July 24, 1948

REPUBLIC ACT NO. 337

AN ACT REGULATING BANKS AND BANKING INSTITUTIONS AND FOR OTHER

PURPOSES

CHAPTER I
Title and Definitions
SECTION 1. The short title of this Act shall be "The General Banking Act."
SECTION 2. Only duly authorized persons and entities may engage in the lending
of funds obtained from the public through the receipt of deposits or the sale of bonds,
securities, or obligations of any kind, and all entities regularly conducting such
operations shall be considered as banking institutions and shall be subject to the
provisions of this Act, of the Central Bank Act, and of other pertinent laws. The terms
"banking institution" and "bank," as used in this Act, are synonymous and
interchangeable and speci cally include banks, banking institutions, commercial banks,
savings banks, mortgage banks, trust companies, building and loan associations,
branches and agencies in the Philippines of foreign banks, hereinafter called Philippine
branches, and all other corporations, companies, partnerships, and associations
performing banking functions in the Philippines.
Persons and entities which receive deposits only occasionally shall not be
considered as banks, but such persons and entities shall be subject to regulation by the
Monetary Board of the Central Bank; nevertheless, in no case may the Central Bank
authorize the drawing of checks against deposits not maintained in banks, or branches
or agencies thereof.
The Monetary Board may similarly regulate the activities of persons and entities
which act as agents of banks. casia

SECTION 3. Insurance companies are exempted from the provisions of this Act,
but such companies shall present to the Central Bank such information, data or report
as the Monetary Board may require in order to ascertain the effects of the operations
of insurance companies on the monetary, credit, and exchange situation in the
Philippines.
SECTION 4. Cases of doubt as to the banking character of the activities of any
person or entity, and to the consequent applicability of this Act, shall be decided by the
Monetary Board subject to judicial review. The Board may, through the Superintendent
of Banks, examine, inspect or investigate the books and records of such person or
entity for the purpose of resolving the question.
SECTION 5. The following terms shall be held to be synonymous and
interchangeable:
(a) "Commercial bank" and "commercial banking corporation";
(b) "Savings bank," "mortgage bank," and "savings and mortgage bank";
(c) "Building and loan association" and "mutual building and loan
association";

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 (d) "Trust company" and "trust corporation"; and
(e) "Foreign bank" and "foreign banking corporation."
SECTION 6. No person, association or corporation not conducting the business
of a commercial banking corporation, trust corporation, savings and mortgage bank, or
building and loan association, as de ned in this Act, shall advertise or hold itself out as
being engaged in the business of such bank, corporation or association, or use in
connection with its business title the word or words "bank," "banking," "banker," "building
and loan association," "trust corporation," "trust company," or words of similar import,
or solicit or receive deposits of money for deposit, disbursement, safekeeping, or
otherwise, or transact in any manner the business of any such bank, corporation or
association without having rst complied with the provisions of this Act in so far as it
relates to commercial banking corporations, trust corporations, savings and mortgage
banks, or building and loan associations, as the case may be. For any violation of the
provisions of this section by a corporation, the o cers and directors thereof shall be
jointly and severally liable. Any violation of the provisions of this section shall be
punished by a ne of ve hundred pesos for each day during which such violation is
continued or repeated, and in default of the payment thereof, subsidiary imprisonment
as prescribed by law.
CHAPTER II
Establishment of Domestic Banks
SECTION 7. Domestic banking institutions, except building and loan associations,
shall be organized in the form of stock corporations.
SECTION 8. No banking institution shall issue no par value stock.
SECTION 9. The Securities and Exchange Commissioner shall not register the
articles of incorporation of any bank, or any amendment thereto, unless accompanied
by a certi cate of authority issued by the Monetary Board, under its o cial seal. Such
certi cate shall not be issued unless the Monetary Board is satis ed from the evidence
submitted to it: (a) that all the requirements of existing laws and regulations to engage
in the business for which the applicant is proposed to be incorporated have been
complied with; (b) that the public interest and economic conditions, both general and
local, justify the authorization; and (c) that the amount of capital, the nancing
organization, direction and administration, as well as the integrity and responsibility of
the organizers and administrators reasonably assure the safety of the interests which
the public may entrust to them.
SECTION 10. The Securities and Exchange Commissioner shall not register the
by-laws of any bank or banking institution, or any amendment thereto, unless
accompanied by a certi cate of the Monetary Board to the effect that such by-laws or
amendment thereto are in accordance with law.
SECTION 11. After the approval of this Act, no bank which may be established
and licensed to do business in the Philippines shall receive deposits, unless
incorporated under the laws of the Republic of the Philippines: Provided, however, That
this prohibition shall not apply to branches and agencies of foreign banks which, at the
time of the approval of this Act, are actually receiving deposits: And provided, further,
That, after the passage of this Act, all deposits so received by such branches and
agencies of foreign bank shall not be invested in any manner outside the territorial
limits of the Republic of the Philippines.
SECTION 12. At least sixty per cent (60%) of the capital stock of any banking
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 institution which may be established after the approval of this Act shall be owned by
citizens of the Philippines.
SECTION 13. At least two-thirds of the members of the board of directors of any
bank or banking institution which may be established after the approval of this Act shall
be citizens of the Philippines.
CHAPTER III
Licensing of Foreign Banks
SECTION 14. No foreign bank or banking corporation formed, organized or
existing under the laws other than those of the Republic of the Philippines shall be
permitted to transact business in the Philippines, or maintain by itself or assignee any
suit for the recovery of any debt, claims, or demand whatsoever, until after it shall have
obtained, upon order of the Monetary Board, a license for that purpose from the
Securities and Exchange Commissioner. Any o cer, director or agent of any such
corporation who transacts business in the Philippines without the said license shall be
punished by imprisonment for not less than one year nor more than ten years and by a
fine of not less than one thousand pesos nor more than ten thousand pesos.
For the issuance of such license to any foreign bank, the Securities and Exchange
Commissioner shall collect a fee in proportion to the corporate capital of such bank in
accordance with the schedule established in section eight of Act Numbered Fourteen
hundred and fifty-nine, as amended.
No order for a license shall be issued by the Monetary Board unless and until it is
convinced that the public interest and economic conditions, both general and local,
justify the issuance of such order; that the foreign bank or banking corporation is
solvent and in sound nancial condition; and that a duly appointed agent in the
Philippines has been authorized to accept summons and legal processes.
SECTION 15. No foreign building and loan association or building and loan
association not formed, organized, or existing under the laws of the Philippines shall be
permitted to transact business in the Philippines.
SECTION 16. The Monetary Board, by the a rmative vote of at least ve of its
members and with the approval of the President of the Philippines, may revoke the
license to transact business in the Philippines of any foreign bank or banking
corporation not formed, organized, or existing under the laws of the Philippines, if the
said Board nds after due investigation at which such bank or banking corporation is
given a chance to be heard by itself or counsel, that the foreign bank or banking
corporation is in imminent danger of insolvency or that its continuance in business will
involve probable loss to those transacting business with it. After the revocation of its
license, it shall be unlawful for any such foreign bank or banking corporation to transact
business in the Philippines unless its license is renewed or reissued. After the
revocation of such license the Solicitor General shall take such proceedings as may be
proper to protect creditors of such foreign bank or banking institution and the public.
SECTION 17. Summons and legal process served upon the Philippines agent of
any foreign banking corporation designated to accept service thereof shall give
jurisdiction to the courts over such banking corporation, and service of notices on such
agent shall be as binding upon the corporation which he represents as if made upon the
corporation itself.
Should the authority of such agent to accept service of summons and legal
processes for the corporation or notice to it be revoked, or should such agent become
mentally incompetent or otherwise unable to accept service while exercising such
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 authority, it shall be the duty of the corporation to name and designate promptly
another agent upon whom service of summons and processes in legal proceedings,
against the corporation and of notices affecting the corporation may be made, and to
le with the Securities and Exchange Commissioner a duly authenticated nomination of
such agent.
Should there be no person authorized by the corporation upon whom service of
summons, processes, and all legal notices may be made, service of summons,
processes and legal notices may be made upon the Superintendent of Banks and such
service shall be as effective as if made upon the corporation or upon its duly authorized
agent. In case of service for the corporation upon the Superintendent of Banks, the said
Superintendent shall register and transmit by mail to the president or the secretary of
the corporation at its head or principal o ce a copy, duly certi ed by him, of the
summons, processes, or notice. The sending of such copy of the summons, process, or
notice shall be a necessary part of the service and shall complete the service. The
registry receipt of mailing shall be prima facie evidence of the transmission of the
summons, process or notice. All costs necessarily incurred by the said Superintendent
for the making and mailing and sending of a copy of the summons, process, or notice
to the president or the secretary of the corporation at its head or principal o ce shall
be paid in advance by the party at whose instance the service is made.
SECTION 18. In all matters not speci cally covered by special provisions
applicable only to foreign banks, or their branches and agencies in the Philippines, any
foreign banking corporation or foreign bank not formed, organized, or existing under
the laws of the Philippines but lawfully doing business in the Philippines shall be bound
by all laws, rules, and regulations applicable to domestic banking corporations of the
same class, except such laws, rules and regulations as provided for the creation,
formation, organization, or dissolution of corporations or as xed for the relation,
liabilities, responsibilities, or duties of members, stockholders, or o cers of
corporations, to each other or to the corporation.
SECTION 19. Residents and citizens of the Philippines who are creditors of a
branch or agency in the Philippines of a foreign bank or banking corporation shall have
preferential rights to the assets of such branch or agency.cdasia

CHAPTER IV
Commercial Banking Corporations
SECTION 20. A commercial banking corporation shall be any corporation which
accepts or creates demand deposits subject to withdrawal by check.
SECTION 21. A commercial banking corporation, in addition to the general
powers incident to corporations, shall have all such powers as shall be necessary to
carry on the business of commercial banking, by accepting drafts and issuing letters of
credit, by discounting and negotiating promissory notes, drafts, bills of exchange, and
other evidences of debt; by receiving deposits; by buying and selling foreign exchange
and gold or silver bullion, and by lending money against personal security or against
securities consisting of personal property or rst mortgages on improved real estate
and the insured improvements thereon. No loan on the security of real estate shall have
a maturity in excess of fteen years, but the aggregate of such loans on real estate
security shall not exceed seventy per cent (70%) of the total savings deposits of the
bank.
Nothing in this section shall be construed as preventing a commercial bank from
accepting real estate security in order to protect itself from loss on account of a loan
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 previously contracted in good faith, nor shall there be included in the foregoing
limitations loans made on the security of real estate arising out of the sale of property
owned by such bank.
Commercial banks may acquire high-grade bonds and other evidences of
indebtedness. Except in exceptional circumstances, however, the Monetary Board shall
not permit commercial banks to invest in securities having maturities greater than three
years from the date of acquisition by the bank an amount in excess of twenty per cent
(20%) of its total deposits.
SECTION 22. The combined capital accounts of each commercial bank shall not
be less than an amount equal to fteen per cent (15%) of its total assets, excluding the
following assets:
(a) Cash on hand;
(b) Amounts due from banks, both at home and abroad, including all
deposits with the Central Bank; and
(c) Evidences of indebtedness of the Republic of the Philippines and of the
Central Bank, and any other evidences of indebtedness or obligations
the servicing and repayment of which are fully guaranteed by the
Republic of the Philippines.
The Monetary Board shall prescribe the manner of determining the total assets
of banking institutions for the purposes of this section, but contingent accounts shall
not be defined as being included among total assets.
Whenever the capital accounts of a bank are de cient with respect to the
requirements of this Act, the Monetary Board, after considering a report of the
Superintendent of Banks on the state of solvency of the institution concerned, shall
limit or prohibit the distribution of net pro ts and shall require that part or all of net
pro ts be used to increase the capital accounts of the institution until the minimum
requirement has been met. The Monetary Board may, furthermore, after considering,
the aforesaid report of the Superintendent of Banks and if the amount of the de ciency
justi es it, restrict or prohibit the making of new investments of any sort by the bank,
with the exception of purchases of readily marketable evidences of indebtedness
included under subsection (c) of this section, until the minimum required capital ratio
has been restored.
SECTION 23. Except as the Monetary Board may otherwise prescribe, the total
liabilities of any person, company, corporation or rm, to a commercial banking
corporation for money borrowed, with the exception of money borrowed against
obligations of the Central Bank or of the Philippine Government, or borrowed with the
full guarantee by the Government of payment of principal and interest, shall at no time
exceed fifteen per cent (15%) of the unimpaired capital and surplus of such bank.
The total liabilities of any borrower may amount to a further fteen per cent
(15%) of the unimpaired capital and surplus of such banking corporation provided the
additional liabilities are adequately secured by shipping documents, warehouse
receipts or other similar documents transferring or securing title covering readily
marketable, non-perishable staples which staples must be fully covered by insurance,
and must have a market value equal to at least one hundred and twenty- ve per cent
(125%) of such additional liabilities.
The term "liabilities" as used herein, shall mean the direct liability of the maker or
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 acceptor of paper discounted with or sold to such bank and the liability of the indorser,
drawer, or guarantor who obtains a loan from or discounts paper with or sells paper
under his guaranty to such bank and shall include in the case of liabilities of a co-
partnership or association the liabilities of the several members thereof and shall
include in the case of liabilities of a corporation all liabilities of all subsidiaries thereof
in which such corporation owns or controls a majority interest. But the discount of bills
of exchange drawn in good faith against actually existing values, and the discount of
commercial or business paper actually owned by the person negotiating the same, shall
not be considered as money borrowed, for the purposes of this section.
SECTION 24. No commercial bank shall make any loan or discount on the
security of shares of its own capital stock, nor be the purchaser or holder of any such
shares, unless such security or purchase be necessary to prevent loss upon a debt
previously contracted in good faith, and the stock so purchased or acquired, or
purchased or acquired for any other reason in the course of its operations, shall, within
six months from the time of its purchase or acquisition, be sold or disposed of at
public or private sale, or in default thereof, a receiver shall be appointed to close up the
business of the bank in accordance with law.
SECTION 25. Any commercial bank may purchase, hold, and convey real estate
for the following purposes:
(a) Such as shall be necessary for its immediate accommodation in the
transaction of its business: Provided, however, That the total
investment in such real estate and improvements thereof shall not
exceed twenty- ve per cent (25%) of its paid-up capital stock and
surplus;
(b) Such as shall be mortgaged to it in good faith by way of security for
debts;
(c) Such as shall be conveyed to it in satisfaction of debts previously
contracted in the course of its dealings;
(d) Such as it shall purchase at sales under judgments, decrees, mortgages,
or trust deeds held by it and such as it shall purchase to secure debts
due to it.
But no such bank shall hold the possession of any real estate under mortgage or
trust deed, or the title and possession of any real estate purchased to secure any debt
due to it, for a longer period than five years.
SECTION 26. The deposit liabilities of commercial banks, including the Philippine
National Bank, shall be subject to the reserve requirements and other conditions
prescribed by the Monetary Board in accordance with the authority granted to it under
the provisions of the Central Bank Act.
SECTION 27. Any commercial bank organized under the laws of the Philippines
may, with the prior approval of the Monetary Board, establish branches in the
Philippines or branches or agencies outside the Philippines, and the bank shall be
responsible for all business conducted in such branches to the same extent and in the
same manner as though such business had all been conducted in the head office.
For the purposes of this Act, a bank and its branches shall be treated as a unit.
SECTION 28. The Monetary Board, by the a rmative vote of at least ve of its
members, may compel the head o ce of any commercial bank organized under the
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 laws of the Philippines to liquidate the business of any branch or agency if the business
of such branch or agency is being conducted unlawfully or in a manner likely to
prejudice the interests of the creditors of the branch or agency or of the head office.
CHAPTER V
Savings and Mortgage Banks
SECTION 29. A savings and mortgage bank shall be any corporation organized
primarily for the purpose of accumulating the small savings of depositors and investing
them, together with its capital, in bonds or in loans secured by bonds, real estate
mortgages, and other forms of security, as hereinafter provided. ac

SECTION 30. The combined capital accounts of each savings and mortgage
bank shall not be less than an amount equal to fteen per cent (15%) of its total assets,
after deducting the following assets:
(a) Cash on hand;
(b) Amounts due from banks, both at home and abroad, including all
deposits with the Central Bank; and
(c) Evidences of indebtedness of the Republic of the Philippines and of the
Central Bank, and any other evidences of indebtedness or obligations
the servicing and repayment of which are fully guaranteed by the
Republic of the Philippines.
The Monetary Board shall prescribe the manner of determining the total assets
of banking institutions for the purposes of this section, but contingent accounts shall
not be defined as being included among total assets.
Whenever the capital accounts of a bank are de cient with respect to the
requirements of the preceding paragraph, the Monetary Board, after considering a
report of the Superintendent of Banks on the state of solvency of the institution
concerned, shall limit or prohibit the distribution of net pro ts and shall require that
part or all of net pro ts be used to increase the capital accounts of the institution until
the minimum requirement has been met. The Monetary Board may, after considering
the aforesaid report of the Superintendent of Banks and if the amount of the de ciency
justi es it, restrict or prohibit the making of new investments of any sort by the bank,
with the exception of purchases of the evidences of indebtedness included under
subsection (c) of this section until the minimum required capital ratio has been
restored.
SECTION 31. The loans and investments of savings and mortgage banks shall be
limited to the following:
(a) Loans with the security of their own savings deposit obligations or of
mortgage and mortgage bonds which they have issued, or with the
security of savings deposit obligations of other banks doing business
in the Philippines;
(b) Medium-term loans of the following types:
(1) Loans for the encouragement of cattle, carabao and other
livestock breeding, with maturities up to three years. Such loans
shall be repaid in regular installments and shall have as
principal security a lien on the animals, the bank being
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 empowered, however, to require, in addition, real estate and
other securities to its satisfaction. The amount of any such loan
shall not exceed fty per cent (50%) of the commercial value of
the animals at the time the loan is made, but similar additional
loans, up to fty per cent (50%) may be made as the value of
the stock increases.
(2) Equipment loans with maturities up to ve years, for the
acquisition of fertilizers and any instruments, machinery and
other movable equipment used in the production, processing,
transformation, handling or transportation of agricultural and
industrial products. Such loans shall constitute a rst lien on
the assets acquired with the proceeds of the loan, the bank
being empowered, however, to require as additional security a
lien or mortgage on other properties of the debtor.
(c) Mortgage loans, with maturities up to ten years, for the conservation,
enlargement or improvement of productive properties, or the
acquisition of machinery or other xed installation. Such loans shall
be secured by a first mortgage on the property.
(d) Real estate mortgage loans with maturities of not more than twenty
years, for the following purposes only:
(1) For the construction, acquisition, expansion or improvement of
rural and urban properties;
(2) For the refinancing of similar loans and mortgages; and
(3) For such other purposes as may be authorized by the Monetary
Board.
(e) High-grade bonds and other evidences of indebtedness, and loans
against such obligations;
(f) Drafts, bills of exchange, acceptances, or notes arising out of current
commercial transaction which are endorsed or accepted by any
solvent bank operating in the Philippines. The aggregate investments
in this class shall not exceed ten per cent (10%) of the total assets of
the bank;
(g) Collateral trust bonds or notes, or obligations secured by such bonds or
notes, secured by a rst mortgage or by a participating interest in a
rst mortgage on improved urban or rural real estate in cities and
municipalities of the Philippines, provided that such bonds and notes
shall have been outstanding for at least three years prior to their
purchase by the savings bank, and provided that during that period
the earnings of the property mortgaged and available for paying
interest have been equal to at least two hundred per cent (200%) of
the annual interest payable on account of all rst mortgage
obligations outstanding. No such bonds or notes, or obligations
secured thereby, shall be purchased by the bank if the aggregate of
rst mortgage obligations outstanding against the property exceeds
seventy per cent (70%) of the appraised value thereof;
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 (h) Loans secured by the pledge to the corporation of gold or silver bullion:
Provided, That the loans shall not exceed ninety per cent (90%) of the
value of the pledge by which the loan is secured;
(i) Loans with rst mortgages transferred to the corporation as collateral
security on improved and otherwise unencumbered real estate in
cities and municipalities in the Philippines: Provided, however, That
the mortgage transferred to the corporation as collateral security
with interest accrued and due shall not exceed sixty per cent (60%) of
the appraised value of the real estate and insured improvements
which secure such mortgage.
Notwithstanding any provisions in this or any other Act to the contrary, any
savings and mortgage bank, existing or doing business on the date of the approval of
this Act and engaged in the business of lending of money against the pledge of jewelry,
precious stones and articles of similar nature, may continue to engage in such
business.
SECTION 32. Except as the Monetary Board may otherwise prescribe, the direct
indebtedness to a savings and mortgage bank of any person, company, corporation or
rm, including in the indebtedness of the company or rm the indebtedness of the
several members thereof, for money borrowed, with the exception of money borrowed
against obligations of the Central Bank or the Philippine Government, or borrowed with
the full guarantee by the Government of payment of principal and interest, shall at no
time exceed twenty- ve per cent (25%) of the unimpaired capital and surplus of the
bank: Provided, however, That this limitation shall not apply to loans made under
subsection (f) of section thirty-one.
SECTION 33. Any savings and mortgage bank may, with the approval of the
Monetary Board, issue mortgage and chattel mortgage certi cates, buy and sell them
for its own account or for the account of others, or accept and receive them in payment
or as amortization of its loans.
Such mortgage and chattel mortgage certi cates shall be issued exclusively in
national currency and exclusively for the nancing of the loans enumerated in
subsections (b), (c), and (d) of section thirty-one. The Monetary Board may issue such
regulations as it deems necessary with respect to the maturities, rates of interest,
denominations and other conditions pertaining to such certificates.
The bank shall strive to coordinate the amounts and maturities of its certi cates
with those of its loans, so as to ensure adequate cash receipts for the payment of
principal and interest at the time they become due.
Savings and mortgage banks shall accept their own certi cates at least at the
actual price of issue, in any prepayment of loans which mortgage or chattel mortgage
debtors may wish to make, provided that the date of maturity of the certi cates is not
later than the date on which the payment would otherwise become due, in the absence
of the aforesaid prepayment. cdt

SECTION 34. Savings and mortgage banks may purchase, hold and convey real
estate under the same conditions as those governing commercial banks as speci ed in
section twenty-five of this Act.
SECTION 35. Married women and minors may, in their own right and in their own
names, make deposits and withdraw the same, and may receive dividends and interest:
Provided, however, That if any guardian shall give notice in writing to any savings bank
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 not to make payments of deposits, dividends, or interest to the minor of whom he is
guardian, then such payment shall be made only to the guardian.
SECTION 36. Savings deposits shall be returned to the depositors or to their
legal representatives upon their petition in the manner and at the time and under the
conditions which shall be determined by the board of directors and stipulated in
regulations which shall be in conformity with law and with such regulations as the
Monetary Board may prescribe.
SECTION 37. All savings and mortgage banks shall maintain on deposit with the
Central Bank of the Philippines such reserves against their deposit liabilities as the
Monetary Board shall determine in accordance with the pertinent provisions of the
Central Bank Act.
SECTION 38. Whenever there is a call by depositors of a savings bank for
repayment of their deposits and the call so made shall result in reducing its legal
reserves below the amount required by the Monetary Board, such bank shall not make
any new loans or investment of the funds or depositors or earnings of such funds until
the call of the depositors has been satis ed and its legal reserves have been restored
to the required minimum.
Any o cer or director of a savings and mortgage bank who makes or causes to
be made any loan or investment or funds of depositors or of the earnings of such funds
in violation of this section shall be punished by imprisonment for not less than one year
nor more than ten years and by a ne of not less than one thousand nor more than ten
thousand pesos.
CHAPTER VI
Building and Loan Associations
SECTION 39. All corporations whose capital stock is required or is permitted to
be paid in by the stockholders in regular, equal, periodical payments and whose
purpose is to accumulate the savings of its stockholders, to repay to said stockholders
their accumulated savings and pro ts upon surrender of their shares, to encourage
industry, frugality, and home building among its stockholders, and to loan its funds, and
funds borrowed for the purpose, to stockholders on the security of unencumbered real
estate and with the pledge of shares of the capital stock owned by such stockholders
as collateral security, shall be known as building and loan associations, and the words
"mutual building and loan association" shall form part of the name of every such
association.
It shall be unlawful for any building and loan association to make any loan upon
property that is suitable for use only as theater, public hall, church, convent, school, club,
hotel, garage, or other public buildings: Provided, however, That to facilitate the
investment of the idle funds of a building and loan association, the Monetary Board
may, in special instances, waive the provisions of this paragraph, in cases of public hall,
school, hotel and other public buildings.
With the approval of the Monetary Board, a building and loan association may
also invest such of its funds as may otherwise remain idle, in bonds and obligations of
the Republic of the Philippines, or of any of its political subdivisions, or of any
government-owned or controlled corporation, including the Central Bank.
SECTION 40. The articles of incorporation shall state the purpose of the
association as set forth in section thirty-nine.
SECTION 41. Any person may become a stockholder of any building and loan
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 association by subscribing for one or more shares therein and signing the by-laws of
the association, following his signature with his post o ce address, but no member
may borrow upon the security of real estate from any such association having assets of
one hundred thousand pesos or more an amount in excess of ten per cent (10%) of the
total assets of the association, nor may any such association make a loan upon any one
piece of real estate amounting to more than ten per cent (10%) of the total assets of
the association. In the case of a building and loan association having assets amounting
to less than one hundred thousand pesos, no loan to any one borrower and no loan
upon any one piece of real estate shall exceed ten thousand pesos. The Monetary
Board shall have power to issue regulations governing the manner of determining such
assets as the basis for computing the foregoing limitations.
SECTION 42. The capital stock of such associations shall be paid in by the
stockholders in regular, equal, periodical payments known as dues, at such times and in
such amounts as shall be provided in the by-laws of the association. The dues on each
share of stock subscribed for by a stockholder shall continue to be paid by the
stockholder to the association until the share has been duly withdrawn, cancelled, or
forfeited or until the share has reached its matured value; that is to say, when the dues
paid on each share and the net earnings thereof in accordance with the by-laws shall
amount to the matured value of the share, but such association may issue and sell paid-
up stock for each and also investment stock to be paid in installments, and may pay to
the holders of such paid-up stock out of the net pro ts such rates of dividends as may
be xed from time to time by the board of directors of the association, which shall be
expressed in the stock certi cates and shall not participate further in the pro ts or
accretions of the association. Paid-up stock issued after the date when this Act shall
become effective shall not be entitled to vote. The dividends payable upon such paid-up
stock shall not be cumulative in the sense of being a charge upon the future earnings of
the association should the earnings of the association not be su cient in any particular
year to meet the dividend requirements of such stock in that year. Either paid-up or
investment stock may be surrendered by the holder at any time upon the giving of such
notice as the association may require.
SECTION 43. The capital stock of every such association shall be divided into
shares of the matured or par value of two hundred pesos each.
SECTION 44. Certi cates of stock shall be issued to each stockholder upon the
payment of the membership fee and rst installment of the dues. The association may
charge a membership or entrance fee not exceeding one peso on each share of stock
issued and may also charge a transfer fee not exceeding twenty centavos on each
share transferred, all of which shall be paid into the treasury and accounted for as funds
of the association. Shares which have not been pledged as security for the payment of
a loan shall be called "free shares," and shares which have been so pledged shall be
called "pledged shares."
SECTION 45. Payment of dues on shares of stock shall commence from the time
of issue of such shares.
SECTION 46. Whenever any stockholder shall be six months in arrears in the
payment of his dues upon free shares, the secretary or clerk of the association shall
give him notice in writing of his arrearages by mailing to him at the last post o ce
address given by him to the association a statement of all such arrearages. If the
stockholder fails to pay within two months after receipt of such notice the full amount
of his arrearages the board of directors may, at its option, declare his shares forfeited.
At the time of the forfeiture the withdrawal value of the forfeited shares shall be
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 determined and stated by the board of directors, and the defaulting stockholder shall
be entitled to receive such value without interest upon such notice as is required of a
withdrawing stockholder.
SECTION 47. When the stock shall have reached its matured value, payment of
dues thereon shall cease and holders of such matured shares shall be paid out of the
funds of the association the matured value of their shares with interest thereon at the
rate prescribed in the by-laws, from the time the board of directors shall declare such
shares to have matured until payment is made. The order of payment of matured
shares shall be prescribed in the by-laws and at no time shall more than one-third of the
receipts of the association be applied to the payment of matured shares without the
consent of the board of directors and the approval of the Monetary Board: Provided,
however, That if shares pledged to the association as security for loans shall mature
before the loan is repaid the matured value may be credited to the loan. The withdrawal
value of the pledged shares shall not be returned to the stockholders unless such value
is applied in liquidation of the loan which the shares secure.
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SECTION 48. By the a rmative vote of a majority of all its directors the
association may borrow money for such temporary uses and purposes as the
exigencies of the business may demand provided such action is consistent with the
objects of the association. The aggregate amount of the outstanding indebtedness of
any such association shall not at any time exceed fty per cent (50%) of its capital
stock actually paid in: Provided, however, That such limitation shall not include
indebtedness to the Central Bank.
SECTION 49. In addition to the other requirements established in this Act, every
loan made by the association must be properly evidenced by a note or other instrument
in writing and must be secured by a rst mortgage or deed of trust on unencumbered
real estate and also by the pledge to the association of shares of stock of the
association the matured value of which shall at least equal the amount loaned:
Provided, however, That loans may be made on the security of free shares pledged to
the association for the payment of the loan in case, at the time that the loan is made,
the withdrawal value of such free shares under the by-laws shall exceed the amount
borrowed and interest thereon for six months.
SECTION 50. In the discretion of the board of directors a loan may be repaid by
the surrender of pledged shares whose withdrawal value equals the amount loaned and
all interest and fines due thereon.
SECTION 51. The rates of interest on loans may be xed in the by-laws or may be
prescribed from time to time by the board of directors, subject to the provisions of the
Usury Law and to any regulations which the Monetary Board may issue with respect
thereto.
SECTION 52. Whenever a borrowing stockholder shall be three months in arrears
in the payment of his dues on stock or in the interest or premium or installments of
premium on any loan, the whole loan, at the option of board of directors, shall become
due and payable and the board may proceed by action to enforce collection upon the
securities held by the association. The withdrawal value of all shares pledged as
collateral security at the time of the commencement of the action shall be applied to
the payment of the loan, and such shares from the time of such application shall be
deemed to be surrendered to the association.
SECTION 53. Mutual building and loan associations may purchase, hold, and
convey real estate under the same conditions as those speci ed with reference to
commercial banks in Section twenty-five of this Act.
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 SECTION 54. Stockholders may surrender their shares and withdraw from the
association after paying twelve monthly installments of dues upon giving sixty days'
notice in writing to the board of directors, and the withdrawal value of such shares shall
be the total sum of the dues paid thereon plus not less than ninety per cent of all
dividends earned by such shares up to the end of the last preceding scal period plus
such interest for the time elapsed since the end of that period as shall be allowed by
the board of directors. Stockholders who have not paid twelve monthly installments of
dues may, after giving sixty days' notice in writing to the board of directors, surrender
their shares and withdraw from the association, and the withdrawal value of such
shares shall be the total sum of the dues paid thereon plus such dividend or interest as
may be allowed by the board of directors. In no event, however, shall more than one-
third of the total receipts of the association be paid in any one month to retire such
shares. Payment for such surrendered shares shall be made in the order in which
notices of withdrawal have been received by the board of directors: Provided, That
should the business of the association during the period such withdrawing member has
been a stockholder show a loss in excess of the reserve available for meeting such
loss, the withdrawal value of such shares shall be charged with their proportion of such
loss: And provided, nally , That any nes or charges lawfully chargeable against such
shares may be deducted before making payment to the stockholder. Except in cases of
voluntary or forced liquidation of a building and loan association or forfeitures as
provided in section forty-six of this Act, the board of directors of such association shall
not have power to force the surrender and withdrawal of unmatured shares.
SECTION 55. At least once a year the pro ts on all business transacted shall be
determined by the board of directors and apportioned to all the shares in each series
outstanding at the time of such apportionment on the basis of the actual value of such
shares, as distinguished from their withdrawal value, but in determining the pro ts
which may be so apportioned, there shall be deducted from the gross earnings of the
association all expenses and losses incurred in conducting its business. Five per cent
(5%) of the net earnings shall be credited to a reserve account until the reserve equals
ve per cent (5%) of the total assets of the association. The reserve shall be maintained
at ve per cent (5%) of the total assets and shall be available for meeting losses
incurred by the association. The remainder of the net earnings shall be available for
apportionment among the stockholders. In the event of the liquidation of a building and
loan association there shall escheat to the State any part of the reserve remaining after
charging off all losses and defraying all expenses of liquidation.
CHAPTER VII
Trust Corporations
SECTION 56. Any corporation formed or organized for the purpose of acting as
trustee or administering any trust or holding property in trust or on deposit for the use,
benefit, or behoof of others, shall be known as a trust corporation or company.
SECTION 57. A trust company may, with the approval of the Monetary Board, do
a commercial banking business but such business must be kept separate and distinct
from its trust business. All relevant provisions of Chapter IV of this Act governing the
business of commercial banking corporations shall be held to apply to the commercial
banking activities of a trust company.
A commercial banking corporation may, with the approval of the Monetary Board,
be authorized to engage in the business of a trust company, but shall be subject to the
provisions of this Chapter as regards its trust business.
SECTION 58. A trust company, in addition to the general powers incident to
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 corporations, shall have power:
(a) To act as trustee on any mortgage or bond issued by any municipality,
corporation, or any body politic and to accept and execute any other
municipal or corporate trust not inconsistent with law;
(b) To act under the order or appointment of any court of record as
guardian, receiver, trustee, or depositary of the estate of any minor,
insane person, idiot, habitual drunkard, or other incompetent or
irresponsible person, and as receiver and depositary of any moneys
paid into court by parties to any legal proceedings and of property of
any kind which may be brought under the jurisdiction of the court by
proper legal proceedings;
(c) To act as the executor of any last will or testament when it is named in
the last will and testament as the executor thereof;
(d) To act under appointment of a court of competent jurisdiction as
administrator of the estate of any deceased person, with the will
annexed, or as administrator of the estate of any deceased person
when there is no will and when in either case there is no person
quali ed, competent, willing, able and entitled to accept such
administration;
(e) To accept and execute any legal trust con ded to it by any court of
record or by any person or corporation for the holding, management,
and administration of any estate, real or personal, and the rents,
issues, and profits thereof.
SECTION 59. Except as may otherwise be provided in this Act, no bond or other
security shall be required from any trust company for the faithful performance of its
duties as trustee, executor, administrator, guardian, receiver, or depositary: Provided,
however, That the court o cer appointing such company as trustee, executor,
administrator, guardian, receiver, or depositary may, upon proper application, showing
special cause therefor, require any corporation which shall seek to be or shall have been
so appointed to give adequate security for the protection of the funds or property
con ded to the corporation and, upon failure of such corporation to give the security
required, its appointment as trustee, executor, administrator, guardian, receiver or
depositary shall be revoked.
The court shall require such trust company to make all reports, render all
accounts, perform such duties, and do such acts as might be required by the court of a
natural person acting as trustee, executor, administrator, guardian, receiver, or
depositary.
SECTION 60. Upon the application of any executor, administrator, guardian,
trustee, receiver, or depositary or any other person in interest, any court having
jurisdiction over such o cer, trustee, receiver, or depositary and over the subject
matter of the trust or deposit may, upon such notice to the parties in interest as the
court shall direct and after hearing the application and all parties in interest desiring to
be heard, order said o cer, receiver, trustee, or depositary to deposit with some trust
company lawfully doing business in the Philippines the whole or any part of the moneys
or personal property held by such o cer, receiver, trustee, or depositary. Upon
presentation to the court of the receipt or written acknowledgment of the trust
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 company that the deposit of said moneys and personal property has been made in
accordance with the order of the court, the court may order that the bond given or
required to be given by such o cer, trustee, receiver or depositary for the faithful
performance of his duties be reduced to such sum as the court may deem proper:
Provided, however, That the reduced bond shall be su cient to secure adequately the
proper administration and care of any property remaining in the hands or under the
control of such o cer, trustee, receiver, or depositary, and the proper accounting for
such property. Property deposited with any trust company in conformity with this
section shall be held by said company under the orders and direction of the court. aisa dc

SECTION 61. All moneys, properties, or securities received by any trust company
as executor of the will of any deceased person or as administrator, with or without the
will annexed, of the estate of any deceased person, or as guardian, receiver, trustee, or
depositary, of the estate of any minor, insane person, idiot, habitual drunkard, or other
incompetent or irresponsible person, or as receiver or depositary under and by virtue of
any order or appointment of any court, shall be kept separate and distinct from all other
funds, properties, and assets of its general business. The accounts of all such moneys,
properties, or securities shall likewise be kept separate and distinct from the accounts
of its general business.
SECTION 62. No trust company shall have the right to accept any trust whatever
which it would be unlawful for any individual to make, accept, or execute, and it shall be
the duty of a trust company, acting as trustee of any legal trust, to execute such trust in
accordance with the lawful terms of the trust.
SECTION 63. The lending or investment of deposits or moneys received by any
trust company as executor of the will of any deceased person or as administrator, with
or without the will annexed, or as guardian, receiver, trustee, or depositary of the estate
of any minor, insane person, idiot, habitual drunkard, or other incompetent or
irresponsible person, or as receiver or depositary under and by virtue of any order or
appointment of any court, or as trustee under any instrument in writing constituting the
company a trustee, unless otherwise directed by the instrument creating the trust, shall
be limited to the loans and investments enumerated in section thirty-one of Chapter V
(Savings and Mortgage Banks). Any o cer or director of any trust company authorizing
or making any loan on security otherwise than as provided in this section shall be
punished by imprisonment of not less than one year nor more than ten years and by a
fine of not less than one thousand nor more than ten thousand pesos.
SECTION 64. The capital stock and funds of a trust company may be loaned or
otherwise invested as its by-laws prescribe; if it does a commercial banking business in
addition to its trust business, the investment of its funds other than trust funds shall be
governed by the relevant provisions of Chapter IV of this Act.
Real estate acquired by a trust company, in whatever manner and for whatever
purpose, shall likewise be governed by the relevant provisions of section twenty- ve of
this Act.
SECTION 65. As security for the faithful performance of its trust duties, every
trust company, before transacting trust business, shall carry on deposit with the Central
Bank of the Philippines, cash or securities approved by the Monetary Board in an
amount equal to not less than two hundred and fty thousand pesos: Provided,
however, That the Monetary Board shall require any trust company to increase the
amount of its securities on deposit with the Central Bank whenever in the judgment of
the Monetary Board such increase is necessary by reason of the growth of the trust
business of the company: And provided, further, That the paid-in capital and surplus of
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 the company must be at least equal to the amount required to be deposited with the
Central Bank in accordance with the provisions of this paragraph. Should the capital
and surplus fall below said amount, the Monetary Board shall have the same authority
as that granted to it under the provisions of the last paragraph of section twenty-two of
this Act.
A trust company, so long as it shall continue solvent and comply with the laws of
the Philippines, shall have the right to collect the interest earned on any securities so
deposited and, from time to time, with the approval of the Monetary Board, to exchange
such securities for others.
All claims arising out of the trust business of a trust company shall have priority
over all other claims as regards the securities deposited as above provided. The
Monetary Board may not permit the securities deposited in accordance with the
provisions of this section to be reduced below the minimum amount of two hundred
and fty thousand pesos until the depositing company shall discontinue its trust
business and shall satisfy the Monetary Board that it has complied with all of its
obligations in connection with such business.

No assets held by a trust company in its capacity as trustee shall be subject to

any claims other than those of the parties interested in the specific trusts.
SECTION 66. Every trust company, before the declaration of dividend, shall carry
to surplus ten per cent (10%) of its net pro ts accruing since the last preceding
dividend until the surplus shall amount to twenty per cent (20%) of its authorized capital
stock and no part of the surplus shall at any time be paid out in dividends, but losses
accruing in the course of its business may be charged against the surplus. Nothing
herein contained shall prevent the accumulation of a larger surplus than that above
prescribed should the directors so decide.
SECTION 67. The ordinary business of a trust company shall be transacted at the
place of business speci ed in its articles of incorporations. But any trust company may,
with the prior approval of the Monetary Board, establish branches in the Philippines,
and the said company shall be responsible for all business conducted in such branches
to the same extent and in the same manner as though such business had all been
conducted in the head office.
For the purposes of this Act, the company and its branches shall be treated as a
unit.
CHAPTER VIII
Branches and Agencies of Foreign Banks
SECTION 68. In the case of a foreign bank which has more than one branch or
agency in the Philippines, all such branches and agencies shall be treated as a unit for
the purpose of this Act, and all references to Philippine branches and agencies of
foreign banks shall be held to refer to such units.
SECTION 69. In the case of Philippine branches of foreign banks, the provisions
of this section shall replace those of sections twenty-two and thirty of this Act, except
insofar as is specified to the contrary in the last paragraph of this section.
In order to provide effective protection of the interests of the depositors and
other creditors of Philippine branches of foreign banks, the head o ce of such
branches shall fully guarantee the prompt payment of all liabilities of its Philippine
branch.
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 The Monetary Board shall from time to time direct the Superintendent of Banks
to make such investigations as it may deem necessary to ascertain that the aforesaid
guarantee by the head o ce represents effective protection of the depositors and
other creditors of the branch. Should the investigations of the Superintendent of Banks
indicate that said guarantee is inadequate, the Monetary Board may take such
measures as it is authorized to take in the case of capital de ciencies, under the
provisions of the third paragraph of section twenty-two of this Act. The Board may,
further, as long as the guarantee of the head o ce is deemed inadequate, require the
head o ce to assign to its Philippine branch an amount of capital su cient to meet
the minimum capital requirement established in section twenty-two of this Act.
Nothing in this section shall be held to prevent a branch of a foreign bank from
assigning capital to its Philippine branch, and from being governed by the provisions of
section twenty-two or thirty, as the case may be, instead of by the provisions of this
section. In such cases, the term "capital accounts" shall be held to include all net
amounts due by the branch to its head o ce and to other branches thereof outside the
Philippines.
SECTION 70. In the case of Philippine branches of foreign banks, the present
section shall replace sections twenty-three and thirty-two of this Act.
Except as the Monetary Board may otherwise provide, the total liabilities of any
person, or of any company, corporation, or rm, to the Philippine branch of a foreign
bank for money borrowed, with the exception of money borrowed against obligations
of the Central Bank or of the Philippine Government, or borrowed with the full guarantee
by the Government of payment of principal and interest, shall at no time exceed fteen
per cent (15%) of the sum of:
(a) The net amount due by such branch to the head o ce and branches
outside the Philippines, and
(b) The total capital accounts, if any, representing funds de nitely assigned
to the branch by the head office.
The liabilities of any borrower may amount to a further fteen per cent (15%) of
the two items mentioned in subsections (a) and (b) of this section, provided the
additional liabilities are adequately secured by shipping documents, warehouse
receipts or other similar documents transferring or securing title covering readily
marketable, non-perishable staples, which staples must be fully covered by insurance,
and must have a market value equal to at least one hundred and twenty- ve per cent
(125%) of such additional liabilities.
The term "liabilities" as used herein, shall mean the direct liability of the maker or
acceptor of paper discounted with or sold to such bank and the liability of the indorser,
drawer, or guarantor who obtains a loan from or discounts paper with or sells paper
under his guaranty to such bank and shall include in the case of liabilities of a co-
partnership or association the liabilities of the several members thereof and shall
include in the case of liabilities of a corporation of all subsidiaries thereof in which such
corporation owns or controls a majority interest. But the discount of bills of exchange
drawn in good faith against actually existing values, and the discount of commercial or
business paper actually owned by the person negotiating the same, shall not be
considered as money borrowed, for the purpose of this section.
Whenever, and to the extent that, the head o ce of a Philippine branch of a
foreign bank guarantees the repayment of liabilities of its branch, the limitation
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 established in this section shall not apply. Moreover, nothing in this Act shall be
construed as restricting in any manner loans made by the Philippine branch of a foreign
bank for the account of, and with funds supplied by, its head o ce or branches outside
the Philippines, but the Monetary Board may require that all such loans be reported to it
in accordance with such rules and regulations as it may issue on the subject.
CHAPTER IX
General Provisions
SECTION 71. Any opinion, decision, ruling, or regulation made or issued by the
Superintendent of Banks may be appealed to the Monetary Board, which shall have the
power and authority to con rm, modify or repeal such opinion, decision, ruling or
regulation made or issued as aforesaid; but the action of the Monetary Board with
respect thereto shall be subject to judicial review. aisa dc

SECTION 72. In addition to the operations speci cally authorized elsewhere in

this Act, banking institutions other than building and loan associations may perform the
following services:
(a) Receive in custody funds, documents, and valuable objects, and rent
safety deposit boxes for the safeguarding of such effects;
(b) Act as nancial agent and buy and sell, by order of and for the account of
their customers, shares, evidences of indebtedness and all types of
securities;
(c) Make collections and payments for the account of others and perform
such other services for their customers as are not incompatible with
banking business.
The banks shall perform the services permitted under subsections (a), (b) and (c)
of this section as depositories or as agents. Accordingly, they shall keep the funds,
securities and other effects which they thus receive duly separated and apart from the
bank's own assets and liabilities.
The Monetary Board may regulate the operations authorized by this section in
order to insure that said operations do not endanger the interests of the depositors
and other creditors of the banks.
SECTION 73. Banking institutions shall not engage in insurance business as the
insurer.
SECTION 74. No bank or banking institution shall enter, directly or indirectly, into
any contract of guaranty or suretyship, or shall guarantee the interest or principal of any
obligation of any person, co-partnership, association, corporation or other entity. The
provisions of this section shall, however, not be held to apply to the borrowing of
money by any such bank or institution through the rediscounting of its receivables, of or
otherwise, as may be permitted by law, nor to be granting or guaranteeing of
acceptance credits in the ordinary course of its business. Nor shall the provisions of
this section apply to the certi cation of checks or to transactions involving the release
of documents attached to items received for collection, nor to any other transaction
which may properly be regarded as common usage and accepted banking practice.
SECTION 75. Banks shall grant loans only in the amounts and for the periods of
time essential for the effective completion of the operations to be financed.
SECTION 76. Before granting a loan, banks must exercise proper caution to
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 ascertain that the debtor is capable of fulfilling his commitments to the bank.
Toward this end, banks may demand of their credit applicants a statement of
their property and of their income and expenditures. Should such statement prove to be
false or incorrect in any material detail, the bank may terminate any loan granted on the
basis of said statement and shall have the right to demand immediate repayment of the
obligation.
SECTION 77. The purpose of all loans shall be stated in the contract between the
bank and the borrower. If the bank nds that the funds have been employed, without its
approval, for purposes other than those agreed upon with the bank, the bank shall have
the right to terminate the loan and demand immediate repayment of the obligation.
SECTION 78. Loans against real estate security shall not exceed seventy per cent
(70%) of the appraised value of the respective real estate security, plus seventy per
cent (70%) of the appraised value of insured improvements, and such loans shall not be
made unless title to the real estate, free from all encumbrances, shall be in the
mortgagor. In the event of foreclosure, whether judicially or extrajudicially, of any
mortgage on real estate which is security for any loan granted before the passage of
this Act or under the provisions of this Act, the mortgagor or debtor whose real
property has been sold at public auction, judicially or extrajudicially, for the full or partial
payment of an obligation to any bank, banking, or credit institution, within the purview of
this Act, shall have the right, within one year after the sale of the real estate as a result
of the foreclosure of the respective mortgage, to redeem the property by paying the
amount xed by the court in the order of execution, with interest thereon at the rate
speci ed in the mortgage, and all the costs and other judicial expenses incurred by the
bank or institution concerned by reason of the execution and sale and as a result of the
custody of said property less the income received from the property. However, the
purchaser at the auction sale concerned shall have the right to enter upon and take
possession of such property immediately after the date of the con rmation of the
auction sale and administer the same in accordance with law.
Similarly, loans on the security of chattels shall not exceed fty per cent (50%) of
the appraised value of the security, and such loans shall not be made unless title to the
chattels, free from all encumbrances, shall be in the mortgagor.
The Monetary Board may, by regulation, prescribe further security requirements
to which the various types of bank credit shall be subject, and, in accordance with the
authority granted to it in section one hundred eleven of the Central Bank Act, the Board
may by regulation reduce the maximum ratios established in the present section, but in
the exercise of the aforementioned authority, the Board shall in no case x ratios
greater than those established herein.
The Monetary Board may, similarly, in accordance with the authority granted to it
in section one hundred eleven of the Central Bank Act, reduce the maximum permissible
maturities speci ed in this Act for various types of bank loans, but in no case shall the
Board exercise such power to authorize maximum maturities greater than those
established in this Act. Any reduction by the Board of the maximum maturities
specified in this Act shall apply only to loans made after the date of such action.
SECTION 79. The amortization schedule of bank loans shall be adapted to the
nature of the operations to be financed.
In the case of loans with maturities of more than three years, provision must be
made for periodic amortization payments, but such payments must be made at least
annually: Provided, however, That when the borrowed funds are to be used for purposes
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 which do not initially produce revenues adequate for regular amortization payments
therefrom, the bank may permit the initial amortization payment to be deferred until
such time as said revenues are su cient for such purpose, but in no case shall the
initial amortization date be later than three years from the date on which the loan is
granted.
SECTION 80. Borrowers may at any time prior to the agreed maturity date
prepay, in whole or in part, the unpaid balance of any bank loan.
SECTION 81. The Monetary Board may by regulation prescribe the conditions
and limitations under which banks may grant extensions or renewals of their loans.
SECTION 82. Banks and banking institutions incorporated under the laws of the
Philippines shall not advertise the amount of their authorized or subscribed capital
stock without indicating, at the same time and with equal prominence, the amount of
their capital actually paid-up.
No branch of any foreign bank doing business in the Philippines shall in any way
announce the amount of the capital and surplus of its head o ce, or of the bank in its
entirety without indicating at the same time and with equal prominence the amount of
the capital, if any, de nitely assigned to such branch. In case no capital has been
de nitely assigned to such branch, such fact shall be stated in, and shall form part of,
the advertisement.
SECTION 83. No director or o cer of any banking institution shall, either directly
or indirectly, for himself or as the representative or agent of others, borrow any of the
deposits of funds of such bank, nor shall he become a guarantor, indorser, or surety for
loans from such bank to others, or in any manner be an obligor for moneys borrowed
from the bank or loaned by it, except with the written approval of the majority of the
directors of the bank, excluding the director concerned. Any such approval shall be
entered upon the records of the corporation and a copy of such entry shall be
transmitted forthwith to the Superintendents of Banks. The o ce of any director or
o cer of a bank who violates the provisions of this section shall immediately become
vacant and the director or o cer shall be punished by imprisonment of not less than
one year nor more than ten years and by a ne of not less than one thousand nor more
than ten thousand pesos.
In addition to the conditions established in the preceding paragraph, no director
of a building and loan association shall engage in any of the operations mentioned in
said paragraph except upon the pledge of shares of the association having a total
withdrawal value greater than the amount borrowed.
SECTION 84. If losses have at any time been sustained by any banking institution
equal to or exceeding the undivided pro ts on hand, no dividend shall be declared; and
no dividend shall ever be declared by any such bank while it continues in banking
operations to an amount greater than its net pro ts then on hand, deducting therefrom
its losses and bad debts. All debts due to any such bank on which interest is past due
and unpaid for a period of six months, unless the same are well-secured and in process
of collection, shall be considered bad debts within the meaning of this section.
SECTION 85. Any director or o cer of any banking institution who receives or
permits or causes to be received in said bank any deposit, or who pays out or permits
or causes to be paid out any funds of said bank, or who transfers or permits or causes
to be transferred any securities or property of said bank, after said bank becomes
insolvent, shall be punished by ne of not less than one thousand nor more than ten
thousand pesos and by imprisonment for not less than two nor more than ten years. cdt

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 SECTION 86. In case of the voluntary liquidation of any bank or banking
institution incorporated under the laws of the Philippines, or of any branch in the
Philippines of a foreign bank or banking corporation, written notice of such liquidation
shall be sent to the Monetary Board before such liquidation is undertaken, and the
Monetary Board shall have the right to intervene and take such steps as may be
necessary to protect the interests of the creditors.
SECTION 87. Unless otherwise herein provided, the violation of any of the
provisions of this Act shall be punished by a ne of not more than two thousand pesos
or by imprisonment for not more than two years, or by both. If the violation is
committed by a corporation, the same shall, upon such violation being proved, be
dissolved by quo warranto proceedings instituted by the Solicitor General: Provided,
That nothing in this section shall be construed as repealing the other causes for the
dissolution of corporations prescribed by existing law, and the remedy provided for in
this section shall be considered as additional to the remedies already existing.
CHAPTER X
Final Provisions
SECTION 88. All authority now vested in the Bank Commissioner and the Bureau
of Banking with respect to the establishment, operation or liquidation of banking and
credit institutions, and branches or agencies thereof, are hereby transferred to the
Central Bank.
SECTION 89. All authority now vested in the Secretary of Finance with respect to
the establishment, operation or liquidation of banking and credit institutions, or
branches or agencies thereof, shall be transferred to, and exercised by the Monetary
Board of the Central Bank.
SECTION 90. Sections one hundred seventy- ve to one hundred eighty-three and
one hundred ninety-nine to two hundred seventeen of the Code of Commerce, as
amended; sections one hundred three to one hundred forty-six and one hundred
seventy-one to one hundred ninety of Act Numbered Fourteen hundred and fty-nine, as
amended; Acts Numbered Thirty-one hundred and fty-four and Thirty- ve hundred and
twenty, and all laws or parts thereof, including those parts of special charters of the
Philippine National Bank and of other banking institutions in the Philippines which are
inconsistent herewith, are hereby repealed.
SECTION 91. This Act shall take effect on the same day that the Central Bank
commences operation.
Approved: July 24, 1948
Published in the Official Gazette, Vol. 45, No. 4, p. 1647 in April 1949

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