Title XIII

Letters of Credit
Article 567
Letters of credit are those issued by one merchant to another, or for purpose of
attending to a commercial transaction.
Article 568
The essential conditions of letters of credit shall be:
1. To be issued in favor of a determined person and not to order.
2. To be limited to a fixed and specified amount, or to one or more indeterminate
amounts, but all included in a maximum sum the limit of which must be exactly
stated.
Letters of credit which do not have one of these conditions shall be considered simply as
letters of recommendation.
Article 569
Who issues a letter of credit shall be liable to the person on whom it was issued for the
amount paid by virtue of the same within the maximum fixed therein.
Letters of credit can not be protested, even when not paid, nor can the holder thereof
acquire any right of action for said nonpayment against the person who issued it.
The payor shall have a right to demand the proof of the identity of the person in whose
favor the letter of credit was issued.
Article 570
The donor of a letter of credit may annul it, informing the bearer and the person to
whom it is addressed of said revocation.
Article 571
The holder of a letter of credit shall pay the donor the amount received without delay.
Should he not do so an action including attachment may be brought to recover said
amount with the legal interest and the current exchange in the place where the payment
was made to the place where it was repaid.
Article 572
If the holder of a letter of credit does not make use thereof within the period agreed
upon with the donor of the same, or, in the absence of a fixed period, within six months
from its date in any point of the Philippine Islands, and within twelve months outside
thereof, it shall be void in fact and in law.
PRESIDENTIAL DECREE No. 115 January 29, 1973

PROVIDING FOR THE REGULATION OF TRUST RECEIPTS TRANSACTIONS

WHEREAS, the utilization of trust receipts, as a convenient business device to assist importers and
merchants solve their financing problems, had gained popular acceptance in international and
domestic business practices, particularly in commercial banking transactions;

WHEREAS, there is no specific law in the Philippines that governs trust receipt transactions,
especially the rights and obligations of the parties involved therein and the enforcement of the said
rights in case of default or violation of the terms of the trust receipt agreement;

WHEREAS, the recommendations contained in the report on the financial system which have been
accepted, with certain modifications by the monetary authorities included, among others, the
enactment of a law regulating the trust receipt transactions;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the

powers vested in me by the Constitution, as Commander-in-Chief of all the Armed Forces of the
Philippines, and pursuant to Proclamation No. 1081, dated September 21, 1972, and General Order
No. 1, dated September 22, 1972, as amended, and in order to effect the desired changes and
reforms in the social, economic, and political structure of our society, do hereby order and decree
and make as part of the law of the land the following:

Section 1. Short Title. This Decree shall be known as the Trust Receipts Law.

Section 2. Declaration of Policy. It is hereby declared to be the policy of the state (a) to encourage
and promote the use of trust receipts as an additional and convenient aid to commerce and trade;
(b) to provide for the regulation of trust receipts transactions in order to assure the protection of the
rights and enforcement of obligations of the parties involved therein; and (c) to declare the misuse
and/or misappropriation of goods or proceeds realized from the sale of goods, documents or
instruments released under trust receipts as a criminal offense punishable under Article Three
hundred and fifteen of the Revised Penal Code.

Section 3. Definition of terms. As used in this Decree, unless the context otherwise requires, the
term

(a) "Document" shall mean written or printed evidence of title to goods.

(b) "Entrustee" shall refer to the person having or taking possession of goods, documents or
instruments under a trust receipt transaction, and any successor in interest of such person
for the purpose or purposes specified in the trust receipt agreement.

(c) "Entruster" shall refer to the person holding title over the goods, documents, or
instruments subject of a trust receipt transaction, and any successor in interest of such
person.

(d) "Goods" shall include chattels and personal property other than: money, things in action,
or things so affixed to land as to become a part thereof.

(e) "Instrument" means any negotiable instrument as defined in the Negotiable Instrument
Law; any certificate of stock, or bond or debenture for the payment of money issued by a
 public or private corporation, or any certificate of deposit, participation certificate or receipt,
any credit or investment instrument of a sort marketed in the ordinary course of business or
finance, whereby the entrustee, after the issuance of the trust receipt, appears by virtue of
possession and the face of the instrument to be the owner. "Instrument" shall not include a
document as defined in this Decree.

(f) "Purchase" means taking by sale, conditional sale, lease, mortgage, or pledge, legal or
equitable.

(g) "Purchaser" means any person taking by purchase.

(h) "Security Interest" means a property interest in goods, documents or instruments to

secure performance of some obligations of the entrustee or of some third persons to the
entruster and includes title, whether or not expressed to be absolute, whenever such title is
in substance taken or retained for security only.

(i) "Person" means, as the case may be, an individual, trustee, receiver, or other fiduciary,
partnership, corporation, business trust or other association, and two more persons having a
joint or common interest.

(j) "Trust Receipt" shall refer to the written or printed document signed by the entrustee in
favor of the entruster containing terms and conditions substantially complying with the
provisions of this Decree. No further formality of execution or authentication shall be
necessary to the validity of a trust receipt.

(k) "Value" means any consideration sufficient to support a simple contract.

Section 4. What constitutes a trust receipt transaction. A trust receipt transaction, within the
meaning of this Decree, is any transaction by and between a person referred to in this Decree as the
entruster, and another person referred to in this Decree as entrustee, whereby the entruster, who
owns or holds absolute title or security interests over certain specified goods, documents or
instruments, releases the same to the possession of the entrustee upon the latter's execution and
delivery to the entruster of a signed document called a "trust receipt" wherein the entrustee binds
himself to hold the designated goods, documents or instruments in trust for the entruster and to sell
or otherwise dispose of the goods, documents or instruments with the obligation to turn over to the
entruster the proceeds thereof to the extent of the amount owing to the entruster or as appears in
the trust receipt or the goods, documents or instruments themselves if they are unsold or not
otherwise disposed of, in accordance with the terms and conditions specified in the trust receipt, or
for other purposes substantially equivalent to any of the following:

1. In the case of goods or documents, (a) to sell the goods or procure their sale; or (b) to
manufacture or process the goods with the purpose of ultimate sale: Provided, That, in the
case of goods delivered under trust receipt for the purpose of manufacturing or processing
before its ultimate sale, the entruster shall retain its title over the goods whether in its original
or processed form until the entrustee has complied fully with his obligation under the trust
receipt; or (c) to load, unload, ship or tranship or otherwise deal with them in a manner
preliminary or necessary to their sale; or

2. In the case of instruments,

a) to sell or procure their sale or exchange; or

 b) to deliver them to a principal; or

c) to effect the consummation of some transactions involving delivery to a depository

or register; or

d) to effect their presentation, collection or renewal

The sale of goods, documents or instruments by a person in the business of selling goods,
documents or instruments for profit who, at the outset of the transaction, has, as against the
buyer, general property rights in such goods, documents or instruments, or who sells the
same to the buyer on credit, retaining title or other interest as security for the payment of the
purchase price, does not constitute a trust receipt transaction and is outside the purview and
coverage of this Decree.

Section 5. Form of trust receipts; contents. A trust receipt need not be in any particular form, but
every such receipt must substantially contain (a) a description of the goods, documents or
instruments subject of the trust receipt; (2) the total invoice value of the goods and the amount of the
draft to be paid by the entrustee; (3) an undertaking or a commitment of the entrustee (a) to hold in
trust for the entruster the goods, documents or instruments therein described; (b) to dispose of them
in the manner provided for in the trust receipt; and (c) to turn over the proceeds of the sale of the
goods, documents or instruments to the entruster to the extent of the amount owing to the entruster
or as appears in the trust receipt or to return the goods, documents or instruments in the event of
their non-sale within the period specified therein.

The trust receipt may contain other terms and conditions agreed upon by the parties in addition to
those hereinabove enumerated provided that such terms and conditions shall not be contrary to the
provisions of this Decree, any existing laws, public policy or morals, public order or good customs.

Section 6. Currency in which a trust receipt may be denominated. A trust receipt may be
denominated in the Philippine currency or any foreign currency acceptable and eligible as part of
international reserves of the Philippines, the provisions of existing law, executive orders, rules and
regulations to the contrary notwithstanding: Provided, however, That in the case of trust receipts
denominated in foreign currency, payment shall be made in its equivalent in Philippine currency
computed at the prevailing exchange rate on the date the proceeds of sale of the goods, documents
or instruments held in trust by the entrustee are turned over to the entruster or on such other date as
may be stipulated in the trust receipt or other agreements executed between the entruster and the
entrustee.

Section 7. Rights of the entruster. The entruster shall be entitled to the proceeds from the sale of
the goods, documents or instruments released under a trust receipt to the entrustee to the extent of
the amount owing to the entruster or as appears in the trust receipt, or to the return of the goods,
documents or instruments in case of non-sale, and to the enforcement of all other rights conferred
on him in the trust receipt provided such are not contrary to the provisions of this Decree.

The entruster may cancel the trust and take possession of the goods, documents or instruments
subject of the trust or of the proceeds realized therefrom at any time upon default or failure of the
entrustee to comply with any of the terms and conditions of the trust receipt or any other agreement
between the entruster and the entrustee, and the entruster in possession of the goods, documents
or instruments may, on or after default, give notice to the entrustee of the intention to sell, and may,
not less than five days after serving or sending of such notice, sell the goods, documents or
instruments at public or private sale, and the entruster may, at a public sale, become a purchaser.
The proceeds of any such sale, whether public or private, shall be applied (a) to the payment of the
expenses thereof; (b) to the payment of the expenses of re-taking, keeping and storing the goods,
documents or instruments; (c) to the satisfaction of the entrustee's indebtedness to the entruster.
The entrustee shall receive any surplus but shall be liable to the entruster for any deficiency. Notice
of sale shall be deemed sufficiently given if in writing, and either personally served on the entrustee
or sent by post-paid ordinary mail to the entrustee's last known business address.

Section 8. Entruster not responsible on sale by entrustee. The entruster holding a security interest
shall not, merely by virtue of such interest or having given the entrustee liberty of sale or other
disposition of the goods, documents or instruments under the terms of the trust receipt transaction
be responsible as principal or as vendor under any sale or contract to sell made by the entrustee.

Section 9. Obligations of the entrustee. The entrustee shall (1) hold the goods, documents or
instruments in trust for the entruster and shall dispose of them strictly in accordance with the terms
and conditions of the trust receipt; (2) receive the proceeds in trust for the entruster and turn over the
same to the entruster to the extent of the amount owing to the entruster or as appears on the trust
receipt; (3) insure the goods for their total value against loss from fire, theft, pilferage or other
casualties; (4) keep said goods or proceeds thereof whether in money or whatever form, separate
and capable of identification as property of the entruster; (5) return the goods, documents or
instruments in the event of non-sale or upon demand of the entruster; and (6) observe all other
terms and conditions of the trust receipt not contrary to the provisions of this Decree.

Section 10. Liability of entrustee for loss. The risk of loss shall be borne by the entrustee. Loss of
goods, documents or instruments which are the subject of a trust receipt, pending their disposition,
irrespective of whether or not it was due to the fault or negligence of the entrustee, shall not
extinguish his obligation to the entruster for the value thereof.

Section 11. Rights of purchaser for value and in good faith. Any purchaser of goods from an
entrustee with right to sell, or of documents or instruments through their customary form of transfer,
who buys the goods, documents, or instruments for value and in good faith from the entrustee,
acquires said goods, documents or instruments free from the entruster's security interest.

Section 12. Validity of entruster's security interest as against creditors. The entruster's security
interest in goods, documents, or instruments pursuant to the written terms of a trust receipt shall be
valid as against all creditors of the entrustee for the duration of the trust receipt agreement.

Section 13. Penalty clause. The failure of an entrustee to turn over the proceeds of the sale of the
goods, documents or instruments covered by a trust receipt to the extent of the amount owing to the
entruster or as appears in the trust receipt or to return said goods, documents or instruments if they
were not sold or disposed of in accordance with the terms of the trust receipt shall constitute the
crime of estafa, punishable under the provisions of Article Three hundred and fifteen, paragraph one
(b) of Act Numbered Three thousand eight hundred and fifteen, as amended, otherwise known as
the Revised Penal Code. If the violation or offense is committed by a corporation, partnership,
association or other juridical entities, the penalty provided for in this Decree shall be imposed upon
the directors, officers, employees or other officials or persons therein responsible for the offense,
without prejudice to the civil liabilities arising from the criminal offense.

Section 14. Cases not covered by this Decree. Cases not provided for in this Decree shall be
governed by the applicable provisions of existing laws.

Section 15. Separability clause. If any provision or section of this Decree or the application thereof
to any person or circumstance is held invalid, the other provisions or sections hereof and the
application of such provisions or sections to other persons or circumstances shall not be affected
thereby.

Section 16. Repealing clause. All Acts inconsistent with this Decree are hereby repealed.

Section 17. This Decree shall take effect immediately.

Done in the City of Manila, this 29th day of January, in the year of Our Lord, nineteen hundred and
seventy-three.
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 the 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 stability 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 sufficient 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 Government 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.
 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. The Bangko 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 supervision 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 the Bangko 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
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 year 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 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
emolument 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 in 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 institutions 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 the Bangko 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 (5) years, or both, at the discretion
of the court.

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 of
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.

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 hereof.

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 the 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 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 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 Mining 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 (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 of 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;

(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 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 of the
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 the Bangko Sentral or to any bank or agent
designated by the Bangko 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 or 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 in
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 and
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 or 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

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 amount 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 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. - The Bangko Sentral shall collect interest and other
appropriate charges on all loans and advances it extends, the closure, receivership or liquidations 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 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 any bank 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 or 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 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 exemption 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, the Bangko 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. - The Bangko 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 the Bangko 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 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 Section 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.

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

REPUBLIC ACT NO. 8791 May 23, 2000

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 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 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. (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 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 re-lending 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 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 function 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 therefore 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. (2-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 of 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 corporations or related groups of persons with the bank. (12-Ba)

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 group of persons with the bank. (12-Ba)

Section 14. Certificate of Authority to Register. - The Securities and Exchange Commission shall no
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 it 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
or 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). (l3a)
Section 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. (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 sane
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.
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 bark; and

30.2. The equity investment in any one enterprise shall not exceed twenty-five percent (25%) of tile
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 investment.(2lA-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 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, 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 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 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.(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, endorser
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, an such loans and other credit accommodation 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 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. (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, 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 micro finance 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 micro finance 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
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. (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 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. (84a)

Section 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.

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-bark 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 Sental ng Pilipinas 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 non regular 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, 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 thee 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 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, 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, 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 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. (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 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. (85a)

CHAPTER VII
LAWS GOVERNING OTHER TYPES OF BANKS

Section 71. Other Banking Laws. - The organization, the 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 such bank to the extent necessary for it to own one hundred percent (100%) of
the voting stock thereof. In the exercise of the 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 the 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 shill 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 banks 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 of 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.

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 or not less
than Five hundred thousand pesos (P500,000.00) or such higher amount as may 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 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. Al
claims rising 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. 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 entry 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 therefore, 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 purposes, 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 tinder Section 66 of this Act as well as Sections 36 and 37 of the New Central Bank Act.
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 bylaw1
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, a 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,

FRANKLIN M. DRILON
President of the Senate

MANUEL B. VILLAR JR.

Speaker of the House of Representatives

This Act, which is a consolidation of Senate Bill No. 1519 and House Bill No. 6814, was finally
passed by the Senate and the House of Representatives on April 12, 2000.
ROBERTO P. NAZARENO
Secretary General House of Representatives

OSCAR G. YABES
Secretary of the Senate

Approved:

JOSEPH EJERCITO ESTRADA

President of the Philippines
REPUBLIC ACT No. 1405

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. 1 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
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.

Section 3. It shall be unlawful for any official or employee of a banking institution to disclose to any
person other than those mentioned in Section two hereof any information concerning said deposits.

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

Footnote

1This Section and Section 3 were both amended by PD No. 1792 issued January 16, 1981,
PD 1792 was expressly repealed by Sec 135 of R.A. No. 7653, approved June 14, 1993.
The original sections 2 and 3 of R.A. No.1405 are hereby reproduced for reference, as
follows; "Sec 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 upon written per-mission 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," "Sec. 3. It shall be unlawful for any official or employee of a banking
institution to disclose to any person other than those mentioned in Section two hereof any
information concerning said deposits."
PRESIDENTIAL DECREE No. 1792

AMENDING REPUBLIC ACT NO. 1405

WHEREAS, under existing legal framework, the Central Bank has the authority to examine all
records of banks in the discharge of its responsibilities under the Central Bank Charter;

WHEREAS, the prohibition against inquiry into bank deposits adversely delimits the examining
authority of the Central Bank.

WHEREAS, limited examination powers operate against effective supervision of banks and
endangers the safety of deposits which may affect the public's faith in the banking system.

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the

powers in me vested by the Constitution, do hereby decree and make the following part of the law of
the land;

Section 1. Section 2 of Republic Act No. 1405 is hereby amended to read as follows:

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.

Section 2. Section 3 of the same Act is hereby amended to read as follows:

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.

Section 3. This Decree shall take effect immediately.

Done in the City of Manila, this 16th day of January, in the year of Our Lord, nineteen hundred and
eighty-one.
 REPUBLIC ACT NO. 3591

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.

Sec. 2. The powers and functions of the Corporation shall be vested in a board of directors
consisting of three (3) members one of whom shall be the governor of the Central Bank of the
Philippines and two of whom shall be citizens of the Republic of the Philippines to be appointed by the
President of the Philippines with the advice and consent of the Commission on Appointments. One of
the appointive members shall be the Chairman of the Board of Directors of the Corporation who shall
be appointed on a full time basis for a term of six (6) years at an annual salary of twenty-four
thousand pesos (P24,000.00). The other appointive member, who shall be appointed for a term of
four (4) years and the Governor of the Central Bank shall each receive a per diem of not exceeding
fifty pesos (P50.00) for each day of meeting actually attended by them but in no case shall each of
them receive more than five hundred pesos (P500.00) a month. In the event of a vacancy in the
Office of the Governor of the Central Bank of the Philippines, and pending the appointment of his
successor or during the absence of the Governor, the Acting Governor of the Central Bank of the
Philippines shall act as member of the Board of Director. In the event of a vacancy in the Office of the
Chairman of the Board of Directors and pending the appointment of his successor, the Governor of the
Central Bank of the Philippines shall act as Chairman. The members of the Board of Directors shall be
ineligible during the time they are in office and for a period of two years thereafter to hold any office,
position or employment in any insured bank, except that this restriction shall not apply to any member
who has served the full term for which he was appointed. No member of the Board of Directors shall
be an officer or director of any insured bank; and before entering upon his duties as member of the
Board of Directors he shall certify under oath that he has complied with this requirement and such
certification shall be filed with the Secretary of the Board of Directors. Any vacancy in the Board
created by the death, resignation, or removal of an appointive member shall be filled by the
appointment of new member to complete the unexpired period of the term of the member
concerned.

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, operations and administration of the Corporation;

3. To appoint, fix the remunerations and remove all officers and employees of the Corporation,
subject to the Civil Service Law; and

4. To authorize such expenditures by the Corporation as are in the interest of the effective
administration and operation of the Corporation.

Sec. 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 banks, mortgage banks, rural banks, development banks,
cooperative banks, trust companies, branches and agencies in the Philippines of foreign banks and all
other companies, corporations, partnership performing banking functions in the Philippines.
(c) The term "receiver" includes a receiver, liquidating agent, conservator, commission, person, or
other agency charged by law with the duty of winding up the affairs of a bank.

(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.

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 which is evidenced by its certificate of deposit, and trust
funds held by such bank whether retained or deposited in any department of such bank or deposited
in another bank, together with such other obligations of a bank as the Board of Directors shall find and
shall 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 the insured deposit:
Provided, further, That 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 obligation
payable only at such branch.

(g) The term "insured deposit" means the net amount due to any depositor for deposits in an
insured bank (after deducting offsets) less any part thereof which is in excess of P10,000. Such net
amount shall be determined according to such regulations as the Board of Directors may prescribe and
in determining the amount due to any depositor there shall be added together all deposits in the bank
maintained in the same capacity and the same right for his benefit or in his own name or in the names
of others.

(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.

Sec. 4. 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, may insure its deposit liabilities with the Corporation. Before approving the
application of such bank to become an insured bank, the Board of Directors shall give consideration to
the factors enumerated in Sec. 5 and shall determine upon the basis of a thorough examination of
such bank, that its assets in excess of its capital requirements are adequate to enable it to meet all its
liabilities to depositors and other creditors as shown by the books of the bank.

Sec. 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.

Sec. 6. (a) The assessment rate shall be determined by the Board of Directors: Provided, That the
assessment rate shall not exceed one-twelfth of one per centum per annum. The semiannual
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. The assessment base shall be the amount of the
liability of the bank for deposits, according to the definition of the term "deposit" in and pursuant to
subsection (f) of Sec. 3 without any deduction for indebtedness of depositors: Provided, further, That
the bank —

(1) may deduct (i) from the deposit balance due to an insured bank the deposit balance due from
such insured bank (other than trust funds deposited by it in such bank) which is subject to an
immediate withdrawal; and (ii) cash items as determined by either of the following methods, at the
option of the bank: (aa) by multiplying by 2 the total of the cash items forwarded for collection on the
assessment base days (being the days on which the average deposits are computed) and cash items
held for clearings at the close of business on said days, which are in the process of collection and
which the bank has paid in the regular course of business or credited to deposit accounts; or (bb) by
deducting the total of cash items forwarded for collection on the assessment base days and cash items
held for clearing at the close of business on said days, which are in the process of collection and which
the bank has paid in the regular course of business or credited to deposit accounts, plus such
uncollected items paid or credited on preceding days which are in the process of collection: Provided,
That the Board of Directors may define the terms "cash items", "process of collection", and
"uncollected items" and shall fix the maximum period for which any such item may be deducted; and

(2) may exclude from its assessment base (i) drafts drawn by it on deposit accounts in other banks
which are issued in the regular course of business; and the amount of devices or authorizations issued
by it for cash letters received, directing that its deposit account in the sending bank be charged with
the amount thereof; and (ii) cash funds which are received and held solely for the purpose of securing
a liability to the bank but not in an amount in excess of such liability, and which are not subject to
withdrawal by the obligor and are carried in a special non-interest bearing account designated to
properly show their purpose.

Each insured bank, as a condition to the right to make any such deduction or exclusion in determining
its assessment base, shall maintain such records as will readily permit verification of the correctness
thereof. The semiannual assessment base for one semiannual 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
semiannual assessment base for the other semiannual 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 nonbusiness day or a 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 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 days after filing the certified statement setting forth the amount of
assessment.

(b) On or before the 15th 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 15th 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 on the following June thirty which it is required to certify.

(c) Each bank which becomes an insured bank shall not be required to file any certified statement or
pay any assessment for the semiannual 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 semiannual 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 semiannual
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) As of December thirty-one nineteen hundred sixty-four, and as of December thirty-one of each
calendar year thereafter, the Corporation shall transfer 40 per centum of its net assessment income to
its capital account and the balance of the net assessment income shall be credited pro rata to the
insured banks based upon the assessment of each bank becoming due during said calendar year. Each
year such credit shall be applied by the Corporation toward the payment of the total assessment
becoming due for the semiannual assessment period beginning the next ensuing July 1 and any
excess credit shall be applied upon the assessment next becoming due. The term "net assessment
income" as used therein means the total assessments which becomes due during the calendar year
less (1) the operating costs and expenses of the Corporation for the calendar year; (2) additions to
reserve to provide for insurance losses during the calendar year, except that any adjustments to
reserve which result in a reduction of such reserve shall be added; and (3) the insurance losses
sustained in said calendar year plus losses from any preceding years in excess of such reserves. If the
above deductions exceed in amount the total assessments which become due during the calendar
year, the amount of such excess shall be restored by deduction from total assessments becoming due
in subsequent years.

(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.

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 of evade, in a 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 fraudulent.

(h) 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
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 law the insured
status of such bank shall be terminated by the Board of Directors. The remedies provided in this
subsection and in the two preceding subsections shall not be construed as limiting any other remedies
against an insured bank but shall be in addition thereto.

(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 P10,000 for each trust estate, and when deposited by the fiduciary bank in another
insured 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 the 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.

Sec. 7. (a) Any insured bank may, upon not less than ninety days, written notice to the Corporation,
and to the Development Bank of the Philippines if it owns or holds as pledges any preferred stock,
capital notes, or debentures of such bank, terminate its status as an insured bank. Whenever the
Board of Directors shall find that an insured bank or its directors or trustees have continued unsafe or
unsound practices in conducting the business of the bank or which have knowingly or negligently
permitted any of its officers or agents to violate any provisions of any law or regulation to which the
insured bank is subject, the Board of Directors shall first give to the Central Bank of the Philippines a
statement with respect to such practices or violations for the purpose of securing the correction
thereof and shall give a copy thereof to the bank. Unless such correction shall be made within one
hundred twenty days or such shorter period of time as the Central Bank of the Philippines shall
require, the Board of Directors, if it shall determine to proceed further, shall give to the bank not less
than thirty days' written notice of intention to determine the status of the bank as an insured bank,
and shall fix a time and place for a hearing before the Board of Directors or before a person
designated by it to conduct such hearing, at which evidence may be produced, and upon such
evidence the Board of Directors shall make written findings which shall be conclusive. Unless the bank
shall appear at the hearing by a duly authorized representative, it shall be deemed to have consented
to the termination of its status as an insured bank. If the Board of Directors shall find that any unsafe
or unsound practice or violation specified in such notice has been established and has not been
corrected within the time above prescribed in which to make such correction, the Board of Directors
may order that the insured status of the bank be terminated on a date subsequent to such finding and
to the expiration of the same specified in such notice of intention. The Corporation may publish notice
of such termination and the bank shall give notice of such termination to each of the depositors at his
last address of record on the books of the bank, in such a manner and at such at time as the Board of
Directors may find to be necessary and may order for the protection of the depositors. After the
termination of the insured status of any bank under the provisions of this subsection, the insured
deposits of each depositor in the bank on the date of such termination, less all subsequent
withdrawals from any deposits of such depositor, shall continue for a period of two years to be
insured, and the bank shall continue to pay to the Corporation assessments as in the case of an
insured bank during such period. No additions to any such deposits and no new deposits in such bank
made after the date of such termination shall be insured by the Corporation, and the bank shall not
advertise or hold itself out as having insured deposits unless in the same connection it shall also state
equal prominence that such additions to deposits and new deposits made after such date are not so
insured. Such bank shall, in all other respects, be subject to the duties and obligations of an insured
bank for the period of two years from the date of such termination, and in the event that such bank
shall be closed on account of insolvency within such period of two years, the Corporation shall have
the same powers and rights with respect to such bank as in case of an insured bank.

(b) Notwithstanding any other provision of law, whenever the Board of Directors shall determine
that an insured banking institution is not engaged in the business of receiving deposits, the
Corporation shall notify the banking institution that its insured status will terminate at the expiration
of the first full semiannual assessment period following such notice. A finding by the Board of
Directors that a banking institution is not engaged in the business of receiving deposits shall be
conclusive. The Board of Directors shall prescribe the notice to be given by the banking institution of
such termination and the Corporation may publish notice thereof. Upon the termination of the insured
status of any such banking institution, its deposits shall thereupon cease to be insured and the
banking institution shall thereafter be relieved of all future obligations to the Corporation, including
the obligation to pay future assessments.

(c) Whenever the liabilities of an insured bank for deposits shall have been assumed by another
insured bank or banks, the insured status of the bank whose liabilities are so assumed shall terminate
on the date of receipt by the Corporation of satisfactory evidence of such assumption with like effect
as if its insured status had been terminated on said date by the Board of Directors after proceedings
under subsection (a) of this section: Provided, That if the bank whose liabilities are so assumed gives
to its depositors notice of such assumption within thirty days after such assumption takes effect, by
publication or by any reasonable means, in accordance with regulations to be prescribed by the Board
of Directors, the insurance of its deposits shall terminate at the end of six months from the date such
assumption takes effect. Such bank shall be subject to the duties and obligations of an insured bank
for the period its deposits are insured: Provided, further, That if the deposits are assumed by a newly
insured bank, the bank whose deposits are assumed shall not be required to pay any assessment
upon the deposits which have been so assumed after the semiannual period in which the assumption
takes effect.
Sec. 8. The Corporation as a corporate body shall have the power —

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
any 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 make examination of and to require information and reports from banks, as provided in
this Act.

Ninth. — To act as receiver.

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.

Sec. 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
mails 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 or any bank making application to become an insured bank,
whenever in the judgment of the Board of Directors an examination of the bank is necessary. Each
such examiner shall have power to make a thorough examination of all the affairs of the bank and in
doing so he shall have power to administer oaths and to examine and take and preserve the testimony
of any of the officers and agents thereof, 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 power to investigate and examine all claims for insured deposits and transferred deposits.
Each claim agent shall have power to administer oaths and to examine under oath and take and
preserve the testimony of any person relating to such claims.

(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 of its use.

(d) The Corporation shall have access to reports of examination made by, and reports of condition
made to the Superintendent of Banks or the Governor of the Central Bank of the Philippines, and the
Superintendent of Banks or the Governor of the Central Bank of the Philippines shall also have access
to reports of examination made on behalf of, and reports of condition made to the Corporation.

(e) The members of the Board of Directors and the officers and employees of the Corporation are
prohibited from revealing any information relating to the condition or business of any insured bank
and any member of the Board of Directors, officer or employee of the Corporation violating this
provision shall be held liable for any loss or injury suffered by the Corporation.

Sec. 10. (a) A permanent insurance fund in the amount of P5,000,000 to be appropriated from the
General Fund is hereby created to be used by the Corporation to carry out the purposes of this Act:
Provided, That the maximum amount of the insured deposit of any depositor shall be P10,000.

(b) For the purposes of this Act an insured bank shall be deemed to have been closed on account of
insolvency in any case in which it has been closed for the purpose of liquidation without adequate
provision being made for payment of its depositors.

(c) Whenever an insured bank shall have been closed on account of insolvency, payment of the
insured deposits in such 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 the insured deposit of such depositor: Provided, That the Corporation, in its
discretion, may require proof of claims to be filed before paying the insured deposit, and that in any
case where the Corporation is not satisfied as to the validity of a claim for an insured deposit, it may
require the final determination of a court of competent jurisdiction before paying such claim.

(d) The Corporation, upon the 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 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 deposit,
but such depositor shall retain his claim for any uninsured portion of his deposit.

Sec. 11. (a) 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.

(b) Except as otherwise prescribed by the Board of Directors, neither the Corporation nor 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.

(c) 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 the claim due from such bank, pending the determination and payment of
such liability by such depositor or any other person liable therefor.

(d) If, after the Corporation shall have given at least three months notice to the depositor by
mailing a copy thereof to his last-known address appearing on the records of the closed bank, any
depositor in the closed bank shall fail to claim his insured deposit from the Corporation within eighteen
months after the Monetary Board of the Central Bank of the Philippines or the proper court shall have
ordered the conversion of the assets of such closed bank into money, all rights of the depositor
against the Corporation with respect to the insured deposit shall be barred, and 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.
Sec. 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: Provided, That the Corporation shall not sell or purchase any such obligations for its
own account and in its own right and interest, at any one time aggregating in excess of P100,000,
without the approval of the Insurance Commissioner: And Provided, further, That the Insurance
Commissioner may waive the requirement of his approval with respect to any transaction or classes of
transactions subject to the provisions of this subsection for the period of time and under such
conditions as he may determine.

(b) The banking or checking accounts of the Corporation shall be kept with the Central Bank of the
Philippines, with the Philippine National Bank, or with any other bank designated as depositary or
fiscal agent of the Philippine Government.

(c) 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 make deposits in, such insured bank, upon such terms and
conditions 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.
Such loans and deposits may be in subordination to the rights of depositors and other creditors.

Sec. 13. The corporation is authorized to borrow from the Central Bank of the Philippines and the
Central Bank is authorized and directed to loan the Corporation on such terms as may be fixed by the
Corporation and the Central Bank, such funds as in the judgment of the Board of Directors of the
Corporation are from time to time required for insurance purposes not exceeding in the aggregate of
one hundred million pesos outstanding at any one time: Provided, That the rate of interest to be
charged in connection with any loan made pursuant to this section shall not be less than the current
average rate on outstanding marketable and nonmarketable obligations of the Republic of the
Philippines as of the last day of the month preceding the making of such loan. Any such loan shall be
used by the Corporation solely in carrying out its functions with respect to such insurance.

Sec. 14. All notes, debentures, bonds, or such obligations issued by the Corporation shall be exempt
from taxation.

Sec. 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 General Auditing Office in
accordance with the principles and procedures applicable to commercial corporate transactions and
under such rules and regulations as may be prescribed by the Auditor General. The audit shall be
conducted at the place or places where accounts of the Corporation are normally kept. The
representatives of the General Auditing Office 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 depositaries, 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.

(c) A report of the Audit for each fiscal year ending on June 30 shall be made by the Auditor General
to the Congress not later than January 15 following the close of such fiscal year. On or before
December 15 following such fiscal year the Auditor General shall furnish the Corporation a short form
report showing the financial position of the Corporation at the close of fiscal year. The report to the
Congress shall set forth the scope of the audit and shall include a statement of assets and liabilities
and surplus or deficit; a statement of surplus or deficit analysis; a statement of income and expenses;
a statement of sources and application of funds and such comments and information as may be
deemed necessary to inform Congress of the financial operations and condition of the Corporation,
together with such recommendations with respect thereto as the Auditor General may deem advisable.
The report shall also show specifically any program, expenditure, or other financial transactions or
undertaking observed in the course of the audit, which in the opinion of the Auditor General, has been
carried on or made without authority of law. A copy of each report shall be furnished to the President
of the Philippines, to the Governor of the Central Bank of the Philippines, and to the Corporation at the
time submitted to the Congress.

Sec. 16. (a) Every insured bank shall display at each place of business maintained by it a sign or
signs, and shall include a statement to the effect that its deposits are insured by the Corporation in all
of its advertisements: 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 regulation the forms of such signs and the manner
of display and the substance of such statements and the manner of use. For each day an insured bank
continues to violate any provisions of this subsection or any lawful provisions of said regulations, it
shall be subject to a penalty of not more than P100, which the Corporation may recover for its use.

(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; and any
director or officer of any insured bank who participates in the declaration or payment of any such
dividend or interest or in any such distribution shall, upon conviction, be fined not more than P1,000
or imprisoned not more than one year, or both: 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 of payment upon
final determination of the issue.

(c) Without prior written consent by the Corporation, no insured bank shall (1) merge or consolidate
with any noninsured bank or institution or convert into a noninsured bank or institution or (2) assume
liability to pay any deposits made in, or similar liabilities of, any noninsured bank or institution or (3)
transfer assets to any noninsured 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 any insured bank to provide protection and indemnity against
burglary, defalcation, and other similar insurable losses. Whenever any insured bank refuses to
comply with any such requirement the Corporation may contract for such protection and indemnity
and add the cost thereof to the assessment otherwise payable by such bank.

(e) Any insured bank which wilfully fails or refuses to file any certified statement or pay any
assessment required under this Act shall be subject to a penalty of not more than P100 for each day
that such violations continue, which penalty the Corporation may recover for its use: Provided, That
this subsection shall not be applicable under the circumstances stated in the provisions of subsection
(b) of this section.

Sec. 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.

Sec. 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.

Sec. 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.

Sec. 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.

Approved: June 22, 1963

REPUBLIC ACT No. 10846

AN ACT ENHANCING THE RESOLUTION AND LIQUIDATION FRAMEWORK FOR BANKS,

AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 3591, AS AMENDED, AND OTHER
RELATED LAWS

Be it enacted by the Senate and House of Representatives of the Philippines in Congress

assembled:

SECTION 1. Section 1 of Republic Act No. 3591, as amended, is hereby amended to read as
follows:

“THE CREATION OF THE PHILIPPINE

DEPOSIT INSURANCE CORPORATION

“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 providing insurance coverage on all insured deposits and helping maintain a sound and
stable banking system.”

SECTION 2. A new section entitled Section 2 of the same Act shall be inserted between Sections 1
and 3 which shall read as follows:

“STATE POLICY

“SEC. 2. — It is hereby declared to be the policy of the State to strengthen the mandatory deposit
insurance coverage system to generate, preserve, maintain faith and confidence in the country’s
banking system, and protect it from illegal schemes and machinations.

“Towards this end, the government must extend all means and mechanisms necessary for the
Corporation to effectively fulfill its vital task of promoting and safeguarding the interests of the
depositing public by way of providing insurance coverage on bank deposits and in helping develop a
sound and stable banking system.

“In view of the crucial role and the nature of its functions and responsibilities, the Corporation, while
being a government instrumentality with corporate powers, shall enjoy fiscal and administrative
autonomy.”

SECTION 3. Section 2 of the same Act is accordingly renumbered as Section 3 and is hereby
amended to read as follows:

“BOARD OF DIRECTORS: COMPOSITION

AND AUTHORITY

“SEC. 3. (a) The powers and functions of the Corporation shall be vested in and exercised by a
Board of Directors which shall be composed of seven (7) members as follows:
 “(1) The Secretary of Finance who shall be the ex officio Chairman of the
Board without compensation;

“(2) The Governor of the Bangko Sentral ng Pilipinas who shall be ex officio
member of the Board without compensation;

“(3) The President of the Corporation, who shall be appointed by the

President of the Philippines from a shortlist prepared by the Governance
Commission for Government-Owned or -Controlled Corporations pursuant to
Republic Act No. 10149 to serve on a full-time basis for a term of six (6)
years. The President of the Corporation shall also serve as Vice Chairman of
the Board;

“(4) Four (4) members from the private sector to be appointed by the
President of the Philippines from a shortlist prepared by the Governance
Commission for Government-Owned or -Controlled Corporations pursuant to
Republic Act No. 10149. The appointive directors shall serve for a term of six
(6) years unless sooner removed for cause and shall be subject to only one
(1) reappointment: Provided, That of those first appointed, the first two (2)
appointees shall serve for a period of three (3) years: Provided, however,
That the appointive director shall continue to hold office until the successor is
appointed. An appointive director may be nominated by the Governance
Commission for Government-Owned or -Controlled Corporations for
reappointment by the President only if one obtains a performance score of
above average or its equivalent or higher in the immediately preceding year
of tenure as appointive director based on the performance criteria for
appointive directors of the Corporation.

“Appointment to any vacancy shall be only for the unexpired term of the predecessor
pursuant to Republic Act No. 10149.

“No person shall be appointed as member of the Board unless he or she be of good
moral character, of unquestionable integrity and responsibility, of known probity and
patriotism, 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 of office and for a period of one
(1) 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 ng Pilipinas may
each designate an alternate, who shall be an official with a rank not lower than
assistant secretary or its equivalent with written authority from the Secretary of
Finance or the Governor of the Bangko Sentral ng Pilipinas 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, and in the absence of the Vice Chairman, the
members of the Board shall designate from among themselves who shall act as
Chairman.

“The President of the Philippines may remove any appointive member of the Board
of Directors for any of the following reasons:
 “(i) If the member is physically or mentally incapacitated that he or she
cannot properly discharge his or her duties and responsibilities, and such
incapacity has lasted for more than six (6) months; or

“(ii) 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 Corporation; or

“(iii) If the member no longer possesses the qualifications specified in this

Act; or

“(iv) If the member does not meet the standards for performance based on
the evaluation by the Governance Commission for Government-Owned or -
Controlled Corporations under Republic Act No. 10149.

“The presence of four (4) members shall constitute a quorum. All decisions of the
Board of Directors shall require the concurrence of at least four (4) members.

“The compensation, per diems, allowances, incentives, and other benefits for board
members shall be determined by the Governance Commission for Government-
Owned or -Controlled Corporations.

“In addition to the requirements of Republic Act No. 6713, otherwise known as the
‘Code of Conduct and Ethical Standards for Public Officials and Employees’, any
member of the Board of Directors with personal or pecuniary interest in any matter in
the agenda of the Board of Directors shall disclose his or her interest to the Board
and shall recuse from the meeting when the matter is taken up. The minutes shall
reflect the disclosure made and the recusal of the member concerned.

“(b) The Board of Directors shall have the authority:

“(1) To approve and issue rules and regulations for banks and the depositing
public as it considers necessary for the effective discharge of its
responsibilities;

“(2) To act as the policy-making body of the Corporation and constitute Board
committees to oversee the management, operations 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
personnel. Such system shall aim to establish professionalism and
excellence at all levels of the Corporation in accordance with sound
principles of management;

“(4) To approve a compensation structure as an integral component of the

Corporation’s human resource development program based on job
evaluation studies and wage surveys, and revise the same as it may deem
necessary: Provided, That all positions in the Corporation shall be governed
by a compensation package, 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 structure
shall be comparable to that of other financial institutions based on prevailing
market standards, and shall provide for yearly merit reviews or increases
based on productivity. The Corporation shall therefore be exempt from
existing laws, rules and regulations on compensation package, 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;

“(5) To appoint, establish the rank, fix the remuneration, benefits, including
health care services through a Health Maintenance Organization (HMO) and
medical benefits other than those provided for under Republic Act No. 7875,
as amended, 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: Provided, further, That in no case shall there be any diminution of
existing salaries, benefits and other emoluments;

“(6) To approve policy on local and foreign travel, and the corresponding
expenses, allowances and per diems, of officers, employees, agents of the
Corporation, which shall be comparable with the expenses, allowances and
per diems of personnel of other financial institutions based on prevailing
market standards, notwithstanding the provisions of Presidential Decree No.
1177, Executive Order No. 292, Executive Order No. 248, as amended,
Executive Order No. 298, and similar laws;

“(7) 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;

“(8) To approve the target level of the Deposit Insurance Fund (DIF) and the
methodology for determining reserves for insurance and financial assistance
losses;

“(9) 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;

“(10) To design, adopt and revise, as it may deem necessary, an early

separation plan for employees of the Corporation to ensure availability of a
human resource pool qualified and capable of implementing the
Corporation’s authorities under this Charter in a manner responsive and
attuned to market developments, and to provide incentives for all those who
shall be separated from the service. Notwithstanding any law to the contrary,
these incentives shall be in addition to all gratuities and benefits the
employee is entitled to under existing laws; and

“(11) To promote and sponsor the local or foreign training or study of

personnel in the fields of banking, finance, management, information
technology and law. Towards this end, the Corporation is hereby authorized
to defray the costs of such training or study. The Board shall prescribe rules
and regulations to govern the training or study programs of the Corporation.”
SECTION 4. Section 3 of the same Act is accordingly renumbered as Section 4.

SECTION 5. The first paragraph of Section 4 of the same Act, as renumbered, is hereby amended to
read as follows:

“PRESIDENT OF THE CORPORATION

COMPENSATION, POWERS AND DUTIES

“SEC. 4. The President of the Corporation shall be its Chief Executive Officer and the Vice Chairman
of its Board of Directors and his or her salary shall be fixed by the President of the Philippines upon
the recommendation of the Governance Commission for Government-Owned or -Controlled
Corporations, at a sum commensurate to the importance and responsibility attached to the position.
The sum total of the salary, allowances, benefits and other emoluments of the President of the
Corporation shall be higher than the compensation package of the next highest ranking executive of
the Corporation.”

SECTION 6. Section 4, paragraphs (d), (f) and (h) of the same Act, as renumbered, are hereby
amended to read as follows:

“(d) To represent the Corporation 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;

“(f) To represent the Corporation, either personally or through counsel, including private counsel, as
may be authorized by the PDIC Board, in any legal proceeding or action;

“(h) x x x. 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 appointment
of a new President of the Corporation by the President of the Philippines, the Board of Directors
shall designate the officer-in-charge of the Corporation.”

SECTION 7. Section 4 of the same Act is accordingly renumbered as Section 5, and is hereby
amended to read as follows:

“DEFINITION OF TERMS

“SEC. 5. As used in this Act –

“(a) The term asset refers to movable, immovable, tangible, or intangible resources
or properties over which a bank has an established or equitable interest, including
the proceeds of the sale of its bank and branch licenses subject to the approval of
the Bangko Sentral ng Pilipinas.

“(b) The term asset distribution plan refers to the plan of distribution of the assets of a
closed bank to its creditors, based on its estimated realizable value as of a certain
cut-off date, prepared in accordance with the Rules on Concurrence and Preference
of Credits under the Civil Code or other laws.
“An asset distribution plan may be partial when it pertains to the distribution of a
portion or some of the assets of the closed bank, or final when it pertains to the
distribution of all the assets of the closed bank.

“(c) The term Board of Directors means the Board of Directors of the Corporation.

“(d) The term bank and banking institution shall be synonymous and interchangeable
and shall include banks, commercial banks, savings banks, 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.

“(e) The term closed bank refers to a bank placed under liquidation by the Monetary
Board.

“(f) The term creditor refers to any individual or entity with a valid claim against the
assets of the closed bank.

“(g) 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, evidenced by a
passbook, certificate of deposit, or other evidence of deposit issued in accordance
with Bangko Sentral ng Pilipinas 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 deposit: 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:

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

“(2) Deposit accounts or transactions which are fictitious or fraudulent as

determined by the Corporation;

“(3) Deposit accounts or transactions constituting, and/or emanating from,

unsafe and unsound banking practice/s, as determined by the Corporation, in
consultation with the Bangko Sentral ng Pilipinas, after due notice and
hearing, and publication of a directive to cease and desist issued by the
Corporation against such deposit accounts, transactions or practices; and

“(4) Deposits that are determined to be the proceeds of an unlawful activity

as defined under Republic Act No. 9160, as amended.
“The actions of the Corporation taken under Section 5(g) shall be final and executory,
and may only be restrained or set aside by the Court of Appeals, upon 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.

“(h) The term disputed claim refers to a claim or suit against the assets of a closed
bank, or for specific performance, or breach of contract, or damages, of whatever
nature or character, whether for money or otherwise, liquidated or unliquidated, fixed
or contingent, matured or current, denied by the receiver.

“(i) The term insured bank means any bank the deposits of which are insured in
accordance with the provisions of this Act.

“(j) The term insured deposit means the amount due to any bonafide depositor for
legitimate deposits in an insured bank as of the date of closure but not to exceed
Five hundred thousand pesos (P500,000.00). Such 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 or her benefit
either in his or her 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 deposit 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, That the provisions of any law
to the contrary notwithstanding, no owner/holder of any passbook, certificate of
deposit, or other evidence of deposit shall be recognized as a depositor entitled to
the rights provided in this Act unless the passbook, certificate of deposit, or other
evidence of deposit is determined by the Corporation to be an authentic document or
record 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 22 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.

“(k) The term liquidation refers to the proceedings under Sections 12 to 16 of this Act.

“(1) The term liquidation court refers to the Regional Trial Court (RTC) of general
jurisdiction where the petition for assistance in the liquidation of a closed bank is filed
and given due course.
“(m) The term payout refers to the payment of insured deposits.

“(n) The term petition for assistance in the liquidation of a closed bank refers to the
petition filed by the receiver with the RTC in accordance with Section 16 of this Act.

“(o) The term purchase of assets and assumption of liabilities refers to a transaction
where an insured bank purchases any or all assets and assumes any or all liabilities
of another bank under resolution or liquidation, as provided in this Act.

“(p) The term receiver refers to the Corporation or any of its duly authorized agents
acting as receiver of a closed bank.

“(q) The term records include all documents, titles, papers and electronic data of the
closed bank, including those pertaining to deposit accounts of and with the closed
bank, its assets, transactions and corporate affairs.

“(r) The term residual assets refer to assets, in cash or in kind, to be turned over to
the closed bank’s stockholders of record, in proportion to their interest in the closed
bank as of date of closure, after payment in full of liquidation costs, fees and
expenses, and the valid claims and surplus dividends to all the creditors.

“(s) The term resolution refers to the actions undertaken by the Corporation under
Section 11 of this Act to:

“(1) Protect depositors, creditors and the DIF;

“(2) Safeguard the continuity of essential banking services or maintain

financial stability; and

“(3) Prevent deterioration or dissipation of bank assets.

“(t) The term risk-based assessment system pertains to a method for calculating an
insured bank’s assessment on the probability that the DIF will incur a loss with
respect to the bank, and the likely amount of any such loss, based on its risk rating
that takes into consideration the following:

“(1) Quality and concentration of assets;

“(2) Categories and concentration of liabilities, both insured and uninsured,

contingent and noncontingent;

“(3) Capital position;

“(4) Liquidity position;

“(5) Management and governance; and

“(6) Other factors relevant to assessing such probability, as may be

determined by the Corporation:
 “(u) The term statement of affairs refers to a report of financial condition of the closed
bank at a given date, showing the: (1) estimated realizable value of assets; (2)
classification of credits; and (3) estimated liabilities to be settled.

“(v) The term surplus dividends refers to the remaining assets of the closed bank
after satisfaction in full of all the liquidation costs, fees and expenses, and valid
claims. The surplus dividends shall be computed at the legal rate of interest from the
date of takeover to cut-off date of the distribution plan, and shall be paid, in cash or in
kind, to creditors of the closed bank in accordance with the Rules on Concurrence
and Preference of Credits under the Civil Code or other laws.

“(w) The term takeover refers to the act of physically taking possession and control of
the premises, assets and affairs of a closed bank for the purpose of liquidating the
bank.

“(x) 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.

“(y) 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.

“(z) The term valid claim refers to the claim recognized by the receiver or allowed by
the liquidation court.

“(aa) The term winding up period refers to the period provided in Section 16 of this
Act.”

SECTION 8. Section 5 of the same Act is accordingly renumbered as Section 6, and is hereby
amended to read as follows:

“DEPOSIT INSURANCE COVERAGE

“SEC. 6. The deposit liabilities of any bank 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.

“Whenever a bank is determined by the Bangko Sentral ng Pilipinas to be capital deficient, the
Corporation may conduct an insurance risk evaluation on the bank to enable it to assess the risks to
the DIF. Such evaluation may include the determination of: (i) the fair market value of the assets and
liabilities of a bank; or (ii) the risk classification of a bank; or (iii) possible resolution modes under
Section 11 of this Act, subject to such terms and conditions as the PDIC Board may prescribe.”

SECTION 9. Section 6 of the same Act is accordingly renumbered as Section 7.

SECTION 10. Section 7 paragraph (a) of the same Act, as renumbered, is hereby amended to read
as follows:

“ASSESSMENT OF MEMBER BANKS

“SEC. 7. (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 (g) of Section 5 without any deduction for indebtedness of
depositors.

“In addition, the Board of Directors may establish a risk-based assessment system and impose a
risk-based assessment rate which shall not exceed two-fifth (2/5) of one per centum (1%) per annum
multiplied by the assessment base.

“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 nonbusiness 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.”

SECTION 11. Section 7, paragraphs (d) and (h), of the same Act, as renumbered, are hereby
amended to read as follows:

“(d) All assessment collections and income from operations after expenses and charges shall be
added to the DIF under Section 17 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.

“(h) 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 nonpayment of assessment fees.”

SECTION 12. An additional paragraph to Section 7 of the same Act, as renumbered, is hereby
inserted after paragraph (h) which shall read as follows:

“(i) The Corporation shall have the authority to collect a special assessment from any member bank
and prescribe the terms and conditions thereof to maintain the target level of the DIF set by the
Board of Directors in accordance with this Act.”

SECTION 13. Section 7 of the same Act is accordingly renumbered as Section 8, and is hereby
amended to read as follows:
 “SANCTIONS AGAINST UNSAFE AND
UNSOUND BANKING PRACTICES

“SEC. 8. (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 26(g) 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.

“(b) The actions and proceedings provided in the preceding subsections 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 provision 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.

“(c) The Corporation may terminate the insured status of any bank that fails or refuses to comply,
within thirty (30) days from notice, with any cease-and-desist order issued by the Corporation, or
with any corrective action imposed by the Monetary Board, under this section pertaining to a deposit-
related unsafe and/or unsound banking practice.

“Such termination shall be final and executory, and shall be effective upon publication of the notice
of termination in a newspaper of general circulation.

“The deposits of each depositor in the bank on the effective date of the termination of insurance
coverage, less all subsequent withdrawals, shall continue to be insured up to the maximum deposit
insurance coverage for a period of one hundred eighty (180) days. Additions to, or renewal of,
existing deposits and new deposits in such bank after the effective date of termination of insured
status of the bank shall not be insured by the Corporation.

“The bank shall not advertise or represent that additions to, or renewal of, existing deposits and new
deposits made after the effective date of termination aye covered by deposit insurance.”

SECTION 14. Section 8 of the same Act is accordingly renumbered as Section 9.

SECTION 15. Section 9, paragraph Twelfth of the same Act, as renumbered, is hereby amended to
read as follows:

“Twelfth – The provisions of Presidential Decree No. 1445, as amended, Executive Order No. 292,
and other similar laws notwithstanding, to compromise, condone or release, in whole or in part, any
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 the Corporation,
and to write off the Corporation’s receivables and assets which are no longer recoverable or
realizable;”

SECTION 16. Section 9 of the same Act, as renumbered, is further amended by inserting additional
paragraphs after paragraph Twelfth, which shall read as follows:

“Thirteenth – To determine qualified interested acquirers or investors for any of the modes of
resolution or liquidation of banks;

“Fourteenth – To determine the appropriate resolution method and to implement the same for a bank
subject of resolution; and

“Fifteenth – To determine the appropriate mode of liquidation of a closed bank and to implement the
same.”

SECTION 17. Section 9 of the same Act is accordingly renumbered as Section 10.

SECTION 18. Section 10 paragraph (b-1) of the same Act, as renumbered, is hereby amended to
read as follows:

“(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. For this purpose, the Corporation may appoint or hire persons
or entities of recognized competence in forensic and fraud investigations as its agents.”

SECTION 19. Section 10 paragraph (c) of the same Act, as renumbered, is hereby amended to read
as follows:

“(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, as the Board of Directors may require, shall be subject to a penalty
of not more than Ten thousand pesos (P10,000.00) for each day of such failure recoverable by the
Corporation for its use.”

SECTION 20. Section 10 paragraph (d-1) of the same Act, as renumbered, is hereby amended to
read as follows:

“(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 and
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 26(f) of this Act.”

SECTION 21. Section 10 paragraph (f) of the same Act, as renumbered, is hereby amended to read
as follows:
“(f) The Corporation shall underwrite or advance all legal 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.”

SECTION 22. The second paragraph of Section 10 paragraph (i) of the same Act, as renumbered, is
hereby amended to read as follows:

“(i) Notwithstanding the provisions of this section and Section 3 of this Act, 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.”

SECTION 23. A new section entitled Section 11 of the same Act is hereby inserted between
Sections 10 and 12 which shall read as follows:

“BANK RESOLUTION

“SEC. 11. (a) The Corporation, in coordination with the Bangko Sentral ng Pilipinas, may commence
the resolution of a bank under this section upon:

“(1) Failure of prompt corrective action as declared by the Monetary Board; or

“(2) Request by a bank to be placed under resolution.

“The Corporation shall inform the hank of its eligibility for entry into resolution.

“(b) The Bangko Sentral ng Pilipinas shall inform the Corporation of the initiation of prompt corrective
action on any bank and shall be authorized to share with the Corporation all information, agreements
or documents, including any order of the Monetary Board, in relation to the prompt corrective action.
The Corporation shall have the authority to inquire and monitor the status of banks under prompt
corrective action.

“(c) When there is a failure of prompt corrective action as declared by the Monetary Board due to
capital deficiency, the Corporation, its duly authorized officers or employees, may examine, inquire
or look into the deposit records of a bank: Provided, That such authority may not be exercised when
the failure of prompt corrective action is due to grounds other than capital deficiency. For this
purpose, banks, their officers and employees are hereby mandated to disclose and report to the
Corporation or its duly authorized officers and employees, deposit account information in said bank.
“The Corporation, its duly authorized officers or employees are prohibited from disclosing information
obtained under this section to any person, government official, bureau or office. Any act done
pursuant to this section shall not be deemed as a violation of Republic Act No. 1405, as amended,
Republic Act No. 6426, as amended, Republic Act No. 8791, and other similar laws protecting or
safeguarding the secrecy or confidentiality of bank deposits: Provided, That any unauthorized
disclosure of the information under this section shall be subject to the same penalty under the
foregoing laws protecting the secrecy or confidentiality of bank deposits.

“(d) The stockholders, directors, officers or employees of the bank shall have the following
obligations:

“(1) Ensure bank compliance with the terms and conditions prescribed by the
Corporation for the resolution of the bank;

“(2) Cause the engagement, with the consent of the Corporation, of an independent
appraiser or auditor for the purpose of determining the valuation of the bank
consistent with generally accepted valuation standards;

“(3) Ensure prudent management and administration of the bank’s assets, liabilities
and records; and

“(4) Cooperate with the Corporation in the conduct or exercise of any or all of its
authorities under this Act and honor in good faith its commitment or undertaking with
the Corporation on the resolution of the bank.

“(e) Within a period of one hundred eighty (180) days from a bank’s entry into resolution, the
Corporation, through the affirmative vote of at least five (5) members of the PDIC Board, shall
determine whether the bank may be resolved through the purchase of all its assets and assumption
of all its liabilities, or merger or consolidation with, or its acquisition, by a qualified investor.

“For this purpose, the Corporation may:

“(1) Determine a resolution package for the bank;

“(2) Identify and, with the approval of the Monetary Board, pre-qualify possible
acquirers or investors;

“(3) Authorize pre-qualified acquirers or investors to conduct due diligence on the

bank, for purposes of determining the valuation of a bank through an objective and
thorough review and appraisal of its assets and liabilities, and assessment of risks or
events that may affect its valuation; and

“(4) Conduct a bidding to determine the acquirer of the bank.

“(f) In determining the appropriate resolution method for a bank, the Corporation shall consider the:

“(1) Fair market value of the assets of the bank, its franchise, as well as the amount
of its liabilities;

“(2) Availability of a qualified investor;

 “(3) Least cost to the DIF; and

“(4) Interest of the depositing public.

“(g) The Corporation may appoint or hire persons or entities of recognized competence in banking,
finance, asset management or remedial management, as its agents, to perform such powers and
functions of the Corporation in the resolution of a bank, or assist in the performance thereof.

“(h) The PDIC Board shall prescribe the guidelines or criteria for a bank to be placed under
resolution.

“(i) Upon a determination by the Corporation that the bank may not be resolved, the Monetary Board
may act in accordance with Section 30 of Republic Act No. 7653 or the New Central Bank Act.

“(j) Bank resolution involving the purchase of all assets and assumption of all liabilities of a bank
shall be exempt from the provisions of Act No. 3952, otherwise known as ‘The Bulk Sales Law’.

“(k) The provisions of this section are without prejudice to any action that the Monetary Board may
take under existing laws.”

SECTION 24. Sections 10, 11 and 12 of the same Act are hereby deleted.

SECTION 25. A new section entitled Section 12 of the same Act is hereby inserted between
Sections 11 and 13 which shall read as follows:

“LIQUIDATION OF A CLOSED BANK

“SEC. 12. (a) Whenever a bank is ordered closed by the Monetary Board, the Corporation shall be
designated as receiver and it shall proceed with the takeover and liquidation of the closed bank in
accordance with this Act. For this purpose, banks closed by the Monetary Board shall no longer be
rehabilitated.”

SECTION 26. A new section entitled Section 13 of the same Act is hereby inserted between
Sections 12 and 14 which shall read as follows:

“AUTHORITIES OF A RECEIVER AND EFFECTS OF

PLACEMENT OF A BANK UNDER LIQUIDATION

“SEC. 13. (a) The receiver is authorized to adopt and implement, without need of consent of the
stockholders, board of directors, creditors or depositors of the closed bank, any or a combination of
the following modes of liquidation:

“(1) Conventional liquidation; and

“(2) Purchase of assets and/or assumption of liabilities.

“(b) In addition to the powers of a receiver provided under existing laws, the Corporation, as receiver
of a closed bank, is empowered to:

“(1) Represent and act for and on behalf of the closed bank;
“(2) Gather and take charge of all the assets, records and affairs of the closed bank,
and administer the same for the benefit of its creditors;

“(3) Convert the assets of the closed bank to cash or other forms of liquid assets, as
far as practicable;

“(4) Bring suits to enforce liabilities of the directors, officers, employees, agents of the
closed bank and other entities related or connected to the closed bank or to collect,
recover, and preserve all assets, including assets over which the bank has equitable
interest;

“(5) Appoint or hire persons or entities of recognized competence in banking, finance,

asset management or remedial management, as its deputies, assistants or agents, to
perform such powers and functions of the Corporation as receiver of the closed bank,
or assist in the performance thereof;

“(6) Appoint or hire persons or entities of recognized competence in forensic and

fraud investigations;

“(7) 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;

“(8) Collect loans and other claims of the closed bank and for this purpose, modify,
compromise or restructure the terms and conditions of such loans or claims as may
be deemed advantageous to the interests of the creditors of the closed bank;

“(9) Hire or retain private counsel as may be necessary;

“(10) 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 its depositors
and creditors;

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

“(12) Utilize available funds of the bank, including funds generated by the receiver
from the conversion of assets to pay for reasonable costs and expenses incurred for
the preservation of the assets, and liquidation of, the closed bank, without need for
approval of the liquidation court;

“For banks with insufficient funds, the Corporation is authorized to advance the
foregoing costs and expenses, and collect payment, as and when funds become
available.

“(13) Charge reasonable fees for the liquidation of the bank from the assets of the
bank: Provided, That payment of these fees, including any unpaid advances under
 the immediately preceding paragraph, shall be subject to approval by the liquidation
court;

“(14) Distribute the available assets of the closed bank, in cash or in kind, to its
creditors in accordance with the Rules on Concurrence and Preference of Credits
under the Civil Code or other laws;

“(15) Dispose records of the closed bank that are no longer needed in the liquidation
in accordance with guidelines set by the PDIC Board of Directors, notwithstanding
the laws on archival period and disposal of records; and

“(16) 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, assistants and agents of the Corporation.

“(c) After the payment of all liabilities and claims against the closed bank, the Corporation shall pay
surplus, if any, 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 the Rules on Concurrence and
Preference of Credits under the Civil Code or other laws before distribution to the shareholders of
the closed bank.

“(d) The officers, employees, deputies, assistants and agents of the receiver shall have no liability
and shall not be subject to any action, claim or demand in connection with any act done or omitted to
be done by them in good faith in connection with the exercise of their powers and functions under
this Act and other applicable laws, or other actions duly approved by the court.

“(e) The placement of a bank under liquidation shall have the following effects:

“(1) On the corporate franchise or existence

“Upon placement by the Monetary Board of a bank under liquidation, it shall continue
as a body corporate until the termination of the winding-up period under Section 16
of this Act. Such continuation as a body corporate shall only be for the purpose of
liquidating, settling and closing its affairs and for the disposal, conveyance or
distribution of its assets pursuant to this Act. The receiver shall represent the closed
bank in all cases by or against the closed bank and prosecute and defend suits by or
against it. In no case shall the bank be reopened and permitted to resume banking
business after being placed under liquidation.

“(2) On the powers and functions of its directors, officers and stockholders

“The powers, voting rights, functions and duties, as well as the allowances,
remuneration and perquisites of the directors, officers, and stockholders of such bank
are terminated upon its closure. Accordingly, the directors, officers, and stockholders
shall be barred from interfering in any way with the assets, records, and affairs of the
bank.

“The receiver shall exercise all authorities as may be required to facilitate the
liquidation of the closed bank for the benefit of all its creditors.
“(3) On the assets

“Upon service of notice of closure as provided in Section 14 of this Act, all the assets
of the closed bank shall he deemed in custodia legis in the hands of the receiver, and
as such, these assets may not be subject to attachment, garnishment, execution,
levy or any other court processes. A’ judge, officer of the court or any person who
shall issue, order, process or cause the issuance or implementation of the
garnishment order, levy, attachment or execution, shall be liable under Section 27 of
this Act: Provided, however, That collaterals securing the loans and advances
granted by the Bangko Sentral ng Pilipinas shall not be included in the assets of the
closed bank for distribution to other creditors: Provided, further, That the proceeds in
excess of the amount secured shall be returned by the Bangko Sentral ng Pilipinas to
the receiver.

“Any preliminary attachment or garnishment on any of the assets of the closed bank
existing at the time of closure shall not give any preference to the attaching or
garnishing party. Upon motion of the receiver, the preliminary attachment or
garnishment shall be lifted and/or discharged.

“(4) On labor relations

“Notwithstanding the provisions of the Labor Code, the employer-employee

relationship between the closed bank and its employees shall be deemed terminated
upon service of the notice of closure of the bank in accordance with this Act.
Payment of separation pay or benefits provided for by law shall be made from
available assets of the bank in accordance with the Rules on Concurrence and
Preference of Credits under the Civil Code or other laws.

‘(5) Contractual obligations

“The receiver may cancel, terminate, rescind or repudiate any contract of the closed
bank that is not necessary for the orderly liquidation of the bank, or is grossly
disadvantageous to the closed bank, or for any ground provided by law.

“(6) On interest payments

“The liability of a bank to pay interest on deposits and all other obligations as of
closure shall cease upon its closure by the Monetary Board without prejudice to the
first paragraph of Section 85 of Republic Act No. 7653 (the New Central Bank Act):
Provided, That the receiver shall have the authority, without need for approval of the
liquidation court, to assign, as payment to secured creditors, the bank assets serving
as collaterals to their respective loans up to the extent of the outstanding obligations,
including interest as of date of closure of the hank, as validated by the receiver. The
valuation of the asset shall be based on the prevailing market value of the collaterals
as appraised by an independent appraiser on an ‘as is where is’ basis.

“(7) Liability for penalties and surcharges for late payment and nonpayment of taxes

“From the time of closure, the closed bank shall not be liable for the payment of
penalties and surcharges arising from the late payment or nonpayment of real
property tax, capital gains tax, transfer tax and similar charges.
 “(8) Bank charges and fees on services

“The receiver may impose, on behalf of the closed bank, charges and fees for
services rendered after bank closure, such as, but not limited to, the execution of
pertinent deeds and certifications.

“(9) Actions pending for or against the closed bank

“Except for actions pending before the Supreme Court, actions pending for or against
the closed bank in any court or quasi-judicial body shall, upon motion of the receiver,
be suspended for a period not exceeding one hundred eighty (180) days and referred
to mandatory mediation. Upon termination of the mediation, the case shall be
referred back to the court or quasi-judicial body for further proceedings.

“(10) Final decisions against the closed bank

“The execution and enforcement of a final decision of a court other than the
liquidation court against the assets of a closed bank shall be stayed. The prevailing
parly shall file the final decision as a claim with the liquidation court and settled in
accordance with the Rules on Concurrence and Preference of Credits under the Civil
Code or other laws.

“(11) Docket and other court fees

“Payment of docket and other court fees relating to all cases or actions filed by the
receiver with any judicial or quasi-judicial bodies shall be deferred until the action is
terminated with finality. Any such fees shall constitute as a first Hen on any judgment
in favor of the closed bank or in case of unfavorable judgment, such fees shall be
paid as liquidation costs and expenses during the distribution of the assets of the
closed bank.

“(12) All assets, records, and documents in the possession of the closed bank at the
time of its closure are presumed held by the bank in the concept of an owner.

“(13) The exercise of authority, functions, and duties by the receiver under this Act
shall be presumed to have been performed in the regular course of business.

“(14) Assets and documents of the closed bank shall retain their private nature even
if administered by the receiver. Matters relating to the exercise by the receiver of the
functions under this Act shall be subject to visitorial audit only by the Commission on
Audit.”

SECTION 27. A new section entitled Section 14 of the same Act is hereby inserted between
Sections 13 and 15 which shall read as follows:

“NOTICE OF CLOSURE AND

TAKEOVER ACTIVITIES

“SEC. 14. (a) Upon the designation of the Corporation as receiver of a closed bank, it shall serve a
notice of closure to the highest-ranking officer of the bank present in the bank premises, or in the
absence of such officer, post the notice of closure in the bank premises or on its main entrance. The
closure of the bank shall be deemed effective upon the service of the notice of closure. Thereafter,
the receiver shall takeover the bank and exercise the powers of the receiver as provided in this Act.

“(b) The receiver shall have authority to use reasonable force, including the authority to force open
the premises of the bank, and exercise such acts necessary to take actual physical possession and
custody of the bank and all its assets, records, documents, and take charge of its affairs upon the
service of the notice of closure.

“(c) Directors, officers, employees or agents of a bank hold money and other assets of the bank in
trust or under administration or management by them for the bank in their fiduciary capacity.

Upon service of the notice of closure to the bank, all directors, officers, employees or agents of the
closed bank shall have the duty to immediately account for, surrender and turn over to the receiver,
and provide information relative to, the assets, records, and affairs of the closed bank in their
possession, custody, administration or management.

“(d) When the circumstances so warrant, the local government unit and law enforcement agencies
concerned shall, upon request, immediately provide assistance to the receiver during the service of
notice of closure and actual takeover operations to ensure the orderly conduct thereof and the
security and safety of the personnel of the receiver and the employees of the closed bank.”

SECTION 28. A new section entitled Section 15 of the same Act is hereby inserted between
Sections 14 and 16 which shall read as follows:

“PURCHASE OF ASSETS AND

ASSUMPTION OF LIABILITIES

“SEC. 15. (a) The receiver shall have the authority to facilitate and implement the purchase of the
assets of the closed bank and the assumption of its liabilities by another insured bank, without need
for approval of the liquidation court. The exercise of this authority shall be in accordance with the
Rules on Concurrence and Preference of Credits under the Civil Code or other laws, subject to such
terms and conditions as the Corporation may prescribe. The disposition of the branch licenses and
other bank licenses of the closed bank shall be subject to the approval of the Bangko Sentral ng
Pilipinas.

“(b) Such action of the receiver to determine whether a bank may be the subject of a purchase of
assets and assumption of liabilities transaction shall be final and executory, and may not be set
aside by any court.”

SECTION 29. A new section entitled Section 16 of the same Act is hereby inserted between
Sections 15 and 17 which shall read as follows:

“CONVENTIONAL LIQUIDATION
“A. ASSET MANAGEMENT AND CONVERSION

“SEC. 16. (a) The assets gathered by the receiver shall be evaluated and verified as to their
existence, ownership, condition, and other factors to determine their realizable value. In the
management, preservation and disposition of assets, the receiver shall be guided by cost-benefit
considerations, resources of the closed bank, and potential asset recovery.
“(b) The conversion of the assets of the closed bank shall be carried out in a fair and transparent
manner in accordance with the rules and procedures as may be determined by the receiver.

“(c) In the management and/or conversion of the assets of the closed bank, the receiver shall have
the authority to:

“(1) Represent the closed bank before the Land Registration Authority (LRA), the
Bureau of Lands, the Register of Deeds, the Land Transportation Office (LTO), the
Assessor’s Office or other appropriate office of the local government unit, the
Securities and Exchange Commission (SEC), or such other similar government
agencies or private entities in:

“(i) Verifying the authenticity of ownership documents;

“(ii) Registering the interest of the closed bank on a specific property;

“(iii) Consolidating ownership over an asset of the closed bank;

“(iv) Securing certified true copies of documents held by the foregoing

agencies/entities in relation to an asset of the closed bank;

“(v) Securing the appropriate certification from the foregoing agencies/entities

in relation to an asset of the closed bank; and

“(vi) Performing other related activities;

“(2) Conduct a physical or ocular inspection of the properties owned by, or

mortgaged to, the closed bank, to determine their existence and present condition;

“(3) Determine the disposal price of assets in accordance with generally accepted
valuation principles, standards and practices, subject to such guidelines as the
receiver may determine;

“(4) Dispose real or personal properties of the closed bank through bidding,
negotiated sale or any other mode including lease with option to purchase, whether
by piece or by lot, as may be reasonably determined by the receiver based on cost-
benefit considerations and to allow efficient distribution of assets to creditors; and

“(5) Engage third parties to assist in the liquidation, manage and/or dispose the
assets, handle cases filed against or by the closed bank, subject to such guidelines
as determined by the receiver.

“(d) Notwithstanding any provision of law to the contrary, the following rules shall apply to the
management and/or conversion by the receiver of the assets of the closed bank:

“(1) Upon notification of the closure of a bank, the LRA, the Bureau of Lands, the
Register of Deeds, the LTO, the assessor’s office or other appropriate office of the
local government unit, or such other similar government agencies shall not allow any
transaction affecting the assets of the closed bank without the consent of the
receiver.
 “(2) Upon issuance by the Monetary Board of the resolution ordering the closure of a
bank, any person or entity in custody or possession of assets or records of the
closed bank, including, but not limited to, the closed bank’s deposit accounts, titles to
real property, collaterals, promissory notes, evidence of indebtedness or investments
shall immediately turn over custody of said assets and records to the receiver. Such
obligation shall cover evidences of deposit such as passbooks or certificates of
deposit issued by the bank to its depositors. Pending turnover, all persons or entities
in custody or possession of any asset or record of the closed bank shall hold the said
assets or records in trust for the receiver.

“(3) The persons or entities in custody or possession of such asset shall not allow,
authorize or cause the withdrawal, transfer, disposition, removal, conversion,
concealment, or other transaction involving or relating to the subject asset, unless
otherwise directed by the receiver.

“(e) The receiver shall have the authority to invest funds received from the conversion of the assets
of the closed bank in government securities, other government-guaranteed marketable securities or
investment-grade debt instruments.

“(f) The proceeds of the sale of the bank and branch licenses shall be for the benefit of the creditors
of the closed bank which shall be distributed in accordance with this Act and the Rules on
Concurrence and Preference of Credits under the Civil Code or other laws.

“B. PETITION FOR ASSISTANCE IN THE

LIQUIDATION OF A CLOSED BANK

“(g) A petition for assistance in the liquidation is a special proceeding for the liquidation of a closed
bank, and includes the declaration of the concomitant right of its creditors and the order of payment
of their valid claims in the disposition of its assets.

“Any proceeding initiated under this section shall be considered in rem. Jurisdiction over all persons
affected by the proceeding shall be considered as acquired upon publication of the order setting the
case for initial hearing in any newspaper of general circulation in the Philippines.

“(h) The liquidation court shall have exclusive jurisdiction to adjudicate disputed claims against the
closed banks, assist in the enforcement of individual liabilities of the stockholders, directors and
officers and decide on all other issues as may be material to implement the distribution plan adopted
by the Corporation for general application to all closed banks.

“(i) The provisions of Republic Act No. 8799, otherwise known as ‘The Securities Regulation Code’,
and Supreme Court Administrative Matter No. 00-8-10-SC, entitled, ‘The Rules of Procedure on
Corporate Rehabilitation’, shall not be applicable to the petition for assistance in the liquidation of the
closed bank.

“(j) The petition shall be filed in the RTC which has jurisdiction over the principal office of the closed
bank or the principal office of the receiver, at the option of the latter.

“(k) The petition shall be filed ex parte within a reasonable period from receipt of the Monetary Board
Resolution placing the bank under liquidation.
 “(1) All persons or entities with claims against the assets of the closed bank shall file
their claims with the receiver within sixty (60) days from the date of publication of the
notice of closure. Claims filed outside the foregoing prescribed period shall be
disallowed.

“Claims denied by the receiver shall be filed with the liquidation court within sixty (60) days from
receipt of the final notice of denial of claim.

“(m) A claim whose validity has not yet been determined with finality at the time of the submission of
the final asset distribution plan, either by reason of a pending suit or for whatever reason, shall be
considered as contingent claim and shall not be paid under the proposed final asset distribution plan.

“(n) Upon finality of the order approving the final asset distribution plan, the petition for assistance in
the liquidation of a closed bank shall henceforth be, for all intents and purposes, considered closed
and terminated and the receiver, its officers, employees or agents, are forever discharged from any
and all claims and/or liability arising from or in connection with the liquidation of the closed bank.

“(o) The receiver shall submit a final report on the implementation of the approved final asset
distribution plan to the Monetary Board and the SEC after the expiration of the winding-up period
provided in this Act.

“(p) The Supreme Court shall promulgate the appropriate procedural rules to implement this section.

“C. WINDING-UP

“(q) The creditors shall have a period of six (6) months from the date of publication of notice of the
approval by the court of the final asset distribution plan of the closed bank within which to claim
payment of the principal obligations and surplus dividends. During this six-month period, the receiver
shall hold as trustee the assets allocated in the final asset distribution plan for said creditors.

“Failure by the creditor to comply with the documentary requirements within the prescribed period
and/or refusal to accept the asset as payment shall be deemed as abandonment or waiver of his or
her right to payment.

“(r) The individual stockholders of record or their duly-authorized representative or the court-
appointed stockholders’ representative shall have a period of six (6) months from publication of
notice of the approval by the court of the final asset distribution plan of the closed bank within which
to claim the residual assets. During this six-month period, the receiver shall hold as trustee the
assets allocated in the final asset distribution plan for said stockholders of record.

“Failure by the individual stockholders of record or their duly-authorized representative or the court-
appointed stockholders’ representative to comply with the documentary requirements within the
prescribed period and/or refusal to accept the residual assets in kind shall be deemed as
abandonment or waiver of right to receive the residual assets.

“(s) After the lapse of the six-month period provided in paragraphs (q) and (r) of this section, all
assets which remain unclaimed by the creditors and/or stockholders of record shall be turned over to
the Bureau of Treasury.

“(t) The receiver shall continue to keep all the pertinent records of the closed bank for a period of six
(6) months from the date of publication of the approval of the final asset distribution plan.
After the lapse of this period, the receiver is authorized to dispose of the same in accordance with
the rules and regulations to be prescribed by the receiver.”

SECTION 30. Section 13 of the same Act is hereby renumbered as Section 17.

SECTION 31. A new section entitled Section 18 of the same Act is hereby inserted between
Sections 17 and 19 which shall read as follows:

“DIVIDEND DECLARATION

“SEC. 18. Consistent with the policy of the State to generate, preserve, maintain faith and
confidence in the country’s banking system, the Corporation shall build up and maintain the DIF at
the target level set by the PDIC Board of Directors. Such target level shall be subject to periodic
review and may be adjusted as necessary.

“The Corporation is exempt from Republic Act No. 7656; instead, the Corporation shall remit
dividends to the national government only if the target DIF level for the applicable year has been
reached. For purposes of computing the amount of dividends to be declared and remitted to the
national government, all assessment collections shall not be considered as income. The dividend
rate shall be at least fifty percent (50%) of the income from other sources only.”

SECTION 32. Section 14 of the same Act is accordingly renumbered as Section 19 and is hereby
amended to read as follows:

“PAYMENT OF INSURED DEPOSITS

“SEC. 19. Whenever an insured bank shall have been closed by the Monetary Board pursuant to
Section 30 of Republic Act No. 7653, or upon expiration or revocation of a bank’s corporate term,
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 validity 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 the Corporation together with such other office, body or
agency.”

SECTION 33. Section 15 of the same Act is accordingly renumbered as Section 20 and is hereby
amended to read as follows:

“SEC. 20. The Corporation, upon payment of any depositor as provided for in Section 19 of this Act,
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: Provided, That such depositor shall retain his or her claim for any uninsured
portion of his or her deposit, which legal preference shall be the same as that of the subrogated
claim of the Corporation for its payment of insured deposits. 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 in the order of preference under Article 2244 (9) of the New Civil
Code.”

SECTION 34. Section 16 of the same Act is accordingly renumbered as Section 21 and paragraph
(c) thereof is hereby amended to read as follows:

“(c) Except as otherwise prescribed by the Board of Directors, neither the Corporation nor such other
insured bank shall be required to recognize as the owner of any portion of a deposit evidenced by a
passbook, certificate of deposit or other evidence of deposit determined by the Corporation to be an
authentic document or record 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 passbook, certificate of
deposit or other evidence of deposit 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.”

SECTION 35. Section 17 of the same Act is accordingly renumbered as Section 22.

SECTION 36. Section 22 paragraph (a) of the same Act, as renumbered, is hereby amended to read
as follows:

“CORPORATE FUNDS AND ASSETS

“SEC. 22. (a) Subject to guidelines and limits as approved by the Board of Directors, money of the
Corporation denominated in the local currency, 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.

“The Corporation may also invest in debt instruments denominated in foreign currencies issued or
guaranteed by the Republic of the Philippines, or debt instruments denominated in freely convertible
foreign currencies issued by supranationals, multilateral agencies, or foreign governments with at
least an investment grade credit rating.

“The Corporation shall likewise be authorized to buy and/or sell debt instruments and foreign
currencies from any government securities eligible dealers or any counterparties or brokers,
accredited by the PDIC Board.

“For this purpose, the Corporation shall be authorized to open securities custodianship and
settlement accounts.”

SECTION 37. Section 22 paragraph (b) of the same Act, as renumbered, is hereby amended to read
as follows:

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

SECTION 38. An additional paragraph to Section 22 of the same Act, as renumbered, is hereby
inserted after paragraph (c) which shall read as follows:
“(d) Assets of the Corporation shall be exempt from attachment, garnishment or any other order or
process of any court, agency or any other administrative body.”

SECTION 39. Section 17 paragraph (d) of the same Act is accordingly renumbered as Section 22
paragraph (e) and is hereby amended to read as follows:

“FINANCIAL ASSISTANCE

“(e) In the exercise of its authorities under Section 11 of this Act, the Corporation is authorized to
make loans to, or purchase the assets of, or assume liabilities of, or make deposits in:

“(1) A bank in danger of closing, upon its acquisition by a qualified investor; or

“(2) A qualified investor, upon its purchase of all assets and assumption of all
liabilities of a bank in danger of closing; or

“(3) A surviving or consolidated institution that has merged or consolidated with a

bank in danger of closing; upon such terms and conditions as the Board of Directors
may prescribe, when in the opinion of the Board of Directors, such acquisition,
purchase of assets, assumption of liabilities, merger or consolidation, is essential to
provide adequate banking service in the community or maintain financial stability in
the economy.

“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
DIF.

“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.”

SECTION 40. Section 18 of the same Act is accordingly renumbered as Section 23 and is hereby
amended to read as follows:

“AUTHORITY TO BORROW

“SEC. 23. The Corporation is authorized to borrow from the Bangko Sentral ng Pilipinas and the
Bangko Sentral ng Pilipinas is authorized to lend to the Corporation on such terms as may be
agreed upon by the Corporation and the Bangko Sentral ng Pilipinas, 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 22(e) of this Act: Provided, That any such loan as
may be granted by the Bangko Sentral ng Pilipinas shall be consistent with monetary policy:
Provided, further, That the rate of interest thereon shall be fixed by the Monetary Board.

“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: Provided, That such loan shall be of short-term duration: Provided,
further, That no prior Monetary Board opinion shall be required for the Corporation and its
counterparties on individual drawdowns or borrowings within an approved borrowing program where
prior Monetary Board opinion has already been obtained, pursuant to Section 123 of Republic Act
No. 7653.”

SECTION 41. Section 19 of the same Act is accordingly renumbered as Section 24 and is hereby
amended to read as follows:

“ISSUANCE OF BONDS, DEBENTURES

AND OTHER OBLIGATIONS

“SEC. 24. With the approval of the President of the Philippines, upon the recommendation of the
Department of Finance, 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, to facilitate the implementation of bank resolution
under Section 11 of this Act, 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 may 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 DIF as of
date of the debt issuance, shall be expressed on the face thereof.

“The Corporation may issue notes, debentures, bonds, or other debt instruments without the
approval of the President of the Philippines, as long as these shall not be guaranteed by the national
government.

“The Board of Directors shall have the power to prescribe the terms and conditions, 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.”

SECTION 42. Section 20 of the same Act is accordingly renumbered as Section 25.

SECTION 43. Section 21 of the same Act is accordingly renumbered as Section 26.

SECTION 44. Section 26 paragraph (f) of the same Act, as renumbered, is hereby amended to read
as follows:
“(f) The penalty of imprisonment of not less than six (6) years but not more than twelve (12) years or
a fine of not less than Fifty thousand pesos (P50,000.00) but not more than Ten million pesos
(P10,000,000.00), or both, at the discretion of the court, shall be imposed upon:

“(1) Any director, officer, employee or agent of a bank for:

“(a) Any willful refusal to submit reports as required by law, rules and regulations;

“(b) Any unjustified refusal to permit examination and audit of the deposit records or
the affairs of the institution;

“(c) Any willful making of a false statement or entry in any bank report or document
required by the Corporation;

“(d) Submission of false material information in connection with or in relation to any

financial assistance of the Corporation extended to the bank;

“(e) Splitting of deposits or creation of fictitious or fraudulent loans or deposit

accounts.

“Splitting of deposits occurs whenever a deposit account with an outstanding balance

of more than 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;

“(f) Refusal to receive the notice of closure as provided under Section 14 of this Act;

“(g) Refusal to allow the Corporation to take over a closed bank or obstructing such
action of the Corporation;

“(h) Refusal to turn over or destroying or tampering bank records;

“(i) Fraudulent disposal, transfer or concealment of any asset, property or liability of

the closed bank;

“(j) 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;

“(k) 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 in
relation to Section 56 of Republic Act No. 8791, or ‘The General Banking Law of
2000’.
“Notwithstanding any law to the contrary, the foregoing acts of directors, officers, employees or
agents of the bank shall be considered as additional grounds for disqualification under the fit and
proper rules of the Bangko Sentral ng Pilipinas.

“(1) Other acts inimical to the interest of the bank or the Corporation, such as, but not limited to,
conflict of interest, disloyalty, authorizing related party transactions with terms detrimental to the
bank and its stakeholders, and unauthorized disclosure of confidential information, as may be
determined by the Corporation.

“(2) Any person for:

“(a) Refusal to disclose information, records or data pertaining to the bank accounts
of a closed bank to the receiver;

“(b) Refusal to turn over possession or custody of the asset and record of the closed
bank to the receiver, notwithstanding any agreement to the contrary;

“(c) Refusal or delaying the:

“(i) Verification of authenticity of the ownership documents;

“(ii) Registration of interest of the closed bank on a specific property;

“(iii) Consolidation of ownership over an asset of the closed bank;

“(iv) Act of securing certified true copies of documents in relation to an asset

of the closed bank;

“(v) Act of securing the appropriate certification from the agencies or entities
stated in Section 16 of this Act in relation to an asset of the closed bank;

“(vi) Conduct of a physical or ocular inspection of the properties owned by, or

mortgaged to, the closed bank, to determine their existence and present
condition; or

“(vii) Other related activities of the receiver; or

“(d) Allowing the withdrawal from deposits or disposition of any asset of the closed
bank other than by the receiver;

“(e) Willfully violating any provision of this Act;

“(f) Conspiring or willfully participating in any of the offenses enumerated in

Paragraph 1 of this section;

“(3) Any law enforcement officer or local government official who refuses or fails to assist the
receiver in the service of the notice of closure, as provided under Section 14 of this Act.”

SECTION 45. Additional paragraphs to Section 26 of the same Act, as renumbered, are hereby
inserted after paragraph (g) which shall read as follows:
“(h) The penalty of imprisonment of not less than ten (10) years but not more than twelve (12) years,
or a fine of not less than Five hundred thousand pesos (P500,000.00) but not more than Ten million
pesos (P 10,000,000.00), or both, at the discretion of the court, shall be imposed upon:

“(1) Any depositor who files a fictitious and/or fraudulent claim for deposit insurance;
and

“(2) Any bank officer who certifies to the validity of the deposit liabilities which is
subsequently verified to be fictitious and/or fraudulent.

“(i) The penalty of imprisonment of not less than twelve (12) years but not more than fourteen (14)
years shall be imposed upon any person who participates, or attempts to participate, in a scheme to
defraud a bank.

“If the offense shall have been committed by a director or officer of the bank, the penalty of
imprisonment of not less than fifteen (15) years, but not more than seventeen (17) years shall be
imposed.

“If the offense shall have resulted in systemic consequences, as determined by the Bangko Sentral
ng Pilipinas, the penalty of imprisonment of not less than eighteen (18) years but not more than
twenty (20) years shall be imposed.”

SECTION 46. Section 22 of the same Act is accordingly renumbered as Section 27.

SECTION 47. Section 23 of the same Act is hereby renumbered as Section 28 and amended to read
as follows:

“SEC. 28. Exempting Clause. – The Corporation shall be exempt from Presidential Decree No. 985,
Presidential Decree No. 1597, Republic Act No. 6758, as amended, Joint Resolution No. 4 (2009)
and other laws on salary standardization, Presidential Decree No. 1177, Executive Order No. 248,
as amended, Executive Order No. 298 and the provisions of Republic Act No. 10149 with regard to
position classification, qualification standards, and the compensation package of the employees of
the Corporation: Provided, That the PDIC shall be subject to all other policies under Republic Act
No. 10149, including, but not limited to, performance evaluation by the Governance Commission for
Government-Owned or -Controlled Corporations, selection and nomination of appointive directors,
and limitations on the creation of subsidiaries and the acquisition of affiliates except in the case of
acquisition of shares in the grant of financial assistance under this Act.”

SECTION 48. Section 24 of the same Act is deleted and a new Section 29 is added to read as
follows:

“SEC. 29. Transitory Provisions. — (a) The incumbent President of the Corporation and private
sector members of the Board of Directors shall continue to exercise their respective duties and
functions until replaced by the President of the Philippines: Provided, That such new appointees
shall be subject to the term of office provided under Section 3 of this Act, as amended.

“(b) Payment of surplus dividends under Section 13(c) of this Act, as amended, shall be applicable to
banks without a court-approved final asset distribution plan at the time of the effectivity of this Act.
“(c) The preference indicated under Section 15 of this Act, as amended, shall be likewise effective
upon liquidation proceedings already commenced and pending as of the effectivity of this Act, where
no distribution of assets has been made. 1âwphi 1

“(d) The provisions in Section 10 of this Act, as amended, on legal assistance, protection and
indemnification shall apply to all cases pending before the effectivity of this Act.”

SECTION 49. Section 25 of the same Act is accordingly renumbered as Section 30.

SECTION 50. The Corporation may be reorganized by its 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 shah any personnel be
considered as having prior or vested rights with respect to retention in the Corporation or in any
position which may be created in the new staffing pattern, even if he or she 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 horn
the service.

SECTION 51. 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 may be in addition to all gratuities and
benefits to which they may be entitled under existing laws.

SECTION 52. Separability Clause. – 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 53. Repealing Clause. – 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 54. Effectivity Clause. – This Act shall take effect fifteen (15) days following the
completion of its publication in the Official Gazette or in two (2) newspapers of general circulation.

Approved,

(Sgd.) FELICIANO BELMONTE JR. (Sgd.) FRANKLIN M. DRILON

Speaker of the House President of the Senate
of Representatives

Senate Bill No. 2976, which was approved by the Senate on December 14, 2015, was adopted as
an amendment to House Bill No. 6020 by the House of Representatives on January 19, 2016.

(Sgd.) MARILYN B. BARUA-YAP (Sgd.) OSCAR G. YABES

Secretary General Secretary of the Senate
House of Representatives

Approved: MAY 23 2016

(Sgd.) BENIGNO S. AQUINO III
President of the Philippines
 [REPUBLIC ACT NO. 9160]

AN ACT DEFINING THE CRIME OF MONEY LAUNDERING, PROVIDING

PENALTIES THEREFOR AND FOR OTHER PURPOSES

Be it enacted by the Senate and the House of Representatives of the Philippines in

Congress assembled.

SECTION 1. Short Title. — This Act shall be known as the “Anti-Money Laundering Act
of 2001.”

SEC. 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.

SEC. 3. Definitions. — For purposes of this Act, the following terms are hereby defined
as follows:

(a) “Covered institution” refers to:

(1) banks, non-banks, quasi-banks, trust entities, and all other institutions and their
subsidiaries and affiliates supervised or regulated by the Bangko Sentral ng Pilipinas
(BSP);

(2) insurance companies and all other institutions supervised or regulated by the
Insurance Commission; and

(3) (i) securities dealers, brokers, salesmen, investment houses and other similar
entities managing securities or rendering services as investment agent, advisor, or
consultant, (ii) mutual funds, closed-end investment companies, common trust funds,
pre-need companies and other similar entities, (iii) foreign exchange corporations,
money changers, money payment, remittance, and transfer companies and other similar
entities, and (iv) 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
Securities and Exchange Commission.

(b) “Covered transaction” is a single, series, or combination of transactions involving a

total amount in excess of Four million Philippine pesos (Php4,000,000.00) or an
equivalent amount in foreign currency based on the prevailing exchange rate within five
(5) consecutive banking days except those between a covered institution and a person
who, at the time of the transaction was a properly identified client and the amount is
commensurate with the business or financial capacity of the client; or those with an
underlying legal or trade obligation, purpose, origin or economic justification.

It likewise refers to a single, series or combination or pattern of unusually large and

complex transactions in excess of Four million Philippine pesos (Php4,000,000.00)
especially cash deposits and investments having no credible purpose or origin,
underlying trade obligation or contract.

(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 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 3, 4, 5, 7, 8 and 9 of Article Two of Republic Act No. 6425, as amended,
otherwise known as the Dangerous Drugs Act of 1972;
(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 of the Revised Penal Code, as amended;

(10) Smuggling under Republic Act Nos. 455 and 1937;

(11) Violations under 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, including those
perpetrated by terrorists against non-combatant persons and similar targets;

(13) Fraudulent practices and other violations under Republic Act No. 8799, otherwise
known as the Securities Regulation Code of 2000;

(14) Felonies or offenses of a similar nature that are punishable under the penal laws of
other countries.

SEC. 4. Money Laundering Offense. — Money laundering is a crime whereby the

proceeds of an unlawful activity are transacted, thereby making them appear to have
originated from legitimate sources. It is committed by the following:

(a) Any person knowing that any monetary instrument or property represents, involves,
or relates to, the proceeds of any unlawful activity, transacts or attempts to transact said
monetary instrument or property.

(b) Any person knowing that any monetary instrument or property involves the proceeds
of any unlawful activity, performs or fails to perform any act as a result of which he
facilitates the offense of money laundering referred to in paragraph (a) above.
(c) Any person knowing that any monetary instrument or property is required under this
Act to be disclosed and filed with the Anti-Money Laundering Council (AMLC), fails to do
so.

SEC. 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.

SEC. 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) Any proceeding relating to the unlawful activity shall be given precedence over the
prosecution of any offense or violation under this Act without prejudice to the freezing
and other remedies provided.

SEC. 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:

(1) to require and receive covered 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 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 initiate investigations of covered transactions, money laundering activities and

other violations of this Act;

(6) to freeze any monetary instrument or property alleged to be proceeds of any

unlawful activity;
(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; and

(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.

SEC. 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.

SEC. 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 Transactions. — Covered institutions shall report to the AMLC
all covered transactions within five (5) working days from occurrence thereof, unless the
Supervising Authority concerned prescribes a longer period not exceeding ten (10)
working days.

When reporting covered transactions to the AMLC, covered institutions and their
officers, employees, representatives, agents, advisors, consultants or associates 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 transaction report was made, the contents thereof, or any
other information in relation thereto. In case of violation thereof, the concerned officer,
employee, representative, agent, advisor, consultant or associate 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 transaction report
in the regular performance of his duties and in good faith, whether or not such reporting
results in any criminal prosecution under this Act or any other Philippine law.

When reporting covered transactions to the AMLC, covered institutions and their
officers, employees, representatives, agents, advisors, consultants or associates are
prohibited from communicating, directly or indirectly, in any manner or by any means, to
any person, entity, the media, the fact that a covered transaction report was made, the
contents thereof, 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, employee,
representative, agent, advisor, consultant or associate of the covered institution, or
media shall be held criminally liable.

SEC. 10. Authority to Freeze. — Upon determination that probable cause exists that
any deposit or similar account is in any way related to an unlawful activity, the AMLC
may issue a freeze order, which shall be effective immediately, on the account for a
period not exceeding fifteen (15) days. Notice to the depositor that his account has been
frozen shall be issued simultaneously with the issuance of the freeze order. The
depositor shall have seventy-two (72) hours upon receipt of the notice to explain why
the freeze order should be lifted. The AMLC has seventy-two (72) hours to dispose of
the depositor’s explanation. If it fails to act within seventy-two (72) hours from receipt of
the depositor’s explanation, the freeze order shall automatically be dissolved. The
fifteen (15)-day freeze order of the AMLC may be extended upon order of the court,
provided that the fifteen (15)-day period shall be tolled pending the court’s decision to
extend the period.

No court shall issue a temporary restraining order or writ of injunction against any freeze
order issued by the AMLC except the Court of Appeals or the Supreme Court.

SEC. 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 with any banking institution or non-bank financial institution upon order of
any competent court in cases of violation of this Act when it has been established that
there is probable cause that the deposits or investments involved are in any way related
to a money laundering offense: Provided, That this provision shall not apply to deposits
and investments made prior to the effectivity of this Act.

SEC. 12. Forfeiture Provisions.

(a) Civil Forfeiture. — When there is a covered transaction report made, and the court
has, in a petition filed for the purpose ordered seizure of any monetary instrument or
property, in whole or in part, directly or indirectly, related to said report, the Revised
Rules of Court on civil forfeiture shall apply.

(b) Claim on Forfeiture 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 conviction and order of forfeiture, within fifteen (15)
days from the date 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.

SEC. 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.

SEC. 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 of 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) 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(b) 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 Section 4(c) of this Act.

(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, report 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
(Php100,000.00) but not more than Five hundred thousand Philippine pesos
(Php500,000.00), 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 the commission of the crime or who shall have knowingly permitted or
failed to prevent its commission. 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.

(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
(Php500,000.00) but not more than One million Philippine pesos (Php1,000,000.00),
shall be imposed on a person convicted for a violation under Section 9(c).

SEC. 15. System of Incentives and Rewards. — A system of special incentives and
rewards is hereby established to be given to the appropriate government agency and its
personnel that led and initiated an investigation, prosecution and conviction of persons
involved in the offense penalized in Section 4 of this Act.

SEC. 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.

SEC. 17. Restitution. — Restitution for any aggrieved party shall be governed by the
provisions of the New Civil Code.
SEC. 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.

SEC. 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.

SEC. 20. 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.

SEC. 21. 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.

SEC. 22. 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.

SEC. 23. 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.
The provisions of this Act shall not apply to deposits and investments made prior to its
effectivity.

Approved,

(Sgd.) JOSE DE VENECIA JR.

(Sgd.) FRANKLIN M. DRILON
Speaker of the House
President of the Senate
of Representatives

This Act which is a consolidation of House Bill No. 3083 and Senate Bill No. 1745 was
finally passed by the House of Representatives and the Senate on September 29, 2001.

(Sgd.) ROBERTO P. NAZARENO

(Sgd.) OSCAR G. YABES
Secretary General
Secretary of the Senate
House of Representatives

Approved: SEP 29 2001

(Sgd.) GLORIA MACAPAGAL-ARROYO

President of the Philippines