philippine banking and allied laws

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PHILIPPINE

BANKING & ALLIED LAWS ____________

BANKING & ALLIED LAWS

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TABLE OF CONTENTS

The General Banking Law of 2000 (RA 8791) 3 The New Central Bank Act (RA 7653) 31 Foreign Banks Liberization Act (RA 7721) 85 Rural Bank Act (RA7353) 90 Thrifts Bank Act (RA 7906) 103 Philippine Deposit Insurance Corporation (RA3591,as amended) 115 Secrecy of Bank Deposits (RA 1405) 142 Foreign Currency Deposit Act (RA 6426) 143 Truth Lending Act (RA 3765) 146 The Unclaimed Balances Law (RA 3936) 149 Anti-Money Laundering Act (RA 9160 as amended by RA 9194) 153 RA 10167: AN ACT TO FURTHER STRENGTHEN THE ANTI-MONEY LAUNDERING LAW, AMENDING FOR THE PURPOSE SECTIONS 10 AND 11 OF REPUBLIC ACT NO. 9160, OTHERWISE KNOWN AS THE “ANTI-MONEY LAUNDERING ACT OF 2001″, AS AMENDED, AND FOR OTHER PURPOSES

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The Terrorism Financing Prevention and Suppression Act of 2012 (RA 10168) 163 Extrajudicial Foreclosure of Mortgage (Act 3135, as amended) 172 Human Security Act of 2007 (RA 9372) 174

**See other attachment for the Revised IRR of the AMLA LAW.


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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)


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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


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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)


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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


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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


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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


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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%)


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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


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(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)


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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


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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)


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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)


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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)


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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


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accommodations, advances and other assets shall be subject to regulations issued by the Monetary Board. (84a)

Section 50. Major Investments. - For the purpose or enhancing bank supervision, the Monetary Board shall establish criteria for reviewing major acquisitions of investments by a bank including corporate affiliations or structures that may expose the bank to undue risks or in any way hinder effective supervision.

Section 51. Ceiling on Investments in Certain Assets. - Any bank may acquire real estate as shall be necessary for its own use in the conduct of its business: Provided, however, That the total investment in such real estate and improvements thereof including bank equipment, shall not exceed fifty percent (50%) of combined capital accounts: Provided, further, That the equity investment of a bank in another corporation engaged primarily in real estate shall be considered as part of the bank's total investment in real estate, unless otherwise provided by the Monetary Board. (25a)

Section 52. Acquisition of Real Estate by Way of Satisfaction of Claims. - Notwithstanding the limitations of the preceding Section, a bank may acquire, hold or convey real property under the following circumstances:

52.1. Such as shall be mortgaged to it in good faith by way of security for debts;

52.2. Such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings, or

52.3. Such as it shall purchase at sales under judgments, decrees, mortgages, or trust deeds held by it and such as it shall purchase to secure debts due it.

Any real property acquired or held under the circumstances enumerated in the above paragraph shall be disposed of by the bank within a period of five (5) years or as may be prescribed by the Monetary Board: Provided, however, That the bank may, after said period, continue to hold the property for its own use, subject to the limitations of the preceding Section. (25a)


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Section 53. Other Banking Services. - In addition to the operations specifically authorized in this Act, a bank may perform the following services:

53.1. Receive in custody funds, documents and valuable objects;

53.2. Act as financial agent and buy and sell, by order of and for the account of their customers, shares, evidences of indebtedness and all types of securities;

53.3. Make collections and payments for the account of others and perform such other services for their customers as are not incompatible with banking business;

53.4 Upon prior approval of the Monetary Board, act as managing agent, adviser, consultant or administrator of investment management/ advisory/consultancy accounts; and

53.5. Rent out safety deposit boxes.

The bank shall perform the services permitted under Subsections 53.1, 53.2,53.3 and 53.4 as depositary or as an agent. Accordingly, it shall keep the funds, securities and other effects which it receives duly separate from the bank's own assets and liabilities: The Monetary Board may regulate the operations authorized by this Section in order to ensure that such operations do not endanger the interests of the depositors and other creditors of the bank. In case a bank or quasi-bark notifies the Bangko Sentral or publicly announces a bank holiday, or in any manner suspends the payment of its deposit liabilities continuously for more than thirty (30) days, the Monetary Board may summarily and without need for prior hearing close such banking institution and place it under receivership of the Philippine Deposit Insurance Corporation. (72a)

Section 54. Prohibition to Act as Insurer. - A bank shall not directly engage in insurance business as the insurer. (73)


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Section 55. Prohibited Transactions.

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

(a) Make false entries in any bank report or statement or participate in any fraudulent transaction, thereby affecting the financial interest of, or causing damage to, the bank or any person;

(b) Without order of a court of competent jurisdiction, disclose to any unauthorized person any information relative to the funds or properties in the custody of the bank belonging to private individuals, corporations, or any other entity: Provided, That with respect to bank deposits, the provisions of existing laws shall prevail;

(c) Accept gifts, fees, or commissions or any other form of remuneration in connection with the approval of a loan or other credit accommodation from said bank;

(d) Overvalue or aid in overvaluing any security for the purpose of influencing in any way the actions of the bank or any bank; or

(e) Outsource inherent banking functions.

55.2. No borrower of a bank shall -

(a) Fraudulently overvalue property offered as security for a loan or other credit accommodation from the bank;

(b) Furnish false or make misrepresentation or suppression of material facts for the purpose of obtaining, renewing, or increasing a loan or other credit accommodation or extending the period thereof;

(c) Attempt to defraud the said bank in the event of a court action to recover a loan or other credit accommodation; or

(d) Offer any director, officer, employee or agent of a bank any gift, fee, commission, or any other form of compensation in order to influence such persons into approving a loan or other credit accommodation application.

55.3 No examiner, officer or employee of the Bangko Sentral or of any department, bureau, office, branch or agency of the Government that is assigned to supervise, examine, assist or render technical assistance to any bank shall commit any of the acts enumerated in this Section or aid in the commission of the same. (87-Aa)

The making of false reports or misrepresentation or suppression of material facts by personnel of the Bangko Sental ng Pilipinas shall be subject to the


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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)


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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)


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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)


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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)


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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


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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


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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


27

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


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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


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from the accounts of the general business of the trust entity. (61)

Section 88. Investment Limitations of a Trust Entity. - Unless otherwise directed by the instrument creating the trust, the lending and investment of funds and other assets acquired by a trust entity as executor, administrator, guardian, trustee, receiver or depositary of the estate of any minor or other incompetent person shall be limited to loans or investments as may be prescribed by law, the Monetary Board or any court of competent jurisdiction. (63a)

Section 89. Real Estate Acquired by a Trust Entity. - Unless otherwise specifically directed by the trustor or the nature of the trust, real estate acquired by a trust entity in whatever manner and for whatever purposes, shall likewise be governed by the relevant provisions of Section 52 of this Act. (64a)

Section 90. Investment of Non-Trust Funds. - The investment of funds other than trust funds of a trust entity which is a bank, financing company or an investment house shall be governed by the relevant provisions of this Act and other applicable laws. (64)

Section 91. Sanctions and Penalties. - A trust entity or any of its officers and

directors found to have willfully violated any pertinent provisions of this Act, shall be subject to the sanctions and penalties provided tinder Section 66 of this Act as well as Sections 36 and 37 of the New Central Bank Act.

Section 92. Exemption of Trust Assets from Claims. - No assets held by a trust entity in its capacity as trustee shall be subject to any claims other than those of the parties interested in the specific trusts. (65)

Section 93. Establishment of Branches of a Trust Entity. - The ordinary business of a trust entity shall be transacted at the place of business specified in its articles of incorporation. Such trust entity may, with prior approval of the Monetary Board, establish branches in the Philippines and the said entity shall be responsible for all business conducted in such branches to the same extent and in the same manner as though such business had all been conducted in the head office. For the purpose of this Act, the trust entity and its branches shall be treated as one unit. (67)

CHAPTER X FINAL PROVISIONS

Section 94. Phase Out of Bangko Sentral Powers Over Building and Loan Associations. - Within a period of three (3) years from the effectivity of this Act, the Bangko Sentral shall phase out and transfer its supervising and regulatory powers over building and loan associations to the Home Insurance and Guaranty Corporation which shall assume the same. Until otherwise provided bylaw1 building and loan associations shall continue to be governed by Sections 39 to 55, Chapter VI of the General Banking Act, as amended, including such rules and regulations issued pursuant thereto. Upon assumption by the Home Insurance and Guaranty Corporation of


30

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)

Section 96. Separability Clause. - If any provision or section of this Act or the

application thereof to any person or circumstance is held invalid, the other provisions or sections of this Act, and the application of such provision or section to other persons or circumstances shall not be affected thereby. (n)

Section 97. Effectivity Clause - This Act shall take effect fifteen (15) days following its publication in the Official Gazette or in two (2) national newspapers of general circulation. (91)

Approved,

FRANKLIN M. DRILON President of the Senate

MANUEL B. VILLAR JR. Speaker of the House of Representatives

This Act, which is a consolidation of Senate Bill No. 1519 and House Bill No. 6814, was finally passed by the Senate and the House of Representatives on April 12, 2000.

ROBERTO P. NAZARENO Secretary General House of Representatives

OSCAR G. YABES Secretary of the Senate

Approved:

JOSEPH EJERCITO ESTRADA President of the Philippines


31

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


32

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


33

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


34

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


35

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


36

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


37

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


38

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,


39

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.


40

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


41

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


42

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.


43

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.


44

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


45

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


46

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


47

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


48

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.


49

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


50

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


51

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


52

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


53

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


54

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.


55

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


56

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


57

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


58

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,


59

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


60

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.


61

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


62

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


63

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


64

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


65

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.


66

(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.


67

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


68

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.


69

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.


70

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


71

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


72

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


73

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


74

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


75

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


76

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


77

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


78

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


79

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,


80

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


81

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


82

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


83

twenty-five (25) years or until such time that liabilities have

been liquidated: Provided, That the Bangko Sentral may

financially assist the Central Bank of Liquidators in the

liquidation of CB liabilities: Provided, finally, That upon

disposition of said retained assets and liquidation of said

retained liabilities, the Central Bank shall be deemed

abolished.

All actions taken by the Bangko Sentral Monetary Board under this

section shall be reported to Congress and the President within thirty

(30) days.

Section 133. Mandate to Organize. - The Bangko Sentral shall be

organized by the Monetary Board without being subject to the

provisions of Republic Act No. 7430, by adopting if it so desires, an

entirely new staffing pattern on organizational structure to suit the

operations of the Bangko Sentral under this Act. No preferential or

priority right shall be given to or enjoyed by any personnel for

appointment to any position in the new staffing pattern, nor shall any

personnel be considered as having prior or vested rights with respect

to retention in the Bangko Sentral or in any position which may be

created in the new staffing pattern, even if he should be the incumbent

of a similar position prior to organization. The formulation of the

program of organization shall be completed within six (6) months after

the effectivity of this Act, and shall be fully implemented within a

period of six (6) months thereafter. Personnel who may not be retained

are deemed separated from the service.

Section 134. Separation Benefits. - Pursuant to Section 15 of this Act, the

Monetary Board is authorized to provide separation incentives, and all

those who shall retire or be separated from the service on account of

reorganization under the preceding section shall be entitled to such

incentives, which shall be in addition to all gratuities and benefits to

which they may be entitled under existing laws.

Section 135. Repealing Clause. - Except as may be provided for in

Section 46 and 132 of this Act, Republic Act No. 265, as amended, the

provisions of any other law, special charters, rule or regulation issued

pursuant to said Republic Act No. 265, as amended, or parts thereof,

which may be inconsistent with the provisions of this Act are hereby

repealed. Presidential Decree No. 1792 is likewise repealed.

Section 136. Transfer of Powers. - All powers, duties and functions

vested by law in the Central Bank of the Philippines not inconsistent

with the provisions of this Act shall be deemed transferred to the


84

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


85

REPUBLIC ACT NO. 7721

AN ACT LIBERALIZING THE ENTRY AND SCOPE OF

OPERATIONS OF FOREIGN BANKS IN THE PHILIPPINES AND

FOR OTHER PURPOSES.

SECTION 1. Declaration of Policy. — The State shall develop a self-

reliant and independent national economy effectively controlled by

Filipinos and encourage, promote, and maintain a stable, competitive,

efficient, and dynamic banking and financial system that will stimulate

economic growth, attract foreign investments, provide a wider variety

of financial services to Philippine enterprises, households and

individuals, strengthen linkages with global financial centers, enhance

the country's competitiveness in the international market and serve as

a channel for the flow of funds and investments into the economy to

promote industrialization.

Pursuant to this policy, the Philippine banking and financial system is

hereby liberalized to create a more competitive environment and

encourage greater foreign participation through increase in ownership

in domestic banks by foreign banks and the entry of new foreign bank

branches.

In allowing increased foreign participation in the financial system, it

shall be the policy of the State that the financial system shall remain

effectively controlled by Filipinos.

Sec. 2. Modes of Entry. — The Monetary Board may authorize foreign

banks to operate in the Philippine banking system through any of the

following modes of entry: (i) by acquiring, purchasing or owning up to

sixty percent (60%) of the voting stock of an existing bank; (ii) by

investing in up to sixty percent (60%) of the voting stock of a new

banking subsidiary incorporated under the laws of the Philippines; or

(iii) by establishing branches with full banking authority: Provided,

That a foreign bank may avail itself of only one (1) mode of entry:

Provided, further, That a foreign bank or a Philippine corporation may

own up to a sixty percent (60%) of the voting stock of only one (1)

domestic bank or new banking subsidiary.

Sec. 3. Guidelines for Approval. — In approving entry applications of

foreign banks, the Monetary Board shall: (i) ensure geographic

representation and complementation; (ii) consider strategic trade and

investment relationships between the Philippines and the country of

incorporation of the foreign bank; (iii) study the demonstrated


86

capacity, global reputation for financial innovations and stability in a

competitive environment of the applicant; (iv) see to it that reciprocity

rights are enjoyed by Philippine banks in the applicant's country; and

(v) consider willingness to fully share their technology.

Only those among the top one hundred fifty (150) foreign banks in the

world or the top five (5) banks in their country of origin as of the date

of application shall be allowed entry in accordance with Section 2 (ii)

and (iii) hereof.

In the exercise of this authority, the Monetary Board shall adopt such

measures as may be necessary to: (i) ensure that at all times the control

of seventy percent (70%) of the resources or assets of the entire

banking system is held by domestic banks which are at least majority-

owned by Filipinos; (ii) prevent a dominant market position by one

bank or the concentration of economic power in one or more financial

institutions, or in corporations, participations, partnerships, groups or

individuals with related interests; and (iii) secure the listing in the

Philippine Stock Exchange of the shares of stocks of banking

corporations established under Section 2(i) and (ii) of this

Act: Provided, That said banking corporations shall establish stock

option plans for their officers and employees as the resources or assets

of these corporations may allow in the best business judgment of their

respective boards of directors, pursuant to the Corporation Code of the

Philippines.

To qualify to establish a branch or a subsidiary, the foreign bank

applicant must be widely-owned and publicly-listed in its country of

origin, unless the foreign bank applicant is owned by the government

of its country of origin.

Sec. 4. Capital Requirements. — (i) For Locally Incorporated

Subsidiaries. — The minimum capital required for locally incorporated

subsidiaries of foreign banks shall be equal to that prescribed by the

Monetary Board for domestic banks of the same category.

(ii) For Foreign Bank Branches. — Foreign banks seeking entry

pursuant to Section 2 (iii) of this Act shall permanently assign capital

of not less than the U.S. dollar equivalent of Two hundred ten million

pesos (P210,000,000.00) at the exchange rate on the date of the

effectivity of this Act, as ascertained by the Monetary Board. The

permanently assigned capital shall be inwardly remitted and

converted into Philippine currency. The foreign bank shall be entitled

to three (3) branches.

The foreign bank may open three (3) additional branches in locations

designated by the Monetary Board by inwardly remitting and

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87

converting into Philippine currency as permanently assigned capital,

the U.S. dollar equivalent of Thirty-five million pesos (P35,000,000.00)

per additional branch at the exchange rate on the date of the effectivity

of this Act, as ascertained by the Monetary Board. The total number of

branches for each new foreign bank entrant shall not exceed six (6).

For purposes of meeting the prescribed capital ratios, the term

"capital" shall include permanently assigned capital plus "net due to

head office, branches and subsidiaries and offices outside the

Philippines" in the ratio prescribed by law or as may be prescribed by

the Monetary Board: Provided, That in all cases, the permanently

assigned capital and fifteen percent (15%) of "net due to" required to

comply with prescribed capital ratios shall be inwardly remitted and

converted to Philippine currency: Provided, further, That amounts

invested in productive enterprises or utilized by Philippine companies

for export activities, shall not be subject to conversion into Philippine

currency: Provided, finally, That the Monetary Board shall monitor the

effective use of the "net due to" funds.Whenever there results "net due

from head office" outside the Philippines, this shall be deducted from

the capital accounts for purposes of determining the required capital

ratios.

Sec. 5. Head Office Guarantee. — The head office of foreign bank

branches shall guarantee prompt payment of all liabilities of its

Philippine branches.

Sec. 6. Entrants under Section 2(iii). — Foreign banks shall be allowed

entry under Section 2 (iii) within five (5) years from the effectivity of

this Act. During this period, six (6) new foreign banks shall be allowed

entry under Section 2(iii) upon the approval of the Monetary

Board. An additional four (4) foreign banks may be allowed entry on

recommendation of the Monetary Board, subject to compliance with

Sections 2, 3, 4, and 5 of this Act, upon approval of the President as the

national interest may require.

Sec. 7. Board of Directors. — 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. chan robles virtual law

library

Sec. 8. Equal Treatment. — Foreign banks authorized to operate

under Section 2 of this Act, shall perform the same functions, enjoy the

same privileges, and be subject to the same limitations imposed upon a

Philippine bank of the same category. These limits include, among

others, the single borrower's limit and capital to risk asset ratio as well

as the capitalization required for expanded commercial banking

activities under the General Banking Act and other related laws of the


88

Philippines.

The basis for computing the ratio shall be the capital of the foreign

bank branch in the Philippines.

The foreign banks shall guarantee the observance of the rights of their

employees under the Constitution.

Any right, privilege or incentive granted to foreign banks or their

subsidiaries or affiliates under this Act, shall be equally enjoyed by

and extended under the same conditions to Philippine

banks. Philippine corporations whose shares of stocks are listed in the

Philippine Stock Exchange or are of long standing for at least ten (10)

years shall have the right to acquire, purchase or own up to sixty

percent (60%) of the voting stock of a domestic bank.

Sec. 9. Development Loans Incentives. — Loans extended by a

foreign bank's majority-owned subsidiary incorporated under the laws

of the Philippines and/or a Philippine bank sixty percent (60%) of the

voting stock of which is held by a foreign bank, to finance educational

institutions, cooperatives, hospitals and other medical services,

socialized or low-cost housing, and to local government units without

national government guarantee, shall be included for purposes of

determining compliance with the provisions of Presidential Decree

No. 717, as amended.

Sec. 10. Transitory Provisions. — Foreign banks operating through

branches in the Philippines upon the effectivity of this Act, shall be

eligible for the privilege of establishing up to six (6) additional

branches under the same terms and conditions required by Section 4

(ii) hereof: Provided, That for any branch additional to what is existing

at the time of the effectivity of this Act, the prescribed permanently

assigned capital shall be complied with immediately: Provided,

further, That a foreign bank may open three (3) branches in the

location of its choice and the next three (3) branches in locations

designated by the Monetary Board to insure balanced economic

development in all the regions.

The existing Philippine branches of foreign banks shall be given one-

and-a-half (1 1/2) years from the effectivity of this Act to comply with

the minimum capital requirements as prescribed under Section 4 (ii) of

this Act.

Sec. 11. Separability Clause. — If any provision of this Act is declared

unconstitutional, the same shall not affect the validity of the other

provisions not affected thereby.


89

Sec. 12. Applicability of Other Banking Laws. — The provisions of

Republic Act No. 337, as amended, otherwise known as the General

Banking Act, insofar as they are applicable and not in conflict with any

provision of this Act, shall apply to banks authorized pursuant to this

Act.

Sec. 13.Delegation of Rule-Making Powers and Compliance Reports.

— The Monetary Board is hereby authorized to issue such rules and

regulations as may be needed to implement the provisions of this Act

after consultation with the chairpersons of the Banks Committee of the

House of Representatives and the Senate of the Philippines. On or

before May 30 of each year, the Monetary Board shall file a written

report to Congress and its respective Banks Committees, on the

developments in the implementation of this Act.

Sec. 14. Amendment and Repeal of Inconsistent Laws. — Sections 11,

12, 12-A, 12-B, 13, 14-A, 21-B, and 68 of Republic Act No. 337, as

amended, otherwise known as the General Banking Act: Sections 4

and 5 of Republic Act No. 7353, otherwise known as the Rural Banks

Act; Sections 4 and 14 of Republic Act No. 3779, as amended,

otherwise known as the Savings and Loan Association Act; and

Section 4 of Republic Act No. 4093, as amended, otherwise known as

the Private Development Banks Act insofar as they are inconsistent

with this Act, are hereby repealed or modified accordingly.

Sec. 15. Effectivity Clause. — This Act shall take effect fifteen (15)

days after its publication in the Official Gazette or in two (2) national

newspapers of general circulation.

Approved: May 18, 1994


90


AN ACT PROVIDING FOR THE CREATION, ORGANIZATION AND OPERATION OF RURAL BANKS, AND FOR OTHER

PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. This Act shall be known and cited as the "Rural Act of 1992."

Sec. 2. The State hereby recognizes the need to promote comprehensive rural development with the end in view of attaining acquitable distribution of opportunities, income and wealth; a sustained increase in the amount of goods and services produced by the nation of the benefit of the people; and in expanding productivity as a key raising the quality of life for all, especially the underprivileged.

Towards these ends, the State hereby encourages and assists in the establishment of rural banking system designed to make needed credit available and readily accessible in the rural areas on reasonable terms.

Sec. 3. In furtherance of this policy, the Monetary Board of the Central Bank of the Philippines shall formulate the necessary rules and regulations governing the establishment and operation of rural banks for the purpose of providing adequate credit facilities to farmers and merchants, or to cooperatives of such farmers and merchants and in general, the people of the rural communities, and to supervise the operation of such banks.

Sec. 4. No rural bank shall be operated without a Certificate of Authority from the Monetary Board of the Central Bank. Rural banks shall be organized in the form of stock corporations. Upon consultation with the rural banks in the area, duly established cooperatives and corporations primarily organize to hold equities in rural banks may organize a rural bank and/or subscribe to the shares of stock of any rural bank: Provided, That a cooperative or corporation

owning or controlling the whole or majority of the voting stock of the rural bank shall be subject to special examination and to such rules and regulations as the Monetary Board may prescribe. With exception of shareholdings of corporations organized primarily to hold equities in rural banks as provided for under Section 12-C of Republic Act 337, as amended, and of Filipino-controlled domestic banks, the capital stock of any rural bank shall be fully owned and held directly or indirectly by citizens of the Philippines or corporations, associations or cooperatives qualified under Philippine laws to own and hold such capital stock: Provided, That any provisions of existing laws to own and hold such capital stock: Provided, That any provision of existing laws to the contrary notwithstanding, stockholdings in a rural bank shall be exempt from any ownership ceiling for a period of ten (10)


91

years from the approval of this Act: Provided, further, That any such exemption shall require the approval of the Monetary Board. If subscription of private shareholders to the capital stock of rural cannot be secured or is not available, or insufficient to meet the normal credit needs of the locality, the Land Bank of the Philippines, the

Development Bank of the Philippines, or any government-owned or controlled bank or financial institution, on representation of the said private shareholders but subject to the investment guidelines, policies and procedures of the bank or financial institution and upon approval of the Monetary Board of the Central Bank, shall subscribe to the capital stock of such rural bank, which shall be paid in full at the time of subscription, in an amount equal to the fully paid subscribe and unimpaired capital of the private stockholders or such amount as the Monetary Board may prescribed as may be necessary to promote and expand rural economic development: Provided, however, That such shares of stock subscribe by the Land Bank of the Philippines, the Development Bank of the Philippines or any government-owned or controlled bank or financial institution may be sold at any time at market value to private individuals who are citizens of the Philippines: Provided, finally, That in the sale of shares of stock subscribed by the Land Bank of the Philippines, the Development bank of the Philippines or any government-owned or controlled bank or financial institution, the registered stockholders shall have the right of preemption within one (1) year from the date of offer in proportion to their respective holdings, but in the absence of such buyer, preference, however, shall be given to residents of the locality or province where the rural bank is located.

Sec. 5. All members of the Board of Directors of the rural bank shall be citizens of the Philippines at the time of their assumption to office: Provided, however, That nothing in this Act shall be construed as prohibiting any appointive or elective public official from serving as director, officer, consultant or in any capacity in the bank.

No Director or officer of any rural bank shall, either directly or indirectly, for himself or as the representative or agent of another borrow any of the deposits or funds of such banks, nor shall he become a guarantor, indorser, or surety for loans from such bank to others, or in any manner be an obligor for money borrowed from the bank or loaned by it except with the written approval of the majority of the directors of the bank, excluding the director concerned. Any such approval shall be entered upon the records of the corporation and a copy of such entry shall be transmitted forthwith to the appropriate supervising department. The director/officer of the bank who violates the provisions of this section shall be immediately dismissed from his office and shall be penalized in accordance with Section 26 of this Act.

The Monetary Board may regulate the amount of credit accommodations that may be extended directly to the directors, officers or stockholders of rural banks of banking institutions.


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However, the outstanding credit accommodations which a rural bank may extend to each of its stockholders owning two percent (2%) or more of the subscribed capital stock, its directors, or officers shall be limited to an amount equivalent to the respective outstanding deposits and book value of the paid-in capital contributions in the bank.

Sec. 6. Loans or advances extended by rural banks organized and operated under this Act shall be primarily for the purpose of meeting the normal credit needs of farmers, fishermen or farm families owning or cultivating land dedicated to agricultural production as well as the normal credit needs of cooperatives and merchants. In granting of loans, the rural bank shall give preference to the application of farmers and merchant whose cash requirements are small.

Loans may be granted by rural banks on the security of lands without Torrens Title where the owner of private property can show five (5) years on more peaceful, continuous and uninterrupted possession in concept of owner; or of portions of friar land estates or other lands administered by the Bureau of Lands that are covered by sales contracts and the purchase have paid at least five (5) years installment thereon, without the necessity of prior approval and consent by the Director of lands; or of portions of other estates under the

administration of the Department of Agrarian Reform or other government agency which are likewise covered by sales contracts and the purchasers have paid at least five (5) years installment thereon, without the necessity of prior approval and consent of the Department of Agrarian Reform or corresponding government agency; or of homesteads or free patent lands pending the issuance of titles but already approved, are issued, the provisions of any law or regulations to the contrary notwithstanding: Provided, That when the

corresponding titles are issued, the same shall be delivered to the Register of Deeds of the province where such lands are situated to the annotation of the encumbrance: Provided, further, That in the case of lands pending homestead of free patent titles, copies of notices for the presentation of the final proof shall also be furnished the creditor rural bank and, if the borrower applicants fail to present the final proof within thirty (30) days from date of notice, the creditor rural bank may do so for them at their expense: Provided, furthermore, That the applicant for homestead or free patent has already made improvements on the land and the loan applied for is to be used for further development of the same or for other productive economic activities: Provided, finally, That the appraisal and verification of the status of a land is a full responsibility of the rural bank and any loan granted on any land which shall be found later to be within the forest zone shall be for the sole account of the rural bank.

The foreclosure of mortgage covering loans granted by rural banks and executions of judgment thereon involving real properties levied upon by a sheriff shall be exempt from the publications in newspaper now required by law where the total amount of loan, excluding interest due and unpaid, does not exceed One hundred thousand


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pesos (P100,000) or such amount as the Monetary Board may prescribe as may be warranted by prevailing economic conditions. It shall be sufficient publication in such cases if the notices of foreclosure and execution of judgment are posted in the most conspicuous area of the municipal building, the municipal public market, the rural bank, the

barangay hall, the barangay public market, if any, where the land mortgaged is situated during the period of sixty (60) days immediately preceding the public auction or execution of judgment. Proof of publication as required herein shall be accomplished by an affidavit of the sheriff or officer conducting the foreclosure sale or execution of judgment and shall be attached with the records of the case: Provided, That when a homestead or free patent is foreclosed, the homesteader or free patent holder, as well as his heirs shall have the right to redeem the same within one (1) year from the date of the registration of the foreclosure in the case of land covered by a Torrens Title: Provided, finally, That in any case, borrowers, especially those who are mere tenants, need only to secure their loans with the procedure corresponding to their share.

A rural bank shall be allowed to foreclose lands mortgaged to it: Provided, That said lands shall be covered under Republic Act No. 6657.

Sec. 7. With the view to ensuring the balanced rural economic growth and expansion, rural banks may, within limits and conditions fixed by the Monetary Board, devote a portion of their loanable funds to meeting the normal credit needs of small business enterprises: provided, That loans shall not exceed fifteen percent (15%) of the net worth of a rural bank of such amount as the Monetary Board may prescribe as may be warranted by prevailing economic conditions, and

of essential enterprises or industries, other than those which are strictly agricultural in nature.

Sec. 8. To provide supplemental capital to any rural bank until it has accumulated enough capital of its own or stimulate private investments in rural banks, the Land Bank of the Philippines or any government-owned or controlled bank or financial institution shall subscribe within thirty (30) days to the capital stock of any rural bank from time to time in an amount equal to the total equity investment of the private shareholders which shall be paid in full at the time of the subscription of such amount as may be necessary to promote and expand rural economic development: Provided, however, That shares of stock issued to the Land Bank of the Philippines, the Development Bank of the Philippines or any government-owned or -controlled bank or financial institution, may, pursuant to this section, at any time, be paid off at par and retired in whole or in part if the rural bank has accumulated enough capital strength to permit retirement of such shares; or if an offer is received from private sources to replace the equity investment of the Land Bank of the Philippines, the Development Bank of the Philippines or any government-owned or –controlled bank or financial institution with an equivalent investment


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or more in the equity of such bank. In case of retirement of stock or replacement of equity investment of the Land Bank of the Philippines, the Development Bank of the Philippines or any government-owned or –controlled bank or financial institution, the registered private shareholders of the rural bank shall have the right of preemption

within one (1) year from the date of offer in proportion to their respective holdings.

Stock held by the Land Bank of the Philippines, the Development Bank of the Philippines or by any government-owned or –controlled bank or financial institution, under the terms of this section, shall be made preferred only as to assets upon liquidation and without power to vote and shall share in dividend distribution from the date of issuance in the amount of four percent (4%) on the first and second years, six

percent (6%) on the third and fourth years, eight percent (8%) on the fifth and sixth years, ten percent (10%) on the seventh and eighth years and twelve percent (12%) on the ninth to the fifteen years without preference: Provided, however, That is such stock of the Land Bank of the Philippines, the Development bank of the Philippines or any government-owned or –controlled bank or financial institution is sold to private shareholders, the same may be converted into common stock of the class provide for in Section 10 hereof: Provided, further, That pending the amendment of Articles of Incorporation of the rural bank, if necessary, for the purpose of reflecting the conversion into common stock of preferred stock sold to private stockholders, the transfer shall be recorded by the rural bank in the stock and transfer book and such shareholders shall thereafter enjoy all the rights and privileges of common stockholders. The preferred stocks so transferred shall be surrendered and cancelled and the corresponding common stocks shall be issued.

The corporate secretary of the rural bank shall submit to the Central Bank and the Securities and Exchange Commission a report on every transfer of preferred stock to private shareholders, and such report received by the Securities and Exchange Commission shall form part of the corporate records of rural bank. When all the prepared shares of stock of a rural bank have been sold to private shareholders, the Articles of Incorporation of the rural bank shall be amended to reflect the conversion of the preferred shares of stock into common stock. For this purpose, the President, the corporate secretary, and a majority of the Board of Directors, shall be filed with the Securities and Exchange Commission, which shall attach the same to the original Articles of Incorporation on file with said office.

The Securities and Exchange Commission shall not register and amended Articles of Incorporation unless accompanied by the Certificate of Authority required under Section 9 of Republic Act No. 337, as amended.

All supervised past due and restructured past due loans, including those covered under existing rehabilitation programs of the Central


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Bank, and fifty percent (50%) of non-supervised past due and restructured past due loans including accrued interest thereon on rural banks organized under Republic Act No. 720, as amended, as of December 31, 1986, shall be converted into preferred stocks, of the rural bank and issued in favor of the Land Bank of the Philippines, the

Development Bank of the Philippines or any government-owned or –controlled bank or financial institution: Provided, That penalties thereon are hereby warned except accrued interest on arrearages: Provided, further, That rural banks that prefer to settle their arrearages under a plan or payment or a combination of both plan of payment and conversion may do so in accordance with existing regulations and provisions of this Act: Provided, furthermore, That rural banks shall match these preferred stocks with private equity in equal annual installments over a period of fifteen (15) years to begin three (3) years after conversion: Provided, finally, That the Central Bank, the Land Bank of the Philippines, the Development Bank of the Philippines and any government-owned and –controlled bank or financial institution shall continue to rediscount subject to their respective programs, policies and guidelines against papers evidencing a loan granted by a rural bank in order to achieve the declared policy and promote the objectives of this Act.

Sec. 9. The Land Bank of the Philippines, the Development Bank of the Philippines, or any government-owned or –controlled bank or financial institution may obtain from any source as may be authorized under existing laws and regulations such amount as it may require for the purpose of subscribing to the shares of stock of rural bank: as provided in Section 13 of this Act.

Sec. 10. Stock certificates shall be issued to represent the contributions

to capital stock of the rural bank by the Government through the Land Bank of the Philippines, the Development Bank of the Philippines or through any government-owned or –controlled bank or financial institutions, and by qualified persons under such terms and conditions as the Monetary Board mat prescribe. The powers of the Monetary Board over rural banks shall extend to prescribing the amount, value and class of stock issued by any rural bank, organized under this Act.

Sec. 11. The power to supervise the operation of any rural bank by the Monetary Board as herein indicated shall consists in placing limits to the maximum credit allowed to any individual borrower; in prescribing the interest rate; in determining the loan period and loan procedures; in indicating the manner in which technical assistance shall be extended to rural banks; in imposing a uniform accounting system and manner of keeping the accounts and records of rural banks; in instituting periodic surveys of loan and lending procedures, audits, test-check of cash and other transactions of the rural banks; and, in general in supervising the business operations of the rural banks.

The Central bank shall have the power to enforce the laws, orders,


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instructions, rules and regulations promulgated by the Monetary Board applicable to rural banks; to require rural banks, their directors, officers and agents to conduct and manage the affairs of the rural banks in a lawful and orderly manner, and, upon proof that the rural bank of its Board of Directors, or officers are conducting and

managing the affairs of the banking in a manner contrary to the laws, orders, instructions, rules and regulations promulgated by the Monetary Board or in a manner substantially prejudicial in the interest of the Government, depositors or creditors, to take over the management of such bank when specifically authorized to do so by the Monetary Board after due hearing process until a new board of directors and officers are elected and qualified without prejudice to the prosecution of the persons for such violations under the provisions of Sections 32, 33 and 34 of Republic Act No. 265, as amended.

The management of the rural bank by the Central Bank shall be without expense to the rural bank, except such as is actually necessary for its operation, pending the election and qualification of a new board of directors and officers to take place of those responsible for the violations or acts contrary to the interest of the Government, depositors or creditors.

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

Sec. 12. In addition to the operations especially authorized in this Act, any rural bank may:

a. Accept saving and time deposit; b. Open current or checking accounts, provided the rural bank

has net assets of at least Five million (P5,000,000) subject to such guidelines as may be established by the Monetary Board:

c. Act as correspondent for other financial institutions; d. Act as a collection agent;

e. Act as official depositary of municipal, city or provincial funds in the municipality, city or province where it is located, subject to such guidelines as may be established by the Monetary Board;

f. Rediscount paper with the Philippine National Bank, the Land Bank of the Philippines, the Development Bank of the Philippines, or any other banking institution, including its branches and agencies. Said institution shall specify the nature of paper deemed acceptable for rediscount, as well as the rediscount rate to be charged by any of these institutions;

g. Offer other banking service as provided in Section 72 of Republic Act No. 337, as amended, and


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h. Extend financial assistance to public and private employees in accordance with the provisions of Section 5 of Republic Act No. 3779, as amended.

With written permission of the Monetary Board of the Central bank, any rural bank may act as trustee over estates or properties of farmer and merchants.

Nothing in this section shall be construed as precluding a rural bank from performing, with prior approval of the Monetary Board, all the services authorized and mortgage banks, of for commercial banks, under an expanded banking authority as provided in Section 21-B of the same Act.

Sec. 13. Subject to such guidelines as may be established by the Monetary, rural banks may invest in equities of the allied undertakings are hereinafter enumerated: Provided, That: (a) the total investment in equities shall not exceed twenty- five percent (25%) of the net worth of the rural bank; (b) the equity investment in any single enterprise shall be limited to fifteen percent (15%) of the net worth of the rural bank; and (c) the equity investment of the rural bank in any single enterprise shall remain a minority holding in that enterprise: Provided, further, That equity investment shall not be permitted in non-related activities.

Allied undertaking shall include:

a. banks, financial institutions and non-bank financial intermediaries;

b. Warehousing and other post-harvested facilities; c. Fertilizer and agricultural chemical and pesticides

distribution; d. Farm equipment distribution; e. Trucking an transportation of agricultural products; f. Marketing and agricultural products; g. Leasing; andOther undertakings as may be determined by the

Monetary Board.

Sec. 14. The Land Bank of the Philippines, the Development Bank of the Philippines or any government-owned or –controlled bank or financial institution shall, within sixty (60) days of certification of the Monetary Board, which shall be final, extend to a rural bank a loan or loans from time to time repayable in ten (10) years, with concessional rates of interest, against security which may be offered by any stockholders or stockholders of the rural bank: Provided:

a. That the Monetary Board is convinced that the resources of the rural bank are inadequate to meet the legitimate credit requirements of the locality wherein the rural bank is established.;

b. That there is a dearth of private capital in the said locality; and


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c. That it is not possible for the stockholders of the rural bank to increase the paid-up capital thereof.

Sec. 15. All rural banks created and organized under the provisions of this Act shall be exempt from the payment of all taxes, fees and charges of whatever nature and description, except the corporate income tax and local taxes, fees and charges, for a period of five (5) years from the date of commencement of operations.

All rural banks in operation as of the date of approval of this Act shall be exempt from the payment of all taxes, fees and charges of whatsoever nature and description, except the corporate income tax and local taxes, fees and charges, for a period of five (5) years from the approval of this Act.

Sec. 16. In an emergency or when a financial crisis is imminent, the Central Bank may give a loan to any rural bank against assets of the rural bank which may be considered acceptable by a concurrent vote of at least four (4) members of the Monetary Board.

In normal times the Central bank may rediscount against paper evidencing a loan granted by a rural bank to any of its customers which can be liquefied for a period of three hundred sixty (360) days: Provided, however, That for the purpose of implementing a nationwide program of agricultural and industrial development, rural banks are hereby authorized, under such terms and conditions as the Central bank shall prescribe, to borrow, on a medium – or long-term basis, funds that the Central Bank or any other government financing institution shall borrow from the Development Bank of the Philippines or other international or foreign-lending institutions for the specific purpose of financing the abovestated agricultural and industrial program. Repayment of loans obtained by the Central Bank of the Philippines or any other government financing institutions from said foreign-lending institutions under this section shall be guaranteed by the Republic of the Philippines.

Sec. 17. Deposits of rural banks with government-owned or –controlled financial institutions like the Land Bank of the Philippines, the Development Bank of the Philippines, and the Philippine national Bank are exempted from the Single Borrower’s Limit imposed by the General Banking Act.

In areas where there are no government banks, rural banks may deposit in private banks more than the amount prescribed by the Single Borrower’s Limit subject to Monetary Board regulations.

Sec. 18. To encourage consolidation and mergers of rural banks, if there are five (5) or more rural banks within the region that merge and consolidate within three (3) years from the enactment of this Act, the merged or consolidated entity will be given the following incentives


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for a period of seven (7) years:

a. Its deposit liabilities shall be subjected to only one-third (1/3) of reserves normally required for rural banks;

b. Its reserve requirement can all be maintained under interest-bearing government securities but kept unencumbered with government financial institutions or the Central Bank; and

c. It shall have unrestricted branching right within the region, free from any assessment or surcharge required in setting up a branch but under coordination with the Central bank which will have to assess that there are qualified personnel, control and procedures to operate the branch.

Sec. 19. The Central Bank of the Philippines shall extend technical assistance to any rural bank in the process of organization or during the course of operations whenever it is requested to do so or whenever the Monetary Board deems it necessary to preserve, protect and promote the objectives of this Act: Provided, however, That said assistance shall be without cost or obligation on the part of the rural bank.

Sec. 20. Any city or municipal trial court in his capacity as notary public ex officio shall administer the oath to or acknowledgement the instruments of any rural bank and to borrowers or mortgagors, fee from all charges, fees and documentary stamp tax, collectible under existing laws, relative to any loan or transaction not exceeding Fifty thousand pesos (P50,000), or such amount as the Secretary of Finance, upon recommendation of the Monetary Board may prescribe as may be necessary to promote and expand the rural economy.

Sec. 21. Any Register of Deeds shall accept from any rural bank and its borrowers and mortgagors for registration, free from all charges, fees and documentary stamp tax, collectible under existing laws, any instrument, whether voluntary or involuntary, relating to loans or transaction extended by a rural bank in an amount not exceeding Fifty thousand pesos (P50,000): Provided, however, That charges, if any, shall be collectible on the amount in excess of Fifty thousand pesos (P50,000); and that in instruments related to assignments of several mortgage consolidated in a single deed, if any, shall be levied only on

the amount in excess of Fifty thousand pesos (P50,000) of the consideration in the assignments of each mortgage, of such amount as the Secretary of Finance, upon recommendation of the Monetary Board may prescribe as may be necessary to promote and expand the rural economy.

Sec. 22. Any rural bank organized under this Act may, pursuant to regulations promulgated for the purpose by the Monetary Board, be

required to contribute to the Central Bank an annual fee to help defray the cost of maintaining the appropriate supervising department within the central bank in an amount to be determined by the Monetary Board but in no case to exceed one-fortieth of one percent (1/40 of 1%)


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of its average total assets during the preceding year, as shown on its end-of-month balance sheets, after deducting its cash on hand and amounts due from banks, including the Central Bank.

Sec. 23. Every individual acting as officer or employee of a rural bank and handling funds or securities amounting to Five thousand pesos (P5,000) or more than one (1) year, shall be covered by an adequate bond as determined by the Monetary Board; and the bylaws of the rural bank may also provide for the bonding of other employees or officers of rural banks.

Sec. 24. For the purpose of carrying out the objectives of this Act, the Central Bank is authorized to require the services and facilities of any department or instrumentality of the Government or any officer or employee of any such department or government instrumentality.

Sec. 25. Rural banks organized and operated under the provisions of this Act shall act as agents of the Philippine National Bank, the Land Bank of the Philippines and the Development Bank of the Philippines in places where these banks have no offices, subject to accreditation guidelines.

Sec. 26. Without prejudice to any prosecution under any law which may have been violated a fine of not more than ten thousand pesos (P10,000) or imprisonment of not less than six (6) months but not more than ten (10) years, or both, at the discretion of the court, shall imposed upon:

a. Any officer, employee, or agent of a rural bank who shall:

1. Make fake entries in any bank report or statement thereby affecting the financial interest of or causing damage to, the bank or any person;

2. Without order of a court of competent jurisdiction, disclose any information relative to the funds or properties in the custody of the bank belonging to private individuals, corporations, or any other entity;

3. Accept gifts, fees or commission or any other form of remuneration in connection with the approval of a loan from said bank; or

4. Overvalue or aid in overvaluing any security for the purpose of influencing in any way the action of the bank on any loan; or

5. Appear and sign as guarantor, indorser, or surety for loans granted; or

6. Violate any of the provisions of this Act.

b. Any applicant for a loan from, or borrower of a rural bank who shall:

(a) Misuse, misapply, or divert the proceeds of the loan


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obtained by him from its declared purpose; or (b) Fraudulently overvalue property offered as security

for loan from said bank; or (c) Give out or furnish false misrepresentation of material

facts for the purpose of obtaining, renewing, or

increasing a loan or extending the period thereof; or (d) Attempt to defraud the said bank in the event of court

action to recover a loan; or (e) Offer any officer, employee, or agent of a rural bank as

a gift, fee, commission, or other form of compensation in order to influence such bank personality in approving an application; or

(f) Dispose or encumber the property or the crops offered as security for the loan.

c. Any examiner, or officer or employee of the Central Bank of the Philippines or other department, bureau, office, branch or agency of the Government who is assigned to examine, supervise, assist or render technical services to rural banks and who shall connive or aid in the commission of the same.

Sec. 27. Any municipal trial court judge or register of deeds who shall

demand or accept, directly or indirectly, any gift, fee, commission or other form of compensation in connection with the service, or the registration of documents required to be as provided in Section 20 and by said register of deeds as proposed in Section 21 of this Act, shall be punished by One thousand pesos (P1,000) or by imprisonment for not more than one (1) year, or both, at the discretion of the court.

Sec. 28. Any bank not organized under this Act and any person, association, or corporation doing the business of banking, not authorized under this Act which shall use the words "Rural Bank" as part of the name or title of such bank or of such person, association, or corporations, shall be punished by a fine of not less than Fifty pesos (P50) for each day during which said words are so used.

Sec. 29. The Monetary Board of the Central Bank shall submit a report to the Congress of the Philippines as the end of each calendar year of all the rules and regulations promulgated by it in accordance with the

provisions of this Act, as well as its other actuations in connection with rural banks, together with an explanation of its reasons therefor.

Sec. 30. 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, and the application of such provision or section to other persons or circumstances, shall not be affected thereby.

Sec. 31. Republic Act No. _____, as amended, is hereby repealed. The provisions of Republic Act No. 265, as amended, and Republic Act No. 337, as amended, insofar as they are applicable and not in conflict with


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any provision of this Act, are hereby made a part of this Act.

Sec. 32. This Act shall take effect upon its approval.

Approved,

NEPTALI GONZALES President of Senate

RAMON V. MITRA Speaker of the House of Representatives

This Act which is a consolidation of House Bill No. 28736 and Senate Bill No. 1554 was finally passed by the House of Representatives and the Senate on January 22, 1992.

CAMILO L. SABIO Secretary of the Senate Secretary General House of Representatives

Approved : April 02, 1992

CORAZON C. AQUINO President of the Philippines


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REPUBLIC ACT NO. 7906 AN ACT PROVIDING FOR THE REGULATION OF THE

ORGANIZATION AND OPERATIONS OF THRIFT BANKS, AND FOR OTHER PURPOSES.

CHAPTER I

DECLARATION OF POLICY AND DEFINITIONS

Section 1. Title. — This Act shall be known and cited as the "Thrift Banks Act of 1995." Sec. 2. Declaration of Policy. — It is hereby declared the policy of the State to:

(a) Recognize the indispensable role of the private sector, to encourage private enterprise, and to provide incentives to needed investments;

(b) Promote economic development pursuant to the

socioeconomic program of the government, to expand industrial and agricultural growth, to encourage the establishment of more private thrift banks in order to meet the needs for capital, personal and investment credit or medium- and long-term loans for Filipino entrepreneurs;

(c) Encourage and assist the establishment of thrift bank system which will promote agriculture and industry and at the same time place within easy reach of the people the medium-and long-term credit facilities at reasonable cost;

(d) Encourage industry, frugality and the accumulation of savings among the public, and the members and stockholders of thrift banks; and

(e) Regulate and supervise the activities of thrift banks in order to place their operations on a sound, stable and efficient basis and to curtail or prevent acts or practices which are prejudicial to the public interest.

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

(a) "Thrift banks" shall include savings and mortgage banks, private development banks, and stock savings and loans associations organized under existing laws, and any banking corporation that may be organized for the following purposes: (1) Accumulating the savings of depositors and investing them, together with capital loans secured by bonds, mortgages in real estate and insured improvements thereon, chattel mortgage, bonds and other forms of security or in loans for personal or household finance, whether secured or unsecured, or in financing for homebuilding and home development; in readily marketable and debt


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securities; in commercial papers and accounts receivables, drafts, bills of exchange, acceptances or notes arising out of commercial transactions; and in such other investments and loans which the Monetary Board may determine as necessary in the furtherance

of national economic objectives; (2) Providing short-term working capital, medium- and long-term financing, to businesses engaged in agriculture, services, industry and housing; and (3) Providing diversified financial and allied services for its chosen market and constituencies specially for small and medium enterprises and individuals.

(b) "Monetary Board" shall mean the Monetary Board of the Bangko Sentral ng Pilipinas. (c) "Bangko Sentral" shall refer to the Bangko Sentral ng Pilipinas created under Republic Act No. 7653.

CHAPTER II ORGANIZATION

Sec. 4. Organization. — A thrift bank shall be organized in the form of stock corporation. The Monetary Board shall fix the minimum paid-up capital of thrift banks in such amount as the Board may consider necessary for the safe and sound operation of thrift banks taking into account the development thrusts of this Act and due protection of the general public. No thrift bank shall be organized without a certificate of authority from the Monetary Board. Sec. 5. Establishment of Thrift Banks. — The articles of incorporation of any bank, or any amendment thereto, shall not be registered by the Securities and Exchange Commission unless accompanied by a certificate of authority issued by the Monetary Board under its official seal. Such certificate shall not be issued unless the Monetary Board is satisfied from the evidence submitted to it: (a) that all the requirements of the existing laws and regulations to engage in business for which the applicant is proposed to be incorporated have been complied with; (b) that public interest and the economic conditions, both general and local, justify the authorization; and (c) that the amount of capital, the financing organization, direction and administration, as well as the integrity and the responsibility of the organizers and administrators reasonably assure the safety of the interest which the public may

entrust to them. The by-laws of any thrift bank, or any amendment thereto, shall not be registered by the Securities and Exchange Commission unless accompanied by a certificate of the Monetary Board to the effect that such by-laws or amendments thereto are in accordance with law. Sec. 6. Bank Management. — In order to maintain the quality of bank management and afford better protection to depositors and the public in general, the Monetary Board may pass upon and review the qualifications of persons who are elected or appointed bank directors and officers and disqualify those unfit. The Monetary Board shall prescribe the qualifications of bank directors and officers for purposes of this Section. Sec. 7. Directors and Officers. — At least a majority of the members of


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the board of directors of any thrift bank which may be established after the effectivity of this Act shall be citizens of the Philippines: Provided, however, That no appointive or elective official, whether full-time or part-time, shall at the same time serve as officer of any thrift bank, except in cases where such service is incident to

financial assistance provided by the government or a government-owned or -controlled corporation to the bank: Provided, further, That in the case of merger or consolidation duly approved by the Monetary Board, the limitation on the number of directors in a corporation, as provided in Section 14 of the Corporation Code of the Philippines, shall not be applied so that membership in the new board may include up to the total number of directors provided for in the respective articles of incorporation of the merging or consolidating banks. CHAPTER III OWNERSHIP AND CAPITAL REQUIREMENTS

Sec. 8. Ownership. — At least forty percent (40%) of the voting stock of a thrift bank which may be established after the approval of this Act shall be owned by citizens of the Philippines, except where a new bank may be established as a result of a merger or consolidation of existing thrift banks with foreign holdings in which case, the resulting foreign holdings shall not be increased but may be reduced and, once reduced, shall not be increased thereafter beyond sixty percent (60%) of the voting stock of thrift banks. The percentage of the foreign-owned voting stocks shall be determined by the citizenship of individual stockholders and in case of corporations owning shares, by the citizenship of each stockholder in the said corporations. Any provision of existing laws to the contrary notwithstanding, stockholdings in a thrift bank shall be exempt from any ownership ceiling for a period of ten (10) years from the effectivity of this Act. Sec. 9. Combined Capital Accounts of Thrift Banks. — The combined capital accounts of each thrift bank shall not be less than an amount equal to ten percent (10%) of its risk assets which is defined as its total assets minus the following assets:

(a) Cash on hand;

(b) Amounts from the Bangko Sentral;

(c) Evidences of indebtedness of the Republic of the Philippines and of the Bangko Sentral, and any other evidences of indebtedness or obligations the servicing and repayment of which are fully guaranteed by the Republic of the Philippines;

(d) Loans to the extent covered by hold-out on, or assignment of deposits maintained in the lending bank and held in the Philippines; and

(e) Other non-risk items as the Monetary Board may, from time to time, authorize to be deducted from total assets.

The Monetary Board shall prescribe the manner of determining the



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total assets of banking institutions for purposes of this Section. Whenever the capital accounts of a bank are deficient with respect to the requirements of the preceding paragraph, the Monetary Board, after considering the report of the appropriate supervising department on the state of solvency of the institution, shall limit or prohibit the

distribution of net profits and shall require that part or all of net profits be used to increase the capital accounts of the institution until the minimum requirement has been met. The Monetary Board may, after considering the aforesaid report of the appropriate supervising department and if the amount of the deficiency justifies it, restrict or prohibit the making of new investments of any sort by the bank, with the exception of purchases of evidences of indebtedness included under subsection (c) of this Section, until the minimum required capital ratio has been restored. Where in the process of a bank merger or consolidation, the merged or constituent bank may not be able to comply fully with the net worth to risk asset ratio herein prescribed, the Monetary Board may, at its discretion, temporarily relieve the bank from full compliance with this requirement under such conditions it may prescribe. CHAPTER IV POWERS

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

(a) Accept savings and time deposits; (b) Open current or checking accounts: Provided, That the thrift bank has net assets of at least Twenty million pesos (P20,000,000) subject to such guidelines as may be established by the Monetary Board; and shall be allowed to directly clear its demand deposit operations with the Bangko Sentral and

the Philippine Clearing House Corporation; (c) Act as correspondent for other financial institutions; (d) Act as collection agent for government entities, including but not limited to, the Bureau of Internal Revenue, Social Security System, and the Bureau of Customs; (e) Act as official depository of national agencies and of municipal, city or provincial funds in the municipality, city or province where the thrift bank is located, subject to such guidelines as may be established by the Monetary Board; (f) Rediscount paper with the Philippine National Bank, the Land Bank of the Philippines, the Development Bank of the Philippines, and other government-owned or -controlled corporations. Said institutions shall specify the nature of paper deemed acceptable for rediscount, as well as rediscounting rate to be charged by any of these institutions; and (g) Issue mortgage and chattel mortgage certificates, buy and sell them for its own account or for the account of others, or accept and receive them in payment or as amortization of its loan. Such mortgage and chattel mortgage certificates shall be issued exclusively in national currency and exclusively for the


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financing of equipment loans, mortgage loans for the acquisition of machinery and other fixed installations, conservation, enlargement or improvement of productive properties and real estate mortgage loans for: (1) the construction, acquisition, expansion or improvement of rural

and urban properties; (2) the refinancing of similar loans and mortgages; and (3) such other purposes as may be authorized by the Monetary Board. A thrift bank shall coordinate the amounts and maturities of its certificates with those of its loans, so as to ensure adequate cash receipts for the payment of principal and interest at the time they become due. The bank shall accept its own certificates at least at the actual price of issue, in any prepayment of loans which mortgage or chattel mortgage debtors may wish to make: Provided, That the date of maturity of the certificates is not later than the date on which the payment would otherwise become due, in the absence of the aforesaid prepayment; (h) Purchase, hold and convey real estate under the same conditions as those governing commercial banks as specified under Section 25 of Republic Act No. 337; (i) Engage in quasi-banking and money market operations; (j) Open domestic letters of credit; (k) Extend credit facilities to private and government employees: Provided, That in the case of a borrower who is a permanent employee or wage earner, the treasurer, cashier or paymaster of the office employing him is authorized, notwithstanding the provisions of any existing law, rules and regulations to the contrary, to make deductions from his salary, wage or income pursuant to the terms of his loan, to remit deductions to the thrift bank concerned, and collect such reasonable fee for his services; (l) Extend credit against the security of jewelry, precious stones and articles of similar nature, subject to such rules and regulations as the Monetary Board may prescribe; and (m) Offer other banking services as provided in Section 72 of Republic Act No. 337 and Republic Act No. 6426, as amended.

Thrift banks may perform the services under subsections (b), (d), (e), (g) and (i) only upon prior approval of the Monetary Board. Nothing in this Section shall be construed as precluding a thrift bank from performing, with prior approval of the Monetary Board, commercial banking services, or from operating under an expanded banking authority, nor from exercising, whenever applicable and not inconsistent with the provisions of this Act and Bangko Sentral regulations, and such other powers incident to a corporation. Sec. 11. Limitations on Lending Authority. — Except as the Monetary Board may otherwise prescribe, the direct indebtedness to thrift banks of any person, company, corporation, or firm, including the indebtedness of members of a partnership and association, for money borrowed, excluding: (a) loans secured by obligations of the Bangko


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Sentral; (b) loans fully guaranteed by the government as to the payment of principal and interest; (c) loans to the extent covered by the hold-out on, or assignment of, deposits maintained in the lending bank and held in the Philippines; and (d) other loans or credits as the Monetary Board may, from time to time, specify as non-risk assets,

which shall in no time exceed fifteen percent (15%) of unimpaired capital and surplus of the bank. Notwithstanding the provisions of the preceding paragraph and subject to such regulations as the Monetary Board may prescribe, the total indebtedness of any borrower to the bank may amount to a further fifteen percent (15%) of the unimpaired capital and surplus of such bank provided the additional indebtedness is for the purpose of financing subdivision or housing development, medium- and low-income borrowers and agriculture on a fully secured basis. The term "indebtedness" as used herein, shall mean the direct liability of the maker or acceptor of paper discounted with or sold to such bank and liability of the indorser, drawer or guarantor who obtains a loan from or discounts paper with or sells paper under his guaranty to such bank; and shall include in the case of liabilities of a partnership or association the liabilities of the several members thereof; and shall include in the case of liabilities of a corporation, all liabilities of all the subsidiaries thereof in which such corporation owns or controls a majority interest: Provided, That even if the parent corporation, partnership or association has no liability to the bank, the Monetary Board may prescribe the combination of liabilities of subsidiary corporations or members of the partnership or association under certain circumstances, including but need not be limited to any of the following situations: (a) the parent corporation, partnership or association guarantees the repayment of liabilities; (b) the liabilities were incurred for the accommodation of the parent corporation or another subsidiary or of the partnership or association; or (c) the subsidiaries through separate entities operate merely as departments or divisions of a single entity: Provided, further, That the discount of bills of exchange drawn in good faith against actually existing values, and the discount of commercial and business paper actually owned by the person negotiating the same, shall not be considered as money borrowed for the purpose of this Section: Provided, finally, That certain types of contingent liabilities of borrowers may be included among the total liabilities as may be determined by the Monetary Board. Loan accommodations granted by thrift banks to any other bank, as well as deposits maintained by them in any bank licensed to do business in the Philippines, shall be subject to the loan limit of any single borrower as herein prescribed. Sec. 12. Investment in Allied Undertakings. — Subject to such guidelines as may be established by the Monetary Board, thrift banks may invest in equities of allied undertakings as hereinafter enumerated: Provided, That: (a) the total investments in equities shall not exceed twenty-five percent (25%) of the net worth of the thrift bank; (b) the equity investment in any single enterprise shall be limited to fifteen percent (15%) of the net worth of the thrift bank; (c) the equity investment in any single enterprise shall remain a minority


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holding in that enterprise; and (d) the equity investment in other banks shall be subject to the same provisions governing similar investments of commercial banks and shall be deducted from the investing bank's net worth for the purpose of computing of the prescribed ratio as provided in Section 9 hereof: Provided, further,

That equity investments shall not be permitted in non-related activities.Where the allied activity is a wholly- or majority-owned subsidiary of the thrift bank, the Bangko Sentral may subject it to examination. Investment in allied undertaking shall include institutions engaged in the following activities:

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

CHAPTER V SUPERVISION

Sec. 13. Supervisory Powers of the Monetary Board. — The power to supervise the operation of any thrift bank by the Monetary Board shall consist in placing limits to the maximum credit allowed to any individual borrower; in indicating the manner in which technical assistance shall be extended to thrift banks; in imposing a uniform accounting system and manner of keeping the accounts and records of thrift banks; in instituting periodic surveys of loans and lending procedures, audits, test-check of cash and other transactions of the thrift banks; in conducting training courses for personnel of thrift banks; and, in general, in supervising the business operations of the thrift banks. The Bangko Sentral shall have the power to enforce the laws, orders, instructions, rules and regulations promulgated by the Monetary Board applicable to thrift banks; to require thrift banks, their directors,

officers and agents to conduct and manage the affairs of the thrift bank in a lawful and orderly manner; and upon proof that the thrift bank or its board of directors or officers are conducting and managing the affairs of the bank in a manner contrary to laws, orders, instructions, rules and regulations promulgated by the Monetary Board or in a manner substantially prejudicial to the interest of the government, depositors, creditors, or the general public, to appoint a conservator pursuant to Section 29 of Republic Act No. 7653 without prejudice to the prosecution of persons responsible for such violations under the provisions of Sections 36 and 37 of Republic Act No. 7653. The director and examiners of the department of Bangko Sentral charged with the supervision of thrift banks are hereby authorized to administer oaths to any director, officer or employee of any thrift bank


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or to any voluntary witness and to compel the presentation of all books, documents, papers or records necessary in his or their judgment to ascertain the facts relative to the true conditions of any thrift bank or to any loan. CHAPTER VI INCENTIVES

Sec. 14. Reserve Requirement Differential. — Reserve requirement imposed on thrift banks by the Monetary Board shall enjoy equitable preferential terms over those imposed on commercial banks: Provided, That the Monetary Board may change reserve differentials for the purpose of stimulating economic growth in the countryside, thereby promoting national economic development. Sec. 15. Liberalized Branching Rules. — Thrift banks shall have unrestricted branching right within the region, free from any assessment or surcharges required in setting up a branch, but under coordination with the Bangko Sentral which will have to assess that there are qualified personnel, control and procedures to operate the branch. Sec. 16. Notices of Statement of Condition. — Subject to Monetary Board approval, a thrift bank may publish its statement of condition in a newspaper of general circulation, or post it in the most conspicuous area of its premises, municipal building, municipal public market, barangay hall and barangay public market if there be any, where the thrift bank concerned is located. CHAPTER VII EXEMPTIONS

Sec. 17. Tax Exemptions. — All thrift banks, whether created or organized under this Act or in operation as of the date of effectivity of this Act, shall be exempt from payment of all taxes, fees and charges of whatever nature and description, except the corporate income taxes and local taxes, fees and charges for a period of five (5) years, counted from the date of commencement of operations for thrift banks created under this Act and from the date of the effectivity of this Act for existing thrift banks. Sec. 18. Exemption from Publication Requirement. — The foreclosure of mortgage covering loans granted by thrift banks and executions of judgments thereon involving real properties and levied upon by a sheriff shall be exempt from publication requirements where the total amount of the loan, excluding interest due and unpaid, does not exceed One hundred thousand pesos (P100,000) or such amount as the Monetary Board may prescribe, as may be warranted by the prevailing economic conditions and by the nature of service of customers served by each category of the thrift bank. It shall be sufficient publication in such cases if the notice of foreclosure and execution of judgment are posted in the conspicuous area of a thrift bank's premises, municipal building, the municipal public market, the barangay hall, and the


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barangay public market, if there be any, where the land mortgaged is situated within a period of sixty (60) days immediately preceding the public auction of the execution of judgment. Proof of publication as required herein shall be accomplished by an affidavit of the sheriff or officer conducting the foreclosure sale or execution of judgment and

shall be attached with the records of the case. A thrift bank shall be allowed to foreclose lands mortgaged to it; Provided, That said lands shall be covered under Republic Act No. 6657. Sec. 19. Exemption from Notarial Charges. — Any metropolitan, municipal, or municipal circuit trial court judge in his capacity as notary public ex officio shall administer the oath to or acknowledge the instrument of any thrift bank and its borrowers or mortgagor free from all charges, fees and documentary stamp tax, collectible under existing laws, relative to any loan or transaction not exceeding Fifty pesos (P50.00) or such amount as the Secretary of Finance, upon recommendation of the Monetary Board, may prescribe as may be necessary to promote and expand the economy. Sec. 20. Exemption from Registration Fees. — Any register of deeds shall accept from any thrift bank and its borrowers and mortgagors for registration, free from all charges, fees and documentary stamp tax, collectible under existing laws, any instrument, whether voluntary or involuntary, relating to loans or transactions extended by any thrift bank in an amount not exceeding Fifty thousand pesos (P50,000): Provided, however, That charges, if any, shall be collectible on the amount in excess of Fifty thousand pesos (P50,000); and that an instrument related to assignments of several mortgages consolidated in a single deed, if any, shall be levied only on the amount in excess of Fifty thousand pesos (P50,000) of the consideration in the assignment of each mortgage, or such amount as the Secretary of Finance, upon recommendation of the Monetary Board, may prescribe as may be necessary to promote and expand the economy. CHAPTER VIII PROHIBITIONS

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

(a) Any officer, employee, or agent of a thrift bank who shall: (1) Make false entries in any bank report or statement thereby affecting the financial interest of, or causing damage to, the bank or any person; or

(2) Without order of a court of competent jurisdiction, disclose any information relative to the funds or properties in the custody of the bank belonging to private individuals, corporations, or any other entity; or


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(3) Accept gifts, fees or commissions or any other form of remuneration in connection with the approval of a loan from said bank; or (4) Overvalue or aid in the overvaluing any security for the purpose of influencing in any way the action of the

bank on any loan; or (5) Appear and sign as guarantor, indorser, or surety for loans granted; or (6) Violate any provision of this Act.

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

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

(c) Any examiner, or officer or employee of the Bangko Sentral or of any department, bureau, office, branch, or agency of the government who is assigned to examine, supervise, assist or render technical service to thrift banks and who shall connive or aid in the commission of the same. (d) Any metropolitan, municipal, or municipal circuit trial court judge or register of deeds who shall demand or accept, directly or indirectly, any gift, fee, commission, or any other form of compensation in connection with the service, or shall arbitrarily and without reasonable cause delay the acknowledgment or administration of oath or the registration of documents required to be performed by said judge or by said register of deeds shall be punished with a fine of not more than One (1) thousand pesos (P1,000) or by imprisonment of not more than one (1) year, or both, at the discretion of the court. (e) Any bank not organized under this Act and any person, association, or corporation doing the business of banking, not authorized under this Act or existing laws which shall use the words "Development Bank," "Savings Bank," "Mortgage Bank," "Savings and Mortgage Bank," or "Savings and Loan Association," as part of the name or title of such bank or of such person, association, or corporation, shall be punished by a fine of not less than One hundred pesos (P100), but in no


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case to exceed Thirty thousand pesos (P30,000), for each day during which the said words are so used.

CHAPTER IX GENERAL PROVISIONS

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

Sec. 23. Return of Deposits. — Deposits shall be returned to the depositors or to their legal representatives in the manner and at the time and under the conditions which shall be determined by the board of directors and stipulated in regulations which shall be in conformity with laws and with such regulations as the Monetary Board may prescribe. Sec. 24. Deposit Insurance. — Deposit in thrift banks shall be eligible for insurance coverage under Republic Act No. 3591, as amended. Sec. 25. Annual Fees. — Consistent with the provisions of Section 28 of Republic Act No. 7653, any thrift bank organized under this Act may, pursuant to regulations promulgated for the purpose by the Monetary Board, be required to contribute to the Bangko Sentral an annual fee in an amount to be determined by the Monetary Board.

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

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

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

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


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Sec. 30. Repealing Clause. — Republic Act No. 4093, Republic Act No. 3779 to the extent that it applies to thrift banks, and Chapter 5 of Republic Act No. 337 are hereby repealed. Any law or parts of any law inconsistent with the provisions of this Act are hereby repealed. In all matters affecting the price stability of the peso, the provisions of Republic Act No. 7653 shall prevail. Sec. 31. Applicability of Other Laws. — The provisions of Republic Act No. 7653 and Republic Act No. 337, as amended, insofar as they are applicable and not in conflict with any provision of this Act, shall apply to thrift banks organized hereunder. Sec. 32. Effectivity. — This Act shall take effect fifteen (15) days following the completion of its publication in the Official Gazette or in two (2) national newspapers of general circulation. Approved: February 23, 1995


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Republic of the Philippines Congress of the Philippines

Metro Manila (REPUBLIC ACT NO. 3591, as amended)

AN ACT ESTABLISHING THE PHILIPPINE DEPOSIT INSURANCE CORPORATION, DEFINING ITS POWERS AND DUTIES AND FOR

OTHER PURPOSES

THE CREATION OF THE PHILIPPINE DEPOSIT INSURANCE CORPORATION

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.

The Corporation shall, as a basic policy, promote and safeguard the interests of the depositing public by way of providing permanent and continuing insurance coverage on all insured deposits.1

BOARD OF DIRECTORS: COMPOSITION AND AUTHORITY

SECTION 2. The powers and functions of the Corporation shall be vested in and exercised by a Board of Directors which shall be composed of five (5) members as follows:

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. (As amended by R.A. 9302, 12 August 2004)

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. (As amended by R.A. 9302, 12 August 2004)

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


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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. (As amended by R.A. 9302, 12 August 2004)

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. (As amended by R.A. 9302, 12 August 2004)

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. (As amended by R.A. 9302, 12 August 2004)

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 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. (As added by R.A. 9302, 12 August 2004)

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 Corporation’s 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


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principles under Republic Act No. 6758, as amended. (As added by R.A. 9302, 12 August 2004

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; (As amended by R.A. 9302, 12 August 2004)

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; (As amended by R.A. 9302, 12 August 2004) 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. (As added by R.A. 9302, 12 August 2004)

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. (As added by R.A. 9576, 29 April 2009)

PRESIDENT OF THE CORPORATION COMPENSATION, POWERS, AND DUTIES

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. (Renumbered from Sec. 2-A by R.A. 9302, 12 August 2004)

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


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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 E.O. 890, 08 April 1983; R.A. 7400, 13 April 1992)

DEFINITION OF TERMS

SECTION 4. As used in this Act - (Renumbered from Sec. 3 by R.A. 9302, 12 August 2004)

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 R.A. 7400, 13 April 1992)

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 R.A. 7400, 13 April 1992)

d. The term “insured bank” means any bank the deposits of which are


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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 P.D. 1940, 27 June 1984; R.A. 7400, 13 April 1992; R.A. 9302, 12 August 2004; R.A. 9576, 29 April 2009)

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


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closure, but not to exceed Five Hundred Thousand Pesos (P500,000.00).2 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 R.A. 9302, 12 August 2004; R.A. 9576, 2009)

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.

DEPOSIT INSURANCE COVERAGE

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. (As amended by R.A. 6037, 04 August 1969; renumbered from Sec. 4 by R.A. 9302, 12


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August 2004)

ASSESSMENT OF MEMBER BANKS

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. (As amended by R.A. 9302, 12 August 2004)

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. (As amended by R.A. 7400, 13 April 1992)

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


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certify. (As amended by P.D. 1940, 27 June 1984)

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. 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. (As amended by R.A. 9302, 12 August 2004)

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


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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. 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. (As amended by R.A. 9302, 12 August 2004)

SANCTIONS AGAINST UNSAFE AND UNSOUND BANKING PRACTICES

SECTION 7.

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. (As amended by R.A. 7400, 13 April 1992; R.A. 9302, 12 August 2004)

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


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issued by the Corporation or any written condition imposed by the Corporation in connection with any transaction with or grant by the Corporation. (As amended by E.O. 890, 08 April 1983; R.A. 7400, 13 April 1992)

POWERS AS A CORPORATE BODY

SECTION 8.The Corporation as a corporate body shall have the power -

c. First - To adopt and use a corporate seal; d. Second - To have succession until dissolved by an Act of Congress; e. Third - To make contracts; f. 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;

g. 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;

h. 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;

i. 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;

j. 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;


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(As amended by R.A. 9302, 12 August 2004, R.A. 9576,29 April 2009) k. Ninth - To act as receiver; l. 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; (As amended by R.A. 6037, 04 August 1969)

m. 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; (As amended by P.D. 1940, 27 June 1984)

n. 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. (As added by R.A. 7400, 13 April 1992)

POWERS AND RESPONSIBILITIES AND PROHIBITIONS

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 mails 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. 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. (As amended by E.O. 890, 08 April 1983; R.A. 7400, 13 April 1992)

(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


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to the subject of investigation. (As added by R.A. 9302, 12 August 2004)

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 theBangko 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. (As amended by E.O. 890, 08 April 1983; R.A. 7400, 13 April 1992; R.A. 9302, 12 August 2004)

(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.(As added by R.A. 9302, 12 August 2004)

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; (As added by R.A. 7400, 13 April 1992)

2. receiving any gift or thing of value from any officer, director or employee thereof; (As added by R.A. 7400, 13 April 1992)

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


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receive such information. (As amended by R.A. 9302, 12 August 2004)

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 R.A. 9302, 12 August 2004)

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 R.A. 9302, 12 August 2004)

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 R.A. 9576, 29 April 2009)

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


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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 R.A. 9302, 12 August 2004)

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 R.A. 7400, 13 April 1992)

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 R.A. 7400, 13 April 1992)

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. (As amended/renumbered from Sec. 9-A by R.A. 9302, 12 August 2004)

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. (As added by R.A. 9302, 12 August 2004)

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


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be liable under Section 21 hereof. (As added by R.A. 9302, 12 August 2004)

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; (As amended by R.A. 9302, 12 August 2004)

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; (As amended by R.A. 9302, 12 August 2004)

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; (As added by R.A. 9302, 12 August 2004)

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; (As added by R.A. 9302, 12 August 2004)

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; (As added by. R.A. 9302, 12 August 2004)

6. hire or retain private counsels as may be necessary; (As added by R.A. 9302, 12 August 2004)

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; (As added by R.A. 9302, 12 August 2004)

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; (As added by


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R.A. 9302, 12 August 2004) 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. (As added by R.A. 9302, 12 August 2004)

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. (As added by R.A. 9302, 12 August 2004)

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. (As added by R.A. 9302, 12 August 2004)

SECTION 12. 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. (As added by R.A. 7400, 13 April 1992; renumbered from Sec. 9-B by R.A. 9302, 12 August 2004)

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. (As added by R.A. 9302, 12 August 2004)

PERMANENT INSURANCE FUND

Section 9 (c) – (Repealed by R.A. 9302, 12 August 2004)

SECTION 13. To carry out the purposes of this Act, the permanent insurance fund shall be Three billion pesos (P3,000,000,000.00). (As amended by R.A. 9302, 12 August 2004)

The Deposit Insurance Fund shall be the capital account of the Corporation


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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. (As added by R.A. 9302, 12 August 2004)

PAYMENT OF INSURED DEPOSITS

Section 10 (b) – (Amended by P.D. 1940, 27 June 1984; repealed by R.A. 9302, 12 August 2004)

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. (As amended by R.A. 9302, 12 August 2004)

SECTION 15. The Corporation, upon payment of any depositor as provided for in subsection (c) of this Section3, 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


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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. (As amended by P.D. 1940, 27 June 1984; R.A. 7400, 13 April 1992; renumbered from Sec. 10(d) by R.A. 9302, 12 August 2004)

SECTION 16.

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. (As added by R.A. 9302, 12 August 2004)

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. (Renumbered from Sec. 11 (a) by R.A. 9302, 12 August 2004)

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. (Renumbered from Sec. 11 (b) by R.A. 9302, 12 August 2004)

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. (Renumbered from Sec. 11 (c) by R.A. 9302, 12 August 2004)

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


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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. (As amended by R.A. 9302, 12 August 2004)

CORPORATE FUNDS

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. (As amended by R.A. 6037, 04 August 1969; renumbered from Sec. 12 by R.A. 9302, 12 August 2004)

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. (As amended by R.A. 9302, 12 August 2004)

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 R.A 9576, 29 April 2009)

FINANCIAL ASSISTANCE

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


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(c) by R.A. 9576, 29 April 2009)

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. (As amended by R.A. 7400, 13 April 1992)

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. (As amended by R.A. 7400, 13 April 1992)

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.(As amended by R.A. 9302, 12 August 2004)

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. (As amended by R.A. 9302, 12 August 2004)

AUTHORITY TO BORROW

SECTION 18. The Corporation is authorized to borrow from the Bangko


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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. (As amended/renumbered from Sec. 13 by R.A. 9302, 12 August 2004)

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. (As amended by R.A. 6037; P.D. 653, 01 February 1975; P.D. 1940, 27 June 1984; R.A. 7400, 13 April 1992)

ISSUANCE OF BONDS, DEBENTURES AND OTHER OBLIGATIONS

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. (As amended by R.A.9576, 29 April 2009)

REPORTS

SECTION 20.

a. The Corporation shall annually make a report of its operations to


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the Congress as soon as practicable after the 1st day of January in each year. (Renumbered from Sec. 15 (a) by R.A. 9302, 12 August 2004)

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 R.A. 9302, 12 August 2004)

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 R.A. 9302, 12 August 2004)

SANCTIONS AND PENALTIES

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


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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 R.A. 9302, 12 August 2004)

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 R.A. 9302, 12 August 2004)

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 E.O. 890, 8 April 1983; renumbered from Sec. 16 (c) by R.A. 9302, 12 August 2004)

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 R.A. 7400, 13 April 1992; R.A. 9302, 12 August 2004)

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 E.O. 890, 08 April 1983; R.A. 7400, 13 April 1992)

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 R.A. 9302,


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12 August 2004) 1. for any willful refusal to submit reports as required by law,

rules and regulations; (As amended by R.A. 9302, 12 August 2004)

2. any unjustified refusal to permit examination and audit of the deposit records or the affairs of the institution; (As amended by R.A. 9302, 12 August 2004)

3. any willful making of a false statement or entry in any bank report or document required by the Corporation; (As amended by R.A. 9302, 12 August 2004)

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 R.A. 9302, 12 August, 2004)

5. splitting of deposits or creation of fictitious loans or deposit accounts. (As added by R.A. 9302, 12 August 2004)

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 R.A. 9302, 12 August 2004; as amended by R.A. 9576, 29 April 2009)

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 R.A. 9302, 12 August 2004)

7. refusal to turn over or destroying or tampering bank records; (As added by R.A. 9302, 12 August 2004)

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 R.A. 9302, 12 August 2004)

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 R.A. 9302, 12 August 2004)

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 R.A. 9302, 12 August 2004)


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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 R.A. 9302, 12 August 2004)

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 R.A. 9302, 12 August 2004)

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 R.A. 9302, 12 August 2004)

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 R.A. 9302, 12 August 2004)

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 R.A. 9302, 12 August 2004)

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 R.A. 9302, 12 August 2004)


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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 R.A. 9302, 12 August 2004)

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 R.A. 9302, 12 August 2004)

SEPARABILITY CLAUSE

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 R.A. 9302, 12 August 2004)

REPEALING CLAUSE

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 R.A. 9302, 12 August 2004)

EFFECTIVITY CLAUSE

SECTION 28. Effectivity Clause4. - 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 R.A. 9302, 12 August 2004)

____________________ 1 Section 1 of R.A. 9576 (29 April 2009) also provides: “SECTION 1. Statement of State Policy and Objectives. – It is hereby declared to be the policy of the State to strengthen the mandatory deposit insurance coverage system to generate, preserve, maintain faith and confidence in the country’s banking system, and protect it from illegal schemes and machinations.

Towards this end, the government must extend all means and mechanisms necessary for the Philippine Deposit Insurance Corporation to effectively fulfill its vital task of promoting and safeguarding the interests of the depositing public by way of providing permanent and continuing insurance coverage on all insured deposits, and in helping develop a sound and stable banking system at all times.”

2 Section 4 of R.A. 9576 (29 April 2009) further states: “SEC. 4. The


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maximum deposit insurance coverage of Five Hundred Thousand Pesos (P500,000.00) provided in Section 4(g) of Republic Act 3591, as amended herein, shall be paid by the Corporation: Provided, That, for the first three (3) years from the effectivity of this Act, the first Two Hundred Fifty Thousand Pesos (P250,000.00) of the deposit insurance coverage shall be for

the account of the Corporation, and those in excess of Two Hundred Fifty Thousand Pesos (P250,000.00) but not more than Five Hundred Thousand Pesos (P500,000.00) shall be for the account of the National Government. The Congress shall annually appropriate the necessary funding to reimburse the Corporation for any payment to insured depositors paid in excess of Two Hundred Fifty Thousand Pesos (P250,000.00).”

3 Section 15 was formerly Section 10 (d) of R.A. 3591, as amended by R.A. 7400. Subsection (c) refers to Section 10 (c) of R.A. 3591, as amended by R.A.

7400 which has been renumbered to Section 14 by R.A. 9302

4 Section 13 of R.A. 9576 (1 June 2009) also states: SEC. 13. Joint Congressional Oversight Committee. – There is hereby created a joint congressional committee to oversee the implementation of this Act. The committee shall be composed of the chairpersons of the Senate Committee on Banks, Financial Institutions and Currencies and the Committee on Finance and five (5) senators to be appointed by the President of the Senate,

and the chairpersons of the House Committee on Banks and Financial Intermediaries and the Committee on Appropriations and five (5) members to be appointed by the Speaker of the House of Representatives.


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REPUBLIC ACT NO.1405

AN ACT PROHIBITING DISCLOSURE OF OR INQUIRY INTO, DEPOSITS WITH ANY BANKING INSTITUTION

AND PROVIDING PENALTY THEREFORE

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. 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.

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


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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

http://www.lawphil.net/statutes/repacts/ra1993/ra_7653_1993.html


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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

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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


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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


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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


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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


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PRESIDENTIAL DECREE No. 679 April 2, 1975

AMENDING ACT NUMBERED THIRTY NINE HUNDRED AND THIRTY SIX (3936), AN ACT REQUIRING BANKS, TRUST

CORPORATIONS, AND BUILDING AND LOAN ASSOCIATIONS, TO TRANSFER UNCLAIMED BALANCES

HELD BY THEM TO THE TREASURER OF THE PHILIPPINES AND FOR OTHER PURPOSES.

WHEREAS, Act No. 3936 requires the publication of a sworn statement of unclaimed balances in banks once a week of three consecutive weeks in at least two newspapers of general circulation in the locality where the banks are situated, if there be any, and if there is none, in the City of Manila, one in English and one in Spanish, the cost

of which shall be paid by the Bureau of Treasury, which shall be reimbursed out of the escheated funds;

WHEREAS, the law also provides for the publication of summons and a notice upon the commencement of the prescribed judicial proceedings for the escheat of unclaimed balances;

WHEREAS, past experience has shown that the cost of publication required by law, the increase of which has been substantial the past few years, is more than the aggregate amount of the unclaimed balances to be escheated, the average amount of which is small;

WHEREAS, there is a felt need to simplify the procedure for the escheat of unclaimed balances for the purpose of reducing the expenses therefor;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers in me vested by the Constitution, do hereby decree and order:

Section 1. Sections 1, 2, 3, 4, and 5 of Act No. 3936 are hereby amended to read as follows:

"Sec. 1. "Unclaimed balances", within the meaning of this Act, shall include credits or deposits of money, bullion, security or other evidence of indebtedness of any kind, and interest thereon with banks, buildings and loan associations, and trust corporations, as hereinafter defined, in favor of any person known to be dead or who has not made further deposits or withdrawals during the preceding ten years or more. Such unclaimed balances, together with the increase and proceeds thereof, shall be deposited with the Treasurer of the Philippines to the credit of the Government of the Republic of the Philippines to be used as the National Assembly may direct.

"Banks", "building and loan associations" and "trust corporations", within the meaning of this Act, shall refer to institutions defined under Section two, thirty-nine and fifty-six, respectively, of Republic Act


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Numbered Three Hundred Thirty Seven, otherwise known as the General Banking Act, as amended, whether organized under special charters or not.

"Sec. 2. Immediately after the taking effect of this Act and within the month of January of every odd year, all banks, building and loan associations, and trust corporations shall forward to the Treasurer of the Philippines a statement, under oath, of their respective managing officers, of all credits and deposits held by them in favor of persons known to be dead, or who have not made further deposits or withdrawals during the preceding ten years or more, arranged in alphabetical order according to the names of creditors and depositors, and showing:

"(a) The names and last known place of residence or post office addresses of the persons in whose favor such unclaimed balances stand;

"(b) The amount and the date of the outstanding unclaimed balance and whether the same is in money or in security, and if the latter, the nature of the same;

"(c) The date when the person in whose favor the unclaimed balance stands died, if known, or the date when he made his last deposit or withdrawal; and

"(d) The interest due on such unclaimed balance, if any, and the amount thereof.

"A copy of the above sworn statement shall be posted in a conspicuous place in the premises of the bank, building and loan association, or trust corporation concerned for at least sixty days from the date of filing thereof: Provided, That immediately before filing the above sworn statement, the bank, building and loan association, and trust corporation shall communicate with the person in whose favor the unclaimed balance stands at his last known place of residence or post office address.

"It shall be the duty of the Treasurer of the Philippines to inform the Solicitor General from time to time the existence of unclaimed balances held by banks, building and loan associations, and trust corporations.

"Sec. 3. Whenever the Solicitor General shall be informed of such unclaimed balances, he shall commence an action or actions in the name of the People of the Republic of the Philippines in the Court of First Instance of the province or city where the bank, building and loan association or trust corporation is located, in which shall be joined as parties the bank, building and loan association or trust corporation and all such creditors or depositors. All or any of such creditors or depositors or banks, building and loan association or trust corporations may be included in one action. Service of process in such


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action or actions shall be made by delivery of a copy of the complaint and summons to the president, cashier, or managing officer of each defendant bank, building and loan association or trust corporation and by publication of a copy of such summons in a newspaper of general circulation, either in English, in Filipino, or in a local dialect, published

in the locality where the bank, building and loan association or trust corporation is situated, if there be any, and in case there is none, in the City of Manila, at such time as the court may order. Upon the trial, the court must hear all parties who have appeared therein, and if it be determined that such unclaimed balances in any defendant bank, building and loan association or trust corporation are unclaimed as hereinbefore stated, then the court shall render judgment in favor of the Government of the Republic of the Philippines, declaring that said unclaimed balances have escheated to the Government of the Republic of the Philippines and commanding said bank, building and loan association or trust corporation to forthwith deposit the same with the Treasurer of the Philippines to credit of the Government of the Republic of the Philippines to be used as the National Assembly may direct.

"At the time of issuing summons in the action above provided for, the clerk of court shall also issue a notice signed by him, giving the title and number of said action, and referring to the complaint therein, and directed to all persons, other than those named as defendants therein, claiming any interest in any unclaimed balance mentioned in said complaint, and requiring them to appear within sixty days after the publication or first publication, if there are several, of such summons, and show cause, if they have any, why the unclaimed balances involved in said action should not be deposited with the Treasurer of the Philippines as in this Act provided and notifying them that if they do not appear and show cause, the Government of the Republic of the Philippines will apply to the court for the relief demanded in the complaint. A copy of said notice shall be attached to, and published with the copy of, said summons required to be published as above, and at the end of the copy of such notice so published, there shall be a statement of the date of publication, or first publication, if there are several, of said summons and notice. Any person interested may appear in said action and become a party thereto. Upon the publication or the completion of the publication, if there are several, of the summons and notice, and the service of the summons on the defendant banks, building and loan associations or trust corporations, the court shall have full and complete jurisdiction in the Republic of the Philippines over the said unclaimed balances and over the persons having or claiming any interest in the said unclaimed balances, or any of them, and shall have full and complete jurisdiction to hear and determine the issues herein, and render the appropriate judgment thereon.

"Sec. 4. If the president, cashier or managing officer of the bank, building and loan association, or trust corporation neglects or refuses to make and file the sworn statement required by this action, such bank, building and loan association, or trust corporation shall pay to


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the Government the sum of five hundred pesos a month for each month or fraction thereof during which such default shall continue.

"Sec. 5. Any bank, building and loan association or trust corporation which shall make any deposit with the Treasurer of the Philippines in conformity with the provisions of this Act shall not thereafter be liable to any person for the same and any action which may be brought by any person against in any bank, building and loan association, or trust corporation for unclaimed balances so deposited with the Treasurer of the Philippines shall be defended by the Solicitor General without cost to such bank, building and loan association or trust corporation."

Section 2. This Decree shall take effect immediately.

DONE in the City of Manila, this 2nd day of April, in the year of Our Lord, nineteen hundred and seventy-five.


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Republic Act No. 9194

March 7, 2003

AN ACT AMENDING REPUBLIC ACT NO. 9160, OTHERWISE KNOWN AS THE "ANTI-MONEY LAUNDERING ACT OF 2001"

Be it enacted by the Senate and House of Representative of the Philippines in Congress assembled:

SECTION 1. Section 3, paragraph (b) of Republic Act No. 9160 is hereby amended as follows:

"(b) 'Covered transaction' is a transaction in cash or other equivalent monetary instrument involving a total amount in excess of Five hundred thousand pesos (PhP 500,000.00) within one (1) banking day.

SECTION 2. Section 3 of the same Act is further amended by inserting between paragraphs (b) and (c) a new paragraph designated as (b-1) to

read as follows:

"(b-1) 'Suspicious transaction' are transactions with covered institutions, regardless of the amounts involved, where any of the following circumstances exist:

1. there is no underlying legal or trade obligation, purpose or economic justification;

2. the client is not properly identified;

3. the amount involved is not commensurate with the business or financial capacity of the client;

4. taking into account all known circumstances, it may be perceived that the client's transaction is structured in order to avoid being the subject of reporting requirements under the Act;

5. any circumstances relating to the transaction which is observed to deviate from the profile of the client and/or the client's past transactions with the covered institution;

6. the transactions is in a way related to an unlawful activity or offense under this Act that is about to be, is being or has been committed; or

7. any transactions that is similar or analogous to any of the


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foregoing."

SECTION 3. Section 3(i) of the same Act is further amended to read as follows:

"(i) 'Unlawful activity' refers to any act or omission or series or combination thereof involving or having direct relation to following:

"(1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the Revised Penal Code, as amended;

"(2) Sections 4, 5, 6, 8, 9, 10, 12, 13, 14, 15, and 16 of Republic Act No. 9165, otherwise known as the Comprehensive Dangerous Act of 2002;

"(3) Section 3 paragraphs B, C, E, G, H and I of republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act;

"(4) Plunder under Republic Act No. 7080, as amended;

"(5) Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302 of the Revised Penal Code, as amended;

"(6) Jueteng and Masiao punished as illegal gambling under Presidential Decree No. 1602;

"(7) Piracy on the high seas under the Revised Penal Code, as amended and Presidential under the Revised Penal Code, as amended and Presidential Decree No. 532;

"(8) Qualified theft under Article 310 of the Revised penal Code, as amended;

"(9) Swindling under Article 315 of the Revised Penal Code, as amended;

"(10) Smuggling under Republic Act Nos. 455 and 1937;

"(11) Violations under Republic Act No. 8792, otherwise known as the Electrinic Commerce Act of 2000;

"(12) Hijacking and other violations under Republic Act No. 6235; destructive arson and murder, as defined under the Revised Penal Code, as amended, including those perpetrated by terrorists against non-combatant persons and similar targets;

"(13) Fraudulent practices and other violations under Republic


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Act No. 8799, otherwise known as the Securities Regulation Code of 2000;

"(14) Felonies or offenses of a similar nature that are punishable under the penal laws of other countries."

SECTION 4. Section 4 of the same Act is hereby amended to read as follows:

"SEC. 4. Money Laundering Offense. -- Money laundering is a crime whereby the proceeds of an unlawful activity as herein defined are transacted, theeby making them appear to have originated from legitimate sources. It is committed by the following:

(a) Any person knowing that any monetary instrument or property represents, involves, or relates to, the proceeds of any unlawful activity, transacts or attempts to transacts said monetary instrument or property.

(b) Any person knowing that any monetary instrument or property involves the proceeds of any unlawful activity, performs or fails to perform any act as a result of which he falicitates the offense of money laundering referred to in paragraph (a) above.

(c) Any person knowing that any monetary instrument or property is required under this Act to be disclosed and filed with the Anti-Money Laundering Council (AMLC), fails to do so."

SECTION 5. Section 7 of the same Act is hereby amended as follows:

"SEC.7. Creation of Anti-Money Laundering Council (AMLC). -- The Anti-Money Laundering Council is hereby created and shall be composed of the Governor of the Bangko Sentral ng Pilipinas as chairman, the Commissioner of the Insurance Commission and the Chairman of the Securities and Exchange Commission as member. The AMLC shall shall act unanimously in the discharge of its functions as defined hereunder:

"(1) to require and receive covered or suspicious transaction reports from covered institutions;

"(2) to issue orders addressed to the appropriate Supervising Authority or the covered institutions to determine the true identity of the owner of any monetary instrument or preperty subject of a covered transaction or suspicious transaction report or request for assistance from a foreign State, or believed by the Council, on the basis fo substantial evidence,


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to be, in whole or in part, wherever located, representing, involving, or related to directly or indirectly, in any manner or by any means, the proceeds of an unlawful activitity.

"(3) to institute civil forfeiture proceedings and all other remedial proceedings through the Office of th Solicitor General;

"(4) to cause the filing of complaints with the Department of Justice or the Ombudsman for the prosecution of money laundering offenses;

"(5) to investigate suspicious transactions and covered transactions deemed suspicious after an investigation by AMLC, money laundering activities and other violations of this Act;

"(6) to apply before the Court of Appeals, ex parte, for the freezing of any monetary instrument or property alleged to be the proceeds of any unlawful activity as defined in Section 3(i) hereof;

"(7) to implement such measures as may be necessary and justified under this Act to counteract money laundering;

"(8) to receive and take action in respect of, any request from foreign states for assistance in their own anti-money laundering operations provided in this Act;

"(9) to develop educational programs on the pernicious effects of money laundering, the methods and techniques used in the money laundering, the viable means of preventing money laundering and the effective ways of prosecuting and punishing offenders;

"(10) to enlist the assistance of any branch, department, bureau, office, agency, or instrumentality of the government, including government-owned and -controlled corporations, in undertaking any and all anti-money laundering operations, which may include the use of its personnel, facilities and resources for the more resolute prevention, detection, and investigation of money laundering offenses and prosecution of offenders; and

"(11) to impose administrative sanctions for the violation of laws, rules, regulations, and orders and resolutions issued pursuant thereto."

SECTION 6. Section 9(c) of the same Act is hereby amended to read as


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follows:

"(c) Reporting of Covered and Suspicious Transactions. -- Covered institutions shall report to the AMLC all covered transactions and suspicious transactions within five(5) working days from occurrences thereof, unless the Supervising Authority prescribes a longer period not exceeding ten (10) working days.

"Should a transaction be determined to be both a covered transaction and a suspicious transaction, the covered institution shall be required to report the same as a suspicious transaction.

"When reporting covered or suspicious transactions to the AMLC, covered institutions and their officers and employees shall not be deemed to have violated Republic Act No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act No. 8791 and other similar laws, but are prohibited from communicating, directly or indirectly, in any manner or by an means, to any person, the fact that a covered or suspicious transaction report was made, the contents thereof, or any other information in relation thereto. In case of violation thereof, the concerned officer and employee of the covered institution shall be criminally liable. However, no administrative, criminal or civil proceedings, shall lie against any person for having made a covered or suspicious transaction report in the regular performance of his duties in good faith, whether or not such reporting results in any criminal prosecution under this Act of any other law.

"When reporting covered or suspicious transactions to the AMLC, covered instituting and their officers and employees are prohibited from communicating directly or indirectly, in any manner or by any means, to any person or entity, the media, the fact that a covered or suspicious transaction report was made, the contents thereof, or any other information in relation thereto. Neither may such reporting be published or aired in any manner or form by the mass media, electronic

mail, or other similar devices. In case of violation thereof, the concerned officer and employee of the covered institution and media shall be held criminally liable.


"Sec 10. Freezing of Monetary Instrument or Property. -- The Court of Appeals, upon application ex parte by the AMLC and

after determination that probable cause exists that any monetary instrument or property is in any way related to an unlawful activity as defined in Section 3(i) hereof, may issue a


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freeze order which shall be effective immediately. The freeze order shall be for a period of twenty (20) days unless extended by the court.


"Sec. 11. Authority to Inquire into Bank Deposits. -- Notwithstanding the provisions of Republic Act No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act No. 8791, and other laws, the AMLC may inquire into or examine any particular deposit or investment with any banking institution or non-bank financial institution upon order of any competent court in cases of violation of this Act, when it has been established that there is probable cause that the deposits or investments are related to an unlawful activities as defined in Section 3(I) hereof or a money laundering offense under Section 4 hereof, except that no court order shall be required in cases involving unlawful activities defined in Sections 3(I)1, (2) and (12).

"To ensure compliance with this Act, the Bangko Sentral ng Pilipinas (BSP) may inquire into or examine any deposit of investment with any banking institution or non-bank financial institution when the examination is made in the course of a periodic or special examination, in accordance with the rules of examination of the BSP.

SECTION 9. Section 14, paragraphs (c) and (d) of the same Act is hereby amended to read as follows:

"(c) Malicious Reporting. Any person who, with malice, or in bad faith, reports or files a completely unwarranted or false information relative to money laundering transaction against any person shall be subject to a penalty to six (6) months to four (4) years imprisonment and a fine of not less than One hundred thousand Philippine pesos (Php100,000.00) but not more than Five hundred thousand Philippine pesos (Php500,000.00), at the discretion of the court: Provided, That

the offender is not entitled to avail the benefits of the Probation Law.

"If the offender is a corporation, association, partnership or any juridical person, the penalty shall be imposed upon the responsible officers, as the case may be, who participated in, or allowed by their gross negligence, the commission of the crime. If the offender is a juridical person, the court may suspend or revoke its license. If the offer is an alien, he shall, in addition to the penalties herein prescribed, be deported without further proceedings after serving the penalties herein prescribed. If the offender is a public official or employee, he


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shall, in addition to the penalties prescribed herein, suffer perpetual or temporary absolute disqualification from office, as the case may be.

"Any public official or employee who is called upon to testify and refuses to do the same or purposely fails to testify shall suffer the same penalties prescribed herein.

"(d) Breach of Confidentiality. The punishment of imprisonment ranging from three (3) to eight (8) years and a fine of not less than Five hundred thousand Philippine pesos (Php500,000.00) but not more than One million Philippine pesos (Php1,000,000.00) shall be imposed on a person convicted for a violation under Section 9(c). In the case of a breach of confidentiality that is published or reported by media, the responsible reporter, writer, president, publisher, manager and editor-in-chief shall be liable under this Act.

SECTION 10. Section 15 of Republic Act No. 9160 is hereby deleted.


"SEC. 23. Effectivity. -- This Act shall take effect fifteen (15) days after its complete publication in the Official Gazette or in

at least two (2) national newspapers of general circulation.

SECTION 12. Transitory Provision. -- Existing freeze orders issued by the AMLC shall remain in force for a period of thirty (30) days after the effectivity of this Act, unless extended by the Court of Appeals.

SECTION 13. Effectivity. -- This Act shall take effect fifteen (15) days after its complete publication in the Official Gazette or in at least two (2) national newspapers of general circulation.


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Metro Manila Fifteenth Congress

Second Regular Session Begun and held in Metro Manila, on Monday, the twenty-fifth day of July, two thousand eleven.

[REPUBLIC ACT NO. 10167]

AN ACT TO FURTHER STRENGTHEN THE ANTI-MONEY LAUNDERING LAW, AMENDING FOR THE PURPOSE SECTIONS 10 AND 11 OF REPUBLIC ACT NO. 9160, OTHERWISE KNOWN AS THE “ANTI-MONEY LAUNDERING ACT OF 2001″, AS AMENDED, AND

FOR OTHER PURPOSES Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

SECTION 1. Section 10 of Republic Act No. 9160, as amended, is hereby amended to read as follows: “SEC. 10. Freezing of Monetary Instrument or Property. – Upon verified ex parte petition by the AMLC and after determination that probable cause exists that any monetary instrument or property is in any way related to an unlawful activity as defined in Section 3(i) hereof, the Court of Appeals may issue a freeze order, which shall be effective immediately. The freeze order shall be for a period of twenty (20) days unless extended by the court. In any case, the court should act on the petition to freeze within twenty-four (24) hours from filing of the petition. If the application is filed a day before a nonworking day, the computation of the twenty-four (24)-hour period shall exclude the nonworking days.” “A person whose account has been frozen may file a motion to lift the freeze order and the court must resolve this motion before the expiration of the twenty (20)-day original freeze order.” “No court shall issue a temporary restraining order or a writ of injunction against any freeze order, except the Supreme Court.” SEC. 2. Section 11 of the same Act is hereby amended to read as follows: “SEC. 11. Authority to Inquire into Bank Deposits. – Notwithstanding the provisions of Republic Act No. 1405, as amended; Republic Act No. 6426, as amended; Republic Act No. 8791; and other laws, the AMLC may inquire into or examine any particular deposit or investment, including related accounts, with any banking institution or non-bank financial institution upon order of any competent court based on an ex parte application in cases

of violations of this Act, when it has been established that there is probable cause that the deposits or investments, including related accounts involved, are related to an unlawful activity as defined in Section 3(i) hereof or a


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money laundering offense under Section 4 hereof; except that no court order shall be required in cases involving activities defined in Section 3(i)(1), (2), and (12) hereof, and felonies or offenses of a nature similar to those mentioned in Section 3(i)(1), (2), and (12), which are Punishable under the penal laws of other countries, and terrorism and conspiracy to commit

terrorism as defined and penalized under Republic Act No. 9372.” “The Court of Appeals shall act on the application to inquire into or examine any deposit or investment with any banking institution or non-bank financial institution within twenty-four (24) hours from filing of the application.” “To ensure compliance with this Act, the Bangko Sentral ng Pilipinas may, in the course of a periodic or special examination, check the compliance of a Covered institution with the requirements of the AMLA and its implementing rules and regulations.” “For purposes of this section, ‘related accounts’ shall refer to accounts, the funds and sources of which originated from and/or are materially linked to the monetary instrument(s) or property(ies) subject of the freeze order(s).” “A court order ex parte must first be obtained before the AMLC can inquire into these related Accounts: Provided, That the procedure for the ex parte application of the ex parte court order for the principal account shall be the same with that of the related accounts.” “The authority to inquire into or examine the main account and the related accounts shall comply with the requirements of Article III, Sections 2 and 3 of the 1987 Constitution, which are hereby incorporated by reference.” SEC. 3. Separability Clause. – If any provision of this Act or the application

thereof to any person or circumstance is held to be void, or unconstitutional, any other provision not affected thereby shall remain in full force and effect. SEC. 4. Repealing Clause. – All laws, decrees, executive orders, rules and regulations or parts thereof as are inconsistent with this Act are hereby repealed, amended or modified accordingly: Provided, That the penal provisions shall not apply to acts done prior to the effectivity of the AMLA on October 17, 2001. SEC. 5. Effectivity. – This Act shall take effect fifteen (15) days after its complete publication in the Official Gazette or in at least two (2) national newspapers of general circulation. Approved,

(Sgd.) FELICIANO BELMONTE JR. (Sgd.) JUAN PONCE ENRILE


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Speaker of the House of Representatives President of the Senate

This Act which is a consolidation of Senate Bill No. 3009 and House Bill No. 4275 was finally passed by the Senate and the House of Representatives on June 6, 2012.

(Sgd.) MARILYN B. BARUA-YAP (Sgd.) EMMA LIRIO-REYES

Secretary General House of Representatives Secretary of the Senate

Approved: (Sgd.) BENIGNO S. AQUINO III

President of the Philippines


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Metro Manila Fifteenth Congress

Second Regular Session Begun and held in Metro Manila, on Monday, the twenty-fifth day of July, two thousand eleven.

[REPUBLIC ACT NO. 10168]

AN ACT DEFINING THE CRIME OF FINANCING OF TERRORISM,

PROVIDING PENALTIES THEREFOR AND FOR OTHER PURPOSES Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

SECTION 1. Short Title. – This Act shall be known as “The Terrorism

Financing Prevention and Suppression Act of 2012″. SEC. 2. Declaration of Policy. – It is the policy of the State to protect life, liberty, and property from acts of terrorism and to condemn terrorism and those who support and finance it and to recognize it as inimical and dangerous to national security and the welfare of the people, and to make the financing of terrorism a crime against the Filipino people, against humanity, and against the law of nations. The State, likewise, recognizes and adheres to international commitments to combat the financing of terrorism, specifically to the International Convention for the Suppression of the Financing of Terrorism, as well as other binding terrorism-related resolutions of the United Nations Security Council pursuant to Chapter 7 of the Charter of the United Nations (UN). Toward this end, the State shall reinforce its fight against terrorism by criminalizing the financing of terrorism and related offenses, and by preventing and suppressing the commission of said offenses through freezing and forfeiture of properties or funds while protecting human rights. SEC. 3. Definition of Terms. – As used in this Act: (a) Anti-Money Laundering Council (AMLC) refers to the Council created by virtue of Republic Act No. 9160, as amended, otherwise known as the “Anti-Money Laundering Act of 2001, as amended”. (b) Anti-Terrorism Council (ATC) refers to the Council created by, virtue of Republic Act No. 9372, otherwise known as the “Human Security Act of 2007″. (c) Covered institutions refer to or shall have the same meaning as defined

under the Anti-Money Laundering Act (AMLA), as amended. (d) Dealing, with regard to property or funds refers to receipt, acquisition, transacting, representing, concealing, disposing or converting, transferring


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or moving, use as security of or providing financial services. (e) Designated persons refers to: (1) any person or entity designated and/or identified as a terrorist, one who

finances terrorism, or a terrorist organization or group under the applicable United Nations Security Council Resolution or by another jurisdiction or supranational jurisdiction; (2) any organization, association, or group of persons proscribed pursuant to Section 17 of the Human Security Act of 2007; or (3) any person, organization, association, or group of persons whose funds or property, based on probable cause are subject to seizure and sequestration under Section 39 of the Human Security Act of 2007. (f) Forfeiture refers to a court order transferring in favor of the government, after due process, ownership of property or funds representing, involving, or relating to financing of terrorism as defined in Section 4 or an offense under Sections 5, 6, 7, 8, or 9 of this Act. (g) Freeze refers to the blocking or restraining of specific property or funds

from being transacted, converted, concealed, moved or disposed without affecting the ownership thereof. (h) Property or funds refer to financial assets, property of every kind, whether tangible or intangible, movable or immovable, however acquired, and legal documents or instruments in any form, including electronic or digital, evidencing title to, or interest in, such funds or other assets, including, but not limited to, bank credits, travellers cheques, bank cheques, money orders, shares, securities, bonds, drafts, or letters of credit, and any interest, dividends or other income on or value accruing from or generated by such funds or other assets. (i) Terrorist refers to any natural person who: (1) commits, or attempts, or

conspires to commit terrorist acts by any means, directly or indirectly, unlawfully and willfully; (2) participates, as a principal or as an accomplice, in terrorist acts; (3) organizes or directs others to commit terrorist acts; or (4) contributes to the commission of terrorist acts by a group of persons acting with a common purpose where the contribution is made intentionally and with the aim of furthering the terrorist act or with the knowledge of the intention of the group to commit a terrorist act. (j) Terrorist acts refer to the following: (1) Any act in violation of Section 3 or Section 4 of the Human Security Act of 2007; (2) Any other act intended to cause death or serious bodily injury to a civilian, or to any other person not taking an active part in the hostilities in a situation of armed conflict, when the purpose of such act, by its nature or context, is to intimidate a population, or to compel a government or an


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international organization to do or to abstain from doing any act; (3) Any act which constitutes an offense under this Act, that is within the scope of any of the following treaties of which the Republic of the Philippines is a State party:

(a) Convention for the Suppression of Unlawful Seizure of Aircraft, done at The Hague on 16 December 1970; (b) Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation, done at Montreal on 23 September 1971; (c) Convention on the Prevention and Punishment of Crimes against Internationally Protected Persons, including Diplomatic Agents, adopted by the General Assembly of the United Nations on 14 December 1973; (d) International Convention against the Taking of Hostages, adopted by the General Assembly of the United Nations on 17 December 1979; (e) Convention on the Physical Protection of Nuclear Material, adopted at Vienna on 3 March 1980; (f) Protocol for the Suppression of Unlawful Acts of Violence at Airports Serving International Civil Aviation, supplementary to the Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation, done at Montreal on 24 February 1988; (g) Convention for the Suppression of Unlawful Acts against the Safety of Maritime Navigation, done at Rome on 10 March 1988; (h) Protocol for the Suppression of Unlawful Acts against the Safety of Fixed Platforms located on the Continental Shelf, done at Rome on 10 March 1988; or (i) International Convention for the Suppression of Terrorist Bombings, adopted by the General Assembly of the United Nations on 15 December 1997. (k) Terrorist organization, association or a group of persons refers to any entity

owned or controlled by any terrorist or group of terrorists that: (1) commits, or attempts to commit, terrorist acts by any means, directly or indirectly, unlawfully and willfully; (2) participates as an accomplice in terrorist acts; (3) organizes or directs others to commit terrorist acts; or (4) contributes to the commission of terrorist acts by a group of persons acting with common purpose of furthering the terrorist act where the contribution is made intentionally and with the aim of furthering the terrorist act or with the knowledge of the intention of the group to commit a terrorist act.


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SEC. 4. Financing of Terrorism. – Any person who, directly or indirectly, willfully and without lawful excuse, possesses, provides, collects or uses property or funds or makes available property, funds or financial service or other related services, by any means, with the unlawful and willful intention that they should be used or with the knowledge that they are to be used, in full or in part: (a) to carry out or facilitate the commission of any terrorist act; (b) by a terrorist organization, association or group; or (c) by an individual terrorist, shall be guilty of the crime of financing of terrorism and shall suffer the penalty of reclusion temporal in its maximum period to reclusion perpetua and a fine of not less than Five hundred thousand pesos (Php500,000.00) nor more than One million pesos (Php1,000,000.00). Any person who organizes or directs others to commit financing of terrorism under the immediately preceding paragraph shall likewise be guilty of an offense and shall suffer the same penalty as herein prescribed. For purposes of this Act, knowledge or intent may be established by direct evidence or inferred from the attendant circumstances. For an act to constitute a crime under this Act, it shall not be necessary that the funds were actually used to carry out a crime referred to in Section 3(j). SEC. 5. Attempt or Conspiracy to Commit the Crimes of Financing of Terrorism and Dealing with Property or Funds of Designated Persons. – Any attempt to commit any crime under Section 4 or Section 8 under this Act shall be penalized by a penalty two degrees lower than that prescribed for the commission of the same as provided under this Act. Any conspiracy to commit any crime under Section 4 or Section 8 of this Act shall be penalized by the same penalty prescribed for the commission of such crime under the said sections. There is conspiracy to commit the offenses punishable under Sections 4 and 8 of this Act when two (2) or more persons come to an agreement concerning the commission of such offenses and decided to commit it. SEC. 6. Accomplice. – Any person who, not being a principal under Article 17 of the Revised Penal Code or a conspirator as defined in Section 5 hereof, cooperates in the execution of either the crime of financing of terrorism or conspiracy to commit the crime of financing of terrorism by previous or simultaneous acts shall suffer the penalty one degree lower than that prescribed for the conspirator. SEC. 7. Accessory. – Any person who, having knowledge of the commission of the crime of financing of terrorism but without having participated therein as a principal, takes part subsequent to its commission, by profiting from it or by assisting the principal or principals to profit by the effects of the crime, or by concealing or destroying the effects of the crime in order to

prevent its discovery, or by harboring, concealing or assisting in the escape of a principal of the crime shall be guilty as an accessory to the crime of financing of terrorism and shall be imposed a penalty two degrees lower than that prescribed for principals in the crime of financing terrorism.


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SEC. 8. Prohibition Against Dealing with Property or Funds of Designated Persons. – Any person who, not being an accomplice under Section 6 or accessory under Section 7 in relation to any property or fund: (i) deals directly or indirectly, in any way and by any means, with any property or fund that he knows or has reasonable ground to believe is owned or controlled by a designated person, organization, association or group of persons, including funds derived or generated from property or funds owned or controlled, directly or indirectly, by a designated person, organization, association or group of persons; or (ii) makes available any property or funds, or financial services or other related services to a designated and/or identified person, organization, association, or group of persons, shall suffer the penalty of reclusion temporal in its maximum period to reclusion perpetua and a fine of not less than Five hundred thousand pesos

(Php500,000.00) nor more than One million pesos (Php1,000,000.00). SEC. 9. Offense by a Juridical Person, Corporate Body or Alien. – If the offender is a corporation, association, partnership or any juridical person, the penalty shall be imposed upon the responsible officers, as the case may be, who participated in, or allowed by their gross negligence, the commission of the crime or who shall have knowingly permitted or failed to prevent its commission. If the offender is a juridical person, the court may suspend or revoke its license. If the offender is an alien, the alien shall, in addition to the penalties herein prescribed, be deported without further proceedings after serving the penalties herein prescribed. SEC. 10. Authority to Investigate Financing of Terrorism. – The AMLC, either upon its own initiative or at the request of the ATC, is hereby authorized to investigate: (a) any property or funds that are in any way related to financing of terrorism or acts of terrorism; (b) property or funds of any person or persons in relation to whom there is probable cause to believe that such person or persons are committing or attempting or conspiring to commit, or participating in or facilitating the financing of terrorism or acts of terrorism as defined herein. The AMLC may also enlist the assistance of any branch, department, bureau, office, agency or instrumentality of the government, including government-owned and -controlled corporations in undertaking measures to counter the financing of terrorism, which may include the use of its personnel, facilities and resources. For purposes of this section and notwithstanding the provisions of Republic Act No. 1405, otherwise known as the “Law on Secrecy of Bank Deposits”, as amended; Republic Act No. 6426, otherwise known as the “Foreign Currency Deposit Act of the Philippines”, as amended; Republic Act No. 8791, otherwise known as “The General Banking Law of 2000″ and other laws, the AMLC is hereby authorized to inquire into or examine deposits and investments with any banking institution or non-bank financial institution and their subsidiaries and affiliates without a court order.


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SEC. 11. Authority to Freeze. – The AMLC, either upon its own initiative or at the request of the ATC, is hereby authorized to issue an ex parteorder to freeze without delay: (a) property or funds that are in any way related to financing of terrorism or acts of terrorism; or (b) property or funds of any person, group of persons, terrorist organization, or association, in relation

to whom there is probable cause to believe that they are committing or attempting or conspiring to commit, or participating in or facilitating the commission of financing of terrorism or acts of terrorism as defined herein. The freeze order shall be effective for a period not exceeding twenty (20) days. Upon a petition filed by the AMLC before the expiration of the period, the effectivity of the freeze order may be extended up to a period not exceeding six (6) months upon order of the Court of Appeals:Provided, That the twenty-day period shall be tolled upon filing of

a petition to extend the effectivity of the freeze order. Notwithstanding the preceding paragraphs, the AMLC, consistent with the Philippines’ international obligations, shall be authorized to issue a freeze order with respect to property or funds of a designated organization, association, group or any individual to comply with binding terrorism-related Resolutions, including Resolution No. 1373, of the UN Security Council pursuant to Article 41 of the Charter of the UN. Said freeze order shall be effective until the basis for the issuance thereof shall have been lifted. During the effectivity of the freeze order, an aggrieved party may, within twenty (20) days from issuance, file with the Court of Appeals a petition to determine the basis of the freeze order according to the principle of effective judicial protection. However, if the property or funds subject of the freeze order under the immediately preceding paragraph are found to be in any way related to financing of terrorism or acts of terrorism committed within the jurisdiction of the Philippines, said property or funds shall be the subject of civil forfeiture proceedings as hereinafter provided. SEC. 12. Exceptions for Investigative Requirements. – Notwithstanding the

immediately preceding provision, the AMLC may decide to defer the issuance of a freeze order for as long as necessary for any specific investigative/prosecutorial purposes. SEC. 13. Humanitarian Exemptions. – The person whose property or funds have been frozen under the first paragraph of Section 11 may withdraw such sums as the court determines to be reasonably needed for monthly family needs and sustenance including the services of counsel and the family medical needs of such person. The person whose property or funds have been frozen under the third paragraph of Section 11 may withdraw such sums as the AMLC determines to be reasonably needed for monthly family needs including the services of counsel and the family medical needs of such person. SEC. 14. Appropriation and Use of Funds of Public Attorney’s Office (PAO). – Any appropriation and use of funds of PAO to provide free legal

assistance or services to persons charged of the offenses defined and


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penalized herein shall not be construed as a violation of this Act, thereby exempting the PAO from any liability. SEC. 15. Publication of Designation. – The Department of Foreign Affairs with respect to designation under Section 3 (e) (1) of this Act, and the ATC with

respect to designation under Section 3 (e) (2) and (3) and Section 11 of this Act, shall publish a list of the designated persons to which this Act or the Human Security Act applies. The concerned agencies shall ensure that an electronic version of the document is made available to the public on their respective website. Each respective agency or authority shall ensure that information on procedures established in rules and regulations issued pursuant to this Act for delisting, unfreezing and exemptions for basic, necessary or extraordinary expenses shall likewise be made available in their respective website. SEC. 16. Duty of the Covered Institutions and/or Relevant Government Agencies Upon Receipt of the Freeze Order. – Upon receipt of the notice of a freeze order, the covered institutions and/or relevant government agencies shall immediately preserve the subject property or funds in accordance with the order of the AMLC and shall forthwith serve a copy of the notice of the freeze order upon the owner or holder of the property or funds. Any responsible officer or other person who fails to comply with a freeze order shall suffer the penalty of imprisonment from six (6) months to four (4) years and a fine of not less than One hundred thousand pesos (Php100,000.00) nor more than Five hundred thousand pesos (Php500,000.00), at the discretion of the court, without prejudice to the administrative sanctions that the AMLC may impose on the erring covered institution. SEC. 17. Predicate Offense to Money Laundering. – Financing of terrorism under Section 4 and offenses punishable under Sections 5, 6, and 7 of this Act shall be predicate offenses to money laundering as defined in Republic Act No. 9160, otherwise known as the “Anti-Money Laundering Act of 2001″, as amended, and subject to its suspicious transaction reporting requirement. SEC. 18. Civil Forfeiture. – The procedure for the civil forfeiture of property

or funds found to be in any way related to financing of terrorism under Section 4 and other offenses punishable under Sections 5, 6, and 7 of this Act shall be made in accordance with the AMLA, as amended, its Revised Implementing Rules and Regulations and the Rules of Procedure promulgated by the Supreme Court. SEC. 19. Extra-Territorial Application of this Act. – Subject to the provision of an existing treaty, including the International Convention for the Suppression of the Financing of Terrorism of which the Philippines is a State Party, and to any contrary provision of any law of preferential application, the criminal provisions of this Act shall apply: (a) to individual persons who, although physically outside the territorial limits of the Philippines, commit, conspire or plot to commit any of the crimes defined


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and punished in this Act inside the territorial limits of the Philippines; (b) to individual persons who, although physically outside the territorial limits of the Philippines, commit any of the said crimes on board Philippine ship or Philippine airship; (c) to individual persons who commit any of said crimes within any embassy, consulate, or diplomatic premises belonging to or

occupied by the Philippine government in an official capacity; (d) to individual persons who, although physically outside the territorial limits of the Philippines, commit said crimes against Philippine citizens or persons of Philippine descent, where their citizenship or ethnicity was a factor in the commission of the crime; and (e) to individual persons who, although physically outside the territorial limits of the Philippines, commit said crimes directly against the Philippine government. The provisions of this Act shall likewise apply to a Filipino national who, although outside the territorial jurisdiction of the Philippines, commit, conspire or plot to commit any of the crimes defined and punished in this Act. In case of an alien whose extradition is requested pursuant to the International Convention for the Suppression of the Financing of Terrorism, and that alien is not extradited to the requesting State, the Republic of the Philippines, without exception whatsoever and whether or not the offense was committed in the Philippines, shall submit the case without undue delay to the Department of Justice for the purpose of prosecution in the same manner as if the act constituting the offense had been committed in the Philippines, in which case, the courts of the Philippines shall have jurisdiction over the offense. SEC. 20. Extradition. – The Philippines may, at its option, subject to the principle of reciprocity, consider the International Convention for the Suppression of the Financing of Terrorism as a legal basis for requesting or granting extradition in respect of the offenses set forth under this Act. SEC. 21. Applicability of the Revised Penal Code. – The provisions of Book I of the Revised Penal Code shall apply suppletorily to this Act. SEC. 22. Implementing Rules and Regulations. -Within thirty (30) days from the effectivity of this Act, the AMLC, in coordination with relevant government agencies, shall promulgate rules and regulations to implement effectively the provisions of this Act. The rules and regulations to be promulgated may include, but not limited to, designation, delisting, notification of matters of interest of persons affected by the Act, exceptions for basic, necessary and extraordinary expenses, matters of evidence, definition of probable cause, inter-agency coordination, publication of relevant information, administrative offenses and penalties, procedures and forms, and other mechanisms for implementation of the Act. SEC. 23. Separability Clause. – If, for any reason, any provision of this Act is declared invalid or unconstitutional, the remaining provisions not affected thereby shall continue to be in force and effect.


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SEC. 24. Repealing Clause. – All laws, decrees, executive orders, proclamations, rules and regulations, and other issuances, or parts thereof, which are inconsistent with the provisions of this Act are hereby repealed or modified accordingly. SEC. 25. Effectivity Clause. – This Act shall take effect fifteen (15) days after its complete publication in the Official Gazette or in at least two (2) newspapers of general circulation. Approved,

(Sgd.) FELICIANO BELMONTE JR. (Sgd.) JUAN PONCE ENRILE

Speaker of the House of Representatives

President of the Senate

This Act which is a consolidation of Senate Bill No. 3127 and House Bill No. 5015 was finally passed by the Senate and the House of Representatives on June 6, 2012.

(Sgd.) MARILYN B. BARUA-YAP (Sgd.) EMMA LIRIO-REYES

Secretary General House of Representatives

Secretary of the Senate

Approved:

(Sgd.) BENIGNO S. AQUINO III President of the Philippines


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ACT NO. 3135 – AN ACT TO REGULATE THE SALE OF PROPERTY UNDER SPECIAL POWERS INSERTED IN OR ANNEXED TO REAL-ESTATE MORTGAGES as AMENDED BY ACT NO. 4118. SECTION 1. When a sale is made under a special power inserted in or attached to any real-estate mortgagehereafter made as security for the payment of money or the fulfillment of any other obligation, the provisionsof the following election shall govern as to the manner in which the sale and redemption shall be effected,whether or not provision for the same is made in the power. SECTION 2. Said sale cannot be made legally outside of the province in which the property sold is situated;and in case the place within said province in which the sale is to be made is subject to stipulation, such sale shall be made in said place or in the municipal building of the municipality in which the property or part thereof is situated. SECTION 3. Notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if such property is worthmore than four hundred pesos, such notice shall also be published once a week for at least three consecutiveweeks in a newspaper of general circulation in the municipality or city. SECTION 4. The sale shall be made at public auction, between the hours or nine in the morning and four inthe afternoon; and shall be under the direction of the sheriff of the province, the justice or auxiliary justiceof the peace of the municipality in which such sale has to be made, or a notary public of said municipality,who shall be entitled to collect a fee of five pesos each day of actual work performed, in addition to hisexpenses. SECTION 5. At any sale, the creditor, trustee, or other persons authorized to act for the creditor, may participate in the bidding and purchase under the same conditions as any other bidder, unless the contraryhas been expressly provided in the mortgage or trust deed under which the sale is made.

SECTION 6. In all cases in which an extrajudicial sale is made under the special power herein beforereferred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of said debtor,or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may redeem the same at any time within the term of one year from and after the date of the sale; and such redemption shall be governed by the provisions of sections four hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in so far as these are not inconsistent with the provisions of this Act.

SECTION 7. In any sale made under the provisions of this Act, the purchaser may petition the Court of First Instance of the province or place where the property or any part thereof is situated, to give him


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possessionthereof during the redemption period, furnishing bond in an amount equivalent to the use of the property for a period of twelve months, to indemnify the debtor in case it be shown that the sale was made without violating the mortgage or without complying with the requirements of this Act. Such petition shall be madeunder oath and filed in form of an ex parte

motion in the registration or cadastral proceedings if the property is registered, or in special proceedings in the case of property registered under the Mortgage Lawor under section one hundred and ninety-four of the Administrative Code, or of any other real propertyencumbered with a mortgage duly registered in the office of any register of deeds in accordance with anyexisting law, and in each case the clerk of the court shall, upon the filing of such petition, collect the fees specified in paragraph eleven of section one hundred and fourteen of Act Numbered Four hundred and ninety-six, as amended by Act Numbered Twenty-eight hundred and sixty-six, and the court shall, uponapproval of the bond, order that a writ of possession issue, addressed to the sheriff of the province in whichthe property is situated, who shall execute said order immediately. SECTION 8. The debtor may, in the proceedings in which possession was requested, but not later thanthirty days after the purchaser was given possession, petition that the sale be set aside and the writ of possession cancelled, specifying the damages suffered by him, because the mortgage was not violated or the sale was not made in accordance with the provisions hereof, and the court shall take cognizance of this petition in accordance with the summary procedure provided for in section one hundred and twelve of Act Numbered Four hundred and ninety-six; and if it finds the complaint of the debtor justified, it shall disposein his favor of all or part of the bond furnished by the person who obtained possession. Either of the partiesmay appeal from the order of the judge in accordance with section fourteen of Act Numbered Four hundred and ninety-six; but the order of possession shall continue in effect during the pendency of the appeal. SECTION 9. When the property is redeemed after the purchaser has been given possession, the redeemer shall be entitled to deduct from the price of redemption any rentals that said purchaser may have collected in case the property or any part thereof was rented; if the purchaser occupied the property as his owndwelling, it being town property, or used it gainfully, it being rural property, the redeemer may deduct fromthe price the interest of one per centum per month provided for in section four hundred and sixty-five of theCode of Civil Procedure.”

SECTION 10. This Act shall take effect on its approval. Approved: March 6, 1924


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AN ACT TO SECURE THE STATE AND PROTECT OUR PEOPLE FROM TERRORISM

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

SECTION 1. Short Title. “ This Act shall henceforth be known as the â€œHuman Security Act of 2007.”•

SEC. 2. Declaration of Policy. â€“ It is declared a policy of the State to protect life, liberty, and property from acts of terrorism, to condemn

terrorism as inimical and dangerous to the national security of the country and to the welfare of the people, and to make terrorism a crime against the Filipino people, against humanity, and against the law of nations.

In the implementation of the policy stated above, the State shall uphold the basic rights and fundamental liberties of the people as enshrined in the constitution.

The State recognizes that the fight against terrorism requires a comprehensive approach, comprising political, economic, diplomatic, military, and legal means duly taking into account the root causes of terrorism without acknowledging these as justifications for terrorist and/or criminal activities. Such measures shall include conflict management and post-conflict peace-building, addressing the roots of conflict by building state capacity and promoting equitable economic development.

Nothing in this Act shall be interpreted as a curtailment, restriction or diminution of constitutionally recognized powers of the executive branch of the government. It is to be understood, however, that the exercise of the constitutionally recognized powers of the executive department of the government shall not prejudice respect for human rights which shall be absolute and protected at all times.

SEC. 3. Terrorism. â€“ Any person who commits an act punishable under any of the following provisions of the Revised Penal Code:

1. Article 122 (Piracy in General and Mutiny in the High Seas or in the Philippine Waters); 2. Article 134 (Rebellion or Insurrection); 3. Article 134-a (Coup dâ€˜Etat), including acts committed by private persons; 4. Article 248 (Murder); 5. Article 267 (Kidnapping and Serious Illegal Detention); 6. Article 324 (Crimes Involving Destruction,


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or under

1. Presidential Decree No. 1613 (The Law on Arson); 2. Republic Act No. 6969 (Toxic Substances and Hazardous and Nuclear Waste Control Act of 1990); 3. Republic Act No. 5207, (Atomic Energy Regulatory and Liability Act of 1968); 4. Republic Act No. 6235 (Anti-Hijacking Law); 5. Presidential Decree No. 532 (Anti-piracy and Anti-highway Robbery Law of 1974); and, 6. Presidential Decree No. 1866, as amended (Decree Codifying the Laws on Illegal and Unlawful Possession, Manufacture, Dealing in, Acquisition or Disposition of Firearms, Ammunitions or Explosives)

thereby sowing and creating a condition of widespread and extraordinary fear and panic among the populace, in order to coerce the government to give in to an unlawful demand shall be guilty of the crime of terrorism and shall suffer the penalty of forty (40) years of imprisonment, without the benefit of parole as provided for under Act No. 4103, otherwise known as the Indeterminate Sentence Law, as amended.

SEC. 4. Conspiracy to Commit Terrorism. â€“ Persons who conspire to

commit the crime of terrorism shall suffer the penalty of forty (40) years of imprisonment.

There is conspiracy when two or more persons come to an agreement concerning the commission of the crime of terrorism as defined in Section 3 hereof and decide to commit the same.

SEC. 5. Accomplice. â€“ Any person who, not being a principal under Article 17 of the Revised Penal Code or a conspirator as defined in Section 4 hereof, cooperates in the execution of either the crime of terrorism or conspiracy to commit terrorism by previous or simultaneous acts shall suffer the penalty of from seventeen (17) years, four (4) months one day to twenty (20) years of imprisonment.

SEC. 6. Accessory. â€“ Any person who, having knowledge of the

commission of the crime of terrorism or conspiracy to commit terrorism, and without having participated therein, either as principal or accomplice under Articles 17 and 18 of the Revised Penal Code, takes part subsequent to its commission in any of the following manner: (a) by profiting himself or assisting the offender to profit by the effects of the crime; (b) by concealing or destroying the body of the crime, or the effects, or instruments thereof, in order to prevent its discovery; (c) by harboring, concealing, or assisting in the escape of the principal or conspirator of the crime, shall suffer the penalty of ten (10) years and one day to twelve (12) years of imprisonment.

Notwithstanding the above paragraph, the penalties prescribed for accessories shall not be imposed upon those who are such with respect


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to their spouses, ascendants, descendants, legitimate, natural, and adopted brothers and sisters, or relatives by affinity within the same degrees, with the single exception of accessories falling within the provisions of subparagraph (a).

SEC. 7. Surveillance of Suspects and Interception and Recording of

Communications. â€“ The provisions of Republic Act No. 4200 (Anti-wire Tapping Law) to the contrary notwithstanding, a police or law enforcement official and the members of his team may, upon a written order of the Court of Appeals, listen to, intercept and record, with the use of any mode, form, kind or type of electronic or other surveillance equipment or intercepting and tracking devices, or with the use of any other suitable ways and means for that purpose, any communication, message, conversation, discussion, or spoken or written words

between members of a judicially declared and outlawed terrorist organization, association, or group of persons or of any person charged with or suspected of the crime of terrorism or conspiracy to commit terrorism.

Provided, That surveillance, interception and recording of communications between lawyers and clients, doctors and patients, journalists and their sources and confidential business correspondence

shall not be authorized.

SEC. 8. Formal Application for Judicial Authorization. â€“ The written order of the authorizing division of the Court of Appeals to track down, tap, listen to, intercept, and record communications, messages, conversations, discussions, or spoken or written words of any person suspected of the crime of terrorism or the crime of conspiracy to commit terrorism shall only be granted by the authorizing division of the Court of Appeals upon an ex parte written application of a police or of a law enforcement official who has been duly authorized in writing by the Anti-Terrorism Council created in Section 53 of this Act to file such ex parte application, and upon examination under oath or affirmation of the applicant and the witnesses he may produce to establish: (a) that there is probable cause to believe based on personal knowledge of facts or circumstances that the said crime of terrorism or conspiracy to commit terrorism has been committed, or is being committed, or is about to be committed; (b) that there is probable cause to believe based on personal knowledge of facts or circumstances that evidence, which is essential to the conviction of any charged or suspected person for, or to the solution or prevention of, any such crimes, will be obtained; and, (c) that there is no other effective means readily available for acquiring such evidence.

SEC. 9. Classification and Contents of the Order of the Court. â€“ The

written order granted by the authorizing division of the Court of Appeals as well as its order, if any, to extend or renew the same, the original application of the applicant, including his application to extend or renew, if any, and the written authorizations of the Anti-Terrorism Council shall be deemed and are hereby declared as


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classified information: Provided, That the person being surveilled or whose communications, letters, papers, messages, conversations. Discussions, spoken or written words and effects have been monitored, listened to, bugged or recorded by law enforcement authorities has the right to be informed of the acts done by the law

enforcement authorities in the premises or to challenge, if he or she intends to do so, the legality of the interference before the Court of Appeals which issued the written order. The written order of the authorizing division of the Court of Appeals shall specify the following: (a) the identity, such as name and address, if known, of the charged or suspected person whose communications, messages, conversations, discussions, or spoken or written words are to be tracked down, tapped, listened to, intercepted, and recorded and, in the case of radio, electronic, or telephonic (whether wireless or otherwise) communications, messages, conversations, discussions, or spoken or written words, the electronic transmission systems or the telephone numbers to be tracked down, tapped, listened to, intercepted, and recorded and their locations or if the person suspected of the crime of terrorism or conspiracy to commit terrorism is not fully known, such person shall be subject to continuous surveillance provided there is a reasonable ground to do so; (b) the identity (name, address, and the police or law enforcement organization) of the police or of the law enforcement official, including the individual identity (names, addresses, and the police or law enforcement organization) of the members of his team, judicially authorized to track down, tap, listen to, intercept, and record the communications, messages, conversations, discussions, or spoken or written words; (c) the offense or offenses committed, or being committed, or sought to be prevented; and, (d) the length of time within which the authorization shall be used or carried out.

SEC. 10. Effective Period of Judicial Authorization. â€“ Any authorization granted by the authorizing division of the Court of Appeals, pursuant to Sec. 9 (d) of this Act, shall only be effective for the length of time specified in the written order of the authorizing division of the Court of Appeals, which shall not exceed a period of thirty (30) days from the date of receipt of the written order of the authorizing division of the Court of Appeals by the applicant police or law enforcement official.

The authorizing division of the Court of Appeals may extend or renew the said authorization for another non-extendible period, which shall not exceed thirty (30) days from the expiration of the original period: Provided, That the authorizing division of the Court of Appeals is satisfied that such extension or renewal is in the public interest: and Provided, further, That the ex parte application for extension or renewal, which must be filed by the original applicant, has been duly authorized in writing by the Anti-Terrorism Council.

In case of death of the original applicant or in case he is physically disabled to file the application for extension or renewal, the one next in


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rank to the original applicant among the members of the team named in the original written order of the authorizing division of the Court of Appeals shall file the application for extension or renewal: Provided, That, without prejudice to the liability of the police or law enforcement personnel under Section 20 hereof, the applicant police or law

enforcement official shall have thirty (30) days after the termination of the period granted by the Court of Appeals as provided in the preceding paragraphs within which to file the appropriate case before the Public Prosecutorâ€™s Office for any violation of this Act.

If no case is filed within the thirty (30)-day period, the applicant police or law enforcement official shall immediately notify the person subject of the surveillance, interception and recording of the termination of the said surveillance, interception and recording. The penalty of ten

(10) years and one day to twelve (12) years of imprisonment shall be imposed upon the applicant police or law enforcement official who fails to notify the person subject of the surveillance, monitoring, interception and recording as specified above.

SEC. 11. Custody of Intercepted and Recorded Communications. â€“ All tapes, discs, and recordings made pursuant to the authorization of the authorizing division of the Court of Appeals, including all excerpts

and summaries thereof as well as all written notes or memoranda made in connection therewith, shall, within forty-eight (48) hours after the expiration of the period fixed in the written order of the authorizing division of the Court of Appeals or within forty-eight (48) hours after the expiration of any extension or renewal granted by the authorizing division of the Court of Appeals, be deposited with the authorizing Division of the Court of Appeals in a sealed envelope or sealed package, as the case may be, and shall be accompanied by a

joint affidavit of the applicant police or law enforcement official and the members of his team.

In case of death of the applicant or in case he is physically disabled to execute the required affidavit, the one next in rank to the applicant among the members of the team named in the written order of the authorizing division of the Court of Appeals shall execute with the members of the team that required affidavit.

It shall be unlawful for any person, police officer or any custodian of the tapes, discs and recording, and their excerpts and summaries, written notes or memoranda to copy in whatever form, to remove, delete, expunge, incinerate, shred or destroy in any manner the items enumerated above in whole or in part under any pretext whatsoever.

Any person who removes, deletes, expunges incinerates, shreds or destroys the items enumerated above shall suffer a penalty of not less

than six (6) years and one day to twelve (12) years of imprisonment.

SEC. 12. Contents of Joint Affidavit. â€“ The joint affidavit of the police or of the law enforcement official and the individual members of his


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team shall state: (a) the number of tapes, discs, and recordings that have been made, as well as the number of excerpts and summaries thereof and the number of written notes and memoranda, if any, made in connection therewith; (b) the dates and times covered by each of such tapes, discs, and recordings; (c) the number of tapes, discs, and

recordings, as well as the number of excerpts and summaries thereof and the number of written notes and memoranda made in connection therewith that have been included in the deposit; and (d) the date of the original written authorization granted by the Anti-Terrorism Council to the applicant to file the ex parte application to conduct the tracking down, tapping, intercepting, and recording, as well as the date of any extension or renewal of the original written authority granted by the authorizing division of the Court of Appeals.

The joint affidavit shall also certify under oath that no duplicates or copies of the whole or any part of any of such tapes, discs, and recordings, and that no duplicates or copies of the whole or any part of any of such excerpts, summaries, written notes, and memoranda, have been made, or, if made, that all such duplicates and copies are included in the sealed envelope or sealed package, as the case may be, deposited with the authorizing division of the Court of Appeals.

It shall be unlawful for any person, police or law enforcement official to omit or exclude from the joint affidavit any item or portion thereof mentioned in this Section.

Any person, police or law enforcement officer who violates any of the acts proscribed in the preceding paragraph shall suffer the penalty of not less than ten (10) years and one day to twelve (12) years of imprisonment.

SEC. 13. Disposition of Deposited Materials. â€“ The sealed envelope or

sealed package and the contents thereof, which are deposited with the authorizing division of the Court of Appeals, shall be deemed and are hereby declared classified information, and the sealed envelope or sealed package shall not be opened and its contents (including the tapes, discs, and recordings and all the excerpts and summaries thereof and the notes and memoranda made in connection therewith) shall not be divulged, revealed, read, replayed, or used as evidence

unless authorized by written order of the authorizing division of the Court of Appeals, which written order shall be granted only upon a written application of the Department of Justice filed before the authorizing division of the Court of Appeals and only upon a showing that the Department of Justice has been duly authorized in writing by the Anti-Terrorism Council to file the application with proper written notice the person whose conversation, communication, message discussion or spoken or written words have been the subject of surveillance, monitoring, recording and interception to open, reveal, divulge, and use the contents of the sealed envelope or sealed package as evidence.


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Any person, law enforcement official or judicial authority who violates his duty to notify in writing the persons subject of the surveillance as defined above shall suffer the penalty of six (6) years and one day to eight (8) years of imprisonment.

SEC. 14. Application to Open Deposited Sealed Envelop or Sealed Package.

â€“ The written application with notice to the party concerned to open the deposited sealed envelope or sealed package shall clearly state the purpose or reason: (a) for opening the sealed envelope or sealed package; (b) for revealing or disclosing its classified contents; (c) for replaying, divulging, and or reading any of the listened to, intercepted, and recorded communications, messages, conversations, discussions, or spoken or written words (including any of the excerpts and summaries thereof and any of the notes or memoranda made in

connection therewith); and, (d) for using any of said listened to ,intercepted, and recorded communications, messages, conversations, discussions, or spoken or written words (including any of the excerpts and summaries thereof and any of the notes or memoranda made in connection therewith) as evidence.

Any person, law enforcement official or judicial authority who violates his duty to notify as defined above shall suffer the penalty of six (6)

years and one day to eight (8) years of imprisonment.

SEC. 15. Evidentiary Value of Deposited Materials. â€“ Any listened to, intercepted, and recorded communications, messages, conversations, discussions, or spoken or written words, or any part or parts thereof, or any information or fact contained therein, including their existence, content, substance, purport, effect, or meaning, which have been secured in violation of the pertinent provisions of this Act, shall absolutely not be admissible and usable as evidence against anybody in any judicial, quasi-judicial, legislative, or administrative investigation, inquiry, proceeding, or hearing.

SEC. 16. Penalty for Unauthorized or malicious Interceptions and/or Recordings. â€“ Any police or law enforcement personnel who, not being authorized to do so by the authorizing division of the Court of Appeals, tracks down, taps, listens to, intercepts, and records in whatever manner or form any communication, message, conversation,

discussion, or spoken or written word of a person charged with or suspected of the crime of terrorism or the crime of conspiracy to commit terrorism shall be guilty of an offense and shall suffer the penalty of ten (10) years and one day to twelve (12) years of imprisonment.

In addition to the liability attaching to the offender for the commission of any other offense, the penalty of ten (10) years and one day to

twelve (12) years of imprisonment and the accessory penalty of perpetual absolute disqualification from public office shall be imposed upon any police or law enforcement personnel who maliciously obtained an authority from the Court of Appeals to track down, tap,


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listen to, intercept, and record in whatever manner or form any communication, message, conversation, discussion, or spoken or written words of a person charged with or suspected of the crime of terrorism or conspiracy to commit terrorism: Provided, That notwithstanding Section 13 of this Act, the party aggrieved by such

authorization shall be allowed access to the sealed envelope or sealed package and the contents thereof as evidence for the prosecution of any police or law enforcement personnel who maliciously procured said authorization.

SEC. 17. Proscription of Terrorist Organizations, Association, or Group of Persons. â€“ Any organization, association, or group of persons organized for the purpose of engaging in terrorism, or which, although not organized for that purpose, actually uses the acts to

terrorize mentioned in this Act or to sow and create a condition of widespread and extraordinary fear and panic among the populace in order to coerce the government to give in to an unlawful demand shall, upon application of the Department of Justice before a competent Regional Trial Court, with due notice and opportunity to be heard given to the organization, association, or group of persons concerned, be declared as a terrorist and outlawed organization, association, or group of persons by the said Regional Trial Court.

SEC. 18. Period of Detention Without Judicial Warrant of Arrest. â€“ The provisions of Article 125 of the Revised Penal Code to the contrary notwithstanding, any police or law enforcement personnel, who, having been duly authorized in writing by the Anti-Terrorism Council has taken custody of a person charged with or suspected of the crime of terrorism or the crime of conspiracy to commit terrorism shall, without incurring any criminal liability for delay in the delivery of

detained persons to the proper judicial authorities, deliver said charged or suspected person to the proper judicial authority within a period of three (3) days counted from the moment the said charged or suspected person has been apprehended or arrested, detained, and taken into custody by the said police, or law enforcement personnel: Provided, That the arrest of those suspected of the crime of terrorism or conspiracy to commit terrorism must result from the surveillance under Section 7 and examination of bank deposits under Section 27 of this Act.

The police or law enforcement personnel concerned shall, before detaining the person suspected of the crime of terrorism, present him or her before any judge at the latterâ€™s residence or office nearest the place where the arrest took place at any time of the day or night. It shall be the duty of the judge, among other things, to ascertain the identity of the police or law enforcement personnel and the person or persons they have arrested and presented before him or her, to inquire of them the reasons why they have arrested the person and determine by questioning and personal observation whether or not the suspect has been subjected to any physical, moral or psychological torture by whom and why. The judge shall then submit a written report of what


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he/she had observed when the subject was brought before him to the proper court that has jurisdiction over the case of the person thus arrested. the judge shall forthwith submit his/her report within three (3) calendar days from the time the suspect was brought to his/her residence or office.

Immediately after taking custody of a person charged with or suspected of the crime of terrorism or conspiracy to commit terrorism, the police or law enforcement personnel shall notify in writing the judge of the court nearest the place of apprehension or arrest: Provided, That where the arrest is made during saturdays, sundays, holidays or after office hours, the written notice shall be served at the residence of the judge nearest the place where the accused was arrested.

The penalty of ten (10) years and one day to twelve (12) years of imprisonment shall be imposed upon the police or law enforcement personnel who fails to notify any judge as provided in the preceding paragraph.

SEC. 19. Period of Detention in the Event of an Actual or Imminent Terrorist Attack. â€“ In the event of an actual or imminent terrorist

attack, suspects may not be detained for more than three (3) days without the written approval of a municipal, city, provincial or regional official of a Human Rights Commission or judge of the municipal, regional trial court, the Sandiganbayan or a justice of the Court of Appeals nearest the place of the arrest. If the arrest is made during Saturdays, Sundays, holidays or after office hours, the arresting police or law enforcement personnel shall bring the person thus arrested to the residence of any of the officials mentioned above that is nearest the place where the accused was arrested. The approval in writing of any of the said officials shall be secured by the police or law enforcement personnel concerned within five (5) days after the date of the detention of the persons concerned: Provided, however, That within three (3) days after the detention the suspects, whose connection with the terror attack or threat is not established, shall be released immediately.

SEC. 20. Penalty for Failure to Deliver Suspect to the Proper Judicial

Authority Within Three (3) Days. â€“ The penalty of ten (10) years and one day to twelve (12) years of imprisonment shall be imposed upon any police or law enforcement personnel who has apprehended or arrested, detained and taken custody of a person charged with or suspected of the crime of terrorism or conspiracy to commit terrorism and fails to deliver such charged or suspected person to the proper judicial authority within the period of three (3) days.

SEC. 21. Rights of a Person Under Custodial Detention. â€“ The moment a person charged with or suspected of the crime of terrorism or the crime of conspiracy to commit terrorism is apprehended or arrested and detained, he shall forthwith be informed, by the arresting police or


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law enforcement officers or by the police or law enforcement officers to whose custody the person concerned is brought, of his or her right: (a) to be informed of the nature and cause of his arrest, to remain silent and to have competent and independent counsel preferably of his choice. If the person cannot afford the services of counsel of his or her

choice, the police or law enforcement officers concerned shall immediately contact the free legal assistance unit of the Integrated Bar of the Philippines (IBP) or the Public Attorneyâ€™s Office (PAO). It shall be the duty of the free legal assistance unit of the IBP or the PAO thus contacted to immediately visit the person(s) detained and provide him or her with legal assistance. These rights cannot be waived except in writing and in the presence of the counsel of choice; (b) informed of the cause or causes of his detention in the presence of his legal counsel; (c) allowed to communicate freely with his legal counsel and to confer with them at any time without restriction; (d) allowed to communicate freely and privately without restrictions with the members of his family or with his nearest relatives and to be visited by them; and, (e) allowed freely to avail of the service of a physician or physicians of choice.

SEC. 22. Penalty for Violation of the Rights of a Detainee. â€“ Any police

or law enforcement personnel, or any personnel of the police or other law enforcement custodial unit that violates any of the aforesaid rights of a person charged with or suspected of the crime of terrorism or the crime of conspiracy to commit terrorism shall be guilty of an offense and shall suffer the penalty of ten (10) years and one day to twelve (12) years of imprisonment.

Unless the police or law enforcement personnel who violated the rights of a detainee or detainees as stated above is duly identified, the

same penalty shall be imposed on the police officer or head or leader of the law enforcement unit having custody of the detainee at the time the violation was done.

SEC. 23. Requirement for an Official Custodial Logbook and Its Contents. â€“ The police or other law enforcement custodial unit in whose care and control the person charged with or suspected of the crime of terrorism or the crime of conspiracy to commit terrorism has been placed under custodial arrest and detention shall keep a securely and orderly maintained official logbook, which is hereby declared as a public document and opened to and made available for the inspection and scrutiny of the lawyer or lawyers of the person under custody or any member of his or her family or relative by consanguinity or affinity within the fourth civil degree or his or her physician at any time of the day or night without any form of restriction. The logbook shall contain a clear and concise record of: (a) the name, description, and address of the detained person; (b) the date and exact time of his initial admission for custodial arrest and detention; (c) the name and address of the physician or physicians who examined him physically and medically; (d) the state of his health and physical condition at the time of his initial admission for custodial detention; (e) the date and


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time of each removal of the detained person from his cell for interrogation or for any purpose; (f) the date and time of his return to his cell; (g) the name and address of the physician or physicians who physically and medically examined him after each interrogation; (h) a summary of the physical and medical findings on the detained person

after each of such interrogation; (i) the names and addresses of his family members and nearest relatives, if any and if available; (j) the names and addresses of persons who visit the detained person; (k) the date and time of each of such visits; (l) the date and time of each request of the detained person to communicate and confer with his legal counsel or counsels; (m) the date and time of each visit, and date and time of each departure of his legal counsel or counsels; and, (n) all other important events bearing on and all relevant details regarding the treatment of the detained person while under custodial arrest and detention.

The said police or law enforcement custodial unit shall upon demand of the aforementioned lawyer or lawyers or members of the family or relatives within the fourth civil degree of consanguinity or affinity of the person under custody or his or her physician issue a certified true copy of the entries of the logbook relative to the concerned detained person without delay or restriction or requiring any fees whatsoever including documentary stamp tax, notarial fees, and the like. This certified true copy may be attested by the person who has custody of the logbook or who allowed the party concerned to scrutinize it at the time the demand for the certified true copy is made.

The police or other law enforcement custodial unit who fails to comply with the preceding paragraph to keep an official logbook shall suffer the penalty of ten (10) years and one day to twelve (12) years of

imprisonment.

SEC. 24. No Torture or Coercion in Investigation and Interrogation. â€“ No threat, intimidation, or coercion, and no act which will inflict any form of physical pain or torment, or mental, moral, or psychological pressure, on the detained person, which shall vitiate his free-will, shall be employed in his investigation and interrogation for the crime of terrorism or the crime of conspiracy to commit terrorism; otherwise, the evidence obtained from said detained person resulting from such threat, intimidation, or coercion, or from such inflicted physical pain or torment, or mental, moral, or psychological pressure, shall be, in its entirety, absolutely not admissible and usable as evidence in any judicial, quasi-judicial, legislative, or administrative investigation, inquiry, proceeding, or hearing.

SEC. 25. Penalty for Threat, Intimidation, Coercion, or Torture in the

Investigation and Interrogation of a Detained Person. â€“ Any person or

persons who use threat, intimidation, or coercion, or who inflict physical pain or torment, or mental, moral, or psychological pressure, which shall vitiate the free-will of a charged or suspected person under investigation and interrogation for the crime of terrorism or the


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crime of conspiracy to commit terrorism shall be guilty of an offense and shall suffer the penalty of twelve (12) years and one day to twenty (20) years of imprisonment.

When death or serious permanent disability of said detained person occurs as a consequence of the use of such threat, intimidation, or coercion, or as a consequence of the infliction on him of such physical pain or torment, or as a consequence of the infliction on him of such mental, moral, or psychological pressure, the penalty shall be twelve (12) years and one day to twenty (20) years of imprisonment

SEC. 26. Restriction on Travel. – In cases where evidence of guilt is not strong, and the person charged with the crime of terrorism or conspiracy to commit terrorism is entitled to bail and is granted the same, the court, upon application by the prosecutor, shall limit the right of travel of the accused to within the municipality or city where he resides or where the case is pending, in the interest of national security and public safety, consistent with Article III, Section 6 of the Constitution. Travel outside of said municipality or city, without the authorization of the court, shall be deemed a violation of the terms and conditions of his bail, which shall then be forfeited as provided under the Rules of Court.

He or she may also be placed under house arrest by order of the court at his or her usual place of residence.

While under house arrest, he or she may not use telephones, cellphones, e-mails, computers, the internet or other means of communications with people outside the residence until otherwise ordered by the court.

The restrictions abovementioned shall be terminated upon the acquittal of the accused or of the dismissal of the case filed against him or earlier upon the discretion of the court on motion of the prosecutor or of the accused.

SEC. 27. Judicial Authorization Required to Examine Bank Deposits, Accounts, and Records. â€“ The provisions of Republic Act No. 1405 as

amended, to the contrary notwithstanding, the justices of the Court of Appeals designated as a special court to handle anti-terrorism cases after satisfying themselves of the existence of probable cause in a hearing called for that purpose that (1) a person charged with or suspected of the crime of terrorism or conspiracy to commit terrorism, (2) of a judicially declared and outlawed terrorist organization, association, or group of persons, and (3) of a member of such judicially declared and outlawed organization, association, or group of persons, may authorize in writing any police or law enforcement officer and the members of his/her team duly authorized in writing by the anti-terrorism council to: (a) examine, or cause the examination of, the deposits, placements, trust accounts, assets and records in a bank or financial institution; and (b) gather or cause the gathering of any


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relevant information about such deposits, placements, trust accounts, assets, and records from a bank or financial institution. the bank or financial institution concerned shall not refuse to allow such examination or to provide the desired information, when so ordered by and served with the written order of the Court of Appeals.

SEC. 28. Application to Examine Bank Deposits, Accounts, and Records. â€“ The written order of the Court of Appeals authorizing the examination of bank deposits, placements, trust accounts, assets, and records: (1) of a person charged with or suspected of the crime of terrorism or conspiracy to commit terrorism, (2) of any judicially declared and outlawed terrorist organization, association, or group of persons, or (3) of any member of such organization, association, or group of persons in a bank or financial institution, and the gathering of any relevant

information about the same from said bank or financial institution, shall only be granted by the authorizing division of the Court of Appeals upon an ex parte application to that effect of a police or of a law enforcement official who has been duly authorized in writing to file such ex parte application by the Anti-Terrorism Council created in Section 53 of this Act to file such ex parte application, and upon examination under oath or affirmation of the applicant and the witnesses he may produce to establish the facts that will justify the need and urgency of examining and freezing the bank deposits, placements, trust accounts, assets, and records: (1) of the person charged with or suspected of the crime of terrorism or conspiracy to commit terrorism, (2) of a judicially declared and outlawed terrorist organization, association or group of persons, or (3) of any member of such organization, association, or group of persons.

SEC. 29. Classification and Contents of the Court Order Authorizing the

Examination of Bank Deposits, Accounts, and Records. â€“ The written order granted by the authorizing division of the Court of Appeals as well as its order, if any, to extend or renew the same, the original ex parte application of the applicant, including his ex parte application to extend or renew, if any, and the written authorizations of the Anti Terrorism Council, shall be deemed and are hereby declared as classified information: Provided, That the person whose bank deposits, placements, trust accounts, assets, and records have been examined, frozen, sequestered and seized by law enforcement authorities has the right to be informed of the acts done by the law enforcement authorities in the premises or to challenge, if he or she intends to do so, the legality of the interference. The written order of the authorizing division of the Court of Appeals designated to handle cases involving terrorism shall specify: (a) the identity of the said: (1) person charged with or suspected of the crime of terrorism or conspiracy to commit terrorism, (2) judicially declared and outlawed terrorist organization, association, or group of persons, and (3) member of such judicially declared and outlawed organization, association, or group of persons, as the case may be, whose deposits, placements, trust accounts, assets, and records are to be examined or the information to be gathered; (b) the identity of the bank or financial institution where such deposits, placements, trust accounts, assets, and records are held and


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maintained; (c) the identity of the persons who will conduct the said examination and the gathering of the desired information; and, (d) the length of time the authorization shall be carried out.

SEC. 30. Effective Period of Court Authorization to Examine and Obtain Information on Bank Deposits, Accounts, and Records. â€“ The

authorization issued or granted by the authorizing division of the Court of Appeals to examine or cause the examination of and to freeze bank deposits, placements, trust accounts, assets, and records, or to gather information about the same, shall be effective for the length of time specified in the written order of the authorizing division of the Court of Appeals, which shall not exceed a period of thirty (30) days from the date of receipt of the written order of the authorizing division of the Court of Appeals by the applicant police or law enforcement

official.

The authorizing division of the Court of Appeals may extend or renew the said authorization for another period, which shall not exceed thirty (30) days renewable to another thirty (30) days from the expiration of the original period, provided that the authorizing division of the Court of Appeals is satisfied that such extension or renewal is in the public interest, and provided further that the application for extension or

renewal, which must be filed by the original applicant, has been duly authorized in writing by the Anti-Terrorism Council.

In case of death of the original applicant or in case he is physically disabled to file the application for extension or renewal, the one next in rank to the original applicant among the members of the team named in the original written order of the authorizing division of the Court of Appeals shall file the application for extension or renewal: Provided, That, without prejudice to the liability of the police or law enforcement personnel under Section 19 hereof, the applicant police or law enforcement official shall have thirty (30) days after the termination of the period granted by the Court of Appeals as provided in the preceding paragraphs within which to file the appropriate case before the Public Prosecutorâ€™s Office for any violation of this Act.

If no case is filed within the thirty (30)-day period, the applicant police or law enforcement official shall immediately notify in writing the

person subject of the bank examination and freezing of bank deposits, placements, trust accounts, assets and records. The penalty of ten (10) years and one day to twelve (12) years of imprisonment shall be imposed upon the applicant police or law enforcement official who fails to notify in writing the person subject of the bank examination and freezing of bank deposits, placements, trust accounts, assets and records.

Any person, law enforcement official or judicial authority who violates his duty to notify in writing as defined above shall suffer the penalty of six (6) years and one day to eight (8) years of imprisonment.


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SEC. 31. Custody of Bank Data and Information Obtained after Examination of Deposits, Placements, Trust Accounts, Assets and Records. â€“ All information, data, excerpts, summaries, notes, memoranda, working sheets, reports, and other documents obtained from the examination of the bank deposits, placements, trust accounts, assets and records of: (1)

a person charged with or suspected of the crime of terrorism or the crime of conspiracy to commit terrorism, (2) a judicially declared and outlawed terrorist organization, association, or group of persons, or (3) a member of any such organization, association, or group of persons shall, within forty-eight (48) hours after the expiration of the period fixed in the written order of the authorizing division of the Court of Appeals or within forty-eight (48) hours after the expiration of the extension or renewal granted by the authorizing division of the Court of Appeals, be deposited with the authorizing division of the Court of Appeals in a sealed envelope or sealed package, as the case may be, and shall be accompanied by a joint affidavit of the applicant police or law enforcement official and the persons who actually conducted the examination of said bank deposits, placements, trust accounts, assets and records.

SEC. 32. Contents of Joint Affidavit. â€“ The joint affidavit shall state: (a)

the identifying marks, numbers, or symbols of the deposits, placements, trust accounts, assets, and records examined; (b) the identity and address of the bank or financial institution where such deposits, placements, trust accounts, assets, and records are held and maintained; (c) the number of bank deposits, placements, trust accounts, assets, and records discovered, examined, and frozen; (d) the outstanding balances of each of such deposits, placements, trust accounts, assets; (e) all information, data, excerpts, summaries, notes, memoranda, working sheets, reports, documents, records examined and placed in the sealed envelope or sealed package deposited with the authorizing division of the Court of Appeals; (f) the date of the original written authorization granted by the Anti-Terrorism Council to the applicant to file the ex parte application to conduct the examination of the said bank deposits, placements, trust accounts, assets and records, as well as the date of any extension or renewal of the original written authorization granted by the authorizing division of the Court of Appeals; and (g) that the items enumerated were all that were found in the bank or financial institution examined at the time of the completion of the examination.

The joint affidavit shall also certify under oath that no duplicates or copies of the information, data, excerpts, summaries, notes, memoranda, working sheets, reports, and documents acquired from the examination of the bank deposits, placements, trust accounts, assets and records have been made, or, if made, that all such duplicates and copies are placed in the sealed envelope or sealed package deposited with the authorizing division of the Court of Appeals.

It shall be unlawful for any person, police officer or custodian of the


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bank data and information obtained after examination of deposits, placements, trust accounts, assets and records to copy, to remove, delete, expunge, incinerate, shred or destroy in any manner the items enumerated above in whole or in part under any pretext whatsoever.

Any person who copies, removes, deletes, expunges incinerates, shreds or destroys the items enumerated above shall suffer a penalty of not less than six (6) years and one day to twelve (12) years of imprisonment.

SEC. 33. Disposition of Bank Materials. â€“ The sealed envelope or sealed package and the contents thereof, which are deposited with the authorizing division of the Court of Appeals, shall be deemed and are hereby declared classified information, and the sealed envelope or sealed package shall not be opened and its contents shall not be divulged, revealed, read, or used as evidence unless authorized in a written order of the authorizing division of the Court of Appeals, which written order shall be granted only upon a written application of the Department of Justice filed before the authorizing division of the Court of Appeals and only upon a showing that the Department of Justice has been duly authorized in writing by the Anti-Terrorism Council to file the application, with notice in writing to the party

concerned not later than three (3) days before the scheduled opening, to open, reveal, divulge, and use the contents of the sealed envelope or sealed package as evidence.

Any person, law enforcement official or judicial authority who violates his duty to notify in writing as defined above shall suffer the penalty of six (6) years and one day to eight (8) years of imprisonment.

SEC. 34. Application to Open Deposited Bank Materials. â€“ The written application, with notice in writing to the party concerned not later than three (3) days of the scheduled opening, to open the sealed envelope or sealed package shall clearly state the purpose and reason: (a) for opening the sealed envelope or sealed package; (b) for revealing and disclosing its classified contents; and, (c) for using the classified information, data, excerpts, summaries, notes, memoranda, working sheets, reports, and documents as evidence.

SEC. 35. Evidentiary Value of Deposited Bank Materials. â€“ Any

information, data, excerpts, summaries, notes, memoranda, work sheets, reports, or documents acquired from the examination of the bank deposits, placements, trust accounts, assets and records of: (1) a person charged or suspected of the crime of terrorism or the crime of conspiracy to commit terrorism, (2) a judicially declared and outlawed terrorist organization, association, or group of persons, or (3) a member of such organization, association, or group of persons, which

have been secured in violation of the provisions of this Act, shall absolutely not be admissible and usable as evidence against anybody in any judicial, quasi-judicial, legislative, or administrative


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investigation, inquiry, proceeding, or hearing.

SEC. 36. Penalty for Unauthorized or Malicious Examination of a Bank or a Financial Institution. â€“ Any person, police or law enforcement personnel who examines the deposits, placements, trust accounts, assets, or records in a bank or financial institution of: (1) a person charged with or suspected of the crime of terrorism or the crime of conspiracy to commit terrorism, (2) a judicially declared and outlawed terrorist organization, association, or group of persons, or (3) a member of such organization, association, or group of persons, without being authorized to do so by the Court of Appeals, shall be guilty of an offense and shall suffer the penalty of ten (10) years and one day to twelve (12) years of imprisonment.

In addition to the liability attaching to the offender for the commission of any other offense, the penalty of ten (10) years and one day to twelve (12) years of imprisonment shall be imposed upon any police or law enforcement personnel, who maliciously obtained an authority from the Court of Appeals to examine the deposits, placements, trust accounts, assets, or records in a bank or financial institution of: (1) a person charged with or suspected of the crime of terrorism or conspiracy to commit terrorism, (2) a judicially declared and outlawed

terrorist organization, association, or group of persons, or (3) a member of such organization, association, or group of persons: Provided, That notwithstanding Section 33 of this Act, the party aggrieved by such authorization shall upon motion duly filed be allowed access to the sealed envelope or sealed package and the contents thereof as evidence for the prosecution of any police or law enforcement personnel who maliciously procured said authorization.

SEC. 37. Penalty of Bank Officials and Employees Defying a Court

Authorization. â€“ An employee, official, or a member of the board of directors of a bank or financial institution, who refuses to allow the examination of the deposits, placements, trust accounts, assets, and records of: (1) a person charged with or suspected of the crime of terrorism or the crime of conspiracy to commit terrorism, (2) a judicially declared and outlawed terrorist organization, association, or group of persons, or (3) a member of such judicially declared and outlawed organization, association, or group of persons in said bank or financial institution, when duly served with the written order of the authorizing division of the Court of Appeals, shall be guilty of an offense and shall suffer the penalty of ten (10) years and one day to twelve (12) years of imprisonment.

SEC. 38. Penalty for False or Untruthful Statement or Misrepresentation of Material Fact in Joint Affidavits. â€“ Any false or untruthful statement or

misrepresentation of material fact in the joint affidavits required respectively in Section 12 and Section 32 of this Act shall constitute a criminal offense and the affiants shall suffer individually the penalty of ten (10) years and one day to twelve (12) years of imprisonment.


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SEC. 39. Seizure and Sequestration. â€“ The deposits and their outstanding balances, placements, trust accounts, assets, and records in any bank or financial institution, moneys, businesses, transportation and communication equipment, supplies and other implements, and property of whatever kind and nature belonging: (1) to any person

suspected of or charged before a competent Regional Trial Court for the crime of terrorism or the crime of conspiracy to commit terrorism; (2) to a judicially declared and outlawed organization, association, or group of persons; or (3) to a member of such organization, association, or group of persons shall be seized, sequestered, and frozen in order to prevent their use, transfer, or conveyance for purposes that are inimical to the safety and security of the people or injurious to the interest of the State.

The accused or a person suspected of may withdraw such sums as may be reasonably needed by the monthly needs of his family including the services of his or her counsel and his or her familyâ€™s medical needs upon approval of the court. He or she may also use any of his property that is under seizure or sequestration or frozen because of his or her indictment as a terrorist upon permission of the court for any legitimate reason.

Any person who unjustifiably refuses to follow the order of the proper division of the Court of Appeals to allow the person accused of the crime of terrorism or of the crime of conspiracy to commit terrorism to withdraw such sums from sequestered or frozen deposits, placements, trust accounts, assets and records as may be necessary for the regular sustenance of his or her family or to use any of his or her property that has been seized, sequestered or frozen for legitimate purposes while his or her case is pending shall suffer the penalty of ten (10) years and

one day to twelve (12) years of imprisonment.

SEC. 40. Nature of Seized, Sequestered and Frozen Bank Deposits, Placements, Trust Accounts, Assets and Records. â€“ The seized, sequestered and frozen bank deposits, placements, trust accounts, assets and records belonging to a person suspected of or charged with the crime of terrorism or conspiracy to commit terrorism shall be deemed as property held in trust by the bank or financial institution for such person and the government during the pendency of the investigation of the person suspected of or during the pendency of the trial of the person charged with any of the said crimes, as the case may be and their use or disposition while the case is pending shall be subject to the approval of the court before which the case or cases are pending.

SEC. 41. Disposition of the Seized, Sequestered and Frozen Bank Deposits,

Placements, Trust Accounts, Assets and Record. â€“ If the person

suspected of or charged with the crime of terrorism or conspiracy to commit terrorism is found, after his investigation, to be innocent by the investigating body, or is acquitted, after his arraignment or his case is dismissed before his arraignment by a competent court, the seizure,


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sequestration and freezing of his bank deposits, placements, trust accounts, assets and records shall forthwith be deemed lifted by the investigating body or by the competent court, as the case may be, and his bank deposits, placements, trust accounts, assets and records shall be deemed released from such seizure, sequestration and freezing, and

shall be restored to him without any delay by the bank or financial institution concerned without any further action on his part. The filing of any appeal on motion for reconsideration shall not state the release of said funds from seizure, sequestration and freezing.

If the person charged with the crime of terrorism or conspiracy to commit terrorism is convicted by a final judgment of a competent trial court, his seized, sequestered and frozen bank deposits, placements, trust accounts, assets and records shall be automatically forfeited in

favor of the government.

Upon his or her acquittal or the dismissal of the charges against him or her, the amount of Five Hundred Thousand Pesos (P500,000.00) a day for the period in which his properties, assets or funds were seized shall be paid to him on the concept of liquidated damages. The amount shall be taken from the appropriations of the police or law enforcement agency that caused the filing of the enumerated charges

against him or her.

SEC. 42. Penalty for Unjustified Refusal to Restore or Delay in Restoring Seized, Sequestered and Frozen Bank Deposits, Placements, Trust Accounts, Assets and Records. â€“ Any person who unjustifiably refuses to restore or delays the restoration of seized, sequestered and frozen bank deposits, placements, trust accounts, assets and records of a person suspected of or charged with the crime of terrorism or conspiracy to commit terrorism after such suspected person has been found innocent by the investigating body or after the case against such charged person has been dismissed or after he is acquitted by a competent court shall suffer the penalty of ten (10) years and one day to twelve (12) years of imprisonment.

SEC. 43. Penalty for the Loss, Misuse, Diversion or Dissipation of Seized, Sequestered and Frozen Bank Deposits, Placements, Trust Accounts, Assets

and Records. â€“ Any person who is responsible for the loss, misuse,

diversion, or dissipation of the whole or any part of the seized, sequestered and frozen bank deposits, placements, trust accounts, assets and records of a person suspected of or charged with the crime of terrorism or conspiracy to commit terrorism shall suffer the penalty of ten (10) years and one day to twelve (12) years of imprisonment.

SEC. 44. Infidelity in the Custody of Detained Persons. â€“ Any public officer who has direct custody of a detained person under the provisions of this Act and who by his deliberate act, misconduct, or inexcusable negligence causes or allows the escape of such detained person shall be guilty of an offense and shall suffer the penalty of: (a) twelve (12) years and one day to twenty (20) years of imprisonment, if


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the detained person has already been convicted and sentenced in a final judgment of a competent court; and (b) six (6) years and one day to twelve (12) years of imprisonment, if the detained person has not been convicted and sentenced in a final judgment of a competent court.

SEC. 45. Immunity and Protection of Government Witnesses. â€“ The provisions of Republic Act No. 6981 (Witness Protection, Security and Benefits Act) to the contrary notwithstanding, the immunity of government witnesses testifying under this Act shall be governed by Sections 17 and 18 of Rule 119 of the Rules of Court: Provided, however, That said witnesses shall be entitled to benefits granted to witnesses under said Republic Act No. 6981.

SEC. 46. Penalty for Unauthorized Revelation of Classified Materials. â€“

The penalty of ten (10) years and one day to twelve (12) years of imprisonment shall be imposed upon any person, police or law enforcement agent, judicial officer or civil servant who, not being authorized by the Court of Appeals to do so, reveals in any manner or form any classified information under this Act.

SEC. 47. Penalty for Furnishing False Evidence, Forged Document, or Spurious Evidence. â€“ The penalty of twelve (12) years and one day to

twenty (20) years of imprisonment shall be imposed upon any person who knowingly furnishes false testimony, forged document or spurious evidence in any investigation or hearing under this Act.

SEC. 48. Continuous Trial. – In cases of terrorism or conspiracy to commit terrorism, the judge shall set the case for continuous trial on a daily basis from Monday to Friday or other short-term trial calendar so as to ensure speedy trial.

SEC. 49. Prosecution Under This Act Shall Be a Bar to Another Prosecution

Under the Revised Penal Code or Any Special Penal Laws. – When a person has been prosecuted under a provision of this Act, upon a valid complaint or information or other formal charge sufficient in form and substance to sustain a conviction and after the accused had pleaded to the charge, the acquittal of the accused or the dismissal of the case shall be a bar to another prosecution for any offense or felony which is necessarily included in the offense charged under this Act.

SEC. 50. Damages for Unproven Charge of Terrorism. â€“ Upon acquittal, any person who is accused of terrorism shall be entitled to the payment of damages in the amount of Five Hundred Thousand Pesos (P500,000.00) for every day that he or she has been detained or deprived of liberty or arrested without a warrant as a result of such an accusation. The amount of damages shall be automatically charged against the appropriations of the police agency or the Anti-Terrorism Council that brought or sanctioned the filing of the charges against the accused. It shall also be released within fifteen (15) days from the date of the acquittal of the accused. The award of damages mentioned

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above shall be without prejudice to the right of the acquitted accused to file criminal or administrative charges against those responsible for charging him with the case of terrorism.

Any officer, employee, personnel, or person who delays the release or refuses to release the amounts awarded to the individual acquitted of the crime of terrorism as directed in the paragraph immediately preceding shall suffer the penalty of six (6) months of imprisonment.

If the deductions are less than the amounts due to the detained persons, the amount needed to complete the compensation shall be taken from the current appropriations for intelligence, emergency, social or other funds of the Office of the President.

In the event that the amount cannot be covered by the current budget of the police or law enforcement agency concerned, the amount shall be automatically included in the appropriations of the said agency for the coming year.

SEC. 51. Duty to Record and Report the Name and Address of the Informant. – The police or law enforcement officers to whom the name of a suspect in the crime of terrorism was first revealed shall record the real name and the specific address of the informant.

The police or law enforcement officials concerned shall report the informantâ€™s name and address to their superior officer who shall transmit the information to the Congressional Oversight Committee or to the proper court within five (5) days after the suspect was placed under arrest or his properties were sequestered, seized or frozen.

The name and address of the informant shall be considered confidential and shall not be unnecessarily revealed until after the proceedings against the suspect shall have been terminated.

SEC. 52. Applicability of the Revised Penal Code. – The provisions of Book

I of the Revised Penal Code shall be applicable to this Act.

SEC. 53. Anti-Terrorism Council. â€“ An Anti-Terrorism Council,

hereinafter referred to, for brevity, as the â€œCouncil,â€• is hereby created. The members of the Council are: (1) the Executive Secretary, who shall be its chairperson; (2) the Secretary of Justice, who shall be its Vice Chairperson; and (3) the Secretary of Foreign Affairs; (4) the Secretary of National Defense; (5) the Secretary of the Interior and Local Government; (6) the Secretary of Finance; and (7) the National Security Advisor, as its other members.

The Council shall implement this Act and assume the responsibility for the proper and effective implementation of the anti-terrorism policy of the country. The Council shall keep records of its proceedings and decisions. All records of the Council shall be subject to such security classifications as the Council may, in its judgment and


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discretion, decide to adopt to safeguard the safety of the people, the security of the Republic, and the welfare of the nation.

The National Intelligence Coordinating Agency shall be the Secretariat of the Council. The Council shall define the powers, duties, and functions of the National Intelligence Coordinating Agency as Secretariat of the Council. The National Bureau of Investigation, the Bureau of Immigration, the Office of Civil Defense, the Intelligence Service of the Armed Forces of the Philippines, the Anti-Money Laundering Council, the Philippine Center on Transnational Crime, and the Philippine National Police intelligence and investigative elements shall serve as support agencies for the Council.

The Council shall formulate and adopt comprehensive, adequate, efficient, and effective anti-terrorism plans, programs, and counter-measures to suppress and eradicate terrorism in the country and to protect the people from acts of terrorism. Nothing herein shall be interpreted to empower the Anti-Terrorism Council to exercise any judicial or quasi-judicial power or authority.

SEC. 54. Functions of the Council. â€“ In pursuit of its mandate in the previous Section, the Council shall have the following functions with due regard for the rights of the people as mandated by the Constitution and pertinent laws:

1. Formulate and adopt plans, programs and counter-measures against terrorists and acts of terrorism in the country;

2. Coordinate all national efforts to suppress and eradicate acts of terrorism in the country and mobilize the entire nation against terrorism proscribed in this Act;

3. Direct the speedy investigation and prosecution of all persons accused or detained for the crime of terrorism or conspiracy to commit terrorism and other offenses punishable under this Act, and monitor the progress of their cases;

4. Establish and maintain comprehensive data-base information systems on terrorism, terrorist activities, and counter-terrorism operations;

5. Freeze the funds property, bank deposits, placements, trust accounts, assets and records belonging to a person suspected of or charged with the crime of terrorism or conspiracy to commit terrorism, pursuant to Republic Act No. 9160 otherwise known as the Anti-Money Laundering Act of 2001, as amended;

6. Grant monetary rewards and other incentives to informers who give vital information leading to the apprehension, arrest, detention, prosecution, and conviction of person or persons who are liable for the


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crime of terrorism or conspiracy to commit terrorism;

7. Establish and maintain coordination with and the cooperation and assistance of other nations in the struggle against international terrorism; and

8. Request the Supreme Court to designate specific divisions of the Court of Appeals and regional trial courts in Manila, Cebu City and Cagayan de Oro City, as the case may be, to handle all cases involving the crime of terrorism or conspiracy to commit terrorism and all matters incident to said crimes. The Secretary of Justice shall assign a team of prosecutors from: (a) Luzon to handle terrorism cases filed in the regional trial court in Manila; (b) from the Visayas to handle cases filed in Cebu City; and (c) from Mindanao to handle cases filed in Cagayan de Oro City.

SEC. 55. Role of the Commission on Human Rights. – The Commission on Human Rights shall give the highest priority to the investigation and prosecution of violations of civil and political rights of persons in relation to the implementation of this Act; and for this purpose, the Commission shall have the concurrent jurisdiction to prosecute public officials, law enforcers, and other persons who may have violated the civil and political rights of persons suspected of, accused of, or detained for the crime of terrorism or conspiracy to commit terrorism.

SEC. 56. Creation of a Grievance Committee. – There is hereby created a Grievance Committee composed of the Ombudsman, as chair, and the Solicitor General, and an undersecretary from the Department of Justice (DOJ), as members, to receive and evaluate complaints against the actuations of the police and law enforcement officials in the implementation of this Act. The Committee shall hold office in Manila.

The Committee shall have three (3) subcommittees that will be respectively headed by the Deputy Ombudsmen in Luzon, the Visayas and Mindanao. The subcommittees shall respectively hold office at the Offices of Deputy Ombudsmen. Three (3) Assistant Solicitors General designated by the Solicitor General, and the regional prosecutors of the DOJ assigned to the regions where the Deputy Ombudsmen hold office shall be members thereof. The three (3) subcommittees shall assist the Grievance Committee in receiving, investigating and evaluating complaints against the police and other law enforcement officers in the implementation of the Act. If the evidence warrants it, they may file the appropriate cases against the erring police and law enforcement officers. Unless seasonably disowned or denounced by the complainants, decisions or judgments in the said cases shall preclude the filing of other cases based on the same cause or causes of action as those that were filed with the Grievance Committee or its

branches.

SEC. 57. Ban on Extraordinary Rendition. – No person suspected or convicted of the crime of terrorism shall be subjected to extraordinary


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rendition to any country unless his or her testimony is needed for terrorist related police investigations or judicial trials in the said country and unless his or her human rights, including the right against torture, and right to counsel, are officially assured by the requesting country and transmitted accordingly and approved by the Department

of Justice.

SEC. 58. Extra-Territorial Application of this Act. â€“ Subject to the provision of an existing treaty of which the Philippines is a signatory and to any contrary provision of any law of preferential application, the provisions of this Act shall apply: (1) to individual persons who commit any of the crimes defined and punished in this Act within the terrestrial domain, interior waters, maritime zone, and airspace of the Philippines; (2) to individual persons who, although physically

outside the territorial limits of the Philippines, commit, conspire or plot to commit any of the crimes defined and punished in this Act inside the territorial limits of the Philippines; (3) to individual persons who, although physically outside the territorial limits of the Philippines, commit any of the said crimes on board Philippine ship or Philippine airship; (4) to individual persons who commit any of said crimes within any embassy, consulate, or diplomatic premises belonging to or occupied by the Philippine government in an official capacity; (5) to individual persons who, although physically outside the territorial limits of the Philippines, commit said crimes against Philippine citizens or persons of Philippine descent, where their citizenship or ethnicity was a factor in the commission of the crime; and (6) to individual persons who, although physically outside the territorial limits of the Philippines, commit said crimes directly against the Philippine government.

SEC. 59. Joint Oversight Committee. – There is hereby created a Joint Oversight Committee to oversee the implementation of this Act.

The Oversight Committee shall be composed of five (5) members each from the Senate and the House in addition to the Chairs of the Committees of Public Order of both Houses who shall also Chair the Oversight Committee in the order specified herein. The membership of the Committee for every House shall at least have two (2) opposition or minority members. The Joint Oversight Committee shall have its own independent counsel.

The Chair of the Committee shall rotate every six (6) months with the Senate chairing it for the first six (6) months and the House for the next six (6) months. In every case, the ranking opposition or minority member of the Committee shall be the Vice Chair.

Upon the expiration of one year after this Act is approved by the

President, the Committee shall review the Act particularly the provisions that authorize the surveillance of suspects of or persons charged with the crime of terrorism. To that end, the Committee shall summon the police and law enforcement officers and the members of


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the Anti-Terrorism Council and require them to answer questions from the members of Congress and to submit a written report of the acts they have done in the implementation of the law including the manner in which the persons suspected of or charged with the crime of terrorism have been dealt with in their custody and from the date

when the movements of the latter were subjected to surveillance and his or her correspondences, messages, conversations and the like were listened to or subjected to monitoring, recording and tapping.

Without prejudice to its submitting other reports, the Committee shall render a semi-annual report to both Houses of Congress. The report may include where necessary a recommendation to reassess the effects of globalization on terrorist activities on the people, provide a sunset clause to or amend any portion of the Act or to repeal the Act in its

entirety.

The courts dealing with anti-terrorism cases shall submit to Congress and the President a report every six (6) months of the status of anti-terrorism cases that have been filed with them starting from the date this Act is implemented.

SEC. 60. Separability Clause. â€“ If for any reason any part or provision

of this Act is declared unconstitutional or invalid, the other parts or provisions hereof which are not affected thereby shall remain and continue to be in full force and effect.

SEC. 61. Repealing Clause. â€“ All laws, decrees, executive orders, rules or regulations or parts thereof, inconsistent with the provisions of this Act are hereby repealed, amended, or modified accordingly.

SEC. 62. Special Effectivity Clause. – After the bill shall have been signed into law by the President, the Act shall be published in three (3) newspapers of national circulation; three (3) newspapers of local circulation, one each in Ilocos Norte, Baguio City and Pampanga; three (3) newspapers of local circulation, one each in Cebu, Iloilo and Tacloban; and three (3) newspapers of local circulation, one each in Cagayan de Oro, Davao and General Santos City.

The title of the Act and its provisions defining the acts of terrorism that are punished shall be aired everyday at primetime for seven (7) days, morning, noon and night over three (3) national television and radio networks; three (3) radio and television networks, one each in Cebu, Tacloban and Iloilo; and in five (5) radio and television networks, one each in Lanao del Sur, Cagayan de Oro, Davao City, Cotabato City and Zamboanga City. The publication in the newspapers of local circulation and the announcements over local radio and television networks shall be done in the dominant language of the community.

After the publication required above shall have been done, the Act shall take effect two (2) months after the elections are held in May


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2007.

Thereafter, the provisions of this Act shall be automatically suspended one month before and two months after the holding of any election.