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BATAS PAMBANSA BILANG. 61

BATAS PAMBANSA BLG. 61 - AN ACT AMENDING FURTHER REPUBLIC ACT NUMBERED THREE HUNDRED THIRTY-SEVEN, AS AMENDED, REGULATING BANKS AND BANKING INSTITUTIONS AND FOR OTHER PURPOSES, OTHERWISE KNOWN AS THE  "GENERAL BANKING ACT"

Section 1. Sec. 2-A of Republic Act Numbered Three hundred thirty-seven, as amended, is hereby further amended to read as follows:

"Sec. 2-A. The following entities shall not be considered as banking institutions but shall be subject to regulation by the Monetary Board which may include, but need not be limited to, the imposition of net worth to risk assets ratios, reserve requirements, interest rate ceilings, methods of computation thereof, prescribing maximum charges which may be collected, minimum capitalization, and submission of statistical reports: 


"(a) Entities regularly engaged in the lending of funds  or purchasing of receivables or other obligations with funds  obtained from the public through the issuance, endorsement or  acceptance of debt instruments of any kind for their own account,  or through the issuance of certificates of assignment or similar  instruments with recourse, trust certificates, or of repurchase  agreements, whether any of these means of obtaining funds from  the public is done on a regular basis or only occasionally; 

"(b) Entities regularly engaged in the lending of funds which receive deposits only occasionally; and

"(c) Trust companies, building and loan associations, and non-stock savings and loan associations, but such non-deposit accepting entities shall continue "to be supervised and regulated by the Monetary Board under the pertinent provisions of this Act, and/or Republic Act Nos. 265, as amended, and 3779."


Sec. 2. Sec. 2-B of the same Act is hereby amended to read as follows: 

"Sec. 2-B. The operations and activities of non-bank  financial intermediaries, except insurance companies, shall be subject  to regulation by the Monetary Board which may include, but need  not be limited to, the imposition of constraints covering the (a)  minimum size of funds received, (b) methods of marketing and  distribution, (c) terms and maturities of funds received, and (d)  uses of funds: Provided, however, That if such entities are  authorized by the Central Bank to perform quasi-banking functions,  they may be further subject to regulation under Sec. 2-A of  this Act."


Sec. 3. Sec. 6-A of the same Act is hereby further amended to read as follows:

"Sec. 6-A. For purposes of uniformity, simplicity and  equality of treatment, banking institutions shall be classified into  the following general categories: (a) Commercial banks, (b)  Thrift banks, composed of (1) Savings and mortgage banks, (2)  Stock savings and loan associations, and (3) Private development  banks, and (c) Rural banks. Specialized and unique government banks, such as the Development Bank of the Philippines and the Land Bank, are not covered by this classification, but shall be  subject to supervision and regulation by the Central Bank  pursuant to the provisions of Section twenty-five of Republic Act  No. 265.  

"The Monetary Board shall determine the proper classification of other types of banking institutions that may be established after the approval of this Act."


Sec. 4. Sec. 6-B of the same Act is hereby further amended to read as follows:

"Sec. 6-B. With prior approval of the Monetary Board, commercial banks, thrift banks and rural banks may establish branches, agencies, or extension offices, on a nationwide basis.

"Notwithstanding the provisions of any law to the contrary, no government or private banks may open branches, agencies, or extension offices without prior approval of the Monetary Board." 


Sec. 5. Sec. 8 of the same Act is hereby further amended to read as follows:

"Sec. 8. No banking institutions shall issue no-par value stock. For the purpose primarily of determining the permanency of  equity, the types of stock a banking institution may issue,  including the terms thereof and the rights appurtenant thereto,  shall be subject to such rules and regulations as the Monetary  Board may prescribe, the provision of any law to the contrary  notwithstanding."


Sec. 6. Sec. 12-C of the same Act is hereby amended to read as follows: 

"Sec. 12-C. A corporation organized primarily for the  purpose of owning equity in thrift banks or rural banks may own  more than thirty percent (30%) of the voting stock of a thrift  bank and/or rural bank up to a majority or all of the equity  thereof: Provided, That the acquisition of such equity is subject  to the prior approval of the Monetary Board which shall  promulgate appropriate guidelines to govern such investments:  Provided, further, That the equity ownership of any individual, related  group or corporation in the parent corporation owning more than  thirty percent (30%) of the voting stock of the thrift bank or  rural bank is in accordance with the provisions of Sec. 12,  12-A, 12-B and 12-D of this Act: Provided, finally, That the  parent company owning a majority or all of the equity in a bank may  not engage in activities not allowed to the invested bank.


Sec. 7. The same Act is hereby amended by adding a new section after Sec. 12-D, to read as follows: 

"Sec. 12-E. To promote competitive conditions in financial markets, the Monetary Board may further limit the equity investments, direct or indirect, in banks and non-bank financial intermediaries performing quasi-banking functions."


Sec. 8. Sec. 13 of the same Act is hereby further amended to read as follows: 

"Sec. 13. At least two-thirds of the members of the board  of directors of any bank or banking institution which may be  establish after the approval of this Act shall be citizens of the  Philippines: Provided, That no appointive or elective public  official, whether full-time or part-time, shall at the same time  serve as officer of any private bank, except in cases where such  service is incident to financial assistance provided by the  government or a government-owned or controlled corporation to the  bank: Provided, further, That in the case of a bank merger or  consolidation duly approved by the Monetary Board, the limitation  on the number of directors in a corporation, as provided for in  section fourteen of the Corporation Code of the Philippines,  shall not be applied so that membership in the new board may  include up to the total number of directors provided for in the  respective articles of incorporation to the merging or  consolidating banks."


Sec. 9. Sec. 14-A of the same Act is hereby further amended to read as follows: 

"Sec. 14-A. Foreign banking institutions without branches  in the Philippines, including (a) their wholly-or majority-owned  subsidiaries, and (b) their holding companies having majority  holdings in such foreign banking institutions, may invest, with  prior approval of the Monetary Board, in equities of local  companies engaged in financial allied undertakings under the same  restrictions imposed on domestic banks of the same category, as  provided for in Section s twenty-one-A and thirty-one of this Act  or in other banking laws. In any case, the aggregate holdings of  voting stocks of all foreign entities in any single domestic  financial enterprise shall remain a minority participation in  that enterprise.

"With prior approval of the Central Bank, these foreign  entities may also purchase equities in domestic banks: Provided, That their aggregate holdings of voting stocks shall remain at  all times subject to the limitations prescribed in Sec. 12-A  of this Act.

"The foregoing limitations shall not apply either to international or regional inter-governmental financial organizations and their subsidiaries of which the Philippines is a member." 


Sec. 10. Sec. 21 of the same Act is hereby further amended to read as follows:

"Sec. 21. A commercial banking corporation, in addition to  the general powers incident to corporations, shall have all such  powers as shall be necessary to carry on the business of  commercial banking, by accepting drafts and issuing letters of credit,  by discounting and negotiating promissory notes, drafts, bills of  exchange, and other evidences of debts; by receiving deposits; by  buying and selling foreign exchange and gold or silver bullion,  and by lending money against personal security or against  securities consisting of personal property or mortgages on improved  real estate and the insured improvements thereon. 

"Commercial banks may acquire readily marketable bonds and other debt securities subject to such rules as the Monetary Board may promulgate. These rules may include, but need not be limited to the determination of bonds and other debt securities eligible for investment, the maturities and aggregate amount of such investment."


Sec. 11. Sec. 21-A of the same Act is hereby further amended to read as follows:

"Sec. 21-A. Commercial banks, including Government banks  and foreign banks with existing local branches, may invest in  equities of the following allied undertakings: warehousing  companies, leasing companies, storage companies, safe deposit  box companies, companies engaged in the management of mutual funds but  not in the mutual funds themselves, banks, and such other similar  activities as the Monetary Board may declare as appropriate from  time to time: Provided, That (a) the total investment in equities  shall not exceed twenty-five percent (25%) of the net worth of  the bank; (b) the equity investment in any one enterprise shall  not exceed fifteen percent (15%) of the net worth of the bank; (c) the total equity investment of the bank in any single  enterprise, except as provided in Sec. 21-C of this Act or where  the enterprise is a non-financial allied undertaking; and (d) the  equity investment in other banks shall be deducted from the  investing bank's net worth for purposes of computing the prescribed  ration of net worth to risk assets. Equity investments shall not be permitted in non-related activities.

"Where the allied undertaking is a wholly or majority-owned subsidiary of the bank, the Central Bank may subject it to examination."


Sec. 12. The same Act is hereby amended by adding three new sections after Sec. 21-A thereof, to read as follows:

"Sec. 21-B. The provisions in this or in any other Act to  the contrary notwithstanding, the Monetary Board, whenever it  shall deem appropriate and necessary to further national  development objectives or support national priority projects,  may authorize a commercial bank, a bank authorized to provide  commercial banking services, as well as a government-owned and  controlled bank, to operate under an expanded commercial banking  authority and by virtue thereof exercise, in addition to  powers authorized for commercial banks, the powers of an  Investment House as provided in Presidential Decree No. 129,  invest in the equity of a non-allied undertaking, or own a  majority or all of the equity in a financial intermediary other  than a commercial bank or a bank authorized to provide  commercial banking services: Provided, That (a) the total  investment in equities shall not exceed fifty percent  (50%) of the net worth of the bank; (b) the equity  investment in any one enterprise whether allied or non-allied shall  not exceed fifteen percent (15%) of the net worth of the bank; (c)  the equity investment of the bank, or of its wholly or  majority-owned subsidiary, in an single non-allied undertaking  shall not exceed thirty-five percent (35%) of the total  equity in the enterprise nor shall it exceed  thirty-five percent (35%) of the voting stock in that  enterprise; and (d) the equity investment in  other banks shall be deducted from the investing bank's net worth  for purposes of computing the prescribed ratio of net worth to  risk assets. 


"In the exercise of the authority granted herein, the  Monetary Board shall take into consideration the capability of  the bank in terms of its past performance as a bank or as a  financial intermediary, financial resources and technical  expertise, and the investment of the bank shall be subject to such  regulations as the Monetary Board may prescribe which may include  but need not be limited to the categories of undertakings or  projects that may be invested in by the bank directly or through its  wholly or majority-owned subsidiary or the extent of exposure in  any of the activities authorized in this section. 

"Where the enterprise is wholly or majority-owned by the bank, the Central Bank may subject it to examination.

"In order to avoid undue concentration of economic power, the total equity investments of banks, quasi-banks and their subsidiaries in a single enterprise or industry may be subject to such limitations as may be prescribed by the Monetary Board, but shall in any case remain a minority in any enterprise except as may be otherwise approved by the President (Prime Minister). 


"For the purpose of determining compliance with the  limitations on equity holdings by a bank in a non-allied undertaking,  the equity holdings of the bank in the undertaking, when combined  with those of its directors, officers and substantial stockholders,  and its wholly or majority-owned subsidiaries shall not  exceed the prescribed thirty-five percent (35%) of the equity of  that undertaking. The same rule shall be observed in the case of an equity investment by a subsidiary wholly or majority-owned by the bank, where the investors in the undertaking consist of the subsidiary, the bank which owns the majority or all of the equity of the subsidiary, the officers, directors and substantial stockholders of the bank, as well as those of the subsidiary.  

"The regulations issued by the Monetary Board to implement the provisions of this section and Sec. 21-C of this Act shall be reported to the President (Prime Minister) and to the Batasang Pambansa within fifteen days from the date of their issuance.  Such regulations shall be published in a newspaper of general circulation.


"Sec. 21-C. The provisions of this Act or of any other Act  to the contrary notwithstanding, a commercial bank or any bank  authorized to provide commercial banking services, or to operate  under an expanded commercial banking authority, may own more than  thirty percent (30%) of the voting stock of a thrift bank or a  rural bank up to a majority or all of the equity thereof:  Provided, That 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: Provided,  further, That the equity ownership of any individual, related  group or corporation in the investing bank is in accordance with  the provisions of Sec. 12, 12-A, 12-B and 12-D of this Act:  Provided, finally, That the equity investment in other banks  shall be deducted from the investing bank's net worth for  purposes of computing the prescribed ratio of net worth to risk  assets. 

"Sec. 21-D. The Monetary Board is hereby authorized to take such measures as may be necessary, when the expanded commercial banking authority permitted under the provisions of this Act would result in an undue concentration of economic power in one or more financial institutions or in corporations, partnerships, groups or individuals with related interest."


Sec. 13. Sec. 22 of the same Act is hereby further amended to read as follows:

"Sec. 22. The combined capital accounts of each commercial bank shall not be less than an amount equal to ten percent (10%) of its risk assets which is defined as its total assets minus the following assets: 

"(a) Cash on hand;


"(b) Amounts due from the Central Bank;

"(c) Evidences of indebtedness of the Republic of the Philippines and of the Central Bank, and any other evidences of indebtedness or obligations the servicing and repayment of which are fully guaranteed by the Republic of the Philippines;

"(d) Loans to the extent covered by hold-out on, or assignment of, deposits maintained in the lending bank and held in the Philippines;

"(e) Loans or acceptances under letters of credit to the extent covered by margin deposits; and 

"(f) Other non-risk items which the Monetary Board may, from time to time, authorize to be deducted from total assets.


"The Monetary Board shall prescribe the manner of determining the total assets of banking institutions for the purposes of this section, but contingent accounts shall not be defined as being included among total assets.

"The Monetary Board may, consistent with prudent banking  and general economic conditions obtaining at the time, prescribe  ratios of net worth to risk assets lower than that hereinabove  prescribed: Provided, That such ratios shall not be less than  five percent (5%): Provided, further, That the reduction from the  ration will apply uniformly to all banks, regardless of category,  beyond a certain minimum size with respect to the level of their  capital accounts: Provided, finally, That the Monetary Board may  subsequently raise a ratio but any such upward adjustment shall  be made effective only after a reasonable period of time. The Monetary Board may, at its discretion, require that the ratio of net worth to risk assets be determined on the basis of the combined risk assets of the parent bank and its subsidiaries, financial or otherwise. 


"Whenever the capital accounts of a bank are deficient with respect to the requirements of this Act, the Monetary Board, after considering a report of the appropriate supervising department on the state of solvency of the institution concerned, shall limit or prohibit the distribution of net profits and shall require that part or all of net profits be used to increase the capital accounts of the institution until the minimum requirement has been met. The Monetary Board may, furthermore, after considering the aforesaid report of the appropriate supervising department and if the amount of the deficiency justifies it, restrict or prohibit the making of new investments of any sort by the bank, with the exception of purchases of readily marketable evidences of indebtedness included under Subsection (c) of this  Section , until the minimum required capital ratio has been restored.

"Where in the process of a bank merger or consolidation,  the merged or constituent bank may not be able to comply fully  with the net worth to risk assets ratio herein prescribed, the  Monetary Board may, at its discretion, temporarily relieve the  bank from full compliance with this requirement under such  conditions as it may prescribe." 


Sec. 14. Sec. 23 of the same Act is hereby further amended  to read as follows:

"Sec. 23. Except as the Monetary Board may otherwise  prescribe, the total liabilities of any person, company, corporation  or firm, to a commercial banking corporation for money borrowed,  excluding (a) loans secured by obligations of the Central Bank or  of the Philippine Government; (b) loans fully guaranteed by the government as to the payment of principal and interest; (c) loans  to the extent covered by hold-out on, or assignment of, deposits  maintained in the lending bank and held in the Philippines; (d)  loans and acceptances under letters of credit to the extent  covered by margin deposits; and (e) other loans or credits which the  Monetary Board may, from time to time, specify as non-risk  assets, shall at no time exceed fifteen percent (15%) of the  unimpaired capital and surplus of such bank. 


"The total liabilities of any borrower may amount to a  further fifteen percent (15%) of the unimpaired capital and  surplus of such banking corporation provided the additional  liabilities are adequately secured by shipping documents,  warehouse receipts or other similar documents transferring or  securing title covering readily marketable,  nonperishable staples, which staples must be fully  covered by insurance, and must have a market  value equal to at least one hundred and twenty-five  percent (25%) of such additional liabilities.


"The term "liabilities", as used herein, shall mean the  direct liability of the maker or acceptor of paper discounted  with or sold to such bank and the liability of the indorser,  drawer or guarantor who obtains a loan from or discounts paper  with or sells papers under his guaranty to such bank and shall  include in the case of liabilities of a co-partnership or  association the liabilities of the several members  thereof and shall include in the case of liabilities of a  corporation all liabilities of subsidiaries thereof in which such  corporation owns or controls a majority interest: Provided, That  even if the parent corporation, co-partnership or association has  no liability to the bank, the Monetary Board may prescribe the  combination of the liabilities of subsidiary corporations or  members of the co-partnership or association under certain  circumstances, including but need not be limited to any of the  following situations: (a) the parent corporation, co-partnership or  association guarantees the repayment of the liabilities; (b) the  liabilities were incurred for the accommodation of the parent  corporation or another subsidiary or of the co-partnership or  association; or (c) the subsidiaries through separate entities  operate merely as departments or divisions of a single enterprise:  Provided, finally, That the discount of bills of exchange drawn  in good faith against actually existing values, and the discount  of commercial or business paper actually owned by the person  negotiating the same, shall not be considered as money borrowed for  the purpose of this section. 


"Loan accommodations granted by commercial banks to any other  bank, as well as deposits maintained by them in any bank licensed  to do business in the Philippines, shall be subject to the loan  limit to any single borrower as herein prescribed."


Sec. 15. Sec. 29 of the same Act is hereby further amended  to read as follows:

"Sec. 29. A savings and mortgage bank shall be any  corporation organized for the purpose of accumulating the savings  of depositors and investing them, together with its capital, in  readily marketable bonds and debt securities; commercial papers and accounts receivables; drafts, bills of exchange, acceptances,  or notes arising out of commercial transactions or in loans  secured by bonds, mortgaged on real estate and insured  improvements thereon, and other forms of security or in  loans for personal or household finance, whether secured  or unsecured, and financing for home building and home  development; and in such other investments and loans  which the Monetary Board may determine as necessary  in the furtherance of national economic objectives:  Provided, however, That investments made and loans granted  pursuant to the provisions of this section shall be in conformity  with such regulations as the Monetary Board may prescribe. A  savings and mortgage bank may also issue a domestic letter  of credit denominated in Philippine currency in accordance with such  regulations as the Monetary Board may prescribe. 


"Nothing in this section shall be construed as precluding a  savings and mortgage bank from performing, with prior approval of  the Monetary Board, commercial banking services, or from  operating under an expanded commercial banking authority, nor from  exercising, whenever applicable and not inconsistent with the  provisions of this Act and Central Bank regulations, such other  powers incident to a corporation.

"Notwithstanding any provision in any other Act to the  contrary, savings and mortgage banks may lend money against the  security of jewelry, precious stones and articles of similar  nature, subject to such rules and regulations as the Monetary  Board may prescribe."


Sec. 16. Sec. 31 of the same Act is hereby further amended  to read as follows: 

"Sec. 31. Savings and mortgage banks may invest in equities  of allied undertakings as may be approved by the Monetary Board  for banks of their category as provided under Sec. 6-A of this  Act: Provided, That (1) the total investment in equities shall  not exceed twenty-five percent (25%) of the net worth of the  bank; (2) the equity investment in any single enterprise shall  not exceed fifteen percent (15%) of the net worth of the bank; (3) the total equity investment of the bank in any single  enterprise shall remain a minority holding in that enterprise, except  where the enterprise is a non-financial allied undertaking; and  (4) the equity investment in other banks shall be subject to the  same regulations governing similar investment of commercial banks  and shall be deducted from the investing bank's net worth for the  purposes of computing the prescribed ratio of net worth to risk  assets. Equity investments shall not be permitted in non-related  activities. 

"Where the allied undertaking is a wholly or  majority-owned subsidiary of the bank, the Central  Bank may subject it to examination."


Sec. 17. Sec. 33 of the same Act is hereby further amended  to read as follows:

"Sec. 33. Any savings and mortgage bank may, with the  approval of the Monetary Board, issue mortgage and chattel  mortgage certificates, buy and sell them for its own account or  for the account of others, or accept and receive them in payment  or as amortization of its loans.

"Such mortgage and chattel mortgage certificates shall be  issued exclusively in national currency and exclusively for the  financing of equipment loans, mortgage loans for the acquisition  of machinery and other fixed installations, conservation,  enlargement or improvement of productive properties, and real  estate mortgage loans (1) for the construction, acquisition,  expansion or improvement of rural and urban properties; (2) for the  refinancing of similar loans and mortgages; and (3) for such  other purposes as may be authorized by the Monetary Board. The  Monetary Board may issue such regulations as it deems necessary  with respect to the maturities, rates of interest, denominations  and other conditions pertaining to such certificates.  


"The bank shall coordinate the amounts and maturities of  its certificates with those of its loans, so as to ensure  adequate cash receipts for the payment of principal and interest at  the time they become due.

"Savings and mortgage banks shall accept their own  certificates at least at the actual price of issue, in any  repayment of loans which mortgage or chattel mortgage debtors may  wish to make, provided that the date of maturity of the  certificates is not later than the date on which the payment would  otherwise become due, in the absence of the aforesaid  prepayment."


Sec. 18. Sec. 78 of the same Act is hereby further amended  to read as follows: 

"Sec. 78. Loans against real estate security shall not  exceed seventy percent (70%) of the appraised value of the  respective real estate security, plus seventy percent (70%) of  the appraised value of the insured improvements, and such loans  shall not be made unless title to the real estate shall be in the  mortgagor. In the event of foreclosure, whether judicially or  extrajudicially, of any mortgage on real estate which is security  for any loan granted before the passage of this Act or under the  provisions of this Act or under the provisions of this Act, the  mortgagor or debtor whose real property has been sold at public  auction, judicially or extrajudicially, for the full or partial  payment of an obligation to any bank, banking or credit  institution, within the purview of this Act shall have the right,  within one year after the sale of the real estate as a result of  the foreclosure of the respective mortgage, to redeem the  property by paying the amount fixed by the court in the order  of execution, with interest thereon at the rate specified in the  mortgage, and all the costs and other judicial  expenses incurred by the bank or institution concerned  by reason of the execution and sale and as a result of the  custody of said property less the income received from the  property. However, the purchaser at the auction sale concerned 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. 


"Similarly, loans on the security of chattels shall not  exceed fifty percent (50%) of the appraised value of the  security, and such loans shall not be made unless title  to the chattels, free from all encumbrances, shall be  in the mortgagor.


"The Monetary Board may, by regulation, prescribe further  security requirements to which the various types of bank credit  shall be subject, and in accordance with the authority granted to  it in Section one hundred eleven of the Central Bank Act, the  Board may by regulation reduce the maximum ratios established in  the present section, or, in special cases, increase the maximum  ratios established herein.

"The Monetary Board may, similarly, in accordance with the  authority granted to it in Section one hundred eleven of the  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. Any change by the Board in the  maximum maturities shall apply only to loans made after the date of  such action."  


Sec. 19. This Act shall take effect upon its approval.

Approved: April 1, 1980. 

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