An Act Enhancing the Resolution and Liquidation Framework for Banks

Section 17

To carry out the purposes of this Act, the permanent insurance fund shall be Three billion pesos (P3,000,000,000.00). The Deposit Insurance Fund shall be the capital account of the Corporation and shall principally consist of the following: (i) the Permanent Insurance Fund; (ii) assessment collections, subject to the charges enumerated in Section 6 (d); (iii) reserves for insurance and financial assistance losses; and (iv) retained earnings: Provided: That the reserves for insurance and financial assistance losses and retained earnings shall be maintained at a reasonable level to ensure capital adequacy: Provided, further, That the Corporation may, within two (2) years from the passage of this Act, and every five (5) years thereafter, conduct a study on the need to adjust the amount of the Permanent Insurance Fund, insurance cover, assessment rate and assessment base, and thereafter make the necessary recommendation to Congress. For this purpose, the Corporation may hire the services of actuarial consultants to determine, among others, the affordability of assessment rates, analysis and evaluation of insurance risk, and advisability of imposing varying assessment rates or insurance cover of different bank categories. Obligations of the PDIC DIVIDEND DECLARATION

Section 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 shall declare and remit cash dividends to the National Government in accordance with Republic Act No. 7656: Provided, That Section 2(d) on the determination of the dividend base and Section 3 with respect to dividend base and the manner of payment shall not apply. In lieu thereof, the succeeding paragraphs shall be applicable. For purposes of computing the amount of dividends to be declared and remitted to the National Government, the dividend base shall be the sum of all income, but excluding all assessment income. No other deductions from the dividend base shall be allowed. Such cash dividends accruing to the National Government shall be received by the National Treasury and recorded as income of the General Fund. (as amended by RA No 11840) PAYMENT OF INSURED DEPOSITS

Section 19

Section 17(c) of Republic Act No. 11439 on the non-applicability of Republic Act No. 3591, as amended, is hereby amended insofar as certain products or arrangements of Islamic banks which may be deemed as deposit by the Bangko Sentral ng Pilipinas for purposes of this Act All other laws, decrees, resolutions, instructions, and rules and regulations, or parts thereof which are inconsistent with this Act are hereby deemed repealed or modified accordingly.

Section 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.

Section 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.

Section 20

This Act shall take effect fifteen (15) days after its publication in the Official Gazette or in a newspaper of general circulation. RA No 11840 lapsed into law on 17 June 2022.

Section 21

(a) The Corporation shall commence the determination of insured deposits due the depositors of a closed bank upon its actual takeover of the closed bank. The Corporation shall give notice to the depositors of the closed bank of the insured deposits due them by whatever means deemed appropriate by the Board of Directors: Provided, That the Corporation shall publish the notice once a week for at least three (3) consecutive weeks in a newspaper of general circulation or, when appropriate, in a newspaper circulated in the community or communities where the closed bank or its branches are located. (b) Payment of an insured deposit to any person by the Corporation shall discharge the Corporation, and payment of a transferred deposit to any person by the new bank or by an insured bank in which a transferred deposit has been made available shall discharge the Corporation and such new bank or other insured bank, to the same extent that payment to such person by the closed bank would have discharged it from liability for the insured deposit. (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. (d) The Corporation may withhold payment of such portion of the insured deposit of any depositor in a closed bank as may be required to provide for the payment of any liability of such depositor as a stockholder of the closed bank, or of any liability of such depositor to the closed bank or its receiver, which is not offset against a claim due from such bank, pending the determination and payment of such liability by such depositor or any other liable therefor. (e) Unless otherwise waived by the Corporation, if the depositor in the closed bank shall fail to claim his insured deposits with the Corporation within two (2) years from actual takeover of the closed bank by the receiver, or does not enforce his claim filed with the corporation within two (2) years after the two-year period to file a claim as mentioned hereinabove, all rights of the depositor against the Corporation with respect to the insured deposit shall be barred; however, all rights of the depositor against the closed bank and its shareholders or the receivership estate to which the Corporation may have become subrogated, shall thereupon revert to the depositor. Thereafter, the Corporation shall be discharged from any liability on the insured deposit. CORPORATE FUNDS AND ASSETS

Section 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. (c) It is hereby declared to be the policy of the State that the Deposit Insurance Fund of the Corporation shall be preserved and maintained at all times. Accordingly, all tax obligations of the Corporation for a period of five (5) years reckoned from the date of effectivity of this Act shall be chargeable to the Tax Expenditure Fund (TEF) in the annual General Appropriation Act pursuant to the provisions of Executive Order No. 93, series of 1986: Provided, That, on the 6th year and thereafter, the Corporation shall be exempt from income tax, final withholding tax, value-added tax on assessments collected from member banks and local taxes. (as added by RA No 9576) (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) The Corporation is authorized to make loans to, or purchase the assets of, or assume liabilities of, or make deposits in: (1) A bank in danger of closing, upon its acquisition by a qualified investor; or (2) A qualified investor, upon its purchase of all assets and assumption of all liabilities of a bank in danger of closing; or (3) A surviving or consolidated institution that has merged or consolidated with a bank in danger of closing; upon such terms and conditions as the Board of Directors may prescribe, when in the opinion of the Board of Directors, such acquisition, purchase of assets, assumption of liabilities, merger or consolidation, is essential to provide adequate banking service in the community or maintain financial stability in the economy. The Corporation may, taking into consideration the peculiar characteristics of Islamic banks, formulate rules and regulations for the extension of financial assistance under this section. 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 condition as may be deemed necessary by the Board of Directors, subject to the concurrence by the Monetary Board and without additional cost to the DIF at the time of granting the financial assistance. (as amended by RA No 11840) 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

Section 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

Section 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 or to facilitate the implementation of 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. (as amended by RA No 11840) 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.

Section 25

(a) The Corporation shall annually make a report of its operations to the Congress as soon as practicable after the 1st day of January in each year. (b) The financial transactions of the Corporation shall be audited by the Commission on Audit in accordance with the principles and procedures applicable to commercial corporate transactions and under such rules and regulations as may be prescribed by the Commission on Audit. The audit shall be conducted at the place or places where accounts of the Corporation are normally kept. Except as to matters relating to the function of the Corporation as receiver which shall be subject to visitorial audit only, the representatives of the Commission on Audit shall have access to all books, accounts, records, reports, files and all other papers, things, or property belonging to or in use by the Corporation pertaining to its financial transactions and necessary to facilitate the audit, and they shall be afforded full facilities for verifying transactions with the balances or securities held by depositories, fiscal agents, and custodians. All such books, accounts, records, reports, files, papers, and property of the Corporation shall remain in possession and custody of the Corporation.

Section 26

(a) Every insured bank shall display at each place of business maintained by it a sign or signs, and shall include a statement in all its advertisements to the effect that its deposits are insured by the Corporation: Provided, That the Board of Directors may exempt from this requirement advertisements which do not relate to deposits or when it is impractical to include such statement therein. The Board of Directors shall prescribe by regulations the forms of such signs and the manner of use. (b) No insured bank shall pay any dividend on its capital stock or interest on its capital notes or debentures (if such interest is required to be paid only out of net profits) or distribute any of its capital assets while it remains in default in the payment of any assessment due to the Corporation: Provided, That if such default is due to a dispute between the insured bank and the Corporation over the amount of such assessment, this subsection shall not apply if such bank shall deposit security satisfactory to the Corporation for payment upon final determination of the issue. (c) The Corporation may require an insured bank to provide protection and indemnity against burglary, defalcation, losses arising from discharge of duties by, or particular acts of defaults of its directors, officers, or employees, and other similar insurable losses. The Board of Directors in consultation with the Bangko Sentral, shall determine the bonding requirement as it refers to directors, officers and employers of the insured bank as well as the form and amount of the bond. Whenever any insured bank refuses to comply with any such requirement the Corporation may contract for such protection and add the cost thereof to the assessment otherwise payable by such bank. (d) Any assessment payable by an insured bank under this Act shall be subject to payment of interest computed from the date such assessment became due and payable and at the legal rate for loans as prescribed by law or appropriate authority and in case of willful failure or refusal to pay such assessment and interest thereon, there shall be added a penalty equivalent to twice the amount of interest payable as computed herein for each day such violations continue, which the interest and penalty the Corporation may recover for its use: Provided, That the penalty shall not be applicable under the circumstances stated in the provisions of subsection (b) of this Section. (e) 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: (a) Any willful refusal to submit reports as required by law, rules and regulations; (b) Any unjustified refusal to permit examination and audit of the deposit records or the affairs of the institution; (c) Any willful making of a false statement or entry in any bank report or document required by the Corporation; (d) Submission of false material information in connection with or in relation to any financial assistance of the Corporation extended to the bank; (e) Splitting of deposits or creation of fictitious or fraudulent loans or deposit accounts. Splitting of deposits occurs whenever a deposit account with an outstanding balance of more than the statutory maximum amount of insured deposit maintained under the name of natural or juridical persons is broken down and transferred into two (2) or more accounts in the name/s of natural or juridical persons or entities who have no beneficial ownership on transferred deposits in their names within one hundred twenty (120) days immediately preceding or during a bank-declared bank holiday, or immediately preceding a closure order issued by the Monetary Board of the Bangko Sentral ng Pilipinas for the purpose of availing of the maximum deposit insurance coverage; (f) Refusal to receive the notice of closure as provided under Section 14 of this Act; (g) Refusal to allow the Corporation to take over a closed bank or obstructing such action of the Corporation; (h) Refusal to turn over or destroying or tampering bank records; (i) Fraudulent disposal, transfer or concealment of any asset, property or liability of the closed bank; (j) Violation of, or causing any person to violate, the exemption from garnishment, levy, attachment or execution provided under this Act and the New Central Bank Act; (k) Any willful failure or refusal to comply with, or violation of any provision of this Act, or commission of any other irregularities, and/or conducting business in an unsafe or unsound manner as may be determined by the Board of Directors in relation to Section 56 of Republic Act No. 8791, or ‘The General Banking Law of 2000’. 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. (l) 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: (a) Refusal to disclose information, records or data pertaining to the bank accounts of a closed bank to the receiver; (b) Refusal to turn over possession or custody of the asset and record of the closed bank to the receiver, notwithstanding any agreement to the contrary; (c) Refusal or delaying the: (i) Verification of authenticity of the ownership documents; (ii) Registration of interest of the closed bank on a specific property; (iii) Consolidation of ownership over an asset of the closed bank; (iv) Act of securing certified true copies of documents in relation to an asset of the closed bank; (v) Act of securing the appropriate certification from the agencies or entities stated in Section 16 of this Act in relation to an asset of the closed bank; (vi) Conduct of a physical or ocular inspection of the properties owned by, or mortgaged to, the closed bank, to determine their existence and present condition; or (vii) Other related activities of the receiver; or (d) Allowing the withdrawal from deposits or disposition of any asset of the closed bank other than by the receiver; (e) Willfully violating any provision of this Act; (f) Conspiring or willfully participating in any of the offenses enumerated in Paragraph 1 of this section; (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. (f) The Board of Directors is hereby authorized to impose administrative fines for any act or omission enumerated in the preceding subsection, and for violation of any order, instruction, rule or regulation issued by the Corporation, against a bank and/or any of its directors, officers or agents responsible for such act, omission, or violation, in amounts as it may be determined to be appropriate, but in no case to exceed three times the amount of the damages or costs caused by the transaction for each day that the violation subsists, taking into consideration the attendant circumstances, such as the nature and gravity of the violation or irregularity and the size of the bank. (g) 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: (1) Any depositor who files a fictitious and/or fraudulent claim for deposit insurance; and (2) Any bank officer who certifies to the validity of the deposit liabilities which is subsequently verified to be fictitious and/or fraudulent. (h) 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. (par. c deleted by RA No 11840 and succeeding paragraphs renumbered)

Section 27

No court, except the Court of Appeals, shall issue any temporary restraining order, preliminary injunction or preliminary mandatory injunction against the Corporation for any action under this Act. This prohibition shall apply in all cases, disputes or controversies instituted by a private party, the insured bank, or any shareholder of the insured bank. The Supreme Court may issue a restraining order or injunction when the matter is of extreme urgency involving a constitutional issue, such that unless a temporary restraining order is issued, grave injustice and irreparable injury will arise. The party applying for the issuance of a restraining order or injunction shall file a bond in an amount to be fixed by the Supreme Court, which bond shall accrue in favor of the Corporation if the court should finally decide that the applicant was not entitled to the relief sought. Any restraining order or injunction issued in violation of this Section is void and of no force and effect and any judge who has issued the same shall suffer the penalty of suspension of at least sixty (60) days without pay.

Section 28

Bank liquidation involving the purchase of all assets and assumption of all liabilities of a bank to a third party shall be exempt from the provisions of Act No. 3952, otherwise known as ‘The Bulk Sales Law’. (as amended by RA No 11840)

Section 30

The words "Central Bank" and the "Central Bank of the Philippines" wherever they appear in Republic Act No. 3591, as amended, is hereby replaced with Bangko Sentral and/or Bangko Sentral ng Pilipinas, respectively.

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 31 [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 32 [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 33 [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. Other provisions by RA No 11840