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Classification Of Banks

Banks are classified into: (CUT-RICO)
(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 “Thrift Banks Act” (Republic
Act No. 7906).
(d) Rural banks, as defined in the “Rural Banks Act” (Republic Act No. 7353);
(e) Cooperative banks, as defined in the “Cooperative Code” (Republic Act No.
6938);
(f) Islamic banks as defi ned in the “Charter of Al Amanah Islamic Investment Bank
of the Philippines’’ (Republic Act No. 6848); and
(g) Other classifi cations of banks as determined by the Monetary Board of the
Bangko Sentral ng Pilipinas. (Section 3, GBL)
Universal Banks
Universal banks are large commercial banks licensed by the Bangko Sentral ng
Pilipinas (BSP) “to do both commercial and investment banking.’’ A universal bank
shall have the authority to exercise:
a. the powers authorized for a commercial bank,
b. the powers of an investment house as provided in existing laws, and
c. the power to invest in non-allied enterprises. (Section 23, GBL)
Commercial Banks
A commercial bank shall have:
a. the general powers incident to corporations,
b. all such powers as may be necessary to carry on the business of commercial
banking, such as:
(i) accepting drafts and issuing letters of credit;
(ii) discounting and negotiating promissory notes, drafts, bills of exchange,
and other evidences of debt;
(iii) accepting or creating demand deposits;
(iv) receiving other types of deposits and deposit substitutes;
(v) buying and selling foreign exchange and gold or silver bullion; acquiring
marketable bonds and other debt securities; and
(vi) 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. (Section 29, GBL)
Rural Banks
The State recognizes the need to promote comprehensive rural development with
the end in view of attaining acquitable distribution of opportunities, income and
wealth; a sustained increase in the amount of goods and services produced by the
nation for the benefit of the people; and in expanding productivity as a key raising
the quality of life for all, especially the underprivileged. (Sec. 1 RA 7353 – An Act

whether secured or unsecured.and long-term loans for Filipino entrepreneurs. (d) Encourage industry. together with capital loans secured by bonds. frugality and the accumulation of savings among the public. bills of exchange. and (e) Regulate and supervise the activities of thrift banks in order to place their operations on a sound. bonds and other forms of security or in loans for personal or household finance. or in financing for home building and home development. private development banks. acceptances or notes arising out of commercial transactions.Providing for the Creation. to encourage the establishment of more private thrift banks in order to meet the needs for capital. Loans or advances extended by rural banks shall be primarily for the purpose of meeting the normal credit needs of farmers. Towards these ends. (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. (Sec 17. and to provide incentives to needed investments. It is the policy of the State to: (a) Recognize the indispensable role of the private sector. chattel mortgage. to encourage private enterprise. stable and effi cient basis and to curtail or prevent acts or practices which are prejudicial to the public interest. personal and investment credit or medium. in commercial papers and accounts receivables. and for Other Purposes). and for Other Purposes). “Thrift banks” include savings and mortgage banks. Organization and Operation of Rural Banks. the rural bank shall give preference to the application of farmers and merchant whose cash requirements are small. in readily marketable and debt securities. and in such other investments and loans which the . drafts. fishermen or farm families owning or cultivating land dedicated to agricultural production as well as the normal credit needs of cooperatives and merchants. and stock savings and loans associations organized under existing laws. rural banks may deposit in private banks more than the amount prescribed by the Single Borrower’s Limit subject to Monetary Board regulations. (b) Promote economic development pursuant to the socio-economic program of the government. to expand industrial and agricultural growth. and the members and stockholders of thrift banks. RA 7353) Thrift Banks i. In granting of loans. the State 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. (Sec 2. RA 7353) In areas where there are no government banks.and long-term credit facilities at reasonable cost. RA 7906 – An Act Providing for the Regulation of the Organization and Operations of Thrift Banks. (Sec 6. mortgages in real estate and insured improvements thereon. and any banking corporation that may be organized for the following purposes: (1) Accumulating the savings of depositors and investing them. ii.

acquisition. services. the Land Bank of the Philippines. as well as rediscounting rate to be charged by any of these institutions. (2) Providing short-term working capital. buy and sell them for its own account or for the account of others. subject to such guidelines as may be established by the Monetary Board. and other government owned or -controlled corporations. the Development Bank of the Philippines. That the thrift bank has net assets of at least Twenty million pesos (P20. (e) Act as official depository of national agencies and of municipal. enlargement or improvement of productive properties and real estate mortgage loans for: (1) the construction. and the Bureau of Customs. to businesses engaged in agriculture. The following are the powers of thrift banks: (a) Accept savings and time deposits. Social Security System. industry and housing.000. That the date of maturity of the certifi cates is not later than the date on which the payment would otherwise become due. (Sec 3 RA 7906) iii. city or provincial funds in the municipality. city or province where the thrift bank is located. in the absence of the aforesaid prepayment. including but not limited to. ➢ Such mortgage and chattel mortgage certificates shall be issued exclusively in national currency and exclusively for the financing of equipment loans. conservation. and (g) Issue mortgage and chattel mortgage certificates. expansion or improvement of rural and urban properties. . the Bureau of Internal Revenue. or accept and receive them in payment or as amortization of its loan. (b) Open current or checking accounts: Provided. (2) the refi nancing of similar loans and mortgages. (d) Act as collection agent for government entities. (f) Rediscount paper with the Philippine National Bank. and (3) Providing diversified financial and allied services for its chosen market and constituencies specially for small and medium enterprises and individuals. medium and long-term financing. ➢ A thrift bank shall coordinate the amounts and maturities of its certificates with those of its loans. (c) Act as correspondent for other financial institutions.000) subject to such guidelines as may be established by the Monetary Board. Said institutions shall specify the nature of paper deemed acceptable for rediscount. 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. so as to ensure adequate cash receipts for the payment of principal and interest at the time they become due.Monetary Board may determine as necessary in the furtherance of national economic objectives. and (3) such other purposes as may be authorized 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. mortgage loans for the acquisition of machinery and other fixed installations.

wage or income pursuant to the terms of his loan. That the performance of any banking function shall be subject to prior approval by the Central Bank of the Philippines. (e). to remit deductions to the thrift bank concerned. The term “cooperative bank” shall include cooperative rural banks. to make deductions from his salary. (l) Extend credit against the security of jewelry. the majority shares of which is owned and controlled by. ii. (7) To issue debentures subject to the approval of and under conditions and guarantees to be prescribed by the Government. That in the case of a borrower who is a permanent employee or wage earner. (6) To issue negotiable instruments to facilitate the activities of cooperatives. A cooperative bank is one organized by. (5) To discount bills and promissory notes issued and drawn by cooperatives. (3) To mobilize savings of its members for the benefi t of the cooperative movement. (g) and (i) only upon prior approval of the Monetary Board. (Sec 100 RA 6938 – An Act to Ordain a Cooperative Code of the Philippines). iii. A cooperative bank may perform the following functions: (1) To carry on banking and credit services for the cooperatives. hold and convey real estate under the same conditions as those governing commercial banks.(h) Purchase. operate under an expanded banking authority. (4) To act as a balancing medium for the surplus funds of cooperatives and their federations. (d). (2) To receive financial aid or loans from the Government and the Central Bank of the Philippines for and in behalf of the cooperative banks and primary cooperatives and their federations engaged in business and to supervise the lending and collection of loans. subject to such rules and regulations as the Monetary Board may prescribe. (8) To borrow money from banks and other financial institutions within the limit to be prescribed by the Central Bank. rules and regulations to the contrary. cooperatives primarily to provide financial and credit services to cooperatives. It may also perform commercial banking services.(Sec 10) Cooperative Banks i. the treasurer. and (m) Offer other banking services. and collect such reasonable fee for his services. precious stones and articles of similar nature. (i) Engage in quasi-banking and money market operations. (k) Extend credit facilities to private and government employees: Provided. cashier or paymaster of the offi ce employing him is authorized. Membership of a cooperative bank shall include only cooperatives and federations of cooperatives. notwithstanding the provisions of any existing law. (j) Open domestic letters of credit. Thrift banks may perform the services under (b). and (9) To carry out all other functions as may be prescribed by the Cooperative Development Authority: Provided. or exercise such other powers incident to a corporation with prior approval of the Monetary Board. (Sec 102) Islamic Banks .

by virtue thereof. 6848 created the Al-Amanah Islamic Investment Bank of the Philippines. RA 6848 – An Act Providing for the 1989 Charter of the Al-Amanah Islamic Investment Bank of the Philippines. or the Islamic Bank. or otherwise by participating in any way with other companies. the Islamic Bank is authorized to operate an Investment House pursuant to Presidential Decree No. R. as amended.(Sec 3) iii. partner. rules and regulations of the Bangko Sentral ng Pilipinas. and (3) The Islamic Bank may perform all business ventures and transactions as may be necessary to carry out the objectives of its charter within the framework of the Islamic Bank’s fi nancial capabilities and technical considerations prescribed by law and convention: Provided. Its principal domicile and place of business is in Zamboanga City. industrial. Any zakat or “tithe” paid by the Islamic Bank on behalf of its shareholders and depositors shall be considered as part of compliance by the Islamic Bank with its obligation to appropriate said zakat fund and to disburse it in legitimate channels to be ascertained fi rst by the Shari’a Advisory Council. All business dealings and activities of the Islamic Bank shall be subject to the basic principles and rulings of Islamic Shari’a within the purview of the declared policy. (2) The Islamic Bank may carry on commercial operations for the purpose of realizing its investment banking objectives by establishing enterprises or fi nancing existing enterprises. Other Banks The following are Government-Owned Banks: . carry on the following types of commercial operations: (1) The Islamic Bank may have a direct interest as a shareholder. That these shall not involve any riba or other activities prohibited by the Islamic Shari’a principles. financing and investment operations and to establish and participate in agricultural. 1688 and. commercial and industrial ventures based on the Islamic concept of banking. Authorizing its Conduct of Islamic Banking Business and Repealing for this Purpose Presidential Decree Numbered Two Hundred and Sixty-four as Amended by Presidential Decree Numbered Five Hundred and Forty-Two Creating The Philippine Amanah Bank. owner or any other capacity in any commercial. iv.A. and as a Venture Capital Corporation pursuant to Presidential Decree No. agricultural. institutions or banks performing activities similar to its own or which may help accomplish its objectives in the Philippines or abroad. Notwithstanding the provisions of any law to the contrary.i. (Sec2. or otherwise invest under any of the various contemporary Islamic fi nancing techniques or modes of investment for profi t sharing. It may establish branches. under any of the contemporary Islamic fi nancing techniques or modes of investment for profi t sharing. The primary purpose of the Islamic Bank is to promote and accelerate the socioeconomic development of the Autonomous Region by performing banking. real estate or development project under mudarabah form of partnership or musharaka joint venture agreement or by decreasing participation. agencies or other offi ces at such places in the Philippines or abroad subject to the laws.) ii. 129.

The common shares were fully subscribed by the Government for and on behalf of the veterans. promissory notes. (Sec 95. the Philippine Veterans Bank was created with the enactment of Republic Act No. which were to be sold to the veterans at the rate of one share each. participations. Quasi-Banks Quasi-banks refer to entities engaged in the borrowing of funds through the issuance. but need not be limited to. through the issuance. These instruments may include. the government created the Rehabilitation Finance Corporation (RFC) under R. which became its charter. While PVB was conceived and created as a private commercial bank that is owned by the veterans. In 1958. and paid out of the Veterans Trust Fund. Under the provisions of this law. endorsement.000 common shares and 490.00. The preferred shares. 85 which absorbed the assets and took over the functions of the Agricultural Industrial Bank. (iii) Development Bank of the Philippines In 1947. or acceptance of debt instruments for the borrower’s own account.The Association confi nes its membership to a well-defi ned group of persons and cannot transact business with the general public. The RFC provided credit facilities for the development of agriculture. Non-Stock Savings and Loan Associations Non-stock savings and loan association is a non-stock. (ii) Land Bank of the Philippines Republic Act No. 1963. bankers acceptances. NCBA) Organization Of Banks A. the P100 million authorized capital of the Bank will be divided into 510. certifi cates of assignment and similar instruments with recourse. for the purpose of relending or purchasing of receivables and other obligations. 3844 (Agricultural Land Reform Code) created the Land Bank of the Philippines to fi nance the acquisition and distribution of agricultural estates for division and resale to small landholders as well as the purchase of the landholding by the agricultural lessee. commerce and industry and the reconstruction of properties damaged by the war. other than deposits. their widows and orphans. deposit substitutes is an alternative form of obtaining funds from the public.A. were eventually distributed to them at no cost on their part.In this connection. Conditions . the law provided that it shall be a government depository as a gesture of appreciation by a grateful nation to the veterans for the sacrifi ces that they offered on the altar of freedom. 3518. non-profi t 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 fi nancing for home building and development and for personal fi nance.(i) Philippine Veterans Bank On June 18.000 preferred shares with a par value of P100. the RFC was reorganized into the Development Bank of the Philippines. endorsement or assignment with recourse or acceptance of deposit substitutes for purposes of relending or purchasing of receivables and other obligations. and repurchase agreements. The change in corporate name marked the shift from rehabilitation to broader activities.

and d) internal controls. (Sec. Incorporators/Subscribers (i) The incorporators/subscribers and proposed directors and offi cers must be persons of integrity and of good credit standing in the business community.(Sec 9. and unless otherwise allowed under the provisions of existing laws are not offi cers and employees of a government agency. 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. That the entity is a stock corporation. b) directors and senior management. Capabilities The Monetary Board shall take into consideration their capability in terms of their fi nancial resources and technical expertise and integrity. The bank licensing process shall incorporate an assessment of: a) the bank’s ownership structure. as well as e) its projected fi nancial condition and capital base. (iii) A bank may be organized with not less than fi ve (5) nor more than fi fteen (15) incorporators. (Sec 4 RA 7353) . Upon consultation with the rural banks in the area. GBL) 2. including the terms thereof and rights appurtenant thereto to determine compliance with laws and regulations governing capital and equity structure of banks. That the minimum capital requirements prescribed by the Monetary Board for each category of banks are satisfi ed. or the granting of loans to banks. 8 GBL) C. In case there are more than fi fteen (15) persons initially interested in organizing and investing in the proposed bank. (S) ➢ The Monetary Board may prescribe rules and regulations on the types of stock a bank may issue. c) its operating plan. (C) B. That its funds are obtained from the public. * Note: Cooperatives may organize a rural bank. department or offi ce charged with the supervision of. and (P) 3. which shall mean twenty (20) or more persons. the excess may be listed among the original subscribers in the Articles of Incorporation. Capital Requirements See new requirements D. (ii) The incorporators/subscribers and proposed directors and offi cers must not have been convicted of any crime involving moral turpitude. The subscribers must have adequate fi nancial strength to pay for their proposed subscriptions in the bank. duly established cooperatives and corporations primarily organize to hold equities in rural banks may organize a rural bank and/or subscribe to the shares of stock of any rural bank: Provided.The Monetary Board may authorize the organization of a bank or quasi-bank subject to the following conditions: (SPC) 1. ➢ Banks shall issue par value stocks only. instrumentality.