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BANKING LAWS
GOVERNING LAW
Banking Institution are governed by the following laws: A. General banking laws  General Banking Law (R.A. No. 8791) . New Central Bank Act (R.A. No. 7653) B. Special banking laws  New Rural Banks Act (R.A. No. 7353)  Private Development Banks Act (R.A. No. 4093)  Savings and Loan Association Act (R.A. No. 3779)  . Thrift Banks Act (R.A. No. 7906) C. Other laws affecting banks  Secrecy of Bank Deposits Law (R.A. No. 1405)  Unclaimed Balances Law (Act No. 3936)  Philippine Deposit Insurance Corporation Act (R.A. No. 3591)  The general banking laws above mentioned are applicable to government banks like DBP and PNB.  The Al- Amanah Islamic Bank is subject to all banking and pertinent laws. (Bar Review Materials Miravite, 2002 ed.) in Commercial Law, Jorge BAR QUESTION: JOINT ACCOUNT VS. PARTNERSHIP (2000) Distinguish joint account from partnership. (3%) SUGGESTED ANSWER The following are the distinctions between joint account and partnership: 1) A partnership has a firm name while a joint account has none and is conducted in the name of the ostensible partner. 2) WHILE A PARTNERSHIP HAS JURIDICAL PERSONALITY AND MAY SUE OR BE SUED UNDER ITS FIRM NAME, A JOINT ACCOUNT HAS NO JURIDICAL PERSONALITY AND CAN SUE OR BE SUED ONLY IN THE NAME OF THE OSTENSIBLE PARTNER. 3) While a partnership has a common fund, a joint account has none. 4) While in a partnership, all general partners have the right of management, in a joint account, the ostensible partner manages its business operations. 5) While liquidations of a partnership may, by agreement, be entrusted to a partner or partners, in joint account liquidation thereof can only be done by the ostensible partner.

T HREE KINDS OF ENTITIES THAT INTRODUCE FUNDS INTO THE ECONOMY :
1. 2. 3. banks : entities that obtains funds from the public in the form of deposits and re-lend it to the public; quasi-banks : those that obtain funds in the form of deposit substitutes and re-lend the same and not from the public or depositors. Finance companies and other financial intermediaries: those that lend funds from their own assets.

BAR QUESTION: Theory of Cognition vs. Theory of Manifestation (1997) The Civil Code adopts the theory of cognition, while the Code of Commerce generally recognizes the theory of manifestation, in the perfection of contracts. How do these two theories differ? SUGGESTED ANSWER: Under the theory of cognition, the acceptance is considered to effectively bind the offeror only from the time it came to his knowledge. Under the theory of manifestation, the contract is perfected at the moment when the acceptance is declared or made by the offeree.

FIVE PERSONS PRIMARILY INTERESTED IN THE BUSINESS OF BANKING
1. 2. 3. 4. 5. Government Depositors Investors Creditors Borrowers

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GENERAL BANKING LAW OF 2000 (GBL) (RA No. 8791)

The certificate of authority shall not be issued unless the Monetary Board is satisfied: 1. That all requirements of existing laws and regulations to engage in the business for which the applicant is proposed to be incorporated have been complied with; That the public interest and economic conditions, both general and local, justify the authorization; and That the amount of the capital, the financing, organization, direction and administration, as well as the integrity and responsibility of the organizers and administrators, reasonably assure the safety of deposits and the public interest (Sec. 14).

Purpose: To promote and maintain a stable and efficient banking and financial system that is globally competitive, dynamic and responsive to the demands of a developing economy (Sec. 2). Scope of Application: The GBL primarily governs universal banks and commercial banks. It suppletorily governs thrift banks, rural banks and other banking institutions.

2.

3.

GENERAL CONCEPTS
BANKS   Entities engaged in the lending of funds obtained in the form of deposits (Sec. 2) Entities duly authorized by the Monetary Board to engage in the business of regularly lending funds obtained regularly from the public through the receipt of deposits of any kind. An investment company that performs function as such is NOT a bank. Thus an investment company that is engage solely in investing, reinvesting or trading in securities is not engage in banking. ( Banas vs. Asia Pacific Finance Corp., Oct. 18, 2000). However, an investment company which loans out money of its customers, collects interest, and charges a commission to both lender or borrower is engage in banking (Republic vs. Security Credit and Acceptance Corp.)

Organization of a Bank or Quasi-Bank Requirements: 1. The entity is a stock corporation; 2. Its funds are obtained from the public, i.e. 20 or more persons; and 3. The minimum capital requirements prescribed by the Monetary Board are satisfied (Sec. 8). Note: In Quasi banks, Deposit substitute are alternative forms of obtaining funds for the public, other than deposit, through the issuance, endorsement, or acceptance of debt instrument for the borrowers own account, for the purpose of relending or purchasing of receivables and other obligations.in banking or quasi-banking functions   A person or entity cannot engage in banking or quasi-banking functions without a certificate of authority from the BSP (Sec. 6). The determination of whether a person or entity is performing banking or quasi-banking functions without BSP authority shall be decided by the Monetary Board.  

QUASI-BANKS  Entities engaged in the borrowing of funds through the issuance, endorsement or assignment with recourse or acceptance of deposit substitutes (Sec. 95) Entities authorized to perform universal or commercial banking functions may also engage in quasi-banking functions.

NATURE OF BANKING BUSINESS 
Impressed with public interest where the trust and confidence of the public in general is of paramount importance such that: 1. The appropriate standard of diligence must be very high, if not the highest, degree of diligence; highest degree of care (PCI Bank vs. CA, 350 SCRA 446, PBCom vs. CA, G.R. No. 121413, 29 Jan. 2001)  This applies only to cases where banks are acting in their fiduciary capacity, that is, as depository of the deposits of their depositors (Reyes vs. CA, G.R. No. 118492, 15 Aug. 2001). Subject to reasonable regulation under the police power of the state. 

FINANCIAL INTERMEDIARIES  Persons or entities whose principal functions include the lending, investing or placement of funds on evidences of indebtedness or equity deposited with them, acquired by them or otherwise coursed through them, either for their own account or for the account of others.

ORGANIZATION AND OPERATION
A. Authority to Register/Incorporate  The SEC shall not register the articles of incorporation of any bank or any amendment thereto unless accompanied by a certificate of authority issued by the Monetary Board under its seal (Sec. 14). 2. 

While an innocent mortgagee is not expected to conduct an exhaustive investigation on the history of the mortgagor¶s title, in case of a banking

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CLASSIFICATION OF BANKS (SEC. It is subject to heavy and close supervision and/or regulation by the BSP (Central Bank of the Phils. October 28. In case of merger or consolidation. representatives are sent to the premises offered as collaterals so as to investigate who the real owners are (DBP vs. May declare dividends out of its unrestricted retained earnings. 5. Notes of hotjurist in foro conscientiae . the number of directors shall not exceed 21 (Sec. No. 2. Other classification of banks as determined by the Monetary Board of the Bangko Sentral ng Pilipinas. which are primarily governed by the Thrift Banks Act (R. it has unrestricted retained earnings in its books to cover the shares to be purchased/ acquired.  The business of a bank is one affected by public interest for which reason the bank should guard against loss due to negligence and bad faith. CA. Must be composed of 5 to 15 directors. 208 SCRA 652). Commercial banks . May not declare dividends. Universal banks . Reason: Before a loan is approved. if any of the conditions set forth under Sec. and cannot rely upon on what is or is not annotated on the title.Primarily governed by the General Banking Law (GBL). G. The President may also intervene at any time and assume jurisdiction over such labor dispute in order to settle or terminate the same.Page 3 of 26 institution. each of whom shall own at least one (1) share of the capital stock of the corporation.R. 331 SCRA 267). certify it to the NLRC for compulsory arbitration 1. 7906). of Labor who has 2 options: a. such as the Al Amanah Islamic Investment Bank of the Philippines which was created by RA 6848. 17). He may assume jurisdiction over and decide the dispute.  ORDINARY CORPORATION May be a stock or non-stock corporation May issue par value or no par value stocks. 155206. It is expected to ascertain and verify the identities of the persons it transacts business with (UCPB vs.). CA. 3. November 11.Ordinary banks governed by the GBL which have a lower capitalization requirement than universal banks and can neither exercise the powers of an investment house nor invest in non-allied enterprises. provided that. can exercise the powers of an investment house and invest in nonallied enterprises and have the highest capitalization requirement. Rural banks ± Mandated to make needed credit available and readily accessible in the rural areas on reasonable terms and which are primarily governed by the Rural Banks Act of 1992 (RA 7353). 10). Thrift banks ± These are a) Savings and mortgage banks. 2. Due diligence required of banks extend even to persons. No. Callejo. c) Private development banks. 183 SCRA 361). or institutions like the GSIS. Eduardo Santiago. 3) 1. They are governed primarily by the Cooperative Code (RA 6938). or b. regularly engaged in the business of lending money secured by real estate mortgages (GSIS vs. if unsettled after 7 calendar days shall be reported by the BSP to the Sec. 57 are present. Special rules on strikes and lockouts: any strike or lockout involving banks. 6.R. 2003. 4. Except: when authorized by the Monetary Board.A. May be registered with the SEC without any certificate of authority issued by a government agency. b) Stock savings and loan associations. J. 2003). BANKING CORPORATION Must generally be a stock corporation Shall issue par value stocks only (Sec. Cooperative banks ± Those banks organized whose majority shares are owned and controlled by May not purchase/ acquire its shares or accept them as security for a loan. 9). Also composed of 5 to 15 directors. Islamic banks ± Banks whose business dealings and activities are subject to the basic principles and rulings of Islamic Shari¶ a. It is required to exercise utmost diligence in the handling of deposits (Simex International Manila Inc. Must secure a certificate of authority from the Monetary Board before it can register with SEC.. CONSEQUENCES OF NATURE OF BUSINESS: 1. 7. v. In such case. it must exercise due diligence before entering into said contract. May purchase/acquire its own shares for a legitimate corporate purpose. cooperatives primarily to provide financial and credit services to cooperatives. It shall include cooperative rural banks. Ramos. 147800. the bank must sell or dispose of said shares within 6 months from the time of their acquisition (Sec. G.

58. 31). (Sec. c.Page 4 of 26 UNIVERSAL BANK Authority to exercise additional powers other than those authorized for commercial banks May invest in the equities of allied. The power to invest in non-allied enterprises (Sec. Accepting or creating demand deposits. 24) COMMERCIAL BANK No such powers additional payment in legal tender upon demand by the presentation of checks (Sec. 23). The powers of an investment house. 25) A publicly-listed bank may own up to 100% of the voting stock of only one other UB / CB (Sec. drafts. receiving other types of deposits and deposit substitutes. 24-28) COMM¶L BANK (Sec. d. and 3. Equity investment in non-financial allied enterprises 100% of equity 100% of equity UNIVERSAL & COMMERCIAL BANK Authorized to engage in quasi-banking functions without need for approval May accept or create demand deposits without need for approval Demand deposits Liabilities of the BSP and of other banks which are denominated in Philippine currency and are subject to OTHER BANKS Not so authorized Equity investment in a single non-allied enterprise Must seek approval of Monetary Board before accepting or creating demand deposits. whether financial or non-financial POINT OF DISTINCTION UNIVERSAL BANK (Sec. Such powers as may be necessary to carry on the business of commercial banking: a. 33) Shall not exceed 35% of the total equity in that enterprise nor shall it exceed 35% of the voting stock in that enterprise N/A Equity investment Quasi-Banks in 40% 40% Notes of hotjurist in foro conscientiae . bills of exchange and other evidence of debt. Extending credit. EQUITY INVESTMENTS May only invest in equities of allied enterprises. 35% of net worth N/A Powers 1. General powers incident to corporations 2. investment shall remain a minority holding (Sec. 2. Accepting drafts and issuing letter of credits. 1. Discounting and negotiating promissory notes. NCBA). The powers authorized for a commercial bank. rural bank or any financial allied enterprise (Sec. whether financial or non-financial. 30-32) Total investment in allied enterprises Total investment in non-allied enterprises Equity investment in any one enterprise 50% of net worth 50% of net worth 25% of net worth 25% of net worth (Allied only) Equity investment in financial allied enterprise: thrift bank. 25). 29) 100% of equity 100% of equity y In other financial allied enterprises. and non-allied enterprises (Sec. e. b. (Sec. Buying and selling foreign exchange and other debt securities.

Acquisition of major assets and making of new investments may be restricted. Notes of hotjurist in foro conscientiae . or constituent bank or corporations under rehabilitation from full compliance with the required capital ratio. Distribution of net profits may be limited or prohibited and MB may require that part or all of the net profits be used to increase the capital accounts of the bank until the minimum requirement has been met. Acquisition of major assets and making of new investments may be restricted. 24). Distribution of net profits may be limited or prohibited and MB may require that part or all of the net profits be used to increase the capital accounts of the bank until the minimum requirement has been met. Effect of non-compliance with the prescribed minimum ratio: 1. b. retained earnings and undivided profit. consultant or administrator of investment management/ advisory/consultancy accounts. Loan Function 2. However. Note: The bank acting as depositary or as an agent shall keep the funds. negligence would be void for being contrary to public policy (CA-Agro Dev¶t vs. Receive in custody funds. the MB may temporarily relieve the surviving bank. act as managing agent. 3. Should such statements prove to be false or incorrect. documents and valuable objects. adviser. a bank must ascertain that the debtor is capable of fulfilling his commitments to the bank. March 5.Page 5 of 26 Allied Enterprises ± those entities which enhance or complement banking Non-Financial Allied Enterprises ± pertains to activities that do not involve money matters (such as warehousing. or when a bank is under rehabilitation under a program approved by BSP. that of a good father of the family is to be observed. d. the MB may temporarily relieve the surviving bank. Any stipulation exempting the depositary from any liability arising from loss on account of fraud. Rules: 1.   A. such ratio shall be applied uniformly to banks of the same category (Sec. evidences of indebtedness and types of securities. CA. (Sec. safety deposit boxes) NET WORTH The total of the unimpaired paid-in capital including paid-in surplus. c. or 2. 34). PROVIDED that. the Monetary Board may require or suspend compliance with such ratio whenever necessary for a maximum period of one year. shares. Make collection and payments for the account of others and perform such other services for their customer as are not incompatible with banking business. or constituent bank or corporations under rehabilitation from full compliance with the required capital ratio. FUNCTIONS OF BANKS BASIC FUNCTIONS: 1. in the absence of any stipulation prescribing the degree of diligence required. the bank may terminate any loan granted on the basis of said statements and shall have the right to demand immediate repayment or liquidation of obligation (Sec. and e. 3. 40). Act as financial agent and buy and sell. consolidated bank. In case of a bank merger or consolidation. by order of and for the account of their customer. 34). 2. consolidated bank. A bank may demand from its applicants a statement of their assets and liabilities and of their income and expenditures and other information. Upon prior approval of the Monetary Board. Deposit Function OTHER FUNCTIONS Universal banks and commercial banks may also exercise any of the following functions: a. EXCEPT: purchases of evidence of indebtedness guaranteed by the Government. Rent out safety deposit boxes. securities and other effects which it receives duly separated from its own assets and liabilities. 219 SCRA 426. In case of a bank merger or consolidation.  The depositary would be liable if in performing its obligation it is found guilty of fraud. or when a bank is under rehabilitation under a program approved by BSP. 53) RISK±BASED CAPITAL  The minimum ratio prescribed by the Monetary Board which the net worth of a bank must bear to its total risk assets which may include contingent accounts. or 2. net valuation reserves and other adjustments as may be required by the Bangko Sentral (Sec. negligence. EXCEPT: purchases of evidence of indebtedness guaranteed by the Government (Sec. LOAN FUNCTION Requirement for Grant of Loans Before granting a loan. Effects of non-compliance with the prescribed minimum ratio: 1. 1993).

pledge or assignment covers only said co-owner¶s undivided interest. Loans. c. relatives within first degree of consanguinity or affinity. and b. 341 SCRA 781). pledge or assignment covers only said coowner¶s undivided interest. Exclusions (NON-RISK LOANS): 1. of property/right/interest (mortgaged. individually and/or together with any of the following persons. (3) a bank in which a controlling proportion of the shares is owned by the same interest that owns a controlling proportion of the shares of his bank. Notes of hotjurist in foro conscientiae . Officers ± Either identified in the by-laws or are generally known as such Stockholders ± those whose stockholdings. In case of default. Who are covered (BSP Circular No. pledged. and 5. Single Borrower¶s Limit (SBL) Rules The total amount of loans extended by a bank to any person. CLASSIFIED LOANS Those that have extraordinary risks of loss in collection due to some defects such as bad debts or those under litigation. or any stockholder of a bank and related interest. Joint and Solidary Signature (JSS) Practice A common banking practice requiring as an additional security for a loan granted to a corporation the joint and Solidary signature of a major stockholder or corporate officer of the borrowing corporation (Security Bank vs. Loans secured by obligations of the Bangko Sentral or the Philippine Government. Corporation with inter-locking directors or where 20% of the capital stock is owned by the DOS and/or their spouses or relatives mentioned above. The loan or financial accommodation of the DOS. or relative mentioned above. credit accommodations and acceptances under letters of credit to the extent covered by margin deposits. Loans fully guaranteed by the government. His spouse or relative within the first degree of affinity/consanguinity or relative by legal adoption. association. partnerships of which a DOS or any of the foregoing is a general partner. 2. creditor¶s recourse is not limited to corporate properties but extends to personal assets of the surety. pledged or assigned to secure the loan or credit accommodations. Co-owner. 170): a. Reasons: a. credit accommodations and guarantees (Sec. The total amount of loans may be increased by an additional 10% of the net worth of such bank provided the additional liabilities of any borrower are adequately secured by trust receipts. assigned to secure the loans or credit accommodations.Page 6 of 26 2. singly or with that of his related interest. Loans covered by assignment of deposits maintained in the lending bank and held in the Philippines. Surety would be compelled to ensure that the loan would be used for the purpose intended. Other loans or credit accommodations which the MB may specify as non-risk items. is in excess of 5% of the capital and surplus of the lending bank or in the maximum amount permitted by law. The loan or financial accommodation is from (1) his bank or (2) a bank that is a subsidiary of a bank holding company of which both his bank and lending bank are subsidiaries. with the DOS or his spouse or relative within the first degree of consanguinity or affinity. whichever is lower. partnership. Classification of Loans UNCLASSIFIED LOANS Those that do not have a greater±than± normal risk and the borrower have apparent ability to satisfy it in full and no loss in ultimate collection is anticipated. Cuenca. Stockholders. 170): 1. the Bangko Sentral has not yet implemented such rates. 8791 provides for the rates of 20% and 10% respectively. shipping documents. 4. except when the mortgage. 35) 1. c. Directors ± Directors of the lending bank 2. except when the mortgage. (d). warehouse receipts or other similar documents transferring or securing title covering readily marketable. and Related Interests) Officers. 3. corporation or other entity shall at no time exceed 20% of the net worth of such bank. 3.A. or relative by legal adoption of a DOS. A co-owner. b. He contracts a loan or any form of financial accommodation c. Related Interest ± a. b. Requisites (BSP Circular No. or relative by legal adoption. The borrower is director. with the stockholder or the stockholder¶s spouse. and d. partnership wherein any of the foregoing is a general partner. amount to 2% or more of the total subscribed capital stock of the bank: a. b. Spouse. DOSRI Accounts (Directors. 4. or wholly or majority owned or controlled by any related entity or a group of related entities in items (b). b. The prevailing rates are 25% and 15% respectively. and (e). Limit on loans. Note: While R. officer. non-perishable goods which must be fully covered by insurance. of the property/interest/ right mortgaged.

a. 222 SCRA 24 [1993]). Central Bank. v. endorser or surety for loans from such bank to others. Savings b. Information obtained from examination is strictly confidential. Loans extended to DOSRI shall be limited to an amount equivalent to their respective unencumbered deposits and book value of their paid-in capital contribution in the bank. is required. Except: i. e. Trust account As bailee-bailor 3. As debtor-creditor a.R. Cooperative banks with regard to their cooperative shareholders. excluding the director concerned. CA. 20 SCRA 507). or in any manner be an obligor or incur any contractual liability to the bank. constituting a common fund. cited in Ranioso v. b. Rules on amount of secured loans Those secured by real estate shall not exceed 75% of the appraised value of the real estate security. 96 SCRA 96) ii. 37). BAR QUESTION: BANKS. The resolution approving the loan shall be entered in the records of the bank and transmitted to the BSP. credit accommodations. d. which makes him an officer. Money deposited is commingled with the other money. COLLATERALS 1. credit accommodations. ii. As trustee-trustor a. Demand Characteristics: i. 2000). A written approval of the majority vote of all the directors of the bank. trademarks. Contract of loan/mutuum with the depositor as creditor iii. excluding the director concerned. trade names and copyrights) shall not exceed 75% of the appraised value of the security (Sec. As lessor-lessee a. No director or officer of any bank shall. Value of collaterals The loan shall not exceed 75% of the appraised value of the real property plus 60% of the appraised value of the improvements or 75% of the appraised value of the chattel ( Secs. Explain whether the loan officer is correct. Safety deposit boxes ± the relation between a bank renting out safety deposit boxes and its customer with respect to the contents of the box is that of a bailor and bailee ± the bailment for hire and mutual benefit has been adopted in this jurisdiction. His wife applied for a loan with the said bank to finance an internet cafe. Furthermore. such dealings must be upon terms not less favorable to the bank than those offered to others (Section 1326. except with the written approval of the majority of all the directors of the bank. plus 60% of the appraised value of the insured improvements (Sec. Morfe. Notes of hotjurist in foro conscientiae . In the nature of irregular deposits (Serrano vs. Loans. Bank acquires ownership of the thing deposited and the right to use and dispose iv. 117416. DEPOSIT FUNCTION Kinds of Deposits between a Bank and its Depositor 1. Those secured by chattels and intangible properties (such as patents. The General Banking Law provides for additional restrictions to the bank before it can lend to its directors or officers.Page 7 of 26 Restrictions under the GBL and NCBA: a. directly or indirectly. f. b. Not preferred credits (Central Bank vs. CA. G. (5%) SUGGESTED ANSWER: 3. and guarantees secured by assets considered as non-risk by the Monetary Board. and stockholders is prohibited by the General Banking Law. c. Central Bank's "Manual of Regulations for Banks and Other Financial Intermediaries. In this case. officers. No waiver is required if the related interests are the borrower. 2. directly or indirectly. GBL ) B. 38). December 8. Pio is the president of Western Bank. from borrowing from the bank. 4. borrow from such bank nor shall be guarantor. Dealings of a bank with any of its DOSRI shall be upon terms not less favorable to the bank than those offered to others (ARMS LENGTH RULE). Loans. The written approval shall not be required for loans granted to officers under a fringe benefit plan approved by the Bangko Sentral. Section 36 of the General Banking Law of 2000 does not entirely prohibit directors or officers of the bank. and advances to officers in the form of fringe benefits. Time c. A violation of this provision will cause his or her position to be declared vacant and the erring director or officer subjected to the penal provisions of the New Central Bank Act. iii. RESTRICTIONS ON LOAN ACCOMMODATIONS (2006) Pio is the president of Western Bank. 37 & 38. The loan officer told her that her application will not be approved because the grant of loans to related interests of bank directors. director and stockholder of the said bank. It cannot be considered as a contract of lease because the full possession and control of the safety deposit box is not given to the renters (Sia vs. No. Waiver of secrecy of deposits of whatever nature in all banks in the Philippines by the borrower.

able to read and write c. CA. dividends. 22. July 21. March 29. NOW accounts. Deposit of check for collection b. 7192 Kinds of Deposits Note: DEMAND DEPOSITS Only a universal or commercial bank can accept or create demand deposits. (BPI v. Minors : a. savings. b.Page 8 of 26 a. 33) Banks are prohibited from issuing / accepting withdrawal slips or other similar instruments to effect withdrawals without the passbooks except for bank authorized by the BSP to adopt the no passbook withdrawal system. A bank is negligent if it allows the withdrawal without requiring the presentation of a passbook. ³And´ account  Co-ownership  The signatures of both co-depositors are required for withdrawals. However. 1998 ed. (Sec. Deposit for specific purpose c. not disqualified by any incapacity d.A. Thrift Banks Act of 1995)  Married Women are allowed to open bank accounts without assistance of their husbands (RA No. at least seven years of age b. A bank other than a universal bank or commercial bank CANNOT accept demand deposit SAVINGS ACCOUNT Evidenced passbook. 5. Drawings against uncollected deposits (uncleared checks) are generally prohibited. 1990) Temporary overdrawing against current accounts shall not be allowed unless caused by normal bank charges and other fees incidental to handling such accounts. Deposit for safekeeping NOW ACCOUNTS (Negotiable Order of Withdrawal) Interest bearing deposit accounts that combine the payable on demand feature of checks and investment feature of savings account.) 1. then such payment shall be made to the guardian. 251. Individual Joint a. 2. No 9160 as amended by RA 9194. by a   Demand. ( R. Types of deposit accounts (Handbook on Bank Deposits. Deposit strictly for safekeeping and for specific purposes As agent-principal: a. CA)  Anonymous accounts are prohibited. 2000) exception: Foreign currency deposits may be a ³numbered account´. ³And/or´ account Notes of hotjurist in foro conscientiae . (Sec.. A. Viray. the law requires that the necessary measures are undertaken by the bank to record and establish the true identity of the depositor.  Joint account may be the subject of a survivorship agreement whereby the co-depositor agree to permit 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 ( Vitug vs. TIME DEPOSITS Depositors: 1. or interest to the minor of whom he is the guardian. BSP Circular No. time deposits and deposit substitutes shall not be subject to interest ceilings.1 PD No. it should only be savings or time deposits An account with fixed term Note: Parents may deposit for their minor children or wards (Sec.734)  If the guardian shall give notice in writing to any thrift bank not to make payments of deposits. A bank other than a universal or commercial bank must seek approval of Monetary Board before accepting or creating demand deposits.

Failure by the bank to pay the depositor is failure to pay a simple loan and not a breach of trust. through the issuance. 55). Unauthorized advertisement representation (Sec. if at the time of declaration: a. 2003). People¶s Bank and Trust Co. CA. 3. March 5. or or business  To employ casual or non-regular personnel or too lengthy probationary personnel in the conduct of its business involving bank deposits (Sec. 546 [1942]). beyond those required of non-bank debtors. RA 7653). The law simply imposes on the bank a higher standard of integrity and performance in complying with its obligations under the contract of simple loan. it does not comply with the liquidity standards/ratios prescribed by the Bangko Sentral for purposes of determining funds available for dividend declaration. The account may be deemed a survivorship agreement depending on the intention of the parties. ON DIRECTORS.R. 53) PROHIBITIONS A. DEPOSIT SUBSTITUTE Guaranteed by certificates and other instruments. 2. whether express or implied. negligence. 1993). CA.). (Handbook on Bank Deposits. 519. Publication of capital stock (Sec. 6. Ibid. consent and signature of the other. other than deposits. PNB vs. To directly act as insurer (Sec. No. Any stipulation exempting the depositary from any liability arising from loss on account of fraud. Make false entries in any bank report or statement or participate in any fraudulent transaction. And upon the death of one. Notes of hotjurist in foro conscientiae . that of a good father of the family is to be observed. or to defeat the legitime of a forced heir (Rivera vs. or in any manner suspends the payment of its deposit liabilities continuously for more than 30 days. b.) Note: The bank shall act as depositary or as an agent shall keep the funds. OFFICERS. under a similar contract of simple loan (CBTC vs.. OR AGENTS OF BANKS: 1. 53). 62). negligence would be void for being contrary to public policy (CA-Agro Dev¶t vs. The fiduciary nature of banking requires banks to assume a degree of diligence higher than that of a good father of a family (CBTC vs. A. Viray. its clearing account with the Bangko Sentral is overdrawn. Suspension of Payment on its Deposit Liabilities B.Page 9 of 26  Either one of the co-depositors may deposit and withdraw from the account without the knowledge. the Monetary Board may summarily and without need for prior hearing close such banking institution and place it under receivership of the Philippine Deposit Insurance Corporation (Sec. endorsement. for the purpose of re-lending or purchasing of receivables and other obligations (Sec. DEPOSIT No security given to guarantee repayment. 5. In case a bank or quasi-bank notifies the Bangko Sentral or publicly announces a bank holiday. G. Rationale: To prevent violation of Bank Secrecy Law. 56).  Deposit substitutes An alternative form of obtaining funds from the public. 95. 4. or It has committed a major violation as may be determined by the Bangko Sentral (Sec. aleatory contract supported by a lawful consideration which is valid unless when made as a mere cloak to hide an inofficious donation. it is deficient in the required liquidity floor for government deposits for 5 or more consecutive days. This fiduciary relationship means that the bank¶s obligation to observe ³high standards of integrity and performance´ is deemed written into every deposit agreement between a bank and its depositor. 219 SCRA 426. c. ON BANKS: 1. 62 Phil. 1998 ed. or acceptance of debt instruments for the borrower¶s own account.  d. 138569. CA. To conduct business in an unsafe or unsound manner (Sec. 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. PNB. securities and other effects which it receives duly separated from its own assets and liabilities (Sec. September 11. the depositor relies on the stability and reputation of the bank. 57).  A bank has the right to set-off the deposits in its hands for the payment of any outstanding indebtedness to it on the part of the depositor (Gullas vs. EMPLOYEES. in the absence of any stipulation prescribing the degree of diligence required.  The depositary would be liable if in performing its obligation it is found guilty of fraud. to transfer property in fraud of creditors. 73 Phil. 272 SCRA 291). 54) For banks or quasi-banks to declare dividends. CA. the survivor may withdraw the entire balance on deposit. 64).

i. or 1. except for certain functions affecting the ability of the bank to ensure the fit of technology services deployed to meet its strategic and business objectives and comply with pertinent laws and regulations. Fraudulently overvalue property offered as security for a loan from the bank. Furnish false or make misrepresentations or suppression of material facts for the purpose of obtaining. h.  OWNERSHIP OF STOCKS OF A DOMESTIC BANK Filipino In case of a Filipino individual or a domestic nonbank corporation. Vehicle service contracts o. Clearing and processing of checks not included in the Philippine Clearing House System. ON EXAMINERS. j. quasi-banks. which is not otherwise prohibited by law. investors. Offer any director. the bank has to do it by itself. 55 or aid in the commission of the same. ON BORROWERS: 1. g. f. a bank may outsource. Accept gifts or any other form of remuneration in connection with the approval of a loan or other credit accommodation from said bank. Transfer agent services for debt and equity services. a. advantage or preference to the bank or any party in the discharge by the director or officer of his duties and responsibilities through manifest partiality. The act or omission has caused any undue injury.  Notes of hotjurist in foro conscientiae . k. Property appraisal. storage. Rationale: To prevent violation of Bank Secrecy Law (Handbook on Bank Deposits. may be deemed as conducting business in an unsafe or unsound manner. officer. Foreign Foreign individuals and non-bank corporations may own or control up to an aggregate of 40% of the voting stock of a domestic bank. courier and postal services. 2. import and other trading transactions. All information technology systems and processes. upon prior approval of the Monetary Board the following functions: D. 4. b. creditors.Page 10 of 26 2. Property management services. 3.  However. employee or agent of a bank any gift. or any other form of compensation in order to influence such persons into approving a loan or other credit accommodation application. fee. 3. and stockholders or to the BSP or to the public in general. whether or not the director or officer profited or will profit thereby. Credit card services. Printing of bank loan statements and other non-deposit records. corporations. 56) In determining whether a particular act or omission. The act or omission involves entering into any contract or transaction manifestly and grossly disadvantageous to the bank. m. ASSIST OR RENDER TECHNICAL ASSISTANCE TO ANY BANK: Commit any of the acts enumerated in Sec. n. Janitorial services. Without order of a court of component jurisdiction. rule or regulation affecting banks. or any other entity. or increasing a loan or extending the period thereof. 5. 3. EXAMINE. or abnormal risk to the institution¶s depositors. or has given any unwarranted benefits. The act or omission has resulted or may result in material loss or damage.). Security guard services. quasi-bank or trust entity. Other services as determined by the Monetary Board. e. the MB shall consider any of the following circumstances: 1. each may own up to 40% of the outstanding voting stock of a local bank. Messenger. Data imaging.  The making of false reports or misrepresentations or suppression of material facts by personnel of the BSP shall constitute fraud and shall be subject to administrative and criminal sanctions. CONDUCTING BUSINESS IN AN UNSAFE OR UNSOUND MANNER (SEC. stability. or Outsource inherent banking functions ± a bank cannot engage the services of another entity to receive deposits on its behalf. liquidity or solvency of the institution. 4. disclose to any unauthorized person any information relative to the funds or properties in the custody of the bank belonging to private individuals. evident bad faith or gross inexcusable negligence. l. C. commission. 1998 ed. bank forms and promotional materials. A. Processing of export. Viray.. 4. Credit investigation and collection. or trust entities. renewing. Attempt to defraud the said bank in the event of a court action to recover a loan or other credit accommodation. Printing of bank statements. The act or omission has resulted or may result in material loss or damage. BSP OR GOVERNMENT OFFICERS AND EMPLOYEES ASSIGNED TO SUPERVISE. Overvalue or aid in overvaluing any security for the purpose of influencing in any way the actions of the bank or any bank. 2. d. c. or abnormal risk or danger to the safety. 2. p. and other related systems.

Entry: Governed by the provisions of the Foreign Bank Liberalization Act and the Offshore Banking System Decree (Sec. By investing in up to 60% of the voting stock of a new banking subsidiary incorporated under laws of Philippines. 72) Revocation of license to do business in the Philippines: The Monetary Board may revoke such license on the grounds that the foreign bank is insolvent or in imminent danger thereof or that its continuance in business will involve probable loss to those transacting business with it (Sec. 72 78) As mortgaged to it in good faith by way of security for debts. Foreign bank or Philippine corporation may own up to 60% of the voting stock of only one domestic bank or new banking subsidiary (Sec. By establishing branches with full banking authority. Also. foreign bank may avail itself of only one mode of entry. (Sec 13. irrespective of the place of incorporation (Sec. GBL)  Unlike the former law. 2). and b. to S TOCKHOLDINGS OF F AMILY GROUPS OR R ELATED I NTEREST  The law does not prohibit ownership of the stock by members of the same family or related interest. 11). Thus. 3. 2. the equity investment of a bank in another corporation engaged primarily in real estate shall be considered as part of the bank's total investment in real estate. 2. If individuals: by the citizenship of the individuals b. GBL). By acquiring. (Sec 12. For foreign bank branches ± not less than the US$ equivalent of P210M  Amendments introduced by GBL 2000 1. NO. purchasing or owning up 60% of the voting stock of an existing bank. Within seven years from effectivity of the GBL (June 13. However. 2. FOREIGN BANKS (SECS. EXCEPTIONS: 1. banks must maintain liquidity at all times to enable it to perform its functions. The total investment in such real estate and improvements shall not exceed 50% of the combined capital accounts. However this should not be without prejudice to the 40% restriction imposed by Sec 11of the GBL. MINIMUM CAPITALIZATION:  OWNERSHIP OF REAL PROPERTY GENERAL RULE: A bank cannot acquire and own real property. 73. banks must as much as possible retain only assets that are easily marketable. and such as it shall purchase at forced sales or to Notes of hotjurist in foro conscientiae . 2. Entries under the second and third modes are restricted to banks which are among the top 150 foreign banks in the world or top 5 banks in their country of origin. For locally incorporated subsidiaries ± equal to that of domestic banks of the same category 2. 11. the law provides that stockholdings of individuals related to each other within the 4th degree of consanguinity or affinity. Other foreign individuals and non-bank corporations may own up to 40% of the voting stock of a domestic bank. GBL)  Two or more corporations owned and controlled by the same family group or same group of person shall be considered related interest and must be fully disclosed in all transaction by such corporations or related group of person with the bank. GBL). the GBL does NOT impose a limit on the number of shares that can be owned by the same family or related interest. legitimate or common law. 1. provided: a. the nationality of the controlling shareholders of the non-bank corporations will be traced to determine the foreign ownership of the domestic bank (Sec. provided: a. foreign banks may be allowed to own up to 100% equity of only one domestic bank as a mode of entry if authorized by the Monetary Board (Sec. unless otherwise provided by the Monetary Board (Sec. ACT LIBERALIZING ENTRY OF FOREIGN BANKS (R.A. 51).Page 11 of 26  The percentage of foreign-owned voting stocks in a bank shall be determined: (GRANDFATHER RULE) a. If corporations: by the citizenship of the controlling stockholders of the corporation. 7721) The Monetary Board authorizes foreign banks to operate through any of the following modes of entry: 1. conveyed to it in satisfaction of a debt previously contracted in the course of its dealings. As shall be necessary for its own use in the conduct of its business. and b. 78). 1. 2000). shall be considered family groups or related interest and must be fully disclosed in all transaction by such individual with the bank. Rationale: Banks are not engaged in the business of acquiring and possessing real property.

shall.Page 12 of 26 secure debts. pass upon and review the qualifications and disqualifications of individuals elected or appointed as bank directors or officers and disqualify those found unfit (Sec. CA. Prohibition on Public Officials GENERAL RULE: No appointive or elective official. January 15. As otherwise provided under existing laws. the Monetary Board shall prescribe. however. the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other person. p. benefit. 47). AM No. No. Mortgagor is a juridical person ± At any time before the registration of the certificate of foreclosure sale which in no case shall be more than 3 months after foreclosure. 19). 16) Independent Director A person other than an officer or employee of the bank. even though no benefit may accrue to the bank therefrom (10 Am Jur 2d. To maintain the quality of bank management and afford better protection to depositors and the public. Accordingly. in general. As otherwise provided under Sec. Union Bank vs. 127469. 2004). converting it to conventional redemption or by estoppel if the extension was unilaterally made. nor will it be permitted to shirk from its responsibility for such frauds. A bank may be bound by an agreement providing for a longer redemption period (Ibaan Rural Bank TRUST OPERATIONS (SECS.  To enjoin or restrain the conduct of foreclosure proceedings. provided that the bank may after said period continue to hold the property for its own use. 99-10-05) 2.R. whether full-time or part-time. subject to (1) (Sec. Where such service is incidental to financial assistance provided by the government-owned or controlled corporation to the bank 3. a banking corporation is liable to innocent third persons where the representation is made in the course of its business by an agent acting within the general scope of his authority even though. vs. thus. for his own ultimate benefit (Philippine Banking Corp. Redemption price: Amount due under the mortgage deed + interest + all the cost and expenses incurred by the bank or institution from the sale and custody of the property less the derived income (Sec 78. GR 134068. CA. 114). 79)  Notes of hotjurist in foro conscientiae . G. Mortgagor is a natural person ± Within one year after the registration of sale with the Register of Deeds (Sec.  A bank holding out its officers and agents as worthy of confidence will not be permitted to profit by the frauds they may thus be enabled to perpetrate in the apparent scope of their employment. provided. 1(3) SC Cir. 321 SCRA 83). RULES ON FORECLOSURE OF A REAL ESTATE MORTGAGE BY A MORTGAGEE-BANK Application: Judicial or extrajudicial foreclosure JUDICIAL EXTRAJUDICIAL Fit and Proper Rule DIRECTORS & OFFICERS Right of redemption Within 1 year from registration of the foreclosure sale (exception to Rule 68) 1. serve as an officer of any private bank (Sec. 2001) Right of purchaser to possess property: Immediately after the date of the confirmation of the auction sale. 79-93)  Only a stock corporation or a person duly authorized by the Monetary Board shall act as a trustee or administer any trust or hold property in trust or on deposit for the use. vs. whichever is earlier. that property acquired under such circumstances shall be disposed of by the bank within a period of 5 years. CA and Marcos. June 25. 5 of the Rural Bank Act 2. its subsidiaries or affiliates or related interests. the petitioner must file a bond conditioned that he will pay all the damages which the bank may suffer by the injunction (Sec. 52). at the same time. or behalf of others (Sec. EXCEPTIONS: 1. in the particular case.

banking. or depositary of the estate of any minor or incompetent person. Suspension or removal of the director or officer 2. Establish and manage common trust funds (Sec. administrator. benefit.Page 13 of 26 4. 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 of the trust prior to the transaction (Sec. 4. or when there is no will 5. To promote and maintain monetary stability and the convertibility of the peso. banking and credit. including savings and loan associations (Busuego vs. Trust Business. with the will annexed. Act as trustee on any mortgage or bond issued by any municipality. No. and similar institutions (Sec. directors.A. assign or lend money or property to. receiver. Dissolution of the corporation by quo warranto proceedings THE NEW CENTRAL BANK ACT (NCBA) Powers of trust entities: 1. stockholders or employees of the trust entity. especially where the PCHC does not operate (Sec. and profits thereof 6. 3) 2. corporation or body politic and to accept and execute any trust consistent with law 2. management and administration of any estate. purchase debt from instruments of. including all other funds. Notes of hotjurist in foro conscientiae . As provided by specific provisions 2. 94. Act as administrator of the estate of any deceased person. GBL). including relatives within the 1st degree of consanguinity or affinity. 87.any activity resulting from a trustortrustee relationship involving the appointment of a trustee by a trustor for the administration. advantage of trustor or others called beneficiaries. purchase or acquire property from. real or personal. Act as the executor of any will when it is named the executor thereof 4. holding. and the rents. 3. banking and credit system of the country and is granted the power of supervision and examination over bank and non-bank financial institutions performing quasi-banking functions. it is the government agency charged with the responsibility of administering the monetary. any of the departments. 66) 1. No trust entity shall. GBL). 80. receiver or depositary shall be kept separate and distinct from the general business. 102) Banker of the government ± the BSP shall be the official depository of the Government and shall PENALTIES FOR VIOLATION OF THE GBL (SEC. Issuer of currency (Sec. 83) BANGKO SENTRAL NG PILIPINAS (BSP) The state¶s central monetary authority. properties. 7653) Purpose: To maintain a central monetary authority that shall function and operate as an independent and accountable body in the discharge of its responsibilities concerning money. officers. R ESPONSIBILITIES : 1. 2. properties or securities received by any trust entity as executor. P RIMARY OBJECTIVES : 1. 103) Clearing channel or house. of such directors. To maintain price stability conducive to a balanced and sustainable growth of the economy. for account of the trustor or the beneficiary of the trust. and as receiver and depositary of any money paid into court by parties to any legal proceedings (R. or the related interests. 3. The trust business and all funds. issues. Accept and execute any trust for the holding. P OWERS / FUNCTIONS : 1. Prohibitions: 1. trustee. trustee. management of funds and/or properties of the trustor by the trustee for the use. Act under the order or appointment of any court as guardian. and assets. and credit To supervise bank operations To regulate the operations of finance companies and non-bank financial institutions performing quasi-banking functions. officers and stockholders. 151 SCRA 376 [1987]). CA. transfer. To provide policy directions in the areas of money. of such trust entity (Sec. 49-60) Custodian of reserves (Secs. guardian. 64-66. Sections 34-37 of RA 7653 (by excluding the bank from clearing) 3. or sell. 3. 2.

of unquestionable integrity. this power may not be restrained by a writ of injunction unless there is convincing proof that the action of the BSP is plainly arbitrary (Sec. 30) c. and conduct periodic or special examinations of. the President may contract or guarantee foreign loans but with the prior concurrence of the Monetary Board. cannot be connected directly with any multilateral banking or financial institution or has a substantial interest in any private bank in the Philippines. officer. MONETARY BOARD (MB) The body by which the powers and functions of the Bangko Sentral are exercised (Sec. remunerated or ad honorem. 81-89. whether public or private. Financial advisor of the government (Secs. by designation of the President.16. Accordingly. extending to enterprises wholly or majority-owned or controlled by the bank (Sec. Source of credit (Secs.Page 14 of 26 represent it in all monetary fund dealings (Secs. quasi-bank or any other institution which is subject to supervision or examination by the No restraining order or injunction shall be issued by the court enjoining the Bangko Sentral from examining any institution subject to supervision or examination by the Bangko Sentral. in social and The BSP shall have supervision over. RA 8791). 8. 3. those coming from the private sector shall not hold any other public office or public employment during their tenure (Sec. D ISQUALIFICATIONS AND I NHIBITION ON GOVERNOR AND B OARD M EMBERS : NO RESTRAINING ORDER AGAINST BSP 1. within one (1) year prior to his appointment (Sec. 123124) ± Under Article VII. 9). Subsidiary ± a corporation more than 50% of the voting stock of which is owned by a bank or quasi-bank Affiliate ± a corporation the voting stock of which.  S UPERVISION AND E XAMINATION OF B ANKS Q UALIFICATIONS OF MEMBERS OF THE MONETARY B OARD : 1. is owned by a bank or quasi-bank or which is related or linked to such institution or intermediary through common stockholders or other factors determined by the Monetary Board. officials and employees of the BSP in the performance of their functions is extraordinary diligence (Sec. consultant. in case any member of the Monetary Board with personal or pecuniary interest in any matter in the agenda of the Monetary Board shall disclose his interest to the Board and shall retire from the meeting when the matter is taken up (Sec. 25) ± shall include the power to: a. 9). disqualified from being a director. civic. unless there is convincing proof that the action of the Bangko Sentral is plainly arbitrary Notes of hotjurist in foro conscientiae . must be natural-born citizens of the Philippines. 7. 2. 3. 20 of the 1987 Constitution. C OMPOSITION : Seven members consisting of: 1. they may not accept any other employment. 3. cannot be employed in any such institution within two (2) years after the expiration of his term except when he serves as an official representative of the Philippine Government to such institution (Sec. with the exception of positions in eleemosynary. Initiate criminal prosecution of erring officers of banks Government agent (Secs. banking institutions and quasi-banks. the Governor or the full-time member is tasked to represent the interest of the Government or other government agencies in matters connected with or affecting the economy or the financial system of the country (Sec. agent or stockholder of any bank. all of whom shall serve full-time. 4. NCBA). 5. 20). 6. 110. 25) b. 4. 2. 9). Place a bank under receivership or liquidation (Sec. cultural or religious organizations or whenever. 7. Sec. lawyer. 109) Supervisor of the banking system (Sec. 61-63. in which case such member shall resign from.116) 5. 14). and with recognized competence economic disciplines. 6. to the extent of 50% or less. and divest himself of any and all interests in such institution before assumption of office (Sec. 2. of good moral character. employee. Chairman: Governor of the BSP A member of the cabinet to be designated by the President of the Philippines Five (5) members who shall come from the private sector. with the exception of the Governor who should at least be 40 years of age. 117-122) Bangko Sentral. at least 35 years of age. the Governor of the Bangko Sentral and the fulltime members of the Board shall limit their professional activities to those pertaining directly to their positions with the Bangko Sentral.6). including their subsidiaries and affiliates engaged in allied activities. Examine. Note: The degree of diligence required of the members of the MB. of known probity and patriotism. 9).

or settled liability to the BSP To do and perform such other necessary powers R EFUSAL TO M AKE R EPORTS E XAMINATION . 27) 2. (Sec. director or officerin-charge of any institution subject to the supervision or examination by the Bangko Sentral who. 2. DIRECTORS. void. consultant or stockholder. voidable.  A conservator appointed by the BSP may take over without the need of first declaring the bank insolvent. directly or indirectly. liabilities.The willful making of a false or misleading statement on a material fact to the Monetary Board or to the examiners of the Bangko Sentral shall be punished. 34) False Statement. director. . 4. Not a precondition to the designation of a receiver Powers of conservator: 1. 4. 35) PROHIBITIONS ON BANK OFFICERS. CA. present or pecuniary or material benefit for himself or another. condone. 5. being required in writing by the Monetary Board or by the head of the supervising and examining department willfully refuses to file the required report or permit any lawful examination into the affairs of such institution shall be punished under the Act. 2. The power to revoke contracts only covers those that are deemed defective ± i. 6. in an amount to be fixed by the court. To adopt. being an officer. But if the continuance in business of the bank would involve probable loss to its depositors or creditors. 3. 4. 7. of any institution subject to supervision or examination by the Bangko Sentral. Collect all monies and debts due said bank. His authority would be only to bring actions to assail the same. 252 SCRA 259). reorganization of management and the restoration of viability. CORPORATE POWERS OF THE BSP 1. otherwise they would infringe the nonimpairment clause of the Constitution. Int¶l Bank vs. employee. proceedings for receivership and liquidation shall be pursued (Sec.. except under orders of the court. When the MB is satisfied that the institution can continue to operate on its own and the conservatorship is no longer necessary. To lease. 3. alter and use a corporate seal which shall be judicially noticed To enter into contracts RECEIVERSHIP OF A BANK OR Notes of hotjurist in foro conscientiae . Bank/quasi-bank retains juridical personality 2. revealing in any manner. To take charge of the assets.Page 15 of 26 and made in bad faith and the petitioner or plaintiff files with the clerk or judge of the court in which the action is pending a bond executed in favor of the Bangko Sentral. owner. manager. (Sec. .e. The conservator¶s power is not unilateral and he cannot simply repudiate valid obligations of the bank. the Congress or any government office or agency authorized by law. directly or indirectly requesting or receiving any gift. AGENTS Personnel of the Bangko Sentral are hereby prohibited from: 1. and Exercise all powers necessary to restore its viability. information relating to the condition or business of any institution. The powers must be related to preservation of assets. from any institution subject to supervision or examination by the Bangko Sentral. unenforceable or rescissible (First Phil. fully disclosed to the Monetary Board. LAWYERS. borrowing from any institution subject to supervision or examination by the Bangko Sentral shall be prohibited unless said borrowings are adequately secured.  3. 29). and except as otherwise provided in this Act. or release any claim of. lawyer or agent. own. (Sec. with the power to overrule or rebuke the actions of the previous management and board of directors of the bank or quasi-bank. 2. and sell property To sue and be sued To acquire and hold such assets and incur such liabilities in connection with its operations or as are essential to the proper conduct of operation To compromise. and the management thereof. Duration: Not to exceed 1 year Effects: 1.Any officer. agent. Reorganize the management. Termination: 1. Exception: non-stock savings and loan associations and provident funds organized exclusively for employees of the Bangko Sentral. Such power to revoke cannot extend to post-facto repudiation of perfected transactions. OR PERMIT CONSERVATORSHIP OF A BANK OR QUASI-BANK Ground: State of continuing inability or unwillingness to maintain a condition of liquidity deemed adequate to protect the interest of depositors and creditors.

forbidding it from doing business in the Philippines. involving acts or transactions which amount to fraud or a dissipation of the assets of the institution (Sec. Grounds: Under NCBA 1. 2. This ³close now and hear later´ scheme is grounded on practical and legal consideration to prevent the unwarranted dissipation of the bank¶s asset and as a valid exercise of the police power to protect the depositors. placing it under receivership and appointing Ramon V. Persistence in conducting business in an unsafe or unsound manner. the appointment of a receiver operates to suspend the authority of the bank and of its directors and officers over its property and effects (Villanueva vs. the legislature could not have intended or authorize ³no prior notice and hearing´ in the closure of the bank and at the same time allow the suit to annul it on the basis of the absence thereof.R. 30. it is unmistakable that the assailed actions should precede the filing of the case. CA. GBL) Facts: Based on the financial reports submitted to the Central Bank. Thus. or 4. (Sec. Willful violation of a cease and desist order that has become final. 53. 220 SCRA 536). 220 SCRA 536 2. 53. stockholders and the general public. Inability to pay liabilities as they become due in the ordinary course of business. No. Insufficiency of realizable assets to meet its liabilities. Banks ± PDIC 2. Taiaoqi as receiver. 29 of the Central Bank Act does not contemplate prior notice and hearing before a bank is placed under receivership. Court of Appeals. GBL)  review. but not including inability to pay those caused by extraordinary demands induced by financial panic in the banking community. 76118. CLOSE NOW. Plainly. HEAR LATER SCHEME  Sec. CASE DIGEST Central Bank of the Philippines vs. Central Bank vs. Inability to continue business without involving probable losses to its depositors or creditors. Quasi-banks ± Any person competence in banking or finance of recognized Functions: 1. Under GBL 1. Determination ASAP but not later than 90 days. the Monetary Board issued a Resolution ordering the closure of TSB.  Note the distinctions between rehabilitation and liquidation. GBL) 3. creditors. CA. March 30. Ruling: Section 29 of the Central Bank Act does not contemplate prior notice and hearing before a bank may be declared to stop operations and placed under receivership. which states that the Financial condition of The Triumph Savings Bank (TSB) is one of insolvency and its continuance in the business world involve probable loss to its depositors and creditors. NCBA. It is enough that such action is made the subject of a subsequent judicial 1. G. 56. liquidation or conservatorship. whether the institution should undergo rehabilitation or liquidation. creditors. The TSB filed a complaint assailing the resolution on the ground of lack of prior notice and hearing 3. When it provides for the filing of the case within 10 days after the receiver takes charge of the assets of the bank. General powers of a receiver 3. 244 SCRA 395 [1995]). stockholders and general public (Central Bank vs. Receiver: 1. 1993). Reason: Stockholders owning a majority of the shares are expected to be more objective in determining whether the resolution is plainly arbitrary and issued in bad faith (Sec. 30) Issue: Whether or not a Monetary Board Resolution be annulled on the ground of lack of prior notice and hearing. The purpose of the scheme is to protect the depositors. Only stockholders representing the majority of the capital stock of a bank have the personality to file a petition for certiorari to be filed within 10 days from receipt by the board of directors of the institution of the order directing receivership.Page 16 of 26 QUASI-BANK/CLOSURE Receivership is equivalent to an injunction to restrain the bank in any way. MANDATORY REQUIREMENTS FOR BANK CLOSURE Examination by the appropriate BSP department as to the condition of the bank Notes of hotjurist in foro conscientiae . Suspension of payment of deposit liabilities continuously for more than 30 days (Sec. Notification to the BSP or public announcement of a bank holiday (Sec. CA. Immediate gathering and taking charge of all the assets and liabilities of the institution and administering them for the benefit of creditors 2.

00 (Circular No.Page 17 of 26 2. 2. Regular courts have no jurisdiction over actions filed by claimants against an insolvent bank (Ong vs CA. with the proper RTC. both public and private. 5. and if public interest requires. 2. Notes and coins called in for replacement shall remain legal tender for a period of one year from the date of call. Receiver shall file ex parte. it closes the rediscount window or charges very high interest rates for rediscounted notes 4. CFI. the MB shall determine and confirm if the bank is insolvent. if the volume of money is high. both public and private (Sec. 60). 2. MONETARY STABILIZATION EFFECTS OF APPOINTMENT OF RECEIVER/ LIQUIDATION 1. 90) a. If BSP wants to decrease money supply. a petition for assistance in the liquidation of the institution pursuant to a liquidation plan adopted by the PDIC for general application to all closed banks. 2. He shall convert the assets of the institution to money for the purpose of paying the debts of the institution (Sec. Procedure: 1. it buys government securities b. 549 [1928]) Deposits do not become preferred credits (CB vs. the notes and coins which have not been exchanged shall cease to be a liability of BSP and shall be demonetized (Sec. Reserve Requirements (Sec. 3. 4. CA. vs. BSP will raise reserve requirement Notes of hotjurist in foro conscientiae . 1. it shall appoint a receiver of the assets and liabilities of the bank (Banco Filipino vs. After the expiration of this latter period. shall order the liquidation of the bank. MB. levy.  3. attachment or execution (Sec. 30). they shall cease to be legal tender during the following year or for such longer period as MB may determine. LEGAL TENDER All notes and coins issued by the Bangko Sentral are fully guaranteed by the Republic and shall be legal tender in the Philippines for all debts. Suspension of operation 2. If BSP wants to increase money supply. In case of quasi-banks.where a certain percentage of the deposit is set aside and cannot be lent out a. 1. the liquidation plan shall be adopted by the Monetary Board.00 25 centavo coin or less: In amounts not exceeding P100. If BSP wants to decrease money supply. 3. it sells government securities 3 IMPORTANT TOOLS TO ACHIEVE PRICE STABILITY 1. a check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited to his account (Sec. 1-Peso. 94) . 2. Open Market Operations (Sec. 52) Legal tender power of coins 3.  Checks representing demand deposits do not have legal tender power and their acceptance in the payment of debts. 30). Morfe. 3. Bank is not liable to pay interest on deposits during the period of suspension of operation (Overseas Bank vs. Within 60 days. it opens the rediscount window by reducing interest on loans b. The assets under receivership or liquidation shall be deemed in custodia legis in the hands of the receiver and shall be exempt from garnishment. Notes for any series or denomination ± More than 5 years old Coins ± More than 10 years old Rules: LIQUIDATION Grounds: 1.000. 204 SCRA 519 [1991]). If BSP wants to increase money supply. Examination shows that the condition of the bank is one of insolvency Director shall inform the MB in writing of such fact If the MB shall find the statement of the department to be true. After that period. 5-Peso and 10-Peso coins: In amounts not exceeding P1. 113 SCRA 778 [1982]) The corporation retains its legal personality (Teal Motor Co. A determination by the MB that the bank cannot be rehabilitated. 51 Phil. 57). However. 2006) BSP Authority to Replace 1.  Payment shall be in accordance with the rules on concurrence and preference of credits. is at the option of the creditor. 83) (Rediscounting) a. Loans to Banks (Sec. 537. 253 SCRA 105). 20 SCRA 507 [1967]) 2. 5. The condition of the bank is one of insolvency or that its continuance would involve probable loss to its depositors and creditors.

reserve requirement is reduced. 3019. Since the required reserves are imposed primarily to control the volume of money. In cases of impeachment. A taxpayer who has filed an application for compromise of his tax liability by reason of financial incapacity to pay his tax liability. The required reserves of each bank shall be proportional to the volume of its deposit liabilities. From other laws 1. MO. Notes of hotjurist in foro conscientiae . EXCEPTIONS: A. GENERAL RULE: The deposits covered by law are considered as of an absolutely confidential nature and may not be examined. to satisfy the judgment in favor of his creditor. either directly or indirectly. It was held in China Banking Corporation v. Anti-Graft and Corrupt Practices Act cases (R. if the volume of money is low. 4. He must file a written waiver of his privilege under RA 1405 or other general or special laws (Sec. PROHIBITIONS ON THE BSP 1. (Sec. including investments in bonds issued by the Government of the Philippines. or any other order or process of any court or agency (Sec. 6[f]. or office. In cases where the money deposited or invested is the subject matter of the litigation. 4. It shall not acquire shares of any kind or accept them as collateral. added by analogy in PNB vs. 2) Rules: 1. inquired or looked into by any person. its political subdivisions and its instrumentalities. with the banks in the Philippines including investments in bonds issued by the Government. execution process. when it has been 2. (5%) Is CDC's complaint meritorious or not? Reason briefly. Garnishment (2004) CDC maintained a savings account with CBank. Examination and inquiry or looking into all deposits. A decedent to determine his gross estate. SECRECY OF BANK DEPOSITS LAW (R. Deposits maintained with the Bangko Sentral as part of the reserve requirements shall be exempt from attachment. Upon service of the notice of garnishment on the bank where the defendant deposited funds. 3. and shall not participate in the ownership or management of any enterprise. B. 2. Gancayco. 1405 Upon written permission of the depositor. 103). NIRC .A. No. Ortega. 128). To encourage people to deposit in banks 2. 2.000 of his account. Inquiry or examination by the Anti-Money Laundering Council (AMLC) of any particular deposit or investment with any banking institution or non-bank financial institution upon order of any competent court in cases of violation of the AntiMoney Laundering Law. To discourage private hoarding so that banks may lend such funds and assist in the economic development PROHIBITED ACTS: 1. the Sheriff garnished P50. F ROM R. On orders of the MM Regional Trial Court. 2. Execution is the goal of litigation as it is its fruit. 49 SCRA 355 (1973) that peso deposits may be garnished and the depositary bank can comply with the order of garnishment without violating the Law on the Secrecy of Bank Deposits. 15 SCRA 91 [1965]). such funds become part of the subject matter of litigation. CDC's complaint is not meritorious. SUGGESTED ANSWER No. Upon order of a competent court in cases of bribery or dereliction of duty of public officials. N O . b. the Bangko Sentral shall not pay interests thereon (Sec.Inquiry by the Commissioner of Internal Revenue into bank deposits of: a.A. Any disclosure by any official or employee of any bank to any unauthorized person of any information concerning the said deposits. 3. CDC complained that the garnishment violated the Law on the Secrecy of Bank Deposits because the existence of his savings account was disclosed to the public. Garnishment is part of the Coverage: All deposits of whatever nature with banks or banking institutions in the Philippines. BAR QUESTION: Banks: Secrecy of Bank Deposits.Page 18 of 26 b. of whatever nature. No increase of more than 4% point within 30day period. 94). 1. governmental bureau.A. No. and It shall not engage in development banking and financing (Sec. 3. NIRC). 2. 1405) Purposes: 1. garnishment.

including the statutory exemptions provided therein. Kidnapping for ransom under Art. 11. ascendants. Periodic and special examinations by the BSP (Sec.A.A. the corporation also submitted in evidence records of the officers· U. General Banking Law of 2000 (R. D. No.  Illegally acquired property extends to cases where property is concealed by being held by or recorded in the name of respondent¶s spouse. The officers alleged that their bank deposits were illegally disclosed for want of a court order.A. c. Outsourcing of inherent bank functions Money-market placement is not covered by RA 1405 because it is not deposited in the bank. It was not the intention of the legislature to place bank deposits beyond the reach of execution to satisfy a final judgment. 128996. 9160)  Provides for another exception to confidentiality.A. otherwise known as the Foreign Currency Deposit Act of the Philippines. Dollar deposits in several banks overseas . Garnishment of bank deposit of judgment debtor does not violate RA 1405.R. Its purpose is merely to secure information as to the name of the depositor and whether or not the defendant had a deposit in said bank. 2002) 2. b. 49 SCRA 355). garnishment. No.A. No. including its punitive provisions. OTHER LAWS RELATING TO SECRECY OF BANK DEPOSITS A. 267 RPC. relatives. New Central Bank Act (R. DOSRI loans 2. February 15. refers to foreign currency deposits accounts constituted within the Philippines. destructive arson and murder under RPC. No. 1405). and that they were grossly negligent in handling its affairs. provided that with respect to bank deposits. disclose to any unauthorized person any information relative to the funds or properties in the custody of the bank belonging to private individuals. The corporation claimed that the said officers were guilty of advancing their personal interests to the prejudice of the corporation.A. corporations. 6426. (Intengan v. but the law contains only one ground authorizing examination: upon written permission of the depositor. No bank shall employ casual or non-regular personnel or too lengthy probationary personnel in the conduct of its business involving bank deposits (Sec. 9165). even when constituted locally.Boston Bank. Including those perpetrated by terrorists against non-combatant persons and similar targets´ (Sec. except that no court order shall be required in the following unlawful activities: a.A. officer. without court order.S. are not applicable to FCDU accounts.4). and Bank of New York. Extends confidentiality to foreign currency deposits. Disclosure to the Treasurer of the Philippines of dormant deposits for at least 10 years under the Unclaimed Balances Act (Act No. even though they are banks. 1405)? Explain. 6426): B. Hijacking and other violations under RA 6235. BAR QUESTION: BANKS: APPLICABILITY: FOREIGN CURRENCY DEPOSIT ACT & SECRECY OF BANK DEPOSITS (2005) Hi Yielding Corporation filed a complaint against five of its officers for violation of Section 31 of the Corporation Code. 9160 as amended by Sec. SUGGESTED ANSWER: No. 55[b]). 161 SCRA 576). Anti-Money Laundering Act (R. It has no application at all to accounts. No. For their part. Court of Appeals. 8 of RA 9194) 4. or any other entity. Foreign Currency Deposit Act (R. Any disclosure is purely incidental to the execution process (China Banking Corporation vs. Comprehensive Dangerous Drugs Act of 2002 (RA No. or agent of any bank shall. which is applicable to both peso and foreign currency deposits. 7653): 1. the provisions of existing laws shall prevail (Sec. 6426). employee.Page 19 of 26 established that there is probable cause that the deposits or investments are related to an unlawful activity or a money laundering offense. opened and constituted abroad b) Was there a violation of the Secrecy of Bank Deposits Law (Republic Act No. 3936). a) Will the complaint filed against the directors of Hi Yielding Corporation prosper? Explain  SUGGESTED ANSWER: No. G. R. Purisima. Ortega. only for purposes of  REQUISITES FOR IN-CAMERA INSPECTION OF BANK DEPOSITS Notes of hotjurist in foro conscientiae . 55. 3. Bank of Switzerland. the officers filed a criminal complaint against the directors of Hi Yielding Corporation for violation of Republic Act No. No director. C. and that such deposits were not even the subject of the case against them. descendants. No. Aside from documents and contracts. because the Foreign Currency Deposit Act (R. No. No. 8791): 1. or any other persons (Banco Filipino Savings and Mortgage Bank vs. 25) E. because the punitive provisions of the Secrecy of Bank Deposits Law (R.

Fidel Purisima. officer or stockholder of a bank or their related interests to submit a written waiver of the secrecy of all his deposits of whatever nature in all banks of the Philippines in favor of the Bangko Sentral. Viray believe that the general rule still applies.´ (PNB v. Aquino and Prof.A. 25. requires a director. the defense moved to strike out the testimonies of the depositary bank¶s witnesses. NCBA)  Prof. Chief Justice Davide ruled that Clarissa Ocampo could testify on the Jose Estrada/Jaime Dichaves accounts maintained with Equitable PCIB Bank. however. 4. Hence. In another case. Here. The Court struck down the argument that the examination would violate the Bank Secrecy Law. descendants and relatives. 4. Gancayco.´ The Court added that the examination of bank records was not a fishing expedition. The only conclusion possible is that Section 8 of the Anti-Graft Law is intended to amend Section 2 of Republic Act No. (Section X315. Basis for this ruling was that the inquiry would be made in the course of an impeachment proceeding. Manual of Regulations for Banks).000 to the recipient. stating Section 2 of said law allows the disclosure of bank deposits in cases where the money deposited is the subject matter of the litigation. Magsino. Thus. The bank personnel and account holder must be present during the inspection. the insurance company wanted to determine how the defendant had applied the proceeds of the check. June 27. the consent is involuntary because the law requires it. 190 SCRA 633. A waiver of the Bank Secrecy Law is also required in case of loans secured by a hold-out or an assignment of certificates of time deposits. when it allowed an examination not only of the accused¶s deposits. This overturned an earlier case decided by the High Court where it held that a prosecution under the AntiGraft Law was not embraced within any of the exceptions to the Bank Secrecy Law that would allow disclosure by a bank of information concerning a deposit. However. G. Section 26 of the New Central Bank Act as implemented by BSP Circular No. UNEXPLAINED WEALTH (RA3019) Although the Bank Secrecy Law did not include cases covered by the Anti-Graft Law among the exceptions. (Tatalon Bario Council v. 1405 by providing an additional exception to the rule against disclosure of band deposits. The trial court allowed Sun Life to examine pertinent records of the bank in which the check was deposited. 161 SCRA 576 (1988). (Mellon Bank v. over the objections of the defense that this would violate the Bank Secrecy Law. This consent may be given voluntarily. R. 7 SCRA 10 (1963). in the discretion of the court. No. The Supreme Court allowed their testimonies to remain on the record.R. series of 1998.  In another case. during the impeachment proceedings against former President Estrada. 3. 1405 VIS-À-VIS POWER OF THE BSP TO CONDUCT PERIODIC AND/OR SPECIAL EXAMINATIONS (SEC. Bank of PI. the Supreme Court held that they should be included. 170. if he applies for a DOSRI loan. explaining that the examination fell within the exception ³in cases where the money deposited or invested is the subject matter of litigation. who deposited part of the remittance in a local bank. the Court declared as proper the production by subpoena duces tecum of bank records of transactions by or in the names of the wife. An oral or implied authorization does not suffice. W RITTEN P ERMISSION OF DEPOSITOR A bank may allow an inquiry into a deposit with the written consent of the depositor. The inspection must cover only the account identified in the pending case. NO. 5. but rather a method by which Sun Life could trace the proceeds of the check that it paid to the petitioners. but also those of his spouse. Impeachment In impeachment proceedings. the impeachment court may inquire into bank deposits. and other persons as well. the Supreme Court expanded the exception under the Anti-Graft Law. Mellon Bank remitted $1 million rather that an intended $1. Penalties Imprisonment of not more than 5 years or a fine not more than P20. GBL & SEC. When personnel of the depositary bank testified on the bank deposits. Ruling: The Supreme Court held that the examination was authorized by Section 10 of Rule 57. 230 SCRA 181 Facts: Sun Life brought a collection case to recover the proceeds of a check it had issued. Thus. Desierto. 2. W HERE F UNDS D EPOSITED ARE S UBJECT OF L ITIGATION Case Digest Onate v Hon Zeus Abrogar. 15 SCRA 91 (1965). 135882. Pending case before a court of competent jurisdiction Account must be clearly identified The inspection is limited to the subject of the pending litigation. In some cases.Page 20 of 26 Marquez vs. ascendant. the deposit remains confidential. children and friends of a special agent of the Bureau of customs accused of having Notes of hotjurist in foro conscientiae . (Banco Filipino v. on the examination of a person whose property has been attached and person indebted to him or controlling his property. Hon. the information obtained from the examination remains confidential and may be used by BSP examiners only in legal action it may initiate involving the said deposits. 2001 1.000 or both.

A. Desierto. 359 SCRA 772 (2001) Unclaimed Balances Law The Unclaimed Balances Law (Republic Act No. 2. that the prohibition against examination of or inquiry into a bank deposit under Republic Act No. this is done only after the bank shall have first communicated with the depositor at his last known residence or post office address. 9194) Purposes: 1.´ the Supreme court held that the Ombudsman could not inquire into bank deposits until there was a pending case in court involving the deposits. and would make available to persons in government who illegally acquire property an easy and fool-proof means of evading investigation and prosecution. Secrecy of Bank Deposits (2000) GP is a suspected Jueteng lord who is rumored to be enjoying police and military protection. The Committee conducting the investigation is not a competent court or the Ombudsman authorized under the law to issue a subpoena for the production of the bank record involving such disclosure. 2. among them GP. as amended by R. 4. and possibly even of local government officials. including the power to examine and have access to bank accounts and records. The opposition is valid. in the illegal activities of suspected gambling and drug lords. Covered Entities: 1. Banks Non-banks Quasi-banks Trust entities All other institutions. 1405 does not preclude its being garnished to insure satisfaction of a judgment. and if the existence of the deposit is disclosed. does not violate the Bank Secrecy Law. or his spouse and unmarried children. issue subpoena and subpoena duces tecum and take testimony in any investigation or inquiry. in cash or other equivalent monetary instrument in excess of P500. there is no real inquiry in such a case. ANTI-MONEY LAUNDERING ACT OF 2001 (R. The investigation does not involve one of the exceptions to the prohibition against disclosure of any information concerning bank deposits under the Law on Secrecy of Bank Deposits. It is also requires the bank to post a copy of the sworn statement in the bank premises. is unwarranted in the light of the provisions of the statutes in question. Court of Appeals. 5. This is an absurdity that we will not ascribe to the lawmakers. The Court explained: To sustain the petitioner¶s theory. Such a disclosure of the deposits and the depositors.´(Phil.(Marquez v. To protect and preserve the integrity and confidentiality of bank accounts. 93 SCRA 452 (1991). and restrict the inquiry only to property held by or in the name of the government official or employee. GP is not a public official. 1405. GP was summoned to a hearing of the Committee on Racketeering and Other Syndicated SUSPICIOUS TRANSACTIONS: Transactions with covered institutions regardless of the amounts involved.000. There is no underlying legal or trade obligation Notes of hotjurist in foro conscientiae . GP and the banks opposed the production of the banks· records of deposits on the ground that no such inquiry is allowed under the Law on Secrecy of Bank Deposits (RA 1405 as amended). Said the court: ³It is clear from the discussion of the conference committee report on x x x Republic Act. Crimes of the House of Representatives. 3. Garnishment of Bank Deposit In China Banking Corporation v. No. through the expedient of converting their assets into cash and depositing the same in a bank. where any of the following circumstances exists: 1. 9160. SUGGESTED ANSWER: Yes. However. Indeed. 3936) requires each bank to file a sworn statement with the Treasurer of the Philippines stating the deposits that the bank holds in the names of persons known to be dead or who have not made deposits or withdrawals during the preceding ten years or more. and To pursue State¶s foreign policy to extend cooperation in transnational investigations and prosecution on money laundering activities. Upon Order of the Ombudsman Although Section 8 of the law that created the Office of the Ombudsman expressly granted the Ombudsman the power to ³administer oaths. Commercial & International Bank v. The envy of many drug lords who had not escaped the dragnet of the law. the disclosure to evade payment of their just debts. within one banking day. Court of Appeals. even if ordered by the Court. (193 SCRA 452 (1991) the Supreme Court held that the garnishment of a bank deposit does not violate the Bank Secrecy Law. to ensure that the Philippines shall not be used as a site for unlawful money laundering activities. No. Subpoenaed to attend the investigation were officers of certain identified banks with a directive to them to bring the records and documents of bank deposits of individuals mentioned in the subpoenas. Is the opposition of GP and the banks valid? Explain.A. their subsidiaries and affiliates supervised or regulated by the BSP COVERED TRANSACTION: Transaction. which was conducting a congressional investigation ´in aid of legislationµ on the involvement of police and military personnel. BAR QUESTION: Banks. all they would have to do would be to simply place the property in the possession or name of persons other than their spouse and unmarried children.Page 21 of 26 allegedly acquired property manifestly out of proportion to his salary and lawful income.

7. SUGGESTED ANSWER: No. Customer Identification ± Covered institutions shall establish and record the true identity of its clients based on official documents. are made to appear as having originated from legitimate sources. only: a. AMLC charged him with violation of the Anti-Money Laundering Law. He maintains several bank accounts and has purchased 5 houses and lots for his children from the Luansing Realty. shall be preserved and safely stored for at least 5 years from the dates when they were closed. 3. AMLC (2006) Rudy is jobless but is reputed to be a Jueteng operator. thereby making them appear to have originated from legitimate sources. 3. the proceeds of any unlawful activity. Rudy would be guilty of a "money laundering crime" committed when the proceeds of an "unlawful activity. P REVENTION OF M ONEY L AUNDERING 1. 4. 2. Any circumstance relating to the transaction which is observed to deviate from the profile and/or the client¶s past transactions with the covered institution Transaction is in any way related to an unlawful activity or offense under this Act that is about to be. They shall maintain a system of verifying their clients and in case of corporate client. ± Covered institution shall report to the AMLC all covered and suspicious transactions within 5 working days from the occurrence thereof. Under the Anti-Money Laundering Law. performs or fails to perform any act as a result of which he facilitates the offense referred to in number 1 above. Client is not properly identified Amount involved is not commensurate with the business or financial capacity Taking into account all known circumstances. With respect to closed accounts. BAR QUESTION: BANKS. transacts or attempts to transact said monetary instrument or property. unless the Supervising Authority prescribes a longer period not exceeding 10 working days. the records on customer identification. and requires no previous conviction for the unlawful activity (See also Sec. account files and business correspondence.Page 22 of 26 2. Anti-Money Laundering Act of 2001).  MONEY LAUNDERING: A crime whereby the proceeds of an unlawful activity are transacted. involves. upon ex parte application of AMLC. is being or has been committed Analogous transactions to any of the foregoing P OWER TO F REEZE A CCOUNTS  The power of the AMLC to freeze accounts has been deleted under RA 9194 6. Reporting of Covered and Suspicious Transactions. Since he does not have any visible job. Inc. Subsequently. Record Keeping. The money laundering crime is separate from the unlawful activity of being a Jueteng operator. Can Rudy move to dismiss the case on the ground that he has no criminal record? (2. or relates to. require a system of verifying their legal existence and organizational structure. Any person knowing that any monetary instrument or property involves the proceeds of any unlawful activity.5%) 2.All records of all transaction of covered institution shall be maintained and safely stored for 5 years from the dates of transaction. the bank disclosed to it Rudy's bank deposits amounting to P100 Million. the company reported his purchases to the Anti-Money Laundering Council (AMLC). unless extended by the court. 1. The Court of Appeals may issue a freeze order. s well as the authority and identification of all person purporting to act on their behalf. Any person knowing that any monetary instrument or property represents. which shall be effective immediately and for a period of 20 days. b. It is committed by the following: 1. Upon request of the AMLC. Any person knowing that any monetary instrument or property is required under this Act to be disclosed and filed with the AMLC fails to do so. it may be perceived that the client¶s transaction is structured in order to avoid being the subject of reporting requirements under the Act J URISDICTION :   All cases: RTC Public officers and private persons in conspiracy with them: Sandiganbayan 5. He has never been charged or convicted of any crime. and after determination that probable cause exists that any monetary instrument or property is in any way related to an unlawful activity." like Jueteng operations. Thereafter. Notes of hotjurist in foro conscientiae . he was charged in court for violation of the Anti-Money Laundering Law. 3. SECRECY OF BANK DEPOSIT. 3.

therefore. or banking transactions have been used in support or in furtherance of the objectives of the said coup d·etat. PDIC's authority to examine its member banks. Inc. To insure the deposit liability of banks in an account up to P250. Hence. insurance companies. Supposing the titles of the houses and lots are in possession of the Luansing Realty. PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC) ACT (R. or banking transactions in the name of and/or utilized by a person. Can Luansing Realty. Inc. is it under obligation to deliver the titles to Rudy? (2. be modified. Inc. A. provides that the Commission may ask the Monetary Board to disclose information on and/or to grant B. without thereby violating any law. the bank did not violate any law. it may not invoke this law to refuse delivery of the titles to Rudy. BAR QUESTION: BANKS. 2. Even if it did. Recommend Measures to Prevent the Occurrence of Similar Attempts At a Violent Seizure of Power and for Other Purposes. 4. creating a commission to conduct an investigation of the failed 1989 coup d·etat and to recommend measures to prevent similar attempts to seize power is a valid exercise of police power. hence it is not a covered institution under Section 3 of the Anti-Money Laundering Act. natural or juridical. under investigation by the Commission. or even repealed. Bank Examination Under the new law.Page 23 of 26 2. As Luansing Realty. pre-need companies and other entities administering or otherwise dealing in currency. Only banking institutions. trust or investment funds.000 per depositor.impairment clause. commodities or financial derivatives are covered institutions. The bank being specified as a "covered institution" under the AntiMoney Laundering Law. Deposits are insured up to a maximum coverage of P250. is obliged to report to the AMLC covered and suspicious transactions. by a subsequent law. 9302) Purposes: 1. SUGGESTED ANSWER: Yes. securities dealers and brokers. the PDIC. Rudy sold the houses and lots to a friend.000 for every single depositor of each bank irrespective of the number of accounts therewith. To create a government-owned entity. trust or investment funds. is not a covered institution under Section 3 of the Anti-Money Laundering Act. expressly or impliedly. RA 6832. the police power of the State is superior to the non. did the bank violate any law? (2. may not use the Anti-Money Laundering Act to refuse to transfer to the buyer ownership of the houses and lots. Does the above provision not violate the Law on Secrecy of Bank Deposits (RA 1405)? SUGGESTED ANSWER: The Law on Secrecy of Bank Deposits is itself merely a statutory enactment.. In case of bank closures. SECRECY OF BANK DEPOSITS (1991) The law (RA 6832) creating a Commission to conduct a Thorough Fact-Finding Investigation of the Failed Coup d·etat of Dec 1989. be compelled to transfer to the buyer ownership of the houses and lots? (2. Inc. SUGGESTED ANSWER: Luansing Realty. 3. in any bank or banking institution in the Philippines. when the Commission has reasonable ground to believe that said deposits. In disclosing Rudy's bank accounts to the AMLC. C. This is one of the exceptions to the Secrecy of Bank Deposit Act.5%) PHILIPPINE DEPOSIT INSURANCE CORPORATION F UNCTIONS : A. Inc.5%) authority to examine any bank deposits. is a real estate company. Insurance The PDIC assesses and collects insurance assessments from member-banks to insure member-banks¶ deposit accounts. The Secrecy of Bank Deposits Act did not amount to a contract between the depositors and depository banks within the meaning of the non-impairment clause of the Constitution. To raise funds for his defense. Notes of hotjurist in foro conscientiae . has been restored. Bank Rehabilitation The PDIC may grant financial assistance to distressed banks if it is proven to be a less costly alternative than closure. the PDIC processes and services claim for insured deposits. or amended (such as by providing further exceptions therefrom). with prior approval by the Monetary Board. it has an obligation to deliver titles to Rudy.5%) SUGGESTED ANSWER: No. Luansing Realty. and it may.

July 22. 283 SCRA 462 3.00 per deposit (RA 9302) Condition precedent for entitlement to payment: Filing of claim within twenty-four months from order of closure Manner of payment: a. the PDIC shall recommend the liquidation of the assets of the closed bank. 15012. not the depositors. Transferred deposit ± A deposit in an insured bank made available to a depositor by the PDIC as payment of the insured deposit of such depositor in a closed bank and assumed by another insured bank. Insured deposits  The net amount due to any depositor for deposits in an insured bank. joint ³and´ account. 283 SCRA 462). Ruling: The fact that the certificate state that the certificates are insured by PDIC does not ipso facto make the latter liable for the same should the contingency insured against arise. 7.000. Nature: Compulsory insurance on all bank deposits Coverage: ³Insured deposits´ . 2.000 per depositor. PNB. But the PDIC refused to pay the claim for it is not included in the list of duly recorded liabilities of the RSB. The deposit liability of the PDIC is determined by the provisions of R. In case the depositor¶s account is more than the insurance coverage. The insurance premiums are to be paid by the insured bank. 519 and Republic vs. CA. the balance may still be recovered from the PDIC after the final liquidation of the remaining assets of the closed bank. 5. Instead of paying the promissory notes and checks. the PDIC is designated as statutory receiver. Subrogates the PDIC to all the rights of the depositor against the closed bank to the extent of such payment.the net amount due to any depositor for deposits in an insured bank. CA. 3519 and statements in the certificate that the same are insured by PDIC are not binding upon the latter. after deducting unpaid loans and other obligations of the depositor to the closed bank. G. even though in several branches.A. Accounts in a bank. Cash b. E. 2. Liquidation of closed banks After it is determined that the closed bank can not be rehabilitated. the RSB issued 13 certificate of time deposit which was insured with the PDIC. Effect of payment by the PDIC to the depositor of his insured deposit: a. Issue: Whether or not the PDIC is liable for the plaintiffs¶ claims. After deducting offsets Consistent with the rulings in Gullas vs. 62 Phil. 4. after deducting offsets. The bank failed to pay the corresponding amount of the time deposit on its maturity date due to insolvency and advised the plaintiffs to file a claim with the PDIC. The PDIC upon receipt of the MB resolution ordering the closure of a bank. PDIC liability is on a per bank basis. SPECIAL RULES 1. 6. INSURANCE FUNCTION 1. Discharges the PDIC from further liability b. No. losses due to a bank robbery are not covered.  Capacities: individual account. Facts: Notes of hotjurist in foro conscientiae . Transferred deposits A deposit in an insured bank made available to a depositor by the PDIC as payment of the insured deposit of the depositor in a closed bank and assumed by another insured bank. are to be added together.  Trust funds and safety deposit boxes are not covered. Receivership of closed banks Once a bank is ordered closed by the Monetary Board (MB) of the Bangko Sentral ng Pilipinas. In no case shall insured deposit exceed P250. Case Digest PDIC vs. Receivership is the stage within which the PDIC manages the affairs of the closed bank and preserves its assets for the benefit of creditors.000. provided that they are maintained in the same capacity and the same right for his benefit either in his own name or in the name of others.R. Liquidation refers to the recovery and conversion of assets into cash for distribution to all creditors in accordance with the order of creditor preference pursuant to law The plaintiffs invested in the money market placement with the Premier Financing Corporation (PFC) but when they went to PFC to encashed the checks and promissory notes corresponding to their investment the PFC referred them to the Regent Savings Bank (RSB). Thus. immediately physically takes over the closed bank. less any part thereof which is in excess of P250. Amount of insurance: Maximum of P250. CA. joint ³and/or´ account. the deposit liability of the PDIC is determined by the provisions of RA 3519 (PDIC vs.Page 24 of 26 D. set-off takes place ipso jure with respect to the depositor¶s bank deposit and his matured loan with the bank. Specific risk insured against: Bank closure only. 3. 1975 recognizing the debtor-creditor relationship of the bank and the depositor.  The fact that a bank instrument provides that the certificate is insured by the PDIC does not ipso facto make the latter liable for the same.

 Demand drafts cannot be escheated but telegraphic notes can be escheated (Republic vs. 1034). No. Security.00). Authority to terminate insured status 1. Under CB Circular No. There must be a claim or deposit of: a. garnishment. d. Foreign currency deposits are exempt from taxes except the interests OTHER FEATURES: 1. the maximum insured deposit shall be divided into as many equal shares as there are individuals. shall likewise be subject to the maximum insured deposit of Two hundred fifty thousand pesos (P250. No. mandate that foreign currency deposits shall be insured under the provisions of RA 3591. or who has not made further deposits or withdrawals during the preceding 10 years or more. who is dead. 1389. further. If the account is held by a juridical person or entity jointly with one or more natural persons. building and loan association. No. UN C L AI ME D BAL AN C E S L AW (R . That the aggregate of the interests of each co-owner over several joint accounts. A. b. 2. 79 of Central Bank (CB) Circular No. N O . 1993. 6426) FOREIGN CURRENCY DEPOSIT Governed by R. the SC allowed garnishment of such deposits of a transient American tourist arising out of a heinous crime committed against a Filipino minor since to hold otherwise would result to injustice to a citizen perpetrated by a foreigner Notes of hotjurist in foro conscientiae . 6426 1 exception + 1 provided under AMLA (R. and for Other Purposes") and Sec. unless a different sharing is stipulated in the document of deposit. b. If the account is held jointly by two or more natural persons. Bullion. 9 of RA 6426 (µAn Act Instituting a Foreign Currency Deposit System in the Philippines. No.A. b. Authorized banks may adopt a numbered account system for recording and servicing deposits in nonchecking accounts The credit or deposit must be with a bank. or other evidence of indebtedness. whether owned by the same or different combinations of individuals. 2. a. 3. 1405) Note: The PDIC law is not applicable to Offshore Banking Units (P. the maximum insured deposit shall be presumed to belong entirely to such juridical person or entity: Provided. and other court order and processes. In the event a new enactment or regulation is issued decreasing the rights granted under the law. No. Money. depositors are entitled to receive payment in the same currency in which the insured deposit is denominated. c. FNCB.A. 3 93 6) ELEMENTS OF UNCLAIMED BALANCES 1. or by two or more juridical persons or entities. 2. PESO DEPOSIT Governed by R.A.A.A. 3. 1405 4 exceptions + exceptions found in special laws May be garnished or attached (not a violation of R. Non-payment of insurance premiums Continued engagement in unsafe and unsound banking practices FOREIGN CURRENCY DEPOSIT ACT (R. LEGAL CONSEQUENCE The unclaimed balances may be subject of escheat proceedings.Page 25 of 26 4. 9160) GENERAL RULE: Exempt from attachment. juridical persons or entities. dated August 13.D. and The credit or deposit is in favor of a person: a.000. it shall not apply to FCD¶s already made or existing at the time of the issuance of such new regulation or enactment. juridical persons or entities. 1389.  In a sui generis case. EXCEPTION: Salvacion vs. No. after proper publication and the depositors still do not lay claim to them. CB (278 SCRA 27)  Sec. as amended. 3 SCRA 851 [1961]). or trust corporation.

et al. c) It would allow Dana to refuse payment of financial charges or. any creditor shall furnish to each person to whom credit is extended. In addition to the advertised selling price. the parties may agree that the obligation or transaction shall be settled in any other currency at the time of payment (Sec. The difference between the amounts set forth under clauses 1 and 2. The finance charge expressed in terms of pesos and centavos.  Under Sec. The cash price or delivered price of the property or service required. a clear statement in writing setting forth. b) A violation of the Truth in Lending Act will not adversely affect the validity of the contract itself. vs. if already paid.Page 26 of 26 (Salvacion. The total amount to be financed. if any to be credited as down payment and/or trade-ins. It did not. The amounts. TRUTH IN LENDING ACT ( RA 3765)  The law assures full disclosure by requiring the lender to give the borrower all the details regarding the transaction. submit to Dana a written statement setting forth therein the Notes of hotjurist in foro conscientiae . the conditional deed of sale which the parties executed mentioned that the total amount indicated therein included such finance charges.. 5. Has there been substantial compliance of the aforesaid Act? If your answer to the foregoing question is in the negative.  REPEALING LAW TO UNIFORM CURRENCY ACT (R. what is the effect of the violation on the contract?  In the event of a violation of the Act. The statement that the total amount due includes the principal and the financial charges. which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit. 8183) All monetary obligations shall be settled in the Philippine currency which is legal tender in the Philippines. the latter imposed finance charges consisting of interests. 7. Dana may also initiate criminal charges against the creditor. 2. 4. 4. The law provides that the creditor must make a full disclosure of the credit lost. prior to the consummation of the transaction. However. 278 SCRA 27). 1). however. to the extent applicable and in accordance with rules and regulation prescribed by the Board the following informations: 1. individually itemized. 3. *** *2'63((' BAR QUESTION: TRUTH IN LENDING ACT (1991) Dana Gianina purchased on a 36 month installment basis the latest model of the Nissan Sentra Sedan car from the Jobel Cars Inc.A. The charges. Note: This case does not constitute another exception. without specifying the amounts due on each portion thereof would be insufficient and unacceptable. what remedies may be availed of by Dana? SUGGESTED ANSWER: a) There was no substantial compliance with the Truth in Lending Act. NO. and The percentage that the finance bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation. information required by the Truth in Lending Act (RA 3765). Nevertheless. Central Bank et al. to recover the same. the SC only ruled as such due to the special circumstances of the said case. fees and service charges. 6.

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