Section 11Sec./Art. 11

Limitations on Lending Authority. - Except as the Monetary Board may otherwise prescribe, the direct indebtedness to thrift banks of any person, company, corporation, or firm, including the indebtedness of members of a partnership and association, for money borrowed, excluding: (a) loans secured by obligations of the Bangko Sentral; (b) loans fully guaranteed by the government as to the payment of principal and interest; (c) loans to the extent covered by the hold-out on, or assignment of, deposits maintained in the lending bank and held in the Philippines; and (d) other loans or credits as the Monetary Board may, from time to time, specify as non-risk assets, which shall in no time exceed fifteen percent (15%) of unimpaired capital and surplus of the bank.

Notwithstanding the provisions of the preceding paragraph and subject to such regulations as the Monetary Board may prescribe, the total indebtedness of any borrower to the bank may amount to a further fifteen percent (15%) of the unimpaired capital and surplus of such bank provided the additional indebtedness is for the purpose of financing subdivision or housing development, medium- and low-income borrowers and agriculture on a fully secured basis.

The term 'indebtedness' as used herein, shall mean the direct liability of the maker or acceptor of paper discounted with or sold to such bank and liability of the indorser, 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 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 the subsidiaries thereof in which such corporation owns or controls a majority interest: Provided, That even if the. parent corporation, partnership or association has no liability to the bank, the Monetary Board may prescribe the combination of liabilities of subsidiary corporations or members of the partnership or association under certain circumstances, including but need not be limited to any of the following situations: (a) the parent corporation, partnership or association guarantees the repayment of liabilities; (b) the liabilities were incurred for the accommodation of the parent corporation or another subsidiary or of the partnership or association; or (c) the subsidiaries through separate entities operate merely as departments or divisions of a single entity: Provided, further, That the discount of bills of exchange drawn in good faith against actually existing values, and the discount of commercial and business paper actually owned by the person negotiating the same, shall not be considered as money borrowed for the purpose of this Section: Provided, finally, That certain types of contingent liabilities of borrowers may be included among the total liabilities as may be determined by the Monetary Board.

Loan accommodations granted by thrift banks to any other bank, as well as deposits maintained by them in any bank licensed to do business in the Philippines, shall be subject to the loan limit of any single borrower as herein prescribed.