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THIRTEENTH CONGRESS OF THE REPUBLIC 
) 
OF THE PHILIPPINES 
1 
First Regular Session 
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S E N A T E  
S. No. 
1314 
Introduced by Senator S. R. OsmeAa 111 
EXPLANATORY NOTE 
It is common knowledge that some unscrupulous businessmen andlor 
business enterprises maintain multiple sets of books and financial statements. 
Thus, they submit a doctored set as a basis for their income and other tax 
obligations and use a more accurate set for purposes of obtaining loans from 
banks and other financial institutions. 
Such practices are, of course, illegal. The payment of tens of billions of 
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pesos in legitimate taxes due to the government is evaded. In this light, the 
bank, its executives and loan officers, wittingly or unwittingly, become silent 
collaborators in the crime of tax evasion by allowing borrowers to present 
financial reports quite different from that which is filed with their periodic reports 
to the Bureau of Internal Revenue (BIR) and other government agencies. 
There is therefor, a felt need to discourage such illegal practices, erisure 
honestly in compliance with tax laws, promote sound banking management and 
protect the integrity of the banking and financial system. 
This measure seeks to make officers and directors of banks and other 
financial institutions criminally liable for allowing the use of financial statements 
from their prospective borrowers other than the audited financial statements that 
they submitted to the BIR and other government agencies, as a basis for the 
grant of credit accommodations to said borrowers. 
This measure also holds liable any banking officer or director who fails to 
report to the Bangko Sentral ng Pilipinas and the BIR any knowledge they may 
have if a borrower keeps more than one set of financial accounts. 
In order to collect taxes validly owed the government, the early passage Of 
this measure is earnestly requested. 
S RGlO OSMENA 111 
Senator 
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THIRTEENTH CONGRESS OF THE REPUBLIC 
) 
OF THE PHILIPPINES 
Frst Regular Session 
1 
S E N A T E  
S. No. 
1314 
Introduced by Senator S. R. Osmefia 111 
AN ACT 
REQUIRING THE OFFICERS AND DIRECTORS OF BANKS AND OTHER 
FINANCIAL INSTITUTIONS. 
TO UTILIZE AS THE BASIS FOR THE 
APPROVAL 
OF 
CREDIT 
ACCOMMODATIONS 
THE 
FINANCIAL 
STATEMENTS USED FOR PAYMENT OF TAX OBLIGATIONS BY THE 
PROSPECTIVE BORROWERS, PROVIDING PENALTIES FOR VIOLATIONS 
THEREOIF, AMENDING REPUBLIC ACT. 337, OTHERWISE KNOWN AS THE 
GENERAL BANKING ACT AND FOR OTHER PURPOSES 
Be it enacted by the Senate and the House of Representatives of the Republic of 
the Philippines in Congress assembled: 
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applications. 
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Section 1. Declaration of Policies. - It is hereby declared the policy of 
the State to insure honesty in compliance with the nation's tax laws and to 
protect the integrity of the banking and financial system through the use of a 
single accurate set of books in business for the purpose of tax returns and credit 
Sec. 2. - Section 76 of Rep. Act. No. 337, otherwise known as the 
"General Banking Act". Is hereby amended to read as follows: 
"Sec. 76. - Before granting a loan, banks must exercise proper 
caution to ascertain that the debtor is capable of fulfilling his commitments 
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to the bank 
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Toward this end, banks may demand of their credit applicants a 
statement of their property and SHALL DEMAND CERTIFIED COPIES of 


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their income and expenditures AND THEIR INCOME TAX RETURNS 
FOR THE PRECEDING THREE (3) YEARS INCLUDING THE AUDITED 
FINANCIAL STATEMENTS ON WHICH SAID TAX RETURNS WERE 
BASED, IN THE EVALUATION OF CREDIT APPLICATIONS AND THE 
GRANT OF LOANS. 
Should such STATEMENTS OR ANY PART 
THEREOF prove to be false or incorrect in any material detail, the bank 
[may] SHALL REJECT THE CREDIT APPLICATION AND SHALL 
DECLINE TO EXTEND ANY LOAN OR CREDIT ACCOMMODATION. 
THE BANK SHALL ALSO terminate any loan granted on the basis of said 
statements and shall have the right to demand immediate repayment of 
the obligation.“ THE BANK IS HEREBY REQUIRED TO IMMEDIATELY 
REPORT ITS DISCOVERY OF FINANCIAL DISCREPANCIES AND/OR 
FALSE STATEMENTS TO THE BANGKO SENTRAL NG PILIPINAS, THE 
BUREAU OF INTERNAL REVENUE AND OTHER CONCERNED 
GOVERNMENT AGENCIES. 
Sec. 3. - A New Section is hereby inserted to read as follows: 
“Sec. 76-A. - THE DIRECTOR AND OFFICER OF THE BANK OR 
FINANCIAL INSTITUTION FOUND GUILTY OF WILLFUL VIOLATION OF 
ANY OF THE ACTS PROHIBITED UNDER THE PRECEDING SECTION 
SHALL BE PUNISHED BY A FINE RANGING FROM FIVE MILLION 
PESOS 
(P5,000,000,00) 
TO 
TWENTY 
MILLION 
PESOS 
(P20,000,000.00) OR THRICE THE AMOUNT OF THE TAX DEFICIT OF 
THE BORROWER, WHICHEVER IS HIGHER, OR IMPRISONMENT 
RANGING FROM FOUR (4) YEARS TO TWELVE (12) YEARS, OR 
BOTH, AT THE DISCRETION OF THE COURT.” 
See. 4. - Any provision of law, decree, executive order or any issuance 
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inconsistent herewith is hereby repealed and/or modified accordingly. 


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of general circulation. 
Sec. 5. - This Act shall take effect fifteen (15) days) after the completion 
of its publication in the Official Gazette or in at least two (2) national newspapers 
Approved,