Chapter 3 Government Banking Institutions

GOVERNME
NT BANKING
INSTITUTIO
NS
 The role of the government in the banking
system is to supplement the credit facilities
of the private financial institutions.
 The government is responsible primarily to
render services while the private financial
institutions operate basically for profit.
 The different government banking
institutions are Philippine National Bank,
the Land Bank of the Philippines, the
Development Bank of the Philippines and
the Philippine Amanah Bank.
PHILIPPINE NATIONAL BANK
The present authority, powers, and
operations of the Philippine National
Bank (PNB) are governed by
Executive Order No. 80.
The operations and affairs of PNB
are governed by a board of directors
consisting of nine members who are
elected annually by the stockholders.
Corporate Powers. The PNB is a universal or
expanded commercial bank with the following
corporate powers:
1. To engage in the business of commercial
banking by:
a. Accepting drafts
b. Issuing letters of credit
c. Discounting and negotiating promissory notes,
drafts, bill of exchange and other evidences of
debts.
d. Receiving deposits
e. Buying and selling foreign exchange and gold
or silver bullions.
f. Acting as financial agent
g. Financing personal leasing
h. Lending money against personal security
or against securities consisting of
personal property or first mortgage on
improved real estate and the insured
improvements thereon.
To accept and execute trusts and to carry on
a general trust business.
 To
hold, own, purchase, acquire, sell,
mortgage, dispose of
To organize and incorporate investment and/ or
development financing subsidiaries.
To issue in the Philippines or in a foreign
country for purposes of increasing it's capital
To guarantee foreign loans or credit
accommodations extended directly by foreign
firms or persons to domestic borrowers for
capital investment purposes.
To engage or participate in the development of
secondary markets for government securities
and short, medium and long term papers.
To invest in the shares of stock of allied
undertakings
To borrow money, or incur indebtedness or
contract obligations in connection with its
banking operations.
To engage in the warehousing of rice, corn
and other grains
To act as official government depository with
full authority to maintain deposits of the
government
To prescribe it's by laws.
To adopt and use a seal.
To make contracts.
To sue and be sued.
To acquire own and hold real and
personal property necessary to carry on
its business
To exercise the general powers of
corporations as provided for under
existing laws
BANKING OPERATIONS IN GENERAL
In connection with the grant of loans and
credit accommodations, PNB is authorized:
 To purchase, discount or negotiate
promissory notes, drafts, bills of exchange
and other evidences of debt issued
 To grant loans on, or to discount notes
secured by, harvested and stored crops.
 To grant loans for the production of rice,
corn and other agricultural crops .

To grant medium term and long term
loans and advances against security
of real estate
To grant loans against personal
security, or against security
To make loans to any branch,
subdivision, or agency of the
government
LAND BANK OF THE PHILIPPINES
 Thecreation and operation of Land Bank

of the Philippines (LBP) is authorized
under the Code of Agrarian Reforms.
 The LBP aims to provide timely and
adequate financial support in all phases
involved in the execution of the needed
agrarian Reforms ostensibly to free tenant
farmers from the clutches of landlordism.
Corporate powers. Like PNB, LBP is also a
universal or expanded commercial bank with
the following corporate powers:
 To prescribe, repeal and alter its own by laws
to determine it's operating policies
 To adopt, alter and use a corporate seal.
 To hold, purchase, acquire and own real and
personal property
 To sue and be sued, make contracts,
negotiate, and secure loans from both local

and foreign sources.
 To grant short medium and long term loans and
advances against security of real estate
 To grant loans to farmers cooperatives/
associations to facilitate production marketing

of crops and acquisition of essential
commodities.
 Tofinance and/ or guarantee the acquisition of
farm lots transferred to tenant farmers
 To underwrite, hold, own, purchase, acquire,
sell, mortgage, dispose of or otherwise invest
or reinvest in stocks, bonds, debentures,
securities and other evidences of indebtedness
of other corporations
 To guarantee acceptances, credits, loans,
transactions or obligations of any person, co
partnership, association or corporation
 To borrow from or rediscount notes, bills of
exchange and other commercial papers with

the Bangko Sentral
 To act as trustee or administer any trust in
accordance with existing laws, rules, and

regulations governing trust corporations.
 To exercise the general powers of
corporations embodied in the Corporation
Code and other pertinent laws
DEVELOPMENT BANK OF THE PHILIPPINES
 The Development Bank of the Philippines (DBP)
formerly known as Rehabilitation Finance
Corporation, was created under Republic Act No.
85 repealed by Executive Order No. 81).
 to provide credit facilities for the Rehabilitation
and development and expansion of agriculture

and industry, the reconstruction of property
damages by war and the broadening and
diversification of private development banks in
provinces and cities.
Corporate Powers. The DBP has the following
corporate powers:
 To grant loans for home building or home
financing projects and for the rehabilitation, the
establishment or development of any
agricultural and/ or industrial enterprise
 To purchase preferred redeemable shares of
stock, securities other than shares of stock and
obligations of
 Togrant loans to provincial, city, and municipal
governments
 Togrant loans to cooperative associations to
facilitate production, the marketing of crops
and the acquisition of essential commodities.
 To grant loans to individual employees in
government owned or controlled corporation
or private corporation
 To underwrite, purchase, own sell, mortgage
or otherwise dispose of stocks, bonds,
debentures, securities and other evidences of
indebtedness issued for
 To accept and manage trust funds and
properties and carry on the business of a

trust Corporation.
 To organize, establish and operate subsidiary
corporations whenever necessary to better
achieve DBPs objectives.
 To issue bonds, debentures, securities,
collaterals and other obligations and/or the

renewal or the refunding of the same.
 To
adopt, alter and use a corporate seal; to
make contracts; to borrow money; to issue or
own real and personal property; and to sell,
mortgage or otherwise dispose of the same
 To subscribe put of its funds to the capital stock of
private provincial and city development banks
created under Republic Act No. 4092 as amended.
 To guarantee acceptance credits, loans,
transactions or obligations of any person, co-
partnership, association or corporation
 To issue performance bonds or guarantee to
secure the performance of contracts funded in
foreign currency
 Toguarantee or counter guarantee performance
bonds or guarantees issued by Philippine foreign
banking and financial institutions
PHILIPPINE AMANAH BANK
 The Philippine Amanah Bank (PAB) was
created under Presidential Decree No.
264.
 The purpose of bank is to promote and
accelerate the socioeconomic growth and

development of Mindanao, particularly the
economically depressed provinces.
 The bank aims to provide credit
commercial, development, and savings
banking facilities at reasonable terms
primarily to the people of Muslim
Stock classification. The shares of stock of
the bank are divided into the following
classes:
1. Series A - ₱30 million equivalent to
300,000 common shares to be subscribed
by the government.
2. Series B - ₱20 million equivalent to
200,000 preferred shred to be subscribed
by the government, its agencies or
instrumentalities.
3. Series C - ₱30 million equivalent to
300,000 common shares to be
subscribed solely by the citizens of the
Philippines and domestic corporations
and entities
4. Series D - ₱20 million equivalent to
200,000 common shares which shall be
available for subscription of foreign
nationals, their corporations and/ or
associations.
Corporate Powers. The PAB has the following
corporate powers:
 To prescribe its by laws
 To adopt, alter and use a corporate seal.
 To make contracts, to sue and be sued.
 To accept savings and time deposits, and open
current/ checking accounts.

 To borrow money, to own real or personal
property and to sell, mortgage or otherwise
dispose of the same.
 Toemploy such officers and personnel, preferably
from the Muslim population in Mindanao and
 To establish such branches and agencies in
the dominantly Muslim provinces in
Mindanao and Palawan
 To grant loans for the establishment,
acquisition, development and expansion of
any agricultural, commercial and/ or
industrial enterprises
 To invest in equities of allied undertakings
 To carry on trust business
 To issue bonds, debentures, securities,
collaterals and/or the renewal or refinancing
 To exercise such incidental powers
Loans and Investments. PAB is
authorized:
 To purchase or discount promissory
notes, drafts and bills of exchange issued
 To grant loans or discount notes secured
by harvested or stored crops.
 To grant loans to agriculturist on
installment
 To grant loans to provincial, city and
municipal governments and to any other
branch
 To grant loans to cooperative
associations
 To grant loans to small farmers,
merchants and traders
 To grant loans to employees in the
government service or in private
industry
 To rediscount paper with the Bangko
Sentral, PNB, or other banks, including
their branches or agencies.
 To make advances or discount paper
for agricultural, manufacturing,
industrial or commercial purposes.
MISCELLANEOUS MATTERS
 The transactions of government banks are subject
to audit by representatives of the Commission on
Audit.
 The recruitment and employment of their officers
and operating personnel
 Like private banking institutions, these government
banks are subject to the supervision and regulation
of the Central Bank for which they pay the required
fees for the purpose
 The Bangko Sentral requires, in addition to meeting
the goals and objectives of their respective
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GOVERNME

corn and other agricultural crops .

 Thecreation and operation of Land Bank

negotiate, and secure loans from both local

associations to facilitate production marketing

exchange and other commercial papers with

accordance with existing laws, rules, and

and development and expansion of agriculture

properties and carry on the business of a

collaterals and other obligations and/or the

accelerate the socioeconomic growth and

current/ checking accounts.

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