Organization,

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.

The Organization and Management of a domestic banking institution are

governed by the following legislation:

1. General Banking Act

REPUBLIC ACT No. 337

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.

Section 5. The following terms shall be held to be synonymous and interchangeable:

(a) "Commercial bank" and "commercial banking corporation;

(b) "Savings bank," "mortgage bank," and "savings and mortgage bank";

(c) "Building and loan association" and mutual "building and loan association";

(d) "Trust company" and "trust corporation"; and

(e) "Foreign bank" and "foreign banking corporation."

Section 6. No person, association or corporation not conducting the business of a commercial

banking corporation, trust corporation, savings and mortgage bank, or building and loan
association, as defined in this Act, shall advertise or hold itself out as being engaged in the
business of such bank, corporation or association, or use in connection with its business title the
word or words "bank," "banking," "banker," "building and loan association," "trust corporation,"
"trust company," or words of similar import, or solicit or receive deposits of money for deposit,
disbursement, safekeeping, or otherwise, or transact in any manner the business of any such
bank, corporation or association, without having first complied with the provisions of this Act in
so far as it relates to commercial banking corporations, trust corporations, savings and mortgage
banks, or building and loan associations, as the case may be. For any violation of the provisions
of this section by a corporation, the officers and directors thereof shall be jointly and severally
liable. Any violation of the provisions of this section shall be punished by a fine of five hundred
pesos for each day during which such violation is continued or repeated, and in default of the
payment thereof, subsidiary imprisonment as prescribed by law.

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.

2. Central Bank Act

NEW CENTRAL BANK ACT (Republic Act No. 7653)

CHAPTER I ESTABLISHMENT AND ORGANIZATION OF THE BANGKO SENTRAL NG

PILIPINAS

ARTICLE I – CREATION, RESPONSIBILITIES AND CORPORATE POWERS OF THE

BANGKO SENTRAL
SECTION 1. Declaration of Policy. — The State shall maintain a central monetary authority
that shall function and operate as an independent and accountable body corporate in the
discharge of its mandated responsibilities concerning money, banking and credit. In line with this
policy, and considering its unique functions and responsibilities, the central monetary authority
established under this Act, while being a government-owned corporation, shall enjoy fiscal and
administrative autonomy.

SECTION 2. Creation of the Bangko Sentral. — There is hereby established an independent

central monetary authority, which shall be a body corporate known as the Bangko Sentral ng
Pilipinas, hereafter referred to as the Bangko Sentral.

The capital of the Bangko Sentral shall be 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.

3. Revised Securities Act (BATAS PAMBANSA BILANG 178)

Section 1. Title. — This Act shall be known as the "Revised Securities Act."

"Securities" shall include bonds, debentures, notes, evidences of indebtedness, shares in

a company, pre-organization certificates or subscriptions, investment contracts, certificates of
interest or participation in a profit sharing agreement, collateral trust certificates, equipment
trust certificates (including conditional sale contracts or similar interests or instruments
serving the same purpose), voting trust certificates, certificates of deposit for a security, or
fractional undivided interest in oil, gas, or other mineral rights, or, in general, interests or
instruments commonly considered to be "securities", or certificates of interests or
participation in, temporary or interim certificates for, receipts for, guarantees of, or warrants
or rights to subscribe to or buy or sell any of the foregoing; or commercial papers evidencing
indebtedness of any person, financial or non-financial entity, irrespective of maturity, issued,
endorsed, sold, transferred or in any manner conveyed to another, with or without recourse,
such as promissory notes, repurchase agreements, certificates of assignments, certificates of
participation, trust certificates or similar instruments; or proprietary or non-proprietary
membership certificates, commodity futures contracts, transferable stock options, pre-need
plans, pension plans, life plans, joint venture contracts, and similar contracts and investments
where there is no tangible return on investments plus profits but an appreciation of capital as
well as enjoyment of particular privileges and services.

4. Corporation Code of the Philippines

(Republic Act (RA) No. 11232)

The Revised Code initiates significant changes to the legal framework for the registration
and operation of private corporations in the Philippines, including the following:

A. Simplifying Corporate Registration

The Revised Code simplifies the requirements to set-up and register a corporation with
the SEC. The provisions of the new law likewise expressly recognize the importance of
technology and its use to facilitate government and internal corporate processes.

1. Removal of minimum number of shareholders, directors, trustees, and minimum

capitalization requirements

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.

2. One Person Corporation

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.

4. Electronic Filing and Monitoring System

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.

5. Electronic notices and remote communication

Shareholders and directors are expressly allowed to participate in meetings through
remote communication.

To encourage efficient communication of notices to the shareholders, members, directors

or trustees, the Revised Code permits sending of notices by electronic means.

B. Strengthening Corporate Governance

The Revised Code also aims to improve corporate governance and protection of minority
shareholders, through the following provisions:

1. Appointment of Independent Directors and Compliance Officer

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.

2. Additional reporting requirements

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:

1. The corporate articles of incorporation and/or bylaws may include an arbitration

agreement for intra-corporate disputes. In order to be valid, the provision must
specifically mention the number of arbitrators and manner of their appointment.

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

a) The Rural Bank Act (Republic Act No. 7353)

The Congress of the Philippines' Republic Act No. 7353 aims to promote comprehensive rural
development with the end in view of attaining equitable distribution of opportunities, income and
wealth, a sustained increase in the amount of goods and services produced by the nation of the
benefit of the people, and expanded productivity as a key raising the quality of life for all,
especially the underprivileged. Towards these ends, this act 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. The law is divided into several chapters, and
sets forth provisions on the following topics:

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

c) Savings and Loan Association Act

 PRESIDENTIAL DECREE NO. 1796
 AMENDING FURTHER REPUBLIC ACT NO. 3779, AS AMENDED,
OTHERWISE KNOWN AS THE "SAVINGS AND LOAN
ASSOCIATION ACT"

WHEREAS, there is a need to amend Section 5 of Republic Act No. 3779, as

amended, to reflect the original intention of said law;

WHEREAS, there is a need to strengthen the supervisory authority of the Central

Bank over savings and loan associations;

WHEREAS, the Central Bank should have the flexibility in its authority to issue
rules governing said associations.

REPUBLIC ACT NO. 8367

"Revised Non-Stock Savings and Loan Association Act of 1997"

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.