WHEREAS, there were pending before Congress prior to the promulgation of Proclamation No. 1081, dated September 21, 1972, certain bills proposing amendments to Republic Act No. 3779, entitled "Savings and Loan Associations Act";

WHEREAS, the recommendations resulting from an extensive survey and study of the financial system undertaken for the purposes of assessing its adequacy in Philippine economic growth, and of facilitating the savings-in vestment process in development have been accepted, with modifications by monetary authorities; and

WHEREAS, savings and loan associations have proved to be a very effective instrument in encouraging the thrift-savings habit especially of small savers and in providing additional credit assistance to small scale entrepreneurs, home builders and consumers;

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. 3779, as amended, as follows:

SECTION 1. Section three (a) of Republic Act Numbered Three thousand seven hundred seventy-nine, as amended, is hereby amended to read as follows:

"SEC. 3(a). 'Savings and loan association hereinafter called the association shall include any corporation engaged in the business of accumulating the savings of its members or stockholders, and using such accumulations, together with its capital in the case of a stock corporation, for loans and/or for investment in the securities of productive enterprises or in securities of the Government, or any of its political subdivisions, instrumentalities or corporations: Provided, That they shall be primarily engaged in servicing the needs of households by providing personal finance and long-term financing for home building and development";

SEC. 2. Section four (b) of the same Act is hereby amended to read as follows:

"SEC. 4(b). The Monetary Board shall fix the minimum paid-up capital of a savings and loan association organized as a stock corporation in such amount as said Board may consider necessary for the safe and sound operation of such association: Provided, however, That in no case shall such paid-up capital be less than one hundred thousand pesos: Provided, further, That at least seventy per cent (70%) of the voting stock of a savings and loan association which may be established after the approval of this Act shall be owned by citizens of the Philippines, except where a new association is established as a result of the consolidation of existing associations in which there are foreign-owned voting stocks at the time of consolidation: Provided, furthermore, That the percentage of foreign-owned voting stocks in stock savings and loan associations existing upon the effectivity of this Act, if such percentage is in excess of thirty per cent (30%) of the voting stock of the savings and loan association, shall not be increased, but may be reduced, and, once reduced, shall not be increased thereafter beyond thirty per cent (30%) of the voting stock of the savings and loan association. The percentage of foreign-owned voting stocks in an association shall be determined by the citizenship of the individual stockholders in that association. In the case of corporations owning shares in the association, the citizenship of each stockholder in that corporation shall be the basis of computing the percentage. Such association is authorized to receive deposits from, and extend loans to, the general public."

SEC. 3. Section five of the same Act is hereby amended to read as follows:

"SEC. 5. Powers of savings and loan association. — A savings and loan association shall be incorporated under the Corporation Law, and in addition to the powers therein granted whenever applicable, it shall exercise the following:

"(a) To grant loans of not exceeding the amount deposited by the borrower plus his four months' salary or regular income in the case of a permanent employee or wage earner, or seventy per cent of the fair market value of any property acceptable as collateral on first mortgage that he may put up by way of security: Provided, That no loan shall have a maturity date of more than three years, except loans on the security of unencumbered real estate for the purpose of home building and home development which may be granted with maturities not exceeding twenty years subject to regulations prescribed by the Monetary Board: Provided, further, That in the case of a borrower who is a permanent employee or wage earner, the treasurer, cashier or paymaster of the office employing him is authorized, the provisions of any existing law, rule and regulation to the contrary notwithstanding, to make deductions from his salary, wage, or income pursuant to the terms of his loan, to remit deductions to the savings and loan association, and to collect such reasonable fee for his services as may be authorized by rules promulgated by the Monetary Board.

"(b) To charge interest within the limits allowed by law, and collect such necessary fees incidental to the grant of loans as may, by regulation, be authorized by the Monetary Board;

"(c) Subject to such rules as the Monetary Board may approve, to discount with recourse commercial papers and accounts receivables;

"(d) To invest its funds in any sound non-speculative enterprise, as well as in bonds, securities, and other obligations issued by the Government of the Philippines, or any of its political subdivisions, instrumentalities or corporations including government-owned or controlled corporations subject to the rules and regulations of the Monetary Board: Provided, That stock savings and loan associations may invest in equities only of such allied undertakings as may be approved by the Central Bank for banks of their category as provided for in Section 6-A of Republic Act No. 337, as amended: Provided, further, That (a) the total investment in equities shall not exceed twenty-five percent (25%) of the net worth of the association; (b) the equity investment in any single enterprise shall be limited to fifteen per cent (15%) of the net worth of the association; (c) the total equity investment of the association in any single enterprise shall remain a minority holding in that enterprise, except where the enterprise is not a financial intermediary;, and (d) 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 stock savings and loan association's net worth for purposes of computing the prescribed ratio of net worth to risk assets. Equity investments shall not be permitted in non-related activities. Where the allied undertaking is a wholly or majority-owned subsidiary of the investing association, it may be subject to examination by the Central Bank.

"(e) To allow member-depositors to participate in the profits of the savings and loan association on the basis of their deposits on the date dividends are declared; and

"(f) To borrow money or incur such obligations not exceeding twenty per centum of the total assets of the association, from any public lending institutions, such as the Development Bank of the Philippines, the Philippine National Bank, the Government Service Insurance System, the Social Security System, and from such private lending institutions as may be approved by the Monetary Board, including other stock savings and loan associations. The Monetary Board may, in meritorious cases, raise the ceiling on the borrowing capacity of a savings and loan association to an amount not exceeding thirty per centum of its total assets: Provided, That in the case of a non-stock savings and loan association organized by employees of an entity or a corporation, such association may borrow funds from said entity or corporation but not vice versa.

"(f-1) To maintain deposits with banks and other stock savings and loan associations: Provided, That the amount of such deposits shall be subject to the loan limit to a single borrower as prescribed herein or by other special laws or regulations.

"A savings and loan association may, subject to such rules as the Monetary Board may promulgate, also borrow from, or rediscount notes, bills of exchange and other commercial papers with the Central Bank. The rate of interest on such obligations or borrowings to be charged such associations shall not be more than that charged rural banks."

SEC. 4. Subsection (b) of Section six of the same Act is hereby amended to read as follows:

"SEC. 6(b). No non-stock savings and loan association shall advertise or represent itself to the public as a bank. A stock savings and loan association may use the word bank in connection with its business name only upon compliance with such requirements as may be imposed by, and prior approval of, the Monetary Board."

SEC. 5. Section fourteen of the same Act hereby amended to read as follows:

"SEC. 14. Qualification for directors. — No person shall be eligible as director of an association unless he is a member, in case of nonstock associations, or an owner in his own right or stocks in the association with an aggregate par value of at least five thousand pesos, in case of stock associations: Provided, That at least two-thirds of the members of the board of directors of any stock savings and loan association which may be established after the approval of this Act 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 stock savings and loan association except in cases where such service is incident to financial assistance provided by the Government or a government-owned or controlled corporation to such association: Provided, further, That in the case of a merger or consolidation of savings and loan associations duly approved by the Monetary Board, the limitation on the maximum number of directors in a corporation, as provided for in Section 28 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 consolidating savings and loan associations."

SEC. 6. Section eighteen of the same Act is hereby amended to read as follows:

"SEC. 18. Limitations on lending authority. — (a) An association shall not commit itself to make any loans for amounts in excess of the total of the following amounts:

1. amount of cash available for loan purposes;
2. amount of cash which can be readily realized upon the sale or redemption of permissible investments made by the association;
3. amount of credit available for loan purposes from government or private financing institutions.

"(b) No association shall directly or indirectly make any loans to any director or officer of such association, either for himself or as agent or as partner of another, except with the written approval of the majority of the directors of the association, excluding the director concerned: Provided, That in the case of a nonstock association, the aggregate loans, direct or indirect, granted at any one time to such directors and officers shall not exceed twenty per centum of the total paid-up capital of the association: Provided, further. That in the case of a stock association, the Monetary Board may regulate the amount of credit that the association may extend, directly or indirectly, to its directors, officers or stockholders. In any case, however, the outstanding credit accommodations which a stock association may extend to each of its stockholders owning two percent (2%) or more of the subscribed capital stock, its directors or its officers, shall be limited to an amount equivalent to the respective outstanding deposits and book value of the paid-in capital contribution in the association. In all cases of credit accommodations granted to directors and officers under this subsection, the written approval of the majority of the directors of the association, excluding the director concerned, shall be entered upon the records of the association and a copy of such entry shall be transmitted forthwith to the appropriate supervising department of the Central Bank.

"The office of any director or officer of an association who violates the provisions of this subsection shall immediately become vacant and the director or officer shall be punished by imprisonment of not less than one year nor more than ten years and by a fine of not less than one thousand nor more than ten thousand pesos.

"(c) No association shall make any loan to any corporation of which a majority of the stock is owned or controlled directly or indirectly, by any one or more of the directors or officers of such association collectively except with the written approval of the majority of the directors of the association excluding the director or directors concerned. Any such approval shall be entered upon the records of the association and a copy of such entry shall be transmitted forthwith to the appropriate supervising department of the Central Bank.

'"The Monetary Board may regulate the amount of credit that an association may extend to a corporation referred to in this subsection in the same manner as it may regulate credit accommodations to directors and officers of the association under the preceding subsection.

"(d) No association shall loan any of its funds upon the security of its own stock."

SEC. 7. Section twenty-one of the same Act is hereby amended to read as follows:

"SEC. 21. Limitations on investment. — (a) No association at any one time shall have invested in bonds and securities an aggregate amount in excess of ten per centum of the total assets of such association;

"(b) No non-stock savings and loan association at any one time shall have invested in real property an aggregate amount in excess of five per centum of the total assets of such association;

"(c) No nonstock savings and loan association at any one time shall invest in furniture, fixture, furnishings and equipment and leasehold improvements for its offices, more than ten per centum of its aggregate paid-up capital;

"(d) No stock savings and loan association, at any one time, shall have an investment in real estate and improvements thereon, including equipment, in an aggregate amount in excess of fifty per cent of its net worth: Provided, That real estate used for the stock savings and loan association's purposes owned by another corporation in which that association owns equity shall be considered as part of the association's total investment in real estate."

SEC. 8. Section 29 of the same Act is hereby amended, by adding the following subsections after Subsection (c) thereof, which read as follows:

"SEC. 29(c-1). Whenever any officer, employee, or agent of a savings and loan association makes false entries in any association report or statement thereby affecting the financial interest of, or causing damage to, the association or any person; or without order of a court of competent jurisdiction, discloses to any unauthorized person any information relative to the funds or properties in the custody of the association belonging to private individuals, corporations, or any other entity: Provided, That with respect to bank deposits, Section 4(a) of this Act shall prevail; or accepts gifts, fees or commissions or any other form of remuneration in connection with the approval of a loan from said association; or overvalues or aids in overvaluing any security for the purpose of influencing in any way the action of the association on any loan, such officer, employee or agent shall be punished by a fine of not more than two thousand pesos or imprisonment for not more than one year, or both, at the discretion of the court;

"(c-2). Whenever any applicant for a loan from, or borrower of, a savings and loan association fraudulently overvalues property offered us security for a loan from the said association; or furnishes false, or makes willful misrepresentation of, material facts for the purpose of obtaining, renewing, or increasing a loan or extending the period thereof; or attempts to defraud the said association in the event of a court action to recover a loan; or offers any officer, employee or agent of a savings and loan association any gift, fee, commission, or other form of compensation in order to influence such association personnel into approving a loan application, such applicant or borrower shall be punished by a fine of not more than two thousand pesos or imprisonment for not more than one year, or both, at the discretion of the court;

"(c-3). Whenever any examiner, officer or employee of the Central Bank of the Philippines, who is assigned to examine, supervise, assist or render technical service to a savings and loan association, commits any of the acts enumerated in subsection c-1 of this section or connives or aids in the commission of the same, he shall be punished by a fine of not more than two thousand pesos or imprisonment of not more than one year or both, at the discretion of the court."

SEC. 9. The same Act is hereby further amended, by adding the following section immediately after Section twenty-nine thereof, which reads as follows:

"SEC. 29-A. The provisions of Republic Acts Numbered Two hundred and sixty-five, as amended, and Three hundred thirty-seven, as amended, insofar as they are applicable and not in conflict with any provision of this Act, shall apply to savings and loan associations organized hereunder."

SEC. 10. All acts and parts of acts inconsistent with the provisions of this Act are hereby repealed.

SEC. 11. 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.