General Banking Law, As Amended

May 23, 2000
REPUBLIC ACT NO. 8791
AN ACT PROVIDING FOR THE REGULATION OF THE ORGANIZATION AND OPERATIONS OF BANKS, QUASI-BANKS, TRUST ENTITIES AND FOR OTHER PURPOSES
CHAPTER I Title and Classification of Banks SECTION 1. Title. The short title of this Act shall be "The General Banking Law of 2000." (1a) SECTION 2. Declaration of Policy. The State recognizes the vital role of banks in providing an environment conducive to the sustained development of the national economy and the fiduciary nature of banking that requires high standards of integrity and performance. In furtherance thereof, the State shall promote and maintain a stable and efficient banking and financial system that is globally competitive, dynamic and responsive to the demands of a developing economy. (n)
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SECTION 3. 3.1. 3.2.
Definition and Classification of Banks.
"Banks" shall refer to entities engaged in the lending of funds obtained in the form of deposits. (2a) Banks shall be classified into: (a) (b) (c) Universal banks; Commercial banks; Thrift banks, composed of: (i) Savings and mortgage banks, (ii) Stock savings and loan associations, and (iii) Private development banks, as defined in Republic Act No.
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7906 (hereafter the "Thrift Banks Act"); (d) (e) (f) Rural banks, as defined in Republic Act No. 7353 (hereafter the "Rural Banks Act"); Cooperative banks, as defined in Republic Act No. 6938 (hereafter the "Cooperative Code"); Islamic banks as defined in Republic Act No. 6848, otherwise known as the "Charter of Al Amanah Islamic Investment Bank of the Philippines"; and Other classifications of banks as determined by the Monetary Board of the Bangko Sentral ng Pilipinas. (6-Aa) CHAPTER II Authority of the Bangko Sentral SECTION 4. Supervisory Powers. The operations and activities of banks shall be subject to supervision of the Bangko Sentral. "Supervision" shall include the following: 4.1. The issuance of rules of conduct or the establishment of standards of operation for uniform application to all institutions or functions covered, taking into consideration the distinctive character of the operations of institutions and the substantive similarities of specific functions to which such rules, modes or standards are to be applied;
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The conduct of examination to determine compliance with laws and regulations if the circumstances so warrant as determined by the Monetary Board; Overseeing to ascertain that laws and regulations are complied with; Regular investigation which shall not be oftener than once a year from the last date of examination to determine whether an institution is conducting its business on a safe or sound basis: Provided, That the deficiencies/irregularities found by or
4.3. 4.4.
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discovered by an audit shall be immediately addressed; 4.5. 4.6. Inquiring into the solvency and liquidity of the institution (2-D); or Enforcing prompt corrective action. (n)
The Bangko Sentral shall also have supervision over the operations of and exercise regulatory powers over quasi-banks, trust entities and other financial institutions which under special laws are subject to Bangko Sentral supervision. (2-Ca) For the purposes of this Act, "quasi-banks" shall refer to entities engaged in the borrowing of funds through the issuance, endorsement or assignment with recourse or acceptance of deposit substitutes as defined in Section 95 of Republic Act No. 7653 (hereafter the "New Central Bank Act") for purposes of relending or purchasing of receivables and other obligations. (2-Da) SECTION 5. Policy Direction; Ratios, Ceilings and Limitations. The Bangko Sentral shall provide policy direction in the areas of money, banking and credit. (n) For this purpose, the Monetary Board may prescribe ratios, ceilings, limitations, or other forms of regulation on the different types of accounts and practices of banks and quasi-banks which shall, to the extent feasible, conform to internationally accepted standards, including those of the Bank for International Settlements (BIS). The Monetary Board may exempt particular categories of transactions from such ratios, ceilings and limitations, but not limited to exceptional cases or to enable a bank or quasi-bank under rehabilitation or during a merger or consolidation to continue in business with safety to its creditors, depositors and the general public. (2-Ca) SECTION 6. Authority to Engage in Banking and Quasi-Banking Functions. No person or entity shall engage in banking operations or quasi-banking functions without authority from the Bangko Sentral: Provided, however, That an entity authorized by the Bangko Sentral to perform universal or commercial banking functions shall likewise have the authority to engage in quasi-banking functions. The determination of whether a person or entity is performing banking or quasi-banking functions without Bangko Sentral authority shall be decided by the Monetary Board. To resolve such issue, the Monetary Board may, through the
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appropriate supervising and examining department of the Bangko Sentral, examine, inspect or investigate the books and records of such person or entity. Upon issuance of this authority, such person or entity may commence to engage in banking operations or quasi-banking functions and shall continue to do so unless such authority is sooner surrendered, revoked, suspended or annulled by the Bangko Sentral in accordance with this Act or other special laws. The department head and the examiners of the appropriate supervising and examining department are hereby authorized to administer oaths to any such person, employee, officer, or director of any such entity and to compel the presentation or production of such books, documents, papers or records that are reasonably necessary to ascertain the facts relative to the true functions and operations of such person or entity. Failure or refusal to comply with the required presentation or production of such books, documents, papers or records within a reasonable time shall subject the persons responsible therefor to the penal sanctions provided under the New Central Bank Act. Persons or entities found to be performing banking or quasi-banking functions without authority from the Bangko Sentral shall be subject to appropriate sanctions under the New Central Bank Act and other applicable laws. (4a) SECTION 7. Examination by the Bangko Sentral. The Bangko Sentral shall, when examining a bank, have the authority to examine an enterprise which is wholly or majority-owned or controlled by the bank. (21-Ba) CHAPTER III Organization, Management and Administration of Banks, Quasi-Banks and Trust Entities SECTION 8. Organization. The Monetary Board may authorize the organization of a bank or quasi-bank subject to the following conditions: 8.1. 8.2. 8.3. That the entity is a stock corporation (7); That its funds are obtained from the public, which shall mean twenty (20) or more persons (2-Da); and That the minimum capital requirements prescribed by the Monetary Board for each category of banks are satisfied. (n)
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No new commercial bank shall be established within three (3) years from the effectivity of this Act. In the exercise of the authority granted herein, the Monetary Board shall take into consideration their capability in terms of their financial resources and technical expertise and integrity. The bank licensing process shall incorporate an assessment of the bank's ownership structure, directors and senior management, its operating plan and internal controls as well as its projected financial condition and capital base. SECTION 9. Issuance of Stocks. The Monetary Board may prescribe rules and regulations on the types of stock a bank may issue, including the terms thereof and rights appurtenant thereto to determine compliance with laws and regulations governing capital and equity structure of banks: Provided, That banks shall issue par value stocks only. SECTION 10. Treasury Stocks. No bank shall purchase or acquire shares of its own capital stock or accept its own shares as a security for a loan, except when authorized by the Monetary Board: Provided, That in every case the stock so purchased or acquired shall, within six (6) months from the time of its purchase or acquisition, be sold or disposed of at a public or private sale. (24a)
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SECTION 11. Foreign Stockholdings. Foreign individuals and non-bank corporations may own or control up to forty percent (40%) of the voting stock of a domestic bank. This rule shall apply to Filipinos and domestic non-bank corporations. (12a; 12-Aa) The percentage of foreign-owned voting stocks in a bank shall be determined by the citizenship of the individual stockholders in that bank. The citizenship of the corporation which is a stockholder in a bank shall follow the citizenship of the controlling stockholders of the corporation, irrespective of the place of incorporation. (n) SECTION 12. Stockholdings of Family Groups or Related Interests. Stockholdings of individuals related to each other within the fourth degree of consanguinity or affinity, legitimate or common-law, shall be considered family groups or related interests and must be fully disclosed in all transactions by such an individual with the bank. (12-Da) SECTION 13. Corporate Stockholdings. Two or more corporations owned or controlled by the same family group or same group of persons shall be considered related interests and must be fully disclosed in all transactions by such
corporations or related groups of persons with the bank. (12-Ba) SECTION 14. Certificate of Authority to Register. The Securities and Exchange Commission shall not register the articles of incorporation of any bank, or any amendment thereto, unless accompanied by a certificate of authority issued by the Monetary Board, under its seal. Such certificate shall not be issued unless the Monetary Board is satisfied from the evidence submitted to it: 14.1. That all requirements of existing laws and regulations to engage in the business for which the applicant is proposed to be incorporated have been complied with; 14.2. That the public interest and economic conditions, both general and local, justify the authorization; and 14.3. That the amount of capital, the financing, organization, direction and administration, as well as the integrity and responsibility of the organizers and administrators reasonably assure the safety of deposits and the public interest. (9) The Securities and Exchange Commission shall not register the by-laws of any bank, or any amendment thereto, unless accompanied by a certificate of authority from the Bangko Sentral. (10)
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SECTION 15. Board of Directors. The provisions of the Corporation Code to the contrary notwithstanding, there shall be at least five (5), and a maximum of fifteen (15) members of the board of directors of a bank, two (2) of whom shall be independent directors. An "independent director" shall mean a person other than an officer or employee of the bank, its subsidiaries or affiliates or related interests. (n) Non-Filipino citizens may become members of the board of directors of a bank to the extent of the foreign participation in the equity of said bank. (Sec. 7, RA 7721) The meetings of the board of directors may be conducted through modern technologies such as, but not limited to, teleconferencing and video-conferencing. (n) SECTION 16. Fit and Proper Rule. To maintain the quality of bank management and afford better protection to depositors and the public in general, the
Monetary Board shall prescribe, pass upon and review the qualifications and disqualifications of individuals elected or appointed bank directors or officers and disqualify those found unfit. After due notice to the board of directors of the bank, the Monetary Board may disqualify, suspend or remove any bank director or officer who commits or omits an act which render him unfit for the position. In determining whether an individual is fit and proper to hold the position of a director or officer of a bank, regard shall be given to his integrity, experience, education, training, and competence. (9-Aa) SECTION 17. Directors of Merged or Consolidated Banks. In the case of a bank merger or consolidation, the number of directors shall not exceed twenty-one (21). (13a) SECTION 18. Compensation and Other Benefits of Directors and Officers. To protect the funds of depositors and creditors, the Monetary Board may regulate the payment by the bank to its directors and officers of compensation, allowance, fees, bonuses, stock options, profit sharing and fringe benefits only in exceptional cases and when the circumstances warrant, such as but not limited to the following: 18.1. When a bank is under comptrollership or conservatorship; or 18.2. When a bank is found by the Monetary Board to be conducting business in an unsafe or unsound manner; or 18.3. When a bank is found by the Monetary Board to be in an unsatisfactory financial condition. (n)
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SECTION 19. Prohibition on Public Officials. Except as otherwise provided in the Rural Banks Act, no appointive or elective public official, whether full-time or part-time shall at the same time serve as officer of any private bank, save in cases where such service is incident to financial assistance provided by the government or a government-owned or controlled corporation to the bank or unless otherwise provided under existing laws. (13) SECTION 20. Bank Branches. Universal or commercial banks may open branches or other offices within or outside the Philippines upon prior approval of the Bangko Sentral.
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Branching by all other banks shall be governed by pertinent laws. A bank may, subject to prior approval of the Monetary Board, use any or all of its branches as outlets for the presentation and/or sale of the financial products of its allied undertaking or of its investment house units. A bank authorized to establish branches or other offices shall be responsible for all business conducted in such branches and offices to the same extent and in the same manner as though such business had all been conducted in the head office. A bank and its branches and offices shall be treated as one unit. (6-B; 27) SECTION 21. Banking Days and Hours. Unless otherwise authorized by the Bangko Sentral in the interest of the banking public, all banks including their branches and offices shall transact business on all working days for at least six (6) hours a day. In addition, banks or any of their branches or offices may open for business on Saturdays, Sundays or holidays for at least three (3) hours a day: Provided, That banks which opt to open on days other than working days shall report to the Bangko Sentral the additional days during which they or their branches or offices shall transact business. For purposes of this Section, working days shall mean Mondays to Fridays, except if such days are holidays. (6-Ca)
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SECTION 22. Strikes and Lockouts. The banking industry is hereby declared as indispensable to the national interest and, notwithstanding the provisions of any law to the contrary, any strike or lockout involving banks, if unsettled after seven (7) calendar days shall be reported by the Bangko Sentral to the Secretary of Labor who may assume jurisdiction over the dispute or decide it or certify the same to the National Labor Relations Commission for compulsory arbitration. However, the President of the Philippines may at any time intervene and assume jurisdiction over such labor dispute in order to settle or terminate the same. (6-E) CHAPTER IV Deposits, Loans and Other Operations ARTICLE I Operations of Universal Banks SECTION 23.
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Powers of a Universal Bank. A universal bank shall have

the authority to exercise, in addition to the powers authorized for a commercial bank in Section 29, the powers of an investment house as provided in existing laws and the power to invest in non-allied enterprises as provided in this Act. (21-B) SECTION 24. Equity Investments of a Universal Bank. A universal bank may, subject to the conditions stated in the succeeding paragraph, invest in the equities of allied and non-allied enterprises as may be determined by the Monetary Board. Allied enterprises may either be financial or non-financial. Except as the Monetary Board may otherwise prescribe: 24.1. The total investment in equities of allied and non-allied enterprises shall not exceed fifty percent (50%) of the net worth of the bank; and 24.2. The equity investment in any one enterprise, whether allied or non-allied, shall not exceed twenty-five percent (25%) of the net worth of the bank. As used in this Act, "net worth" shall mean the total of the unimpaired paid-in capital including paid-in surplus, retained earnings and undivided profit, net of valuation reserves and other adjustments as may be required by the Bangko Sentral. The acquisition of such equity or equities is subject to the prior approval of the Monetary Board which shall promulgate appropriate guidelines to govern such investments. (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 the equity in a thrift bank, a rural bank or a financial allied enterprise. A publicly-listed universal or commercial bank may own up to one hundred percent (100%) of the voting stock of only one other universal or commercial bank. (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 the equity in a non-financial allied enterprise. (21-Ba) SECTION 27. Equity Investments of a Universal Bank in Non-Allied Enterprises. The equity investment of a universal bank, or of its wholly or
majority-owned subsidiaries, in a single non-allied enterprise shall not exceed thirty-five percent (35%) of the total equity in that enterprise nor shall it exceed thirty-five percent (35%) of the voting stock in that enterprise. (21-B) SECTION 28. Equity Investments in Quasi-Banks. To promote competitive conditions in financial markets, the Monetary Board may further limit to forty percent (40%) equity investments of universal banks in quasi-banks. This rule shall also apply in the case of commercial banks. (12-E) ARTICLE II Operations of Commercial Banks SECTION 29. Powers of a Commercial Bank. A commercial bank shall have, in addition to the general powers incident to corporations, all such powers as may be necessary to carry on the business of commercial banking, such as accepting drafts and issuing letters of credit; discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; accepting or creating demand deposits; receiving other types of deposits and deposit substitutes; buying and selling foreign exchange and gold or silver bullion; acquiring marketable bonds and other debt securities; and extending credit, subject to such rules as the Monetary Board may promulgate. These rules may include the determination of bonds and other debt securities eligible for investment, the maturities and aggregate amount of such investment. (21a) SECTION 30. Equity Investments of a Commercial Bank. A commercial bank may, subject to the conditions stated in the succeeding paragraphs, invest only in the equities of allied enterprises as may be determined by the Monetary Board. Allied enterprises may either be financial or non-financial.
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Except as the Monetary Board may otherwise prescribe: 30.1. The total investment in equities of allied enterprises shall not exceed thirty-five percent (35%) of the net worth of the bank; and 30.2. The equity investment in any one enterprise shall not exceed twenty-five percent (25%) of the net worth of the bank. The acquisition of such equity or equities is subject to the prior approval of the Monetary Board which shall promulgate appropriate guidelines to govern such investments. (21A-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 the equity of a thrift bank or a rural bank. Where the equity investment of a commercial bank is in other financial allied enterprises, including another commercial bank, such investment shall remain a minority holding in that enterprise. (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 the equity in a non-financial allied enterprise. (21-Aa) ARTICLE III Provisions Applicable to All Banks, Quasi-Banks, and Trust Entities SECTION 33. Acceptance of Demand Deposits. A bank other than a universal or commercial bank cannot accept or create demand deposits except upon prior approval of, and subject to such conditions and rules as may be prescribed by the Monetary Board. (72-Aa) SECTION 34. Risk-Based Capital. The Monetary Board shall prescribe the minimum ratio which the net worth of a bank must bear to its total risk assets which may include contingent accounts.
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For purposes of this Section, the Monetary Board may require that such ratio be determined on the basis of the net worth and risk assets of a bank and its subsidiaries, financial or otherwise, as well as prescribe the composition and the manner of determining the net worth and total risk assets of banks and their subsidiaries: Provided, That in the exercise of this authority, the Monetary Board shall, to the extent feasible, conform to internationally accepted standards, including those of the Bank for International Settlements (BIS), relating to risk-based capital requirements: Provided, further, That it may alter or suspend compliance with such ratio whenever necessary for a maximum period of one (1) year: Provided, finally, That such ratio shall be applied uniformly to banks of the same category. In case a bank does not comply with the prescribed minimum ratio, the Monetary Board may limit or prohibit the distribution of net profits by such bank and may require that part or all of the net profits be used to increase the capital accounts of the bank until the minimum requirement has been met. The Monetary Board may,
furthermore, restrict or prohibit the acquisition of major assets and the making of new investments by the bank, with the exception of purchases of readily marketable evidences of indebtedness of the Republic of the Philippines and of the Bangko Sentral and any other evidences of indebtedness or obligations the servicing and repayment of which are fully guaranteed by the Republic of the Philippines, until the minimum required capital ratio has been restored. In case of a bank merger or consolidation, or when a bank is under rehabilitation under a program approved by the Bangko Sentral, the Monetary Board may temporarily relieve the surviving bank, consolidated bank, or constituent bank or corporations under rehabilitation from full compliance with the required capital ratio under such conditions as it may prescribe. Before the effectivity of the rules which the Monetary Board is authorized to prescribe under this provision, Section 22 of the General Banking Act, as amended, Section 9 of the Thrift Banks Act, and all pertinent rules issued pursuant thereto, shall continue to be in force. (22a) SECTION 35. 35.1. Except as the Monetary Board may otherwise prescribe for reasons of national interest, the total amount of loans, credit accommodations and guarantees as may be defined by the Monetary Board that may be extended by a bank to any person, partnership, association, corporation or other entity shall at no time exceed twenty percent (20%) of the net worth of such bank. The basis for determining compliance with single-borrower limit is the total credit commitment of the bank to the borrower. 35.2. Unless the Monetary Board prescribes otherwise, the total amount of loans, credit accommodations and guarantees prescribed in the preceding paragraph may be increased by an additional ten percent (10%) of the net worth of such bank provided the additional liabilities of any borrower are adequately secured by trust receipts, shipping documents, warehouse receipts or other similar documents transferring or securing title covering readily marketable, non-perishable goods which must be fully covered by insurance. Limit on Loans, Credit Accommodations and Guarantees.
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35.3. The above prescribed ceilings shall include: (a) the direct liability of the maker or acceptor of paper discounted with or sold to such bank and the liability of a general indorser, drawer or guarantor who obtains a loan or other credit accommodation from or discounts paper with or sells papers to such bank; (b) in the case of an individual who owns or controls a majority interest in a corporation, partnership, association or any other entity, the liabilities of said entities to such bank; (c) in the case of a corporation, all liabilities to such bank of all subsidiaries in which such corporation owns or controls a majority interest; and (d) in the case of a partnership, association or other entity, the liabilities of the members thereof to such bank. 35.4. Even if a parent corporation, partnership, association, entity or an individual who owns or controls a majority interest in such entities has no liability to the bank, the Monetary Board may prescribe the combination of the liabilities of subsidiary corporations or members of the partnership, association, entity or such individual under certain circumstances, including but not limited to any of the following situations: (a) the parent corporation, partnership, association, entity or individual guarantees the repayment of the liabilities; (b) the liabilities were incurred for the accommodation of the parent corporation or another subsidiary or of the partnership or association or entity or such individual; or (c) the subsidiaries though separate entities operate merely as departments or divisions of a single entity. 35.5. For purposes of this Section, loans, other credit accommodations and guarantees shall exclude: (a) loans and other credit accommodations secured by obligations of the Bangko Sentral or of the Philippine Government; (b) loans and other credit accommodations fully guaranteed by the government as to the payment of principal and interest; (c) loans and other credit accommodations covered by assignment of deposits maintained in the lending bank and held in the Philippines; (d) loans, credit accommodations and acceptances under letters of credit to the extent covered by margin deposits; and (e) other loans or credit accommodations which the Monetary Board may from time to time, specify as non-risk items.
35.6. Loans and other credit accommodations, deposits maintained with, and usual guarantees by a bank to any other bank or non-bank entity, whether locally or abroad, shall be subject to the limits as herein prescribed. 35.7. Certain types of contingent accounts of borrowers may be included among those subject to these prescribed limits as may be determined by the Monetary Board. (23a) SECTION 36. Restriction on Bank Exposure to Directors, Officers, Stockholders and Their Related Interests. No director or officer of any bank shall, directly or indirectly, for himself or as the representative or agent of others, borrow from such bank nor shall he become a guarantor, indorser or surety for loans from such bank to others, or in any manner be an obligor or incur any contractual liability to the bank except with the written approval of the majority of all the directors of the bank, excluding the director concerned: Provided, That such written approval shall not be required for loans, other credit accommodations and advances granted to officers under a fringe benefit plan approved by the Bangko Sentral. The required approval shall be entered upon the records of the bank and a copy of such entry shall be transmitted forthwith to the appropriate supervising and examining department of the Bangko Sentral. Dealings of a bank with any of its directors, officers or stockholders and their related interests shall be upon terms not less favorable to the bank than those offered to others. After due notice to the board of directors of the bank, the office of any bank director or officer who violates the provisions of this Section may be declared vacant and the director or officer shall be subject to the penal provisions of the New Central Bank Act. The Monetary Board may regulate the amount of loans, credit accommodations and guarantees that may be extended, directly or indirectly, by a bank to its directors, officers, stockholders and their related interests, as well as investments of such bank in enterprises owned or controlled by said directors, officers, stockholders and their related interests. However, the outstanding loans, credit accommodations and guarantees which a bank may extend to each of its stockholders, directors, or officers and their related interests, shall be limited to an amount equivalent to their respective unencumbered deposits and book value of their paid-in capital contribution in the bank: Provided, however, That loans, credit
accommodations and guarantees secured by assets considered as non-risk by the Monetary Board shall be excluded from such limit: Provided, further, That loans, credit accommodations and advances to officers in the form of fringe benefits granted in accordance with rules as may be prescribed by the Monetary Board shall not be subject to the individual limit. The Monetary Board shall define the term "related interests." The limit on loans, credit accommodations and guarantees prescribed herein shall not apply to loans, credit accommodations and guarantees extended by a cooperative bank to its cooperative shareholders. (83a) SECTION 37. Loans and Other Credit Accommodations Against Real Estate. Except as the Monetary Board may otherwise prescribe, loans and other credit accommodations against real estate shall not exceed seventy-five percent (75%) of the appraised value of the respective real estate security, plus sixty percent (60%) of the appraised value of the insured improvements, and such loans may be made to the owner of the real estate or to his assignees. (78a) SECTION 38. Loans and Other Credit Accommodations on Security of Chattels and Intangible Properties. Except as the Monetary Board may otherwise prescribe, loans and other credit accommodations on security of chattels and intangible properties, such as, but not limited to, patents, trademarks, trade names, and copyrights shall not exceed seventy-five percent (75%) of the appraised value of the security, and such loans and other credit accommodations may be made to the title-holder of the chattels and intangible properties or his assignees. (78a) SECTION 39. Grant and Purpose of Loans and Other Credit Accommodations. A bank shall grant loans and other credit accommodations only in amounts and for the periods of time essential for the effective completion of the operations to be financed. Such grant of loans and other credit accommodations shall be consistent with safe and sound banking practices. (75a) The purpose of all loans and other credit accommodations shall be stated in the application and in the contract between the bank and the borrower. If the bank finds that the proceeds of the loan or other credit accommodation have been employed, without its approval, for purposes other than those agreed upon with the bank, it shall have the right to terminate the loan or other credit accommodation and demand immediate repayment of the obligation. (77)
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SECTION 40.
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Requirement for Grant of Loans or Other Credit

Accommodations. Before granting a loan or other credit accommodation, a bank must ascertain that the debtor is capable of fulfilling his commitments to the bank. Toward this end, a bank may demand from its credit applicants a statement of their assets and liabilities and of their income and expenditures and such information as may be prescribed by law or by rules and regulations of Monetary Board to enable the bank to properly evaluate the credit application which includes the corresponding financial statements submitted for taxation purposes to the Bureau of Internal Revenue. Should such statements prove to be false or incorrect in any material detail, the bank may terminate any loan or other credit accommodation granted on the basis of said statements and shall have the right to demand immediate repayment or liquidation of the obligation. In formulating rules and regulations under this Section, the Monetary Board shall recognize the peculiar characteristics of microfinancing, such as cash flow-based lending to the basic sectors that are not covered by traditional collateral. (76a) SECTION 41. Unsecured Loans or Other Credit Accommodations. The Monetary Board is hereby authorized to issue such regulations as it may deem necessary with respect to unsecured loans or other credit accommodations that may be granted by banks. (n) SECTION 42. Other Security Requirements for Bank Credits. The Monetary Board may, by regulation, prescribe further security requirements to which the various types of bank credits shall be subject, and, in accordance with the authority granted to it in Section 106 of the New Central Bank Act, the Board may by regulation, reduce the maximum ratios established in Sections 36 and 37 of this Act, or, in special cases, increase the maximum ratios established therein. (78) SECTION 43. Authority to Prescribe Terms and Conditions of Loans and Other Credit Accommodations. The Monetary Board may, similarly, in accordance with the authority granted to it in Section 106 of the New Central Bank Act, and taking into account the requirements of the economy for the effective utilization of long-term funds, prescribe the maturities, as well as related terms and conditions for various types of bank loans and other credit accommodations. Any change by the Board in the maximum maturities shall apply only to loans and other credit accommodations made after the date of such action.
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The Monetary Board shall regulate the interest imposed on microfinance borrowers by lending investors and similar lenders, such as, but not limited to, the
unconscionable rates of interest collected on salary loans and similar credit accommodations. (78a) SECTION 44. Amortization on Loans and Other Credit Accommodations. The amortization schedule of bank loans and other credit accommodations shall be adapted to the nature of the operations to be financed. In case of loans and other credit accommodations with maturities of more than five (5) years, provisions must be made for periodic amortization payments, but such payments must be made at least annually: Provided, however, That when the borrowed funds are to be used for purposes which do not initially produce revenues adequate for regular amortization payments therefrom, the bank may permit the initial amortization payment to be deferred until such time as said revenues are sufficient for such purpose, but in no case shall the initial amortization date be later than five (5) years from the date on which the loan or other credit accommodation is granted. (79a) In case of loans and other credit accommodations to microfinance sectors, the schedule of loan amortization shall take into consideration the projected cash flow of the borrower and adopt this into the terms and conditions formulated by banks. (n) SECTION 45. Prepayment of Loans and Other Credit Accommodations. A borrower may at any time prior to the agreed maturity date prepay, in whole or in part, the unpaid balance of any bank loan and other credit accommodation, subject to such reasonable terms and conditions as may be agreed upon between the bank and its borrower. (80a) SECTION 46. Development Assistance Incentives. The Bangko Sentral shall provide incentives to banks which, without government guarantee, extend loans to finance educational institutions, cooperatives, hospitals and other medical services, socialized or low-cost housing, local government units and other activities with social content. (n) SECTION 47. Foreclosure of Real Estate Mortgage. In the event of foreclosure, whether judicially or extrajudicially, of any mortgage on real estate which is security for any loan or other credit accommodation granted, the mortgagor or debtor whose real property has been sold for the full or partial payment of his obligation shall have the right within one year after the sale of the real estate, to redeem the property by paying the amount due under the mortgage deed, with interest thereon at the rate specified in the mortgage, and all the costs and expenses incurred by the bank or institution from the sale and custody of said property less the income
derived therefrom. However, the purchaser at the auction sale concerned whether in a judicial or extrajudicial foreclosure shall have the right to enter upon and take possession of such property immediately after the date of the confirmation of the auction sale and administer the same in accordance with law. Any petition in court to enjoin or restrain the conduct of foreclosure proceedings instituted pursuant to this provision shall be given due course only upon the filing by the petitioner of a bond in an amount fixed by the court conditioned that he will pay all the damages which the bank may suffer by the enjoining or the restraint of the foreclosure proceeding.
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Notwithstanding Act 3135, juridical persons whose property is being sold pursuant to an extrajudicial foreclosure, shall have the right to redeem the property in accordance with this provision until, but not after, the registration of the certificate of foreclosure sale with the applicable Register of Deeds which in no case shall be more than three (3) months after foreclosure, whichever is earlier. Owners of property that has been sold in a foreclosure sale prior to the effectivity of this Act shall retain their redemption rights until their expiration. (78a) SECTION 48. Renewal or Extension of Loans and Other Credit Accommodations. The Monetary Board may, by regulation, prescribe the conditions and limitations under which a bank may grant extensions or renewals of its loans and other credit accommodations. (81) SECTION 49. Provisions for Losses and Write-Offs. All debts due to any bank on which interest is past due and unpaid for such period as may be determined by the Monetary Board, unless the same are well-secured and in the process of collection shall be considered bad debts within the meaning of this Section. The Monetary Board may fix, by regulation or by order in a specific case, the amount of reserves for bad debts or doubtful accounts or other contingencies. Writing off of loans, other credit accommodations, advances and other assets shall be subject to regulations issued by the Monetary Board. (84a) SECTION 50. Major Investments. For the purpose of enhancing bank supervision, the Monetary Board shall establish criteria for reviewing major acquisitions or investments by a bank including corporate affiliations or structures that may expose the bank to undue risks or in any way hinder effective supervision. SECTION 51. Ceiling on Investments in Certain Assets. Any bank may acquire real estate as shall be necessary for its own use in the conduct of its business: Provided, however, That the total investment in such real estate and improvements
thereof, including bank equipment, shall not exceed fifty percent (50%) of combined capital accounts: Provided, further, That the equity investment of a bank in another corporation engaged primarily in real estate shall be considered as part of the bank's total investment in real estate, unless otherwise provided by the Monetary Board. (25a)
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SECTION 52. Acquisition of Real Estate by Way of Satisfaction of Claims. Notwithstanding the limitations of the preceding Section, a bank may acquire, hold or convey real property under the following circumstances: 52.1. Such as shall be mortgaged to it in good faith by way of security for debts; 52.2. Such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings; or 52.3. Such as it shall purchase at sales under judgments, decrees, mortgages, or trust deeds held by it and such as it shall purchase to secure debts due it. Any real property acquired or held under the circumstances enumerated in the above paragraph shall be disposed of by the bank within a period of five (5) years or as may be prescribed by the Monetary Board: Provided, however, That the bank may, after said period, continue to hold the property for its own use, subject to the limitations of the preceding Section. (25a) SECTION 53. Other Banking Services. In addition to the operations specifically authorized in this Act, a bank may perform the following services: 53.1. Receive in custody funds, documents and valuable objects; 53.2. Act as financial agent and buy and sell, by order of and for the account of their customers, shares, evidences of indebtedness and all types of securities; 53.3. Make collections and payments for the account of others and perform such other services for their customers as are not incompatible with banking business; 53.4. Upon prior approval of the Monetary Board, act as managing agent, adviser, consultant or administrator of investment
management/advisory/consultancy accounts; and 53.5. Rent out safety deposit boxes. The bank shall perform the services permitted under Subsections 53.1, 53.2, 53.3 and 53.4 as depositary or as an agent. Accordingly, it shall keep the funds, securities and other effects which it receives duly separate from the bank's own assets and liabilities.
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The Monetary Board may regulate the operations authorized by this Section in order to ensure that such operations do not endanger the interests of the depositors and other creditors of the bank. In case a bank or quasi-bank notifies the Bangko Sentral or publicly announces a bank holiday, or in any manner suspends the payment of its deposit liabilities continuously for more than thirty (30) days, the Monetary Board may summarily and without need for prior hearing close such banking institution and place it under receivership of the Philippine Deposit Insurance Corporation. (72a) SECTION 54. Prohibition to Act as Insurer. A bank shall not directly engage in insurance business as the insurer. (73) SECTION 55. Prohibited Transactions.
55.1. No director, officer, employee, or agent of any bank shall (a) Make false entries in any bank report or statement or participate in any fraudulent transaction, thereby affecting the financial interest of, or causing damage to, the bank or any person; (b) Without order of a court of competent jurisdiction, disclose to any unauthorized person any information relative to the funds or properties in the custody of the bank belonging to private individuals, corporations, or any other entity: Provided, That with respect to bank deposits, the provisions of existing laws shall prevail; (c) Accept gifts, fees or commissions or any other form of remuneration in connection with the approval of a loan or other credit accommodation from said bank; (d) Overvalue or aid in overvaluing any security for the purpose of influencing in any way the actions of the bank or any bank; or
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(e) Outsource inherent banking functions. 55.2. No borrower of a bank shall (a) Fraudulently overvalue property offered as security for a loan or other credit accommodation from the bank;
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(b) Furnish false or make misrepresentation or suppression of material facts for the purpose of obtaining, renewing, or increasing a loan or other credit accommodation or extending the period thereof; (c) Attempt to defraud the said bank in the event of a court action to recover a loan or other credit accommodation; or (d) Offer any director, officer, employee or agent of a bank any gift, fee, commission, or any other form of compensation in order to influence such persons into approving a loan or other credit accommodation application. 55.3. No examiner, officer or employee of the Bangko Sentral or of any department, bureau, office, branch or agency of the Government that is assigned to supervise, examine, assist or render technical assistance to any bank shall commit any of the acts enumerated in this Section or aid in the commission of the same. (87-Aa) The making of false reports or misrepresentation or suppression of material facts by personnel of the Bangko Sentral ng Pilipinas shall constitute fraud and shall be subject to the administrative and criminal sanctions provided under the New Central Bank Act. 55.4. Consistent with the provisions of Republic Act No. 1405, otherwise known as the Banks Secrecy Law, no bank shall employ casual or nonregular personnel or too lengthy probationary personnel in the conduct of its business involving bank deposits. SECTION 56. Conducting Business in an Unsafe or Unsound Manner. In determining whether a particular act or omission, which is not otherwise prohibited by any law, rule or regulation affecting banks, quasi-banks or trust entities, may be deemed as conducting business in an unsafe or unsound manner for purposes of this Section, the Monetary Board shall consider any of the following circumstances: 56.1. The act or omission has resulted or may result in material loss or damage, or abnormal risk or danger to the safety, stability, liquidity or solvency of the institution;
56.2. The act or omission has resulted or may result in material loss or damage or abnormal risk to the institution's depositors, creditors, investors, stockholders or to the Bangko Sentral or to the public in general; 56.3. The act or omission has caused any undue injury, or has given any unwarranted benefits, advantage or preference to the bank or any party in the discharge by the director or officer of his duties and responsibilities through manifest partiality, evident bad faith or gross inexcusable negligence; or 56.4. The act or omission involves entering into any contract or transaction manifestly and grossly disadvantageous to the bank, quasi-bank or trust entity, whether or not the director or officer profited or will profit thereby.
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Whenever a bank, quasi-bank or trust entity persists in conducting its business in an unsafe or unsound manner, the Monetary Board may, without prejudice to the administrative sanctions provided in Section 37 of the New Central Bank Act, take action under Section 30 of the same Act and/or immediately exclude the erring bank from clearing, the provisions of law to the contrary notwithstanding. (n) SECTION 57. Prohibition on Dividend Declaration. No bank or quasi-bank shall declare dividends greater than its accumulated net profits then on hand, deducting therefrom its losses and bad debts. Neither shall the bank nor quasi-bank declare dividends, if at the time of declaration: 57.1 Its clearing account with the Bangko Sentral is overdrawn; or 57.2 It is deficient in the required liquidity floor for government deposits for five (5) or more consecutive days; or 57.3 It does not comply with the liquidity standards/ratios prescribed by the Bangko Sentral for purposes of determining funds available for dividend declaration; or 57.4 It has committed a major violation as may be determined by the Bangko Sentral. (84a) SECTION 58. Independent Auditor. The Monetary Board may require a bank, quasi-bank or trust entity to engage the services of an independent auditor to be
chosen by the bank, quasi-bank or trust entity concerned from a list of certified public accountants acceptable to the Monetary Board. The term of the engagement shall be as prescribed by the Monetary Board which may either be on a continuing basis where the auditor shall act as resident examiner, or on the basis of special engagements; but in any case, the independent auditor shall be responsible to the bank's, quasi-bank's or trust entity's board of directors. A copy of the report shall be furnished to the Monetary Board. The Monetary Board may also direct the board of directors of a bank, quasi-bank, trusty entity and/or the individual members thereof, to conduct, either personally or by a committee created by the board, an annual balance sheet audit of the bank, quasi-bank or trust entity to review the internal audit and control system of the bank, quasi-bank or trust entity and to submit a report of such audit. (6-Da) SECTION 59. Authority to Regulate Electronic Transactions. The Bangko Sentral shall have full authority to regulate the use of electronic devices, such as computers, and processes for recording, storing and transmitting information or data in connection with the operations of a bank, quasi-bank or trust entity, including the delivery of services and products to customers by such entity. (n) SECTION 60. Financial Statements. Every bank, quasi-bank or trust entity shall submit to the appropriate supervising and examining department of the Bangko Sentral financial statements in such form and frequency as may be prescribed by the Bangko Sentral. Such statements, which shall be as of a specific date designated by the Bangko Sentral, shall show the actual financial condition of the institution submitting the statement, and of its branches, offices, subsidiaries and affiliates, including the results of its operations, and shall contain such information as may be required in Bangko Sentral regulations. (n) SECTION 61. Publication of Financial Statements. Every bank, quasi-bank or trust entity, shall publish a statement of its financial condition, including those of its subsidiaries and affiliates, in such terms understandable to the layman and in such frequency as may be prescribed by the Bangko Sentral, in English or Filipino, at least once every quarter in a newspaper of general circulation in the city or province where the principal office, in the case of a domestic institution, or the principal branch or office in the case of a foreign bank, is located, but if no newspaper is published in the same province, then in a newspaper published in Metro Manila or in the nearest city or province. The Bangko Sentral may by regulation prescribe the newspaper where the
statements prescribed herein shall be published. The Monetary Board may allow the posting of the financial statements of a bank, quasi-bank or trust entity in public places it may determine, in lieu of the publication required in the preceding paragraph, when warranted by the circumstances. Additionally, banks shall make available to the public in such form and manner as the Bangko Sentral may prescribe the complete set of its audited financial statements as well as such other relevant information including those on enterprises majority-owned or controlled by the bank, that will inform the public of the true financial condition of a bank as of any given time. In periods of national and/or local emergency or of imminent panic which directly threaten monetary and banking stability, the Monetary Board, by a vote of at least five (5) of its members, in special cases and upon application of the bank, quasi-bank or trust entity, may allow such bank, quasi-bank or trust entity to defer for a stated period of time the publication of the statement of financial condition required herein. (n)
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SECTION 62. Publication of Capital Stock. A bank, quasi-bank or trust entity incorporated under the laws of the Philippines shall not publish the amount of its authorized or subscribed capital stock without indicating at the same time and with equal prominence, the amount of its capital actually paid up. No branch of any foreign bank doing business in the Philippines shall in any way announce the amount of the capital and surplus of its head office, or of the bank in its entirety without indicating at the same time and with equal prominence the amount of the capital, if any, definitely assigned to such branch. In case no capital has been definitely assigned to such branch, such fact shall be stated in, and shall form part of the publication. (82) SECTION 63. Settlement of Disputes. The provisions of any law to the contrary notwithstanding, the Bangko Sentral shall be consulted by other government agencies or instrumentalities in actions or proceedings initiated by or brought before them involving controversies in banks, quasi-banks or trust entities arising out of and involving relations between and among their directors, officers or stockholders, as well as disputes between any or all of them and the bank, quasi-bank or trust entity of which they are directors, officers or stockholders. (n) SECTION 64.
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No person, association, or corporation unless duly authorized to engage in the business of a bank, quasi-bank, trust entity, or savings and loan association as defined in this Act, or other banking laws, shall advertise or hold itself out as being engaged in the business of such bank, quasi-bank, trust entity, or association, or use in connection with its business title, the word or words "bank", "banking", "banker", "quasi-bank", "quasi-banking", "quasi-banker", "savings and loan association", "trust corporation", "trust company" or words of similar import or transact in any manner the business of any such bank, corporation or association. (6) SECTION 65. Service Fees. The Bangko Sentral may charge equitable rates, commissions or fees, as may be prescribed by the Monetary Board for supervision, examination and other services which it renders under this Act. (n)
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SECTION 66. Penalty for Violation of this Act. Unless otherwise herein provided, the violation of any of the provisions of this Act shall be subject to Sections 34, 35, 36 and 37 of the New Central Bank Act. If the offender is a director or officer of a bank, quasi-bank or trust entity, the Monetary Board may also suspend or remove such director or officer. If the violation is committed by a corporation, such corporation may be dissolved by quo warranto proceedings instituted by the Solicitor General. (87) CHAPTER V Placement Under Conservatorship SECTION 67. Conservatorship. The grounds and procedures for placing a bank under conservatorship, as well as, the powers and duties of the conservator appointed for the bank shall be governed by the provisions of Section 29 and the last two paragraphs of Section 30 of the New Central Bank Act: Provided, That this Section shall also apply to conservatorship proceedings of quasi-banks. (n) CHAPTER VI Cessation of Banking Business SECTION 68. Voluntary Liquidation. In case of the voluntary liquidation of any bank organized under the laws of the Philippines, or of any branch or office in the Philippines of a foreign bank, written notice of such liquidation shall be sent to the Monetary Board before such liquidation is undertaken, and the
Monetary Board shall have the right to intervene and take such steps as may be necessary to protect the interests of creditors. (86) SECTION 69. Receivership and Involuntary Liquidation. The grounds and procedures for placing a bank under receivership or liquidation, as well as the powers and duties of the receiver or liquidator appointed for the bank shall be governed by the provisions of Sections 30, 31, 32, and 33 of the New Central Bank Act: Provided, That the petitioner or plaintiff files with the clerk or judge of the court in which the action is pending a bond, executed in favor of the Bangko Sentral, in an amount to be fixed by the court. This Section shall also apply to the extent possible to the receivership and liquidation proceedings of quasi-banks. (n)
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SECTION 70. Penalty for Transactions After a Bank Becomes Insolvent. Any director or officer of any bank declared insolvent or placed under receivership by the Monetary Board who refuses to turn over the bank's records and assets to the designated receivers, or who tampers with banks records, or who appropriates for himself or another party or destroys or causes the misappropriation and destruction of the bank's assets, or who receives or permits or causes to be received in said bank any deposit, collection of loans and/or receivables, or who pays out or permits or causes to be paid out any funds of said bank, or who transfers or permits or causes to be transferred any securities or property of said bank shall be subject to the penal provisions of the New Central Bank Act. (85a) CHAPTER VII Laws Governing Other Types of Banks SECTION 71. Other Banking Laws. The organization, ownership and capital requirements, powers, supervision and general conduct of business of thrift banks, rural banks and cooperative banks shall be governed by the provisions of the Thrift Banks Act, the Rural Banks Act, and the Cooperative Code, respectively. The organization, ownership and capital requirements, powers, supervision and general conduct of business of Islamic banks shall be governed by special laws. The provisions of this Act, however, insofar as they are not in conflict with the provisions of the Thrift Banks Act, the Rural Banks Act, and the Cooperative Code shall likewise apply to thrift banks, rural banks, and cooperative banks, respectively. However, for purposes of prescribing the minimum ratio which the net worth of a thrift bank must bear to its total risk assets, the provisions of Section 33 of this Act
shall govern. (n) CHAPTER VIII Foreign Banks SECTION 72. Transacting Business in the Philippines. The entry of foreign banks in the Philippines through the establishment of branches shall be governed by the provisions of the Foreign Banks Liberalization Act. The conduct of offshore banking business in the Philippines shall be governed by the provisions of the Presidential Decree No. 1034, otherwise known as the "Offshore Banking System Decree." (14a) SECTION 73. Acquisition of Voting Stock in a Domestic Bank. Within seven (7) years from the effectivity of this Act and subject to guidelines issued pursuant to the Foreign Banks Liberalization Act, the Monetary Board may authorize a foreign bank to acquire up to one hundred percent (100%) of the voting stock of only one (1) bank organized under the laws of the Republic of the Philippines.
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Within the same period, the Monetary Board may authorize any foreign bank, which prior to the effectivity of this Act availed itself of the privilege to acquire up to sixty percent (60%) of the voting stock of a bank under the Foreign Banks Liberalization Act and the Thrift Banks Act, to further acquire voting shares of such bank to the extent necessary for it to own one hundred percent (100%) of the voting stock thereof. In the exercise of this authority, the Monetary Board shall adopt measures as may be necessary to ensure that at all times the control of seventy percent (70%) of the resources or assets of the entire banking system is held by banks which are at least majority-owned by Filipinos. Any right, privilege or incentive granted to a foreign bank under this Section shall be equally enjoyed by and extended under the same conditions to banks organized under the laws of the Republic of the Philippines. (Secs. 2 and 3, RA 7721) SECTION 74. Local Branches of Foreign Banks. In the case of a foreign bank which has more than one (1) branch in the Philippines, all such branches shall be treated as one (1) unit for the purpose of this Act, and all references to the Philippine branches of foreign banks shall be held to refer to such units. (68)
SECTION 75. Head Office Guarantee. In order to provide effective protection of the interests of the depositors and other creditors of Philippine branches of a foreign bank, the head office of such branches shall fully guarantee the prompt payment of all liabilities of its Philippine branch. (69) Residents and citizens of the Philippines who are creditors of a branch in the Philippines of a foreign bank shall have preferential rights to the assets of such branch in accordance with existing laws. (19) SECTION 76. Summons and Legal Process. Summons and legal process served upon the Philippine agent or head of any foreign bank designated to accept service thereof shall give jurisdiction to the courts over such bank, and service of notices on such agent or head shall be as binding upon the bank which he represents as if made upon the bank itself. Should the authority of such agent or head to accept service of summons and legal processes for the bank or notice to it be revoked, or should such agent or head become mentally incompetent or otherwise unable to accept service while exercising such authority, it shall be the duty of the bank to name and designate promptly another agent or head upon whom service of summons and processes in legal proceedings against the bank and of notices affecting the bank may be made, and to file with the Securities and Exchange Commission a duly authenticated nomination of such agent. In the absence of the agent or head or should there be no person authorized by the bank upon whom service of summons, processes and all legal notices may be made, service of summons, processes and legal notices may be made upon the Bangko Sentral Deputy Governor In-Charge of the supervising and examining departments and such service shall be as effective as if made upon the bank or its duly authorized agent or head. In case of service for the bank upon the Bangko Sentral Deputy Governor In-Charge of the supervising and examining departments, the said Deputy Governor shall register and transmit by mail to the president or the secretary of the bank at its head or principal office a copy, duly certified by him, of the summons, process, or notice. The sending of such copy of the summons, process, or notice shall be a necessary part of the services and shall complete the service. The registry receipt of mailing shall be prima facie evidence of the transmission of the summons, process or notice. All costs necessarily incurred by the said Deputy Governor for the making and mailing and sending of a copy of the summons, process, or notice to the president or
the secretary of the bank at its head or principal office shall be paid in advance by the party at whose instance the service is made. (17) SECTION 77. Laws Applicable. In all matters not specifically covered by special provisions applicable only to a foreign bank or its branches and other offices in the Philippines, any foreign bank licensed to do business in the Philippines shall be bound by the provisions of this Act, all other laws, rules and regulations applicable to banks organized under the laws of the Philippines of the same class, except those that provide for the creation, formation, organization or dissolution of corporations or for the fixing of the relations, liabilities, responsibilities, or duties of stockholders, members, directors or officers of corporations to each other or to the corporation. (18) SECTION 78. Revocation of License of a Foreign Bank. The Monetary Board may revoke the license to transact business in the Philippines of any foreign bank, if it finds that the foreign bank is insolvent or in imminent danger thereof or that its continuance in business will involve probable loss to those transacting business with it. After the revocation of its license, it shall be unlawful for any such foreign bank to transact business in the Philippines unless its license is renewed or reissued. After the revocation of such license, the Bangko Sentral shall take the necessary action to protect the creditors of such foreign bank and the public. The provisions of the New Central Bank Act on sanctions and penalties shall likewise be applicable. (16) CHAPTER IX Trust Operations SECTION 79. Authority to Engage in Trust Business. Only a stock corporation or a person duly authorized by the Monetary Board to engage in trust business shall act as a trustee or administer any trust or hold property in trust or on deposit for the use, benefit, or behoof of others. For purposes of this Act, such a corporation shall be referred to as a trust entity. (56a; 57a) SECTION 80. Conduct of Trust Business. A trust entity shall administer the funds or property under its custody with the diligence that a prudent man would exercise in the conduct of an enterprise of a like character and with similar aims. No trust entity shall, for the account of the trustor or the beneficiary of the trust, purchase or acquire property from, or sell, transfer, assign or lend money or property to, or purchase debt instruments of, any of the departments, directors,
officers, stockholders, or employees of the trust entity, relatives within the first degree of consanguinity or affinity, or the related interests, of such directors, officers and stockholders, unless the transaction is specifically authorized by the trustor and the relationship of the trustee and the other party involved in the transaction is fully disclosed to the trustor or beneficiary of the trust prior to the transaction.
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The Monetary Board shall promulgate such rules and regulations as may be necessary to prevent circumvention of this prohibition or the evasion of the responsibility herein imposed on a trust entity. (56) SECTION 81. Registration of Articles of Incorporation and By-Laws of a Trust Entity. The Securities and Exchange Commission shall not register the articles of incorporation and by-laws or any amendment thereto, of any trust entity, unless accompanied by a certificate of authority issued by the Bangko Sentral. (n) SECTION 82. Minimum Capitalization. A trust entity, before it can engage in trust or other fiduciary business, shall comply with the minimum paid-in capital requirement which will be determined by the Monetary Board. (n) SECTION 83. Powers of a Trust Entity. A trust entity, in addition to the general powers incident to corporations, shall have the power to: 83.1. Act as trustee on any mortgage or bond issued by any municipality, corporation, or any body politic and to accept and execute any trust consistent with law; 83.2. Act under the order or appointment of any court as guardian, receiver, trustee, or depositary of the estate of any minor or other incompetent person, and as receiver and depositary of any moneys paid into court by parties to any legal proceedings and of property of any kind which may be brought under the jurisdiction of the court; 83.3. Act as the executor of any will when it is named the executor thereof; 83.4. Act as administrator of the estate of any deceased person, with the will annexed, or as administrator of the estate of any deceased person when there is no will;
83.5. Accept and execute any trust for the holding, management, and administration of any estate, real or personal, and the rents, issues and profits thereof; and 83.6. Establish and manage common trust funds, subject to such rules and regulations as may be prescribed by the Monetary Board. (58)
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SECTION 84. Deposit for the Faithful Performance of Trust Duties. Before transacting trust business, every trust entity shall deposit with the Bangko Sentral as security for the faithful performance of its trust duties, cash or securities approved by the Monetary Board in an amount equal to not less than Five hundred thousand pesos (P500,000.00) or such higher amount as may be fixed by the Monetary Board: Provided, however, That the Monetary Board shall require every trust entity to increase the amount of its cash or securities on deposit with the Bangko Sentral whenever in its judgment such increase is necessary by reason of the trust business of such entity: Provided, further, That the paid-in capital and surplus of such entity must be at least equal to the amount required to be deposited with the Bangko Sentral in accordance with the provisions of this paragraph. Should the capital and surplus fall below said amount, the Monetary Board shall have the same authority as that granted to it under the provisions of the fifth paragraph of Section 34 of this Act. A trust entity so long as it shall continue to be solvent and comply with laws or regulations shall have the right to collect the interest earned on such securities deposited with the Bangko Sentral and, from time to time, with the approval of the Bangko Sentral, to exchange the securities for others. If the trust entity fails to comply with any law or regulation, the Bangko Sentral shall retain such interest on the securities deposited with it for the benefit of rightful claimants. All claims arising out of the trust business of a trust entity shall have priority over all other claims as regards the cash or securities deposited as above provided. The Monetary Board may not permit the cash or securities deposited in accordance with the provisions of this Section to be reduced below the prescribed minimum amount until the depositing entity shall discontinue its trust business and shall satisfy the Monetary Board that it has complied with all its obligations in connection with such business. (65a) SECTION 85. Bond of Certain Persons for the Faithful Performance of Duties. Before an executor, administrator, guardian, trustee, receiver or depositary appointed by the court enters upon the execution of his duties, he shall, upon order of the court, file a bond in such sum as the court may direct.
Upon the application of any executor, administrator, guardian, trustee, receiver, depositary or any other person in interest, the court may, after notice and hearing, order that the subject matter of the trust or any part thereof be deposited with a trust entity. Upon presentation of proof to the court that the subject matter of the trust has been deposited with a trust entity, the court may order that the bond given by such persons for the faithful performance of their duties be reduced to such sums as it may deem proper: Provided, however, That the reduced bond shall be sufficient to secure adequately the proper administration and care of any property remaining under the control of such persons and the proper accounting for such property. Property deposited with any trust entity in conformity with this Section shall be held by such entity under the orders and direction of the court. (59) SECTION 86. Exemption of Trust Entity from Bond Requirement. No bond or other security shall be required by the court from a trust entity for the faithful performance of its duties as court-appointed trustee, executor, administrator, guardian, receiver, or depositary. However, the court may, upon proper application with it showing special cause therefor, require the trust entity to post a bond or other security for the protection of funds or property confided to such entity. (59) SECTION 87. Separation of Trust Business from General Business. The trust business and all funds, properties or securities received by any trust entity as executor, administrator, guardian, trustee, receiver, or depositary shall be kept separate and distinct from the general business including all other funds, properties, and assets of such trust entity. The accounts of all such funds, properties, or securities shall likewise be kept separate and distinct from the accounts of the general business of the trust entity. (61) SECTION 88. Investment Limitations of a Trust Entity. Unless otherwise directed by the instrument creating the trust, the lending and investment of funds and other assets acquired by a trust entity as executor, administrator, guardian, trustee, receiver or depositary of the estate of any minor or other incompetent person shall be limited to loans or investments as may be prescribed by law, the Monetary Board or any court of competent jurisdiction. (63a) SECTION 89. Real Estate Acquired by a Trust Entity. Unless otherwise specifically directed by the trustor or the nature of the trust, real estate acquired by a trust entity in whatever manner and for whatever purpose, shall likewise be governed by the relevant provisions of Section 52 of this Act. (64a)
SECTION 90. Investment of Non-Trust Funds. The investment of funds other than trust funds of a trust entity which is a bank, financing company or an investment house shall be governed by the relevant provisions of this Act and other applicable laws. (64) SECTION 91. Sanctions and Penalties. A trust entity or any of its officers and directors found to have willfully violated any pertinent provisions of this Act, shall be subject to the sanctions and penalties provided under Section 66 of this Act as well as Sections 36 and 37 of the New Central Bank Act. (63)
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SECTION 92. Exemption of Trust Assets from Claims. No assets held by a trust entity in its capacity as trustee shall be subject to any claims other than those of the parties interested in the specific trusts. (65) SECTION 93. Establishment of Branches of a Trust Entity. The ordinary business of a trust entity shall be transacted at the place of business specified in its articles of incorporation. Such trust entity may, with prior approval of the Monetary Board, establish branches in the Philippines, and the said entity shall be responsible for all business conducted in such branches to the same extent and in the same manner as though such business had all been conducted in the head office. For the purpose of this Act, the trust entity and its branches shall be treated as one unit. (67) CHAPTER X Final Provisions SECTION 94. Phase Out of Bangko Sentral Powers Over Building and Loan Associations. Within a period of three (3) years from the effectivity of this Act, the Bangko Sentral shall phase out and transfer its supervising and regulatory powers over building and loan associations to the Home Insurance and Guaranty Corporation which shall assume the same. Until otherwise provided by law, building and loan associations shall continue to be governed by Sections 39 to 55, Chapter VI of the General Banking Act, as amended, including such rules and regulations issued pursuant thereto. Upon assumption by the Home Insurance and Guaranty Corporation of supervising and regulatory powers over building and loan associations, all references in Sections 39 to 55 of the General Banking Act, as amended, to the Bangko Sentral and the Monetary Board shall be deemed to refer to the Home Insurance and Guaranty Corporation and its board of directors,
respectively. (n) SECTION 95. Repealing Clause. Except as may be provided for in Sections 34 and 94 of this Act, the General Banking Act, as amended, and the provisions of any other law, special charters, rule or regulation issued pursuant to said General Banking Act, as amended, or parts thereof, which may be inconsistent with the provisions of this Act are hereby repealed. The provisions of paragraph 8, Section 8, Republic Act No. 3591, as amended by Republic Act No. 7400, are likewise repealed. (90a) SECTION 96. Separability Clause. If any provision or section of this Act or the application thereof to any person or circumstance is held invalid, the other provisions or sections of this Act, and the application of such provision or section to other persons or circumstances, shall not be affected thereby. (n) SECTION 97. Effectivity Clause. This Act shall take effect fifteen (15) days following its publication in the Official Gazette or in two (2) national newspapers of general circulation. (91) Approved: May 23, 2000 Published in Malaya and The Manila Times on May 29, 2000. Published in the Official Gazette, Vol. 96 No. 40, page 6235 on October 2, 2000.
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AN ACT CONSOLIDATING AND AMENDING REPUBLIC ACT NOS. 580, 1557, 5488, AND 7835 AND EXECUTIVE ORDER NOS. 535 AND 90, AS THEY APPLY TO THE HOME INSURANCE AND GUARANTY CORPORATION WHICH SHALL BE RENAMED AS HOME GUARANTY CORPORATION, AND FOR OTHER PURPOSES
CHAPTER I Title and Declaration of Policy SECTION 1. Title. This Act shall be known as the "Home Guaranty Corporation Act of 2000." SECTION 2. Declaration of Policy. It is hereby declared the policy of the State to undertake, in cooperation with the private sector, a continuing nationwide housing program which will make available at affordable cost decent housing.
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In recognition of the role of housing as catalyst of economic growth and development, it is hereby declared a state policy to strengthen, promote and support the component activities of housing production and finance. SECTION 3. Statement of Objectives. Towards this end, the State shall integrate all laws providing for housing credit guaranty to attain the following objectives: (a) Ensure continuous funding support to vigorously implement the government's programs for urban and rural housing, resettlement, the development of sites and services, and the renewal of blighted areas; Enhance the capability of low-income groups to acquire decent and low-cost housing units through the introduction of support mechanisms and facilities which shall render affordable such acquisitions; Provide for a strong and sustainable housing finance program with complimentary support systems, which will pump prime, build-up, and strengthen available sources of cheap and long-term capital; Increase the private sector's participation in the investment of their
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funds into the mainstream of housing finance for developmental and end-user financing requirements; (e) Encourage the flow of private funds for mass housing development and homebuyers' financing through a viable system of mortgage and credit guaranty; Enjoin the active participation of local government units in socialized housing programs through adequate measures for housing development in their respective areas; Strengthen the capital base and optimize the resources of the National Government and the Corporation to ensure that homeless families across the nation can enjoy the benefits that can be derived from the government's guaranty facilities; Serve the housing requirements of all the underprivileged and those gainfully employed, especially those who are not members of any funding agencies such as the Government Service and Insurance System (GSIS), the Social Security System (SSS), and the Home Development Mutual Fund (HDMF); and Institutionalize and promote the aided self-help approach in homeownership and introduce support facilities that will enhance the capability of low income groups to acquire decent housing. CHAPTER II Home Guaranty Corporation SECTION 4. Home Guaranty Corporation. The Home Insurance and Guaranty Corporation is hereby renamed as the Home Guaranty Corporation, hereinafter referred to as the Corporation, which shall have its principal office in Metropolitan Manila and shall exist for a period of fifty (50) years from December 15, 2000. The Corporation may establish such offices, agencies, subsidiaries or branches anywhere in the Philippines as its operations would require and its Board of Directors would determine.
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SECTION 5. Corporate Powers and Functions. The Corporation, in addition to the regular powers and functions provided under Section 36 of the Corporation Code, shall have the following powers and functions, subject to the
limitations hereinafter provided: (a) To promote homebuilding and land ownership, giving primary preference to the homeless and underprivileged sectors of the society; To guaranty the payment in favor of any natural or juridical person, of any and all forms of mortgages, loans and other forms of credit facilities and receivables arising from financial contracts exclusively for residential purposes and the necessary support facilities thereto; To assist private developers to undertake socialized, low, and medium cost mass housing projects by encouraging private funds to finance such housing projects through a viable system of long-term mortgages, guaranties and other incentives; To pursue the development and sustainability of a secondary mortgage market for housing as the primary strategy to encourage private sector participation in housing finance. The Corporation shall undertake such programs and measures using the guaranty cover as enhancement to encourage trading by the public in a secondary market for housing mortgages, bonds, debentures, notes and securities; To underwrite, purchase, own, sell, mortgage or otherwise dispose of stocks, bonds, debentures, securities and other evidence of indebtedness issued in connection with the powers enumerated in this Act: Provided, That, it shall not engage in direct mortgage lending activities; To borrow money and/or to issue bonds, debentures, securities, collaterals, notes, and other obligations in local currencies with the approval of the President of the Philippines after consultation with the Monetary Board of the Bangko Sentral ng Pilipinas, and in foreign currencies, here or abroad, with the approval of the President of the Philippines in consultation with the Monetary Board of the Bangko Sentral ng Pilipinas and the Secretary of Finance, but in no case to exceed at any one time the aggregate amount of the principal obligations of all mortgages and accounts
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guaranteed under this Act. These bonds and other obligations shall be issued under such terms and conditions as provided in this Act and the rules and regulations prescribed by the Corporation, and in such manner as may be stipulated therein and shall bear such rate of interest as may be fixed by the Corporation. Such obligations shall be secured by the assets of the Corporation including the stocks, bonds, debentures and other securities underwritten, purchased or held by it under the provisions of this Act. Such obligations may be issued and offered for sale at such price as the Corporation may determine, and shall be exempt from taxation as hereinafter provided as to principal and interest, except estate, inheritance, and gift taxes. Bonds issued by the Corporation shall be registered at the request of the holder thereof under such rules and regulations as may be prescribed by the Corporation;
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To promote housing by the aided self-help method whereby families with some outside aid build their own houses with their own labor; to provide technical guidance to such families; to guaranty loans to such families on first liens on house and land with such other security and conditions as the Corporation shall determine, providing at least for ultimate recovery of principals; and to do all other activities as are relevant and significant in such a program of aided self-help for housing; To adopt, alter, and use a corporate seal; to enter into contracts; and to sue and be sued in any court of competent jurisdiction; To acquire, purchase, own, hold, manage, administer, operate, develop, lease, pledge, mortgage, exchange, sell, transfer or otherwise dispose of, in any manner permitted by law, real and personal property with every kind and description, monies and funds, or any interests therein as may be necessary to carry out the purposes and objectives of the Corporation; and To do any and all acts and things and to exercise all powers which may be necessary or convenient to the accomplishment or furtherance of its purposes and objectives, or which a natural person can do and exercise and which may now be or hereafter be
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authorized by law. SECTION 6. Authorized Capital Stock. The Corporation shall have an authorized capital stock of Fifty Billion Pesos (P50,000,000,000.00), divided into Fifty Million (50,000,000) shares of common stock with a par value of One Thousand Pesos (P1,000.00) per share. Out of the increase in its authorized capital stock of Forty-seven Billion Five Hundred Million Pesos (P47,500,000,000.00), the amount of Seven Billion Five Hundred Million Pesos (P7,500,000,000.00) shall be subscribed and paid in cash by the Government of the Republic of the Philippines upon the approval of this Act, and accordingly the said amount of Seven Billion Five Hundred Million Pesos (P7,500,000,000.00) is hereby appropriated out of the funds of the National Treasury, not otherwise appropriated. Succeeding National Government equity to the Corporation shall be included in the annual General Appropriations Act. No portion of the authorized capital stock of the Corporation shall accrue to any agency or instrumentality of the National Government, including government-owned or -controlled corporations. SECTION 7. Use of Net Worth. The use of the net worth of the Corporation shall be subject to the following limitations: (a) At least forty percent (40%) shall be allocated exclusively for socialized housing, to be distributed equitably among all the regions, to the extent practicable; At least thirty percent (30%) shall be allocated exclusively for low-cost housing, to be distributed equitably among all the regions, to the extent practicable; At least twenty percent (20%) shall be allocated exclusively for medium-cost housing, to be distributed equitably among all the regions, to the extent practicable; and Not more than ten percent (10%) may be allocated for open housing.
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Investments, if any, by the Corporation in any establishment or enterprise, whether public or private, shall be subject to the same limitation, herein above provided as well as those specified in Chapter III of this Act.
SECTION 8. Board of Directors. The Corporation shall be governed and its activities be directed, controlled and managed by a Board of Directors, hereinafter referred to as the Board, which shall be composed of seven (7) members, as follows: (a) (b) (c) (d) (e) The Secretary of the Department of Finance as the ex-officio Chairman; The Chairman of the Housing and Urban Development Coordinating Council (HUDCC), as the ex-officio Vice Chairman; The Director General of the National Economic and Development Authority (NEDA), as ex-officio member; The President of the Corporation, as member; and Three (3) other members to be appointed by the President of the Philippines, who shall serve for a term of five (5) years: Provided, That the person appointed shall be of good moral character, of unquestionable integrity, of known probity and patriotism and with expertise and experience of at least ten (10) years in business, finance and the professions: Provided, further, That in the event of vacancy, the successor appointed to fill the same shall serve only the unexpired portion of the term of the number he succeeds to.
The decisions of the Board shall be made by a vote of the majority of all its members. The Chairman of the Corporation shall preside over meetings of the Board of Directors. The Vice Chairman of the Board shall assist the Chairman and act in his stead in case of the latter's absence or incapacity.
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The Chairman, Vice Chairman, and the Members of the Board shall be entitled to per diem for each meeting actually attended at such amount as may be fixed by the Board in accordance with existing laws, rules and regulations. SECTION 9. Powers, Functions and Duties of the Board of Directors. The Board shall have the following powers, functions and duties: (a)
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To adopt the by-laws of the Corporation and to revise or amend the same as may be expedient;
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To direct the management, operations and administration of the Corporation; To authorize such expenditures by the Corporation as are in the interest of the effective administration and operations of the Corporation; To formulate, revise or adjust periodically all policies, plans and projects, and to promulgate the necessary rules and regulations and manuals of procedures for the effective implementation of the provisions of this Act, in any event to conform to the prevailing economic and financial conditions: Provided, That anything contained herein to the contrary notwithstanding, all such policies, rules and regulations, manuals of procedures, on ceilings and limitations shall be subject to the concurrence of the Monetary Board of the Bangko Sentral ng Pilipinas; To create offices or positions necessary for the efficient management, operation and administration of the Corporation: Provided, That all positions in the Home Guaranty Corporation (HGC) shall be governed by a compensation and position classification system and qualifications standards approved by the Corporation's Board of Directors based on a comprehensive job analysis and audit of actual duties and responsibilities: Provided, further, That the compensation plan shall be comparable with the prevailing compensation plans in the private sector and which shall be exempt from Republic Act No. 6758, otherwise known as the Salary Standardization Law, and from other laws, rules and regulations on salaries and compensations; and to establish a Provident Fund and determine the Corporation's and the employee's contributions to the Fund; and To exercise such other powers as may be necessary and proper for the effective enforcement of this Act and to accomplish the purposes for which the Corporation was organized; and to do and perform any and all acts and deeds as are necessary and incidental to the attainment of the purposes of the Corporation.
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SECTION 10. President of the Corporation. The President of the Corporation shall be appointed by the President of the Philippines for a term of five
(5) years unless sooner removed for cause. He shall be a person of good moral character, of unquestionable integrity, of known probity and patriotism, and with expertise and experience of at least ten (10) years in business, finance and the professions. He shall receive such compensation, allowances and other emoluments as may be determined by the Board. SECTION 11. Powers and Duties of the President. The President shall have the following powers and duties: (a) To prepare the agenda for meetings of the Board, and to submit for its consideration the policies and measures which are necessary to carry out the purposes and provisions of this Act; To execute and administer the policies and measures approved by the Board; To represent the Corporation in all dealings with other offices, agencies and instrumentalities of the Government and with all persons and entities, public or private, domestic or foreign; and To exercise such other powers, functions, and duties as may be delegated by the Board.
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SECTION 12. Executive Vice President and General Manager of the Corporation. The Executive Vice President, who shall be the General Manager of the Corporation, shall be appointed by the Board of Directors. He shall act as President of the Corporation in the latter's absence. CHAPTER III Credit Guaranty SECTION 13. Requirements of Guaranty. To be eligible for credit guaranty, the account shall: (a) For developmental loans, involve a principal obligation not to exceed: (i) seventy percent (70%) of the prudent production cost of the project for bond guaranty coverage; and (ii) sixty percent (60%) of the prudent production cost of the project for cash guaranty coverage.
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Such obligations may cover the installation of improvements involving: (a) a project by a developmental builder for the construction of not less than twenty (20) dwellings at one time under a single-mortgage with a release clause permitting the subsequent sale of each individual completed house together with land. Loans for advances of funds used for purchase of materials in anticipation of mass construction and standardization of parts may be guaranteed in the discretion of the Corporation; and (b) a rental project of at least twenty (20) units and involve a principal obligation, including such initial service charges, appraisal, inspection, and other fees as the Corporation shall approve. The prudent production cost of the project shall be determined in accordance with the prevailing industry standards: Provided, That the builder shall submit certified bills of sale and other evidences of prudent production cost of the project and the Corporation shall be the sole judge of the prudence of the expenditure as necessary to comply with the plans and specifications. (b) For single family residence, involve a principal obligation not to exceed: (i) one hundred percent (100%) of the appraised value of the property for socialized housing packages; (ii) ninety percent (90%) of the appraised value of the property for low-cost housing packages; (iii) eighty percent (80%) of the appraised value of the property for medium-cost housing packages; and (iv) seventy percent (70%) of the appraised value of the property for open housing packages. The Corporation as a matter of sound business policy may set downward limits on the total amount to be guaranteed for the aforestated programs which limits may be adjusted to conform with the prevailing economic and financial conditions subject to the concurrence of the Monetary Board of the Bangko Sentral ng Pilipinas; (c) Be secured by a first lien on real estate or other rights in rem including leasehold rights under a contract of lease for not less than twenty (20) years to run from the date the guaranty was
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executed, held by a qualified lender or trustee determined by the Corporation as responsible and able to service the guaranteed account: Provided, That such mortgage rights, or other rights in rem are duly annotated on the title to the real estate; or otherwise effectively protected; (d) Be intended for production and/or acquisition of residential lot or house and lot, improvements, repairs and mass housing construction projects; Contain complete amortization provisions satisfactory to the Corporation requiring periodic payments by the borrower not in excess of his reasonable ability to pay the loan which shall comply with the required loan to collateral ratio as determined by the Corporation; Have a maturity satisfactory to the Corporation but not to exceed thirty (30) years; Contain such terms and provisions with respect to insurance, repair, alterations, payment of taxes, default, reserves, delinquency charges, foreclosure proceedings, anticipation of maturity, additional and secondary liens, and other matters as the Corporation may in its discretion prescribe; and Shall involve real properties held by the following: (1) The National Government, provincial, city, or municipal governments, or government-owned or controlled corporations and agencies; Private corporations, banking institutions, trust companies, personal finance companies, mortgage companies, building and loan associations, savings and loan associations, installment lending companies, insurance companies, developmental builders, associations and cooperative societies which are legal agents of owner-occupants, or trusts formed or created for the purpose of rehabilitating slum or blighted areas, or providing housing for rent or sale, and which possess powers necessary therefor and incidental
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thereto; and (3) An individual owner or joint-owners.
SECTION 14. Guaranty Premiums, Appraisal Fees and Other Charges. (a) The Corporation shall fix in accordance with sound actuarial practice and the risk characteristics involved, the rates of guaranty premiums to be imposed: Provided, however, That no guaranty premium shall be fixed at less than one-half of one percent (1/2 of 1%) of the amount of the outstanding principal obligation for socialized housing; three fourths of one percent (3/4 of 1%) for low-cost housing; one percent (1%) for medium-cost housing; and one and one-half percent (1.5%) for open housing. Such guaranty premiums shall be payable by the mortgagee or guaranteed entity, either in cash or in debentures issued by the Corporation at its present value, in such manner as may be prescribed by the Corporation. In addition, the Corporation may charge and collect from the mortgagee or guaranteed entity, such fees and amounts as may be reasonable to implement its guaranty programs.
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(b) In addition, the Corporation may fix, charge and collect such fees and amounts as may be reasonable for the appraisal of a property or project offered for guaranty and may likewise charge and collect such fees and amounts as may be reasonable for the inspection of such property or project during construction. SECTION 15. Guaranty Coverage and Composition of Guaranteed Accounts. (a) The Corporation shall guarantee payment of the balance outstanding and due on the guaranteed principal obligation, plus interest and yields thereon up to eleven percent (11%) per annum for socialized housing packages; ten percent (10%) per annum for low-cost housing packages; nine and one-half percent (9.5%) per annum for medium-cost housing packages; and eight and one-half percent (8.5%) per annum for open housing packages; (b) The Corporation shall guarantee accounts under this Act, as follows: (1) (2) (3) At least forty percent (40%) of guaranty accounts shall be allocated for socialized housing packages; At least thirty percent (30%) of guaranty accounts shall be allocated for low-cost housing packages; At least twenty percent (20%) of guaranty accounts shall be allocated for medium-cost housing packages; and
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Not more than ten percent (10%) of guaranty accounts may be allocated for open housing packages.
For the foregoing purpose, the respective ceilings for socialized, low-cost, medium-cost, and open housing shall be jointly determined by the Housing and Urban Development Coordinating Council and the National Economic and Development Authority: Provided, That at any time, but not more often than once every two (2) years, such ceilings may be reviewed or revised to conform to prevailing economic conditions. (c) The Corporation shall as much as possible and practicable, allocate its guaranty obligations fairly and equitably among all the regions of the country. SECTION 16. Guaranty Limitations. Any and all guaranties issued by the Corporation shall be subject to the following limitations, anything to the contrary notwithstanding: (a) The extension of guaranty or guaranties for developmental projects for the account of any one institution or entity shall not, at any time, exceed three (3) times the net worth of such institution or entity; The extension of guaranty shall not exempt banks and other financial institutions regulated by the Bangko Sentral ng Pilipinas from complying with the pertinent single borrowers limit as provided by the Monetary Board of the Bangko Sentral ng Pilipinas; The aggregate amount of the outstanding obligations shall not, at any time, exceed twenty (20) times the capital and surplus of the Corporation; All guaranteed bonds, debentures, commercial papers and other securities issued by individual persons which are sold to the public shall still be subjects to the registration requirements under the Revised Securities Act; The Corporation shall set aside five percent (5%) of its annual net operating revenues before interests as reserve or sinking fund to answer for guaranty calls; and
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All rules and regulations on ceilings and limitations under this Act shall be subject to the concurrence of the Monetary Board of the Bangko Sentral ng Pilipinas.
SECTION 17. Payment of Guaranty Calls. (a) In the event of a default on the guaranteed obligation in accordance with the regulations of the Corporation, the guaranteed entity shall be entitled to receive the benefit of the guaranty as herein provided, upon (1) the prompt conveyance to the Corporation of the right to the property securing the guaranteed obligations; and (2) the assignment to the Corporation of all claims to the mortgagee against the mortgagor under the guaranteed obligation. Upon such conveyance and assignment, the obligation of the guaranteed entity to pay the premium charges for guaranty shall cease and the Corporation shall, at its option, pay in cash and/or issue to the guaranteed entity, debenture bonds equivalent to the guaranteed obligation; (b) For the purpose of the above subsection (a), the balance outstanding and due on the guaranteed mortgage shall be determined in accordance with the rules and regulations prescribed by the Corporation; (c) Debentures issued under this Section shall be subject to such terms and conditions, and shall include such provisions for redemption, if any, as may be prescribed by the Corporation, and may be in coupon or registered form; (d) Debentures issued under this Section to any mortgagee with respect to mortgages or loans guaranteed under Chapters III and IV shall be executed in the name of the Home Guaranty Corporation as obligor, and signed for the Corporation by the President of the Corporation, either by his written or engraved signature, and shall be negotiable, exempt from taxation to the extent specified in this Act, attachment, execution or seizure, redeemable at the option of the Corporation at or before maturity and fully guaranteed as to principal and interest by the Republic of the Philippines. All such debentures shall be dated as of the date the mortgagee conveys and assigns to the Corporation its rights under the mortgage and valid claims against the mortgagor and shall bear interest not exceeding the interest rate established for the principal obligation. The interest on the debentures shall be payable semi-annually on the first day of January and the first day of July of each year. The debentures shall mature ten (10) years after date on which the debentures were issued or three (3) years after July first following the maturity of the mortgage on the property in exchange for which the debentures were issued whichever is the shorter period, and may be used at the option of the mortgagee in the payment of
guaranty premium due the Corporation; (e) If the net amount realized from the sale or disposition of any property conveyed to the Corporation under this Section and the claims assigned therewith, after deducting all expenses incurred by the Corporation in handling, dealing with, and disposing of such property and in collecting such claims, exceeds the face value of the debentures issued and the cash paid in exchange for such property plus all interest paid on such debentures, such excess shall be paid to the mortgagor of the property; (f) The aggregate amount at any time of all such debentures, securities, and other evidences of indebtedness issued under this Section, shall be determined by the Corporation with the approval of the President of the Philippines after consultation with the Monetary Board of the Bangko Sentral ng Pilipinas, which shall in no case exceed the aggregate amount of the outstanding principal obligations of all mortgages insured under this Act; and (g) The Corporation may, in accordance with the provisions of the mortgage, or in the absence thereof, upon such terms and conditions as it may prescribe, release part or parts of the mortgaged property from the lien of the mortgage. SECTION 18. Guaranty of the Republic of the Philippines. (a) The Republic of the Philippines hereby fully and unconditionally guaranties to payment by the Corporation both of the principal sums and interest of the bonds, debentures, collateral, notes, or other such obligations of the Corporation, issued or incurred by virtue of this Act and shall pay such principal sums and interest in the event that the Corporation fails to do so: Provided, That such guaranty shall be expressed on the face of the certificate of indebtedness: Provided, further, That the aggregate amount of such bonds, debentures, collateral, notes or other such obligations of the Corporation does not exceed at any time, the limit prescribed under Section 5 (f) of this Act. (b) The Republic of the Philippines hereby fully and unconditionally guaranties the guaranty obligations of the Corporation incurred in accordance with this Act both as to principal, and as to interest up to eleven percent (11%) for socialized housing, ten percent (10%) for low-cost housing, nine and one-half percent (9.5%) for medium-cost housing, and eight and one-half percent (8.5%) for open housing: Provided, That such guaranty shall be expressed on the face of the debenture bonds: Provided, further, That the aggregate amount of the outstanding obligations shall not, at any time, exceed twenty (20) times the capital and surplus of the
Corporation.
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The Republic of the Philippines shall succeed to all the rights of the holders of such bonds, debentures, collateral, notes or other instruments to the extent of the payments made, unless the sums so paid by the Republic of the Philippines shall be refunded by the Corporation within a reasonable time. SECTION 19. Tax Exemption. Interests and yields earned or accumulated on mortgage, debentures, bonds, notes, mortgage and asset-backed securities, interest under a lease, and other credit instruments, whether issued by the Corporation or covered by its guaranty in favor of natural or juridical person, in cash or in bonds, shall be exempt from all taxation to the same extent provided in Section 15 (a) hereof: Provided, however, That the Corporation shall have the authority to increase the limit of such exemption in such varying amounts as shall be reflective of the social concerns of the State: Provided, further, That the exercise of said authority shall be subject to the approval of the President of the Philippines upon the recommendation of the Monetary Board of the Bangko Sentral ng Pilipinas: Provided, finally, That the Corporation shall not exercise such authority more often than once every five (5) years. CHAPTER IV Building and Loan Associations SECTION 20. Building and Loan Associations. (a) In order to encourage the accumulation of savings and the financing of homes through the local mutual thrift institutions, the Corporation is authorized, under such rules and regulations as it may prescribe, to issue contracts of guaranty for the accounts of such building and loan associations in accordance with the best practices of known mutual thrift and home financing institutions. (b) Whenever guaranteed by the Corporation and where the loan is intended for housing development, such associations shall lend their funds only on the security of first liens upon real estate located within an area to be determined by the Corporation. (c) The Corporation is authorized to subscribe for preferred shares in such associations which shall be preferred as to the assets of the association and which shall be entitled to a dividend, if earned, after payment of expenses and provision for reasonable reserves, to the same extent as other shareholders: Provided, however, That no such subscription shall be made unless in the judgment of the Corporation the
funds are necessary for the encouragement of reasonable local home financing in the community to be served. In case of the liquidation of any such association, the shares held by the Corporation shall be retired on the same basis as payments are made to other shareholders in accordance with existing laws.
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(d) When guaranteed by the Corporation, such associations including their franchises, capital, reserves, surplus, and their loans, receipts, and incomes, shall be exempt from all taxation now or hereafter imposed by the Government. SECTION 21. Open-end Mortgages. Notwithstanding any other provisions of this Act, in connection with any mortgage guaranteed pursuant to any Section of this Act which covers a property upon which there is located a dwelling designed for residential use, the Corporation is authorized, upon such terms and conditions as it may prescribe, to guaranty the amount of any advances for the improvement or repair of property made to the mortgagor pursuant to an "open-end" provision in the mortgage and to add the amount of such advance to the original principal obligation in determining the value of the mortgage for the purpose of computing the amounts of debentures to which the mortgage may be entitled. The Corporation may require the payment of such charges, including charges in lieu of guaranty premiums, as it may consider appropriate for the guaranty of such "open-end" advances. Only advances for such improvements or repairs as will substantially protect or improve the basic liability or utility of the property involved shall be eligible for guaranty under this Section. No such advances shall be guaranteed under this Section if the amount thereof plus the amount of the unpaid balance of the original principal obligation of the mortgage would exceed the amount of such original principal obligation unless the mortgagor certifies that the proceeds of such advance will be used to finance the construction of additional rooms or other enclosed space as part of the dwelling. The guaranty of "open-end" advances shall not be taken into account in determining the aggregate amount of principal obligations of mortgages which may be guaranteed under this Act. SECTION 22. Investment of Funds. Corporate funds not needed for the current operations of the Corporation, shall be deposited with any government bank as may be approved by the Board, or invested in bonds or other obligations guaranteed as to principal and interest by the Government. The Corporation may purchase in the open market debentures issued under the provisions of this Act which debentures shall be cancelled and not reissued.
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CHAPTER V
Miscellaneous Provisions SECTION 23. Definitions. As used in this Act, and unless the context otherwise requires, the term: (a) "Bond guaranty coverage" refers to the type of guaranty coverage which entitles the guaranteed entity to a claim payment in the form of debenture bonds upon call on the guaranty; "Builder/Developer" refers to the person or entity who develops raw land for housing; "Cash guaranty coverage" refers to the type of guaranty coverage which entitles the guaranteed entity to cash payment upon call on the guaranty; "Developmental loan" pertains to a type of loan the proceeds of which shall be used for housing subdivision development or construction of residential houses; "Guaranty premium" refers to the fee to be charged by the Corporation for the extension of the guaranty; "Housing finance" refers to the comprehensive funds flow system covering the entire housing provision cycle from identification of financial requirements, fund sourcing for various aspects of housing program, such as lot acquisition, development and construction, to end-buyers financing; "Maturity date" means the date on which the mortgage indebtedness would be extinguished if paid in accordance with the periodic payments provided for in the mortgage; "Mortgage" shall mean a first mortgage on real estate in fee simple, or on the interest of either the lessor or lessee thereof under a lease for not less than twenty (20) years to run from the date the mortgage was executed, upon which there is located or upon which there is to be constructed a building or buildings designed principally for residential use; and the term "first mortgage" means such classes of first liens as are commonly given to secure advances on, or the unpaid purchase price of, real estate, together
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with the credit instrument or instruments, if any, secured thereby, and may be in the form of bonds, notes, stocks and mortgage and asset-backed securities, trust mortgages or mortgage indentures of deeds of trust securing notes, bonds, or other credit instruments; (i) "Mortgagee" shall mean the original lender under a mortgage, and its successors and assigns, and includes the holders of bonds, notes, stocks, mortgage and asset-backed securities, and other credit instruments issued under a trust mortgage or deed of trust pursuant to which such holders act by and through a trustee herein named; "Mortgagor" shall mean the original borrower under a mortgage as defined herein, and its successors and assigns; "Net worth" shall mean the paid-up capital plus fifty percent (50%) of the retained earnings of the Corporation. "Open housing" refers to housing packages with cost above the medium-cost packages set in Section 15 of this Act but in no case costing more than Five Million Pesos (P5,000,000.00); "Prudent production cost" of the project shall mean, with respect to the relevant project, the relevant cost of the builder of the proposed physical improvements, including buildings, utilities within the boundaries of the subject property, cost of land, architects' fees, taxes and interests accruing during construction, but not including builders' profit nor other charges, except for estimated depreciated cost of any existing utilities; "Rental housing" shall mean housing, the occupancy of which is permitted by the owner thereof in consideration of the payment of agreed charges, whether or not by the terms of the agreement, such payment over a period of time will entitle the occupant to the ownership of the premises; "Secondary mortgage market" means a market where existing mortgages are sold to and bought by the public; "Single family residence" means a type of residential structure
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designed to include one dwelling; and (q) "Slum or blighted area" shall mean any area where dwellings predominate which, by reason of dilapidation, overcrowding, faulty arrangement or design, lack of ventilation, light or sanitation facilities, or any combination of these factors, are detrimental to safety, health, or morals.
SECTION 24. Warranties of Developers/Builders, Sellers, or Funders. The Corporation shall require the guaranteed sellers, developers/builders, or funders, and such other person as may be required by the said Corporation to become warrantor, to deliver to the purchaser or owner of such property a warranty that the dwelling is constructed in substantial conformity with the plans and specifications on which the Corporation based its valuation of the dwelling. The Corporation shall deliver to the developer/builder, seller, or funder or other warrantor their written approval of any amendment of, or change or variation in, such plans and specifications which the Corporation deems to be a substantial amendment thereof, or change or variation therein, and shall file a copy of such written approval with such plans and specifications. Such warranty shall apply only with respect to such instances of substantial nonconformity to such approved plans and specifications as to which the purchaser or homeowner has given written notice to the warrantor within two (2) years from the date of conveyance of title to, or initial occupancy of the dwelling, which ever first occurs, without prejudice to all other rights and privileges which such purchaser or owner may have under any other law or instrument. Any amendment of, or change, or variation in, such plans and specifications shall be with the prior written approval of the Corporation.
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SECTION 25. Participation of Financing Institutions and Other Investors. (a) All banking institutions, trust companies, personal finance companies, mortgage companies, building and loan associations, savings and loan associations, installment lending companies, insurance companies, the GSIS, the SSS, the Development Bank of the Philippines (DBP), and other government financing institutions or other government-owned and -controlled corporations, are hereby authorized to invest part of their funds for the purpose of giving loans and advances of credit contemplated and provided in this Act, as well as on the purchases of obligations representing loans and advances of credit made pursuant to the provisions of this Act, any provision of their respective charters or by-laws to the contrary notwithstanding. All housing loans, within the loan ceiling fixed by the Corporation to be granted by the foregoing government institutions shall be guaranteed by the
Corporation under the provisions of this Act. All mortgagee institutions participating in the mortgage guaranty programs shall be bound by the terms and conditions for guaranteed mortgage loans as may be approved by the Corporation. Any amount invested by all the foregoing entities in the financing or mortgage loans for housing development under this Act, shall be guaranteed both as to principal and interest, as herein provided, by both the Corporation and the Government of the Republic of the Philippines. (b) The aforementioned government financing institutions are hereby authorized to constitute the secondary market for guaranteed mortgages and shall: (1) (2) Purchase, service or sell mortgages which are guaranteed under the provisions of this Act. Subject to the approval of the Monetary Board of the Bangko Sentral ng Pilipinas, issue bonds, debentures, securities, collaterals and other obligations against the security of mortgages guaranteed under this Act, in such amount and in such proportion to the face value of such mortgage as their respective boards may designate and such obligations may be issued and offered for sale at such price or prices as the particular government institution may determine, and shall be negotiable and exempt from taxes both as to principal and interest, subject to Section 19 hereof.
SECTION 26. Powers Over Homeowners' Associations. The powers, authorities and responsibilities vested in the Corporation with respect to homeowners' associations under Republic Act No. 580, as amended by Executive Order No. 535 is hereby transferred to the Housing and Land Use Regulatory Board (HLURB). Subject to existing laws, the HLURB is hereby authorized to create additional positions and augment its present budget allocation as may be needed for the operation and maintenance of the newly-created unit or office as a consequence of the transfer of functions and powers. Pending the approval of the HLURB's Revised Staffing and Organizational Plan and release of budgetary allocations therefore, the Corporation shall extend technical, operational and administrative assistance to the HLURB as may be mutually deemed necessary to ensure smooth turnover of functions. However, such assistance shall not extend beyond a period of one (1) year from date of effectivity of
this Act. SECTION 27. Penalties. (a) Whoever, for the purpose of obtaining any loan or advance of credit from any person, partnership, association, or corporation with the intent that such loan or advance of credit shall be offered to or accepted by the Corporation for guaranty, or for the purpose of credit, or mortgage guaranteed by the said Corporation, or the acceptance, release, or substitution of any security on such loan, advance of credit, or for the purpose of influencing in any way the action of the said Corporation under this Act, (1) makes, passes, utters, or publishes, or causes to be made, passed, uttered, or published any statement, knowing the same to be false, or (2) alters, forges, or counterfeits, or causes or procures to be altered, forged, or counterfeited, any instrument, paper, or document, or (3) utters, publishes, or passes as true or causes to be uttered, published or passed as true, any instrument, paper or documents, knowing it to have been altered, forged or counterfeited, or (4) willfully overvalues any security, asset, or income, shall be punished by a fine of not less than the amount of the loan or loans involved or by imprisonment for not more than ten (10) years or both. (b) Whoever (1) falsely makes, forges, or counterfeits any obligation or coupon, in imitation of or purporting to be an obligation or coupon issued under authority of this Act, or (2) passes, utters, or publishes, or attempts to pass, utter, or publish, any false, forged, or counterfeited obligation or coupon purporting to have been so issued knowing the same to be false, forged, or counterfeited, or (3) falsely alters any obligation or coupon so issued or purporting to have been so issued, or (4) passes, utters, or publishes, or attempts to pass, utter, or publish, as true, any falsely altered or spurious obligation or coupon, so issued or purporting to have been so issued, knowing the same to be falsely altered or spurious shall be punished by a fine of not less than the amount of loan involved, or by imprisonment for not more than five (5) years, or both. (c) Any person (1) who willfully and knowingly makes, circulates, or transmits to another or others any statement, or rumor written, printed or by word of mouth, which is untrue in fact and is directly or by inference derogatory to the financial condition or affects the solvency or financial standing of the Corporation, or (2) who knowingly counsels, aids, procures, or induces another to start, transmit, or circulate any such statement of rumor, is guilty of felony punishable by a fine of not less than the amount of loan involved or by imprisonment of not exceeding one year, or both. SECTION 28.
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Fund Sources for Operation. The Bangko Sentral ng

Pilipinas may extend to the Corporation advances which may be needed for its operations and/or grant loans secured by any assets which are defined as acceptable securities by the Monetary Board.
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SECTION 29. Exemptions. The Corporation is exempt from the coverage of the regulations of Bangko Sentral ng Pilipinas governing quasi-banking functions. SECTION 30. Legal Counsel. The Office of the Government Corporate Counsel shall be the General Counsel of the Corporation. SECTION 31. Resident Auditor. The Resident Auditor of the Corporation shall be appointed by the Chairman of the Commission on Audit, who shall also appoint and for cause, remove, upon the recommendation of the Resident Auditor, the personnel of the Auditing Office. The Auditor shall submit, through the Commission, an annual report on the financial condition and the result of the operations of the Corporation to the President of the Republic of the Philippines, each member of the Senate and the House of Representatives, the National Economic and Development Authority and the Chairman of the Commission on Audit. SECTION 32. Reports. The Corporation shall submit a quarterly report to the President of the Philippines and to each member of the Congress of the Philippines, within the first forty-five (45) days of the succeeding quarter, regarding its activities under this Act for the previous quarter. SECTION 33. Transitory Provision. Any and all policies, guidelines, programs, ceilings and limits currently in effect with respect to the issuance of guaranty shall be submitted to the Monetary Board of the Bangko Sentral ng Pilipinas for concurrence within six (6) months after the effectivity of this Act. SECTION 34. Report on the Development of the Secondary Mortgage Marker. The Housing and Urban Development Coordinating Council and the Corporation shall submit to the President of the Philippines and to Congress a program for the development of the secondary mortgage market. SECTION 35. Sunset Review. Every year after the effectivity of this Act, Congress shall conduct a sunset review which shall entail a systematic evaluation of the Corporation to determine whether or not its performance, impact or accomplishment with respect to its mandates merit its continued existence. Such review shall be undertaken by the Committee on Housing and Urban Development and the Committee on Government Corporations and Public Enterprises of the Senate
and the Committee on Housing and Urban Development and the Committee on Government Enterprises and Privatization of the House of Representatives which have legislative jurisdiction over the Corporation.
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SECTION 36. Suppletory Application of the Corporation Code. The provisions of the Corporation Code shall have suppletory application in matters not provided in this Act. SECTION 37. Implementing Rules and Regulations. The Corporation, with the Department of Finance, the Housing and Urban Development Coordinating Council, and the Department of Budget and Management shall promulgate the rules and regulations necessary for the implementation of and consistent with this Act. SECTION 38. Repeal. Republic Act Nos. 580, 1557 and 5488, and Executive Order No. 535 are hereby repealed. The provisions of Republic Act Nos. 6846, 7279 and 7835, and Executive Order No. 90 and all other laws, orders and proclamations, rules and regulations, or parts thereof, inconsistent with or contrary to the provisions of this Act or its purposes are hereby amended or modified accordingly. SECTION 39. Separability Provisions. If for any reason, any provision of this Act, or the application thereof to any person or circumstances, is held invalid, the remaining provisions not affected thereby shall continue to be in full force and effect. SECTION 40. Effectivity. This Act shall take effect fifteen (15) days after its publication in the Official Gazette or in at least two (2) newspapers of general circulation.
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Approved: March 7, 2000 Published in the Manila Bulletin and Kabayan on March 13, 2000 and Philippine Star on March 14, 2000.
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(2)
March 7, 2000
AN ACT LIBERALIZING THE RETAIL TRADE BUSINESS, REPEALING FOR THE PURPOSE REPUBLIC ACT NO. 1180, AS AMENDED, AND FOR OTHER PURPOSES
SECTION 1. Title. This Act shall be known as the "Retail Trade Liberalization Act of 2000." SECTION 2. Declaration of Policy. It is the policy of the State to promote consumer welfare in attracting, promoting and welcoming productive investments that will bring down prices for the Filipino consumer, create more jobs, promote tourism, assist small manufacturers, stimulate economic growth and enable Philippine goods and services to become globally competitive through the liberalization of the retail trade sector. Pursuant to this policy, the Philippine retail industry is hereby liberalized to encourage Filipino and foreign investors to forge an efficient and competitive retail trade sector in the interest of empowering the Filipino consumer through lower prices, higher quality goods, better services and wider choices. SECTION 3. (1) Definition. As used in this Act:
"Retail Trade" shall mean any act, occupation or calling of habitually selling direct to the general public merchandise, commodities or goods for consumption, but the restrictions of this law shall not apply to the following: (a) Sales by a manufacturer, processor, laborer, or worker, to the general public the products manufactured, processed or produced by him if his capital does not exceed One hundred thousand pesos (P100,000.00);
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(b) (c)
Sales by a farmer or agriculturist selling the products of his farm; Sales in restaurant operations by a hotel owner or inn-keeper irrespective of the amount of capital: Provided, That the restaurant is incidental to the hotel business; and Sales which are limited only to products manufactured, processed or assembled by a manufacturer through a single outlet, irrespective of capitalization.
(d)
(2)
"High-end or luxury goods" shall refer to goods which are not necessary for life maintenance and whose demand is generated in large part by the higher income groups. Luxury goods shall include, but are not limited to, products such as: jewelry, branded or designer clothing and footwear, wearing apparel, leisure and sporting goods, electronics and other personal effects.
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SECTION 4. Treatment of Natural-Born Citizen Who Has Lost His Philippine Citizenship. A natural-born citizen of the Philippines who has lost his Philippine citizenship but who resides in the Philippines shall be granted the same rights as Filipino citizens for purposes of this Act. SECTION 5(3). Foreign Equity Participation. Foreign-owned partnerships, associations and corporations formed and organized under the laws of the Philippines may, upon registration with the Securities and Exchange Commission (SEC) and the Department of Trade and Industry (DTI), or in case of foreign-owned single proprietorships, with the DTI, engage or invest in the retail trade business, subject to the following categories: Category A Enterprises with paid-up capital of the equivalent in Philippine Pesos of less than Two million five hundred thousand US dollars (US$2,500,000.00) shall be reserved exclusively for Filipino citizens and corporations wholly owned by Filipino citizens. Category B Enterprises with a minimum paid-up capital of the equivalent in Philippine Pesos of Two million five hundred thousand US dollars (US$2,500,000.00) but less than Seven million five hundred thousand US dollars (US$7,500,000.00) may be wholly owned by foreigners except for the first two (2) years after the effectivity of this Act wherein foreign participation shall be limited to
not more than sixty percent (60%) of total equity. Category C Enterprises with a paid-up capital of the equivalent in Philippine Pesos of Seven million five hundred thousand US dollars (US$7,500,000.00) or more may be wholly owned by foreigners: Provided, however, That in no case shall the investments for establishing a store in Categories B and C be less than the equivalent in Philippine Pesos of Eight hundred thirty thousand US dollars (US$830,000.00). Category D Enterprises specializing in high-end or luxury products with a paid-up capital of the equivalent in Philippine Pesos of Two hundred fifty thousand US dollars (US$250,000.00) per store may be wholly owned by foreigners. The foreign investor shall be required to maintain in the Philippines the full amount of the prescribed minimum capital, unless the foreign investor has notified the SEC and the DTI of its intention to repatriate its capital and cease operations in the Philippines. The actual use in Philippine operations of the inwardly remitted minimum capital requirement shall be monitored by the SEC. Failure to maintain the full amount of the prescribed minimum capital prior to notification of the SEC and the DTI, shall subject the foreign investor to penalties or restrictions on any future trading activities/business in the Philippines. Foreign retail stores shall secure a certification from the Bangko Sentral ng Pilipinas (BSP) and the DTI, which will verify or confirm inward remittance of the minimum required capital investment. SECTION 6. Foreign Investors Acquiring Shares of Stock of Local Retailers. Foreign investors acquiring shares from existing retail stores whether or not publicly listed whose net worth is in excess of the peso equivalent of Two million five hundred thousand US dollars (US$2,500,000.00) may purchase only up to a maximum of sixty percent (60%) of the equity thereof within the first two (2) years from the effectivity of this Act and thereafter, they may acquire the remaining percentage consistent with the allowable foreign participation as herein provided. SECTION 7. Public Offering of Shares of Stock. All retail trade enterprises under Categories B and C in which foreign ownership exceeds eighty percent (80%) of equity shall offer a minimum of thirty percent (30%) of their equity to the public through any stock exchange in the Philippines within eight (8) years from their start of operations.
SECTION 8. Qualifications of Foreign Retailers. No foreign retailer shall be allowed to engage in retail trade in the Philippines unless all the following qualifications are met: (a) A minimum of Two hundred million US dollars (US$200,000,000.00) net worth in its parent corporation for Categories B and C, and Fifty million US dollars (US$50,000,000.00) net worth in its parent corporation for Category D; Five (5) retailing branches or franchises in operation anywhere around the world unless such retailer has at least one (1) store capitalized at a minimum of Twenty-five million US dollars (US$25,000,000.00); Five (5)-year track record in retailing; and Only nationals from, or juridical entities formed or incorporated in countries which allow the entry of Filipino retailers shall be allowed to engage in retail trade in the Philippines.
(b)
(c) (d)
The DTI is hereby authorized to pre-qualify all foreign retailers, subject to the provisions of this Act, before they are allowed to conduct business in the Philippines. The DTI shall keep a record of qualified foreign retailers who may, upon compliance with law, establish retail stores in the Philippines. It shall ensure that the parent retail trading company of the foreign investor complies with the qualifications on capitalization and track record prescribed in this section. The Inter-Agency Committee on Tariff and Related Matters of the National Economic Development Authority (NEDA) Board shall formulate and regularly update a list of foreign retailers of high-end or luxury goods and render an annual report on the same to Congress. SECTION 9. Promotion of Locally Manufactured Products. For ten (10) years after the effectivity of this Act, at least thirty percent (30%) of the aggregate cost of the stock inventory of foreign retailers falling under Categories B and C and ten percent (10%) for Category D shall be made in the Philippines. SECTION 10. Prohibited Activities of Qualified Foreign Retailers. Qualified foreign retailers shall not be allowed to engage in certain retailing activities
outside their accredited stores through the use of mobile or rolling stores or carts, the use of sales representatives, door-to-door selling, restaurants and sari-sari stores and such other similar retailing activities: Provided, That a detailed list of prohibited activities shall hereafter be formulated by the DTI. SECTION 11(4). Implementing Agency; Rules and Regulations. The monitoring and regulation of foreign sole proprietorships, partnerships, associations, or corporations allowed to engage in retail trade shall be the responsibility of the DTI. This shall include resolution of conflicts. The DTI, in coordination with the SEC, the NEDA and the BSP shall formulate and issue the implementing rules and regulations necessary to implement this Act within ninety (90) days after its approval.
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SECTION 12(5). Penalty Clause. Any person who shall be found guilty of violation of any provision of this Act shall be punished by imprisonment of not less than six (6) years and one (1) day but not more than eight (8) years, and a fine of not less than One million pesos (P1,000,000.00) but not more than Twenty million pesos (P20,000,000.00). In the case of associations, partnerships or corporations, the penalty shall be imposed upon its partners, president, directors, manager and other officers responsible for the violation. If the offender is not a citizen of the Philippines, he shall be deported immediately after service of sentence. If the Filipino offender is a public officer or employee, he shall, in addition to the penalty prescribed herein, suffer dismissal and permanent disqualification from public office. SECTION 13. Repealing Clause. Republic Act No. 1180, as amended, is hereby repealed. Republic Act No. 3018, as amended, and all other laws, executive orders, rules and regulations or parts thereof inconsistent with this Act are repealed or modified accordingly. SECTION 14. Separability Clause. If any provisions of this Act shall be held unconstitutional, the other provisions not otherwise affected thereby shall remain in force and effect. SECTION 15. Effectivity. This Act shall take effect fifteen (15) days after its approval and publication in at least two (2) newspapers of general circulation in the Philippines.
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Approved: March 7, 2000 Published in The Manila Times and Malaya on March 10, 2000. Published in
the Official Gazette, Vol. 96 No. 24, page 3695 on June 12, 2000.
(6)
February 15, 2000 January 1, 2000
AN ACT IMPOSING THE VALUE-ADDED TAX ON CERTAIN SERVICES BEGINNING JANUARY 1, 2001, AMENDING FOR THE PURPOSE SECTION 5 OF REPUBLIC ACT NO. 8424 AND FOR OTHER PURPOSES
SECTION 1. read as follows:
Section 5 of Republic Act No. 8424 is hereby amended to
"SEC. 5. Transitory Provisions. Effectivity of the Imposition of VAT on Certain Services. The imposition of the value-added tax on the following services shall take effect on January 1, 2001: "(a) Services performed in the exercise of profession or calling subject to the professional tax as provided for under Republic Act No. 7160, otherwise known as the Local Government Code of 1991, and professional services performed by registered general professional partnerships; actors, actresses, talents, singers and emcees; radio and television broadcasters, choreographers; musical, radio, movie, television and stage directors; and professional athletes;
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"(b) Services rendered by banks, non-bank financial intermediaries, finance companies, and other financial intermediaries not performing quasi-banking functions; and
"(c) Services rendered by stock, real estate, commercial, customs and immigration brokers: Provided, That, for the year beginning January 1 up to December 31, 2000, the aforementioned brokers shall, in lieu of the value-added tax prescribed under Title IV of the National Internal Revenue Code of 1997, be subject to a tax equivalent to seven percent (7%) based on gross receipts from brokering services which shall be paid in the manner and in accordance with the provisions of Title V of the said Code: Provided, further, That beginning January 1, 2001, the aforementioned brokers shall be subject to the value-added tax, in lieu of the seven percent (7%) tax. "The taxpayers rendering services mentioned under paragraphs (a) and (b) hereof, shall pay the applicable taxes prescribed under the pertinent provisions of the National Internal Revenue Code, as amended."
SECTION 2. Implementing Rules and Regulations. The Secretary of Finance shall, upon the recommendation of the Commissioner of Internal Revenue, promulgate the necessary rules and regulations for the effective implementation of this Act. SECTION 3. Repealing Clause. All laws, decrees, orders, issuances, rules and regulations and other issuances or parts thereof inconsistent with this Act are hereby repealed or modified accordingly.
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SECTION 4.
Effectivity. This Act shall take effect on January 1, 2000.
Approved: February 15, 2000 Published in the Official Gazette, Vol. 96 No. 24, page 3694 on June 12, 2000.
(7)
February 14, 2000
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AN ACT INSTITUTIONALIZING A NATIONAL FACILITATION SERVICE NETWORK THROUGH THE ESTABLISHMENT OF A PUBLIC EMPLOYMENT SERVICE OFFICE IN EVERY PROVINCE, KEY CITY AND OTHER STRATEGIC AREAS THROUGHOUT THE COUNTRY
SECTION 1. Title. This Act shall be known as the "Public Employment Service Office Act of 1999." SECTION 2. Declaration of Policy. It is a declared policy of the State to promote full employment and equality of employment opportunities for all, and for this purpose, to strengthen and expand the existing employment facilitation service machinery of the government particularly at the local levels.
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SECTION 3. Establishment of the Public Employment Service Office. To carry out the above-declared policy, there shall be established in all capital towns of provinces, key cities and other strategic areas a Public Employment Service Office, hereinafter referred to as "PESO," which shall be community-based and maintained largely by local government units (LGUs) and a number of nongovernmental organizations (NGOs) or community-based organizations (CBOs) and state universities and colleges (SUCs). The PESOs shall be linked to the regional offices of the Department of Labor and Employment (DOLE) for coordination and technical supervision, and to the DOLE central office, to constitute the national employment service network. SECTION 4. Objectives of the PESO. In general, the PESO shall ensure the prompt, timely and efficient delivery of employment service and provision of information on the other DOLE programs. Specifically, the PESO shall: (a) Provide a venue where people could explore simultaneously various employment options and actually seek assistance they prefer; Serve as referral and information center for the various services and programs of DOLE and other government agencies present in
(b)
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the area; (c) (d) Provide clients with adequate information on employment and labor market situation in the area; and Network with other PESOs within the region on employment for job exchange purposes. Functions of the PESO. The PESO shall have the
SECTION 5. following functions: (a)
Encourage employers to submit to the PESO on a regular basis a list of job vacancies in their respective establishments in order to facilitate the exchange of labor market information between job seekers and employers by providing employment information services to job seekers, both for local and overseas employment, and recruitment assistance to employers; Develop and administer testing and evaluation instruments for effective job selection, training and counselling; Provide persons with entrepreneurship qualities access to the various livelihood and self-employment programs offered by both government and nongovernmental organizations at the provincial/city/municipal/barangay levels by undertaking referrals for such programs; Undertake employability enhancement trainings/seminars for job seekers, as well as those who would like to change career or enhance their employability; Provide employment or occupational counselling, career guidance, mass motivation and values development activities; Conduct pre-employment counselling and orientation prospective local and, most especially, overseas workers; to
(b) (c)
(d)
(e) (f) (g) (h)

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Provide reintegration assistance services to returning Filipino migrant workers; and Perform such functions as willfully carry out the objectives of this
Act. SECTION 6. Other Services of the PESO. In addition to the functions enumerated in the preceding section, every PESO shall also undertake the following programs and activities: (a) Jobs Fairs These shall be conducted periodically all over the country to bring together in one venue job seekers and employers for immediate matching; Livelihood and Self-Employment Bazaars These will give clients information on the wide array of livelihood programs they choose to avail of, particularly in the rural areas; Special Credit Assistance for Placed Overseas Workers This type of assistance will enable poor but qualified applicants to avail of opportunities for overseas employment;
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(b)
(c)
(d)
Special Program for Employment of Students and Out-of-School Youth (SPESOS) This program shall endeavor to provide employment to deserving students and out-of-school youth coming from poor families during summer and/or Christmas vacations as provided for under Republic Act No. 7323 and its implementing rules, to enable them to pursue their education; Work Appreciation Program (WAP) This program aims to develop the values of work appreciation and ethics by exposing the young to actual work situations; Workers Hiring for Infrastructure Projects (WHIP) This program is in pursuance of Republic Act No. 6685 which requires construction companies, including the Department of Public Works and Highways and contractors for government-funded infrastructure projects, to hire thirty percent (30%) of skilled and fifty percent (50%) of unskilled labor requirements from the areas where the project is constructed/located; and Other programs/activities developed by DOLE to enhance provision of employment assistance to PESO clients, particularly for special groups of disadvantaged workers such as persons with
(e)
(f)
(g)
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disabilities (PWDs) and displaced workers. SECTION 7. Role of DOLE and LGUs, NGOs, CBOs and SUCs. Upon the request of the LGUs, NGOs, CBOs, SUCs which do not have existing PESOs, the establishment, operation and maintenance of PESOs shall be undertaken by the DOLE. The DOLE shall enter into memoranda of agreements with the concerned LGUs, NGOs, CBOs, SUCs for the establishment, operation and maintenance of PESOs in their respective areas of jurisdiction, and the institutionalization of existing PESOs. It shall be the responsibility of the DOLE to: (a) Establish and maintain a computerized national manpower registry of skills and employment and business opportunities to facilitate the provision and packaging of employment assistance to PESO clients and the setting-up of intra- and inter-regional job clearance systems as part of the overall employment network;
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(b)
Provide office space, equipment and/or supplies, as well as the necessary personnel complement to manage, operate and maintain the PESO; Designate, in consultation with the LGU, NGO, CBO or SUC concerned, a qualified project manager and/or key personnel who shall be responsible for the operation and management of the PESO; Provide technical assistance and allied support services to the PESO; Train PESO personnel in the various aspects of employment facilitation functions; Extend/facilitate such other package of employment services to the provision of employment assistance to clients of the LGU, NGO, CBO or SUC concerned, including the conduct of jobs fairs and other activities; and Undertake, monitor, assess and evaluate the PESO program implementation.
(c)
(d) (e) (f)
(g)
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For their part, the LGUs, NGOs, CBOs or SUCs shall extend such assistance and services as may be necessary in the promotion of employment within their respective areas of jurisdiction. SECTION 8. Administration of the PESO Program. The DOLE shall be primarily responsible for the administration of the PESO Program through its Bureau of Local Employment, as well as its regional offices throughout the country. The Secretary of Labor and Employment, in coordination with the Department of the Interior and Local Government and in consultation with the presidents of the various local government leagues, namely the League of Provinces, the League of Cities, the League of Municipalities and the League of Barangays, shall accordingly promulgate, within ninety (90) days from the effectivity of this Act, the necessary rules and regulations for the effective implementation of the Program. SECTION 9. Funding. The amount necessary for the initial implementation of this Act shall be charged against the existing appropriation of the DOLE and its other operating agencies. Thereafter, the amounts needed for the full implementation of this Act shall be included in the budget of the DOLE in the succeeding General Appropriations Act.
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SECTION 10. Repealing Clause. All laws, decrees, executive orders, rules and regulations or any part thereof which are inconsistent herewith are hereby deemed repealed or modified accordingly. SECTION 11. Separability Clause. If for any reason, any section or provision of this Act or any part thereof, or the application of such section, provision or portion is declared invalid or unconstitutional, the remainder thereof shall not be affected by such declaration. SECTION 12. Effectivity. This Act shall take effect fifteen (15) days after its publication in the Official Gazette or in at least two (2) newspapers of general circulation. Approved: February 14, 2000 Published in Malaya and Manila Standard on February 19, 2000. Published in the Official Gazette, Vol. 96 No. 24, page 3692 on June 12, 2000.
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Endnotes 1 (Popup - Popup)

Revenue Regulations No. 16-05
HLURB Board of Commissioners Resolution No. 765-04 HLURB Resolution No. 770-04 HLURB Resolution No. R-771-04 Homeowners Associations DOJ Circular No. 89
Rules and Regulations Implementing Republic Act No. 8763 Otherwise Known As The Home Guaranty Corporation Act of 2000 EO 535-1979
Rules on the Registration and Supervision of
EO 90-1999 RA 580 RA 1557 RA 5488 RA 6758 RA 6846 RA 7835 RA 7279
2 (Popup - Popup)
General Policies and Specific Guidelines to Implement the 2009 Investments Priorities Plan
General Policies and Specific Guidelines to Implement the 2008 Investment Priorities Plan DOJ Circular No. 89
Rules and Regulations Implementing Republic Act No. 8762, An Act Liberalizing the Retail Trade Business, Repealing Republic Act No. 1180, As Amended
EO 286-2000
EO 139-2002
MO 299-2009
RA 1180
RA 3018
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3 (Popup - Popup)
EO 286 entitled Fourth Regular Foreign Investment Negative List (08-24-2000); EO 139 entitled Promulgation of the 5th Regular Foreign Investment Negative List (10-22-2002).
See
4 (Popup - Popup)
Rules And Regulations Implementing Republic Act No. 8762, An Act Liberalizing The Retail Trade Business, Repealing Republic Act No. 1180, As Amended (07-28-2000)
5 (Popup - Popup)
DOJ Circular No. 89
(08-29-2000)
6 (Popup - Popup)
RA 7160
RA 8424
RA 9010
RA 9238
7 (Popup - Popup)
Implementing Rules and Regulations of RA 9547, Amending RA 7323 (Special Program for the Employment of Students) Implementing Rules and Regulations of Republic Act No. 8759, Otherwise Known as the Public Employment Service Act of 1999 POEA Rules and Regulations Governing the Recruitment and Employment of Land-Based Overseas Workers RA 6685
RA 7323
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General Banking Law, As Amended

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REPUBLIC ACT NO. 8791

SECTION 3. 3.1. 3.2.

Definition and Classification of Banks.

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Powers of a Universal Bank. A universal bank shall have

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Requirement for Grant of Loans or Other Credit

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Unauthorized Advertisement or Business Representation.

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REPUBLIC ACT NO. 8763

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CD Technologies Asia, Inc. and Accesslaw, Inc.

CD Technologies Asia, Inc. and Accesslaw, Inc.

CD Technologies Asia, Inc. and Accesslaw, Inc.

CD Technologies Asia, Inc. and Accesslaw, Inc.

Philippine Law Encyclopedia 2011

CD Technologies Asia, Inc. and Accesslaw, Inc.

CD Technologies Asia, Inc. and Accesslaw, Inc.

thereto; and (3) An individual owner or joint-owners.

CD Technologies Asia, Inc. and Accesslaw, Inc.

CD Technologies Asia, Inc. and Accesslaw, Inc.

CD Technologies Asia, Inc. and Accesslaw, Inc.

(j) (k) (l)

CD Technologies Asia, Inc. and Accesslaw, Inc.

Fund Sources for Operation. The Bangko Sentral ng

CD Technologies Asia, Inc. and Accesslaw, Inc.

CD Technologies Asia, Inc. and Accesslaw, Inc.

Philippine Law Encyclopedia 2011

REPUBLIC ACT NO. 8762

CD Technologies Asia, Inc. and Accesslaw, Inc.

REPUBLIC ACT NO. 8761

SECTION 1. read as follows:

Section 5 of Republic Act No. 8424 is hereby amended to

Effectivity. This Act shall take effect on January 1, 2000.

CD Technologies Asia, Inc. and Accesslaw, Inc.

Philippine Law Encyclopedia 2011

REPUBLIC ACT NO. 8759

CD Technologies Asia, Inc. and Accesslaw, Inc.

SECTION 5. following functions: (a)

(e) (f) (g) (h)

CD Technologies Asia, Inc. and Accesslaw, Inc.

CD Technologies Asia, Inc. and Accesslaw, Inc.

(d) (e) (f)

CD Technologies Asia, Inc. and Accesslaw, Inc.

Philippine Law Encyclopedia 2011

CD Technologies Asia, Inc. and Accesslaw, Inc.

Philippine Law Encyclopedia 2011

Endnotes 1 (Popup - Popup)

Rules on the Registration and Supervision of

EO 90-1999 RA 580 RA 1557 RA 5488 RA 6758 RA 6846 RA 7835 RA 7279