Reorganization of the Development Bank of the Philippines
Executive Order No. 1078

January 20, 1986



WHEREAS, the Development Bank of the Philippines is a government financing institution charged with providing credit facilities for the expansion and development of agriculture and industry;

WHEREAS, the Bank is now faccing severe liquidity problems due to the large accumulation of non-performing accounts in its portfolio resulting largely from the present economic crisis;

WHEREAS, there is an urgent need to reorganize the Bank to enable it to meet the present exigencies;

WHEREAS, the Bank's rehabilitation entails the transfer of its non-performing accounts to the National Government, together with the liabilities corresponding but not limited to such non-performing accounts, as well as the restructuring of its present organization;

WHEREAS, once it is allowed to implement its proposed rehabilitation program, the Bank can pursue its role more vigorously as a development bank involved in countryside development, especially as regards the agricultural and small and medium-scale industrial sectors;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested upon me by

SECTION 1. Rehabilitation Program. Upon the effectivity of this Executive Order, the Development Bank of the Philippines, hereinafter referred to as the Bank, shall embark on a rehabilitation program consisting of the following strategies: transfer to and assumption by the National Government of the non-performing accounts of the Bank together with identified liabilities, retention of performing assets as the Government's fresh equity, and restructuring of its organization. acd

SECTION 2. Transfer of Non-Performing Accounts. The non-performing accounts in the portfolio of the Bank, together will all the assets, rights, choses-in-action, obligations, liabilities and contracts appurtenant thereto, and other liabilities of the Bank, as determined by its Board, shall be removed and divested from its portfolio and transferred to, and assumed by, the National Government, or such entity as it may create or designate, for their management and/or disposition.

SECTION 3. Lending Operations. The Bank shall, in its lending operations and grant of loans and financial assistance, concentrate on and give preference to agricultural projects, small and medium-scale industrial projects, and to home building and/or home financing projects, and to such other projects which, in the determination of the Board of the Bank, are essential or will contribute to the early economic recovery of the country: Provided, That all operations, functions and powers of the Bank not herein affected shall remain, and the Bank shall continue to perform and exercise the same.

SECTION 4. Capitalization. The capital stock of the Bank shall remain at Fifty Billion Pesos (P50,000,000,000.00) divided into Fifty Million (50,000,000.00) shares having a par value of One Thousand Pesos (P1,000.00) each. The said capital stock shall be fully subscribed by the Government of the Republic of the Philippines, and payment of said subscription shall be as follows:

a) The initial paid-up capital shall be Seven Billion Fifty Seven Million Pesos (P7,057,000,000.00) which amount shall be equivalent to the value of the assets of the reorganized Bank remaining after the transfer of the non-performing accounts less certain identified liabilities to be retained.

b) All net income of the Bank shall be automatically applied by the Bank to payment of the Government's subscription to the capital stock until the said capital stock has been fully paid for, after which said net income shall be utilized for such purposes as may be authorized by the Board of the Bank.

c) The amount of taxes due on the income of the Bank beginning with CY 1985 as well as of such other taxes, duties, fees, assessments, charges and imposts due to all transactions or operations of the Bank, is hereby appropriated under this Executive Order to be automatically applied to the payment of the subscription of the Government in the capital stock of the Bank until said capital stock is fully paid for.

SECTION 5. Borrower's Limit. The provisions of any law to the contrary notwithstanding, the total liabilities to the Bank of any person, company, corporation or firm, or political subdivision, agency or instrumentality of the Government, or corporation owned or controlled by the Government, including in the liabilities of the individual, those of his spouse and children, and in the liabilities of the company, corporation or firm, those of the several members, partners or stockholders thereof, with the exception of money borrowed against obligations of the Central Bank or the Philippine Government, or borrowed with full guarantee by the Government of payment of principal, interest, and other charges, but inclusive of guarantees under paragraph (1) of Section 2 of the Bank's Charter, shall at no time exceed ten (10%) percent of the unimpaired capital and surplus of the Bank. cd

SECTION 6. Equity Investments. The equity investments of the Bank shall comply with the limitations prescribed by existing laws, rules and regulations, including but not limited to the limits on individual and aggregate equity investments: Provided, however, That equity investments in excess of the limitations as of the date of the effectivity of this Executive Order shall be reduced within five years in accordance with such program of reduction as may be approved by the Monetary Board. The period of reduction may be extended for another five years by the President of the Philippines upon recommendation by the Monetary Board.

SECTION 7. Board of Directors and Officers. The Board of Governors of the Bank is hereby renamed and reconstituted as Board of Directors, hereinafter referred to as the Board, and shall hereafter be composed of a Chairman, a Vice-Chairman and seven other members who shall be appointed or designated by the President of the Philippines from the government or the private sector. The members of the Board shall serve at the pleasure of the President of the Philippines.

No person shall be appointed or designated Chairman, Vice-Chairman or members of the Board of Directors unless he be a natural-born citizen of the Philippines, of good moral character and unquestionable integrity, and has attained proficiency, expertise and recognized competence in economics, agriculture, industry, banking, management, public administration and/or law.

The Chairman shall also be the President of the Bank, and shall preside at all meetings of the Board. In the absence or temporary incapacity of the Chairman, the Vice-Chairman shall act as Chairman. In case of absence or temporary incapacity of both the Chairman and the Vice-Chairman, the remaining members of the Board shall designate an acting Chairman from among themselves.

The President of the Bank shall be its Chief Executive Officer. He shall, on behalf of the Board, have the direction and control of the business affairs and properties of the Bank in all matters which are not by the Charter or by the By-laws of the Bank specifically reserved to be done by the Board or other officers of the Bank. For this purpose, he shall, among others, execute, carry out, and administer the policies, measures, orders, and resolutions approved by the Board; direct and supervise the operation and administration of the Bank; sign and execute contracts concluded by the Bank and notes, securities , certificates, and other major documents of the Bank; recommend the appointment, promotion, transfer or removal of all subordinate officers and employees of the Bank; exercise the powers of general supervision and administration attached to the position of the President; delegate any of his powers, duties and functions to any officer of the Bank, with the approval of the Board; and exercise such other powers and perform such other duties as may be directed or assigned to him by law or the Board from time to time.

The President shall receive a compensation, and the other members of the Board shall receive a per diem for every meeting attended, in such amount as may be fixed by the Board with the approval of the President of the Philippines.

The President of the Bank shall be assisted by one or more Executive Vice-Presidents, who shall have the same qualifications as the members of the Board, and such member of Senior Vice-Presidents, Vice-Presidents and Assistant Vice-Presidents as may be required or necessary for the effective operations of the Bank. The Executive Vice-Presidents, Senior Vice-Presidents, Vice- Presidents and Assistant Vice-Presidents shall be appointed and may be removed for any cause, and their salaries fixed, by the Board, upon recommendation of the President of the Bank.

Except for the Chairman, no other member of the Board shall perform, or be charged with, any administrative function or responsibility.

The present Board of Governors shall continue to exist and perform its functions until the Chairman, Vice-Chairman and three (3) members of the new Board of Directors are appointed or designated by the President of the Philippines, and have qualified.

SECTION 8. Legal Adviser. The Minister of Justice shall be the ex-officio legal adviser of the Bank. He shall appoint, and may remove for cause, upon recommendation of the Board, a representative, who shall be the Chief Legal Counsel of the Bank and head of its Legal Department. All the other personnel in the Legal Department shall be appointed, and may be removed for any cause, by the Minister of Justice, upon recommendation of the Board. Except as herein provided, all personnel in the Legal Department shall be subject to the policies and regulations of the bank as are applicable to Bank personnel in general.

Whenever necessary, and on a case to case basis, the Bank may, upon recommendation of the Chief Legal Counsel, engage the services of an external counsel. The Bank may, in appropriate cases, also avail of the legal services of the Office of the Solicitor General, the Office of the Government Corporate Counsel, or any government legal office authorized to render such services to government- owned or controlled corporations. For the services of the aforesaid offices, the Bank shall appropriate and pay such amounts as may be assessed by them, in addition to the allowances which the Bank may grant to defray the transportation and representation expenses of lawyers who may be assigned to handle the legal affairs of the Bank. asia dc

SECTION 9. Reorganization. The Board of the Bank is hereby authorized and empowered to reorganize the Bank within six (6) months from the date this Executive Order takes effect, and for this purpose, it shall prepare and adopt an organizational structure and staffing pattern consonant with its reduced lending operations and internal restructuring to make it more cost-effective and more responsive to its new thrusts. The Board shall have the power to create, classify and abolish, positions in line with the Bank's stated functions, responsibilities and demands: Provided, That in no case shall the rates of compensation of the officers and employees of the Bank be lower than the rates provided under the classification established by the Office of Compensation and Classification. asia dc

The present personnel complement of the Bank shall, in the interim, continue to discharge their respective functions.

SECTION 10. Affected Personnel. All officers and employees of the Development Bank of the Philippines, who may be separated from the service by reason or as a consequence of the reorganization of the Bank as herein authorized, shall be entitled to a separation gratuity, which shall be paid in one lump sum, at a rate equivalent to one month's basic salary for every year of service, or equivalent nearest fraction thereof favorable to them, rendered to the Bank or any other branch of the government, including government-owned or controlled corporations, on the basis of the highest salary received; and to such other benefits as the Board may grant or hereafter authorize: Provided, That any such officer or employee shall, in lieu of availing of the separation gratuity, have the option to retire under the general retirement laws, if he otherwise meets or satisfies the requirements therefor. The separation gratuity herein granted shall be exempt from any and all taxes: Provided, further, That in case of subsequent reinstatement in the government service or in any government-owned or controlled corporation of any officer or employee who has been paid the separation gratuity, he shall refund to the National Government the value of the gratuity which he would not have received had it been paid to him in monthly installments.

SECTION 11. Re-enactment of Applicable Provisions in Old Charter. Except as modified herein, all the provisions of the

SECTION 12. Repealing Clause. All laws, decrees, orders, proclamations, rules, regulations, or parts thereof, which are inconsistent with any of the provisions of this Executive Order are hereby repealed, amended or modified accordingly.

SECTION 13. Separability Clause. Any portion or provision of this Executive Order that may be declared unconstitutional shall not have the effect of nullifying the other provisions thereof: Provided, That the latter provisions can stand alone and be enforced in their entirety.

SECTION 14. Effectivity. This Executive Order shall take effect immediately.

DONE in the City of Manila, this 20th day of January, in the year of Our Lord, Nineteen Hundred and Eighty-Six.

Published in the Official Gazette, Vol. 82 No. 6 page 895 on February 10, 1986.