AMENDING PRESIDENTIAL DECREE NO. 5 RELATIVE TO THE CHARTER OF THE PHILIPPINE NATIONAL BANK

• Number: Presidential Decree No. 64
• Sections: 20

Preamble

WHEREAS, Presidential Decree No. 5, of September 27,

1972, adopted and approved into law House Bill No. 2483 which was

pending before Congress at the time of the promulgation of Proclamation

No. 1081, dated September 21, 1972;

WHEREAS, it has been found necessary to incorporate

certain changes and modifications to the Charter of the Philippine

National Bank, particularly certain proposals recommended by an official

banking survey commission which recently submitted its report;

WHEREAS, for clarity and accuracy, it is deemed

essential to set forth hereunder the text of the pertinent provisions of

the Charter of the Philippine National Bank, together with the

abovementioned changes and modifications, which shall supersede the

entire text of the said House Bill No. 2483 as adopted and approved into

law by Presidential Decree No. 5;

NOW, THEREFORE, I, FERDINAND E. MARCOS, Commander-in-Chief

of all the Armed Forces of the Philippines, pursuant to Proclamation

Order No. 1081, dated September 21, 1972, as amended, and in order to

effect desired changes and reforms in the social, economic and political

structures of our society, do hereby order and decree as follows:

Section 1

SECTION 1. Subsection (g) of Section two of Republic

Act Numbered Thirteen hundred, as amended, is further amended to read

as follows:

"CORPORATE POWERS"

"SEC. 2. Corporate powers and duties.

—The said National Bank, upon its organization, shall be a body

corporate and shall have power:

"(g) To grant long-term loans and advances against security of real

estate and/or other acceptable assets for the establishment,

rehabilitation or expansion of agricultural, export, industrial and

other productive enterprises: Provided, That the aggregate of

such loans shall not exceed the sum of the paid-up capital and

unimpaired surplus, long-term indebtedness and obligations and thirty

per cent of the total deposits: Provided, further, That

notarial services in connection with loan application of not more than

one thousand pesos shall be free, and in places where the bank has no

lawyers, notarial services shall be performed by municipal judges and

other government notaries public free of charge;"

Section 2

SEC. 2. Section three of Republic Act Numbered

Thirteen hundred, as amended, is further amended to read as follows:

"CAPITAL"

"SEC. 3. Authorized Capital Stock — Par Value —

Government Subscription and payment. — The authorized capital

stock of the Philippine National Bank shall be one billion pesos divided

into ten million per value shares of one hundred pesos each, which

shall include its present capitalization: Provided, That the

Bank may purchase the shares held privately: Provided, further, That

five hundred million pesos of the authorized capital shall be fully

subscribed by the Government and said subscription shall be paid in the

following manner: Two hundred twenty-five million of surplus and

reserves of the Bank as of December thirty-one nineteen hundred and

seventy-one shall be applied by the Bank in payment of the outstanding

unpaid subscribed shareholdings of the Government which together with

the present paid-up capital of one hundred fifty million pesos,

including private stockholdings, shall be considered as part of the

paid-in capital of the Bank and the balance from funds from the Treasury

not otherwise appropriated: Provided, furthermore, That three

hundred million pesos of the authorized capital shall be offered for

sale to the public, subject to the proportionate preemptive rights of

existing private stockholders, and the Bank may within one year from

approval hereof take necessary steps to have these shares listed in any

duly registered stock exchange: Provided, furthermore, That

private holders of Land Bank bonds may exchange such bonds for shares of

the Bank offered for sale to the public: Provided finally,

That upon the lapse of five years from the listing of these shares in

any duly registered stock exchange, the shares remaining unsold shall be

automatically subscribed and paid for by the Government and the

Secretary of Finance, with the approval of the President of the

Philippines shall issue Government bonds in exchange for such shares of

stock subscribed by the Government."

Section 3

SEC. 3. Section five of Republic Act Numbered

Thirteen hundred, as amended, is further amended to read as follows:

"BANKING OPERATIONS IN GENERAL"

"SEC. 5. Loans and investments

authorized-Total liabilities of a single borrower—Additional

liabilities and security required. - Said National Bank is hereby

authorized;

"(a) To purchase or discount promissory notes, drafts, and bills of

exchange issued or drawn for agricultural, export, industrial or

commercial purposes with securities required by the Bank, or the

proceeds of which have been used or are to be used for such purposes;

"(b) To make loans on or to discount notes, secured by, harvested

and stored crops: Provided, That no loan on the security of

such harvested and stored crops shall exceed eighty per centum of the

market value thereof on the date of the loan: Provided, further.

That the crops so mortgaged shall be insured by the mortgagor for the

benefit of the National Bank for their entire market value: And provided,

finally, That if, owing to any circumstance whatever the value of

the crops given as security shall diminish, the mortgagor shall obligate

himself to furnish additional security or refund such part of the loan

as the Bank may deem necessary. Such loans shall be granted for a period

of not to exceed one year, subject to extension, in the discretion of

the Bank;

"(c) To make loans to agriculturists in installments, on standing

crops of the natural products of the Philippines such as rice, hemp,

copra sugar tobacco corn, maguey, etc., not in excess of seventy per

centum of the estimated value of such crops: Provided, however,

That before granting such loans the National Bank may require

additional security in the nature of mortgage's on real estate duly

registered in the name of the debtor, or chattel mortgage including

those upon livestock, machinery, and agricultural implements, or

personal bonds with sufficient surety or sureties, satisfactory to the

Bank;'

"(d) To make loans to any branch or subdivision of the Republic of

the Philippines or to government-owned or controlled corporations,

subject to the condition that such loans should be for productive

revenue producing socio-economic development project pursuant to the

priorities established in the development program, as certified to by

the National Economic Development Authority in an amount within the

borrowing entity's paying capacity, duly guaranteed by the National

Government through the Secretary of Finance upon authority of the

President of the Philippines with respect to principal and interest:

Provided, however, That loans covered by government guarantees

shall not exceed the ceiling prescribed by the Monetary Board: Provided,

finally, That such a ceiling shall exclude loans to government

corporations with acceptable and sufficient collateral which shall

however be subject to the limitation hereinunder provided.

"The aggregate obligation of all these government agencies and

entities for the loans herein authorized shall at no time exceed the

advances, deposits, and paid-in capital contribution of the Government

[plus twenty percent (20%)], except in cases of emergency situations.

"(e) Generally, to make advances or discount paper for

agricultural, export, manufacturing, industrial, or commercial purposes:

Provided, That loans, discounts or advances made under this

section shall have maturities not exceeding one year, renewable from

year to year, in the discretion of the Bank;

"(f) To engage or participate in the development of secondary

markets for medium and long-term papers.

"(g) To invest in equities of the following allied, undertakings:

warehousing companies as provided for under Section 2

subsection (h), leasing companies, storage companies, sate deposit box

companies, trust companies, companies, engaged in the management of

mutual funds but not in the mutual funds themselves, banks other than

rural banks, and such other similar activities as the Monetary Board of

the Central Bank of the Philippines may declare as appropriate from time

to time: Provided, however. That (a) the total investment in

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

the Bank, (b) the investment in any one enterprise shall not exceed ten

per cent (10%) of the net worth of the Bank; (c) the investment of the

Bank in any single enterprise, except where that enterprise is not a

financial intermediary; and (d) the investment in other banks shall be

deducted from the Bank'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-owned or majority

controlled subsidiary of the Bank, it shall be subject to examination by

the Central Bank."

"(h) To grant loans to cooperatives as well as to individual

members of such cooperatives: Provided, That in the grant of

said loans the collateral requirements elsewhere required in this Act

may be waived in appropriate cases.

"The aggregate amount of loan for any single industry shall at no

time exceed twenty (20%) per cent of the Bank's lending capacity.

"The total liabilities to the Bank of any individual, including the

liabilities of the individual's spouse for money borrowed shall at no

time exceed two-and-a-half per cent of the unimpaired capital and

surplus of the Bank. The total liabilities to the Bank of any company

corporation, or firm, for money borrowed including in the liabilities,

of the company or firm, the liabilities of the several members thereof,

shall at no time exceed ten (10%) per centum of the unimpaired capital

and surplus of the Bank. But the discount of bills of exchange drawn in

good faith against actually existing values and the discount of

commercial or business paper actually owned by the person negotiating

the same shall not be considered as money borrowed, and in addition to

the ten (10%) per centum of the unimpaired capital and surplus of Bank provided

such additional liabilities are secured by shipping documents,

warehouse receipts or other similar documents transferring or securing

title covering readily marketable, nonperishable stocks, when such

staples have a market" value equal to at least one hundred twenty-five

per centum of such additional liabilities.

"Provided, further, That the total contingent liabilities

to the Bank of any person, whether natural or juridical, under any form

or type of letters of credit accommodations, whether domestic or

foreign, or under any other form of financing shall at no time exceed

ten (10%) per centum of the unimpaired capital and surplus of the Bank.

"The Bank shall not make any loan upon the stock of any other

corporation as collateral if the aggregate market value of all such

stocks held as collateral exceeds an amount equal to ten (10%) per

centum of the unimpaired capital stock and surplus of the Bank.

''The term 'loan' whenever used in this Act shall include

overdrafts and the limitations contained in this section shall apply to

any loan of any kind whenever secured wholly or partly by real estate

mortgage."

Section 4

SEC. 4. Section six of Republic Act Numbered

Thirteen hundred, as amended, is further amended to read as follows:

"BOARD OF DIRECTORS - COMPOSITION AND ORGANIZATION"

"SEC. 6. Board of Directors — Composition — Per

diems — Tenure. — The affairs and business of the National

Bank shall be directed and its property managed and preserved unless

otherwise provided in the Act by a Board of Directors

consisting of nine members duly elected as hereinafter provided

for terms of three years who shall be paid a per diem of Two

Hundred Fifty pesos for each session of the Board of Directors: Provided,

however, That the first members elected under the provisions of

this section shall have terms of office of one, two, and three years,

respectively."

Section 5

SEC. 5. Section seven of Republic Act Numbered

Thirteen hundred, as amended, is further amended to read as follows:

"SEC. 7. Election of Board of Directors —

Election of Chairman and Vice-Chairman of the Board. — Who may be

elected members of the Board of Directors.— Annually on the first

Tuesday after the first Monday in March, the stockholders shall meet to

elect the members of the Board of Directors whose terms have expired,

each stockholder or proxy to be entitled to as many votes as he may have

shares of stocks, registered in his name on the thirty-first of January

last preceding and held by him at the time of the election. Immediately

after the election, the directorate shall be organized as such and

elect from among themselves a chairman, the President of the Bank shall

be ex officio vice-chairman, who shall assist the chairman and act in

his stead in case of absence or incapacity. In case of incapacity or

absence of both the chairman and vice-chairman, the Board of Directors

shall designate a temporary chairman from among its members: Provided,

That no director, shareholder or employee of any other bank shall be

eligible as member of the Board of Directors of the National Bank: Provided,

further, That no person shall be elected director of the Bank

unless he is a natural born citizen of the Philippines, not less than

thirty-five years of age, of good moral character and has attained

proficiency, expertise and recognized competence in one or more of the

following: banking, finance, economics, law, agriculture, business

management, public utility or government administration.

Section 6

SEC. 6. Section eight of Republic Act Numbered

Thirteen hundred, as amended, is further amended to read as follows:

"SEC. 8. President and Vice-President -

Appointment and removal — Salaries. — The Chief executive of the

Bank shall be the President, who shall be elected by the Board of

Directors from amongst themselves for a term of four years unless

earlier removed for cause or by reason of incapacity. No person shall be

elected President of the Bank unless he is at least forty years of age,

of good moral character and reputation, with at least ten years

previous experience in banking, and has a reputed proficiency, expertise

and recognized competence in banking and economics, or finance, or

management, or government administration, or law, or agriculture, or

industry. He shall be assisted by an executive vice-president and such

number of senior vice-presidents and vice-presidents as may be necessary

for the efficient operation of the business of the Bank, who shall have

the same qualifications as the President and who shall be chosen and

may be removed for cause by the Board of Directors. The salaries of the

President, Executive Vice-President, the Senior Vice-Presidents and

Vice-Presidents shall be fixed by the Board of Directors in line with

the policy declared by the President of the Philippines."

Section 7

SEC. 7. Section nine of the Republic Act Numbered

Thirteen hundred, as amended, is further amended to read as follows:

"BOARD OF DIRECTORS"

"SEC. 9. The Board of Directors shall have, among

other duties, powers and authority:

"(a) To formulate policies necessary to carry out effectively the

provisions of this Act and adopt such by-laws, rules and regulations

for the effective operation of the Bank, in conformity with this Act and

existing laws;

"(b) To establish branches or agencies in other countries and at

such points within the Philippines as it may deem advisable, which shall

perform functions as may be delegated to them by the Board of

Directors: Provided, however, That there shall be established

branch banks or agencies in every provincial capital. AND

PROVIDED, FINALLY, THAT THE BANK SHALL NOT OPEN BRANCHES, AGENCIES OR

EXTENSION OFFICES WITHOUT PRIOR APPROVALOF THE MONETARY BOARD OF THE

CENTRAL BANK OF THE PHILIPPINES.

"With the authorization of the proper department Secretary first

had, the Board of Directors may appoint as agents of said Bank, the

provincial or municipal treasurers, who shall receive such additional

compensation as the Board may determine."

"(c) To adopt an annual budget for the effective operation and

administration of the Bank, the expenses for personnel of which shall

not exceed thirty (30%) per cent of the gross income of the Bank for the

preceding calendar year, including all salaries, allowances, benefits

and other emoluments of whatever kind or nature."

Section 8

SEC. 8. Section eleven of Republic Act Numbered

Thirteen hundred, as amended, is further amended to read as follows:

"LEGAL COUNSEL"

"SEC. 11. Chief Legal Counsel — Any

provision of laws, existing executive orders and administrative orders

to the contrary notwithstanding, all legal cases and- matters of the

Philippine National Bank shall be exclusively handled, controlled and

supervised by a Chief Legal Counsel of the Bank who shall be chosen and

may be removed for cause by the Board of Directors."

Section 9

SEC. 9. Section twelve of Republic Act Numbered

Thirteen hundred, as amended, is further amended to read as follows:

"AUDITING DEPARTMENT"

"SEC. 12. Bank Auditor, salaries and expenses

of the Auditing Department, reports. — The Auditor General shall be

the ex officio auditor of the National Bank and shall with the advice

and consent of the President of the Philippines appoint a Bank auditor

who shall be the chief of the Auditing Department of the Bank, and shall

receive the salary in an amount equal to the salary of the Executive

Vice-President of the Bank. All the other employees of the department

shall be appointed by the Auditor General, who with the approval of the

President of the Philippines, shall fix the salaries of the same in

accordance with the job evaluation program of the Bank. Any provision

of- law or charter to the contrary notwithstanding, such salaries and

number of Auditing Personnel, once fixed, shall not be thereafter

increased, diminished or altered unless initiated by the Auditor

General. The Bank Auditor and his subordinate personnel shall also

receive such allowances and privileges as are or shall be authorized to

management personnel having the same rank and/or salary.

"The operating expenses of the department and the salaries and

traveling expenses of the employees thereof shall be payable by the bank

and the Board of Directors shall make the necessary appropriation

therefor which shall not exceed three (3%) per cent of the gross income

of the Bank during the preceding calendar year.

"The appointment and removal of the Bank Auditor and subordinate

officials and employees of the Auditing Department shall be made by the

Auditor General in accordance with the established personnel policies of

the Bank; Provided, however, That in the promotion of

subordinate officials and employees of the department, the Auditor

General shall be guided by a list of qualified and eligible personnel to

be submitted by the Bank Auditor with a certification that merit and

seniority have been strictly observed.

"The Bank Auditor shall make a quarterly audit report, or as often

as the exigencies of the service may require, on the condition of the

Bank, to the President of the Philippines, through the Secretary of

Finance, to the Auditor General and to the Board of Directors of the

Bank. The report shall contain, among other things, a statement of

resources and liability, including earnings and expenses, the amount of

capital stock, dividends paid, surplus reserve, and undivided profits,

as well as the losses, bank debts and suspended and overdue paper

carried in the Bank's assets as of the day in which the statements are

compiled."

Section 10

SEC. 10. Section thirteen of Republic Act Numbered

Thirteen hundred, as amended, is further amended to read as follows:

"APPOINTMENT AND REMOVAL OF OTHER OFFICERS AND

EMPLOYEES OF THE NATIONAL BANK"

"SEC. 13. Other officers and employees, appointment and

removal — Salaries — Non-applicability of the Civil Service Law. —

All other officers and employees of the Bank shall be appointed and

removed by the Board of Directors, on recommendation of the President.

Said officers and employees shall not be subject to the Civil Service

Law. Officers may be transferred or re-assigned according to the sound

judgment of the Board of Directors. Duties and compensation of said

officers and employees shall be fixed by the President with the approval

of the Board of Directors: Provided, That whenever the

Chairman or the Vice-Chairman, by order of the Board of Directors, shall

temporarily or permanently perform duties incumbent upon other officers

or employees, they may be granted compensation therefor subject to the

written approval of the President of the Philippines.

"Provided, That it is declared to be the policy of this

Act that the Bank is an instrument of the national monetary policy of

the Government and its operation affects national interest and all the

officers and employees of the Bank shall not strike for the purpose of

securing changes or modifications in their terms and condition of

employment but such officers and employees may belong to any labor

organization which does not impose the obligation to strike or to join

in strike.”

Section 11

SEC. 11. Section sixteen of Republic Act Numbered

Thirteen hundred, as amended, is further amended to read as follows:

“SEC. 16. Confidential information. — The

Superintendent of the Banks and the Auditor General, or other officers

designated by law to inspect or investigate the condition of the

National Bank and officers and employees of the National Bank shall not

reveal to any person other than the President of the Philippines, the

Secretary of Finance, and the Board of Directors the details of the

inspection or investigation or give any information relative to any bank

transaction of any private individuals, corporations, or any other

entity, except by order of a Court of competent jurisdiction.”

Section 12

SEC. 12. Section eighteen of Republic Act Numbered

Thirteen hundred, as amended, is further amended to read as follows:

“SEC. 18. Loans to officers, directors and

employees prohibited. — The National Bank shall not directly or

indirectly grant loans to any director, officer, employee or agent of

the Bank and no loan shall be granted to a corporation, partnership or

company wherein any member of the Board of Directors is a shareholder,

agent or employee in any manner.”

Section 13

SEC. 13. Republic Act Numbered Thirteen hundred, as

amended, is amended by adding the following section immediately after

Section 14

SEC. 14. Section twenty-five of Republic Act

Numbered Thirteen hundred, as amended, is further amended to read as

follows:

"NET PROFITS"

"SEC. 25. Allocation of Net Profit. — At

the close of each calendar year, the Bank shall determine the net result

of its operations, in the Calculation of which, adequate allowances

shall be made for probable losses. From the net profit arrived thereat

seventy-five (75%) per cent thereof shall be set aside for declaration

of dividends corresponding to the Government and the private

stockholders and the remaining twenty-five (25%) per cent shall be

accumulated in the surplus account which shall be utilized for such

purposes as may be authorized by the Board of Directors."

Section 15

SEC. 15. Section twenty-six of Republic Act Numbered

Thirteen hundred, as amended, is further amended to read as follows:

"PAYMENT OF DIVIDENDS OF GOVERNMENT SHARES"

"SEC. 26. Payment of dividends corresponding to

Government-owned shares. — The dividends declared corresponding to the

shares of the Government as provided for in Section twenty-five

hereof, shall be set aside and is hereby appropriated to form a special

bond sinking fund which shall be used for the purpose only of retiring

the government bonds issued pursuant to the last paragraph of Section

three of this Act. The Bank shall be the trustee of these funds until

the purpose for which it was created shall have been accomplished. Any

and all income that may accrue shall form part of the fund. This special

fund shall be deposited with the Bank. After the retirement and payment

of the bonds including interest thereon from the special fund shall

have been made, whatever residue remaining shall be used to pay for

additional government subscription on the unissued shares of authorized

capital stock. Thereafter, all profits assigned as dividends to the

shares of the Government shall be paid into the Treasury of the

Philippines for the general funds thereof.

Section 16

SEC. 16. If any provision or section of this Act or

the application thereof to any person, association or circumstances is

held invalid, the other pertinent provisions or sections of this Act and

their application to such person, association or circumstances shall

not be affected thereby.

Section 17 Repealing Clause.

SEC. 17. Repealing Clause. — All Acts,

executive orders, administrative orders, proclamations, rules and

regulations or parts thereof inconsistent with any of the provisions of

this Act are hereby repealed or modified accordingly.

Section 18

SEC. 18. This Decree shall take effect immediately.

Done in the City of Manila, this 20th day of November, in the year of

Our Lord, nineteen hundred and seventy-two.

(Sgd.) FERDINAND E. MARCOS

President

Republic of the Philippines

By the President:

(Sgd.) ALEJANDRO MELCHOR

Executive Secretary

Section 22

Section 22 thereof, which reads as follows:

"SEC. 22-A. Prohibition against writing-off of

loans without prior Central Bank approval. — Writing-off of loans

and advances with an outstanding amount of one hundred thousand pesos or

more shall require the prior approval of the Monetary Board of the

Central Bank of the Philippines."