Article 170Supplement v1, p. 170

COMMERCIAL LAWS SUPPLEMENT

loans associations organized under existing laws, and any

banking corporation that may be organized for the

following purposes:

(1) Accumulating the savings of depositors and investing

them, together with capital loans secured by bonds,

mortgages in real estate and insured improvements

thereon, chattel mortgage, bonds and other forms of

security or in loans for personal or household finance,

whether secured or unsecured, or in financing for home

building and home development; in readily marketable

and debt securities; in commercial papers and accounts

receivables, drafts, bills of exchange, acceptances or notes

arising out of commercial transactions; and in such other

investments and loans which the Monetary Board may

determine as necessary in the furtherance of national

economic objectives;

(2) Providing short-term working capital, medium-and

long-term

financing,

to

businesses

engaged

in

agriculture, services, industry and housing; and

(3) Providing diversified financial and allied services for its

chosen market and constituencies specially for small and

medium enterprises and individuals.

(b) "Monetary Board" shall mean the Monetary Board of

the Bangko Sentral ng Pilipinas .

(c) " Bangko Sentral " shall refer to the Bangko Sentral ng

Pilipinas created under Republic Act No. 7653 .

CHAPTER II Organization

SECTION

4.

Organization .

— A thrift bank shall be

organized in the form of stock corporation. The Monetary

Board shall fix the minimum paid-up capital of thrift

banks

in

such amount as the Board may consider

necessary for the safe and sound operation of thrift banks

taking into account the development thrusts of this Act

and due protection of the general public. No thrift bank

shall be organized without a certificate of authority from

the Monetary Board.

SECTION 5. Establishment of Thrift Banks . — The articles

of incorporation of any bank, or any amendment thereto,

shall not be registered by the Securities and Exchange

Commission

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 the existing laws and

regulations to engage in business for which the applicant

is proposed to be incorporated have been complied with;

(b) that public interest and the 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

the responsibility of the organizers and administrators

reasonably assure the safety of the interest which the

public may entrust to them.

The by-laws of any thrift bank, or any amendment

thereto, shall not be registered by the Securities and

Exchange

Commission

unless

accompanied

by

a

certificate of the Monetary Board to the effect that such

by-laws or amendments thereto are in accordance with

law.

SECTION 6. Bank Management . — In order to maintain

the

quality of bank management and afford better

protection to depositors and the public in general, the

Monetary

Board

may

pass

upon

and

review

the

qualifications of persons who are elected or appointed

bank directors and officers and disqualify those unfit. The

Monetary Board shall prescribe the qualifications of bank

directors and officers for purposes of this Section.

SECTION 7. Directors and Officers . — At least a majority of

the members of the board of directors of any thrift bank

which may be established after the effectivity of this Act

shall be citizens of the Philippines: Provided , however ,

That no appointive or elective official, whether full-time or

part-time, shall at the same time serve as officer of any

thrift bank, except in cases where such service is incident

to financial assistance provided by the government or a

government-owned or -controlled corporation to the

bank: Provided , further , That in the case of merger or

consolidation duly approved by the Monetary Board, the

limitation on the number of directors in a corporation, as

provided in Section 14 of the Corporation Code of the

Philippines, shall not be applied so that membership in

the new board may include up to the total number of

directors

provided

for

in

the

respective

articles

of

incorporation of the merging or consolidating banks.

CHAPTER III Ownership and Capital

Requirements

SECTION 8. Ownership . — At least forty percent (40%) of

the

voting

stock

of

a

thrift

bank

which

may

be

established after the approval of this Act shall be owned

by citizens of the Philippines, except where a new bank

may

be

established

as

a

result

of

a

merger

or

consolidation

of

existing

thrift

banks

with

foreign

holdings in which case, the resulting foreign holdings

shall not be increased but may be reduced and, once

reduced, shall not be increased thereafter beyond sixty

percent (60%) of the voting stock of thrift banks. The

percentage of the foreign-owned voting stocks shall be

determined by the citizenship of individual stockholders

and

in

case

of

corporations owning shares, by the

citizenship of each stockholder in the said corporations.

Any

provision

of

existing

laws

to

the

contrary

notwithstanding, stockholdings in a thrift bank shall be

exempt from any ownership ceiling for a period of ten (10)

years from the effectivity of this Act.

SECTION 9. Combined Capital Accounts of Thrift Banks .

— The combined capital accounts of each thrift bank

shall not be less than an amount equal to ten percent

(10%) of its risk assets which is defined as its total assets

minus the following assets:

(a) Cash on hand;

(b) Amounts from the Bangko Sentral ;

(c) Evidences of indebtedness of the Republic of the

Philippines and of the Bangko Sentral , and any other

evidences of indebtedness or obligations the servicing

and repayment of which are fully guaranteed by the

Republic of the Philippines;

(d) Loans to the extent covered by hold-out on, or

assignment of deposits maintained in the lending bank

and held in the Philippines; and

(e) Other non-risk items as the Monetary Board may, from

time to time authorize to be deducted from total assets.

The

Monetary

Board

shall

prescribe the manner of

determining the total assets of banking institutions for

purposes of this Section.

Whenever the capital accounts of a bank are deficient

with

respect

to

the

requirements of the preceding

paragraph, the Monetary Board, after considering the

report of the appropriate supervising department on the

state of solvency of the institution, 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 appropriate

supervising

department

and

if

the

amount

of

the

deficiency justifies it, restrict or prohibit the making of

new investments of any sort by the bank, with the

exception of purchases of evidences of indebtedness

included under subsection (c) of this Section, until the

minimum required capital ratio has been restored.

© Compiled by RGL

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