AMENDING FURTHER CERTAIN SECTIONS OF REPUBLIC ACT NUMBERED FOUR THOUSAND NINETY-THREE, AS AMENDED, OTHERWISE KNOWN AS THE "PRIVATE DEVELOPMENT BANKS' ACT"

• Number: Presidential Decree No. 119
• Sections: 5

Preamble

WHEREAS, there were pending before Congress prior to the

promulgation of Proclamation No. 1081, dated September 21, 1972, urgent

banking measures proposing amendments to Republic Act No. 4093, as

amended, otherwise known as "The Private Development Banks' Act," which

arc vital to the national development program of the Government;

WHEREAS, an extensive survey and study of the banking and

credit system had been undertaken for the purpose of assessing its

adequacy in Philippine economic growth, and of facilitating the

savings-investment process in development; and

WHEREAS, the result of the survey was an integrated set of

recommendations which were accepted, with modifications by the monetary

authorities, and made the basis for this Decree to effect reforms in the

banking system, and to render monetary and credit policies more

responsive to the requirements of economic development;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the

Philippines, by virtue of the powers m 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. 4093, as amended, as follows:

Section 1

SECTION 1. Section four of Republic Act Numbered Four

thousand ninety-three, as amended, is hereby amended to read as follows:

"SEC. 4. A private development bank shall be organized in

the form of a stock corporation and its paid-up capital shall not be

less than four million pesos for Class A, two million pesos for Class B,

and one million pesos for Class C: Provided, That at least

seventy per cent of the voting stock subscribed by the private sector

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

new bank is established as a result of the consolidation of existing

private development banks in any of which there are foreign-owned voting

stocks at the time of consolidation: Provided, however, That

the Monetary Board may, with the approval of the President of the

Philippines, reduce the required minimum percentage of Philippine

ownership prescribed herein from seventy percent (70%) to sixty percent

(60%); Provided, further, That if said subscription of private

shareholders to the initial capitalization of a private development bank

cannot be secured or is not available, the Development Bank of the

Philippines on representation of the said private shareholders and with

the approval of its Board of Governors shall, within thirty days from

date of approval by the Board of Governors, and after compliance by the

private stockholders with the conditions of said approval, subscribe to

the capital stock of such development banks, which shall be paid in full

at the time of subscription out of the trust fund provided in section

three, paragraph three of Republic Act Numbered Two thousand eighty-one,

in an amount equal to the difference between the required paid-up

capital and to the fully-paid subscribed capital of the private

stockholders but not exceeding the latter: Provided, furthermore,

That the Board of Governors shall act on the representation made by the

private shareholders within thirty days from the date it is filed: Provided,

still further, That such shares of stock subscribed by the bank

shall be preferred shares entitled to cumulative dividends at the yearly

rate of one per cent during the first five years, two per cent during

the following five years, and three per cent thereafter, shall be

preferred as against common and other preferred stockholders in the

distribution of assets in the event of liquidation, and shall be

entitled to voting privileges: Provided, finally, That such

preferred shares of the bank may be sold at any time at par to private

individuals who are citizens of the Philippines, and in the sale

thereof, the qualified registered stockholders shall have the right of

preemption within one year from the date of offer in proportion to their

respective holdings, but in the absence of such buyers, preference

shall be given to residents of the province or city where the

development bank is located. All members of the board of directors of

the private development bank 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 private development bank, except in

cases where such service is incident to financial assistance provided by

the government or a government-owned or controlled corporation to the

bank: Provided, further, That, in the case of merger or

consolidation of private development banks duly approved by the Monetary

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

corporation, as provided for in Section twenty-eight 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

private development banks."

Section 2

SEC. 2. Section five-A of the same Act is hereby amended to

read as follows:

"SEC. 5-A. Equipment or livestock loans granted by

private development banks need not be secured by the chattel, equipment

or livestock acquired out of the proceeds of the loan if the borrower

offers to constitute a lien or mortgage on real estate properties

seventy percent (70%) of the appraised value of which equals or exceeds

the loan granted."

Section 3

SEC. 3. The same Act is further amended by adding the

following section immediately after Section seven thereof, the new

section to read as follows:

"SEC. 7-A. Any private development bank may invest in

equities of such allied undertakings as may be approved by the Central

Bank for banks of their category as provided in Section 6-A of Republic

Act No. 337, as amended: Provided, however, That (1) the total

investment m equities shall not exceed twenty-five percent (25%)of the

net worth of the private development bank; (2) the equity investment in

any single enterprise shall be limited to fifteen percent (15%) of the

net worth of the private development bank; (3) the total equity

investment of the private development bank in any single enterprise

shall remain a minority holding in that enterprise except where the

enterprise is not a financial intermediary; and (4) 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 bank's net

worth for purposes of computing the prescribed ratio of net worth to

risk assets: Provided, further, That equity investments shall

not be permitted in non-related activities: Provided, finally,

That where the allied undertaking is a wholly or majority-owned

subsidiary of the development bank, the same may be subject to

examination by the Central Bank."

Section 4

SEC. 4. 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