Article 147p. 147

COMMERCIAL LAWS NEGOTIABLE INSTRUMENTS, CORPORATION, INSURANCE, TRANSPORTATION, BANKING

up to one hundred percent (100%) of the equity in a thrift

bank, a rural bank or a financial allied enterprise.

A publicly-listed universal or commercial bank may own

up to one hundred percent (100%) of the voting stock of

only one other universal or commercial bank. (21-B; 21-Ca)

SECTION 26. Equity Investments of a Universal Bank in

Non-Financial Allied Enterprises . — A universal bank

may own up to one hundred percent (100%) of the equity

in a non-financial allied enterprise. (21-Ba)

SECTION 27. Equity Investments of a Universal Bank in

Non-Allied Enterprises . — The equity investment of a

universal

bank,

or

of

its

wholly

or

majority-owned

subsidiaries, in a single non-allied enterprise shall not

exceed thirty-five percent (35%) of the total equity in that

enterprise nor shall it exceed thirty-five percent (35%) of

the voting stock in that enterprise. (21-B)

SECTION 28. Equity Investments in Quasi-Banks . — To

promote competitive conditions in financial markets, the

Monetary Board may further limit to forty percent (40%)

equity investments of universal banks in quasi-banks. This

rule shall also apply in the case of commercial banks.

(12-E)

ARTICLE II Operations of Commercial Banks

SECTION

29.

Powers of a Commercial Bank . — A

commercial bank shall have, in addition to the general

powers incident to corporations, all such powers as may

be necessary to carry on the business of commercial

banking, such as accepting drafts and issuing letters of

credit; discounting and negotiating promissory notes,

drafts, bills of exchange, and other evidences of debt;

accepting or creating demand deposits; receiving other

types of deposits and deposit substitutes; buying and

selling

foreign

exchange

and

gold

or silver bullion;

acquiring marketable bonds and other debt securities;

and

extending

credit,

subject

to

such rules as the

Monetary

Board

may

promulgate.

These

rules

may

include the determination of bonds and other debt

securities eligible for investment, the maturities and

aggregate amount of such investment. (21a)

SECTION 30. Equity Investments of a Commercial Bank .

— A commercial bank may, subject to the conditions

stated in the succeeding paragraphs, invest only in the

equities of allied enterprises as may be determined by the

Monetary

Board.

Allied

enterprises

may

either

be

financial or non-financial.

Except as the Monetary Board may otherwise prescribe:

30.1. The total investment in equities of allied enterprises

shall not exceed thirty-five percent (35%) of the net worth

of the bank; and

30.2. The equity investment in any one enterprise shall

not exceed twenty-five percent (25%) of the net worth of

the bank.

The acquisition of such equity or equities is subject to the

prior

approval

of

the

Monetary

Board

which

shall

promulgate

appropriate

guidelines

to

govern

such

investments. (21A-a; 21-Ca)

SECTION 31. Equity Investments of a Commercial Bank

in Financial Allied Enterprises . — A commercial bank

may own up to one hundred percent (100%) of the equity

of a thrift bank or a rural bank.

Where the equity investment of a commercial bank is in

other

financial

allied

enterprises,

including

another

commercial

bank,

such

investment

shall

remain

a

minority holding in that enterprise. (21-Aa; 21-Ca)

SECTION 32. Equity Investments of a Commercial Bank

in Non-Financial Allied Enterprises . — A commercial

bank may own up to one hundred percent (100%) of the

equity in a non-financial allied enterprise. (21-Aa)

ARTICLE III Provisions Applicable to All Banks ,

Quasi-Banks , and Trust Entities

SECTION 33. Acceptance of Demand Deposits . — A bank

other than a universal or commercial bank cannot accept

or create demand deposits except upon prior approval of,

and subject to such conditions and rules as may be

prescribed by the Monetary Board. (72-Aa)

SECTION 34. Risk-Based Capital . — The Monetary Board

shall prescribe the minimum ratio which the net worth of

a bank must bear to its total risk assets which may

include contingent accounts.

For purposes of this Section, the Monetary Board may

require that such ratio be determined on the basis of the

net worth and risk assets of a bank and its subsidiaries,

financial

or

otherwise,

as

well

as

prescribe

the

composition and the manner of determining the net

worth and total risk assets of banks and their subsidiaries:

Provided ,

That in the exercise of this authority, the

Monetary Board shall, to the extent feasible, conform to

internationally accepted standards, including those of the

Bank

for

International

Settlements

(BIS), relating to

risk-based capital requirements: Provided , further , That it

may

alter

or

suspend

compliance

with

such

ratio

whenever necessary for a maximum period of one (1) year:

Provided ,

finally ,

That

such

ratio

shall

be

applied

uniformly to banks of the same category.

In case a bank does not comply with the prescribed

minimum ratio, the Monetary Board may limit or prohibit

the distribution of net profits by such bank and may

require that part or all of the net profits be used to

increase the capital accounts of the bank until the

minimum requirement has been met. The Monetary

Board

may,

furthermore,

restrict

or

prohibit

the

acquisition of major assets and the making of new

investments by the bank, with the exception of purchases

of readily marketable evidences of indebtedness of the

Republic of the Philippines and of the Bangko Sentral

and any other evidences of indebtedness or obligations

the

servicing

and

repayment

of

which

are

fully

guaranteed by the Republic of the Philippines, until the

minimum required capital ratio has been restored.

In case of a bank merger or consolidation, or when a bank

is under rehabilitation under a program approved by the

Bangko Sentral, the Monetary Board may temporarily

relieve

the

surviving

bank,

consolidated

bank,

or

constituent bank or corporations under rehabilitation

from full compliance with the required capital ratio under

such conditions as it may prescribe.

Before the effectivity of the rules which the Monetary

Board is authorized to prescribe under this provision,

Section 22 of the General Banking Act, as amended,

Section 9 of the Thrift Banks Act, and all pertinent rules

issued pursuant thereto, shall continue to be in force.

(22a)

SECTION 35. Limit on Loans , Credit Accommodations

and Guarantees . —

35.1.

Except

as

the

Monetary

Board

may

otherwise

prescribe

for

reasons

of

national

interest,

the

total

amount of loans, credit accommodations and guarantees

as may be defined by the Monetary Board that may be

extended

by

a

bank

to

any

person,

partnership,

association, corporation or other entity shall at no time

exceed twenty percent (20%) of the net worth of such

bank.

The

basis

for

determining

compliance

with

single-borrower limit is the total credit commitment of

the bank to the borrower.

35.2. Unless the Monetary Board prescribes otherwise, the

total

amount

of

loans,

credit

accommodations

and

guarantees prescribed in the preceding paragraph may

be increased by an additional ten percent (10%) of the net

worth of such bank provided the additional liabilities of

any borrower are adequately secured by trust receipts,

shipping documents, warehouse receipts or other similar

documents transferring or securing title covering readily

© Compiled by RGL

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