Tomas Del Rosario College

Capitol Drive, San Jose, Balanga City, Bataan

Accountancy Department

Non-Bank Financial Institutions: Building and Loan Associations, Non-Stock Savings and
Loan Associations, and Trust Corporations
Bachelor of Science in Accountancy 2-B
Financial Markets

Prepared by:
Santos, Bea Camille G.
Manalaotao, Fatima
San Jose, Aubrey Jane
Baluyot, Allyssa Mica
Gonzales, Anne Coleen
 Building and Loan Associations, Non-Stock Savings and Loan Associations and Trust Corporation
This written report explains the legal provision on the organization, administration and functions/services of building
and loan associations, non-stock savings and loan associations and Trust Corporation.

DEFINITION OF TERMS

LEGAL INCOMPETENTS
 Lack of legal ability to do something. Especially to testify or stand trial, also known as ‘incompetency’.
May be caused by various types of disqualification, inability, or unfitness. Someone who is judged
incompetent by means of a formal hearing may have a guardian appointed by the court.
 For example, a legally incompetent person who does not understand the charges against him\her cannot
take part in his own defense.
DEEDS OF TRUST
 A deed of trust or trust deed is a deed wherein legal title in real property is transferred to a trustee, which
holds it as security for a loan (Debt) between a borrower and lender. The equitable title remains with the
borrower. The borrower is referred to as the trustor, while the lender is referred to as the beneficiary.
 For example, a deed of trust can only be sold by the trustee who is not permitted to change the selling
price to benefit either the borrower or lender. Once the sale of a property under a deed of trust is
finalized, the trustee distributes the proceeds to the lender, with the remainder to the borrower.
TRUST AGREEMENTS
 Or also known as formal agreement or legal agreement through which a trustor vests the ownership
rights (title) to one or more assets to one or more trustees for conversation and protection on behalf of
one or more beneficiaries of the trust.
WILL
 A legal document containing instructions as to what should be done with one’s money and property
after’s one death.
 A legal document by which a person, the testator, expresses their wishes as to how their property is to be
distributed to death, and names one or more persons, the executor, to manage the estate until its final
distribution.

BATAS PAMBANSA BLG. 61

An act amending further RA 337, as amended, regulating banks and banking institutions and for other purposes, otherwise
known as the “GENERAL BANKING ACT”
Sec. 2-A. The following entities shall not be considered as banking institutions but shall be subject to regulation by the
Monetary Board which may include, but need not be limited to, the imposition of net worth to risk assets ratios, reserve
requirements, interest rate ceilings, method of computation thereof, prescribing maximum charges which may be collected,
minimum capitalization and submission of statistical reports:
(a) Entities regularly engaged in the lending of funds or purchasing of receivables or other obligations with funds
obtained from the public through the issuance, endorsement or acceptance of debt instruments of any kind for their
own account, or through the issuance of certificates of assignment or similar instruments with recourse, trust
 certificates, or repurchase agreements, whether any of these means of obtaining funds from the public is done on a
regular basis or only occasionally.

(b) Entities regularly engaged in the lending of funds which receive deposits only occasionally;

(c) Trust companies, building and loan associations and non-stock savings and loan associations, but such non-deposit
accepting entities shall continue “to be supervised and regulated by the Monetary Board under the pertinent
provisions of this Act, and or Republic Act Nos. 265 as amended and 3779.”
The Governing laws affecting the operations of the trust corporations, building and non-stock savings and loan
association are the NEW CENTRAL BANK ACT (for all the three entities), General Banking Act, and Savings and Loan
Association Act, respectively.
Also, the BANGKO SENTRAL through its Monetary Board, in the exercise of the authority to regulate the operations
of the aforementioned entities, commits and does the following:
1. Imposition of net worth to risk assets ratios.
2. Reserve requirements
3. Interest rate ceilings
4. Methods of computation.
5. Prescribing maximum charges which may be collected.
6. Minimum capitalization
7. Submission of statistical reports.

I. BUILDING AND LOAN ASSOCIATION

 Also called mutual building and loan association

 Refers to all corporations whose capital stock is required or is permitted to be paid in by the
stockholders in regular, equal periodical payment.
 Accumulate the savings of its stockholders of its stockholders for the purpose of encouraging industry, frugality,
and homebuilding among their stockholders.
 May also acquire real estate for subdivision into residential lots for sale or lease exclusively to their members

 Neighborhood Cooperative Societies

o early savings and loan associations
o Individuals with common bond of interest agreed to pool their savings so that eventually all the
members of the association would become owners of their own houses. Such cooperatives originated
in England and Scotland.
o Were once called building and loan association.

How a building and Loan Association Worked

 A building and loan association got its start when a pool of individuals agreed to pay membership
fee and subscribed to a certain number of shares that had a predetermined maturity value. The
members were obliged to pay a certain amount each month until the maturity value of their shares
had been reached
Purposes of Building and Loan Association
 To accumulate the savings of its stockholders
 To repay to said stockholders their accumulated savings and profits upon surrender of their shares
 To encourage industry, frugality, and home building among its stockholders
 To loan its funds

Forms of Business Organization

 A building and loan association is to be organized in the form of a corporation ( as amended from
the provision of section 39 of R.A No. 337)
Capitalization
 The capital stock of a building and loan association is to be divided into shares of the matured or par
value of P200 each. Any person may become a stockholder of a building and loan association by
subscribing for one or more shares therein and signing the by-laws of the association.

 Payments by the stockholders to the subscribed capital stock are in regular, equal, periodical
payments known as dues, at such times and such amounts as may be provided in the by-laws of the
association.

 The association is authorized to charge a membership or entrance fee not exceeding one peso on
each share of stock issued and may at the same time charge a transfer fee not exceeding twenty
centavos on each share transferred.

 Stockholders may surrender their shares and withdraw from the association after paying twelve
monthly installments of dues upon giving sixty days' notice in writing to the board of directors, and
the withdrawal value of such shares shall be the total sum of the dues paid thereon plus not less than
ninety per cent of all dividends earned by such shares up to the end of the last preceding fiscal period
plus such interest for the time elapsed since the end of that period as shall be allowed by the board
of directors.

Lending
 It is considered unlawful for any building and loan association to make any loan upon property that
is suitable for use only as theater, public hall, church, convent, school, club, hotel, garage or public
building.
 No member of the building and loan association having assets of P100,000 or more an amount in
excess of 10% of the total assets of the association, nor may any such association make a loan upon
any one piece of real state amounting to more than 10% of the total assets of the association.
 In the case of a building and loan association having assets amounting to less than P100, 000, no
loan to any borrower and no loan to any one piece of real estate may exceed P10, 000.
 Every loan made by the building and loan association must be properly evidenced by written note
and must be secured by:
a. ) A first mortgage or deed of trust on unencumbered real estate and;
b.) The pledge to the association of shares of stocks of the matured value of which is at least equal to
the amount loaned.
OTHER MATTERS
• By the affirmative vote of a majority of all its directors the association may borrow money for such
temporary uses and purposes as the exigencies of the business may demand provided such action is consistent
with the objects of the association. The aggregate amount of the outstanding indebtedness of any such
association shall not at any time exceed fifty per cent (50%) of its capital stock actually paid in: Provided,
however, that such limitation shall not include indebtedness to the Central Bank.
• With the approval of the Monetary Board, a building and loan association may also invest such of its funds
as may otherwise remain idle, in bonds and obligations of the Republic of the Philippines, or of any of its
political subdivisions, or of any government-owned or controlled corporation, including the Central Bank.
• Mutual building and loan associations may purchase, hold, and convey real estate under the same conditions
as those specified with reference to commercial banks.

Examples of Building and Loan Association

1. Manila Building and Loan Association

2. Tahanan Mutual Building and Loan Association
3. Home Credit Building and Loan Association

II. TRUST CORPORATION

 Defined to mean as “any corporation formed or organize for the purpose of acting as trustee or
administering any trust or holding property in trust or on deposit for the use.”
 A trust company or any bank authorized to engage in such business is required to administer the funds
or property under its custody with the skill, care, prudence, and diligence necessary under the
circumstances when prevailing.
 These are financial institutions which serve as executors or administrators of decedents’ estate properties, as
guardians of the properties of legal incompetents, and as trustees under deeds of trust, trust agreements, and
wills.
 They also perform agency functions for individuals, corporations, associations, governments, and educational,
religious and other public institutions.
 Wealthy individuals entrust the administration of their estates to a trust corporation because of the latter’s
competence.
 Has experts in accounting, taxation, and investment.
 Exercises great wisdom and prudence in investing trust funds in the interest of their clients.
 In some cases it acts as a guardian or trustee of the estate of a minor, insane person, idiot, habitual drinker,
incompetent, or irresponsible person.

A. Forms of business organization. An entity engaged in the trust business should be organized in the
form of a corporation. Such corporation, with the approval of the Monetary Board, may engage in
commercial banking business separate and distinct from its business. On the other hand, any banking
corporation may, with the approval, be authorized to engage in the business of a trust company or trust
corporation but subject to the provisions of laws applicable to trust business.

B. Every trust company must carry on deposit with the Bangko Sentral, either cash or securities approved
by the Monetary Board, in an amount equal to not less than P250, 000. Such deposit serves as
 security for a trust company in transacting trust business. The Monetary Board may increase the amount
of such securities depending on the growth of the trust business of the company.

C. The trust company has the right to collect the interest earned on any securities deposited, and to exchange
such securities for others, with the approval of the Monetary Board, as long as the company continues
to be solvent and complying with the laws of the Philippines.

D. Capitalization. The of capital stocks and funds of a trust company may be loaned or otherwise invested
as it’s by laws prescribe and if it does a commercial banking business in addition to its trust business,
the investment of its fund other than trust funds must be governed by the provisions of laws applicable
to commercial banking corporation.

E. Before any trust company can declare dividend, it is required by law to carry to surplus 10% of its net
profits accruing since the last preceding dividend until the surplus amounts to 20% of it authorize capital
stock. No part of the surplus may at any time be paid out in dividends. Nevertheless, losses accruing in
the course of its business may be charged against surplus. Also, a larger surplus may be accumulated, if
the directors so decide.

CORPORATE POWERS OF A TRUST CORPORATION

1) To act as trustee on any mortgage or bond issued by any municipality, corporation, or any body politic
and to accept and execute any other municipal or corporate trust not inconsistent with law.
2) To act under the order or appointment of any court of record as guardian, receiver, trustee, or depositary
of the estate of any minor, insane person, idiot, habitual drunkard, or other incompetent or irresponsible
person, and as receiver and depositary of any money’s paid into court by parties to any legal proceedings
and of property of any kind which may be brought under the jurisdiction of the court by proper legal
proceedings.
3) To act as the executor of any last will or testament when it is named in the last will and testament as the
executor thereof.
4) to act under appointment of a court of competent jurisdiction as administrator of the estate of any deceased
person, with the will annexed, or as administrator of the estate of any deceased person when there is no
will, and when in either case there is no person qualified, competent, willing, able and entitled to accept
such administration.
5) To accept and execute any legal trust confided to it by any court of record or by any person or corporation
for the holding, management, and administration of any estate, real or personal, and the rents, issues and
profits thereof.
OTHER REQUIREMENTS
1) Unless otherwise provided by law, no bond or other security is required from any trust company for the
faithful performance of its duties as trustee, executor, administrator, guardian, receiver, or depository.
However if a special cause warrants the imposition of adequate security for the protection of the funds or
property confided to the corporation, the appointing court officer may require the appointed trust company
such adequate security, upon proper application. In the event if inability or failure if said trust company
to give the required security, its appointment as trustee, executor, administrator, guardian, receiver, or
depositary is to be worked by the appointing court officer. Likewise, the trust company is required to make
all reports, render all accounts, perform such duties, and do such acts as might be required by the court of
a natural person acting as trustee, executor administrator, guardian, receiver or depositary.

2) All moneys, properties, or securities received by any trust company as executor of the will of any deceased
person or as administrator, with or without the will annexed, receiver, trustee, or depositary of the estate
of any minor insane person idiot, habitual drunkard, or other incompetent or irresponsible person, or as
 receiver or depositary under and by virtue of any order or appointment of any court, be kept separate and
distinct from all other funds, properties, and assets of its general business. Likewise, the accounts of all
such moneys, properties, or securities be kept separate and distinct form the accounts of its general
business.

3) Unless otherwise directed by the instrument creating the trust, the lending or investment of deposits or
moneys received by any trust company as executor of the will of any deceased person or as administrator,
with or without the will annexed, or as guardian, receiver, trustee, or depositary of the estate of any minor,
insane person, idiot, habitual drunkard, or other incompetent or irresponsible person, or as a receiver or
depositary under and by virtue of any order or appointment of any court, or as trustee under any instrument
in writing constituting the company as trustee, be limited to the loans and investments as may be prescribed
by the imprisonment of not less than one year nor more than ten years and by a fine of not less than P1,000
nor more than P10,000.

4) No trust company or bank engaged in the business of a trust company may purchase or acquire property,
for the amount of the trustor or the beneficiary of the trust, form ant of the departments, directors, officers,
or employees or the trust company or bank, unless the transaction is specifically authorized by the trustor
and the relationship of the trustee and the party from whom the property is acquired is fully disclosed in
the trustor prior to the transaction.

5) A trust company may acquire real estate in whatever manner and for whatever purpose subject in the same
rules applicable to Commercial Banking Corporation.

List of BSP Supervised Financial Institutions with Trust Authority as of 25 June 2019
A. Universal and Commercial Banks
1 Asia United Bank Corporation
2 Bank of Commerce
3 BDO Private Bank, Inc.
4 BDO Unibank, Inc.
5 China Banking Corporation
6 Citibank, N.A. *
7 CTBC Bank (Philippines) Corporation
8 Deutsche Bank AG *
9 Development Bank of the Philippines
10 East West Banking Corporation
11 Land Bank of the Philippines
12 Maybank Philippines, Incorporated
13 Metropolitan Bank and Trust Company
14 Philippine Bank of Communications
15 Philippine National Bank
16 Philippine Trust Company
17 Philippine Veterans Bank
18 Rizal Commercial Banking Corporation
19 Robinsons Bank Corporation
20 Security Bank Corporation
 21 Standard Chartered Bank *
22 The Hongkong & Shanghai Banking Corporation
23 Union Bank of the Philippines
24 United Coconut Planters Bank

B. Thrift Banks
1 All Bank (A Thrift Bank), Inc.*
2 City state Savings Bank, Inc.
3 Philippine Business Bank, Inc., A Savings Bank
4 Philippine Savings Bank 5 RCBC Savings Bank, Inc.
6 Sterling Bank of Asia, Inc. (A Savings Bank)

C. Trust Corporation
1 ATRAM Trust Corporation
2 BPI Asset Management and Trust Corporation
3 Manulife Asset Management and Trust Corporation

D. Other Non-Bank Financial Intermediaries

1 AB Capital and Investment Corporation
2 Philippine Commercial Capital, Inc.
3 Philippine Depository and Trust Corporation*

Note: *inactive

III. NON-STOCK SAVINGS AND LOAN ASSOCIATION

As defined in Republic Act (RA) 8367 otherwise known as “Revised Non-Stock Savings and Loan
Association Act of 1997”, NSSLAs are non-stock, non-profit corporations engaged in the business of
accumulating the savings of its members and using such accumulations for extending credit to them. NSSLAs are
under the direct supervision and regulation of the Bangko Sentral ng Pilipinas (BSP) and are classified as non-
bank financial intermediaries (NBFIs) under the BSP Manual of Regulations. (February 11, 2016)
o It is prohibited to transact business with the general public.
o It can only accept deposits from, and grant loans to, members and depositors.

Revenue Memorandum Circular No. 9-2016 clarifies the taxability of NSSLAs as follows:
1. Income tax – exempt from income tax on income earned, including interest on its deposits with any bank.
However, any income derived from any of its properties (real of personal) or any activity conducted for profit,
regardless of the disposition thereof is subject to the applicable income tax and other taxes that may be imposed
under the Tax Code;
2. Gross receipts tax (GRT) – subject to GRT as a nonbank financial institution on its income derived from its
operations, unless otherwise exempted under special rules.
3. Documentary stamp tax (DST) – subject to DST on loan agreements, mortgages, pledges, foreclosures and
sales, among others. In case, a NSSLA is one of the parties to a taxable transaction, the NSSLA shall be
responsible for the remittance of the DST due regardless of who will bear the burden of paying the DST.
Capitalization. A savings and loan association organized as a non-stock corporation with a minimum paid-up
capital of 50,000 may be converted into stock savings and loan association provided it has been operating for the
last three years.

The Monetary Board may refuse to award the certificate of approval on the following grounds:
1. That the corporation is to be formed for any business other than the legitimate savings and loan business;
2. That the association’s financial program is unsound; and
3. That the area where the association is to be located is adequately served by one or more existing associations.
 As of end-June 2017, there were 65 operating NSSLA representing 1.2 percent of the 5,524 operating
non-bank financial institutions supervised by the BSP.

List of Non-Stock Savings and Loan Association: Updated as of 13 August 2019

1. Sanitary Care Products Asia Employees Savings and Loans Association, Inc. (SCPA ESLAI)
2. Earist Savings & Loan Association, Inc.
3. Shell Refinery Employees Savings & Loan Association, Inc.
4. SM Savings and Loan Association, Inc.
5. Southernside Savings & Loan Association, Inc.
6. Supreme Court Savings & Loan Association, Inc. (SCSLAI)
7. Meralco Employees Savings and Loan Association, Inc. (MESALA)
8. Multi-Savings & Loan Association, Inc.
9. Muntinlupa Employees Savings and Loan Association, Inc.
10. NBI Savings & Loan Association, Inc.
11. NIA Savings & Loan Association, Inc.
12. NPC Savings & Loan Association, Inc.
13. Philippine Coast Guard Savings & Loan Association, Inc. (PCGSLAI)
14. Telecommunications Savings & Loan Association, Inc.
15. Toyota Motor Philippines Savings & Loan Association, Inc. (TMPSLAI)
16. University of Luzon Savings & Loan Association
17. Water and Sewerage Sector Savings and Loan Association, Inc.
18. Wyeth Philippines Employees Savings & Loan Association, Inc.
19. Air Materiel Wing Savings & Loan Association, Inc. (AMWSLAI)

CORPORATE POWERS OF A NON-STOCK SAVING AND LOAN ASSOCIATION

1. To grant loans not exceeding the member-borrower’s savings and time deposits in the associations,
plus his four-month salary or regular income whether from employment or from his own business, or
70% of the fair market value of any property acceptable as collateral on first mortgage that he may
offer as security. The maturity for loan is not be more than five years, except
a. Loans on the security encumbered real estate for the purpose of home building and
development which may be granted with maturities not exceeding 30 years.
b. Medium or long term loans to finance agricultural projects subject to regulations
prescribed by Monetary Board.
 In the case of borrower who is permanent employee or wage earner, the treasurer, cashier, or
paymaster of the office employing him is authorized to make to make deductions from his salary,
wage or income pursuant to the terms of his loan.

2. To charge interest within the limits allowed by law and collect such necessary fees incidental to the
grant of loans as may, by regulation, be authorized by the Monetary Board.

3. To discount with recourse commercial papers and accounts receivable subject to such rules as the
Monetary Board approval

4. To invest its funds in any sound non speculative enterpise, as well as in bonds, securities, and other
obligations issued by the government of the Philippines or any of its political subdivision,
instrumentalities or corporation including government owned or controlled corporations subject to the
rules and regulations of the Monetary Board.

5. To allow member depositors to participate in the profits of the savings and loan associations on the
basis of their deposits on the date of dividends are declared.

6. To borrow money or incur such obligations not exceeding 20% of the total assets of the association,
from any public lending institutions such as the DBP, the PNB, the GSIS, the SSS, and from such
private lending institutions as may be approved by the Monetary Board.

7. To maintain deposits with banks and other stock savings and loan associations. The amount of such
deposits will be subject to the loan limit to a single borrower as may be prescribed by law or rules and
regulations.
Limitation on Investment. In making investments, a non-stock savings and loan associations is subject to the
following limitations:
1. It cannot invest in bonds and securities an aggregate amount in excess of 10% of the total assets
of such associations.
2. It cannot invest in real property an aggregate amount in excess of 5% of the total assets of such
associations.
3. It cannot invest in furniture, fixture, furnishings and equipment and leasehold improvements of its
offices, more than 10% of its aggregate paid up capital.
4. It cannot make an investment in real estate and improvements, thereon including equipment in an
aggregate amount in excess of 50% of its net worth.
Reserves. Every non stock savings and loan association is required to create a withdrawable share reserve which
will consist of 3% of the aggregate capital contributions of the members. The withdrawable share reserve is to be
set up from the profits of the non-stock savings and loan association.
 IV. Summary
 Building and Loan Associations
o Accumulate the savings of its
stockholders of its stockholders
for the purpose of encouraging
industry, frugality, and
homebuilding among their
stockholders.
o May also acquire real estate for
subdivision into residential lots
for sale or lease exclusively to
their members
 Neighborhood Cooperative
Societies
 early savings and loan
associations
 Individuals with common
bond of interest agreed to
pool their savings so that
eventually all the members
of the association would
become owners of their
own houses. Such
cooperatives originated in
England and Scotland.
 Were once called building
and loan association.
 Trust Corporation/ Company
 Non-stock Savings and
Loan Association
o It is prohibited to transact
business with the general
public.
o It can only accept
deposits from, and grant
loans to, members and
depositors.
 Savings and Loan
Associations
o Most savings and loan
association do not differ
essentially from mutual
savings bank.
o Both accept savings from
anybody and extend loans
to all qualified borrowers
even if they are not
depositors or members.
o These are financial institutions
which serve as executors or
administrators of decedents’
estate properties, as guardians of
the properties of legal
incompetents, and as trustees
under deeds of trust, trust
agreements, and wills.
o They also perform agency
functions for individuals,
corporations, associations,
governments, and educational,
religious and other public
institutions.
o Wealthy individuals entrust the
administration of their estates to a
trust corporation because of the
latter’s competence.
o Has experts in accounting,
taxation, and investment.
o Exercises great wisdom and
prudence in investing trust funds
in the interest of their clients.
o In some cases it acts as a guardian
or trustee of the estate of a minor,
insane person, idiot, habitual
drinker, incompetent, or
irresponsible person.