BSP briefer on the Anti-Money Laundering Act of 2001
February 21, 2012
A Bangko Sentral ng Pilipinas briefer on the Anti-Money
Laundering Act of 2001
1. What is money laundering?
Money laundering is an act or series or combination of acts whereby
proceeds of an unlawful activity, whether in cash, property or other assets,
are converted, concealed or disguised to make them appear to have
originated from legitimate sources. One way of laundering money is
through the financial system. Republic Act No. 9160, otherwise known
as the Anti-Money Laundering Act of 2001 (AMLA), as amended, defined
money laundering as a scheme whereby proceeds of an unlawful activity
are transacted or attempted to be transacted, thereby making them
appear to have originated from legitimate sources.
2. What has the Philippine government done to curb money
laundering?
The government enacted Republic Act (R.A.) No. 9160 (The Anti-Money
Laundering Act of 2001), which took effect on 17 October 2001. Certain
provisions of AMLA were amended by R.A. No. 9194 (An Act Amending
R.A. 9160) effective 23 March 2003. It has also issued the Revised
Implementing Rules and Regulations (RIRR) implementing R.A. No. 9160,
as amended.
3. What are considered unlawful activities under the AMLA, as
amended?
There are 14 unlawful activities or predicate crimes covered by the AMLA.
These are, in the order enumerated in the law:
Kidnapping for ransom
Drug offenses
Graft and corrupt practices
Plunder
Robbery and extortion
Jueteng and masiao
Piracy on the high seas
Qualified theft
Swindling
Smuggling
Electronic Commerce crimes
Hijacking, destructive arson and murder, including those perpetrated
against non-combatant persons (terrorist acts)
Securities fraud
Felonies or offenses of a similar nature punishable under penal laws of
other countries
4. How is money laundered through the financial system?
Placement involves initial placement or introduction of the illegal funds
into the financial system. Financial institutions are usually used at this
point.
Layering involves a series of financial transactions during which the
dirty money is passed through a series of procedures, putting layer upon
layer of persons and financial activities into the laundering process. Ex.
wire transfers, use of shell corporations, etc.
Integration the money is once again made available to the criminal
with the occupational and geographic origin obscured or concealed. The
laundered funds are now integrated back into the legitimate economy
through the purchase of properties, businesses and other investments.
5. Why is Money Laundering a problem?
Money laundering allows criminals to preserve and enjoy the proceeds of
their crimes, thus providing them with the incentives and the means to
continue their illegal activities. At the same time, it provides them the
opportunity to appear in public like legitimate entrepreneurs. Organized
crime, through money laundering, is known to have the capacity to
destabilize governments and undermine their financial systems. It is thus
a threat to national security.
6. What are the salient features of the law?
It criminalizes money laundering, meaning it makes money laundering a
crime, and provides penalties for its commission, including hefty fines and
imprisonment.
It states clearly the determination of the government to prevent the
Philippines from becoming a haven for money laundering, while ensuring
to preserve the integrity and confidentiality of good bank accounts.
It creates an Anti-Money Laundering Council (AMLC) that is tasked to
oversee the implementation of the law and to act as a financial
intelligence unit to receive and analyze covered and suspicious
transaction reports.
It establishes the rules and the administration process for the prevention,
detection and prosecution of money laundering activities.
It relaxes the bank deposit secrecy laws authorizing the AMLC and the
Bangko Sentral ng Pilipinas access to deposit and investment accounts in
specific circumstances.
It requires covered institutions to report covered and suspicious
transactions and to cooperate with the government in prosecuting
offenders. It also requires them to know their customers and to safely
keep all records of their transactions.
 It carries provisions to protect innocent parties by providing penalties for
causing the disclosure to the public of confidential information contained
in the covered and suspicious transactions.
It establishes procedures for international cooperation and assistance in
the apprehension and prosecution of money laundering suspects.
7. What is the Anti-Money Laundering Council (AMLC)? What are
its powers?
The AMLC is the Philippines financial intelligence unit, which is tasked to
implement the AMLA. It is composed of the Governor of the Bangko
Sentral ng Pilipinas (BSP) as Chairman & the Commissioner of the
Insurance Commission (IC) and the Chairman of the Securities and
Exchange Commission (SEC) as members. The AMLC is authorized to:
Require and receive covered or suspicious transaction reports from
covered institutions.
Issue orders to determine the true identity of the owner of any monetary
instrument or property that is the subject of a covered or suspicious
transaction report, and to request the assistance of a foreign country if the
Council believes it is necessary.
Institute civil forfeiture and all other remedial proceedings through the
Office of the Solicitor General.
Cause the filing of complaints with the Department of Justice or the
Ombudsman for the prosecution of money laundering offenses.
Investigate suspicious transactions, covered transactions deemed
suspicious, money laundering activities and other violations of the AMLA.
Secure the order of the Court of Appeals to freeze any monetary
instrument or property alleged to be the proceeds of unlawful activity.
Implement such measures as may be necessary and justified to
counteract money laundering.
Receive and take action on any request from foreign countries for
assistance in their own anti-money laundering operations.
Develop educational programs to make the public aware of the pernicious
effects of money laundering and how they can participate in bringing the
offenders to the fold of the law.
Enlist the assistance of any branch of government for the prevention,
detection and investigation of money laundering offenses and the
prosecution of offenders. In this connection, the AMLC can require
intelligence agencies of the government to divulge any information that
will facilitate the work of the Council in going after money launderers.
Impose administrative sanctions on those who violate the law, and the
rules, regulations, orders and resolutions issued in connection with the
enforcement of the law.
8. What are the covered institutions?
Banks, offshore banking units, quasi-banks, trust entities, non-stock
savings and loan associations, pawnshops, and all other institutions,
including their subsidiaries and affiliates supervised and/or regulated by
the Bangko Sentral ng Pilipinas (BSP)
Insurance companies, holding companies and all other institutions
supervised or regulated by the Insurance Commission (IC)
Securities dealers, brokers, pre-need companies, foreign exchange
corporations, investment houses, trading advisers, as well as other
entities supervised or regulated by the Securities and Exchange
Commission (SEC)
9. What are the Customer Identification Requirements KYC
(Know Your Customer Rule)?
Covered institutions shall:
Establish and record the true identity of their clients based on official
documents.
In case of individual clients, maintain a system of verifying the true
identity of their clients.
In case of corporate clients, require a system verifying their legal
existence and organizational structure, as well as the authority and
identification of all persons purporting to act in their behalf.
Establish appropriate systems and methods based on internationally
compliant standards and adequate internal controls for verifying and
recording the true and full identify of their customers.
10. What are the Record-Keeping Requirements?
All covered institutions shall:
Maintain and safely store all records of all their transactions for five years
from the transaction dates;
Ensure that said records/files contain the full and true identity of the
owners or holders of the accounts involved in the covered transactions
and all other identification documents;
Undertake the necessary adequate measures to ensure the confidentiality
of such files;
Prepare and maintain documentation, in accordance with client
identification requirements, on their customer accounts, relationships and
transactions such that any account, relationship or transaction can be so
reconstructed as to enable the AMLC and/or the courts to establish an
audit trail for money laundering;
Maintain and safely store all records of existing and new accounts and of
new transactions for 5 years from October 17, 2001 or from the dates of
the accounts or transactions, whichever is later;
 Anent closed accounts, preserve and safely store the records on customer
identification, account files and business correspondence for at least 5
years from the dates they were closed;
If a money laundering case based on any record kept by the covered
institution has been filed in court, retain said files until it is confirmed that
the case has been finally resolved or terminated by the court; and
Retain records as originals in such forms as are admissible in court
11. What are covered transactions?
Transaction in cash or other equivalent monetary instruments involving a
total amount in excess of P500,000.00 within one business day.
12. What are suspicious transactions?
Transactions, regardless of the amount involved, where the following
circumstances exist:
a. there is no underlying legal or trade obligation, purpose or economic
justification;
b.the client is not properly identified;
c. the amount involved is not commensurate with the business or financial
capacity of the client;
d. taking into account all known circumstances, it may be perceived that
the clients transaction is structured in order to avoid being the subject of
reporting requirements under the Act;
e. any circumstance relating to the transaction which is observed to
deviate from the profile of the client and/or the clients past transactions
with the covered institution;
f. the transaction is in any way related to an unlawful activity or offense
under this Act that is about to be, is being or has been committed; or
g. any transaction that is similar or analogous to the foregoing.
13. What are the reporting requirements?
Covered institutions shall report to the AMLC all covered transactions and
suspicious transactions within five working days from occurrence thereof,
unless the Supervision Authority (the Bangko Sentral ng Pilipinas, the
Securities and Exchange Commission, or the Insurance Commission)
prescribes a longer period not exceeding ten working days. Should a
transaction be determined to be both a covered transaction and a
suspicious transaction, it shall be reported as suspicious transaction.
14. How is reporting done?
The reports on covered and/or suspicious transactions shall be
accomplished in the prescribed formats and submitted within five business
days from occurrence of the transactions in a secured manner to the AMLC
in electronic form, either via diskettes, leased lines, or through internet
facilities. The corresponding hard copy for suspicious transactions shall be
sent to AMLC at the 5th Floor EDPC Building, Bangko Sentral ng Pilipinas
Complex, Manila, Philippines. All pawnshops should coordinate with the
AMLC thru tel. nos. 523-4421, 521-5662 or 302-3979 on reporting
requirements, procedures and deadlines.
15. Are there sanctions for failure to report covered or suspicious
transactions and non-compliance with R.A. 9160, as amended?
Sanctions/penalties shall be imposed on pawnshops that will fail to comply
with the provisions of R.A. 9160, as amended.
16. What are the sanctions for failure to report covered or
suspicious transactions?
Any person, required to report covered and suspicious transactions failed
to do so will be subjected to penalty of 6 months to 4 years imprisonment
or a fine of not less than P100,000.00 but not more than P500,000.00, or
both.
17. Are there confidentiality restrictions on the reporting of
covered transaction and/or suspicious transaction?
When reporting covered transactions or suspicious transactions to the
AMLC, covered institutions and their officers and employees, are
prohibited from communicating, directly or indirectly, in any manner or by
any means, to any person, entity, the media, the fact that a covered or
suspicious transaction report was made, the contents thereof, or any other
information in relation thereto. Neither may such reporting be published or
aired in any manner or form by the mass media, electronic mail, or other
similar devices. In case of violation thereof, the concerned officer, and
employee, of the covered institution, or media shall be held criminally
liable.
18. What are the other offenses punishable under the AMLA, as
amended?
a. Failure to keep records is committed by any responsible official or
employee of a covered institution who fails to maintain and safely store all
records of transactions for 5 years from the dates the transactions were
made or when the accounts were closed. The penalty is 6 months to 1
year imprisonment or a fine of not less than P100,000.00 but not more
than P500,000.00, or both.
b. Malicious reporting is committed by any person who, with malice or in
bad faith, reports or files a completely unwarranted or false information
regarding a money laundering transaction against any person. The penalty
is 6 months to 4 years imprisonment and a fine of not less than
P100,000.00 but not more than P500,000.00. The offender is not entitled
to the benefits of the Probation Law.
c. Breach of Confidentiality. For this offense, the penalty is 3 to 8 years
imprisonment and a fine of not less than P500,000.00 but not more than
P1 million. In case the prohibited information is reported by media, the
responsible reporter, writer, president, publisher, manager, and editor-in-
chief are held criminally liable.
d. Administrative offenses. The AMLC, after due investigation, can impose
fines from P100,000.00 to P500,000.00 on officers and employees of
covered institutions or any person who violates the provisions of the
AMLA, as amended, the Implementing Rules and Regulations, and orders
and resolutions issued pursuant thereto.
Republic Act No. 10365
February 15, 2013
H. No. 6565
S. No. 3123
Republic of the PhilippinesCongress of the PhilippinesMetro
ManilaFifteenth CongressThird Regular Session
Begun and held in Metro Manila, on Monday, the twenty-third day of July,
two thousand twelve.
[REPUBLIC ACT NO. 10365]
AN ACT FURTHER STRENGTHENING THE ANTI-MONEY LAUNDERING
LAW, AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 9160,
OTHERWISE KNOWN AS THE ANTI-MONEY LAUNDERING ACT OF
2001, AS AMENDED
Be it enacted by the Senate and House of Representatives of the
Philippines in Congress assembled:
SECTION 1. Section 3(a) of Republic Act No. 9160, as amended, is hereby
amended to read as follows:
(a) Covered persons, natural or juridical, refer to:
(1) banks, non-banks, quasi-banks, trust entities, foreign exchange
dealers, pawnshops, money changers, remittance and transfer companies
and other similar entities and all other persons and their subsidiaries and
affiliates supervised or regulated by the Bangko Sentral ng Pilipinas (BSP);
(2) insurance companies, pre-need companies and all other persons
supervised or regulated by the Insurance Commission (IC);
(3) (i) securities dealers, brokers, salesmen, investment houses and other
similar persons managing securities or rendering services as investment
agent, advisor, or consultant, (ii) mutual funds, close-end investment
companies, common trust funds, and other similar persons, and (iii) other
entities administering or otherwise dealing in currency, commodities or
financial derivatives based thereon, valuable objects, cash substitutes and
other similar monetary instruments or property supervised or regulated by
the Securities and Exchange Commission (SEC);
(4) jewelry dealers in precious metals, who, as a business, trade in
precious metals, for transactions in excess of One million pesos
(P1,000,000.00);
(5) jewelry dealers in precious stones, who, as a business, trade in
precious stones, for transactions in excess of One million pesos
(P1,000,000.00);
(6) company service providers which, as a business, provide any of the
following services to third parties: (i) acting as a formation agent of
juridical persons; (ii) acting as (or arranging for another person to act as) a
director or corporate secretary of a company, a partner of a partnership,
or a similar position in relation to other juridical persons; (iii) providing a
registered office, business address or accommodation, correspondence or
administrative address for a company, a partnership or any other legal
person or arrangement; and (iv) acting as (or arranging for another person
to act as) a nominee shareholder for another person; and
(7) persons who provide any of the following services:
(i) managing of client money, securities or other assets;
(ii) management of bank, savings or securities accounts;
(iii) organization of contributions for the creation, operation or
management of companies; and
(iv) creation, operation or management of juridical persons or
arrangements, and buying and selling business entities.
Notwithstanding the foregoing, the term covered persons shall exclude
lawyers and accountants acting as independent legal professionals in
relation to information concerning their clients or where disclosure of
information would compromise client confidences or the attorney-client
relationship: Provided, That these lawyers and accountants are authorized
to practice in the Philippines and shall continue to be subject to the
provisions of their respective codes of conduct and/or professional
responsibility or any of its amendments.
SEC. 2. Section 3(i) of the same Act is hereby amended to read as follows:
(i) Unlawful activity refers to any act or omission or series or
combination thereof involving or having direct relation to the following:
(1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise
known as the Revised Penal Code, as amended;
(2) Sections 4, 5, 6, 8, 9, 10, 11, 12, 13, 14, 15 and 16 of Republic Act No.
9165, otherwise known as the Comprehensive Dangerous Drugs Act of
2002;
(3) Section 3 paragraphs B, C, E, G, H and I of Republic Act No. 3019, as
amended, otherwise known as the Anti-Graft and Corrupt Practices Act;
(4) Plunder under Republic Act No. 7080, as amended;
(5) Robbery and extortion under Articles 294, 295, 296, 299, 300, 301
and 302 of the Revised Penal Code, as amended;
(6) Jueteng and Masiao punished as illegal gambling under Presidential
Decree No. 1602;
(7) Piracy on the high seas under the Revised Penal Code, as amended
and Presidential Decree No. 532;
(8) Qualified theft under Article 310 of the Revised Penal Code, as
amended;
(9) Swindling under Article 315 and Other Forms of Swindling under
Article 316 of the Revised Penal Code, as amended;
(10) Smuggling under Republic Act Nos. 455 and 1937;
(11) Violations of Republic Act No. 8792, otherwise known as the
Electronic Commerce Act of 2000;
(12) Hijacking and other violations under Republic Act No. 6235;
destructive arson and murder, as defined under the Revised Penal Code,
as amended;
(13) Terrorism and conspiracy to commit terrorism as defined and
penalized under Sections 3 and 4 of Republic Act No. 9372;
(14) Financing of terrorism under Section 4 and offenses punishable
under Sections 5, 6, 7 and 8 of Republic Act No. 10168, otherwise known
as the Terrorism Financing Prevention and Suppression Act of 2012:
(15) Bribery under Articles 210, 211 and 211-A of the Revised Penal
Code, as amended, and Corruption of Public Officers under Article 212 of
the Revised Penal Code, as amended;
(16) Frauds and Illegal Exactions and Transactions under Articles 213,
214, 215 and 216 of the Revised Penal Code, as amended;
(17) Malversation of Public Funds and Property under Articles 217 and
222 of the Revised Penal Code, as amended;
(18) Forgeries and Counterfeiting under Articles 163, 166, 167, 168, 169
and 176 of the Revised Penal Code, as amended;
(19) Violations of Sections 4 to 6 of Republic Act No. 9208, otherwise
known as the Anti-Trafficking in Persons Act of 2003;
(20) Violations of Sections 78 to 79 of Chapter IV, of Presidential Decree
No. 705, otherwise known as the Revised Forestry Code of the Philippines,
as amended;
(21) Violations of Sections 86 to 106 of Chapter VI, of Republic Act No.
8550, otherwise known as the Philippine Fisheries Code of 1998;
(22) Violations of Sections 101 to 107, and 110 of Republic Act No. 7942,
otherwise known as the Philippine Mining Act of 1995;
(23) Violations of Section 27(c), (e), (f), (g) and (i), of Republic Act No.
9147, otherwise known as the Wildlife Resources Conservation and
Protection Act;
(24) Violation of Section 7(b) of Republic Act No. 9072, otherwise known
as the National Caves and Cave Resources Management Protection Act;
(25) Violation of Republic Act No. 6539, otherwise known as the Anti-
Carnapping Act of 2002, as amended;
(26) Violations of Sections 1, 3 and 5 of Presidential Decree No. 1866, as
amended, otherwise known as the decree Codifying the Laws on
Illegal/Unlawful Possession, Manufacture, Dealing In, Acquisition or
Disposition of Firearms, Ammunition or Explosives;
(27) Violation of Presidential Decree No. 1612, otherwise known as the
Anti-Fencing Law;
(28) Violation of Section 6 of Republic Act No. 8042, otherwise known as
the Migrant Workers and Overseas Filipinos Act of 1995, as amended by
Republic Act No. 10022;
(29) Violation of Republic Act No. 8293, otherwise known as the
Intellectual Property Code of the Philippines;
(30) Violation of Section 4 of Republic Act No. 9995, otherwise known as
the Anti-Photo and Video Voyeurism Act of 2009;
(31) Violation of Section 4 of Republic Act No. 9775, otherwise known as
the Anti-Child Pornography Act of 2009;
(32) Violations of Sections 5, 7, 8, 9, 10(c), (d) and (e), 11, 12 and 14 of
Republic Act No. 7610, otherwise known as the Special Protection of
Children Against Abuse, Exploitation and Discrimination;
(33) Fraudulent practices and other violations under Republic Act No.
8799, otherwise known as the Securities Regulation Code of 2000; and
(34) Felonies or offenses of a similar nature that are punishable under the
penal laws of other countries.
SEC. 3. Section 3 of the same Act shall have new paragraphs (j) and (k).
(j) Precious metals shall mean gold, silver, platinum, palladium, rhodium,
ruthenium, iridium and osmium. These include alloys of precious metals,
solders and plating chemicals such as rhodium and palladium plating
solutions and potassium gold cyanide and potassium silver cyanide and
silver cyanide in salt solution.
(k) Precious stones shall mean diamond, ruby, emerald, sapphire, opal,
amethyst, beryl, topaz, and garnet that are used in jewelry making,
including those formerly classified as semi-precious stones.
SEC. 4. Section 4 of the same Act is hereby amended to read as follows:
SEC. 4. Money Laundering Offense. Money laundering is committed by
any person who, knowing that any monetary instrument or property
represents, involves, or relates to the proceeds of any unlawful activity:
(a) transacts said monetary instrument or property;
(b) converts, transfers, disposes of, moves, acquires, possesses or uses
said monetary instrument or property;
(c) conceals or disguises the true nature, source, location, disposition,
movement or ownership of or rights with respect to said monetary
instrument or property;
(d) attempts or conspires to commit money laundering offenses referred
to in paragraphs (a), (b) or (c);
(e) aids, abets, assists in or counsels the commission of the money
laundering offenses referred to in paragraphs (a), (b) or (c) above; and
(f) performs or fails to perform any act as a result of which he facilitates
the offense of money laundering referred to in paragraphs (a), (b) or (c)
above.
Money laundering is also committed by any covered person who,
knowing that a covered or suspicious transaction is required under this Act
to be reported to the Anti-Money Laundering Council (AMLC), fails to do
so.
SEC. 5. Section 6(a) of the same Act is hereby amended to read as follows:
SEC. 6. Prosecution of Money Laundering.
(a) Any person may be charged with and convicted of both the offense of
money laundering and the unlawful activity as herein defined.
(b) The prosecution of any offense or violation under this Act shall
proceed independently of any proceeding relating to the unlawful activity.
SEC. 6. Section 7 of the same Act is hereby amended to read as follows:
SEC. 7. Creation of Anti-Money Laundering Council (AMLC). The Anti-
Money Laundering Council is hereby created and shall be composed of the
Governor of the Bangko Sentral ng Pilipinas as Chairman, the
Commissioner of the Insurance Commission and the Chairman of the
Securities and Exchange Commission, as members. The AMLC shall act
unanimously in the discharge of its functions as defined hereunder:
x x x
(6) to apply before the Court of Appeals, ex parte, for the freezing of any
monetary instrument or property alleged to be laundered, proceeds from,
or instrumentalities used in or intended for use in any unlawful activity as
defined in Section 3(i) hereof;
x x x
(12) to require the Land Registration Authority and all its Registries of
Deeds to submit to the AMLC, reports on all real estate transactions
involving an amount in excess of Five hundred thousand pesos
(P500,000.00) within fifteen (15) days from the date of registration of the
transaction, in a form to be prescribed by the AMLC. The AMLC may also
require the Land Registration Authority and all its Registries of Deeds to
submit copies of relevant documents of all real estate transactions.
SEC. 7. Section 9(c), paragraphs 1 and 4 of the same Act are hereby
amended to read as follows:
SEC. 9. Prevention of Money Laundering; Customer Identification
Requirements and Record Keeping.
(a) x x x
(b) x x x
(c) Reporting of Covered and Suspicious Transactions. Covered persons
shall report to the AMLC all covered transactions and suspicious
transactions within five (5) working days from occurrence thereof, unless
the AMLC prescribes a different period not exceeding fifteen (15) working
days.
Lawyers and accountants acting as independent legal professionals are
not required to report covered and suspicious transactions if the relevant
information was obtained in circumstances where they are subject to
professional secrecy or legal professional privilege.
x x x
x x x
When reporting covered or suspicious transactions to the AMLC, covered
persons and their officers and employees are prohibited from
communicating, directly or indirectly, in any manner or by any means, to
any person or entity, the media, the fact that a covered or suspicious
transaction has been reported or is about to be reported, the contents of
the report, or any other information in relation thereto. Neither may such
reporting be published or aired in any manner or form by the mass
media, electronic mail, or other similar devices. In case of violation
thereof, the concerned officer and employee of the covered person and
media shall be held criminally liable.
SEC. 8. Section 10 of the same Act, as amended by Republic Act No.
10167, is hereby amended to read as follows:
SEC. 10. Freezing of Monetary Instrument or Property. Upon a verified
ex parte petition by the AMLC and after determination that probable cause
exists that any monetary instrument or property is in any way related to
an unlawful activity as defined in Section 3(i) hereof, the Court of Appeals
may issue a freeze order which shall be effective immediately, and which
shall not exceed six (6) months depending upon the circumstances of the
case: Provided, That if there is no case filed against a person whose
account has been frozen within the period determined by the court, the
freeze order shall be deemed ipso facto lifted: Provided, further, That this
new rule shall not apply to pending cases in the courts. In any case, the
court should act on the petition to freeze within twenty-four (24) hours
from filing of the petition. If the application is filed a day before a
nonworking day, the computation of the twenty-four (24)-hour period shall
exclude the nonworking days.
A person whose account has been frozen may file a motion to lift the
freeze order and the court must resolve this motion before the expiration
of the freeze order.
No court shall issue a temporary restraining order or a writ of injunction
against any freeze order, except the Supreme Court.
SEC. 9. Section 12 of the same Act is hereby amended to read as follows:
(a) Civil Forfeiture. Upon determination by the AMLC that probable
cause exists that any monetary instrument or property is in any way
related to an unlawful activity as defined in Section 3(i) or a money
laundering offense under Section 4 hereof, the AMLC shall file with the
appropriate court through the Office of the Solicitor General, a verified ex
parte petition for forfeiture, and the Rules of Court on Civil Forfeiture shall
apply.
The forfeiture shall include those other monetary instrument or property
having an equivalent value to that of the monetary instrument or property
found to be related in any way to an unlawful activity or a money
laundering offense, when with due diligence, the former cannot be
located, or it has been substantially altered, destroyed, diminished in
value or otherwise rendered worthless by any act or omission, or it has
been concealed, removed, converted, or otherwise transferred, or it is
located outside the Philippines or has been placed or brought outside the
jurisdiction of the court, or it has been commingled with other monetary
instrument or property belonging to either the offender himself or a third
person or entity, thereby rendering the same difficult to identify or be
segregated for purposes of forfeiture.
(b) Claim on Forfeited Assets. Where the court has issued an order of
forfeiture of the monetary instrument or property in a criminal prosecution
for any money laundering offense defined under Section 4 of this Act, the
offender or any other person claiming an interest therein may apply, by
verified petition, for a declaration that the same legitimately belongs to
him and for segregation or exclusion of the monetary instrument or
property corresponding thereto. The verified petition shall be filed with the
court which rendered the judgment of forfeiture, within fifteen (15) days
from the date of the finality of the order of forfeiture, in default of which
the said order shall become final and executor. This provision shall apply
in both civil and criminal forfeiture.
(c) Payment in Lieu of Forfeiture. Where the court has issued an order
of forfeiture of the monetary instrument or property subject of a money
laundering offense defined under Section 4, and said order cannot be
enforced because any particular monetary instrument or property cannot,
with due diligence, be located, or it has been substantially altered,
destroyed, diminished in value or otherwise rendered worthless by any act
or omission, directly or indirectly, attributable to the offender, or it has
been concealed, removed, converted, or otherwise transferred to prevent
the same from being found or to avoid forfeiture thereof, or it is located
outside the Philippines or has been placed or brought outside the
jurisdiction of the court, or it has been commingled with other monetary
instruments or property belonging to either the offender himself or a third
person or entity, thereby rendering the same difficult to identify or be
segregated for purposes of forfeiture, the court may, instead of enforcing
the order of forfeiture of the monetary instrument or property or part
thereof or interest therein, accordingly order the convicted offender to pay
an amount equal to the value of said monetary instrument or property.
This provision shall apply in both civil and criminal forfeiture.
SEC. 10. Section 14 of the same Act, as amended, is hereby further
amended to read as follows:
SEC. 14. Penal Provisions. (a) Penalties for the Crime of Money
Laundering. The penalty of imprisonment ranging from seven (7) to
fourteen (14) years and a fine of not less than Three million Philippine
pesos (Php3,000,000.00) but not more than twice the value of the
monetary instrument or property involved in the offense, shall be imposed
upon a person convicted under Section 4(a), (b), (c) and (d) of this Act.
The penalty of imprisonment from four (4) to seven (7) years and a fine
of not less than One million five hundred thousand Philippine pesos
(Php1,500,000.00) but not more than Three million Philippine pesos
(Php3,000,000.00), shall be imposed upon a person convicted under
Section 4(e) and (f) of this Act.
The penalty of imprisonment from six (6) months to four (4) years or a
fine of not less than One hundred thousand Philippine pesos
(Php100,000.00) but not more than Five hundred thousand Philippine
pesos (Php500,000.00), or both, shall be imposed on a person convicted
under the last paragraph of Section 4 of this Act.
(b) x x x
(c) x x x
(d) x x x
(e) The penalty of imprisonment ranging from four (4) to seven (7) years
and a fine corresponding to not more than two hundred percent (200%) of
the value of the monetary instrument or property laundered shall be
imposed upon the covered person, its directors, officers or pesonnel who
knowingly participated in the commission of the crime of money
laundering.
(f) Imposition of Administrative Sanctions. The imposition of the
administrative sanctions shall be without prejudice to the filing of criminal
charges against the persons responsible for the violation.
After due notice and hearing, the AMLC shall, at its discretion, impose
sanctions, including monetary penalties, warning or reprimand, upon any
covered person, its directors, officers, employees or any other person for
the violation of this Act, its implementing rules and regulations, or for
failure or refusal to comply with AMLC orders, resolutions and other
issuances. Such monetary penalties shall be in amounts as may be
determined by the AMLC to be appropriate, which shall not be more than
Five hundred thousand Philippine pesos (P500,000.00) per violation.
The AMLC may promulgate rules on fines and penalties taking into
consideration the attendant circumstances, such as the nature and gravity
of the violation or irregularity.
(g) The provision of this law shall not be construed or implemented in a
manner that will discriminate against certain customer types, such as
politically-exposed persons, as well as their relatives, or against a certain
religion, race or ethnic origin, or such other attributes or profiles when
used as the only basis to deny these persons access to the services
provided by the covered persons. Whenever a bank, or quasi-bank,
financial institution or whenever any person or entity commits said
discriminatory act, the person or persons responsible for such violation
shall be subject to sanctions as may be deemed appropriate by their
respective regulators.
SEC. 11. New sections are hereby inserted after Section 19 of the same
Act, as amended, to read as follows:
SEC. 20. Non-intervention in the Bureau of Internal Revenue (BIR)
Operations. Nothing contained in this Act nor in related antecedent laws
or existing agreements shall be construed to allow the AMLC to participate
in any manner in the operations of the BIR.
SEC. 21. The authority to inquire into or examine the main account and
the related accounts shall comply with the requirements of Article III,
Sections 2 and 3 of the 1987 Constitution, which are hereby incorporated
by reference. Likewise, the constitutional injunction against ex post facto
laws and bills of attainder shall be respected in the implementation of this
Act.
SEC. 12. The succeeding sections are hereby renumbered accordingly.
SEC. 13. Separability Clause. If any provision of this Act is declared
unconstitutional, the same shall not affect the validity and effectivity of
the other provisions hereof.
SEC. 14. Repealing Clause. All laws, decrees, orders, and issuances or
portions thereof, which are inconsistent with the provisions of this Act, are
hereby repealed, amended or modified accordingly.
SEC. 15. Effectivity. This Act shall take effect fifteen (15) days following
its publication in at least two (2) national newspapers of general
circulation.
Approved,
REPUBLIC ACT No. 7653
THE NEW CENTRAL BANK ACT
CHAPTER I ESTABLISHMENT AND ORGANIZATION OF THE
BANGKO SENTRAL NG PILIPINAS
ARTICLE ICREATION, RESPONSIBILITIES AND CORPORATE POWERS
OF THE BANGKO SENTRAL
Section 1. Declaration of Policy. - The State shall maintain a
central monetary authority that shall function and operate as an
independent and accountable body corporate in the discharge of its
mandated responsibilities concerning money, banking and credit. In line
with this policy, and considering its unique functions and responsibilities,
the central monetary authority established under this Act, while being a
government-owned corporation, shall enjoy fiscal and administrative
autonomy.
Section 2. Creation of the Bangko Sentral. - There is hereby
established an independent central monetary authority, which shall be a
body corporate known as the Bangko Sentral ng Pilipinas, hereafter
referred to as the Bangko Sentral.
The capital of the Bangko Sentral shall be Fifty billion pesos
(P50,000,000,000), to be fully subscribed by the Government of the
Republic, hereafter referred to as the Government, Ten billion pesos
(P10,000,000,000) of which shall be fully paid for by the Government upon
the effectivity of this Act and the balance to be paid for within a period of
two (2) years from the effectivity of this Act in such manner and form as
the Government, through the Secretary of Finance and the Secretary of
Budget and Management, may thereafter determine.
Section 3. Responsibility and Primary Objective. - The Bangko
Sentral shall provide policy directions in the areas of money, banking, and
credit. It shall have supervision over the operations of banks and exercise
such regulatory powers as provided in this Act and other pertinent laws
over the operations of finance companies and non-bank financial
institutions performing quasi-banking functions, hereafter referred to as
quasi-banks, and institutions performing similar functions.
The primary objective of the Bangko Sentral is to maintain price
stability conducive to a balanced and sustainable growth of the economy.
It shall also promote and maintain monetary stability and the convertibility
of the peso.
Section 4. Place of Business. - The Bangko Sentral shall have its
principal place of business in Metro Manila, but may maintain branches,
agencies and correspondents in such other places as the proper conduct
of its business may require.
Section 5. Corporate Powers. - The Bangko Sentral is hereby
authorized to adopt, alter, and use a corporate seal which shall be
judicially noticed; to enter into contracts; to lease or own real and
personal property, and to sell or otherwise dispose of the same; to sue and
be sued; and otherwise to do and perform any and all things that may be
necessary or proper to carry out the purposes of this Act.
The Bangko Sentral may acquire and hold such assets and incur
such liabilities in connection with its operations authorized by the
provisions of this Act, or as are essential to the proper conduct of such
operations.
The Bangko Sentral may compromise, condone or release, in whole
or in part, any claim of or settled liability to the Bangko Sentral, regardless
of the amount involved, under such terms and conditions as may be
prescribed by the Monetary Board to protect the interests of the Bangko
Sentral.
ARTICLE IITHE MONETARY BOARD
Section 6. Composition of the Monetary Board. - The powers and
functions of the Bangko Sentral shall be exercised by the Bangko Sentral
Monetary Board, hereafter referred to as the Monetary Board, composed of
seven (7) members appointed by the President of the Philippines for a
term of six (6) years.
The seven (7) members are:
(a) the Governor of the Bangko Sentral, who shall be the Chairman of the
Monetary Board. The Governor of the Bangko Sentral shall be head of a
department and his appointment shall be subject to confirmation by the
Commission on Appointments. Whenever the Governor is unable to attend
a meeting of the Board, he shall designate a Deputy Governor to act as his
alternate: Provided, That in such event, the Monetary Board shall
designate one of its members as acting Chairman;
(b) a member of the Cabinet to be designated by the President of the
Philippines. Whenever the designated Cabinet Member is unable to attend
a meeting of the Board, he shall designate an Undersecretary in his
Department to attend as his alternate; and
(c) five (5) members who shall come from the private sector, all of whom
shall serve full-time: Provided, however, That of the members first
appointed under the provisions of this subsection, three (3) shall have a
term of six (6) years, and the other two (2), three (3) years.
No member of the Monetary Board may be reappointed more than
once.
Section 7. Vacancies. - Any vacancy in the Monetary Board
created by the death, resignation, or removal of any member shall be
filled by the appointment of a new member to complete the unexpired
period of the term of the member concerned.
Section 8. Qualifications. - The members of the Monetary Board
must be natural-born citizens of the Philippines, at least thirty-five (35)
years of age, with the exception of the Governor who should at least be
forty (40) years of age, of good moral character, of unquestionable
integrity, of known probity and patriotism, and with recognized
competence in social and economic disciplines.
Section 9. Disqualifications. - In addition to the disqualifications
imposed by Republic Act No. 6713, a member of the Monetary Board is
disqualified from being a director, officer, employee, consultant, lawyer,
agent or stockholder of any bank, quasi-bank or any other institution
which is subject to supervision or examination by the Bangko Sentral, in
which case such member shall resign from, and divest himself of any and
all interests in such institution before assumption of office as member of
the Monetary Board.
The members of the Monetary Board coming from the private
sector shall not hold any other public office or public employment during
their tenure.
No person shall be a member of the Monetary Board if he has been
connected directly with any multilateral banking or financial institution or
has a substantial interest in any private bank in the Philippines, within one
(1) year prior to his appointment; likewise, no member of the Monetary
Board shall be employed in any such institution within two (2) years after
the expiration of his term except when he serves as an official
representative of the Philippine Government to such institution.
Section 10. Removal. - The President may remove any member of
the Monetary Board for any of the following reasons:
(a) If the member is subsequently disqualified under the provisions of
Section 8 of this Act; or
(b) If he is physically or mentally incapacitated that he cannot properly
discharge his duties and responsibilities and such incapacity has lasted for
more than six (6) months; or
(c) If the member is guilty of acts or operations which are of fraudulent or
illegal character or which are manifestly opposed to the aims and interests
of the Bangko Sentral; or
(d) If the member no longer possesses the qualifications specified in
Section 8 of this Act.
Section 11. Meetings. - The Monetary Board shall meet at least
once a week. The Board may be called to a meeting by the Governor of
the Bangko Sentral or by two (2) other members of the Board.
The presence of four (4) members shall constitute a quorum:
Provided, That in all cases the Governor or his duly designated alternate
shall be among the four (4).
Unless otherwise provided in this Act, all decisions of the Monetary
Board shall require the concurrence of at least four (4) members.
The Bangko Sentral shall maintain and preserve a complete record
of the proceedings and deliberations of the Monetary Board, including the
tapes and transcripts of the stenographic notes, either in their original
form or in microfilm.
Section 12. Attendance of the Deputy Governors. - The Deputy
Governors may attend the meetings of the Monetary Board with the right
to be heard.
Section 13. Salary. - The salary of the Governor and the members
of the Monetary Board from the private sector shall be fixed by the
President of the Philippines at a sum commensurate to the importance
and responsibility attached to the position.
Section 14. Withdrawal of Persons Having a Personal Interest. - In
addition to the requirements of Republic Act No. 6713, any member of the
Monetary Board with personal or pecuniary interest in any matter in the
agenda of the Monetary Board shall disclose his interest to the Board and
shall retire from the meeting when the matter is taken up. The decision
taken on the matter shall be made public. The minutes shall reflect the
disclosure made and the retirement of the member concerned from the
meeting.
Section 15. Exercise of Authority. - In the exercise of its authority,
the Monetary Board shall:
(a) issue rules and regulations it considers necessary for the effective
discharge of the responsibilities and exercise of the powers vested upon
the Monetary Board and the Bangko Sentral. The rules and regulations
issued shall be reported to the President and the Congress within fifteen
(15) days from the date of their issuance;
(b) direct the management, operations, and administration of the Bangko
Sentral, reorganize its personnel, and issue such rules and regulations as
it may deem necessary or convenient for this purpose. The legal units of
the Bangko Sentral shall be under the exclusive supervision and control of
the Monetary Board;
(c) establish a human resource management system which shall govern
the selection, hiring, appointment, transfer, promotion, or dismissal of all
personnel. Such system shall aim to establish professionalism and
excellence at all levels of the Bangko Sentral in accordance with sound
principles of management.
A compensation structure, based on job evaluation studies and
wage surveys and subject to the Board's approval, shall be instituted as an
integral component of the Bangko Sentral's human resource development
program: Provided, That the Monetary Board shall make its own system
conform as closely as possible with the principles provided for under
Republic Act No. 6758: Provided, however, That compensation and wage
structure of employees whose positions fall under salary grade 19 and
below shall be in accordance with the rates prescribed under Republic Act
No. 6758.
On the recommendation of the Governor, appoint, fix the
remunerations and other emoluments, and remove personnel of the
Bangko Sentral, subject to pertinent civil service laws: Provided, That the
Monetary Board shall have exclusive and final authority to promote,
transfer, assign, or reassign personnel of the Bangko Sentral and these
personnel actions are deemed made in the interest of the service and not
disciplinary: Provided, further, That the Monetary Board may delegate
such authority to the Governor under such guidelines as it may determine.
(d) adopt an annual budget for and authorize such expenditures by the
Bangko Sentral as are in the interest of the effective administration and
operations of the Bangko Sentral in accordance with applicable laws and
regulations; and
(e) indemnify its members and other officials of the Bangko Sentral,
including personnel of the departments performing supervision and
examination functions against all costs and expenses reasonably incurred
by such persons in connection with any civil or criminal action, suit or
proceedings to which he may be, or is, made a party by reason of the
performance of his functions or duties, unless he is finally adjudged in
such action or proceeding to be liable for negligence or misconduct.
In the event of a settlement or compromise, indemnification shall
be provided only in connection with such matters covered by the
settlement as to which the Bangko Sentral is advised by external counsel
that the person to be indemnified did not commit any negligence or
misconduct.
The costs and expenses incurred in defending the aforementioned
action, suit or proceeding may be paid by the Bangko Sentral in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the member, officer, or employee to repay
the amount advanced should it ultimately be determined by the Monetary
Board that he is not entitled to be indemnified as provided in this
subsection.
Section 16. Responsibility. - Members of the Monetary Board,
officials, examiners, and employees of the Bangko Sentral who willfully
violate this Act or who are guilty of negligence, abuses or acts of
malfeasance or misfeasance or fail to exercise extraordinary diligence in
the performance of his duties shall be held liable for any loss or injury
suffered by the Bangko Sentral or other banking institutions as a result of
such violation, negligence, abuse, malfeasance, misfeasance or failure to
exercise extraordinary diligence.
Similar responsibility shall apply to members, officers, and
employees of the Bangko Sentral for: (1) the disclosure of any information
of a confidential nature, or any information on the discussions or
resolutions of the Monetary Board, or about the confidential operations of
the Bangko Sentral, unless the disclosure is in connection with the
performance of official functions with the Bangko Sentral, or is with prior
authorization of the Monetary Board or the Governor; or (2) the use of
such information for personal gain or to the detriment of the Government,
the Bangko Sentral or third parties: Provided, however, That any data or
information required to be submitted to the President and/or the Congress,
or to be published under the provisions of this Act shall not be considered
confidential.
ARTICLE IIITHE GOVERNOR AND DEPUTY GOVERNORS OF THE
BANGKO SENTRAL
Section 17. Powers and Duties of the Governor. - The Governor
shall be the chief executive officer of the Bangko Sentral. His powers and
duties shall be to:
(a) prepare the agenda for the meetings of the Monetary Board and to
submit for the consideration of the Board the policies and measures which
he believes to be necessary to carry out the purposes and provisions of
this Act;
(b) execute and administer the policies and measures approved by the
Monetary Board;
(c) direct and supervise the operations and internal administration of the
Bangko Sentral. The Governor may delegate certain of his administrative
responsibilities to other officers or may assign specific tasks or
responsibilities to any full-time member of the Monetary Board without
additional remuneration or allowance whenever he may deem fit or
subject to such rules and regulations as the Monetary Board may
prescribe;
(d) appoint and fix the remunerations and other emoluments of personnel
below the rank of a department head in accordance with the position and
compensation plans approved by the Monetary Board, as well as to
impose disciplinary measures upon personnel of the Bangko Sentral,
subject to the provisions of Section 15(c) of this Act: Provided, That
removal of personnel shall be with the approval of the Monetary Board;
(e) render opinions, decisions, or rulings, which shall be final and
executory until reversed or modified by the Monetary Board, on matters
regarding application or enforcement of laws pertaining to institutions
supervised by the Bangko Sentral and laws pertaining to quasi-banks, as
well as regulations, policies or instructions issued by the Monetary Board,
and the implementation thereof; and
(f) exercise such other powers as may be vested in him by the Monetary
Board.
Section 18. Representation of the Monetary Board and the
Bangko Sentral. - The Governor of the Bangko Sentral shall be the
principal representative of the Monetary Board and of the Bangko Sentral
and, in such capacity and in accordance with the instructions of the
Monetary Board, he shall be empowered to:
(a) represent the Monetary Board and the Bangko Sentral in all dealings
with other offices, agencies and instrumentalities of the Government and
all other persons or entities, public or private, whether domestic, foreign
or international;
(b) sign contracts entered into by the Bangko Sentral, notes and securities
issued by the Bangko Sentral, all reports, balance sheets, profit and loss
statements, correspondence and other documents of the Bangko Sentral.
The signature of the Governor may be in facsimile whenever
appropriate;
(c) represent the Bangko Sentral, either personally or through counsel,
including private counsel, as may be authorized by the Monetary Board, in
any legal proceedings, action or specialized legal studies; and
(d) delegate his power to represent the Bangko Sentral, as provided in
subsections (a), (b) and (c) of this section, to other officers upon his own
responsibility: Provided, however, That in order to preserve the integrity
and the prestige of his office, the Governor of the Bangko Sentral may
choose not to participate in preliminary discussions with any multilateral
banking or financial institution on any negotiations for the Government
within or outside the Philippines. During the negotiations, he may instead
be represented by a permanent negotiator.
Section 19. Authority of the Governor in Emergencies. - In case of
emergencies where time is sufficient to call a meeting of the Monetary
Board, the Governor of the Bangko Sentral, with the concurrence of two
(2) other members of the Monetary Board, may decide any matter or take
any action within the authority of the Board.
The Governor shall submit a report to the President and Congress
within seventy-two (72) hours after the action has been taken.
At the soonest possible time, the Governor shall call a meeting of
the Monetary Board to submit his action for ratification.
Section 20. Outside Interests of the Governor and the Full-time
Members of the Board. - The Governor of the Bangko Sentral and the full-
time members of the Board shall limit their professional activities to those
pertaining directly to their positions with the Bangko Sentral. Accordingly,
they may not accept any other employment, whether public or private,
remunerated or ad honorem, with the exception of positions in
eleemosynary, civic, cultural or religious organizations or whenever, by
designation of the President, the Governor or the full-time member is
tasked to represent the interest of the Government or other government
agencies in matters connected with or affecting the economy or the
financial system of the country.
Section 21. Deputy Governors. - The Governor of the Bangko
Sentral, with the approval of the Monetary Board, shall appoint not more
than three (3) Deputy Governors who shall perform duties as may be
assigned to them by the Governor and the Board.
In the absence of the Governor, a Deputy Governor designated by
the Governor shall act as chief executive of the Bangko Sentral and shall
exercise the powers and perform the duties of the Governor. Whenever
the Government is unable to attend meetings of government boards or
councils in which he is an ex officio member pursuant to provisions of
special laws, a Deputy Governor as may be designated by the Governor
shall be vested with authority to participate and exercise the right to vote
in such meetings.
ARTICLE IVOPERATIONS OF THE BANGKO SENTRAL
Section 22. Research and Statistics. - The Bangko Sentral shall
prepare data and conduct economic research for the guidance of the
Monetary Board in the formulation and implementation of its policies. Such
data shall include, among others, forecasts of the balance of payments of
the Philippines, statistics on the monthly movement of the monetary
aggregates and of prices and other statistical series and economic studies
useful for the formulation and analysis of monetary, banking, credit and
exchange policies.
Section 23. Authority to Obtain Data and Information. - The
Bangko Sentral shall have the authority to request from government
offices and instrumentalities, or government-owned or controlled
corporations, any data which it may require for the proper discharge of its
functions and responsibilities. The Bangko Sentral through the Governor or
in his absence, a duly authorized representative shall have the power to
issue a subpoena for the production of the books and records for the
aforesaid purpose. Those who refuse the subpoena without justifiable
cause, or who refuse to supply the bank with data requested or required,
shall be subject to punishment for contempt in accordance with the
provisions of the Rules of Court.
Data on individual firms, other than banks, gathered by the
Department of Economic Research and other departments or units of the
Bangko Sentral shall not be made available to any person or entity outside
of the Bangko Sentral whether public or private except under order of the
court or under such conditions as may be prescribed by the Monetary
Board: Provided, however, That the collective data on firms may be
released to interested persons or entities: Provided, finally, That in the
case of data on banks, the provisions of Section 27 of this Act shall apply.
Section 24. Training of Technical Personnel. - The Bangko Sentral
shall promote and sponsor the training of technical personnel in the field
of money and banking. Toward this end, the Bangko Sentral is hereby
authorized to defray the costs of study, at home or abroad, of qualified
employees of the Bangko Sentral, of promising university graduates or of
any other qualified persons who shall be determined by proper
competitive examinations. The Monetary Board shall prescribe rules and
regulations to govern the training program of the Bangko Sentral.
Section 25. Supervision and Examination. - The Bangko Sentral
shall have supervision over, and conduct periodic or special examinations
of, banking institutions and quasi-banks, including their subsidiaries and
affiliates engaged in allied activities.
For purposes of this section, a subsidiary means a corporation
more than fifty percent (50%) of the voting stock of which is owned by a
bank or quasi-bank and an affiliate means a corporation the voting stock
of which, to the extent of fifty percent (50%) or less, is owned by a bank or
quasi-bank or which is related or linked to such institution or intermediary
through common stockholders or such other factors as may be determined
by the Monetary Board.
The department heads and the examiners of the supervising
and/or examining departments are hereby authorized to administer oaths
to any director, officer, or employee of any institution under their
respective supervision or subject to their examination and to compel the
presentation of all books, documents, papers or records necessary in their
judgment to ascertain the facts relative to the true condition of any
institution as well as the books and records of persons and entities relative
to or in connection with the operations, activities or transactions of the
institution under examination, subject to the provision of existing laws
protecting or safeguarding the secrecy or confidentiality of bank deposits
as well as investments of private persons, natural or juridical, in debt
instruments issued by the Government.
No restraining order or injunction shall be issued by the court
enjoining the Bangko Sentral from examining any institution subject to
supervision or examination by the Bangko Sentral, unless there is
convincing proof that the action of the Bangko Sentral is plainly arbitrary
and made in bad faith and 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. The
provisions of Rule 58 of the New Rules of Court insofar as they are
applicable and not inconsistent with the provisions of this section shall
govern the issuance and dissolution of the restraining order or injunction
contemplated in this section.
Section 26. Bank Deposits and Investments. - Any director, officer
or stockholder who, together with his related interest, contracts a loan or
any form of financial accommodation from: (1) his bank; or (2) from a
bank (a) which is a subsidiary of a bank holding company of which both his
bank and the lending bank are subsidiaries or (b) in which a controlling
proportion of the shares is owned by the same interest that owns a
controlling proportion of the shares of his bank, in excess of five percent
(5%) of the capital and surplus of the bank, or in the maximum amount
permitted by law, whichever is lower, shall be required by the lending
bank to waive the secrecy of his deposits of whatever nature in all banks
in the Philippines. Any information obtained from an examination of his
deposits shall be held strictly confidential and may be used by the
examiners only in connection with their supervisory and examination
responsibility or by the Bangko Sentral in an appropriate legal action it has
initiated involving the deposit account.
Section 27. Prohibitions. - In addition to the prohibitions found in
Republic Act Nos. 3019 and 6713, personnel of the Bangko Sentral are
hereby prohibited from:
(a) being an officer, director, lawyer or agent, employee, consultant or
stockholder, directly or indirectly, of any institution subject to supervision
or examination by the Bangko Sentral, except non-stock savings and loan
associations and provident funds organized exclusively for employees of
the Bangko Sentral, and except as otherwise provided in this Act;
(b) directly or indirectly requesting or receiving any gift, present or
pecuniary or material benefit for himself or another, from any institution
subject to supervision or examination by the Bangko Sentral;
(c) revealing in any manner, except under orders of the court, the
Congress or any government office or agency authorized by law, or under
such conditions as may be prescribed by the Monetary Board, information
relating to the condition or business of any institution. This prohibition
shall not be held to apply to the giving of information to the Monetary
Board or the Governor of the Bangko Sentral, or to any person authorized
by either of them, in writing, to receive such information; and
(d) borrowing from any institution subject to supervision or examination by
the Bangko Sentral shall be prohibited unless said borrowings are
adequately secured, fully disclosed to the Monetary Board, and shall be
subject to such further rules and regulations as the Monetary Board may
prescribe: Provided, however, That personnel of the supervising and
examining departments are prohibited from borrowing from a bank under
their supervision or examination.
Section 28. Examination and Fees. - The supervising and
examining department head, personally or by deputy, shall examine the
books of every banking institution once in every twelve (12) months, and
at such other times as the Monetary Board by an affirmative vote of five
(5) members, may deem expedient and to make a report on the same to
the Monetary Board: Provided, That there shall be an interval of at least
twelve (12) months between annual examinations.
The bank concerned shall afford to the head of the appropriate
supervising and examining departments and to his authorized deputies
full opportunity to examine its books, cash and available assets and
general condition at any time during banking hours when requested to do
so by the Bangko Sentral: Provided, however, That none of the reports and
other papers relative to such examinations shall be open to inspection by
the public except insofar as such publicity is incidental to the proceedings
hereinafter authorized or is necessary for the prosecution of violations in
connection with the business of such institutions.
 Banking and quasi-banking institutions which are subject to
examination by the Bangko Sentral shall pay to the Bangko Sentral, within
the first thirty (30) days of each year, an annual fee in an amount equal to
a percentage as may be prescribed by the Monetary Board of its average
total assets during the preceding year as shown on its end-of-month
balance sheets, after deducting cash on hand and amounts due from
banks, including the Bangko Sentral and banks abroad.
Section 29. Appointment of Conservator. - Whenever, on the
basis of a report submitted by the appropriate supervising or examining
department, the Monetary Board finds that a bank or a quasi-bank is in a
state of continuing inability or unwillingness to maintain a condition of
liquidity deemed adequate to protect the interest of depositors and
creditors, the Monetary Board may appoint a conservator with such
powers as the Monetary Board shall deem necessary to take charge of the
assets, liabilities, and the management thereof, reorganize the
management, collect all monies and debts due said institution, and
exercise all powers necessary to restore its viability. The conservator shall
report and be responsible to the Monetary Board and shall have the power
to overrule or revoke the actions of the previous management and board
of directors of the bank or quasi-bank.
The conservator should be competent and knowledgeable in bank
operations and management. The conservatorship shall not exceed one
(1) year.
The conservator shall receive remuneration to be fixed by the
Monetary Board in an amount not to exceed two-thirds (2/3) of the salary
of the president of the institution in one (1) year, payable in twelve (12)
equal monthly payments: Provided, That, if at any time within one-year
period, the conservatorship is terminated on the ground that the
institution can operate on its own, the conservator shall receive the
balance of the remuneration which he would have received up to the end
of the year; but if the conservatorship is terminated on other grounds, the
conservator shall not be entitled to such remaining balance. The Monetary
Board may appoint a conservator connected with the Bangko Sentral, in
which case he shall not be entitled to receive any remuneration or
emolument from the Bangko Sentral during the conservatorship. The
expenses attendant to the conservatorship shall be borne by the bank or
quasi-bank concerned.
The Monetary Board shall terminate the conservatorship when it is
satisfied that the institution can continue to operate on its own and the
conservatorship is no longer necessary. The conservatorship shall likewise
be terminated should the Monetary Board, on the basis of the report of the
conservator or of its own findings, determine that the continuance in
business of the institution would involve probable loss to its depositors or
creditors, in which case the provisions of Section 30 shall apply.
Section 30. Proceedings in Receivership and Liquidation. -
Whenever, upon report of the head of the supervising or examining
department, the Monetary Board finds that a bank or quasi-bank:
(a) is unable to pay its liabilities as they become due in the ordinary
course of business: Provided, That this shall not include inability to pay
caused by extraordinary demands induced by financial panic in the
banking community;
(b) has insufficient realizable assets, as determined by the Bangko Sentral,
to meet its liabilities; or
(c) cannot continue in business without involving probable losses to its
depositors or creditors; or
(d) has willfully violated a cease and desist order under Section 37 that
has become final, involving acts or transactions which amount to fraud or
a dissipation of the assets of the institution; in which cases, the Monetary
Board may summarily and without need for prior hearing forbid the
institution from doing business in the Philippines and designate the
Philippine Deposit Insurance Corporation as receiver of the banking
institution.
For a quasi-bank, any person of recognized competence in banking
or finance may be designed as receiver.
The receiver shall immediately gather and take charge of all the
assets and liabilities of the institution, administer the same for the benefit
of its creditors, and exercise the general powers of a receiver under the
Revised Rules of Court but shall not, with the exception of administrative
expenditures, pay or commit any act that will involve the transfer or
disposition of any asset of the institution: Provided, That the receiver may
deposit or place the funds of the institution in non-speculative
investments. The receiver shall determine as soon as possible, but not
later than ninety (90) days from take over, whether the institution may be
rehabilitated or otherwise placed in such a condition so that it may be
permitted to resume business with safety to its depositors and creditors
and the general public: Provided, That any determination for the
resumption of business of the institution shall be subject to prior approval
of the Monetary Board.
If the receiver determines that the institution cannot be
rehabilitated or permitted to resume business in accordance with the next
preceding paragraph, the Monetary Board shall notify in writing the board
of directors of its findings and direct the receiver to proceed with the
liquidation of the institution. The receiver shall:
(1) file ex parte with the proper regional trial court, and without
requirement of prior notice or any other action, a petition for assistance in
the liquidation of the institution pursuant to a liquidation plan adopted by
the Philippine Deposit Insurance Corporation for general application to all
closed banks. In case of quasi-banks, the liquidation plan shall be adopted
by the Monetary Board. Upon acquiring jurisdiction, the court shall, upon
motion by the receiver after due notice, adjudicate disputed claims
against the institution, assist the enforcement of individual liabilities of the
stockholders, directors and officers, and decide on other issues as may be
material to implement the liquidation plan adopted. The receiver shall pay
the cost of the proceedings from the assets of the institution.
(2) convert the assets of the institutions to money, dispose of the same to
creditors and other parties, for the purpose of paying the debts of such
institution in accordance with the rules on concurrence and preference of
credit under the Civil Code of the Philippines and he may, in the name of
the institution, and with the assistance of counsel as he may retain,
institute such actions as may be necessary to collect and recover accounts
and assets of, or defend any action against, the institution. The assets of
an institution under receivership or liquidation shall be deemed in custodia
legis in the hands of the receiver and shall, from the moment the
institution was placed under such receivership or liquidation, be exempt
from any order of garnishment, levy, attachment, or execution.
The actions of the Monetary Board taken under this section or
under Section 29 of this Act shall be final and executory, and may not be
restrained or set aside by the court except on petition for certiorari on the
ground that the action taken was in excess of jurisdiction or with such
grave abuse of discretion as to amount to lack or excess of jurisdiction.
The petition for certiorari may only be filed by the stockholders of record
representing the majority of the capital stock within ten (10) days from
receipt by the board of directors of the institution of the order directing
receivership, liquidation or conservatorship.
The designation of a conservator under Section 29 of this Act or
the appointment of a receiver under this section shall be vested
exclusively with the Monetary Board. Furthermore, the designation of a
conservator is not a precondition to the designation of a receiver.
Section 31. Distribution of Assets. - In case of liquidation of a
bank or quasi-bank, after payment of the cost of proceedings, including
reasonable expenses and fees of the receiver to be allowed by the court,
the receiver shall pay the debts of such institution, under order of the
court, in accordance with the rules on concurrence and preference of
credit as provided in the Civil Code.
Section 32. Disposition of Revenues and Earnings. - All revenues
and earnings realized by the receiver in winding up the affairs and
administering the assets of any bank or quasi-bank within the purview of
this Act shall be used to pay the costs, fees and expenses mentioned in
the preceding section, salaries of such personnel whose employment is
rendered necessary in the discharge of the liquidation together with other
additional expenses caused thereby. The balance of revenues and
earnings, after the payment of all said expenses, shall form part of the
assets available for payment to creditors.
Section 33. Disposition of Banking Franchise. - The Bangko
Sentral may, if public interest so requires, award to an institution, upon
such terms and conditions as the Monetary Board may approve, the
banking franchise of a bank under liquidation to operate in the area where
said bank or its branches were previously operating: Provided, That
whatever proceeds may be realized from such award shall be subject to
the appropriate exclusive disposition of the Monetary Board.
Section 34. Refusal to Make Reports or Permit Examination. - Any
officer, owner, agent, manager, director or officer-in-charge of any
institution subject to the supervision or examination by the Bangko Sentral
within the purview of this Act who, being required in writing by the
Monetary Board or by the head of the supervising and examining
department willfully refuses to file the required report or permit any lawful
examination into the affairs of such institution shall be punished by a fine
of not less than Fifty thousand pesos (P50,000) nor more than One
hundred thousand pesos (P100,000) or by imprisonment of not less than
one (1) year nor more than five (5) years, or both, in the discretion of the
court.
Section 35. False Statement. - The willful making of a false or
misleading statement on a material fact to the Monetary Board or to the
examiners of the Bangko Sentral shall be punished by a fine of not less
than One hundred thousand pesos (P100,000) nor more than Two hundred
thousand pesos (P200,000), or by imprisonment of not more than (5)
years, or both, at the discretion of the court.
Section 36. Proceedings Upon Violation of This Act and Other
Banking Laws, Rules, Regulations, Orders or Instructions. - Whenever a
bank or quasi-bank, or whenever any person or entity willfully violates this
Act or other pertinent banking laws being enforced or implemented by the
Bangko Sentral or any order, instruction, rule or regulation issued by the
Monetary Board, the person or persons responsible for such violation shall
unless otherwise provided in this Act be punished by a fine of not less than
Fifty thousand pesos (P50,000) nor more than Two hundred thousand
pesos (P200,000) or by imprisonment of not less than two (2) years nor
more than ten (10) years, or both, at the discretion of the court.
Whenever a bank or quasi-bank persists in carrying on its business
in an unlawful or unsafe manner, the Board may, without prejudice to the
penalties provided in the preceding paragraph of this section and the
administrative sanctions provided in Section 37 of this Act, take action
under Section 30 of this Act.
Section 37. Administrative Sanctions on Banks and Quasi-banks. -
Without prejudice to the criminal sanctions against the culpable persons
provided in Sections 34, 35, and 36 of this Act, the Monetary Board may,
at its discretion, impose upon any bank or quasi-bank, their directors
and/or officers, for any willful violation of its charter or by-laws, willful
delay in the submission of reports or publications thereof as required by
law, rules and regulations; any refusal to permit examination into the
affairs of the institution; any willful making of a false or misleading
statement to the Board or the appropriate supervising and examining
department or its examiners; any willful failure or refusal to comply with,
or violation of, any banking law or any order, instruction or regulation
issued by the Monetary Board, or any order, instruction or ruling by the
Governor; or any commission of irregularities, and/or conducting business
in an unsafe or unsound manner as may be determined by the Monetary
Board, the following administrative sanctions, whenever applicable:
(a) fines in amounts as may be determined by the Monetary Board to be
appropriate, but in no case to exceed Thirty thousand pesos (P30,000) a
day for each violation, taking into consideration the attendant
circumstances, such as the nature and gravity of the violation or
irregularity and the size of the bank or quasi-bank;
(b) suspension of rediscounting privileges or access to Bangko Sentral
credit facilities;
(c) suspension of lending or foreign exchange operations or authority to
accept new deposits or make new investments;
(d) suspension of interbank clearing privileges; and/or
(e) revocation of quasi-banking license.
Resignation or termination from office shall not exempt such
director or officer from administrative or criminal sanctions.
The Monetary Board may, whenever warranted by circumstances,
preventively suspend any director or officer of a bank or quasi-bank
pending an investigation: Provided, That should the case be not finally
decided by the Bangko Sentral within a period of one hundred twenty
(120) days after the date of suspension, said director or officer shall be
reinstated in his position: Provided, further, That when the delay in the
disposition of the case is due to the fault, negligence or petition of the
director or officer, the period of delay shall not be counted in computing
the period of suspension herein provided.
The above administrative sanctions need not be applied in the
order of their severity.
Whether or not there is an administrative proceeding, if the
institution and/or the directors and/or officers concerned continue with or
otherwise persist in the commission of the indicated practice or violation,
the Monetary Board may issue an order requiring the institution and/or the
directors and/or officers concerned to cease and desist from the indicated
practice or violation, and may further order that immediate action be
taken to correct the conditions resulting from such practice or violation.
The cease and desist order shall be immediately effective upon service on
the respondents.
The respondents shall be afforded an opportunity to defend their
action in a hearing before the Monetary Board or any committee chaired
by any Monetary Board member created for the purpose, upon request
made by the respondents within five (5) days from their receipt of the
order. If no such hearing is requested within said period, the order shall be
final. If a hearing is conducted, all issues shall be determined on the basis
of records, after which the Monetary Board may either reconsider or make
final its order.
The Governor is hereby authorized, at his discretion, to impose
upon banking institutions, for any failure to comply with the requirements
of law, Monetary Board regulations and policies, and/or instructions issued
by the Monetary Board or by the Governor, fines not in excess of Ten
thousand pesos (P10,000) a day for each violation, the imposition of which
shall be final and executory until reversed, modified or lifted by the
Monetary Board on appeal.
Section 38. Operating Departments of the Bangko Sentral. - The
Monetary Board shall, in accordance with its authority under this Act,
determine and provide for such operating departments and other offices,
including a public information office, of the Bangko Sentral as it deems
convenient for the proper and efficient conduct of the operations and the
accomplishment of the objectives of the Bangko Sentral. The functions
and duties of such operating departments and other offices shall be
determined by the Monetary Board.
ARTICLE VREPORTS AND PUBLICATIONS
Section 39. Reports and Publications. - The Bangko Sentral shall
publish a general balance sheet showing the volume and composition of
its assets and liabilities as of the last working day of the month within
sixty (60) days after the end of each month except for the month of
December, which shall be submitted within ninety (90) days after the end
hereof.
The Monetary Board shall publish and submit the following reports
to the President and to the Congress:
(a) not later than ninety (90) days after the end of each quarter, an
analysis of economic and financial developments, including the condition
of net international reserves and monetary aggregates;
(b) within ninety (90) days after the end of the year, the preceding year's
budget and profit and loss statement of the Bangko Sentral showing in
reasonable detail the result of its operations;
(c) one hundred twenty (120) days after the end of each semester, a
review of the state of the financial system; and
(d) as soon as practicable, abnormal movements in monetary aggregates
and the general price level, and, not later than seventy-two (72) hours
after they are taken, remedial measures in response to such abnormal
movements.
Section 40. Annual Report. - Before the end of March of each
year, the Bangko Sentral shall publish and submit to the President and the
Congress an annual report on the condition of the Bangko Sentral
including a review of the policies and measures adopted by the Monetary
Board during the past year and an analysis of the economic and financial
circumstances which gave rise to said policies and measures.
The annual report shall also include a statement of the financial
condition of the Bangko Sentral and a statistical appendix which shall
present, as a minimum, the following data:
(a) the monthly movement of monetary aggregates and their components;
(b) the monthly movement of purchases and sales of foreign exchange
and of the international reserves of the Bangko Sentral;
(c) the balance of payments of the Philippines;
(d) monthly indices of consumer prices and of import and export prices;
(e) the monthly movement, in summary form, of exports and imports, by
volume and value;
(f) the monthly movement of the accounts of the Bangko Sentral and of
other banks;
(g) the principal data on government receipts and expenditures and on the
status of the public debt, both domestic and foreign; and
(h) the texts of the major legal and administrative measures adopted by
the Government and the Monetary Board during the year which relate to
the functions or operations of the Bangko Sentral or of the financial
system.
The Bangko Sentral shall publish another version of the annual
report in terms understandable to the layman.
Failure to comply with the reportorial requirements pursuant to this
article without justifiable reason as may be determined by the Monetary
Board shall cause the withholding of the salary of the personnel concerned
until the requirements are complied with.
Section 41. Signatures on Statements. - The balance sheets and
other financial statements of the Bangko Sentral shall be signed by the
officers responsible for their preparation, by the Governor, and by the
auditor of the Bangko Sentral.
ARTICLE VIPROFITS, LOSSES, AND SPECIAL ACCOUNTS
Section 42. Fiscal Year. - The fiscal year of the Bangko Sentral
shall begin on January first and end on December thirty-first of each year.
Section 43. Computation of Profits and Losses. - Within the first
thirty (30) days following the end of each year, the Bangko Sentral shall
determine its net profits or losses. In the calculation of net profits, the
Bangko Sentral shall make adequate allowance or establish adequate
reserves for bad and doubtful accounts.
Section 44. Distribution of Net Profits. - Within the first sixty (60)
days following the end of each fiscal year, the Monetary Board shall
determine and carry out the distribution of the net profits, in accordance
with the following rule:
Fifty percent (50%) of the net profits shall be carried to surplus and
the remaining fifty percent (50%) shall revert back to the National
Treasury, except as otherwise provided in the transitory provisions of this
Act.
Section 45. Revaluation Profits and Losses. - Profits or losses
arising from any revaluation of the Bangko Sentral's net assets or liabilities
in gold or foreign currencies with respect to the Philippine peso shall not
be included in the computation of the annual profits and losses of the
Bangko Sentral. Any profits or losses arising in this manner shall be offset
by any amounts which, as a consequence of such revaluations, are owed
by the Philippines to any international or regional intergovernmental
financial institution of which the Philippines is a member or are owed by
these institutions to the Philippines. Any remaining profit or loss shall be
carried in a special frozen account which shall be named "Revaluation of
International Reserve" and the net balance of which shall appear either
among the liabilities or among the assets of the Bangko Sentral,
depending on whether the revaluations have produced net profits or net
losses.
 The Revaluation of International Reserve account shall be neither
credited nor debited for any purposes other than those specifically
authorized in this section.
Section 46. Suspense Accounts. - Sections 43 and 43-A of
Republic Act No. 265, as amended, creating the Monetary Adjustment
Account (MAA) and the Exchange Stabilization Adjustment Account
(ESAA), respectively, are hereby repealed. Amounts outstanding as of the
effective date of this Act based on these accounts shall continue to be for
the account of the Central Bank and shall be governed by the transitory
provisions of this Act.
The Revaluation of International Reserve (RIR) account as of the
effective date of this Act of the Central Bank shall continue to be for the
account of the same entity and shall be governed by the provisions of
Section 44 of Republic Act No. 265, as amended, until otherwise provided
for in accordance with the transitory provisions of this Act.
ARTICLE VIITHE AUDITOR
Section 47. Appointment and Personnel. - The Chairman of the
Commission on Audit shall act as the ex officio auditor of the Bangko
Sentral and, as such, he is empowered and authorized to appoint a
representative who shall be the auditor of the Bangko Sentral and, in
accordance with law, fix his salary, and to appoint and fix salaries and
number of personnel to assist said representative in his work. The salaries
and other emoluments shall be paid by the Commission. The auditor of the
Bangko Sentral and personnel under him may be removed only by the
Chairman of the Commission.
The representative of the Chairman of the Commission must be a
certified public accountant with at least ten (10) years experience as such.
No relative of any member of the Monetary Board or the Chairman of the
Commission within the sixth degree of consanguinity or affinity shall be
appointed such representative.
CHAPTER II THE BANGKO SENTRAL AND THE MEANS OF
PAYMENT
ARTICLE ITHE UNIT OF MONETARY VALUE
Section 48. The Peso. - The unit of monetary value in the
Philippines is the "peso," which is represented by the sign "P."
The peso is divided into one hundred (100) equal parts called
"centavos," which are represented by the sign "c."
ARTICLE IIISSUE OF MEANS OF PAYMENT
A. CURRENCY
Section 49. Definition of Currency. - The word "currency" is
hereby defined, for purposes of this Act, as meaning all Philippine notes
and coins issued or circulating in accordance with the provisions of this
Act.
Section 50. Exclusive Issue Power. - The Bangko Sentral shall
have the sole power and authority to issue currency, within the territory of
the Philippines. No other person or entity, public or private, may put into
circulation notes, coins or any other object or document which, in the
opinion of the Monetary Board, might circulate as currency, nor reproduce
or imitate the facsimiles of Bangko Sentral notes without prior authority
from the Bangko Sentral.
The Monetary Board may issue such regulations as it may deem
advisable in order to prevent the circulation of foreign currency or of
currency substitutes as well as to prevent the reproduction of facsimiles of
Bangko Sentral notes.
The Bangko Sentral shall have the authority to investigate, make
arrests, conduct searches and seizures in accordance with law, for the
purpose of maintaining the integrity of the currency.
Violation of this provision or any regulation issued by the Bangko
Sentral pursuant thereto shall constitute an offense punishable by
imprisonment of not less than five (5) years but not more than ten (10)
years. In case the Revised Penal Code provides for a greater penalty, then
that penalty shall be imposed.
Section 51. Liability for Notes and Coins. - Notes and coins issued
by the Bangko Sentral shall be liabilities of the Bangko Sentral and may be
issued only against, and in amounts not exceeding, the assets of the
Bangko Sentral. Said notes and coins shall be a first and paramount lien
on all assets of the Bangko Sentral.
The Bangko Sentral's holdings of its own notes and coins shall not
be considered as part of its currency issue and, accordingly, shall not form
part of the assets or liabilities of the Bangko Sentral.
Section 52. Legal Tender Power. - All notes and coins issued by
the Bangko Sentral shall be fully guaranteed by the Government of the
Republic of the Philippines and shall be legal tender in the Philippines for
all debts, both public and private: Provided, however, That, unless
otherwise fixed by the Monetary Board, coins shall be legal tender in
amounts not exceeding Fifty pesos (P50.00) for denominations of Twenty-
five centavos and above, and in amounts not exceeding Twenty pesos
(P20.00) for denominations of Ten centavos or less.
Section 53. Characteristics of the Currency. - The Monetary
Board, with the approval of the President of the Philippines, shall prescribe
the denominations, dimensions, designs, inscriptions and other
characteristics of notes issued by the Bangko Sentral: Provided, however,
That said notes shall state that they are liabilities of the Bangko Sentral
and are fully guaranteed by the Government of the Republic of the
Philippines. Said notes shall bear the signatures, in facsimile, of the
President of the Philippines and of the Governor of the Bangko Sentral.
Similarly, the Monetary Board, with the approval of the President of
the Philippines, shall prescribe the weight, fineness, designs,
denominations and other characteristics of the coins issued by the Bangko
Sentral. In the minting of coins, the Monetary Board shall give full
consideration to the availability of suitable metals and to their relative
prices and cost of minting.
Section 54. Printing of Notes and Mining of Coins. - The Monetary
Board shall prescribe the amounts of notes and coins to be printed and
minted, respectively, and the conditions to which the printing of notes and
the minting of coins shall be subject. The Monetary Board shall have the
authority to contract institutions, mints or firms for such operations.
All expenses incurred in the printing of notes and the minting of
coins shall be for the account of the Bangko Sentral.
Section 55. Interconvertibility of Currency. - The Bangko Sentral
shall exchange, on demand and without charge, Philippine currency of any
denomination for Philippine notes and coins of any other denomination
requested. If for any reason the Bangko Sentral is temporarily unable to
provide notes or coins of the denominations requested, it shall meet its
obligations by delivering notes and coins of the denominations which most
nearly approximate those requested.
Section 56. Replacement of Currency Unfit for Circulation. - The
Bangko Sentral shall withdraw from circulation and shall demonetize all
notes and coins which for any reason whatsoever are unfit for circulation
and shall replace them by adequate notes and coins: Provided, however,
That the Bangko Sentral shall not replace notes and coins the
identification of which is impossible, coins which show signs of filing,
clipping or perforation, and notes which have lost more than two-fifths
(2/5) of their surface or all of the signatures inscribed thereon. Notes and
coins in such mutilated conditions shall be withdrawn from circulation and
demonetized without compensation to the bearer.
Section 57. Retirement of Old Notes and Coins. - The Bangko
Sentral may call in for replacement notes of any series or denomination
which are more than five (5) years old and coins which are more than (10)
years old.
Notes and coins called in for replacement in accordance with this
provision shall remain legal tender for a period of one (1) year from the
date of call. After this period, they shall cease to be legal tender but
during the following year, or for such longer period as the Monetary Board
may determine, they may be exchanged at par and without charge in the
Bangko Sentral and by agents duly authorized by the Bangko Sentral for
this purpose. After the expiration of this latter period, the notes and coins
which have not been exchanged shall cease to be a liability of the Bangko
Sentral and shall be demonetized. The Bangko Sentral shall also
demonetize all notes and coins which have been called in and replaced.
B. DEMAND DEPOSITS
Section 58. Definition. - For purposes of this Act, the term
"demand deposits" means all those liabilities of the Bangko Sentral and of
other banks which are denominated in Philippine currency and are subject
to payment in legal tender upon demand by the presentation of checks.
Section 59. Issue of Demand Deposits. - Only banks duly
authorized to do so may accept funds or create liabilities payable in pesos
upon demand by the presentation of checks, and such operations shall be
subject to the control of the Monetary Board in accordance with the
powers granted it with respect thereto under this Act.
Section 60. Legal Character. - Checks representing demand
deposits do not have legal tender power and their acceptance in the
payment of debts, both public and private, is at the option of the creditor:
Provided, however, That a check which has been cleared and credited to
the account of the creditor shall be equivalent to a delivery to the creditor
of cash in an amount equal to the amount credited to his account.
CHAPTER III GUIDING PRINCIPLES OF MONETARY
ADMINISTRATION BY THE BANGKO SENTRAL
ARTICLE IDOMESTIC MONETARY STABILIZATION
Section 61. Guiding Principle. - The Monetary Board shall
endeavor to control any expansion or contraction in monetary aggregates
which is prejudicial to the attainment or maintenance of price stability.
Section 62. Power to Define Terms. - For purposes of this article
and of this Act, the Monetary Board shall formulate definitions of monetary
aggregates, credit and prices and shall make public such definitions and
any changes thereof.
Section 63. Action When Abnormal Movements Occur in the
Monetary Aggregates, Credit, or Price Level. - Whenever abnormal
movements in the monetary aggregates, in credit, or in prices endanger
the stability of the Philippine economy or important sectors thereof, the
Monetary Board shall:
(a) take such remedial measures as are appropriate and within the powers
granted to the Monetary Board and the Bangko Sentral under the
provisions of this Act; and
(b) submit to the President of the Philippines and the Congress, and make
public, a detailed report which shall include, as a minimum, a description
and analysis of:
(1) the causes of the rise or fall of the monetary aggregates, of credit or of
prices;
(2) the extent to which the changes in the monetary aggregates, in credit,
or in prices have been reflected in changes in the level of domestic output,
employment, wages and economic activity in general, and the nature and
significance of any such changes; and
(3) the measures which the Monetary Board has taken and the other
monetary, fiscal or administrative measures which it recommends to be
adopted.
Whenever the monetary aggregates, or the level of credit,
increases or decreases by more than fifteen percent (15%), or the cost of
living index increases by more than ten percent (10%), in relation to the
level existing at the end of the corresponding month of the preceding
year, or even though any of these quantitative guidelines have not been
reached when in its judgment the circumstances so warrant, the Monetary
Board shall submit the reports mentioned in this section, and shall state
therein whether, in the opinion of the Board, said changes in the monetary
aggregates, credit or cost of living represent a threat to the stability of the
Philippine economy or of important sectors thereof.
The Monetary Board shall continue to submit periodic reports to
the President of the Philippines and to Congress until it considers that the
monetary, credit or price disturbances have disappeared or have been
adequately controlled.
ARTICLE IIINTERNATIONAL MONETARY STABILIZATION
Section 64. International Monetary Stabilization. - The Bangko
Sentral shall exercise its powers under this Act to preserve the
international value of the peso and to maintain its convertibility into other
freely convertible currencies primarily for, although not necessarily limited
to, current payments for foreign trade and invisibles.
Section 65. International Reserves. - In order to maintain the
international stability and convertibility of the Philippine peso, the Bangko
Sentral shall maintain international reserves adequate to meet any
foreseeable net demands on the Bangko Sentral for foreign currencies.
In judging the adequacy of the international reserves, the
Monetary Board shall be guided by the prospective receipts and payments
of foreign exchange by the Philippines. The Board shall give special
attention to the volume and maturity of the Bangko Sentral's own
liabilities in foreign currencies, to the volume and maturity of the foreign
exchange assets and liabilities of other banks operating in the Philippines
and, insofar as they are known or can be estimated, the volume and
maturity of the foreign exchange assets and liabilities of all other persons
and entities in the Philippines.
Section 66. Composition of the International Reserves. - The
international reserves of the Bangko Sentral may include but shall not be
limited to the following assets:
(a) gold; and
(b) assets in foreign currencies in the form of: documents and instruments
customarily employed for the international transfer of funds; demand and
time deposits in central banks, treasuries and commercial banks abroad;
foreign government securities; and foreign notes and coins.
The Monetary Board shall endeavor to hold the foreign exchange
resources of the Bangko Sentral in freely convertible currencies; moreover,
the Board shall give particular consideration to the prospects of continued
strength and convertibility of the currencies in which the reserve is
maintained, as well as to the anticipated demands for such currencies.
The Monetary Board shall issue regulations determining the other
qualifications which foreign exchange assets must meet in order to be
included in the international reserves of the Bangko Sentral.
The Bangko Sentral shall be free to convert any of the assets in its
international reserves into other assets as described in subsections (a)
and (b) of this section.
Section 67. Action When the International Stability of the Peso Is
Threatened. - Whenever the international reserve of the Bangko Sentral
falls to a level which the Monetary Board considers inadequate to meet
prospective net demands on the Bangko Sentral for foreign currencies, or
whenever the international reserve appears to be in imminent danger of
falling to such a level, or whenever the international reserve is falling as a
result of payments or remittances abroad which, in the opinion of the
Monetary Board, are contrary to the national welfare, the Monetary Board
shall:
(a) take such remedial measures as are appropriate and within the powers
granted to the Monetary Board and the Bangko Sentral under the
provisions of this Act; and
(b) submit to the President of the Philippines and to Congress a detailed
report which shall include, as a minimum, a description and analysis of:
(1) the nature and causes of the existing or imminent decline;
(2) the remedial measures already taken or to be taken by the Monetary
Board;
(3) the monetary, fiscal or administrative measures further proposed; and
(4) the character and extent of the cooperation required from other
government agencies for the successful execution of the policies of the
Monetary Board.
If the resultant actions fail to check the deterioration of the reserve
position of the Bangko Sentral, or if the deterioration cannot be checked
except by chronic restrictions on exchange and trade transactions or by
sacrifice of the domestic objectives of a balanced and sustainable growth
of the economy, the Monetary Board shall propose to the President, with
appropriate notice of the Congress, such additional action as it deems
necessary to restore equilibrium in the international balance of payments
of the Philippines.
The Monetary Board shall submit periodic reports to the President
and to Congress until the threat to the international monetary stability of
the Philippines has disappeared.
CHAPTER IV INSTRUMENTS OF BANGKO SENTRAL ACTION
ARTICLE IGENERAL CRITERION
Section 68. Means of Action. - In order to achieve the primary
objective of price stability, the Monetary Board shall rely on its moral
influence and the powers granted to it under this Act for the management
of monetary aggregates.
ARTICLE IIOPERATIONS IN GOLD AND FOREIGN EXCHANGE
Section 69. Purchases and Sales of Gold. - The Bangko Sentral
may buy and sell gold in any form, subject to such regulations as the
Monetary Board may issue.
The purchases and sales of gold authorized by this section shall be
made in the national currency at the prevailing international market price
as determined by the Monetary Board.
Section 70. Purchases and Sales of Foreign Exchange. - The
Bangko Sentral may buy and sell foreign notes and coins, and documents
and instruments of types customarily employed for the international
transfer of funds. The Bangko Sentral may engage in future exchange
operations.
The Bangko Sentral may engage in foreign exchange transactions
with the following entities or persons only:
(a) banking institutions operating in the Philippines;
(b) the Government, its political subdivisions and instrumentalities;
(c) foreign or international financial institutions;
(d) foreign governments and their instrumentalities; and
(e) other entities or persons which the Monetary Board is hereby
empowered to authorize as foreign exchange dealers, subject to such
rules and regulations as the Monetary Board shall prescribe.
In order to maintain the convertibility of the peso, the Bangko
Sentral may, at the request of any banking institution operating in the
Philippines, buy any quantity of foreign exchange offered, and sell any
quantity of foreign exchange demanded, by such institution, provided that
the foreign currencies so offered or demanded are freely convertible into
gold or United States dollars. This requirement shall not apply to demands
for foreign notes and coins.
The Bangko Sentral shall effect its exchange transactions between
foreign currencies and the Philippine peso at the rates determined in
accordance with the provisions of Section 74 of this Act.
Section 71. Foreign Asset Position of the Bangko Sentral. - The
Bangko Sentral shall endeavor to maintain at all times a net positive
foreign asset position so that its gross foreign exchange assets will always
exceed its gross foreign liabilities. In the event that the equivalent amount
in pesos of the foreign exchange liabilities of the Bangko Sentral exceed
twice the equivalent amount in pesos of the foreign exchange assets of
the bank, the Bangko Sentral shall, within sixty (60) days from the date
the limit is exceeded, submit a report to the Congress stating the origin of
these liabilities, and the manner in which they will be paid.
Section 72. Emergency Restrictions on Exchange Operations. - In
order to achieve the primary objective of the Bangko Sentral as set forth
in Section 3 of this Act, or protect the international reserves of the Bangko
Sentral in the imminence of, or during an exchange crisis, or in time of
national emergency and to give the Monetary Board and the Government
time in which to take constructive measures to forestall, combat, or
overcome such a crisis or emergency, the Monetary Board, with the
concurrence of at least five (5) of its members and with the approval of
the President of the Philippines, may temporarily suspend or restrict sales
of exchange by the Bangko Sentral, and may subject all transactions in
gold and foreign exchange to license by the Bangko Sentral, and may
require that any foreign exchange thereafter obtained by any person
residing or entity operating in the Philippines be delivered to the Bangko
Sentral or to any bank or agent designated by the Bangko Sentral for the
purpose, at the effective exchange rate or rates: Provided, however, That
foreign currency deposits made under Republic Act No. 6426 shall be
exempt from these requirements.
Section 73. Acquisition of Inconvertible Currencies. - The Bangko
Sentral shall avoid the acquisition and holding of currencies which are not
freely convertible, and may acquire such currencies in an amount
exceeding the minimum balance necessary to cover current demands for
said currencies only when, and to the extent that, such acquisition is
considered by the Monetary Board to be in the national interest. The
Monetary Board shall determine the procedures which shall apply to the
acquisition and disposition by the Bangko Sentral of foreign exchange
which is not freely utilizable in the international market.
Section 74. Exchange Rates. - The Monetary Board shall
determine the exchange rate policy of the country.
The Monetary Board shall determine the rates at which the Bangko
Sentral shall buy and sell spot exchange, and shall establish deviation
limits from the effective exchange rate or rates as it may deem proper.
The Bangko Sentral shall not collect any additional commissions or
charges of any sort, other than actual telegraphic or cable costs incurred
by it.
The Monetary Board shall similarly determine the rates for other
types of foreign exchange transactions by the Bangko Sentral, including
purchases and sales of foreign notes and coins, but the margins between
the effective exchange rates and the rates thus established may not
exceed the corresponding margins for spot exchange transactions by more
than the additional costs or expenses involved in each type of
transactions.
Section 75. Operations with Foreign Entities. - The Monetary
Board may authorize the Bangko Sentral to grant loans to and receive
loans from foreign banks and other foreign or international entities, both
public and private, and may engage in such other operations with these
entities as are in the national interest and are appropriate to its character
as a central bank. The Bangko Sentral may also act as agent or
correspondent for such entities.
Upon authority of the Monetary Board, the Bangko Sentral may
pledge any gold or other assets which it possesses as security against
loans which it receives from foreign or international entities.
ARTICLE IIIREGULATION OF FOREIGN EXCHANGE OPERATIONS OF
THE BANKS
Section 76. Foreign Exchange Holdings of the Banks. - In order
that the Bangko Sentral may at all times have foreign exchange resources
sufficient to enable it to maintain the international stability and
convertibility of the peso, or in order to promote the domestic investment
of bank resources, the Monetary Board may require the banks to sell to
the Bangko Sentral or to other banks all or part of their surplus holdings of
foreign exchange. Such transfers may be required for all foreign currencies
or for only certain of such currencies, according to the decision of the
Monetary Board. The transfers shall be made at the rates established
under the provisions of Section 74 of this Act.
The Monetary Board may, whenever warranted, determine the net
assets and net liabilities of banks and shall, in making such a
determination, take into account the bank's networth, outstanding
liabilities, actual and contingent, or such other financial or performance
ratios as may be appropriate under the circumstances. Any such
determination of net assets and net liabilities shall be applied in all banks
uniformly and without discrimination.
Section 77. Requirement of Balanced Currency Position. - The
Monetary Board may require the banks to maintain a balanced position
between their assets and liabilities in Philippine pesos or in any other
currency or currencies in which they operate. The banks shall be granted a
reasonable period of time in which to adjust their currency positions to any
such requirement.
The powers granted under this section shall be exercised only
when special circumstances make such action necessary, in the opinion of
the Monetary Board, and shall be applied to all banks alike and without
discrimination.
Section 78. Regulation of Non-spot Exchange Transactions. - In
order to restrain the banks from taking speculative positions with respect
to future fluctuations in foreign exchange rates, the Monetary Board may
issue such regulations governing bank purchases and sales of non-spot
exchange as it may consider necessary for said purpose.
Section 79. Other Exchange Profits and Losses. - The banks shall
bear the risks of non-compliance with the terms of the foreign exchange
documents and instruments which they buy and sell, and shall also bear
any other typically commercial or banking risks, including exchange risks
not assumed by the Bangko Sentral under the provisions of the preceding
section.
Section 80. Information on Exchange Operations. - The banks
shall report to the Bangko Sentral the volume and composition of their
purchases and sales of gold and foreign exchange each day, and must
furnish such additional information as the Bangko Sentral may request
with reference to the movements in their accounts in foreign currencies.
The Monetary Board may also require other persons and entities to
report to it currently all transactions or operations in gold, in any shape or
form, and in foreign exchange whether entered into or undertaken by
them directly or through agents, or to submit such data as may be
required on operations or activities giving rise to or in connection with or
relating to a gold or foreign exchange transaction. The Monetary Board
shall prescribe the forms on which such declarations must be made. The
accuracy of the declarations may be verified by the Bangko Sentral by
whatever inspection it may deem necessary.
ARTICLE IVLOANS TO BANKING AND OTHER FINANCIAL
INSTITUTIONS
A. CREDIT POLICY
Section 81. Guiding Principles. - The rediscounts, discounts, loans
and advances which the Bangko Sentral is authorized to extend to banking
institutions under the provisions of the present article of this Act shall be
used to influence the volume of credit consistent with the objective of
price stability.
B. NORMAL CREDIT OPERATIONS
Section 82. Authorized Types of Operations. - Subject to the
principle stated in the preceding section of this Act, the Bangko Sentral
may normally and regularly carry on the following credit operations with
banking institutions operating in the Philippines:
(a) Commercial credits. - The Bangko Sentral may rediscount, discount,
buy and sell bills, acceptances, promissory notes and other credit
instruments with maturities of not more than one hundred eighty (180)
days from the date of their rediscount, discount or acquisition by the
Bangko Sentral and resulting from transactions related to:
(1) the importation, exportation, purchase or sale of readily saleable goods
and products, or their transportation within the Philippines; or
(2) the storing of non-perishable goods and products which are duly
insured and deposited, under conditions assuring their preservation, in
authorized bonded warehouses or in other places approved by the
Monetary Board.
(b) Production credits. - The Bangko Sentral may rediscount, discount, buy
and sell bills, acceptances, promissory notes and other credit instruments
having maturities of not more than three hundred sixty (360) days from
the date of their rediscount, discount or acquisition by the Bangko Sentral
and resulting from transactions related to the production or processing of
agricultural, animal, mineral, or industrial products. Documents or
instruments acquired in accordance with this subsection shall be secured
by a pledge of the respective crops or products: Provided, however, That
the crops or products need not be pledged to secure the documents if the
original loan granted by the Bangko Sentral is secured by a lien or
mortgage on real estate property seventy percent (70%) of the appraised
value of which equals or exceeds the amount of the loan granted.
(c) Other credits. - Special credit instruments not otherwise rediscountable
under the immediately preceding subsections (a) and (b) may be eligible
for rediscounting in accordance with rules and regulations which the
Bangko Sentral shall prescribe. Whenever necessary, the Bangko Sentral
shall provide funds from non-inflationary sources: Provided, however, That
the Monetary Board shall prescribe additional safeguards for disbursing
these funds.
(d) Advances. - The Bangko Sentral may grant advances against the
following kinds of collaterals for fixed periods which, with the exception of
advances against collateral named in clause (4) of the present subsection,
shall not exceed one hundred eighty (180) days:
(1) gold coins or bullion;
(2) securities representing obligations of the Bangko Sentral or of other
domestic institutions of recognized solvency;
(3) the credit instruments to which reference is made in subsection (a) of
this section;
(4) the credit instruments to which reference is made in subsection (b) of
this section, for periods which shall not exceed three hundred sixty (360)
days;
(5) utilized portions of advances in current amount covered by regular
overdraft agreements related to operations included under subsections (a)
and (b) of this section, and certified as to amount and liquidity by the
institution soliciting the advance;
(6) negotiable treasury bills, certificates of indebtedness, notes and other
negotiable obligations of the Government maturing within three (3) years
from the date of the advance; and
(7) negotiable bonds issued by the Government of the Philippines, by
Philippine provincial, city or municipal governments, or by any Philippine
Government instrumentality, and having maturities of not more than ten
(10) years from the date of advance.
The rediscounts, discounts, loans and advances made in accordance with
the provisions of this section may not be renewed or extended unless
extraordinary circumstances fully justify such renewal or extension.
Advances made against the collateral named in clauses (6) and (7)
of subsection (d) of this section may not exceed eighty percent (80%) of
the current market value of the collateral.
C. SPECIAL CREDIT OPERATION
Section 83. Loans for Liquidity Purposes. - The Bangko Sentral
may extend loans and advances to banking institutions for a period of not
more than seven (7) days without any collateral for the purpose of
providing liquidity to the banking system in times of need.
D. EMERGENCY CREDIT OPERATION
Section 84. Emergency Loans and Advances. - In periods of
national and/or local emergency or of imminent financial panic which
directly threaten monetary and banking stability, the Monetary Board
may, by a vote of at least five (5) of its members, authorize the Bangko
Sentral to grant extraordinary loans or advances to banking institutions
secured by assets as defined hereunder: Provided, That while such loans
or advances are outstanding, the debtor institution shall not, except upon
prior authorization by the Monetary Board, expand the total volume of its
loans or investments.
The Monetary Board may, at its discretion, likewise authorize the
Bangko Sentral to grant emergency loans or advances to banking
institutions, even during normal periods, for the purpose of assisting a
bank in a precarious financial condition or under serious financial
pressures brought by unforeseen events, or events which, though
foreseeable, could not be prevented by the bank concerned: Provided,
however, That the Monetary Board has ascertained that the bank is not
insolvent and has the assets defined hereunder to secure the advances:
Provided, further, That a concurrent vote of at least five (5) members of
the Monetary Board is obtained.
The amount of any emergency loan or advance shall not exceed
the sum of fifty percent (50%) of total deposits and deposit substitutes of
the banking institution and shall be disbursed in two (2) or more tranches.
The amount of the first tranche shall be limited to twenty-five percent
(25%) of the total deposit and deposit substitutes of the institution and
shall be secured by government securities to the extent of their applicable
loan values and other unencumbered first class collaterals which the
Monetary Board may approve: Provided, That if as determined by the
Monetary Board, the circumstances surrounding the emergency warrant a
loan or advance greater than the amount provided hereinabove, the
amount of the first tranche may exceed twenty-five percent (25%) of the
bank's total deposit and deposit substitutes if the same is adequately
secured by applicable loan values of government securities and
unencumbered first class collaterals approved by the Monetary Board, and
the principal stockholders of the institution furnish an acceptable
undertaking to indemnify and hold harmless from suit a conservator
whose appointment the Monetary Board may find necessary at any time.
Prior to the release of the first tranche, the banking institution shall
submit to the Bangko Sentral a resolution of its board of directors
authorizing the Bangko Sentral to evaluate other assets of the banking
institution certified by its external auditor to be good and available for
collateral purposes should the release of the subsequent tranche be
thereafter applied for.
The Monetary Board may, by a vote of at least five (5) of its
members, authorize the release of a subsequent tranche on condition that
the principal stockholders of the institution:
(a) furnish an acceptable undertaking to indemnify and hold harmless
from suit a conservator whose appointment the Monetary Board may find
necessary at any time; and
(b) provide acceptable security which, in the judgment of the Monetary
Board, would be adequate to supplement, where necessary, the assets
tendered by the banking institution to collateralize the subsequent
tranche.
In connection with the exercise of these powers, the prohibitions in
Section 128 of this Act shall not apply insofar as it refers to acceptance as
collateral of shares and their acquisition as a result of foreclosure
proceedings, including the exercise of voting rights pertaining to said
shares: Provided, however, That should the Bangko Sentral acquire any of
the shares it has accepted as collateral as a result of foreclosure
proceedings, the Bangko Sentral shall dispose of said shares by public
bidding within one (1) year from the date of consolidation of title by the
Bangko Sentral.
Whenever a financial institution incurs an overdraft in its account
with the Bangko Sentral, the same shall be eliminated within the period
prescribed in Section 102 of this Act.
E. CREDIT TERMS
Section 85. Interest and Rediscount. - The Bangko Sentral shall
collect interest and other appropriate charges on all loans and advances it
extends, the closure, receivership or liquidations of the debtor-institution
notwithstanding. This provision shall apply prospectively.
The Monetary Board shall fix the interest and rediscount rates to
be charged by the Bangko Sentral on its credit operations in accordance
with the character and term of the operation, but after due consideration
has been given to the credit needs of the market, the composition of the
Bangko Sentral's portfolio, and the general requirements of the national
monetary policy. Interest and rediscount rates shall be applied to all banks
of the same category uniformly and without discrimination.
Section 86. Endorsement. - The documents rediscounted,
discounted, bought or accepted as collateral by the Bangko Sentral in the
course of the credit operations authorized in this article shall bear the
endorsement of the institution from which they are received.
Section 87. Repayment of Credits. - Documents rediscounted,
discounted or accepted as collateral by the Bangko Sentral must be
withdrawn by the borrowing institution on the dates of their maturities, or
upon liquidation of the obligations which they represent or to which they
relate whenever said obligations have been liquidated prior to their dates
of maturity.
Banks shall have the right at any time to withdraw any documents
which they have presented to the Bangko Sentral as collateral, upon
payment in full of the corresponding debt to the Bangko Sentral, including
interest charges.
Section 88. Other requirements. - The Monetary Board may
prescribe, within the general powers granted to it under this Act,
additional conditions which borrowing institutions must satisfy in order to
have access to the credit of the Bangko Sentral. These conditions may
refer to the rates of interest charged by the banks, to the purposes for
which their loans in general are destined, and to any other clearly
definable aspect of the credit policy of the bank.
Section 89. Provisional Advances to the National Government. -
The Bangko Sentral may make direct provisional advances with or without
interest to the National Government to finance expenditures authorized in
its annual appropriation: Provided, That said advances shall be repaid
before the end of three (3) months extendible by another three (3) months
as the Monetary Board may allow following the date the National
Government received such provisional advances and shall not, in their
aggregate, exceed twenty percent (20%) of the average annual income of
the borrower for the last three (3) preceding fiscal years.
ARTICLE VOPEN MARKET OPERATIONS FOR THE ACCOUNT OF THE
BANGKO SENTRAL
Section 90. Principles of Open Market Operations. - The open
market purchases and sales of securities by the Bangko Sentral shall be
made exclusively in accordance with its primary objective of achieving
price stability.
Section 91. Purchases and Sales of Government Securities. - In
order to achieve the objectives of the national monetary policy, the
Bangko Sentral may, in accordance with the principle stated in Section 90
of this Act and with such rules and regulations as may be prescribed by
the Monetary Board, buy and sell in the open market for its own account:
(a) evidences of indebtedness issued directly by the Government of the
Philippines or by its political subdivisions; and
(b) evidences of indebtedness issued by government instrumentalities and
fully guaranteed by the Government.
The evidences of indebtedness acquired under the provisions of
this section must be freely negotiable and regularly serviced and must be
available to the general public through banking institutions and local
government treasuries in denominations of a thousand pesos or more.
Section 92. Issue and Negotiation of Bangko Sentral Obligations. -
In order to provide the Bangko Sentral with effective instruments for open
market operations, the Bangko Sentral may, subject to such rules and
regulations as the Monetary Board may prescribe and in accordance with
the principles stated in Section 90 of this Act, issue, place, buy and sell
freely negotiable evidences of indebtedness of the Bangko Sentral:
Provided, That issuance of such certificates of indebtedness shall be made
only in cases of extraordinary movement in price levels. Said evidences of
indebtedness may be issued directly against the international reserve of
the Bangko Sentral or against the securities which it has acquired under
the provisions of Section 91 of this Act, or may be issued without relation
to specific types of assets of the Bangko Sentral.
The Monetary Board shall determine the interest rates, maturities
and other characteristics of said obligations of the Bangko Sentral, and
may, if it deems it advisable, denominate the obligations in gold or foreign
currencies.
Subject to the principles stated in Section 90 of this Act, the
evidences of indebtedness of the Bangko Sentral to which this section
refers may be acquired by the Bangko Sentral before their maturity, either
through purchases in the open market or through redemptions at par and
by lot if the Bangko Sentral has reserved the right to make such
redemptions. The evidences of indebtedness acquired or redeemed by the
Bangko Sentral shall not be included among its assets, and shall be
immediately retired and cancelled.
ARTICLE VICOMPOSITION OF BANGKO SENTRAL'S PORTFOLIO
Section 93. Review of the Bangko Sentral's Portfolio. - At least
once every month the Monetary Board shall review the portfolio of the
Bangko Sentral in relation to its future credit policy.
In reviewing the Bangko Sentral's portfolio, the Monetary Board
shall especially consider whether a sufficiently large part of the portfolio
consists of assets with early maturities, in order that a contraction in
Bangko Sentral credit may be effected promptly whenever the national
monetary policy so requires.
ARTICLE VIIBANK RESERVES
Section 94. Reserve Requirements. - In order to control the
volume of money created by the credit operations of the banking system,
all banks operating in the Philippines shall be required to maintain
reserves against their deposit liabilities: Provided, That the Monetary
Board may, at its discretion, also require all banks and/or quasi-banks to
maintain reserves against funds held in trust and liabilities for deposit
substitutes as defined in this Act. The required reserves of each bank shall
be proportional to the volume of its deposit liabilities and shall ordinarily
take the form of a deposit in the Bangko Sentral. Reserve requirements
shall be applied to all banks of the same category uniformly and without
discrimination.
Reserves against deposit substitutes, if imposed, shall be
determined in the same manner as provided for reserve requirements
against regular bank deposits, with respect to the imposition, increase,
and computation of reserves.
The Monetary Board may exempt from reserve requirements
deposits and deposit substitutes with remaining maturities of two (2)
years or more, as well as interbank borrowings.
Since the requirement to maintain bank reserves is imposed
primarily to control the volume of money, the Bangko Sentral shall not pay
interest on the reserves maintained with it unless the Monetary Board
decides otherwise as warranted by circumstances.
Section 95. Definition of Deposit Substitutes. - The term "deposit
substitutes" is defined as an alternative form of obtaining funds from the
public, other than deposits, through the issuance, endorsement, or
acceptance of debt instruments for the borrower's own account, for the
purpose of relending or purchasing of receivables and other obligations.
These instruments may include, but need not be limited to, bankers
acceptances, promissory notes, participations, certificates of assignment
and similar instruments with recourse, and repurchase agreements. The
Monetary Board shall determine what specific instruments shall be
considered as deposit substitutes for the purposes of Section 94 of this
Act: Provided, however, That deposit substitutes of commercial, industrial
and other non-financial companies for the limited purpose of financing
their own needs or the needs of their agents or dealers shall not be
covered by the provisions of Section 94 of this Act.
Section 96. Required Reserves Against Peso Deposits. - The
Monetary Board may fix and, when it deems necessary, alter the minimum
reserve ratios to peso deposits, as well as to deposit substitutes, which
each bank and/or quasi-bank may maintain, and such ratio shall be
applied uniformly to all banks of the same category as well as to quasi-
banks.
Section 97. Required Reserves Against Foreign Currency
Deposits. - The Monetary Board is similarly authorized to prescribe and
modify the minimum reserve ratios applicable to deposits denominated in
foreign currencies.
Section 98. Reserves Against Unused Balances of Overdraft
Lines. - In order to facilitate Bangko Sentral control over the volume of
bank credit, the Monetary Board may establish minimum reserve
requirements for unused balances of overdraft lines.
The powers of the Monetary Board to prescribe and modify reserve
requirements against unused balances of overdraft lines shall be the same
as its powers with respect to reserve requirements against demand
deposits.
Section 99. Increase in Reserve Requirements. - Whenever in the
opinion of the Monetary Board it becomes necessary to increase reserve
requirements against existing liabilities, the increase shall be made in a
gradual manner and shall not exceed four percentage points in any thirty-
day period. Banks and other affected financial institutions shall be notified
reasonably in advance of the date on which such increase is to become
effective.
Section 100. Computation on Reserves. - The reserve position of
each bank or quasi-bank shall be calculated daily on the basis of the
amount, at the close of business for the day, of the institution's reserves
and the amount of its liability accounts against which reserves are
required to be maintained: Provided, That with reference to holidays or
non-banking days, the reserve position as calculated at the close of the
business day immediately preceding such holidays and non-banking days
shall apply on such days.
For the purpose of computing the reserve position of each bank or
quasi-bank, its principal office in the Philippines and all its branches and
agencies located therein shall be considered as a single unit.
Section 101. Reserve Deficiencies. - Whenever the reserve
position of any bank or quasi-bank, computed in the manner specified in
the preceding section of this Act, is below the required minimum, the bank
or quasi-bank shall pay the Bangko Sentral one-tenth of one percent (1/10
of 1%) per day on the amount of the deficiency or the prevailing ninety-
one-day treasury bill rate plus three percentage points, whichever is
higher: Provided, however, That banks and quasi-banks shall ordinarily be
permitted to offset any reserve deficiency occurring on one or more days
of the week with any excess reserves which they may hold on other days
of the same week and shall be required to pay the penalty only on the
average daily deficiency during the week. In cases of abuse, the Monetary
Board may deny any bank or quasi-bank the privilege of offsetting reserve
deficiencies in the aforesaid manner.
If a bank or quasi-bank chronically has a reserve deficiency, the
Monetary Board may limit or prohibit the making of new loans or
investments by the institution and may require that part or all of the net
profits of the institution be assigned to surplus.
The Monetary Board may modify or set aside the reserve
deficiency penalties provided in this section, for part or the entire period
of a strike or lockout affecting a bank or a quasi-bank as defined in the
Labor Code, or of a national emergency affecting operations of banks or
quasi-banks. The Monetary Board may also modify or set aside reserved
deficiency penalties for rehabilitation program of a bank.
Section 102. Interbank Settlement. - The Bangko Sentral shall
establish facilities for interbank clearing under such rules and regulations
as the Monetary Board may prescribe: Provided, That the Bangko Sentral
may charge administrative and other fees for the maintenance of such
facilities.
The deposit reserves maintained by the banks in the Bangko
Sentral in accordance with the provisions of Section 94 of this Act shall
serve as basis for the clearing of checks and the settlement of interbank
balances, subject to such rules and regulations as the Monetary Board
may issue with respect to such operations: Provided, That any bank which
incurs on overdrawing in its deposit account with the Bangko Sentral shall
fully cover said overdraft, including interest thereon at a rate equivalent to
one-tenth of one percent (1/10 of 1%) per day or the prevailing ninety-
one-day treasury bill rate plus three percentage points, whichever is
higher, not later than the next clearing day: Provided, further, That
settlement of clearing balances shall not be effected for any account
which continues to be overdrawn for five (5) consecutive banking days
until such time as the overdrawing is fully covered or otherwise converted
into an emergency loan or advance pursuant to the provisions of Section
84 of this Act: Provided, finally, That the appropriate clearing office shall
be officially notified of banks with overdrawn balances. Banks with existing
overdrafts with the Bangko Sentral as of the effectivity of this Act shall,
within such period as may be prescribed by the Monetary Board, either
convert the overdraft into an emergency loan or advance with a plan of
payment, or settle such overdrafts, and that, upon failure to so comply
herewith, the Bangko Sentral shall take such action against the bank as
may be warranted under this Act.
Section 103. Exemption from Attachment and Other Purposes. -
Deposits maintained by banks with the Bangko Sentral as part of their
reserve requirements shall be exempt from attachment, garnishments, or
any other order or process of any court, government agency or any other
administrative body issued to satisfy the claim of a party other than the
Government, or its political subdivisions or instrumentalities.
ARTICLE VIIISELECTIVE REGULATION OF BANK OPERATIONS
Section 104. Guiding Principle. - The Monetary Board shall use
the powers granted to it under this Act to ensure that the supply,
availability and cost of money are in accord with the needs of the
Philippine economy and that bank credit is not granted for speculative
purposes prejudicial to the national interests. Regulations on bank
operations shall be applied to all banks of the same category uniformly
and without discrimination.
Section 105. Margin Requirements Against Letters of Credit. - The
Monetary Board may at any time prescribe minimum cash margins for the
opening of letters of credit, and may relate the size of the required margin
to the nature of the transaction to be financed.
Section 106. Required Security Against Bank Loans. - In order to
promote liquidity and solvency of the banking system, the Monetary Board
may issue such regulations as it may deem necessary with respect to the
maximum permissible maturities of the loans and investments which the
banks may make, and the kind and amount of security to be required
against the various types of credit operations of the banks.
Section 107. Portfolio Ceilings. - Whenever the Monetary Board
considers it advisable to prevent or check an expansion of bank credit, the
Board may place an upper limit on the amount of loans and investments
which the banks may hold, or may place a limit on the rate of increase of
such assets within specified periods of time. The Monetary Board may
apply such limits to the loans and investments of each bank or to specific
categories thereof.
In no case shall the Monetary Board establish limits which are
below the value of the loans or investments of the banks on the date on
which they are notified of such restrictions. The restrictions shall be
applied to all banks uniformly and without discrimination.
Section 108. Minimum Capital Ratios. - The Monetary Board may
prescribe minimum ratios which the capital and surplus of the banks must
bear to the volume of their assets, or to specific categories thereof, and
may alter said ratios whenever it deems necessary.
ARTICLE IXCOORDINATION OF CREDIT POLICIES BY GOVERNMENT
INSTITUTIONS
Section 109. Coordination of Credit Policies. - Government-owned
corporations which perform banking or credit functions shall coordinate
their general credit policies with those of the Monetary Board.
Toward this end, the Monetary Board may, whenever it deems it
expedient, make suggestions or recommendations to such corporations for
the more effective coordination of their policies with those of the Bangko
Sentral.
CHAPTER V FUNCTIONS AS BANKER AND FINANCIAL ADVISOR
OF THE GOVERNMENT
ARTICLE I
FUNCTIONS AS BANKER OF THE GOVERNMENT
Section 110. Designation of Bangko Sentral as Banker of the
Government. - The Bangko Sentral shall act as a banker of the
Government, its political subdivisions and instrumentalities.
Section 111. Representation with the International Monetary
Fund. - The Bangko Sentral shall represent the Government in all dealings,
negotiations and transactions with the International Monetary Fund and
shall carry such accounts as may result from Philippine membership in, or
operations with, said Fund.
Section 112. Representation with Other Financial Institutions. -
The Bangko Sentral may be authorized by the Government to represent it
in dealings, negotiations or transactions with the International Bank for
Reconstruction and Development and with other foreign or international
financial institutions or agencies. The President may, however, designate
any of his other financial advisors to jointly represent the Government in
such dealings, negotiations or transactions.
Section 113. Official Deposits. - The Bangko Sentral shall be the
official depository of the Government, its political subdivisions and
instrumentalities as well as of government-owned or controlled
corporations and, as a general policy, their cash balances should be
deposited with the Bangko Sentral, with only minimum working balances
to be held by government-owned banks and such other banks
incorporated in the Philippines as the Monetary Board may designate,
subject to such rules and regulations as the Board may prescribe:
Provided, That such banks may hold deposits of the political subdivisions
and instrumentalities of the Government beyond their minimum working
balances whenever such subdivisions or instrumentalities have
outstanding loans with said banks.
The Bangko Sentral may pay interest on deposits of the
Government or of its political subdivisions and instrumentalities, as well as
on deposits of banks with the Bangko Sentral.
Section 114. Fiscal Operations. - The Bangko Sentral shall open a
general cash account for the Treasurer of the Philippines, in which the
liquid funds of the Government shall be deposited.
Transfers of funds from this account to other accounts shall be
made only upon order of the Treasurer of the Philippines.
Section 115. Other Banks as Agents of the Bangko Sentral. - In
the performance of its functions as fiscal agent, the Bangko Sentral may
engage the services of other government-owned and controlled banks and
of other domestic banks for operations in localities at home or abroad in
which the Bangko Sentral does not have offices or agencies adequately
equipped to perform said operations: Provided, however, That for fiscal
operations in foreign countries, the Bangko Sentral may engage the
services of foreign banking and financial institutions.
Section 116. Remuneration for Services. - The Bangko Sentral
may charge equitable rates, commissions or fees for services which it
renders to the Government, its political subdivisions and instrumentalities.
ARTICLE IITHE MARKETING AND STABILIZATION OF SECURITIES
FOR THE ACCOUNT OF THE GOVERNMENT
A. THE ISSUE AND PLACING OF GOVERNMENT SECURITIES
Section 117. Issue of Government Obligations. - The issue of
securities representing obligations of the Government, its political
subdivisions or instrumentalities, may be made through the Bangko
Sentral, which may act as agent of, and for the account of, the
Government or its respective subdivisions or instrumentality, as the case
may be: Provided, however, That the Bangko Sentral shall not guarantee
the placement of said securities, and shall not subscribe to their issue
except to replace its maturing holdings of securities with the same type as
the maturing securities.
Section 118. Methods of Placing Government Securities. - The
Bangko Sentral may place the securities to which the preceding section
refers through direct sale to financial institutions and the public.
The Bangko Sentral shall not be a member of any stock exchange
or syndicate, but may intervene therein for the sole purpose of regulating
their operations in the placing of government securities.
The Government, or its political subdivisions or instrumentalities,
shall reimburse the Bangko Sentral for the expenses incurred in the
placing of the aforesaid securities.
Section 119. Servicing and Redemption of the Public Debt. - The
servicing and redemption of the public debt shall also be effected through
the Bangko Sentral.
B. BANGKO SENTRAL SUPPORT OF THE GOVERNMENT
SECURITIES MARKET
Section 120. The Securities Stabilization Fund. - There shall be
established a "Securities Stabilization Fund" which shall be administered
by the Bangko Sentral for the account of the Government.
The operations of the Securities Stabilization Fund shall consist of
purchases and sales, in the open market, of bonds and other evidences of
indebtedness issued or fully guaranteed by the Government. The purpose
of these operations shall be to increase the liquidity and stabilize the
value of said securities in order thereby to promote investment in
government obligations.
The Monetary Board shall use the resources of the Fund to prevent,
or moderate, sharp fluctuations in the quotations of said government
obligations, but shall not endeavor to alter movements of the market
resulting from basic changes in the pattern or level of interest rates.
The Monetary Board shall issue such regulations as may be
necessary to implement the provisions of this section.
Section 121. Resources of the Securities Stabilization Fund. -
Subject to Section 132 of this Act, the resources of the Securities
Stabilization Fund shall come from the balance of the fund as held by the
Central Bank under Republic Act No. 265 as of the effective date of this
Act.
Section 122. Profits and Losses of the Fund. - The Securities
Stabilization Fund shall retain net profits which it may make on its
operations, regardless of whether said profits arise from capital gains or
from interest earnings. The Fund shall correspondingly bear any net losses
which it may incur.
ARTICLE IIIFUNCTIONS AS FINANCIAL ADVISOR OF THE
GOVERNMENT
Section 123. Financial Advice on Official Credit Operations. -
Before undertaking any credit operation abroad, the Government, through
the Secretary of Finance, shall request the opinion, in writing, of the
Monetary Board on the monetary implications of the contemplated action.
Such opinions must similarly be requested by all political subdivisions and
instrumentalities of the Government before any credit operation abroad is
undertaken by them.
The opinion of the Monetary Board shall be based on the gold and
foreign exchange resources and obligations of the nation and on the
effects of the proposed operation on the balance of payments and on
monetary aggregates.
Whenever the Government, or any of its political subdivisions or
instrumentalities, contemplates borrowing within the Philippines, the prior
opinion of the Monetary Board shall likewise be requested in order that the
Board may render an opinion on the probable effects of the proposed
operation on monetary aggregates, the price level, and the balance of
payments.
Section 124. Representation on the National Economic and
Development Authority. - In order to assure effective coordination between
the economic, financial and fiscal policies of the Government and the
monetary, credit and exchange policies of the Bangko Sentral, the Deputy
Governor designated by the Governor of the Bangko Sentral shall be an ex
officio member of the National Economic and Development Authority
Board.
CHAPTER VI PRIVILEGES AND PROHIBITIONS
ARTICLE IPRIVILEGES
Section 125. Tax Exemptions. - The Bangko Sentral shall be
exempt for a period of five (5) years from the approval of this Act from all
national, provincial, municipal and city taxes, fees, charges and
assessments.
The exemption authorized in the preceding paragraph of this
section shall apply to all property of the Bangko Sentral, to the resources,
receipts, expenditures, profits and income of the Bangko Sentral, as well
as to all contracts, deeds, documents and transactions related to the
conduct of the business of the Bangko Sentral: Provided, however, That
said exemptions shall apply only to such taxes, fees, charges and
assessments for which the Bangko Sentral itself would otherwise be liable,
and shall not apply to taxes, fees, charges, or assessments payable by
persons or other entities doing business with the Bangko Sentral:
Provided, further, That foreign loans and other obligations of the Bangko
Sentral shall be exempt, both as to principal and interest, from any and all
taxes if the payment of such taxes has been assumed by the Bangko
Sentral.
Section 126. Exemption from Customs Duties. - The provision of
any general or special law to the contrary notwithstanding, the
importation and exportation by the Bangko Sentral of notes and coins, and
of gold and other metals to be used for purposes authorized under this
Act, and the importation of all equipment needed for bank note
production, minting of coins, metal refining and other security printing
operations shall be fully exempt from all customs duties and consular fees
and from all other taxes, assessments and charges related to such
importation or exportation.
Section 127. Applicability of the Civil Service Law. - Appointments
in the Bangko Sentral, except as to those which are policy-determining,
primarily confidential or highly technical in nature, shall be made only
according to the Civil Service Law and regulations: Provided, That no
qualification requirements for positions in the Bangko Sentral shall be
imposed other than those set by the Monetary Board: Provided, further,
That, the Monetary Board or Governor, in accordance with Sections 15(c)
and 17(d) of this Act, respectively, may without need of obtaining prior
approval from any other government agency, appoint personnel in the
Bangko Sentral whose services are deemed necessary in order not to
unduly disrupt the operations of the Bangko Sentral.
 Officers and employees of the Bangko Sentral, including all
members of the Monetary Board, shall not engage directly or indirectly in
partisan activities or take part in any election except to vote.
ARTICLE IIPROHIBITIONS
Section 128. Prohibitions. - The Bangko Sentral shall not acquire
shares of any kind or accept them as collateral, and shall not participate in
the ownership or management of any enterprise, either directly or
indirectly.
The Bangko Sentral shall not engage in development banking or
financing: Provided, however, That outstanding loans obtained or
extended for development financing shall not be affected by the
prohibition of this section.
CHAPTER VII TRANSITORY PROVISIONS
Section 129. Phase-out of Fiscal Agency Functions. - Unless
circumstances warrant otherwise and approved by the Congress Oversight
Committee, the Bangko Sentral shall, within a period of three (3) years but
in no case longer than five (5) years from the approval of this Act, phase
out all fiscal agency functions provided for in Sections 117, 118, 119, and
120 as well as in other pertinent provisions of this Act and transfer the
same to the Department of Finance.
Section 130. Phase-out of Regulatory Powers Over the
Operations of Finance Corporations and Other Institutions Performing
Similar Functions. - The Bangko Sentral shall, within a period of five (5)
years from the effectivity of this Act, phase out its regulatory powers over
finance companies without quasi-banking functions and other institutions
performing similar functions as provided in existing laws, the same to be
assumed by the Securities and Exchange Commission.
Section 131. Implementing Details. - The Bangko Sentral shall be
made operational by the performance of the following acts:
(a) the President shall constitute the Monetary Board by appointing the
members thereof within sixty (60) days from the effectivity of this Act; and
(b) the transfer of such assets and liabilities from the Central Bank to the
Bangko Sentral as provided in Section 132 shall be completed within
ninety (90) days from the constitution of the Monetary Board.
All incumbent personnel in the Central Bank as of the date of the
approval of this Act shall continue to exercise their duties and functions as
personnel of the Bangko Sentral subject to the provisions of Section 133:
Provided, That such personnel in the Central Bank as may be necessary
for the purpose of implementing Section 132 may be assigned by the
Bangko Sentral Monetary Board to the Central Bank.
Section 132. Transfer of Assets and Liabilities. - Upon the
effectivity of this Act, three (3) members of the Monetary Board, which
may include the Governor, in representation of the Bangko Sentral, the
Secretary of Finance and the Secretary of Budget and Management in
representation of the National Government, and the Chairmen of the
Committees on Banks of the Senate and the House of Representatives
shall determine the assets and liabilities of the Central Bank which may be
transferred to or assumed by the Bangko Sentral. The Committee shall
complete its work within ninety (90) days from the constitution of the
Monetary Board submitting a comprehensive report with all its findings
and justification.
The following guidelines shall be strictly observed in the
determination of which assets and liabilities shall be transferred to the
Bangko Sentral:
(a) the Monetary Board and the Secretary of Finance shall have primary
responsibility for working out creative monetary and financial solutions to
retire the Central Bank liabilities and losses at the least cost to the
Government;
(b) the Bangko Sentral shall remit seventy-five percent (75%) of its net
profits to a special deposit account (sinking fund) until such time as the
net liabilities of the Central Bank shall have been liquidated through
generally accepted finance mechanisms such as, but not limited to, write-
offs, set-offs, condonation, collections, reappraisal, revaluation and bond
issuance by the National Government, or to the National Government as
dividends;
(c) the assets and liabilities to be transferred shall be limited to an amount
that will enable the Bangko Sentral to perform its responsibilities
adequately and operate on a viable basis: Provided, That the assets shall
exceed the liabilities as certified by the Commission on Audit (COA), by an
initial amount of Ten billion pesos (P10,000,000,000);
(d) liabilities to be assumed by the Bangko Sentral shall include liability for
notes and coins in circulation as of the effective date of this Act; and
(e) any asset or liability of the Central Bank not transferred to the Bangko
Sentral shall be retained and administered, disposed of and liquidated by
the Central Bank itself which shall continue to exist as the CB Board of
Liquidators only for the purposes provided in this paragraph but not later
than twenty-five (25) years or until such time that liabilities have been
liquidated: Provided, That the Bangko Sentral may financially assist the
Central Bank of Liquidators in the liquidation of CB liabilities: Provided,
finally, That upon disposition of said retained assets and liquidation of said
retained liabilities, the Central Bank shall be deemed abolished.
All actions taken by the Bangko Sentral Monetary Board under this
section shall be reported to Congress and the President within thirty (30)
days.
Section 133. Mandate to Organize. - The Bangko Sentral shall be
organized by the Monetary Board without being subject to the provisions
of Republic Act No. 7430, by adopting if it so desires, an entirely new
staffing pattern on organizational structure to suit the operations of the
Bangko Sentral under this Act. No preferential or priority right shall be
given to or enjoyed by any personnel for appointment to any position in
the new staffing pattern, nor shall any personnel be considered as having
prior or vested rights with respect to retention in the Bangko Sentral or in
any position which may be created in the new staffing pattern, even if he
should be the incumbent of a similar position prior to organization. The
formulation of the program of organization shall be completed within six
(6) months after the effectivity of this Act, and shall be fully implemented
within a period of six (6) months thereafter. Personnel who may not be
retained are deemed separated from the service.
Section 134. Separation Benefits. - Pursuant to Section 15 of this
Act, the Monetary Board is authorized to provide separation incentives,
and all those who shall retire or be separated from the service on account
of reorganization under the preceding section shall be entitled to such
incentives, which shall be in addition to all gratuities and benefits to which
they may be entitled under existing laws.
Section 135. Repealing Clause. - Except as may be provided for in
Section 46 and 132 of this Act, Republic Act No. 265, as amended, the
provisions of any other law, special charters, rule or regulation issued
pursuant to said Republic Act No. 265, as amended, or parts thereof,
which may be inconsistent with the provisions of this Act are hereby
repealed. Presidential Decree No. 1792 is likewise repealed.
Section 136. Transfer of Powers. - All powers, duties and
functions vested by law in the Central Bank of the Philippines not
inconsistent with the provisions of this Act shall be deemed transferred to
the Bangko Sentral ng Pilipinas. All references to the Central Bank of the
Philippines in any law or special charters shall be deemed to refer to the
Bangko Sentral.
Section 137. 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.
Section 138. 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.
Approved: June 14, 1993
A 8791 GENERAL BANKING LAW OF 2000
An Act Providing for the Regulation of and Organization and
Operations of Banks, Quasi-banks, Trust Entities and for other
purposes.
The General Banking Law of 2000 (GBL) is the law that generally governs
the regulation, organization and operation of banks, quasi-banks, and
other quasi-entities. It primarily governs Universal Banks[1] (UB) and
Commercial Banks[2] (CB), and has suppletory application to Thrift Banks
(which is primarily governed by RA 7906, the Thrift Banks Act), Rural
Banks (primarily governed by RA 7353, the Rural Banks Act), and
Cooperative Banks (primarily governed by RA 6938, the Cooperative
Code).[3]
Banks
Definition
Banks are entities engaged in the lending of funds obtained in the form of
deposits from the public.[4] This is usually referred to as core-banking
functions of mobilizing savings (through deposit-taking) and allocating
resources (through lending).
GBL requires that banks are stock corporations and its funds are obtained
from the public, i.e. deposits of twenty (20) or more persons.[5]
In Baas v. Asia Pacific Finance Corp.,[6] the Supreme Court said that an
investment company that engages solely in investing, reinvesting, or
trading in securities is not engaged in banking. An investment
company refers to any issuer which is or holds itself out as being
engaged or proposes to engage primarily in the business of
investing, reinvesting or trading in securities. As defined in
 Revised Securities Act, securities shall include commercial papers
evidencing indebtedness of any person, financial or non-financial
entity, irrespective of maturity, issued, endorsed, sold,
transferred or in any manner conveyed to another with or without
recourse, such as promissory notes. Clearly, the transaction
between petitioners and respondent was one involving not a loan
but purchase of receivables at a discount, well within the purview
of investing, reinvesting or trading in securities which an
investment company, like ASIA PACIFIC, is authorized to perform
and does not constitute a violation of the General Banking Act.
In Republic v. Security Credit and Acceptance Corporation,[7] the
Court said that an investment company which loans out the
money of its customers, collects the interest and charges a
commission to both lender and borrower, is a bank. It is conceded
that a total of 59,463 savings account deposits have been made
by the public with the corporation and its 74 branches, with an
aggregate deposit of P1,689,136.74, which has been lent out to
such persons as the corporation deemed suitable therefore. It is
clear that these transactions partake of the nature of banking, as
the term is used in Section 2 of the General Banking Act.
Banks must also be contrasted from quasi-banks (QB). The
latter 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 Sec. 95 RA 7653,
the New Central Bank Act) for purposes of relending or
purchasing of receivables and other obligations. (last part of Sec.
4) Since this is an inherent power of UBs and CBs, they do not
require separate licensing or authorization for this purpose.
Nature of Business
Section 2 of GBL provides that 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. This consequently means
that a bank shall be subject to heavy and close supervision and/or
regulation by the Bangko Sentral ng Pilipinas,[8] and that it must exercise
utmost diligence in the handling of deposits.[9]
To promote and maintain a stable and efficient banking and financial
system, there are special rules that govern banks. Because it is
indispensable to the national interest, 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 has two options: (1) he may
assume jurisdiction over the dispute or decide it or (2) certify the same to
the National Labor Relations Commission for compulsory arbitration. The
law allows the President of the Philippines, at any time, to intervene and
assume jurisdiction over such labor dispute in order to settle or terminate
the same.[10]
Authority to incorporate and operate
GBL provides that a bank or quasi-bank cannot be incorporated without
authority from the BSP. The law states that 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.[11]
In addition, an entity performing banking and quasi-banking function
cannot also operate without a certificate of authority from the BSP.[12]
Classification of Banks
Section 3.2 of the GBL classifies banks into:
Universal Banks (UB) banks that have the authority to exercise, in
addition to the powers authorized for a commercial bank, the powers of an
investment house and the power to invest in non-allied enterprises.[13]
Commercial Banks (CB) banks that 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.[14]
iii. Rural Banks banks that are created to make needed credit available
and readily accessible in the rural areas for purposes of promoting
comprehensive rural development.[15]
1 Thrift Banks banks that include savings and mortgage banks, private A UB MAY INVEST IN THE EQUITIES OF A CB MAY INVEST ONLY IN
development banks, and stock savings and loan associations. ALLIED (EITHER FINANCIAL OR NON- THE EQUITIES
2 Cooperative Banks banks that primarily provide financial, banking and FINANCIAL) AND NON-ALLIED OF ALLIED ENTERPRISES
credit services to cooperative organizations and their members.[16] ENTERPRISES. (SEC. 24) (EITHER
3 Islamic Banks Charter of Al Amanah Islamic Investment Bank of the EXCEPT AS THE MB MAY OTHERWISE FINANCIAL OR NON-
Philippines.[17] PRESCRIBE: FINANCIAL). (SEC.
vii. Other classification of banks as determined by the Monetary Board THE TOTAL INVESTMENT 30)
(MB) of the BSP. IN EQUITIES OF ALLIED EXCEPT AS THE MB MAY
AND NON-ALLIED OTHERWISE
UNIVERSAL BANKS COMMERCIAL BANKS ENTERPRISES SHALL NOT PRESCRIBE:
EXCEED 50% OF THE NET WORTH; AND THE TOTAL INVESTMENT IN
As to Powers
THE EQUITY INVESTMENT IN ANY ONE EQUITIES OF
The powers authorized for a ENTERPRISE, WHETHER ALLIED OR ALLIED ENTERPRISES SHALL
Commercial Bank; BSP Circular 271 (2002) NON-ALLIED, SHALL NOT EXCEED 25% NOT
The powers of an investment house (1) invest in the equities of OF THE NET WORTH OF THE BANK (SEC. EXCEED 35% OF THE NET
as provided in existing laws; allied enterprises; 24) WORTH OF THE
and (2) purchase, hold and BANK; AND
The power to invest in non-allied convey real estate; THE EQUITY INVESTMENT IN
enterprises as provided in the GBL. (3) receive in custody funds, ANY ONE
(Sec. 23) documents and valuable ENTERPRISE SHALL NOT
THE GENERAL POWERS INCIDENT TO objects; EXCEED 25% OF
CORPORATIONS, (4) act as financial agent; THE NET WORTH OF THE
ALL SUCH POWERS AS MAY BE (5) make collections and BANK. (SEC
NECESSARY TO CARRY ON THE payments for the account of
Equity Investments in Financial Allied
BUSINESS OF COMMERCIAL BANKING, others;
Enterprises
SUCH AS ACCEPTING DRAFTS AND (6) act as managing agent,
ISSUING LETTERS OF CREDIT; adviser, consultant or A UB CAN OWN UP TO A KB MAY OWN UP TO 100%
DISCOUNTING AND NEGOTIATING administrator of investment 100% OF THE EQUITY IN OF THE
PROMISSORY NOTES, DRAFTS, BILLS OF management/advisory/- A THRIFT BANK, EQUITY OF
EXCHANGE, AND OTHER EVIDENCES OF consultancy accounts; A RURAL BANK OR A THRIFT BANK OR
DEBT; (7) rent out safety deposit A FINANCIAL ALLIED A RURAL BANK. (SEC. 31)
SUBJECT TO SUCH RULES AS THE MB boxes; and ENTERPRISE. (SEC. 25) WHERE THE EQUITY
MAY PROMULGATE. THESE RULES MAY (8) engage in quasi-banking INVESTMENT OF A CB IS IN
INCLUDE THE DETERMINATION OF functions. OTHER FINANCIAL ALLIED
BONDS AND OTHER DEBT SECURITIES ENTERPRISES, INCLUDING
ELIGIBLE FOR INVESTMENT, THE ANOTHER
MATURITIES AND AGGREGATE AMOUNT COMMERCIAL BANK, SUCH
OF SUCH INVESTMENT. (SEC. 29) INVESTMENT SHALL REMAIN
A
As to Equity Investments
MINORITY HOLDING IN THAT
 ENTERPRISE. (SEC. 31)
Since the bank is the borrower, it can make use as its own the money
Equity Investments in Non-Financial Allied Enterprises deposited, and the amount is not held in trust for the depositor nor is it
A UB OR CB MAY OWN UP TO ONE A UB OR CB MAY OWN UP TO kept for safekeeping.[18] Bank officers cannot also be held liable for
HUNDRED PERCENT (100%) OF THE ONE HUNDRED PERCENT estafa if they authorized the use of the money deposited by the depositor.
EQUITY IN A NON-FINANCIAL ALLIED (100%) OF THE [19] Third persons who may have the right to the money deposited cannot
ENTERPRISE. (SEC. 26 AND 32) EQUITY IN A NON-FINANCIAL hold the bank responsible unless there is a court order or garnishment,
ALLIED ENTERPRISE. (SEC. since the duty of the bank is to the creditor-depositor and not to third
26 AND 32) persons.[20]
Equity Investments in QBs In San Carlos Milling Co., Ltd v. BPI, the Court declared that banks are run
TO PROMOTE COMPETITIVE TO PROMOTE COMPETITIVE for gain, and they solicit deposits in order that they can use the money for
CONDITIONS IN FINANCIAL MARKETS, CONDITIONS IN FINANCIAL that very purpose. For the same reason, it has been held that a bank
THE MB MAY FURTHER LIMIT TO 40% MARKETS, THE MB MAY has a right of set off of the deposits in its hands for the payment of any
EQUITY INVESTMENTS OF UBS AND FURTHER LIMIT TO 40% indebtedness to it on the part of a depositor.[21] Conversely, the
CBS IN QBS. (SEC. 28) EQUITY INVESTMENTS OF depositor has every right to apply his deposit in a bank against his loan
UBS AND from such bank.[22]
CBS IN QBS. (SEC. 28)
Kinds of Deposits
Equity Investments in Non-Allied Enterprises
THE EQUITY INVESTMENT OF A UB, OR The basic types of deposit are demand deposits, savings account,
OF ITS WHOLLY OR MAJORITY-OWNED time deposits, and NOW account.
SUBSIDIARIES, IN A SINGLE NON-ALLIED Demand deposits are those liabilities of banks which are denominated in
ENTERPRISE Philippine currency and are subject to payment in legal tender upon
shall not exceed 35% of the total demand by presentation of checks. In here, no interest is paid by the bank
equity in that enterprise nor because the depositor can take out his funds any time. It is called demand
shall it exceed 35% of the voting stock deposit because the depositor can withdraw the money he deposited on
in that enterprise. (Sec. 27) the very same day.
Savings Account, which is the most common type of deposit, is usually
evidenced by a passbook. Under the fine print, if you deposit today, you
cannot withdraw the amount until 60 days later. Bank pays an interest
2 Functions of Banks
rate, but not as high as time deposits.
Time Deposit is an account with fixed term. The interest rate is stipulated
1 Deposit Function
depending on the number of days. During this period, the money
deposited cannot be withdrawn. It has a higher rate of interest than saving
1 Nature of the Function
account.
Deposit is one of the core banking functions. While the function is referred
Negotiable Order of Withdrawal (NOW) Account is an interest-bearing
to as deposit, it is strictly simple loan where the bank is the debtor and
deposit account that combines the payable on demand feature of checks
the depositor is the creditor. Fixed, savings and current deposits of money
and investment feature of savings accounts.
in banks and similar institutions shall be governed by the provisions
Other Account is one that may be opened by one individual or by two or
concerning simple loan (Article 1980, Civil Code of the Philippines).
more persons. Whenever two or more persons open an account, the same
 may be an and/or account or an and account.
NB: A bank other than a UB or CB 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.[23]
Moreover, the bank is under the obligation to treat deposit accounts of it
depositors with meticulous care. It must bear the blame for failing to
discover the mistake of its employees despite the established procedure
requiring bank papers to pass through bank personnel whose duty it is to
check and countercheck them for possible errors.[24] As a business
affected with public interest and because of the nature of its functions, a
bank is under obligation to treat the accounts of its depositors with
meticulous case, always having in mind the fiduciary nature of their
relationship.[25]
Note on Safety Deposit Boxes: In the case of rent of safety deposit box,
the contract is a special kind of deposit and cannot be characterized as an
ordinary contract of lease because the full and absolute possession and
control of the deposit box is not given to the renters. The prevailing rule is
that the relation between the bank renting out and the renter is that of
bailer and bailee the bailment being for hire and mutual benefit.[26]
1 Loan Function
1 Basic Rules and Restrictions: 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, consistent with
safe and sound banking practices. The bank must ascertain before
granting the load or other credit accommodation the ability of the debtor
to fulfill his commitment.
1 Risk-Based Capital Ratio: The MB shall prescribe the minimum ratio which
the net worth of a bank must bear to its total risk assets which may
include contingent accounts (i.e. net worth : total risk assets).[27] The
risk-based capital ratio of a bank, expressed as a percentage of qualifying
capital to risk-weighted assets, shall not be less than 10% for both solo
basis (head office plus branches) and consolidated basis (parent bank plus
subsidiary financial allied undertakings, but excluding insurance
companies). The ratio shall be maintained daily.[28]
iii. Single Borrowers Limit (SBL): Except as the MB may otherwise
prescribe for reasons of national interest, the total amount of loans, credit
accommodations and guarantees as may be defined by the MB that may
be extended by a bank to any person, partnership, association,
corporation or other entity shall at no time exceed 25% of the net worth of
such bank.[29] The basis for determining compliance with SBL is the total
credit commitment of the bank to the borrower.[30]
GBL provides that, unless the MB prescribes otherwise, the total amount of
loans, credit accommodations and guarantees prescribed in the preceding
paragraph may be increased by an additional 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.[31]
DORSI Accounts: GBL imposes restrictions (not total prohibition) on
borrowings and security arrangement by directors, officers, and
stockholders of the bank. These restrictions apply when the loan or
financial accommodation of DORSI is in excess of 5% of the capital and
surplus of the lending bank or in the maximum amount permitted by law,
whichever is lower. The GENERAL RULE is: a director or officer of any bank
shall neither, directly or indirectly, for himself or as the representative or
agent of others, borrow from such bank; nor 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. The EXCEPTION is
when there is a written approval of the majority of all the directors of the
bank, excluding the director concerned. 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 BSP.[32]
Limits on loans and other credit accommodations (collaterals): Unless
otherwise prescribed by the MB, loans and other credit accommodations
against real estate shall not exceed 75% of the appraised value of the
respective real estate security, plus 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.[33] Those against security of chattels and
intangible properties shall not exceed 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.[34]
NB: 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.[35]

1 Foreclosure of 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.
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 3 months after
foreclosure, whichever is earlier. Owners of property that has been sold in
a foreclosure sale prior to the effectivity of the GBL shall retain their
redemption rights until their expiration.[36]
1 Loan to Banks
The guiding principle for loan on banks is enunciated in Section 81 of
NCBA which reads, The rediscounts, discounts, loans and advances which
the BSP is authorized to extend to banking institutions under the
provisions of the present article of this Act shall be used to influence the
volume of credit consistent with the objective of price stability.
1 Other Functions
UB and CB may also exercise any of the following functions:
1 Receive in custody funds, documents and valuable objects;
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;
iii. Make collections and payments for the account of others and perform
such other services for their customers as are not incompatible with
baking business;
Upon prior approval of the MB, act as managing agent, adviser, consultant
of administrator of investment management/advisory/consultancy
accounts; and
Rent out safety deposit boxes.
Prohibited Acts
GBL prohibits banks from directly engaging in insurance business as
insurer.[37]
Directors, officers, employees, or agents of any bank are prohibited from:
(1) Making false entries in any bank report or statement or participating in
any fraudulent transaction, thereby affecting the financial interest of, or
causing damage to, the bank or any person;
(2) Without order of a court of competent jurisdiction, disclosing 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;
(3) Accepting 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;
(4) Overvaluing or aiding the overvaluing of any security for the purpose
of influencing in any way the actions of the bank or any bank; or
(5) Outsourcing inherent banking functions.[38]
iii. Outsourcing per BSP Circular 268 (2000)
Section 2.1 Outsourcing of inherent banking functions shall refer to any
contract between the bank and a service provider for the latter to supply
the manpower to service the deposit transactions of the former.
Section 2.2 Banks cannot outsource management functions except as may
be authorized by the Monetary Board when circumstances justify.
Section 3. Outsourcing of Information Technology Systems/Processes.
Subject to prior approval of the MB, banks may outsource all information
technology systems and processes except for functions excluded in
Section 3.1.
Section 3.1 Functions affecting the ability of the bank to ensure the fit of
technology services deployed to meet its strategic and business objectives
and to comply with all pertinent banking laws and regulations may not be
outsourced. Subject to prior approval of the MB, consultants and/or service
 providers may be engaged to provide assistance/support.
Section 4. Outsourcing of Other Banking Functions.
Section 4.1 Subject to prior approval of the MB, banks may outsource data
imaging, storage, retrieval and other related systems; clearing and
processing of checks not included in the Philippine Clearing House System;
printing of bank deposit statements.
Section 4.2. Banks may outsource credit card services; printing of bank
loan statements and other non-deposit records, bank forms and
promotional materials; credit investigation and collection; processing of
export, import and other trading transactions; transfer agent services for
debt and equity securities; property appraisal; property management
services; messenger, courier and postal services; security guard services;
vehicle service contracts; janitorial services.
Section 5. Service Providers. When allowed by law and under this circular,
banks may enter into outsourcing contracts only with service providers
with demonstrable technical and financial capability commensurate to the
services to be rendered.
1 Prohibited Transactions of Borrowers of Bank: borrowers of banks are
prohibited from
2 Fraudulently overvaluing property offered as security for a loan or other
credit accommodation from the bank;
3 Furnishing false or misrepresenting or suppressing material facts for the
purpose of obtaining, renewing, or increasing a loan or other credit
accommodation or extending the period thereof;
4 Attempting to defraud the said bank in the event of a court action to
recover a loan or other credit accommodation; or
5 Offering 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.
[39]
3 Ownership of Banks
4 Foreign Ownership[40]
As to their stockholdings, foreign individuals and non-bank
corporations may own or control up to forty percent (40%) of the voting
stock of a domestic bank. This rule shall apply to Filipinos and domestic
non-bank corporations.
The percentage of foreign-owned voting stocks in a bank shall be
determined by the citizenship of the individual stockholders in that bank.
The citizenship of the corporation which is a stockholder in a bank shall
follow the citizenship of the controlling stockholders of the corporation,
irrespective of the place of incorporation.
NB: Foreign banks are not subject to the 40% limitation prescribed under
Sec. 11 of the GBL. R.A. 7721 prescribes 60% are the maximum foreign
bank equity. Sec. 73 of the GBL also allows the acquisition beyond the
60% limit within a period of seven years from the effectivity of the GBL.
Filipino Stockholdings
Section 11 of the GBL applies to Filipinos and domestic non-bank
corporations.
NB: The restriction applies on foreigners in terms of their total equity
participation, while it applies to individual equity participation to Filipinos
and non-bank corporations.
Stockholdings of Family Groups and related interests
There is no prohibition against stockholding of family groups or
related interests. What GBL imposes is that 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.[41]
In addition, 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.
Directors and Officers
Composition of Board
Section 15 of the GBL provides for the composition of the BOD:
there shall be at least five (5), and a maximum of fifteen (15) members of
the board of directors of 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)
Section 19 of GBL imposes a prohibition on public officials, such that 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.
1 Meetings
Section 15 of the GBL also provides that the meetings of the board
of directors may be conducted through modern technologies such as, but
not limited to, teleconferencing and video-conferencing.
1 Qualifications
Section 16 of the GBL provides the Fit and Proper Rule which
states that 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.
NB: Sec. 19 of the GBL prohibits appointive or elective public
official, whether full-time or part-time, from serving as officer of any
private bank, save in cases where:
1 Such service is incident to financial assistance provided by the
government or a GOCC to the bank;
2 Unless otherwise provided in the Rural Banks Act; or
3 Unless otherwise provided under existing laws.
5 Liquidity and Security
For purposes of maintaining liquidity and security, GBL and the
New Central Bank Act provide regulations relating to loans and other
matters:
1 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.[42]
2 The law imposes limits on loans, credit accommodations and quarantees
that may be extended by banks.
3 Limitation is placed on banks exposure to DORSI.[43]
The law imposes restrictions on the value of collaterals on loans.
The law may provide for restrictions on unsecured loans.[44]
MB may prescribe maturities and other terms and conditions for various
types of loans and accommodations.[45]
The law prescribes restrictions on dividend declrations.[46]
Ownership of Real Property
Section 51 of the GBL provides that any bank may acquire real estate as
shall be necessary for its own use in the conduct of its business.
However, the total investment in such real estate and improvements
thereof, including bank equipment, shall not exceed fifty percent (50%) of
combined capital accounts. It must be noted however that the equity
investment of a bank in another corporation engaged primarily in real
estate shall be considered as part of the banks total investment in real
estate, unless otherwise provided by the Monetary Board.
In Section 52, however, of the GBL, a bank may acquire, hold or convey
real property under the following circumstances:
Such as shall be mortgaged to it in good faith by way of security for debts;
Such as shall be conveyed to it in satisfaction of debts previously
contracted in the course of its dealings; or
iii. 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. After said
period, the bank may continue to hold the property for its own use,
subject to the limitations of the preceding Section.
Trust Operations of Banks
Applicable Rules
NB: Art 1442 of the Civil Code states that the principles of the general
law of trusts, insofar as they are not in conflict w/ the Civil Code, the Code
of Commerce, the Rules of Court and special laws (including the GBL) are
hereby adopted.
2 Prudent Man Rule
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.[47]
iii. Self-Dealing Rule
The GBL provides, as a general rule, that no trust entity shall, for the
account of the trustor or the beneficiary of the trust,
1 purchase or acquire property from, or
2 sell, transfer, assign or lend money or property to, or
3 purchase debt instruments of
4 any of the departments, directors, officers, stockholders, or employees of
the trust entity
5 relatives within the 1st degree of consanguinity or affinity, or the related
interests, of such directors, officers and stockholders,
Except:
1 the transaction is specifically authorized by the trustor, and
2 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.[48]
1 Prior Authority
Only a stock corporation or a person duly authorized by the MB 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 behalf of others. For
purposes of the GBL, such a corporation is referred to as a trust entity.[49]
1 Trust Business
A trust business is any activity resulting from a trustor-trustee relationship
(trusteeship) involving the appointment of a trustee by a trustor for the
administration, holding, management of funds and/or properties of the
trustor by the trustee for the use, benefit or advantage of the trustor or of
others called beneficiaries.[50]
1 Powers
A trust entity, in addition to the general powers incident to corporations,
shall have the power to:
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;
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;
Act as the executor of any will when it is named the executor thereof;
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;
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
Establish and manage common trust funds, subject to such rules and
regulations as may be prescribed by the MB.
Separation of Trust Business of Banks
Section 87 of the GBL requires that 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
Conservatorship
Section 67 of the GBL provides that 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.
Grounds
Whenever, on the basis of a report submitted by the appropriate
supervising or examining department, the Monetary Board finds that a
bank or a quasi-bank is in a state of continuing inability or unwillingness to
maintain a condition of liquidity deemed adequate to protect the interest
of depositors and creditors, the Monetary Board may appoint a
conservator with such powers as the Monetary Board shall deem
necessary.[51]
1 Powers of Conservatorship[52]
2 Take charge of the assets, liabilities, and the management thereof,
3 Reorganize the management,
iii. Collect all monies and debts due said institution, and
1 Exercise all powers necessary to restore its viability.
9 Receivership and 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 Secs. 30, 31,
32, and 33 of the NCBA: 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 BSP, in an amount to be fixed by the court. This
shall also apply to the extent possible to the receivership and liquidation
proceedings of QBs. (Sec. 69)
Republic ACT NO. 8791 May 23, 2000
AN ACT PROVIDING FOR THE REGULATION OF THE ORGANIZATION
AND OPERATIONS OF BANKS, QUASI-BANKS, TRUST ENTITIES AND
FOR OTHER PURPOSES
CHAPTER ITITLE 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 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)
Section 3. Definition and Classification of Banks. -
3.1. "Banks" shall refer to entities engaged in the lending of funds
obtained in the form of deposits. (2a)
3.2. Banks shall be classified into:
(a) Universal banks;
(b) Commercial banks;
(c) Thrift banks, composed of: (i) Savings and mortgage banks, (ii) Stock
savings and loan associations, and (iii) Private development banks, as
defined in the Republic Act No. 7906 (hereafter the "Thrift Banks Act");
(d) Rural banks, as defined in Republic Act No. 73S3 (hereafter the "Rural
Banks Act");
(e) Cooperative banks, as defined in Republic Act No 6938 (hereafter the
"Cooperative Code");
(f) Islamic banks as defined in Republic Act No. 6848, otherwise known as
the "Charter of Al Amanah Islamic Investment Bank of the Philippines";
and
(g) Other classifications of banks as determined by the Monetary Board of
the Bangko Sentral ng Pilipinas. (6-Aa)
CHAPTER IIAUTHORITY 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 standards of
operation for uniform application to all institutions or functions covered,
taking into consideration the distinctive character of the operations of
institutions and the substantive similarities of specific functions to which
such rules, modes or standards are to be applied;
4.2 The conduct of examination to determine compliance with laws and
regulations if the circumstances so warrant as determined by the
Monetary Board;
4.3 Overseeing to ascertain that laws and regulations are complied with;
4.4 Regular investigation which shall not be oftener than once a year from
the last date of examination to determine whether an institution is
conducting its business on a safe or sound basis: Provided, That the
deficiencies/irregularities found by or discovered by an audit shall be
immediately addressed;
4.5 Inquiring into the solvency and liquidity of the institution (2-D); or
4.6 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 re-lending 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 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 appropriate supervising and examining department of the
Bangko Sentral, examine, inspect or investigate the books and records of
such person or entity. Upon issuance of this authority, such person or
entity may commence to engage in banking operations or quasi-banking
function and shall continue to do so unless such authority is sooner
surrendered, revoked, suspended or annulled by the Bangko Sentral in
accordance with this Act or other special laws.
The department head and the examiners of the appropriate supervising
and examining department are hereby authorized to administer oaths to
any such person, employee, officer, or director of any such entity and to
compel the presentation or production of such books, documents, papers
or records that are reasonably necessary to ascertain the facts relative to
the true functions and operations of such person or entity. Failure or
refusal to comply with the required presentation or production of such
books, documents, papers or records within a reasonable time shall
subject the persons responsible therefore to the penal sanctions provided
under the New Central Bank Act.
Persons or entities found to be performing banking or quasi-banking
functions without authority from the Bangko Sentral shall be subject to
appropriate sanctions under the New Central Bank Act and other
applicable laws. (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. (2-
Ba)
CHAPTER IIIORGANIZATION, 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 That the entity is a stock corporation (7);
8.2 That its funds are obtained from the public, which shall mean twenty
(20) or more persons (2-Da); and
8.3 That the minimum capital requirements prescribed by the Monetary
Board for each category of banks are satisfied. (n)
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)
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 of Related Interests. -
Stockholdings of individuals related to each other within the fourth degree
of consanguinity or affinity, legitimate or common-law, shall be considered
family groups or related interests and must be fully disclosed in all
transactions by such corporations or related groups of persons with the
bank. (12-Ba)
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 group of persons with the bank. (12-Ba)
Section 14. Certificate of Authority to Register. - The Securities and
Exchange Commission shall no register the articles of incorporation of any
bank, or any amendment thereto, unless accompanied by a certificate of
authority issued by the Monetary Board, under it 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)
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 or directors of a bank, two
(2) of whom shall be independent directors. An "independent director"
shall mean a person other than an officer or employee of the bank, its
subsidiaries or affiliates or related interests. (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). (l3a)
Section 18. Compensation and Other Benefits of Directors and Officers.
To protect the finds of depositors and creditors the Monetary Board may
regulate the payment by the bark to its directors and officers of
compensation, allowance, fees, bonuses, stock options, profit sharing and
fringe benefits only in exceptional cases and when the circumstances
warrant, such as but not limited to the following:
18.1. When a bank is under comptrollership or conservatorship; or
18.2. When a bank is found by the Monetary Board to be conducting
business in an unsafe or unsound manner; or
18.3. When a bank is found by the Monetary Board to be in an
unsatisfactory financial condition. (n)
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. 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)
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 sane 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 IVDEPOSITS. LOANS AND OTHER OPERATIONS
Article IOperations Of Universal Banks
Section 23. Powers of a Universal Bank - A universal bank shall have the
authority to exercise, in addition to the powers authorized for a
commercial bank in Section 29, the powers of an investment house as
provided in existing laws and the power to invest in non-allied enterprises
as provided in this Act. (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.
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. 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 bark; and
30.2. The equity investment in any one enterprise shall not exceed
twenty-five percent (25%) of tile net worth of the bank. The acquisition of
such equity or equities is subject to the prior approval of the Monetary
Board which shall promulgate appropriate guidelines to govern such
investment.(2lA-a; 21-Ca)
Section 31. Equity Investments of a Commercial Bank in Financial Allied
Enterprises. - A commercial bank may own up to one hundred percent
(100%) of 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. For purposes of this
Section, the Monetary Board may require such ratio be determined on the
basis of the net worth and risk assets of a bank and its subsidiaries,
financial or otherwise, as well as prescribe the composition and the
manner of determining the net worth and total risk assets of banks and
their subsidiaries: Provided, That in the exercise of this authority, the
Monetary Board shall, to the extent feasible conform to internationally
accepted standards, including those of the Bank for International
Settlements(BIS), relating to risk-based capital requirements: Provided
further, That it may alter or suspend compliance with such ratio whenever
necessary for a maximum period of one (1) year: Provided, finally, That
such ratio shall be applied uniformly to banks of the same category. In
case a bank does not comply with the prescribed minimum ratio, the
Monetary Board may limit or prohibit the distribution of net profits by such
bank and may require that part or all of the net profits be used to increase
the capital accounts of the bank until the minimum requirement has been
met The Monetary Board may, furthermore, restrict or prohibit the
acquisition of major assets and the making of new investments by the
bank, with the exception of purchases of readily marketable evidences of
indebtedness of the Republic of the Philippines and of the Bangko Sentral
and any other evidences of indebtedness or obligations the servicing and
repayment of which are fully guaranteed by the Republic of the
Philippines, until the minimum required capital ratio has been restored. In
case of a bank merger or consolidation, or when a bank is under
rehabilitation under a program approved by the Bangko Sentral, Monetary
Board may temporarily relieve the surviving bank, consolidated bank, or
constituent bank or corporations under rehabilitation from full compliance
with the required capital ratio under such conditions as it may prescribe.
Before the effectivity of rules which the Monetary Board is authorized to
prescribe under this provision, Section 22 of the General Banking Act, as
amended, Section 9 of the Thrift Banks Act, and all pertinent rules issued
pursuant thereto, shall continue to be in force. (22a)
Section 35. Limit on Loans, Credit Accommodations and Guarantees
35.1 Except as the Monetary Board may otherwise prescribe for reasons of
national interest, the total amount of loans, credit accommodations and
guarantees as may be defined by the Monetary Board that may be
extended by a bank to any person, partnership, association, corporation or
other entity shall at no time exceed twenty percent (20%) of the net worth
of such bank. The basis for determining compliance with single borrower
limit is the total credit commitment of the bank to the borrower.
35.2. Unless the Monetary Board prescribes otherwise, the total amount of
loans, credit accommodations and guarantees prescribed in the preceding
paragraph may be increased by an additional ten percent (10%) of the net
worth of such bank provided the additional liabilities of any borrower are
adequately secured by trust receipts, shipping documents, warehouse
receipts or other similar documents transferring or securing title covering
readily marketable, non-perishable goods which must be fully covered by
insurance.
35.3 The above prescribed ceilings shall include (a) the direct liability of
the maker or acceptor of paper discounted with or sold to such bank and
the liability of a general endorser, drawer or guarantor who obtains a loan
or other credit accommodation from or discounts paper with or sells
papers to such bank; (b) in the case of an individual who owns or controls
a majority interest in a corporation, partnership, association or any other
entity, the liabilities of said entities to such bank; (c) in the case of a
corporation, all liabilities to such bank of all subsidiaries in which such
corporation owns or controls a majority interest; and (d) in the case of a
partnership, association or other entity, the liabilities of the members
thereof to such bank.
35.4. Even if a parent corporation, partnership, association, entity or an
individual who owns or controls a majority interest in such entities has no
liability to the bank, the Monetary Board may prescribe the combination of
the liabilities of subsidiary corporations or members of the partnership,
association, entity or such individual under certain circumstances,
including but not limited to any of the following situations: (a) the parent
corporation, partnership, association, entity or individual guarantees the
repayment of the liabilities; (b) the liabilities were incurred for the
accommodation of the parent corporation or another subsidiary or of the
partnership or association or entity or such individual; or (c) the
subsidiaries though separate entities operate merely as departments or
divisions of a single entity.
35.5. For purposes of this Section, loans, other credit accommodations and
guarantees shall exclude: (a) loans and other credit accommodations
secured by obligations of the Bangko Sentral or of the Philippine
Government: (b) loans and other credit accommodations fully guaranteed
by the government as to the payment of principal and interest; (c) loans
and other credit accommodations covered by assignment of deposits
maintained in the lending bank and held in the Philippines; (d) loans,
credit accommodations and acceptances under letters of credit to the
extent covered by margin deposits; and (e) other loans or credit
accommodations which the Monetary Board may from time to time,
specify as non-risk items.
35.6. Loans and other credit accommodations, deposits maintained with,
and usual guarantees by a bank to any other bank or non-bank entity,
whether locally or abroad, shall be subject to the limits as herein
prescribed.
35.7. Certain types of contingent accounts of borrowers may be included
among those subject to these prescribed limits as may be determined by
the Monetary Board.(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,
endorser or surety for loans from such bank to others, or in any manner be
an obligor or incur any contractual liability to the bank except with the
written approval of the majority of all the directors of the bank, excluding
the director concerned: Provided, That such written approval shall not be
required for loans, other credit accommodations and advances granted to
officers under a fringe benefit plan approved by the Bangko Sentral. The
required approval shall be entered upon the records of the bank and a
copy of such entry shall be transmitted forthwith to the appropriate
supervising and examining department of the Bangko Sentral. Dealings of
a bank with any of its directors, officers or stockholders and their related
interests shall be upon terms not less favorable to the bank than those
offered to others. After due notice to the board of directors of the bank,
the office of any bank director or officer who violates the provisions of this
Section may be declared vacant and the director or officer shall be subject
to the penal provisions of the New Central Bank Act. The Monetary Board
may regulate the amount of loans, credit accommodations and guarantees
that may be extended, directly or indirectly, by a bank to its directors,
officers, stockholders and their related interests, as well as investments of
such bank in enterprises owned or controlled by said directors, officers,
stockholders and their related interests. However, the outstanding loans,
credit accommodations and guarantees which a bank may extend to each
of its stockholders, directors, or officers and their related interests, shall
be limited to an amount equivalent to their respective unencumbered
deposits and book value of their paid-in capital contribution in the bank:
Provided, however, That loans, credit accommodations and guarantees
secured by assets considered as non-risk by the Monetary Board shall be
excluded from such limit: Provided, further, That loans, credit
accommodations and advances to officers in the form of fringe benefits
granted in accordance with rules as may be prescribed by the Monetary
Board shall not be subject to the individual limit. The Monetary Board shall
define the term "related interests." The limit on loans, credit
accommodations and guarantees prescribed herein shall not apply to
loans, credit accommodations and guarantees extended by a cooperative
bank to its cooperative shareholders. (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, an such loans and
other credit accommodation 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)
Section 40. Requirement for Grant Of Loans or 0ther Credit
Accommodations. - Before granting a loan or other credit accommodation,
a bank must ascertain that the debtor is capable of fulfilling his
commitments to the bank. Toward this end, a bank may demand from its
credit applicants a statement of their assets and liabilities and of their
income and expenditures and such information as may be prescribed by
law or by rules and regulations of the Monetary Board to enable the bank
to properly evaluate the credit application which includes the
corresponding financial statements submitted for taxation purposes to the
Bureau of Internal Revenue. Should such statements prove to be false or
incorrect in any material detail, the bank may terminate any loan or other
credit accommodation granted on the basis of said statements and shall
have the right to demand immediate repayment or liquidation of the
obligation. In formulating rules and regulations under this Section, the
Monetary Board shall recognize the peculiar characteristics of micro
financing, such as cash flow-based lending to the basic sectors that are
not covered by traditional collateral. (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, as well as related terms and conditions for
various types of bank loans and other credit accommodations. Any change
by the Board in the maximum maturities shall apply only to loans and
other credit accommodations made after the date of such action. The
Monetary Board shall regulate the interest imposed on micro finance
borrowers by lending investors and similar lenders such as, but not limited
to, the unconscionable rates of interest collected on salary loans and
similar credit accommodations. (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 micro
finance sectors, the schedule of loan amortization shall take into
consideration the projected cash flow of the borrower and adopt this into
the terms and conditions formulated by banks. (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 extra-judicially, of any mortgage on real
estate which is security for any loan or other credit accommodation
granted, the mortgagor or debtor whose real property has been sold for
the full or partial payment of his obligation shall have the right within one
year after the sale of the real estate, to redeem the property by paying
the amount due under the mortgage deed, with interest thereon at rate
specified in the mortgage, and all the costs and expenses incurred by the
bank or institution from the sale and custody of said property less the
income derived therefrom. However, the purchaser at the auction sale
concerned whether in a judicial or extra-judicial foreclosure shall have the
right to enter upon and take possession of such property immediately
after the date of the confirmation of the auction sale and administer the
same in accordance with law. Any petition in court to enjoin or restrain the
conduct of foreclosure proceedings instituted pursuant to this provision
shall be given due course only upon the filing by the petitioner of a bond
in an amount fixed by the court conditioned that he will pay all the
damages which the bank may suffer by the enjoining or the restraint of
the foreclosure proceeding. Notwithstanding Act 3135, juridical persons
whose property is being sold pursuant to an extrajudicial foreclosure, shall
have the right to redeem the property in accordance with this provision
until, but not after, the registration of the certificate of foreclosure sale
with the applicable Register of Deeds which in no case shall be more than
three (3) months after foreclosure, whichever is earlier. Owners of property
that has been sold in a foreclosure sale prior to the effectivity of this Act
shall retain their redemption rights until their expiration. (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 welt-secured and
in the process of collection shall be considered bad debts within the
meaning of this Section. The Monetary Board may fix, by regulation or by
order in a specific case, the amount of reserves for bad debts or doubtful
accounts or other contingencies. Writing off of loans, other credit
accommodations, advances and other assets shall be subject to
regulations issued by the Monetary Board. (84a)
Section 50. Major Investments. - For the purpose or enhancing bank
supervision, the Monetary Board shall establish criteria for reviewing
major acquisitions of investments by a bank including corporate
affiliations or structures that may expose the bank to undue risks or in any
way hinder effective supervision.
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)
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: 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-bark 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
(e) Outsource inherent banking functions.
55.2. No borrower of a bank shall -
(a) Fraudulently overvalue property offered as security for a loan or other
credit accommodation from the bank;
(b) Furnish false or make misrepresentation or suppression of material
facts for the purpose of obtaining, renewing, or increasing a loan or other
credit accommodation or extending the period thereof;
(c) Attempt to defraud the said bank in the event of a court action to
recover a loan or other credit accommodation; or
(d) Offer any director, officer, employee or agent of a bank any gift, fee,
commission, or any other form of compensation in order to influence such
persons into approving a loan or other credit accommodation application.
55.3 No examiner, officer or employee of the Bangko Sentral or of any
department, bureau, office, branch or agency of the Government that is
assigned to supervise, examine, assist or render technical assistance to
any bank shall commit any of the acts enumerated in this Section or aid in
the commission of the same. (87-Aa)
The making of false reports or misrepresentation or suppression of
material facts by personnel of the Bangko Sental ng Pilipinas shall be
subject to the administrative and criminal sanctions provided under the
New Central Bank Act.
55.4. Consistent with the provisions of Republic Act No. 1405, otherwise
known as the Banks Secrecy Law, no bank shall employ casual or non
regular personnel or too lengthy probationary personnel in the conduct of
its business involving bank deposits.
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.
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, 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 thee
actual financial condition of the institution submitting the statement, and
of its branches, offices, subsidiaries and affiliates, including the results of
its operations, and shall contain such information as may be required in
Bangko Sentral regulations. (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 Bangko Sentral, in
English or Filipino, at least once every quarter in a newspaper of general
circulation in the city or province where the principal office, in the case of
a domestic institution or the principal branch or office in the case of a
foreign bank, is located, but if no newspaper is published in the same
province, then in a newspaper published in Metro Manila or in the nearest
city or province. The Bangko Sentral may by regulation prescribe the
newspaper where the statements prescribed herein shall be published.
The Monetary Board may allow the posting of the financial statements of a
bank, quasi-bank or trust entity in public places it may determine, lieu of
the publication required in the preceding paragraph, when warranted by
the circumstances. Additionally, banks shall make available to the public
in such form and manner as the Bangko Sentral may prescribe the
complete set of its audited financial statements as well as such other
relevant information including those on enterprises majority-owned or
controlled by the bank, that will inform the public of the true financial
condition of a bank as of any given time. In periods of national and/or local
emergency or of imminent panic which directly threaten monetary and
banking stability, the Monetary Board, by a vote of at least five (5) of its
members, in special cases and upon application of the bank, quasi-bank or
trust entity, may allow such bank, quasi-bank or trust entity to defer for a
stated period of time the publication of the statement of financial
condition required herein. (n)
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, 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. Unauthorized Advertisement or Business Representation. -
No person, association, or corporation unless duly authorized to engage in
the business of a bank, quasi-bank, trust entity, or savings and loan
association as defined in this Act, or other banking laws, shall advertise or
hold itself out as being engaged in the business of such bank, quasi-bank,
trust entity, or association, or use in connection with its business title, the
word or words "bank", "banking", "banker", "quasi-bank", "quasi-banking",
"quasi-banker", "savings and loan association", "trust corporation", "trust
company" or words of similar import or transact in any manner the
business of any such bank, corporation or association. (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)
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 VPLACEMENT 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 VICESSATION OF BANKING BUSINESS
Section 68. Voluntary Liquidation. - In case of voluntary liquidation of any
bank organized under the laws of the Philippines, or of any branch or
office in the Philippines of a foreign bank, written notice of such liquidation
shall be sent to the Monetary Board before such liquidation shall be sent
to the Monetary Board before such liquidation is undertaken, and the
Monetary Board shall have the right to intervene and take such steps as
may be necessary to protect the interests of creditors. (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)
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 for another party or
destroys or causes the misappropriation and destruction of the bank's
assets, or who receives or permits or causes to be received in said bank
any deposit, collection of loans and/or receivables, or who pays out or
permits or causes to be transferred any securities or property of said bank
shall be subject to the penal provisions of the New Central Bank Act. (85a)
CHAPTER VIILAWS GOVERNING OTHER TYPES OF BANKS
Section 71. Other Banking Laws. - The organization, the ownership and
capital requirements, powers, supervision and general conduct of business
of thrift banks, rural banks and cooperative banks shall be governed by
the provisions of the Thrift Banks Act, the Rural Banks Act, and the
Cooperative Code, respectively. The organization, ownership and capital
requirements, powers, supervision and general conduct of business of
Islamic banks shall be governed by special laws. The provisions of this Act,
however, insofar as they are not in conflict with the provisions of the Thrift
Banks Act, the Rural Banks Act, and the Cooperative Code shall likewise
apply to thrift banks, rural banks, and cooperative banks, respectively.
However, for purposes of prescribing the minimum ratio which the net
worth of a thrift bank must bear to its total risk assets, the provisions of
Section 33 of this Act shall govern. (n)
CHAPTER VIIIFOREIGN 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. Within the same period, the Monetary
Board may authorize any foreign bank, which prior to the effectivity of this
Act availed itself of the privilege to acquire up to sixty percent (60%) of
the voting stock of a bank under the Foreign Banks Liberalization Act and
the Thrift Banks Act, to further acquire voting shares such bank to the
extent necessary for it to own one hundred percent (100%) of the voting
stock thereof. In the exercise of the authority, the Monetary Board shall
adopt measures as may be necessary to ensure that at all times the
control of seventy percent (70%) of the resources or assets of the entire
banking system is held by banks which are at least majority-owned by
Filipinos. Any right, privilege or incentive granted to a foreign bank under
this Section shall be equally enjoyed by and extended under the same
conditions to banks organized under the laws of the Republic of the
Philippines. (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 the 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 shill register and transmit by mail to the president
or the secretary of the bank at its head or principal office a copy, duly
certified by him, of the summons, process, or notice. The sending of such
copy of the summons, process, or notice shall be a necessary part of the
services and shall complete the service. The registry receipt of mailing
shall be prima facie evidence of the transmission of the summons, process
or notice. All costs necessarily incurred by the said Deputy Governor for
the making and mailing and sending of a copy of the summons, process,
or notice to the president or the secretary of the bank at its head or
principal office shall be paid in advance by the party at whose instance the
service is made. (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 banks to transact
business in the Philippines unless its license is renewed or reissued. After
the revocation of such license, the Bangko Sentral shall take the necessary
action to protect the creditors of such foreign bank and the public. The
provisions of the New Central Bank Act on sanctions and penalties shall
likewise be applicable. (16)
CHAPTER IXTRUST 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 of beneficiary of the trust
prior to the transaction. The Monetary Board shall promulgate such rules
and regulations as may be necessary to prevent circumvention of this
prohibition or the evasion of the responsibility herein imposed on a trust
entity. (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.
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 or not
less than Five hundred thousand pesos (P500,000.00) or such higher
amount as may fixed by the Monetary Board: Provided, however, That the
Monetary Board shall require every trust entity to increase the amount of
its cash or securities on deposit with the Bangko Sentral in accordance
with the provisions of this paragraph. Should the capital and surplus fall
below said amount, the Monetary Board shall have the same authority as
that granted to it under the provisions of the fifth paragraph of Section 34
of this Act. A trust entity so long as it shall continue to be solvent and
comply with laws or regulations shall have the right to collect the interest
earned on such securities deposited with the Bangko Sentral and, from
time to time, with the approval of the Bangko Sentral, to exchange the
securities for others. If the trust entity fails to comply with any law or
regulation, the Bangko Sentral shall retain such interest on the securities
deposited with it for the benefit of rightful claimants. Al claims rising out of
the trust business of a trust entity shall have priority over all other claims
as regards the cash or securities deposited as above provided. The
Monetary Board may not permit the cash or securities deposited in
accordance with the provisions of this Section to be reduced below the
prescribed minimum amount until the depositing entity shall discontinue
its trust business and shall satisfy the Monetary Board that it has complied
with all its obligations in connection with such business. (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. 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 entry for the
faithful performance of its duties as court-appointed trustee, executor,
administrator, guardian, receiver, or depositary. However, the court may,
upon proper application with it showing special cause therefore, require
the trust entity to post a bond or other security for the protection of funds
or property confided to such entity. (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 purposes,
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 tinder
Section 66 of this Act as well as Sections 36 and 37 of the New Central
Bank Act.
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 XFINAL 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 bylaw1 building and loan associations shall continue to
be governed by Sections 39 to 55, Chapter VI of the General Banking Act,
as amended, including such rules and regulations issued pursuant thereto.
Upon assumption by the Home Insurance and Guaranty Corporation of
supervising and regulatory powers over building and loan associations, a
references in Sections 39 to 55 of the General Banking Act, as amended,
to the Bangko Sentral and the Monetary Board shall be deemed to refer to
the Home Insurance and Guaranty Corporation and its board of directors,
respectively. (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 newspapers of general circulation. (91)
amended by republic Act No. 7400, are likewise repealed. (90a) Approved,
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