Question & AnswerQ&A (PRESIDENTIAL DECREE NO. 447)
The main purpose of Presidential Decree No. 447 is to increase the capitalization of rural banks to strengthen their capital base and expand their capacity to meet the credit needs in rural areas, especially those covered by the agrarian reform program.
The Central Bank of the Philippines has the authority to determine the increased capitalization amounts, proportions, and the periods within which rural banks must comply.
Outstanding rediscounting obligations of rural banks with the Central Bank of the Philippines can be converted into government counterpart investments or equity in rural banks under terms prescribed by the Central Bank.
The Land Bank of the Philippines will hold the equity from the converted rediscounting obligations in rural banks and will issue its own shares in favor of the Republic of the Philippines. It is also entitled to nominate one director in rural banks where it holds preferred shares.
The Central Bank may open the area served by the failing rural bank to new rural banks, cause the sale of unissued shares to the public or acceptable parties, or take other actions necessary if the rural bank fails to submit or comply with a viable capitalization program.
Yes, the decree allows conversion of rediscounting obligations into equity despite any provisions of existing laws to the contrary.
The total sum of direct government investment and the converted rediscounting obligations into equity shall not exceed the aggregate outstanding rediscounting obligations of rural banks with the Central Bank as of June 30, 1974.
Presidential Decree No. 447 took effect immediately upon signing on May 7, 1974.