Professional Documents
Culture Documents
Organization Original
Organization Original
Management and
Administration on Bank
(Group 12)
Establishment of Domestic Bank
A bank, unlike other types of business undertakings is not easy to
organize. There are stringent and rigid provisions of laws that must be
strictly complied with. Such requirements are due to the fact that the
business of a bank is important with "Public trust" and "Public Interest".
Indeed, the banking industry is considered indispensable to growth of
the national economy, a declared policy of the state embodied in the
Presidential Decree of No. 1738.
An Act Regulating Banks and Banking Institutions and for Other Purposes
Section 1. The short title of this Act shall be "The General Banking Act."
Section 2. Only duly authorized persons and entities may engage in the lending of funds
obtained from the public through the receipt of deposits or the sale of bonds, securities, or
obligations of any kind, and all entities regularly conducting such operations shall be considered
as banking institutions and shall be subject to the provisions of this Act, of the Central Bank Act,
and of other pertinent laws. The terms "banking institution" and "bank," as used in this Act, are
synonymous and interchangeable and specifically include banks, banking institutions,
commercial banks, savings banks, mortgage banks, trust companies, building and loan
associations, branches and agencies in the Philippines of foreign banks, hereinafter called
Philippine branches, and all other corporations, companies, partnerships, and associations
performing banking functions in the Philippines.
Persons and entities which receive deposits only occasionally shall not be considered as banks,
but such persons and entities shall be subject to regulation by the Monetary Board of the Central
Bank; nevertheless, in no case may the Central Bank authorize the drawing of checks against
deposits not maintained in banks, or branches or agencies thereof.
The Monetary Board may similarly regulate the activities of persons and entities which act as
agents of banks.
Section 3. Insurance companies are exempted from the provisions of this Act, but such
companies shall present to the Central Bank such information, data or reports as the Monetary
Board may require in order to ascertain the effects of the operations of insurance companies on
the monetary, credit, and exchange situation in the Philippines.
Section 4. Cases of doubt as to the banking character of the activities of any person or entity, and
to the consequent applicability of this Act, shall be decided by the Monetary Board subject to
judicial review. The Board may, through the Superintendent of Banks, examine, inspect or
investigate the books and records of such person or entity for the purpose of resolving the
question.
(b) "Savings bank," "mortgage bank," and "savings and mortgage bank";
(c) "Building and loan association" and mutual "building and loan association";
Chapter II
Establishment of Domestic Banks
Section 7. Domestic banking institutions, except building and loan associations, shall be
organized in the form of stock corporations.
Section 8. No banking institution shall issue no par value stock.
Section 9. The Securities and Exchange Commissioner shall not register the articles of
incorporation of any bank, or any amendment thereto, unless accompanied by a certificate of
authority issued by the Monetary Board, under its official seal. Such certificate shall not be
issued unless the Monetary Board is satisfied from the evidence submitted to it: (a) that all the
requirements of existing laws and regulations to engage in the business for which the applicant is
proposed to be incorporated have been complied with; (b) that the public interest and economic
conditions, both general and local, justify the authorization; and (c) that the amount of capital,
the financing organization, direction and administration, as well as the integrity and
responsibility of the organizers and administrators reasonably assure the safety of the interests
which the public may entrust to them.
Section 10. The Securities and Exchange Commissioner shall not register the by-laws of any
bank or banking institution, or any amendment thereto, unless accompanied by a certificate of
the Monetary Board to the effect that such by-laws or amendment thereto are in accordance with
law.
Section 11. After the approval of this Act, no bank which may be established and licensed to do
business in the Philippines shall receive deposits, unless incorporated under the laws of the
Republic of the Philippines: Provided, However, That this prohibition shall not apply to branches
and agencies of foreign banks which, at the time of the approval of this Act, are actually
receiving deposits: And Provided, further, That, after the passage of this Act, all deposits so
received by such branches and agencies of foreign bank shall not be invested in any manner
outside the territorial limits of the Republic of the Philippines.
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Section 12. At least sixty per cent (60%) of the capital stock of any banking institution which
may be established after the approval of this Act shall be owned by citizens of the Philippines.
Section 13. At least two-thirds of the members of the board of directors of any bank or banking
institution which may be established after the approval of this Act shall be citizens of the
Philippines.
The capital of the Bangko Sentral shall be Fifty billion pesos (P50,000,000,000), to be fully
subscribed by the Government of the Republic, hereafter referred to as the Government, Ten
billion pesos (P10,000,000,000) of which shall be fully paid for by the Government upon the
effectivity of this Act and the balance to be paid for within a period of two (2) years from the
effectivity of this Act in such manner and form as the Government, through the Secretary of
Finance and the Secretary of Budget and Management, may thereafter determine.
SECTION 3. Responsibility and Primary Objective. — The Bangko Sentral shall provide policy
directions in the areas of money, banking, and credit. It shall have supervision over the
operations of banks and exercise such regulatory powers as provided in this Act and other
pertinent laws over the operations of finance companies and non-bank financial institutions
performing quasi-banking functions, hereafter referred to as quasi-banks, and institutions
performing similar functions.
The primary objective of the Bangko Sentral is to maintain price stability conducive to a
balanced and sustainable growth of the economy. It shall also promote and maintain monetary
stability and the convertibility of the peso.
SECTION 4. Place of Business. — The Bangko Sentral shall have its principal place of
business in Metro Manila, but may maintain branches, agencies and correspondents in such other
places as the proper conduct of its business may require.
SECTION 5. Corporate Powers. — The Bangko Sentral is hereby authorized to adopt, alter, and
use a corporate seal which shall be judicially noticed; to enter into contracts; to lease or own real
and personal property, and to sell or otherwise dispose of the same; to sue and be sued; and
otherwise to do and perform any and all things that may be necessary or proper to carry out the
purposes of this Act.
The Bangko Sentral may acquire and hold such assets and incur such liabilities in connection
with its operations authorized by the provisions of this Act, or as are essential to the proper
conduct of such operations.
The Bangko Sentral may compromise, condone or release, in whole or in part, any claim of or
settled liability to the Bangko Sentral, regardless of the amount involved, under such terms and
conditions as may be prescribed by the Monetary Board to protect the interests of the Bangko
Sentral.
Section 1. Title. — This Act shall be known as the "Revised Securities Act."
The Revised Code initiates significant changes to the legal framework for the registration
and operation of private corporations in the Philippines, including the following:
The Revised Code no longer requires five shareholders to establish a new corporation. It
has also removed, subject to compliance with special laws, the minimum subscribed and
paid-up capital requirement for stock corporations.
The new law permits natural persons, trusts or estates to form One Person Corporations,
with the single shareholder becoming, by default, the sole director and president.
3. Perpetual existence
Under the Revised Code, a corporation shall have perpetual existence unless its articles of
incorporation provide otherwise. This new law repeals the prior 50 year maximum
corporate term.
The new law grants perpetual existence to corporations whose corporate terms have not
yet expired. Corporations who intend to be bound by a specific corporate term must
notify the SEC.
A corporation whose corporate term has expired may submit an application to the SEC
for a revival of its corporate existence, together with all the rights and privileges under its
certificate of incorporation and subject to all of its duties, debts, and liabilities existing
prior to its revival.
In line with the government's drive to eliminate red tape and streamline government
procedures, the Revised Code mandates the SEC to develop and implement a system to
enable electronic submission of applications, reports and other documents, as well as the
sharing of pertinent information with other government agencies.
The Revised Code also aims to improve corporate governance and protection of minority
shareholders, through the following provisions:
The new law requires a corporation vested with public interest[1] to have (i) a board with
independent directors occupying at least 20% of its board seats, and (ii) a compliance
officer.
An independent director is one, who, apart from shareholdings and fees received from the
corporation, is independent of management and free from any business or relationship
which could (or could reasonably be perceived to) materially interfere with the exercise
of independent judgment in carrying out the responsibilities as a director.
Apart from the annual financial statements and general information sheets required for all
corporations, a corporation vested with public interest must also submit (i) a director
compensation report; and (ii) a director appraisal or performance report, which should
include the standards or criteria used to assess each director.
3. Emergency Board
In the event an emergency action is required to prevent grave, substantial and irreparable
loss or damage to the corporation, and the current number of directors is not enough to
constitute a quorum, the Revised Code permits the appointment of a temporary director to
fill in the vacancy, by the unanimous vote of the remaining directors.
The action by the temporary director shall be limited to the emergency action necessary,
and his term shall cease within a reasonable time from the termination of the emergency
or upon election of the replacement director, whichever comes earlier.
C. Other Important Provisions
Other notable amendments introduced by the new law include the following:
2. The minimum amount of security deposit required for foreign corporations doing
business in the Philippines is increased from PhP 100,000 to PhP 500,000.
3. A person required to file a report with the SEC may redact confidential information
from such report. The confidential information shall be filed in a supplemental report
labelled "confidential", together with a request for confidential treatment of the report and
the specific grounds for the grant thereof.
5. Other
1. Monetary Board
2. Loans
3. Organization
4. Credit
5. Supplemental Capital
6. Supervision
7. Operations
8. Fees
9. Taxes
10. Sanctions and Penalties
b) Private Development Bank Act ( Republic Act No. 4093)
This Act shall be known as “The Private Development Banks’ Act.”
SECTION 2. It shall be the declared policy of Congress to promote and expand the
economy of the country pursuant to the socio-economic program of the Government; to
expand the industrial and agricultural growth; and to encourage the establishment of more
private development banks in order to meet the needs for capital and to meet the demands for
adequate investment credit or medium and long term loans for Filipino entrepreneurs. Toward
this end, the Government shall encourage and assist in the establishment of a system of private
development banks which will promote agriculture and industry and at the same time place
within easy reach to the people the medium and long term credit facilities at reasonable cost.
The Development Bank of the Philippines, the Philippine National Bank, the Government
Service Insurance System, the Social Security System, the National Economic Council, the
Department of Agriculture and Natural Resources, the Department of Commerce and Industry,
and other appropriate agencies, corporations, or instrumentalities of the Government may, in
cooperation with the private development banks, provide adequate assistance in the form of
saving deposits, and technical know-how in agriculture and industry
WHEREAS, the Central Bank should have the flexibility in its authority to issue
rules governing said associations.
Declaration of policy.
It is hereby declared the policy of the State to: a) encourage industry, frugality and the
accumulation of savings, and judicious utilization of credit among the members of non-stock savings
and loan associations; b) regulate and supervise the activities of non-stock savings and loan associations
in order to place their operations on a sound, stable, and efficient basis to the end that they may be able
to better provide for the establishment of additional savings and credit facilities in a fair manner to their
members and to curtail or prevent acts or practices of these Associations which are prejudicial to their
members' interest; c) lay down the minimum requirements and the standards under which non-stock
savings and loan Associations may organize and operate; and d) maximize the protection of members of
non-stock savings and loan associations against misfeasance and malfeasance of the trustees and
officers thereof.
Banking Institution domestically organized must be in the form of Stock Corporation. The
Securities and Exchange Commissioner is required to register the articles on incorporation of
any bank, or any amendment thereto, if accompanied by a certificate of authority issued by the
Monetary Board, under its official seal. However, the issuance of the certificate by the
Monetary Board is based on the evidence submitted to it:
1) That all the requirements of existing laws and regulations to engage in the business of
which the applicant is proposed to be incorporated have been complied with;
2) That the public interest and economic conditions, both general and local justify the
authorization; and
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 the interest which the public may entrust to them.