1 
I 
10 
I 1  
1' 
13 
. 14 
1 
I5 
16 
17 
I S  
5 ;#+? -.=> 
F;) ;!;) 
.K 
S E N A T E  
!!.a;: 
c.;cc; C Y  . . , ~ ~  
.. 
, I , , .  - 
13TH CONGRESS OF THE REPUBLIC ) 
OF THE PHILIPPINES 
) 
First Regular Session 
) 
S.B. NO. ___ 
(In substitution of Senate Bill Nos. 557 and 1822) 
Prepared by the Committee on Banks, Financial Institutions and Currencies, 
with Senators Sergio Osrnefia 111 and Edgardo 3 .  Angara, as authors. 
AN ACT 
AMENDING REPUBLIC ACT NUMBERED SEVENTY-SIX HUNDRED AND 
FIFTY-THREE ENTITLED "THE NEW CENTRAL BANK ACT" AND 
FOR OTHER PURPOSES 
Be it enacted by the Senate and the House of Representatives of the Philippines in 
Congress assembled: 
Section 1. Section 3, Republic Act No. 7653, otherwise known as the "The New Central 
Bank Act", is hereby amended to read as follows: 
"SECTION 3. Responsibility and Primary Objective. - The Bangko Sentral shall 
provide policy directions in the areas of money, banking and credit. It shall have 
6 
supervision over the operations of banks, QUASI-BANKS, AND OTHER FINANCIAL 
INSTITUTIONS WHICH UNDER THIS ACT OR SPECIAL LAWS ARE SUBJECT TO BANGKO 
SENTRAL SUPERVISION and exercise such regulatory powers as provided in this Act and 
other pertinent laws over the operations of [finance companies and] OTHER non-bank 
financial institutions NOT SUPERVISED OR REGULATED BY OTHER GOVERNMENT 
AGENCIES [performing quasi-banking functions, hereafter referred to as quasi-banks, 
and institutions performing similar functions]. 
. 
The primary objective of the Bangko Sentral is to maintain price stability 
conducive to a balanced and sustainable growth of the economy. It shall also promote 
and maintain monetary stability and the convertibility of the peso. IT SHALL LIKEWISE 
PROMOTE, OVERSEE AND MAINTAIN THE STABILIlY OF THE FINANCIAL AND 
PAYMENTS SYSTEMS OF THE COUNTRY IN ACCORDANCE WITH INTERNATIONALLY- 
ACCEPTED PRINCIPLES. 
TOWARDS THIS 
END, THE BANGKO SENTRAL SHALL ISSUE 
AND ENFORCE APPROPRIATE REGULATIONS. 


3 
4 
5 
6 
7 
S 
9 
I .  
10 
' 
I 1  
12 
13 
14 
15 
16 
17 
i 
Section 2. 
Section 11 of the same Act is hereby amended by inserting a new 
paragraph between the third and the fourth paragraphs which shall read as follows: 
, 
"MEETINGS OF THE MONETARY BOARD MAY BE CONDUCTED THROUGH THE 
USE OF MODERN TECHNOLOGY 
INCLUDING, 
BUT NOT LIMITED TO, TELE- 
CONFERENCING OR VIDEO-CONFERENCING." 
Section 3. Section 15 (Exercise of the Authority of the Monetary Board), paragraphs 
(b) and (e), of the same Act is hereby amended to read as follows: 
"(b) 
direct the management, operations, and administration of the Bangko 
Sentral, 
reorganize 
its 
personnel, 
PROVIDE SEPARATION BENEFITS WHENEVER 
NECESSARY, 
and 
issue such rules and regulations as it may deem necessary or 
convenient for this purpose. The legal units of thd Bangko Sentral shall be under the 
exclusive supervision and control of the Monetaiy Board; 
"(e) 
indemnify 
its members and other [officials] PERSONNEL of the Bangko 
Sentral [ , including personnel of the departments performing supervision and 
examination functions] against all costs and expenses reasonably incurred by such 
persons in connection with any civil or criminal action, suit or proceedings to which 
he may be, or is, made a party by reason of the performance of his functions or duties, 
IS 
19 
MALICE, GROSS negligence or GROSS misconduct. 
I 
20 
; 
unless he is finally adjudged in such action or proceeding to be liable for BAD FAITH, 
i 
I n  the event of a settlement or compromise, indemnification shall be provided 
? I  
72 
23 
24 
25 
26 
27 
3-S 
29 
only in connection with such matters covered by the settlement as to which the 
Bangko Sentral is advised by external counsel that the person to be indemnified [did 
not commit any] HAD NOT ACTED WrrH BAD FAITH, MALICE, GROSS negligence or 
GROSS misconduct. 
The costs and expenses incurred in defending the aforementioned action, suit 
or proceeding may be paid by the Bangko Sentral in advance of the final disposition of 
such action, suit or proceeding upon receipt of an undertaking by or on behalf of the 
member [, officer, or employee] AND OTHER PERSONNEL to repay the amount 
advanced should it ultimately be determined by the Monetary Board khat he is not 
2 


1 
entitled to be indemnified as 
provided in this subsection ON ACCOUNT OF BAD 
I 
2 
FAITH, MALICE, GROSS NEGLIGENCE OR GROSS MISCONDUCT. 
i 
3 
4 
read as follows: 
5 
Section 4. 
The first parzgraph of Section 16 of the same Act is hereby amended to 
"SECTION 16. 
Responsibility. - THE GENERAL RULE AND THE EXCEPTION 
6 
THEREFROM ON THE LIABILiTY OF PUBLIC OFFICERS AS PROVIDED IN SECTIONS 38 
7 
AND 39 OF CHAPTER 9, BOOK I 
OF THE REVISED ADMINISTRATIVE CODE OF 1987 
8 
SHALL 
APPLY 
TO members of the Monetary Board [,officials, 
examiners, and 
9 
employees] AND OTHER PERSONNEL of the Bangko Sentral. [who willfully violate 
10 
this Act 
or who 
are guilty 
of negligence, abuses or acts of malfeasance or 
11 
misfeasance or fail to exercise extraordinary diligence in the performance of his duties 
* 
12 
shall be held liable for any loss or injury suffered by the Bangko Sentral or other 
' 
13 
banking institutions as a result of 
such violation, negligence, abuse, malfeasance, 
14 
15 
misfeasance or failure to exercise extraordinary diligence.] 
Section 5. 
The first paragraph of Section 21 of the same Act is hereby amended to 
16 
17 
18 
19 
20 
21 
22 
23 
24 
read as follows: 
"SECTION 21. Deputy Governors. - The Governor of the Bangko Sentral, with 
the approval of the Monetary Board, shall appoint not more than [three (3)] FIVE (5) 
Deputy Governors who shall perform duties as may be assigned to them by the 
Governor and the Board." 
Section 6. 
The first paragraph of Section 23 of the same Act is hereby amended to 
: 
read as follows: 
i 
"SECTION 23. Authority to Obtain Data and Information.- The Bangko Sentral 
shall 
have the 
authority to request from ANY PERSON OR ENTITY, INCLUDING 
25 
government offices and instrumentalities, 
or government-owned 
or controlled 
26 
corporations, any data which it may require for the proper discharge of its functions 
27 
and responsibilities. The Bangko Sentral through the Governor or in his absence, a 
28 
duly authorized representative shall 
have the power to issue a subpoena for the 
29 
production of the books and records for the aforesaid purpose. Those who refuse 
30 
the subpoena without justifiable cause, or who refuse to supply the bank with data 
3 


c 
1 
2 
3 
4 
5 
6 
7 
: 
10 
1 1  
12 
13 
14 
* 
15 
' 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
2s 
7 29 
requested or required, shall be subject to punishment for contempt in accordance 
with the provisions of the Rules of Court." 
§ection 7. Section 25 of the same Act is hereby amended to read as follows: 
"SECTION 25. 
Supewision and Examination. - The Bangko Sentral shall have 
, 
i 
supervision over, and conduct periodic or special examination of [ banking institutions, 
and ] BANKS AND quasi-banks, including their subsidiaries and affiliates engaged in 
allied activities, AND OTHER FINANCIAL INSTITUTIONS WHICH, UNDER SPECIAL LAWS, 
ARE SUBJECT TO BANGKO 
SENTRAL 
SUPERVISION. 
PURSUANT 
TO 
THE 
AUTHORITY OF THE BANGKO SENTRAL UNDER THIS SECTION, AND I N  ADDITION 
TO SUCH OTHER AUTHORITY GRANTED BY LAW, PRIOR APPROVAL BY THE BANGKO 
SENTRAL SHALL BE REQUIRED FOR TRANSFERS OR ACQUISITIONS OF SHARES OF 
STOCK I N  BANKS OR QUASI-BANKS WHERE ANY SUCH TRANSFER OR ACQUISITION 
OR SERIES 
OF TRANSFERS OR ACQUISITIONS 
WOULD BE SUFFICIENT 
TO ELECT AT 
LEAST ONE SEAT I N  THE BOARD OF DIRECTORS OR WOULD EFFECT A CHANGE 
I N  THE MAJORITY OWNERSHIP OR CONTROL OF THE VOTING STOCK I N  ANY OF 
THESE INSTITUTIONS. 
PRIOR TO SUCH APPROVAL, 
NO SUCH TRANSFER OR 
ACQUISITION SHALL BE RECOGNIZED I N  THE BOOKS OF THE INSTITUTION NOR BY 
ANY GOVERNMENT AGENCY AND THE TRANSFEROR-STOCKHOLDERS, 
I N  CASES 
INVOLVING TRANSFERS, SHALL 
REMAIN 
ACCOUNTABLE 
AND 
RESPONSIBLE 
~ 
THEREFOR. I N  APPROVING SAID TRANSFERS OR ACQUISITIONS, REGARD SHALL BE 
GIVEN 
BY THE BANGKO SENTRAL TO THE 
FITNESS OF THE INCOMING 
STOCKHOLDERS AS MAY BE INDICATED 
BY THEIR 
INTEGRITY 
AND FINANCIAL 
CAPACITY. 
For purposes of this section, a subsidiary means a corporation more than fifty 
I 
i 
percent (50%) of the voting stock of which is owned DIRECTLY OR INDIRECTLY by a 
bank or quasi-bank and an affiliate means a corporation the voting stock of which, 
to the extent of fifty percent (50%) or less,, is owned by a bank, quasi-bank or which 
is related or linked to such institution or intermediary through common stockholders 
or such other factors as may be determined by the Monetary Board. 
4 


1 
2 
3 
4 
S 
6 
7 
8 
9 
IO 
I 1  
12 
13 
14 
15 
16 
17 
* 
1s 
' 
19 
20 
21 
22 
23 
24 
25 
26 
17 
2s 
29 
30 
CONTROL EXISTS WHEN THE PARENT OWNS DIRECTLY OR INDIRECTLY 
MORE THAN ONE HALF OF THE VOTING STOCK OF AN ENTERPRISE. CONTROL 
MAY ALSO EXIST EVEN WHEN THE PARENT OWNS ONE HALF OR LESS OF THE VOTING 
STOCK OF AN ENTERPRISE WHEN THERE IS: 
(A) 
POWER OVER MORE THAN ONE HALF OF THE VOTING RIGHTS BY VIRTUE 
OF AN AGREEMENT WITH OTHER INVESTORS; OR 
(B) 
POWER TO GOVERN THE FINANCIAL AND OPERATlNG POLICIES OF THE 
I 
ENTERPRISE UNDER A STATUTE OR AN AGREEMENT; OR 
b 
(C) 
POWER TO APPOINT OR REMOVE THE MAJORITY OF THE MEMBERS OF 
THE BOARD OF DIRECTORS; OR 
(D) 
POWER TO CAST THE MAJORITY OF VOTES AT MEETINGS OF THE BOARD 
OF DIRECTORS; OR 
(E) 
The 
department 
heads and the 
examiners 
of the supervising and/or 
examining departments are hereby authorized to administer oaths to any director, 
officer, or employee of any 
institution 
under 
their respective 
supervision or 
subject to their examination and to compel the presentation of all books, documents, 
papers or records necessary in their judgment to ascertain the facts relative to the 
true condition of any institution as well as the books and records of persons and 
entities relative to or in connection with the operations, activities or transactions 
of the institution under examination, subject to the provision of existing laws 
protecting or safeguarding the secrecy or confidentiality of bank deposits, as well 
as investments of private persons, 
natural or juridical, in debt instruments issued 
by the Government. 
OTHER ARRANGEMENTS SIMILAR TO ANY OF THE ABOVE. 
No restraining order or injunction shall be issued by the court enjoining 
the 
Bangko 
Sentral 
from examining any institution subject to supervision 
or 
examination by the Bangko Sentral, unless there is convincing proof that the 
I 
i 
action of the Bangko Sentral is plainly arbitrary and made in bad faith and the 
petitioner or plaintiff files with the clerk or judge of court in which the action is 
pending a bond executed in favor of the Bangko Sentral, in an amount to be fixed by 
5 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
1 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
, 
21 
22 
23 
24 
25 
26 
'7 
28 
29 
30 
the court. 
The provisions of Rule 58 of the New Rules of Court insofar as they are 
applicable and not inconsistent with the provisions of this section shall govern the 
issuance and dissolution of the restraining ord,er or injunction contemplated in this 
section. 
Section 8. Section 26 of the same Act Is hereby amended to read as follows: 
"SECTION 26. 
Bank Deposits and Investments. - Any director, officer 
or 
stockholder who, together with his related interest, contracts a loan or any form of 
financial accommodation from: (1) his bank; or (2) from 
a 
bank (a) which is a 
subsidiary of a bank holding company of which both his bank and the lending bank 
are subsidiaries or (b) in which a controlling proportion of the shares is owned by the 
same interest that owns a controlling proportion of the shares of his bank, in excess ' 
of ONE PERCENT (lob) of the capital and surplus of the bank, or in the maximum 
amount permitted by law, whichever is lower, shall be required by the lending bank to 
waive the secrecy of his deposits of whatever nature in all banks in the Philippines. 
Any information obtained from an examination of his deposits shall be held strictly 
confidential and may be used by the examiners only in connection with their 
supervisory and examination 
responsibility 
or 
by 
the 
Bangko Sentral in an 
appropriate legal action it has initiated involving the deposit account." 
Section 9. Section 28 of the same Act is hereby amended to read as foliows: 
"SECTION 28. 
Examination and Fees. 
- The supervising and examining 
department head, personally or by deputy, shall examine the books of every [banking 
institution] 
BANK AND QUASI-BANK, INCLUDING THEIR SUBSIDIARIES 
AND 
AFFILIATES 
ENGAGED 
IN 
ALLIED 
ACTIVITIES 
AND 
OTHER FINANCIAL 
INSTITUTIONS WHICH UNDER SPECIAL LAWS ARE SUBJECT TO BANGKO SENTRAL 
SUPERVISION, I N  ACCORDANCE WITH THE GUIDELINES SET BY THE MONETARY 
BOARD: [once in every twelve (12) months, and at such other times as the Monetary 
Board by an affirmative 
vote of five (5) members, may deem expedient and 
to 
make 
a report on the same to the Monetary Board:] Provided, That there shall be 
an interval of at least twelve (12) months between REGULAR [annual] examinations: 
PROVIDED, FURTHER, THAT THE MONETARY BOARD BY AN AFFIRMATIVE VOTE OF 
! i 
6 


1 
2 
3 
4 
3 
G 
7 
S 
9 
I O  
I I  
12 
13 
14 
1s 
16 
17 
I S  
19 
20 
21 
32 
23 
24 
25 
26 
27 
29 
30 
AT LEAST FIVE (5) MEMBERS MAY AUTHORIZE A SPECIAL EXAMINATION IF THE 
CIRCUMSTANCES SO WARRANT. 
The 
[bank] 
INSTWJTION 
concerned 
shall 
afford 
to the head of the 
appropriate 'supervising and examining departments and to his authorized deputies 
full opportunity to examine its books, cash and available assets and general condition 
at any time during [banking] BUSINESS hours when requested to do so by the Bangko 
Sentral: Provided, however, that none of the reports and other papers relative to 
such examinations shall be open to inspection 
by the public except insofar 
as 
such publicity 
is 
incidental 
to the proceedings hereinafter authorized or is 
necessary for the prosecution of violations in connection with the business of such 
institutions. 
[Banking] BANKS, [and quasi-banking institutions] 
QUASI-BANKS, 
AND 
OTHER FINANCIAL INSTITUTIONS WHICH UNDER SPECIAL LAWS, [which] are 
' 
subject to examination by the Bangko Sentral, shall pay to the Bangko Sentral, within 
the first thirty (30) days of each year, an annual fee in an amount equal to a 
percentage as may be prescribed by the Monetary 
Board [ofl 
BASED ON 
its 
average total assets during the preceding year 
[as shown on its end-of-month 
balance sheets, after deducting cash on hand and amounts due from banks, including 
the Bangko Sentral 
and 
banks abroad]. IN CONSOLIDATED EXAMINATION OF 
RESOURCES, THE FEES FOR THE EXAMINATION OF SUBSIDIARIES AND AFFILIATES 
ENGAGED I N  ALLIED ACTIVITIES SHALL BE CHARGED AGAINST THEIR PARENT 
INSTITUTION UNDER EXAMINATION ." 
§ection IO. Section 30 of the same Act is hereby amended to read as follows: 
6 
"SECTION 
30. 
Proceedings in Receivership and Liquidation.- Whenever, 
upon report of the head of the supervising [or] AND examining department, 
the 
Monetary Board finds that a bank, or quasi-bank: 
(a) 
HAS NOTIFIED THE BANGKO SENTRAL OR PUBLICLY ANNOUNCED A 
UNILATERAL CLOSURE, OR I N  ANY MANNER HAS SUSPENDED THE.PAYMENT OF 
ITS DEPOSIT/DEPOSIT 
SUBSTITUTES 
LIABILITIES, OR is unable to pay its 
liabilities as they become due in the ordinary course of business: Provided, That 
7 


1 
this shall not include inability to pay caused by extraordinary demands induced 
2 
3 
(b) 
has 
insufficient 
realizable 
assets 
TO MEET ITS LIABILITIES, as 
4 
determined 
by 
the Bangko Sentral I N  ACCORDANCE W F H  THE BANKING 
3 
by financial panic in the banking OR FINANCIAL community; OR 
~ 
REGULATIONS [ta meet its liabilities]; or 
6 
(c) 
cannot continue in business without involving probable losses to its 
7 
depositors or creditors; or 
8 
9 
10 
11 
in which cases, 
the Monetary Board may summarily and without need for prior 
(d) 
has willfully violated a cease and desist order under Section 37 that has 
become final, involving acts or transactions which amount to fraud or a dissipation of 
the assets of the institution; 
12 
13 
14 
16 
17 
I S  
19 
71 
22 
23 
24 
25 
26 
27 
28 
21) 
30 
hearing forbid the institution from doing business in the Philippines and IN CASE 
I T  I S  A BANK, designate the Philippine Deposit Insurance Corporation as receiver of the 
banking institution. 
For a quasi-bank, any person of recognized competence in banking or finance 
may be designated as receiver. 
The receiver shall immediately.gather and take charge of all the assets and 
liabilities of the institution, administer the same for the benefit of its creditors, and, 
exercise the general powers of a receiver under the Revised Rules of Court but shall not, 
with the exception of administrative expenditures, pay or commit any act that will 
involve the transfer or disposition of any asset of the institution: Provided, That the 
receiver may 
deposit 
or 
place the funds 
of the institution in non-speculative 
investments. 
The receiver shall determine as soon as possible, but not later than 
ninety (90) days from take-over, whether the institution may be 
rehabilitated or 
otherwise placed in such a condition so that it may be permitted to resume 
business with safety to its depositors 
and creditors and the general 
public: 
Provided, That any determination for the resumption of business of the institution shall 
be subject to prior approval of the Monetary Board. 
I N  ORDER TO REHABILITATE THE CLOSED INSTITUTION OR TO RESTORE ITS 
OPERATIONS 
WITH 
SAFETY TO ITS DEPOSITORS, 
CREDITORS 
AND THE GENERAL 
i 


1 
2 
1 
1 
4 
5 
6 
7 
8 
9 
I O  
I 1  
12 
13 
14 
16 
17 
18 
19 
20 
7-1 
22 
23 
24 
25 
26 
17 
28 
~ 
29 
PUBLIC OR TO MERGE OR CONSOLIDATE THE CLOSED INSTITUTION WITH ANOTHER 
QUALIFIED INSTITUTION, THE RECEIVER MAY IMMEDIATELY TRANSFER OR DISPOSE 
OF ANY OR ALL OF THE ASSETS OF THE CLOSED INSTITUTION AND PERFORM SUCH 
OTHER ACTS AS MAY BE AUTHORIZED BY LAW. 
If the receiver determines that the institutisn cannot be rehabilitated or 
permitted to 
resume 
business 
in 
accordance with [ the 
next preceding 
paragraph ] THIS SECTION, the Monetary Board shall notify in writing the board of 
directors of its findings and direct the receiver to proceed with the liquidation of the 
institutions. The receiver shall: 
(1) file ex parte with the proper regional trial court, and without requirement 
of prior notice or any other action, a petition for assistance in the liquidation of the 
institution 
pursuant to a liquidation plan adopted 
by 
the 
Philippine 
Deposit 
Insurance Corporation for general application to all closed banks. I n  case of quasi- 
banks, the liquidation plan shall be adopted by the Monetary Board. Upon acquiring 
jurisdiction, the court shall, upon motion by the receiver after due notice, adjudicate 
disputed claims against the institution, assist the enforcement of individual liabilities of 
the stockhoiders, directors and officers, and decide on other issues as may be material 
to implement the liquidation plan adopted. The receiver shall pay the cost of the 
proceedings from the assets of the institution. 
I i 
(2) convert the assets of the institution to money, dispose of the same to 
creditors and other parties, for the purpose of paying the debts of such 
institution 
in 
accordance with the rules on concurrence and preference of credit under the 
Civil Code of the Philippines and he may, in the name of the institution, and with the 
assistance of counsel as he may retain, institute 
such 
actions 
as may 
be 
necessary to collect and recover accounts and assets of, or defend any action against 
the institution. The assets of an institution under receivership or liquidation shall be 
deemed in custodia legis in the hands of the receiver and shall, from the moment the 
institution was placed under such receivership or liquidation, be exempt from any 
order of garnishment, levy, attachment, or execution. 
9 


4 
5 
6 
I 
8 
9 
10 
1 1  
. 
12 
, 
13 
14 
15 
16 
17 
1s 
19 
20 
21 
22 
23 
24 
25 
26 
21 
2s 
29 
The actions of the Monetary Board taken under this section or under Section 
29 of this Act shall be final and executory, and may not be restrained or set aside 
by the court except on petition for certiorari on the ground AND UPON A FINDING 
AFTER DUE HEARING that the action taken was 
in 
excess of jurisdiction or with 
such grave abuse of discretion as to 
amount 
to 
lack or excess of jurisdiction: 
PROVIDED, HOWEVER, THAT ANY ORDER RESTRAINING, ENJOINING OR SETTING 
ASIDE THE ACTION COMPLAINED OF I N  THE PETITION FOR CERTIORARI, MAY 
i 
ONLY BE ISSUED BY THE COURT OF APPEALS, 
BUT MAY BE DISSOLVED OR 
STAYED UPON BANGKO SENTRAL FILING A WRITTEN UNDERTAKING THAT TT WILL 
PAY ALL DAMAGES WHICH THE PETITIONER MAY SUFFER 
FROM THE DENIAL, 
DISSOLUTION OR STAY OF THE INJUNCTION SHOULD IT BE DECIDED I N  A FINAL 
JUDGMENT 
THAT 
THE 
PETITIONER IS ENTITLED 
TO HAVE THE 
ACTS 
COMPLAINED OF PERMANENTLY ENJOINED. The petition for certiorari may only be 
filed by the stockholders of record representing the majority of 
the 
capital stock 
within ten (10) days from receipt by the board of directors of the institution of the 
order directing receivership, liquidation or conservatorship. THE PROVISIONS OF RULE 
58 OF THE 1997 RULES ON CIVIL PROCEDURE I N  SO FAR AS THEY ARE APPLICABLE 
AND NOT INCONSISTENT WITH THE 
PROVISIONS 
OF 
THIS 
SECTION 
SHALL 
GOVERN THE ISSUANCE AND DISSOLUTION OF THE RESTRAINING ORDER OR 
INJUNCTION CONTEMPLATED I N  THIS SECTION. 
The designation of a conservator under Section 29 of this Act or the appointment 
of a receiver under this section shall be vested exclusively with the Monetary Board. 
Furthermore, the designation of a conservator is not a precondition to the designation of 
receiver.'' 
~ i 
THE AUTHORITY OF THE MONETARY BOARD TO PLACE A BANK OR QUASI- 
BANK UNDER RECEIVERSHIP AS PROVIDED ABOVE MAY ALSO BE EXERCISED OVER 
NON-STOCK SAVINGS AND LOAN ASSOCIATIONS, BASED ON THE SAME APPLICABLE 
GROUNDS. FOR THIS PURPOSE, ANY PERSON OF RECOGNIZED COMPETENCE I N  
BANKING, CREDIT AND FINANCE MAY BE DESIGNATED AS A RECEIVER. 


1 
2 
Section 11. A new section entitled Section 30-A of the same Act shall be inserted 
between Sections 30 and 31 which shall read as follows: 
3 
"SECTION 30-A. WHENEVER UPON THE REPORT OF THE HEAD OF THE 
4 
' 
SUPERVISING AND EXAMINING DEPARTMENT, THE MONETARY BOARD FINDS THAT 
5 
6 
7 
s 
9 
10 
11 
12 
13 
14 
. 
15 
1 
16 
17 
1s 
19 
20 
21 
__ 
?7 
23 
24 
25 
26 
27 
2s 
29 
30 
THE ADJUSTED CAPITAL ACCOUNTS OF A BANK OR QUASI-BANK I S  LOWER THAN 
THE MINIMUM CAPITAL REQUIRED UNDER EXISTING RULES AND REGULATIONS, OR 
IT 
HAS 
A 
CAPITAL 
ADEQUACY RATIO LOWER THAN THE MINIMUM RATIO 
PRESCRIBED UNDER EXISTING REGULATIONS, THE MONETARY BOARD SHALL HAVE 
THE AUTHORITY TO DIRECT THE 
EXISTING STOCKHOLDERS OF SAID BANK OR 
i 
QUASI-BANK TO INFUSE CAPITAL WlTHIN A PERIOD NOT EXCEEDING 90 DAYS 
FROM THE DATE OF DIRECTIVE I N  SUCH AMOUNT AS MAY BE NECESSARY TO 
RESTORE THE ENTITY'S CAPITAL TO THE MINIMUM REQUIRED AMOUNT AND/OR 
RATIO. I N  CASE OF INABILITY OR UNWILLINGNESS OF THE STOCKHOLDERS TO 
INFUSE THE REQUIRED AMOUNT OF ADDITIONAL 
CAPITAL 
WITHIN 
THE 
PRESCRIBED PERIOD, THE MONETARY BOARD MAY DIRECT SAID BANK OR QUASI- 
BANK TO ACCEPT INVESTMENTS FROM QUALIFIED THIRD PARTIES OR TO MERGE 
OR CONSOLIDATE WITH A QUALIFIED FINANCIAL INSTITUTION. 
THE MONETARY 
BOARD 
MAY 
ALSO AUTHORIZE 
OR 
ORDER 
THE 
EXISTING STOCKHOLDERS 
OF THE CONCERNED ENTITY TO EFFECT 
A QUASI- 
REORGANIZATION OF SAID ENTITY TO REFLECT THE FAIR VALUE OF TTS CAPITAL. 
Section 12. Section 36 of the same Act is hereby amended to read as follows: 
"SECTION 36. Proceedings Upon Violation of This Act and Other Banking 
Laws, Rules, Regulations, Orders or Instructions.- Whenever a bank, [or] quasi-bank, 
OR OTHER FINANCIAL INSTITUTION WHICH UNDER THIS ACT OR SPECIAL LAWS 
IS SUBJECT TO BANGKO SENTRAL SUPERVISION or whenever any person or entity 
willfully 
violates 
this 
Act 
or other pertinent 
banking laws being enforced or 
implemented by the Bangko Sentral or 
any order, instruction, rule or 
regulation 
issued by the Monetary Board, the person or persons responsible for such violation 
shall unless otherwise provided in this Act be punished by a fine of not less than Fifty 
thousand 
pesos 
(P50,OOO) 
nor 
more than 
[Two 
hundred 
thousand 
pesos 
I 
i 


I 
2 
3 
4 
5 
6 
7 
s 
9 
10 
11 
12 
13 
14 
15 
16 
17 
- 
Is 
' 
19 
20 
21 
22 
2 3 
24 
25 
26 
27 
28 
29 
30 
(P200,000)] 
TWO MILLION PESOS (P2,OOO,OOO) or by imprisonment of not less than 
two (2) years nor more than ten (10) years, or both, at the discretion of the court. 
Whenever AN ENTITY UNDER BANGKO SENTRAL SUPERVISION [a bank or 
quasi-bank] persists in carrying on its business in an unlawful or unsafe manner, the 
Board may, without prejudice to the penalties provided in the preceding paragraph of 
this section and the administrative sanctions provided in Section 37 of this Act, take 
action under Section 30 of this Act." 
Section 13. Section 37 of the same Act is hereby amended to read as follows: 
"SECTION 37. 
Administrative Sanctions [on Banks and Quasi-Banks]. - Without 
prejudice 
to 
the 
criminal sanctions . against the culpable persons provided in 
Sections 34, 
35, 
and 36 of this Act, the Monetary Board may, a t  its discretion, 
impose 
upon 
any 
bank 
or quasi-bank, INCLUDING THEIR SUBSIDIARIES AND 
AFFILIATES ENGAGED IN ALLIED ACTIVITIES, 
OR OTHER INSTLTUTIONS WHICH 
UNDER SPECIAL LAWS ARE SUBJECT 
TO THE BANGKO SENTRAL SUPERVISION, 
their directors and/or officers, 
for any willful violation of its charter or by-laws, 
willful delay in the submission of reports or publications thereof as required by law, 
rules 
and regulations; any refusal to permit examination into the affairs of the 
institution; any willful making of a false or misleading statement to the Board or 
the appropriate supervising and examining department or its examiners; any willful 
failure, or refusal to comply with, or violation of, any banking law or any order, 
instruction or regulation issued by the Monetary Board, or any order, instruction or 
ruling 
by 
the Governor; 
or any commission of irregularities, and/or conducting 
business in an unsafe or unsound manner as may be determined by the 
Monetary 
Board, the following administrative sanctions, whenever applicable: 
(a) 
Fines 
in amounts as may be determined by the Monetary Board to be 
appropriate, 
[but 
in no case to exceed Thirty thousand pesos (P30,OOO) 
a day 
for each violation, taking into consideration the attendant circumstances, such as 
the nature and gravity of the violation or irregularity and the size of the bank or quasi- 
bank;] FOR EACH VIOLATION OR IRREGULARTTY BUT I N  NO CASE TO EXCEED THE 
FOLLOWING AMOUNTS PER BANKING DAY: 
12 


NATURE OF VIOLATION OR IRREGULARrrVi 
TYPE OF INSTITUTION 
MAXIMUM 
AMOUNT 
I N  PESOS 
UNIVERSA'L BANKS, COMMERCIAL BANKS, 
THEIR DIRECTORS AND/OR OFFICERS 
- SERIOUS OR GRAVE VIOLATION/IRREGULARITf 
300.000 
- LESS SERIOUS OR LESS GRAVE VIOLATION/IRREGULARITY 
150,000 
- MINOR VIOLATION/IRREGULARITY 
50,000 
SUBSIDIARIES 
AND AFFILIATES 
OF UNIVERSAL BANKS AND 
i 
COMMERCIAL BANKS, THRIFT BANKS, QUASI-BANKS, 
THEIR SUBSIDIARIES AND AFFILIATES, 
OTHER INSTITUTIONS UNDER BSP SUPERVISION, THEIR 
DIRECTORS AND/OR OFFICERS. 
- SERIOUS OR GRAVE VIOLATION/IRREGULARITY 
100,000 
- LESS SERIOUS OR LESS GRAVE VIOLATION/IRREGULARITY 
50,000 
- MINOR VIOLATION/IRREGULARIN 
25,000 
RURAL BANKS, NON-STOCK SAVINGS AND LOAN ASSOCIATIONS, 
PAWNSHOPS, THEIR SUBSIDIARIES 
AND AFFILIATES, DIRECTORS AND OFFICERS 
- SERIOUS OR GRAVE VIOLATION/IRREGULARITf 
50,000 
- LESS SERIOUS OR LESS GRAVE VIOLATION/IRREGULARIIY 
25,000 
- MINOR VIOLATION/IRREGULARITY 
10,000 
1 
- 
? 
3 
4 
5 
TO PROPERLY AND EFFECTIVELY IMPLEMENT THE FOREGOING SANCTIONS, 
THE MONETARY BOARD SHALL, BY REGULATION, DEFINE SERIOUS OR GRAVE, LESS 
SERIOUS OR LESS GRAVE, AND MINOR OFFENSES TAKING INTO CONSIDERATION THE 
ATTENDANT CIRCUMSTANCES, SUCH AS NATURE AND GRAVITY OF THE VIOLATION 
' 
i 
13 
I 


1 
2 
3 
4 
5 
6 
7 
8 
9 
I O  
1 1  
12 
I3 
14 
15 
16 
17 
IS 
19 
20 
21 
22. 
33 
7d 
25 
16 
21 
2s 
79 
OR IRREGULARm AND THE SIZE OF THE INSTITUTION: PROVIDED, THAT WILLFUL 
VIOLATIONS AND IRREGULARITIES MAY BE AUTOMATICALLY CONSIDERED BY THE 
MONETARY BOARD AS SERIOUS OR GRAVE REGARDLESS OF THEIR EFFECT TO THE 
FINANCIAL CONDITION OF THE CONCERNED INSTlTUTION: PROVIDED, FURTHER, 
THAT WITHOUT PREJUDICE TO THE IMPOSITION OF APPLICABLE SANCTION TO THE 
INSTITUTION THAT COMMITTED A SPECIFIC VIOLATION OR IRREGULARITY, THE 
MONETARY BOARD MAY ALSO IMPOSE SANCTTONS TO ITS PARENT UNIVERSAL OR 
COMMERCIAL BANK IF THERE IS EVIDENCE THAT SAID PARENT INSTITUTION 
ABEPED THE COMMISSION OF THE VIOLATION OR IRREGULARITY OR DID NOT 
EXERCISE REASONABLE MEANS TO PREVENT THE SAME." 
(b) suspension of rediscounting privileges or access to Bangko Sentral credit 
facilities; 
(c) suspension of lending or foreign exchange operations or authority to accept 
' 
new deposits or make new investments; 
(d) suspension of interbank clearing privileges; [and/or] 
(e) revocation of quasi-banking license; 
(F) REVOCATION OF TRUST LICENSE; 
(G) PROHIBITION FROM DECLARING CASH DIVIDENDS; 
(H) CONFISCATION BY AND FORFEITURE I N  FAVOR OF THE BANGKO SENTRAL 
OF ANY AND ALL PROFITS, AS MAY BE DETERMINED BY THE MONETARY BOARD, 
ARISING FROM THE OFFENSE OR VIOLATION OF BANKING LAWS, RULES AND 
REGULATIONS; AND/OR 
(I) 
OTHER SANCTIONS AS THE MONETARY BOARD MAY DEEM APPROPRIATE 
UNDER THE CIRCUMSTANCES. 
THE DIRECTOR OR OFFICER RESPONSIBLE 
FOR THE VIOLATION MAY, 
AFTER DUE 
PROCESS, 
BE 
SUSPENDED, REMOVED OR DISQUALIFIED FROM 
HOLDING OFFICE, 
OR 
ANY 
POSITION, 
IN AN INSTITUTION UNDER THE 
SUPERVISION OF THE BANGKO SENTRAL, 
FOR A PERIOD TO BE DETERMINED BY 
THE MONETARY BOARD, TAKING INTO CONSIDERATION 
THE 
ATTENDANT 
14 


<
-
 
1 
CIRCUMSTANCES, 
SUCH 
AS 
THE NATURE AND GRAVITY OF THE ACT OR 
i 
2 
3 
4 
OMISSION AND THE SIZE OF THE INSTITUTION. 
Resignation or termination from office shall not exempt such director or officer 
from administrative or criminal sanctions. 
5 
The 
Monetary 
Board 
may, 
whenever 
warranted 
by 
circumstances, 
6 
preventively suspend any director or officer of 
[a bank or quasi-bank] THE 
7 
INSTITUTION pending an investigation: Provided, That should the case be.not finally 
8 
decided by the Bangko Sentral within a period of one hundred twenty (120) days 
9 
after the date of suspension, said director or officer shall be reinstated in his position: 
10 
Provided further, That when the delay in the disposition of the case is due to the fault, 
11 
negligence or petition of the director or officer, the period of delay shall not be 
- 
12 
counted in computing the period of suspension herein provided. 
' 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
The above administrative sanctions need not be applied in the order of their 
severity. 
4 
Whether or not there is an administrative proceeding, if the institution and/or 
the 
directors and/or officers concerned continue with or otherwise persist in the 
commission of the indicated practice or violation, the Monetary Board may issue an 
order requiring the institution and/or the directors and/or officers concerned to cease 
and desist from the indicated practice or 
violation, and may further 
order that 
immediate action be taken to correct the conditions resulting from such practice or 
violation. The cease and desist order shall be immediately effective upon service on the 
respondents. 
i 
The respondents shall be afforded an opportunity to defend their action in a 
hearing before the Monetary Board or any committee chaired by any Monetary Board 
member created for the purpose, upon request made by the respondents within five 
(5) days from their receipt of the order. If no such hearing is requested within said 
period, 
the order shall be final. 
If 
a hearing 
is conducted, 
all issues shall 
be determined on the basis of records, after which the Monetary Board may either 
reconsider or make final its order. 
< 
15 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
' 15 
' 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
30 
The Governor is hereby authorized, at his discretion, to impose upon [banking 
institutions,] 
BANKS AND QUASI-BANKS, INCLUDING THEIR 
SUBSIDIARIES 
AND 
AFFILIATES ENGAGED I N  ALLIED ACTIVITIES, AND OTHER FINANCIAL INSTITUTIONS 
WHICH UNDER SPECIAL LAWS ARE SUBJECT TO BANGKO SENTRAL SUPERVISION 
for any failure to comply with the requirements of law, Monetary Board regulations and 
policies, and/or instructions issued by the Monetary Board or by the Governor, fines 
not in excess of [Ten thousand pesos (P10,OOO) 
a] ONE HUNDRED THOUSAND PESOS 
(p100,OOO) PER BANKING day for each violation, the imposition of which shall be final 
and executory until reversed, modified or lifted by the Monetary Board on appeal." 
Section 14. Section 77 of the same Act is hereby amended to read as foilows: 
"SECTION 77. 
Requirement of Balanced Currency Position.- The Monetary 
Board 
may 
require 
[the] 
banks AND 
QUASI-BANKS, 
INCLUDING' THEIR 
SUBSIDIARIES AND AFFILIATES ENGAGED IN ALLIED ACTIVITIES, to maintain a 
balanced position between their assets and liabilities in Philippine pesos or in any 
other currency 
or currencies in which they operate. [The Banks] THEY shall be 
granted a reasonable period of time in which to adjust their currency positions to any 
such requirement. 
I 
0 
The powers granted under this section shall be exercised only when special 
circumstances make such action necessary, in the opinion of the Monetary 
Board, 
and 
shall 
be applied to all banks AND QUASI-BANKS, INCLUDING THEIR 
SUBSIDIARIES AND AFFILIATES ENGAGED IN ALLIED ACTIVITIES, alike and without 
discrimination." 
Section 15. 
A new section entitled Section 88-A of the same Act shall be inserted 
between Sections 88' and 89 which shall read as follows: 
"SECTION 88-A. EXEMPTION FROM ATTACHMENT. THE PROVISIONS OF ANY 
i 
LAW TO THE CONTRARY NOTWlTHSTANDING 'AND SECTION 31 OF THIS ACT, 
COLLATERALS ON LOANS AND ADVANCES GRANTED BY THE BANGKO SENTRAL TO 
BANKING INSTITUTIONS SHALL NOT BE SUBJECT TO ATTACHMENT, EXECUTION OR 
ANY OTHER COURT PROCESS, NOR SHALL THEY BE INCLUDED I N  THE PROPERTY 
OF INSOLVENT PERSONS OR INSTITUTIONS, UNLESS ALL DEBTS AND OBLIGATIONS 
16 


> 
i 
1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
* 
18 
' 19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
30 
OF THE BANKING INSTITUTIONS TO THE BANGKO SENTRAL, WHETHER REGISTERED 
OR NOT, 
HAVE BEEN PAID, INCLUDING ACCRUED 
INEREST, 
PENALTIES, 
COLLECTION EXPENSES, AND OTHER CHARGES." 
Section 16. A new section entitled Section 89-A of the same Act shall be inserted 
between Sections 89 which shall read as follows: 
"SECTION 89-A. CREDIT FACILITIES FOR ISLAMIC BANKS. 
THE BANGKO 
SENTRAL MAY, TAKING INTO CONSIDERATION THE PECULIAR CHARACTERISTICS OF 
ISLAMIC BANKING, FORMULATE RULES AND REGULATIONS FOR THE EXTENSION OF 
REDISCOUNTING OR OTHER SIMILAR FACILlTIES TO ISLAMIC BANKS.'' 
Section 17. Section 95 of the same Act is hereby amended to read as foilows: 
"SECTION 95. 
Definition of Deposit Substitutes. - The term "deposit 
substitutes" is defined as an alternative form of obtaining funds from the public, 
other 
than 
deposits, 
through 
the 
issuance, 
endorsement, 
or acceptance 
of debt 
instruments for 
the borrower's own account, for the purpose of 
re-lending or 
purchasing of receivables and other obligations. These instruments may include, but 
need not be limited to, bankers, acceptances, 
promissory notes, participations, 
ceitificates of assignment and similar instruments with recourse, and repurcnase 
agreements. The Monetary Board shall determine what specific instruments shall 
be considered as deposit substitutes for the purposes of Section 94 of this Act[:]. THE 
MONETARY BOARD MAY ALSO EXCLUDE FUNDS OBTAINED OR BORROWED FROM 
CERTAIN INSTITUTIONAL LENDERS FROM THIS SECTION: Provided, however, That 
deposit substitutes of commercial, 
industrial and other non-financial companies 
issued for the limited purpose of financing their own needs or the needs of their agents 
or dealers shall not be covered by the provisions of Section 94 of this Act." 
Section 18. The second paragraph of Section 102 of the same Act is hereby amended 
to read as follows: 
"The 
deposit 
reserves maintained by the banks in the Bangko Sentral in 
accordance with the provisions of Section 94 of this Act 'shall serve as basis for the 
clearing of checks and the seftlement of interbank balances, subject to such rules and 
regulations 
as 
the 
Monetary 
Board 
may issue 
with respect 
to 
such 
17 


*
I
 
'
2
 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
* 21 
' 22 
23 
24 
25 
26 
2 1  
28 
29 
30 
operations: 
Provided, That any bank which incurs an overdrawing in its deposit 
account with Bangko Sentral shall fully cover said overdraft, including interest thereon at 
a rate equivalent to one-tenth of 
one percent (1/10 of l0/o) 
per day or the 
prevailing ninety-one-day treasury bill rate plus three percentage points, whichever is 
higher, not later than the next clearing day: Provided, HOWEVER,[further], 
That 
settlement of clearing balances shall not be effected for 
any account which I S  
[continues to be] overdrawn for A PERIOD AS MAY BE DECIDED BY THE MONETARY 
BOARD WHENEVER WARRANTED BY THE CIRCUMSTANCES: PROVIDED, THAT SUCH 
PERIOD SHALL IN NO CASE EXCEED five (5) consecutive banking days until such 
time as the overdrawing is fully covered or otherwise converted into an emergency 
loan or advance pursuant to the provisions of Section 84 of this Act: Provided, 
finally, That the appropriate clearing 
office shall be officially notified of banks with 
overdrawn balances. Banks with existing overdrafts with the Bangko Sentral as of the 
effectivity of this Act shall, within such period as may be prescribed by the Monetary 
Board, either convert the overdraft into an emergency loan or advance with a plan 
of payment, or settle such overdrafts, 
and that, 
upon failure to so comply 
herewith, the Bangko Sentral 
shall take such action against the bank as may be 
warranted under this Act." 
Section 19. Section 108 of the same Act is hereby amended to read as follows: 
"SECTION 108. 
Minimum Capital Ratios. 
- 
The 
Monetary Board may 
prescribe 
minimum 
RISK-BASED 
CAPITAL 
ADEQUACY 
ratios 
BASED 
ON 
INTERNATIONALLY 
ACCEPTED 
STANDARDS [which the capital and surplus of the 
banks must bear to the volume of their assets, or to specific categories thereof, ] 
and may alter said ratios whenever it deems necessary. I N  THE EXERCISE OF TTS 
AUTHORITY UNDER THIS SECTION, THE MONETARY BOARD MAY 
PRESCRIBE 
A 
HIGHER 
MINIMUM CAPITAL ADEQUACY RATIO FOR INDIVIDUAL BANKS WHICH ARE 
EXPOSED TO MORE THAN NORMAL RISKS." 
Section 20. Section 125 of the same Act is hereby amended to read as follows: 
"SECTION 125. Tax Exemptions.- THE PROVISIONS OF ANY GENERAL OR 
SPECIAL LAW 
TO THE CONTRARY 
NOTWITHSTANDING, 
the 
Bangko Sentral 
18 


, 
1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
2; 
24 
25 
26 
27 
28 
29 
30 
shall be exempt [, for a period of five (5) years from the approval of this Act] from 
all national, provincial, municipal and city taxes, fees, charges and assessments [.I NOW 
IN FORCE OR HEREAFTER ESTABLISHED. 
The 
exemptions 
authorized 
in 
the 
preceding paragraph of this section shall apply to all 
property of the Bangko 
Sentral, to the resources, receipts, 
expenditures, profits and income of the Bangko 
Sentral, as well as 
to all 
contracts, deeds, documents and transactions related to 
the conduct of the business of the Bangko Sentral: Provided, however, That said 
exemptions shall apply only such taxes, fees, charges, and assessments for which the 
Bangko Sentral 
itself 
would otherwise be [,I liable, and shall not apply to taxes, 
fees, charges, or asessments payable by persons or other entities doing business 
with the Bangko Sentral: Provided, further, That foreign loans and other obligations 
of the Bangko Sentral shall be exempt, both as to principal and interest, from any and 
all other taxes if the payment of such taxes has been assumed by the Bangko Sentral." 
Section 21. The first paragraph of Section 126 of the same Act is hereby amended to 
read as follows: 
"SECTION 126. 
Exemption from Customs Duties. - 
The provision 
of any 
general or special law to the contrary notwithstanding, the importation and exportation 
by the Bangko Sentral of notes and coins, and of gold and other metals to be used 
for purposes authorized under this Act, and the importation of all equipment AND 
SUPPLIES needed [for] 
I N  THE BANGKO SENTRAL OPERATIONS SUCH AS bank 
note production, minting of coins, metal refining, 
[and 
other] 
security printing 
operations AND TRANSPORT OF CURRENCY shall be fully exempt from all customs 
duties and consular fees and from 
all other taxes, 
assessments and charges 
related to such importation or exportation." 
Section 22. The first paragraph of Section 128 of the same Act is hereby amended to 
read as foilows: 
"SECTION 128. Prohibitions.- The Bangko Sentral shall not acquire shares of 
any kind or accept them as collateral, and shall not participate in the ownership or 
management of [any] AN enterprise, either directly or 
indirectly [.I: 
PROVIDED, 
THAT THIS 
PROHIBITION 
SHALL NOT APPLY WHENEVER 
SUCH 
OWNERSHIP 
i 
19 


1 
AND/OR MANAGEMENT I S  EXPRESSLY AUTHORIZED BY LAW, OR THE MONETARY 
2 
BOARD BY A VOTE OF AT LEAST FIVE (5) OF ITS MEMBERS DEEMS AN ACQUISITION 
3 
OR INVESTMENT TO BE NECESSARY TO THE PERFORMANCE BY BANGKO SENTRAL OF 
4 
ITS 
MANDATES 
UNDER THIS ACT OR TO QUALIFY OR AS REQUIRED FOR 
5 
MEMBERSHIP I N  INTERNATIONAL AND REGIONAL ORGANIZATIONS.” 
’ 6  
7 
8 
9 
10 
11 
12 
13 
14 
15 
‘ 16 
17 
Section 
23. 
Repealing Clause. All provisions of existing laws, orders, rules and 
regulations, or parts thereof, in conflict or inconsistent with the provisions of this Act are hereby 
repealed. 
Section 24. 
Separability Clause. If any provision or section of this Act or the 
application thereof to any person or circumstance is held to be invalid, the other provisions or 
sections of this Act, and the application of such provision or section to other persons or 
circumstances, shall not be affected thereby. 
Section 25. Effectivity. This Act shall take effect after fifteen (15) days following its 
publication either in the Official Gazette or in a newspaper of general circulation in the 
Philippines. 
Approved. 
i 
20 


i 
Commercial Banks 
Thrift Banks 
Rural Banks 
Government Banks 
Total 
Specialized 
COMMITTEE ON BANKS, FINANCIAL INSTITUTIONS AND CURRENCIES 
1981-1990 1991-2000 2001-2003 
3 
2 
0 
36 
13 
2 
182 
122 
38 
0 
0 
0 
221 
137 
40 
SUMMARY OF PROCEEDINGS 
I. BACKGROUND 
The banking system remains the dominant sector in the Philippine 
financial market. Its assets make up 81.6 percent of GDP and 82.3 percent of the 
whole financial system. 
The Bangko Sentral ng Pilipinas (the "BSP") has the mandate to oversee 
the banking system. I t a  has the duty to supervise the operations of banks and 
exercise regulatory powers over non-bank financial institutions with quasi- 
banking functions.' 
Since the BSP Charter's enactment in 1993, new 
developments have occurred in the local and global financial environment. The 
BSP's experience would show that the powers and authority granted to the BSP 
seem inadequate to combat and address more efficiently and promptly problems 
in the financial system, particularly in the banking sector. A proof of the 
inadequacy of such power is the high incidence of bank failures. 
NUMBER OF CLOSED PDIC MEMBER BANKS 
Thus, the proposed amendments, 
Two bills were proposed for the amendment of the BSP Charter - Senate 
Bill Nos. 553 and 1822, introduced by Senators Sergio Osmefia I11 and Edgardo 
J. Angara, respectively. These bills focused on four major objectives, to wit: 
A. To protect public interest through a more effective supervision of the 
banking system. 
This objective will be met by allowing the BSP to examine banks and 
related companies on a consolidated basis since in reality, the performance, and 
exposure of the affiliates and subsidiaries can also affect the financial standing of 
a parent bank. This also calls for an increase in the penal and administrative 
sanctions on erring banks, their directors and officers to deter them from risking 
Republic Act No. 7653, otherwise known as the "New Central Bank Act" which was enacted in 
1993. 


- 2 -  
non-compliance with regulations in consideration of lower penalties but with 
higher returns. 
6 
6. To improve the quality of bank ownership and encourage banks to 
maintain a sound capital position. 
The BSP will be given the authority to screen incoming substantial 
stockholders so that it may prevent the entry into the system of persons with 
questionable background and capital. The BSP should also be able to direct 
acceptance of new capital, mergers and quasi-reorganization so that the bank 
will reflect the true value of.its capital. 
C. To enhance the administration of the monetary, credit and banking 
system. 
This objective will be met by strengthening the payment system which is a 
key component of the financial structure. Moreover, the BSP should be able to 
obtain data on a broader basis in the performance of its mandate to formulate 
monetary policy. 
D. To develop a stronger and more responsive BSP. 
The BSP should have the flexibility in managing its resource complement. 
Also, it is important for the examiners, who are prone to suits in the performance 
of their functions, to be givm adequate legal protection. The bills likewise 
proposed that the degree of diligence required of BSpls officers and employees 
be made at par with those of other similar public officers. 
The adoption of the proposed amendments is geared towards making our 
laws in accord with the international best practices in banking supervision. 
11. COMMITEE ACTION 
A. The Committee on Banks, Financial Institutions and Currencies (the 
"Committee") conducted a public hearing on the two bills on 9 November 
2004. The hearing was attended by the Governor of the BSP, Governor 
Rafael Buenaventura, and other ranking officials of the institution, as well 
as the Chairperson of the Securities and Exchange Commission, Ms. Fe 
Barin, who herself was the Secretary to the Monetary Board for several 
of the Bankers Association of the Philippines, the Chamber of Thrift Banks 
and the Rural Bankers Association of the Philippines. 
B. The discussions in the hearing, as well as the comments and suggestions 
in the position papers submitted to the Committee, were taken into 
consideration in the drafting of the Substitute Bill. 
years. The private sector was likewise represented by the representatives 
i 
111. FINDINGS 
Some of the proposed amendments gathered no objections from the 
concerned parties. However, the following issues were controverted: 
A. On the scope of BSP's supervision 


- 3 -  
Proposed Amendment 
It was proposed that the supervisory powers of the BSP be 
broadened to include quasi-banks,' trust entities, and other financial 
institutions which under RA 7653 and other laws are subject to BSP 
supervision. This will align RA 7653 with Section 4 of RA 8791, otherwise 
known as the General Banking Law", which provides that - 
"The Bangko Sentral shall also have supervision over 
i 
the operations of and exercise regulatory po wers over quasi- 
banks, trust entities and other financial institutions which 
under special laws are subject to Bangko Sentral 
supervision, I' 
Discussion 
The inclusion of trust entities was questioned on the ground that at 
present, there are no trust entities established independently of banking 
institutions*. Despite the fact that under the GBL, trust entities may be 
established separately from banks, the BSP's supervisory powers should 
not, as yet, be expanded to cover them. 
Committee Consensus 
Discussions 
The Committee decided to exclude trust entities from the expanded 
coverage of BSP supervision as the Senate should not legislate in a 
vacuum. 
B. On the waiver of the confidentiality of bank deposits for DOSRI 
borrowings 
Section 26 of the New Central Bank Act presently requires any 
director, officer, stockholder or their related interest rDOSRI") who 
contracts a loan or any form of financial accommodation from: 
(1) his bank; or 
(2) from a bank 
(a) which is a subsidiary of a bank holding company of which 
both his bank and the lending bank are subsidiaries or 
(b) in which a controlling proportion of the shares is owned 
by the same interest that owns a controlling proportion of the 
shares of his bank, 
in excess of five percent (5%) of the capital and surplus of the bank, or in 
the maximum amount permitted by law, whichever is lower, to waive 
the secrecv of his deposits of whatever nature in all banks in the 
Philippines. 
Prouosed Amendment 
borrowings by DOSRIs, regardless of amount. 
i 
The two bills proposed for the waiver to be required for all 
' Senator Juan Ponce Enrile, Vice Chairman 


. 
- 4 -  
The proposed amendment will have a very grave impact on 
investors of the covered institutions. Any borrowing by a DOSRI, even for 
a very minimal amount, will require the said waiver, not only of the bank 
deposits with the lending institution but also deposits with other banks. 
This might discourage investments in banks, quasi-banks and other 
financial institutions under the supervision of the BSP.3 
However, the present 5% threshold is “quite big and very few 
DOSRIs may be able to borrow this much,’A thus, this is not sufficient to 
protect the general public from excessive borrowings of DOSRIs. 
Committee Consensus 
Based on the report submitted by the BSP, there are still several 
L 
cases of DOSRI violations5 despite the protective measures in the existing 
law. The Committee decided that there is a need to incorporate a stricter 
safeguard against abuses of DOSRIs. A more feasible solution, however, is 
not to remove the threshold altogether, but to find a balance between the 
two-fold objectives of encouraging investment in the financial system and 
the protection of the depositors from abuses of DOSRIs. Thus, the 
decision of lowering the threshold from 5%.tO 1%. 
A 1% threshold may be reasonable considering the minimum 
capital requirements as follows: 
TvPe of Bank 
a. Universal Banks 
b. Commercial Banks 
, 
c. Thrift Banks 
- With head office within 
Metro Manila 
- With head office outside 
Metro Manila 
- within Metro Manila 
- Cities of Cebu and Davao 
- I n  ist, 2nd & 3rd class 
cities and 1st class 
municipalities 
- In 4th, 5th & 6th class 
cities and in 2nd, 3rd & 4th 
class municipalities 
- I n  5th & 6th class 
municipalities 
d. Rural Banks 
Minimum 
Capital 
Reauirement 
(In Million Pesos) 
4,950.0 
2,400.0 
325.0 
52.0 
26.0 
13.0 
6.5 
3.9 
2.6 
Borrowings 
subject to the 
Waiver 
Requirement 
(In Million Pesos) 
49.5 
24 
/10/0 Fl00tQ 
3.25 
0.52 
0.26 
0.13 
0.065 
0.039 
0.026 
1 i 
Former Prime Minister Cesar Virata, President of the Bankers’ Association of the Philippines. 
Atty. Fe Barin, Chairperson of the Securities and Exchange Commission, Former Secretary to 
Report dated 1 December 2004. 
the Monetary Board. 


. 
%
'
 . 
- 5 -  
C. On the administrative fines 
Proposed Amendment 
The bills proposed an increase in the maximum amount imposable by the 
Monetary Board from thirty Thousand Pesos (P30,OOO.OO) to Three Hundred 
Thousand Pesos (P300,OOO.OO) 
a day for each violation. The maximum 
amount imposable by the Governor was likewise raised from Ten Thousand 
Pesos (Pi0,OOO.OO) to One Hundred Thousand Pesos a day for each violation. 
Discussions 
The higher sanctions will serve as a deterrent to the violation or 
circumvention of regulations. Based on the present rates, banks may 
deliberately violate the regulations in exchange for higher returns.6 
The increase, however, raised concerns from the private sector. The 
Chamber of Thrift Banks7 and the Rural Bankers Association of the 
Philippines' raised their concerns as "the increase is confiscatory and grossly 
disproportionate" to small banks and will eat up the finances of the banking 
sector. Moreover, the ground for the imposition of the said sanctions - that is 
the conduct of business in an "unsafe and unsound" manner - is relative and 
may be subject to different interpretations. Increasing the penalty to a very 
high level may be subject to abuses. The Bankers Association of the 
Philippines likewise objected to the very high increases in the administrative 
fines. 
i 
Committee consensus 
In order to balance the concerns of both the regulatory body and the 
private sector, the Committee decided that the administrative fines be 
graduated depending on the classification of erring institution and the gravity 
of the  violation^.^ 
D.' On the exemption from taxes and customs duties 
ProDosed Amendment 
The bills proposed that the BSP shall be exempt from taxes and customs 
duties. 
Discussions 
Since BSP is performing purely governmental functions, it should not be 
hampered in its performance by the revenue programs of the government. 
Moreover, in lieu of the taxes, the BSP is under the obligation to remit 75% 
of its annual income as dividends to the National Government." 
Atty. Juan de ZuRiga, Assistant Governor of the BSP. 
As proposed by Senator Edgardo J. Angara, Chairman. 
' Position paper dated 5 November 2004. 
* Position paper dated 8 November 2004. 
lo BSP Governor Rafael Buenaventura. 
i 


. 
h '  
.. 
L 6 -  
Committee Consensus 
Exempting the BSP from taxes will not only reduce friction cost and 
intermediation cost but will also produce greater cash flow for the National 
Government in view of BSP's obligation to remit 75% of its income to the 
National Government. Moreover, the Department of Finance is agreeable to 
the exemption of the BSP from income tax and customs duties." Thus, the 
proposed amendment was adopted. 
E. On the complete exemption from the Salary Standardization Law 
Prouosed Amendment 
shall be exempt from the Salary Standardization Law (,SSL").12 
The Senate Bill No. 557 proposed that rank and file employees of the BSP 
Discussions 
The proposed exemption will give the BSP flexibility in managing its 
human resource complement. The applicability of the SSL to the rank and file 
employees has led to an equitable and double standard of treating BSP 
personnel. 
Committee Consensus 
In view of the planned review of the SSL, the Committee decided not to 
adopt the proposed amendment. 
(NOTA BENE: In view of subsequent developments whereby the 
continuous application of the SSL to the rank and file employees of the BSP 
was declared by the Supreme Court as uncon~titutional,'~ the BSP withdrew 
this particular proposed amendment.) 
F. On the legal protection to BSP personnel 
ProDosed Amendment 
Adequate legal protection should be provided the personnel of the BSP 
who are sued in the course of the performance of their duties. They may be 
held liable only for gross negligence or gross misconduct. 
Moreover, the standard of diligence to be applied to the officials and 
personnel of the BSP shall be in accordance with the revised Administrative 
Code. 
'l Governor Buenaventura's letter dated 27 January 2005. 
The New Central Bank Act provides that "compensation and wage structure of employees 
whose positions fall under salary grade 19 and below shall be in accordance with the rates 
prescribed under Republic Act No. 6758". 
'3 Central Bank Employees Association, 1nc;vs. 
Bangko Sentral ng Pilipinas, et al. (G.R. No. 
148208, 15 December 2004) 
i 


c 
-7- 
Discussions 
BSP personnel should be able to perform their functions confidently and 
with firm resolve, without the threat or burden of harassment suits against 
them. This is a protection that is being afforded to examiners in other 
jurisdictions (e.g. USA, Australia, UK, Hong Kong, New Zealand, Canada and 
Singapore). 
The extraordinary diligence required under the present provision is a very 
exacting standard, which, in the Philippine legal system, has only been 
required of common carriers. The present provision has virtually encouraged 
the filing of suits against BSP officials for the slightest perception of any 
inaccuracy or omission, although immaterial, in the performance of their 
work.14 
The above amendments were fully supported by the Chamber of Thrift 
banks and the Rural Bankers Association of the Philippines. 
Committee Consensus 
The Committee decided to adopt the proposed amendment since BSP 
personnel should not be brought up or below the standard applicable to the 
public servants in general.15 However, in addition to gross negligence or gross 
misconduct, indemnity should likewise not be allowed upon findings of bad 
faith and malice. 
G. On the Immunity of BSP officials and personnel 
Prouosed Amendment 
SBN 557 proposed immunity from suit of officials and personnel of BSP's 
supervision and Examination Sector. 
Discussion 
Both the Rural Bankers Association of the Philippines and the Chamber of 
Thrift Banks opposed the grant of immunity to the examiners because of their 
direct responsibility for the banks' evaluation and performance rating. Not 
granting them immunity would make them more careful in making 
assessments of a bank's performance. 
Committee Consensus 
In view of the decision of putting BSP personnel within the coverage of 
the Revised Administrative Code and thus subjecting them to similar standard 
applicable to the public servants in general, the Committee deemed it proper 
not to include the proposed amendment granting BSP officials and personnel 
immunity from suit. 
H. On remuneration for other services. 
BSP Assistant Governor Juan de Zufiiga, 
14 
l5 Senator Edgardo 3. Angara, Chairman. 


- 8 -  
i 
Prooosed Amendment 
The bills proposed to give the BSP an' authority to charge fees for other 
services rendered to banks and other supervised institutions. This will be on 
top of the supervisory fees. 
Discussion 
The present law mentions only the charging of supervision fees on banks. 
Since the BSP renders other services to banks and other financial institutions 
under its supervision, it should be compensated for the services rendered. 
This provision is being opposed by the Chamber of Thrift Banks and the 
Rural Bankers Association of the Philippines since the supervision fees are 
already very high. Additional charges will be unaffordable to the banks. 
Committee Consensus 
I n  view of the supervision fees already being collected from the 
supervised institutions, they should not be burdened with additional fees 
which they will eventually pass on to their clientele. The additional charges 
will only increase finance charges. 
i