THRIFT

BANKS
Thrift Bank Act of 1995 or The Republic Act No. 7906

Submitted by:
Justine G. Uayan
BSBA FM 2-1
Submitted to:
Ragrciel G. Manalo
 Thrift Banks
 After Philippine independence in 1946 and the establishment of the Central
Bank of the Philippines in 1949, there were only three thrift banks operating in
the Philippines.
 As of March 2019, there are 54 thrift banks in the Philippines.
 With 54 head offices and 2,600 branch offices, there’s a total of 2,654 thrift bank
offices in the country as of February 2019.
Ranking as to Total Assets
Thrift Bank Group
As of March 31, 2019
(Amounts in Million Pesos)

RANK NAME OF BANK TOTAL ASSETS

1 BPI FAMILY SAVINGS BANK INC 284,743.52

2 PHIL SAVINGS BANK 234,906.22

3 RCBC SAVINGS BANK INC 137,038.84

4 CHINA BANK SAVINGS INC 95,827.27

5 PHILIPPINE BUSINESS BANK INC A SAVINGS BANK 94,845.56

6 CITY SAVINGS BANK INC 80,121.83

7 PNB SAVINGS BANK 60,968.18

8 STERLING BANK OF ASIA INC (A SAVINGS BANK) 40,123.16

9 BANK OF MAKATI (A SAVINGS BANK) INC 36,279.31

10 PRODUCERS SAVINGS BANK CORPORATION 18,676.22

11 UCPB SAVINGS BANK 18,248.54

12 FIRST CONSOLIDATED BANK INC (A PDB) 17,829.83

13 BPI DIRECT BANKO INC A SAVINGS BANK 15,573.21

14 HSBC SAVINGS BANK (PHILS) INC 13,532.95

15 WEALTH DEVELOPMENT BANK CORPORATION 10,135.78

16 MALAYAN BANK SAVINGS AND MORT BANK INC 9,338.67

17 EQUICOM SAVINGS BANK INC 9,213.96

18 1ST VALLEY BANK INC A DEVELOPMENT BANK 8,932.50

19 CARD SME BANK INC A THRIFT BANK 6,522.18

20 LUZON DEVELOPMENT BANK 5,470.84

21 CITYSTATE SAVINGS BANK INC 3,743.58

22 ALLBANK (A THRIFT BANK) INC 3,268.42

23 BANGKO KABAYAN INC

24 (A PRIVATE DEVELOPMENT BANK) 3,110.86

25 PENBANK INC (A PDB)

26 (FORMERLY: PENINSULA RB INC) 2,719.40

YUANTA SAVINGS BANK PHILIPPINES INC 2,662.83

27 LEGAZPI SAVINGS BANK INC 2,423.27

ENTERPRISE BANK INC (A THRIFT BANK) 2,346.49

28 QUEEN CITY DEVELOPMENT BANK INC

OR QUEENBANK A THRIFT BANK 2,257.75

29 SUN SAVINGS BANK INC 1,712.76

30 MERCHANTS SAVINGS & LOAN ASSN INC 1,638.60

31 BANK ONE SAVINGS CORPORATION 1,616.35

32 DUMAGUETE CITY DEV BANK INC 1,545.19

33 CENTURY SAVINGS BANK CORPORATION 1,487.90

34 HIYAS BANKING CORPORATION 1,412.48

35 ISLA BANK (A THRIFT BANK) INC 1,392.94

36 UNIVERSITY SAVINGS BANK INC 1,007.99

 37 FARMERS SAVINGS & LOAN BANK INC 773.10

38 NORTHPOINT DEV'T BANK INC 687.63

39 PAMPANGA DEVELOPMENT BANK 540.39

40 METRO CEBU PUBLIC SAVINGS BANK 512.81

41 PACIFIC ACE SAVINGS BANK INC 483.41

42 BATAAN DEVELOPMENT BANK 456.86

43 CORDILLERA SAVINGS BANK INC 446.29

44 INTER-ASIA DEVELOPMENT BANK 352.53

45 BUSINESS AND CONSUMERS BANK (A DB) 346.31

46 LIFE SAVINGS BANK INC 291.91

47 LEMERY SAVINGS & LOAN BANK, INC. 237.58

48 PHIL STAR DEVELOPMENT BANK INC 168.19

49 MARITIME SAVINGS BANK CORPORATION 156.60

50 QUEZON COCONUT BANK INC (A THRIFT BANK) 90.88

Thrift banks were originally classified into three types.

1. Savings and Mortgage Banks or SMBs - REPUBLIC ACT NO. 337
2. Private Development Banks or PDBs - REPUBLIC ACT NO. 4093
3. Stock Savings and Loan Associations or SSLAs - REPUBLIC ACT NO. 3779
All three are engaged in similar activities but somewhat cater to specific market.
For example, SMBs and SSLAs concentrated on providing finance for home building
and home development, while PDBs catered more to the capital and credit needs
for the promotion of industrial and agricultural growth. In the last few years,
however, these differences have become insignificant, and with the Thrift Bank Act
of 1995 (Republic Act No. 7906), these banks are categorized into what is now
simply called the thrift bank industry. The most important among thrift banks are the
SMBs which hold some 65% of this sector’s assets, followed by 30% of PDBs and only
5% for SSLAs.
1.) Savings and Mortgage Banks – RA. 337 “The General Banking Act”
 Sec. 29. A savings and mortgage bank shall be any corporation
organized primarily for the purpose of accumulating the small savings
of depositors and investing them, together with its capital, in bonds or
in loans secured by bonds, real estate mortgages, and other forms of
security, as hereinafter provided.
 A savings and mortgage bank is a financial institution that
specializes in savings deposits and mortgage loans, and has
become one of the primary sources of mortgage loans for
homebuyers today, because it is created to promote affordable
homeownership. It offers mortgage services to people from
the savings and deposits received from private investors. It is
allowed to make investment, grant loans, issue domestic Letter of
Credit dominated in the Philippine currency.
 Depositors and borrowers are members with voting rights and have
the ability to direct the financial and managerial goals of
the organization.
Characteristics:
 Privately or locally managed financial institutions
 Uses individuals’ deposits to make long-term amortized loans to
home buyers.
 Disperses loans for home repairs, construction, and refinancing

Sec. 30. The combined capital accounts of each savings and mortgage
bank shall not be less than an amount equal to fifteen per cent (15%) of
its total assets,
The loans and investments of savings and mortgage banks shall be limited
to the following:
(a) Loans with the security of their own savings deposit obligations or of
mortgage and chattel mortgage bonds which they have issued, or with
the security of savings deposit obligations of other banks doing business in
the Philippines;

(b) Medium-term loans of the following types:

(1) Loans for the encouragement of cattle, carabao and other
livestock breeding, with maturities up to three years. Such loans shall
be repaid in regular installments and shall have as principal security a
lien on the animals, the bank being empowered, however, to require,
 in addition, real estate and other securities to its satisfaction. The
amount of any such loan, shall not exceed fifty per cent (50%) of the
commercial value of the animals at the time the loan is made, but
similar additional loans, up to fifty per cent (50%) may be made as the
value of the stock increases.

(2) Equipment loans, with maturities up to five years, for the

acquisition of fertilizers and any instruments, machinery and other
movable equipment used in the production, processing, transformation,
handling or transportation of agricultural and industrial products. Such
loans shall constitute a first lien on the assets acquired with the
proceeds of the loan, the bank being empowered, however, to require
as additional security a lien or mortgage on other properties of the
debtor.
(c) Mortgage loans, with maturities up to ten years for the conservation,
enlargement or improvement of productive properties, or the acquisition
of machinery or other fixed installations. Such loans shall be secured by a
first mortgage on the property.

(d) Real estate mortgage loans with maturities of not more than twenty
years, for the following purposes only:
(1) For the construction, acquisition, expansion or improvement of
rural and urban properties;

(2) For the refinancing of similar loans and mortgages; and

(3) For such other purposes as may be authorized by the Monetary

Board.

(e) High-grade bonds and other evidences of indebtedness, and loans

against such obligations;

(f) Drafts, bills of exchange, acceptances, or notes arising out of current

commercial transactions which are endorsed or accepted by any solvent
bank operating in the Philippines. The aggregate investments in this class
shall not exceed ten per cent (10%) of the total assets of the bank
Sec. 32. Except as the Monetary Board may otherwise prescribe, the
direct indebtedness to a savings and mortgage bank of any person,
company, corporation or firm, including in the indebtedness of the
company or firm the indebtedness of the several members thereof, for
money borrowed, with the exception of money borrowed against
obligations of the Central Bank or of the Philippine Government, or
borrowed with the full guarantee by the Government of payment of
 principal and interest, shall at no time exceed twenty-five per cent (25%)
of the unimpaired capital and surplus of the bank: Provided, however,
That this limitation shall not apply to loans made under subsection (f) of
section thirty-one.
Sec. 33. Any savings and mortgage bank may, with the approval of the
Monetary Board, issue mortgage and chattel mortgage certificates, buy
and sell them for its own account or for the account of others, or accept
and receive them in payment or as amortization of its loans.
EXAMPLES:
1. Union Savings and Mortgage 3. Anchor Savings and Mortgage
BanK Bank
2. Banco Filipino Savings & 4. Malayan Bank Savings and
Mortgage Bank Mortgage Bank

2.) Private Development Banks

 It is under Republic Act No. 4093 “Private Development Bank’s Act”
 A private development bank shall exercise all the power and shall assume
all the obligations of Savings and Mortgage bank as provided in the
General Banking Act.
 Private Development Banks cater to the needs of agriculture and industry
providing them with reasonable rate loans for medium and long term
purposes. The Philippine government has asked the assistance of
government agencies like the Development Bank of the Philippines (DBP),
the Philippine National bank (PNB), the Government Service Insurance
System (GSIS), the Social Security System (SSS), and other government
departments to help private banks’ clients. They are authorized to grant
real estate mortgage loans with maturities of not and for investment in
agricultural, industrial, manufacturing, commercial, and other economic
enterprises.
 It shall be the declared policy of Congress to promote and expand the
economy of the country pursuant to the socio-economic program of the
Government; to expand the industrial and agricultural growth; and to
encourage the establishment of more private development banks in order
to meet the needs for capital and to meet the demands for adequate
investment credit or medium and long term loans for Filipino
entrepreneurs. Toward this end, the Government shall encourage and
assist in the establishment of a system of private development banks
which will promote agriculture and industry and at the same time place
within easy reach to the people the medium and long term credit
facilities at reasonable cost.
 Section 3. A private development bank shall be incorporated under the
provisions of the General Banking Act for mortgage banks and shall
exercise all the powers and shall assume all the obligations of a shortage
bank as defined in the said Act, except as otherwise provided
herein: Provided, That no private development bank shall be operated
without a certificate of authority from the monetary board of the Central
bank which shall be issued upon compliance with the provisions of this
law.

Section 4: A private development bank shall be organized in the form of a

stock corporation and its paid-up capital shall not be less than four million
pesos for class A, two million pesos for class B, and one million pesos for
class C: Provided, That at least (60%) of the capital stock subscribed by
the private sector shall be owned and held by citizens of the Philippines:
 Provided, Further, That if said subscription of private shareholders to the
capital stock of a private development bank cannot be secured or is not
available, the Development Bank of the Philippines on representation of
the said private shareholders and with the approval of its Board of
Governors shall, within thirty days from the date of approval by the Board
of Governors, and after compliance by the private stockholders with the
conditions of said approval, subscribe to the capital stock of such
development banks, which shall be paid in full at the time of subscription
out of the trust fund provided in paragraph 3, Section 3 of Republic Act
Numbered Two thousand eighty-one, in an amount equal to the
difference between the required paid-up capital and to the fully paid
subscribed capital of the private stockholders but not exceeding the
latter:
 Provided, furthermore, That the Board of Governors shall act on the
representation made by the private shareholders within thirty days from
the date it is filed:
 Provided, still further, That such shares of stock subscribed by the bank
shall be preferred shares entitled to cumulate dividends at a rate of one
per cent during the first five years, two per cent during the following five
years, and three per cent thereafter, shall be preferred as against
common and other preferred stockholders in the distribution of assets in
the event of liquidation shall be entitled to voting privileges
 Provided, Finally, That such preferred shares of the bank may be sold at
any time at par to private individuals who are citizens of the Philippines,
and in the sale thereof the qualified registered stockholders shall have the
right of preemption within one year from the date of offer in proportion to
their respective holdings, but in the absence of such buyers, preference
shall be given to residents of the province or city where the development
bank is located.
All members of the board of directors of the private development bank
shall be citizens of the Philippines.
The Development Bank of the Philippines, the Philippine National Bank,
the Government Service Insurance System, the Social Security System, the
National Economic Council, the Department of Agriculture and Natural
Resources, the Department of Commerce and Industry, and other
appropriate agencies, corporations, or instrumentalities of the
Government may, in cooperation with the private development banks,
provide adequate assistance in the form of saving deposits, and
technical know-how in agriculture and industry.
Section 5. (75%) of the loanable funds of the private development bank
shall be invested in medium and long term loans for economic
development purposes and in no case shall the Bank invest more than
twenty-five per centum of the loanable funds in short term loans for
miscellaneous purposes.
Section 7. Any private development bank may, with the approval of the
Monetary Board:
(a) Accept savings and time deposits;
(b) Act as correspondent for other financial institution and as collection
agent whenever there is no rural or commercial bank existing in the
locality;
(c) Rediscount paper with the Central Bank, Philippine National Bank or
other Banks and their branches or agencies. The Central bank shall
specify the nature of papers deemed acceptable for rediscount as well
as the rediscount rate to be charged by any of these institutions.
Section 8. To augment and supplement the capital of any private
development bank, the Development Bank of the Philippines shall be
permitted to extend to the private development banks a loan or loans
from time to time repayable in ten years with interest at the rate that may
be agreed upon against security which may be offered by the private
development bank or any stockholders of the private development
bank: Provided, That
(a) The Development Bank of the Philippines is convinced that the
resources of the private development bank are inadequate to meet the
legitimate credit requirements of the locality wherein the private
development bank is established;
(b) There is a dearth of private capital in the said locality;
(c) It is not possible for the stockholders of the private development bank
to increase the paid-up capital thereof.
Section 9. In an emergency or when a financial crisis is imminent, the
Central Bank may give a loan to any private development bank against
the assets of the private development bank which may be considered
acceptable by a concurrent vote of the members of the Monetary Board.
Section 10. All existing private development banks shall be totally
exempted from the payment of income and gross receipts taxes for a
period of three (3) years after the effectivity of this Act. Thereafter, they
shall be taxed on a gradually increasing basis of twenty-five percent (25%)
per year for the next succeeding four (4) years after the end of which
period they shall pay all taxes in full. Those banks that may be established
within three (3) years from the date of effectivity of this Act, shall be
totally exempted from income and gross receipts taxes for three years
from the date of their organization. Thereafter they shall be taxed on a
gradually increasing basis of twenty-five per cent (25%) per year for the
next succeeding four (4) years after the end of which period they shall
pay all such taxes in full.
Section 12. Every individual acting as officer or employee of a private
development bank and handling fund or securities amounting to one
thousand pesos or more, in any one year, shall be covered by an
adequate bond as determined by the Monetary Board; and the by-laws
of the private development bank may also provide for the bonding of
other employees or officers thereof.
EXAMPLES
1. Queen City Development Bank 5. Wealth Development Bank
Corporation
2. 1st Valley Bank
6. Pampanga Development Bank
3. Dumaguete City Development
Bank, Inc 7. Bataan Development Bank
4. NorthPoint Development Bank,
Inc
3.) STOCK SAVINGS AND LOAN ASSOCIATIONS
They are corporations engaged in the business of accumulating the
savings of its member stockholders, and using such accumulations
together with its capital in the case of stock corporation, Forloans and/or
investment in the securities of productive enterprises or securities of the
Government or its political subdivision instrumentalities or corporation.

Thrift Banks Loans and ROPOA

Thrift Banks is limited in its powers and size compared to commercial banks,
thrift banks tend to be more conservative in its operations, as it can count on less
expertise than its bigger counterparts. For example, they have consistently held
more cash than Commercial Banks (KBs). In 1980, while KBs had 9.7% of total assets
in cash, TBs had 11.1%. The same was true in 2003L 7.4% for KBs and 8.2% for TBs.
Its investment in government and private securities were also much lower than
KBs. For while KBs nearly tripled the share of these investments as a percentage of
total assets from 1980 to 2004, TBs only rose from 12.1% to 18.2% for the same period.
Again, this is more in keeping with the nature of thrift banks.
In terms of loans and Repossessed Assets (ROPOAs), TBs were also more
conservative in their operations. Using the loans-to-deposit ratio (LDR), we can see
how banks make use of their ability to create money by its lending activities. The
higher the ratio, the more credit and money it engenders. However, we can see
that TB’s LDR was quiet high through the period 1980 to 2004, playing around 80% to
90% mostly, but reaching a peak of 137% during the banking crisis of 1983-85. This
lending spree settled down to more normal levels, but climbed to a relative high of
103% in 1994 or just prior to the Asian crisis of 1997.
However, bad debts converted to ROPOAs of TBs were only 3.6% of total
assets in 1980. It went on an upward trend during the two banking crises but slowed
down to 11.1% in 2003.

Agriculture and SME Lending

Thrift Banks tend to lend more to the agricultural sector and SME. Agriculture
accounts for almost 20% of the nation’s gross national product or GNP (as of 2004)
and plays an important role in the livelihood of the Philippine economy.
 Small and Medium enterprise (SMEs) also take a big share of the economy in
that they account for 90% of registered businesses and firms, and they employ
about 66% of the country’s labor force. Hence, in order to boost economic growth,
there is a need to focus on agricultural development, as well as the requirements of
SMEs. One basic factor that needs to be addressed is access to credit, and this is
where the thrift bank industry plays its vital role.

Thrift Banks Deposits

As thrift banks were not able to have current account until 1995, it meant that
its deposits were mostly savings and time deposits. While this started at 100% of their
total deposits, by 2004, it stood at 100% of their total deposits, by 2004, it stood at
around 90%, because of the checking accounts and foreign currency deposit unit
(FCDU) accounts some SMBs were able to handle.

Percentage Assets vs. Percentage Share in Savings + Time Deposits for 1980 and
2003 (by Bank Type)

1980 2003
% of Assets % of S-T Deposits % of Assets % of S-T Deposits
Banking Institutions 100.0 100.0 100.0 100.0
Commercial Banks 73.3 87.2 90.2 84.5
Thrift Banks 5.6 9.5 7.5 11.2
Rural Banks 2.0 3.2 2.4 4.3

Capital Adequacy
Part of the picture depicting thrift banks is that they have been showing
greater capital adequacy since the pre-banking crisis of 1982-85. From 11.5% in 1980,
capital adequacy ratio (CAR) stabilized throughout the 1980s and started rising in
1990s, reaching a peak of 18.6% in 1999. This is a result of increased profitability of
thrift banks and the higher capital requirements imposed on them through the years,
especially after the Asian financial crisis. However, after that year, TB’s CAR went on
a downward slope reaching 13.5% in 2004. This was a result of continuing losses of
the industry from 1998 to 2004, with the exception of a small net income posted in
2003.
 Thrift Banks Income Statements
The profitability of TBs has waned in the recent years. Return on Assets (ROAs)
was below 1% from 1980-1988. It rose to a peak of 2.4% in 1992, but slowly started
declining since then. As mentioned above, it has been negative since 1998, except
for 2003.
The improvement in the late 1980s was due to higher interest margins (interest
income – interest expense), which reached a peak of 66.7% in 1988. This was fairly
steady until 1996, but took a sharp fall with the Asian financial crisis of 1997. Margins
dropped to a low of 32.9% in 1988. Overlending to the real estate sector had a big
negative effect on TBs. A number had to be taken over by some other bigger banks,
and a few more rehabilitated with Philippines Deposit Insurance Corporation (PDIC)
assistance.
Interest margins have been improving, but TBs have had a hard time
exceeding 50% since 1997 due to higher costs of deposits and borrowings as
commercial banks have put up stiff competition for savings and time deposits.
With regard to non-performing loans (NPL), BSP data start only in 1999, when
the NPL ratio of TBs was 14.4%. This has been declining steadily since then and was
8.9% in 2005.
Nonetheless, it is clear that unless TBs can continue to improve their interest
margins and lower their NPLs, they will continue to find difficulty to get back into the
black.

Governance and Empowerment

Monte de Piedad was the oldest thrift bank in the country.
Chamber of Thrift Banks, caters to the survival and growth of the thrift bank industry.
2 general purposes;
1. Serve the needs of savings and development banks, as well as savings and
loan associations
2. Coordinate with other banking institutions and government agencies such as
the BSP and PDIC in supervising thrift bank activities and strengthening the role
of the industry.
 REPUBLIC ACT NO. 7906
AN ACT PROVIDING FOR THE REGULATION OF THE ORGANIZATION AND
OPERATIONS OF THRIFT BANKS, AND FOR OTHER PURPOSES.

CHAPTER I
DECLARATION OF POLICY AND DEFINITIONS

Section 1. Title. — This Act shall be known and cited as the "Thrift Banks Act of 1995."

Sec. 2. Declaration of Policy. — It is hereby declared the policy of the State to:

(a) Recognize the indispensable role of the private sector, to encourage private
enterprise, and to provide incentives to needed investments;
(b) Promote economic development pursuant to the socioeconomic program of
the government, to expand industrial and agricultural growth, to encourage the
establishment of more private thrift banks in order to meet the needs for capital,
personal and investment credit or medium- and long-term loans for Filipino
entrepreneurs;
(c) Encourage and assist the establishment of thrift bank system which will promote
agriculture and industry and at the same time place within easy reach of the
people the medium-and long-term credit facilities at reasonable cost;
(d) Encourage industry, frugality and the accumulation of savings among the public,
and the members and stockholders of thrift banks; and
(e) Regulate and supervise the activities of thrift banks in order to place their
operations on a sound, stable and efficient basis and to curtail or prevent acts or
practices which are prejudicial to the public interest.

Sec. 3. Definition of Terms. — For purposes of implementing this Act, the following
definitions shall apply:

(a) "Thrift banks" shall include savings and mortgage banks, private development
banks, and stock savings and loans associations organized under existing laws, and
any banking corporation that may be organized for the following purposes:

(1) Accumulating the savings of depositors and investing them, together with
capital loans secured by bonds, mortgages in real estate and insured improvements
thereon, chattel mortgage, bonds and other forms of security or in loans for
personal or household finance, whether secured or unsecured, or in financing for
homebuilding and home development; in readily marketable and debt securities; in
commercial papers and accounts receivables, drafts, bills of exchange,
acceptances or notes arising out of commercial transactions; and in such other
investments and loans which the Monetary Board may determine as necessary in
the furtherance of national economic objectives;
(2) Providing short-term working capital, medium- and long-term financing, to
businesses engaged in agriculture, services, industry and housing; and
(3) Providing diversified financial and allied services for its chosen market and
constituencies specially for small and medium enterprises and individuals.
(b) "Monetary Board" shall mean the Monetary Board of the Bangko Sentral ng
Pilipinas.
(c) "Bangko Sentral" shall refer to the Bangko Sentral ng Pilipinas created under
Republic Act No. 7653.

CHAPTER II
ORGANIZATION

Sec. 4. Organization. — A thrift bank shall be organized in the form of stock

corporation. The Monetary Board shall fix the minimum paid-up capital of thrift
banks in such amount as the Board may consider necessary for the safe and sound
operation of thrift banks taking into account the development thrusts of this Act and
due protection of the general public. No thrift bank shall be organized without a
certificate of authority from the Monetary Board.

Sec. 5. Establishment of Thrift Banks. — The articles of incorporation of any bank, or

any amendment thereto, shall not be registered by the Securities and Exchange
Commission unless accompanied by a certificate of authority issued by the
Monetary Board under its official seal.

REQUIRED CAPITALIZATION OF THRIFT BANKS:

Head Office in:

 Metro Manila 1 billion

 Cebu and Davao cities 500 million
 Other Areas 250 million

Head Office in the National

Capital Region (NCR)

 Head Office only 500 million

 Up to 10 branches1/ 750 million
 11 to 50 branches1/ 1.00 billion
 More than 50 2.00 billion
 branches1/

Head Office in All Other Areas

Outside NCR

 Head Office only 200 million

 Up to 10 branches1/ 300 million
 11 to 50 branches1/ 400 million
 More than 50 800 million
branches1/

Sec. 6. Bank Management. — In order to maintain the quality of bank management

and afford better protection to depositors and the public in general, the Monetary
Board may pass upon and review the qualifications of persons who are elected or
appointed bank directors and officers and disqualify those unfit. The Monetary
Board shall prescribe the qualifications of bank directors and officers for purposes of
this Section.

Sec. 7. Directors and Officers. — At least a majority of the members of the board of
directors of any thrift bank which may be established after the effectivity of this Act
shall be citizens of the Philippines: Provided, however, That no appointive or elective
official, whether full-time or part-time, shall at the same time serve as officer of any
thrift bank, except in cases where such service is incident to financial assistance
provided by the government or a government-owned or -controlled corporation to
the bank: Provided, further, That in the case of merger or consolidation duly
approved by the Monetary Board, the limitation on the number of directors in a
corporation, as provided in Section 14 of the Corporation Code of the Philippines,
shall not be applied so that membership in the new board may include up to the
total number of directors provided for in the respective articles of incorporation of
the merging or consolidating banks.

CHAPTER III
OWNERSHIP AND CAPITAL REQUIREMENTS

Sec. 8. Ownership. — At least forty percent (40%) of the voting stock of a thrift bank
which may be established after the approval of this Act shall be owned by citizens
of the Philippines, except where a new bank may be established as a result of a
merger or consolidation of existing thrift banks with foreign holdings in which case,
the resulting foreign holdings shall not be increased but may be reduced and, once
reduced, shall not be increased thereafter beyond sixty percent (60%) of the voting
stock of thrift banks. The percentage of the foreign-owned voting stocks shall be
determined by the citizenship of individual stockholders and in case of corporations
owning shares, by the citizenship of each stockholder in the said corporations.

Any provision of existing laws to the contrary notwithstanding, stockholdings in a

thrift bank shall be exempt from any ownership ceiling for a period of ten (10) years
from the effectivity of this Act.

Sec. 9. Combined Capital Accounts of Thrift Banks. — The combined capital

accounts of each thrift bank shall not be less than an amount equal to ten percent
(10%) of its risk assets which is defined as its total assets minus the following assets:

(a) Cash on hand;

(b) Amounts from the Bangko Sentral;
(c) 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;
(d) Loans to the extent covered by hold-out on, or assignment of deposits
maintained in the lending bank and held in the Philippines; and
(e) Other non-risk items as the Monetary Board may, from time to time, authorize to
be deducted from total assets.

CHAPTER IV
POWERS

Sec. 10. Powers of Thrift Banks. — In addition to powers granted it by this Act and
existing laws, any thrift bank may:

(a) Accept savings and time deposits;

(b) Open current or checking accounts: Provided, That the thrift bank has net assets
of at least Twenty million pesos (P20,000,000) subject to such guidelines as may be
established by the Monetary Board; and shall be allowed to directly clear its
demand deposit operations with the Bangko Sentral and the Philippine Clearing
House Corporation;
(c) Act as correspondent for other financial institutions;
(d) Act as collection agent for government entities, including but not limited to, the
Bureau of Internal Revenue, Social Security System, and the Bureau of Customs;
(e) Act as official depository of national agencies and of municipal, city or
provincial funds in the municipality, city or province where the thrift bank is located,
subject to such guidelines as may be established by the Monetary Board;
(f) Rediscount paper with the Philippine National Bank, the Land Bank of the
Philippines, the Development Bank of the Philippines, and other government-owned
or –controlled corporations. Said institutions shall specify the nature of paper
deemed acceptable for rediscount, as well as rediscounting rate to be charged by
any of these institutions; and
(g) Issue mortgage and chattel mortgage certificates, buy and sell them for its own
account or for the account of others, or accept and receive them in payment or as
amortization of its loan.
(h) Purchase, hold and convey real estate under the same conditions as those
governing commercial banks as specified under Section 25 of Republic Act No. 337;
(i) Engage in quasi-banking and money market operations;
(j) Open domestic letters of credit;
(k) Extend credit facilities to private and government employees: Provided, That in
the case of a borrower who is a permanent employee or wage earner, the treasurer,
cashier or paymaster of the office employing him is authorized, notwithstanding the
provisions of any existing law, rules and regulations to the contrary, to make
deductions from his salary, wage or income pursuant to the terms of his loan, to
remit deductions to the thrift bank concerned, and collect such reasonable fee for
his services;
(l) Extend credit against the security of jewelry, precious stones and articles of similar
nature, subject to such rules and regulations as the Monetary Board may prescribe;
and
(m) Offer other banking services as provided in Section 72 of Republic Act No. 337
and Republic Act No. 6426, as amended.

Thrift banks may perform the services under subsections (b), (d), (e), (g) and (i) only
upon prior approval of the Monetary Board.

Nothing in this Section shall be construed as precluding a thrift bank from performing,
with prior approval of the Monetary Board, commercial banking services, or from
operating under an expanded banking authority, nor from exercising, whenever
applicable and not inconsistent with the provisions of this Act and Bangko Sentral
regulations, and such other powers incident to a corporation.

Sec. 11. Limitations on Lending Authority. — Except as the Monetary Board may
otherwise prescribe, the direct indebtedness to thrift banks of any person, company,
corporation, or firm, including the indebtedness of members of a partnership and
association, for money borrowed, excluding: (a) loans secured by obligations of the
Bangko Sentral; (b) loans fully guaranteed by the government as to the payment of
principal and interest; (c) loans to the extent covered by the hold-out on, or
assignment of, deposits maintained in the lending bank and held in the Philippines;
and (d) other loans or credits as the Monetary Board may, from time to time, specify
as non-risk assets, which shall in no time exceed fifteen percent (15%) of unimpaired
capital and surplus of the bank.

Notwithstanding the provisions of the preceding paragraph and subject to such

regulations as the Monetary Board may prescribe, the total indebtedness of any
borrower to the bank may amount to a further fifteen percent (15%) of the
unimpaired capital and surplus of such bank provided the additional indebtedness
is for the purpose of financing subdivision or housing development, medium- and
low-income borrowers and agriculture on a fully secured basis.

Sec. 12. Investment in Allied Undertakings. — Subject to such guidelines as may be

established by the Monetary Board, thrift banks may invest in equities of allied
undertakings as hereinafter enumerated: Provided, That: (a) the total investments in
equities shall not exceed twenty-five percent (25%) of the net worth of the thrift
bank; (b) the equity investment in any single enterprise shall be limited to fifteen
percent (15%) of the net worth of the thrift bank; (c) the equity investment in any
single enterprise shall remain a minority holding in that enterprise; and (d) the equity
investment in other banks shall be subject to the same provisions governing similar
investments of commercial banks and shall be deducted from the investing bank's
net worth for the purpose of computing of the prescribed ratio as provided in
Section 9 hereof: Provided, further, That equity investments shall not be permitted in
non-related activities. Where the allied activity is a wholly- or majority-owned
subsidiary of the thrift bank, the Bangko Sentral may subject it to examination.
Investment in allied undertaking shall include institutions engaged in the following
activities:

(a) Banking and financing;

(b) Warehousing and other post-harvesting activities;
(c) Fertilizer and agricultural chemical and pesticides distribution;
(d) Farm equipment distribution;
(e) Trucking and transportation of agricultural products;
(f) Marketing of agricultural products;
(g) Leasing; and
(h) Other undertakings as may be determined by the Monetary Board.

CHAPTER V
SUPERVISION

Sec. 13. Supervisory Powers of the Monetary Board. — The power to supervise the
operation of any thrift bank by the Monetary Board shall consist in placing limits to
the maximum credit allowed to any individual borrower; in indicating the manner in
which technical assistance shall be extended to thrift banks; in imposing a uniform
accounting system and manner of keeping the accounts and records of thrift banks;
in instituting periodic surveys of loans and lending procedures, audits, test-check of
cash and other transactions of the thrift banks; in conducting training courses for
personnel of thrift banks; and, in general, in supervising the business operations of
the thrift banks. The Bangko Sentral shall have the power to enforce the laws, orders,
instructions, rules and regulations promulgated by the Monetary Board applicable
to thrift banks; to require thrift banks, their directors, officers and agents to conduct
and manage the affairs of the thrift bank in a lawful and orderly manner; and upon
proof that the thrift bank or its board of directors or officers are conducting and
managing the affairs of the bank in a manner contrary to laws, orders, instructions,
rules and regulations promulgated by the Monetary Board or in a manner
substantially prejudicial to the interest of the government, depositors, creditors, or
the general public, to appoint a conservator pursuant to Section 29 of Republic Act
No. 7653 without prejudice to the prosecution of persons responsible for such
violations under the provisions of Sections 36 and 37 of Republic Act No. 7653.

The director and examiners of the department of Bangko Sentral charged with the
supervision of thrift banks are hereby authorized to administer oaths to any director,
officer or employee of any thrift bank or to any voluntary witness and to compel the
presentation of all books, documents, papers or records necessary in his or their
judgment to ascertain the facts relative to the true conditions of any thrift bank or to
any loan.

CHAPTER VI
INCENTIVES

Sec. 14. Reserve Requirement Differential. — Reserve requirement imposed on thrift

banks by the Monetary Board shall enjoy equitable preferential terms over those
imposed on commercial banks: Provided, That the Monetary Board may change
reserve differentials for the purpose of stimulating economic growth in the
countryside, thereby promoting national economic development.

Sec. 15. Liberalized Branching Rules. — Thrift banks shall have unrestricted branching
right within the region, free from any assessment or surcharges required in setting up
a branch, but under coordination with the Bangko Sentral which will have to assess
that there are qualified personnel, control and procedures to operate the branch.

Sec. 16. Notices of Statement of Condition. — Subject to Monetary Board approval,

a thrift bank may publish its statement of condition in a newspaper of general
circulation, or post it in the most conspicuous area of its premises, municipal building,
municipal public market, barangay hall and barangay public market if there be any,
where the thrift bank concerned is located.

CHAPTER VII
EXEMPTIONS

Sec. 17. Tax Exemptions. — All thrift banks, whether created or organized under this
Act or in operation as of the date of effectivity of this Act, shall be exempt from
payment of all taxes, fees and charges of whatever nature and description, except
the corporate income taxes and local taxes, fees and charges for a period of five (5)
years, counted from the date of commencement of operations for thrift banks
created under this Act and from the date of the effectivity of this Act for existing
thrift banks.

Top 10 Thrift Banks that dominate the Philippines

1. BPI Family Savings Bank
2. Philippine Savings Bank
(PSBank)
3. RCBC Savings Bank
(RSB)
4. Philippine Business Bank
5. China Bank Savings
(CBS)

6. City Savings Bank

7. PNB Savings Bank
8. Sterling Bank of Asia
9. Bank of Makati
10. Producers Savings
Bank
Sec. 18. Exemption from Publication Requirement. — The foreclosure of mortgage
covering loans granted by thrift banks and executions of judgments thereon
involving real properties and levied upon by a sheriff shall be exempt from
publication requirements where the total amount of the loan, excluding interest due
and unpaid, does not exceed One hundred thousand pesos (P100,000) or such
amount as the Monetary Board may prescribe, as may be warranted by the
prevailing economic conditions and by the nature of service of customers served by
each category of the thrift bank. It shall be sufficient publication in such cases if the
notice of foreclosure and execution of judgment are posted in the conspicuous
area of a thrift bank's premises, municipal building, the municipal public market, the
barangay hall, and the barangay public market, if there be any, where the land
mortgaged is situated within a period of sixty (60) days immediately preceding the
public auction of the execution of judgment. Proof of publication as required herein
shall be accomplished by an affidavit of the sheriff or officer conducting the
foreclosure sale or execution of judgment and shall be attached with the records of
the case. A thrift bank shall be allowed to foreclose lands mortgaged to it; Provided,
That said lands shall be covered under Republic Act No. 6657.

Sec. 19. Exemption from Notarial Charges. — Any metropolitan, municipal, or

municipal circuit trial court judge in his capacity as notary public ex officio shall
administer the oath to or acknowledge the instrument of any thrift bank and its
borrowers or mortgagor free from all charges, fees and documentary stamp tax,
collectible under existing laws, relative to any loan or transaction not exceeding Fifty
pesos (P50.00) or such amount as the Secretary of Finance, upon recommendation
of the Monetary Board, may prescribe as may be necessary to promote and
expand the economy.

Sec. 20. Exemption from Registration Fees. — Any register of deeds shall accept from
any thrift bank and its borrowers and mortgagors for registration, free from all
charges, fees and documentary stamp tax, collectible under existing laws, any
instrument, whether voluntary or involuntary, relating to loans or transactions
extended by any thrift bank in an amount not exceeding Fifty thousand pesos
(P50,000): Provided, however, That charges, if any, shall be collectible on the
amount in excess of Fifty thousand pesos (P50,000); and that an instrument related
to assignments of several mortgages consolidated in a single deed, if any, shall be
levied only on the amount in excess of Fifty thousand pesos (P50,000) of the
consideration in the assignment of each mortgage, or such amount as the
Secretary of Finance, upon recommendation of the Monetary Board, may prescribe
as may be necessary to promote and expand the economy.
 CHAPTER VIII
PROHIBITIONS

Sec. 21. Prohibited Acts. — Without prejudice to any prosecution under any law
which may have been violated, a fine of not more than Ten thousand pesos
(P10,000) or imprisonment for not less than six (6) months but not more than ten (10)
years, or both, at the discretion of the court, shall be imposed upon:

(a) Any officer, employee, or agent of a thrift bank who shall:

(1) Make false entries in any bank report or statement thereby affecting the
financial interest of, or causing damage to, the bank or any person; or
(2) Without order of a court of competent jurisdiction, disclose any information
relative to the funds or properties in the custody of the bank belonging to private
individuals, corporations, or any other entity; or
(3) Accept gifts, fees or commissions or any other form of remuneration in
connection with the approval of a loan from said bank; or
(4) Overvalue or aid in the overvaluing any security for the purpose of influencing in
any way the action of the bank on any loan; or
(5) Appear and sign as guarantor, indorser, or surety for loans granted; or
(6) Violate any provision of this Act.

(b) Any applicant for a loan from, or borrower of a thrift bank who shall:

(1) Misuse, misapply or divert the proceeds of the loan obtained by him from its
declared purpose; or
(2) Fraudulently overvalue property offered as security for a loan from said bank; or
(3) Give out or furnish false or willful misinterpretation of material facts for the
purpose of obtaining, renewing, or increasing a loan extending the period thereof;
or
(4) Attempt to defraud the said bank in the event of court action to recover the
loan; or
(5) Offer any officer, employee or agent of a thrift bank a gift, fee, commission or
other forms of compensation in order to influence such bank personnel into
approving a loan application; or
(6) Dispose or encumber the property offered as security for the loan.

(c) Any examiner, or officer or employee of the Bangko Sentral or of any

department, bureau, office, branch, or agency of the government who is assigned
to examine, supervise, assist or render technical service to thrift banks and who shall
connive or aid in the commission of the same.

(d) Any metropolitan, municipal, or municipal circuit trial court judge or register of
deeds who shall demand or accept, directly or indirectly, any gift, fee, commission,
or any other form of compensation in connection with the service, or shall arbitrarily
and without reasonable cause delay the acknowledgment or administration of oath
or the registration of documents required to be performed by said judge or by said
register of deeds shall be punished with a fine of not more than One (1) thousand
pesos (P1,000) or by imprisonment of not more than one (1) year, or both, at the
discretion of the court.

(e) Any bank not organized under this Act and any person, association, or
corporation doing the business of banking, not authorized under this Act or existing
laws which shall use the words "Development Bank," "Savings Bank," "Mortgage
Bank," "Savings and Mortgage Bank," or "Savings and Loan Association," as part of
the name or title of such bank or of such person, association, or corporation, shall be
punished by a fine of not less than One hundred pesos (P100), but in no case to
exceed Thirty thousand pesos (P30,000), for each day during which the said words
are so used.

CHAPTER IX
GENERAL PROVISIONS

Sec. 22. Minors as Depositors. — Minors in their own rights and in their own names
may make deposits and withdraw the same, and may receive dividends and
interest: Provided, however, That, if any guardian shall give notice in writing to any
thrift bank not to make payments of deposits, dividends, or interest to the minor of
whom he is the guardian, then such payment shall be made only to the guardian.

Sec. 23. Return of Deposits. — Deposits shall be returned to the depositors or to their
legal representatives in the manner and at the time and under the conditions which
shall be determined by the board of directors and stipulated in regulations which
shall be in conformity with laws and with such regulations as the Monetary Board
may prescribe.

Sec. 24. Deposit Insurance. — Deposit in thrift banks shall be eligible for insurance
coverage under Republic Act No. 3591, as amended.

Sec. 25. Annual Fees. — Consistent with the provisions of Section 28 of Republic Act
No. 7653, any thrift bank organized under this Act may, pursuant to regulations
promulgated for the purpose by the Monetary Board, be required to contribute to
the Bangko Sentral an annual fee in an amount to be determined by the Monetary
Board.

Sec. 26. Implementation. — For the purpose of carrying the objectives of this Act,
the Bangko Sentral is authorized to require the services and facilities of any
department or instrumentality of the government or any officer or employee of any
such department or government instrumentality.

Sec. 27. Annual Report. — The Monetary Board shall submit a report to the Congress
of the Philippines at the end of each calendar year of all the rules and regulations
promulgated by it in accordance with the provisions of this Act, as well as its other
actuations in connection with thrift banks together with an explanation of its reasons
therefor and recommendations on legislative actions.

Sec. 28. Parity Clause Under Same Circumstances. — The incentives granted shall be
enjoyed by financial institutions giving the same services for countryside lending and
development under such terms as may be equitable and as may be defined by the
Monetary Board.

Sec. 29. Separability Clause. — If any provision of this Act or the application thereof
to any person or circumstances is held invalid, the other provisions of this Act and
the application of such provisions to other persons and circumstances, shall not be
affected thereby.

Sec. 30. Repealing Clause. — Republic Act No. 4093, Republic Act No. 3779 to the
extent that it applies to thrift banks, and Chapter 5 of Republic Act No. 337 are
hereby repealed. Any law or parts of any law inconsistent with the provisions of this
Act are hereby repealed. In all matters affecting the price stability of the peso, the
provisions of Republic Act No. 7653 shall prevail.

Sec. 31. Applicability of Other Laws. — The provisions of Republic Act No. 7653 and
Republic Act No. 337, as amended, insofar as they are applicable and not in
conflict with any provision of this Act, shall apply to thrift banks organized hereunder.

Sec. 32. Effectivity. — This Act shall take effect fifteen (15) days following the
completion of its publication in the Official Gazette or in two (2) national
newspapers of general circulation.

Approved: February 23, 1995