RA No 1405 | Secrecy of Bank

Deposits Act
September 9, 1955

As amended by PD No 1792

AN ACT PROHIBITING DISCLOSURE OF OR INQUIRY INTO, DEPOSITS WITH ANY BANKING INSTITUTION
AND PROVIDING PENALTY THEREFOR

SECTION 1. It is hereby declared to be the policy of the Government to give encouragement to the
people to deposit their money in banking institutions and to discourage private hoarding so that the
same may be properly utilized by banks in authorized loans to assist in the economic development of
the country.

SECTION 2. All deposits of whatever nature with banks or banking institutions in the Philippines
including investments in bonds issued by the Government of the Philippines, its political subdivisions
and its instrumentalities, are hereby considered as of an absolutely confidential nature and may not
be examined, inquired or looked into by any person, government official, bureau or office, except
when the examination is made in the course of a special or general examination of a bank and is
specifically authorized by the Monetary Board after being satisfied that there is reasonable ground to
believe that a bank fraud or serious irregularity has been or is being committed and that it is necessary
to look into the deposit to establish such fraud or irregularity, or when the examination is made by an
independent auditor hired by the bank to conduct its regular audit provided that the examination is
for audit purposes only and the results thereof shall be for the exclusive use of the bank, or upon
written permission of the depositor, or in cases of impeachment, or upon order of a competent court
in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or
invested is the subject matter of the litigation. (as amended by PD No 1792)

SECTION 3. It shall be unlawful for any official or employee of a bank to disclose to any person other
than those mentioned in Section Two hereof, or for an independent auditor hired by a bank to
conduct its regular audit to disclose to any person other than a bank director, official or employee
authorized by the bank, any information concerning said deposits. (as amended by PD No 1792)

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are inconsistent with the provisions of this Act are hereby repealed.

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

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

Approved, September 9, 1955.

Published in the Official Gazette, Vol. 51, No. 10, p. 4976 in October 1955

REPUBLIC ACT NO. 7653

 THE NEW CENTRAL BANK ACT

CHAPTER I Establishment and Organization of the

Bangko Sentral ng Pilipinas

ARTICLE I Creation, Responsibilities and Corporate Powers of the Bangko Sentral

SECTION 1. Declaration of Policy. — The State shall maintain a central monetary authority that shall
function and operate as an independent and accountable body corporate in the discharge of its
mandated responsibilities concerning money, banking and credit. In line with this policy, and
considering its unique functions and responsibilities, the central monetary authority established
under this Act, while being a government-owned corporation, shall enjoy fiscal and administrative
autonomy.

SECTION 2. Creation of the Bangko Sentral. — There is hereby established an independent central
monetary authority, which shall be a body corporate known as the Bangko Sentral ng
Pilipinas, hereafter referred to as the Bangko Sentral.

The capital of the Bangko Sentral shall be Fifty billion pesos (P50,000,000,000), to be fully subscribed
by the Government of the Republic, hereafter referred to as the Government, Ten billion pesos
(P10,000,000,000) of which shall be fully paid for by the Government upon the effectivity of this Act
and the balance to be paid for within a period of two (2) years from the effectivity of this Act in such
manner and form as the Government, through the Secretary of Finance and Secretary of Budget and
Management, may thereafter determine.

SECTION 3. Responsibility and Primary Objective. — The Bangko Sentral shall provide policy

directions in the areas of money, banking, and credit. It shall have supervision over the operations of
banks and exercise such regulatory powers as provided in this Act and other pertinent laws over the
operations of finance companies and non-bank financial institutions performing quasi-banking
functions, hereafter referred to as quasi-banks, and institutions performing similar functions.

The primary objective of the Bangko Sentral is to maintain price ability conducive to a balanced and
sustainable growth of the economy. It shall also promote and maintain monetary stability and the
convertibility of the peso.

SECTION 4. Place of Business. — The Bangko Sentral shall have its principal place of business in
Metro Manila, but may maintain branches, agencies and correspondents in such other places as the
proper conduct of its business may require.

SECTION 5. Corporate Powers. — The Bangko Sentral is hereby authorized to adopt, alter, and use a
corporate seal which shall be judicially noticed; to enter into contracts; to lease or own real and
personal property, and to sell or otherwise dispose of the same; to sue and be sued; and otherwise to
do and perform any and all things that may be necessary or proper to carry out the purposes of this
Act.

The Bangko Sentral may acquire and hold such assets and incur such liabilities in connection with its
operations authorized by the provisions of this Act, or as are essential to the proper conduct of such
operations.

The Bangko Sentral may compromise, condone or release, in whole or in part, any claim of or settled
liability to the Bangko Sentral, regardless of the amount involved, under such terms and conditions
as may be prescribed by the Monetary Board to protect the interests of the Bangko Sentral.

ARTICLE II The Monetary Board

SECTION 6. Composition of the Monetary Board. — The powers and functions of the Bangko
Sentral shall be exercised by the Bangko Sentral Monetary Board, hereafter referred to as the
Monetary Board, composed of seven (7) members appointed by the President of the Philippines for a
term of six (6) years.

The seven (7) members are:

(a) the Governor of the Bangko Sentral, who shall be the Chairman of the Monetary Board. The
Governor of the Bangko Sentral shall be head of a department and his appointment shall be subject
to confirmation by the Commission on Appointments. Whenever the Governor is unable to attend a
meeting of the Board, he shall designate a Deputy Governor to act as his alternate:  Provided, That in
such event, the Monetary Board shall designate one of its members as acting Chairman;

(b) a member of the Cabinet to be designated by the President of the Philippines. Whenever the
designated Cabinet Member is unable to attend a meeting of the Board, he shall designate an
Undersecretary in his Department to attend as his alternate; and

(c) five (5) members who shall come from the private sector, all of whom shall serve full-
time: Provided, however, That of the members first appointed under the provisions of this
subsection, three (3) shall have a term of six (6) years, and the other two (2), three (3) years.

No member of the Monetary Board may be reappointed more than once.

SECTION 7. Vacancies. — Any vacancy in the Monetary Board created by the death, resignation, or
removal of any member shall be filled by the appointment of a new member to complete the
unexpired period of the term of the member concerned.

SECTION 8. Qualifications. — The members of the Monetary Board must be natural-born citizens of the
Philippines, at least thirty-five (35) years of age, with the exception of the Governor who should at
least be forty (40) years of age, of good moral character, of unquestionable integrity, of known probity
and patriotism, and with recognized competence in social and economic disciplines.

SECTION 9. Disqualifications. — In addition to the disqualifications imposed by Republic Act No. 6713,
a member of the Monetary Board is disqualified from being a director, officer, employee, consultant,
lawyer, agent or stockholder of any bank, quasi-bank or any other institution which is subject to
supervision or examination by the Bangko Sentral, in which case such member shall resign from, and
divest himself of any and all interests in such institution before assumption of office as member of the
Monetary Board.

The members of the Monetary Board coming from the private sector shall not hold any other public
office or public employment during their tenure.

No person shall be a member of the Monetary Board if he has been connected directly with any
multilateral banking or financial institution or has a substantial interest in any private bank in the
Philippines, within one (1) year prior to his appointment; likewise, no member of the Monetary Board
shall be employed in any such institution within two (2) years after the expiration of his term except
when he serves as an official representative of the Philippine Government to such institution.

SECTION 10. Removal. — The President may remove any member of the Monetary Board for any of the
following reasons:

(a) If the member is subsequently disqualified under the provisions of Section 8 of this Act; or

(b) If he is physically or mentally incapacitated that he cannot properly discharge his duties and
responsibilities and such incapacity has lasted for more than six (6) months; or

(c) If the member is guilty of acts or operations which are of fraudulent or illegal character or which
are manifestly opposed to the aims and interests of the Bangko Sentral; or

(d) If the member no longer possesses the qualifications specified in Section 8 of this Act.

SECTION 11. Meetings. — The Monetary Board shall meet at least once a week. The Board may be
called to a meeting by the Governor of the Bangko Sentral or by two (2) other members of the Board.

The presence of four (4) members shall constitute a quorum: Provided, That in all cases the Governor
or his duly designated alternate shall be among the four (4).

Unless otherwise provided in this Act, all decisions of the Monetary Board shall require the
concurrence of at least four (4) members.

The Bangko Sentral shall maintain and preserve a complete record of the proceedings and
deliberations of the Monetary Board, including the tapes and transcripts of the stenographic notes,
either in their original form or in microfilm.

SECTION 12. Attendance of the Deputy Governors. — The Deputy Governors may attend the meetings
of the Monetary Board with the right to be heard.

SECTION 13. Salary. — The salary of the Governor and the members of the Monetary Board from the
private sector shall be fixed by the President of the Philippines at a sum commensurate to the
importance and responsibility attached to the position.

SECTION 14. Withdrawal of Persons Having a Personal Interest. — In addition to the requirements
of Republic Act No. 6713, any member of the Monetary Board with personal or pecuniary interest in
any matter in the agenda of the Monetary Board shall disclose his interest to the Board and shall retire
from the meeting when the matter is taken up. The decision taken on the matter shall be made public.
The minutes shall reflect the disclosure made and the retirement of the member concerned from the
meeting.

SECTION 15. Exercise of Authority. — In the exercise of its authority, the Monetary Board shall:

(a) issue rules and regulations it considers necessary for the effective discharge of the responsibilities
and exercise of the powers vested upon the Monetary Board and the Bangko Sentral. The rules and
regulations issued shall be reported to the President and the Congress within fifteen (15) days from
the date of their issuance;

(b) direct the management, operations, and administration of the Bangko Sentral, reorganize its
personnel, and issue such rules and regulations as it may deem necessary or convenient for this
purpose. The legal units of the Bangko Sentral shall be under the exclusive supervision and control of
the Monetary Board;

(c) establish a human resource management system which shall govern the selection, hiring,
appointment, transfer, promotion, or dismissal of all personnel. Such system shall aim to establish
professionalism and excellence at all levels of the Bangko Sentral in accordance with sound
principles of management.

A compensation structure, based on job evaluation studies and wage surveys and subject to the
Board's approval, shall be instituted as an integral component of the Bangko Sentral's human
resource development program: Provided, That the Monetary Board shall make its own system
conform as closely as possible with the principles provided for under Republic Act No.
6758: Provided, however, That compensation and wage structure of employees whose positions fall
under salary grade 19 and below shall be in accordance with the rates prescribed under  Republic Act
No. 6758.

On the recommendation of the Governor, appoint, fix the remunerations and other emoluments, and
remove personnel of the Bangko Sentral, subject to pertinent civil service laws: Provided, That the
Monetary Board shall have exclusive and final authority to promote, transfer, assign, or reassign
personnel of the Bangko Sentral and these personnel actions are deemed made in the interest of the
service and not disciplinary: Provided, further, That the Monetary Board may delegate such authority
to the Governor under such guidelines as it may determine.

(d) adopt an annual budget for and authorize such expenditures by the Bangko Sentral as are in the
interest of the effective administration and operations of the Bangko Sentral in accordance with
applicable laws and regulations; and

(e) indemnify its members and other officials of the Bangko Sentral, including personnel of the
departments performing supervision and examination functions against all costs and expenses
reasonably incurred by such persons in connection with any civil or criminal action, suit or
proceedings to which he may be, or is, made a party by reason of the performance of his functions or
duties, unless he is finally adjudged in such action or proceeding to be liable for negligence or
misconduct.

In the event of a settlement or compromise, indemnification shall be provided only in connection with
such matters covered by the settlement as to which the Bangko Sentral is advised by external
counsel that the person to be indemnified did not commit any negligence or misconduct.
The costs and expenses incurred in defending the aforementioned action, suit or proceeding may be
paid by the Bangko Sentral in advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of the member, officer, or employee to repay the amount
advanced should it ultimately be determined by the Monetary Board that he is not entitled to be
indemnified as provided in this subsection.

SECTION 16. Responsibility. — Members of the Monetary Board, officials, examiners, and employees of
the Bangko Sentral who willfully violate this Act or who are guilty of negligence, abuses or acts of
malfeasance or misfeasance or fail to exercise extraordinary diligence in the performance of his duties
shall be held liable for any loss or injury suffered by the Bangko Sentral or other banking institutions
as a result of such violation, negligence, abuse, malfeasance, misfeasance or failure to exercise
extraordinary diligence.

Similar responsibility shall apply to members, officers, and employees of the Bangko Sentral for: (1)
the disclosure of any information of a confidential nature, or any information on the discussions or
resolutions of the Monetary Board, or about the confidential operations of the Bangko Sentral, unless
the disclosure is in connection with the performance of official functions with the Bangko Sentral, or
is with prior authorization of the Monetary Board or the Governor; or (2) the use of such information
for personal gain or to the detriment of the Government, the Bangko Sentral or third
parties: Provided, however, That any data or information required to be submitted to the President
and/or the Congress, or to be published under the provisions of this Act shall not be considered
confidential.

ARTICLE III The Governor and Deputy Governors of the Bangko Sentral

SECTION 17. Powers and Duties of the Governor. — The Governor shall be the chief executive officer of
the Bangko Sentral. His powers and duties shall be to:

(a) prepare the agenda for the meetings of the Monetary Board and to submit for the consideration of
the Board the policies and measures which he believes to be necessary to carry out the purposes and
provisions of this Act;

(b) execute and administer the policies and measures approved by the Monetary Board;

(c) direct and supervise the operations and internal administration of the Bangko Sentral. The
Governor may delegate certain of his administrative responsibilities to other officers or may assign
specific tasks or responsibilities to any full-time member of the Monetary Board without additional
remuneration or allowance whenever he may deem fit or subject to such rules and regulations as the
Monetary Board may prescribe;

(d) appoint and fix the remunerations and other emoluments of personnel below the rank of a
department head in accordance with the position and compensation plans approved by the Monetary
Board, as well as to impose disciplinary measures upon personnel of the Bangko Sentral, subject to
the provisions of Section 15(c) of this Act: Provided, That removal of personnel shall be with the
approval of the Monetary Board;
(e) render opinions, decisions, or rulings, which shall be final and executory until reversed or modified
by the Monetary Board, on matters regarding application or enforcement of laws pertaining to
institutions supervised by the Bangko Sentral and laws pertaining to quasi-banks, as well as
regulations, policies or instructions issued by the Monetary Board, and the implementation thereof;
and

(f) exercise such other powers as may be vested in him by the Monetary Board.

SECTION 18. Representation of the Monetary Board and the Bangko Sentral. — The Governor of
the Bangko Sentral shall be the principal representative of the Monetary Board and of the Bangko
Sentral and, in such capacity and in accordance with the instructions of the Monetary Board, he shall
be empowered to:

(a) represent the Monetary Board and the Bangko Sentral in all dealings with other offices, agencies
and instrumentalities of the Government and all other persons or entities, public or private, whether
domestic, foreign or international;

(b) sign contracts entered into by the Bangko Sentral, notes and securities issued by the Bangko
Sentral, all reports, balance sheets, profit and loss statements, correspondence and other documents
of the Bangko Sentral.

The signature of the Governor may be in facsimile whenever appropriate;

(c) represent the Bangko Sentral, either personally or through counsel, including private counsel, as
may be authorized by the Monetary Board, in any legal proceedings, action or specialized legal
studies; and

(d) delegate his power to represent the Bangko Sentral, as provided in subsections (a), (b) and (c) of
this section, to other officers upon his own responsibility: Provided, however, That in order to
preserve the integrity and the prestige of his office, the Governor of the  Bangko Sentral may choose
not to participate in preliminary discussions with any multilateral banking or financial institution on
any negotiations for the Government within or outside the Philippines. During the negotiations, he
may instead be represented by a permanent negotiator.

SECTION 19. Authority of the Governor in Emergencies. — In case of emergencies where time is
insufficient to call a meeting of the Monetary Board, the Governor of the Bangko Sentral, with the
concurrence of two (2) other members of the Monetary Board, may decide any matter or take any
action within the authority of the Board.

The Governor shall submit a report to the President and Congress within seventy-two (72) hours after
the action has been taken.

At the soonest possible time, the Governor shall call a meeting of the Monetary Board to submit his
action for ratification.

SECTION 20. Outside Interests of the Governor and the Full-time Members of the Board. — The
Governor of the Bangko Sentral and the full-time members of the Board shall limit their professional
activities to those pertaining directly to their positions with the Bangko Sentral. Accordingly, they
may not accept any other employment, whether public or private, remunerated or ad honorem, with
the exception of positions in eleemosynary, civic, cultural or religious organizations or whenever, by
designation of the President, the Governor or the full-time member is tasked to represent the interest
of the Government or other government agencies in matters connected with or affecting the economy
or the financial system of the country.

SECTION 21. Deputy Governors. — The Governor of the Bangko Sentral, with the approval of the
Monetary Board, shall appoint not more than three (3) Deputy Governors who shall perform duties as
may be assigned to them by the Governor and the Board.

In the absence of the Governor, a Deputy Governor designated by the Governor shall act as chief
executive of the Bangko Sentral and shall exercise the powers and perform the duties of the
Governor. Whenever the Governor is unable to attend meetings of government boards or councils in
which he is an ex officio member pursuant to provisions of special laws, a Deputy Governor as may be
designated by the Governor shall be vested with authority to participate and exercise the right to vote
in such meetings. acd

ARTICLE IV Operations of the Bangko Sentral

SECTION 22. Research and Statistics. — The Bangko Sentral shall prepare data and conduct
economic research for the guidance of the Monetary Board in the formulation and implementation of
its policies. Such data shall include, among others, forecasts of the balance of payments of the
Philippines, statistics on the monthly movement of the monetary aggregates and of prices and other
statistical series and economic studies useful for the formulation and analysis of monetary, banking,
credit and exchange policies.

SECTION 23. Authority to Obtain Data and Information. — The Bangko Sentral shall have the
authority to request from government offices and instrumentalities, or government-owned or -
controlled corporations, any data which it may require for the proper discharge of its functions and
responsibilities. TheBangko Sentral through the Governor or in his absence, a duly authorized
representative shall have the power to issue a subpoena for the production of the books and records
for the aforesaid purpose. Those who refuse the subpoena without justifiable cause, or who refuse to
supply the bank with data requested or required, shall be subject to punishment for contempt in
accordance with the provisions of the Rules of Court.

Data on individual firms, other than banks, gathered by the Department of Economic Research and
other departments or units of the Bangko Sentral shall not be made available to any person or entity
outside of the Bangko Sentral whether public or private except under order of the court or under
such conditions as may be prescribed by the Monetary Board: Provided, however, That the collective
data on firms may be released to interested persons or entities: Provided, finally, That in the case of
data on banks, the provisions of Section 27 of this Act shall apply.

SECTION 24. Training of Technical Personnel. — The Bangko Sentral shall promote and sponsor the
training of technical personnel in the field of money and banking. Toward this end, the Bangko
Sentral is hereby authorized to defray the costs of study, at home or abroad, of qualified employees
of the Bangko Sentral, of promising university graduates or of any other qualified persons who shall
be determined by proper competitive examinations. The Monetary Board shall prescribe rules and
regulations to govern the training program of the Bangko Sentral.
SECTION 25. Supervision and Examination. — The Bangko Sentral shall have supervision over, and
conduct periodic or special examinations of, banking institutions and quasi-banks, including their
subsidiaries and affiliates engaged in allied activities.

For purposes of this section, a subsidiary means a corporation more than fifty percent (50%) of the
voting stock of which is owned by a bank or quasi-bank and an affiliate means a corporation the
voting stock of which, to the extent of fifty percent (50%) or less, is owned by a bank or quasi-bank or
which is related or linked to such institution or intermediary through common stockholders or such
other factors as may be determined by the Monetary Board.

The department heads and the examiners of the supervising and/or examining departments are
hereby authorized to administer oaths to any director, officer, or employee of any institution under
their respective supervisions or subject to their examination and to compel the presentation of all
books, documents, papers or records necessary in their judgment to ascertain the facts relative to the
true condition of any institution as well as the books and records of persons and entities relative to or
in connection with the operations, activities or transactions of the institution under examination,
subject to the provision of existing laws protecting or safeguarding the secrecy or confidentiality of
bank deposits as well as investments of private persons, natural or juridical, in debt instruments
issued by the Government.

No restraining order or injunction shall be issued by the court enjoining the Bangko Sentral from
examining any institution subject to supervision or examination by the Bangko Sentral, unless there
is convincing proof that the action of the Bangko Sentral is plainly arbitrary and made in bad faith
and the petitioner or plaintiff files with the clerk or judge of the court in which the action is pending a
bond executed in favor of the Bangko Sentral, in an amount to be fixed by the court. The provisions of
Rule 58 of the New Rules of Court insofar as they are applicable and not inconsistent with the
provisions of this section shall govern the issuance and dissolution of the restraining order or
injunction contemplated in this section.

SECTION 26. Bank Deposits and Investments. — Any director, officer or stockholder who, together
with his related interest, contracts a loan or any form of financial accommodation from: (1) his bank;
or (2) from a bank (a) which is a subsidiary of a bank holding company of which both his bank and the
lending bank are subsidiaries or (b) in which a controlling proportion of the shares is owned by the
same interest that owns a controlling proportion of the shares of his bank, in excess of five percent
(5%) of the capital and surplus of the bank, or in the maximum amount permitted by law, whichever is
lower, shall be required by the lending bank to waive the secrecy of his deposits of whatever nature in
all banks in the Philippines. Any information obtained from an examination of his deposits shall be
held strictly confidential and may be used by the examiners only in connection with their supervisory
and examination responsibility or by the Bangko Sentral in an appropriate legal action it has initiated
involving the deposit account.

SECTION 27. Prohibitions. — In addition to the prohibitions found in Republic Act Nos. 3019 and 6713,
personnel of the Bangko Sentral are hereby prohibited from:

(a) being an officer, director, lawyer or agent, employee, consultant or stockholder, directly or
indirectly, of any institution subject to supervision or examination by the Bangko Sentral, except
non-stock savings and loan associations and provident funds organized exclusively for employees of
theBangko Sentral and except as otherwise provided in this Act;
(b) directly or indirectly requesting or receiving any gift, present or pecuniary or material benefit for
himself or another, from any institution subject to supervision or examination by the Bangko Sentral;

(c) revealing in any manner, except under orders of the court, the Congress or any government office
or agency authorized by law, or under such conditions as may be prescribed by the Monetary Board,
information relating to the condition or business of any such institution. This prohibition shall not be
held to apply to the giving of information to the Monetary Board or the Governor of the Bangko
Sentral, or to any person authorized by either of them, in writing, to receive such information; and

(d) borrowing from any institution subject to supervision or examination by the Bangko Sentral shall
be prohibited unless said borrowings are adequately secured, fully disclosed to the Monetary Board,
and shall be subject to such further rules and regulations as the Monetary Board may
prescribe: Provided, however, That personnel of the supervising and examining departments are
prohibited from borrowing from a bank under their supervision or examination.

SECTION 28. Examination and Fees. — The supervising and examining department head, personally or
by deputy, shall examine the books of every banking institution once in every twelve (12) months, and
at such other times as the Monetary Board by an affirmative vote of five (5) members, may deem
expedient and to make a report on the same to the Monetary Board: Provided, That there shall be an
interval of at least twelve (12) months between annual examinations.

The bank concerned shall afford to the head of the appropriate supervising and examining
departments and to his authorized deputies full opportunity to examine its books, cash and available
assets and general condition at any time during banking hours when requested to do so by
the Bangko Sentral: Provided, however, That none of the reports and other papers relative to such
examinations shall be open to inspection by the public except insofar as such publicity is incidental to
the proceedings hereinafter authorized or is necessary for the prosecution of violations in connection
with the business of such institutions.

Banking and quasi-banking institutions which are subject to examination by the Bangko Sentral shall
pay to the Bangko Sentral, within the first thirty (30) days of each year, an annual fee in an amount
equal to a percentage as may be prescribed by the Monetary Board of its average total assets during
the preceding years as shown on its end-of-month balance sheets, after deducting cash on hand and
amounts due from banks, including the Bangko Sentral and banks abroad.

SECTION 29. Appointment of Conservator. — Whenever, on the basis of a report submitted by the

appropriate supervising or examining department, the Monetary Board finds that a bank or a quasi-
bank is in a state of continuing inability or unwillingness to maintain a condition of liquidity deemed
adequate to protect the interest of depositors and creditors, the Monetary Board may appoint a
conservator with such powers as the Monetary Board shall deem necessary to take charge of the
assets, liabilities, and the management thereof, reorganize the management, collect all monies and
debts due said institution, and exercise all powers necessary to restore its viability. The conservator
shall report and be responsible to the Monetary Board and shall have the power to overrule or revoke
the actions of the previous management and board of directors of the bank or quasi-bank.

The conservator should be competent and knowledgeable in bank operations and management. The
conservatorship shall not exceed one (1) year.

The conservator shall receive remuneration to be fixed by the Monetary Board in an amount not to
exceed two-thirds (2/3) of the salary of the president of the institution in one (1) year, payable in
twelve (12) equal monthly payments: Provided, That, if at any time within the one-year period, the
conservatorship is terminated on the ground that the institution can operate on its own, the
conservator shall receive the balance of the remuneration which he would have received up to the
end of the year; but if the conservatorship is terminated on other grounds, the conservator shall not
be entitled to such remaining balance. The Monetary Board may appoint a conservator connected
with the Bangko Sentral, in which case he shall not be entitled to receive any remuneration or
emoluments from the Bangko Sentral during the conservatorship. The expenses attendant to the
conservatorship shall be borne by the bank or quasi-bank concerned.

The Monetary Board shall terminate the conservatorship when it is satisfied that the institution can
continue to operate on its own and the conservatorship is no longer necessary. The conservatorship
shall likewise be terminated should the Monetary Board, on the basis of the report of the conservator
or of its own findings, determine that the continuance in business of the institution would involve
probable loss to its depositors or creditors, in which case the provisions of Section 30 shall apply.

SECTION 30. Proceedings in Receivership and Liquidation. — Whenever, upon report of the head of the
supervising or examining department, the Monetary Board finds that a bank or quasi-bank:

(a) is unable to pay its liabilities as they become due to the ordinary course of business: Provided,
That this shall not include inability to pay caused by extraordinary demands induced by financial
panic in the banking community;

(b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its liabilities; or

(c) cannot continue in business without involving probable losses to its depositors or creditors; or

(d) has willfully violated a cease and desist order under Section 37 that has become final, involving
acts or transactions which amount to fraud or a dissipation of the assets of the institution; in which
cases, the Monetary Board may summarily and without need for prior hearing forbid the institution
from doing business in the Philippines and designate the Philippine Deposit Insurance Corporation as
receiver of the banking institution.

For a quasi-bank, any person of recognized competence in banking or finance may be designed as
receiver.

The receiver shall immediately gather and take charge of all the assets and liabilities of the institution,
administer the same for the benefit of its creditors, and exercise the general powers of a receiver
under the Revised Rules of Court but shall not, with the exception of administrative expenditures, pay
or commit any act that will involve the transfer or disposition of any asset of the institution: Provided,
That the receiver may deposit or place the funds of the institution in non-speculative investments. The
receiver shall determine as soon as possible, but not later than ninety (90) days from take-over,
whether the institution may be rehabilitated or otherwise placed in such a condition so that it may be
permitted to resume business with safety to its depositors and creditors and the general
public: Provided, That any determination for the resumption of business of the institution shall be
subject to prior approval of the Monetary Board.

If the receiver determines that the institution cannot be rehabilitated or permitted to resume business
in accordance with the next preceding paragraph, the Monetary Board shall notify in writing the board
of directors of its findings and direct the receiver to proceed with the liquidation of the institution. The
receiver shall:
(1) file ex parte with the proper regional trial court, and without requirement of prior notice or any
other action, a petition for assistance in the liquidation of the institution pursuant to a liquidation
plan adopted by the Philippine Deposit Insurance Corporation for general application to all closed
banks. In case of quasi-banks, the liquidation plan shall be adopted by the Monetary Board. Upon
acquiring jurisdiction, the court shall, upon motion by the receiver after due notice, adjudicate
disputed claims against the institution, assist the enforcement of individual liabilities of the
stockholders, directors and officers, and decide on other issues as may be material to implement the
liquidation plan adopted. The receiver shall pay the cost of the proceedings from the assets of the
institution.

(2) convert the assets of the institution to money, dispose of the same to creditors and other parties,
for the purpose of paying the debts of such institution in accordance with the rules on concurrence
and preference of credit under the Civil Code of the Philippines and he may, in the name of the
institution, and with the assistance of counsel as he may retain, institute such actions as may be
necessary to collect and recover accounts and assets of, or defend any action against, the institution.
The assets of an institution under receivership or liquidation shall be deemed in custodia legis in the
hands of the receiver and shall, from the moment the institution was placed under such receivership
or liquidation, be exempt from any order of garnishment, levy, attachment, or execution.

The actions of the Monetary Board taken under this section or under Section 29 of this Act shall be
final and executory, and may not be restrained or set aside by the court except on petition
for certiorari on the ground that the action taken was in excess of jurisdiction or with such grave
abuse of discretion as to amount to lack or excess of jurisdiction. The petition for  certiorari may only
be filed by the stockholders of record representing the majority of the capital stock within ten (10)
days from receipt by the board of directors of the institution of the order directing receivership,
liquidation or conservatorship.

The designation of a conservator under Section 29 of this Act or the appointment of a receiver under
this section shall be vested exclusively with the Monetary Board. Furthermore, the designation of a
conservator is not a precondition to the designation of a receiver.

SECTION 31. Distribution of Assets. — In case of liquidation of a bank or quasi-bank, after payment of
the cost of proceedings, including reasonable expenses and fees of the receiver to be allowed by the
court, the receiver shall pay the debts of such institution, under order of the court, in accordance with
the rules on concurrence and preference of credit as provided in the Civil Code.

SECTION 32. Disposition of Revenues and Earnings. — All revenues and earnings realized by the
receiver in winding up the affairs and administering the assets of any bank or quasi-bank within the
purview of this Act shall be used to pay the costs, fees and expenses mentioned in the preceding
section, salaries of such personnel whose employment is rendered necessary in the discharge of the
liquidation together with other additional expenses caused thereby. The balance of revenues and
earnings, after the payment of all said expenses, shall form part of the assets available for payment to
creditors.

SECTION 33. Disposition of Banking Franchise. — The Bangko Sentral may, if public interest so

requires, award to an institution, upon such terms and conditions as the Monetary Board may
approve, the banking franchise of a bank under liquidation to operate in the area where said bank or
its branches were previously operating: Provided, That whatever proceeds may be realized from such
award shall be subject to the appropriate exclusive disposition of the Monetary Board.
SECTION 34. Refusal to Make Reports or Permit Examination. — Any officer, owner, agent, manager,
director or officer-in-charge of any institution subject to the supervision or examination by
the Bangko Sentral within the purview of this Act who, being required in writing by the Monetary
Board or by the head of the supervising and examining department willfully refuses to file the required
report or permit any lawful examination into the affairs of such institution shall be punished by a fine
of not less than Fifty thousand pesos (P50,000) nor more than One hundred thousand pesos
(P100,000) or by imprisonment of not less than one (1) year nor more than five (5) years, or both, in the
discretion of the court.

SECTION 35. False Statement. — The willful making of a false or misleading statement on a material
fact to the Monetary Board or to the examiners of theBangko Sentral shall be punished by a fine of
not less than One hundred thousand pesos (P100,000) nor more than Two hundred thousand pesos
(P200,000), or by imprisonment of not more than five (5) years, or both, at the discretion of the court.
cd

SECTION 36. Proceedings Upon Violation of This Act and Other Banking Laws, Rules, Regulations,
Orders or Instructions. — Whenever a bank or quasi-bank, or whenever any person or entity willfully
violates this Act or other pertinent banking laws being enforced or implemented by the  Bangko
Sentral or any order, instruction, rule or regulation issued by the Monetary Board, the person or
persons responsible for such violation shall unless otherwise provided in this Act be punished by a fine
of not less than Fifty thousand pesos (P50,000) nor more than Two hundred thousand pesos
(P200,000) or by imprisonment of not less than two (2) years nor more than ten (10) years, or both, at
the discretion of the court.

Whenever a bank or quasi-bank persists in carrying on its business in an unlawful or unsafe manner,
the Board may, without prejudice to the penalties provided in the preceding paragraph of this section
and the administrative sanctions provided in Section 37 of this Act, take action under Section 30 of
this Act.

SECTION 37. Administrative Sanctions on Banks and Quasi-banks. — Without prejudice to the criminal
sanctions against the culpable persons provided in Sections 34, 35, and 36 of this Act, the Monetary
Board may, at its discretion, impose upon any bank or quasi-bank, their directors and/or officers, for
any willful violation of its charter or by-laws, willful delay in the submission of reports or publications
thereof as required by law, rules and regulations; any refusal to permit examination into the affairs of
the institution; any willful making of a false or misleading statement to the Board or the appropriate
supervising and examining department or its examiners; any willful failure or refusal to comply with,
or violation of, any banking law or any order, instruction or regulation issued by the Monetary Board,
or any order, instruction or ruling by the Governor; or any commission or irregularities, and/or
conducting business in an unsafe or unsound manner as may be determined by the Monetary Board,
the following administrative sanctions, whenever applicable:

(a) fines in amounts as may be determined by the Monetary Board to be appropriate, but in no case to
exceed Thirty thousand pesos (P30,000) a day for each violation, taking into consideration the
attendant circumstances, such as the nature and gravity of the violation or irregularity and the size of
the bank or quasi-bank;

(b) suspension of rediscounting privileges or access to Bangko Sentral credit facilities;

(c) suspension of lending or foreign exchange operations or authority to accept new deposits or make
new investments;

(d) suspension of interbank clearing privileges; and/or

(e) revocation of quasi-banking license.

Resignation or termination from office shall not exempt such director or officer from administrative or
criminal sanctions.

The Monetary Board may, whenever warranted by circumstances, preventively suspend any director
or officer of a bank or quasi-bank pending an investigation: Provided, That should the case be not
finally decided by the Bangko Sentral within a period of one hundred twenty (120) days after the date
of suspension, said director or officer shall be reinstated in his position: Provided, further, That when
the delay in the disposition of the case is due to the fault, negligence or petition of the director or
officer, the period of delay shall not be counted in computing the period of suspension herein
provided.

The above administrative sanctions need not be applied in the order of their severity.

Whether or not there is an administrative proceeding, if the institution and/or the directors and/or
officers concerned continue with or otherwise persist in the commission of the indicated practice or
violation, the Monetary Board may issue an order requiring the institution and/or the directors and/or
officers concerned to cease and desist from the indicated practice or violation, and may further order
that immediate action be taken to correct the conditions resulting from such practice or violation. The
cease and desist order shall be immediately effective upon service on the respondents.

The respondents shall be afforded an opportunity to defend their action in a hearing before the
Monetary Board or any committee chaired by any Monetary Board member created for the purpose,
upon request made by the respondents within five (5) days from their receipt of the order. If no such
hearing is requested within said period, the order shall be final. If a hearing is conducted, all issues
shall be determined on the basis of records, after which the Monetary Board may either reconsider or
make final its order.

The Governor is hereby authorized, at his discretion, to impose upon banking institutions, for any
failure to comply with the requirements of law, Monetary Board regulations and policies, and/or
instructions issued by the Monetary Board or by the Governor, fines not in excess of Ten thousand
pesos (P10,000) a day for each violation, the imposition of which shall be final and executory until
reversed, modified or lifted by the Monetary Board on appeal.

SECTION 38. Operating Departments of the Bangko Sentral. — The Monetary Board shall, in
accordance with its authority under this Act, determine and provide for such operating departments
and other offices, including a public information office, of the Bangko Sentral as it deems convenient
for the proper and efficient conduct of the operations and the accomplishment of the objectives of
the Bangko Sentral. The functions and duties of such operating departments and other offices shall
be determined by the Monetary Board. acd
 ARTICLE V Reports and Publications

SECTION 39. Reports and Publications. — The Bangko Sentral shall publish a general balance sheet
showing the volume and composition of its assets and liabilities as of the last working day of the
month within sixty (60) days after the end of each month except for the month of December, which
shall be submitted within ninety (90) days after the end thereof.

The Monetary Board shall publish and submit the following reports to the President and to the
Congress:

(a) not later than ninety (90) days after the end of each quarter, an analysis of economic and financial
developments, including the condition of net international reserves and monetary aggregates;

(b) within ninety (90) days after the end of the year, the preceding year's budget and profit and loss
statement of the Bangko Sentral showing in reasonable detail the result of its operations;

(c) one hundred twenty (120) days after the end of each semester, a review of the state of the financial
system; and

(d) as soon as practicable, abnormal movements in monetary aggregates and the general price level,
and, not later than seventy-two (72) hours after they are taken, remedial measures in response to such
abnormal movements.

SECTION 40. Annual Report. — Before the end of March of each year, the Bangko Sentral shall publish
and submit to the President and the Congress an annual report on the condition of the Bangko
Sentral including a review of the policies and measures adopted by the Monetary Board during the
past year and an analysis of the economic and financial circumstances which gave rise to said policies
and measures.

The annual report shall also include a statement of the financial condition of the Bangko Sentral and
a statistical appendix which shall present, as a minimum, the following data:

(a) the monthly movement of monetary aggregates and their components;

(b) the monthly movement of purchases and sales of foreign exchange and of the international
reserves of the Bangko Sentral;

(c) the balance of payments of the Philippines;

(d) monthly indices of consumer prices and of import and export prices;

(e) the monthly movement, in summary form, of exports and imports, by volume and value;

(f) the monthly movement of the accounts of the Bangko Sentral and of other banks;

(g) the principal data on government receipts and expenditures and on the status of the public debt,
both domestic and foreign; and
(h) the texts of the major legal and administrative measures adopted by the Government and the
Monetary Board during the year which relate to the functions or operations of the Bangko Sentral or
of the financial system.

The Bangko Sentral shall publish another version of the annual report in terms understandable to the
layman.

Failure to comply with the reportorial requirements pursuant to this article without justifiable reason
as may be determined by the Monetary Board shall cause the withholding of the salary of the
personnel concerned until such requirements are complied with.

SECTION 41. Signatures on Statements. — The balance sheets and other financial statements of
the Bangko Sentral shall be signed by the officers responsible for their preparation, by the Governor,
and by the auditor of the Bangko Sentral.

ARTICLE VI Profits, Losses, and Special Accounts

SECTION 42. Fiscal Year. — The fiscal year of the Bangko Sentral shall begin on January first and end
on December thirty-first of each year.

SECTION 43. Computation of Profits and Losses. — Within the first thirty (30) days following the end of
each year, the Bangko Sentral shall determine its net profits or losses. In the calculation of net
profits, the Bangko Sentral shall make adequate allowance or establish adequate reserves for bad
and doubtful accounts.

SECTION 44. Distribution of Net Profits. — Within the first sixty (60) days following the end of each
fiscal year, the Monetary Board shall determine and carry out the distribution of the net profits, in
accordance with the following rule:

Fifty percent (50%) of the net profits shall be carried to surplus and the remaining fifty percent (50%)
shall revert back to the National Treasury, except as otherwise provided in the transitory provisions of
this Act.

SECTION 45. Revaluation Profits and Losses. — Profits or losses arising from any revaluation of
the Bangko Sentral's net assets or liabilities in gold or foreign currencies with respect to the
Philippine peso shall not be included in the computation of the annual profits and losses of
the Bangko Sentral. Any profits or losses arising in this manner shall be offset by any amounts which,
as a consequence of such revaluations, are owed by the Philippines to any international or regional
intergovernmental financial institution of which the Philippines is a member or are owed by these
institutions to the Philippines. Any remaining profit or loss shall be carried in a special frozen account
which shall be named "Revaluation of International Reserve" and the net balance of which shall
appear either among the liabilities or among the assets of the Bangko Sentral, depending on whether
the revaluations have produced net profits or net losses.

The Revaluation of International Reserve account shall be neither credited nor debited for any
purposes other than those specifically authorized in this section.
SECTION 46. Suspense Accounts. — Sections 43 and 43-A of Republic Act No. 265, as amended,
creating the Monetary Adjustment Account (MAA) and the Exchange Stabilization Adjustment Account
(ESAA), respectively, are hereby repealed. Amounts outstanding as of the effective date of this Act
based on these accounts shall continue to be for the account of the Central Bank and shall be
governed by the transitory provisions of this Act.

The Revaluation of International Reserve (RIR) account as of the effective date of this Act of the
Central Bank shall continue to be for the account of the same entity and shall be governed by the
provisions of Section 44 of Republic Act No. 265, as amended, until otherwise provided for in
accordance with the transitory provisions of this Act.

ARTICLE VII

The Auditor

SECTION 47. Appointment and Personnel. — The Chairman of the Commission on Audit shall act as
the ex officio auditor of the Bangko Sentral and, as such, he is empowered and authorized to appoint
a representative who shall be the auditor of the Bangko Sentral and, in accordance with law, fix his
salary, and to appoint and fix the salaries and number of personnel to assist said representative in his
work. The salaries and other emoluments shall be paid by the Commission. The auditor of the  Bangko
Sentral and personnel under him may be removed only by the Chairman of the Commission.

The representative of the Chairman of the Commission must be a certified public accountant with at
least ten (10) years experience as such. No relative of any member of the Monetary Board or the
Chairman of the Commission within the sixth degree of consanguinity or affinity shall be appointed
such representative.

CHAPTER II The Bangko Sentral and the Means of

Payment

ARTICLE I The Unit of Monetary Value

SECTION 48. The Peso. — The unit of monetary value in the Philippines is the "peso," which is
represented by the sign "P."

The peso is divided into one hundred (100) equal parts called "centavos," which are represented by
the sign "c."
 ARTICLE II Issue of Means of Payment

A. Currency

SECTION 49. Definition of Currency. — The word "currency" is hereby defined, for purposes of this Act,
as meaning all Philippine notes and coins issued or circulating in accordance with the provisions of
this Act.

SECTION 50. Exclusive Issue Power. — The Bangko Sentral shall have the sole power and authority to
issue currency, within the territory of the Philippines. No other person or entity, public or private, may
put into circulation notes, coins or any other object or document which in the opinion of the Monetary
Board, might circulate as currency, nor reproduce or imitate the facsimiles of Bangko Sentral notes
without prior authority from the Bangko Sentral.

The Monetary Board may issue such regulations as it may deem advisable in order to prevent the
circulation of foreign currency or of currency substitutes as well as to prevent the reproduction of
facsimiles of Bangko Sentral notes.

The Bangko Sentral shall have the authority to investigate, make arrests, conduct searches and
seizures in accordance with law, for the purpose of maintaining the integrity of the currency.

Violation of this provision or of any regulation issued by the Bangko Sentral pursuant thereto shall
constitute an offense punishable by imprisonment of not less than five (5) years but not more than ten
(10) years. In case the Revised Penal Code provides for a greater penalty, then that penalty shall be
imposed.

SECTION 51. Liability for Notes and Coins. — Notes and coins issued by the Bangko Sentral shall be
liabilities of the Bangko Sentral and may be issued only against, and in amounts not exceeding, the
assets of the Bangko Sentral. Said notes and coins shall be a first and paramount lien on all assets of
the Bangko Sentral.

The Bangko Sentral's holdings of its own notes and coins shall not be considered as part of its
currency issue and, accordingly, shall not form part of the assets or liabilities of the Bangko Sentral.

SECTION 52. Legal Tender Power. — All notes and coins issued by the Bangko Sentral shall be fully
guaranteed by the Government of the Republic of the Philippines and shall be legal tender in the
Philippines for all debts, both public and private: Provided, however, That, unless otherwise fixed by
the Monetary Board, coins shall be legal tender in amounts not exceeding Fifty pesos (P50.00) for
denominations of Twenty-five centavos and above, and in amounts not exceeding Twenty pesos
(P20.00) for denominations of Ten centavos or less.

SECTION 53. Characteristics of the Currency. — The Monetary Board, with the approval of the
President of the Philippines, shall prescribe the denominations, dimensions, designs, inscriptions and
other characteristics of notes issued by the Bangko Sentral: Provided, however, That said notes
shall state that they are liabilities of the Bangko Sentral and are fully guaranteed by the Government
of the Republic of the Philippines. Said notes shall bear the signatures, in facsimile, of the President of
the Philippines and of the Governor of the Bangko Sentral.

Similarly, the Monetary Board, with the approval of the President of the Philippines, shall prescribe
the weight, fineness, designs, denominations and other characteristics of the coins issued by
the Bangko Sentral. In the minting of coins, the Monetary Board shall give full consideration to the
availability of suitable metals and to their relative prices and cost of minting.

SECTION 54. Printing of Notes and Minting of Coins. — The Monetary Board shall prescribe the
amounts of notes and coins to be printed and minted, respectively, and the conditions to which the
printing of notes and the minting of coins shall be subject. The Monetary Board shall have the
authority to contract institutions, mints or firms for such operations.

All expenses incurred in the printing of notes and the minting of coins shall be for the account of
the Bangko Sentral.

SECTION 55. Interconvertibility of Currency. — The Bangko Sentral shall exchange, on demand and

without charge, Philippine currency of any denomination for Philippine notes and coins of any other
denomination requested. If for any reason the Bangko Sentral is temporarily unable to provide notes
or coins of the denominations requested, it shall meet its obligations by delivering notes and coins of
the denominations which most nearly approximate those requested.

SECTION 56. Replacement of Currency Unfit for Circulation. — The Bangko Sentral shall withdraw

from circulation and shall demonetize all notes and coins which for any reason whatsoever are unfit
for circulation and shall replace them by adequate notes and coins: Provided, however, That
the Bangko Sentral shall not replace notes and coins the identification of which is impossible, coins
which show signs of filing, clipping or perforation, and notes which have lost more than two-fifths
(2/5) of their surface or all of the signatures inscribed thereon. Notes and coins in such mutilated
conditions shall be withdrawn from circulation and demonetized without compensation to the bearer.

SECTION 57. Retirement of Old Notes and Coins. — The Bangko Sentral may call in for replacement
notes of any series or denomination which are more than five (5) years old and coins which are more
than ten (10) years old.

Notes and coins called in for replacement in accordance with this provision shall remain legal tender
for a period of one (1) year from the date of call. After this period, they shall cease to be legal tender
but during the following year, or for such longer period as the Monetary Board may determine, they
may be exchanged at par and without charge in the Bangko Sentral and by agents duly authorized by
the Bangko Sentral for this purpose. After the expiration of this latter period, the notes and coins
which have not been exchanged shall cease to be a liability of the Bangko Sentral and shall be
demonetized. The Bangko Sentral shall also demonetize all notes and coins, which have been called
in and replaced.

B. Demand Deposits

SECTION 58. Definition. — For purposes of this Act, the term "demand deposits" means all those
liabilities of the Bangko Sentral and other banks which are denominated in Philippine currency and
are subject to payment in legal tender upon demand by the presentation of checks.
SECTION 59. Issue of Demand Deposits. — Only banks duly authorized to do so may accept funds or
create liabilities payable in pesos upon demand by the presentation of checks, and such operations
shall be subject to the control of the Monetary Board in accordance with the powers granted it with
respect thereto under this Act.

SECTION 60. Legal Character. — Checks representing demand deposits do not have legal tender
power and their acceptance in the payment of debts, both public and private, is at the option of the
creditor: Provided, however, That a check which has been cleared and credited to the account of the
creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount
credited to his account.

CHAPTER III Guiding Principles of Monetary

Administration by the Bangko Sentral

ARTICLE I Domestic Monetary Stabilization

SECTION 61. Guiding Principle. — The Monetary Board shall endeavor to control any expansion or
contraction in monetary aggregates which is prejudicial to the attainment or maintenance of price
stability.

SECTION 62. Power to Define Terms. — For purposes of this article and of this Act, the Monetary Board
shall formulate definitions of monetary aggregates, credit and prices and shall make public such
definitions and any changes thereof.

SECTION 63. Action When Abnormal Movements Occur in the Monetary Aggregates, Credit, or Price
Level. — Whenever abnormal movements in the monetary aggregates, in credit, or in prices endanger
the stability of the Philippine economy or important sectors thereof, the Monetary Board shall:

(a) take such remedial measures as are appropriate and within the powers granted to the Monetary
Board and the Bangko Sentral under the provisions of this Act; and

(b) submit to the President of the Philippines and the Congress, and make public, a detailed report
which shall include, as a minimum, a description and analysis of:

(1) the causes of the rise or fall of the monetary aggregates, of credit or of prices; cd

(2) the extent to which the changes in the monetary aggregates, in credit, or in prices have been
reflected in changes in the level of domestic output, employment, wages and economic activity in
general, and the nature and significance of any such changes; and

(3) the measures which the Monetary Board has taken and the other monetary, fiscal or administrative
measures which it recommends to be adopted.
Whenever the monetary aggregates, or the level of credit, increases or decreases by more than fifteen
percent (15%), or the cost of living index increases by more than ten percent (10%), in relation to the
level existing at the end of the corresponding month of the preceding year, or even though any of
these quantitative guidelines have not been reached when in its judgment the circumstances so
warrant, the Monetary Board shall submit the reports mentioned in this section, and shall state
therein whether, in the opinion of the Board, said changes in the monetary aggregates, credit or cost
of living represent a threat to the stability of the Philippine economy or of important sectors thereof.

The Monetary Board shall continue to submit periodic reports to the President of the Philippines and
to Congress until it considers that the monetary, credit or price disturbances have disappeared or
have been adequately controlled.

ARTICLE II International Monetary Stabilization

SECTION 64. International Monetary Stabilization. — The Bangko Sentral shall exercise its powers

under this Act to preserve the international value of the peso and to maintain its convertibility into
other freely convertible currencies primarily for, although not necessarily limited to, current payments
for foreign trade and invisibles.

SECTION 65. International Reserves. — In order to maintain the international stability and
convertibility of the Philippine peso, the Bangko Sentral shall maintain international reserves
adequate to meet any foreseeable net demands on the Bangko Sentral for foreign currencies.

In judging the adequacy of the international reserves, the Monetary Board shall be guided by the
prospective receipts and payments of foreign exchange by the Philippines. The Board shall give
special attention to the volume and maturity of the Bangko Sentral's own liabilities in foreign
currencies, to the volume and maturity of the foreign exchange assets and liabilities of other banks
operating in the Philippines and, insofar as they are known or can be estimated, the volume and
maturity of the foreign exchange assets and liabilities of all other persons and entities in the
Philippines.

SECTION 66. Composition of the International Reserves. — The international reserves of the Bangko

Sentral may include but shall not be limited to the following assets:

(a) gold; and

(b) assets in foreign currencies in the form of: documents and instruments customarily employed for
the international transfer of funds; demand and time deposits in central banks, treasuries and
commercial banks abroad; foreign government securities; and foreign notes and coins.

The Monetary Board shall endeavor to hold the foreign exchange resources of the  Bangko Sentral in
freely convertible currencies; moreover, the Board shall give particular consideration to the prospects
of continued strength and convertibility of the currencies in which the reserve is maintained, as well
as to the anticipated demands for such currencies. The Monetary Board shall issue regulations
determining the other qualifications which foreign exchange assets must meet in order to be included
in the international reserves of the Bangko Sentral.
The Bangko Sentral shall be free to convert any of the assets in its international reserves into other
assets as described in subsections (a) and (b) of this section.

SECTION 67. Action When the International Stability of the Peso Is Threatened. — Whenever the
international reserve of the Bangko Sentral falls to a level which the Monetary Board considers
inadequate to meet the prospective net demands on the Bangko Sentral for foreign currencies, or
whenever the international reserve appears to be in imminent danger of falling to such a level, or
whenever the international reserve is falling as a result of payments or remittances abroad which in
the opinion of the Monetary Board, are contrary to the national welfare, the Monetary Board shall:

(a) take such remedial measures as are appropriate and within the powers granted to the Monetary
Board and the Bangko Sentral under the provisions of this Act; and

(b) submit to the President of the Philippines and to Congress a detailed report which shall include, as
a minimum, a description and analysis of:

(1) the nature and causes of the existing or imminent decline;

(2) the remedial measures already taken or to be taken by the Monetary Board;

(3) the monetary, fiscal or administrative measures further proposed; and

(4) the character and extent of the cooperation required from other government agencies for the
successful execution of the policies of the Monetary Board.

If the resultant actions fail to check the deterioration of the reserve position of the Bangko Sentral, or
if the deterioration cannot be checked except by chronic restrictions on exchange and trade
transactions or by sacrifice of the domestic objectives of a balanced and sustainable growth of the
economy, the Monetary Board shall propose to the President, with appropriate notice to Congress,
such additional action as it deems necessary to restore equilibrium in the international balance of
payments of the Philippines.

The Monetary Board shall submit periodic reports to the President and to Congress until the threat to
the international monetary stability of the Philippines has disappeared.

CHAPTER IV Instruments of Bangko Sentral Action

ARTICLE I General Criterion

SECTION 68. Means of Action. — In order to achieve the primary objective of price stability, the
Monetary Board shall rely on its moral influence and the powers granted to it under this Act for the
management of monetary aggregates.
 ARTICLE II Operations in Gold and Foreign Exchange

SECTION 69. Purchases and Sales of Gold. — The Bangko Sentral may buy and sell gold in any form,
subject to such regulations as the Monetary Board may issue.

The purchases and sales of gold authorized by this section shall be made in the national currency at
the prevailing international market price as determined by the Monetary Board.

SECTION 70. Purchases and Sales of Foreign Exchange. — The Bangko Sentral may buy and sell
foreign notes and coins, and documents and instruments of types customarily employed for the
international transfer of funds. The Bangko Sentral may engage in future exchange operations.

The Bangko Sentral may engage in foreign exchange transactions with the following entities or
persons only:

(a) banking institutions operating in the Philippines;

(b) the Government, its political subdivisions and instrumentalities;

(c) foreign or international financial institutions;

(d) foreign governments and their instrumentalities; and

(e) other entities or persons which the Monetary Board is hereby empowered to authorize as foreign
exchange dealers, subject to such rules and regulations as the Monetary Board shall prescribe.

In order to maintain the convertibility of the peso, the Bangko Sentral may, at the request of any
banking institution operating in the Philippines, buy any quantity of foreign exchange offered, and sell
any quantity of foreign exchange demanded, by such institution, provided that the foreign currencies
so offered or demanded are freely convertible into gold or United States dollars. This requirement
shall not apply to demands for foreign notes and coins.

The Bangko Sentral shall effect its exchange transactions between foreign currencies and the
Philippine peso at the rates determined in accordance with the provisions of Section 74 of this Act.

SECTION 71. Foreign Asset Position of the Bangko Sentral. — The Bangko Sentral shall endeavor to
maintain at all times a net positive foreign asset position so that its gross foreign exchange assets will
always exceed its gross foreign liabilities. In the event that the equivalent amount in pesos of the
foreign exchange liabilities of the Bangko Sentral exceed twice the equivalent amount in pesos of the
foreign exchange assets of the bank, the Bangko Sentral shall, within sixty (60) days from the date the
limit is exceeded, submit a report to the Congress stating the origin of these liabilities, and the manner
in which they will be paid.

SECTION 72. Emergency Restrictions on Exchange Operations. — In order to achieve the primary
objective of the Bangko Sentral as set forth in Section 3 of this Act, or protect the international
reserves of the Bangko Sentral in the imminence of, or during an exchange crisis, or in time of
national emergency and to give the Monetary Board and the Government time in which to take
constructive measures to forestall, combat, or overcome such a crisis or emergency, the Monetary
Board, with the concurrence of at least five (5) of its members and with the approval of the President
of the Philippines, may temporarily suspend or restrict sales of exchange by the Bangko Sentral, and
may subject all transactions in gold and foreign exchange to license by the Bangko Sentral, and may
require that any foreign exchange thereafter obtained by any person residing or entity operating in
the Philippines be delivered to Bangko Sentral or to any bank or agent designated by theBangko
Sentral for the purpose, at the effective exchange rate or rates: Provided, however, That foreign
currency deposits made under Republic Act No. 6426 shall be exempt from these requirements.

SECTION 73. Acquisition of Inconvertible Currencies. — The Bangko Sentral shall avoid the

acquisition and holding of currencies which are not freely convertible, and may acquire such
currencies in an amount exceeding the minimum balance necessary to cover current demands for said
currencies only when, and to the extent that, such acquisition is considered by the Monetary Board to
be in the national interest. The Monetary Board shall determine the procedures which shall apply to
the acquisition and disposition by the Bangko Sentral of foreign exchange which is not freely
utilizable in the international market.

SECTION 74. Exchange Rates. — The Monetary Board shall determine the exchange rate policy of the
country.

The Monetary Board shall determine the rates at which the Bangko Sentral shall buy and sell spot
exchange, and shall establish deviation limits from the effective exchange rate or rates as it may deem
proper. The Bangko Sentral shall not collect any additional commissions or charges of any sort, other
than actual telegraphic of cable costs incurred by it.

The Monetary Board shall similarly determine the rates for other types of foreign exchange
transactions by the Bangko Sentral, including purchases and sales of foreign notes and coins, but the
margins between the effective exchange rates and the rates thus established may not exceed the
corresponding margins for spot exchange transactions by more than the additional costs or expenses
involved in each type of transactions.

SECTION 75. Operations with Foreign Entities. — The Monetary Board may authorize the Bangko
Sentral to grant loans to and receive loans from foreign banks and other foreign or international
entities, both public and private, and may engage in such other operations with these entities as are in
the national interest and are appropriate to its character as a central bank. The Bangko Sentral may
also act as agent or correspondent for such entities.

Upon authority of the Monetary Board, the Bangko Sentral may pledge any gold or other assets
which it possesses as security against loans which it receives from foreign or international entities.

ARTICLE III Regulation of Foreign Exchange Operations of the Banks

SECTION 76. Foreign Exchange Holdings of the Banks. — In order that the Bangko Sentral may at all
times have foreign exchange resources sufficient to enable it to maintain the international stability
and convertibility of the peso, or in order to promote the domestic investment of bank resources, the
Monetary Board may require the banks to sell to the Bangko Sentral or to other banks all or part of
their surplus holdings of foreign exchange. Such transfers may be required for all foreign currencies or
for only certain of such currencies, according to the decision of the Monetary Board. The transfers
shall be made at the rates established under the provisions of Section 74 of this Act.

The Monetary Board, may whenever warranted, determine the net assets and net liabilities of banks
and shall, in making such a determination, take into account the bank's networth, outstanding
liabilities, actual and contingent, or such other financial or performance ratios as may be appropriate
under the circumstances. Any such determination of net assets and net liabilities shall be applied to
all banks uniformly and without discrimination.

SECTION 77. Requirement of Balanced Currency Position. — The Monetary Board may require the
banks to maintain a balanced position between their assets and liabilities in Philippine pesos or in any
other currency or currencies in which they operate. The banks shall be granted a reasonable period of
time in which to adjust their currency positions to any such requirement.

The powers granted under this section shall be exercised only when special circumstances make such
action necessary, in the opinion of the Monetary Board, and shall be applied to all banks alike and
without discrimination.

SECTION 78. Regulation of Non-spot Exchange Transactions. — In order to restrain the banks from
taking speculative positions with respect to future fluctuations in foreign exchange rates, the
Monetary Board may issue such regulations governing bank purchases and sales of non-spot
exchange as it may consider necessary for said purpose.

SECTION 79. Other Exchange Profits and Losses. — The banks shall bear the risks of non-compliance
with the terms of the foreign exchange documents and instruments which they buy or sell, and shall
also bear any other typically commercial or banking risks, including exchange risks not assumed by
the Bangko Sentral under the provisions of the preceding section.

SECTION 80. Information on Exchange Operations. — The banks shall report to the Bangko

Sentral the volume and composition of their purchases and sales of gold and foreign exchange each
day, and must furnish such additional information as the Bangko Sentral may request with reference
to the movements in their accounts in foreign currencies.

The Monetary Board may also require other persons and entities to report to it currently all
transactions or operations in gold, in any shape or form, and in foreign exchange whether entered into
or undertaken by them directly or through agents, or to submit such data as may be required on
operations or activities giving rise to or in connection with or relating to a gold or foreign exchange
transaction. The Monetary Board shall prescribe the forms on which such declarations must be made.
The accuracy of the declarations may be verified by the Bangko Sentral by whatever inspection it
may deem necessary.

ARTICLE IV Loans to Banking and Other Financial Institutions

A. Credit Policy
SECTION 81. Guiding Principles. — The rediscounts, discounts, loans and advances which the Bangko
Sentral is authorized to extend to banking institutions under the provisions of the present article of
this Act shall be used to influence the volume of credit consistent with the objective of price stability.

B. Normal Credit Operations

SECTION 82. Authorized Types of Operations. — Subject to the principle stated in the preceding
section of this Act, the Bangko Sentral may normally and regularly carry on the following credit
operations with banking institutions operating in the Philippines:

(a) Commercial credits. — The Bangko Sentral may rediscount, discount, buy and sell bills,
acceptances, promissory notes and other credit instruments with maturities of not more than one
hundred eighty (180) days from the date of their rediscount, discount or acquisition by the  Bangko
Sentral and resulting from transactions related to:

(1) the importation, exportation, purchase or sale of readily saleable goods and products, or their
transportation within the Philippines; or

(2) the storing of non-perishable goods and products which are duly insured and deposited, under
conditions assuring their preservation, in authorized bonded warehouses or in other places approved
by the Monetary Board.

(b) Production credits. — The Bangko Sentral may rediscount, discount, buy and sell bills,
acceptances, promissory notes and other credit instruments having maturities of not more than three
hundred sixty (360) days from the date of their rediscount, discount of acquisition by the Bangko
Sentral and resulting from transactions related to the production or processing of agricultural,
animal, mineral, or industrial products. Documents or instruments acquired in accordance with this
subsection shall be secured by a pledge of the respective crops or products: Provided, however, That
the crops or products need not be pledged to secure the documents if the original loan granted by
the Bangko Sentral is secured by a lien or mortgage on real estate property seventy percent (70%) of
the appraised value of which equals or exceeds the amount of the loan granted.

(c) Other credits. — Special credit instruments not otherwise rediscountable under the immediately
preceding subsections (a) and (b) may be eligible for rediscounting in accordance with rules and
regulations which the Bangko Sentral shall prescribe. Whenever necessary, the Bangko Sentral shall
provide funds from non-inflationary sources: Provided, however, That the Monetary Board shall
prescribe additional safeguards for disbursing these funds.

(d) Advances. — The Bangko Sentral may grant advances against the following kinds of collaterals
for fixed periods which, with the exception of advances against collateral named in clause (4) of the
present subsection, shall not exceed one hundred eighty (180) days:

(1) gold coins or bullion;

(2) securities representing obligations of the Bangko Sentral or of other domestic credit institutions
of recognized solvency;

(3) the credit instruments to which reference is made in subsection (a) of this section;

(4) the credit instruments to which reference is made in subsection (b) of this section, for periods
which shall not exceed three hundred sixty (360) days;
(5) utilized portions of advances in current account covered by regular overdraft agreements related
to operations included under subsections (a) and (b) of this section, and certified as to amount and
liquidity by the institution soliciting the advance;

(6) negotiable treasury bills, certificates of indebtedness, notes and other negotiable obligations of
the Government maturing within three (3) years from the date of the advance; and

(7) negotiable bonds issued by the Government of the Philippines by Philippine provincial, city or
municipal governments, or by any Philippine Government instrumentality, and having maturities of
not more than ten (10) years from the date of the advance.

The rediscounts, discounts, loans and advances made in accordance with the provisions of this
section may not be renewed or extended unless extraordinary circumstances fully justify such renewal
or extension.

Advances made against the collateral named in clauses (6) and (7) of subsection (d) of this section
may not exceed eighty percent (80%) of the current market value of the collateral.

C. Special Credit Operation

SECTION 83. Loans for Liquidity Purposes. — The Bangko Sentral may extend loans and advances to
banking institutions for a period of not more than seven (7) days without any collateral for the
purpose of providing liquidity to the banking system in times of need.

D. Emergency Credit Operation

SECTION 84. Emergency Loans and Advances. — In periods of national and/or local emergency or of
imminent financial panic which directly threaten monetary and banking stability, the Monetary Board
may, by a vote of at least five (5) of its members, authorize the  Bangko Sentral to grant extraordinary
loans or advances to banking institutions secured by assets as defined hereunder: Provided, That
while such loans or advances are outstanding, the debtor institution shall not, except upon prior
authorization by the Monetary Board, expand the total volume of its loans or investments.

The Monetary Board may, at its discretion, likewise authorize the Bangko Sentral to grant emergency
loans or advances to banking institutions, even during normal periods, for the purpose of assisting a
bank in a precarious financial condition or under serious financial pressures brought by unforeseen
events, or events which, though foreseeable, could not be prevented by the bank
concerned: Provided, however, That the Monetary Board has ascertained that the bank is not
insolvent and has the assets defined hereunder to secure the advances: Provided, further, That a
concurrent vote of at least five (5) members of the Monetary Board is obtained.

The amount of any emergency loan or advance shall not exceed the sum of fifty percent (50%) of total
deposits and deposit substitutes of the banking institution and shall be disbursed in two (2) or more
tranches. The amount of the first tranche shall be limited to twenty-five percent (25%) of the total
deposit and deposit substitutes of the institution and shall be secured by government securities to the
extent of their applicable loan values and other unencumbered first class collaterals which the
Monetary Board may approve: Provided, That if as determined by the Monetary Board, the
circumstances surrounding the emergency warrant a loan or advance greater than the amount
provided hereinabove, the amount of the first tranche may exceed twenty-five percent (25%) of the
bank's total deposit and deposit substitutes if the same is adequately secured by applicable loan
values of government securities and unencumbered first class collaterals approved by the Monetary
Board, and the principal stockholders of the institution furnish an acceptable undertaking to
indemnify and hold harmless from suit a conservator whose appointment the Monetary Board may
find necessary at any time.

Prior to the release of the first tranche, the banking institution shall submit to the Bangko Sentral a
resolution of its board of directors authorizing the Bangko Sentral to evaluate other assets of the
banking institution certified by its external auditor to be good and available for collateral purposes
should the release of the subsequent tranche be thereafter applied for.

The Monetary Board may, by a vote of at least five (5) of its members, authorize the release of a
subsequent tranche on condition that the principal stockholders of the institution:

(a) furnish an acceptable undertaking to indemnify and hold harmless from suit a conservator whose
appointment the Monetary Board may find necessary at any time; and

(b) provide acceptable security which, in the judgment of the Monetary Board, would be adequate to
supplement, where necessary, the assets tendered by the banking institution to collateralize the
subsequent tranche.

In connection with the exercise of these powers, the prohibitions in Section 128 of this Act shall not
apply insofar as it refers to acceptance as collateral of shares and their acquisition as a result of
foreclosure proceedings, including the exercise of voting rights pertaining to said shares: Provided,
however, That should the Bangko Sentral acquire any of the shares it has accepted as collateral as a
result of foreclosure proceedings, the Bangko Sentral shall dispose of said shares by public bidding
within one (1) year from the date of consolidation of title by the Bangko Sentral.

Whenever a financial institution incurs an overdraft in its account with the Bangko Sentral, the same
shall be eliminated within the period prescribed in Section 102 of this Act.

E. Credit Terms

SECTION 85. Interest and Rediscount Rates. — The Bangko Sentral shall collect interest and other
appropriate charges on all loans and advances it extends, the closure, receivership or liquidation of
the debtor-institution notwithstanding. This provision shall apply prospectively.

The Monetary Board shall fix the interest and rediscount rates to be charged by the Bangko
Sentral on its credit operations in accordance with the character and term of the operation, but after
due consideration has been given to the credit needs of the market, the composition of the  Bangko
Sentral's portfolio, and the general requirements of the national monetary policy. Interest and
rediscount rates shall be applied to all banks of the same category uniformly and without
discrimination.

SECTION 86. Endorsement. — The documents rediscounted, discounted, bought or accepted as

collateral by the Bangko Sentral in the course of the credit operations authorized in this article shall
bear the endorsement of the institution from which they are received.

SECTION 87. Repayment of Credits. — Documents rediscounted, discounted or accepted as collateral

by the Bangko Sentral must be withdrawn by the borrowing institution on the dates of their
maturities, or upon liquidation of the obligations which they represent or to which they relate
whenever said obligations have been liquidated prior to their dates of maturity.

Banks shall have the right at any time to withdraw any documents which they have presented to
the Bangko Sentral as collateral, upon payment in full of the corresponding debt to the Bangko
Sentral, including interest charges.

SECTION 88. Other Requirements. — The Monetary Board may prescribe, within the general powers
granted to it under this Act, additional conditions which borrowing institutions must satisfy in order to
have access to the credit of the Bangko Sentral. These conditions may refer to the rates of interest
charged by the banks, to the purposes for which their loans in general are destined, and to any other
clearly definable aspect of the credit policy of the bank.

SECTION 89. Provisional Advances to the National Government. — The Bangko Sentral may make

direct provisional advances with or without interest to the National Government to finance
expenditures authorized in its annual appropriation: Provided, That said advances shall be repaid
before the end of three (3) months extendible by another three (3) months as the Monetary Board may
allow following the date the National Government received such provisional advances and shall not,
in their aggregate, exceed twenty percent (20%) of the average annual income of the borrower for the
last three (3) preceding fiscal years.

ARTICLE V Open Market Operations for the Account of the Bangko Sentral

SECTION 90. Principles of Open Market Operations. — The open market purchases and sales of
securities by the Bangko Sentral shall be made exclusively in accordance with its primary objective of
achieving price stability.

SECTION 91. Purchases and Sales of Government Securities. — In order to achieve the objectives of
the national monetary policy, the Bangko Sentral may, in accordance with the principle stated in
Section 90 of this Act and with such rules and regulations as may be prescribed by the Monetary
Board, buy and sell in the open market for its own account:

(a) evidences of indebtedness issued directly by the Government of the Philippines or by its political
subdivisions; and

(b) evidences of indebtedness issued by government instrumentalities and fully guaranteed by the
Government.

The evidences of indebtedness acquired under the provisions of this section must be freely negotiable
and regularly serviced and must be available to the general public through banking institutions and
local government treasuries in denominations of a thousand pesos or more.

SECTION 92. Issue and Negotiation of Bangko Sentral Obligations. — In order to provide the Bangko
Sentral with effective instruments for open market operations, the Bangko Sentral may, subject to
such rules and regulations as the Monetary Board may prescribe and in accordance with the principles
stated in Section 90 of this Act, issue, place, buy and sell freely negotiable evidences of indebtedness
of the Bangko Sentral: Provided, That issuance of such certificates of indebtedness shall be made
only in cases of extraordinary movement in price levels. Said evidences of indebtedness may be issued
directly against the international reserve of the Bangko Sentral or against the securities which it has
acquired under the provisions of Section 91 of this Act, or may be issued without relation to specific
types of assets of the Bangko Sentral.

The Monetary Board shall determine the interest rates, maturities and other characteristics of said
obligations of the Bangko Sentral, and may, if it deems it advisable, denominate the obligations in
gold or foreign currencies.

Subject to the principles stated in Section 90 of this Act, the evidences of indebtedness of the  Bangko
Sentral to which this section refers may be acquired by the Bangko Sentral before their maturity,
either through purchases in the open market or through redemptions at par and by lot if the Bangko
Sentral has reserved the right to make such redemptions. The evidences of indebtedness acquired or
redeemed by the Bangko Sentral shall not be included among its assets, and shall be immediately
retired and cancelled.

ARTICLE VI Composition of Bangko Sentral's Portfolio

SECTION 93. Review of the Bangko Sentral's Portfolio. — At least once every month the Monetary
Board shall review the portfolio of the Bangko Sentral in relation to its future credit policy.

In reviewing the Bangko Sentral's portfolio, the Monetary Board shall especially consider whether a
sufficiently large part of the portfolio consists of assets with early maturities, in order that a
contraction in Bangko Sentral credit may be effected promptly whenever the national monetary
policy so requires.

ARTICLE VII Bank Reserves

SECTION 94. Reserve Requirements. — In order to control the volume of money created by the credit
operations of the banking system, all banks operating in the Philippines shall be required to maintain
reserves against their deposit liabilities: Provided, That the Monetary Board may, at its discretion,
also require all banks and/or quasi-banks to maintain reserves against funds held in trust and
liabilities for deposit substitutes as defined in this Act. The required reserves of each bank shall be
proportional to the volume of its deposit liabilities and shall ordinarily take the form of a deposit in
the Bangko Sentral. Reserve requirements shall be applied to all banks of the same category
uniformly and without discrimination.

Reserves against deposit substitutes, if imposed, shall be determined in the same manner as provided
for reserve requirements against regular bank deposits, with respect to the imposition, increase, and
computation of reserves.
The Monetary Board may exempt from reserve requirements deposits and deposit substitutes with
remaining maturities of two (2) years or more, as well as interbank borrowings.

Since the requirement to maintain bank reserves is imposed primarily to control the volume of
money, the Bangko Sentral shall not pay interest on the reserves maintained with it unless the
Monetary Board decides otherwise as warranted by circumstances.

SECTION 95. Definition of Deposit Substitutes. — The term "deposit substitutes" is defined as an

alternative form of obtaining funds from the public, other than deposits, through the issuance,
endorsement, or acceptance of debt instruments for the borrower's own account, for the purpose of
relending or purchasing of receivables and other obligations. These instruments may include, but
need not be limited to, bankers acceptances, promissory notes, participations, certificates of
assignment and similar instruments with recourse, and repurchase agreements. The Monetary Board
shall determine what specific instruments shall be considered as deposit substitutes for the purposes
of Section 94 of this Act: Provided, however, That deposit substitutes of commercial, industrial and
other non-financial companies issued for the limited purpose of financing their own needs or the
needs of their agents or dealers shall not be covered by the provisions of Section 94 of this Act.

SECTION 96. Required Reserves Against Peso Deposits. — The Monetary Board may fix and, when it
deems necessary, alter the minimum reserve ratios to peso deposits, as well as to deposit substitutes,
which each bank and/or quasi-bank may maintain, and such ratio shall be applied uniformly to all
banks of the same category as well as to quasi-banks.

SECTION 97. Required Reserves Against Foreign Currency Deposits. — The Monetary Board is similarly
authorized to prescribe and modify the minimum reserve ratios applicable to deposits denominated
in foreign currencies.

SECTION 98. Reserves Against Unused Balances of Overdraft Lines. — In order to facilitate Bangko
Sentral control over the volume of bank credit, the Monetary Board may establish minimum reserve
requirements for unused balances of overdraft lines.

The powers of the Monetary Board to prescribe and modify reserve requirements against unused
balances of overdraft lines shall be the same as its powers with respect to reserve requirements
against demand deposits.

SECTION 99. Increase in Reserve Requirements. — Whenever in the opinion of the Monetary Board it
becomes necessary to increase reserve requirements against existing liabilities, the increase shall be
made in a gradual manner and shall not exceed four percentage points in any thirty-day period. Banks
and other affected financial institutions shall be notified reasonably in advance of the date on which
such increase is to become effective.

SECTION 100. Computation on Reserves. — The reserve position of each bank or quasi-bank shall be
calculated daily on the basis of the amount, at the close of business for the day, of the institution's
reserves and the amount of its liability accounts against which reserves are required to be
maintained: Provided, That with reference to holidays or non-banking days, the reserve position as
calculated at the close of the business day immediately preceding such holidays and non-banking
days shall apply on such days.

For the purpose of computing the reserve position of each bank or quasi-bank, its principal office in
the Philippines and all its branches and agencies located therein shall be considered as a single unit.
SECTION 101. Reserve Deficiencies. — Whenever the reserve position of any bank or quasi-bank,
computed in the manner specified in the preceding section of this Act, is below the required
minimum, the bank or quasi-bank shall pay the Bangko Sentral one-tenth of one percent (1/10 of 1%)
per day on the amount of the deficiency or the prevailing ninety-one-day treasury bill rate plus three
percentage points, whichever is higher: Provided, however, That banks and quasi-banks shall
ordinarily be permitted to offset any reserve deficiency occurring on one or more days of the week
with any excess reserves which they may hold on other days of the same week and shall be required to
pay the penalty only on the average daily deficiency during the week. In cases of abuse, the Monetary
Board may deny anybank or quasi-bank the privilege of offsetting reserve deficiencies in the aforesaid
manner.

If a bank or quasi-bank chronically has a reserve deficiency, the Monetary Board may limit or prohibit
the making of new loans or investments by the institution and may require that part or all of the net
profits of the institution be assigned to surplus.

The Monetary Board may modify or set aside the reserve deficiency penalties provided in this section,
for part or the entire period of a strike or lockout affecting a bank or a quasi-bank as defined in the
Labor Code, or of a national emergency affecting operations of banks or quasi-banks. The Monetary
Board may also modify or set aside reserved deficiency penalties for rehabilitation program of a bank.

SECTION 102. Interbank Settlement. — The Bangko Sentral shall establish facilities for interbank

clearing under such rules and regulations as the Monetary Board may prescribe: Provided, That
the Bangko Sentral may charge administrative and other fees for the maintenance of such facilities.

The deposit reserves maintained by the banks in the Bangko Sentral in accordance with the
provisions of Section 94 of this Act shall serve as basis for the clearing of checks and the settlement of
interbank balances, subject to such rules and regulations as the Monetary Board may issue with
respect to such operations:Provided, That any bank which incurs on overdrawing in its deposit
account with the Bangko Sentral shall fully cover said overdraft, including interest thereon at a rate
equivalent to one-tenth of one percent (1/10 of 1%) per day or the prevailing ninety-one-day treasury
bill rate plus three percentage points, whichever is higher, not later than the next clearing
day: Provided, further, That settlement of clearing balances shall not be effected for any account
which continues to be overdrawn for five (5) consecutive banking days until such time as the
overdrawing is fully covered or otherwise converted into an emergency loan or advance pursuant to
the provisions of Section 84 of this Act: Provided, finally, That the appropriate clearing office shall be
officially notified of banks with overdrawn balances. Banks with existing overdrafts with the Bangko
Sentral as of the effectivity of this Act shall, within such period as may be prescribed by the Monetary
Board, either convert the overdraft into an emergency loan or advance with a plan of payment, or
settle such overdrafts, and that, upon failure to so comply herewith, the Bangko Sentral shall take
such action against the bank as may be warranted under this Act.

SECTION 103. Exemption from Attachment and Other Purposes. — Deposits maintained by banks with
the Bangko Sentral as part of their reserve requirements shall be exempt from attachment,
garnishments, or any other order or process of any court, government agency or any other
administrative body issued to satisfy the claim of a party other than the Government, or its political
subdivisions or instrumentalities.
 ARTICLE VIII Selective Regulation of Bank Operations

SECTION 104. Guiding Principle. — The Monetary Board shall use the powers granted to it under this
Act to ensure that the supply, availability and cost of money are in accord with the needs of the
Philippine economy and that bank credit is not granted for speculative purposes prejudicial to the
national interests. Regulations on bank operations shall be applied to all banks of the same category
uniformly and without discrimination.

SECTION 105. Margin Requirements Against Letters of Credit. — The Monetary Board may at any time
prescribe minimum cash margins for the opening of letters of credit, and may relate the size of the
required margin to the nature of the transaction to be financed.

SECTION 106. Required Security Against Bank Loans. — In order to promote liquidity and solvency of
the banking system, the Monetary Board may issue such regulations as it may deem necessary with
respect to the maximum permissible maturities of the loans and investments which the banks may
make, and the kind and amount of security to be required against the various types of credit
operations of the banks.

SECTION 107. Portfolio Ceilings. — Whenever the Monetary Board considers it advisable to prevent or
check an expansion of bank credit, the Board may place an upper limit on the amount of loans and
investments which the banks may hold, or may place a limit on the rate of increase of such assets
within specified periods of time. The Monetary Board may apply such limits to the loans and
investments of each bank or to specific categories thereof.

In no case shall the Monetary Board establish limits which are below the value of the loans or
investments of the banks on the date on which they are notified of such restrictions. The restrictions
shall be applied to all banks uniformly and without discrimination.

SECTION 108. Minimum Capital Ratios. — The Monetary Board may prescribe minimum ratios which
the capital and surplus of the banks must bear to the volume of their assets, or to specific categories
thereof, and may alter said ratios whenever it deems necessary.

ARTICLE IX Coordination of Credit Policies by Government Institutions

SECTION 109. Coordination of Credit Policies. — Government-owned corporations which perform

banking or credit functions shall coordinate their general credit policies with those of the Monetary
Board.

Toward this end, the Monetary Board may, whenever it deems it expedient, make suggestions or
recommendations to such corporations for the more effective coordination of their policies with those
of the Bangko Sentral.
 CHAPTER V Functions as Banker and Financial
Advisor of the Government

ARTICLE I Functions as Banker of the Government

SECTION 110. Designation of Bangko Sentral as Banker of the Government. — The Bangko

Sentral shall act as a banker of the Government, its political subdivisions and instrumentalities.

SECTION 111. Representation with the International Monetary Fund. — The Bangko Sentral shall

represent the Government in all dealings, negotiations and transactions with the International
Monetary Fund and shall carry such accounts as may result from Philippine membership in, or
operations with, said Fund.

SECTION 112. Representation with Other Financial Institutions. — The Bangko Sentral may be

authorized by the Government to represent it in dealings, negotiations or transactions with the
International Bank for Reconstruction and Development and with other foreign or international
financial institutions or agencies. The President may, however, designate any of his other financial
advisors to jointly represent the Government in such dealings, negotiations or transactions.

SECTION 113. Official Deposits. — The Bangko Sentral shall be the official depository of the

Government, its political subdivisions and instrumentalities as well as of government-owned or -
controlled corporations and, as a general policy, their cash balances should be deposited with
the Bangko Sentral, with only minimum working balances to be held by government-owned banks
and such other banks incorporated in the Philippines as the Monetary Board may designate, subject
to such rules and regulations as the Board may prescribe: Provided, That such banks may hold
deposits of the political subdivisions and instrumentalities of the Government beyond their minimum
working balances whenever such subdivisions and instrumentalities have outstanding loans with said
banks.

The Bangko Sentral may pay interest on deposits of the Government or of its political subdivisions
and instrumentalities, as well as on deposits of banks with the Bangko Sentral.

SECTION 114. Fiscal Operations. — The Bangko Sentral shall open a general cash account for the
Treasurer of the Philippines, in which the liquid funds of the Government shall be deposited.

Transfers of funds from this account to other accounts shall be made only upon order of the Treasurer
of the Philippines.

SECTION 115. Other Banks as Agents of the Bangko Sentral. — In the performance of its functions as
fiscal agent, the Bangko Sentral may engage the services of other government-owned and -
controlled banks and of other domestic banks for operations in localities at home or abroad in which
the Bangko Sentral does not have offices or agencies adequately equipped to perform said
operations: Provided, however, That for fiscal operations in foreign countries, the Bangko
Sentral may engage the services of foreign banking and financial institutions.

SECTION 116. Remuneration for Services. — The Bangko Sentral may charge equitable rates,

commissions or fees for services which it renders to the Government, its political subdivisions and
instrumentalities.

ARTICLE II The Marketing and Stabilization of Securities for the Account of the
Government

A. The Issue and Placing of Government Securities

SECTION 117. Issue of Government Obligations. — The issue of securities representing obligations of

the Government, its political subdivisions or instrumentalities, may be made through the Bangko
Sentral, which may act as agent of, and for the account of, the Government or its respective
subdivisions or instrumentality, as the case may be: Provided, however, That the Bangko
Sentral shall not guarantee the placement of said securities, and shall not subscribe to their issue
except to replace its maturing holdings of securities with the same type as the maturing securities.

SECTION 118. Methods of Placing Government Securities. — The Bangko Sentral may place the

securities to which the preceding section refers through direct sale to financial institutions and the
public.

The Bangko Sentral shall not be a member of any stock exchange or syndicate, but may intervene
therein for the sole purpose of regulating their operations in the placing of government securities.

The Government, or its political subdivisions or instrumentalities, shall reimburse the Bangko

Sentral for the expenses incurred in the placing of the aforesaid securities.

SECTION 119. Servicing and Redemption of the Public Debt. — The servicing and redemption of the
public debt shall also be effected through the Bangko Sentral.

B. Bangko Sentral Support of the Government Securities Market

SECTION 120. The Securities Stabilization Fund. — There shall be established a "Securities

Stabilization Fund" which shall be administered by the Bangko Sentral for the account of the
Government.

The operations of the Securities Stabilization Fund shall consist of purchases and sales, in the open
market, of bonds and other evidences of indebtedness, issued or fully guaranteed by the Government.
The purpose of these operations shall be to increase the liquidity and stabilize the value of said
securities in order thereby to promote private investment in government obligations.

The Monetary Board shall use the resources of the Fund to prevent, or moderate, sharp fluctuations in
the quotations of said government obligations, but shall not endeavor to alter movements of the
market resulting from basic changes in the pattern or level of interest rates.
The Monetary Board shall issue such regulations as may be necessary to implement the provisions of
this section.

SECTION 121. Resources of the Securities Stabilization Fund. — Subject to Section 132 of this Act, the
resources of the Securities Stabilization Fund shall come from the balance of the fund as held by the
Central Bank under Republic Act No. 265 as of the effective date of this Act.

SECTION 122. Profits and Losses of the Fund. — The Securities Stabilization Fund shall retain net
profits which it may make on its operations, regardless of whether said profits arise from capital gains
or from interest earnings. The Fund shall correspondingly bear any net losses which it may incur.

ARTICLE III Functions as Financial Advisor of the Government

SECTION 123. Financial Advice on Official Credit Operations. — Before undertaking any credit
operation abroad, the Government, through the Secretary of Finance, shall request the opinion, in
writing, of the Monetary Board on the monetary implications of the contemplated action. Such
opinions must similarly be requested by all political subdivisions and instrumentalities of the
Government before any credit operation abroad is undertaken by them.

The opinion of the Monetary Board shall be based on the gold and foreign exchange resources and
obligations of the nation and on the effects of the proposed operation on the balance of payments
and on monetary aggregates.

Whenever the Government, or any of its political subdivisions or instrumentalities, contemplates

borrowing within the Philippines, the prior opinion of the Monetary Board shall likewise be requested
in order that the Board may render an opinion on the probable effects of the proposed operation on
monetary aggregates, the price level, and the balance of payments.

SECTION 124. Representation on the National Economic and Development Authority. — In order to
assure effective coordination between the economic, financial and fiscal policies of the Government
and the monetary, credit and exchange policies of the Bangko Sentral, the Deputy Governor
designated by the Governor of the Bangko Sentral shall be an ex officio member of the National
Economic and Development Authority Board.

CHAPTER VI Privileges and Prohibitions

 ARTICLE I Privileges

SECTION 125. Tax Exemptions. — The Bangko Sentral shall be exempt for a period of five (5) years
from the approval of this Act from all national, provincial, municipal and city taxes, fees, charges and
assessments.

The exemptions authorized in the preceding paragraph of this section shall apply to all property of
the Bangko Sentral, to the resources, receipts, expenditures, profits and income of the Bangko
Sentral, as well as to all contracts, deeds, documents and transactions related to the conduct of the
business of the Bangko Sentral:Provided, however, That said exemptions shall apply only to such
taxes, fees, charges and assessments for which the Bangko Sentral itself would otherwise be liable,
and shall not apply to taxes, fees, charges, or assessments payable by persons or other entities doing
business with the Bangko Sentral: Provided, further, That foreign loans and other obligations of
the Bangko Sentral shall be exempt, both as to principal and interest, from any and all taxes if the
payment of such taxes has been assumed by the Bangko Sentral.

SECTION 126. Exemption from Customs Duties. — The provision of any general or special law to the
contrary notwithstanding, the importation and exportation by the Bangko Sentral of notes and coins,
and of gold and other metals to be used for purposes authorized under this Act, and the importation
of all equipment needed for bank note production, minting of coins, metal refining and other security
printing operations shall be fully exempt from all customs duties and consular fees and from all other
taxes, assessments and charges related to such importation or exportation.

SECTION 127. Applicability of the Civil Service Law. — Appointments in the Bangko Sentral, except as
to those which are policy-determining, primarily confidential or highly technical in nature, shall be
made only according to the Civil Service Law and regulations: Provided, That no qualification
requirements for positions in the Bangko Sentral shall be imposed other than those set by the
Monetary Board: Provided, further, That, the Monetary Board or Governor, in accordance with
Sections 15(c) and 17(d) of this Act, respectively, may without need of obtaining prior approval from
any other government agency, appoint personnel in the Bangko Sentral whose services are deemed
necessary in order not to unduly disrupt the operations of the Bangko Sentral.

Officers and employees of the Bangko Sentral, including all members of the Monetary Board, shall
not engage directly or indirectly in partisan activities or take part in any election except to vote.

ARTICLE II Prohibitions

SECTION 128. Prohibitions. — The Bangko Sentral shall not acquire shares of any kind or accept them
as collateral, and shall not participate in the ownership or management of any enterprise, either
directly or indirectly.
The Bangko Sentral shall not engage in development banking or financing: Provided, however, That
outstanding loans obtained or extended for development financing shall not be affected by the
prohibition of this section.

CHAPTER VII Transitory Provisions

SECTION 129. Phase-out of Fiscal Agency Functions. — Unless circumstances warrant otherwise and
approved by the Congress Oversight Committee, theBangko Sentral shall, within a period of three (3)
years but in no case longer than five (5) years from the approval of this Act, phase out all fiscal agency
functions provided for in Sections 117, 118, 119, and 120 as well as in other pertinent provisions of this
Act and transfer the same to the Department of Finance.

SECTION 130. Phase-out of Regulatory Powers Over the Operations of Finance Corporations and Other
Institutions Performing Similar Functions. — TheBangko Sentral shall, within a period of five (5) years
from the effectivity of this Act, phase out its regulatory powers over finance companies without quasi-
banking functions and other institutions performing similar functions as provided in existing laws, the
same to be assumed by the Securities and Exchange Commission.

SECTION 131. Implementing Details. — The Bangko Sentral shall be made operational by the

performance of the following acts:

(a) the President shall constitute the Monetary Board by appointing the members thereof within sixty
(60) days from the effectivity of this Act; and

(b) the transfer of such assets and liabilities from the Central Bank to the Bangko Sentral as provided
in Section 132 shall be completed within ninety (90) days from the constitution of the Monetary Board.

All incumbent personnel in the Central Bank as of the date of the approval of this Act shall continue to
exercise their duties and functions as personnel of theBangko Sentral subject to the provisions of
Section 133: Provided, That such personnel in the Central Bank as may be necessary for the purpose
of implementing Section 132 may be assigned by the Bangko Sentral Monetary Board to the Central
Bank.

SECTION 132. Transfer of Assets and Liabilities. — Upon the effectivity of this Act, three (3) members of
the Monetary Board, which may include the Governor, in representation of the Bangko Sentral, the
Secretary of Finance and the Secretary of Budget and Management in representation of the National
Government, and the Chairmen of the Committees on Banks of the Senate and the House of
Representatives shall determine the assets and liabilities of the Central Bank which may be
transferred to or assumed by the Bangko Sentral. The Committee shall complete its work within
ninety (90) days from the constitution of the Monetary Board submitting a comprehensive report with
all its findings and justification.

The following guidelines shall be strictly observed in the determination of which assets and liabilities
shall be transferred to the Bangko Sentral:
(a) the Monetary Board and the Secretary of Finance shall have primary responsibility for working out
creative monetary and financial solutions to retire the Central Bank liabilities and losses at the least
cost to the Government;

(b) the Bangko Sentral shall remit seventy-five percent (75%) of its net profits to a special deposit
account (sinking fund) until such time as the net liabilities of the Central Bank shall have been
liquidated through generally accepted finance mechanisms such as, but not limited to, write-offs, set-
offs, condonation, collections, reappraisal, revaluation and bond issuance by the National
Government, or to the National Government as dividends;

(c) the assets and liabilities to be transferred shall be limited to an amount that will enable
the Bangko Sentral to perform its responsibilities adequately and operate on a viable
basis: Provided, That the assets shall exceed the liabilities as certified by the Commission on Audit
(COA), by an initial amount of Ten billion pesos (P10,000,000,000);

(d) liabilities to be assumed by the Bangko Sentral shall include liability for notes and coins in
circulation as of the effective date of this Act; and

(e) any asset or liability of the Central Bank not transferred to the Bangko Sentral shall be retained
and administered, disposed of and liquidated by the Central Bank itself which shall continue to exist
as the CB Board of Liquidators only for the purposes provided in this paragraph but not later than
twenty-five (25) years or until such time that liabilities have been liquidated: Provided, That
the Bangko Sentral may financially assist the Central Bank Board of Liquidators in the liquidation of
CB liabilities: Provided, finally, That upon disposition of said retained assets and liquidation of said
retained liabilities, the Central Bank shall be deemed abolished.

All actions taken by the Bangko Sentral Monetary Board under this section shall be reported to
Congress and the President within thirty (30) days.

SECTION 133. Mandate to Organize. — The Bangko Sentral shall be organized by the Monetary Board

without being subject to the provisions of Republic Act No. 7430, by adopting if it so desires, an
entirely new staffing pattern on organizational structure to suit the operations of the Bangko
Sentral under this Act. No preferential or priority right shall be given to or enjoyed by any personnel
for appointment to any position in the new staffing pattern, nor shall any personnel be considered as
having prior or vested rights with respect to retention in the Bangko Sentral or in any position which
may be created in the new staffing pattern, even if he should be the incumbent of a similar position
prior to organization. The formulation of the program of organization shall be completed within six (6)
months after the effectivity of this Act, and shall be fully implemented within a period of six (6) months
thereafter. Personnel who may not be retained are deemed separated from the service.

SECTION 134. Separation Benefits. — Pursuant to Section 15 of this Act, the Monetary Board is
authorized to provide separation incentives, and all those who shall retire or be separated from the
service on account of reorganization under the preceding section shall be entitled to such incentives,
which shall be in addition to all gratuities and benefits to which they may be entitled under existing
laws.

SECTION 135. Repealing Clause. — Except as may be provided for in Sections 46 and 132 of this
Act, Republic Act No. 265, as amended, the provisions of any other law, special charters, rule or
regulation issued pursuant to said Republic Act No. 265, as amended, or parts thereof, which may be
inconsistent with the provisions of this Act are hereby repealed. Presidential Decree No. 1792 is
likewise repealed.

SECTION 136. Transfer of Powers. — All powers, duties and functions vested by law in the Central Bank
of the Philippines not inconsistent with the provisions of this Act shall be deemed transferred to
the Bangko Sentral ng Pilipinas. All references to the Central Bank of the Philippines in any law or
special charters shall be deemed to refer to the Bangko Sentral. cd

SECTION 137. Separability Clause. — If any provision or section of this Act or the application thereof to
any person or circumstance is held invalid, the other provisions or sections of this Act, and the
application of such provision or section to other persons or circumstances, shall not be affected
thereby.

SECTION 138. Effectivity Clause. — This Act shall take effect fifteen (15) days following its publication
in the Official Gazette or in two (2) national newspapers of general circulation.

Approved: June 14, 1993

Published in Malaya and the Philippine Times Journal on June 18, 1993. Published in the Official
Gazette, Vol. 89 No. 32 page 4425 on August 9, 1993.

(New Central Bank Act, Republic Act No. 7653, [June 14, 1993])
May 23, 2000

REPUBLIC ACT NO. 8791

AN ACT PROVIDING FOR THE REGULATION OF THE ORGANIZATION AND OPERATIONS OF BANKS,
QUASI-BANKS, TRUST ENTITIES AND FOR OTHER PURPOSES

CHAPTER I Title and Classification of Banks

SECTION 1. Title. — The short title of this Act shall be "The General Banking Law of 2000." (1a)

SECTION 2. Declaration of Policy. — The State recognizes the vital role of banks in providing an
environment conducive to the sustained development of the national economy and the fiduciary
nature of banking that requires high standards of integrity and performance. In furtherance thereof,
the State shall promote and maintain a stable and efficient banking and financial system that is
globally competitive, dynamic and responsive to the demands of a developing economy. (n)

SECTION 3. Definition and Classification of Banks. —

3.1. "Banks" shall refer to entities engaged in the lending of funds obtained in the form of deposits.
(2a)

3.2. Banks shall be classified into:

(a) Universal banks;

(b) Commercial banks;

(c) Thrift banks, composed of: (i) Savings and mortgage banks, (ii) Stock savings and loan associations,
and (iii) Private development banks, as defined in Republic Act No. 7906 (hereafter the "Thrift Banks
Act");

(d) Rural banks, as defined in Republic Act No. 7353 (hereafter the "Rural Banks Act");

(e) Cooperative banks, as defined in Republic Act No. 6938 (hereafter the "Cooperative Code");

(f) Islamic banks as defined in Republic Act No. 6848, otherwise known as the "Charter of Al Amanah
Islamic Investment Bank of the Philippines"; and
(g) Other classifications of banks as determined by the Monetary Board of the Bangko Sentral ng
Pilipinas. (6-Aa)

CHAPTER II Authority of the Bangko Sentral

SECTION 4. Supervisory Powers. — The operations and activities of banks shall be subject to
supervision of the Bangko Sentral. "Supervision" shall include the following:

4.1. The issuance of rules of conduct or the establishment of standards of operation for uniform
application to all institutions or functions covered, taking into consideration the distinctive character
of the operations of institutions and the substantive similarities of specific functions to which such
rules, modes or standards are to be applied;

4.2. The conduct of examination to determine compliance with laws and regulations if the
circumstances so warrant as determined by the Monetary Board;

4.3. Overseeing to ascertain that laws and regulations are complied with;

4.4. Regular investigation which shall not be oftener than once a year from the last date of
examination to determine whether an institution is conducting its business on a safe or sound
basis: Provided, That the deficiencies/irregularities found by or discovered by an audit shall be
immediately addressed;

4.5. Inquiring into the solvency and liquidity of the institution (2-D); or

4.6. Enforcing prompt corrective action. (n)

The Bangko Sentral shall also have supervision over the operations of and exercise regulatory powers
over quasi-banks, trust entities and other financial institutions which under special laws are subject to
Bangko Sentral supervision. (2-Ca)

For the purposes of this Act, "quasi-banks" shall refer to entities engaged in the borrowing of funds
through the issuance, endorsement or assignment with recourse or acceptance of deposit substitutes
as defined in Section 95 of Republic Act No. 7653 (hereafter the "New Central Bank Act") for purposes
of relending or purchasing of receivables and other obligations. (2-Da)

SECTION 5. Policy Direction; Ratios, Ceilings and Limitations. — The Bangko Sentral shall provide
policy direction in the areas of money, banking and credit. (n)

For this purpose, the Monetary Board may prescribe ratios, ceilings, limitations, or other forms of
regulation on the different types of accounts and practices of banks and quasi-banks which shall, to
the extent feasible, conform to internationally accepted standards, including those of the Bank for
International Settlements (BIS). The Monetary Board may exempt particular categories of transactions
from such ratios, ceilings and limitations, but not limited to exceptional cases or to enable a bank or
quasi-bank under rehabilitation or during a merger or consolidation to continue in business with
safety to its creditors, depositors and the general public. (2-Ca)
SECTION 6. Authority to Engage in Banking and Quasi-Banking Functions. — No person or entity shall
engage in banking operations or quasi-banking functions without authority from the Bangko
Sentral: Provided, however, That an entity authorized by the Bangko Sentral to perform universal or
commercial banking functions shall likewise have the authority to engage in quasi-banking functions.

The determination of whether a person or entity is performing banking or quasi-banking functions

without Bangko Sentral authority shall be decided by the Monetary Board. To resolve such issue, the
Monetary Board may, through the appropriate supervising and examining department of the Bangko
Sentral, examine, inspect or investigate the books and records of such person or entity. Upon issuance
of this authority, such person or entity may commence to engage in banking operations or quasi-
banking functions and shall continue to do so unless such authority is sooner surrendered, revoked,
suspended or annulled by the Bangko Sentral in accordance with this Act or other special laws.

The department head and the examiners of the appropriate supervising and examining department
are hereby authorized to administer oaths to any such person, employee, officer, or director of any
such entity and to compel the presentation or production of such books, documents, papers or
records that are reasonably necessary to ascertain the facts relative to the true functions and
operations of such person or entity. Failure or refusal to comply with the required presentation or
production of such books, documents, papers or records within a reasonable time shall subject the
persons responsible therefor to the penal sanctions provided under the New Central Bank Act.

Persons or entities found to be performing banking or quasi-banking functions without authority from
the Bangko Sentral shall be subject to appropriate sanctions under the New Central Bank Act and
other applicable laws. (4a)

SECTION 7. Examination by the Bangko Sentral. — The Bangko Sentral shall, when examining a bank,
have the authority to examine an enterprise which is wholly or majority-owned or controlled by the
bank. (21-Ba)

CHAPTER III Organization, Management and

Administration of Banks, Quasi-Banks and Trust
Entities
SECTION 8. Organization. — The Monetary Board may authorize the organization of a bank or quasi-
bank subject to the following conditions:

8.1. That the entity is a stock corporation (7);

8.2. That its funds are obtained from the public, which shall mean twenty (20) or more persons (2-Da);
and

8.3. That the minimum capital requirements prescribed by the Monetary Board for each category of
banks are satisfied. (n)
No new commercial bank shall be established within three (3) years from the effectivity of this Act. In
the exercise of the authority granted herein, the Monetary Board shall take into consideration their
capability in terms of their financial resources and technical expertise and integrity. The bank
licensing process shall incorporate an assessment of the bank's ownership structure, directors and
senior management, its operating plan and internal controls as well as its projected financial
condition and capital base.

SECTION 9. Issuance of Stocks. — The Monetary Board may prescribe rules and regulations on the
types of stock a bank may issue, including the terms thereof and rights appurtenant thereto to
determine compliance with laws and regulations governing capital and equity structure of
banks: Provided, That banks shall issue par value stocks only.

SECTION 10. Treasury Stocks. — No bank shall purchase or acquire shares of its own capital stock or
accept its own shares as a security for a loan, except when authorized by the Monetary
Board: Provided, That in every case the stock so purchased or acquired shall, within six (6) months
from the time of its purchase or acquisition, be sold or disposed of at a public or private sale. (24a)

SECTION 11. Foreign Stockholdings. — Foreign individuals and non-bank corporations may own or
control up to forty percent (40%) of the voting stock of a domestic bank. This rule shall apply to
Filipinos and domestic non-bank corporations. (12a; 12-Aa)

The percentage of foreign-owned voting stocks in a bank shall be determined by the citizenship of the
individual stockholders in that bank. The citizenship of the corporation which is a stockholder in a
bank shall follow the citizenship of the controlling stockholders of the corporation, irrespective of the
place of incorporation. (n)

SECTION 12. Stockholdings of Family Groups or Related Interests. — Stockholdings of individuals

related to each other within the fourth degree of consanguinity or affinity, legitimate or common-law,
shall be considered family groups or related interests and must be fully disclosed in all transactions by
such an individual with the bank. (12-Da)

SECTION 13. Corporate Stockholdings. — Two or more corporations owned or controlled by the same
family group or same group of persons shall be considered related interests and must be fully
disclosed in all transactions by such corporations or related groups of persons with the bank. (12-Ba)

SECTION 14. Certificate of Authority to Register. — The Securities and Exchange Commission shall not
register the articles of incorporation of any bank, or any amendment thereto, unless accompanied by
a certificate of authority issued by the Monetary Board, under its seal. Such certificate shall not be
issued unless the Monetary Board is satisfied from the evidence submitted to it:

14.1. That all requirements of existing laws and regulations to engage in the business for which the
applicant is proposed to be incorporated have been complied with;

14.2. That the public interest and economic conditions, both general and local, justify the
authorization; and

14.3. That the amount of capital, the financing, organization, direction and administration, as well as
the integrity and responsibility of the organizers and administrators reasonably assure the safety of
deposits and the public interest. (9)
The Securities and Exchange Commission shall not register the by-laws of any bank, or any
amendment thereto, unless accompanied by a certificate of authority from the Bangko Sentral. (10)

SECTION 15. Board of Directors. — The provisions of the Corporation Code to the contrary

notwithstanding, there shall be at least five (5), and a maximum of fifteen (15) members of the board
of directors of a bank, two (2) of whom shall be independent directors. An "independent director"
shall mean a person other than an officer or employee of the bank, its subsidiaries or affiliates or
related interests. (n)

Non-Filipino citizens may become members of the board of directors of a bank to the extent of the
foreign participation in the equity of said bank. (Sec. 7, RA 7721)

The meetings of the board of directors may be conducted through modern technologies such as, but
not limited to, teleconferencing and video-conferencing. (n)

SECTION 16. Fit and Proper Rule. — To maintain the quality of bank management and afford better
protection to depositors and the public in general, the Monetary Board shall prescribe, pass upon and
review the qualifications and disqualifications of individuals elected or appointed bank directors or
officers and disqualify those found unfit.

After due notice to the board of directors of the bank, the Monetary Board may disqualify, suspend or
remove any bank director or officer who commits or omits an act which render him unfit for the
position.

In determining whether an individual is fit and proper to hold the position of a director or officer of a
bank, regard shall be given to his integrity, experience, education, training, and competence. (9-Aa)

SECTION 17. Directors of Merged or Consolidated Banks. — In the case of a bank merger or
consolidation, the number of directors shall not exceed twenty-one (21). (13a)

SECTION 18. Compensation and Other Benefits of Directors and Officers. — To protect the funds of
depositors and creditors, the Monetary Board may regulate the payment by the bank to its directors
and officers of compensation, allowance, fees, bonuses, stock options, profit sharing and fringe
benefits only in exceptional cases and when the circumstances warrant, such as but not limited to the
following:

18.1. When a bank is under comptrollership or conservatorship; or

18.2. When a bank is found by the Monetary Board to be conducting business in an unsafe or unsound
manner; or

18.3. When a bank is found by the Monetary Board to be in an unsatisfactory financial condition. (n)

SECTION 19. Prohibition on Public Officials. — Except as otherwise provided in the Rural Banks Act, no
appointive or elective public official, whether full-time or part-time shall at the same time serve as
officer of any private bank, save in cases where such service is incident to financial assistance
provided by the government or a government-owned or controlled corporation to the bank or unless
otherwise provided under existing laws. (13)

SECTION 20. Bank Branches. — Universal or commercial banks may open branches or other offices
within or outside the Philippines upon prior approval of the Bangko Sentral.
Branching by all other banks shall be governed by pertinent laws.

A bank may, subject to prior approval of the Monetary Board, use any or all of its branches as outlets
for the presentation and/or sale of the financial products of its allied undertaking or of its investment
house units.

A bank authorized to establish branches or other offices shall be responsible for all business
conducted in such branches and offices to the same extent and in the same manner as though such
business had all been conducted in the head office. A bank and its branches and offices shall be
treated as one unit. (6-B; 27)

SECTION 21. Banking Days and Hours. — Unless otherwise authorized by the Bangko Sentral in the
interest of the banking public, all banks including their branches and offices shall transact business on
all working days for at least six (6) hours a day. In addition, banks or any of their branches or offices
may open for business on Saturdays, Sundays or holidays for at least three (3) hours a day:  Provided,
That banks which opt to open on days other than working days shall report to the Bangko Sentral the
additional days during which they or their branches or offices shall transact business.

For purposes of this Section, working days shall mean Mondays to Fridays, except if such days are
holidays. (6-Ca)

SECTION 22. Strikes and Lockouts. — The banking industry is hereby declared as indispensable to the
national interest and, notwithstanding the provisions of any law to the contrary, any strike or lockout
involving banks, if unsettled after seven (7) calendar days shall be reported by the Bangko Sentral to
the Secretary of Labor who may assume jurisdiction over the dispute or decide it or certify the same to
the National Labor Relations Commission for compulsory arbitration. However, the President of the
Philippines may at any time intervene and assume jurisdiction over such labor dispute in order to
settle or terminate the same. (6-E)

CHAPTER IV Deposits, Loans and Other Operations

ARTICLE I Operations of Universal Banks

SECTION 23. Powers of a Universal Bank. — A universal bank shall have the authority to exercise, in
addition to the powers authorized for a commercial bank in Section 29, the powers of an investment
house as provided in existing laws and the power to invest in non-allied enterprises as provided in this
Act. (21-B)

SECTION 24. Equity Investments of a Universal Bank. — A universal bank may, subject to the
conditions stated in the succeeding paragraph, invest in the equities of allied and non-allied
enterprises as may be determined by the Monetary Board. Allied enterprises may either be financial or
non-financial.
Except as the Monetary Board may otherwise prescribe:

24.1. The total investment in equities of allied and non-allied enterprises shall not exceed fifty percent
(50%) of the net worth of the bank; and

24.2. The equity investment in any one enterprise, whether allied or non-allied, shall not exceed
twenty-five percent (25%) of the net worth of the bank.

As used in this Act, "net worth" shall mean the total of the unimpaired paid-in capital including paid-in
surplus, retained earnings and undivided profit, net of valuation reserves and other adjustments as
may be required by the Bangko Sentral.

The acquisition of such equity or equities is subject to the prior approval of the Monetary Board which
shall promulgate appropriate guidelines to govern such investments. (21-Ba)

SECTION 25. Equity Investments of a Universal Bank in Financial Allied Enterprises. — A universal bank
can own up to one hundred percent (100%) of the equity in a thrift bank, a rural bank or a financial
allied enterprise.

A publicly-listed universal or commercial bank may own up to one hundred percent (100%) of the
voting stock of only one other universal or commercial bank. (21-B; 21-Ca)

SECTION 26. Equity Investments of a Universal Bank in Non-Financial Allied Enterprises. — A universal
bank may own up to one hundred percent (100%) of the equity in a non-financial allied enterprise.
(21-Ba)

SECTION 27. Equity Investments of a Universal Bank in Non-Allied Enterprises. — The equity

investment of a universal bank, or of its wholly or majority-owned subsidiaries, in a single non-allied
enterprise shall not exceed thirty-five percent (35%) of the total equity in that enterprise nor shall it
exceed thirty-five percent (35%) of the voting stock in that enterprise. (21-B)

SECTION 28. Equity Investments in Quasi-Banks. — To promote competitive conditions in financial

markets, the Monetary Board may further limit to forty percent (40%) equity investments of universal
banks in quasi-banks. This rule shall also apply in the case of commercial banks. (12-E)

ARTICLE II Operations of Commercial Banks

SECTION 29. Powers of a Commercial Bank. — A commercial bank shall have, in addition to the
general powers incident to corporations, all such powers as may be necessary to carry on the business
of commercial banking, such as accepting drafts and issuing letters of credit; discounting and
negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; accepting or
creating demand deposits; receiving other types of deposits and deposit substitutes; buying and
selling foreign exchange and gold or silver bullion; acquiring marketable bonds and other debt
securities; and extending credit, subject to such rules as the Monetary Board may promulgate. These
rules may include the determination of bonds and other debt securities eligible for investment, the
maturities and aggregate amount of such investment. (21a)
SECTION 30. Equity Investments of a Commercial Bank. — A commercial bank may, subject to the
conditions stated in the succeeding paragraphs, invest only in the equities of allied enterprises as may
be determined by the Monetary Board. Allied enterprises may either be financial or non-financial.

Except as the Monetary Board may otherwise prescribe:

30.1. The total investment in equities of allied enterprises shall not exceed thirty-five percent (35%) of
the net worth of the bank; and

30.2. The equity investment in any one enterprise shall not exceed twenty-five percent (25%) of the
net worth of the bank.

The acquisition of such equity or equities is subject to the prior approval of the Monetary Board which
shall promulgate appropriate guidelines to govern such investments. (21A-a; 21-Ca)

SECTION 31. Equity Investments of a Commercial Bank in Financial Allied Enterprises. — A commercial
bank may own up to one hundred percent (100%) of the equity of a thrift bank or a rural bank.

Where the equity investment of a commercial bank is in other financial allied enterprises, including
another commercial bank, such investment shall remain a minority holding in that enterprise. (21-Aa;
21-Ca)

SECTION 32. Equity Investments of a Commercial Bank in Non-Financial Allied Enterprises. — A

commercial bank may own up to one hundred percent (100%) of the equity in a non-financial allied
enterprise. (21-Aa)

ARTICLE III Provisions Applicable to All Banks, Quasi-Banks, and Trust Entities

SECTION 33. Acceptance of Demand Deposits. — A bank other than a universal or commercial bank
cannot accept or create demand deposits except upon prior approval of, and subject to such
conditions and rules as may be prescribed by the Monetary Board. (72-Aa)

SECTION 34. Risk-Based Capital. — The Monetary Board shall prescribe the minimum ratio which the
net worth of a bank must bear to its total risk assets which may include contingent accounts.

For purposes of this Section, the Monetary Board may require that such ratio be determined on the
basis of the net worth and risk assets of a bank and its subsidiaries, financial or otherwise, as well as
prescribe the composition and the manner of determining the net worth and total risk assets of banks
and their subsidiaries: Provided, That in the exercise of this authority, the Monetary Board shall, to
the extent feasible, conform to internationally accepted standards, including those of the Bank for
International Settlements (BIS), relating to risk-based capital requirements: Provided, further, That it
may alter or suspend compliance with such ratio whenever necessary for a maximum period of one (1)
year: Provided, finally, That such ratio shall be applied uniformly to banks of the same category.

In case a bank does not comply with the prescribed minimum ratio, the Monetary Board may limit or
prohibit the distribution of net profits by such bank and may require that part or all of the net profits
be used to increase the capital accounts of the bank until the minimum requirement has been met.
The Monetary Board may, furthermore, restrict or prohibit the acquisition of major assets and the
making of new investments by the bank, with the exception of purchases of readily marketable
evidences of indebtedness of the Republic of the Philippines and of the Bangko Sentral and any other
evidences of indebtedness or obligations the servicing and repayment of which are fully guaranteed
by the Republic of the Philippines, until the minimum required capital ratio has been restored.

In case of a bank merger or consolidation, or when a bank is under rehabilitation under a program
approved by the Bangko Sentral, the Monetary Board may temporarily relieve the surviving bank,
consolidated bank, or constituent bank or corporations under rehabilitation from full compliance
with the required capital ratio under such conditions as it may prescribe.

Before the effectivity of the rules which the Monetary Board is authorized to prescribe under this
provision, Section 22 of the General Banking Act, as amended, Section 9 of the Thrift Banks Act, and all
pertinent rules issued pursuant thereto, shall continue to be in force. (22a)

SECTION 35. Limit on Loans, Credit Accommodations and Guarantees. —

35.1. Except as the Monetary Board may otherwise prescribe for reasons of national interest, the total
amount of loans, credit accommodations and guarantees as may be defined by the Monetary Board
that may be extended by a bank to any person, partnership, association, corporation or other entity
shall at no time exceed twenty percent (20%) of the net worth of such bank. The basis for determining
compliance with single-borrower limit is the total credit commitment of the bank to the borrower.

35.2. Unless the Monetary Board prescribes otherwise, the total amount of loans, credit
accommodations and guarantees prescribed in the preceding paragraph may be increased by an
additional ten percent (10%) of the net worth of such bank provided the additional liabilities of any
borrower are adequately secured by trust receipts, shipping documents, warehouse receipts or other
similar documents transferring or securing title covering readily marketable, non-perishable goods
which must be fully covered by insurance.

35.3. The above prescribed ceilings shall include: (a) the direct liability of the maker or acceptor of
paper discounted with or sold to such bank and the liability of a general indorser, drawer or guarantor
who obtains a loan or other credit accommodation from or discounts paper with or sells papers to
such bank; (b) in the case of an individual who owns or controls a majority interest in a corporation,
partnership, association or any other entity, the liabilities of said entities to such bank; (c) in the case
of a corporation, all liabilities to such bank of all subsidiaries in which such corporation owns or
controls a majority interest; and (d) in the case of a partnership, association or other entity, the
liabilities of the members thereof to such bank.

35.4. Even if a parent corporation, partnership, association, entity or an individual who owns or
controls a majority interest in such entities has no liability to the bank, the Monetary Board may
prescribe the combination of the liabilities of subsidiary corporations or members of the partnership,
association, entity or such individual under certain circumstances, including but not limited to any of
the following situations: (a) the parent corporation, partnership, association, entity or individual
guarantees the repayment of the liabilities; (b) the liabilities were incurred for the accommodation of
the parent corporation or another subsidiary or of the partnership or association or entity or such
individual; or (c) the subsidiaries though separate entities operate merely as departments or divisions
of a single entity.
35.5. For purposes of this Section, loans, other credit accommodations and guarantees shall exclude:
(a) loans and other credit accommodations secured by obligations of the Bangko Sentral or of the
Philippine Government; (b) loans and other credit accommodations fully guaranteed by the
government as to the payment of principal and interest; (c) loans and other credit accommodations
covered by assignment of deposits maintained in the lending bank and held in the Philippines; (d)
loans, credit accommodations and acceptances under letters of credit to the extent covered by
margin deposits; and (e) other loans or credit accommodations which the Monetary Board may from
time to time, specify as non-risk items.

35.6. Loans and other credit accommodations, deposits maintained with, and usual guarantees by a
bank to any other bank or non-bank entity, whether locally or abroad, shall be subject to the limits as
herein prescribed.

35.7. Certain types of contingent accounts of borrowers may be included among those subject to
these prescribed limits as may be determined by the Monetary Board. (23a)

SECTION 36. Restriction on Bank Exposure to Directors, Officers, Stockholders and Their Related

Interests. — No director or officer of any bank shall, directly or indirectly, for himself or as the
representative or agent of others, borrow from such bank nor shall he become a guarantor, indorser
or surety for loans from such bank to others, or in any manner be an obligor or incur any contractual
liability to the bank except with the written approval of the majority of all the directors of the bank,
excluding the director concerned: Provided, That such written approval shall not be required for
loans, other credit accommodations and advances granted to officers under a fringe benefit plan
approved by the Bangko Sentral. The required approval shall be entered upon the records of the bank
and a copy of such entry shall be transmitted forthwith to the appropriate supervising and examining
department of the Bangko Sentral.

Dealings of a bank with any of its directors, officers or stockholders and their related interests shall be
upon terms not less favorable to the bank than those offered to others.

After due notice to the board of directors of the bank, the office of any bank director or officer who
violates the provisions of this Section may be declared vacant and the director or officer shall be
subject to the penal provisions of the New Central Bank Act.

The Monetary Board may regulate the amount of loans, credit accommodations and guarantees that
may be extended, directly or indirectly, by a bank to its directors, officers, stockholders and their
related interests, as well as investments of such bank in enterprises owned or controlled by said
directors, officers, stockholders and their related interests. However, the outstanding loans, credit
accommodations and guarantees which a bank may extend to each of its stockholders, directors, or
officers and their related interests, shall be limited to an amount equivalent to their respective
unencumbered deposits and book value of their paid-in capital contribution in the
bank: Provided, however, That loans, credit accommodations and guarantees secured by assets
considered as non-risk by the Monetary Board shall be excluded from such limit:  Provided, further,
That loans, credit accommodations and advances to officers in the form of fringe benefits granted in
accordance with rules as may be prescribed by the Monetary Board shall not be subject to the
individual limit.

The Monetary Board shall define the term "related interests."

The limit on loans, credit accommodations and guarantees prescribed herein shall not apply to loans,
credit accommodations and guarantees extended by a cooperative bank to its cooperative
shareholders. (83a)

SECTION 37. Loans and Other Credit Accommodations Against Real Estate. — Except as the Monetary
Board may otherwise prescribe, loans and other credit accommodations against real estate shall not
exceed seventy-five percent (75%) of the appraised value of the respective real estate security, plus
sixty percent (60%) of the appraised value of the insured improvements, and such loans may be made
to the owner of the real estate or to his assignees. (78a)

SECTION 38. Loans and Other Credit Accommodations on Security of Chattels and Intangible
Properties. — Except as the Monetary Board may otherwise prescribe, loans and other credit
accommodations on security of chattels and intangible properties, such as, but not limited to,
patents, trademarks, trade names, and copyrights shall not exceed seventy-five percent (75%) of the
appraised value of the security, and such loans and other credit accommodations may be made to the
title-holder of the chattels and intangible properties or his assignees. (78a)

SECTION 39. Grant and Purpose of Loans and Other Credit Accommodations. — A bank shall grant
loans and other credit accommodations only in amounts and for the periods of time essential for the
effective completion of the operations to be financed. Such grant of loans and other credit
accommodations shall be consistent with safe and sound banking practices. (75a)

The purpose of all loans and other credit accommodations shall be stated in the application and in the
contract between the bank and the borrower. If the bank finds that the proceeds of the loan or other
credit accommodation have been employed, without its approval, for purposes other than those
agreed upon with the bank, it shall have the right to terminate the loan or other credit
accommodation and demand immediate repayment of the obligation. (77)

SECTION 40. Requirement for Grant of Loans or Other Credit Accommodations. — Before granting a
loan or other credit accommodation, a bank must ascertain that the debtor is capable of fulfilling his
commitments to the bank.

Toward this end, a bank may demand from its credit applicants a statement of their assets and
liabilities and of their income and expenditures and such information as may be prescribed by law or
by rules and regulations of Monetary Board to enable the bank to properly evaluate the credit
application which includes the corresponding financial statements submitted for taxation purposes to
the Bureau of Internal Revenue. Should such statements prove to be false or incorrect in any material
detail, the bank may terminate any loan or other credit accommodation granted on the basis of said
statements and shall have the right to demand immediate repayment or liquidation of the obligation.

In formulating rules and regulations under this Section, the Monetary Board shall recognize the
peculiar characteristics of microfinancing, such as cash flow-based lending to the basic sectors that
are not covered by traditional collateral. (76a)

SECTION 41. Unsecured Loans or Other Credit Accommodations. — The Monetary Board is hereby
authorized to issue such regulations as it may deem necessary with respect to unsecured loans or
other credit accommodations that may be granted by banks. (n)

SECTION 42. Other Security Requirements for Bank Credits. — The Monetary Board may, by
regulation, prescribe further security requirements to which the various types of bank credits shall be
subject, and, in accordance with the authority granted to it in Section 106 of the New Central Bank
Act, the Board may by regulation, reduce the maximum ratios established in Sections 36 and 37 of this
Act, or, in special cases, increase the maximum ratios established therein. (78)

SECTION 43. Authority to Prescribe Terms and Conditions of Loans and Other Credit
Accommodations. — The Monetary Board may, similarly, in accordance with the authority granted to
it in Section 106 of the New Central Bank Act, and taking into account the requirements of the
economy for the effective utilization of long-term funds, prescribe the maturities, as well as related
terms and conditions for various types of bank loans and other credit accommodations. Any change
by the Board in the maximum maturities shall apply only to loans and other credit accommodations
made after the date of such action.

The Monetary Board shall regulate the interest imposed on microfinance borrowers by lending
investors and similar lenders, such as, but not limited to, the unconscionable rates of interest
collected on salary loans and similar credit accommodations. (78a)

SECTION 44. Amortization on Loans and Other Credit Accommodations. — The amortization schedule
of bank loans and other credit accommodations shall be adapted to the nature of the operations to be
financed.

In case of loans and other credit accommodations with maturities of more than five (5) years,
provisions must be made for periodic amortization payments, but such payments must be made at
least annually: Provided, however, That when the borrowed funds are to be used for purposes which
do not initially produce revenues adequate for regular amortization payments therefrom, the bank
may permit the initial amortization payment to be deferred until such time as said revenues are
sufficient for such purpose, but in no case shall the initial amortization date be later than five (5) years
from the date on which the loan or other credit accommodation is granted. (79a)

In case of loans and other credit accommodations to microfinance sectors, the schedule of loan
amortization shall take into consideration the projected cash flow of the borrower and adopt this into
the terms and conditions formulated by banks. (n)

SECTION 45. Prepayment of Loans and Other Credit Accommodations. — A borrower may at any time
prior to the agreed maturity date prepay, in whole or in part, the unpaid balance of any bank loan and
other credit accommodation, subject to such reasonable terms and conditions as may be agreed upon
between the bank and its borrower. (80a)

SECTION 46. Development Assistance Incentives. — The Bangko Sentral shall provide incentives to
banks which, without government guarantee, extend loans to finance educational institutions,
cooperatives, hospitals and other medical services, socialized or low-cost housing, local government
units and other activities with social content. (n)

SECTION 47. Foreclosure of Real Estate Mortgage. — In the event of foreclosure, whether judicially or
extrajudicially, of any mortgage on real estate which is security for any loan or other credit
accommodation granted, the mortgagor or debtor whose real property has been sold for the full or
partial payment of his obligation shall have the right within one year after the sale of the real estate, to
redeem the property by paying the amount due under the mortgage deed, with interest thereon at the
rate specified in the mortgage, and all the costs and expenses incurred by the bank or institution from
the sale and custody of said property less the income derived therefrom. However, the purchaser at
the auction sale concerned whether in a judicial or extrajudicial foreclosure shall have the right to
enter upon and take possession of such property immediately after the date of the confirmation of the
auction sale and administer the same in accordance with law. Any petition in court to enjoin or
restrain the conduct of foreclosure proceedings instituted pursuant to this provision shall be given
due course only upon the filing by the petitioner of a bond in an amount fixed by the court
conditioned that he will pay all the damages which the bank may suffer by the enjoining or the
restraint of the foreclosure proceeding.

Notwithstanding Act 3135, juridical persons whose property is being sold pursuant to an extrajudicial
foreclosure, shall have the right to redeem the property in accordance with this provision until, but
not after, the registration of the certificate of foreclosure sale with the applicable Register of Deeds
which in no case shall be more than three (3) months after foreclosure, whichever is earlier. Owners of
property that has been sold in a foreclosure sale prior to the effectivity of this Act shall retain their
redemption rights until their expiration. (78a)

SECTION 48. Renewal or Extension of Loans and Other Credit Accommodations. — The Monetary
Board may, by regulation, prescribe the conditions and limitations under which a bank may grant
extensions or renewals of its loans and other credit accommodations. (81)

SECTION 49. Provisions for Losses and Write-Offs. — All debts due to any bank on which interest is
past due and unpaid for such period as may be determined by the Monetary Board, unless the same
are well-secured and in the process of collection shall be considered bad debts within the meaning of
this Section.

The Monetary Board may fix, by regulation or by order in a specific case, the amount of reserves for
bad debts or doubtful accounts or other contingencies.

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

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

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

SECTION 52. Acquisition of Real Estate by Way of Satisfaction of Claims. — Notwithstanding the

limitations of the preceding Section, a bank may acquire, hold or convey real property under the
following circumstances:

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

52.2. Such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its
dealings; or
52.3. Such as it shall purchase at sales under judgments, decrees, mortgages, or trust deeds held by it
and such as it shall purchase to secure debts due it.

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

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

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

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

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

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

53.5. Rent out safety deposit boxes.

The bank shall perform the services permitted under Subsections 53.1, 53.2, 53.3 and 53.4 as
depositary or as an agent. Accordingly, it shall keep the funds, securities and other effects which it
receives duly separate from the bank's own assets and liabilities.

The Monetary Board may regulate the operations authorized by this Section in order to ensure that
such operations do not endanger the interests of the depositors and other creditors of the bank.

In case a bank or quasi-bank notifies the Bangko Sentral or publicly announces a bank holiday, or in
any manner suspends the payment of its deposit liabilities continuously for more than thirty (30) days,
the Monetary Board may summarily and without need for prior hearing close such banking institution
and place it under receivership of the Philippine Deposit Insurance Corporation. (72a)

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

SECTION 55. Prohibited Transactions. —

55.1. No director, officer, employee, or agent of any bank shall — (a) Make false entries in any bank
report or statement or participate in any fraudulent transaction, thereby affecting the financial
interest of, or causing damage to, the bank or any person;

(b) Without order of a court of competent jurisdiction, disclose to any unauthorized person any
information relative to the funds or properties in the custody of the bank belonging to private
individuals, corporations, or any other entity: Provided, That with respect to bank deposits, the
provisions of existing laws shall prevail;
(c) Accept gifts, fees or commissions or any other form of remuneration in connection with the
approval of a loan or other credit accommodation from said bank;

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

(e) Outsource inherent banking functions.

55.2. No borrower of a bank shall — (a) Fraudulently overvalue property offered as security for a loan
or other credit accommodation from the bank;

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

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

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

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

The making of false reports or misrepresentation or suppression of material facts by personnel of the
Bangko Sentral ng Pilipinas shall constitute fraud and shall be subject to the administrative and
criminal sanctions provided under the New Central Bank Act.

55.4. Consistent with the provisions of Republic Act No. 1405, otherwise known as the Banks Secrecy
Law, no bank shall employ casual or nonregular personnel or too lengthy probationary personnel in
the conduct of its business involving bank deposits.

SECTION 56. Conducting Business in an Unsafe or Unsound Manner. — In determining whether a

particular act or omission, which is not otherwise prohibited by any law, rule or regulation affecting
banks, quasi-banks or trust entities, may be deemed as conducting business in an unsafe or unsound
manner for purposes of this Section, the Monetary Board shall consider any of the following
circumstances:

56.1. The act or omission has resulted or may result in material loss or damage, or abnormal risk or
danger to the safety, stability, liquidity or solvency of the institution;

56.2. The act or omission has resulted or may result in material loss or damage or abnormal risk to the
institution's depositors, creditors, investors, stockholders or to the Bangko Sentral or to the public in
general;

56.3. The act or omission has caused any undue injury, or has given any unwarranted benefits,
advantage or preference to the bank or any party in the discharge by the director or officer of his
duties and responsibilities through manifest partiality, evident bad faith or gross inexcusable
negligence; or

56.4. The act or omission involves entering into any contract or transaction manifestly and grossly
disadvantageous to the bank, quasi-bank or trust entity, whether or not the director or officer profited
or will profit thereby.

Whenever a bank, quasi-bank or trust entity persists in conducting its business in an unsafe or
unsound manner, the Monetary Board may, without prejudice to the administrative sanctions
provided in Section 37 of the New Central Bank Act, take action under Section 30 of the same Act
and/or immediately exclude the erring bank from clearing, the provisions of law to the contrary
notwithstanding. (n)

SECTION 57. Prohibition on Dividend Declaration. — No bank or quasi-bank shall declare dividends
greater than its accumulated net profits then on hand, deducting therefrom its losses and bad debts.
Neither shall the bank nor quasi-bank declare dividends, if at the time of declaration:

57.1 Its clearing account with the Bangko Sentral is overdrawn; or

57.2 It is deficient in the required liquidity floor for government deposits for five (5) or more
consecutive days; or

57.3 It does not comply with the liquidity standards/ratios prescribed by the Bangko Sentral for
purposes of determining funds available for dividend declaration; or

57.4 It has committed a major violation as may be determined by the Bangko Sentral. (84a)

SECTION 58. Independent Auditor. — The Monetary Board may require a bank, quasi-bank or trust
entity to engage the services of an independent auditor to be chosen by the bank, quasi-bank or trust
entity concerned from a list of certified public accountants acceptable to the Monetary Board. The
term of the engagement shall be as prescribed by the Monetary Board which may either be on a
continuing basis where the auditor shall act as resident examiner, or on the basis of special
engagements; but in any case, the independent auditor shall be responsible to the bank's, quasi-
bank's or trust entity's board of directors. A copy of the report shall be furnished to the Monetary
Board. The Monetary Board may also direct the board of directors of a bank, quasi-bank, trusty entity
and/or the individual members thereof, to conduct, either personally or by a committee created by
the board, an annual balance sheet audit of the bank, quasi-bank or trust entity to review the internal
audit and control system of the bank, quasi-bank or trust entity and to submit a report of such audit.
(6-Da)

SECTION 59. Authority to Regulate Electronic Transactions. — The Bangko Sentral shall have full
authority to regulate the use of electronic devices, such as computers, and processes for recording,
storing and transmitting information or data in connection with the operations of a bank, quasi-bank
or trust entity, including the delivery of services and products to customers by such entity. (n)

SECTION 60. Financial Statements. — Every bank, quasi-bank or trust entity shall submit to the
appropriate supervising and examining department of the Bangko Sentral financial statements in
such form and frequency as may be prescribed by the Bangko Sentral. Such statements, which shall
be as of a specific date designated by the Bangko Sentral, shall show the actual financial condition of
the institution submitting the statement, and of its branches, offices, subsidiaries and affiliates,
including the results of its operations, and shall contain such information as may be required in
Bangko Sentral regulations. (n)

SECTION 61. Publication of Financial Statements. — Every bank, quasi-bank or trust entity, shall
publish a statement of its financial condition, including those of its subsidiaries and affiliates, in such
terms understandable to the layman and in such frequency as may be prescribed by the Bangko
Sentral, in English or Filipino, at least once every quarter in a newspaper of general circulation in the
city or province where the principal office, in the case of a domestic institution, or the principal branch
or office in the case of a foreign bank, is located, but if no newspaper is published in the same
province, then in a newspaper published in Metro Manila or in the nearest city or province.

The Bangko Sentral may by regulation prescribe the newspaper where the statements prescribed
herein shall be published.

The Monetary Board may allow the posting of the financial statements of a bank, quasi-bank or trust
entity in public places it may determine, in lieu of the publication required in the preceding
paragraph, when warranted by the circumstances.

Additionally, banks shall make available to the public in such form and manner as the Bangko Sentral
may prescribe the complete set of its audited financial statements as well as such other relevant
information including those on enterprises majority-owned or controlled by the bank, that will inform
the public of the true financial condition of a bank as of any given time.

In periods of national and/or local emergency or of imminent panic which directly threaten monetary
and banking stability, the Monetary Board, by a vote of at least five (5) of its members, in special cases
and upon application of the bank, quasi-bank or trust entity, may allow such bank, quasi-bank or trust
entity to defer for a stated period of time the publication of the statement of financial condition
required herein. (n)

SECTION 62. Publication of Capital Stock. — A bank, quasi-bank or trust entity incorporated under the
laws of the Philippines shall not publish the amount of its authorized or subscribed capital stock
without indicating at the same time and with equal prominence, the amount of its capital actually
paid up.

No branch of any foreign bank doing business in the Philippines shall in any way announce the
amount of the capital and surplus of its head office, or of the bank in its entirety without indicating at
the same time and with equal prominence the amount of the capital, if any, definitely assigned to
such branch. In case no capital has been definitely assigned to such branch, such fact shall be stated
in, and shall form part of the publication. (82)

SECTION 63. Settlement of Disputes. — The provisions of any law to the contrary notwithstanding, the
Bangko Sentral shall be consulted by other government agencies or instrumentalities in actions or
proceedings initiated by or brought before them involving controversies in banks, quasi-banks or trust
entities arising out of and involving relations between and among their directors, officers or
stockholders, as well as disputes between any or all of them and the bank, quasi-bank or trust entity
of which they are directors, officers or stockholders. (n)

SECTION 64. Unauthorized Advertisement or Business Representation. — No person, association, or

corporation unless duly authorized to engage in the business of a bank, quasi-bank, trust entity, or
savings and loan association as defined in this Act, or other banking laws, shall advertise or hold itself
out as being engaged in the business of such bank, quasi-bank, trust entity, or association, or use in
connection with its business title, the word or words "bank", "banking", "banker", "quasi-bank",
"quasi-banking", "quasi-banker", "savings and loan association", "trust corporation", "trust
company" or words of similar import or transact in any manner the business of any such bank,
corporation or association. (6)

SECTION 65. Service Fees. — The Bangko Sentral may charge equitable rates, commissions or fees, as
may be prescribed by the Monetary Board for supervision, examination and other services which it
renders under this Act. (n)

SECTION 66. Penalty for Violation of this Act. — Unless otherwise herein provided, the violation of any
of the provisions of this Act shall be subject to Sections 34, 35, 36 and 37 of  the New Central Bank Act.
If the offender is a director or officer of a bank, quasi-bank or trust entity, the Monetary Board may
also suspend or remove such director or officer. If the violation is committed by a corporation, such
corporation may be dissolved by quo warranto proceedings instituted by the Solicitor General. (87)

CHAPTER V Placement Under Conservatorship

SECTION 67. Conservatorship. — The grounds and procedures for placing a bank under
conservatorship, as well as, the powers and duties of the conservator appointed for the bank shall be
governed by the provisions of Section 29 and the last two paragraphs of Section 30 of the New Central
Bank Act:Provided, That this Section shall also apply to conservatorship proceedings of quasi-banks.
(n)

CHAPTER VI Cessation of Banking Business

SECTION 68. Voluntary Liquidation. — In case of the voluntary liquidation of any bank organized under
the laws of the Philippines, or of any branch or office in the Philippines of a foreign bank, written
notice of such liquidation shall be sent to the Monetary Board before such liquidation is undertaken,
and the Monetary Board shall have the right to intervene and take such steps as may be necessary to
protect the interests of creditors. (86)

SECTION 69. Receivership and Involuntary Liquidation. — The grounds and procedures for placing a
bank under receivership or liquidation, as well as the powers and duties of the receiver or liquidator
appointed for the bank shall be governed by the provisions of Sections 30, 31, 32, and 33 of the New
Central Bank Act:Provided, That the petitioner or plaintiff files with the clerk or judge of the court in
which the action is pending a bond, executed in favor of the Bangko Sentral, in an amount to be fixed
by the court. This Section shall also apply to the extent possible to the receivership and liquidation
proceedings of quasi-banks. (n)

SECTION 70. Penalty for Transactions After a Bank Becomes Insolvent. — Any director or officer of any
bank declared insolvent or placed under receivership by the Monetary Board who refuses to turn over
the bank's records and assets to the designated receivers, or who tampers with banks records, or who
appropriates for himself or another party or destroys or causes the misappropriation and destruction
of the bank's assets, or who receives or permits or causes to be received in said bank any deposit,
collection of loans and/or receivables, or who pays out or permits or causes to be paid out any funds
of said bank, or who transfers or permits or causes to be transferred any securities or property of said
bank shall be subject to the penal provisions of the New Central Bank Act. (85a)

CHAPTER VII Laws Governing Other Types of

Banks
SECTION 71. Other Banking Laws. — The organization, ownership and capital requirements, powers,
supervision and general conduct of business of thrift banks, rural banks and cooperative banks shall
be governed by the provisions of the Thrift Banks Act, the Rural Banks Act, and the Cooperative Code,
respectively.

The organization, ownership and capital requirements, powers, supervision and general conduct of
business of Islamic banks shall be governed by special laws.

The provisions of this Act, however, insofar as they are not in conflict with the provisions of the Thrift
Banks Act, the Rural Banks Act, and the Cooperative Code shall likewise apply to thrift banks, rural
banks, and cooperative banks, respectively. However, for purposes of prescribing the minimum ratio
which the net worth of a thrift bank must bear to its total risk assets, the provisions of Section 33 of
this Act shall govern. (n)

CHAPTER VIII Foreign Banks

SECTION 72. Transacting Business in the Philippines. — The entry of foreign banks in the Philippines
through the establishment of branches shall be governed by the provisions of the Foreign Banks
Liberalization Act.

The conduct of offshore banking business in the Philippines shall be governed by the provisions of
the Presidential Decree No. 1034, otherwise known as the "Offshore Banking System Decree." (14a)

SECTION 73. Acquisition of Voting Stock in a Domestic Bank. — Within seven (7) years from the
effectivity of this Act and subject to guidelines issued pursuant to the Foreign Banks Liberalization Act,
the Monetary Board may authorize a foreign bank to acquire up to one hundred percent (100%) of the
voting stock of only one (1) bank organized under the laws of the Republic of the Philippines.

Within the same period, the Monetary Board may authorize any foreign bank, which prior to the
effectivity of this Act availed itself of the privilege to acquire up to sixty percent (60%) of the voting
stock of a bank under the Foreign Banks Liberalization Act and the Thrift Banks Act, to further acquire
voting shares of such bank to the extent necessary for it to own one hundred percent (100%) of the
voting stock thereof.

In the exercise of this authority, the Monetary Board shall adopt measures as may be necessary to
ensure that at all times the control of seventy percent (70%) of the resources or assets of the entire
banking system is held by banks which are at least majority-owned by Filipinos.

Any right, privilege or incentive granted to a foreign bank under this Section shall be equally enjoyed
by and extended under the same conditions to banks organized under the laws of the Republic of the
Philippines. (Secs. 2 and 3, RA 7721)

SECTION 74. Local Branches of Foreign Banks. — In the case of a foreign bank which has more than
one (1) branch in the Philippines, all such branches shall be treated as one (1) unit for the purpose of
this Act, and all references to the Philippine branches of foreign banks shall be held to refer to such
units. (68)

SECTION 75. Head Office Guarantee. — In order to provide effective protection of the interests of the
depositors and other creditors of Philippine branches of a foreign bank, the head office of such
branches shall fully guarantee the prompt payment of all liabilities of its Philippine branch. (69)

Residents and citizens of the Philippines who are creditors of a branch in the Philippines of a foreign
bank shall have preferential rights to the assets of such branch in accordance with existing laws. (19)

SECTION 76. Summons and Legal Process. — Summons and legal process served upon the Philippine
agent or head of any foreign bank designated to accept service thereof shall give jurisdiction to the
courts over such bank, and service of notices on such agent or head shall be as binding upon the bank
which he represents as if made upon the bank itself.

Should the authority of such agent or head to accept service of summons and legal processes for the
bank or notice to it be revoked, or should such agent or head become mentally incompetent or
otherwise unable to accept service while exercising such authority, it shall be the duty of the bank to
name and designate promptly another agent or head upon whom service of summons and processes
in legal proceedings against the bank and of notices affecting the bank may be made, and to file with
the Securities and Exchange Commission a duly authenticated nomination of such agent.

In the absence of the agent or head or should there be no person authorized by the bank upon whom
service of summons, processes and all legal notices may be made, service of summons, processes and
legal notices may be made upon the Bangko Sentral Deputy Governor In-Charge of the supervising
and examining departments and such service shall be as effective as if made upon the bank or its duly
authorized agent or head.

In case of service for the bank upon the Bangko Sentral Deputy Governor In-Charge of the supervising
and examining departments, the said Deputy Governor shall register and transmit by mail to the
president or the secretary of the bank at its head or principal office a copy, duly certified by him, of the
summons, process, or notice. The sending of such copy of the summons, process, or notice shall be a
necessary part of the services and shall complete the service. The registry receipt of mailing shall
be prima facie evidence of the transmission of the summons, process or notice. All costs necessarily
incurred by the said Deputy Governor for the making and mailing and sending of a copy of the
summons, process, or notice to the president or the secretary of the bank at its head or principal office
shall be paid in advance by the party at whose instance the service is made. (17)
SECTION 77. Laws Applicable. — In all matters not specifically covered by special provisions
applicable only to a foreign bank or its branches and other offices in the Philippines, any foreign bank
licensed to do business in the Philippines shall be bound by the provisions of this Act, all other laws,
rules and regulations applicable to banks organized under the laws of the Philippines of the same
class, except those that provide for the creation, formation, organization or dissolution of
corporations or for the fixing of the relations, liabilities, responsibilities, or duties of stockholders,
members, directors or officers of corporations to each other or to the corporation. (18)

SECTION 78. Revocation of License of a Foreign Bank. — The Monetary Board may revoke the license
to transact business in the Philippines of any foreign bank, if it finds that the foreign bank is insolvent
or in imminent danger thereof or that its continuance in business will involve probable loss to those
transacting business with it. After the revocation of its license, it shall be unlawful for any such foreign
bank to transact business in the Philippines unless its license is renewed or reissued. After the
revocation of such license, the Bangko Sentral shall take the necessary action to protect the creditors
of such foreign bank and the public. The provisions of the New Central Bank Act on sanctions and
penalties shall likewise be applicable. (16)

CHAPTER IX Trust Operations

SECTION 79. Authority to Engage in Trust Business. — Only a stock corporation or a person duly
authorized by the Monetary Board to engage in trust business shall act as a trustee or administer any
trust or hold property in trust or on deposit for the use, benefit, or behoof of others. For purposes of
this Act, such a corporation shall be referred to as a trust entity. (56a; 57a)

SECTION 80. Conduct of Trust Business. — A trust entity shall administer the funds or property under
its custody with the diligence that a prudent man would exercise in the conduct of an enterprise of a
like character and with similar aims.

No trust entity shall, for the account of the trustor or the beneficiary of the trust, purchase or acquire
property from, or sell, transfer, assign or lend money or property to, or purchase debt instruments of,
any of the departments, directors, officers, stockholders, or employees of the trust entity, relatives
within the first degree of consanguinity or affinity, or the related interests, of such directors, officers
and stockholders, unless the transaction is specifically authorized by the trustor and the relationship
of the trustee and the other party involved in the transaction is fully disclosed to the trustor or
beneficiary of the trust prior to the transaction.

The Monetary Board shall promulgate such rules and regulations as may be necessary to prevent
circumvention of this prohibition or the evasion of the responsibility herein imposed on a trust entity.
(56)

SECTION 81. Registration of Articles of Incorporation and By-Laws of a Trust Entity. — The Securities
and Exchange Commission shall not register the articles of incorporation and by-laws or any
amendment thereto, of any trust entity, unless accompanied by a certificate of authority issued by the
Bangko Sentral. (n)
SECTION 82. Minimum Capitalization. — A trust entity, before it can engage in trust or other fiduciary
business, shall comply with the minimum paid-in capital requirement which will be determined by the
Monetary Board. (n)

SECTION 83. Powers of a Trust Entity. — A trust entity, in addition to the general powers incident to
corporations, shall have the power to:

83.1. Act as trustee on any mortgage or bond issued by any municipality, corporation, or any body
politic and to accept and execute any trust consistent with law;

83.2. Act under the order or appointment of any court as guardian, receiver, trustee, or depositary of
the estate of any minor or other incompetent person, and as receiver and depositary of any moneys
paid into court by parties to any legal proceedings and of property of any kind which may be brought
under the jurisdiction of the court;

83.3. Act as the executor of any will when it is named the executor thereof;

83.4. Act as administrator of the estate of any deceased person, with the will annexed, or as
administrator of the estate of any deceased person when there is no will;

83.5. Accept and execute any trust for the holding, management, and administration of any estate,
real or personal, and the rents, issues and profits thereof; and

83.6. Establish and manage common trust funds, subject to such rules and regulations as may be
prescribed by the Monetary Board. (58)

SECTION 84. Deposit for the Faithful Performance of Trust Duties. — Before transacting trust business,
every trust entity shall deposit with the Bangko Sentral as security for the faithful performance of its
trust duties, cash or securities approved by the Monetary Board in an amount equal to not less than
Five hundred thousand pesos (P500,000.00) or such higher amount as may be fixed by the Monetary
Board: Provided, however, That the Monetary Board shall require every trust entity to increase the
amount of its cash or securities on deposit with the Bangko Sentral whenever in its judgment such
increase is necessary by reason of the trust business of such entity: Provided, further, That the paid-
in capital and surplus of such entity must be at least equal to the amount required to be deposited
with the Bangko Sentral in accordance with the provisions of this paragraph. Should the capital and
surplus fall below said amount, the Monetary Board shall have the same authority as that granted to it
under the provisions of the fifth paragraph of Section 34 of this Act.

A trust entity so long as it shall continue to be solvent and comply with laws or regulations shall have
the right to collect the interest earned on such securities deposited with the Bangko Sentral and, from
time to time, with the approval of the Bangko Sentral, to exchange the securities for others. If the trust
entity fails to comply with any law or regulation, the Bangko Sentral shall retain such interest on the
securities deposited with it for the benefit of rightful claimants. All claims arising out of the trust
business of a trust entity shall have priority over all other claims as regards the cash or securities
deposited as above provided. The Monetary Board may not permit the cash or securities deposited in
accordance with the provisions of this Section to be reduced below the prescribed minimum amount
until the depositing entity shall discontinue its trust business and shall satisfy the Monetary Board
that it has complied with all its obligations in connection with such business. (65a)
SECTION 85. Bond of Certain Persons for the Faithful Performance of Duties. — Before an executor,
administrator, guardian, trustee, receiver or depositary appointed by the court enters upon the
execution of his duties, he shall, upon order of the court, file a bond in such sum as the court may
direct.

Upon the application of any executor, administrator, guardian, trustee, receiver, depositary or any
other person in interest, the court may, after notice and hearing, order that the subject matter of the
trust or any part thereof be deposited with a trust entity. Upon presentation of proof to the court that
the subject matter of the trust has been deposited with a trust entity, the court may order that the
bond given by such persons for the faithful performance of their duties be reduced to such sums as it
may deem proper: Provided, however, That the reduced bond shall be sufficient to secure
adequately the proper administration and care of any property remaining under the control of such
persons and the proper accounting for such property.

Property deposited with any trust entity in conformity with this Section shall be held by such entity
under the orders and direction of the court. (59)

SECTION 86. Exemption of Trust Entity from Bond Requirement. — No bond or other security shall be
required by the court from a trust entity for the faithful performance of its duties as court-appointed
trustee, executor, administrator, guardian, receiver, or depositary. However, the court may, upon
proper application with it showing special cause therefor, require the trust entity to post a bond or
other security for the protection of funds or property confided to such entity. (59)

SECTION 87. Separation of Trust Business from General Business. — The trust business and all funds,
properties or securities received by any trust entity as executor, administrator, guardian, trustee,
receiver, or depositary shall be kept separate and distinct from the general business including all
other funds, properties, and assets of such trust entity. The accounts of all such funds, properties, or
securities shall likewise be kept separate and distinct from the accounts of the general business of the
trust entity. (61)

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

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

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

SECTION 91. Sanctions and Penalties. — A trust entity or any of its officers and directors found to have
willfully violated any pertinent provisions of this Act, shall be subject to the sanctions and penalties
provided under Section 66 of this Act as well as Sections 36 and 37 of the New Central Bank Act. (63)
SECTION 92. Exemption of Trust Assets from Claims. — No assets held by a trust entity in its capacity
as trustee shall be subject to any claims other than those of the parties interested in the specific
trusts. (65)

SECTION 93. Establishment of Branches of a Trust Entity. — The ordinary business of a trust entity
shall be transacted at the place of business specified in its articles of incorporation. Such trust entity
may, with prior approval of the Monetary Board, establish branches in the Philippines, and the said
entity shall be responsible for all business conducted in such branches to the same extent and in the
same manner as though such business had all been conducted in the head office.

For the purpose of this Act, the trust entity and its branches shall be treated as one unit. (67)

CHAPTER X Final Provisions

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

SECTION 95. Repealing Clause. — Except as may be provided for in Sections 34 and 94 of this Act, the
General Banking Act, as amended, and the provisions of any other law, special charters, rule or
regulation issued pursuant to said General Banking Act, as amended, or parts thereof, which may be
inconsistent with the provisions of this Act are hereby repealed. The provisions of paragraph 8,
Section 8, Republic Act No. 3591, as amended by Republic Act No. 7400, are likewise repealed. (90a)

SECTION 96. Separability Clause. — If any provision or section of this Act or the application thereof to
any person or circumstance is held invalid, the other provisions or sections of this Act, and the
application of such provision or section to other persons or circumstances, shall not be affected
thereby. (n)

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

Approved: May 23, 2000

Published in Malaya and The Manila Times on May 29, 2000. Published in the Official Gazette, Vol.
96 No. 40, page 6235 on October 2, 2000.

(The General Banking Law of 2000, Republic Act No. 8791, [May 23, 2000])
June 22, 1963

REPUBLIC ACT NO. 3591

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

SECTION 1. There is hereby created a Philippine Deposit Insurance Corporation hereinafter

referred to as the "Corporation" which shall insure, as herein provided, the deposits of all
banks which are entitled to the benefits of insurance under this Act, and which shall have the
powers hereinafter granted.

The Corporation shall, as a basic policy, promote and safeguard the interests of the
depositing public by way of providing permanent and continuing insurance coverage on all
insured deposits. (as added by RA No 9302)

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

(a) The Secretary of Finance who shall be ex-officio Chairman of the Board without
compensation.

(b) The Governor of the Bangko Sentral ng Pilipinas, who shall be ex-officio member of the
Board without compensation.

(c) The President of the Corporation, who shall be appointed by the President of the
Philippines from either the Government or private sector to serve on full-time basis for a term
of six (6) years. The President of the Corporation shall also serve as Vice Chairman of the
Board.

(d) Two (2) members from the private sector, to be appointed for a term of six (6) years
without reappointment by the President of the Philippines: Provided, That of those first
appointed, the first appointee shall serve for a period of two (2) years.

No person shall be appointed as member of the Board unless he be of good moral character
and of unquestionable integrity and responsibility, and who is of recognized competence in
economics, banking and finance, law, management administration or insurance, and shall be
at least thirty-five (35) years of age. For the duration of their tenure or term in office and for a
period of one year thereafter, the appointive members of the Board shall be disqualified from
holding any office, position, or employment in any insured bank.

The Secretary of Finance and the Governor of the Bangko Sentral may each designate a
representative, whose position shall not be lower than an undersecretary or deputy governor
respectively, to attend such meetings and to vote on behalf of their respective principals.
Whenever the Chairman of the Board is unable to attend a meeting of the Board, or in the
event of a vacancy in the office of the Secretary of Finance, the President of the Corporation
shall act as Chairman.

The presence of three (3) members shall constitute a quorum. All decisions of the Board of
Directors shall require the concurrence of at least three (3) members.

The Secretary of Finance shall fix the rate of per diem for every Board meeting attended by
the members of the Board of Directors from the private sector. The President of the
Philippines may fix such emoluments that may be received by the Board of Directors
comparable to the emoluments of members of the Board of Directors of other government
financial institutions.

The Board of Directors shall have the authority:

1. To prepare and issue rules and regulations as it considers necessary for the effective
discharge of its responsibilities;

2. To direct the management, operation and administration of the Corporation;

3. To establish a human resource management system which shall govern the selection,
hiring, appointment, transfer, promotion, or dismissal of all personnel. Such system shall aim
to establish professionalism and excellence at all levels of the Corporation in accordance with
sound principles of management.

A compensation structure, based on job evaluation studies and wage surveys and subject to
the Board's approval, shall be instituted as an integral component of the Corporation's
human resource development program: Provided, That all positions in the Corporation shall
be governed by a compensation, position classification system and qualification standards
approved by the Board based on a comprehensive job analysis and audit of actual duties and
responsibilities. The compensation plan shall be comparable with the prevailing
compensation plans of other government financial institutions and shall be subject to review
by the Board no more than once every two (2) years without prejudice to yearly merit reviews
or increases based on productivity and profitability. The Corporation shall therefore be
exempt from existing laws, rules and regulations on compensation, position classification
and qualification standards It shall however endeavor to make its system conform as closely
as possible with the principles under Republic Act No. 6758, as amended.

4. To appoint, establish the rank, fix the remuneration, approve local and foreign training of,
and remove any officer or employee of the Corporation, for cause, subject to pertinent civil
service laws: Provided, That the Board of Directors may delegate this authority to the
President subject to specific guidelines;

5. To adopt an annual budget for, and authorize such expenditures by the Corporation as are
in the interest of the effective administration and operation of the Corporation; and

6. To approve the methodology for determining the level and amount of provisioning for
insurance and financial assistance losses, which shall establish reasonable levels of deposit
insurance reserves.

(as amended by RA No 6037, PD No 121, EO No 890, s. of 1983, RA No 9302)

7. To review the organizational set-up of the Corporation and adopt a new or revised
organizational structure as it may deem necessary for the Corporation to undertake its
mandate and functions. (as added by RA No 9576)

SECTION 3 [2-A]. The President of the Corporation shall be the Chief Executive thereof and his
salary shall be fixed by the President of the Philippines at a sum commensurate to the
importance and responsibility attached to the position. The sum total of the salary of the
President and the allowances and other emoluments which the Board of Directors may grant
him shall be ceiling for fixing the salary, allowances and other emoluments of all other
personnel in the Corporation.

The powers and duties of the President of the Corporation are:

(a) To prepare the agenda for the meeting of the Board and to submit for the consideration of
the Board the policies and measures which he believes to be necessary to carry out the
purposes and provisions of this Act;

(b) To execute and administer the policies and measures approved by the Board;

(c) To direct and supervise the operations and internal administration of the Corporation in
accordance with the policies established by the Board. The President may delegate certain of
his administrative responsibilities to other officers of the Corporation, subject to the rules
and regulations of the Board;

(d) To represent the Corporation, upon prior authority of the Board, in all dealings with other
offices, agencies and instrumentalities of the Government and with all other persons or
entities, public or private, whether domestic, foreign or international;

(e) To authorize, with his signature, upon prior authority of the Board, contracts entered into
by the Corporation, notes and securities issued by the Corporation, and the annual reports,
balance sheets, profits and loss statements, correspondence and other documents of the
Corporation. The signature of the President may be in facsimile wherever appropriate;

(f) To represent the Corporation, either personally or through counsel, in all legal proceedings
or actions;

(g) To delegate, with the prior approval of the Board of Directors, his power to represent the
Corporation, as provided in subsections (d) and (f) of this Section, to other officers of the
Corporation; and

(h) To exercise such other powers as may be vested in him by the Board.

The President shall be assisted by a Vice-President and other officials whose appointment
and removal for cause shall be approved and whose salary shall be fixed by the Board of
Directors upon recommendation of the President of the Corporation. During the absence or
temporary incapacity of the President, or in case of vacancy or permanent incapacity and
pending the appointment of a new President of the Corporation by the President of the
Philippines, the Vice-President shall act as President and discharge the duties and
responsibilities thereof. (as added by EO No 890, s. of 1983, amended by RA No 7400)

SECTION 4 [3]. As used in this Act —

(a) The term "Board of Directors" means the Board of Directors of the Corporation.

(b) The term 'Bank' and 'Banking Institution' shall be synonymous and interchangeable and
shall include banks, commercial banks, savings bank, mortgage banks, rural banks,
development banks, cooperative banks, stock savings and loan associations and branches
and agencies in the Philippines of foreign banks and all other corporations authorized to
perform banking functions in the Philippines. (as amended by RA No 7400)

(c) The term 'receiver' includes a receiver, commission, person or other agency charged by
law with the duty to take charge of the assets and liabilities of a bank which has been
forbidden from doing business in the Philippines, as well as the duty to gather, preserve and
administer such assets and liabilities for the benefit of the depositors and creditors of said
bank, and to continue into liquidation whenever authorized under this Act or other laws, and
to dispose of the assets and to wind up the affairs of such bank. (as amended by RA No 7400)

(d) The term "insured bank" means any bank the deposit of which are insured in accordance
with the provision of this Act;

(e) The term "non-insured bank" means any bank the deposit of which are not insured.

(f) The term "deposit" means the unpaid balance of money or its equivalent received by a
bank in the usual course of business and for which it has given or is obliged to give credit to a
commercial, checking, savings, time or thrift account, or issued in accordance with Bangko
Sentral rules and regulations and other applicable laws, together with such other obligations
of a bank, which, consistent with banking usage and practices, the Board of Directors shall
determine and prescribe by regulations to be deposit liabilities of the bank: Provided, That
any obligation of a bank which is payable at the office of the bank located outside of the
Philippines shall not be a deposit for any of the purposes of this Act or included as part of the
total deposits or of insured deposits: Provided, further, That, subject to the approval of the
Board of Directors, any insured bank which is incorporated under the laws of the Philippines
which maintains a branch outside the Philippines may elect to include for insurance its
deposit obligations payable only at such branch.

The corporation shall not pay deposit insurance for the following accounts or transactions,
whether denominated, documented, recorded or booked as deposit by the bank:

(1) Investment products such as bonds and securities, trust accounts, and other similar
instruments;

(2) Deposit accounts or transactions which are unfunded, or that are fictitious or fraudulent;

(3) Deposits accounts or transactions constituting, and/or emanating from, unsage and
unsound banking practice/s, as determined by the Corporation, in consultation with the BSP,
after due notice and hearing, and publication of a cease and desist order issued by the
Corporation against such deposit accounts or transactions; and

(4) Deposits that are determined to be the proceeds of an unlawful activity as defined under
republic act 9160, as amended.

The actions of the Corporation taken under this section shall be final and executory, and may
not be restrained or set aside by the court, except on appropriate petition for certiorari on the
ground that the action was taken in excess of jurisdiction or with such grave abuse of
discretion as to amount to a lack or excess of jurisdiction. The petition for certiorari may only
be filed within thirty (30) days from notice of denial of claim for deposit insurance. (as
amended by PD No 1940, RA No 7400, 9576)
(g) The term "insured deposit" means the amount due to any bona fide depositor for
legitimate deposits in an insured bank net of any obligation of the depositor to the insured
bank as of date of closure, but not to exceed Five hundred thousand pesos (P500,000.00).
Such net amount shall be determined according to such regulations as the Board of Directors
may prescribe, In determining such amount due to any depositor, there shall be added
together all deposits in the bank maintained in the same right and capacity for his benefits
either in his own name or in the name of others. A joint account regardless of whether the
conjunction 'and,' 'or,' 'and/or' is used, shall be insured separately from any individually-
owned deposit account: Provided, That (1) If the account is held jointly by two or more
natural persons, or by two or more juridical persons or entities, the maximum insured deposit
shall be divided into as many equal shares as there are individuals, juridical persons or
entities, unless a different sharing is stipulated in the document of deposit, and (2) If the
account is held by a juridical person or entity jointly with one or more natural persons, the
maximum insured deposits shall be presumed to belong entirely to such juridical person or
entity: Provided, further, That the aggregate of the interest of each co-owner over several joint
accounts, whether owned by the same or different combinations of individuals, juridical
persons or entities, shall likewise be subject to the maximum insured deposit of Five hundred
thousand pesos (P500,000.00): Provided, Furthermore, The the provisions of any law to the
contrary notwithstanding, no owner/holder of any negotiable certificate of deposit shall be
recognized as a depositor entitled to the rights provided in this Act unless his name is
registered as owner/holder thereof in the books of the issuing bank: Provided, Finally, That, in
case of a condition that threatens the monetary and financial stability of the banking system
that may have systemic consequences, as defined in section 17 hereof, as determined by the
monetary board, the maximum deposit insurance cover may be adjusted in such amount, for
such a period, and/or for such deposit products, as may be determined by a unanimous vote
of the Board of Directors in a meeting called for the purpose and chaired by the Secretary of
Finance, subject to the approval of the President of the Philippines. (as amended by PD No
1451, 1897, RA No 7400, 9302, 9576)
RA No 9576. Section 4. The maximum deposit insurance coverage of
Five hundred thousand pesos (P500,000.00) provided in Section
4(g) of Republic Act 3591, as amended herein, shall be paid by
the Corporation: Provided, That for the first three (3) years
from the effectivity of this Act, the first Two hundred fifty
thousand pesos (P250,000.00) of the deposited insurance coverage
shall be for the account of the Corporation, and those in excess
of Two hundred fifty thousand pesos (P250,000.00) but not more
than Five hundred thousand pesos (P500,000.00) shall be for the
account of the National Government. The Congress shall annually
appropriate the necessary funding to reimburse the Corporation
for any payment to insured depositors paid in excess of Two
hundred fifty thousand pesos (P250,000.00).

(h) The term "transfer deposit" means a deposit in an insured bank made available to a
depositor by the Corporation as payment of insured deposit of such depositor in a closed
bank and assumed by another insured bank.
(i) The term "trust funds" means funds held by an insured bank in a fiduciary capacity and
includes without being limited to, funds held as trustee, executor, administrator, guardian, or
agent.

SECTION 5 [4]. The deposit liabilities of any bank or banking institution, which is engaged in
the business of receiving deposits as herein defined on the effective date of this Act, or which
thereafter may engage in the business of receiving deposits, shall be insured with the
corporation. (as amended by RA No 6037)

SECTION 5. The factors to be considered by the Board of Directors under the preceding
section shall be the following: the financial history and condition of the Bank, the adequacy of
its capital structure, its future earning prospects, the general character of its management,
the convenience and needs of the community to be served by the Bank and whether or not its
corporate powers are consistent with the purposes of this Act. (as repealed by RA No 6037)

SECTION 6. (a) The assessment rate shall be determined by the Board of Directors: Provided,
That the assessment rate shall not exceed one-fifth (1/5) of one per centum (1%) per annum.
The semi-annual assessment for each insured bank shall be in the amount of the product of
one-half (1/2) the assessment rate multiplied by the assessment base but in no case shall it be
less than Five thousand pesos (P5,000.00). The assessment base shall be the amount of the
liability of the bank for deposits as defined under subsection (f) of Section 4 without any
deduction for indebtedness of depositors.

The semi-annual assessment base for one semi-annual period shall be the average of the
assessment base of the bank as of the close of business on March thirty-one and June thirty
and the semi-annual assessment base for the other semi-annual period shall be the average
of the assessment base of the bank as of the close of business on September thirty and
December thirty-one: Provided, That when any of said days is a non-business day or legal
holiday, either national or provincial, the preceding business day shall be used. The certified
statements required to be filed with the Corporation under subsections (b) and (c) of this
Section shall be in such form and set forth such supporting information as the Board of
Directors shall prescribe. The assessment payments required from the insured banks under
subsections (b) and (c) of this Section shall be made in such manner and at such time or times
as the Board of Directors shall prescribe, provided the time or times so prescribed shall not be
later than sixty (60) days after filing the certified statement setting forth the amount of
assessment. (as amended by RA No 7400, 9302)

(b) On or before the 31st of July of each year, each insured bank shall file with the
Corporation a certified statement showing for the six months ending on the preceding June
thirty the amount of the assessment base and the amount of the semiannual assessment due
to the Corporation for the period ending on the following December thirty-one, determined in
accordance with subsection (a) of this section, which shall contain or be verified by a written
declaration that it is made under the penalties of perjury. Each insured bank shall pay to the
Corporation the amount of the semiannual assessment it is required to certify. On or before
the 31st day of January of each year, each insured bank shall file with the Corporation a
similar certified statement for the six months ending on the preceding December thirty-one
and shall pay to the Corporation the amount of the semiannual assessment for the period
ending in the following June thirty which it is required to certify. (as amended by PD No 1940)
(c) Each bank which becomes an insured bank shall not be required to file any certified
statement or pay any assessment for the semi-annual period in which it becomes an insured
bank. On the expiration of such period, each such bank shall comply with the provisions of
subsection (b) of this section except that the semi-annual assessment base for its first
certified statement shall be the assessment base of the bank as of the close of business on the
preceding June thirty or December thirty-one, whichever is applicable, determined in
accordance with subsection (a) of this section. If such bank has assumed the liabilities for
deposits of another bank or banks, it shall include such liabilities in its assessment base. The
first certified statement shall show as the amount of the first semi-annual assessment due to
the Corporation, an amount equal to the product of one-half of the annual assessment rate
multiplied by such assessment base.

(d) All assessment collections and income from operations after expenses and charges shall
be added to the Deposit Insurance Fund under Section 13 hereof. Such expenses and charges
are: (1) the operating costs and expenses of the Corporation for the calendar year; (2)
additions to reserve to provide for insurance and financial assistance losses, net of
recoverable amounts from applicable assets and collaterals, during the calendar year; and (3)
the net insurance and financial assistance losses sustained in said calendar year. (as
amended by RA No 9302)

(e) The Corporation (1) may refund to an insured bank any payment of assessment in excess
of the amount due to the Corporation or (2) may credit such excess toward the payment of
the assessment next becoming due from such bank and upon succeeding assessments until
the credit is exhausted.

(f) Any insured bank which fails to file any certified statement required to be filed by it in
connection with determining the amount of any assessment payable by the bank to the
Corporation may be compelled to file such statement by mandatory injunction or other
appropriate remedy in a suit brought for such purpose by the Corporation against the bank
and any officer or officers thereof in any court of the Philippines of competent jurisdiction in
which such bank is located.

(g) The Corporation, in a suit brought in any court of competent jurisdiction, shall be entitled
to recover from any insured bank the amount of any unpaid assessment lawfully payable by
such insured bank to the Corporation, whether or not such bank shall have filed any such
certified statement and whether or not suit shall have been brought to compel the bank to
file any such statement. No action or proceeding shall be brought for recovery of any
assessment due to the Corporation or for the recovering of any amount paid to the
Corporation in excess of the amount due to it, unless such action or proceeding shall have
been brought within five years after the right accrued for which the claim is made, except
where the insured bank has made or filed with the Corporation a false or fraudulent certified
statement with the intent to evade, in whole or in part, the payment of assessment, in which
case the claim shall not have been deemed to have accrued until the discovery by the
Corporation that the certified statement is false or fraudulent.

(h) The Corporation shall not terminate the insured status of any bank which continues to
operate or receive deposits. Should any insured bank fail or refuse to pay any assessment
required to be paid by such bank under any provision of this Act, and should the bank not
correct such failure or refusal within thirty (30) days after written notice has been given by the
Corporation to an officer of the bank citing this subsection, and stating that the bank has
failed or refused to pay as required by the law, the Corporation may, at its discretion, file a
case for collection before the appropriate court without prejudice to the imposition of
administrative sanctions allowed under the provisions of this Law on the bank officials
responsible for the non payment of assessment fees. (as amended by RA Nos 7400, 9302)

(i) Trust funds held by an insured bank in a fiduciary capacity whether held in trust or
deposited in any other department or in another bank shall be insured like other forms of
deposits, in an amount not to exceed P40,000.00 for each trust estate, and when deposited by
the fiduciary bank in another bank such trust funds shall be similarly insured to the fiduciary
bank according to the trust estates represented. Notwithstanding any other provision of this
Act, such insurance shall be separate from and additional to that covering other deposits of
the owners of such trust funds or the beneficiaries of such trust estates: Provided, That where
the fiduciary bank deposits any of such trust funds in other insured banks, the amount so
held by other insured banks on deposit shall not for the purpose of any certified statement
required under subsections (b) and (c) of this section be considered to be a deposit liability of
the fiduciary bank, but shall be considered to be a deposit liability of the bank in which such
funds are so deposited by such fiduciary bank. The Board of Directors shall have the power by
regulation to prescribe the manner of reporting and of depositing such trust funds. (as
amended by PD No 1451, 1897, repealed by PD No 1940)

SECTION 7. (a). Whenever upon examination by the Corporation into the condition of any
insured bank, it shall be disclosed that an insured bank or its directors or agents have
committed, are committing or about to commit unsafe or unsound practices in conducting
the business of the bank, or have violated, are violating or about to violate any provisions of
any law or regulation to which the insured bank is subject, the Board of Directors shall submit
the report of the examination to the Monetary Board to secure corrective action thereon. If no
such corrective action is taken by the Monetary Board within forty-five (45) days from the
submission of the report, the Board of Directors shall, motu proprio, institute corrective
action which it deems necessary. The Board of Directors may thereafter issue a cease and
desist order, and require the bank or its directors or agents concerned to correct the practices
or violations within forty-five (45) days. However, if the practice or violation is likely to cause
insolvency or substantial dissipation of assets or earnings of the bank, or is likely to seriously
weaken the condition of the bank or otherwise seriously prejudice the interests of its
depositors and the Corporation, the period to take corrective action shall not be more than
fifteen (15) days. The order may also include the imposition of fines provided in Section 21 (f)
hereof. The Board of Directors shall duly inform the Monetary Board of the Bangko Sentral ng
Pilipinas of action it has taken under this subsection with respect to such practices or
violations. (as amended by RA No 9302)

(b) The actions and proceedings provided in the preceding subsection may be undertaken by
the Corporation if, in its opinion, an insured bank or its directors or agents have violated, are
violating or about to violate any provisions of this Act or any order, rule or instruction issued
by the Corporation or any written condition imposed by the Corporation in connection with
any transaction with or grant by the Corporation. (as amended by EO No 890, s. of 1983, RA No
7400)
SECTION 8. The Corporation as a corporate body shall have the powers:

First— To adopt and use a corporate seal;

Second— To have succession until dissolved by an Act of Congress;

Third— To make contracts;

Fourth— To sue and be sued, complain and defend, in any court of law in the Philippines. All
suits of a civil nature to which the Corporation shall be a part shall be deemed to arise under
the laws of the Philippines. No attachment or execution shall be issued against the
Corporation or its property before final judgment in any suit, action or proceeding in any
court. The Board of Directors shall designate an agent upon whom service of process may be
made in any province or city or jurisdiction in which the insured bank is located;

Fifth— To appoint by its Board of Directors such officers and employees as are not otherwise
provided for in this Act, to define their duties, fix their compensation, require bonds of them
and fix penalty thereof and to dismiss such officers and employees for cause;

Sixth— To prescribe, by its Board of Directors, by-laws not inconsistent with law, regulating
the manner in which its general business may be conducted, and the privileges granted to it
by law may be exercised and enjoyed;

Seventh— To exercise, by its Board of Directors, or duly authorized officers or agents, all
powers specifically granted by the provisions of this Act, and such incidental powers as shall
be necessary to carry on the powers so granted;

Eighth  — To conduct examination of banks with prior approval of the Monetary

Board: Provided, That no examination can be conducted within twelve (12) months from the
last examination date: Provided, however, That the Corporation may, in coordination with the
Bangko Sentral, conduct a special examination as the Board of Directors, by an affirmative
vote of a majority of all of its members, if there is a threatened or impending closure of a
bank: Provided, further, That notwithstanding the provisions of Republic Act No. 1405, as
amended, Republic Act No. 6426, as amended, Republic Act No. 8791, and other laws, the
Corporation and/or Bangko Sentral may inquire into or examine deposit accounts and all
information related thereto in case there is a finding of unsafe or unsound banking
practice: Provided, finally, That to avoid overlapping of efforts, the examination shall
maximize the efficient use of the relevant reports, information, and findings of the Bangko
Sentral, which it shall make available to the Corporation. (as amended by RA No 7400, 9302,
9576)

Ninth— To act as receiver; and

Tenth— To prescribe by its Board of Directors such rules and regulations as it may deem
necessary to carry out the provisions of this Act. (as amended by RA No 6037)

Eleventh. — The Corporation may establish its own provident fund which shall consist of
contributions made both by the Corporation and by its officers and employees to a common
fund for the payment of benefits to such officers or employees or their heirs. The Board of
Directors shall prepare and issue rules and regulations as it may deem necessary to make
effective the establishment and operation of the fund. (as added by PD No 1940)

Twelfth  — To compromise, condone or release, in whole or in part, any of claim or settled

liability to the Corporation, regardless of the amount involved, under such terms and
conditions as may be imposed by the Board of Directors to protect the interest of
Corporation. (as added by RA No 7400)

SECTION 9. (a) The Board of Directors shall administer the affairs of the Corporation fairly and
impartially and without discrimination. The Corporation shall be entitled to the free use of
Philippine mail in the same manner as the other offices of the national government.

(b) The Board of Directors shall appoint examiners who shall have power, on behalf of the
Corporation to examine any insured bank. Each such examiner shall have the power to make
a through examination of all the affairs of the bank and in doing so, he shall have the power to
administer oaths, to examine and take and preserve the testimony of any the officers and
agents thereof, and, to compel the presentation of books, documents, papers or records
necessary in his judgment to ascertain the facts relative to the condition of the bank; and
shall make a full and detailed report of the condition of the bank to the Corporation. The
Board of Directors in like manner shall appoint claim agents who shall have the power to
investigate and examine all claims for insured deposits and transferred deposits. Each claim
agent shall have the power to administer oaths and examine under oath and take and
preserve testimony of any person relating to such claim. (as amended by EO No 890, s. of 1983,
RA No 7400)

(b-1) The investigators appointed by the Board of Directors shall have the power on behalf of
the Corporation to conduct investigations on frauds, irregularities and anomalies committed
in banks, based on reports of examination conducted by the Corporation and Bangko Sentral
ng Pilipinas or complaints from depositors or from other government agency. Each such
investigator shall have the power to administer oaths, and to examine and take and preserve
the testimony of any person relating to the subject of investigation. (as added by RA No 9302)

(c) Each insured bank shall make to the Corporation reports of condition in such form and at
such times as the Board of Directors may require such reports to be published in such
manner, not inconsistent with any applicable law, as it may direct. Every such bank which
fails to make or publish any such report within such time, not less than five days, as the Board
of Directors may require, shall be subject to a penalty of not more than P100 for each day of
such failure recoverable by the Corporation for its use.

(d) The Corporation shall have access to reports of examination made by, and reports of
condition made to the Bangko Sentral ng Pilipinas or its appropriate supervising
departments, and the Bangko Sentral ng Pilipinas shall also have access to reports of
examination made by, and reports of condition made to the Corporation: Provided, That the
provisions of any law to the contrary notwithstanding, the Corporation shall likewise have
access to reports, findings and any other information derived from any special or general
examination or inquiry conducted by the Bangko Sentral in respect to bank fraud or serious
irregularity in an insured bank: Provided, That, the Corporation shall use such reports and
findings under similar terms and conditions prescribed by applicable laws on the Bangko
Sentral. (as amended by EO No 890, s. of 1983, RA No 7400)
(d-1) Each insured bank shall keep and maintain a true and accurate record or statement of
its daily deposit transactions consistent with the standards set by the Bangko Sentral ng
Pilipinas and the Corporation. Compliance with such standards shall be duly certified by the
president of the bank or the compliance officer: Provided, That refusal or willful failure to
issue the required certification shall constitute a violation of this Section and shall subject
such officers of the bank to the sanctions provided for under Section 21 (f) of this Act. (as
added by RA No 9302)

(e) Personnel of the Corporation are hereby prohibited from:

(1) being an officer, director, consultant, employee or stockholder, directly or indirectly, of

any bank or banking institution except as otherwise provided in this Act;

(2) receiving any gift or thing of value from any officer, director or employee thereof;

(3) revealing in any manner, except as provided in this Act or under order of the court,
information relating to the condition or business of any such institution. This prohibition shall
not apply to the giving of information to the Board of Directors, the President of the
Corporation, Congress, any agency of government authorized by law, or to any person
authorized by either of them in writing to receive such information. (as amended by RA No
9302)

(f) The Corporation shall underwrite or advance litigation costs and expenses, including legal
fees and other expenses of external counsel, or provide legal assistance to, directors, officers,
employees or agents of the Corporation in connection with any civil, criminal, administrative
or any other action or proceeding, to which such director, officer, employee or agent is made
a party by reason of, or in connection with, the exercise of authority or performance of
functions and duties under this Act: Provided, That such legal protection shall not apply to
any civil, criminal, administrative or any action or proceeding that may be initiated by the
Corporation, in whatever capacity, against such director, officer, employee or agent:
Provided, further, That directors, officers, employees or agents who shall resign, retire,
transfer to another agency or be separated from the service, shall continue to be provided
with such legal protection in connection with any act done or omitted to be done by them in
good faith during their tenure or employment with the Corporation: Provided, finally, That in
the event of a settlement or compromise, indemnification shall be provided only in
connection with such matters covered by the settlement as to which the Corporation is
advised by counsel that the persons to be indemnified did not commit any negligence or
misconduct. (as added by RA No 9302)

(g) The costs and expenses incurred in defending the aforementioned action, suit or
proceeding may be paid by the Corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer,
employee or agent to repay the amount advanced should it ultimately be determined by the
Board of Directors that he is not entitled to be indemnified as provided in this subsection. (as
added by RA No 9302)

(h) Unless the actions of the Corporation or any of its officers and employees are found to be
in willful violation of this Act, performed in bad faith, with malice and/or gross negligence, the
Corporation, its directors, officers, employees and agents are held free and harmless to the
fullest extent permitted by law from any liability, and they shall be indemnified for any and all
liabilities, losses, claims, demands, damages, deficiencies, costs and expenses of whatsoever
kind and nature that may arise in connection with the performance of their functions, without
prejudice to any criminal liability under existing laws. (as added by RA No 9576)

(i) Legal assistance shall include the grant or advance of reasonable legal fees as determined
by the Board of Directors to enable the concerned director, officer, employee or agent to
engage counsel of his choice, subject to approval by the Board of Directors. (as added by RA
No 9302, renumbered by RA No 9576)

Notwithstanding the provisions of this Section and Section 2, members of the Board of
Directors and personnel of the Corporation may become directors and officers of any bank
and banking institution and of any entity related to such institution in connection with
financial assistance extended by the Corporation to such institution and when, in the opinion
of the Board, it is appropriate to make such designation to protect the interest of the
Corporation.

Borrowing from any bank or banking institution by examiners and other personnel of the
examination departments of the Corporation shall be prohibited only with respect to the
particular institution in which they are assigned, or are conducting an examination.
Personnel of other departments, offices or units of the Corporation shall likewise be
prohibited from borrowing from any bank or banking institution during the period of time
that a transaction of such institution with the Corporation is being evaluated, processed or
acted upon by such personnel: Provided, however, That the Board may, at its discretion,
indicate the position levels or functional groups to which the prohibition is applicable.

Borrowing by all full-time personnel of the Corporation from any bank or banking institution
shall be secured and disclosed to the Board, and shall be subject to such further rules and
regulations as the Board may prescribe.

(as amended RA No 7400, 9302)

SECTION 10 [9-A]. (a) The provisions of other laws, general or special, to the contrary
notwithstanding, whenever it shall be appropriate for the Monetary Board of the Bangko
Sentral ng Pilipinas to appoint a receiver of any banking institution pursuant to existing laws,
the Monetary Board shall give prior notice and appoint the Corporation as receiver.

(b) The Corporation as receiver shall control, manage and administer the affairs of the closed
bank. Effective immediately upon takeover as receiver of such bank, the powers, functions
and duties, as well as all allowances, remunerations and perquisites of the directors, officers,
and stockholders of such bank are suspended, and the relevant provisions of the Articles of
Incorporation and By-laws of the closed bank are likewise deemed suspended.

The assets of the closed bank under receivership shall be deemed in custodia legis in the
hands of the receiver. From the time the closed bank is placed under such receivership, its
assets shall not be subject to attachment, garnishment, execution, levy or any other court
processes. Therefore, a judge, officer of the court or any person who shall issue, order,
process or cause the issuance or implementation of the writ of garnishment, levy, attachment
or execution shall be liable under Section 21 hereof.
(c) In addition to the powers of a receiver pursuant to existing laws, the Corporation is
empowered to:

(1) bring suits to enforce liabilities to or recoveries of the closed bank;

(2) appoint and hire persons or entities of recognized competence in banking or finance as its
deputies and assistants, to perform such powers and functions of the Corporation as receiver
or liquidator of the closed bank;

(3) suspend or terminate the employment of officers and employees of the closed bank:
Provided, That payment of separation pay or benefits shall be made only after the closed
bank has been placed under liquidation pursuant to the order of the Monetary Board under
Section 30 of R.A. 7653, and that such payment shall be made from available funds of the
bank after deducting reasonable expenses for receivership and liquidation;

(4) pay accrued utilities, rentals and salaries of personnel of the closed bank, for a period not
exceeding three (3) months, from available funds of the closed bank;

(5) collect loans and other claims of the closed bank, and for the purpose, modify,
compromise or restructure the terms and conditions of such loans or claims as may be
deemed advantageous to the interest of the creditors and claimants of the closed bank;

(6) hire or retain private counsels as may be necessary;

(7) borrow or obtain a loan, or mortgage, pledge or encumber any asset of the closed bank,
when necessary to preserve or prevent dissipation of the assets, or to redeem foreclosed
assets of the closed bank, or to minimize losses to the depositors and creditors;

(8) if the stipulated interest on deposits is unusually high compared with the prevailing
applicable interest rate, the Corporation as receiver may exercise such powers which may
include a reduction of the interest rate to a reasonable rate: Provided, That any modification
or reduction shall apply only to unpaid interest; and

(9) exercise such other powers as are inherent and necessary for the effective discharge of the
duties of the Corporation as receiver.

The Board of Directors shall adopt such policies and guidelines as may be necessary for the
performance of the above powers by personnel, deputies and agents of the Corporation. (as
added by RA No 7400, renumbered and amended by RA No 9302)

SECTION 11. In all cases or actions filed by the Corporation as receiver for the recovery of, or
involving any asset of the closed bank, payment of all docket and other court fees shall be
deferred until the action is terminated with finality. Any such fees shall constitute as a first
lien on any judgment in favor of the closed bank or in case of unfavorable judgment, such
fees shall be paid as administrative expenses during the distribution of the assets of the
closed bank. (as added by RA No 9302)

SECTION 12 [9-B]. Before any distribution of the assets of the closed bank in accordance with
the preferences established by law, the Corporation shall periodically charge against said
assets reasonable receivership expenses and subject to approval by the proper court,
reasonable liquidation expenses, it has incurred as part of the cost of receivership/liquidation
proceedings and collect payment therefore from available assets.

After the payment of all liabilities and claims against the closed bank, the Corporation shall
pay any surplus dividends at the legal rate of interest from date of takeover to date of
distribution, to creditors and claimants of the closed bank in accordance with legal priority
before distribution to the shareholders of the closed bank. (renumbered and amended by RA
No 9302)

SECTION 9-C. Cases not provided in Section 9-A above including the filing of cases to modify,
set aside or restrain any action of the Corporation therein shall be governed by Section 29 of
R. A. 265, as amended. (as added by RA No 7400, repealed by RA No 9302)

SECTION 13 [10]. To carry out the purposes of this Act, the permanent insurance fund shall be
Three billion pesos (P3,000,000,000.00).

The Deposit Insurance Fund shall be the capital account of the Corporation and shall
principally consist of the following: (i) the Permanent Insurance Fund; (ii) assessment
collections, subject to the charges enumerated in Section 6 (d); (iii) reserves for insurance and
financial assistance losses; and (iv) retained earnings: Provided: That the reserves for
insurance and financial assistance losses and retained earnings shall be maintained at a
reasonable level to ensure capital adequacy: Provided, further, That the Corporation may,
within two (2) years from the passage of this Act, and every five (5) years thereafter, conduct a
study on the need to adjust the amount of the Permanent Insurance Fund, insurance cover,
assessment rate and assessment base, and thereafter make the necessary recommendation
to Congress. For this purpose, the Corporation may hire the services of actuarial consultants
to determine, among others, the affordability of assessment rates, analysis and evaluation of
insurance risk, and advisability of imposing varying assessment rates or insurance cover of
different bank categories. (As added by PD No 120, amended by PD No 1451, 1897, 1985, RA No
7400, renumbered and amended by RA No 9302)

(b) For purposes of this Act an insured bank shall be deemed to have been closed on account
of insolvency when ordered closed by the Monetary Board of the Central Bank of the
Philippines pursuant to Section 29 of R.A. 265, as amended. (as amended by PD No 1940,
repealed by RA No 9302)

SECTION 14 [10(c)]. Whenever an insured bank shall have been closed by the Monetary Board
pursuant to Section 30 of R.A. 7653, payment of the insured deposits on such closed bank
shall be made by the Corporation as soon as possible either (1) by cash or (2) by making
available to each depositor a transferred deposit in another insured bank in an amount equal
to insured deposit of such depositor: Provided, however, That the Corporation, in its
discretion, may require proof of claims to be filed before paying the insured deposits, and
that in any case where the Corporation is not satisfied as to the viability of a claim for an
insured deposit, it may require final determination of a court of competent jurisdiction before
paying such claim: Provided, further, That failure to settle the claim, within six (6) months
from the date of filing of claim for insured deposit, where such failure was due to grave abuse
of discretion, gross negligence, bad faith, or malice, shall, upon conviction, subject the
directors, officers or employees of the Corporation responsible for the delay, to imprisonment
from six (6) months to one (1) year: Provided, furthermore, That the period shall not apply if
the validity of the claim requires the resolution of issues of facts and or law by another office,
body or agency including the case mentioned in the first proviso or by Corporation together
with such other office, body or agency (as amended by RA No 7400, renumbered and amended
by RA No 9302)

SECTION 15 [10(d)]. The Corporation, upon payment of any depositor as provided for in
subsection (c) of this Section, shall be subrogated to all rights of the depositor against the
closed bank to the extent of such payment. Such subrogation shall include the right on the
part of the Corporation to receive the same dividends and payments from the proceeds of the
assets of such closed bank and recoveries on account of stockholders liability as would have
been payable to the depositor on a claim for the insured deposits but, such depositor shall
retain his claim for any uninsured portion of his deposit. All payments by the corporation of
insured deposits in closed banks partake of the nature of public funds, and as such, must be
considered a preferred credit similar to taxes due to the National Government in the order of
preference under Article 2244 of the New Civil Code: Provided, further, That this preference
shall be likewise effective upon liquidation proceedings already commenced and pending as
of the approval of this Act, where no distribution of assets has been made. (as amended by PD
No 1940, RA No 7400, renumbered by RA No 9302)

SECTION 16 [11]. (a) The Corporation shall commence the determination of insured deposits
due the depositors of a closed bank upon its actual takeover of the closed bank. The
Corporation shall give notice to the depositors of the closed bank of the insured deposits due
them by whatever means deemed appropriate by the Board of Directors: Provided, That the
Corporation shall publish the notice once a week for at least three (3) consecutive weeks in a
newspaper of general circulation or, when appropriate, in a newspaper circulated in the
community or communities where the closed bank or its branches are located.

(b) Payment of an insured deposit to any person by the Corporation shall discharge the
Corporation, and payment of a transferred deposit to any person by the new bank or by an
insured bank in which a transferred deposit has been made available shall discharge the
Corporation and such new bank or other insured bank, to the same extent that payment to
such person by the closed bank would have discharged it from liability for the insured
deposit.

(c) Except as otherwise prescribed by the Board of Directors, neither the Corporation or such
other insured bank shall be required to recognize as the owner of any portion of a deposit
appearing on the records of the closed bank under a name other than that of the claimant,
any person whose name or interest as such owner is not disclosed on the records of such
closed bank as part owner of said deposit, if such recognition would increase the aggregate
amount of the insured deposits in such closed bank.

(d) The Corporation may withhold payment of such portion of the insured deposit of any
depositor in a closed bank as may be required to provide for the payment of any liability of
such depositor as a stockholder of the closed bank, or of any liability of such depositor to the
closed bank or its receiver, which is not offset against a claim due from such bank, pending
the determination and payment of such liability by such depositor or any other liable
therefor.
(e) Unless otherwise waived by the Corporation, if the depositor in the closed bank shall fail
to claim his insured deposits with the Corporation within two (2) years from actual takeover
of the closed bank by the receiver, or does not enforce his claim filed with the corporation
within two (2) years after the two-year period to file a claim as mentioned hereinabove, all
rights of the depositor against the Corporation with respect to the insured deposit shall be
barred; however, all rights of the depositor against the closed bank and its shareholders or
the receivership estate to which the Corporation may have become subrogated, shall
thereupon revert to the depositor. Thereafter, the Corporation shall be discharged from any
liability on the insured deposit. (as amended by PD No 1940, RA No 7400, renumbered and
amended by RA No 9302)

SECTION 17 [12]. (a) Money of the Corporation not otherwise employed shall be invested in
obligations of the Republic of the Philippines or in obligations guaranteed as to principal and
interest by the Republic of the Philippines.

(b) The banking or checking accounts of the Corporation shall be kept with the Bangko
Sentral ng Pilipinas, with the Philippine National Bank, or with any other bank designated as
depository or fiscal agent of the Philippine Government.

(c) It is hereby declared to be the policy of the State that the Deposit Insurance Fund of the
Corporation shall be preserved and maintained at all times. Accordingly, all tax obligations of
the Corporation for a period of five (5) years reckoned from the date of effectivity of this Act
shall be chargeable to the Tax Expenditure Fund (TEF) in the annual General Appropriation
Act pursuant to the provisions of Executive Order No. 93, series of 1986: Provided, That, on the
6th year and thereafter, the Corporation shall be exempt from income tax, final withholding
tax, value-added tax on assessments collected from member banks and local taxes. (as
added by RA No 9576)

(d) When the Corporation has determined that an insured bank is in danger of closing, in
order to prevent such closing, the Corporation, in the discretion of its Board of Directors, is
authorized to make loans to, or purchase the assets of, or assume liabilities of, or make
deposits in, such insured bank, upon such terms and condition as the Board of Directors may
prescribe, when in the opinion of the Board of Directors, the continued operation of such
bank is essential to provide adequate banking service in the community or maintain financial
stability in the economy.

The authority of the Corporation under the foregoing paragraph to extend financial
assistance to, assume liabilities of, purchase the assets of an insured bank may also be
exercised in the case of a closed insured bank if the Corporation finds that the resumption of
operations of such bank is vital to the interests of the community, or a severe financial
climate exists which threatens the stability of a number of banks possessing significant
resources: Provided, That the reopening and resumption of operations of the closed bank
shall be subject to the prior approval of the Monetary Board.

The Corporation may provide any corporation acquiring control of, merging or consolidating
with or acquiring the assets of an insured bank in danger of closing in order to prevent such
closing or of a closed insured bank in order to restore to normal operations, with such
financial assistance as it could provide an insured bank under this subsection: Provided, That,
within sixty (60) days from date of assistance the Corporation shall submit a report thereof to
the Monetary Board.

The Corporation, prior to the exercise of the powers under this Section, shall determine that
actual payoff and liquidation thereof will be more expensive than the exercise of this power:
Provided, That when the Monetary Board has determined that there are systemic
consequences of a probable failure or closure of an insured bank, the Corporation may grant
financial assistance to such insured bank in such amount as may be necessary to prevent its
failure or closure and/or restore the insured bank to viable operations, under such terms and
conditions as may be deemed necessary by the Board of Directors, subject to concurrence by
the Monetary Board and without additional cost to the Deposit Insurance Fund.

A systemic risk refers to the possibility that failure of one bank to settle net transactions with
other banks will trigger a chain reaction, depriving other banks of funds leading to a general
shutdown of normal clearing and settlement activity. Systemic risk also means the likelihood
of a sudden, unexpected collapse of confidence in a significant portion of the banking or
financial system with potentially large real economic effects. Finally, the Corporation may not
use its authority under this subsection to purchase the voting or common stock of an insured
bank but it can enter into and enforce agreements that it determines to be necessary to
protect its financial interests: Provided, That the financial assistance may take the form of
equity or quasi-equity of the insured bank as may be deemed necessary by the Board of
Directors with concurrence by the Monetary Board: Provided, further, That the Corporation
shall dispose of such equity as soon as practicable. (as amended by RA No 6037, PD No 121, RA
No 7400, renumbered and amended by RA No 9302)

SECTION 18 [13]. The Corporation is authorized to borrow from the Bangko Sentral ng
Pilipinas and the Bangko Sentral is authorized to lend the Corporation on such terms as may
be agreed upon by the Corporation and the Bangko Sentral, such funds as in the judgment of
the Board of Directors of the Corporation are from time to time required for insurance
purposes and financial assistance provided for in Section 17(c) of this Act: Provided, That any
such loan as may be granted by the Bangko Sentral shall be consistent with monetary policy:
Provided, further, That the rate of interest thereon shall be fixed by the Monetary Board but
shall not exceed the treasury bill rate.

When in the judgment of the Board of Directors the funds of the Corporation are not sufficient
to provide for an emergency or urgent need to attain the purposes of this Act, the Corporation
is likewise authorized to borrow money, obtain loans or arrange credit lines or other credit
accommodations from any bank designated as depository or fiscal agent of the Philippine
Government: Provided, That such loan shall be of short-term duration. (as amended by RA No
6037, PD No 653, 1940, RA No 7400, renumbered and amended by RA No 9302)

SECTION 19 [14]. With the approval of the President of the Philippines, the Corporation is
authorized to issue bonds, debentures, and other obligations, both local or foreign, as may be
necessary for purposes of providing liquidity for settlement of insured deposits in closed
banks as well as for financial assistance as provided herein: Provided, That the Board of
Directors shall determine the interest rates, maturity and other requirements of said
obligations: Provided, further, That the Corporation shall provide for appropriate reserves for
the redemption or retirement of said obligation.
All notes, debentures, bonds, or such obligations issued by the Corporation shall be exempt
from taxation both as to principal and interest, and shall be fully guaranteed by the
Government of the Republic of the Philippines. Such guarantee, which in no case shall exceed
two times the Deposit Insurance Fund as of date of the debt issuance, shall be expressed on
the face thereof.

The Board of Directors shall have the power to prescribe rules and regulations for the
issuance, reissuance, servicing, placement and redemption of the bonds herein authorized to
be issued as well as the registration of such bonds at the request of the holders thereof. (as
amended by RA No 6037, renumbered and amended by RA No 9302, 9576)

SECTION 20 [15]. (a) The Corporation shall annually make a report of its operations to the
Congress as soon as practicable after the 1st day of January in each year.

(b) The financial transactions of the Corporation shall be audited by the Commission on Audit
in accordance with the principles and procedures applicable to commercial corporate
transactions and under such rules and regulations as may be prescribed by the Commission
on Audit. The audit shall be conducted at the place or places where accounts of the
Corporation are normally kept. Except as to matters relating to the function of the
Corporation as receiver which shall be subject to visitorial audit only, the representatives of
the Commission on Audit shall have access to all books, accounts, records, reports, files and
all other papers, things, or property belonging to or in use by the Corporation pertaining to its
financial transactions and necessary to facilitate the audit, and they shall be afforded full
facilities for verifying transactions with the balances or securities held by depositories, fiscal
agents, and custodians. All such books, accounts, records, reports, files, papers, and property
of the Corporation shall remain in possession and custody of the
Corporation. (as renumbered and amended by RA No 9302)

SECTION 21 [16]. (a) Every insured bank shall display at each place of business maintained by
it a sign or signs, and shall include a statement in all its advertisements to the effect that its
deposits are insured by the Corporation: Provided, That the Board of Directors may exempt
from this requirement advertisements which do not relate to deposits or when it is
impractical to include such statement therein. The Board of Directors shall prescribe by
regulations the forms of such signs and the manner of use. (as amended by RA No 7400, 9302)

(b) No insured bank shall pay any dividend on its capital stock or interest on its capital notes
or debentures (if such interest is required to be paid only out of net profits) or distribute any
of its capital assets while it remains in default in the payment of any assessment due to the
Corporation: Provided, That if such default is due to a dispute between the insured bank and
the Corporation over the amount of such assessment, this subsection shall not apply if such
bank shall deposit security satisfactory to the Corporation for payment upon final
determination of the issue. (as amended by RA No 9302)

(c) Without prior written consent by the Corporation, no insured bank shall (1) merge or
consolidate with any bank or institution or (2) assume liability to pay any deposits made in, or
similar liabilities of, any bank or institution or (3) transfer assets to any bank or institution in
consideration of the assumption of liabilities for any portion of the deposits made in such
insured bank.
(d) The Corporation may require an insured bank to provide protection and indemnity against
burglary, defalcation, losses arising from discharge of duties by, or particular acts of defaults
of its directors, officers, or employees, and other similar insurable losses. The Board of
Directors in consultation with the Bangko Sentral, shall determine the bonding requirement
as it refers to directors, officers and employers of the insured bank as well as the form and
amount of the bond. Whenever any insured bank refuses to comply with any such
requirement the Corporation may contract for such protection and add the cost thereof to
the assessment otherwise payable by such bank. (Amending R.A. No. 3591 (PDIC Charter),
Republic Act No. 7400, [April 13, 1992])

(e) Any assessment payable by an insured bank under this Act shall be subject to payment of
interest computed from the date such assessment became due and payable and at the legal
rate for loans as prescribed by law or appropriate authority and in case of willful failure or
refusal to pay such assessment and interest thereon, there shall be added a penalty
equivalent to twice the amount of interest payable as computed herein for each day such
violations continue, which the interest and penalty the Corporation may recover for its
use:Provided, That the penalty shall not be applicable under the circumstances stated in the
provisions of subsection (b) of this Section. (as amended by RA No 6037, EO No 890, s. of 1983,
RA No 7400)

(f) The penalty of prision mayor or a fine of not less than Fifty thousand pesos (P50,000.00)
but not more than Two million pesos (P2,000,000.00), or both, at the discretion of the court,
shall be imposed upon any director, officer, employee or agent of a bank:

1) for any willful refusal to submit reports as required by law, rules and regulations;

2) any unjustified refusal to permit examination and audit of the deposit records or the affairs
of the institution;

3) any willful making of a false statement or entry in any bank report or document required by
the Corporation;

4) submission of false material information in connection with or in relation to any financial

assistance of the Corporation extended to the bank;

5) splitting of deposits or creation of fictitious loans or deposits accounts.

Splitting of deposits occurs whenever a deposit account with an outstanding balance of more
that the statutory maximum amount of insured deposit maintained under the name of
natural or juridical persons is broken down and transferred into two (2) or more accounts in
the name/s of natural or juridical persons or entities who have no beneficial ownership on
transferred deposits in their names within one hundred twenty (120) days immediately
preceding or during a bank-declared bank holiday, or immediately preceding a closure order
issued by the Monetary Board of the Bangko Sentral ng Pilipinas for the purpose of availing of
the maximum deposit insurance coverage; (as amended by RA No 9576)

6) refusal to allow the Corporation to take over a closed bank placed under its receivership or
obstructing such action of the Corporation;

7) refusal to turn over or destroying or tampering bank records;

8) fraudulent disposal, transfer or concealment of any asset, property or liability of the closed
bank under the receivership of the Corporation;

9) violation of, or causing any person to violate, the exemption from garnishment, levy,
attachment or execution provided under this Act and the New Central Bank Act;

10) any willful failure or refusal to comply with, or violation of any provision of this Act, or
commission of any other irregularities, and/or conducting business in an unsafe or unsound
manner as may be determined by the Board of Directors. (as added by PD No 1940, amended
by RA No 7400, 9302)

(g) The Board of Directors is hereby authorized to impose administrative fines for any act or
omission enumerated in the preceding subsection, and for violation of any order, instruction,
rule or regulation issued by the Corporation, against a bank and/or any of its directors,
officers or agents responsible for such act, omission, or violation, in amounts as it may be
determined to be appropriate, but in no case to exceed three times the amount of the
damages or costs caused by the transaction for each day that the violation subsists, taking
into consideration the attendant circumstances, such as the nature and gravity of the
violation or irregularity and the size of the bank. (as added by PD No 1940, amended by RA No
9302)

SECTION 22. No court, except the Court of Appeals, shall issue any temporary restraining
order, preliminary injunction or preliminary mandatory injunction against the Corporation for
any action under this Act.

This prohibition shall apply in all cases, disputes or controversies instituted by a private
party, the insured bank, or any shareholder of the insured bank.

The Supreme Court may issue a restraining order or injunction when the matter is of extreme
urgency involving a constitutional issue, such that unless a temporary restraining order is
issued, grave injustice and irreparable injury will arise. The party applying for the issuance of
a restraining order or injunction shall file a bond in an amount to be fixed by the Supreme
Court, which bond shall accrue in favor of the Corporation if the court should finally decide
that the applicant was not entitled to the relief sought.

Any restraining order or injunction issued in violation of this Section is void and of no force
and effect and any judge who has issued the same shall suffer the penalty of suspension of at
least sixty (60) days without pay. (as added RA No 9302)

SECTION 23. The Corporation may be reorganized by the Board of Directors by adopting if it
so desires, an entirely new staffing pattern or organizational structure to suit the operations
of the Corporation under this Act. No preferential or priority right shall be given to or enjoyed
by any personnel for appointment to any position in the new staffing pattern nor shall any
personnel be considered as having prior or vested rights with respect to retention in the
Corporation or in any other position which may be created in the new staffing pattern, even if
he should be the incumbent of a similar position prior to reorganization. The reorganization
shall be completed within six (6) months after the effectivity of this Act. Personnel who are
not retained are deemed separated from the service. (as added RA No 9302)
SECTION 24. The Board of Directors is hereby authorized to provide separation incentives,
and all those who shall retire or be separated from the service on account of reorganization
under the preceding section shall be entitled to such incentives which shall be in addition to
all gratuities and benefits to which they may be entitled under existing laws. (as added RA No
9302)
Original provisions of RA No 3591
SECTION 17. Except with the written consent of the Corporation,
no person shall serve as a director, officer, or employee of an
insured bank who has been convicted, or who is hereafter
convicted, of any criminal offense involving dishonesty or a
breach of trust. For each willful violation of this prohibition,
the bank involved shall be subject to a penalty of not more than
P100 for each day this prohibition is violated, which the
Corporation may recover for its use.
SECTION 18. If any provision or section of this Act or the
application thereof to any person or circumstances is held
invalid, the other provisions or sections of this Act, in the
application of such provision or section to other persons or
circumstances, shall not be affected thereby.
SECTION 19. All Acts or parts of Acts and executive orders,
administrative orders, or parts thereof which are inconsistent
with the provisions of this Act are hereby repealed.
SECTION 20. This Act shall take effect upon approval. The
Philippine Deposit Insurance Corporation shall commence business
upon organization of the Board of Directors and certification by
the Treasurer of the Philippines that the Permanent Insurance
Fund has been appropriated.

RA No 7400 SECTION 15. Transitory Provisions. — a) Authority to

Reorganize. — In view of the new powers and functions herein
provided, a reorganization of the Corporation is hereby
authorized including adopting a new staffing pattern for
effective and efficient exercise and performance of such powers
and function.
The formulation of the program of reorganization shall be
completed as soon as possible and the full implementation of such
program within eighteen (18) months after approval of this Act.
b) Implementing Details. — Organization and Staffing of the
Corporation. — Upon the effectivity of this Act, the Secretary of
Finance, the incumbent President of the Corporation and the
Governor of the Bangko Sentral shall constitute the Chairman and
members of the Board provided hereof. The President is hereby
authorized subject to the approval of the Board of Directors as
appropriate, to issue such orders, rules and regulations as may
be necessary to implement the reorganization authorized under the
preceding section which will involve the determination and
adoption of (1) a new internal structure of the Corporation as
reorganized down to the divisional, section or lowest
reorganization levels; (2) a new staffing pattern including
appropriate salary rates.
The provisions of any law to the contrary notwithstanding, in the
implementation of the reorganization herein, and in appointments
to appropriate positions in the new staffing pattern of the
Corporation, no preferential or priority rights shall be given to
or enjoyed by any officer or personnel of the Corporation for
appointment to any position in the new staffing pattern nor shall
any officer or personnel be considered as having prior or vested
rights with respect to retention in the Corporation or in any
position as may have been created in its new staffing pattern,
even if he should be the incumbent of a similar position therein.
Pending the completion of the personnel actions above provided
and the issuance of the appropriate implementing orders, all
incumbents shall continue to exercise their mutual functions,
duties and responsibilities.

RA No 9576. Section 13. Joint Congressional Oversight

Committee. - There is hereby created a joint congressional
oversight committee to oversee the implementation of this Act.
The committee shall be composed of the chairpersons of the Senate
Committee on Banks, Financial Institutions and Currencies and the
Committee on Finance and five (5) senators to be appointed by the
President of the Senate, and the chairpersons of the House
Committee on Banks and Financial Intermediaries and the Committee
on Appropriations and five (5) members to be appointed by the
Speaker of the House of Representatives.

Approved: June 22, 1963

Published in the Official Gazette, Vol.  59, No. 36, p.  6003 on September 9, 1963.

(Charter of the Philippine Deposit Insurance Corp., Republic Act No. 3591, [June 22, 1963])
 RA No 8799 | The Securities
Regulations Code
July 19, 2000

CHAPTER I Title and Definitions

SECTION 1. Title. — This shall be known as "The Securities Regulation Code".

SECTION 2. Declaration of State Policy. — The State shall establish a socially conscious, free
market that regulates itself, encourage the widest participation of ownership in enterprises,
enhance the democratization of wealth, promote the development of the capital market,
protect investors, ensure full and fair disclosure about securities, minimize if not totally
eliminate insider trading and other fraudulent or manipulative devices and practices which
create distortions in the free market.

To achieve these ends, this Securities Regulation Code is hereby enacted.

SECTION 3. Definition of Terms. — 3.1. "Securities" are shares, participation or interests in a

corporation or in a commercial enterprise or profit-making venture and evidenced by a
certificate, contract, instrument, whether written or electronic in character. It includes:

(a) Shares of stock, bonds, debentures, notes, evidences of indebtedness, asset-backed

securities;

(b) Investment contracts, certificates of interest or participation in a profit sharing

agreement, certificates of deposit for a future subscription;

(c) Fractional undivided interests in oil, gas or other mineral rights;

(d) Derivatives like option and warrants;

(e) Certificates of assignments, certificates of participation, trust certificates, voting trust
certificates or similar instruments;

(f) Proprietary or nonproprietary membership certificates in corporations; and

(g) Other instruments as may in the future be determined by the Commission.

3.2. "Issuer" is the originator, maker, obligor, or creator of the security.

3.3. "Broker" is a person engaged in the business of buying and selling securities for the
account of others.

3.4. "Dealer" means any person who buys and sells securities for his/her own account in the
ordinary course of business.

3.5. "Associated person of a broker or dealer" is an employee thereof who, directly exercises
control of supervisory authority, but does not include a salesman, or an agent or a person
whose functions are solely clerical or ministerial.

3.6. "Clearing agency" is any person who acts as intermediary in making deliveries upon
payment to effect settlement in securities transactions.

3.7. "Exchange" is an organized marketplace or facility that brings together buyers and sellers
and executes trades of securities and/or commodities.

3.8. "Insider" means: (a) the issuer; (b) a director or officer (or person performing similar
functions) of, or a person controlling the issuer; (c) a person whose relationship or former
relationship to the issuer gives or gave him access to material information about the issuer or
the security that is not generally available to the public; (d) a government employee, or
director, or officer of an exchange, clearing agency and/or self-regulatory organization who
has access to material information about an issuer or a security that is not generally available
to the public; or (e) a person who learns such information by a communication from any of
the foregoing insiders.

3.9. "Pre-need plans" are contracts which provide for the performance of future services or
the payment of future monetary considerations at the time of actual need, for which
planholders pay in cash or installment at stated prices, with or without interest or insurance
coverage and includes life, pension, education, interment, and other plans which the
Commission may from time to time approve.

3.10. "Promoter" is a person who, acting alone or with others, takes initiative in founding and
organizing the business or enterprise of the issuer and receives consideration therefor.

3.11. "Prospectus" is the document made by or on behalf of an issuer, underwriter or dealer

to sell or offer securities for sale to the public through a registration statement filed with the
Commission.

3.12. "Registration statement" is the application for the registration of securities required to
be filed with the Commission.
3.13. "Salesman" is a natural person, employed as such or as an agent, by a dealer, issuer or
broker to buy and sell securities.

3.14. "Uncertificated security" is a security evidenced by electronic or similar records.

3.15. "Underwriter" is a person who guarantees on a firm commitment and/or declared best
effort basis the distribution and sale of securities of any kind by another company.

CHAPTER II Securities and Exchange Commission

SECTION 4. Administrative Agency. — 4.1. This Code shall be administered by the Securities
and Exchange Commission (hereinafter referred to as the "Commission") as a collegial body,
composed of a Chairperson and four (4) Commissioners, appointed by the President for a
term of seven (7) years each and who shall serve as such until their successor shall have been
appointed and qualified. A Commissioner appointed to fill a vacancy occurring prior to the
expiration of the term for which his/her predecessor was appointed, shall serve only for the
unexpired portion of such term. The incumbent Chairperson and Commissioners at the
effectivity of this Code, shall serve the unexpired portion of their terms under Presidential
Decree No. 902-A. Unless the context indicates otherwise, the term "Commissioner" includes
the Chairperson.

4.2. The Commissioners must be natural-born citizens of the Philippines, at least forty (40)
years of age for the Chairperson and at least thirty-five (35) years of age for the
Commissioners, of good moral character, of unquestionable integrity, of known probity and
patriotism, and with recognized competence in social and economic disciplines: Provided,
That the majority of Commissioners, including the Chairperson, shall be members of the
Philippine Bar.

4.3. The Chairperson is chief executive officer of the Commission. The Chairperson shall
execute and administer the policies, decisions, orders and resolutions approved by the
Commission and shall have the general executive direction and supervision of the work and
operation of the Commission and of its members, bodies, boards, offices, personnel and all
its administrative business.

4.4. The salary of the Chairperson and the Commissioners shall be fixed by the President of
the Philippines based on an objective classification system, at a sum comparable to the
members of the Monetary Board and commensurate to the importance and responsibilities
attached to the position.

4.5. The Commission shall hold meetings at least once a week for the conduct of business or
as often as may be necessary upon call of the Chairperson or upon the request of three (3)
Commissioners. The notice of the meeting shall be given to all Commissioners and the
presence of three (3) Commissioners shall constitute a quorum. In the absence of the
Chairperson, the most senior Commissioner shall act as presiding officer of the meeting.
4.6. The Commission may, for purposes of efficiency, delegate any of its functions to any
department or office of the Commission, an individual Commissioner or staff member of the
Commission except its review or appellate authority and its power to adopt, alter and
supplement any rule or regulation.

The Commission may review upon its own initiative or upon the petition of any interested
party any action of any department or office, individual Commissioner, or staff member of the
Commission.

SECTION 5. Powers and Functions of the Commission. — 5.1. The Commission shall act with
transparency and shall have the powers and functions provided by this Code, Presidential
Decree No. 902-A, the Corporation Code, the Investment Houses Law, the Financing Company
Act and other existing laws. Pursuant thereto the Commission shall have, among others, the
following powers and functions:

(a) Have jurisdiction and supervision over all corporations, partnerships or associations who
are the grantees of primary franchises and/or a license or permit issued by the Government;

(b) Formulate policies and recommendations on issues concerning the securities market,
advise Congress and other government agencies on all aspects of the securities market and
propose legislation and amendments thereto;

(c) Approve, reject, suspend, revoke or require amendments to registration statements, and
registration and licensing applications;

(d) Regulate, investigate or supervise the activities of persons to ensure compliance;

(e) Supervise, monitor, suspend or take over the activities of exchanges, clearing agencies
and other SROs;

(f) Impose sanctions for the violation of laws and the rules, regulations and orders issued
pursuant thereto;

(g) Prepare, approve, amend or repeal rules, regulations and orders, and issue opinions and
provide guidance on and supervise compliance with such rules, regulations and orders;

(h) Enlist the aid and support of and/or deputize any and all enforcement agencies of the
Government, civil or military as well as any private institution, corporation, firm, association
or person in the implementation of its powers and functions under this Code;

(i) Issue cease and desist orders to prevent fraud or injury to the investing public;

(j) Punish for contempt of the Commission, both direct and indirect, in accordance with the
pertinent provisions of and penalties prescribed by the Rules of Court;

(k) Compel the officers of any registered corporation or association to call meetings of
stockholders or members thereof under its supervision;

(l) Issue subpoena duces tecum and summon witnesses to appear in any proceedings of the
Commission and in appropriate cases, order the examination, search and seizure of all
documents, papers, files and records, tax returns, and books of accounts of any entity or
person under investigation as may be necessary for the proper disposition of the cases before
it, subject to the provisions of existing laws;

(m) Suspend, or revoke, after proper notice and hearing the franchise or certificate of
registration of corporations, partnerships or associations, upon any of the grounds provided
by law; and

(n) Exercise such other powers as may be provided by law as well as those which may be
implied from, or which are necessary or incidental to the carrying out of, the express powers
granted the Commission to achieve the objectives and purposes of these laws.

5.2. The Commission's jurisdiction over all cases enumerated under Section 5 of Presidential
Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate
Regional Trial Court: Provided, That the Supreme Court in the exercise of its authority may
designate the Regional Trial Court branches that shall exercise jurisdiction over these cases.
The Commission shall retain jurisdiction over pending cases involving intra-corporate
disputes submitted for final resolution which should be resolved within one (1) year from the
enactment of this Code. The Commission shall retain jurisdiction over pending suspension of
payments/rehabilitation cases filed as of 30 June 2000 until finally disposed.

SECTION 6. Indemnification and Responsibilities of Commissioners. — 6.1. The Commission

shall indemnify each Commissioner and other officials of the Commission, including
personnel performing supervision and examination functions for all costs and expenses
reasonably incurred by such persons in connection with any civil or criminal actions, suits or
proceedings to which they may be or made a party by reason of the performance of their
functions or duties, unless they are finally adjudged in such actions or proceedings to be
liable for gross negligence or misconduct.

In the event of settlement or compromise, indemnification shall be provided only in

connection with such matters covered by the settlement as to which the Commission is
advised by external counsel that the persons to be indemnified did not commit any gross
negligence or misconduct.

The costs and expenses incurred in defending the aforementioned action, suit or proceeding
may be paid by the Commission in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the Commissioner, officer or
employee to repay the amount advanced should it ultimately be determined by the
Commission that he/she is not entitled to be indemnified as provided in this subsection.

6.2. The Commissioners, officers and employees of the Commission who willfully violate this
Code or who are guilty of negligence, abuse or acts of malfeasance or fail to exercise
extraordinary diligence in the performance of their duties shall be held liable for any loss or
injury suffered by the Commission or other institutions as a result of such violation,
negligence, abuse, malfeasance, or failure to exercise extraordinary diligence.

Similar responsibility shall apply to the Commissioners, officers and employees of the
Commission for (1) the disclosure of any information, discussion or resolution of the
Commission of a confidential nature, or about the confidential operations of the Commission,
unless the disclosure is in connection with the performance of official functions with the
Commission or with prior authorization of the Commissioners; or (2) the use of such
information for personal gain or to the detriment of the government, the Commission or third
parties: Provided, however, That any data or information required to be submitted to the
President and/or Congress or its appropriate committee, or to be published under the
provisions of this Code shall not be considered confidential.

SECTION 7. Reorganization. — 7.1. To achieve the goals of this Code, consistent with Civil
Service laws, the Commission is hereby authorized to provide for its reorganization, to
streamline its structure and operations, upgrade its human resource component and enable
it to more efficiently and effectively perform its functions and exercise its powers under this
Code.

7.2. All positions of the Commission shall be governed by a compensation and position
classification systems and qualification standards approved by the Commission based on a
comprehensive job analysis and audit of actual duties and responsibilities. The compensation
plan shall be comparable with the prevailing compensation plan in the Bangko Sentral ng
Pilipinas and other government financial institutions and shall be subject to periodic review
by the Commission no more than once every two (2) years without prejudice to yearly merit
reviews or increases based on productivity and efficiency. The Commission shall, therefore,
be exempt from laws, rules, and regulations on compensation, position classification and
qualification standards. The Commission shall, however, endeavor to make its system
conform as closely as possible with the principles under the Compensation and Position
Classification Act of 1989 (Republic Act No. 6758, as amended).

CHAPTER III Registration of Securities

SECTION 8. Requirement of Registration of Securities. — 8.1. Securities shall not be sold or
offered for sale or distribution within the Philippines, without a registration statement duly filed
with and approved by the Commission. Prior to such sale, information on the securities, in such
form and with such substance as the Commission may prescribe, shall be made available to
each prospective purchaser.

8.2. The Commission may conditionally approve the registration statement under such terms
as it may deem necessary.

8.3. The Commission may specify the terms and conditions under which any written
communication, including any summary prospectus, shall be deemed not to constitute an
offer for sale under this Section.

8.4. A record of the registration of securities shall be kept in a Register of Securities in which
shall be recorded orders entered by the Commission with respect to such securities. Such
register and all documents or information with respect to the securities registered therein
shall be open to public inspection at reasonable hours on business days.
8.5. The Commission may audit the financial statements, assets and other information of a
firm applying for registration of its securities whenever it deems the same necessary to insure
full disclosure or to protect the interest of the investors and the public in general.

SECTION 9. Exempt Securities. —  9.1. The requirement of registration under Subsection 8.1
shall not as a general rule apply to any of the following classes of securities:

(a) Any security issued or guaranteed by the Government of the Philippines, or by any political
subdivision or agency thereof, or by any person controlled or supervised by, and acting as an
instrumentality of said Government.

(b) Any security issued or guaranteed by the government of any country with which the
Philippines maintains diplomatic relations, or by any state, province or political subdivision
thereof on the basis of reciprocity: Provided, That the Commission may require compliance
with the form and content of disclosures the Commission may prescribe.

(c) Certificates issued by a receiver or by a trustee in bankruptcy duly approved by the proper
adjudicatory body.

(d) Any security or its derivatives the sale or transfer of which, by law, is under the supervision
and regulation of the Office of the Insurance Commission, Housing and Land Use Regulatory
Board, or the Bureau of Internal Revenue.

(e) Any security issued by a bank except its own shares of stock.

9.2. The Commission may, by rule or regulation after public hearing, add to the foregoing any
class of securities if it finds that the enforcement of this Codewith respect to such securities is
not necessary in the public interest and for the protection of investors.

SECTION 10. Exempt Transactions. — 10.1. The requirement of registration under

Subsection 8.1 shall not apply to the sale of any security in any of the following transactions:

(a) At any judicial sale, or sale by an executor, administrator, guardian or receiver or trustee in
insolvency or bankruptcy.

(b) By or for the account of a pledge holder, or mortgagee or any other similar lien holder
selling or offering for sale or delivery in the ordinary course of business and not for the
purpose of avoiding the provisions of this Code, to liquidate a bona fide debt, a security
pledged in good faith as security for such debt.

(c) An isolated transaction in which any security is sold, offered for sale, subscription or
delivery by the owner thereof, or by his representative for the owner's account, such sale or
offer for sale, subscription or delivery not being made in the course of repeated and
successive transactions of a like character by such owner, or on his account by such
representative and such owner or representative not being the underwriter of such security.

(d) The distribution by a corporation, actively engaged in the business authorized by its
articles of incorporation, of securities to its stockholders or other security holders as a stock
dividend or other distribution out of surplus.
(e) The sale of capital stock of a corporation to its own stockholders exclusively, where no
commission or other remuneration is paid or given directly or indirectly in connection with
the sale of such capital stock.

(f) The issuance of bonds or notes secured by mortgage upon real estate or tangible personal
property, where the entire mortgage together with all the bonds or notes secured thereby are
sold to a single purchaser at a single sale.

(g) The issue and delivery of any security in exchange for any other security of the same issuer
pursuant to a right of conversion entitling the holder of the security surrendered in exchange
to make such conversion: Provided, That the security so surrendered has been registered
under this Code or was, when sold, exempt from the provisions of this Code, and that the
security issued and delivered in exchange, if sold at the conversion price, would at the time of
such conversion fall within the class of securities entitled to registration under this Code.
Upon such conversion the par value of the security surrendered in such exchange shall be
deemed the price at which the securities issued and delivered in such exchange are sold.

(h) Broker's transactions, executed upon customer's orders, on any registered Exchange or
other trading market.

(i) Subscriptions for shares of the capital stock of a corporation prior to the incorporation
thereof or in pursuance of an increase in its authorized capital stock under the Corporation
Code, when no expense is incurred, or no commission, compensation or remuneration is paid
or given in connection with the sale or disposition of such securities, and only when the
purpose for soliciting, giving or taking of such subscriptions is to comply with the
requirements of such law as to the percentage of the capital stock of a corporation which
should be subscribed before it can be registered and duly incorporated, or its authorized
capital increased.

(j) The exchange of securities by the issuer with its existing security holders exclusively, where
no commission or other remuneration is paid or given directly or indirectly for soliciting such
exchange.

(k) The sale of securities by an issuer to fewer than twenty (20) persons in the Philippines
during any twelve-month period.

(l) The sale of securities to any number of the following qualified buyers:

(i) Bank;

(ii) Registered investment house;

(iii) Insurance company;

(iv) Pension fund or retirement plan maintained by the Government of the Philippines or any
political subdivision thereof or managed by a bank or other persons authorized by the
Bangko Sentral to engage in trust functions;

(v) Investment company; or

(vi) Such other person as the Commission may by rule determine as qualified buyers, on the
basis of such factors as financial sophistication, net worth, knowledge, and experience in
financial and business matters, or amount of assets under management.

10.2. The Commission may exempt other transactions, if it finds that the requirements of
registration under this Code is not necessary in the public interest or for the protection of the
investors such as by reason of the small amount involved or the limited character of the
public offering.

10.3. Any person applying for an exemption under this Section, shall file with the Commission
a notice identifying the exemption relied upon on such form and at such time as the
Commission by rule may prescribe and with such notice shall pay to the Commission a fee
equivalent to one-tenth (1/10) of one percent (1%) of the maximum aggregate price or issued
value of the securities.

SECTION 11. Commodity Futures Contracts. — No person shall offer, sell or enter into
commodity futures contracts except in accordance with rules, regulations and orders the
Commission may prescribe in the public interest. The Commission shall promulgate rules and
regulations involving commodity futures contracts to protect investors to ensure the
development of a fair and transparent commodities market.

SECTION 12. Procedure for Registration of Securities. — 12.1. All securities required to be

registered under Subsection 8.1 shall be registered through the filing by the issuer in the main
office of the Commission, of a sworn registration statement with respect to such securities, in
such form and containing such information and documents as the Commission shall prescribe.
The registration statement shall include any prospectus required or permitted to be delivered
under Subsections 8.2, 8.3 and 8.4.

12.2. In promulgating rules governing the content of any registration statement (including
any prospectus made a part thereof or annexed thereto), the Commission may require the
registration statement to contain such information or documents as it may, by rule,
prescribe. It may dispense with any such requirement, or may require additional information
or documents, including written information from an expert, depending on the necessity
thereof or their applicability to the class of securities sought to be registered.

12.3. The information required for the registration of any kind, and all securities, shall
include, among others, the effect of the securities issue on ownership, on the mix of
ownership, especially foreign and local ownership.

12.4. The registration statement shall be signed by the issuer's executive officer, its principal
operating officer, its principal financial officer, its comptroller, its principal accounting officer,
its corporate secretary or persons performing similar functions accompanied by a duly
verified resolution of the board of directors of the issuer corporation. The written consent of
the expert named as having certified any part of the registration statement or any document
used in connection therewith shall also be filed. Where the registration statement includes
shares to be sold by selling shareholders, a written certification by such selling shareholders
as to the accuracy of any part of the registration statement contributed to by such selling
shareholders shall also be filed.
12.5. (a) Upon filing of the registration statement, the issuer shall pay to the Commission a fee
of not more than one-tenth (1/10) of one  per centum (1%) of the maximum aggregate price at
which such securities are proposed to be offered. The Commission shall prescribe by rule
diminishing fees in inverse proportion the value of the aggregate price of the offering.

(b) Notice of the filing of the registration statement shall be immediately published by the
issuer, at its own expense, in two (2) newspapers of general circulation in the Philippines,
once a week for two (2) consecutive weeks, or in such other manner as the Commission by
rule shall prescribe, reciting that a registration statement for the sale of such security has
been filed, and that the aforesaid registration statement, as well as the papers attached
thereto are open to inspection at the Commission during business hours, and copies thereof,
photostatic or otherwise, shall be furnished to interested parties at such reasonable charge
as the Commission may prescribe.

12.6. Within forty-five (45) days after the date of filing of the registration statement, or by such
later date to which the issuer has consented, the Commission shall declare the registration
statement effective or rejected, unless the applicant is allowed to amend the registration
statement as provided in Section 14 hereof. The Commission shall enter an order declaring
the registration statement to be effective if it finds that the registration statement together
with all the other papers and documents attached thereto, is on its face complete and that
the requirements have been complied with. The Commission may impose such terms and
conditions as may be necessary or appropriate for the protection of the investors.

12.7. Upon effectivity of the registration statement, the issuer shall state under oath in every
prospectus that all registration requirements have been met and that all information are true
and correct as represented by the issuer or the one making the statement. Any untrue
statement of fact or omission to state a material fact required to be stated therein or
necessary to make the statement therein not misleading shall constitute fraud.

SECTION 13. Rejection and Revocation of Registration of Securities. —  13.1. The

Commission may reject a registration statement and refuse registration of the security
thereunder, or revoke the effectivity of a registration statement and the registration of the
security thereunder after due notice and hearing by issuing an order to such effect, setting forth
its findings in respect thereto, if it finds that:

(a) The issuer:

(i) Has been judicially declared insolvent;

(ii) Has violated any of the provisions of this Code, the rules promulgated pursuant thereto, or
any order of the Commission of which the issuer has notice in connection with the offering for
which the registration statement has been filed;

(iii) Has been or is engaged or is about to engage in fraudulent transactions;

(iv) Has made any false or misleading representation of material facts in any prospectus
concerning the issuer or its securities;
(v) Has failed to comply with any requirement that the Commission may impose as a
condition for registration of the security for which the registration statement has been filed;
or

(b) The registration statement is on its face incomplete or inaccurate in any material respect
or includes any untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading; or

(c) The issuer, any officer, director or controlling person of the issuer, or person performing
similar functions, or any underwriter has been convicted, by a competent judicial or
administrative body, upon plea of guilty, or otherwise, of an offense involving moral turpitude
and/or fraud or is enjoined or restrained by the Commission or other competent judicial or
administrative body for violations of securities, commodities, and other related laws.

For purposes of this subsection, the term "competent judicial or administrative body" shall
include a foreign court of competent jurisdiction as provided for under the Rules of Court.

13.2. The Commission may compel the production of all the books and papers of such issuer,
and may administer oaths to, and examine the officers of such issuer or any other person
connected therewith as to its business and affairs.

13.3. If any issuer shall refuse to permit an examination to be made by the Commission, its
refusal shall be ground for the refusal or revocation of the registration of its securities.

13.4. If the Commission deems it necessary, it may issue an order suspending the offer and
sale of the securities pending any investigation. The order shall state the grounds for taking
such action, but such order of suspension although binding upon the persons notified
thereof, shall be deemed confidential, and shall not be published. Upon the issuance of the
suspension order, no further offer or sale of such security shall be made until the same is
lifted or set aside by the Commission. Otherwise, such sale shall be void.

13.5. Notice of issuance of such order shall be given to the issuer and every dealer and broker
who shall have notified the Commission of an intention to sell such security.

13.6. A registration statement may be withdrawn by the issuer only with the consent of the
Commission.

SECTION 14. Amendments to the Registration Statement. — 14.1. If a registration statement

is on its face incomplete or inaccurate in any material respect, the Commission shall issue an
order directing the amendment of the registration statement. Upon compliance with such
order, the amended registration statement shall become effective in accordance with the
procedure mentioned in Subsection 12.6 hereof.

14.2. An amendment filed prior to the effective date of the registration statement shall
recommence the forty-five (45) days period within which the Commission shall act on a
registration statement. An amendment filed after the effective date of the registration
statement shall become effective only upon such date as determined by the Commission.

14.3. If any change occurs in the facts set forth in a registration statement, the issuer shall file
an amendment thereto setting forth the change.
14.4. If, at any time, the Commission finds that a registration statement contains any false
statement or omits to state any fact required to be stated therein or necessary to make the
statements therein not misleading, the Commission may conduct an examination, and, after
due notice and hearing, issue an Order suspending the effectivity of the registration
statement. If the statement is duly amended, the suspension order may be lifted.

14.5. In making such examination the Commission or any officer or officers designated by it
may administer oaths and affirmations and shall have access to, and may demand the
production of, any books, records or documents relevant to the examination. Failure of the
issuer, underwriter, or any other person to cooperate, or his obstruction or refusal to undergo
an examination, shall be a ground for the issuance of a suspension order.

SECTION 15. Suspension of Registration. — 15.1. If, at any time, the information contained in
the registration statement filed is or has become misleading, incorrect, inadequate or
incomplete in any material respect, or the sale or offering for sale of the security registered
thereunder may work or tend to work a fraud, the Commission may require from the issuer
such further information as may in its judgment be necessary to enable the Commission to
ascertain whether the registration of such security should be revoked on any ground
specified in this Code. The Commission may also suspend the right to sell and offer for sale
such security pending further investigation, by entering an order specifying the grounds for
such action, and by notifying the issuer, underwriter, dealer or broker known as participating
in such offering.

15.2. The refusal to furnish information required by the Commission may be a ground for the
issuance of an order of suspension pursuant to Subsection 15.1. Upon the issuance of any
such order and notification to the issuer, underwriter, dealer or broker known as participating
in such offering, no further offer or sale of any such security shall be made until the same is
lifted or set aside by the Commission. Otherwise, such sale shall be void.

15.3. Upon issuance of an order of suspension, the Commission shall conduct a hearing. If the
Commission determines that the sale of any security should be revoked, it shall issue an order
prohibiting sale of such security.

Until the issuance of a final order, the suspension of the right to sell, though binding upon the
persons notified thereof, shall be deemed confidential, and shall not be published, unless it
shall appear that the order of suspension has been violated after notice. If, however, the
Commission finds that the sale of the security will neither be fraudulent nor result in fraud, it
shall forthwith issue an order revoking the order of suspension, and such security shall be
restored to its status as a registered security as of the date of such order of suspension.

CHAPTER IV Regulation of Pre-Need Plans

SECTION 16. Pre-Need Plans. — No person shall sell or offer for sale to the public any pre-
need plan except in accordance with rules and regulations which the Commission shall
prescribe. Such rules shall regulate the sale of pre-need plans by, among other things,
requiring the registration of pre-need plans, licensing persons involved in the sale of pre-need
plans, requiring disclosures to prospective plan holders, prescribing advertising guidelines,
providing for uniform accounting system, reports and record keeping with respect to such
plans, imposing capital, bonding and other financial responsibility, and establishing trust
funds for the payment of benefits under such plans.

CHAPTER V Reportorial Requirements

SECTION 17. Periodic and Other Reports of Issuers. — 17.1. Every issuer satisfying the
requirements in Subsection 17.2 hereof shall file with the Commission:

(a) Within one hundred thirty-five (135) days, after the end of the issuer's fiscal year, or such
other time as the Commission may prescribe, an annual report which shall include, among
others, a balance sheet, profit and loss statement and statement of cash flows, for such last
fiscal year, certified by an independent certified public accountant, and a management
discussion and analysis of results of operations; and

(b) Such other periodical reports for interim fiscal periods and current reports on significant
developments of the issuer as the Commission may prescribe as necessary to keep current
information on the operation of the business and financial condition of the issuer.

17.2. The reportorial requirements of Subsection 17.1 shall apply to the following:

(a) An issuer which has sold a class of its securities pursuant to a registration under Section 12
hereof: Provided, however, That the obligation of such issuer to file reports shall be
suspended for any fiscal year after the year such registration became effective if such issuer,
as of the first day of any such fiscal year, has less than one hundred (100) holders of such class
of securities or such other number as the Commission shall prescribe and it notifies the
Commission of such;

(b) An issuer with a class of securities listed for trading on an Exchange; and

(c) An issuer with assets of at least Fifty million pesos (P50,000,000.00) or such other amount
as the Commission shall prescribe, and having two hundred (200) or more holders each
holding at least one hundred (100) shares of a class of its equity securities: Provided, however,
That the obligation of such issuer to file reports shall be terminated ninety (90) days after
notification to the Commission by the issuer that the number of its holders holding at least
one hundred (100) shares is reduced to less than one hundred (100).

17.3. Every issuer of a security listed for trading on an Exchange shall file with the Exchange a
copy of any report filed with the Commission under Subsection 17.1 hereof.

17.4. All reports (including financial statements) required to be filed with the Commission
pursuant to Subsection 17.1 hereof shall be in such form, contain such information and be
filed at such times as the Commission shall prescribe, and shall be in lieu of any periodical or
current reports or financial statements otherwise required to be filed under the Corporation
Code.

17.5. Every issuer which has a class of equity securities satisfying any of the requirements in
Subsection 17.2 shall furnish to each holder of such equity security an annual report in such
form and containing such information as the Commission shall prescribe.

17.6. Within such period as the Commission may prescribe preceding the annual meeting of
the holders of any equity security of a class entitled to vote at such meeting, the issuer shall
transmit to such holders an annual report in conformity with Subsection 17.5.

SECTION 18. Reports by Five per centum (5%) Holders of Equity Securities. — 18.1. In every
case in which an issuer satisfies the requirements of Subsection 17.2 hereof, any person who
acquires directly or indirectly the beneficial ownership of more than five per centum (5%) of
such class or in excess of such lesser per centum as the Commission by rule may prescribe,
shall, within ten (10) days after such acquisition or such reasonable time as fixed by the
Commission, submit to the issuer of the security, to the Exchange where the security is
traded, and to the Commission a sworn statement containing the following information and
such other information as the Commission may require in the public interest or for the
protection of investors:

(a) The personal background, identity, residence, and citizenship of, and the nature of such
beneficial ownership by, such person and all other persons by whom or on whose behalf the
purchases are effected; in the event the beneficial owner is a juridical person, the lines of
business of the beneficial owner shall also be reported;

(b) If the purpose of the purchases or prospective purchases is to acquire control of the
business of the issuer of the securities, any plans or proposals which such persons may have
that will effect a major change in its business or corporate structure;

(c) The number of shares of such security which are beneficially owned, and the number of
shares concerning which there is a right to acquire, directly or indirectly, by: (i) such person,
and (ii) each associate of such person, giving the background, identity, residence, and
citizenship of each such associate; and

(d) Information as to any contracts, arrangements, or understanding with any person with
respect to any securities of the issuer including but not limited to transfer, joint ventures,
loan or option arrangements, puts or calls, guarantees or division of losses or profits, or
proxies naming the persons with whom such contracts, arrangements, or understanding have
been entered into, and giving the details thereof.

18.2. If any change occurs in the facts set forth in the statements, an amendment shall be
transmitted to the issuer, the Exchange and the Commission.

18.3. The Commission, may permit any person to file in lieu of the statement required by
Subsection 17.1 hereof, a notice stating the name of such person, the shares of any equity
securities subject to Subsection 17.1 which are owned by him, the date of their acquisition
and such other information as the Commission may specify, if it appears to the Commission
that such securities were acquired by such person in the ordinary course of his business and
were not acquired for the purpose of and do not have the effect of changing or influencing the
control of the issuer nor in connection with any transaction having such purpose or effect.

CHAPTER VI Protection of Shareholder Interests

SECTION 19. Tender Offers. — 19.1. (a) Any person or group of persons acting in concert who
intends to acquire at least fifteen percent (15%) of any class of any equity security of a listed
corporation or of any class of any equity security of a corporation with assets of at least Fifty
million pesos (P50,000,000.00) and having two hundred (200) or more stockholders with at
least one hundred (100) shares each or who intends to acquire at least thirty percent (30%) of
such equity over a period of twelve (12) months shall make a tender offer to stockholders by
filing with the Commission a declaration to that effect; and furnish the issuer, a statement
containing such of the information required in Section 17 of this Code as the Commission may
prescribe. Such person or group of persons shall publish all requests or invitations for tender,
or materials making a tender offer or requesting or inviting letters of such a security. Copies
of any additional material soliciting or requesting such tender offers subsequent to the initial
solicitation or request shall contain such information as the Commission may prescribe, and
shall be filed with the Commission and sent to the issuer not later than the time copies of
such materials are first published or sent or given to security holders.

(b) Any solicitation or recommendation to the holders of such a security to accept or reject a
tender offer or request or invitation for tenders shall be made in accordance with such rules
and regulations as the Commission may prescribe.

(c) Securities deposited pursuant to a tender offer or request or invitation for tenders may be
withdrawn by or on behalf of the depositor at any time throughout the period that the tender
offer remains open and if the securities deposited have not been previously accepted for
payment, and at any time after sixty (60) days from the date of the original tender offer or
request or invitation, except as the Commission may otherwise prescribe.

(d) Where the securities offered exceed that which a person or group of persons is bound or
willing to take up and pay for, the securities that are subject of the tender offer shall be taken
up as nearly as may be pro rata, disregarding fractions, according to the number of securities
deposited by each depositor. The provisions of this subsection shall also apply to securities
deposited within ten (10) days after notice of an increase in the consideration offered to
security holders, as described in paragraph (e) of this subsection, is first published or sent or
given to security holders.

(e) Where any person varies the terms of a tender offer or request or invitation for tenders
before the expiration thereof by increasing the consideration offered to holders of such
securities, such person shall pay the increased consideration to each security holder whose
securities are taken up and paid for whether or not such securities have been taken up by
such person before the variation of the tender offer or request or invitation.
19.2. It shall be unlawful for any person to make any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made, in the light
of the circumstances under which they are made, not misleading, or to engage in any
fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer
or request or invitation for tenders, or any solicitation of security holders in opposition to or
in favor of any such offer, request, or invitation. The Commission shall, for the purposes of
this subsection, define and prescribe means reasonably designed to prevent, such acts and
practices as are fraudulent, deceptive, or manipulative.

SECTION 20. Proxy Solicitations. — 20.1. Proxies must be issued and proxy solicitation must
be made in accordance with rules and regulations to be issued by the Commission.

20.2. Proxies must be in writing, signed by the stockholder or his duly authorized
representative and filed before the scheduled meeting with the corporate secretary.

20.3. Unless otherwise provided in the proxy, it shall be valid only for the meeting for which it
is intended. No proxy shall be valid and effective for a period longer than five (5) years at one
time.

20.4. No broker or dealer shall give any proxy, consent or authorization, in respect of any
security carried for the account of a customer, to a person other than the customer, without
the express written authorization of such customer.

20.5. A broker or dealer who holds or acquires the proxy for at least ten  per centum (10%) or
such percentage as the Commission may prescribe of the outstanding share of the issuer,
shall submit a report identifying the beneficial owner within ten (10) days after such
acquisition, for its own account or customer, to the issuer of the security, to the Exchange
where the security is traded and to the Commission.

SECTION 21. Fees for Tender Offers and Certain Proxy Solicitations. — At the time of filing
with the Commission of any statement required under Section 19 for any tender offer or
Section 72.2 for issuer repurchases, or Section 20 for proxy or consent solicitation, the
Commission may require that the person making such filing pay a fee of not more than one-
tenth (1/10) of one percentum (1%) of:

21.1. The proposed aggregate purchase price in the case of a transaction under Sections 20 or
72.2; or

21.2. The proposed payment in cash, and the value of any securities or property to be
transferred in the acquisition, merger or consolidation, or the cash and value of any securities
proposed to be received upon the sale or disposition of such assets in the case of a
solicitation under Section 20. The Commission shall prescribe by rule diminishing fees in
inverse proportion to the value of the aggregate price of the offering.

SECTION 22. Internal Record Keeping and Accounting Controls. — Every issuer which has a
class of securities that satisfies the requirements of Subsection 17.2 shall:

22.1. Make and keep books, records, and accounts which, in reasonable detail accurately and
fairly reflect the transactions and dispositions of assets of the issuer;
22.2. Devise and maintain a system of internal accounting controls sufficient to provide
reasonable assurances that: (a) Transactions and access to assets are pursuant to
management authorization; (b) Financial statements are prepared in conformity with
generally accepted accounting principles that are adopted by the Accounting Standards
Council and the rules promulgated by the Commission with regard to the preparation of
financial statements; and (c) Recorded assets are compared with existing assets at
reasonable intervals and differences are reconciled.

SECTION 23. Transactions of Directors,  Officers and Principal Stockholders. — 23.1. Every

person who is directly or indirectly the beneficial owner of more than ten per centum (10%) of
any class of any equity security which satisfies the requirements of Subsection 17.2, or who is
a director or an officer of the issuer of such security, shall file, at the time either such
requirement is first satisfied or within ten days after he becomes such a beneficial owner,
director, or officer, a statement with the Commission and, if such security is listed for trading
on an Exchange, also with the Exchange, of the amount of all equity securities of such issuer
of which he is the beneficial owner, and within ten (10) days after the close of each calendar
month thereafter, if there has been a change in such ownership during such month, shall file
with the Commission, and if such security is listed for trading on an Exchange, shall also file
with the Exchange, a statement indicating his ownership at the close of the calendar month
and such changes in his ownership as have occurred during such calendar month.

23.2. For the purpose of preventing the unfair use of information which may have been
obtained by such beneficial owner, director, or officer by reason of his relationship to the
issuer, any profit realized by him from any purchase and sale, or any sale and purchase, of any
equity security of such issuer within any period of less than six (6) months, unless such
security was acquired in good faith in connection with a debt previously contracted, shall
inure to and be recoverable by the issuer, irrespective of any intention of holding the security
purchased or of not repurchasing the security sold for a period exceeding six (6) months. Suit
to recover such profit may be instituted before the Regional Trial Court by the issuer, or by
the owner of any security of the issuer in the name and in behalf of the issuer if the issuer
shall fail or refuse to bring such suit within sixty (60) days after request or shall fail diligently
to prosecute the same thereafter, but no such suit shall be brought more than two (2) years
after the date such profit was realized. This subsection shall not be construed to cover any
transaction where such beneficial owner was not such both at the time of the purchase and
sale, or the sale and purchase, of the security involved, or any transaction or transactions
which the Commission by rules and regulations may exempt as not comprehended within the
purpose of this subsection.

23.3. It shall be unlawful for any such beneficial owner, director, or officer, directly or
indirectly, to sell any equity security of such issuer if the person selling the security or his
principal: (a) Does not own the security sold; or (b) If owning the security, does not deliver it
against such sale within twenty (20) days thereafter, or does not within five (5) days after such
sale deposit it in the mails or other usual channels of transportation; but no person shall be
deemed to have violated this subsection if he proves that notwithstanding the exercise of
good faith he was unable to make such delivery or deposit within such time, or that to do so
would cause undue inconvenience or expense.
23.4. The provisions of Subsection 23.2 shall not apply to any purchase and sale, or sale and
purchase, and the provisions of Subsection 23.3 shall not apply to any sale, of an equity
security not then or thereafter held by him in an investment account, by a dealer in the
ordinary course of his business and incident to the establishment or maintenance by him of a
primary or secondary market, otherwise than on an Exchange, for such security. The
Commission may, by such rules and regulations as it deems necessary or appropriate in the
public interest, define and prescribe terms and conditions with respect to securities held in
an investment account and transactions made in the ordinary course of business and
incident to the establishment or maintenance of a primary or secondary market.

CHAPTER VII Prohibitions on Fraud, Manipulation

and Insider Trading
SECTION 24. Manipulation of Security Prices;  Devices and Practices. — 24.1 It shall be
unlawful for any person acting for himself or through a dealer or broker, directly or indirectly:

(a) To create a false or misleading appearance of active trading in any listed security traded in
an Exchange or any other trading market (hereafter referred to purposes of this Chapter as
"Exchange"):

(i) By effecting any transaction in such security which involves no change in the beneficial
ownership thereof;

(ii) By entering an order or orders for the purchase or sale of such security with the knowledge
that a simultaneous order or orders of substantially the same size, time and price, for the sale
or purchase of any such security, has or will be entered by or for the same or different parties;
or

(iii) By performing similar act where there is no change in beneficial ownership.

(b) To effect, alone or with others, a series of transactions in securities that: (i) Raises their
price to induce the purchase of a security, whether of the same or a different class of the
same issuer or of a controlling, controlled, or commonly controlled company by others; (ii)
Depresses their price to induce the sale of a security, whether of the same or a different class,
of the same issuer or of a controlling, controlled, or commonly controlled company by others;
or (iii) Creates active trading to induce such a purchase or sale through manipulative devices
such as marking the close, painting the tape, squeezing the float, hype and dump, boiler
room operations and such other similar devices.

(c) To circulate or disseminate information that the price of any security listed in an Exchange
will or is likely to rise or fall because of manipulative market operations of any one or more
persons conducted for the purpose of raising or depressing the price of the security for the
purpose of inducing the purchase or sale of such security.
(d) To make false or misleading statement with respect to any material fact, which he knew or
had reasonable ground to believe was so false or misleading, for the purpose of inducing the
purchase or sale of any security listed or traded in an Exchange.

(e) To effect, either alone or others, any series of transactions for the purchase and/or sale of
any security traded in an Exchange for the purpose of pegging, fixing or stabilizing the price of
such security, unless otherwise allowed by this Code or by rules of the Commission.

24.2. No person shall use or employ, in connection with the purchase or sale of any security
any manipulative or deceptive device or contrivance. Neither shall any short sale be effected
nor any stop-loss order be executed in connection with the purchase or sale of any security
except in accordance with such rules and regulations as the Commission may prescribe as
necessary or appropriate in the public interest or for the protection of investors.

24.3. The foregoing provisions notwithstanding, the Commission, having due regard to the
public interest and the protection of investors, may, by rules and regulations, allow certain
acts or transactions that may otherwise be prohibited under this Section.

SECTION 25. Regulation of Option Trading. — No member of an Exchange shall, directly or

indirectly endorse or guarantee the performance of any put, call, straddle, option or privilege
in relation to any security registered on a securities exchange.

The terms "put", "call", "straddle", "option", or "privilege" shall not include any registered
warrant, right or convertible security.

SECTION 26. Fraudulent Transactions. — It shall be unlawful for any person, directly or
indirectly, in connection with the purchase or sale of any securitiesto:

26.1. Employ any device, scheme, or artifice to defraud;

26.2. Obtain money or property by means of any untrue statement of a material fact of any
omission to state a material fact necessary in order to make the statements made, in the light
of the circumstances under which they were made, not misleading; or

26.3. Engage in any act, transaction, practice or course of business which operates or would
operate as a fraud or deceit upon any person.

SECTION 27. Insider's Duty to Disclose When Trading. — 27.1. It shall be unlawful for an
insider to sell or buy a security of the issuer, while in possession of material information with
respect to the issuer or the security that is not generally available to the public, unless: (a)
The insider proves that the information was not gained from such relationship; or (b) If the
other party selling to or buying from the insider (or his agent) is identified, the insider proves:
(i) that he disclosed the information to the other party, or (ii) that he had reason to believe
that the other party otherwise is also in possession of the information. A purchase or sale of a
security of the issuer made by an insider defined in Subsection 3.8, or such insider's spouse or
relatives by affinity or consanguinity within the second degree, legitimate or common-law,
shall be presumed to have been effected while in possession of material nonpublic
information if transacted after such information came into existence but prior to
dissemination of such information to the public and the lapse of a reasonable time for the
market to absorb such information: Provided,however, That this presumption shall be
rebutted upon a showing by the purchaser or seller that he was not aware of the material
nonpublic information at the time of the purchase or sale.

27.2. For purposes of this Section, information is "material nonpublic" if: (a) It has not been
generally disclosed to the public and would likely affect the market price of the security after
being disseminated to the public and the lapse of a reasonable time for the market to absorb
the information; or (b) would be considered by a reasonable person important under the
circumstances in determining his course of action whether to buy, sell or hold a security.

27.3. It shall be unlawful for any insider to communicate material nonpublic information
about the issuer or the security to any person who, by virtue of the communication, becomes
an insider as defined in Subsection 3.8, where the insider communicating the information
knows or has reason to believe that such person will likely buy or sell a security of the issuer
while in possession of such information.

27.4. a) It shall be unlawful where a tender offer has commenced or is about to commence for:

(i) Any person (other than the tender offeror) who is in possession of material nonpublic
information relating to such tender offer, to buy or sell the securities of the issuer that are
sought or to be sought by such tender offer if such person knows or has reason to believe that
the information is nonpublic and has been acquired directly or indirectly from the tender
offeror, those acting on its behalf, the issuer of the securities sought or to be sought by such
tender offer, or any insider of such issuer; and

(ii) Any tender offeror, those acting on its behalf, the issuer of the securities sought or to be
sought by such tender offer, and any insider of such issuer to communicate material
nonpublic information relating to the tender offer to any other person where such
communication is likely to result in a violation of Subsection 27.4 (a)(i).

(b) For purposes of this subsection the term "securities of the issuer sought or to be sought by
such tender offer" shall include any securities convertible or exchangeable into such
securities or any options or rights in any of the foregoing securities.

CHAPTER VIII Regulation of Securities Market

Professionals
SECTION 28. Registration of Brokers,  Dealers,  Salesmen and Associated Persons. — 28.1.
No person shall engage in the business of buying or selling securities in the Philippines as a
broker or dealer, or act as a salesman, or an associated person of any broker or dealer unless
registered as such with the Commission.

28.2. No registered broker or dealer shall employ any salesman or any associated person, and
no issuer shall employ any salesman, who is not registered as such with the Commission.
28.3. The Commission, by rule or order, may conditionally or unconditionally exempt from
Subsections 28.1 and 28.2 any broker, dealer, salesman, associated person of any broker or
dealer, or any class of the foregoing, as it deems consistent with the public interest and the
protection of investors.

28.4. The Commission shall promulgate rules and regulations prescribing the qualifications
for registration of each category of applicant, which shall, among other things, require as a
condition for registration that:

(a) If a natural person, the applicant satisfactorily pass a written examination as to his
proficiency and knowledge in the area of activity for which registration is sought;

(b) In the case of a broker or dealer, the applicant satisfy a minimum net capital as prescribed
by the Commission, and provide a bond or other security as the Commission may prescribe to
secure compliance with the provisions of this Code; and

(c) If located outside of the Philippines, the applicant files a written consent to service of
process upon the Commission pursuant to Section 65 hereof.

28.5. A broker or dealer may apply for registration by filing with the Commission a written
application in such form and containing such information and documents concerning such
broker or dealer as the Commission by rule shall prescribe.

28.6. Registration of a salesman or of an associated person of a registered broker or dealer

may be made upon written application filed with the Commission by such salesman or
associated person. The application shall be separately signed and certified by the registered
broker or dealer to which such salesman or associated person is to become affiliated, or by
the issuer in the case of a salesman employed, appointed or authorized solely by such issuer.
The application shall be in such form and contain such information and documents
concerning the salesman or associated person as the Commission by rule shall prescribe. For
purposes of this Section, a salesman shall not include any employee of an issuer whose
compensation is not determined directly or indirectly on sales of securities of the issuer.

28.7. Applications filed pursuant to Subsections 28.5 and 28.6 shall be accompanied by a
registration fee in such reasonable amount prescribed by the Commission.

28.8. Within thirty (30) days after the filing of any application under this Section, the
Commission shall by order: (a) Grant registration if it determines that the requirements of this
Section and the qualifications for registration set forth in its rules and regulations have been
satisfied; or (b) Deny said registration.

28.9. The names and addresses of all persons approved for registration as brokers, dealers,
associated persons or salesmen and all orders of the Commission with respect thereto shall
be recorded in a Register of Securities Market Professionals kept in the office of the
Commission which shall be open to public inspection.

28.10. Every person registered pursuant to this Section shall file with the Commission, in such
form as the Commission shall prescribe, information necessary to keep the application for
registration current and accurate, including in the case of a broker or dealer changes in
salesmen, associated persons and owners thereof.
28.11. Every person registered pursuant to this Section shall pay to the Commission an
annual fee at such time and in such reasonable amount as the Commission shall prescribe.
Upon notice by the Commission that such annual fee has not been paid as required, the
registration of such person shall be suspended until payment has been made.

28.12. The registration of a salesman or associated person shall be automatically terminated

upon the cessation of his affiliation with said registered broker or dealer, or with an issuer in
the case of a salesman employed, appointed or authorized by such issuer. Promptly following
any such cessation of affiliation, the registered broker or dealer, or issuer, as the case may be,
shall file with the Commission a notice of separation of such salesman or associated person.

SECTION 29. Revocation,  Refusal or Suspension of Registration of

Brokers,  Dealers,  Salesmen and Associated Persons. — 29.1. Registration under Section 28
of this Code may be refused, or any registration granted thereunder may be revoked,
suspended, or limitations placed thereon, by the Commission if, after due notice and hearing,
the Commission determines the applicant or registrant:

(a) Has willfully violated any provision of this Code, any rule, regulation or order made
hereunder, or any other law administered by the Commission, or in the case of a registered
broker, dealer or associated person has failed to supervise, with a view to preventing such
violation, another person who commits such violation;

(b) Has willfully made or caused to be made a materially false or misleading statement in any
application for registration or report filed with the Commission or a self-regulatory
organization, or has willfully omitted to state any material fact that is required to be stated
therein;

(c) Has failed to satisfy the qualifications or requirements for registration prescribed under
Section 28 and the rules and regulations of the Commission promulgated thereunder;

(d) Has been convicted, by a competent judicial or administrative body of an offense

involving moral turpitude, fraud, embezzlement, counterfeiting, theft, estafa,
misappropriation, forgery, bribery, false oath, or perjury, or of a violation of securities,
commodities, banking, real estate or insurance laws;

(e) Is enjoined or restrained by a competent judicial or administrative body from engaging in

securities, commodities, banking, real estate or insurance activities or from willfully violating
laws governing such activities;

(f) Is subject to an order of a competent judicial or administrative body refusing, revoking or

suspending any registration, license or other permit under this Code, the rules and
regulations promulgated thereunder, any other law administered by the Commission;

(g) Is subject to an order of a self-regulatory organization suspending or expelling him from

membership or participation therein or from association with a member or participant
thereof;

(h) Has been found by a competent judicial or administrative body to have willfully violated
any provisions of securities, commodities, banking, real estate or insurance laws, or has
willfully aided, abetted, counseled, commanded, induced or procured such violation; or
(i) Has been judicially declared insolvent.

For purposes of this subsection, the term "competent judicial or administrative body" shall
include a foreign court of competent jurisdiction and a foreign financial regulator.

29.2. (a) In cases of charges against a salesman or associated person, notice thereof shall also
be given the broker, dealer or issuer employing such salesman or associated person.

(b) Pending the hearing, the Commission shall have the power to order the suspension of
such broker's, dealer's, associated person's or salesman's registration: Provided, That such
order shall state the cause for such suspension. Until the entry of a final order, the suspension
of such registration, though binding upon the persons notified thereof, shall be deemed
confidential, and shall not be published, unless it shall appear that the order of suspension
has been violated after notice.

29.3. The order of the Commission refusing, revoking, suspending or placing limitations on a
registration as herein above provided, together with its findings, shall be entered in the
Register of Securities Market Professionals. The suspension or revocation of the registration
of a dealer or broker shall also automatically suspend the registration of all salesmen and
associated persons affiliated with such broker or dealer.

29.4. It shall be sufficient cause for refusal, revocation or suspension of a broker's or dealer's
registration, if any associated person thereof or any juridical entity controlled by such
associated person has committed any act or omission or is subject to any disability
enumerated in paragraphs (a) through (i) of Subsection 29.1 hereof.

SECTION 30. Transactions and Responsibility of Brokers and Dealers. — 30.1. No broker or

dealer shall deal in or otherwise buy or sell, for its own account or for the account of
customers, securities listed on an Exchange issued by any corporation where any
stockholder, director, associated person or salesman, or authorized clerk of said broker or
dealer and all the relatives of the foregoing within the fourth civil degree of consanguinity or
affinity, is at the time holding office in said issuer corporation as a director, president, vice-
president, manager, treasurer, comptroller, secretary or any office of trust and responsibility,
or is a controlling person of the issuer.

30.2. No broker or dealer shall effect any transaction in securities or induce or attempt to
induce the purchase or sale of any security except in compliance with such rules and
regulations as the Commission shall prescribe to ensure fair and honest dealings in securities
and provide financial safeguards and other standards for the operation of brokers and
dealers, including the establishment of minimum net capital requirements, the acceptance of
custody and use ofsecurities of customers, and the carrying and use of deposits and credit
balances of customers.

SECTION 31. Development of Securities Market Professionals. — The Commission, in joint

undertaking with self regulatory organizations, organizations and associations of finance
professionals as well as private educational and research institutions shall undertake or
facilitate/organize continuing training, conferences/seminars, updating programs, research
and development as well as technology transfer at the latest and advanced trends in issuance
and trading of securities, derivatives, commodity trades and other financial instruments, as
well as securities markets of other countries.

CHAPTER IX Exchanges and Other Securities

Trading Markets
SECTION 32. Prohibition on Use of Unregistered Exchange;  Regulation of Over-the-Counter
Markets. — 32.1. No broker, dealer, salesman, associated person of a broker or dealer, or
Exchange, directly or indirectly, shall make use of any facility of an Exchange in the
Philippines to effect any transaction in a security, or to report such transaction, unless such
Exchange is registered as such under Section 33 of this Code.

32.2. (a) No broker, dealer, salesman or associated person of a broker or dealer, singly or in
concert with any other person, shall make, create or operate, or enable another to make,
create or operate, any trading market, otherwise than on a registered Exchange, for the
buying and selling of any security, except in accordance with rules and regulations the
Commission may prescribe.

(b) The Commission may promulgate rules and regulations governing transactions by
brokers, dealers, salesmen or associated persons of a broker or dealer, over any facilities of
such trading market and may require such market to be administered by a self-regulatory
organization determined by the Commission as capable of insuring the protection of
investors comparable to that provided in the case of a registered Exchange. Such self-
regulatory organization must provide a centralized marketplace for trading and must satisfy
requirements comparable to those prescribed for registration of Exchanges in Section 33 of
this Code.

SECTION 33. Registration of Exchanges. — 33.1. Any Exchange may be registered as such

with the Commission under the terms and conditions hereinafter provided in this Section and
Section 40 hereof, by filing an application for registration in such form and containing such
information and supporting documents as the Commission by rule shall prescribe, including
the following:

(a) An undertaking to comply and enforce compliance by its members with the provisions of
this Code, its implementing rules or regulations and the rules of the Exchange;

(b) The organizational charts of the Exchange, rules of procedure, and a list of its officers and
members;

(c) Copies of the rules of the Exchange; and

(d) An undertaking that in the event a member firm becomes insolvent or when the Exchange
shall have found that the financial condition of its member firm has so deteriorated that it
cannot readily meet the demands of its customers for the delivery of securities and/or
payment of sales proceeds, the Exchange shall, upon order of the Commission, take over the
operation of the insolvent member firm and immediately proceed to settle the member firm's
liabilities to its customers.

33.2. Registration of an Exchange shall be granted upon compliance with the following
provisions:

(a) That the applicant is organized as a stock corporation: Provided, That any registered
Exchange existing prior to the effectivity of this Code shall within one (1) year reorganize as a
stock corporation pursuant to a demutualization plan approved by the Commission;

(b) That the applicant is engaged solely in the business of operating an

exchange: Provided, however, That the Commission may adopt rules, regulations or issue an
order, upon application, exempting an Exchange organized as a stock corporation and owned
and controlled by another juridical person from this restriction.

(c) Where the Exchange is organized as a stock corporation, that no person may beneficially
own or control, directly or indirectly, more than five percent (5%) of the voting rights of the
Exchange and no industry or business group may beneficially own or control, directly or
indirectly, more than twenty percent (20%) of the voting rights of the
Exchange: Provided, however, That the Commission may adopt rules, regulations or issue an
order, upon application, exempting an applicant from this prohibition where it finds that such
ownership or control will not negatively impact on the exchange's ability to effectively
operate in the public interest.

(d) The expulsion, suspension, or disciplining of a member and persons associated with a
member for conduct or proceeding inconsistent with just and equitable principles of fair
trade, and for violations of provisions of this Code, or any other Act administered by the
Commission, the rules, regulations and orders thereunder, or the rules of the Exchange;

(e) A fair procedure for the disciplining of members and persons associated with members,
the denial of membership to any person seeking to be a member, the barring of any person
from association with a member, and the prohibition or limitation of any person from access
to services offered by the Exchange;

(f) That the brokers in the board of the Exchange shall comprise of not more than forty-nine
percent (49%) of such board and shall proportionately represent the Exchange membership
in terms of volume/value of trade and paid up capital, and that any natural person associated
with a juridical entity that is a member shall himself be deemed to be a member for this
purpose: Provided, That any registered Exchange existing prior to the effectivity of this Code
shall immediately comply with this requirement;

(g) For the board of the Exchange to include in its composition (i) the president of the
Exchange, and (ii) no less than fifty one percent (51%) of the remaining members of the board
to be comprised of three (3) independent directors and persons who represent the interests
of issuers, investors, and other market participants, who are not associated with any broker
or dealer or member of the Exchange for a period of two (2) years prior to his/her
appointment. No officer or employee of a member, its subsidiaries or affiliates or related
interests shall become an independent director:Provided, however, That the Commission may
by rule, regulation, or order upon application, permit the exchange organized as a stock
corporation to use a different governance structure: Provided,  further, That the Commission
is satisfied that the Exchange is acting in the public interest and is able to effectively operate
as a self-regulatory organization under this Code: Provided,  finally, That any registered
exchange existing prior to the effectivity of this Code shall immediately comply with this
requirement.

(h) The president and other management of the Exchange to consist only of persons who are
not members and are not associated in any capacity, directly or indirectly with any broker or
dealer or member or listed company of the Exchange: Provided, That the Exchange may only
appoint, and a person may only serve, as an officer of the exchange if such person has not
been a member or affiliated with any broker, dealer, or member of the Exchange for a period
of at least two (2) years prior to such appointment;

(i) The transparency of transactions on the Exchange;

(j) The equitable allocation of reasonable dues, fees, and other charges among members and
issuers and other persons using any facility or system which the Exchange operates or
controls;

(k) Prevention of fraudulent and manipulative acts and practices, promotion of just and
equitable principles of trade, and, in general, protection of investors and the public interest;
and

(l) The transparent, prompt and accurate clearance and settlement of transactions effected
on the Exchange.

33.3. If the Commission finds that the applicant Exchange is capable of complying and
enforcing compliance by its members, and persons associated with such members, with the
provisions of this Code, its rules and regulations, and the rules of the Exchange, and that the
rules of the Exchange are fair, just and adequate, the Commission shall cause such Exchange
to be registered. If, after notice due and hearing, the Commission finds otherwise, the
application shall be denied.

33.4. Within ninety (90) days after the filing of the application the Commission may issue an
order either granting or denying registration as an Exchange, unless the Exchange applying
for registration shall withdraw its application or shall consent to the Commission's deferring
action on its application for a stated longer period after the date of filing. The filing with the
Commission of an application for registration by an Exchange shall be deemed to have taken
place upon the receipt thereof. Amendments to an application may be made upon such terms
as the Commission may prescribe.

33.5. Upon the registration of an Exchange, it shall pay a fee in such amount and within such
period as the Commission may fix.

33.6. Upon appropriate application in accordance with the rules and regulations of the
Commission and upon such terms as the Commission may deem necessary for the protection
of investors, an Exchange may withdraw its registration or suspend its operations or resume
the same.
SECTION 34. Segregation and Limitation of Functions of Members,  Brokers and Dealers. —
34.1. It shall be unlawful for any member-broker of an Exchange to effect any
transaction on such Exchange for its own account, the account of an associated person,
or an account with respect to which it or an associated person thereof exercises
investment discretion: Provided, however, That this Section shall not make unlawful —

(a) Any transaction by a member-broker acting in the capacity of a market maker;

(b) Any transaction reasonably necessary to carry on an odd-lot transactions;

(c) Any transaction to offset a transaction made in error; and

(d) Any other transaction of a similar nature as may be defined by the Commission.

34.2. In all instances where the member-broker effects a transaction on an Exchange for its
own account or the account of an associated person or an account with respect to which it
exercises investment discretion, it shall disclose to such customer at or before the completion
of the transaction it is acting for its own account: Provided,  further, That this fact shall be
reflected in the order ticket and the confirmation slip.

34.3. Any member-broker who violates the provisions of this Section shall be subject to the
administrative sanctions provided in Section 54 of this Code.

SECTION 35. Additional Fees of Exchanges. — In addition to the registration fee prescribed in
Section 33 of this Code, every Exchange shall pay to the Commission, on a semestral basis on
or before the tenth day of the end of every semester of the calendar year, a fee in such an
amount as the Commission shall prescribe, but not more than one-hundredth of
one  per centum (1%) of the aggregate amount of the sales of securities transacted on such
Exchange during the preceding calendar year, for the privilege of doing business, during the
preceding calendar year or any part thereof.

SECTION 36. Powers with Respect to Exchanges and Other Trading Market. — 36.1. The
Commission is authorized, if in its opinion such action is necessary or appropriate for the
protection of investors and the public interest so requires, summarily to suspend trading in
any listed security on any Exchange or other trading market for a period not exceeding thirty
(30) days or, with the approval of the President of the Philippines, summarily to suspend all
trading on any securities Exchange or other trading market for a period of more than thirty
(30) but not exceeding ninety (90) days: Provided, however, That the Commission, promptly
following the issuance of the order of suspension, shall notify the affected issuer of the
reasons for such suspension and provide such issuer with an opportunity for hearing to
determine whether the suspension should be lifted.

36.2. Wherever two (2) or more Exchanges or other trading markets exist, the Commission
may require and enforce uniformity of trading regulations in and/or between or among said
Exchanges or other trading markets.

36.3. In addition to the existing Philippine Stock Exchange, the Commission shall have the
authority to determine the number, size and location of stock Exchanges, other trading
markets and commodity Exchanges and other similar organizations in the light of national or
regional requirements for such activities with the view to promote, enhance, protect,
conserve or rationalize investment.

36.4. The Commission, having due regard to the public interest, the protection of investors,
the safeguarding of securities and funds, and maintenance of fair competition among
brokers, dealers, clearing agencies, and transfer agents, shall promulgate rules and
regulations for the prompt and accurate clearance and settlement of securities transactions.

36.5. (a) The Commission may establish or facilitate the establishment of trust funds which
shall be contributed by Exchanges, brokers, dealers, underwriters, transfer agents, salesmen
and other persons transacting in securities, as the Commission may require, for the purpose
of compensating investors for the extraordinary losses or damage they may suffer due to
business failure or fraud or mismanagement of the persons with whom they transact, under
such rules and regulations as the Commission may from time to time prescribe or approve in
the public interest.

(b) The Commission may, having due regard to the public interest or the protection of
investors, regulate, supervise, examine, suspend or otherwise discontinue such and other
similar funds under such rules and regulations which the Commission may promulgate, and
which may include taking custody and management of the fund itself as well as investments
in and disbursements from the funds under such forms of control and supervision by the
Commission as it may from time to time require. The authority granted to the Commission
under this subsection shall also apply to all funds established for the protection of investors,
whether established by the Commission or otherwise.

SECTION 37. Registration of Innovative and Other Trading Markets. — The Commission,

having due regard for national economic development, shall encourage competitiveness in
the market by promulgating within six (6) months upon the enactment of this Code, rules for
the registration and licensing of innovative and other trading markets or Exchanges covering,
but not limited to, the issuance and trading of innovative securities, securities of small,
medium, growth and venture enterprises, and technology-based ventures pursuant to
Section 33 of this Code.

SECTION 38. Independent Directors. — Any corporation with a class of equity securities

listed for trading on an Exchange or with assets in excess of Fifty million pesos
(P50,000,000.00) and having two hundred (200) or more holders, at least of two hundred (200)
of which are holding at least one hundred (100) shares of a class of its equity securities or
which has sold a class of equity securities to the public pursuant to an effective registration
statement in compliance with Section 12 hereof shall have at least two (2) independent
directors or such independent directors shall constitute at least twenty percent (20%) of the
members of such board, whichever is the lesser. For this purpose, an "independent director"
shall mean a person other than an officer or employee of the corporation, its parent or
subsidiaries, or any other individual having a relationship with the corporation, which would
interfere with the exercise of independent judgment in carrying out the responsibilities of a
director.
 CHAPTER X Registration, Responsibilities and
Oversight of Self-Regulatory Organizations
SECTION 39. Associations of Securities Brokers,  and Dealers,  and Other Securities Related
Organizations. — 39.1. The Commission shall have the power to register as a self-regulatory
organization, or otherwise grant licenses, and to regulate, supervise, examine, suspend or
otherwise discontinue, as a condition for the operation of organizations whose operations are
related to or connected with the securities market such as but not limited to associations of
brokers and dealers, transfer agents, custodians, fiscal and paying agents, computer services,
news disseminating services, proxy solicitors, statistical agencies, securities rating agencies,
and securities information processors which are engaged in the business of: (a) Collecting,
processing, or preparing for distribution or publication, or assisting, participating in, or
coordinating the distribution or publication of, information with respect to transactions in or
quotations for any security; or (b) Distributing or publishing, whether by means of a ticker
tape, a communications network, a terminal display device, or otherwise, on a current and
continuing basis, information with respect to such transactions or quotations. The
Commission may prescribe rules and regulations which are necessary or appropriate in the
public interest or for the protection of investors to govern self-regulatory organizations and
other organizations licensed or regulated pursuant to the authority granted in Subsection
39.1 including the requirement of cooperation within and among, and electronic integration
of the records of, all participants in the securities market to ensure transparency and
facilitate exchange of information.

39.2. An association of brokers and dealers may be registered as a securities association

pursuant to Subsection 39.3 by filing with the Commission an application for registration in
such form as the Commission, by rule, may prescribe containing the rules of the association
and such other information and documents as the Commission, by rule, may prescribe as
necessary or appropriate in the public interest or for the protection of investors.

39.3. An association of brokers and dealers shall not be registered as a securities association
unless the Commission determines that:

(a) The association is so organized and has the capacity to be able to carry out the purposes
of this Code and to comply with, and to enforce compliance by its members and persons
associated with its members, with the provisions of this Code, the rules and regulations
thereunder, and the rules of the association.

(b) The rules of the association, notwithstanding anything in the Corporation Code to the
contrary, provide that:

(i) Any registered broker or dealer may become a member of the association;

(ii) There exist a fair representation of its members to serve on the Board of Directors of the
association and in the administration of its affairs, and that any natural person associated
with a juridical entity that is a member shall himself be deemed to be a member for this
purpose;
(iii) The Board of Directors of the association includes in its composition: (a) The president of
the association and (b) Persons who represent the interests of issuers and public investors
and are not associated with any broker or dealer or member of the association; that the
president and other management of the association not be a member or associated with any
broker, dealer or member of the association;

(iv) For the equitable allocation of reasonable dues, fees, and other charges among members
and issuers and other persons using any facility or system which the association operates or
controls;

(v) For the prevention of fraudulent and manipulative acts and practices, the promotion of
just and equitable principles of trade, and, in general, the protection of investors and the
public interest;

(vi) That its members and persons associated with its members shall be appropriately
disciplined for violation of any provision of this Code, the rules or regulations thereunder, or
the rules of the association;

(vii) That a fair procedure for the disciplining of members and persons associated with
members, the denial of membership to any person seeking membership therein, the barring
of any person from becoming associated with a member thereof, and the prohibition or
limitation by the association of any person with respect to access to services offered by the
association or a member thereof.

39.4. (a) A registered securities association shall deny membership to any person who is not a
registered broker or dealer.

(b) A registered securities association may deny membership to, or condition the
membership of, a registered broker or dealer if such broker or dealer:

(i) Does not meet the standards of financial responsibility, operational capability, training,
experience, or competence that are prescribed by the rules of the association; or

(ii) Has engaged, and there is a reasonable likelihood it will again engage, in acts or practices
inconsistent with just and equitable principles of fair trade.

(c) A registered securities association may deny membership to a registered broker or dealer
not engaged in a type of business in which the rules of the association require members to be
engaged: Provided, however, That no registered securities association may deny membership
to a registered broker or dealer by reason of the amount of business done by the broker or
dealer.

A registered securities association may examine and verify the qualifications of an applicant
to become a member in accordance with procedures established by the rules of the
association.

(d) A registered securities association may bar a salesman or person associated with a broker
or dealer from being employed by a member or set conditions for the employment of a
salesman or associated if such person:
(i) Does not meet the standards of training, experience, or competence that are prescribed by
the rules of the association; or

(ii) Has engaged, and there is a reasonable likelihood he will again engage, in acts or practices
inconsistent with just and equitable principles of fair trade.

A registered securities association may examine and verify the qualifications of an applicant
to become a salesman or associated person employed by a member in accordance with
procedures established by the rules of the association. A registered association also may
require a salesman or associated person employed by a member to be registered with the
association in accordance with procedures prescribed in the rules of the association.

39.5. In any proceeding by a registered securities association to determine whether a person

shall be denied membership, or barred from association with a member, the association shall
provide notice to the person under review of the specific grounds being considered for denial,
afford him an opportunity to defend against the allegations, and keep a record of the
proceedings. A determination by the association to deny membership shall be supported by a
statement setting forth the specific grounds on which the denial is based.

SECTION 40. Powers with Respect to Self-Regulatory Organizations. — 40.1. Upon the filing
of an application for registration as an Exchange under Section 33, a registered securities
association under Section 39, a registered clearing agency under Section 42, or other self-
regulatory organization under this Section, the Commission shall have ninety (90) days within
which to either grant registration or institute a proceeding to determine whether registration
should be denied. In the event proceedings are instituted, the Commission shall have two
hundred seventy (270) days within which to conclude such proceedings at which time it shall,
by order, grant or deny such registration.

40.2. Every self-regulatory organization shall comply with the provisions of this Code, the
rules and regulations thereunder, and its own rules, and enforce compliance therewith,
notwithstanding any provision of the Corporation Code to the contrary, by its members,
persons associated with its members or its participants.

40.3. (a) Each self-regulatory organization shall submit to the Commission for prior approval
any proposed rule or amendment thereto, together with a concise statement of the reason
and effect of the proposed amendment.

(b) Within sixty (60) days after submission of a proposed amendment, the Commission shall,
by order, approve the proposed amendment. Otherwise, the same may be made effective by
the self-regulatory organization.

(c) In the event of an emergency requiring action for the protection of investors, the
maintenance of fair and orderly markets, or the safeguarding of securities and funds, a self-
regulatory organization may put a proposed amendment into effect
summarily: Provided,  however, That a copy of the same shall be immediately submitted to the
Commission.

40.4. The Commission is further authorized, if after making appropriate request in writing to a
self-regulatory organization that such organization effect on its own behalf specified changes
in its rules and practices and, after due notice and hearing it determines that such changes
have not been effected, and that such changes are necessary, by rule or regulation or by
order, may alter, abrogate or supplement the rules of such self-regulatory organization in so
far as necessary or appropriate to effect such changes in respect of such matters as:

(a) Safeguards in respect of the financial responsibility of members and adequate provision
against the evasion of financial responsibility through the use of corporate forms or special
partnerships;

(b) The supervision of trading practices;

(c) The listing or striking from listing of any security;

(d) Hours of trading;

(e) The manner, method, and place of soliciting business;

(f) Fictitious accounts;

(g) The time and method of making settlements, payments, and deliveries, and of closing
accounts;

(h) The transparency of securities transactions and prices;

(i) The fixing of reasonable rates of fees, interest, listing and other charges, but not rates of
commission;

(j) Minimum units of trading;

(k) Odd-lot purchases and sales;

(l) Minimum deposits on margin accounts; and

(m) The supervision, auditing and disciplining of members or participants.

40.5. The Commission, after due notice and hearing, is authorized, in the public interest and
to protect investors:

(a) To suspend for a period not exceeding twelve (12) months or to revoke the registration of
a self-regulatory organization, or to censure or impose limitations on the activities, functions,
and operations of such self-regulatory organization, if the Commission finds that such a self-
regulatory organization has willfully violated or is unable to comply with any provision of this
Code or of the rules and regulations thereunder, or its own rules, or has failed to enforce
compliance therewith by a member of, person associated with a member, or a participant in
such self-regulatory organization;

(b) To expel from a self-regulatory organization any member thereof or any participant
therein who is subject to an order of the Commission under Section 29 of this Code or is found
to have willfully violated any provision of this Code or suspend for a period not exceeding
twelve (12) months for violation of any provision of this Code or any other laws administered
by the Commission, or the rules and regulations thereunder, or effected, directly or indirectly,
any transaction for any person who, such member or participant had reason to believe, was
violating in respect of such transaction any of such provisions; and

(c) To remove from office or censure any officer or director of a self-regulatory organization if
it finds that such officer or director has violated any provision of this Code, any other law
administered by the Commission, the rules or regulations thereunder, or the rules of such
self-regulatory organization, abused his authority, or without reasonable justification or
excuse has failed to enforce compliance with any of such provisions.

40.6. (a) A self-regulatory organization is authorized to discipline a member of or participant

in such self-regulatory organization, or any person associated with a member, including the
suspension or expulsion of such member or participant, and the suspension or bar from being
associated with a member, if such person has engaged in acts or practices inconsistent with
just and equitable principles of fair trade or in willful violation of any provision of the Code,
any other law administered by the Commission, the rules or regulations thereunder, or the
rules of the self-regulatory organization. In any disciplinary proceeding by a self-regulatory
organization (other than a summary proceeding pursuant to paragraph (b) of this subsection)
the self-regulatory organization shall bring specific charges, provide notice to the person
charged, afford the person charged with an opportunity to defend against the charges, and
keep a record of the proceedings. A determination to impose a disciplinary sanction shall be
supported by a written statement of the offense, a summary of the evidence presented and a
statement of the sanction imposed.

(b) A self-regulatory organization may summarily: (i) Suspend a member, participant or

person associated with a member who has been or is expelled or suspended from any other
self-regulatory organization; or (ii) Suspend a member who the self-regulatory organization
finds to be in such financial or operating difficulty that the member or participant cannot be
permitted to continue to do business as a member with safety to investors, creditors, other
members, participants or the self-regulatory organization: Provided, That the self-regulatory
organization immediately notifies the Commission of the action taken. Any person aggrieved
by a summary action pursuant to this paragraph shall be promptly afforded an opportunity
for a hearing by the association in accordance with the provisions of paragraph (a) of this
subsection. The Commission, by order, may stay a summary action on its own motion or
upon application by any person aggrieved thereby, if the Commission determines summarily
or after due notice and hearing (which hearing may consist solely of the submission of
affidavits or presentation of oral arguments) that a stay is consistent with the public interest
and the protection of investors.

40.7. A self-regulatory organization shall promptly notify the Commission of any disciplinary
sanction on any member thereof or participant therein, any denial of membership or
participation in such organization, or the imposition of any disciplinary sanction on a person
associated with a member or a bar of such person from becoming so associated. Within thirty
(30) days after such notice, any aggrieved person may appeal to the Commission from, or the
Commission on its own motion within such period, may institute review of, the decision of the
self-regulatory organization, at the conclusion of which, after due notice and hearing (which
may consist solely of review of the record before the self-regulatory organization), the
Commission shall affirm, modify or set aside the sanction. In such proceeding the
Commission shall determine whether the aggrieved person has engaged or omitted to
engage in the acts and practices as found by the self-regulatory organization, whether such
acts and practices constitute willful violations of this Code, any other law administered by the
Commission, the rules or regulations thereunder, or the rules of the self-regulatory
organization as specified by such organization, whether such provisions were applied in a
manner consistent with the purposes of this Code, and whether, with due regard for the
public interest and the protection of investors the sanction is excessive or oppressive.

40.8. The powers of the Commission under this section shall apply to organized exchanges
and registered clearing agencies.

CHAPTER XI Acquisition and Transfer of Securities

and Settlement of Transactions in Securities
SECTION 41. Prohibition on Use of Unregistered Clearing Agency. — It shall be unlawful for
any broker, dealer, salesman, associated person of a broker or dealer, or clearing agency,
directly or indirectly, to make use of any facility of a clearing agency in the Philippines to
make deliveries in connection with transactions insecurities or to reduce the number of
settlements of securities transactions or to allocate securities settlement responsibilities or
to provide for the central handling of securities so that transfers, loans and pledges and
similar transactions can be made by bookkeeping entry or otherwise to facilitate the
settlement of securities transactions without physical delivery of securities certificates,
unless such clearing agency is registered as such under Section 42 of this Code or is exempted
from such registration upon application by the clearing agency because, in the opinion of the
Commission, by reason of the limited volume of transactions which are settled using the
clearing agency, it is not practicable and not necessary or appropriate in the public interest or
for the protection of investors to require such registration.

SECTION 42. Registration of Clearing Agencies. — 42.1. Any clearing agency may be

registered as such with the Commission under the terms and conditions hereinafter provided
in this Section, by filing an application for registration in such form and containing such
information and supporting documents as the Commission by rule shall prescribe, including
the following:

(a) An undertaking to comply and enforce compliance by its participants with the provisions
of this Code, and any amendment thereto, and the implementing rules or regulations made
or to be made thereunder, and the clearing agency's rules;

(b) The organizational charts of the Exchange, its rules of procedure, and a list of its officers
and participants;

(c) Copies of the clearing agency's rules.

42.2. No registration of a clearing agency shall be granted unless the rules of the clearing
agency include provision for:
(a) The expulsion, suspension, or disciplining of a participant for violations of this Code, or
any other Act administered by the Commission, the rules, regulations, and orders thereunder,
or the clearing agency's rules;

(b) A fair procedure for the disciplining of participants, the denial of participation rights to any
person seeking to be a participant, and the prohibition or limitation of any person from
access to services offered by the clearing agency;

(c) The equitable allocation of reasonable dues, fees, and other charges among participants;

(d) Prevention of fraudulent and manipulative acts and practices, promotion of just and
equitable principles of trade, and, in general, protection of investors and the public interest;

(e) The transparent, prompt and accurate clearance and settlement of transactions in
securities handled by the clearing agency; and

(f) The establishment and oversight of a fund to guarantee the prompt and accurate
clearance and settlement of transactions executed on an exchange, including a requirement
that members each contribute an amount based on their volume and a relevant percentage
of the daily exposure of the four (4) largest trading brokers which adequately reflects trading
risks undertaken or pursuant to another formula set forth in Commission rules or regulations
or order, upon application: Provided, however, That a clearing agency engaged in the
business of a securities depository shall be exempt from this requirement.

42.3. In the case of an application filed pursuant to this Section, the Commission shall grant
registration if it finds that the requirements of this Code and the rules and regulations
thereunder with respect to the applicant have been satisfied, and shall deny registration if it
does not make such finding.

42.4. Upon appropriate application in accordance with the rules and regulations of the
Commission and upon such terms as the Commission may deem necessary for the protection
of investors, a clearing agency may withdraw its registration or suspend its operation or
resume the same.

42.5. Section 32 of this Code shall apply to every registered clearing agency.

SECTION 43. Uncertificated Securities. —  Notwithstanding Section 63 of the  Corporation

Code of the Philippines: 43.1. A corporation whose securities are registered pursuant to this
Code or listed on a securities Exchange may:

(a) If so resolved by its Board of Directors and agreed by a shareholder, investor or securities
intermediary, issue shares to, or record the transfer of some or all of its shares into the name
of said shareholders, investors or, securities intermediary in the form of uncertificated
securities. The use of uncertificated securities in these circumstances shall be without
prejudice to the rights of the securities intermediary subsequently to require the corporation
to issue a certificate in respect of any shares recorded in its name; and

(b) If so provided in its articles of incorporation and by-laws, issue all of the shares of a
particular class in the form of uncertificated securities and subject to a condition that
investors may not require the corporation to issue a certificate in respect of any shares
recorded in their name.

43.2. The Commission by rule may allow other corporations to provide in their articles of
incorporation and by-laws for the use of uncertificated securities.

43.3. Transfers of securities, including an uncertificated securities, may be validly made and
consummated by appropriate book-entries in the securities accounts maintained by
securities intermediaries, or in the stock and transfer book held by the corporation or the
stock transfer agent and such bookkeeping entries shall be binding on the parties to the
transfer. A transfer under this subsection has the effect of the delivery of a security in bearer
form or duly indorsed in blank representing the quantity or amount of security or right
transferred, including the unrestricted negotiability of that security by reason of such
delivery. However, transfer of uncertificated shares shall only be valid, so far as the
corporation is concerned, when a transfer is recorded in the books of the corporation so as to
show the names of the parties to the transfer and the number of shares transferred.

However, nothing in this Code shall preclude compliance by banking and other institutions
under the supervision of the Bangko Sentral ng Pilipinas and their stockholders with the
applicable ceilings on shareholdings prescribed under pertinent banking laws and
regulations.

SECTION 44. Evidentiary Value of Clearing Agency Record. — The official records and book
entries of a clearing agency shall constitute the best evidence of such transactions between
clearing agency and its participants and members, without prejudice to the right of
participants' or members' clients to prove their rights, title and entitlement with respect to
the book-entry security holdings of the participants or members held on behalf of the clients.
However, the corporation shall not be bound by the foregoing transactions unless the
corporate secretary is duly notified in such manner as the Commission may provide.

SECTION 45. Pledging a Security or Interest Therein. — In addition to other methods

recognized by law, a pledge of, or release of a pledge of, a security, including an
uncertificated security, is properly constituted and the instrument proving the right pledged
shall be considered delivered to the creditor under Articles 2093 and 2095 of the Civil Code if a
securities intermediary indicates by book-entry that such security has been credited to a
specially designated pledge account in favor of the pledgee. A pledge under this subsection
has the effect of the delivery of a security in bearer form or duly indorsed in blank
representing the quantity or amount of such security or right pledged. In the case of a
registered clearing agency, the procedures by which, and the exact time at which, such book-
entries are created shall be governed by the registered clearing agency's rules. However, the
corporation shall not be bound by the foregoing transactions unless the corporate secretary
is duly notified in such manner as the Commission may provide.

SECTION 46. Issuer's Responsibility for Wrongful Transfer to Registered Clearing Agency.

— The registration of a transfer of a security into the name of and by a registered clearing
agency or its nominee shall be final and conclusive unless the clearing agency had notice of
an adverse claim before the registration was made. The above provision shall be without
prejudice to any rights which the claimant may have against the issuer for wrongful
registration in such circumstances.
SECTION 47. Power of the Commission With Respect to Securities Ownership. — The
Commission is authorized, having due regard to the public interest and the protection of
investors, to promulgate rules and regulations which:

47.1. Validate the transfer of securities by book-entries rather than the delivery of physical
certificates;

47.2. Establish when a person acquires a security or an interest therein and when delivery of a
security to a purchaser occurs;

47.3. Establish which records constitute the best evidence of a person's interests in a security
and the effect of any errors in electronic records of ownership;

47.4. Codify the rights of investors who choose to hold their securities indirectly through a
registered clearing agency and/or other securities intermediaries;

47.5. Codify the duties of securities intermediaries (including clearing agencies) who hold
securities on behalf of investors; and

47.6. Give first priority to any claims of a registered clearing agency against a participant
arising from a failure by the participant to meet its obligations under the clearing agency's
rules in respect of the clearing and settlement of transactions in securities, in a dissolution of
the participant, and any such rules and regulations shall bind the issuers of the securities,
investors in the securities, any third parties with interests in the securities, and the creditors
of a participant of a registered clearing agency.

CHAPTER XII Margin and Credit

SECTION 48. Margin Requirements. — 48.1. For the purpose of preventing the excessive use
of credit for the purchase or carrying of securities, the Commission, in accordance with the
credit and monetary policies that may be promulgated from time to time by the Monetary
Board of the Bangko Sentral ng Pilipinas, shall prescribe rules and regulations with respect to
the amount of credit that may be extended on any security. For the extension of credit, such
rules and regulations shall be based upon the following standard:

An amount not greater than whichever is the higher of —

(a) Sixty-five  per centum (65%) of the current market price of the security, or

(b) One hundred per centum (100%) of the lowest market price of the security during the
preceding thirty-six (36) calendar months, but not more than seventy-five  per centum (75%)
of the current market price.

However, the Monetary Board may increase or decrease the above percentages, in order to
achieve the objectives of the Government with due regard for promotion of the economy and
prevention of the use of excessive credit.
Such rules and regulations may make appropriate provision with respect to the carrying of
undermargined accounts for limited periods and under specified conditions; the withdrawal
of funds or securities; the transfer of accounts from one lender to another; special or different
margin requirements for delayed deliveries, short sales, arbitrage transactions, and securities
to which letter (b) of the second paragraph of this subsection does not apply; the bases and
the methods to be used in calculating loans, and margins and market prices; and similar
administrative adjustments and details.

48.2. No member of an Exchange or broker or dealer shall, directly or indirectly, extend or

maintain credit or arrange for the extension or maintenance of credit to or for any customer:

(a) On any security unless such credit is extended and maintained in accordance with the
rules and regulations which the Commission shall prescribe under this Section including rules
setting credit in relation to net capital of such member, broker or dealer; and

(b) Without collateral or on any collateral other than securities, except (i) to maintain a credit
initially extended in conformity with the rules and regulations of the Commission and (ii) in
cases where the extension or maintenance of credit is not for the purpose of purchasing or
carryingsecurities or of evading or circumventing the provisions of paragraph (a) of this
subsection.

48.3. Any person not subject to Subsection 48.2 hereof shall extend or maintain credit or
arrange for the extension or maintenance of credit for the purpose of purchasing or carrying
any security, only in accordance with such rules and regulations as the Commission shall
prescribe to prevent the excessive use of credit for the purchasing or carrying of or trading in
securities in circumvention of the other provisions of this Section. Such rules and regulations
may impose upon all loans made for the purpose of purchasing or carrying securities
limitations similar to those imposed upon members, brokers, or dealers by Subsection 48.2
and the rules and regulations thereunder. This subsection and the rules and regulations
thereunder shall not apply:

(a) To a credit extension made by a person not in the ordinary course of business;

(b) To a loan to a dealer to aid in the financing of the distribution of securities to customers
not through the medium of an Exchange; or

(c) To such other credit extension as the Commission shall exempt from the operation of this
subsection and the rules and regulations thereunder upon specified terms and conditions or
for stated period.

SECTION 49. Restrictions on Borrowings by Members,  Brokers,  and Dealers. — It shall be

unlawful for any registered broker or dealer, or member of an Exchange, directly or indirectly:

49.1. To permit in the ordinary course of business as a broker or dealer his aggregate
indebtedness including customers' credit balances, to exceed such percentage of the net
capital (exclusive of fixed assets and value of Exchange membership) employed in the
business, but not exceeding in any case two thousand percentum  (2,000%), as the
Commission may by rules and regulations prescribe as necessary or appropriate in the public
interest or for the protection of investors.
49.2. To pledge, mortgage, or otherwise encumber or arrange for the pledge, mortgage or
encumbrance of any security carried for the account of any customer under circumstances:
(a) That will permit the commingling of his securities, without his written consent, with the
securities of any customer; (b) That will permit such securities to be commingled with the
securities of any person other than a bona fide customer; or (c) That will permit such
securities to be pledged, mortgaged or encumbered, or subjected to any lien or claim of the
pledgee, for a sum in excess of the aggregate indebtedness of such customers in respect of
such securities. However, the Commission, having due regard to the protection of investors,
may, by rules and regulations, allow certain transactions that may otherwise be prohibited
under this subsection.

49.3. To lend or arrange for the lending of any security carried for the account of any
customer without the written consent of such customer or in contravention of such rules and
regulations as the Commission shall prescribe.

SECTION 50. Enforcement of Margin Requirements and Restrictions on Borrowing. — To

prevent indirect violations of the margin requirements under Section 48, the broker or dealer
shall require the customer in non-margin transactions to pay the price of the security
purchased for his account within such period as the Commission may prescribe, which shall
in no case exceed the prescribed settlement date. Otherwise, the broker shall sell the security
purchased starting on the next trading day but not beyond ten (10) trading days following the
last day for the customer to pay such purchase price, unless such sale cannot be effected
within said period for justifiable reasons. The sale shall be without prejudice to the right of
the broker or dealer to recover any deficiency from the customer. To prevent indirect
violation of the restrictions on borrowings under Section 49, the broker shall, unless
otherwise directed by the customer, pay the net sales price of the securities sold for a
customer within the same period as above prescribed by the Commission: Provided, That the
customer shall be required to deliver the instruments evidencing the securities as a condition
for such payment upon demand by the broker.

CHAPTER XIII General Provisions

SECTION 51. Liabilities of Controlling Persons,  Aider and Abettor and Other Secondary
Liability. — 51.1. Every person who, by or through stock ownership, agency, or otherwise, or
in connection with an agreement or understanding with one or more other persons, controls
any person liable under this Code or the rules or regulations of the Commission thereunder,
shall also be liable jointly and severally with and to the same extent as such controlled
persons to any person to whom such controlled person is liable, unless the controlling person
proves that, despite the exercise of due diligence on his part, he has no knowledge of the
existence of the facts by reason of which the liability of the controlled person is alleged to
exist.
51.2. It shall be unlawful for any person, directly or indirectly, to do any act or thing which it
would be unlawful for such person to do under the provisions of this Code or any rule or
regulation thereunder.

51.3. It shall be unlawful for any director or officer of, or any owner of any securities issued by,
any issuer required to file any document, report or other information under this Code or any
rule or regulation of the Commission thereunder, without just cause, to hinder, delay or
obstruct the making or filing of any such document, report, or information.

51.4. It shall be unlawful for any person to aid, abet, counsel, command, induce or procure
any violation of this Code, or any rule, regulation or order of the Commission thereunder.

51.5. Every person who substantially assists the act or omission of any person primarily liable
under Sections 57, 58, 59 and 60 of this Code, with knowledge or in reckless disregard that
such act or omission is wrongful, shall be jointly and severally liable as an aider and abettor
for damages resulting from the conduct of the person primarily liable: Provided, however,
That an aider and abettor shall be liable only to the extent of his relative contribution in
causing such damages in comparison to that of the person primarily liable, or the extent to
which the aider and abettor was unjustly enriched thereby, whichever is greater.

SECTION 52. Accounts and Records,  Reports,  Examination of Exchanges,  Members,  and

Others. — 52.1. Every registered Exchange, broker or dealer, transfer agent, clearing agency,
securities association, and other self-regulatory organization, and every other person
required to register under this Code, shall make, keep and preserve for such periods, records,
furnish such copies thereof, and make such reports, as the Commission by its rules and
regulations may prescribe. Such accounts, correspondence, memoranda, papers, books, and
other records shall be subject at any time to such reasonable periodic, special or other
examinations by representatives of the Commission as the Commission may deem necessary
or appropriate in the public interest or for the protection of investors.

52.2. Any broker, dealer or other person extending credit, who is subject to the rules and
regulations prescribed by the Commission pursuant to this Code, shall make such reports to
the Commission as may be necessary or appropriate to enable it to perform the functions
conferred upon it by this Code.

52.3. For purposes of this Section, the term "records" refers to accounts, correspondence,
memoranda, tapes, discs, papers, books and other documents or transcribed information of
any type, whether written or electronic in character.

SECTION 53. Investigations,  Injunctions and Prosecution of Offenses. — 53.1. The

Commission may, in its discretion, make such investigations as it deems necessary to
determine whether any person has violated or is about to violate any provision of this Code,
any rule, regulation or order thereunder, or any rule of an Exchange, registered securities
association, clearing agency, other self-regulatory organization, and may require or permit
any person to file with it a statement in writing, under oath or otherwise, as the Commission
shall determine, as to all facts and circumstances concerning the matter to be investigated.
The Commission may publish information concerning any such violations, and to investigate
any fact, condition, practice or matter which it may deem necessary or proper to aid in the
enforcement of the provisions of this Code, in the prescribing of rules and regulations
thereunder, or in securing information to serve as a basis for recommending further
legislation concerning the matters to which this Code relates: Provided,  however, That any
person requested or subpoenaed to produce documents or testify in any investigation shall
simultaneously be notified in writing of the purpose of such investigation: Provided,  further,
That all criminal complaints for violations of this Code, and the implementing rules and
regulations enforced or administered by the Commission shall be referred to the Department
of Justice for preliminary investigation and prosecution before the proper
court: Provided, furthermore, That in instances where the law allows independent civil or
criminal proceedings of violations arising from the same act, the Commission shall take
appropriate action to implement the same: Provided, finally, That the investigation,
prosecution, and trial of such cases shall be given priority.

53.2. For the purpose of any such investigation, or any other proceeding under this Code, the
Commission or any officer designated by it is empowered to administer oaths and
affirmations, subpoena witnesses, compel attendance, take evidence, require the production
of any book, paper, correspondence, memorandum, or other record which the Commission
deems relevant or material to the inquiry, and to perform such other acts necessary in the
conduct of such investigation or proceedings.

53.3. Whenever it shall appear to the Commission that any person has engaged or is about to
engage in any act or practice constituting a violation of any provision of this Code, any rule,
regulation or order thereunder, or any rule of an Exchange, registered securities association,
clearing agency or other self-regulatory organization, it may issue an order to such person to
desist from committing such act or practice: Provided, however, That the Commission shall
not charge any person with violation of the rules of an Exchange or other self-regulatory
organization unless it appears to the Commission that such Exchange or other self-regulatory
organization is unable or unwilling to take action against such person. After finding that such
person has engaged in any such act or practice and that there is a reasonable likelihood of
continuing, further or future violations by such person, the Commission may issue ex-parte a
cease and desist order for a maximum period of ten (10) days, enjoining the violation and
compelling compliance with such provision. The Commission may transmit such evidence as
may be available concerning any violation of any provision of this Code, or any rule,
regulation or order thereunder, to the Department of Justice, which may institute the
appropriate criminal proceedings under this Code.

53.4. Any person who, within his power but without cause, fails or refuses to comply with any
lawful order, decision or subpoena  issued by the Commission under Subsection 53.2 or
Subsection 53.3 or Section 64 of this Code, shall after due notice and hearing, be guilty of
contempt of the Commission. Such person shall be fined in such reasonable amount as the
Commission may determine, or when such failure or refusal is a clear and open defiance of
the Commission's order, decision or subpoena, shall be detained under an arrest order issued
by the Commission, until such order, decision or subpoena is complied with.

SECTION 54. Administrative Sanctions. — 54.1. If, after due notice and hearing, the
Commission finds that: (a) There is a violation of this Code, its rules, or its orders; (b) Any
registered broker or dealer, associated person thereof has failed reasonably to supervise,
with a view to preventing violations, another person subject to supervision who commits any
such violation; (c) Any registrant or other person has, in a registration statement or in other
reports, applications, accounts, records or documents required by law or rules to be filed with
the Commission, made any untrue statement of a material fact, or omitted to state any
material fact required to be stated therein or necessary to make the statements therein not
misleading; or, in the case of an underwriter, has failed to conduct an inquiry with reasonable
diligence to insure that a registration statement is accurate and complete in all material
respects; or (d) Any person has refused to permit any lawful examinations into its affairs, it
shall, in its discretion, and subject only to the limitations hereinafter prescribed, impose any
or all of the following sanctions as may be appropriate in light of the facts and circumstances:

(i) Suspension, or revocation of any registration for the offering of securities;

(ii) A fine of no less than Ten thousand pesos (P10,000.00) nor more than One million pesos
(P1,000,000.00) plus not more than Two thousand pesos (P2,000.00) for each day of
continuing violation;

(iii) In the case of a violation of Sections 19.2, 20, 24, 26 and 27, disqualification from being an
officer, member of the Board of Directors, or person performing similar functions, of an issuer
required to file reports under Section 17 of this Code or any other act, rule or regulation
administered by the Commission;

(iv) In the case of a violation of Section 34, a fine of no more than three (3) times the profit
gained or loss avoided as a result of the purchase, sale or communication proscribed by such
Section; and

(v) Other penalties within the power of the Commission to impose.

54.2. The imposition of the foregoing administrative sanctions shall be without prejudice to
the filing of criminal charges against the individuals responsible for the violation.

54.3. The Commission shall have the power to issue writs of execution to enforce the
provisions of this Section and to enforce payment of the fees and other dues collectible under
this Code.

SECTION 55. Settlement Offers. — 55.1. At any time, during an investigation or proceeding

under this Code, parties being investigated and/or charged may propose in writing an offer of
settlement with the Commission.

55.2. Upon receipt of such offer of settlement, the Commission may consider the offer based
on timing, the nature of the investigation or proceeding, and the public interest.

55.3. The Commission may only agree to a settlement offer based on its findings that such
settlement is in the public interest. Any agreement to settle shall have no legal effect until
publicly disclosed. Such decision may be made without a determination of guilt on the part of
the person making the offer.

55.4. The Commission shall adopt rules and procedures governing the filing, review,
withdrawal, form of rejection and acceptance of such offers.

SECTION 56. Civil Liabilities on Account of False Registration Statement. — 56.1. Any

person acquiring a security, the registration statement of which or any part thereof contains
on its effectivity an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make such statements not misleading, and who
suffers damage, may sue and recover damages from the following enumerated persons,
unless it is proved that at the time of such acquisition he knew of such untrue statement or
omission:

(a) The issuer and every person who signed the registration statement;

(b) Every person who was a director of, or any other person performing similar functions, or a
partner in, the issuer at the time of the filing of the registration statement or any part,
supplement or amendment thereof with respect to which his liability is asserted;

(c) Every person who is named in the registration statement as being or about to become a
director of, or a person performing similar functions, or a partner in, the issuer and whose
written consent thereto is filed with the registration statement;

(d) Every auditor or auditing firm named as having certified any financial statements used in
connection with the registration statement or prospectus.

(e) Every person who, with his written consent, which shall be filed with the registration
statement, has been named as having prepared or certified any part of the registration
statement, or as having prepared or certified any report or valuation which is used in
connection with the registration statement, with respect to the statement, report, or
valuation, which purports to have been prepared or certified by him.

(f) Every selling shareholder who contributed to and certified as to the accuracy of a portion
of the registration statement, with respect to that portion of the registration statement which
purports to have been contributed by him.

(g) Every underwriter with respect to such security.

56.2. If the person who acquired the security did so after the issuer has made generally
available to its security holders an income statement covering a period of at least twelve (12)
months beginning from the effective date of the registration statement, then the right of
recovery under this subsection shall be conditioned on proof that such person acquired the
security relying upon such untrue statement in the registration statement or relying upon the
registration statement and not knowing of such income statement, but such reliance may be
established without proof of the reading of the registration statement by such person.

SECTION 57. Civil Liabilities Arising in Connection with Prospectus,  Communications and

Reports. — 57.1. Any person who:

(a) Offers to sell or sells a security in violation of Chapter III, or

(b) Offers to sell or sells a security, whether or not exempted by the provisions of this Code, by
the use of any means or instruments of transportation or communication, by means of a
prospectus or other written or oral communication, which includes an untrue statement of a
material fact or omits to state a material fact necessary in order to make the statements, in
the light of the circumstances under which they were made, not misleading (the purchaser
not knowing of such untruth or omission), and who shall fail in the burden of proof that he did
not know, and in the exercise of reasonable care could not have known, of such untruth or
omission, shall be liable to the person purchasing such security from him, who may sue to
recover the consideration paid for such security with interest thereon, less the amount of any
income received thereon, upon the tender of such security, or for damages if he no longer
owns the security.

57.2. Any person who shall make or cause to be made any statement in any report, or
document filed pursuant to this Code or any rule or regulation thereunder, which statement
was at the time and in the light of the circumstances under which it was made false or
misleading with respect to any material fact, shall be liable to any person who, not knowing
that such statement was false or misleading, and relying upon such statements shall have
purchased or sold a security at a price which was affected by such statement, for damages
caused by such reliance, unless the person sued shall prove that he acted in good faith and
had no knowledge that such statement was false or misleading.

SECTION 58. Civil Liability for Fraud in Connection with Securities Transactions. — Any
person who engages in any act or transaction in violation of Sections 19.2, 20 or 26, or any
rule or regulation of the Commission thereunder, shall be liable to any other person who
purchases or sells any security, grants or refuses to grant any proxy, consent or authorization,
or accepts or declines an invitation for tender of a security, as the case may be, for the
damages sustained by such other person as a result of such act or transaction.

SECTION 59. Civil Liability for Manipulation of Security Prices. — Any person who willfully
participates in any act or transaction in violation of Section 24 shall be liable to any person
who shall purchase or sell any security at a price which was affected by such act or
transaction, and the person so injured may sue to recover the damages sustained as a result
of such act or transaction.

SECTION 60. Civil Liability with Respect to Commodity Futures Contracts and Pre-need
Plans. — 60.1. Any person who engages in any act or transaction in willful violation of any rule
or regulation promulgated by the Commission under Section 11 or 16, which the Commission
denominates at the time of issuance as intended to prohibit fraud in the offer and sale of pre-
need plans or to prohibit fraud, manipulation, fictitious transactions, undue speculation, or
other unfair or abusive practices with respect to commodity future contracts, shall be liable
to any other person sustaining damage as a result of such act or transaction.

60.2. As to each such rule or regulation so denominated, the Commission by rule shall
prescribe the elements of proof required for recovery and any limitations on the amount of
damages that may be imposed.

SECTION 61. Civil Liability on Account of Insider Trading. — 61.1. Any insider who violates
Subsection 27.1 and any person in the case of a tender offer who violates Subsection 27.4 (a)
(i), or any rule or regulation thereunder, by purchasing or selling a security while in
possession of material information not generally available to the public, shall be liable in a
suit brought by any investor who, contemporaneously with the purchase or sale of securities
that is the subject of the violation, purchased or sold securities of the same class unless such
insider, or such person in the case of a tender offer, proves that such investor knew the
information or would have purchased or sold at the same price regardless of disclosure of the
information to him.
61.2. An insider who violates Subsection 27.3 or any person in the case of a tender offer who
violates Subsection 27.4 (a), or any rule or regulation thereunder, by communicating material
nonpublic information, shall be jointly and severally liable under Subsection 61.1 with, and to
the same extent as, the insider, or person in the case of a tender offer, to whom the
communication was directed and who is liable under Subsection 61.1 by reason of his
purchase or sale of a security.

SECTION 62. Limitation of Actions. — 62.1. No action shall be maintained to enforce any

liability created under Section 56 or 57 of this Code unless brought within two (2) years after
the discovery of the untrue statement or the omission, or, if the action is to enforce a liability
created under Subsection 57.1 (a), unless brought within two (2) years after the violation
upon which it is based. In no event shall any such action be brought to enforce a liability
created under Section 56 or Subsection 57.1 (a) more than five (5) years after the security
was bona fide offered to the public, or under Subsection 57.1 (b) more than five (5) years after
the sale.

62.2. No action shall be maintained to enforce any liability created under any other provision
of this Code unless brought within two (2) years after the discovery of the facts constituting
the cause of action and within five (5) years after such cause of action accrued.

SECTION 63. Amount of Damages to be Awarded. — 63.1. All suits to recover damages

pursuant to Sections 56, 57, 58, 59, 60 and 61 shall be brought before the Regional Trial Court,
which shall have exclusive jurisdiction to hear and decide such suits. The Court is hereby
authorized to award damages in an amount not exceeding triple the amount of the
transaction plus actual damages.

Exemplary damages may also be awarded in cases of bad faith, fraud, malevolence or
wantonness in the violation of this Code or the rules and regulations promulgated
thereunder.

The Court is also authorized to award attorney's fees not exceeding thirty  percentum (30%) of
the award.

63.2. The persons specified in Sections 56, 57, 58, 59, 60 and 61 hereof shall be jointly and
severally liable for the payment of damages. However, any person who becomes liable for the
payment of such damages may recover contribution from any other person who, if sued
separately, would have been liable to make the same payment, unless the former was guilty
of fraudulent representation and the latter was not.

63.3. Notwithstanding any provision of law to the contrary, all persons, including the issuer,
held liable under the provisions of Sections 56, 57, 58, 59, 60 and 61 shall contribute equally
to the total liability adjudged herein. In no case shall the principal stockholders, directors and
other officers of the issuer or persons occupying similar positions therein, recover their
contribution to the liability from the issuer. However, the right of the issuer to recover from
the guilty parties the amount it has contributed under this Section shall not be prejudiced.

SECTION 64. Cease and Desist Order. — 64.1. The Commission, after proper investigation or
verification, motu proprio, or upon verified complaint by any aggrieved party, may issue a
cease and desist order without the necessity of a prior hearing if in its judgment the act or
practice, unless restrained, will operate as a fraud on investors or is otherwise likely to cause
grave or irreparable injury or prejudice to the investing public.

64.2. Until the Commission issues a cease and desist order, the fact that an investigation has
been initiated or that a complaint has been filed, including the contents of the complaint,
shall be confidential. Upon issuance of a cease and desist order, the Commission shall make
public such order and a copy thereof shall be immediately furnished to each person subject
to the order.

64.3. Any person against whom a cease and desist order was issued may, within five (5) days
from receipt of the order, file a formal request for a lifting thereof. Said request shall be set for
hearing by the Commission not later than fifteen (15) days from its filing and the resolution
thereof shall be made not later than ten (10) days from the termination of the hearing. If the
Commission fails to resolve the request within the time herein prescribed, the cease and
desist order shall automatically be lifted.

SECTION 65. Substituted Service Upon the Commission. — Service of summons or other

process shall be made upon the Commission in actions or legal proceedings against an issuer
or any person liable under this Code who is not domiciled in the Philippines. Upon receipt by
the Commission of such summons, the Commission shall within ten (10) days thereafter,
transmit by registered mail a copy of such summons and the complaint or other legal process
to such issuer or person at his last known address or principal office. The sending thereof by
the Commission, the expenses for which shall be advanced by the party at whose instance it
is made, shall complete such service.

SECTION 66. Revelation of Information Filed with the Commission. — 66.1. All information
filed with the Commission in compliance with the requirements of this Code shall be made
available to any member of the general public, upon request, in the premises and during
regular office hours of the Commission, except as set forth in this Section.

66.2. Nothing in this Code shall be construed to require, or to authorize the Commission to
require, the revealing of trade secrets or processes in any application, report, or document
filed with the Commission.

66.3. Any person filing any such application, report or document may make written objection
to the public disclosure of information contained therein, stating the grounds for such
objection, and the Commission may hear objections as it deems necessary. The Commission
may, in such cases, make available to the public the information contained in any such
application, report, or document only when a disclosure of such information is required in the
public interest or for the protection of investors; and copies of information so made available
may be furnished to any person having a legitimate interest therein at such reasonable
charge and under such reasonable limitations as the Commission may prescribe.

66.4. It shall be unlawful for any member, officer, or employee of the Commission to disclose
to any person other than a member, officer or employee of the Commission or to use for
personal benefit, any information contained in any application, report, or document filed
with the Commission which is not made available to the public pursuant to Subsection 66.3.
66.5. Notwithstanding anything in Subsection 66.4 to the contrary, on request from a foreign
enforcement authority of any country whose laws grant reciprocal assistance as herein
provided, the Commission may provide assistance in accordance with this subsection,
including the disclosure of any information filed with or transmitted to the Commission, if the
requesting authority states that it is conducting an investigation which it deems necessary to
determine whether any person has violated, is violating, or is about to violate any laws
relating to securities or commodities matters that the requesting authority administers or
enforces. Such assistance may be provided without regard to whether the facts stated in the
request would also constitute a violation of law of the Philippines.

SECTION 67. Effect of Action of Commission and Unlawful Representations with Respect

Thereto. — 67.1. No action or failure to act by the Commission in the administration of this
Code shall be construed to mean that the Commission has in any way passed upon the merits
of or given approval to any security or any transaction or transactions therein, nor shall such
action or failure to act with regard to any statement or report filed with or examined by the
Commission pursuant to this Code or the rules and regulations thereunder to be deemed a
finding by the Commission that such statements or report is true and accurate on its face or
that it is not false or misleading. It shall be unlawful to make, or cause to be made, to any
prospective purchaser or seller of a security any representation that any such action or failure
to act by the Commission is to be so construed or has such effect.

67.2. Nothing contained in Subsection 67.1 shall, however, be construed as an exemption

from liability of an employee or officer of the Commission for any nonfeasance, misfeasance
or malfeasance in the discharge of his official duties.

SECTION 68. Special Accounting Rules. — The Commission shall have the authority to make,
amend, and rescind such accounting rules and regulations as may be necessary to carry out
the provisions of this Code, including rules and regulations governing registration statements
and prospectuses for various classes of securities and issuers, and defining accounting,
technical and trade terms used in this Code. Among other things, the Commission may
prescribe the form or forms in which required information shall be set forth, the items or
details to be shown in the balance sheet and income statement, and the methods to be
followed in the preparation of accounts, appraisal or valuation of assets and liabilities,
determination of depreciation and depletion, differentiation of recurring and non-recurring
income, differentiation of investment and operating income, and in the preparation, where
the Commission deems it necessary or desirable, of consolidated balance sheets or income
accounts of any person directly or indirectly controlling or controlled by the issuer, or any
person under direct or indirect common control with, the issuer.

SECTION 69. Effect on Existing Law. — The rights and remedies provided by this Code shall
be in addition to any and all other rights and remedies that may now exist. However, except
as provided in Sections 56 and 63 hereof, no person permitted to maintain a suit for damages
under the provisions of this Code shall recover, through satisfaction of judgment in one or
more actions, a total amount in excess of his actual damages on account of the act
complained of: Provided, That exemplary damages may be awarded in cases of bad faith,
fraud, malevolence or wantonness in the violation of this Code or the rules and regulations
promulgated thereunder.
SECTION 70. Judicial Review of Commission Orders. — Any person aggrieved by an order of
the Commission may appeal the order to the Court of Appeals by petition for review in
accordance with the pertinent provisions of the Rules of Court.

SECTION 71. Validity of Contracts. — 71.1. Any condition, stipulation, provision binding any
person to waive compliance with any provision of this Code or of any rule or regulation
thereunder, or of any rule of an Exchange required thereby, as well as the waiver itself, shall
be void.

71.2. Every contract made in violation of any provision of this Code or of any rule or regulation
thereunder, and every contract, including any contract for listing a security on an Exchange
heretofore or hereafter made, the performance of which involves the violation of, or the
continuance of any relationship or practice in violation of, any provision of this Code, or any
rule or regulation thereunder, shall be void:

(a) As regards the rights of any person who, in violation of any such provision, rule or
regulation, shall have made or engaged in the performance of any such contract, and

(b) As regards the rights of any person who, not being a party to such contract, shall have
acquired any right thereunder with actual knowledge of the facts by reason of which the
making or performance of such contract was in violation of any such provision, rule or
regulation.

71.3. Nothing in this Code shall be construed:

(a) To affect the validity of any loan or extension of credit made or of any lien created prior or
subsequent to the effectivity of this Code, unless at the time of the making of such loan or
extension of credit or the creating of such lien, the person making such loan or extension of
credit or acquiring such lien shall have actual knowledge of the facts by reason of which the
making of such loan or extension of credit or the acquisition of such lien is a violation of the
provisions of this Code or any rules or regulations thereunder; or

(b) To afford a defense to the collection of any debt, obligation or the enforcement of any lien
by any person who shall have acquired such debt, obligation or lien in good faith, for value
and without actual knowledge of the violation of any provision of this Code or any rule or
regulation thereunder affecting the legality of such debt, obligation or lien.

SECTION 72. Rules and Regulations;  Effectivity. — 72.1. This Code shall be self-executory.
To effect the provisions and purposes of this Code, the Commission may issue, amend, and
rescind such rules and regulations and orders necessary or appropriate, including rules and
regulations defining accounting, technical, and trade terms used in this Code, and prescribing
the form or forms in which information required in registration statements, applications, and
reports to the Commission shall be set forth. For purposes of its rules or regulations, the
Commission may classify persons, securities, and other matters within its jurisdiction,
prescribe different requirements for different classes of persons, securities, or matters, and
by rule or order, conditionally or unconditionally exempt any person, security, or transaction,
or class or classes of persons, securities or transactions, from any or all provisions of this
Code.
Failure on the part of the Commission to issue rules and regulations shall not in any manner
affect the self-executory nature of this Code.

72.2. The Commission shall promulgate rules and regulations providing for reporting,
disclosure and the prevention of fraudulent, deceptive or manipulative practices in
connection with the purchase by an issuer, by tender offer or otherwise, of and equity
security of a class issued by it that satisfies the requirements of Subsection 17.2. Such rules
and regulations may require such issuer to provide holders of equity securities of such dates
with such information relating to the reasons for such purchase, the source of funds, the
number of shares to be purchased, the price to be paid for such securities, the method of
purchase and such additional information as the Commission deems necessary or
appropriate in the public interest or for the protection of investors, or which the Commission
deems to be material to a determination by holders whether such security should be sold.

72.3. For the purpose of Subsection 72.2, a purchase by or for the issuer or any person
controlling, controlled by, or under common control with the issuer, or a purchase subject to
the control of the issuer or any such person, shall be deemed to be a purchased by the issuer.
The Commission shall have the power to make rules and regulations implementing this
subsection, including exemptive rules and regulations covering situations in which the
Commission deems it unnecessary or inappropriate that a purchase of the type described in
this subsection shall be deemed to be a purchase by the issuer for the purpose of some or all
of the provisions of Subsection 72.2.

72.4. The rules and regulations promulgated by the Commission shall be published in two (2)
newspapers of general circulation in the Philippines, and unless otherwise prescribed by the
Commission, the same shall be effective fifteen (15) days after the date of the last publication.

SECTION 73. Penalties. — Any person who violates any of the provisions of this Code, or the
rules and regulations promulgated by the Commission under authority thereof, or any person
who, in a registration statement filed under this Code, makes any untrue statement of a
material fact or omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, shall, upon conviction, suffer a fine of not less
than Fifty thousand pesos (P50,000.00) nor more than Five million pesos (P5,000,000.00) or
imprisonment of not less than seven (7) years nor more than twenty-one (21) years, or both in
the discretion of the court. If the offender is a corporation, partnership or association or other
juridical entity, the penalty may in the discretion of the court be imposed upon such juridical
entity and upon the officer or officers of the corporation, partnership, association or entity
responsible for the violation, and if such officer is an alien, he shall in addition to the
penalties prescribed, be deported without further proceedings after service of sentence.

SECTION 74. Transitory Provisions. — The Commission, as organized under existing laws,

shall continue to exist and exercise its powers, functions and duties under such laws and this
Code: Provided, That until otherwise mandated by a subsequent law, the Commission shall
continue to regulate and supervise commodity futures contracts as provided in Section 11
and pre-need plans and the pre-need industry as provided in Section 16 of this Code.

All further requirements herein shall be complied with upon approval of this
Code: Provided, however, That compliance may be deferred for such reasonable time as the
Commission may determine but not to exceed one (1) year from approval of this
Code: Provided,  further, That securities which are being offered at the time of effectivity of
this Code pursuant to an effective registration and permit, may continue to be offered and
sold in accordance with the provisions of the Revised Securities Act in effect immediately
prior to approval of this Code.

All unexpended funds for the calendar year, properties, equipment and records of the
Securities and Exchange Commission are hereby retained by the Commission as reorganized
under this Code and the amount of Two hundred million pesos (P200,000,000.00) or such
amount necessary to carry out the reorganization provided in this Code is hereby
appropriated.

All employees of the Commission who voluntarily retire or are separated from the service
with the Commission and whose retirement or separation has been approved by the
Commission, shall be paid retirement or separation benefits and other entitlements granted
under existing laws.

SECTION 75. Partial Use of Income. — To carry out the purposes of this Code, the
Commission is hereby authorized, in addition to its annual budget, to retain and utilize an
amount equal to One hundred million pesos (P100,000,000.00) from its income.

The use of such additional amount shall be subject to the auditing requirements, standards
and procedures under existing laws.

SECTION 76. Repealing Clause. — The Revised Securities Act (Batas Pambansa Blg. 178), as

amended, in its entirety, and Sections 2, 4 and 8 of Presidential Decree 902-A, as amended,
are hereby repealed. All other laws, orders, rules and regulations, or parts thereof,
inconsistent with any provision of this Code are hereby repealed or modified accordingly.

SECTION 77. Separability Clause. — If any portion or provision of this Code is declared
unconstitutional or invalid, the other portions or provisions hereof, which are not affected
thereby shall continue in full force and effect.

SECTION 78. Effectivity. — This Code shall take effect fifteen (15) days after its publication in
the Official Gazette or in two (2) newspapers of general circulation.

Approved: July 19, 2000

Published in The Daily Tribune and Today on July 24,  2000. Published in the Official Gazette, Vol.
97 No. 1, 182 Supp., on January 1, 2001. (The Securities Regulation Code, Republic Act No. 8799,
[July 19, 2000])
RA No 6426 | Foreign Currency Deposit
Act of the Philippines
As amended by PD Nos 1035, 1246, 1453
AN ACT INSTITUTING A FOREIGN CURRENCY DEPOSIT SYSTEM IN THE PHILIPPINES, AND
FOR OTHER PURPOSES.

Section 1. Title.– This act shall be known as the "Foreign Currency Deposit Act of the
Philippines."

Section 2. Authority to deposit foreign currencies. – Any person, natural or juridical, may, in
accordance with the provisions of this Act, deposit with such Philippine banks in good
standing, as may, upon application, be designated by the Central Bank for the purpose,
foreign currencies which are acceptable as part of the international reserve, except those
which are required by the Central Bank to be surrendered in accordance with the provisions
of Republic Act Numbered two hundred sixty-five (Now Rep. Act No. 7653).

Section 3. Authority of banks to accept foreign currency deposits. – The banks designated by
the Central Bank under Section two hereof shall have the authority:

(1) To accept deposits and to accept foreign currencies in trust Provided, That numbered
accounts for recording and servicing of said deposits shall be allowed;

(2) To issue certificates to evidence such deposits;

(3) To discount said certificates;

(4) To accept said deposits as collateral for loans subject to such rules and regulations as may
be promulgated by the Central Bank from time to time; and

(5) To pay interest in foreign currency on such deposits.

Section 4. Foreign currency cover requirements.  – Except as the Monetary Board may
otherwise prescribe or allow, the depository banks shall maintain at all times a one hundred
percent foreign currency cover for their liabilities, of which cover at least fifteen percent shall
be in the form of foreign currency deposit with the Central Bank, and the balance in the form
of foreign currency loans or securities, which loans or securities shall be of short term
maturities and readily marketable. Such foreign currency loans may include loans to
domestic enterprises which are export-oriented or registered with the Board of Investments,
subject to the limitations to be prescribed by the Monetary Board on such loans. Except as
the Monetary Board may otherwise prescribe or allow, the foreign currency cover shall be in
the same currency as that of the corresponding foreign currency deposit liability. The Central
Bank may pay interest on the foreign currency deposit, and if requested shall exchange the
foreign currency notes and coins into foreign currency instruments drawn on its depository
banks. (As amended by  PD No. 1453,  June 11, 1978.)

Depository banks which, on account of networth, resources, past performance, or other

pertinent criteria, have been qualified by the Monetary Board to function under an expanded
foreign currency deposit system, shall be exempt from the requirements in the preceding
paragraph of maintaining fifteen percent (15%) of the cover in the form of foreign currency
deposit with the Central Bank. Subject to prior Central Bank approval when required by
Central Bank regulations, said depository banks may extend foreign currency loans to any
domestic enterprise, without the limitations prescribed in the preceding paragraph regarding
maturity and marketability, and such loans shall be eligible for purposes of the 100% foreign
currency cover prescribed in the preceding paragraph. (As added by PD No. 1035.)

Section 5. Withdrawability and transferability of deposits.  – There shall be no restriction on

the withdrawal by the depositor of his deposit or on the transferability of the same abroad
except those arising from the contract between the depositor and the bank.

Section 6. Tax exemption. – All foreign currency deposits made under this Act, as amended by
PD No. 1035, as well as foreign currency deposits authorized under PD No. 1034, including
interest and all other income or earnings of such deposits, are hereby exempted from any and
all taxes whatsoever irrespective of whether or not these deposits are made by residents or
nonresidents so long as the deposits are eligible or allowed under aforementioned laws and,
in the case of nonresidents, irrespective of whether or not they are engaged in trade or
business in the Philippines. (As amended by  PD No. 1246,  prom. Nov. 21, 1977.)

Section 7. Rules and regulations.  – The Monetary Board of the Central Bank shall promulgate
such rules and regulations as may be necessary to carry out the provisions of this Act which
shall take effect after the publications in the Official Gazette and in a newspaper of national
circulation for at least once a week for three consecutive weeks. In case the Central Bank
promulgates new rules and regulations decreasing the rights of depositors, rules and
regulations at the time the deposit was made shall govern.

Section 8. Secrecy of foreign currency deposits.  – All foreign currency deposits authorized
under this Act, as amended by PD No. 1035, as well as foreign currency deposits authorized
under PD No. 1034, are hereby declared as and considered of an absolutely confidential
nature and, except upon the written permission of the depositor, in no instance shall foreign
currency deposits be examined, inquired or looked into by any person, government official,
bureau or office whether judicial or administrative or legislative, or any other entity whether
public or private; Provided, however, That said foreign currency deposits shall be exempt from
attachment, garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever. (As amended by PD No. 1035, and
further amended by PD No. 1246, prom. Nov. 21, 1977.)
Section 9. Deposit insurance coverage.  – The deposits under this Act shall be insured under
the provisions of Republic Act No. 3591, as amended (Philippine Deposit Insurance
Corporation), as well as its implementing rules and regulations: Provided, That insurance
payment shall be in the same currency in which the insured deposits are denominated.

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

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

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

Section 12-A. Amendatory enactments and regulations. – In the event a new enactment or

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

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

Approved, April 4, 1974

 RA No 9160 | Anti-Money Laundering
Act of 2001
As amended by RA No 9194, 10167, 10365

September 29, 2001

REPUBLIC ACT NO. 9160

As amended by RA No 9194, 10167, 10365

AN ACT DEFINING THE CRIME OF MONEY LAUNDERING, PROVIDING PENALTIES THEREFOR

AND FOR OTHER PURPOSES

SECTION 1. Short Title. — This Act shall be known as the "Anti-Money Laundering Act of
2001."

SECTION 2. Declaration of Policy. — It is hereby declared the policy of the State to protect
and preserve the integrity and confidentiality of bank accounts and to ensure that the
Philippines shall not be used as a money laundering site for the proceeds of any unlawful
activity. Consistent with its foreign policy, the State shall extend cooperation in transnational
investigations and prosecutions of persons involved in money laundering activities wherever
committed.

SECTION 3. Definitions. — For purposes of this Act, the following terms are hereby defined as
follows:

(a) "Covered persons",  natural or juridical,  refers to:

(1) banks, non-banks, quasi-banks, trust entities, foreign exchange dealers, pawnshops,
money changers, remittance and transfer companies and other similar entities and all other
persons and their subsidiaries and affiliates supervised or regulated by the Bangko Sentral ng
Pilipinas (BSP);

(2) insurance companies, pre-need companies and all other persons supervised or regulated
by the Insurance Commission (IC);
(3) (i) securities dealers, brokers, salesmen, investment houses and other similar persons
managing securities or rendering services as investment agent, advisor, or consultant, (ii)
mutual funds, close-end investment companies, common trust funds, and other similar
persons, and (iii) other entities administering or otherwise dealing in currency, commodities
or financial derivatives based thereon, valuable objects, cash substitutes and other similar
monetary instruments or property supervised or regulated by the Securities and Exchange
Commission (SEC);

(4) jewelry dealers in precious metals, who, as a business, trade in precious metals, for
transactions in excess of One million pesos (P1,000,000.00);

(5) jewelry dealers in precious stones, who, as a business, trade in precious stones, for
transactions in excess of One million pesos (P1,000,000.00);

(6) company service providers which, as a business, provide any of the following services to
third parties: (i) acting as a formation agent of juridical persons; (ii) acting as (or arranging for
another person to act as) a director or corporate secretary of a company, a partner of a
partnership, or a similar position in relation to other juridical persons; (iii) providing a
registered office, business address or accommodation, correspondence or administrative
address for a company, a partnership or any other legal person or arrangement; and (iv)
acting as (or arranging for another person to act as) a nominee shareholder for another
person; and

(7) persons who provide any of the following services:

(i) managing of client money, securities or other assets;

(ii) management of bank, savings or securities accounts;

(iii) organization of contributions for the creation, operation or management of companies;

and

(iv) creation, operation or management of juridical persons or arrangements, and buying and
selling business entities.

Notwithstanding the foregoing, the term 'covered persons' shall exclude lawyers and
accountants acting as independent legal professionals in relation to information concerning
their clients or where disclosure of information would compromise client confidences or the
attorney-client relationship: Provided, That these lawyers and accountants are authorized to
practice in the Philippines and shall continue to be subject to the provisions of their
respective codes of conduct and/or professional responsibility or any of its amendments.

(as amended by RA No 10365)

(b) 'Covered transaction' is a transaction in cash or other equivalent monetary instrument

involving a total amount in excess of Five hundred thousand pesos (P500,000.00) within one
(1) banking day. (as amended by RA No 9194)

(b-1) 'Suspicious transaction' are transactions with covered institutions, regardless of the
amounts involved, where any of the following circumstances exist:
1. there is no underlying legal or trade obligation, purpose or economic justification;

2. the client is not properly identified;

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

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

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

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

7. any transaction that is similar or analogous to any of the foregoing.

(as amended by RA No 9194)

(c) "Monetary instrument"  refers to:

(1) coins or currency of legal tender of the Philippines, or of any other country;

(2) drafts, checks and notes;

(3) securities or negotiable instruments, bonds, commercial papers, deposit certificates, trust
certificates, custodial receipts or deposit substitute instruments, trading orders, transaction
tickets and confirmations of sale or investments and money market instruments; and

(4) other similar instruments where title thereto passes to another by endorsement,
assignment or delivery.

(d) "Offender"  refers to any person who commits a money laundering offense.

(e) "Person" refers to any natural or juridical person.

(f) "Proceeds"  refers to an amount derived or realized from an unlawful activity.

(g) "Supervising Authority" refers to the appropriate supervisory or regulatory agency,

department or office supervising or regulating the covered institutions enumerated in Section
3(a).

(h) "Transaction"  refers to any act establishing any right or obligation or giving rise to any
contractual or legal relationship between the parties thereto. It also includes any movement
of funds by any means with a covered institution.

(i) 'Unlawful activity' refers to any act or omission or series or combination thereof involving

or having direct relation to the following:
(1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the Revised
Penal Code, as amended;

(2) Sections 4, 5, 6, 8, 9, 10, 11, 12, 13, 14, 15 and 16 of Republic Act No. 9165, otherwise known
as the Comprehensive Dangerous Drugs Act of 2002;

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

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

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

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

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

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

(9) Swindling under Article 315 and Other Forms of Swindling under Article 316 of the Revised
Penal Code, as amended;

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

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

(12) Hijacking and other violations under Republic Act No. 6235; destructive arson and
murder, as defined under the Revised Penal Code, as amended;

(13) Terrorism and conspiracy to commit terrorism as defined and penalized under Sections 3
and 4 of Republic Act No. 9372;

(14) Financing of terrorism under Section 4 and offenses punishable under Sections 5, 6, 7
and 8 of Republic Act No. 10168, otherwise known as the Terrorism Financing Prevention and
Suppression Act of 2012;

(15) Bribery under Articles 210, 211 and 211-A of the Revised Penal Code, as amended, and
Corruption of Public Officers under Article 212 of the Revised Penal Code, as amended;

(16) Frauds and Illegal Exactions and Transactions under Articles 213, 214, 215 and 216 of the
Revised Penal Code, as amended;

(17) Malversation of Public Funds and Property under Articles 217 and 222 of the Revised
Penal Code, as amended;

(18) Forgeries and Counterfeiting under Articles 163, 166, l67, 168, 169 and 176 of the Revised
Penal Code, as amended;
(19) Violations of Sections 4 to 6 of Republic Act No. 9208, otherwise known as the Anti-
Trafficking in Persons Act of 2003;

(20) Violations of Sections 78 to 79 of Chapter IV, of Presidential Decree No. 705, otherwise
known as the Revised Forestry Code of the Philippines, as amended;

(21) Violations of Sections 86 to 106 of Chapter VI, of Republic Act No. 8550, otherwise known
as the Philippine Fisheries Code of 1998;

(22) Violations of Sections 101 to 107, and 110 of Republic Act No. 7942, otherwise known as
the Philippine Mining Act of 1995;

(23) Violations of Section 27(c), (e), (f), (g) and (i), of Republic Act No. 9147, otherwise known
as the Wildlife Resources Conservation and Protection Act;

(24) Violation of Section 7(b) of Republic Act No. 9072, otherwise known as the National Caves
and Cave Resources Management Protection Act;

(25) Violation of Republic Act No. 6539, otherwise known as the Anti-Carnapping Act of 2002,
as amended;

(26) Violations of Sections 1, 3 and 5 of Presidential Decree No. 1866, as amended, otherwise
known as the decree Codifying the Laws on Illegal/Unlawful Possession, Manufacture, Dealing
in, Acquisition or Disposition of Firearms, Ammunition or Explosives;

(27) Violation of Presidential Decree No. 1612, otherwise known as the Anti-Fencing Law;

(28) Violation of Section 6 of Republic Act No. 8042, otherwise known as the Migrant Workers
and Overseas Filipinos Act of 1995, as amended by Republic Act No. 10022;

(29) Violation of Republic Act No. 8293, otherwise known as the Intellectual Property Code of
the Philippines;

(30) Violation of Section 4 of Republic Act No. 9995, otherwise known as the Anti-Photo and
Video Voyeurism Act of 2009;

(31) Violation of Section 4 of Republic Act No. 9775, otherwise known as the Anti-Child
Pornography Act of 2009;

(32) Violations of Sections 5, 7, 8, 9, 10(c), (d) and (e), 11, 12 and 14 of Republic Act No. 7610,
otherwise known as the Special Protection of Children Against Abuse, Exploitation and
Discrimination;

(33) Fraudulent practices and other violations under Republic Act No. 8799, otherwise known
as the Securities Regulation Code of 2000; and

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

(as amended by RA No 9194, 10365)

(j) 'Precious metals' shall mean gold, silver, platinum, palladium, rhodium, ruthenium, iridium
and osmium. These include alloys of precious metals, solders and plating chemicals such as
rhodium and palladium plating solutions and potassium gold cyanide and potassium silver
cyanide and silver cyanide in salt solution.

(k)  'Precious stones' shall mean diamond, ruby, emerald, sapphire, opal, amethyst, beryl,
topaz, and garnet that are used in jewelry making, including those formerly classified as semi-
precious stones.

(as amended by RA No 10365)

SECTION 4. Money Laundering Offense. — Money laundering is committed by any person

who, knowing that any monetary instrument or property represents, involves, or relates to
the proceeds of any unlawful activity:

(a) transacts said monetary instrument or property;

(b) converts, transfers, disposes of, moves, acquires, possesses or uses said monetary
instrument or property;

(c) conceals or disguises the true nature, source, location, disposition, movement or
ownership of or rights with respect to said monetary instrument or property;

(d) attempts or conspires to commit money laundering offenses referred to in paragraphs (a),
(b) or (c);

(e) aids, abets, assists in or counsels the commission of the money laundering offenses
referred to in paragraphs (a), (b) or (c) above; and

(f) performs or fails to perform any act as a result of which he facilitates the offense of money
laundering referred to in paragraphs (a), (b) or (c) above.

Money laundering is also committed by any covered person who, knowing that a covered or
suspicious transaction is required under this Act to be reported to the Anti-Money Laundering
Council (AMLC), fails to do so.

(as amended by RA No 9194, 10365)

SECTION 5. Jurisdiction of Money Laundering Cases. — The regional trial courts shall have
jurisdiction to try all cases on money laundering. Those committed by public officers and
private persons who are in conspiracy with such public officers shall be under the jurisdiction
of the Sandiganbayan.

SECTION 6. Prosecution of Money Laundering. —

(a) Any person may be charged with and convicted of both the offense of money laundering
and the unlawful activity as herein defined.

(b) The prosecution of any offense or violation under this Act shall proceed independently of
any proceeding relating to the unlawful activity.
(as amended by RA No 10365)

SECTION 7. Creation of Anti-Money Laundering Council (AMLC). — The Anti-Money

Laundering Council is hereby created and shall be composed of the Governor of the Bangko
Sentral ng Pilipinas as Chairman, the Commissioner of the Insurance Commission and the
Chairman of the Securities and Exchange Commission, as members. The AMLC shall act
unanimously in the discharge of its functions as defined hereunder: (as amended by RA No
10365)

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

(2) to issue orders addressed to the appropriate Supervising Authority or the covered
institution to determine the true identity of the owner of any monetary instrument or
property subject of a covered transaction or suspicious transaction report or request for
assistance from a foreign State, or believed by the Council, on the basis of substantial
evidence, to be, in whole or in part, wherever located, representing, involving, or related to,
directly or indirectly, in any manner or by any means, the proceeds of an unlawful activity.

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

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

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

(6) to apply before the Court of Appeals, ex parte, for the freezing of any monetary instrument
or property alleged to be laundered, proceeds from, or instrumentalities used in or intended
for use in any unlawful activity as defined in Section 3(i) hereof; (as amended by RA No 10365)

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

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

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

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

(11) to impose administrative sanctions for the violation of laws, rules, regulations and orders
and resolutions issued pursuant thereto.
(as amended by RA No 9194)

(12) to require the Land Registration Authority and all its Registries of Deeds to submit to the
AMLC, reports on all real estate transactions involving an amount in excess of Five hundred
thousand pesos (P500,000.00) within fifteen (15) days from the date of registration of the
transaction, in a form to be prescribed by the AMLC. The AMLC may also require the Land
Registration Authority and all its Registries of Deeds to submit copies of relevant documents
of all real estate transactions. (as amended by RA No 10365)

SECTION 8. Creation of a Secretariat. — The AMLC is hereby authorized to establish a

secretariat to be headed by an Executive Director who shall be appointed by the Council for a
term of five (5) years. He must be a member of the Philippine Bar, at least thirty-five (35) years
of age and of good moral character, unquestionable integrity and known probity. All
members of the Secretariat must have served for at least five (5) years either in the Insurance
Commission, the Securities and Exchange Commission or the Bangko Sentral ng Pilipinas
(BSP) and shall hold full-time permanent positions within the BSP.

SECTION 9. Prevention of Money Laundering; Customer Identification Requirements and

Record Keeping. — (a) Customer Identification. — Covered institutions shall establish and
record the true identity of its clients based on official documents. They shall maintain a
system of verifying the true identity of their clients and, in case of corporate clients, require a
system of verifying their legal existence and organizational structure, as well as the authority
and identification of all persons purporting to act on their behalf.

The provisions of existing laws to the contrary notwithstanding, anonymous accounts,

accounts under fictitious names, and all other similar accounts shall be absolutely
prohibited. Peso and foreign currency non-checking numbered accounts shall be allowed.
The BSP may conduct annual testing solely limited to the determination of the existence and
true identity of the owners of such accounts.

(b) Record Keeping. — All records of all transactions of covered institutions shall be

maintained and safely stored for five (5) years from the dates of transactions. With respect to
closed accounts, the records on customer identification, account files and business
correspondence, shall be preserved and safely stored for at least five (5) years from the dates
when they were closed.

(c) Reporting of Covered and Suspicious Transactions. — Covered persons shall report to the
AMLC all covered transactions and suspicious transactions within five (5) working days from
occurrence thereof, unless the AMLC prescribes a different period not exceeding fifteen (15)
working days.

Lawyers and accountants acting as independent legal professionals are not required to report
covered and suspicious transactions if the relevant information was obtained in
circumstances where they are subject to professional secrecy or legal professional privilege.

(as amended by RA No 10365)

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

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

When reporting covered or suspicious transactions to the AMLC, covered persons and their
officers and employees are prohibited from communicating, directly or indirectly, in any
manner or by any means, to any person or entity, the media, the fact that a covered or
suspicious transaction has been reported or is about to be reported, the contents of the
report, or any other information in relation thereto. Neither may such reporting be published
or aired in any manner or form by the mass media, electronic mail, or other similar devices. In
case of violation thereof, the concerned officer and employee of the covered person and
media shall be held criminally liable.

(as amended by RA No 9194, 10365)

SECTION 10. Freezing of Monetary Instrument or Property. —Upon a verified ex parte

petition by the AMLC and after determination that probable cause exists that any monetary
instrument or property is in any way related to an unlawful activity as defined in Section 3(i)
hereof, the Court of Appeals may issue a freeze order which shall be effective immediately,
and which shall not exceed six (6) months depending upon the circumstances of the case:
Provided, That if there is no case filed against a person whose account has been frozen within
the period determined by the court, the freeze order shall be deemed ipso facto lifted:
Provided, further, That this new rule shall not apply to pending cases in the courts. In any
case, the court should act on the petition to freeze within twenty-four (24) hours from filing of
the petition. If the application is filed a day before a non-working day, the computation of the
twenty-four (24)-hour period shall exclude the non-working days.

A person whose account has been frozen may file a motion to lift the freeze order and the
court must resolve this motion before the expiration of the freeze order.

No court shall issue a temporary restraining order or a writ of injunction against any freeze
order, except the Supreme Court. (as amended by RA No 9194, 10167, 10365)

SECTION 11. Authority to Inquire into Bank Deposits. — Notwithstanding the provisions of

Republic Act No. 1405, as amended; Republic Act No. 6426, as amended; Republic Act No.
8791; and other laws, the AMLC may inquire into or examine any particular deposit or
investment, including related accounts, with any banking institution or non-bank financial
institution upon order of any competent court based on an ex parte application in cases of
violations of this Act, when it has been established that there is probable cause that the
deposits or investments, including related accounts involved, are related to an unlawful
activity as defined in Section 3(i) hereof or a money laundering offense under Section 4
hereof; except that no court order shall be required in cases involving activities defined in
Section 3(i)(1), (2), and (12) hereof, and felonies or offenses of a nature similar to those
mentioned in Section 3(i)(1), (2), and (12), which are Punishable under the penal laws of other
countries, and terrorism and conspiracy to commit terrorism as defined and penalized under
Republic Act No. 9372.

The Court of Appeals shall act on the application to inquire into or examine any depositor or
investment with any banking institution or non-bank financial institution within twenty-four
(24) hours from filing of the application.

To ensure compliance with this Act, the Bangko Sentral ng Pilipinas may, in the course of a
periodic or special examination, check the compliance of a Covered institution with the
requirements of the AMLA and its implementing rules and regulations.

For purposes of this section, 'related accounts' shall refer to accounts, the funds and sources
of which originated from and/or are materially linked to the monetary instrument(s) or
property(ies) subject of the freeze order(s).

A court order ex parte must first be obtained before the AMLC can inquire into these related
Accounts: Provided, That the procedure for the ex parte application of the ex parte court
order for the principal account shall be the same with that of the related accounts.

The authority to inquire into or examine the main account and the related accounts shall
comply with the requirements of Article III, Sections 2 and 3 of the 1987 Constitution, which
are hereby incorporated by reference. (as amended by RA No 9194, 10167)

SECTION 12. Forfeiture Provisions. —

(a) Civil Forfeiture. — Upon determination by the AMLC that probable cause exists that any
monetary instrument or property is in any way related to an unlawful activity as defined in
Section 3(i) or a money laundering offense under Section 4 hereof, the AMLC shall file with the
appropriate court through the Office of the Solicitor General, a verified ex parte petition for
forfeiture, and the Rules of Court on Civil Forfeiture shall apply.

The forfeiture shall include those other monetary instrument or property having an
equivalent value to that of the monetary instrument or property found to be related in any
way to an unlawful activity or a money laundering offense, when with due diligence, the
former cannot be located, or it has been substantially altered, destroyed, diminished in value
or otherwise rendered worthless by any act or omission, or it has been concealed, removed,
converted, or otherwise transferred, or it is located outside the Philippines or has been
placed or brought outside the jurisdiction of the court, or it has been commingled with other
monetary instrument or property belonging to either the offender himself or a third person or
entity, thereby rendering the same difficult to identify or be segregated for purposes of
forfeiture.
(b) Claim on Forfeited Assets. — Where the court has issued an order of forfeiture of the
monetary instrument or property in a criminal prosecution for any money laundering offense
defined under Section 4 of this Act, the offender or any other person claiming an interest
therein may apply, by verified petition, for a declaration that the same legitimately belongs to
him and for segregation or exclusion of the monetary instrument or property corresponding
thereto. The verified petition shall be filed with the court which rendered the judgment of
forfeiture, within fifteen (15) days from the date of the finality of the order of forfeiture, in
default of which the said order shall become final and executory. This provision shall apply in
both civil and criminal forfeiture.

(c) Payment in Lieu of Forfeiture. — Where the court has issued an order of forfeiture of the
monetary instrument or property subject of a money laundering offense defined under
Section 4, and said order cannot be enforced because any particular monetary instrument or
property cannot, with due diligence, be located, or it has been substantially altered,
destroyed, diminished in value or otherwise rendered worthless by any act or omission,
directly or indirectly, attributable to the offender, or it has been concealed, removed,
converted, or otherwise transferred to prevent the same from being found or to avoid
forfeiture thereof, or it is located outside the Philippines or has been placed or brought
outside the jurisdiction of the court, or it has been commingled with other monetary
instruments or property belonging to either the offender himself or a third person or entity,
thereby rendering the same difficult to identify or be segregated for purposes of forfeiture,
the court may, instead of enforcing the order of forfeiture of the monetary instrument or
property or part thereof or interest therein, accordingly order the convicted offender to pay
an amount equal to the value of said monetary instrument or property. This provision shall
apply in both civil and criminal forfeiture.

(as amended by RA No 10365)

SECTION 13. Mutual Assistance among States. —

(a) Request for Assistance from a Foreign State. — Where a foreign State makes a request for
assistance in the investigation or prosecution of a money laundering offense, the AMLC may
execute the request or refuse to execute the same and inform the foreign State of any valid
reason for not executing the request or for delaying the execution thereof. The principles of
mutuality and reciprocity shall, for this purpose, be at all times recognized.

(b) Powers of the AMLC to Act on a Request for Assistance from a Foreign State. — The AMLC
may execute a request for assistance from a foreign State by: (1) tracking down, freezing,
restraining and seizing assets alleged to be proceeds of any unlawful activity under the
procedures laid down in this Act; (2) giving information needed by the foreign State within the
procedures laid down in this Act; and (3) applying for an order of forfeiture of any monetary
instrument or property in the court: Provided, That the court shall not issue such an order
unless the application is accompanied by an authenticated copy of the order of a court in the
requesting State ordering the forfeiture of said monetary instrument or property of a person
who has been convicted of a money laundering offense in the requesting State, and a
certification or an affidavit of a competent officer of the requesting State stating that the
conviction and the order of forfeiture are final and that no further appeal lies in respect of
either.
(c) Obtaining Assistance from Foreign States. — The AMLC may make a request to any foreign
State for assistance in (1) tracking down, freezing, restraining and seizing assets alleged to be
proceeds of any unlawful activity; (2) obtaining information that it needs relating to any
covered transaction, money laundering offense or any other matter directly or indirectly
related thereto; (3) to the extent allowed by the law of the foreign State, applying with the
proper court therein for an order to enter any premises belonging to or in the possession or
control of, any or all of the persons named in said request, and/or search any or all such
persons named therein and/or remove any document, material or object named in said
request: Provided, That the documents accompanying the request in support of the
application have been duly authenticated in accordance with the applicable law or regulation
of the foreign State; and (4) applying for an order of forfeiture of any monetary instrument or
property in the proper court in the foreign State: Provided, That the request is accompanied
by an authenticated copy of the order of the regional trial court ordering the forfeiture of said
monetary instrument or property of a convicted offender and an affidavit of the clerk of court
stating that the conviction and the order of forfeiture are final and that no further appeal lies
in respect of either.

(d) Limitations on Request for Mutual Assistance. — The AMLC may refuse to comply with any
request for assistance where the action sought by the request contravenes any provision of
the Constitution or the execution of a request is likely to prejudice the national interest of the
Philippines unless there is a treaty between the Philippines and the requesting State relating
to the provision of assistance in relation to money laundering offenses.

(e) Requirements for Requests for Mutual Assistance from Foreign States. — A request for
mutual assistance from a foreign State must (1) confirm that an investigation or prosecution
is being conducted in respect of a money launderer named therein or that he has been
convicted of any money laundering offense; (2) state the grounds on which any person is
being investigated or prosecuted for money laundering or the details of his conviction; (3)
give sufficient particulars as to the identity of said person; (4) give particulars sufficient to
identify any covered institution believed to have any information, document, material or
object which may be of assistance to the investigation or prosecution; (5) ask from the
covered institution concerned any information, document, material or object which may be
of assistance to the investigation or prosecution; (6) specify the manner in which and to
whom said information, document, material or object obtained pursuant to said request, is to
be produced; (7) give all the particulars necessary for the issuance by the court in the
requested State of the writs, orders or processes needed by the requesting State; and (8)
contain such other information as may assist in the execution of the request.

(f) Authentication of Documents. — For purposes of this Section, a document is authenticated

if the same is signed or certified by a judge, magistrate or equivalent officer in or of, the
requesting State, and authenticated by the oath or affirmation of a witness or sealed with an
official or public seal of a minister, secretary of State, or officer in or of, the government of the
requesting State, or of the person administering the government or a department of the
requesting territory, protectorate or colony. The certificate of authentication may also be
made by a secretary of the embassy or legation, consul general, consul, vice consul, consular
agent or any officer in the foreign service of the Philippines stationed in the foreign State in
which the record is kept, and authenticated by the seal of his office.
(g) Extradition. — The Philippines shall negotiate for the inclusion of money laundering
offenses as herein defined among extraditable offenses in all future treaties.

SECTION 14. Penal Provisions. — (a) Penalties for the Crime of Money Laundering. The
penalty of imprisonment ranging from seven (7) to fourteen (14) years and a fine not less than
Three million Philippine pesos (Php3,000,000.00) but not more than twice the value of the
monetary instrument or property involved in the offense, shall be imposed upon a person
convicted under Section 4(a), (b), (c) and (d) of this Act.

The penalty of imprisonment from four (4) to seven (7) years and a fine of not less than One
million five hundred thousand Philippine pesos (Php1,500,000.00) but not more than Three
million Philippine pesos (Php3,000,000.00), shall be imposed upon a person convicted under
Section 4(e) and (f) of this Act.

The penalty of imprisonment from six (6) months to four (4) years or a fine of not less than
One hundred thousand Philippine pesos (Php100,000.00) but not more than Five hundred
thousand Philippine pesos (Php500,000.00), or both, shall be imposed on a person convicted
under the last paragraph of Section 4 of this Act.

(as amended by RA No 10365)

(b) Penalties for Failure to Keep Records. The penalty of imprisonment from six (6) months to
one (1) year or a fine of not less than One hundred thousand Philippine pesos (Php100,000.00)
but not more than Five hundred thousand Philippine pesos (Php500,000.00), or both, shall be
imposed on a person convicted under Section 9(b) of this Act.

(c) Malicious Reporting. Any person who, with malice, or in bad faith, reports or files a
completely unwarranted or false information relative to money laundering transaction
against any person shall be subject to a penalty of six (6) months to four (4) years
imprisonment and a fine of not less than One hundred thousand Philippine pesos (Php
100,000.00) but not more than Five hundred thousand Philippine pesos (Php 500,000.00), at
the discretion of the court: Provided, That the offender is not entitled to avail the benefits of
the Probation Law.

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

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

(as amended by RA No 9194)

(d) Breach of Confidentiality. The punishment of imprisonment ranging from three (3) to eight
(8) years and a fine of not less than Five hundred thousand Philippine pesos (Php 500,000.00)
but not more than One million Philippine pesos (Php 1,000,000.00) shall be imposed on a
person convicted for a violation under Section 9(c). In the case of a breach of confidentiality
that is published or reported by media, the responsible reporter, writer, president, publisher,
manager and editor-in-chief shall be liable under this Act. (as amended by RA No 9194)

(e) The penalty of imprisonment ranging from four (4) to seven (7) years and a fine
corresponding to not more than two hundred percent (200%) of the value of the monetary
instrument or property laundered shall be imposed upon the covered person, its directors,
officers or personnel who knowingly participated in the commission of the crime of money
laundering.

(f) Imposition of Administrative Sanctions. The imposition of the administrative sanctions shall

be without prejudice to the filing of criminal charges against the persons responsible for the
violation.

After due notice and hearing, the AMLC shall, at its discretion, impose sanctions, including
monetary penalties, warning or reprimand, upon any covered person, its directors, officers,
employees or any other person for the violation of this Act, its implementing rules and
regulations, or for failure or refusal to comply with AMLC orders, resolutions and other
issuances. Such monetary penalties shall be in amounts as may be determined by the AMLC
to be appropriate, which shall not be more than Five hundred thousand Philippine pesos
(P500,000.00) per violation.

The AMLC may promulgate rules on fines and penalties taking into consideration the
attendant circumstances, such as the nature and gravity of the violation or irregularity.

(g) The provision of this law shall not be construed or implemented in a manner that will
discriminate against certain customer types, such as politically-exposed persons, as well as
their relatives, or against a certain religion, race or ethnic origin, or such other attributes or
profiles when used as the only basis to deny these persons access to the services provided by
the covered persons. Whenever a bank, or quasi-bank, financial institution or whenever any
person or entity commits said discriminatory act, the person or persons responsible for such
violation shall be subject to sanctions as may be deemed appropriate by their respective
regulators.

(as amended by RA No 10365)

SECTION 15. System of Incentives and Rewards. — (as amended by RA No 9194)

SECTION 16. Prohibitions Against Political Harassment. — This Act shall not be used for
political persecution or harassment or as an instrument to hamper competition in trade and
commerce.

No case for money laundering may be filed against and no assets shall be frozen, attached or
forfeited to the prejudice of a candidate for an electoral office during an election period.

SECTION 17. Restitution. — Restitution for any aggrieved party shall be governed by the
provisions of the New Civil Code.
SECTION 18. Implementing Rules and Regulations. — Within thirty (30) days from the
effectivity of this Act, the Bangko Sentral ng Pilipinas, the Insurance Commission and the
Securities and Exchange Commission shall promulgate the rules and regulations to
implement effectively the provisions of this Act. Said rules and regulations shall be submitted
to the Congressional Oversight Committee for approval.

Covered institutions shall formulate their respective money laundering prevention programs
in accordance with this Act including, but not limited to, information dissemination on money
laundering activities and its prevention, detection and reporting, and the training of
responsible officers and personnel of covered institutions.

SECTION 19. Congressional Oversight Committee. — There is hereby created a

Congressional Oversight Committee composed of seven (7) members from the Senate and
seven (7) members from the House of Representatives. The members from the Senate shall
be appointed by the Senate President based on the proportional representation of the parties
or coalitions therein with at least two (2) Senators representing the minority. The members
from the House of Representatives shall be appointed by the Speaker also based on
proportional representation of the parties or coalitions therein with at least two (2) members
representing the minority.

The Oversight Committee shall have the power to promulgate its own rules, to oversee the
implementation of this Act, and to review or revise the implementing rules issued by the Anti-
Money Laundering Council within thirty (30) days from the promulgation of the said rules.

SECTION 20. Non-intervention in the Bureau of Internal Revenue (BIR) Operations.

— Nothing contained in this Act nor in related antecedent laws or existing agreements shall
be construed to allow the AMLC to participate in any manner in the operations of the BIR.

(as amended by RA No 10365)

SECTION 21. The authority to inquire into or examine the main account and the related
accounts shall comply with the requirements of Article III, Sections 2 and 3 of the 1987
Constitution, which are hereby incorporated by reference. Likewise, the constitutional
injunction against ex post facto laws and bills of attainder shall be respected in the
implementation of this Act.

(as amended by RA No 10365)

SECTION 22. Appropriations Clause. — The AMLC shall be provided with an initial

appropriation of Twenty-five million Philippine pesos (Php25,000,000.00) to be drawn from
the national government. Appropriations for the succeeding years shall be included in the
General Appropriations Act.

SECTION 23. Separability Clause. — If any provision or section of this Act or the application
thereof to any person or circumstance is held to be invalid, the other provisions or sections of
this Act, and the application of such provision or section to other persons or circumstances,
shall not be affected thereby.

SECTION 24. Repealing Clause. — All laws, decrees, executive orders, rules and regulations
or parts thereof, including the relevant provisions of Republic Act No. 1405, as
amended; Republic Act No. 6426, as amended; Republic Act No. 8791, as amended and other
similar laws, as are inconsistent with this Act, are hereby repealed, amended or modified
accordingly.

SECTION 25. Effectivity. — This Act shall take effect fifteen (15) days after its complete
publication in the Official Gazette or in at least two (2) national newspapers of general
circulation. (as amended by RA No 9194)

Approved: September 29, 2001

Published in the Philippine Star and Manila Times on October 2,  2001. Also published in the
Official Gazette, Vol. 97 No. 48, page 7001 on November 26, 2001 and in Vol. 98 No. 46, page 6654
on November 18, 2002.

(Anti-Money Laundering Act of 2001, Republic Act No. 9160, [September 29, 2001])