AN ACT ENHANCING THE RESOLUTION AND LIQUIDATION FRAMEWORK FOR BANKS, AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 3591, AS AMENDED, AND OTHER RELATED LAWS

Sixteenth Congress
Third Regular Session

Begun and held in Metro Manila, on Monday, the twenty-seventh day of July, two thousand fifteen.

REPUBLIC ACT No. 10846

AN ACT ENHANCING THE RESOLUTION AND LIQUIDATION FRAMEWORK FOR BANKS, AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 3591, AS AMENDED, AND OTHER RELATED LAWS

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

SECTION 1. Section 1 of Republic Act No. 3591, as amended, is hereby amended to read as follows:

SECTION 2. A new section entitled Section 2 of the same Act shall be inserted between Sections 1 and 3 which shall read as follows:

SECTION 3. Section 2 of the same Act is accordingly renumbered as Section 3 and is hereby amended to read as follows:

SECTION 4. Section 3 of the same Act is accordingly renumbered as Section 4.

SECTION 5. The first paragraph of Section 4 of the same Act, as renumbered, is hereby amended to read as follows:

SECTION 6. Section 4, paragraphs (d), (f) and (h) of the same Act, as renumbered, are hereby amended to read as follows:

SECTION 7. Section 4 of the same Act is accordingly renumbered as Section 5, and is hereby amended to read as follows:

SECTION 8. Section 5 of the same Act is accordingly renumbered as Section 6, and is hereby amended to read as follows:

SECTION 9. Section 6 of the same Act is accordingly renumbered as Section 7.

SECTION 10. Section 7 paragraph (a) of the same Act, as renumbered, is hereby amended to read as follows:

SECTION 11. Section 7, paragraphs (d) and (h), of the same Act, as renumbered, are hereby amended to read as follows:

SECTION 12. An additional paragraph to Section 7 of the same Act, as renumbered, is hereby inserted after paragraph (h) which shall read as follows:

SECTION 13. Section 7 of the same Act is accordingly renumbered as Section 8, and is hereby amended to read as follows:

SECTION 14. Section 8 of the same Act is accordingly renumbered as Section 9.

SECTION 15. Section 9, paragraph Twelfth of the same Act, as renumbered, is hereby amended to read as follows:

SECTION 16. Section 9 of the same Act, as renumbered, is further amended by inserting additional paragraphs after paragraph Twelfth, which shall read as follows:

SECTION 17. Section 9 of the same Act is accordingly renumbered as Section 10.

SECTION 18. Section 10 paragraph (b-1) of the same Act, as renumbered, is hereby amended to read as follows:

SECTION 19. Section 10 paragraph (c) of the same Act, as renumbered, is hereby amended to read as follows:

SECTION 20. Section 10 paragraph (d-1) of the same Act, as renumbered, is hereby amended to read as follows:

SECTION 21. Section 10 paragraph (f) of the same Act, as renumbered, is hereby amended to read as follows:

SECTION 22. The second paragraph of Section 10 paragraph (i) of the same Act, as renumbered, is hereby amended to read as follows:

SECTION 23. A new section entitled Section 11 of the same Act is hereby inserted between Sections 10 and 12 which shall read as follows:

SECTION 24. Sections 10, 11 and 12 of the same Act are hereby deleted.

SECTION 25. A new section entitled Section 12 of the same Act is hereby inserted between Sections 11 and 13 which shall read as follows:

SECTION 26. A new section entitled Section 13 of the same Act is hereby inserted between Sections 12 and 14 which shall read as follows:

SECTION 27. A new section entitled Section 14 of the same Act is hereby inserted between Sections 13 and 15 which shall read as follows:

SECTION 28. A new section entitled Section 15 of the same Act is hereby inserted between Sections 14 and 16 which shall read as follows:

SECTION 29. A new section entitled Section 16 of the same Act is hereby inserted between Sections 15 and 17 which shall read as follows:

SECTION 30. Section 13 of the same Act is hereby renumbered as Section 17.

SECTION 31. A new section entitled Section 18 of the same Act is hereby inserted between Sections 17 and 19 which shall read as follows:

SECTION 32. Section 14 of the same Act is accordingly renumbered as Section 19 and is hereby amended to read as follows:

SECTION 33. Section 15 of the same Act is accordingly renumbered as Section 20 and is hereby amended to read as follows:

SECTION 34. Section 16 of the same Act is accordingly renumbered as Section 21 and paragraph (c) thereof is hereby amended to read as follows:

SECTION 35. Section 17 of the same Act is accordingly renumbered as Section 22.

SECTION 36. Section 22 paragraph (a) of the same Act, as renumbered, is hereby amended to read as follows:

SECTION 37. Section 22 paragraph (b) of the same Act, as renumbered, is hereby amended to read as follows:

SECTION 38. An additional paragraph to Section 22 of the same Act, as renumbered, is hereby inserted after paragraph (c) which shall read as follows:

SECTION 39. Section 17 paragraph (d) of the same Act is accordingly renumbered as Section 22 paragraph (e) and is hereby amended to read as follows:

SECTION 40. Section 18 of the same Act is accordingly renumbered as Section 23 and is hereby amended to read as follows:

SECTION 41. Section 19 of the same Act is accordingly renumbered as Section 24 and is hereby amended to read as follows:

SECTION 42. Section 20 of the same Act is accordingly renumbered as Section 25.

SECTION 43. Section 21 of the same Act is accordingly renumbered as Section 26.

SECTION 44. Section 26 paragraph (f) of the same Act, as renumbered, is hereby amended to read as follows:

SECTION 45. Additional paragraphs to Section 26 of the same Act, as renumbered, are hereby inserted after paragraph (g) which shall read as follows:

SECTION 46. Section 22 of the same Act is accordingly renumbered as Section 27.

SECTION 47. Section 23 of the same Act is hereby renumbered as Section 28 and amended to read as follows:

SECTION 48. Section 24 of the same Act is deleted and a new Section 29 is added to read as follows:

SECTION 49. Section 25 of the same Act is accordingly renumbered as Section 30.

SECTION 50. The Corporation may be reorganized by its Board of Directors by adopting if it so desires, an entirely new staffing pattern or organizational structure to suit the operations of the Corporation under this Act. No preferential or priority right shall be given to or enjoyed by any personnel for appointment to any position in the new staffing pattern nor shah any personnel be considered as having prior or vested rights with respect to retention in the Corporation or in any position which may be created in the new staffing pattern, even if he or she should be the incumbent of a similar position prior to reorganization. The reorganization shall be completed within six (6) months after the effectivity of this Act. Personnel who are not retained are deemed separated horn the service.

SECTION 51. The Board of Directors is hereby authorized to provide separation incentives, and all those who shall retire or be separated from the service on account of reorganization under the preceding section shall be entitled to such incentives which may be in addition to all gratuities and benefits to which they may be entitled under existing laws.

SECTION 52. Separability Clause. – If any provision or section of this Act or the application thereof to any person or circumstances is held invalid, the other provisions or sections of this Act, in the application of such provision or section to other persons or circumstances, shall not be affected thereby.

SECTION 53. Repealing Clause. – All acts or parts of acts and executive orders, administrative orders, or parts thereof which are inconsistent with the provisions of this Act are hereby repealed.

SECTION 54. Effectivity Clause. – This Act shall take effect fifteen (15) days following the completion of its publication in the Official Gazette or in two (2) newspapers of general circulation.

Approved,

Senate Bill No. 2976, which was approved by the Senate on December 14, 2015, was adopted as an amendment to House Bill No. 6020 by the House of Representatives on January 19, 2016.

Approved: MAY 23 2016

(Sgd.) BENIGNO S. AQUINO III
President of the Philippines

“THE CREATION OF THE PHILIPPINE
DEPOSIT INSURANCE CORPORATION

“SECTION 1. — There is hereby created a Philippine Deposit Insurance Corporation hereinafter referred to as the ‘Corporation’ which shall insure as herein provided, the deposits of all banks which are entitled to the benefits of insurance under this Act, and which shall have the powers hereinafter granted.

“The Corporation shall, as a basic policy, promote and safeguard the interests of the depositing public by providing insurance coverage on all insured deposits and helping maintain a sound and stable banking system.”

“STATE POLICY

“SEC. 2. — It is hereby declared to be the policy of the State to strengthen the mandatory deposit insurance coverage system to generate, preserve, maintain faith and confidence in the country’s banking system, and protect it from illegal schemes and machinations.

“Towards this end, the government must extend all means and mechanisms necessary for the Corporation to effectively fulfill its vital task of promoting and safeguarding the interests of the depositing public by way of providing insurance coverage on bank deposits and in helping develop a sound and stable banking system.

“In view of the crucial role and the nature of its functions and responsibilities, the Corporation, while being a government instrumentality with corporate powers, shall enjoy fiscal and administrative autonomy.”

“BOARD OF DIRECTORS: COMPOSITION
AND AUTHORITY

“SEC. 3. (a) The powers and functions of the Corporation shall be vested in and exercised by a Board of Directors which shall be composed of seven (7) members as follows:

“PRESIDENT OF THE CORPORATION
COMPENSATION, POWERS AND DUTIES

“SEC. 4. The President of the Corporation shall be its Chief Executive Officer and the Vice Chairman of its Board of Directors and his or her salary shall be fixed by the President of the Philippines upon the recommendation of the Governance Commission for Government-Owned or -Controlled Corporations, at a sum commensurate to the importance and responsibility attached to the position. The sum total of the salary, allowances, benefits and other emoluments of the President of the Corporation shall be higher than the compensation package of the next highest ranking executive of the Corporation.”

“(d) To represent the Corporation in all dealings with other offices, agencies and instrumentalities of the government and with all other persons or entities, public or private, whether domestic, foreign or international;

“(f) To represent the Corporation, either personally or through counsel, including private counsel, as may be authorized by the PDIC Board, in any legal proceeding or action;

“(h) x x x. The President shall be assisted by a Vice President and other officials whose appointment and removal for cause shall be approved and whose salary shall be fixed by the Board of Directors upon recommendation of the President of the Corporation. During the absence or temporary incapacity of the President, or in case of vacancy or permanent incapacity and pending appointment of a new President of the Corporation by the President of the Philippines, the Board of Directors shall designate the officer-in-charge of the Corporation.”

“DEFINITION OF TERMS

“SEC. 5. As used in this Act –

“DEPOSIT INSURANCE COVERAGE

“SEC. 6. The deposit liabilities of any bank which is engaged in the business of receiving deposits as herein defined on the effective date of this Act, or which thereafter may engage in the business of receiving deposits, shall be insured with the Corporation.

“Whenever a bank is determined by the Bangko Sentral ng Pilipinas to be capital deficient, the Corporation may conduct an insurance risk evaluation on the bank to enable it to assess the risks to the DIF. Such evaluation may include the determination of: (i) the fair market value of the assets and liabilities of a bank; or (ii) the risk classification of a bank; or (iii) possible resolution modes under Section 11 of this Act, subject to such terms and conditions as the PDIC Board may prescribe.”

“ASSESSMENT OF MEMBER BANKS

“SEC. 7. (a) The assessment rate shall be determined by the Board of Directors: Provided, That the assessment rate shall not exceed one-fifth (1/5) of one per centum (1%) per annum. The semi-annual assessment for each insured bank shall be in the amount of the product of one-half (1/2) the assessment rate multiplied by the assessment base but in no case shall it be less than Five thousand pesos (P5,000.00). The assessment base shall be the amount of the liability of the bank for deposits as defined under subsection (g) of Section 5 without any deduction for indebtedness of depositors.

“In addition, the Board of Directors may establish a risk-based assessment system and impose a risk-based assessment rate which shall not exceed two-fifth (2/5) of one per centum (1%) per annum multiplied by the assessment base.

“The semi-annual assessment base for one semi-annual period shall be the average of the assessment base of the bank as of the close of business on March thirty-one and June thirty and the semi-annual assessment base for the other semi-annual period shall be the average of the assessment base of the bank as of the close of business on September thirty and December thirty-one: Provided, That when any of said days is a nonbusiness day or legal holiday, either national or provincial, the preceding business day shall be used. The certified statements required to be filed with the Corporation under subsections (b) and (c) of this section shall be in such form and set forth such supporting information as the Board of Directors shall prescribe. The assessment payments required from the insured banks under subsections (b) and (c) of this section shall be made in such manner and at such time or times as the Board of Directors shall prescribe.”

“(d) All assessment collections and income from operations after expenses and charges shall be added to the DIF under Section 17 hereof. Such expenses and charges are: (1) the operating costs and expenses of the Corporation for the calendar year; (2) additions to reserve to provide for insurance and financial assistance losses, net of recoverable amounts from applicable assets and collaterals, during the calendar year; and (3) the net insurance and financial assistance losses sustained in said calendar year.

“(h) Should any insured bank fail or refuse to pay any assessment required to be paid by such bank under any provision of this Act, and should the bank not correct such failure or refusal within thirty (30) days after written notice has been given by the Corporation to an officer of the bank citing this subsection, and stating that the bank has failed or refused to pay as required by the law, the Corporation may, at its discretion, file a case for collection before the appropriate court without prejudice to the imposition of administrative sanctions allowed under the provisions of this law on the bank officials responsible for the nonpayment of assessment fees.”

“(i) The Corporation shall have the authority to collect a special assessment from any member bank and prescribe the terms and conditions thereof to maintain the target level of the DIF set by the Board of Directors in accordance with this Act.”

“SANCTIONS AGAINST UNSAFE AND
UNSOUND BANKING PRACTICES

“SEC. 8. (a) Whenever upon examination by the Corporation into the condition of any insured bank, it shall be disclosed that an insured bank or its directors or agents have committed, are committing or about to commit unsafe or unsound practices in conducting the business of the bank, or have violated, are violating or about to violate any provisions of any law or regulation to which the insured bank is subject, the Board of Directors shall submit the report of the examination to the Monetary Board to secure corrective action thereon. If no such corrective action is taken by the Monetary Board within forty-five (45) days from the submission of the report, the Board of Directors shall, motu proprio, institute corrective action which it deems necessary. The Board of Directors may thereafter issue a cease and desist order, and require the bank or its directors or agents concerned to correct the practices or violations within forty-five (45) days. However, if the practice or violation is likely to cause insolvency or substantial dissipation of assets or earnings of the bank, or is likely to seriously weaken the condition of the bank or otherwise seriously prejudice the interests of its depositors and the Corporation, the period to take corrective action shall not be more than fifteen (15) days. The order may also include the imposition of fines provided in Section 26(g) hereof. The Board of Directors shall duly inform the Monetary Board of the Bangko Sentral ng Pilipinas of action it has taken under this subsection with respect to such practices or violations.

“(b) The actions and proceedings provided in the preceding subsections may be undertaken by the Corporation if, in its opinion, an insured bank or its directors or agents have violated, are violating or about to violate any provision of this Act or any order, rule or instruction issued by the Corporation or any written condition imposed by the Corporation in connection with any transaction with or grant by the Corporation.

“(c) The Corporation may terminate the insured status of any bank that fails or refuses to comply, within thirty (30) days from notice, with any cease-and-desist order issued by the Corporation, or with any corrective action imposed by the Monetary Board, under this section pertaining to a deposit-related unsafe and/or unsound banking practice.

“Such termination shall be final and executory, and shall be effective upon publication of the notice of termination in a newspaper of general circulation.

“The deposits of each depositor in the bank on the effective date of the termination of insurance coverage, less all subsequent withdrawals, shall continue to be insured up to the maximum deposit insurance coverage for a period of one hundred eighty (180) days. Additions to, or renewal of, existing deposits and new deposits in such bank after the effective date of termination of insured status of the bank shall not be insured by the Corporation.

“The bank shall not advertise or represent that additions to, or renewal of, existing deposits and new deposits made after the effective date of termination aye covered by deposit insurance.”

“Twelfth – The provisions of Presidential Decree No. 1445, as amended, Executive Order No. 292, and other similar laws notwithstanding, to compromise, condone or release, in whole or in part, any claim or settled liability to the Corporation, regardless of the amount involved, under such terms and conditions as may be imposed by the Board of Directors to protect the interest of the Corporation, and to write off the Corporation’s receivables and assets which are no longer recoverable or realizable;”

“Thirteenth – To determine qualified interested acquirers or investors for any of the modes of resolution or liquidation of banks;

“Fourteenth – To determine the appropriate resolution method and to implement the same for a bank subject of resolution; and

“Fifteenth – To determine the appropriate mode of liquidation of a closed bank and to implement the same.”

“(b-1) The investigators appointed by the Board of Directors shall have the power on behalf of the Corporation to conduct investigations on frauds, irregularities and anomalies committed in banks, based on reports of examination conducted by the Corporation and Bangko Sentral ng Pilipinas or complaints from depositors or from other government agency. Each such investigator shall have the power to administer oaths, and to examine and take and preserve the testimony of any person relating to the subject of investigation. For this purpose, the Corporation may appoint or hire persons or entities of recognized competence in forensic and fraud investigations as its agents.”

“(c) Each insured bank shall make to the Corporation reports of condition in such form and at such times as the Board of Directors may require such reports to be published in such manner, not inconsistent with any applicable law, as it may direct. Every such bank which fails to make or publish any such report within such time, as the Board of Directors may require, shall be subject to a penalty of not more than Ten thousand pesos (P10,000.00) for each day of such failure recoverable by the Corporation for its use.”

“(d-1) Each insured bank shall keep and maintain a true and accurate record or statement of its daily deposit transactions consistent with the standards set by the Bangko Sentral ng Pilipinas and the Corporation. Compliance with such standards shall be duly certified by the president of the bank and the compliance officer: Provided, That refusal or willful failure to issue the required certification shall constitute a violation of this section and shall subject such officers of the bank to the sanctions provided for under Section 26(f) of this Act.”

“(f) The Corporation shall underwrite or advance all legal costs and expenses, including legal fees and other expenses of external counsel, or provide legal assistance to, directors, officers, employees or agents of the Corporation in connection with any civil, criminal, administrative or any other action or proceeding, to which such director, officer, employee or agent is made a party by reason of, or in connection with, the exercise of authority or performance of functions and duties under this Act: Provided, That such legal protection shall not apply to any civil, criminal, administrative or any action or proceeding that may be initiated by the Corporation, in whatever capacity, against such director, officer, employee or agent: Provided, further, That directors, officers, employees or agents who shall resign, retire, transfer to another agency or be separated from the service, shall continue to be provided with such legal protection in connection with any act done or omitted to be done by them in good faith during their tenure or employment with the Corporation: Provided, finally, That in the event of a settlement or compromise, indemnification shall be provided only in connection with such matters covered by the settlement as to which the Corporation is advised by counsel that the persons to be indemnified did not commit any negligence or misconduct.”

“(i) Notwithstanding the provisions of this section and Section 3 of this Act, members of the Board of Directors and personnel of the Corporation may become directors and officers of any bank and banking institution and of any entity related to such institution in connection with financial assistance extended by the Corporation to such institution and when, in the opinion of the Board, it is appropriate to make such designation to protect the interest of the Corporation.”

“BANK RESOLUTION

“SEC. 11. (a) The Corporation, in coordination with the Bangko Sentral ng Pilipinas, may commence the resolution of a bank under this section upon:

“The Corporation shall inform the hank of its eligibility for entry into resolution.

“(b) The Bangko Sentral ng Pilipinas shall inform the Corporation of the initiation of prompt corrective action on any bank and shall be authorized to share with the Corporation all information, agreements or documents, including any order of the Monetary Board, in relation to the prompt corrective action. The Corporation shall have the authority to inquire and monitor the status of banks under prompt corrective action.

“(c) When there is a failure of prompt corrective action as declared by the Monetary Board due to capital deficiency, the Corporation, its duly authorized officers or employees, may examine, inquire or look into the deposit records of a bank: Provided, That such authority may not be exercised when the failure of prompt corrective action is due to grounds other than capital deficiency. For this purpose, banks, their officers and employees are hereby mandated to disclose and report to the Corporation or its duly authorized officers and employees, deposit account information in said bank.

“The Corporation, its duly authorized officers or employees are prohibited from disclosing information obtained under this section to any person, government official, bureau or office. Any act done pursuant to this section shall not be deemed as a violation of Republic Act No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act No. 8791, and other similar laws protecting or safeguarding the secrecy or confidentiality of bank deposits: Provided, That any unauthorized disclosure of the information under this section shall be subject to the same penalty under the foregoing laws protecting the secrecy or confidentiality of bank deposits.

“(d) The stockholders, directors, officers or employees of the bank shall have the following obligations:

“(e) Within a period of one hundred eighty (180) days from a bank’s entry into resolution, the Corporation, through the affirmative vote of at least five (5) members of the PDIC Board, shall determine whether the bank may be resolved through the purchase of all its assets and assumption of all its liabilities, or merger or consolidation with, or its acquisition, by a qualified investor.

“For this purpose, the Corporation may:

“(f) In determining the appropriate resolution method for a bank, the Corporation shall consider the:

“(g) The Corporation may appoint or hire persons or entities of recognized competence in banking, finance, asset management or remedial management, as its agents, to perform such powers and functions of the Corporation in the resolution of a bank, or assist in the performance thereof.

“(h) The PDIC Board shall prescribe the guidelines or criteria for a bank to be placed under resolution.

“(i) Upon a determination by the Corporation that the bank may not be resolved, the Monetary Board may act in accordance with Section 30 of Republic Act No. 7653 or the New Central Bank Act.

“(j) Bank resolution involving the purchase of all assets and assumption of all liabilities of a bank shall be exempt from the provisions of Act No. 3952, otherwise known as ‘The Bulk Sales Law’.

“(k) The provisions of this section are without prejudice to any action that the Monetary Board may take under existing laws.”

“LIQUIDATION OF A CLOSED BANK

“SEC. 12. (a) Whenever a bank is ordered closed by the Monetary Board, the Corporation shall be designated as receiver and it shall proceed with the takeover and liquidation of the closed bank in accordance with this Act. For this purpose, banks closed by the Monetary Board shall no longer be rehabilitated.”

“AUTHORITIES OF A RECEIVER AND EFFECTS OF
PLACEMENT OF A BANK UNDER LIQUIDATION

“SEC. 13. (a) The receiver is authorized to adopt and implement, without need of consent of the stockholders, board of directors, creditors or depositors of the closed bank, any or a combination of the following modes of liquidation:

“(b) In addition to the powers of a receiver provided under existing laws, the Corporation, as receiver of a closed bank, is empowered to:

“The Board of Directors shall adopt such policies and guidelines as may be necessary for the performance of the above powers by personnel, deputies, assistants and agents of the Corporation.

“(c) After the payment of all liabilities and claims against the closed bank, the Corporation shall pay surplus, if any, dividends at the legal rate of interest from date of takeover to date of distribution to creditors and claimants of the closed bank in accordance with the Rules on Concurrence and Preference of Credits under the Civil Code or other laws before distribution to the shareholders of the closed bank.

“(d) The officers, employees, deputies, assistants and agents of the receiver shall have no liability and shall not be subject to any action, claim or demand in connection with any act done or omitted to be done by them in good faith in connection with the exercise of their powers and functions under this Act and other applicable laws, or other actions duly approved by the court.

“(e) The placement of a bank under liquidation shall have the following effects:

“NOTICE OF CLOSURE AND
TAKEOVER ACTIVITIES

“SEC. 14. (a) Upon the designation of the Corporation as receiver of a closed bank, it shall serve a notice of closure to the highest-ranking officer of the bank present in the bank premises, or in the absence of such officer, post the notice of closure in the bank premises or on its main entrance. The closure of the bank shall be deemed effective upon the service of the notice of closure. Thereafter, the receiver shall takeover the bank and exercise the powers of the receiver as provided in this Act.

“(b) The receiver shall have authority to use reasonable force, including the authority to force open the premises of the bank, and exercise such acts necessary to take actual physical possession and custody of the bank and all its assets, records, documents, and take charge of its affairs upon the service of the notice of closure.

“(c) Directors, officers, employees or agents of a bank hold money and other assets of the bank in trust or under administration or management by them for the bank in their fiduciary capacity.

Upon service of the notice of closure to the bank, all directors, officers, employees or agents of the closed bank shall have the duty to immediately account for, surrender and turn over to the receiver, and provide information relative to, the assets, records, and affairs of the closed bank in their possession, custody, administration or management.

“(d) When the circumstances so warrant, the local government unit and law enforcement agencies concerned shall, upon request, immediately provide assistance to the receiver during the service of notice of closure and actual takeover operations to ensure the orderly conduct thereof and the security and safety of the personnel of the receiver and the employees of the closed bank.”

“PURCHASE OF ASSETS AND
ASSUMPTION OF LIABILITIES

“SEC. 15. (a) The receiver shall have the authority to facilitate and implement the purchase of the assets of the closed bank and the assumption of its liabilities by another insured bank, without need for approval of the liquidation court. The exercise of this authority shall be in accordance with the Rules on Concurrence and Preference of Credits under the Civil Code or other laws, subject to such terms and conditions as the Corporation may prescribe. The disposition of the branch licenses and other bank licenses of the closed bank shall be subject to the approval of the Bangko Sentral ng Pilipinas.

“(b) Such action of the receiver to determine whether a bank may be the subject of a purchase of assets and assumption of liabilities transaction shall be final and executory, and may not be set aside by any court.”

“CONVENTIONAL LIQUIDATION
“A. ASSET MANAGEMENT AND CONVERSION

“SEC. 16. (a) The assets gathered by the receiver shall be evaluated and verified as to their existence, ownership, condition, and other factors to determine their realizable value. In the management, preservation and disposition of assets, the receiver shall be guided by cost-benefit considerations, resources of the closed bank, and potential asset recovery.

“(b) The conversion of the assets of the closed bank shall be carried out in a fair and transparent manner in accordance with the rules and procedures as may be determined by the receiver.

“(c) In the management and/or conversion of the assets of the closed bank, the receiver shall have the authority to:

“(d) Notwithstanding any provision of law to the contrary, the following rules shall apply to the management and/or conversion by the receiver of the assets of the closed bank:

“(e) The receiver shall have the authority to invest funds received from the conversion of the assets of the closed bank in government securities, other government-guaranteed marketable securities or investment-grade debt instruments.

“(f) The proceeds of the sale of the bank and branch licenses shall be for the benefit of the creditors of the closed bank which shall be distributed in accordance with this Act and the Rules on Concurrence and Preference of Credits under the Civil Code or other laws.

“B. PETITION FOR ASSISTANCE IN THE
LIQUIDATION OF A CLOSED BANK

“(g) A petition for assistance in the liquidation is a special proceeding for the liquidation of a closed bank, and includes the declaration of the concomitant right of its creditors and the order of payment of their valid claims in the disposition of its assets.

“Any proceeding initiated under this section shall be considered in rem. Jurisdiction over all persons affected by the proceeding shall be considered as acquired upon publication of the order setting the case for initial hearing in any newspaper of general circulation in the Philippines.

“(h) The liquidation court shall have exclusive jurisdiction to adjudicate disputed claims against the closed banks, assist in the enforcement of individual liabilities of the stockholders, directors and officers and decide on all other issues as may be material to implement the distribution plan adopted by the Corporation for general application to all closed banks.

“(i) The provisions of Republic Act No. 8799, otherwise known as ‘The Securities Regulation Code’, and Supreme Court Administrative Matter No. 00-8-10-SC, entitled, ‘The Rules of Procedure on Corporate Rehabilitation’, shall not be applicable to the petition for assistance in the liquidation of the closed bank.

“(j) The petition shall be filed in the RTC which has jurisdiction over the principal office of the closed bank or the principal office of the receiver, at the option of the latter.

“(k) The petition shall be filed ex parte within a reasonable period from receipt of the Monetary Board Resolution placing the bank under liquidation.

“Claims denied by the receiver shall be filed with the liquidation court within sixty (60) days from receipt of the final notice of denial of claim.

“(m) A claim whose validity has not yet been determined with finality at the time of the submission of the final asset distribution plan, either by reason of a pending suit or for whatever reason, shall be considered as contingent claim and shall not be paid under the proposed final asset distribution plan.

“(n) Upon finality of the order approving the final asset distribution plan, the petition for assistance in the liquidation of a closed bank shall henceforth be, for all intents and purposes, considered closed and terminated and the receiver, its officers, employees or agents, are forever discharged from any and all claims and/or liability arising from or in connection with the liquidation of the closed bank.

“(o) The receiver shall submit a final report on the implementation of the approved final asset distribution plan to the Monetary Board and the SEC after the expiration of the winding-up period provided in this Act.

“(p) The Supreme Court shall promulgate the appropriate procedural rules to implement this section.

“C. WINDING-UP

“(q) The creditors shall have a period of six (6) months from the date of publication of notice of the approval by the court of the final asset distribution plan of the closed bank within which to claim payment of the principal obligations and surplus dividends. During this six-month period, the receiver shall hold as trustee the assets allocated in the final asset distribution plan for said creditors.

“Failure by the creditor to comply with the documentary requirements within the prescribed period and/or refusal to accept the asset as payment shall be deemed as abandonment or waiver of his or her right to payment.

“(r) The individual stockholders of record or their duly-authorized representative or the court-appointed stockholders’ representative shall have a period of six (6) months from publication of notice of the approval by the court of the final asset distribution plan of the closed bank within which to claim the residual assets. During this six-month period, the receiver shall hold as trustee the assets allocated in the final asset distribution plan for said stockholders of record.

“Failure by the individual stockholders of record or their duly-authorized representative or the court-appointed stockholders’ representative to comply with the documentary requirements within the prescribed period and/or refusal to accept the residual assets in kind shall be deemed as abandonment or waiver of right to receive the residual assets.

“(s) After the lapse of the six-month period provided in paragraphs (q) and (r) of this section, all assets which remain unclaimed by the creditors and/or stockholders of record shall be turned over to the Bureau of Treasury.

“(t) The receiver shall continue to keep all the pertinent records of the closed bank for a period of six (6) months from the date of publication of the approval of the final asset distribution plan.

After the lapse of this period, the receiver is authorized to dispose of the same in accordance with the rules and regulations to be prescribed by the receiver.”

“DIVIDEND DECLARATION

“SEC. 18. Consistent with the policy of the State to generate, preserve, maintain faith and confidence in the country’s banking system, the Corporation shall build up and maintain the DIF at the target level set by the PDIC Board of Directors. Such target level shall be subject to periodic review and may be adjusted as necessary.

“The Corporation is exempt from Republic Act No. 7656; instead, the Corporation shall remit dividends to the national government only if the target DIF level for the applicable year has been reached. For purposes of computing the amount of dividends to be declared and remitted to the national government, all assessment collections shall not be considered as income. The dividend rate shall be at least fifty percent (50%) of the income from other sources only.”

“PAYMENT OF INSURED DEPOSITS

“SEC. 19. Whenever an insured bank shall have been closed by the Monetary Board pursuant to Section 30 of Republic Act No. 7653, or upon expiration or revocation of a bank’s corporate term, payment of the insured deposits on such closed bank shall be made by the Corporation as soon as possible either (1) by cash or (2) by making available to each depositor a transferred deposit in another insured bank in an amount equal to insured deposit of such depositor: Provided, however, That the Corporation, in its discretion, may require proof of claims to be filed before paying the insured deposits, and that in any case where the Corporation is not satisfied as to the validity of a claim for an insured deposit, it may require final determination of a court of competent jurisdiction before paying such claim: Provided, further, That failure to settle the claim, within six (6) months from the date of filing of claim for insured deposit, where such failure was due to grave abuse of discretion, gross negligence, bad faith, or malice, shall, upon conviction, subject the directors, officers or employees of the Corporation responsible for the delay, to imprisonment from six (6) months to one (1) year: Provided, furthermore, That the period shall not apply if the validity of the claim requires the resolution of issues of facts and or law by another office, body or agency including the case mentioned in the first proviso or by the Corporation together with such other office, body or agency.”

“SEC. 20. The Corporation, upon payment of any depositor as provided for in Section 19 of this Act, shall be subrogated to all rights of the depositor against the closed bank to the extent of such payment. Such subrogation shall include the right on the part of the Corporation to receive the same dividends and payments from the proceeds of the assets of such closed bank and recoveries on account of stockholders’ liability as would have been payable to the depositor on a claim for the insured deposits: Provided, That such depositor shall retain his or her claim for any uninsured portion of his or her deposit, which legal preference shall be the same as that of the subrogated claim of the Corporation for its payment of insured deposits. All payments by the Corporation of insured deposits in closed banks partake of the nature of public funds, and as such, must be considered a preferred credit in the order of preference under Article 2244 (9) of the New Civil Code.”

“(c) Except as otherwise prescribed by the Board of Directors, neither the Corporation nor such other insured bank shall be required to recognize as the owner of any portion of a deposit evidenced by a passbook, certificate of deposit or other evidence of deposit determined by the Corporation to be an authentic document or record of the closed bank under a name other than that of the claimant, any person whose name or interest as such owner is not disclosed on the passbook, certificate of deposit or other evidence of deposit of such closed bank as part owner of said deposit, if such recognition would increase the aggregate amount of the insured deposits in such closed bank.”

“CORPORATE FUNDS AND ASSETS

“SEC. 22. (a) Subject to guidelines and limits as approved by the Board of Directors, money of the Corporation denominated in the local currency, not otherwise employed, shall be invested in obligations of the Republic of the Philippines or in obligations guaranteed as to principal and interest by the Republic of the Philippines.

“The Corporation may also invest in debt instruments denominated in foreign currencies issued or guaranteed by the Republic of the Philippines, or debt instruments denominated in freely convertible foreign currencies issued by supranationals, multilateral agencies, or foreign governments with at least an investment grade credit rating.

“The Corporation shall likewise be authorized to buy and/or sell debt instruments and foreign currencies from any government securities eligible dealers or any counterparties or brokers, accredited by the PDIC Board.

“For this purpose, the Corporation shall be authorized to open securities custodianship and settlement accounts.”

“(b) The banking or checking accounts of the Corporation shall be kept with the Bangko Sentral ng Pilipinas, or with any other bank designated as depository or fiscal agent of the Philippine government.”

“(d) Assets of the Corporation shall be exempt from attachment, garnishment or any other order or process of any court, agency or any other administrative body.”

“FINANCIAL ASSISTANCE

“(e) In the exercise of its authorities under Section 11 of this Act, the Corporation is authorized to make loans to, or purchase the assets of, or assume liabilities of, or make deposits in:

“The Corporation, prior to the exercise of the powers under this section, shall determine that actual payoff and liquidation thereof will be more expensive than the exercise of this power: Provided, That when the Monetary Board has determined that there are systemic consequences of a probable failure or closure of an insured bank, the Corporation may grant financial assistance to such insured bank in such amount as may be necessary to prevent its failure or closure and/or restore the insured bank to viable operations, under such terms and conditions as may be deemed necessary by the Board of Directors, subject to concurrence by the Monetary Board and without additional cost to the DIF.

“A systemic risk refers to the possibility that failure of one bank to settle net transactions with other banks will trigger a chain reaction, depriving other banks of funds leading to a general shutdown of normal clearing and settlement activity. Systemic risk also means the likelihood of a sudden, unexpected collapse of confidence in a significant portion of the banking or financial system with potentially large real economic effects. Finally, the Corporation may not use its authority under this subsection to purchase the voting or common stock of an insured bank but it can enter into and enforce agreements that it determines to be necessary to protect its financial interests: Provided, That the financial assistance may take the form of equity or quasi-equity of the insured bank as may be deemed necessary by the Board of Directors with concurrence by the Monetary Board: Provided, further, That the Corporation shall dispose of such equity as soon as practicable.”

“AUTHORITY TO BORROW

“SEC. 23. The Corporation is authorized to borrow from the Bangko Sentral ng Pilipinas and the Bangko Sentral ng Pilipinas is authorized to lend to the Corporation on such terms as may be agreed upon by the Corporation and the Bangko Sentral ng Pilipinas, such funds as in the judgment of the Board of Directors of the Corporation are from time to time required for insurance purposes and financial assistance provided for in Section 22(e) of this Act: Provided, That any such loan as may be granted by the Bangko Sentral ng Pilipinas shall be consistent with monetary policy: Provided, further, That the rate of interest thereon shall be fixed by the Monetary Board.

“When in the judgment of the Board of Directors the funds of the Corporation are not sufficient to provide for an emergency or urgent need to attain the purposes of this Act, the Corporation is likewise authorized to borrow money, obtain loans or arrange credit lines or other credit accommodations from any bank: Provided, That such loan shall be of short-term duration: Provided, further, That no prior Monetary Board opinion shall be required for the Corporation and its counterparties on individual drawdowns or borrowings within an approved borrowing program where prior Monetary Board opinion has already been obtained, pursuant to Section 123 of Republic Act No. 7653.”

“ISSUANCE OF BONDS, DEBENTURES
AND OTHER OBLIGATIONS

“SEC. 24. With the approval of the President of the Philippines, upon the recommendation of the Department of Finance, the Corporation is authorized to issue bonds, debentures, and other obligations, both local or foreign, as may be necessary for purposes of providing liquidity for settlement of insured deposits in closed banks, to facilitate the implementation of bank resolution under Section 11 of this Act, as well as for financial assistance as provided herein: Provided, That the Board of Directors shall determine the interest rates, maturity and other requirements of said obligations: Provided, further, That the Corporation may provide for appropriate reserves for the redemption or retirement of said obligation.

“All notes, debentures, bonds, or such obligations issued by the Corporation shall be exempt from taxation both as to principal and interest, and shall be fully guaranteed by the Government of the Republic of the Philippines. Such guarantee, which in no case shall exceed two times the DIF as of date of the debt issuance, shall be expressed on the face thereof.

“The Corporation may issue notes, debentures, bonds, or other debt instruments without the approval of the President of the Philippines, as long as these shall not be guaranteed by the national government.

“The Board of Directors shall have the power to prescribe the terms and conditions, rules and regulations for the issuance, reissuance, servicing, placement and redemption of the bonds herein authorized to be issued as well as the registration of such bonds at the request of the holders thereof.”

“(f) The penalty of imprisonment of not less than six (6) years but not more than twelve (12) years or a fine of not less than Fifty thousand pesos (P50,000.00) but not more than Ten million pesos (P10,000,000.00), or both, at the discretion of the court, shall be imposed upon:

“(1) Any director, officer, employee or agent of a bank for:

“Notwithstanding any law to the contrary, the foregoing acts of directors, officers, employees or agents of the bank shall be considered as additional grounds for disqualification under the fit and proper rules of the Bangko Sentral ng Pilipinas.

“(1) Other acts inimical to the interest of the bank or the Corporation, such as, but not limited to, conflict of interest, disloyalty, authorizing related party transactions with terms detrimental to the bank and its stakeholders, and unauthorized disclosure of confidential information, as may be determined by the Corporation.

“(2) Any person for:

“(3) Any law enforcement officer or local government official who refuses or fails to assist the receiver in the service of the notice of closure, as provided under Section 14 of this Act.”

“(h) The penalty of imprisonment of not less than ten (10) years but not more than twelve (12) years, or a fine of not less than Five hundred thousand pesos (P500,000.00) but not more than Ten million pesos (P 10,000,000.00), or both, at the discretion of the court, shall be imposed upon:

“(i) The penalty of imprisonment of not less than twelve (12) years but not more than fourteen (14) years shall be imposed upon any person who participates, or attempts to participate, in a scheme to defraud a bank.

“If the offense shall have been committed by a director or officer of the bank, the penalty of imprisonment of not less than fifteen (15) years, but not more than seventeen (17) years shall be imposed.

“If the offense shall have resulted in systemic consequences, as determined by the Bangko Sentral ng Pilipinas, the penalty of imprisonment of not less than eighteen (18) years but not more than twenty (20) years shall be imposed.”

“SEC. 28. Exempting Clause. – The Corporation shall be exempt from Presidential Decree No. 985, Presidential Decree No. 1597, Republic Act No. 6758, as amended, Joint Resolution No. 4 (2009) and other laws on salary standardization, Presidential Decree No. 1177, Executive Order No. 248, as amended, Executive Order No. 298 and the provisions of Republic Act No. 10149 with regard to position classification, qualification standards, and the compensation package of the employees of the Corporation: Provided, That the PDIC shall be subject to all other policies under Republic Act No. 10149, including, but not limited to, performance evaluation by the Governance Commission for Government-Owned or -Controlled Corporations, selection and nomination of appointive directors, and limitations on the creation of subsidiaries and the acquisition of affiliates except in the case of acquisition of shares in the grant of financial assistance under this Act.”

“SEC. 29. Transitory Provisions. — (a) The incumbent President of the Corporation and private sector members of the Board of Directors shall continue to exercise their respective duties and functions until replaced by the President of the Philippines: Provided, That such new appointees shall be subject to the term of office provided under Section 3 of this Act, as amended.

“(b) Payment of surplus dividends under Section 13(c) of this Act, as amended, shall be applicable to banks without a court-approved final asset distribution plan at the time of the effectivity of this Act.

“(c) The preference indicated under Section 15 of this Act, as amended, shall be likewise effective upon liquidation proceedings already commenced and pending as of the effectivity of this Act, where no distribution of assets has been made.

“(d) The provisions in Section 10 of this Act, as amended, on legal assistance, protection and indemnification shall apply to all cases pending before the effectivity of this Act.”