Section 7
SEC. 7. Sections one hundred and sixteen to and including section one hundred and twenty-nine are hereby amended so that they shall read as follows: "SEC. 116. A commercial banking corporation is a corporation which receives the money of others on deposit and uses it, together with its own capital, to form a joint fund which it makes a business of employing either directly or indirectjy in one or more of the following uses: "The making of loans; "The maintenance of a note circulation; or "The purchase, sale or collection of bills of exchange or other kinds of negotiable paper. "SEC. 117. A commercial banking corporation, in addition to the general powers incident to corporations as set forth in this Act, as amended, shall have all such incidental powers as shall be necessary to carry on the business of banking, by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; by receiving deposits; by buying and selling exchange, coin, and bullion; and by loaning money against personal security or against securities consisting of personal property or first mortgages on improved real estate and insured improvements thereon: Provided, however, That no loan made against real estate security shall have a maturity in excess of five years, that such loan shall not exceed sixty per centum of the appraised value of the real estate security, plus sixty per centum of the appraised value of the insured improvements, and that the aggregate of such loans shall not exceed twenty-five per centum of the unimpaired capital stock and surplus or one-half of the total savings deposits of such banking corporation, at the option of such commercial banking corporation. And provided, further, That banking corporations engaged in the business of making loans secured by real estate, in accordance with their charters and the laws under which they were organized before the passage of this Act, may continue to make such loans on real estate as prescribed by such charters and laws. Nothing in this section shall be considered as preventing a commercial banking corporation from accepting real estate security in order to protect itself from loss on account of a loan previously contracted in good faith, nor shall there be included in the foregoing limitations loans made on the security of real estate arising out of the sale of property owned by the commercial banking corporation. "SEC. 118. No commercial banking corporation incorporated under the laws of the Philippine Islands shall be permitted to commence operations unless its articles of incorporation show under oath of the incorporators that the paid-in capital stock of such corporation is not less than five hundred thousand pesos if located in a city or municipality the total number of inhabitants of which amounts to two hundred thousand persons or more. In the case of commercial banking corporations located in cities or municipalities with more than fifty thousand persons and less than two hundred thousand persons, the minimum requirement as regards paid-in capital stock shall be one hundred thousand pesos. In the case of commercial banking corporations located in cities or municipalities with less than fifty thousand persons, the minimum requirement as regards paid-in capital stock shall be fifty thousand pesos. The population of any city or municipality shall be deemed to be that shown in the records of the Department of the Interior as certified to by the Secretary of the Department. But no commercial banking corporation may accept savings deposits unless it complies with the minimum capital stock requirements of savings and mortgage banks located in the same place. "If the total deposits of such a commercial banking corporation amount to more than ten times the unimpaired capital stock and surplus, additional capital shall be paid in so that as nearly as possible the bank shall have at least one peso of unimpaired capital and surplus for each ten pesos of deposits. The adjustment of the capital stock account herein required shall take place on the thirty-first day of December of each year. "Except with the approval of the Bank Commissioner no such commercial banking- corporation may carry on deposit with another person, firm, corporation, or entity, an amount in excess of twenty-five per centum of the unimpaired capital and surplus of such commercial banking corporation after deducting sums due by it to such person, firm, corporation or entity. "SEC. 119. The total liabilities to a commercial banking corporation of any person, or 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 fifteen per centum of the unimpaired capital and surplus of such 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 fifteen per centum of the unimpaired capital and surplus of a banking corporation hereinabove provided for the total liabilities of any borrower may amount to a further fifteen per centum of the unimpaired capital and surplus of such banking corporation provided such additional liabilities are secured by shipping documents, warehouse receipts or other similar documents transferring or securing title covering readily marketable, non-perishable staples, when such staples are fully covered by insurance, and when such staples have a market value equal to at least one hundred and twenty-five per centum of such additional liabilities. "No commercial banking corporation shall hereafter make any loan upon the stock of any other corporation as collateral if the aggregate market value of all such stock held as collateral exceeds an amount equal to fifteen per centum of the unimpaired capital stock and surplus of such commercial banking corporation. "The provisions of this section shall apply to the Philippine National Bank and to the Bank of the Philippine Islands irrespective of anything to the contrary contained in their respective charters; provided they agree to accept the foregoing provisions together with the provisions of sections one hundred twenty-five, one hundred twenty-six and one hundred thirty-three of this Act, as amended. "SEC. 120. No commercial banking corporation organized under this Act shall make any loan or discount on the security of the shares of its own capital stock, nor be the purchaser or holder of any such shares, unless such security or purchase shall be necessary to prevent loss upon a debt previously contracted in good faith, and stock so purchased or acquired shall, within six months from the time of its purchase, be sold or disposed of at public or private sale, or, in default thereof, a receiver may be appointed to close up the business of the bank in accordance with law. "SEC. 121. No such commercial banking corporation shall at any time be indebted or in any way liable to an amount exceeding the amount of its capital stock at such time actually paid in and remaining undiminished by losses or otherwise, except on account of demands of the following nature: "(1) Moneys deposited with or collected by the bank; "(2) Bills of exchange or drafts drawn against money actually on deposit to the credit of the bank or due thereto; "(3) Liabilities to the stockholders of the bank for dividends and reserve profits. "SEC. 122. Such commercial banking corporation may purchase, hold, and convey real estate for the following purposes and no other: "(1) Such as shall be necessary for its immediate accommodation in the transaction of its business: Provided, however, That the total investment in such real estate and improvements thereon shall not exceed twenty-five per centum of the paid-up capital stock and surplus of such commercial banking corporation; "(2) Such as shall be mortgaged to it in good faith by way of security for debts; "(3) Such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings; "(4) Such as it shall purchase at sales under judgments, decrees, mortgages, or trust deeds held by the bank or shall purchase to secure debts due to it. "But no commercial banking corporation shall hold the possession of any real estate under mortgage or trust deed or the title and possession of any real estate purchased to secure any debt due to it for a longer period than five years. "SEC. 123. No such commercial banking corporation shall loan money to any director or officer thereof, unless such loan shall previously have been approved in writing by a majority of the directors thereof, excluding the borrowing director, and such approval shall have been entered upon the records of the bank. "SEC. 124. If losses have at any time been sustained by any such commercial banking corporation equal to or exceeding the undivided profits on hand, no dividend shall be declared; and no dividend shall ever be declared by any such bank while it continues in banking operations to an amount greater than its net profits then on hand, deducting therefrom its losses and bad debts. All debts due to any such bank, on which interest is past due and unpaid for a period of six months, unless the same are well secured, and in process of collection, shall be considered bad debts within the meaning of this section. "SEC. 125. Every such commercial banking corporation shall at all times have on hand in lawful money of the Philippine Islands or of the United States, an amount equal to at least eighteen per centum of the aggregate amount of its deposits in current accounts which are payable on demand and of its fixed deposits coming due within thirty days. Such commercial banking corporation shall also at all times maintain reserve equal in amount to at least five per centum of its total savings deposits. The said reserve may be maintained in the form of lawful money of the Philippine Islands or of the United States, or in bonds issued or guaranteed by the Government of the Philippine Islands or of the United States. Such bonds may be kept on hand in the vaults of the bank or may be kept on deposit with the Insular Treasurer or with any fiscal agent of the Philippine Government abroad. The depositing bank shall have the right to collect the interest accruing on such securities and to substitute from time to time other securities issued and guaranteed by the Government of the Philippine Islands or of the United States for those already on deposit. But any such commercial banking corporation in the Philippine Islands which shall have given the security required by section six hundred twenty-five of Act Numbered Twenty-seven hundred eleven, as amended, and been designated a Government depository as in said section provided, shall not in addition to such security be required to hold a reserve of eighteen per centum and five per centum of the amount of such Government deposits as may be made therein, the provisions of any other law or the bylaws of the commercial banking corporation to the contrary notwithstanding. The term 'lawful money of the Philippine Islands' shall include Treasury certificates legally issued under authority of the Government of the Philippine Islands, and the term 'lawful money of the United States' shall include gold and silver certificates of the United States and bank notes issued under the authority of the laws of the United States: Provided, however, That in the case of a bank having branches as provided in section one hundred and twenty-eight of this Act, as amended, the provision regarding reserve shall be deemed to be complied with if the principal bank and its branches in the Philippine Islands in the aggregate have on hand the required amount of reserve. "The percentage of reserve to deposits in the case of the Philippine National Bank and the Bank of the Philippine Islands is hereby fixed at eighteen per centum of demand deposits and fixed deposits payable within thirty days and five per centum of savings deposits, in the same manner as is prescribed in this section for commercial banking corporations in general, which reserve against savings deposits may consist of Philippine Government or United States Government bonds. "SEC. 126. Whenever the reserve as denned in the last preceding section of any commercial banking corporation shall be below the amount required in that section such commercial banking corporation shall not diminish the amount of such reserve by making any new loans or discounts, or declare any dividend out of its profits until the required proportion between the aggregate amount of its deposits and its reserve has been restored. Reserve deficiencies shall be penalized at the rate of one per cent per month upon the amount of the certificate and for the periods of their duration in accordance with a regulation to be issued by the Bank Commissioner. The penalty assessed shall be collected by the Collector of Internal Revenue in accordance with the rules, regulations and procedure to be determined by him. In the case of any commercial Banking corporation whose reserve is continuously deficient for a period of thirty days, the business of such corporation may be wound up by the Bank Commissioner in accordance with section sixteen hundred and thirty-nine of Act Numbered Twenty-seven hundred and eleven, as amended, known as the Administrative Code. "The provisions of this section shall apply to the Philippine National Bank and the Bank of the Philippine Islands. "SEC. 127. Each such commercial banking corporation before the declaration of a dividend, shall carry ten per centum of its net profits accruing since the last preceding dividend to surplus until the same shall amount to twenty per centum of its authorized capital stock; and no part of the surplus shall at any time be paid out in dividends, but losses accruing in the course of business of the commercial banking corporation may be charged against the surplus. Nothing herein contained shall prevent the accumulation of a larger surplus should the directors so determine. "SEC. 128. Any such commercial banking corporation having a paid-up capital of not less than one million pesos, may establish with the prior approval of the bank commissioner a branch or branches in any city or municipality in the Philippine Islands, and the corporation shall be responsible for all the business conducted in its branch or branches to the same extent and in the same manner as though such business had all been conducted in the principal institution. In the case of the establishment of a branch or branches, the business shall be treated as an entirety. "SEC. 129. Any director or officer of any commercial banking corporation who receives or permits or causes to be received in said bank any deposit or who pays out or permits or causes to be paid out any funds of said bank or who transfers or permits or causes to be transferred any securities or property of said bank after said bank becomes insolvent shall be punished by a fine of not less than one thousand nor more than ten thousand pesos and by imprisonment for not less than two nor more than ten years." TRUST CORPORATIONS