BANKING LAWS REPUBLIC ACT NO.

8791 The General Banking Law of 2000 Banks" shall refer to entities engaged in the lending of funds obtained in the form of de osits! Classification of Banks "a# Commer$ial banks% "b# Uni&ersal banks "$# Thrift banks' $om osed of( "i# Sa&ings and mortgage banks% "ii# Sto$k sa&ings and loan asso$iations% and "iii# )ri&ate de&elo ment banks "d# Rural banks "e# Islami$ banks "f# Coo erati&e banks "g# Other $lassifi$ations of banks as determined b* the +onetar* Board of the Bangko Sentral ng )ili inas! POWER AUT!ORIT" O# T!E BAN$%O ENTRAL ,! &'()*iso)+ Po,()s! The o erations and a$ti&ities of banks shall be sub-e$t to su er&ision of the Bangko Sentral! It shall also ha&e su er&ision o&er the o erations of and e.er$ise regulator* owers o&er quasi-banks' trust entities and other finan$ial institutions whi$h under s e$ial laws are sub-e$t to Bangko Sentral su er&ision! -&asi./anks0 shall refer to entities engaged in the borrowing of funds through the issuan$e' endorsement or assignment with re$ourse or a$$e tan$e of deposit substitutes for ur oses of re/lending or ur$hasing of re$ei&ables and other obligations "1('osit s&/stit&t(s" is defined as an alternati&e form of obtaining funds from the ubli$' other than de osits' through the issuan$e' endorsement' or a$$e tan$e of debt instruments for the borrower0s own a$$ount' for the ur ose of relending or ur$hasing of re$ei&ables and other obligations! These instruments ma* in$lude' but need not be limited to' bankers a$$e tan$es' romissor* notes' arti$i ations' $ertifi$ates of assignment and similar instruments with re$ourse' and re ur$hase agreements! &'()*ision0 shall in$lude the following( a! The issuan$e of rules of' $ondu$t or the establishment standards of o eration for uniform a li$ation to all institutions or fun$tions $o&ered' taking into 2!

$onsideration the distin$ti&e $hara$ter of the o erations of institutions and the substanti&e similarities of s e$ifi$ fun$tions to whi$h su$h rules' modes or standards are to be a lied b! The $ondu$t of e.amination to determine $om lian$e with laws and regulations if the $ir$umstan$es so warrant as determined b* the +onetar* Board $! 1&erseeing to as$ertain that laws and regulations are $om lied with d! 2egular in&estigation whi$h shall not be oftener than on$e a *ear from the last date of e.amination to determine whether an institution is $ondu$ting its business on a safe or sound basis( )ro&ided' That the defi$ien$ies3irregularities found b* or dis$o&ered b* an audit shall be immediatel* addressed e! In4uiring into the sol&en$* and li4uidit* of the institution% or f! 5nfor$ing rom t $orre$ti&e a$tion! The +onetar* Board ma* ')(sc)i/( )atios2 c(ilin3s2 li4itations2 o) ot5() fo)4s of )(3&lation on the different t* es of a$$ounts and ra$ti$es of banks and 4uasi/banks whi$h shall' to the e.tent feasible' $onform to internationall* a$$e ted standards' in$luding of the Bank for International Settlements "BIS#! The +onetar* Board ma* e.em t arti$ular $ategories of transa$tions from the abo&ementioned regulations' but not limited to( ,! 5.$e tional $ases or 2! To enable a bank or 4uasi/bank under rehabilitation or during a merger or $onsolidation to $ontinue in business' with safet* to its $reditors' de ositors and the general ubli$! 6! Authori7e erson or entit* to engage in banking o erations or 4uasi/banking fun$tions No '()son o) (ntit+ s5all (n3a3( in /ankin3 o'()ations o) 6&asi./ankin3 f&nctions ,it5o&t a&t5o)it+ f)o4 t5( Ban3ko (nt)al7 )ro&ided' howe&er' That an entit* authori7ed b* the Bangko Sentral to erform uni&ersal or $ommer$ial banking fun$tions shall likewise ha&e the authorit* to engage in 4uasi/banking fun$tions! U'on iss&anc( of t5is a&t5o)it+' su$h erson or entit* ma* co44(nc( to (n3a3( in /ankin3 o'()ations o) 6&asi./ankin3 f&nction and shall $ontinue to do so &nl(ss su$h authorit* is sooner ,! urrendered' ,

2! 6! 8!

Annulled b* the Bangko Sentral in a$$ordan$e with this A$t or other s e$ial laws! Re&oked' us ended

a! b! $! d!

)ersons or entities found to be erforming banking or 4uasi/banking fun$tions without authorit* from the Bangko Sentral shall be sub-e$t to a ro riate san$tions under the New 9entral Bank A$t and other a li$able laws! 8! The de artment head and the e.aminers of the a ro riate su er&ising and e.amining de artment are a&t5o)i8(1 to a14inist() oat5s to an* su$h erson' em lo*ee' offi$er' or dire$tor of an* su$h entit* and to co4'(l t5( ')(s(ntation o) ')o1&ction of su$h books' do$uments' a ers or re$ords that are reasonabl* ne$essar* to as$ertain the fa$ts relati&e to the true fun$tions and o erations of su$h erson or entit*! :ailure or refusal to $om l* with the re4uired resentation or rodu$tion of su$h books' do$uments' a ers or re$ords within a reasonable time shall sub-e$t the ersons res onsible therefore to the enal san$tions ro&ided under the New 9entral Bank A$t! ;! The Bangko Sentral shall' when e.amining a bank' ha&e the a&t5o)it+ to (9a4in( an (nt()')is( ,5ic5 is ,5oll+ o) 4a:o)it+.o,n(1 o) cont)oll(1 /+ t5( /ank. P5as( O&t of Ban3ko (nt)al Po,()s O*() B&il1in3 an1 Loan Associations. Within a eriod of three "6# *ears from the effe$ti&it* of this A$t' the Bangko Sentral shall hase out and transfer its su er&ising and regulator* owers o&er building and loan asso$iations to the <ome Insuran$e and Guarant* 9or oration whi$h shall assume the same! Con1itions in t5( o)3ani8ation of /ank o) 6&asi. /ank ,! That the entit* is a sto$k $or oration% 2! That its funds are obtained from the ubli$' whi$h shall mean twent* "20# or more ersons% and 6! That the minimum $a ital re4uirements res$ribed b* the +onetar* Board for ea$h $ategor* of banks are satisfied !Ot5() Consi1()ations ,! 9a abilit* in terms of their finan$ial resour$es and te$hni$al e. ertise and integrit*! 2! The bank li$ensing ro$ess shall in$or orate

an assessment of the bank=s ownershi stru$ture' dire$tors and senior management' its o erating lan internal $ontrols its ro-e$ted finan$ial $ondition and $a ital base!

Iss&anc( of tocks. Pa) *al&( stocks onl+ Treasur* Sto$ks / No /ank s5all '&)c5as( o) ac6&i)( s5a)(s of its o,n ca'ital stock o) acc('t its o,n s5a)(s as a s(c&)it+ fo) a loan' (9c('t when authori7ed b* the +onetar* Board( P)o*i1(1' That in e&er* $ase the sto$k so ur$hased or a$4uired shall' within si. "># months from the time of its ur$hase or a$4uisition' be sold or dis osed of at a ubli$ or ri&ate sale! #o)(i3n tock5ol1in3s :oreign indi&iduals and non/bank $or orations ma* own or $ontrol u to fort* er$ent "80?# of the &oting sto$k of a domesti$ bank! This rule shall a l* to :ili inos and domesti$ non/bank $or orations! The '()c(nta3( of fo)(i3n.o,n(1 *otin3 stocks in a bank shall be determined b* the $iti7enshi of the indi&idual sto$kholders in that bank! T5( citi8(ns5i' of t5( co)'o)ation ,5ic5 is a stock5ol1() in a /ank s5all follo, t5( citizenship of the controlling stockholders of the corporation, irrespective of the place of incorporation. @9ontrol Test a liesA +atters whi$h must be full* dis$losed in all transa$tions b* $or orations or related grou s of ersons with the bank @S$o e of 25LAT5B INT525STA ,! Sto$kholdings of :amil* Grou s of 2elated Interests Sto$kholdings of individuals related to each other within the fourth degree of consanguinity or affinity, legitimate or common-law' shall be $onsidered famil* grou s or related interests! 2! 9or orate Sto$kholdings! Two or more corporations owned or controlled by the same family group or same group of persons shall be $onsidered related interests T5( (c&)iti(s an1 E9c5an3( Co44ission s5all not )(3ist() t5( a)ticl(s of inco)'o)ation of an+ /ank2 o) 2

;.

an+ a4(n14(nt t5()(to' unless acco4'ani(1 /+ a c()tificat( of a&t5o)it+ issued b* the +onetar* Board' under its seal! E*i1(nc( to /( s&/4itt(1 fo) t5( iss&anc( of t5( c()tificat( of a&t5o)it+ a# That all re4uirements of e.isting laws and regulations to engage in the business for whi$h the a li$ant is ro osed to be in$or orated ha&e been $om lied with% b#That the ubli$ interest and e$onomi$ $onditions' both general and lo$al' -ustif* the authori7ation% and $# That the amount of $a ital' the finan$ing' organi7ation' dire$tion and administration' as well as the integrit* and res onsibilit* of the organi7ers and administrators reasonabl* assure the safet* of de osits and the ubli$ interest! T5( (c&)iti(s an1 E9c5an3( Co44ission s5all not )(3ist() t5( /+.la,s of an+ /ank2 o) an+ a4(n14(nt t5()(to2 &nl(ss acco4'ani(1 /+ a c()tificat( of a&t5o)it+ f)o4 t5( Ban3ko (nt)al! Boa)1 of <i)(cto)s. At least fi&e ";#' and a ma.imum of fifteen ",;# members of the board or dire$tors of a bank' two "2# of whom shall be independent directors! An "in1('(n1(nt 1i)(cto)" shall mean a erson other than an offi$er or em lo*ee of the bank' its subsidiaries or affiliates or related interests! In the $ase of a bank merger or $onsolidation' the number of dire$tors shall not e.$eed twent*/one "2,# Non/:ili ino $iti7ens ma* be$ome members of the board of dire$tors of a bank to the e.tent of the foreign arti$i ation in the e4uit* of said bank!

After due noti$e to the board of dire$tors of the bank' the +onetar* Board ma* disqualify, suspend or remove an* bank dire$tor or offi$er who $ommits or omits an a$t whi$h render him unfit for the osition! In determining whether an indi&idual is fit and ro er to hold the osition of a dire$tor or offi$er of a bank' regard shall be gi&en to his ,! E9 erien$e! 2! Com eten$e 6! Integrit* 8! Training ;! Edu$ation P)o5i/ition on P&/lic Officials. 5.$e t as otherwise ro&ided in the 2ural Banks A$t' no a ointi&e or ele$ti&e '&/lic official whether full/ time or art/time shall at t5( sa4( ti4( s()*( as offic() of an+ ')i*at( /ank' sa*( in cas(s ,5()( ,! Su$h ser&i$e is in$ident to finan$ial assistan$e ro&ided b* the go&ernment or a go&ernment owned or $ontrolled $or oration to the bank or 2! Cnless otherwise ro&ided under e.isting laws! Bank B)anc5(s Cni&ersal or $ommer$ial banks ma* o en bran$hes or other offi$es within or outside the )hili ines u on rior a ro&al of the Bangko Sentral! @all other banks shall be go&erned b* ertinent laws!A A bank ma*' sub-e$t to rior a ro&al of the +onetar* Board' use an* or all of its bran$hes as outlets for the resentation and3or sale of the finan$ial rodu$ts of its allied undertaking or of its investment house units! A /ank authori7ed to establish bran$hes or other offi$es shall be )(s'onsi/l( fo) all /&sin(ss con1&ct(1 in s&c5 /)anc5(s an1 offic(s to the same e.tent and in the same manner as t5o&35 s&c5 /&sin(ss 5a1 all /((n con1&ct(1 in t5( 5(a1 offic(! A /ank an1 its /)anc5(s an1 offic(s s5all /( t)(at(1 as on( &nit. t)ik(s an1 Locko&ts / An* strike or lo$kout in&ol&ing banks' / if unsettled after se&en "D# $alendar da*s / shall be re orted b* the Bangko Sentral to the Se$retar* of Labor who( ,! +a* ass&4( :&)is1iction o&er the dis ute or 2! <(ci1( it or 6! C()tif+ the same to the National Labor 2elations 9ommission fo) co4'&lso)+ a)/it)ation! 6

The meetings of the board of dire$tors ma* be $ondu$ted through modern te$hnologies su$h as' but not limited to' ,! tele$onferen$ing and 2! &ideo/$onferen$ing! Fit and Proper Rule! The +onetar* Board shall res$ribe' ass u on and re&iew the 4ualifi$ations and dis4ualifi$ations of indi&iduals ele$ted or a ointed /ank 1i)(cto)s o) offic()s and dis4ualif* those found unfit! Ratio7 To maintain the 4ualit* of bank management and afford better rote$tion to de ositors and the ubli$ in general

!o,(*()' the P)(si1(nt of the )hili ines ma* at an* time int()*(n( an1 ass&4( :&)is1iction o*() s&c5 la/o) 1is'&t( in o)1() to s(ttl( o) t()4inat( t5( sa4(! Ratio7 The banking industr* is de$lared indis ensable to the national interest O'()ations Of Uni*()sal Banks an1 Co44()cial Banks Po,()s of a Uni*()sal Bank ,! General owers in$ident to $or orations 2! )owers ne$essar* to $arr* on the business banking su$h as a! a$$e ting drafts and issuing letters of $redit% b! dis$ounting and negotiating romissor* notes' drafts' bills of e.$hange' and other e&iden$es of debt% $! a$$e ting or $reating demand de osits% Not(7 A bank other than a uni&ersal or $ommer$ial bank $annot a$$e t or $reate demand de osits e.$e t u on rior a ro&al of' and sub-e$t to su$h $onditions and rules as ma* be res$ribed b* the +onetar* Board! "se$ 22# d! re$ei&ing other t* es of de osits and de osit substitutes% e! bu*ing and selling foreign e.$hange and gold or sil&er bullion% f! a$4uiring marketable bonds and other debt se$urities% and g! e.tending $redit'! 6! owers of an in&estment house as ro&ided in e.isting laws and the ower to in&est in non/ allied enter rises as ro&ided in this A$t! O'()ations Of Co44()cial Banks Po,()s of a Co44()cial Bank! same as ",# and "2# of Cni&ersal banks Uni*()sal Banks E6&it+ In*(st4(nts Co44()cial Banks as

'()c(nt >@CAB of t5( net worth of the bankD an1 /.T5( (6&it+ in*(st4(nt in an+ on( (nt()')is(2 ,5(t5() alli(1 o) non.alli(12 s5all not (9c((1 t,(nt+.fi*( '()c(nt >E@AB of t5( net worth** of the bank.

of t5( /ankD an1 /.T5( (6&it+ in*(st4(nt in an+ on( (nt()')is( s5all not (9c((1 t,(nt+.fi*( '()c(nt >E@AB of til( n(t ,o)t5 of t5( /ank. c. &/:(ct to ')io) a'')o*al of t5( Fon(ta)+ Boa)1

Con1itions to (6&it+ in*(st4(nt

A &ni*()sal /ank A co44()cial 4a+ in*(st in t5( /ank 4a+ in*(st (6&iti(s of onl+ in t5( (6&iti(s alli(1== an1 non. of alli(1== alli(1 (nt()')is(s (nt()')is(s ==Alli(1 (nt()')is(s 4a+ (it5() /( financial o) non.financial. a. T5( total a. T5( total in*(st4(nt in in*(st4(nt in (6&iti(s of (6&iti(s of alli(1 alli(1 an1 (nt()')is(s s5all non.alli(1 not (9c((1 (nt()')is(s t5i)t+.fi*( s5all not '()c(nt >?@AB (9c((1 fift+ of t5( n(t ,o)t5

c. &/:(ct to ')io) a'')o*al of t5( Fon(ta)+ Boa)1 ==n(t ,o)t50 s5all 4(an t5( total of t5( &ni4'ai)(1 'ai1.in ca'ital incl&1in3 'ai1.in s&)'l&s2 )(tain(1 (a)nin3s an1 &n1i*i1(1 ')ofit2 n(t of *al&ation )(s()*(s an1 ot5() a1:&st4(nts as 4a+ /( )(6&i)(1 /+ t5( Ban3ko (nt)al E6&it+ a. Fa+ o,n &' a. Fa+ o,n &' to In*(st4(nts in to on( on( 5&n1)(1 #inancial 5&n1)(1 '()c(nt >1CCAB Alli(1 '()c(nt of t5( (6&it+ of Ent()')is(s >1CCAB of t5( o a t5)ift (6&it+ in /ank o) o a t5)ift o a )&)al /ank2 /ank o a )&)al /.W5()( t5( /ank o) (6&it+ oa in*(st4(nt of a co44()cial financial /ank is in ot5() alli(1 financial alli(1 (nt()')is( (nt()')is(s2 /.A '&/licl+. incl&1in3 list(1 anot5() &ni*()sal 4a+ co44()cial o,n &' to on( /ank2 s&c5 5&n1)(1 in*(st4(nt s5all '()c(nt )(4ain a >1CCAB of t5( 4ino)it+ *otin3 stock of 5ol1in3 in t5at onl+ on( ot5() (nt()')is( &ni*()sal o) GHHH A co44()cial '&/licl+.list(1 /ank co44()cial /ank 4a+ o,n &' to on( 5&n1)(1 '()c(nt 8

E6&it+ In*(st4(nts in Non.#inancial Alli(1 Ent()')is(s.

E6&it+ In*(st4(nts in -&asi.Banks.

E6&it+ In*(st4(nts in Non.Alli(1 Ent()')is(s

Fa+ o,n &' to on( 5&n1)(1 '()c(nt >1CCAB of t5( (6&it+ in a non.financial alli(1 (nt()')is(. To ')o4ot( co4'(titi*( con1itions in financial 4a)k(ts2 t5( Fon(ta)+ Boa)1 4a+ f&)t5() li4it to fo)t+ '()c(nt >JCAB (6&it+ in*(st4(nts of &ni*()sal /anks in 6&asi./anks. T5is )&l( s5all also a''l+ in t5( cas( of co44()cial /anks. - T5( (6&it+ in*(st4(nt of a &ni*()sal /ank2 o) - of its ,5oll+ o) 4a:o)it+. o,n(1 s&/si1ia)i(s2 - in a sin3l( non.alli(1 (nt()')is( - s5all not (9c((1 t5i)t+. fi*( '()c(nt >?@AB of t5( total (6&it+ in t5at (nt()')is( - no) s5all it (9c((1 t5i)t+. fi*( '()c(nt >?@AB of t5( *otin3 stock in t5at (nt()')is(.

>1CCAB of t5( *otin3 stock of onl+ on( ot5() &ni*()sal o) co44()cial /ank >s(c E@BI Fa+ o,n &' to on( 5&n1)(1 '()c(nt >1CCAB of t5( (6&it+ in a non. financial alli(1 (nt()')is(

Ot5() Bankin3 ()*ic(s. In addition to the o erations s e$ifi$all* authori7ed in this A$t' a bank ma* erform the following ser&i$es( ,! 2! 2e$ei&e in $ustod* funds' do$uments and &aluable ob-e$ts% A$t as finan$ial agent and bu* and sell' b* order of and for the a$$ount of their $ustomers' shares' e&iden$es of indebtedness and all t* es of se$urities% +ake $olle$tions and a*ments for the a$$ount of others and erform su$h other ser&i$es for their $ustomers as are not in$om atible with banking business% C on rior a ro&al of the +onetar* Board' a$t as managing agent' ad&iser' $onsultant or administrator of in&estment management3ad&isor*3$onsultan$* a$$ounts% and 2ent out safet* de osit bo.es!

6!

8!

;! .1o.

The bank shall erform the ser&i$es ermitted under Subse$tions ,!'!2' 6! and!8! as 1('osita)+ 12 as an a3(nt! A$$ordingl*' it shall kee the funds' se$urities and other effe$ts whi$h it re$ei&es dul* se arate from the bank0s own assets and liabilities( In cas( a /ank o) 6&asi./ank notifies the Bangko Sentral or ubli$l* announ$es a 1. /ank 5oli1a+' 12 E. In an* manner s&s'(n1s t5( 'a+4(nt of its 1('osit lia/iliti(s contin&o&sl+ fo) 4o)( t5an t5i)t+ >?CB 1a+s' the +onetar* Board ma* summaril* and without need for rior hearing $lose su$h banking institution and la$e it under re$ei&ershi of the )hili ine Be osit Insuran$e 9or oration! Acc('tanc( of <(4an1 <('osits! A bank other than a uni&ersal or $ommer$ial bank $annot a$$e t or $reate demand de osits e.$e t u on rior a ro&al of' and sub-e$t to su$h $onditions and rules as ma* be res$ribed b* the +onetar* Board! Risk.Bas(1 Ca'ital. The +onetar* Board shall res$ribe the minimum ratio whi$h the net worth of a bank must bear to its total risk assets whi$h ma* in$lude $ontingent a$$ounts! t5( )atio /( 1(t()4in(1 on t5( /asis of t5( n(t ,o)t5 an1 )isk ass(ts of a /ank an1 its s&/si1ia)i(s2 financial o) ot5(),is(2 +B ma* res$ribe the $om osition and the manner of determining the net worth and total risk assets of banks and their subsidiaries( ;

.Non(.

PROKI ION APPLICABLE TO ALL BAN% 2 -UA I.BAN% 2 AN< TRU T ENTITIE

- )ro&ided' That in the e.er$ise of this authorit*' the +onetar* Board shall' to the e.tent feasible $onform to internationall* a$$e ted standards' in$luding those of the Bank for International Settlements "BIS#' relating to risk/based $a ital re4uirements( - )ro&ided further' That it ma* alter or sus end $om lian$e with su$h ratio whene&er ne$essar* for a ma.imum eriod of one ",# *ear( - )ro&ided' finall*' That su$h ratio shall be a lied uniforml* to banks of the same $ategor*! In cas( a /ank 1o(s not co4'l+ ,it5 t5( ')(sc)i/(1 4ini4&4 )atio7 ,! The +onetar* Board ma* limit or rohibit the distribution of net rofits b* su$h bank and ma* re4uire that art or all of the net rofits be used to in$rease the $a ital a$$ounts of the bank until the minimum re4uirement has been met 2! The +onetar* Board ma*' furthermore' restri$t or rohibit the a$4uisition of ma-or assets and the making of new in&estments b* the bank' with the e.$e tion of ur$hases of readil* marketable e&iden$es of indebtedness of the 2e ubli$ of the )hili ines and of the Bangko Sentral and an* other e&iden$es of indebtedness or obligations the ser&i$ing and re a*ment of whi$h are full* guaranteed b* the 2e ubli$ of the )hili ines' until the minimum re4uired $a ital ratio has been restored! In $ase of a bank merger or $onsolidation' or when a bank is under rehabilitation under a rogram a ro&ed b* the Bangko Sentral' +onetar* Board ma* tem oraril* relie&e the sur&i&ing bank' $onsolidated bank' or $onstituent bank or $or orations under rehabilitation from full $om lian$e with the re4uired $a ital ratio under su$h $onditions as it ma* res$ribe! Before the effe$ti&it* of rules whi$h the +onetar* Board is authori7ed to res$ribe under this ro&ision' Se$tion 22 of the General Banking A$t' as amended' Se$tion E of the Thrift Banks A$t' and all ertinent rules issued ursuant thereto' shall $ontinue to be in for$e! Li4it on Loans2 C)(1it Acco44o1ations an1 $&a)ant((s! / 5.$e t as the +onetar* Board ma* otherwise res$ribe for reasons of national interest' the total amount of loans' $redit a$$ommodations and guarantees that ma* be e.tended b* a bank to an*

erson' artnershi ' asso$iation' $or oration or other entit* shall at no ti4( (9c((1 t,(nt+ '()c(nt >ECAB of t5( n(t ,o)t5 of s&c5 /ank! The /asis for determining $om lian$e with single borrower limit is the total $redit $ommitment of the bank to the borrower! Cnless the +onetar* Board res$ribes otherwise' the total amount of loans' $redit a$$ommodations and guarantees res$ribed in the re$eding aragra h 4a+ /( inc)(as(1 /+ an a11itional t(n '()c(nt >1CAB of t5( n(t ,o)t5 of s&c5 /ank P)o*i1(1 the additional liabilities of an* borrower are a1(6&at(l+ s(c&)(1 b* trust re$ei ts' shi ing do$uments' warehouse re$ei ts or other similar do$uments transferring or se$uring title $o&ering readil* marketable' non/ erishable goods whi$h must be full* $o&ered b* insuran$e! The abo&e res$ribed $eilings shall in$lude( "a# the 1i)(ct lia/ilit+ of t5( 4ak() o) acc('to) of a er dis$ounted with or sold to su$h bank and the lia/ilit+ of a 3(n()al (n1o)s()2 1)a,() o) 3&a)anto) who obtains a loan or other $redit a$$ommodation from or dis$ounts a er with or sells a ers to su$h bank% "b# in the $ase of an in1i*i1&al ,5o o,ns o) cont)ols a 4a:o)it+ int()(st in a co)'o)ation2 'a)tn()s5i'2 association o) an+ ot5() (ntit+' the liabilities of said entities to su$h bank% "$# in the $ase of a $or oration2 all lia/iliti(s to s&c5 /ank of all s&/si1ia)i(s in ,5ic5 s&c5 co)'o)ation o,ns o) cont)ols a 4a:o)it+ int()(st% and "d# in the $ase of a artnershi ' asso$iation or other entit*' the lia/iliti(s of t5( 4(4/()s t5()(of to su$h bank! NOTE7 5&en if a arent $or oration' artnershi ' asso$iation' entit* or an indi&idual who owns or $ontrols a ma-orit* interest in su$h entities has no liabilit* to the bank' the +onetar* Board ma* res$ribe the $ombination of the liabilities of subsidiar* $or orations or members of the artnershi ' asso$iation' entit* or su$h indi&idual under $ertain $ir$umstan$es' in$luding but not limited to' an* of the following situations( "a# the arent $or oration' artnershi ' asso$iation' entit* or indi&idual 3&a)ant((s t5( )('a+4(nt of t5( lia/iliti(s% "b# the liabilities were in$urred for the acco44o1ation of the arent $or oration or another subsidiar* or of the artnershi or asso$iation or entit* or su$h indi&idual% or >

"$# the s&/si1ia)i(s though se arate entities o erate merel* as 1('a)t4(nts o) 1i*isions of a sin3l( (ntit+. Ot5() c)(1it acco44o1ations an1 3&a)ant((s s5all (9cl&1(( "a# loans and other $redit a$$ommodations se$ured b* obligations of the Bangko Sentral or of the )hili ine Go&ernment% "b# loans and other $redit a$$ommodations full* guaranteed b* the go&ernment as to the a*ment of rin$i al and interest% "$# loans and other $redit a$$ommodations $o&ered b* assignment of de osits maintained in the lending bank and held in the )hili ines% "d# loans' $redit a$$ommodations and a$$e tan$es under letters of $redit to the e.tent $o&ered b* margin de osits% and "e# other loans or $redit a$$ommodations whi$h the +onetar* Board ma* from time to time' s e$if* as non/risk items! NOTE7 Loans and other $redit a$$ommodations' de osits maintained with' and usual guarantees b* a bank to an* other bank or non/bank entit*' whether lo$all* or abroad' shall be sub-e$t to the limits as herein res$ribed! 9ertain t* es of $ontingent a$$ounts of borrowers ma* be in$luded among those sub-e$t to these res$ribed limits as ma* be determined b* the +onetar* Board! R(st)iction on Bank E9'os&)( to <i)(cto)s2 Offic()s2 tock5ol1()s an1 T5(i) R(lat(1 Int()(stsFFF! ><O RIB - No dire$tor or offi$er of an* bank - shall' dire$tl* or indire$tl*' for himself or as the re resentati&e or agent of others' a! /o))o, from su$h bank b! no) shall he be$ome a 3&a)anto)2 (n1o)s() o) s&)(t+ fo) loans f)o4 s&c5 /ank to others' $! or in an+ 4ann() /( an o/li3o) o) inc&) an+ cont)act&al lia/ilit+ to t5( /ank (9c('t ,it5 t5( ,)itt(n a'')o*al of t5( 4a:o)it+ of all t5( 1i)(cto)s of t5( /ank2 (9cl&1in3 t5( 1i)(cto) conc()n(17 P)o*i1(12 That su$h ,)itt(n a'')o*al s5all not /( )(6&i)(1 for loans' other $redit a$$ommodations and ad&an$es granted to offi$ers &n1() a f)in3( /(n(fit 'lan a ro&ed b* the Bangko Sentral! The re4uired a ro&al shall be entered u on the re$ords of the bank and a

$o * of su$h entr* shall be transmitted forthwith to the a ro riate su er&ising and e.amining de artment of the Bangko Sentral! NOTE7 Bealings of a bank with an* of its dire$tors' offi$ers or sto$kholders and their related interests shall be u on terms not less fa&orable to the bank than those offered to others! Eff(ct of *iolation to t5( ')o*ision ,! 1ffi$e ma* be 1(cla)(1 *acant and E. The dire$tor or offi$er shall be sub-e$t to the enal ro&isions of the New 9entral Bank A$t! The +onetar* Board ma* regulate the amount of loans' $redit a$$ommodations and guarantees that ma* be e.tended' dire$tl* or indire$tl*' b* a bank to its B1S2I' as well as in&estments of su$h bank in enter rises owned or $ontrolled b* said B1S2I <owe&er' the outstanding loans' $redit a$$ommodations and guarantees whi$h a bank ma* e.tend to ea$h of its B1S2I' shall be li4it(1 to an a4o&nt (6&i*al(nt to t5(i) )(s'(cti*( &n(nc&4/()(1 1('osits an1 /ook *al&( of t5(i) 'ai1.in ca'ital cont)i/&tion in t5( /ank( )ro&ided' howe&er' That loans' $redit a$$ommodations and guarantees se$ured b* assets $onsidered as non/ risk b* the +onetar* Board shall be e.$luded from su$h limit( )ro&ided' further' That loans' $redit a$$ommodations and ad&an$es to offi$ers in the form of fringe benefits granted in a$$ordan$e with rules as ma* be res$ribed b* the +onetar* Board shall not be sub-e$t to the indi&idual limit! NOTE7 The limit on loans' $redit a$$ommodations and guarantees res$ribed herein shall not a l* to loans' $redit a$$ommodations and guarantees e.tended b* a D

$oo erati&e bank to its $oo erati&e shareholders! Loans an1 Ot5() C)(1it Acco44o1ations A3ainst R(al Estat(. 5.$e t as the +onetar* Board ma* otherwise res$ribe' loans an1 ot5() c)(1it acco44o1ations a3ainst )(al (stat( s5all not (9c((1 s(*(nt+.fi*( '()c(nt >7@AB of t5( a'')ais(1 *al&( of t5( )(s'(cti*( )(al (stat( s(c&)it+2 'l&s si9t+ '()c(nt >;CAB of t5( a'')ais(1 *al&( of t5( ins&)(1 i4')o*(4(nts ' and su$h loans ma* be made to the owner of the real estate or to his assignees! Loans An1 Ot5() C)(1it Acco44o1ations on (c&)it+ of C5att(ls an1 Intan3i/l( P)o'()ti(s! 5.$e t as the +onetar* Board ma* otherwise res$ribe' loans and other $redit a$$ommodations on s(c&)it+ of c5att(ls an1 intan3i/l( ')o'()ti(s s&c5 as2 /&t not li4it(1 to2 'at(nts2 t)a1(4a)ks2 t)a1( na4(s2 an1 co'+)i35ts s5all not (9c((1 s(*(nt+.fi*( '()c(nt >7@AB of t5( a'')ais(1 *al&( of t5( s(c&)it+' an su$h loans and other $redit a$$ommodation ma* be 4a1( to t5( titl(. 5ol1() of the $hattels and intangible ro erties or his assignees! $)ant an1 P&)'os( of Loans an1 Ot5() C)(1it Acco44o1ations. A /ank s5all 3)ant loans an1 ot5() c)(1it acco44o1ations onl+ in a4o&nts an1 fo) t5( '()io1s of ti4( (ss(ntial fo) t5( (ff(cti*( co4'l(tion of t5( o'()ations to /( financ(1. Su$h grant of loans and other $redit a$$ommodations shall be $onsistent with safe and sound banking ra$ti$es! T5( '&)'os( of all loans an1 ot5() c)(1it acco44o1ations s5all /( stat(1 in the a li$ation and in the $ontra$t between the bank and the borrower! If the bank finds that the ')oc((1s of the loan or other $redit a$$ommodation ha&e been (4'lo+(12 ,it5o&t its a'')o*al' fo) '&)'os(s ot5() t5an t5os( a3)((1 &'on with the bank' it shall ha&e the right to ",# terminate the loan or other $redit a$$ommodation and "2# demand immediate re a*ment of the obligation! R(6&i)(4(nt fo) $)ant Of Loans o) Ct5() C)(1it Acco44o1ations. Bebtor should be $a able of fulfilling his $ommitments to the bank Toward this end' a bank ma* demand

a! b! $!

A statement of their ass(ts an1 lia/iliti(s and of their inco4( an1 (9'(n1it&)(s and ot5() info)4ation as ma* be res$ribed b* law or b* rules and regulations of the +onetar* Board to enable the bank to ro erl* e&aluate the $redit a li$ation whi$h in$ludes the $orres onding finan$ial statements submitted for ta.ation ur oses to the Bureau of Internal 2e&enue!

5ffe$t of false or in$orre$t detail' a! The bank ma* t()4inat( an* loan or other $redit a$$ommodation granted on the basis of said statements and Shall ha&e the right to demand i44(1iat( )('a+4(nt o) li6&i1ation of t5( o/li3ation.

b!

Uns(c&)(1 Loans o) Ot5() C)(1it Acco44o1ations. The +onetar* Board is hereb* authori7ed to issue su$h regulations as it ma* deem ne$essar* with res e$t to unse$ured loans or other $redit a$$ommodations that ma* be granted b* banks! A&t5o)it+ to P)(sc)i/( T()4s an1 Con1itions of Loans an1 Ot5() C)(1it Acco44o1ations. The +onetar* Board' ma* res$ribe the maturities' as well as related terms and $onditions for &arious t* es of bank loans and other $redit a$$ommodations! An+ c5an3( /+ t5( Boa)1 in t5( 4a9i4&4 4at&)iti(s2 as ,(ll as )(lat(1 t()4s an1 con1itions fo) *a)io&s t+'(s of /ank loans an1 ot5() c)(1it acco44o1ations. An+ c5an3( /+ t5( Boa)1 in t5( 4a9i4&4 4at&)iti(s s5all a''l+ onl+ to loans an1 ot5() c)(1it acco44o1ations 4a1( aft() t5( 1at( of s&c5 action. A4o)ti8ation on Loans an1 Ot5() C)(1it Acco44o1ations. The a4o)ti8ation sc5(1&l( of bank loans and other $redit a$$ommodations shall be ada ted to the nat&)( of t5( o'()ations to /( financ(1! ,! In $ase of loans and other $redit a$$ommodations with 4at&)iti(s of 4o)( t5an fi*( >@B +(a)s' - ro&isions must be made for eriodi$ amorti7ation a*ments' but su$h 'a+4(nts 4&st /( 4a1( at l(ast ann&all+7 G

P)o*i1(12 5o,(*()' That when the borrowed funds are to be used for ur oses whi$h do not initiall* rodu$e re&enues ade4uate for regular amorti7ation a*ments therefrom' the bank ma* ermit the initial amorti7ation a*ment to be deferred until su$h time as said re&enues are suffi$ient for su$h ur ose' /&t in no cas( s5all t5( initial a4o)ti8ation 1at( /( lat() t5an fi*( >@B +(a)s f)o4 t5( 1at( on ,5ic5 t5( loan o) ot5() c)(1it acco44o1ation is 3)ant(1. 2! In $ase of loans and other $redit a$$ommodations to 4ic)o financ( s(cto)s' the s$hedule of loan amorti7ation shall take into $onsideration the ro-e$ted $ash flow of the borrower and ado t this into the terms and $onditions formulated b* banks! P)('a+4(nt of Loans an1 Ot5() C)(1it Acco44o1ations. A borrower ma* at an* time rior to the agreed maturit* date re a*' in whole or in art' the un aid balan$e of an* bank loan and other $redit a$$ommodation' sub-e$t to su$h reasonable terms and $onditions as ma* be agreed u on between the bank and its borrower! #o)(clos&)( of R(al Estat( Fo)t3a3(. In the e&ent of fo)(clos&)(' whether -udi$iall* or e.tra/-udi$iall*' of an* mortgage on real estate whi$h is se$urit* for an* loan or other $redit a$$ommodation granted' the mortgagor or debtor whose real ro ert* has been sold for the full or artial a*ment of his obligation shall ha&e the )i35t ,it5in on( +(a) aft() t5( sal( of t5( )(al (stat(2 to )(1((4 t5( ')o'()t+ b* a*ing ,! the a4o&nt 1&( under the mortgage deed' with int()(st t5()(on at )at( s'(cifi(1 in the mortgage' and all t5( costs an1 (9'(ns(s inc&))(1 b* the bank or institution from the sale and $ustod* of said ro ert* less the in$ome deri&ed therefrom!

of t5( a&ction sal( and administer the same in a$$ordan$e with law! NOTE7 An+ '(tition in co&)t to (n:oin o) )(st)ain t5( con1&ct of fo)(clos&)( ')oc((1in3s instit&t(1 '&)s&ant to t5is ')o*ision s5all /( 3i*(n 1&( co&)s( onl+ &'on t5( filin3 /+ t5( '(tition() of a /on1 in an a4o&nt fi9(1 /+ t5( co&)t con1ition(1 t5at 5( ,ill 'a+ all t5( 1a4a3(s ,5ic5 t5( /ank 4a+ s&ff() /+ t5( (n:oinin3 o) t5( )(st)aint of t5( fo)(clos&)( ')oc((1in3. Notwithstanding A$t 6,6;' :&)i1ical '()sons whose ro ert* is being sold ursuant to an (9t)a:&1icial fo)(clos&)(' shall ha&e the )i35t to )(1((4 the ro ert* in a$$ordan$e with this ro&ision until' but not after' the )(3ist)ation of t5( c()tificat( of fo)(clos&)( sal( with the a li$able 2egister of Beeds whi$h in no $ase shall be more than three "6# months after fore$losure' whi$he&er is earlier! R(n(,al o) E9t(nsion of Loans an1 Ot5() C)(1it Acco44o1ations. The +onetar* Board ma*' b* regulation' res$ribe the $onditions and limitations under whi$h a bank ma* grant e.tensions or renewals of its loans and other $redit a$$ommodations! P)o*isions fo) Loss(s an1 W)it(.Offs. Ba1 <(/ts / All debts due to an* bank on whi$h interest is ast due and un aid for su$h eriod as ma* be determined b* the +onetar* Board' unless the same are welt/se$ured and in the ro$ess of $olle$tion The +onetar* Board ma* fi.' b* regulation or b* order in a s e$ifi$ $ase' the amount of reser&es for bad debts or doubtful a$$ounts or other $ontingen$ies! Writing off of loans' other $redit a$$ommodations' ad&an$es and other assets shall be sub-e$t to regulations issued b* the +onetar* Board! 9eiling on In&estments in 9ertain Assets! An+ /ank 4a+ ac6&i)( )(al (stat( as shall be n(c(ssa)+ fo) its o,n &s( in the $ondu$t of its business( P)o*i1(12 5o,(*()' That the total in*(st4(nt in su$h )(al (stat( an1 i4')o*(4(nts t5()(of incl&1in3 /ank (6&i'4(nt ' shall not e.$eed fift* er$ent ";0?# of $ombined $a ital a$$ounts( P)o*i1(12 f&)t5()' That the (6&it+ in*(st4(nt of a bank in anot5() co)'o)ation (n3a3(1 E

2!

!o,(*()' the '&)c5as() at t5( a&ction sal( $on$erned whether in a -udi$ial or e.tra/-udi$ial fore$losure shall ha&e the )i35t to (nt() &'on an1 tak( 'oss(ssion of s&c5 ')o'()t+ i44(1iat(l+ aft() t5( 1at( of t5( confi)4ation

')i4a)il+ in )(al (stat( shall be $onsidered as art of the bank=s total in&estment in real estate' unless otherwise ro&ided b* the +onetar* Board! "se$ ;,# N1T5( Notwithstanding the limitations abo&e/ mentioned "se$ ;,#' a bank ma* a$4uire' hold or $on&e* real ro ert* under the following $ir$umstan$es( ,! Su$h as shall be mortgaged to it in good faith b* wa* of se$urit* for debts% 2! Su$h as shall be $on&e*ed to it in satisfa$tion of debts re&iousl* $ontra$ted in the $ourse of its dealings% or 6! Su$h as it shall ur$hase at sales under -udgments' de$rees' mortgages' or trust deeds held b* it and su$h as it shall ur$hase to se$ure debts due it! "se$ ;2# NOTE7 An* )(al ')o'()t+ ac6&i)(1 o) 5(l1 under the $ir$umstan$es enumerated in the abo&e aragra h "se$ ;2B s5all /( 1is'os(1 of /+ t5( /ank ,it5in a '()io1 of fi*( >@B +(a)s or as ma* be res$ribed b* the +onetar* Board( P)o*i1(12 5o,(*()' That the bank ma*' after said eriod' $ontinue to hold the ro ert* for its own use' sub-e$t to the limitations of the re$eding se$tion "se$ ;,# P)o5i/it(1 T)ansactions. ,! 2! A bank shall not dire$tl* engage in insuran$e business as the insurer No dire$tor' offi$er' em lo*ee' or agent of an* bank shall a! Fak( fals( (nt)i(s in an* bank re ort or statement or arti$i ate in an* fraudulent transa$tion' thereb* affe$ting the finan$ial interest of' or $ausing damage to' the bank or an* erson% b! Without order of a $ourt of $om etent -urisdi$tion' 1isclos( to an* unauthori7ed erson an* info)4ation relati&e to the funds or ro erties in the $ustod* of the bank belonging to ri&ate indi&iduals' $or orations' or an* other entit*( )ro&ided' That with res e$t to bank de osits' the ro&isions of e.isting laws shall re&ail% $! Acc('t 3ifts2 f((s2 o) co44issions or an* other form of remuneration in $onne$tion with ;!

the a ro&al of a loan or other $redit a$$ommodation from said bank% d! O*()*al&( o) ai1 in o*()*al&in3 an+ s(c&)it+ for the ur ose of influen$ing in an* wa* the a$tions of the bank or an* bank% or e! O&tso&)c( in5()(nt /ankin3 f&nctions! 6! No borrower of a bank shall a! #)a&1&l(ntl+ o*()*al&( ')o'()t+ off()(1 as s(c&)it+ for a loan or other $redit a$$ommodation from the bank% b! #&)nis5 fals( o) 4ak( 4is)(')(s(ntation o) s&'')(ssion of 4at()ial facts for the ur ose of obtaining' renewing' or in$reasing a loan or other $redit a$$ommodation or e.tending the eriod thereof% $! Att(4't to 1(f)a&1 the said bank in the e&ent of a $ourt a$tion to re$o&er a loan or other $redit a$$ommodation% or d! Off() an* dire$tor' offi$er' em lo*ee or agent of a bank an* 3ift2 f((2 co44ission' or an* other form of $om ensation in order to infl&(nc( s&c5 '()sons into a'')o*in3 a loan or other $redit a$$ommodation a li$ation! 8! No e.aminer' offi$er or em lo*ee of the Bangko Sentral or of an* de artment' bureau' offi$e' bran$h or agen$* of the Go&ernment that is assigned to su er&ise' e.amine' assist or render te$hni$al assistan$e to an* bank shall $ommit an* of the a$ts enumerated in this Se$tion or aid in the $ommission of the same! The making of false re orts or misre resentation or su ression of material fa$ts b* ersonnel of the Bangko Sentral ng )ili inas shall be sub-e$t to the administrati&e and $riminal san$tions ro&ided under the New 9entral Bank A$t! 9onsistent with the ro&isions of 2e ubli$ A$t No! ,80;' otherwise known as the Banks Se$re$* Law' no bank shall em lo* $asual or non regular ersonnel or too length* robationar* ersonnel in the $ondu$t of its business in&ol&ing bank de osit )rohibition on Bi&idend Be$laration! H No bank or 4uasi/bank shall de$lare di&idends' if at the time of de$laration( a! b! $! Its $learing a$$ount with the Bangko Sentral is o&erdrawn% or It is defi$ient in the re4uired li4uidit* floor for go&ernment de osits for fi&e ";# or more $onse$uti&e da*s' or It does not $om l* with the li4uidit* standards3ratios res$ribed b* the Bangko Sentral for ur oses of determining funds a&ailable for di&idend de$laration% or ,0

>!

d!

It has $ommitted a ma-or &iolation as ma* be determined b* the Bangko Sentral!

a! b!

Con1&ctin3 B&sin(ss in an Unsaf( o) Unso&n1 Fann() In determining whether a arti$ular a$t or omission' whi$h is not otherwise rohibited b* an* law' rule or regulation affe$ting banks' 4uasi/banks or trust entities' ma* be deemed as $ondu$ting business in an unsafe or unsound manner for ur oses of this Se$tion' the +onetar* Board shall consi1() an+ of t5( follo,in3 ci)c&4stanc(s( ,! The a$t or omission has resulted or ma* result in 4at()ial loss o) 1a4a3(2 o) a/no)4al )isk o) 1an3() to t5( saf(t+2 sta/ilit+2 li6&i1it+ o) sol*(nc+ of t5( instit&tion% The a$t or omission has resulted or ma* result in 4at()ial loss o) 1a4a3( o) a/no)4al )isk to t5( instit&tionLs 1('osito)s2 c)(1ito)s2 in*(sto)s2 stock5ol1()s o) to t5( Ban3ko (nt)al o) to t5( '&/lic in 3(n()al% The a$t or omission has $aused an* undue in-ur*' or has gi&en an* unwarranted benefits' ad&antage or referen$e to the bank or an* art* in the dis$harge b* the dire$tor or offi$er of his duties and res onsibilities through manifest artialit*' e&ident bad faith or gross ine.$usable negligen$e% or The a$t or omission in&ol&es entering into an* $ontra$t or transa$tion manifestl* and grossl* disad&antageous to the bank' 4uasi/ bank or trust entit*' whether or not the dire$tor or offi$er rofited or will rofit thereb*!

on a $ontinuing basis where the auditor shall a$t as )(si1(nt (9a4in()' or on the basis of s'(cial (n3a3(4(nts% but in an* $ase' the inde endent auditor shall be res onsible to the bank=s' 4uasi/bank=s or trust entit*=s board of dire$tors! A $o * of the re ort shall be furnished to the +onetar* Board!

The +onetar* Board ma* also dire$t the board of dire$tors of a bank' 4uasi/bank' trust* entit* and3or the indi&idual members thereof% to $ondu$t' either ersonall* or b* a $ommittee $reated b* the board' an ann&al /alanc( s5((t a&1it of t5( /ank2 6&asi. /ank o) t)&st (ntit+ to )(*i(, t5( int()nal a&1it an1 cont)ol s+st(4 of t5( /ank2 6&asi./ank o) t)&st (ntit+ an1 to s&/4it a )('o)t of s&c5 a&1it. #inancial tat(4(nts. 5&er* bank' 4uasi/bank or trust entit* shall submit to the a ro riate su er&ising and e.amining de artment of the Bangko Sentral finan$ial statements in su$h form and fre4uen$* as ma* be res$ribed b* the Bangko Sentral! Su$h statements' whi$h shall be as of a s e$ifi$ date designated b* the Bangko Sentral' shall show t5(( act&al financial con1ition of t5( instit&tion submitting the statement' and of its /)anc5(s2 offic(s2 s&/si1ia)i(s an1 affiliat(s ' in$luding the )(s&lts of its o'()ations' and shall $ontain su$h information as ma* be re4uired in Bangko Sentral regulations! P&/lication of #inancial tat(4(nts. in su$h terms understandable to the la*man and in su$h fre4uen$* as ma* be res$ribed Bangko Sentral' in En3lis5 o) #ili'ino' at l(ast onc( (*()+ 6&a)t() in a news a er of general $ir$ulation in the $it* or ro&in$e ,5()( t5( ')inci'al offic(2 in the $ase of a domesti$ institution or the rin$i al bran$h or offi$e in the $ase of a foreign bank' is lo$ated' but if no news a er is ublished in the same ro&in$e' then in a news a er ublished in +etro +anila or in the nearest $it* or ro&in$e! The Bangko Sentral ma* b* regulation res$ribe the news a er where the statements res$ribed herein shall be ublished! The +onetar* Board ma* allow the 'ostin3 of t5( financial stat(4(nts of a bank' 4uasi/bank or trust entit* in '&/lic 'lac(s it ma* determine' li(& of t5( '&/lication ,,

2!

6!

8!

Whene&er a bank' 4uasi/bank or trust entit* ersists in $ondu$ting its business in an unsafe or unsound manner' the +onetar* Board ma*' without re-udi$e to the administrati&e san$tions ro&ided in Se$tion 6D of the New 9entral Bank A$t' take a$tion under Se$tion 60 of the same A$t and3or immediatel* e.$lude the erring bank from $learing' the ro&isions of law to the $ontrar* notwithstanding! In1('(n1(nt A&1ito). The +onetar* Board ma* re4uire a bank' 4uasi/bank or trust entit* to engage the ser&i$es of an in1('(n1(nt a&1ito) to /( c5os(n /+ t5( /ank2 6&asi./ank o) t)&st (ntit+ $on$erned f)o4 a list of c()tifi(1 '&/lic acco&ntants acc('ta/l( to t5( Fon(ta)+ Boa)1! The term of the engagement shall be as res$ribed b* the +onetar* Board whi$h ma* either be

re4uired in the re$eding aragra h' ,5(n ,a))ant(1 /+ t5( ci)c&4stanc(s! Additionall*' banks shall make a&ailable to the ubli$ in su$h form and manner as the Bangko Sentral ma* res$ribe the $om lete set of its audited finan$ial statements as well as su$h other rele&ant information in$luding those on enter rises ma-orit*/owned or $ontrolled b* the bank' that will inform the ubli$ of the true finan$ial $ondition of a bank as of an* gi&en time! In eriods of national and3or lo$al emergen$* or of imminent ani$ whi$h dire$tl* threaten monetar* and banking stabilit*' the +onetar* Board' b* a &ote of at least fi&e ";# of its members' in s e$ial $ases and u on a li$ation of the bank' 4uasi/bank or trust entit*' ma* allow su$h bank' 4uasi/bank or trust entit* to defer for a stated eriod of time the ubli$ation of the statement of finan$ial $ondition re4uired herein! P&/lication of Ca'ital tock! A /ank' 4uasi/bank or trust entit* in$or orated under the laws of the )hili ines s5all not '&/lis5 t5( a4o&nt of its a&t5o)i8(1 o) s&/sc)i/(1 ca'ital stock ,it5o&t in1icatin3 at the same time and with e4ual rominen$e2 t5( a4o&nt of its ca'ital act&all+ 'ai1 &'! No /)anc5 of an+ fo)(i3n /ank 1oin3 /&sin(ss in t5( P5ili''in(s s5all in an+ ,a+ anno&nc( t5( a4o&nt of t5( ca'ital an1 s&)'l&s of its 5(a1 offic(' o) of t5( /ank in its (nti)(t+ ,it5o&t in1icatin3 at the same time and with e4ual rominen$e t5( a4o&nt of t5( ca'ital2 if an+2 1(finit(l+ assi3n(1 to s&c5 /)anc52 s&c5 fact s5all /( stat(1 in2 an1 s5all fo)4 'a)t of t5( '&/lication! (ttl(4(nt of <is'&t(s! The ro&isions of an* law to the $ontrar* notwithstanding2 t5( Ban3ko (nt)al s5all /( cons&lt(1 b* other go&ernment agen$ies or instrumentalities in a$tions or ro$eedings initiated b* or brought before them in*ol*in3 cont)o*()si(s in banks' 4uasi/banks or trust entities arising out of and in*ol*in3 a! b! relations between and among their dire$tors' offi$ers or sto$kholders' as well as dis utes between an* or all of them and the bank' 4uasi/bank or trust entit* of whi$h the* are dire$tors' offi$ers or sto$kholders! A1*()tis(4(nt o) B&sin(ss

No '()son2 association2 o) co)'o)ation &nl(ss 1&l+ a&t5o)i8(1 to (n3a3( in t5( /&sin(ss of a /ank2 6&asi./ank2 t)&st (ntit+2 o) sa*in3s an1 loan association as defined in this A$t' or other banking laws' a! s5all a1*()tis( o) 5ol1 its(lf o&t as /(in3 (n3a3(1 in t5( /&sin(ss of s&c5 /ank2 6&asi./ank2 t)&st (ntit+2 o) association' or &s( in conn(ction ,it5 its /&sin(ss titl(2 t5( ,o)1 or words Ibank'J Ibanking'J Ibanker'J I4uasi/bank'J I4uasi/banking'J I4uasi/banker'J Isa&ings and loan asso$iation'J Itrust $or oration'J Itrust $om an*J o) ,o)1s of si4ila) i4'o)t o) t)ansact in an+ 4ann() t5( /&sin(ss of an+ s&c5 /ank2 co)'o)ation o) association!

b!

KK P(nalt+ fo) Kiolation of t5is Act. Cnless otherwise herein ro&ided' the &iolation of an* of the ro&isions of this A$t shall be sub-e$t to Se$tions 68' 6;' 6> and 6D of the New 9entral Bank A$t! If the offender is a dire$tor or offi$er of a bank' 4uasi/bank or trust entit*' the +onetar* Board ma* also sus end or remo&e su$h dire$tor or offi$er! If the &iolation is $ommitted b* a $or oration' su$h $or oration ma* be dissol&ed b* 4uo warranto ro$eedings instituted b* the Soli$itor General! PLACEFENT UN<ER CON ERKATOR !IP )ro&ided' That this Se$tion shall also a l* to $onser&atorshi ro$eedings of 4uasi/banks! Appointment of Conservator @The $onser&ator should be $om etent and knowledgeable in bank o erations and managementA Grounds( a! a bank or a 4uasi/bank is in a ",# stat( of contin&in3 ina/ilit+ or "2# &n,illin3n(ss to maintain a $ondition of li4uidit* deemed ade4uate to rote$t the interest of de ositors and $reditors'

Responsibilit of the conservator! a! to tak( c5a)3( of the assets' liabilities' and the management thereof' )(o)3ani8( t5( 4ana3(4(nt' $olle$t all monies and debts due said institution' and (9()cis( all 'o,()s n(c(ssa)+ to )(sto)( its *ia/ilit+. shall re ort and be res onsible to the +onetar* Board and ,2

Una&t5o)i8(1 R(')(s(ntation.

b!

$!

shall ha&e the 'o,() to o*())&l( o) )(*ok( t5( actions of t5( ')(*io&s 4ana3(4(nt an1 /oa)1 of 1i)(cto)s of t5( /ank o) 6&asi./ank.

"a# has insuffi$ient reali7able assets' as determined b* the Bangko Sentral' to meet its liabilities% or "b# $annot $ontinue in business without in&ol&ing robable losses to its de ositors or $reditors% or "$# has willfull* &iolated a $ease and desist order that has be$ome final' in&ol&ing a$ts or transa$tions whi$h amount to fraud or a dissi ation of the assets of the institution% in whi$h $ases' the +onetar* Board ma* summaril* and without need for rior hearing forbid the institution from doing business in the )hili ines and designate the )hili ine Be osit Insuran$e 9or oration as re$ei&er of the banking institution! :or a 4uasi/bank' an* erson of re$ogni7ed $om eten$e in banking or finan$e ma* be designed as re$ei&er! Li4uidation( If t5( )(c(i*() 1(t()4in(s t5at t5( instit&tion cannot /( )(5a/ilitat(1 o) '()4itt(1 to )(s&4( /&sin(ss the +onetar* Board shall notif* in writing the board of dire$tors of its findings and dire$t the re$ei&er to ro$eed with the li4uidation of the institution! The re$ei&er shall( ",# file ex parte with the ro er regional trial $ourt' and without re4uirement of rior noti$e or an* other a$tion' a etition for assistan$e in the li4uidation of the institution ursuant to a li4uidation lan ado ted b* the )hili ine Be osit Insuran$e 9or oration "2# C on a$4uiring -urisdi$tion' the $ourt shall' u on motion b* the re$ei&er after due noti$e' ad-udi$ate dis uted $laims against the institution' assist the enfor$ement of indi&idual liabilities of the sto$kholders' dire$tors and offi$ers' and de$ide on other issues as ma* be material to im lement the li4uidation lan ado ted! "6# $on&ert the assets of the institutions to mone*' dis ose of the same to $reditors and other arties' for the ur ose of a*ing the debts of su$h institution in a$$ordan$e with the rules on $on$urren$e and referen$e of $redit under the 9i&il 9ode "8# institute su$h a$tions as ma* be ne$essar* to $olle$t and re$o&er ,6

The +onetar* Board shall t()4inat( t5( cons()*ato)s5i' a! After the e. iration of one ",# *ear @The $onser&atorshi shall not e.$eed one ",# *earA When it is satisfied that the instit&tion can contin&( to o'()at( on its o,n an1 t5( cons()*ato)s5i' is no lon3() n(c(ssa)+ o) 1n the basis of the re ort of the $onser&ator or of its own findings' determine that the $ontinuan$e in business of the institution would in&ol&e robable loss to its de ositors or $reditors

b!

$!

CE

ATION O# BAN%IN$ BU INE

"oluntar #i$uidation. In $ase of &oluntar* li4uidation of an* bank organi7ed under the laws of the )hili ines' or of an* bran$h or offi$e in the )hili ines of a foreign bank' written noti$e of su$h li4uidation shall be sent to the +onetar* Board before su$h li4uidation is undertaken' and the +onetar* Board shall ha&e the right to inter&ene and take su$h ste s as ma* be ne$essar* to rote$t the interests of $reditors! R(c(i*()s5i' an1 In*ol&nta)+ Li6&i1ation! The grounds and ro$edures for la$ing a bank under re$ei&ershi or li4uidation' as well as the owers and duties of the re$ei&er or li4uidator a ointed for the bank shall be go&erned b* the ro&isions of Se$tions 60' 6,' 62' and 66 of the New 9entral Bank A$t( P)o*i1(12 That the etitioner or laintiff files with the $lerk or -udge of the $ourt in whi$h the a$tion is ending a bond' e.e$uted in fa&or of the Bangko Sentral' in an amount to be fi.ed b* the $ourt! This Se$tion shall also a l* to the e.tent ossible to the re$ei&ershi and li4uidation ro$eedings of 4uasi/banks! $)o&n1s fo) )(c(i*()s5i' is unable to a* its liabilities as the* be$ome due in the ordinar* $ourse of business( )ro&ided' That this shall not in$lude inabilit* to a* $aused b* e.traordinar* demands indu$ed b* finan$ial ani$ in the banking $ommunit*%

a$$ounts and assets of' or defend an* a$tion against' the institution! The assets of an institution under re$ei&ershi or li4uidation shall be deemed in custodia legis in the hands of the re$ei&er and shall' from the moment the institution was la$ed under su$h re$ei&ershi or li4uidation' be e.em t from an* order of garnishment' le&*' atta$hment' or e.e$ution! The a$tions of the +onetar* Board taken shall be final and e.e$utor*' and ma* not be restrained or set aside b* the $ourt e.$e t on etition for $ertiorari on the ground that the a$tion taken was in e.$ess of -urisdi$tion or with su$h gra&e abuse of dis$retion as to amount to la$k or e.$ess of -urisdi$tion! The etition for $ertiorari ma* onl* be filed b* the sto$kholders of re$ord re resenting the ma-orit* of the $a ital sto$k within ten ",0# da*s from re$ei t b* the board of dire$tors of the institution of the order dire$ting re$ei&ershi ' li4uidation or $onser&atorshi ! %istribution of Assets. In $ase of li4uidation of a bank or 4uasi/bank' ",# aft() 'a+4(nt of t5( cost of ')oc((1in3s2 incl&1in3 )(asona/l( (9'(ns(s an1 f((s of t5( )(c(i*() to be allowed b* the $ourt' the re$ei&er shall "2# 'a+ t5( 1(/ts of s&c5 instit&tion' under order of the $ourt' in a$$ordan$e with the rules on $on$urren$e and referen$e of $redit as ro&ided in the 9i&il 9ode! %isposition of Revenues and &arnings. All re&enues and earnings reali7ed b* the re$ei&er in winding u the affairs and administering the assets of an* bank or 4uasi/ bank within the ur&iew of this A$t shall be used to a* the $osts' fees and e. enses mentioned in the re$eding se$tion' salaries of su$h ersonnel whose em lo*ment is rendered ne$essar* in the dis$harge of the li4uidation together with other additional e. enses $aused thereb*! The balan$e of re&enues and earnings' after the a*ment of all said e. enses' shall form art of the assets a&ailable for a*ment to $reditors! P(nalt+ fo) T)ansactions Aft() a Bank B(co4(s Insol*(nt. An* dire$tor or offi$er of an* bank de$lared insol&ent or la$ed under re$ei&ershi b* the +onetar* Board who

,! 2! 6!

refuses to turn o&er the bank=s re$ords and assets to the designated re$ei&ers' or who tam ers with banks re$ords' or who a ro riates for himself for another art* or destro*s or $auses the misa ro riation and destru$tion of the bank=s assets' or who re$ei&es or ermits or $auses to be re$ei&ed in said bank an* de osit' $olle$tion of loans and3or re$ei&ables' or who a*s out or ermits or $auses to be transferred an* se$urities or ro ert* of said bank

8!

;!

shall be sub-e$t to the enal ro&isions of the New 9entral Bank A$t! LAW $OKERNIN$ OT!ER T"PE O# BAN% The ro&isions of this A$t' howe&er' insofar as the* are not in $onfli$t with the ro&isions of the Thrift Banks A$t' the 2ural Banks A$t' and the 9oo erati&e 9ode shall likewise a l* to thrift banks' rural banks' and $oo erati&e banks' res e$ti&el*! <owe&er' for ur oses of res$ribing the minimum ratio whi$h the net worth of a thrift bank must bear to its total risk assets' the ro&isions of Se$tion 66 of this A$t shall go&ern! #OREI$N BAN% Transa$ting Business in the )hili ines! The entr* of foreign banks in the )hili ines through the establishment of bran$hes shall be go&erned b* the ro&isions of the :oreign Banks Liberali7ation A$t! The $ondu$t of offshore banking business in the )hili ines shall be go&erned b* the ro&isions of the )residential Be$ree No! ,068' otherwise known as the I1ffshore Banking S*stem Be$ree!J A$4uisition of Loting Sto$k in a Bomesti$ Bank! Wit5in s(*(n >7B +(a)s f)o4 t5( (ff(cti*it+ of t5is act and sub-e$t to guidelines issued ursuant to the :oreign Banks Liberali7ation A$t' the +onetar* Board 4a+ a&t5o)i8( a fo)(i3n /ank to ac6&i)( &' to on( 5&n1)(1 '()c(nt >1CCAB of t5( *otin3 stock of onl+ on( >1B /ank o)3ani8(1 &n1() t5( la,s of t5( R('&/lic of t5( P5ili''in(s. Within the same eriod' the +onetar* Board ma* authori7e an* foreign bank' whi$h rior to the effe$ti&it* of this A$t a&ailed itself of the ri&ilege to a$4uire u to si.t* er$ent ">0?# of the &oting sto$k of a bank under the :oreign Banks Liberali7ation A$t and the Thrift Banks A$t' to further a$4uire &oting shares su$h bank to the e.tent ne$essar* for it to own one hundred er$ent ",00?# of the &oting sto$k thereof! ,8

!OWEKER7 In the e.er$ise of the authorit*' the +onetar* Board shall ado t measures as ma* be ne$essar* to (ns&)( t5at at all ti4(s t5( cont)ol of s(*(nt+ '()c(nt >7CAB of t5( )(so&)c(s o) ass(ts of t5( (nti)( /ankin3 s+st(4 is 5(l1 /+ /anks ,5ic5 a)( at l(ast 4a:o)it+.o,n(1 /+ #ili'inos. NOTE7 An* right' ri&ilege or in$enti&e granted to a foreign bank under this Se$tion shall be e4uall* en-o*ed b* and e.tended under the same $onditions to banks organi7ed under the laws of the 2e ubli$ of the )hili ines! Lo$al Bran$hes of :oreign Banks! In the $ase of a foreign bank whi$h has more than one ",# bran$h in the )hili ines' all su$h bran$hes shall be treated as one ",# unit for the ur ose of this A$t' and all referen$es to the )hili ine bran$hes of foreign banks shall be held to refer to su$h units! !(a1 Offic( $&a)ant((. In order to ro&ide effe$ti&e rote$tion of the interests of the de ositors and other $reditors of )hili ine bran$hes of a foreign bank' t5( 5(a1 offic( of s&c5 /)anc5(s s5all f&ll+ 3&a)ant(( t5( ')o4't 'a+4(nt of all lia/iliti(s of its P5ili''in( /)anc5. R(si1(nts an1 citi8(ns of t5( P5ili''in(s ,5o a)( c)(1ito)s of a /)anc5 in t5( P5ili''in(s of a foreign bank shall ha&e ')(f()(ntial )i35ts to t5( ass(ts of s&c5 /)anc5 in a$$ordan$e with the e.isting laws! Summons and Legal )ro$ess! Summons and legal ro$ess ser&ed u on the 1. )hili ine a3(nt or designated to a$$e t E. <ead of an* foreign bank ser&i$e thereof shall gi&e :&)is1iction to t5( co&)ts o*() s&c5 /ank' and ser&i$e of noti$es on su$h agent or head s5all /( as /in1in3 &'on t5( /ank ,5ic5 5( )(')(s(nts as if 4a1( &'on t5( /ank its(lf. Should the authorit* ,! be )(*ok(12 or 2! should su$h a3(nt o) 5(a1 /(co4( 4(ntall+ inco4'(t(nt or 6! ot5(),is( &na/l( to acc('t s()*ic( ,5il( (9()cisin3 s&c5 a&t5o)it+' it shall be the 1&t+ of t5( /ank >1B to na4( an1 1(si3nat( rom tl* anot5() a3(nt o) 5(a1 &'on ,5o4 s()*ic( of s&44ons an1 ')oc(ss(s in legal ro$eedings against the bank and of noti$es affe$ting the bank 4a+ /( 4a1(' and >EB to file with the S59 a dul* a&t5(nticat(1 no4ination of s&c5 a3(nt!

In t5( a/s(nc( of t5( a3(nt o) 5(a1 o) s5o&l1 t5()( /( no '()son a&t5o)i8(1 /+ t5( /ank u on whom ser&i$e of summons' ro$esses and all legal noti$es ma* be made' s()*ic( of s&44ons2 ')oc(ss(s an1 l(3al notic(s 4a+ /( 4a1( &'on t5( Ban3ko (nt)al <('&t+ $o*()no) In.C5a)3( of t5( s&'()*isin3 an1 (9a4inin3 1('a)t4(nts and su$h ser&i$e shall be as (ff(cti*( as if 4a1( &'on t5( /ank o) its 1&l+ a&t5o)i8(1 a3(nt o) 5(a1. The said de ut* $o*()no) s5all )(3ist() an1 t)ans4it /+ 4ail to t5( ')(si1(nt o) t5( s(c)(ta)+ of t5( /ank at its 5(a1 o) ')inci'al offic( a co'+2 1&l+ c()tifi(1 /+ 5i42 of t5( s&44ons2 ')oc(ss2 o) notic(. The sending of su$h $o * of the summons' ro$ess' or noti$e shall be a ne$essar* art of the ser&i$es and shall co4'l(t( t5( s()*ic(. The registr* re$ei t of mailing shall be rima fa$ie e&iden$e of the transmission of the summons' ro$ess or noti$e! All $osts ne$essaril* in$urred b* the said Be ut* Go&ernor for the making and mailing and sending of a $o * of the summons' ro$ess' or noti$e shall be aid in ad&an$e b* the art* at whose instan$e the ser&i$e is made! Laws A li$able! / In all matters not s e$ifi$all* $o&ered b* s e$ial ro&isions a li$able onl* to a foreign bank or its bran$hes and other offi$es in the )hili ines an* foreign bank li$ensed to do business in the )hili ines shall be /o&n1 /+ t5( ')o*isions of t5is Act2 all ot5() la,s2 )&l(s an1 )(3&lations a''lica/l( to /anks o)3ani8(1 &n1() t5( la,s of t5( P5ili''in(s of t5( sa4( class' (9c('t those that ro&ide for the >1B $reation' >EB formation' >?B organi7ation or "JB dissolution of $or orations or >@Bfor the fi.ing of the relations' liabilities' res onsibilities' or duties of sto$kholders' members' dire$tors or offi$ers of $or orations to ea$h other or to the $or oration! R(*ocation of Lic(ns( of a #o)(i3n Bank The +onetar* Board ma* re&oke the li$ense to transa$t business in the )hili ines of' an* foreign bank' ,! if it finds that the foreign bank is insol&ent or 2! in imminent danger thereof or that its $ontinuan$e in business will in&ol&e robable loss to those transa$ting business with it! Aft() t5( )(*ocation of its lic(ns( ' it shall be &nla,f&l for an* su$h foreign banks to t)ansact /&sin(ss in t5( P5ili''in(s &nl(ss its lic(ns( is )(n(,(1 o) )(iss&(1! After the re&o$ation of su$h li$ense' the Bangko Sentral shall take the ne$essar* a$tion to rote$t the $reditors of su$h foreign bank and the ubli$! The ,;

ro&isions of the New 9entral Bank A$t on san$tions and enalties shall likewise be a li$able! 2! TRU T OPERATION Authorit* to 5ngage in Trust Business! Onl+ a stock co)'o)ation o) a '()son 1&l+ a&t5o)i8(1 /+ t5( Fon(ta)+ Boa)1 to (n3a3( in t)&st /&sin(ss shall a$t as a trustee or administer an* trust or hold ro ert* in trust or on de osit for the use' benefit' or behalf of others! :or ur oses of this A$t' su$h a $or oration shall be referred to as a trust entit*! The EC s5all not )(3ist() t5( a)ticl(s of inco)'o)ation an1 /+.la,s o) an+ a4(n14(nt t5()(to' of an* trust entit*' &nl(ss acco4'ani(1 /+ a c()tificat( of a&t5o)it+ issued b* the Bangko Sentral! Fini4&4 Ca'itali8ation! H A trust entit*' before it $an engage in trust or other fidu$iar* business' shall $om l* with the minimum aid/in $a ital re4uirement whi$h will be determined b* the +onetar* Board! Con1&ct of T)&st B&sin(ss. A trust entit* s5all a14inist() the funds or ro ert* under its $ustod* ,it5 t5( 1ili3(nc( t5at a ')&1(nt 4an ,o&l1 (9()cis( in t5( con1&ct of an (nt()')is( of a lik( c5a)act() an1 ,it5 si4ila) ai4s. P)o5i/it(1 t)ansactions No trust entit* shall' for the a$$ount of the trustor or the benefi$iar* of the trust' ur$hase or a$4uire ro ert* from' or sell' transfer' assign' or lend mone* or ro ert* to' or ur$hase debt instruments of' ,! an* of the de artments' dire$tors' offi$ers' sto$kholders' or em lo*ees of the trust entit*' 2! relati&es within the first degree of $onsanguinit* or affinit*' or 6! the related interests' of su$h dire$tors' offi$ers and sto$kholders' unless the transa$tion is s e$ifi$all* authori7ed b* the trustor and the relationshi of the trustee and the other art* in&ol&ed in the transa$tion is full* dis$losed to the trustor of benefi$iar* of the trust rior to the transa$tion! Po,()s of a T)&st Entit+. A trust entit*' in addition to the general owers in$ident to $or orations' shall ha&e the ower to( ,! A$t as t)&st(( on an+ 4o)t3a3( o) /on1 issued b* an* muni$i alit*' $or oration' or an* bod* oliti$ and to

6!

8! ;!

>!

D!

acc('t an1 (9(c&t( an+ t)&st $onsistent with law% Act under the order or a ointment of an* co&)t as 3&a)1ian2 )(c(i*()2 t)&st((2 o) 1('osita)+ of t5( (stat( of an+ 4ino) o) ot5() inco4'(t(nt '()son' A$t under the a ointment of an* $ourt as )(c(i*() an1 1('osita)+ of an+ 4on(+s 'ai1 into co&)t /+ 'a)ti(s to an+ l(3al ')oc((1in3s and of ro ert* of an* kind whi$h ma* be brought under the -urisdi$tion of the $ourt% Act as t5( (9(c&to) of an* will when it is named the e.e$utor thereof% Act as a14inist)ato) of t5( (stat( of an* de$eased erson' with the will anne.ed' or as administrator of the estate of an* de$eased erson when there is no will% Acc('t an1 (9(c&t( an+ t)&st fo) t5( 5ol1in32 4ana3(4(nt2 an1 a14inist)ation of an+ (stat( ' real or ersonal' an1 t5( )(nts2 iss&(s an1 ')ofits t5()(of% and Esta/lis5 an1 4ana3( co44on t)&st f&n1s' sub-e$t to su$h rules and regulations as ma* be res$ribed b* the +onetar* Board!

#o) t5( #ait5f&l P()fo)4anc( of T)&st <&ti(s. ,! Before transa$ting trust business' e&er* trust entit* shall 1('osit with the Bangko Sentral' as se$urit* for the faithful erforman$e of its trust duties' cas5 o) s(c&)iti(s a ro&ed b* the +onetar* Board in an amount (6&al to o) not l(ss t5an #i*( 5&n1)(1 t5o&san1 '(sos >P@CC2CCC.CCB o) s&c5 5i35() amount as ma* fi.ed b* the +onetar* Board( )ro&ided' howe&er' That the +onetar* Board shall re4uire e&er* trust entit* to inc)(as( t5( a4o&nt of its cas5 o) s(c&)iti(s on 1('osit with the Bangko Sentral 5o&l1 t5( ca'ital an1 s&)'l&s fall /(lo, sai1 a4o&nt' A trust entit* so long as it shall $ontinue to be sol&ent and $om l* with laws or regulations shall ha&e the right to $olle$t the interest earned on su$h se$urities de osited with the Bangko Sentral and' from time to time' with the a ro&al of the Bangko Sentral' to e.$hange the se$urities for others! If the trust entit* fails to $om l* with an* law or regulation' the Bangko Sentral shall retain su$h interest on the se$urities de osited with it for the benefit of rightful $laimants! ,>

2!

All $laims rising out of the trust business of a trust entit* shall ha&e riorit* o&er all other $laims as regards the $ash or se$urities de osited as abo&e ro&ided! Before an e.e$utor' administrator' guardian' trustee' re$ei&er or de ositar* a ointed b* the $ourt enters u on the e.e$ution of his duties' he shall' u on order of the $ourt' fil( a /on1 in su$h sum as the $ourt ma* dire$t! NOTE7 No /on1 o) ot5() s(c&)it+ s5all /( )(6&i)(1 /+ t5( co&)t f)o4 a t)&st (nt)+ fo) t5( fait5f&l '()fo)4anc( of its 1&ti(s as co&)t. a''oint(1 t)&st((2 (9(c&to)2 a14inist)ato)2 3&a)1ian2 )(c(i*()2 o) 1('osita)+! <owe&er' the $ourt ma*' u on ro er a li$ation with it showing s e$ial $ause therefore' re4uire the trust entit* to ost a bond or other se$urit* for the rote$tion of funds or ro ert* $onfided to su$h entit*!

:or the ur ose of this A$t' the trust entit* and its bran$hes shall be treated as one unit! ......................................... T5( N(, C(nt)al Bank Act RA 7;@? C5a't() I7 5stablishment and organi7ation of Bangko Sentral ng )ili inas The $entral Bank shall be the $entral monetar* authorit* that shall fun$tion and o erate as an inde endent and a$$ountable bod* $or orate in the dis$harge of its mandated res onsibilities $on$erning mone*' banking and $redit! It is a go&ernment/owned/and/$ontrolled $or oration but it was $reated as an autonomous bod* $or orate go&erned b* the ro&isions of its $harter "2A 2>;#! It en-o*s fis$al and administrati&e autonom*!" Se$,% 9ha ter I # CORPORATE POWER "Se$ ;% 9ha ter I# ,! authori7ed to ado t' alter and use a $or orate seal 2! lease or own real and ersonal ro ert* 6! sell or dis ose of the $or orate ro erties 8! to sue or be sued ;! to do and erform an* and all things that ma* be ne$essar* or ro er to $arr* out the ur oses of this A$t >! ma* a$4uire and hold assets and in$ur liabilities in $onne$tion with its o erations D! ma* $om romise' $ondone or release in whole or in art' an* $laim of or settled liabilit* to the Bangko Sentral It has a $a ital of its own% );0B to be full* subs$ribed b* the Go&ernment' ),0B of whi$h shall be full* aid b* the Go&ernment u on the effe$ti&it* of the A$t and the balan$e to be aid within a eriod of 2 *ears from the effe$ti&it* of the A$t! It has a $a ital of its own and o erates under a budget re ared b* its own +onetar* Board and a ro riates mone* for its own o erations and other e. enditures inde endentl* of the national budget! It does not de end on the national go&ernment for the finan$ing of its o erations% it is the national go&ernment that o$$asionall* resorts to it for needed budgetar* a$$ommodations!

('a)ation of T)&st B&sin(ss f)o4 $(n()al B&sin(ss. The trust business shall be ke t se arate and distin$t from the general business in$luding all other funds' ro erties' and assets of su$h trust entit*! The a$$ounts of all su$h funds' ro erties' or se$urities shall likewise be ke t se arate and distin$t from the a$$ounts of the general business of the trust entit*! In*(st4(nt Li4itations of a T)&st Entit+. Cnless otherwise dire$ted b* the instrument $reating the trust' the lending and in&estment of funds and other assets a$4uired b* a trust entit* as e.e$utor' administrator' guardian' trustee' re$ei&er or de ositar* of the estate of an* minor or other in$om etent erson s5all /( li4it(1 to loans o) in*(st4(nts as 4a+ /( ')(sc)i/(1 /+ la,2 t5( Fon(ta)+ Boa)1 o) an+ co&)t of co4'(t(nt :&)is1iction! E9(4'tion of T)&st Ass(ts f)o4 Clai4s. No assets held b* a trust entit* in its $a a$it* as trustee shall be sub-e$t to an* $laims other than those of the arties interested in the s e$ifi$ trusts! Esta/lis54(nt of B)anc5(s of a T)&st Entit+! The ordinar* business of a trust entit* shall be transa$ted at the la$e of business s e$ified in its arti$les of in$or oration! With rior a ro&al of the +onetar* Board' establish bran$hes in the )hili ines and the said entit* shall be res onsible for all business $ondu$ted in su$h bran$hes to the same e.tent and in the same manner as though su$h business had all been $ondu$ted in the head offi$e!

RE PON IBILIT" AN< PRIFAR" OBMECTIKE "Se$ 6% 9ha ter I# R(s'onsi/iliti(s7 ,! )ro&ide oli$* dire$tions in the areas of mone*' banking and $redit ,D

2! Shall ha&e su er&ision o&er the o erations of banks% and 6! 5.er$ise su$h regulator* owers as ro&ided in this A$t and other ertinent laws o&er the o eration of banks and ertinent laws o&er the o erations of finan$e $om anies and non/bank finan$ial institution erforming 4uasi/banking fun$tions! P)i4a)+ o/:(cti*(s( ,! +aintain ri$e stabilit* $ondu$i&e to a balan$ed and sustainable growth of the e$onom* 2! )romote and maintain monetar* stabilit* and the $on&ertibilit* of the eso "it in$ludes ower to regulate no/dollar im orts% owing to the influen$e and effe$t that the same ma* and do ha&e u on the stabilit* of our eso and its international &alue# T!E FONETAR" BOAR< / it shall e.er$ise all the owers and fun$tions of the 9entral Bank T5( (9()cis( of a&t5o)it+ "se$,;% 9ha ter II# The monetar* board shall( a! issue rules and regulations it $onsiders ne$essar* for the effe$ti&e dis$harge of the res onsibilities and e.er$ise of the owers &ested u on the +onetar* Board and Bangko Sentral% b! dire$t the management' o erations and administrations of Bangko Sentral' reorgani7e its ersonnel' and issue su$h rules and regulations as it ma* deem ne$essar* or $on&enient% $! 5stablish a human resour$e management s*stem whi$h shall go&ern the sele$tion' hiring! A ointment' transfer' romotion or dismissal of all ersonnel! AI+ 1: SMST5+( establish rofessionalism and e.$ellen$e at all le&els of Bangko Sentral in a$$ordan$e with sound rin$i les of management! d! Ado t an annual budget for and authori7e e. enditures b* the Bangko Sentral as are in the interest of effe$ti&e administration and o erations of the bank in a$$ordan$e with a li$able laws and regulations% and e! Indemnif* its members and other offi$ials of Bangko Sentral' in$luding ersonnel of de artments erforming su er&ision and e.amination fun$tions against all $osts and e. enses reasonabl* in$urred b* su$h ersons! " $i&il or $riminal a$tion' suit or ro$eeding whi$h he ma* be a art* b* reason of erforman$e of his fun$tions or duties #

Co4'osition of t5( 4on(ta)+ /oa)17 / D members a ointed b* the )resident of the )hili ines for a term of > *ears 'he seven members are! a! Go&ernor of Bangko Sentral H shall be the 9hairman of the +onetar* Board% his a ointment is sub-e$t to the $onfirmation b* 9ommission of A ointments b! +embers of the 9abinet H designated b* the )resident of the )hili ines $! ; members who shall $ome from the ri&ate se$tor' all shall ser&e full/term / 6 shall ha&e a term of > *ears / 2 shall ha&e a term of 6 *ears KKKNo member of the +onetar* Board ma* be rea ointed more than on$e!

T!E $OKERNOR O# BAN$%O ENTRAL The owers and duties of the Go&ernor( ,! As a $hief e.e$uti&e offi$er of Bangko Sentral% his owers and duties are( a! re are the agenda for the meetings of the +onetar* Board and submit for the $onsideration of the board the oli$ies and measures ne$essar* to $arr* out the ur ose of the A$t% b! e.e$ute and administer the oli$ies and measures a ro&ed b* the +onetar* Board% $! dire$t and su er&ise the o erations and internal administration of the Bangko Sentral% d! a oint and fi. the remuneration and other emoluments of ersonnel below the rank of a de artment head in a$$ordan$e with the osition and $om ensation lans a ro&ed b* the board' as well as to im ose dis$i linar* measures u on ersonnel of Bangko Sentral e! render o inions' de$isions or rulings' whi$h shall be final and e.e$utor* until re&ersed or modified b* the board' on matters regarding a li$ation or enfor$ement of laws ertaining to institutions su er&ised b* the Bangko Sentral and laws ertaining to 4uasi/ banks% and f! e.er$ise su$h other owers as ma* be &ested in him b* the +onetar* Board! 2! As a rin$i al re resentati&e of the +onetar* Board and the Bangko Sentral% he is em owered to( a! re resent the +onetar* Board and Bangko Sentral in all dealings with other offi$es' agen$ies and instrumentalities of the Go&ernment and all other ersons or ,G

entities' ubli$ or ri&ate' whether domesti$' foreign or international% b! sign $ontra$ts entered into b* the Bangko Sentral' notes and se$urities issued b* the Bangko Sentral' all re orts' balan$e sheets' rofit and loss statements' $orres onden$e and other do$uments of the Bangko Sentral the signature of the Go&ernor ma* be in fa$simile whene&er a ro riate $! re resent the Bangko Sentral' either ersonall* or through $ounsel as ma* be authori7ed b* the +onetar* Board in an* legal ro$eedings' a$tion or s e$iali7ed legal studies% and d! delegate his ower to re resent the Bangko Sentral to other offi$ers u on his own res onsibilit*

2! +embers $oming from ri&ate se$tor shall not hold an* other ubli$ offi$e3 ubli$ em lo*ment during their tenure% 6! 9onne$ted dire$tl* with an* multilateral banking or finan$ial institution or has substantial interest in an* ri&ate bank in the )hili ines within , *ear rior to his a ointment% 8! 5m lo*ed in an* su$h institution within 2 *ears after e. iration of his term e.$e t when he ser&es as an offi$ial re resentati&e of the )hili ines to su$h institution! REFOKAL / the )resident ma* remo&e an* member for the following reasons( a! if the member is subse4uentl* dis4ualified under the ro&ision of this A$t% b! if he is h*si$all* or mentall* in$a a$itated that he $annot ro erl* dis$harge his duties and res onsibilities and su$h in$a a$it* lasted for more than > months% $! if the member is guilt* of a$ts or o erations whi$h are of fraudulent or illegal $hara$ter or whi$h are manifestl* o osed to the aims and interest of Bangko Sentral% or d! if the member no longer ossesses the 4ualifi$ation s e$ified in this A$t! KACANC" / $reated b* death' resignation or remo&al of an* member shall be filled b* the a ointment of a new member to $om lete the une. ired eriod of the term of the member $on$erned! FEETIN$ H meet at least on$e a week -UOROF / resen$e of 8 members shall $onstitute a' ) )21LIB5B' that in all $ases the Go&ernor or his dul* designated alternate shall be among the 8! KOTE N $on$urren$e of at least 8 members for de$isions of monetar* Board ALAR" H shall be fi.ed b* the )resident of the )hili ines at a sum $ommensurate to the im ortan$e and res onsibilit* atta$hed to the osition KKan* member of the +onetar* Board with ersonal or e$uniar* interest in an* matter in the agenda of Board shall dis$lose his interest to the Board and shall retire from the meeting when matter is taken u ! OPERATION O# T!E BAN$%O ENTRAL ,! Shall re are data and $ondu$t e$onomi$ resear$h for the guidan$e of the monetar* board in the formulation and im lementation of its oli$ies! %A'A ()C#*%&+( ,E

6! The Go&ernor also has emergen$* owers where time is insuffi$ient to $all a meeting of the +onetar* Board! There are 2 re4uirements for the e.er$ise of this ower' the* are( a! There must be the $on$urren$e of 2 other members of the monetar* Board b! <e must submit a re ort to the )resident and 9ongress within D2 hours after the a$tion has been taken! At the soonest ossible time' the Go&ernor shall $all a meeting of the +onetar* Board to submit his a$tion for ratifi$ation! T!E <EPUT" $OKERNOR / the Go&ernor' with the a ro&al of the +onetar* Board' shall a oint not more than 6 de ut* go&ernors who shall erform duties as ma* be assigned to them b* the Go&ernor and the Board! KKK In the absen$e of the Go&ernor' the Be ut* designated shall a$t as $hief e.e$uti&e of the Bangko Sentral and shall e.er$ise the owers and erform the duties of the Go&ernor! -UALI#ICATION O# T!E FEFBER O# T!E BOAR< ,! must be a natural born $iti7en of the )hili ines 2! at least 80 *rs old for the Go&ernor and at least 6; *rs old for the other members 6! of good moral $hara$ter 8! of un4uestionable integrit* ;! of known robit* and atriotism >! with re$ogni7ed $om eten$e in so$ial and e$onomi$ dis$i line <I -UALI#ICATION O# T!E FEFBER O# T!E BOAR< ,! Bis4ualified from being a dire$tor' offi$er' em lo*ee' $onsultant' and law*er' agent ore sto$kholder of an* bank' 4uasi/bank or an* other institution sub-e$t to su er&ision or e.amination b* the Bangko Sentral%

a! fore$ast of the balan$e of a*ments of )hili ines b! statisti$s on the monthl* mo&ement of the monetar* aggregates' of ri$es and other statisti$al series $! e$onomi$ studies useful for the formulation and anal*sis of monetar*' banking' $redit and e.$hange oli$ies 2! Shall ha&e authorit* to re4uest from go&ernment offi$es and instrumentalities' or G199=s' an* data whi$h it ma* re4uire for the ro er dis$harge of its fun$tions and res onsibilities! 6! Shall romote and s onsor the training of te$hni$al ersonnel in the field of mone* and banking H authori7ed to defra* the $osts of stud*' at home or abroad' of 4ualified em lo*ees of the Bangko Sentral' of romising uni&ersit* graduates or an* other 4ualified erson who shall be determined b* ro er $om etiti&e e.aminations! 8! Shall ha&e su er&ision o&er' and $ondu$t eriodi$ or s e$ial e.aminations of' banking institutions and 4uasi/ banks' in$luding subsidiaries and affiliates engaged in allied a$ti&ities! UB I<IAR" H a $or oration more than ;0? of &oting sto$k of whi$h is owned b* a bank or 4uasi/bank A##ILIATE H a $or oration the &oting sto$k of whi$h' to the e.tent of ;0? or less' is owned b* a bank or 4uasi/ bank or whi$h is related or linked to su$h institution or intermediar* through $ommon sto$kholders or su$h other fa$tors as determined b* the Board! UPERKI ION AN< EOAFINATION the de artment heads and e.aminees of the su er&ising or e.amining de artments are hereb* authori7ed to( a! administer oaths of an* dire$tor' offi$er or em lo*ee of an* institution under their res e$ti&e su er&ision or sub-e$t to their e.amination% b! $om el the resentation of all books' do$uments' a ers or re$ords ne$essar* in their -udgment to as$ertain the fa$ts relati&e to the true $ondition of an* institution% $! $om el the resentation of books and re$ords of ersons and entities relati&e to or in $onne$tion with the o erations' a$ti&ities or transa$tions of the institutions under e.amination! b N $ is sub-e$t to the ro&isions of e.isting laws rote$ting or safeguarding the se$re$* as $onfidentialit* of bank de osits as well as in&estments of ri&ate ersons' natural or -uridi$al' in debt institutions issued b* the Go&ernment $ENERAL RULE7 no restraining order or in-un$tion shall be issued b* the $ourt en-oining the Bangko Sentral from e.amining an* institution sub-e$t to the su er&ision or e.amination b* the Bangko Sentral!

EOCEPTION7 ,! a$tion of Bangko Sentral is lainl* arbitrar* and made in bad faith% and 2! etitioner files with the $lerk or -udge of $ourt in whi$h the a$tion is ending a bond e.e$uted in fa&or of Bangko Sentral' in an amount fi.ed b* the $ourt! ,hen is supervision and e-amination conducted. / the su er&ising and e.amining de artment head' ersonall* or b* his de ut*' shall e.amine the books of e&er* banking institution once in every 12 months and in such other times as the Monetary oard by an affirmative vote of ! members may deem expedient" PR/"(%&%0 that there shall be an inter&al of at least ,2 months between annual e.aminations! / e.amination of its books' $ash and a&ailable assets and general $ondition ma* be made at any time during banking hours when re4uested to do so b* the Bangko Sentral! !o, F&c5 >#((sB / banking and 4uasi/banking institutions whi$h are sub-e$t to e.amination shall a* to Bangko Sentral an annual fee in an amount equivalent to a percentage as may be prescribed by the Monetary oard of its average total assets during the preceding year" ,hen are fees paid. / Within the first 60 da*s of ea$h *ear' shown in its end/of/the/month balan$e sheet T!E CON ERKATOR Whene&er on the basis of a re ort submitted b* the a ro riate su er&ising or e.amining de artment' the +onetar* Board finds that a bank or a 4uasi/bank is in a state of $ontinuing inabilit* or unwillingness to maintain a $ondition of li4uidit* deemed ade4uate to rote$t the interest of de ositors and $reditors% shall a oint a $onser&ator! Po,()s of t5( Cons()*ato)7 ,! take $harge of assets' liabilities and the management thereof% 2! reorgani7e the management 6! $olle$t all monies and debts due said institution 8! e.er$ise all owers ne$essar* to restore &iabilit* of its banking institution ;! re ort and be res onsible to the +onetar* Board% and >! shall ha&e the ower to o&errule or re&oke the a$tions of the re&ious management and Board of dire$tors of the bank or 4uasi/bank T()4 of offic(( the $onser&atorshi shall not e.$eed , *ear 20

2emuneration of the 9onser&ator( To be fi.ed b* the +onetar* Board in an amount not to e.$eed 236 of the salar* of the )resident of the Institution in , *ear' a*able in ,2 e4ual monthl* a*ments! 2ules on 2emuneration( ,! if at an* time within the , *ear eriod' the $onser&atorshi is terminated on the ground that the institution $an o erate on its own' the $onser&ator shall re$ei&e the balan$e of the remuneration whi$h he would ha&e re$ei&ed u to the end of the *ear! 2! if the $onser&atorshi is terminated on other grounds' the $onser&ator shall not be entitled to su$h remaining balan$e! 6! if the +onetar* Board a oints a $onser&ator $onne$ted with the Bangko Sentral' he shall not be entitled to re$ei&e an* remuneration or emolument from the Bangko Sentral during the $onser&atorshi ! T()4ination of t5( Cons()*ato)s5i'7 ,! When the +onetar* Board is satisfied that the institution $an $ontinue to o erate on its own and the $onser&atorshi is no longer ne$essar*! 2! When on the basis of the re ort of the $onser&ator or of the +onetar* Board=s own findings' determine that the $ontinuan$e in business of the institution would in&ol&e robable loss to its de ositors or $reditors' ro&isions on re$ei&ershi and li4uidation will a l*! T!E AU<ITOR 9hairman of the 9ommission on Audit shall a$t as the e./offi$io auditor of the Bangko Sentral and is em owered and authori7ed to( a! a oint a re resentati&e who shall be the auditor of Bangko Sentral b! fi. salar* of su$h re resentati&e $! a oint and fi. the salaries and number or ersonnel to assist said re resentati&e in his work! 'he representative must be( a! a $ertified ubli$ a$$ountant b! with at least ,0 *ears e. erien$e KKNo relati&e of an* member of the +onetar* Board or the 9hairman of the 9ommission within the #th degree of consanguinity or affinity shall be a ointed su$h re resentati&e! RECEIKER !IP AN< LI-UI<ATION Receivership K Banking institution H +onetar* Board ma* summaril* and without need for rior hearing forbid the institution from doing business in the )hili ines and designate the )hili ine Be osit Insuran$e 9or oration as re$ei&er!

K Ouasi/banking Institution H an* erson of re$ogni7ed $om eten$e in banking or finan$e ma* be designated as re$ei&er b* the +onetar* Board! A re$ei&er shall be a ointed when the +onetar* Board finds that a bank or 4uasi/bank( a! is unable to a* its liabilities as the* be$ome due in the ordinar* $ourse of business' BCT it shall not in$lude inabilit* to a* $aused b* e.traordinar* demands indu$ed b* finan$ial ani$ in banking $ommunit*% b! has insuffi$ient reali7able assets' as determined b* Bangko Sentral' to meet its liabilities% $! $annot $ontinue in business without in&ol&ing robable losses to its de ositors3$reditors% d! has willfull* &iolated a $ease and desist order that had be$ome final and in&ol&es a$ts3transa$tions whi$h amount to fraud or a dissi ation of the assets of the institution! K during rehabilitation re$ei&ershi ' the assets are held in trust for the e4ual benefit of all $reditors to re$lude one from obtaining an ad&antage or referen$e o&er another b* the e. edien$* of an atta$hment' e.e$ution or otherwise! K Ie4ualit* is e4uit*J/ means when a $or oration threatened b* bankru t$* is taken o&er b* a re$ei&er' all the $reditors should stand on an e4ual footing! Not an*one of them should be gi&en an* referen$e b* a*ing one or some of them ahead of the others! Re$uirements before a bank ma be found insolvent and declared dissolved! ,! an e.amination shall be $ondu$ted b* the head of the a ro riate su er&ising or e.amining de artment or his e.aminers or agents into the $ondition of the bank% 2! it shall be dis$losed in the e.amination that the $ondition of the bank is one of insol&en$* or that its $ontinuan$e in business would in&ol&e robable loss to its de ositors and $reditors% 6! the de artment head $on$erned shall inform the +onetar* Board in writing' of the fa$ts% and 8! the +onetar* Board shall find the statements of the de artment head to be true! K the bank shall be $onsidered as insol&ent when Ithe reali7able assets of a bank or a non/bank finan$ial intermediar* erforming 4uasi/banking fun$tions as determined b* the 9entral Bank are insuffi$ient to meet its liabilities! Powers of the Receiver! ,! Immediatel* gather and take $harge of all the assets and liabilities of the institution% 2! Administer the assets and liabilities for the benefit of its $reditors% and 6! 5.er$ise the general owers of re$ei&er under the 2e&ised 2ules of 9ourt BCT shall not a* or 2,

$ommit an* a$t that will in&ol&e the transfer or dis osition of an* assets of the institution% 8! +a* de osit or la$e the funds of the institution in nons e$ulati&e in&estments! K the re$ei&er shall determine as soon as ossible' but not later than E0 da*s from take/o&er' whether the institution ma* be rehabilitated or otherwise la$ed in su$h a $ondition so that it ma* be ermitted to resume business with safet* to its de ositors and $reditors and the general ubli$! K if the re$ei&er determines that the institution $annot be rehabilitated or ermitted to resume business' the +onetar* Board shall notif* in writing the Board of Bire$tors of its findings and dire$t the re$ei&er to ro$eed with the li4uidation of the institution! #i$uidation K Banking Institution H re$ei&er shall file e. arte with the ro er 2T9 a etition for assistan$e in the li4uidation of the institution ursuant to a li4uidation lan ado ted b* the )hili ine Be osit Insuran$e 9or oration K Ouasi/banking Institution H re$ei&er shall also file an e. arte etition for assistan$e in li4uidation' the lan to be ado ted b* the monetar* Board! P)oc(1&)( of Li6&i1ation7 ,! the $ourt shall' u on a$4uiring -urisdi$tion' u on motion of the re$ei&er' assist the enfor$ement of indi&idual liabilities of the sto$kholders' dire$tors and offi$ers' and de$ide on other issues as ma* be material to im lement the li4uidation lan ado ted% 2! $on&ert the assets of the institution to mone*' dis ose of the same to the $reditors and other arties' for the ur ose of a*ing the debts in a$$ordan$e with the rules on $on$urren$e and referen$e of $redit% 6! ma* institute su$h a$tions as ma* be ne$essar* to $olle$t and re$o&er a$$ounts and assets of' or defend an* a$tion against the institution! (mportant points to remember! KK the assets of an institution under re$ei&ershi or li4uidation shall be deemed in custodia legis in the hands of the re$ei&er and shall from the moment of institution was la$ed under re$ei&ershi or li4uidation be e.em t from an* order of garnishment' le&*' atta$hment or e.e$ution! KK the a$tions of the +onetar* Board taken under a ointment of $onser&ator' re$ei&ershi or li4uidation shall be final and e.e$utor*' and ma* not be restrained or set aside b* the $ourt e.$e t on etition for $ertiorari on the ground of e.$ess of -urisdi$tion or with su$h abuse of dis$retion as to amount to la$k or e.$ess of -urisdi$tion! REPORT AN< PUBLICATION The re orts to be submitted and ublished b* the Banko Sentral are the following(

,! General balan$e sheet/ shows the &olume and $om osition of its assets and liabilities as of the last working da* of the month! W<5N T1 )CBLIS<( Within >0 da*s after the end of ea$h month e.$e t for the month of Be$ember whi$h shall be submitted within ninet* da*s after the end thereof! 2! Anal*sis of e$onomi$ and finan$ial de&elo ment! W<5N T1 )CBLIS<( Not later than E0 da*s after the end of ea$h 4uarter! 6! )rofit and loss statement/ reasonable detail of Banko Sentral=s o eration! W<5N T1 )CBLIS<( Within E0 da*s after the end of the *ear! 8! A re&iew of the state of the finan$ial s*stem! W<5N T1 )CBLIS<( ,20 da*s after the end of ea$h semester! ;! Abnormal mo&ements in monetar* aggregates and the general ri$e le&el W<5N T1 )CBLIS<( as soon as ra$ti$able >! 2emedial measures in res onse to su$h abnormal mo&ements! W<5N T1 )CBLIS<( not later than D2 hrs after the* are taken D! Annual re ort on the $ondition of the Bangko Sentral! W<5N T1 )CBLIS<( before the end of +ar$h of ea$h *ear KKthe annual re ort shall also in$lude( ,! a finan$ial $ondition of the Bangko Sentral% and 2! a statisti$al a endi. whi$h shall resent the following( a! monthl* mo&ement of monetar* aggregate and their $om onents b! monthl* mo&ement of ur$hases and sales of foreign e.$hange and of int=l reser&es of the Bangko Sentral $! balan$e of a*ments of the )hili ines d! monthl* indi$es of $onsumer ri$es and of im ort and e. ort ri$es e! monthl* mo&ement' in summar* form' of e. orts and im orts b* &olume and &alue f! monthl* mo&ements of the a$$ounts of the Bangko Sentral and of other banks g! rin$i al data on go&=t re$ei ts and e. enditures and on the status of the ubli$ debt' both domesti$ and foreign% and h! te.ts of the ma-or legal and administrati&e measures ado ted b* the go&=t and the monetar* Board during the *ear whi$h relate to the fun$tions or o erations of the Bangko Sentral or of the finan$ial s*stem! PRO#IT AN< LO E Net )rofits H in the $al$ulation of rofits' the Bangko Sentral shall make ade4uate allowan$e 22

or establish ade4uate reser&es for bad and doubtful a$$ounts! KKthe net rofits and losses shall be determined b* the Bangko Sentral within the first 60 da*s following the end of ea$h *ear KKthe determination and $arr*ing out the distribution of the net rofits shall be made within the first >;0 da*s following the end of ea$h fis$al *ear and the rules on su$h distribution are( a! ;0? of the net rofits shall be $arried to sur lus% and b! the remaining ;0? shall re&ert ba$k to the national treasur* R(*al&ation of ')ofits an1 loss(s )rofits or losses arising from an* re&aluation of the Bangko Sentral=s net assets or liabilities in gold or foreign $urren$ies shall not be in$luded in the $om utation of the annual rofits and losses H it shall be offset b* an* amounts whi$h are( a! owed b* the )hili ines to an* international or regional inter/go&=t finan$ial institution of whi$h the )hili ines is a member% or b! owed b* these institutions to the )hili ines! R(*al&ation of Int()national R(s()*(s H this is a s e$ial fro7en a$$ount where the remaining rofit or loss shall be $arried and the net balan$e of whi$h shall a ear either among the liabilities or among the assets of Bangko Sentral' de ending on whether the re&aluations ha&e rodu$ed net rofits or net losses #iscal "(a)7 begin on Panuar* ,st and end on Be$ember 6,st of ea$h *ear C!APTER II7 T!E BAN$%O ENTRAL AN< T!E FEAN O# PA"FENT KKthe unit of monetar* &alue in the )hili ines is the peso" A! 9urren$* H means all )hili ine notes and $oins issued or $ir$ulating in a$$ordan$e with the ro&isions of the A$t! the Bangko Sentral shall ha&e the sole ower and authorit* to issue $urren$*' within the territor* of the )hili ines the Bangko Sentral shall also ha&e the authorit* to in&estigate' make arrests' $ondu$t sear$hes and sei7ures in a$$ordan$e with law' for the ur ose of maintaining the integrit* of the $urren$*! the +onetar* Board ma* issue regulations as it ma* deem ad&isable in order to re&ent the $ir$ulation of foreign $urren$* or of $urren$*

substitutes as well as re&ent the re rodu$tion of fa$similes of Bangko Sentral notes Lia/ilit+ fo) not(s an1 coins / notes and $oins issued b* the Bangko Sentral shall be liabilities of the Banko Sentral and ma* be issued onl* against' and in amounts not e.$eeding' the assets of the Bangko Sentral! / all notes and $oins issued b* the Bangko Sentral shall be full* guaranteed b* the Go&=t of the )hili ines and shall be legal tender in the )hili ines for all debts' both ubli$ and ri&ate! NOTE( 9oins shall be legal tender( a! in the amounts not e.$eeding );0 for denominations of 2;$ents and abo&e% and b! in amounts not e.$eeding )20 for denominations of ,0$ents or less Characteristics of the currenc The +onetar* Board shall' with a ro&al of the )resident( ,! )res$ribe the denominations' dimensions' designs' ins$ri tions and other $hara$teristi$s of notes issued b* Bangko Sentral% 2! )res$ribe the weight' fineness' designs' denominations and other $hara$teristi$s of the $oins issued b* the Bangko Sentral% 6! )res$ribe the amounts of the notes and $oins to be rinted and minted! = not(s shall bear the signatures' in fa$similes' of the )resident and of the Go&ernor of the Bangko Sentral! INTERCONKERTIBILIT" O# CURRENC" Bangko Sentral shall e.$hange' on demand and without $harge' )hili ine $urren$* of an* denomination for )hili ine notes and $oins of an* other denomination re4uests! If Bangko Sentral is tem oraril* unable to ro&ide notes or $oins of the denominations re4uested' it shall meet its obligations b* deli&ering notes and $oins of the denominations whi$h most nearl* a ro.imate those re4uested! R('lac(4(nt of c&))(nc+ &nfit fo) ci)c&lation 1&)&RA# R*#&( Bangko Sentral shall withdraw from $ir$ulation and shall demoneti7e all notes and $oins whi$h for an* reason whatsoe&er are unfit for $ir$ulation and shall re la$e them b* ade4uate notes and $oins! &2C&P'(/)( $oins whi$h show signs of filing' $li ing or erforation' and notes whi$h ha&e lost more than 23; of their surfa$e or all of the signatures ins$ribed thereon shall not be re la$ed b* the Bangko Sentral and shall be withdrawn from $ir$ulation and demoneti7ed without $om ensation to the bearer! R('lac(4(nt of ol1 not(s an1 coins 26

2e la$ement ha ens when Bangko Sentral $all in for re la$ement of notes of an* series or denominations whi$h are more than ? *ears old and $oins whi$h are more than ,0 *ears old! NOTE7 notes and $oins $alled in for re la$ement in a$$ordan$e with this ro&ision shall remain legal tender for a eriod of , *ear from the date of $all H after this eriod' the* shall $ease to be legal tender but during the following *ear or for su$h longer eriod' it ma*be e.$hanged at ar and without $harge in the Bangko Sentral! B! <(4an1 1('osits H all those liabilities of the Bangko Sentral and of other Banks whi$h are denominated in )hili ine $urren$* and are sub-e$t to a*ment in legal tender u on demand b* the resentation of $he$ks! $he$ks re resenting demand de osits do not ha&e legal tender ower and their a$$e tan$e in the a*ment of debts' both ubli$ and ri&ate' is at the o tion of the $reditor

6!

a$ti&it* in general and the nature and signifi$an$e of an* su$h $hanges% and the measures whi$h the +onetar* Board has taken and the other monetar*' fis$al or administrati&e measures whi$h it re$ommends to be ado ted!

B. Int()national Fon(ta)+ ta/ili8ation The Bangko Sentral shall e.er$ise its owers to preserve the $nternational value of the peso and to maintain its convertibility into other freely convertible currencies rimaril* for' although not ne$essaril* limited to' $urrent a*ments' for foreign trade and industr*! 3ow to maintain such stabilit and convertibilit . The Bangko Sentral shall maintain $nternational reserves ade4uate to meet an* foreseeable net demands on the Bangko Sentral for foreign $urren$ies! $UI<E TO FONETAR" BOAR< IN MU<$IN$ A<E-UAC" O# INTERNATIONAL RE ERKE ( ,! the ros e$ti&e re$ei ts and a*ment of foreign e.$hange b* the )hili ines% 2! gi&e s e$ial attention to the &olume and maturit* of the Bangko Sentral=s own liabilities in foreign $urren$ies% 6! gi&e s e$ial attention also to the &olume and maturit* of the foreign e.$hange assets and liabilities of other banks o erating in the )hili ines% and 8! gi&e s e$ial attention to the &olume and maturit* of the foreign e.$hange assets and liabilities of all other ersons and entities in the )hili ines! Co4'osition of Int()national )(s()*(s It in$ludes' but not limited to( a! gold% and b! assets in foreign $urren$ies whi$h in$ludes( / do$uments and instruments $ustomaril* em lo*ed for the international transfer of funds / demand and time de osits in 9entral Banks' treasuries and $ommer$ial banks abroad / foreign go&=t se$urities% and / foreign notes and $oins T5( Fon(ta)+ Boa)1 s5all7 ,! endea&or to hold the foreign e.$hange resour$es of the Bangko Sentral in freel* $on&ertible $urren$ies% 2! gi&e arti$ular $onsideration to the ros e$ts of $ontinued strengths and $on&ertibilit* of the $urren$ies in whi$h the reser&e is maintained' in$luding anti$i ated demands to su$h $urren$ies% 6! issue regulations determining the other 4ualifi$ations whi$h foreign e.$hange assets must meet in order to be in$luded in the international reser&es of the Bangko Sentral!

C!APTER III7 $UI<IN$ PRINCIPLE O# FONETAR" A<FINI TRATION B" T!E BAN$%O ENTRAL A. <o4(stic Fon(ta)+ sta/ili8ation +onetar* Board shall endea&or to $ontrol an* e. ansion or $ontra$tion in monetar* aggregates whi$h is re-udi$ial to the attainment or maintenan$e of ri$e stabilit*! +onetar* Board shall ha&e due regard for their effe$ts on the a&ailabilit* and $ost of mone* and $redit to arti$ular se$tors of the e$onom* as well as to the e$onom* as a whole' and their effe$ts on the relationshi of domesti$ ri$es and $osts to world ri$es and $osts! ACTION W!EN ABNORFAL FOKEFENT IN FONETAR" A$$RE$ATE OCCUR H whene&er abnormal mo&ements in the monetar* aggregates' in $redit or in ri$es endanger the stabilit* of the )hili ine e$onom* or im ortant se$tors thereof' the +onetar* Board shall( a! take su$h remedial measures as are a ro riate and within the owers granted to the +onetar* Board and the Bangko Sentral% and b! submits to the )resident of the )hili ines and 9ongress and make ubli$' a detailed re ort whi$h shall in$lude( ,! $auses of the rise or fall of the monetar* aggregates of $redit or of ri$es% 2! the e.tent to whi$h the $hanges in the monetar* aggregates' in $redit' or in ri$es ha&e been refle$ted in $hanges in the le&el of domesti$ out ut' em lo*ment' wages and e$onomi$

28

ACTION W!EN INTERNATIONAL TABILIT" O# PE O I T!REATENE<( The +onetar* Board shall( a! take su$h remedial measures as are a ro riate and within the owers granted to the +onetar* Board and the Bangko Sentral% and b! submits to the )resident and to $ongress a detailed re ort whi$h shall in$lude a des$ri tion and anal*sis of( ,! nature and $auses of e.isting or imminent de$line% 2! remedial measures alread* taken or to be taken b* the +onetar* Board 6! monetar*' fis$al or administrati&e measures% and 8! $hara$ter and e.tent of the $oo eration re4uired from other go&=t agen$ies for the su$$essful e.e$ution of the oli$ies of the +onetar* Board! ,hen is it threatened. ,! whene&er the international reser&e of the Bangko Sentral falls to a le&el whi$h the +onetar* Board $onsiders inade4uate to met the ros e$ti&e net demands on the Bangko Sentral for foreign $urren$ies% 2! whene&er the international reser&es a ears to be in imminent danger of falling to su$h a le&el% 6! whene&er the international reser&e is falling as a result of a*ments or remittan$es abroad whi$h is $ontrar* to the national welfare! C!APTER IK7 IN TRUFENT O# BAN$%O ENTRAL ACTION K in order to a$hie&e the rimar* ob-e$ti&e of ri$e stabilit*' the +onetar* Board shall rel* on its moral influen$e and the owers granted to it for the management of monetar* aggregates! PURC!A E AN< ALE ,! Gold H the Bangko Sentral ma* bu* and sell gold in an* form% su$h ur$hases and sales shall be made in the national $urren$* at the re&ailing international market ri$e as determined b* the +onetar* Board! 2! :oreign 5.$hange H the Bangko Sentral ma* bu* and sell foreign notes and $oins' and do$uments and instruments of t* es $ustomaril* em lo*ed for the int=l transfer of funds! :oreign e.$hange ma* be had with the following entities or ersons( a! Banking institutions o erating in the )hili ines% b! The go&ernment' its oliti$al subdi&isions and instrumentalities $! :oreign or int=l finan$ial institutions

d! e!

:oreign gob=s and their instrumentalities% and 1ther entities and ersons whi$h the +onetar* Board is hereb* em owered to authori7e as foreign e.$hange dealers!

!o, to 4aintain con*()ti/ilit+ of '(soH ,! bu* an* 4uantit* of foreign e.$hange offered 2! sell an* 4uantit* of foreign e.$hange demanded b* su$h institution PR/"(%&%, that the foreign $urren$ies so offered or demanded are freel* $on&ertible into gold or Cs dollars% but their re4uirement shall not a l* to demands for foreign notes and $oins! K Bangko Sentral shall a&oid the a$4uisition and holdings of $urren$ies whi$h are not freel* $on&ertible and ma* a$4uire su$h $urren$ies to an amount e.$eeding the minimum balan$e ne$essar* to $o&er $urrent demands onl* when su$h is $onsidered b* +onetar* Board to be in the national interest! EOC!AN$E RATE H the +onetar* Board shall determine( ,! The e.$hange rate oli$* of the $ountr*% 2! The rates of whi$h the Bangko Sentral shall bu* and sell s ot e.$hange% 6! 5stablish de&iation limits from the effe$ti&e e.$hange rate"s# as it ma* deem ro er% and 8! The rates for other t* es of foreign e.$hange transa$tions b* the Bangko Sentral in$luding ur$hases and sales of foreign notes and $oins! K The Bangko Sentral shall not $olle$t an* additional $ommissions3$harges of an* sort other than the a$tual telegra hi$3 $able $osts in$urred b* it! K The Bangko Sentral shall endea&or to maintain at all times a net ositi&e foreign asset osition so that its gross foreign e.$hange assets will alwa*s e.$eed its gross foreign liabilities H in $ase the amount in eso of the liabilities e.$eed twi$e the amount in eso of the assets% Bangko Sentral shall submit a re ort to 9ongress stating the origin of these liabilities and the manner the* will be aid within >0 da*s from the date the limit is e.$eeded! EFER$ENC" RE TRICTION ON EOC!AN$E OPERATION Buring an e.$hange $risis or in time of national emergen$* or $risis' the +onetar* Board( K+a* tem oraril* sus end or restri$t sales of e.$hange b* the Bangko Sentral' with the $on$urren$e of at least ; of its members% and K+a* sub-e$t all transa$tions in gold and foreign e.$hange to li$ense b* the Bangko Sentral and an* foreign e.$hange thereafter obtained b* an* erson or entit* in the )hili ines be deli&ered to Bangko Sentral or to an* bank or agent designated b* the Bangko Sentral for the ur ose! 2;

RE$ULATION O# #OREI$N EOC!AN$E OPERATION O# BAN% ,! ma* re4uire the banks to sell to Bangko Sentral or to other banks all or art of their sur lus holdings of foreign e.$hange% 2! determine the net assets and net liabilities of banks and shall take into a$$ount the bank=s net worth' outstanding liabilities or su$h other finan$ial or erforman$e ratios% 6! re4uire banks to ha&e a Balan$ed 9urren$* )osition H maintain a balan$ed osition between their assets and liabilities in )hili ine eso or in an* other $urren$* in whi$h the* o erate% 8! issue regulations go&erning bank=s ur$hases and sales of non/s ot e.$hanges% ;! banks shall bear the risks of non$om lian$e with the terms of foreign e.$hange do$uments and instruments whi$h the* bu* and sell and other t* i$all* $ommer$ial or banking risks% >! banks shall re ort to Bangko Sentral the &olume and $om osition of their ur$hases and sales of gold and foreign e.$hange ea$h da* and furnish additional information with regard to the mo&ements in their a$$ounts in foreign $urren$ies% D! +onetar* Board ma* also re4uire other ersons and entities to re ort to it $urrentl* all transa$tions or o erations in gold and in foreign e.$hange! LOAN TO BAN% IN TITUTION AN< OT!ER O##ICIAL

their redis$ount' dis$ount or a$4uisition and resulting from transa$tions related to rodu$tion or ro$essing of agri$ultural' animal' mineral and industrial rodu$ts! K this shall be se$ured b* a ledge of the res e$ti&e $ro s or rodu$ts but if the original loan granted b* the Bangko Sentral is se$ured b* a lien or mortgage on real estate ro ert* D0? of the a raised &alue e4uals or e.$eeds the amount of loans granted' then rodu$ts need not be ledged! 6! ot5() c)(1its H s e$ial $redit instruments not otherwise redis$ountable under "a# and "b# ma* be redis$ountable in a$$ordan$e with rules and regulation whi$h Bangko Sentral shall res$ribe! 8! ad&an$es ma* be granted b* Bangko Sentral against Qthe following kinds of $ollateral( a! gold $oins or bullion% b! se$urities re resenting obligations of the Bangko Sentral or other domesti$ $redit institutions of re$ogni7ed sol&en$*% $! $redit instruments for $ommer$ial $redits% d! $redit instruments for rodu$tion $redits% e! utili7ed ortions of ad&an$es in $urrent a$$ount $o&ered b* regular o&erdraft agreements% f! negotiable treasur* bills' $ertifi$ate of indebtedness' notes and other negotiable obligations of the go&=t maturing within 6 *ears from date of ad&an$e% and g! negotiable bonds issued b* the go&=t ha&ing maturities of not more than ,0 *ears from date of ad&an$e B. PECIAL CRE<IT OPERATION #oans for li$uidit purposes H the Bangko Sentral ma* e.tend loans and ad&an$es to banking institutions for a eriod of not more than ) days without any collateral for the ur ose of ro&iding li4uidit* to the banking s*stem in times of need! C. EFER$ENC" CRE<IT OPERATION ,! In eriods of national or lo$al emergen$* or during imminent finan$ial ani$ whi$h dire$tl* threaten monetar* banking stabilit*' the +onetar* Board ma*' b* a &ote of at least ; of its members' authori7e Bangko Sentral to grant e.traordinar* loans or ad&an$es se$ured b* assets! *mount of loan or advance ( shall not e.$eed the sum of ;0? of total de osits and de osit substitutes of the banking institution! Manner of +aying( shall be disbursed in 2 or more tran$hes% ,st tran$h shall be limited to 2;? of the total de osits and de osit substitute of the institution and shall be se$ured b* go&=t se$urities to the e.tent of their a li$able loan 2>

Credit Polic H the redis$ounts' dis$ounts' loans and ad&an$es whi$h the Bangko Sentral is authori7ed to e.tend to banking institutions shall be used to influence the volume of credit consistent with the ob%ective of price stability" A. NORFAL CRE<IT OPERATION ,! Co44()cial c)(1its H the Bangko Sentral ma* redis$ount' dis$ount' bu* and sell bills' a$$e tan$es' romissor* notes and other $redit instruments with maturities of not more than 1&' days from date of redis$ount' dis$ount or a$4uisition and resulting from transa$tions related to( A! im ortation' e. ortation' ur$hase or sale of readil* saleable goods and rodu$ts' or their trans ortation within the )hili ines% or b! storing of non/ erishable goods and rodu$ts whi$h are dul* insured and de osited' under $onditions assuring their reser&ation in authori7ed bonded warehouses or in other la$es a ro&ed b* the monetar* board 2! P)o1&ction c)(1its H the Bangko Sentral ma* redis$ount' dis$ount' bu* and sell bills' a$$e tan$es' romissor* notes and other $redit instruments ha&ing maturities of not more than 6>0 da*s from the date of

&alued and other unen$umbered first $lass $ollaterals whi$h monetar* Board ma* a ro&e! 2! the +onetar* Board ma*' at its dis$retion' e&en during normal eriods' authori7e Bangko Sentral to grant emergen$* loans or ad&an$es for the ur ose of assisting a bank in re$arious finan$ial $ondition or under serious finan$ial ressures brought b* unforeseen e&ents or e&ents whi$h through foreseeable $ould not be re&ented b* the bank! R&4*(+('&+! a! monetar* board shall as$ertain that the bank is not insol&ent% b! that the bank has the assets defined to se$ure the ad&an$es% $! there should be a $on$urrent &ote of at least ; members of the +onetar* Board CRE<IT TERF OR RE-UIREFENT ( ,! the Bangko Sentral shall $olle$t interest and other a ro riate $harges on all loans and ad&an$es it e.tends 2! the do$ument redis$ounted' dis$ounted or a$$e ted as $ollateral b* the Bangko Sentral should bear the endorsement of the institution from whi$h the* are re$ei&ed% 6! do$uments redis$ounted' dis$ounted' or a$$e ted as $ollateral b* Bangko Sentral must be withdrawn b* the borrowing institution in the dates of their maturities or u on li4uidation of obligation banks shall ha&e the right at an* time to withdraw an* do$ument resented as $ollateral u on a*ment in full of the $orres onding debt to Bangko Sentral in$luding interest $harges! 8! monetar* board res$ribe additional $onditions whi$h borrowing institutions must satisf* in order to ha&e a$$ess to the $redit of Bangko Sentral OPEN FAR%ET OPERATION )rin$i les( the o en market ur$hases and sales of se$urities b* Bangko Sentral shall be made e.$lusi&el* in a$$ordan$e with its rimar* ob-e$ti&e of a$hie&ing ri$e stabilit*! ,hat to bu and sell in open market. ,! e&iden$es of indebtedness issued dire$tl* b* the Go&ernment 2! e&iden$es of indebtedness issued b* Go&ernment instrumentalities and full* guaranteed b* the Go&ernment K these e&iden$es of indebtedness must be freel* negotiable and regularl* ser&i$ed and must be a&ailable to the general ubli$ through banking institutions and lo$al go&ernment treasuries in denominations of a thousand esos or more

6! Bangko Sentral ma* also issue' la$e' bu* and sell freel* negotiable e&iden$es of indebtedness of the Bangko Sentral in order to ro&ide the latter with effe$ti&e instruments for o en market o erations K these issuan$es shall onl* be made in $ases of e.traordinar* mo&ement in ri$e le&els! Ban3ko (nt)alPs Po)tfolio / at least on$e a month' the +onetar* Board shall re&iew the ortfolio of Bangko Sentral es e$iall* $onsidering whether a suffi$ientl* large art of the ortfolio $onsists of assets with earl* maturities' in order that $ontra$tion in Bangko Sentral $redit ma* be effe$ted rom tl* whene&er the national monetar* oli$* so re4uires! BAN% RE ERKE / in order to $ontrol the &olume of mone* $reated b* the $redit o erations of the banking s*stems' all banks o erating in the )hili ines shall be re4uired to maintain reser&es against their de osit liabilities / this re4uired reser&es of ea$h bank shall be ro ortional to the &olume of its de osit liabilities and shall ordinaril* take the form of a de osit in the Bangko Sentral / the +onetar* Board ma* e.em t from reser&e re4uirement de osits and de osit substitutes with remaining maturities of 2 *ears or more as well as interbank borrowings! <EPO IT UB TITUTE H an alternati&e form of obtaining funds from the ubli$ "other than de osits# through the issuan$e' endorsement or a$$e tan$e of debt instruments for the borrower=s own a$$ount' for the ur ose of relending or ur$hasing of re$ei&ables and other obligations% e.am les of these instruments are( ,! banker=s a$$e tan$es 2! romissor* notes 6! arti$i ations 8! $ertifi$ates of assignment and similar instruments with re$ourse% and ;! ur$hase agreements KK the +onetar* Board ma* fi. and alter the minimum reser&e ratios a li$able to de osits denominated in both eso and foreign $urren$ies' as well as to de osit substitutes' whi$h ea$h bank maintains! Co4'&tation of )(s()*(s It shall be calculated daily at the end of the day on the basis of the amount of the institution=s reser&es and the amount of its liabilit* a$$ounts against whi$h reser&es are re4uired to be maintained! Whene&er it be$omes ne$essar* to in$rease reser&e re4uirements against e.isting liabilities' the 2D

increase shall be made in a gradual manner and shall not exceed ,- points in any .' day period" Reserve deficiencies( o$$urs whene&er the reser&e osition of an* bank or 4uasi/bank is below the re4uired minimum% E##ECT7 shall a* the Bangko Sentral ,3,0 of ,? er da* on the amount of the defi$ien$* or the re&ailing E, da* treasur* bill rate lus 6? oints' whi$he&er is higher KK the banks and 4uasi/banks shall ordinaril* be ermitted to affe$t an* reser&e defi$ien$* o$$urring on one or more da*s of the week with an* e.$ess reser&es whi$h the* ma* hold on other da*s of the same week and shall be re4uired to a* the enalt* onl* on the a&erage dail* defi$ien$* during the week! KK the +onetar* Board ma* modif* or set aside the reser&e defi$ien$* enalties for art or the entire eriod of a# a strike or lo$kout affe$ting a bank or 4uasi/bank' b# or of a national emergen$* affe$ting o erations of banks or 4uasi/banks! (nterbank settlement H Bangko Sentral shall establish fa$ilities for interbank $learing under su$h rules and regulations as the +onetar* Bank ma* res$ribe% the de osit reser&es maintained b* the banks in the Bangko Sentral ser&e as basis for the $learing of $he$ks and the settlement of interbank balan$es! &-emption from attachment and other purposes Be osits maintained b* banks with the Bangko Sentral as art of their reser&e re4uirement shall be e.em t from atta$hment' garnishment' or an* other order or ro$ess of an* $ourt' go&ernment agen$* or an* other administrati&e bod* issued to satisf* the $laim of a art* other than the go&ernment! KK the +onetar* Board shall use the owers granted to it to ensure that the su l*' a&ailabilit* and $ost of mone* are in a$$ord with the needs of the )hili ine e$onom* and that bank $redit is not granted for s e$ulati&e ur oses re-udi$ial to the national interest! C!APTER K7 #UNCTION A BAN%ER AN< #INANCIAL A<KI OR O# T!E $OKERNEFENT #&nctions as Bank() of t5( $o*()n4(nt ,! The Bangko Sentral shall a$t as a banker of the Go&ernment' its oliti$al subdi&isions and instrumentalities! 2! The Bangko Sentral shall re resent the Go&ernment in all dealings' negotiations and transa$tions with the $nternational Monetary /und, $nternational ank for 0econstruction and 1evelopment and with other foreign or international financial institutions or agencies" 6! The Bangko Sentral shall be the official depository of the 2overnment ' its oliti$al subdi&ision and instrumentalities as well as G199=s' their $ash balan$es should be de osited

with the Bangko Sentral' with onl* minimum working balan$es to be held b* go&ernment owned banks and su$h other banks as the +onetar* Board ma* designate! 8! The Bangko Sentral shall o en a general $ash a$$ount for the treasurer of the )hili ines' in whi$h the li4uid funds of the go&ernment shall be de osited ;! In the erforman$e of its fun$tions as fis$al agent' the Bangko Sentral ma* engage the ser&i$es of other government owned and controlled banks and of other domestic banks for o erations in lo$alities at home or abroad in whi$h the angko 3entral does not have offices or agencies adequately equipped to perform said operations T!E FAR%ETIN$ AN< TABILIQATION O# ECURITIE #OR T!E ACCOUNT O# T!E $OKERNFENT '3& (++*& A)% P#AC()1 /F 1/"&R)5&)' +&C*R('(&+ The issue of go&ernment se$urities / the issue of se$urities re resenting obligations of the go&ernment and its instrumentalities ma* be made through the Bangko Sentral whi$h ma* a$t as agent of' and for the a$$ount of' the go&ernment or its res e$ti&e subdi&isions or instrumentalit*! <1W5L52' Bangko Sentral shall not guarantee the la$ement of said se$urities' and shall not subs$ribe to their issue e.$e t to re la$e its maturing holdings of se$urities! T5( 'lacin3 of 3o*()n4(nt s(c&)iti(s / the Bangko Sentral ma* la$e the se$urities through dire$t sale to finan$ial institutions and the ubli$ / the Bangko Sentral shall not be a member of an* sto$k e.$hange or s*ndi$ate' but ma* inter&ene therein for the sole ur ose of regulating their o erations in the la$ing of go&ernment se$urities! #UNCTION A #INANCIAL A<KI OR O# T!E $OKERNFENT :inan$ial ad&i$es on offi$ial $redit o erations( ,! the go&ernment "through the se$retar* of :inan$e# 2! oliti$al subdi&isions and instrumentalities of the go&ernment% B5:125 undertaking an* $redit o erations abroad shall re4uest the o inion' in writing' of the +onetar* Board on the monetar* im li$ations of the $ontem lated a$tions! 6asis of opinion! ,! based on the gold and foreign e.$hange resour$es and obligations of the nation% 2G

2! 6!

based on the effe$ts of the ro osed o eration on the balan$e of a*ments% and based on mone* aggregates

R.A NO. 79C; T<2I:T BANKS A9T 1: ,EE; '3R(F' 6A)7+ H Shall in$lude sa&ings and mortgage banks' ri&ate de&elo ment banks' and sto$k sa&ings and loans asso$iations organi7ed under e.isting laws' and an* banking $or orations that ma* be organi7ed for the following ur oses( a! A$$umulating the sa&ings of de ositors and in&esting them' together with $a ital loans se$ured b* bonds' mortgage in real estate and insured im ro&ements thereon' $hattel mortgage' bonds and other forms of se$urit* or in loans for ersonal or household finan$e' whether se$ured or not' or in finan$ing for homebuilding and home de&elo ment% in readil* marketable and debt se$urities% in $ommer$ial a ers and a$$ounts re$ei&ables' draft' bills of e.$hange' a$$e tan$es or notes arising out of $ommer$ial transa$tions% b! )ro&iding short/term working $a ital' medium and term finan$ing' to businesses engaged in agri$ulture' ser&i$es' industr* and housing and $! )ro&iding di&ersified finan$ial and allied ser&i$es for its $hosen market and $onstituen$ies es e$iall* for small and medium enter rises and indi&iduals! OR$ANIQATION A thrift bank shall be organi7ed in the form of Sto$k 9or oration! The +onetar* Board "of the 9entral Bank of the )hili ines# shall fi.ed the minimum aid/u $a ital taking into a$$ount the de&elo ment thrusts of this A$t and due rote$tion of the ubli$! No thrift bank shall be organi7ed without a $ertifi$ate of authorit* from monetar* board! The arti$les of in$or oration' or an* amendment thereto shall not be registered b* the S59 unless a$$om anied b* a $ertifi$ate of authorit* issued b* the monetar* board under its offi$ial seal! Re$uirement for the issuance of certificate! ,! All the re4uirements of the e.isting laws and regulations to engage in business for whi$h the a li$ant is ro osed to be in$or orated ha&e been $om lied with 2! That ubli$ interest and the e$onomi$ $onditions' both general and lo$al' -ustif* the authori7ation 6! The amount of $a ital' the finan$ing organi7ation' dire$tion and administration' as well as the integrit* and the res onsibilit* of the organi7ers and the administrators reasonabl* assure the safet* of the interest whi$h the ubli$ ma* entrust to them 2E

ECURITIE TABILIQATION #UN< H shall be administered b* the Bangko Sentral for the a$$ount of the Go&ernment! /perations! $onsists of ur$hases and sales' in the o en market' of bonds and other e&iden$e of indebtedness issued or full* guaranteed b* the Go&ernment )ur ose( to in$rease the li4uidit* and stabili7e the &alue of said se$urities in order to romote ri&ate in&estment in go&ernment obligations Resources! shall $ome from the balan$e of the fund held b* the 9entral Bank Profits and #osses( shall retain an* net rofits whi$h it ma* make on its o erations' regardless of whether said rofits arise from $a ital gains or from interest earnings% shall $orres ondingl* bear an* net losses whi$h it ma* in$ur! C!APTER KI7 PRIKILE$E AN< PRO!IBITION P)i*il(3(s ,! 'a- &-emptions H the Bangko Sentral shall be e.em t for a eriod of ; *ears from the a ro&al of the A$t from all national' ro&in$ial' muni$i al and $it* ta.es' fees' $harges and assessments! KK this e.em tion shall a l* to a# all ro ert* of Bangko Sentral' b# resour$es' re$ei ts' e. enditures' rofits and in$ome of Bangko Sentral' $# as well as to all $ontra$ts' deeds' do$uments and transa$tions relate to the $ondu$t of the business of Bangko Sentral 2! &-emption from custom duties H the im ortation and e. ortation b* the Bangko Sentral of a# notes and $oins% b# of gold and other metals to be used for the $ondu$t of business of Bangko Sentral and $# im ortation of all e4ui ment needed for bank note rodu$tion' minting of $oins' metal refining and other se$urit* rinting o erations! Prohibitions ,! the Bangko shall not a$4uire shares of an* kind or a$$e t them as $ollateral 2! shall not arti$i ate in the ownershi or management of an* enter rise' either dire$tl* or indire$tl* 6! shall not engage in de&elo ment banking or finan$ing .........................................

The monetar* board ma* ass u on and re&iew the 4ualifi$ations of ersons who are ele$ted or a ointed bank dire$tors and offi$ers' and dis4ualif* those unfit! At least ma-orit* of the members of the board of dire$tors shall be $iti7en of the )hili ines! N1 a ointi&e or ele$ted offi$ial' whether full time or art time' shall at the same time ser&e as offi$er of an* thrift bank' (9c('t in $ases where su$h ser&i$e is in$ident to finan$ial assistan$e ro&ided b* the go&ernment owned or $ontrolled $or oration to the bank! In $ase of merger or $onsolidation' the limitation on the number of dire$tors in a $or oration "se$! ,8 of the $or oration $ode of the )hili ines# shall not be a lied so that membershi in the new board ma* in$lude u to the total number of dire$tors ro&ided for in the res e$ti&e arti$les of in$or oration of the merging3$onsolidating banks!

Whene&er the $a ital a$$ounts are defi$ient' the +onetar* Board shall limit or rohibit the distribution of net rofit and shall re4uire that art or all of net rofits be used to in$rease the $a ital a$$ounts until the re4uirement has been met ! The Board ma* restri$t or rohibit the making of new in&estments of an* sort b* bank' with the e.$e tion of ur$hases of e&iden$es of indebtedness abo&e mentioned!

OWNER !IP AN< CAPITAL RE-UIREFENT At least 80? of the &oting sto$k shall be owned b* $iti7ens of the )hili ines' (9c('t where a new bank ma* be established as a result of a merger3$onsolidation with foreign holdings in whi$h $ase' the resulting foreign holdings shall not be in$reased but ma* be redu$ed and' on$e redu$ed' shall not be in$reased thereafter be*ond >0? of the &oting sto$k of thrift banks! The er$entage of the foreign/owned &oting sto$ks shall be determined b* the $iti7enshi of indi&idual holders and in $ase of $or orations owning shares' b* the $iti7enshi of ea$h sto$kholder in the said $or orations! The $ombined $a ital a$$ounts shall not be less than an amount e4ual to ,0? of the risk assets! Risk assets/ total asset minus the following

assets( b! $! a! $ash on hand amount from Bangko Sentral e&iden$es of indebtedness of the re ubli$ of the )hili ines and of the Bangko Sentral! And an* other e&iden$es of indebtedness or obligations the ser&i$ing and re a*ment of whi$h are full* guaranteed b* the 2e ! of the )hil! loans to e.tent $o&ered b* hold/out on' or assignment of de osits maintained in the lending bank and held in the )hili ines other non/risk items as the +onetar* Board ma* authori7e to be dedu$ted from the total assets!

POWER O# T!RI#T BAN% a$$e t sa&ings and time de osit o en $urrent or $he$king a$$ounts' ')o*i1(1 that the bank has net assets of at least )20'00'000 $! a$t as $orres ondent for other finan$ial institutions d! a$t as $olle$tion agent for go&ernment entities' in$luding but not limited to' the BI2' SSS' N the Bureau of $ustoms e! a$t as offi$ial de ositor* national agen$ies and muni$i al' $it* or ro&in$ial funds in the muni$i alit*' $it* or ro&in$e where the thrift bank is lo$ated f! redis$ount a er with the )NB' Land Bank of the )hili ines' Be&elo ment Bank of the )hili ines' and other G199=s g! issue mortgage and $hattel mortgage $ertifi$ates' bu* and sell them for its own a$$ount or for others' or a$$e t and re$ei&e them in a*ment or as amorti7ation of its loan K su$h mortgage and $hattel mortgage $ertifi$ates shall be issued e.$lusi&el* in national $urren$* and e.$lusi&el* for the finan$ing of e4ui ment loans' mortgage loans for the a$4uisition of ma$hiner* and other fi.ed installations' $onser&ation' enlargement or im ro&ement of rodu$ti&e ro erties and real estate mortgage loans for ",# the $onstru$tion' a$4uisition' e. ansion or im ro&ement of rural and urban ro erties% "2# the finan$ing of similar loans and mortgages% and "6# su$h other ur oses as ma* be authori7ed b* the +onetar* Board! h! ur$hase' hold and $on&e* real estate i! engage in 4uasi/banking and monetar* market o erations -! o en domesti$ letters of $redit k! e.tend $redit fa$ilities to ri&ate and go&ernment em lo*ees l! e.tend $redit against the se$urit* of -ewelr*' re$ious stones and arti$les of similar nature a! b!

d! e!

4imitations on 4ending authority- the dire$t indebtedness to thrift banks of an* erson' $om an*' $or oration' or firm' in$luding the indebtedness of members of a artnershi and asso$iation' for mone* borrowed shall in no time e.$eed ,;? of unim aired $a ital and sur lus of the bank (9c('t7 a! loans se$ured b* obligation of the 9entral Bank b! loans full* guaranteed b* the go&ernment as to a*ment of rin$i al and interest 60

$! d!

loans to the e.tent $o&ered b* the hold/out on' or assignment of' de osits maintained in the lending bank and held in the )hili ines other loans or $redits as the +onetar* Board ma* s e$if* a non/risk assets

The total indebtedness ma* amount to a further ,;? of the unim aired $a ital and sur lus of su$h bank ro&ide the additional indebtedness is for the ur ose of finan$ing subdi&ision or housing de&elo ment' medium and low in$ome borrowers and agri$ulture on a full se$ured basis! $nvestments in allied undertakings- shall in$lude institutions engaged in the following a$ti&ities( a! banking and finan$ing b! warehousing and other ost har&esting a$ti&ities $! fertili7er N agri$ultural $hemi$al N esti$ides distribution d! farm e4ui ment distribution e! tru$king and trans ortation f! marketing of agri$ultural rodu$ts g! leasing h! other undertakings as determined b* the Board P)o*i1(17 a. that the total in&estments in e4uities shall not e.$eed 2;? of the net worth of the thrift bank /. the e4uit* in&estment in an* single enter rise shall be limited to ,;? of the net worth of the thrift bank c. the e4uit* in&estment in an* single enter rise shall remain a minorit* holding in that enter rise 1. the e4uit* in&estment in other banks shall be sub-e$t to the same ro&isions go&erning similar in&estments of $ommer$ial banks and shall be dedu$ted from the in&esting bank=s net worth for the ur ose of $om uting of the res$ribed ratio as ro&ided in se$!E hereof "re( $ombined $a ital a$$ounts# UPERKI I OR" POWER O# T!E FONETAR" BOAR< OKER T!RI#T BAN% 7 a! la$ing limits to the ma.imum $redit allowed to an* indi&idual borrower b! indi$ating the manner in whi$h te$hni$al assistan$e shall be e.tended to thrift banks $! im osing a uniform a$$ounting s*stem and manner of kee ing the a$$ounts and re$ords of thrift banks d! instituting eriodi$ sur&e*s of loans and lending ro$edures' audits' test/$he$k of $ash and other transa$tions of the thrift banks

UPERKI OR" POWER O# T!E CENTRAL BAN% OKER T!RI#T BAN% 7 a! to enfor$e the laws' orders' instru$tions' rules and regulations romulgated b* the +onetar* Board a li$able to thrift banks b! to re4uire thrift banks' their dire$tors' offi$ers and agents to $ondu$t and manage the affairs of the thrift bank in a lawful and orderl* manner $! to a oint a $onser&ator u on roof that the bank or its board of dire$tors or offi$ers are $ondu$ting and managing the affairs of the bank in a manner $ontrar* to laws' orders' instru$tions romulgated b* the +onetar* Board or in manner substantiall* re-udi$ial to the interest of the go&ernment' de ositors' $reditors' or the general ubli$

*** The dire$tor and e.aminers of the de artment of Bangko Sentral $harged with the su er&ision of thrift banks are authori7ed to administer oaths to an* dire$tor' offi$er' or em lo*ee of an* thrift bank or to an* &oluntar* witness and to $om el the resentation of al books' do$uments' a ers or re$ords ne$essar* in his or their -udgment to as$ertain the fa$ts relati&e to the true $onditions of an* thrift bank or to an* loan! INCENTIKE 2eser&e re4uirement im osed in thrift banks b* the +onetar* Board shall en-o* e4uitable referential terms those im osed on $ommer$ial banks Thrift banks shall ha&e unrestri$ted bran$hing right within the region' free from an* assessment or sur$harges re4uired in setting u a bran$h' but under the $oordination with the Bangko Sentral whi$h will ha&e to assess that there are 4ualified ersonnel' $ontrol and ro$edures to o erate the bran$h! A thrift bank ma* ublish its statement of $ondition in a news a er of general $ir$ulation' or ost it in the most $ons i$uous area of its remises' muni$i al building' muni$i al ubli$ market' baranga* hall and baranga* ubli$ market' if an*' where the bank $on$erned is lo$ated! EOEFPTION a! all thrift banks' whether $reated organi7ed under this A$t or in o eration as of the date of effe$ti&it* of this A$t' shall be e.em t from a*ment of all ta.es' fees and $harges for a eriod of ; *ears' $ounted from the 6,

b!

$!

d!

date of $ommen$ement of o erations for banks $reated under this A$t and from the date of effe$ti&it* of this A$t for e.isting banks The fore$losure of mortgage $o&ering loans granted and e.e$utions of -udgments thereon in&ol&ing real ro erties and le&ied u on b* a sheriff shall be e.em t from ubli$ation re4uirements where the total amount of the loan' e.$luding interest due and un aid' does not e.$eed P1CC2CCC! ** It shall be suffi$ient ubli$ation if the noti$e of fore$losure and e.e$ution of -udgment are osted in the $ons i$uous area of a thrift bank=s remises' muni$i al building' mun! ubli$ market' baranga* hall' and baranga* ubli$ market where the land mortgaged is situated within a eriod of >0 da*s immediatel* re$eding the ubli$ au$tion of the e.e$ution of -udgment! )roof of ubli$ation shall be a$$om lished b* an affida&it of the sheriff of the offi$er $ondu$ting the fore$losure sale or e.e$ution of -udgment! An* metro olitan' muni$i al' or muni$i al $ir$uit trial $ourt -udge in his $a a$it* as notar* ubli$ e. offi$io shall administer oath or a$knowledge the instrument of an* thrift bank and its borrowers or mortgagor free from all $harges' fees and do$umentar* stam ta.' $olle$tible under e.isting laws' relati&e to an* loan or transa$tion not e.$eeding P@C.CC The registration of an* instrument' whether &oluntar* or in&oluntar* to the register of deeds b* an* thrift bank and its borrowers and mortgagors shall be free from all $harges' fees and do$umentar* stam ta. rela*ing to loans or transa$tions in an amount not e.$eeding P@C2CCC. ** 9harges shall be $olle$ted' if an*' on the amount in e.$ess of );0' 000! Instrument related to assignments of se&eral mortgages $onsolidated in a single deed' if an*' shall be le&ied onl* on the amount in e.$ess of );0' 000 of the $onsideration in the assignment of ea$h mortgage!

,! +ake false entries in an* bank re ort or statement 2! Without order of a $ourt of $om etent -urisdi$tion' dis$lose an* information relati&e to the funds or ro erties in the $ustod* of the bank belonging to ri&ate indi&iduals' $or orations' or an* other entit*! 6! A$$e t gifts' fees or $ommissions or an* other form of remuneration in $onne$tion with the a ro&al of a loan from said bank 8! 1&er&alue or aid in the o&er&aluing an* se$urit* for the ur ose of influen$ing in an* wa* the a$tion of the bank on an* loan ;! A ear and sign as guarantor' indorser' or suret* for loans granted >! Liolate an* ro&ision of this A$t B. an+ a''licant fo) a loan f)o42 o) /o))o,() of a t5)ift /ank ,5o s5all7 ,! +isuse' misa l* or di&ert the ro$eeds of the loan obtained b* him from its de$lared ur oses 2! :raudulentl* o&er&alue ro ert* offered as se$urit* for a loan from said bank 6! Gi&e out or furnish false or willful misinter retation of material fa$ts for the ur ose of obtaining' renewing' or in$reasing a loan e.tending the eriod thereof 8! Attem t to defraud the said bank in the e&ent of $ourt a$tion to re$o&er the loan ;! 1ffer an* offi$er' em lo*ee or agent of a thrift bank a gift' fee' $ommission or other forms of $om ensation in order to influen$e su$h bank ersonnel into a ro&ing a loan a li$ation >! Bis ose or en$umber the ro ert* offered as se$urit* for a loan C. An+ (9a4in()2 o) offic() o) (4'lo+(( of t5( Ban3ko (nt)al o) of an+ 1('a)t4(nt2 /&)(a&2 offic(2 /)anc52 o) a3(nc+ of t5( 3o*()n4(nt ,5o is assi3n(1 to (9a4in(2 s&'()*is(2 assist o) )(n1() t(c5nical s()*ic( to t5)ift /anks an1 ,5o s5all conni*( o) ai1 in t5( co44ission of t5( sa4( <. An+ F(TC2 FTC2 o) FCTC :&13( o) )(3ist() of 1((1s ,5o s5all 1(4an1 o) acc('t2 1i)(ctl+ o) in1i)(ctl+2 an+ 3ift2 f((2 co44ission2 o) an+ ot5() f)o4 of co4'(nsation in conn(ction ,it5 t5( s()*ic(2 o) s5all a)/it)a)il+ an1 ,it5o&t )(asona/l( ca&s( 1(la+ t5( ackno,l(134(nt o) a14inist)ation of oat5 o) t5( )(3ist)ation of 1oc&4(nts N s5all /( '&nis5(1 ,it5 a fin( of not 4o)( t5an P12 CCC o) i4')ison4(nt of not 4o)( t5at 1 +(a)2 o) /ot5. E. An+ /ank not o)3ani8(1 &n1() t5is Act an1 an+ '()son2 association2 o) co)'o)ation 1oin3 /&sin(ss of /ankin32 not a&t5o)i8(1 &n1() t5is 62

e!

An* thrift bank shall be e.em t from an* ownershi $eiling for a eriod of ,0 *ears from the effe$ti&it* of this a$t!

PRO!IBITION A fine of not more than ),0' 000 or im risonment for not less than > months but not more that ,0 *ears' or both shall be im osed u on( A. an+ offic()2 (4'lo+((2 o) a3(nt of a t5)ift /ank ,5o s5all7

Act o) (9istin3 la,s ,5ic5 s5all &s( t5( ,o)1s <(*(lo'4(nt Bank20 a*in3s Bank20 a*in3s an1 Fo)t3a3( Bank20 o) a*in3s an1 Loan Association20 as 'a)t of t5( na4( o) titl( of s&c5 /ank o) of s&c5 '()son2 assoc.2 o) co)'. N s5all /( '&nis5(1 /+ a fin( of not l(ss t5an P1CC2 /&t in no cas( to (9c((1 P?C2CCC2 fo) (ac5 1a+ 1&)in3 ,5ic5 t5( sai1 ,o)1s a)( &s(1. ...................................

reem tion within 1 +(a) from the date of offer in ro ortion to their res e$ti&e holdings' but in the absen$e of su$h bu*er' referen$e shall be gi&en to residents of the lo$alit* or ro&in$e where the rural bank is lo$ated! *** To ro&ide su lemental $a ital until the bank has a$$umulated enough $a ital of its own or stimulate ri&ate in&estments' the same institutions shall also subs$ribe within 60 da*s to the $a ital sto$k of an* rural bank in an amount e4ual to the e4uit* in&estment of the ri&ate shareholders whi$h shall be aid in full at the time of the subs$ri tion H right of reem tion is also a&ailable% If su$h sto$k held is sold to ri&ate indi&iduals' the same ma* be $on&erted into $ommon sto$k! Sto$ks held shall be made referred onl* as to assets u on li4uidation and ,it5o&t 'o,() to *ot( and shall share in di&idend distributions from the date of issuan$e in the amount( a! 8?// on the ,st and 2nd *ears b! >?// on the 6rd and 8th *ears $! G?// on the ;th and >th *ears d! ,0?// on the Dth and Gth *ears e! ,2?// on the Eth to the ,;th *ears without referen$e ** The $or orate se$retar* of the bank shall submit to the 9entral Bank and the S59 a re ort on e&er* transfer of referred sto$k to ri&ate shareholders! When all the referred shares of sto$k ha&e been sold to ri&ate shareholders' the Arti$les of In$or oration of the bank shall be amended to refle$t the $on&ersion! All members of the Board of Bire$tors of the rural bank shall be $iti7ens of the )hili ines at the time of their assum tion to offi$e *** NO dire$tor or offi$er shall for himself or as a re resentati&e or agent of another' borrow an* of the de osits or funds of su$h banks' nor shall he be$ome a guarantor' indorser' or suret* for loans from su$h bank or others' or in an* manner be an obligor for mone* borrowed from the bank or loaned b* it (9c('t with the written a ro&al of the ma-orit* of the dire$tors of the bank' e.$luding the dire$tor $on$erned! An* su$h a ro&al shall be entered u on the re$ords of the $or oration and a $o * of su$h entr* shall be transmitted to the a ro riate su er&ising de artment *** The +onetar* Board ma* regulate the amount of $redit a$$ommodations that ma* be e.tended dire$tl* to the dire$tors' offi$ers or sto$kholders of rural banks of banking institutions! 66

R.A. NO. 7?@? 2C2AL BANKS A9T 1: ,EE2 No rural bank shall be o erated without a $ertifi$ate of authorit* from the +onetar* Board of the 9entral Bank! 2ural banks shall be organi7ed in the form of sto$k $or orations C on $onsultation with the rural banks in the area' dul* established $oo erati&es and $or orations rimaril* organi7ed to hold e4uities in rural banks ma* organi7e a rural bank and3or subs$ribe to the shares of sto$k of an* rural bank! P)o*i1(12 that a $oo erati&e or $or oration owning or $ontrolling the whole or ma-orit* of the &oting sto$k of the rural bank shall be sub-e$t to s e$ial e.amination and to su$h rules and regulations as the +onetar* Board ma* res$ribe The $a ital sto$k of an* rural bank shall be full* owned and held dire$tl* or indire$tl* b* $iti7ens of the )hili ines or $or orations' asso$iations or $oo erati&es 4ualified under )hili ine laws to own and hold su$h $a ital sto$k with the (9c('tion of shareholdings of $or orations organi7ed rimaril* to hold e4uities in rural banks and of :ili ino/ $ontrolled domesti$ banks! If the subs$ri tion of ri&ate share holders to the $a ital sto$k $annot be se$ured or is not a&ailable' or insuffi$ient to meet the normal $redit needs of the lo$alit* // the Land Bank of the )hili ines' the Be&elo ment Bank of the )hil!' or an* go&ernment/ owned or $ontrolled bank or finan$ial institution shall subs$ribe to the $a ital sto$k of su$h rural bank' whi$h shall be aid in full at the time of subs$ri tion' in an amount e4ual to the full* aid subs$ribed and unim aired' $a ital of the ri&ate sto$kholders! PROKI<E<2 su$h shares ma* be sold at an* time at market &alue to ri&ate indi&iduals who are $iti7ens of the )hili ines' and that the registered sto$kholders shall ha&e the right of

<owe&er' the outstanding $redit a$$ommodations to ea$h of its sto$kholders owning 2? or more of the subs$ribed $a ital sto$k' its dire$tors' or offi$ers shall be limited to an amount e4ui&alent to the res e$ti&e outstanding de osits and book &alue of the ad/in $a ital $ontributions in the bank! Loans or ad&an$es e.tended b* rural banks shall be ')i4a)il+ fo) t5( '&)'os( of meeting the normal $redit needs of farmers' fishermen or farm families owning or $ulti&ating land dedi$ated to agri$ultural rodu$tion as well as the normal $redit needs of $oo erati&es and mer$hants! In granting loans' referen$e shall be gi&en to the a li$ation of farmers and mer$hants whose $ash re4uirements are small Loans ma* be granted b* rural banks on the se$urit* of lands on the following( a! those without Torrens title where the owner of ri&ate ro ert* $an show ; *ears or more of ea$eful' $ontinuous and uninterru ted ossession in $on$e t of owner b! ortions of friar land estates or other lands administered b* the Bureau of Lands that are $o&ered b* sales $ontra$ts and the ur$hasers ha&e aid at least ; *ears installment thereon' without the ne$essit* of rior a ro&al and $onsent b* the Bire$tor of Lands $! ortions of other estates under the administration of the Be artment of Agrarian 2eform or other go&ernmental agen$* whi$h are likewise $o&ered b* sales $ontra$ts "same $onditions as abo&e stated# d! homesteads or free atent lands ending the issuan$e of titles but alread* a ro&ed *** When the $orres onding titles are issued' the same shall be deli&ered to the 2egister of Beeds of the ro&in$e where su$h lands are situated for the annotation of the en$umbran$e *** In $ase of lands homestead or free atent titles' $o ies of the noti$es for the resentation of the final roof shall also be furnished the $reditor rural bank% That the a li$ant has alread* made im ro&ements on the land and the loan a lied for is to be used for further de&elo ment of the same or for other rodu$ti&e e$onomi$ a$ti&ities *** The a raisal and &erifi$ation of the status of a land is a full res onsibilit* of the rural bank and an* loan granted on an* land whi$h shall be found later to be forest 7one shall be for the sole a$$ount of the rural bank!

2ural banks ma*' de&ote a ortion of their loanable funds to meeting the normal $redit needs of small business enter rise% )ro&ided' the loans shall not e.$eed ,;? of he net worth of a rural bank or su$h amount as the +onetar* Board ma* res$ribe! All su er&ised ast due and restru$tured ast due loans' in$luding those $o&ered under e.isting rehabilitation rograms of the 9entral Bank' and ;0? of non/su er&ised ast due shall be $on&erted into referred sto$ks of the rural bank and issued in fa&or of the Land Bank of the )hil!' the BB) or an* go&ernment/owned or $ontrolled bank or finan$ial institution P)o*i1(17 a. enalties thereon are wai&ed e.$e t a$$rued interest on arrearages /. e4ui&alent enalties due from $orres onding farmers are wai&ed c. rural banks that refer to settle their arrearages under a lan of a*ment or a $ombination of both lan of a*ment and $on&ersion ma* do so 1. rural banks shall mat$h these referred sto$ks wit ri&ate e4uit* in e4ual annual installments o&er a eriod of ,; *ears to begin 6 *ears after $on&ersion UPERKI OR" POWER O# T!E FONETAR" BOAR< a! la$ing the limits to the ma.imum $redit allowed to an* indi&idual borrower b! res$ribing the interest rate $! determining the loan eriod and loan ro$edures d! indi$ating the manner in whi$h te$hni$al assistan$e shall be e.tended to rural banks e! im osing a uniform a$$ounting s*stem and manner in kee ing the a$$ounts and re$ords of rural banks f! instituting eriodi$ sur&e*s of loan and lending ro$edures' audits' test/$he$k of $ask and other transa$tions of the rural banks g! $ondu$ting training $ourses for ersonnel of rural banks h! su er&ising the business o erations of the rural bank' in general i! res$ribe the amount' &alue and $lass of sto$k issued b* an* rural bank UPERKI OR" POWER O# T!E CENTRAL BAN% a! enfor$e laws' orders' instru$tions' rules and regulations romulgated b* the +onetar* Board a li$able to rural banks b! to re4uire rural banks' their dire$tors' offi$ers and agents to $ondu$t and manage the affairs of the banks in a lawful and orderl* manner 68

$!

u on roof of &iolation of the ro&isions abo&e mentioned' or that the affairs of the bank are $ondu$ted in a manner substantiall* re-udi$ial to the interest of the go&ernment' de ositors or $reditors' to take o&er the management of su$h bank when authori7ed to do so b* the +onetar* Board after due hearing ro$ess until a new board of dire$tors and offi$ers are ele$ted and 4ualified *** The management of the rural bank b* the 9entral Bank shall be without e. ense to the rural bank' e.$e t su$h is a$tuall* ne$essar* for its o eration' ending the ele$tion and dis4ualifi$ation of a new board of dire$tors and offi$ers *** The dire$tor and the e.aminers of the $entral bank $harged with the su er&ision of rural banks are authori7ed to administer oaths to an* dire$tor' offi$er or em lo*ee of an* rural bank or to an* &oluntar* witness and to $om el the resentation of all books' do$uments' a ers or re$ords ne$essar* in his or their -udgment to as$ertain the fa$ts relati&e to the true $ondition of an* rural bank of to an* loan! POWER O# RURAL BAN% 7 a! A$$e t sa&ings and time de osits b! 1 en $urrent or $he$king a$$ounts' ro&ided the bank has net assets of at least P@2CCC2CCC $! A$t as $orres ondent for other finan$ial institutions d! A$t as $olle$tion agent e! A$t as offi$ial de ositor* of muni$i al' $it* or ro&in$ial funds in the muni$i alit*! 9it* or ro&in$e where it is lo$ated f! 2edis$ount a er wit the )NB' Land Bank of the )hil!' Be&elo ment Bank of the )hil!' or an* banking institution' in$luding its bran$hes and agen$ies g! 1ffer other banking ser&i$es as ro&ided in se$! D2 2A No! 66D h! 5.tend finan$ial assistan$e to ri&ate and ubli$ em lo*ees $nvestment in allied undertakings5 shall in$lude( a! Banks' finan$ial institutions and non/bank finan$ial intermediaries b! Warehousing and other ost/har&est fa$ilities $! :ertili7er and agri$ultural $hemi$al and esti$ides distribution d! :arm e4ui ment distribution e! Tru$king and trans ortation of agri$ultural rodu$ts f! +arketing of agri$ultural rodu$ts g! Leasing h! 1ther undertakings as ma* be determined b* the +onetar* Board

')o*i1(17 a. the total in&estment to e4uities shall not e.$eed 2;? of the net worth of the rural bank /. the e4uit* in&estment in an* single enter rise shall be limited to ,;? of the net worth of the rural bank c. the e4uit* in&estment in an* single enter rise shall remain a minorit* holding in that enter rise The LB)' BB)' or an* go&ernment owned or $ontrolled bank or finan$ial institution shall within > da*s of $ertifi$ation of the +onetar* Board' whi$h shall be final' e.tend to a rural bank loans re a*able in ,0 *ears' with $on$essional rates of interest' against se$urit* whi$h ma* be offered b* an* sto$kholder3s of said bank ro&ided( a. That the +onetar* Board is $on&in$ed that the resour$es of the bank are inade4uate to meet the legitimate $redit re4uirements of the lo$alit* wherein the bank is established /. That there is dearth of ri&ate $a ital in the said lo$alit* c. That it is not ossible for the sto$kholders of the rural bank to in$rease the aid/u $a ital thereof! In an emergen$* or when a finan$ial $risis is imminent' the 9entral Bank ma* gi&e a loan to an* rural bank against assets of the rural bank whi$h ma* be $onsidered a$$e table b* a $on$urrent &ote of at least 8 members of the +onetar* Board To en$ourage $onsolidation and mergers of rural banks' there are ; or more rural banks within the region that merge and $onsolidate within 6 *ears from the ena$tment of this A$t' the merged or $onsolidated entit* will be gi&en the ff in$enti&es for a eriod of D *ears( a! Its de osit liabilities shall be sub-e$ted to onl* ,36 of reser&es normall* re4uired for rural banks b! Its reser&e re4uirement $an all be maintained under interest/bearing go&ernment se$urities but ke t unen$umbered with go&ernment finan$ial institutions or the 9entral Bank $! It shall ha&e unrestri$ted bran$hing right within the region' free from an* assessment or sur$harges re4uired in setting u a bran$h but under the $oordination with the 9entral Bank whi$h will ha&e to assess that there are 4ualified ersonnel' $ontrol and ro$edures to o erate the bran$h 5&er* indi&idual a$ting as offi$er or em lo*ee of a rural bank and handling funds or se$urities amounting to P@2 CCC or more in an* , *ear' 6;

shall be $o&ered b* an ade4uate bond as determined b* the +onetar* Board% the b*/laws of the bank ma* also ro&ide for the bonding of other em lo*ees or offi$ers of rural banks EOEFPTION 7 a! Sto$kholdings in a rural bank shall be e.em t from an* ownershi $eiling for a eriod of ,0 *ears from the a ro&al of this A$t! The e.em tion shall re4uire the a ro&al of the +onetar* Board b! The fore$losure of mortgages $o&ering loans granted b* rural banks and e.e$utions of -udgment thereon in&ol&ing real ro erties le&ied u on b* the sheriff shall be e.em t from the ubli$ations in news a er where the total amount of loan' e.$luding interest due and un aid' does not e.$eed P1CC2 CCC. It shall be suffi$ient if the noti$es of fore$losure and e.e$ution of -udgment are osted in the most $ons i$uous area of the muni$i al building' the muni$i al ubli$ market' rural bank' baranga* hall' baranga* ubli$ market where the land mortgaged is situated during the eriod of >0 da*s immediatel* re$eding the ubli$ au$tion or e.e$ution of -udgment! )roof of ubli$ation shall be a$$om lished b* an affida&it! $! All rural banks shall be e.em t from the a*ment of all ta.es' fees and $harges of whate&er nature and des$ri tion' e.$e t the $or orate in$ome ta. and lo$al ta.es' fees and $harges' for a eriod of ; *ears from the date of $ommen$ement of o erations and from the a ro&al of this A$t for rural banks alread* in o eration as of a ro&al of this A$t! d! Be osits of rural banks with go&ernment/ owned or $ontrolled finan$ial institutions like the LB)' BB)' and the )NB are e.em ted from the Single Borrower=s Limit im osed b* the General Banking A$t! e! An* $it* or muni$i al trial $ourt -udge in his $a a$it* as notar* ubli$ e. offi$io shall administer oath or a$knowledge the instruments of an* rural bank and its borrowers or mortgagors' free from all $harges' fees and do$umentar* stam ta. relati&e to an* loan or transa$tion not e.$eeding P@C2CCC f! The registration of an* instrument to an* register of deeds b* an* rural bank and its borrowers or mortgagors' shall be free from all $harges' fees and do$umentar* stam ta.' relating to loans or transa$tions in an amount not e.$eeding P@C2 CCC. In instruments related to assignments of se&eral mortgages $onsolidated in a single deed' if an*' shall be le&ied onl* on the amount in

e.$ess of );0'000 of the $onsideration in the assignment of ea$h mortgage PRO!IBITION 7 A fine of not more than P1C2 CCC' or im risonment for not less than > months but not more than ,0 *ears or both' at the dis$retion of the $ourt' shall be im osed u on( a. An+ offic()2 (4'lo+((2 o) a3(nt of a )&)al /ank ,5o s5all7 ,! +ake false entries in an* bank re ort or statement 2! Without order of a $ourt' dis$lose an* information relati&e to the funds or ro erties in the $ustod* of t he bank belonging to ri&ate indi&iduals' $or orations' or an* other entit* 6! A$$e t gifts' fees or $ommission or an* other form of remuneration in $onne$tion with the a ro&al of a loan from said bank 8! 1&er&alue or aid in o&er&aluing an* se$urit* for the ur ose of influen$ing in an* wa* the a$tion of the bank in an* loan ;! A ear and sign as guarantor' indorser' or suret* for loans granted >! Liolate an* of the ro&isions of this A$t /. An+ a''licant fo) a loan f)o42 o) /o))o,() of a )&)al /ank ,5o s5all7 ,! +isuse' misa l*' or di&ert the ro$eeds of the loan obtained b* him from its de$lared ur oses 2! :raudulentl* o&er&alue ro ert* offered as se$urit* for a loan fro said bank 6! Gi&e out or furnish false or willful misre resentation of material fa$ts for the ur ose of obtaining' renewing' or in$reasing a loan or e.tending the eriod thereof 8! Attem t to defraud the said bank in the e&ent of $ourt a$tion to re$o&er a loan ;! 1ffer an* offi$er' em lo*ee or agent of a rural bank as a gift' fee or $ommission or other form of $om ensation in order to influen$e su$h bank ersonnel into a ro&ing a loan a li$ation >! Bis ose or en$umber the ro ert* or the $ro s offered as se$urit* for the loan c. An+ (9a4in()2 o) offic() o) (4'lo+(( of t5( C(nt)al Bank of t5( P5il. o) of an+ 1('a)t4(nt 2 /&)(a&2 offic(2 /)anc5 o) a3(nc+ of t5( 3o*()n4(nt ,5o is assi3n(1 to (9a4in(2 s&'()*is(2 assist o) )(n1() t(c5nical s()*ic( to )&)al /anks ,5o s5all conni*( o) ai1 in t5( co44ission of t5( sa4( 1. An+ 4&nici'al t)ial :&13( o) )(3ist() of 1((1s ,5o s5all 1(4an1 o) acc('t2 1i)(ctl+ o) in1i)(ctl+2 an+ 3ift2 f((2 co44ission o) ot5() fo)4 of co4'(nsation in conn(ction ,it5 t5( s()*ic(2 o) s5all a)/it)a)il+ o) ,it5o&t )(asona/l( ca&s( 1(la+ t5( ackno,l(134(nt o) a14inist)ation of oat5 o) t5( )(3ist)ation of 1oc&4(nts 6>

(.

)(6&i)(1 to /( '()fo)4(1 an1 /+ sai1 )(3ist() of 1((1s s5all /( '&nis5(1 /+ a fin( of not 4o)( t5an P12 CCC o) /+ i4')ison4(nt fo) not 4o)( t5an 1 +(a)2 o) /ot5 An+ /ank not o)3ani8(1 &n1() t5is Act an1 an+ '()son2 association2 o) co)'o)ation 1oin3 t5( /&sin(ss of /ankin32 not a&t5o)i8(1 &n1() t5is Act ,5ic5 s5all &s( t5( ,o)1s R&)al Banks0 as 'a)t of t5( na4( o) titl( of s&c5 /ank o) of s&c5 '()son2 association2 o) co)'o)ation2 s5all /( '&nis5(1 /+ a fin( of not l(ss t5an P@C fo) (ac5 1a+ 1&)in3 ,5ic5 sai1 ,o)1s a)( so &s(1.

G! To borrow mone* from banks and other finan$ial institutions within the limit to be res$ribed b* the 9entral Bank E! To $arr* out all other fun$tions as ma* be res$ribed b* the Authorit*! )ro&ided' that the erforman$e of an* banking fun$tion shall be sub-e$t to rior a ro&al b* the 9entral Bank and it satisfies all re4uirements for registration as a $oo erati&e No entr* shall be registered b* the 9oo erati&e Be&elo ment Authorit* as a $oo erati&e bank unless arti$les of $oo eration and b*/laws thereof as well as its establishment and o eration as a $oo erati&e bank ha&e been a ro&ed b* the 9entral Bank +embershi of a $oo erati&e bank shall in$lude onl* $oo erati&es and federations of $oo erati&es The number' $om osition and &oting rights of the board of dire$tors shall be defined in the arti$les of $oo eration and b*/laws of the $oo erati&e bank 9oo erati&es ma* obtain loans from a $oo erati&e bank! Loans granted b* a $oo ! bank shall be re orted to the 9entral Bank! The $oo erati&e banks registered under this $ode shall be under the su er&ision of the 9entral Bank! The 9entral Bank u on $onsultation with the agen$* and the $oo erati&e mo&ement shall formulate guidelines regarding the o eration and banking transa$tions of $oo erati&e banks! 9oo erati&e banks ma* be e.em ted from 9entral Bank rules and regulations' a li$able to other t* es of banks' whi$h would im ede the $oo erati&e rural bank from erforming legitimate finan$ial and banking to its members! A national $oo ! shall ha&e a minimum authori7ed share $a ital of PECC2 CCC2CCC. The authori7ed share $a ital shall be di&ided into su$h number of shares with a minimum ar &alue of ),' 000 er share A lo$al $oo ! bank shall ha&e a minimum authori7ed share $a ital of PEC2CCC2CCC di&ided into su$h number of shares with a minimum ar &alue of ),00 er share! P)i*il(3(s >s&/:(ct to t5( a'')o*al of t5( C(nt)al Bank an1 co4'lianc( ,S a''lica/l( /ankin3 la,s2 )&l(s an1 )(3&lationsB7 ,! 9oo ! banks registered under this $ode shall be gi&en the same ri&ilege granted to the rural banks' ri&ate de&elo ment banks' $ommer$ial banks' and all other banks to redis$ount notes with the 9entral Bank' the Land 6D

......................................... R.A. NO. ;9?8 AN A9T T1 12BAIN A 911)52ATIL5 91B5 1: T<5 )<ILI))IN5S C!APTER OIIIR PECIAL PROKI ION RELATIN$ TO COOPERARIKE BAN% Coo'()ati*( /ank N is one organi7ed b*' the ma-orit* shares of whi$h is owned and $ontrolled b*' $oo erati&es rimaril* to ro&ide finan$ial and $redit ser&i$es to $oo erati&es! The term $oo erati&e bank shall in$lude $oo erati&e rural banks #&nctions of a coo'()ati*( /ank7 ,! To $arr* on banking and $redit ser&i$es for the $oo erati&es 2! To re$ei&e finan$ial aid or loans from the go&ernment and the 9entral Bank of the )hil! for and in behalf of the $oo erati&e banks and rimar* $oo erati&es and their federations engaged in business and to su er&ise the lending and $olle$tion of loans 6! To mobili7e sa&ings of its members for the benefit of the $oo erati&e and their federations 8! To a$t as a balan$ing medium for the sur lus funds of $oo erati&es and their federations ;! To dis$ount bills and romissor* notes issued and drawn $* $oo erati&es >! To issue negotiable instruments to fa$ilitate the a$ti&ities of $oo erati&es D! To issue debentures sub-e$t to the a ro&al of and under $onditions and guarantees to be res$ribed b* the go&ernment

Bank of the )hili ines and other banks without affe$ting in an* wa* the ro&isions if this $ode 2! To a$t as de ositor* of go&ernment funds Whene&er a $oo ! bank organi7ed under this $ode is distressed or ma* need assistan$e in the rehabilitation of its finan$ial $ondition or to a&oid bankru t$*' the +onetar* Board of the 9entral Bank shall designate an offi$ial of the 9entral Bank or a erson of re$ogni7ed $om eten$e in banking or finan$e as re$ei&er or $onser&ator of the said bank!

;! in $ases where the mone* in&ested or de osited is the sub-e$t matter of the litigation! KK It shall be unlawful for an* offi$ial or em lo*ee of a bank to dis$lose to an* erson other than those under the e.$e tions' or for an inde endent auditor hired b* a bank to $ondu$t its regular audit to dis$lose to an* erson other than a bank dire$tor' offi$ial or em lo*ee authori7ed b* the bank' an information concerning said deposits. (5P/R'A)' P/()'+ '/ R&5&56&R! KK 9ourt $annot order rodu$tion of bank de osit re$ords of de ositor unless e.em ted! KK Sto$kholders $annot in4uire as to the e.isten$e of bank de osits and how mu$h' of his debtor KK Writ of garnishment ma* be issued against debtor=s bank de osits be$ause the in4uir* refers onl* as to W1N the debtor had a de osit in the bank $on$erned! There was reall* no in4uir* as to the outstanding balan$e! ......................................... T<5 )<ILI))IN5 B5)1SIT INSC2AN95 912)12ATI1N A9T >P< ?@91 A AFEN<E< B" RA 7JCCB W5at is t5( '&)'os( of t5( la,H

......................................... RA 1JC@ T5( la, on (c)(c+ of Bank <('osits In this A$t it is de$lared to be the oli$* of the Go&ernment to( ,! gi&e en$ouragement to the eo le to de osit their mone* in banking institutions% and 2! dis$ourage ri&ate hoarding so that the mone* ma* be ro erl* utili7ed b* banks in authori7ed loans to assist in the e$onomi$ de&elo ment of the $ountr* $ENERAL RULE( all de osits of whate&er nature with banks or banking institutions in the )hili ines in$luding in&estments in bonds issued b* the Go&ernment' its oliti$al subdi&isions and instrumentalities 2 are hereb considered as of an absolutel confidential nature and ma not be e-amined, in$uired or looked into b an person, government official, bureau or office. &2C&P'(/)+! ,! when the e.amination is made in the $ourse of a s e$ial or general e.amination of a bank and is s e$ifi$all* authori7ed b* the +onetar* Board after being satisfied that there is reasonable ground to belie&e that a bank fraud or serious irregularit* has been or is being $ommitted and that it is ne$essar* to look into the de osit% 2! when the e.amination is made b* an inde endent auditor hired b* the bank to $ondu$t its regular audit ro&ided that the e.amination is for audit ur oses onl* and the results thereof shall be for the e.$lusi&e use of the bank% 6! u on written ermission of the de ositor' or in $ases of im ea$hment% 8! u on order of a $om etent $ourt in $ases of briber* or dereli$tion of dut* of ubli$ offi$ials' or in $ases of une. lained wealth under the Anti/ graft Law%

The ur ose of the law is to $reate a go&ernment/owned entit*' the )BI9' that shall insure the de osit liabilities of all banks entitled to the benefits of insuran$e under the A$t! Su$h insuran$e is intended to rote$t de ositors from situations that re&ent banks from a*ing out de osits' as in bank failures or $losures' ant to en$ourage eo le to de osit in banks! Co4'osition of 3o*()nin3 /oa)1 a. The Se$retar* of :inan$e who shall be the e. offi$io $hairman of the board without $om ensation! /. The Go&ernment of the 9entral Bank' who shall be the e. offi$io member of the board without $om ensation! c. The resident of the $or oration' who shall be a ointed b* the )resident of the )hili ines from either the Go&ernment or )ri&ate se$tor to ser&e on a full/time basis for a term of > *ears! The )resident shall also ser&e &i$e $hairman of the board! 1. The members from the ri&ate se$tor' to be a ointed for a term of > *ears without rea ointment from the )resident of the )hili ines( +rovided' that of those first a ointed' the first a ointee shall ser&e a eriod of 2 *ears! 6G

W5at is 1('osit0H

The term Ide ositJ means the un aid balan$e of mone* or its e4ui&alent re$ei&ed b* a bank in the usual $ourse of business and for whi$h it has gi&en or is obliged to gi&e $redit to a $ommer$ial' $he$king' sa&ings' time or thrift a$$ount or whi$h is e&iden$ed b* assbook $he$k' and3or $ertifi$ate of de osit' rinted or issued in a$$ordan$e with 9entral Bank 2ules and 2egulations and other a li$able laws' together with su$h other obligations of a bank' whi$h' $onsistent with banking usage and ra$ti$es' the Board of Bire$tors shall determine and res$ribe b* regulations to be de osit liabilities of the bank( +rovided, That an* obligation of a bank whi$h is a*able at the offi$e of the bank lo$ated outside of the )hili ines shall no be a de osit for an* of the ur oses of this A$t or in$luded as art of the total de osits or insured de osit( +rovided' :urther' That' sub-e$t to the a ro&al of the Board of Bire$tors' an* insured bank whi$h is in$or orated the laws of the )hili ines whi$h maintains a bran$h outside the )hili ines ma* ele$t to in$lude for insuran$e its de osit obligations a*able onl* at su$h bran$h! W5at is T)ansf())(1 <('ositH

A t)ansf())(1 1('osit is a de osit in an insured bank made a&ailable to a de ositor b* the )BI9 as a*ment of the insured de osit of su$h de ositor in a $losed bank and assumed b* another insured bank! B* a*ing its liabilities to de ositors in this manner' the )BI9 ho es to ersuade these de ositors to kee their sa&ings in banks where su$h funds $ould be lent out' rather than hoarded and ke t out of the banking s*stem! W5os( 1('osit lia/iliti(s a)( )(6&i)(1 to /( ins&)(1 ,it5 t5( P<ICH "Se$! 8#

The de osit liabilities of an* bank engaged in the business re$ei&ing de osits are re4uired to be insured with the )BI9! W5(n 1o(s t5( P<IC /(co4( lia/l( to 'a+ t5( ins&)(1 1('ositsH "Se$! ,0R$S#

The )BI9 be$omes liable to a* the insured de osits in a bank when the is $losed b* the +onetar* Board of the Bangko Sentral ng )ili inas' that is' rohibited from doing further business in the )hili ines' on a$$ount of insol&en$* and other grounds under the law! W5at is t5( (9t(nt of t5( P<ICPs lia/ilit+ to a /ank 1('osito)H "Se$! 6RgS# The )BI9=s liabilit* is u to ),00'000 er de ositor3 er $a a$it*! Is t5( lia/ilit+ of t5( P<IC on a '() /ank o) '() /)anc5 /asisH 1n a er bank basis!

W5(n an ins&)(1 /ank is clos(1 on acco&nt of insol*(nc+ 5o, ,ill 'a+4(nt of t5( ins&)(1 1('osits in s&c5 /ank /( 4a1( B" t5( P<ICH "Se$! ,0R$S# The )BI9 shall a* either in $ash or b* making a&ailable to ea$h de ositor a transferred de osit in another insured bank in an amount e4ual to the insured de osit of su$h de ositor! If a 1('osito) 5as s(*()al acco&nts ,it5 t5( /ank2 5o, ,ill t5( lia/ilit+ of t5( P<IC to 5i4 /( calc&lat(1H "Se$! 6RgS# The liabilit* of the )BI9 will be $al$ulated b* adding together all de osits in the bank maintained b* the de ositor in the same $a a$it* and the same right for his benefit either in his own name in the name of others! W5at is t5( (ff(ct of 'a+4(nt to t5( 1('osito) of 5is ins&)(1 1('osit )a*ment to the de ositor of his insured de osit ",# dis$harges the )BI9 from an* further liabilit* to the de ositor' and "2# subrogates the )BI9 to all the rights of the de ositor against the $losed bank to the e.tent of su$h a*ment! W5at notic( )(6&i)(4(nt is i4'os(1 /+ t5( Act on /anksH "Se$! ,>RaS# 5&er* insured bank is re4uired b* the A$t to dis la* at ea$h la$e of business maintained b* the bank a sign or signs stating that its de osits are insured b* the )BI9! A similar statement shall be in$luded b* the bank in its ad&ertisements! P<IC *s. CA2 <(c(4/() EE2 1997 The )BI9 was $reated b* law and as su$h' is go&erned rimaril* b* the ro&isions of the s e$ial b* the ro&isions of the s e$ial law $reating it! The liabilit* of the )BI9 for insured de osits therefore is statutor* and' under 2A 6;E,' su$h liabilit* rests u on the e.isten$e of de osits with the insured bank' not on the negotiabilit* or non/negotiabilit* of the $ertifi$ates e&iden$ing these de osits! In order that a $laim for de osit insuran$e with the )BI9 ma* ros er' the law re4uires that a $orres onding de osit be la$ed in the insured bank! A de osit' as defined in se$tion 6"f# of 2A 6;E,' ma* be $onstituted onl* if mone* or the e4ui&alent of mone* is re$ei&ed b* a bank! Trust funds de osited with an insured bank and bearer time de osit $ertifi$ates with no registered a*ee are e.$luded from the insuran$e $o&erage )BI9 $an sto insuran$e $o&erage if assessments against the insured bank are not aid in 60 da*s after noti$e #o)(i3n C&))(nc+ <('osit +st(4 of t5( P5ili''in(s RA ;J E; W5o 4a+ 1('osit7 6E

An* erson a! Pudi$ial b! Natural A&t5o)it+ of t5( C(nt)al Bank7 a! To a$$e t de osits and to a$$e t foreign $urren$ies in trust( )ro&ided' that numbered a$$ounts for re$ording and ser&i$ing of su$h de osits shall be allowed% b! To issue $ertifi$ates to e&iden$e su$h de osits% $! To dis$ount su$h $ertifi$ates% d! To a$$e t said de osits as $ollateral as loans sub-e$t to su$h rules and regulations as ma*be romulgated b* the 9entral Bank from time to time! e! To a* interest in foreign $urren$* on su$h de osits!

BAC%ROUN< 2e ubli$ A$t no! >82> otherwise known as the foreign $urren$* de osit a$t' established the foreign $urren$* de osit a$$ount s*stem in the $ountr* in ,ED2! essentiall*' it allowed an* erson to de osit' and banks to a$$e t for de osit' an* foreign $urren$* a$$e table as art of our international reser&e! W5at a)( t5( &ni6&( f(at&)(s of t5( actH Cnlike ordinar* bank de osits' foreign $urren$* de osits ha&e the following features( "a# A/sol&t( Confi1(ntialit+/ a foreign $urren$* de osit $an not be e.amined' in4uired or looked into * an* erson or offi$e' whether ubli$ or ri&ate' or -udi$ial' administrati&e or legislati&e "Se$! G' as amended b* )B ,28>",EDD# e.$e t( i! C on the written ermission of the de ositor% ii! Without need of a $ourt order' if the anti/mone* laundering $oun$il determines that a arti$ular de osit or in&estment with an* banking institution is related to an* one of the following unlawful a$ti&ities "aa# kidna ing for ransom under Arti$le 2>D of A$t No! 6G,;' otherwise known as the 2e&ised )enal 9ode' as amended "Se$! 6"i#",##% "bb# &iolations of se$tions 8';'>'G'E',0',2',6',8',;' and ,> of 2e ubli$ A$t No! E,>;' otherwise known as the 9om rehensi&e Bangerous Brugs A$t of 2002 "Se$! 6"i# "2##% and "$$# hi-a$king and other &iolations under 2e ubli$ A$t No! >26;% destru$ti&e arson and murder' as defined under the re&ised enal $ode' as amended' in$luding those er etrated b* terrorists against non/$ombatant ersons and similar targets "Se$t! 6"i# ",2#! iii! u on order of the $ourt' if the anti/ mone* laundering $oun$il determines that a arti$ular de osit or in&estment with an* banking institution is related to an* one of the unlawful a$ti&ities under Se$! 6"i#' e.$e t those referred to in Se$tion 6"i#",#' "2# and ",2#' of 2A E,>0 or a mone* laundering offense under Se$tion 8 "Se$! ,,' 2A E,>0#%and' i& in4uir* into or e.amination of an* de osit or in&estment with an* banking institution when the e.amination is made b* the BS) in the $ourse of a eriodi$ or s e$ial e.amination in a$$ordan$e with the rules of 80

P&)'os(7 :oreign $urren$ies whi$h are a$$e table as a$$e table as art of the international reser&ed e.$e t those whi$h are re4uired b* the 9entral Bank to be surrendered! #o)(i3n C&))(nc+ co*() )(6&i)(4(nts7 Shall maintain at all times a ,00? foreign $urren$* $o&er for their de osit liabilities of whi$h $o&er at least ,;? shall be in the form of foreign $urren$* de osit with the 9entral Bank A balan$e in the form of foreign $urren$* de osits or foreign $urren$* loans or se$urities whi$h loans or se$urities shall be of short term maturities and readil* marketable! +a* in$lude loans to domesti$ enter rises whi$h are e. ort e&ented or registered with the Board of In&estments! :oreign $urren$* $o&er shall be in the same $urren$* as that of the $orres onding foreign $urren$* de osit liabilit*! The 9entral Bank ma* a* interest on the foreign $urren$* de osit and if re4uested shall e.$hange the foreign $urren$* notes and $oins into foreign $urren$* instruments drawn on its de ositor* banks! Wit51)a,a/ilit+ an1 t)ansf()a/ilit+ of 1('osits7 - There shall be no restri$tion on the withdrawal b* the de ositor of his de osit or on the transferabilit* of his de osit! Ta9 (9(4'tion of int()(sts on 1('osits. The interest on de osits belonging to non H resident nor engaged in trade or business in the )hils!' shall be e.em t from in$ome ta.!

T........................................ #OREI$N CURRENC" <EPO IT ACT

"b#

"$#

"d#

"e#

e.amination of the BS) "Se$! ,,' 2A ,E>0% see also Se$! 8' 2A GDE,#! N&4/()(1 Acco&nts/ authori7ed banks ma* ado t a numbered a$$ount s*stem for re$ording and ser&i$ing de osits in non/ $he$king a$$ounts "Se$! 6 in relation to Se$! E "a#' 2A E,>0' as amended#! Ta9(s/ the foreign $urren$* de osits' in$luding interests and all other in$ome or earnings of su$h de osits' are e.em t from an* and all ta.es whatsoe&er irres e$ti&e of whether or not these de osits are made b* residents or non/residents and' in the latter $ase' irres e$ti&e whether or not the non/ residents are engaged in trade or business in the )hili ines "Se$! >' as amended b* )B ,28>#! Note' howe&er' that under se$tions 28"B#",#' 2D"B#",# and 2G"A#"D#"a# of the NI29' the interest re$ei&e b* the indi&idual "5.$e t a non/resident indi&idual#' domesti$ $or oration and resident foreign $or oration from su$h de osits shall' effe$ti&e Panuar* ,' ,EEG' be sub-e$t to a final in$ome ta. of D!;?! Co&)t o)1() o) ')oc(ss/ the* are e.em t from atta$hment' garnishment or an* other order or ro$ess of an* $ourt' legislati&e or administrati&e bod*' or go&ernment agen$* whatsoe&er "Se$! G as amended b* )B ,28># e.$e t the 9ourt of A eals' u on a li$ation e. arte b* the anti/mone* laundering $oun$il and after determination that robable $ause e.ists that an* monetar* instrument or ro ert* is in an* wa* related to an unlawful a$ti&it* as defined in Se$tion 6"i# of the anti/mone* laundering a$t' ma* free7e the a$$ount into whi$h the monetar* instrument or ro ert* is de osited "Se$! ,0' 2A E,>0' as amended#! N(, (nact4(nt o) )(3&lation/ in the e&ent a new ena$tmentor regulation is issued de$reasing the rights granted under the law' su$h new ena$tment or regulation shall not a l* to foreign $urren$* de osits alread* made or e.isting at the time of issuan$e of su$h new ena$tment or regulation "Se$! ,2/ A' as inserted b* )B ,28>#!

Sal&a$ion and her arents! At the time of his arrest' Bartelli maintained a C!S Bollar de osit a$$ount with 9hina Banking 9or oration "9B9#! When the etitioner to ha&e the bank de osit of Bartelli with 9B9 garnished to satisf* the -udgment rendered in their fa&or' the bank refused $iting Se$tion G of 2e ubli$ A$t No! >82>' as amended' whi$h e.em t foreign $urren$* de osit a$$ounts from atta$hment' garnishment or an* other order or ro$ess of an* $ourt' legislati&e or administrati&e bod*' or go&ernment agen$* whatsoe&er! The $ourt ruled that Se$tion G of 2e ubli$ A$t No! >82> does not rote$t and would not a l* to the foreign $urren$* de osit of a transient alien de ositor under the e$uliar $ir$umstan$es of this $ase and ordered 9B9 to release to Sal&a$ion and her arents the dollar de osit of bartelli in su$h amount as would satisf* -udgment! 9omment( this $ase should not be understood as remo&ing from foreign $urren$* de osits a$$ounts maintained b* transient alien de ositors the benefit and rote$tion afforded b* that Se$tion G of 2e ubli$ A$t No! >82>! su$h benefit and rote$tion ma* be remo&ed onl* under $ir$umstan$es similar to the fa$ts of this $ase! C R&lin3( $ntengan, et al vs 6*, et al, G!2! No! ,2GEE>' :ebruar* ,;' 2002 The $ourt held that the a$$ounts in 4uestion' being C!S! Bollar de osits' are not $o&ered b* the law on se$re$* of bank de osits "2A ,80;' as amended# but b* the foreign $urren$* de osit a$t "2A >82>' as amended#! Thus' a $ase for &iolation of the latter law should ha&e been the ro er $ase brought against ri&ate res ondents Li$ Lim' a &i$e resident of 9itibank' and Po&en 2e*es' Li$e )resident3Business +anager of the Global 9onsumer Banking Grou of 9itibank' who admitted that the* had dis$losed details of etitioners= dollar de osits without the latter=s written ermission! A$$ording to the $ourt' Lim=s a$t of dis$losing details of etitioners= bank re$ords regarding their foreign $urren$* de osits' with the authorit* of 2e*es' would a ear to belong tot hat s e$ies of $riminal a$ts unishable b* s e$ial laws $alled malum rohibitum! The ri&ate res ondents' howe&er' $ould no longer be $harged under 2A >82>' a s e$ial law' as the offense has res$ribed! Being a s e$ial law' the ro&isions of A$t No! 662>' entitled IAn A$t to 5stablish )eriods of )res$ri tion for Liolations )enali7ed b* S e$ial A$ts and +uni$i al 1rdinan$es and to )ro&ide When )res$ri tion Shall Begin to 2un=' as amended b* A$t No! 6D>6' are a li$able! A &iolation of 2A >82> shall sub-e$t the offender to im risonment of not less than , *ear or more than ; *ears' or to a fine of not less than );'000!00 nor more than )2;'000!00' or both! A l*ing A$t 662>' the offense res$ribes in G *ears! The filing of $om laint or information for alleged &iolation of 2A ,80; did not ha&e the effe$t of tolling the res$ri ti&e eriod! It is the filing of the $om laint or information $orres onding to the $orre$t offense whi$h rodu$es that effe$t!

C R&lin3( 3alvacion, et al vs" 6entral ank, et al ! G2 No! E8D26' Aug! 2,' ,EED )etitioner Karen 5! Sal&a$ion' a minor' was detained and ra ed b* Greg Bartelli' an Ameri$an tourist! Sal&a$ion was later on res$ued b* the oli$e' Bartelli was arrested' and $riminal $ases for serious illegal detention and ra e were filed against the latter! A $ase for damages was also filed b* Sal&a$ion and her arents against Bartelli! Bartelli was able to es$a e from -ail and the $riminal $ases against him were thereafter ar$hi&ed! <owe&er' the $i&il $ase for damages against Bartelli $ontinued and -udgment was rendered in fa&or of

8,