REPUBLIC ACT No. 337
AN ACT REGULATING BANKS
AND BANKING INSTITUTIONS AND FOR OTHER PURPOSES
CHAPTER I
Title and Definitions
Section
1
The short title of this Act shall be "The General Banking Act"
Section
2
Only duly authorized persons and entities
may engage in the lending of funds obtained from the public through the receipt
of deposits or the sale of bonds, securities, or obligations of any kind, and
all entities regularly conducting such operations shall be considered as
banking institutions and shall be subject to the provisions of this Act, of the
Central Bank Act, and of other pertinent laws. The terms "banking
institution" and "bank," as used in this Act, are synonymous and
interchangeable and specifically include banks, banking institutions,
commercial banks, savings banks, mortgage banks, trust companies, building and
loan associations, branches and agencies in the Philippines of foreign banks,
hereinafter called Philippine branches, and all other corporations, companies,
partnerships, and associations performing banking functions in the Philippines.
Persons and entities which receive deposits
only occasionally shall not be considered as banks, but such persons and
entities shall be subject to regulation by the Monetary Board of the Central
Bank; nevertheless, in no case may the Central Bank authorize the drawing of
checks against deposits not maintained in banks, or branches or agencies
thereof.
The Monetary Board may similarly regulate
the activities of persons and entities which act as agents of banks.
Section
3
Insurance companies are exempted from the
provisions of this Act, but such companies shall present to the Central Bank
such information, data or reports as the Monetary Board may require ascertaining
the effects of the operations of insurance companies on the monetary, credit,
and exchanging situation in the Philippines.
Section
4
Cases of doubt as to the banking character
of the activities of any person or entity, and to the consequent applicability
of this Act, shall be decided by the Monetary Board subject to judicial review.
The Board may, through the Superintendent of Banks, examine, inspect or
investigate the books and records of such person or entity for the purpose of
resolving the question.
Section
5
The following terms shall be held to be
synonymous and interchangeable:
(a)"Commercial
bank" and "commercial banking corporation;
(b) "Savings
bank," "mortgage bank," and "savings and mortgage
bank";
(c) "Building
and loan association" and mutual "building and loan
association";
(d) "Trust
company" and "trust corporation"; and
(e) "Foreign
bank" and "foreign banking corporation"
Section
6
No person, association or corporation not
conducting the business of a commercial banking corporation, trust corporation,
savings and mortgage bank, or building and loan association, as defined in this
Act, shall advertise or hold itself out as being engaged in the business of
such bank, corporation or association, or use in connection with its business
title the word or words "bank," "banking,"
"banker," "building and loan association," "trust
corporation," "trust company," or words of similar import, or solicit
or receive deposits of money for deposit, disbursement, safekeeping, or
otherwise, or transact in any manner the business of any such bank, corporation
or association, without having first complied with the provisions of this Act
in so far as it relates to commercial banking corporations, trust corporations,
savings and mortgage banks, or building and loan associations, as the case may
be. For any violation of the provisions of this section by a corporation, the
officers and directors thereof shall be jointly and severally liable. Any
violation of the provisions of this section shall be punished by a fine of five
hundred pesos for each day during which such violation is continued or
repeated, and in default of the payment thereof, subsidiary imprisonment as
prescribed by law.
CHAPTER II
Establishment of
Domestic Banks
Section
7
Domestic banking institutions, except
building and loan associations, shall be organized in the form of stock
corporations.
Section
8
No banking institution shall issue no par
value stock.
Section
9
The Securities and Exchange Commissioner
shall not 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 its official seal. Such certificate shall not be issued
unless the Monetary Board is satisfied from the evidence submitted to it:
(a) That
all the requirements of existing laws and regulations to engage in the business
for which the applicant is proposed to be incorporated have been complied with;
(b) That
the public interest and economic conditions, both general and local, justify
the authorization; and
(c) 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 the interests which the public
may entrust to them.
Section
10
The Securities and Exchange Commissioner
shall not register the by-laws of any bank or banking institution, or any
amendment thereto, unless accompanied by a certificate of the Monetary Board to
the effect that such by-laws or amendment thereto are in accordance with law.
Section
11
After the approval of this Act, no bank
which may be established and licensed to do business in the Philippines shall
receive deposits, unless incorporated under the laws of the Republic of the
Philippines: Provided, however, That this prohibition shall not apply to
branches and agencies of foreign banks which, at the time of the approval of
this Act, are actually receiving deposits: And provided, further, That, after
the passage of this Act, all deposits so received by such branches and agencies
of foreign bank shall not be invested in any manner outside the territorial
limits of the Republic of the Philippines.
Section
12
At least sixty per cent (60%) of the
capital stock of any banking institution which may be established after the
approval of this Act shall be owned by citizens of the Philippines.
Section
13
At least two-thirds of the members of the
board of directors of any bank or banking institution which may be established
after the approval of this Act shall be citizens of the Philippines.
CHAPTER III
Licensing of Foreign
Banks
Section
14
No foreign bank or banking corporation
formed, organized or existing under the laws other than those of the Republic
of the Philippines shall be permitted to transact business in the Philippines,
or maintain by itself or assignee any suit for the recovery of any debt,
claims, or demand whatsoever, until after it shall have obtained, upon order of
the Monetary Board, a license for that purpose from the Securities and Exchange
Commissioner. Any officer, director or agent of any such corporation who
transacts business in the Philippines without the said license shall be
punished by imprisonment for not less than one year nor more than ten years and
by a fine of not less than one thousand pesos nor more than ten thousand pesos.
For the issuance of such license to any
foreign bank, the Securities and Exchange Commissioner shall collect a fee in
proportion to the corporate capital of such bank in accordance with the
schedule established in section eight of Act Numbered Fourteen hundred and
fifty-nine, as amended.
No order for a license shall be issued by
the Monetary Board unless and until it is convinced that the public interest
and economic conditions, both general and local, justify the issuance of such order;
that the foreign bank or banking corporation is solvent and in sound financial
condition; and that a duly appointed agent in the Philippines has been
authorized to accept summons and legal processes.
Section
15
No foreign building and loan association or
building and loan association not formed, organized, or existing under the laws
of the Philippines shall be permitted to transact business in the Philippines.
Section
16
The Monetary Board, by the affirmative vote
of at least five of its members and with the approval of the President of the
Philippines, may revoke the license to transact business in the Philippines of
any foreign bank or banking corporation not formed, organized, or existing
under the laws of the Philippines, if the said Board finds after due
investigation at which such bank or banking corporation is given a chance to be
heard by itself or counsel, that the foreign bank or banking corporation is in
imminent danger of insolvency 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 bank or banking
corporation to transact business in the Philippines unless its license is
renewed or reissued. After the revocation of such license the Solicitor General
shall take such proceedings as may be proper to protect creditors of such
foreign bank or banking institution and the public.
Section
17
Summons and legal process served upon the
Philippine agent of any foreign banking corporation designated to accept
service thereof shall give jurisdiction to the courts over such banking
corporation, and service of notices on such agent shall be as binding upon the
corporation which he represents as if made upon the corporation itself.
Should the authority of such agent to
accept service of summons and legal processes for the corporation or notice to
it be revoked, or should such agent become mentally incompetent or otherwise
unable to accept service while exercising such authority, it shall be the duty
of the corporation to name and designate promptly another agent upon whom
service of summons and processes in legal proceedings against the corporation
and of notices affecting the corporation may be made, and to file with the
Securities and Exchange Commissioner a duly authenticated nomination of such
agent.
Should there be no person authorized by the
corporation 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
Superintendent of Banks and such service shall be as effective as if made upon
the corporation or upon its duly authorized agent. In case of service for the
corporation upon the Superintendent of Banks, the said Superintendent shall
register and transmit by mail to the president or the secretary of the
corporation 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 service 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 Superintendent for the making and mailing and sending of a
copy of the summons, process, or notice to the president or the secretary of
the corporation at its head or principal office shall be paid in advance by the
party at whose instance the service is made.
Section
18
In all matters not specifically covered by
special provisions applicable only to foreign banks, or their branches and
agencies in the Philippines, any foreign banking corporation or foreign bank
not formed, organized, or existing under the laws of the Philippines but
lawfully doing business in the Philippines shall be bound by all laws, rules,
and regulations applicable to domestic banking corporations of the same class,
except such laws, rules and regulations as provide for the creation, formation,
organization, or dissolution of corporations or as fix the relation,
liabilities, responsibilities, or duties of members, stockholders, or officers
of corporations, to each other or to the corporation.
Section
19
Residents and citizens of the Philippines
who are creditors of a branch or agency in the Philippines of a foreign bank or
banking corporation shall have preferential rights to the assets of such branch
or agency.
CHAPTER IV
Commercial Banking
Corporations
Section
20
A commercial banking corporation shall be
any corporation which accepts or creates demand deposits subject to withdrawal
by check.
Section
21
A commercial banking corporation, in
addition to the general powers incident to corporations, shall have all such
powers as shall be necessary to carry on the business of commercial banking, by
accepting drafts and issuing letters of credit, by discounting and negotiating
promissory notes, drafts, bills of exchange, and other evidences of debt; by
receiving deposits; by buying and selling foreign exchange and gold or silver
bullion, and by lending money against personal security or against securities
consisting of personal property or first mortgages or improved real estate and
the insured improvements thereon. No loan on the security of real estate shall
have a maturity in excess of fifteen years but the aggregate of such loans on
real estate security shall not exceed seventy per cent (70%) of the total
savings deposits of the bank.
Nothing in this section shall be construed
as preventing a commercial bank from accepting real estate security in order to
protect itself from loss on account of a loan previously contracted in good
faith, nor shall there be included in the foregoing limitations loans made on
the security of real estate arising out of the sale of property owned by such
bank.
Commercial banks may acquire high-grade
bonds and other evidences of indebtedness. Except in exceptional circumstances,
however, the Monetary Board shall not permit commercial banks to invest in
securities having maturities greater than three years from the date of
acquisition by the bank an amount in excess of twenty per cent (20%) of its
total deposits.
Section
22
The combined capital accounts of each
commercial bank shall not be less than an amount equal to fifteen per cent
(15%) of its total assets, excluding the following assets:
(a) Cash
on hand;
(b) Amounts
due from banks, both at home and abroad, including all deposits with the
Central Bank; and
(c) Evidences
of indebtedness of the Republic of the Philippines and of the Central Bank, and
any other evidences of indebtedness or obligations the servicing and repayment
of which are fully guaranteed by the Republic of the Philippines.
The Monetary Board shall prescribe the
manner of determining the total assets of banking institutions for the purposes
of this section, but contingent accounts shall not be defined as being included
among total assets.
Whenever the capital accounts of a bank are
deficient with respect to the requirements of this Act, the Monetary Board,
after considering a report of the Superintendent of Banks on the state of
solvency of the institution concerned, shall limit or prohibit the distribution
of net profits and shall require that part or all of net profits be used to
increase the capital accounts of the institution until the minimum requirement
has been met. The Monetary Board may, furthermore, after considering the
aforesaid report of the Superintendent of Banks and if the amount of the
deficiency justifies it, restrict or prohibit the making of new investments of
any sort by the bank, with the exception of purchases of readily marketable
evidences of indebtedness included under subsection (c) of this section, until
the minimum required capital ratio has been restored.
Section
23
Except as the Monetary Board may otherwise
prescribe, the total liabilities of any person, company, corporation or firm,
to a commercial banking corporation for money borrowed, with the exception of
money borrowed against obligations of the Central Bank or of the Philippine
Government, or borrowed with the full guarantee by the Government of payment of
principal and interest, shall at no time exceed fifteen per cent (15%) of the unimpaired
capital and surplus of such bank.
The total liabilities of any borrower may
amount to a further fifteen per cent (15%) of the unimpaired capital and
surplus of such banking corporation provided the additional liabilities are
adequately secured by shipping documents, warehouse receipts or other similar
documents transferring or securing title covering readily marketable,
non-perishable staples which staples must be fully covered by insurance, and
must have a market value equal to at least one hundred and twenty-five per cent
(125%) of such additional liabilities.
The term "liabilities" as used
herein, shall mean the direct liability of the maker or acceptor of paper
discounted with or sold to such bank and the liability of the endorser, drawer,
or guarantor who obtains a loan from or discounts paper with or sells paper
under his guaranty to such bank and shall include in the case of liabilities of
a co-partnership or association the liabilities of the several members thereof
and shall include in the case of liabilities of a corporation all liabilities
of all subsidiaries thereof in which such corporation owns or controls a
majority interest. But the discount of bills of exchange drawn in good faith
against actually existing values, and the discount of commercial or business
paper actually owned by the person negotiating the same, shall not be
considered as money borrowed, for the purposes of this section.
Section
24
No commercial bank shall make any loan or
discount on the security of shares of its own capital stock, nor be the
purchaser or holder of any such shares, unless such security or purchase be
necessary to prevent loss upon a debt previously contracted in good faith, and
the stock so purchased or acquired, or purchased or acquired for any other
reason in the course of its operations, shall, within six months from the time
of its purchase or acquisition, be sold or disposed of at public or private
sale or in default thereof, a receiver shall be appointed to close up the
business of the bank in accordance with law.
Section
25
Any commercial bank may purchase hold, and
convey real estate for the following purposes:
(a) Such
as shall be necessary for its immediate accommodation in the transaction of its
business: Provided, however, That the total investment in such real estate and
improvements thereof shall not exceed twenty-five per cent (25%) of its paid-up
capital stock and surplus;
(b) Such
as shall be mortgaged to it in good faith by way of security for debts;
(c) Such
as shall be conveyed to it in satisfaction of debts previously contracted in
the course of its dealings;
(d) 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 to it.
But no such bank shall hold the possession
of any real estate under mortgage or trust deed, or the title and possession of
any real estate purchased to secure any debt due to it, for a longer period
than five years.
Section
26
The deposit liabilities of commercial
banks, including the Philippine National Bank, shall be subject to the reserve
requirements and other conditions prescribed by the Monetary Board in
accordance with the authority granted to it under the provisions of the Central
Bank Act.
Section
27
Any commercial bank organized under the
laws of the Philippines may, with the prior approval of the Monetary Board,
establish branches in the Philippines or branches or agencies outside the
Philippines, and the bank 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 purposes of this Act, a bank and
its branches shall be treated as a unit.
Section
28
The Monetary Board, by the affirmative vote
of at least five of its members, may compel the head office of any commercial
bank organized under the laws of the Philippines to liquidate the business of
any branch or agency if the business of such branch or agency is being
conducted unlawfully or in a manner likely to prejudice the interests of the
creditors of the branch or agency or of the head office.
CHAPTER V
Savings and Mortgage
Banks
Section
29
A savings and mortgage bank shall be any
corporation organized primarily for the purpose of accumulating the small
savings of depositors and investing them, together with its capital, in bonds
or in loans secured by bonds, real estate mortgages, and other forms of
security, as hereinafter provided.
Section
30
The combined capital accounts of each
savings and mortgage bank shall not be less than an amount equal to fifteen per
cent (15%) of its total assets, after deducting the following assets:
(a) Cash
on hands;
(b) Amounts
due from banks, both at home and abroad, including all deposits with the
Central Bank; and
(c) Evidences
of indebtedness of the Republic of the Philippines and of the Central Bank, and
any other evidences of indebtedness or obligations the servicing and repayment
of which are fully guaranteed by the Republic of the Philippines.
The Monetary Board shall prescribe the
manner of determining the total assets of banking institutions for the purposes
of this section, but contingent accounts shall not be defined as being included
among total assets.
Whenever the capital accounts of a bank are
deficient with respect to the requirements of the preceding paragraph, the
Monetary Board, after considering a report of the Superintendent of Banks on the
state of solvency of the institution concerned, shall limit or prohibit the
distribution of net profits and shall require that part or all of net profits
be used to increase the capital accounts of the institution until the minimum
requirement has been met. The Monetary Board may, after considering the
aforesaid report of the Superintendent of Banks and if the amount of the
deficiency justifies it, restrict or prohibit the making of new investments of
any sort by the bank, with the exception of purchases of the evidences of
indebtedness included under subsection (c) of this section until the minimum
required capital ratio has been restored.
Section
31
The loans and investments of savings and
mortgage banks shall be limited to the following:
(a) Loans
with the security of their own savings deposit obligations or of mortgage and
chattel mortgage bonds which they have issued, or with the security of savings
deposit obligations of other banks doing business in the Philippines;
(b) Medium-term
loans of the following types:
(1) Loans
for the encouragement of cattle, carabao and other livestock breeding, with
maturities up to three years. Such loans shall be repaid in regular
installments and shall have as principal security a lien on the animals, the
bank being empowered, however, to require, in addition, real estate and other
securities to its satisfaction. The amount of any such loan, shall not exceed
fifty per cent (50%) of the commercial value of the animals at the time the
loan is made, but similar additional loans, up to fifty per cent (50%) may be
made as the value of the stock increases.
(2) Equipment
loans, with maturities up to five years, for the acquisition of fertilizers and
any instruments, machinery and other movable equipment used in the production,
processing, transformation, handling or transportation of agricultural and
industrial products. Such loans shall constitute a first lien on the assets
acquired with the proceeds of the loan, the bank being empowered, however, to
require as additional security a lien or mortgage on other properties of the
debtor.
(c) Mortgage
loans, with maturities up to ten years for the conservation, enlargement or
improvement of productive properties, or the acquisition of machinery or other
fixed installations. Such loans shall be secured by a first mortgage on the
property.
(d) Real
estate mortgage loans with maturities of not more than twenty years, for the
following purposes only:
(1) For
the construction, acquisition, expansion or improvement of rural and urban
properties;
(2) For
the refinancing of similar loans and mortgages; and
(3) For
such other purposes as may be authorized by the Monetary Board.
(e) High-grade
bonds and other evidences of indebtedness, and loans against such obligations;
(f) Drafts,
bills of exchange, acceptances, or notes arising out of current commercial
transactions which are endorsed or accepted by any solvent bank operating in
the Philippines. The aggregate investments in this class shall not exceed ten
per cent (10%) of the total assets of the bank;
(g) Collateral
trust funds or notes, or obligations secured by such bonds or notes, secured by
a first mortgage or by a participating interest in a first mortgage on improved
urban or rural real estate in cities and municipalities of the Philippines,
provided that such bonds and notes shall have been outstanding for at least
three years prior to their purchase by the savings bank, and provided that
during that period the earnings of the property mortgaged and available for
paying interest have been equal to at least two hundred per cent (200%) of the
annual interest payable on account of all first mortgage obligations
outstanding. No such bonds or notes, or obligations secured thereby, shall be
purchased by the bank if the aggregate of first mortgage obligations
outstanding against the property exceeds seventy per cent (70%) of the
appraised value thereof;
(h) Loans
secured by the pledge to the corporation of gold or silver bullion: Provided,
That the loans shall not exceed ninety per cent (90%) of the value of the
pledge by which the loan is secured;
(i) Loans
with first mortgages transferred to the corporation as collateral security on
improved and otherwise unencumbered real estate in cities and municipalities in
the Philippines: Provided, however, That the mortgage transferred to the
corporation as collateral security with interest accrued and due shall not
exceed sixty per cent (60%) of the appraised value of the real estate and
insured improvements which secure such mortgage.
Notwithstanding any provisions in this or
any other Act to the contrary, any savings and mortgage bank, existing or doing
business on the date of the approval of this Act and engaged in the business of
lending of money against the pledge of jewelry, precious stones and articles of
similar nature, may continue to engage in such business.
Section
32
Except as the Monetary Board may otherwise
prescribe, the direct indebtedness to a savings and mortgage bank of any
person, company, corporation or firm, including in the indebtedness of the
company or firm the indebtedness of the several members thereof, for money
borrowed, with the exception of money borrowed against obligations of the
Central Bank or of the Philippine Government, or borrowed with the full
guarantee by the Government of payment of principal and interest, shall at no
time exceed twenty-five per cent (25%) of the unimpaired capital and surplus of
the bank: Provided, however, That this limitation shall not apply to loans made
under subsection (f) of section thirty-one.
Section
33
Any savings and mortgage bank may, with the
approval of the Monetary Board, issue mortgage and chattel mortgage
certificates, buy and sell them for its own account or for the account of
others, or accept and receive them in payment or as amortization of its loans.
Such mortgage and chattel mortgage
certificates shall be issued exclusively in national currency and exclusively
for the financing of the loans enumerated in subsections (b), (c), and (d) of
section thirty-one. The Monetary Board may issue such regulations as it deems
necessary with respect to the maturities, rates of interest, denominations and
other conditions pertaining to such certificates.
The bank shall strive to coordinate the
amounts and maturities of its certificates with those of its loans, so as to
ensure adequate cash receipts for the payment of principal and interest at the
time they become due.
Savings and mortgage banks shall accept
their own certificates at least at the actual price of issue, in any prepayment
of loans which mortgage or chattel mortgage debtors may wish to make, provided
that the date of maturity of the certificates is not later than the date on
which the payment would otherwise become due, in the absence of the aforesaid
prepayment.
Section
34
Savings and mortgage banks may purchase,
hold and convey real estate under the same conditions as those governing
commercial banks as specified in section twenty-five of this Act.
Section
35
Married women and minors may, in their own
right and in their own names, make deposits and withdraw the same, and may
receive dividends and interest: Provided, however, That if any guardian shall
give notice in writing to any savings bank not to make payments of deposits,
dividends, or interest to the minor of whom he is guardian, then such payment
shall be made only to the guardian.
Section
36
Savings deposits shall be returned to the
depositors or to their legal representatives upon their petition in the manner
and at the time and under the conditions which shall be determined by the board
of directors and stipulated in regulations which shall be in conformity with
law and with such regulations as the Monetary Board may prescribe.
Section
37
All savings and mortgage banks shall
maintain on deposit with the Central Bank of the Philippines such reserves
against their deposit liabilities as the Monetary Board shall determine in
accordance with the pertinent provisions of the Central Bank Act.
Section
38
Whenever there is a call by depositors of a
savings bank for repayment of their deposits and the call so made shall result
in reducing its legal reserves below the amount required by the Monetary Board,
such bank shall not make any new loans or investment of the funds or depositors
or earnings of such funds until the call of the depositors has been satisfied
and its legal reserves have been restored to the required minimum.
Any officer or director of a savings and
mortgage bank who makes or causes to be made any loan or investment or funds of
depositors or of the earnings of such funds in violation of this section shall
be punished by imprisonment for not less than one year nor more than ten years
and by a fine of not less than one thousand nor more than ten thousand pesos.
CHAPTER VI
Building and Loan
Associations
Section
39
All corporations whose capital stock is
required or is permitted to be paid in by the stockholders in regular, equal
periodical payments and whose purpose is to accumulate the savings of its
stockholders, to repay to said stockholders their accumulated savings and
profits upon surrender of their shares, to encourage industry, frugality, and
home building among its stockholders, and to loan its funds, and funds borrowed
for the purpose, to stockholders of the security of unencumbered real estate
and with the pledge of shares of the capital stock owned by such stockholders
as collateral security, shall be known as building and loan associations, and
the words "mutual building and loan association" shall form part of
the name of every such association.
It shall be unlawful for any building and
loan association to make any loan upon property that is suitable for only as
theater, public hall, church, convent, school, club, hotel, garage, or other
public building: Provided, however, That to facilitate the investment of the
idle funds of a building and loan association, the Monetary Board may, in
special instances, waive the provisions of this paragraph, in cases of public
hall, school, hotel and other public buildings.
With the approval of the Monetary Board, a
building and loan association may also invest such of its funds as may
otherwise remain idle, in bonds and obligations of the Republic of the
Philippines, or of any of its political subdivisions, or of any
government-owned or controlled corporation, including the Central Bank.
Section
40
The articles of incorporation shall state
the purpose of the association as set forth in section thirty-nine.
Section
41
Any person may become a stockholder of any
building and loan association by subscribing for one or more shares therein and
signing the by-laws of the association, following his signature with his post
office address, but no member may borrow upon the security of real estate from
any such association having assets of one hundred thousand pesos or more an
amount in excess of ten per cent (10%) of the total assets of the association,
nor may any such association make a loan upon any one piece of real estate
amounting to more than ten per cent (10%) of the total assets of the
association. In the case of a building and loan association having assets
amounting to less than one hundred thousand pesos, no loan to any one borrower
and no loan upon any one piece of real estate shall exceed ten thousand pesos.
The Monetary Board shall have the power to issue regulations governing the
manner of determining such assets as the basis for computing the foregoing
limitations.
Section
42
The capital stock of such associations
shall be paid in by the stockholders in regular, equal, periodical payments
known as dues, at such times and in such amounts as shall be provided in the
by-laws of the association. The dues on each share of stock subscribed for by a
stockholder shall continue to be paid by the stockholder to the association
until the share has been duly withdrawn, cancelled, or forfeited or until the
share has reached its matured value; that is to say, when the dues paid on each
share and the net earnings thereof in accordance with the by-laws shall amount
to the matured value of the share, but such association may issue and sell
paid-up stock for each and also investment stock to be paid in installments,
and may pay to the holders of such paid-up stock out of the net profits such
rates of dividends as may be fixed from time to time by the board of directors
of the association, which shall be expressed in the stock certificates and
shall not participate further in the profits or accretions of the association.
Paid-up stock issued after the date when this Act shall become effective shall
not be entitled to vote. The dividends payable upon such paid-up stock shall
not be cumulative in the sense of being a charge upon the future earnings of
the association should the earnings of the association not be sufficient in any
particular year to meet the dividend requirements of such stock in that year.
Either paid-up or investment stock may be surrendered by the holder at any time
upon the giving of such notice as the association may require.
Section
43
The capital stock of every association
shall be divided into shares of the matured or par value of two hundred pesos
each.
Section
44
Certificates of stock shall be issued to
each stockholder upon the payment of the membership fee and first installment
of the dues. The association may charge a membership or entrance fee not
exceeding one peso on each share of stock issued and may also charge a transfer
fee not exceeding twenty centavos on each share transferred, all of which shall
be paid into the treasury and accounted for as funds of the association. Shares
which have not been pledged as security for the payment of a loan shall be
called "free shares," and shares which have been so pledged shall be
called "pledged shares."
Section
45
Payment of dues on shares of stock shall
commence from the time of issue of such shares.
Section
46
Whenever any stockholder shall be six
months in arrears in the payment of his dues upon free shares, the secretary or
clerk of the association shall give him notice in writing of his arrearages by
mailing to him at the last post office address given by him to the association
a statement of all such arrearages. If the stockholder fails to pay within two
months after receipt of such notice the full amount of his arrearages the board
of directors may, at its option, declare his shares forfeited. At the time of
the forfeiture the withdrawal value of the forfeited shares shall be determined
and stated by the board of directors, and the defaulting stockholder shall be
entitled to receive such value without interest upon such notice as is required
of a withdrawing stockholder.
Section
47
When the stock shall have reached its
matured value, payment of dues thereon shall cease and holders of such matured
shares shall be paid out of the funds of the association the matured value of
their shares with interest thereon at the rate prescribed in the by-laws, from
the time the board of directors shall declare such shares to have matured until
payment is made. The order of payment of matured shares shall be prescribed in
the by-laws and at no time shall more than one-third of the receipts of the
association be applied to the payment of matured shares without the consent of
the board of directors and the approval of the Monetary Board: Provided,
however, That if shares pledged to the association as security for loans shall
mature before the loan is repaid the matured value may be credited to the loan.
The withdrawal value of the pledged shares shall not be returned to the
stockholders unless such value is applied in liquidation of the loan which the
shares secure.
Section
48
By the affirmative vote of a majority of
all its directors the association may borrow money for such temporary uses and
purposes as the exigencies of the business may demand provided such action is
consistent with the objects of the association. The aggregate amount of the
outstanding indebtedness of any such association shall not at any time exceed
fifty per cent (50%) of its capital stock actually paid in: Provided, however,
That such limitation shall not include indebtedness to the Central Bank.
Section
49
In addition to the other requirements
established in this Act, every loan made by the association must be properly
evidenced by a note or other instrument in writing and must be secured by a
first mortgage or deed of trust on unencumbered real estate and also by the
pledge to the association of shares of stock of the association the matured
value of which shall at least equal the amount loaned: Provided, however, That
loans may be made on the security of free shares pledged to the association for
the payment of the loan in case, at the time that the loan is made, the
withdrawal value of such free shares under the by-laws shall exceed the amount
borrowed and interest thereon for six months.
Section
50
In the discretion of the board of directors
a loan may be repaid by the surrender of pledged shares whose withdrawal value
equals the amount loaned and all interest and fines due thereon.
Section
51
The rates of interest on loans may be fixed
in the by-laws or may be prescribed from time to time by the board of
directors, subject to the provisions of the Usury Law and to any regulations
which the Monetary Board may issue with respect thereto.
Section
52
Whenever a borrowing stockholder shall be
three months in arrears in the payment of his dues on stock or in the interest
or premium or installments of premium on any loan, the whole loan, at the
option of board of directors, shall become due and payable and the board may
proceed by action to enforce collection upon the securities held by the
association. The withdrawal value of all shares pledged as collateral security
at the time of the commencement of the action shall be applied to the payment
of the loan, and such shares from the time of such application shall be deemed
to be surrendered to the association.
Section
53
Mutual building and loan associations may
purchase, hold, and convey real estate under the same conditions as those specified
with reference to commercial banks in section twenty-five of this Act.
Section
54
Stockholders may surrender their shares and
withdraw from the association after paying twelve monthly installments of dues
upon giving sixty days' notice in writing to the board of directors, and the
withdrawal value of such shares shall be the total sum of the dues paid thereon
plus not less than ninety per cent of all dividends earned by such shares up to
the end of the last preceding fiscal period plus such interest for the time
elapsed since the end of that period as shall be allowed by the board of
directors. Stockholders who have not paid twelve monthly installments of dues
may, after giving sixty days' notice in writing to the board of directors,
surrender their shares and withdraw from the association, and the withdrawal
value of such shares shall be the total sum of the dues paid thereon plus such
dividend or interest as may be allowed by the board of directors. In no event,
however, shall more than one-third of the total receipts of the association be
paid in any one month to retire such shares. Payment for such surrendered
shares shall be made in the order in which notices of withdrawal have been
received by the board of directors: Provided, That should the business of the
association during the period such withdrawing member has been a stockholder
show a loss in excess of the reserve available for meeting such loss, the
withdrawal value of such shares shall be charged with their proportion of such
loss: And provided, finally, That any fines or charges lawfully chargeable
against such shares may be deducted before making payment to the stockholder.
Except in cases of voluntary or forced liquidation of a building and loan
association or forfeitures as provided in section forty-six of this Act, the
board of directors of such association shall not have power to force the
surrender and withdrawal of unmatured shares.
Section
55
At least once a year the profits on all
business transacted shall be determined by the board of directors and
apportioned to all the shares in each series outstanding at the time of such
apportionment on the basis of the actual value of such shares, as distinguished
from their withdrawal value, but in determining the profits which may be so
apportioned, there shall be deducted from the gross earnings of the association
all expenses and losses incurred in conducting its business. Five per cent (5%)
of the net earnings shall be credited to a reserve account until the reserve
equals five per cent (5%) of the total assets of the association. The reserve
shall be maintained at five per cent (5%) of the total assets and shall be
available for meeting losses incurred by the association. The remainder of the
net earnings shall be available for apportionment among the stockholders. In
the event of the liquidation of a building and loan association there shall
escheat to the State any part of the reserve remaining after charging off all
losses and defraying all expenses of liquidation.
CHAPTER VII
Trust Corporations
Section
56
Any corporation formed or organized for the
purpose of acting as trustee or administering any trust or holding property in
trust or on deposit for the use, benefit, or behoof of others, shall be known
as a trust corporation or company.
Section
57
A trust company may, with the approval of
the Monetary Board, do a commercial banking business but such business must be
kept separate and distinct from its trust business. All relevant provisions of
Chapter IV of this Act governing the business of commercial banking
corporations shall be held to apply to the commercial banking activities of a
trust company.
A commercial banking corporation may, with
the approval of the Monetary Board, be authorized to engage in the business of
a trust company, but shall be subject to the provisions of this Chapter as
regards its trust business.
Section
58
A trust company, in addition to the general
powers incident to corporations, shall have power:
(a) To
act as trustee on any mortgage or bond issued by any municipality, corporation,
or any body politic and to accept and execute any other municipal or corporate
trust not inconsistent with law;
(b) To
act under the order or appointment of any court of record as guardian,
receiver, trustee, or depositary of the estate of any minor, insane person,
idiot, habitual drunkard, or other incompetent or irresponsible 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 by proper legal proceedings;
(c) To
act as the executor of any last will or testament when it is named in the last
will and testament as the executor thereof;
(d) To
act under appointment of a court of competent jurisdiction 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, and when in either
case there is no person qualified, competent, willing, able and entitled to
accept such administration;
(e) To
accept and execute any legal trust confided to it by any court of record or by
any person or corporation for the holding, management, and administration of
any estate, real or personal, and the rents, issues, and profits thereof.
Section
59
Except as may otherwise be provided in this
Act, no bond or other security shall be required from any trust company for the
faithful performance of its duties as trustee, executor, administrator,
guardian, receiver, or depositary: Provided, however, That the court officer
appointing such company as trustee, executor, administrator, guardian,
receiver, or depositary may, upon proper application, showing special cause
therefor, require any corporation which shall seek to be or shall have been so
appointed to give adequate security for the protection of the funds or property
confided to the corporation and, upon failure of such corporation to give the
security required, its appointment as trustee, executor, administrator,
guardian, receiver or depositary shall be revoked.
The court shall require such trust company
to make all reports, render all accounts, perform such duties, and do such acts
as might be required by the court of a natural person acting as trustee,
executor, administrator, guardian, receiver, or depositary.
Section
60
Upon the application of any executor,
administrator, guardian, trustee, receiver, or depositary or any other person
in interest, any court having jurisdiction over such officer, trustee,
receiver, or depositary and over the subject matter of the trust or deposit
may, upon such notice to the parties in interest as the court shall direct and
after hearing the application and all parties in interest desiring to be heard,
order said officer, receiver, trustee, or depositary to deposit with some trust
company lawfully doing business in the Philippines the whole or any part of the
moneys or personal property held by such officer, receiver, trustee, or
depositary. Upon presentation to the court of the receipt or written
acknowledgment of the trust company that the deposit of said moneys and
personal property has been made in accordance with the order of the court, the
court may order that the bond given or required to be given by such officer,
trustee, receiver or depositary for the faithful performance of his duties be
reduced to such sum as the court may deem proper: Provided, however, That the
reduced bond shall be sufficient to secure adequately the proper administration
and care of any property remaining in the hands or under the control of such
officer, trustee, receiver, or depositary, and the proper accounting for such
property. Property deposited with any trust company in conformity with this
section shall be held by said company under the orders and direction of the
court.
Section
61
All moneys, properties, or securities
received by any trust company as executor of the will of any deceased person or
as administrator, with or without the will annexed, of the estate of any
deceased person, or as guardian, receiver, trustee, or depositary, of the
estate of any minor, insane person, idiot, habitual drunkard, or other
incompetent or irresponsible person, or as receiver or depository under and by
virtue of any order or appointment of any court, shall be kept separate and
distinct from all other funds, properties, and assets of its general business.
The accounts of all such moneys, properties, or securities shall likewise be
kept separate and distinct from the accounts of its general business.
Section
62
No trust company shall have the right to
accept any trust whatever which it would be unlawful for any individual to
make, accept, or execute, and it shall be the duty of a trust company, acting
as trustee of any legal trust, to execute such trust in accordance with the
lawful terms of the trust.
Section
63
The lending or investment of deposits or
moneys received by any trust company as executor of the will of any deceased
person or as administrator, with or without the will annexed, or as guardian,
receiver, trustee, or depositary of the estate of any minor, insane person,
idiot, habitual drunkard, or other incompetent or irresponsible person, or as
receiver or depositary under and by virtue of any order or appointment of any
court, or as trustee under any instrument in writing constituting the company a
trustee, unless otherwise directed by the instrument creating the trust, shall
be limited to the loans and investments enumerated in section thirty-one of
Chapter V (Savings and Mortgage Banks). Any officer or director of any trust
company authorizing or making any loan on security otherwise than as provided
in this section shall be punished by imprisonment of not less than one year nor
more than ten years and by a fine of not less than one thousand nor more than
ten thousand pesos.
Section
64
The capital stock and funds of a trust
company may be loaned or otherwise invested as its by-laws prescribe; if it
does a commercial banking business in addition to its trust business, the
investment of its funds other than trust funds shall be governed by the relevant
provisions of Chapter IV of this Act.
Real estate acquired by a trust company, in
whatever manner and for whatever purpose, shall likewise be governed by the
relevant provisions of section twenty-five of this Act.
Section
65
As security for the faithful performance of
its trust duties, every trust company, before transacting trust business, shall
carry on deposit with the Central Bank of the Philippines, cash or securities
approved by the Monetary Board in an amount equal to not less than two hundred
and fifty pesos: Provided, however, That the Monetary Board shall require any
trust company to increase the amount of its securities on deposit with the
Central Bank whenever in the judgment of the Monetary Board such increase is necessary
by reason of the growth of the trust business of the company: And provided,
further, That the paid-up capital and surplus of the company must be at least
equal to the amount required to be deposited with the Central Bank 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 last paragraph of
section twenty-two of this Act.
A trust company, so long as it shall
continue solvent and comply with the laws of the Philippines, shall have the
right to collect the interest earned on any securities so deposited and, from
time to time, with the approval of the Monetary Board, to exchange such
securities for others.
All claims arising out of the trust
business of a trust company shall have priority over all other claims as
regards the securities deposited as above provided. The Monetary Board may not
permit the securities deposited in accordance with the provisions of this
section to be reduced below the minimum amount of two hundred and fifty
thousand pesos until the depositing company shall discontinue its trust
business and shall satisfy the Monetary Board that it has complied with all of
its obligations in connection with such business.
No assets held by a trust company in its
capacity as trustee shall be subject to any claims other than those of the
parties interested in the specific trusts.
Section
66
Every trust company, before the declaration
of a dividend, shall carry to surplus ten per cent (10%) of its net profits
accruing since the last preceding dividend until the surplus shall amount to
twenty per cent (20%) of its authorized capital stock and no part of the
surplus shall at any time be paid out in dividends, but losses accruing in the
course of its business may be charged against the surplus. Nothing herein
contained shall prevent the accumulation of a larger surplus than the above
prescribed should the directors so decide.
Section
67
The ordinary business of a trust company
shall be transacted at the place of business specified in its articles of
incorporation. But any trust company may, with the prior approval of the
Monetary Board, establish branches in the Philippines, and the said company
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 purposes of this Act, the company
and its branches shall be treated as a unit.
CHAPTER VIII
Branches and Agencies of
Foreign Banks
Section
68
In the case of a foreign bank which has
more than one branch or agency in the Philippines, all such branches and
agencies shall be treated as a unit for the purpose of this Act, and all
references to Philippine branches and agencies of foreign banks shall be held
to refer to such units.
Section
69
In the case of Philippine branches of
foreign banks, the provisions of this section shall replace those of sections
twenty-two and thirty of this Act, except insofar as is specified to the
contrary in the last paragraph of this section.
In order to provide effective protection of
the interests of the depositors and other creditors of Philippine branches of
foreign banks, the head office of such branches shall fully guarantee the
prompt payment of all liabilities of its Philippine branch.
The Monetary Board shall from time to time
direct the Superintendent of Banks to make such investigations as it may deem
necessary to ascertain that the aforesaid guarantee by the head office
represents effective protection of the depositors and other creditors of the
branch. Should the investigations of the Superintendent of Banks indicate that
said guarantee is inadequate, the Monetary Board may take such measures as it
is authorized to take in the case of capital deficiencies, under the provisions
of the third paragraph of section twenty-two of this Act. The Board may,
further, as long as the guarantee of the head office is deemed inadequate,
require the head office to assign to its Philippine branch an amount of capital
sufficient to meet the minimum capital requirement established in section
twenty-two of this Act.
Nothing in this section shall be held to
prevent a branch of a foreign bank from assigning capital to its Philippine
branch, and from being governed by the provisions of section twenty-two or
thirty, as the case may be, instead of by the provisions of this section. In
such cases, the term "capital accounts" shall be held to include all
net amounts due by the branch to its head office and to other branches thereof
outside the Philippines.
Section
70
In the case of Philippine branches of
foreign banks, the present section shall replace sections twenty-three and
thirty-two of this Act.
Except as the Monetary Board may otherwise
provide, the total liabilities of any person, or of any company, corporation,
or firm, to the Philippine branch of a foreign bank for money borrowed, with
the exception of money borrowed against obligations of the Central Bank or of
the Philippine Government, or borrowed with the full guarantee by the
Government of payment of principal and interest, shall at no time exceed
fifteen per cent (15%) of the sum of:
(a) The
net amount due by such branch to the head office and branches outside the
Philippines, and
(b) The
total capital accounts, if any, representing funds definitely assigned to the
branch by the head office.
The liabilities of any borrower may amount
to a further fifteen per cent (15%) of the two items mentioned in subsections
(a) and (b) of this section, provided the additional liabilities are adequately
secured by shipping documents, warehouse receipts or other similar documents
transferring or securing title covering readily marketable, non-perishable staples,
which staples must be fully covered by insurance, and must have a market value
equal to at least one hundred and twenty-five per cent (125%) of such
additional liabilities.
The term "liabilities" as used
herein, shall mean the direct liability of the maker or acceptor of paper
discounted with or sold to such bank and the liability of the endorser, drawer,
or guarantor who obtains a loan from or discounts paper with or sells paper
under his guaranty to such bank and shall include in the case of liabilities of
a co-partnership or association the liabilities of the several members thereof
and shall include in the case of liabilities of a corporation of all
subsidiaries thereof in which such corporation owns or controls a majority
interest. But the discount of bills of exchange drawn in good faith against
actually existing values, and the discount of commercial or business paper
actually owned by the person negotiating the same, shall not be considered as
money borrowed, for the purposes of this section.
Whenever, and to the extent that, the head
office of a Philippine branch of a foreign bank guarantees the repayment of
liabilities of its branch, the limitation established in this section shall not
apply. Moreover, nothing in this Act shall be construed as restricting in any
manner loans made by the Philippine branch of a foreign bank for the account
of, and with funds supplied by, its head office or branches outside the Philippines,
but the Monetary Board may require that all such loans be reported to it in
accordance with such rules and regulations as it may issue on the subject.
CHAPTER IX
General Provisions
Section
71
Any opinion, ruling, or regulation made or
issued by the Superintendent of Banks may be appealed to the Monetary Board,
which shall have the power and authority to confirm, modify or repeal such
opinion, decision, ruling or regulation made or issued as aforesaid; but the
action of the Monetary Board with respect thereto shall be subject to judicial
review.
Section
72
In addition to the operations specifically
authorized elsewhere in this Act, banking institutions other than building and
loan associations may perform the following services:
(a) Receive
in custody funds, documents, and valuable objects, and rent safety deposit
boxes for the safeguarding of such effects;
(b) 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;
(c) Make
collections and payments for the account of others and perform such other
services for their customers as are not incompatible with banking business.
The banks shall perform the services
permitted under subsections (a), (b) and (c) of this section as depositories or
as agents. Accordingly, they shall keep the funds, securities and other effects
which they thus receive duly separated and apart from the bank's own assets and
liabilities.
The Monetary Board may regulate the operations
authorized by this section in order to insure that said operations do not
endanger the interests of the depositors and other creditors of the banks.
Section
73
Banking institutions shall not engage in
insurance business as the insurer.
Section
74
No bank or banking institution shall enter,
directly or indirectly, into any contract of guaranty or suretyship, or shall
guarantee the interest or principal of any obligation of any person,
co-partnership, association, corporation or other entity. The provisions of
this section shall, however, not be held to apply to the borrowing of money by
any such bank or institution through the rediscounting of its receivables, or
otherwise, as may be permitted by law, nor to the granting or guaranteeing of acceptance
credits in the ordinary course of its business. Nor shall the provisions of
this section apply to the certification of checks or to transactions involving
the release of documents attached to items received for collection, nor to any
other transaction which may properly be regarded as common usage and accepted
banking practice.
Section
75
Banks shall grant loans only in the amounts
and for the periods of time essential for the effective completion of the
operations to be financed.
Section
76
Before granting a loan, banks must exercise
proper caution to ascertain that the debtor is capable of fulfilling his
commitments to the bank.
Toward this end, banks may demand of their
credits applicants a statement of their property and of their income and
expenditures. Should such statement prove to be false or incorrect in any
material detail, the bank may terminate any loan granted on the basis of said
statement and shall have the right to demand immediate repayment of the
obligation.
Section
77
The purpose of all loans shall be stated in
the contract between the bank and the borrower. If the bank finds that the
funds have been employed, without its approval, for purposes other than those
agreed upon with the bank, the bank shall have the right to terminate the loan
and demand immediate repayment of the obligation.
Section
78
Loans against real estate security shall
not exceed seventy per cent (70%) of the appraised value of the respective real
estate security, plus seventy per cent (70%) of the appraised value of insured
improvements, and such loans shall not be made unless title to the real estate,
free from all encumbrances, shall be in the mortgagor. In the event of
foreclosure, whether judicially or extrajudicially, of any mortgage on real
estate which is security for any loan granted before the passage of this Act or
under the provisions of this Act, the mortgagor or debtor whose real property
has been sold at public auction, judicially or extrajudicially, for the full or
partial payment of an obligation to any bank, banking, or credit institution,
within the purview of this Act, shall have the right, within one year after the
sale of the real estate as a result of the foreclosure of the respective
mortgage, to redeem the property by paying the amount fixed by the court in the
order of execution, with interest thereon at the rate specified in the
mortgage, and all the costs and other judicial expenses incurred by the bank or
institution concerned by reason of the execution and sale and as a result of
the custody of said property less the income received from the property. However,
the purchaser at the auction sale concerned shall have the right to enter upon
and take possession of such property immediately after the date of the
confirmation of the auction sale and administer the same in accordance with
law.
Similarly, loans on the security of
chattels shall not exceed fifty per cent (50%) of the appraised value of the
security, and such loans shall not be made unless title to the chattels, free
from all encumbrances, shall be in the mortgagor.
The Monetary Board may, by regulation,
prescribe further security requirements to which the various types of bank
credit shall be subject, and, in accordance with the authority granted to it in
section one hundred eleven of the Central Bank Act, the Board may by regulation
reduce the maximum ratios established in the present section, but in the
exercise of the aforementioned authority, the Board shall in no case fix ratios
greater than those established herein.
The Monetary Board may, similarly, in
accordance with the authority granted to it in section one hundred eleven of
the Central Bank Act, reduce the maximum permissible maturities specified in
this Act for various types of bank loans, but in no case shall the Board
exercise such power to authorize maximum maturities greater than those
established in this Act. Any reduction by the Board of the maximum maturities
specified in this Act shall apply only to loans made after the date of such
action.
Section
79
The amortization schedule of bank loans
shall be adapted to the nature of the operations to be financed.
In the case of loans with maturities of
more than three years, provision 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 three years from the date on which the loan is
granted.
Section
80
Borrowers may at any time prior to the
agreed maturity date prepay, in whole or in part, the unpaid balance of any
bank loan.
Section
81
The Monetary Board may by regulation
prescribe the conditions and limitations under which banks may grant extensions
or renewals of their loans.
Section
82
Banks and banking institutions incorporated
under the laws of the Philippines shall not advertise the amount of their
authorized or subscribed capital stock without indicating, at the same time and
with equal prominence, the amount of their 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. In case no capital has
been definitely assigned to such branch, such fact shall be stated in, and
shall form part of, the advertisement.
Section
83
No director or officer of any banking
institution shall, either directly or indirectly, for himself or as the
representative or agent of others, borrow any of the deposits of funds of such
bank, nor shall he become a guarantor, indorser, or surety for loans from such
bank to others, or in any manner be an obligor for moneys borrowed from the
bank or loaned by it, except with the written approval of the majority of the
directors of the bank, excluding the director concerned. Any such approval shall
be entered upon the records of the corporation and a copy of such entry shall
be transmitted forthwith to the Superintendent of Banks. The office of any
director or officer of a bank who violates the provisions of this section shall
immediately become vacant and the director or officer shall be punished by
imprisonment of not less than one year nor more than ten years and by a fine of
not less than one thousand nor more than ten thousand pesos.
In addition to the conditions established
in the preceding paragraph, no director of a building and loan association
shall engage in any of the operations mentioned in said paragraph except upon
the pledge of shares of the association having a total withdrawal value greater
than the amount borrowed.
Section
84
If losses have at any time been sustained
by any banking institution equal to or exceeding the undivided profits on hand,
no dividend shall be declared; and no dividend shall ever be declared by any
such bank while it continues in banking operations to an amount greater than
its net profits then on hand, deducting therefrom its losses and bad debts. All
debts due to any such bank on which interest is past due and unpaid for a
period of six months, unless the same are well-secured and in process of collection,
shall be considered bad debts within the meaning of this section.
Section
85
Any director or officer of any banking
institution who receives or permits or causes to be received in said bank any
deposit, or who pays out or permits or cause to be paid out any funds of said
bank, or who transfers or permits or causes to be transferred any securities or
property of said bank, after said bank becomes insolvent, shall be punished by
fine of not less than one thousand nor more than ten thousand and by imprisonment
for not less than two nor more than ten years.
Section
86
In case of the voluntary liquidation of any
bank or banking institution incorporated under the laws of the Philippines, or
of any branch in the Philippines of a foreign bank or banking corporation,
written notice of 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
the creditors.
Section
87
Unless otherwise herein provided, the
violation of any of the provisions of this Act shall be punished by a fine of
not more than two thousand pesos or by imprisonment for not more than two
years, or by both. If the violation is committed by a corporation, the same
shall, upon such violation being proved, be dissolved by quo warranto
proceedings instituted by the Solicitor General: Provided, That nothing in this
section shall be construed as repealing the other causes for the dissolution of
corporations prescribed by existing law, and the remedy provided for in this
section shall be considered as additional to the remedies already existing.
CHAPTER X
Final Provisions
Section
88
All authority now vested in the Bank
Commissioner and the Bureau of Banking with respect to the establishment,
operation or liquidation of banking and credit institutions, and branches or
agencies thereof, are hereby transferred to the Central Bank.
Section
89
All authority now vested in the Secretary
of Finance with respect to the establishment, operation or liquidation of
banking and credit institutions, or branches or agencies thereof, shall be
transferred to, and exercised by the Monetary Board of the Central Bank.
Section
90
Sections one hundred seventy-five to one
hundred eighty-three and one hundred ninety-nine to two hundred seventeen of
the Code of Commerce, as amended; sections one hundred three to one hundred
forty-six and one hundred seventy-one to one hundred ninety of Act Numbered
Fourteen hundred and fifty-nine, as amended; Acts Numbered Thirty-one hundred
and fifty-four and Thirty-five hundred and twenty, and all laws or parts
thereof, including those parts of special charters of the Philippine National
Bank and of other banking institutions in the Philippines which are
inconsistent herewith, are hereby repealed.
Section
91
This Act shall take effect on the same day
that the Central Bank commences operation.
Approved:
July
24, 1948
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