Article 168Supplement v1, p. 168

COMMERCIAL LAWS SUPPLEMENT

All increase in the compensation, in any form, of all

trustees and trustee-officers in excess of ten percent (10%)

thereof per annum shall require the approval of the

Bangko Sentral.

Section 15. Limitations on lending authority . – a) An

Association shall not commit itself to make any loans for

amounts in excess of the total of the following amounts:

1) amount of cash available for loan purposes;

2) amount of cash which can be readily realized upon the

sale or redemption of permissible investments made by

the Association; and

3) amount of credit available for loan purposes from

government or private financing institutions.

b) No Association shall directly or indirectly make any

loans to any trustee or officer of such Association, either

for himself or as agent or as partner of another, except

with the written approval of the majority of the trustees of

the

Association,

excluding

the

trustee

concerned:

Provided , That the total loans, direct or indirect, granted

at any one time to such trustees and officers shall not

exceed

twenty

percent

(20%)

of

the

total

capital

contributions of the Association; in all cases of the credit

accommodations granted to trustees and officers under

this subSec., the written approval of the majority of the

trustees

of

the

Association,

excluding

the

trustee

concerned, shall be entered upon the records of the

Association and a copy of such entry shall be transmitted

forthwith to the Bangko Sentral.

The

transactions

of

all

trustee-officers

with

the

Association shall not be under terms more favorable than

those transacted with other members. The office of any

trustee or trustee-officer of an Association who violates

the provisions of this subSec. shall immediately become

vacant and the trustees or officers shall be punished by

imprisonment of not less than one (1) year nor more than

ten (10) years and by a fine of not less than Five thousand

pesos (P5,000) nor more than Fifty thousand pesos

(P50,000).

Section 16. Execution of loan agreement . – For each

loan made by an Association, a written note or other

obligation expressing a rate of interest must be executed

by the borrower.

Section 17. Liability of officers for loans contrary to

law . – No Association shall make or purchase any loan or

investment not authorized or permitted under this Act,

and any trustee, officer or employee, who on behalf of any

such Association, knowingly makes or purchases any

such loan or investment or who knowingly consents

thereto shall be personally liable to the Association for the

full amount of any such loan or investment.

Section

18.

Limitations

on

investment .

–

a)

No

Association at any one time shall invest in bonds and

securities in a total amount in excess of ten percent (10%)

of the total assets of such Association without prior

written approval of the Bangko Sentral.

b) No Association at any one time shall invest in real

property in a total amount in excess of five percent (5%) of

the total assets of such Association.

c) No Association at any one time shall invest in furniture,

fixture,

furnishings

and

equipment

and

leasehold

improvements for its offices, in an amount more than ten

percent (10%) of its total capital contribution.

Section 19. Reserves . – Every Association shall create a

withdrawable share reserve which shall consist of two

percent (2%) of the total capital contributions of the

members which the Monetary Board may increase to a

maximum of three percent (3%), as the situation warrants.

No Association shall distribute to its members any portion

of its net income if its withdrawable share reserve is less

than the minimum requirement, or if by such payment or

distribution, such reserve will be reduced to an amount

below the minimum requirement provided herein.

Section 20. Withdrawal by a member . – For the sole

purpose

of

allowing

an

equitable

valuation

and

distribution

of

assets

for

withdrawing

members, an

Association shall, upon the effectivity of this Act, impute

revalued surplus to be added to the withdrawn capital,

subject

to

such

rules

as

the

Monetary Board may

prescribe. Such rules shall allow a reasonable period

between withdrawal of capital and payment of the share

of the member from the revalued surplus.

Section 21. Annual reports by the Association . – Every

Association

shall,

within

one

hundred

twenty

(120)

calendar days after the close of its fiscal year furnish the

Monetary Board and post in any of the Association's

bulletin board or in any other conspicuous place a copy of

its financial statement showing, in such form and detail

as the Monetary Board shall require, the amount and

character of the assets and liabilities of the Association at

the end of the preceding fiscal year. The Monetary Board

may, in addition to the foregoing, require the disclosure of

such other information as it shall deem necessary for the

protection of the members of the Association.

Section 22. Regulatory powers over Associations . –

Notwithstanding the provisions of Sec. 130 of Republic

Act No. 7653, the power to regulate the operations of any

Association by the Monetary Board shall continue and

consist of the following:

a) in seeing to it that the capital, financing, direction and

administration, as well as the integrity, responsibility, and

ability of organizers, administrators, trustees, and officers

of all Associations organized and operated under this Act,

shall reasonably assure the safety of the interests which

its members entrust to them;

b)

in

regulating

the

operation

and

activities

of

Associations, which include, among others: 1) in placing

limits to the maximum credit allowed any individual

borrower; 2) in determining the loan repayment period

and

loan

procedures;

3)

in

imposing

a

uniform

accounting system and manner of keeping the accounts

and records of Associations; 4) in instituting periodic

surveys of loan and lending procedures, audits, test check

of each and other transactions of Associations; and 5)

whenever necessary, in conducting training courses for

personnel of Associations;

c) in requiring all accountable officers and employees of

every

Association

to

post

bonds

for

the

faithful

performance of their duties in reasonable sums and with

such sureties as the Monetary Board may require;

d) in fixing, by rules or by orders, in specific cases, after

notice and hearing, the limits of loanable funds, amounts

for investment and reserves for withdrawals and other

contingencies;

e)

in

issuing

rules

and

regulations

for

the

proper

implementation of this Act, effective administration of

the Associations, and to render advisory assistance to all

interested parties in order to carry out the intents and

purposes of this Act; and

f) in conducting such investigations, taking such remedial

measures and exercising all powers under Republic Act

No.

7653,

insofar

as

they

are

applicable

in

the

enforcement of this Act.

The Bangko Sentral shall have the power to enforce the

laws,

orders,

instructions,

rules

and

regulations

promulgated

by

the

Monetary

Board

applicable

to

Associations;

to

require

Associations,

their

trustees,

officers and agents to conduct and manage the affairs of

the Association in a lawful and orderly manner. After due

notice and hearing, the Monetary Board may revoke or

suspend the license of any Association, for such period as

it determines necessary, particularly when the solvency of

an Association is imperiled by losses or irregularities,

and/or

when

an

Association

willfully

violates

any

provisions

of

this

Act

or

any

rule

or

regulations

promulgated hereunder.

The director and examiners of the department of the

Bangko

Sentral

charged

with

the

regulation

of

Associations are hereby authorized to administer oaths to

any trustee, officer or employee of any Association or to

© Compiled by RGL

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