Expanding The Authority Of Certain Depository Banks Under R.A. No. 6426 And For Other Purposes

MALACAÑANG
M a n i l a

PRESIDENTIAL DECREE No. 1035 September 30, 1976

EXPANDING THE AUTHORITY OF CERTAIN DEPOSITORY BANKS UNDER R.A. NO. 6426 AND FOR OTHER PURPOSES

WHEREAS, the establishment of an offshore banking system in the Philippine has been authorized under a separate decree;

WHEREAS, a number of local commercial banks, as depository banks under the Foreign Currency Deposit Act (R.A. No. 6426), have the resources and managerial competence to more actively engage in foreign exchange transactions and participate in the grant of foreign currency loans to resident corporations and firms;

WHEREAS, it is timely to expand the foreign currency lending authority of the said depository banks under R.A. 6426 and apply to their transactions the same taxes as would be applicable to transaction of the proposed offshore banking units:

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers in me vested by the Constitution, do hereby decree and make the following part of the law of the land:

Section 1. A second paragraph is...

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Summary of Presidential Decree No. 1035

Expansion of Authority of Certain Depository Banks under R.A. No. 6426
- Depository banks qualified by the Monetary Board can function under an expanded foreign currency deposit system (Section 1)
-- Exempted from maintaining 15% foreign currency deposit with Central Bank
-- Can extend foreign currency loans to domestic enterprises without maturity and marketability limitations, subject to Central Bank approval (Section 1)
-- Such loans eligible for 100% foreign currency cover requirement

Foreign Currency Transactions and Taxation
- Qualified depository banks can obtain foreign currency loans from and conduct transactions with non-residents, offshore banking units, and other qualified depository banks (Section 2)
- Net income from such transactions subject to 5% tax in lieu of all taxes, except as specified by Secretary of Finance (Section 2)
- Interest income from foreign currency loans to residents (except offshore banking units and qualified depository banks) subject to 10% withholding tax as final tax (Section 2)
- Income of non-residents from foreign currency loans to qualified depository banks exempt from income tax (Section 2)

Secrecy of Deposits and Non-Applicability of Certain Laws
- Secrecy of deposits governed by R.A. No. 1405 (Section 3)
- Usury Law (R.A. No. 2566) and Uniform Currency Law (R.A. No. 529) not applicable to qualified depository banks' foreign currency transactions (Section 3)

Implementation
- Monetary Board to promulgate necessary regulations for implementation (Section 4)
- Decree takes effect upon approval (Section 5)