WHEREAS, Presidential Decree No. 5, of September 27, 1972, adopted and approved into law House Bill No. 2483 which was pending before Congress at the time of the promulgation of Proclamation No. 1081, dated September 21, 1972;

WHEREAS, it has been found necessary to incorporate certain changes and modifications to the Charter of the Philippine National Bank, particularly certain proposals recommended by an official banking survey commission which recently submitted its report;

WHEREAS, for clarity and accuracy, it is deemed essential to set forth hereunder the text of the pertinent provisions of the Charter of the Philippine National Bank, together with the abovementioned changes and modifications, which shall supersede the entire text of the said House Bill No. 2483 as adopted and approved into law by Presidential Decree No. 5;

NOW, THEREFORE, I, FERDINAND E. MARCOS, Commander-in-Chief of all the Armed Forces of the Philippines, pursuant to Proclamation Order No. 1081, dated September 21, 1972, as amended, and in order to effect desired changes and reforms in the social, economic and political structures of our society, do hereby order and decree as follows:

SECTION 1. Subsection (g) of Section two of Republic Act Numbered Thirteen hundred, as amended, is further amended to read as follows:

"CORPORATE POWERS"

"SEC. 2. Corporate powers and duties. —The said National Bank, upon its organization, shall be a body corporate and shall have power:

"(g) To grant long-term loans and advances against security of real estate and/or other acceptable assets for the establishment, rehabilitation or expansion of agricultural, export, industrial and other productive enterprises: Provided, That the aggregate of such loans shall not exceed the sum of the paid-up capital and unimpaired surplus, long-term indebtedness and obligations and thirty per cent of the total deposits: Provided, further, That notarial services in connection with loan application of not more than one thousand pesos shall be free, and in places where the bank has no lawyers, notarial services shall be performed by municipal judges and other government notaries public free of charge;"

SEC. 2. Section three of Republic Act Numbered Thirteen hundred, as amended, is further amended to read as follows:

"CAPITAL"

"SEC. 3. Authorized Capital Stock — Par Value — Government Subscription and payment. — The authorized capital stock of the Philippine National Bank shall be one billion pesos divided into ten million per value shares of one hundred pesos each, which shall include its present capitalization: Provided, That the Bank may purchase the shares held privately: Provided, further, That five hundred million pesos of the authorized capital shall be fully subscribed by the Government and said subscription shall be paid in the following manner: Two hundred twenty-five million of surplus and reserves of the Bank as of December thirty-one nineteen hundred and seventy-one shall be applied by the Bank in payment of the outstanding unpaid subscribed shareholdings of the Government which together with the present paid-up capital of one hundred fifty million pesos, including private stockholdings, shall be considered as part of the paid-in capital of the Bank and the balance from funds from the Treasury not otherwise appropriated: Provided, furthermore, That three hundred million pesos of the authorized capital shall be offered for sale to the public, subject to the proportionate preemptive rights of existing private stockholders, and the Bank may within one year from approval hereof take necessary steps to have these shares listed in any duly registered stock exchange: Provided, furthermore, That private holders of Land Bank bonds may exchange such bonds for shares of the Bank offered for sale to the public: Provided finally, That upon the lapse of five years from the listing of these shares in any duly registered stock exchange, the shares remaining unsold shall be automatically subscribed and paid for by the Government and the Secretary of Finance, with the approval of the President of the Philippines shall issue Government bonds in exchange for such shares of stock subscribed by the Government."

SEC. 3. Section five of Republic Act Numbered Thirteen hundred, as amended, is further amended to read as follows:

"BANKING OPERATIONS IN GENERAL"

"SEC. 5. Loans and investments authorized-Total liabilities of a single borrower—Additional liabilities and security required. - Said National Bank is hereby authorized;

"(a) To purchase or discount promissory notes, drafts, and bills of exchange issued or drawn for agricultural, export, industrial or commercial purposes with securities required by the Bank, or the proceeds of which have been used or are to be used for such purposes;

"(b) To make loans on or to discount notes, secured by, harvested and stored crops: Provided, That no loan on the security of such harvested and stored crops shall exceed eighty per centum of the market value thereof on the date of the loan: Provided, further. That the crops so mortgaged shall be insured by the mortgagor for the benefit of the National Bank for their entire market value: And provided, finally, That if, owing to any circumstance whatever the value of the crops given as security shall diminish, the mortgagor shall obligate himself to furnish additional security or refund such part of the loan as the Bank may deem necessary. Such loans shall be granted for a period of not to exceed one year, subject to extension, in the discretion of the Bank;

"(c) To make loans to agriculturists in installments, on standing crops of the natural products of the Philippines such as rice, hemp, copra sugar tobacco corn, maguey, etc., not in excess of seventy per centum of the estimated value of such crops: Provided, however, That before granting such loans the National Bank may require additional security in the nature of mortgage's on real estate duly registered in the name of the debtor, or chattel mortgage including those upon livestock, machinery, and agricultural implements, or personal bonds with sufficient surety or sureties, satisfactory to the Bank;'

"(d) To make loans to any branch or subdivision 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 socio-economic development project pursuant to the priorities established in the development program, as certified to by the National Economic 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 and interest: Provided, however, That loans covered by government guarantees shall not exceed the ceiling prescribed by the Monetary Board: Provided, finally, That such a ceiling shall exclude loans to government corporations with acceptable and sufficient collateral which shall however be subject to the limitation hereinunder provided.

"The aggregate obligation of all these government agencies and entities for the loans herein authorized shall at no time exceed the advances, deposits, and paid-in capital contribution of the Government [plus twenty percent (20%)], except in cases of emergency situations.

"(e) Generally, to make advances or discount paper for agricultural, export, manufacturing, industrial, or commercial purposes: Provided, That loans, discounts or advances made under this section shall have maturities not exceeding one year, renewable from year to year, in the discretion of the Bank;

"(f) To engage or participate in the development of secondary markets for medium and long-term papers.

"(g) To invest in equities of the following allied, undertakings: warehousing companies as provided for under Section 2 subsection (h), leasing companies, storage companies, sate deposit box companies, trust companies, companies, engaged in the management of mutual funds but not in the mutual funds themselves, banks other than rural banks, and such other similar activities as the Monetary Board of the Central Bank of the Philippines may declare as appropriate from time to time: Provided, however. That (a) the total investment in equities shall not exceed twenty-five percent (25%) of the net worth of the Bank, (b) the investment in any one enterprise shall not exceed ten per cent (10%) of the net worth of the Bank; (c) the investment of the Bank in any single enterprise, except where that enterprise is not a financial intermediary; and (d) the investment in other banks shall be deducted from the Bank'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-owned or majority controlled subsidiary of the Bank, it shall be subject to examination by the Central Bank."

"(h) To grant loans to cooperatives as well as to individual members of such cooperatives: Provided, That in the grant of said loans the collateral requirements elsewhere required in this Act may be waived in appropriate cases.

"The aggregate amount of loan for any single industry shall at no time exceed twenty (20%) per cent of the Bank's lending capacity.

"The total liabilities to the Bank of any individual, including the liabilities of the individual's spouse for money borrowed shall at no time exceed two-and-a-half per cent of the unimpaired capital and surplus of the Bank. The total liabilities to the Bank of any company corporation, or firm, for money borrowed including in the liabilities, of the company or firm, the liabilities of the several members thereof, shall at no time exceed ten (10%) per centum of the unimpaired capital and surplus of the Bank. But the discount of bills of exchange drawn in good faith against actually existing values and the discount of commercial or business paper actually owned by the person negotiating the same shall not be considered as money borrowed, and in addition to the ten (10%) per centum of the unimpaired capital and surplus of Bank provided such additional liabilities are secured by shipping documents, warehouse receipts or other similar documents transferring or securing title covering readily marketable, nonperishable stocks, when such staples have a market" value equal to at least one hundred twenty-five per centum of such additional liabilities.

"Provided, further, That the total contingent liabilities to the Bank of any person, whether natural or juridical, under any form or type of letters of credit accommodations, whether domestic or foreign, or under any other form of financing shall at no time exceed ten (10%) per centum of the unimpaired capital and surplus of the Bank.

"The Bank shall not make any loan upon the stock of any other corporation as collateral if the aggregate market value of all such stocks held as collateral exceeds an amount equal to ten (10%) per centum of the unimpaired capital stock and surplus of the Bank.

''The term 'loan' whenever used in this Act shall include overdrafts and the limitations contained in this section shall apply to any loan of any kind whenever secured wholly or partly by real estate mortgage."

SEC. 4. Section six of Republic Act Numbered Thirteen hundred, as amended, is further amended to read as follows:

"BOARD OF DIRECTORS - COMPOSITION AND ORGANIZATION"

"SEC. 6. Board of Directors — Composition — Per diems — Tenure. — The affairs and business of the National Bank shall be directed and its property managed and preserved unless otherwise provided in the Act by a Board of Directors consisting of nine members duly elected as hereinafter provided for terms of three years who shall be paid a per diem of Two Hundred Fifty pesos for each session of the Board of Directors: Provided, however, That the first members elected under the provisions of this section shall have terms of office of one, two, and three years, respectively."

SEC. 5. Section seven of Republic Act Numbered Thirteen hundred, as amended, is further amended to read as follows:

"SEC. 7. Election of Board of Directors — Election of Chairman and Vice-Chairman of the Board. — Who may be elected members of the Board of Directors.— Annually on the first Tuesday after the first Monday in March, the stockholders shall meet to elect the members of the Board of Directors whose terms have expired, each stockholder or proxy to be entitled to as many votes as he may have shares of stocks, registered in his name on the thirty-first of January last preceding and held by him at the time of the election. Immediately after the election, the directorate shall be organized as such and elect from among themselves a chairman, the President of the Bank shall be ex officio vice-chairman, who shall assist the chairman and act in his stead in case of absence or incapacity. In case of incapacity or absence of both the chairman and vice-chairman, the Board of Directors shall designate a temporary chairman from among its members: Provided, That no director, shareholder or employee of any other bank shall be eligible as member of the Board of Directors of the National Bank: Provided, further, That no person shall be elected director of the Bank unless he is a natural born citizen of the Philippines, not less than thirty-five years of age, of good moral character and has attained proficiency, expertise and recognized competence in one or more of the following: banking, finance, economics, law, agriculture, business management, public utility or government administration.

SEC. 6. Section eight of Republic Act Numbered Thirteen hundred, as amended, is further amended to read as follows:

"SEC. 8. President and Vice-President - Appointment and removal — Salaries. — The Chief executive of the Bank shall be the President, who shall be elected by the Board of Directors from amongst themselves for a term of four years unless earlier removed for cause or by reason of incapacity. No person shall be elected President of the Bank unless he is at least forty years of age, of good moral character and reputation, with at least ten years previous experience in banking, and has a reputed proficiency, expertise and recognized competence in banking and economics, or finance, or management, or government administration, or law, or agriculture, or industry. He shall be assisted by an executive vice-president and such number of senior vice-presidents and vice-presidents as may be necessary for the efficient operation of the business of the Bank, who shall have the same qualifications as the President and who shall be chosen and may be removed for cause by the Board of Directors. The salaries of the President, Executive Vice-President, the Senior Vice-Presidents and Vice-Presidents shall be fixed by the Board of Directors in line with the policy declared by the President of the Philippines."

SEC. 7. Section nine of the Republic Act Numbered Thirteen hundred, as amended, is further amended to read as follows:

"BOARD OF DIRECTORS"

"SEC. 9. The Board of Directors shall have, among other duties, powers and authority:

"(a) To formulate policies necessary to carry out effectively the provisions of this Act and adopt such by-laws, rules and regulations for the effective operation of the Bank, in conformity with this Act and existing laws;

"(b) To establish branches or agencies in other countries and at such points within the Philippines as it may deem advisable, which shall perform functions as may be delegated to them by the Board of Directors: Provided, however, That there shall be established branch banks or agencies in every provincial capital. AND PROVIDED, FINALLY, THAT THE BANK SHALL NOT OPEN BRANCHES, AGENCIES OR EXTENSION OFFICES WITHOUT PRIOR APPROVALOF THE MONETARY BOARD OF THE CENTRAL BANK OF THE PHILIPPINES.

"With the authorization of the proper department Secretary first had, the Board of Directors may appoint as agents of said Bank, the provincial or municipal treasurers, who shall receive such additional compensation as the Board may determine."

"(c) To adopt an annual budget for the effective operation and administration of the Bank, the expenses for personnel of which shall not exceed thirty (30%) per cent of the gross income of the Bank for the preceding calendar year, including all salaries, allowances, benefits and other emoluments of whatever kind or nature."

SEC. 8. Section eleven of Republic Act Numbered Thirteen hundred, as amended, is further amended to read as follows:

"LEGAL COUNSEL"

"SEC. 11. Chief Legal Counsel — Any provision of laws, existing executive orders and administrative orders to the contrary notwithstanding, all legal cases and- matters of the Philippine National Bank shall be exclusively handled, controlled and supervised by a Chief Legal Counsel of the Bank who shall be chosen and may be removed for cause by the Board of Directors."

SEC. 9. Section twelve of Republic Act Numbered Thirteen hundred, as amended, is further amended to read as follows:

"AUDITING DEPARTMENT"

"SEC. 12. Bank Auditor, salaries and expenses of the Auditing Department, reports. — The Auditor General shall be the ex officio auditor of the National Bank and shall with the advice and consent of the President of the Philippines appoint a Bank auditor who shall be the chief of the Auditing Department of the Bank, and shall receive the salary in an amount equal to the salary of the Executive Vice-President of the Bank. All the other employees of the department shall be appointed by the Auditor General, who with the approval of the President of the Philippines, shall fix the salaries of the same in accordance with the job evaluation program of the Bank. Any provision of- law or charter to the contrary notwithstanding, such salaries and number of Auditing Personnel, once fixed, shall not be thereafter increased, diminished or altered unless initiated by the Auditor General. The Bank Auditor and his subordinate personnel shall also receive such allowances and privileges as are or shall be authorized to management personnel having the same rank and/or salary.

"The operating expenses of the department and the salaries and traveling expenses of the employees thereof shall be payable by the bank and the Board of Directors shall make the necessary appropriation therefor which shall not exceed three (3%) per cent of the gross income of the Bank during the preceding calendar year.

"The appointment and removal of the Bank Auditor and subordinate officials and employees of the Auditing Department shall be made by the Auditor General in accordance with the established personnel policies of the Bank; Provided, however, That in the promotion of subordinate officials and employees of the department, the Auditor General shall be guided by a list of qualified and eligible personnel to be submitted by the Bank Auditor with a certification that merit and seniority have been strictly observed.

"The Bank Auditor shall make a quarterly audit report, or as often as the exigencies of the service may require, on the condition of the Bank, to the President of the Philippines, through the Secretary of Finance, to the Auditor General and to the Board of Directors of the Bank. The report shall contain, among other things, a statement of resources and liability, including earnings and expenses, the amount of capital stock, dividends paid, surplus reserve, and undivided profits, as well as the losses, bank debts and suspended and overdue paper carried in the Bank's assets as of the day in which the statements are compiled."

SEC. 10. Section thirteen of Republic Act Numbered Thirteen hundred, as amended, is further amended to read as follows:

"APPOINTMENT AND REMOVAL OF OTHER OFFICERS AND EMPLOYEES OF THE NATIONAL BANK"

"SEC. 13. Other officers and employees, appointment and removal — Salaries — Non-applicability of the Civil Service Law. — All other officers and employees of the Bank shall be appointed and removed by the Board of Directors, on recommendation of the President. Said officers and employees shall not be subject to the Civil Service Law. Officers may be transferred or re-assigned according to the sound judgment of the Board of Directors. Duties and compensation of said officers and employees shall be fixed by the President with the approval of the Board of Directors: Provided, That whenever the Chairman or the Vice-Chairman, by order of the Board of Directors, shall temporarily or permanently perform duties incumbent upon other officers or employees, they may be granted compensation therefor subject to the written approval of the President of the Philippines.

"Provided, That it is declared to be the policy of this Act that the Bank is an instrument of the national monetary policy of the Government and its operation affects national interest and all the officers and employees of the Bank shall not strike for the purpose of securing changes or modifications in their terms and condition of employment but such officers and employees may belong to any labor organization which does not impose the obligation to strike or to join in strike.”

SEC. 11. Section sixteen of Republic Act Numbered Thirteen hundred, as amended, is further amended to read as follows:

“SEC. 16. Confidential information. — The Superintendent of the Banks and the Auditor General, or other officers designated by law to inspect or investigate the condition of the National Bank and officers and employees of the National Bank shall not reveal to any person other than the President of the Philippines, the Secretary of Finance, and the Board of Directors the details of the inspection or investigation or give any information relative to any bank transaction of any private individuals, corporations, or any other entity, except by order of a Court of competent jurisdiction.”

SEC. 12. Section eighteen of Republic Act Numbered Thirteen hundred, as amended, is further amended to read as follows:

“SEC. 18. Loans to officers, directors and employees prohibited. — The National Bank shall not directly or indirectly grant loans to any director, officer, employee or agent of the Bank and no loan shall be granted to a corporation, partnership or company wherein any member of the Board of Directors is a shareholder, agent or employee in any manner.”

SEC. 13. Republic Act Numbered Thirteen hundred, as amended, is amended by adding the following section immediately after Section 22 thereof, which reads as follows:

"SEC. 22-A. Prohibition against writing-off of loans without prior Central Bank approval. — Writing-off of loans and advances with an outstanding amount of one hundred thousand pesos or more shall require the prior approval of the Monetary Board of the Central Bank of the Philippines."

SEC. 14. Section twenty-five of Republic Act Numbered Thirteen hundred, as amended, is further amended to read as follows:

"NET PROFITS"

"SEC. 25. Allocation of Net Profit. — At the close of each calendar year, the Bank shall determine the net result of its operations, in the Calculation of which, adequate allowances shall be made for probable losses. From the net profit arrived thereat seventy-five (75%) per cent thereof shall be set aside for declaration of dividends corresponding to the Government and the private stockholders and the remaining twenty-five (25%) per cent shall be accumulated in the surplus account which shall be utilized for such purposes as may be authorized by the Board of Directors."

SEC. 15. Section twenty-six of Republic Act Numbered Thirteen hundred, as amended, is further amended to read as follows:

"PAYMENT OF DIVIDENDS OF GOVERNMENT SHARES"

"SEC. 26. Payment of dividends corresponding to Government-owned shares. — The dividends declared corresponding to the shares of the Government as provided for in Section twenty-five hereof, shall be set aside and is hereby appropriated to form a special bond sinking fund which shall be used for the purpose only of retiring the government bonds issued pursuant to the last paragraph of Section three of this Act. The Bank shall be the trustee of these funds until the purpose for which it was created shall have been accomplished. Any and all income that may accrue shall form part of the fund. This special fund shall be deposited with the Bank. After the retirement and payment of the bonds including interest thereon from the special fund shall have been made, whatever residue remaining shall be used to pay for additional government subscription on the unissued shares of authorized capital stock. Thereafter, all profits assigned as dividends to the shares of the Government shall be paid into the Treasury of the Philippines for the general funds thereof.

SEC. 16. If any provision or section of this Act or the application thereof to any person, association or circumstances is held invalid, the other pertinent provisions or sections of this Act and their application to such person, association or circumstances shall not be affected thereby.

SEC. 17. Repealing Clause. — All Acts, executive orders, administrative orders, proclamations, rules and regulations or parts thereof inconsistent with any of the provisions of this Act are hereby repealed or modified accordingly.

SEC. 18. This Decree shall take effect immediately.

Done in the City of Manila, this 20th day of November, in the year of Our Lord, nineteen hundred and seventy-two.

			(Sgd.) FERDINAND E. MARCOS President Republic of the Philippines
	By the President:
	(Sgd.) ALEJANDRO MELCHOR
		Executive Secretary