NINETEENTH CONGRESS OF THE)
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

House Bill No. 2838

Introduced by Representative Ralph G. Recto

AN ACT
PROVIDING FOR A NEW CHARTER OF THE DEVELOPMENT BANK OF THE
PHILIPPINES, REPEALING FOR THE PURPOSE EXECUTIVE ORDER NO. 81,
AS AMENDED

EXPLANATORY NOTE

As the country’s government-mandated infrastructure bank, the Development
Bank of the Philippines (DBP) expands its role as a stimulus for development,
especially as the country continues to march towards progress amidst the COVID-19
pandemic. As the premiere development and universal government bank, it supports
the National Government in its shared task of nation-building to achieve its legal
mandate to power the country towards sustainable economic growth.

For several decades, DBP has been at the forefront of strengthening our
economic growth through its array of relevant, responsive and purposeful
development financing programs. Its vital role as a provider of reliable funding for
essential public infrastructure projects under the government's Build, Build, Build
Program is also noteworthy.

DBP is not just an ordinary universal bank. More importantly, it is a government
financial institution and a government-owned and -controlled corporation which
intends to live out its developmental government mandate to the fullest while
maintaining sound profitability and strong balance sheet required on universal banks
under existing banking laws and regulations.


There is a need, however, to further amend the Revised DBP Charter (Executive
Order No. 81, Series of 1986, as amended by Republic Act No. 8523) to improve and
expand the powers and functions of DBP with a corresponding needed increase in its
capitalization. Consequently, this will enhance the Bank’s capability to ensure
continuity of developmental service to the nation in the delivery of better products
and more effectively serve its clients while complying with the risk-based banking laws
and regulations.

Among the proposed amendments to the DBP Revised Charter to further
strengthen the Bank's capability in fulfilling its government mandate within the context
of a financially viable and stable banking institution, are as follows:

a. Increase in DBP’s authorized capital stock in the amount of Three Hundred
Billion Pesos (PhP300,000,000,000.00) to comply with the risk-based capital
ratio and other capital related Bangko Sentral ng Pilipinas (BSP) requiations
in relation to the risks continually assumed by the Bank in its developmental
mandate;

b. Authorizes DBP to engage in non-traditional banking service, such as
financial leasing;

cc. Allows DBP to act as loan or credit facility program administrator on loans
granted by the National Government;

d. Strengthens DBP’s primary objective of being a premier universal
government developmental bank by specifying the crucial sectors it will
service which are vital to the country’s economic growth, such as
Infrastructure, Tourism Development Projects, — Agriculture-based
Entrepreneurial Ventures, Education, Health Care, Socialized Housing,
Protection of the Environment and the Public Sector;

e. Grants the Bank the authority to exercise all such powers and services of a
universal bank under the General Banking Law (GBL) of 2000 (Republic Act
No. 8791), subject to Monetary Board regulations, in order to perform its
mandate;

f. Expands the authority of the Board of Directors, in order to harmonize the
DBP Charter with the provisions of R.A. No. 8791, to include the approval

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of other credit accommodations, bank guarantees, other financial activities,
and investment activities, subject to the BSP regulations. Further, it includes
the express power of the Board to continually reorganize the Bank personnel
50 as to provide DBP with greater operational and organizational flexibility
to rationalize the organization and structure of DBP in its universal banking
activities, including developmental banking activities, to promote cost-
savings and efficiency;

|. Provides for DBP’s perpetual corporate existence consistent with the recent

amendments to the Revised Corporation Code (R. A. No. 11232);

. Harmonizes the Right of Redemption of Mortgagors under the DBP Charter

with that of the GBL of 2000;
Strengthens the provisions on the avoidance of conflict of interest to ensure
good corporate governance; and

j. Increases the sanctions and penalties for specific violations of the Revised

Charter to the current values to be at par and consistent with sanctions
provided by prevailing laws.

With these further Charter amendments, DBP will be able to do more and

become a more valuable partner for their stakeholders in moving this nation forward
amidst the pandemic and other pressing challenges. DBP fully shares this vision which
ignites its passion to stay responsive and relevant as a development and infrastructure

government bank,

Sao

In light of the foregoing, the immediate approval of this bill is earnestly sought.


NINETEENTH CONGRESS OF THE )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

2838

House Bill No.

Introduced by Representative Ralph G. Recto

AN ACT
PROVIDING FOR A NEW CHARTER OF THE DEVELOPMENT BANK OF THE
PHILIPPINES, REPEALING FOR THE PURPOSE EXECUTIVE ORDER NO. 81,
AS AMENDED

Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:

Section 1. Short Title. - This Act shall be known as “The New Development
Bank of the Philippines (DBP) Act’.

Sec 2. Declaration of Policy. — It is the policy of the State to strengthen the
powers and functions of the Development Bank of the Philippines, hereinafter referred
to as the Bank, as a premier government developmental financial institution that
provides developmental financing and banking services necessary in the achievement
of sustained economic growth. The State recognizes that the Bank plays an important
role in the country’s aspiration to meet the challenges of globalization and the
integration of the Association of South East Asian Nations (ASEAN) by assisting
Philippine industries and other strategic sectors of the economy and enhancing their
capability to compete in the globa! market.

The State shall support the Bank in pursuing corporate citizenship programs
through initiatives that promote the welfare of the Filipino people, particularly the
underprivileged. The Bank shall carry out relevant and meaningful programs through
its flagship initiatives in education, health, environmental preservation and social

outreach programs.


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Sec. 3. Name and Corporate Existence. - The Bank, shall henceforth operate
under the provisions of this Act. The Bank shall continue to exist as a body corporate
and shall have perpetual existence from the date of effectivity of this Act.

Sec. 4, Primary Objective of the Bank. — As a partner in national development,
the Bank shall support the programs of the government that enable growth and
productivity such as infrastructure programs, information and communication
technology programs, tourism development projects, —agriculture-based
entrepreneurial ventures, socially-beneficial programs in education, health care, and
socialized housing, those that support the protection of the environment, and other
public sector programs: Provided, That this objective shall be pursued with utmost
consideration of the need and responsibility to preserve and protect the financial
viability of the Bank while ensuring that it remains globally competitive. As a universal
bank, it shall at all times safeguard its financial position in order that it can effectively
participate in the accomplishment of the national goal of attaining meaningful and
inclusive economic growth.

Sec. 5. Corporate Powers, — In addition to the general powers of a corporation
under Republic Act No. 11232 otherwise known as the “Revised Corporation Code of
the Philippines”, the Bank shall have the power to:

a) Exercise all such powers and services as may be necessary to carry on
the business of a universal bank under Republic Act No. 8791 or “The
General Banking Law of 2000” subject to the existing rules and
regulations of the Monetary Board in order to perform its mandate under
this Act;

b) Accept and manage trust funds and properties and carry on the business

of a trust corporation;

Act as official government depository with authority to maintain deposits
and deposit substitutes of the national government, its agencies,
bureaus and instrumentalities, and government-owned or -controlled
corporations, and local government units, subject to such rules and
regulations as the Monetary Board may prescribe;

Adopt, amend, or change its by-laws; to adopt, alter and use a seal; to
lease or own real and personal property and to sell or otherwise dispose

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e)

h)

of the same; to make contracts; to sue and be sued; and to exercise the
general powers of a corporation mentioned in the Revised Corporation
Code of the Philippines, including the power to acquire or establish
subsidiaries registered with the Securities and Exchange Commission
(SEC) and enter into joint venture agreements for purposes of
developing or disposing acquired assets and Bank properties, insofar as
such powers are not inconsistent or incompatible with the provisions of
this Act and banking laws, rules and regulations;

Obtain from the Government Service Insurance System (GSIS) or other
reputable insurance companies duly accredited by the appropriate
regulatory body, directors, officers and liability insurance coverage,
without prejudice to the right of the bank, as may be determined by its
board of directors, to put up its own legal insurance fund;

Act as loan or credit facility programs administrator with respect to the
loans granted by the national government;

Develop and dispose the Bank’s owned properties. To add value to,
improve profitability on, and enhance the marketability of bank’s owned
property, the bank may further develop or renovate the same either with
its own capital or through a joint venture arrangement with private
companies or individuals, without need of approval by the National
Economic Development Authority (NEDA);

Dispose of its acquired assets which shall not be subject to any injunction
or restraining order issued by any court, commission, tribunal or office
which shall bar, impede or delay the sale and disposition thereof except
on questions of ownership and national or public interest. For this
purpose, the Board of Directors may adopt programs and policies as may
be necessary to implement this provision; and

Engage in financial leasing of movable and immovable properties in
connection with government projects.

Unless otherwise provided for in this Act, the exercise of the above-mentioned
powers shall be subject to applicable laws, as well as regulations promulgated by the
Bangko Sentral ng Pilipinas (BSP) and other applicable prevailing laws, rules and

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regulations. The Bank shall observe utmost transparency in dispensing loans and
selling of government assets. The Bank must ensure that its resources are not being
unduly taken advantage of by its management to favor certain private interests:
Provided, That, in any case: (a) no grant of loan or disposition of asset shall be
implemented by the Bank unless it undergoes the requisite evaluation and approval
process; and (b) the file pertaining to the transaction contains a full disclosure of: (i)
how the account originated and endorsed to the approving bodies; and (ii) the
deliberation made by the approving bodies on the transaction is faithfully recorded
and the record of such deliberation and pertinent account files are kept and made
available for audit in the future by authorized officials, subject to prevailing laws, rules
and regulations on retention and management of public records.

Sec. 6. Principal Office, Branches, and other Offices. - The Bank's principal
office and place of business shall be in Metro Manila. It may open and maintain
branches and agencies in accordance with existing regulations of the BSP.

Sec. 7. Authorized Capital Stock-Par Value. — The capital stock of the Bank shall
be Three hundred billion pesos (P300,000,000,000.00) to be divided into three billion
(3,000,000,000) common shares with par value of One hundred pesos (P100.00) per
share, which shall be fully subscribed by the national government: Provided, That the
increase in capitalization shall be funded solely from the declared cash dividends of
the Bank in favor of the National Government. For this purpose, any and all declared
cash dividends of the Bank in favor of the National Government shall be deposited in
a special account in the General Fund and earmarked for the payment of the Bank's
increase in capitalization. Such payment shall be released and disbursed immediately
and shall continue until the increase in capitalization has been fully paid.

The President of the Philippines, may approve the increase of the capitalization
of the Bank to be fully subscribed by the national government, upon the
recommendation of the Board and the concurrence of the Secretary of Finance, up to
such an amount as may be necessary to attain the objectives of this Act.

Sec. 8. Voting of Shares. — The voting power of all the common shares of stock
of the Bank shall be vested in the President of the Philippines or to the delegated or
authorized representative, subject to prevailing laws, rules and regulations.


Sec. 9. Loans and Other Investments. — Loans and other investments of the
Bank shall be subject to the same |imits and ceilings imposed on universal banks by
the Monetary Board.

Sec. 10. Issuance of Bonds, Eligible Capital Instruments, and other Securities.
— The Bank may issue all kinds of bonds, notes, debentures, other evidences of
indebtedness, derivatives, commodities, negotiable instruments, eligible capital
instruments, and other securities, and the renewal or refunding thereof within or
outside the Philippines, at such terms, rates, and conditions as the Board may
determine, subject to compliance with the provisions of applicable laws, and rules and
regulations promulgated by the Monetary Board.

The Bank shall provide for appropriate reserves for the redemption or
retirement of the bonds. These bonds and other obligations shall be redeemable at
the option of the Bank at or before maturity and in such manner as may be stipulated
therein and shall bear such rate of interest as may be fixed by the Bank.

Such obligations shall be secured by the assets of the Bank, including the
stocks, bonds, debentures, and other securities purchased or held by it under the
provisions of this Act. These bonds and debentures may be long-term, medium, or
short-term, with fixed interest rate or floating interest rate.

Sec. 11. Board of Directors, Composition, Tenure and Per Diems. — The affairs
and business of the Bank shall be directed, and its properties managed and preserved,
by a Board of Directors consisting of nine (9) members. The other members of the
board shall be appointed by the President of the Philippines from a shortlist prepared
by the Governance Commission for Government -Owned and —Controlled Corporations
(GCG) subject to prior vetting from the BSP and its rules on disqualification, watchlist
files and the fit and proper rule, in accordance with the procedure laid down in R.A.
No. 10149 otherwise known as the “GOCC Governance Act of 2011”: Provided,
however, That, the position of Chairperson of the Board and President of the Bank
shall not be held by the same person.

The directors must always meet the fit and proper requirements under R.A. No.
8791 and the guidelines of the BSP and the GCG.

The Chairperson shall preside over the meetings of the Board.


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The President of the Bank shall be the Vice-Chairperson of the Board. In case
the Chairperson is absent or incapacitated, the President shall act as Chairperson. In
case of incapacity or absence of both the Chairperson and the Vice-Chairperson, the
Board shall designate a temporary chairperson from among its members.

No person shall be appointed director of the Bank unless that person is a
natural-born citizen of the Philippines, not less than thirty-five (35) years of age, of
good moral character and has attained proficiency, expertise and recognized
competence in one or more of the following: banking, finance, accounting, information
technology, information security, economics, law, agriculture, business management,
public utility or government administration.

At least four (4) of the members of the Board shall come from the private
sector. Except for the Chairperson and the President, no incumbent officer or
employee of the Bank may be appointed as a member of the Board; nor shall any
incumbent director, officer, or employee of any other bank be eligible as a member of
the Board.

The President and Chief Executive Officer (CEO) shall be elected annually by
the members of the Board in accordance with Section 13 hereof.

The term of office of the President and the members of the Board shall be for
@ period of one (1) year or until such time as their successors are appointed.

The members of the Board, including the President and CEO, shall receive per
diems for every meeting actually attended, and receive such other allowances,
incentives and emoluments, including reasonable transportation and representation
allowances and performance-based incentives, comparable to those received by
directors in private banks of the universal bank category, subject, however, to existing
laws and regulations.

Sec. 12. Powers and Duties of the Board of Directors. — The Board shall have
the following duties, powers, and authority:

a) To formulate policies necessary to carry out effectively the provisions of
this Act and to prescribe, amend, and repeal by-laws, rules and regulations for the
effective operation of the Bank, and the manner in which the general business of the
Bank may be conducted and the powers granted by law to the Bank are exercised;


b) To approve loans, other credit accommodations and guarantees issued
or obtained by the Bank, and prescribe terms and conditions to govern the granting
ies under such terms and

of the foregoing, and engage in such other financial acti
conditions as it may be deemed necessary, consistent with the provisions of this Act
and the existing banking laws and regulations promulgated by the Monetary Board:
Provided, That, the Board may delegate the authority to approve loans to such officers
or committees as may be deemed necessary;

©) To approve investment activities with terms and conditions beneficial to
the Bank and subject to the regulations promulgated by the Monetary Board;

d) To adopt an annual budget for the effective operation and administration
of the Bank;

e) To create and establish a "Provident Fund" which shall consist of
contributions, made both by the Bank and its officers or employees, to a common fund
for the payment of benefits to such officers or employees, or their heirs, under such
terms and conditions as the Board may fix;

f) To compromise or release, in whole or in part, any claim or settled
liability to the Bank regardless of the amount involved, under such terms and
conditions it may impose to protect the interests of the Bank. This authority to
compromise shall extend to claims against the Bank;

g) To appoint, promote or remove officers from the rank of Vice President
or its equivalent, and other more senior officer positions, excluding the Chairperson
and the Vice Chairperson: Provided, That no person shall be appointed to any
executive position in the Bank mentioned in the preceding section unless one is of
good moral character, of unquestionable integrity and responsibility, who is of
recognized competence in the field of one or more of the following: economics,
agriculture, industry, law, banking or finance, accounting, information technology,
information security, and possesses demonstrated administrative skill and ability;

h) To establish such branches, agencies and other offices which the Board
shall determine to be necessary and convenient in accordance with existing rules and
regulations of the BSP;

i) To establish a human resource management system which shall govern
the selection, hiring, appointment, transfer, promotion or dismissal of all personnel,

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and determination of compensation and benefits of all employees, subject to existing
laws and regulations such as R.A. No. 10149. Such system shall aim to establish
professionalism and excellence at all levels of the Bank in accordance with sound
principles of management;

j) To reorganize the bank personnel as the Board may deem necessary;
and to rationalize the organization and structure of the Bank to promote cost-savings
and efficiency. The Board is authorized to design and adopt an early retirement or
separation incentive plan for the purpose of providing a financial package of benefits,
apart from that granted under the GSIS law, due to retrenchment, reorganization,
streamlining of its organization, merger with another bank or a similar occurrence to
enable its personnel who may or may not yet be qualified for optional retirement under
existing retirement laws to retire or be separated from the service with additional
financial benefits: Provided, That the provisions of the Civil Service Law and its
implementing rules shall, at all times, be observed: Provided, further, That any
separation benefit and incentive which may be granted by the Bank equivalent to at
least two (2) months basic salary for every year of service, in addition to those
provided under existing laws, for those personnel referred to in this section shall be
sourced from the corporate funds of the Bank. This provision shall be subject to
applicable existing laws, rules and regulations;

k) To promote and sponsor the local or foreign training or study of officers
and employees in the related fields such as banking, finance, treasury, money market,
risk management, information technology and law. Toward this end, the Bank is
authorized to defray the costs of such training or study. The Board shall provide rules
and regulations to govern the training or study programs of the Bank, subject to
applicable existing regulations on training and study, as well as accounting and
auditing rules; and

!) To obtain from GSIS or other reputable insurance companies, duly
accredited by the appropriate regulatory body, directors, officers and liability insurance
coverage, without prejudice to the right of the Bank, as may be determined by the
Board, to put up its own legal insurance fund, subject to the regulations issued by the
GCG.


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The Board shall exercise its powers in a manner consistent with the principles
of transparency, fairness and accountability.

Sec. 13. President and Chief Executive Officer. — The President of the Bank
shail be the Chief Executive Officer who shall be elected by the Board from among
themselves with the written advice and consent of the President of the Philippines. No
person shall be appointed President of the Bank unless one is at least forty (40) years
of age, of good moral character and reputation, with at least ten (10) years of previous
experience in banking, and has a reputed proficiency, expertise and recognized
competence in banking or financial management.

The President shall, among other powers and duties, execute, carry out and
administer the policies, measures, orders and resolutions approved by the Board;
direct and supervise the operation and administration of the Bank; and exercise such
other powers and perform such other function or duty as may be directed or assigned
by law, regulations, executive issuances or by the Board from time to time.

The President shall have the following powers and duties:

a) To sign and execute all contracts concluded by the Bank and enter into
all necessary obligations required or permitted by this Act, upon proper
authorization by the Board; and sign all notes, securities certificates, and
‘other major documents of the Bank;

To exercise, as Chief Executive Officer of the Bank, the powers of control

and supervision over decisions and actions of subordinate officers and

all other powers that may be granted by the Board;

c) To report to the Board the main facts concerning the operations of the
Bank and to recommend changes in policies which one may deem

b)

advisable;
d) To submit an annual report to the President of the Philippines on the
result of the operations of the Bank;
To recommend to the Board the appointment, promotion, or removal of
all officers of the Bank, with the rank of at least vice-president or its
equivalent;
f) To appoint, promote or remove employees and officers below the rank

©)

of vice-president or its equivalent: Provided, That promotions, transfers,

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assignments or reassignments of officers and personnel of the Bank are
personnel actions deemed made in the interest of the service and not
disciplinary, any provision of the Civil Service Law to contrary
notwithstanding; and

g) As required by circumstances, to delegate any of the powers, duties or
functions to any officer or director of the Bank, with the approval of the
Board.

Sec. 14. Legal Matters and Cases. — The Bank shall have its own chief legal
counsel as head of the legal department, who shall be appointed by the Board of the
Bank upon recommendation of its President. The other members of the legal
department shall be appointed in accordance with the Bank’s policies on hiring and
promotion.

In appropriate cases, the Bank may avail also of the legal services of any
government legal office authorized to render such services to government-owned or
controlled corporations.

Notwithstanding Section 10 of Chapter 3, Title III, Book IV of Executive Order
292, otherwise known as the “Administrative Code of 1987”, the Legal Department
can also act as the principal law office of the Bank duly authorized to appear in its
behalf in any court or quasi-judicial body. The hiring of any external private counsel
may be authorized by the Board, upon the recommendation of the chief legal counsel,
without need of securing the approval of the Office of the Government Corporate
Counsel (OGCC) and the Commission on Audit (COA), any provision of a general or
special law to the contrary notwithstanding.

The Bank may, upon the recommendation of its chief legal counsel, deputize
any member of its legal staff to act as special sheriff in foreclosure cases, in the sale
or attachment of the debtor's properties and in the enforcement of court writs and
processes in cases involving the Bank. The special sheriff of the Bank shall make a
report to the proper court after any action taken which shall treat such action as if it
were an act of its own sheriffs in all respects.

The sale of mortgaged properties under the provisions of existing laws or of
this Act shall be conducted under the direction of the sheriff of the province or any
special sheriff of the Bank, or of a municipal judge or notary public of the city or

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municipality where the sale is to be made, who shall be entitled to collect the fees
provided for in the Rules of Court with respect to sale of properties under execution.

Sec. 15. Foreclosure by the Bank. — Unless warranted by the circumstances as
may be determined by the Board or otherwise directed by the President of the Bank
or his duly authorized representative for justifiable reasons, the Bank, after the lapse
of sixty (60) days from the date the account became past due as defined under the
rules and regulations of the BSP, shall immediately foreclose the collaterals and/or
securities for any loan, credit, accommodation, and/or guarantees granted by the Bank
whenever the arrearages on such account, including accrued interest and other
charges, amount to at least twenty percent (20%) of the total outstanding obligations,
including interest and other charges, as appearing in the books of account and/or
related records of the Bank.

Upon application of foreclosure of the collateral of delinquent borrowers,
whether judicially or extra-judicially, by the Bank, the court and/or officials concerned
shail immediately act and give priority to the same and schedule the publication
thereof within five (5) days from receipt of the application, the auction sale to be held
not later than ten (10) days from date of the last publication. The certificate of sale
must be issued on the date of sale and the same must be registered by the Register
of Deeds concerned not later than five (5) days after submission of the certificate of
sale.

As a result of foreclosure or any other legal proceedings wherein the properties
of the debtor which are foreclosed, attached, or levied upon in satisfaction of a
judgment are sold to the Bank, the said properties shall be placed in the possession
and control of the Bank, with the assistance of the Philippine National Police whenever
necessary. The petition for writ of possession shall be acted upon by the court within
fifteen (15) days from the date of filing.

The Bank is hereby directed to report to the Office of the President of the
Philippines any official who delays the proceedings as provided herein or who violates
any of the provisions of this section.

This provision is without prejudice to the right of the Bank to enter into a
compromise agreement pursuant to Section 12(f) of this Act.


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Sec. 16. Right of Redemption. — Any individual or juridical mortgagor of the
Bank whose real property has been judicially sold at public auction, or any individual
mortgagor of the Bank whose real property has been extra-judicially sold at public
auction shall, within one (1) year counted from the date of registration of the
certificate of foreclosure sale with the applicable Register of Deeds, has the right to
redeem the real property by paying to the Bank all of the latter's claims as determined
by the Bank.

Notwithstanding the provisions of Act No. 3135 entitled “An Act to Regulate the
Sale of Property Under Special Powers Inserting In or Annexed to Real Estate
Mortgage”, as amended, juridical mortgagors whose real property has been extra-
judicially sold at public auction shall have the right to redeem the property until, but
not after the registration of the certificate of foreclosure sale with the applicable
Register of Deeds, which registration shall in no case be more than three (3) months
from the date of foreclosure, whichever is earlier.

The Bank may take possession of the foreclosed property during the
redemption period. When the Bank takes possession during such period, it shall be
entitled to the fruits of the property with no obligation to account for them, the same
being considered compensation for the interest that would otherwise accrue on the
account. Neither shall the Bank be obliged to post a bond for the purpose of such
possession.

Sec, 17, Exemption from Attachment. — The provisions of any law to the
contrary notwithstanding, collaterals, securities on loans or other credit
accommodation and guarantees granted by the Bank or its predecessors-in-interest
shall not be subject to attachment, execution or any other court process, nor shall
they be included in the property of insolvent persons or institutions, unless all debts
and obligations of the debtor to the Bank and its predecessors-in-interest have been
previously paid, including accrued interest, penalties, collection expenses, and other
charges.

No attachment or execution shall be issued against the Bank or its property
before final judgment in any suit, action or proceeding in any court.

Sec. 18. Personnel, — The Board shall provide for an organization and staff of
officers and employees of the Bank and establish a bank personnel management

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system which shall govern the selection, hiring, appointment, transfer, promotion, or
dismissal of all bank personnel, including the continuous reorganization thereof.

The appointments in the Bank, except those which are policy-determining,
primarily confidential or highly technical in nature, shall be made only according to the
Civil Service Law and regulations: Provided, That no qualification or eligibility
requirements for positions in the Bank shall be imposed other than those set by the
Board: Provided, further, That the Monetary Board shall prescribe, pass upon and
review the qualifications of individuals appointed as officers and disqualify those found
unfit: Provided, finally, That the Board or the President in accordance with Sections
12 and 13 of this Act, respectively, may without need of obtaining prior approval from
any other government agency, appoint its contractual personnel whose services are
deemed necessary in order not to unduly disrupt the operations of the Bank except in
the conduct of business involving bank deposits.

All positions in the bank shall be governed by the compensation and position
classification system (CPCS) and qualification standards subject to the approval of the
President of the Philippines based on a comprehensive job analysis of actual duties
and responsibilities and the compensation plan shall be comparable with the prevailing
compensation plans of universal banks in the private sector. The Board shall fix the
total compensation package and other remunerations and emoluments of bank
personnel, including the President and Chief Executive Officer. The total compensation
package shall include reasonable allowances, incentives, bonuses, privileges and other
benefits, comparable to those given in private banks of the universal bank category,
as may be necessary or proper for the effective management, operation and
administration of the Bank.

The Bank's CPCS shall be subject to periodic review by the Board once every
two (2) years, without prejudice to yearly merit or increases based on the bank's
productivity and profitability. The Bank shall be exempt from all existing laws, rules,
and regulations on compensation, position classification and qualification standards.

The foregoing actions of the Board in the immediately preceding three (3)
paragraphs of this section shall be subject to existing laws and regulations, such as
R.A. No. 10149,

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No officer or employee of the Bank subject to the Civil Service Law shall be
dismissed except for cause as provided by law.

Sec. 19. Inhibition from Board Meeting of Member with Personal Interest. —
Whenever any member attending a meeting of the Board of Directors, or any of one’s
relatives within the fourth civil degree of consanguinity or affinity has a personal or
pecuniary interest, directly or indirectly, in any matter in the agenda of the board
meeting or in the discussion or resolution of any given matter, said member shall
disclose said interest to the Board and shall not participate in the discussion or
resolution of the matter and must retire from the meeting during the deliberation
thereon. The members of the Board of Directors present in the meeting should still
constitute a quorum despite the inhibition of the member with personal or pecuniary
interest in any matter, discussion or resolution in the same meeting.

The minutes of the meeting, which shall note the subject matter, the fact that
a member had a personal interest in it, and the withdrawal of the member concerned,
may be made available to the public.

For this purpose, the member of the Board shall, at the beginning of their
respective terms, disclose to the Board any and all interests they may have in any
corporation, partnership or association and shall, thereafter, disclose to the Board, any
change thereto.

Sec. 20. Prohibition on Persons with Personal/Pecuniary Interest. — No member
of the Board, officer, attorney, agent, or employee of the Bank shall in any manner,
directly participate in the deliberation upon or the determination of any question
affecting one’s direct personal interest or the personal interests of relatives within the
fourth civil degree of consanguinity or affinity, or of any corporation, partnership, or
association in which the member has a direct interest. Any person violating the
provisions of this section shall be removed from office and shall upon conviction be
punished with a fine of not less than Fifty thousand pesos (P50,000) nor more than
Two million pesos (P2,000,000) or by imprisonment of not less than two (2) years nor
more than ten (10) years, or by both fine and imprisonment at the discretion of the
court.

Sec. 21. Borrowing by Directors, Officers and Employees; Restriction and
Limitation. — No (1) director, officer or employee of the Bank; or (2) any corporation,

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partnership, or company wherein any member of the Bank's Board of Directors, officer
or employee, or their relatives within the first civil degree of consanguinity or affinity
is a director, officer or controlling shareholder either directly or indirectly, for one’s
self or as representative or agent of others, borrow any of the deposits of funds from
the Bank, nor shall become a guarantor, or in any manner be an obligor for money
borrowed from the Bank or loaned by it: Provided, That this prohibition on loans to
directors, officers and employees shall not include loans allowed in the form of fringe
benefits granted in accordance with rules and regulations as may be prescribed by the
Monetary Board: Provided, further, That this prohibition shall not apply to loans to
corporations wherein the director, officer or employee of the Bank sits on the board
of the borrower corporation to represent the interest of the Bank.

Sec. 22. Rules and Regulations on Conflict of Interest. — The Board of Directors
is hereby authorized to issue rules and regulations for the purposes of determining
and resolving conflict of interest questions, which rules shall, in particular, include the
requirement on all officers and. employees of the Bank to disclose any shareholdings
they, or their relatives within the fourth civil degree of consanguinity or affinity, may
have in any corporation, partnership, or company in excess of two percent (2%) of
the equity of said corporation, partnership, or company or in any related party
transactions defined by the Monetary Board of the BSP and the Board of Directors of
the Bank.

Sec. 23. Prohibition on Officers and Employees of the Bank. — Except as
required by law, or upon order of a court of competent jurisdiction, or the express
order of the President of the Philippines or written permission of the client, no officer
or employee of the Bank shall reveal nor allow to be examined, inquired or looked
into, by any third person, government official, bureau or office any information relative
to details of individual accounts or specific banking transactions, condition or business
of any of its clients, or funds or properties in the custody of the Bank belonging to
private individuals: Provided, That in respect to deposits or whatever nature, the
provisions of existing law shall apply.

This prohibition shall not apply to the exchange of confidential credit
information among government financial institutions or among banks, in accordance
with established banking practices or as may be allowed by law.

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Sec. 24. Exaction of Fee, Commission, Gift or Charge. — No unauthorized fee,
commission, gift, or charge of any kind shall be exacted, demanded, or paid, for
obtaining loans from the Bank, and any officer, employee, or agent of the Bank found
guilty of exacting, demanding, or receiving any fee services in obtaining any service
‘or transaction from the Bank, shall be punished by a fine of not less than Fifty
thousand pesos (P50,000) nor more than Two million pesos (P2,000,000),
imprisonment for not less than six (6) years and one (1) month nor more than fifteen
(15) years, and perpetual disqualification from public office and confiscation or
forfeiture in favor of the government of any prohibited interest and unexplained
wealth.

Sec. 25. Examination of the Bank. — The Bank shall be subject to supervision
and examination by the appropriate department of the BSP, and audit by the COA.

Sec. 26. General Penal Provisions. — Any director, officer or employee of the
Bank who violates, or permits any of the officers, employees or agents of said Bank
or any other person to violate, any of the provisions of this Act not specifically punished
in the preceding sections and any person violating any provision of this Act or aiding
and abetting the violation thereof, shall be punished with a fine not less than Fifty
thousand pesos (P50,000) nor more than Two million pesos (P2,000,000) or by
imprisonment for not less than two (2) years nor more than ten (10) years, or both,
at the discretion of the court.

Sec. 27. Other Liability of Guilty Officer or Employee. — Any member of the
Board of Directors or officer or employee of the Bank who willfully violates any of the
provisions of this Act shall, in addition to the criminal and administrative liability
resulting from such act, be held liable for any loss or injury suffered by the Bank as a
result of such violation.

Sec. 28. Liability of Directors, Officers or Partners of Offending Corporation or
Partnership. — If the violation of the provisions of this Act is committed by a
corporation or partnership, the directors, officers or partners hereof who participated
in the violation shall be criminally liable for such violation.

Sec. 29. Applicability of Banking Laws. — The provisions of R.A. No. 7653,
otherwise known as the New Central Bank Act, as amended by R.A. No, 11211, R.A.


No. 8791, and other applicable banking laws, insofar as they are not in conflict with
any provision of this Act, shall apply to the Bank.

The penal provisions of Section 66 R.A. No. 8791, in relation to Sections 34,
35, 36 and 37 of R.A. No. 7653, as amended by R.A. No. 11211 shall be applicable to
directors, officers, employees and borrowers of the Bank.

Sec. 30. Separability Clause. — In the event that any provision of this Act or
the applicability of such provisions to any person or circumstances is declared invalid,
the remainder of the Act or the application of said provision to other persons or
circumstances shall not be affected by such declaration.

Sec. 31. Repealing Clause. — The provisions of Presidential Decree No. 985,
Presidential Decree No. 1597, R.A. No. 6758, as amended, Joint Resolution No. 4, the
provisions of any other law, special charters, executive orders, administrative orders,
proclamations, rules and regulations issued pursuant to Executive Order No. 81, as
amended, or parts thereof, or any other laws, rules and regulations which may be
inconsistent with any of the provisions of this Act, are hereby amended accordingly.

Executive Order No, 81, as amended, is hereby repealed.

Sec. 32. Effectivity. — This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in a newspaper of general circulation in the
Philippines.

Approved,