CHAPTER 9

BUILDING AND LOAN ASSOCIATIONS, NONSTOCK SAVINGS AND

LOAN ASSOCIATIONS, AND TRUST CORPORATION
 INTRODUCTION
Early..

Saving and Loans Association

-were basically neighborhood cooperatives societies
-individuals with the common bond of interests agreed to pool their
savings so that eventually all the members of the association would
become owners of their own houses.
-they also called once "building and loan association"

Presentation By Group 1 01 of 24
 SAVINGS AND LOAN ASSOCIATIONS

Present..
-do not differ essentially from mutual savings banks,.
-both financial institutions accept savings from anybody.
-it extend loans to all qualified borrowers even if they are
not depositors or members.

Presentation By Group 1 02 of 24
NON-STOCK SAVINGS AND LOAN ASSOCIATION
-it is prohibited to transact business with the general public.
-it can only accept deposits and grant loans from members
and depositors.

BUILDING AND LOAN ASSOCIATION

-they accumulate the savings of the stockholders for the

purpose of encouraging industry, frugality, and
homebuilding among their stockholders.
-it may also acquire real state for subdivision into residential
lots for sale of lease exclusively to their members

Presentation By Group 1 03 of 24
TRUST CORPORATION

-these are financial institutions that serve as executors or

administrators of decedents' estate properties, as guardians
of the properties of legal incompetents, and as trustees
under deeds of trusts, trust agreements, and wills.
-they perform agency functions for individuals,
corporations, associations, governments, and educational,
religious and other public institutions

Presentation By Group 1 04 of 24
 BATAS PAMBANSA BLG.61

BATAS PAMBANSA BLG. 61 - AN ACT

AMENDING FURTHER REPUBLIC ACT
NUMBERED THREE HUNDRED THIRTY-
SEVEN, AS AMENDED, REGULATING BANKS
AND BANKING INSTITUTIONS AND FOR
OTHER PURPOSES, OTHERWISE KNOWN AS
THE "GENERAL BANKING ACT"

https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/2/23924 05 of 24

 BATAS PAMBANSA BLG.61

Sec. 2-A. The following entities shall not be

considered as banking institutions but shall
be subject to regulation by the Monetary
Board which may include, but need not
limited to the imposition of networth to risk
assets ratios, reserve requirements, interest
rate ceilings, methods of computation
thereof, prescribing maximum charges
which maybe collected, minimum
capitalization, and submission of statistical
reports:

Presentation By Group 1 06 of 24
 BATAS PAMBANSA BLG.61

(A) ENTITIES REGULARLY ENGAGED IN THE LENDING OF FUNDS OR PURCHASING OF

RECEIVABLES OR OTHER OBLIGATIONS WITH FUNDS OBTAINED FROM THE PUBLIC
THROUGH THE ISSUANCE,ENDORSEMENT, OR ACCEPTANCE OF DEBT INSTRUMENTS OF
ANY KIND FOR THEIR OWN ACCOUNT, OR THROUGH THE ISSUANCE OF CERTIFICATES OF
ASSIGNMENT OR SIMILAR INSTRUMENTS WITH RECOURSE,TRUST CERTIFICATES OR OF
REPURCHASE AGREEMENTS, WHETHER ANY OF THESE MEANS OF OBTAINING FUNDS
FROM THE PUBLIC IS DONE ON A REGULAR BASIS OR ONLY OCCASIONALLY:

(B) ENTITIES REGULARLY ENGAGED IN THE LENDING OF FUNDS WHICH RECEIVED

DEPOSITS ONLY OCCASIONALLY

(C) TRUST COMPANIES, BUILDING AND LOAN ASSOCIATIONS, AND NON-STOCK SAVINGS
AND LOAN ASSOCIATIONS, BUT SUCH NON-DEPOSIT ACCEPTING ENTITIES SHALL CONTINUE
TO BE SUPERVISED AND REGULATED BY THE MONETARY BOARD UNDER THE PERTINENT
PROVISIONS OF THIS ACT, AND/OR REPUBLIC ACT NOS. 265, AS AMENDED AND 3779.

Presentation By Group 1 07 of 24
 1. Imposition of net worth
The governing laws affecting the
to risk assets rations.
operations of the trust corporations,
2. Reserve Requirments.
building and loan associations, and
3. Interest Rate Ceilings.
non-stock savings and loan
4. Methods of
associations are the New Central Bank Computation.
Act, General Banking Act, and Savings 5. Prescribing maximum
and Loan Association Act. Also, the BS charges which may be
through its Monetary Board, in the collected.
exercise of its authority to regulate the 6. Minimum Capitalization.
operations of the aforementioned 7. Submission of statistical
entities, commits and does the reports.
following:

Presentation By Group 1 08 of 24
 BUILDING AND LOAN ASSOCIATIONS

The term "building and loan associations" or "mutual building and loan association"
may refer to "all corporations whose capital stock is required or is permitted to be
paid in by the stockholders in regular, equal periodical payment and whose purpose
is to accumulate the savings of its stockholders; to repay to said stockholders their
accumulated savings and profits 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 the
unencumbered real estate and with the pledge of shares of the capital stock owned
by such stockholders as collateral security. The words "mutual building and loan
association" shall form part of the name of every such association. "

Presentation By Group 1 09 of 24
 FORMS OF ORGANIZATION

A building and loan association is to be organized in the form of a

corporation. This is clear from the provision of Section 39 of R.A.
No. 337 as amended. Likewise, Section 40 of the same law speak
of the purpose of the association stated in the articles of
incorporation. On the other hand, the Corporation Code of the
Philippines otherwise known as Batas Pambansa Blg. 68 has this
to say:
Any of all the share or series of shares may have a par value
as may be provided for in the articles of incorporation: Provided,
however, That banks trust , trust companies, insuranc companies,
building and loan associations shall not be permitted to issue no
par value shares of stock (Section 6).

Presentation By Group 1 10 of 24
 CAPITALIZATION The dues on each share of stock
subscribed for by a stockholder · is to be
paid by him to the corporation
The capital stock of ·a building and loan
continuously until the share has been
the association is to be divided into
duly withdrawn, cancelled or forfeited or
shares ·or the matured or par value of
until the share has reached its mature
P200 each. Any person may become a
value, that is, when the dues paid on its
stockholder of a building and loan
share and the net earnings thereof
association by subscribing for one or
amounts to the matured value of the
more shares therein and signing the by-
share.
laws of the association. Payments by the
stockholders to the subscribed capital
stock are in regular, equal, periodical
payments known as dues, at such times
and in such amounts as may be provided
in the by-laws of the association.

Presentation By Group 1 11 of 24
 LENDING OPERATIONS
It is considered unlawful for any building and loan association to
make any loan upon property that is suitablefor use only as theater,
public hall, church, convent, school, club, hotel, garage, or public
building. However, in order to facilitate the investment of the idle
funds of a building and loan association, the Monetary Board of the
CB may, in special instances, waive the prohibition stated above, in
cases of a public hall, school, hotel, and other public buildings.

Every loan made by the building and loan association must be

properly evidenced by a written note and must be secured by (a) a
first mortgage or deed of trust on unencumbered real estate and (b)
the pledge to the association of shares of stock of the matured value
of which is at least equal to the amount loaned.

Presentation By Group 1 12 of 24
 OTHER MATTERS

By affirmative 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
objective of the association. The aggregate amount of the outsanding
indebtedness of any such association is required no to exceed at any time
50% of its capital stock actually paid in. Indebtedness to the Bangko
Sentral ng Pilipinas is not included in the limitation aforementioned.

With the approval of the Monetary Board, a building and loan association
may also invest much of its funds, as may otherwise remain idle, in bonds
and obligations of the Republic of the Philippines, or any of its political
subdivisions, or of any government-owned or controlled corporation,
including the Bangko Sentral.

Presentation By Group 1 13 of 24
 TRUST CORPORATION

The term "trust corporation or trust company" is

defined to "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 before
of others."

In addition, to what has been mentioned, a

trusted company or any bank authorized to
engage in such business is required to
administer funds or property under its custody,
with the skill, care, prudence, and diligence
necessary under the circumstances when
prevailing.

Presentation By Group 1 14 of 24
 TRUST CORPORATION

Form of business organization

An entity engaged in the trust business should be organized in the form of a corporation. Such a
corporation, with the approval of the Monetary Board, may engage in a commercial banking
business separate and distinct from its trust business.

Every trust company must carry on deposit with the Bangko

Sentral, either cash or securities approved by Monetary Board, in
an amount equal to not less than P250,000.

The trust company has the right to collect the interest earned on any
securities deposited, and to exchange such securities for others, with the
approval of the Monetary Board, as long as the company continues to be
solvent and complying with the laws of the Philippines

Presentation By Group 1 15 of 24
 TRUST CORPORATION 2. 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,
Capitalization idiot, habitual drunkard, or another incompetent or
The capital stock and funds of a trust company may be irresponsible person, and as receiver and depositary
loaned or otherwise invested as its by laws prescribe, of any amounts of money paid into court by parties
and if it does commercial banking business in addition to to any legal proceedings and of property of any kind
its trust business, the investment of its funds other than which may be bought under the jurisdiction of the
trust funds must be governed by the provisions of laws court by proper legal proceedings.
applicable to a commercial banking corporation.
3. To act as the executor of any last will or testament
when it is named in the last will and testament as the
The trust business executor thereof.
A trust company, in addition to the general powers
incident to corporations, is authorized by law: 4. To act under appointment of a court of competent
jurisdiction as an administrator of the estate of any
1. To act as trustee on any mortgage or bond issued by any deceased person, with the will annexed, or as
municipality, corporation, or anybody politic and to accept administrator of the estate of any deceased person when
and execute any other municipal or corporate trust not there is no will, and when in either case there is no person
inconsistent with law. qualified, competent, willing, able and entitled to accept
such administration.
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Presentation By Group 1
 TRUST CORPORATION
5. To accept and execute any legal trust confided to it by any court of record or any person or corporation for the
holding, management, and administration anyestate, real orpersonal, and the rents, issues, and profits thereof.

Other requirements.
A trust company or trust corporation acting as a trustee, executor, administrator, guardian, receiver, or depositary
is required and duty-bound to observe the following:

1. Unless otherwise provided by law, no bond or other security is required from any trust company for the faithful
performance of its duties as trustee, executor, administrator, guardian, receiver, or depositary.

2. All money, 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 annex, receiver,
trustee, or depositary of the estate of any minor, insane person, idiot, habitual drunkard, or
other incompetent or irresponsible people, or as receiver or depositary under and by virtue
of any order or appointment of any court, be kept separate and distinct from all other
funds, properties, and assets of its general business..

Presentation By Group 1 17 of 24
 TRUST CORPORATION
4. No trust company or bank engaged in the business of a
3. Unless otherwise directed by the instrument creating trust company may purchase or acquire property, for
trust, the lending or investment of deposits or money the account of the trust or the beneficiary of the trust,
received by any trust company as executor of the will of from any of the departments, directors, officers, or
any deceased person or as administrator under any employees or the trust company or bank, unless the
instrument in writing constituting the company as trustee, transaction is specifically authorized by the trustor and
be limited to the loans and investments as may be the relationship of the trustee and the party from whom
prescribed by the Monetary Board. Violator is punished by the propertyis acquired is fully disclosed to the trust or
imprisonment of not less than one year nor more than ten prior to the transaction.
years and by a fine ofnotlessthan P1,000 or morethan
P10,000 5. A trust company may acquire real estate in whatever
manner and for whatever purpose subject to the same
rules applicable to a commercial banking corporation.

Presentation By Group 1 18 of 24
 Non-Stock Savings and Loan
Association
The governing law for the business of non-stock
savings and loan associations is Republic Act No.
3779, as amended, otherwise known as the Savings
and Loan Association Act.

- is any corporation engaged in the business of

accumulating the savings of its members.
-The membership of a savings and loan association
organized as a non-stock corporation is confined to a
well defined group of persons.
Such entity is not authorized to transact
business with the general public but accepts
deposits from, and grants loans to, its member-
depositors.

Presentation By Group 1 19 of 24
CAPITALIZATION
-a savings and loan association organized as a non-stock corporation with a
minimum paid-up capital of P50,000 may be converted into stock savings
and loan association provided it has been operating for the last three years.

It must be noted, however, that the articles of incorporation and by-laws of a

proposed non-stock savings and loan association will not be acted favorably
by the Securities and Exchange Commission Accompanied by a certificate of
approval by the Monetary Board of the BS. The Monetary Board may refuse to
award a certificate of approval on the following grounds:

1. that the corporation is to be formed for any business other than the
legitimate savings and loan business:
2. that the association’s financial program is unsound; and
3. that the area where the association is to be located is adequately served by
one or more existing associations.

Presentation By Group 1 20 of 24
POWER
A non-stock savings and loan association, in addition to the powers granted in the
Corporation Code of the Philippines, is authorized to exercise the following:

1. To grant loans not exceeding the member borrowers savings and time deposits in the
association, plus his four months salary or regular income whether from employment or
from his own business, or 70% of the fair market value of any property acceptable as
collateral on the first mortgage that he may offer as security.

2. To charge interest within the limits allowed by law, and collect such necessary fees
incidental to the grant of loans as may, by regulation, be authorized by the Monetary
Board.

3. To discount with recourse commercial papers and accounts receivable, subject to such
rules as the Monetary Board may approve.

Presentation By Group 1 21 of 24
POWER
4. To invest its funds in any sound non-speculative enterprise, as well as in bonds,
securities, and other obligations issued by the government of the Philippines, or any of its
political subdivisions, instrumentalities, or corporation including government-owned or
controlled corporation subject to the rules and regulations of the Monetary Board.

5. To allow member-depositors to participate in the profits of the savings and loan

association on the basis of their deposits on the date dividends are declared.

6. To borrow money or incur such obligations not exceeding 20% of the total assets of the
association, from any public lending institutions, such as the DBP, PNB, GSIS, SSS and from
such private lending institutions as may be approved by the Monetary Board.

7. To maintain deposits with banks and other stock savings and loan associations. The
number of such deposits will be subject to the loan limit to a single borrower as may be
prescribed by law or rules and regulations.

Presentation By Group 1 22 of 24
LIMITATION ON INVESTMENT
In making investments, a non-stock savings and loan association is subject to the
following limitations:

1.It cannot invest in bonds and securities an aggregate amount in excess of 10% of the
total assets of such association.

2. It cannot invest in real property an aggregate amount in excess of 5% of the total assets
of such association.

3. It cannot invest in furniture, fixture, furnishings and equipment, and leasehold

improvements for its offices, more than 10% of its aggregate paid-up capital.

4. It cannot make an investment in real estate and improvements, thereon, including

equipment, in an aggregate amount in excess of 50% of its net worth.

Presentation By Group 1 23 of 24
RESERVES

Every non-stock savings and loan association

is required to create a withdrawable share
reserve which will consist of 3% of the
aggregate capital contributions of the
members. The withdrawable share reserve is
to be set up from the profits of the non-stock
savings and loan associations.

Presentation By Group 1 24 of 24
THANK YOU