REPUBLIC ACT NO. 3591 Board of Directors.
Any vacancy in the Board created by the death,
AN ACT ESTABLISHING THE PHILIPPINE DEPOSIT INSURANCE
CORPORATION, DEFINING ITS POWERS AND DUTIES AND FOR OTHER
PURPOSES
SECTION 1. There is hereby created a Philippine Deposit Insurance
Corporation hereinafter referred to as the Corporation which shall insure, as
herein provided, the deposits of all banks which are entitled to the benefits of
insurance under this Act, and which shall have the powers hereinafter
granted.
SECTION 2. The powers and functions of the Corporation shall be vested in a
board of directors consisting of three (3) members one of whom shall be the
Governor of the Central Bank of the Philippines and two of whom shall be
citizens of the Republic of the Philippines to be appointed by the President of
the Philippines with the advice and consent of the Commission on
Appointments. One of the appointive members shall be the Chairman of the
Board of Directors of the Corporation who shall be appointed on a full time
basis for a term of six (6) years at an annual salary of twenty-four thousand
pesos (P24,000.00). The other appointive member, who shall be appointed
for a term of four (4) years and the Governor of the Central Bank shall each
receive a per diem of not exceeding fifty pesos (P50.00) for each day of
meeting actually attended by them but in no case shall each of them receive
more than five hundred pesos (P500.00) a month. In the event of a vacancy
in the Office of the Governor of the Central Bank of the Philippines, and
pending the appointment of his successor or during the absence of the
Governor, the Acting Governor of the Central Bank of the Philippines shall act
as member of the Board of Directors. In the event of a vacancy in the Office
of the Chairman of the Board of Directors and pending the appointment of his
successor, the Governor of the Central Bank of the Philippines shall act as
Chairman. The members of the Board of Directors shall be ineligible during
the time they are in office and for a period of two years thereafter to hold any
office, position or employment in any insured bank, except that this restriction
shall not apply to any member who has served the full term for which he was
appointed. No member of the Board of Directors shall be an officer or director
of any insured bank; and before entering upon his duties as member of the
Board of Directors he shall certify under oath that he has complied with this
requirement and such certification shall be filed with the Secretary of the
resignation, or removal of an appointive member shall be filled by the
appointment of new member to complete the unexpired period of the term of
the member concerned.{{1}}
The Board of Directors shall have the authority:
1. To prepare and issue rules and regulations as it considers necessary for
the effective discharge of its responsibilities;
2. To direct the management, operations and administration of the
Corporation;
3. To appoint, fix the remunerations and remove all officers and employees of
the Corporation, subject to the Civil Service Law; and{{2}}
4. To authorize such expenditures by the Corporation as are in the interest of
the effective administration and operation of the Corporation.{{3}}
[See additions as per RA 9302{{4}} and RA 9576{{5}}]
SECTION 3. As used in this Act
(a) The term Board of Directors means the Board of Directors of the
Corporation.
(b) The term Bank and Banking Institution shall be synonymous and
interchangeable and shall include banks, commercial banks, savings banks,
mortgage banks, rural banks, development banks, cooperative banks, trust
companies, branches and agencies in the Philippines of foreign banks and all
other companies, corporations, partnership performing banking functions in
the Philippines.
(c) The term receiver includes a receiver, liquidating agent, conservator,
commission, person, or other agency charged by law with the duty of winding
up the affairs of a bank.
(d) The term insured bank means any bank the deposit of which are insured
in accordance with the provision of this Act;
(e) The term non-insured bank means any bank the deposit of which are not
insured.
(f) The term deposit means the unpaid balance of money or its equivalent
received by a bank in the usual course of business and for which it has given
or is obliged to give credit to a commercial, checking, savings, time or thrift
account or which is evidenced by its certificate of deposit, and trust funds held
by such bank whether retained or deposited in any department of such bank
or deposited in another bank, together with such other obligations of a bank
as the Board of Directors shall find and shall prescribe by regulations to be
deposit liabilities of the Bank: Provided, That any obligation of a bank which is
payable at the office of the bank located outside of the Philippines shall not be
a deposit for any of the purposes of this Act or included as part of the total
deposits or of the insured deposit: Provided, further, That any insured bank
which is incorporated under the laws of the Philippines which maintains a
branch outside the Philippines may elect to include for insurance its deposit
obligation payable only at such branch.
(g) The term insured deposit means the net amount due to any depositor for
deposits in an insured bank (after deducting offsets) less any part thereof
which is in excess of P10,000. Such net amount shall be determined
according to such regulations as the Board of Directors may prescribe and in
determining the amount due to any depositor there shall be added together all
deposits in the bank maintained in the same capacity and the same right for
his benefit or in his own name or in the names of others.
(h) The term transfer deposit means a deposit in an insured bank made
available to a depositor by the Corporation as payment of insured deposit of
such depositor in a closed bank and assumed by another insured bank.
(i) The term trust funds means funds held by an insured bank in a fiduciary
capacity and includes without being limited to, funds held as trustee,
executor, administrator, guardian, or agent.{{6}}
SECTION 4. Any bank or banking institution which is engaged in the business
of receiving deposits as herein defined on the effective date of this Act, or
which thereafter may engage in the business of receiving deposits, may
insure its deposit liabilities with the Corporation. Before approving the
application of such bank to become an insured bank, the Board of Directors
shall give consideration to the factors enumerated in Section 5 and shall
determine upon the basis of a thorough examination of such bank, that its
assets in excess of its capital requirements are adequate to enable it to meet
all its liabilities to depositors and other creditors as shown by the books of the
bank.{{7}}
SECTION 5. The factors to be considered by the Board of Directors under the
preceding section shall be the following: the financial history and condition of
the Bank, the adequacy of its capital structure, its future earning prospects,
the general character of its management, the convenience and needs of the
community to be served by the Bank and whether or not its corporate powers
are consistent with the purposes of this Act.{{8}}
SECTION 6. (a) The assessment rate shall be determined by the Board of
Directors: Provided, That the assessment rate shall not exceed one-twelfth of
one per centum per annum. The semiannual assessment for each insured
bank shall be in the amount of the product of one-half (1/2) the assessment
rate multiplied by the assessment base. The assessment base shall be the
amount of the liability of the bank for deposits, according to the definition of
the term deposit in and pursuant to subsection (f) of Section 3 without any
deduction for indebtedness of depositors: Provided, further, That the bank
(1) may deduct (i) from the deposit balance due to an insured bank the
deposit balance due from such insured bank (other than trust funds deposited
by it in such bank) which is subject to an immediate withdrawal; and (ii) cash
items as determined by either of the following methods, at the option of the
bank: (aa) by multiplying by 2 the total of the cash items forwarded for
collection on the assessment base days (being the days on which the
average deposits are computed) and cash items held for clearings at the
close of business on said days, which are in the process of collection and
which the bank has paid in the regular course of business or credited to
deposit accounts; or (bb) by deducting the total of cash items forwarded for
collection on the assessment base days and cash items held for clearings at
the close of business on said days, which are in the process of collection and
which the bank has paid in the regular course of business or credited to
deposit accounts, plus such uncollected items paid or credited on preceding
days which are in the process of collection: Provided, That the Board of
Directors may define the terms cash items, process of collection, and declaration that it is made under the penalties of perjury. Each insured bank
uncollected items and shall fix the maximum period for which any such item
may be deducted; and
(2) may exclude from its assessment base (i) drafts drawn by it on deposit
accounts in other banks which are issued in the regular course of business;
and the amount of devices or authorizations issued by it for cash letters
received, directing that its deposit account in the sending bank be charged
with the amount thereof; and (ii) cash funds which are received and held
solely for the purpose of securing a liability to the bank but not in an amount
in excess of such liability, and which are not subject to withdrawal by the
obligor and are carried in a special non-interest bearing account designated
to properly show their purpose.
Each insured bank, as a condition to the right to make any such deduction or
exclusion in determining its assessment base, shall maintain such records as
will readily permit verification of the correctness thereof. The semiannual
assessment base for one semi-annual period shall be the average of the
assessment base of the bank as of the close of business on March thirty-one
and June thirty, and the semi-annual assessment base for the other semi-
annual period shall be the average of the assessment base of the bank as of
the close of business on September thirty and December thirty-one: Provided,
That when any of said days is a nonbusiness day or a legal holiday, either
National or Provincial, the preceding business day shall be used. The certified
statements required to be filed with the Corporation under subsections (b)
and (c) of this section shall be in such form and set forth such supporting
information as the Board of Directors shall prescribe. The assessment
payments required from insured banks under subsections (b) and (c) of this
section shall be made in such manner and at such time or times as the Board
of Directors shall prescribe, provided the time or times so prescribed shall not
be later than sixty days after filing the certified statement setting forth the
amount of assessment.{{9}}{{10}}
(b) On or before the 15th of July of each year, each insured bank shall file
with the Corporation a certified statement showing for the six months ending
on the preceding June thirty the amount of the assessment base and the
amount of the semi-annual assessment due to the Corporation for the period
ending on the following December thirty-one, determined in accordance with
subsection (a) of this section, which shall contain or be verified by a written
shall pay to the Corporation the amount of the semi-annual assessment it is
required to certify. On or before the 15th day of January of each year, each
insured bank shall file with the Corporation a similar certified statement for the
six months ending on the preceding December thirty-one and shall pay to the
Corporation the amount of the semi-annual assessment for the period ending
on the following June thirty which it is required to certify.{{11}}
(c) Each bank which becomes an insured bank shall not be required to file
any certified statement or pay any assessment for the semi-annual period in
which it becomes an insured bank. On the expiration of such period, each
such bank shall comply with the provisions of subsection (b) of this section
except that the semi-annual assessment base for its first certified statement
shall be the assessment base of the bank as of the close of business on the
preceding June thirty or December thirty-one, whichever is applicable,
determined in accordance with subsection (a) of this section. If such bank has
assumed the liabilities for deposits of another bank or banks, it shall include
such liabilities in its assessment base. The first certified statement shall show
as the amount of the first semi-annual assessment due to the Corporation, an
amount equal to the product of one-half of the annual assessment rate
multiplied by such assessment base.
(d) As of December thirty-one nineteen hundred sixty-four and as of
December thirty-one of each calendar year thereafter, the Corporation shall
transfer 40 per centum of its net assessment income to its capital account
and the balance of the net assessment income shall be credited pro rata to
the insured banks based upon the assessment of each bank becoming due
during the said calendar year. Each year such credit shall be applied by the
Corporation toward the payment of the total assessment becoming due for
the semi-annual assessment period beginning the next ensuing July 1 and
any excess credit shall be applied upon the assessment next becoming due.
The term net assessment income as used therein means the total
assessments which become due during the calendar year less (1) the
operating costs and expenses of the Corporation for the calendar year; (2)
additions to reserve to provide for insurance losses during the calendar year,
except that any adjustment to reserve which result in a reduction of such
reserve shall be added; and (3) the insurance losses sustained in said
calendar year plus losses from any preceding years in excess of such
reserves. If the above deductions exceed in amount the total assessments
which become due during the calendar year, the amount of such excess shall
be restored by deduction from total assessments becoming due in
subsequent years.{{12}}
(e) The Corporation (1) may refund to an insured bank any payment of
assessment in excess of the amount due to the Corporation or (2) may credit
such excess toward the payment of the assessment next becoming due from
such bank and upon succeeding assessments until the credit is exhausted.
(f) Any insured bank which fails to file any certified statement required to be
filed by it in connection with determining the amount of any assessment
payable by the bank to the Corporation may be compelled to file such
statement by mandatory injunction or other appropriate remedy in a suit
brought for such purpose by the Corporation against the bank and any officer
or officers thereof in any court of the Philippines of competent jurisdiction in
which such bank is located.
(g) The Corporation, in a suit brought in any court of competent jurisdiction,
shall be entitled to recover from any insured bank the amount of any unpaid
assessment lawfully payable by such insured bank to the Corporation,
whether or not such bank shall have filed any such certified statement and
whether or not suit shall have been brought to compel the bank to file any
such statement. No action or proceeding shall be brought for recovery of any
assessment due to the Corporation or for the recovering of any amount paid
to the Corporation in excess of the amount due to it, unless such action or
proceeding shall have been brought within five years after the right accrued
for which the claim is made, except where the insured bank has made or filed
with the Corporation a false or fraudulent certified statement with the intent to
evade, in whole or in part, the payment of assessment, in which case the
claim shall not have been deemed to have accrued until the discovery by the
Corporation that the certified statement is false or fraudulent.
(h) Should any insured bank fail or refuse to pay any assessment required to
be paid by such bank under any provision of this Act, and should the bank not
correct such failure or refusal within thirty days after written notice has been
given by the Corporation to an officer of the bank, citing this subsection, and
stating that the bank has failed or refused to pay as required by law the
insured status of such bank shall be terminated by the Board of Directors.
The remedies provided in this subsection and in the two preceding
subsections shall not be construed as limiting any other remedies against an
insured bank but shall be in addition thereto.{{13}}
(i) Trust funds held by an insured bank in a fiduciary capacity whether held in
trust or deposited in any other department or in another bank shall be insured
like other forms of deposits, in an amount not to exceed P10,000 for each
trust estate, and when deposited by the fiduciary bank in another insured
bank, such trust funds shall be similarly insured to the fiduciary bank
according to the trust estates represented. Notwithstanding any other
provision of this Act, such insurance shall be separate from and additional to
that covering other deposits of the owners of such trust funds or the
beneficiaries of such trust estates: Provided, That where the fiduciary bank
deposits any of such trust funds in other insured banks, the amount so held
by other insured banks on deposit shall not for the purpose of any certified
statement required under subsections (b) and (c) of this section be
considered to be a deposit liability of the fiduciary bank, but shall be
considered to be a deposit liability of the bank in which such funds are so
deposited by such fiduciary bank. The Board of Directors shall have the
power by regulation to prescribe the manner of reporting and of depositing
such trust funds.
SECTION 7. (a) Any insured bank may, upon not less than ninety days,
written notice to the Corporation, and to the Development Bank of the
Philippines if it owns or holds as pledges any preferred stock, capital notes, or
debentures of such bank, terminate its status as an insured bank. Whenever
the Board of Directors shall find that an insured bank or its directors or
trustees have continued unsafe or unsound practices in conducting the
business of the bank or which have knowingly or negligently permitted any of
its officers or agents to violate any provisions of any law or regulation to which
the insured bank is subject, the Board of Directors shall first give to the
Central Bank of the Philippines a statement with respect to such practices or
violations for the purpose of securing the correction thereof and shall give a
copy thereof to the bank. Unless such correction shall be made within one
hundred twenty days or such shorter period of time as the Central Bank of the
Philippines shall require, the Board of Directors, if it shall determine to
proceed further, shall give to the bank not less than thirty days written notice
of intention to determine the status of the bank as an insured bank, and shall
fix a time and place for a hearing before the Board of Directors or before a
person designated by it to conduct such hearing, at which evidence may be
produced, and upon such evidence the Board of Directors shall make written
findings which shall be conclusive. Unless the bank shall appear at the
hearing by a duly authorized representative, it shall be deemed to have
consented to the termination of its status as an insured bank. If the Board of
Directors shall find that any unsafe or unsound practice or violation specified
in such notice has been established and has not been corrected within the
time above prescribed in which to make such correction, the Board of
Directors may order that the insured status of the bank be terminated on a
date subsequent to such finding and to the expiration of the time specified in
such notice of intention. The Corporation may publish notice of such
termination and the bank shall give notice of such termination to each of the
depositors at his last address of record on the books of the bank, in such a
manner and at such a time as the Board of Directors may find to be
necessary and may order for the protection of the depositors. After the
termination of the insured status of any bank under the provisions of this
subsection, the insured deposits of each depositor in the bank on the date of
such termination, less all subsequent withdrawals from any deposits of such
depositor, shall continue for a period of two years to be insured, and the bank
shall continue to pay to the Corporation assessments as in the case of an
insured bank during such period. No additions to any such deposits and no
new deposits in such bank made after the date of such termination shall be
insured by the Corporation, and the bank shall not advertise or hold itself out
as having insured deposits unless in the same connection it shall also state
equal prominence that such additions to deposits and new deposits made
after such date are not so insured. Such bank shall, in all other respects, be
subject to the duties and obligations of an insured bank for the period of two
years from the date of such termination, and in the event that such bank shall
be closed on account of insolvency within such period of two years, the
Corporation shall have the same powers and rights with respect to such bank
as in case of an insured bank.{{14}}
(b) Notwithstanding any other provision of law, whenever the Board of
Directors shall determine that an insured banking institution is not engaged in
the business of receiving deposits, the Corporation shall notify the banking
institution that its insured status will terminate at the expiration of the first full
semi-annual assessment period following such notice. A finding by the Board
of Directors that a banking institution is not engaged in the business of
receiving deposits shall be conclusive. The Board of Directors shall prescribe
the notice to be given by the banking institution of such termination and the
Corporation may publish notice thereof. Upon the termination of the insured
status of any such banking institution, its deposits shall thereupon cease to be
insured and the banking institution shall thereafter be relieved of all future
obligations to the Corporation, including the obligation to pay future
assessments.{{15}}
(c) Whenever the liabilities of an insured bank for deposits shall have been
assumed by another insured bank or banks, the insured status of the bank
whose liabilities are so assumed shall terminate on the date of receipt by the
Corporation of satisfactory evidence of such assumption with like effect as if
its insured status had been terminated on said date by the Board of Directors
after proceedings under subsection (a) of this section: Provided, That if the
bank whose liabilities are so assumed gives to its depositors notice of such
assumption within thirty days after such assumption takes effect, by
publication or by any reasonable means, in accordance with regulations to be
prescribed by the Board of Directors, the insurance of its deposits shall
terminate at the end of six months from the date such assumption takes
effect. Such bank shall be subject to the duties and obligations of an insured
bank for the period its deposits are insured: Provided, further, That if the
deposits are assumed by a newly insured bank, the bank whose deposits are
assumed shall not be required to pay any assessment upon the deposits
which have been so assumed after the semi-annual period in which the
assumption takes effect.
SECTION 8. The Corporation as a corporate body shall have the power
First. To adopt and use a corporate seal.
Second. To have succession until dissolved by an Act of Congress.
Third. To make contracts.
Fourth. To sue and be sued, complain and defend, in any court of law in
the Philippines. All suits of a civil nature to which the corporation shall be a
part shall be deemed to arise under the laws of the Philippines. No
attachment or execution shall be issued against the Corporation or its
property before final judgment in any suit, action, or proceeding in any court.
The Board of Directors shall designate an agent upon whom service of
process may be made in any province or city or jurisdiction in which any
insured bank is located.
Fifth. To appoint by its Board of Directors such officers and employees as
are not otherwise provided for in this Act to define their duties, fix their
compensation, require bonds of them and fix penalty thereof and to dismiss
such officers and employees for cause.
Sixth. To prescribe, by its Board of Directors, by-laws not inconsistent with
law, regulating the manner in which its general business may be conducted,
and the privileges granted to it by law may be exercised and enjoyed.
Seventh. To exercise by its Board of Directors, or duly authorized officers
or agents, all powers specifically granted by the provisions of this Act, and
such incidental powers as shall be necessary to carry on the powers so
granted.
Eighth. To make examinations of and to require information and reports
from banks, as provided in this Act.{{16}}
Ninth. To act as receiver.
Tenth. To prescribe by its Board of Directors such rules and regulations as
it may deem necessary to carry out the provisions of this Act.{{17}}
[See additions as per PD 1940{{18}} and RA 7400{{19}}]
SECTION 9. (a) The Board of Directors shall administer the affairs of the
Corporation fairly and impartially and without discrimination. The Corporation
shall be entitled to the free use of Philippine mail in the same manner as the
other offices of the national government.
(b) The Board of Directors shall appoint examiners who shall have power, on
behalf of the Corporation to examine any insured bank or any bank making
application to become an insured bank, whenever in the judgment of the
Board of Directors an examination of the bank is necessary. Each such
examiner shall have power to make a thorough examination of all the affairs
of the bank and in doing so he shall have power to administer oaths and to
examine and take and preserve the testimony of any of the officers and
agents thereof, and shall make a full and detailed report of the condition of
the bank to the Corporation. The Board of Directors in like manner shall
appoint claim agents who shall have power to investigate and examine all
claims for insured deposits and transferred deposits. Each claim agent shall
have power to administer oaths and to examine under oath and take and
preserve the testimony of any person relating to such claims.{{20}}{{21}}
(c) Each insured bank shall make to the Corporation reports of condition in
such form and at such times as the Board of Directors may require such
reports to be published in such manner, not inconsistent with any applicable
law, as it may direct. Every such bank which fails to make or publish any such
report within such time, not less than five days, as the Board of Directors may
require, shall be subject to a penalty of not more than P100 for each day of
such failure recoverable by the Corporation for its use.
(d) The Corporation shall have access to reports of examination made by,
and reports of condition made to the Superintendent of Banks or the
Governor of the Central Bank of the Philippines, and the Superintendent of
Banks or the Governor of the Central Bank of the Philippines shall also have
access to reports of examination made on behalf of, and reports of condition
made to the Corporation.{{22}}{{23}}
(e) The members of the Board of Directors and the officers and employees of
the Corporation are prohibited from revealing any information relating to the
condition or business of any insured bank and any member of the Board of
Directors, officer or employee of the Corporation violating this provision shall
be held liable for any loss or injury suffered by the Corporation.{{24}}
[See additions as per RA 9302, RA 9576, and RA 7400{{25}}]
SECTION 10. (a) A permanent insurance fund in the amount of P5,000,000 to
be appropriated from the General Fund is hereby created to be used by the
Corporation to carry out the purposes of this Act; Provided, That the
maximum amount of the insured deposit of any depositor shall be
P10,000.{{26}}
(b) For the purposes of this Act an insured bank shall be deemed to have
been closed on account of insolvency in any case in which it has been closed
for the purpose of liquidation without adequate provision being made for
payment of its depositors.{{27}}
(c) Whenever an insured bank shall have been closed on account of
insolvency, payment of the insured deposits in such bank shall be made by
the Corporation as soon as possible either (1) by cash or (2) by making
available to each depositor a transferred deposit in another insured bank in
an amount equal to the insured deposit of such depositor: Provided, That the
Corporation, in its discretion, may require proof of claims to be filed before
paying the insured deposits, and that in any case where the Corporation is
not satisfied as to the validity of a claim for an insured deposit, it may require
the final determination of a court of competent jurisdiction before paying such
claim.{{28}}
(d) The Corporation, upon the payment of any depositor as provided for in
subsection (c) of this section shall be subrogated to all rights of the depositor
against the closed bank to the extent of such payment. Such subrogation
shall include the right on the part of the Corporation to receive the same
dividends from the proceeds of the assets of such closed bank and recoveries
on account of stockholders liability as would have been payable to the
depositor on a claim for the insured deposits, but such depositor shall retain
his claim for any uninsured portion of his deposit.
SECTION 11. (a) Payment of an insured deposit to any person by the
Corporation shall discharge the Corporation, and payment of a transferred
deposit to any person by the new bank or by an insured bank in which a
transferred deposit has been made available shall discharge the Corporation
and such new bank or other insured bank, to the same extent that payment to
such person by the closed bank would have discharged it from liability for the
insured deposit.
(b) Except as otherwise prescribed by the Board of Directors, neither the
Corporation nor such other insured bank shall be required to recognize as the
owner of any portion of a deposit appearing on the records of the closed bank
under a name other than that of the claimant, any person whose name or
interest as such owner is not disclosed on the records of such closed bank as
part owner of said deposit, if such recognition would increase the aggregate
amount of the insured deposits in such closed bank.
(c) The Corporation may withhold payment of such portion of the insured
deposit of any depositor in a closed bank as may be required to provide for
the payment of any liability of such depositor as a stockholder of the closed
bank, or of any liability of such depositor to the closed bank or its receiver,
which is not offset against a claim due from such bank, pending the
determination and payment of such liability by such depositor or any other
person liable therefor.
(d) If, after the Corporation shall have given at least three months notice to
the depositor by mailing a copy thereof to his last-known address appearing
on the records of the closed bank, any depositor in the closed bank shall fail
to claim his insured deposit from the Corporation within eighteen months after
the Monetary Board of the Central Bank of the Philippines or the proper court
shall have ordered the conversion of the assets of such closed bank into
money, all rights of the depositor against the Corporation with respect to the
insured deposit shall be barred, and all rights of the depositor against the
closed bank and its shareholders or the receivership estate to which the
Corporation may have become subrogated, shall thereupon revert to the
depositor.{{29}}
SECTION 12. (a) Money of the Corporation not otherwise employed shall be
invested in obligations of the Republic of the Philippines or in obligations
guaranteed as to principal and interest by the Republic of the Philippines:
Provided, That the Corporation shall not sell or purchase any such obligations
for its own account and in its own right and interest, at any one time
aggregating in excess of P100,000, without the approval of the Insurance
Commissioner: And Provided, further, That the Insurance Commissioner may
waive the requirement of his approval with respect to any transaction or
classes of transactions subject to the provisions of this subsection for such
period of time and under such conditions as he may determine.
(b) The banking or checking accounts of the Corporation shall be kept with
the Central Bank of the Philippines, with the Philippine National Bank, or with
any other bank designated as depository or fiscal agent of the Philippine
Government.
(c) When the Corporation has determined that an insured bank is in danger of
closing, in order to prevent such closing, the Corporation, in the discretion of
its Board of Directors, is authorized to make loans to, or purchase the assets
of, or make deposits in, such insured bank, upon such terms and conditions
as the Board of Directors may prescribe, when in the opinion of the Board of
Directors, the continued operation of such bank is essential to provide
adequate banking service in the community. Such loans and deposits may be
in subordination to the rights of depositors and other creditors.{{30}}{{31}}
SECTION 13. The corporation is authorized to borrow from the Central Bank
of the Philippines and the Central Bank is authorized and directed to loan the
Corporation on such terms as may be fixed by the Corporation and the
Central Bank, such funds as in the judgment of the Board of Directors of the
Corporation are from time to time required for insurance purposes not
exceeding in the aggregate of one hundred million pesos outstanding at any
one time: Provided, That the rate of interest to be charged in connection with
any loan made pursuant to this section shall not be less than the current
average rate on outstanding marketable and nonmarketable obligations of the
Republic of the Philippines as of the last day of the month preceding the
making of such loan. Any such loan shall be used by the Corporation solely in
carrying out its functions with respect to such insurance.{{32}}
SECTION 14. All notes, debentures, bonds or such obligations issued by the
Corporation shall be exempt from taxation.{{33}}
SECTION 15. (a) The Corporation shall annually make a report of its
operations to the Congress as soon as practicable after the 1st day of
January in each year.
(b) The financial transactions of the Corporation shall be audited by the
General Auditing Office in accordance with the principles and procedures
applicable to commercial corporate transactions and under such rules and
regulations as may be prescribed by the Auditor General. The audit shall be
conducted at the place or places where accounts of the Corporation are
normally kept. The representatives of the General Auditing Office shall have
access to all books, accounts, records, reports, files, and all other papers,
things, or property belonging to or in use by the Corporation pertaining to its
financial transactions and necessary to facilitate the audit, and they shall be
afforded full facilities for verifying transactions with the balances or securities
held by depositaries, fiscal agents, and custodians. All such books, accounts,
records, reports, files, papers, and property of the Corporation shall remain in
possession and custody of the Corporation.
(c) A report of the Audit for each fiscal year ending on June 30 shall be made
by the Auditor General to the Congress not later than January 15 following
the close of such fiscal year. On or before December 15 following such fiscal
year the Auditor General shall furnish the Corporation a short form report
showing the financial position of the Corporation at the close of fiscal year.
The report to the Congress shall set forth the scope of the audit and shall
include a statement of assets and liabilities and surplus or deficit; a statement
of surplus or deficit analysis; a statement of income and expenses; a
statement of sources and application of funds and such comments and
information as may be deemed necessary to inform Congress of the financial
operations and condition of the Corporation, together with such
recommendations with respect thereto as the Auditor General may deem
advisable. The report shall also show specifically any program, expenditure,
or other financial transactions or undertaking observed in the course of the
audit, which in the opinion of the Auditor General, has been carried on or
made without authority of law. A copy of each report shall be furnished to the
President of the Philippines, to the Governor of the Central Bank of the
Philippines, and to the Corporation at the time submitted to the
Congress.{{34}}
SECTION 16. (a) Every insured bank shall display at each place of business
maintained by it a sign or signs, and shall include a statement to the effect
that its deposits are insured by the Corporation in all of its advertisements:
Provided, That the Board of Directors may exempt from this requirement
advertisements which do not relate to deposits or when it is impractical to
include such statement therein. The Board of Directors shall prescribe by
regulation the forms of such signs and the manner of display and the
substance of such statements and the manner of use. For each day an
insured bank continues to violate any provisions of this subsection or any
lawful provisions of said regulations, it shall be subject to a penalty of not
more than P100, which the Corporation may recover for its use.{{35}}
(b) No insured bank shall pay any dividend on its capital stock or interest on
its capital notes or debentures (if such interest is required to be paid only out
of net profits) or distribute any of its capital assets while it remains in default
in the payment of any assessment due to the Corporation; and any director or
officer of any insured bank who participates in the declaration or payment of
any such dividend or interest or in any such distribution shall, upon conviction,
be fined not more than P1,000 or imprisoned not more than one year, or both:
Provided, That if such default is due to a dispute between the insured bank
and the Corporation over the amount of such assessment, this subsection
shall not apply, if such bank shall deposit security satisfactory to the
Corporation of payment upon final determination of the issue.{{36}}
(c) Without prior written consent by the Corporation, no insured bank shall (1)
merge or consolidate with any noninsured bank or institution or convert into a
noninsured bank or institution or (2) assume liability to pay any deposits made
in, or similar liabilities of, any noninsured bank or institution or (3) transfer
assets to any noninsured bank or institution in consideration of the
assumption of liabilities for any portion of the deposits made in such insured
bank.{{37}}
SECTION 19. All Acts or parts of Acts and executive orders, administrative
orders, or parts thereof which are inconsistent with the provisions of this Act
are hereby repealed.{{47}}
SECTION 20. This Act shall take effect upon approval. The Philippine Deposit
Insurance Corporation shall commence business upon organization of the
Board of Directors and certification by the Treasurer of the Philippines that the
Permanent Insurance Fund has been appropriated.{{48}}
[Section 21{{49}}]
[Section 22{{50}}]

(d) The Corporation may require any insured bank to provide protection and [Section 23{{51}}]
indemnity against burglary, defalcation, and other similar insurable losses.
Whenever any insured bank refuses to comply with any such requirement the [Section 24{{52}}]
Corporation may contract for such protection and indemnity and add the cost
thereof to the assessment otherwise payable by such bank.{{38}} [Section 25{{53}}]

(e) Any insured bank which willfully fails or refuses to file any certified [Section 26{{54}}]
statement or pay any assessment required under this Act shall be subject to a
penalty of not more than P100 for each day that such violations continue, [Section 27{{55}}]
which penalty the Corporation may recover for its use: Provided, That this
subsection shall not be applicable under the circumstances stated in the [Section 28{{56}}]]
provisions of subsection (b) of this section.{{39}}
Approved: June 22, 1963
SECTION 17. Except with the written consent of the Corporation, no person
shall serve as a director, officer, or employee of an insured bank who has Published in the Official Gazette, Vol. 59, No. 36, p. 6003 on September 9,
been convicted, or who is hereafter convicted, of any criminal offense 1963.
involving dishonesty or a breach of trust. For each willful violation of this
prohibition, the bank involved shall be subject to a penalty of not more than Source: CD Asia
P100 for each day this prohibition is violated, which the Corporation may
recover for its use.{{40}}{{41}}{{42}}{{43}}{{44}} [[1]] As amended by Republic Act No. 9302, August 12, 2004:

SECTION 18. If any provision or section of this Act or the application thereof SECTION 2. The powers and functions of the Corporation shall be vested in
to any person or circumstances is held invalid, the other provisions or and exercised by a Board of Directors which shall be composed of five (5)
sections of this Act, in the application of such provision or section to other members as follows:
persons or circumstances, shall not be affected thereby.{{45}}{{46}}
a. The Secretary of Finance who shall be the ex-officio Chairman of the Board
without compensation.
b. The Governor of the Bangko Sentral ng Pilipinas, who shall be ex-
officio member of the Board without compensation.
c. The President of the Corporation, who shall be appointed by the President
of the Philippines from either the Government or private sector to serve on a
full-time basis for a term of six (6) years. The President of the Corporation
shall also serve as Vice Chairman of the Board.
d. Two (2) members from the private sector, to be appointed for a term of six
(6) years without reappointment by the President of the Philippines: Provided,
That of those first appointed, the first appointee shall serve for a period of two
(2) years.
No person shall be appointed as member of the Board unless he be of good
moral character and of unquestionable integrity and responsibility, and who is
of recognized competence in economics, banking and finance, law,
management administration or insurance, and shall be at least thirty-five (35)
years of age. For the duration of their tenure or term in office and for a period
of one year thereafter, the appointive members of the Board shall be
disqualified from holding any office, position or employment in any insured
bank.
The Secretary of Finance and the Governor of the Bangko Sentral may each
designate a representative, whose position shall not be lower than an
undersecretary or deputy governor respectively, to attend such meetings and
to vote on behalf of their respective principals. Whenever the Chairman of the
Board is unable to attend a meeting of the Board, or in the event of a vacancy
in the office of the Secretary of Finance, the President of the Corporation shall
act as Chairman.
The presence of three (3) members shall constitute a quorum. All decisions of
the Board of Directors shall require the concurrence of at least three (3)
members.
The Secretary of Finance shall fix the rate of per diem for every Board
meeting attended by the members of the Board of Directors from the private
sector. The President of the Philippines may fix such emoluments that may be
received by the Board of Directors comparable to the emoluments of
members of the Board of Directors of other government financial
institutions.[[1]]
[[2]] As amended by RA 9302:
3. To 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 Corporation in accordance with sound principles of
management.
A compensation structure, based on job evaluation studies and wage surveys
and subject to the Boards approval, shall be instituted as an integral
component of the Corporations human resource development
program: Provided, That all positions in the Corporation shall be governed by
a compensation, position classification system and qualification standards
approved by the Board based on a comprehensive job analysis and audit of
actual duties and responsibilities. The compensation plan shall be
comparable with the prevailing compensation plans of other government
financial institutions and shall be subject to review by the Board no more than
once every two (2) years without prejudice to yearly merit reviews or
increases based on productivity and profitability. The Corporation shall
therefore be exempt from existing laws, rules and regulations on
compensation, position classification and qualification standards. It shall
however endeavor to make its system conform as closely as possible with the
principles under Republic Act No. 6758, as amended.[[2]]
[[3]]As amended by RA 9302:
4. To appoint, establish the rank, fix the remuneration, approve local and
foreign training of, and remove any officer or employee of the Corporation, for
cause, subject to pertinent civil service laws: Provided, That the Board of
Directors may delegate this authority to the President subject to specific
guidelines;[[3]]
[[4]] As added by RA 9302:
5. To adopt an annual budget for, and authorize such expenditures by the
Corporation as are in the interest of the effective administration and operation
of the Corporation; and
6. To approve the methodology for determining the level and amount of
provisioning for insurance and financial assistance losses, which shall
establish reasonable levels of deposit insurance reserves.[[4]]
[[5]] As added by RA 9576:
7. To review the organizational set-up of the Corporation and adopt a new or
revised rganizational structure as it may deem necessary for the Corporation
to undertake its mandate and functions.[[5]]
[[6]] Renumbered from Sec. 2 by RA 9302:
SECTION 3. The President of the Corporation shall be the Chief Executive
thereof and his salary shall be fixed by the President of the Philippines at a
sum commensurate to the importance and responsibility attached to the
position. The sum total of the salary of the President and the allowances and
other emoluments which the Board of Directors may grant him shall be the
ceiling for fixing the salary, allowances and other emoluments of all other
personnel in the Corporation.
The powers and duties of the President of the Corporation are:
a. To prepare the agenda for the meeting of the 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. To execute and administer the policies and measures approved by the
Board;
c. To direct and supervise the operations and internal administration of the
Corporation in accordance with the policies established by the Board. The
President may delegate certain of his administrative responsibilities to other
officers of the Corporation, subject to the rules and regulations of the Board;
d. To represent the Corporation, upon prior authority of the Board, in all
dealings with other offices, agencies and instrumentalities of the government
and with all other persons or entities, public or private, whether domestic,
foreign or international;
e. To authorize, with his signature, upon prior authority of the Board, contracts
entered into by the Corporation, notes and securities issued by the
Corporation, and the annual reports, balance sheets, profits and loss
statements, correspondence and other documents of the Corporation. The
signature of the President may be in facsimile wherever appropriate;
f. To represent the Corporation, either personally or through counsel, in all
legal proceedings or actions;
g. To delegate, with the prior approval of the Board of Directors, his power to
represent the Corporation, as provided in subsections (d) and (f) of this
Section, to other officers of the Corporation; and
h. To exercise such other powers as may be vested in him by the Board.
The President shall be assisted by a Vice President and other officials whose
appointment and removal for cause shall be approved and whose salary shall
be fixed by the Board of Directors upon recommendation of the President of
the Corporation. During the absence or temporary incapacity of the President,
or in case of vacancy or permanent incapacity and pending the appointment
of a new President of the Corporation by the President of the Philippines, the
Vice President shall act as President and discharge the duties and
responsibilities thereof (as amended by Executive Order No. 890, April 8,
1983; RA 7400, April 13, 1992).[[6]]
[[7]] Renumbered from Sec. 3 by RA 9302:
SECTION 4. As used in this Act
a. The term Board of Directors means the Board of Directors of the
Corporation.
b. The term Bank and Banking Institution shall be synonymous and
interchangeable and shall include banks, commercial banks, savings bank,
mortgage banks, rural banks, development banks, cooperative banks, stock
savings and loan associations and branches and agencies in the Philippines
of foreign banks and all other corporations authorized to perform banking
functions in the Philippines (as amended by RA 7400).
c. The term receiver includes a receiver, commission, person or other
agency charged by law with the duty to take charge of the assets and
liabilities of a bank which has been forbidden from doing business in the
Philippines, as well as the duty to gather, preserve and administer such
assets and liabilities for the benefit of the depositors and creditors of said
bank, and to continue into liquidation whenever authorized under this Act or
other laws, and to dispose of the assets and to wind up the affairs of such
bank (as amended by RA 7400).
d. The term insured bank means any bank the deposits of which are insured
in accordance with the provisions of this Act.
e. The term non-insured bank means any bank the deposits of which are not
insured.
f. The term deposit means the unpaid balance of money or its equivalent
received by a bank in the usual course of business and for which it has given
or is obliged to give credit to a commercial, checking, savings, time or thrift
account, or issued in accordance with Bangko Sentral rules and regulations
and other applicable laws, together with such other obligations of a bank,
which, consistent with banking usage and practices, the Board of Directors
shall determine and prescribe by regulations to be deposit liabilities of the
bank: Provided, That any obligation of a bank which is payable at the office of
the bank located outside of the Philippines shall not be a deposit for any of
the purposes of this Act or included as part of the total deposits or of insured
deposit: Provided, further, That, subject to the approval of the Board of
Directors, any insured bank which is incorporated under the laws of the
Philippines which maintains a branch outside the Philippines may elect to
include for insurance its deposit obligations payable only at such branch.
The Corporation shall not pay deposit insurance for the following accounts or
transactions, whether denominated, documented, recorded or booked as
deposit by the bank:
1. Investment products such as bonds and securities, trust accounts, and other
similar instruments;
2. Deposit accounts or transactions which are unfunded, or that are fictitious or
fraudulent;
3. Deposit accounts or transactions constituting, and/or emanating from, unsafe
and unsound banking practice/s, as determined by the Corporation, in
consultation with the BSP, after due notice and hearing, and publication of a
cease and desist order issued by the Corporation against such deposit accounts
or transactions; and
4. Deposits that are determined to be the proceeds of an unlawful activity as
defined under Republic Act 9160, as amended.
The actions of the Corporation taken under this section shall be final and
executory, and may not be restrained or set aside by the court, except on
appropriate petition for certiorari on the ground that the action was taken in
excess of jurisdiction or with such grave abuse of discretion as to amount to a
lack or excess of jurisdiction. The petition for certiorari may only be filed within
thirty (30) days from notice of denial of claim for deposit insurance (as
amended by Presidential Decree 1940, June 27, 1984; RA 7400; RA 9302;
RA 9576).
g. The term insured deposit means the amount due to any bona fide
depositor for legitimate deposits in an insured bank net of any obligation of
the depositor to the insured bank as of the date of closure, but not to exceed
Five Hundred Thousand Pesos (P500,000.00). Such net amount shall be
determined according to such regulations as the Board of Directors may
prescribe. In determining such amount due to any depositor, there shall be
added together all deposits in the bank maintained in the same right and
capacity for his benefit either in his own name or in the name of others. A joint
account regardless of whether the conjunction and, or, and/or is used,
shall be insured separately from any individually-owned deposit
account: Provided, That (1) If the account is held jointly by two or more
natural persons, or by two or more juridical persons or entities, the maximum
insured deposit shall be divided into as many equal shares as there are
individuals, juridical persons or entities, unless a different sharing is stipulated
in the document of deposit, and (2) if the account is held by a juridical person
or entity jointly with one or more natural persons, the maximum insured
deposit shall be presumed to belong entirely to such juridical person or
entity: Provided, further, That the aggregate of the interest of each co-owner
over several joint accounts, whether owned by the same or different
combinations of individuals, juridical persons or entities, shall likewise be
subject to the maximum insured deposit of Five Hundred Thousand Pesos
(P500,000.00): Provided, furthermore, That the provisions of any law to the
contrary notwithstanding, no owner/holder of any negotiable certificate of
deposit shall be recognized as a depositor entitled to the rights provided in
this Act unless his name is registered as owner/holder thereof in the books of
the issuing bank: Provided, finally, That, in case of a condition that threatens
the monetary and financial stability of the banking system that may have
systemic consequences, as defined in section 17 hereof, as determined by
the Monetary Board, the maximum deposit insurance cover may be adjusted
in such amount, for such a period, and/or for such deposit products, as may
be determined by a unanimous vote of the Board of Directors in a meeting
called for the purpose and chaired by the Secretary of Finance, subject to the
approval of the President of the Philippines (as amended by RA 9302; RA
9576).
h. The term transfer deposit means a deposit in an insured bank made
available to a depositor by the Corporation as payment of insured deposit of
such depositor in a closed bank and assumed by another insured bank.
i. The term trust funds means funds held by an insured bank in a fiduciary
capacity and includes without being limited to, funds held as trustee,
executor, administrator, guardian or agent.[[7]]
[[8]] As amended by RA 6037, August 4, 1969; renumbered from Sec. 4 by
RA 9302:
SECTION 5. The deposit liabilities of any bank or banking institution, which is
engaged in the business of receiving deposits as herein defined on the
effective date of this Act, or which thereafter may engage in the business of
receiving deposits, shall be insured with the Corporation.[[8]]
[[9]] As amended by RA 9302:
SECTION 6.
a. The assessment rate shall be determined by the Board of
Directors: Provided, That the assessment rate shall not exceed one-fifth (1/5)
of one per centum (1%) per annum. The semiannual assessment for each
insured bank shall be in the amount of the product of one-half (1/2) the
assessment rate multiplied by the assessment base but in no case shall it be
less than Five thousand pesos (P5,000.00). The assessment base shall be
the amount of the liability of the bank for deposits as defined under
subsection (f) of Section 4 without any deduction for indebtedness of
depositors.[[9]]
[[10]] As amended by RA 7400:
The semi-annual assessment base for one semi-annual period shall be the
average of the assessment base of the bank as of the close of business on
March thirty-one and June thirty and the semi-annual assessment base for
the other semi-annual period shall be the average of the assessment base of
the bank as of the close of business on September thirty and December
thirty-one: Provided, That when any of said days is a non-business day or
legal holiday, either national or provincial, the preceding business day shall
be used. The certified statements required to be filed with the Corporation
under subsections (b) and (c) of this Section shall be in such form and set
forth such supporting information as the Board of Directors shall prescribe.
The assessment payments required from the insured banks under
subsections (b) and (c) of this Section shall be made in such manner and at
such time or times as the Board of Directors shall prescribe, provided the time
or times so prescribed shall not be later than sixty (60) days after filing the
certified statement setting forth the amount of assessment.[[10]]
[[11]]As amended by PD 1940:
b. On or before the 31st of July of each year, each insured bank shall file with
the Corporation a certified statement showing for the six months ending on
the preceding June thirty the amount of the assessment base and the amount
of the semi-annual assessment due to the Corporation for the period ending
on the following December thirty-one, determined in accordance with
subsection (a) of this Section, which shall contain or be verified by a written
declaration that it is made under the penalties of perjury. Each insured bank
shall pay to the Corporation the amount of the semi-annual assessment it is
required to certify. On or before the 31st day of January of each year, each
insured bank shall file with the Corporation a similar certified statement for the
six months ending on the preceding December thirtyone and shall pay to the
Corporation the amount of the semi-annual assessment for the period ending
on the following June thirty which it is required to certify.[[11]]
[[12]] As amended by RA 9302:
d. All assessment collections and income from operations after expenses and
charges shall be added to the Deposit Insurance Fund under Section 13
hereof. Such expenses and charges are: (1) the operating costs and
expenses of the Corporation for the calendar year; (2) additions to reserve to
provide for insurance and financial assistance losses, net of recoverable
amounts from applicable assets and collaterals, during the calendar year; and
(3) the net insurance and financial assistance losses sustained in said
calendar year.[[12]]
[[13]] As amended by RA 9302:
h. The Corporation shall not terminate the insured status of any bank which
continues to operate or receive deposits. Should any insured bank fail or
refuse to pay any assessment required to be paid by such bank under any
provision of this Act, and should the bank not correct such failure or refusal
within thirty (30) days after written notice has been given by the Corporation
to an officer of the bank citing this subsection, and stating that the bank has
failed or refused to pay as required by the law, the Corporation may, at its
discretion, file a case for collection before the appropriate court without
prejudice to the imposition of administrative sanctions allowed under the
provisions of this Law on the bank officials responsible for the non-payment of
assessment fees.[[13]]
[[14]] As amended by RA 7400; RA 9302:
a. Whenever upon examination by the Corporation into the condition of any
insured bank, it shall be disclosed that an insured bank or its directors or
agents have committed, are committing or about to commit unsafe or
unsound practices in conducting the business of the bank, or have violated,
are violating or about to violate any provisions of any law or regulation to
which the insured bank is subject, the Board of Directors shall submit the
report of the examination to the Monetary Board to secure corrective action
thereon. If no such corrective action is taken by the Monetary Board within
forty-five (45) days from the submission of the report, the Board of Directors
shall, motu proprio, institute corrective action which it deems necessary. The
Board of Directors may thereafter issue a cease and desist order, and require
the bank or its directors or agents concerned to correct the practices or
violations within forty-five (45) days. However, if the practice or violation is
likely to cause insolvency or substantial dissipation of assets or earnings of
the bank, or is likely to seriously weaken the condition of the bank or
otherwise seriously prejudice the interests of its depositors and the
Corporation, the period to take corrective action shall not be more than fifteen
(15) days. The order may also include the imposition of fines provided in
Section 21 (f) hereof. The Board of Directors shall duly inform the Monetary
Board of the Bangko Sentral ng Pilipinas of action it has taken under this
subsection with respect to such practices or violations.[[14]]
[[15]] As amended by EO 890; RA 7400:
b. The actions and proceedings provided in the preceding subsection may be
undertaken by the Corporation if, in its opinion, an insured bank or its
directors or agents have violated, are violating or about to violate any
provision of this Act or any order, rule or instruction issued by the Corporation
or any written condition imposed by the Corporation in connection with any
transaction with or grant by the Corporation. [[15]]
[[16]] As amended by RA 9302; RA 9576:
Eighth To conduct examination of banks with prior approval of the Monetary
Board: Provided, That no examination can be conducted within twelve (12)
months from the last examination date: Provided, however, That the
Corporation may, in coordination with the Bangko Sentral, conduct a special
examination as the Board of Directors, by an affirmative vote of a majority of
all of its members, if there is a threatened or impending closure of a
bank; Provided, further, That, notwithstanding the provisions of Republic Act
No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act
No. 8791, and other laws, the Corporation and/or the Bangko Sentral, may
inquire into or examine deposit accounts and all information related thereto in
case there is a finding of unsafe or unsound banking practice; Provided,
finally, That to avoid overlapping of efforts, the examination shall maximize
the efficient use of the relevant reports, information, and findings of the
Bangko Sentral, which it shall make available to the Corporation;[[16]]
[[17]] As amended by RA 6037:
Tenth To prescribe by its Board of Directors such rules and regulations as it
may deem necessary to carry out the provisions of this Act;[[17]]
[[18]] As amended by PD 1940:
Eleventh The Corporation may establish its own provident fund which shall
consist of contributions made both by the Corporation and by its officers and
employees to a common fund for the payment of benefits to such officers or
employees or their heirs. The Board of Directors shall prepare and issue rules
and regulations as it may deem necessary to make effective the
establishment and operation of the fund;[[18]]
[[19]] As added by RA 7400:
Twelfth To compromise, condone or release, in whole or in part, any of
claim or settled liability to the Corporation, regardless of the amount involved,
under such terms and conditions as may be imposed by the Board of
Directors to protect the interest of the Corporation.[[19]]
[[20]] As amended by EO 890; RA 7400:
b. The Board of Directors shall appoint examiners who shall have power, on
behalf of the Corporation to examine any insured bank. Each such examiner
shall have the power to make a thorough examination of all the affairs of the
bank and in doing so, he shall have the power to administer oaths, to
examine and take and preserve the testimony of any of the officers and
agents thereof, and, to compel the presentation of books, documents, papers,
or records necessary in his judgment to ascertain the facts relative to the
condition of the bank; and shall make a full and detailed report of the
condition of the bank to the Corporation. The Board of Directors in like
manner shall appoint claim agents who shall have the power to investigate
and examine all claims for insured deposits and transferred deposits. Each
claim agent shall have the power to administer oaths and to examine under
oath and take and preserve testimony of any person relating to such
claim.[[20]]
[[21]] As added by RA 9302:
(b-1) The investigators appointed by the Board of Directors shall have the
power on behalf of the Corporation to conduct investigations on frauds,
irregularities and anomalies committed in banks, based on reports of
examination conducted by the Corporation and Bangko Sentral ng Pilipinas or
complaints from depositors or from other government agency. Each such
investigator shall have the power to administer oaths, and to examine and
take and preserve the testimony of any person relating to the subject of
investigation.[[21]]
[[22]] As amended by EO 890; RA 7400; RA 9302:
d. The Corporation shall have access to reports of examination made by, and
reports of condition made to the Bangko Sentral ng Pilipinas or its appropriate
supervising departments, and the Bangko Sentral ng Pilipinas shall also have
access to reports of examination made by, and reports of condition made to
the Corporation:Provided, That the provisions of any law to the contrary
notwithstanding, the Corporation shall likewise have access to reports,
findings and any other information derived from any special or general
examination or inquiry conducted by the Bangko Sentral in respect to bank
fraud or serious irregularity in an insured bank: Provided, That the
Corporation shall use reports and findings under similar terms and conditions
prescribed by applicable laws on the Bangko Sentral.[[22]]
[[23]] As added by RA 9302:
(d-1) Each insured bank shall keep and maintain a true and accurate record
or statement of its daily deposit transactions consistent with the standards set
by the Bangko Sentral ng Pilipinas and the Corporation. Compliance with
such standards shall be duly certified by the president of the bank or the
compliance officer:Provided, That refusal or willful failure to issue the required
certification shall constitute a violation of this Section and shall subject such
officers of the bank to the sanctions provided for under Section 21 (f) of this
Act.[[23]]
[[24]] As added by RA 7400:
e. Personnel of the Corporation are hereby prohibited from:
 1. being an officer, director, consultant, employee or stockholder, directly or
indirectly, of any bank or banking institution except as otherwise provided in
this Act;
2. receiving any gift or thing of value from any officer, director or employee
thereof;
3. revealing in any manner, except as provided in this Act or under order of the
court, information relating to the condition or business of any such institution.
This prohibition shall not apply to the giving of information to the Board of
Directors, the President of the Corporation, Congress, any agency of
government authorized by law, or to any person authorized by either of them
in writing to receive such information (as amended by RA 9302).[[24]]
[[25]] f. The Corporation shall underwrite or advance litigation costs and
expenses, including legal fees and other expenses of external counsel, or
provide legal assistance to, directors, officers, employees or agents of the
Corporation in connection with any civil, criminal, administrative or any other
action or proceeding, to which such director, officer, employee or agent is
made a party by reason of, or in connection with, the exercise of authority or
performance of functions and duties under this Act: Provided, That such legal
protection shall not apply to any civil, criminal, administrative or any action or
proceeding that may be initiated by the Corporation, in whatever capacity,
against such director, officer, employee or agent: Provided, further, That
directors, officers, employees or agents who shall resign, retire, transfer to
another agency or be separated from the service, shall continue to be
provided with such legal protection in connection with any act done or omitted
to be done by them in good faith during their tenure or employment with the
Corporation: Provided, finally, That in the event of a settlement or
compromise, indemnification shall be provided only in connection with such
matters covered by the settlement as to which the Corporation is advised by
counsel that the persons to be indemnified did not commit any negligence or
misconduct (as added by RA 9302).
g. The costs and expenses incurred in defending the aforementioned action,
suit or proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of the director, officer, employee or agent to repay the amount
advanced should it ultimately be determined by the Board of Directors that he
is not entitled to be indemnified as provided in this subsection (as added by
RA 9302).
h. Unless the actions of the Corporation or any of its officers and employees
are found to be in willful violation of this Act, performed in bad faith, with
malice and/or gross negligence, the Corporation, its directors, officers,
employees and agents are held free and harmless to the fullest extent
permitted by law from any liability, and they shall be indemnified for any and
all liabilities, losses, claims, demands, damages, deficiencies, costs and
expenses of whatsoever kind and nature that may arise in connection with the
performance of their functions, without prejudice to any criminal liability under
existing laws (as added by RA 9576).
i. Legal assistance shall include the grant or advance of reasonable legal fees
as determined by the Board of Directors to enable the concerned director,
officer, employee or agent to engage counsel of his choice, subject to
approval by the Board of Directors.
Notwithstanding the provisions of this Section and Section 2, members of the
Board of Directors and personnel of the Corporation may become directors
and officers of any bank and banking institution and of any entity related to
such institution in connection with financial assistance extended by the
Corporation to such institution and when, in the opinion of the Board, it is
appropriate to make such designation to protect the interest of the
Corporation (as amended by RA 9302).
Borrowing from any bank or banking institution by examiners and other
personnel of the examination departments of the Corporation shall be
prohibited only with respect to the particular institution in which they are
assigned, or are conducting an examination. Personnel of other departments,
offices or units of the Corporation shall likewise be prohibited from borrowing
from any bank or banking institution during the period of time that a
transaction of such institution with the Corporation is being evaluated,
processed or acted upon by such personnel: Provided, however, That the
Board may, at its discretion, indicate the position levels or functional groups to
which the prohibition is applicable (as amended by RA 7400).
Borrowing by all full-time personnel of the Corporation from any bank or
banking institution shall be secured and disclosed to the Board, and shall be
subject to such further rules and regulations as the Board may prescribe (as
amended by RA 7400).[[25]]
[[26]] As amended/renumbered from Sec. 9-A by RA 9302:
SECTION 10. a. The provisions of other laws, general or special, to the
contrary otwithstanding, whenever it shall be appropriate for the Monetary
Board of the Bangko Sentral ng Pilipinas to appoint a receiver of any banking
institution pursuant to existing laws, the Monetary Board shall give prior notice
and appoint the Corporation as receiver.[[26]]
[[27]] As added by RA 9302:
b. The Corporation as receiver shall control, manage and administer the
affairs of the closed bank. Effective immediately upon takeover as receiver of
such bank, the powers, functions and duties, as well as all allowances,
remunerations and perquisites of the directors, officers, and stockholders of
such bank are suspended, and the relevant provisions of the Articles of
Incorporation and By-laws of the closed bank are likewise deemed
suspended.
The assets of the closed bank under receivership shall be deemed in custodia
legis in the hands of the receiver. From the time the closed bank is placed
under such receivership, its assets shall not be subject to attachment,
garnishment, execution, levy or any other court processes. Therefore, a
judge, officer of the court or any person who shall issue, order, process or
cause the issuance or implementation of the writ of garnishment, levy,
attachment or execution shall be liable under Section 21 hereof.[[27]]
[[28]] As amended and added by RA 9302:
c. In addition to the powers of a receiver pursuant to existing laws, the
Corporation is empowered to:
1. bring suits to enforce liabilities to or recoveries of the closed bank;
2. appoint and hire persons or entities of recognized competence in banking or
finance as its deputies and assistants, to perform such powers and functions of
the Corporation as receiver or liquidator of the closed bank;
3. suspend or terminate the employment of officers and employees of the closed
bank: Provided, That payment of separation pay or benefits shall be made
only after the closed bank has been placed under liquidation pursuant to the
order of the Monetary Board under Section 30 of R.A. 7653, and that such
payment shall be made from available funds of the bank after deducting
reasonable expenses for receivership and liquidation;
4. pay accrued utilities, rentals and salaries of personnel of the closed bank, for a
period not exceeding three (3) months, from available funds of the closed
bank;
5. collect loans and other claims of the closed bank, and for the purpose, modify,
compromise or restructure the terms and conditions of such loans or claims as
may be deemed advantageous to the interest of the creditors and claimants of
the closed bank;
6. hire or retain private counsels as may be necessary;
7. borrow or obtain a loan, or mortgage, pledge or encumber any asset of the
closed bank, when necessary to preserve or prevent dissipation of the assets,
or to redeem foreclosed assets of the closed bank, or to minimize losses to the
depositors and creditors;
8. if the stipulated interest on deposits is unusually high compared with the
prevailing applicable interest rate, the Corporation as receiver may exercise
such powers which may include a reduction of the interest rate to a reasonable
rate: Provided, That any modification or reduction shall apply only to unpaid
interest; and and
9. exercise such other powers as are inherent and necessary for the effective
discharge of the duties of the Corporation as a receiver.
The Board of Directors shall adopt such policies and guidelines as may be
necessary for the performance of the above powers by personnel, deputies
and agents of the Corporation.[[28]]
[[29]] As added by RA 9302:
SECTION 11. In all cases or actions filed by the Corporation as receiver for
the recovery of, or involving any asset of the closed bank, payment of all
docket and other court fees shall be deferred until the action is terminated
with finality. Any such fees shall constitute as a first lien on any judgment in
favor of the closed bank or in case of unfavorable judgment, such fees shall
be paid as administrative expenses during the distribution of the assets of the
closed bank.[[29]]
[[30]] As added by RA 7400; renumbered from Sec. 9-B by RA 9302:
Before any distribution of the assets of the closed bank in accordance with
the preference established by law, the Corporation shall periodically charge
against said assets reasonable receivership expenses and subject to
approval by the proper court, reasonable liquidation expenses, it has incurred
as part of the cost of receivership/liquidation proceedings and collect payment
therefore from available assets.[[30]]
[[31]] As added by RA 9302:
After the payment of all liabilities and claims against the closed bank, the
Corporation shall pay any surplus dividends at the legal rate of interest from
date of takeover to date of distribution, to creditors and claimants of the
closed bank in accordance with legal priority before distribution to the
shareholders of the closed bank.[[31]]
[[32]] As amended and added by RA 9302:
SECTION 13. To carry out the purposes of this Act, the permanent insurance
fund shall be Three billion pesos (P3,000,000,000.00).
The Deposit Insurance Fund shall be the capital account of the Corporation
and shall principally consist of the following: (i) the Permanent Insurance
Fund; (ii) assessment collections, subject to the charges enumerated in
Section 6 (d); (iii) reserves for insurance and financial assistance losses; and
(iv) retained earnings: Provided, That the reserves for insurance and financial
assistance losses and retained earnings shall be maintained at a reasonable
level to ensure capital adequacy: Provided, further, That the Corporation may,
within two (2) years from the passage of this Act, and every five (5) years
thereafter, conduct a study on the need to adjust the amount of the
Permanent Insurance Fund, insurance cover, assessment rate and
assessment base, and thereafter make the necessary recommendation to
Congress. For this purpose, the Corporation may hire the services of actuarial
consultants to determine, among others, the affordability of assessment rates,
analysis and evaluation of insurance risk, and advisability of imposing varying
assessment rates or insurance cover of different bank categories.[[32]]
[[33]] As amended by RA 9302:
SECTION 14. Whenever an insured bank shall have been closed by the
Monetary Board pursuant to Section 30 of R.A. 7653, payment of the insured
deposits on such closed bank shall be made by the Corporation as soon as
possible either (1) by cash or (2) by making available to each depositor a
transferred deposit in another insured bank in an amount equal to insured
deposit of such depositor: Provided, however, That the Corporation, in its
discretion, may require proof of claims to be filed before paying the insured
deposits, and that in any case where the Corporation is not satisfied as to the
viability of a claim for an insured deposit, it may require final determination of
a court of competent jurisdiction before paying such claim: Provided, further,
That failure to settle the claim, within six (6) months from the date of filing of
claim for insured deposit, where such failure was due to grave abuse of
discretion, gross negligence, bad faith, or malice, shall, upon conviction,
subject the directors, officers or employees of the Corporation responsible for
the delay, to imprisonment from six (6) months to one (1) year: Provided,
furthermore, That the period shall not apply if the validity of the claim requires
the resolution of issues of facts and or law by another office, body or agency
including the case mentioned in the first proviso or by the Corporation
together with such other office, body or agency.[[33]]
[[34]] As amended by PD 1940; RA 7400; renumbered from Sec. 10(d) by RA
9302:
SECTION 15. The Corporation, upon payment of any depositor as provided
for in subsection (c) of this Section, shall be subrogated to all rights of the
depositor against the closed bank to the extent of such payment. Such
subrogation shall include the right on the part of the Corporation to receive
the same dividends and payments from the proceeds of the assets of such
closed bank and recoveries on account of stockholders liability as would
have been payable to the depositor on a claim for the insured deposits but,
such depositor shall retain his claim for any uninsured portion of his deposit.
All payments by the Corporation of insured deposits in closed banks partake
of the nature of public funds, and as such, must be considered a preferred
credit similar to taxes due to the National Government in the order of
preference under Article 2244 of the New Civil Code: Provided, further, That
this preference shall be likewise effective upon liquidation proceedings
already commenced and pending as of the approval of this Act, where no
distribution of assets has been made.[[34]]
[[35]] As added by RA 9302:
a. The Corporation shall commence the determination of insured deposits due
the depositors of a closed bank upon its actual takeover of the closed bank.
The Corporation shall give notice to the depositors of the closed bank of the
insured deposits due them by whatever means deemed appropriate by the
Board of Directors: Provided, That the Corporation shall publish the notice
once a week for at least three (3) consecutive weeks in a newspaper of
general circulation or, when appropriate, in a newspaper circulated in the
community or communities where the closed bank or its branches are
located.[[35]]
[[36]] Renumbered from Sec. 11 (a) by RA 9302:
b. Payment of an insured deposit to any person by the Corporation shall
discharge the Corporation, and payment of transferred deposit to any person
by the new bank or by an insured bank in which a transferred deposit has
been made available shall discharge the Corporation and such new bank or
other insured bank, to the same extent that payment to such person by the
closed bank would have discharged it from liability for the insured
deposit.[[36]]
[[37]] Renumbered from Sec. 11 (b) by RA 9302:
c. Except as otherwise prescribed by the Board of Directors, neither the
Corporation nor such other insured bank shall be required to recognize as the
owner of any portion of a deposit appearing on the records of the closed bank
under a name other than that of the claimant, any person whose name or
interest as such owner is not disclosed on the records of such closed bank as
part owner of said deposit, if such recognition would increase the aggregate
amount of the insured deposits in such closed bank.[[37]]
[[38]] Renumbered from Sec. 11 (c) by RA 9302:
d. The Corporation may withhold payment of such portion of the insured
deposit of any depositor in a closed bank as may be required to provide for
the payment of any liability of such depositor as a stockholder of the closed
bank, or of any liability of such depositor to the closed bank or its receiver,
which is not offset against a claim due from such bank, pending the
determination and payment of such liability by such depositor or any other
liable therefor.[[38]]
[[39]] As amended by RA 9302:
e. Unless otherwise waived by the Corporation, if the depositor in the closed
bank shall fail to claim his insured deposits with the Corporation within two (2)
years from actual takeover of the closed bank by the receiver, or does not
enforce his claim filed with the corporation within two (2) years after the two-
year period to file a claim as mentioned hereinabove, all rights of the
depositor against the Corporation with respect to the insured deposit shall be
barred; however, all rights of the depositor against the closed bank and its
shareholders or the receivership estate to which the Corporation may have
become subrogated, shall thereupon revert to the depositor. Thereafter, the
Corporation shall be discharged from any liability on the insured deposit.[[39]]
[[40]] As amended by RA 6037; renumbered from Sec. 12 by RA 9302:
SECTION 17. a. Money of the Corporation not otherwise employed shall be
invested in obligations of the Republic of the Philippines or in obligations
guaranteed as to principal and interest by the Republic of the
Philippines.[[40]]
[[41]] As amended by RA 9302:
b. The banking or checking accounts of the Corporation shall be kept with the
Bangko Sentral ng Pilipinas, with the Philippine National Bank, or with any
other bank designated as depository or fiscal agent of the Philippine
government.[[41]]
[[42]] As amended by RA 9576:
c. It is hereby declared to be the policy of the State that the Deposit Insurance
Fund of the Corporation shall be preserved and maintained at all times.
Accordingly, all tax obligations of the Corporation for a period of five (5) years
reckoned from the date of effectivity of this Act shall be chargeable to the Tax
Expenditure Fund (TEF) in the annual General Appropriations Act pursuant to
the provisions of Executive Order No. 93, series of 1986; Provided, That, on
the 6th year and thereafter, the Corporation shall be exempt from income tax,
final withholding tax, value-added tax on assessments collected from member
banks, and local taxes (as added by RA 9576).
d. When the Corporation has determined that an insured bank is in danger of
closing, in order to prevent such closing, the Corporation, in the discretion of
its Board of Directors, is authorized to make loans to, or purchase the assets
of, or assume liabilities of, or make deposits in, such insured bank, upon such
terms and condition as the Board of Directors may prescribe, when in the
opinion of the Board of Directors, the continued operation of such bank is
essential to provide adequate banking service in the community or maintain
financial stability in the economy (renumbered from Sec. 17 (c) by RA
9576).[[42]]
[[43]] As amended by RA 7400:
The authority of the Corporation under the foregoing paragraph to extend
financial assistance to, assume liabilities of, purchase the assets of an
insured bank may also be exercised in the case of a closed insured bank if
the Corporation finds that the resumption of operations of such bank is vital to
the interests of the community, or a severe financial climate exists which
threatens the stability of a number of banks possessing significant resources:
Provided, That the reopening and resumption of operations of the closed
bank shall be subject to the prior approval of the Monetary Board.
The Corporation may provide any corporation acquiring control of, merging or
consolidating with or acquiring the assets of an insured bank in danger of
closing in order to prevent such closing or of a closed insured bank in order to
restore to normal operations, with such financial assistance as it could
provide an insured bank under this subsection: Provided, That, within sixty
(60) days from date of assistance the Corporation shall submit a report
thereof to the Monetary Board.[[43]]
[[44]] As amended by RA 9302:
The Corporation, prior to the exercise of the powers under this Section, shall
determine that actual payoff and liquidation thereof will be more expensive
than the exercise of this power: Provided, That when the Monetary Board has
determined that there are systemic consequences of a probable failure or
closure of an insured bank, the Corporation may grant financial assistance to
such insured bank in such amount as may be necessary to prevent its failure
or closure and/or restore the insured bank to viable operations, under such
terms and conditions as may be deemed necessary by the Board of Directors,
subject to concurrence by the Monetary Board and without additional cost to
the Deposit Insurance Fund.
A systemic risk refers to the possibility that failure of one bank to settle net
transactions with other banks will trigger a chain reaction, depriving other
banks of funds leading to a general shutdown of normal clearing and
settlement activity. Systemic risk also means the likelihood of a sudden,
unexpected collapse of confidence in a significant portion of the banking or
financial system with potentially large real economic effects. Finally, the
Corporation may not use its authority under this subsection to purchase the
voting or common stock of an insured bank but it can enter into and enforce
agreements that it determines to be necessary to protect its financial
interests: Provided, That the financial assistance may take the form of equity
or quasiequity of the insured bank as may be deemed necessary by the
Board of Directors with concurrence by the Monetary Board: Provided,
further, That the Corporation shall dispose of such equity as soon as
practicable.[[44]]
[[45]] As amended/renumbered from Sec. 13 by RA 9302:
SECTION 18. The Corporation is authorized to borrow from the Bangko
Sentral ng Pilipinas and theBangko Sentral is authorized to lend the
Corporation on such terms as may be agreed upon by the Corporation and
the Bangko Sentral, such funds as in the judgment of the Board of Directors
of the Corporation are from time to time required for insurance purposes and
financial assistance provided for in Section 17(d) of this Act: Provided, That
any such loan as may be granted by the Bangko Sentral shall be consistent
with monetary policy; Provided, further, That the rate of interest thereon shall
be fixed by the Monetary Board but shall not exceed the treasury bill
rate.[[45]]
[[46]] As amended by RA 6037; PD 653, February 1, 1975; PD 1940; RA
7400:
When in the judgment of the Board of Directors the funds of the Corporation
are not sufficient to provide for an emergency or urgent need to attain the
purposes of this Act, the Corporation is likewise authorized to borrow money,
obtain loans or arrange credit lines or other credit accommodations from any
bank designated as depository or fiscal agent of the Philippine Government:
Provided, That such loan shall be of short-term duration.[[46]]
[[47]] As amended by RA 9576:
SECTION 19. With the approval of the President of the Philippines, the
Corporation is authorized to issue bonds, debentures, and other obligations,
both local or foreign, as may be necessary for purposes of providing liquidity
for settlement of insured deposits in closed banks as well as for financial
assistance as provided herein: Provided, That the Board of Directors shall
determine the interest rates, maturity and other requirements of said
obligations: Provided, further, That the Corporation shall provide for
appropriate reserves for the redemption or retirement of said obligation.
All notes, debentures, bonds, or such obligations issued by the Corporation
shall be exempt from taxation both as to principal and interest, and shall be
fully guaranteed by the Government of the Republic of the Philippines. Such
guarantee, which in no case shall exceed two times the Deposit Insurance
Fund as of date of the debt issuance, shall be expressed on the face thereof.
The Board of Directors shall have the power to prescribe rules and
regulations for the issuance, reissuance, servicing, placement and
redemption of the bonds herein authorized to be issued as well as the
registration of such bonds at the request of the holders thereof.[[47]]
[[48]] As amended by RA 9302:
SECTION 20. a. The Corporation shall annually make a report of its
operations to the Congress as soon as practicable after the 1st day of
January in each year (renumbered from Sec. 15 (a) by RA 9302).
b. The financial transactions of the Corporation shall be audited by the
Commission on Audit in accordance with the principles and procedures
applicable to commercial corporate transactions and under such rules and
regulations as may be prescribed by the Commission on Audit. The audit
shall be conducted at the place or places where accounts of the Corporation
are normally kept. Except as to matters relating to the function of the
Corporation as receiver which shall be subject to visitorial audit only, the
representatives of the Commission on Audit shall have access to all books,
accounts, records, reports, files and all other papers, things, or property
belonging to or in use by the Corporation pertaining to its financial
transactions and necessary to facilitate the audit, and they shall be afforded
full facilities for verifying transactions with the balances or securities held by
depositories, fiscal agents, and custodians. All such books, accounts,
records, reports, files, papers, and property of the Corporation shall remain in
possession and custody of the Corporation (as amended/renumbered from
Sec. 15 (b) by RA 9302).
c. A report of the Audit for each fiscal year ending on June 30 shall be made
by the Auditor General to the Congress not later than January 15 following
the close of such fiscal year. On or before December 15 following such fiscal
year, the Auditor General shall furnish the Corporation a short form report
showing the financial position of the Corporation at the close of fiscal year.
The report to the Congress shall set forth the scope of the audit and shall
include a statement of assets and liabilities and surplus or deficit; a statement
of surplus or deficit analysis; a statement of income and expenses; a
statement of sources and application of funds and such comments and
information as may be deemed necessary to inform Congress of the financial
operations and condition of the Corporation, together with such
recommendations with respect thereto as the Auditor General may deem
advisable. The report shall also show specifically any program, expenditure,
or other financial transactions or undertaking observed in the course of the
audit, which in the opinion of the Auditor General, has been carried on or
made without authority of law. A copy of each report shall be furnished to the
President of the Philippines, to the Governor of the Bangko Sentral ng
Pilipinas, and to the Corporation at the time submitted to the Congress (as
amended/renumbered from Sec. 15 (c) by RA 9302).[[48]]
[[49]]SECTION 21.
a. Every insured bank shall display at each place of business maintained by it
a sign or signs, and shall include a statement in all its advertisements to the
effect that its deposits are insured by the Corporation: Provided, That the
Board of Directors may exempt from this requirement advertisements which
do not relate to deposits or when it is impractical to include such statement
therein. The Board of Directors shall prescribe by regulations the forms of
such signs and the manner of use (as amended/renumbered from Sec. 16 (a)
by RA 9302).
b. No insured bank shall pay any dividend on its capital stock or interest on its
capital notes or debentures (if such interest is required to be paid only out of
net profits) or distribute any of its capital assets while it remains in default in
the payment of any assessment due to the Corporation: Provided, That if
such default is due to a dispute between the insured bank and the
Corporation over the amount of such assessment, this subsection shall not
apply if such bank shall deposit security satisfactory to the Corporation for
payment upon final determination of the issue (as amended/renumbered from
Sec. 16 (b) by RA 9302).
c. Without prior written consent by the Corporation, no insured bank shall (1)
merge or consolidate with any bank or institution or (2) assume liability to pay
any deposits made in, or similar liabilities of, any bank or institution or (3)
transfer assets to any bank or institution in consideration of the assumption of
liabilities for any portion of the deposits made in such insured bank (as
amended by EO 890; renumbered from Sec. 16 (c) by RA 9302).
d. The Corporation may require an insured bank to provide protection and
indemnity against burglary, defalcation, losses arising from discharge of
duties by, or particular acts of defaults of its directors, officers, or employees,
and other similar insurable losses. The Board of Directors in consultation with
the Bangko Sentral, shall determine the bonding requirement as it refers to
directors, officers and employers of the insured bank as well as the form and
amount of the bond. Whenever any insured bank refuses to comply with any
such requirement the Corporation may contract for such protection and add
the cost thereof to the assessment otherwise payable by such bank (as
amended by RA 7400; RA 9302).
e. Any assessment payable by an insured bank under this Act shall be
subject to payment of interest computed from the date such assessment
became due and payable and at the legal rate for loans as prescribed by law
or appropriate authority and in case of willful failure or refusal to pay such
assessment and interest thereon, there shall be added a penalty equivalent to
twice the amount of interest payable as computed herein for each day such
violations continue, which the interest and penalty the Corporation may
recover for its use: Provided, That the penalty shall not be applicable under
the circumstances stated in the provisions of subsection (b) of this Section (as
amended by EO 890; RA 7400).
f. The penalty of prision mayor or a fine of not less than Fifty thousand pesos
(P50,000.00) but not more than Two million pesos (P2,000,000.00), or both,
at the discretion of the court, shall be imposed upon any director, officer,
employee or agent of a bank (as amended by RA 9302):
1. for any willful refusal to submit reports as required by law, rules and
regulations
(as amended by RA 9302);
2. any unjustified refusal to permit examination and audit of the deposit records
or the affairs of the institution (as amended by RA 9302);
3. any willful making of a false statement or entry in any bank report or
document required by the Corporation (as amended by RA 9302);
4. submission of false material information in connection with or in relation to
any financial assistance of the Corporation extended to the bank (as added by
RA 9302);
5. splitting of deposits or creation of fictitious loans or deposit accounts (as
added by RA 9302).
Splitting of deposits occurs whenever a deposit account with an outstanding
balance of more than the statutory maximum amount of insured deposit
maintained under the name of natural or juridical persons is broken down and
transferred into two (2) or more accounts in the name/s of natural or juridical
persons or entities who have no beneficial ownership on transferred deposits
in their names within one hundred twenty (120) days immediately preceding
or during a bankdeclared bank holiday, or immediately preceding a closure
order issued by the Monetary Board of the Bangko Sentral ng Pilipinas for the
purpose of availing of the maximum deposit insurance coverage (as added by
RA 9302; as amended by RA 9576);
6. refusal to allow the Corporation to take over a closed bank placed under its
receivership or obstructing such action of the Corporation (as added by RA
9302);
7. refusal to turn over or destroying or tampering bank records (as added by RA
9302);
 8. fraudulent disposal, transfer or concealment of any asset, property or liability
of the closed bank under the receivership of the Corporation (as added by RA
9302);
9. violation of, or causing any person to violate, the exemption from
garnishment, levy, attachment or execution provided under this Act and the
New Central Bank Act (as added by RA 9302);
10. any willful failure or refusal to comply with, or violation of any provision of
this Act, or commission of any other irregularities, and/or conducting business
in an unsafe or unsound manner as may be determined by the Board of
Directors (as amended by RA 9302).
g. The Board of Directors is hereby authorized to impose administrative fines
for any act or omission enumerated in the preceding subsection, and for
violation of any order, instruction, rule or regulation issued by the Corporation,
against a bank and/or any of its directors, officers or agents responsible for
such act, omission, or violation, in amounts as it may be determined to be
appropriate, but in no case to exceed three times the amount of the damages
or costs caused by the transaction for each day that the violation subsists,
taking into consideration the attendant circumstances, such as the nature and
gravity of the violation or irregularity and the size of the bank (as amended by
RA 9302).[[49]]
[[50]] SECTION 22. No court, except the Court of Appeals, shall issue any
temporary restraining order, preliminary injunction or preliminary mandatory
injunction against the Corporation for any action under this Act (as added by
RA 9302).
This prohibition shall apply in all cases, disputes or controversies instituted by
a private party, the insured bank, or any shareholder of the insured bank (as
added by RA 9302).
The Supreme Court may issue a restraining order or injunction when the
matter is of extreme urgency involving a constitutional issue, such that unless
a temporary restraining order is issued, grave injustice and irreparable injury
will arise. The party applying for the issuance of a restraining order or
injunction shall file a bond in an amount to be fixed by the Supreme Court,
which bond shall accrue in favor of the Corporation if the court should finally
decide that the applicant was not entitled to the relief sought (as added by RA
9302).
Any restraining order or injunction issued in violation of this Section is void
and of no force and effect and any judge who has issued the same shall
suffer the penalty of suspension of at least sixty (60) days without pay (as
added by RA 9302).[[50]]
[[51]] SECTION 23. The Corporation may be reorganized by the Board of
Directors by adopting if it so desires, an entirely new staffing pattern or
organizational structure to suit the operations of the Corporation under this
Act. No preferential or priority right shall be given to or enjoyed by any
personnel for appointment to any position in the new staffing pattern nor shall
any personnel be considered as having prior or vested rights with respect to
retention in the Corporation or in any position which may be created in the
new staffing pattern, even if he should be the incumbent of a similar position
prior to reorganization. The reorganization shall be completed within six (6)
months after the effectivity of this Act. Personnel who are not retained are
deemed separated from the service (as added by RA 9302).[[51]]
[[52]] SECTION 24. The Board of Directors is hereby authorized to provide
separation incentives, and all those who shall retire or be separated from the
service on account of reorganization under the preceding section shall be
entitled to such incentives which shall be in addition to all gratuities and
benefits to which they may be entitled under existing laws (as added by RA
9302).[[52]]
[[53]] SECTION 25. The words Central Bank and the Central Bank of the
Philippines wherever they appear in Republic Act No. 3591, as amended, is
hereby replaced with Bangko Sentral and/or Bangko Sentral ng Pilipinas,
respectively (as added by RA 9302).[[53]]
[[54]] SECTION 26. Separability Clause. If any provision or section of this
Act or the application thereof to any person or circumstances is held invalid,
the other provisions or sections of this Act, in the application of such provision
or section to other persons or circumstances, shall not be affected thereby (as
added by RA 9302).[[54]]
[[55]] SECTION 27. Repealing Clause. All acts or parts of acts and
executive orders, administrative orders, or parts thereof which are
inconsistent with the provisions of this Act are hereby repealed (as added by
RA 9302).[[55]]
[[56]] SECTION 28. Effectivity Clause. This Act shall take effect fifteen
(15) days following the completion of its publication in the Official Gazette or
in two (2) newspapers of general circulation (as added by RA 9302).[[56]]
REPUBLIC ACT No. 3765
AN ACT TO REQUIRE THE DISCLOSURE OF FINANCE CHARGES IN CONNECTION
WITH EXTENSIONS OF CREDIT.
Section 1. This Act shall be known as the "Truth in Lending Act."
Section 2. Declaration of Policy. It is hereby declared to be the policy of the State to
protect its citizens from a lack of awareness of the true cost of credit to the user by
assuring a full disclosure of such cost with a view of preventing the uninformed use of
credit to the detriment of the national economy.
Section 3. As used in this Act, the term
(1) "Board" means the Monetary Board of the Central Bank of the Philippines.
(2) "Credit" means any loan, mortgage, deed of trust, advance, or discount; any
conditional sales contract; any contract to sell, or sale or contract of sale of
property or services, either for present or future delivery, under which part or all
of the price is payable subsequent to the making of such sale or contract; any
rental-purchase contract; any contract or arrangement for the hire, bailment, or
leasing of property; any option, demand, lien, pledge, or other claim against, or
for the delivery of, property or money; any purchase, or other acquisition of, or
any credit upon the security of, any obligation of claim arising out of any of the
foregoing; and any transaction or series of transactions having a similar purpose
or effect.
(3) "Finance charge" includes interest, fees, service charges, discounts, and
such other charges incident to the extension of credit as the Board may be
regulation prescribe.
(4) "Creditor" means any person engaged in the business of extending credit
(including any person who as a regular business practice make loans or sells or
rents property or services on a time, credit, or installment basis, either as
principal or as agent) who requires as an incident to the extension of credit, the
payment of a finance charge.
(5) "Person" means any individual, corporation, partnership, association, or other
organized group of persons, or the legal successor or representative of the
foregoing, and includes the Philippine Government or any agency thereof, or any
other government, or of any of its political subdivisions, or any agency of the
foregoing.
Section 4. Any creditor shall furnish to each person to whom credit is extended, prior to
the consummation of the transaction, a clear statement in writing setting forth, to the
extent applicable and in accordance with rules and regulations prescribed by the Board,
the following information:
(1) the cash price or delivered price of the property or service to be acquired;
(2) the amounts, if any, to be credited as down payment and/or trade-in;
(3) the difference between the amounts set forth under clauses (1) and (2);
(4) the charges, individually itemized, which are paid or to be paid by such
person in connection with the transaction but which are not incident to the
extension of credit;
(5) the total amount to be financed;
(6) the finance charge expressed in terms of pesos and centavos; and
(7) the percentage that the finance bears to the total amount to be financed
expressed as a simple annual rate on the outstanding unpaid balance of the
obligation.
Section 5. The Board shall prescribe such rules and regulations as may be necessary or
proper in carrying out the provisions of this Act. Any rule or regulation prescribed
hereunder may contain such classifications and differentiations as in the judgment of the
Board are necessary or proper to effectuate the purposes of this Act or to prevent
circumvention or evasion, or to facilitate the enforcement of this Act, or any rule or
regulation issued thereunder.
Section 6. (a) Any creditor who in connection with any credit transaction fails to disclose
to any person any information in violation of this Act or any regulation issued thereunder
shall be liable to such person in the amount of P100 or in an amount equal to twice the
finance charged required by such creditor in connection with such transaction, whichever
is the greater, except that such liability shall not exceed P2,000 on any credit transaction.
Action to recover such penalty may be brought by such person within one year from the
date of the occurrence of the violation, in any court of competent jurisdiction. In any
action under this subsection in which any person is entitled to a recovery, the creditor
shall be liable for reasonable attorney's fees and court costs as determined by the court.
(b) Except as specified in subsection (a) of this section, nothing contained in this
Act or any regulation contained in this Act or any regulation thereunder shall
affect the validity or enforceability of any contract or transactions.
 (c) Any person who willfully violates any provision of this Act or any regulation
issued thereunder shall be fined by not less than P1,00 or more than P5,000 or
imprisonment for not less than 6 months, nor more than one year or both.

(d) No punishment or penalty provided by this Act shall apply to the Philippine
Government or any agency or any political subdivision thereof.

(e) A final judgment hereafter rendered in any criminal proceeding under this Act
to the effect that a defendant has willfully violated this Act shall be prima facie
evidence against such defendant in an action or proceeding brought by any other
party against such defendant under this Act as to all matters respecting which
said judgment would be an estoppel as between the parties thereto.

Section 7. This Act shall become effective upon approval.

Approved: June 22, 1963

REPUBLIC ACT NO. 8791 May 23, 2000
AN ACT PROVIDING FOR THE REGULATION OF THE ORGANIZATION AND
OPERATIONS OF BANKS, QUASI-BANKS, TRUST ENTITIES AND FOR OTHER
PURPOSES
CHAPTER I
TITLE AND CLASSIFICATION OF BANKS
Section 1. Title. 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 II
AUTHORITY OF THE BANGKO SENTRAL
Section 4. Supervisory Powers. The operations and activities of banks shall be subject
to supervision of the Bangko Sentral. "Supervision" shall include the following:
4.1. The issuance of rules of, conduct or the establishment 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 III
ORGANIZATION, MANAGEMENT AND ADMINISTRATION OF BANKS. QUASI-
BANKS AND TRUST ENTITIES
Section 8. Organization. - The Monetary Board may authorize the organization of a bank
or quasi-bank subject to the following conditions:
8.1 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 IV
DEPOSITS. LOANS AND OTHER OPERATIONS
Article I
Operations 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;
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)

52.2. Such as shall be conveyed to it in satisfaction of debts previously contracted in the Section 55. Prohibited Transactions.
course of its dealings, or
55.1. No director, officer, employee, or agent of any bank shall -
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.
(a) Make false entries in any bank report or statement or participate in any
fraudulent transaction, thereby affecting the financial interest of, or causing
Any real property acquired or held under the circumstances enumerated in the above damage to, the bank or any person;
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
(b) Without order of a court of competent jurisdiction, disclose to any
period, continue to hold the property for its own use, subject to the limitations of the
unauthorized person any information relative to the funds or properties in the
preceding Section. (25a)
custody of the bank belonging to private individuals, corporations, or any other
entity: Provided, That with respect to bank deposits, the provisions of existing
Section 53. Other Banking Services. - In addition to the operations specifically laws shall prevail;
authorized in this Act, a bank may perform the following services:
 (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 V
PLACEMENT UNDER CONSERVATORSHIP
Section 67. Conservatorship. - The grounds and procedures for placing a bank under
conservatorship, as well as, the powers and duties of the conservator appointed for the
bank shall be governed by the provisions of Section 29 and the last two paragraphs of
Section 30 of the New Central Bank Act: Provided, That this Section shall also apply to
conservatorship proceedings of quasi-banks. (n)
CHAPTER VI
CESSATION OF BANKING BUSINESS
Section 68. Voluntary Liquidation. - In case of 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 VII
LAWS 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 VIII
FOREIGN BANKS
Section 72. Transacting Business in the Philippines. - The entry of foreign banks in the
Philippines through the establishment of branches shall be governed by the provisions of
the Foreign Banks Liberalization Act. The conduct of offshore banking business in the
Philippines shall be governed by the provisions of the Presidential Decree No. 1034,
otherwise known as the "Offshore Banking System Decree." (14a)
Section 73. Acquisition of Voting Stock in a Domestic Bank. - Within seven (7) years
from the effectivity of this act and subject to guidelines issued pursuant to the Foreign
Banks Liberalization Act, the Monetary Board may authorize a foreign bank to acquire up
to one hundred percent (100%) of the voting stock of only one (1) bank organized under
the laws of the Republic of the Philippines. 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 IX
TRUST OPERATIONS
Section 79. Authority to Engage in Trust Business. - Only a stock corporation or a
person duly authorized by the Monetary Board to engage in trust business shall act as a
trustee or administer any trust or hold property in trust or on deposit for the use, benefit,
or behoof of others. For purposes of this Act, such a corporation shall be referred to as a
trust entity. (56a; 57a)
Section 80. Conduct of Trust Business. - A trust entity shall administer the funds or
property under its custody with the diligence that a prudent man would exercise in the
conduct of an enterprise of a like character and with similar aims. No trust entity shall, for
the account of the trustor or the beneficiary of the trust, purchase or acquire property
from, or sell, transfer, assign, or lend money or property to, or purchase debt instruments
of, any of the departments, directors, officers, stockholders, or employees of the trust
entity, relatives within the first degree of consanguinity or affinity, or the related interests,
of such directors, officers and stockholders, unless the transaction is specifically
authorized by the trustor and the relationship of the trustee and the other party involved
in the transaction is fully disclosed to the trustor 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 96. Separability Clause. - If any provision or section of this Act or the application
thereof to any person or circumstance is held invalid, the other provisions or sections of
this Act, and the application of such provision or section to other persons or
circumstances shall not be affected thereby. (n)
Section 97. Effectivity Clause - This Act shall take effect fifteen (15) days following its
publication in the Official Gazette or in two (2) national newspapers of general circulation.
(91)

Section 92. Exemption of Trust Assets from Claims. - No assets held by a trust entity in Approved,
its capacity as trustee shall be subject to any claims other than those of the parties
interested in the specific trusts. (65) FRANKLIN M. DRILON
President of the Senate
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 MANUEL B. VILLAR JR.
incorporation. Such trust entity may, with prior approval of the Monetary Board, establish Speaker of the House of Representatives
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 This Act, which is a consolidation of Senate Bill No. 1519 and House Bill No. 6814, was
business had all been conducted in the head office. For the purpose of this Act, the trust finally passed by the Senate and the House of Representatives on April 12, 2000.
entity and its branches shall be treated as one unit. (67)
ROBERTO P. NAZARENO
CHAPTER X Secretary General House of Representatives
FINAL PROVISIONS
OSCAR G. YABES
Section 94. Phase Out of Bangko Sentral Powers Over Building and Loan Secretary of the Senate
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
Approved:
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 JOSEPH EJERCITO ESTRADA
Act, as amended, including such rules and regulations issued pursuant thereto. Upon President of the Philippines
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
amended by republic Act No. 7400, are likewise repealed. (90a)
REPUBLIC ACT No. 7653
THE NEW CENTRAL BANK ACT
CHAPTER I ESTABLISHMENT AND ORGANIZATION OF THE BANGKO
SENTRAL NG PILIPINAS
ARTICLE I
CREATION, 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 II
THE 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 III
THE 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 IV
OPERATIONS 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 V
REPORTS 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 VI
PROFITS, 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 VII
THE 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 I
THE 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 II
ISSUE 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 I
DOMESTIC 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 II
INTERNATIONAL 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 I
GENERAL 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 II
OPERATIONS 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 III
REGULATION 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 IV
LOANS 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 V
OPEN 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 VI
COMPOSITION 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 VII
BANK 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 VIII
SELECTIVE 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 IX
COORDINATION 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 II
THE 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 III
FUNCTIONS 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 I
PRIVILEGES
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 II
PROHIBITIONS
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 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

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
REPUBLIC ACT No. 1405
AN ACT PROHIBITING DISCLOSURE OF OR INQUIRY INTO, DEPOSITS WITH ANY
BANKING INSTITUTION AND PROVIDING PENALTY THEREFOR.
Section 1. It is hereby declared to be the policy of the Government to give
encouragement to the people to deposit their money in banking institutions and to
discourage private hoarding so that the same may be properly utilized by banks in
authorized loans to assist in the economic development of the country.
Section 2. 1 All deposits of whatever nature with banks or banking institutions in the
Philippines including investments in bonds issued by the Government of the Philippines,
its political subdivisions and its instrumentalities, are hereby considered as of an
absolutely confidential nature and may not be examined, inquired or looked into by any
person, government official, bureau or office, except upon written permission of the
depositor, or in cases of impeachment, or upon order of a competent court in cases of
bribery or dereliction of duty of public officials, or in cases where the money deposited or
invested is the subject matter of the litigation.
are hereby reproduced for reference, as follows; "Sec 2 All deposits of whatever
nature with banks or banking institutions in the Philippines including investments
in bonds issued by the Government of the Philippines, its political subdivisions
and its instrumentalities, are hereby considered as of an absolutely confidential
nature and may not be examined, inquired or looked into by any person,
government official, bureau or office, except upon written per-mission of the
depositor, or in cases of impeachment, or upon order of a competent court in
cases of bribery or dereliction of duty of public officials. or in cases where the
money deposited or invested is the subject matter of the litigation," "Sec. 3. It
shall be unlawful for any official or employee of a banking institution to disclose to
any person other than those mentioned in Section two hereof any information
concerning said deposits."

Section 3. It shall be unlawful for any official or employee of a banking institution to

disclose to any person other than those mentioned in Section two hereof any information
concerning said deposits.

Section 4. All Acts or parts of Acts, Special Charters, Executive Orders, Rules and
Regulations which are inconsistent with the provisions of this Act are hereby repealed.

Section 5. Any violation of this law will subject offender upon conviction, to an
imprisonment of not more than five years or a fine of not more than twenty thousand
pesos or both, in the discretion of the court.

Section 6. This Act shall take effect upon its approval.

Approved: September 9, 1955

Footnote

1This Section and Section 3 were both amended by PD No. 1792 issued January
16, 1981, PD 1792 was expressly repealed by Sec 135 of R.A. No.
7653, approved June 14, 1993. The original sections 2 and 3 of R.A. No.1405
REPUBLIC ACT No. 6426
AN ACT INSTITUTING A FOREIGN CURRENCY DEPOSIT SYSTEM IN THE
PHILIPPINES, AND FOR OTHER PURPOSES.
Section 1. Title. This act shall be known as the "Foreign Currency Deposit Act of the
Philippines."
Section 2. Authority to deposit foreign currencies. Any person, natural or juridical, may,
in accordance with the provisions of this Act, deposit with such Philippine banks in good
standing, as may, upon application, be designated by the Central Bank for the purpose,
foreign currencies which are acceptable as part of the international reserve, except those
which are required by the Central Bank to be surrendered in accordance with the
provisions of Republic Act Numbered two hundred sixty-five (Now Rep. Act No. 7653).
Section 3. Authority of banks to accept foreign currency deposits. The banks
designated by the Central Bank under Section two hereof shall have the authority:
(1) To accept deposits and to accept foreign currencies in trust Provided, That
numbered accounts for recording and servicing of said deposits shall be allowed;
(2) To issue certificates to evidence such deposits;
(3) To discount said certificates;
(4) To accept said deposits as collateral for loans subject to such rules and
regulations as may be promulgated by the Central Bank from time to time; and
(5) To pay interest in foreign currency on such deposits.
Section 4. Foreign currency cover requirements. Except as the Monetary Board may
otherwise prescribe or allow, the depository banks shall maintain at all times a one
hundred percent foreign currency cover for their liabilities, of which cover at least fifteen
percent shall be in the form of foreign currency deposit with the Central Bank, and the
balance in the form of foreign currency loans or securities, which loans or securities shall
be of short term maturities and readily marketable. Such foreign currency loans may
include loans to domestic enterprises which are export-oriented or registered with the
Board of Investments, subject to the limitations to be prescribed by the Monetary Board
on such loans. Except as the Monetary Board may otherwise prescribe or allow, the
foreign currency cover shall be in the same currency as that of the corresponding foreign
currency deposit liability. The Central Bank may pay interest on the foreign currency
deposit, and if requested shall exchange the foreign currency notes and coins into
foreign currency instruments drawn on its depository banks. (As amended by PD No.
1453, June 11, 1978.)
Depository banks which, on account of networth, resources, past performance, or other
pertinent criteria, have been qualified by the Monetary Board to function under an
expanded foreign currency deposit system, shall be exempt from the requirements in the
preceding paragraph of maintaining fifteen percent (15%) of the cover in the form of
foreign currency deposit with the Central Bank. Subject to prior Central Bank approval
when required by Central Bank regulations, said depository banks may extend foreign
currency loans to any domestic enterprise, without the limitations prescribed in the preceding
paragraph regarding maturity and marketability, and such loans shall be eligible for purposes
of the 100% foreign currency cover prescribed in the preceding paragraph. (As added by PD
No. 1035.)
Section 5. Withdrawability and transferability of deposits. There shall be no restriction
on the withdrawal by the depositor of his deposit or on the transferability of the same
abroad except those arising from the contract between the depositor and the bank.
Section 6. Tax exemption. All foreign currency deposits made under this Act, as
amended by PD No. 1035, as well as foreign currency deposits authorized under PD No.
1034, including interest and all other income or earnings of such deposits, are hereby
exempted from any and all taxes whatsoever irrespective of whether or not these
deposits are made by residents or nonresidents so long as the deposits are eligible or
allowed under aforementioned laws and, in the case of nonresidents, irrespective of
whether or not they are engaged in trade or business in the Philippines. (As amended
by PD No. 1246, prom. Nov. 21, 1977.)
Section 7. Rules and regulations. The Monetary Board of the Central Bank shall
promulgate such rules and regulations as may be necessary to carry out the provisions
of this Act which shall take effect after the publications in the Official Gazette and in a
newspaper of national circulation for at least once a week for three consecutive weeks.
In case the Central Bank promulgates new rules and regulations decreasing the rights of
depositors, rules and regulations at the time the deposit was made shall govern.
Section 8. Secrecy of foreign currency deposits. All foreign currency deposits
authorized under this Act, as amended by PD No. 1035, as well as foreign currency
deposits authorized under PD No. 1034, are hereby declared as and considered of an
absolutely confidential nature and, except upon the written permission of the depositor, in
no instance shall foreign currency deposits be examined, inquired or looked into by any
person, government official, bureau or office whether judicial or administrative or
legislative, or any other entity whether public or private; Provided, however, That said
foreign currency deposits shall be exempt from attachment, garnishment, or any other
order or process of any court, legislative body, government agency or any administrative
body whatsoever. (As amended by PD No. 1035, and further amended by PD No. 1246,
prom. Nov. 21, 1977.)

Section 9. Deposit insurance coverage. The deposits under this Act shall be insured
under the provisions of Republic Act No. 3591, as amended (Philippine Deposit
Insurance Corporation), as well as its implementing rules and regulations: Provided, That
insurance payment shall be in the same currency in which the insured deposits are
denominated.

Section 10. Penal provisions. Any willful violation of this Act or any regulation duly
promulgated by the Monetary Board pursuant hereto shall subject the offender upon
conviction to an imprisonment of not less than one year nor more than five years or a fine
of not less than five thousand pesos nor more than twenty-five thousand pesos, or both
such fine and imprisonment at the discretion of the court.

Section 11. Separability clause. The provisions of this Act are hereby declared to be
separable and in the event one or more of such provisions are held unconstitutional, the
validity of other provisions shall not be affected thereby.

Section 12. Repealing clause. All acts, executive orders, rules and regulations, or
parts thereof, which are inconsistent with any provisions of this Act are hereby repealed,
amended or modified accordingly, without prejudice, however, to deposits made
thereunder.

Section 12-A. Amendatory enactments and regulations. In the event a new enactment
or regulation is issued decreasing the rights hereunder granted, such new enactment or
regulation shall not apply to foreign currency deposits already made or existing at the
time of issuance of such new enactment or regulation, but such new enactment or
regulation shall apply only to foreign currency deposits made after its issuance. (As
added by PD No. 1246, prom. Nov. 21, 1977.)

Section 13. Effectivity. This Act shall take effect upon its approval.

Approved, April 4, 1974