Article 148p. 148

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

marketable, non-perishable goods which must be fully

covered by insurance.

35.3. The above prescribed ceilings shall include: (a) the

direct

liability

of

the

maker

or

acceptor

of

paper

discounted with or sold to such bank and the liability of a

general indorser, drawer or guarantor who obtains a loan

or other credit accommodation from or discounts paper

with or sells papers to such bank; (b) in the case of an

individual who owns or controls a majority interest in a

corporation, partnership, association or any other entity,

the liabilities of said entities to such bank; (c) in the case

of

a

corporation,

all

liabilities

to

such

bank

of

all

subsidiaries in which such corporation owns or controls a

majority interest; and (d) in the case of a partnership,

association or other entity, the liabilities of the members

thereof to such bank.

35.4. Even if a parent corporation, partnership, association,

entity or an individual who owns or controls a majority

interest in such entities has no liability to the bank, the

Monetary Board may prescribe the combination of the

liabilities of subsidiary corporations or members of the

partnership, association, entity or such individual under

certain circumstances, including but not limited to any of

the

following

situations:

(a)

the

parent

corporation,

partnership, association, entity or individual guarantees

the repayment of the liabilities; (b) the liabilities were

incurred

for

the

accommodation

of

the

parent

corporation or another subsidiary or of the partnership or

association

or

entity

or

such

individual;

or

(c)

the

subsidiaries though separate entities operate merely as

departments or divisions of a single entity.

35.5. For purposes of this Section, loans, other credit

accommodations and guarantees shall exclude: (a) loans

and other credit accommodations secured by obligations

of the Bangko Sentral or of the Philippine Government;

(b)

loans

and

other

credit

accommodations

fully

guaranteed by the government as to the payment of

principal

and

interest;

(c)

loans

and

other

credit

accommodations covered by assignment of deposits

maintained

in

the

lending

bank

and

held

in

the

Philippines;

(d)

loans,

credit

accommodations

and

acceptances under letters of credit to the extent covered

by

margin

deposits;

and

(e)

other

loans

or

credit

accommodations which the Monetary Board may from

time to time, specify as non-risk items.

35.6. Loans and other credit accommodations, deposits

maintained with, and usual guarantees by a bank to any

other bank or non-bank entity, whether locally or abroad,

shall be subject to the limits as herein prescribed.

35.7. Certain types of contingent accounts of borrowers

may

be

included

among

those

subject

to

these

prescribed limits as may be determined by the Monetary

Board. (23a)

SECTION 36. Restriction on Bank Exposure to Directors ,

Officers , Stockholders and Their Related Interests . — No

director or officer of any bank shall, directly or indirectly,

for himself or as the representative or agent of others,

borrow from such bank nor shall he become a guarantor,

indorser or surety for loans from such bank to others, or in

any manner be an obligor or incur any contractual liability

to the bank except with the written approval of the

majority of all the directors of the bank, excluding the

director concerned: Provided , That such written approval

shall

not

be

required

for

loans,

other

credit

accommodations and advances granted to officers under

a fringe benefit plan approved by the Bangko Sentral.

The required approval shall be entered upon the records

of the bank and a copy of such entry shall be transmitted

forthwith to the appropriate supervising and examining

department of the Bangko Sentral.

Dealings of a bank with any of its directors, officers or

stockholders and their related interests shall be upon

terms not less favorable to the bank than those offered to

others.

After due notice to the board of directors of the bank, the

office of any bank director or officer who violates the

provisions of this Section may be declared vacant and the

director or officer shall be subject to the penal provisions

of the New Central Bank Act .

The Monetary Board may regulate the amount of loans,

credit accommodations and guarantees that may be

extended, directly or indirectly, by a bank to its directors,

officers, stockholders and their related interests, as well as

investments

of

such

bank

in

enterprises

owned or

controlled by said directors, officers, stockholders and

their related interests. However, the outstanding loans,

credit accommodations and guarantees which a bank

may extend to each of its stockholders, directors, or

officers and their related interests, shall be limited to an

amount equivalent to their respective unencumbered

deposits

and

book

value

of

their

paid-in

capital

contribution in the bank: Provided , however , That loans,

credit

accommodations

and

guarantees

secured

by

assets considered as non-risk by the Monetary Board shall

be excluded from such limit: Provided , further , That loans,

credit accommodations and advances to officers in the

form of fringe benefits granted in accordance with rules

as may be prescribed by the Monetary Board shall not be

subject to the individual limit.

The

Monetary

Board

shall

define the term "related

interests."

The

limit

on

loans,

credit

accommodations

and

guarantees prescribed herein shall not apply to loans,

credit accommodations and guarantees extended by a

cooperative bank to its cooperative shareholders. (83a)

SECTION 37. Loans and Other Credit Accommodations

Against Real Estate . — Except as the Monetary Board

may

otherwise

prescribe,

loans

and

other

credit

accommodations against real estate shall not exceed

seventy-five percent (75%) of the appraised value of the

respective real estate security, plus sixty percent (60%) of

the appraised value of the insured improvements, and

such loans may be made to the owner of the real estate

or to his assignees. (78a)

SECTION 38. Loans and Other Credit Accommodations

on Security of Chattels and Intangible Properties . —

Except as the Monetary Board may otherwise prescribe,

loans and other credit accommodations on security of

chattels

and intangible properties, such as, but not

limited

to,

patents,

trademarks,

trade

names,

and

copyrights shall not exceed seventy-five percent (75%) of

the appraised value of the security, and such loans and

other

credit accommodations may be made to the

title-holder of the chattels and intangible properties or

his assignees. (78a)

SECTION 39. Grant and Purpose of Loans and Other

Credit Accommodations . — A bank shall grant loans and

other credit accommodations only in amounts and for

the periods of time essential for the effective completion

of the operations to be financed. Such grant of loans and

other credit accommodations shall be consistent with

safe and sound banking practices. (75a)

The

purpose

of

all

loans

and

other

credit

accommodations shall be stated in the application and in

the contract between the bank and the borrower. If the

bank finds that the proceeds of the loan or other credit

accommodation

have

been

employed,

without

its

approval, for purposes other than those agreed upon with

the bank, it shall have the right to terminate the loan or

other credit accommodation and demand immediate

repayment of the obligation. (77)

SECTION 40. Requirement for Grant of Loans or Other

Credit Accommodations . — Before granting a loan or

other credit accommodation, a bank must ascertain that

the debtor is capable of fulfilling his commitments to the

bank.

Toward this end, a bank may demand from its credit

applicants a statement of their assets and liabilities and

of their income and expenditures and such information

as may be prescribed by law or by rules and regulations of

Monetary Board to enable the bank to properly evaluate

the credit application which includes the corresponding

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