FIFTEENTH CONGRESS OF THE REPUBLIC ) 
OF THE PHILIPPINES 
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Third Regular Session 
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SENATE 
S.B. No. 3282 
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Prepared by the Committee on Banks, Financial Institutions and Currencies with 
Senators Miriam Defensor-Santiago, Edgardo Angara, and Sergio Osmeiia III as 
authors 
AN ACT ALLOWING INFUSION OF FOREIGN EQUITY IN THE CAPITAL OF 
RURAL BANKS, AMENDING REPUBLIC ACT NO. 7353, OTHERWISE 
KNOWN AS THE RURAL BANK ACT OF 1992, AS AMENDED AND FOR 
OTHER PURPOSES. 
Be it enacted by the Senate and the House of Representatives of the Philippines in Congress 
assembled: 
1 
SECTION 1. Section 4 of Republic Act No. 7353, as amended is hereby amended 
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to read as follows: 
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"Sec. 4. No rural bank shall be operated without a Certificate of Authority from the 
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Monetary Board of the [Central Bank] BANGKO SENTRAL NG PILIPINAS. Rural 
5 
banks shall be organized in the form of stock corporations. NO LESS THAN 40% OF 
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RURAL BANKS SHALL BE OWNED BY CITIZENS OF THE PHILIPINES OR 
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CORPORATIONS OR ASSOCIATIONS ORGANIZED UNDER THE LAWS OF 
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THE PHILIPPINES AT LEAST 60% OF WHOSE CAPITAL IS OWNED BY 
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SUCH CITIZENS. NON-FILIPINO CITIZENS MAY OWN, ACQUIRE, OR 
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PURCHASE UP TO SIXTY PERCENT (60%) OF THE VOTING STOCKS IN A 
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RURAL BANK. THE PERCENTAGE OF FOREIGN-OWNED VOTING STOCKS 
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SHALL BE DETERMINED BY THE CITIZENSHIP OF THE INDIVIDUAL OR 


I 
CORPORATE STOCKHOLDERS OF THE RURAL BANK. Upon consultation with 
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the rural banks in the area, duly established cooperatives and corporations primarily 
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organized to hold equities in rural banks may organize a rural bank and/or subscribe to the 
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shares of stock of any rural bank: Provided, That a cooperative or corporation owning or 
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controlling the whole or majority of tlie 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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prescribe. [With exception of shareholdings of corporations organized primarily to hold 
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equities in rural banks as provided for 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 
II 
corporations, associations or cooperatives qualified under Philippine 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 ceiling 
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for a period of ten (10) years from the approval of this Act: Provided, further, that any 
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such exemption shall require the approval of the Monetary Board.] If subscription of 
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private shareholders to the capital stock of rural bank cannot be secured or is not available, 
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or insufficient to meet the normal credit needs of the locality, the Land Bank of the 
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Philippines, the Development Bank of the Philippines, or any government-owned or 
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controlled bank or financial institution, on representation of the said private shareholders 
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but subject to the investment guidelines, policies and procedures of the bank or financial 
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institution and upon approval of the Monetary Board of the Central Bank, shall subscribe 
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to the capital stock of such rural bank, which shall be paid in full at the time of 
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subscription, in an amount equal to the fully paid subscribed and unimpaired capital of the 
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private stockholders or such amount as the Monetary Board may prescribe as may be 
25 
necessary to promote and expand rural economic development: Provided, however, That 
2 


such shares of stock subscribed by the Land Bank of the Philippines, the Development 
2 
Bank of the Philippines or any government-owned or controlled bank or financial 
3 
institution may be sold at any time at [market] ADJUSTED BOOK value [to private 
4 
individuals who are citizens of the Philippines]: Provided, finally, That in the sale of 
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shares of stock subscribed by the Land Bank of the Philippines, the Development Bank of 
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the Philippines or any government-owned or controlled bank or financial institution, the 
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registered stockholders shall have the right of preemption within one (1) year from the 
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date of offer in proportion to their respective holdings, but in the absence of such buyer, 
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preference, however, shall be given to residents of the locality or province where the rural 
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bank is located. 
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SECTION 2. Section 5 of Republic Act No. 7353, as amended, is hereby 
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amended as follows: 
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"Sec. 5. [All members of the Board of Directors of the rural bank shall be citizens 
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of the Philippines at the time of their assumption to office.] NON-FILIPINO CITIZENS 
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MAY BECOME MEMBERS OF THE BOARD OF DIRECTORS OF A RURAL 
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BANK BUT THEIR PARTICIPATION IN THE BOARD SHALL BE LIMITED TO 
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THEIR PROPORTIONATE SHARE IN THE EQUITY OF THE RURAL BANK: 
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Provided, however, that nothing in this Act shall be construed as prohibiting any 
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appointive or elective public official from serving as director, officer, consultant or in any 
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capacity in the SAID bank, SUBJECT TO THE PROVISIONS OF EXISTING 
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LAWS. 
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No Director or officer of any rural bank shall, either directly or indirectly, for 
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himself or as the representative or agent of another borrow any of the deposits or funds of 
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such banks, nor shall he become a guarantor, indorser, or surety for loans from such bank 
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to others, or in any manner be an obligor for money borrowed from the bank or loaned by 
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it except with the written approval of the majority of the directors of the bank, excluding 
2 
the director concerned. Any such approval shall be entered upon the records of the 
3 
corporation and a copy of such entry shall be transmitted forthwith to the appropriate 
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supervising department. The director/officer of the bank who violates the provisions of 
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this section shall be immediately dismissed from his office and shall be penalized in 
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accordance with Section 26 of this Act. 
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The Monetary Board may regulate the amount of credit accommodations that may 
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be extended directly to the directors, officers or stockholders of rural banks of banking 
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institutions. However, the outstanding credit accommodations which a rural bank may 
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extend to each of its stockholders owning two percent (2%) or more of the subscribed 
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capital stock, its directors, or officers shall be limited to an amount equivalent to the 
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respective outstanding deposits and book value of the paid-in capital contributions in the 
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bank." 
14 
SECTION 3. Section 8 of Republic Act No. 7353 is hereby amended to read as 
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follows: 
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"To provide supplemental capital to any rural bank until it has accumulated enough 
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capital of its own or stimulate private investments in rural banks, the Land Bank of the 
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Philippines, the Development Bank of the Philippines or any government-owned or 
19 
controlled bank or financial institution shall subscribe within thirty (30) days to the capital 
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stock of any rural bank from time to time in an amount equal to the total equity investment 
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ofthe private shareholders which shall be paid in full at the time of the subscription or 
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such amount as may be necessary to promote and expand rural economic development: 
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Provided, however, That shares of stock issued to the Land Bank of the Philippines, the 
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Development Bank ofthe Philippines or any government-owned or controlled bank or 
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financial institution, may, pursuant to this section, at any time, be BOUGHT [paid off] 
4 


AT ADJUSTED BOOK VALUE [par and retired in whole or in part if the rural bank has 
2 
accumulated enough capital strength to permit retirement of such shares, or if an offer is 
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received form private sources to replace the equity investment of the Land Bank of the 
4 
Philippines, the Development Bank of the Philippines or any government owned or 
5' controlled bank or financial institution with an equivalent investment or more in the equity 
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of such bank. In case of retirement of stock or replacement of equity investments of the 
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Land Bank of the Philippines, the Development Bank of the Philippines or of any 
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government-owned or controlled bank or financial institution, the registered private 
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shareholders of the rural bank shall have the right of preemption within one (1) year from 
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the date of offer in proportion to their respective holdings]. 
11 
"Stocks held by the Land Bank of the Philippines, the Development Bank of the 
12 
Philippines or by any government-owned or controlled bank or financial institution, under' 
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the terms of this Section, shall be made preferred only as to assets upon liquidation and 
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without the power to vote and shall share in dividend distributions from the date of 
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issuance in [the] AN amount BASED ON THE LENDING BENCHMARK 
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APPROVED BY THE BANGKO SENTRAL NG PILIPINAS PLUS THE 
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PREVAILING NON-PRIME SPREAD OF THE GOVERNMENT FINANCIAL 
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INSTITUTION [off our percent (4%) on the first and second years, six percent (6%) on 
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the third and fourth years, eight percent (8%) on the fifth and sixth years, ten percent 
20 
(10%) on the seventh and eighth years and twelve percent (12%) on the ninth to the 
21 
fifteenth years without preference;]: Provided, however, that if such stock of the Land 
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Bank of the Philippines, the Development Bank of the Philippines or any government-
23 
owned or controlled bank or financial institution is sold to private shareholders, the same 
. 24 
may be converted into common stock of the class provided for in Section 10 hereof: 
25 
Provided, further, That pending the amendment of the Articles of Incorporation of the 
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rural bank, if necessary, for the purpose of reflecting the conversion into common stock of 
preferred stock sold to private shareholders, the transfer shall be recorded by the rural 
bank in the stock and transfer book and such shareholders shall thereafter enjoy all the 
rights and privileges of common stockholders. The preferred stocks so transferred shall be 
surrendered and cancelled and the corresponding common stocks shall be issued." 
SECTION 4. The Bangko Sentral ng Pilipinas, consistent with Section 11 of 
Republic Act No. 7353, shall prescribe the necessary rules and regulations on the 
amendments of the Rural Banks Act of 1992 in consultation with various stakeholders as 
well as disseminate this information to allow entry of foreign equity into our rural bank 
system to revitalize the rural banking industry and improve access of banking services to 
the rural areas in the country. 
The implementing rules and regulations shall be published- within ninety (90) days 
from the publication of this Act in two (2) newspapers of general circulation in the 
Philippines. 
SECTION 5. Separability Clause. - If, for any reason, any provision of this Act is 
declared invalid or unconstitutional, the remaining provisions not affected thereby shall 
17 
continue to be in force and effect. 
18 
SECTION 6. Repealing Clause. -
All laws, decrees, executive orders, 
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proclamations, rules and regulations, and other issuances, or parts thereof, which are 
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inconsistent with the provisions ofthis Act are hereby repealed or modified accordingly. 
21 
SECTION 7. Effectivity Clause. - This Act shall take effect fifteen (15) days 
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after its complete publication in the Official Gazette or in at least two (2) newspapers of 
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general circulation, whichever is earlier. 
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Approved, 
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