QuestionsQuestions (Republic Act No. 8791)
The short title is “The General Banking Law of 2000.” The State recognizes the vital role of banks in the national economy and the fiduciary nature of banking, promoting and maintaining a stable and efficient, globally competitive banking and financial system.
“Banks” are entities engaged in lending funds obtained in the form of deposits. Classifications include: universal banks, commercial banks, thrift banks (savings and mortgage banks; stock savings and loan associations; private development banks), rural banks (per RA 7353), cooperative banks (per RA 6928), Islamic banks (per RA 6848), and other classifications as determined by the Monetary Board.
Supervision includes: issuing rules/standards of operation; conducting examinations if circumstances warrant; overseeing compliance; conducting regular investigations not more than once a year from the last examination; inquiring into solvency and liquidity; and enforcing prompt corrective action.
Quasi-banks are entities engaged in borrowing funds through the issuance/endorsement/assignment with recourse or acceptance of deposit substitutes (as defined in the New Central Bank Act) for purposes of relending or purchasing receivables and other obligations.
No person or entity may engage in banking or quasi-banking operations without Bangko Sentral authority. The Monetary Board decides whether the entity is performing such functions and may examine the entity’s records. Violators face sanctions under the New Central Bank Act and other applicable laws.
When examining a bank, the Bangko Sentral may examine any enterprise wholly or majority-owned or controlled by the bank.
It must be a stock corporation; its funds are obtained from the public (20 or more persons); and minimum capital requirements prescribed by the Monetary Board are satisfied. The Monetary Board also considers capability, financial resources/technical expertise, integrity, ownership structure, directors/senior management, operating plan/internal controls, and projected financial condition/capital base for licensing.
A bank may not purchase or acquire its own shares or accept its own shares as security for a loan except when authorized by the Monetary Board. If authorized, the shares must be sold or disposed of within six months from purchase/acquisition.
Foreign individuals and non-bank corporations may own or control up to 40% of the voting stock of a domestic bank. This applies to Filipinos and domestic non-bank corporations as well for purposes of determining the voting stock percentage. The citizenship of corporate stockholders follows the citizenship of controlling stockholders.
Stockholdings of individuals related within the 4th degree of consanguinity or affinity (legitimate or common-law) are considered family groups/related interests and must be fully disclosed in transactions with the bank. Also, two or more corporations owned or controlled by the same family group or group of persons are considered related interests and must be fully disclosed.
SEC shall not register the articles of incorporation (or amendments) of a bank without a Monetary Board certificate of authority under the Monetary Board’s seal. It shall likewise not register bank bylaws (or amendments) without a certificate of authority from the Bangko Sentral (as provided in the Act).
A bank’s board must have at least 5 and at most 15 members, with 2 independent directors. Independent directors are persons other than officers/employees of the bank, its subsidiaries/affiliates, or related interests.
The Monetary Board prescribes qualifications/disqualifications and may disqualify, suspend, or remove persons found unfit after due notice. Determinants include integrity, experience, education, training, and competence.
Generally, total loans/credit accommodations/guarantees to any borrower may not exceed 20% of the bank’s net worth. An additional 10% may be allowed if the borrower’s additional liabilities are adequately secured by trust receipts/shipping documents/warehouse receipts or similar documents covering readily marketable, non-perishable insured goods.
A bank may not declare dividends greater than accumulated net profits on hand after deducting losses and bad debts. It also cannot declare dividends if, at the time of declaration, the clearing account is overdrawn; or it is deficient in the liquidity floor for government deposits for 5 or more consecutive days; or it does not comply with liquidity standards for dividend declaration; or it has committed a major violation.
A borrower may prepay at any time before the agreed maturity date, in whole or part, subject to reasonable terms and conditions agreed by the bank and borrower.
The mortgagor/debtor may redeem within one year after sale by paying the amount due under the mortgage deed with interest as specified plus costs/expenses of the bank less income derived from the property. Juridical persons retain redemption rights until registration of the certificate of foreclosure sale, which must be within 3 months after foreclosure.