M a n i l a
PRESIDENTIAL DECREE No. 119 January 29, 1973
AMENDING FURTHER CERTAIN SECTIONS OF REPUBLIC ACT NUMBERED FOUR THOUSAND NINETY-THREE, AS AMENDED, OTHERWISE KNOWN AS THE "PRIVATE DEVELOPMENT BANKS' ACT"
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 are 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.
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 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. 4093, as follows:
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 per cent (70%) to sixty per cent (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 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 consolidation private development banks."
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."
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) of the total investment in equities shall not exceed twenty-five per cent (25%) of the net worth of the private development bank; (2) the equity in any single enterprise shall be limited to fifteen per cent (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."
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.