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)
Sec.
2. Declaration Of Policy.
- The State recognizes the vital role
of banks 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.
Sec.
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.
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 the Republic Act No. 7906
(hereafter
the “Thrift Banks Act”);
(d)
Rural banks, as defined in Republic Act No. 73S3 (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.
CHAPTER
II
AUTHORITY
OF THE BANGKO SENTRAL
Sec.
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 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; or
4.6.
Enforcing prompt corrective action.
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. .
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 re-lending or purchasing of receivables and
other
obligations.
Sec.5. Policy
Direction; Ratios, Ceilings and Limitations. – The
Bangko
Sentral shall provide policy direction in the areas of money, banking
and
credit.
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 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.
Sec.
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 function 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
therefore
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.
Sec.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.
CHAPTER
III
ORGANIZATION,
MANAGEMENT
AND
ADMINISTRATION OF
BANKS,
QUASI-BANKS AND TRUST ENTITIES
Sec.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;
8.2
That its funds are obtained from the public, which shall mean twenty
(20)
or more persons; and
8.3
That the minimum capital requirements prescribed by the Monetary Board
for each category of banks are satisfied.
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.
Sec.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.
Sec.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.
Sec.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.
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.
Sec.12. Stockholdings
of Family Groups of 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 corporations or related groups of persons with the bank. .
Sec.
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 group of persons with the bank.
Sec.14. Certificate of Authority to Register. – The
Securities and
Exchange
Commission shall no 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.
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.
Sec.
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 or 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. .
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.
The
meetings of the board of directors may be conducted through modern
technologies
such as, but not limited to, teleconferencing and video-conferencing.
Sec.
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.
Sec.
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). .
Sec.
18. Compensation
and Other Benefits of Directors and Officers.
To protect the finds of depositors and creditors the Monetary Board may
regulate the payment by the bark 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.
Sec.
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.
Sec.
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. .
Sec.
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.
Sec.
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.
CHAPTER
IV
DEPOSITS.
LOANS AND OTHER OPERATIONS
Article
I.
Operations
Of Universal Banks
Sec.
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.
Sec.
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. .
Sec.
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.
Sec.
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.
Sec.
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.
Sec.
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.
Article
II.
Operations
Of Commercial Banks
Sec.
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.
Sec.
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 tile 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 investment. .
Sec.
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.
Sec.
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.
Article
III.
Provisions
Applicable To All Banks,
Quasi-Banks,
And Trust Entities
Sec.
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.
Sec.
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 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, 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 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. .
Sec.
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 endorser, 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.
Sec.
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,
endorser 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. .
Sec.
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.
Sec.
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, an such loans and other credit
accommodation may be made to the title-holder of the chattels and
intangible
properties or his assignees.
Sec.
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.
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. .
Sec.
40. Requirement for
Grant Of Loans or 0ther 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 the 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 micro financing, such
as
cash flow-based lending to the basic sectors that are not covered by
traditional
collateral.
Sec.
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.
Sec.
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.
Sec.
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, 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 micro finance
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.
Sec.
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.
In
case of loans and other credit accommodations to micro finance 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.
Sec.
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.
Sec.
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.
Sec.
47. Foreclosure of Real
Estate Mortgage. - In the event of
foreclosure,
whether judicially or extra-judicially, 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 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 extra-judicial 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.
Sec.
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.
Sec.
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 welt-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.
Sec.
50. Major Investments.
- For the purpose or enhancing bank
supervision,
the Monetary Board shall establish criteria for reviewing major
acquisitions
of investments by a bank including corporate affiliations or structures
that may expose the bank to undue risks or in any way hinder effective
supervision.
Sec.
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.
Sec.
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.
Sec.
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.
Sec.
54. Prohibition to
Act as Insurer. - A bank shall
not
directly engage in insurance business as the insurer.
Sec.
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.
The
making of false reports or misrepresentation or suppression of material
facts by personnel of the Bangko Sental ng Pilipinas 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 non
regular
personnel or too lengthy probationary personnel in the conduct of its
business
involving bank deposits.
Sec.
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.
Sec.
57. Prohibition on
Dividend Declaration. – No bank or
quasi-bank
shall 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. .
Sec.
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.
Sec.
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.
Sec.
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
thee
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. .
SEC
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 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, 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.
Sec.
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, such fact shall be stated in, and shall form part of
the
publication.
Sec.
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. .
Sec.
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.
Sec.
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.
Sec.
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.
PLACEMENT
UNDER CONSERVATORSHIP
Sec.
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..
CHAPTER
VI
CESSATION
OF BANKING BUSINESS
Sec.
68. Voluntary Liquidation. – In case of 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
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.
Sec.
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.
Sec.
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 for 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 transferred any securities or property of said bank shall be
subject
to the penal provisions of the New Central Bank Act.
CHAPTER
VII
LAWS
GOVERNING OTHER TYPES OF BANKS
Sec.
71. Other Banking Laws. – The organization, the 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.
CHAPTER
VIII
FOREIGN
BANKS
Sec.
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.”
Sec.
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 such bank to the extent necessary for it to own one
hundred
percent (100%) of the voting stock thereof.
In
the exercise of the 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.
Sec.
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.
Sec.
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.
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 the existing laws.
Sec.
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
shill 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..
Sec.
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.
Sec.
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 banks 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.
CHAPTER IX
TRUST OPERATIONS
Sec. 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. .
Sec.
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 of 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.
Sec.
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.
Sec.
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..
Sec.
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.
Sec.
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 or not less than Five hundred thousand pesos (P500,000.00) or
such higher amount as may 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 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. Al claims rising
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.
Sec.
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. 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.
Sec.
86. Exemption of
Trust Entity from Bond Requirement. – No
bond or other security shall be required by the court from a trust
entry
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
therefore,
require the trust entity to post a bond or other security for the
protection
of funds or property confided to such entity.
Sec.
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.
Sec.
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. .
Sec.
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
purposes,
shall likewise be governed by the relevant provisions of Section 52 of
this Act.
Sec.
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.
Sec.
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
tinder
Section 66 of this Act as well as Sections 36 and 37 of the New Central
Bank Act.
Sec.
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.
Sec.
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.
CHAPTER
X
FINAL
PROVISIONS
Sec.
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, a 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. .
Sec.
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.
Sec.
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. .
Sec.
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.
Approved:
MANUEL
B. VILLAR, JR.
Speaker
of the House of Representatives
FRANKLIN
M. DRILON
President
of the Senate
This
Act, which is a consolidation of Senate Bill No. 1519 and House Bill
No.
6814, was finally passed by the Senate and the House of Representatives
on April 12, 2000.
ROBERTO
P. NAZARENO
Secretary
General
House
of Representatives
OSCAR
G. YABES
Secretary
of the Senate
Approved:
JOSEPH
EJERCITO ESTRADA
President
of the Philippines
