QuestionsQuestions (Republic Act No. 7906)
RA 7906 is cited as the “Thrift Banks Act of 1995.” Its declared policy is to promote private participation with incentives, expand capital and medium- to long-term credit facilities for Filipino entrepreneurs (including agriculture and industry), encourage savings, and regulate/supervise thrift banks for soundness, stability, efficiency, and protection of the public interest.
“Thrift banks” include savings and mortgage banks, private development banks, and stock savings and loans associations under existing laws, and any banking corporation organized to (1) accumulate savings and invest them in specified ways and secured personal/household finance and homebuilding/home development; (2) provide short-term working capital and medium- and long-term financing for agriculture, services, industry, and housing; and (3) provide diversified financial and allied services, especially for SMEs and individuals.
A thrift bank must be organized as a stock corporation. It cannot be organized without a certificate of authority from the Monetary Board (Bangko Sentral ng Pilipinas).
The SEC may not register the articles (or amendments) unless accompanied by a certificate of authority issued by the Monetary Board. The Monetary Board issues it only if requirements of existing laws were complied with, public interest and economic conditions justify authorization, and organizers/administrators have integrity and responsibility assuring protection of the public’s interest.
The SEC shall not register thrift bank bylaws (or amendments) unless accompanied by a certificate from the Monetary Board that such bylaws/amendments are in accordance with law.
The Monetary Board may pass upon and review the qualifications of persons elected/appointed as directors/officers and disqualify those unfit, and it shall prescribe the qualifications for directors and officers.
At least a majority of the board of directors must be citizens of the Philippines for thrift banks established after the Act’s effectivity.
Generally, no appointive or elective official (full-time or part-time) may serve simultaneously as an officer of any thrift bank. Exception: when such service is incident to financial assistance provided by the government or a GOCC to the bank.
In duly approved mergers/consolidations, the limitation on number of directors in the Corporation Code is not applied, allowing the membership in the new board to include up to the total number of directors provided in the respective articles of incorporation of the merging/consolidating banks.
For thrift banks to be established after approval of the Act, at least 40% of the voting stock must be owned by Philippine citizens, except where a new bank results from merger/consolidation involving foreign holdings: foreign holdings may not be increased beyond the specified post-merger limits (may be reduced, but once reduced may not exceed 60% of voting stock). Determination is based on individual citizenship; if corporations hold shares, it is based on citizenship of each stockholder in those corporations.
It provides that stockholdings in a thrift bank are exempt from any ownership ceiling for a period of 10 years from the effectivity of the Act.
A thrift bank’s combined capital accounts must not be less than an amount equal to 10% of its risk assets, where “risk assets” = total assets minus specified non-risk items (e.g., cash on hand; amounts from BSP; certain fully guaranteed evidences of indebtedness; loans covered by hold-out/assignment of deposits held in the lending bank; and other non-risk items authorized by the Monetary Board).
After considering the supervising department’s solvency report, the Monetary Board may limit/prohibit distribution of net profits and require part or all of net profits to increase capital accounts until the minimum ratio is met. It may also restrict/prohibit new investments (except certain BSP/RP evidences of indebtedness) until compliance is restored, subject to conditions and the deficiency justification.
Thrift banks may accept savings/time deposits; open current/checking accounts if they have net assets of at least P20,000,000 (subject to BSP guidelines); clear demand deposits directly with the BSP and Philippine Clearing House Corporation; act as correspondent/collection agent; act as official depository for local funds subject to BSP guidelines; rediscount certain papers with specified government-owned/controlled banks; and more.
Direct indebtedness of any borrower to a thrift bank generally cannot exceed an amount corresponding to 15% of unimpaired capital and surplus, excluding certain non-risk categories (e.g., loans secured by BSP obligations; loans fully government-guaranteed; loans covered by hold-out/assignment of deposits; and non-risk assets per BSP—capped at 15% of unimpaired capital and surplus). Additionally, total indebtedness of a borrower may amount to a further additional 15% (i.e., another 15%) if the additional credit is for subdivision/housing development, medium- and low-income borrowers, and agriculture on a fully secured basis. The statute also defines “indebtedness” broadly including maker/acceptor liability and guarantor/indorser/guaranty liabilities and, in corporate cases, liabilities of majority-controlled subsidiaries.
Subject to BSP guidelines: (1) total equity investments cannot exceed 25% of thrift bank net worth; (2) equity in any single enterprise limited to 15% of net worth; (3) equity investment in any single enterprise must be a minority holding; and (4) equity investments in other banks are subject to commercial bank rules and deducted from net worth for purposes of the Section 9 capital ratio. Equity investments are not allowed in non-related activities.
Deposits in thrift banks are eligible for insurance coverage under Republic Act No. 3591, as amended.
Examples: (1) officers/employees/agents making false entries in bank reports or statements affecting financial interest/damaging the bank or persons; (2) officers/employees/agents accepting gifts/fees/commissions connected to approving loans; (3) borrowers misusing/diverting loan proceeds or fraudulently overvaluing security, etc. Penalty framework: fine not more than P10,000 or imprisonment not less than six months but not more than ten years, or both (at the court’s discretion).
All thrift banks are exempt from payment of all taxes, fees, and charges except corporate income taxes and local taxes, fees, and charges, for 5 years. For new thrift banks created under the Act: counted from commencement of operations; for existing thrift banks: counted from the Act’s effectivity.