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TENTH CONGRESS
Third Regular Session

CONrERI'NCE COMMI'ITEE REPORT

The Conference Committee on the disagreeing provisions of Senate Bill No. 1699,

entitled :

"AN ACT
PROVIDINC; FOR THE RECIJEATION OF THE ORGANIZATION AND
OPERA riON OF NON STOCK SAVINGS AND LOAN ASSOCIATIONS"

and House Dill No. 986, etilillcd;

"AN ACT
PROVIDING FOR THE REGULA I’lON OF THE ORGANIZATION AND
OPERATION OF NONS'I'OCK SAVINGS AND LOAN ASSOCIATIONS"

after having met and discussed the subject matter in full and free conferetice, lias agreed to

recommend and does hereby recommend to their respective Houses that Senate Bill No. 1699,

in consolidation with House Bill No, 986, be approved in accordance with the attached copy of

(lie bill as reconciled and approved by ihe conferees.

Apjiroved,

CONl'EREES ON I'llE PART OF THE CONFERICES ON THE PART OF

HOUSE OF REPRESENTATIVES : THE SENATE ;

t
VICrORICO L. CHAVES
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IlKNA’K) I*. imA<;ON N M. l/I.AVII'.lt

JUUO A. LliUKS’lMA IV HAUL S. KOCO

MANUI’,1, A. KOXAS

MAIUJAimO I,. TKVI'S

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of tlie Pliilippines )
Third Regular Session )

AN ACT
l‘ROVlI)INn I:OR Tlin RROIJI.ATION OF TIIF ORGANIZATION
AND Ol’liRATION OF NON-STOCK SAVINGS AND LOAN
ASSOCIATIONS
De it enacted by the Senate and House of Representatives of the Philippines in Congress assembled;

SECTION 1. Title. - The short title of this Act shall be the "Revised Non-Stock

Savings and Loan Association Act of 1997".

SEC. 2. Declaration of Policy. - It is hereby declared the policy of the State to:

a) encourage industry, frugality and the accumulation of savings, and judicious

utilization of credit among the members of non-stock savings and loan associations;

b) regulate and supervise the activities of non-stock savings and loan associations

in order to jrlace their operations on a sound, stable, and efticient basis to the end tliat

they may be able to better jirovide for tlie establislnnent of additional savings and credit

facilities in a fair manner to their members and to curtail or prevent acts or practices of

these Associations whicli are prejudicial to their members’ interest;

c) lay down the minimum requirements and the standards under which non-stock

savings and loan Associations may organize and operate; and

d) maximize the protection of members of non-stock savings and loan associations

against misfeasance and malfeasance of tlie trustees and officers thereof.

SEC. 3. Definition of Terms. - For the purposes of implementing this Act, the

following definitions shall apply:

a) "Non-stock savings and loan association" shall mean a non-stock, non-profit

corporation engaged in the business of accumulating the savings of its members and using

such accumulations for loans to members to service the needs of households by providing

long term financing for home building and development and for personal finance;

b) "Association" shall refer only to non-stock savings and loan associations

organized under this Act and the Corporation Code of the Philippines;
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Pilipinas-, and

d) "Bnngko Senlrot" shall mean the Dangko Sentral ng Pilipinas.

SEC. 4. Organization of an Association. - At least five (5) but not more tlian

fifteen (15) nienibers an Association under this Act. An Association, prior to

transacting any l)iisincss, shall secure a license from the Monetary Board and register

with the Securities and Exchange Cuminission. The application for a license, signed by

a majority of the incorporators and vcrilicd by one of the trustees, shall include:

a) the proposed articles of incorporation and bylaws together with names and

addresses of the iticorporalors, trustees atid officers, willi a statement of their cliaractcr,

experience and general fitness to engage in the non-stock savings and loan business;

b) an itemized statement of the estimated receipts and expenditures of the

proposed Association for the first year;

c) a filing fee in such amount as may be determined by the Monetary Board; and

d) such other information as the Monetary Board may require.

The Securities atid Exchange Cotntnissioti (SEC) shall not register the articles of

incorporation and bylaws of a proposed Association unless the application is accompanied

by a certificate of the Motietary Board approving the satne. The Monetary Board may

deny the application to organize an Association under this Act if it finds that the

Association is being organized I'or any purpose other than to engage iti the business of

a legititnate non-stock savitigs atid loan association or that the Association’s financial

program is unsound, or that the propo.sed members are adequately served by one or more

existing Associations.

The Associatioti shall cotifine its tnetnbership to a well-defined group of persons

and shall not transact Inisincss with the general public. A "well-defined group" shall be

defined by the Monetary Board, and shall cotisist of, but shall not be limited to, any of

the following;

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ol ils members Imm llie net iiieomc ol the Associations shall he exempt from income tax.

SEC. 6. Prohibition Against Inquiry Into or Disclosure of Deposits. - All deposits

of whatever nature with an Association in the Philippines are hereby considered as of an

absolutely confidential nature and may not he exatnined, inquired or looked into by any

person, government official, bureau or office, except upon written permission of the

depositor, or in cases of impeachment, or upon order of a competent court in cases of

bribery or dereliction of duly of public officials, or in cases where the money deposited

or invested is the subject matter of litigation.

It shall be unlawful for any official or employee of an Association to disclose to

any person any information concerning said deposits, except in the cases mentioned in

the preceding paragraph of this section. Any official or employee of an Association who

violates this section shall he punished under [Republic Act No. 1405, as amended.

SEC. 7. Powers of Associations. - 'I’he Association shall accept deposits from and

grant loans only to its members, subject to such rules and regulations as the Monetary

Uoard may promulgate to ensure sound, stable and efficient operation: Provided, That

no deposits shall be sourced or deducted from the loans granted to a member without his

or her written consent.

The loans shall not exceed the members’ deposits and contributions in the

Association,‘plus twelve (12) months of liis regular salary as the Association may allow

or seventy percent (70%) of the fair market value of any property acceptable as collateral

on first mortgage that he may offer as security: Provided, That no loan shall have the

maturity date of more than five (5) years, except loans oti the security of unencumbered

real estate for the purpose of home building and home development, which may be

granted with maturities not exceeding twenty-five (25) years, and medium and long-term

loans to finance agricultural projects, subject to regulations prescribed by the Monetary

Board: Provided, further, That the treasurer, cashier, or paymaster of the office
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and reguinliun tu llic cunirary, to make deductions from ills salary, wage, income or

retirement pension pursuant to the terms of Ids loan, and all other deductions authorized

by the member, to remit such deductions to the Association concerned, and to collect

such reasonable fee for his services as may be authorized by rules promulgated by the

Monetary Board;

In addition to the powers granted it by this Act and existing laws, any Association

may:

a) charge reasonable interest and collect such necessary fees and charges

incidental to the gratit of loans;

b) invest its funds in any sound non-speculative enterprises as well as in bonds,

security, and other obligations issued by the Government of the Philippines, or any of

its political subdivisions, instruinenlalities, or corporations including government-owned

or -controlled corporations, subject to the rules and regulations of the Monetary Board;

c) allow members to participate in the profits of the Association;

d) borrow money or incur such obligations tiot exceeding twenty percent (20%)

of the total assets of the Association, from any lending institution. The Monetary Board,

may, in meritorious cases, raise the ceiling on the borrowing capacity of an Association

to an amount not exceeding thirty percent (30%) of its total assets: Provided, That any

such Association organized by employees of an entity or corporation may borrow funds

from said entity or corporation but not vice-versa: Provided, further. That the number

of the Association’s creditors shall not exceed nineteen (19) at any one lime;

e) maintain deposits with banks: Provided, That the amount of such deposits shall

be subject to llie loan limit to a single borrower as prescribed herein or by other special

laws or regulations;

0 require the employer-entity or corporation to provide it with adequate office

space wilhitt which it can conduct its business; and

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its members.

SKC. 8. Resiriclions on Associations. - a) No Association shall have or carry

upon its books for any person any (Icmand, commercial or checking account, or any

credit to be withdrawn upon the presentation of any ticgotiable check or draft.

b) No Association shall advertise or represent itself to the public as a bank.

c) No Association shall issue, publish or cause or permit to be issued or

published, any advertisement that it is doing or permitted to do any business which is

prohibited by law for an Association.

SEC. 9. Service Units. - An Association shall opeti, maintain and operate service

utiits as may be necessary in order to deliver services to its members subject to approval

of the Monetary Board.

SFlC. 10. Agents and Salesmen. - No person shall act as an agent or sales

representative of an Association or operate an agency without obtaining a license from

the Monetary Board. No license is retjuired for a collector of an Association but no

person shall hold himself out or act as collector unless he is authorized as a collector in

writing by such Association.

SKC. II. Merger or Consolidation of Associations. - 'lo achieve simplicity,

economy and efficiency, different associaliotts of one company or departtnetU or office

may merge or consolidate upon approval of the Monetary Board.

SKC. 12. Trustees. - Only members are eligible as trustees of an Association:

Provided, 'I'hat in the case of a merger or consolidation of Associations duly approved

by the Monetary Board, the limitation on the maximum tiumbcr of trustees in a

corporation, as provided for iti the Corporation Code, shall not be applied for a

maximum period of three (3) years so that membership in the new board may include up

to the total number of trustees provided for in the respective articles of incorporation of

the merging or consolidating Associations.

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Association who, in the regular discharge of llieir duties liave access to money or

negotiable securities shall, before entering upon such duties, furnish to the employing

Association a good and sufficient botid, tlie form and amount of which shall be

prescribed by the Monetary Board, and providing for indemnity to the Association

against the loss of money or securities, by reason of their dishonesty.

SEC. 14. Compensation of Trustees, Officers and Employees. - No trustee,

officer, or employee of an Association shall receive from such Association, and no

Association shall pay to atiy trustee, officer, or etnployee of sucli Association, any

commission, emolument, gratuity or reward based oti (he volume or number of loans

tnade, or based on the interest or fees collected thereon. Nothing in this section prohibits

or limits any of the following:

a) receipt or payment of salaries of trustees, officers and employees;

b) receipt of payment of commissions to agents whether or not based on the

volume or number of loans or on the interest or fees collected thereon; and

c) receipt or irayment of bonuses to trustees, officers or etnployees if such

bonuses are based on the performance and not on the volume or number of loans made

or on the interest or fees collected thereon.

All increase in the compensation, in any form, of all trustees and trustee-officers

in excess of ten percent (10%) thereof per annum shall require the approval of the

liangko Sentral.

SEC. 15. Limitations on Lending Authority. - a) An Association shall not commit

itself to make any loans for amounts in excess of the total of the following amounts:

1) amount of cash available for loan purposes;

2) amount of cash which can l)c readily realized upon tlie sate or rodomptiun of

permissible investments made by the Associatioti; and

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financing instiliitions.

I)) No Associalion shall direclly or iiulircclly make any loans to any Iruslee or

ol fleer of such Association, cither for himself or as agent or as partner of anotlier, except

with the written aiijiroval of the majority of the trustees of the Association, excluding the

trustee concerned: Provided, That the total loans, direct or indirect, granted at any one

time to such trustees and officers shall not exceed twenty percent (20%) of tlie total

capital conlriltulions of the Associalion; in all cases of credit accommodations granted

to trustees and officers under this subsection, the written approval of the majority of the

trustees of the Association, excluding the trustee concerned, shall be entered upon the

records of the Association and a copy of such entry shall be transmitted forthwith to the

Baiisko Sentral.

'rite transactions of all trustee-officers with the Association shall not be under

terms more favorable than those transacted with other members. The office of any trustee

or tiustcc-ofliccr of an Associalion who violates the provisions of this subsection shall

immediately become vacant and the trustees or officers shall be punished by

ini|)risonment ol not less than one (1) year nor more than ten (10) years and by a fine

of not less than Five thousand pesos (P5,000) nor more than Fifty thousand pesos

(F50.000).

SICC. 16. h’xeciilion of Loan Agreement. - For each loan made by an Association,

a written note or other obligation expressing a rate of interest must be executed by the

borrower.

SKC. 17. Liability of Officers for Loans Contrary to Law. - No Association shall

make or purchase any loan or investment not authorized or permitted under this Act, and

any Iruslee, officer or employee, who on behalf of any such Association, knowingly

makes or purchases any such loan or investment or who knowingly consents thereto shall

be personally liable to the Association for the 'full amount of any such loan or

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SKC. 18. Umilalions on Investment. - a) No Association at any one time sliall

invest in bonds and securities in a total aiViount in excess of ten percent (10%) of the total

assets of such Association witliout prior written approval of tlie Dangko Sentral.

b) No Association at any one time sliall invest in real property in a total amount

in excess of five percent (5%) of the total assets of such Association.

c) No Association at any one time shall invest in furniture, fixture, furnishings

and c(|uipment and leasehold improvements fur its offices, in an amount mure than ten

percent (10%) of its total capital contribution.

Sl£C. 19. Reserves. - Every Association shall create a withdrawable share reserve
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which sliall consist of two percent (2%) of the total capital contributions of the members

which the Monetary Board may increase to a maximum of three percent (3%), as the

situation warrants.

No Association shall distribute to its members any portion of its net income if its

withdrawable share reserve is less than the minimum requirement, or if by such payment

or distribution, such reserve will be reduced to an amount below the minimum

rcciuiremciit provided herein.

SEC. 20. Withdrawal by a Member. - For the sole purpose of allowing an

equitable valuation and distribution of as.scls fur withdrawing members, an Association

shall, upon the effectivity of this Act, impute revalued surplus to be added to the

withdrawn capital, subject to such rules as the Monetary Board may prescribe. Such

rules shall allow a reasonable period between withdrawal of capital and payment of the

share of the member from the revalued surplus.

SEC. 21. Annual Reports by the Association. - Every Association shall, within

one hundred twenty (120) calendar days after the close of its fiscal year furnish the

Monetary Board and post in any of the Association’s bulletin board or in any other

conspicuous place a copy of its financial statement showing, in such form and detail as

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........... 1 .......... ““u i-iiaiuuci ui uic asiiciii aiiu liabilities

()l the Association at llic end of the preceding fiscal year. I’he Monetary Board may, in

addition to the foregoing, require die disclosure of such other information as it shall

deem necessary for the protection of the members of the Association.

SEC. 22. Regiilaloty rowers Over Associations. - Notwithstanding the provisions

ol Section 130 of Republic Act No. 7653, the power to regulate the operations of any

Association by the Monetary Board shall continue and consist of the following:

a) in seeing to it that the capital, fiiiaticing, direction and administration, as well

as the integrity, responsibility, and ability of organizers, administrators, trustees, and

officers of all Associations organized and operated under this Act, shall reasonably assure

the safety of the interests which its members entrust to them;

b) in regulating the operation and activities of Associations, which include, among

others: 1) in placing limits to the maximum credit allowed any individual borrower; 2)

in determining the loan re|)ayment period and loan |)rocedures; 3) in imposing a uniform-

accounting system and manner of keeping the accounts and records of Associations; 4)

in instituting periodic surveys of loan and letiding procedures, audits, test check of each

and other transactions of Associations; and 5) whenever necessary, in conducting training

courses for personnel of Associations;

c) in requiring ail accountable officers and employees of every Association to post

bonds for the faithful performance of their duties in reasonable sums and with such

sureties as the Monetary Board may require;

d) III fixing, by rules or by orders, in specific cases, after notice and hearing, the

limits of loanable funds, amounts for investment and reserves for withdrawals and other

contingencies;

e) in issuing rules and regulations for the proper implementation of this Act,

clfcctivc administralioii of the Associations, and to render advisory assistance to all

interested parties in order to carry out the intents and purposes of this Act; and

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all |)i)\vers uiidei kcpublic Act No. 7653, insofar as they are applicable in the

enforcement of this Act.

The Bangko Seniral sliall have the power to enforce the laws, orders, instructions,

rules and regulations proinulgalcd by the Monetiiry Hoard apjrlicable to Associations; to

require Associations, tlicir trustees, officers and agents to conduct and manage tiie affairs

of the Association in a lawful and orderly manner. After due notice and hearing, the

Monetary Board may revoke or suspend the license of any Association, for such period

as it determines necessary, particularly when tlie solvency of an Association is imperiled

by losses or irregularities, and/or when an Association willfully violates any provisions

of this Act or any rule or regulations promulgated hereunder.

The director and examiners of the department of liie Bangko 5e/J/ra/charged with

the regulation of Associations are hereby authorized to administer oaths to any trustee,

officer or employee of any Association or to any voluntary witness and to compel the

presentation of till hooks, documents, papers or records necessary in his judgment to

ascertain tlie facts relative to the true condition of any Association or to any loan.

S1£C. 23. Penalties. - a) The provisions of Section 34 of Republic Act No. 7653

shall ajjply to any agent, manager, or other officer-in-charge of any Association who

willfully refuses any lawful examination into the affairs of such Association.

b) ’I’hc willful making of a false statement or misleading statement on a material

fact to the Monetary Board or to the director of the department of the Bangko Sentral

charged with the regulation of Associations or to his examiners shall be punished in

accordance with Section 35 of liepiiblic Act No. 7653.

c) Whenever any Association, person or entity willfully violates this Act or any

order, instruction, rule or regulation issued by the Monetary Board applicable to

Associations, the persons responsible for such violation shall be punished in accordance

with Section 36 of Republic Act No. 7653. '

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•)r commissions or any oilier form of remuneration in connection with the approval of a

loan from said Association; or overvalues or aids in overvaluing any security for the

purjiose of influencing in any way the action of the Association on any loan, such officer,

employee or agent shall be punished by a fine of not more than Ten thousand pesos

(I* 10,()()()) or three times the loan amount involved, whichever is higher, or imprisonment

for not more than one (I) year, at the discretion of the court.

e) Whenever any applicant for a loan, or borrower of an Association fraudulently

overvalues jiroperty offered as security for loan from the said Association: or furnishes

false, or makes willful misrepresentation of material facts for the purpose of obtaining,

renewing, or increasing a loan or extending the period thereof: or attempts to defraud the

said Association in the event of a court action to recover a loan; or offers any officer,

of a court action to recover a loan; or offers any officer, employee or agent of an

Association any gift, fee, commission, or other form of compensation in order to

influence such Association personnel into approving a loan application; such applicant

or borrower shall be punished by a fine of not more than Five (Itousand pesos (P5,000)

or three times the loan amount involved, whichever is higher, or imprisonment for not

more than one (1) year, at the discretion of the court.

0 Whenever atiy cxamiticr, officer or employee of the Bangko Seniral, wlio is

assigned to examine, assist or retider technical service to an Association, overvalues or

aids in overvaluing any security for the purpose of influencing in any way the action of

the Association on any loan or connives or aids in the commission of the same, he shall

be punished by a fine of not more than 'I’en thousatid pesos (P 10,000) or three times the

loan amount involved, whichever is higher, o^ imprisonment for not more than one (1)

year, at the discretion of the court.

SliC. 24. Annual Fees. - Consistent with the provisions of Section 28 of Republic

Act No. 7653, atty Associatioti orgatiized under this Act may, pursuant to regulations

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nu“K,'U ..... . k'i; ll' fli'icimined hy ||1L. Monetary Hoard.

SI.;c. 25. Iniph'iiii'iifiiiiiiii. Iw.lLc pnrpo.se ol ca.rying ,|1C objectives of (I.is

Ael, llie flanfiko Snuml is aniliori/ed (o .e.inire the .setvicc.s and facilities of any

tiepaitnient or insti nmentality of tl.e ,;ovet ninciil or any officer or employee of any .sucli

rieparlment or instrmnentality.

SP;C. 26. Annual Report of the Monetary Hoard. - TIte Monetary Hoard sliall

.sttl,tt.il a repo, I to the (’ottgress of (he l>hilippi„c.s as of ihc end of cad. calendar year of

i'll I he files and regulations p.onmigtited l.y it in aecordatice with Ihe provisions of ihis

Act, together will, the explanations of its leasons therefor.

Sls(.. 27. Industry As.soeiation. - Membership in an existing associatioti of

Assoctalions duly tiecrediied tmd reeogni/.ed l.y the Ikingko Scntml, is hereby

eneonrtiged.

SIsC. 28. Applicahiliiy 0f Other Laws • The |.rovisio.is of Republic Act No. 7653

and Republic Act No. 3.17, as amended, ins-;,,, as they arc applicable and tiot in cotiniel

with any provision ,.f this Act, shall tipply to A.ssociath.ns ..rganized hereunder.

SKC. 29. Separahility Clause. - If ;n.y provision of thi.s Act or the application

'he.eof to any persons or . i.en.nstanees is h-ld invalid, the other provisions of this Act

and ihe a|.plication of such prt.visi(.ns to otl.r, persons atui circumstances, shall not be

aliccled thereby.

SEC. 30. Repealing Clause. - Republic Act No. 3779, as amended, is hereby

repealed. Any law t.r parts of law inconsisteiii with the provisions of this Act are hereby

repealed. In all tnatlers affeclit.g (he price stability of the peso, the provisions of

Republic Act No. 7653 shall prevail.

SEC. 31. RffeelMly. - This Act shall take effect fifteen (15) days following the

completion of its publietdio., in .be OtTicial Gazette or in two (2) national newspapers of
general circulation.

Approved,

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