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

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

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

Sec. 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.
 
3.2.   Banks shall be classified into:


(a)  Universal banks;
 
(b)  Commercial banks;
 
(c)  Thrift banks, composed of:
 
(i) Savings and mortgage banks;
 
(ii) Stock savings and loan associations; and
 
(iii) Private development banks, as defined in the Republic Act No. 7906 (hereafter the “Thrift Banks Act”);
 
(d)    Rural banks, as defined in Republic Act No. 73S3 (hereafter the "Rural Banks Act");
 
(e)     Cooperative banks, as defined in Republic Act No 6938 (hereafter the "Cooperative Code");
 
(f)      Islamic banks as defined in Republic Act No. 6848, otherwise known as the “Charter of Al Amanah Islamic Investment Bank of the Philippines”; and
 
(g)    Other classifications of banks as determined by the Monetary Board of the Bangko Sentral ng Pilipinas.

Sec. 4. Supervisory Powers. The operations and activities of banks shall be subject to supervision of the Bangko Sentral.  “Supervision” shall include the following:

4.1. The issuance of rules of, conduct or the establishment standards of operation for uniform application to all institutions or functions covered, taking into consideration the distinctive character of the operations of institutions and the substantive similarities of specific functions to which such rules, modes or standards are to be applied;
 
4.2.The conduct of examination to determine compliance with laws and regulations if the circumstances so warrant as determined by the Monetary Board;
 
4.3. Overseeing to ascertain that laws and regulations are complied with;
 
4.4. Regular investigation which shall not be oftener than once a year from the last date of examination to determine whether an institution is conducting its business on a safe or sound basis: Provided, That the deficiencies/irregularities found by or discovered by an audit shall be immediately addressed;


4.5.    Inquiring into the solvency and liquidity of the institution; or


4.6.    Enforcing prompt corrective action.

   

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.
  Sec.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.   Sec.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;
 
8.2   That its funds are obtained from the public, which shall mean twenty (20) or more persons; and
 
8.3  That the minimum capital requirements prescribed by the Monetary Board for each category of banks are satisfied.

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.

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.

Sec. 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).  .

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

18.1. When a bank is under comptrollership or conservatorship; or
 
18.2. When a bank is found by the Monetary Board to be conducting business in an unsafe or unsound manner; or
 
18.3. When a bank is found by the Monetary Board to be in an unsatisfactory financial condition.

 

    For purposes of this Section, working days shall mean Mondays to Fridays, except if such days are holidays.
      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.

  Sec. 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.  
Sec. 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.  
 

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 tile net worth of the bank.

Article III. Provisions Applicable To All Banks, Quasi-Banks, And Trust Entities  

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

Sec. 35.  Limit on Loans, Credit Accommodations and Guarantees. -

35.1.  Except as the Monetary Board may otherwise prescribe for reasons of national interest,  the total amount of loans, credit accommodations and guarantees as may be defined by the Monetary Board that may be extended by a bank to any person, partnership, association, corporation or other entity shall at no time exceed twenty percent (20%) of the net worth of such bank. The basis for determining compliance with single borrower limit is the total credit commitment of the bank to the borrower.
 
35.2.  Unless the Monetary Board prescribes otherwise, the total amount of loans, credit accommodations and guarantees prescribed in the preceding paragraph may be increased by an additional ten percent (10%) of the net worth of such bank provided the additional liabilities of any borrower are adequately secured by trust receipts, shipping documents, warehouse receipts or other similar documents transferring or securing title covering readily marketable,  non-perishable goods which must be fully covered by insurance.
 
35.3. The above prescribed ceilings shall include:
 
(a) the direct liability of the maker or acceptor of paper discounted with or sold to such bank and the liability of a general endorser, drawer or guarantor who obtains a loan or other credit accommodation from or discounts paper with or sells papers to such bank;
 
(b) in the case of an individual who owns or controls a majority interest in a corporation, partnership, association or any other entity, the liabilities of said entities to such bank;
 
(c) in the case of a corporation, all liabilities to such bank of all subsidiaries in which such corporation owns or controls a majority interest; and
 
(d) in the case of a partnership, association or other entity, the liabilities of the members thereof to such bank.
 
35.4.  Even if a parent corporation, partnership, association, entity or an individual who owns or controls a majority interest in such entities has no liability to the bank, the Monetary Board may prescribe the combination of the liabilities of subsidiary corporations or members of the partnership, association, entity or such individual under certain circumstances, including but not limited to, any of the following situations:   .
 
(a) the parent corporation, partnership, association, entity or individual guarantees the repayment of the liabilities;
 
(b) the liabilities were incurred for the accommodation of the parent corporation or another subsidiary or of the partnership or association or entity or such individual; or
 
(c) the subsidiaries though separate entities operate merely as departments or divisions of a single entity.
 
35.5.   For purposes of this Section, loans, other credit accommodations and guarantees shall exclude:
 
(a) loans and other credit accommodations secured by obligations of the Bangko Sentral or of the Philippine Government;
 
(b) loans and other credit accommodations fully guaranteed by the government as to the payment of principal and interest;
 
(c) loans and other credit accommodations covered by assignment of deposits maintained in the lending bank and held in the Philippines;
 
(d) loans, credit accommodations and acceptances under letters of credit to the extent covered by margin deposits; and
 
(e) other loans or credit accommodations which the Monetary Board may from time to time, specify as non-risk items.
 
35.6.  Loans and other credit accommodations, deposits maintained with, and usual guarantees by a bank to any other bank or non-bank entity, whether locally or abroad, shall be subject to the limits as herein prescribed.
 
35.7.  Certain types of contingent accounts of borrowers may be included among those subject to these prescribed limits as may be determined by the Monetary Board.

Sec. 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.

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

Sec. 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.

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. .

Sec. 40. Requirement for Grant Of Loans or 0ther Credit Accommodations. - Before granting a loan or other credit accommodation, a bank must ascertain that the debtor is capable of fulfilling his commitments to the bank.

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

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

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

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

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

Sec. 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.

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

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

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

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

Sec. 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.

Sec. 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.

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.

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.

(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.

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.

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.  .

 

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.

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

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

Sec. 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.  .

Sec. 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.

 
   PLACEMENT UNDER CONSERVATORSHIP  
  CHAPTER VI CESSATION OF BANKING BUSINESS

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

Sec. 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.

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

CHAPTER VII LAWS GOVERNING OTHER TYPES OF BANKS   CHAPTER VIII FOREIGN BANKS