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PRESIDENTIAL DECREE NO. 447
PRESIDENTIAL DECREE NO. 447
- PROVIDING FOR THE INCREASE IN CAPITALIZATION OF RURAL BANKS
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WHEREAS,
the rural banking system is an effective instrument that can be
employed in the implementation of the agrarian reform program
envisioned in Presidential Decree No. 27;chanroblesvirtualawlibrary
WHEREAS, mobilization of funds from both the government and private
sectors for agricultural credit through the rural banking system will
speed up the attainment of widespread increased agricultural and
industrial production and commercial activities in the countryside or
rural areas;chanroblesvirtualawlibrary
WHEREAS, existing capital inadequacy in the rural banking system
impairs its active involvement in the current effort of the government
to accelerate the implementation of the objectives outlined in the
preceding paragraphs; chanroblesvirtualawlibrary
WHEREAS, outstanding rediscounting obligations of the rural banks with
the Central Bank of the Philippines can be utilized as additional
capitalization of rural banks through conversion thereof into
government counterpart investments in such rural banks under terms and
conditions as may be prescribed by the Central Bank of the Philippines.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines,
by virtue of the powers vested in me by the Constitution, do hereby
decree and order that:cralaw:red
Section 1. In order to strengthen the capital base of
rural banks and expand their capacity to meet the credit needs of their
respective areas in the countryside, especially those covered by the
agrarian reform program, their present government and private
capitalizations shall be increased to such amounts, in such proportion,
and within such periods as the Central Bank of the Philippines shall
determine.
Section 2. Subject to such terms and conditions as it
may prescribe, the Central Bank of the Philippines, the provisions of
any existing law to the contrary notwithstanding, is authorized to
convert the rediscounting obligations of rural banks into equity in the
name of the Land Bank of the Philippines, and the Secretary of Finance
shall correspondingly issue government bonds in favor of the Central
Bank of the Philippines. In consideration of the equity acquired by it,
the Land Bank shall issue its own shares of stock in favor of the
Republic of the Philippines. chanroblesvirtualawlibrary
Section 3. Whenever the outstanding rediscounting
obligations of a rural bank, when converted into government equity, are
insufficient to meet the required capitalization as determined in
Section 1 hereof, the Government shall directly subscribe to the
balance thereof, such investment to be paid by government bonds to be
issued by the Secretary of Finance to the rural bank concerned, which
bonds may be pledged, sold or otherwise disposed of by the rural bank
in accordance with rules and regulations that the Monetary Board shall
prescribe. In case a rural bank has no outstanding rediscounting
obligations with the Central Bank, the Secretary of Finance shall
likewise issue the necessary amount of government bonds in favor of the
rural bank to raise the Government equity to the desired level:
Provided, however, That the total sum of such direct investment of the
Government and the rediscounting obligations converted into equity
shall not exceed the aggregate rediscounting obligations of rural banks
with the Central Bank of the Philippines outstanding as of June 30,
1974.
Section 4. All preferred shares that rural banks may
issue in favor of the Land Bank under Section 2 and Section 3 of this
Decree shall share in dividend distribution at three per cent (3%),
without preference. By virtue of its holdings of preferred shares, the
Land Bank shall be entitled to nominate one director in any rural bank
where preferred shares are held by it.
Section 5. Government bonds that may be issued in
consideration of Government preferred shares in rural banks shall bear
interest at three per cent (3%) per annum. Such bonds as the Secretary
of Finance may issue directly to rural banks for said purpose shall be
given Central Bank support and shall be eligible as part of the
required reserves against deposit liabilities of the original rural
bank holders of the bonds.
Section 6. The Central Bank of the Philippines is
authorized to require rural banks to match government equity with
private equity. The provisions of R.A. 720 to the contrary
notwithstanding, the Central Bank of the Philippines may open for the
establishment of a new rural bank the area served by an existing rural
bank in any of the following events:cralaw:red
a. Upon failure of a rural bank to submit a viable
capitalization program to raise its private sector capital to the level
of government equity;chanroblesvirtualawlibrary
b. Upon failure of the rural bank, after submission
and approval of a viable capitalization program, to comply with the
terms and conditions of the program. chanroblesvirtualawlibrary
The Central Bank may take such other action or actions necessary to
cause the sale of the unissued shares of stock of the rural bank to the
public or to other parties acceptable to it. chanroblesvirtualawlibrary
Section 7. The Monetary Board of the Central Bank
shall promulgate rules and regulations necessary for the effective
implementation of this Decree.
Section 8. This Decree shall take effect immediately.
DONE in the City of Manila,
this 7th day of May, in the year of Our Lord, nineteen hundred and
seventy-four.
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