WHEREAS, it is the responsibility of the government to foster conditions conducive to the development of healthy competition among the different banking institutions;

WHEREAS, one important segment of the banking industry is the thrift banking system whose continued viability is essential to the efficient functioning of the financial system as well as to the attainment of national economic goals; and

WHEREAS, a strong thrift banking system will further enhance its capacity to service fully the increasing needs of households for a more convenient payments facility for personal and consumer finance as well as for long-term financing for home building and home development;

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 amendment of Republic Act No. 337, as amended:

SECTION 1. Section 20 of Republic Act No. 337, as amended, is hereby further amended to read as follows:

"SEC. 20. A commercial bank shall be a corporation primarily organized for the purpose of performing the functions provided in section twenty-one of this Act and of accepting or creating demand deposits subject to withdrawal by check."

SEC. 2. Subsection (a) of Section 31 of the same Act is hereby further amended to read as follows:

"(a) Loans with the security of their own savings and time deposit obligations or of mortgage and chattel mortgage bonds which they have issued, or with the security of savings and time deposit obligations of other banks doing business in the Philippines: Provided, That subject to such regulations as the Monetary Board may prescribe, banks may grant: (1) clean loans for personal and household finance in amounts not exceeding the borrower's savings and time deposits in the bank plus his four months salary or regular income whether from employment or from his own business, and (2) Loans for personal and household finance secured by real estate or chattel mortgage. The aggregate loans granted under subsection (2) shall not exceed ten per cent (10%) of the total assets of the bank."

SEC. 3. Subsection (b) of Section 31 of the same Act is hereby amended to road as follows:

"(b) Loans of the following types:

"(1) Loans to encourage the breeding, raising and production of cattle, carabao and other livestock, with maturities up to three years: Provided, however, That the Monetary Board may, in special cases and notwithstanding the provisions of the last paragraph of Section seventy-eight of this Act, allow longer maturities. Loans under this subsection shall be repaid in regular installments and shall have as principal security a lien on the animals, the bank being empowered, however, to require, in addition real estate and other securities to its satisfaction; Provided, however, That the livestock need not secure the loan if the borrower constitutes a lien or mortgage on reel estate property seventy per cent (70%) of the appraised value of which equals or exceeds the amount of the loan granted. The amount of any such loan shall not exceed fifty per cent (50%) of the commercial value of the animals at the time the loan is made but similar additional loans up to fifty per cent (50%) may be made as the value of the stock increases.

"(2) Equipment loans, with maturities up to five years, for the acquisition of any instruments, machinery and other movable equipment for the production, processing, transformation, handling or transportation of agricultural and industrial products for the use of the borrower. Such loans shall constitute a first lien on the assets so acquired with the proceeds of the loan, the bank being empowered, however, to require as additional security a lien or mortgage on other properties of the debtor: Provided, That the lien need not be constituted if the borrower executes a mortgage on real estate property seventy per cent (70%) of the appraised value of which equals or exceeds the amount of the loan granted.

"(3) Loans for the acquisition of agricultural inputs, such as seeds, fertilizers, feeds and other similar items. Such loans shall be secured either by chattel mortgage on growing, standing or stored crops or by any other acceptable collateral and shall be subject to such ceiling and regulations as the Monetary Board may prescribe: Provided, That the bank shall be empowered to require as additional security a lien or mortgage on other properties of the debtor: Provided, further, That such loans need not be secured by the growing, standing or stored crops or other collateral if the borrower executed a mortgage on real estate property seventy per cent (70%) of the appraised value of which equals or exceeds the amount of the loan granted."

SEC. 4. Subsection (e) of Section 31 of the same Act is hereby amended to read as follows:

"(e) High grade bonds and other evidences of indebtedness, and loans against such obligations, and commercial papers and accounts receivable discounted with recourse, subject to such rules as the Monetary Board may promulgate."

SEC. 5. Section 31 of the same Act is hereby amended by adding a new subsection after subsection (j) which shall read as follows:

"(k) Such other loans and investments which the Monetary Board may determine as necessary in the furtherance of national economic objectives."

SEC. 6. Section 32 of the same Act is hereby amended to read as follows:

"SEC. 32. Except as the Monetary Board may otherwise prescribe, the direct indebtedness to a savings and mortgage bank of any person, company, corporation or firm, including in the indebtedness of the company or firm the indebtedness of the several members thereof, for money borrowed, excluding (a) loans secured by obligations of the Central Bank or of the Philippine Government, (b) loans fully guaranteed by the Government as to the payment of principal and interest, (c) loans to the extent covered by hold-out on, or assignment of, deposits maintained in the lending bank and held in the Philippines, and (d) other loans or credits as the Monetary Board may, from time to time, specify as non-risk assets, shall at no time exceed fifteen per cent (15%) of unimpaired capital and surplus of the bank: Provided, however, That this limitation shall not apply to loans made under subsection (f) of section thirty-one.

"Notwithstanding the provisions of the preceding paragraph and subject to such regulations as the Monetary Board may proscribe, the total indebtedness of any borrower to the bank may amount to a further fifteen per cent (15%) of the unimpaired capital and surplus of such bank provided the additional indebtedness is for the purpose of subdivision or housing development.

"Loans accommodations granted by savings mortgage banks to any other bank, as well as deposits maintained by them in any bank licensed to do business in the Philippines, shall be subject to the loan limit to any single borrower as herein prescribed."

SEC. 7. The same Act is hereby amended by adding a new Section to be designated as Section 72-A which shall read as follows:

"SEC. 72-A. Banking institutions other than commercial banks may, upon prior approval of, and subject to such conditions and rules as may be prescribed by, the Monetary Board, accept or create demand deposits subject to withdrawal by check."

SEC. 8. Section 78 of the same Act is hereby amended to read as follows:

"SEC. 78. Loans against real estate security shall not exceed seventy per cent (70%) of the appraised value of the respective real estate security, plus seventy per cent (70%) of the appraised value of the insured improvements, and such loans shall not be made unless titles to the real estate, free from all encumbrances, shall be in the mortgagor. In the event of foreclosure, whether judicially or extra judicially, of any mortgage on real estate which is security for any loan granted before the passage of this Act or under the provisions of this Act, the mortgagor or debtor whose real property has been sold at public auction, judicially or extra judicially, for the full or partial payment of an obligation to any bank, banking or credit institution, within the purview of this Act shall have the right, within one year after the sale of the real estate as a result of the foreclosure of the respective mortgage, to redeem the property by paying the amount fixed by the court in the order of execution, with interest thereon at the rate specified in the mortgage, and all the costs and other judicial expenses incurred by the bank or institution concerned by reason of the execution and sale and as a result of the custody of said property less the income received from the property.

However, the purchaser at the auction sale concerned shall have the right to enter upon and take possession of such property immediately after the date of confirmation of the auction sale and administer same in accordance with law.

"Similarly, loans on the security of chattels shall not exceed fifty per cent (50%) of the appraised value of the security, and such loans shall not be made unless title to the chattels, free from all encumbrances, shall be in the mortgagor.

"The Monetary Board may, by regulation, prescribe further security requirements to which the various types of bank credit shall be subject, and, in accordance with the authority granted to it in section one hundred eleven of the Central Bank Act, the Board may be regulation reduce the maximum ratios established in the present section, or, in special cases, increase the maximum ratios established herein.

"The Monetary Board may, similarly, in accordance with the authority granted to it in section one hundred eleven of the Central Bank Act, reduce the maximum permissible maturities specified in this Act for various types of bank loans, but in no case shall the Board exercise such power to authorize maximum maturities greater than those established in this Act. Any reduction by the Board of the maximum maturities specified in this Act shall apply only to loans made after the date of such action."

SEC. 9. All existing laws, orders, rules and regulations or parts thereof in conflict or inconsistent herewith are hereby repealed or modified accordingly.

SEC. 10. This Decree shall take effect immediately.

DONE in the City of Manila, this 29th day of March, in the year of Our Lord, nineteen hundred and seventy-eight.

			(Sgd.) FERDINAND E. MARCOS President of the Philippines
	By the President:
	(Sgd.) JACOBO C. CLAVE
		Presidential Executive Assistant