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Const it ut ion St a t ut es Exec ut ive Issua nc es Judic ia l Issua nc es Ot her Issua nc es Jurisprudenc e Int erna t iona l Lega l Resourc es
AUSL Exc lusive

Elevent h Congress

REPUBLIC ACT NO. 8791 May 23, 2000

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. T he short t it le of t his Act shall be "T he General Banking Law of 2000." (1a)

Section 2. Declaration Of Policy. - T he St at e recognizes t he vit al role of banks providing an environment

conducive to t he sust ained development of t he nat ional economy and t he fiduciary nat ure of banking t hat
requires high st andards of int egrit y and performance. In furt herance t hereof, t he St at e shall promot e and
maint ain a st able and efficient banking and financial syst em t hat is globally compet it ive, dynamic and
responsive to t he demands of a developing economy. (n)

Section 3. Definition and Classification of Banks. -

3.1. "Banks" shall refer to ent it ies engaged in t he lending of funds obt ained in t he form of deposit s. (2a)

3.2. Banks shall be classified into:

(a) Universal banks;

(b) Commercial banks;

(c) T hrift banks, composed of: (i) Savings and mort gage banks, (ii) Stock savings and loan associat ions,
and (iii) Privat e development banks, as defined in t he Republic Act No. 7906 (hereaft er t he "T hrift Banks
Act ");

(d) Rural banks, as defined in Republic Act No. 73S3 (hereaft er t he "Rural Banks Act ");

(e) Cooperat ive banks, as defined in Republic Act No 6938 (hereaft er t he "Cooperat ive Code");

(f) Islamic banks as defined in Republic Act No. 6848, ot herwise known as t he "Chart er of Al Amanah
Islamic Invest ment Bank of t he Philippines"; and

(g) Ot her classificat ions of banks as det ermined by t he Monet ary Board of t he Bangko Sent ral ng
Pilipinas. (6-Aa)

CHAPTER II
AUTHORIT Y OF THE BANGKO SENTRAL

Section 4. Supervisory Powers. T he operat ions and act ivit ies of banks shall be subject to supervision of t he
Bangko Sent ral. "Supervision" shall include t he following:

4.1. T he issuance of rules of, conduct or t he est ablishment st andards of operat ion for uniform applicat ion to all
inst it ut ions or funct ions covered, t aking into considerat ion t he dist inct ive charact er of t he operat ions of
inst it ut ions and t he subst ant ive similarit ies of specific funct ions to which such rules, modes or st andards are
to be applied;
4.2 T he conduct of examinat ion to det ermine compliance wit h laws and regulat ions if t he circumst ances so
warrant as det ermined by t he Monet ary Board;

4.3 Overseeing to ascert ain t hat laws and regulat ions are complied wit h;

4.4 Regular invest igat ion which shall not be oft ener t han once a year from t he last dat e of examinat ion to
det ermine whet her an inst it ut ion is conduct ing it s business on a safe or sound basis: Provided, T hat t he
deficiencies/irregularit ies found by or discovered by an audit shall be immediat ely addressed;

4.5 Inquiring into t he solvency and liquidit y of t he inst it ut ion (2-D); or

4.6 Enforcing prompt correct ive act ion. (n)

T he Bangko Sent ral shall also have supervision over t he operat ions of and exercise regulatory powers over
quasi-banks, t rust ent it ies and ot her financial inst it ut ions which under special laws are subject to Bangko
Sent ral supervision. (2-Ca)

For t he purposes of t his Act , "quasi-banks" shall refer to ent it ies engaged in t he borrowing of funds t hrough t he
issuance, endorsement or assignment wit h recourse or accept ance of deposit subst it ut es as defined in
Sect ion 95 of Republic Act No. 7653 (hereaft er t he "New Cent ral Bank Act ") for purposes of re-lending or
purchasing of receivables and ot her obligat ions. (2-Da)

Section 5. Policy Direction; Ratios, Ceilings and Limitations. - T he Bangko Sent ral shall provide policy direct ion in t he
areas of money, banking and credit . (n)

For t his purpose, t he Monet ary Board may prescribe rat ios, ceilings, limit at ions, or ot her forms of regulat ion on
t he different t ypes of account s and pract ices of banks and quasi-banks which shall, to t he ext ent feasible,
conform to int ernat ionally accept ed st andards, including of t he Bank for Int ernat ional Set t lement s (BIS). T he
Monet ary Board may exempt part icular cat egories of t ransact ions from such rat ios, ceilings. and limit at ions,
but not limit ed to except ional cases or to enable a bank or quasi-bank under rehabilit at ion or during a merger or
consolidat ion to cont inue in business, wit h safet y to it s creditors, depositors and t he general public. (2-Ca)

Section 6. Authority to Engage in Banking and Quasi-Banking Functions. - No person or ent it y shall engage in banking
operat ions or quasi-banking funct ions wit hout aut horit y from t he Bangko Sent ral: .Provided, however, T hat an
ent it y aut horized by t he Bangko Sent ral to perform universal or commercial banking funct ions shall likewise
have t he aut horit y to engage in quasi-banking funct ions.

T he det erminat ion of whet her a person or ent it y is performing banking or quasi-banking funct ions wit hout
Bangko Sent ral aut horit y shall be decided by t he Monet ary Board. To resolve such issue, t he Monet ary Board
may; t hrough t he appropriat e supervising and examining depart ment of t he Bangko Sent ral, examine, inspect or
invest igat e t he books and records of such person or ent it y. Upon issuance of t his aut horit y, such person or
ent it y may commence to engage in banking operat ions or quasi-banking funct ion and shall cont inue to do so
unless such aut horit y is sooner surrendered, revoked, suspended or annulled by t he Bangko Sent ral in
accordance wit h t his Act or ot her special laws.

T he depart ment head and t he examiners of t he appropriat e supervising and examining depart ment are hereby
aut horized to administ er oat hs to any such person, employee, officer, or director of any such ent it y and to
compel t he present at ion or product ion of such books, document s, papers or records t hat are reasonably
necessary to ascert ain t he fact s relat ive to t he t rue funct ions and operat ions of such person or ent it y. Failure
or refusal to comply wit h t he required present at ion or product ion of such books, document s, papers or records
wit hin a reasonable t ime shall subject t he persons responsible t herefore to t he penal sanct ions provided under
t he New Cent ral Bank Act .

Persons or ent it ies found to be performing banking or quasi-banking funct ions wit hout aut horit y from t he
Bangko Sent ral shall be subject to appropriat e sanct ions under t he New Cent ral Bank Act and ot her applicable
laws. (4a)

Section 7. Examination by the Bangko Sentral. - T he Bangko Sent ral shall, when examining a bank, have t he
aut horit y to examine an ent erprise which is wholly or majorit y-owned or cont rolled by t he bank. (2-Ba)

CHAPTER III
ORGANIZATION, MANAGEMENT AND ADMINISTRATION OF BANKS. QUASI-BANKS AND TRUST ENTITIES

Section 8. Organization. - T he Monet ary Board may aut horize t he organizat ion of a bank or quasi-bank subject to
t he following condit ions:

8.1 T hat t he ent it y is a stock corporat ion (7);

8.2 T hat it s funds are obt ained from t he public, which shall mean t went y (20) or more persons (2-Da); and

8.3 T hat t he minimum capit al requirement s prescribed by t he Monet ary Board for each cat egory of banks are
sat isfied. (n)

No new commercial bank shall be est ablished wit hin t hree (3) years from t he effect ivit y of t his Act . In t he
exercise of t he aut horit y grant ed herein, t he Monet ary Board shall t ake into considerat ion t heir capabilit y in
t erms of t heir financial resources and t echnical expert ise and int egrit y. T he bank licensing process shall
incorporat e an assessment of t he bank's ownership st ruct ure, directors and senior management , it s operat ing
plan and int ernal cont rols as well as it s project ed financial condit ion and capit al base.

Section 9. Issuance of Stocks. - T he Monet ary Board may prescribe rules and regulat ions on t he t ypes of stock a
bank may issue, including t he t erms t hereof and right s appurt enant t hereto to det ermine compliance wit h laws
and regulat ions governing capit al and equit y st ruct ure of banks; Provided, T hat banks shall issue par value
stocks only.

Section 10. Treasury Stocks. - No bank shall purchase or acquire shares of it s own capit al stock or accept it s own
shares as a securit y for a loan, except when aut horized by t he Monet ary Board: Provided, T hat in every case t he
stock so purchased or acquired shall, wit hin six (6) mont hs from t he t ime of it s purchase or acquisit ion, be sold
or disposed of at a public or privat e sale. (24a)

Section 11. Foreign Stockholdings. - Foreign individuals and non-bank corporat ions may own or cont rol up to fort y
percent (40%) of t he vot ing stock of a domest ic bank. T his rule shall apply to Filipinos and domest ic non-bank
corporat ions. (12a; 12-Aa) T he percent age of foreign-owned vot ing stocks in a bank shall be det ermined by t he
cit izenship of t he individual stockholders in t hat bank. T he cit izenship of t he corporat ion which is a stockholder
in a bank shall follow t he cit izenship of t he cont rolling stockholders of t he corporat ion, irrespect ive of t he place
of incorporat ion. (n)

Section 12. Stockholdings of Family Groups of Related Interests. - Stockholdings of individuals relat ed to each ot her
wit hin t he fourt h degree of consanguinit y or affinit y, legit imat e or common-law, shall be considered family
groups or relat ed int erest s and must be fully disclosed in all t ransact ions by such corporat ions or relat ed
groups of persons wit h t he bank. (12-Ba)

Section 13. Corporate Stockholdings. - Two or more corporat ions owned or cont rolled by t he same family group
or same group of persons shall be considered relat ed int erest s and must be fully disclosed in all t ransact ions by
such corporat ions or relat ed group of persons wit h t he bank. (12-Ba)

Section 14. Certificate of Authority to Register. - T he Securit ies and Exchange Commission shall no regist er t he
art icles of incorporat ion of any bank, or any amendment t hereto, unless accompanied by a cert ificat e of
aut horit y issued by t he Monet ary Board, under it seal. Such cert ificat e shall not be issued unless t he Monet ary
Board is sat isfied from t he evidence submit t ed to it :

14.1 T hat all requirement s of exist ing laws and regulat ions to engage in t he business for which t he applicant is
proposed to be incorporat ed have been complied wit h;

14.2 T hat t he public int erest and economic condit ions, bot h general and local, just ify t he aut horizat ion; and

14.3 T hat t he amount of capit al, t he financing, organizat ion, direct ion and administ rat ion, as well as t he
int egrit y and responsibilit y of t he organizers and administ rators reasonably assure t he safet y of deposit s and
t he public int erest . (9)

T he Securit ies and Exchange Commission shall not regist er t he by-laws of any bank, or any amendment
t hereto, unless accompanied by a cert ificat e of aut horit y from t he Bangko Sent ral. (10)

Section 15. Board of Directors. - T he provisions of t he Corporat ion Code to t he cont rary not wit hst anding, t here
shall be at least five (5), and a maximum of fift een (15) members of t he board or directors of a bank, t wo (2) of
whom shall be independent directors. An "independent director" shall mean a person ot her t han an officer or
employee of t he bank, it s subsidiaries or affiliat es or relat ed int erest s. (n) Non-Filipino cit izens may become
members of t he board of directors of a bank to t he ext ent of t he foreign part icipat ion in t he equit y of said bank.
(Sec. 7, RA 7721) T he meet ings of t he board of directors may be conduct ed t hrough modern t echnologies such
as, but not limit ed to, t eleconferencing and video-conferencing. (n)

Section 16. Fit and Proper Rule. - To maint ain t he qualit y of bank management and afford bet t er prot ect ion to
depositors and t he public in general t he Monet ary Board shall prescribe, pass upon and review t he qualificat ions
and disqualificat ions of individuals elect ed or appoint ed bank directors or officers and disqualify t hose found
unfit . Aft er due not ice to t he board of directors of t he bank, t he Monet ary Board may disqualify, suspend or
remove any bank director or officer who commit s or omit s an act which render him unfit for t he posit ion. In
det ermining whet her an individual is fit and proper to hold t he posit ion of a director or officer of a bank, regard
shall be given to his int egrit y, experience, educat ion, t raining, and compet ence. (9-Aa)

Section 17. Directors of Merged or Consolidated Banks. - In t he case of a bank merger or consolidat ion, t he
number of directors shall not exceed t went y-one (21). (l3a)

Section 18. Compensation and Other Benefits of Directors and Officers. To prot ect t he finds of depositors and
creditors t he Monet ary Board may regulat e t he payment by t he bark to it s directors and officers of
compensat ion, allowance, fees, bonuses, stock opt ions, profit sharing and fringe benefit s only in except ional
cases and when t he circumst ances warrant , such as but not limit ed to t he following:

18.1. When a bank is under compt rollership or conservatorship; or

18.2. When a bank is found by t he Monet ary Board to be conduct ing business in an unsafe or unsound manner;
or

18.3. When a bank is found by t he Monet ary Board to be in an unsat isfactory financial condit ion. (n)

Section 19. Prohibition on Public Officials. - Except as ot herwise provided in t he Rural Banks Act , no appoint ive or
elect ive public official whet her full-t ime or part -t ime shall at t he same t ime serve as officer of any privat e bank,
save in cases where such service is incident to financial assist ance provided by t he government or a
government owned or cont rolled corporat ion to t he bank or unless ot herwise provided under exist ing laws. (13)

Section 20. Bank Branches. - Universal or commercial banks may open branches or ot her offices wit hin or out side
t he Philippines upon prior approval of t he Bangko Sent ral. Branching by all ot her banks shall be governed by
pert inent laws.

A bank may, subject to prior approval of t he Monet ary Board, use any or all of it s branches as out let s for t he
present at ion and/or sale of t he financial product s of it s allied undert aking or of it s invest ment house unit s. A
bank aut horized to est ablish branches or ot her offices shall be responsible for all business conduct ed in such
branches and offices to t he same ext ent and in t he same manner as t hough such business had all been
conduct ed in t he head office. A bank and it s branches and offices shall be t reat ed as one unit . (6-B; 27)

Section 21. Banking Days and Hours. - Unless ot herwise aut horized by t he Bangko Sent ral in t he int erest of t he
banking public, all banks including t heir branches and offices shall t ransact business on all working days for at
least six (6) hours a day. In addit ion, banks or any of t heir branches or offices may open for business on
Sat urdays, Sundays or holidays for at least t hree (3) hours a day: Provided, T hat banks which opt to open on
days ot her t han working days shall report to t he Bangko Sent ral t he addit ional days during which t hey or t heir
branches or offices shall t ransact business. For purposes of t his Sect ion, working days shall mean Mondays to
Fridays, except if such days are holidays. (6-Ca)

Section 22. Strikes and Lockouts. - T he banking indust ry is hereby declared as indispensable to t he nat ional
int erest and, not wit hst anding t he provisions of any law to t he cont rary, any st rike or lockout involving banks, if
unset t led aft er seven (7) calendar days shall be report ed by t he Bangko Sent ral to t he secret ary of Labor who
may assume jurisdict ion over t he disput e or decide it or cert ify t he sane to t he Nat ional Labor Relat ions
Commission for compulsory arbit rat ion. However, t he President of t he Philippines may at any t ime int ervene and
assume jurisdict ion over such labor disput e in order to set t le or t erminat e t he same. (6-E)

CHAPTER IV
DEPOSITS. LOANS AND OTHER OPERATIONS

Article I
Operations Of Universal Banks

Section 23. Powers of a Universal Bank - A universal bank shall have t he aut horit y to exercise, in addit ion to t he
powers aut horized for a commercial bank in Sect ion 29, t he powers of an invest ment house as provided in
exist ing laws and t he power to invest in non-allied ent erprises as provided in t his Act . (21-B)

Section 24. Equity Investments of a Universal Bank. - A universal bank may, subject to t he condit ions st at ed in t he
succeeding paragraph, invest in t he equit ies of allied and non-allied ent erprises as may be det ermined by t he
Monet ary Board. Allied ent erprises may eit her be financial or non-financial. Except as t he Monet ary Board may
ot herwise prescribe:

24.1. T he tot al invest ment in equit ies of allied and non-allied ent erprises shall not exceed fift y percent (50%) of
t he net wort h of t he bank; and

24.2. T he equit y invest ment in any one ent erprise, whet her allied or non-allied, shall not exceed t went y-five
percent (25%) of t he net wort h of t he bank.
As used in t his Act , "net wort h" shall mean t he tot al of t he unimpaired paid-in capit al including paid-in surplus,
ret ained earnings and undivided profit , net of valuat ion reserves and ot her adjust ment s as may be required by
t he Bangko Sent ral.

T he acquisit ion of such equit y or equit ies is subject to t he prior approval of t he Monet ary Board which shall
promulgat e appropriat e guidelines to govern such invest ment s. (21-Ba)

Section 25. Equity Investments of a Universal Bank in Financial Allied Enterprises. - A universal bank can own up to
one hundred percent (100%) of t he equit y in a t hrift bank, a rural bank or a financial allied ent erprise. A publicly-
list ed universal or commercial bank may own up to one hundred percent (100%) of t he vot ing stock of only one
ot her universal or commercial bank. (21-B; 21-Ca)

Section 26. Equity Investments of a Universal Bank in Non-Financial Allied Enterprises. - A universal bank may own up
to one hundred percent (100%) of t he equit y in a non-financial allied ent erprise. (21-Ba)

Section 27. Equity Investments of a Universal Bank in Non-Allied Enterprises. - T he equit y invest ment of a universal
bank, or of it s wholly or majorit y-owned subsidiaries, in a single non-allied ent erprise shall not exceed t hirt y-five
percent (35%) of t he tot al equit y in t hat ent erprise nor shall it exceed t hirt y-five percent (35%) of t he vot ing
stock in t hat ent erprise. (21-B)

Section 28. Equity Investments in Quasi-Banks. - To promot e compet it ive condit ions in financial market s, t he
Monet ary Board may furt her limit to fort y percent (40%) equit y invest ment s of universal banks in quasi-banks.
T his rule shall also apply in t he case of commercial banks. (12-E) Art icle II. Operat ions Of Commercial Banks

Section 29. Powers of a Commercial Bank. - A commercial bank shall have, in addit ion to t he general powers
incident to corporat ions, all such powers as may be necessary to carry on t he business of commercial banking
such as accept ing draft s and issuing let t ers of credit ; discount ing and negot iat ing promissory not es, draft s,
bills of exchange, and ot her evidences of debt ; accept ing or creat ing demand deposit s; receiving ot her t ypes of
deposit s and deposit subst it ut es; buying and selling foreign exchange and gold or silver bullion; acquiring
market able bonds and ot her debt securit ies; and ext ending credit , subject to such rules as t he Monet ary Board
may promulgat e. T hese rules may include t he det erminat ion of bonds and ot her debt securit ies eligible for
invest ment , t he mat urit ies and aggregat e amount of such invest ment .

Section 30. Equity Investments of a Commercial Bank. - A commercial bank may, subject to t he condit ions st at ed
in t he succeeding paragraphs, invest only in t he equit ies of allied ent erprises as may be det ermined by t he
Monet ary Board. Allied ent erprises may eit her be financial or non-financial. Except as t he Monet ary Board may
ot herwise prescribe:

30.1. T he tot al invest ment in equit ies of allied ent erprises shall not exceed t hirt y-five percent (35%) of t he net
wort h of t he bark; and

30.2. T he equit y invest ment in any one ent erprise shall not exceed t went y-five percent (25%) of t ile net wort h of
t he bank. T he acquisit ion of such equit y or equit ies is subject to t he prior approval of t he Monet ary Board which
shall promulgat e appropriat e guidelines to govern such invest ment .(2lA-a; 21-Ca)

Section 31. Equity Investments of a Commercial Bank in Financial Allied Enterprises. - A commercial bank may own
up to one hundred percent (100%) of t he equit y of a t hrift bank or a rural bank. Where t he equit y invest ment of a
commercial bank is in ot her financial allied ent erprises, including anot her commercial bank, such invest ment
shall remain a minorit y holding in t hat ent erprise. (21-Aa; 21-Ca)

Section 32. Equity Investments of a Commercial Bank in Non-Financial Allied Enterprises. A commercial bank may
own up to one hundred percent (100%) of t he equit y in a non-financial allied ent erprise. (21-Aa) Art icle III.
Provisions Applicable To All Banks, Quasi-Banks, And Trust Ent it ies

Section 33. Acceptance of Demand Deposits. - A bank ot her t han a universal or commercial bank cannot accept or
creat e demand deposit s except upon prior approval of, and subject to such condit ions and rules as may be
prescribed by t he Monet ary Board. (72-Aa)

Section 34. Risk-Based Capital. - T he Monet ary Board shall prescribe t he minimum rat io which t he net wort h of a
bank must bear to it s tot al risk asset s which may include cont ingent account s. For purposes of t his Sect ion,
t he Monet ary Board may require such rat io be det ermined on t he basis of t he net wort h and risk asset s of a
bank and it s subsidiaries, financial or ot herwise, as well as prescribe t he composit ion and t he manner of
det ermining t he net wort h and tot al risk asset s of banks and t heir subsidiaries: Provided, T hat in t he exercise of
t his aut horit y, t he Monet ary Board shall, to t he ext ent feasible conform to int ernat ionally accept ed st andards,
including t hose of t he Bank for Int ernat ional Set t lement s(BIS), relat ing to risk-based capit al requirement s:
Provided furt her, T hat it may alt er or suspend compliance wit h such rat io whenever necessary for a maximum
period of one (1) year: Provided, finally, T hat such rat io shall be applied uniformly to banks of t he same cat egory.
In case a bank does not comply wit h t he prescribed minimum rat io, t he Monet ary Board may limit or prohibit t he
dist ribut ion of net profit s by such bank and may require t hat part or all of t he net profit s be used to increase t he
capit al account s of t he bank unt il t he minimum requirement has been met T he Monet ary Board may,
furt hermore, rest rict or prohibit t he acquisit ion of major asset s and t he making of new invest ment s by t he
bank, wit h t he except ion of purchases of readily market able evidences of indebt edness of t he Republic of t he
Philippines and of t he Bangko Sent ral and any ot her evidences of indebt edness or obligat ions t he servicing and
repayment of which are fully guarant eed by t he Republic of t he Philippines, unt il t he minimum required capit al
rat io has been restored. In case of a bank merger or consolidat ion, or when a bank is under rehabilit at ion under a
program approved by t he Bangko Sent ral, Monet ary Board may t emporarily relieve t he surviving bank,
consolidat ed bank, or const it uent bank or corporat ions under rehabilit at ion from full compliance wit h t he
required capit al rat io under such condit ions as it may prescribe. Before t he effect ivit y of rules which t he
Monet ary Board is aut horized to prescribe under t his provision, Sect ion 22 of t he General Banking Act , as
amended, Sect ion 9 of t he T hrift Banks Act , and all pert inent rules issued pursuant t hereto, shall cont inue to be
in force. (22a)

Section 35. Limit on Loans, Credit Accommodations and Guarantees

35.1 Except as t he Monet ary Board may ot herwise prescribe for reasons of nat ional int erest , t he tot al amount
of loans, credit accommodat ions and guarant ees as may be defined by t he Monet ary Board t hat may be
ext ended by a bank to any person, part nership, associat ion, corporat ion or ot her ent it y shall at no t ime exceed
t went y percent (20%) of t he net wort h of such bank. T he basis for det ermining compliance wit h single borrower
limit is t he tot al credit commit ment of t he bank to t he borrower.

35.2. Unless t he Monet ary Board prescribes ot herwise, t he tot al amount of loans, credit accommodat ions and
guarant ees prescribed in t he preceding paragraph may be increased by an addit ional t en percent (10%) of t he
net wort h of such bank provided t he addit ional liabilit ies of any borrower are adequat ely secured by t rust
receipt s, shipping document s, warehouse receipt s or ot her similar document s t ransferring or securing t it le
covering readily market able, non-perishable goods which must be fully covered by insurance.

35.3 T he above prescribed ceilings shall include (a) t he direct liabilit y of t he maker or acceptor of paper
discount ed wit h or sold to such bank and t he liabilit y of a general endorser, drawer or guarantor who obt ains a
loan or ot her credit accommodat ion from or discount s paper wit h or sells papers to such bank; (b) in t he case of
an individual who owns or cont rols a majorit y int erest in a corporat ion, part nership, associat ion or any ot her
ent it y, t he liabilit ies of said ent it ies to such bank; (c) in t he case of a corporat ion, all liabilit ies to such bank of all
subsidiaries in which such corporat ion owns or cont rols a majorit y int erest ; and (d) in t he case of a part nership,
associat ion or ot her ent it y, t he liabilit ies of t he members t hereof to such bank.

35.4. Even if a parent corporat ion, part nership, associat ion, ent it y or an individual who owns or cont rols a
majorit y int erest in such ent it ies has no liabilit y to t he bank, t he Monet ary Board may prescribe t he combinat ion
of t he liabilit ies of subsidiary corporat ions or members of t he part nership, associat ion, ent it y or such individual
under cert ain circumst ances, including but not limit ed to any of t he following sit uat ions: (a) t he parent
corporat ion, part nership, associat ion, ent it y or individual guarant ees t he repayment of t he liabilit ies; (b) t he
liabilit ies were incurred for t he accommodat ion of t he parent corporat ion or anot her subsidiary or of t he
part nership or associat ion or ent it y or such individual; or (c) t he subsidiaries t hough separat e ent it ies operat e
merely as depart ment s or divisions of a single ent it y.

35.5. For purposes of t his Sect ion, loans, ot her credit accommodat ions and guarant ees shall exclude: (a) loans
and ot her credit accommodat ions secured by obligat ions of t he Bangko Sent ral or of t he Philippine Government :
(b) loans and ot her credit accommodat ions fully guarant eed by t he government as to t he payment of principal
and int erest ; (c) loans and ot her credit accommodat ions covered by assignment of deposit s maint ained in t he
lending bank and held in t he Philippines; (d) loans, credit accommodat ions and accept ances under let t ers of
credit to t he ext ent covered by margin deposit s; and (e) ot her loans or credit accommodat ions which t he
Monet ary Board may from t ime to t ime, specify as non-risk it ems.

35.6. Loans and ot her credit accommodat ions, deposit s maint ained wit h, and usual guarant ees by a bank to any
ot her bank or non-bank ent it y, whet her locally or abroad, shall be subject to t he limit s as herein prescribed.

35.7. Cert ain t ypes of cont ingent account s of borrowers may be included among t hose subject to t hese
prescribed limit s as may be det ermined by t he Monet ary Board.(23a)

Section 36. Restriction on Bank Exposure to Directors, Officers, Stockholders and Their Related Interests. - No director
or officer of any bank shall, direct ly or indirect ly, for himself or as t he represent at ive or agent of ot hers, borrow
from such bank nor shall he become a guarantor, endorser or suret y for loans from such bank to ot hers, or in
any manner be an obligor or incur any cont ract ual liabilit y to t he bank except wit h t he writ t en approval of t he
majorit y of all t he directors of t he bank, excluding t he director concerned: Provided, T hat such writ t en approval
shall not be required for loans, ot her credit accommodat ions and advances grant ed to officers under a fringe
benefit plan approved by t he Bangko Sent ral. T he required approval shall be ent ered upon t he records of t he
bank and a copy of such ent ry shall be t ransmit t ed fort hwit h to t he appropriat e supervising and examining
depart ment of t he Bangko Sent ral. Dealings of a bank wit h any of it s directors, officers or stockholders and t heir
relat ed int erest s shall be upon t erms not less favorable to t he bank t han t hose offered to ot hers. Aft er due
not ice to t he board of directors of t he bank, t he office of any bank director or officer who violat es t he provisions
of t his Sect ion may be declared vacant and t he director or officer shall be subject to t he penal provisions of t he
New Cent ral Bank Act . T he Monet ary Board may regulat e t he amount of loans, credit accommodat ions and
guarant ees t hat may be ext ended, direct ly or indirect ly, by a bank to it s directors, officers, stockholders and
t heir relat ed int erest s, as well as invest ment s of such bank in ent erprises owned or cont rolled by said directors,
officers, stockholders and t heir relat ed int erest s. However, t he out st anding loans, credit accommodat ions and
guarant ees which a bank may ext end to each of it s stockholders, directors, or officers and t heir relat ed
int erest s, shall be limit ed to an amount equivalent to t heir respect ive unencumbered deposit s and book value of
t heir paid-in capit al cont ribut ion in t he bank: Provided, however, T hat loans, credit accommodat ions and
guarant ees secured by asset s considered as non-risk by t he Monet ary Board shall be excluded from such limit :
Provided, furt her, T hat loans, credit accommodat ions and advances to officers in t he form of fringe benefit s
grant ed in accordance wit h rules as may be prescribed by t he Monet ary Board shall not be subject to t he
individual limit . T he Monet ary Board shall define t he t erm "relat ed int erest s." T he limit on loans, credit
accommodat ions and guarant ees prescribed herein shall not apply to loans, credit accommodat ions and
guarant ees ext ended by a cooperat ive bank to it s cooperat ive shareholders. (83a)

Section 37. Loans and Other Credit Accommodations Against Real Estate. - Except as t he Monet ary Board may
ot herwise prescribe, loans and ot her credit accommodat ions against real est at e shall not exceed sevent y-five
percent (75%) of t he appraised value of t he respect ive real est at e securit y, plus sixt y percent (60%) of t he
appraised value of t he insured improvement s, and such loans may be made to t he owner of t he real est at e or to
his assignees. (78a)

Section 38. Loans And Other Credit Accommodations on Security of Chattels and Intangible Properties. - Except as
t he Monet ary Board may ot herwise prescribe, loans and ot her credit accommodat ions on securit y of chat t els
and int angible propert ies such as, but not limit ed to, pat ent s, t rademarks, t rade names, and copyright s shall not
exceed sevent y-five percent (75%) of t he appraised value of t he securit y, an such loans and ot her credit
accommodat ion may be made to t he t it le-holder of t he chat t els and int angible propert ies or his assignees.
(78a)

Section 39. Grant and Purpose of Loans and Other Credit Accommodations. - A bank shall grant loans and ot her
credit accommodat ions only in amount s and for t he periods of t ime essent ial for t he effect ive complet ion of
t he operat ions to be financed. Such grant of loans and ot her credit accommodat ions shall be consist ent wit h
safe and sound banking pract ices. (75a) T he purpose of all loans and ot her credit accommodat ions shall be
st at ed in t he applicat ion and in t he cont ract bet ween t he bank and t he borrower. If t he bank finds t hat t he
proceeds of t he loan or ot her credit accommodat ion have been employed, wit hout it s approval, for purposes
ot her t han t hose agreed upon wit h t he bank, it shall have t he right to t erminat e t he loan or ot her credit
accommodat ion and demand immediat e repayment of t he obligat ion. (77)

Section 40. Requirement for Grant Of Loans or 0ther Credit Accommodations. - Before grant ing a loan or ot her credit
accommodat ion, a bank must ascert ain t hat t he debtor is capable of fulfilling his commit ment s to t he bank.
Toward t his end, a bank may demand from it s credit applicant s a st at ement of t heir asset s and liabilit ies and of
t heir income and expendit ures and such informat ion as may be prescribed by law or by rules and regulat ions of
t he Monet ary Board to enable t he bank to properly evaluat e t he credit applicat ion which includes t he
corresponding financial st at ement s submit t ed for t axat ion purposes to t he Bureau of Int ernal Revenue. Should
such st at ement s prove to be false or incorrect in any mat erial det ail, t he bank may t erminat e any loan or ot her
credit accommodat ion grant ed on t he basis of said st at ement s and shall have t he right to demand immediat e
repayment or liquidat ion of t he obligat ion. In formulat ing rules and regulat ions under t his Sect ion, t he Monet ary
Board shall recognize t he peculiar charact erist ics of micro financing, such as cash flow-based lending to t he
basic sectors t hat are not covered by t radit ional collat eral. (76a)

Section 41. Unsecured Loans or Other Credit Accommodations. - T he Monet ary Board is hereby aut horized to issue
such regulat ions as it may deem necessary wit h respect to unsecured loans or ot her credit accommodat ions
t hat may be grant ed by banks. (n)

Section 42. Other Security Requirements for Bank Credits. - T he Monet ary Board may, by regulat ion, prescribe
furt her securit y requirement s to which t he various t ypes of bank credit s shall be subject , and, in accordance
wit h t he aut horit y grant ed to it in Sect ion 106 of t he New Cent ral Bank Act , t he Board may by regulat ion, reduce
t he maximum rat ios est ablished in Sect ions 36 and 37 of t his Act , or, in special cases, increase t he maximum
rat ios est ablished t herein. (78)

Section 43. Authority to Prescribe Terms and Conditions of Loans and Other Credit Accommodations. - T he Monet ary
Board, may, similarly in accordance wit h t he aut horit y grant ed to it in Sect ion 106 of t he New Cent ral Bank Act ,
and t aking into account t he requirement s of t he economy for t he effect ive ut ilizat ion of long-t erm funds,
prescribe t he mat urit ies, as well as relat ed t erms and condit ions for various t ypes of bank loans and ot her
credit accommodat ions. Any change by t he Board in t he maximum mat urit ies, as well as relat ed t erms and
condit ions for various t ypes of bank loans and ot her credit accommodat ions. Any change by t he Board in t he
maximum mat urit ies shall apply only to loans and ot her credit accommodat ions made aft er t he dat e of such
act ion. T he Monet ary Board shall regulat e t he int erest imposed on micro finance borrowers by lending investors
and similar lenders such as, but not limit ed to, t he unconscionable rat es of int erest collect ed on salary loans
and similar credit accommodat ions. (78a)

Section 44. Amortization on Loans and Other Credit Accommodations. - T he amort izat ion schedule of bank loans
and ot her credit accommodat ions shall be adapt ed to t he nat ure of t he operat ions to be financed. In case of
loans and ot her credit accommodat ions wit h mat urit ies of more t han five (5) years, provisions must be made
for periodic amort izat ion payment s, but such payment s must be made at least annually: Provided, however,
T hat when t he borrowed funds are to be used for purposes which do not init ially produce revenues adequat e for
regular amort izat ion payment s t herefrom, t he bank may permit t he init ial amort izat ion payment to be deferred
unt il such t ime as said revenues are sufficient for such purpose, but in no case shall t he init ial amort izat ion dat e
be lat er t han five (5) years from t he dat e on which t he loan or ot her credit accommodat ion is grant ed. (79a) In
case of loans and ot her credit accommodat ions to micro finance sectors, t he schedule of loan amort izat ion
shall t ake into considerat ion t he project ed cash flow of t he borrower and adopt t his into t he t erms and
condit ions formulat ed by banks. (n)

Section 45. Prepayment of Loans and Other Credit Accommodations. - A borrower may at any t ime prior to t he
agreed mat urit y dat e prepay, in whole or in part , t he unpaid balance of any bank loan and ot her credit
accommodat ion, subject to such reasonable t erms and condit ions as may be agreed upon bet ween t he bank
and it s borrower. (80a)

Section 46. Development Assistance Incentives. - T he Bangko Sent ral shall provide incent ives to banks which,
wit hout government guarant ee, ext end loans to finance educat ional inst it ut ions cooperat ives, hospit als and
ot her medical services, socialized or low-cost housing, local government unit s and ot her act ivit ies wit h social
cont ent . (n)

Section 47. Foreclosure of Real Estate Mortgage. - In t he event of foreclosure, whet her judicially or ext ra-judicially,
of any mort gage on real est at e which is securit y for any loan or ot her credit accommodat ion grant ed, t he
mort gagor or debtor whose real propert y has been sold for t he full or part ial payment of his obligat ion shall have
t he right wit hin one year aft er t he sale of t he real est at e, to redeem t he propert y by paying t he amount due
under t he mort gage deed, wit h int erest t hereon at rat e specified in t he mort gage, and all t he cost s and
expenses incurred by t he bank or inst it ut ion from t he sale and custody of said propert y less t he income derived
t herefrom. However, t he purchaser at t he auct ion sale concerned whet her in a judicial or ext ra-judicial
foreclosure shall have t he right to ent er upon and t ake possession of such propert y immediat ely aft er t he dat e
of t he confirmat ion of t he auct ion sale and administ er t he same in accordance wit h law. Any pet it ion in court to
enjoin or rest rain t he conduct of foreclosure proceedings inst it ut ed pursuant to t his provision shall be given due
course only upon t he filing by t he pet it ioner of a bond in an amount fixed by t he court condit ioned t hat he will pay
all t he damages which t he bank may suffer by t he enjoining or t he rest raint of t he foreclosure proceeding.
Not wit hst anding Act 3135, juridical persons whose propert y is being sold pursuant to an ext rajudicial
foreclosure, shall have t he right to redeem t he propert y in accordance wit h t his provision unt il, but not aft er, t he
regist rat ion of t he cert ificat e of foreclosure sale wit h t he applicable Regist er of Deeds which in no case shall be
more t han t hree (3) mont hs aft er foreclosure, whichever is earlier. Owners of propert y t hat has been sold in a
foreclosure sale prior to t he effect ivit y of t his Act shall ret ain t heir redempt ion right s unt il t heir expirat ion. (78a)

Section 48. Renewal or Extension of Loans and Other Credit Accommodations. - T he Monet ary Board may, by
regulat ion, prescribe t he condit ions and limit at ions under which a bank may grant ext ensions or renewals of it s
loans and ot her credit accommodat ions. (81)

Section 49. Provisions for Losses and Write-Offs. - All debt s due to any bank on which int erest is past due and
unpaid for such period as may be det ermined by t he Monet ary Board, unless t he same are welt -secured and in
t he process of collect ion shall be considered bad debt s wit hin t he meaning of t his Sect ion. T he Monet ary Board
may fix, by regulat ion or by order in a specific case, t he amount of reserves for bad debt s or doubt ful account s
or ot her cont ingencies. Writ ing off of loans, ot her credit accommodat ions, advances and ot her asset s shall be
subject to regulat ions issued by t he Monet ary Board. (84a)

Section 50. Major Investments. - For t he purpose or enhancing bank supervision, t he Monet ary Board shall
est ablish crit eria for reviewing major acquisit ions of invest ment s by a bank including corporat e affiliat ions or
st ruct ures t hat may expose t he bank to undue risks or in any way hinder effect ive supervision.

Section 51. Ceiling on Investments in Certain Assets. - Any bank may acquire real est at e as shall be necessary for
it s own use in t he conduct of it s business: Provided, however, T hat t he tot al invest ment in such real est at e and
improvement s t hereof including bank equipment , shall not exceed fift y percent (50%) of combined capit al
account s: Provided, furt her, T hat t he equit y invest ment of a bank in anot her corporat ion engaged primarily in
real est at e shall be considered as part of t he bank's tot al invest ment in real est at e, unless ot herwise provided
by t he Monet ary Board. (25a)

Section 52. Acquisition of Real Estate by Way of Satisfaction of Claims. - Not wit hst anding t he limit at ions of t he
preceding Sect ion, a bank may acquire, hold or convey real propert y under t he following circumst ances:

52.1. Such as shall be mort gaged to it in good fait h by way of securit y for debt s;

52.2. Such as shall be conveyed to it in sat isfact ion of debt s previously cont ract ed in t he course of it s dealings,
or

52.3. Such as it shall purchase at sales under judgment s, decrees, mort gages, or t rust deeds held by it and such
as it shall purchase to secure debt s due it .

Any real propert y acquired or held under t he circumst ances enumerat ed in t he above paragraph shall be
disposed of by t he bank wit hin a period of five (5) years or as may be prescribed by t he Monet ary Board:
Provided, however, T hat t he bank may, aft er said period, cont inue to hold t he propert y for it s own use, subject to
t he limit at ions of t he preceding Sect ion. (25a)

Section 53. Other Banking Services. - In addit ion to t he operat ions specifically aut horized in t his Act , a bank may
perform t he following services:

53.1. Receive in custody funds, document s and valuable object s;

53.2. Act as financial agent and buy and sell, by order of and for t he account of t heir customers, shares,
evidences of indebt edness and all t ypes of securit ies;

53.3. Make collect ions and payment s for t he account of ot hers and perform such ot her services for t heir
customers as are not incompat ible wit h banking business;

53.4 Upon prior approval of t he Monet ary Board, act as managing agent , adviser, consult ant or administ rator of
invest ment management /advisory/consult ancy account s; and

53.5. Rent out safet y deposit boxes.

T he bank shall perform t he services permit t ed under Subsect ions 53.1, 53.2,53.3 and 53.4 as deposit ary or as
an agent . Accordingly, it shall keep t he funds, securit ies and ot her effect s which it receives duly separat e from
t he bank's own asset s and liabilit ies: T he Monet ary Board may regulat e t he operat ions aut horized by t his
Sect ion in order to ensure t hat such operat ions do not endanger t he int erest s of t he depositors and ot her
creditors of t he bank. In case a bank or quasi-bark not ifies t he Bangko Sent ral or publicly announces a bank
holiday, or in any manner suspends t he payment of it s deposit liabilit ies cont inuously for more t han t hirt y (30)
days, t he Monet ary Board may summarily and wit hout need for prior hearing close such banking inst it ut ion and
place it under receivership of t he Philippine Deposit Insurance Corporat ion. (72a)

Section 54. Prohibition to Act as Insurer. - A bank shall not direct ly engage in insurance business as t he insurer.
(73)

Section 55. Prohibited Transactions.

55.1. No director, officer, employee, or agent of any bank shall -

(a) Make false ent ries in any bank report or st at ement or part icipat e in any fraudulent t ransact ion,
t hereby affect ing t he financial int erest of, or causing damage to, t he bank or any person;

(b) Wit hout order of a court of compet ent jurisdict ion, disclose to any unaut horized person any
informat ion relat ive to t he funds or propert ies in t he custody of t he bank belonging to privat e individuals,
corporat ions, or any ot her ent it y: Provided, T hat wit h respect to bank deposit s, t he provisions of exist ing
laws shall prevail;

(c) Accept gift s, fees, or commissions or any ot her form of remunerat ion in connect ion wit h t he approval
of a loan or ot her credit accommodat ion from said bank;

(d) Overvalue or aid in overvaluing any securit y for t he purpose of influencing in any way t he act ions of t he
bank or any bank; or

(e) Out source inherent banking funct ions.

55.2. No borrower of a bank shall -

 (a) Fraudulent ly overvalue propert y offered as securit y for a loan or ot her credit accommodat ion from t he
bank;

(b) Furnish false or make misrepresent at ion or suppression of mat erial fact s for t he purpose of
obt aining, renewing, or increasing a loan or ot her credit accommodat ion or ext ending t he period t hereof;

(c) At t empt to defraud t he said bank in t he event of a court act ion to recover a loan or ot her credit
accommodat ion; or

(d) Offer any director, officer, employee or agent of a bank any gift , fee, commission, or any ot her form of
compensat ion in order to influence such persons into approving a loan or ot her credit accommodat ion
applicat ion.

55.3 No examiner, officer or employee of t he Bangko Sent ral or of any depart ment , bureau, office, branch or
agency of t he Government t hat is assigned to supervise, examine, assist or render t echnical assist ance to any
bank shall commit any of t he act s enumerat ed in t his Sect ion or aid in t he commission of t he same. (87-Aa)

T he making of false report s or misrepresent at ion or suppression of mat erial fact s by personnel of t he Bangko
Sent al ng Pilipinas shall be subject to t he administ rat ive and criminal sanct ions provided under t he New Cent ral
Bank Act .

55.4. Consist ent wit h t he provisions of Republic Act No. 1405, ot herwise known as t he Banks Secrecy Law, no
bank shall employ casual or non regular personnel or too lengt hy probat ionary personnel in t he conduct of it s
business involving bank deposit s.

Section 56. Conducting Business in an Unsafe or Unsound Manner - In det ermining whet her a part icular act or
omission, which is not ot herwise prohibit ed by any law, rule or regulat ion affect ing banks, quasi-banks or t rust
ent it ies, may be deemed as conduct ing business in an unsafe or unsound manner for purposes of t his Sect ion,
t he Monet ary Board shall consider any of t he following circumst ances:

56.1 T he act or omission has result ed or may result in mat erial loss or damage, or abnormal risk or danger to t he
safet y, st abilit y, liquidit y or solvency of t he inst it ut ion;

56.2 T he act or omission has result ed or may result in mat erial loss or damage or abnormal risk to t he
inst it ut ion's depositors, creditors, investors, stockholders or to t he Bangko Sent ral or to t he public in general;

56.3 T he act or omission has caused any undue injury, or has given any unwarrant ed benefit s, advant age or
preference to t he bank or any part y in t he discharge by t he director or officer of his dut ies and responsibilit ies
t hrough manifest part ialit y, evident bad fait h or gross inexcusable negligence; or

56.4 T he act or omission involves ent ering into any cont ract or t ransact ion manifest ly and grossly
disadvant ageous to t he bank, quasi-bank or t rust ent it y, whet her or not t he director or officer profit ed or will
profit t hereby.

Whenever a bank, quasi-bank or t rust ent it y persist s in conduct ing it s business in an unsafe or unsound manner,
t he Monet ary Board may, wit hout prejudice to t he administ rat ive sanct ions provided in Sect ion 37 of t he New
Cent ral Bank Act , t ake act ion under Sect ion 30 of t he same Act and/or immediat ely exclude t he erring bank
from clearing, t he provisions of law to t he cont rary not wit hst anding. (n)

Section 57. Prohibition on Dividend Declaration. - No bank or quasi-bank shall declare dividends, if at t he t ime of
declarat ion:

57.1 It s clearing account wit h t he Bangko Sent ral is overdrawn; or

57.2 It is deficient in t he required liquidit y floor for government deposit s for five (5) or more consecut ive days, or

57.3 It does not comply wit h t he liquidit y st andards/rat ios prescribed by t he Bangko Sent ral for purposes of
det ermining funds available for dividend declarat ion; or

57.4 It has commit t ed a major violat ion as may be det ermined by t he Bangko Sent ral (84a)

Section 58. Independent Auditor. - T he Monet ary Board may require a bank, quasi-bank or t rust ent it y to engage
t he services of an independent auditor to be chosen by t he bank, quasi-bank or t rust ent it y concerned from a
list of cert ified public account ant s accept able to t he Monet ary Board. T he t erm of t he engagement shall be as
prescribed by t he Monet ary Board which may eit her be on a cont inuing basis where t he auditor shall act as
resident examiner, or on t he basis of special engagement s; but in any case, t he independent auditor shall be
responsible to t he bank's, quasi-bank's or t rust ent it y's board of directors. A copy of t he report shall be
furnished to t he Monet ary Board. T he Monet ary Board may also direct t he board of directors of a bank, quasi-
bank, t rust y ent it y and/or t he individual members t hereof; to conduct , eit her personally or by a commit t ee
creat ed by t he board, an annual balance sheet audit of t he bank, quasi-bank or t rust ent it y to review t he int ernal
audit and cont rol syst em of t he bank, quasi-bank or t rust ent it y and to submit a report of such audit . (6-Da)

Section 59. Authority to Regulate Electronic Transactions. - T he Bangko Sent ral shall have full aut horit y to regulat e
t he use of elect ronic devices, such as comput ers, and processes for recording, storing and t ransmit t ing
informat ion or dat a in connect ion wit h t he operat ions of a bank; quasi-bank or t rust ent it y, including t he delivery
of services and product s to customers by such ent it y. (n)

Section 60. Financial Statements. - Every bank, quasi-bank or t rust ent it y shall submit to t he appropriat e
supervising and examining depart ment of t he Bangko Sent ral financial st at ement s in such form and frequency
as may be prescribed by t he Bangko Sent ral. Such st at ement s, which shall be as of a specific dat e designat ed
by t he Bangko Sent ral, shall show t hee act ual financial condit ion of t he inst it ut ion submit t ing t he st at ement ,
and of it s branches, offices, subsidiaries and affiliat es, including t he result s of it s operat ions, and shall cont ain
such informat ion as may be required in Bangko Sent ral regulat ions. (n)

Section 61. Publication of Financial Statements. - Every bank, quasi-bank or t rust ent it y, shall publish a st at ement
of it s financial condit ion, including t hose of it s subsidiaries and affiliat es, in such t erms underst andable to t he
layman and in such frequency as may be prescribed Bangko Sent ral, in English or Filipino, at least once every
quart er in a newspaper of general circulat ion in t he cit y or province where t he principal office, in t he case of a
domest ic inst it ut ion or t he principal branch or office in t he case of a foreign bank, is locat ed, but if no
newspaper is published in t he same province, t hen in a newspaper published in Met ro Manila or in t he nearest
cit y or province. T he Bangko Sent ral may by regulat ion prescribe t he newspaper where t he st at ement s
prescribed herein shall be published. T he Monet ary Board may allow t he post ing of t he financial st at ement s of a
bank, quasi-bank or t rust ent it y in public places it may det ermine, lieu of t he publicat ion required in t he
preceding paragraph, when warrant ed by t he circumst ances. Addit ionally, banks shall make available to t he
public in such form and manner as t he Bangko Sent ral may prescribe t he complet e set of it s audit ed financial
st at ement s as well as such ot her relevant informat ion including t hose on ent erprises majorit y-owned or
cont rolled by t he bank, t hat will inform t he public of t he t rue financial condit ion of a bank as of any given t ime. In
periods of nat ional and/or local emergency or of imminent panic which direct ly t hreat en monet ary and banking
st abilit y, t he Monet ary Board, by a vot e of at least five (5) of it s members, in special cases and upon applicat ion
of t he bank, quasi-bank or t rust ent it y, may allow such bank, quasi-bank or t rust ent it y to defer for a st at ed
period of t ime t he publicat ion of t he st at ement of financial condit ion required herein. (n)

Section 62. Publication of Capital Stock. - A bank, quasi-bank or t rust ent it y incorporat ed under t he laws of t he
Philippines shall not publish t he amount of it s aut horized or subscribed capit al stock wit hout indicat ing at t he
same t ime and wit h equal prominence, t he amount of it s capit al act ually paid up. No branch of any foreign bank
doing business in t he Philippines shall in any way announce t he amount of t he capit al and surplus of it s head
office, or of t he bank in it s ent iret y wit hout indicat ing at t he same t ime and wit h equal prominence t he amount
of t he capit al, if any, definit ely assigned to such branch, such fact shall be st at ed in, and shall form part of t he
publicat ion. (82)

Section 63. Settlement of Disputes. - T he provisions of any law to t he cont rary not wit hst anding, t he Bangko
Sent ral shall be consult ed by ot her government agencies or inst rument alit ies in act ions or proceedings init iat ed
by or brought before t hem involving cont roversies in banks, quasi-banks or t rust ent it ies arising out of and
involving relat ions bet ween and among t heir directors, officers or stockholders, as well as disput es bet ween any
or all of t hem and t he bank, quasi-bank or t rust ent it y of which t hey are directors, officers or stockholders. (n)

Section 64. Unauthorized Advertisement or Business Representation. - No person, associat ion, or corporat ion
unless duly aut horized to engage in t he business of a bank, quasi-bank, t rust ent it y, or savings and loan
associat ion as defined in t his Act , or ot her banking laws, shall advert ise or hold it self out as being engaged in
t he business of such bank, quasi-bank, t rust ent it y, or associat ion, or use in connect ion wit h it s business t it le,
t he word or words "bank", "banking", "banker", "quasi-bank", "quasi-banking", "quasi-banker", "savings and loan
associat ion", "t rust corporat ion", "t rust company" or words of similar import or t ransact in any manner t he
business of any such bank, corporat ion or associat ion. (6)

Section 65. Service Fees. - T he Bangko Sent ral may charge equit able rat es, commissions or fees, as may be
prescribed by t he Monet ary Board for supervision, examinat ion and ot her services which it renders under t his
Act . (n)

Section 66. Penalty for Violation of this Act. - Unless ot herwise herein provided, t he violat ion of any of t he
provisions of t his Act shall be subject to Sect ions 34, 35, 36 and 37 of t he New Cent ral Bank Act . If t he offender
is a director or officer of a bank, quasi-bank or t rust ent it y, t he Monet ary Board may also suspend or remove
such director or officer. If t he violat ion is commit t ed by a corporat ion, such corporat ion may be dissolved by quo
warranto proceedings inst it ut ed by t he Solicitor General. (87)
 CHAPTER V
PLACEMENT UNDER CONSERVATORSHIP

Section 67. Conservatorship. - T he grounds and procedures for placing a bank under conservatorship, as well as,
t he powers and dut ies of t he conservator appoint ed for t he bank shall be governed by t he provisions of Sect ion
29 and t he last t wo paragraphs of Sect ion 30 of t he New Cent ral Bank Act : Provided, T hat t his Sect ion shall also
apply to conservatorship proceedings of quasi-banks. (n)

CHAPTER VI
CESSATION OF BANKING BUSINESS

Section 68. Voluntary Liquidation. - In case of volunt ary liquidat ion of any bank organized under t he laws of t he
Philippines, or of any branch or office in t he Philippines of a foreign bank, writ t en not ice of such liquidat ion shall
be sent to t he Monet ary Board before such liquidat ion shall be sent to t he Monet ary Board before such
liquidat ion is undert aken, and t he Monet ary Board shall have t he right to int ervene and t ake such st eps as may
be necessary to prot ect t he int erest s of creditors. (86)

Section 69. Receivership and Involuntary Liquidation. - T he grounds and procedures for placing a bank under
receivership or liquidat ion, as well as t he powers and dut ies of t he receiver or liquidator appoint ed for t he bank
shall be governed by t he provisions of Sect ions 30, 31, 32, and 33 of t he New Cent ral Bank Act : Provided, T hat
t he pet it ioner or plaint iff files wit h t he clerk or judge of t he court in which t he act ion is pending a bond, execut ed
in favor of t he Bangko Sent ral, in an amount to be fixed by t he court . T his Sect ion shall also apply to t he ext ent
possible to t he receivership and liquidat ion proceedings of quasi-banks. (n)

Section 70. Penalty for Transactions After a Bank Becomes Insolvent. - Any director or officer of any bank declared
insolvent or placed under receivership by t he Monet ary Board who refuses to t urn over t he bank's records and
asset s to t he designat ed receivers, or who t ampers wit h banks records, or who appropriat es for himself for
anot her part y or dest roys or causes t he misappropriat ion and dest ruct ion of t he bank's asset s, or who receives
or permit s or causes to be received in said bank any deposit , collect ion of loans and/or receivables, or who pays
out or permit s or causes to be t ransferred any securit ies or propert y of said bank shall be subject to t he penal
provisions of t he New Cent ral Bank Act . (85a)

CHAPTER VII
LAWS GOVERNING OTHER T YPES OF BANKS

Section 71. Other Banking Laws. - T he organizat ion, t he ownership and capit al requirement s, powers, supervision
and general conduct of business of t hrift banks, rural banks and cooperat ive banks shall be governed by t he
provisions of t he T hrift Banks Act , t he Rural Banks Act , and t he Cooperat ive Code, respect ively. T he
organizat ion, ownership and capit al requirement s, powers, supervision and general conduct of business of
Islamic banks shall be governed by special laws. T he provisions of t his Act , however, insofar as t hey are not in
conflict wit h t he provisions of t he T hrift Banks Act , t he Rural Banks Act , and t he Cooperat ive Code shall likewise
apply to t hrift banks, rural banks, and cooperat ive banks, respect ively. However, for purposes of prescribing t he
minimum rat io which t he net wort h of a t hrift bank must bear to it s tot al risk asset s, t he provisions of Sect ion
33 of t his Act shall govern. (n)

CHAPTER VIII
FOREIGN BANKS

Section 72. Transacting Business in the Philippines. - T he ent ry of foreign banks in t he Philippines t hrough t he
est ablishment of branches shall be governed by t he provisions of t he Foreign Banks Liberalizat ion Act . T he
conduct of offshore banking business in t he Philippines shall be governed by t he provisions of t he President ial
Decree No. 1034, ot herwise known as t he "Offshore Banking Syst em Decree." (14a)

Section 73. Acquisition of Voting Stock in a Domestic Bank. - Wit hin seven (7) years from t he effect ivit y of t his act
and subject to guidelines issued pursuant to t he Foreign Banks Liberalizat ion Act , t he Monet ary Board may
aut horize a foreign bank to acquire up to one hundred percent (100%) of t he vot ing stock of only one (1) bank
organized under t he laws of t he Republic of t he Philippines. Wit hin t he same period, t he Monet ary Board may
aut horize any foreign bank, which prior to t he effect ivit y of t his Act availed it self of t he privilege to acquire up to
sixt y percent (60%) of t he vot ing stock of a bank under t he Foreign Banks Liberalizat ion Act and t he T hrift Banks
Act , to furt her acquire vot ing shares such bank to t he ext ent necessary for it to own one hundred percent
(100%) of t he vot ing stock t hereof. In t he exercise of t he aut horit y, t he Monet ary Board shall adopt measures
as may be necessary to ensure t hat at all t imes t he cont rol of sevent y percent (70%) of t he resources or
asset s of t he ent ire banking syst em is held by banks which are at least majorit y-owned by Filipinos. Any right ,
privilege or incent ive grant ed to a foreign bank under t his Sect ion shall be equally enjoyed by and ext ended under
t he same condit ions to banks organized under t he laws of t he Republic of t he Philippines. (Secs. 2 and 3, RA
7721
Section 74. Local Branches of Foreign Banks. - In t he case of a foreign bank which has more t han one (1) branch in
t he Philippines, all such branches shall be t reat ed as one (1) unit for t he purpose of t his Act , and all references
to t he Philippine branches of foreign banks shall be held to refer to such unit s. (68)

Section 75. Head Office Guarantee. - In order to provide effect ive prot ect ion of t he int erest s of t he depositors
and ot her creditors of Philippine branches of a foreign bank, t he head office of such branches shall fully
guarant ee t he prompt payment of all liabilit ies of it s Philippine branch. (69) Resident s and cit izens of t he
Philippines who are creditors of a branch in t he Philippines of a foreign bank shall have preferent ial right s to t he
asset s of such branch in accordance wit h t he exist ing laws. (19)

Section 76. Summons and Legal Process. - Summons and legal process served upon t he Philippine agent or head
of any foreign bank designat ed to accept service t hereof shall give jurisdict ion to t he court s over such bank,
and service of not ices on such agent or head shall be as binding upon t he bank which he represent s as if made
upon t he bank it self. Should t he aut horit y of such agent or head to accept service of summons and legal
processes for t he bank or not ice to it be revoked, or should such agent or head become ment ally incompet ent
or ot herwise unable to accept service while exercising such aut horit y, it shall be t he dut y of t he bank to name
and designat e prompt ly anot her agent or head upon whom service of summons and processes in legal
proceedings against t he bank and of not ices affect ing t he bank may be made, and to file wit h t he Securit ies
and Exchange Commission a duly aut hent icat ed nominat ion of such agent . In t he absence of t he agent or head
or should t here be no person aut horized by t he bank upon whom service of summons, processes and all legal
not ices may be made, service of summons, processes and legal not ices may be made upon t he Bangko Sent ral
Deput y Governor In-Charge of t he supervising and examining depart ment s and such service shall be as
effect ive as if made upon t he bank or it s duly aut horized agent or head. In case of service for t he bank upon t he
Bangko Sent ral Deput y Governor In-charge of t he supervising and examining depart ment s, t he said deput y
Governor shill regist er and t ransmit by mail to t he president or t he secret ary of t he bank at it s head or principal
office a copy, duly cert ified by him, of t he summons, process, or not ice. T he sending of such copy of t he
summons, process, or not ice shall be a necessary part of t he services and shall complet e t he service. T he
regist ry receipt of mailing shall be prima facie evidence of t he t ransmission of t he summons, process or not ice.
All cost s necessarily incurred by t he said Deput y Governor for t he making and mailing and sending of a copy of
t he summons, process, or not ice to t he president or t he secret ary of t he bank at it s head or principal office shall
be paid in advance by t he part y at whose inst ance t he service is made. (17)

Section 77. Laws Applicable. - In all mat t ers not specifically covered by special provisions applicable only to a
foreign bank or it s branches and ot her offices in t he Philippines any foreign bank licensed to do business in t he
Philippines shall be bound by t he provisions of t his Act , all ot her laws, rules and regulat ions applicable to banks
organized under t he laws of t he Philippines of t he same class, except t hose t hat provide for t he creat ion,
format ion, organizat ion or dissolut ion of corporat ions or for t he fixing of t he relat ions, liabilit ies, responsibilit ies,
or dut ies of stockholders, members, directors or officers of corporat ions to each ot her or to t he corporat ion.
(18)

Section 78. Revocation of License of a Foreign Bank - T he Monet ary Board may revoke t he license to t ransact
business in t he Philippines of, any foreign bank, if it finds t hat t he foreign bank is insolvent or in imminent danger
t hereof or t hat it s cont inuance in business will involve probable loss to t hose t ransact ing business wit h it . Aft er
t he revocat ion of it s license, it shall be unlawful for any such foreign banks to t ransact business in t he
Philippines unless it s license is renewed or reissued. Aft er t he revocat ion of such license, t he Bangko Sent ral
shall t ake t he necessary act ion to prot ect t he creditors of such foreign bank and t he public. T he provisions of
t he New Cent ral Bank Act on sanct ions and penalt ies shall likewise be applicable. (16)

CHAPTER IX
TRUST OPERATIONS

Section 79. Authority to Engage in Trust Business. - Only a stock corporat ion or a person duly aut horized by t he
Monet ary Board to engage in t rust business shall act as a t rust ee or administ er any t rust or hold propert y in
t rust or on deposit for t he use, benefit , or behoof of ot hers. For purposes of t his Act , such a corporat ion shall be
referred to as a t rust ent it y. (56a; 57a)

Section 80. Conduct of Trust Business. - A t rust ent it y shall administ er t he funds or propert y under it s custody
wit h t he diligence t hat a prudent man would exercise in t he conduct of an ent erprise of a like charact er and wit h
similar aims. No t rust ent it y shall, for t he account of t he t rustor or t he beneficiary of t he t rust , purchase or
acquire propert y from, or sell, t ransfer, assign, or lend money or propert y to, or purchase debt inst rument s of,
any of t he depart ment s, directors, officers, stockholders, or employees of t he t rust ent it y, relat ives wit hin t he
first degree of consanguinit y or affinit y, or t he relat ed int erest s, of such directors, officers and stockholders,
unless t he t ransact ion is specifically aut horized by t he t rustor and t he relat ionship of t he t rust ee and t he ot her
part y involved in t he t ransact ion is fully disclosed to t he t rustor of beneficiary of t he t rust prior to t he
t ransact ion. T he Monet ary Board shall promulgat e such rules and regulat ions as may be necessary to prevent
circumvent ion of t his prohibit ion or t he evasion of t he responsibilit y herein imposed on a t rust ent it y. (56)
Section 81. Registration of Articles of Incorporation and By-Laws of a Trust Entity. - T he Securit ies and Exchange
Commission shall not regist er t he art icles of incorporat ion and by-laws or any amendment t hereto, of any t rust
ent it y, unless accompanied by a cert ificat e of aut horit y issued by t he Bangko Sent ral. (n)

Section 82. Minimum Capitalization. - A t rust ent it y, before it can engage in t rust or ot her fiduciary business, shall
comply wit h t he minimum paid-in capit al requirement which will be det ermined by t he Monet ary Board. (n)

Section 83. Powers of a Trust Entity. - A t rust ent it y, in addit ion to t he general powers incident to corporat ions,
shall have t he power to:

83.1 Act as t rust ee on any mort gage or bond issued by any municipalit y, corporat ion, or any body polit ic and to
accept and execut e any t rust consist ent wit h law;

83.2 Act under t he order or appoint ment of any court as guardian, receiver, t rust ee, or deposit ary of t he est at e
of any minor or ot her incompet ent person, and as receiver and deposit ary of any moneys paid into court by
part ies to any legal proceedings and of propert y of any kind which may be brought under t he jurisdict ion of t he
court ;

83.3. Act as t he executor of any will when it is named t he executor t hereof;

83.4 Act as administ rator of t he est at e of any deceased person, wit h t he will annexed, or as administ rator of
t he est at e of any deceased person when t here is no will;

83.5. Accept and execut e any t rust for t he holding, management , and administ rat ion of any est at e, real or
personal, and t he rent s, issues and profit s t hereof; and

83.6. Est ablish and manage common t rust funds, subject to such rules and regulat ions as may be prescribed by
t he Monet ary Board.

Section 84. Deposit for the Faithful Performance of Trust Duties. - Before t ransact ing t rust business, every t rust
ent it y shall deposit wit h t he Bangko Sent ral, as securit y for t he fait hful performance of it s t rust dut ies, cash or
securit ies approved by t he Monet ary Board in an amount equal to or not less t han Five hundred t housand pesos
(P500,000.00) or such higher amount as may fixed by t he Monet ary Board: Provided, however, T hat t he Monet ary
Board shall require every t rust ent it y to increase t he amount of it s cash or securit ies on deposit wit h t he
Bangko Sent ral in accordance wit h t he provisions of t his paragraph. Should t he capit al and surplus fall below
said amount , t he Monet ary Board shall have t he same aut horit y as t hat grant ed to it under t he provisions of t he
fift h paragraph of Sect ion 34 of t his Act . A t rust ent it y so long as it shall cont inue to be solvent and comply wit h
laws or regulat ions shall have t he right to collect t he int erest earned on such securit ies deposit ed wit h t he
Bangko Sent ral and, from t ime to t ime, wit h t he approval of t he Bangko Sent ral, to exchange t he securit ies for
ot hers. If t he t rust ent it y fails to comply wit h any law or regulat ion, t he Bangko Sent ral shall ret ain such int erest
on t he securit ies deposit ed wit h it for t he benefit of right ful claimant s. Al claims rising out of t he t rust business
of a t rust ent it y shall have priorit y over all ot her claims as regards t he cash or securit ies deposit ed as above
provided. T he Monet ary Board may not permit t he cash or securit ies deposit ed in accordance wit h t he
provisions of t his Sect ion to be reduced below t he prescribed minimum amount unt il t he deposit ing ent it y shall
discont inue it s t rust business and shall sat isfy t he Monet ary Board t hat it has complied wit h all it s obligat ions
in connect ion wit h such business. (65a)

Section 85. Bond of Certain Persons for the Faithful Performance of Duties. - Before an executor, administ rator,
guardian, t rust ee, receiver or deposit ary appoint ed by t he court ent ers upon t he execut ion of his dut ies, he shall,
upon order of t he court , file a bond in such sum as t he court may direct . Upon t he applicat ion of any executor,
administ rator, guardian, t rust ee, receiver, deposit ary or any ot her person in int erest , t he court may, aft er not ice
and hearing, order t hat t he subject mat t er of t he t rust or any part , t hereof be deposit ed wit h a t rust ent it y.
Upon present at ion of proof to t he court t hat t he subject mat t er of t he t rust has been deposit ed wit h a t rust
ent it y. Upon present at ion of proof to t he court t hat t he subject mat t er of t he t rust has been deposit ed wit h a
t rust ent it y, t he court may order t hat t he bond given by such persons for t he fait hful performance of t heir
dut ies be reduced to such sums as it may deem proper: Provided, however, T hat t he reduced bond shall be
sufficient to secure adequat ely t he proper administ rat ion and care of any propert y remaining under t he cont rol
of such persons and t he proper account ing for such propert y. Propert y deposit ed wit h any t rust ent it y in
conformit y wit h t his Sect ion shall be held by such ent it y under t he orders and direct ion of t he court . (59)

Section 86. Exemption of Trust Entity from Bond Requirement. - No bond or ot her securit y shall be required by t he
court from a t rust ent ry for t he fait hful performance of it s dut ies as court -appoint ed t rust ee, executor,
administ rator, guardian, receiver, or deposit ary. However, t he court may, upon proper applicat ion wit h it showing
special cause t herefore, require t he t rust ent it y to post a bond or ot her securit y for t he prot ect ion of funds or
propert y confided to such ent it y. (59)
Section 87. Separation of Trust Business from General Business. - T he t rust business and all funds, propert ies or
securit ies received by any t rust ent it y as executor, administ rator, guardian, t rust ee, receiver, or deposit ary shall
be kept separat e and dist inct from t he general business including all ot her funds, propert ies, and asset s of
such t rust ent it y. T he account s of all such funds, propert ies, or securit ies shall likewise be kept separat e and
dist inct from t he account s of t he general business of t he t rust ent it y. (61)

Section 88. Investment Limitations of a Trust Entity. - Unless ot herwise direct ed by t he inst rument creat ing t he
t rust , t he lending and invest ment of funds and ot her asset s acquired by a t rust ent it y as executor,
administ rator, guardian, t rust ee, receiver or deposit ary of t he est at e of any minor or ot her incompet ent person
shall be limit ed to loans or invest ment s as may be prescribed by law, t he Monet ary Board or any court of
compet ent jurisdict ion. (63a)

Section 89. Real Estate Acquired by a Trust Entity. - Unless ot herwise specifically direct ed by t he t rustor or t he
nat ure of t he t rust , real est at e acquired by a t rust ent it y in what ever manner and for what ever purposes, shall
likewise be governed by t he relevant provisions of Sect ion 52 of t his Act . (64a)

Section 90. Investment of Non-Trust Funds. - T he invest ment of funds ot her t han t rust funds of a t rust ent it y
which is a bank, financing company or an invest ment house shall be governed by t he relevant provisions of t his
Act and ot her applicable laws. (64)

Section 91. Sanctions and Penalties. - A t rust ent it y or any of it s officers and directors found to have willfully
violat ed any pert inent provisions of t his Act , shall be subject to t he sanct ions and penalt ies provided t inder
Sect ion 66 of t his Act as well as Sect ions 36 and 37 of t he New Cent ral Bank Act .

Section 92. Exemption of Trust Assets from Claims. - No asset s held by a t rust ent it y in it s capacit y as t rust ee
shall be subject to any claims ot her t han t hose of t he part ies int erest ed in t he specific t rust s. (65)

Section 93. Establishment of Branches of a Trust Entity. - T he ordinary business of a t rust ent it y shall be
t ransact ed at t he place of business specified in it s art icles of incorporat ion. Such t rust ent it y may, wit h prior
approval of t he Monet ary Board, est ablish branches in t he Philippines and t he said ent it y shall be responsible for
all business conduct ed in such branches to t he same ext ent and in t he same manner as t hough such business
had all been conduct ed in t he head office. For t he purpose of t his Act , t he t rust ent it y and it s branches shall be
t reat ed as one unit . (67)

CHAPTER X
FINAL PROVISIONS

Section 94. Phase Out of Bangko Sentral Powers Over Building and Loan Associations. - Wit hin a period of t hree (3)
years from t he effect ivit y of t his Act , t he Bangko Sent ral shall phase out and t ransfer it s supervising and
regulatory powers over building and loan associat ions to t he Home Insurance and Guarant y Corporat ion which
shall assume t he same. Unt il ot herwise provided bylaw1 building and loan associat ions shall cont inue to be
governed by Sect ions 39 to 55, Chapt er VI of t he General Banking Act , as amended, including such rules and
regulat ions issued pursuant t hereto. Upon assumpt ion by t he Home Insurance and Guarant y Corporat ion of
supervising and regulatory powers over building and loan associat ions, a references in Sect ions 39 to 55 of t he
General Banking Act , as amended, to t he Bangko Sent ral and t he Monet ary Board shall be deemed to refer to t he
Home Insurance and Guarant y Corporat ion and it s board of directors, respect ively. (n)

Section 95. Repealing Clause. - Except as may be provided for in Sect ions 34 and 94 of t his Act , t he General
Banking Act , as amended, and t he provisions of any ot her law, special chart ers, rule or regulat ion issued
pursuant to said General Banking Act , as amended, or part s t hereof, which may be inconsist ent wit h t he
provisions of t his Act are hereby repealed. T he provisions of paragraph 8, Sect ion 8, Republic Act No. 3591, as
amended by republic Act No. 7400, are likewise repealed. (90a)

Section 96. Separability Clause. - If any provision or sect ion of t his Act or t he applicat ion t hereof to any person or
circumst ance is held invalid, t he ot her provisions or sect ions of t his Act , and t he applicat ion of such provision or
sect ion to ot her persons or circumst ances shall not be affect ed t hereby. (n)

Section 97. Effectivity Clause - T his Act shall t ake effect fift een (15) days following it s publicat ion in t he Official
Gazet t e or in t wo (2) nat ional newspapers of general circulat ion. (91)

Approved,

FRANKLIN M. DRILON
President of the Senate

MANUEL B. VILLAR JR.

Speaker of the House of Representatives