REPUBLIC ACT No.
6426 loans shall be eligible for purposes of the 100% foreign currency cover prescribed in
AN ACT INSTITUTING A FOREIGN CURRENCY DEPOSIT SYSTEM IN THE
PHILIPPINES, AND FOR OTHER PURPOSES.
Section 1. Title.– This act shall be known as the "Foreign Currency Deposit Act of the
Philippines."
Section 2. Authority to deposit foreign currencies. – Any person, natural or juridical,
may, in accordance with the provisions of this Act, deposit with such Philippine banks
in good standing, as may, upon application, be designated by the Central Bank for
the purpose, foreign currencies which are acceptable as part of the international
reserve, except those which are required by the Central Bank to be surrendered in
accordance with the provisions of Republic Act Numbered two hundred sixty-five (Now
Rep. Act No. 7653).
Section 3. Authority of banks to accept foreign currency deposits. – The banks
designated by the Central Bank under Section two hereof shall have the authority:
(1) To accept deposits and to accept foreign currencies in trust Provided, That
numbered accounts for recording and servicing of said deposits shall be allowed;
(2) To issue certificates to evidence such deposits;
(3) To discount said certificates;
(4) To accept said deposits as collateral for loans subject to such rules and regulations
as may be promulgated by the Central Bank from time to time; and
(5) To pay interest in foreign currency on such deposits.
Section 4. Foreign currency cover requirements. – Except as the Monetary Board may
otherwise prescribe or allow, the depository banks shall maintain at all times a one
hundred percent foreign currency cover for their liabilities, of which cover at least
fifteen percent shall be in the form of foreign currency deposit with the Central Bank,
and the balance in the form of foreign currency loans or securities, which loans or
securities shall be of short term maturities and readily marketable. Such foreign
currency loans may include loans to domestic enterprises which are export-oriented
or registered with the Board of Investments, subject to the limitations to be prescribed
by the Monetary Board on such loans. Except as the Monetary Board may otherwise
prescribe or allow, the foreign currency cover shall be in the same currency as that
of the corresponding foreign currency deposit liability. The Central Bank may pay
interest on the foreign currency deposit, and if requested shall exchange the foreign
currency notes and coins into foreign currency instruments drawn on its depository
banks. (As amended by PD No. 1453, June 11, 1978.)
Depository banks which, on account of networth, resources, past performance, or
other pertinent criteria, have been qualified by the Monetary Board to function under
an expanded foreign currency deposit system, shall be exempt from the requirements
in the preceding paragraph of maintaining fifteen percent (15%) of the cover in the
form of foreign currency deposit with the Central Bank. Subject to prior Central Bank
approval when required by Central Bank regulations, said depository banks may
extend foreign currency loans to any domestic enterprise, without the limitations
prescribed in the preceding paragraph regarding maturity and marketability, and such
the preceding paragraph. (As added by PD No. 1035.)
Section 5. Withdrawability and transferability of deposits. – There shall be no
restriction on the withdrawal by the depositor of his deposit or on the transferability
of the same abroad except those arising from the contract between the depositor and
the bank.
Section 6. Tax exemption. – All foreign currency deposits made under this Act, as
amended by PD No. 1035, as well as foreign currency deposits authorized under PD
No. 1034, including interest and all other income or earnings of such deposits, are
hereby exempted from any and all taxes whatsoever irrespective of whether or not
these deposits are made by residents or nonresidents so long as the deposits are
eligible or allowed under aforementioned laws and, in the case of nonresidents,
irrespective of whether or not they are engaged in trade or business in the Philippines.
(As amended by PD No. 1246, prom. Nov. 21, 1977.)
Section 7. Rules and regulations. – The Monetary Board of the Central Bank shall
promulgate such rules and regulations as may be necessary to carry out the
provisions of this Act which shall take effect after the publications in the Official
Gazette and in a newspaper of national circulation for at least once a week for three
consecutive weeks. In case the Central Bank promulgates new rules and regulations
decreasing the rights of depositors, rules and regulations at the time the deposit was
made shall govern.
Section 8. Secrecy of foreign currency deposits. – All foreign currency deposits
authorized under this Act, as amended by PD No. 1035, as well as foreign currency
deposits authorized under PD No. 1034, are hereby declared as and considered of an
absolutely confidential nature and, except upon the written permission of the
depositor, in no instance shall foreign currency deposits be examined, inquired or
looked into by any person, government official, bureau or office whether judicial or
administrative or legislative, or any other entity whether public or private; Provided,
however, That said foreign currency deposits shall be exempt from attachment,
garnishment, or any other order or process of any court, legislative body, government
agency or any administrative body whatsoever. (As amended by PD No. 1035, and
further amended by PD No. 1246, prom. Nov. 21, 1977.)
Section 9. Deposit insurance coverage. – The deposits under this Act shall be insured
under the provisions of Republic Act No. 3591, as amended (Philippine Deposit
Insurance Corporation), as well as its implementing rules and regulations: Provided,
That insurance payment shall be in the same currency in which the insured deposits
are denominated.
Section 10. Penal provisions. – Any willful violation of this Act or any regulation duly
promulgated by the Monetary Board pursuant hereto shall subject the offender upon
conviction to an imprisonment of not less than one year nor more than five years or
a fine of not less than five thousand pesos nor more than twenty-five thousand pesos,
or both such fine and imprisonment at the discretion of the court.
Section 11. Separability clause. – The provisions of this Act are hereby declared to be
separable and in the event one or more of such provisions are held unconstitutional,
the validity of other provisions shall not be affected thereby.
Section 12. Repealing clause. – All acts, executive orders, rules and regulations, or
parts thereof, which are inconsistent with any provisions of this Act are hereby
repealed, amended or modified accordingly, without prejudice, however, to deposits
made thereunder.
Section 12-A. Amendatory enactments and regulations. – In the event a new
enactment or regulation is issued decreasing the rights hereunder granted, such new
enactment or regulation shall not apply to foreign currency deposits already made or
existing at the time of issuance of such new enactment or regulation, but such new
enactment or regulation shall apply only to foreign currency deposits made after its
issuance. (As added by PD No. 1246, prom. Nov. 21, 1977.)
Section 13. Effectivity. – This Act shall take effect upon its approval.
REPUBLIC ACT NO. 9160
AN ACT DEFINING THE CRIME OF MONEY LAUNDERING, PROVIDING PENALTIES
THEREFOR AND FOR OTHER PURPOSES.
Section 1. Short Title. – This Act shall be known as the "Anti-Money Laundering Act
of 2001."
Sec. 2. Declaration of Policy. – It is hereby declared the policy of the State to protect
and preserve the integrity and confidentiality of bank accounts and to ensure that the
Philippines shall not be used as a money laundering site for the proceeds of any
unlawful activity. Consistent with its foreign policy, the State shall extend cooperation
in transnational investigations and prosecutions of persons involved in money
laundering activities wherever committed.
Sec. 3. Definitions. – For purposes of this Act, the following terms are hereby defined
as follows:
(a) "Covered institution" refers to:
(1) banks, non-banks, quasi-banks, trust entities, and all other institutions and their
subsidiaries and affiliates supervised or regulated by the Bangko Sentral ng Pilipinas
(BSP);
(2) insurance companies and all other institutions supervised or regulated by the
Insurance Commission; and
(3)
a. securities dealers, brokers, salesmen, investment houses and other similar entities
managing securities or rendering services as investment agent, advisor, or
consultant;
b. mutual funds, close-end investment companies, common trust funds, pre-need
companies and other similar entities;
c. foreign exchange corporations, money changers, money payment, remittance, and
transfer companies and other similar entities; and
d. other entities administering or otherwise dealing in currency, commodities or
financial derivatives based thereon, valuable objects, cash substitutes and other
similar monetary instruments or property supervised or regulated by the Securities
and Exchange Commission.
(b) "Covered transaction" is a single, series, or combination of transactions involving
a total amount in excess of Four Million Philippine pesos (PhP4,000,000.00) or an
equivalent amount in foreign currency based on the prevailing exchange rate within
five (5) consecutive banking days except those between a covered institution and a
person who, at the time of the transaction was a properly identified client and the
amount is commensurate with the business or financial capacity of the client; or those
with an underlying legal or trade obligation, purpose, origin or economic justification.
It likewise refers to a single, series or combination or pattern of unusually large and
complex transactions in excess of Four Million Philippine pesos (PhP4,000,000.00)
especially cash deposits and investments having no credible purpose or origin,
underlying trade obligation or contract.
(c) "Monetary instrument" refers to:
(1) coins or currency of legal tender of the Philippines, or of any other country;
(2) drafts, checks and notes;
(3) securities or negotiable instruments, bonds, commercial papers, deposit
certificates, trust certificates, custodial receipts or deposit substitute instruments,
trading orders, transaction tickets and confirmations of sale or investments and
money market instruments; and
(4) other similar instruments where title thereto passes to another by endorsement,
assignment or delivery.
(d) "Offender" refers to any person who commits a money laundering offense.
(e) "Person" refers to any natural or juridical person.
(f) "Proceeds" refers to an amount derived or realized from an unlawful activity.
(g) "Supervising Authority" refers to the appropriate supervisory or regulatory
agency, department or office supervising or regulating the covered institutions
enumerated in Section 3(a).
(h) "Transaction" refers to any act establishing any right or obligation or giving rise
to any contractual or legal relationship between the parties thereto. It also includes
any movement of funds by any means with a covered institution.
(i) "Unlawful activity" refers to any act or omission or series or combination thereof
involving or having relation to the following:
(1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the
Revised Penal Code, as amended;
(2) Sections 3, 4, 5, 7, 8 and 9 of Article Two of Republic Act No. 6425, as amended,
otherwise known as the Dangerous Drugs Act of 1972;
(3) Section 3 paragraphs B, C, E, G, H and I of Republic Act No. 3019, as amended,
otherwise known as the Anti-Graft and Corrupt Practices Act;
(4) Plunder under Republic Act No. 7080, as amended;
(5) Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302 of
the Revised Penal Code, as amended;
(6) Jueteng and Masiao punished as illegal gambling under Presidential Decree No.
1602;
(7) Piracy on the high seas under the Revised Penal Code, as amended and
Presidential Decree No. 532;
(8) Qualified theft under Article 310 of the Revised Penal Code, as amended;
(9) Swindling under Article 315 of the Revised Penal Code, as amended;
(10) Smuggling under Republic Act Nos. 455 and 1937;
(11) Violations under Republic Act No. 8792, otherwise known as the Electronic
Commerce Act of 2000;
(12) Hijacking and other violations under Republic Act No. 6235; destructive arson
and murder, as defined under the Revised Penal Code, as amended, including those
perpetrated by terrorists against non-combatant persons and similar targets;
(13) Fraudulent practices and other violations under Republic Act No. 8799, otherwise
known as the Securities Regulation Code of 2000;
(14) Felonies or offenses of a similar nature that are punishable under the penal laws
of other countries.
Sec. 4. Money Laundering Offense. – Money laundering is a crime whereby the
proceeds of an unlawful activity are transacted, thereby making them appear to have
originated from legitimate sources. It is committed by the following:
(a) Any person knowing that any monetary instrument or property represents,
involves, or relates to, the proceeds of any unlawful activity, transacts or attempts to
transact said monetary instrument or property.
(b) Any person knowing that any monetary instrument or property involves the
proceeds of any unlawful activity, performs or fails to perform any act as a result of
which he facilitates the offense of money laundering referred to in paragraph (a)
above.
(c) Any person knowing that any monetary instrument or property is required under
this Act to be disclosed and filed with the Anti-Money Laundering Council (AMLC), fails
to do so.
Sec. 5. Jurisdiction of Money Laundering Cases. – The regional trial courts shall have
jurisdiction to try all cases on money laundering. Those committed by public officers
and private persons who are in conspiracy with such public officers shall be under the
jurisdiction of the Sandiganbayan.
Sec. 6. Prosecution of Money Laundering. –
(a) Any person may be charged with and convicted of both the offense of money
laundering and the unlawful activity as herein defined.
(b) Any proceeding relating to the unlawful activity shall be given precedence over
the prosecution of any offense or violation under this Act without prejudice to the
freezing and other remedies provided.
Sec. 7. Creation of Anti-Money Laundering Council (AMLC). – The Anti-Money
Laundering Council is hereby created and shall be composed of the Governor of the
Bangko Sentral ng Pilipinas as chairman, the Commissioner of the Insurance
Commission and the Chairman of the Securities and Exchange Commission as
members. The AMLC shall act unanimously in the discharge of its functions as defined
hereunder:
(1) to require and receive covered transaction reports from covered institutions;
(2) to issue orders addressed to the appropriate Supervising Authority or the covered
institution to determine the true identity of the owner of any monetary instrument or
property subject of a covered transaction report or request for assistance from a
foreign State, or believed by the Council, on the basis of substantial evidence, to be,
in whole or in part, wherever located, representing, involving, or related to, directly
or indirectly, in any manner or by any means, the proceeds of an unlawful activity;
(3) to institute civil forfeiture proceedings and all other remedial proceedings through
the Office of the Solicitor General;
(4) to cause the filing of complaints with the Department of Justice or the Ombudsman
for the prosecution of money laundering offenses;
(5) to initiate investigations of covered transactions, money laundering activities and
other violations of this Act;
(6) to freeze any monetary instrument or property alleged to be proceeds of any
unlawful activity;
(7) to implement such measures as may be necessary and justified under this Act to
counteract money laundering;
(8) to receive and take action in respect of, any request from foreign states for
assistance in their own anti-money laundering operations provided in this Act;
(9) to develop educational programs on the pernicious effects of money laundering,
the methods and techniques used in money laundering, the viable means of
preventing money laundering and the effective ways of prosecuting and punishing
offenders; and
(10) to enlist the assistance of any branch, department, bureau, office, agency or
instrumentality of the government, including government-owned and -controlled
corporations, in undertaking any and all anti-money laundering operations, which may
include the use of its personnel, facilities and resources for the more resolute
prevention, detection and investigation of money laundering offenses and prosecution
of offenders.
Sec. 8. Creation of a Secretariat. – The AMLC is hereby authorized to establish a
secretariat to be headed by an Executive Director who shall be appointed by the
Council for a term of five (5) years. He must be a member of the Philippine Bar, at
least thirty-five (35) years of age and of good moral character, unquestionable
integrity and known probity. All members of the Secretariat must have served for at
least five (5) years either in the Insurance Commission, the Securities and Exchange
Commission or the Bangko Sentral ng Pilipinas (BSP) and shall hold full-time
permanent positions within the BSP.
Sec. 9. Prevention of Money Laundering; Customer Identification Requirements and
Record Keeping. –
(a) Customer Identification. - Covered institutions shall establish and record the true
identity of its clients based on official documents. They shall maintain a system of
verifying the true identity of their clients and, in case of corporate clients, require a
system of verifying their legal existence and organizational structure, as well as the
authority and identification of all persons purporting to act on their behalf.
The provisions of existing laws to the contrary notwithstanding, anonymous accounts,
accounts under fictitious names, and all other similar accounts shall be absolutely
prohibited. Peso and foreign currency non-checking numbered accounts shall be
allowed. The BSP may conduct annual testing solely limited to the determination of
the existence and true identity of the owners of such accounts.
(b) Record Keeping. - All records of all transactions of covered institutions shall be
maintained and safely stored for five (5) years from the dates of transactions. With
respect to closed accounts, the records on customer identification, account files and
business correspondence, shall be preserved and safely stored for at least five (5)
years from the dates when they were closed.
(c) Reporting of Covered Transactions. - Covered institutions shall report to the AMLC
all covered transactions within five (5) working days from occurrence thereof, unless
the Supervising Authority concerned prescribes a longer period not exceeding ten
(10) working days.
When reporting covered transactions to the AMLC, covered institutions and their
officers, employees, representatives, agents, advisors, consultants or associates shall
not be deemed to have violated Republic Act No. 1405, as amended; Republic Act No.
6426, as amended; Republic Act No. 8791 and other similar laws, but are prohibited
from communicating, directly or indirectly, in any manner or by any means, to any
person the fact that a covered transaction report was made, the contents thereof, or
any other information in relation thereto. In case of violation thereof, the concerned
officer, employee, representative, agent, advisor, consultant or associate of the
covered institution, shall be criminally liable.
However, no administrative, criminal or civil proceedings, shall lie against any person
for having made a covered transaction report in the regular performance of his duties
and in good faith, whether or not such reporting results in any criminal prosecution
under this Act or any other Philippine law.
When reporting covered transactions to the AMLC, covered institutions and their
officers, employees, representatives, agents, advisors, consultants or associates are
prohibited from communicating, directly or indirectly, in any manner or by any means,
to any person, entity, the media, the fact that a covered transaction report was made,
the contents thereof, or any other information in relation thereto. Neither may such
reporting be published or aired in any manner or form by the mass media, electronic
mail, or other similar devices. In case of violation thereof, the concerned officer,
employee, representative, agent, advisor, consultant or associate of the covered
institution, or media shall be held criminally liable.
Sec. 10. Authority to Freeze. – Upon determination that probable cause exists that
any deposit or similar account is in any way related to an unlawful activity, the AMLC
may issue a freeze order, which shall be effective immediately, on the account for a
period not exceeding fifteen (15) days. Notice to the depositor that his account has
been frozen shall be issued simultaneously with the issuance of the freeze order. The
depositor shall have seventy-two (72) hours upon receipt of the notice to explain why
the freeze order should be lifted. The AMLC has seventy-two (72) hours to dispose of
the depositor’s explanation. If it fails to act within seventy-two (72) hours from receipt
of the depositor’s explanation, the freeze order shall automatically be dissolved. The
fifteen (15)-day freeze order of the AMLC may be extended upon order of the court,
provided that the fifteen (15)-day period shall be tolled pending the court’s decision
to extend the period.
No court shall issue a temporary restraining order or writ of injunction against any
freeze order issued by the AMLC except the Court of Appeals or the Supreme Court.
Sec. 11. Authority to Inquire into Bank Deposits. – Notwithstanding the provisions of
Republic Act No. 1405, as amended; Republic Act No. 6426, as amended; Republic
Act No. 8791, and other laws, the AMLC may inquire into or examine any particular
deposit or investment with any banking institution or non-bank financial institution
upon order of any competent court in cases of violation of this Act when it has been
established that there is probable cause that the deposits or investments involved are
in any way related to a money laundering offense: Provided, That this provision shall
not apply to deposits and investments made prior to the effectivity of this Act.
Sec. 12 Forfeiture Provisions. –
(a) Civil Forfeiture. - When there is a covered transaction report made, and the court
has, in a petition filed for the purpose ordered seizure of any monetary instrument or
property, in whole or in part, directly or indirectly, related to said report, the Revised
Rules of Court on civil forfeiture shall apply.
(b) Claim on Forfeited Assets. - Where the court has issued an order of forfeiture of
the monetary instrument or property in a criminal prosecution for any money
laundering offense defined under Section 4 of this Act, the offender or any other
person claiming an interest therein may apply, by verified petition, for a declaration
that the same legitimately belongs to him and for segregation or exclusion of the
monetary instrument or property corresponding thereto. The verified petition shall be
filed with the court which rendered the judgment of conviction and order of forfeiture,
within fifteen (15) days from the date of the order of forfeiture, in default of which
the said order shall become final and executory. This provision shall apply in both civil
and criminal forfeiture.
(c) Payment in Lieu of Forfeiture. - Where the court has issued an order of forfeiture
of the monetary instrument or property subject of a money laundering offense defined
under Section 4, and said order cannot be enforced because any particular monetary
instrument or property cannot, with due diligence, be located, or it has been
substantially altered, destroyed, diminished in value or otherwise rendered worthless
by any act or omission, directly or indirectly, attributable to the offender, or it has
been concealed, removed, converted or otherwise transferred to prevent the same
from being found or to avoid forfeiture thereof, or it is located outside the Philippines
or has been placed or brought outside the jurisdiction of the court, or it has been
commingled with other monetary instruments or property belonging to either the
offender himself or a third person or entity, thereby rendering the same difficult to
identify or be segregated for purposes of forfeiture, the court may, instead of
enforcing the order of forfeiture of the monetary instrument or property or part
thereof or interest therein, accordingly order the convicted offender to pay an amount
equal to the value of said monetary instrument or property. This provision shall apply
in both civil and criminal forfeiture.
Sec. 13. Mutual Assistance among States. –
(a) Request for Assistance from a Foreign State. - Where a foreign State makes a
request for assistance in the investigation or prosecution of a money laundering
offense, the AMLC may execute the request or refuse to execute the same and inform
the foreign State of any valid reason for not executing the request or for delaying the
execution thereof. The principles of mutuality and reciprocity shall, for this purpose,
be at all times recognized.
(b) Powers of the AMLC to Act on a Request for Assistance from a Foreign State. -
The AMLC may execute a request for assistance from a foreign State by: (1) tracking
down, freezing, restraining and seizing assets alleged to be proceeds of any unlawful
activity under the procedures laid down in this Act; (2) giving information needed by
the foreign State within the procedures laid down in this Act; and (3) applying for an
order of forfeiture of any monetary instrument or property in the court: Provided,
That the court shall not issue such an order unless the application is accompanied by
an authenticated copy of the order of a court in the requesting State ordering the
forfeiture of said monetary instrument or property of a person who has been convicted
of a money laundering offense in the requesting State, and a certification or an
affidavit of a competent officer of the requesting State stating that the conviction and
the order of forfeiture are final and that no further appeal lies in respect of either.
(c) Obtaining Assistance from Foreign States. - The AMLC may make a request to any
foreign State for assistance in (1) tracking down, freezing, restraining and seizing
assets alleged to be proceeds of any unlawful activity; (2) obtaining information that
it needs relating to any covered transaction, money laundering offense or any other
matter directly or indirectly related thereto; (3) to the extent allowed by the law of
the foreign State, applying with the proper court therein for an order to enter any
premises belonging to or in the possession or control of, any or all of the persons
named in said request, and/or search any or all such persons named therein and/or
remove any document, material or object named in said request: Provided, That the
documents accompanying the request in support of the application have been duly
authenticated in accordance with the applicable law or regulation of the foreign State;
and (4) applying for an order of forfeiture of any monetary instrument or property in
the proper court in the foreign State: Provided, That the request is accompanied by
an authenticated copy of the order of the regional trial court ordering the forfeiture
of said monetary instrument or property of a convicted offender and an affidavit of
the clerk of court stating that the conviction and the order of forfeiture are final and
that no further appeal lies in respect of either.
(d) Limitations on Requests for Mutual Assistance. - The AMLC may refuse to comply
with any request for assistance where the action sought by the request contravenes
any provision of the Constitution or the execution of a request is likely to prejudice
the national interest of the Philippines unless there is a treaty between the Philippines
and the requesting State relating to the provision of assistance in relation to money
laundering offenses.
(e) Requirements for Requests for Mutual Assistance from Foreign States. - A request
for mutual assistance from a foreign State must (1) confirm that an investigation or
prosecution is being conducted in respect of a money launderer named therein or that
he has been convicted of any money laundering offense; (2) state the grounds on
which any person is being investigated or prosecuted for money laundering or the
details of his conviction; (3) give sufficient particulars as to the identity of said person;
(4) give particulars sufficient to identify any covered institution believed to have any
information, document, material or object which may be of assistance to the
investigation or prosecution; (5) ask from the covered institution concerned any
information, document, material or object which may be of assistance to the
investigation or prosecution; (6) specify the manner in which and to whom said
information, document, material or object obtained pursuant to said request, is to be
produced; (7) give all the particulars necessary for the issuance by the court in the
requested State of the writs, orders or processes needed by the requesting State;
and (8) contain such other information as may assist in the execution of the request.
(f) Authentication of Documents. - For purposes of this Section, a document is
authenticated if the same is signed or certified by a judge, magistrate or equivalent
officer in or of, the requesting State, and authenticated by the oath or affirmation of
a witness or sealed with an official or public seal of a minister, secretary of State, or
officer in or of, the government of the requesting State, or of the person administering
the government or a department of the requesting territory, protectorate or colony.
The certificate of authentication may also be made by a secretary of the embassy or
legation, consul general, consul, vice consul, consular agent or any officer in the
foreign service of the Philippines stationed in the foreign State in which the record is
kept, and authenticated by the seal of his office.
(g) Extradition. - The Philippines shall negotiate for the inclusion of money laundering
offenses as herein defined among extraditable offenses in all future treaties.
Sec. 14. Penal Provisions. – (a) Penalties for the Crime of Money Laundering. - The
penalty of imprisonment ranging from seven (7) to fourteen (14) years and a fine of
not less than Three Million Philippine pesos (PhP3,000,000.00) but not more than
twice the value of the monetary instrument or property involved in the offense, shall
be imposed upon a person convicted under Section 4(a) of this Act.
The penalty of imprisonment from four (4) to seven (7) years and a fine of not less
than One million five hundred thousand Philippine pesos (PhP1,500,000.00) but not
more than Three million Philippine pesos (PhP3,000,000.00), shall be imposed upon
a person convicted under Section 4(b) of this Act.
The penalty of imprisonment from six (6) months to four (4) years or a fine of not
less than One hundred thousand Philippine pesos (PhP100,000.00) but not more than
Five hundred thousand Philippine pesos (PhP500,000.00), or both, shall be imposed
on a person convicted under Section 4(c) of this Act.
(b) Penalties for Failure to Keep Records. - The penalty of imprisonment from six (6)
months to one (1) year or a fine of not less than One hundred thousand Philippine
pesos (PhP100,000.00) but not more than Five hundred thousand Philippine pesos
(PhP500,000.00), or both, shall be imposed on a person convicted under Section 9(b)
of this Act.
(c) Malicious Reporting. - Any person who, with malice, or in bad faith, reports or files
a completely unwarranted or false information relative to money laundering
transaction against any person shall be subject to a penalty of six (6) months to four
(4) years imprisonment and a fine of not less than One hundred thousand Philippine
pesos (PhP100,000.00) but not more than Five hundred thousand Philippine pesos
(PhP500,000.00), at the discretion of the court: Provided, That the offender is not
entitled to avail the benefits of the Probation Law.
If the offender is a corporation, association, partnership or any juridical person, the
penalty shall be imposed upon the responsible officers, as the case may be, who
participated in the commission of the crime or who shall have knowingly permitted or
failed to prevent its commission. If the offender is a juridical person, the court may
suspend or revoke its license. If the offender is an alien, he shall, in addition to the
penalties herein prescribed, be deported without further proceedings after serving the
penalties herein prescribed. If the offender is a public official or employee, he shall,
in addition to the penalties prescribed herein, suffer perpetual or temporary absolute
disqualification from office, as the case may be.
Any public official or employee who is called upon to testify and refuses to do the
same or purposely fails to testify shall suffer the same penalties prescribed herein.
(d) Breach of Confidentiality. - The punishment of imprisonment ranging from three
(3) to eight (8) years and a fine of not less than Five hundred thousand Philippine
pesos (PhP500,000.00) but not more than One million Philippine pesos
(PhP1,000,000.00), shall be imposed on a person convicted for a violation under
Section 9(c).
Sec. 15. System of Incentives and Rewards. – A system of special incentives and
rewards is hereby established to be given to the appropriate government agency and
its personnel that led and initiated an investigation, prosecution and conviction of
persons involved in the offense penalized in Section 4 of this Act.
Sec. 16. Prohibitions Against Political Harassment. – This Act shall not be used for
political persecution or harassment or as an instrument to hamper competition in
trade and commerce.
No case for money laundering may be filed against and no assets shall be frozen,
attached or forfeited to the prejudice of a candidate for an electoral office during an
election period.
Sec. 17. Restitution. – Restitution for any aggrieved party shall be governed by the
provisions of the New Civil Code.
Sec. 18. Implementing Rules and Regulations. – Within thirty (30) days from the
effectivity of this Act, the Bangko Sentral ng Pilipinas, the Insurance Commission and
the Securities and Exchange Commission shall promulgate the rules and regulations
to implement effectively the provisions of this Act. Said rules and regulations shall be
submitted to the Congressional Oversight Committee for approval.
Covered institutions shall formulate their respective money laundering prevention
programs in accordance with this Act including, but not limited to, information
dissemination on money laundering activities and its prevention, detection and
reporting, and the training of responsible officers and personnel of covered
institutions.
Sec. 19. Congressional Oversight Committee. – There is hereby created a
Congressional Oversight Committee composed of seven (7) members from the Senate
and seven (7) members from the House of Representatives. The members from the
Senate shall be appointed by the Senate President based on the proportional
representation of the parties or coalitions therein with at least two (2) Senators
representing the minority. The members from the House of Representatives shall be
appointed by the Speaker also based on proportional representation of the parties or
coalitions therein with at least two (2) members representing the minority.
The Oversight Committee shall have the power to promulgate its own rules, to
oversee the implementation of this Act, and to review or revise the implementing
rules issued by the Anti-Money Laundering Council within thirty (30) days from the
promulgation of the said rules.
Sec. 20. Appropriations Clause. – The AMLC shall be provided with an initial
appropriation of Twenty-five million Philippine pesos (PhP25,000,000.00) to be drawn
from the national government. Appropriations for the succeeding years shall be
included in the General Appropriations Act.
Sec. 21. Separability Clause. – If any provision or section of this Act or the application
thereof to any person or circumstance is held to be 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. 22. Repealing Clause. – All laws, decrees, executive orders, rules and regulations
or parts thereof, including the relevant provisions of Republic Act No. 1405, as
amended; Republic Act No. 6426, as amended; Republic Act No. 8791, as amended
and other similar laws, as are inconsistent with this Act, are hereby repealed,
amended or modified accordingly.
REPUBLIC ACT NO. 8791 - AN ACT PROVIDING FOR THE REGULATION OF THE
ORGANIZATION AND OPERATIONS OF BANKS, QUASI-
BANKS, TRUST ENTITIES AND FOR OTHER PURPOSES
CHAPTER I
TITLE AND CLASSIFICATION OF BANKS
Section 1. Title. The short title of this Act shall be “The General Banking Law of 2000."
(1a)
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. .
REPUBLIC ACT No. 10846
AN ACT ENHANCING THE RESOLUTION AND LIQUIDATION FRAMEWORK FOR
BANKS, AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 3591, AS
AMENDED, AND OTHER RELATED LAWS (PDIC)
Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:
SECTION 1. Section 1 of Republic Act No. 3591, as amended, is hereby amended to
read as follows:
“THE CREATION OF THE PHILIPPINE
DEPOSIT INSURANCE CORPORATION
“SECTION 1. — There is hereby created a Philippine Deposit Insurance Corporation
hereinafter referred to as the ‘Corporation’ which shall insure as herein provided, the
deposits of all banks which are entitled to the benefits of insurance under this Act,
and which shall have the powers hereinafter granted.
“The Corporation shall, as a basic policy, promote and safeguard the interests of the
depositing public by providing insurance coverage on all insured deposits and helping
maintain a sound and stable banking system.”
SECTION 2. A new section entitled Section 2 of the same Act shall be inserted between
Sections 1 and 3 which shall read as follows:
“STATE POLICY
“SEC. 2. — It is hereby declared to be the policy of the State to strengthen the
mandatory deposit insurance coverage system to generate, preserve, maintain faith
and confidence in the country’s banking system, and protect it from illegal schemes
and machinations.
“Towards this end, the government must extend all means and mechanisms
necessary for the Corporation to effectively fulfill its vital task of promoting and
safeguarding the interests of the depositing public by way of providing insurance
coverage on bank deposits and in helping develop a sound and stable banking system.
“In view of the crucial role and the nature of its functions and responsibilities, the
Corporation, while being a government instrumentality with corporate powers, shall
enjoy fiscal and administrative autonomy.”
SECTION 3. Section 2 of the same Act is accordingly renumbered as Section 3 and is
hereby amended to read as follows:
“BOARD OF DIRECTORS: COMPOSITION
AND AUTHORITY
“SEC. 3. (a) The powers and functions of the Corporation shall be vested in and
exercised by a Board of Directors which shall be composed of seven (7) members as
follows:
“(1) The Secretary of Finance who shall be the ex officio Chairman of the Board
without compensation;
“(2) The Governor of the Bangko Sentral ng Pilipinas who shall be ex officio member
of the Board without compensation;
“(3) The President of the Corporation, who shall be appointed by the President of the
Philippines from a shortlist prepared by the Governance Commission for Government-
Owned or -Controlled Corporations pursuant to Republic Act No. 10149 to serve on a
full-time basis for a term of six (6) years. The President of the Corporation shall also
serve as Vice Chairman of the Board;
“(4) Four (4) members from the private sector to be appointed by the President of
the Philippines from a shortlist prepared by the Governance Commission for
Government-Owned or -Controlled Corporations pursuant to Republic Act No. 10149.
The appointive directors shall serve for a term of six (6) years unless sooner removed
for cause and shall be subject to only one (1) reappointment: Provided, That of those
first appointed, the first two (2) appointees shall serve for a period of three (3) years:
Provided, however, That the appointive director shall continue to hold office until the
successor is appointed. An appointive director may be nominated by the Governance
Commission for Government-Owned or -Controlled Corporations for reappointment
by the President only if one obtains a performance score of above average or its
equivalent or higher in the immediately preceding year of tenure as appointive
director based on the performance criteria for appointive directors of the Corporation.
“Appointment to any vacancy shall be only for the unexpired term of the predecessor
pursuant to Republic Act No. 10149.
“No person shall be appointed as member of the Board unless he or she be of good
moral character, of unquestionable integrity and responsibility, of known probity and
patriotism, and who is of recognized competence in economics, banking and finance,
law, management administration or insurance, and shall be at least thirty-five (35)
years of age. For the duration of their tenure or term of office and for a period of one
(1) year thereafter, the appointive members of the Board shall be disqualified from
holding any office, position or employment in any insured bank.
“The Secretary of Finance and the Governor of the Bangko Sentral ng Pilipinas may
each designate an alternate, who shall be an official with a rank not lower than
assistant secretary or its equivalent with written authority from the Secretary of
Finance or the Governor of the Bangko Sentral ng Pilipinas to attend such meetings
and to vote on behalf of their respective principals. Whenever the Chairman of the
Board is unable to attend a meeting of the Board, or in the event of a vacancy in the
office of the Secretary of Finance, and in the absence of the Vice Chairman, the
members of the Board shall designate from among themselves who shall act as
Chairman.
“The President of the Philippines may remove any appointive member of the Board of
Directors for any of the following reasons:
“(i) If the member is physically or mentally incapacitated that he or she cannot
properly discharge his or her duties and responsibilities, and such incapacity has
lasted for more than six (6) months; or
“(ii) If the member is guilty of acts or operations which are of fraudulent or illegal
character or which are manifestly opposed to the aims and interests of the
Corporation; or
“(iii) If the member no longer possesses the qualifications specified in this Act; or
“(iv) If the member does not meet the standards for performance based on the
evaluation by the Governance Commission for Government-Owned or -Controlled
Corporations under Republic Act No. 10149.
“The presence of four (4) members shall constitute a quorum. All decisions of the
Board of Directors shall require the concurrence of at least four (4) members.
“The compensation, per diems, allowances, incentives, and other benefits for board
members shall be determined by the Governance Commission for Government-Owned
or -Controlled Corporations.
“In addition to the requirements of Republic Act No. 6713, otherwise known as the
‘Code of Conduct and Ethical Standards for Public Officials and Employees’, any
member of the Board of Directors with personal or pecuniary interest in any matter
in the agenda of the Board of Directors shall disclose his or her interest to the Board
and shall recuse from the meeting when the matter is taken up. The minutes shall
reflect the disclosure made and the recusal of the member concerned.
“(b) The Board of Directors shall have the authority:
“(1) To approve and issue rules and regulations for banks and the depositing public
as it considers necessary for the effective discharge of its responsibilities;
“(2) To act as the policy-making body of the Corporation and constitute Board
committees to oversee the management, operations and administration of the
Corporation;
“(3) To establish a human resource management system which shall govern the
selection, hiring, appointment, transfer, promotion, or dismissal of personnel. Such
system shall aim to establish professionalism and excellence at all levels of the
Corporation in accordance with sound principles of management;
“(4) To approve a compensation structure as an integral component of the
Corporation’s human resource development program based on job evaluation studies
and wage surveys, and revise the same as it may deem necessary: Provided, That all
positions in the Corporation shall be governed by a compensation package, position
classification system and qualification standards approved by the Board based on a
comprehensive job analysis and audit of actual duties and responsibilities. The
compensation structure shall be comparable to that of other financial institutions
based on prevailing market standards, and shall provide for yearly merit reviews or
increases based on productivity. The Corporation shall therefore be exempt from
existing laws, rules and regulations on compensation package, position classification
and qualification standards. It shall however endeavor to make its system conform as
closely as possible with the principles under Republic Act No. 6758, as amended;
“(5) To appoint, establish the rank, fix the remuneration, benefits, including health
care services through a Health Maintenance Organization (HMO) and medical benefits
other than those provided for under Republic Act No. 7875, as amended, and remove
any officer or employee of the Corporation, for cause, subject to pertinent civil service
laws: Provided, That the Board of Directors may delegate this authority to the
President subject to specific guidelines: Provided, further, That in no case shall there
be any diminution of existing salaries, benefits and other emoluments;
“(6) To approve policy on local and foreign travel, and the corresponding expenses,
allowances and per diems, of officers, employees, agents of the Corporation, which
shall be comparable with the expenses, allowances and per diems of personnel of
other financial institutions based on prevailing market standards, notwithstanding the
provisions of Presidential Decree No. 1177, Executive Order No. 292, Executive Order
No. 248, as amended, Executive Order No. 298, and similar laws;
“(7) To adopt an annual budget for, and authorize such expenditures by the
Corporation, as are in the interest of the effective administration and operation of the
Corporation;
“(8) To approve the target level of the Deposit Insurance Fund (DIF) and the
methodology for determining reserves for insurance and financial assistance losses;
“(9) To review the organizational set-up of the Corporation and adopt a new or revised
organizational structure as it may deem necessary for the Corporation to undertake
its mandate and functions;
“(10) To design, adopt and revise, as it may deem necessary, an early separation
plan for employees of the Corporation to ensure availability of a human resource pool
qualified and capable of implementing the Corporation’s authorities under this Charter
in a manner responsive and attuned to market developments, and to provide
incentives for all those who shall be separated from the service. Notwithstanding any
law to the contrary, these incentives shall be in addition to all gratuities and benefits
the employee is entitled to under existing laws; and
“(11) To promote and sponsor the local or foreign training or study of personnel in
the fields of banking, finance, management, information technology and law. Towards
this end, the Corporation is hereby authorized to defray the costs of such training or
study. The Board shall prescribe rules and regulations to govern the training or study
programs of the Corporation.”
SECTION 4. Section 3 of the same Act is accordingly renumbered as Section 4.
SECTION 5. The first paragraph of Section 4 of the same Act, as renumbered, is
hereby amended to read as follows:
“PRESIDENT OF THE CORPORATION
COMPENSATION, POWERS AND DUTIES
“SEC. 4. The President of the Corporation shall be its Chief Executive Officer and the
Vice Chairman of its Board of Directors and his or her salary shall be fixed by the
President of the Philippines upon the recommendation of the Governance Commission
for Government-Owned or -Controlled Corporations, at a sum commensurate to the
importance and responsibility attached to the position. The sum total of the salary,
allowances, benefits and other emoluments of the President of the Corporation shall
be higher than the compensation package of the next highest ranking executive of
the Corporation.”
SECTION 6. Section 4, paragraphs (d), (f) and (h) of the same Act, as renumbered,
are hereby amended to read as follows:
“(d) To represent the Corporation in all dealings with other offices, agencies and
instrumentalities of the government and with all other persons or entities, public or
private, whether domestic, foreign or international;
“(f) To represent the Corporation, either personally or through counsel, including
private counsel, as may be authorized by the PDIC Board, in any legal proceeding or
action;
“(h) x x x. The President shall be assisted by a Vice President and other officials whose
appointment and removal for cause shall be approved and whose salary shall be fixed
by the Board of Directors upon recommendation of the President of the Corporation.
During the absence or temporary incapacity of the President, or in case of vacancy or
permanent incapacity and pending appointment of a new President of the Corporation
by the President of the Philippines, the Board of Directors shall designate the officer-
in-charge of the Corporation.”
SECTION 7. Section 4 of the same Act is accordingly renumbered as Section 5, and is
hereby amended to read as follows:
“DEFINITION OF TERMS
“SEC. 5. As used in this Act –
“(a) The term asset refers to movable, immovable, tangible, or intangible resources
or properties over which a bank has an established or equitable interest, including the
proceeds of the sale of its bank and branch licenses subject to the approval of the
Bangko Sentral ng Pilipinas.
“(b) The term asset distribution plan refers to the plan of distribution of the assets of
a closed bank to its creditors, based on its estimated realizable value as of a certain
cut-off date, prepared in accordance with the Rules on Concurrence and Preference
of Credits under the Civil Code or other laws.
“An asset distribution plan may be partial when it pertains to the distribution of a
portion or some of the assets of the closed bank, or final when it pertains to the
distribution of all the assets of the closed bank.
“(c) The term Board of Directors means the Board of Directors of the Corporation.
“(d) The term bank and banking institution shall be synonymous and interchangeable
and shall include banks, commercial banks, savings banks, mortgage banks, rural
banks, development banks, cooperative banks, stock savings and loan associations
and branches and agencies in the Philippines of foreign banks and all other
corporations authorized to perform banking functions in the Philippines.
“(e) The term closed bank refers to a bank placed under liquidation by the Monetary
Board.
“(f) The term creditor refers to any individual or entity with a valid claim against the
assets of the closed bank.
“(g) The term deposit means the unpaid balance of money or its equivalent received
by a bank in the usual course of business and for which it has given or is obliged to
give credit to a commercial, checking, savings, time or thrift account, evidenced by a
passbook, certificate of deposit, or other evidence of deposit issued in accordance
with Bangko Sentral ng Pilipinas rules and regulations and other applicable laws,
together with such other obligations of a bank, which, consistent with banking usage
and practices, the Board of Directors shall determine and prescribe by regulations to
be deposit liabilities of the bank: Provided, That any obligation of a bank which is
payable at the office of the bank located outside of the Philippines shall not be a
deposit for any of the purposes of this Act or included as part of the total deposits or
of insured deposit: Provided, further, That subject to the approval of the Board of
Directors, any insured bank which is incorporated under the laws of the Philippines
which maintains a branch outside the Philippines may elect to include for insurance
its deposit obligations payable only at such branch.
“The Corporation shall not pay deposit insurance for the following accounts or
transactions:
“(1) Investment products such as bonds and securities, trust accounts, and other
similar instruments;
“(2) Deposit accounts or transactions which are fictitious or fraudulent as determined
by the Corporation;
“(3) Deposit accounts or transactions constituting, and/or emanating from, unsafe
and unsound banking practice/s, as determined by the Corporation, in consultation
with the Bangko Sentral ng Pilipinas, after due notice and hearing, and publication of
a directive to cease and desist issued by the Corporation against such deposit
accounts, transactions or practices; and
“(4) Deposits that are determined to be the proceeds of an unlawful activity as defined
under Republic Act No. 9160, as amended.
“The actions of the Corporation taken under Section 5(g) shall be final and executory,
and may only be restrained or set aside by the Court of Appeals, upon appropriate
petition for certiorari on the ground that the action was taken in excess of jurisdiction
or with such grave abuse of discretion as to amount to a lack or excess of jurisdiction.
The petition for certiorari may only be filed within thirty (30) days from notice of
denial of claim for deposit insurance.
“(h) The term disputed claim refers to a claim or suit against the assets of a closed
bank, or for specific performance, or breach of contract, or damages, of whatever
nature or character, whether for money or otherwise, liquidated or unliquidated, fixed
or contingent, matured or current, denied by the receiver.
“(i) The term insured bank means any bank the deposits of which are insured in
accordance with the provisions of this Act.
“(j) The term insured deposit means the amount due to any bonafide depositor for
legitimate deposits in an insured bank as of the date of closure but not to exceed Five
hundred thousand pesos (P500,000.00). Such amount shall be determined according
to such regulations as the Board of Directors may prescribe. In determining such
amount due to any depositor, there shall be added together all deposits in the bank
maintained in the same right and capacity for his or her benefit either in his or her
own name or in the name of others. A joint account regardless of whether the
conjunction ‘and’, ‘or’, ‘and/or’ is used, shall be insured separately from any
individually-owned deposit account: Provided, That (1) if the account is held jointly
by two or more natural persons, or by two or more juridical persons or entities, the
maximum insured deposit shall be divided into as many equal shares as there are
individuals, juridical persons or entities, unless a different sharing is stipulated in the
document of deposit, and (2) if the account is held by a juridical person or entity
jointly with one or more natural persons, the maximum insured deposit shall be
presumed to belong entirely to such juridical person or entity: Provided, further, That
the aggregate of the interest of each co-owner over several joint accounts, whether
owned by the same or different combinations of individuals, juridical persons or
entities, shall likewise be subject to the maximum insured deposit of Five hundred
thousand pesos (P500,000.00): Provided, furthermore, That the provisions of any law
to the contrary notwithstanding, no owner/holder of any passbook, certificate of
deposit, or other evidence of deposit shall be recognized as a depositor entitled to the
rights provided in this Act unless the passbook, certificate of deposit, or other
evidence of deposit is determined by the Corporation to be an authentic document or
record of the issuing bank: Provided, finally, That in case of a condition that threatens
the monetary and financial stability of the banking system that may have systemic
consequences, as defined in Section 22 hereof, as determined by the Monetary Board,
the maximum deposit insurance cover may be adjusted in such amount, for such a
period, and/or for such deposit products, as may be determined by a unanimous vote
of the Board of Directors in a meeting called for the purpose and chaired by the
Secretary of Finance, subject to the approval of the President of the Philippines.
“(k) The term liquidation refers to the proceedings under Sections 12 to 16 of this
Act.
“(1) The term liquidation court refers to the Regional Trial Court (RTC) of general
jurisdiction where the petition for assistance in the liquidation of a closed bank is filed
and given due course.
“(m) The term payout refers to the payment of insured deposits.
“(n) The term petition for assistance in the liquidation of a closed bank refers to the
petition filed by the receiver with the RTC in accordance with Section 16 of this Act.
“(o) The term purchase of assets and assumption of liabilities refers to a transaction
where an insured bank purchases any or all assets and assumes any or all liabilities
of another bank under resolution or liquidation, as provided in this Act.
“(p) The term receiver refers to the Corporation or any of its duly authorized agents
acting as receiver of a closed bank.
“(q) The term records include all documents, titles, papers and electronic data of the
closed bank, including those pertaining to deposit accounts of and with the closed
bank, its assets, transactions and corporate affairs.
“(r) The term residual assets refer to assets, in cash or in kind, to be turned over to
the closed bank’s stockholders of record, in proportion to their interest in the closed
bank as of date of closure, after payment in full of liquidation costs, fees and
expenses, and the valid claims and surplus dividends to all the creditors.
“(s) The term resolution refers to the actions undertaken by the Corporation under
Section 11 of this Act to:
“(1) Protect depositors, creditors and the DIF;
“(2) Safeguard the continuity of essential banking services or maintain financial
stability; and
“(3) Prevent deterioration or dissipation of bank assets.
“(t) The term risk-based assessment system pertains to a method for calculating an
insured bank’s assessment on the probability that the DIF will incur a loss with respect
to the bank, and the likely amount of any such loss, based on its risk rating that takes
into consideration the following:
“(1) Quality and concentration of assets;
“(2) Categories and concentration of liabilities, both insured and uninsured,
contingent and noncontingent;
“(3) Capital position;
“(4) Liquidity position;
“(5) Management and governance; and
“(6) Other factors relevant to assessing such probability, as may be determined by
the Corporation:
“(u) The term statement of affairs refers to a report of financial condition of the closed
bank at a given date, showing the: (1) estimated realizable value of assets; (2)
classification of credits; and (3) estimated liabilities to be settled.
“(v) The term surplus dividends refers to the remaining assets of the closed bank
after satisfaction in full of all the liquidation costs, fees and expenses, and valid claims.
The surplus dividends shall be computed at the legal rate of interest from the date of
takeover to cut-off date of the distribution plan, and shall be paid, in cash or in kind,
to creditors of the closed bank in accordance with the Rules on Concurrence and
Preference of Credits under the Civil Code or other laws.
“(w) The term takeover refers to the act of physically taking possession and control
of the premises, assets and affairs of a closed bank for the purpose of liquidating the
bank.
“(x) The term transfer deposit means, a deposit in an insured bank made available to
a depositor by the Corporation as payment of insured deposit of such depositor in a
closed bank and assumed by another insured bank.
“(y) The term trust funds means funds held by an insured bank in a fiduciary capacity
and includes without being limited to, funds held as trustee, executor, administrator,
guardian or agent.
“(z) The term valid claim refers to the claim recognized by the receiver or allowed by
the liquidation court.
“(aa) The term winding up period refers to the period provided in Section 16 of this
Act.”
SECTION 8. Section 5 of the same Act is accordingly renumbered as Section 6, and is
hereby amended to read as follows:
“DEPOSIT INSURANCE COVERAGE
“SEC. 6. The deposit liabilities of any bank which is engaged in the business of
receiving deposits as herein defined on the effective date of this Act, or which
thereafter may engage in the business of receiving deposits, shall be insured with the
Corporation.
“Whenever a bank is determined by the Bangko Sentral ng Pilipinas to be capital
deficient, the Corporation may conduct an insurance risk evaluation on the bank to
enable it to assess the risks to the DIF. Such evaluation may include the determination
of: (i) the fair market value of the assets and liabilities of a bank; or (ii) the risk
classification of a bank; or (iii) possible resolution modes under Section 11 of this Act,
subject to such terms and conditions as the PDIC Board may prescribe.”
SECTION 9. Section 6 of the same Act is accordingly renumbered as Section 7.
SECTION 10. Section 7 paragraph (a) of the same Act, as renumbered, is hereby
amended to read as follows:
“ASSESSMENT OF MEMBER BANKS
“SEC. 7. (a) The assessment rate shall be determined by the Board of Directors:
Provided, That the assessment rate shall not exceed one-fifth (1/5) of one per centum
(1%) per annum. The semi-annual assessment for each insured bank shall be in the
amount of the product of one-half (1/2) the assessment rate multiplied by the
assessment base but in no case shall it be less than Five thousand pesos (P5,000.00).
The assessment base shall be the amount of the liability of the bank for deposits as
defined under subsection (g) of Section 5 without any deduction for indebtedness of
depositors.
“In addition, the Board of Directors may establish a risk-based assessment system
and impose a risk-based assessment rate which shall not exceed two-fifth (2/5) of
one per centum (1%) per annum multiplied by the assessment base.
“The semi-annual assessment base for one semi-annual period shall be the average
of the assessment base of the bank as of the close of business on March thirty-one
and June thirty and the semi-annual assessment base for the other semi-annual
period shall be the average of the assessment base of the bank as of the close of
business on September thirty and December thirty-one: Provided, That when any of
said days is a nonbusiness day or legal holiday, either national or provincial, the
preceding business day shall be used. The certified statements required to be filed
with the Corporation under subsections (b) and (c) of this section shall be in such
form and set forth such supporting information as the Board of Directors shall
prescribe. The assessment payments required from the insured banks under
subsections (b) and (c) of this section shall be made in such manner and at such time
or times as the Board of Directors shall prescribe.”
SECTION 11. Section 7, paragraphs (d) and (h), of the same Act, as renumbered, are
hereby amended to read as follows:
“(d) All assessment collections and income from operations after expenses and
charges shall be added to the DIF under Section 17 hereof. Such expenses and
charges are: (1) the operating costs and expenses of the Corporation for the calendar
year; (2) additions to reserve to provide for insurance and financial assistance losses,
net of recoverable amounts from applicable assets and collaterals, during the calendar
year; and (3) the net insurance and financial assistance losses sustained in said
calendar year.
“(h) Should any insured bank fail or refuse to pay any assessment required to be paid
by such bank under any provision of this Act, and should the bank not correct such
failure or refusal within thirty (30) days after written notice has been given by the
Corporation to an officer of the bank citing this subsection, and stating that the bank
has failed or refused to pay as required by the law, the Corporation may, at its
discretion, file a case for collection before the appropriate court without prejudice to
the imposition of administrative sanctions allowed under the provisions of this law on
the bank officials responsible for the nonpayment of assessment fees.”
SECTION 12. An additional paragraph to Section 7 of the same Act, as renumbered,
is hereby inserted after paragraph (h) which shall read as follows:
“(i) The Corporation shall have the authority to collect a special assessment from any
member bank and prescribe the terms and conditions thereof to maintain the target
level of the DIF set by the Board of Directors in accordance with this Act.”
SECTION 13. Section 7 of the same Act is accordingly renumbered as Section 8, and
is hereby amended to read as follows:
“SANCTIONS AGAINST UNSAFE AND
UNSOUND BANKING PRACTICES
“SEC. 8. (a) Whenever upon examination by the Corporation into the condition of any
insured bank, it shall be disclosed that an insured bank or its directors or agents have
committed, are committing or about to commit unsafe or unsound practices in
conducting the business of the bank, or have violated, are violating or about to violate
any provisions of any law or regulation to which the insured bank is subject, the Board
of Directors shall submit the report of the examination to the Monetary Board to
secure corrective action thereon. If no such corrective action is taken by the Monetary
Board within forty-five (45) days from the submission of the report, the Board of
Directors shall, motu proprio, institute corrective action which it deems necessary.
The Board of Directors may thereafter issue a cease and desist order, and require the
bank or its directors or agents concerned to correct the practices or violations within
forty-five (45) days. However, if the practice or violation is likely to cause insolvency
or substantial dissipation of assets or earnings of the bank, or is likely to seriously
weaken the condition of the bank or otherwise seriously prejudice the interests of its
depositors and the Corporation, the period to take corrective action shall not be more
than fifteen (15) days. The order may also include the imposition of fines provided in
Section 26(g) hereof. The Board of Directors shall duly inform the Monetary Board of
the Bangko Sentral ng Pilipinas of action it has taken under this subsection with
respect to such practices or violations.
“(b) The actions and proceedings provided in the preceding subsections may be
undertaken by the Corporation if, in its opinion, an insured bank or its directors or
agents have violated, are violating or about to violate any provision of this Act or any
order, rule or instruction issued by the Corporation or any written condition imposed
by the Corporation in connection with any transaction with or grant by the
Corporation.
“(c) The Corporation may terminate the insured status of any bank that fails or refuses
to comply, within thirty (30) days from notice, with any cease-and-desist order issued
by the Corporation, or with any corrective action imposed by the Monetary Board,
under this section pertaining to a deposit-related unsafe and/or unsound banking
practice.
“Such termination shall be final and executory, and shall be effective upon publication
of the notice of termination in a newspaper of general circulation.
“The deposits of each depositor in the bank on the effective date of the termination
of insurance coverage, less all subsequent withdrawals, shall continue to be insured
up to the maximum deposit insurance coverage for a period of one hundred eighty
(180) days. Additions to, or renewal of, existing deposits and new deposits in such
bank after the effective date of termination of insured status of the bank shall not be
insured by the Corporation.
“The bank shall not advertise or represent that additions to, or renewal of, existing
deposits and new deposits made after the effective date of termination aye covered
by deposit insurance.”
SECTION 14. Section 8 of the same Act is accordingly renumbered as Section 9.
SECTION 15. Section 9, paragraph Twelfth of the same Act, as renumbered, is hereby
amended to read as follows:
“Twelfth – The provisions of Presidential Decree No. 1445, as amended, Executive
Order No. 292, and other similar laws notwithstanding, to compromise, condone or
release, in whole or in part, any claim or settled liability to the Corporation, regardless
of the amount involved, under such terms and conditions as may be imposed by the
Board of Directors to protect the interest of the Corporation, and to write off the
Corporation’s receivables and assets which are no longer recoverable or realizable;”
SECTION 16. Section 9 of the same Act, as renumbered, is further amended by
inserting additional paragraphs after paragraph Twelfth, which shall read as follows:
“Thirteenth – To determine qualified interested acquirers or investors for any of the
modes of resolution or liquidation of banks;
“Fourteenth – To determine the appropriate resolution method and to implement the
same for a bank subject of resolution; and
“Fifteenth – To determine the appropriate mode of liquidation of a closed bank and to
implement the same.”
SECTION 17. Section 9 of the same Act is accordingly renumbered as Section 10.
SECTION 18. Section 10 paragraph (b-1) of the same Act, as renumbered, is hereby
amended to read as follows:
“(b-1) The investigators appointed by the Board of Directors shall have the power on
behalf of the Corporation to conduct investigations on frauds, irregularities and
anomalies committed in banks, based on reports of examination conducted by the
Corporation and Bangko Sentral ng Pilipinas or complaints from depositors or from
other government agency. Each such investigator shall have the power to administer
oaths, and to examine and take and preserve the testimony of any person relating to
the subject of investigation. For this purpose, the Corporation may appoint or hire
persons or entities of recognized competence in forensic and fraud investigations as
its agents.”
SECTION 19. Section 10 paragraph (c) of the same Act, as renumbered, is hereby
amended to read as follows:
“(c) Each insured bank shall make to the Corporation reports of condition in such form
and at such times as the Board of Directors may require such reports to be published
in such manner, not inconsistent with any applicable law, as it may direct. Every such
bank which fails to make or publish any such report within such time, as the Board of
Directors may require, shall be subject to a penalty of not more than Ten thousand
pesos (P10,000.00) for each day of such failure recoverable by the Corporation for its
use.”
SECTION 20. Section 10 paragraph (d-1) of the same Act, as renumbered, is hereby
amended to read as follows:
“(d-1) Each insured bank shall keep and maintain a true and accurate record or
statement of its daily deposit transactions consistent with the standards set by the
Bangko Sentral ng Pilipinas and the Corporation. Compliance with such standards
shall be duly certified by the president of the bank and the compliance officer:
Provided, That refusal or willful failure to issue the required certification shall
constitute a violation of this section and shall subject such officers of the bank to the
sanctions provided for under Section 26(f) of this Act.”
SECTION 21. Section 10 paragraph (f) of the same Act, as renumbered, is hereby
amended to read as follows:
“(f) The Corporation shall underwrite or advance all legal costs and expenses,
including legal fees and other expenses of external counsel, or provide legal
assistance to, directors, officers, employees or agents of the Corporation in
connection with any civil, criminal, administrative or any other action or proceeding,
to which such director, officer, employee or agent is made a party by reason of, or in
connection with, the exercise of authority or performance of functions and duties
under this Act: Provided, That such legal protection shall not apply to any civil,
criminal, administrative or any action or proceeding that may be initiated by the
Corporation, in whatever capacity, against such director, officer, employee or agent:
Provided, further, That directors, officers, employees or agents who shall resign,
retire, transfer to another agency or be separated from the service, shall continue to
be provided with such legal protection in connection with any act done or omitted to
be done by them in good faith during their tenure or employment with the
Corporation: Provided, finally, That in the event of a settlement or compromise,
indemnification shall be provided only in connection with such matters covered by the
settlement as to which the Corporation is advised by counsel that the persons to be
indemnified did not commit any negligence or misconduct.”
SECTION 22. The second paragraph of Section 10 paragraph (i) of the same Act, as
renumbered, is hereby amended to read as follows:
“(i) Notwithstanding the provisions of this section and Section 3 of this Act, members
of the Board of Directors and personnel of the Corporation may become directors and
officers of any bank and banking institution and of any entity related to such
institution in connection with financial assistance extended by the Corporation to such
institution and when, in the opinion of the Board, it is appropriate to make such
designation to protect the interest of the Corporation.”
SECTION 23. A new section entitled Section 11 of the same Act is hereby inserted
between Sections 10 and 12 which shall read as follows:
“BANK RESOLUTION
“SEC. 11. (a) The Corporation, in coordination with the Bangko Sentral ng Pilipinas,
may commence the resolution of a bank under this section upon:
“(1) Failure of prompt corrective action as declared by the Monetary Board; or
“(2) Request by a bank to be placed under resolution.
“The Corporation shall inform the hank of its eligibility for entry into resolution.
“(b) The Bangko Sentral ng Pilipinas shall inform the Corporation of the initiation of
prompt corrective action on any bank and shall be authorized to share with the
Corporation all information, agreements or documents, including any order of the
Monetary Board, in relation to the prompt corrective action. The Corporation shall
have the authority to inquire and monitor the status of banks under prompt corrective
action.
“(c) When there is a failure of prompt corrective action as declared by the Monetary
Board due to capital deficiency, the Corporation, its duly authorized officers or
employees, may examine, inquire or look into the deposit records of a bank: Provided,
That such authority may not be exercised when the failure of prompt corrective action
is due to grounds other than capital deficiency. For this purpose, banks, their officers
and employees are hereby mandated to disclose and report to the Corporation or its
duly authorized officers and employees, deposit account information in said bank.
“The Corporation, its duly authorized officers or employees are prohibited from
disclosing information obtained under this section to any person, government official,
bureau or office. Any act done pursuant to this section shall not be deemed as a
violation of Republic Act No. 1405, as amended, Republic Act No. 6426, as amended,
Republic Act No. 8791, and other similar laws protecting or safeguarding the secrecy
or confidentiality of bank deposits: Provided, That any unauthorized disclosure of the
information under this section shall be subject to the same penalty under the
foregoing laws protecting the secrecy or confidentiality of bank deposits.
“(d) The stockholders, directors, officers or employees of the bank shall have the
following obligations:
“(1) Ensure bank compliance with the terms and conditions prescribed by the
Corporation for the resolution of the bank;
“(2) Cause the engagement, with the consent of the Corporation, of an independent
appraiser or auditor for the purpose of determining the valuation of the bank
consistent with generally accepted valuation standards;
“(3) Ensure prudent management and administration of the bank’s assets, liabilities
and records; and
“(4) Cooperate with the Corporation in the conduct or exercise of any or all of its
authorities under this Act and honor in good faith its commitment or undertaking with
the Corporation on the resolution of the bank.
“(e) Within a period of one hundred eighty (180) days from a bank’s entry into
resolution, the Corporation, through the affirmative vote of at least five (5) members
of the PDIC Board, shall determine whether the bank may be resolved through the
purchase of all its assets and assumption of all its liabilities, or merger or consolidation
with, or its acquisition, by a qualified investor.
“For this purpose, the Corporation may:
“(1) Determine a resolution package for the bank;
“(2) Identify and, with the approval of the Monetary Board, pre-qualify possible
acquirers or investors;
“(3) Authorize pre-qualified acquirers or investors to conduct due diligence on the
bank, for purposes of determining the valuation of a bank through an objective and
thorough review and appraisal of its assets and liabilities, and assessment of risks or
events that may affect its valuation; and
“(4) Conduct a bidding to determine the acquirer of the bank.
“(f) In determining the appropriate resolution method for a bank, the Corporation
shall consider the:
“(1) Fair market value of the assets of the bank, its franchise, as well as the amount
of its liabilities;
“(2) Availability of a qualified investor;
“(3) Least cost to the DIF; and
“(4) Interest of the depositing public.
“(g) The Corporation may appoint or hire persons or entities of recognized
competence in banking, finance, asset management or remedial management, as its
agents, to perform such powers and functions of the Corporation in the resolution of
a bank, or assist in the performance thereof.
“(h) The PDIC Board shall prescribe the guidelines or criteria for a bank to be placed
under resolution.
“(i) Upon a determination by the Corporation that the bank may not be resolved, the
Monetary Board may act in accordance with Section 30 of Republic Act No. 7653 or
the New Central Bank Act.
“(j) Bank resolution involving the purchase of all assets and assumption of all liabilities
of a bank shall be exempt from the provisions of Act No. 3952, otherwise known as
‘The Bulk Sales Law’.
“(k) The provisions of this section are without prejudice to any action that the
Monetary Board may take under existing laws.”
SECTION 24. Sections 10, 11 and 12 of the same Act are hereby deleted.
SECTION 25. A new section entitled Section 12 of the same Act is hereby inserted
between Sections 11 and 13 which shall read as follows:
“LIQUIDATION OF A CLOSED BANK
“SEC. 12. (a) Whenever a bank is ordered closed by the Monetary Board, the
Corporation shall be designated as receiver and it shall proceed with the takeover and
liquidation of the closed bank in accordance with this Act. For this purpose, banks
closed by the Monetary Board shall no longer be rehabilitated.”
SECTION 26. A new section entitled Section 13 of the same Act is hereby inserted
between Sections 12 and 14 which shall read as follows:
“AUTHORITIES OF A RECEIVER AND EFFECTS OF
PLACEMENT OF A BANK UNDER LIQUIDATION
“SEC. 13. (a) The receiver is authorized to adopt and implement, without need of
consent of the stockholders, board of directors, creditors or depositors of the closed
bank, any or a combination of the following modes of liquidation:
“(1) Conventional liquidation; and
“(2) Purchase of assets and/or assumption of liabilities.
“(b) In addition to the powers of a receiver provided under existing laws, the
Corporation, as receiver of a closed bank, is empowered to:
“(1) Represent and act for and on behalf of the closed bank;
“(2) Gather and take charge of all the assets, records and affairs of the closed bank,
and administer the same for the benefit of its creditors;
“(3) Convert the assets of the closed bank to cash or other forms of liquid assets, as
far as practicable;
“(4) Bring suits to enforce liabilities of the directors, officers, employees, agents of
the closed bank and other entities related or connected to the closed bank or to
collect, recover, and preserve all assets, including assets over which the bank has
equitable interest;
“(5) Appoint or hire persons or entities of recognized competence in banking, finance,
asset management or remedial management, as its deputies, assistants or agents, to
perform such powers and functions of the Corporation as receiver of the closed bank,
or assist in the performance thereof;
“(6) Appoint or hire persons or entities of recognized competence in forensic and fraud
investigations;
“(7) Pay accrued utilities, rentals and salaries of personnel of the closed bank for a
period not exceeding three (3) months, from available funds of the closed bank;
“(8) Collect loans and other claims of the closed bank and for this purpose, modify,
compromise or restructure the terms and conditions of such loans or claims as may
be deemed advantageous to the interests of the creditors of the closed bank;
“(9) Hire or retain private counsel as may be necessary;
“(10) Borrow or obtain a loan, or mortgage, pledge or encumber any asset of the
closed bank, when necessary to preserve or prevent dissipation of the assets, or to
redeem foreclosed assets of the closed bank, or to minimize losses to its depositors
and creditors;
“(11) If the stipulated interest rate on deposits is unusually high compared with
prevailing applicable interest rates, the Corporation as receiver, may exercise such
powers which may include a reduction of the interest rate to a reasonable rate:
Provided, That any modifications or reductions shall apply only to earned and unpaid
interest;
“(12) Utilize available funds of the bank, including funds generated by the receiver
from the conversion of assets to pay for reasonable costs and expenses incurred for
the preservation of the assets, and liquidation of, the closed bank, without need for
approval of the liquidation court;
“For banks with insufficient funds, the Corporation is authorized to advance the
foregoing costs and expenses, and collect payment, as and when funds become
available.
“(13) Charge reasonable fees for the liquidation of the bank from the assets of the
bank: Provided, That payment of these fees, including any unpaid advances under
the immediately preceding paragraph, shall be subject to approval by the liquidation
court;
“(14) Distribute the available assets of the closed bank, in cash or in kind, to its
creditors in accordance with the Rules on Concurrence and Preference of Credits under
the Civil Code or other laws;
“(15) Dispose records of the closed bank that are no longer needed in the liquidation
in accordance with guidelines set by the PDIC Board of Directors, notwithstanding the
laws on archival period and disposal of records; and

“(16) Exercise such other powers as are inherent and necessary for the effective
discharge of the duties of the Corporation as receiver.
“The Board of Directors shall adopt such policies and guidelines as may be necessary
for the performance of the above powers by personnel, deputies, assistants and
agents of the Corporation.
“(c) After the payment of all liabilities and claims against the closed bank, the
Corporation shall pay surplus, if any, dividends at the legal rate of interest from date
of takeover to date of distribution to creditors and claimants of the closed bank in
accordance with the Rules on Concurrence and Preference of Credits under the Civil
Code or other laws before distribution to the shareholders of the closed bank.
“(d) The officers, employees, deputies, assistants and agents of the receiver shall
have no liability and shall not be subject to any action, claim or demand in connection
with any act done or omitted to be done by them in good faith in connection with the
exercise of their powers and functions under this Act and other applicable laws, or
other actions duly approved by the court.
“(e) The placement of a bank under liquidation shall have the following effects:
“(1) On the corporate franchise or existence
“Upon placement by the Monetary Board of a bank under liquidation, it shall continue
as a body corporate until the termination of the winding-up period under Section 16
of this Act. Such continuation as a body corporate shall only be for the purpose of
liquidating, settling and closing its affairs and for the disposal, conveyance or
distribution of its assets pursuant to this Act. The receiver shall represent the closed
bank in all cases by or against the closed bank and prosecute and defend suits by or
against it. In no case shall the bank be reopened and permitted to resume banking
business after being placed under liquidation.
“(2) On the powers and functions of its directors, officers and stockholders
“The powers, voting rights, functions and duties, as well as the allowances,
remuneration and perquisites of the directors, officers, and stockholders of such bank
are terminated upon its closure. Accordingly, the directors, officers, and stockholders
shall be barred from interfering in any way with the assets, records, and affairs of the
bank.
“The receiver shall exercise all authorities as may be required to facilitate the
liquidation of the closed bank for the benefit of all its creditors.
“(3) On the assets
“Upon service of notice of closure as provided in Section 14 of this Act, all the assets
of the closed bank shall he deemed in custodia legis in the hands of the receiver, and
as such, these assets may not be subject to attachment, garnishment, execution, levy
or any other court processes. A’ judge, officer of the court or any person who shall
issue, order, process or cause the issuance or implementation of the garnishment
order, levy, attachment or execution, shall be liable under Section 27 of this Act:
Provided, however, That collaterals securing the loans and advances granted by the
Bangko Sentral ng Pilipinas shall not be included in the assets of the closed bank for
distribution to other creditors: Provided, further, That the proceeds in excess of the
amount secured shall be returned by the Bangko Sentral ng Pilipinas to the receiver.
“Any preliminary attachment or garnishment on any of the assets of the closed bank
existing at the time of closure shall not give any preference to the attaching or
garnishing party. Upon motion of the receiver, the preliminary attachment or
garnishment shall be lifted and/or discharged.
“(4) On labor relations
“Notwithstanding the provisions of the Labor Code, the employer-employee
relationship between the closed bank and its employees shall be deemed terminated
upon service of the notice of closure of the bank in accordance with this Act. Payment
of separation pay or benefits provided for by law shall be made from available assets
of the bank in accordance with the Rules on Concurrence and Preference of Credits
under the Civil Code or other laws.
‘(5) Contractual obligations
“The receiver may cancel, terminate, rescind or repudiate any contract of the closed
bank that is not necessary for the orderly liquidation of the bank, or is grossly
disadvantageous to the closed bank, or for any ground provided by law.
“(6) On interest payments
“The liability of a bank to pay interest on deposits and all other obligations as of
closure shall cease upon its closure by the Monetary Board without prejudice to the
first paragraph of Section 85 of Republic Act No. 7653 (the New Central Bank Act):
Provided, That the receiver shall have the authority, without need for approval of the
liquidation court, to assign, as payment to secured creditors, the bank assets serving
as collaterals to their respective loans up to the extent of the outstanding obligations,
including interest as of date of closure of the hank, as validated by the receiver. The
valuation of the asset shall be based on the prevailing market value of the collaterals
as appraised by an independent appraiser on an ‘as is where is’ basis.
“(7) Liability for penalties and surcharges for late payment and nonpayment of taxes
“From the time of closure, the closed bank shall not be liable for the payment of
penalties and surcharges arising from the late payment or nonpayment of real
property tax, capital gains tax, transfer tax and similar charges.
“(8) Bank charges and fees on services
“The receiver may impose, on behalf of the closed bank, charges and fees for services
rendered after bank closure, such as, but not limited to, the execution of pertinent
deeds and certifications.
“(9) Actions pending for or against the closed bank
“Except for actions pending before the Supreme Court, actions pending for or against
the closed bank in any court or quasi-judicial body shall, upon motion of the receiver,
be suspended for a period not exceeding one hundred eighty (180) days and referred
to mandatory mediation. Upon termination of the mediation, the case shall be referred
back to the court or quasi-judicial body for further proceedings.
“(10) Final decisions against the closed bank
“The execution and enforcement of a final decision of a court other than the liquidation
court against the assets of a closed bank shall be stayed. The prevailing parly shall
file the final decision as a claim with the liquidation court and settled in accordance
with the Rules on Concurrence and Preference of Credits under the Civil Code or other
laws.
“(11) Docket and other court fees
“Payment of docket and other court fees relating to all cases or actions filed by the
receiver with any judicial or quasi-judicial bodies shall be deferred until the action is
terminated with finality. Any such fees shall constitute as a first Hen on any judgment
in favor of the closed bank or in case of unfavorable judgment, such fees shall be paid
as liquidation costs and expenses during the distribution of the assets of the closed
bank.
“(12) All assets, records, and documents in the possession of the closed bank at the
time of its closure are presumed held by the bank in the concept of an owner.
“(13) The exercise of authority, functions, and duties by the receiver under this Act
shall be presumed to have been performed in the regular course of business.
“(14) Assets and documents of the closed bank shall retain their private nature even
if administered by the receiver. Matters relating to the exercise by the receiver of the
functions under this Act shall be subject to visitorial audit only by the Commission on
Audit.”
SECTION 27. A new section entitled Section 14 of the same Act is hereby inserted
between Sections 13 and 15 which shall read as follows:
“NOTICE OF CLOSURE AND
TAKEOVER ACTIVITIES
“SEC. 14. (a) Upon the designation of the Corporation as receiver of a closed bank, it
shall serve a notice of closure to the highest-ranking officer of the bank present in
the bank premises, or in the absence of such officer, post the notice of closure in the
bank premises or on its main entrance. The closure of the bank shall be deemed
effective upon the service of the notice of closure. Thereafter, the receiver shall
takeover the bank and exercise the powers of the receiver as provided in this Act.
“(b) The receiver shall have authority to use reasonable force, including the authority
to force open the premises of the bank, and exercise such acts necessary to take
actual physical possession and custody of the bank and all its assets, records,
documents, and take charge of its affairs upon the service of the notice of closure.
“(c) Directors, officers, employees or agents of a bank hold money and other assets
of the bank in trust or under administration or management by them for the bank in
their fiduciary capacity.
Upon service of the notice of closure to the bank, all directors, officers, employees or
agents of the closed bank shall have the duty to immediately account for, surrender
and turn over to the receiver, and provide information relative to, the assets, records,
and affairs of the closed bank in their possession, custody, administration or
management.
“(d) When the circumstances so warrant, the local government unit and law
enforcement agencies concerned shall, upon request, immediately provide assistance
to the receiver during the service of notice of closure and actual takeover operations
to ensure the orderly conduct thereof and the security and safety of the personnel of
the receiver and the employees of the closed bank.”
SECTION 28. A new section entitled Section 15 of the same Act is hereby inserted
between Sections 14 and 16 which shall read as follows:
“PURCHASE OF ASSETS AND
ASSUMPTION OF LIABILITIES
“SEC. 15. (a) The receiver shall have the authority to facilitate and implement the
purchase of the assets of the closed bank and the assumption of its liabilities by
another insured bank, without need for approval of the liquidation court. The exercise
of this authority shall be in accordance with the Rules on Concurrence and Preference
of Credits under the Civil Code or other laws, subject to such terms and conditions as
the Corporation may prescribe. The disposition of the branch licenses and other bank
licenses of the closed bank shall be subject to the approval of the Bangko Sentral ng
Pilipinas.
“(b) Such action of the receiver to determine whether a bank may be the subject of
a purchase of assets and assumption of liabilities transaction shall be final and
executory, and may not be set aside by any court.”
SECTION 29. A new section entitled Section 16 of the same Act is hereby inserted
between Sections 15 and 17 which shall read as follows:
“CONVENTIONAL LIQUIDATION
“A. ASSET MANAGEMENT AND CONVERSION
“SEC. 16. (a) The assets gathered by the receiver shall be evaluated and verified as
to their existence, ownership, condition, and other factors to determine their
realizable value. In the management, preservation and disposition of assets, the
receiver shall be guided by cost-benefit considerations, resources of the closed bank,
and potential asset recovery.
“(b) The conversion of the assets of the closed bank shall be carried out in a fair and
transparent manner in accordance with the rules and procedures as may be
determined by the receiver.
“(c) In the management and/or conversion of the assets of the closed bank, the
receiver shall have the authority to:
“(1) Represent the closed bank before the Land Registration Authority (LRA), the
Bureau of Lands, the Register of Deeds, the Land Transportation Office (LTO), the
Assessor’s Office or other appropriate office of the local government unit, the
Securities and Exchange Commission (SEC), or such other similar government
agencies or private entities in:
“(i) Verifying the authenticity of ownership documents;
“(ii) Registering the interest of the closed bank on a specific property;
“(iii) Consolidating ownership over an asset of the closed bank;
“(iv) Securing certified true copies of documents held by the foregoing
agencies/entities in relation to an asset of the closed bank;
“(v) Securing the appropriate certification from the foregoing agencies/entities in
relation to an asset of the closed bank; and
“(vi) Performing other related activities;
“(2) Conduct a physical or ocular inspection of the properties owned by, or mortgaged
to, the closed bank, to determine their existence and present condition;
“(3) Determine the disposal price of assets in accordance with generally accepted
valuation principles, standards and practices, subject to such guidelines as the
receiver may determine;
“(4) Dispose real or personal properties of the closed bank through bidding,
negotiated sale or any other mode including lease with option to purchase, whether
by piece or by lot, as may be reasonably determined by the receiver based on cost-
benefit considerations and to allow efficient distribution of assets to creditors; and
“(5) Engage third parties to assist in the liquidation, manage and/or dispose the
assets, handle cases filed against or by the closed bank, subject to such guidelines as
determined by the receiver.
“(d) Notwithstanding any provision of law to the contrary, the following rules shall
apply to the management and/or conversion by the receiver of the assets of the closed
bank:
“(1) Upon notification of the closure of a bank, the LRA, the Bureau of Lands, the
Register of Deeds, the LTO, the assessor’s office or other appropriate office of the
local government unit, or such other similar government agencies shall not allow any
transaction affecting the assets of the closed bank without the consent of the receiver.
“(2) Upon issuance by the Monetary Board of the resolution ordering the closure of a
bank, any person or entity in custody or possession of assets or records of the closed
bank, including, but not limited to, the closed bank’s deposit accounts, titles to real
property, collaterals, promissory notes, evidence of indebtedness or investments shall
immediately turn over custody of said assets and records to the receiver. Such
obligation shall cover evidences of deposit such as passbooks or certificates of deposit
issued by the bank to its depositors. Pending turnover, all persons or entities in
custody or possession of any asset or record of the closed bank shall hold the said
assets or records in trust for the receiver.
“(3) The persons or entities in custody or possession of such asset shall not allow,
authorize or cause the withdrawal, transfer, disposition, removal, conversion,
concealment, or other transaction involving or relating to the subject asset, unless
otherwise directed by the receiver.
“(e) The receiver shall have the authority to invest funds received from the conversion
of the assets of the closed bank in government securities, other government-
guaranteed marketable securities or investment-grade debt instruments.
“(f) The proceeds of the sale of the bank and branch licenses shall be for the benefit
of the creditors of the closed bank which shall be distributed in accordance with this
Act and the Rules on Concurrence and Preference of Credits under the Civil Code or
other laws.
“B. PETITION FOR ASSISTANCE IN THE
LIQUIDATION OF A CLOSED BANK
“(g) A petition for assistance in the liquidation is a special proceeding for the
liquidation of a closed bank, and includes the declaration of the concomitant right of
its creditors and the order of payment of their valid claims in the disposition of its
assets.
“Any proceeding initiated under this section shall be considered in rem. Jurisdiction
over all persons affected by the proceeding shall be considered as acquired upon
publication of the order setting the case for initial hearing in any newspaper of general
circulation in the Philippines.
“(h) The liquidation court shall have exclusive jurisdiction to adjudicate disputed
claims against the closed banks, assist in the enforcement of individual liabilities of
the stockholders, directors and officers and decide on all other issues as may be
material to implement the distribution plan adopted by the Corporation for general
application to all closed banks.
“(i) The provisions of Republic Act No. 8799, otherwise known as ‘The Securities
Regulation Code’, and Supreme Court Administrative Matter No. 00-8-10-SC, entitled,
‘The Rules of Procedure on Corporate Rehabilitation’, shall not be applicable to the
petition for assistance in the liquidation of the closed bank.
“(j) The petition shall be filed in the RTC which has jurisdiction over the principal office
of the closed bank or the principal office of the receiver, at the option of the latter.
“(k) The petition shall be filed ex parte within a reasonable period from receipt of the
Monetary Board Resolution placing the bank under liquidation.
“(1) All persons or entities with claims against the assets of the closed bank shall file
their claims with the receiver within sixty (60) days from the date of publication of
the notice of closure. Claims filed outside the foregoing prescribed period shall be
disallowed.
“Claims denied by the receiver shall be filed with the liquidation court within sixty
(60) days from receipt of the final notice of denial of claim.
“(m) A claim whose validity has not yet been determined with finality at the time of
the submission of the final asset distribution plan, either by reason of a pending suit
or for whatever reason, shall be considered as contingent claim and shall not be paid
under the proposed final asset distribution plan.
“(n) Upon finality of the order approving the final asset distribution plan, the petition
for assistance in the liquidation of a closed bank shall henceforth be, for all intents
and purposes, considered closed and terminated and the receiver, its officers,
employees or agents, are forever discharged from any and all claims and/or liability
arising from or in connection with the liquidation of the closed bank.
“(o) The receiver shall submit a final report on the implementation of the approved
final asset distribution plan to the Monetary Board and the SEC after the expiration of
the winding-up period provided in this Act.
“(p) The Supreme Court shall promulgate the appropriate procedural rules to
implement this section.
“C. WINDING-UP
“(q) The creditors shall have a period of six (6) months from the date of publication
of notice of the approval by the court of the final asset distribution plan of the closed
bank within which to claim payment of the principal obligations and surplus dividends.
During this six-month period, the receiver shall hold as trustee the assets allocated
in the final asset distribution plan for said creditors.
“Failure by the creditor to comply with the documentary requirements within the
prescribed period and/or refusal to accept the asset as payment shall be deemed as
abandonment or waiver of his or her right to payment.
“(r) The individual stockholders of record or their duly-authorized representative or
the court-appointed stockholders’ representative shall have a period of six (6) months
from publication of notice of the approval by the court of the final asset distribution
plan of the closed bank within which to claim the residual assets. During this six-
month period, the receiver shall hold as trustee the assets allocated in the final asset
distribution plan for said stockholders of record.
“Failure by the individual stockholders of record or their duly-authorized
representative or the court-appointed stockholders’ representative to comply with the
documentary requirements within the prescribed period and/or refusal to accept the
residual assets in kind shall be deemed as abandonment or waiver of right to receive
the residual assets.
“(s) After the lapse of the six-month period provided in paragraphs (q) and (r) of this
section, all assets which remain unclaimed by the creditors and/or stockholders of
record shall be turned over to the Bureau of Treasury.
“(t) The receiver shall continue to keep all the pertinent records of the closed bank
for a period of six (6) months from the date of publication of the approval of the final
asset distribution plan.
After the lapse of this period, the receiver is authorized to dispose of the same in
accordance with the rules and regulations to be prescribed by the receiver.”
SECTION 30. Section 13 of the same Act is hereby renumbered as Section 17.
SECTION 31. A new section entitled Section 18 of the same Act is hereby inserted
between Sections 17 and 19 which shall read as follows:
“DIVIDEND DECLARATION
“SEC. 18. Consistent with the policy of the State to generate, preserve, maintain faith
and confidence in the country’s banking system, the Corporation shall build up and
maintain the DIF at the target level set by the PDIC Board of Directors. Such target
level shall be subject to periodic review and may be adjusted as necessary.
“The Corporation is exempt from Republic Act No. 7656; instead, the Corporation
shall remit dividends to the national government only if the target DIF level for the
applicable year has been reached. For purposes of computing the amount of dividends
to be declared and remitted to the national government, all assessment collections
shall not be considered as income. The dividend rate shall be at least fifty percent
(50%) of the income from other sources only.”
SECTION 32. Section 14 of the same Act is accordingly renumbered as Section 19
and is hereby amended to read as follows:
“PAYMENT OF INSURED DEPOSITS
“SEC. 19. Whenever an insured bank shall have been closed by the Monetary Board
pursuant to Section 30 of Republic Act No. 7653, or upon expiration or revocation of
a bank’s corporate term, payment of the insured deposits on such closed bank shall
be made by the Corporation as soon as possible either (1) by cash or (2) by making
available to each depositor a transferred deposit in another insured bank in an amount
equal to insured deposit of such depositor: Provided, however, That the Corporation,
in its discretion, may require proof of claims to be filed before paying the insured
deposits, and that in any case where the Corporation is not satisfied as to the validity
of a claim for an insured deposit, it may require final determination of a court of
competent jurisdiction before paying such claim: Provided, further, That failure to
settle the claim, within six (6) months from the date of filing of claim for insured
deposit, where such failure was due to grave abuse of discretion, gross negligence,
bad faith, or malice, shall, upon conviction, subject the directors, officers or
employees of the Corporation responsible for the delay, to imprisonment from six (6)
months to one (1) year: Provided, furthermore, That the period shall not apply if the
validity of the claim requires the resolution of issues of facts and or law by another
office, body or agency including the case mentioned in the first proviso or by the
Corporation together with such other office, body or agency.”
SECTION 33. Section 15 of the same Act is accordingly renumbered as Section 20
and is hereby amended to read as follows:
“SEC. 20. The Corporation, upon payment of any depositor as provided for in Section
19 of this Act, shall be subrogated to all rights of the depositor against the closed
bank to the extent of such payment. Such subrogation shall include the right on the
part of the Corporation to receive the same dividends and payments from the
proceeds of the assets of such closed bank and recoveries on account of stockholders’
liability as would have been payable to the depositor on a claim for the insured
deposits: Provided, That such depositor shall retain his or her claim for any uninsured
portion of his or her deposit, which legal preference shall be the same as that of the
subrogated claim of the Corporation for its payment of insured deposits. All payments
by the Corporation of insured deposits in closed banks partake of the nature of public
funds, and as such, must be considered a preferred credit in the order of preference
under Article 2244 (9) of the New Civil Code.”
SECTION 34. Section 16 of the same Act is accordingly renumbered as Section 21
and paragraph (c) thereof is hereby amended to read as follows:
“(c) Except as otherwise prescribed by the Board of Directors, neither the Corporation
nor such other insured bank shall be required to recognize as the owner of any portion
of a deposit evidenced by a passbook, certificate of deposit or other evidence of
deposit determined by the Corporation to be an authentic document or record of the
closed bank under a name other than that of the claimant, any person whose name
or interest as such owner is not disclosed on the passbook, certificate of deposit or
other evidence of deposit of such closed bank as part owner of said deposit, if such
recognition would increase the aggregate amount of the insured deposits in such
closed bank.”
SECTION 35. Section 17 of the same Act is accordingly renumbered as Section 22.
SECTION 36. Section 22 paragraph (a) of the same Act, as renumbered, is hereby
amended to read as follows:
“CORPORATE FUNDS AND ASSETS
“SEC. 22. (a) Subject to guidelines and limits as approved by the Board of Directors,
money of the Corporation denominated in the local currency, not otherwise employed,
shall be invested in obligations of the Republic of the Philippines or in obligations
guaranteed as to principal and interest by the Republic of the Philippines.
“The Corporation may also invest in debt instruments denominated in foreign
currencies issued or guaranteed by the Republic of the Philippines, or debt
instruments denominated in freely convertible foreign currencies issued by
supranationals, multilateral agencies, or foreign governments with at least an
investment grade credit rating.
“The Corporation shall likewise be authorized to buy and/or sell debt instruments and
foreign currencies from any government securities eligible dealers or any
counterparties or brokers, accredited by the PDIC Board.
“For this purpose, the Corporation shall be authorized to open securities custodianship
and settlement accounts.”
SECTION 37. Section 22 paragraph (b) of the same Act, as renumbered, is hereby
amended to read as follows:
“(b) The banking or checking accounts of the Corporation shall be kept with the
Bangko Sentral ng Pilipinas, or with any other bank designated as depository or fiscal
agent of the Philippine government.”
SECTION 38. An additional paragraph to Section 22 of the same Act, as renumbered,
is hereby inserted after paragraph (c) which shall read as follows:
“(d) Assets of the Corporation shall be exempt from attachment, garnishment or any
other order or process of any court, agency or any other administrative body.”
SECTION 39. Section 17 paragraph (d) of the same Act is accordingly renumbered as
Section 22 paragraph (e) and is hereby amended to read as follows:
“FINANCIAL ASSISTANCE
“(e) In the exercise of its authorities under Section 11 of this Act, the Corporation is
authorized to make loans to, or purchase the assets of, or assume liabilities of, or
make deposits in:
“(1) A bank in danger of closing, upon its acquisition by a qualified investor; or
“(2) A qualified investor, upon its purchase of all assets and assumption of all liabilities
of a bank in danger of closing; or
“(3) A surviving or consolidated institution that has merged or consolidated with a
bank in danger of closing; upon such terms and conditions as the Board of Directors
may prescribe, when in the opinion of the Board of Directors, such acquisition,
purchase of assets, assumption of liabilities, merger or consolidation, is essential to
provide adequate banking service in the community or maintain financial stability in
the economy.
“The Corporation, prior to the exercise of the powers under this section, shall
determine that actual payoff and liquidation thereof will be more expensive than the
exercise of this power: Provided, That when the Monetary Board has determined that
there are systemic consequences of a probable failure or closure of an insured bank,
the Corporation may grant financial assistance to such insured bank in such amount
as may be necessary to prevent its failure or closure and/or restore the insured bank
to viable operations, under such terms and conditions as may be deemed necessary
by the Board of Directors, subject to concurrence by the Monetary Board and without
additional cost to the DIF.
“A systemic risk refers to the possibility that failure of one bank to settle net
transactions with other banks will trigger a chain reaction, depriving other banks of
funds leading to a general shutdown of normal clearing and settlement activity.
Systemic risk also means the likelihood of a sudden, unexpected collapse of
confidence in a significant portion of the banking or financial system with potentially
large real economic effects. Finally, the Corporation may not use its authority under
this subsection to purchase the voting or common stock of an insured bank but it can
enter into and enforce agreements that it determines to be necessary to protect its
financial interests: Provided, That the financial assistance may take the form of equity
or quasi-equity of the insured bank as may be deemed necessary by the Board of
Directors with concurrence by the Monetary Board: Provided, further, That the
Corporation shall dispose of such equity as soon as practicable.”
SECTION 40. Section 18 of the same Act is accordingly renumbered as Section 23
and is hereby amended to read as follows:
“AUTHORITY TO BORROW
“SEC. 23. The Corporation is authorized to borrow from the Bangko Sentral ng
Pilipinas and the Bangko Sentral ng Pilipinas is authorized to lend to the Corporation
on such terms as may be agreed upon by the Corporation and the Bangko Sentral ng
Pilipinas, such funds as in the judgment of the Board of Directors of the Corporation
are from time to time required for insurance purposes and financial assistance
provided for in Section 22(e) of this Act: Provided, That any such loan as may be
granted by the Bangko Sentral ng Pilipinas shall be consistent with monetary policy:
Provided, further, That the rate of interest thereon shall be fixed by the Monetary
Board.
“When in the judgment of the Board of Directors the funds of the Corporation are not
sufficient to provide for an emergency or urgent need to attain the purposes of this
Act, the Corporation is likewise authorized to borrow money, obtain loans or arrange
credit lines or other credit accommodations from any bank: Provided, That such loan
shall be of short-term duration: Provided, further, That no prior Monetary Board
opinion shall be required for the Corporation and its counterparties on individual
drawdowns or borrowings within an approved borrowing program where prior
Monetary Board opinion has already been obtained, pursuant to Section 123 of
Republic Act No. 7653.”
SECTION 41. Section 19 of the same Act is accordingly renumbered as Section 24
and is hereby amended to read as follows:
“ISSUANCE OF BONDS, DEBENTURES
AND OTHER OBLIGATIONS
“SEC. 24. With the approval of the President of the Philippines, upon the
recommendation of the Department of Finance, the Corporation is authorized to issue
bonds, debentures, and other obligations, both local or foreign, as may be necessary
for purposes of providing liquidity for settlement of insured deposits in closed banks,
to facilitate the implementation of bank resolution under Section 11 of this Act, as
well as for financial assistance as provided herein: Provided, That the Board of
Directors shall determine the interest rates, maturity and other requirements of said
obligations: Provided, further, That the Corporation may provide for appropriate
reserves for the redemption or retirement of said obligation.
“All notes, debentures, bonds, or such obligations issued by the Corporation shall be
exempt from taxation both as to principal and interest, and shall be fully guaranteed
by the Government of the Republic of the Philippines. Such guarantee, which in no
case shall exceed two times the DIF as of date of the debt issuance, shall be expressed
on the face thereof.
“The Corporation may issue notes, debentures, bonds, or other debt instruments
without the approval of the President of the Philippines, as long as these shall not be
guaranteed by the national government.
“The Board of Directors shall have the power to prescribe the terms and conditions,
rules and regulations for the issuance, reissuance, servicing, placement and
redemption of the bonds herein authorized to be issued as well as the registration of
such bonds at the request of the holders thereof.”
SECTION 42. Section 20 of the same Act is accordingly renumbered as Section 25.
SECTION 43. Section 21 of the same Act is accordingly renumbered as Section 26.
SECTION 44. Section 26 paragraph (f) of the same Act, as renumbered, is hereby
amended to read as follows:
“(f) The penalty of imprisonment of not less than six (6) years but not more than
twelve (12) years or a fine of not less than Fifty thousand pesos (P50,000.00) but not
more than Ten million pesos (P10,000,000.00), or both, at the discretion of the court,
shall be imposed upon:
“(1) Any director, officer, employee or agent of a bank for:
“(a) Any willful refusal to submit reports as required by law, rules and regulations;
“(b) Any unjustified refusal to permit examination and audit of the deposit records or
the affairs of the institution;
“(c) Any willful making of a false statement or entry in any bank report or document
required by the Corporation;
“(d) Submission of false material information in connection with or in relation to any
financial assistance of the Corporation extended to the bank;
“(e) Splitting of deposits or creation of fictitious or fraudulent loans or deposit
accounts.
“Splitting of deposits occurs whenever a deposit account with an outstanding balance
of more than the statutory maximum amount of insured deposit maintained under
the name of natural or juridical persons is broken down and transferred into two (2)
or more accounts in the name/s of natural or juridical persons or entities who have
no beneficial ownership on transferred deposits in their names within one hundred
twenty (120) days immediately preceding or during a bank-declared bank holiday, or
immediately preceding a closure order issued by the Monetary Board of the Bangko
Sentral ng Pilipinas for the purpose of availing of the maximum deposit insurance
coverage;
“(f) Refusal to receive the notice of closure as provided under Section 14 of this Act;
“(g) Refusal to allow the Corporation to take over a closed bank or obstructing such
action of the Corporation;
“(h) Refusal to turn over or destroying or tampering bank records;
“(i) Fraudulent disposal, transfer or concealment of any asset, property or liability of
the closed bank;
“(j) Violation of, or causing any person to violate, the exemption from garnishment,
levy, attachment or execution provided under this Act and the New Central Bank Act;
“(k) Any willful failure or refusal to comply with, or violation of any provision of this
Act, or commission of any other irregularities, and/or conducting business in an
unsafe or unsound manner as may be determined by the Board of Directors in relation
to Section 56 of Republic Act No. 8791, or ‘The General Banking Law of 2000’.
“Notwithstanding any law to the contrary, the foregoing acts of directors, officers,
employees or agents of the bank shall be considered as additional grounds for
disqualification under the fit and proper rules of the Bangko Sentral ng Pilipinas.
“(1) Other acts inimical to the interest of the bank or the Corporation, such as, but
not limited to, conflict of interest, disloyalty, authorizing related party transactions
with terms detrimental to the bank and its stakeholders, and unauthorized disclosure
of confidential information, as may be determined by the Corporation.
“(2) Any person for:
“(a) Refusal to disclose information, records or data pertaining to the bank accounts
of a closed bank to the receiver;
“(b) Refusal to turn over possession or custody of the asset and record of the closed
bank to the receiver, notwithstanding any agreement to the contrary;
“(c) Refusal or delaying the:
“(i) Verification of authenticity of the ownership documents;

“(ii) Registration of interest of the closed bank on a specific property;
“(iii) Consolidation of ownership over an asset of the closed bank;
“(iv) Act of securing certified true copies of documents in relation to an asset of the
closed bank;
“(v) Act of securing the appropriate certification from the agencies or entities stated
in Section 16 of this Act in relation to an asset of the closed bank;
“(vi) Conduct of a physical or ocular inspection of the properties owned by, or
mortgaged to, the closed bank, to determine their existence and present condition;
or
“(vii) Other related activities of the receiver; or
“(d) Allowing the withdrawal from deposits or disposition of any asset of the closed
bank other than by the receiver;
“(e) Willfully violating any provision of this Act;
“(f) Conspiring or willfully participating in any of the offenses enumerated in
Paragraph 1 of this section;
“(3) Any law enforcement officer or local government official who refuses or fails to
assist the receiver in the service of the notice of closure, as provided under Section
14 of this Act.”
SECTION 45. Additional paragraphs to Section 26 of the same Act, as renumbered,
are hereby inserted after paragraph (g) which shall read as follows:
“(h) The penalty of imprisonment of not less than ten (10) years but not more than
twelve (12) years, or a fine of not less than Five hundred thousand pesos
(P500,000.00) but not more than Ten million pesos (P 10,000,000.00), or both, at
the discretion of the court, shall be imposed upon:
“(1) Any depositor who files a fictitious and/or fraudulent claim for deposit insurance;
and
“(2) Any bank officer who certifies to the validity of the deposit liabilities which is
subsequently verified to be fictitious and/or fraudulent.
“(i) The penalty of imprisonment of not less than twelve (12) years but not more than
fourteen (14) years shall be imposed upon any person who participates, or attempts
to participate, in a scheme to defraud a bank.
“If the offense shall have been committed by a director or officer of the bank, the
penalty of imprisonment of not less than fifteen (15) years, but not more than
seventeen (17) years shall be imposed.
“If the offense shall have resulted in systemic consequences, as determined by the
Bangko Sentral ng Pilipinas, the penalty of imprisonment of not less than eighteen
(18) years but not more than twenty (20) years shall be imposed.”
SECTION 46. Section 22 of the same Act is accordingly renumbered as Section 27.
SECTION 47. Section 23 of the same Act is hereby renumbered as Section 28 and
amended to read as follows:
“SEC. 28. Exempting Clause. – The Corporation shall be exempt from Presidential
Decree No. 985, Presidential Decree No. 1597, Republic Act No. 6758, as amended,
Joint Resolution No. 4 (2009) and other laws on salary standardization, Presidential
Decree No. 1177, Executive Order No. 248, as amended, Executive Order No. 298
and the provisions of Republic Act No. 10149 with regard to position classification,
qualification standards, and the compensation package of the employees of the
Corporation: Provided, That the PDIC shall be subject to all other policies under
Republic Act No. 10149, including, but not limited to, performance evaluation by the
Governance Commission for Government-Owned or -Controlled Corporations,
selection and nomination of appointive directors, and limitations on the creation of
subsidiaries and the acquisition of affiliates except in the case of acquisition of shares
in the grant of financial assistance under this Act.”
SECTION 48. Section 24 of the same Act is deleted and a new Section 29 is added to
read as follows:
“SEC. 29. Transitory Provisions. — (a) The incumbent President of the Corporation
and private sector members of the Board of Directors shall continue to exercise their
respective duties and functions until replaced by the President of the Philippines:
Provided, That such new appointees shall be subject to the term of office provided
under Section 3 of this Act, as amended.
“(b) Payment of surplus dividends under Section 13(c) of this Act, as amended, shall
be applicable to banks without a court-approved final asset distribution plan at the
time of the effectivity of this Act.
“(c) The preference indicated under Section 15 of this Act, as amended, shall be
likewise effective upon liquidation proceedings already commenced and pending as of
the effectivity of this Act, where no distribution of assets has been made.1âwphi1
“(d) The provisions in Section 10 of this Act, as amended, on legal assistance,
protection and indemnification shall apply to all cases pending before the effectivity
of this Act.”
SECTION 49. Section 25 of the same Act is accordingly renumbered as Section 30.
SECTION 50. The Corporation may be reorganized by its Board of Directors by
adopting if it so desires, an entirely new staffing pattern or organizational structure
to suit the operations of the Corporation under this Act. No preferential or priority
right shall be given to or enjoyed by any personnel for appointment to any position
in the new staffing pattern nor shah any personnel be considered as having prior or
vested rights with respect to retention in the Corporation or in any position which may
be created in the new staffing pattern, even if he or she should be the incumbent of
a similar position prior to reorganization. The reorganization shall be completed within
six (6) months after the effectivity of this Act. Personnel who are not retained are
deemed separated horn the service.
SECTION 51. The Board of Directors is hereby authorized to provide separation
incentives, and all those who shall retire or be separated from the service on account
of reorganization under the preceding section shall be entitled to such incentives
which may be in addition to all gratuities and benefits to which they may be entitled
under existing laws.
SECTION 52. Separability Clause. – If any provision or section of this Act or the
application thereof to any person or circumstances is held invalid, the other provisions
or sections of this Act, in the application of such provision or section to other persons
or circumstances, shall not be affected thereby.
REPUBLIC ACT No. 3765
AN ACT TO REQUIRE THE DISCLOSURE OF FINANCE CHARGES IN
CONNECTION WITH EXTENSIONS OF CREDIT.
Section 1. This Act shall be known as the "Truth in Lending Act."
Section 2. Declaration of Policy. It is hereby declared to be the policy of the State to
protect its citizens from a lack of awareness of the true cost of credit to the user by
assuring a full disclosure of such cost with a view of preventing the uninformed use
of credit to the detriment of the national economy.
Section 3. As used in this Act, the term
(1) "Board" means the Monetary Board of the Central Bank of the Philippines.
(2) "Credit" means any loan, mortgage, deed of trust, advance, or discount; any
conditional sales contract; any contract to sell, or sale or contract of sale of property
or services, either for present or future delivery, under which part or all of the price
is payable subsequent to the making of such sale or contract; any rental-purchase
contract; any contract or arrangement for the hire, bailment, or leasing of property;
any option, demand, lien, pledge, or other claim against, or for the delivery of,
property or money; any purchase, or other acquisition of, or any credit upon the
security of, any obligation of claim arising out of any of the foregoing; and any
transaction or series of transactions having a similar purpose or effect.
(3) "Finance charge" includes interest, fees, service charges, discounts, and such
other charges incident to the extension of credit as the Board may be regulation
prescribe.
(4) "Creditor" means any person engaged in the business of extending credit
(including any person who as a regular business practice make loans or sells or rents
property or services on a time, credit, or installment basis, either as principal or as
agent) who requires as an incident to the extension of credit, the payment of a finance
charge.
(5) "Person" means any individual, corporation, partnership, association, or other
organized group of persons, or the legal successor or representative of the foregoing,
and includes the Philippine Government or any agency thereof, or any other
government, or of any of its political subdivisions, or any agency of the foregoing.
Section 4. Any creditor shall furnish to each person to whom credit is extended, prior
to the consummation of the transaction, a clear statement in writing setting forth, to
the extent applicable and in accordance with rules and regulations prescribed by the
Board, the following information:
(1) the cash price or delivered price of the property or service to be acquired;
(2) the amounts, if any, to be credited as down payment and/or trade-in;
(3) the difference between the amounts set forth under clauses (1) and (2);
(4) the charges, individually itemized, which are paid or to be paid by such person in
connection with the transaction but which are not incident to the extension of credit;
(5) the total amount to be financed;
(6) the finance charge expressed in terms of pesos and centavos; and
(7) the percentage that the finance bears to the total amount to be financed expressed
as a simple annual rate on the outstanding unpaid balance of the obligation.
Section 5. The Board shall prescribe such rules and regulations as may be necessary
or proper in carrying out the provisions of this Act. Any rule or regulation prescribed
hereunder may contain such classifications and differentiations as in the judgment of
the Board are necessary or proper to effectuate the purposes of this Act or to prevent
circumvention or evasion, or to facilitate the enforcement of this Act, or any rule or
regulation issued thereunder.
Section 6. (a) Any creditor who in connection with any credit transaction fails to
disclose to any person any information in violation of this Act or any regulation issued
thereunder shall be liable to such person in the amount of P100 or in an amount equal
to twice the finance charged required by such creditor in connection with such
transaction, whichever is the greater, except that such liability shall not exceed
P2,000 on any credit transaction. Action to recover such penalty may be brought by
such person within one year from the date of the occurrence of the violation, in any
court of competent jurisdiction. In any action under this subsection in which any
person is entitled to a recovery, the creditor shall be liable for reasonable attorney's
fees and court costs as determined by the court.
(b) Except as specified in subsection (a) of this section, nothing contained in this Act
or any regulation contained in this Act or any regulation thereunder shall affect the
validity or enforceability of any contract or transactions.
(c) Any person who willfully violates any provision of this Act or any regulation issued
thereunder shall be fined by not less than P1,00 or more than P5,000 or imprisonment
for not less than 6 months, nor more than one year or both.
(d) No punishment or penalty provided by this Act shall apply to the Philippine
Government or any agency or any political subdivision thereof.
(e) A final judgment hereafter rendered in any criminal proceeding under this Act to
the effect that a defendant has willfully violated this Act shall be prima facie evidence
against such defendant in an action or proceeding brought by any other party against
such defendant under this Act as to all matters respecting which said judgment would
be an estoppel as between the parties thereto.