Presidential Decree No. 447 (PD 447) — Providing for the Increase in Capitalization of Rural Banks
WHEREAS, the rural banking system is an effective instrument
that can be employed in the implementation of the agrarian reform
program envisioned in Presidential Decree No. 27;
WHEREAS, mobilization of funds from both the government and
private sectors for agricultural credit through the rural banking system
will speed up the attainment of widespread increased agricultural and
industrial production and commercial activities in the countryside or
rural areas;
WHEREAS, existing capital inadequacy in the rural banking
system impairs its active involvement in the current effort of the
government to accelerate the implementation of the objectives outlined
in the preceding paragraphs;
WHEREAS, outstanding rediscounting obligations of the rural
banks with the Central Bank of the Philippines can be utilized as
additional capitalization of rural banks through conversion thereof into
government counterpart investments in such rural banks under terms and
conditions as may be prescribed by the Central Bank of the Philippines.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the
Philippines, by virtue of the powers vested in me by the Constitution,
do hereby decree and order that:
SECTION 1. In order to strengthen the capital base of rural
banks and expand their capacity to meet the credit needs of their
respective areas in the countryside, especially those covered by the
agrarian reform program, their present government and private
capitalizations shall be increased to such amounts, in such proportion,
and within such periods as the Central Bank of the Philippines shall
determine.
SEC. 2. Subject to such terms and conditions as it may
prescribe, the Central Bank of the Philippines, the provisions of any
existing law to the contrary notwithstanding, is authorized to convert
the rediscounting obligations of rural banks into equity in the name of
the Land Bank of the Philippines, and the Secretary of Finance shall
correspondingly issue government bonds in favor of the Central Bank of
the Philippines. In consideration of the equity acquired by it, the Land
Bank shall issue its own shares of stock in favor of the Republic of
the Philippines.
SEC. 3. Whenever the outstanding rediscounting obligations
of a rural bank, when converted into government equity, are insufficient
to meet the required capitalization as determined in Section 1 hereof,
the Government shall directly subscribe to the balance thereof, such
investment to be paid by government bonds to be issued by the Secretary
of Finance to the rural bank concerned, which bonds may be pledged, sold
or otherwise disposed of by the rural bank in accordance with rules and
regulations that the Monetary Board shall prescribe. In case a rural
bank has no outstanding rediscounting obligations with the Central Bank,
the Secretary of Finance shall likewise issue the necessary amount of
government bonds in favor of the rural bank to raise the Government
equity to the desired level: Provided, however, That the total
sum of such, direct investment of the Government and the rediscounting
obligations converted into equity shall not exceed the aggregate
rediscounting obligations of rural banks with the Central Bank of the
Philippines outstanding as of June 30, 1974.
SEC. 4. All preferred shares that rural banks may issue in
favor of the Land Bank under Section 2 and Section 3 of this Decree
shall share hi dividend distribution at three per cent (3%), without
preference. By virtue of its holdings of preferred shares, the Land Bank
shall be entitled to nominate one director in any rural bank where
preferred shares are held by it.
SEC. 5. Government bonds that may be issued in consideration
of Government preferred shares in rural banks shall bear interest at
three per cent (3%) per annum. Such bonds as the Secretary of Finance
may issue directly to rural banks for said purpose shall be given
Central Bank support and shall be eligible as part of the required
reserves against deposit liabilities of the original rural bank holders
of the bonds.
SEC. 6. The Central Bank of the Philippines is authorized to
require rural banks to match government equity with private equity. The
provisions of R.A. 720 to the contrary notwithstanding, the Central
Bank of the Philippines may open for the establishment of a new rural
bank the area served by an existing rural bank in any of the following
events:
Upon failure of a rural bank to submit a viable capitalization
program to raise its private sector capital to the level of government
equity;
Upon failure of the rural bank, after submission and approval
of a viable capitalization program, to comply with the terms and
conditions of the program.
The Central Bank may take such other action or actions necessary
to cause the sale of the unissued shares of stock of the rural bank to
the public or to other parties acceptable to it.
SEC. 7. The Monetary Board of the Central Bank shall
promulgate rules and regulations necessary for the effective
implementation of this Decree.
SEC. 8. This Decree shall take effect immediately.
Done in the City of Manila, this 7th day of May, in the year
of Our Lord, nineteen hundred and seventy four.
(Sgd.) FERDINAND E.
MARCOS
President of the Philippines
By the President:
(Sgd.) ALEJANDRO
MELCHOR
Executive Secretary
Source: Supreme Court E-Library, Republic of the Philippines. Philippine laws are public documents (works of the government).
