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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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if any of the conditions set forth under Sec. Universal banks . Must be composed of 5 to 15 directors. 183 SCRA 361). Commercial banks . b) Stock savings and loan associations. Other classification of banks as determined by the Monetary Board of the Bangko Sentral ng Pilipinas. 3) 1. Except: when authorized by the Monetary Board. CA. No. BANKING CORPORATION Must generally be a stock corporation Shall issue par value stocks only (Sec.  ORDINARY CORPORATION May be a stock or non-stock corporation May issue par value or no par value stocks. Callejo. J. of Labor who has 2 options: a. 2.). Due diligence required of banks extend even to persons. Notes of hotjurist in foro conscientiae . 208 SCRA 652). the bank must sell or dispose of said shares within 6 months from the time of their acquisition (Sec. 2. It shall include cooperative rural banks. 155206. It is expected to ascertain and verify the identities of the persons it transacts business with (UCPB vs. c) Private development banks. 5. CA. which are primarily governed by the Thrift Banks Act (R. Must secure a certificate of authority from the Monetary Board before it can register with SEC. Islamic banks ± Banks whose business dealings and activities are subject to the basic principles and rulings of Islamic Shari¶ a. 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). it must exercise due diligence before entering into said contract. or institutions like the GSIS.Primarily governed by the General Banking Law (GBL).R. 3. The President may also intervene at any time and assume jurisdiction over such labor dispute in order to settle or terminate the same. and cannot rely upon on what is or is not annotated on the title. No. 2003). Also composed of 5 to 15 directors. 147800. In such case. v. each of whom shall own at least one (1) share of the capital stock of the corporation. May declare dividends out of its unrestricted retained earnings. 10). cooperatives primarily to provide financial and credit services to cooperatives. if unsettled after 7 calendar days shall be reported by the BSP to the Sec. it has unrestricted retained earnings in its books to cover the shares to be purchased/ acquired. Ramos. 6. 2003. 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. He may assume jurisdiction over and decide the dispute. 17). October 28. or b. regularly engaged in the business of lending money secured by real estate mortgages (GSIS vs. They are governed primarily by the Cooperative Code (RA 6938). CLASSIFICATION OF BANKS (SEC. the number of directors shall not exceed 21 (Sec.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. such as the Al Amanah Islamic Investment Bank of the Philippines which was created by RA 6848. 4. Reason: Before a loan is approved. 331 SCRA 267).A. In case of merger or consolidation. May not declare dividends. G. 7906). May be registered with the SEC without any certificate of authority issued by a government agency. 57 are present. Special rules on strikes and lockouts: any strike or lockout involving banks. November 11. It is subject to heavy and close supervision and/or regulation by the BSP (Central Bank of the Phils. provided that. 7. certify it to the NLRC for compulsory arbitration 1.  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. representatives are sent to the premises offered as collaterals so as to investigate who the real owners are (DBP vs. G. Thrift banks ± These are a) Savings and mortgage banks. It is required to exercise utmost diligence in the handling of deposits (Simex International Manila Inc. May purchase/acquire its own shares for a legitimate corporate purpose.. can exercise the powers of an investment house and invest in nonallied enterprises and have the highest capitalization requirement. Eduardo Santiago.R. 9).Page 3 of 26 institution. CONSEQUENCES OF NATURE OF BUSINESS: 1.

e. 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. receiving other types of deposits and deposit substitutes. 24) COMMERCIAL BANK No such powers additional payment in legal tender upon demand by the presentation of checks (Sec. drafts. 58. 25) A publicly-listed bank may own up to 100% of the voting stock of only one other UB / CB (Sec. 23). investment shall remain a minority holding (Sec. b. rural bank or any financial allied enterprise (Sec. Extending credit. 2. 25). General powers incident to corporations 2. Accepting drafts and issuing letter of credits. EQUITY INVESTMENTS May only invest in equities of allied enterprises. 29) 100% of equity 100% of equity y In other financial allied enterprises. 31). and non-allied enterprises (Sec.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. Buying and selling foreign exchange and other debt securities. Discounting and negotiating promissory notes. Accepting or creating demand deposits. The powers authorized for a commercial bank. c. d. whether financial or non-financial. NCBA). whether financial or non-financial POINT OF DISTINCTION UNIVERSAL BANK (Sec. (Sec. bills of exchange and other evidence of debt. 1. Such powers as may be necessary to carry on the business of commercial banking: a. 24-28) COMM¶L BANK (Sec. and 3. The power to invest in non-allied enterprises (Sec. (Sec. 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 . The powers of an investment house. 35% of net worth N/A Powers 1. 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.

negligence. 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 when a bank is under rehabilitation under a program approved by BSP. adviser. 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. evidences of indebtedness and types of securities. 34). FUNCTIONS OF BANKS BASIC FUNCTIONS: 1. Should such statements prove to be false or incorrect. by order of and for the account of their customer. safety deposit boxes) NET WORTH The total of the unimpaired paid-in capital including paid-in surplus. 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. the MB may temporarily relieve the surviving bank. Loan Function 2. such ratio shall be applied uniformly to banks of the same category (Sec. EXCEPT: purchases of evidence of indebtedness guaranteed by the Government. 219 SCRA 426. LOAN F UNCTION Requirement for Grant of Loans Before granting a loan. In case of a bank merger or consolidation. that of a good father of the family is to be observed. 2. Acquisition of major assets and making of new investments may be restricted. b. Deposit Function OTHER FUNCTIONS Universal banks and commercial banks may also exercise any of the following functions: a. d. Upon prior approval of the Monetary Board. negligence would be void for being contrary to public policy (CA-Agro Dev¶t vs. Effects of non-compliance with the prescribed minimum ratio: 1. consultant or administrator of investment management/ advisory/consultancy accounts. March 5. Acquisition of major assets and making of new investments may be restricted. Rent out safety deposit boxes. Note: The bank acting as depositary or as an agent shall keep the funds. 34). or 2. net valuation reserves and other adjustments as may be required by the Bangko Sentral (Sec. Any stipulation exempting the depositary from any liability arising from loss on account of fraud. or constituent bank or corporations under rehabilitation from full compliance with the required capital ratio. (Sec. 3. in the absence of any stipulation prescribing the degree of diligence required. retained earnings and undivided profit.  The depositary would be liable if in performing its obligation it is found guilty of fraud. However. 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. consolidated bank. EXCEPT: purchases of evidence of indebtedness guaranteed by the Government (Sec. c. the Monetary Board may require or suspend compliance with such ratio whenever necessary for a maximum period of one year. the MB may temporarily relieve the surviving bank. documents and valuable objects. consolidated bank. Rules: 1. A bank may demand from its applicants a statement of their assets and liabilities and of their income and expenditures and other information. shares. and e. In case of a bank merger or consolidation. PROVIDED that. or 2. 3. Effect of non-compliance with the prescribed minimum ratio: 1. Act as financial agent and buy and sell. CA. 40). a bank must ascertain that the debtor is capable of fulfilling his commitments to the bank. or constituent bank or corporations under rehabilitation from full compliance with the required capital ratio. securities and other effects which it receives duly separated from its own assets and liabilities. 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. Notes of hotjurist in foro conscientiae . Receive in custody funds. 1993). act as managing agent. 24).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.   A. or when a bank is under rehabilitation under a program approved by BSP.

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

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

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

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

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

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.Page 11 of 26  The percentage of foreign-owned voting stocks in a bank shall be determined: (GRANDFATHER RULE) a. banks must maintain liquidity at all times to enable it to perform its functions. NO. 73. Thus. 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. shall be considered family groups or related interest and must be fully disclosed in all transaction by such individual with the bank. 72ʹ78) As mortgaged to it in good faith by way of security for debts. 2. provided: a. By acquiring. Also. Other foreign individuals and non-bank corporations may own up to 40% of the voting stock of a domestic bank. GBL)  Unlike the former law.A. By establishing branches with full banking authority. ACT LIBERALIZING ENTRY OF FOREIGN BANKS (R. legitimate or common law. For locally incorporated subsidiaries ± equal to that of domestic banks of the same category 2. GBL). As shall be necessary for its own use in the conduct of its business. (Sec 12. By investing in up to 60% of the voting stock of a new banking subsidiary incorporated under laws of Philippines. and b. unless otherwise provided by the Monetary Board (Sec. If individuals: by the citizenship of the individuals b. 2). the GBL does NOT impose a limit on the number of shares that can be owned by the same family or related interest. 1. and b. GBL). 2. Within seven years from effectivity of the GBL (June 13. 11. the law provides that stockholdings of individuals related to each other within the 4th degree of consanguinity or affinity. 1. 11). 2. 3. If corporations: by the citizenship of the controlling stockholders of the corporation. 78). Rationale: Banks are not engaged in the business of acquiring and possessing real property. Foreign bank or Philippine corporation may own up to 60% of the voting stock of only one domestic bank or new banking subsidiary (Sec. 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. 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. irrespective of the place of incorporation (Sec. 7721) The Monetary Board authorizes foreign banks to operate through any of the following modes of entry: 1. For foreign bank branches ± not less than the US$ equivalent of P210M  Amendments introduced by GBL 2000 1. purchasing or owning up 60% of the voting stock of an existing 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. EXCEPTIONS: 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. conveyed to it in satisfaction of a debt previously contracted in the course of its dealings. 2000). 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. However. foreign bank may avail itself of only one mode of entry. MINIMUM CAPITALIZATION:  OWNERSHIP OF REAL PROPERTY GENERAL RULE: A bank cannot acquire and own real property. However this should not be without prejudice to the 40% restriction imposed by Sec 11of the GBL. 2. and such as it shall purchase at forced sales or to Notes of hotjurist in foro conscientiae . Entry: Governed by the provisions of the Foreign Bank Liberalization Act and the Offshore Banking System Decree (Sec. banks must as much as possible retain only assets that are easily marketable. FOREIGN BANKS (SECS. 51). (Sec 13. The total investment in such real estate and improvements shall not exceed 50% of the combined capital accounts.

nor will it be permitted to shirk from its responsibility for such frauds. converting it to conventional redemption or by estoppel if the extension was unilaterally made. Prohibition on Public Officials GENERAL RULE: No appointive or elective official. 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. whichever is earlier. 321 SCRA 83). however. June 25. or behalf of others (Sec. 5 of the Rural Bank Act 2. the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other person. 16) Independent Director A person other than an officer or employee of the bank. CA. 19). 79)  Notes of hotjurist in foro conscientiae . G. p. 99-10-05) 2.  To enjoin or restrain the conduct of foreclosure proceedings. the Monetary Board shall prescribe. whether full-time or part-time. CA. 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.R. As otherwise provided under Sec. Mortgagor is a natural person ± Within one year after the registration of sale with the Register of Deeds (Sec. subject to (1) (Sec. vs. even though no benefit may accrue to the bank therefrom (10 Am Jur 2d. CA and Marcos. that property acquired under such circumstances shall be disposed of by the bank within a period of 5 years. 114). January 15. No. As otherwise provided under existing laws. 52). thus. EXCEPTIONS: 1.Page 12 of 26 secure debts. 1(3) SC Cir. in general. Where such service is incidental to financial assistance provided by the government-owned or controlled corporation to the bank 3. vs. A bank may be bound by an agreement providing for a longer redemption period (Ibaan Rural Bank TRUST OPERATIONS (SECS.  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. 2001) Right of purchaser to possess property: Immediately after the date of the confirmation of the auction sale. in the particular case. serve as an officer of any private bank (Sec. its subsidiaries or affiliates or related interests. shall. Accordingly. for his own ultimate benefit (Philippine Banking Corp. 2004). pass upon and review the qualifications and disqualifications of individuals elected or appointed as bank directors or officers and disqualify those found unfit (Sec. 47). 127469. provided. 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. To maintain the quality of bank management and afford better protection to depositors and the public. 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. at the same time. 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. the petitioner must file a bond conditioned that he will pay all the damages which the bank may suffer by the injunction (Sec. AM No. provided that the bank may after said period continue to hold the property for its own use. GR 134068. benefit. Union Bank vs.

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

123124) ± Under Article VII. with the exception of the Governor who should at least be 40 years of age. Source of credit (Secs. they may not accept any other employment. Initiate criminal prosecution of erring officers of banks Government agent (Secs. Accordingly. 7. 2. of good moral character. 6. by designation of the President. 6. 8. employee. 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. MONETARY BOARD (MB) The body by which the powers and functions of the Bangko Sentral are exercised (Sec. 2. 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. 5. 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. 3.  S UPERVISION AND E XAMINATION OF B ANKS Q UALIFICATIONS OF MEMBERS OF THE MONETARY B OARD : 1. 14). 25) b. RA 8791). whether public or private. in which case such member shall resign from. of unquestionable integrity. C OMPOSITION : Seven members consisting of: 1. 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. Place a bank under receivership or liquidation (Sec. those coming from the private sector shall not hold any other public office or public employment during their tenure (Sec. 117-122) Bangko Sentral. 4. within one (1) year prior to his appointment (Sec. consultant. 3. 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. 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. NCBA). 9). 20). must be natural-born citizens of the Philippines. 9). Note: The degree of diligence required of the members of the MB. disqualified from being a director. and with recognized competence economic disciplines. 81-89.6). 30) c. 2. banking institutions and quasi-banks. extending to enterprises wholly or majority-owned or controlled by the bank (Sec. 25) ± shall include the power to: a. 9). unless there is convincing proof that the action of the Bangko Sentral is plainly arbitrary Notes of hotjurist in foro conscientiae . to the extent of 50% or less. in social and The BSP shall have supervision over. 7. remunerated or ad honorem. 110. at least 35 years of age. Financial advisor of the government (Secs. civic. with the exception of positions in eleemosynary. 109) Supervisor of the banking system (Sec.16. all of whom shall serve full-time. lawyer. officials and employees of the BSP in the performance of their functions is extraordinary diligence (Sec. Sec. 20 of the 1987 Constitution. including their subsidiaries and affiliates engaged in allied activities. D ISQUALIFICATIONS AND I NHIBITION ON GOVERNOR AND B OARD M EMBERS : NO RESTRAINING ORDER AGAINST BSP 1. cultural or religious organizations or whenever. and conduct periodic or special examinations of. 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. and divest himself of any and all interests in such institution before assumption of office (Sec. cannot be connected directly with any multilateral banking or financial institution or has a substantial interest in any private bank in the Philippines. of known probity and patriotism. 3. agent or stockholder of any bank. Examine. 4. officer. 61-63. 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. the President may contract or guarantee foreign loans but with the prior concurrence of the Monetary Board. 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.Page 14 of 26 represent it in all monetary fund dealings (Secs. 9).116) 5.

To adopt. Collect all monies and debts due said bank. Termination: 1. . 2. manager. 6.  3. 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. AGENTS Personnel of the Bangko Sentral are hereby prohibited from: 1. Int¶l Bank vs. Bank/quasi-bank retains juridical personality 2. reorganization of management and the restoration of viability.Any officer. the Congress or any government office or agency authorized by law. from any institution subject to supervision or examination by the Bangko Sentral. lawyer or agent. Exception: non-stock savings and loan associations and provident funds organized exclusively for employees of the Bangko Sentral. director. 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. To lease. Such power to revoke cannot extend to post-facto repudiation of perfected transactions. 4. (Sec. 7. borrowing from any institution subject to supervision or examination by the Bangko Sentral shall be prohibited unless said borrowings are adequately secured.  A conservator appointed by the BSP may take over without the need of first declaring the bank insolvent.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. information relating to the condition or business of any institution. and except as otherwise provided in this Act.e. employee. otherwise they would infringe the nonimpairment clause of the Constitution. 29). To take charge of the assets. in an amount to be fixed by the court. (Sec. owner. proceedings for receivership and liquidation shall be pursued (Sec. 35) PROHIBITIONS ON BANK OFFICERS. agent. 4. His authority would be only to bring actions to assail the same. own. LAWYERS. consultant or stockholder. 3. 34) False Statement. The powers must be related to preservation of assets. CORPORATE POWERS OF THE BSP 1. The conservator¶s power is not unilateral and he cannot simply repudiate valid obligations of the bank. except under orders of the court. 252 SCRA 259). condone. directly or indirectly. directly or indirectly requesting or receiving any gift. Duration: Not to exceed 1 year Effects: 1. 4. present or pecuniary or material benefit for himself or another. voidable. and Exercise all powers necessary to restore its viability. fully disclosed to the Monetary Board. unenforceable or rescissible (First Phil. . 5. revealing in any manner. being an officer. Reorganize the management. void. 2.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. and the management thereof. liabilities. director or officerin-charge of any institution subject to the supervision or examination by the Bangko Sentral who. with the power to overrule or rebuke the actions of the previous management and board of directors of the bank or quasi-bank. Not a precondition to the designation of a receiver Powers of conservator: 1. 27) 2. But if the continuance in business of the bank would involve probable loss to its depositors or creditors. 2. 3. When the MB is satisfied that the institution can continue to operate on its own and the conservatorship is no longer necessary. (Sec. of any institution subject to supervision or examination by the Bangko Sentral.. 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. 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 . or settled liability to the BSP To do and perform such other necessary powers R EFUSAL TO M AKE R EPORTS E XAMINATION . The power to revoke contracts only covers those that are deemed defective ± i. or release any claim of. CA. DIRECTORS.

CA. or 4. Taiaoqi as receiver. it is unmistakable that the assailed actions should precede the filing of the case. The TSB filed a complaint assailing the resolution on the ground of lack of prior notice and hearing 3. the Monetary Board issued a Resolution ordering the closure of TSB. Notification to the BSP or public announcement of a bank holiday (Sec. whether the institution should undergo rehabilitation or liquidation. liquidation or conservatorship. creditors. Willful violation of a cease and desist order that has become final. No. Central Bank vs. 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. 1993).Page 16 of 26 QUASI-BANK/CLOSURE Receivership is equivalent to an injunction to restrain the bank in any way. 2. Persistence in conducting business in an unsafe or unsound manner. 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. 220 SCRA 536 2. ͞CLOSE NOW. stockholders and general public (Central Bank vs. Quasi-banks ± Any person competence in banking or finance of recognized Functions: 1. Inability to pay liabilities as they become due in the ordinary course of business. involving acts or transactions which amount to fraud or a dissipation of the assets of the institution (Sec. Banks ± PDIC 2. 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. It is enough that such action is made the subject of a subsequent judicial 1. but not including inability to pay those caused by extraordinary demands induced by financial panic in the banking community. placing it under receivership and appointing Ramon V. When it provides for the filing of the case within 10 days after the receiver takes charge of the assets of the bank. Inability to continue business without involving probable losses to its depositors or creditors. The purpose of the scheme is to protect the depositors. GBL) Facts: Based on the financial reports submitted to the Central Bank. GBL)  review. creditors. CA. Receiver: 1. 30) Issue: Whether or not a Monetary Board Resolution be annulled on the ground of lack of prior notice and hearing. 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. Thus. CASE DIGEST Central Bank of the Philippines vs. Court of Appeals. 56.R. 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. March 30. NCBA. 220 SCRA 536). 29 of the Central Bank Act does not contemplate prior notice and hearing before a bank is placed under receivership. forbidding it from doing business in the Philippines. GBL) 3. 53. G. Grounds: Under NCBA 1. Determination ASAP but not later than 90 days. 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. Insufficiency of realizable assets to meet its liabilities. (Sec. Suspension of payment of deposit liabilities continuously for more than 30 days (Sec. MANDATORY REQUIREMENTS FOR BANK CLOSURE Examination by the appropriate BSP department as to the condition of the bank Notes of hotjurist in foro conscientiae . 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. 30. 53. General powers of a receiver 3. Under GBL 1. stockholders and the general public. Immediate gathering and taking charge of all the assets and liabilities of the institution and administering them for the benefit of creditors 2. HEAR LATER͟ SCHEME  Sec. Plainly.  Note the distinctions between rehabilitation and liquidation. 76118. CA. 244 SCRA 395 [1995]).

After that period. CFI. 2.where a certain percentage of the deposit is set aside and cannot be lent out a.  Payment shall be in accordance with the rules on concurrence and preference of credits. 204 SCRA 519 [1991]). 4.  Checks representing demand deposits do not have legal tender power and their acceptance in the payment of debts. 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. CA. it buys government securities b. Bank is not liable to pay interest on deposits during the period of suspension of operation (Overseas Bank vs. However. the liquidation plan shall be adopted by the Monetary Board. 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. MB.00 (Circular No. it sells government securities 3 IMPORTANT TOOLS TO ACHIEVE PRICE STABILITY 1. Receiver shall file ex parte. 90) a. Open Market Operations (Sec. Notes and coins called in for replacement shall remain legal tender for a period of one year from the date of call. with the proper RTC. Morfe. 2006) BSP Authority to Replace 1. The assets under receivership or liquidation shall be deemed in custodia legis in the hands of the receiver and shall be exempt from garnishment. is at the option of the creditor. After the expiration of this latter period. attachment or execution (Sec. If BSP wants to increase money supply. He shall convert the assets of the institution to money for the purpose of paying the debts of the institution (Sec. 2. 549 [1928]) Deposits do not become preferred credits (CB vs. 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. 537. and if public interest requires. if the volume of money is high. Procedure: 1. 60). In case of quasi-banks. 83) (Rediscounting) a. If BSP wants to increase money supply. 30). shall order the liquidation of the bank. levy. 2. Suspension of operation 2. it opens the rediscount window by reducing interest on loans b. 5. it closes the rediscount window or charges very high interest rates for rediscounted notes 4. MONETARY STABILIZATION EFFECTS OF APPOINTMENT OF RECEIVER/ LIQUIDATION 1. 57). Notes for any series or denomination ± More than 5 years old Coins ± More than 10 years old Rules: LIQUIDATION Grounds: 1. 94) .  3. If BSP wants to decrease money supply. 2. 51 Phil. 30). both public and private. 1. it shall appoint a receiver of the assets and liabilities of the bank (Banco Filipino vs. 3. the MB shall determine and confirm if the bank is insolvent. 5. Loans to Banks (Sec. both public and private (Sec.00 25 centavo coin or less: In amounts not exceeding P100. 3. 1-Peso. Regular courts have no jurisdiction over actions filed by claimants against an insolvent bank (Ong vs CA. 20 SCRA 507 [1967]) 2.000. 2. BSP will raise reserve requirement Notes of hotjurist in foro conscientiae . 253 SCRA 105). the notes and coins which have not been exchanged shall cease to be a liability of BSP and shall be demonetized (Sec. If BSP wants to decrease money supply. 52) Legal tender power of coins 3. The condition of the bank is one of insolvency or that its continuance would involve probable loss to its depositors and creditors. Within 60 days. Reserve Requirements (Sec. 1. 3. 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.Page 17 of 26 2. 113 SCRA 778 [1982]) The corporation retains its legal personality (Teal Motor Co. vs. 5-Peso and 10-Peso coins: In amounts not exceeding P1. A determination by the MB that the bank cannot be rehabilitated.

Page 18 of 26 b. 103). 4. He must file a written waiver of his privilege under RA 1405 or other general or special laws (Sec. B. 1405 Upon written permission of the depositor. MO. EXCEPTIONS: A. Examination and inquiry or looking into all deposits.A. Upon order of a competent court in cases of bribery or dereliction of duty of public officials.A. including investments in bonds issued by the Government of the Philippines. 128). reserve requirement is reduced.000 of his account. or office. CDC's complaint is not meritorious. A decedent to determine his gross estate. To discourage private hoarding so that banks may lend such funds and assist in the economic development PROHIBITED ACTS: 1. Notes of hotjurist in foro conscientiae . Since the required reserves are imposed primarily to control the volume of money.A. 15 SCRA 91 [1965]). (Sec. such funds become part of the subject matter of litigation. the Bangko Sentral shall not pay interests thereon (Sec. Any disclosure by any official or employee of any bank to any unauthorized person of any information concerning the said deposits. It was held in China Banking Corporation v. 3. NIRC). Garnishment is part of the Coverage: All deposits of whatever nature with banks or banking institutions in the Philippines. 2. of whatever nature. and shall not participate in the ownership or management of any enterprise. 94). (5%) Is CDC's complaint meritorious or not? Reason briefly. 3. F ROM R. Deposits maintained with the Bangko Sentral as part of the reserve requirements shall be exempt from attachment. with the banks in the Philippines including investments in bonds issued by the Government. 2. N O . GENERAL RULE: The deposits covered by law are considered as of an absolutely confidential nature and may not be examined. Ortega. Gancayco. On orders of the MM Regional Trial Court. PROHIBITIONS ON THE BSP 1. To encourage people to deposit in banks 2. 2. A taxpayer who has filed an application for compromise of his tax liability by reason of financial incapacity to pay his tax liability. governmental bureau. if the volume of money is low. In cases of impeachment. the Sheriff garnished P50. b. and It shall not engage in development banking and financing (Sec. 3019. 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. Garnishment (2004) CDC maintained a savings account with CBank.Inquiry by the Commissioner of Internal Revenue into bank deposits of: a. to satisfy the judgment in favor of his creditor. 1. SECRECY OF BANK DEPOSITS LAW (R. inquired or looked into by any person. 4. BAR QUESTION: Banks: Secrecy of Bank Deposits. Anti-Graft and Corrupt Practices Act cases (R. 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. 6[f]. 2) Rules: 1. In cases where the money deposited or invested is the subject matter of the litigation. SUGGESTED ANSWER No. Upon service of the notice of garnishment on the bank where the defendant deposited funds. its political subdivisions and its instrumentalities. either directly or indirectly. when it has been 2. From other laws 1. It shall not acquire shares of any kind or accept them as collateral. ҏ The required reserves of each bank shall be proportional to the volume of its deposit liabilities. NIRC . 2. No increase of more than 4% point within 30day period. added by analogy in PNB vs. 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. or any other order or process of any court or agency (Sec. No. execution process. No. Execution is the goal of litigation as it is its fruit. 1405) Purposes: 1. garnishment. 3.

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

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

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

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

To create a government-owned entity. be compelled to transfer to the buyer ownership of the houses and lots? (2. with prior approval by the Monetary Board. Insurance The PDIC assesses and collects insurance assessments from member-banks to insure member-banks¶ deposit accounts. Luansing Realty. A. expressly or impliedly. In disclosing Rudy's bank accounts to the AMLC. C. Inc.. the PDIC processes and services claim for insured deposits. Inc. To raise funds for his defense. 3.5%) PHILIPPINE DEPOSIT INSURANCE CORPORATION F UNCTIONS : A. Bank Examination Under the new law. under investigation by the Commission. The bank being specified as a "covered institution" under the AntiMoney Laundering Law. by a subsequent law. This is one of the exceptions to the Secrecy of Bank Deposit Act. hence it is not a covered institution under Section 3 of the Anti-Money Laundering Act. Bank Rehabilitation The PDIC may grant financial assistance to distressed banks if it is proven to be a less costly alternative than closure.Page 23 of 26 2.000 for every single depositor of each bank irrespective of the number of accounts therewith. Inc. when the Commission has reasonable ground to believe that said deposits. may not use the Anti-Money Laundering Act to refuse to transfer to the buyer ownership of the houses and lots. Can Luansing Realty. or even repealed. natural or juridical. PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC) ACT (R. Rudy sold the houses and lots to a friend. securities dealers and brokers. did the bank violate any law? (2. is it under obligation to deliver the titles to Rudy? (2. BAR QUESTION: BANKS. and it may. RA 6832. pre-need companies and other entities administering or otherwise dealing in currency. Notes of hotjurist in foro conscientiae . Hence. therefore. the bank did not violate any law.impairment clause. without thereby violating any law. or amended (such as by providing further exceptions therefrom). 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 1989.5%) SUGGESTED ANSWER: No. is obliged to report to the AMLC covered and suspicious transactions. insurance companies. be modified. it may not invoke this law to refuse delivery of the titles to Rudy. has been restored.000 per depositor. Inc. Deposits are insured up to a maximum coverage of P250. 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. To insure the deposit liability of banks in an account up to P250. provides that the Commission may ask the Monetary Board to disclose information on and/or to grant B. Even if it did. SUGGESTED ANSWER: Luansing Realty. or banking transactions in the name of and/or utilized by a person. 9302) Purposes: 1. In case of bank closures. 2. 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. 4. As Luansing Realty. Supposing the titles of the houses and lots are in possession of the Luansing Realty. 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. Recommend Measures to Prevent the Occurrence of Similar Attempts At a Violent Seizure of Power and for Other Purposes. the police power of the State is superior to the non. is not a covered institution under Section 3 of the Anti-Money Laundering Act. in any bank or banking institution in the Philippines. commodities or financial derivatives are covered institutions. SUGGESTED ANSWER: Yes. 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. trust or investment funds. it has an obligation to deliver titles to Rudy. the PDIC. Inc. is a real estate company.5%) authority to examine any bank deposits. Only banking institutions. trust or investment funds.

losses due to a bank robbery are not covered. 5.R. The deposit liability of the PDIC is determined by the provisions of R.  Trust funds and safety deposit boxes are not covered. 3. SPECIAL RULES 1. Subrogates the PDIC to all the rights of the depositor against the closed bank to the extent of such payment. 3519 and statements in the certificate that the same are insured by PDIC are not binding upon the latter. Insured deposits  The net amount due to any depositor for deposits in an insured bank.  Capacities: individual account. CA. Case Digest PDIC vs. Facts: Notes of hotjurist in foro conscientiae . Liquidation of closed banks After it is determined that the closed bank can not be rehabilitated. G. Thus. 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). the deposit liability of the PDIC is determined by the provisions of RA 3519 (PDIC vs. 15012. 2. No.000 per depositor.000. 6. immediately physically takes over the closed bank. less any part thereof which is in excess of P250. The insurance premiums are to be paid by the insured bank. joint ³and´ account. Accounts in a bank. 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. joint ³and/or´ account. In no case shall insured deposit exceed P250. the PDIC shall recommend the liquidation of the assets of the closed bank. the balance may still be recovered from the PDIC after the final liquidation of the remaining assets of the closed bank. 1975 recognizing the debtor-creditor relationship of the bank and the depositor.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. 62 Phil. Cash b. Issue: Whether or not the PDIC is liable for the plaintiffs¶ claims.Page 24 of 26 D. After deducting offsets Consistent with the rulings in Gullas vs. the PDIC is designated as statutory receiver. In case the depositor¶s account is more than the insurance coverage. 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. Discharges the PDIC from further liability b. Instead of paying the promissory notes and checks. 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. Receivership of closed banks Once a bank is ordered closed by the Monetary Board (MB) of the Bangko Sentral ng Pilipinas.A. Effect of payment by the PDIC to the depositor of his insured deposit: a. after deducting unpaid loans and other obligations of the depositor to the closed bank. But the PDIC refused to pay the claim for it is not included in the list of duly recorded liabilities of the RSB. set-off takes place ipso jure with respect to the depositor¶s bank deposit and his matured loan with the bank. PNB. the RSB issued 13 certificate of time deposit which was insured with the PDIC. 2. Nature: Compulsory insurance on all bank deposits Coverage: ³Insured deposits´ . Amount of insurance: Maximum of P250.  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. are to be added together.000. 7. CA. July 22. after deducting offsets. Specific risk insured against: Bank closure only. Receivership is the stage within which the PDIC manages the affairs of the closed bank and preserves its assets for the benefit of creditors. E. 519 and Republic vs. 4. 283 SCRA 462 3. 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. The PDIC upon receipt of the MB resolution ordering the closure of a bank. CA. INSURANCE FUNCTION 1. 283 SCRA 462). even though in several branches. not the depositors.the net amount due to any depositor for deposits in an insured bank. PDIC liability is on a per bank basis. 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.

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

c) It would allow Dana to refuse payment of financial charges or.  Under Sec. 8183) All monetary obligations shall be settled in the Philippine currency which is legal tender in the Philippines. a clear statement in writing setting forth. if any to be credited as down payment and/or trade-ins. The cash price or delivered price of the property or service required. Central Bank et al. 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. The charges. what is the effect of the violation on the contract?  In the event of a violation of the Act. Dana may also initiate criminal charges against the creditor. vs.. prior to the consummation of the transaction. 5. However. what remedies may be availed of by Dana? SUGGESTED ANSWER: a) There was no substantial compliance with the Truth in Lending Act. without specifying the amounts due on each portion thereof would be insufficient and unacceptable. The total amount to be financed. 7. 278 SCRA 27). fees and service charges. any creditor shall furnish to each person to whom credit is extended. The law provides that the creditor must make a full disclosure of the credit lost. 4. The finance charge expressed in terms of pesos and centavos. individually itemized. information required by the Truth in Lending Act (RA 3765). the SC only ruled as such due to the special circumstances of the said case. Nevertheless.Page 26 of 26 (Salvacion. to the extent applicable and in accordance with rules and regulation prescribed by the Board the following informations: 1. 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. et al. the conditional deed of sale which the parties executed mentioned that the total amount indicated therein included such finance charges. b) A violation of the Truth in Lending Act will not adversely affect the validity of the contract itself. to recover the same. 4. 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. submit to Dana a written statement setting forth therein the Notes of hotjurist in foro conscientiae . the latter imposed finance charges consisting of interests. the parties may agree that the obligation or transaction shall be settled in any other currency at the time of payment (Sec. Note: This case does not constitute another exception. NO. In addition to the advertised selling price. 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. if already paid. 2. *** *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. 1).A. It did not. The amounts. The statement that the total amount due includes the principal and the financial charges. 3. however. The difference between the amounts set forth under clauses 1 and 2. 6.

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