Definition of Commercial Bank
- A commercial bank is primarily organized to perform banking functions outlined in Section 21 of the Act.
- It must accept or create demand deposits subject to withdrawal by check.
Authorized Loans Secured by Deposits or Bonds
- Banks may grant loans secured by their own savings, time deposits, mortgage bonds, or bonds from other banks in the Philippines.
- Banks may, under Monetary Board regulations, provide:
- Clean loans for personal and household finance not exceeding the borrower's deposits plus four months’ salary or income.
- Loans secured by real estate or chattel mortgage, with aggregate loans under this category capped at 10% of the bank's total assets.
Specific Loan Types and Conditions
- Loans to promote livestock breeding with maturities up to 3 years; longer maturities allowed in special cases by the Monetary Board.
- Principal security is a lien on the animals; additional real estate or securities may be required.
- Loan limits based on commercial value of livestock; additional loans allowed as stock value increases.
- Equipment loans for acquiring machinery and equipment used in agriculture and industry, with maturities up to 5 years.
- First lien on acquired assets; may require additional liens or mortgages on other properties.
- Loans for agricultural inputs like seeds and fertilizers secured by chattel mortgage on crops or other collateral.
- Banks may require additional lien or mortgage on debtor’s other properties.
Investment and Loan Instruments
- Banks may invest in or loan against high-grade bonds, commercial papers, and accounts receivable discounted with recourse.
- Such activities are subject to rules promulgated by the Monetary Board.
Expansion of Authorized Loans and Investments
- The Monetary Board may determine additional loan and investment types necessary to advance national economic objectives.
Loan Limits and Borrower Indebtedness
- The total direct indebtedness of a borrower to a savings and mortgage bank is limited to 15% of the bank's unimpaired capital and surplus, excluding certain secured or guaranteed loans.
- An additional 15% may be allowed for loans related to subdivision or housing development.
- Loans or deposits by savings banks in other banks are subject to the single borrower limit.
Demand Deposit Acceptance by Banking Institutions
- Banking institutions other than commercial banks may accept or create demand deposits subject to withdrawal by check upon prior Monetary Board approval and subject to prescribed conditions.
Loans Against Real Estate and Chattels: Security and Limits
- Loans against real estate must not exceed 70% of appraised value plus 70% of appraised value of insured improvements.
- Titles to real estate must be free from encumbrances in the mortgagor’s name.
- Mortgagors have a right of redemption within one year after foreclosure sale by paying the ordered amount plus interest, costs, and expenses.
- Purchasers at foreclosure auctions have immediate possession rights after sale confirmation.
- Loans on chattels secured by mortgage shall not exceed 50% of the appraised value.
- Monetary Board may prescribe additional security requirements and adjust maximum loan ratios and maturities within the bounds set by law.
Repealing Clause
- All conflicting laws, orders, rules, and regulations are repealed or modified accordingly.
Effectivity
- The amendments take effect immediately upon promulgation.