May 28, 1996

DAR OPINION NO. 26-96

Mr. Alberta V . Reyes

Deputy Governor

Central Bank of the Philippines

Supervision and Examination Sector

Manila, Philippines

Dear Mr. Reyes:

This refers to your letter requesting for clarification regarding the implication of Section 6 of RA 7881 on the authority for the bank to sell, transfer or convey foreclosed agricultural lands under its existing policy on disposal.

Please be clarified that the net effect of Section 6 of RA 7881 is to allow government financial institutions to dispose to third parties their properties which were foreclosed on or after the effectivity of RA 7881, i.e., March 12, 1995, under the General Banking Act. However, since said properties fall under CARP coverage, the same shall still be acquired by the government through the DAR for distribution to qualified farmer beneficiaries as mandated under RA 6657.

As regards private banks, Section 71 of RA 6657 provides that said foreclosed assets are subject to existing laws on their compulsory transfer (that is, under the General Banking Act) and acquisition under Section 16 of said Act. This means that private banks may sell to third parties their foreclosed assets but still subject to acquisition under Section 16 of RA 6657 (copy of DAR MC 5, Series of 1996 attached).

We hope to have clarified you on the matter.

Very truly yours,

(SGD.) LORENZO R. REYES

OIC-Undersecretary
LAFMA

Copy furnished:

OSEC

Doc. No. 96030119