CHAPTER 11: THRIFT BANKING

REPUBLIC ACT NO. 7906

The “Thrift Banks Act of 1995” aims to regulate and promote the sound and efficient operations of thrift
banks in the Philippines, encouraging private enterprise, investment, and savings among the public while providing
capital and credit to Filipino entrepreneurs
BACKGROUND OF THRIFT BANKS
The umbrella organization of country’s thrift banks in 1974 as the chamber of Savings and Development
banks, and was then composed of 10 saving banks, 28 private development banks and 44 savings and loans
association.
Capital is one of the most important components of any business enterprise. As the level of business activity
determines the state of a country’s economy, it is important that businesses are well-supplied with capital. This
happens when people are inclined to provide the needed funds through savings.
As many individuals and institutions have limited time and expertise for making investments, they will require
the services of institutions that will receive and keep their savings useful and secure. The form of service provided by
the economy, in this case is called thrift banking.
Thrift banking, undoubtedly, play an important role in the formation of capital.
WHAT ARE THRIFT BANKS
Financial intermediaries consist of two types: depository and non-depository. Thrift banks are depository
intermediaries that sell secondary securities in the form of time and savings deposits and invest principally in
residential mortgage and consumer loans.
Thrift banks consist of the following types:
1. saving bank and mortgage banks
2. private development banks
3. microfinance thrift banks
4. stock savings and loan associations

1) SAVING BANKS
Saving banks may be defined as ‘thrift institutions that derive most of their funds from setting savings
deposits to the public and invest most of their incoming funds in mortgages, corporate bonds, and consumer loans”.
A savings bank is “a bank where investors can deposit small sums of money and receive interest in it”.
A saving and mortgage bank is any corporation organized for the purpose of accumulating the savings of
depositors and investing them together with its capital, in:
1. readily marketable bonds and debt securities;
2. commercial papers and accounts receivable;
3. drafts, bills of exchange, acceptances, or notes arising out of commercial transactions or in loans secured
by bonds, mortgages on real estate and insured improvements thereon, and other forms of security or in
loans for personal or household finance, whether secured or unsecured, and financing for home building
and loan development; and
4. in such other investments and loans which the monetary board may determine as necessary in the
furtherance of national economic objectives.
Service Offered
Modern day savings banks offer more services than their predecessors. This is so because of the need for
savings banks to survive. Previously, savings banks were only allowed to handle savings deposits and residential
mortgage loans. This restriction severely affected the viability of savings banks. Later, they were allowed to expand
their services into non-traditional lines.
EXAMPLES OF SAVINGS AND MORTGAGE BANKS OPERATING IN THE PHILIPPINES WITH THEIR SERVICES
AND PRODUCTS OFFERED:
 1. Bank of the Philippine Islands
a. Savings account
 Juggle your daily expense easily
 Earn more as you save more
 Savings accounts for teens
b. Time deposit
 High return
 Inflation-ready
 Keep your savings untouched

c. OFW Account
 Track remittance
 Pay government fees
 Send money
2. Philippine Savings Bank
a. E-banking
b. Debit and Credit Mastercard
c. Prepaid Mastercard
d. Remittance
e. Mobile Check Deposit
f. Cardless withdrawal
3. China Bank Savings
a. Savings
 Easy-Save ATM
 Easy-Save Passbook
 Easy-Save for Kids
 Easy-Save Loaded
b. Trust
 Personal trust
 Corporate trust
 Agency
c. Loans
 Auto individuals
 Auto corporate
 Housing
 Personal
d. Checking
 Easy-Checking
 Easy-Checking Diary
2) PRIVATE DEVELOPMENT BANKS
Private development banks are designed to support the policy of the government in promoting and expanding
the economy, expanding industrial and agricultural growth, supplying the needs for capital and meeting the demands
for adequate investment credit or medium and long-term loans for entrepreneurs.
What is Private Development Bank
A development bank is a financial institution whose lending policy is guided, in part or in total, by the
perceived economic, social, or political needs of a country rather than by commercial goals alone.
A private development bank lends almost exclusively to private businesses, and in general, make intermediate
to long-term loans.
A private development bank shall exercise all the powers and shall assume all obligations of a savings (and
mortgage) bank as provided in the General Banking Act. It shall be organized in the form of a stock corporation.
Service Offered
As private development banks also exercise the powers of savings bank, it is not surprising to find out that the
financial services they carry are similar. The differences will be based on the capability of each to offer as many
services they can. Moreover, priorities will also make them different in terms of deposit accommodation and loan
exposure
EXAMPLES OF PRIVATE DEVELOPMENT BANKS IN THE PHILIPPINES WITH THEIR PRODUCTS AND SERVICES:

Bank Head Office Location

1. Development Bank of the Philippines Metro Manila
a. Electronic cash card
 convenient
 worry free
 safe
 interest-earning account
 insured
b. Bank to bank credit
c. Cash pick-up
d. Payment to institutions
2. Luzon Development Bank Calamba, Laguna
a. Savings accounts
 Regular savings
 iSavers
 Business Savings account
 Savings Maximizer
 Young Earner’s Savings
b. Current accounts
 Regular current account
 Tseke ni Juan
 Manager’s check
c. Time deposit
 Regular time deposit
 Time earner
3. Pampanga Development Bank Puerto Princesa City
a. Savings account
b. Time deposit
c. Salary loan
d. Agri-Business loan
e. Microfinance loan
f. Market retailers loan
g. Loan to private corporation
h. Commercial loan
i. Real estate loan
j. Student loan
k. Car loan
l. Business loan
3) MICROFINANCE THRIFT BANKS
The need to empower the poor masses through credit has been recognized as early as in the 1960s. Several
programs were adapted but they failed to produce the required results. This did not deter government policy. Thus,
the microfinance thrift banks came into being

What is a Microfinance Thrift Bank

A Microfinance bank is one devoted to extending small loans, referred to as microloans, to individuals,
businesses, and organizations
Banks with microfinance function are classified by the Bangko Sentral ng Pilipinas as follows:
1. microfinance oriented thrift banks
2. microfinance engaged thrift banks
3. microfinance oriented rural banks
4. microfinance engaged cooperative banks
5. microfinance engaged rural banks
6. universal banks performing microfinance function
7. regular commercial bank performing microfinance function
EXAMPLES OF THRIFT BANKS ENGAGED IN MICROFINANCE
A. Central Luzon
1. Pampanga Development Bank
B. National Capital Region
1. BPI Globe Bank,Inc.
2. Century Savings Bank
C. Calabarzon
1. Luzon Development Bank
2. World Partners Bank
D. Central Vizayas
1. Sun Savings Bank
E. Northern Mindanao
1. 1st Valley Bank
F. Davao Region
1. Merchant Savings & Loan Association
G. Caraga
1. Enterprise Bank

4) STOCK SAVINGS AND LOAN ASSOCIATION

Savings and loan associations are established to provide credit and savings facilities in a fair manner to the
consuming public, industry, commerce, and agriculture.

What is a Savings and Loan Association?

Savings and loan associations are thrift institutions that raise most of their funds by offering savings deposits
to the public and devote most of their assets to home mortgages and other residential related loans and securities.
A savings and loan association is any corporation engaged in the business of accumulating the savings of its
members or stockholders, and using such accumulation together with its capital in the case of stock corporation
for loan and/or for investment in the securities of productive enterprises or in securities of the Government, or any
of its political subdivision, instrumentalities or corporations.
The law indicates that savings and loan associations shall be primarily engaged in servicing the needs of
households by providing personal finance and long-term financing for home building and development.
Savings and loan associations are of two type:
1. Stock, and
2. Non-stock

A stock savings and loan association (SSLA) shall, in addition to the powers granted under the Corporation
Code of the Philippines, exercise all the powers and assume all the obligations of a savings and mortgage bank.

Service Offered
SSLAs are allowed by law to exercise all the powers of a savings and mortgage bank, and with the approval of
the Monetary Board, perform services authorized for commercial banks. As such, it is not surprising to find
SSLAs offering services similar to savings banks and commercial banks. The types of services they offer will only
be limited by the individual capabilities of the SSLAs.

EXAMPLES OF STOCK SAVINGS AND LOANS ASSOCIATIONS OPERATING IN THE PHILIPPINES

1. Cordillera Savings Bank
a. Deposits
b. Loans
c. BDO POS
d. Western Union
2. Legaspi Savings Bank
a. Online banking
b. Business loan
c. Saving account
d. Debit card
e. Mobile banking
 f. Checking account
g. Personal loan
h. E-statement
i. Direct deposit
j. Real estate loan
k. Insurance services
3. Life Savings Bank
a. Regular Philippine Peso
b. Kids passbook savings account
c. Foreign currency deposit unit account
d. Business loan
e. Microfinance program loan
f. Mortgage loan
g. Crop loan
h. Auto loan
i. Salary loan

UPDATE ON RESOURCES OF THRIFT BANKS IN THE PHILIPPINES AS OF 2023

Resources of thrift bank went up by 7% to P1.1 trillion from P1.28 trillion a year ago

NUMBERS OF THRIFT BANKS IN THE PHILIPPINES AS OF 2023

There are 42 in total as of 2023 and PSB is at the top according to its total assets 237,119.91 and Quezon
Coconut Bank Inc. at the bottom with total assets of 67.21
https://www.bsp.gov.ph/Statistics/Financial%20Statements/Thrift/assets.aspx

AREAS SERVED BY THRIFT BANKS

In terms of areas served, thrift banks play a role that becomes more important every year. Most thrift banks
serve areas that are not covered or fully served by commercial bank.

A THRIFT BANK SERVING THE PROVINCES AREAS

BPI FAMILY SAVINGS BANK

Head office, Paseo de Roxas corner Dela Rosa Streets Makati City

AREAS NO. OF AREAS NO. OF AREAS NO. OF

BRANCHES BRANCHES BRANCHES
1. Kalookan 1 1. Quezon city 34 1. Pampanga 3
2. Las pinas 3 2. San Juan 5 2. Pangasinan 1
3. Makati 9 3. Taguig 1 3. Quezon 1
4. Malabon 3 4. Valenzuela 2 4. Rizal 7
5. Mandaluyong 6 5. Batangas 2 5. Bacolod 1
6. Manila 15 6. Benguet 1 6. Cebu 4
7. Marikina 2 7. Bulacan 2 7. Iloilo 1
8. Muntinlupa 3 8. Naga 1 8. Cagayan de Oro 1
9. Paranaque 10 9. Cavite 7 9. Davao 2
10. Pasay 5 10. Ilocos Norte 1
11. Pasig 3 11. laguna 5

A THRIFT BANK SERVING THE URBAN AREAS

HONGKONG AND SHANGHAI BANKING CORPORATION

Head office: G/F Peninsula Court, 8735 Paseo de Roxas corner Makati Avenue, Makati City

Branches Location
1. Binondo Quintin paredes corner ongpin Sts. Binondo, manila
2. Bonifacio Global city 5th Avenue West Bonifacio Global City Taguig, Metro Manila
3. Cebu Cebu Buisness Park Cebu City
4. Davao Luisa Avenue Square Davao City
5. Makati Paseo de Roxas Makati City
6. Ortigas Ortigas Center Pasig City
 7. Quezon City West Triangle City

DIFFERENCE OF THRIFT, COOPERATIVE, RURAL, COMMERCIAL, AND UNIVERSAL BANK

The BSP says the Philippine banking system is composed of universal and commercial banks, thrift banks,
rural and cooperative banks.

In the Philippines, banks are classified into three main categories:

 rural and cooperative banks
 thrift or savings banks, and
 universal or commercial banks.

REPUBLIC ACT NO. 7906

CHAPTER IV
POWERS

Sec. 10. Powers of Thrift Banks. — In addition to powers granted it by this Act and existing laws, any thrift bank
may:
(a) Accept savings and time deposits;

(b) Open current or checking accounts: Provided, That the thrift bank has net assets of at least Twenty million pesos
(P20,000,000) subject to such guidelines as may be established by the Monetary Board; and shall be allowed to
directly clear its demand deposit operations with the Bangko Sentral and the Philippine Clearing House
Corporation;
(c) Act as correspondent for other financial institutions;
(d) Act as collection agent for government entities, including but not limited to, the Bureau of Internal Revenue,
Social Security System, and the Bureau of Customs;
(e) Act as official depository of national agencies and of municipal, city or provincial funds in the municipality, city
or province where the thrift bank is located, subject to such guidelines as may be established by the Monetary
Board;
(f) Rediscount paper with the Philippine National Bank, the Land Bank of the Philippines, the Development Bank of
the Philippines, and other government-owned or -controlled corporations. Said institutions shall specify the nature
of paper deemed acceptable for rediscount, as well as rediscounting rate to be charged by any of these institutions;
and
(g) Issue mortgage and chattel mortgage certificates, buy and sell them for its own account or for the account of
others, or accept and receive them in payment or as amortization of its loan.
Such mortgage and chattel mortgage certificates shall be issued exclusively in national currency and exclusively for
the financing of equipment loans, mortgage loans for the acquisition of machinery and other fixed installations,
conservation, enlargement or improvement of productive properties and real estate mortgage loans for: (1) the
construction, acquisition, expansion or improvement of rural and urban properties; (2) the refinancing of similar loans
and mortgages; and (3) such other purposes as may be authorized by the Monetary Board.

A thrift bank shall coordinate the amounts and maturities of its certificates with those of its loans, so as to ensure
adequate cash receipts for the payment of principal and interest at the time they become due. The bank shall accept its
own certificates at least at the actual price of issue, in any prepayment of loans which mortgage or chattel mortgage
debtors may wish to make: Provided, That the date of maturity of the certificates is not later than the date on which the
payment would otherwise become due, in the absence of the aforesaid prepayment;

(h) Purchase, hold and convey real estate under the same conditions as those governing commercial banks as
specified under Section 25 of Republic Act No. 337;
(i) Engage in quasi-banking and money market operations;
(j) Open domestic letters of credit;
(k)Extend credit facilities to private and government employees: Provided, That in the case of a borrower who is a
permanent employee or wage earner, the treasurer, cashier or paymaster of the office employing him is authorized,
notwithstanding the provisions of any existing law, rules and regulations to the contrary, to make deductions from
his salary, wage or income pursuant to the terms of his loan, to remit deductions to the thrift bank concerned, and
collect such reasonable fee for his services;
(l) Extend credit against the security of jewelry, precious stones and articles of similar nature, subject to such rules and
regulations as the Monetary Board may prescribe; and
(m) Offer other banking services as provided in Section 72 of Republic Act No. 337 and Republic Act No. 6426,
as amended.
Thrift banks may perform the services under subsections (b), (d), (e), (g) and (i) only upon prior approval of the
Monetary Board.

Nothing in this Section shall be construed as precluding a thrift bank from performing, with prior approval of the
Monetary Board, commercial banking services, or from operating under an expanded banking authority, nor from
exercising, whenever applicable and not inconsistent with the provisions of this Act and Bangko Sentral regulations,
and such other powers incident to a corporation.

Sec. 11. Limitations on Lending Authority. — Except as the Monetary Board may otherwise prescribe, the direct
indebtedness to thrift banks of any person, company, corporation, or firm, including the indebtedness of members of a
partnership and association, for money borrowed, excluding: (a) loans secured by obligations of the Bangko Sentral;
(b) loans fully guaranteed by the government as to the payment of principal and interest; (c) loans to the extent
covered by the hold-out on, or assignment of, deposits maintained in the lending bank and held in the Philippines; and
(d) other loans or credits as the Monetary Board may, from time to time, specify as non-risk assets, which shall in no
time exceed fifteen percent (15%) of unimpaired capital and surplus of the bank.

Notwithstanding the provisions of the preceding paragraph and subject to such regulations as the Monetary Board may
prescribe, the total indebtedness of any borrower to the bank may amount to a further fifteen percent (15%) of the
unimpaired capital and surplus of such bank provided the additional indebtedness is for the purpose of financing
subdivision or housing development, medium- and low-income borrowers and agriculture on a fully secured basis.
The term "indebtedness" as used herein, shall mean the direct liability of the maker or acceptor of paper discounted
with or sold to such bank and liability of the indorser, drawer or guarantor who obtains a loan from or discounts paper
with or sells paper under his guaranty to such bank; and shall include in the case of liabilities of a partnership or
association the liabilities of the several members thereof; and shall include in the case of liabilities of a corporation, all
liabilities of all the subsidiaries thereof in which such corporation owns or controls a majority interest: Provided, That
even if the parent corporation, partnership or association has no liability to the bank, the Monetary Board may
prescribe the combination of liabilities of subsidiary corporations or members of the partnership or association under
certain circumstances, including but need not be limited to any of the following situations: (a) the parent corporation,
partnership or association guarantees the repayment of liabilities; (b) the liabilities were incurred for the
accommodation of the parent corporation or another subsidiary or of the partnership or association; or (c) the
subsidiaries through separate entities operate merely as departments or divisions of a single entity: Provided, further,
That the discount of bills of exchange drawn in good faith against actually existing values, and the discount of
commercial and business paper actually owned by the person negotiating the same, shall not be considered as money
borrowed for the purpose of this Section: Provided, finally, That certain types of contingent liabilities of borrowers
may be included among the total liabilities as may be determined by the Monetary Board.
Loan accommodations granted by thrift banks to any other bank, as well as deposits maintained by them in any bank
licensed to do business in the Philippines, shall be subject to the loan limit of any single borrower as herein prescribed.
Sec. 12. Investment in Allied Undertakings. — Subject to such guidelines as may be established by the Monetary
Board, thrift banks may invest in equities of allied undertakings as hereinafter enumerated: Provided, That: (a) the
total investments in equities shall not exceed twenty-five percent (25%) of the net worth of the thrift bank; (b) the
equity investment in any single enterprise shall be limited to fifteen percent (15%) of the net worth of the thrift bank;
(c) the equity investment in any single enterprise shall remain a minority holding in that enterprise; and (d) the equity
investment in other banks shall be subject to the same provisions governing similar investments of commercial banks
and shall be deducted from the investing bank's net worth for the purpose of computing of the prescribed ratio as
provided in Section 9 hereof: Provided, further, That equity investments shall not be permitted in non-related
activities.Where the allied activity is a wholly- or majority-owned subsidiary of the thrift bank, the Bangko Sentral
may subject it to examination.
Investment in allied undertaking shall include institutions engaged in the following activities:
(a) Banking and financing;
(b) Warehousing and other post-harvesting activities;
(c) Fertilizer and agricultural chemical and pesticides distribution;
(d) Farm equipment distribution;
(e) Trucking and transportation of agricultural products;
(f) Marketing of agricultural products;
(g) Leasing; and
(h) Other undertakings as may be determined by the Monetary Board.
Universal and commercial banks offer the widest variety of banking services among financial institutions. In
addition to the function of an ordinary commercial bank, universal banks are also “authorized to engage in
underwriting and other functions of investment houses, and to invest in equities of non-allied undertakings.”

Thrift banks, meanwhile, are composed of savings and mortgage banks, private development banks, stock savings
and loan associations, and microfinance thrift banks. They are essentially engaged in accumulating savings of
depositors and investing them, providing short-term working capital and medium- and long-term financing to
businesses engaged in agriculture, services, industry and housing, and diversified financial and allied services, and
to their chosen markets, especially small- and medium- enterprises and individuals.

Finally, rural and cooperative banks are most familiar to thos eliving in rural or provincial areas. Their role is to
“promote and expand the rural economy in an orderly and effective manner” by providing basic financial services.
Many rural and cooperative banks help farmers through the stages of production, from buying seedlings to
marketing of their produce. These banks are also differentiated from each other by ownership; while rural banks
are privately owned and managed, cooperative banks are organized/owned by cooperatives or federation of
cooperatives.

SUMMARY
Thrift banks provide an economical means of accumulating funds in large amounts which in turn are used to
finance consumer lending. Thrift banks invest primarily in residential mortgage and consumer loans.
Small savers which could not usually be accommodated by commercial banks are the primary target
customers of thrift banks.
Thrift banks are classified into savings and mortgage banks, private development banks, and stock savings
and loan associations.
The three types of thrift banks differ mostly in terms of the types of borrowers they serve. Savings and
mortgage banks primarily cater to consumer lending, while private development banks to business lending, and
stock savings and loan associations mostly to consumers.
The number and resources of thrift banks have. continuously grown through the years. This growth enabled
them to serve a wider coverage in terms of areas and types of customers.