AMENDING FURTHER CERTAIN SECTIONS OF REPUBLIC ACT NUMBERED THREE THOUSAND SEVEN HUNDRED SEVENTY-NINE, AS AMENDED, OTHERWISE KNOWN AS THE "SAVINGS AND LOAN ASSOCIATIONS ACT"

• Number: Presidential Decree No. 113
• Sections: 12

Preamble

WHEREAS, there were pending before Congress prior

to the promulgation of Proclamation No. 1081, dated September 21, 1972,

certain bills proposing amendments to Republic Act No. 3779, entitled

"Savings and Loan Associations Act";

WHEREAS, the recommendations resulting from an

extensive survey and study of the financial system undertaken for the

purposes of assessing its adequacy in Philippine economic growth, and of

facilitating the savings-in vestment process in development have been

accepted, with modifications by monetary authorities; and

WHEREAS, savings and loan associations have

proved to be a very effective instrument in encouraging the

thrift-savings habit especially of small savers and in providing

additional credit assistance to small scale entrepreneurs, home builders

and consumers;

NOW, THEREFORE, I, FERDINAND E. MARCOS,

President of the Philippines, by virtue of the powers in me vested by

the Constitution as Commander-in-Chief of the Armed Forces of the

Philippines, and pursuant to Proclamation No. 1081, dated September 21,

1972, and General Order No. 1, dated September 22, 1972, as amended, and

in order to effect the desired changes and reforms in the social,

economic, and political structure of our society, do hereby order and

decree the amendment of Republic Act No. 3779, as amended, as follows:

Section 1

SECTION 1. Section three (a) of Republic Act

Numbered Three thousand seven hundred seventy-nine, as amended, is

hereby amended to read as follows:

"SEC. 3(a). 'Savings and loan association

hereinafter called the association shall include any corporation engaged

in the business of accumulating the savings of its members or

stockholders, and using such accumulations, together with its capital in

the case of a stock corporation, for loans and/or for investment in the

securities of productive enterprises or in securities of the

Government, or any of its political subdivisions, instrumentalities or

corporations: Provided, That they shall be primarily engaged in

servicing the needs of households by providing personal finance and

long-term financing for home building and development";

Section 2

SEC. 2. Section four (b) of the same Act is

hereby amended to read as follows:

"SEC. 4(b). The Monetary Board shall fix the

minimum paid-up capital of a savings and loan association organized as a

stock corporation in such amount as said Board may consider necessary

for the safe and sound operation of such association: Provided,

however, That in no case shall such paid-up capital be less than

one hundred thousand pesos: Provided, further, That at least

seventy per cent (70%) of the voting stock of a savings and loan

association which may be established after the approval of this Act

shall be owned by citizens of the Philippines, except where a new

association is established as a result of the consolidation of existing

associations in which there are foreign-owned voting stocks at the time

of consolidation: Provided, furthermore, That the percentage of

foreign-owned voting stocks in stock savings and loan associations

existing upon the effectivity of this Act, if such percentage is in

excess of thirty per cent (30%) of the voting stock of the savings and

loan association, shall not be increased, but may be reduced, and, once

reduced, shall not be increased thereafter beyond thirty per cent (30%)

of the voting stock of the savings and loan association. The percentage

of foreign-owned voting stocks in an association shall be determined by

the citizenship of the individual stockholders in that association. In

the case of corporations owning shares in the association, the

citizenship of each stockholder in that corporation shall be the basis

of computing the percentage. Such association is authorized to receive

deposits from, and extend loans to, the general public."

Section 3

SEC. 3. Section five of the same Act is

hereby amended to read as follows:

"SEC. 5. Powers of savings and loan

association. — A savings and loan association shall be incorporated

under the Corporation Law, and in addition to the powers therein

granted whenever applicable, it shall exercise the following:

"(a) To grant loans of not exceeding the amount deposited by

the borrower plus his four months' salary or regular income in the case

of a permanent employee or wage earner, or seventy per cent of the fair

market value of any property acceptable as collateral on first mortgage

that he may put up by way of security: Provided, That no loan

shall have a maturity date of more than three years, except loans on the

security of unencumbered real estate for the purpose of home building

and home development which may be granted with maturities not exceeding

twenty years subject to regulations prescribed by the Monetary Board: Provided,

further, That in the case of a borrower who is a permanent

employee or wage earner, the treasurer, cashier or paymaster of the

office employing him is authorized, the provisions of any existing law,

rule and regulation to the contrary notwithstanding, to make deductions

from his salary, wage, or income pursuant to the terms of his loan, to

remit deductions to the savings and loan association, and to collect

such reasonable fee for his services as may be authorized by rules

promulgated by the Monetary Board.

"(b) 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;

"(c) Subject to such rules as the Monetary Board may approve,

to discount with recourse commercial papers and accounts receivables;

"(d) 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 corporations including

government-owned or controlled corporations subject to the rules and

regulations of the Monetary Board: Provided, That stock savings

and loan associations may invest in equities only of such allied

undertakings as may be approved by the Central Bank for banks of their

category as provided for in Section 6-A of Republic Act No. 337, as

amended: Provided, further, That (a) the total investment in

equities shall not exceed twenty-five percent (25%) of the net worth of

the association; (b) the equity investment in any single enterprise

shall be limited to fifteen per cent (15%) of the net worth of the

association; (c) the total equity investment of the association in any

single enterprise shall remain a minority holding in that enterprise,

except where the enterprise is not a financial intermediary;, and (d)

the equity investment in other banks, if allowed by the Monetary Board,

shall be subject to the same limitations imposed on similar investments'

of commercial banks and shall be deducted from the investing stock

savings and loan association's net worth for purposes of computing the

prescribed ratio of net worth to risk assets. Equity investments shall

not be permitted in non-related activities. Where the allied undertaking

is a wholly or majority-owned subsidiary of the investing association,

it may be subject to examination by the Central Bank.

"(e) 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; and

"(f) To borrow money or incur such obligations not exceeding

twenty per centum of the total assets of the association, from

any public lending institutions, such as the Development Bank of the

Philippines, the Philippine National Bank, the Government Service

Insurance System, the Social Security System, and from such private

lending institutions as may be approved by the Monetary Board, including

other stock savings and loan associations. The Monetary Board may, in

meritorious cases, raise the ceiling on the borrowing capacity of a

savings and loan association to an amount not exceeding thirty per

centum of its total assets: Provided, That in the case of a

non-stock savings and loan association organized by employees of an

entity or a corporation, such association may borrow funds from said

entity or corporation but not vice versa.

"(f-1) To maintain deposits with banks and other stock savings

and loan associations: Provided, That the amount of such

deposits shall be subject to the loan limit to a single borrower as

prescribed herein or by other special laws or regulations.

"A savings and loan association may, subject to such rules as the

Monetary Board may promulgate, also borrow from, or rediscount notes,

bills of exchange and other commercial papers with the Central Bank. The

rate of interest on such obligations or borrowings to be charged such

associations shall not be more than that charged rural banks."

Section 4

SEC. 4. Subsection (b) of Section six of the

same Act is hereby amended to read as follows:

"SEC. 6(b). No non-stock savings and loan

association shall advertise or represent itself to the public as a bank.

A stock savings and loan association may use the word bank in

connection with its business name only upon compliance with such

requirements as may be imposed by, and prior approval of, the Monetary

Board."

Section 5

SEC. 5. Section fourteen of the same Act

hereby amended to read as follows:

"SEC. 14. Qualification for directors. —

No person shall be eligible as director of an association unless he is a

member, in case of nonstock associations, or an owner in his own right

or stocks in the association with an aggregate par value of at least

five thousand pesos, in case of stock associations: Provided,

That at least two-thirds of the members of the board of directors of any

stock savings and loan association which may be established after the

approval of this Act shall be citizens of the Philippines: Provided,

however, That no full-time appointive or elective public official

shall at the same time serve as officer; director, legal counsel or

consultant of any stock savings and loan association except in cases

where such service is incident to financial assistance provided by the

Government or a government-owned or controlled corporation to such

association: Provided, further, That in the case of a merger or

consolidation of savings and loan associations duly approved by the

Monetary Board, the limitation on the maximum number of directors in a

corporation, as provided for in Section 28 of the Corporation Law (Act

No. 1459), shall not be applied so that membership in the new board may

include Up to the total number of directors provided for in the

respective articles of incorporation of the merging or consolidating

savings and loan associations."

Section 6

SEC. 6. Section eighteen of the same Act is

hereby amended to read as follows:

"SEC. 18. Limitations on lending authority.

— (a) An association shall not commit itself to make any loans for

amounts in excess of the total of the following amounts:

amount of cash available for loan purposes;

amount of cash which can be readily realized upon the sale or

redemption of permissible investments made by the association;

amount of credit available for loan purposes from

government or private financing institutions.

"(b) No association shall directly or indirectly make any loans

to any director or officer of such association, either for himself or

as agent or as partner of another, except with the written approval of

the majority of the directors of the association, excluding the director

concerned: Provided, That in the case of a nonstock

association, the aggregate loans, direct or indirect, granted at any one

time to such directors and officers shall not exceed twenty per

centum of the total paid-up capital of the association: Provided,

further. That in the case of a stock association, the Monetary

Board may regulate the amount of credit that the association may extend,

directly or indirectly, to its directors, officers or stockholders. In

any case, however, the outstanding credit accommodations which a stock

association may extend to each of its stockholders owning two percent

(2%) or more of the subscribed capital stock, its directors or its

officers, shall be limited to an amount equivalent to the respective

outstanding deposits and book value of the paid-in capital contribution

in the association. In all cases of credit accommodations granted to

directors and officers under this subsection, the written approval of

the majority of the directors of the association, excluding the director

concerned, shall be entered upon the records of the association and a

copy of such entry shall be transmitted forthwith to the appropriate

supervising department of the Central Bank.

"The office of any director or officer of an association who

violates the provisions of this subsection shall immediately become

vacant and the director or officer 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.

"(c) No association shall make any loan to any corporation of

which a majority of the stock is owned or controlled directly or

indirectly, by any one or more of the directors or officers of such

association collectively except with the written approval of the

majority of the directors of the association excluding the director or

directors concerned. Any such approval shall be entered upon the records

of the association and a copy of such entry shall be transmitted

forthwith to the appropriate supervising department of the Central Bank.

'"The Monetary Board may regulate the amount of credit that an

association may extend to a corporation referred to in this subsection

in the same manner as it may regulate credit accommodations to directors

and officers of the association under the preceding subsection.

"(d) No association shall loan any of its funds upon the

security of its own stock."

Section 7

SEC. 7. Section twenty-one of the same Act is

hereby amended to read as follows:

"SEC. 21. Limitations on investment. —

(a) No association at any one time shall have invested in bonds and

securities an aggregate amount in excess of ten per centum of

the total assets of such association;

"(b) No non-stock savings and loan association at any one time

shall have invested in real property an aggregate amount in excess of

five per centum of the total assets of such association;

"(c) No nonstock savings and loan association at any one time

shall invest in furniture, fixture, furnishings and equipment and

leasehold improvements for its offices, more than ten per centum

of its aggregate paid-up capital;

"(d) No stock savings and loan association, at any one time,

shall have an investment in real estate and improvements thereon,

including equipment, in an aggregate amount in excess of fifty per cent

of its net worth: Provided, That real estate used for the stock

savings and loan association's purposes owned by another corporation in

which that association owns equity shall be considered as part of the

association's total investment in real estate."

Section 8

SEC. 8. Section 29 of the same Act is hereby

amended, by adding the following subsections after Subsection (c)

thereof, which read as follows:

"SEC. 29(c-1). Whenever any officer, employee, or

agent of a savings and loan association makes false entries in any

association report or statement thereby affecting the financial interest

of, or causing damage to, the association or any person; or without

order of a court of competent jurisdiction, discloses to any

unauthorized person any information relative to the funds or properties

in the custody of the association belonging to private individuals,

corporations, or any other entity: Provided, That with respect

to bank deposits, Section 4(a) of this Act shall prevail; or accepts

gifts, fees or commissions or any other form of remuneration in

connection with the approval of a loan from said association; or

overvalues or aids in overvaluing any security for the purpose of

influencing in any way the action of the association on any loan, such

officer, employee or agent shall be punished by a fine of not more than

two thousand pesos or imprisonment for not more than one year, or both,

at the discretion of the court;

"(c-2). Whenever any applicant for a loan from, or

borrower of, a savings and loan association fraudulently overvalues

property offered us security for a loan from the said association; or

furnishes false, or makes willful misrepresentation of, material facts

for the purpose of obtaining, renewing, or increasing a loan or

extending the period thereof; or attempts to defraud the said

association in the event of a court action to recover a loan; or offers

any officer, employee or agent of a savings and loan association any

gift, fee, commission, or other form of compensation in order to

influence such association personnel into approving a loan application,

such applicant or borrower shall be punished by a fine of not more than

two thousand pesos or imprisonment for not more than one year, or both,

at the discretion of the court;

"(c-3). Whenever any examiner, officer or employee

of the Central Bank of the Philippines, who is assigned to examine,

supervise, assist or render technical service to a savings and loan

association, commits any of the acts enumerated in subsection c-1 of

this section or connives or aids in the commission of the same, he shall

be punished by a fine of not more than two thousand pesos or

imprisonment of not more than one year or both, at the discretion of the

court."

Section 9

SEC. 9. The same Act is hereby further amended,

by adding the following section immediately after Section twenty-nine

thereof, which reads as follows:

"SEC. 29-A. The provisions of Republic Acts

Numbered Two hundred and sixty-five, as amended, and Three hundred

thirty-seven, as amended, insofar as they are applicable and not in

conflict with any provision of this Act, shall apply to savings and loan

associations organized hereunder."

Section 10

SEC. 10. All acts and parts of acts inconsistent

with the provisions of this Act are hereby repealed.

Section 11

SEC. 11. This Decree shall take effect

immediately.

Done in the City of Manila, this 29th day of January, in the year

of Our Lord, nineteen hundred and seventy-three.

(Sgd.) FERDINAND E. MARCOS

President

Republic of the Philippines

By the President:

(Sgd.) ALEJANDRO MELCHOR

Executive Secretary