Providing for the Creation, Organization and Operation of Rural Banks, and for Other
Purposes).
Towards these ends, the State encourages and assists in the establishment of rural
banking system designed to make needed credit available and readily accessible in
the rural areas on reasonable terms.
Loans or advances extended by rural banks shall be primarily for the purpose of
meeting the normal credit needs of farmers, shermen or farm families owning or
cultivating land dedicated to agricultural production as well as the normal credit
needs of cooperatives and merchants. In granting of loans, the rural bank shall give
preference to the application of farmers and merchant whose cash requirements are
small. (Sec 6, RA 7353)
In areas where there are no government banks, rural banks may deposit in private
banks more than the amount prescribed by the Single Borrowers Limit subject to
Monetary Board regulations. (Sec 17, RA 7353)
Thrift Banks
i. It is the policy of the State to:
(a) Recognize the indispensable role of the private sector, to encourage
private enterprise, and
to provide incentives to needed investments;
(b) Promote economic development pursuant to the socio-economic program
of the government, to expand industrial and agricultural growth, to
encourage the establishment of more private thrift banks in order to meet the
needs for capital, personal and investment credit or medium- and long-term
loans for Filipino entrepreneurs;
(c) Encourage and assist the establishment of thrift bank system which will
promote agriculture and industry and at the same time place within easy
reach of the people the medium- and long-term credit facilities at reasonable
cost;
(d) Encourage industry, frugality and the accumulation of savings among the
public, and the members and stockholders of thrift banks; and
(e) Regulate and supervise the activities of thrift banks in order to place their
operations on a sound, stable and ef cient basis and to curtail or prevent
acts or practices which are prejudicial to the public interest. (Sec 2, RA 7906
An Act Providing for the Regulation of the Organization and Operations of
Thrift Banks, and for Other Purposes).
ii. Thrift banks include savings and mortgage banks, private development banks,
and stock savings and loans associations organized under existing laws, and any
banking corporation that may be organized for the following purposes:
(1) Accumulating the savings of depositors and investing them, together with
capital loans secured by bonds, mortgages in real estate and insured
improvements thereon, chattel mortgage, bonds and other forms of security
or in loans for personal or household nance, whether secured or unsecured,
or in nancing for home building and home development; in readily
marketable and debt securities; in commercial papers and accounts
receivables, drafts, bills of exchange, acceptances or notes arising out of
commercial transactions; and in such other investments and loans which the
(h) Purchase, hold and convey real estate under the same conditions as those
governing commercial banks;
(i) Engage in quasi-banking and money market operations;
(j) Open domestic letters of credit;
(k) Extend credit facilities to private and government employees: Provided,
That in the case of a borrower who is a permanent employee or wage earner,
the treasurer, cashier or paymaster of the of ce employing him is
authorized, notwithstanding the provisions of any existing law, rules and
regulations to the contrary, to make deductions from his salary, wage or
income pursuant to the terms of his loan, to remit deductions to the thrift
bank concerned, and collect such reasonable fee for his services;
(l) Extend credit against the security of jewelry, precious stones and articles
of similar nature, subject to such rules and regulations as the Monetary Board
may prescribe; and
(m) Offer other banking services.
Thrift banks may perform the services under (b), (d), (e), (g) and (i) only upon prior
approval of the Monetary Board. It may also perform commercial banking services,
operate under an expanded banking authority, or exercise such other powers
incident to a corporation with prior approval of the Monetary Board.(Sec 10)
Cooperative Banks
i. A cooperative bank is one organized by, the majority shares of which is owned and
controlled by, cooperatives primarily to provide nancial and credit services to
cooperatives. The term cooperative bank shall include cooperative rural banks.
(Sec 100 RA 6938 An Act to Ordain a Cooperative Code of the Philippines).
ii. A cooperative bank may perform the following functions:
(1) To carry on banking and credit services for the cooperatives;
(2) To receive nancial aid or loans from the Government and the Central
Bank of the Philippines for and in behalf of the cooperative banks and primary
cooperatives and their federations engaged in business and to supervise the
lending and collection of loans;
(3) To mobilize savings of its members for the bene t of the cooperative
movement;
(4) To act as a balancing medium for the surplus funds of cooperatives and
their federations;
(5) To discount bills and promissory notes issued and drawn by cooperatives;
(6) To issue negotiable instruments to facilitate the activities of cooperatives;
(7) To issue debentures subject to the approval of and under conditions and
guarantees to be prescribed by the Government;
(8) To borrow money from banks and other nancial institutions within the
limit to be prescribed by the Central Bank; and
(9) To carry out all other functions as may be prescribed by the Cooperative
Development Authority: Provided, That the performance of any banking
function shall be subject to prior approval by the Central Bank of the
Philippines.
iii. Membership of a cooperative bank shall include only cooperatives and
federations of cooperatives. (Sec 102)
Islamic Banks
i. R.A. 6848 created the Al-Amanah Islamic Investment Bank of the Philippines, or
the Islamic Bank. Its principal domicile and place of business is in Zamboanga City.
It may establish branches, agencies or other of ces at such places in the
Philippines or abroad subject to the laws, rules and regulations of the Bangko
Sentral ng Pilipinas. (Sec2. RA 6848 An Act Providing for the 1989 Charter of the
Al-Amanah Islamic Investment Bank of the Philippines, Authorizing its Conduct of
Islamic Banking Business and Repealing for this Purpose Presidential Decree
Numbered Two Hundred and Sixty-four as Amended by Presidential Decree
Numbered Five Hundred and Forty-Two Creating The Philippine Amanah Bank.)
ii. The primary purpose of the Islamic Bank is to promote and accelerate the socioeconomic development of the Autonomous Region by performing banking, nancing
and investment operations and to establish and participate in agricultural,
commercial and industrial ventures based on the Islamic concept of banking.(Sec 3)
iii. All business dealings and activities of the Islamic Bank shall be subject to the
basic principles and rulings of Islamic Sharia within the purview of the declared
policy. Any zakat or tithe paid by the Islamic Bank on behalf of its shareholders
and depositors shall be considered as part of compliance by the Islamic Bank with
its obligation to appropriate said zakat fund and to disburse it in legitimate channels
to be ascertained rst by the Sharia Advisory Council.
iv. Notwithstanding the provisions of any law to the contrary, the Islamic Bank is
authorized to operate an Investment House pursuant to Presidential Decree No.
129, as amended, and as a Venture Capital Corporation pursuant to Presidential
Decree No. 1688 and, by virtue thereof, carry on the following types of commercial
operations:
(1) The Islamic Bank may have a direct interest as a shareholder, partner,
owner or any other capacity in any commercial, industrial, agricultural, real
estate or development project under mudarabah form of partnership or
musharaka joint venture agreement or by decreasing participation, or
otherwise invest under any of the various contemporary Islamic nancing
techniques or modes of investment for pro t sharing;
(2) The Islamic Bank may carry on commercial operations for the purpose of
realizing its investment banking objectives by establishing enterprises or
nancing existing enterprises, or otherwise by participating in any way with
other companies, institutions or banks performing activities similar to its own
or which may help accomplish its objectives in the Philippines or abroad,
under any of the contemporary Islamic nancing techniques or modes of
investment for pro t sharing; and
(3) The Islamic Bank may perform all business ventures and transactions as
may be necessary to carry out the objectives of its charter within the
framework of the Islamic Banks nancial capabilities and technical
considerations prescribed by law and convention: Provided, That these shall
not involve any riba or other activities prohibited by the Islamic Sharia
principles.
Other Banks
The following are Government-Owned Banks:
(i) Philippine Veterans Bank On June 18, 1963, the Philippine Veterans Bank was
created with the enactment of Republic Act No. 3518, which became its charter.
Under the provisions of this law, the P100 million authorized capital of the Bank will
be divided into 510,000 common shares and 490,000 preferred shares with a par
value of P100.00. The common shares were fully subscribed by the Government for
and on behalf of the veterans, their widows and orphans, and paid out of the
Veterans Trust Fund. The preferred shares, which were to be sold to the veterans at
the rate of one share each, were eventually distributed to them at no cost on their
part. While PVB was conceived and created as a private commercial bank that is
owned by the veterans, the law provided that it shall be a government depository as
a gesture of appreciation by a grateful nation to the veterans for the sacri ces that
they offered on the altar of freedom.
(ii) Land Bank of the Philippines Republic Act No. 3844 (Agricultural Land Reform
Code) created the Land Bank of the Philippines to nance the acquisition and
distribution of agricultural estates for division and resale to small landholders as
well as the purchase of the landholding by the agricultural lessee.
(iii) Development Bank of the Philippines In 1947, the government created the
Rehabilitation Finance Corporation (RFC) under R.A. 85 which absorbed the assets
and took over the functions of the Agricultural Industrial Bank. The RFC provided
credit facilities for the development of agriculture, commerce and industry and the
reconstruction of properties damaged by the war. In 1958, the RFC was reorganized
into the Development Bank of the Philippines. The change in corporate name
marked the shift from rehabilitation to broader activities.
Non-Stock Savings and Loan Associations
Non-stock savings and loan association is a non-stock, non-pro t corporation
engaged in the business of accumulating the savings of its members and using such
accumulations for loans to members to service the needs of households by
providing long-term nancing for home building and development and for personal
nance.The Association con nes its membership to a well-de ned group of
persons and cannot transact business with the general public.
Quasi-Banks
Quasi-banks refer to entities engaged in the borrowing of funds through the
issuance, endorsement or assignment with recourse or acceptance of deposit
substitutes for purposes of relending or purchasing of receivables and other
obligations.In this connection, deposit substitutes is an alternative form of obtaining
funds from the public, other than deposits, through the issuance, endorsement, or
acceptance of debt instruments for the borrowers own account, for the purpose of
relending or purchasing of receivables and other obligations. These instruments
may include, but need not be limited to, bankers acceptances, promissory notes,
participations, certi cates of assignment and similar instruments with recourse,
and repurchase agreements. (Sec 95, NCBA)
Organization Of Banks
A. Conditions
The Monetary Board may authorize the organization of a bank or quasi-bank subject
to the following conditions: (SPC)
1. That the entity is a stock corporation; (S)
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.
Banks shall issue par value stocks only.(Sec 9, GBL)
2. That its funds are obtained from the public, which shall mean twenty (20)
or more persons; and (P)
3. That the minimum capital requirements prescribed by the Monetary Board
for each category of banks are satis ed. (C)
B. Capabilities
The Monetary Board shall take into consideration their capability in terms of their
nancial resources and technical expertise and integrity. The bank licensing process
shall incorporate an assessment of:
a) the banks ownership structure,
b) directors and senior management,
c) its operating plan, and
d) internal controls, as well as
e) its projected nancial condition and capital base. (Sec, 8 GBL)
C. Capital Requirements
See new requirements
D. Incorporators/Subscribers
(i) The incorporators/subscribers and proposed directors and of cers must be
persons of integrity and of good credit standing in the business community.
The subscribers must have adequate nancial strength to pay for their
proposed subscriptions in the bank.
(ii) The incorporators/subscribers and proposed directors and of cers must
not have been convicted of any crime involving moral turpitude, and unless
otherwise allowed under the provisions of existing laws are not of cers and
employees of a government agency, instrumentality, department or of ce
charged with the supervision of, or the granting of loans to banks.
(iii) A bank may be organized with not less than ve (5) nor more than
fteen (15) incorporators. In case there are more than fteen (15) persons
initially interested in organizing and investing in the proposed bank, the
excess may be listed among the original subscribers in the Articles of
Incorporation.
* Note: Cooperatives may organize a rural bank. Upon consultation with the rural
banks in the area, duly established cooperatives and corporations primarily organize
to hold equities in rural banks may organize a rural bank and/or subscribe to the
shares of stock of any rural bank: Provided, That a cooperative or corporation
owning or controlling the whole or majority of the voting stock of the rural bank
shall be subject to special examination and to such rules and regulations as the
Monetary Board may prescribe. (Sec 4 RA 7353)