REPUBLIC ACT NO.

8791 May 23, 2000

AN ACT PROVIDING FOR THE REGULATION OF THE ORGANIZATION AND OPERATIONS OF BANKS,
QUASI-BANKS, TRUST ENTITIES AND FOR OTHER PURPOSES

CHAPTER I

TITLE AND CLASSIFICATION OF BANKS

Section 1. Title. The short title of this Act shall be "The General Banking Law of
2000." (1a)

Section 2. Declaration Of Policy. - The State recognizes the vital role of banks
providing an environment conducive to the sustained development of the national
economy and the fiduciary nature of banking that requires high standards of
integrity and performance. In furtherance thereof, the State shall promote and
maintain a stable and efficient banking and financial system that is globally
competitive, dynamic and responsive to the demands of a developing economy. (n)

Section 3. Definition and Classification of Banks. -

3.1. "Banks" shall refer to entities engaged in the lending of funds obtained in
the form of deposits. (2a)

3.2. Banks shall be classified into:

(a) Universal banks;

(b) Commercial banks;

(c) Thrift banks, composed of: (i) Savings and mortgage banks, (ii) Stock savings
and loan associations, and (iii) Private development banks, as defined in the
Republic Act No. 7906 (hereafter the "Thrift Banks Act");

(d) Rural banks, as defined in Republic Act No. 73S3 (hereafter the "Rural Banks
Act");

(e) Cooperative banks, as defined in Republic Act No 6938 (hereafter the

"Cooperative Code");

(f) Islamic banks as defined in Republic Act No. 6848, otherwise known as the
"Charter of Al Amanah Islamic Investment Bank of the Philippines"; and

(g) Other classifications of banks as determined by the Monetary Board of the

Bangko Sentral ng Pilipinas. (6-Aa)

CHAPTER II

AUTHORITY OF THE BANGKO SENTRAL

Section 4. Supervisory Powers. The operations and activities of banks shall be

subject to supervision of the Bangko Sentral. "Supervision" shall include the
following:

4.1. The issuance of rules of, conduct or the establishment standards of operation
for uniform application to all institutions or functions covered, taking into
consideration the distinctive character of the operations of institutions and the
substantive similarities of specific functions to which such rules, modes or
standards are to be applied;
4.2 The conduct of examination to determine compliance with laws and regulations if
the circumstances so warrant as determined by the Monetary Board;

4.3 Overseeing to ascertain that laws and regulations are complied with;

4.4 Regular investigation which shall not be oftener than once a year from the last
date of examination to determine whether an institution is conducting its business
on a safe or sound basis: Provided, That the deficiencies/irregularities found by
or discovered by an audit shall be immediately addressed;

4.5 Inquiring into the solvency and liquidity of the institution (2-D); or

4.6 Enforcing prompt corrective action. (n)

The Bangko Sentral shall also have supervision over the operations of and exercise
regulatory powers over quasi-banks, trust entities and other financial institutions
which under special laws are subject to Bangko Sentral supervision. (2-Ca)

For the purposes of this Act, "quasi-banks" shall refer to entities engaged in the
borrowing of funds through the issuance, endorsement or assignment with recourse or
acceptance of deposit substitutes as defined in Section 95 of Republic Act No. 7653
(hereafter the "New Central Bank Act") for purposes of re-lending or purchasing of
receivables and other obligations. (2-Da)

Section 5. Policy Direction; Ratios, Ceilings and Limitations. - The Bangko Sentral
shall provide policy direction in the areas of money, banking and credit. (n)

For this purpose, the Monetary Board may prescribe ratios, ceilings, limitations,
or other forms of regulation on the different types of accounts and practices of
banks and quasi-banks which shall, to the extent feasible, conform to
internationally accepted standards, including of the Bank for International
Settlements (BIS). The Monetary Board may exempt particular categories of
transactions from such ratios, ceilings. and limitations, but not limited to
exceptional cases or to enable a bank or quasi-bank under rehabilitation or during
a merger or consolidation to continue in business, with safety to its creditors,
depositors and the general public. (2-Ca)

Section 6. Authority to Engage in Banking and Quasi-Banking Functions. - No person

or entity shall engage in banking operations or quasi-banking functions without
authority from the Bangko Sentral: .Provided, however, That an entity authorized by
the Bangko Sentral to perform universal or commercial banking functions shall
likewise have the authority to engage in quasi-banking functions.

The determination of whether a person or entity is performing banking or quasi-

banking functions without Bangko Sentral authority shall be decided by the Monetary
Board. To resolve such issue, the Monetary Board may; through the appropriate
supervising and examining department of the Bangko Sentral, examine, inspect or
investigate the books and records of such person or entity. Upon issuance of this
authority, such person or entity may commence to engage in banking operations or
quasi-banking function and shall continue to do so unless such authority is sooner
surrendered, revoked, suspended or annulled by the Bangko Sentral in accordance
with this Act or other special laws.

The department head and the examiners of the appropriate supervising and examining
department are hereby authorized to administer oaths to any such person, employee,
officer, or director of any such entity and to compel the presentation or
production of such books, documents, papers or records that are reasonably
necessary to ascertain the facts relative to the true functions and operations of
such person or entity. Failure or refusal to comply with the required presentation
or production of such books, documents, papers or records within a reasonable time
shall subject the persons responsible therefore to the penal sanctions provided
under the New Central Bank Act.

Persons or entities found to be performing banking or quasi-banking functions

without authority from the Bangko Sentral shall be subject to appropriate sanctions
under the New Central Bank Act and other applicable laws. (4a)

Section 7. Examination by the Bangko Sentral. - The Bangko Sentral shall, when
examining a bank, have the authority to examine an enterprise which is wholly or
majority-owned or controlled by the bank. (2-Ba)

CHAPTER III

ORGANIZATION, MANAGEMENT AND ADMINISTRATION OF BANKS. QUASI-BANKS AND TRUST

ENTITIES

Section 8. Organization. - The Monetary Board may authorize the organization of a

bank or quasi-bank subject to the following conditions:

8.1 That the entity is a stock corporation (7);

8.2 That its funds are obtained from the public, which shall mean twenty (20) or
more persons (2-Da); and

8.3 That the minimum capital requirements prescribed by the Monetary Board for each
category of banks are satisfied. (n)

No new commercial bank shall be established within three (3) years from the
effectivity of this Act. In the exercise of the authority granted herein, the
Monetary Board shall take into consideration their capability in terms of their
financial resources and technical expertise and integrity. The bank licensing
process shall incorporate an assessment of the bank's ownership structure,
directors and senior management, its operating plan and internal controls as well
as its projected financial condition and capital base.

Section 9. Issuance of Stocks. - The Monetary Board may prescribe rules and
regulations on the types of stock a bank may issue, including the terms thereof and
rights appurtenant thereto to determine compliance with laws and regulations
governing capital and equity structure of banks; Provided, That banks shall issue
par value stocks only.

Section 10. Treasury Stocks. - No bank shall purchase or acquire shares of its own
capital stock or accept its own shares as a security for a loan, except when
authorized by the Monetary Board: Provided, That in every case the stock so
purchased or acquired shall, within six (6) months from the time of its purchase or
acquisition, be sold or disposed of at a public or private sale. (24a)

Section 11. Foreign Stockholdings. - Foreign individuals and non-bank corporations

may own or control up to forty percent (40%) of the voting stock of a domestic
bank. This rule shall apply to Filipinos and domestic non-bank corporations. (12a;
12-Aa) The percentage of foreign-owned voting stocks in a bank shall be determined
by the citizenship of the individual stockholders in that bank. The citizenship of
the corporation which is a stockholder in a bank shall follow the citizenship of
the controlling stockholders of the corporation, irrespective of the place of
incorporation. (n)

Section 12. Stockholdings of Family Groups of Related Interests. - Stockholdings of

individuals related to each other within the fourth degree of consanguinity or
affinity, legitimate or common-law, shall be considered family groups or related
interests and must be fully disclosed in all transactions by such corporations or
related groups of persons with the bank. (12-Ba)

Section 13. Corporate Stockholdings. - Two or more corporations owned or controlled

by the same family group or same group of persons shall be considered related
interests and must be fully disclosed in all transactions by such corporations or
related group of persons with the bank. (12-Ba)

Section 14. Certificate of Authority to Register. - The Securities and Exchange

Commission shall no register the articles of incorporation of any bank, or any
amendment thereto, unless accompanied by a certificate of authority issued by the
Monetary Board, under it seal. Such certificate shall not be issued unless the
Monetary Board is satisfied from the evidence submitted to it:

14.1 That all requirements of existing laws and regulations to engage in the
business for which the applicant is proposed to be incorporated have been complied
with;

14.2 That the public interest and economic conditions, both general and local,
justify the authorization; and

14.3 That the amount of capital, the financing, organization, direction and
administration, as well as the integrity and responsibility of the organizers and
administrators reasonably assure the safety of deposits and the public interest.
(9)

The Securities and Exchange Commission shall not register the by-laws of any bank,
or any amendment thereto, unless accompanied by a certificate of authority from the
Bangko Sentral. (10)

Section 15. Board of Directors. - The provisions of the Corporation Code to the
contrary notwithstanding, there shall be at least five (5), and a maximum of
fifteen (15) members of the board or directors of a bank, two (2) of whom shall be
independent directors. An "independent director" shall mean a person other than an
officer or employee of the bank, its subsidiaries or affiliates or related
interests. (n) Non-Filipino citizens may become members of the board of directors
of a bank to the extent of the foreign participation in the equity of said bank.
(Sec. 7, RA 7721) The meetings of the board of directors may be conducted through
modern technologies such as, but not limited to, teleconferencing and video-
conferencing. (n)

Section 16. Fit and Proper Rule. - To maintain the quality of bank management and
afford better protection to depositors and the public in general the Monetary Board
shall prescribe, pass upon and review the qualifications and disqualifications of
individuals elected or appointed bank directors or officers and disqualify those
found unfit. After due notice to the board of directors of the bank, the Monetary
Board may disqualify, suspend or remove any bank director or officer who commits or
omits an act which render him unfit for the position. In determining whether an
individual is fit and proper to hold the position of a director or officer of a
bank, regard shall be given to his integrity, experience, education, training, and
competence. (9-Aa)

Section 17. Directors of Merged or Consolidated Banks. - In the case of a bank

merger or consolidation, the number of directors shall not exceed twenty-one (21).
(l3a)

Section 18. Compensation and Other Benefits of Directors and Officers. To protect
the finds of depositors and creditors the Monetary Board may regulate the payment
by the bark to its directors and officers of compensation, allowance, fees,
bonuses, stock options, profit sharing and fringe benefits only in exceptional
cases and when the circumstances warrant, such as but not limited to the following:

18.1. When a bank is under comptrollership or conservatorship; or

18.2. When a bank is found by the Monetary Board to be conducting business in an

unsafe or unsound manner; or

18.3. When a bank is found by the Monetary Board to be in an unsatisfactory

financial condition. (n)

Section 19. Prohibition on Public Officials. - Except as otherwise provided in the

Rural Banks Act, no appointive or elective public official whether full-time or
part-time shall at the same time serve as officer of any private bank, save in
cases where such service is incident to financial assistance provided by the
government or a government owned or controlled corporation to the bank or unless
otherwise provided under existing laws. (13)

Section 20. Bank Branches. - Universal or commercial banks may open branches or
other offices within or outside the Philippines upon prior approval of the Bangko
Sentral. Branching by all other banks shall be governed by pertinent laws.

A bank may, subject to prior approval of the Monetary Board, use any or all of its
branches as outlets for the presentation and/or sale of the financial products of
its allied undertaking or of its investment house units. A bank authorized to
establish branches or other offices shall be responsible for all business conducted
in such branches and offices to the same extent and in the same manner as though
such business had all been conducted in the head office. A bank and its branches
and offices shall be treated as one unit. (6-B; 27)

Section 21. Banking Days and Hours. - Unless otherwise authorized by the Bangko
Sentral in the interest of the banking public, all banks including their branches
and offices shall transact business on all working days for at least six (6) hours
a day. In addition, banks or any of their branches or offices may open for business
on Saturdays, Sundays or holidays for at least three (3) hours a day: Provided,
That banks which opt to open on days other than working days shall report to the
Bangko Sentral the additional days during which they or their branches or offices
shall transact business. For purposes of this Section, working days shall mean
Mondays to Fridays, except if such days are holidays. (6-Ca)

Section 22. Strikes and Lockouts. - The banking industry is hereby declared as
indispensable to the national interest and, notwithstanding the provisions of any
law to the contrary, any strike or lockout involving banks, if unsettled after
seven (7) calendar days shall be reported by the Bangko Sentral to the secretary of
Labor who may assume jurisdiction over the dispute or decide it or certify the sane
to the National Labor Relations Commission for compulsory arbitration. However, the
President of the Philippines may at any time intervene and assume jurisdiction over
such labor dispute in order to settle or terminate the same. (6-E)