compliance with such ratio whenever necessary for a maximum period of one (1) year: Provided, finally, That such ratio shall be applied uniformly to banks of the same category.

In case a bank does not comply with the prescribed minimum ratio, the Monetary Board may limit or prohibit the distribution of net profits by such bank and may require that part or all of the net profits be used to increase the capital accounts of the bank until the minimum requirement has been met. The Monetary Board may, furthermore, restrict or prohibit the acquisition of major assets and the making of new investments by the bank, with the exception of purchases of readily marketable evidences of indebtedness of the Republic of the Philippines and of the Bangko Sentral and any other evidences of indebtedness or obligations the servicing and repayment of which are fully guaranteed by the Republic of the Philippines, until the minimum required capital ratio has been restored.

In case of a bank merger or consolidation, or when a bank is under rehabilitation under a program approved by the Bangko Sentral, the Monetary Board may temporarily relieve the surviving bank, consolidated bank, or constituent bank or corporations under rehabilitation from full compliance with the required capital ratio under such conditions as it may prescribe.

Before the effectivity of the rules which the Monetary Board is authorized to prescribe under this provision, Section 22 of the General Banking Act, as amended, Section 9 of the Thrift Banks Act, and all pertinent rules issued pursuant thereto, shall continue to be in force. (22a)

SECTION 35. Limit on Loans, Credit Accommodations and Guarantees. —

35.1. Except as the Monetary Board may otherwise prescribe for reasons of national interest, the total amount of loans, credit accommodations and guarantees as may be defined by the Monetary Board that may be extended by a bank to any person, partnership, association, corporation or other entity shall at no time exceed twenty percent (20%) of the net worth of such bank. The basis for determining compliance with single-borrower limit is the total credit commitment of the bank to the borrower.

35.2. Unless the Monetary Board prescribes otherwise, the total amount of loans, credit accommodations and guarantees prescribed in the preceding paragraph may be increased by an additional ten percent (10%) of the net worth of such bank provided the additional liabilities of any borrower are adequately secured by trust receipts, shipping documents, warehouse receipts or other similar documents transferring or securing title covering readily marketable, non-perishable goods which must be fully covered by insurance.

35.3. The above prescribed ceilings shall include: (a) the direct liability of the maker or acceptor of paper discounted with or sold to such bank and the liability of a general indorser, drawer or guarantor who obtains a loan or other credit accommodation from or discounts paper with or sells papers to such bank; (b) in the case of an individual who owns or controls a majority interest in a corporation, partnership, association or any other entity, the liabilities of said entities to such bank; (c) in the case of a corporation, all liabilities to such bank of all subsidiaries in which such corporation owns or controls a majority interest; and (d) in the case of a partnership, association or other entity, the liabilities of the members thereof to such bank.

35.4. Even if a parent corporation, partnership, association, entity or an individual who owns or controls a majority interest in such entities has no liability to the bank, the Monetary Board may prescribe the combination of the liabilities of subsidiary corporations or members of the partnership, association, entity or such individual under certain circumstances, including but not limited to any of the following situations: (a) the parent corporation, partnership, association, entity or individual guarantees the repayment of the liabilities; (b) the liabilities were incurred for the accommodation of the parent corporation or another subsidiary or of the partnership or association or entity or such individual; or (c) the subsidiaries though separate entities operate merely as departments or divisions of a single entity.

35.5. For purposes of this Section, loans, other credit accommodations and guarantees shall exclude: (a) loans and other credit accommodations secured by obligations of the Bangko Sentral or of the Philippine Government; (b) loans and other credit accommodations fully guaranteed by the government as to the payment of principal and interest; (c) loans and other credit accommodations covered by assignment of deposits maintained in the lending bank and held in the Philippines; (d) loans, credit accommodations and acceptances under letters of credit to the extent covered by margin deposits; and (e) other loans or credit accommodations which the Monetary Board may from time to time, specify as non-risk items.

35.6. Loans and other credit accommodations, deposits maintained with, and usual guarantees by a bank to any other bank or non-bank entity, whether locally or abroad, shall be subject to the limits as herein prescribed.

35.7. Certain types of contingent accounts of borrowers may be included among those subject to these prescribed limits as may be determined by the Monetary Board. (23a)

SECTION 36. Restriction on Bank Exposure to Directors, Officers, Stockholders and Their Related Interests. — No director or officer of any bank shall, directly or indirectly, for himself or as the representative or agent of others, borrow from such bank nor shall he become a guarantor, indorser or surety for loans from such bank to others, or in any manner be an obligor or incur any contractual liability to the bank except with the written approval of the majority of all the directors of the bank, excluding the director concerned: Provided, That such written approval shall not be required for loans, other credit accommodations and advances granted to officers under a fringe benefit plan approved by the Bangko Sentral. The required approval shall be entered upon the records of the bank and a copy of such entry shall be transmitted forthwith to the appropriate supervising and examining department of the Bangko Sentral.

Dealings of a bank with any of its directors, officers or stockholders and their related interests shall be upon terms not less favorable to the bank than those offered to others.

After due notice to the board of directors of the bank, the office of any bank director or officer who violates the provisions of this Section may be declared vacant and the director or officer shall be subject to the penal provisions of the New Central Bank Act.

The Monetary Board may regulate the amount of loans, credit accommodations and guarantees that may be extended, directly or indirectly, by a bank to its directors, officers, stockholders and their related interests, as well as investments of such bank in enterprises owned or controlled by said directors, officers, stockholders and their related interests. However, the outstanding loans, credit accommodations and guarantees which a bank may extend to each of its stockholders, directors, or officers and their related interests, shall be limited to an amount equivalent to their respective unencumbered deposits and book value of their paid-in capital contribution in the bank: Provided, however, That loans, credit accommodations and guarantees secured by assets considered as non-risk by the Monetary Board shall be excluded from such limit: Provided, further, That loans, credit accommodations and advances to officers in the form of fringe benefits granted in accordance with rules as may be prescribed by the Monetary Board shall not be subject to the individual limit.

The Monetary Board shall define the term "related interests."

The limit on loans, credit accommodations and guarantees prescribed herein shall not apply to loans, credit accommodations and guarantees extended by a cooperative bank to its cooperative shareholders. (83a)

SECTION 37. Loans and Other Credit Accommodations Against Real Estate. — Except as the Monetary Board may otherwise prescribe, loans and other credit accommodations against real estate shall not exceed seventy-five percent (75%) of the appraised value of the respective real estate security, plus sixty percent (60%) of the appraised value of the insured improvements, and such loans may be made to the owner of the real estate or to his assignees. (78a)

SECTION 38. Loans and Other Credit Accommodations on Security of Chattels and Intangible Properties. — Except as the Monetary Board may otherwise prescribe, loans and other credit accommodations on security of chattels and intangible properties, such as, but not limited to, patents, trademarks, trade names, and copyrights shall not exceed seventy-five percent (75%) of the appraised value of the security, and such loans and other credit accommodations may be made to the title-holder of the chattels and intangible properties or his assignees. (78a)

SECTION 39. Grant and Purpose of Loans and Other Credit Accommodations. — A bank shall grant loans and other credit accommodations only in amounts and for the periods of time essential for the effective completion of the operations to be financed. Such grant of loans and other credit accommodations shall be consistent with safe and sound banking practices. (75a)

The purpose of all loans and other credit accommodations shall be stated in the application and in the contract between the bank and the borrower. If the bank finds that the proceeds of the loan or other credit accommodation have been employed, without its approval, for purposes other than those agreed upon with the bank, it shall have the right to terminate the loan or other credit accommodation and demand immediate repayment of the obligation. (77)

SECTION 40. Requirement for Grant of Loans or Other Credit Accommodations. — Before granting a loan or other credit accommodation, a bank must ascertain that the debtor is capable of fulfilling his commitments to the bank.

Toward this end, a bank may demand from its credit applicants a statement of their assets and liabilities and of their income and expenditures and such information as may be prescribed by law or by rules and regulations of Monetary Board to enable the bank to properly evaluate the credit application which includes the corresponding financial statements submitted for taxation purposes to the Bureau of Internal Revenue. Should such statements prove to be false or incorrect in any material detail, the bank may terminate any loan or other credit accommodation granted on the basis of said statements and shall have the right to demand immediate repayment or liquidation of the obligation.

In formulating rules and regulations under this Section, the Monetary Board shall recognize the peculiar characteristics of microfinancing, such as cash flow-based lending to the basic sectors that are not covered by traditional collateral. (76a)

SECTION 41. Unsecured Loans or Other Credit Accommodations. — The Monetary Board is hereby authorized to issue such regulations as it may deem necessary with respect to unsecured loans or other credit accommodations that may be granted by banks. (n)

SECTION 42. Other Security Requirements for Bank Credits. — The Monetary Board may, by regulation, prescribe further security requirements to which the various types of bank credits shall be subject, and, in accordance with the authority granted to it in Section 106 of the New Central Bank Act, the Board may by regulation, reduce the maximum ratios established in Sections 36 and 37 of this Act, or, in special cases, increase the maximum ratios established therein. (78)

SECTION 43. Authority to Prescribe Terms and Conditions of Loans and Other Credit Accommodations. — The Monetary Board may, similarly, in accordance with the authority granted to it in Section 106 of the New Central Bank Act, and taking into account the requirements of the economy for the effective utilization of long-term funds, prescribe the maturities, as well as related terms and conditions for various types of bank loans and other credit accommodations. Any change by the Board in the maximum maturities shall apply only to loans and other credit accommodations made after the date of such action.

The Monetary Board shall regulate the interest imposed on microfinance borrowers by lending investors and similar lenders, such as, but not limited to, the unconscionable rates of interest collected on salary loans and similar credit accommodations. (78a)

SECTION 44. Amortization on Loans and Other Credit Accommodations. — The amortization schedule of bank loans and other credit accommodations shall be adapted to the nature of the operations to be financed.

In case of loans and other credit accommodations with maturities of more than five (5) years, provisions must be made for periodic amortization payments, but such payments must be made at least annually: Provided, however, That when the borrowed funds are to be used for purposes which do not initially produce revenues adequate for regular amortization payments therefrom, the bank may permit the initial amortization payment to be deferred until such time as said revenues are sufficient for such purpose, but in no case shall the initial amortization date be later than five (5) years from the date on which the loan or other credit accommodation is granted. (79a)

In case of loans and other credit accommodations to microfinance sectors, the schedule of loan amortization shall take into consideration the projected cash flow of the borrower and adopt this into the terms and conditions formulated by banks. (n)

SECTION 45. Prepayment of Loans and Other Credit Accommodations. — A borrower may at any time prior to the agreed maturity date prepay, in whole or in part, the unpaid balance of any bank loan and other credit accommodation, subject to such reasonable terms and conditions as may be agreed upon between the bank and its borrower. (80a)

SECTION 46. Development Assistance Incentives. — The Bangko Sentral shall provide incentives to banks which, without government guarantee, extend loans to finance educational institutions, cooperatives, hospitals and other medical services, socialized or low-cost housing, local government units and other activities with social content. (n)

SECTION 47. Foreclosure of Real Estate Mortgage. — In the event of foreclosure, whether judicially or extrajudicially, of any mortgage on real estate which is security for any loan or other credit accommodation granted, the mortgagor or debtor whose real property has been sold for the full or partial payment of his obligation shall have the right within one year after the sale of the real estate, to redeem the property by paying the amount due under the mortgage deed, with interest thereon at the rate specified in the mortgage, and all the costs and expenses incurred by the bank or institution from the sale and custody of said property less the income derived therefrom. However, the purchaser at the auction sale concerned whether in a judicial or extrajudicial foreclosure shall have the right to enter upon and take possession of such property immediately after the date of the confirmation of the auction sale and administer the same in accordance with law. Any petition in court to enjoin or restrain the conduct of foreclosure proceedings instituted pursuant to this provision shall be given due course only upon the filing by the petitioner of a bond in an amount fixed by the court conditioned that he will pay all the damages which the bank may suffer by the enjoining or the restraint of the foreclosure proceeding.

Notwithstanding Act 3135, juridical persons whose property is being sold pursuant to an extrajudicial foreclosure, shall have the right to redeem the property in accordance with this provision until, but not after, the registration of the certificate of foreclosure sale with the applicable Register of Deeds which in no case shall be more than three (3) months after foreclosure, whichever is earlier. Owners of property that has been sold in a foreclosure sale prior to the effectivity of this Act shall retain their redemption rights until their expiration. (78a)

SECTION 48. Renewal or Extension of Loans and Other Credit Accommodations. — The Monetary Board may, by regulation, prescribe the conditions and limitations under which a bank may grant extensions or renewals of its loans and other credit accommodations. (81)

SECTION 49. Provisions for Losses and Write-Offs. — All debts due to any bank on which interest is past due and unpaid for such period as may be determined by the Monetary Board, unless the same are well-secured and in the process of collection shall be considered bad debts within the meaning of this Section.

The Monetary Board may fix, by regulation or by order in a specific case, the amount of reserves for bad debts or doubtful accounts or other contingencies.

Writing off of loans, other credit accommodations, advances and other assets shall be subject to regulations issued by the Monetary Board. (84a)

SECTION 50. Major Investments. — For the purpose of enhancing bank supervision, the Monetary Board shall establish criteria for reviewing major acquisitions or investments by a bank including corporate affiliations or structures that may expose the bank to undue risks or in any way hinder effective supervision.

SECTION 51. Ceiling on Investments in Certain Assets. — Any bank may acquire real estate as shall be necessary for its own use in the conduct of its business: Provided, however, That the total investment in such real estate and improvements thereof, including bank equipment, shall not exceed fifty percent (50%) of combined capital accounts: Provided, further, That the equity investment of a bank in another corporation engaged primarily in real estate shall be considered as part of the bank's total investment in real estate, unless otherwise provided by the Monetary Board. (25a)

SECTION 52. Acquisition of Real Estate by Way of Satisfaction of Claims. — Notwithstanding the limitations of the preceding Section, a bank may acquire, hold or convey real property under the following circumstances:

52.1. Such as shall be mortgaged to it in good faith by way of security for debts;

52.2. Such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings; or

52.3. Such as it shall purchase at sales under judgments, decrees, mortgages, or trust deeds held by it and such as it shall purchase to secure debts due it.

Any real property acquired or held under the circumstances enumerated in the above paragraph shall be disposed of by the bank within a period of five (5) years or as may be prescribed by the Monetary Board: Provided, however, That the bank may, after said period, continue to hold the property for its own use, subject to the limitations of the preceding Section. (25a)

SECTION 53. Other Banking Services. — In addition to the operations specifically authorized in this Act, a bank may perform the following services:

53.1. Receive in custody funds, documents and valuable objects;

53.2. Act as financial agent and buy and sell, by order of and for the account of their customers, shares, evidences of indebtedness and all types of securities;

53.3. Make collections and payments for the account of others and perform such other services for their customers as are not incompatible with banking business;

53.4. Upon prior approval of the Monetary Board, act as managing agent, adviser, consultant or administrator of investment management/advisory/consultancy accounts; and

53.5. Rent out safety deposit boxes.

The bank shall perform the services permitted under Subsections 53.1, 53.2, 53.3 and 53.4 as depositary or as an agent. Accordingly, it shall keep the funds, securities and other effects which it receives duly separate from the bank's own assets and liabilities.

The Monetary Board may regulate the operations authorized by this Section in order to ensure that such operations do not endanger the interests of the depositors and other creditors of the bank.

In case a bank or quasi-bank notifies the Bangko Sentral or publicly announces a bank holiday, or in any manner suspends the payment of its deposit liabilities continuously for more than thirty (30) days, the Monetary Board may summarily and without need for prior hearing close such banking institution and place it under receivership of the Philippine Deposit Insurance Corporation. (72a)

SECTION 54. Prohibition to Act as Insurer. — A bank shall not directly engage in insurance business as the insurer. (73)

SECTION 55. Prohibited Transactions. —

55.1. No director, officer, employee, or agent of any bank shall — (a) Make false entries in any bank report or statement or participate in any fraudulent transaction, thereby affecting the financial interest of, or causing damage to, the bank or any person;

(b) Without order of a court of competent jurisdiction, disclose to any unauthorized person any information relative to the funds or properties in the custody of the bank belonging to private individuals, corporations, or any other entity: Provided, That with respect to bank deposits, the provisions of existing laws shall prevail;

(c) Accept gifts, fees or commissions or any other form of remuneration in connection with the approval of a loan or other credit accommodation from said bank;

(d) Overvalue or aid in overvaluing any security for the purpose of influencing in any way the actions of the bank or any bank; or

(e) Outsource inherent banking functions.

55.2. No borrower of a bank shall — (a) Fraudulently overvalue property offered as security for a loan or other credit accommodation from the bank;

(b) Furnish false or make misrepresentation or suppression of material facts for the purpose of obtaining, renewing, or increasing a loan or other credit accommodation or extending the period thereof;

(c) Attempt to defraud the said bank in the event of a court action to recover a loan or other credit accommodation; or

(d) Offer any director, officer, employee or agent of a bank any gift, fee, commission, or any other form of compensation in order to influence such persons into approving a loan or other credit accommodation application.

55.3. No examiner, officer or employee of the Bangko Sentral or of any department, bureau, office, branch or agency of the Government that is assigned to supervise, examine, assist or render technical assistance to any bank shall commit any of the acts enumerated in this Section or aid in the commission of the same. (87-Aa)

The making of false reports or misrepresentation or suppression of material facts by personnel of the Bangko Sentral ng Pilipinas shall constitute fraud and shall be subject to the administrative and criminal sanctions provided under the New Central Bank Act.

55.4. Consistent with the provisions of Republic Act No. 1405, otherwise known as the Banks Secrecy Law, no bank shall employ casual or nonregular personnel or too lengthy probationary personnel in the conduct of its business involving bank deposits.

SECTION 56. Conducting Business in an Unsafe or Unsound Manner. — In determining whether a particular act or omission, which is not otherwise prohibited by any law, rule or regulation affecting banks, quasi-banks or trust entities, may be deemed as conducting business in an unsafe or unsound manner for purposes of this Section, the Monetary Board shall consider any of the following circumstances:

56.1. The act or omission has resulted or may result in material loss or damage, or abnormal risk or danger to the safety, stability, liquidity or solvency of the institution;

56.2. The act or omission has resulted or may result in material loss or damage or abnormal risk to the institution's depositors, creditors, investors, stockholders or to the Bangko Sentral or to the public in general;

56.3. The act or omission has caused any undue injury, or has given any unwarranted benefits, advantage or preference to the bank or any party in the discharge by the director or officer of his duties and responsibilities through manifest partiality, evident bad faith or gross inexcusable negligence; or

56.4. The act or omission involves entering into any contract or transaction manifestly and grossly disadvantageous to the bank, quasi-bank or trust entity, whether or not the director or officer profited or will profit thereby.

Whenever a bank, quasi-bank or trust entity persists in conducting its business in an unsafe or unsound manner, the Monetary Board may, without prejudice to the administrative sanctions provided in Section 37 of the New Central Bank Act, take action under Section 30 of the same Act and/or immediately exclude the erring bank from clearing, the provisions of law to the contrary notwithstanding. (n)

SECTION 57. Prohibition on Dividend Declaration. — No bank or quasi-bank shall declare dividends greater than its accumulated net profits then on hand, deducting therefrom its losses and bad debts. Neither shall the bank nor quasi-bank declare dividends, if at the time of declaration:

57.1 Its clearing account with the Bangko Sentral is overdrawn; or

57.2 It is deficient in the required liquidity floor for government deposits for five (5) or more consecutive days; or

57.3 It does not comply with the liquidity standards/ratios prescribed by the Bangko Sentral for purposes of determining funds available for dividend declaration; or

57.4 It has committed a major violation as may be determined by the Bangko Sentral. (84a)

SECTION 58. Independent Auditor. — The Monetary Board may require a bank, quasi-bank or trust entity to engage the services of an independent auditor to be chosen by the bank, quasi-bank or trust entity concerned from a list of certified public accountants acceptable to the Monetary Board. The term of the engagement shall be as prescribed by the Monetary Board which may either be on a continuing basis where the auditor shall act as resident examiner, or on the basis of special engagements; but in any case, the independent auditor shall be responsible to the bank's, quasi-bank's or trust entity's board of directors. A copy of the report shall be furnished to the Monetary Board. The Monetary Board may also direct the board of directors of a bank, quasi-bank, trusty entity and/or the individual members thereof, to conduct, either personally or by a committee created by the board, an annual balance sheet audit of the bank, quasi-bank or trust entity to review the internal audit and control system of the bank, quasi-bank or trust entity and to submit a report of such audit. (6-Da)

SECTION 59. Authority to Regulate Electronic Transactions. — The Bangko Sentral shall have full authority to regulate the use of electronic devices, such as computers, and processes for recording, storing and transmitting information or data in connection with the operations of a bank, quasi-bank or trust entity, including the delivery of services and products to customers by such entity. (n)

SECTION 60. Financial Statements. — Every bank, quasi-bank or trust entity shall submit to the appropriate supervising and examining department of the Bangko Sentral financial statements in such form and frequency as may be prescribed by the Bangko Sentral. Such statements, which shall be as of a specific date designated by the Bangko Sentral, shall show the actual financial condition of the institution submitting the statement, and of its branches, offices, subsidiaries and affiliates, including the results of its operations, and shall contain such information as may be required in Bangko Sentral regulations. (n)

SECTION 61. Publication of Financial Statements. — Every bank, quasi-bank or trust entity, shall publish a statement of its financial condition, including those of its subsidiaries and affiliates, in such terms understandable to the layman and in such frequency as may be prescribed by the Bangko Sentral, in English or Filipino, at least once every quarter in a newspaper of general circulation in the city or province where the principal office, in the case of a domestic institution, or the principal branch or office in the case of a foreign bank, is located, but if no newspaper is published in the same province, then in a newspaper published in Metro Manila or in the nearest city or province.

The Bangko Sentral may by regulation prescribe the newspaper where the statements prescribed herein shall be published.

The Monetary Board may allow the posting of the financial statements of a bank, quasi-bank or trust entity in public places it may determine, in lieu of the publication required in the preceding paragraph, when warranted by the circumstances.

Additionally, banks shall make available to the public in such form and manner as the Bangko Sentral may prescribe the complete set of its audited financial statements as well as such other relevant information including those on enterprises majority-owned or controlled by the bank, that will inform the public of the true financial condition of a bank as of any given time.

In periods of national and/or local emergency or of imminent panic which directly threaten monetary and banking stability, the Monetary Board, by a vote of at least five (5) of its members, in special cases and upon application of the bank, quasi-bank or trust entity, may allow such bank, quasi-bank or trust entity to defer for a stated period of time the publication of the statement of financial condition required herein. (n)

SECTION 62. Publication of Capital Stock. — A bank, quasi-bank or trust entity incorporated under the laws of the Philippines shall not publish the amount of its authorized or subscribed capital stock without indicating at the same time and with equal prominence, the amount of its capital actually paid up.

No branch of any foreign bank doing business in the Philippines shall in any way announce the amount of the capital and surplus of its head office, or of the bank in its entirety without indicating at the same time and with equal prominence the amount of the capital, if any, definitely assigned to such branch. In case no capital has been definitely assigned to such branch, such fact shall be stated in, and shall form part of the publication. (82)

SECTION 63. Settlement of Disputes. — The provisions of any law to the contrary notwithstanding, the Bangko Sentral shall be consulted by other government agencies or instrumentalities in actions or proceedings initiated by or brought before them involving controversies in banks, quasi-banks or trust entities arising out of and involving relations between and among their directors, officers or stockholders, as well as disputes between any or all of them and the bank, quasi-bank or trust entity of which they are directors, officers or stockholders. (n)

SECTION 64. Unauthorized Advertisement or Business Representation. — No person, association, or corporation unless duly authorized to engage in the business of a bank, quasi-bank, trust entity, or savings and loan association as defined in this Act, or other banking laws, shall advertise or hold itself out as being engaged in the business of such bank, quasi-bank, trust entity, or association, or use in connection with its business title, the word or words "bank", "banking", "banker", "quasi-bank", "quasi-banking", "quasi-banker", "savings and loan association", "trust corporation", "trust company" or words of similar import or transact in any manner the business of any such bank, corporation or association. (6)

SECTION 65. Service Fees. — The Bangko Sentral may charge equitable rates, commissions or fees, as may be prescribed by the Monetary Board for supervision, examination and other services which it renders under this Act. (n)

SECTION 66. Penalty for Violation of this Act. — Unless otherwise herein provided, the violation of any of the provisions of this Act shall be subject to Sections 34, 35, 36 and 37 of the New Central Bank Act. If the offender is a director or officer of a bank, quasi-bank or trust entity, the Monetary Board may also suspend or remove such director or officer. If the violation is committed by a corporation, such corporation may be dissolved by quo warranto proceedings instituted by the Solicitor General. (87)

CHAPTER V Placement Under Conservatorship

SECTION 67. Conservatorship. — The grounds and procedures for placing a bank under conservatorship, as well as, the powers and duties of the conservator appointed for the bank shall be governed by the provisions of Section 29 and the last two paragraphs of Section 30 of the New Central Bank Act:Provided, That this Section shall also apply to conservatorship proceedings of quasi-banks. (n)

CHAPTER VI Cessation of Banking Business

SECTION 68. Voluntary Liquidation. — In case of the voluntary liquidation of any bank organized under the laws of the Philippines, or of any branch or office in the Philippines of a foreign bank, written notice of such liquidation shall be sent to the Monetary Board before such liquidation is undertaken, and the Monetary Board shall have the right to intervene and take such steps as may be necessary to protect the interests of creditors. (86)

SECTION 69. Receivership and Involuntary Liquidation. — The grounds and procedures for placing a bank under receivership or liquidation, as well as the powers and duties of the receiver or liquidator appointed for the bank shall be governed by the provisions of Sections 30, 31, 32, and 33 of the New Central Bank Act: Provided, That the petitioner or plaintiff files with the clerk or judge of the court in which the action is pending a bond, executed in favor of the Bangko Sentral, in an amount to be fixed by the court. This Section shall also apply to the extent possible to the receivership and liquidation proceedings of quasi-banks. (n)

SECTION 70. Penalty for Transactions After a Bank Becomes Insolvent. — Any director or officer of any bank declared insolvent or placed under receivership by the Monetary Board who refuses to turn over the bank's records and assets to the designated receivers, or who tampers with banks records, or who appropriates for himself or another party or destroys or causes the misappropriation and destruction of the bank's assets, or who receives or permits or causes to be received in said bank any deposit, collection of loans and/or receivables, or who pays out or permits or causes to be paid out any funds of said bank, or who transfers or permits or causes to be transferred any securities or property of said bank shall be subject to the penal provisions of the New Central Bank Act. (85a)

CHAPTER VII Laws Governing Other Types of Banks

SECTION 71. Other Banking Laws. — The organization, ownership and capital requirements, powers, supervision and general conduct of business of thrift banks, rural banks and cooperative banks shall be governed by the provisions of the Thrift Banks Act, the Rural Banks Act, and the Cooperative Code, respectively.

The organization, ownership and capital requirements, powers, supervision and general conduct of business of Islamic banks shall be governed by special laws.

The provisions of this Act, however, insofar as they are not in conflict with the provisions of the Thrift Banks Act, the Rural Banks Act, and the Cooperative Code shall likewise apply to thrift banks, rural banks, and cooperative banks, respectively. However, for purposes of prescribing the minimum ratio which the net worth of a thrift bank must bear to its total risk assets, the provisions of Section 33 of this Act shall govern. (n)

CHAPTER VIII Foreign Banks

SECTION 72. Transacting Business in the Philippines. — The entry of foreign banks in the Philippines through the establishment of branches shall be governed by the provisions of the Foreign Banks Liberalization Act.

The conduct of offshore banking business in the Philippines shall be governed by the provisions of the Presidential Decree No. 1034, otherwise known as the "Offshore Banking System Decree." (14a)

SECTION 73. Acquisition of Voting Stock in a Domestic Bank. — Within seven (7) years from the effectivity of this Act and subject to guidelines issued pursuant to the Foreign Banks Liberalization Act, the Monetary Board may authorize a foreign bank to acquire up to one hundred percent (100%) of the voting stock of only one (1) bank organized under the laws of the Republic of the Philippines.

Within the same period, the Monetary Board may authorize any foreign bank, which prior to the effectivity of this Act availed itself of the privilege to acquire up to sixty percent (60%) of the voting stock of a bank under the Foreign Banks Liberalization Act and the Thrift Banks Act, to further acquire voting shares of such bank to the extent necessary for it to own one hundred percent (100%) of the voting stock thereof.

In the exercise of this authority, the Monetary Board shall adopt measures as may be necessary to ensure that at all times the control of seventy percent (70%) of the resources or assets of the entire banking system is held by banks which are at least majority-owned by Filipinos.

Any right, privilege or incentive granted to a foreign bank under this Section shall be equally enjoyed by and extended under the same conditions to banks organized under the laws of the Republic of the Philippines. (Secs. 2 and 3, RA 7721)

SECTION 74. Local Branches of Foreign Banks. — In the case of a foreign bank which has more than one (1) branch in the Philippines, all such branches shall be treated as one (1) unit for the purpose of this Act, and all references to the Philippine branches of foreign banks shall be held to refer to such units. (68)

SECTION 75. Head Office Guarantee. — In order to provide effective protection of the interests of the depositors and other creditors of Philippine branches of a foreign bank, the head office of such branches shall fully guarantee the prompt payment of all liabilities of its Philippine branch. (69)

Residents and citizens of the Philippines who are creditors of a branch in the Philippines of a foreign bank shall have preferential rights to the assets of such branch in accordance with existing laws. (19)

SECTION 76. Summons and Legal Process. — Summons and legal process served upon the Philippine agent or head of any foreign bank designated to accept service thereof shall give jurisdiction to the courts over such bank, and service of notices on such agent or head shall be as binding upon the bank which he represents as if made upon the bank itself.

Should the authority of such agent or head to accept service of summons and legal processes for the bank or notice to it be revoked, or should such agent or head become mentally incompetent or otherwise unable to accept service while exercising such authority, it shall be the duty of the bank to name and designate promptly another agent or head upon whom service of summons and processes in legal proceedings against the bank and of notices affecting the bank may be made, and to file with the Securities and Exchange Commission a duly authenticated nomination of such agent.

In the absence of the agent or head or should there be no person authorized by the bank upon whom service of summons, processes and all legal notices may be made, service of summons, processes and legal notices may be made upon the Bangko Sentral Deputy Governor In-Charge of the supervising and examining departments and such service shall be as effective as if made upon the bank or its duly authorized agent or head.

In case of service for the bank upon the Bangko Sentral Deputy Governor In-Charge of the supervising and examining departments, the said Deputy Governor shall register and transmit by mail to the president or the secretary of the bank at its head or principal office a copy, duly certified by him, of the summons, process, or notice. The sending of such copy of the summons, process, or notice shall be a necessary part of the services and shall complete the service. The registry receipt of mailing shall be prima facie evidence of the transmission of the summons, process or notice. All costs necessarily incurred by the said Deputy Governor for the making and mailing and sending of a copy of the summons, process, or notice to the president or the secretary of the bank at its head or principal office shall be paid in advance by the party at whose instance the service is made. (17)

SECTION 77. Laws Applicable. — In all matters not specifically covered by special provisions applicable only to a foreign bank or its branches and other offices in the Philippines, any foreign bank licensed to do business in the Philippines shall be bound by the provisions of this Act, all other laws, rules and regulations applicable to banks organized under the laws of the Philippines of the same class, except those that provide for the creation, formation, organization or dissolution of corporations or for the fixing of the relations, liabilities, responsibilities, or duties of stockholders, members, directors or officers of corporations to each other or to the corporation. (18)

SECTION 78. Revocation of License of a Foreign Bank. — The Monetary Board may revoke the license to transact business in the Philippines of any foreign bank, if it finds that the foreign bank is insolvent or in imminent danger thereof or that its continuance in business will involve probable loss to those transacting business with it. After the revocation of its license, it shall be unlawful for any such foreign bank to transact business in the Philippines unless its license is renewed or reissued. After the revocation of such license, the Bangko Sentral shall take the necessary action to protect the creditors of such foreign bank and the public. The provisions of the New Central Bank Act on sanctions and penalties shall likewise be applicable. (16)

CHAPTER IX Trust Operations

SECTION 79. Authority to Engage in Trust Business. — Only a stock corporation or a person duly authorized by the Monetary Board to engage in trust business shall act as a trustee or administer any trust or hold property in trust or on deposit for the use, benefit, or behoof of others. For purposes of this Act, such a corporation shall be referred to as a trust entity. (56a; 57a)

SECTION 80. Conduct of Trust Business. — A trust entity shall administer the funds or property under its custody with the diligence that a prudent man would exercise in the conduct of an enterprise of a like character and with similar aims.

No trust entity shall, for the account of the trustor or the beneficiary of the trust, purchase or acquire property from, or sell, transfer, assign or lend money or property to, or purchase debt instruments of, any of the departments, directors, officers, stockholders, or employees of the trust entity, relatives within the first degree of consanguinity or affinity, or the related interests, of such directors, officers and stockholders, unless the transaction is specifically authorized by the trustor and the relationship of the trustee and the other party involved in the transaction is fully disclosed to the trustor or beneficiary of the trust prior to the transaction.

The Monetary Board shall promulgate such rules and regulations as may be necessary to prevent circumvention of this prohibition or the evasion of the responsibility herein imposed on a trust entity. (56)

SECTION 81. Registration of Articles of Incorporation and By-Laws of a Trust Entity. — The Securities and Exchange Commission shall not register the articles of incorporation and by-laws or any amendment thereto, of any trust entity, unless accompanied by a certificate of authority issued by the Bangko Sentral. (n)

SECTION 82. Minimum Capitalization. — A trust entity, before it can engage in trust or other fiduciary business, shall comply with the minimum paid-in capital requirement which will be determined by the Monetary Board. (n)

SECTION 83. Powers of a Trust Entity. — A trust entity, in addition to the general powers incident to corporations, shall have the power to:

83.1. Act as trustee on any mortgage or bond issued by any municipality, corporation, or any body politic and to accept and execute any trust consistent with law;

83.2. Act under the order or appointment of any court as guardian, receiver, trustee, or depositary of the estate of any minor or other incompetent person, and as receiver and depositary of any moneys paid into court by parties to any legal proceedings and of property of any kind which may be brought under the jurisdiction of the court;

83.3. Act as the executor of any will when it is named the executor thereof;

83.4. Act as administrator of the estate of any deceased person, with the will annexed, or as administrator of the estate of any deceased person when there is no will;

83.5. Accept and execute any trust for the holding, management, and administration of any estate, real or personal, and the rents, issues and profits thereof; and

83.6. Establish and manage common trust funds, subject to such rules and regulations as may be prescribed by the Monetary Board. (58)

SECTION 84. Deposit for the Faithful Performance of Trust Duties. — Before transacting trust business, every trust entity shall deposit with the Bangko Sentral as security for the faithful performance of its trust duties, cash or securities approved by the Monetary Board in an amount equal to not less than Five hundred thousand pesos (P500,000.00) or such higher amount as may be fixed by the Monetary Board: Provided, however, That the Monetary Board shall require every trust entity to increase the amount of its cash or securities on deposit with the Bangko Sentral whenever in its judgment such increase is necessary by reason of the trust business of such entity: Provided, further, That the paid-in capital and surplus of such entity must be at least equal to the amount required to be deposited with the Bangko Sentral in accordance with the provisions of this paragraph. Should the capital and surplus fall below said amount, the Monetary Board shall have the same authority as that granted to it under the provisions of the fifth paragraph of Section 34 of this Act.

A trust entity so long as it shall continue to be solvent and comply with laws or regulations shall have the right to collect the interest earned on such securities deposited with the Bangko Sentral and, from time to time, with the approval of the Bangko Sentral, to exchange the securities for others. If the trust entity fails to comply with any law or regulation, the Bangko Sentral shall retain such interest on the securities deposited with it for the benefit of rightful claimants. All claims arising out of the trust business of a trust entity shall have priority over all other claims as regards the cash or securities deposited as above provided. The Monetary Board may not permit the cash or securities deposited in accordance with the provisions of this Section to be reduced below the prescribed minimum amount until the depositing entity shall discontinue its trust business and shall satisfy the Monetary Board that it has complied with all its obligations in connection with such business. (65a)

SECTION 85. Bond of Certain Persons for the Faithful Performance of Duties. — Before an executor, administrator, guardian, trustee, receiver or depositary appointed by the court enters upon the execution of his duties, he shall, upon order of the court, file a bond in such sum as the court may direct.

Upon the application of any executor, administrator, guardian, trustee, receiver, depositary or any other person in interest, the court may, after notice and hearing, order that the subject matter of the trust or any part thereof be deposited with a trust entity. Upon presentation of proof to the court that the subject matter of the trust has been deposited with a trust entity, the court may order that the bond given by such persons for the faithful performance of their duties be reduced to such sums as it may deem proper: Provided, however, That the reduced bond shall be sufficient to secure adequately the proper administration and care of any property remaining under the control of such persons and the proper accounting for such property.

Property deposited with any trust entity in conformity with this Section shall be held by such entity under the orders and direction of the court. (59)

SECTION 86. Exemption of Trust Entity from Bond Requirement. — No bond or other security shall be required by the court from a trust entity for the faithful performance of its duties as court-appointed trustee, executor, administrator, guardian, receiver, or depositary. However, the court may, upon proper application with it showing special cause therefor, require the trust entity to post a bond or other security for the protection of funds or property confided to such entity. (59)

SECTION 87. Separation of Trust Business from General Business. — The trust business and all funds, properties or securities received by any trust entity as executor, administrator, guardian, trustee, receiver, or depositary shall be kept separate and distinct from the general business including all other funds, properties, and assets of such trust entity. The accounts of all such funds, properties, or securities shall likewise be kept separate and distinct from the accounts of the general business of the trust entity. (61)

SECTION 88. Investment Limitations of a Trust Entity. — Unless otherwise directed by the instrument creating the trust, the lending and investment of funds and other assets acquired by a trust entity as executor, administrator, guardian, trustee, receiver or depositary of the estate of any minor or other incompetent person shall be limited to loans or investments as may be prescribed by law, the Monetary Board or any court of competent jurisdiction. (63a)

SECTION 89. Real Estate Acquired by a Trust Entity. — Unless otherwise specifically directed by the trustor or the nature of the trust, real estate acquired by a trust entity in whatever manner and for whatever purpose, shall likewise be governed by the relevant provisions of Section 52 of this Act. (64a)

SECTION 90. Investment of Non-Trust Funds. — The investment of funds other than trust funds of a trust entity which is a bank, financing company or an investment house shall be governed by the relevant provisions of this Act and other applicable laws. (64)

SECTION 91. Sanctions and Penalties. — A trust entity or any of its officers and directors found to have willfully violated any pertinent provisions of this Act, shall be subject to the sanctions and penalties provided under Section 66 of this Act as well as Sections 36 and 37 of the New Central Bank Act. (63)

SECTION 92. Exemption of Trust Assets from Claims. — No assets held by a trust entity in its capacity as trustee shall be subject to any claims other than those of the parties interested in the specific trusts. (65)

SECTION 93. Establishment of Branches of a Trust Entity. — The ordinary business of a trust entity shall be transacted at the place of business specified in its articles of incorporation. Such trust entity may, with prior approval of the Monetary Board, establish branches in the Philippines, and the said entity shall be responsible for all business conducted in such branches to the same extent and in the same manner as though such business had all been conducted in the head office.

For the purpose of this Act, the trust entity and its branches shall be treated as one unit. (67)

CHAPTER X Final Provisions

SECTION 94. Phase Out of Bangko Sentral Powers Over Building and Loan Associations. — Within a period of three (3) years from the effectivity of this Act, the Bangko Sentral shall phase out and transfer its supervising and regulatory powers over building and loan associations to the Home Insurance and Guaranty Corporation which shall assume the same. Until otherwise provided by law, building and loan associations shall continue to be governed by Sections 39 to 55, Chapter VI of the General Banking Act, as amended, including such rules and regulations issued pursuant thereto. Upon assumption by the Home Insurance and Guaranty Corporation of supervising and regulatory powers over building and loan associations, all references in Sections 39 to 55 of the General Banking Act, as amended, to the Bangko Sentral and the Monetary Board shall be deemed to refer to the Home Insurance and Guaranty Corporation and its board of directors, respectively. (n)

SECTION 95. Repealing Clause. — Except as may be provided for in Sections 34 and 94 of this Act, the General Banking Act, as amended, and the provisions of any other law, special charters, rule or regulation issued pursuant to said General Banking Act, as amended, or parts thereof, which may be inconsistent with the provisions of this Act are hereby repealed. The provisions of paragraph 8, Section 8, Republic Act No. 3591, as amended by Republic Act No. 7400, are likewise repealed. (90a)

SECTION 96. Separability Clause. — If any provision or section of this Act or the application thereof to any person or circumstance is held invalid, the other provisions or sections of this Act, and the application of such provision or section to other persons or circumstances, shall not be affected thereby. (n)

SECTION 97. Effectivity Clause. — This Act shall take effect fifteen (15) days following its publication in the Official Gazette or in two (2) national newspapers of general circulation. (91)

Approved: May 23, 2000

Published in Malaya and The Manila Times on May 29, 2000. Published in the Official Gazette, Vol. 96 No. 40, page 6235 on October 2, 2000.

Lapsed into law on 28 July 2022

AN ACT STRENGTHENING THE FINANCING SYSTEM, INCLUDING CAPACITY-BUILDING AND ORGANIZATION, FOR AGRICULTURE, FISHERIES, AND RURAL DEVELOPMENT IN THE PHILIPPINES,

REPEALING FOR THE PURPOSE REPUBLIC ACT NO. 10000 OR “THE AGRI-AGRA REFORM CREDIT ACT OF 2009”

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Short Title. — This Act shall be known as “The Agriculture, Fisheries and Rural Development Financing Enhancement Act of 2022”.

Section 2. Declaration of Policy. — It is hereby declared the policy of the State to promote inclusive and broad-based economic growth by ensuring equal access to opportunities under an environment of sustained growth and expanding productivity as the key to raising the quality of life for all. Towards this end, the State shall promote rural development by enhancing access of rural communities and agricultural and fisheries households to financial services and programs that increase productivity, enhance market efficiency, and promote modernization and improve the welfare and economic prospects of beneficiaries in rural communities through active participation of banking institutions.

The Landbank of the Philippines (LBP) and the Development Bank of the Philippines (DBP) shall continue to promote savings and credit in the rural areas by offering affordable deposit products such as the basic deposit account for deposits and low interest rates for loans.

The lending cooperatives, microfinance institutions, retail banks, rural and thrift banks shall apply minimum interest rates for wholesale loans obtained from government banks.

Likewise, the LBP and DBP shall use their resources to innovate, develop, promote and invest in digital, automation technology, branchless banking and cash agent operations to reach remote barangays and municipalities; using e-commerce, online transactions, bank-on-wheels, point of sale devices with retailers and non-banking institutions, lottery kiosks and mobile phone applications in making banking services accessible to the rural public.

The State also recognizes the importance of designing and implementing capacity-building programs that will develop and improve skill sets and competencies of farmers, fisherfolk, agrarian reform beneficiaries, and other agricultural workers which will allow them to operate productive, profitable and viable agricultural and business ventures, as well as enhance their paying capacity and access to formal financing channels.

Section 3. Definition of Terms. — As used in this Act:

(a) Agrarian Reform Beneficiary (ARB) refers to a farmer who was granted land under Presidential Decree No. 27, the Comprehensive Agrarian Reform Law of 1998 and Republic Act No. 9700 or the “Comprehensive Agrarian Reform Program Extension with Reforms” and a regular farmworker who is landless, irrespective of tenurial arrangement, who benefited from the redistribution of land, regardless of crops or fruits produced, to include the totality of factors and support services designed to lift the economic status of the beneficiary and all other alternative arrangements to the physical distribution of lands, such as production or profit sharing, labor administration, and the distribution of shares of stock which will allow the beneficiary to receive a just share of the fruits of the lands one tilled. The term shall also include registered ARBs’ cooperatives/associations/other farm groups, respectively endorsed as comprising of ARBs by the nearest office of the Department of Agrarian Reform (DAR), as well as ARB households;

(b) Agrarian Reform Community (ARC) refers to a barangay or a cluster of barangays primarily composed of and managed by ARBs which is organized and willing to undertake the integrated development of an area and/or their organizations/cooperatives;

(c) Agri-Business refers to agriculture and fishery-related activities that put farmers, fisherfolk, processors, distributors, and consumers within a system that produces, processes, transports, markets, and distributes agricultural and fishery products. It encompasses input production, farm and fishery operations and management, equipment and supplies manufacturing, food/non-food processing, trading, and retailing;

(d) Agri-Tourism, also referred to as “Farm Tourism” under Republic Act No. 10816, or the “Farm Tourism Development Act of 2016”, refers to the practice of attracting visitors and tourists to farm areas for production, educational and recreational purposes. It involves any agricultural or fishery-based operation or activity that brings to a duly-accredited farm tourism camp, visitors, tourists, farmers and fisherfolk who want to be educated and trained on farming and its related activities;

(e) Agricultural Lessee refers to any person who, with or without help from one’s immediate farm household, cultivates the land owned by another for a certain price in money, in produce, or in both;

(f) Agricultural or fisheries household refers to a' household with at least one (1) member of the household who is a farmer, a fisherman, an ARB, a settler, an agricultural lessee, an amortizing owner, a farmworker, a fishworker, an owner-cultivator, a compact farmer, or a tenant farmer;

(g) Agricultural Value Chain (AVC) refers to a set of actors/players, such as farmers, fisherfolk, traders, suppliers, processors, aggregators, who make up a linked sequence of value-adding activities undergone by an agricultural product when converted from raw material to the final form it is presented to the consumers;

(h) Agricultural Value Chain Financing (AVCF) refers to the financial products and services made available to an AVC following the appropriate evaluation of the AVC’s composition, goal, size and capacity;

(i) Agro-Industry Modernization Credit and Financing Program (AMCFP) refers to the umbrella credit/financing program of the government for the agriculture and fisheries sector created under Republic Act No. 8435, or the “Agriculture and Fisheries Modernization Act of 1997”;

(j) Amortizing owners refer to landowners who amortize payment for the land to a private individual or to the State;

(k) Basic Deposit Account (BDA) refers to interest- or non-interest-bearing account designed to promote financial inclusion;

(l) Cash agent refers to a third party entity contracted by a bank to accept and disburse cash on its behalf, and facilitate self-service deposits, withdrawals and fund transfers, bills payment and other banking services, as allowed under Bangko Sentral ng Pilipinas (BSP) rules and regulations;

(m) Compact farmers refer to those farmers with adjoining farms operating as a single unit under one (1) management, farm plan and budget;

(n) Farmer refers to a natural person whose primary livelihood is cultivation of land or the production of agricultural crops, agro-forest products, or livestock, either by oneself, or primarily with the assistance of their immediate farm household, whether the land is owned by them or by another person under a leasehold or share tenancy agreement or arrangement with the owner thereof;

(o) Farmworker refers to a natural person who renders service for value as an employee or laborer in an agricultural enterprise or farm regardless of whether the compensation is paid on a daily, weekly, monthly or pakyaw or contracted project. The term includes an individual whose work has ceased as a consequence of, or in connection with, a pending agrarian dispute who has not obtained a substantially equivalent and regular farm employment;

(p) Farmers’ cooperatives refer to cooperatives composed primarily of small agricultural producers, farmers, farmworkers, or other ARBs who voluntarily organize themselves for the purpose of pooling land, manpower, technological, financial or other economic resources, and operate on the principle of “one member, one vote”. A juridical person may be a member of a cooperative, with the same rights and duties as a natural person;

(q) Farmers and fisherfolk organizations or associations refer to farming or fishing cooperatives, associations or corporations duly registered with appropriate government agencies and which are composed primarily of small agricultural producers, farmers, farmworkers, ARBs, and fisherfolk who voluntarily join together to form business enterprises or non-business organizations which they themselves own, control and patronize;

(r) Farm-To-Market road refers to a road linking the agriculture and fisheries production sites, coastal landing point and post-harvest facility to the market and arterial road or highway;

(s) Financial services refer to services extended by banks and financial institutions such as credit lending, deposits, rediscounting, investments, and insurance;

(t) Fisherfolk refers to people directly or personally and physically engaged in catching and processing fishery and/or aquatic resources, and in fish farming or aquaculture whether the fish specie is grown in tanks, fishponds or other types of enclosures;

(u) Fishworker refers to a person whether or not regularly employed in commercial fishing and related industries, whose income is either from wages, profit sharing or stratified sharing basis, including those working in fishpens, fish corrals/traps, fishponds, prawn farms, sea farms, salt beds, fish ports, fishing boats or trawlers, or fish processing and/or packing plants, but excluding administrators, security guards and overseers;

(v) Green projects refer to green economic activities and projects. Aside from activities that promote climate change adaptation and mitigation, green projects also cover environmental and efficiency improvements, natural capital preservation and resource mobilization;

(w) Micro, Small and Medium Enterprise (MSME) refers to any business activity or enterprise defined as such under existing laws;

(x) Newly Established Bank refers to a domestic or foreign bank without banking presence in the Philippines prior to the issuance of its certificate of authority to operate. It shall not include banks that have been formed through the acquisition, purchase of ownership of the voting stock of an existing domestic bank or the merger or consolidation of banks;

(y) Owner-cultivators refer to natural persons who own lands by purchase, inheritance, or land distribution by the State. Owner-cultivators can operate the farm themselves, supervise wage labor or delegate operations to farmers;

(z) Post-harvest Activities refer to threshing, drying, milling, grading, storing, and handling of produce and such other activities of similar nature such as stripping, winnowing, chipping and washing;

(aa) Post-harvest Facilities refer to threshers, moisture meters, dryers, weighing scales, milling equipment, fish ports, fish landings, ice plants and cold storage facilities, processing plants, warehouses, buying stations, market infrastructure and transportation facilities, and such other facilities supporting post-harvest activities;

(bb) Public Rural Infrastructure refers to infrastructure in rural communities such as highways, streets, bridges, tunnels, railways, railroads, transport systems, ports, airports, hydropower projects, canals, dams, irrigation, government buildings and housing projects, public schools, public hospitals, public health centers, public markets, slaughterhouses, warehouses, solid waste management, sewerage, flood control, drainage, dredging and other similar infrastructure projects;

(cc) Registry System for Basic Sectors in Agriculture (RSBSA) refers to an electronic compilation of basic information on farmers, farmworkers, and fisherfolk. The database, which includes the profile of farmers, farmworkers and fisherfolk, and additional information such as farm parcels and fisheries, among others, is mainly used to help government planners and policymakers in formulating policies for agricultural development;

(dd) Rural Community refers to an area that is defined as such by the Philippine Statistics Authority (PSA);

(ee) Rural Financial Institution (RFI) refers to any financial institution established and is operating in a rural community;

(ff) Settlers refer to persons who range from the forest-clearing pioneers, including indigenous people, with a subsistence economy to the better equipped and more experienced farmers;

(gg) Sustainable Finance refers to any form of financial product or service which integrates environmental, social and governance criteria into business decisions that support economic growth and provide lasting benefit for both clients and society while reducing pressures on the environment. This also covers green finance which is designed to facilitate the flow of funds towards green economic activities and climate change mitigation and adaptation projects; and

(hh) Tenant Farmer refers to one who cultivates another’s land under a sharing or leasehold agreement.

Section 4. Agriculture, Fisheries and Rural Development Financing System. — There shall be an agriculture, fisheries, and rural development financing system to improve the productivity, income, competitiveness and welfare of the rural community beneficiaries, particularly the farmers, fisherfolk, ARBs, ARCs, settlers, agricultural lessees, amortizing owners, farmworkers, fishworkers, owner-cultivators, compact farmers, tenant farmers, and members of their household and their MSMEs, as well as farmer’s and fisherfolk’s cooperatives, organizations and associations, through government and private banking institutions.

Agriculture, fisheries and rural development financing, as used herein, shall consist of loans and investments to finance activities that shall enhance productivity and increase income of an agricultural and fisheries household, thereby promoting agricultural sector productivity and competitiveness, as well as sustainable development of rural communities. These shall include, but not be limited to: activities identified under the AMCFP as enumerated under Title 1, Chapter 3, Section 23 of Republic Act No. 8435, off-farm/fishery entrepreneurial activities, agricultural mechanization/modernization, agri-tourism, environmental, social and governance projects, including green projects, digitalization/automation of farming, fishery and agri-business activities and processes, acquisition of lands authorized under the Agrarian Reform Code of the Philippines and its amendments, efficient and effective marketing, processing, distribution, shipping and logistics, and storage of agricultural and fishery commodities, public rural infrastructure, as well as programs that shall promote the health and wellness of farmers, fisherfolk and ARBs, including members of their households, such as water arid sanitation projects for rural communities, and address the developmental needs of rural communities, such as, but not limited to, projects that promote the livelihood, skills enhancement, and other capacity-building activities of the rural community beneficiaries and all other activities consistent or analogous to the foregoing.

Toward this end, banking institutions are expected to design and offer financial products and services that suit the specific requirements of their agricultural clients, taking into account their cash flows and the gestation and harvest period of the agricultural produce/activity/project being financed.

Section 5. Rural Community Beneficiaries. — The financing mentioned in the preceding section shall be extended to the rural community beneficiaries named therein or to cooperatives, associations, MSMEs or organizations in good standing of such beneficiaries, regardless of capitalization, based on the feasibility of the project and their paying capacity, their estimated production, and/or securities they can provide as well as such assets as may be acquired by them from the proceeds of the loan and investments.

Section 6. Credit Quota. — All banking institutions, whether government or private, except newly-established banks for a period of five (5) years from the date of commencement of the banks’ operations, shall set aside a credit quota, or a minimum mandatory agricultural and fisheries financing requirement of at least twenty-five percent (25%) of their total loanable funds.

The total loanable funds generated by a banking institution shall be defined by the BSP. During the first year of effectivity of this Act, the total loanable funds generated shall be computed starting from 20 April 2010, the effectivity of Republic Act No. 10000, after which the bank’s total loanable funds shall be determined based on funds generated starting from the second year of the effectivity of this Act.

Section 7. Modes of Compliance. — Banks may comply with the mandatory credit requirement by lending to rural community beneficiaries, to finance agricultural and fishery-related activities as enumerated under Section 4 of this Act. Banks may also comply with the mandatory financing requirement through other means as follows;

(a) Invest in debt securities, including those issued by the DBF and the LBP: Provided, That the proceeds from said debt securities shall be used to finance activities under Section 4 hereof: Provided, further. That the proceeds from debt securities issued by the DBF and the LBF shall be separately accounted for and shall not be considered for purposes of computing the loanable funds under Section 6 hereof of the said banks;

(b) Open deposit accounts and/or invest in fixed term deposit products with RFIs: Provided, That such deposit accounts/products shall be separately accounted for by the depository bank and shall not be considered for purposes of computing the loanable funds of the said banks as described in Section 6 hereof;

(c) Rediscount with banks eligible paper covering agriculture, fisheries and agrarian reform credits: Provided, That rediscounted paper shall no longer be eligible as comphance on the part of the originating bank;

(d) Invest directly in shares of stock of RFIs, subject to prevailing laws, rules or regulations, or lend wholesale to RFIs: Provided, That the wholesale loans shall be credited as compliance of the bank acting as wholesale lender alone;

(e) Lend for the construction and upgrading of infrastructure, including but not limited to, farm-to-market roads, as well as the provision of post-harvest facilities and other public rural infrastructure that will benefit the rural community;

(f) Lend to agri-business enterprises that maintain agricultural commodity supply-chain arrangements directly with rural community beneficiaries;

(g) Undertake AVCF to actors/players in the AVC that benefits rural communities;

(h) Engage in sustainable finance;

(i) Invest in shares of stock of the Philippine Crop Insurance Corporation (PCIC) or in companies that primarily engage in activities under Section 4 hereof, including investments in venture capital corporations, that benefit rural community beneficiaries; and

(j) Provide financing to electronic platforms that will facilitate AVCF and supply chain financing transactions among actors in agriculture:

Provided, That the loans and investments that are counted as compliance are not funded by proceeds from the issuance of debt securities, and/or deposit/lending of other banks that have been counted as compliance with the mandatory credit: Provided, further, That loans to finance activities that shall generally benefit ARBs, ARCs, or other priority sectors, as may be determined by the Agricultural Credit Policy Council (ACPC), shall be counted at ten times (10x) their outstanding amount, or as otherwise prescribed by the ACPC, for purposes of determining compliance with the mandatory agricultural and fisheries financing requirement.

The modes of compliance enumerated in this section shall be subject to review by the ACPC after implementation to determine whether these are adequate to support the financing requirements of rural communities and recommend to Congress for appropriate action.

The BSP, the Department of Agriculture (DA) and the DAR may provide inputs to the review process in their capacity as members of the ACPC.

Further, the BSP shall be authorized to identify other actions that may be considered as eligible modes of compliance with the mandatory credit to rural community beneficiaries.

Section 8. Annual Reports. — The BSP shall furnish reports on the compliance with the mandatory agriculture, fisheries and rural development financing requirement, including information on amount of agri-agra penalties collected and remitted to the implementing agencies as identified under Sections 9, 10 and 11 of this Act, to the ACPC and the Congress on a yearly basis. The BSP shall, as part of its regulatory functions, monitor the compliance by the banks with the requirements of this Act.

Section 9. Penalty Clause. — The BSP shall impose administrative sanctions and other penalties on the lending institutions for violation of any of the provisions of this Act. Penalties on noncompliance or under compliance shall be computed at one-half of one percent (0.5%) of noncompliance or under compliance, or at rates prescribed by the BSP Monetary Board. Upon collection of the penalties, the BSP shall remit the same to the implementing agencies as identified under Sections 9, 10 and 11 of this Act. Five percent (5%) of the penalties collected shall be retained by the BSP to cover administrative expenses and twenty percent (20%) shall be allocated as fund for agricultural- and fishery- related organizational- capacity- and institution- budding programs and activities to be implemented equally by the LBP and DBP: Provided, That these programs shall result in equipping the ARBs, duly registered farmers, as well as members of their household and their MSMEs, and agrarian reform communities with the appropriate knowledge and skills to improve their welfare, competitiveness, income and productivity. For this purpose, the LBP and DBP may coordinate with and/or tap the services of qualified training providers as well as the ACPC and the Cooperative Development Authority (CDA), on the design and delivery of these capacity-budding programs.

Section 10. Special Fund. — The Special Fund shall consist of penalties due from banks on their noncompliance or under compliance with the mandatory agri-agra credit requirement under Republic Act No. 10000, conducted after the effectivity of this Act, net of the five percent (5%) amount to be retained by the BSP and the twenty percent (20%) to be allocated as fund for agricultural- and fishery- related organizational- capacity- and institution-building programs and activities in accordance with Section 9 of this Act, and penalties collected under Section 9 of this Act.

The annual penalties for noncompliance and under compliance with the mandatory agri-agra credit that are collected by the BSP under this Act shall be remitted directly to the implementing agencies, within one (1) year and six (6) months from imposition of the same, for distribution in accordance with the provisions under Sections 9, 10 and 11 of this Act.

Section 11. Use of the Special Fund. — The Special Fund under Section 10 of this Act shall be allocated to the following implementing agencies in this manner:

(a) Thirty-five percent (35%) of the fund shall be allocated to the DAR for the titling and parcelization of landholdings covered with collective Certificate of Land Ownership Awards (CLOA);

(b) Sixty-five percent (65%) of the fund shall be made available in the form of credit facility with minimal interest rates and with minimum collateral requirements, to be equally managed by the LBP and the DBP which shall set their geographic coverage in administering said credit facility.

The LBP and DBP shall utilize the Special Fund for lending to farmers and fisheries registered in the RSBSA, farmers and fisheries cooperatives and associations, and microfinance institutions.

In the case of the DBP share, to promote financial inclusion in Islamic communities, particularly the ARBs in the Bangsamoro Region, two and one-half percent (2.5%) in the thirty-two and one-half percent (32.5%) share of DBP shall be allocated to Al-Amanah Islamic Investment Bank of the Philippines (AAIIBP) for as long as the National Government is a majority shareholder of AAIIBP.

All loan repayments and other collections shall be used to fund credit facility of the LBP, DBP and AAIIBP under this section: Provided, That LBP, DBP and AAIIBP shall be allowed to reimburse direct costs incurred in the management of the fund, but in no case shall these reimbursements exceed two percent (2%) of the average quarterly loan balance.

Section 12. Sunset Clause. — The provisions related to the mandatory credit quota for agriculture, fisheries, and rural development under Section 6 of this Act shall cease to have effect on the tenth (10th) year from the approval of this Act: Provided, That all unutilized funds allocated for any of the implementing agencies and all loan collections shall be remitted to the General Fund.

Section 13. Congressional Oversight. — The Congressional Oversight Committee on Agricultural and Fisheries Modernization (COCAFM) shall exercise oversight functions over the implementation of this Act. In line with this, COCAFM shall conduct an independent review of the use of the Special Fund administered by the implementing agencies.

Section 14. Implementing Guidelines. — The BSP, in consultation with the LBP, DBP, AAIIBP, CDA, DA, DAB, the banking industry, microfinance organizations and other relevant agencies, shah, promulgate such rules and regulations as may be necessary to implement the provisions relating to the mandatory agricultural and fisheries financing requirement, within sixty (60) working days after approval of this Act.

Section 15. Separability Clause. — If any part, section or provision of this Act is held invalid or unconstitutional, other provisions not affected thereby shall remain in force and effect.

Section 16. Repealing Clause. — Republic Act No. 10000 is hereby repealed. Any other provisions of laws, decrees, regulations, and administrative orders inconsistent with the provisions of this Act are hereby repealed or amended accordingly.

Section 17. Effectivity. — This Act shall take effect fifteen (15) days after its publication in the Official Gazette or in a newspaper of general circulation.

October 21, 1997

AN ACT PROVIDING FOR THE REGULATION OF THE ORGANIZATION AND OPERATION OF NON-STOCK SAVINGS AND LOAN ASSOCIATIONS

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled::

Section 1. Title. – The short title of this Act shall be the "Revised Non-Stock Savings and Loan Association Act of 1997".

Section 2. Declaration of policy. – It is hereby declared the policy of the State to:

a) encourage industry, frugality and the accumulation of savings, and judicious utilization of credit among the members of non-stock savings and loan associations;

b) regulate and supervise the activities of non-stock savings and loan associations in order to place their operations on a sound, stable, and efficient basis to the end that they may be able to better provide for the establishment of additional savings and credit facilities in a fair manner to their members and to curtail or prevent acts or practices of these Associations which are prejudicial to their members' interest;

c) lay down the minimum requirements and the standards under which non-stock savings and loan Associations may organize and operate; and

d) maximize the protection of members of non-stock savings and loan associations against misfeasance and malfeasance of the trustees and officers thereof.

Section 3. Definition of terms. – For the purposes of implementing this Act, the following definitions shall apply:

a) Non-stock savings and loan association shall mean a non-stock, non-profit corporation engaged in the business of accumulating the savings of its members and using such accumulations for loans to members to service the needs of households by providing long term financing for home building and development and for personal finance;

b) Association shall refer only to non-stock savings and loan associations organized under this Act and the Corporation Code of the Philippines;

c) Monetary Board shall mean the Monetary Board of the Bangko Sentral ng Pilipinas; and

d) Bangko Sentral shall mean the Bangko Sentral ng Pilipinas.

Section 4. Organization of an Association. – At least five (5) but not more than fifteen (15) members of a well-defined group as provided herein may form an Association under this Act. An Association, prior to transacting any business, shall secure a license from the Monetary Board and register with the Securities and Exchange Commission (SEC). The application for a license, signed by a majority of the incorporators and verified by one of the trustees, shall include:

a) the proposed articles of incorporation and bylaws together with names and addresses of the incorporators, trustees and officers, with a statement of their character, experience and general fitness to engage in the non-stock savings and loan business;

b) an itemized statement of the estimated receipts and expenditures of the proposed Association for the first year;

c) a filing fee in such amount as may be determined by the Monetary Board; and

d) such other information as the Monetary Board may require.

The SEC shall not register the articles of incorporation and bylaws of a proposed Association unless the application is accompanied by a certificate of the Monetary Board approving the same. The Monetary Board may deny the application to organize an Association under this Act if it finds that the Association is being organized for any purpose other than to engage in the business of a legitimate non-stock savings and loan association or that the Association's financial program is unsound, or that the proposed members are adequately served by one or more existing Associations.

The Association shall confine its membership to a well-defined group of persons and shall not transact business with the general public. A "well-defined group" shall be defined by the Monetary Board, and shall consist of, but not be limited to, any of the following:

1) employees, officers, and directors of one company, including member-retirees;

2) government employees belonging to the same department/branch/office, including member-retirees; and

3) immediate members of the families (up to second degree of consanguinity or affinity) of those falling under paragraphs 1 and 2 above.

Associations whose articles of incorporation and bylaws were approved and registered prior to the effectivity of this Act and which allow membership coverage broader than the foregoing definition, shall be allowed to continue as such, unless otherwise required by the Monetary Board.

The Monetary Board may, as circumstances warrant, require Associations mentioned in the immediately preceding paragraph to amend their bylaws to comply with the concept of a "well-defined group."

In no case shall the total amount of entrance fees exceed one percent (1%) of the amount to be contributed or otherwise paid in by the particular member: Provided, That for new members, the said fee shall be based on the amount of contribution computed in accordance with the revaluation of the assets of the Association.

No person, association, partnership or corporation shall do business, or hold itself out as doing business, as an Association, or shall use the term "Savings and Loan Association" or any other title or name tending to give the public the impression that it is engaged in the operations and activities of an Association, unless so authorized under this Act.

Section 5. Tax exemption. – An Association shall be exempt from payment of tax in respect to income it receives, including interest on its deposits with any bank: Provided, however, That income derived from any of its properties, real or personal, or any activity conducted for profit, regardless of the disposition thereof, is subject to the corresponding internal revenue taxes imposed under the National Internal Revenue Code.

Interest earnings on deposits of members with Associations as well as the shares of its members from the net income of the Associations shall be exempt from income tax.

Section 6. Prohibition against inquiry into or disclosure of deposits. – All deposits of whatever nature with an Association in the Philippines are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of litigation.

It shall be unlawful for any official or employee of an Association to disclose to any person any information concerning said deposits, except in the cases mentioned in the preceding paragraph of this Sec.. Any official or employee of an Association who violates this Sec. shall be punished under Republic Act No. 1405, as amended.

Section 7. Powers of Associations. – The Association shall accept deposits from and grant loans only to its members, subject to such rules and regulations as the Monetary Board may promulgate to ensure sound, stable and efficient operation: Provided, That no deposits shall be sourced or deducted from the loans granted to a member without his or her written consent.

The loans shall not exceed the members' deposits and contributions in the Association, plus twelve (12) months of his regular salary as the Association may allow or seventy percent (70%) of the fair market value of any property acceptable as collateral on first mortgage that he may offer as security: Provided, That no loan shall have the maturity date of more than five (5) years, except loans on the security of unencumbered real estate for the purpose of home building and home development, which may be granted with maturities not exceeding twenty-five (25) years, and medium and long-term loans to finance agricultural projects, subject to regulations prescribed by the Monetary Board: Provided, further, That the treasurer, cashier, or paymaster of the office employing a member is required, notwithstanding the provision of any existing law, rule and regulation to the contrary, to make deductions from his salary, wage, income or retirement pension pursuant to the terms of his loan, and all other deductions authorized by the member, to remit such deductions to the Association concerned, and to collect such reasonable fee for his services as may be authorized by rules promulgated by the Monetary Board.

In addition to the powers granted it by this Act and existing laws, any Association may:

a) charge reasonable interest and collect such necessary fees and charges incidental to the grant of loans;

b) invest its funds in any sound non-speculative enterprises as well as in bonds, security, and other obligations issued by the Government of the Philippines, or any of its political subdivisions, instrumentalities, or corporations including government-owned or -controlled corporations, subject to the rules and regulations of the Monetary Board;

c) allow members to participate in the profits of the Association;

d) borrow money or incur such obligations not exceeding twenty percent (20%) of the total assets of the Association, from any lending institution. The Monetary Board, may, in meritorious cases, raise the ceiling on the borrowing capacity of an Association to an amount not exceeding thirty percent (30%) of its total assets: Provided, That any such Association organized by employees of an entity or corporation may borrow funds from said entity or corporation but not vice-versa: Provided, further, That the number of the Association's creditors shall not exceed nineteen (19) at any one time;

e) maintain deposits with banks: Provided, That the amount of such deposits shall be subject to the loan limit to a single borrower as prescribed herein or by other special laws or regulations;

f) require the employer-entity or corporation to provide it with adequate office space within which it can conduct its business; and

g) engage in death benefit program meant exclusively for the mutual benefit of its members.

Section 8. Restrictions on Associations. – a) No Association shall have or carry upon its books for any person any demand, commercial or checking account, or any credit to be withdrawn upon the presentation of any negotiable check or draft.

b) No Association shall advertise or represent itself to the public as a bank.

c) No Association shall issue, publish or cause or permit to be issued or published, any advertisement that it is doing or permitted to do any business which is prohibited by law for an Association.

Section 9. Service units. – An Association shall open, maintain and operate service units as may be necessary in order to deliver services to its members subject to approval of the Monetary Board.

Section 10. Agents and salesmen. – No person shall act as an agent or sales representative of an Association or operate an agency without obtaining a license from the Monetary Board. No license is required for a collector of an Association but no person shall hold himself out or act as collector unless he is authorized as a collector in writing by such Association.

Section 11. Merger or consolidation of Associations. – To achieve simplicity, economy and efficiency, different associations of one company or department or office may merge or consolidate upon approval of the Monetary Board.

Section 12. Trustees. – Only members are eligible as trustees of an Association: Provided, That in the case of a merger or consolidation of Associations duly approved by the Monetary Board, the limitation on the maximum number of trustees in a corporation, as provided for in the Corporation Code, shall not be applied for a maximum period of three (3) years so that membership in the new board may include up to the total number of trustees provided for in the respective articles of incorporation of the merging or consolidating Associations.

Section 13. Bond of officers and employees. – All officers and employees of an Association who, in the regular discharge of their duties have access to money or negotiable securities shall, before entering upon such duties, furnish to the employing Association a good and sufficient bond, the form and amount of which shall be prescribed by the Monetary Board, and providing for indemnity to the Association against the loss of money or securities, by reason of their dishonesty.

Section 14. Compensation of trustees, officers and employees. – No trustee, officer, or employee of an Association shall receive from such Association, and no Association shall pay to any trustee, officer, or employee of such Association, any commission, emolument, gratuity or reward based on the volume or number of loans made, or based on the interest or fees collected thereon. Nothing in this Sec. prohibits or limits any of the following:

a) receipt or payment of salaries of trustees, officers and employees;

b) receipt of payment of commissions to agents whether or not based on the volume or number of loans or on the interest or fees collected thereon; and

c) receipt or payment of bonuses to trustees, officers or employees if such bonuses are based on the performance and not on the volume or number of loans made or on the interest or fees collected thereon.

All increase in the compensation, in any form, of all trustees and trustee-officers in excess of ten percent (10%) thereof per annum shall require the approval of the Bangko Sentral.

Section 15. Limitations on lending authority. – a) An Association shall not commit itself to make any loans for amounts in excess of the total of the following amounts:

1) amount of cash available for loan purposes;

2) amount of cash which can be readily realized upon the sale or redemption of permissible investments made by the Association; and

3) amount of credit available for loan purposes from government or private financing institutions.

b) No Association shall directly or indirectly make any loans to any trustee or officer of such Association, either for himself or as agent or as partner of another, except with the written approval of the majority of the trustees of the Association, excluding the trustee concerned: Provided, That the total loans, direct or indirect, granted at any one time to such trustees and officers shall not exceed twenty percent (20%) of the total capital contributions of the Association; in all cases of the credit accommodations granted to trustees and officers under this subSec., the written approval of the majority of the trustees of the Association, excluding the trustee concerned, shall be entered upon the records of the Association and a copy of such entry shall be transmitted forthwith to the Bangko Sentral.

The transactions of all trustee-officers with the Association shall not be under terms more favorable than those transacted with other members. The office of any trustee or trustee-officer of an Association who violates the provisions of this subSec. shall immediately become vacant and the trustees or officers shall be punished by imprisonment of not less than one (1) year nor more than ten (10) years and by a fine of not less than Five thousand pesos (P5,000) nor more than Fifty thousand pesos (P50,000).

Section 16. Execution of loan agreement. – For each loan made by an Association, a written note or other obligation expressing a rate of interest must be executed by the borrower.

Section 17. Liability of officers for loans contrary to law. – No Association shall make or purchase any loan or investment not authorized or permitted under this Act, and any trustee, officer or employee, who on behalf of any such Association, knowingly makes or purchases any such loan or investment or who knowingly consents thereto shall be personally liable to the Association for the full amount of any such loan or investment.

Section 18. Limitations on investment. – a) No Association at any one time shall invest in bonds and securities in a total amount in excess of ten percent (10%) of the total assets of such Association without prior written approval of the Bangko Sentral.

b) No Association at any one time shall invest in real property in a total amount in excess of five percent (5%) of the total assets of such Association.

c) No Association at any one time shall invest in furniture, fixture, furnishings and equipment and leasehold improvements for its offices, in an amount more than ten percent (10%) of its total capital contribution.

Section 19. Reserves. – Every Association shall create a withdrawable share reserve which shall consist of two percent (2%) of the total capital contributions of the members which the Monetary Board may increase to a maximum of three percent (3%), as the situation warrants.

No Association shall distribute to its members any portion of its net income if its withdrawable share reserve is less than the minimum requirement, or if by such payment or distribution, such reserve will be reduced to an amount below the minimum requirement provided herein.

Section 20. Withdrawal by a member. – For the sole purpose of allowing an equitable valuation and distribution of assets for withdrawing members, an Association shall, upon the effectivity of this Act, impute revalued surplus to be added to the withdrawn capital, subject to such rules as the Monetary Board may prescribe. Such rules shall allow a reasonable period between withdrawal of capital and payment of the share of the member from the revalued surplus.

Section 21. Annual reports by the Association. – Every Association shall, within one hundred twenty (120) calendar days after the close of its fiscal year furnish the Monetary Board and post in any of the Association's bulletin board or in any other conspicuous place a copy of its financial statement showing, in such form and detail as the Monetary Board shall require, the amount and character of the assets and liabilities of the Association at the end of the preceding fiscal year. The Monetary Board may, in addition to the foregoing, require the disclosure of such other information as it shall deem necessary for the protection of the members of the Association.

Section 22. Regulatory powers over Associations. – Notwithstanding the provisions of Sec. 130 of Republic Act No. 7653, the power to regulate the operations of any Association by the Monetary Board shall continue and consist of the following:

a) in seeing to it that the capital, financing, direction and administration, as well as the integrity, responsibility, and ability of organizers, administrators, trustees, and officers of all Associations organized and operated under this Act, shall reasonably assure the safety of the interests which its members entrust to them;

b) in regulating the operation and activities of Associations, which include, among others: 1) in placing limits to the maximum credit allowed any individual borrower; 2) in determining the loan repayment period and loan procedures; 3) in imposing a uniform accounting system and manner of keeping the accounts and records of Associations; 4) in instituting periodic surveys of loan and lending procedures, audits, test check of each and other transactions of Associations; and 5) whenever necessary, in conducting training courses for personnel of Associations;

c) in requiring all accountable officers and employees of every Association to post bonds for the faithful performance of their duties in reasonable sums and with such sureties as the Monetary Board may require;

d) in fixing, by rules or by orders, in specific cases, after notice and hearing, the limits of loanable funds, amounts for investment and reserves for withdrawals and other contingencies;

e) in issuing rules and regulations for the proper implementation of this Act, effective administration of the Associations, and to render advisory assistance to all interested parties in order to carry out the intents and purposes of this Act; and

f) in conducting such investigations, taking such remedial measures and exercising all powers under Republic Act No. 7653, insofar as they are applicable in the enforcement of this Act.

The Bangko Sentral shall have the power to enforce the laws, orders, instructions, rules and regulations promulgated by the Monetary Board applicable to Associations; to require Associations, their trustees, officers and agents to conduct and manage the affairs of the Association in a lawful and orderly manner. After due notice and hearing, the Monetary Board may revoke or suspend the license of any Association, for such period as it determines necessary, particularly when the solvency of an Association is imperiled by losses or irregularities, and/or when an Association willfully violates any provisions of this Act or any rule or regulations promulgated hereunder.

The director and examiners of the department of the Bangko Sentral charged with the regulation of Associations are hereby authorized to administer oaths to any trustee, officer or employee of any Association or to any voluntary witness and to compel the presentation of all books, documents, papers or records necessary in his judgment to ascertain the facts relative to the true condition of any Association or to any loan.

Section 23. Penalties. – a) The provisions of Sec. 34 of Republic Act No. 7653 shall apply to any agent, manager, or other officer-in-charge of any Association who willfully refuses any lawful examination into the affairs of such Association.

b) The willful making of a false statement or misleading statement on a material fact to the Monetary Board or to the director of the department of the Bangko Sentral charged with the regulation of Associations or to his examiners shall be punished in accordance with Sec. 35 of Republic Act No. 7653.

c) Whenever any Association, person or entity willfully violates this Act or any order, instruction, rule or regulation issued by the Monetary Board applicable to Associations, the persons responsible for such violation shall be punished in accordance with Sec. 36 of Republic Act No. 7653.

d) Whenever any officer, employee, or agent of an Association accepts gifts, fees or commissions or any other form of remuneration in connection with the approval of a loan from said Association; or overvalues or aids in overvaluing any security for the purpose of influencing in any way the action of the Association on any loan, such officer, employee or agent shall be punished by a fine of not more than Ten thousand pesos (P10,000) or three times the loan amount involved, whichever is higher, or imprisonment for not more than one (1) year, at the discretion of the court.

e) Whenever any applicant for a loan, or borrower of an Association fraudulently overvalues property offered as security for loan from the said Association; or furnishes false, or makes willful misrepresentation of material facts for the purpose of obtaining, renewing, or increasing a loan or extending the period thereof; or attempts to defraud the said Association in the event of a court action to recover a loan; or offers any officer, of a court action to recover a loan; or offers any officer, employee or agent of an Association any gift, fee, commission, or other form of compensation in order to influence such Association personnel into approving a loan application; such applicant or borrower shall be punished by a fine of not more than Five thousand pesos (P5,000) or three times the loan amount involved, whichever is higher, or imprisonment for not more than one (1) year, at the discretion of the court.

f) Whenever any examiner, officer or employee of the Bangko Sentral, who is assigned to examine, assist or render technical service to an Association, overvalues or aids in overvaluing any security for the purpose of influencing in any way the action of the Association on any loan or connives or aids in the commission of the same, he shall be punished by a fine of not more than Ten thousand pesos (P10,000) or three times the loan amount involved, whichever is higher, or imprisonment for not more than one (1) year, at the discretion of the court.

Section 24. Annual fees. – Consistent with the provisions of Sec. 28 of Republic Act No. 7653, any Association organized under this Act may, pursuant to regulations promulgated for the purpose by the Monetary Board, be required to contribute to the Bangko Sentral an annual fee to be determined by the Monetary Board.

Section 25. Implementation. – For the purpose of carrying the objectives of this Act, the Bangko Sentral is authorized to require the services and facilities of any department or instrumentality of the government or any officer or employee of any such department or instrumentality.

Section 26. Annual report of the Monetary Board. – The Monetary Board shall submit a report to the Congress of the Philippines as of the end of each calendar year of all the rules and regulations promulgated by it in accordance with the provisions of this Act, together with the explanations of its reasons therefor.

Section 27. Industry Association. – Membership in an existing association of Associations duly accredited and recognized by the Bangko Sentral, is hereby encouraged.

Section 28. Applicability of other laws. – The provisions of Republic Act No. 7653 and Republic Act No. 337, as amended, insofar as they are applicable and not in conflict with any provision of this Act, shall apply to Associations organized hereunder.

Section 29. Separability clause. – If any provision of this Act or the application thereof to any persons or circumstances is held invalid, the other provisions of this Act and the application of such provisions to other persons and circumstances, shall not be affected thereby.

Section 30. Repealing clause. – Republic Act No. 3779, as amended, is hereby repealed. Any law or parts of law inconsistent with the provisions of this Act are hereby repealed. In all matters affecting the price stability of the peso, the provisions of Republic Act No. 7653 shall prevail.

Section 31. Effectivity. – This Act shall take effect fifteen (15) days following the completion of its publication in the Official Gazette or in two (2) national newspapers of general circulation.

Approved: October 21, 1997.

February 23, 1995

AN ACT PROVIDING FOR THE REGULATION OF THE ORGANIZATION AND OPERATIONS OF THRIFT BANKS, AND FOR OTHER PURPOSES

CHAPTER I Declaration of Policy and Definitions

SECTION 1. Title. — This Act shall be known and cited as the "Thrift Banks Act of 1995."

SECTION 2. Declaration of Policy. — It is hereby declared the policy of the State to:

(a) Recognize the indispensable role of the private sector, to encourage private enterprise, and to provide incentives to needed investments;

(b) Promote economic development pursuant to the socio-economic program of the government, to expand industrial and agricultural growth, to encourage the establishment of more private thrift banks in order to meet the needs for capital, personal and investment credit or medium- and long-term loans for Filipino entrepreneurs;

(c) Encourage and assist the establishment of thrift bank system which will promote agriculture and industry and at the same time place within easy reach of the people the medium- and long-term credit facilities at reasonable cost;

(d) Encourage industry, frugality and the accumulation of savings among the public, and the members and stockholders of thrift banks; and

(e) Regulate and supervise the activities of thrift banks in order to place their operations on a sound, stable and efficient basis and to curtail or prevent acts or practices which are prejudicial to the public interest.

SECTION 3. Definition of Terms. — For purposes of implementing this Act, the following definitions shall apply:

(a) "Thrift banks" shall include savings and mortgage banks, private development banks, and stock savings and loans associations organized under existing laws, and any banking corporation that may be organized for the following purposes:

(1) Accumulating the savings of depositors and investing them, together with capital loans secured by bonds, mortgages in real estate and insured improvements thereon, chattel mortgage, bonds and other forms of security or in loans for personal or household finance, whether secured or unsecured, or in financing for home building and home development; in readily marketable and debt securities; in commercial papers and accounts receivables, drafts, bills of exchange, acceptances or notes arising out of commercial transactions; and in such other investments and loans which the Monetary Board may determine as necessary in the furtherance of national economic objectives;

(2) Providing short-term working capital, medium-and long-term financing, to businesses engaged in agriculture, services, industry and housing; and

(3) Providing diversified financial and allied services for its chosen market and constituencies specially for small and medium enterprises and individuals.

(b) "Monetary Board" shall mean the Monetary Board of the Bangko Sentral ng Pilipinas.

(c) "Bangko Sentral" shall refer to the Bangko Sentral ng Pilipinas created under Republic Act No. 7653.

CHAPTER II Organization

SECTION 4. Organization. — A thrift bank shall be organized in the form of stock corporation. The Monetary Board shall fix the minimum paid-up capital of thrift banks in such amount as the Board may consider necessary for the safe and sound operation of thrift banks taking into account the development thrusts of this Act and due protection of the general public. No thrift bank shall be organized without a certificate of authority from the Monetary Board.

SECTION 5. Establishment of Thrift Banks. — The articles of incorporation of any bank, or any amendment thereto, shall not be registered by the Securities and Exchange Commission unless accompanied by a certificate of authority issued by the Monetary Board, under its official seal. Such certificate shall not be issued unless the Monetary Board is satisfied from the evidence submitted to it: (a) that all the requirements of the existing laws and regulations to engage in business for which the applicant is proposed to be incorporated have been complied with; (b) that public interest and the economic conditions, both general and local, justify the authorization; and (c) that the amount of capital, the financing organization, direction and administration, as well as the integrity and the responsibility of the organizers and administrators reasonably assure the safety of the interest which the public may entrust to them.

The by-laws of any thrift bank, or any amendment thereto, shall not be registered by the Securities and Exchange Commission unless accompanied by a certificate of the Monetary Board to the effect that such by-laws or amendments thereto are in accordance with law.

SECTION 6. Bank Management. — In order to maintain the quality of bank management and afford better protection to depositors and the public in general, the Monetary Board may pass upon and review the qualifications of persons who are elected or appointed bank directors and officers and disqualify those unfit. The Monetary Board shall prescribe the qualifications of bank directors and officers for purposes of this Section.

SECTION 7. Directors and Officers. — At least a majority of the members of the board of directors of any thrift bank which may be established after the effectivity of this Act shall be citizens of the Philippines: Provided, however, That no appointive or elective official, whether full-time or part-time, shall at the same time serve as officer of any thrift bank, except in cases where such service is incident to financial assistance provided by the government or a government-owned or -controlled corporation to the bank: Provided, further, That in the case of merger or consolidation duly approved by the Monetary Board, the limitation on the number of directors in a corporation, as provided in Section 14 of the Corporation Code of the Philippines, shall not be applied so that membership in the new board may include up to the total number of directors provided for in the respective articles of incorporation of the merging or consolidating banks.

CHAPTER III Ownership and Capital Requirements

SECTION 8. Ownership. — At least forty percent (40%) of the voting stock of a thrift bank which may be established after the approval of this Act shall be owned by citizens of the Philippines, except where a new bank may be established as a result of a merger or consolidation of existing thrift banks with foreign holdings in which case, the resulting foreign holdings shall not be increased but may be reduced and, once reduced, shall not be increased thereafter beyond sixty percent (60%) of the voting stock of thrift banks. The percentage of the foreign-owned voting stocks shall be determined by the citizenship of individual stockholders and in case of corporations owning shares, by the citizenship of each stockholder in the said corporations.

Any provision of existing laws to the contrary notwithstanding, stockholdings in a thrift bank shall be exempt from any ownership ceiling for a period of ten (10) years from the effectivity of this Act.

SECTION 9. Combined Capital Accounts of Thrift Banks. — The combined capital accounts of each thrift bank shall not be less than an amount equal to ten percent (10%) of its risk assets which is defined as its total assets minus the following assets:

(a) Cash on hand;

(b) Amounts from the Bangko Sentral;

(c) Evidences of indebtedness of the Republic of the Philippines and of the Bangko Sentral, and any other evidences of indebtedness or obligations the servicing and repayment of which are fully guaranteed by the Republic of the Philippines;

(d) Loans to the extent covered by hold-out on, or assignment of deposits maintained in the lending bank and held in the Philippines; and

(e) Other non-risk items as the Monetary Board may, from time to time authorize to be deducted from total assets.

The Monetary Board shall prescribe the manner of determining the total assets of banking institutions for purposes of this Section.

Whenever the capital accounts of a bank are deficient with respect to the requirements of the preceding paragraph, the Monetary Board, after considering the report of the appropriate supervising department on the state of solvency of the institution, shall limit or prohibit the distribution of net profits and shall require that part or all of net profits be used to increase the capital accounts of the institution until the minimum requirement has been met. The Monetary Board may, after considering the aforesaid report of the appropriate supervising department and if the amount of the deficiency justifies it, restrict or prohibit the making of new investments of any sort by the bank, with the exception of purchases of evidences of indebtedness included under subsection (c) of this Section, until the minimum required capital ratio has been restored.

Where in the process of a bank merger or consolidation, the merged or constituent bank may not be able to comply fully with the net worth to risk asset ratio herein prescribed, the Monetary Board may, at its discretion, temporarily relieve the bank from full compliance with this requirement under such conditions it may prescribed.

CHAPTER IV Powers

SECTION 10. Powers of Thrift Banks. — In addition to powers granted it by this Act and existing laws, any thrift bank may:

(a) Accept savings and time deposits;

(b) Open current or checking accounts: Provided, That the thrift bank has net assets of at least Twenty million pesos (P20,000,000) subject to such guidelines as may be established by the Monetary Board; and shall be allowed to directly clear its demand deposit operations with the Bangko Sentral and the Philippine Clearing House Corporation;

(c) Act as correspondent for other financial institutions;

(d) Act as collection agent for government entities, including but not limited to, the Bureau of Internal Revenue, Social Security System, and the Bureau of Customs;

(e) Act as official depository of national agencies and of municipal, city or provincial funds in the municipality, city or province where the thrift bank is located, subject to such guidelines as may be established by the Monetary Board;

(f) Rediscount paper with the Philippine National Bank, the Land Bank of the Philippines, the Development Bank of the Philippines, and other government-owned or -controlled corporations. Said institutions shall specify the nature of paper deemed acceptable for rediscount, as well as rediscounting rate to be charged by any of these institutions; and

(g) Issue mortgage and chattel mortgage certificates, buy and sell them for its own account or for the account of others, or accept and receive them in payment or as amortization of its loan.

Such mortgage and chattel mortgage certificates shall be issued exclusively in national currency and exclusively for the financing of equipment loans, mortgage loans for the acquisition of machinery and other fixed installations, conservation, enlargement or improvement of productive properties and real estate mortgage loans for: (1) the construction, acquisition, expansion or improvement of rural and urban properties; (2) the refinancing of similar loans and mortgages; and (3) such other purposes as may be authorized by the Monetary Board.

A thrift bank shall coordinate the amounts and maturities of its certificates with those of its loans, so as to ensure adequate cash receipts for the payment of principal and interest at the time they become due. The bank shall accept its own certificates at least at the actual price of issue, in any prepayment of loans which mortgage or chattel mortgage debtors may wish to make: Provided, That the date of maturity of the certificates is not later than the date on which the payment would otherwise become due, in the absence of the aforesaid prepayment;

(h) Purchase, hold and convey real estate under the same conditions as those governing commercial banks as specified under Section 25 of Republic Act No. 337;

(i) Engage in quasi-banking and money market operations;

(j) Open domestic letters of credit;

(k) Extend credit facilities to private and government employees: Provided, That in the case of a borrower who is a permanent employee or wage earner, the treasurer, cashier or paymaster of the office employing him is authorized, notwithstanding the provisions of any existing law, rules and regulations to the contrary, to make deductions from his salary, wage or income pursuant to the terms of his loan, to remit deductions to the thrift bank concerned, and collect such reasonable fee for his services;

(l) Extend credit against the security of jewelry, precious stones and articles of similar nature, subject to such rules and regulations as the Monetary Board may prescribe; and

(m) Offer other banking services as provided in Section 72 of Republic Act No. 337 and Republic Act No. 6426, as amended.

Thrift banks may perform the services under subsections (b), (d), (e), (g) and (i) only upon prior approval of the Monetary Board.

Nothing in this Section shall be construed as precluding a thrift bank from performing, with prior approval of the Monetary Board, commercial banking services, or from operating under an expanded banking authority, nor from exercising, whenever applicable and not inconsistent with the provisions of this Act and Bangko Sentral regulations, and such other powers incident to a corporation.

SECTION 11. Limitations on Lending Authority. — Except as the Monetary Board may otherwise prescribe, the direct indebtedness to thrift banks of any person, company, corporation, or firm, including the indebtedness of members of a partnership and association, for money borrowed, excluding: (a) loans secured by obligations of the Bangko Sentral; (b) loans fully guaranteed by the government as to the payment of principal and interest; (c) loans to the extent covered by the hold-out on, or assignment of, deposits maintained in the lending bank and held in the Philippines; and (d) other loans or credits as the Monetary Board may, from time to time, specify as non-risk assets, which shall in no time exceed fifteen percent (15%) of unimpaired capital and surplus of the bank.

Notwithstanding the provisions of the preceding paragraph and subject to such regulations as the Monetary Board may prescribe, the total indebtedness of any borrower to the bank may amount to a further fifteen percent (15%) of the unimpaired capital and surplus of such bank provided the additional indebtedness is for the purpose of financing subdivision or housing development, medium- and low-income borrowers and agriculture on a fully secured basis.

The term "indebtedness" as used herein, shall mean the direct liability of the maker or acceptor of paper discounted with or sold to such bank and liability of the indorser, drawer or guarantor who obtains a loan from or discounts paper with or sells paper under his guaranty to such bank; and shall include in the case of liabilities of a partnership or association the liabilities of the several members thereof; and shall include in the case of liabilities of a corporation, all liabilities of all the subsidiaries thereof in which such corporation owns or controls a majority interest: Provided, That even if the parent corporation, partnership or association has no liability to the bank, the Monetary Board may prescribe the combination of liabilities of subsidiary corporations or members of the partnership or association under certain circumstances, including but need not be limited to any of the following situations: (a) the parent corporation, partnership or association guarantees the repayment of liabilities; (b) the liabilities were incurred for the accommodation of the parent corporation or another subsidiary or of the partnership or association; or (c) the subsidiaries through separate entities operate merely as departments or divisions of a single entity: Provided, further, That the discount of bills of exchange drawn in good faith against actually existing values, and the discount of commercial and business paper actually owned by the person negotiating the same, shall not be considered as money borrowed for the purpose of this Section: Provided, finally, That certain types of contingent liabilities of borrowers may be included among the total liabilities as may be determined by the Monetary Board.

Loan accommodations granted by thrift banks to any other bank, as well as deposits maintained by them in any bank licensed to do business in the Philippines, shall be subject to the loan limit of any single borrower as herein prescribed.

SECTION 12. Investment in Allied Undertakings. — Subject to such guidelines as may be established by the Monetary Board, thrift banks may invest in equities of allied undertakings as hereinafter enumerated: Provided, That: (a) the total investments in equities shall not exceed twenty-five percent (25%) of the net worth of the thrift bank; (b) the equity investment in any single enterprise shall be limited to fifteen percent (15%) of the net worth of the thrift bank; (c) the equity investment of the thrift bank in any single enterprise shall remain a minority holding in that enterprise; and (d) the equity investment in other banks shall be subject to the same provisions governing similar investments of commercial banks and shall be deducted from the investing bank's net worth for the purpose of computing of the prescribed ratio as provided in Section 9 hereof: Provided, further, That equity investments shall not be permitted in non-related activities. Where the allied activity is a wholly- or majority-owned subsidiary of the thrift bank, the Bangko Sentral may subject it to examination.

Investment in allied undertaking shall include institutions engaged in the following activities:

(a) Banking and financing;

(b) Warehousing and other post-harvesting activities;

(c) Fertilizer and agricultural chemical and pesticides distribution;

(d) Farm equipment distribution;

(e) Trucking and transportation of agricultural products;

(f) Marketing of agricultural products;

(g) Leasing; and

(h) Other undertakings as may be determined by the Monetary Board.

CHAPTER V Supervision

SECTION 13. Supervisory Powers of the Monetary Board. — The power to supervise the operation of any thrift bank by the Monetary Board shall consist in placing limits to the maximum credit allowed to any individual borrower; in indicating the manner in which technical assistance shall be extended to thrift banks; in imposing a uniform accounting system and manner of keeping the accounts and records of thrift banks; in instituting periodic surveys of loans and lending procedures, audits, test-check of cash and other transactions of the thrift banks; in conducting training courses for personnel of thrift banks; and, in general, in supervising the business operations of the thrift banks.

The Bangko Sentral shall have the power to enforce the laws, orders, instructions, rules and regulations promulgated by the Monetary Board applicable to thrift banks; to require thrift banks, their directors, officers and agents to conduct and manage the affairs of the thrift bank in a lawful and orderly manner; and upon proof that the thrift bank or its board of directors or officers are conducting and managing the affairs of the bank in a manner contrary to laws, orders, instructions, rules and regulations promulgated by the Monetary Board or in a manner substantially prejudicial to the interest of the government, depositors, creditors, or the general public, to appoint a conservator pursuant to Section 29 of Republic Act No. 7653 without prejudice to the prosecution of persons responsible for such violations under the provisions of Sections 36 and 37 of Republic Act No. 7653.

The director and examiners of the department of Bangko Sentral charged with the supervision of thrift banks are hereby authorized to administer oaths to any director, officer or employee of any thrift bank or to any voluntary witness and to compel the presentation of all books, documents, papers or records necessary in his or their judgment to ascertain the facts relative to the true conditions of any thrift bank or to any loan.

CHAPTER VI Incentives

SECTION 14. Reserve Requirement Differential. — Reserve requirement imposed on thrift banks by the Monetary Board shall enjoy equitable preferential terms over those imposed on commercial banks: Provided, That the Monetary Board may change reserve differentials for the purpose of stimulating economic growth in the countryside, thereby promoting national economic development.

SECTION 15. Liberalized Branching Rules. — Thrift banks shall have unrestricted branching right within the region, free from any assessment or surcharges required in setting up a branch, but under coordination with the Bangko Sentral which will have to assess that there are qualified personnel, control and procedures to operate the branch.

SECTION 16. Notices of Statement of Condition. — Subject to Monetary Board approval, a thrift bank may publish its statement of condition in a newspaper of general circulation, or post it in the most conspicuous area of its premises, municipal building, municipal public market, barangay hall and barangay public market if there be any, where the thrift bank concerned is located.

CHAPTER VII Exemptions

SECTION 17. Tax Exemptions. — All thrift banks, whether created or organized under this Act or in operation as of the date of effectivity of this Act, shall be exempt from payment of all taxes, fees and charges of whatever nature and description, except the corporate income taxes and local taxes, fees and charges for a period of five (5) years, counted from the date of commencement of operations for thrift banks created under this Act and from the date of the effectivity of this Act for existing thrift banks.

SECTION 18. Exemption from Publication Requirement. — The foreclosure of mortgage covering loans granted by thrift banks and executions of judgments thereon involving real properties and levied upon by a sheriff shall be exempt from publication requirements where the total amount of the loan, excluding interest due and unpaid, does not exceed One hundred thousand pesos (P100,000) or such amount as the Monetary Board may prescribe, as may be warranted by the prevailing economic conditions and by the nature of service of customers served by each category of the thrift bank. It shall be sufficient publication in such cases if the notice of foreclosure and execution of judgment are posted in the conspicuous area of a thrift bank's premises, municipal building, the municipal public market, the barangay hall, and the barangay public market, if there be any, where the land mortgaged is situated within a period of sixty (60) days immediately preceding the public auction of the execution of judgment. Proof of publication as required herein shall be accomplished by an affidavit of the sheriff or officer conducting the foreclosure sale or execution of judgment and shall be attached with the records of the case.

A thrift bank shall be allowed to foreclose lands mortgaged to it: Provided, That said lands shall be covered under Republic Act No. 6657.

SECTION 19. Exemption from Notarial Charges. — Any metropolitan, municipal, or municipal circuit trial court judge in his capacity as notary public ex officio shall administer the oath to or acknowledge the instrument of any thrift bank and its borrowers or mortgagor free from all charges, fees and documentary stamp tax, collectible under existing laws, relative to any loan or transaction not exceeding Fifty thousand pesos (P50,000) or such amount as the Secretary of Finance, upon recommendation of the Monetary Board, may prescribe as may be necessary to promote and expand the economy.

SECTION 20. Exemption from Registration Fees. — Any register of deeds shall accept from any thrift bank and its borrowers and mortgagors for registration, free from all charges, fees and documentary stamp tax, collectible under existing laws, any instrument, whether voluntary or involuntary, relating to loans or transactions extended by any thrift bank in an amount not exceeding Fifty thousand pesos (P50,000): Provided, however, That charges, if any, shall be collectible on the amount in excess of Fifty thousand pesos (P50,000); and that an instrument related to assignments of several mortgages consolidated in a single deed, if any, shall be levied only on the amount in excess of Fifty thousand pesos (P50,000) of the consideration in the assignment of each mortgage, or such amount as the Secretary of Finance, upon recommendation of the Monetary Board, may prescribe as may be necessary to promote and expand the economy.

CHAPTER VIII Prohibitions

SECTION 21. Prohibited Acts. — Without prejudice to any prosecution under any law which may have been violated, a fine of not more than Ten thousand pesos (P10,000) or imprisonment for not less than six (6) months but not more than ten (10) years, or both, at the discretion of the court, shall be imposed upon:

(a) Any officer, employee, or agent of a thrift bank who shall:

(1) Make false entries in any bank report or statement thereby affecting the financial interest of, or causing damage to, the bank or any person; or

(2) Without order of a court of competent jurisdiction, disclose any information relative to the funds or properties in the custody of the bank belonging to private individuals, corporations, or any other entity; or

(3) Accept gifts, fees or commissions or any other form of remuneration in connection with the approval of a loan from said bank; or

(4) Overvalue or aid in the overvaluing any security for the purpose of influencing in any way the action of the bank on any loan; or

(5) Appear and sign as guarantor, indorser, or surety for loans granted; or

(6) Violate any provision of this Act.

(b) Any applicant for a loan from, or borrower of a thrift bank who shall:

(1) Misuse, misapply or divert the proceeds of the loan obtained by him from its declared purpose; or

(2) Fraudulently overvalue property offered as security for a loan from said bank; or

(3) Give out or furnish false or willful misinterpretation of material facts for the purpose of obtaining, renewing, or increasing a loan extending the period thereof; or

(4) Attempt to defraud the said bank in the event of court action to recover the loan; or

(5) Offer any officer, employee or agent of a thrift bank a gift, fee, commission or other forms of compensation in order to influence such bank personnel into approving a loan application; or

(6) Dispose or encumber the property offered as security for the loan.

(c) Any examiner, or officer or employee of the Bangko Sentral or of any department, bureau, office, branch, or agency of the government who is assigned to examine, supervise, assist or render technical service to thrift banks and who shall connive or aid in the commission of the same.

(d) Any metropolitan, municipal, or municipal circuit trial court judge or register of deeds who shall demand or accept, directly or indirectly, any gift, fee, commission, or any other form of compensation in connection with the service, or shall arbitrarily and without reasonable cause delay the acknowledgment or administration of oath or the registration of documents required to be performed by said judge or by said register of deeds shall be punished with a fine of not more than One thousand pesos (P1,000) or by imprisonment of not more than one (1) year, or both, at the discretion of the court.

(e) Any bank not organized under this Act and any person, association, or corporation doing the business of banking, not authorized under this Act or existing laws which shall use the words "Development Bank," "Savings Bank," "Mortgage Bank," "Savings and Mortgage Bank," or "Savings and Loan Association," as part of the name or title of such bank or of such person, association, or corporation, shall be punished by a fine of not less than One hundred pesos (P100), but in no case to exceed Thirty thousand pesos (P30,000), for each day during which the said words are so used.

CHAPTER IX General Provisions

SECTION 22. Minors as Depositors. — Minors in their own rights and in their own names may make deposits and withdraw the same, and may receive dividends and interest: Provided, however, That, if any guardian shall give notice in writing to any thrift bank not to make payments of deposits, dividends, or interest to the minor of whom he is the guardian, then such payment shall be made only to the guardian.

SECTION 23. Return of Deposits. — Deposits shall be returned to the depositors or to their legal representatives in the manner and at the time and under the conditions which shall be determined by the board of directors and stipulated in regulations which shall be in conformity with laws and with such regulations as the Monetary Board may prescribe.

SECTION 24. Deposit Insurance. — Deposit in thrift banks shall be eligible for insurance coverage under Republic Act No. 3591, as amended.

SECTION 25. Annual Fees. — Consistent with the provisions of Section 28 of Republic Act No. 7653, any thrift bank organized under this Act may, pursuant to regulations promulgated for the purpose by the Monetary Board, be required to contribute to the Bangko Sentral an annual fee in an amount to be determined by the Monetary Board.

SECTION 26. Implementation. — For the purpose of carrying the objectives of this Act, the Bangko Sentral is authorized to require the services and facilities of any department or instrumentality of the government or any officer or employee of any such department or government instrumentality.

SECTION 27. Annual Report. — The Monetary Board shall submit a report to the Congress of the Philippines at the end of each calendar year of all the rules and regulations promulgated by it in accordance with the provisions of this Act, as well as its other actuations in connection with thrift banks together with an explanation of its reasons therefor and recommendations on legislative actions.

SECTION 28. Parity Clause Under the Same Circumstances. — The incentives granted shall be enjoyed by financial institutions giving the same services for countryside lending and development under such terms as may be equitable and as may be defined by the Monetary Board.

SECTION 29. Separability Clause. — If any provision of this Act or the application thereof to any person or circumstances is held invalid, the other provisions of this Act and the application of such provisions to other persons and circumstances, shall not be affected thereby.

SECTION 30. Repealing Clause. — Republic Act No. 4093, Republic Act No. 3779 to the extent that it applies to thrift banks, and Chapter 5 of Republic Act No. 337 are hereby repealed. Any law or parts of any law inconsistent with the provisions of this Act are hereby repealed. In all matters affecting the price stability of the peso, the provisions of Republic Act No. 7653 shall prevail.

SECTION 31. Applicability of Other Laws. — The provisions of Republic Act No. 7653 and Republic Act No. 337, as amended, insofar as they are applicable and not in conflict with any provision of this Act, shall apply to thrift banks organized hereunder.

SECTION 32. Effectivity. — This Act shall take effect fifteen (15) days following the completion of its publication in the Official Gazette or in two (2) national newspapers of general circulation.

Approved: February 23, 1995

Published in Malaya and the Philippine Times Journal on March 2, 1995.

May 18, 1994

AN ACT LIBERALIZING THE ENTRY AND SCOPE OF OPERATIONS OF FOREIGN BANKS IN THE PHILIPPINES AND FOR OTHER PURPOSES

SECTION 1. Declaration of Policy. — The State shall develop a self-reliant and independent national economy effectively controlled by Filipinos and encourage, promote, and maintain a stable, competitive, efficient, and dynamic banking and financial system that will stimulate economic growth, attract foreign investments, provide a wider variety of financial services to Philippine enterprises, households and individuals, strengthen linkages with global financial centers, enhance the country's competitiveness in the international market and serve as a channel for the flow of funds and investments into the economy to promote industrialization.

Pursuant to this policy, the Philippine banking and financial system is hereby liberalized to create a more competitive environment and encourage greater foreign participation through increase in ownership in domestic banks by foreign banks and the entry of new foreign bank branches.

In allowing increased foreign participation in the financial system, it shall be the policy of the State that the financial system shall remain effectively controlled by Filipinos.

SECTION 2. Modes of Entry. — The Monetary Board may authorize foreign banks to operate in the Philippine banking system through any one of the following" modes of entry: (i) by acquiring, purchasing or owning up to one hundred percent (100%) of the voting stock of an existing bank; (ii) by investing in up to one hundred percent (100%) of the voting stockof a new banking subsidiary incorporated under the laws of the Philippines; or (iii) by establishing branches with full banking authority. (as amended by RA No 10641)

SECTION 3. Guidelines for Approval. — In approving entry applications of foreign banks, the Monetary Board shall: (i) ensure geographic representation and complementation; (ii) consider strategic trade and investment relationships between the Philippines and the country of incorporation of the foreign bank; (iii) study the demonstrated capacity, global reputation for financial innovations and stability in a competitive environment of the applicant; (iv) see to it that reciprocity rights are enjoyed by Philippine banks in the applicant’s country; and (v) consider willingness to fully share their technology.

Only established, reputable and financially sound foreign banks shall be allowed entry in accordance with Section 2 of this Act. The foreign bank applicant must be widely-owned and publicly-listed in its country of origin, unless the foreign bank applicant is owned and controlled by the government of its country of origin.

In the exercise of this authority, the Monetary Board shall adopt such measures as may be necessary to ensure that the control of at least sixty percent(60%) of the resources or assets of the entire banking system is held by domestic banks which are majority-owned by Filipinos. (as amended by RA No 10641)

SECTION 4. Capital Requirements. — (i) For Locally Incorporated Subsidiaries – The minimum capital required for locally incorporated subsidiaries of foreign banks shall be equal to that prescribed by the Monetary Board for domestic banks of the same category.

(ii) For Foreign Bank Branches – Foreign banks that shall be authorized to establish branches pursuant to Section 2(hi) of this Act shah permanently assign capital of an amount not less than the minimum capital required for domestic banks of the same category. The permanently assigned capital shall be inwardly remitted and converted into Philippine currency.

The foreign bank branch may open up to five (5) sub-branches as may be approved by the Monetary Board. Locally incorporated subsidiaries of foreign banks pursuant to Section 2(h) of this Act shall have the same branching privileges as domestic banks of the same category. (as amended by RA No 10641)

SECTION 5. Head Office Guarantee. — The head office of foreign bank branches shall guarantee prompt payment of all liabilities of its Philippine branches.

SECTION 6. Entrants under Section 2 (iii). — Foreign banks shall be allowed entry under Section 2 (iii) within five (5) years from the effectivity of this Act. During this period, six (6) new foreign banks shall be allowed entry under Section 2(iii) upon the approval of the Monetary Board. An additional four (4) foreign banks may be allowed entry on recommendation of the Monetary Board, subject to compliance with Sections 2, 3, 4, and 5 of this Act, upon approval of the President as the national interest may require. (as repealed by RA No 10641)

SECTION 7. Board of Directors. — Non-Filipino citizens may become members of the Board of Directors of a bank to the extent of the foreign participation in the equity of said bank.

SECTION 8. Equal Treatment. — Foreign banks authorized to operate under Section 2 of this Act, shall perform the same functions, enjoy the same privileges, and be subject to the same limitations imposed upon a Philippine bank of the same category. The single borrower’s limit of a foreign bank branch shall be aligned with that of a domestic bank.

The foreign banks shall guarantee the observance of the rights of their employees under the Constitution.

Any right, privilege or incentive granted to foreign banks or their subsidiaries or affiliates under this Act, shall be equally enjoyed by and extended under the same conditions to Philippine banks. (as amended by RA No 10641)

SECTION 9. Participation in Foreclosure Proceedings.—Foreign banks which are authorized to do banking business in the Philippines through any of the modes of entry under Section 2 hereof shall be allowed to bid and take part in foreclosure sales of real property mortgaged to them, as well as to avail of enforcement and other proceedings, and accordingly take possession of the mortgaged property, for a period not exceeding five (5) years from actual possession: Provided, That in no event shall title to the property be transferred to such foreign bank. In case said bank is the winning bidder, it shall, during the said five (5)-year period, transfer its rights to a qualified Philippine national, without prejudice to a borrower’s rights under applicable laws. Should the bank fail to transfer such property within the five (5)-year period, it shall be penalized one half (1/2) of one percent (1%) per annum of the price at which the property was foreclosed until it is able to transfer the property to a qualified Philippine national. (as amended by RA No 10641)

RA No 10641 Section 7. Transitory Provisions. –Foreign banks which are already authorized to do banking business in the Philippines through any of the modes of entry under Section 2 hereof may apply to change their original mode of entry.

Foreign banks operating through branches in the Philippines upon the effectivity of this Act shall retain their original privilege upon entry to establish a limited number of sub-branches. However, the previous restriction on the locations of such additional branches is hereby lifted.

The existing Philippine branches of foreign banks shall comply within one (1) year from the effectivity of this Act with the minimum capital requirements as prescribed under Section 4(ii) of this Act, unless otherwise extended by the Monetary Board.

SECTION 10. Transitory Provisions. — Foreign banks operating through branches in the Philippines upon the effectivity of this Act, shall be eligible for the privilege of establishing up to six (6) additional branches under the same terms and conditions required by Section 4 (n) hereof: Provided, That for any branch additional to what is existing at the time of the effectivity of this Act, the prescribed permanently assigned capital shall be complied with immediately: Provided, further, That a foreign bank may open three (3) branches in the location of its choice and the next three (3) branches in locations designated by the Monetary Board to insure balanced economic development in all the regions.

The existing Philippine branches of foreign banks shall be given one-and-a-half (1 1/2) years from the effectivity of this Act to comply with the minimum capital requirements as prescribed under Section 4 (ii) of this Act.

SECTION 11. Separability Clause. — If any provision of this Act is declared unconstitutional, the same shall not affect the validity of the other provisions not affected thereby.

SECTION 12. Applicability of Other Banking Laws. — The provisions of Republic Act No. 7653, otherwise known as the New Central Bank Act and the provisions of Republic Act No. 8791, otherwise known as The General Banking Law of 2000′, insofar as they are applicable and not in conflict with any provision of this Act, shall apply to banks authorized pursuant to this Act. (as amended by RA No 10641)

SECTION 13. Rule-Making Powers of the Monetary Board of the Bangko Sentral ng Pilipinas and Compliance Reports. – The Monetary Board is hereby authorized to issue such rules and regulations as may be needed to implement "the provisions of this Act. On or before May 30 of each year, the Monetary Board shall file a written report to Congress and its respective Banks Committees, on the developments in the implementation of this Act. The implementing rules and regulations of this Act shall be published in at least two (2) newspapers of general circulation. (as amended by RA No 10641)

SECTION 14. Amendment and Repeal of Inconsistent Laws. — Sections 11, 12, 12-A, 12-B, 13, 14-A, 21-B, and 68 of Republic Act No. 337, as amended, otherwise known as the General Banking Act; Sections 4 and 5 of Republic Act No. 7353, otherwise known as the Rural Banks Act; Sections 4 and 14 of Republic Act No. 3779, as amended, otherwise known as the Savings and Loan Association Act; and Section 4 of Republic Act No. 4093, as amended, otherwise known as the Private Development Banks Act insofar as they are inconsistent with this Act, are hereby repealed or modified accordingly.

SECTION 15. Effectivity Clause. — This Act shall take effect fifteen (15) days following its publication in the Official Gazette or in two (2) national newspapers of general circulation.

Approved: May 18, 1994

Published in Malaya and the Philippine Times Journal on May 21, 1994.

AN ACT PROVIDING FOR THE CREATION, ORGANIZATION AND OPERATION OF RURAL BANKS,

AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. This Act shall be known and cited as the "Rural Act of 1992."

Section 2. The State hereby recognizes the need to promote comprehensive rural development with the end in view of attaining equitable distribution of opportunities, income and wealth; a sustained increase in the amount of goods and services produced by the nation of the benefit of the people; and in expanding productivity as a key raising the quality of life for all, especially the underprivileged.

Towards these ends, the State hereby encourages and assists in the establishment of rural banking system designed to make needed credit available and readily accessible in the rural areas on reasonable terms.

Section 3. In furtherance of this policy, the Monetary Board of the Central Bank of the Philippines shall formulate the necessary rules and regulations governing the establishment and operation of rural banks for the purpose of providing adequate credit facilities to farmers and merchants, or to cooperatives of such farmers and merchants and in general, the people of the rural communities, and to supervise the operation of such banks.

Section 4. No rural bank shall be operated without a Certificate of Authority from the Monetary Board of the Bangko Sentral ng Pilipinas. Rural banks shall be organized in the form of stock corporations. No less than forty percent (40%) of the voting stocks of a rural bank shall be owned by citizens of the Philippines or corporations or associations organized under the laws of the Philippines at least sixty percent (60%) of whose capital is owned by such citizens. Non-Filipino citizens may own, acquire or purchase up to sixty percent (60%) of the voting stocks in a rural bank. The percentage of foreign-owned voting stocks shall be determined by the citizenship of the individual or corporate stockholders of the rural bank. Upon consultation with the rural banks in the area, duly established cooperatives and corporations primarily organized to hold equities in rural banks may organize a rural bank and/or subscribe to the shares of stock of any rural bank: Provided, That a cooperative or corporation owning or controlling the whole or majority of the voting stock of the rural bank shall be subject to special examination and to such rules and regulations as the Monetary Board may prescribe. If subscription of private shareholders to the capital stock of a rural bank cannot be secured or is not available, or insufficient to meet the normal credit needs of the locality, the Land Bank of the Philippines, the Development Bank of the Philippines, or any government-owned or -controlled bank or financial institution, on representation of the said private shareholders but subject to the investment guidelines, policies and procedures of the bank or financial institution and upon approval of the Monetary Board of the Bangko Sentral ng Pilipinas, shall subscribe to the capital stock of such rural bank, which shall be paid in full at the time of subscription, in an amount equal to the fully paid subscribed and unimpaired capital of the private stockholders or such amount as the Monetary Board may prescribe as may be necessary to promote and expand rural economic development: Provided, however, That such shares of stock subscribed by the Land Bank of the Philippines, the Development Bank of the Philippines or any government-owned or -controlled bank or financial institution may be sold at any time at adjusted book value: Provided, finally, That in the sale of shares of stock subscribed by the Land Bank of the Philippines, the Development Bank of the Philippines or any government-owned or -controlled bank or financial institution, the registered stockholders shall have the right of preemption within one (1) year from the date of offer in proportion to their respective holdings, but in the absence of such buyer, preference, however, shall be given to residents of the locality or province where the rural bank is located. (as amended by RA No 10574)

Section 5. Non-Filipino citizens may become members of the Board of Directors of a rural bank but their participation in the Board shall be limited to their proportionate share in the equity of the rural bank: Provided, however, That at least one (1) independent director shall be elected to the Board of Directors.

No director or officer of any rural bank shall, either directly or indirectly, for himself or as the representative or agent of another, borrow any of the deposits or funds of such banks, nor shall he become a guarantor, indorser, or surety for loans from such bank to others, or in any manner be an obligor for money borrowed from the bank or loaned by it except with the written approval of the majority of the directors of the bank, excluding the director concerned. Any such approval shall be entered upon the records of the corporation and a copy of such entry shall be transmitted forthwith to the appropriate supervising department. The director/officer of the bank who violates the provisions of this section shall be immediately dismissed from his office and shall be penalized in accordance with Section 26 of this Act.

The Monetary Board may regulate the amount of credit accommodations that may be extended directly to the directors, officers or stockholders of rural banks of banking institutions. However, the outstanding credit accommodations which a rural bank may extend to each of its stockholders owning two percent (2%) or more of the subscribed capital stock, its directors, or officers shall be limited to an amount equivalent to the respective outstanding deposits and book value of the paid-in capital contributions in the bank. (as amended by RA No 10574)

Section 6. Loans or advances extended by rural banks organized and operated under this Act shall be primarily for the purpose of meeting the normal credit needs of farmers, fishermen or farm families owning or cultivating land dedicated to agricultural production as well as the normal credit needs of cooperatives and merchants.

Loans may be granted by rural banks on the security of lands without Torrens Title where the owner of private property can show five (5) years or more of peaceful, continuous and uninterrupted possession in concept of owner; or of portions of friar land estates or other lands administered by the Bureau of Lands that are covered by sales contracts and the purchasers have paid at least five (5) years installment thereon, without the necessity of prior approval and consent by the Director of Lands; or of portions of other estates under the administration of the Department of Agrarian Reform or other governmental agency which are likewise covered by sales contracts and the purchasers have paid at least five (5) years installment thereon, without the necessity of prior approval and consent of the Department of Agrarian Reform or corresponding governmental agency; or of homesteads or free patent lands pending the issuance of titles but already approved, the provisions of any law or regulations to the contrary notwithstanding: Provided, That when the corresponding titles are issued, the same shall be delivered to the Register of Deeds of the province where such lands are situated for the annotation of the encumbrance: Provided, further, That in the case of lands pending homestead or free patent titles, copies of notices for the presentation of the final proof shall also be furnished the creditor rural bank and, if the borrower applicants fail to present the final proof within thirty (30) days from date of notice, the creditor rural bank may do so for them at their expense: Provided, furthermore, That the applicant for homestead or free patent has already made improvements on the land and the loan applied for is to be used for further development of the same or for other productive economic activities: Provided, finally, That the appraisal and verification of the status of a land is a full responsibility of the rural bank and any loan granted on any land which shall be found later to be within the forest zone shall be for the sole account of the rural bank.

The foreclosure of mortgages covering loans granted by rural banks and executions of judgment thereon involving real properties levied upon by a sheriff shall be exempt from the publications in newspapers now required by law where the total amount of loan, excluding interest due and unpaid, does not exceed One hundred thousand pesos (P100,000) or such amount as the Monetary Board may prescribe as may be warranted by prevailing economic conditions. It shall be sufficient publication in such cases if the notices of foreclosure and execution of judgment are posted in the most conspicuous area of the municipal building, the municipal public market, the rural bank, the barangay hall, and the barangay public market, if any, where the land mortgaged is situated during the period of sixty (60) days immediately preceding the public auction or execution of judgment. Proof of publication as required herein shall be accomplished by an affidavit of the sheriff or officer conducting the foreclosure sale or execution of judgment and shall be attached with the records of the case: Provided, That when a homestead or free patent is foreclosed, the homesteader or free patent holder, as well as his heirs shall have the right to redeem the same within one (1) year from the date of foreclosure in the case of land not covered by a Torrens Title or one (1) year from the date of the registration of the foreclosure in the case of land covered by a Torrens Title: Provided, finally, That in any case, borrowers, especially those who are mere tenants, need only to secure their loans with the produce corresponding to their share.

A rural bank shall be allowed to foreclose lands mortgaged to it including lands covered by Republic Act No. 6657 (Comprehensive Agrarian Reform Law of 1988), as amended: Provided, That said lands shall be subject to the retention limits provided under Republic Act No. 6657.

Rural banks which are not qualified to acquire or hold land in the Philippines shall be allowed to bid and take part in foreclosure sales of real property mortgaged to them, as well as to avail of enforcement and other proceedings, and accordingly to take possession of the mortgaged property, for a period not exceeding five (5)-years from actual possession: Provided, That in no event shall title to the property be transferred to such rural bank. In case the rural bank is the winning bidder, it shall, during the said five (5)-year period, transfer its rights to a qualified Philippine national, without prejudice to a borrower’s rights under applicable laws. Should a rural bank be not able to transfer such property within the five (5)-year period, the rural bank shall be penalized one-half (1/2) of one percent (1%) per annum of the price at which the property was foreclosed until the rural bank is able to transfer the property to a qualified Philippine national. (as amended by RA No 10574)

Section 7. With the view to ensuring the balanced rural economic growth and expansion, rural banks may, within limits and conditions fixed by the Monetary Board, devote a portion of their loanable funds to meeting the normal credit needs of small business enterprises: provided, That loans shall not exceed fifteen percent (15%) of the net worth of a rural bank of such amount as the Monetary Board may prescribe as may be warranted by prevailing economic conditions, and of essential enterprises or industries, other than those which are strictly agricultural in nature.

Section 8. To provide supplemental capital to any rural bank until it has accumulated enough capital of its own or stimulate private investments in rural banks, the Land Bank of the Philippines, the Development Bank of the Philippines or any government-owned or -controlled bank or financial institution shall subscribe within thirty (30) days to the capital stock of any rural bank from time to time in an amount equal to the total equity investment of the private shareholders which shall be paid in full at the time of the subscription or such amount as may be necessary to promote and expand rural economic development: Provided, however, That shares of stock issued to the Land Bank of the Philippines, the Development Bank of the Philippines or any government-owned or -controlled bank or financial institution, may, pursuant to this section, at any time, be bought at adjusted book value.

Stocks held by the Land Bank of the Philippines, the Development Bank of the Philippines or by any government-owned or -controlled bank or financial institution, under the terms of this section, shall be made preferred only as to assets upon liquidation and without the power to vote and shall share in dividend distributions from the date of issuance in an amount based on the lending benchmark approved by the Bangko Sentral ng Pilipinas plus the prevailing non-prime spread of the government financial institution: Provided, however, That if such stock of the Land Bank of the Philippines, the Development Bank of the Philippines or any government-owned or -controlled bank or financial institution is sold to private shareholders, the same may be converted into common stock of the class provided for in Section 10 hereof: Provided, further, That pending the amendment of the Articles of Incorporation of the rural bank, if necessary, for the purpose of reflecting the conversion into common stock of preferred stock sold to private shareholders, the transfer shall be recorded by the rural bank in the stock and transfer book and such shareholders shall thereafter enjoy all the rights and privileges of common stockholders. The preferred stocks so transferred shall be surrendered and cancelled and the corresponding common stocks shall be issued. (as amended by RA No 10574)

The corporate secretary of the rural bank shall submit to the Central Bank and the Securities and Exchange Commission a report on every transfer of preferred stock to private shareholders, and such report received by the Securities and Exchange Commission shall form part of the corporate records of rural bank. When all the prepared shares of stock of a rural bank have been sold to private shareholders, the Articles of Incorporation of the rural bank shall be amended to reflect the conversion of the preferred shares of stock into common stock. For this purpose, the President, the corporate secretary, and a majority of the Board of Directors, shall be filed with the Securities and Exchange Commission, which shall attach the same to the original Articles of Incorporation on file with said office.

The Securities and Exchange Commission shall not register and amended Articles of Incorporation unless accompanied by the Certificate of Authority required under Section 9 of Republic Act No. 337, as amended.

All supervised past due and restructured past due loans, including those covered under existing rehabilitation programs of the Central Bank, and fifty percent (50%) of non-supervised past due and restructured past due loans including accrued interest thereon on rural banks organized under Republic Act No. 720, as amended, as of December 31, 1986, shall be converted into preferred stocks, of the rural bank and issued in favor of the Land Bank of the Philippines, the Development Bank of the Philippines or any government-owned or –controlled bank or financial institution: Provided, That penalties thereon are hereby warned except accrued interest on arrearages: Provided, further, That rural banks that prefer to settle their arrearages under a plan or payment or a combination of both plan of payment and conversion may do so in accordance with existing regulations and provisions of this Act: Provided, furthermore, That rural banks shall match these preferred stocks with private equity in equal annual installments over a period of fifteen (15) years to begin three (3) years after conversion: Provided, finally, That the Central Bank, the Land Bank of the Philippines, the Development Bank of the Philippines and any government-owned and –controlled bank or financial institution shall continue to rediscount subject to their respective programs, policies and guidelines against papers evidencing a loan granted by a rural bank in order to achieve the declared policy and promote the objectives of this Act.

Section 9. The Land Bank of the Philippines, the Development Bank of the Philippines, or any government-owned or –controlled bank or financial institution may obtain from any source as may be authorized under existing laws and regulations such amount as it may require for the purpose of subscribing to the shares of stock of rural bank: as provided in Section 13 of this Act.

Section 10. Stock certificates shall be issued to represent the contributions to capital stock of the rural bank by the Government through the Land Bank of the Philippines, the Development Bank of the Philippines or through any government-owned or –controlled bank or financial institutions, and by qualified persons under such terms and conditions as the Monetary Board mat prescribe. The powers of the Monetary Board over rural banks shall extend to prescribing the amount, value and class of stock issued by any rural bank, organized under this Act.

Section 11. The power to supervise the operation of any rural bank by the Monetary Board as herein indicated shall consists in placing limits to the maximum credit allowed to any individual borrower; in prescribing the interest rate; in determining the loan period and loan procedures; in indicating the manner in which technical assistance shall be extended to rural banks; in imposing a uniform accounting system and manner of keeping the accounts and records of rural banks; in instituting periodic surveys of loan and lending procedures, audits, test-check of cash and other transactions of the rural banks; and, in general in supervising the business operations of the rural banks.

The Central bank shall have the power to enforce the laws, orders, instructions, rules and regulations promulgated by the Monetary Board applicable to rural banks; to require rural banks, their directors, officers and agents to conduct and manage the affairs of the rural banks in a lawful and orderly manner, and, upon proof that the rural bank of its Board of Directors, or officers are conducting and managing the affairs of the banking in a manner contrary to the laws, orders, instructions, rules and regulations promulgated by the Monetary Board or in a manner substantially prejudicial in the interest of the Government, depositors or creditors, to take over the management of such bank when specifically authorized to do so by the Monetary Board after due hearing process until a new board of directors and officers are elected and qualified without prejudice to the prosecution of the persons for such violations under the provisions of Sections 32, 33 and 34 of Republic Act No. 265, as amended.

The management of the rural bank by the Central Bank shall be without expense to the rural bank, except such as is actually necessary for its operation, pending the election and qualification of a new board of directors and officers to take place of those responsible for the violations or acts contrary to the interest of the Government, depositors or creditors.

The director and the examiners of the department of the Central Bank charged with the supervision of rural banks are hereby authorized to administer oaths to any director, officer or employee of any rural bank or to any voluntary witness and to compel the presentation of all books, documents, papers or records necessary in his or their judgment to ascertain the facts relative to the true condition of any rural bank or to any loan

Section 12. In addition to the operations especially authorized in this Act, any rural bank may:

a. Accept saving and time deposit;

b. Open current or checking accounts, provided the rural bank has net assets of at least Five million (P5,000,000) subject to such guidelines as may be established by the Monetary Board:

c. Act as correspondent for other financial institutions;

d. Act as a collection agent;

e. Act as official depositary of municipal, city or provincial funds in the municipality, city or province where it is located, subject to such guidelines as may be established by the Monetary Board;

f. Rediscount paper with the Philippine National Bank, the Land Bank of the Philippines, the Development Bank of the Philippines, or any other banking institution, including its branches and agencies. Said institution shall specify the nature of paper deemed acceptable for rediscount, as well as the rediscount rate to be charged by any of these institutions;

g. Offer other banking service as provided in Section 72 of Republic Act No. 337, as amended, and

h. Extend financial assistance to public and private employees in accordance with the provisions of Section 5 of Republic Act No. 3779, as amended.

With written permission of the Monetary Board of the Central bank, any rural bank may act as trustee over estates or properties of farmer and merchants.

Nothing in this section shall be construed as precluding a rural bank from performing, with prior approval of the Monetary Board, all the services authorized and mortgage banks, of for commercial banks, under an expanded banking authority as provided in Section 21-B of the same Act.

Section 13. Subject to such guidelines as may be established by the Monetary, rural banks may invest in equities of the allied undertakings are hereinafter enumerated: Provided, That: (a) the total investment in equities shall not exceed twenty- five percent (25%) of the net worth of the rural bank; (b) the equity investment in any single enterprise shall be limited to fifteen percent (15%) of the net worth of the rural bank; and (c) the equity investment of the rural bank in any single enterprise shall remain a minority holding in that enterprise: Provided, further, That equity investment shall not be permitted in non-related activities.

Allied undertaking shall include:

a. banks, financial institutions and non-bank financial intermediaries;

b. Warehousing and other post-harvested facilities;

c. Fertilizer and agricultural chemical and pesticides distribution;

d. Farm equipment distribution;

e. Trucking an transportation of agricultural products;

f. Marketing and agricultural products;

g. Leasing; and Other undertakings as may be determined by the Monetary Board.

Section 14. The Land Bank of the Philippines, the Development Bank of the Philippines or any government-owned or –controlled bank or financial institution shall, within sixty (60) days of certification of the Monetary Board, which shall be final, extend to a rural bank a loan or loans from time to time repayable in ten (10) years, with concessional rates of interest, against security which may be offered by any stockholders or stockholders of the rural bank: Provided:

a. That the Monetary Board is convinced that the resources of the rural bank are inadequate to meet the legitimate credit requirements of the locality wherein the rural bank is established.;

b. That there is a dearth of private capital in the said locality; and

c. That it is not possible for the stockholders of the rural bank to increase the paid-up capital thereof.

Section 15. All rural banks created and organized under the provisions of this Act shall be exempt from the payment of all taxes, fees and charges of whatever nature and description, except the corporate income tax and local taxes, fees and charges, for a period of five (5) years from the date of commencement of operations.

All rural banks in operation as of the date of approval of this Act shall be exempt from the payment of all taxes, fees and charges of whatsoever nature and description, except the corporate income tax and local taxes, fees and charges, for a period of five (5) years from the approval of this Act.

Section 16. In an emergency or when a financial crisis is imminent, the Central Bank may give a loan to any rural bank against assets of the rural bank which may be considered acceptable by a concurrent vote of at least four (4) members of the Monetary Board.

In normal times the Central bank may rediscount against paper evidencing a loan granted by a rural bank to any of its customers which can be liquefied for a period of three hundred sixty (360) days: Provided, however, That for the purpose of implementing a nationwide program of agricultural and industrial development, rural banks are hereby authorized, under such terms and conditions as the Central bank shall prescribe, to borrow, on a medium – or long-term basis, funds that the Central Bank or any other government financing institution shall borrow from the Development Bank of the Philippines or other international or foreign-lending institutions for the specific purpose of financing the abovestated agricultural and industrial program. Repayment of loans obtained by the Central Bank of the Philippines or any other government financing institutions from said foreign-lending institutions under this section shall be guaranteed by the Republic of the Philippines.

Section 17. Deposits of rural banks with government-owned or –controlled financial institutions like the Land Bank of the Philippines, the Development Bank of the Philippines, and the Philippine national Bank are exempted from the Single Borrower’s Limit imposed by the General Banking Act.

In areas where there are no government banks, rural banks may deposit in private banks more than the amount prescribed by the Single Borrower’s Limit subject to Monetary Board regulations.

Section 18. To encourage consolidation and mergers of rural banks, if there are five (5) or more rural banks within the region that merge and consolidate within three (3) years from the enactment of this Act, the merged or consolidated entity will be given the following incentives for a period of seven (7) years:

a. Its deposit liabilities shall be subjected to only one-third (1/3) of reserves normally required for rural banks;

b. Its reserve requirement can all be maintained under interest-bearing government securities but kept unencumbered with government financial institutions or the Central Bank; and

c. It shall have unrestricted branching right within the region, free from any assessment or surcharge required in setting up a branch but under coordination with the Central bank which will have to assess that there are qualified personnel, control and procedures to operate the branch.

Section 19. The Central Bank of the Philippines shall extend technical assistance to any rural bank in the process of organization or during the course of operations whenever it is requested to do so or whenever the Monetary Board deems it necessary to preserve, protect and promote the objectives of this Act: Provided, however, That said assistance shall be without cost or obligation on the part of the rural bank.

Section 20. Any city or municipal trial court in his capacity as notary public ex officio shall administer the oath to or acknowledgement the instruments of any rural bank and to borrowers or mortgagors, fee from all charges, fees and documentary stamp tax, collectible under existing laws, relative to any loan or transaction not exceeding Fifty thousand pesos (P50,000), or such amount as the Secretary of Finance, upon recommendation of the Monetary Board may prescribe as may be necessary to promote and expand the rural economy.

Section 21. Any Register of Deeds shall accept from any rural bank and its borrowers and mortgagors for registration, free from all charges, fees and documentary stamp tax, collectible under existing laws, any instrument, whether voluntary or involuntary, relating to loans or transaction extended by a rural bank in an amount not exceeding Fifty thousand pesos (P50,000): Provided, however, That charges, if any, shall be collectible on the amount in excess of Fifty thousand pesos (P50,000); and that in instruments related to assignments of several mortgage consolidated in a single deed, if any, shall be levied only on the amount in excess of Fifty thousand pesos (P50,000) of the consideration in the assignments of each mortgage, of such amount as the Secretary of Finance, upon recommendation of the Monetary Board may prescribe as may be necessary to promote and expand the rural economy.

Section 22. Any rural bank organized under this Act may, pursuant to regulations promulgated for the purpose by the Monetary Board, be required to contribute to the Central Bank an annual fee to help defray the cost of maintaining the appropriate supervising department within the central bank in an amount to be determined by the Monetary Board but in no case to exceed one-fortieth of one percent (1/40 of 1%) of its average total assets during the preceding year, as shown on its end-of-month balance sheets, after deducting its cash on hand and amounts due from banks, including the Central Bank.

Section 23. Every individual acting as officer or employee of a rural bank and handling funds or securities amounting to Five thousand pesos (P5,000) or more than one (1) year, shall be covered by an adequate bond as determined by the Monetary Board; and the bylaws of the rural bank may also provide for the bonding of other employees or officers of rural banks.

Section 24. For the purpose of carrying out the objectives of this Act, the Central Bank is authorized to require the services and facilities of any department or instrumentality of the Government or any officer or employee of any such department or government instrumentality.

Section 25. Rural banks organized and operated under the provisions of this Act shall act as agents of the Philippine National Bank, the Land Bank of the Philippines and the Development Bank of the Philippines in places where these banks have no offices, subject to accreditation guidelines.

Section 26. Without prejudice to any prosecution under any law which may have been violated a fine of not more than ten thousand pesos (P10,000) or imprisonment of not less than six (6) months but not more than ten (10) years, or both, at the discretion of the court, shall imposed upon:

a. Any officer, employee, or agent of a rural bank who shall:

1. Make fake entries in any bank report or statement thereby affecting the financial interest of or causing damage to, the bank or any person;

2. Without order of a court of competent jurisdiction, disclose any information relative to the funds or properties in the custody of the bank belonging to private individuals, corporations, or any other entity;

3. Accept gifts, fees or commission or any other form of remuneration in connection with the approval of a loan from said bank; or

4. Overvalue or aid in overvaluing any security for the purpose of influencing in any way the action of the bank on any loan; or

5. Appear and sign as guarantor, indorser, or surety for loans granted; or

6. Violate any of the provisions of this Act.

b. Any applicant for a loan from, or borrower of a rural bank who shall:

1. Misuse, misapply, or divert the proceeds of the loan obtained by him from its declared purpose; or

2. Fraudulently overvalue property offered as security for loan from said bank; or

3. Give out or furnish false misrepresentation of material facts for the purpose of obtaining, renewing, or increasing a loan or extending the period thereof; or

4. Attempt to defraud the said bank in the event of court action to recover a loan; or

5. Offer any officer, employee, or agent of a rural bank as a gift, fee, commission, or other form of compensation in order to influence such bank personality in approving an application; or

6. Dispose or encumber the property or the crops offered as security for the loan.

c. Any examiner, or officer or employee of the Central Bank of the Philippines or other department, bureau, office, branch or agency of the Government who is assigned to examine, supervise, assist or render technical services to rural banks and who shall connive or aid in the commission of the same.

Section 27. Any municipal trial court judge or register of deeds who shall demand or accept, directly or indirectly, any gift, fee, commission or other form of compensation in connection with the service, or the registration of documents required to be as provided in Section 20 and by said register of deeds as proposed in Section 21 of this Act, shall be punished by One thousand pesos (P1,000) or by imprisonment for not more than one (1) year, or both, at the discretion of the court.

Section 28. Any bank not organized under this Act and any person, association, or corporation doing the business of banking, not authorized under this Act which shall use the words "Rural Bank" as part of the name or title of such bank or of such person, association, or corporations, shall be punished by a fine of not less than Fifty pesos (P50) for each day during which said words are so used.

Section 29. The Monetary Board of the Central Bank shall submit a report to the Congress of the Philippines as the end of each calendar year of all the rules and regulations promulgated by it in accordance with the provisions of this Act, as well as its other actuations in connection with rural banks, together with an explanation of its reasons therefor.

Section 30. If any provision or section of this Act or the application thereof to any person or circumstances is held invalid, the other provisions or sections of this Act, and the application of such provision or section to other persons or circumstances, shall not be affected thereby.

Section 31. Republic Act No. _____, as amended, is hereby repealed. The provisions of Republic Act No. 265, as amended, and Republic Act No. 337, as amended, insofar as they are applicable and not in conflict with any provision of this Act, are hereby made a part of this Act.

Section 32. This Act shall take effect upon its approval.

September 30, 1976

AUTHORIZING THE ESTABLISHMENT OF AN OFFSHORE BANKING SYSTEM IN THE PHILIPPINES

WHEREAS, conditions conducive to the establishment of an offshore banking system, such as political stability, a growing economy and adequate communication facilities, among others, exist in the Philippines;

WHEREAS, it is in the interest of developing countries to have as wide access as possible to the sources of capital funds for economic development;

WHEREAS, an offshore banking system based in the Philippines will be advantageous and beneficial to the country by increasing our links with foreign lenders, facilitating the flow of desired investments into the Philippines, creating employment opportunities and expertise in international finance, and contributing to the national development effort.

WHEREAS, the geographical location, physical and human resources, and other positive factors provide the Philippines with the clear potential to develop as another financial center in Asia;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers in me vested by the Constitution, do hereby decree and make the following part of the law of the land:

Section 1. Definition of Terms. As used in this Decree, unless the context otherwise indicates:

(a) "Offshore Banking" shall refer to the conduct of banking transactions in foreign currencies involving the receipt of funds from external sources and the utilization of such funds as provided in this Decree.

(b) "Offshore Banking Unit" shall mean a branch, subsidiary or affiliate of a foreign banking corporation which is duly authorized by the Central Bank of the Philippines to transact offshore banking business in the Philippines.

(c) "Deposits" shall mean funds in foreign currencies which are accepted and held by an offshore banking unit in the regular course of business, with the obligation to return an equivalent amount to the owner thereof, with or without interest.

(d) "Resident" shall mean

1. an individual citizen of the Philippines residing therein; or

2. an individual who is not a citizen of the Philippines but is permanently residing therein; or

3. a corporation or other juridical person organized under the law of the Philippines.

(e) "Non-resident" shall mean an individual, corporation or other juridical person not included in the above definition of "resident": Provided, however, that branches, subsidiaries, affiliates, extension offices or any other units of corporation or juridical person organized under the laws of any foreign country operating in the Philippines shall be considered residents of the Philippines.

"Branch" shall mean a separately managed department or unit of a foreign corporation.

Section 2. Qualification Requirements. Subject to such regulatory guidelines as the Monetary Board may prescribe, only banks which are organized under any law other than those of the Republic of the Philippines their branches, subsidiaries or affiliates, shall be qualified to operate offshore banking units in the Philippines. However, local branches of foreign banks already authorized to accept foreign currency deposits under the provisions of R.A. No. 6426 may opt to apply for authority to operate an offshore banking unit under the provisions of this Decree: Provided, that, upon their receipt of a corresponding certificate of authority to operate as an offshore banking unit, the license to transact business under the provisions of R.A. No. 6426 shall be deemed automatically withdrawn.

Section 3. Certificate of Authority to Operate. The Monetary Board of the Central Bank of the Philippines is hereby authorized to issue certificates of authority to operate offshore banking units: Provided, however, that, in issuing such certificates, the Monetary Board shall take into consideration the applicant's liquidity and solvency position, networth and resources, management, international banking expertise, contribution to the Philippine economy, and other relevant factors such as participation in equity of local commercial banks and appropriate geographic representation.

The Central Bank of the Philippines is hereby authorized to collect a fee of not less than US$ 20,000.00 upon issuing any certificate of authority to operate and annually thereafter on the anniversary date of such certificate.

Section 4. Corporate Undertaking. No application to operate as an offshore banking unit under the provisions of this Decree shall be considered unless the applicant shall have first submitted to the Central Bank of the Philippines a sworn undertaking of its head office or parent or holding company, duly supported by an appropriate resolution of its board of directors, that, among other things: (a) it will, on demand, provide the necessary specified currencies to cover liquidity needs that may arise or other shortfall that is offshore banking unit may incur; (b) the operations of its offshore banking unit shall be managed soundly and with prudence; (c) it will train and continually educate a specific number of Filipinos in international banking and foreign exchange trading with a view to reducing the number of expatriates; (d) it will provide and maintain in its offshore banking unit net office funds in the minimum amount of US$ 1,000,000.00 and (e) it will start operations of its offshore banking unit within 180 days from receipt of its certificate of authority to operate such unit.

Section 5. Supervision. The operations and activities of offshore banking units shall be conducted under the supervision of the Central Bank of the Philippines.

Section 6. Transactions of Offshore Banking Units: Regulations. Transactions of offshore banking units with non-residents or with other offshore banking units shall be freely allowed: Provided, that the Central Bank of the Philippines may establish such safeguards as may be necessary to prevent circumvention of applicable foreign exchange regulations. Transactions of offshore banking units with resident of the Philippines, including those with local commercial banks and local branches of foreign banks authorized to receive foreign currency deposits under Republic Act No. 6426, shall be subject to applicable law and regulations.

The Monetary Board of the Central Bank of the Philippines shall promulgate such rules and regulations as may be necessary to carry out and implement the provisions of this Decree.

Section 7. Tax and Other Incentives.

(a) The provisions of any law to the contrary notwithstanding, the transactions of offshore banking unit authorized hereunder with non-residents and other offshore banking units shall be subject to a five per cent (5%) tax on the net, income from such transactions which shall be in lieu of all taxes on the said transactions: Provided, however, that transactions of offshore banking units with local commercial banks, including branches of foreign banks that may be authorized by the Central Bank to transact business with offshore banking units, shall likewise be subject to the same tax, except net income from such transactions as may be specified by the Secretary of Finance, upon recommendation of the Monetary Board, to be subject to the usual income tax payable by banks. Any income of non-residents from transactions with said offshore banking units shall be exempt from any tax.

(b) In the case of transaction with residents (other than other offshore banking units or local commercial banks including local branches of foreign banks that may be authorized by the Central Bank of the Philippines to transact business with offshore banking units), interest income from loans granted to such residents shall be subject only to a ten per cent (10%) withholding tax as final tax.

(c) Notwithstanding the provision of any law to the contrary, foreign personnel may be assigned by any foreign bank to work in its offshore banking unit in the Philippines. Such foreign personnel, their spouses and unmarried children under twenty-one years of age, shall be issued a multiple entry special visa, valid for a period of one year, to enter the Philippines: Provided, however, that a responsible officer of such foreign bank submits a certificate of the effect that the person who seeks entry in the Philippines is an employee of the said foreign bank and will work exclusively for its offshore banking unit in the Philippines and that he will be paid by the foreign bank in the Philippines compensation in foreign currencies: Provided, further, that in the case of the spouse and unmarried children mentioned herein the certificate shall be to the effect that they are dependents of the foreign personnel working in the offshore banking unit.

The admission and stay of the foreign personnel and their dependents mentioned in the next preceding paragraph shall be co-terminous with the validity of the multiple entry special visa: Provided, however, that their stay may be extended yearly upon submission to the Commission on Immigration and Deportation of a sworn certification by a responsible officer of the offshore banking unit in the Philippines that such bank's authority to operate as an offshore banking unit is valid and subsisting and that the personnel concerned has been paid in the Philippines, from the date of original admission, the compensation mentioned in the next preceding paragraph, for which that tax due thereon has been withheld and paid to the Bureau of Internal Revenue.

The foreign personnel and their respective spouses and dependents mentioned in this Section shall be exempt from: the Payment of all fees due under the immigration and alien registration laws; securing alien certificates of registration; and obtaining emigration clearance certificates, and all types of clearances required by any government department or agency, except that upon their final departure from the Philippines, the employer of the said foreign personnel shall so advice in writing the Commission on Immigration and Deportation at least five (5) working days prior to such departure, and the finally departing personnel shall be required to submit to the said office a tax clearance from the Bureau of Internal Revenue.

(d) Section 22 of Commonwealth Act No. 466, as amended, is hereby amended to include an additional subsection (d) to read as follows:

"(d) Aliens employed by offshore banking units. There shall be levied, collected and paid for each taxable year upon the gross income received by every alien individual employed by offshore banking units established in the Philippines as salaries, wages, annuities, compensations, remunerations and emoluments from such offshore banking units a tax equal to fifteen per centum of such gross income."

(e) The alien executives of offshore banking units shall enjoy the privileges extended to foreigners coming to settle in the Philippines for the first time as provided for under Section 105(h) of the Tariff and Customs Code, as amended.

(f) The offshore banking units shall be exempt from all forms of local licenses, fees, dues, imposts, or any other local taxes or burdens.

Section 8. Effect of Certain Laws. The provisions of Act No. 2566 (Usury Law), Republic Act No. 529, as amended (Uniform Currency Law), and Republic Act No. 3591, as amended (Deposit Insurance Law), shall not apply to transactions and/or deposits in offshore banking units in the Philippines: Provided, however, that the provisions of R.A. No. 1405 (Secrecy of Bank Deposits Law) shall apply to deposits in offshore banking units.

Section 9. Sanctions for Violations. Any willful violation by any bank authorized to engage in offshore banking in the Philippines of any of the provisions of this Decree, or its implementing rules and regulations, or other terms and conditions of the authority to engage in offshore banking in the Philippines may be subject to the administrative sanctions provided for in Section 34-A, as well as to other applicable provisions, of Republic Act No. 265, as amended.

Section 10. Repealing Clause. Any provisions of existing general or special laws inconsistent with the provisions of this Decree shall be deemed modified, amended or repealed accordingly.

Section 11. Effectivity. This Decree shall take effect upon approval.

DONE in the City of Manila, this 30th day of September, in the year of Our Lord, nineteen hundred and seventy-six.

AN ACT ENHANCING THE RESOLUTION AND LIQUIDATION FRAMEWORK FOR BANKS, AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 3591, AS AMENDED, AND OTHER RELATED LAWS

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

THE CREATION OF THE PHILIPPINE DEPOSIT INSURANCE CORPORATION

SECTION 1. — There is hereby created a Philippine Deposit Insurance Corporation hereinafter referred to as the ‘Corporation’ which shall insure as herein provided, the deposits of all banks which are entitled to the benefits of insurance under this Act, and which shall have the powers hereinafter granted.

The Corporation shall, as a basic policy, promote and safeguard the interests of the depositing public by providing insurance coverage on all insured deposits and helping maintain a sound and stable banking system.

The Corporation shall be attached to the Bangko Sentral ng Pilipinas for policy and program coordination. (as amended by RA No 11840)

STATE POLICY

SECTION 2. — It is hereby declared to be the policy of the State to strengthen the mandatory deposit insurance coverage system to generate, preserve, maintain faith and confidence in the country’s banking system, and protect it from illegal schemes and machinations.

Towards this end, the government must extend all means and mechanisms necessary for the Corporation to effectively fulfill its vital task of promoting and safeguarding the interests of the depositing public by way of providing insurance coverage on bank deposits and in helping develop a sound and stable banking system.

In view of the crucial role and the nature of its functions and responsibilities, the Corporation, while being a government instrumentality with corporate powers, shall enjoy fiscal and administrative autonomy.

BOARD OF DIRECTORS: COMPOSITION AND AUTHORITY

SECTION 3. (a) The powers and functions of the Corporation shall be vested in and exercised by a Board of Directors which shall be composed of seven (7) members as follows:

(1) The Governor of the Bangko Sentral ng Pilipinas who shall be the ex officio Chairperson of the Board without compensation;

(2) The Secretary of Finance who shall be the ex officio Vice Chairperson and member of the Board without compensation;

(3) The President of the Corporation, who shall be appointed by the President of the Philippines from a shortlist prepared by the Governance Commission for Government-Owned or -Controlled Corporations pursuant to Republic Act No. 10149, or the “GOCC Governance Act of 2011” to serve on a full-time basis for a term of six (6) years;

(4) Four (4) members from the private sector to be appointed by the President of the Philippines from a shortlist prepared by the Governance Commission for Government-Owned or -Controlled Corporations pursuant to Republic Act No. 10149. The appointive directors shall serve for a term of six (6) years unless sooner removed for cause and shall be subject to only one (1) reappointment: Provided, That of those first appointed, the first two (2) appointees shall serve for a period of three (3) years: Provided, however, That the appointive director shall continue to hold office until the successor is appointed. An appointive director may be nominated by the Governance Commission for Government-Owned or -Controlled Corporations for reappointment by the President only if the appointive director obtains a performance score of above average or its equivalent or higher in the immediately preceding year of tenure as appointive director based on the performance criteria for appointive directors of the Corporation.

Appointment to any vacancy shall be only for the unexpired term of the predecessor pursuant to Republic Act No. 10149.

No person shall be appointed as member of the Board unless he or she be of good moral character, of unquestionable integrity and responsibility, of known probity and patriotism, and who is of recognized competence in economics, banking and finance, law, management administration or insurance, and shall be at least thirty-five (35) years of age. For the duration of their tenure or term of office and for a period of one (1) year thereafter, the appointive members of the Board shall be disqualified from holding any office, position or employment in any insured bank.

The Secretary of Finance and the Governor of the Bangko Sentral ng Pilipinas may each designate an alternate, who shall be an official with a rank not lower than assistant secretary of the Department of Finance or Deputy Governor of the Bangko Sentral ng Pilipinas with written authority from the Secretary of Finance or the Governor of the Bangko Sentral ng Pilipinas, to attend such meetings and to vote on behalf of their respective principals. Whenever the Chairperson of the Board is unable to attend a meeting of the Board, or in the event of a vacancy in the office of the Governor of the Bangko Sentral ng Pilipinas, his or her designated alternate shall preside. In the absence of the Chairperson and his or her designated alternate, the Secretary of Finance or his or her representative shall preside.

The President of the Philippines may remove any appointive member of the Board of Directors for any of the following reasons:

(i) If the member is physically or mentally incapacitated that he or she cannot properly discharge his or her duties and responsibilities, and such incapacity has lasted for more than six (6) months; or

(ii) If the member is guilty of acts or operations which are of fraudulent or illegal character or which are manifestly opposed to the aims and interests of the Corporation; or

(iii) If the member no longer possesses the qualifications specified in this Act; or

(iv) If the member does not meet the standards for performance based on the evaluation by the Governance Commission for Government-Owned or -Controlled Corporations under Republic Act No. 10149.

The presence of four (4) members shall constitute a quorum. All decisions of the Board of Directors shall require the concurrence of at least four (4) members.

The compensation, per diems, allowances, incentives, and other benefits for board members shall be determined by the Governance Commission for Government-Owned or -Controlled Corporations.

In addition to the requirements of Republic Act No. 6713, otherwise known as the ‘Code of Conduct and Ethical Standards for Public Officials and Employees’, any member of the Board of Directors with personal or pecuniary interest in any matter in the agenda of the Board of Directors shall disclose his or her interest to the Board and shall recuse from the meeting when the matter is taken up. The minutes shall reflect the disclosure made and the recusal of the member concerned.

(b) The Board of Directors shall have the authority:

(1) To approve and issue rules and regulations for banks and the depositing public, as it considers necessary for the effective discharge of its responsibilities under this Act including the establishment of separate insurance funds, and insurance arrangements or structures or takaful, taking into consideration the peculiar characteristics of Islamic banking. This authority includes increasing the insurance coverage, eligibility of the institutions, assessment premium rate, and other implementation rules and regulations.

For purposes of this Act, takaful shall be defined as a mutual guarantee in return for the commitment to donate an amount in the form of a specified contribution to the covered entities’ risk fund, whereby a group of covered entities agree among themselves to support one another jointly for the losses arising from specified risks;

(2) To act as the policy-making body of the Corporation and constitute Board committees to oversee the management, operations and administration of the Corporation;

(3) To establish a human resource management system which shall govern the selection, hiring, appointment, transfer, promotion, or dismissal of personnel. Such system shall aim to establish professionalism and excellence at all levels of the Corporation in accordance with sound principles of management;

(4) To appoint and remove any officer or employee of the Corporation, for cause, subject to pertinent civil service laws: Provided, That the Board of Directors may delegate this authority to the President subject to specific guidelines: Provided, further, That in no case shall there be any diminution of existing salaries, benefits and other emoluments;

(5) To approve policy on local and foreign travel, and the corresponding expenses, allowances and per diems, of officers, employees, agents of the Corporation, which shall be comparable with the expenses, allowances and per diems of personnel of other financial institutions based on prevailing market standards, notwithstanding the provisions of Presidential Decree No. 1177, Executive Order No. 292, Executive Order No. 248, as amended, Executive Order No. 298, and similar laws;

(6) To adopt an annual budget for, and authorize such expenditures by the Corporation, as are in the interest of the effective administration and operation of the Corporation;

(7) To approve the target level of the Deposit Insurance Fund (DIF) and the methodology for determining reserves for insurance and financial assistance losses;

(8) To review the organizational set-up of the Corporation and adopt a new or revised organizational structure as it may deem necessary for the Corporation to undertake its mandate and functions;

(9) To design, adopt and revise, as it may deem necessary, an early separation plan for employees of the Corporation to ensure availability of a human resource pool qualified and capable of implementing the Corporation’s authorities under this Charter in a manner responsive and attuned to market developments, and to provide incentives for all those who shall be separated from the service. Notwithstanding any law to the contrary, these incentives shall be in addition to all gratuities and benefits the employee is entitled to under existing laws; and

(10) To promote and sponsor the local or foreign training or study of personnel in the fields of banking, finance, management, information technology and law. Towards this end, the Corporation is hereby authorized to defray the costs of such training or study. The Board shall prescribe rules and regulations to govern the training or study programs of the Corporation. (as amended by RA No 11840)

PRESIDENT OF THE CORPORATION

COMPENSATION, POWERS AND DUTIES

SECTION 4. The President of the Corporation shall be its Chief Executive Officer whose salary shall be based on the Compensation and Position Classification System developed by the Governance Commission for Government-Owned or -Controlled Corporations and as approved by the President of the Philippines. The sum total of the salary, allowances, benefits and other emoluments of the President of the Corporation shall be higher than the compensation package of the next highest ranking executive of the Corporation.

The powers and duties of the President of the Corporation are:

(a) To prepare the agenda for the meeting of the Board and to submit for the consideration of the Board the policies and measures which he believes to be necessary to carry out the purposes and provisions of this Act;

(b) To execute and administer the policies and measures approved by the Board;

(c) To direct and supervise the operations and internal administration of the Corporation in accordance with the policies established by the Board. The President may delegate certain of his administrative responsibilities to other officers of the Corporation, subject to the rules and regulations of the Board;

(d) To represent the Corporation in all dealings with other offices, agencies and instrumentalities of the government and with all other persons or entities, public or private, whether domestic, foreign or international;

(e) To authorize, with his signature, upon prior authority of the Board, contracts entered into by the Corporation, notes and securities issued by the Corporation, and the annual reports, balance sheets, profits and loss statements, correspondence and other documents of the Corporation. The signature of the President may be in facsimile wherever appropriate;

(f) To represent the Corporation, either personally or through counsel, including private counsel, as may be authorized by the PDIC Board, in any legal proceeding or action;

(g) To delegate, with the prior approval of the Board of Directors, his power to represent the Corporation, as provided in subsections (d) and (f) of this Section, to other officers of the Corporation; and

(h) To exercise such other powers as may be vested in him by the Board.

The President shall be assisted by a Vice President and other officials whose appointment and removal for cause shall be approved by the Board of Directors upon recommendation of the President of the Corporation. The salary of the Vice President and other officials shall be based on the Compensation and Position Classification System established by the Governance Commission for Government-Owned or -Controlled Corporations and as approved by the President of the Philippines. (as amended by RA No 11840)

DEFINITION OF TERMS

SECTION 5. As used in this Act –

(a) The term asset refers to movable, immovable, tangible, or intangible resources or properties over which a bank has an established or equitable interest, including the proceeds of the sale of its bank and branch licenses subject to the approval of the Bangko Sentral ng Pilipinas.

(b) The term asset distribution plan refers to the plan of distribution of the assets of a closed bank to its creditors, based on its estimated realizable value as of a certain cut-off date, prepared in accordance with the Rules on Concurrence and Preference of Credits under the Civil Code or other laws.

An asset distribution plan may be partial when it pertains to the distribution of a portion or some of the assets of the closed bank, or final when it pertains to the distribution of all the assets of the closed bank.

(c) The term Board of Directors means the Board of Directors of the Corporation.

(d) The term bank and banking institution shall be synonymous and interchangeable and shall include banks, commercial banks, savings banks, mortgage banks, rural banks, development banks, cooperative banks, stock savings and loan associations and branches and agencies in the Philippines of foreign banks and all other corporations authorized to perform banking functions in the Philippines.

(e) The term closed bank refers to a bank placed under liquidation by the Monetary Board.

(f) The term creditor refers to any individual or entity with a valid claim against the assets of the closed bank.

(g) The term deposit means the unpaid balance of money or its equivalent received by a bank in the usual course of business and for which it has given or is obliged to give credit to a commercial, checking, savings, time or thrift account, evidenced by a passbook, certificate of deposit, or other evidence of deposit issued in accordance with Bangko Sentral ng Pilipinas rules and regulations and other applicable laws, together with such other obligations of a bank, which, consistent with banking usage and practices, the Board of Directors shall determine and prescribe by regulations to be deposit liabilities of the bank: Provided, That any obligation of a bank which is payable at the office of the bank located outside of the Philippines shall not be a deposit for any of the purposes of this Act or included as part of the total deposits or of insured deposit: Provided, further, That subject to the approval of the Board of Directors, any insured bank which is incorporated under the laws of the Philippines which maintains a branch outside the Philippines may elect to include for insurance its deposit obligations payable only at such branch.

Certain products or arrangements of Islamic banks shall be deemed as deposit by the Bangko Sentral ng Pilipinas for purposes of this Act.

The Corporation shall not pay deposit insurance for the following accounts or transactions:

(1) Investment products such as bonds and securities, trust accounts, and other similar instruments;

(2) Deposit accounts or transactions which are fictitious or fraudulent as determined by the Corporation;

(3) Deposit accounts or transactions constituting unsafe and unsound banking, as determined by the Corporation, in consultation with the Bangko Sentral ng Pilipinas, after due notice and hearing, and publication of a directive to cease and desist issued by the Bangko Sentral ng Pilipinas against such deposit accounts, transactions or unsafe and unsound banking; and

(4) Deposits that are determined to be the proceeds of an unlawful activity as defined under Republic Act No. 9160, as amended.

The actions of the Corporation taken under Section 5(g) shall be final and executory, and may only be restrained or set aside by the Court of Appeals, upon appropriate petition for certiorari on the ground that the action was taken in excess of jurisdiction or with such grave abuse of discretion as to amount to a lack or excess of jurisdiction. The petition for certiorari may only be filed within thirty (30) days from notice of denial of claim for deposit insurance.

(h) The term disputed claim refers to a claim or suit against the assets of a closed bank, or for specific performance, or breach of contract, or damages, of whatever nature or character, whether for money or otherwise, liquidated or unliquidated, fixed or contingent, matured or current, denied by the receiver.

(i) The term income from other sources means income actually realized by the Corporation from sources other than assessment collections, as defined by relevant and prevailing accounting standards.

(j) The term insured bank means any bank the deposits of which are insured in accordance with the provisions of this Act.

(k) The term insured deposit means the amount due to any bona fide depositor for legitimate deposits in an insured bank as of the date of closure but not to exceed Five hundred thousand pesos (P500,000.00). Such amount shall be determined according to such regulations as the Board of Directors may prescribe. In determining such amount due to any depositor, there shall be added together all deposits in the bank maintained in the same right and capacity for his or her benefit either in his or her own name or in the name of others. A joint account regardless of whether the conjunction ‘and’, ‘or’, ‘and/or’ is used, shall be insured separately from any individually-owned deposit account: Provided, That

(1) if the account is held jointly by two or more natural persons, or by two or more juridical persons or entities, the maximum insured deposit shall be divided into as many equal shares as there are individuals, juridical persons or entities, unless a different sharing is stipulated in the document of deposit, and

(2) if the account is held by a juridical person or entity jointly with one or more natural persons, the maximum insured deposit shall be presumed to belong entirely to such juridical person or entity:

Provided, further, That the aggregate of the interest of each co-owner over several joint accounts, whether owned by the same or different combinations of individuals, juridical persons or entities, shall likewise be subject to the maximum insured deposit: Provided, furthermore, That the provisions of any law to the contrary notwithstanding, no owner/holder of any passbook, certificate of deposit or other evidence of deposit shall be recognized as a depositor entitled to the rights provided in this Act unless the passbook, certificate of deposit or other evidence of deposit is determined by the Corporation to be an authentic document or record of the issuing bank.

In case a condition occurs that threatens the monetary and financial stability of the banking system that may have systemic consequences, as defined in Section 22 hereof, and as determined by the Monetary Board, the maximum deposit insurance cover may be adjusted in such amount, for such a period, and/or for such deposit products, as may be determined by a unanimous vote of the Board of Directors in a meeting called for the purpose and chaired by the Governor of the Bangko Sentral ng Pilipinas or the designated alternate, subject to the approval of the President of the Philippines.

The Board of Directors may increase the amount of the maximum deposit insurance coverage to an amount indexed to inflation or in consideration of other economic indicators as may be deemed appropriate by the Board. The Board of Directors shall review the amount of the maximum deposit insurance coverage every three (3) years and increase the maximum deposit insurance coverage as may be warranted. In the exercise of this authority, the Board may consider economic indicators other than inflation. For this purpose, the Board may hire the services of independent actuarial consultants and other experts to determine the feasibility and advisability of increasing the maximum deposit insurance coverage.

(l) The term liquidation refers to the proceedings under Sections 12 to 16 of this Act.

(m) The term liquidation court refers to the Regional Trial Court (RTC) of general jurisdiction where the petition for assistance in the liquidation of a closed bank is filed and given due course.

(n) The term payout refers to the payment of insured deposits.

(o) The term petition for assistance in the liquidation of a closed bank refers to the petition filed by the receiver with the RTC in accordance with Section 16 of this Act.

(p) The term purchase of assets and assumption of liabilities refers to a transaction where an insured bank purchases any or all assets and assumes any or all liabilities of another bank under liquidation, as provided in this Act.

(q) The term receiver refers to the Corporation or any of its duly authorized agents acting as receiver of a closed bank.

(r) The term records include all documents, titles, papers and electronic data of the closed bank, including those pertaining to deposit accounts of and with the closed bank, its assets, transactions and corporate affairs.

(s) The term residual assets refer to assets, in cash or in kind, to be turned over to the closed bank’s stockholders of record, in proportion to their interest in the closed bank as of date of closure, after payment in full of liquidation costs, fees and expenses, and the vahd claims and surplus dividends to all the creditors.

(t) The term risk-based assessment system pertains to a method for calculating an insured bank’s assessment on the probability that the DIF will incur a loss with respect to the bank, and the likely amount of any such loss, based on its risk rating that takes into consideration the following;

(1) Quality and concentration of assets;

(2) Categories and concentration of liabilities, both insured and uninsured, contingent and noncontingent;

(3) Capital position;

(4) Liquidity position;

(5) Management and governance; and

(6) Other factors relevant to assessing such probability, as may be determined by the Corporation.

(u) The term statement of affairs refers to a report of the financial condition of the closed bank at a given date, showing the:

(1) estimated realizable value of assets;

(2) classification of credits; and

(3) estimated liabilities to be settled.

(v) The term surplus dividends refers to the remaining assets of the closed bank after satisfaction in full of all the liquidation costs, fees and expenses, and valid claims. The surplus dividends shall be computed at the legal rate of interest from the date of takeover to cut-off date of the distribution plan, and shall be paid, in cash or in kind, to creditors of the closed bank in accordance with the Rules on Concurrence and Preference of Credits under the Civil Code or other laws.

(w) The term takeover refers to the act of physically taking possession and control of the premises, assets and affairs of a closed bank for the purpose of liquidating the bank.

(x) The term transfer deposit means, a deposit in an insured bank made available to a depositor by the Corporation as payment of insured deposit of such depositor in a closed bank and assumed by another insured bank.

(y) The term trust funds means funds held by an insured bank in a fiduciary capacity and includes without being limited to, funds held as trustee, executor, administrator, guardian or agent.

(z) The term unsafe and unsound banking refers to the conduct of business in an unlawful, unsafe or unsound manner as may be defined by the Bangko Sentral ng Pilipinas under Republic Act No. 7653, as amended.

(aa) The term valid claim refers to the claim recognized by the receiver or allowed by the liquidation court.

(bb) The term winding up period refers to the period provided in Section 16 of this Act. (as amended by RA No 11840)

DEPOSIT INSURANCE COVERAGE

SECTION 6. The deposit liabilities of any bank which is engaged in the business of receiving deposits as herein defined on the effective date of this Act, or which thereafter may engage in the business of receiving deposits, shall be insured with the Corporation. The Corporation may establish separate insurance funds and insurance arrangements or structures or takaful that take into consideration the peculiar characteristics of Islamic banking.

Whenever a bank is determined by the Bangko Sentral ng Pilipinas to be capital deficient, the Corporation may conduct an insurance risk evaluation on the bank to enable it to assess the risks to the DIF. Such evaluation may include the determination of:

(i) the fair market value of the assets and liabilities of a bank; or

(ii) the risk classification of a bank. (as amended by RA No 11840)

ASSESSMENT OF MEMBER BANKS

SECTION 7. (a) The assessment rate shall be determined by the Board of Directors: Provided, That the assessment rate shall not exceed one-fifth (1/5) of one per centum (1%) per annum. The semi-annual assessment for each insured bank shall be in the amount of the product of one-half (1/2) the assessment rate multiplied by the assessment base but in no case shall it be less than Five thousand pesos (P5.000.00). The assessment base shall be the amount of the liability of the bank for deposits as defined under subsection (g) of Section 5 without any deduction for indebtedness of depositors.

In addition, the Board of Directors shall conduct a study on the need to establish a risk-based assessment system within five (5) years from passage of this Act the results of which shall be reported to the Joint Congressional Oversight Committee to ensure compliance with the intent of the law. For which purpose, the Board of Directors shall consider the viability of a mechanism that adjusts the assessment rate depending on the creditworthiness or risk profile of the bank, consistent with the national development goals and impose a commensurate risk-based adjusted assessment rate per annum per bank. The risk-based assessment rate and assessment base shall be determined to ensure the adequacy and sustainability of the DIF while at the same time rationalizing the financial burden on banks and stability of the financial system. The assessment of each insured bank shall be determined by multiplying the risk-based assessment rate with the assessment base.

In case there will be an increase in the maximum deposit insurance coverage, the PDIC Board shall have the authority to adjust the assessment rate for banks taking into consideration the current economic conditions, and the adequacy and sustainability of the DIF.

The Corporation and the Board of Directors shall ensure and endeavor to maintain transparency under all possible conditions in the way of conducting all of the foregoing activities under Section 7(a).

The semi-annual assessment base for one semi annual period shall be the average of the assessment base of the bank as of the close of business on March thirty-one and June thirty and the semi annual assessment base for the other semi-annual period shall be the average of the assessment base of the bank as of the close of business on September thirty and December thirty-one; Provided, That when any of said days is a nonbusiness day or legal holiday, either national or provincial, the preceding business day shall be used. The certified statements required to be filed with the Corporation under subsections (b) and (c) of this section shall be in such form and set forth such supporting information as the Board of Directors shall prescribe. The assessment payments required from the insured banks under subsections (b) and (c) of this section shall be made in such manner and at such time or times as the Board of Directors shall prescribe. (as amended by RA No 11840)

(b) On or before the 31st of July of each year, each insured bank shall file with the Corporation a certified statement showing for the six months ending on the preceding June thirty the amount of the assessment base and the amount of the semiannual assessment due to the Corporation for the period ending on the following December thirty-one, determined in accordance with subsection (a) of this section, which shall contain or be verified by a written declaration that it is made under the penalties of perjury. Each insured bank shall pay to the Corporation the amount of the semiannual assessment it is required to certify. On or before the 31st day of January of each year, each insured bank shall file with the Corporation a similar certified statement for the six months ending on the preceding December thirty-one and shall pay to the Corporation the amount of the semiannual assessment for the period ending in the following June thirty which it is required to certify. (as amended by PD No 1940)

(c) Each bank which becomes an insured bank shall not be required to file any certified statement or pay any assessment for the semi-annual period in which it becomes an insured bank. On the expiration of such period, each such bank shall comply with the provisions of subsection (b) of this section except that the semi-annual assessment base for its first certified statement shall be the assessment base of the bank as of the close of business on the preceding June thirty or December thirty-one, whichever is applicable, determined in accordance with subsection (a) of this section. If such bank has assumed the liabilities for deposits of another bank or banks, it shall include such liabilities in its assessment base. The first certified statement shall show as the amount of the first semi-annual assessment due to the Corporation, an amount equal to the product of one-half of the annual assessment rate multiplied by such assessment base.

(d) All assessment collections and income from operations after expenses and charges shall be added to the DIF under Section 17 hereof. Such expenses and charges are: (1) the operating costs and expenses of the Corporation for the calendar year; (2) additions to reserve to provide for insurance and financial assistance losses, net of recoverable amounts from applicable assets and collaterals, during the calendar year; and (3) the net insurance and financial assistance losses sustained in said calendar year.

(e) The Corporation (1) may refund to an insured bank any payment of assessment in excess of the amount due to the Corporation or (2) may credit such excess toward the payment of the assessment next becoming due from such bank and upon succeeding assessments until the credit is exhausted.

(f) Any insured bank which fails to file any certified statement required to be filed by it in connection with determining the amount of any assessment payable by the bank to the Corporation may be compelled to file such statement by mandatory injunction or other appropriate remedy in a suit brought for such purpose by the Corporation against the bank and any officer or officers thereof in any court of the Philippines of competent jurisdiction in which such bank is located.

(g) The Corporation, in a suit brought in any court of competent jurisdiction, shall be entitled to recover from any insured bank the amount of any unpaid assessment lawfully payable by such insured bank to the Corporation, whether or not such bank shall have filed any such certified statement and whether or not suit shall have been brought to compel the bank to file any such statement. No action or proceeding shall be brought for recovery of any assessment due to the Corporation or for the recovering of any amount paid to the Corporation in excess of the amount due to it, unless such action or proceeding shall have been brought within five years after the right accrued for which the claim is made, except where the insured bank has made or filed with the Corporation a false or fraudulent certified statement with the intent to evade, in whole or in part, the payment of assessment, in which case the claim shall not have been deemed to have accrued until the discovery by the Corporation that the certified statement is false or fraudulent.

(h) Should any insured bank fail or refuse to pay any assessment required to be paid by such bank under any provision of this Act, and should the bank not correct such failure or refusal within thirty (30) days after written notice has been given by the Corporation to an officer of the bank citing this subsection, and stating that the bank has failed or refused to pay as required by the law, the Corporation may, at its discretion, file a case for collection before the appropriate court without prejudice to the imposition of administrative sanctions allowed under the provisions of this law on the bank officials responsible for the nonpayment of assessment fees.

(i) The Corporation shall have the authority to collect a special assessment from any member bank and prescribe the terms and conditions thereof to maintain the target level of the DIF set by the Board of Directors in accordance with this Act.

SANCTIONS AGAINST UNSAFE AND UNSOUND BANKING PRACTICES

SECTION 8. (a) Whenever upon examination by the Corporation into the condition of any insured bank, it shall be disclosed that an insured bank or its directors or agents have committed, are committing or about to commit unsafe or unsound banking, or have violated, are violating or about to violate any provisions of any law or regulation to which the insured bank is subject. The Board of Directors shall submit the report of the examination to the Monetary Board. (as amended by RA No 11840)

(b) The Corporation may terminate the insured status of any bank that fails or refuses to comply, within thirty (30) days from notice, with any cease-and-desist order issued by the Bangko Sentral ng Pilipinas, pertaining to a deposit-related unsafe and/or unsound banking. (as amended by RA No 11840)

(c) The Corporation may terminate the insured status of any bank that fails or refuses to comply, within thirty (30) days from notice, with any cease-and-desist order issued by the Corporation, or with any corrective action imposed by the Monetary Board, under this section pertaining to a deposit-related unsafe and/or unsound banking practice.

Such termination shall be final and executory, and shall be effective upon publication of the notice of termination in a newspaper of general circulation.

The deposits of each depositor in the bank on the effective date of the termination of insurance coverage, less all subsequent withdrawals, shall continue to be insured up to the maximum deposit insurance coverage for a period of one hundred eighty (180) days. Additions to, or renewal of, existing deposits and new deposits in such bank after the effective date of termination of insured status of the bank shall not be insured by the Corporation.

The bank shall not advertise or represent that additions to, or renewal of, existing deposits and new deposits made after the effective date of termination are covered by deposit insurance.

SECTION 9. The Corporation as a corporate body shall have the powers:

First— To adopt and use a corporate seal;

Second— To have succession until dissolved by an Act of Congress;

Third— To make contracts;

Fourth— To sue and be sued, complain and defend, in any court of law in the Philippines. All suits of a civil nature to which the Corporation shall be a part shall be deemed to arise under the laws of the Philippines. No attachment or execution shall be issued against the Corporation or its property before final judgment in any suit, action or proceeding in any court. The Board of Directors shall designate an agent upon whom service of process may be made in any province or city or jurisdiction in which the insured bank is located;

Fifth— To appoint by its Board of Directors such officers and employees as are not otherwise provided for in this Act, to define their duties, require bonds of them and fix penalty thereof and to dismiss such officers and employees for cause; (as amended by RA No 11840)

Sixth— To prescribe, by its Board of Directors, by-laws not inconsistent with law, regulating the manner in which its general business may be conducted, and the privileges granted to it by law may be exercised and enjoyed;

Seventh— To exercise, by its Board of Directors, or duly authorized officers or agents, all powers specifically granted by the provisions of this Act, and such incidental powers as shall be necessary to carry on the powers so granted;

Eighth — To examine the records and books of accounts and require information and reports from depository institutions in case there is a finding of fraud or unsafe or unsound banking related to deposit-taking: Provided, That, notwithstanding the provisions of Republic Act No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act No. 8791, and other laws, the Corporation and/or the Bangko Sentral ng Pilipinas, may inquire into or examine deposit accounts and aU information related thereto in case there is a finding of unsafe or unsound banking practice: Provided, further, That to avoid overlapping of efforts, the examination shall maximize the efficient use of the relevant reports, information, and findings of the Bangko Sentral ng Pilipinas, which it shall make available to the Corporation. (as amended by RA No 7400, 9302, 9576, 11840)

Ninth— To act as receiver; and

Tenth— To prescribe by its Board of Directors such rules and regulations as it may deem necessary to carry out the provisions of this Act. (as amended by RA No 6037)

Eleventh. — The Corporation may establish its own provident fund which shall consist of contributions made both by the Corporation and by its officers and employees to a common fund for the payment of benefits to such officers or employees or their heirs. The Board of Directors shall prepare and issue rules and regulations as it may deem necessary to make effective the establishment and operation of the fund. (as added by PD No 1940)

Twelfth — The provisions of Presidential Decree No. 1445, as amended, Executive Order No. 292, and other similar laws notwithstanding, to compromise, condone or release, in whole or in part, any claim or settled liability to the Corporation, regardless of the amount involved, under such terms and conditions as may be imposed by the Board of Directors to protect the interest of the Corporation, and to write off the Corporation’s receivables and assets which are no longer recoverable or realizable; (as added by RA No 7400, amended by RA No 10846)

Thirteenth – To determine qualified interested acquirers or investors for any of the modes of resolution or liquidation of banks; and

Fourteenth – To determine the appropriate mode of liquidation of a closed bank and to implement the same. (as amended by RA No 11840)

POWERS, RESPONSIBILITY, AND PROHIBITIONS

SECTION 10. (a) The Board of Directors shall administer the affairs of the Corporation fairly and impartially and without discrimination. The Corporation shall be entitled to the free use of Philippine mail in the same manner as the other offices of the national government.

(b) Whenever the Bangko Sentral ng Pilipinas deems it appropriate and necessary for PDIC to join the conduct of the examination of a bank, the Board of Directors shall appoint examiners who shall have power, on behalf of the Corporation, to examine any insured bank. Each examiner shall have the power to make a thorough examination of all the affairs of the bank and in doing so, he shall have the power to administer oaths, to examine and take and preserve the testimony of any of the officers and agents thereof, and to compel the presentation of books, documents, papers or records necessary in his judgment to ascertain the facts relative to the condition of the bank; and shall make a full and detailed report of the condition of the bank to the Corporation. The Board of Directors in like manner shall appoint claim agents who shall have the power to investigate and examine all claims for insured deposits and transferred deposits. Each claim agent shall have the power to administer oaths and examine under oath and take and preserve testimony of any person relating to such claim. (as amended by EO No 890, s. of 1983, RA Nos 7400, 11840)

(b-1) The investigators appointed by the Board of Directors shall have the power on behalf of the Corporation to conduct investigations on frauds, irregularities and anomalies committed in banks, based on reports of examination conducted by the Corporation and Bangko Sentral ng Pilipinas or complaints from depositors or from other government agency. Each such investigator shall have the power to administer oaths, and to examine and take and preserve the testimony of any person relating to the subject of investigation. For this purpose, the Corporation may appoint or hire persons or entities of recognized competence in forensic and fraud investigations as its agents. (as added by RA No 9302)

(c) Each insured bank shall make to the Corporation reports of condition in such form and at such times as the Board of Directors may require such reports to be published in such manner, not inconsistent with any applicable law, as it may direct. Every such bank which fails to make or publish any such report within such time, as the Board of Directors may require, shall be subject to a penalty of not more than Ten thousand pesos (P10,000.00) for each day of such failure recoverable by the Corporation for its use.

(d) The Bangko Sentral ng Pilipinas shall have access to bank examination reports made by the Corporation, and to such other reports or information as may be agreed upon by the Corporation and the Bangko Sentral ng Pilipinas. The Bangko Sentral ng Pilipinas shall share to the Corporation its reports of examination on banks, and such other reports or information as may be agreed upon by them: Provided, That the use of such reports or information are in accordance with the terms and conditions agreed upon by the Corporation and the Bangko Sentral ng Pilipinas and prescribed by applicable laws and regulations. (as amended by EO No 890, s. of 1983, RA Nos 7400, 11840)

(d-1) Each insured bank shall keep and maintain a true and accurate record or statement of its daily deposit transactions consistent with the standards set by the Bangko Sentral ng Pilipinas and the Corporation. Compliance with such standards shall be duly certified by the president of the bank and the compliance officer: Provided, That refusal or willful failure to issue the required certification shall constitute a violation of this section and shall subject such officers of the bank to the sanctions provided for under Section 26(f) of this Act. (as added by RA No 9302)

(e) Personnel of the Corporation are hereby prohibited from:

(1) being an officer, director, consultant, employee or stockholder, directly or indirectly, of any bank or banking institution except as otherwise provided in this Act;

(2) receiving any gift or thing of value from any officer, director or employee thereof;

(3) revealing in any manner, except as provided in this Act or under order of the court, information relating to the condition or business of any such institution. This prohibition shall not apply to the giving of information to the Board of Directors, the President of the Corporation, Congress, any agency of government authorized by law, or to any person authorized by either of them in writing to receive such information. (as amended by RA No 9302)

(f) The Corporation shall underwrite or advance all legal costs and expenses, including legal fees and other expenses of external counsel, or provide legal assistance to, directors, officers, employees or agents of the Corporation in connection with any civil, criminal, administrative or any other action or proceeding, to which such director, officer, employee or agent is made a party by reason of, or in connection with, the exercise of authority or performance of functions and duties under this Act: Provided, That such legal protection shall not apply to any civil, criminal, administrative or any action or proceeding that may be initiated by the Corporation, in whatever capacity, against such director, officer, employee or agent: Provided, further, That directors, officers, employees or agents who shall resign, retire, transfer to another agency or be separated from the service, shall continue to be provided with such legal protection in connection with any act done or omitted to be done by them in good faith during their tenure or employment with the Corporation: Provided, finally, That in the event of a settlement or compromise, indemnification shall be provided only in connection with such matters covered by the settlement as to which the Corporation is advised by counsel that the persons to be indemnified did not commit any negligence or misconduct. (as added by RA No 9302)

(g) The costs and expenses incurred in defending the aforementioned action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay the amount advanced should it ultimately be determined by the Board of Directors that he is not entitled to be indemnified as provided in this subsection. (as added by RA No 9302)

(h) Unless the actions of the Corporation or any of its officers and employees are found to be in willful violation of this Act, performed in bad faith, with malice and/or gross negligence, the Corporation, its directors, officers, employees and agents are held free and harmless to the fullest extent permitted by law from any liability, and they shall be indemnified for any and all liabilities, losses, claims, demands, damages, deficiencies, costs and expenses of whatsoever kind and nature that may arise in connection with the performance of their functions, without prejudice to any criminal liability under existing laws. (as added by RA No 9576)

(i) Legal assistance shall include the grant or advance of reasonable legal fees as determined by the Board of Directors to enable the concerned director, officer, employee or agent to engage counsel of his choice, subject to approval by the Board of Directors. (as added by RA No 9302, renumbered by RA No 9576)

Notwithstanding the provisions of this section and Section 3 of this Act, members of the Board of Directors and personnel of the Corporation may become directors and officers of any bank and banking institution and of any entity related to such institution in connection with financial assistance extended by the Corporation to such institution and when, in the opinion of the Board, it is appropriate to make such designation to protect the interest of the Corporation.

Borrowing from any bank or banking institution by examiners and other personnel of the examination departments of the Corporation shall be prohibited only with respect to the particular institution in which they are assigned, or are conducting an examination. Personnel of other departments, offices or units of the Corporation shall likewise be prohibited from borrowing from any bank or banking institution during the period of time that a transaction of such institution with the Corporation is being evaluated, processed or acted upon by such personnel: Provided, however, That the Board may, at its discretion, indicate the position levels or functional groups to which the prohibition is applicable.

Borrowing by all full-time personnel of the Corporation from any bank or banking institution shall be secured and disclosed to the Board, and shall be subject to such further rules and regulations as the Board may prescribe.

(as amended RA No 7400, 9302)

AUTHORITY TO EXAMINE DEPOSIT RECORDS

SECTION 11. When there is a failure of prompt corrective action as declared by the Monetary Board due to capital deficiency, the Corporation and the Bangko Sentral ng Pilipinas may examine, inquire or look into the deposit records of a bank: Provided, That such authority may not be exercised when the failure of prompt corrective action is due to grounds other than capital deficiency. For this purpose, banks, their officers and employees are hereby mandated to disclose and report to the Corporation and the Bangko Sentral ng Pilipinas or their duly authorized officers and employees, the required deposit account information.

The Corporation and the Bangko Sentral ng Pilipinas, their duly authorized officers or employees are prohibited from disclosing information obtained under this section to any person, government official, bureau or office. Any act done pursuant to this section shall not be deemed as a violation of Republic Act No. 1405, as amended. Republic Act No. 6426, as amended. Republic Act No. 8791, and other similar laws protecting or safeguarding the secrecy or confidentiality of bank deposits. Any unauthorized disclosure of the information under this section shall be subject to the same penalty under the laws protecting the secrecy or confidentiality of bank deposits.

The provisions of this section notwithstanding, the Monetary Board may take other actions under existing laws that it may deem necessary. (as amended by RA No 11840)

LIQUIDATION OF A CLOSED BANK

SECTION 12. (a) Whenever a bank is ordered closed by the Monetary Board, the Corporation shall be designated as receiver and it shall proceed with the takeover and liquidation of the closed bank in accordance with this Act. For this purpose, banks closed by the Monetary Board shall no longer be rehabilitated.

AUTHORITIES OF A RECEIVER AND EFFECTS OF PLACEMENT OF A BANK UNDER LIQUIDATION

SECTION 13. (a) The receiver is authorized to adopt and implement, without need of consent of the stockholders, board of directors, creditors or depositors of the closed bank, any or a combination of the following modes of liquidation:

(1) Conventional liquidation; and

(2) Purchase of assets and/or assumption of liabilities.

(b) In addition to the powers of a receiver provided under existing laws, the Corporation, as receiver of a closed bank, is empowered to:

(1) Represent and act for and on behalf of the closed bank;

(2) Gather and take charge of all the assets, records and affairs of the closed bank, and administer the same for the benefit of its creditors;

(3) Convert the assets of the closed bank to cash or other forms of liquid assets, as far as practicable: Provided, That the Corporation is authorized to seU assets of closed banks, which are held by the Corporation as receiver, to a Financial Institutions Strategic Transfer Corporation (FISTC), in accordance with the provisions of Republic Act No. 11523 or the “Financial Institutions Strategic Transfer (FIST) Act”. For this purpose, the Board of Directors shall be the appropriate regulatory authority and shall promulgate the necessary implementing rules and regulations. (as amended by RA No 11840)

(4) Bring suits to enforce liabilities of the directors, officers, employees, agents of the closed bank and other entities related or connected to the closed bank or to collect, recover, and preserve all assets, including assets over which the bank has equitable interest;

(5) Appoint or hire persons or entities of recognized competence in banking, finance, asset management or remedial management, as its deputies, assistants or agents, to perform such powers and functions of the Corporation as receiver of the closed bank, or assist in the performance thereof;

(6) Appoint or hire persons or entities of recognized competence in forensic and fraud investigations;

(7) Pay accrued utilities, rentals and salaries of personnel of the closed bank for a period not exceeding three (3) months, from available funds of the closed bank;

(8) Collect loans and other claims of the closed bank and for this purpose, modify, compromise or restructure the terms and conditions of such loans or claims as may be deemed advantageous to the interests of the creditors of the closed bank;

(9) Hire or retain private counsel as may be necessary;

(10) Borrow or obtain a loan, or mortgage, pledge or encumber any asset of the closed bank, when necessary to preserve or prevent dissipation of the assets, or to redeem foreclosed assets of the closed bank, or to minimize losses to its depositors and creditors;

(11) If the stipulated interest rate on deposits is unusually high compared with prevailing applicable interest rates, the Corporation as receiver, may exercise such powers which may include a reduction of the interest rate to a reasonable rate: Provided, That any modifications or reductions shall apply only to earned and unpaid interest;

(12) Utilize available funds of the bank, including funds generated by the receiver from the conversion of assets to pay for reasonable costs and expenses incurred for the preservation of the assets, and liquidation of, the closed bank, without need for approval of the liquidation court;

For banks with insufficient funds, the Corporation is authorized to advance the foregoing costs and expenses, and collect payment, as and when funds become available.

(13) Charge reasonable fees for the liquidation of the bank from the assets of the bank: Provided, That payment of these fees, including any unpaid advances under the immediately preceding paragraph, shall be subject to approval by the liquidation court;

(14) Distribute the available assets of the closed bank, in cash or in kind, to its creditors in accordance with the Rules on Concurrence and Preference of Credits under the Civil Code or other laws;

(15) Dispose records of the closed bank that are no longer needed in the liquidation in accordance with guidelines set by the PDIC Board of Directors, notwithstanding the laws on archival period and disposal of records; and

(16) Exercise such other powers as are inherent and necessary for the effective discharge of the duties of the Corporation as receiver.

The Board of Directors shall adopt such policies and guidelines as may be necessary for the performance of the above powers by personnel, deputies, assistants and agents of the Corporation.

(c) After the payment of all liabilities and claims against the closed bank, the Corporation shall pay surplus, if any, dividends at the legal rate of interest from date of takeover to date of distribution to creditors and claimants of the closed bank in accordance with the Rules on Concurrence and Preference of Credits under the Civil Code or other laws before distribution to the shareholders of the closed bank.

(d) The officers, employees, deputies, assistants and agents of the receiver shall have no liability and shall not be subject to any action, claim or demand in connection with any act done or omitted to be done by them in good faith in connection with the exercise of their powers and functions under this Act and other applicable laws, or other actions duly approved by the court.

(e) The placement of a bank under liquidation shall have the following effects:

(1) On the corporate franchise or existence

Upon placement by the Monetary Board of a bank under liquidation, it shall continue as a body corporate until the termination of the winding-up period under Section 16 of this Act. Such continuation as a body corporate shall only be for the purpose of liquidating, settling and closing its affairs and for the disposal, conveyance or distribution of its assets pursuant to this Act. The receiver shall represent the closed bank in all cases by or against the closed bank and prosecute and defend suits by or against it. In no case shall the bank be reopened and permitted to resume banking business after being placed under liquidation.

(2) On the powers and functions of its directors, officers and stockholders

The powers, voting rights, functions and duties, as well as the allowances, remuneration and perquisites of the directors, officers, and stockholders of such bank are terminated upon its closure. Accordingly, the directors, officers, and stockholders shall be barred from interfering in any way with the assets, records, and affairs of the bank.

The receiver shall exercise all authorities as may be required to facilitate the liquidation of the closed bank for the benefit of all its creditors.

(3) On the assets

Upon service of notice of closure as provided in Section 14 of this Act, all the assets of the closed bank shall he deemed in custodia legis in the hands of the receiver, and as such, these assets may not be subject to attachment, garnishment, execution, levy or any other court processes. A’ judge, officer of the court or any person who shall issue, order, process or cause the issuance or implementation of the garnishment order, levy, attachment or execution, shall be liable under Section 27 of this Act: Provided, however, That collaterals securing the loans and advances granted by the Bangko Sentral ng Pilipinas shall not be included in the assets of the closed bank for distribution to other creditors: Provided, further, That the proceeds in excess of the amount secured shall be returned by the Bangko Sentral ng Pilipinas to the receiver.

Any preliminary attachment or garnishment on any of the assets of the closed bank existing at the time of closure shall not give any preference to the attaching or garnishing party. Upon motion of the receiver, the preliminary attachment or garnishment shall be lifted and/or discharged.

(4) On labor relations

Notwithstanding the provisions of the Labor Code, the employer-employee relationship between the closed bank and its employees shall be deemed terminated upon service of the notice of closure of the bank in accordance with this Act. Payment of separation pay or benefits provided for by law shall be made from available assets of the bank in accordance with the Rules on Concurrence and Preference of Credits under the Civil Code or other laws.

(5) Contractual obligations

The receiver may cancel, terminate, rescind or repudiate any contract of the closed bank that is not necessary for the orderly liquidation of the bank, or is grossly disadvantageous to the closed bank, or for any ground provided by law.

(6) On interest payments

The liability of a bank to pay interest on deposits and all other obligations as of closure shall cease upon its closure by the Monetary Board without prejudice to the first paragraph of Section 85 of Republic Act No. 7653 (the New Central Bank Act): Provided, That the receiver shall have the authority, without need for approval of the liquidation court, to assign, as payment to secured creditors, the bank assets serving as collaterals to their respective loans up to the extent of the outstanding obligations, including interest as of date of closure of the hank, as validated by the receiver. The valuation of the asset shall be based on the prevailing market value of the collaterals as appraised by an independent appraiser on an ‘as is where is’ basis.

(7) Liability for penalties and surcharges for late payment and nonpayment of taxes

From the time of closure, the closed bank shall not be liable for the payment of penalties and surcharges arising from the late payment or nonpayment of real property tax, capital gains tax, transfer tax and similar charges.

(8) Bank charges and fees on services

The receiver may impose, on behalf of the closed bank, charges and fees for services rendered after bank closure, such as, but not limited to, the execution of pertinent deeds and certifications.

(9) Actions pending for or against the closed bank

Except for actions pending before the Supreme Court, actions pending for or against the closed bank in any court or quasi-judicial body shall, upon motion of the receiver, be suspended for a period not exceeding one hundred eighty (180) days and referred to mandatory mediation. Upon termination of the mediation, the case shall be referred back to the court or quasi-judicial body for further proceedings.

(10) Final decisions against the closed bank

The execution and enforcement of a final decision of a court other than the liquidation court against the assets of a closed bank shall be stayed. The prevailing party shall file the final decision as a claim with the liquidation court and settled in accordance with the Rules on Concurrence and Preference of Credits under the Civil Code or other laws.

(11) Docket and other court fees

Payment of docket and other court fees relating to all cases or actions filed by the receiver with any judicial or quasi-judicial bodies shall be deferred until the action is terminated with finality. Any such fees shall constitute as a first Hen on any judgment in favor of the closed bank or in case of unfavorable judgment, such fees shall be paid as liquidation costs and expenses during the distribution of the assets of the closed bank.

(12) All assets, records, and documents in the possession of the closed bank at the time of its closure are presumed held by the bank in the concept of an owner.

(13) The exercise of authority, functions, and duties by the receiver under this Act shall be presumed to have been performed in the regular course of business.

(14) Assets and documents of the closed bank shall retain their private nature even if administered by the receiver. Matters relating to the exercise by the receiver of the functions under this Act shall be subject to visitorial audit only by the Commission on Audit.

NOTICE OF CLOSURE AND TAKEOVER ACTIVITIES

SECTION 14. (a) Upon the designation of the Corporation as receiver of a closed bank, it shall serve a notice of closure to the highest-ranking officer of the bank present in the bank premises, or in the absence of such officer, post the notice of closure in the bank premises or on its main entrance. The closure of the bank shall be deemed effective upon the service of the notice of closure. Thereafter, the receiver shall takeover the bank and exercise the powers of the receiver as provided in this Act.

(b) The receiver shall have authority to use reasonable force, including the authority to force open the premises of the bank, and exercise such acts necessary to take actual physical possession and custody of the bank and all its assets, records, documents, and take charge of its affairs upon the service of the notice of closure.

(c) Directors, officers, employees or agents of a bank hold money and other assets of the bank in trust or under administration or management by them for the bank in their fiduciary capacity.

Upon service of the notice of closure to the bank, all directors, officers, employees or agents of the closed bank shall have the duty to immediately account for, surrender and turn over to the receiver, and provide information relative to, the assets, records, and affairs of the closed bank in their possession, custody, administration or management.

(d) When the circumstances so warrant, the local government unit and law enforcement agencies concerned shall, upon request, immediately provide assistance to the receiver during the service of notice of closure and actual takeover operations to ensure the orderly conduct thereof and the security and safety of the personnel of the receiver and the employees of the closed bank.

PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES

SECTION 15. (a) The receiver shall have the authority to facilitate and implement the purchase of the assets of the closed bank and the assumption of its liabilities by another insured bank, without need for approval of the liquidation court. The exercise of this authority shall be in accordance with the Rules on Concurrence and Preference of Credits under the Civil Code or other laws, subject to such terms and conditions as the Corporation may prescribe. The disposition of the branch licenses and other bank licenses of the closed bank shall be subject to the approval of the Bangko Sentral ng Pilipinas.

(b) Such action of the receiver to determine whether a bank may be the subject of a purchase of assets and assumption of liabilities transaction shall be final and executory, and may not be set aside by any court.

CONVENTIONAL LIQUIDATION

A. ASSET MANAGEMENT AND CONVERSION

SECTION 16. (a) The assets gathered by the receiver shall be evaluated and verified as to their existence, ownership, condition, and other factors to determine their realizable value. In the management, preservation and disposition of assets, the receiver shall be guided by cost-benefit considerations, resources of the closed bank, and potential asset recovery.

(b) The conversion of the assets of the closed bank shall be carried out in a fair and transparent manner in accordance with the rules and procedures as may be determined by the receiver.

(c) In the management and/or conversion of the assets of the closed bank, the receiver shall have the authority to:

(1) Represent the closed bank before the Land Registration Authority (LRA), the Bureau of Lands, the Register of Deeds, the Land Transportation Office (LTO), the Assessor’s Office or other appropriate office of the local government unit, the Securities and Exchange Commission (SEC), or such other similar government agencies or private entities in:

(i) Verifying the authenticity of ownership documents;

(ii) Registering the interest of the closed bank on a specific property;

(iii) Consolidating ownership over an asset of the closed bank;

(iv) Securing certified true copies of documents held by the foregoing agencies/entities in relation to an asset of the closed bank;

(v) Securing the appropriate certification from the foregoing agencies/entities in relation to an asset of the closed bank; and

(vi) Performing other related activities;

(2) Conduct a physical or ocular inspection of the properties owned by, or mortgaged to, the closed bank, to determine their existence and present condition;

(3) Determine the disposal price of assets in accordance with generally accepted valuation principles, standards and practices, subject to such guidelines as the receiver may determine;

(4) Dispose real or personal properties of the closed bank through bidding, negotiated sale or any other mode including lease with option to purchase, whether by piece or by lot, as may be reasonably determined by the receiver based on cost-benefit considerations and to allow efficient distribution of assets to creditors; and

(5) Engage third parties to assist in the liquidation, manage and/or dispose the assets, handle cases filed against or by the closed bank, subject to such guidelines as determined by the receiver.

(d) Notwithstanding any provision of law to the contrary, the following rules shall apply to the management and/or conversion by the receiver of the assets of the closed bank:

(1) Upon notification of the closure of a bank, the LRA, the Bureau of Lands, the Register of Deeds, the LTO, the assessor’s office or other appropriate office of the local government unit, or such other similar government agencies shall not allow any transaction affecting the assets of the closed bank without the consent of the receiver.

(2) Upon issuance by the Monetary Board of the resolution ordering the closure of a bank, any person or entity in custody or possession of assets or records of the closed bank, including, but not limited to, the closed bank’s deposit accounts, titles to real property, collaterals, promissory notes, evidence of indebtedness or investments shall immediately turn over custody of said assets and records to the receiver. Such obligation shall cover evidences of deposit such as passbooks or certificates of deposit issued by the bank to its depositors. Pending turnover, all persons or entities in custody or possession of any asset or record of the closed bank shall hold the said assets or records in trust for the receiver.

(3) The persons or entities in custody or possession of such asset shall not allow, authorize or cause the withdrawal, transfer, disposition, removal, conversion, concealment, or other transaction involving or relating to the subject asset, unless otherwise directed by the receiver.

(e) The receiver shall have the authority to invest funds received from the conversion of the assets of the closed bank in government securities, other government-guaranteed marketable securities or investment-grade debt instruments.

(f) The proceeds of the sale of the bank and branch licenses shall be for the benefit of the creditors of the closed bank which shall be distributed in accordance with this Act and the Rules on Concurrence and Preference of Credits under the Civil Code or other laws.

B. PETITION FOR ASSISTANCE IN THE LIQUIDATION OF A CLOSED BANK

(g) A petition for assistance in the liquidation is a special proceeding for the liquidation of a closed bank, and includes the declaration of the concomitant right of its creditors and the order of payment of their valid claims in the disposition of its assets.

Any proceeding initiated under this section shall be considered in rem. Jurisdiction over all persons affected by the proceeding shall be considered as acquired upon publication of the order setting the case for initial hearing in any newspaper of general circulation in the Philippines.

(h) The liquidation court shall have exclusive jurisdiction to adjudicate disputed claims against the closed banks, assist in the enforcement of individual liabilities of the stockholders, directors and officers and decide on all other issues as may be material to implement the distribution plan adopted by the Corporation for general application to all closed banks.

(i) The provisions of Republic Act No. 8799, otherwise known as ‘The Securities Regulation Code’, and Supreme Court Administrative Matter No. 00-8-10-SC, entitled, ‘The Rules of Procedure on Corporate Rehabilitation’, shall not be applicable to the petition for assistance in the liquidation of the closed bank.

(j) The petition shall be filed in the RTC which has jurisdiction over the principal office of the closed bank or the principal office of the receiver, at the option of the latter.

(k) The petition shall be filed ex parte within a reasonable period from receipt of the Monetary Board Resolution placing the bank under liquidation.

(1) All persons or entities with claims against the assets of the closed bank shall file their claims with the receiver within sixty (60) days from the date of publication of the notice of closure. Claims filed outside the foregoing prescribed period shall be disallowed.

Claims denied by the receiver shall be filed with the liquidation court within sixty (60) days from receipt of the final notice of denial of claim.

(m) A claim whose validity has not yet been determined with finality at the time of the submission of the final asset distribution plan, either by reason of a pending suit or for whatever reason, shall be considered as contingent claim and shall not be paid under the proposed final asset distribution plan.

(n) Upon finality of the order approving the final asset distribution plan, the petition for assistance in the liquidation of a closed bank shall henceforth be, for all intents and purposes, considered closed and terminated and the receiver, its officers, employees or agents, are forever discharged from any and all claims and/or liability arising from or in connection with the liquidation of the closed bank.

(o) The receiver shall submit a final report on the implementation of the approved final asset distribution plan to the Monetary Board and the SEC after the expiration of the winding-up period provided in this Act.

(p) The Supreme Court shall promulgate the appropriate procedural rules to implement this section.

C. WINDING-UP

(q) The creditors shall have a period of six (6) months from the date of publication of notice of the approval by the court of the final asset distribution plan of the closed bank within which to claim payment of the principal obligations and surplus dividends. During this six-month period, the receiver shall hold as trustee the assets allocated in the final asset distribution plan for said creditors.

Failure by the creditor to comply with the documentary requirements within the prescribed period and/or refusal to accept the asset as payment shall be deemed as abandonment or waiver of his or her right to payment.

(r) The individual stockholders of record or their duly-authorized representative or the court-appointed stockholders’ representative shall have a period of six (6) months from publication of notice of the approval by the court of the final asset distribution plan of the closed bank within which to claim the residual assets. During this six-month period, the receiver shall hold as trustee the assets allocated in the final asset distribution plan for said stockholders of record.

Failure by the individual stockholders of record or their duly-authorized representative or the court-appointed stockholders’ representative to comply with the documentary requirements within the prescribed period and/or refusal to accept the residual assets in kind shall be deemed as abandonment or waiver of right to receive the residual assets.

(s) After the lapse of the six-month period provided in paragraphs (q) and (r) of this section, all assets which remain unclaimed by the creditors and/or stockholders of record shall be turned over to the Bureau of Treasury.

(t) The receiver shall continue to keep all the pertinent records of the closed bank for a period of six (6) months from the date of publication of the approval of the final asset distribution plan.

After the lapse of this period, the receiver is authorized to dispose of the same in accordance with the rules and regulations to be prescribed by the receiver.

SECTION 17. To carry out the purposes of this Act, the permanent insurance fund shall be Three billion pesos (P3,000,000,000.00).

The Deposit Insurance Fund shall be the capital account of the Corporation and shall principally consist of the following: (i) the Permanent Insurance Fund; (ii) assessment collections, subject to the charges enumerated in Section 6 (d); (iii) reserves for insurance and financial assistance losses; and (iv) retained earnings: Provided: That the reserves for insurance and financial assistance losses and retained earnings shall be maintained at a reasonable level to ensure capital adequacy: Provided, further, That the Corporation may, within two (2) years from the passage of this Act, and every five (5) years thereafter, conduct a study on the need to adjust the amount of the Permanent Insurance Fund, insurance cover, assessment rate and assessment base, and thereafter make the necessary recommendation to Congress. For this purpose, the Corporation may hire the services of actuarial consultants to determine, among others, the affordability of assessment rates, analysis and evaluation of insurance risk, and advisability of imposing varying assessment rates or insurance cover of different bank categories.

DIVIDEND DECLARATION

SECTION 18. Consistent with the policy of the State to generate, preserve, maintain faith and confidence in the country’s banking system, the Corporation shall build up and maintain the DIF at the target level set by the PDIC Board of Directors. Such target level shall be subject to periodic review and may be adjusted as necessary.

The Corporation shall declare and remit cash dividends to the National Government in accordance with Republic Act No. 7656: Provided, That Section 2(d) on the determination of the dividend base and Section 3 with respect to dividend base and the manner of payment shall not apply. In lieu thereof, the succeeding paragraphs shall be applicable.

For purposes of computing the amount of dividends to be declared and remitted to the National Government, the dividend base shall be the sum of all income, but excluding all assessment income. No other deductions from the dividend base shall be allowed. Such cash dividends accruing to the National Government shall be received by the National Treasury and recorded as income of the General Fund. (as amended by RA No 11840)

PAYMENT OF INSURED DEPOSITS

SECTION 19. Whenever an insured bank shall have been closed by the Monetary Board pursuant to Section 30 of Republic Act No. 7653, or upon expiration or revocation of a bank’s corporate term, payment of the insured deposits on such closed bank shall be made by the Corporation as soon as possible either (1) by cash or (2) by making available to each depositor a transferred deposit in another insured bank in an amount equal to insured deposit of such depositor: Provided, however, That the Corporation, in its discretion, may require proof of claims to be filed before paying the insured deposits, and that in any case where the Corporation is not satisfied as to the validity of a claim for an insured deposit, it may require final determination of a court of competent jurisdiction before paying such claim: Provided, further, That failure to settle the claim, within six (6) months from the date of filing of claim for insured deposit, where such failure was due to grave abuse of discretion, gross negligence, bad faith, or malice, shall, upon conviction, subject the directors, officers or employees of the Corporation responsible for the delay, to imprisonment from six (6) months to one (1) year: Provided, furthermore, That the period shall not apply if the validity of the claim requires the resolution of issues of facts and or law by another office, body or agency including the case mentioned in the first proviso or by the Corporation together with such other office, body or agency.

SECTION 20. The Corporation, upon payment of any depositor as provided for in Section 19 of this Act, shall be subrogated to all rights of the depositor against the closed bank to the extent of such payment. Such subrogation shall include the right on the part of the Corporation to receive the same dividends and payments from the proceeds of the assets of such closed bank and recoveries on account of stockholders’ liability as would have been payable to the depositor on a claim for the insured deposits: Provided, That such depositor shall retain his or her claim for any uninsured portion of his or her deposit, which legal preference shall be the same as that of the subrogated claim of the Corporation for its payment of insured deposits. All payments by the Corporation of insured deposits in closed banks partake of the nature of public funds, and as such, must be considered a preferred credit in the order of preference under Article 2244 (9) of the New Civil Code.

SECTION 21. (a) The Corporation shall commence the determination of insured deposits due the depositors of a closed bank upon its actual takeover of the closed bank. The Corporation shall give notice to the depositors of the closed bank of the insured deposits due them by whatever means deemed appropriate by the Board of Directors: Provided, That the Corporation shall publish the notice once a week for at least three (3) consecutive weeks in a newspaper of general circulation or, when appropriate, in a newspaper circulated in the community or communities where the closed bank or its branches are located.

(b) Payment of an insured deposit to any person by the Corporation shall discharge the Corporation, and payment of a transferred deposit to any person by the new bank or by an insured bank in which a transferred deposit has been made available shall discharge the Corporation and such new bank or other insured bank, to the same extent that payment to such person by the closed bank would have discharged it from liability for the insured deposit.

(c) Except as otherwise prescribed by the Board of Directors, neither the Corporation nor such other insured bank shall be required to recognize as the owner of any portion of a deposit evidenced by a passbook, certificate of deposit or other evidence of deposit determined by the Corporation to be an authentic document or record of the closed bank under a name other than that of the claimant, any person whose name or interest as such owner is not disclosed on the passbook, certificate of deposit or other evidence of deposit of such closed bank as part owner of said deposit, if such recognition would increase the aggregate amount of the insured deposits in such closed bank.

(d) The Corporation may withhold payment of such portion of the insured deposit of any depositor in a closed bank as may be required to provide for the payment of any liability of such depositor as a stockholder of the closed bank, or of any liability of such depositor to the closed bank or its receiver, which is not offset against a claim due from such bank, pending the determination and payment of such liability by such depositor or any other liable therefor.

(e) Unless otherwise waived by the Corporation, if the depositor in the closed bank shall fail to claim his insured deposits with the Corporation within two (2) years from actual takeover of the closed bank by the receiver, or does not enforce his claim filed with the corporation within two (2) years after the two-year period to file a claim as mentioned hereinabove, all rights of the depositor against the Corporation with respect to the insured deposit shall be barred; however, all rights of the depositor against the closed bank and its shareholders or the receivership estate to which the Corporation may have become subrogated, shall thereupon revert to the depositor. Thereafter, the Corporation shall be discharged from any liability on the insured deposit.

CORPORATE FUNDS AND ASSETS

SECTION 22. (a) Subject to guidelines and limits as approved by the Board of Directors, money of the Corporation denominated in the local currency, not otherwise employed, shall be invested in obligations of the Republic of the Philippines or in obligations guaranteed as to principal and interest by the Republic of the Philippines.

The Corporation may also invest in debt instruments denominated in foreign currencies issued or guaranteed by the Republic of the Philippines, or debt instruments denominated in freely convertible foreign currencies issued by supranationals, multilateral agencies, or foreign governments with at least an investment grade credit rating.

The Corporation shall likewise be authorized to buy and/or sell debt instruments and foreign currencies from any government securities eligible dealers or any counterparties or brokers, accredited by the PDIC Board.

For this purpose, the Corporation shall be authorized to open securities custodianship and settlement accounts.

(b) The banking or checking accounts of the Corporation shall be kept with the Bangko Sentral ng Pilipinas, or with any other bank designated as depository or fiscal agent of the Philippine government.

(c) It is hereby declared to be the policy of the State that the Deposit Insurance Fund of the Corporation shall be preserved and maintained at all times. Accordingly, all tax obligations of the Corporation for a period of five (5) years reckoned from the date of effectivity of this Act shall be chargeable to the Tax Expenditure Fund (TEF) in the annual General Appropriation Act pursuant to the provisions of Executive Order No. 93, series of 1986: Provided, That, on the 6th year and thereafter, the Corporation shall be exempt from income tax, final withholding tax, value-added tax on assessments collected from member banks and local taxes. (as added by RA No 9576)

(d) Assets of the Corporation shall be exempt from attachment, garnishment or any other order or process of any court, agency or any other administrative body.

FINANCIAL ASSISTANCE

(e) The Corporation is authorized to make loans to, or purchase the assets of, or assume liabilities of, or make deposits in:

(1) A bank in danger of closing, upon its acquisition by a qualified investor; or

(2) A qualified investor, upon its purchase of all assets and assumption of all liabilities of a bank in danger of closing; or

(3) A surviving or consolidated institution that has merged or consolidated with a bank in danger of closing; upon such terms and conditions as the Board of Directors may prescribe, when in the opinion of the Board of Directors, such acquisition, purchase of assets, assumption of liabilities, merger or consolidation, is essential to provide adequate banking service in the community or maintain financial stability in the economy.

The Corporation may, taking into consideration the peculiar characteristics of Islamic banks, formulate rules and regulations for the extension of financial assistance under this section.

The Corporation, prior to the exercise of the powers under this section, shall determine that actual payoff and liquidation thereof will be more expensive than the exercise of this power: Provided, That when the Monetary Board has determined that there are systemic consequences of a probable failure or closure of an insured bank, the Corporation may grant financial assistance to such insured bank in such amount as may be necessary to prevent its failure or closure and/or restore the insured bank to viable operations, under such terms and condition as may be deemed necessary by the Board of Directors, subject to the concurrence by the Monetary Board and without additional cost to the DIF at the time of granting the financial assistance. (as amended by RA No 11840)

A systemic risk refers to the possibility that failure of one bank to settle net transactions with other banks will trigger a chain reaction, depriving other banks of funds leading to a general shutdown of normal clearing and settlement activity. Systemic risk also means the likelihood of a sudden, unexpected collapse of confidence in a significant portion of the banking or financial system with potentially large real economic effects. Finally, the Corporation may not use its authority under this subsection to purchase the voting or common stock of an insured bank but it can enter into and enforce agreements that it determines to be necessary to protect its financial interests: Provided, That the financial assistance may take the form of equity or quasi-equity of the insured bank as may be deemed necessary by the Board of Directors with concurrence by the Monetary Board: Provided, further, That the Corporation shall dispose of such equity as soon as practicable.

AUTHORITY TO BORROW

SECTION 23. The Corporation is authorized to borrow from the Bangko Sentral ng Pilipinas and the Bangko Sentral ng Pilipinas is authorized to lend to the Corporation on such terms as may be agreed upon by the Corporation and the Bangko Sentral ng Pilipinas, such funds as in the judgment of the Board of Directors of the Corporation are from time to time required for insurance purposes and financial assistance provided for in Section 22(e) of this Act: Provided, That any such loan as may be granted by the Bangko Sentral ng Pilipinas shall be consistent with monetary policy: Provided, further, That the rate of interest thereon shall be fixed by the Monetary Board.

When in the judgment of the Board of Directors the funds of the Corporation are not sufficient to provide for an emergency or urgent need to attain the purposes of this Act, the Corporation is likewise authorized to borrow money, obtain loans or arrange credit lines or other credit accommodations from any bank: Provided, That such loan shall be of short-term duration: Provided, further, That no prior Monetary Board opinion shall be required for the Corporation and its counterparties on individual drawdowns or borrowings within an approved borrowing program where prior Monetary Board opinion has already been obtained, pursuant to Section 123 of Republic Act No. 7653.

ISSUANCE OF BONDS, DEBENTURES AND OTHER OBLIGATIONS

SECTION 24. With the approval of the President of the Philippines, upon the recommendation of the Department of Finance, the Corporation is authorized to issue bonds, debentures, and other obligations, both local or foreign, as may be necessary for purposes of providing liquidity for settlement of insured deposits in closed banks or to facilitate the implementation of financial assistance as provided herein: Provided, That the Board of Directors shall determine the interest rates, maturity and other requirements of said obligations: Provided, further, That the Corporation may provide for appropriate reserves for the redemption or retirement of said obligation. (as amended by RA No 11840)

All notes, debentures, bonds, or such obligations issued by the Corporation shall be exempt from taxation both as to principal and interest, and shall be fully guaranteed by the Government of the Republic of the Philippines. Such guarantee, which in no case shall exceed two times the DIF as of date of the debt issuance, shall be expressed on the face thereof.

The Corporation may issue notes, debentures, bonds, or other debt instruments without the approval of the President of the Philippines, as long as these shall not be guaranteed by the national government.

The Board of Directors shall have the power to prescribe the terms and conditions, rules and regulations for the issuance, reissuance, servicing, placement and redemption of the bonds herein authorized to be issued as well as the registration of such bonds at the request of the holders thereof.

SECTION 25. (a) The Corporation shall annually make a report of its operations to the Congress as soon as practicable after the 1st day of January in each year.

(b) The financial transactions of the Corporation shall be audited by the Commission on Audit in accordance with the principles and procedures applicable to commercial corporate transactions and under such rules and regulations as may be prescribed by the Commission on Audit. The audit shall be conducted at the place or places where accounts of the Corporation are normally kept. Except as to matters relating to the function of the Corporation as receiver which shall be subject to visitorial audit only, the representatives of the Commission on Audit shall have access to all books, accounts, records, reports, files and all other papers, things, or property belonging to or in use by the Corporation pertaining to its financial transactions and necessary to facilitate the audit, and they shall be afforded full facilities for verifying transactions with the balances or securities held by depositories, fiscal agents, and custodians. All such books, accounts, records, reports, files, papers, and property of the Corporation shall remain in possession and custody of the Corporation.

SECTION 26. (a) Every insured bank shall display at each place of business maintained by it a sign or signs, and shall include a statement in all its advertisements to the effect that its deposits are insured by the Corporation: Provided, That the Board of Directors may exempt from this requirement advertisements which do not relate to deposits or when it is impractical to include such statement therein. The Board of Directors shall prescribe by regulations the forms of such signs and the manner of use.

(b) No insured bank shall pay any dividend on its capital stock or interest on its capital notes or debentures (if such interest is required to be paid only out of net profits) or distribute any of its capital assets while it remains in default in the payment of any assessment due to the Corporation: Provided, That if such default is due to a dispute between the insured bank and the Corporation over the amount of such assessment, this subsection shall not apply if such bank shall deposit security satisfactory to the Corporation for payment upon final determination of the issue.

(c) The Corporation may require an insured bank to provide protection and indemnity against burglary, defalcation, losses arising from discharge of duties by, or particular acts of defaults of its directors, officers, or employees, and other similar insurable losses. The Board of Directors in consultation with the Bangko Sentral, shall determine the bonding requirement as it refers to directors, officers and employers of the insured bank as well as the form and amount of the bond. Whenever any insured bank refuses to comply with any such requirement the Corporation may contract for such protection and add the cost thereof to the assessment otherwise payable by such bank.

(d) Any assessment payable by an insured bank under this Act shall be subject to payment of interest computed from the date such assessment became due and payable and at the legal rate for loans as prescribed by law or appropriate authority and in case of willful failure or refusal to pay such assessment and interest thereon, there shall be added a penalty equivalent to twice the amount of interest payable as computed herein for each day such violations continue, which the interest and penalty the Corporation may recover for its use: Provided, That the penalty shall not be applicable under the circumstances stated in the provisions of subsection (b) of this Section.

(e) The penalty of imprisonment of not less than six (6) years but not more than twelve (12) years or a fine of not less than Fifty thousand pesos (P50,000.00) but not more than Ten million pesos (P10,000,000.00), or both, at the discretion of the court, shall be imposed upon:

(1) Any director, officer, employee or agent of a bank for:

(a) Any willful refusal to submit reports as required by law, rules and regulations;

(b) Any unjustified refusal to permit examination and audit of the deposit records or the affairs of the institution;

(c) Any willful making of a false statement or entry in any bank report or document required by the Corporation;

(d) Submission of false material information in connection with or in relation to any financial assistance of the Corporation extended to the bank;

(e) Splitting of deposits or creation of fictitious or fraudulent loans or deposit accounts.

Splitting of deposits occurs whenever a deposit account with an outstanding balance of more than the statutory maximum amount of insured deposit maintained under the name of natural or juridical persons is broken down and transferred into two (2) or more accounts in the name/s of natural or juridical persons or entities who have no beneficial ownership on transferred deposits in their names within one hundred twenty (120) days immediately preceding or during a bank-declared bank holiday, or immediately preceding a closure order issued by the Monetary Board of the Bangko Sentral ng Pilipinas for the purpose of availing of the maximum deposit insurance coverage;

(f) Refusal to receive the notice of closure as provided under Section 14 of this Act;

(g) Refusal to allow the Corporation to take over a closed bank or obstructing such action of the Corporation;

(h) Refusal to turn over or destroying or tampering bank records;

(i) Fraudulent disposal, transfer or concealment of any asset, property or liability of the closed bank;

(j) Violation of, or causing any person to violate, the exemption from garnishment, levy, attachment or execution provided under this Act and the New Central Bank Act;

(k) Any willful failure or refusal to comply with, or violation of any provision of this Act, or commission of any other irregularities, and/or conducting business in an unsafe or unsound manner as may be determined by the Board of Directors in relation to Section 56 of Republic Act No. 8791, or ‘The General Banking Law of 2000’.

Notwithstanding any law to the contrary, the foregoing acts of directors, officers, employees or agents of the bank shall be considered as additional grounds for disqualification under the fit and proper rules of the Bangko Sentral ng Pilipinas.

(l) Other acts inimical to the interest of the bank or the Corporation, such as, but not limited to, conflict of interest, disloyalty, authorizing related party transactions with terms detrimental to the bank and its stakeholders, and unauthorized disclosure of confidential information, as may be determined by the Corporation.

(2) Any person for:

(a) Refusal to disclose information, records or data pertaining to the bank accounts of a closed bank to the receiver;

(b) Refusal to turn over possession or custody of the asset and record of the closed bank to the receiver, notwithstanding any agreement to the contrary;

(c) Refusal or delaying the:

(i) Verification of authenticity of the ownership documents;

(ii) Registration of interest of the closed bank on a specific property;

(iii) Consolidation of ownership over an asset of the closed bank;

(iv) Act of securing certified true copies of documents in relation to an asset of the closed bank;

(v) Act of securing the appropriate certification from the agencies or entities stated in Section 16 of this Act in relation to an asset of the closed bank;

(vi) Conduct of a physical or ocular inspection of the properties owned by, or mortgaged to, the closed bank, to determine their existence and present condition; or

(vii) Other related activities of the receiver; or

(d) Allowing the withdrawal from deposits or disposition of any asset of the closed bank other than by the receiver;

(e) Willfully violating any provision of this Act;

(f) Conspiring or willfully participating in any of the offenses enumerated in Paragraph 1 of this section;

(3) Any law enforcement officer or local government official who refuses or fails to assist the receiver in the service of the notice of closure, as provided under Section 14 of this Act.

(f) The Board of Directors is hereby authorized to impose administrative fines for any act or omission enumerated in the preceding subsection, and for violation of any order, instruction, rule or regulation issued by the Corporation, against a bank and/or any of its directors, officers or agents responsible for such act, omission, or violation, in amounts as it may be determined to be appropriate, but in no case to exceed three times the amount of the damages or costs caused by the transaction for each day that the violation subsists, taking into consideration the attendant circumstances, such as the nature and gravity of the violation or irregularity and the size of the bank.

(g) The penalty of imprisonment of not less than ten (10) years but not more than twelve (12) years, or a fine of not less than Five hundred thousand pesos (P500,000.00) but not more than Ten million pesos (P 10,000,000.00), or both, at the discretion of the court, shall be imposed upon:

(1) Any depositor who files a fictitious and/or fraudulent claim for deposit insurance; and

(2) Any bank officer who certifies to the validity of the deposit liabilities which is subsequently verified to be fictitious and/or fraudulent.

(h) The penalty of imprisonment of not less than twelve (12) years but not more than fourteen (14) years shall be imposed upon any person who participates, or attempts to participate, in a scheme to defraud a bank.

If the offense shall have been committed by a director or officer of the bank, the penalty of imprisonment of not less than fifteen (15) years, but not more than seventeen (17) years shall be imposed.

If the offense shall have resulted in systemic consequences, as determined by the Bangko Sentral ng Pilipinas, the penalty of imprisonment of not less than eighteen (18) years but not more than twenty (20) years shall be imposed. (par. c deleted by RA No 11840 and succeeding paragraphs renumbered)

SECTION 27. No court, except the Court of Appeals, shall issue any temporary restraining order, preliminary injunction or preliminary mandatory injunction against the Corporation for any action under this Act.

This prohibition shall apply in all cases, disputes or controversies instituted by a private party, the insured bank, or any shareholder of the insured bank.

The Supreme Court may issue a restraining order or injunction when the matter is of extreme urgency involving a constitutional issue, such that unless a temporary restraining order is issued, grave injustice and irreparable injury will arise. The party applying for the issuance of a restraining order or injunction shall file a bond in an amount to be fixed by the Supreme Court, which bond shall accrue in favor of the Corporation if the court should finally decide that the applicant was not entitled to the relief sought.

Any restraining order or injunction issued in violation of this Section is void and of no force and effect and any judge who has issued the same shall suffer the penalty of suspension of at least sixty (60) days without pay.

SECTION 28. Exemption from the Bulk Sales Law. - Bank liquidation involving the purchase of all assets and assumption of all liabilities of a bank to a third party shall be exempt from the provisions of Act No. 3952, otherwise known as ‘The Bulk Sales Law’. (as amended by RA No 11840)

SECTION 29. Transitory Provisions. — (a) The incumbent President of the Corporation and private sector members of the Board of Directors shall continue to exercise their respective duties and functions until replaced by the President of the Philippines: Provided, That such new appointees shall be subject to the term of office provided under Section 3 of this Act, as amended.

(b) Payment of surplus dividends under Section 13(c) of this Act, as amended, shall be applicable to banks without a court-approved final asset distribution plan at the time of the effectivity of this Act.

(c) The preference indicated under Section 15 of this Act, as amended, shall be likewise effective upon liquidation proceedings already commenced and pending as of the effectivity of this Act, where no distribution of assets has been made.

(d) The provisions in Section 10 of this Act, as amended, on legal assistance, protection and indemnification shall apply to all cases pending before the effectivity of this Act.

SECTION 30. The words "Central Bank" and the "Central Bank of the Philippines" wherever they appear in Republic Act No. 3591, as amended, is hereby replaced with Bangko Sentral and/or Bangko Sentral ng Pilipinas, respectively.

SECTION 50. The Corporation may be reorganized by its Board of Directors by adopting if it so desires, an entirely new staffing pattern or organizational structure to suit the operations of the Corporation under this Act. No preferential or priority right shall be given to or enjoyed by any personnel for appointment to any position in the new staffing pattern nor shah any personnel be considered as having prior or vested rights with respect to retention in the Corporation or in any position which may be created in the new staffing pattern, even if he or she should be the incumbent of a similar position prior to reorganization. The reorganization shall be completed within six (6) months after the effectivity of this Act. Personnel who are not retained are deemed separated horn the service.

SECTION 51. The Board of Directors is hereby authorized to provide separation incentives, and all those who shall retire or be separated from the service on account of reorganization under the preceding section shall be entitled to such incentives which may be in addition to all gratuities and benefits to which they may be entitled under existing laws.

SECTION 31 [52]. Separability Clause. – If any provision or section of this Act or the application thereof to any person or circumstances is held invalid, the other provisions or sections of this Act, in the application of such provision or section to other persons or circumstances, shall not be affected thereby.

SECTION 32 [53]. Repealing Clause. – All acts or parts of acts and executive orders, administrative orders, or parts thereof which are inconsistent with the provisions of this Act are hereby repealed.

SECTION 33 [54]. Effectivity Clause. – This Act shall take effect fifteen (15) days following the completion of its publication in the Official Gazette or in two (2) newspapers of general circulation.

Other provisions by RA No 11840

SECTION 19. Repealing Clause. - Section 17(c) of Republic Act No. 11439 on the non-applicability of Republic Act No. 3591, as amended, is hereby amended insofar as certain products or arrangements of Islamic banks which may be deemed as deposit by the Bangko Sentral ng Pilipinas for purposes of this Act

All other laws, decrees, resolutions, instructions, and rules and regulations, or parts thereof which are inconsistent with this Act are hereby deemed repealed or modified accordingly.

SECTION 20. Effectivity. - This Act shall take effect fifteen (15) days after its publication in the Official Gazette or in a newspaper of general circulation.

RA No 11840 lapsed into law on 17 June 2022.

ARTICLE I Creation, Responsibilities and Corporate Powers of the Bangko Sentral

SECTION 1. Declaration of Policy. — The State shall maintain a central monetary authority that shall function and operate as an independent and accountable body corporate in the discharge of its mandated responsibilities concerning money, banking and credit. In line with this policy, and considering its unique functions and responsibilities, the central monetary authority established under this Act, while being a government-owned corporation, shall enjoy fiscal and administrative autonomy.

SECTION 2. Creation of the Bangko Sentral. — There is hereby established an independent central monetary authority, which shall be a body corporate known as the Bangko Sentral ng Pilipinas, hereafter referred to as the Bangko Sentral.

The capital of the Bangko Sentral shall be Two hundred billion pesos (₱200,000,000,000), to be fully subscribed by the Government of the Republic of the Philippines, hereafter referred to as the Government: Provided, That the increase in capitalization shall be funded solely from the declared dividends of the Bangko Sentral in favor of the National Government. For this purpose, any and all declared dividends of the Bangko Sentral in favor of the National Government shall be deposited in a special account in the General Fund, and earmarked for the payment of Bangko Sentral’s increase in capitalization. Such payment shall be released and disbursed immediately and shall continue until the increase in capitalization has been fully paid. (as amended by RA No 11211)

SECTION 3. Responsibility and Primary Objective. — The Bangko Sentral shall provide policy directions in the areas of money, banking, and credit. It shall have supervision over the operations of banks and exercise such regulatory and examination powers as provided in this Act and other pertinent laws over the quasi-banking operations of non-bank financial institutions. As may be determined by the Monetary Board, it shall likewise exercise regulatory and examination powers over money service businesses, credit granting businesses, and payment system operators. The Monetary Board is hereby empowered to authorize entities or persons to engage in money service businesses.

The primary objective of the Bangko Sentral is to maintain price stability conducive to a balanced and sustainable growth of the economy and employment. It shall also promote and maintain monetary stability and the convertibility of the peso.

The Bangko Sentral shall promote financial stability and closely work with the National Government, including, but not limited to, the Department of Finance, Securities and Exchange Commission, the Insurance Commission, and the Philippine Deposit Insurance Corporation.

The Bangko Sentral shall oversee the payment and settlement systems in the Philippines, including critical financial market infrastructures, in order to promote sound and prudent practices consistent with the maintenance of financial stability.

In the attainment of its objectives, the Bangko Sentral shall promote broad and convenient access to high quality financial services and consider the interest of the general public. (as amended by RA No 11211)

SECTION 4. Place of Business. — The Bangko Sentral shall have its principal place of business in Metro Manila, but may maintain branches, agencies and correspondents in such other places as the proper conduct of its business may require.

SECTION 5. Corporate Powers. — The Bangko Sentral is hereby authorized to adopt, alter, and use a corporate seal which shall be judicially noticed; to enter into contracts; to lease or own real and personal property, and to sell or otherwise dispose of the same; to sue and be sued; and otherwise to do and perform any and all things that may be necessary or proper to carry out the purposes of this Act.

The Bangko Sentral may acquire and hold such assets and incur such liabilities in connection with its operations authorized by the provisions of this Act, or as are essential to the proper conduct of such operations.

The Bangko Sentral may compromise, condone or release, in whole or in part, any claim of or settled liability to the Bangko Sentral, regardless of the amount involved, under such terms and conditions as may be prescribed by the Monetary Board to protect the interests of the Bangko Sentral.

ARTICLE II The Monetary Board

SECTION 6. Composition of the Monetary Board. — The powers and functions of the Bangko Sentral shall be exercised by the Bangko Sentral Monetary Board, hereafter referred to as the Monetary Board, composed of seven (7) members appointed by the President of the Philippines for a term of six (6) years.

The seven (7) members are:

(a) the Governor of the Bangko Sentral, who shall be the Chairman of the Monetary Board. The Governor of the Bangko Sentral shall be head of a department and his appointment shall be subject to confirmation by the Commission on Appointments. Whenever the Governor is unable to attend a meeting of the Board, he shall designate a Deputy Governor to act as his alternate: Provided, That in such event, the Monetary Board shall designate one of its members as acting Chairman;

(b) a member of the Cabinet to be designated by the President of the Philippines. Whenever the designated Cabinet Member is unable to attend a meeting of the Board, he shall designate an Undersecretary in his Department to attend as his alternate; and

(c) five (5) members who shall come from the private sector, all of whom shall serve full-time: Provided, however, That of the members first appointed under the provisions of this subsection, three (3) shall have a term of six (6) years, and the other two (2), three (3) years.

No member of the Monetary Board may be reappointed more than once.

SECTION 7. Vacancies. — Any vacancy in the Monetary Board created by the death, resignation, or removal of any member shall be filled by the appointment of a new member to complete the unexpired period of the term of the member concerned.

SECTION 8. Qualifications. — The members of the Monetary Board must be natural-born citizens of the Philippines, at least thirty-five (35) years of age, with the exception of the Governor who should at least be forty (40) years of age, of good moral character, of unquestionable integrity, of known probity and patriotism, and with recognized competence in social and economic disciplines.

SECTION 9. Disqualifications. — In addition to the disqualifications imposed by Republic Act No. 6713, a member of the Monetary Board is disqualified from being a director, officer, employee, consultant, lawyer, agent or stockholder of any bank, quasi-bank or any other institution which is subject to supervision or examination by the Bangko Sentral, in which case such member shall resign from, and divest himself of any and all interests in such institution before assumption of office as member of the Monetary Board.

The members of the Monetary Board coming from the private sector shall not hold any other public office or public employment during their tenure.

No person shall be a member of the Monetary Board if he has been connected directly with any multilateral banking or financial institution or has a substantial interest in any private bank in the Philippines, within one (1) year prior to his appointment; likewise, no member of the Monetary Board shall be employed in any such institution within two (2) years after the expiration of his term except when he serves as an official representative of the Philippine Government to such institution.

SECTION 10. Removal. — The President may remove any member of the Monetary Board for any of the following reasons:

(a) If the member is subsequently disqualified under the provisions of Section 8 of this Act; or

(b) If he is physically or mentally incapacitated that he cannot properly discharge his duties and responsibilities and such incapacity has lasted for more than six (6) months; or

(c) If the member is guilty of acts or operations which are of fraudulent or illegal character or which are manifestly opposed to the aims and interests of the Bangko Sentral; or

(d) If the member no longer possesses the qualifications specified in Section 8 of this Act.

SECTION 11. Meetings. — The Monetary Board shall meet at least once a week. The Board may be called to a meeting by the Governor of the Bangko Sentral or by two (2) other members of the Board.

The presence of four (4) members shall constitute a quorum: Provided, That in all cases the Governor or his duly designated alternate shall be among the four (4) members.

Unless otherwise provided in this Act, all decisions of the Monetary Board shall require the concurrence of at least four (4) members.

The Bangko Sentral shall maintain and preserve a complete record of the proceedings and deliberations of the Monetary Board, including the tapes and transcripts of the stenographic notes, either in their original form or in microfilm.

The meetings of the Monetary Board may be conducted through modern technologies such as, but not limited to, teleconferencing and videoconferencing. (as amended by RA No 11211)

SECTION 12. Attendance of the Deputy Governors. — The Deputy Governors may attend the meetings of the Monetary Board with the right to be heard.

SECTION 13. Salary. — The salary of the Governor and the members of the Monetary Board from the private sector shall be fixed by the President of the Philippines at a sum commensurate to the importance and responsibility attached to the position.

SECTION 14. Withdrawal of Persons Having a Personal Interest. — In addition to the requirements of Republic Act No. 6713, any member of the Monetary Board with personal or pecuniary interest in any matter in the agenda of the Monetary Board shall disclose his interest to the Board and shall retire from the meeting when the matter is taken up. The decision taken on the matter shall be made public. The minutes shall reflect the disclosure made and the retirement of the member concerned from the meeting.

SECTION 15. Exercise of Authority. — In the exercise of its authority, the Monetary Board shall:

(a) issue rules and regulations it considers necessary for the effective discharge of the responsibilities and exercise of the powers vested upon the Monetary Board and the Bangko Sentral. The rules and regulations issued shall be reported to the President and the Congress within fifteen (15) days from the date of their issuance;

(b) direct the management, operations, and administration of the Bangko Sentral, reorganize its personnel, and issue such rules and regulations as it may deem necessary or convenient for this purpose. The legal units of the Bangko Sentral shall be under the exclusive supervision and control of the Monetary Board;

(c) establish a human resource management system which shall govern the selection, hiring, appointment, transfer, promotion, or dismissal of all personnel. Such system shall aim to establish professionalism and excellence at all levels of the Bangko Sentral in accordance with sound principles of management.

A compensation structure, based on job evaluation studies and wage surveys and subject to the Board's approval, shall be instituted as an integral component of the Bangko Sentral's human resource development program: Provided, That the Monetary Board shall make its own system conform as closely as possible with the principles provided for under Republic Act No. 6758: Provided, however, That compensation and wage structure of employees whose positions fall under salary grade 19 and below shall be in accordance with the rates prescribed under Republic Act No. 6758.

On the recommendation of the Governor, appoint, fix the remunerations and other emoluments, and remove personnel of the Bangko Sentral, subject to pertinent civil service laws: Provided, That the Monetary Board shall have exclusive and final authority to promote, transfer, assign, or reassign personnel of the Bangko Sentral and these personnel actions are deemed made in the interest of the service and not disciplinary: Provided, further, That the Monetary Board may delegate such authority to the Governor under such guidelines as it may determine.

(d) adopt an annual budget for and authorize such expenditures by the Bangko Sentral as are in the interest of the effective administration and operations of the Bangko Sentral in accordance with applicable laws and regulations; and

(e) indemnify its members and other officials of the Bangko Sentral, including personnel of the departments performing supervision and examination functions against all costs and expenses reasonably incurred by such persons in connection with any civil or criminal action, suit or proceedings to which he may be, or is, made a party by reason of the performance of his functions or duties, unless he is finally adjudged in such action or proceeding to be liable for willful violation of this Act, performed in evident bad faith or with gross negligence.

In the event of a settlement or compromise, indemnification shall be provided only in connection with such matters covered by the settlement as to which the Bangko Sentral is advised by external counsel that the person to be indemnified did not commit willful violation of this Act, performed in evident bad faith or with gross negligence.

The costs and expenses incurred in defending the aforementioned action, suit or proceeding may be paid by the Bangko Sentral in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the member, officer, or employee to repay the amount advanced should it ultimately be determined by the Monetary Board that he is not entitled to be indemnified as provided in this subsection. (as amended by RA No 11211)

SECTION 16. Responsibility. — The general rule and the exception therefrom on the liability of public officers as provided in Sections 38 and 39 of Chapter 9, Book 1 of the Revised Administrative Code of 1987 shall apply to the members of the Monetary Board and other personnel of the Bangko Sentral.

Similar responsibility shall apply to members of the Monetary Board, and other personnel of the Bangko Sentral for: (1) the disclosure of any information of a confidential nature, or any information on the discussions or resolutions of the Monetary Board, or about the confidential operations of the Bangko Sentral, unless the disclosure is in connection with the performance of official functions with the Bangko Sentral, or is with prior authorization of the Monetary Board or the Governor; or (2) the use of such information for personal gain or to the detriment of the Government, the Bangko Sentral or third parties: Provided, however, That any data or information required to be submitted to the President and/or the Congress, or to be published under the provisions of this Act shall not be considered confidential.

Unless the actions or omissions of the Bangko Sentral, members of the Monetary Board and its other personnel are finally adjudged to be in willful violation of this Act, performed in evident bad faith or with gross negligence, they are held free and harmless to the fullest extent permitted by law from any liability, and they shall be indemnified for any and all liabilities, losses, claims, demands, damages, deficiencies, costs and expenses of whatsoever kind and nature that may arise in connection with the exercise of their powers and performance of their duties and functions. (as amended by RA No 11211)

ARTICLE III The Governor and Deputy Governors of the Bangko Sentral

SECTION 17. Powers and Duties of the Governor. — The Governor shall be the chief executive officer of the Bangko Sentral. His powers and duties shall be to:

(a) prepare the agenda for the meetings of the Monetary Board and to submit for the consideration of the Board the policies and measures which he believes to be necessary to carry out the purposes and provisions of this Act;

(b) execute and administer the policies and measures approved by the Monetary Board;

(c) direct and supervise the operations and internal administration of the Bangko Sentral. The Governor may delegate certain of his administrative responsibilities to other officers or may assign specific tasks or responsibilities to any full-time member of the Monetary Board without additional remuneration or allowance whenever he may deem fit or subject to such rules and regulations as the Monetary Board may prescribe;

(d) appoint and fix the remunerations and other emoluments of personnel below the rank of a department head in accordance with the position and compensation plans approved by the Monetary Board, as well as to impose disciplinary measures upon personnel of the Bangko Sentral, subject to the provisions of Section 15(c) of this Act: Provided, That removal of personnel shall be with the approval of the Monetary Board;

(e) render opinions, decisions, or rulings, which shall be final and executory until reversed or modified by the Monetary Board, on matters regarding application or enforcement of laws pertaining to institutions supervised by the Bangko Sentral and laws pertaining to quasi-banks, as well as regulations, policies or instructions issued by the Monetary Board, and the implementation thereof; and

(f) exercise such other powers as may be vested in him by the Monetary Board.

SECTION 18. Representation of the Monetary Board and the Bangko Sentral. — The Governor of the Bangko Sentral shall be the principal representative of the Monetary Board and of the Bangko Sentral and, in such capacity and in accordance with the instructions of the Monetary Board, he shall be empowered to:

(a) represent the Monetary Board and the Bangko Sentral in all dealings with other offices, agencies and instrumentalities of the Government and all other persons or entities, public or private, whether domestic, foreign or international;

(b) sign contracts entered into by the Bangko Sentral, notes and securities issued by the Bangko Sentral, all reports, balance sheets, profit and loss statements, correspondence and other documents of the Bangko Sentral.

The signature of the Governor may be in facsimile whenever appropriate;

(c) represent the Bangko Sentral, either personally or through counsel, including private counsel, as may be authorized by the Monetary Board, in any legal proceedings, action or specialized legal studies; and

(d) delegate his power to represent the Bangko Sentral, as provided in subsections (a), (b) and (c) of this section, to other officers upon his own responsibility: Provided, however, That in order to preserve the integrity and the prestige of his office, the Governor of the Bangko Sentral may choose not to participate in preliminary discussions with any multilateral banking or financial institution on any negotiations for the Government within or outside the Philippines. During the negotiations, he may instead be represented by a permanent negotiator.

SECTION 19. Authority of the Governor in Emergencies. — In case of emergencies where time is insufficient to call a meeting of the Monetary Board, the Governor of the Bangko Sentral, with the concurrence of two (2) other members of the Monetary Board, may decide any matter or take any action within the authority of the Board.

The Governor shall submit a report to the President and Congress within seventy-two (72) hours after the action has been taken.

At the soonest possible time, the Governor shall call a meeting of the Monetary Board to submit his action for ratification.

SECTION 20. Outside Interests of the Governor and the Full-time Members of the Board. — The Governor of the Bangko Sentral and the full-time members of the Board shall limit their professional activities to those pertaining directly to their positions with the Bangko Sentral. Accordingly, they may not accept any other employment, whether public or private, remunerated or ad honorem, with the exception of positions in eleemosynary, civic, cultural or religious organizations or whenever, by designation of the President, the Governor or the full-time member is tasked to represent the interest of the Government or other government agencies in matters connected with or affecting the economy or the financial system of the country.

SECTION 21. Deputy Governors. — The Governor of the Bangko Sentral, with the approval of the Monetary Board, shall appoint not more than five (5) Deputy Governors who shall perform duties as may be assigned to them,by the Governor and the Board.

In the absence of the Governor, a Deputy Governor designated by the Governor shall act as chief executive of the Bangko Sentral and shall exercise the powers and perform the duties of the Governor. Whenever the Governor is unable to attend meetings of government boards or councils in which he is an ex officio member pursuant to provisions of special laws, a Deputy Governor as may be designated by the Governor shall be vested with authority to participate and exercise the right to vote in such meetings. (as amended by RA No 11211)

ARTICLE IV Operations of the Bangko Sentral

SECTION 22. Research and Statistics. — The Bangko Sentral shall prepare data and conduct economic research for the guidance of the Monetary Board in the formulation and implementation of its policies. Such data shall include, among others, forecasts of the balance of payments of the Philippines, statistics on the monthly movement of the monetary aggregates and of prices and other statistical series and economic studies useful for the formulation and analysis of monetary, banking, credit and exchange policies.

SECTION 23. Authority to Obtain Data and Information. — The Bangko Sentral shall have the authority to require from any person or entity, including government offices and instrumentalities, or government-owned or -controlled corporations, any data, for statistical and policy development purposes in relation to the proper discharge of its functions and responsibilities: Provided, That disaggregated data gathered are subject to prevailing confidentiality laws. The Bangko Sentral through the Governor or in his absence, a duly authorized representative shall have the power to issue a subpoena for the production of the books and records for the aforesaid purpose. Those who refuse the subpoena without justifiable cause, or who refuse to supply the Bangko Sentral with data required, shall be subject to punishment for contempt in accordance with the provisions of the Rules of Court.

The authority of the Bangko Sentral to require data from banks shall continue to be exercised pursuant to its supervisory powers set forth in this Act and other applicable laws.

Data on individuals and firms, other than banks, gathered by the Bangko Sentral shall not be made available to any person or entity outside of the Bangko Sentral whether public or private except under order of the court or under such conditions as may be prescribed by the Monetary Board: Provided, however, That the collective data on firms may be released to interested persons or entities: Provided, finally, That in the case of data on banks, the provisions of Section 27 of this Act shall apply. (as amended by RA No 11211)

SECTION 24. Training of Technical Personnel. — The Bangko Sentral shall promote and sponsor the training of technical personnel in the field of money and banking. Toward this end, the Bangko Sentral is hereby authorized to defray the costs of study, at home or abroad, of qualified employees of the Bangko Sentral, of promising university graduates or of any other qualified persons who shall be determined by proper competitive examinations. The Monetary Board shall prescribe rules and regulations to govern the training program of the Bangko Sentral.

SECTION 25. Supervision and Examination. — The Bangko Sentral shall have supervision over, and conduct regular or special examinations of banking institutions and quasi-banks, including their subsidiaries and affiliates engaged in allied activities.

For purposes of this section, a subsidiary means a corporation more than fifty percent (50%) of the voting stock of which is directly or indirectly owned, controlled or held with power to vote by a bank or quasi-bank and an affiliate means a corporation the voting stock of which, to the extent of fifty percent (50%) or less, is owned by a bank or quasi-bank or which is related or linked directly or indirectly to such institution or intermediary through common stockholders or such other factors as may be determined by the Monetary Board.

The Bangko Sentral shall have regulatory authority over, and conduct regular or special examinations of, entities which under this Act or by special laws are subject to its jurisdiction.

The Bangko Sentral shall establish a mechanism for issues arising from bank examinations. It shall be independent and reports directly to the Monetary Board, without prejudice to the authority of the Bangko Sentral and its Monetary Board to take enforcement and supervisory actions against supervised entities.

The department heads and the examiners of the supervising and/or examining departments are hereby authorized to administer oaths to any director, officer, or employee of any institution under their respective supervision or subject to their examination, and to compel the presentation of all books, documents, papers or records necessary in their judgment to ascertain the facts relative to the true condition of any institution as well as the books and records of persons and entities relative to or in connection with the operations, activities or transactions of the institution under examination, subject to the provision of existing laws protecting or safeguarding the secrecy or confidentiality of bank deposits as well as investments of private persons, natural or juridical, in debt instruments issued by the Government.

No restraining order or injunction shall be issued by the court enjoining the Bangko Sentral from examining any institution subject to supervision or examination by the Bangko Sentral, unless there is convincing proof that the action of the Bangko Sentral is plainly arbitrary and made in bad faith and the petitioner or plaintiff files with the clerk or judge of the court in which the action is pending a bond executed in favor of the Bangko Sentral, in an amount to be fixed by the court. The provisions of Rule 58 of the New Rules of Court insofar as they are applicable and not inconsistent with the provisions of this section shall govern the issuance and dissolution of the restraining order or injunction contemplated in this section. (as amended by RA No 11211)

SECTION. 25-A. Authority to Approve Transfer of Shares. — Transfers or acquisitions, or a series thereof, of at least ten percent (10%) of the voting shares in banks or quasi-banks shall require the prior approval of the Bangko Sentral. The selling or conveying stockholder shall submit such transfer or acquisition for approval by the Bangko Sentral within such period as may be prescribed by the Monetary Board. In approving such transfers or acquisitions, regard shall be given by the Bangko Sentral to the fitness of the incoming stockholders as may be indicated in their integrity, reputation and financial capacity. Without Bangko Sentral approval, no such transfer or acquisition shah have legal effect nor shall the same be recognized in the books of the institution or by any government agency, and the transferor-stockholders shall remain accountable and responsible therefor. Transfer of actual control or management of the institution to the new stockholders or their representatives prior to Bangko Sentral approval shall make the transferor, the transferee and any person responsible therefor liable under Sections 36 and 37 of this Act. Notwithstanding any provision of law to the contrary, the Bangko Sentral may share with the Philippine Deposit Insurance Corporation any information that the Bangko Sentral may obtain pertaining to transfer or acquisition of shares or series of transfers or acquisition of shares in banks and quasi-banks. (as inserted by RA No 11211)

SECTION 26. Bank Deposits and Investments. — Any director, officer or stockholder who, together with his related interest, contracts a loan or any form of financial accommodation from: (1) his bank; or (2) from a bank (a) which is a subsidiary of a bank holding company of which both his bank and the lending bank are subsidiaries or (b) in which a controlling proportion of the shares is owned by the same interest that owns a controlling proportion of the shares of his bank, in excess of five percent (5%) of the capital and surplus of the bank, or in the maximum amount permitted by law, whichever is lower, shall be required by the lending bank to waive the secrecy of his deposits of whatever nature in all banks in the Philippines. Any information obtained from an examination of his deposits shall be held strictly confidential and may be used by the examiners only in connection with their supervisory and examination responsibility or by the Bangko Sentral in an appropriate legal action it has initiated involving the deposit account.

SECTION 27. Prohibitions. — In addition to the prohibitions found in Republic Act Nos. 3019 and 6713, personnel of the Bangko Sentral are hereby prohibited from:

(a) being an officer, director, lawyer or agent, employee, consultant or stockholder, directly or indirectly, of any institution subject to supervision or examination by the Bangko Sentral, except non-stock savings and loan associations and provident funds organized exclusively for employees of theBangko Sentral and except as otherwise provided in this Act;

(b) directly or indirectly requesting or receiving any gift, present or pecuniary or material benefit for himself or another, from any institution subject to supervision or examination by the Bangko Sentral;

(c) revealing in any manner, except under orders of the court, the Congress or any government office or agency authorized by law, or under such conditions as may be prescribed by the Monetary Board, information relating to the condition or business of any such institution. This prohibition shall not be held to apply to the giving of information to the Monetary Board or the Governor of the Bangko Sentral, or to any person authorized by either of them, in writing, to receive such information; and

(d) borrowing from any institution subject to supervision or examination by the Bangko Sentral unless said borrowing is transacted on an arm’s length basis, fully disclosed to the Monetary Board, and shall be subject to such rules and regulations as the Monetary Board may prescribe. (as amended by RA No 11211)

SECTION 28. Examination and Fees. — The supervising and examining department head, personally or by deputy, shall examine the operations of every bank and quasi-bank, including their subsidiaries and affiliates engaged in allied activities, and other entities which under this Act or special laws are subject to Bangko Sentral supervision, in accordance with the guidelines set by the Monetary Board taking into consideration sound and prudent practices: Provided, That there shall be an interval of at least twelve (12) months between regular examinations: Provided, further, That the Monetary Board, by an affirmative vote of at least five (5) members, may authorize a special examination if the circumstances warrant.

The institution concerned shall afford to the head of the appropriate supervising and examining departments and to his authorized deputies full opportunity to examine its books and records, cash and assets and general condition and review its systems and procedures at any time during business hours when requested to do so by the Bangko Sentral: Provided, however, That none of the reports and other papers relative to such examinations shall be open to inspection by the public except insofar as such publicity is incidental to the proceedings hereinafter authorized or is necessary for the prosecution of violations in connection with the business of such institutions.

Supervised institutions shall pay to the Bangko Sentral, no later than May 31 of each year, an annual supervision fee as may be prescribed by the Monetary Board. In determining the amount of the annual supervision fee, the Monetary Board shall consider the costs of supervision. (as amended by RA No 11211)

SECTION. 28-A. Bangko Sentral Coordination. — The suspension or revocation of any government license necessary for the operation of a Bangko Sentral-supervised entity must be done only with prior consultation with the Bangko Sentral. (as inserted by RA No 11211)

SECTION 29. Appointment of Conservator. — Whenever, on the basis of a report submitted by the appropriate supervising or examining department, the Monetary Board finds that a bank or a quasi-bank is in a state of continuing inability or unwillingness to maintain a condition of liquidity deemed adequate to protect the interest of depositors and creditors, the Monetary Board may appoint a conservator with such powers as the Monetary Board shall deem necessary to take charge of the assets, liabilities, and the management thereof, reorganize the management, collect all monies and debts due said institution, and exercise all powers necessary to restore its viability. The conservator shall report and be responsible to the Monetary Board and shall have the power to overrule or revoke the actions of the previous management and board of directors of the bank or quasi-bank.

The conservator should be competent and knowledgeable in bank operations and management. The conservatorship shall not exceed one (1) year.

The conservator shall receive remuneration to be fixed by the Monetary Board in an amount not to exceed two-thirds (2/3) of the salary of the president of the institution in one (1) year, payable in twelve (12) equal monthly payments: Provided, That, if at any time within the one-year period, the conservatorship is terminated on the ground that the institution can operate on its own, the conservator shall receive the balance of the remuneration which he would have received up to the end of the year; but if the conservatorship is terminated on other grounds, the conservator shall not be entitled to such remaining balance. The Monetary Board may appoint a conservator connected with the Bangko Sentral, in which case he shall not be entitled to receive any remuneration or emoluments from the Bangko Sentral during the conservatorship. The expenses attendant to the conservatorship shall be borne by the bank or quasi-bank concerned.

The Monetary Board shall terminate the conservatorship when it is satisfied that the institution can continue to operate on its own and the conservatorship is no longer necessary. The conservatorship shall likewise be terminated should the Monetary Board, on the basis of the report of the conservator or of its own findings, determine that the continuance in business of the institution would involve probable loss to its depositors or creditors, in which case the provisions of Section 30 shall apply.

SECTION 30. Proceedings in Receivership and Liquidation. — Whenever, upon report of the head of the supervising or examining department, the Monetary Board finds that a bank or quasi-bank:

1. has notified the Bangko Sentral or publicly announced a unilateral closure, or has been dormant for at least sixty (60) days or in any manner has suspended the payment of its deposit/deposit substitute liabilities, or is unable to pay its liabilities as they become due in the ordinary course of business: Provided, That this shall not include inability to pay caused by extraordinary demands induced by financial panic in the banking community;

2. has insufficient realizable assets, as determined by the Bangko Sentral, to meet its liabilities; or

3. cannot continue in business without involving probable losses to its depositors or creditors; or

4. has willfully violated a cease and desist order under Section 37 of this Act that has become final, involving acts or transactions which amount to fraud or a dissipation of the assets of the institution; in which cases, the Monetary Board may summarily and without need for prior hearing forbid the institution from doing business in the Philippines and designate the Philippine Deposit Insurance Corporation (PDIC) as receiver in the case of banks and direct the PDIC to proceed with the liquidation of the closed bank pursuant to this section and the relevant provisions of Republic Act No. 3591, as amended. The Monetary Board shall notify in writing, through the receiver, the board of directors of the closed bank of its decision.

The actions of the Monetary Board taken under this section or under Section 29 of this Act shall be final and executory and may not be restrained or set aside by the court except on petition for certiorari on the ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction. The petition for certiorari may only be filed by the stockholders of record representing the majority of the capital stock within ten (10) days from receipt by the board of directors of the institution of the order directing receivership, liquidation or conservatorship. The designation of a conservator under Section 29 of this Act or the appointment of a receiver under this section shall be vested exclusively with the Monetary Board. Furthermore, the designation of a conservator is not a precondition to the designation of a receiver.

The authority of the Monetary Board to summarily and without need for prior hearing forbid the bank or quasi-bank from doing business in the Philippines as provided above may also be exercised over non-stock savings and loan associations, based on the same applicable grounds. For quasi-banks and non-stock savings and loan associations, any person of recognized competence in banking, credit or finance may be designated by the Bangko Sentral as a receiver. (as amended by RA No 11211)

SECTION 31. Distribution of Assets. — (as deleted by RA No 11211)

SECTION 32. Disposition of Revenues and Earnings. — (as deleted by RA No 11211)

SECTION 33. Disposition of Banking Franchise. — The Bangko Sentral may, if public interest so requires, award to an institution, upon such terms and conditions as the Monetary Board may approve, the banking franchise of a bank under liquidation to operate in the area where said bank or its branches were previously operating: Provided, That whatever proceeds may be realized from such award shall be subject to the appropriate exclusive disposition of the Monetary Board.

SECTION 34. Refusal to Make Reports or Permit Examination. — (as deleted by RA No 11211)

SECTION 35. False Statement. — The willful making of a false or misleading statement on a material fact to the Monetary Board or to the examiners of the Bangko Sentral shall be punished by a fine of not less than One hundred thousand pesos (₱100,000) nor more than Two million pesos (₱2,000,000), or by imprisonment of not more than five (5) years, or both, at the discretion of the court. (as amended by RA No 11211) cd

SECTION 36. Proceedings Upon Violation of This Act and Other Banking Laws, Rules, Regulations, Orders or Instructions. — Whenever a bank, quasi-bank, including their subsidiaries and affiliates engaged in allied activities or other entity which under this Act or special laws is subject to Bangko Sentral supervision or whenever any person or entity willfully violates this Act or other pertinent banking laws being enforced or implemented by the Bangko Sentral or any order, instruction, rule or regulation issued by the Monetary Board, the person or persons responsible for such violation shall unless otherwise provided in this Act be punished by a fine of not less than Fifty thousand pesos (₱50,000) nor more than Two million pesos (₱2,000,000) or by imprisonment of not less than two (2) years nor more than ten (10) years, or both, at the discretion of the court.

Whenever an entity under feangko Sentral supervision persists in carrying on its business in an unlawful or unsafe manner, the Board may, without prejudice to the penalties provided in the preceding paragraph of this section and the administrative sanctions provided in Section 37 of this Act, take action under Section 30 of this Act.

The Bangko Sentral may grant informer’s reward to any person, except an officer or employee of the Bangko Sentral or of any intelligence or law enforcement agency, including the relatives of such officer or employee within the fourth degree of consanguinity or affinity, who voluntarily give definite information not yet in the possession of the Bangko Sentral leading to the: (a) arrest of bank directors or officers and/or BSP personnel for violation of this Act or any banking and other laws implemented or enforced by the Bangko Sentral, or for violation of other penal laws committed in connection with their employment or functions; or (b) filing of criminal charges against any person for violation of Section 50 of this Act.

The Monetary Board is hereby authorized to promulgate the implementing guidelines for the grant of informer’s reward, which in no case shall exceed One million pesos (₱1,000,000). Said guidelines may provide for additional qualifications and disqualifications of informants as well as the form and minimum content of the information given.

The cash reward of informers shall be subject to applicable withholding taxes. (as amended by RA No 11211)

SECTION 37. Administrative Sanctions on Banks and Quasi-banks. — The imposition of administrative sanctions shall be fair, consistent and reasonable. Without prejudice to the criminal sanctions against the culpable persons provided in Sections 34, 35, and 36 of this Act, the Monetary Board may, at its discretion, impose upon any bank, quasi-bank, including their subsidiaries and affiliates engaged in allied activities, or other entity which under this Act or special laws are subject to the Bangko Sentral supervision, and/or their directors, officers or employees, for any willful violation of its charter or bylaws, willful delay in the submission of reports or publications thereof as required by law, rules and regulations; any refusal to permit examination into the affairs of the institution; any willful making of a false or misleading statement to the Board or the appropriate supervising and examining department or its examiners; any willful failure or refusal to comply with, or violation of, any banking law or any order, instruction or regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor; or any commission of irregularities, and/or conducting business in an unsafe or unsound manner as may be determined by the Monetary Board, the following administrative sanctions, whenever applicable:

1. fines in amounts as may be determined by the Monetary Board to be appropriate, but in no case to exceed One million pesos (₱1,000,000) for each transactional violation or One hundred thousand pesos (₱100,000) per calendar day for violations of a continuing nature, taking into consideration the attendant circumstances, such as the nature and gravity of the violation or irregularity and the size of the institution: Provided, That in case profit is gained or loss is avoided as a result of the violation, a fine no more than three (3) times the profit gained or loss avoided may also be imposed;

2. suspension of rediscounting privileges or access to Bangko Sentral credit facilities;

3. suspension of lending or foreign exchange operations or authority to accept new deposits or make new investments;

4. suspension of interbank clearing privileges; and/or

5. suspension or revocation of quasi-banking or other special licenses.

Resignation or termination from office shall not exempt such director, officer or employee from administrative or criminal sanctions.

The Monetary Board may, whenever warranted by circumstances, preventively suspend any director, officer or employee of the institution pending an investigation: Provided, That should the case be not finally decided by the Bangko Sentral within a period of one hundred twenty (120) days after the date of suspension, said director, officer or employee shall be reinstated in his position: Provided, further, That when the delay in the disposition of the case is due to the fault, negligence or petition of the director or officer, the period of delay shall not be counted in computing the period of suspension herein provided.

The above administrative sanctions need not be applied in the order of their severity.

Whether or not there is an administrative proceeding, if the institution and/or the directors, officers or employees concerned continue with or otherwise persist in the commission of the indicated practice or violation, the Monetary Board may issue an order requiring the institution and/or the directors, officers or employees concerned to cease and desist from the indicated practice or violation, and may further order that immediate action be taken to correct the conditions resulting from such practice or violation. The cease and desist order shall be immediately effective upon service on the respondents.

The respondents shall be afforded an opportunity to defend their action in a hearing before the Monetary Board or any committee chaired by any Monetary Board member created for the purpose, upon request made by the respondents within five (5) days from their receipt of the order. If no such hearing is requested within said period, the order shall be final. If a hearing is conducted, all issues shall be determined on the basis of records, after which the Monetary Board may either reconsider or make final its order.

The Governor is hereby authorized, at his discretion, to impose upon banks and quasi-banks, including their subsidiaries and affiliates engaged in allied activities, and other entities which under this Act or special laws are subject to Bangko Sentral supervision for any failure to comply with the requirements of law, Monetary Board regulations and policies, and/or instructions issued by the Monetary Board or by the Governor, fines not in excess of One hundred thousand pesos (₱100,000) for each transactional violation or Thirty thousand pesos (₱30,000) per calendar day for violations of a continuing nature, the imposition of which shall be final and executory until reversed, modified or lifted by the Monetary Board on appeal. (as amended by RA No 11211)

SECTION 38. Operating Departments of the Bangko Sentral. — The Monetary Board shall, in accordance with its authority under this Act, determine and provide for such operating departments and other offices, including a public information office, of the Bangko Sentral as it deems convenient for the proper and efficient conduct of the operations and the accomplishment of the objectives of the Bangko Sentral. The functions and duties of such operating departments and other offices shall be determined by the Monetary Board.

SECTION. 38-A. Issuance of Injunctive Relief Against Bangko Sentral Actions. — No court, other than the Court of Appeals and the Supreme Court, shall issue any temporary restraining order, preliminary injunction or preliminary mandatory injunction against the Bangko Sentral for any action under this Act.

Any restraining order or injunction issued in violation of this section is void and of no force and effect.

The provisions of the Rules of Court on injunctions insofar as these are applicable and not inconsistent with the provisions of this Act shall govern the issuance and dissolution of restraining orders or injunctions against the Bangko Sentral. (as inserted by RA No 11211) acd

ARTICLE V Reports and Publications

SECTION 39. Reports and Publications. — The Bangko Sentral shall publish a general balance sheet showing the volume and composition of its assets and liabilities as of the last working day of the month within ninety (90) days after the end of each month, which may be reasonably extended by the Bangko Sentral as warranted.

The Monetary Board shall publish and submit the following reports to the President and to the Congress:

1. not later than ninety (90) days after the end of each quarter, an analysis of economic and financial developments, including the condition of net international reserves and monetary aggregates;

2. within ninety (90) days after the end of the year, which may be reasonably extended by the Bangko Sentral as warranted, the preceding year’s budget and profit and loss statement of the Bangko Sentral showing in reasonable detail the result of its operations;

3. one hundred twenty (120) days after the end of each semester, a review of the state of the financial system; and

4. as soon as practicable, abnormal movements in monetary aggregates and the general price level, and, not later than seventy-two (72) hours after they are taken, remedial measures in response to such abnormal movements. (as amended by RA No 11211)

SECTION 40. Annual Report. — Before the end of June of each year, the Bangko Sentral shall publish and submit to the President and the Congress an annual report on the condition of the Bangko Sentral including a review of the policies and measures adopted by the Monetary Board during the past year and an analysis of the economic and financial circumstances which gave rise to said policies and measures.

The annual report shall also include a statement of the financial condition of the Bangko Sentral and a statistical appendix which shall present, as a minimum, the following data:

1. the monthly movement of monetary aggregates and their components;

2. the monthly movement of purchases and sales of foreign exchange and of the international reserves of the Bangko Sentral;

3. the balance of payments of the Philippines;

4. monthly indices of consumer prices and of import and export prices;

5. the monthly movement, in summary form, of exports and imports, by volume and value;

6. the monthly movement of the accounts of the Bangko Sentral and of other banks;

7. the principal data on government receipts and expenditures and on the status of the public debt, both domestic and foreign; and

8. the texts of the major legal and administrative measures adopted by the Government and the Monetary Board during the year which relate to the functions or operations of the Bangko Sentral or of the financial system.

The Bangko Sentral shall publish another version of the annual report in terms understandable to the layman. (as amended by RA No 11211)

SECTION 41. Signatures on Statements. — The balance sheets and other financial statements of the Bangko Sentral shall be signed by the officers responsible for their preparation, by the Governor, and by the auditor of the Bangko Sentral.

ARTICLE VI Profits, Losses, and Special Accounts

SECTION 42. Fiscal Year. — The fiscal year of the Bangko Sentral shall begin on January first and end on December thirty-first of each year.

SECTION 43. Computation of Profits and Losses. — Within the first sixty (60) days following the end of each year, the Bangko Sentral shall determine its net profits or losses. Notwithstanding any provision of law to the contrary, the net profit of the Bangko Sentral shall be determined after allowing for expenses of operation, adequate allowances and provisions for bad and doubtful debts, depreciation in assets, and such allowances and provisions for contingencies or other purposes as the Monetary Board may determine in accordance with prudent financial management and effective central banking operations. (as amended by RA No 11211)

SECTION. 43-A. Bangko Sentral Reserve Fund. — The Bangko Sentral shall establish a reserve fund, whenever it has income or positive surplus, to mitigate future risks such as, but not limited to, the impacts of foreign exchange and price fluctuations, and to address other contingencies inherent in carrying out the Bangko Sentral-mandated functions as central monetary authority. The reserve fund shall consist of fluctuation reserve, contingency reserve and such other reserves as the Monetary Board deems prudent or necessary. (as inserted by RA No 11211)

SECTION 44. Distribution of Net Profits. — Within the first sixty (60) days following the end of each fiscal year, the Monetary Board shall determine and carry out the distribution of the net profits, in accordance with the following rule:

Fifty percent (50%) of the net profits shall be carried to surplus and the remaining fifty percent (50%) shall revert back to the National Treasury, except as otherwise provided in the transitory provisions of this Act.

SECTION 45. Revaluation Profits and Losses. — Unrealized profits or losses arising from any revaluation of the Bangko Sentral’s assets, liabilities or derivative instruments denominated in foreign currencies with respect to the movements of prices and exchange rates from third currencies to Philippine peso shall not be included in the computation of the annual profits and losses of the Bangko Sentral. Any profits or losses arising in this manner shall be offset by any amounts which, as a consequence of such revaluations, are owed by the Philippines to any international or regional intergovernmental financial institution of which the Philippines is a member or are owed by these institutions to the Philippines. Any remaining unrealized profit or loss shall be carried in an account which shall be named ‘Revaluation of International Reserve (RIRY, and the net balance of which shall appear either among the liabilities or among the assets of the Bangko Sentral, depending on whether the revaluations have produced net profits or net losses.

The RIR account shall be credited or debited for the periodic revaluation as authorized in this section and to reflect the corresponding adjustment resulting to reduction in the Bangko Sentral’s net foreign assets, liabilities and foreign currency-denominated derivative instruments. The RIR shall be adjusted and recognized in the income statement upon sale of gold and foreign securities, or when the foreign currency is repatriated to local currency or is used to pay foreign obligations, or upon maturity of a foreign currency-denominated forward or option contract involving the Philippine peso. (as amended by RA No 11211)

SECTION 46. Suspense Accounts. — Sections 43 and 43-A of Republic Act No. 265, as amended, creating the Monetary Adjustment Account (MAA) and the Exchange Stabilization Adjustment Account (ESAA), respectively, are hereby repealed. Amounts outstanding as of the effective date of this Act based on these accounts shall continue to be for the account of the Central Bank and shall be governed by the transitory provisions of this Act.

The Revaluation of International Reserve (RIR) account as of the effective date of this Act of the Central Bank shall continue to be for the account of the same entity and shall be governed by the provisions of Section 44 of Republic Act No. 265, as amended, until otherwise provided for in accordance with the transitory provisions of this Act.

ARTICLE VII

The Auditor

SECTION 47. Appointment and Personnel. — The Chairman of the Commission on Audit shall act as the ex officio auditor of the Bangko Sentral and, as such, he is empowered and authorized to appoint a representative who shall be the auditor of the Bangko Sentral and, in accordance with law, fix his salary, and to appoint and fix the salaries and number of personnel to assist said representative in his work. The salaries and other emoluments shall be paid by the Commission. The auditor of the Bangko Sentral and personnel under him may be removed only by the Chairman of the Commission.

The representative of the Chairman of the Commission must be a certified public accountant with at least ten (10) years experience as such. No relative of any member of the Monetary Board or the Chairman of the Commission within the sixth degree of consanguinity or affinity shall be appointed such representative.

ARTICLE I The Unit of Monetary Value

SECTION 48. The Peso. — The unit of monetary value in the Philippines is the "peso," which is represented by the sign "P."

The peso is divided into one hundred (100) equal parts called "centavos," which are represented by the sign "c."

ARTICLE II Issue of Means of Payment

A. Currency

SECTION 49. Definition of Currency. — The word "currency" is hereby defined, for purposes of this Act, as meaning all Philippine notes and coins issued or circulating in accordance with the provisions of this Act.

SECTION 50. Exclusive Issue Power. — The Bangko Sentral shall have the sole power and authority to issue currency, within the territory of the Philippines. No other person or entity, public or private, may put into circulation notes, coins or any other object or document which in the opinion of the Monetary Board, might circulate as currency, nor reproduce or imitate the facsimiles of Bangko Sentral notes without prior authority from the Bangko Sentral.

The Monetary Board may issue such regulations as it may deem advisable in order to prevent the circulation of foreign currency or of currency substitutes as well as to prevent the reproduction of facsimiles of Bangko Sentral notes.

The Bangko Sentral shall have the authority to investigate, make arrests, conduct searches and seizures in accordance with law, for the purpose of maintaining the integrity of the currency.

Violation of this provision or of any regulation issued by the Bangko Sentral pursuant thereto shall constitute an offense punishable by imprisonment of not less than five (5) years but not more than ten (10) years. In case the Revised Penal Code provides for a greater penalty, then that penalty shall be imposed.

SECTION 51. Liability for Notes and Coins. — Notes and coins issued by the Bangko Sentral shall be liabilities of the Bangko Sentral and may be issued only against, and in amounts not exceeding, the assets of the Bangko Sentral. Said notes and coins shall be a first and paramount lien on all assets of the Bangko Sentral.

The Bangko Sentral's holdings of its own notes and coins shall not be considered as part of its currency issue and, accordingly, shall not form part of the assets or liabilities of the Bangko Sentral.

SECTION 52. Legal Tender Power. — All notes and coins issued by the Bangko Sentral shall be fully guaranteed by the Government of the Republic of the Philippines and shall be legal tender in the Philippines for all debts, both public and private: Provided, however, That, unless otherwise fixed by the Monetary Board, coins shall be legal tender in amounts not exceeding Fifty pesos (P50.00) for denominations of Twenty-five centavos and above, and in amounts not exceeding Twenty pesos (P20.00) for denominations of Ten centavos or less.

SECTION 53. Characteristics of the Currency. — The Monetary Board, with the approval of the President of the Philippines, shall prescribe the denominations, dimensions, designs, inscriptions and other characteristics of notes issued by the Bangko Sentral: Provided, however, That said notes shall state that they are liabilities of the Bangko Sentral and are fully guaranteed by the Government of the Republic of the Philippines. Said notes shall bear the signatures, in facsimile, of the President of the Philippines and of the Governor of the Bangko Sentral.

Similarly, the Monetary Board, with the approval of the President of the Philippines, shall prescribe the weight, fineness, designs, denominations and other characteristics of the coins issued by the Bangko Sentral. In the minting of coins, the Monetary Board shall give full consideration to the availability of suitable metals and to their relative prices and cost of minting.

SECTION 54. Printing of Notes and Minting of Coins. — The Monetary Board shall prescribe the amounts of notes and coins to be printed and minted, respectively, and the conditions to which the printing of notes and the minting of coins shall be subject. The Monetary Board shall have the authority to contract institutions, mints or firms for such operations.

All expenses incurred in the printing of notes and the minting of coins shall be for the account of the Bangko Sentral.

SECTION 55. Interconvertibility of Currency. — The Bangko Sentral shall exchange, on demand and without charge, Philippine currency of any denomination for Philippine notes and coins of any other denomination requested. If for any reason the Bangko Sentral is temporarily unable to provide notes or coins of the denominations requested, it shall meet its obligations by delivering notes and coins of the denominations which most nearly approximate those requested.

SECTION 56. Replacement of Currency Unfit for Circulation. — The Bangko Sentral shall withdraw from circulation and shall demonetize all notes and coins which for any reason whatsoever are unfit for circulation and shall replace them by adequate notes and coins: Provided, however, That the Bangko Sentral shall not replace notes and coins the identification of which is impossible, coins which show signs of filing, clipping or perforation, and notes which have lost more than two-fifths (2/5) of their surface or all of the signatures inscribed thereon. Notes and coins in such mutilated conditions shall be withdrawn from circulation and demonetized without compensation to the bearer.

SECTION 57. Retirement of Old Notes and Coins. — The Bangko Sentral may call in for replacement notes of any series or denomination which are more than five (5) years old and coins which are more than ten (10) years old.

Notes and coins called in for replacement in accordance with this provision shall remain legal tender for a period of one (1) year from the date of call. After this period, they shall cease to be legal tender but during the following year, or for such longer period as the Monetary Board may determine, they may be exchanged at par and without charge in the Bangko Sentral and by agents duly authorized by the Bangko Sentral for this purpose. After the expiration of this latter period, the notes and coins which have not been exchanged shall cease to be a liability of the Bangko Sentral and shall be demonetized. The Bangko Sentral shall also demonetize all notes and coins, which have been called in and replaced.

B. Demand Deposits

SECTION 58. Definition. — For purposes of this Act, the term "demand deposits" means all those liabilities of the Bangko Sentral and other banks which are denominated in Philippine currency and are subject to payment in legal tender upon demand by the presentation of checks.

SECTION 59. Issue of Demand Deposits. — Only banks duly authorized to do so may accept funds or create liabilities payable in pesos upon demand by the presentation of checks, and such operations shall be subject to the control of the Monetary Board in accordance with the powers granted it with respect thereto under this Act.

SECTION 60. Legal Character. — Checks representing demand deposits do not have legal tender power and their acceptance in the payment of debts, both public and private, is at the option of the creditor: Provided, however, That a check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited to his account.

ARTICLE I Domestic Monetary Stabilization

SECTION 61. Guiding Principle. — The Monetary Board shall regularly assess price developments and outlook and, based on its analysis and evaluation of inflationary pressures, use its policy instruments to attain and maintain price stability. (as amended by RA No 11211)

SECTION 62. Power to Define Terms. — For purposes of this article and of this Act, the Monetary Board shall formulate definitions of monetary aggregates, credit and prices and shall make public such definitions and any changes thereof.

SECTION 63. Action When Abnormal Movements Occur in the Price Level. — Whenever abnormal movements in the prices endanger the stability of the Philippine economy or important sectors thereof, the Monetary Board shall:

1. take such remedial measures as are appropriate and within the powers granted to the Monetary Board and the Bangko Sentral under the provisions of this Act; and

2. submit to the President of the Philippines and the Congress, and make public, a detailed report which shall include, as a minimum, a description and analysis of:

   1. the causes of the rise or fall of prices;

   2. the extent to which the changes in prices have been reflected in changes in the level of domestic output, employment, wages and economic activity in general, and the nature and significance of any such changes; and

   3. the measures which the Monetary Board has taken and the other monetary, fiscal or administrative measures which it recommends to be adopted.

Whenever the cost of living index increases by more than ten percent (10%), in relation to the level existing at the end of the corresponding month of the preceding year, or even though this quantitative guideline has not been reached when in its judgment the circumstances so warrant, the Monetary Board shall submit the reports mentioned in this section, and shall state therein whether, in the opinion of the Board, said changes in the cost of living represent a threat to the stability of the Philippine economy or of important sectors thereof.

The Monetary Board shall continue to submit periodic reports to the President of the Philippines and to Congress until it considers that the price disturbances have disappeared or have been adequately controlled. (as amended by RA No 11211)

ARTICLE II International Monetary Stabilization

SECTION 64. International Monetary Stabilization. — The Bangko Sentral shall exercise its powers under this Act to preserve the international value of the peso and to maintain its convertibility into other freely convertible currencies primarily for, although not necessarily limited to, current payments for foreign trade and invisibles.

SECTION 65. International Reserves. — In order to maintain the international stability and convertibility of the Philippine peso, the Bangko Sentral shall maintain international reserves adequate to meet any foreseeable net demands on the Bangko Sentral for foreign currencies.

In judging the adequacy of the international reserves, the Monetary Board shall be guided by the prospective receipts and payments of foreign exchange by the Philippines. The Board shall give special attention to the volume and maturity of the Bangko Sentral's own liabilities in foreign currencies, to the volume and maturity of the foreign exchange assets and liabilities of other banks operating in the Philippines and, insofar as they are known or can be estimated, the volume and maturity of the foreign exchange assets and liabilities of all other persons and entities in the Philippines.

SECTION 66. Composition of the International Reserves. — The international reserves of the Bangko Sentral may include, but shall not be limited to, the following assets:

1. gold; and

2. assets in foreign currencies in the form of: documents and instruments customarily employed for the international transfer of funds; demand and time deposits in central banks, treasuries and commercial banks abroad; foreign government securities; and foreign notes and coins.

The Monetary Board shall endeavor to hold the foreign exchange resources of the Bangko Sentral in freely convertible currencies. The Monetary Board shall issue regulations determining the other qualifications which foreign exchange assets must meet in order to be included in the international reserves of the Bangko Sentral.

The Bangko Sentral shall be free to convert any of the assets in its international reserves into other assets as described in subsections (a) and (b) of this section. (as amended by RA No 11211)

SECTION 67. Action When the International Stability of the Peso Is Threatened. — Whenever the international reserve of the Bangko Sentral falls to a level which the Monetary Board considers inadequate to meet the prospective net demands on the Bangko Sentral for foreign currencies, or whenever the international reserve appears to be in imminent danger of falling to such a level, or whenever the international reserve is falling as a result of payments or remittances abroad which in the opinion of the Monetary Board, are contrary to the national welfare, the Monetary Board shall:

(a) take such remedial measures as are appropriate and within the powers granted to the Monetary Board and the Bangko Sentral under the provisions of this Act; and

(b) submit to the President of the Philippines and to Congress a detailed report which shall include, as a minimum, a description and analysis of:

(1) the nature and causes of the existing or imminent decline;

(2) the remedial measures already taken or to be taken by the Monetary Board;

(3) the monetary, fiscal or administrative measures further proposed; and

(4) the character and extent of the cooperation required from other government agencies for the successful execution of the policies of the Monetary Board.

If the resultant actions fail to check the deterioration of the reserve position of the Bangko Sentral, or if the deterioration cannot be checked except by chronic restrictions on exchange and trade transactions or by sacrifice of the domestic objectives of a balanced and sustainable growth of the economy, the Monetary Board shall propose to the President, with appropriate notice to Congress, such additional action as it deems necessary to restore equilibrium in the international balance of payments of the Philippines.

The Monetary Board shall submit periodic reports to the President and to Congress until the threat to the international monetary stability of the Philippines has disappeared.

ARTICLE I General Criterion

SECTION 68. Means of Action. — In order to achieve the primary objective of price stability, the Monetary Board shall rely on its moral influence and the powers granted to it under this Act for the management of monetary aggregates.

ARTICLE II Operations in Gold and Foreign Exchange

SECTION 69. Purchases and Sales of Gold. — The Bangko Sentral may buy and sell gold in any form, subject to such regulations as the Monetary Board may issue.

The purchases and sales of gold authorized by this section shall be made in the national currency at the prevailing international market price as determined by the Monetary Board.

SECTION 70. Purchases and Sales of Foreign Exchange. — The Bangko Sentral may buy and sell foreign notes and coins, and documents and instruments of types customarily employed for the international transfer of funds. The Bangko Sentral may engage in future exchange operations.

The Bangko Sentral may engage in foreign exchange transactions with the following entities or persons only:

(a) banking institutions operating in the Philippines;

(b) the Government, its political subdivisions and instrumentalities;

(c) foreign or international financial institutions;

(d) foreign governments and their instrumentalities; and

(e) other entities or persons which the Monetary Board is hereby empowered to authorize as foreign exchange dealers, subject to such rules and regulations as the Monetary Board shall prescribe.

In order to maintain the convertibility of the peso, the Bangko Sentral may, at the request of any banking institution operating in the Philippines, buy any quantity of foreign exchange offered, and sell any quantity of foreign exchange demanded, by such institution, provided that the foreign currencies so offered or demanded are freely convertible into gold or United States dollars. This requirement shall not apply to demands for foreign notes and coins.

The Bangko Sentral shall effect its exchange transactions between foreign currencies and the Philippine peso at the rates determined in accordance with the provisions of Section 74 of this Act.

SECTION 71. Foreign Asset Position of the Bangko Sentral. — The Bangko Sentral shall endeavor to maintain at all times a net positive foreign asset position so that its gross foreign exchange assets will always exceed its gross foreign liabilities. In the event that the equivalent amount in pesos of the foreign exchange liabilities of the Bangko Sentral exceed twice the equivalent amount in pesos of the foreign exchange assets of the bank, the Bangko Sentral shall, within sixty (60) days from the date the limit is exceeded, submit a report to the Congress stating the origin of these liabilities, and the manner in which they will be paid.

SECTION 72. Emergency Restrictions on Exchange Operations. — In order to achieve the primary objective of the Bangko Sentral as set forth in Section 3 of this Act, or protect the international reserves of the Bangko Sentral in the imminence of, or during an exchange crisis, or in time of national emergency and to give the Monetary Board and the Government time in which to take constructive measures to forestall, combat, or overcome such a crisis or emergency, the Monetary Board, with the concurrence of at least five (5) of its members and with the approval of the President of the Philippines, may temporarily suspend or restrict sales of exchange by the Bangko Sentral, and may subject all transactions in gold and foreign exchange to license by the Bangko Sentral, and may require that any foreign exchange thereafter obtained by any person residing or entity operating in the Philippines be delivered to Bangko Sentral or to any bank or agent designated by theBangko Sentral for the purpose, at the effective exchange rate or rates: Provided, however, That foreign currency deposits made under Republic Act No. 6426 shall be exempt from these requirements.

SECTION 73. Acquisition of Inconvertible Currencies. — The Bangko Sentral shall avoid the acquisition and holding of currencies which are not freely convertible, and may acquire such currencies in an amount exceeding the minimum balance necessary to cover current demands for said currencies only when, and to the extent that, such acquisition is considered by the Monetary Board to be in the national interest. The Monetary Board shall determine the procedures which shall apply to the acquisition and disposition by the Bangko Sentral of foreign exchange which is not freely utilizable in the international market.

SECTION 74. Exchange Rates. — The Monetary Board shall determine the exchange rate policy of the country.

The Monetary Board shall determine the rates at which the Bangko Sentral shall buy and sell spot exchange, and shall establish deviation limits from the effective exchange rate or rates as it may deem proper. The Bangko Sentral shall not collect any additional commissions or charges of any sort, other than actual telegraphic of cable costs incurred by it.

The Monetary Board shall similarly determine the rates for other types of foreign exchange transactions by the Bangko Sentral, including purchases and sales of foreign notes and coins, but the margins between the effective exchange rates and the rates thus established may not exceed the corresponding margins for spot exchange transactions by more than the additional costs or expenses involved in each type of transactions.

SECTION 75. Operations with Foreign Entities. — The Monetary Board may authorize the Bangko Sentral to grant loans to and receive loans from foreign banks and other foreign or international entities, both public and private, and may engage in such other operations with these entities as are in the national interest and are appropriate to its character as a central bank. The Bangko Sentral may also act as agent or correspondent for such entities.

Upon authority of the Monetary Board, the Bangko Sentral may pledge any gold or other assets which it possesses as security against loans which it receives from foreign or international entities.

ARTICLE III Regulation of Foreign Exchange Operations of the Banks

SECTION 76. Foreign Exchange Holdings of the Banks. — In order that the Bangko Sentral may at all times have foreign exchange resources sufficient to enable it to maintain the international stability and convertibility of the peso, or in order to promote the domestic investment of bank resources, the Monetary Board may require the banks to sell to the Bangko Sentral or to other banks all or part of their surplus holdings of foreign exchange. Such transfers may be required for all foreign currencies or for only certain of such currencies, according to the decision of the Monetary Board. The transfers shall be made at the rates established under the provisions of Section 74 of this Act.

The Monetary Board, may whenever warranted, determine the net assets and net liabilities of banks and shall, in making such a determination, take into account the bank's networth, outstanding liabilities, actual and contingent, or such other financial or performance ratios as may be appropriate under the circumstances. Any such determination of net assets and net liabilities shall be applied to all banks uniformly and without discrimination.

SECTION 77. Requirement of Balanced Currency Position. — The Monetary Board may require the banks to maintain a balanced position between their assets and liabilities in Philippine pesos or in any other currency or currencies in which they operate. The banks shall be granted a reasonable period of time in which to adjust their currency positions to any such requirement.

The powers granted under this section shall be exercised only when special circumstances make such action necessary, in the opinion of the Monetary Board, and shall be applied to all banks alike and without discrimination.

SECTION 78. Regulation of Non-spot Exchange Transactions. — In order to restrain the banks from taking speculative positions with respect to future fluctuations in foreign exchange rates, the Monetary Board may issue such regulations governing bank purchases and sales of non-spot exchange as it may consider necessary for said purpose.

SECTION 79. Other Exchange Profits and Losses. — The banks shall bear the risks of non-compliance with the terms of the foreign exchange documents and instruments which they buy or sell, and shall also bear any other typically commercial or banking risks, including exchange risks not assumed by the Bangko Sentral under the provisions of the preceding section.

SECTION 80. Information on Exchange Operations. — The banks shall report to the Bangko Sentral the volume and composition of their purchases and sales of gold and foreign exchange each day, and must furnish such additional information as the Bangko Sentral may request with reference to the movements in their accounts in foreign currencies.

The Monetary Board may also require other persons and entities to report to it currently all transactions or operations in gold, in any shape or form, and in foreign exchange whether entered into or undertaken by them directly or through agents, or to submit such data as may be required on operations or activities giving rise to or in connection with or relating to a gold or foreign exchange transaction. The Monetary Board shall prescribe the forms on which such declarations must be made. The accuracy of the declarations may be verified by the Bangko Sentral by whatever inspection it may deem necessary.

ARTICLE IV Loans to Banking and Other Financial Institutions

A. Credit Policy

SECTION 81. Guiding Principles. — The rediscounts, discounts, loans and advances which the Bangko Sentral is authorized to extend to banking institutions, under the provisions of the present article of this Act shall be used to influence the volume of credit consistent with the objective of price stability and maintenance of financial stability. (as amended by RA No 11211)

B. Normal Credit Operations

SECTION 82. Authorized Types of Operations. — Subject to the principle stated in the preceding section of this Act, the Bangko Sentral may normally and regularly carry on the following credit operations with banking institutions operating in the Philippines:

(a) Commercial credits. — The Bangko Sentral may rediscount, discount, buy and sell bills, acceptances, promissory notes and other credit instruments with maturities of not more than one hundred eighty (180) days from the date of their rediscount, discount or acquisition by the Bangko Sentral and resulting from transactions related to:

(1) the importation, exportation, purchase or sale of readily saleable goods and products, or their transportation within the Philippines; or

(2) the storing of non-perishable goods and products which are duly insured and deposited, under conditions assuring their preservation, in authorized bonded warehouses or in other places approved by the Monetary Board.

(b) Production credits. — The Bangko Sentral may rediscount, discount, buy and sell bills, acceptances, promissory notes and other credit instruments having maturities of not more than three hundred sixty (360) days from the date of their rediscount, discount of acquisition by the Bangko Sentral and resulting from transactions related to the production or processing of agricultural, animal, mineral, or industrial products. Documents or instruments acquired in accordance with this subsection shall be secured by a pledge of the respective crops or products: Provided, however, That the crops or products need not be pledged to secure the documents if the original loan granted by the Bangko Sentral is secured by a lien or mortgage on real estate property seventy percent (70%) of the appraised value of which equals or exceeds the amount of the loan granted.

(c) Other credits. — Special credit instruments not otherwise rediscountable under the immediately preceding subsections (a) and (b) may be eligible for rediscounting in accordance with rules and regulations which the Bangko Sentral shall prescribe. Whenever necessary, the Bangko Sentral shall provide funds from non-inflationary sources: Provided, however, That the Monetary Board shall prescribe additional safeguards for disbursing these funds.

(d) Advances. — The Bangko Sentral may grant advances against the following kinds of collaterals for fixed periods which, with the exception of advances against collateral named in clause (4) of the present subsection, shall not exceed one hundred eighty (180) days:

(1) gold coins or bullion;

(2) securities representing obligations of the Bangko Sentral or of other domestic credit institutions of recognized solvency;

(3) the credit instruments to which reference is made in subsection (a) of this section;

(4) the credit instruments to which reference is made in subsection (b) of this section, for periods which shall not exceed three hundred sixty (360) days;

(5) utilized portions of advances in current account covered by regular overdraft agreements related to operations included under subsections (a) and (b) of this section, and certified as to amount and liquidity by the institution soliciting the advance;

(6) negotiable treasury bills, certificates of indebtedness, notes and other negotiable obligations of the Government maturing within three (3) years from the date of the advance; and

(7) negotiable bonds issued by the Government of the Philippines by Philippine provincial, city or municipal governments, or by any Philippine Government instrumentality, and having maturities of not more than ten (10) years from the date of the advance.

The rediscounts, discounts, loans and advances made in accordance with the provisions of this section may not be renewed or extended unless extraordinary circumstances fully justify such renewal or extension.

Advances made against the collateral named in clauses (6) and (7) of subsection (d) of this section may not exceed eighty percent (80%) of the current market value of the collateral.

C. Special Credit Operation

SECTION 83. Loans for Liquidity Purposes. — The Bangko Sentral may extend loans and advances to banking institutions for a period of not more than seven (7) days without any collateral for the purpose of providing liquidity to the banking system in times of need.

D. Emergency Credit Operation

SECTION 84. Emergency Loans and Advances. — In periods of national and/or local emergency or of imminent financial panic which directly threaten monetary and financial stability, the Monetary Board may, by a vote of at least five (5) of its members, authorize the Bangko Sentral to grant extraordinary loans or advances to banking institutions, secured by assets as defined hereunder: Provided, That while such loans or advances are outstanding, the debtor institution shall not, except upon prior authorization by the Monetary Board, expand the total volume of its loans or investments.

The Monetary Board may, at its discretion, likewise authorize the Bangko Sentral to grant emergency loans or advances to banking institutions, even during normal periods, for the purpose of assisting a bank in a precarious financial condition or under serious financial pressures brought by unforeseen events, or events which, though foreseeable, could not be prevented by the bank concerned: Provided, however, That the Monetary Board has ascertained that the bank is not insolvent and has the assets defined hereunder to secure the advances: Provided, further, That a concurrent vote of at least five (5) members of the Monetary Board is obtained.

The amount of any emergency loan or advance shall not exceed the sum of fifty percent (50%) of total deposits and deposit substitutes of the banking institution, and shall be disbursed in two (2) or more tranches. The amount of the first tranche shall be limited to twenty-five percent (25%) of the total deposit and deposit substitutes of the institution and shall be secured by (a) government securities; (b) acceptable guarantees backed up by the national government or its securities; (c) other unencumbered first class collaterals; and (d) other kinds of collaterals as may be authorized by the Monetary Board in accordance with sound risk management principles: Provided, That if as determined by the Monetary Board, the circumstances surrounding the emergency warrant a loan or advance greater than the amount provided hereinabove, the amount of the first tranche may exceed twenty-five percent (25%) of the bank’s total deposit and deposit substitutes if the same is adequately secured by any of the collaterals set forth above as approved by the Monetary Board, and the principal stockholders of the institution furnish an acceptable undertaking to indemnify and hold harmless from suit a conservator whose appointment the Monetary Board may find necessary at any time."Prior to the release of the first tranche, the banking institution shall submit to the Bangko Sentral a resolution of its board of directors authorizing the Bangko Sentral to evaluate other assets of the banking institution certified by its external auditor to be good and available for collateral purposes should the release of the subsequent tranche be thereafter applied for.

The Monetary Board may, by a vote of at least five (5) of its members, authorize the release of a subsequent tranche on condition that the principal stockholders of the institution:

1. furnish an acceptable undertaking to indemnify and hold harmless from suit a conservator whose appointment the Monetary Board may find necessary at any time; and

2. provide acceptable security which, in the judgment of the Monetary Board, would be adequate to supplement, where necessary, the assets tendered by the banking institution to collateralize the subsequent tranche.

In connection with the exercise of these powers, the prohibitions in Section 128 of this Act shall not apply insofar as it refers to acceptance as collateral of shares and their acquisition as a result of foreclosure proceedings, including the exercise of voting rights pertaining to said shares: Provided, however, That should the Bangko Sentral acquire any of the shares it has accepted as collateral as a result of foreclosure proceedings, the Bangko Sentral shall dispose of said shares by public bidding within one (1) year from the date of consolidation of title by the Bangko Sentral.

Whenever a financial institution incurs an overdraft in its account with the Bangko Sentral, the same shall be eliminated within the period prescribed in Section 102 of this Act. (as amended by RA No 11211)

E. Credit Terms

SECTION 85. Interest and Rediscount Rates. — The Bangko Sentral shall collect interest and other appropriate charges on all loans and advances it extends, the closure, receivership or liquidation of the debtor-institution notwithstanding. This provision shall apply prospectively.

The Monetary Board shall fix the interest and rediscount rates to be charged by the Bangko Sentral on its credit operations in accordance with the character and term of the operation, but after due consideration has been given to the credit needs of the market, the composition of the Bangko Sentral's portfolio, and the general requirements of the national monetary policy. Interest and rediscount rates shall be applied to all banks of the same category uniformly and without discrimination.

SECTION 86. Endorsement. — The documents rediscounted, discounted, bought or accepted as collateral by the Bangko Sentral in the course of the credit operations authorized in this article shall bear the endorsement of the institution from which they are received.

SECTION 87. Repayment of Credits. — Documents rediscounted, discounted or accepted as collateral by the Bangko Sentral must be withdrawn by the borrowing institution on the dates of their maturities, or upon liquidation of the obligations which they represent or to which they relate whenever said obligations have been liquidated prior to their dates of maturity.

Banks shall have the right at any time to withdraw any documents which they have presented to the Bangko Sentral as collateral, upon payment in full of the corresponding debt to the Bangko Sentral, including interest charges.

SECTION 88. Other Requirements. — The Monetary Board may prescribe, within the general powers granted to it under this Act, additional conditions which borrowing institutions must satisfy in order to have access to the credit of the Bangko Sentral. These conditions may refer to the rates of interest charged by the banks, to the purposes for which their loans in general are destined, and to any other clearly definable aspect of the credit policy of the bank.

SECTION. 88-A. Exemption of Collaterals from Attachments, Executions and Other Restrictions. — Collaterals on loans and advances granted by the Bangko Sentral, whether or not the interest of the Bangko Sentral is registered, shall not be subject to attachment, execution or any other court process or administrative restrictions on land use, nor shall they be included in the property of insolvent persons or institutions. (as inserted by RA No 11211)

SECTION 88-B. Deputization of Legal Staff in Case of Foreclosures. — In case of an extrajudicial foreclosure of mortgage in connection with loans and advances under this article, the Bangko Sentral may deputize any of its lawyers to conduct the public auction pursuant to Act No. 3135, as amended.

Likewise, in case of a judicial foreclosure in connection with loans and advances under this article, the Bangko Sentral may, with the approval of the court, deputize any of its lawyers to act as special sheriff in the sale of a debtor’s properties and in the enforcement of court writs and processes related thereto. The special sheriff of the Bangko Sentral shall make a report to the proper court after any action has been taken by him, which court shall treat such action as if it were an act of its own sheriff in all respects.

No restraining order or injunction shall be issued by the court enjoining the Bangko Sentral from proceeding with the foreclosure of the mortgage unless a bond is posted in favor of the Bangko Sentral in an amount equivalent to the total claim of the Bangko Sentral. The restraining order or injunction shall be refused or, if granted, shall be dissolved upon filing by the Bangko Sentral of a bond, which shall be in the form of a Bangko Sentral check, in an amount twice the amount of the original bond posted conditioned that the Bangko Sentral will pay the damages which the party may suffer by the refusal or dissolution of the injunction. The provisions of the Rules of Court on injunctions insofar as they are applicable and not inconsistent with the provisions of this section shall govern the issuance and dissolution of the restraining order or injunction contemplated in this section. (as inserted by RA No 11211)

SECTION 88-C. Right of Redemption of Foreclosed Real Property; Right of Possession During Redemption Period. — In the event of foreclosure, whether judicially or extrajudicially, the mortgagor, who is a natural person, shall have the right to redeem the property within one (1) year from the date of foreclosure sale. In case the mortgagor is a juridical person, the mortgagor shall have the right to redeem the property sold in a judicial foreclosure sale within one (1) year from the date of foreclosure sale: Provided, That in case of an extrajudicial foreclosure, notwithstanding Act No. 3135, the mortgagor shall have the right to redeem the property sold within ninety (90) days from the foreclosure sale but not later than the registration of the certificate of foreclosure sale. Redemption shall be effected by paying the principal, interests, charges, commissions and all claims of whatever nature of the Bangko Sentral outstanding and due as of the date of foreclosure sale, including all costs and other expenses incurred by reason of the foreclosure sale and custody of the property.

The Bangko Sentral, as purchaser in the foreclosure sale and without need of posting a bond, may take possession of the foreclosed property during the redemption period. The Bangko Sentral shall be entitled to the fruits of the property, the same to be applied against the redemption price. (as inserted by RA No 11211)

SECTION 88-D. Unsecured Bangko Sentral Claims. — All unsecured claims of the Bangko Sentral shall be considered preferred credits similar to taxes due to the National Government in the order of preference under Article 2244 of the new Civil Code. (as inserted by RA No 11211)

SECTION 89. Provisional Advances to the National Government. — The Bangko Sentral may make direct provisional advances with or without interest to the National Government to finance expenditures authorized in its annual appropriation: Provided, That said advances shall be repaid before the end of three (3) months extendible by another three (3) months as the Monetary Board may allow following the date the National Government received such provisional advances and shall not, in their aggregate, exceed twenty percent (20%) of the average annual income of the borrower for the last three (3) preceding fiscal years.

SECTION 89-A. Financial Facilities for Islamic Banks. — The Bangko Sentral may, taking into consideration the peculiar characteristics of islamic banking, formulate rules and regulations for the extension of financial facilities to islamic banks: Provided, That such exposures shall be properly secured. (as inserted by RA No 11211)

SECTION 89-B. Loans to the Philippine Deposit Insurance Corporation (PDIC). — The Bangko Sentral, pursuant to its mandate of maintaining financial stability, may lend funds to the PDIC for insurance purposes and in cases of financial assistance that the latter is authorized to extend under Section 22(e) of Republic Act No. 3591, as amended. Notwithstanding Section 23 of Republic Act No. 3591, as amended, the Monetary Board shall prescribe interest rates and such other terms and conditions of the loan. (as inserted by RA No 11211)

ARTICLE V Open Market Operations for the Account of the Bangko Sentral

SECTION 90. Principles of Open Market Operations. — The open market purchases and sales of securities by the Bangko Sentral shall be made exclusively in accordance with its primary objective of achieving price stability.

SECTION 91. Purchases and Sales of Government Securities. — In order to achieve the objectives of the national monetary policy, the Bangko Sentral may, in accordance with the principle stated in Section 90 of this Act and with such rules and regulations as may be prescribed by the Monetary Board, buy and sell in the open market for its own account:

(a) evidences of indebtedness issued directly by the Government of the Philippines or by its political subdivisions; and

(b) evidences of indebtedness issued by government instrumentalities and fully guaranteed by the Government.

The evidences of indebtedness acquired under the provisions of this section must be freely negotiable and regularly serviced and must be available to the general public through banking institutions and local government treasuries in denominations of a thousand pesos or more.

SECTION 92. Issue and Negotiation of Bangko Sentral Obligations. — In order to provide the Bangko Sentral with effective instruments for open market operations, the Bangko Sentral may, subject to such rules and regulations as the Monetary Board may prescribe and in accordance with the principles stated in Section 90 of this Act, issue, place, buy and sell freely negotiable evidences of indebtedness of the Bangko Sentral. Said evidence of indebtedness may be issued directly against the international reserve of the Bangko Sentral or against the securities which it has acquired under the provisions of Section 91 of this Act, or may be issued without relation to specific types of assets of the Bangko Sentral.

The Monetary Board shall determine the interest rates, maturities and other characteristics of said obligations of the Bangko Sentral, and may, if it deems it advisable, denominate the obligations in gold or foreign currencies.

Subject to the principles stated in Section 90 of this Act, the evidences of indebtedness of the Bangko Sentral to which this section refers may be acquired by the Bangko Sentral before their maturity, either through purchases in the open market or through redemptions at par and by lot if the Bangko Sentral has reserved the right to make such redemptions. The evidences of indebtedness acquired or redeemed by the Bangko Sentral shall not be included among its assets, and shall be immediately retired and cancelled. (as amended by RA No 11211)

ARTICLE VI Composition of Bangko Sentral's Portfolio

SECTION 93. Review of the Bangko Sentral's Portfolio. — At least once every month the Monetary Board shall review the portfolio of the Bangko Sentral in relation to its future credit policy.

In reviewing the Bangko Sentral's portfolio, the Monetary Board shall especially consider whether a sufficiently large part of the portfolio consists of assets with early maturities, in order that a contraction in Bangko Sentral credit may be effected promptly whenever the national monetary policy so requires.

ARTICLE VII Bank Reserves

SECTION 94. Reserve Requirements. — In order to control the volume of money created by the credit operations of the banking system, all banks operating in the Philippines shall be required to maintain reserves against their deposit liabilities: Provided, That the Monetary Board may, at its discretion, also require all banks and/or quasi-banks to maintain reserves against funds held in trust and liabilities for deposit substitutes as defined in this Act. The required reserves of each bank shall be proportional to the volume of its deposit liabilities and shall ordinarily take the form of a deposit in the Bangko Sentral. Reserve requirements shall be applied to all banks of the same category uniformly and without discrimination.

Reserves against deposit substitutes, if imposed, shall be determined in the same manner as provided for reserve requirements against regular bank deposits, with respect to the imposition, increase, and computation of reserves.

The Monetary Board may exempt from reserve requirements deposits and deposit substitutes with remaining maturities of two (2) years or more, as well as interbank borrowings.

Since the requirement to maintain bank reserves is imposed primarily to control the volume of money, the Bangko Sentral shall not pay interest on the reserves maintained with it unless the Monetary Board decides otherwise as warranted by circumstances.

SECTION 95. Definition of Deposit Substitutes. — The term ‘deposit substitutes’ is defined as an alternative form of obtaining funds from the public, other than deposits, through the issuance, endorsement, or acceptance of debt instruments for the borrower’s own account, for the purpose of relending or purchasing of receivables and other obligations. These instruments may include, but need not be limited to, bankers acceptances, promissory notes, participations, certificates of assignment and similar instruments with recourse, and repurchase agreements. The phrase 'obtaining funds from the public’ shall mean borrowing from twenty (20) or more lenders at any one time, and, for this purpose, Tenders’ shall refer to individuals and corporate entities that are not acting as financial intermediaries, subject to the safeguards and regulations issued by the Monetary Board. The Monetary Board shall determine what specific instruments shall be considered as deposit substitutes for the purposes of Section 94 of this Act: Provided, however, That deposit substitutes of commercial, industrial and other nonfinancial companies for the limited purpose of financing their own needs or the needs of their agents or dealers shall not be covered by the provisions of Section 94 of this Act. (as amended by RA No 11211)

SECTION 96. Required Reserves Against Peso Deposits. — The Monetary Board may fix and, when it deems necessary, alter the minimum reserve ratios to peso deposits, as well as to deposit substitutes, which each bank and/or quasi-bank may maintain, and such ratio shall be applied uniformly to all banks of the same category as well as to quasi-banks.

SECTION 97. Required Reserves Against Foreign Currency Deposits. — The Monetary Board is similarly authorized to prescribe and modify the minimum reserve ratios applicable to deposits denominated in foreign currencies.

SECTION 98. Reserves Against Unused Balances of Overdraft Lines. — In order to facilitate Bangko Sentral control over the volume of bank credit, the Monetary Board may establish minimum reserve requirements for unused balances of overdraft lines.

The powers of the Monetary Board to prescribe and modify reserve requirements against unused balances of overdraft lines shall be the same as its powers with respect to reserve requirements against demand deposits.

SECTION 99. Increase in Reserve Requirements. — Whenever in the opinion of the Monetary Board it becomes necessary to increase reserve requirements against existing liabilities, the increase shall be made in a gradual manner and shall not exceed four percentage points in any thirty-day period. Banks and other affected financial institutions shall be notified reasonably in advance of the date on which such increase is to become effective.

SECTION 100. Computation on Reserves. — The reserve position of each bank or quasi-bank shall be calculated daily on the basis of the amount, at the close of business for the day, of the institution's reserves and the amount of its liability accounts against which reserves are required to be maintained: Provided, That with reference to holidays or non-banking days, the reserve position as calculated at the close of the business day immediately preceding such holidays and non-banking days shall apply on such days.

For the purpose of computing the reserve position of each bank or quasi-bank, its principal office in the Philippines and all its branches and agencies located therein shall be considered as a single unit.

SECTION 101. Reserve Deficiencies. — Whenever the reserve position of any bank or quasi-bank, computed in the manner specified in the preceding section of this Act, is below the required minimum, the bank or quasi-bank shall pay the Bangko Sentral monetary penalty as may be prescribed by the Monetary Board: Provided, however, That banks and quasi-banks shall ordinarily be permitted to offset any reserve deficiency occurring on one or more days of the week with any excess reserves which they may hold on other days of the same week and shall be required to pay the penalty in accordance with the mechanism approved by the Monetary Board. In cases of abuse, the Monetary Board may deny any bank or quasi-bank the privilege of offsetting reserve deficiencies in the aforesaid manner.

If a bank or quasi-bank chronically has a reserve deficiency, the Monetary Board may limit or prohibit the making of new loans or investments by the institution and may require that part or all of the net profits of the institution be assigned to surplus.

The Monetary Board may modify or set aside the reserve deficiency penalties provided in this section, for part or the entire period of a strike or lockout affecting a bank or a quasi-bank as defined in the Labor Code, or of a national emergency affecting operations of banks or quasi-banks, or in such other instances where the grant of waiver of penalties is determined by the Monetary Board to be justifiable. The Monetary Board may also modify or set aside reserve deficiency penalties for rehabilitation program of a bank. (as amended by RA No 11211)

SECTION 102. Interbank Settlement. — The Bangko Sentral shall establish facilities for interbank clearing under such rules and regulations as the Monetary Board may prescribe: Provided, That the Bangko Sentral may charge administrative and other fees for the maintenance of such facilities.

The deposit reserves maintained by the banks in the Bangko Sentral in accordance with the provisions of Section 94 of this Act shall serve as basis for the clearing of checks and the settlement of interbank balances, subject to such rules and regulations as the Monetary Board may issue with respect to such operations:Provided, That any bank which incurs on overdrawing in its deposit account with the Bangko Sentral shall fully cover said overdraft, including interest thereon at a rate equivalent to one-tenth of one percent (1/10 of 1%) per day or the prevailing ninety-one-day treasury bill rate plus three percentage points, whichever is higher, not later than the next clearing day: Provided, further, That settlement of clearing balances shall not be effected for any account which continues to be overdrawn for five (5) consecutive banking days until such time as the overdrawing is fully covered or otherwise converted into an emergency loan or advance pursuant to the provisions of Section 84 of this Act: Provided, finally, That the appropriate clearing office shall be officially notified of banks with overdrawn balances. Banks with existing overdrafts with the Bangko Sentral as of the effectivity of this Act shall, within such period as may be prescribed by the Monetary Board, either convert the overdraft into an emergency loan or advance with a plan of payment, or settle such overdrafts, and that, upon failure to so comply herewith, the Bangko Sentral shall take such action against the bank as may be warranted under this Act.

SECTION 103. Exemption from Attachment and Other Purposes. — Deposits maintained by banks with the Bangko Sentral as part of their reserve requirements shall be exempt from attachment, garnishments, or any other order or process of any court, government agency or any other administrative body issued to satisfy the claim of a party other than the Government, or its political subdivisions or instrumentalities.

ARTICLE VIII Selective Regulation of Bank Operations

SECTION 104. Guiding Principle. — The Monetary Board shall use the powers granted to it under this Act to ensure that the supply, availability and cost of money are in accord with the needs of the Philippine economy and that bank credit is not granted for speculative purposes prejudicial to the national interests. Regulations on bank operations shall be applied to all banks of the same category, as may be defined by the Monetary Board, uniformly and without discrimination. (as amended by RA No 11211)

SECTION 105. Margin Requirements Against Letters of Credit. — The Monetary Board may at any time prescribe minimum cash margins for the opening of letters of credit, and may relate the size of the required margin to the nature of the transaction to be financed.

SECTION 106. Required Security Against Bank Loans. — In order to promote liquidity and solvency of the banking system, the Monetary Board may issue such regulations as it may deem necessary with respect to the maximum permissible maturities of the loans and investments which the banks may make, and the kind and amount of security to be required against the various types of credit operations of the banks.

SECTION 107. Portfolio Ceilings. — Whenever the Monetary Board considers it advisable to prevent or check an expansion of bank credit, the Board may place an upper limit on the amount of loans and investments which the banks may hold, or may place a limit on the rate of increase of such assets within specified periods of time. The Monetary Board may apply such limits to the loans and investments of each bank or to specific categories thereof.

In no case shall the Monetary Board establish limits which are below the value of the loans or investments of the banks on the date on which they are notified of such restrictions. The restrictions shall be applied to all banks uniformly and without discrimination.

SECTION 108. Minimum Capital Ratios. — The Monetary Board may prescribe minimum risk-based capital adequacy ratios based on internationally accepted standards and may alter said ratios whenever it deems necessary. In the exercise of its authority under this section, the Monetary Board may require banks to hold capital beyond the minimum requirements commensurate with the risk profile. (as amended by RA No 11211)

ARTICLE IX Coordination of Credit Policies by Government Institutions

SECTION 109. Coordination of Credit Policies. — Government-owned corporations which perform banking or credit functions shall coordinate their general credit policies with those of the Monetary Board.

Toward this end, the Monetary Board may, whenever it deems it expedient, make suggestions or recommendations to such corporations for the more effective coordination of their policies with those of the Bangko Sentral.

ARTICLE I Functions as Banker of the Government

SECTION 110. Designation of Bangko Sentral as Banker of the Government. — The Bangko Sentral shall act as a banker of the Government, its political subdivisions and instrumentalities.

SECTION 111. Representation with the International Monetary Fund. — The Bangko Sentral shall represent the Government in all dealings, negotiations and transactions with the International Monetary Fund and shall carry such accounts as may result from Philippine membership in, or operations with, said Fund.

SECTION 112. Representation with Other Financial Institutions. — The Bangko Sentral may be authorized by the Government to represent it in dealings, negotiations or transactions with the International Bank for Reconstruction and Development and with other foreign or international financial institutions or agencies. The President may, however, designate any of his other financial advisors to jointly represent the Government in such dealings, negotiations or transactions.

SECTION 113. Official Deposits. — The Bangko Sentral shall be the official depository of the Government, its political subdivisions and instrumentalities as well as of government-owned or -controlled corporations and, as a general policy, their cash balances should be deposited with the Bangko Sentral, with only minimum working balances to be held by government-owned banks and such other banks incorporated in the Philippines as the Monetary Board may designate, subject to such rules and regulations as the Board may prescribe: Provided, That such banks may hold deposits of the political subdivisions and instrumentalities of the Government beyond their minimum working balances whenever such subdivisions and instrumentalities have outstanding loans with said banks.

The Bangko Sentral may pay interest on deposits of the Government or of its political subdivisions and instrumentalities, as well as on deposits of banks with the Bangko Sentral. (as amended by RA No 11211)

SECTION 114. Fiscal Operations. — The Bangko Sentral shall open a general cash account for the Treasurer of the Philippines, in which the liquid funds of the Government shall be deposited.

Transfers of funds from this account to other accounts shall be made only upon order of the Treasurer of the Philippines.

SECTION 115. Other Banks as Agents of the Bangko Sentral. — In the performance of its functions as fiscal agent, the Bangko Sentral may engage the services of other government-owned and -controlled banks and of other domestic banks for operations in localities at home or abroad in which the Bangko Sentral does not have offices or agencies adequately equipped to perform said operations: Provided, however, That for fiscal operations in foreign countries, the Bangko Sentral may engage the services of foreign banking and financial institutions.

SECTION 116. Remuneration for Services. — The Bangko Sentral may charge equitable rates, commissions or fees for services which it renders to the Government, its political subdivisions and instrumentalities.

ARTICLE II The Marketing and Stabilization of Securities for the Account of the Government

A. The Issue and Placing of Government Securities

SECTION 117. Issue of Government Obligations. — The issue of securities representing obligations of the Government, its political subdivisions or instrumentalities, may be made through the Bangko Sentral, which may act as agent of, and for the account of, the Government or its respective subdivisions or instrumentality, as the case may be: Provided, however, That the Bangko Sentral shall not guarantee the placement of said securities, and shall not subscribe to their issue except to replace its maturing holdings of securities with the same type as the maturing securities.

SECTION 118. Methods of Placing Government Securities. — The Bangko Sentral may place the securities to which the preceding section refers through direct sale to financial institutions and the public.

The Bangko Sentral shall not be a member of any stock exchange or syndicate, but may intervene therein for the sole purpose of regulating their operations in the placing of government securities.

The Government, or its political subdivisions or instrumentalities, shall reimburse the Bangko Sentral for the expenses incurred in the placing of the aforesaid securities.

SECTION 119. Servicing and Redemption of the Public Debt. — The servicing and redemption of the public debt shall also be effected through the Bangko Sentral.

B. Bangko Sentral Support of the Government Securities Market

SECTION 120. The Securities Stabilization Fund. — There shall be established a "Securities Stabilization Fund" which shall be administered by the Bangko Sentral for the account of the Government.

The operations of the Securities Stabilization Fund shall consist of purchases and sales, in the open market, of bonds and other evidences of indebtedness, issued or fully guaranteed by the Government. The purpose of these operations shall be to increase the liquidity and stabilize the value of said securities in order thereby to promote private investment in government obligations.

The Monetary Board shall use the resources of the Fund to prevent, or moderate, sharp fluctuations in the quotations of said government obligations, but shall not endeavor to alter movements of the market resulting from basic changes in the pattern or level of interest rates.

The Monetary Board shall issue such regulations as may be necessary to implement the provisions of this section.

SECTION 121. Resources of the Securities Stabilization Fund. — Subject to Section 132 of this Act, the resources of the Securities Stabilization Fund shall come from the balance of the fund as held by the Central Bank under Republic Act No. 265 as of the effective date of this Act.

SECTION 122. Profits and Losses of the Fund. — The Securities Stabilization Fund shall retain net profits which it may make on its operations, regardless of whether said profits arise from capital gains or from interest earnings. The Fund shall correspondingly bear any net losses which it may incur.