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JAY PRJAY PRINCESS SACUPASO

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R.A. No. 337, General Banking Act

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 in order to ascertain the effects of the operations of insurance companies on the monetary, credit, and exchange 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";


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(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


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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


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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


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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


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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;


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(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.


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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;


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(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.


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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


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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


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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


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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


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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:


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(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


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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


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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.


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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


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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.


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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.


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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


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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


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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.

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.


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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


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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


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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:


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(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.


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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


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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.


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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.


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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.


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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


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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.


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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


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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.


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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


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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


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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


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(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.


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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


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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


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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.


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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;


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(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


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(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.


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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.


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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.


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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


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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.


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(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.


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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.


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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.


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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


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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.


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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


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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,


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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.


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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.


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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.


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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.


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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.


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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 PROVISION

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.


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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


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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. 720 - AN ACT PROVIDING FOR THE CREATION, ORGANIZATION AND OPERATION OF RURAL BANKS, AND FOR OTHER PURPOSES

Section 1. The short title of this Act shall be "Rural Banks' Act".


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Sec. 2. It shall be the declared policy of Congress. — To promote and expand the rural economy in an orderly and effective manner by providing the people of the rural communities with the means of facilitating and improving their productive activities, and to encourage cooperatives. Toward this end, the Government shall encourage and assist in the establishment of a system of rural banks which will place within easy reach and access of the people credit facilities on reasonable terms. The Department of Agriculture and Natural Resources, the Department of Commerce and Industry, and other appropriate agencies or instrumentalities of the Government shall, in cooperation with the Rural Bank, provide advice on business or farm management and proper use of credit for production and marketing.

Sec. 3. In furtherance of this policy, the Monetary Board of the Central Bank of the Philippines, shall formulate the necessary rules and regulations governing the establishment and operation of Rural Banks for the purpose of providing adequate credit facilities to small farmers and merchants, and to supervise the operation of such banks.

Sec. 4. No Rural Bank shall be operated without a Certificate of Authority of the Monetary Board of the Central Bank. Rural Banks shall be organized in the form of stock corporations. Duly established cooperatives may organized Rural Banks and/or subscribe to the shares of stock of any Rural Bank. At least sixty per cent of the capital stock of any Rural Bank shall be owned and held by citizens of the Philippines: Provided, however, That if said subscription of private shareholders to the capital stock of a Rural Bank cannot be secured or is not available, the Rehabilitation Finance Corporation, on representation of the said private shareholders and upon approval of the Monetary Board of the Central Bank shall subscribe to the capital stock of such rural bank, which shall be paid in full at the time of subscription, in an amount equal to the fully paid subscribed capital of the private shareholders: Provided, further, That such shares of stock subscribed by the Rehabilitation Finance Corporation may be sold at any time at par to private individuals who are citizens of the Philippines: Provided, finally, That in the sale of the shares of stock subscribed by the Rehabilitation Finance Corporation, the registered stockholders shall be given at least six months option within which to purchase the same in proportion to their respective holdings, but in the absence of such buyer, preference, however, shall be given to residents of the locality or province where the Rural Bank is located. All members of the Board of Directors of the Rural Banks shall be citizens of the Philippines.

Sec. 5. Loans or advances extended by Rural Banks, organized and operated under this Act, shall be primarily for the purpose of meeting the normal credit needs of any small farmer or farm family owning or cultivating, in the aggregate, not more than fifty hectares of land dedicated to agricultural production, as well as the normal credit needs of cooperatives and small merchants. For the purposes of this Act, a small merchant shall be one whose capital investment does not exceed twenty-five thousand pesos. In the granting of loans, the Rural Bank shall give preference to the application of farmers whose cash requirements are small: Provided, however, That in the case of loans secured by real estate no Torrens title shall be required.

Sec. 6. With the view to insuring balanced rural economic growth and expansion, Rural Banks may, within limits and conditions fixed by the Monetary Board, devote a portion of their loanable funds to


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meeting the normal credit needs of small business enterprises whose capital investment does not exceed twenty-five thousand pesos and of essential rural enterprises or industries, other than those which are strictly agricultural in nature.

Sec. 7. To provide supplemental capital to any Rural Bank until it has accumulated enough capital of its own or stimulate private investment in Rural Banks, the Rehabilitation Finance Corporation shall, upon certification of the Monetary Board of the existence of such need, subscribe to capital stock of any Rural Bank from time to time in an amount equal to but not exceeding the total equity investment of the private shareholders: Provided, however, That shares of stock issued to the Rehabilitation Finance Corporation, pursuant to this section, may at any time be paid off at par and retired in whole in part if, in the opinion of the Monetary Board, the Rural Bank has accumulated enough capital strength to permit retirement of such shares; or if an offer is received from private sources, to replace the equity investments of the Rehabilitation Finance Corporation with an equivalent investment or more in the common stock of such Bank. In case of such retirement of stock or replacement of equity investments of the Rehabilitation Finance Corporation, the registered private shareholders of the Rural Bank shall be given the right of preemption in proportion to their respective holdings.

Stock held by the Rehabilitation Finance Corporation, under the terms of this section, shall be made preferred only as to assets upon liquidation and without the power to vote and shall share in dividend distributions without preference: Provided, however, That if such stock of the Rehabilitation Finance Corporation is sold to private shareholders, the same shall thereupon have the right to vote.

Sec. 8. The Rehabilitation Finance Corporation is authorized to obtain from the "Counterpart Fund" and "Special Account" authorized under Republic Act Numbered Six hundred and four such amounts as it may require, but not more than ten million pesos, for the purpose of subscribing to the shares of stock of Rural Banks, and of granting loans to such banks as provided in section twelve of this Act. All funds obtained by the Rehabilitation Finance Corporation from the "Counterpart Fund" and "Special Account" shall constitute a revolving fund and together with the interest which will accrue thereon will be used solely as provided for in this section.

Sec. 9. Stock preferred as to assets upon liquidation shall be issued only to represent the contributions to capital stock of the Rural Bank by the Government through the Rehabilitation Finance Corporation. If there are no such public investments, only one class of stock shall be issued by any Rural Bank. The powers of the Monetary Board over Rural Banks shall extend to prescribing the amount, value and class of stock issued by any Rural Bank, organized under this Act.

Section 10. The power to supervise the operation of any Rural Bank by the Monetary Board of the Central Bank, as herein indicated, shall consist in placing limits to the maximum credited allowed any individual borrower; in prescribing the interest rate; in determining the loan period and loan procedures; in indicating the manner in which technical assistance shall be extended to Rural Banks; in imposing a uniform accounting system and manner of keeping the accounts and records of the Rural Banks; in undertaking regular credit examination of the Rural Banks; in instituting periodic surveys of


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loan and lending procedures, audits, test check of cash and other transactions of the Rural Banks; in conducting training courses of personnel of Rural Banks; and, in general, in supervising the business operation of the Rural Bank.

Section 11. With the written permission of the Monetary Board of the Central Bank, any Rural Bank may:

(a) accept savings and time deposits;(b) open current or checking accounts. The Monetary Board shall determine when a Rural Bank may be authorized to open current or checking accounts;(c) act as a correspondent for other financial institutions; (d) act as a collection agent;(e) rediscount with the Philippine National Bank or Rehabilitation Finance Corporation or other banks and their branches and agencies. The Central Bank shall specify the nature of paper deemed acceptable for rediscount, as well as the rediscount rate to be charged by any of these institutions.

Section 12. The Rehabilitation Finance Corporation shall, upon request of the Monetary Board, extend to a Rural Bank a loan or loans repayable in not more than ten years, with interest at the rate of two per cent per annum, against securities which may be offered by any stockholder or stockholders of the Rural Bank and which the Monetary Board may consider adequate: Provided —

(a) That the Monetary Board is convinced that the resources of the Rural Bank are inadequate to meet the legitimate credit requirements of the locality wherein the Rural Bank is established;(b) That there is a dearth of private capital in the said locality; and(c) That it is not possible for the stockholders of the Rural Bank to increase the paid-up capital thereof.Section 13. In an emergency or when a financial crisis is imminent, the Central Bank may give a loan to any Rural Bank against assets of the Rural Bank which may be considered acceptable by a concurrent vote of at least five members of the Monetary Board.

Section 14. All Rural Banks created and organized under the provisions of this Act, with assets not exceeding five hundred thousand pesos shall be exempt from all taxes of whatever nature a well as charges and fees required in filing articles of incorporation.

Section 15. The Central Bank of the Philippines shall extend technical assistance to any Rural Bank in the process of organization or during the course of operations whenever it is requested to do so or whenever the Monetary Board deems it necessary to preserve, protect and promote the objectives of this Act: Provided, however, That said assistance shall be without cost or obligation on the part of the Rural Bank.

Section 16. Any justice of the peace, in his capacity as notary ex officio, shall render service free of charge to any person applying for a loan not exceeding two thousand pesos from the Rural Bank either in administering the oath or in the acknowledgment of instruments relative to said loan.


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Section 17. Any register of deeds shall accept for registration, free of charge, any instrument relative to a loan not exceeding two thousand pesos made to any person by the Rural Bank.

Section 18. Rural Banks organized under this Act shall be exempt from the obligation of contributing for the maintenance of the Department of Supervision and Examination provided in section twenty-eight of Republic Act Numbered Two hundred and sixty-five.

Section 19. Every individual acting as officer or employee of a Rural Bank and handling funds or securities amounting to one thousand pesos or more, in any one year, shall be covered by an adequate bond as determined by the Monetary Board; and the by-laws of the Rural Bank may also provide for bonding of other employees or officers of Rural Banks.

Sec. 20. For the purpose of carrying out the objectives of this Act, the Central Bank is authorized to require the services and facilities of any Department or instrumentality of the Government or any officer or employee of any such Department or Government instrumentality.

Sec. 21. Rural Banks organized and operated under the provisions of this Act shall act as agent of the Philippine National Bank and the Rehabilitation Finance Corporation in places where the latter have no branch or agency.

Sec. 22. A fine of not more than two thousand pesos or imprisonment for not more than one year, or both, at the discretion of the court, shall be imposed upon:

1. Any officer, employee, or agent of a Rural Bank who shall — (a) make false entries in any bank report or statement thereby affecting the financial interest of, or causing damage to, the bank or any person; or(b) without order of a court of competent jurisdiction disclose any information relative to the funds or properties in the custody of the bank belonging to private individuals, corporations, or any other entity; or(c) accept gifts, fees or commission or any other form of remuneration in connection with the approval of a loan from said bank; or(d) overvalue ord in overvaluing any security for the purpose of influencing in any way the action of the bank on any loan; or(e) appear and sign as guarantor, indorser or surety for loans granted by the bank.

2. Any applicant for a loan from, or borrower of a Rural Bank who shall —(a) misuse, misapply, or divert the proceeds of the loan obtained by him from its declared purpose; or (b) fraudulently overvalue property offered as security for a loan from the said bank; or

(c) give out or furnish false or willful misrepresentation of material facts for the purpose of obtaining, renewing, or increasing a loan or extending the period thereof; or (d) attempt to defraud the said bank in the event of court action to recover a loan; or


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(e) offer any officer, employee or agent of a Rural Bank a gift, fee, commission or other form of compensation in order to influence such bank personnel into approving a loan application; or (f) dispose or encumber the property or the crops offered as security for the loan.

3. Any examiner, or officer or employee of the Central Bank of the Philippines or of department, bureau, office, branch or agency of the Government who is assigned to examine, supervise, assist or rendered technical service to Rural Banks and who shall commit any of the acts enumerated in paragraph one of this section or connive ord in the commission of the same.

Sec. 23. Any justice of the peace or register of deeds who shall demand or accept, directly or indirectly, any gift, fee, commission or other form of compensation in connection with the service required to be performed by said justice of the peace as provided in section seventeen and by said register of deeds as provided in section eighteen of this Act, shall be punished by a fine of not more than one thousand pesos or by imprisonment for not more than one year, or both, at the discretion of the court.

Sec. 24. Any bank not organized under this Act and any person, association, or corporation doing the business of banking, not authorized under this Act which shall use the words "Rural Bank" as part of the name or title of such bank or of such person, association, or corporation, shall be punished by a fine of not less than fifty pesos for each day during which said words are so used.

Sec. 25. The Monetary Board of the Central Bank shall submit a report to the Congress on or before the end of each calendar year of all the rules and regulations promulgated by it in accordance with the provisions of this Act, as well as its other actuations in connection with Rural Banks, together with an explanation of its reasons therefor.

Sec. 26. 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, and the application of such provision or section to other persons or circumstances, shall not be affected thereby.

Sec. 27. The provisions of Republic Acts Numbered Two hundred as they are applicable and not in conflict with any provision of this Act, are hereby made a part of this Act.

Sec. 28. This Act shall take effect upon its approval.




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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

1 This 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.

MALACAÑANG


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M a n i l a

PRESIDENTIAL DECREE No. 679 April 2, 1975

AMENDING ACT NUMBERED THIRTY NINE HUNDRED AND THIRTY SIX, AN ACT REQUIRING BANKS, TRUST CORPORATIONS, AND BUILDING AND LOAN ASSOCIATIONS, TO TRANSFER UNCLAIMED BALANCES HELD BY THEM TO THE TREASURER OF THE PHILIPPINES AND FOR OTHER PURPOSES.

WHEREAS, Act No. 3936 requires the publication of a sworn statement of unclaimed balances in banks once a week of three consecutive weeks in at least two newspapers of general circulation in the locality where the banks are situated, if there be any, and if there is none, in the City of Manila, one in English and one in Spanish, the cost of which shall be paid by the Bureau of Treasury, which shall be reimbursed out of the escheated funds;

WHEREAS, the law also provides for the publication of summons and a notice upon the commencement of the prescribed judicial proceedings for the escheat of unclaimed balances;

WHEREAS, past experience has shown that the cost of publication required by law, the increase of which has been substantial the past few years, is more than the aggregate amount of the unclaimed balances to be escheated, the average amount of which is small;

WHEREAS, there is a felt need to simplify the procedure for the escheat of unclaimed balances for the purpose of reducing the expenses therefor;

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 order:

Section 1. Sections 1, 2, 3, 4, and 5 of Act No. 3936 are hereby amended to read as follows:

"Sec. 1. "Unclaimed balances", within the meaning of this Act, shall include credits or deposits of money, bullion, security or other evidence of indebtedness of any kind, and interest thereon with banks, buildings and loan associations, and trust corporations, as hereinafter defined, in favor of any person known to be dead or who has not made further deposits or withdrawals during the preceding ten years or more. Such unclaimed balances, together with the increase and proceeds thereof, shall be deposited with the Treasurer of the Philippines to the credit of the Government of the Republic of the Philippines to be used as the National Assembly may direct.

"Banks", "building and loan associations" and "trust corporations", within the meaning of this Act, shall refer to institutions defined under Section two, thirty-nine and fifty-six, respectively, of Republic Act Numbered Three Hundred Thirty Seven, otherwise known as the General Banking Act, as amended, whether organized under special charters or not.

"Sec. 2. Immediately after the taking effect of this Act and within the month of January of every odd year, all banks, building and loan associations, and trust corporations shall forward to the Treasurer of


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the Philippines a statement, under oath, of their respective managing officers, of all credits and deposits held by them in favor of persons known to be dead, or who have not made further deposits or withdrawals during the preceding ten years or more, arranged in alphabetical order according to the names of creditors and depositors, and showing:

"(a) The names and last known place of residence or post office addresses of the persons in whose favor such unclaimed balances stand;

"(b) The amount and the date of the outstanding unclaimed balance and whether the same is in money or in security, and if the latter, the nature of the same;

"(c) The date when the person in whose favor the unclaimed balance stands died, if known, or the date when he made his last deposit or withdrawal; and

"(d) The interest due on such unclaimed balance, if any, and the amount thereof.

"A copy of the above sworn statement shall be posted in a conspicuous place in the premises of the bank, building and loan association, or trust corporation concerned for at least sixty days from the date of filing thereof: Provided, That immediately before filing the above sworn statement, the bank, building and loan association, and trust corporation shall communicate with the person in whose favor the unclaimed balance stands at his last known place of residence or post office address.

"It shall be the duty of the Treasurer of the Philippines to inform the Solicitor General from time to time the existence of unclaimed balances held by banks, building and loan associations, and trust corporations.

"Sec. 3. Whenever the Solicitor General shall be informed of such unclaimed balances, he shall commence an action or actions in the name of the People of the Republic of the Philippines in the Court of First Instance of the province or city where the bank, building and loan association or trust corporation is located, in which shall be joined as parties the bank, building and loan association or trust corporation and all such creditors or depositors. All or any of such creditors or depositors or banks, building and loan association or trust corporations may be included in one action. Service of process in such action or actions shall be made by delivery of a copy of the complaint and summons to the president, cashier, or managing officer of each defendant bank, building and loan association or trust corporation and by publication of a copy of such summons in a newspaper of general circulation, either in English, in Filipino, or in a local dialect, published in the locality where the bank, building and loan association or trust corporation is situated, if there be any, and in case there is none, in the City of Manila, at such time as the court may order. Upon the trial, the court must hear all parties who have appeared therein, and if it be determined that such unclaimed balances in any defendant bank, building and loan association or trust corporation are unclaimed as hereinbefore stated, then the court shall render judgment in favor of the Government of the Republic of the Philippines, declaring that said unclaimed balances have escheated to the Government of the Republic of the Philippines and commanding said bank, building and loan association or trust corporation to forthwith deposit the same


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with the Treasurer of the Philippines to credit of the Government of the Republic of the Philippines to be used as the National Assembly may direct.

"At the time of issuing summons in the action above provided for, the clerk of court shall also issue a notice signed by him, giving the title and number of said action, and referring to the complaint therein, and directed to all persons, other than those named as defendants therein, claiming any interest in any unclaimed balance mentioned in said complaint, and requiring them to appear within sixty days after the publication or first publication, if there are several, of such summons, and show cause, if they have any, why the unclaimed balances involved in said action should not be deposited with the Treasurer of the Philippines as in this Act provided and notifying them that if they do not appear and show cause, the Government of the Republic of the Philippines will apply to the court for the relief demanded in the complaint. A copy of said notice shall be attached to, and published with the copy of, said summons required to be published as above, and at the end of the copy of such notice so published, there shall be a statement of the date of publication, or first publication, if there are several, of said summons and notice. Any person interested may appear in said action and become a party thereto. Upon the publication or the completion of the publication, if there are several, of the summons and notice, and the service of the summons on the defendant banks, building and loan associations or trust corporations, the court shall have full and complete jurisdiction in the Republic of the Philippines over the said unclaimed balances and over the persons having or claiming any interest in the said unclaimed balances, or any of them, and shall have full and complete jurisdiction to hear and determine the issues herein, and render the appropriate judgment thereon.

"Sec. 4. If the president, cashier or managing officer of the bank, building and loan association, or trust corporation neglects or refuses to make and file the sworn statement required by this action, such bank, building and loan association, or trust corporation shall pay to the Government the sum of five hundred pesos a month for each month or fraction thereof during which such default shall continue.

"Sec. 5. Any bank, building and loan association or trust corporation which shall make any deposit with the Treasurer of the Philippines in conformity with the provisions of this Act shall not thereafter be liable to any person for the same and any action which may be brought by any person against in any bank, building and loan association, or trust corporation for unclaimed balances so deposited with the Treasurer of the Philippines shall be defended by the Solicitor General without cost to such bank, building and loan association or trust corporation."

Section 2. This Decree shall take effect immediately.

DONE in the City of Manila, this 2nd day of April, in the year of Our Lord, nineteen hundred and seventy-five.


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Anti-Money Laundering Act of 2001 (RA 9160)

AN ACT DEFINING THE CRIME OF MONEY LAUNDERING, PROVIDING PENALTIES THEREFOR AND FOR OTHER PURPOSES

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, close-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 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.


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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;


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(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.


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(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.


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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


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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 Forfeited 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


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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


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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 Requests 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 (Php 3,000,000.00) 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.


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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, reports 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.


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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.


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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.

Republic Act No. 9194 March 7, 2003

AN ACT AMENDING REPUBLIC ACT NO. 9160, OTHERWISE KNOWN AS THE "ANTI-MONEY LAUNDERING ACT OF 2001"

Be it enacted by the Senate and House of Representative of the Philippines in Congress assembled:

SECTION 1. Section 3, paragraph (b) of Republic Act No. 9160 is hereby amended as follows:

"(b) 'Covered transaction' is a transaction in cash or other equivalent monetary instrument involving a total amount in excess of Five hundred thousand pesos (PhP 500,000.00) within one (1) banking day.

SECTION 2. Section 3 of the same Act is further amended by inserting between paragraphs (b) and (c) a new paragraph designated as (b-1) to read as follows:

"(b-1) 'Suspicious transaction' are transactions with covered institutions, regardless of the amounts involved, where any of the following circumstances exist:

1. there is no underlying legal or trade obligation, purpose or economic justification;

2. the client is not properly identified;

3. the amount involved is not commensurate with the business or financial capacity of the client;


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4. taking into account all known circumstances, it may be perceived that the client's transaction is structured in order to avoid being the subject of reporting requirements under the Act;

5. any circumstances relating to the transaction which is observed to deviate from the profile of the client and/or the client's past transactions with the covered institution;

6. the transactions is in a way related to an unlawful activity or offense under this Act that is about to be, is being or has been committed; or

7. any transactions that is similar or analogous to any of the foregoing."

SECTION 3. Section 3(i) of the same Act is further amended to read as follows:

"(i) 'Unlawful activity' refers to any act or omission or series or combination thereof involving or having direct relation to following:

"(1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the Revised Penal Code, as amended;

"(2) Sections 4, 5, 6, 8, 9, 10, 12, 13, 14, 15, and 16 of Republic Act No. 9165, otherwise known as the Comprehensive Dangerous Act of 2002;

"(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 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 Electrinic 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;


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"(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."

SECTION 4. Section 4 of the same Act is hereby amended to read as follows:

"SEC. 4. Money Laundering Offense. -- Money laundering is a crime whereby the proceeds of an unlawful activity as herein defined are transacted, theeby 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 transacts 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 falicitates 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."

SECTION 5. Section 7 of the same Act is hereby amended as follows:

"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 member. The AMLC shall act unanimously in the discharge of its functions as defined hereunder:

"(1) to require and receive covered or suspicious transaction reports from covered institutions;

"(2) to issue orders addressed to the appropriate Supervising Authority or the covered institutions to determine the true identity of the owner of any monetary instrument or property subject of a covered transaction or suspicious transaction report or request for assistance from a foreign State, or believed by the Council, on the basis fo 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 th Solicitor General;

"(4) to cause the filing of complaints with the Department of Justice or the Ombudsman for the prosecution of money laundering offenses;


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"(5) to investigate suspicious transactions and covered transactions deemed suspicious after an investigation by AMLC, money laundering activities and other violations of this Act;

"(6) to apply before the Court of Appeals, ex parte, for the freezing of any monetary instrument or property alleged to be the proceeds of any unlawful activity as defined in Section 3(i) hereof;

"(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 the money laundering, the viable means of preventing money laundering and the effective ways of prosecuting and punishing offenders;

"(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; and

"(11) to impose administrative sanctions for the violation of laws, rules, regulations, and orders and resolutions issued pursuant thereto."

SECTION 6. Section 9(c) of the same Act is hereby amended to read as follows:

"(c) Reporting of Covered and Suspicious Transactions. -- Covered institutions shall report to the AMLC all covered transactions and suspicious transactions within five(5) working days from occurrences thereof, unless the Supervising Authority prescribes a longer period not exceeding ten (10) working days.

"Should a transaction be determined to be both a covered transaction and a suspicious transaction, the covered institution shall be required to report the same as a suspicious transaction.

"When reporting covered or suspicious transactions to the AMLC, covered institutions and their officers and employees 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 an means, to any person, the fact that a covered or suspicious transaction report was made, the contents thereof, or any other information in relation thereto. In case of violation thereof, the concerned officer and employee 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 or suspicious transaction report in the regular


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performance of his duties in good faith, whether or not such reporting results in any criminal prosecution under this Act of any other law.

"When reporting covered or suspicious transactions to the AMLC, covered instituting and their officers and employees are prohibited from communicating directly or indirectly, in any manner or by any means, to any person or entity, the media, the fact that a covered or suspicious 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 and employee of the covered institution and media shall be held criminally liable.


"Sec 10. Freezing of Monetary Instrument or Property. -- The Court of Appeals, upon application ex parte by the AMLC and after determination that probable cause exists that any monetary instrument or property is in any way related to an unlawful activity as defined in Section 3(i) hereof, may issue a freeze order which shall be effective immediately. The freeze order shall be for a period of twenty (20) days unless extended by the 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 are related to an unlawful activities as defined in Section 3(I) hereof or a money laundering offense under Section 4 hereof, except that no court order shall be required in cases involving unlawful activities defined in Sections 3(I)1, (2) and (12).

"To ensure compliance with this Act, the Bangko Sentral ng Pilipinas (BSP) may inquire into or examine any deposit of investment with any banking institution or non-bank financial institution when the examination is made in the course of a periodic or special examination, in accordance with the rules of examination of the BSP.

SECTION 9. Section 14, paragraphs (c) and (d) of the same Act is hereby amended to read as follows:

"(c) Malicious Reporting. Any person who, with malice, or in bad faith, reports or files a completely unwarranted or false information relative to money laundering transaction against any person shall be subject to a penalty to 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.


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"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, or allowed by their gross negligence, the commission of the crime. If the offender is a juridical person, the court may suspend or revoke its license. If the offer 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). In the case of a breach of confidentiality that is published or reported by media, the responsible reporter, writer, president, publisher, manager and editor-in-chief shall be liable under this Act.

SECTION 10. Section 15 of Republic Act No. 9160 is hereby deleted.


"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.

SECTION 12. Transitory Provision. -- Existing freeze orders issued by the AMLC shall remain in force for a period of thirty (30) days after the effectivity of this Act, unless extended by the Court of Appeals.

SECTION 13. 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.

REPUBLIC ACT NO. 10167 June 06, 2012

AN ACT TO FURTHER STRENGTHEN THE ANTI-MONEY LAUNDERING LAW, AMENDING FOR THE PURPOSE SECTIONS 10 AND 11 OF REPUBLIC ACT NO. 9160, OTHERWISE KNOWN AS THE ANTI-MONEY

LAUNDERING ACT OF 2001, AS AMENDED, AND FOR OTHER PURPOSES

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

Section 1. Section 10 of Republic Act No. 9160, as amended, is hereby amended to read as follows:


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"SEC. 10. Freezing of Monetary Instrument or Property. – Upon verified ex parte petition by the AMLC and after determination that probable cause exists that any monetary instrument or property is in any way related to an unlawful activity as defined in Section 3(i) hereof, the Court of Appeals may issue a freeze order, which shall be effective immediately. The freeze order shall be for a period of twenty (20) days unless extended by the court. In any case, the court should act on the petition to freeze within twenty-four (24) hours from filing of the petition. If the application is filed a day before a nonworking day, the computation of the twenty-four (24)-hour period shall exclude the nonworking days."

"A person whose account has been frozen may file a motion to lift the freeze order and the court must resolve this motion before the expiration of the twenty (20)-day original freeze order."

"No court shall issue a temporary restraining order or a writ of injunction against any freeze order, except the Supreme Court."

Section 2. Section 11 of the same Act is hereby amended to read as follows:

"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, including related accounts, with any banking institution or non-bank financial institution upon order of any competent court based on an ex parte application in cases of violations of this Act, when it has been established that there is probable cause that the deposits or investments, including related accounts involved, are related to an unlawful activity as defined in Section 3(i) hereof or a money laundering offense under Section 4 hereof; except that no court order shall be required in cases involving activities defined in Section 3(i)(1), (2), and (12) hereof, and felonies or offenses of a nature similar to those mentioned in Section 3(i)(1), (2), and (12), which are Punishable under the penal laws of other countries, and terrorism and conspiracy to commit terrorism as defined and penalized under Republic Act No. 9372."

"The Court of Appeals shall act on the application to inquire into or examine any deposit or investment with any banking institution or non-bank financial institution within twenty-four (24) hours from filing of the application."

"To ensure compliance with this Act, the Bangko Sentral ng Pilipinas may, in the course of a periodic or special examination, check the compliance of a Covered institution with the requirements of the AMLA and its implementing rules and regulations."

"For purposes of this section, ‘related accounts’ shall refer to accounts, the funds and sources of which originated from and/or are materially linked to the monetary instrument(s) or property(ies) subject of the freeze order(s)."

"A court order ex parte must first be obtained before the AMLC can inquire into these related Accounts: Provided, That the procedure for the ex parte application of the ex parte court order for the principal account shall be the same with that of the related accounts."


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"The authority to inquire into or examine the main account and the related accounts shall comply with the requirements of Article III, Sections 2 and 3 of the 1987 Constitution, which are hereby incorporated by reference."

Section 3. Separability Clause. – If any provision of this Act or the application thereof to any person or circumstance is held to be void, or unconstitutional, any other provision not affected thereby shall remain in full force and effect.

Section 4. Repealing Clause. – All laws, decrees, executive orders, rules and regulations or parts thereof as are inconsistent with this Act are hereby repealed, amended or modified accordingly: Provided, That the penal provisions shall not apply to acts done prior to the effectivity of the AMLA on October 17, 2001 .

Section 5. 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.


AN ACT FURTHER STRENGTHENING THE ANTI-MONEY LAUNDERING LAW, AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 9160, OTHERWISE KNOWN AS THE “ANTI-MONEY LAUNDERING ACT OF 2001″, AS

AMENDED

SECTION 1. Section 3(a) of Republic Act No. 9160, as amended, is hereby amended to read as follows:

“(a) ‘Covered persons’, natural or juridical, refer to:

“(1) banks, non-banks, quasi-banks, trust entities, foreign exchange dealers, pawnshops, money changers, remittance and transfer companies and other similar entities and all other persons and their subsidiaries and affiliates supervised or regulated by the Bangko Sentral ng Pilipinas (BSP);


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“(2) insurance companies, pre-need companies and all other persons supervised or regulated by the Insurance Commission (IC);

“(3) (i) securities dealers, brokers, salesmen, investment houses and other similar persons managing securities or rendering services as investment agent, advisor, or consultant, (ii) mutual funds, close-end investment companies, common trust funds, and other similar persons, and (iii) 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 the Securities and Exchange Commission (SEC);

“(4) jewelry dealers in precious metals, who, as a business, trade in precious metals, for transactions in excess of One million pesos (P1,000,000.00);

“(5) jewelry dealers in precious stones, who, as a business, trade in precious stones, for transactions in excess of One million pesos (P1,000,000.00);

“(6) company service providers which, as a business, provide any of the following services to third parties: (i) acting as a formation agent of juridical persons; (ii) acting as (or arranging for another person to act as) a director or corporate secretary of a company, a partner of a partnership, or a similar position in relation to other juridical persons; (iii) providing a registered office, business address or accommodation, correspondence or administrative address for a company, a partnership or any other legal person or arrangement; and (iv) acting as (or arranging for another person to act as) a nominee shareholder for another person; and

“(7) persons who provide any of the following services:(i) managing of client money, securities or other assets;(ii) management of bank, savings or securities accounts;(iii) organization of contributions for the creation, operation or management of companies; and(iv) creation, operation or management of juridical persons or arrangements, and buying and selling business entities.

“Notwithstanding the foregoing, the term ‘covered persons’ shall exclude lawyers and accountants acting as independent legal professionals in relation to information concerning their clients or where disclosure of information would compromise client confidences or the attorney-client relationship: Provided, That these lawyers and accountants are authorized to practice in the Philippines and shall continue to be subject to the provisions of their respective codes of conduct and/or professional responsibility or any of its amendments.”

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

“(i) ‘Unlawful activity’ refers to any act or omission or series or combination thereof involving or having direct relation to the following:


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“(1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the Revised Penal Code, as amended;

“(2) Sections 4, 5, 6, 8, 9, 10, 11, 12, 13, 14, 15 and 16 of Republic Act No. 9165, otherwise known as the Comprehensive Dangerous Drugs Act of 2002;

“(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 and Other Forms of Swindling under Article 316 of the Revised Penal Code, as amended;

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

“(11) Violations of 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;

“(13) Terrorism and conspiracy to commit terrorism as defined and penalized under Sections 3 and 4 of Republic Act No. 9372;

“(14) Financing of terrorism under Section 4 and offenses punishable under Sections 5, 6, 7 and 8 of Republic Act No. 10168, otherwise known as the Terrorism Financing Prevention and Suppression Act of 2012:

“(15) Bribery under Articles 210, 211 and 211-A of the Revised Penal Code, as amended, and Corruption of Public Officers under Article 212 of the Revised Penal Code, as amended;

“(16) Frauds and Illegal Exactions and Transactions under Articles 213, 214, 215 and 216 of the Revised Penal Code, as amended;

“(17) Malversation of Public Funds and Property under Articles 217 and 222 of the Revised Penal Code, as amended;


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“(18) Forgeries and Counterfeiting under Articles 163, 166, 167, 168, 169 and 176 of the Revised Penal Code, as amended;

“(19) Violations of Sections 4 to 6 of Republic Act No. 9208, otherwise known as the Anti-Trafficking in Persons Act of 2003;

“(20) Violations of Sections 78 to 79 of Chapter IV, of Presidential Decree No. 705, otherwise known as the Revised Forestry Code of the Philippines, as amended;

“(21) Violations of Sections 86 to 106 of Chapter VI, of Republic Act No. 8550, otherwise known as the Philippine Fisheries Code of 1998;

“(22) Violations of Sections 101 to 107, and 110 of Republic Act No. 7942, otherwise known as the Philippine Mining Act of 1995;

“(23) Violations of Section 27(c), (e), (f), (g) and (i), of Republic Act No. 9147, otherwise known as the Wildlife Resources Conservation and Protection Act;

“(24) Violation of Section 7(b) of Republic Act No. 9072, otherwise known as the National Caves and Cave Resources Management Protection Act;

“(25) Violation of Republic Act No. 6539, otherwise known as the Anti-Carnapping Act of 2002, as amended;

“(26) Violations of Sections 1, 3 and 5 of Presidential Decree No. 1866, as amended, otherwise known as the decree Codifying the Laws on Illegal/Unlawful Possession, Manufacture, Dealing In, Acquisition or Disposition of Firearms, Ammunition or Explosives;

“(27) Violation of Presidential Decree No. 1612, otherwise known as the Anti-Fencing Law;

“(28) Violation of Section 6 of Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas Filipinos Act of 1995, as amended by Republic Act No. 10022;

“(29) Violation of Republic Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines;

“(30) Violation of Section 4 of Republic Act No. 9995, otherwise known as the Anti-Photo and Video Voyeurism Act of 2009;

“(31) Violation of Section 4 of Republic Act No. 9775, otherwise known as the Anti-Child Pornography Act of 2009;

“(32) Violations of Sections 5, 7, 8, 9, 10(c), (d) and (e), 11, 12 and 14 of Republic Act No. 7610, otherwise known as the Special Protection of Children Against Abuse, Exploitation and Discrimination;


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

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

SEC. 3. Section 3 of the same Act shall have new paragraphs (j) and (k).

“(j) Precious metals’ shall mean gold, silver, platinum, palladium, rhodium, ruthenium, iridium and osmium. These include alloys of precious metals, solders and plating chemicals such as rhodium and palladium plating solutions and potassium gold cyanide and potassium silver cyanide and silver cyanide in salt solution.

“(k) ‘Precious stones’ shall mean diamond, ruby, emerald, sapphire, opal, amethyst, beryl, topaz, and garnet that are used in jewelry making, including those formerly classified as semi-precious stones.”

SEC. 4. Section 4 of the same Act is hereby amended to read as follows:

“SEC. 4. Money Laundering Offense. – Money laundering is committed by any person who, knowing that any monetary instrument or property represents, involves, or relates to the proceeds of any unlawful activity:

“(a) transacts said monetary instrument or property;

“(b) converts, transfers, disposes of, moves, acquires, possesses or uses said monetary instrument or property;

“(c) conceals or disguises the true nature, source, location, disposition, movement or ownership of or rights with respect to said monetary instrument or property;

“(d) attempts or conspires to commit money laundering offenses referred to in paragraphs (a), (b) or (c);

“(e) aids, abets, assists in or counsels the commission of the money laundering offenses referred to in paragraphs (a), (b) or (c) above; and

“(f) performs or fails to perform any act as a result of which he facilitates the offense of money laundering referred to in paragraphs (a), (b) or (c) above.

“Money laundering is also committed by any covered person who, knowing that a covered or suspicious transaction is required under this Act to be reported to the Anti-Money Laundering Council (AMLC), fails to do so.”

SEC. 5. Section 6(a) of the same Act is hereby amended to read as follows:

“SEC. 6. Prosecution of Money Laundering. –


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“(a) Any person may be charged with and convicted of both the offense of money laundering and the unlawful activity as herein defined.

“(b) The prosecution of any offense or violation under this Act shall proceed independently of any proceeding relating to the unlawful activity.”


“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:

“x x x

“(6) to apply before the Court of Appeals, ex parte, for the freezing of any monetary instrument or property alleged to be laundered, proceeds from, or instrumentalities used in or intended for use in any unlawful activity as defined in Section 3(i) hereof;

“x x x

“(12) to require the Land Registration Authority and all its Registries of Deeds to submit to the AMLC, reports on all real estate transactions involving an amount in excess of Five hundred thousand pesos (P500,000.00) within fifteen (15) days from the date of registration of the transaction, in a form to be prescribed by the AMLC. The AMLC may also require the Land Registration Authority and all its Registries of Deeds to submit copies of relevant documents of all real estate transactions.”

SEC. 7. Section 9(c), paragraphs 1 and 4 of the same Act are hereby amended to read as follows:

“SEC. 9. Prevention of Money Laundering; Customer Identification Requirements and Record Keeping. –

“(a) x x x

“(b) x x x

“(c) Reporting of Covered and Suspicious Transactions. – Covered persons shall report to the AMLC all covered transactions and suspicious transactions within five (5) working days from occurrence thereof, unless the AMLC prescribes a different period not exceeding fifteen (15) working days.

“Lawyers and accountants acting as independent legal professionals are not required to report covered and suspicious transactions if the relevant information was obtained in circumstances where they are subject to professional secrecy or legal professional privilege.

“x x x


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“x x x

“When reporting covered or suspicious transactions to the AMLC, covered persons and their officers and employees are prohibited from communicating, directly or indirectly, in any manner or by any means, to any person or entity, the media, the fact that a covered or suspicious transaction has been reported or is about to be reported, the contents of the report, 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 and employee of the covered person and media shall be held criminally liable.”

SEC. 8. Section 10 of the same Act, as amended by Republic Act No. 10167, is hereby amended to read as follows:

“SEC. 10. Freezing of Monetary Instrument or Property. – Upon a verified ex parte petition by the AMLC and after determination that probable cause exists that any monetary instrument or property is in any way related to an unlawful activity as defined in Section 3(i) hereof, the Court of Appeals may issue a freeze order which shall be effective immediately, and which shall not exceed six (6) months depending upon the circumstances of the case: Provided, That if there is no case filed against a person whose account has been frozen within the period determined by the court, the freeze order shall be deemed ipso facto lifted: Provided, further, That this new rule shall not apply to pending cases in the courts. In any case, the court should act on the petition to freeze within twenty-four (24) hours from filing of the petition. If the application is filed a day before a nonworking day, the computation of the twenty-four (24)-hour period shall exclude the nonworking days.

“A person whose account has been frozen may file a motion to lift the freeze order and the court must resolve this motion before the expiration of the freeze order.

“No court shall issue a temporary restraining order or a writ of injunction against any freeze order, except the Supreme Court.”


“(a) Civil Forfeiture. – Upon determination by the AMLC that probable cause exists that any monetary instrument or property is in any way related to an unlawful activity as defined in Section 3(i) or a money laundering offense under Section 4 hereof, the AMLC shall file with the appropriate court through the Office of the Solicitor General, a verified ex parte petition for forfeiture, and the Rules of Court on Civil Forfeiture shall apply.

“The forfeiture shall include those other monetary instrument or property having an equivalent value to that of the monetary instrument or property found to be related in any way to an unlawful activity or a money laundering offense, when with due diligence, the former cannot be located, or it has been substantially altered, destroyed, diminished in value or otherwise rendered worthless by any act or omission, or it has been concealed, removed, converted, or otherwise transferred, or it is located


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outside the Philippines or has been placed or brought outside the jurisdiction of the court, or it has been commingled with other monetary instrument 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.

“(b) Claim on Forfeited 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 forfeiture, within fifteen (15) days from the date of the finality of the order of forfeiture, in default of which the said order shall become final and executor. 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. 10. Section 14 of the same Act, as amended, is hereby further amended to read as follows:

“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), (b), (c) and (d) 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(e) and (f) 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


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Philippine pesos (Php500,000.00), or both, shall be imposed on a person convicted under the last paragraph of Section 4 of this Act.

“(e) The penalty of imprisonment ranging from four (4) to seven (7) years and a fine corresponding to not more than two hundred percent (200%) of the value of the monetary instrument or property laundered shall be imposed upon the covered person, its directors, officers or pesonnel who knowingly participated in the commission of the crime of money laundering.

“(f) Imposition of Administrative Sanctions. The imposition of the administrative sanctions shall be without prejudice to the filing of criminal charges against the persons responsible for the violation.

“After due notice and hearing, the AMLC shall, at its discretion, impose sanctions, including monetary penalties, warning or reprimand, upon any covered person, its directors, officers, employees or any other person for the violation of this Act, its implementing rules and regulations, or for failure or refusal to comply with AMLC orders, resolutions and other issuances. Such monetary penalties shall be in amounts as may be determined by the AMLC to be appropriate, which shall not be more than Five hundred thousand Philippine pesos (P500,000.00) per violation.

“The AMLC may promulgate rules on fines and penalties taking into consideration the attendant circumstances, such as the nature and gravity of the violation or irregularity.

“(g) The provision of this law shall not be construed or implemented in a manner that will discriminate against certain customer types, such as politically-exposed persons, as well as their relatives, or against a certain religion, race or ethnic origin, or such other attributes or profiles when used as the only basis to deny these persons access to the services provided by the covered persons. Whenever a bank, or quasi-bank, financial institution or whenever any person or entity commits said discriminatory act, the person or persons responsible for such violation shall be subject to sanctions as may be deemed appropriate by their respective regulators.”

SEC. 11. New sections are hereby inserted after Section 19 of the same Act, as amended, to read as follows:

“SEC. 20. Non-intervention in the Bureau of Internal Revenue (BIR) Operations. – Nothing contained in this Act nor in related antecedent laws or existing agreements shall be construed to allow the AMLC to participate in any manner in the operations of the BIR.”

“SEC. 21. The authority to inquire into or examine the main account and the related accounts shall comply with the requirements of Article III, Sections 2 and 3 of the 1987 Constitution, which are hereby incorporated by reference. Likewise, the constitutional injunction against ex post facto laws and bills of attainder shall be respected in the implementation of this Act.”

SEC. 12. The succeeding sections are hereby renumbered accordingly.


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SEC. 13. Separability Clause. – If any provision of this Act is declared unconstitutional, the same shall not affect the validity and effectivity of the other provisions hereof.

SEC. 14. Repealing Clause. – All laws, decrees, orders, and issuances or portions thereof, which are inconsistent with the provisions of this Act, are hereby repealed, amended or modified accordingly.

SEC. 15. Effectivity. – This Act shall take effect fifteen (15) days following its publication in at least two (2) national newspapers of general circulation.


AN ACT TO REQUIRE THE DISCLOSURE OF FINANCE CHARGES IN CONNECTION WITH EXTENSIONS OF CREDIT.

Section 1. This Act shall be known as the "Truth in Lending Act."

Section 2. Declaration of Policy. It is hereby declared to be the policy of the State to protect its citizens from a lack of awareness of the true cost of credit to the user by assuring a full disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of the national economy.

Section 3. As used in this Act, the term

(1) "Board" means the Monetary Board of the Central Bank of the Philippines.

(2) "Credit" means any loan, mortgage, deed of trust, advance, or discount; any conditional sales contract; any contract to sell, or sale or contract of sale of property or services, either for present or future delivery, under which part or all of the price is payable subsequent to the making of such sale or contract; any rental-purchase contract; any contract or arrangement for the hire, bailment, or leasing of property; any option, demand, lien, pledge, or other claim against, or for the delivery of, property or money; any purchase, or other acquisition of, or any credit upon the security of, any obligation of claim arising out of any of the foregoing; and any transaction or series of transactions having a similar purpose or effect.

(3) "Finance charge" includes interest, fees, service charges, discounts, and such other charges incident to the extension of credit as the Board may be regulation prescribe.

(4) "Creditor" means any person engaged in the business of extending credit (including any person who as a regular business practice make loans or sells or rents property or services on a time, credit, or installment basis, either as principal or as agent) who requires as an incident to the extension of credit, the payment of a finance charge.


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(5) "Person" means any individual, corporation, partnership, association, or other organized group of persons, or the legal successor or representative of the foregoing, and includes the Philippine Government or any agency thereof, or any other government, or of any of its political subdivisions, or any agency of the foregoing.

Section 4. Any creditor shall furnish to each person to whom credit is extended, prior to the consummation of the transaction, a clear statement in writing setting forth, to the extent applicable and in accordance with rules and regulations prescribed by the Board, the following information:

(1) the cash price or delivered price of the property or service to be acquired;

(2) the amounts, if any, to be credited as down payment and/or trade-in;

(3) the difference between the amounts set forth under clauses (1) and (2);

(4) the charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit;

(5) the total amount to be financed;

(6) the finance charge expressed in terms of pesos and centavos; and

(7) the percentage that the finance bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation.

Section 5. The Board shall prescribe such rules and regulations as may be necessary or proper in carrying out the provisions of this Act. Any rule or regulation prescribed hereunder may contain such classifications and differentiations as in the judgment of the Board are necessary or proper to effectuate the purposes of this Act or to prevent circumvention or evasion, or to facilitate the enforcement of this Act, or any rule or regulation issued thereunder.

Section 6. (a) Any creditor who in connection with any credit transaction fails to disclose to any person any information in violation of this Act or any regulation issued thereunder shall be liable to such person in the amount of P100 or in an amount equal to twice the finance charged required by such creditor in connection with such transaction, whichever is the greater, except that such liability shall not exceed P2,000 on any credit transaction. Action to recover such penalty may be brought by such person within one year from the date of the occurrence of the violation, in any court of competent jurisdiction. In any action under this subsection in which any person is entitled to a recovery, the creditor shall be liable for reasonable attorney's fees and court costs as determined by the court.

(b) Except as specified in subsection (a) of this section, nothing contained in this Act or any regulation contained in this Act or any regulation thereunder shall affect the validity or enforceability of any contract or transactions.


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(c) Any person who willfully violates any provision of this Act or any regulation issued thereunder shall be fined by not less than P1,00 or more than P5,000 or imprisonment for not less than 6 months, nor more than one year or both.

(d) No punishment or penalty provided by this Act shall apply to the Philippine Government or any agency or any political subdivision thereof.

(e) A final judgment hereafter rendered in any criminal proceeding under this Act to the effect that a defendant has willfully violated this Act shall be prima facie evidence against such defendant in an action or proceeding brought by any other party against such defendant under this Act as to all matters respecting which said judgment would be an estoppel as between the parties thereto.

Section 7. This Act shall become effective upon approval.


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