Amending P.D. No. 694 (Revised Charter of the Philippine National Bank)

June 11, 1978

PRESIDENTIAL DECREE NO. 1478

AMENDING PRESIDENTIAL DECREE NO. 694 PROVIDING FOR THE 1975 REVISED CHARTER OF THE PHILIPPINE NATIONAL BANK

WHEREAS, the Charter of the Philippine National Bank was revised by Presidential Decree No. 694 to enable it to effectively carry out its assigned role providing the necessary financing for economic development of the country under the program of the New Society; cd

WHEREAS, said Charter needs further amendment to enable the Bank to strengthen its abovementioned role in the economic development of the country;

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

SECTION 1.  Section 3, Paragraphs (a) and (e), of Presidential Decree No. 694 is hereby amended to read as follows:

"Sec. 3.  Corporate Powers. — The Philippine National Bank, upon its organization, shall be a body corporate and shall have power:

"a.  To engage in the business of commercial banking by accepting drafts and issuing letters of credit, discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debts, receiving deposits, buying and selling foreign exchange and gold or silver bullion, by acting as financial agent, by financing of personality leasing, and by lending money against personal securities or against securities consisting of personal property of first mortgages on improved real estate and the insured improvements thereon;

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"e.  To issue either in the Philippines or externally, for purposes of augmenting its capital, and/or fund generation requirements, all types of bonds, promissory notes, debentures, certificates of indebtedness or other debt instruments whether senior, unsecured or subordinated obligations, including but not limited to capital notes under such terms and conditions as may be determined by the Board of Directors, which may be: cdt

"1.  Secured by credits against real estate or other assets of the Bank but not in excess of 90% thereof, or without such security and purely on an unsecured or subordinated basis;

"2.  Long-term, medium-term or short-term;

"3.  With fixed interest rate or floating interest rate;

"4.  Denominated either in the lawful legal tender of the Philippines or in such foreign currencies which are eligible for the foreign exchange reserves of the Central Bank of the Philippines; and

"5.  With such other features and requirements which in its discretion are deemed necessary.

"These bonds, debentures, promissory notes, certificates of indebtedness, or other debt instruments shall be unconditionally guaranteed as to principal and interest by the Republic of the Philippines; Provided, however, that the Bank is also authorized to issue these instruments without the guaranty of the Republic of the Philippines; acd

"These bonds, debentures, promissory notes, certificates of indebtedness, or other instruments, shall be exempt, both as to principal and interest, from any and all taxes imposed by the Government or any of its subdivisions;"

SECTION 2.  Section 4 of Presidential Decree No. 694 is hereby amended to read as follows:

"Sec. 4.  Authorized Capital Stock-Par Value — Government Subscription and Payment-Sale of Shares. — The authorized capital stock of the Bank shall be further increased to Five Billion Pesos to be divided into fifty million shares at par value of One Hundred Pesos each. The Government shall increase its paid-in subscription of One Billion Pesos to Two Billion Pesos. Payment for the additional capital contribution by the Government shall be made as follows:

"a.  P500 Million in the form of cash to be authorized under the corresponding appropriation upon recommendation of the Secretary of Finance and payable within three (3) years.

"b.  The balance in cash or in exchange for the bonds or other government securities which the Secretary of Finance is hereby authorized to issue under such terms and conditions as he may prescribe.

"The bank's authorized capital stock shall be divided into the following classes of shares:

"a.  Preferred "A" shares which shall consist of one million shares available for sale to or subscription by the general public. These shares shall have the following features: cd

"1.  preferred as to dividends at ten per cent (10%);

"2.  cumulative;

"3.  participating;

"4.  non-voting;

"5.  dividends thereon shall be exempt from income tax;

"6.  redeemable at the option of the Bank at the prevailing book of value but in no case less than par after five (5) years from issuance thereof; and cd i

"7.  convertible to Common shares at the option of the holder in case the Bank fails to pay dividends thereon for two consecutive years; Provided, however, that if the holder thereof signifies his intention to convert the Preferred "A" shares to Common shares, the Bank may, at its option, redeem said shares even before the lapse of five (5) years counted from date of their issuance.

"b.  Preferred "B" shares which shall consist of two million shares available for sale to or subscription by citizens of the Philippines only. These shares shall have the following features:

"1.  preferred as to dividends;

"2.  cumulative;

"3.  participating;

"4.  non-voting;

"5.  dividends thereon shall be exempt from income tax; and

"6.  convertible to Common at the option of the holder in case the Bank fails to pay dividends thereon for two consecutive years. cd i

"c.  Common "A" shares which shall consist of five hundred thousand (500,000) shares exclusively available for subscription at par by officers and employees of the Bank. These shares shall have the following features:

"1.  preferred as to dividends;

"2.  cumulative;

"3.  participating;

"4.  voting;

"5.  dividends thereon shall be exempt from income tax; and cd i

"6.  non-transferable except to qualified holders as herein provided.

"Transfer of any kind, including that by hereditary succession, to any person other than officers or employees of the Bank shall not be valid and shall not be registered in the books of the Bank. Moreover, such transfer shall give rise to the Bank's right to acquire the shares so transferred at par. The Board of Directors of the Bank shall prescribed the terms and conditions for the distribution of common "A" shares to officers and employees of the Bank as well as for the Bank's reacquisition of said shares from the holders thereof upon their separation from the Bank or upon the transfer of said shares to any person other than officers or employees of the Bank.

"d.  The remaining balance of the authorized capital stock shall be in common shares.

"The Board of Directors of the Bank may, at its discretion, increase the number of any of the preferred shares as well as the Common "A" shares by converting outstanding Common shares, if there are any available, to such shares desired to be increased.

Said increase shall be subject to the approval of the President of the Philippines upon recommendation of the Secretary of Finance. The Bank may take the necessary steps to have its preferred shares listed in any duly registered stock exchange.

"Existing private stockholders may exercise their pre-emptive right. aisa dc

"Upon full payment in cash, or with bonds or other government securities, of its subscription of Two Billion Pesos, the government shall thereafter, subscribe to the balance of the common shares at the rate of at least Two Hundred Fifty Million Pesos per annum: Provided, however, That at any time, the government may, upon recommendation by the Secretary of Finance and the approval of the President of the Philippines, increase or decrease such rate of subscription: Provided, further, that upon the lapse of five years from the listing of the preferred shares in any duly registered stock exchange, but not later than December 31, 1980, such preferred shares remaining unsold or unsubscribed shall be automatically converted to Common shares and subscribed to by the Government.

"Payment of these government subscriptions may likewise be in the form of cash to be authorized under the corresponding appropriation that may be made from time to time or in exchange for bonds or other government securities which the Secretary of Finance is hereby authorized to issue under such terms and conditions as he may prescribe. These bonds or other government securities may be retired in the manner provided for in this Decree. acd

"The Bank is also authorized to purchase its own shares that are held privately.

"Holders of Land Bank bonds may, under such terms and conditions as may be prescribed by the Board of Directors of the Bank, exchange such bonds, for shares of the Bank offered for sale to the public."

SECTION 3.  Section 6, paragraph (f) of Presidential Decree No. 694, is hereby amended to read as follows: casia

"Sec. 6.  Loans and credit accommodations authorized. — The Philippine National Bank is hereby authorized:

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"f.  To make loans to any branch, subdivision or agency 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 or socio-economic projects pursuant to the priorities established in the development program, as prepared, by the National Economic and 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, interest and other charges: Provided, however, that the government guaranty may be dispensed with by the Board of Directors if such branch, subdivision, or agency or government-owned or controlled corporation can offer sufficient and acceptable collaterals in lieu of the guaranty: Provided, further, that the requirement of government guaranty shall be considered complied with in case of loans made to any branch, subdivision or agency of the Republic of the Philippines or to government-owned or controlled corporations which, by virtue of the law creating them or their respective charters or the law authorizing their borrowings, are not required to secure the guaranty of the national government through the Secretary of Finance: Provided, furthermore, that loans covered by government guarantees shall not exceed the ceiling prescribed by the Monetary Board: Provided, finally, that such ceiling on government guarantees shall exclude loans to government corporations with acceptable collateral. However, such loans to government corporations shall nonetheless be subject to the lending ceiling on loans to government agencies and entities provided for in paragraph (d) of Section 7."

SECTION 4.  All laws, executive orders, decrees, rules and regulations, or parts thereof, inconsistent with the provisions of this Decree are hereby repealed, amended or modified accordingly.

SECTION 5.  This Decree shall take effect immediately. cd

DONE in the City of Manila, this 11th day of June, in the year of Our Lord, Nineteen Hundred and Seventy-Eight.

Published in the Official Gazette, Vol. 74 No. 41, 8094-151 Supp., on October 9, 1978.

Published in the Official Gazette, Vol. 74 No. 44, 8651-63 Supp., on October 30, 1978.