Private Development Banks Act overview

Private development banks to be incorporated under the General Banking Act for mortgage banks.
Authorized to exercise all powers and obligations of a mortgage bank except as otherwise provided.
Operation requires a certificate of authority from the Monetary Board of the Central Bank.

Private development banks must be stock corporations.
Minimum paid-up capital requirements are 4 million pesos (Class A), 2 million pesos (Class B), and 1 million pesos (Class C).
At least 60% of capital stock must be held by Filipino citizens.
If private subscription is insufficient, the Development Bank of the Philippines (DBP) may subscribe to preferred shares under specific conditions.
Preferred shares come with cumulative dividends and voting rights and may be sold to Filipino citizens with redemption rights.
All board members must be Filipino citizens.

At least 75% of loanable funds must be invested in medium and long-term loans for economic development.
No more than 25% of funds may be invested in short-term loans for miscellaneous purposes.

Annual appropriation from the Central Bank's net profit creates a revolving fund of 10 million pesos.
DBP uses this fund for subscription to preferred shares and rediscounting promissory notes held by private development banks.
Rediscounting interest rates are determined with consideration of the banks' development objectives.
Funds to finance projects approved by the National Economic Council.

Acceptance of savings and time deposits.
Act as correspondent or collection agent in localities with no rural/commercial banks.
Rediscount paper with specified financial institutions with Central Bank guidance.

DBP may extend loans repayable in ten years to private development banks to augment capital.
Conditions include inadequate local resources, scarcity of private capital, and impossibility of stockholder capital increase.

Central Bank may grant loans against assets of private development banks during emergencies or imminent financial crises with Monetary Board approval.

Full exemption from income and gross receipts taxes for three years from effectivity.
Gradual taxation starts thereafter at 25% per year for four years, then full taxation.

Private development banks must include "Development Bank" in their name, subject to SEC approval.
May establish branches and agencies with Monetary Board approval.
The bank and its branches operate as a single entity.

Officers and employees handling significant funds or securities must be bonded as determined by the Monetary Board.
By-laws may require bonding of other personnel.

DBP authorized to require services and facilities from government departments or instrumentalities to achieve Act objectives.

Penalties up to 2,000 pesos fine or one year imprisonment (or both) for:
- False bank reports affecting financial interests.
- Unauthorized disclosure of funds or properties information.
- Acceptance of gifts or fees related to loan approvals.
- Overvaluation or aiding overvaluation of securities.
- Officers signing as guarantors for loans.
Borrowers penalized for:
- Misuse of loan proceeds.
- Fraudulent overvaluation of collateral.
- Providing false information for loans.
- Attempting to defraud during loan recovery.
- Offering improper compensation to bank personnel.
- Unauthorized disposal or encumbrance of secured property.
Central Bank examiners or officials involved in such violations are equally liable.

DBP must submit an annual report to Congress detailing its actions involving private development banks.

Banks not organized under this Act or unauthorized entities using "Development Bank" in their name are fined not less than 50 pesos per day of usage.

Invalidity of any provision or its application does not affect other provisions or applications.

Applicable provisions of previous laws (RA 265, RA 337, RA 2081) incorporated except conflicting provisions, which are repealed.