An Act to Provide for the Regulation of the Organization and Operations of Savings and Loan Associations

REPUBLIC ACT No. 3779

An Act to Provide for the Regulation of the Organization and Operations of Savings and Loan Associations

Be it enacted by the Senate and House of Representatives of the Philippine Congress Assembled:

Section 1. Title. -The short title of this Act shall be the "Savings and Loan Association Act."

Section 2. Declaration of Policy. -It is hereby declared to be the policy of the State:

Section 3. Definition of terms. -For the purpose relative to the implementation of this Act, the following definitions shall apply.

Section 4. Organization of savings and loan association.—

Section 4. (a) Prohibition against inquiry into, or disclosure of deposits. -All deposits of whatever nature with savings and loan associations in the Philippines are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office, except when the examination is conducted by the Monetary Board or the official of the Central Bank in charge of savings and loan associations or his deputies pursuant to the provisions of this Act, or upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation.

It shall be unlawful for any official or employee of savings and loan association to disclose to any person any information concerning said deposits, except in the cases mentioned in the preceding paragraph of this section.

(b) Deposit insurance. -Deposits in savings and loan associations shall be eligible for insurance coverage under Republic Act Numbered Three thousand five hundred and ninety-one, otherwise known as an Act Establishing the Philippine Deposit Insurance Corporation.

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

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

Section 6. Restriction on savings and loan associations.—

Section 7. Prerequisite approval of articles of incorporation and by-laws. -The articles of incorporation and by-laws of a proposed savings and loan association shall not be filed in the Office of the Securities and Exchange Commissioner unless there is attached thereto a certificate of the Monetary Board approving such articles and by-laws: Provided, However, That this requirement shall not apply to savings and loan associations duly incorporated or registered prior to the approval of this Act and which are actually existing and operating as such: Provided, further, That such existing savings and loan associations shall file an information sheet within sixty days after the approval of this Act with the Central Bank in a form prescribed by the Monetary Board.

No person, association, partnership or corporation shall do business, or hold itself out as doing business, as a savings and loan association, or shall use the term "savings and loan association" or any other title or name tending to give the public the impression that it is engaged in the operations and activities of a savings and loan association unless so authorized under this Act.

Section 8. Application for approval; contents.— The articles of incorporation of a proposed association shall be submitted to the Monetary Board together with a copy of the proposed by-laws and an application, signed by a majority and verified by one of the directors, requesting approval. The application shall set forth:

A filing fee of two hundred pesos shall be paid to the official of the Central Bank in charge of savings and loan associations with each application for approval of proposed article of incorporation and by-laws, but in the case of non-stock savings and loan associations, the filing fee shall be five pesos.

Section 9. Hearing on Application. -Upon the receipt of an application to form a proposed savings and loan association, the Monetary Board shall give written notice to each existing association that an application has been made. The notice shall state the name of the proposed association, and the time and place that a hearing will be held. The hearing shall be conducted not less than ten days after the mailing of the notice. Any person may appear at such hearing in person or by agent or attorney, and orally or in writing show cause why such application should not be approved.

If after public hearing, the Monetary Board believes that the requirements of this Act have been complied with and that no valid reasons exist for the disapproval of the application, it shall favorably endorse such application to the Securities and Exchange Commissioner who shall issue articles of incorporation to the association.

Section 10. Ground for refusal to execute certificate of approval. -The Monetary Board may refuse to approve the application, if upon examination and investigation, it finds that:

Section 11. Prior licensing. -All associations, prior to transacting any business, shall procure a license to transact business from the Monetary Board. After due notice and hearing, the Monetary Board may revoke, or suspend for such period as it determines, the license of any association, the solvency of which is imperiled by losses or irregularities or of any association which wilfully violates any provisions of this Act or any regulation issued thereunder.

Section 12. Branch offices and agencies.—

Section 13. Agents and salesmen. -No person shall act as an agent salesman of an association or operate an agency without obtaining a license from the Monetary Board. No license is required for a collector of an association but no person shall hold himself out or act as a collector unless he is authorized as a collector in writing by such association.

Section 14. Qualification of directors. -No person shall be eligible as directors of an associations unless he is a member, in case of non-stock associations, or an owner is his own right of stocks in the association with an aggregate par value of at least five thousand pesos, in case of stock associations: Provided, That at least two-thirds of the members of the board of directors of any stock savings and loan association which may be established after the approval of this Act shall be citizens of the Philippines: Provided, However, That no full-time appointive or elective public official shall at the same time serve as officer, director, legal counsel or consultant of any stock savings and loan association, except in cases where such service is incident to financial assistance provided by the government or a government-owned or controlled corporation to such association: Provided, further, That in the case of a merger or consolidation of savings and loan associations duly approved by the Monetary Board, the limitation on the maximum number of directors in a corporation, as provided for in Section 28 for the Corporation Law (Act No. 1459), shall not be applied so that membership in the new board may include up to the total number of directors provided for in the respective articles of incorporation of the merging or consolidating savings and loan associations.

Section 15. Bond of officers and employees. -All officers and employees of an association, who have access to money, or negotiable securities of the association, or who issue stock or shares of the association in the regular discharge of their duties shall, before entering upon the duties, furnish to the employing association a good an sufficient bond, the form and amount of which shall be prescribed by the Monetary Board, indemnifying the association against loss of money or securities by reason of their dishonesty and against any loss arising from their dishonest issue to stock or shares.

Section 16. Compensation of directors, officers and employees. -No director, officer, or employee of an association shall receive from such association, and no association shall pay to any director, officer, or employee of such association, any commission, emolument, gratuity or reward based on the volume or number of loans made, or based on the interest or fees collected thereon. Nothing in this section prohibits or limits any of the following:

Section 17. Shares of stock of officers, directors, or employees. -No officer, director, or employee of any association shall acquire any certificate or shares issued by the association with which he is connected by a method other than by investing his funds directly with the association, or by gift, bequest, or descent, or purchase in any amount not exceeding at any one time three thousand pesos, unless such other mode of acquisition has the prior approval of the Monetary Board, and the Auditor of the Central Bank.

Section 18. Limitations on lending authority.—

Section 19. Execution of loan agreement. -For each loan made by an association, a written note or other obligation expressing a rate of interest must be executed by the borrower.

Section 20. Liability of officers for loans contrary law. -No association shall make or purchase any loan or investment not authorized or permitted under this Act, and any director, officer or employee who, on behalf of any such association, knowingly makes or purchases any such loan or investment or who knowingly consents thereto shall be personally liable to the association for the full amount of any such loan or investment.

Section 21. Limitations on investment.—

Section 22. Reserves. -Every non-stock savings and loan association shall create a withdrawable share reserve which shall consists of three per centum of the aggregate capital contributions of the members.

Five per centum of the net earnings of a stock savings and loan association shall credited to a reserve account until the reserve equals five per centum of the total assets of the association and shall be available for meeting losses incurred by the association.

Section 23. When dividends not distributable. -The withdrawable share reserve shall be set up from the profits of the non-stock association, and no association shall pay any dividends or distribute any profits to its members if its withdrawable share reserve is less than, of if by such payment or distribution would be reduced below, the amount specified in Section twenty-two hereof.

Section 24. Annual reports. -Every association shall, within sixty days after the close of its fiscal year furnish the Monetary Board and mail to each of its investors, a copy of its financial statement showing, in such form and detail as the Monetary Board shall require, the amount and character of the assets and liabilities of the association at the end of the preceding fiscal year. Any association may, in lieu of mailing, publish such financial statement in any newspaper of general circulation in the city or town in which its principal and branch offices are located. The Monetary Board may, in addition to the foregoing, require the publication of such other information as it shall deem necessary for the protection of the investors in these associations.

Section 25. Monetary Board’s authority to order discontinuance of unlawful or unsafe or injurious practices of associations. -If the Monetary Board finds at the result of any examination from any report made to it or to any of its investors, that the association is violating the provisions of its articles of incorporation, charter, by-laws, or any law, or is conducting its business in an unsafe or injurious manner, or is insolvent, it may by an order addressed to such association direct a discontinuance of such violations or unsafe or injurious practices and a conformity with all the requirements of law.

Section 26. When Monetary Board authorized to demand and take possession of association. -The Monetary Board may demand and take possession of the property, business and assets of an association if any of the following occur:

Section 27. Time Monetary Board authorized to retain possession of association; liquidation. -The Monetary Board may retain possession of the property, business and assets of an association until the association resumes business with the consent of and subject to the conditions imposed by the Monetary Board, or until its affairs are liquidated; in case of liquidation, the Monetary Board shall be governed by the provisions of the Central Bank Act for liquidation of banks.

Section 28. Supervisory powers over savings and loan association. -In addition to whatever powers have been conferred by the foregoing provisions, the Monetary Board shall have the power to exercise the following:

Section 29. Penalties.—

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

Section 30. Effectivity. -This Act shall take effect upon its approval.

Approved: June 22, 1963.