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FIFTEENTH CONGRESS 
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CONGRESS OF THE PHILIPPINES ) 
Second Regular Session 
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Senate Bill No. 30 B 9 
Introduced by Senator Edgardo 1. Angara 
EXPLANATORY NOTE 
This bill seeks to amend RA 7353 or the Rural Banks Act of 1992 to create room for 
more sophisticated forms of financial services and to comply with increased minimum capital 
requirements. 
The existing policy, in seeking to uphold the provisions of Republic Act No. 8791 or the 
General Banking Law of 2000, bars non-Filipino citizens from owning, acquiring or purchasing 
voting stock of any rural bank. This policy deprives rural banks from foreign investment and 
effectively restricts their activity and services. 
This bill aims to revitalize the rural banking system and improve access of banking 
services to I11ml areas by opening lip rural banks to foreign equity. At the same time, it upholds 
the mandate of the General Banking Law to preserve majority Filipino ownership of rural banks 
by setting a forty percent ceiling in foreign possession of voting stock. 
This bill is expected to stimulate more lively activity among rural banks by creating an 
environment that is beneficial to foreign investors, local banking patrons, and national economy. 
In view of the foregoing, the swift passage of this bill is earnestly sought. 
Cl 
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EDG'ARDOJ. ~oA~ 


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FIFTEENTH CONGRESS 
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CONGRESS OF THE PHILIPPINES ) 
Second Regular Session 
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Senate Bill No . .3 0 B 9 
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Introduced by Senator Edgardo J. Angara 
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AN ACT ALLOWING FOREIGN EQUITY IN THE CAPITAL OF RURAL 
BANKS, AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 7353 
OTHERWISE KNOWN AS "THE RURAL BANK ACT OF 1992", AS AMENDED 
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A~O FOR OTHER PURPOSES 
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Be it enacted by the Senate and (he House of Representatives of the Philippines in 
Congress assembled: 
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Section I. Section 4 of RA No. 7353 is hereby amended as follows: 
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"Sec. 4. No rural bank shall be operated without a Certificate of Authority from 
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the Monetary Board of the Central Bank. Rural banks shall be organized in the form of 
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stock corporations. NON-FILIPINO CITIZENS MAY OWN, ACQUIRE, OR 
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PURCHASE UP TO FORTY PERCENT (40'Yo) OF THE VOTING STOCK OF A 
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RURAL BANK, WHERE A NEW BANK IS ESTABLISHED AS A RESULT OF A 
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MERGER OR CONSOLIDATION OF EXISTING RURAL BANKS WITH 
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FOREIGN HOLDINGS, THE RESULTING FOREIGN HOLDINGS SHALL NOT 
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BE INCREASED BUT MAY BE REDUCED, AND ONCE REDUCED SHALL 
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NOT BE INCREASED THEREAFTER BEYOND FORTY PERCENT (40%) OF 
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THE VOTINGSTOCK OF RURAL BANKS, THE PERCENTAGE OF THE 
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FOREIGN-OWNED VOTING STOCKS SHALL BE DETERMINED BY THE 
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CITIZENSHIP OF INDIVIDUAL STOCKHOLDERS 
AND IN CASE OF 
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CORPORATIONS OWNING SHARES, BY THE CITIZENSHIP OF EACH 
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STOCKHOLDER IN THE SAID CORPORATIONS. 
Upon consultation with the 
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rural banks in the area, duly established cooperatives and corporations primarily organize 
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to hold equities in rural banks may organize a rural bank and/or subscribe to the shares of 
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stock of any rural bank: Provided. That a cooperative or corporation owning or 
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controlling the whole or majority of the voting stock of the rural bank shall be subject to 
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special examination and to such rules and regulations as the Monetary Board may 
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prescri be. [With exception of shareholdings of corporations organized primarily to hold 
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equities in rural banks as provided [or under Section 12-C of Republic Act 337, as 
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amended, and of Filipino-controlled domestic banks, the capital stock of any rural bank 
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shall be fully owned and held directly or indirectly by citizens of the Philippines or 
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corporations, associations or cooperatives qualified under Philippine laws to own and 
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hold such capital stock: Provided, That any provisions of existing laws to own and hold 
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such capital stock: Provided, That any provision of existing laws to the contrary 
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notwithstanding, stockholdings in a rural bank shall be exempt from any ownership 
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ceiling for a period o[ ten (10) years from the approval of this Act: Provided, further, 
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That any such exemption shall require the approval of the Monetary Board.lIf 
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subscription of private shareholders to the capital stock of rural cannot be secured or is 
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not available, or insuftlcient to meet the normal credit needs of the locality, the Land 
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Bank of the Philippines, the Development Bank of the Philippines, or any government-
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owned or controlled bank or financial institution, on representation of the said private 
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shareholders but subject to the investment guidelines, policies and procedures of the bank 
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or financial institution and upon approval of the Monetary Board of the Central Bank, 
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shall subscribe to the capital stock of such rural bank, which shall be paid in full at the 


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time of subscription, in an amount equal to the fully paid subscribe and unimpaired 
capital of the private stockholders or such amount as the Monetary Board may prescribed 
as may be necessary to promote and expand rural economic development: Provided, 
however, That such shares of stock subscribe by the Land Bank of the Philippines, the 
Development Bank of the Philippines or any government-owned or controlled bank or 
financial institution may be sold at any time at market value to private individuals who 
are citizens of the Philippines: Provided, finally, That in the sale of shares of stock 
subscribed by the Land Bank of the Philippines, the Development bank of the Philippines 
or any government-owned or controlled bank or financial institution, the registered 
stockholders shall have the right of preemption within one (1) year from the date of offer 
in proportion to their respective holdings, but in the absence of such buyer, preference, 
however, shall be given to residents of the locality or province where the rural bank is 
located. " 
Sec. 2. Section 5 of the same Act is hereby amended as follows: 
"Sec. 5. NON-FILIPINO CITIZENS MAY BECOME MEMBERS OF THE 
BOARD OF J)IRI~CTORS OF A RURAL BANK TO THE EXTENT OF THE 
FOREIGN PARTICIPATION IN TilE EQ(J(TY OF SAID BANK [All members of 
the Board o[ Directors of the rural bank shall be citizens of the Philippines at the time of 
their assumption to office:] Provided, however, That nothing in this Act shall be 
construed as prohibiting any appointive or elective public official from serving as director, 
officer, consultant or in any capacity in the bank. 
No Director or officer of any rural bank shall. either directly or indirectly, for himself or 
as the representative or agent of another borrow any of the deposits or funds of such· 
banks, nor shall he become a guarantor. indorser. or surety for loans from such bank to 
others, or in any manner be an obligor for money borrowed from the bank or loaned by it 
except with the written approval of the majority of the directors of the bank, excluding 
the director concerned. Any such approval shall be entered upon the records of the 
corporation and a copy of such entry shall be transmitted forthwith to the appropriate 
supervising department. The director/officer of the bank who violates the provisions of 
this section shall be immediately dismissed [rom his office and shall be penalized in 
accordance with Section 26 of this Act. 
The Monetary Board may regulate the amount of credit accommodations that may be 
extended directly to the directors, oJ1icers or stockholders of rural banks of banking 
institutions. However, the outstanding credit accommodations which a rural bank may 
extend to each of its stockholders owning two percent (2%) or more of the subscribed 
capital stock, its directors, or officers shall be limited to an amount equivalent to the 
respective outstanding deposits and book value of the paid-in capital contributions in the 
bank. " 
Sec. 3. Separability Clause.- If any provision of this Act is declared unconstitutional, the 
same shall not aikc! the validity and effectivity of other provisions thereof. 
Sec. -I. Repealing Clause.- All laws, decrees, orders and issuances or portions thereof 
which are inconsistent with the provisions of this Act are hereby repealed. 
Sec. 5. Effectivity.- This Act shall take efleet !lftecn (15) days following its publication 
in the Official Gazette and in at least two (2) national newspapers of general circulation. 
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Approved, 
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