WHEREAS, it is the policy of the state that the national interest in both the maintenance of economic stability and the promotion of economic development is best served by a system of financial intermediation that places primary reliance on the private sector, on the market mechanism, and on the maintenance of conditions of compensation;

WHEREAS, within the context of the general policy there nevertheless exists a clear role for direct government participation in the banking system, particularly in servicing the requirements of agriculture, small and medium scale industry, export development, and the government sector;

WHEREAS, in pursuit of this national policy there is need to restructure the government financial institutions, particularly the Philippines National Bank, to achieve a more efficient and effective use of available scarce resources, to improve its viability, and to avoid unfair competition with the private sector; and

WHEREAS, the reorganization and rehabilitation of the Philippine National Bank into a smaller but stronger and more operationally viable bank is an important component of the nationalization programs for both the financial system and the government corporate sector;

NOW, THEREFORE, I, CORAZON C. AQUINO, President of the Republic of the Philippines, do hereby order:

SEC. 1. This Executive Order shall be known as the "The 1986 Revised Charter of the Philippine National Bank."

SEC.2. Name; Place of Business; Branches; Agencies and Other Offices. - The Philippine National Bank (hereinafter referred to as the "Bank"), a bank created under Act No. 2612, as amended, and operating under the provisions of Presidential Decree No. 694, as amended, shall henceforth operate under the provisions of this 1986 Revised Charter.

The Bank's principal office and place of business shall be in the National Capital Region, also known as Metro Manila. It may open and maintain other branches, agencies or other offices at such places in the Philippines or abroad as its Board of Directors may deem advisable, with the prior approval of the Monetary Board of the Central Bank of the Philippines.

SEC. 3. Corporate Powers and Purposes. -- The Bank shall be a body corporate and shall have the following powers and purposes:

(a) To perform commercial banking, as well as expanded commercial banking functions; and, within the context of a financially viable and stable baking institution, to provide banking services for the development of agriculture and small and medium scale commercial and industrial enterprises particularly in the in the countryside, as provided in Section 4; to provide banking services to the National Government, other government entities and local governments; and to engage in international banking activities, particularly in the promotion of exports;

(b) To accept foreign deposits and operate a foreign currency deposit unit as established under Republic Act No. 6426, as amended;

(c) To accept and administer trusts and to carry on a general trust business;

(d) To act as official government depository with authority to maintain deposits of the government, its branches, subdivisions and instrumentalities, and of government owned or controlled corporations, subject to the provisions of Section 6 hereof and such rules and regulations as the Monetary Board may prescribe; and

(e) To adopt, amend or change its By-laws; to adopt, alter and use a seal, to make contracts; to sue and be sued; and to exercise the general powers of a corporation as provided in the Corporation Code of the Philippines and the powers of a bank of its category under the General Banking Act.

The exercise of the above-mentioned powers on banking shall be subject to applicable law, as well as regulations promulgated by the Central Bank of the Philippines.

SEC. 4. Granting of Loans; Exposure Ceilings and Limits on Equity Investments. -- In the exercise of its lending authority, the Bank shall give preference to loans for agricultural and small-and medium-scale commercial and industrial enterprises, particularly in the countryside.

Unless otherwise provided in this Charter, loans and other credit accommodations granted by the Bank shall be subject to the appropriate applicable loan limits to any single borrower as provided for under Republic Act No. 337, as amended.

The aggregate amount of loans, guarantees and contingent accounts, to Government agencies and entities including government owned and controlled corporations shall at no time exceed the deposits and book value of the shareholdings of the Government, including government agencies and entities, government owned or controlled corporations plus twenty percent (20%) of such total.

The authority of the Bank to invest in equities of allied undertakings, financial or non-financial, as well as in non-allied undertakings, shall be governed by the provisions of Republic Act No. 337, as amended.

SEC. 5. Authorized Capital Stock; Par Value; Sale of Shares. -- The authorized capital stock of the Bank shall be Ten Billion Pesos to be divided into One Hundred Million common shares with par value of P100 per share which are available for subscription by the National Government. The common shares may be offered for sale to or subscription by private; investors; Provided, That, the investment of private investors shall be subject to the applicable provisions of the General Banking Act.

The Board of Directors shall have authority to convert such number of unissued common voting shares into preferred non-voting shares to be issued for sale or subscription, with such features, terms, and restrictions as it may determine.

The issue and offering for sale of additional shares to private investors which will result in more than one-third of the common voting shares being eligible for acquisition by such investors shall require prior approval of the President of the Philippines; provided, that, where the sale of shares will result in a majority ownership by the private sector, the prior approval of the President shall also be required.

SEC. 6. Change in Ownership of the Majority of the Voting Equity of the Bank. -- When the ownership of the majority of the issued common voting shares passes to private investors, the stockholders shall cause the adoption and registration with the Securities and Exchange Commission of the appropriate Articles of Incorporation and revised by-laws within three (3) months from such transfer of ownership. Upon the issuance of the certificate of incorporation under the provisions of the Corporation Code, this Charter shall cease to have force and effect, and shall be deemed repealed. Any special privileges granted to the Bank such as the authority to act as official government depository, or restrictions imposed upon the Bank, shall be withdrawn, and the Bank shall thereafter be considered a privately organized bank subject to the laws and regulations generally applicable to private banks. The Bank shall likewise cease to be a government owned or controlled corporation subject to the coverage of service-wide agencies such as the Commission on Audit and the Civil Service Commission.

The fact of the change of the nature of the Bank from a government-owned and controlled financial institution to a privately-owned entity shall be given publicity.

SEC. 7. National Government Subscription. -- Upon the effectivity of this Charter, the National Government shall subscribe to Twenty-Five Million common shares of stock worth Two Billion Five Hundred Million Pesos which shall be deemed paid for by the Government with the net asset values of the Bank remaining after the transfer of assets and liabilities as provided in Section 29 hereof.

SEC. 8. Who may Vote Government-Owned Stock. -- The voting rights of all the stock of the Bank owned and controlled by the National Government shall be vested in the President of the Philippines, or in such person or persons as the President may from time to time designate.

SEC. 9. Board of Directors; Composition; Tenure; Per Diems. -- The affairs and business of the Bank shall be directed and its properties managed and preserved and its corporate powers exercised, unless otherwise provided in this Charter, by a Board of Directors consisting of nine members, duly elected as herein provided for a term of one year or until their successors are duly elected and qualified.

The Chairman of the Board shall be appointed by the President of the Philippines from among members of the Board: Provided, That the position of Chairman of the Board and President of the Bank shall not be held by the same person.

The Chairman shall preside at meetings of the Board and of the stockholders.

The President of the Bank shall be vice-chairman of the Board and, as such 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.

Unless otherwise set by the Board and approved by the President of the Philippines, members of the Board shall be paid a per diem of one thousand pesos for each meeting of the Board of Directors actually attended: Provided, That the total amount of per diems for every single month shall not exceed the sum of Five Thousand Pesos.

SEC. 10. Election and Qualification of 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 for the current year. Each stockholder or proxy will be entitled to as many votes as he may have shares of stock registered in his name on the thirty-first of January last preceding and held by him at the time of the election multiplied by the number of directors to be elected. In the election of the members of the Board, stockholders shall have the right of cumulative voting as recognized by law.

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.

At least four of the elective members of the Board shall not concurrently hold appointive or elective positions in the National Government, any government-owned or controlled corporation, or in any local government.

No director, officer on employee of any other bank shall be eligible as a member of the Board of Directors of the Bank.

SEC. 11. Powers of the Board of Directors. -- The Board of Directors shall have, among others, the following duties, powers and authority:

(a) To formulate policies necessary to carry out effectively the provisions of this Charter;

(b) To adopt, amend or change the by-laws as well as such rules and regulations as may be necessary for the effective operation of the Bank, in conformity with this Charter and existing laws;

(c) To prescribe such terms and conditions to govern the granting of loans and credits, consistent with the provisions of this Charter;

(d) To adopt an annual budget for the effective operation and administration of the Bank;

(e) To create, establish and operate a "Self-Insurance System" in order to effect possible damage or loss of cash-in-transit that the Bank may suffer on account of cash and check remittances to its branches and agencies and vice-versa, as well as those that may arise from irregular encashment or negotiation of checks, drafts, telegraphic transfers and similar instruments, or losses arising from other forms of fraud;

(f) To create and establish a Provident Fund which shall consist of contributions made both by the Bank and its officers or employees to a common fund for the payment of benefits to such officer or employee or his heirs under such terms and conditions as the Board of Directors may fix;

(g) To compromise or release, in whole or in part, any claim, liability, or demand for or against the Bank, regardless of the amount involved, under such terms and conditions as it may impose to protect the interests of the Bank.

(h) To determine the procedure and requirements for the acquisition of properties necessary for the business of the Bank and

(i) To dispose of properties of the Bank, whether used in the conduct of its business or acquired as a result of its banking operations, by public bidding or private negotiations as provided in Sec. 21 of this Charter.

The Board shall meet as frequently as necessary and the presence of five members shall constitute a quorum.

SEC. 12. President of the Bank. - The Chief Executive Officer of the Bank shall be the President who shall be elected by the Board of Directors from among themselves with the advise and consent of the President of the Philippines. No person shall be appointed 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 or financial management.

The President of the Bank shall, among other powers and duties, execute and administer the policies, measures, order and resolutions approved by the Board of Directors, and direct and supervise the operations and administration of the Bank. Particularly, he shall have the power and duty:

(a) To execute all contracts and to enter into all authorized transactions in behalf of the Bank;

(b) To exercise, as Chief Executive Officer, the power of supervision and control over decisions or actions of subordinate officers and all other powers that may be granted by the Board.

(c) To recommend to the Board the appointment, promotion, or removal of all officers of the Bank with the rank of at least Vice President or its equivalent;

(d) To appoint, promote or remove employees and officers below the rank of Vice President;

(e) To transfer, assign or reassign officers and personnel of the Bank in the interest of the service;

(f) To report periodically to the Board of Directors on the operations of the Bank;

(g) To submit annually a report on the result of the operations of the Bank to the President of the Philippines and to private shareholders in the Bank, if any; and

(h) To delegate any of his powers, duties or functions to unto any official of the Bank, with the approval of the Board of Directors.

SEC. 13. Legal Matters and Cases. -- The Bank shall have its own Legal Department, the head of which shall be appointed by the Board of Directors of the Bank upon recommendation of the President of the Bank.

The Bank may, subject to court approval, deputize any member of its legal staff to act as Special Sheriff in the enforcement of court writs and processes in cases involving the Bank.

SEC. 14. Bank Auditor. -- The Commission on Audit shall be ex-officio auditor of the Bank and shall designate a representative to the Bank.

SEC. 15. Other Officers and Employees. - The Board of Directors shall provide for an organization and staff of officers and employees of the Bank and upon recommendation of the President of the Bank, fix their remunerations and other emoluments.

No officer or employee of the Bank subject to the Civil Service Law shall be dismissed or suspended except as provided by law.

SEC. 16. Examination of the Bank. -- The Bank shall be subject to supervision and examination by the appropriate department of the Central Bank of the Philippines.

SEC. 17. Inhibition from Board Meeting of Member with Personal Interest. -- Whenever any member attending a meeting of the Board of Directors has a persona interest directly or indirectly, in the discussion or resolution of any given matter, said member shall not participate in the discussion or resolution of the matter and must retire from the meeting during the deliberation thereon. The minutes of the meeting which shall not the subject matter, when resolved, the fact that a member had a personal interest in it, and the withdrawal of the members concerned, may be made available to the public.

SEC. 18. Prohibition on Officers and Employees of the Bank. -- Excepts as required by law, or upon order of a court of competent jurisdiction, or express order of the President of the Philippines or writ of permission of the client, no officer or employee of the Bank shall reveal to, nor allow, to be examined, inquired or looked into by any relative to details of individual accounts or specific banking transactions: Provided, that in respect to deposits of whatever nature, the provisions of existing laws shall apply.

This prohibition shall not apply to the exchange of confidential credit information among government financial institutions or among banks, in accordance with established banking practices or as may be allowed by law.

SEC. 19. Borrowings by Directors, Officers and Employees - Restrictions and Limitations. -- No director of officer or employee of the Bank or any corporation, partnership, or company wherein any member of the Board of Directors, officer or employee, and/or their respective relatives within the second degree of consanguinity or affinity, is a director, officer, or controlling shareholder, shall either directly or indirectly, for himself or as representative or agent of others, borrow any of the deposits of funds from the Bank, nor shall he become a guarantor, indorser, or surety for loans from the Bank to others, or in any manner be an obligor for money borrowed from the Bank or loaned by it: Provided, That this provision on loans to directors, officers and employees shall not include loans allowed in the form of fringe benefits granted in accordance with rules and regulations as may be prescribed by the Monetary Board of the Central Bank.

The Bank shall not grant, directly or indirectly, any loans or credit accommodations to the head or to any officer or personnel directly exercising supervisory or regulatory authority over the activities of the Bank such as those of the Central Bank of the Philippines or of the Commission on Audit.

SEC. 20. Prohibited Interest or Fees with Reference to Obtaining Loans. -- No Director, officer or employee of the Bank shall, except as provided in the preceding Section, directly or indirectly, have any pecuniary interest in any loan from the Bank. Neither shall he charge, exact, demand or receive any fee, charge or commission in any form for his service or the use of his influence in obtaining a loan. Any violation of this Section shall be punished as hereinafter provided in Section 27 of this Charter.

SEC. 21. Disposal of Real Estate and Other Properties in the Collection of Debts. -- Real and other properties acquired by the Bank in the collection of debts, receivables or investments by way of foreclosure or other means shall be sold or otherwise disposed of in accordance with the policies and guidelines adopted by the Board of Directors within five years after date of their acquisition.

SEC. 22. Rights of Redemption of Foreclosed Property - Right of Possession During Redemption Period. - Within one year from the registration of the foreclosure sale of real property, the mortgagor shall have the right to redeem the property by paying the principal, interests, charges, commissions and all claims of whatever nature of the Bank outstanding and due as of the date of the sale including all the costs and other expenses incurred by reason of the foreclosure sale and custody of the property, as well as charges and accrued interest.

The Bank may take possession of the foreclosed property during the redemption period. When the Bank takes possession during such period, it shall be entitled to the fruits of the property with no obligation to account for them, the same being considered compensation for the interest that would otherwise accrue on the account. Neither shall the Bank be obliged to post a bond for the purpose of such possession.

SEC. 23. Allocation of Current Net Profits. -- At the close of the calendar year, the Bank shall determine the net results of its operations in the calculation of which adequate allowances shall be made for probable losses. Of the net profits arrived at, at least fifty percent (50%) shall be set aside and accumulated in the earned surplus account. The remaining current net profits may after an examination of the financial condition of the Bank be used for the declaration of Dividends corresponding to the shares of the Government and the private stockholders. Dividends may either be in the form of cash or stock as the Board of Directors shall determine.

SEC. 24. Payment of Cash Dividends Corresponding to Government-Owned Shares. -- Cash Dividends corresponding to the shares of the National Government shall first be set aside and used for the purpose of retiring the government securities which may have been issued by the Minister of Finance for additional Government subscriptions to the unissued shares of the capital stock of the Bank prior to the effectivity of this Charter. Thereafter, cash dividends corresponding to the Government-owned shares shall be paid unto the Treasury of the Philippines to become part of the general funds.

SEC. 25. Term of Legal Existence. -- The legal existence of the Bank shall be for a period of fifty years, counted from the date the Bank operates under the provisions of this Charter.

SEC. 26. Applicability of Banking Laws. - The provisions of Republic Acts No. 265, as amended, and No. 337, as amended, insofar as applicable and not in conflict with any provisions of this Charter shall apply to the Bank.

SEC. 27. Penalties for Violation of the Provisions of this Charter. -- Any director, officer or employee of the Bank who violates or knowingly permits the violation and any person aiding or abetting any violations of any of the provisions of this Charter, shall be punished by a fine not to exceed ten thousand pesos or by imprisonment or not more than five years or both such fine and imprisonment.

TRANSITORY PROVISIONS

SEC. 28. Preparatory Work. -- Upon the effectivity of this Executive Order, the Board of Directors and management of the Bank shall undertake the appropriate steps to establish its current financial condition for the purpose of determining its net asset values and the book value of shares thereof.

All shares of stock held by the Government of the Philippines in the Bank are deemed cancelled and exchanged for Twenty Five Million common shares of stock subscribed and paid-in by the Government, pursuant to Section 7 hereof.

The ratio of the shareholdings of the Government of the Philippines to the shareholdings of the private shareholders before the effectivity of this Charter shall be maintained.

Private shareholders of the Bank, including holders of Common "A" shares, shall exchange their shares for such number of shares of stock of the Bank computed on the basis of the ratio of the common shares held by the Government immediately prior to the effectivity of this Charter to the new shares of stock subscribed and paid-in by the Government pursuant to Section 7 hereof.

SEC. 29. Transfer of Assets and Liabilities of the Philippine National Bank. -- The Bank shall transfer to the National Government such of its assets and liabilities as may be necessary to rehabilitate the Bank and to start its operations under the Revised Charter on a viable basis, as determined by the appropriate authorities, such assets to include but not necessarily be limited to its acquired assets and non-performing accounts, and such liabilities to include real as well as contingent liabilities. The National Government is hereby authorized to accept the same under terms and conditions as may be mutually acceptable to the Bank and the National Government.

SEC. 31. Banking Operations under the 1986 Revised Charters; Governing Laws. -- The Banking operations of the Bank shall be governed by the provisions of this Charter beginning on January 1, 1987, or on such subsequent date as may be determine by the President of the Philippines upon the recommendation of the Minister of Finance.

SEC. 32. Loans and Other Investments, and Liabilities is Excess of Prescribed Limits. -- Loans and other investments as well as liabilities existing as of the date of the effectivity of this Revised Charter which as a result of the assets and liabilities transfer under Section 29 hereof will exceed the limits prescribed under the provisions of this Act, the General Banking Act or Central Bank regulations shall not be subject to such prescribed limits but shall be reduced within a period of two years unless a longer period is prescribed by the Monetary Board, and once reduced, shall not be increased beyond the prescribed limits.

SEC. 33. Authority to Reorganize. -- In view of reduced operations contemplated under this Charter in pursuance of the national policy expressed in the "whereas" clauses hereof, a reorganization of the Bank and a reduction in force are hereby authorized to achieve greater efficiency and economy in operations, including the adoption. The program or reorganization shall begin immediately after the approval of this Order, and shall be completed within six months and shall be fully implemented within eighteen months thereafter.

SEC. 34. Implementing Details; Organization and Staffing of the Bank. -- Upon the effectivity of this Charter, the incumbent Board of Directors and President of the Bank shall continue in office unless or until replaced by the President of the Philippines, provided that the provisions of Section 10 of this Charter shall be observed. The President of the Bank is hereby authorized, subject to the approval of the Board of Directors as appropriate, to issue such orders, rules and regulations as may be necessary to implement the provisions of this Charter, including those relative to the financial aspects, if any, and to the reorganization of the Bank as hereinabove authorized under Section 33 which will involve the determination and adoption of (1) the new internal structure of the Bank as reorganized down to the divisional, section or lowest organizational levels, including such appropriate units as may be needed to handle caretaking activities such the disposition of certain assets and the collection of certain accounts; (2) a new staffing pattern including appropriate salary rates; and (3) the initial operating budget.

In the implementation of the reorganization of the Bank as authorized under Section 33, and in appointments to appropriate positions in the new staffing pattern of the Bank, no personnel of the Bank shall have vested rights to any position in the new staffing pattern or to be otherwise retained in the Bank even if he should be the incumbent of the same or similar position in the new staffing pattern.

SEC. 35. Recall of External Personnel in the Bank. -- Effective on the date the Bank commences to operate in accordance with this Charter, all representatives and/or personnel of other government offices, Commission and government corporations assigned to or on detail with the bank are considered recalled to their respective offices and/or units. New designations to the Bank shall be made by the respective government offices or Commissions conformably with the mandate of law and the requirements of the Bank.

SEC. 36. Separation Benefits. -- All those who are separated from the Bank as a result of its reorganization in pursuance of Section 33 hereof shall be entitled to all gratuities and benefits provided for under existing laws and/or supplementary retirement plans adopted by and effective in the Bank.

SEC. 37. No legal action or suit brought by or on behalf of any aggrieved officer or personnel of the Bank in connection with any matter treated in these Transitory Provisions shall be received in any court unless the verified complaint shows on its face that the cause has first been submitted to, and adversely resolved by, the Civil Service Commission.

SEC. 38. Repealing Clause. -- Subject to Section 31 of this Charter, Presidential Decree No. 694, as amended, is hereby repealed. All other laws, decrees, acts, executive orders, administrative orders, proclamations, rules and regulations or parts thereof inconsistent with any of the provisions of this Charter are hereby repealed or modified accordingly.

SEC. 39. Separability Clause. -- If any provisions or section of this Charter or the application thereof no any person, association or circumstances is held invalid, the other pertinent provisions or sections of this Charter and their application to such person, association or circumstances shall not be affected thereby.

SEC. 40. Effectivity. -- This Executive Order shall take effect upon its approval.

Done in the City of Manila, on the 3rd day of December, in the year of Our Lord, nineteen hundred and eighty six.