Placement Under Conservatorship

SEC. 67. Conservatorship. - The grounds and procedures for placing a bank under conservatorship, as well as, the powers and duties of the conservator appointed for the bank shall be governed by the provisions of Section 29 and the last two paragraphs of Section 30 of the New Central Bank Act: Provided, That this Section shall also apply to conservatorship proceedings of quasi-banks. (n)

CHAPTER VI

Cessation of Banking Business

SEC. 68. Voluntary Liquidation. - In case of the voluntary liquidation of any bank organized under the laws of the Philippines, or of any branch or office in the Philippines of a foreign bank, 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 creditors. (86)

SEC. 69. Receivership and Involuntary Liquidation. - The grounds and procedures for placing a bank under receivership or liquidation, as well as the powers and duties of the receiver or liquidator appointed for the bank shall be governed by the provisions of Sections 30, 31, 32 and 33 of the New Central Bank Act: Provided, That the petitioner or plaintiff files with the clerk or judge of the court in which the action is pending a bond, executed in favor of the Bangko Sentral, in an amount to be fixed by the court. This Section shall also apply to the extent possible to the receivership and liquidation proceedings of quasi-banks. (n)

Laws Governing Other Types of Banks

SEC. 71. Other Banking Laws. - The organization, ownership and capital requirements, powers, supervision and general conduct of business of thrift banks, rural banks and cooperative banks shall be governed by the provisions of the Thrift Banks Act, the Rural Banks Act, and the Cooperative Code, respectively.

The organization, ownership and capital requirements, powers, supervision and general conduct of business of Islamic banks shall be governed by special laws.

The provisions of this Act, however, insofar as they are not in conflict with the provisions of the Thrift Banks Act, the Rural Banks Act, and the Cooperative Code shall likewise apply to thrift banks, rural banks, and cooperative banks, respectively. However, for purposes of prescribing the minimum ratio which the net worth of a thrift bank must bear to its total risk assets, the provisions of Section 33 of this Act shall govern. (n)

CHAPTER VIII

Foreign Banks

SEC. 72. Transacting Business in the Philippines. - The entry of foreign banks in the Philippines through the establishment of branches shall be governed by the provisions of the Foreign Banks Liberalization Act.

The conduct of offshore banking business in the Philippines shall be governed by the provisions of the Presidential Decree No. 1034, otherwise known as the "Offshore Banking System Decree." (14a)

SEC. 73. Acquisition of Voting Stock in a Domestic Bank. - Within seven (7) years from the effectivity of this Act and subject to guidelines issued pursuant to the Foreign Banks Liberalization Act, the Monetary Board may authorize a foreign bank to acquire up to one hundred percent (100%) of the voting stock of only one (1) bank organized under the laws of the Republic of the Philippines.

Within the same period, the Monetary Board may authorize any foreign bank, which prior to the effectivity of this Act availed itself of the privilege to acquire up to sixty percent (60%) of the voting stock of a bank under the Foreign Banks Liberalization Act and the Thrift Banks Act, to further acquire voting shares of such bank to the extent necessary for it to own one hundred percent (100%) of the voting stock thereof.

In the exercise of this authority, the Monetary Board shall adopt measures as may be necessary to ensure that at all times the control of seventy percent (70%) of the resources or assets of the entire banking system is held by banks which are at least majority-owned by Filipinos.

Any right, privilege or incentive granted to a foreign bank under this Section shall be equally enjoyed by and extended under the same conditions to banks organized under the laws of the Republic of the Philippines. (Secs. 2 and 3, RA 7721)

SEC. 74. Local Branches of Foreign Banks. - In the case of a foreign bank which has more than one (1) branch in the Philippines, all such branches shall be treated as one (1) unit for the purpose of this Act, and all references to the Philippine branches of foreign banks shall be held to refer to such units. (68)

SEC. 75. Head Office Guarantee. - In order to provide effective protection of the interests of the depositors and other creditors of Philippine branches of a foreign bank, the head office of such branches shall fully guarantee the prompt payment of all liabilities of its Philippine branch. (69)

Residents and citizens of the Philippines who are creditors of a branch in the Philippines of a foreign bank shall have preferential rights to the assets of such branch in accordance with existing laws. (19)

SEC. 76. Summons and Legal Process. - Summons and legal process served upon the Philippine agent or head of any foreign bank designated to accept service thereof shall give jurisdiction to the courts over such bank, and service of notices on such agent or head shall be as binding upon the bank which he represents as if made upon the bank itself.

Should the authority of such agent or head to accept service of summons and legal processes for the bank or notice to it be revoked, or should such agent or head become mentally incompetent or otherwise unable to accept service while exercising such authority, it shall be the duty of the bank to name and designate promptly another agent or head upon whom service of summons and processes in legal proceedings against the bank and of notices affecting the bank may be made, and to file with the Securities and Exchange Commission a duly authenticated nomination of such agent.

In the absence of the agent or head or should there be no person authorized by the bank 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 Bangko Sentral Deputy Governor In-Charge of the supervising and examining departments and such service shall be as effective as if made upon the bank or its duly authorized agent or head.

In case of service for the bank upon the Bangko Sentral Deputy Governor In-charge of the supervising and examining departments, the said Deputy Governor shall register and transmit by mail to the president or the secretary of the bank at its head or principal office a copy, duly certified by him, of the summons, process, or notice. The sending of such copy of the summons, process, or notice shall be a necessary part of the services 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 Deputy Governor for the making and mailing and sending of a copy of the summons, process, or notice to the president or the secretary of the bank at its head or principal office shall be paid in advance by the party at whose instance the service is made. (17)

SEC. 77. Laws Applicable. - In all matters not specifically covered by special provisions applicable only to a foreign bank or its branches and other offices in the Philippines, any foreign bank licensed to do business in the Philippines shall be bound by the provisions of this Act, all other laws, rules and regulations applicable to banks organized under the laws of the Philippines of the same class, except those that provide for the creation, formation, organization or dissolution of corporations or for the fixing of the relations, liabilities, responsibilities, or duties of stockholders, members, directors or officers of corporations to each other or to the corporation.(18)

Trust Operations

SEC. 79. Authority to Engage in Trust Business. - Only a stock corporation or a person duly authorized by the Monetary Board to engage in trust business shall act as a trustee or administer any trust or hold property in trust or on deposit for the use, benefit, or behalf of others. For purposes of this Act, such a corporation shall be referred to as a trust entity. (56a; 57a)

SEC. 80. Conduct of Trust Business. - A trust entity shall administer the funds or property under its custody with the diligence that a prudent man would exercise in the conduct of an enterprise of a like character and with similar aims.

No trust entity shall, for the account of the trustor or the beneficiary of the trust, purchase or acquire property from, or sell, transfer, assign or lend money or property to, or purchase debt instruments of, any of the departments, directors, officers, stockholders, or employees of the trust entity, relatives within the first degree of consanguinity or affinity, or the related interests, of such directors, transaction is fully disclosed to the trustor or beneficiary of the trust prior to the transaction.

The Monetary Board shall promulgate such rules and regulations as may be necessary to prevent circumvention of this prohibition or the evasion of the responsibility herein imposed on a trust entity. (56)

SEC. 81. Registration of Articles of Incorporation and By-Laws of a Trust Entity. - The Securities and Exchange Commission shall not register the articles of incorporation and by-laws or any amendment thereto, of any trust entity, unless accompanied by a certificate of authority issued by the Bangko Sentral. (n)

SEC. 82. Minimum Capitalization. - A trust entity, before it can engage in trust or other fiduciary business, shall comply with the minimum paid-in capital requirement which will be determined by the Monetary Board. (n)

SEC. 83. Powers of a Trust Entity. - A trust entity, in addition to the general powers incident to corporations, shall have the power to:

83.1. Act as trustee on any mortgage or bond issued by any municipality, corporation, or any body politic and to accept and execute any trust consistent with law;

83.2. Act under the order or appointment of any court as guardian, receiver, trustee, or depositary of the estate of any minor or other incompetent 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;

83.3. Act as the executor of any will when it is named the executor thereof;

83.4. Act 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;

83.5. Accept and execute any trust for the holding, management, and administration of any estate, real or personal, and the rents, issues and profits thereof; and

83.6. Establish and manage common trust funds, subject to such rules and regulations as may be prescribed by the Monetary Board. (58)

SEC. 84. Deposit for the Faithful Performance of Trust Duties. - Before transacting trust business, every trust entity shall deposit with the Bangko Sentral as security for the faithful performance of its trust duties, cash or securities approved by the Monetary Board in an amount equal to not less than five hundred thousand pesos (P500,000.00) or such higher amount as may be fixed by the Monetary Board: Provided, however, That the Monetary Board shall require every trust entity to increase the amount of its cash or securities on deposit with the Bangko Sentral whenever in its judgment such increase is necessary by reason of the trust business of such entity: Provided, further, That the paid-in capital and surplus of such entity must be at least equal to the amount required to be deposited with the Bangko Sentral in accordance with the provisions of the 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 fifth paragraph of Section 34 of this Act.

A trust entity so long as it shall continue to be solvent and comply with laws or regulations shall have the right to collect the interest earned on such securities deposited with the Bangko Sentral and, from time to time, with the approval of the Bangko Sentral, to exchange the securities for others. If the trust entity fails to comply with any law or regulation, the Bangko Sentral shall retain such interest on the securities deposited with it for the benefit of rightful claimants. All claims arising out of the trust business of a trust entity shall have priority over all other claims as regards the cash or securities deposited as above provided. The Monetary Board may not permit the cash or securities deposited in accordance with the provisions of this Section to be reduced below the prescribed minimum amount until the depositing entity shall discontinue its trust business and shall satisfy the Monetary Board that it has complied with all its obligations in connection with such business. (65a)

SEC. 85. Bond of Certain Persons for the Faithful Performance of Duties. - Before an executor, administrator, guardian, trustee, receiver or depositary appointed by the court enters upon the execution of his duties, he shall, upon order of the court, file a bond in such sum as the court may direct.

Upon the application of any executor, administrator, guardian, trustee, receiver, depositary or any other person in interest, the court may, after notice and hearing, order that the subject matter of the trust or any part thereof be deposited with a trust entity. Upon presentation of proof to the court that the subject matter of the trust has been deposited with a trust entity, the court may order that the bond given by such persons for the faithful performance of their duties be reduced to such sums as it may deem proper: Provided, however, That the reduced bond shall be sufficient to secure adequately the proper administration and care of any property remaining under the control of such persons and the proper accounting for such property.

Property deposited with any trust entity in conformity with this Section shall be held by such entity under the orders and direction of the court. (59)

SEC. 86. Exemption of Trust Entity from Bond Requirement. - No bond or other security shall be required by the court from a trust entity for the faithful performance of its duties as court-appointed trustee, executor, administrator, guardian, receiver, or depositary. However, the court may, upon proper application with it showing special cause therefor, require the trust entity to post a bond or other security for the protection of funds or property confided to such entity. (59)

SEC. 87. Separation of Trust Business from General Business. - The trust business and all funds, properties or securities received by any trust entity as executor, administrator, guardian, trustee, receiver, or depositary shall be kept separate and distinct from the general business including all other funds, properties, and assets of such trust entity. The accounts of all such funds, properties, or securities shall likewise be kept separate and distinct from the accounts of the general business of the trust entity. (61)

SEC. 88. Investment Limitations of a Trust Entity. - Unless otherwise directed by the instrument creating the trust, the lending and investment of funds and other assets acquired by a trust entity as executor, administrator, guardian, trustee, receiver or depositary of the estate of any minor or other incompetent person shall be limited to loans or investments as may be prescribed by law, the Monetary Board or any court of competent jurisdiction. (63a)

SEC. 89. Real Estate Acquired by a Trust Entity. - Unless otherwise specifically directed by the trustor or the nature of the trust, real estate acquired by a trust entity in whatever manner and for whatever purpose, shall likewise be governed by the relevant provisions of Section 52 of this Act. (64a)

SEC. 90. Investment of Non-Trust Funds. - The investment of funds other than trust funds of a trust entity which is a bank, financing company or an investment house shall be governed by the relevant provisions of this Act and other applicable laws. (64)

SEC. 91. Sanctions and Penalties. - A trust entity or any of its officers and directors found to have willfully violated any pertinent provisions of this Act, shall be subject to the sanctions and penalties provided under Section 66 of this Act as well as Sections 36 and 37 of the New Central Bank Act. (63)

SEC. 92. Exemption of Trust Assets from Claims. - No assets held by a trust entity in its capacity as trustee shall be subject to any claims other than those of the parties interested in the specific trusts. (65)

SEC. 93. Establishment of Branches of a Trust Entity. - The ordinary business of a trust entity shall be transacted at the place of business specified in its articles of incorporation. Such trust entity may, with prior approval of the Monetary Board, establish branches in the Philippines, and the said entity 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 purpose of this Act, the trust entity and its branches shall be treated as one unit. (67)

CHAPTER X

Final Provisions

SEC. 94. Phase Out of Bangko Sentral Powers Over Building and Loan Associations. - Within a period of three (3) years from the effectivity of this Act, the Bangko Sentral shall phase out and transfer its supervising and regulatory powers over building and loan associations to the Home Insurance and Guaranty Corporation which shall assume the same. Until otherwise provided by law, building and loan associations shall continue to be governed by Sections 39 to 55, Chapter VI of the General Banking Act, as amended, including such rules and regulations issued pursuant thereto. Upon assumption by the Home Insurance and Guaranty Corporation of supervising and regulatory powers over building and loan associations, all references in Sections 39 to 55 of the General Banking Act, as amended, to the Bangko Sentral and the Monetary Board shall be deemed to refer to the Home Insurance and Guaranty Corporation and its board of directors, respectively. (n)

SEC. 95. Repealing Clause. - Except as may be provided for in Sections 34 and 94 of this Act, the General Banking Act, as amended, and the provisions of any other law, special charters, rule or regulation issued pursuant to said General Banking Act, as amended, or parts thereof, which may be inconsistent with the provisions of this Act are hereby repealed. The provisions of paragraph 8, Section 8, Republic Act No. 3591, as amended by Republic Act No. 7400, are likewise repealed. (90a)

SEC. 96. Separability Clause. - If any provision or section of this Act or the application thereof to any person or circumstance is held invalid, the other provisions or sections of this Act, and the application of such provision or section to other persons or circumstances, shall not be affected thereby. (n)

SEC. 97. Effectivity Clause. - This Act shall take effect fifteen (15) days following its publication in the Official Gazette or in two (2) national newspapers of general circulation. (91)