Law Summary
Capitalization and Stock Subscription
- Capital set at 20 million pesos divided into 200,000 shares of 100 pesos each.
- Payment of shares subscribed is staggered with specific deadlines from 1917 to 1921.
- Post-1917 subscriptions paid as prescribed by the board of directors.
Government Ownership and Control
- Government to purchase 101,000 shares at par, payment sourced primarily from Agricultural Bank capital and surplus.
- Additional shares offered to provincial/municipal governments or public at board-determined price.
- Government ownership voting managed by a committee of top governmental officials.
Transfer of Agricultural Bank Assets
- Assets and liabilities of Government Agricultural Bank transferred to Philippine National Bank upon inauguration.
- Uncollectible loans post-transfer guaranteed by the government, with appropriations made as necessary.
Restrictions on Stock Sales and Inauguration
- Public share sales restricted to maintain government majority ownership.
- Inauguration to occur within 180 days after Act’s passage upon certification of readiness.
Loan and Mortgage Provisions
- Authorized to loan up to 50% of capital and surplus on real estate mortgages for agricultural purposes.
- Loans secured by first mortgages on farm lands not to exceed 60% of property value; insurance on improvements may be required.
- Loan terms range from 1 to 30 years with principal and interest installments for terms over 5 years.
- Strict use of loan proceeds only for purposes stated under oath; violations lead to contract rescission and mortgage foreclosure.
Authorized Financial Operations
- Purchase and discount of agricultural, industrial, or commercial promissory notes, drafts, and bills.
- Loans on harvested/stored crops up to 70% market value, requiring insurance and possible additional security.
- Installment loans to agriculturists based on standing crops up to 60% of estimated value, requiring additional security if deemed necessary.
- Loans to provincial/municipal governments guaranteed by the Central Government and purchase of government bonds.
- Loans and discounts are renewable annually with maturities not exceeding one year.
Real Estate Bonds Issuance
- Bonds issued up to 90% of real estate loans held, engraved, signed by bank president, and authenticated by Insular Auditor.
- Bonds payable in U.S. gold coin or Philippine lawful money; exempt from Philippine taxes.
- Bonds secured by deposits of real estate securities with the Philippine Treasurer, including a certificate of deposit on each bond.
- Bonds are redeemable at par before maturity with lottery redemption provisions and premiums for early redemption.
Circulating Notes
- Authorized issuance of circulating notes limited to paid-up capital, surplus, and gold coin holdings.
- Notes payable on demand in lawful money and exempt from taxes.
- Security and backing for notes include specific securities and cash reserves.
- Notes acceptable for government tax payments and redeemable at the central office.
Deposit and Deposit Management
- Obligatory deposit of funds from Insular, provincial, and municipal governments.
- Interest on deposits capped at 4% per annum.
- Secretary of Finance may authorize deposits in other solvent banks if deemed in public interest.
Governance and Management Structure
- Board of directors composed of president (chairman), vice-president, and five elected members.
- President powers include loan approval limits, contracts, and operational reports.
- President and vice-president appointed by Governor-General with Senate consent.
- Other officers appointed by president with board approval for senior positions; not subject to Civil Service Law.
Officer Bonding and Legal Counsel
- President and vice-president mandated to furnish fidelity bonds.
- Other officers required to provide fidelity bonds as prescribed.
- Attorney-General acts as legal counsel; board may hire additional lawyers as needed.
Auditing and Inspection
- Insular Auditor serves as ex officio auditor with annual reports mandated.
- Inspection by Insular Treasurer concerning bank solvency.
- Confidentiality required from inspectors and auditors; disclosure limited to specified public officials or court order.
Compensation and Terms of Office
- President appointed for six years with 24,000 pesos salary, vice-president with 12,000 pesos.
- Five directors serve one-year terms with per diem compensation.
- Stockholders meet annually for board elections.
Board Functions and Reporting
- Board controls general management, sets interest and discount rates, ensures loan security, and publishes semiannual financial statements.
Branches and Agencies
- Authorized to create branches in the U.S., Philippines, and other countries.
- Agency functions include handling Philippine and U.S. government funds, business transactions related to the Philippines, and dealings with U.S. Federal Reserve Banks where lawful.
- Branch staff appointed and removable as per bank rules; treasurers may act as agents under conditions.
Loan Extensions and Restrictions
- Permitted to extend existing government-related loans up to 1.5 million pesos for max 5 years.
- Prohibited from granting loans to board members and branch agents.
Real Estate Ownership and Warehouses
- Authorized to purchase and hold necessary real estate.
- Required to sell acquired real estate from debt collection within five years.
- May erect bonded warehouses for pledged goods.
Mortgage Foreclosure Redemption Rights
- Mortgagors have one year after foreclosure sale to redeem property by paying court-determined amount plus interest and costs.
Security Depreciation and Loan Enforcement
- Bank may demand additional security or declare loans due and payable upon security depreciation or nonpayment.
- Bank may sell securities without notice and apply proceeds against liabilities, returning any surplus.
Deficiency Claims
- Bank may pursue debtors for deficiency if sale proceeds insufficient but excess proceeds paid to debtor.
Forgery and Prohibited Fees
- Violations involving forged bank notes or bonds punishable under relevant laws.
- Prohibition on charging fees or commissions for obtaining loans; violations punishable.
Profit Distribution
- Net profits allocated 50% to reserve and 50% as dividends.
- Dividends capped at 12% per annum; surplus transferred to undivided profits.
- Government’s dividend share paid to Insular Treasury.
Bank Duration and Name Use Restrictions
- Bank existence established for 50 years, extendable by legislature.
- Restriction on use of "national" in bank names by unauthorized entities, with penalty for violations.
Regulatory Authority and Repeals
- Board empowered to adopt operational regulations in line with the Act.
- Repeal of inconsistent laws or parts.
Penalties
- Violations of the Act subject to fines up to 10,000 pesos, imprisonment up to 5 years, or both.
Reserve Requirements
- Specific reserve ratios mandated for circulating notes, demand deposits, and time deposits.
- Funds held in certain banks may be counted towards reserve requirements with Secretary of Finance approval.
Guarantees and Investments in Industrial Bonds
- Bank authorized to guarantee bonds of companies related to Philippine industry with government approval.
- Authorized to purchase such bonds secured by first mortgages limited to 60% of the value of the securing property.
Effectivity
- The Act took effect upon approval on February 20, 1918.