"Section 1.    Purposes, Name and Domicile. — To provide credit facilities for the rehabilitation and development and expansion of agriculture and industry, the reconstruction of property damaged by war and the broadening and diversification of the national economy, and to promote the establishment of private development banks in provinces and cities, there is hereby created a body corporate to be known as the development bank of the Philippines, hereinafter called the Bank, which shall have its principal place of business in the City of Manila and shall exist for a period of fifty years.

"Section 2.    Corporate powers. — The Development Bank of the Philippines shall have the power:

"(a)    To grant loans for home building or home financing projects and for the rehabilitation, the establishment or development of any agricultural and/or industrial enterprise, including public utilities, mining, livestock industry and fishing, whether offshore or inland;

"(b)    To purchase preferred redeemable shares of stock, securities other than shares of stock, and obligations of, and to grant loans to, any agricultural and industrial enterprises mentioned in paragraph (a), to finance their fixed and operating capital requirements. All purchases of preferred redeemable shares, securities and obligations and all loans shall be of such sound value or so secured, as reasonably to assure retirement of such shares, securities or obligations or repayment of the loan; and shall be granted only under such terms, conditions and restrictions as the said board shall determine: Provided, That no loan shall have a maturity period longer than ten years except that any loan granted for the purpose of constructing industrial facilities may have a maturity of ten years plus such additional period as may be necessary not only to complete such construction, but also to repay the loans in accordance with the released regulations to be determined by the board;

"(c)    To grant loans to provincial, city and municipal governments for the rehabilitation, construction or reconstruction of public markets, waterworks, toll bridges, slaughterhouses, for cadastral surveys and other self-liquidating or income-producing services, including the purchase and acquisition of municipal electric power plants and to agencies and corporations owned or controlled by the Government of the Republic of the Philippines for the production and distribution of electrical power, for the purchase and subdivision of rural and urban estates, for housing projects, for irrigation and waterworks systems, and for other essential industrial and agricultural enterprises;

"(d)    To grant loans to cooperative associations to facilitate production, the marketing of crops, and the acquisition of essential commodities;

"(e)    To grant loans to employees in a Government-owned or controlled corporation or private corporation engaged in the development and/or expansion of agriculture or industry, for the purpose of buying shares of stock in such corporations: Provided, That the yearly amortization of such loans shall not exceed ten per cent of the total annual salaries and wages of the employees: Provided, further, That such loans shall be payable in full within a period of not exceeding ten years;

"(f)    To underwrite, purchase, own, sell, mortgage or otherwise dispose of stocks, bonds, debentures, securities and other evidences of indebtedness issued for or in connection with any project or enterprise referred to in the preceding paragraphs;

"(g)    To issue bonds, debentures, securities, collaterals, and other obligations upon recommendation of the Secretary of Finance and with the approval of the President, but in no case to exceed at any one time an aggregate amount equivalent to one hundred per centum of its subscribed capital and surplus. These bonds and other obligations shall be redeemable at the option of the Bank at or before maturity and in such manner as may be stipulated therein and shall bear such rate of interest as may be fixed by the Bank. Such obligations shall be secured by the assets of the bank including the stocks, bonds, debentures and other securities underwritten, purchased or held by it under the provisions of this Act. The bank shall provide for appropriate reserves for the redemption or retirement of said obligations. Such obligations may be issued and offered for sale at such price or prices as the Bank may determine, and shall be exempt from taxation both as to principal and interest. The said obligations shall be and are hereby fully and unconditionally guaranteed both as to principal and interest by the Government of the Republic of the Philippines and such guaranty shall be expressed on the face thereof.  

"In the event that the Bank shall be unable to pay debentures, bonds, collaterals, notes or other such obligations issued by it, the Secretary of Finance shall pay the amount thereof, which is hereby appropriated out of any moneys in the National Treasury not otherwise appropriated, and thereupon, to the extent of the amounts so paid, the Government of the Republic of the Philippines shall succeed to all the rights of the holders of such bonds, notes, debentures, collaterals, or other obligations.

"Subject to the above provisions, the Bank is also authorized to issue 'Rehabilitation and development bonds' in denominations of not less than fifty pesos nor more than one thousand pesos redeemable by the Bank on demand at the option of the holder of said bonds, which may be of the following types: (1) rehabilitation and development bonds at progressive staggered interest with cumulative face value; and (2) rehabilitation and development bonds bearing interests as may be determined by the Board of Governors with the advice and consent of the Secretary of Finance and upon approval by the Monetary Board, said interest to become due and payable semi-annually and payment thereof to be annotated on the back of each bond certificate. Maturity of both types of bonds shall be fixed by the Board of Governors but in no case to exceed ten years.

"The Board of Governors shall have the power to prescribe rules and regulations for the registration of the bonds issued by the bank at the request of the holders of such bonds.

"(h)    To adopt, alter, and use a corporate seal which shall be judicially noticed; to make contracts; to borrow money; to issue or own real and personal property; and to sell, mortgage or otherwise dispose of the same; to sue and be sued; to employ such officers and personnel as may be necessary to carry out the business of the Bank; and otherwise to do and perform any and all things that may be necessary or proper to carry out the purposes of the Bank.

"(i)    To subscribe out of its funds to the capital stock of private provincial and city development banks created pursuant to the provisions of this Act: Provided, That the aggregate of such subscription shall not exceed twenty-five million pesos.

"(j)    To rediscount intermediate and long term notes, loans and/or mortgages of the Philippine National Bank.

"Section 3.    Capital Stock. — The capital stock of the Bank shall be five hundred million pesos divided into five hundred thousand shares having a par value of one thousand pesos each. The said capital stock shall be fully subscribed by the Government of the Republic of the Philippines.

"The provisions of section three of Republic Act Numbered Seventeen hundred eighty-nine to the contrary notwithstanding, an amount equivalent to fifty per cent of the proceeds from the sale of reparations goods and services for fifteen years following the approval of this Act, is hereby appropriated to cover the payment of the unpaid subscription of the government to the capital stock of the Bank: Provided, That seventy-five million pesos of such amount shall be set aside as a trust fund for the purpose ofding the establishment of private provincial and city development banks as provided in this Act.

"Section 4.    Loans. — The Bank may grant loans against security of real estate and/or other acceptable assets including, subject to the provision of existing laws, leasehold rights and permits from the government: Provided, That not more than forty-five per cent of its authorized capital stock shall be available for industrial loans, not more than thirty-five per cent of such capital stock shall be available for agricultural loans and not more than twenty per cent of such capital stock shall be available for miscellaneous loans including loans for home building or home financing projects: Provided, further, That the same proportion hereinabove stated shall be observed in the grant of loans for industrial, agricultural and miscellaneous purpose: Provided, further, That of the amount available for agricultural loans, not more than twenty per cent thereof shall be made available for any agricultural crop and that of the latter amount not more than five per cent thereof shall be loaned to any individual, association or corporation: Provided, further, That no person shall be granted a loan for home building in excess of thirty thousand pesos: Provided, further, That any provision of law to the contrary notwithstanding the Bank is authorized to grant loans on the security of real estate without torrens title if the said real estate has been declared for purposes of taxation continuously for at least ten years and the applicant for loan and his predecessors in interest have been in continuous and uninterrupted possession thereof in the concept of owner for at least ten years, such possession to be established by affidavits of the owners of all the properties adjoining such real estate and other evidences that the board of governors may deem necessary: Provided, further, That the Bank shall set aside twenty-five per cent of its loanable funds for each quarter for the purchase of such mortgage bonds as the Philippine National Bank shall issue for the grant of medium and long-term development loans: Provided, finally, That such bonds sold by the Philippine National Bank to the Bank shall be guaranteed by the government both as to principal and interest.

"Section 5.    The provision of any law to the contrary notwithstanding, twenty-five per cent of the investible funds of the Government Service Insurance System and the Social Security System accumulating monthly shall be invested by the said systems in bonds issued by the Bank.

"Section 6.    The establishment of private development banks in provinces and cities shall be encouraged and shall be given preference and assistance by the government as herein below provided.  

"Section 7.    There shall be three classes or categories of private development banks, namely: class A, class B, and class C.

Class A private development banks shall have a paid-up capital of at least four million pesos; class B shall have a paid-up capital of at least two million pesos; and Class C shall have a paid-up capital of at least one million pesos.

"Section 8.    A private development bank shall be incorporated under the provisions of the General Banking Act for mortgage banks and shall exercise all the powers and shall assume all the obligations of a mortgage bank as defined in the said Act, except as otherwise provided herein: Provided, That no private development bank shall be operated without a certificate of authority from the monetary board of the Central Bank which shall be issued upon compliance with the provisions of this law.

"Any existing domestic bank may be converted into a private development bank in the province or city in which it is located: Provided, That it complies with the requirements prescribed in this Act: Provided, further, That at least sixty per cent of its capital stock is owned by citizens of the Philippines.

"Section 9.    A private development bank shall be organized in the form of a stock corporation and its paid-up capital stock shall not be less than four million pesos for class A, two million pesos for class B, and one million pesos for class C: Provided, That at least sixty per cent of the capital stock subscribed by the private sector shall be owned and held by citizens of the Philippines: Provided, further, That if said subscription of private shareholders to the capital stock of a private development bank cannot be secured or is not available, the Bank on representation of the said private shareholders and with the approval of its Board of Governors shall, with thirty days from date of said approval by the Board of Governors, subscribe to the capital stock of such development banks, which shall be paid in full at the time of subscription out of the trust fund hereinabove mentioned, in an amount equal to the full paid subscribed capital of the private stockholders: Provided, further, That the Board of Governors shall act on the representation made by the private shareholders within thirty days from the date it is filled: Provided, further, That such shares of stock subscribed by the bank shall be preferred shares entitled to cumulative dividends at a rate of one per cent during the first five years, two per cent during the following five years, and three per cent thereafter, shall be preferred as against common and other preferred stockholders in the distribution of assets in the event of liquidation, and shall be entitled to voting privileges: Provided, finally, That such preferred shares of the bank may be sold at any time at par to private individuals who are citizens of the Philippines, and in the sale thereof the qualified registered stockholders shall have the right of preemption within one year from the date of offer in proportion to their respective holdings, but in the absence of such buyers, preference shall be given to residents of the province or city where the development bank is located. All members of the board of directors of the private development banks shall be citizens of the Philippines.

"Section 10.    Private development banks organized under this Act shall be known by the name of the province or city it is to operate followed by the words "Development Bank." Should there be in a province or city more than one such private development bank, the name of the banks organized subsequently shall be preceded by the word second or third and so on following the order of their authorization.

"In the implementation of the provisions of this Act, the Central Bank and the bank shall see to it that, before a second or subsequent private development bank is organized in a particular province or city, ample provision be made to provide for capital assistance in the organization of private development banks in other provinces and cities still without such banks.

"Section 11.    The Central Bank shall advance, within thirty days from the date of the organization and authorization of the first provincial or city private development bank, sums of money not to exceed at any one time ten million pesos for the trust fund payment of the same to be guaranteed by the reparations payments prescribed above.

The loanable funds of the private development bank shall be invested in medium and long-term loans for economic development purpose and in no case shall the bank invest more than twenty-five per cent of such loanable funds in short-term loans.  

"Section 12.    The trust fund shall be used by the Bank in assisting private development banks as follows:

"(a)    To pay for its subscription to preferred shares of stock in said private development banks in the manner and subject to the terms and conditions prescribed in section nine hereof;

"(b)    To rediscount promissory notes and other credit instruments held by the private development bank under the following conditions and limitations:

"(1)    It charges such rediscount or interest rates as it may determine taking into account that the main objective of the private development banks is to engage in medium and long-term loans for economic development. The determination of such rediscount or interest rates acceptable to the bank for purposes of this provision shall be made by the said bank upon or immediately after the commencement of operations of a private development bank;

"(2)    Funds so acquired shall be used only to finance the establishment and operation of projects within the development program of the National Economic Council or along such projects and activities as the National Economic Council may, from time to time, approve.

"Section 13.    The provisions of Republic Act Numbered Three hundred and thirty-seven, insofar as they are applicable and not in conflict with any provision of this Act, are hereby made applicable to private development banks.

"Section 28.    Whenever the phrase "Rehabilitation Finance Corporation" and the word 'corporation' appear in Republic Act Numbered Eighty-five or in any other Act or Executive Order, the same shall mean and refer to the 'Development Bank of the Philippines' and the 'Bank', respectively.

"Upon the approval of this Act, all the assets and liabilities as well as the personnel of the Rehabilitation Finance Corporation are hereby transferred to the Bank.  

"Section 29.    Nothing in this Act shall authorize the Bank to layoff or separate from the service any official or employee of the Rehabilitation Finance Corporation by reason of the approval of this Act.

"Section 30.    In the event that any provision of this Act or the applicability of such provision to any person or circumstance is declared invalid, the remainder of the Act or the application of said provision to other persons or circumstances shall not be affected by such declaration."