Amending Presidential Decree No. 64, Relative To The Charter Of The Philippine National Bank

Case Overview and Summary

Summary of Presidential Decree No. 171

Amendments to the Philippine National Bank Charter:

• Allows the bank to organize and incorporate an investment and/or development financing subsidiary, with the bank holding at least 66-2/3% controlling interest. (Section 1)
• Permits equity investments in allied undertakings like warehousing, leasing, storage, safe deposit box companies, trust companies, mutual fund management companies, and other banks (except rural banks). (Section 2(g))
- Total investments in allied undertakings cannot exceed 25% of the bank's net worth.
- Investment in any single allied undertaking cannot exceed 10% of the bank's net worth.
- The bank's investment in allied undertakings shall remain a minority holding, except where the enterprise is not a financial intermediary.
- Investments in other banks shall be deducted from the bank's net worth for computing the net worth to risk assets ratio.
• Allows the bank to grant loans to cooperatives and their individual members, with collateral requirements waived in appropriate cases. (Section 2(h))
• Limits the total liabilities of any individual, corporation, or firm for money borrowed to 15% of the bank's unimpaired capital and surplus, with an additional 15% allowed if secured by shipping documents, warehouse receipts, or other similar documents covering readily marketable, non-perishable stocks. (Section 2(h))
• Excludes certain loans from the total liabilities ceiling, such as loans secured by government obligations, loans covered by holdout or assignment of deposits, loans covered by margin deposits, and other non-risk assets specified by the Monetary Board. (Section 2(h))
• Prohibits the bank from making loans secured by stocks of other corporations if the aggregate market value of such stocks exceeds 10% of the bank's unimpaired capital stock and surplus. (Section 2(h))
• Sets the term of the Board of Directors to one year, with annual elections on the first Tuesday after the first Monday in March. (Section 3)
• Requires the Board of Directors to elect a Chairman and Vice-Chairman (the President of the bank is ex-officio Vice-Chairman) from among themselves. (Section 4)
• Establishes qualifications for Board of Directors, including being a natural-born Filipino citizen, at least 35 years old, of good moral character, and proficient in banking, finance, economics, law, agriculture, business management, public utility, or government administration. (Section 4)
• Requires the President of the bank to be at least 40 years old, of good moral character and reputation, with at least 10 years of banking experience, and proficient in banking, economics, finance, management, government administration, law, agriculture, or industry. (Section 5)
• Allows the Board of Directors to appoint and remove the Executive Vice-President, Senior Vice-Presidents, and Vice-Presidents, and to fix their salaries in line with the policy declared by the President of the Philippines. (Section 5)