Professional Documents
Culture Documents
CHAPTER 1
fiduciary nature of banking which requires high standards of integrity and performance. Treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. Requires banks to assume a degree of diligence higher than that of a good father of a family Higher level of accountability than that expected of a depositor. C. Not a Trust Agreement The fiduciary nature of a bank-depositor relationship does not convert the contract between the bank and its depositors from a simple loan to a trust agreement, whether express or implied. Failure by the bank to pay the depositor is failure to pay a simple loan, and not a breach of trust. Banks do not accept deposits to enrich depositors but to earn money for themselves. D. Indispensable Institution Plays a vital role in the economic life of every civilized nation. Banks have become an ubiquitous presence among the people, who have come to regard them with respect and even gratitude, and most of all, confidence. E. Impressed with Public Interest The stability of banks largely depends on the confidence of the people in the honesty and efficiency of banks. In every case, the depositor expects the bank to treat his account with the utmost fidelity, whether such account consist only of a few hundred pesos or of millions. The bank must record every single transaction accurately, down to the last centavo, and as promptly as possible. This has to be done if the account is to reflect at any given time the amount of the money the depositor can dispose of as he sees fit, confident that the bank will deliver it as and to whomever he directs. F. Degree of Diligence The law imposes on banks high standards in view of the fiduciary nature of banking. The bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. (Simex Internationsl vs. Court of Appeals) Degree of diligence higher than that of a good father of a family, as prescribed by Section 2 of the GBL. Same higher degree of diligence is not expected to be exerted by banks in commercial transactions that do not involve their fiduciary relationship with their depositors. Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
I.
DECLARED POLICY OF THE STATE The State recognizes the vital role of banks in providing for an environment conducive to the sustained development of the national economy and the fiduciary nature of banking that requires high standards of integrity and performance. In furtherance thereof, the State shall promote and maintain a stable and efficient banking system that is globally competitive, dynamic and responsive to the demands of a developing economy. (Section 2 of RA 8791, General Banking Law of 2000)
II.
DEFINITION OF BANKS Banks are entities engaged in the lending of funds obtained in the form of deposits. A moneyed institute founded to facilitate the borrowing, lending and self-keeping of money and to deal, in notes, bills of exchange, and credits. An investment company which loans out the money of its customers, collects the interest and charges a commission to both lender and borrower, is a bank. Any person engaged in the business carried on by banks of deposit, of discount, or of circulation is doing a banking business, although but one of these functions is exercised.
III. NATURE OF BANKING BUSINESS A. Debtor- Creditor Relationship Art. 1980. Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning loan. The contract between the bank and its depositor is governed by the provisions of the Civil Code on simple loan The bank is the debtor and the depositor is the creditor. The depositor lends the bank money and the bank agrees to pay the depositor on demand. (Consolidated Bank and Trust Corporation vs. Court of Appeals) Bank deposits are in the nature of irregular deposits. They are really loans because they earn interest. (Serrano vs. Central Bank of the Philippines) B. Fiduciary Duty
Any investigation previously conducted on the property offered as collateral does not preclude a bank from considering information on the same property as security for a subsequent loan. (Sps. Omengan vs. Philippine National Bank) L. Banks may Exclude Persons in their Premises Banks are mandated to exercise a higher degree of diligence in the handling of its affairs than that expected of an ordinary business enterprise. Banks may impose reasonable conditions or limitations to access by non-employees to its premises and records, such as the exclusion of non-employees from the working areas for employees, even absent any imminent or actual unlawful aggression on or an invasion of its properties or usurpation thereof, provided that such limitations are not contrary to the law. M. Charging of Interest for Loans Very essential and fundamental element of the banking business; it may be considered to be the very core of the banking existence or being.
IV. LIABILITY FOR ACTS OF OFFICERS AND EMPLOYEES By the very nature of their work the degree of responsibility, care and trustworthiness expected of their employees and officials are far greater than those of ordinary clerks and employees. Banks are expected to exercise the highest degree of diligence in the selection and supervision of their employees. A bank is liable for the wrongful acts of its officers done in the interest of the bank or in their dealings as bank representatives but not for acts outside the scope of their authority. A. Negligence of Manager The bank, as an employer, is liable. Confidence in the banking system, which necessarily includes reliance on bank managers, is vital in the economic life of our society.
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Dealing with Registered Lands Banks should exercise more care and prudence in dealing with registered lands, than private individuals, for their business is one affected with public interest. The rule that persons dealing with registered lands can rely solely on the certificate of title does not apply to banks. Judicial notice is taken of the standard practice for banks, before approving a loan, to send representatives to the premises of the land offered as collateral and to investigate who the real owners thereof are. A mortgagee-bank must exercise due diligence before entering into said contracts.
Negligence of Officers A bank will be held liable for the negligence of its officers or agents when acting within the course and scope of their employment. If a corporation knowingly permits its officer, or any other agent, to perform acts within the scope of an apparent authority, holding him out to the public as possessing power to do those acts, the corporation will, as against any person who has dealt in good faith with the corporation through such agent, be stopped from denying such authority. C. Negligence of Tellers Banks tellers must exercise a high degree of diligence in insuring that they return the passbook only to the depositor or his authorized representative. The tellers Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
In culpa contractual or breach of contract, moral damages are recoverable only if the defendant has acted fraudulently or in bad faith, or is found guilty of gross negligence amounting to bad faith, or in wanton (reckless) disregard of his contractual obligations. Banks may not be held responsible in the absence of bad faith, malice, or wanton attitude. The law affords no remedy for damages resulting from an act which does not amount to a legal injury or wrong. (DAMNUM ABSQUE INJURIA) INJURY- illegal invasion of a legal right DAMAGE- the loss, hurt, or harm which results from the injury Depositor may recover moral damages even if the banks negligence may not have been attended with bad faith, if the former suffered mental anguish, serious anxiety, embarrassment and humiliation. Moral damages are not meant to enrich a complainant at the expense of the defendant. It is only intended to alleviate the moral suffering she has undergone. F. Respondeat Superior, Diligence in the Selection and Supervision of Employees o Banks is bound by the negligence of its employees under the principle of repondeat superior or command responsibility. o The defense of exercising the required diligence in the selection and supervision of employees is not a complete defense in culpa contractual, unlike in culpa aquiliana.
Classification of Banks (CUT-RICO) a. Commercial Bank/s (C) Exercise the general powers incident to a corporations Shall have all powers as may be necessary to carry on business of commercial banking: a. Accepting drafts and issuing letters of credit b. Discounting and negotiating promissory notes, drafts, bills of exchange and other evidence of debt c. Accepting or creating demand deposits d. Receiving other types of deposits and deposits substitute e. Buying and selling foreign exchange and gold or silver bullion, acquiring marketable bonds and other debt securities f. Extending credit, subject to such rules as the Monetary Board may promulgate See section 29 of GBL and chapter 4 for discussion of operations. Universal Banks (U) They are large banks licensed by Bangko Sentral ng Pilipinas to do both commercial and investment banking. Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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Thrift Banks (T) Aside from the powers conferred on it by other laws, a thrift bank namely a savings and mortgage bank, a stock savings and loan association or a private development bank. Recognize the indispensable role of the private sector, to encourage private enterprise and to provide incentives to needed investment. The following are powers of a thrift bank: a. Grant loans, whether secured or not b. Invest marketable bonds and other debt securities c. Issue domestic letters of credit d. Extend credit facilities to private and government employees e. Extend credit against the security of jewelry or other precious stones. f. Accept savings and time deposits g. Rediscount paper with the Land Bank of the Philippines, Development Bank of the Philippines and other GOCC h. Accept foreign currency deposits as provided under Foreign Currency Deposit Act i. Act as correspondent for other financial institutions j. Purchase, hold and convey real estate as specified in sections 51 and 52 of GBL k. Offer other banking services as provided in section 53 of GBL. Thrift banks may perform such services only upon prior approval of Monetary Board. Rural Banks (R) Recognizes the need to promote comprehensive rural development with the end view of attaining acquitable distribution of opportunities, income and wealth. Encourages and assists in the establishment of rural banking system designed to make needed credit available and readily accessible in the rural areas on the reasonable terms. Loans or advances extended by rural banks shall be primarily for the purpose of meeting the normal credit needs of farmers, fishermen or farm families as well as the normal credit needs of cooperatives and merchants. Islamic (I) RA 6848 created the Al-Amanah Islamic Investment Bank of the Philippines. The domicile and place of business is in Zamboanga City.
Primary purpose of the Islamic Bank is to promote and accelerate the socioeconomic development of the Autonomous Region by performing banking, financing and investment operations. f. Cooperative (C) Organized by the majority shares of which is owned and controlled by cooperatives primarily to provide financial and credit services to cooperatives. May perform all the functions of rural bank. Membership of cooperative bank shall include only cooperative and federations of cooperative. g. Other Banks (O) The Monetary Board is authorized to make other classification of banks, as it may deem proper. Philippine Veterans Bank, Land Bank of the Philippines Development Bank of the Philippines is considered to be Government-Owned Banks. OTHER CLASSIFICATION OF BANKS OTHER THAN MENTIONED IN SECTION 3 1. Non-Stock Savings and Loan Associations Is a non-stock, non-profit corporation engaged in the business of accumulating engaged in the business of accumulating the savings of its members and using such accumulations for loans to members to service the needs of households by providing long-term financing for home building and development and for personal finance. 2. Quasi-Banks Refers to entities engaged in the borrowing of funds through the issuance, endorsement or assignment with recourse or acceptance of deposit substitutes for purposes of relending or purchasing of receivables and other obligations. 3. Offshore Banks Refers to the conduct of banking transactions in foreign currencies involving the receipt of funds from external sources and the utilization of such funds. Authority to Engage in Banking and Quasi-Banking Functions A. Authority from Bangko Sentral ng Pilipinas No person or entity shall engage in banking operations or quasi-banking functions without authority from BSP. An entity authorized by the BSP to perform universal or commercial banking the functions shall likewise have the authority to engage in quasi-banking functions. According to the provisions of the Corporation Code that: (a.) no article of incorporation or amendment to articles of incorporation of banks, banking and quasi-banking institution xxx governed by special l aws shall be accepted by the Commission unless accompanied by a favorable recommendation of the appropriate government agency to the effect that such articles or amendment is in accordance with law; (b.) the SEC shall not accept for filing the by-laws or any amendment thereto of any bank, banking institution xxx unless accompanied by a certificate of the appropriate government agency to the effect that such bylaws or amendments are in accordance with law. Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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managing partner, general manager, corporate secretary, treasurer or in-house counsel. Sec 12, Rule 14 of Rules of Court: Service upon a private juridical entity. When the defendant is a foreign private juridical entity, service may be on its resident agent designated in accordance with law. Strict Compliance is Necessary Basic is the rule that a strict compliance with the mode of service is necessary to confer jurisdiction of the court over a corporation. The officer upon who services is made must be one who is named in the statute otherwise service is insufficient. The purpose is to render it reasonably certain that the corporation will receive prompt and proper notice in action against it. Serving of summons on a branch manager is invalid, as stated in the case of BPI vs. Spouses Santiago, the service of summons on BPIs Branch Manager did not bind the corporation for the branch manager is not included in the enumeration of the statute of the persons whom service of summons can be validly be made in behalf of corporation. Such service is void.
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Service of Summons Upon Banks A. Service under the Rules of Court Sec 11, Rule 14 of Rules of Court: Service upon domestic private juridical entity. When the defendant is a corporation, service may be made on the president, Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
That its funds are obtained from the public, which shall mean twenty (20) or more persons. That the minimum capital requirements prescribed by the Monetary Board for each category of banks are satisfied.
B.
Capabilities The Monetary Board shall take into consideration their capability in terms of their financial resources and technical expertise and integrity. (FTI) The bank licensing process shall incorporate an assessment of: The banks ownership structure Directors and senior management Its operating plan Internal control Its projected financial condition and capital base
a. b. c. d. e. C.
Capital Requirements 1. Minimum capital prescribed by the Monetary Board AMOUNTS TYPE OF BANK Universal Banks Commercial Banks Thrift banks - With head office within (In Million Pesos) 4950.0 2400.0
CHAPTER 2 Organization, Management and Administration of Banks, Quasi-Banks and Trust Entities
Metro Manila - With head office outside Metro Manila Rural Banks - within Metro Manila
I. A.
Organization of Banks Conditions The Monetary Board may authorize the organization of a bank or quasi-bank subject to the following conditions: (SPC) 1. That the entity is a stock corporation.
- cities of Cebu and Davao - In 1st, 2nd & 3rd class cities and first class municipalities - in 4th, 5th & 6th class cities and in 2nd, 3rd & 4th class
6.5
At least 25% of the total authorized capital stock shall be subscribed by the subscribers of the proposed bank, and at least 25% of such subscription shall be paid-up, provided that in no case shall be the paid-up capital be less than the minimum required capital stated above. (25% subscribed and 25% of the subscribed shall be paid and shall not be less than the minimum)
Accept its own shares as security for a loan Exception: When authorized by the Monetary Board. (The stock so purchases or acquired shall, within six months from the time of its purchase or acquisition, be sold or disposed of at a public or private sale.)
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Incorporators/Subscribers/Proposed Directors (I/S/PD) I, S & PD - Must be Persons of integrity and of good credit standing in the business community. S - Must have adequate financial strength to pay for their proposed subscriptions in the bank. I, S & PD must not have been convicted of any crime involving moral turpitude I, S & PD unless otherwise allowed by law, are not offices and employees of a government agency, instrumentality, department or office charged with the supervision of, or granting of loans to banks.
*** A bank may be organized with not less than five (5) nor more thank (15) incorporators. In excess of 15 may be listed among the original subscribers in the Articled of Incorporation. E. 1. 2. Bank Branches Universal or Commercial banks may open branches or other offices within or outside the Philippines prior approval of the Bangko Sentral. Branching by all other banks shall be governed by pertinent laws.
Foreign Stockholdings Section 11, GBL Foreign individuals and non-bank corporations may own or control up to 40% of the voting stocks of a domestic bank. This rule shall apply to Filipinos and domestic nonbank corporations. The percentage of foreign-owned voting stocks shall be determined by the citizenship of the individual stockholders. The citizenship of the corporation which is a stockholder in a bank shall follow the citizenship of the controlling stockholders of the corporation, irrespective of the place of incorporation. controlling stockholders individuals holding more that 50% of the voting stock of the corporate stockholders of the bank. Commercial bank at least 60% of voting stock shall be owned by Filipino citizens. Any thrift bank at least 40% of voting stock shall be owned by Filipino citizens. Rural bank 100% shall be owned and held, directly or indirectly, by Filipino citizens or corporations, associations or cooperatives qualified under the Philippine laws to own and hold such capital stock.
C.
Acquisition of Voting Stock in a Domestic Bank Section 73, GBL Family Groups or Related Interests Is formed when: th Stockholdings of individuals related to each other within 4 degree or consanguinity or affinity, legitimate or common-law; or Two or more corporations owned and controlled by the same family or same group of persons. *** such situations must be fully disclosed in all transactions by such corporations or related groups of persons with bank.
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*** A bank may use any or all of its branches as outlets for the presentation and/or sale of the financial products of its allied undertaking or of its investment house units. *** A bank shall be responsible for all business conducted in such branches and offices to the same extent and in the same manner as though business had all been conducted in the head office. *** A bank and its branches shall be treated as one unit.
II. A.
Stockholdings Treasury Stocks The GBL provides that no bank shall: Purchase or acquire shares of its own capital stock
IV. Fit and Proper Rule A. Powers of the Monetary Board The GBL provides for the following rules: 1. The Monetary Board shall prescribe, pass upon and review the qualifications and disqualifications of individuals elected or appointed bank directors and disqualify those unfit. 2. After due notice to the board of directors of the bank, the Monetary Board may disqualify, suspend or remove any bank director or officer who commits or omits an act which render him unfit for the position 3. CITEE integrity, experience, education, training and competence of an individual shall be considered. Disqualifications a. Permanently disqualified from being directors: 1. Persons who have been convicted by final judgment of a court for offenses involving dishonesty or breach of trust; 2. Persons who have been convicted by final judgment of a court sentencing them to serve a maximum term of imprisonment of more than six years; 3. Persons who have been convicted by final judgment of the court for violation of banking laws, rules and regulations; 4. Persons who have been judicially declared insolvent, spendthrift, or incapacitated to contract; 5. Directors, officers or employees of closed banks, quasi-banks/trust entities who were found to be culpable for such institutions closure as determined by the monetary board. 6. Directors and officers of banks, quasi-bank and trust entities found by the monetary board as administratively liable for violation of banking laws, rules and regulations where a penalty of removal from office is imposed, and which finding of the monetary board has become final and executory; 7. Directors and officers of banks, quasi-banks and trust entities or any person found by the monetary board to be unfit for the position of directors or officers because they were found administratively liable by another government agency for violation of banking laws, rules and regulations or any offense/violation involving dishonesty or breach or trust and which finding of said government agency has become final and executory. b. 1. Temporarily disqualified from being directors: Persons who full refuse to fully disclose the extent of their business interest or any material information to the appropriate supervising and examining department when required pursuant to a provision of law; Directors who have been absent or who have not participated for whatever reasons on more than 50% of all meetings, both regular and special, of the board of directors during Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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Directors of Merged or Consolidated Banks In the case of a bank merger or consolidation, the number of directors shall not exceed twenty-one.
C.
Meetings May be conducted through: Teleconferencing Video-conferencing *** Banks shall include in their bylaws a provision that meetings of board of directors shall be held only within the Philippines. Compensation and other Benefits of Directors and Officers The Monetary Board may regulate the payment by the bank to its directors and officers or compensation, allowance, etc. only in exceptional cases such as: (CUU) 1. When a bank is under comptrollership or conservatorship; 2. When a bank is found by the Monetary Board to be conducting business in an unsafe or unsound manner; 3. When a bank is found by the Monetary Board to be in an unsatisfactory financial condition.
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Disqualifications/Prohibitions under the Corporation Code Sec. 27, Corporation Code Disqualifications/Prohibitions under the NCBA Disqualification Sec. 9, NCBA Prohibitions Sec. 27, NCBA
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E. Disqualification/Prohibition under the PDIC Law Sec. 17 PDIC Law F. Disqualification/Prohibition under RA 7353 Sec. 5, RA 7353
G. Disqualification/Prohibition under Appendix 38, Manual of Regulations for Banks H. Prohibitions on Public Officials Sec 19, GBL
4. 5. 6. 7. 8. 9. 10.
V. A.
Banking Days and Hours Number of Days and Hours The GBL provides for the following guidelines: 1. Banks shall transact business on all working days for at least six hours a day. Banks may open for business on Saturdays, Sundays, or holidays for at least three hours a day. 2. Banks which opt to open on days other than working days shall report to the Bangko Sentral the additional days during which they or their branches or offices shall transact business. 3. Working days mean Mondays to Fridays, except if such days are holidays. Rules and Regulations 1. All banks shall observe for the conduct of their business a regular banking week five days (Mondays Fridays), except when such days are holidays. a. For servicing deposits and withdrawals, banks may remain open beyond the minimum six hours, even before 8:00am or after 8:00pm. b. For purposes other than servicing deposits and withdrawals, banks may open beyond the minimum six hours but in no case shall such banking hours start earlier than 8:00am nor extend beyond 8:00 pm. c. Branches of banks at any international airport or major fish port are allowed on flexible baking hours within a twenty-four hour period which shall in no case be less than six hours per day. d. The banking days and hours selected for each of the offices of banks shall be reported in writing to the appropriate supervising and examining department of the Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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The mobile ATMs should be allowed to visit only centers of activity as mentioned in Item A(2) above and should confine their itinerary to Metro Manila until further notice; The bank shall secure insurance coverage or adopt a self-insurance scheme to protect itself against losses of whatever nature in its immobile ATM operations; The bank shall notify the supervising and examining department of the BSP of the actual date a mobile ATM becomes operational and when no longer in operation.
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Subject to compliance with other relevant laws, banks may opt to observe a banking week in excess of five days after reporting to the BSP the additional days during which such banks or their branches or offices shall transact business for at least three hours each day. Without the need of approval from BSP, banks are allowed to close on certain days in celebration of important historical and/or religious event in the locality where the banks operate: Provided, that said closure has the prior approval of the banker s association in the locality: Provided further, that said closure will only be allowed in the municipality or city where the festivities are centered. Banks shall submit either individually or through their head offices, to the appropriate supervising and examining department of the BSP a prior notice of their intended closure on account of a special local festivity, together with a copy of the resolution of the local bankers association approving said closure, at least two days after the date of said resolution. The required notice shall be supported by certification that: a. On the date of temporary closure, the bank and/or branch will maintain a skeletal force to handle out-of-town clearing items b. The notice of the banks closure and the reason thereof sh all be posted conspicuously in the banks premises c. For branches of banks, the closure has the prior approval of their respective head offices.
VII. Independent Auditor The following are the rules with respect to financial audit of banks: 1. The Monetary Board may require a bank, quasi-bank or trust entity to engage the services of an independent auditor to be chosen by the bank, quasi-bank or trust entity concerned from a list of certified public accountants acceptable to the Monetary Board. The term of the engagement shall be prescribed by the Monetary Board which may either be on a continuing basis where the auditor shall act as resident examiner, or on the basis of special engagements, but in any case, the independent auditor shall be responsible to the banks, quasi-banks or trust entitys board of directors. A copy of the report shall be furnished to the Monetary Board. The Monetary Board may also direct the board of directors of a bank, quasi-bank, trust entity and/or the individual members thereof, to conduct, either personally or by a committee created by the board, an annual balance sheet audit of the bank, quasi-bank or trust entity to review the internal audit and control system of the bank, quasi-bank or trust entity and to submit a report of such audit.
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VIII. FINANCIAL STATEMENTS A. Publication of Financial Statements: The following are rules regarding publication of financial statements: Sec. 61, GBL ** Every bank, quasi-bank or trust entity, shall publish a statement of its financial condition
VI. Automated Teller Machines A. Off-Site Automated Teller Machines (ATMs) Banks may establish off-site ATMs, subject to the following conditions: 1. Banks shall submit a report to the appropriated department of the BSP on ATMs which they establish; 2. ATMs shall be installed in centers of activity like supermarkets, etc. Provided, that security measures shall be adopted. 3. Only banks which have shown general compliance with laws, rules and regulations shall be allowed to open off-site ATMs. Mobile ATMs Banks may also establish mobile ATM, subject to the following conditions:
such terms understandable to the layman in such frequency as may be prescribed by the Bangko Sentral in English or Filipino at least once every quarter in a newspaper or general circulation in the place where the bank is located
B.
** In periods of national and/or local emergency or of imminent panic which directly threaten monetary and banking stability, the Monetary Board, by a vote of at least five of its members, in special cases and upon application of the bank, quasi-bank or trust entity, may allow such bank, quasi-bank or trust entity to defer for a stated period of time the publication of the statement of financial condition required herein.
IX. Publication of Capital Stock Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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A bank, quasi-bank or trust entity shall shot publish the amount of its authorized or subscribed capital stock without indicating at the same time and with equal prominence, the amount of its capital actually paid-up. X. A. Settlement of Disputes Unsettled Labor Disputes Any strike or lockout involving banks, if unsettled after seven calendar days shall be reported by the Bangko Sentral to the Secretary of Labor who may assume jurisdiction over the dispute and decide it or certify the same to the NLRC for compulsory arbitration. However, the President may intervene and assume jurisdiction over such labor dispute in order to settle or terminate the same. Reports of Strike and Lockouts The bank shall disclose the following pertinent information on the strike/lockout: a. Cause of the strike/lockout and bank managements position on its legality; b. Bank operations affected. XI. Laws Governing Other Types of Banks Thrift banks Thrift Banks Act Rural Bank Rural Banks Act Cooperative Cooperative Code Islamic Banks special laws
B.
** GBL shall likewise apply to thrift banks, rural banks and cooperative banks insofar as they are not in conflict. ** GBL shall govern for purposes of prescribing the minimum ratio which the net worth of a thrift bank must bear to its total risk assets.
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Thrift Bank, Rural Bank, Cooperative Bank may create or accept demand deposits subject to withdrawal by check WITH prior authority from BSP.
Manner of making the deposit In Philippine Bank of Commerce vs CA the Supreme Court observed: In the ordinary and usual course of banking operations, current account deposits are accepted by the bank on the basis of deposit slips prepared and signed by the depositor, or the latters agent or representative, who indicates therein the current account number to which the deposit is to be credited, the name of the depositor or current account holder, the name of the deposit and the amount of the deposit either in cash or checks. The deposit slip has an upper portion or stub, which is detached and given to the depositor or his agent; the lower portion is retained by the bank. In some instances however, the deposit slips are prepared in duplicate by the depositor. The original of the deposit slip is retained by the bank, while the duplicate copy is returned or given to the depositor. Regulations on Temporary Overdrawings and Drawings against Uncollected Deposits (DAUD) TEMPORARY OVERDRAWINGS against current account SHALL NOT BE ALLOWED, UNLESS caused by normal bank charges and other fees incidental to handling such accounts. Violation: Fine of one-tenth of one percent (1/10 of 1%) per day of violation, computed on the basis of the amount of overdrawing or fines in amounts as may be determined by the Monetary Board, but not to exceed P30,000 a day for each violation whichever is lower. Technical overdrawings arising from force posting in clearing checks shall be debited banks under Returned Checks and Other Cash Items Not in Process of Collection which is part of Other Assets in the Statement Condition. Items to be lodged under this account shall consist only of in clearing checks which may result in technical overdrawn accounts and shall immediately reversed in the following day. The checks lodged under Returned Checks etc. shall either be returned or honored the following day before clearing. The items to be used as cover for honored checks should only consist of any of the following: Cash Cashiers, Managers or Certified Checks Bank Drafts Postal Money Orders Treasury Warrants Duly funded On us checks Fund transfers or credit memos within the same bank representing proceeds of loans granted under existing regulations NOTE: Peso demand deposit accounts maintained by foreign correspondent banks with commercial banks shall NOT be subject to the above-mentioned regulations PROVIDED: Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
1) Demand Deposits all those liabilities of the Bangko Sentral and of other banks which are denominated in Philippine currency and are subject to payment in legal tender upon demand by the presentation of (depositors) checks. Universal and Commercial banks may create or accept demand deposits subject to withdrawal by check WITHOUT prior authority from BSP.
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Banks are under no duty to make up deficiency from the savings account. If a depositor has 2 accounts with a bank, an open account and a savings account, and draws a check upon the open account for more money than the account contains. Checks do not have legal tender power and their acceptance in the payment of debts is at the option of the creditor. Effects if a cross check In State Investment House vs IAC, the SC enumerated the different effects of crossing a check: 1. 2. 3. That the check may not be encashed but only deposited in the bank That the check may be negotiated only once to one who has an account with a bank That the act of crossing the check serves as a warning to the holder that the check has been issued for a definite purpose so that such holder must inquire if the check has been received pursuant to that purpose.
DRAWINGS AGAINST UNCOLLECTED DEPOSITS (DAUDs) shall be PROHIBITED except when the drawings are made against uncollected deposits representing managers/cashiers/treasurers checks, treasurer warrants, postal money orders and duly funded on us c hecks which may be permitted at the discretion of each bank. Current Accounts of Banks Officers and Employees The following officers and employees of banks are PROHIBITED from maintaining demand deposits or current accounts with the banking office in which they are assigned: All officers Employees of the banks cash department/ cash units Other employees who have direct and immediate responsibility in the handling of transactions and/or records pertaining to demand deposits or current accounts. Includes spouses and relatives within second degree of consanguinity and affinity Check is a bill of exchange drawn on a bank payable on demand. Fixed savings and current deposits of money shall be governed by the provision so simple loan Duty of Banks to honor checks Banks are bound to honor checks to the extent of the amount of his (the depositor) deposits. Failure of the bank to honor entitles the drawer to substantial damages without any proof of actual damages Banks must ensure that the amount of the check should be paid only to its designated payee. The fact that the drawee bank did not discover the irregularity seasonably constitutes negligence. Responsibility of Drawer The drawer must personally keep track of his available balance in the bank. Duty of Banks to Know Signatures A bank is bound to know the signatures of its customers If it pays a forged check, it must be considered as making the payment out of its own funds and cannot ordinarily charge the amount so paid to the account of the depositor whose name was forged. Banks are under no obligation to make part payment on a check, up to only the amount of the drawers funds.
Cashiers Check is really the banks own check and may be treated as a promissory note with the bank as the maker. In New Pacific Timber and supply Co. Inc. vs Seeris cashier check is deemed as cash Set-off
A bank may debit the personal account of a depositor for an amount erroneously credited to the depositors sole proprietorship account because the latter being a sole proprietorship has no separate and distinct personality from the depositor. Art. 1980 and Art. 1278 of the Civil Code The law imposes a duty of diligence on the collecting bank to scrutinize checks deposited with it, for the purpose of determining their genuineness and regularity. Crossing of the check with the phrase Payees Account Only is a warning that the check should be deposited only in the account of the payee. It is the duty of the bank to ascertain it.
Relationship of payee or holder and the bank Principal and agent. The bank which receives such paper for collection is the agent of the payee or holder. Encashment of checks Banking business requires that the one who first cashes and negotiates the check must take some precautions to learn whether or not it is genuine. 2) Savings Deposits Servicing deposits Banks may be authorized by the BSP to solicit and accept deposits outside their bank premises, subject to ff: conditions: Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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Banks are prohibited from issuing or accepting withdrawal slips without requiring depositors concerned to present their passbooks except for banks authorized by BSP.
2. 3.
NOTE: There is now law mandating banks to call up their clients whenever their representatives withdraw significant amounts from their accounts. 3) Negotiable Order of Withdrawal (NOW) Accounts NOW accounts interest bearing accounts that combine the payable on demand feature of checks and investment feature of savings account. Universal/Commercial Bank may offer NOW accounts WITHOUT prior authority of the monetary board Thrift/Rural/Cooperative Bank may offer UPON prior approval of the monetary board. Rules on servicing NOW accounts Prior to or simultaneous with the opening of a NOW account, the bank shall inform the depositor of its terms and conditions Banks shall be responsible for the proper identification of its depositors and require 2 specimen signatures and such other pertinent information Deposit shall be covered by deposit slips in duplicate duly validated and initialed by the teller received the deposit NOW accounts shall be kept and maintained separately from the regular savings deposits Blank NOW forms shall be prenumbered and shall be controlled as in the case of unissued blank checks A bank statement shall be sent to each depositor at the end of each month for confirmation of balances Banks must use the form prescribed by the present rules for NOW accounts. 4) Time Deposits one the payment of which cannot legally be required within such a specified number of days. Time deposits shall be issued for a specific period of term Authority shall be automatically granted to any accredited banking institution to accept SPECIAL TIME DEPOSITS from the Agrarian Reform Fund Commission with interest lower than the rate allowed on time deposits accepted from the general public. Rules regarding issuance of Certificates of Time Deposit (CTD) Negotiable Certificates on Time Deposit (NCTD) o Universal/Commercial Banks may issue WITHOUT prior approval of BSP o Thrift/Rural/Cooperative Banks may issue UPON THE PRIOR approval of BSP Non-Negotiable Certificates of Time Deposit o Bank may issue long-term non-negotiable tax-exempt certificates to time deposit without prior approval of the BSP 5) Deposit Substitute Operations (Quasi-Banking Functions) Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
4.
Individual and Joint accounts Joint account may be an and account or an and/or account And account signature of BOTH co-depositor are required for withdrawal And/or account either one of the co-depositors may deposit and withdraw from the account without the knowledge, consent and signature of the other. Withdrawals
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Central Bank may pay interest on the foreign currency deposit and if requested shall exchange the foreign currency notes and coins into foreign currency instruments drawn on its depository banks.
Depository banks on account of networth, resources, past performance or other pertinent criteria, have been qualified by the Monetary board to function under an expanded foreign currency deposit system shall be exempt in no.2 above. There is no restriction on the withdrawal by the depositor of his deposit or on the transferability of the same abroad EXCEPT those arising from the contract bet. the depositor and the bank. 7) Anonymous and Numbered Accounts should not be allowed In case where numbered accounts are allowed, banks or financial institutions should ensure that the client is identified in an official or other identifying documents. Related Laws: Art 178 RPC Art 379, Art 380 of Civil Code Commonwealth Act 142 as amended by Republic Act No. 6085 Administration of Deposits
6) Foreign Currency Deposits Authority to deposit foreign currencies - Any person may deposit with such Phil. Banks in good standing. Authority of Banks to accept foreign currency deposits: Banks designated by Central Bank shall have the authority to: 1. Accept Deposits and to accept foreign currencies in trust. Numbered accounts for recording and servicing of said deposits are allowed. 2. Issue certificates to evidence such deposits. 3. Discount said certificates 4. Accept said deposits as collateral for loans subject to such rules and regulations 5. Pay interest in foreign currency on such deposits Foreign Currency Cover Requirements: Depository banks shall: 1. Maintain at all times a 100% foreign currency cover for their liabilities 2. Of which cover at least 15% shall be in the form of foreign currency deposit with the Central Bank 3. The balance in the form of the foreign currency loans or securities, which loan or securities shall be of short-term maturities and readily marketable 4. Such foreign currency loans may include loans to domestic enterprises which are exportoriented or registered with the Board of Investments 5. Foreign Currency cover shall be in the same currency as that of the corresponding foreign currency deposit liability
All banking institutions are required to set a minimum of 3 specimen signatures to be simultaneously required from each of their depositors and to update the specimen signatures of their depositors every 5 years or sooner. BSP Circular No. 564 Series of 2007 provides for a valid list of identification cards Students who are beneficiaries of an OFW and not on voting age shall be required of 2 valid ID The requirement on presenting 2 valid IDs shall on 1 time basis only or at the commencement of business relationship. Financial transactions may include remittances
Minors are vested with special capacity and power to make savings or time deposits with and withdraw the same as well as receive interest thereon. Requirements: At least 7 years of age Able to read and write Sufficient discretion Not otherwise disqualified by any other incapacity If a guardian shall give notice in writing to any thrift bank not to make payments of deposits dividends or interest to the minor of whom he is the guardian, then such payment shall be made only to the guardian. Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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Corporations may open bank accounts as follows: 1) Incorporation Stage 2) Post Incorporation Interest or yield on time deposit/deposit substitute may be paid at the maturity or upon withdrawal or in advance PROVIDED, it shall not exceed the interest in 1 year. A time deposit not withdrawn or renewed on its due date shall be treated as a savings deposit and shall earn interest from maturity to the date of actual withdrawal or renewal at a rate applicable to savings deposits. Deposit substitute instrument not withdrawn or renewed on its maturity date shall from said date become payable on demand and shall earn an interest or yield from maturity to actual withdrawal or renewal at a rate applicable to a deposit substitute with a maturity of 15 days. All deposits and withdrawals during regular banking hours shall be credited or debited to deposit liability accounts on the day receipt or payment thereof. Provided: That a bank may set clearing cut-off time for its head office not earlier than 2 hours before the start of clearing at BSP and not earlier than 3 hours before the start of clearing of all its branches, agencies and extension offices Provided further: That banks which are located in areas where there are no BSP regional/clearing arrangements may set a clearing cut-off time not earlier than 2 hours before the start of their local clearing after which time deposits received shall be booked likewise as hereinafter provided. Cash deposits received after the selected clearing cut-off time shall be booked s deposits on the day of receipt. Deposits on checks including on us checks etc. may be booked as deposits on the day of receipt.
Any change in the terms and conditions for the imposition of service charges and/or maintenance fees shall take effect only after due notice to the depositor. PROVIDED Information by regular mail, electronic mail, statement of account messages or alternative modes of communication on the depositors last known address at least 60 days prior to implementation shall be considered sufficient notice. PROVIDED FURTHER Failure of the depositor to manifest or register his objection to the new service within 30 days from receipt shall be deemed acceptance of such changes Banks shall likewise post said information on their respective websites, ATM on-screen messages and in conspicuous places within the bank premises at least 60 days prior to implementation. III. Survivorship Agreement when joint (and several) owners of a deposit agree that either of them could withdraw any part or the whole of said account during the lifetime of both and the balance, if any, upon the death of either, belonged to the survivor. an ALEATORY CONTRACT (Art. 1790), by which the mutual agreement of the joint depositors permitting either of them to withdraw the whole deposit during their lifetime and transferring the balance to the survivor upon the death of one of them. Survivorship agreement not invalid per se but may be violative of law , such instances: - a mere cloak to hide an inofficious donation - to transfer property in fraud of creditors - to defeat the legitime of a forced heir
IV. Nature of Bank Deposits A. Deposits received after the close of the regular banking hours shall be booked as deposits the following banking day. Banks impose and collect service charges on savings and demands deposits that fall below the required minimum monthly average daily balance (ADB) subject to ff: conditions: The imposition of such charges is clearly stated among the terms and conditions of the depositor The rate or amount of such charges or fees is properly disclosed among the terms and conditions of the deposit The deposit account balances have fallen below the required minimum monthly ADB for dormant account and for at least 2 consecutive months for active accounts The required minimum monthly ADB of deposits are properly disclosed among the terms and conditions of the deposit. 1. 2. Nature Fixed, savings and current deposits of money in banks and similar institutions are the true deposits and are considered simple loans. Irregular deposits in nature for they are really loans because they earn interest. - In reality: depositor is the creditor while bank is the debtor. - Failure of the bank to honor the time deposit is failure to pay its obligation as a debtor and not a breach of trust arising from a depositorys failure to return the subject matter of the deposit. The relationship between the depositor and the Savings and Loan Association is that of creditor and debtor. - Bank has the obligation to return the amount deposited, however, it has no obligation to return or deliver the same money that was deposited. (Principle of NonFungible) Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
3.
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A.
4. 5.
Purposes 1. To give encouragement to the people to deposit their money in banking institutions. 2. To discourage private hoarding so that the same may be utilized by banks in authorized loans to assist in the economic development of the country. Privacy - Civil Code provides that every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and the other persons and punishes as actionable torts several acts for meddling and prying into the privacy of another. - It also holds public officer or employee or any private individual liable for damages for any violation of the rights and liberties of another person, and recognizes the privacy of letters and other private communications. Absolute Confidentiality - All deposits of whatever nature with banks or banking institutions in the Philippines are considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office. 1. Prohibition against inquiry into or disclosure of deposits under republic Act No. 8367 ( An Act Providing for the Regulation of the Organization and Operation of Non-Stock Savings and Loan Associations) all deposits of whatever nature are considered absolutely confidential in nature EXCEPT, (1) upon written permission of the depositor; (2) in cases of impeachment; (3) upon order of a competent court in cases of bribery or dereliction of duty of public officials; and (4) in cases where the money deposited or invested is the subject matter of litigation. Foreign Currency Deposits - All foreign currency deposits are of an absolutely confidential in nature EXCEPT, upon the written permission of the depositors. - It shall be exempt from attachment, garnishment or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. Confidentiality of Deposits in Islamic Banks - All deposits of whatever nature are confidential EXCEPT: 1. inspection by the banks auditor 2. upon written permission by the depositor 3. in cases where the money deposited or the transaction concerned is the subject matter of a court order
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B.
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VII. Exceptions to Secrecy of Deposits A. Exceptions to the Bank Secrecy Law: 1. Upon written permission of the depositor 2. In cases of impeachment 3. Upon order of a competent court in cases of bribery or dereliction of duty of public officials Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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B.
- BSP may inquire into or examine any deposit or investment with any banking institutions or non-bank financial institution when the examination is made in the course of a periodic or special examination, in accordance with the rules of examination of BSP. - If authorized by the Monetary Board to satisfy a reasonable ground to believe that a bank fraud or serious irregularity has been or is being committed and that it is necessary to look into the deposit to establish such fraud or irregularity. - Examination made by an independent auditor hired by the bank to conduct its regular audit provide that the examination is for audit purposes only and the results thereof shall be for the exclusive use of the bank. G. In Camera Inspection by the Ombudsman - Section 15(8) of republic Act No. 6770 (The Ombudsman Act of 1989) provides as one of the powers of the Ombudsman: (8) Administer oaths, issue subpoena and subpoena duces tecum, and take testimony in any investigation or inquiry, including the power to examine and have access to bank accounts and records. - Before in camera inspection may be allowed, there must be a pending case before a court of competent jurisdiction. The account must clearly be identified. The bank personnel and the account holder must be notified to be present during the inspection and such inspection may cover only the account identified in the pending case. H. Preliminary Attachment - Section 10, Rule 57 of the Rules of Court is compatible with the law on secrecy of bank deposits because it provides an exception in cases where the money deposited or invest ed is the subject matter of the litigation. Disclosure of Dormant Accounts - Section 2 of Act No. 3996 (An Act Requiring Banks and Banking Institutions of Every Kind to Transfer Unclaimed Balances held by them to the Insular Treasury and for Other Purposes) o All banks shall forward to the Insular Treasurer a statement under oath of their respective managing officers, of all credits and deposits held by them in favor of persons known to be dead, or who have not made further deposits or withdrawals during the preceding ten years or more, arranged in alphabetical order according to the names of depositors. o Upon receipt by the Insular Treasurer, it shall publish the same once a week for three consecutive weeks in at least two newspapers of general circulation in the locality where the bank or banks are situated. Authority of the Commissioner of Internal Revenue to Inquire into Deposits - Section 6 of the 1997 National Internal Revenue Code provides: (F) Authority of the Commissioner to inquire into Bank Deposit Accounts. Notwithstanding any contrary provision of Republic Act No. 1405 and other general or special laws, the Commissioner is hereby authorized to inquire into the bank deposits of: (1) a decedent to determine his gross estate; and Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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C.
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ii. Publicly-listed universal or commercial bank- 100% of voting stock of only one other universal or commercial bank Financial Allied Undertakings a. Leasing companies- bank investment of shares shall be limited only in cases of conversion of outstanding loan obligations into equity b. Banks c. Investing houses d. Financing companies e. Credit Card companies f. Financial institutions catering to small and medium scale industries g. Companies engaged in stock brokerage/securities dealership h. Companies engaged in foreign exchange dealership/brokerage i. In addition: i. Insurance companies j. Holding companies - investment of shares shall be limited only in cases of conversion of outstanding loan obligations into equity Equity Investments of a universal Bank in Non-allied Enterprises up to 100% i. Examples of Non Finacial Allied undertakings Warehousing companies Storage companies Safe deposit box companies Companies engaged in management of mutual funds but not in the mutual funds themselves Corporations engaged in any activity similar to management of mutual funds Companies engaged in providing computer services Insurance Agencies/brokerages Companies engaged in home building and development Companies providing drying and/or milling facilities for agricultural crops Service bureaus for outsourcing services Those declared by the Monetary Board Equity Investments of a Universal Bank in Non-Allied enterprise shall not exceed 35% of total equity and voting stock Investments in Non-Allied or Non-Related Undertakings only Universal banks may invest Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
B.
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i. Examples of non-Allied undertakings Enterprise engaged in physically productive activities in a. Agriculture b. Mining and quarrying c. Manufacturing d. Public utilities e. Construction f. Wholesale trade g. Community and Social services ii. Industrial park/real estate projects iii. Financial and commercial complex projects in connection with the Governments privtization program iv. Others declared by Monetary Board G. Equity Investments in Quasi-Banks to promote competitive conditions in financial markets, may own up to 40 % equity investments, also applicable in the case of commercial banks II. Operations of Commercial Banks A. Powers of Commercial Banks i. General powers incident to corporaton ii. Powers necessary to carry out commercial banking Accepting drafts and issuing LOC Negotiating promissory notes, bills of exchange and other evidences of debt Accepting or creating demand deposits Receiving other types of deposits and deposit substitutes Buying and selling foreign exchange, gold and silver bullion; acquiring marketable bonds and other debt securities Extending credit
ii. Characteristics what sets it apart from other accessory contracts is the engagement of the issuing bank to pay the seller once the draft and the required shipping documents are presented to it. Independence Principle assures the seller of prompt payment, independent of any breach of the main sales contract. iii. Intertwined Relationships 3 distinct but intertwined relationships st 1 contract relationship links the party applying for LOC and the party for whose benefit LOC is issued nd 2 contract relationship between the accounting party and the issuing bank. Accounting party applies for LOC and agrees to reimburse the bank for amounts paid by that bank. rd 3 contract relationship between the issuing bank and beneficiary. Pay certain monies to the beneficiary to support the contract. iv. Parties 3 parties, may be increased in most cases of international trade. Buyer procures LOC and obliges himself to reimburse the issuing back upon receiptof documents of title Bank issuing LOC and undertakes to pay the seller upon receipt of the draft and proper documents of titles and to surrender the documents to the buyer upon reimbursement Seller in compliance with the contract of sale ships the goods to the buyers and delivers the documents of title and draft to the issuing bank to recover payment C. Equity Investments of a Commercial Bank may invest only in the equities of allied enterprise (financial or non-financial) as may be determined by the Monetary Board i. Total investment in equities shall not exceed 35% of the net worth ii. Equity investment in any one enterprise shall not 25% net worth Equity Investments of a Commercial Bank in Financial Allied Enterprises i. May own up to 100% equity ONLY of thrift bank or rural bank ii. Other financial allied enterprises minority holding Equity Investments of a Commercial Bank in Non- Financial Allied Enterprises - may own up to 100% of the equity in a non-financial allied enterprise
D.
E. B. Issuance of Letters of Credit i. Nature - developed by merchants as a convenient and relatively safe mode of dealing with sales of goods to satisfy the seemingly irreconcilable interests of a seller, who refuses to part with his goods before he is paid and a buyer who wants to have control of the goods before paying The buyer may be required to contract a bank to issue a letter of credit in favor of the seller so that, by virtue of the letter of credit, the issuing bank can authorize the seller to draw drafts and engage to pay them upon presentment simultaneously with the tender of documents required by the letter of credit.
III.
Risk- Based Capital A. Minimum Ratio minimum ratio which the net worth of a bank must bear to its total risk assets shall be determined by the Monetary Board i. On the basis of the net worth and risk assets of a bank and its subsidiaries ii. Monetary Board shall conform to internationally accepted standards in the exercise of such authority iii. Alter or suspend compliance with such ratio for a maximum period of 1 year Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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Effect of Non-Compliance i. Monetary Board may limit r prohibit the distribution of net profits by such bank and may require that all of the net profits be used to increase the capital accounts of the bank until minimum requirement is reached ii. Restrict or prohibit the acquisition of major assets and the making of new investments by the bank until the minimum required ratio has been restored
Bank Guarantee irrevocable commitment of a bank binding itself to pay a sum of money in the event of non-performance of a contract by a third party. Distinct from principal debt or contract. Subject to such limits. Contingent Accounts are also subject to such limits Assignment of Credits agreement by virtue of which the owner of a credit by a legal cause, transfers his credit and its accessory rights to an assignee.
E. F.
IV.
Limit on Loans, Credit Accomodation And Guarantees A. Single Borrowers Limit i. Shall not exceed 20% if Net Worth of the Bank Exceptions: a. Reasons of national interest b. Deposits of Rural Banks with government-owned or controlled financial institutions are exempted c. May be increased by 10% provided the additional liabilities of any borrower are adequately secured by securing titles As amended by Circular no. 425, SBL must not exceed 23%, still subject to such exceptions
G. No Pacto Commissorio in Assignment of Deposits i. Pacto commisorio automatic appropriation of the pledged or mortgaged property by the creditor in payment of the loan upon its maturity V. Restriction on Bank Exposure to Directors, Officers, Stockholders and their Related Interests A. Approval and Other Requirements i. No director or officer of any bank shall: Directly or indirectly for himself or as an agent of others borrow from such bank Become a guarantor, indorser or surety for loans from such bank An obligor who would incur contractual liability to the bank Exception: written approval of the majority of all the directors of the bank ii. Approval shall be entered upon the records of the bank iii. Dealing shall be upon terms not less favorable to the bank than those offered to others Directors i. Named as such in the articles of incorporation ii. Duly elected in subsequent meetings of stockholders iii. Elected to fill the vacancies Officers i. President, EVP, SVP, General Manager, Secretary, treasurer, trust officer and others whose duties as such are defined in the by-laws or are generally known to be officers of the bank ii. Chairman, Vice-chairman or any other position of the boardwho also performs functions of management such as those ordinarily performed by regular officers Stockholder Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
B.
Inclusion to the Limit i. Prescribed Ceilings shall include: Direct liability of the maker or acceptor of paper discounted with or sold to such bank and liability of a general indorser, drawer or guarantor who obtains a loan or other credit accommodation Liabilities of individuals who own or control a majority interest in a corporation Corporation- all liabilities to such bank of all subsidiaries Partnership liabilities of the members ii. Control of majority interest or Controlling interest when parent owns directly of indirectly through subsidiaries more than one half of the voting power of an enterprise iii. Even if a parent corporation who owns a majority interest has no liabilities, Monetary Board may prescribe combination of liabilities in certain situations Exclusion to the Limit Loans and other accommodations i. Secured by obligations of BSP or of the Philippine Government Reason: The state undoubtedly is always solvent ii. Fully guaranteed by the government as to payment of pricipal and Interest iii. Covered by assignment of deposits maintained in the lending bank and held in the Philippines iv. Under letters of credit to the extend covered by margin deposits
B.
C.
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such corporation, or in the equity of such association or firm, or has an existing management contract or any similar arrangement with the lending bank or its parent/subsidiary F. Effect of Violation After due notice of the board of directors the office of the violator may be declared vacant and subject to penal provisions in the New Central Bank Act
G. Limits of Loans i. Regulated by Monetary Board ii. Outstanding loans shall be limited to an amount equivalent to their respective unencumbered deposits and book value of their paid-in capital contribution in the bank H. Exclusions to the Limit i. Those secured by assets considered as non-risk by the Monetary Board. ii. Those in the form of fringe benefits granted in accordance with rules prescribed by the Monetary Board iii. Those extended by a cooperative bank to its cooperative shareholders Applicabilty of DOSRI Rules and Regulations to Government Borrowings i. Circular 547 DOSRI Rules and Regulations shall also apply to loans, other credit accommodations, and/or guarantees granted to the National Government of the Philippines, its political subdivisions and instrumentalities as well as government-owned or controlled corporations Such loans, other credit accommodations, and/or guarantee (LOG) to RP must be considered as i. Non-risk ii. Not subject to any ceiling LOG to a GOCC or Corporations where RP owns 20% of subscribed capital stock shall be considered indirect borrowings of RP and shall form part of the individual ceiling as well as the aggregate ceiling The Following LOGs to GOCCs where RP owns 20% of capital stock shall be excluded from the 30% ceiling on unsecured loans a. LOGs for infrastructure projects consistent with the Medium-term Development Plan duly certified as such by the Secretary of Socio-Economic Planning b. LOGs granted to financial institutions in the lending programs c. LOGs to provide rediscounting facilities for loans granted to agricultural sector, and micro, small and medium enterprises Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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i. A bank shall grant loans and other credit accommodations only in amounts and periods of time essential for the effective completion of the operations to be financed. It should be consistent with safe and sound banking practice ii. Purpose must be stated in the application iii. Bank shall have the right to terminate the loan and demand immediate repayment of the obligation if it finds that the proceeds of the loan have been employed for purposes other than those agreed upon without the banks approval B. Requirement for Grant of Loans or Other Accomodations before granting a loan, the bank must ascertain that the debtor is capable of fulfilling his commitments through: i. Statement of assets and liabilities ii. Statemement of income and expenditure iii. Other information prescribed by Monetary Board C. Also see 1198 of Civil Code
VI.
Loans and Other Credit Accomodations A. Loans and Other Credit Accomodations against Real Estate shall not exceed 75% of the appraised value of the respective real estate security, plus 60% of the appraised value of the insured improvements, such loans be made to the owner of the real estate or to his assignees i. Exception: As otherwise prescribed by the Monetary Board Loans and Other Credit Accommodations on Security of Chattels and Intangible Properties shall not exceed 75% of the appraised value of the security and the same may be made to the title holder or his assignment i. Exception: As otherwise pescribed by the Monetary Board Joint and Solidary Agreement JSA is indubitably a surety not a guaranty. An agreement where parties consent to be jointly and severally liable. Should be taken contra proferentum against the party who may have cause any ambiguity therein. Effect of Surety Agreement strictly construed against the creditor, every doubt is resolved in favor of the solidary debtor. i. A Bank cannot hold a surety liable for loans obtained in excess of the amount or beyond the period stipulated in the original agreement, absent any clear stipulation that he has waived his right to be notified or to give consent. Reason: Fundamental Rules of fair play require the creditor to obtain consent of surety to any material alteration in the principal agreement.
B.
Reason for Stringent Rules in Granting Loans i. A bank is one affected with public interest for which reason the bank should guard against loss due to negligence or bad faith ii. In funding businesses imposed upon a banking corporation, the bank invests the money that it holds in trust of its depositors iii. Provided by GBL Unsecured Loans or Other Credit Accomodations Monetary Board is authorized to issue regulations necessary with respect to unsecured Loans or Other credit accommodations Other Security Requirements for Bank Credits Monetary Board may prescribe security requirements to which the various types of bank credits shall be subject, the same may reduce and increase maximum ratios Authority to Prescribe Terms and conditions of Loans and Other Credit Accommodations i. Sec. 43 of GBL Monetary Board has the authority granted in Sec 106 of the new Central Bank Act to prescribe the maturities and conditions for various types of bank loans and other credit accommodations ii. Sec. 106 of NCBA Monetary Board may issue such regulation necessary with respect to maximum permissible maturities maturities of loans and investments and the kind and amount of security required against various types of credit operations of the banks
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D.
D.
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F.
VII.
Grant and Purpose of Loans and Other Credit Accomodations A. Amount and purpose of Loan
G. Amortization on Loans and Other Credit Accommodations Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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L. Prepayment of Loans and Other Credit Accommodations; sec. 45, GBL: borrower may prepay unpaid balance of bank loans at any time prior to the agreed maturity date, subject to reasonable terms and conditions agreed upon by bank and borrower. M. Development Assistance Incentives; sec. 46, GBL; Bangko Sentral shall give incentives to banks that have activities with social content (extending loans to finance educational institutions, coops, hospitals, LGUs, low-cost housing). N. Renewal or Extension of Loans and Other Credit Accommodations; sec. 48, GBL; MB may prescribe the conditions and limitations where a bank may grant extensions or renewals of its loans and other credit accommodations. O. Banks Cannot Extend Peso Loans to Non-Residents; (1) to curb undue speculation in the foreign exchange market and (2) to reinforce the memorandum that peso deposits should be funded from inward ForEx remittance. P. Provisions for Losses and Write-Offs; sec. 49, GBL; MB may fix the amount of reserves for bad debts or doubtful accounts or other contingencies (interest is past due). Write-offs likewise subject to regulations by MB. VIII. Truth in Lending A. Policy; to protect citizens from lack of awareness of the true cost of credit, full disclosure is assured B. Disclosure; creditor shall furnish in a clear statement in writing: 1. cash price/delivered price of property or service 2. amounts credited as down-payment 3. difference bet. amounts in 1 and 2 4. charges, individually itemized, not incident to the extension of credit 5. total amount to be financed 6. finance charge in terms of pesos and centavos 7. percentage/simple annual rate on the outstanding unpaid balance C. Definitions i. Credit; any loan, mortgage, deed of trust, advance, discount; conditional sales contract; contract to sale/contract of sale; rental-purchase contracts; contract for hire, bailment or leasing of property; any option, demand, lien, pledge or other claim against property or money; purchase/acquisition of credit; any transaction having a similar purpose or effect. ii. Finance charge; interest, fees, service charges, discounts, charges to the extension of credit as the MB may regularly prescribe iii. Creditor; any person engaged in the business of extending credit who requires the payment of a finance charge as an incident to this extension D. Penalties for Failure to Disclose Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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Limpin v. IAC: Right of Redemption exists only in the case of the extrajudicial foreclosure of the mortgage. No such right is recognized in a judicial foreclosure except only where the mortgagee in the PNB or other bank. Right may be exercised within a period of 1 year, counted from the date of registration. Equity of Redemption is the right of the mortgagor to extinguish the mortgage and retain ownership of the property by paying the secured debt within the 90-day period after the judgment becomes final (Rule 68, CivPro). C. Right of Redemption may be Extended by Agreement; the right to redemption must be exercised within specified time limits but if agreed upon by the parties, it may be extended. D. Estoppel; if a bank had time to object and did not, its silence can be construed as having consented to the extension of the redemption period. Estoppel arises when one, by his own silence when he ought to speak out, intentionally or thru culpable negligence, induces another to believe that certain facts exist. E. Redemption of foreclosed property after the Prescriptive Period; Right to redeem becomes functus officio on the date of its expiry. Exercise after this period in not redemption but repurchase. Redemption is by force of law and the purchaser is bound to accept redemption. Repurchase imposes no such obligation. He may or may not re-sell the property after expiration, and he is not bound by bid price bec after all, the property already belongs to him as owner.
W/N alien-owned bank can acquire ownership of residential lot by deed of transfer as settlement of debt. NO. Its acquisition jeopardizes the purpose of the Constitution to keep in the hands of the people the ownership over private lands. HOWEVER, a lease of a parcel of land for 50 years in favor of an alien corp is registerable. A lease, unlike a sale, does not involve the transfer of dominion over the land. XI. Other Banking Services; acting as depositary or agent 1. receive in custody funds, docs, and valuable objects 2. act as financial agent, buy and sell shares, evidence of indebtedness, all types of securities 3. make collections and payments and other services not incompatible with banking business for their customers 4. upon approval by MB, act as managing agent, adviser, consultant or administration of investment mgmt accts. 5. rent out safety deposit boxes A. Safety Deposit Box Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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XIII. Outsourcing Of Other Functions Subject to prior approval of the MB, banks may outsource data imaging, storage, retrieval and other related systems, clearing and processing of checks, printing of bank deposit statements, other activities det by the MB. Banks may outsource: credit card services printing of bank loan statements and other non-deposit records, bank forms, and promotional materials credit investigation and collection processing of export, import and other trading transactions transfer agent services for debt and equity securities property appraisal property mgmt services messenger, courier and postal services security guard services vehicle service contracts janitorial services public relations services procurement services temporary staffing legal services from local legal counsel Provided, that they do not include servicing/handling bank deposits or other inherent banking functions.
XII. Electronic Transactions BSP has full authority to regulate the use of electronic devices (e.g. computers) for recording, storing, and transmitting data in connection with the operation of banks. (sec 59, GBL) Subject to prior approval by MB, banks may outsource all IT systems and processes except for inherent banking functions. Those that may not be outsourced: those affecting the ability of of the bank to ensure the fit of tech services deployed to meet its strategic and business objectives; strategic planning for the use of IT; determination of system formalities; change mgmt inclusive of quality assurance and testing; service level and contract mgmt Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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Furnishing false or misrepresent or suppress material facts by personnel of BSP shall constitute fraud and shall be subject to administrative and crimina sanctions provided under the New Central Bank Act
Consistent with the Banks Secrecy Law, no bank shall employ casual or nonregular personnel or lengthy probationary personnel in the conduct of it business involving bank deposits
B.
Prohibited Acts a. No Director, officer, employee, or agent of any bank shall- FOORD Make false entries in any bank report or statement or participate in any fraudulent transaction causing damage to the bank or any person Disclose to any unauthorized person any information relative to funds in the custody of the bank without order of a court of competent jurisdiction Accept any for of remuneration or commission in connection with approval of loan or other credit accommodation Overvalue or aid in overvaluing any security for the purpose of influencing the actions of the bank Outsource inherent baking functions to ensure secrecy of bank deposits b. No borrower shall FOFA Fraudulently overvalue property offered as security for a loan or other credit accommodation Furnish false or misrepresent or suppress material facts to botain, renew, increase or extend the period of a loan or other credit accommodation Attempt to defraud a bank in the event of a court action to recover a loan or other credit accommodations Offer any gift or any form of compensation to any director, officer, employee or agent of a bank in order to influence such persons to approve a loan or other credit accommodation No examiner, officer or employee of the Bangko Sentral or of any department, bureau, office, branch or agency of the government that is assigned to supervise, examine, assist or render technical assistance t any bank shall Commit any of the aforementioned acts or aid in the commission of the same
Prohibition Against Outsourcing Certain Banking Functions a. Outsourcing inherent banking functions any contract between the bank and a service provider for the latter to supply manpower to service deposit transactions of the bank. b. Banks cannot outsource management functions unless authorized by the Monetary board when circumstances justify c. III. Prohibition on Dividend Declaration *No bank or quasi-bank shall declare dividends greater than its accumulated net profits then on hand, deducting therefrom its losses and bad debts *Neither shall bank nor quasi-bank declare dividends, if at the time of declaration: 1. Its clearing account with the Bangko Sentral is overdrawn; or C. 2. It is deficient in the required liquidity floor for government deposits for 5 or more consecutive days; or 3. It does not comply with the liquidity standards/ratios prescribed by the Bangko Sentral for purposes of determining funds available for dividend declaration; or 4. It has committed a major violation as may be determined by the Bangko Sentral. IV. Unauthorized Advertisement or Business Representation No person, association, or corporation unless duly authorized to engaged in the business of a bank, quasi-bank, trust entity, or association, or use in connection with its business title, the word or words bank, banking, banker, quasi-bank, quasi-banking, quasi-banker, savings and loan association, trust corporation, trust company, or words of similar import or transact any manner the business of any such bank, corporation or association.
c.
V. Placement Under Conservatorship A. Governing Law The grounds and procedures for placing a bank under conservatorship, as well as, the powers and duties of the conservator appointed for the bank shall be governed by the provisions Section 29 and the last two paragraphs of Section 30 of the New Central Bank Act: Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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Provided, That this Section shall also apply to conservatorship proceeding of quasi-banks. (Section 67 of the GBL) B. Grounds for appointment of conservator The Monetary Board may appoint a conservator whenever it finds that a bank or a quasi-bank is in a state of (1) continuing inability or (2) unwillingness to maintain a condition of liquidity deemed adequate to protect the interest of depositors and creditors. [Section 29, RA 7653] *POWERS OF THE CONSERVATOR 1. Take charge of the assets, liabilities and management of the bank or quasi-bank 2. Reorganize the management 3. Collect all monies and debts due said institution 4. Exercise all powers necessary to restore its viability The conservator has the power to overrule or revoke the actions of the previous management and board of directors of the bank or quasi-bank. Section 28-A of RA No. 265 merely gives the conservator the power to revoke contracts that are deemed to be defective under existing law (i.e., void, voidable, unenforceable, or rescissible); hence, the conservator merely takes the place of a banks board of directors. What the board of directors cannot do, such as repudiating a contract validly entered into under the doctrine of implied authority, the conservator cannot do either. [First Philippine International Bank v. CA, 252 SCRA 255 (1986)] *LIQUIDITY- the ability of an asset to be converted into cash quickly and without any price discount. A corporation is liquid if it has ready access to cash. *SOLVENCY- the condition that exists when liabilities amount to less than total assets, thus providing the ability to pay debts. The test of insolvency is measured by determining whether the realizable assets of a bank are less than its liabilities. C. Qualifications of Conservator The conservator should be competent and knowledgeable in bank operations and management. D. Period of Conservatorship The conservatorship shall not exceed one (1) year. Actions of Monetary Board shall be final and executory, and may not be restrained or set aside by the court except on petition for certiorari on the ground that the action taken was in excess Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal H. Final and Executory G. Termination of conservatorship The Monetary Board shall terminate the conservatorship when it is satisfied that the institution can continue to operate on its own and the conservatorship is no longer necessary. The conservatorship shall likewise be terminated should the Monetary Board determine that the continuance in business of the institution would involve probable loss to its depositors or creditors, in which case proceedings for receivership and liquidation shall be pursued. [Section 29, RA 7653] Shall be borne by the bank or quasi-bank concerned. F. Expenses of Conservatorship The conservator shall receive remuneration to be fixed by the Monetary Board in an amount not to exceed two-thirds of the salary of the president of the institution in 1 year, payable in 12 equal monthly payments. If any time within one-year period, the conservatorship is terminated on the ground that the institution can operate on its own, the conservator shall receive the balance of the remuneration which he would have received up to the end of the year; but if the conservatorship is terminated on other grounds, the conservator shall not be entitled to such remaining balance. The Monetary Board may appoint a conservator connected with the Bangko Sentral, in which case he shall not be entitled to receive any remuneration or emolument from the Bangko Sentral during the conservatorship. E. Remuneration
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of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction. Petition for certiorari may only be filed by the stockholders of record presenting the majority of the capital stock within 10 days from receipt by the board of directors of the institution of the order directing receivership, liquidation or conservatorship. I. Exclusive Power to Appoint Designation of conservator is vested exclusively with the Monetary Board.
A. Voluntary Liquidation 1. request for approval of voluntary dissolution, attaching a liquidation plan therein. (written notice of liquidation shall be sent to the Monetary Board prior to such liquidation.) 2. dissolution in accordance with the Corporation Code 3. liquidation undertaken by the bank itself through its Board of Directors either (a) by a trustee or (b) by a receiver appointed to the bank. Grounds for Receivership and Liquidation
J. Not a Precondition Designation of conservator is not a precondition to the designation of a receiver. K. Powers of Conservator Cannot Impair the Obligations of Contracts. Powers must be related to the (preservation of) the assets of the bank, (the reorganization of) the management thereof and (the restoration of) its viability. Such power cannot extend to the post-facto repudiation of perfected transactions, otherwise they would infringe against the nonimpairment clause of the Constitution. Law merely gives the conservator power to revoke contracts that are, under existing law, deemed to be defective. VI. Cessation of Banking Business A. Voluntary Liquidation B. Receivership and Involutary Liquidation C. Close Now Hear Later Scheme D. Effect of Filing a Petition for Review E. Reasons Behind Receivership and Involuntary Liquidation F. Effects of Receivership and Liquidation
The MB may, summarily & w/o prior hearing, FORBID institution from doing business if the institution: a. is unable to pay liabilities b. has insufficient assets, as determined by BSP c. will involve probable loss to depositors or creditors d. has willfully violated a cease & desist order involving acts or transactions which amount to fraud or a dissipation of assets (50T-200T fine or 2-10Y imprisonment) For quasi-banks, any person of recognized competence in banking or finance may be designated as receiver. The receiver shall immediately 1. gather all assets and liabilities 2. administer assets and liabilities for the creditors 3. exercise general powers under the Rules of Court 4. determine W/N bank may be rehabilitated or resume business w/in 90 days * But he shall NOT (except for administrative expenses) pay or transfer any asset of the institution. If the receiver determines that the bank cannot be rehabilitated, the MB shall notify the board of directors of its findings in writing and direct the receiver to proceed with the liquidation. The receiver shall file with the RTC a petition for assistance in the Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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liquidation. Current and Complete Examination Not Necessary before the closure of a bank R.A. 7653 (1993) provides that only a REPORT of the head of supervising or examining department is necessary. The word "report" is clearly different from "examination." A report is "something that gives information" or "a detailed account". An examination is "a search, investigation or scrutiny." Rural Bank of San Miguel Inc. v. Monetary Board The closure of a bank may be considered as an exercise of police power.
3. destroy or cause misappropriation of the bank's assets 4. receive any deposti, collection of loans, or receivables 5. pay out any funds of the bank 6. transfer securities or property In the case of conservatorship, 1. the actions of the MB shall be final and executory 2. may be set aside by a petition for certiorari filed by the stockholders of record within 10 days
Close Now Hear Later Scheme (p. 213, MemAid) Sec. 174 of the Code of CivPro: A receiver may be appointed if the corporation is dissolved * insolvent * in imminent danger of insolvency * has forfeited corporate rights Sec. 175: General Powers of a Receiver. 1. bring and defend actions in own name 2. take possession of property in controversy 3. receive rent, collect debts, and compound for such 4. make transfers Effects of Receivership and Liquidation (p. 214, MemAid) A receiver is - an indifferent person between the parties to a cause - not the agent or representative of either - but an officer of the court Prohibited Acts Any director or officer of a bank declared insolvent or placed under receivership by the MB shall not 1. refuse to turn over the bank records 2. tamper with bank records 1. Retention of Juridical Personality 2. Suspension of Operations /Stoppage of Business 3. Assets deemed in custodia legis and shall be exempt from garnishment, levy, attachment or execution 4. Execution of judgment is warranted 5. Bank is NOT liable to pay interest on deposits that accrue during the period of suspension 6. But BSP shall collect interest on all loans and advances 7. Bank cannot do new business 8. Deposits do not become preferred credits Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal 1. Sec 29 of the Central Bank Act does NOT contemplate prior notice and hearing. The assailed actions should precede the filing of the case. 2. Purpose is to PREVENT unwarranted dissipation of the bank's assets and as a valid exercise of police power to protect the depositors. 3. The bank is given full opportunity to prove arbitrariness and bad faith in placing the bank under receivership. * The absence of an examination does not mean that there is no basis for the closure order. The purpose of RA 7653 is to make the closure of a bank summary and expeditious in order to protect public interest.
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VII. Disposition and Distribution of Assets A. Distribution of Assets In case of liquidation of a bank or quasi-bank, after payment of the cost of proceedings, including reasonable expenses and fees of the receiver to be allowed by the court, the receiver shall pay the debts of such institution, under order of the court, in accordance with the rules on concurrence and preference of credit as provided in the Civil Code. *Current account and savings account are not preferred credits in cases involving the insolvency and liquidation of a bank, where there are various creditors and it becomes necessary to ascertain the preference of various credits. These deposits are essentially mercantile contracts and should, therefore, be governed by the provisions of the Code of Commerce. B. Disposition of Revenues and Earnings All revenues and earnings realized by the receiver in winding up the affairs and administering the assets of any bank or quasi-bank shall be used to pay the costs, fees and expenses mentioned in Item A above salaries of such personnel whose employment is rendered necessary in the discharge of the liquidation together with other additional expenses caused thereby. The balance of revenues and earnings, after the payment of all said expenses, shall form part of the assets available for payment to creditors. C. Disposition of Banking Franchise
The Bangko Sentral may, if public interest so requires, award to an institution, upon such terms and conditions as the Monetary Board may approve, the banking franchise of a bank under liquidation to operate in the area where said bank or its branches were previously operating; Provided, That whatever proceeds may be realized from such award shall be subject to the appropriate exclusive disposition of the Monetary Board. D. Liabilities
The bank is bound by the acts, or failure to act, of the receiver. At the same time, the receiver is liable to the bank for culpable or negligent failure to collect the assets of such bank and to safeguard said assets.
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Any of the foregoing right, privilege or incentive granted to a foreign bank shall be equally enjoyed by and extended under the same conditions to banks organized under the Phil. laws.
In case of a foreign bank which has more than 1 branch in the Phil, all such branches shall be treated as on unit for the purpose of GBL and all references to the Philippine branches of foreign banks shall be held to refer to such units.(Sec 74 GBL) The head office of the foreign bank shall fully guarantee the prompt payment of all the liabilities of its Phil. Banks. (Sec 75 GBL) Residents and citizens of the Phil. who are creditors of a branch in the Phil. of a foreign bank shall have preferential rights to the assets of such branch in accordance with existing laws. Sec 20 of GBL applies to a universal or commercial bank duly established and organized as a Phil. corporation in accordance with Sec 8 of GBL and authorized to establish branches within or outside the Phil. Home Office Guarantee is clearly for protection of the interests of the depositors and other creditors of local branches of a foreign bank. The foreign bank cannot use the principle for a reserve purpose, to extend the liability of a client to the foreign banks Phil. branch to its head office. Off-setting or compensation of loans with Phil. branch using dollar accounts with a foreign bank cannot be effected unless otherwise stated in the contract.
NOTE: Foreign Corp. doing business in the Philippines are required to obtain a license. Sec. 133 of Corporation Code Foreign Corp. doing business in the Philippines without license are barred from accessing our courts. It is ipso facto incapacitated to bring an action. A license is necessary if its transacting or doing business in the Philippines By securing a license, the foreign entity would give an assurance that it will abide by the decisions of our courts, even adverse to it. Purpose of the statute is to compel a foreign corporation desiring to do business within the state to submit itself to the jurisdiction of the courts of the state.
III. Trust Operations A. Authority to Engage in Trust Business Trust Business refers to any activity resulting from a trustor-trustee relationship involving the appointment of a trustee for the administration, holding, management of funds and/or properties of the trustor for the use or advantage of the beneficiaries. Only stock corporation or a person duly authorized by the Monetary Board to engage in trust business shall act as a trustee or administer any trust or hold property in trust or on deposit for the use or benefit of others. The cardinal principle common to all trust and other fiduciary relationships is fidelity. A bank authorized to engage in trust and fiduciary business is under no obligation, either legal or moral, to accept such business being offered. Conduct of Trust Business A trust entity shall administer the funds or property under its custody with the diligence that prudent man would exercise in the conduct of an enterprise of a like character and similar aims. No trust entity shall, for the account of the trustor or the beneficiary of the trust, unless the transaction is specifically authorized by the trustor and the relationship of the trustee and the other party involved in the transaction is fully disclosed to the trustor or beneficiary. Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
Foreign Banks are allowed to entry in the Philippines subject to the ff: rules: 1. Within 7 years from the effectivity of GBL and subject to guidelines issued pursuant to the RA 7721, the Monetary Board may authorize a foreign bank to acquire up to a 100% of the voting stock of only 1 bank organized under Phil. Laws. 2. Within the same period, the Monetary Board may authorize any foreign bank, which prior to the effectivity of GBL availed itself of the privilege to acquire up to 60% of the voting stock of a bank under RA 7721 and the Thrift Banks Act, to further acquire voting shares of such bank to the extent necessary for it to own 100% of voting stock thereof.
B.
3.
In the exercise of this authority, the Monetary Board shall adopt measures as may be necessary to ensure that at all times the control of 70% of the resources and assets of the entire banking system is held by banks which are at least majority-owned by Filipinos.
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D.
Monetary Board shall require every trust entity to increase the amount of its cash or securities on deposit with BSP. The paid-in capital and surplus of such entity must be at least equal to the amount required to be deposited with the BSP in accordance with the above provisions. A trust entity so long as it shall continue to be solvent and comply with laws or regulations shall have the rights to collect the interest earned on such securities deposited with BSP and to exchange the securities for others. All claims arising out of the trust business of a trust entity shall have priority over all other claims as regards the cash or securities deposited as above provided.
E.
IV. Bond of Certain Persons for the Faithful Performance of Duties A. Bond Requirements Before an executor, administrator etc. appointed by the court enters upon the execution of his duties, upon order of the court, file a bond in such sum, as the court may direct. Upon the application of any executor, administrator etc. the court may, after notice and hearing, order that subject matter of the trust. Upon presentation of the proof to the court that the subject matters of the trust has been deposited with a trust entity. The reduced bond shall be sufficient to secure adequately the proper administration and care of any property remaining under the control of such property. Exemption of Trust Entity from Bond Requirement No bond or other security shall be required by the court from a trust entity for the faithful performance of its duties as court appointed trustee, executor etc.
B. F.
V. Operations of Trust Entity A. Separation of Trust Business from General Business The trust business and all funds received by any trust entity as executor, administrator etc. shall be kept separate and distinct from the general business including all other funds, properties and assets of such trust entity. All moneys, properties or securities received by a bank in its capacity as trustee, fiduciary or investment manager shall be kept physically separate and distinct from the assets of its other business and shall be under the joint custody of at least 2 persons. Investment Limitations of a Trust Entity Unless otherwise directed by the instrument creating the trust, the lending and investment of funds and other assets acquired by a trust entity shall be limited to loans or investments as may be prescribed by laws, the Monetary Board or any court of competent jurisdiction.
B.
G. Deposit for the Faithful Performance of Trust Duties Before transacting trust business, every trust entity shall deposit with the BSP as security for the faithful performance of its trust duties approved by the Monetary Board in an amount equal to not less than Php500, 000.00.
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Sanctions and Penalties A trust entity or any of its officers and directors found to have willfully violated any pertinent provisions of the GBL shall be subject to sanctions and penalties. Exemption of Trust Assets from Claims No assets held by a trust entity in its capacity as trustee shall be subject to any claims other than those of the parties interested in the specific trusts Property held by the insolvent debtor as a trustee of an express or implied trust shall be excluded from the insolvency proceedings.
Limitations: Evidence of indebtedness of the RP and of the BSO and any other evidence of indebtedness or obligations the servicing and repayment of which are fully guaranteed by the RP. Loans fully guaranteed by the RP as to the payment of principal and interest. Loans fully secured by a holdout on, assignment or pledge of deposits maintained either with the bank proper or other banks. Loans fully secured by real estate or chattels in accordance with pertinent laws. Required Specific Derivatives: Transaction to be entered in to Borrowers name Amount Involved Collateral security/ies C. Real Estate Acquired by a Trust Entity Unless otherwise specifically directed by the trustor or the nature of the trust, real estate acquired by a trust entity in whatever manner and for whatever purpose shall likewise be governed by the relevant provisions of the GBL. The following circumstances may acquire, hold or convey real property: o Mortgaged to in good faith by way of security for debts o Conveyed to it in satisfaction of debts previously contracted on the course of its dealings. o Shall purchase under judgments, decrees, mortgages or trust deeds held by it and such as it shall purchase to secure debts due it. Any real property acquired or held under the circumstances enumerated above shall be disposed of by the bank within a period of 5 years provided, that the bank continue to hold the property for its own use, subject to the following limitations: o The total investment in such real estate and improvements including equipment shall not exceed 50% of combined capital accounts o The equity investment of a bank in another corporation engaged primarily in real estate shall be considered as part of the total investment in real estate, unless otherwise provided by the Monetary Board. Investments of Non-Trust Funds Investments of funds other than trust funds of a trust entity which is a bank, financing company or an investment house shall be governed by the relevant provisions of the GBL and other applicable laws.
F.
G. Establishment of Branches of a Trust Entity Ordinary business of a trust entity shall be transacted at the place of business specified in its articles of incorporation. H. Advertisement of Services Trust entities shall advertise their services in a dignified manner and enter such business only when demand for such service is evident, when specially equipped to render such service and upon full appreciation to the responsibilities involved. Money Government Banks may receive or hold as trustee, agent, administrator, financial manager or other similar capacity, any fund or money from the government and government entities, provided, that government-owned banks may received or hold as trustee the following: o Funds of local government units which are expected to be available for investment purposes for a relatively long period of time, provided, that the amounts held in trust or otherwise managed/advised for and in behalf of LGU shall be invested only in government. o Funds of government and government entities which are authorized by special laws to be placed in trust.
I.
D.
Chapter 7 BSP
I. Creation, Responsibilities and Corporate Powers of the BSP a. Declared Policy of the State Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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C.
D.
E.
f. Recognized competence in social and economic discipline. Disqualifications of the members: a. Disqualifications imposed by A code of conduct and ethical standards for public officials or employees b. Being a director, officer, employee, consultant, lawyer, agent or stockholder of any bank, quasi bank, or any other institution which is subject to supervision or examination by the BSP; c. Members coming from the private sector shall not hold any other public office or employment; d. Person is connected directly with any multilateral banking or financial institution; e. Has a substantial interest in any private bank, within 1 year prior to his appointment; f. No member of the MB shall be employed in any such institution within 2 years after the expiration of his term except when he serves as an official representative of the government. Grounds for removal of monetary board: a. If he is physically or mentally incapacitated that he cannot properly discharge his duties and responsibilities and such incapacity has lasted for more than 6 months; b. Member is guilty of acts of fraudulent or illegal character; c. If member no longer possess the qualifications enumerated in B. Meetings, quorums, decisions and proceedings of the MB: a. MB shall meet at least once a week. b. Presence of 4 members shall constitute a quorum. In all cases governor or his designated alternate shall constitute the 4. c. Unless otherwise provided, all decisions of the MB shall require the concurrence of at least 4 members. Note: Exception to E, par. C. 1. Sec. 61 GBL, Publication of financial statements. In periods of national and/or local emergency or of imminent panic which directly threaten monetary and banking stability, MB may by a vote of 5 of its members, may allow such bank xxx, to defer for a stated period of time the publication xxx. 2. Sec. 28, NCBA, Examinations and fees. Examination shall be conducted every year, and at such other times as the MB by an affirmative vote of 5 of its members, may deem expedient and to make a report on the same to the MB. 3. Sec. 72 NCBA, Emergency Restrictions on Exchange operations. Xxx The MB with the concurrence of at least 5 of its members and with the approval of the president, may temporarily suspend or restrict sales of exchange by the BSP, and may subject all transactions in gold and foreign exchange to be delivered to the BSP. Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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V.
Emergencies a. In case of emergencies, the governor, with the concurrence of 2 members of MB, may decide any matter or take any action within the authority of the MB. b. The governor shall submit a report to the president and the congress within 72 hours after the action has been taken. c. Governor shall submit his action to the Mb for ratification. C. Limitations on outside interests of the governor and the full time members of the board a. Limit their professional activities to those pertaining directly to their position with the bangko sentral. b. Not accept any other employment, whether public or private, remunerated or ad honorem, with the exceptions of the positions in eleemosynary, civic, cultural and religious organizations or whenever by designation of the president, the governor or the full time member is tasked to represent the interest of the government. Director, Officer or stockholder and Related Interest A. Contracting loans a. Any director, officer, or stockholder who together with his related interest, contracts a loan or any other form of financial accommodation from his bank or a bank, shall be required by the lending bank to waive the secrecy of his deposits b. Any information obtained from an examination of his deposits shall be held strictly confidential and may be used by the examiners in connection with their supervisory and examination responsibility.
II.
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V.
III.
VI.
IV.
VII.
i. The international reserves of the BS falls to a level which the MB considers inadequate to meet prospective net demands on the BS for foreign currencies. ii. The international reserve appears to be in danger of falling to such a level iii. The international reserve is falling as a result of payment or remittances abroad, which in the opinion of the MB is contrary to national welfare. The monetary board shall: Take such remedial measures as are appropriate Submit to the president and congress reports regarding the nature and cause of the decline, remedial measure already taken, remedies proposed and the character and cooperation required from other government agencies Operations in gold and foreign exchange A. Purchases and sales of gold a. BS may buy and sell gold in any form b. Purchases and sale of gold shall be made in the national currency B. Purchases and sales of foreign exchange a. BS may buy and sell foreign notes and coins, customarily employed for the international transfer of funds. b. BS may buy and sell foreign exchange transactions with the following entities only: i. Banks operating in the Philippines ii. Government iii. Foreign or international financial institutions iv. Foreign government v. Other entities or persons which the MB authorized as foreign exchange dealers C. BS shall at all times maintain a net positive foreign asset position so that its gross foreign exchange assets always exceed its gross foreign liabilities. Regulation of foreign exchange operations of the banks A. Information on exchange operations a. Banks shall report to the BS the volume and composition of their purchases of gold and foreign exchange each day. Loans to bank and other financial institutions A. Authorized type of credit operations a. Commercial credits BS may buy, sell, rediscount, discount xxx with maturities of not more than 180 days from the date of their purchase, discount, rediscount by the BS. b. Production credits same; having maturities of not more than 360 days from the date of the same. c. Other credits d. Advances - BS may grant advances against the following kinds of collateral: i. Gold coins or bullion; Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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VIII.
XI.
XII.
IX.
Open Market Operations for the Account of the BS A. Purchases and sales of government securities. The BS may buy and sell in the open market for its own account: a. Evidence of indebtedness issued by the government b. Same; issued by government instrumentalities fully guaranteed by the government c. The evidence of indebtedness must be freely negotiable and regularly serviced and must be available to the general public. Composition of BSs portfolio A. At least once every month the MB shall review the portfolio of the BS in relation to its future credit policy. In reviewing the portfolio, MB shall take into consideration whether a sufficiently large part of the portfolio consists of assets with early maturities, in order that a contraction in BS credit may be effected promptly whenever the national monetary policy so requires. Bank reserves A. Reserve requirements a. In order to control the volume of money created by the credit operations of the banking system, banks are required to maintain reserves against their deposit liabilities. The required reserves of each bank shall be proportional to the volume of its deposit liabilities and shall ordinarily take the form of a deposit in the BS. Reserve requirements shall be applied to all banks of the same category uniformly and w/o discrimination. b. The MB may exempt from reserve requirements deposit and deposit substitutes with remaining maturities of two years or more, as well as interbank borrowings. c. BS shall not pay interest on the reserves maintained with it, unless the MB decides otherwise as warranted by the circumstances. B. Deposit substitutes are alternative form of obtaining funds from the public, other than deposits, through the issuance, endorsement, or acceptance of debt instruments for the borrowers own account, for the purpose of relending or purchasing of receivables and other obligations. Provided that, commercial, industrial and non-financial companies for the limited purpose of financing their own needs shall not be covered by this provision. C. Required reserves against peso deposits. The MB may fix and alter the minimum reserve ratios to peso deposits, as well as to deposit substitutes, which each bank and quasi bank may maintain. D. Increase in Reserve requirements. Whenever in the opinion of the MB it becomes necessary to increase the reserve requirements, the increase shall be made in a gradual manner and shall not exceed 4 % points in any thirty day period. Banks shall be notified of such increase. E. Computation of reserves. The reserve position of each bank shall be calculated daily on the basis of the amount of its liability accounts against which reserves are required to be maintained. F. Reserve Deficiencies. Whenever the reserve position of any bank is below the required minimum, the bank shall pay to the BS 1/10 of one percent per day on the amount of deficiency or the prevailing 91 day Treasury bill whichever is higher. The banks may, Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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C.
D.
The exemption shall apply to all property of the BS, to the resources, receipts, expenditures, profits and income of the BS, as well as to all contracts, deed, documents and transactions related to the conduct of the business of the BS. The BS shall also be exempted from custom duties, a) the importation and exportation by the BS of notes and coins, and of gold and other metals to be used for purposes authorized under the NCBA, b) importation of equipment needed for bank note production, minting of coins, metal refining and other security printing operations. The civil service law shall also apply to the appointments in the BS except those which are policy-determining, primarily confidential, and highly technical. Provided that no qualification requirements for positions in the BS shall be imposed other than those set by the MB. Officers and employees shall not engage directly or indirectly in partisan activities or take part in any election except to vote.
XIII.
XIV.
XV.
XVI.
Every January of every odd year, all BLT shall forward to Treasurer a statement under oath of managing officers af all credits and deposits held by them in favor of persons known to be dead, or who have not made further deposits or withdrawals during the preceding ten years or more. It shall include: a. Names and addresses of persons with unclaimed balance b. Amount and date c. Date of Death d. Interest due Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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4.
Hearing the person died intestate, seized real or personal property in the Philippines leaving no heir and no cause to show contrary, court shall adjudge the estate of deceased after paying debts and charges shall escheat. Claim to estate People entitled to such estate claims within 5 years from the date of the judgment
The State as an Heir of a Decedent The State shall inherit the decedents estate in default of persons entitle d to succeed: Article 1011 In default of persons entitled to succeed the State shall inherit the whole estate Article 1012 In order that the state may take possession of the property mentioned, the pertinent provisions of the Rules of Court must be observed.
Penalties Refusal to make and file a sworn statement, 500 pesos a month for each month or fraction upon continuance of default. Immunity from suit 1. BLT which shall make any deposit of unclaimed balances with the Treasurer of the Philippines. 2. Defended by the Sol-Gen without cost Service and Maintenance Fees on Dormant Accounts Banks may impose service or maintenance fees on dormant or inactive accounts provided that period of dormancy must first be properly disclosed among the terms and conditions of the deposit. Reclassification All unclaimed balances reported to the Treasurer of the Philippines must first be reclassified or transferred from the deposit/liability to the liability account due to the Treasurer of the Philippines before being turned over. Unclaimed deposit liabilities shall no longer be covered by reserves required of deposit liabilities. Escheats Under the Rules of Court 1. When a person dies intestate with no heir, Sol-Gen in behalf of Philippines may file with RTC of province of residence praying that estate of deceased by declared escheated. Order for hearing shall not be more than 6 months after entry of order, copy of order be published in news paper of General circulation for 6 successive weeks.
Art. 1013. After the payment of debts and charges, the personal property shall be assigned to the municipality or city where the deceased last resided in the Philippines, and the real estate to the municipalities or cities, respectively, in which the same is situated. If the deceased never resided in the Philippines, the whole estate shall be assigned to the respective municipalities or cities where the same is located. Such estate shall be for the benefit of public schools, and public charitable institutions and centers, in such municipalities or cities. The court shall distribute the estate as the respective needs of each beneficiary may warrant. The court, at the instance of an interested party, or on its own motion, may order the establishment of a permanent trust, so that only the income from the property shall be used. (956a) Art. 1014. If a person legally entitled to the estate of the deceased appears and files a claim thereto with the court within five years from the date the property was delivered to the State, such person shall be entitled to the possession of the same, or if sold the municipality or city shall be accountable to him for such part of the proceeds as may not have been lawfully spent. Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
2.
PARTY-DUH NOTES for Banking Laws & Jurisprudence 2009 Trust Receipts
Policy 1. 2. To encourage and promote the use of trust receipts as an additional and convenient aid to commerce and trade Provide for regulation of trust receipts transactions in order to assure the protection of the rights and enforcement of obligations of the parties involved therein Declare the misuse of goods or proceeds realized from the sale as a criminal offence ESTAFA a. b. c. d. Sell or procure their sale or exchange Deliver them to a principal Effect consummation Effect presentation and collection
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There are two situations in a trust receipt transaction: 1. Money received under obligation to deliver it (entregarla) 2. Merchandise received under the obligation to return it (devolvera) Trust receipt is a separate and independent security transaction intended to aid in financing importers whereby the imported goods are held as security by the lending institution for the loan obligation. Spouses Vintola vs. Insular Bank of Asia and America explained the nature and usage. Transaction involves a loan feature represented by the Letter of Credit and security feature which is in the covering trust receipt. * Trust Receipt document in which is expressed a security transaction where the lender having no prior title to the goods and not having possession lends his money to the borrower who has possession on security of the goods which the borrower is privileged to sell with an agreement to pay all or part of the proceeds to the lender.
3.
Definition Entrustee any person having or taking possession of goods, documents or instruments under a trust receipt transaction. Or any of his successors in interest. Entruster any person holding title over the goods, documents or instruments subject of a trust receipt transaction. Or any of his successors in interest. Security Instrument property interest in goods, documents or instruments to secure performance of some obligations or entrustee Trust Receipt written or printed document signed by the entrustee in favor of entruster containing terms and conditions substantially complying with provisions of Trust Receipts Law Trust Receipt Transaction Any transaction by and between an entruster and an entrustee whereby the entruster who owns or holds absolute title or security interests over certain specified goods, documents or instruments releases the same to the possession of the entrustee upon t he latters execution and delivery to the entruster of a signed document called a trust receipt. A trust receipt binds the entrustee to hold the designated goods, documents or instruments in trust for the entruster and to sell or otherwise dispose of them with the obligation to turn over the proceeds to the entruster to the extent of the amount owing to the entruster. Other purposes: 1.) Goods or documents a. Sell the goods or procure their sale b. Manufacture or process goods for sale c. Load, unload, ship, transship 2.) Instruments
Form of Trust Receipts Need not be in a particular form. But must contain: 1. Description of the goods, document or instrument subject to trust receipt 2. Total invoice value of the goods and amount of the draft 3. Undertaking of the entrustee to: a. Hold in trust for the entruster b. Dispose of them in manner provided by trust receipt c. Turn over proceeds of sale of goods Currency Trust receipt may be denominated in any foreign currency acceptable provided that in the case denominated in foreign currency, payment shall be made in Philippine currency equivalent to it. Rights of Entruster
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Application Applies to items: 1. Destined for sale 2. Processed as a component of a product ultimately sold 3. Used to repair and maintain equipment in business Penalty Failure of Entrustee to turn over proceeds of the sale of goods covered by the trust receipt shall constitute the crime of ESTAFA.
2.
3.
4.
Obligations of the Entrustee 1. 2. 3. 4. 5. 6. Hold the goods in trust for the entruster and dispose of them strictly in accordance with the terms of the rust receipt Receive the proceeds in trust for the entruster and turn over the same to the entruster Insure the goods for their total value against loss and other casualties Keep goods separate and capable of identification as property of entruster Return the goods in the event of a non-sale or demand of the entruster Observe all other terms and conditions of the trust receipt
Liability for Loss The risk of Loss shall be borne by the entrustee, irrespective of whether or not it was due to the fault of the entrustee. Rights of Purchaser for Value and Good Faith Innocent purchaser for value acquires goods free from entrusters security interest. Violation of Trust Receipts Law Although is it malum prohibitum, the intent to misuse or misappropriate the goods should be proved. Because the Law punishes the dishonesty and abuse of confidence.
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A) Deposit Liabilities i) deposit liabilities of any bank or banking institution which is engaged in the business of receiving shall be insured with the PDIC . ii) factors considered Financial history and condition of the bank Adequacy of its capital structure Future earning prospects General character of its management Convenience and needs of the community to be served by the bank and whether or not its corporate powers are within the purposes of the PDIC The term deposit, unpaid balance of money or its equivalent received by a bank in its usual course of business and for which it has given or its obliged to give credit B) Statutory Liability of PDIC PDIC governed primarily by the provisions of the special law creating it. The liability of the PDIC for insured deposits therefore is statutory and such liability rests upon the existence of deposits with the insured bank.
Borrowing from Banks Borrowing from any bank or banking institution by examiners and other personnel of the examination departments of PDIC shall be prohibited only with respect to the particular institution in which they are assigned. XIII. Receivership A. Appointment a. Appoint PDIC as receiver b. receiver includes a receiver, commission, person or other agency charged by law with the duty to take charge of the assets and liabilities of a bank which has been forbidden from doing business B. Powers a. Control, manage and administer the affairs of the closed bank
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
PARTY-DUH NOTES for Banking Laws & Jurisprudence 2009 i. Powers, functions and duties, as well as all allowances, remunerations and perquisites of the directors, officers, and stockholders of such bank are suspended ii. Provisions of the Articles of Incorporation are deemed suspended iii. Assets deemed in custodial egis in the hands of the receiver iv. From the time the closed bank is placed under such receivership, assets shall not be subject to attachment, garnishment, execution, levy or any court processes. b. In addition to the powers of a receiver, PDIC is empowered to: i. Bring suit to enforce liabilities to or recoveries of the closed bank ii. Appoint or hire persons to perform such powers and functions of PDIC as receiver or liquidator of the closed bank iii. Suspend or terminate the employment of officers and employees of the closed bank C. Suits Filed by the PDIC a. In cases or actions filed by the PDIC, payment of all docket and other court fees shall be deferred until the action is terminated with finality. D. Distribution of Assets XIV. Payment of Insure Deposits A. Manner of Payment a. Payment of the insured deposits made by PDIC i. By cash ii. By making available to each depositor a transferred deposit in another insured bank in an amount equal to insured deposit of such depositor b. transfer deposit means a deposit in an insured bank made available to a depositor by PDIC as payment of insured deposit of such depositor in a closed bank and assumed by another insured bank c. Joint account insured separately from any individually-owned deposit account d. Account held jointly by 2 or more natural persons, or by 2 or more juridical persons or entities, the maximum insured deposit shall be divided into as
44
B.
C.
D.
E. F. G.
H.
many equal shares as there are individuals, unless a diff. sharing is stipulated in the document of deposit e. Account held by a juridical person or entity jointly the maximum insured deposit shall be presumed to belong entirely to such juridical person or entity f. Aggregate of the interests maximum insured deposit of PhP 250,000 Proof of Claims a. PDIC, in its discretion, may require proof of claims to be filed before paying the insured deposits. b. It may require the final determination of a court of competent jurisdiction before paying such claim Settlement Period and Penalties in Case of Failure to Settle a. Failure to settle the claim due to grave abuse of discretion, gross negligence, bad faith or malice imprisonment from 6 months to 1 year b. Upon payment of any depositor, PDIC shall be subrogated to the rights of the depositor against the closed bank to the extent of such payment c. Subrogation shall include the right to receive the same dividends from the proceeds of the assets of such closed bank and recoveries on account of stockholders liability as would have been payable to the depositor on a claim for the insured deposits Notice a. PDIC shall commence the determination of insured deposits due the depositors of a closed bank upon its actual takeover of the closed bank and give notice b. Publish the notice once a week for at least 3 consecutive weeks Discharge a. Payment of an insured deposit to any person shall discharge PDIC Recognition of Owner Withholding of Payment a. PDIC may withhold payment of such portion of the insured deposit of any depositor in a closed bank as may be required to provide for the payment of any liability of such depositor as a stockholder of the closed bank, or of any liability of such depositor to the closed bank or its receiver Prescription
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
PARTY-DUH NOTES for Banking Laws & Jurisprudence 2009 a. If the depositor in the closed bank shall fail to claim his insured deposits within 2 years from actual takeover of the closed bank by the receiver, or does not enforce his claim within 2 years after the 2-year period to file a claim, all rights of the depositor with respect to the insured deposit shall be barred XV. Investment By PDIC A. Money of PDIC not otherwise employed shall be invested in obligations of the Philippines a. It shall not sell or purchase any such obligations for its own account and in its own right and interest, at any one time aggregating in excess of P100,000 without the approval of the Insurance Commissioner B. The banking or checking accounts of PDIC shall be kept with the Central Bank of the Philippines, with the Philippine National Bank, or with any other bank designated as depository or fiscal agent of the Philippine Government XVI. Extension Of Loans A. If an insured bank is in danger of closing, PDIC is authorized to make loans to, or purchase the assets of, or assume liabilities of, or make deposits in, such insured bank, upon such terms and condition as the Board of Directors may prescribe when it is essential to provide the adequate banking service in the community or maintain financial stability in the economy a. Extend financial assistance to, assume liabilities of, purchase the assets of an insured bank if PDIC finds that the resumption of operations of such bank is vital to the interests of the community OR severe financial climate exists which threatens the stability of a number of banks possessing significant resources b. Reopening and resumption of operations of the closed bank shall be subject to the prior approval of the Monetary Board B. PDIC may provide acquiring control of, merging or consolidating with or acquiring the assets of an insured bank in danger of closing in order to prevent such closing or of a closed insured bank in order to restore to normal operations C. Prior to the exercise of these powers, PDIC shall determine that actual payoff and liquidation thereof will be more expensive than the exercise of its power D. When the MB has determined that there are systematic consequences of a probable failure or closure of an insured bank, PDIC may grant financial assistance to such
45
insured bank in such amount as may be necessary to prevent its failure or closure and/or restore the insured bank to viable operations a. Systemic risk possibility that failure of one bank to settle net transactions with other banks will trigger a chain reaction, depriving other banks of funds leading to a general shutdown of normal clearing and settlement activity E. PDIC may not use these authorities to purchase the voting or common stock of an insured bank F. Financial assistance may take the form of equity or quasi-equity of the insured bank as may be deemed necessary by the Board of Directors XVII. Borrowings A. PDIC is authorized to borrow from the BSP B. When the funds of the PDIC are not sufficient to provide for an emergency or urgent need to attain the purposes of the PDIC law, it is likewise authorized to borrow money, obtain loans or arrange credit lines or other credit accommodations from any bank designated as depository or fiscal agent of the Phil. Govt. XVIII. Issuance of Banks With the approval of the President, PDIC is authorized to issue bonds, debentures, and other obligations for the settlement of insured deposits in closed banks as well as for financial assistance a. Board of Directors to determine the interests rates and maturity b. PDIC to provide appropriate reserves for the redemption or retirement of obligation XIX. Reports and Audit XX. Miscellaneous A. Signs a. Every insured bank shall display at each place of business maintained by it a sign that its deposits are insured by PDIC b. Board may exempt from this requirement advertisements which do not relate to deposits B. Merger or Consolidation of Insured Banks a. No insured bank shall i. merge or consolidate with any noninsured bank or institution, or convert into a noninsured bank
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
PARTY-DUH NOTES for Banking Laws & Jurisprudence 2009 ii. assume liability to pay any deposits made in, or similar liabilities of, any noninsured bank or institution iii. transfer assets to any noninsured bank in consideration of the assumption of liabilities for any portion of the deposits made in such insured bank TRO and Injunction A. No court, except the CA, shall issue any TRO, preliminary injunction or preliminary mandatory injunction against PDIC B. SC may issue a restraining order or injunction when the matter is of extreme urgency involving a constitutional issue C. Any restraining order or injunction issued in violation of the foregoing is void and of no force and effect and any judge who has issued the same shall suffer the penalty of suspension of at least 60 days without pay
46
Policies of AMLA 1. 2. 3. Protect and preserve integrity and confidentiality of bank accounts Ensure that Philippines shall no be used as money laundering site Extend cooperation in transnational investigations and prosecutions
Institutions Covered 1. 2. 3. 4. 5. 6. Banks and other institutions supervised and regulated by BSP Insurance Committees Securities, dealers, etc. Mutual funds, common-trust funds and other similar entities Foreign Exchange corporations and other similar entities Entities administering or dealing with currencies regulated by SEC Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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Functions of AMLC 1. 2. Require and receive covered or suspicious transaction from covered institutions Issue orders addressed to appropriate Supervising Authority or covered institution to determine true identity of the owner of questioned property 3. Institute civil forfeiture through Sol-Gen 4. File complaints with DOJ or Ombudsman 5. Investigation 6. Apply before CA for freezing any property alleged to be proceeds of unlawful activity 7. Implement measures necessary to counteract money laundering 8. receive and take action in respect of any request for foreign assistance 9. develop educational programs 10. Enlist assistance of any branch of governemtn 11. Impose administrative sanctions for violation of rules 12. Establish by a secretariat headed by Executive director appointed by Council Prevention of Money Laundering; Customer Identification Requirements and Record keeping Customer Identification 1. 2. 3. 4. Institutions shall establish and record true identity of its clients based on official documents Maintain a system of verifying true identity of their clients Anonymous accounts, accounts under fictitious names are prohibited Peso and foreign currency non-checking numbered accounts shall be allowed
Unlawful Activities 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Kidnapping for Ransom DDA Anti-Graft and Corrupt Practices Act Plunder Robbery and extortion Jueteng Piracy Qualified Theft Swindling Smuggling Violations of Electronic Commerce Act Hi-jacking Violations of Securities Regulation Code Other felonies of similar nature
Money Laundering Offense Freezing of Monetary Instrument or Property 1. 2. 3. Jurisdiction RTC private persons Sandiganbayan To complete legal measures to prevent money laundering, the AMLC may inquire into or examine any particular deposit or investment with any banking institution or non-bank financial institution upon order of any competent court incases of violation, it must be established that: 1. There is probable cause that deposits are related to unlawful activity or Money laundering offense Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal Person transacting or attempts to transact any monetary instrument purporting to the proceeds of any unlawful activity Performs or failure to perform any act as a result of which he facilitates the offense mentioned in (1) Failure to disclose as required by AMLC The CA upon application ex parte by AMLC after determination of probable cause Freeze period shall be for 20 days unless extended by the court Authority to Inquire Bank Deposits
48
Substantially altered, destroyed, diminished in value or otherwise rendered worthless through an act attributable to the offender Concealed, removed, converted or transferred to prevent from being found Located outside the Philippines or has been placed or brought outside the jurisdiction of the court Commingled with other monetary instruments or property belonging to offender or third persons rendering the same difficult to identifyor segregated for purposes of forfeiture
Mutual Assistance Among States Request for Assistance from Foreign State Principle of mutuality and reciprocity shall be at all times recognized. Powers of AMLC to act on request for assistance from a foreign State 1. AMLC may execute a request for assistance from a foreign State by: a. Tracking down, freezing, restraining and seizing assets to be proceeds of any unlawful activity b. Giving information needed by the foreign state c. Applying for an order of forfeiture of such property
When court order is required, there is no provision which provides that specifically authorizes such court may be issues ex parte, this silence does not preclude the ex parte issuance of the bank inquiry order as it is not prohibited. A Bank inquiry is not a search warrant or warrant of arrest as it contemplates a direct object but not the seizure of persons or property. Because of Bank Secrecy Act, the confidentiality of bank deposits remains a basic state policy in the Philippines. Subsequent laws such as AMLA may have added exceptions to the Bank Secrecy Act yet the secrecy of Bank deposits still lies as the general rule.
Obtaining assistance from Foreign States 1. AMLC may make a request to any foreign State for assistance in: a. Tracking down, freezing, restraining and seizing assets alleged to be proceeds of any unlawful activity b. Obtaining information that it needs relating to covered transactions c. Enter any premises belonging to persons named in said request d. Applying for order of forfeiture
Limitations May refuse to comply with any request for assistance where the action sought by the request contravenes any provision of the Constitution or the execution of a request is likely to prejudice the national interest of Philippines unless a treaty so provides. Requirements for Requests for Mutual Assistance from foreign States
Forfeiture Civil Forfeiture When there is a covered transaction report made, and the court has ordered the seizure of any property related to said report, the Revised Rules of Court on civil forfeiture applies. Payment in Lieu of Forfeiture Court may, instead of enforcing the order of forfeiture, order the convicted offender to pay an amount equal to the value when order cannot be enforced because: 1. Property cannot, with due diligence be located
1. 2. 3. 4. 5.
Confirm that investigation or prosecution is being conducted in respect of a money launderer named therein or that he has been convicted of any money laundering offense State the grounds on which any person is being investigated or prosecuted for money laundering or details of his conviction Give sufficient particulars as to identity of said person Give particulars sufficient to identify any covered institution believed to have information Ask from covered institution any information of assistance Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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Authentication of Documents Authenticated if: 1. Signed or certified by a judge, magistrate or equivalent officer in or of the requesting State 2. Authenticated by the oath or affirmation of a witness or sealed with official or public seal
Extradition Philippines shall negotiate for the inclusion of money laundering offenses among extraditable offenses in all future treaties. Prohibitions Against Political Harassment 1. 2. AMLA shall not be used for political persecution or harassment or as an instrument to hamper competition in trade and commerce May not be filed to the prejudice of a candidate for an electoral office during an election period.
Powers of Congressional Oversight Committee The Power to promulgate its own rules, to oversee the implementation of Anti-money Laundering act and to review or revise the implementing rules issued by AMLC within 30 days from promulgation of said rules. Rules and Regulations to Combat Money Laundering 1. 2. Should take reasonable measures to establish and record the true identity of their clients. In case of doubt as to whether their purported clients or customers are acting for themselves or for another, reasonable measures should be taken to obtain the true identity of the persons on whose behalf an account is opened Anonymous accounts or accounts under fictitious names should not be kept or allowed, unless provided by law Identity of clients should be reviewed at least every other year All records to be maintained for at least 5 years Special attention to all complex, unusual large transactions and all unusual patterns of transactions which have no apparent or visible lawful purpose Other suspicious transactions
3. 4. 5. 6. 7.
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registered and unregistered security and collateral instruments, including but not limited to, real state mortgages, chattel mortgages, pledges and antichresis, whose principal and/or interest have remained unpaid for at least one hundred and eighty (180) days after they have become past due or any of the events of default under the loan agreement has occurred. 15. ROPOA- real and other properties owned or acquired by an FI in settlement of loans and receivables, including real properties, shares of stocks, and chattels formerly constituting collateral's for secured loans which have been acquired by way of dation in payment (dacion en pago) or judicial or extra-judicial foreclosure or execution of judgement. 16. TRUE SALE- a sale wherein the selling FI transfers or sells its NPAs without recourse for cash or property to an SPV with the following results: i. The transferor relinquishes effective control over the transferred NPAs; and ii. The transferred NPAs are legally isolated and put beyond the reach of the transferor and its creditors. C. Organization An SPV shall be organized as stock corporation in accordance with Batas Pambansa Blg. 68, otherwise known as "The Corporation Code of the Philippines" and the rules promulgated by the Commission for purposes of registering the SPV: Provided, That if the SPV will acquire land, at least sixty percent (60%) of its outstanding capital stock shall be owned by Philippines nationals pursuant to Republic Act No7042, as amended, otherwise known as "The Foreign Investment Act". D. Powers of an SPV
i. To engage third parties to manage, operate, collect and dispose of NPAs acquired from an FI; ii. To rent, lease, hire, pledge, mortgage, transfer, sell, exchange, usufruct, secure, securitize, collect rents and profits, and other similar acts concerning its NPAs acquired from an FI; iii. In case of NPLs, to restructure debt, condone debt and undertake other structuring debt, the SPV may reduce the principal, interest, interest rates, and the period for calculating the interest, extend the time for debt repayment or relax the conditions for debt repayment, agree to the conversion of the Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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only SPVs whose applications are filed not later than the 18-month period and are subsequently approved by the Commission shall qualify for the tax exemptions and privileges granted under the Act.
Registration Requirements- shall submit to the Commission the ff. documents for incorporation: (1) Name Verification Slip, showing its proposed name which shall always include the acronym SPV-AMC (Asset Management Company) appended thereto; (2) Articles of Incorporation and By-Laws; (3) Treasurers Affidavit/Authority to verify bank account; (4) Bank Certificates of Deposits (notarized in the place where the bank is located) (5) Written undertaking to change corporate name by incorporator or director; (6) Registration Data Sheet.
An SPV shall have a minimum authorized capital stock of Five hundred million pesos (P500, 000,000.00), with a minimum subscribed capital stock of One hundred twenty five million pesos (P125, 000.000.00), and a minimum paid-up capital of Thirty-one million two hundred fifty thousand pesos (P31, 250.00). Paid-up capital must be in the form of cash.
G. Submission of SPV Plan After the establishment of an SPV pursuant to Section 4 hereof, an SPV Plan shall be submitted to the Commission for approval, which shall include the following: (a) Investment policies of the SPV; (b) Contribution plan including the amounts and draft of subscription documents; (c) Features of the IUIs including the specific amounts issued and/or to be issued; (d) timetable of issuance; Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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(4) SPV shall likewise submit a certification from the FI that the affected borrowers of the NPLs and all persons holding prior encumbrances upon the assets mortgaged or pledged have been notified by registered mail of the intended transfer of NPLs to an SPV Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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ii. The registration statement is on its face incomplete or inaccurate in any material respect or includes any untrue statement of a material fact or omits to state a material fact required to be stated therein iii. The issuer, any officer, director or controlling person of the issuer, or person performing similar functions, or any underwriter has been convicted, by a competent judicial or administrative body, upon plea of guilty, or otherwise, of an offense involving moral turpitude and/or fraud or is enjoined or restrained by the Commission or other competent judicial or administrative body for violations of securities, commodities, and other related laws. (3) If the Commission deems it necessary, it may issue an order suspending the offer and sale of the securities pending any investigation. (c ) Issuance of Securities to the Public Without Prior Registration (1) An SPV that offers to sell or distribute its IUIs to the public within the Philippines without prior registration shall be subject to the penalties provided under the SRC. (2) Imposition of the foregoing administrative sanctions shall be without prejudice to the filing of criminal charges against the individual responsible for the violation. (d) Tax treatments of IUIs - Since IUIs are not considered as deposit substitutes under the Act, interests or other monetary benefit derived from IUIs is not subject to the 20% final withholding tax under the NIRC -The IUI and any income arising from the IUIs shall be subject to normal income tax and/or such other applicable taxes imposed under the NIRC.
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* Any transfer of NPAs not in the nature of True Sale as provided for in the Act shall not qualify for tax exemptions and fee privileges granted under the Act. Provided, That GFIs and GOCCs shall be subject to existing law on the disposition of assets: Provided further, That in the transfer of the NPLs, the provisions on subrogation and assignment of credits under the New Civil Code shall apply. M. Assumption of Rights and Obligations The SPV shall assume all rights and obligations of the FI over the transferred NPA N. Tax Exemptions and Fee Privileges The following transactions are exempt from the payment of taxes: 1. The transfer of NPL by the FI to an SPV; 2. The transfer of ROPOA by the FI to an SPV; 3. The dacion en page of the NPL by the borrower to the FI; 4. The dacion en pago of the NPL by a third party, on behalf of the borrower, to the FI; 5. The transfer of NPL by the FI to an individual; 6. The transfer of the ROPOA by the FI to an individual; 7. The transfer of the NPL by the SPV to a third party; 8. The transfer of the ROPOA by the SPV to a third party; 9. The dacion en pago of the NPL by a third party, on behalf of the borrower, to the SPV; 10. The dacion en pago of the NPL by the borrower to the SPV; 11. The transfer of the NPL by the individual to a third party; and, finally, 12. The transfer of the ROPOA by the individual to a third party. The tax exemptions provided above shall be exempt from the payment of the following taxes: 1. Documentary stamp tax as may be imposed under Title VII of the NIRC; 2. Capital gains tax imposed on the transfer of lands and/or other assets treated as capital assets as defined under Section 39(A)(1) of the NIRC; 3. Creditable withholding income taxes imposed on the transfer of land and or buildings treated as ordinary assets pursuant to Revenue Regulation No. 2-98, as amended; 4. The value-added tax as may be imposed under Title IV of the NIRC, or gross receipts tax under Title V of the same NIRC. Penalties 1.
2.
Any person who violates any of the provisions of this Act, or any person who, in a registration statement, notice, certification or plan filed under this Act, makes any untruthful statement of a material fact or omits to state any material fact required to be stated therein, shall, upon conviction, suffer a fine of not less than Fifty thousand pesos (P50,000.00) nor more than One million pesos (P1,000,000.00) or imprisonment of not less than six (6) years and one (1) day nor more than twelve (12) years, or both, in the discretion of the court, without prejudice to the penalties provided under Sec. 18 hereof and other applicable laws. If the offender is a corporation, association, partnership or any juridical person, the penalty shall be imposed upon the responsible officers , as the case may be, who participated in the commission of the crime or who shall have knowingly permitted or failed to prevent its commission. Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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3. 4. 5.
If the offender is a juridical person, the court may order the suspension or revocation of license. If the offender is an alien, he shall, in addition to the penalties herein prescribed, be deported without further proceedings after serving the penalties herein prescribed. If the offender is a public official or employee, he shall, in addition to the penalties prescribed herein, suffer absolute or temporary disqualification from government or public office, as the case may be.