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Banking Laws

Banking Laws

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Banking Laws -Dizon CHAPTER 1 I. DECLARED Policy of the State (Sec.

2, GBL) -The State recognizes the vital role of banks providing an environment conducive to the sustained development of the national economy and the fiduciary nature of banking that requires high standards of integrity and performance. In furtherance thereof, the State shall promote and maintain a stable and efficient banking and financial system that is globally competitive, dynamic and responsive to the demands of a developing economy. II. Definition of Banks (Sec. 3.1, GBL) -"Banks" shall refer to entities engaged in the lending of funds obtained in the form of deposits. Note: Banks may engage in other activities allowed by law. III. Nature of Banking Business A. Debtor-Creditor Relationship – The relationship existing between a depositor and bank is that of a creditor and debtor. B. Fiduciary Duty 1. Simex Intl., Inc. vs. CA: The State recognizes the “fiduciary nature of banking that requires high standards of integrity and performance.” Banks are required to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. 2. This bank’s obligation is deemed written into every deposit agreement between a bank and its depositor. C. Not A Trust Agreement 1. The fiduciary nature of bank-depositor relationship does NOT convert the contract between the bank and its depositors FROM a SIMPLE LOAN TO a TRUST AGREEMENT. This is because Banks do not accept deposits to enrich depositors but to earn money for themselves. 2. Failure by the bank to pay to pay the depositor is failure to pay a simple loan, and NOT a breach of trust. D. Indispensable Institution 1. Banks is an indispensable institution in the modern world and plays vital role in the economic life of every citizen. People have come to regard them with respect, gratitude, and confidence. 2. Even a humble wage-earner does not hesitate to entrust his life savings 3. An ordinary person usually maintains an account for security and convenience in settling his bills 4. As for business entities, the bank is trusted to help them in running their affairs, not only in the form of loans, but in their day-to-day transactions like encashing a check. E. Impressed with Public Interest (Simex vs. CA) – a depositor expects a bank to treat his account with utmost fidelity, whether such account consists only of a few hundred pesos or millions. F. Degree of Diligence (Simex vs. CA) Art. 1172 of NCC states that the degree of diligence required of an obligor is that prescribed by law or contract, and in the absence of such, that of a good father to a family. NOTE: Due diligence is required of banks extend even to persons or institutions, regularly engaged in the business of lending money secured by real estate mortgage.

G. Treatment of Accounts with Meticulous Care – There is NO LAW mandating banks to call up their clients whenever their representatives withdraw significant amounts from their accounts. H. Duty to Keep Records 1. Banks shall have a true and accurate account, record, statement of their daily transactions especially those of deposit liabilities. 2. The making of a false entry or willful omission of entries is a ground for the imposition of administrative sanctions and disqualification from office. I. Banks are NOT Gratuitous Bailees – Banks solicit deposits in order that they can use the money to gain. J. Banks are NOT Expected to be Infallible, but must bear the blame for NOT discovering mistakes despite established procedures. Q: Sps. A and V opened a joint current account in C Bank with an initial deposit of P2,250. Prior thereto, A had a personal account with the same bank. When the spouse opened their joint current account, the “New Accounts” teller pulled out the old signature card of A and placed the old personal account number of A in the deposit slip. V issued two checks and one of these was dishonored for IF. They were deducted P20 from their account. The bank tried to call the spouses, but they were in Pampanga. Is the bank liable for damages? A: Yes. -a depositor expects a bank to treat his account with utmost fidelity, whether such account consists only of a few hundred pesos or millions. Bank must record every transaction accurately -A blunder on the part of the bank such as dishonor of check without good reason can cause the depositor embarrassment, financial loss, and perhaps civil and criminal litigation Note: Exemplary damages are awarded if there is malice and bad faith. K. Dealing with Registered Lands – The rule that persons dealing with registered lands can rely solely on the certificate of title does NOT APPLY to banks. Banks should exercise more care and prudence in dealing with registered lands that private individuals, for their business is one affected by public interest. Q: A sold is unregistered parcel of land to B. Subsequently, an Orig. Cert.Title (OCT) was issued. A surrendered it to X bank as a consequence of a mortgage. B died w/o knowing that an OCT has been issued. Upon learning of his right, C (B’s heir) confronted A and went to X bank. C asked to photocopy the owner’s duplicate certificate outside the bank’s premises. C then brought it to the Register of Deeds with the Deed of Sale and he was issued a Transfer Cert of Title. Is the bank liable for damages to A? A: Yes. -Bank failed to foresee the risk of its act of entrusting C with the OCT without notifying A and verifying the veracity of C’s claim and character. This acts runs afoul of the bank’s mandate to observe the highest diligence -A has also the right to due process. Notice and hearing are indispensable elements of this right which the bank ignored Q: A bank accepted a property as mortgage despite existence of structures and occupants other than the mortgagor. Is the bank negligent? A: Yes. Banks, being in the business of extending loans, are familiar with the rules on land registration. They are expected to exercise more care and prudence in dealing with

registered lands that private individuals, for their business is one affected by public interest. 1 | Page

7906 (hereafter the “Thrift Banks Act”). 3. malice. V.The bank should have conducted investigation since there occupants other than the owner of the land mortgaged. and (g) Other classifications of banks as determined by the Monetary Board of the Bangko Sentral ng Pilipinas. Negligence of Officers – if within the scope of authority. Banks may Exclude Persons in their Premises – No employees must be spared by banks and their officers and employees to ensure and preserve the trust and confidence of the general public. . This constitutes gross negligence amounting to bad faith. F. as defined in Republic Act No. If the teller has possession of the money since he occupies a position of confidence. otherwise known as the “Charter of Al Amanah Islamic Investment Bank of the Philippines”. THEFT. (Art. (ii) Stock savings and loan associations.2. Diligence in the Selection. If for personal gain. Such is only MATERIAL POSSESSION. QUALIFIED THEFT. Banks shall be classified into: (a) Universal banks. (f) Islamic banks as defined in Republic Act No. Moral – when the good reputation of the client was besmirched or his financial credit Note: Banks are NOT responsible for such damages in the ABSENCE of fraud. or wanton attitude. Malice and bad faith must be attendant 2. First Metro Investment Corp. (b) Commercial banks. (BPI vs. (e) Cooperative banks. bank is liable C. Liabilities other than Actual 1. If given to the wrong person. as defined in the Republic Act No. bank is liable since they would be clothing that person presumptive ownership of the passbook.) B. composed of: (i) Savings and mortgage banks. D. 6848. bad faith. and (iii) Private development banks. L. Note: Appropriation of money by a bank teller is NOT ESTAFA. and Supervision of Employees -A bank is bound by negligence of its employees under the principle of Respondeat superior or command responsibility. (d) Rural banks. IV. (c) Thrift banks. 2181 of NCC) E. A. as defined in Republic Act No 6938 (hereafter the "Cooperative Code"). Classification of Banks (CUT RICO) Sec. Exemplary – by way of example. The bank still has JURIDICAL POSSESSION. Respondeat superior. 73S3 (hereafter the "Rural Banks Act"). Negligence of Manager Bank is liable for the negligence or misdeed of the branch manager since confidence in the banking system necessarily includes reliance on bank managers. Liability For Acts and Employees – Bank is LIABLE for the wrongful acts of its officers done WITHIN the scope of their authority. Negligence of Tellers – returning the passbook ONLY to the depositor or his authorized representative. Right to Recover from Employees – Banks may recover from their employees.

powers authorized for a commercial bank 2. industry. A Cooperative Bank. powers of commercial banks: (A BREAD) D. or farm families E. billboards. cooperatives primarily to provide financial and credit services to cooperatives -“cooperative bank” shall include cooperative rural banks -Membership shall include ONLY cooperatives and federations of cooperatives -Functions of a Cooperative Bank G. powers of an investment house 3. Commercial Banks 1. banks. and other advertising materials. A Private Development Bank. Business Name -Only a bank that is granted universal/ commercial banking authority may represent itself to the public as such in connection with its business name -Thrift Banks: allowed to use and adopt any name. services. private devt. general powers incident to corporations 2. and stock savings and loans associations. B. Rural Banks -designed to make needed credit available and readily accessible in the rural areas on reasonable terms primary purpose is to meet the normal credit needs of farmers. Cooperative Banks -one organized by. Thrift Banks include savings and mortgage banks. medium and long term financing to business engaged in agriculture. and housing Powers of a Thrift Bank: F.A. power to invest in non-allied enterprises C. fishermen. or A Rural Bank. Universal Banks 1. provide the ff words are affixed: A thrift bank. the majority shares of which is owned and controlled by. o The size of the letters of such phrase shall be at least ½ of the size of the business name when shown on letterheads. -Providing short-term working capital. or A stick Savings and Loan Association -Rural or Commercial Banks: allowed to use and adopt any name. provide the ff words are affixed: Rural or Coop. Islamic Banks (Al-Amanh Islamic Investment Bank of the Philippines) -in Zamboanga City -primary purpose shall be to promote and accelerate the socio-economic devt of the Autonomous Region by performing banking and financing operations and to establish . Saving bank.

commercial. 2 | Page .and participate in the agricultural. and industrial ventures based on the Islamic concept of banking.

Whether a person or entity is performing banking or quasi-banking functions W/O the BS authority shall be decided by the Monetary Board by examining and investigating the books and records of such person or entity. compel presentation of books. records. building and loan association. when examining a bank.H. failure to do so would subject such to appropriate sanctions D. insurance companies. (RFC). Authority to Engage in Banking and Quasi-Banking (QB) Functions A. and documents a. may commence to engage in functions until authority is suspended. . Quasi-banks – refer to entities engaged in the borrowing of funds through the issuance. for the purpose of relending or purchasing of receivables and other obligations. endorsement or assignment with recourse or acceptance of deposit substitutes for purposes of relending or purchasing of receivables and other obligations "deposit substitutes" is defined as an alternative form of obtaining funds from the public. BS shall. have the authority to examine an enterprise which is wholly or majority-owned by the bank. (Sec. or acceptance of debt instruments for the borrower's own account. banking and quasi-banking institutions. insurance company. through the issuance. educational institutions. Authority from Bangko Sentral -No person shall engage in banking operations or QB functions WITHOUT authority from the Bangko Sentral -No articles of incorporation or amendment to articles of incorporation of banks. endorsement. administer oath to any such person or entity 2. public utilities. educational institution or other special corporations governed by special laws. public utility. Other Banks -Philippine Veterans Bank – private commercial bank owned by veterans -Land Bank of the Philippines – finance the acquisition and distribution of agricultural estates fro division and resale to small landholders as well as the purchase of the landholding by the agricultural lessee -Development Bank of the Philippines – was created as Rehabilitation Finance Corp. non-profit corp engaged in the business of accumulating the savings of its members and using such accumulations for loans to members for home building or personal finance J. building and loan associations. other than deposits. unless accompanied by a certificate of the appropriate government agency to the effect that such by-lawsor amendments are in accordance with law. banking institution. C. took over the functions of Agricultural Industrial Bank I. Upon issuance of authority. revoked or annulled by BS. 17 of BP 68) -The Securities and Exchange Commission shall not accept for filing the by-laws or any amendment thereto of any bank. VI. trust companies and other financial intermediaries. trust company. E. Non-Stock Saving And Loan Associations – mean a non-stock. The dept head and the examiners of the supervising and examining dept shall: 1. (Sec. and other corporations governed by special laws shall be accepted or approved by the Commission unless accompanied by a favorablerecommendation of the appropriate government agency to the effect that sucharticles or amendment is in accordance with law. 46 of BP 68) B.

Organization of Banks A. Banks shall comply with the required minimum capital by MB: • Universal Bank-4. Its projected financial condition and capital base C.950M • Commercial Bank-2. Bank’s ownership structure 2. The MB shall be satisfied from the evidence submitted to it: (RPC) o All requirements of law have been complied with o Public interest and economic conditions justify the authorization o The amount of capital as well as the integrity of the organizers reasonable assure the safety of deposits and the public interest -The SEC shall not register the by-laws of any bank or any amendment unless accompanied by a certificate of authority issued by the MB.0M . under its seal. Conditions The MB may authorize the organization of a bank and quasi-bank: 1. Internal control 5.Certificate of Authority to Register -The SEC shall not register the articles of corp or any amendment unless accompanied by a certificate of authority issued by the MB.400M • Thrift Banks w/n MM-325.0M • Rural Banks w/n MM-26. Minimum capital requirements by MB are satisfied B. Funds are obtained from the public. MANAGEMENT & ADMINISTRATION OF BANKS. 20 o more persons 3. Capabilities The MB shall take into consideration their apability in terms of their financial resources and technical expertise and integrity. Entity is a stock corporation 2. CHAPTER 2: ORGANIZATION. QUASIBANKS AND TRUST ENTITIES I. under its seal. 1. Director’s and senior management 3.0M Outside MM-52. Its operating plan 4. Capital Requirements 1.

and at least 25% of such subscription shall be paid-up that it must not be less than the minimum required capital. 5th & 6th classcities and in the 2nd. At least 25% of the total authorized capital stock shall be subscribed by the subscribers of the propsed bank.6M 2.5M In 4th. 3rd & 4th class municipalities3.0M In 1st. 2nd & 3rd class cities and 1st class minicipalities-6.9M In 5th & 6th class municipalities-2. 3 | Page .Cities of Cebu and Davao-13.

IF IT APPEARS THAT FPREIGN INDIVIDUALS AND . It shall apply t Filipinos and domestic non-bank cprporations. B. 2. 2. Bank Branches 1. A bank authorized to branch out shall be responsible for all business conducted in such branches because a bank and its offices shall be treated as one unit. Incorporators/ Subscribers 1. Sec. the prohibition against granting loans or discounts upon the security of the stock would become laregly ineffective. -stocks purchased shall be sold or disposed of at a public or private sale. QUERY: MAY COOPERATIVES ORGANIZE A BANK? Yes. established cooperatives and corporations may organize a bank and/or subscribe to the shares of stock oa any rural bank. Foreign inividuals an non-bank corporations may own or control up to 40% of the voting stock of a domestic bank. Purchase/ acquire shares of its own capital stock or . if banking corporations were given a lien on their own stock for the indebtedness of the stockholders. Accept its own shares as a security for a loan EXCEPT: when authorized by the MB. E. Must be persons of integrity and of good credit standing in the business community. Subscribers must have adequate fonancial strength to pay for their propsed subscriptions in the bank.35 of the US National Banking At of 1864. Must not have been convicted of any crime involving moral turpitude unless otherwise allowed. may be listed among the original subscribers in the Articles of Corp. Provided. 3. Stockholdings A. 3. Treasury Stocks 1. At common law. UB & CB may open branches or other offices within or outside the Philppines upon prior approval of the BS. that it shall be subject to special examination and to such rules and regulations prescribed by the MB. a coprpration has no lien upon the shares of stockholders for any indebtedness of the corporation. A bank may be organized with not less than 5 or more than 15 persons in organizing or investing in the proposed bank. II. 2. QUERY: PROVISION IS AMBIGUOUS. *if there is excess. Foreign Stockholdings 1. No bank shall .D.

2. Acquisition of Voting Stock in a Domestic Bank 1. 2. There shall be no aggregate ceiling on the ownership by such individuals and corporations in a domestic bank. that the aggregate foreign-voting stoks owned by them shall not exceed 40% of the outstanding voting stock of the bank. The percentage of foreign-owned voting stock shall be determined by the citizenship of the individual stockholders in the bank. 3. The following tests do not: 1. For thrift banks. MB shall adopt measures necessary to ensure that at all times the control of 70% of the resources or assets of teh entire banking system is held by banks which are at keast majority-owned by Filipinos. -Filipino individual and domestic non-bank corporation may each own up to 40% o the voting stock of a domestic bank. The percentage of foreign-owned voting stock shall be determined by the citizenship of the individual stockholders in the bank – shall follow the citizenship of the controlling stockholders of the corporation. irrespective of the place of incorporation. Investment test 3. FILIPINOS AND DOMESTIC NON-BANK CORPORATIONS MAY ALSO CONTROL ONLY UP TO 40% OF THE VOTING STOCK.NON-BANK COPORATINS MAY ONLY CONTROL UP TO 40% OF THE VOTING STOCK. MB may authorize any foreign bank. the MB may authorize a foreign bank to acquire up to 100% of the voting stock of only one bank organized under the laws of the Republic of the Philippines. *CONTROLLING STOCKHOLDER-refer to individuals holding more than 50% of the voting stock of the corporate stockholders of the bank.all of the capital stock. ON THE OTHER HAND. the CONTROL TEST is applied. War-time test 2. Within the same period. Within 7years from the effectivity of the GBL and subject to guidelines issued pursuant to the Foreign Banks Libearlization Act. to further acquire voting shares of such bank to the extent necessary for it to own 100% of the voting stock thereof. which prior to the effectivity of the GBL availed itself of the privilege to acquire upto 60% of the voting stock of a bank under the Foreign Banks Libearlization Act and the Thrift Banks Act. 3. Place of incorporation test 4. NOTE: In determining the nationality of banks. at least 40% of its voting stock shall be owned by Filipinos. Grandfather rule 5. At least 60% of voting stock of any commercial bank shall be owned by Filipino citizens. In rural banks. WHAT HAPPENS THEN TO THE 20%? -Foreign inividuals an non-bank corporations may own or control up to 40% of the voting stock of a domestic bank – Provided. Principal place of usiness test C. .

D. III. Family Grous or Related Interests 1. Stockholdingsn of individuals related to each other within the fourth degree of consanguinity or affinity. Two or more corporations owned or controlled by the same family group or same group of persons shall be considered related interests and must be fullly disclosed in all transactions by such corporations or related groups of persons with the bank. legitimater or common-law shall be considered family groups or related interests and must be fullt disclosed in all transactions by such an individual with the bank. Board of Directors 4 | Page . 2.

*Non-Filipino citizens may become members of the bord of directors of a bank to the extent of the foreign participation in the equity of said bank. directors must formally organize the election of the a. MB may regulate the payment by the bank to its deirectors and officers of compensation. not acting as a nominee or representatve of any director or substantial holder f.oficer or majority shareholder of the bank/quasibank/trust entity. its subsidiaries and affiliates or related companies e. fees. Corporate officers. Shall be at least 5. legitimate or common law of any director. quorum: -Immediately after election. other officers provided for in the by-laws *Any 2 or more positions may be held concurrently by the same person EXCEPT that no one shall act as a president and secretary or as president and treasurer at the same time. Number of Directors 1. not or has not been an officer or employee of the bank/quasibank/trust entity. Directors of Merged or Consolidated Banks -The number of directors shall not excedd 21.A. an a maximum of 15 members of the board of directors of bank. who may or may not be a director c. secretary who shall be a resident nd citizen of the Philippines d. *Directors or trustees cannot attend ot vote by proy at board meetings. bonuses. its subsidiaries and affiliates or related interests during the past 3 years conted from the date of his election b. a. proit sharing and fringe benefits only in the exceptional cases and when the circumstances warrant. 2 shall be independent directors. . (except) -all be of legal age -majority are residents of the Phil. allowance. president who shall be thedirector b. its subsidiaries or ffiliates or related interests. not a majority shareholder of the institutions. -form a private corporation for any lawful purpose 2. Meetings 1. not a relative w/n 4th degree of consanguinity or affinity. treasurer. INDEPENDENT DIRECTOR-mean a person other tha an officer or employee of the bank. such as but not limited to the following: a. 2. stock options. Compensation and other Benefits of Directors and Officers 1. free from any business or other relationship which could materially interfere with the exerise of his judgment B. D. not a director of officer of related companies of the institution’s majority stokholder c. any of its related ompanies or of its majority shareholder d. May be conducted throuh modern technologies such as teleconferencing and video-conferencing *Banks shall include in theor bylaws a provision taht meetings of their board of directors shall be held only within the Philippines. C.

BP22) 2. Those who have been judicially declared insolvent. taht any such compensation other than per diems maybe granted to directors by the vote of the stockholers representing at least a majority of the outstanding capitl stock at a regular or special stockholder’s meeting. shall be given to his integrity. quasi anks or trust entities who were found by the MB as administratively liable for violation of banking law. Those directors. suspend or remove any bank director or officer who commits or omits an act which render himunfit for the position. Those directors. . officers or emplyees of banks. It shall not exceed 10& of the net income before income tax of the corporation durng the preceeding year. 3. IV. extortion. If found fit and proper. REMEDY: Sec. 2. 2.When a bank is under comptrollership or conservatorship b. malversation. Permanently Disqualified Directors 1. When found by the MB to be conucting business in an unsafe or unsound manner c. Powers of the MB 1.pass upon and review the qualifications and disqualifications of individuals elected or appointed bank directors or officers and disqualify those found unfit. training and competence. Those directors. the MB may disqualify. Have been convicted by final judgment of a court for violation of banking laws. forgery. Disqualification a.30 of the Corporation Code Directors shall not receive any compensation except for reasonable per diems. Have been convicted by final judgment of a court for offenses involving dishonesty or breach of trust (ex. experience. -MB shall prescribe. quasi anks or trust entities who were found to be culpable for such institution’s closure 6. When found to be an unsatisfactory financial condition. spendthrit or incapacitated to contract 5. B. Fit and Proper Rule A. Provided. Estafa. quasi anks or trust entities who were found to be unfit for the position of directors nad officers b. 3. To maintain the quality of bank management and afford better protection to depositors and the public in general. After due notice to the board of directors of the bank. officers or emplyees of banks. rules and regulations 4. Have been convicted by final judgment of a court sentecing them to serve a maximum term of imprisonment of more than 6 years. education. swindling. rules an regulaitons 7. officers or emplyees of banks. Temporarily Disqualified Directors: 1.

and those who failed to 5 | Page . both regular and special.Person who refuses to fully disclose the extent of their business interests to the appropriate suoervising and examining department. 2. Directors who have been absent or who have not participated in more than 50% of all meetings.

3. BP22) 5. or at least 2 obligations with other banks/financial institutions. Directors disqualified for failure to observe/discharge their duties & responsibilities 7. 12. quasi judicial bodies. b. indorser or surety of loans 2. No person convited by fianl judgment of an offense puishable by imprionment for a perios exceeding 6years or a violation of this Code within 5years prior to date of . swindling. Disqualification/ Prohibitions under the Corporation Code Sec. extortion. Any person found by MB to be unfit for th position of directors or officers. DELINQUENT IN THE PAYMENT OF OBLIGATIONS-an obligation of a person with a bank/quasibank/trust entity where he is a director or officer. Directors of officers of closed banks/quasibanks/trust entities pending their clearance by the MB 6. ar past due. malversation. the judiciary. such is found to be administratively liable. Those are administratively liable for violation of banking laws.physically attend at east 25% of all meetings in an year except those with notarized certification executed by the corporate secretary. Any person whose loan proceeds were credited to an acount for the benefit of a director or officer. underdifferent credit lines or loan contracts. C. A corporation. 4. rules and regulations. association or firm whollyowned by any group of persons 4. Obligations shall include all borrowings from a bank/quasibank obtained by: 1. Have been convicted by final judgment of a court for offenses involving dishonesty or breach of trust (ex. Persons who are deinquent in the payment of their obligations: a. Those under preventive suspension 10.27. National Bureau of Investigation. Directors who failed to attend the special seminar for board of directors 8. Director or officer for his own account or acts as guarantor. or on the official files of. 13. Persons dismissed/terminated from employment for cause. 9. The spouse or child under the parental authority of the director or officer 3. forgery. His spouse is the managing partner or a general partner owning a controlling interest in the partnership 5. Philippine National Police. Persons with derogatory records as certified by. 11. When penalty is suspension from office or fine is imposed. Estafa.

Provided. From a list of certified public accountants acceptable to the MB 2. D. Shall transact business on all working days for at least 6 hours a day. Shall submit to the appropriate supervising and examining dept. trustee or officer of any corporation. Financial Statements -Every bank etc. to all to open off site ATMS. Automated Teller Machines A. VI. May open for business on Sat. university campuses. supermarkets. hospitals. . and to submit a report of such audit. Sun or holidays for at least 3 hours a day. Banking Days and Hours A. Must comply with these. 4. 3. Banks hall notify the supervising and examining department of the BSP of the tual date a mobile ATM become oprational and when terminated. Mobile ATMs 1.is electiom or appointment shall qualify as a director. 2. MB shall require a bank etc. Number of Days and Hour 1. Working days mean Mon-Fri excpet holidays. Must submit a report to the appropriate department of the BSP on ATMs which they establish 2. even before 8am or after 8pm. Disqualification? Prohibitions under NCBA V. B. Shall be installed only in the centers of activity like shopping. VIII. 3. Branches at international airport or major fish port are allowed to operate on flexible banking hours provided hat wil inform BSP of the schedule of the banking hours that is not less than 6 hrs a day. Should allowed to visit only centers of activity and should confine their itinerary to Metro Manila until futher notice. VII. that adequate internal control and security measures shall be adopted nd submitted to BSP. Term of engagement hall be prescribed by MB. To review the internal audit and control system of teh bank etc. Board of Directors shall also conduct an annual balance sheet audit of the bank etc. whenther as continuing basis or special engagements. Off-ite Automated Teller Machines (ATMs) 1. To engage the services of an independent auditor to be chosen by a bank etc. Shall secure insurance coverage or adopt a self-insurance scheme to protect itself against losses of whatever nature in ita mobile ATM oprations 3. 2. If so. Independent Auditor 1. must repot to the Bangko Sentrl the additional days 3.

Of the BSP fianncial statements. offices. PUBLICATION: -In English or Filipino -At least once every quarter in a newspaper of general circulation in the city or province -BSP msy prescibe where it shall be published -Shall make available to the public an shall prescribe the complete set of its audited financial statements 6 | Page . -and shall contain such informations as required in the BSP regualtions. -It shall be of a specific date designated by BSP and shall show actual financial conditions of the institution submitting the statements. subsidiaries and affiliates. and of its branhes.

Of Labor who may assume jurisdiction over the dispute and decide it or certify the same. the provisions of the Gbl shall govern. NOTES: page 54-55 (IMPORTANT) IX. Laws Governing other Types of Banks -Thrift Banks Act. . Unsettles Labor Disputes -The banking industry is indispensable to the national interest. XI. Strikes and Lockouts A. X. CHAPTER 3. B. Agencies in actions and proceedings brought before them involving controversies in banks etc. . -No branch of any foreign bank doing business in the Phil shall in any way announce the amount of the capital and surplus of its had office. Cause of the strike/lockout and bank management’s position on its legality 2.-If there is local emergency or imminent panic. -The President. The followings are prohibited from maintaining demand deposits or current accounts with the bank office in which they are assigned. the amount o its capital actually paid-up. Settlement of Disputes -BSP shall be consulted by other gov. Currency and are subject to payment in legal tender upon demand by presentation of checks. -If unsettled afer 7 days shall be reported by the BSP to the Sec. b. a. as well as disputes between any all or all of them which theya re the directors. Rural Banks Act. Cooperative Code -For Islamic banks-special laws -For purposes of prescribing the minimum ration which the net worth of a thrift bank must bear to its total risk assets. Bank oprations affected XII. the MB by vote of at least 5 of its members may allow to defer for a stated period of time the publication of the statement of financial condition. DEPOSIT FUNCTIONS OF BANKS Demand deposits – are all those liabilities of the BSP and other banks which are denominated in Phil. All officers. officers or stockholders. Publication of Capital Stock -It shll not publish the amount of its authorized or subscribed capital stock without indicating at the same tme and with equal prominence. may intervene and assume juridiction over suh labor dispute in order to settle and terminate the same. Reports of Strikes and lockouts The bank shal disclose pertinent info: 1.

QUASI – BANKING FUNCTIONS: Essential elements of quasi-banking are: A. Others employees who have direct and immediate responsibility in the handling of transactions/records pertaining to demand deposits or current accounts. Negotiable order of withdrawal (NOW) – are interest – bearing deposits of accounts that combine the payable on demand feature of the checks and investment feature of a savings acct. Time deposits – one the payment of which cannot legally be required within such a specified number of days. RESPONSIBILITY OF THE DRAWER He must personally keep track of his available balance in the bank and not rely on the bank to notify him of the necessity to fund certain checks he previously issued. Thrift banks/Rural banks/Cooperative banks need approval of BSP NON – NEGOTIABLE CTD -Banks may issue long-term negotiable tax exempt certificates of time deposit without approval of the BSP. B. DUTY OF BANK TO HONOR CHECKS Where the bank possesses funds of a depositor it is bound to honor his checks to the extent of the amount of his deposits. relatives within 2nd degree of consanguinity and affinity of the officers and employee covered by the prohibition. The spouse. Universal banks / commercial banks may issue NCTDs without approval of BSP b. NEGOTIABLE CERTIFICATES OF TIME DEPOSITS (NCTD’s) a. endorsement. Includes also. 20 or more lenders at any one time. DUTY OF BANKS TO KNOW SIGNATURES A bank is bound to know the signatures of its customers. NO OBLI. WITHDRAWALS BAKS ARE PROHIBITED FROM ISSUING/ACCEPTING Withdrawals slips without requiring the depositors to present their passbooks and accomplishing necessary withdrawal slips except for banks authorized by BSP to adopt the no passbook withdrawal system. Methods of borrowing are issuance. entitles the drawer to substantial damage without any proof of actual damages. or acceptance of debt instruments .Employees of the bank’s cash department/cash units c. Failure of the bank to pay the check. borrowing of funds for the borrower’s own account. C. TO PAY PARTIAL PAYMENT A bank is under no obligation to make part payment on the check up to only the amount of the drawer’s fund where the check is drawn for an amount larger than what the drawer has on deposit.

natural or juridical may deposit with such Phil. other than deposits D. The purpose of which is (1) relending. or (2) purchasing receivables or other obligations Any person.of any kind. 7 | Page . Bank in good standing foreign currencies which are acceptable as part of the international reserve except those which are required by the central bank to be surrendered.

deposits received shall be booked likewise. METICULOUS CARE A bank is required to take meticulous care of the deposits of its clients. who have the right to expect high standards of integrity and performance from it. Corporations a. Duties of Banks A. upon the death of either. Clearing cut –off time General rule: all deposits and withdrawals during regular banking hours shall be credited or debited to deposit liability accounts on the date of receipt or payment thereof. its operation or effect may be violative of the law. if any. further that banks are located in areas where there are no BSP regional/clearing arrangement may set a clearing cut-off time not earlier than 2 hours before the start of their local clearing after which time. Parents may nevertheless deposit for their minor children and guardians for their wards. b. Survivorship Agreement Definition: Joint owners of a deposit agree that either of them could withdraw any part or the whole of said account during the lifetime of both. have sufficient discretion. Administration of deposits All banking institutions are required to set a minimum of 3 specimens of their depositors and to update the specimen of signatures every 5 years or sooner. B.Anonymous accounts or accounts under fictitious name should not be kept allowed. 2. III. Post Incorporation – in opening a bank account. the board of directors issues a resolution authorizing the signatories and specifying the depository bank. 4. the SEC requires a bank certificate of deposit of paid-up capital notarized in place where signed. agencies. whether such account consists only of a few hundred pesos or of millions. Provided. able to read and write. In every case the depositor expects the bank to treat his account with the utmost fidelity. at the discretion of the bank. . belonged to the survivor. not otherwise disqualified by any other incapacity. however. 1. at least 7 years of age. II. provided. 3. Minors are vested with special capacity and power to make savings. provided the f requirements are met. and withdraw the same without the assistance of their parents or guardians. IV. and extension office doing business in the Philippines. Although survivorship agreement is per se not contrary to law. and the balance. Incorporation Stage – payment of subscription is in cash. that a bank may set a clearing cut –off time for its head office not earlier than 2 hours before the start of clearing at the BSP and not earlier than 3-1/2 hours before the start of clearing for all its branches.

CHAPTER 4 Operations of a Universal Bank . 2. bureau or office except upon. inquired or looked into by any person. where the money deposited or invested is the subject matter of the litigation. Authority to inquire into bank deposits under the ANTI MONEY LAUNDERING ACT The AMLC may inquire into or examine any particular deposit or investment with any banking institution or non-bank financial institution upon order of any competent court in cases of violation. IN CASE OF DEATH OF DEPOSITOR National revenue code provides: If a bank has knowledge of the death of the depositor. any taxpayer who has filed an application for compromise of his tax liability by reason of financial incapacity to pay his tax liability. 4. 8367 Absolute Confidentiality All deposits of whatever nature with an Association in the Philippines are herby considered as of an absolutely confidential nature and may not be examined. there is probable cause that the deposits or investments are related to an unlawful activity. written permission of the depositor.000 without the said certification. b. b. when it has been established that. Provided. a decedent to determine his gross estate. to give encouragement to the people to deposit their money in banking institutions. it shall not allow any withdrawal from said deposit account unless the commissioner has certified that the taxes imposed thereon by this title have been paid. V. upon order of a competent court in cases of bribery or dereliction of duty of public officials. government official. a money laundering offense. Secrecy of bank Deposits Purposes a. R.PAYMENT TO PROPER PARTY C. a.A. to discourage private hoarding so that the same may be properly utilized by banks in authorized loans to assist in the economic development of the country. 1. a. in case of impeachment. that the administrator of the estate or any 1 of the heirs of the decent may upon authorization of the commissioner withdraw an amount not exceeding 20. Authority of the Commissioner of Internal Revenue to inquire into deposits In cases. b. 3. however. in cases.

Power to invest in non-allied enterprises II. Powers of a commercial bank b. Total investment shall not exceed 50% of the net worth of the bank 8 | Page . Powers of an inverstment house c. Allied or non-allied i. Allied enterprises: financial or non-financial ii.a. Equity Investments of a Universal Bank a.

net of valuation. Shall not exceed 40% equity Operations of Commercial Banks I. insurance agencies. Rural/Cooperative Banks may invest. Powers a. as a non-financial allied undertaking in the ff: i. mining. May own up to 100% b. etc. Financial Allied: leasing companies. Warehousing and postharvest facilities ii. safe deposit box. Marketing of agri products v. Investments in Quasi-Banks a. Such powers necessary to carry on the business of commercial banking: . insurance companies. financial and commercial complex projects. Powers incident to corporations b. financing companies. VI. management of mutual funds. A publicly-listed universal or commercial bank can own only one other universal or commercial bank c. Warehousing. Farm equipment distribution iii.iii. banks.etc. Shall not exceed 35% of the total equity in that enterprise nor shall it exceed 35% of the voting stock b. providing computer services. home building and home development c. Acquisition is subject to prior approval of the Monetary Board III. Can own up to 100% of the equity in a thrift bank. Net worth-total of the unimpaired paid-in capital including paid-in surplus. Total investment in one enterprise shall not exceed 25% of the net worth of the bank iv. Transportation of agricultural products iv. manufacturing. Investments in Non-Allied Enterprises a. Only universal banks can investment in non-allied enterprises: i. storage. reserves and other adjustments b. IV. credit card companies. Equity Investments of a Universal Bank in Non-financial allied enterprises a. holding company. Equity investments of a Universal Bank in Financial Allied Enterprises a. activities in agri. investment houses. Industrial park projects. a rural bank or others within this category b. retained earnings and undivided profit. Leasing V.

Investments of a Commercial Bank a. Independence Principle-assures the seller of prompt payment even if buyer has not yet reimbursed as long as the seller presents the necessary documents III. Letters of Credit a. Accepting drafts and issuance of letters of credit ii. As provided by the monetary board for reasons of national interest . bank and seller. Uniformly applied for banks in the same category II. 100% of the equity of a thrift bank or a rural bank b. Investments in non-financial allied a. Minimum Ratio-monetary board shall prescribe. IV. In other financial allied enterprises. Except: i. Extending credit v. Credit Accommodations and Guarantees I. May be altered or suspended for a maximum of one year when necessary b. investment shall only be a minority holding V. Restrict or prohibit acquisition of major assets Limits on Loans. Only equities in allied enterprises: either financial or non-financial b. Accepting or creating demand deposits iii. ration of the net worth of the bank to its total risk assets which may include contingent accounts a. Discounting negotiating promissory notes. etc. Buying and selling foreign exchange and gold or silver vi. Total investment in any one enterprise shall not exceed 25% of the net worth of the bank. Effect of Non-Compliance a. buyer and seller b. Single Borrower’s Limit-shall not exceed 20% of the net worth of the bank a. Total investments in allied enterprises shall not exceed 35% of the net worth of the bank c. 3 relationships created: bank and buyer. May own up to 100% Risk-Based Capital I.i. Receiving deposit substitutes iv. Limit or prohibit the distribution of net profits b. Investments in Financial Allied a. II.

Prohibits the ff: a. transfers his credit to another who acquires the power to enforce it to the same extent as the creditor could have. Direct or indirectly borrow from the bank b. by a legal cause. such as sales.ii. Assignment of Credit-agreement by virtue of which the owner of a credit. Loans covered by assignment of deposits maintained in the bank c. Direct liability of the maker of paper sold or discounted with the bank b. DOSRI I. If the borrower owns ac majority interest in a corporation. the liabilities of the members thereof III. Become a guarantor or indorses or surety for loans from such bank to others c. SBL should include: a. it shall also be subject to the limits herein prescribed V. Be an obligor to the bank except with the written approval of the majority of all the directors of the bank II. In case of partnership or association. Loans under letters of credit covered by margin deposits d. Deposits of rural banks with GOC financial institutions b. donation. Loans secured by the BSP or government b. Pacto Commissorio-automatic appropriation of the pledged or mortgaged property by the creditor in payment of the loan upon its maturity. Bank Guarantee-irrevocable commitment of bank binding itself to pay in the vent of non-performance by a third party. and without the need of the consent of the debtor. The approval shall entered on the records of the bank 9 | Page . Contingent Accounts of borrowers may be included among those subject to the limits VI. Loans specified as non-risk items IV. Liabilities of subsidiaries of a corporation who is borrowing from the bank d. VII. SBL should exclude: a. the liabilities of said corporation is included c. It is not allowed in assignment of deposits. The limit maybe increased by 10% provided the additional loans are secured II. dation in payment.

co-owner with a DOSRI or those in a) of a property used as a security d. Officers: a. Shall not exceed 75% of the appraised value plus 60% of the insured improvements II. Corporation owned by the stockholder or his wife VII.III. Pres. Stockholder-stockholder or record in the books of the bank a. Treasurer. Corporation or association where the DOSRI or those in a) are is also a director e. VP. Arms Length Rule-Dealings with DOSRI shall be upon terms not less favorable to the bank IV. Elected to fill vacancies V. Spouse and/or relative within the 1st degree or consanguinity or affinity b. Secured by Chattels and Intangible Properties a. Elected in meetings of the stockholders c. Trust Officer b. Related Interests a. Chairman. Names in the articles of incorporation b. GM. Secured by Real Estate a. Includes: i. Shall not exceed to 75% Grant and Purpose of Loans I. Directors: a. VP. Spouse and/or relative within the 1st degree or consanguinity or affinity ii. vice-chairman or any other position who performs functions of management VI. EVP. Effect of Violation-after due notice. Sr. Only in the amount and for the period of time essential for the completion of the operations to be financed. Amount and Purpose a. partnership where DOSRI of those in a) above are general partners c. Corporation wholly or majority owned or owned by at least 20% by the DOSRI or those in a) VIII. Secretary. the office of the person violating shall be declared vacant and shal be subject to the penal provisions of NCBA Securities on Loans I. This shall be done consistent with safe and sound banking practice .

Escalation clause-raising of interest i. The purpose shall be stated in the application c. IV. Will be considered as void. For this reason. Reason for Stringent Rules in Granting Loans-The bank invests the money it holds in trust for the depositors. Hence.b. Only allowed when the monetary board has increased the rate of interest provided that there is also a stipulation that interest will be lowered if MB has lowered the rate of interest ii. the bank may terminate the loan and demand immediate repayment II. Other Security Requirements-The MB may prescribe further security requirements shall be subject to. Even in the absence of this provision.5% per month or 66% per annum. . a bank is expected to ascertain the identities of the persons transacting with them to protect both the interest of the bank and the depositors. Other information prescribed by law or by the Monetary Board d. Exception: if the creditor unilaterally decreased the interest even if it was not stipulated. VI. With those whose maturities are more than 5 years-periodic amortization but must be made annually c. Microfinance-take into consideration the projected cash flow of the borrower e. Requirements: a. esacalation will be allowed f. Shall be adapted to the nature o the operations to be financed b. Statement of their income and expenditure c. Both instances should be present before escalation clause is allowed iii. Unsecured Loans or Other Credit Accommodations-The MB is authorized to issue regulations with respect to unsecured loans V. the bank may still demand immediate repayment because the borrower has lost the benefit of the period under Art. Statement of assets and liabilities b. Unconscionable and exorbitant interests-SC: 5. Amortization on Loans a. 1198 of the Civil Code III. the court may reduce the interest rate VIII. Authority to Prescribe Terms and Conditions of Loans VII. Loans are used for purposes not initially producing revenue-amortization may be deferred until such time as said revenues are sufficient but in no case shall it be later than 5 years d. If the purpose stated was not followed.

and LGUs X. Charges which are paid in connection with the transaction d. The cash price of the property or service to be acquired b. Creditor: any person engaged in the business of extending credit who requires as an incident to the extension of credit. Disclosure shall include: a. Provisions for losses and write-off a. Definitions: a. Banks cannot extend peso loans to non-residents XII. mortgage. or both) V. Any conditional sales contract iii. Finance charge III. Penalty-either civil or criminal (1k-5k fine or imprisonment for 6-12 months. Bad debts-debts due to on which interest is past due and unpaid b. Renewal of Exntension of Loans-maybe regulated by the MB and prescribe conditions and limitations XI. Finance Charge-interest and fees incident to the extension of credit c. hospitals. deed of trust. low-cost housing. Amounts for downpayment c. advance or discount ii.Prepayment of Loans-prior to the maturity date. Rental-purchase contract b. borrower may pay subject to such reasonable terms agreed upon with the bank IX. Government is exempted from the punishment or penalty Foreclosure of Real Estate 10 | P a g e . the payment of a finance charge IV. Development Assistance Incentive-BSP shall give incentives to banks who extend loans to education. cooperatives. any loan. Policy-protect the citizens from a lack of awareness of the true cost of credit by assuring a full disclosure of such cost II. Amount to be financed e. MB shall fix the amount of reserves for bad debts Truth In Lending (RA 3765-Disclosure of Finance Charges) I. Crediti.

Real property. Equity of Redemption-right of the mortgagor to extinguish the mortgage and retain ownership by paying the secured debt within a period not less than 90 days nor more than 120 days after the judgment becomes final. leasehold rights. buildings. fixtures. Total investment in real estate including improvements shall not exceed 50% of combined capital accounts c. Acquisition of Real Estate by way of satisfaction of claims a. The MB shall establish a criteria for reviewing major acquisitions by a bank II. Shall be mortgaged to it in good faith by way of security of debts ii. However. Any petition in court to restrain the auction shall only be given due course upon the filing of a bond in an amount fixed by the court IV. Notwithstanding the limitations given above. Investments by a bank in a real estate corporation shall be considered as part of the total investment in real estate by the bank III. chattel purchased by the bank in its name b. Right of Redemption may be extended Major Investments I. Right of Redemption exists only in extrajudicial foreclosure sale i. Right of Redemption a. a bank may acquire real estate under the ff circumstances: i. quipmet. construction. Acquire real estate necessary for its own use in the conduct of its business i. Bank premises-land. The mortgagor or debtor has the right within one year after the sale of the real estate. furniture ii. the registration of the certificate of foreclosure with the Register of Deeds within 3 months V.I. (Rule 68. . Real Property acquired under this provision shall be disposed by the bank within a period of 5 years c. Conveyed to it in satisfaction of debts previously contracted iii. Juridical Persons shall have the right to redeem the property until. but not after. or trust deeds held by it b. decrees. Purchased at sales under judgments. Ceiling on Investments a. the purchaser at the auction shall have the right to take possession immediately after the date of the confirmation of the auction sale III. mortgages. Rules of Court) iii. to redeem the property by paying the amount due in the mortgage w/ interest and all the cost and expenses II. Equity of Redemption v. In a judicial foreclosure sale where the mortgagee is the PNB or a banking institution. right of redemption exits ii. improvement.

Rent out safety deposit boxes VI. it may continue to hold such property beyond the period given if the limitations given in the previous provision are not yet reached. adviser. With approval of the MB. Receive in custody funds. Outsourcing of IT systems-can be done with prior approval of the MB except: a. Janitorial services g. BSP shall have full authority to regulate the use of electronic devices used in connection with the operations of a bank including the delivery of services and products to customers II. consultant or administrator of an investment management with the approval of the MB V. Make collection and payments for the account of others IV. Data imaging b. Service level and contract management e. Act as financial agent and buy and sell for their customers III. Other Banking Services I. VII. Change management inclusive of quality assurance and testing d. Determination of system functionalities c. Legal services Questions: . If a box is rented by two persons. Credit investigation f. Strategic planning for the use of IT b. bank loan statements. Act as managing agent.However. Safety Deposit Box-Special Kind of Deposit because it cannot be characterized as a contract of lease since the guard key of the box remains with the bank. Printing of bank deposit statement. Clearing and processing of checks not in the Philippine Clearing House system c. Credit card services e. Procurement services h. The SC said that the rent of a safety deposit box is that of a bailor an bailee Electronic Transactions I. the agreement between them shall govern VIII. banks may outsource the ff: a. bank forms and promotional materials d. documents and other objects II. Security policy and administration Outsourcing of other functions I.

or agent of any bank shall – 11 | P a g e . No director. 55. for the purpose of the constitution is to place and keep in the hands of the people the ownership of private lands in order not to endanger the integrity of the nation Chapter 5 Sec. employee. 54. any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety c) doing any kind of business. 55. specifically recognized as constituting the doing of an insurance business within the meaning of the Insurance Code d) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of the Insurance Code Sec. as insurer. as surety. any insurance contract b) making or proposing to make.1. including a reinsurance business.Whether or not an alien-owned bank can acquire ownership of a residential lot by virtue of a deed of transfer as settlement of a debt • No. *Includes: a) making or proposing to make. Prohibited Transactions. officer. -A bank shall not directly engage in insurance business as the insurer. Prohibition to Act as Insurer.

the manpower to service the deposit transactions of the former . (c) Attempt to defraud the said bank in the event of a court action to recover a loan or other credit accommodation. (b) Without order of a court of competent jurisdiction.3. may be deemed as conducting business in an unsafe or unsound manner for purposes of this Section. 1405. officer or employee of the Bangko Sentral or of any department. no bank shall employ casual or non regular personnel or too lengthy probationary personnel in the conduct of its business involving bank deposits. Sec. . examine. the provisions of existing laws shall prevail. which is not otherwise prohibited by any law. the Monetary Board shall consider any . renewing. disclose to any unauthorized person any information relative to the funds or properties in the custody of the bank belonging to private individuals. Consistent with the provisions of Republic Act No. or causing damage to.(a) Make false entries in any bank report or statement or participate in any fraudulent transaction. (c) Accept gifts. intended to ensure secrecy of bank deposits 55. branch or agency of the Government that is assigned to supervise. bureau. or any act whereby the latter supplies. No borrower of a bank shall ( a) Fraudulently overvalue property offered as security for a loan or other credit accommodation from the bank. employee or agent of a bank any gift. (b) Furnish false or make misrepresentation or suppression of material facts for the purpose of obtaining. commission. 56. or commissions or any other form of remuneration in connection with the approval of a loan or other credit accommodation from said bank. No examiner. fee. fees. assist or render technical assistance to any bank shall commit any of the acts enumerated in this Section or aid in the commission of the same. refers to any contract between the bank and a service provider for the latter to supply. rule or regulation affecting banks. Conducting Business in an Unsafe or Unsound Manner -In determining whether a particular act or omission. or increasing a loan or other credit accommodation or extending the period thereof. or any other form of compensation in order to influence such persons into approving a loan or other credit accommodation application. or (e) Outsource inherent banking functions.2. 55. corporations. office. (d) Overvalue or aid in overvaluing any security for the purpose of influencing in any way the actions of the bank or any bank. or any other entity: Provided. the bank or any person. That with respect to bank deposits.4. officer. quasi-banks or trust entities. or (d) Offer any director. The making of false reports or misrepresentation or suppression of material facts by personnel of the Bangko Sental ng Pilipinas shall be subject to the administrative and criminal sanctions provided under the New Central Bank Act. thereby affecting the financial interest of. otherwise known as the Banks Secrecy Law. 55.

creditors. the powers and duties of the conservator appointed for the bank shall be governed by the provisions of Section 29 and the last two paragraphs of Section 30 of the New Central Bank Act: Provided. 57.4.” “trust corporation. the provisions of law to the contrary notwithstanding.” “savings and loan association. 56. association. corporation or association. . It does not comply with the liquidity standards/ratios prescribed by the Bangko Sentral for purposes of determining funds available for dividend declaration.” “quasi-banking.” “banking. It has committed a major violation as may be determined by the Bangko Sentral. 64. the Monetary Board may. or has given any unwarranted benefits. quasi-bank or trust entity. quasi-bank. evident bad faith or gross inexcusable negligence. 67. the word or words “bank. or 57. 57. whether or not the director or officer profited or will profit thereby. That this Section shall also apply to conservatorship proceedings of quasi-banks.4. Conservatorship. – The grounds and procedures for placing a bank under conservatorship. trust entity. stockholders or to the Bangko Sentral or to the public in general.” “trust company” or words of similar import or transact in any manner the business of any such bank. stability. Sec. investors. or association. or 57. – No bank or quasi-bank shall declare dividends. shall advertise or hold itself out as being engaged in the business of such bank. or 56. The act or omission has caused any undue injury. 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. trust entity. without prejudice to the administrative sanctions provided in Section 37 of the New Central Bank Act. or use in connection with its business title. Sec. Unauthorized Advertisement or Business Representation.of the following circumstances: 56.3. It is deficient in the required liquidity floor for government deposits for five (5) or more consecutive days. Its clearing account with the Bangko Sentral is overdrawn. liquidity or solvency of the institution.1.2. or .” “quasi-banker. – No person. or corporation unless duly authorized to engage in the business of a bank. 56.The act or omission involves entering into any contract or transaction manifestly and grossly disadvantageous to the bank. or savings and loan association as defined in this Act. The act or omission has resulted or may result in material loss or damage or abnormal risk to the institution's depositors. quasi-bank or trust entity persists in conducting its business in an unsafe or unsound manner.2. if at the time of declaration: 57. quasi-bank. Prohibition on Dividend Declaration.” “quasi-bank. take action under Section 30 of the same Act and/or immediately exclude the erring bank from clearing. or other banking laws.3. Whenever a bank. The act or omission has resulted or may result in material loss or damage.” “banker. as well as. or abnormal risk or danger to the safety. Sec. .1.

the Monetary Board finds that a bank or quasi-bank is in a state of: 12 | P a g e .*Grounds for appointment of conservator Whenever. on the basis of a report submitted by the appropriate supervising or examining department.

It should likewise be terminated should the Monetary Board. reorganize the management. Sec. . collect all monies and debts due said institutions. under existing law. continuing inability. 2. and the management thereof. The Monetary Board shall terminate the conservatorship when it is satisfied that the institution can continue to operate on its own and the conservatorship is no longer necessary. *Powers of conservator cannot impair the obligations of contracts – the law merely gives him the power to revoke contracts that are. Voluntary Liquidation. thus providing the ability to pay debts *Qualifications of conservator: 1. The conservator shall report and be responsible to the Monetary Board and shall have the power to overrule or revoke the actions of the previous management and board of directors of the bank or quasi-bank. on the basis of the report of the conservator or of its own findings. and the Monetary Board shall have the right to intervene and take such steps as may be necessary to protect the interests of creditors.1. determine that the continuance in business of the institution would involve probable loss to its depositors or creditors. 2. competent 2. or 2. 3. unwillingness to maintain a condition of liquidity deemed adequate to protect the interests of depositors and creditors. 68. liabilities. and 4. written notice of such liquidation shall be sent to the Monetary Board before such liquidation shall be sent to the Monetary Board before such liquidation is undertaken. exercise all powers necessary to restore its viability. *Liquidity – the ability of an asset to be converted into cash quickly and without any price discount *Solvency – the condition that exists when liabilities amount to less than total assets. or of any branch or office in the Philippines of a foreign bank. knowledgeable in bank operations and management *Period of conservatorship – shall not exceed 1 year *Termination of conservatorship: 1. deemed to be defective. – In case of voluntary liquidation of any bank organized under the laws of the Philippines. take charge of the assets. the Monetary Board may appoint a conservator with such powers as the Monetary Board shall deem necessary to: 1. in which case the provisions on receivership and liquidation shall apply.

has willfully violated a cease-and-desist order that has become final. to receive rents d. property. or destroying or causing misappropriation and destruction of the bank’s assets d. to compound for and compromise the same f. to pay outstanding debts h. to divide the money and other property that shall remain among the persons legally entitled to receive the same i. appropriating for himself or another party. to meet its liabilities 3. generally to do such acts respecting the property as the court may authorize *Prohibited acts: Any director or officer of a bank declared insolvent or placed under receivership by the Monetary Board shall not commit any of the ff: a. . to make transfers g. involving acts or transactions which amount to fraud or a dissipation of the assets of the institution *Powers of a receiver: a. to take and keep possession of the property in controversy c. no voluntary dissolution shall be undertaken by a bank without prior approval of the Monetary Board.. that it shall be accompanied by a liquidation plan and written notice *Grounds for receivership and liquidation: The bank or quasi-bank: 1. has insufficient realizable assets. cannot continue in business without involving probable losses to its depositors or creditors 4. to bring and defend. in such capacity. person. provided further. or by a receiver appointed by the bank . tampering with bank records c. as determined by the Bangko Sentral. estate. to collect debts due to himself as receiver or to the fund. actions in his own name b. may be undertaken by the bank itself through its board of directors. is unable to pay its liabilities as they become due in the ordinary course of business 2. or corporation of which he is the receiver e. refusing to turn over the bank’s records and assets to the designated receiver b. by a trustee appointed by the bank.

depositors. A hearing may be subsequent to the closure. retention of juridical personality 2. assets are deemed under custodia legis 4. not liable to pay interest 3. and/or receivables e. paying out or permitting or causing to be paid out any funds of said bank f. *Effects of receivership and liquidation: 1. exclusive jurisdiction of liquidation court 13 | P a g e . This is to prevent unwarranted dissipation of the bank’s assets and is a valid exercise of police power to protect the creditors. restriction of bank’s capacity to act 6. transferring or permitting or causing to be transferred any securities or property of said bank *”Close now hear later” scheme – the law does not contemplate prior notice and hearing before a bank may be directed to stop operations and placed under receivership.receiving or permitting or causing to be received in said bank any deposit. and the general public. stockholders. stay of execution of judgment 5. collection of loans.

or who appropriates for himself for another party or destroys or causes the misappropriation and destruction of the bank’s assets. The SC. or who tampers with banks records. the BSP passed a resolution suspending the bank’s operations. hence it cannot pay the interest. C deposited money with O bank. However.Sec. the bank became insolvent before the buyer learned of the acceptance. collection of loans and/or receivables. for which reason O bank is ready to accept its liability for the payment to C of the balance of the principal amount deposited with it. annulled said resolution. the price agreed upon was reasonable. it is able to generate funds to cover the payment of such interest. Penalty for Transactions After a Bank Becomes Insolvent. Is O bank liable for interest thereon during the period it was closed? . Offshore Banking – governed by Offshore Banking System Decree -conduct of banking transactions in foreign currency involving receipt of funds from external sources and its utilization. or who receives or permits or causes to be received in said bank any deposit. Is the revocation valid? . No. What enables a bank to pay stipulated interest on money deposited with it is that thru the other aspects of its operation. – Any director or officer of any bank declared insolvent or placed under receivership by the Monetary Board who refuses to turn over the bank’s records and assets to the designated receivers. Power of conservator cannot impair the obligations of contracts. or who pays out or permits or causes to be transferred any securities or property of said bank shall be subject to the penal provisions of the New Central Bank Act. . No. A buyer offered to buy the property of a bank which the latter accepted. it cannot generate such funds. Before said deposits could be withdrawn. thru establishments of branches governed by Foreign Bank Liberazation Act. If it is closed. **Problems** The conservator of B bank revoked a contract previously entered into by the bank on the ground that the lands subject of said contract presently commanded a much higher price than when it was sold. Was there a perfected contract? . Foreign Banks – entry to Phils. None. Chapter 6: Foreign Banks and Trust Operations I. A contract of sale entered into by a bank cannot be revoked if at the time of the transaction. The accepted offer became ineffective when the bank became insolvent before the bank’s acceptance of said offer came to the offeror’s knowledge. howver. 70.

-To protect interests of depositors and creditors of Phil. 3. before it issues a license for it to transact business in Phil. branch. Summons and Legal Process: If served on agent or head of foreign bank. who are creditors shall have preferential rights to assets of such branch. service of process: -SEC shall require foreign bank to file with SEC a written power of atty. designating a resident of the Phil. 2. Any right or incentive granted to foreign bank shall be equally enjoyed by banks organized under laws of RP. 128. -Foreign bank shall execute and file with SEC an agreement. 4. shall notify SEC in writing. to further acquire voting shares to extent necessary for it to own up to 100%. within 10 days. If “without license”. latter shall transmit it by mail to the head office of such bank. Agency n Phil but cannot sue before Phil. if it desires to do business here. Doing business without a license – foreign corporation transacting business in Phil. Wthin 7 yrs from effectivitiy of GBL.Offshore banking unit – branch. subsidiary. MB may authorize those foreign bank which prior to effectivity of GBL availed itself of 60% of voting stock of a bank under FBLA and Thrift Banks Act. -Primary purpose of Statute: to compel foreign corp. courts though on any valid cause. even if adverse to it. and all reference to Phil. -By securing a license. Sec. MB may authorize foreign bank to acquire up to 100% of voting stock of ONLY one bank organized under laws of RP. MB shall adopt measures to the control of 70% of resources and assets of entire banking system is held by banks which are majority owned by Filipinos. a foreign entity would be giving assurance that it wll abide by the decisions of our courts. NOTES: -all branches of foreign bank shall be treated as one unit for purpose of GBL. -Residents and citizens of the Phil.. affiliate of a foreign banking corporation authorized to transact offshore banking business in Phil. -In case of change of address of resident agent. Acquisition of Voting Stock in a Domestic Bank: 1. -our courts acquires jurisdiction over such bank. may maintain or intervene in any action. -binds the bank which it represents. Resident agent. Consistent with Corporation Code…. 133. suit or proceeding in any court or adm. branches of foreign banks shall be held to refer to such unit. to submit itself to the jurisdiction of courts of the Phils. -If summons be made with SEC. branches of FB. whom summons must be served. Within same period.no access to our courts and cannot transact business in Phil. Notes: Corporation Code Sec. their head office shall fully guarantee prompt payment of all liabilities of its Phil. .

If authority of agent or head revoked; or he became mentally incompetent, -bank shall designate a new one. -File with SEC a duly authenticated nomination of such agent. In absence of agent or head; or no person authorized , -summons and legal process and notices be made upon Bangko Sentral Deputy Governor In-Charge of the supervising and examining departments. The latter upon receipt, shall transmit by mail to president or secretary of bank at its head or principal office a duly certified copy. -Sending of copy is necessary part of services and shall complete service. -Registry receipt is prima facie evidence of transmission. 14 | P a g e

-All costs incurred in transmission shall be paid in advance by the party whose instance the service is made. Revocation of license of Foreign Bank: -By Monetay Board. -If insolvent, in imminent danger, or its continuance will involve probable loss to those it transacts business with. -After revocation, it cannot transact business unless license is renewed or reissued. -After revocation. BSP shall take action to protect creditors and public. -New Central Bank Act provides the sanction and penalties. II. Liberalized Entry of Foreign Banks: Purpose: 1. to create more competitive environment. 2. to encourage greater foreign participation Policies: 1. develop self-reliant economy controlled by Filipinos. 2. promote a competitive and stable banking system 3. provide a wider variety of financial services 4. enhance competitiveness in international market to promote industrialization. Modes of Entry: a. acquiring up to 60% of voting stocks of an existing bank b. investing up to 60% of voting stocks of new banking subsidiary incorporated under Phil. laws. c. Establishing branches with full banking authority. FB may avail only 1 mode -Only those included in top 150 FB in the world or top 5 banks in their country of origin allowed to mode (b) and (c). -To establish a branch or subsidiary, it must be widely-owned and publicly listed in its country of origin, unless owned by govt. of its country. -FB shall be allowed entry under 3rd mode within 5 yrs. From effectivity of RA 7721. 6 FB may be allowed by MB. -Additional 4 may be allowed on recommendation by MB and approval of President. -FB may open 3 branches in location of their choice, 3 branches in locations designated by MB to insure balanced economic development in all regions. Guidance for Approval: MB shall 1. ensure geographic representation. 2.

consider strategic trade and investment relationship between Phil. and country of FB. 3. study capacity, global reputation and stability in competitive environment of applicant. 4. ensure reciprocity rights are enjoyed by Phil banks in applicant’s country. 5. consider willingness to fully share their technology. Adoption of measures: MB adopt those which 1. ensures that 70% of resources and assets is held by domestic bank majority owned by Filipinos 2. prevents dominant market position by one bank 3. secures the listing in SEC of shares of stocks Capital Requirements: 1. Locally Incorporated Subsidiaries -minimum capital equal to that prescribed by MB for domestic banks of same category. 2. Foreign Bank Branches (entry under the 3rd mode) -not less than US dollar equal to P210,000,000 and shall be entitled to 3 branches o capital shall include those permanently assigned plus net due to head office outside the Philippines, 15% of which shall be inwardly remitted and converted into Philippine currency, provided that amounts invested in productive or export activities shall not be subject to conversion. Establishment of Additional Branches 1. FB can open three additional branches by inwardly remitting and converting into Philippine currency as permanently assigned capital, P35 Million per additional branch. Head Office Guarantee-shall guarantee prompt payment of all liabilities of its Philippine branches Board of Directors-aliens may become members of the Board of a bank to the extent of the foreign participation in the equity of said bank. Equal treatment-foreign banks shall also be subject to limitations imposed upon a Philippine bank such as the SBL, capital to risk asset ratio, development loans incentives etc. Trust Operations I. Authority to engage only a stock corporation or a person duly authorized by the MB shall act as a trustee -the cardinal principle is fidelity -Trust business-refers to any activity resulting from a trustor-trustee relationship involving the appointment of a trustee for the administration of funds and/or properties of the trustor for the benefit of the latter. II. Conduct of Trust business -Administer with diligence that a prudent man would exercise in the conduct of an

unless accompanied by a certificate of authority issued by the BSP IV. Minimum Capital-trust entity shall comply with the minimum paid-in capital requirements which will be determined by the MB. Registration of Articles of incorporation and by-laws -The SEC shall not register the same or any amendment thereto.enterprise -No transaction within the same trust entity will be allowed except when the transaction is authorized by the trustor and the relationship of the trustee and the other party involved is fully disclosed III. V. Powers of a trust entity: -Powers incident to a corporation -Act as trustee on any mortgage or bond issued by any body politic and to accept and execute ant trust consistent with law -Act as an administrator of a minor or incompetent upon the order of a court -Act as the executor of any will if named as the executor -Act as the administrator of any deceased person -Accept and execute and trust for the holding and administration of any estate including the rents and profits thereof -Establish and manage common trust funds 15 | P a g e .

Separation of Trust Business from General Business -Shall be kept physically separated and distinct from the accounts of the general business of the trust entity II. Upon presentation of a proof that the subject matter has been deposited with a trust entity. Those appointed by the court shall file a bond in such sum as the court may require b. Transactions requiring prior authority -Lend. Deposit for faithful performance of trust duties Before transacting any business. the subject matter of the trust or any part thereof be deposited with a trust entity c. MB or any court of competent jurisdiction. the court may order reduction in the amount of the bond given d. Exemption from Bond Requirement a. Trust entities required by the court to be an administrator. real estate acquired by the trust entity shall be acquired.VI. Requirements a. hold. Bond of certain person required for the faithful performance of duties I. etc are not required to give a bond Operations of Trust Entity I. Real Estate acquired by a trust entity -Unless otherwise directed by the trustor or the nature of the trust. or conveyed under the ff circumstances: o Mortgaged to it in good faith by way of security for debts o . sell. The reduced bond shall be adequate to secure the proper administration of the property II. unless directed by the instrument creating the trust III. Upon application in the court.000 -This deposit can be increased by the MB whenever it is necessary -The paid-in capital and surplus of the entity should be at least equal to the amount required to be deposited -A trust entity has the right to collect the interest earned on such deposit -All claims arising out of the trust business shall have priority over all other claims as regards the deposits. there shall be a deposit made with the BSP cash or securities approved by the MB an amount not less that P500. transfer or assign money or property to those related to the trustee -Purchase or acquire property or debt instruments to those related to the trustee -Invest in equities I which the trustee owns 50% of the capital -Sell transfer assign or lend from one trust account to another VII. Investment limitations of a trust entity -Limited to those loans or investments prescribed by law.

mortgages. In line with this policy. Declared Policy of the state • The State shall maintain a central monetary authority that shall function and operate as an independent and accountable body corporate in the discharge of its mandated responsibilities concerning money. while being a government owned corporation. Exemption of Trust Assets from claims • Those assets held by a trust entity shall not be subject to any claims other those of the parties interested in the trusts VI. Responsibilities and corporate Powers of the Banko Sentral A. Establishment of Branches • Shall be in the place of business stated in the articles of incorporation • Additional branches can be established with the approval of the MB • The trust entity and its branches should be considered as one unit VII. Sanctions and Penalties-those who violate the pertinent provisions of the GBL shall be subject to sanctions and penalties VI. Funds of LGUs for long term investments in securities and other evidences guaranteed by the national government. the central monetary authority established under the NCBA. Investment in non-trust funds b. Advertisement of Services • In a dignified manner • Ready and willing to give full disclosure of services being offered • Conduct its dealings with transparency VIII. banking and credit. NCBA) . it may continue to hold it beyond the period when: o It shall not exceed 50% of the combined capital accounts of the entity o The investment of a bank in another corporation engaged in real estate shall be considered as part of the total investment IV. shall enjoy fiscal and administrative autonomy. or trust deeds -These properties shall be conveyed within 5 years -However. decrees. and considering its unique functions and responsibilities. Funds of the government which are authorized by special laws to be placed in trust Chapter 7 The Bangko Sentral ng Pilipinas I. Creation.Conveyed to it in satisfaction of debts previously contracted o Purchased at sales under judgments. Money of Government • Banks may not receive or hold as trustee any money from the government o Except: government-owned banks with respect to the ff: . . Shall be governed by the GBL an other applicable laws V. (Section 1.

which shall be a body corporate known as the Bangko SEntral ng Pilipinas. – There is hereby established an independent central monetary authority. 16 | P a g e .B. Creation of the bangko Sentral ng Pilipinas • Section 2 & 4 of NCBA: SECTION 2 Creation of the Bangko Sentral.

4. the Central bank of the Philippines operating under existing laws. It shall have supervision over operations of banks. – The Bangko SEntral shall have its principal place of business in Metro Manila. but may maintain branches. may thereafter determine. Adopt. Enter into contracts 3. banking. Lease or own real and personal property. • Mandate by the Constitution: The Congress shall establish an independent central monetary authority. Until the congress otherwise provides. banking. Primary objective of BSP – maintain price stability conducive to a balanced and sustainable growth in the economy. 2. It shall also promote and maintain monetary stability and the convertibility of the peso. agencies and correspondents in such other places as the proper conduct of its business may require. the majority of whom shall come from the private sector. and to dispose of the same 4. D. SECTION 4 Place of Business. and credit. Corporate Powers of the Bngko Sentral 1. 5. the members of whose governing board must be natural-born Filipino citizens. C. alter and use a corporate seal 2. The authority shall provide policy direction in the areas of money. and patriotism. It shall have supervision over the operations of banks and exercise such regulatory powers as may be provided by law over the operations of finance companies and other institutions performing similar functions. and institutions performing similar functions. integrity. Sue and be sued 5. through the Secretary of Finance and the Secretary of Budget and Management. and credit. shall function as the central monetary authority. 3.The capital of the Bangko Sentral shall be Fifty Billion Pesos. Responsibility and Primary Objectives of the bangko Sentral 1. Responsibility of BSP -provide policy directions in the areas of money. of known probity. to be fully subscribed by the Government of the Republic. Perform all things necessary to carry out the purposes of the NCBA . It shall also exercise regulatory powers over the operations of finance companies and non-bank financial institutions performing quasi-banking functions. Ten Billion of which shall be fully paid for by the government upon effectivity of this act In such manner and form as the Government. They shall also be subject to such other qualifications and disabilities as may be prescribed by law.

6. E. The closest it can get to prosecuting is its power to sue and be sued (civil cases only). • BSP is an artificial person limited to its statutory powers. under such terms and conditions as maybe prescribed by the monetary board. it is a government corporation created principally to administer the monetary and banking System of the Philippines and not a prosecution authority like the fiscal’s office. F. Acquire and hold assets and incur liabilities in connection with its operation as authorized by the NCBA. anyone can denounce this to any prosecuting authority because said violations constitute a public offense and is a matter of public interest. But BSP and its officials have the duty to cause the prosecution of those who violate the banking laws. condone. Compromise. Power to Prosecute • BSP has no power to prosecute. or a s essential to the proper conduct of such operations 7. or release any claim of or settled liability to the Bangko Sentral . • Prosecution of violation of banking laws is not exclusive to BSP. regardless of the amount involved. Estoppel 17 | P a g e .

Issuance of rules of conduct or the establishment of standards of operation for uniform application to all institutions and functions covered. B. Enforcing prompt corrective action.• BSP is committed to maintain the stability of the country’s foreign exchange reserve position. BSP is stopped from enforcing circulars that would deny banks or banking institutions of their rights. but not limited to exceptional cases or to enable a bank or quasi-bank under rehabilitation or during a merger or consolidation to continue business with safety to its creditors. and limitations or other forms of regulation on the different types of accounts and practices of banks and quasi-banks which shall conform to internationally accepted standards. IV. II. II. the BSP shall phase out and transfer its supervising and regulatory powers over building and loan associations to the Home Insurance and Guarantee Corporation. Conduct of examination to determine compliance with the laws and regulations if the circumstances so warrant and determined by the monetary board. A. ceilings and limitations. but at the same time avoid irreparable or grave prejudice to participants of said program. ceilings. Ratios. III. Authority of the Bangko Sentral A. • Thus in case banks or banking institutions already faithfully complied with BASP’s directives. Hence BSP circulars/ memoranda must be implemented in a manner that would not only safeguard or harmonize them with government programs designed to uplift or promote the country’s level of production and employment. Composition • Composed of 7 members appointed by the president of the Philippines for a . Banking and Credit • Monetary Board may prescribe ratios. Phase out of Bangko Sentral Powers Over Building Loan and Association • Within 3 years form effectivity of GBl. Ceilings and Limitations • BSP shall provide policy direction in the areas of Money. • Monetary Board may exempt particular categories of transactions from such ratios. The Monetary Board • The powers and functions of the bangko Sentral may be exercised by the BAngko SEntral Monetary Board. Regular investigation which shall not be oftener than once a year V. Overseeing to ascertain that laws are complied with. Supervisory Powers of the bangko Sentral • Supervisory powers include the following: I. depositors and the general public. III. Inquiry into the solvency and liquidity of the institution VI. C. Underlying this commitment however is the government’s strict and faithful adherence to basic principles of fairness and decency under the Bill of Rights. Policy Direction. including those of the Bank of International Settlements.

3 shall have a term of 6 years and the other 2.term of 6 years. 18 | P a g e . • 5 members shall come from the private sector. he shall designate a Undersecretary in his department to attend as his alternate. o Whenever such cabinet cannot attend a meeting of the board. he shall designate a Deputy Governor to act as his alternate. 3 years. all of whom shall serve fulltime. · A member of the cabinet to be designated by the President. the Monetary Board shall designate one of its members as acting chairman. In such event. The members are: • Governor o Chairman of the monetary board o Appointment subject to confirmation of the Commission on Appointments o If governor cannot attend a meeting of the board. o Of the members first appointed.

lawyer. Vacancies • Cause of vacancy: death. Disqualifications of Monetary board Members i. Physically or mentally incapacitatedtaht he cannot properly discharge his duties and responsibilities as such incapacity a\has lasted for more than 6 months. employee. iv. Holding public office or public employment during their tenure. No member of the monetary board shall be employed in any such institution within two years after expiration of his term except when he serves as an official representative of the Government to such Institution. Being a director. (section 9 NCBA) E. 35 yrs old. Disqualifications imposed by RA 6713 (An act establishing a code of conduct and ethical standards for public officials and employees) ii. consultant. Qualifications of the Members of the monetary Board i. chairman 40yrs old iii. Known probity and patriotism v. iii.. agent. Grounds for removal of Monetary Board members • The president may remove any member of the monetary board for these reasons : i. Having a substantial interest in any private bank in the Philippines. Good moral character iv. removal • A new member shall be appointed who shall serve the unexpired term of the member concerned. resignation. officer. Recognized competence in social and economic disciplines. stockholder of any bank or any other institution under the supervision of the bangko Sentral. he must resign first to assume office as member of the monetary board iii. Person connected directly with any multilateral banking or financial institution. v. Guilty of fraudulent or illegal acts or which are manifestly opposed to . Unquestionable integrity vi.B. Member is subsequently disqualified under section 9 of NCBA ii. Natural born citizen ii. D. C. within 0ne year prior to his appointment vi.

the aims and interests of the bangko sentral. Exceptions ( 5 votes are needed in these cases): o Sec 61 GBL -In allowing banks to delay publication of its statements of financial condition in periods of national or local emergency. 19 | P a g e . or imminent panic which directly monetary and banking stability. Quorum. The Monetary Bard shall meet at least once a week. Presence of 4 members constitutes a quorum. iv. Decisions of MB shall require concurrence of 4 members. Meetings. i. Member no longer possesses the qualifications. Provided that the governor is always among those 4 iii. upon application of a bank. The board may be called to a meeting by the governor of the bangko sentral or by 2 other members of the board ii. F. Decisions and Proceedings of the Monetary board i.

or in time of national emergency to give the Monetary Board and the Government time in which to take constructive measures to forestall. the Monetary Board may. or during an exchange crisis. and may subject all transactions in gold and foreign exchange to license by the Bangko Sentral. at its discretion. however. — In periods of national and/or local emergency or of imminent financial panic which directly threaten monetary and banking stability. even during normal periods. That the Monetary Board has ascertained that the bank is not insolvent and has the assets defined hereunder to secure the advances: Provided. though foreseeable. That while such loans or advances are outstanding. Emergency Loans and Advances. -in the imminence of. likewise authorize the Bangko Sentral to grant emergency loans or advances to banking institutions. or events which. That a concurrent vote of at least five (5) members of the Monetary Board is obtained. by a vote of at least five (5) of its members. Examination and Fees.o Section 28 NCBA. o Section 72 NCBA. and may require that any foreign exchange thereafter obtained by any person residing or entity operating in the Philippines be delivered to the Bangko Sentral or to any bank or agent designated by the Bangko Sentral for the purpose. That there shall be an interval of at least twelve (12) months between annual examinations. except upon prior authorization by the Monetary Board. may deem expedient and to make a report on the same to the Monetary Board: Provided. o Section 84. authorize the Bangko Sentral to grant extraordinary loans or advances to banking institutions secured by assets as defined hereunder: Provided. may temporarily suspend or restrict sales of exchange by the Bangko Sentral. the debtor institution shall not. with the concurrence of at least five (5) of its members and with the approval of the President of the Philippines. further. the Monetary Board. shall examine the books of every banking institution once in every twelve (12) months. expand the total volume of its loans or investments. for the purpose of assisting a bank in a precarious financial condition or under serious financial pressures brought by unforeseen events. The amount of the first tranche shall be limited to twenty-five percent (25%) of the total deposit and deposit substitutes of the institution and shall be secured by government securities to the extent of their applicable loan values and other unencumbered first class collaterals which the Monetary Board may approve: Provided. at the effective exchange rate or rates. or overcome such a crisis or emergency. The Monetary Board may. personally or by deputy. could not be prevented by the bank concerned: Provided. The amount of any emergency loan or advance shall not exceed the sum of fifty percent (50%) of total deposits and deposit substitutes of the banking institution and shall be disbursed in two (2) or more tranches. and at such other times as the Monetary Board by an affirmative vote of five (5) members. — The supervising and examining department head. That if as determined by . combat.

authorize the release of a subsequent tranche on condition that the principal stockholders of the institution: (a) furnish an acceptable undertaking to indemnify and hold harmless from suit a conservator whose appointment the Monetary Board may find necessary at any time. would be adequate to supplement. where necessary. the banking institution shall submit to the Bangko Sentral a resolution of its board of directors authorizing the Bangko Sentral to evaluate other assets of the banking institution certified by its external auditor to be good and available for collateral purposes should the release of the subsequent tranche be thereafter applied for. the prohibitions in Section 128 of this Act shall not apply insofar as it refers to acceptance as collateral of shares and their acquisition as a result of foreclosure proceedings.the Monetary Board. and (b) provide acceptable security which. by a vote of at least five (5) of its members. the amount of the first tranche may exceed twenty-five percent (25%) of the bank's total deposit and deposit substitutes if the same is adequately secured by applicable loan values of government securities and unencumbered first class collaterals approved by the Monetary Board. The Monetary Board may. however. in the judgment of the Monetary Board. the circumstances surrounding the emergency warrant a loan or advance greater than the amount provided hereinabove. the assets tendered by the banking institution to collateralize the subsequent tranche. including the exercise of voting rights pertaining to said shares: Provided. That should the Bangko Sentral acquire any of the shares it has accepted as 20 | P a g e . Prior to the release of the first tranche. In connection with the exercise of these powers. and the principal stockholders of the institution furnish an acceptable undertaking to indemnify and hold harmless from suit a conservator whose appointment the Monetary Board may find necessary at any time.

operations. Scope of the Authority of the Monetary Board a. Salaries of the Governor and Members of the Monetary Board • Salaries shall be fixed by the president at an amount commensurate to the importance and responsibility attached to the position. based on job evaluation studies and wage surveys and subject to the Board's approval. Deputy Governors may Attend Meetings of the Monetary Board • He may attend with the right to be heard H. On the recommendation of the Governor. further. b. however. and remove personnel of the Bangko Sentral. appoint. and administration of the Bangko Sentral. c. d. That the Monetary Board may delegate such authority to the Governor under such guidelines as it may determine. The minutes shall reflect the disclosure made and the retirement of the member concerned from the meeting. A compensation structure. i.collateral as a result of foreclosure proceedings. adopt an annual budget for and authorize such expenditures by the Bangko . or dismissal of all personnel. That the Monetary Board shall make its own system conform as closely as possible with the principles provided for under Republic Act No. I. Direct the management. transfer. Such system shall aim to establish professionalism and excellence in all levels of BSP in accordance with the sound principles of management. the Bangko Sentral shall dispose of said shares by public bidding within one (1) year from the date of consolidation of title by the Bangko Sentral G. or reassign personnel of the Bangko Sentral and these personnel actions are deemed made in the interest of the service and not disciplinary: Provided. assign. Establish a Human Resource management system which shall govern the selection. That the Monetary Board shall have exclusive and final authority to promote. That compensation and wage structure of employees whose positions fall under salary grade 19 and below shall be in accordance with the rates prescribed under Republic Act No. shall be instituted as an integral component of the Bangko Sentral's human resource development program: Provided. fix the remunerations and other emoluments. J. Personal or Pecuniary Interest • Any member of the MB 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. Issue rules and regulations it considers necessary for the effective discharge of the responsibilities and exercise of the powers vested upon the Monetary Board and the Bangko Sentral. The decision taken on the matter shall be made public. 6758: Provided. subject to pertinent civil service laws: Provided. 6758. ii. reorganize its personnel and issue such rules and regulations as it may deem necessary or convenient for this purpose. hiring.

indemnification shall be provided only in connection with such matters covered by the settlement as to which the Bangko Sentral is advised by external 21 | P a g e . made a party by reason of the performance of his functions or duties. and e. In the event of a settlement or compromise. i.Sentral as are in the interest of the effective administration and operations of the Bangko Sentral in accordance with applicable laws and regulations. suit or proceedings to which he may be. indemnify its members and other officials of the Bangko Sentral. or is. including personnel of the departments performing supervision and examination functions against all costs and expenses reasonably incurred by such persons in connection with any civil or criminal action. unless he is finally adjudged in such action or proceeding to be liable for negligence or misconduct.

the Bangko Sentral or third parties: Provided. examiners. the disclosure of any information of a confidential nature. and employees of the Bangko Sentral who willfully violate this Act or who are guilty of negligence. or is with prior authorization of the Monetary Board or the Governor. and employees of the Bangko Sentral for: i. A. or to be published under the provisions of this Act shall not be considered confidential. or employee to repay the amount advanced should it ultimately be determined by the Monetary Board that he is not entitled to be indemnified as provided in this subsection. and Employees of the Bangko Sentral a. suit or proceeding upon receipt of an undertaking by or on behalf of the member. ii. The costs and expenses incurred in defending the aforementioned action. officers. d. abuse. Similar responsibility shall apply to members. officer. Powers and Duties of the Governor a. abuses or acts of malfeasance or misfeasance or fail to exercise extraordinary diligence in the performance of his duties shall be held liable for any loss or injury suffered by the Bangko Sentral or other banking institutions as a result of such violation. however. execute and administer the policies and measures approved by the Monetary Board. Members of the Monetary Board.counsel that the person to be indemnified did not commit any negligence or misconduct. direct and supervise the operations and internal administration of the Bangko Sentral. unless the disclosure is in connection with the performance of official functions with the Bangko Sentral. c. suit or proceeding may be paid by the Bangko Sentral in advance of the final disposition of such action. b. Officials. or any information on the discussions or resolutions of the Monetary Board. negligence. malfeasance. G. prepare the agenda for the meetings of the monetary board and to submit for the consideration of the monetary board the policies and measures which he believes to be necessary to carry out the purposes and provisions of this act b. or ii. the use of such information for personal gain or to the detriment of the Government. Responsibilities of the Members of the Monetary Board. or about the confidential operations of the Bangko Sentral. officials. Examiners. That any data or information required to be submitted to the President and/or the Congress. . The Governor may delegate certain of his administrative responsibilities to other officers or may assign specific tasks or responsibilities to any full-time member of the Monetary Board without additional remuneration or allowance whenever he may deem fit or subject to such rules and regulations as the Monetary Board may prescribe. misfeasance or failure to exercise extraordinary diligence.

e. or rulings. as well as regulations. That removal of personnel shall be with the approval of the Monetary Board. The Governor and Deputy Governors of the Bangko Sentral • Governor shall be chief executive officer of the Bangko Sentral ng Pilipinas. policies or instructions issued by the Monetary Board. render opinions. on matters regarding application or enforcement of laws pertaining to institutions supervised by the Bangko Sentral and laws pertaining to quasi-banks. which shall be final and executory until reversed or modified by the Monetary Board. and the implementation thereof.appoint and fix the remunerations and other emoluments of personnel below the rank of a department head in accordance with the position and compensation plans approved by the Monetary Board. 22 | P a g e . as well as to impose disciplinary measures upon personnel of the Bangko Sentral. decisions. subject to the provisions of Section 15(c) of this Act: Provided. and IV.

in any legal proceedings. as provided in subsections (a). agencies and instrumentalities of the Government and all other persons or entities. however. by designation of the President. the Governor of the Bangko Sentral. sign contracts entered into by the Bangko Sentral. in such capacity and in accordance with the instructions of the Monetary Board. to other officers upon his own responsibility: Provided. foreign or international b. The signature of the Governor may be in facsimile whenever appropriate c. not accept any other employment. represent the Monetary Board and the Bangko Sentral in all dealings with other offices. Emergencies a. D. including private counsel. E. the Governor of the Bangko Sentral may choose not to participate in preliminary discussions with any multilateral banking or financial institution on any negotiations for the Government within or outside the Philippines. At the soonest possible time. with the exception of positions in eleemosynary. correspondence and other documents of the Bangko Sentral. In case of emergencies where time is sufficient to call a meeting of the Monetary Board. as may be authorized by the Monetary Board. C. During the negotiations. action or specialized legal studies d. 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. b. he may instead be represented by a permanent negotiator. civic. whether domestic. remunerated or ad honorem. notes and securities issued by the Bangko Sentral. B. . balance sheets. Number and Functions of Deputy Governors a. exercise such other powers as may be vested in him by the Monetary Board. delegate his power to represent the Bangko Sentral. cultural or religious organizations or whenever. c. Powers of the Governor as Representative of the Monetary Board and the Bangko Sentral • The Governor of the Bangko Sentral shall be the principal representative of the Monetary Board and of the Bangko Sentral and. b. Limitations on outside interests of the governor and the Full-time Members of the Board • The governor of the Bangko Sentral and the full-time members of the Board shall: a. with the concurrence of two (2) other members of the Monetary Board. public or private. represent the Bangko Sentral. either personally or through counsel. That in order to preserve the integrity and the prestige of his office. profit and loss statements. all reports. The Governor shall submit a report to the President and Congress within seventy-two (72) hours after the action has been taken.f. with the following powers: a. limit their professional activities to those pertaining directly to their positions with the Bangko Sentral. (b) and (c) of this section. the Governor shall call a meeting of the Monetary Board to submit his action for ratification. whether public or private. may decide any matter or take any action within the authority of the Board.

23 | P a g e . with the approval of the Monetary Board.The Governor of the Bangko Sentral. shall appoint not more than three (3) Deputy Governors who shall perform duties as may be assigned to them by the Governor and the Board.

theth the case of data on banks. balance of payments of the Philippines. officer. the Bangko A. The BSP shall have supervision over. Operations of the Bangko Sentral C. any data which it may require for the proper discharge of its functions and responsibilities. Scope of authority of bangko Sentral to Obtain data and Information subsidiaries and affiliates. among others. released to interested persons or entities: provided finally. i. a duly authorized representative shall have the power to issue a subpoena for the production of the books and records for the aforesaid purpose. b. a. or government-owned or i. or employee of any institution under their respective supervision or subject to their examination and to c.V. of promising university · The Bangko Sentral shall prepare data and conduct economic research for the guidance of the Monetary Board in the formulation and implementation of its policies. at home or abroad. forecasts of the graduates or of any other qualified persons who shall be determined by proper competitive examinations. The Monetary Board shall prescribe rules and regulations to govern the training program of the Bangko Sentral. D. of qualified employees of the Bangko Sentral. Data on individual firms. Subsidiary – more than 50% of the voting stock is owned by a bank controlled corporations. a Deputy Governor designated by the Governor shall act as chief executive of the Bangko Sentral and shall exercise the powers and perform the duties of the Governor. Training of technical Personnel · The Bangko Sentral shall promote and sponsor the training of technical personnel in the field of money and banking. is owned by a bank or which is related or linked to such institution or intermediary through common stockholders or such other factors as may be determined by the MB. The Bangko Sentral shall have the authority to request from government offices and instrumentalities. administer oaths to any director. banking. b. documents. a Deputy Governor as may be designated by the Governor shall be vested with authority to participate and exercise the right to vote in such meetings. Toward this end. credit and exchange policies. other htan banks. and conduct periodic or special examination of. Whenever the Government is unable to attend meetings of government boards or councils in which he is an ex officio member pursuant to provisions of special laws. Research and statistics of the bangko Sentral Sentral is hereby authorized to defray the costs of study. compel the presentation of all books. the provisions of section 27 shall apply. shall be examining departments are hereby authorized to subject to punishment for contempt in accordance with the provisions of the Rules of Court. papers or of Economic Research and other departments or units of the Bangko records necessary in their judgment to ascertain the facts . The department heads and the examiners of the supervising and/or Those supply the bank with data requested or required. ii. Such data shall include. statistics on the monthly movement of the monetary aggregates and of prices and other statistical series and economic studies useful for the formulation and analysis of monetary. Affiliate – 50% or less. The Bangko Sentral through the Governor or in his absence. b. gathered by the Department ii. banking institutions and quasi-banks. Scope of the Supervision and Examination by the bangko Sentral a. including their B. In the absence of the Governor.

Sentral shall not be made available to any person or entity outside of relative to the true condition of any institution as well as the the Bangko Sentral whether public or private escept under order of the books and records of persons and entities relative to or in court or under such conditions as may be prescribed by the monetary connection with the operations. activities or transactions of board: Provided however. that the collected data on firms may be the institution under examination. subject to the provision of existing laws protecting or safeguarding the secrecy or 24 | P a g e .

whichever is lower. Examination of Banking Institutions A. VI. and not inconsistent shall govern the issuance and dissolution of the restraining order or injunction. Officer or Stockholder and Related Interests A. i. Director. Contracting Loans a. officer or stockholder who.confidentiality of bank deposits as well as investments of private persons. from a bank 1. Provisions of the Rules of court regarding Preliminary injunction. Court cannot order restraining order prohibiting the BSP from examining any institution subject to the supervision and examination of the BSP. Restraining Order or Injunction a. b. his bank. b. Any director. personally or by deputy. contracts a loan or any form of financial accommodation from: i. together with his related interest. Frequency of Examination • The supervising and examining department head. B. in debt instruments issued by the Government. natural or juridical. Any information obtained from an examination of his deposits shall be held strictly confidential and may be used by the examiners only in connection with their supervisory and examination responsibility or by the Bangko Sentral in an appropriate legal action it has initiated involving the deposit account. in excess of five percent (5%) of the capital and surplus of the bank. E. 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. shall be required by the lending bank to waive the secrecy of his deposits of whatever nature in all banks in the Philippines. or in the maximum amount permitted by law. Prohibitions Against Personnel of the Bangko Sentral (same as disqualifications of MB Member) VII. Exception: there is convincing proof that the action of the BSP is plainly arbitrary 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 is executed infavor of the BSP in the amount fixed by court. in so far as they are applicable. which is a subsidiary of a bank holding company of which both his bank and the lending bank are subsidiaries or 2. shall examine the books of every banking institution once in every twelve . or ii.

B. Service Fees 25 | P a g e . C.(12) months. That there shall be an interval of at least twelve (12) months between annual examinations. Affording Opportunity to Examine • Bank concerned shall afford the head of the appropriate supervising and examining departments full opportunity to examine • Books • Cash and available assets • General condition Anytime during the banking hours when requested by BSP • The reports on the examinations will not be open to the public unless incidental to any proceedings authorized or is necessary for the prosecution of violations in connection with the business of such institutions. and at such other times as the Monetary Board by an affirmative vote of five (5) members. may deem expedient and to make a report on the same to the Monetary Board: Provided.

Analysis of economic and financial developments. including the condition of net international reserves and monetary aggregate. The annual report shall also include a statement of the financial condition of the Bangko Sentral and a statistical appendix which shall present. The functions and duties of such operating departments and other offices shall be determined by the Monetary Board. VIII. B. It shall contain the volume and compositions of its assets and liabilities as of the last working day of the month. of the Bangko Sentral as it deems convenient for the proper and efficient conduct of the operations and the accomplishment of the objectives of the Bangko Sentral. (within 90 days after end of year) iii. which shall be submitted 90 days after end of month. and remedial measures in response to such abnormal movements (not later than 27 hours) C. Abnormal movements in monetary aggregates and the general price level. in accordance with its authority under this Act. Operating Departments of the Bangko Sentral • The Monetary Board shall. including the bangko sentral and the banks abroad. determine and provide for such operating departments and other offices. after deducting cash on hand and the amount due from banks. Required Reports and Publications of the Bangko Sentral a. i. the following data: . b. the Bangko Sentral shall publish and submit to the President and the Congress an annual report on the condition of the Bangko Sentral including a review of the policies and measures adopted by the Monetary Board during the past year and an analysis of the economic and financial circumstances which gave rise to said policies and measures. It would be a percentage of its average total assets during the preceding year as shown by its end of month balance sheets. Administration A. b.• Banks and quasi-banks subject to examination of the BSP shall pay the BSP within 30 days of each year. Review of the state of the financial system ( 120 days after end of semester) iv. Preceeding year’s budget and profit and loss statement of the bankgo sentral showing in reasonable detail the result of its operations. Before the end of March of each year. Annual Report of the Bangko Sentral a. as a minimum. an annual fee. The BSP shall publish a general balance sheet within 60 days after the end of each month except December. (as soon as practicable). • Amount of fee is prescribed by the MB. (90 days after end of each quarter) ii. MB shall publish the ff reports and submit them to the President and to congress. including a public information office.

the principal data on government receipts and expenditures and on the status of the public debt.i. the balance of payments of the Philippines. the monthly movement. vii. monthly indices of consumer prices and of import and export prices. the monthly movement of monetary aggregates and their components. vi. by volume and value. both domestic and foreign. the monthly movement of the accounts of the Bangko Sentral and of other banks. 26 | P a g e . v. in summary form. Failure to comply with the reportorial requirements pursuant to this article without justifiable reason as may be determined by the Monetary Board shall cause the withholding of the salary of the personnel concerned until the requirements are complied with. ii. of exports and imports. and viii. d. the monthly movement of purchases and sales of foreign exchange and of the international reserves of the Bangko Sentral. c. iii. the texts of the major legal and administrative measures adopted by the Government and the Monetary Board during the year which relate to the functions or operations of the Bangko Sentral or of the financial system. iv. The Bangko Sentral shall publish another version of the annual report in terms understandable to the layman.

b. the Monetary Board shall determine and carry out the distribution of the net profits. Fifty percent (50%) of the net profits shall be carried to surplus b. Profits or losses arising from any revaluation of the Bangko Sentral's net assets or liabilities in gold or foreign currencies with respect to the Philippine peso shall not be included in the computation of the annual profits and losses of the Bangko Sentral. Profits or losses arising from any revaluation of the Bangko Sentral's net assets or liabilities in gold or foreign currencies with respect to the Philippine peso shall not be included in the computation of the annual profits and losses of the Bangko Sentral. Signatures on Statements Balance sheets and statements shall be signed by the officers responsible for their preparation. as a consequence of such revaluations. Fiscal Year a. are owed by the Philippines to any international or regional intergovernmental financial institution of which the Philippines is a member or are owed by these institutions to the Philippines. Revaluation of Profits and Losses a. IX. Any remaining profit or loss shall be carried in a special frozen account which shall be named "Revaluation of International Reserve" and the net balance of which shall appear either among the liabilities or among the assets of the Bangko Sentral. Profits. and Special accounts A. in accordance with the following rule: a. Distribution of Net Profits • Within the first sixty (60) days following the end of each fiscal year. The Revaluation of International Reserve account shall be neither credited nor debited for any purposes other than those specifically authorized in this section. except as otherwise provided in the transitory provisions of this Act. . the Bangko Sentral shall determine its net profits or losses. D. B. the remaining fifty percent (50%) shall revert back to the National Treasury. In the calculation of net profits. the Bangko Sentral shall make adequate allowance or establish adequate reserves for bad and doubtful accounts. Any profits or losses arising in this manner shall be offset by any amounts which. Computation of Profits and Losses Within the first thirty (30) days following the end of each year. Losses. c. as a consequence of such revaluations. C. depending on whether the revaluations have produced net profits or net losses. b.D. are owed by the Philippines to any international or regional intergovernmental financial institution of which the Philippines is a member or are owed by these institutions to the Philippines. Any profits or losses arising in this manner shall be offset by any amounts which.

The representative of the Chairman of the Commission must be a certified public accountant with at least ten (10) years experience as such. Suspense Accounts Amounts outstanding as of the effective date of this Act based on these accounts shall continue to be for the account of the Central Bank and shall be governed by the transitory provisions of this Act. and to appoint and fix salaries and number of personnel to assist said representative in his work. until otherwise provided for in accordance with the transitory provisions of this Act. he is empowered and authorized to appoint a representative who shall be the auditor of the Bangko Sentral and. E. as amended. 265. The salaries and other emoluments shall be paid by the Commission.c. F. The Revaluation of International Reserve (RIR) account as of the effective date of this Act of the Central Bank shall continue to be for the account of the same entity and shall be governed by the provisions of Section 44 of Republic Act No. in accordance with law. The Revaluation of International Reserve account shall be neither credited nor debited for any purposes other than those specifically authorized in this section. No relative of any 27 | P a g e . fix his salary. The auditor of the Bangko Sentral and personnel under him may be removed only by the Chairman of the Commission. as such. The Auditor The Chairman of the Commission on Audit shall act as the ex officio auditor of the Bangko Sentral and. Any remaining profit or loss shall be carried in a special frozen account which shall be named "Revaluation of International Reserve" and the net balance of which shall appear either among the liabilities or among the assets of the Bangko Sentral. depending on whether the revaluations have produced net profits or net losses.

Imposable sanctions: i. at the discretion of the court. If the violation is D. Orders or Instructions such as the nature and gravity of the violation or irregularity and the size of the bank. shall be punished by a fine not less than 50. or by imprisonment of not more than (5) years.000) nor more than Two hundred thousand pesos (P200. A bank. Fines not exceeding 30. quasi-bank or trust entity.member of the Monetary Board or the Chairman of the Commission within the sixth degree of consanguinity or affinity shall be appointed such representative. such corporation may be dissolved by quo warranto proceedings instituted by the Solicitor General. or any order. a. Willful making of false or misleading statement to the board or the appropriate supervising and examining department examiners. Penalty for Refusal to make Reports i. owner. or both. the Monetary Board may also suspend or remove such director or officer. rule or ii. 36 and 37 of the New Central Bank Act. the violation of any of the provisions of this Act shall be subject to Sections 34. Penalty for Willful Making of a False or Misleading Statement on a Material Fact Monetary Board.000) or by imprisonment of not less than one (1) year nor more than five (5) years. a. the person or persons responsible for such violation shall unless otherwise provided in this Act be punished by a fine of not less than Fifty thousand pesos (P50. in the discretion of the court. Refusal to permit examination into the affairs of the institution fine of not less than Fifty thousand pesos (P50. C. rule or regulation issued by the Monetary Board. at the discretion of the vi. implemented by the Bangko Sentral or any order. or any entity who willfully the NCBA or other banking laws implemented by BSP. instruction or ruling by the governor · punished by a fine of not less than One hundred thousand pesos (P100. Penalty for Violation two (2) years nor more than ten (10) years. b. Proceedings Upon and Penalty for Violation of NCBA and Other banking laws. Unless otherwise herein provided. Mb would take into consideration the attendant circumstances. but not more than 10 years.000) or by imprisonment of not less than X. instruction or regualtin issued by the B.000) nor more than Two hundred thousand pesos (P200. v. instruction. agent. or both. being required in writing by the Monetary Board or by the head of the ii. 000 and not more than 200.000 for each day of violation. person. court. or any order. quasi-bank. or both. 35.000) nor more than One hundred thousand pesos (P100. Conducting business in an unsafe or unsound manner as may be determined by the MB. Any willful failure or refusal to comply with. instruction. If the offender is a director or officer of a bank. director or officer-in-charge of any institution subject to the supervision or examination by the Bangko Sentral within the purview of this Act who. Suspension of rediscounting privileges or access to BSP credit facilities regulation issued by the monetary board. Willful delay in the submission of required reports and publications 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 by a iii. or whenever any person or entity willfully . Rules Regulations.000). or violation of any banking law or any rder. iv. manager. Whenever a bank or quasi-bank. Administrative violation and penalties: Grounds for administrative sanctions imposable by the MB to any bank or quasi-bank: A.000 or imprisonment of not less than 2 years. Administrative Sanctions on Banks and Quasi Banks committed by a corporation. Any willful violation of its charter or by-laws Any officer.

iv. suspension of lending or foreign exchange operations or authority to accept new deposits or make new investments. suspension of interbank clearing privileges. violates this Act or other pertinent banking laws being enforced or 28 | P a g e . revocation of quasi-banking license. and/or v.iii.

Monetary Stabilization and Functions of the BSP I. . for any failure to comply with the requirements of law. fines not in excess of Ten thousand pesos (P10. the order shall be final. Chapter 8: Currency. the Monetary Board may issue an order requiring the institution and/or the directors and/or officers concerned to cease and desist from the indicated practice or violation. If a hearing is conducted. the imposition of which shall be final and executory until reversed. at his discretion. Issue of Means of Payment A. The Unit of Monetary Value A. upon request made by the respondents within five (5) days from their receipt of the order. parties may agree to settle such obligation in any other currency at the time of the payment. defined -all Philippine notes and coins issued or circulating in accordance with the NCBA. Whether or not there is an administrative proceeding. to impose upon banking institutions. all issues shall be determined on the basis of records. C. currency substitutes. The Peso (P) -unit of monetary value in the Philippines -divided into 100 equal parts: centavos (c) -legal tender.000) a day for each violation. Currency. if the institution and/or the directors and/or officers concerned continue with or otherwise persist in the commission of the indicated practice or violation. modified or lifted by the Monetary Board on appeal. or to prevent the reproduction of facsimiles of Bangko Sentral notes. Monetary Board regulations and policies. Exclusive Issue Power (i) Bangko Sentral-SOLE power to issue currency (ii) Monetary Board-may issue regulations to prevent circulation of foreign currency.b. and may further order that immediate action be taken to correct the conditions resulting from such practice or violation. d. The Governor is hereby authorized. The cease and desist order shall be immediately effective upon service on the respondents. Value of Currency -has value because people are willing to accept it in exchange of goods. and/or instructions issued by the Monetary Board or by the Governor. II. services or payment of debts. The respondents shall be afforded an opportunity to defend their action in a hearing before the Monetary Board or any committee chaired by any Monetary Board member created for the purpose. after which the Monetary Board may either reconsider or make final its order. c. B. If no such hearing is requested within said period. all monetary obligations shall be settled in Philippine currency .

defined in Title One of Book Two of this Code. its interior waters and maritime zone. Illegal Possession and Use of False Treasury or Bank Notes and Other Instruments of Credit 7. Art. (ii) The Bangko Sentral’s holdings of its own notes and coins shall not be considered as part of its currency issue and. Liability for Notes and Coins (i) Notes and coins issued by the BSP shall be liabilities of the BSP. 169. 166.(iii) Bangko Sentral-has authority to investigate. the provisions of this Code shall be enforced not only within the Philippine Archipelago. — The forgery referred to in this section may be committed by any of the following means: 1. In case the RPC provides for a greater penalty. arrest. 164. Art.00 b. should commit an offense in the exercise of their functions. C. 2. search and seize for the purpose of maintaining the integrity of the currency. Art. counterfeiting or altering by any means the figures. and in amounts not exceeding. Importation and Utterance of Mutilated Coins 3. the appearance of a true genuine document. but also outside of its jurisdiction. Should be liable for acts connected with the introduction into these islands of the obligations and securities mentioned in the presiding number. the assets of the BSP. and Uttering Such False or Forged Notes and Documents 5. accordingly. against those who: 1. B. Application of its provisions. *An Exception to Territoriality of Penal Laws (RPC) Art. While being public officers or employees. Mutilation of Coins. Should forge or counterfeit any coin or currency note of the Philippine Islands or obligations and securities issued by the Government of the Philippine Islands. Should commit an offense while on a Philippine ship or airship 2. (iv) Violation: imprisonment of not less than five years but not more than ten years. 165. 25c and above denominations shall not exceed P50. — Except as provided in the treaties and laws of preferential application. 10c or less denominations shall not exceed P20. Making and Importing and Uttering False Coins 2. Such may be issued only against. Without Connivance 4. How forgery is committed. *Related Crimes under the RPC 1. Legal Tender Power -all notes and coins issued by the BSP= Legal Tender for all debts *coins: a. Art. 168. payable to bearer or order mentioned therein.chan robles virtual law library 3. Art. shall not form part of the assets or liabilities of the BSP. Importing and Uttering Instruments Not Payable to Bearer 6. Forging Treasury or Bank Notes on Other Documents Payable to Bearer.00 29 | P a g e . Counterfeiting. including its atmosphere. Art. Art. 163. Such shall be a first and paramount lien on all assets of the BSP. 2. By giving to a treasury or bank note or any instrument. Selling of Flase or Mutilated Coin. By erasing. Importing. 4. 167. or 5. words or signs contained therein. substituting. Should commit any of the crimes against national security and the law of nations. the latter shall prevail. letters.

-checks representing demand deposits do not have legal tender power: one (ii) Such notes called in for replacement shall remain legal tender for cannot be compelled to accept the same. or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed. It shall also have the authority to contract institutions. Denominations 2. Characteristics of the Currency (i) Monetary Board. *a check cleared and credited to the account of the creditor = delivery of cash to such creditor. (ii) Expenses incurred for the operations shall be for the account of the BSP. Designs 4. also shall bear the signatures of the President of the Philippines and the Governor of the BSP. Denominations 5. Inscriptions 4. Fineness 3. The payment of debts in money shall be made in the currency stipulated. In case an extraordinary inflation or deflation of the currency stipulated should supervene. mints or firms for such operations. F. Interconvertibility of Currency . Art. The delivery of promissory notes payable to order. with approval of the President. the value of the currency at the time of the establishment of the obligation shall be the basis of payment. 1250. Other characteristics of notes Provided that: the notes state that they are liabilities of the BSP and are guaranteed by the Government. Other characteristics of the coins The MB shall consider the availability and cost of materials E. Designs 3. In the meantime. Weight 2. (ii) Monetary Board. Printing of Notes and Minting of Coins (i) The MB shall prescribe the amount and conditions of notes and coins to be printed and minted. then in the currency which is legal tender in the Philippines. *Related Civil Code Provisions Art. the action derived from the original obligation shall be held in the abeyance. unless there is an agreement to the contrary. shall prescribe: 1. with approval of the President. shall prescribe: 1. 1249. and if it is not possible to deliver such currency. D. or when through the fault of the creditor they have been impaired.

Replacement of Currency Unfit for Circulation -shall be withdrawn and demonitized by the BSP from circulation and replace them with adequate ones. or Price Level (i) Whenever abnormal movements in the monetary aggregates. (ii) Whenever: a. 10 years old one year since the date of the call. increases or decreases by more than 15%. G. Extent to which such changes have been reflected in the level of domestic output. Credit. clipped. and the nature and significance of any such changes. shall deliver the notes and coins of the denominations which most nearly approximate those requested. B. on demand and with no charge. Lapse of one year. a description and analysis: 1. notes which have lost 2/5 of their surface or all of the signatures therein. Causes of the rise or fall of such monetary aggregates. (mutilated conditions) H. the notes and coins shall cease to be a liability of the BSP and shall be demonitized.-BSP shall exchange. wages and economic activity in general. coins. 2. C. 5 years old. Philippine currency of any denomination to any other denomination of such currency. filed. The called in notes and coins shall likewise be demonitized. . or in prices endanger the stability of the Philippine economy or important sectors. Measures taken and measures proposed to be adopted. may be exchanged at par and without charge during the following year or for a period determined by the MB. If BSP is temporarily unable to do so. Power to Define Terms -MB shall formulate definitions of monetary aggregates. III. or the level of credit. Retirement of Old Notes and Coins (i) The BSP may call in for replacement: notes. the MB shall: a) Take appropriate remedial measures b) Submit a report to the President and the Congress (also made public. perforated coins. the identification of which is impossible. . Guiding Principle on Monetary Stabilization -the MB shall endeavour to control any expansion or contraction in monetary aggregates which is prejudicial to the attainment or maintenance of price stability.shall not replace: notes and coins. credit and prices and shall make public such definitions and any changes thereof. Action When Abnormal Movements Occur in the Monetary Aggregates. Lapse of such period. employment. Domestic Monetary Stabilization A. in credit. 3. The monetary aggregates.

-MB shall pay special attention to the volume and maturity of: 1. IV. International Monetary Stabilization -preserved by the BSP -maintain convertibility into other currencies primarily for foreign trade and invisibles. ForEx assets and liabilities of other banks operating in the Philippines 30 | P a g e .b. International Monetary Stabilization A. the circumstances warrant.) -MB shall judge such adequacy based on: prospective receipts and payments of ForEx by the Philippines. BSP’s own liabilities in foreign currencies 2. (With respect to a-c) the MB shall submit reports and state whether such changes represent a threat to the stability of the economy or of its important sectors. or c. When in its judgment. (iii) The MB shall continue to make periodic reports until the disturbances have disappeared or have been controlled. The cost of living index increases by more than 10%. B. International Reserves -Purpose: to maintain the international stability and convertibility of the Philippine Peso (adequate to meet foreseeable net demands on the BSP for foreign currencies.

Submit a report to the President and the Congress: 1. (iv) BSP is free to convert any asset in its international reserves into other assets as described in a. Nature and causes of the existing or imminent decline 2. or 2) The international reserves appear to be imminent in falling to such level. Assets in foreign currencies in the form of: 1. D. but not limited to: a. Foreign notes and coins (ii) The MB shall: a. Take appropriate remedial measures b. Foreign government securities 4. ForEx assets and liabilities of all other persons and entities in the Philippines C. or 3) The international reserve is falling as a result of payments or remittances abroad which are contrary to the national welfare The MB shall: a. Action when the international stability of the peso is threatened: (i) Whenever: 1) The international reserve falls to a level the MB considers inadequate to meet prospective net demands. Endeavour to hold the ForEx resources of the BSP b. treasuries and commercial banks abroad 3. Documents and instruments customarily employed for the international transfer of funds 2. Composition of the International Reserves (of the BSP): (i) May include. Measures already taken or to be taken by the MB 3. Gold b. Give particular consideration to the prospects of continued strength and convertibility of the currencies c. Give particular consideration to the anticipated demands (iii) The MB shall issue regulations determining the other qualifications which the ForEx must meet in order to be included in the international reserves of the BSP. Demand and time deposits in central banks. and b. Measures proposed .3.

-If ForEx liabilities (in Pesos) > twice the ForEx assets (in Pesos). Subject all gold and ForEx transactions to license 3. Operations in Gold and Foreign Exchange A. the MB shall propose to the President. International Financial Institutions 5. B. Temporarily suspend sales of exchange 2. Cooperation required from other government agencies for the execution of policies of the MB (ii) If such actions fail. (not applicable to demands for foreign notes and coins) -exchange transactions shall be based on the NCBA. Provided. Means of Action -MB shall rely on its moral influence and the powers granted to it under the NCBA. additional action it deems necessary to restore international balance of payments in the Philippines (iii) The MB shall submit periodic reports until the threat to international monetary stability has disappeared. C. BSP shall report to the Congress the origin of the liabilities and the manner it shall be paid. with notice to the Congress. Foreign governments 4. V.4. Banking institutions within the Philippines 2. Purchases and Sales of Gold -by the BSP subject to the regulations of MB -made in the national currency at the prevailing international market price as determined by the MB. Emergency Restrictions on Exchange Operations In order to: (i) Achieve the primary objective of the BSP (ii) Protect international reserves in the imminence or during and exchange crisis (iii) Give time to the MB and the Government to take measures to forestall or overcome such crisis 5 members of the MB and the President of the Philippines may: 1. that such are freely convertible into gold or US dollars. . E. D. (made within 60 days from the date of the occurrence. Purchases and Sales of ForEx -by the BSP -with the following entities or persons only: 1. Foreign Asset Position of the Bangko Sentral -BSP shall maintain NET POSITIVE FOREIGN ASSET POSITION (Gross ForEx assets>Gross ForEx liabilities. Government and its subdivisions and instrumentalities 3. Others authorized by the MB -the BSP may buy or sell any quantity of ForEx upon demand or request by any banking institution in the Philippines.

Operations with Foreign Entities -MB may authorize the BSP to transact with foreign banks or entities. -MB may authorize the BSP to pledge any gold or other assets as securities against loans which it receives from foreign entities. But the margins between the effective exchange rates and the rates established may not exceed the margins for spot exchange by more than the additional costs involved in each type of transactions G. Exchange Rates -determined by the MB -MB shall determine the rates for buying and selling spot exchange and may establish deviation limits from the exchange rates -MB shall determine the rates for other types of ForEx transactions. exempt from this requirements) E. Acquisition of Inconvertible Currencies -shall be avoided -may acquire more than the minimum balance necessary to cover current demands for such currencies only when considered by the MB to be in the national interest. (Foreign currency deposits made under RA 6426.Require that any ForEx obtained by any person or entity in the Philippines be delivered to the BSP at the exchange rates. Foreign Exchange Holdings of the Banks -MB may require the banks to sell to the BSP or to other banks all or part of their surplus holdings of ForEx to maintain international stability and 31 | P a g e . -MB shall determine the procedure F. The BSP may also act as agent for such. Regulation of Foreign Exchange Operations Of the Banks A. VI.

The MB may also require other persons and entities to report to it all transactions as stated above. They shall be granted reasonable time to adjust. Othe Exchange Profits and Losses -banks bear the risks of 1. B. purchase or sale of readily saleable goods and products. buy and sell bills. VII. Requirement of Balanced Currency Position -MB may require banks to maintain a balanced position between their assets and liabilities.convertibility of the Peso. -MB may determine the net assets and liabilities of banks and consider the bank’s networth. It shall prescribe the form such declarations must be made. 2. animal. b. Production Credits-*same* with maturities of not more than 360 days *same* and resulting from transactions related to the production or processing of agricultural. duly insured and deposited. Commercial Credits-BSP may rediscount. The importation. or 2. and must furnish requested additional info. mineral or industrial products. Guiding Priciples -rediscounts. . outstanding liabilities. Such determination shall be applied in all banks uniformly. b. B. or their transportation within the Philippines. The storing of non-perishable goods and products. -such powers shall be exercised only under special circumstances which warrant the same C. discounts. Regulation of Non-spot Exchange Transaction -MB may issue regulations on such transaction to restrain banks from speculating future fluctuations in ForEx D. discount or acquisition and resulting from transactions related to: 1. loans and advances which the BSP is authorized to extend shall be used to influence the volume of credit consistent with the objective of price stability. The BSP may inspect such declarations for verification. promissory notes and other credit instruments with maturities of not more than 180 days from the date of rediscount. Authorized Types of Credit Operations -carried on by the BSP with banks a. Exchange risks not assumed by the BSP regarding non-spot exchange transaction E. or other ratios it may deem appropriate. Loans To Banking And Other Financial Institutions A. exportation. Non-compliance with the terms of the ForEx documents and instruments they buy and sell. Banks shall report to the BSP the volume and composition of their purchases and sales of gold and ForEx each day. Other commercial or other banking risks 3. acceptances. Such transfers shall be at the established rates and may be required of certain currencies only. Information on Exchange Operations: a. Must be secured by: 1. discount.

loans and advances made in accordance with the above provisions may not be renewed or extended unless extraordinary circumstances fully justify such renewal or extension. Gold coins or bullions 2. -when necessary. Negotiable bonds issued by the Govt and its subdivisions and instrumentalities having maturities of not more tan 10 years from the date of the advance Notes: (i) The rediscounts. Commercial credits 4. (ii) Advances made against the collateral in 6 and 7 may not exceed 80% of the current market value of the collateral C. Securities representing obligations of the BSP or of other domestic institutions of recognized solvency 3. Emergency Loans and Advances A. c. notes and other negotiable obligations of the Govt maturing within 3 yrs from the date of the advance 7. MB shall prescribes for additional safeguards for the same.A pledge of the crops or products or 2. Nature of Emergency Loans or Advances -intended to assist a bank with serious liquidity problems arising from causes beyond the control of the management. When Granted . Loans for Liquidity Purposes -BSP may extend loans and advances to banks for a period not exceeding 7 days without collateral to provide liquidity in times of need VIII. and certified as to the amount and liquidity by the institution soliciting the advance 6. Other credits-credit instruments not rediscountable under a and b may be rediscounted in accordance with BSP rules and regulations. -discretion of MB -only a temporary remedial measure -must be on a fully secured basis B. discounts. A lien or mortgage on real prop. BSP may provide funds from non inflationary sources. d. 70% of the appraised value of which equals or exceeds the amount of the loan granted. Utilized portions of advances in current amount covered by regular overdraft agreements related to commercial and production credits. Negotiable treasury bills. cert of indebtedness. Advances-BSP may grant advances against the following for fixed periods not exceeding 180 days except number 4 (360 days): 1. Production credits 5.

a. cannot be prevented. Bank with uncertain financial condition but is not insolvent -MB may authorize the BSP to extend such loans even during normal times to assist a bank in a precarious financial condition brought by unforeseen events or though foreseeable. Limits -amount o loan must not exceed 50% of total deposits or deposit substitutes of a bank -shall be disbursed in 2 or more tranches D. -5 votes of MB members must concur C. Limited to 25% of the total deposits or deposit substitutes 32 | P a g e . First Tranche 1. -MB must first ascertain that the bank is not insolvent and has assets to secure the advances. Whole banking community is threatened with the financial crisis -national/local emergency or imminent financial panic -directly threatening the monetary and banking stability The MB (vote of 5 members) authorize the BSP to grant the same. the debtor cannot expand the total volume of its loan or investments without authorization from the MB b. While such loans are outstanding.

— The Bangko Sentral shall not acquire shares of any kind or accept them as collateral. E. Second Tranche -vote of 5 MB members may authorize the release of a second tranche on condition that the principal stockholders of the institution: 1. The Bangko Sentral shall not engage in development banking or financing: Provided. receivership or liquidation of the bank. If the BSP acquired any of such shares. F. This shall apply prospectively. Interest and Rediscount -The BSP shall collect interest and other charges on loans it extends notwithstanding the closure. Repayment of Credits a. Shares as Collateral Section 128. and shall not participate in the ownership or management of any enterprise. bought or accepted as collateral by the BSP shall bear the endorsement of the bank. C.-secured by govt securities and other unencumbered first class collaterals the MB may approve 2. such shall be disposed in a public bidding within one year from the date of consolidation of title by the BSP. Furnish the undertaking the same as in number 2 above 2. either directly or indirectly. the bank must submit to the BSP a resolution by its board authorizing the BSP to evaluate their assets certified by an external auditor to be good and available for collateral purposes. Overdraft -shall be eliminated within 5 consecutive banking days IX. Endorsement -the documents rediscounted. G. however. Provide acceptable security adequate (in the opinion of the MB) to supplement the assets tendered by the bank to collateralize the subsequent tranche. The collaterals must be withdrawn by the bank on maturity date or upon the liquidation of the obligation which they represent b. Credit Terms A. Prior to the release of the first tranche. Banks have the right to withdraw such collaterals upon payment of the debt and its interest D. If MB determined that the emergency warrant a greater loan. it may exceed 25% -must be secured by govt securities and other unencumbered first class collaterals the MB may approve. Prohibitions. That outstanding loans obtained or extended for development financing shall not be affected by the prohibition of this section. -principal stockholders must furnish an acceptable undertaking to indemnify and hold harmless from suit a conservator appointed by MB 3. -This provision shall not be applicable to acceptance as collateral of shares and their acquisition as a result f foreclosure proceeding. discounted. . -The MB shall fix the interest and rediscount rates (applied uniformly to banks of the same category) B.

Issue and Negotiation of the BSP Obligations -BSP may issue. exceed 20 % of the average annual income of the borrower for the last 3 preceding years. buy and sell freely negotiable evidences of indebtedness of the Bangko Sentral -issuance of such certificates of indebtedness shall be made only in cases of extraordinary movement in price levels. Principles of Open Market Operations -made exclusively in accordance with the objective of achieving price stability B. E. supra X. place. Purchases and Sales of Government Securities -BSP may purchase and sell in open market: a. shall not.Other Requirements -MB may prescribe additional requirements to obtain loan from the BSP. evidences of indebtedness issued directly by the Govt and its subdivisions b. available to the public in denominations of thousand pesos or more. maturities and other characteristics of said obligations of the BSP and may denominate the obligations in gold or foreign currencies. Provisional Advances to the National Government -may be made with or without interest by the BSP to finance expenditures authorized in its annual operations. aggregately. F. -MB may determine the interest rates. in order that a contraction in BSP credit may be effected promptly whenever the national monetary policy so requires XII. Provided that the advances be: 1. XI. and shall be immediately retired and cancelled. Prohibitions Section 128. -acquired by the BSP through purchases or redemptions. Open Market Operations For The Account Of The Bangko Sentral A. regularly serviced. Bank Reserves A. repaid within 3 months (may be extended up to the same period if allowed by the MB) from the date such advances are received by the National Govt 2. evidences of indebtedness issued by govt instrumentalities and guaranteed by the Govt -such evidences must be freely negotiable. Composition of the BSP’s Portfolio Review of the BSP’s Portfolio -by the MB in relation to its future credit policy -shall consider whether a sufficiently large part of the portfolio consists of assets with early maturities. C. -shall not be included among its assets. Reserve Requirements -banks are required to maintain reserves against their deposit liabilities -MB may also require all banks and/or quasi-banks to maintain reserves against funds held in trust and liabilities for deposit substitutes -proportional to the volume of its deposit liabilities and shall ordinarily take the form of a deposit in the BSP -Reserves against deposit substitutes shall be determined in the same manner as provided for reserve requirements against regular bank deposits .

promissory notes. bankers acceptances. other than deposits. through the issuance. These instruments may include. however. participations. Definition of Deposit Substitutes Section 95. for the purpose of relending or purchasing of receivables and other obligations. industrial and other 33 | P a g e . certificates of assignment and similar instruments with recourse. but need not be limited to. — The term "deposit substitutes" is defined as an alternative form of obtaining funds from the public. That deposit substitutes of commercial. The Monetary Board shall determine what specific instruments shall be considered as deposit substitutes for the purposes of Section 94 of this Act: Provided. Definition of Deposit Substitutes. and repurchase agreements. or acceptance of debt instruments for the borrower's own account.-MB may exempt from the reserve requirements those with remaining maturities of 2 yrs or more and interbank borrowings -Maintenance of bank reserves is for the purpose of controlling the volume of money -BSP shall not pay interest unless required by the MB B. endorsement.

the Board may place an upper limit on the amount preceding the same shall apply of loans and investments which the banks may hold. whichever is higher. Section 106. availability and cost of money are in accord with the needs of the Philippine economy and that bank credit is not granted for speculative purposes prejudicial -fixed by MB to the national interests. — The Monetary Board may prescribe minimum ratios . Section 105. Guiding Principle. and may relate the size -increase must be gradual -shall not exceed four percentage points in any thirty-day period of the required margin to the nature of the transaction to be financed. Increase in Reserve Requirements time prescribe minimum cash margins for the opening of letters of credit. -may alter the minimum reserve ratios Required Reserves Against Foreign Currency Deposits this Act to ensure that the supply. Selective Regulation of Bank Operations the needs of their agents or dealers shall not be covered by the provisions of C. -if reserve position is below the minimum required: shall pay the Bangko Sentral In no case shall the Monetary Board establish limits which are below the value of the loans or one-tenth of one percent (1/10 of 1%) per day on the amount of the deficiency or the prevailing ninety-one-day treasury bill rate plus three percentage points. Section 108. Required Security Against Bank Loans. Required Reserves Against Peso Deposit [just for now] -fixed by MB Section 104. Portfolio Ceilings.non-financial companies for the limited purpose of financing their own needs or XIII. or may place a limit on the rate of increase H. -principal office + branches + agencies =SINGLE UNIT Reserve Deficiencies of such assets within specified periods of time. — The Monetary Board may at any F. Minimum Capital Ratios. — The Monetary Board shall use the powers granted to it under D. Margin Requirements Against Letters of Credit. the Monetary Board may issue such regulations as it may deem G. investments of the banks on the date on which they are notified of such restrictions. and the kind and amount of security to be required against the amount of its liability accounts against which reserves are required to be various types of credit operations of the banks. maintained -holidays or non-banking days: the reserve position of the day immediately Section 107. Regulations on bank operations shall be applied to all banks of the E. Reserves against Unused Balances of Overdraft Lines -MB may establish minimum reserve requirements same category uniformly and without discrimination. — In order to promote liquidity and -banks shall be notified in advance as to when it will take effect solvency of the banking system. Section 94 of this Act. Computation on Reserves -calculated daily on the basis of the amount of the institution's reserves and the necessary with respect to the maximum permissible maturities of the loans and investments which the banks may make. The Monetary Board may apply such limits to the loans and investments of each bank or to specific categories thereof. The restrictions shall be applied to all banks uniformly and without discrimination. — Whenever the Monetary Board considers it advisable to prevent or check an expansion of bank credit.

-Deposit reserves-basis for check clearing and settlement of interbank balances CHAPTER V -any bank which incurs on overdrawing in its deposit account with the Bangko FUNCTIONS AS BANKER AND FINANCIAL ADVISOR Sentral shall fully cover said overdraft. negotiations and transactions with the International J.-excess may offset deficiencies (of the same week) -MB may deny such privilege in case of abuse which the capital and surplus of the banks must bear to the volume of their assets. and may alter said ratios whenever it deems necessary. rehabilitation program of a bank. its political subdivisions and instrumentalities. — The Bangko Sentral shall -the appropriate clearing office shall be officially notified of banks with overdrawn represent the Government in all dealings. said Fund. Representation with Other Financial Institutions. whichever is higher. The MB may also modify or set aside reserved deficiency penalties for Monetary Board. Coordination of Credit Policies. Designation of Bangko Sentral as Banker of the Government. -if a bank chronically has a reserve deficiency. I. including interest thereon at a rate equivalent to one-tenth of one percent (1/10 of 1%) per day or the prevailing OF THE GOVERNMENT ninety-one-day treasury bill rate plus three percentage points. or operations with. — Government-owned corporations which perform banking or credit functions shall coordinate their general credit policies with those of the banks. its subdivisions and instrumentalities. — The Bangko Sentral may be shall be exempted to satisfy a claim of any party except the Government. the Monetary Board may. -deposits maintained by banks with the BSP as part of their reserve requirements Section 112. or to specific categories thereof. balances. regulations of the MB. — The Bangko as the overdrawing is fully covered or otherwise converted into an emergency loan or advance. for part or the entire period of a strike or lockout affecting a bank or a quasi-bank or of a national emergency affecting operations of banks or quasiSection 109. not later than the next clearing day. Interbank Settlement Toward this end. Section 111. Sentral shall act as a banker of the Government. BSP may charge fees. Representation with the International Monetary Fund. make suggestions or recommendations to such corporations for the more effective coordination of their policies -BSP shall establish facilities for interbank clearing under prescribed rules and with those of the Bangko Sentral. . Exemption from attachment Monetary Fund and shall carry such accounts as may result from Philippine membership in. whenever it deems it expedient. -settlement of clearing balances shall not be effected for any account which ARTICLE I -FUNCTIONS AS BANKER OF THE GOVERNMENT continues to be overdrawn for five (5) consecutive banking days until such time Section 110. MB may limit or prohibit the making of new loans or investments and may require the net profits be assigned to surplus ARTICLE IX COORDINATION OF CREDIT POLICIES BY GOVERNMENT INSTITUTIONS -MB may modify or set aside the reserve deficiency penalties provided in this section.

negotiations or transactions with the International Bank for Reconstruction and Development and with other foreign or international 34 | P a g e .authorized by the Government to represent it in dealings.

ARTICLE II THE MARKETING AND STABILIZATION OF SECURITIES FOR THE ACCOUNT OF THE GOVERNMENT A. The Bangko Sentral may pay interest on deposits of the Government or of its political subdivisions and instrumentalities. — The Bangko Sentral may charge equitable rates. Section 116. the Bangko Sentral may engage the services of other governmentowned and controlled banks and of other domestic banks for operations in localities at home or abroad in which the Bangko Sentral does not have offices or agencies adequately equipped to perform said operations: Provided. subject to such rules and regulations as the Board may prescribe: Provided. That the Bangko Sentral shall not guarantee the placement of said securities. however. negotiations or transactions. Section 113. — The Bangko Sentral shall be the official depository of the Government. The President may. THE ISSUE AND PLACING OF GOVERNMENT SECURITIES Section 117. Section 114. Remuneration for Services. may be made through the Bangko Sentral. as the case may be: Provided.financial institutions or agencies. commissions or fees for services which it renders to the Government. as a general policy. however. — The Bangko Sentral shall open a general cash account for the Treasurer of the Philippines. in which the liquid funds of the Government shall be deposited. their cash balances should be deposited with the Bangko Sentral. Other Banks as Agents of the Bangko Sentral. That such banks may hold deposits of the political subdivisions and instrumentalities of the Government beyond their minimum working balances whenever such subdivisions or instrumentalities have outstanding loans with said banks. That for fiscal operations in foreign countries. Section 115. its political subdivisions and instrumentalities. Official Deposits. its political subdivisions and instrumentalities as well as of governmentowned or controlled corporations and. designate any of his other financial advisors to jointly represent the Government in such dealings. — The issue of securities representing obligations of the Government. the Government or its respective subdivisions or instrumentality. — In the performance of its functions as fiscal agent. Transfers of funds from this account to other accounts shall be made only upon order of the Treasurer of the Philippines. with only minimum working balances to be held by governmentowned banks and such other banks incorporated in the Philippines as the Monetary Board may designate. and for the account of. however. the Bangko Sentral may engage the services of foreign banking and financial institutions. as well as on deposits of banks with the Bangko Sentral. and shall not subscribe to their issue except to replace its maturing holdings of securities with the same type as the maturing securities. Issue of Government Obligations. its political subdivisions or instrumentalities. which may act as agent of. . Fiscal Operations.

— Before undertaking any credit operation abroad. regardless of whether said profits arise from capital gains or from interest earnings. The Government. Methods of Placing Government Securities. ARTICLE III FUNCTIONS AS FINANCIAL ADVISOR OF THE GOVERNMENT Section 123. or moderate. The Securities Stabilization Fund. sharp fluctuations in the quotations of said government obligations. — The servicing and redemption of the public debt shall also be effected through the Bangko Sentral. but shall not endeavor to alter movements of the market resulting from basic changes in the pattern or level of interest rates. The Fund shall correspondingly bear any net losses which it may incur. The Bangko Sentral shall not be a member of any stock exchange or syndicate. the Government. shall reimburse the Bangko Sentral for the expenses incurred in the placing of the aforesaid securities. — There shall be established a "Securities Stabilization Fund" which shall be administered by the Bangko Sentral for the account of the Government. — The Securities Stabilization Fund shall retain net profits which it may make on its operations. the resources of the Securities Stabilization Fund shall come from the balance of the fund as held by the Central Bank under Republic Act No. The Monetary Board shall use the resources of the Fund to prevent. through the Secretary of Finance. — Subject to Section 132 of this Act. of bonds and other evidences of indebtedness issued or fully guaranteed by the Government. B. BANGKO SENTRAL SUPPORT OF THE GOVERNMENT SECURITIES MARKET Section 120. Resources of the Securities Stabilization Fund. Section 121. Servicing and Redemption of the Public Debt. The purpose of these operations shall be to increase the liquidity and stabilize the value of said securities in order thereby to promote investment in government obligations. or its political subdivisions or instrumentalities. shall request the opinion. The Monetary Board shall issue such regulations as may be necessary to implement the provisions of this section. . Financial Advice on Official Credit Operations. Section 122. Section 119. in the open market. — The Bangko Sentral may place the securities to which the preceding section refers through direct sale to financial institutions and the public. Such opinions must similarly be requested by all political subdivisions and instrumentalities of the Government before any credit operation abroad is undertaken by them.Section 118. chan robles virtual law library The operations of the Securities Stabilization Fund shall consist of purchases and sales. but may intervene therein for the sole purpose of regulating their operations in the placing of government securities. of the Monetary Board on the monetary implications of the contemplated action. Profits and Losses of the Fund. in writing. 265 as of the effective date of this Act.

fees. 35 | P a g e . the prior opinion of the Monetary Board shall likewise be requested in order that the Board may render an opinion on the probable effects of the proposed operation on monetary aggregates. — In order to assure effective coordination between the economic. or any of its political subdivisions or instrumentalities. charges and assessments. Section 124. financial and fiscal policies of the Government and the monetary. Tax Exemptions. the Deputy Governor designated by the Governor of the Bangko Sentral shall be an ex officio member of the National Economic and Development Authority Board. provincial. municipal and city taxes. CHAPTER VI PRIVILEGES AND PROHIBITIONS ARTICLE I PRIVILEGES Section 125. Representation on the National Economic and Development Authority. Whenever the Government. credit and exchange policies of the Bangko Sentral. the price level. — The Bangko Sentral shall be exempt for a period of five (5) years from the approval of this Act from all national. contemplates borrowing within the Philippines.The opinion of the Monetary Board shall be based on the gold and foreign exchange resources and obligations of the nation and on the effects of the proposed operation on the balance of payments and on monetary aggregates. and the balance of payments.

or assessments payable by persons or other entities doing business with the Bangko Sentral: Provided. charges. documents and transactions related to the conduct of the business of the Bangko Sentral: Provided. charges and assessments for which the Bangko Sentral itself would otherwise be liable. primarily confidential or highly technical in nature. . and shall not participate in the ownership or management of any enterprise. except as to those which are policy-determining.The exemption authorized in the preceding paragraph of this section shall apply to all property of the Bangko Sentral. both as to principal and interest. receipts. including all members of the Monetary Board. either directly or indirectly. shall be made only according to the Civil Service Law and regulations: Provided. and the importation of all equipment needed for bank note production. ARTICLE II PROHIBITIONS Section 128. however. appoint personnel in the Bangko Sentral whose services are deemed necessary in order not to unduly disrupt the operations of the Bangko Sentral. Applicability of the Civil Service Law. — Appointments in the Bangko Sentral. as well as to all contracts. Section 127. the importation and exportation by the Bangko Sentral of notes and coins. Prohibitions. expenditures. respectively. Exemption from Customs Duties. minting of coins. further. may without need of obtaining prior approval from any other government agency. deeds. to the resources. and of gold and other metals to be used for purposes authorized under this Act. Section 126. That no qualification requirements for positions in the Bangko Sentral shall be imposed other than those set by the Monetary Board: Provided. fees. shall not engage directly or indirectly in partisan activities or take part in any election except to vote. fees. Officers and employees of the Bangko Sentral. profits and income of the Bangko Sentral. That foreign loans and other obligations of the Bangko Sentral shall be exempt. That said exemptions shall apply only to such taxes. — The Bangko Sentral shall not acquire shares of any kind or accept them as collateral. the Monetary Board or Governor. That. further. from any and all taxes if the payment of such taxes has been assumed by the Bangko Sentral. — The provision of any general or special law to the contrary notwithstanding. The Bangko Sentral shall not engage in development banking or financing: Provided. however. assessments and charges related to such importation or exportation. and shall not apply to taxes. in accordance with Sections 15(c) and 17(d) of this Act. metal refining and other security printing operations shall be fully exempt from all customs duties and consular fees and from all other taxes.

NOT LESS THAN 5 DAYS. Entruster NOT Responsible on Sale by EntrusteeThe Entruster. after serving such. Obligations of the Entrustee The entrustee shall: 1. The Entruster may cancel the trust and take possession of the GDI OR of the proceeds at any time upon default or failure to comply with the terms and conditions or agreement. To the proceed of the sale of GDI . The Entruster may be the purchaser. or ¦ sent by post-paid ordinary mail to the the entrustee's last known bsiness address . holding security interest or has given the entrustee the liberty to sell or dispose of the GDI. The Entrustee shall receive any surpus but shall be liable for any deficiency to the Entruster G. Hold the GDI and shall dispose of them in accordance with the terms and conditions . Rights of the Entruster 1. is NOT responsible as a principal or as a vendor in a sale or contract to sell made by the entrustee. keeping and storing the GDI ¦ To the satisfaction of the entrustee's indebtedness to the entruster . To the return of the GDI incase of non-sale\ . The Entruster shall be entitled: . To the enforcemet of all rights conferred on him in the trust receipt provided such are not contrary to law 2. Give notice to the Entrustee on or after default of the intention to SELL and may. Notice of Sale shall be deemed sufficient if given in writing and either: ¦ served personally to the entrustee. and . Chapter 9 (incomplete) F.That outstanding loans obtained or extended for development financing shall not be affected by the prohibition of this section. The proceeds of such sales shall be applied: ¦ To the payment of the expenses thereof ¦ To the payment of the expenses of re-taking. sell the GDI at a PUBLIC or PRIVATE SALE. . H.

Insure the GOODS for their total value against loss from fire. When the Entrustee fails to: . turn over the proceeds of the sale of the goods 36 | P a g e . pilferage. If the entrustee has the right to sell then a purchaser of value and good faith acquires the GDI free from the entruster's security interest K. 3. 2. Keep said goods adn proceeds thereof whether in money or whatever form. Risk of Loss shall be borne by the Entrustee. whether or not the entrustee is at fault or negligent. Liability of Entrustee for Loss . Rights of the Purchaser for Value and Good Faith . . or other casualties. The loss of the GDI pending their disposition.of the trust receipt. Receive the proceeds in trust for the entruster and turnover the same to the entruster to the extent of the amount owing the entruster or as appears on the trust receipt. 4. The Entruster's security interest in GDI pursuant to the written terms of a trust receipt shall be VALID against all creditors of the Entrustee for the duratioon fo the trust receipt agreement L. theft. Validity of Entruster's Security Interest as Against Creditors . and 5. it shall NOT extinguish his obligation to teh entruster for the value thereof J. Violation of the Trust Receipts Law (Malum Prohibitum--intent is immaterial) . I. Observe all other terms and conditions of the trust receipt not contrary to the provisions of the law. separate and capable of identification as property of the entruster.

The Trust Receipts Law punishes dishonesty and abuse of confidence in handling of money or goods to the prejudice of pubic order. Assessment Rate shall be determined by the Board of Directors -shall not exceed 1/5 of 1% per annum. officers. "w/o prejudice to the civil liabilities. Penalty . But they are LIABLE for the civil liabilities because of the clause. employees. Failure to account. Assessment A. .or other officials or persons therein responsible for the offense. 31 and . but to the public interest. 31 of each year. penalty shall be imposed on the directors. . VI. 1 (b) of the RPC or RA 3815 . If vilaotion is committed by corporations. the assessment base shall be the amount of the liability of he bank for deposits without any deduction for indebtedness of depositors. associations. 31. Certified Statement of Assessment Base and Assessment Due (i) On or before July 31 of each year. upon demand. (ii) On or before Jan." Chapter 10 (incomplete) G. Mere failure to deliver the proceeds or return the goods constitutes a criminal offense the causes prejudice not only to the creditors. partnerships. M. Reason: Corporation and other juridical entities CANNOT be put into jail. semi-assessment rate for each insured bank shall be in the amount of the product of ½ the assessment rate multiplied by the assessment base but in no case shall it be less than P250. 315 par. determined in accordance with (a) above which shall contain or be verified by a written declaration that it is made under the penalties of perjury. a certified statement showing for the 6 months ending on the preceding June 30 the amount of the assessment base and the amount of the semiannual assessment due to PDIC for the period ending on the following Dec. each insured bank shall file with the PDIC a similar certified statement for the 6 months ending on the preceding Dec. or other juridical entities. return the goods covered by the trust receipt if the goods are not sold . each insured bank shall file with the Corp. the maximum amount of insurance. Duty to Indicate Insurance on Deposits All banks shall indicate the coverage of the PDIC in each passbook. Punished under Art. w/o prejudice to the civil liabilities . B.. inter alia. for the goods received in trust is evidence of conversion or misappropriation--constitutes estafa. CTD and/or cover of checkbook for demand deposit/NOW accounts stating.

(iv) On the expiration of such period. or agent -shall be insured like other forms of deposits. (v) If such bank has assumed the liabilities for deposits of another bank or banks. 31. (vi) The assessment payments required from the insured banks shall be made in such manner as the Board shall prescribe. this rule shall not apply if such bank shall deposit security satisfactory to PDIC for payment upon final determination of the issue . whichever is applicable. but shall be considered to be a deposit liability of the IB F. file a case for collection without prejudice to the imposition of administrative sanctions E. and stating that the bank has failed or refused to pay. refund to an IB any payment of assessment in excess of the amount due 2. guardian. (iii) Each bank which becomes an insured bank shall not be required to file any certified statement for the semiannual period in which it becomes as insured bank.000 for each trust estate. Trust Funds -means funds held by an insured bank in a fiduciary capacity and includes. Payment of Dividends and/or Interests -no insured bank shall pay any dividend on its capital stock or interest on its capital notes or debentures or distribute any of its capital assets while it remains in default in the payment of any assessment due -if such default is due to a dispute between the insured bank and PDIC over the amount of such assessment. and when deposited by the fiduciary bank in another IB.shall pay the amount of the semiannual assessment for the period ending in the following June 30 which it is required to certify. Refund and Credit PDIC may: 1. C. such funds shall be similarly insured to the FB according to the trust estates represented -the amount so held by other IBs on deposit shall not for the purpose of any certified statement be considered to be a deposit liability of the FB. determined in accordance with (a) above. each such bank shall comply with (b) above except that the semiannual assessment base for its first certified statement shall be the assessment base of the bank as of the close of business on the preceding June 30 or Dec. at its discretion. it shall include such liabilities in its assessment base. in an amount not to exceed P10. Termination -PDIC shall not terminate the insured status of any bank which continues to operate or receive deposits -Should any IB fail or refuse to pay any assessment required. and should not correct such failure of refusal within 30 days after written notice has been given to an officer of the bank. executor. administrator. without being limited to. funds held as trustee. (vii) Any insured bank which fails to pay any certified statement may be compelled to do so by mandatory injunction or other appropriate remedy . credit such excess toward the payment of the assessment next becoming due from such bank and upon succeeding assessments until the credit is exhausted. provided it shall not be later than 60 days after filing the certified statement setting forth the amount of assessment. PDIC may. D.

subject to the charges 37 | P a g e . Deposit Insurance Fund -the permanent insurance fund shall be P3 billion -the DIF shall be the capital account of PDIC and shall principally consist of the ff: a.VII. assessment collections. the PIF b.

whether or not such bank shall have filed any such certified statement and whether or not suit shall have been brought to compel the bank to file any such statement No action or proceeding shall be brought for recovery of any assessment due of for the recovery of any amount paid in excess of the amount due. conduct a study on the need to adjust the amount of the PIF. net of recoverable amounts from applicable assets and collaterals. Unsound Practice In case of commission of unsafe or unsound practices by an IB or its officers. any provision of the PDIC Law 2. PDIC is entitled to recover from any insured bank the amount of any unpaid assessment lawfully payable by such insured bank. for the calendar year b. and every 5 years thereafter. during the calendar year c.. any order. unless it has been brought within 5 years after the right accrued for which the claim is made VIII.c. and require the bank or its directors or agents concerned to correct the practices or violations within 45 days) -if the practice or violation is likely to cause insolvency or substantial dissipation of assets or earnings of the bank. or is likely to seriously weaken the condition of the bank or otherwise seriously prejudice the interests of its depositors and the Corp. the net insurance and financial assistance losses sustained in said calendar year -In a suit. the operating costs and expenses of the Corp. Such expenses and charges are: a. assessment rate and assessment base. reserves for insurance and financial assistance losses d. the Board of Directors shall: -submit the report of the examination to the MB to secure corrective action thereon -if no such action is taken within 45 days from submission of the report. any written condition imposed in connection with any transaction with or granted by PDIC IX. The order may also include the imposition of fines What may be violated: 1. and thereafter make the necessary recommendation to Congress All assessment collections and income from operations after expenses and charges shall be added to the DIF. the BoD shall motu proprio institute corrective action which it deems necessary (BoD may issue a cease-and-desist order. rule or instruction issued by PDIC 3. the period to take corrective action shall not be more than 15 days. within 2 years from the passage of the PDIC Law. retained earnings -PDIC may. Reports by Insured Banks -each IB shall make to PDIC reports of conditions in such form and at such times as the BoD may require such reports to be published in such manner not inconsistent . additions to reserve to provide for insurance and financial assistance losses. insurance cover.

commission. retired. except as provided by law or under court order. Dealings by PDIC Personnel with Banks A. or transferred to another agency. administrative. or to any person authorized by either of them in writing to receive such information XI. and to continue into liquidation whenever authorized under the law. director. Prohibitions on PDIC Personnel -being an officer.. or other agency charged by law with the duty to take charge of the assets and liabilities of a bank which has been forbidden fro doing business in the Phil. Congress. or agents in connection with any civil. the MB shall give prior notice and appoint PDIC as receiver -“receiver” includes a receiver. employees. or provide legal assistance to its directors. criminal. Borrowing from Banks -shall be prohibited only with respect to the particular institution in which they are assigned. B. of any bank or banking institution except as otherwise provided by law -receiving any gift or thing of value from any officer. authorized by law. the President of the Corp. person. directly or indirectly. processed. officers. consultant. Designation as Directors and Officers of Banks Members of the BoD and personnel of PDIC may become directors and officers of any bank or banking institution and of any entity related to such institution in connection with financial assistance extended by PDIC to such institution and when. and report of conditions made to the BSP or its appropriate supervising dept. as well as the duty to gather. or any other action to which such director etc. is made a party by reason of or in connection with the exercise of authority or performance of functions and duties .. -Applies also to those who resigned. and to dispose of the assets and to wind up the affairs of such bank . and the BSP shall also have access to such reports made by and to PDIC -Each IB shall keep and maintain a true and accurate record or statement of its daily deposit transactions consistent with the standards set by the BSP and PDIC X. or acted upon by such personnel XIII. it is appropriate to make such designation to protect the interest of PDIC. does not apply against actions initiated by PDIC against such director etc. Appointment -whenever it shall be appropriate for the MB of the BSP to appoint a receiver of any banking institution pursuant to existing laws.with any applicable law as it may direct -PDIC shall have access to reports of examination made by. information relating to the condition or business of any bank . or are conducting an examination -personnel are likewise prohibited from borrowing from any bank or banking institution during the time that a transaction of such institution with PDIC is being evaluated. any agency of govt. Receivership A. employee or stockholder. in connection with acts done during their tenure or employment with PDIC XII. in the opinion of the Board. or employee of any bank -revealing in any manner. preserve and administer such assets and liabilities for the benefit of the depositors and creditors of dais bank. Legal Assistance -PDIC shall underwrite or advance litigation costs and expenses. director. shall not apply to the giving of information to the BoD.

B. Powers 38 | P a g e .

functions and duties. to perform such powers and functions of PDIC as receiver and liquidator of the closed bank 3. bring suit to enforce liabilities to or recoveries of the closed bank 2. hire or retain private counsels as ma be necessary 7. remunerations. and stockholders of such bank are suspended -the relevant provisions of the Articles of Incorporation and By-laws of the closed bank are likewise suspended -the assets shall be deemed in custodia legis in the hands of the receiver -from the time the bank is placed under receivership. Suits filed by PDIC (i) In all cases filed by PDIC as receiver for the recovery of or involving any asset of the closed bank. Effective immediately upon takeover as receiver of such bank: -the powers. exercise such other powers as are inherent and necessary for the effective discharge of the duties of PDIC as receiver C. pledge. collect loans and other claims of the bank. and perquisites of the directors. as well as all allowances. modify. or mortgage. PDIC as receiver may exercise such powers which may include a reduction of the interest rate to a reasonable rate. garnishment. payment of separation pay or benefits shall be made only after the bank has been placed under liquidation 4. pay accrued utilities. and for the purpose. borrow or obtain a loan. Any modification or reduction shall apply only to unpaid interest 9. manage and administer the affairs of the closed bank. payment of all docket and other court fees shall be deferred until the action is terminated with finality. officers. such fees shall be paid as administrative expenses during the distribution of the assets of the closed bank. compromise or restructure the terms and conditions of such loans or claims as ma be deemed advantageous to the interest of the creditors and claimants of the bank 6. rentals and salaries of personnel of the bank for a period not exceeding 3 months from available funds of the bank 5. or to redeem foreclosed assets of the closed bank. levy or any other court processes In addition to the powers of a receiver pursuant to existing laws. execution. . or to minimize losses to the depositors and creditors 8. when necessary to preserve or prevent dissipation of the assets. or encumber any asset of the bank. (ii) Any such fees shall constitute as a first lien on any judgment in favor of the closed bank or in case of unfavorable judgment. its assets shall not be subject to attachment. it shall control. appoint and hire persons and entities of recognized competence in banking or finance as its deputies and assistants. if the stipulated interest on deposits is unusually high compared with the prevailing applicable interest rate. suspend or terminate the employment of officers and employees of the bank .As receiver. PDIC is empowered to: 1.

D. Distribution of Assets 1. Before any distribution of assets of the closed bank, PDIC shall charge against such assets: • Reasonable receivership expenses (subject to approval of court) • Reasonable liquidation expenses 2. After payment of all liabilities and claims against closed bank, PDIC shall pay any surplus dividends at the legal rate of interest from the date of takeover to the date of distribution, to creditors and claimants in accordance with legal priority before distribution to the shareholders. XIV. Payment of Insured Deposits A. Manner of Payment 1. Whenever an insured bank shall have been closed by the Monetary Board, payment of the insured deposits on such closed banks shall be made by the PDIC by: i. Cash ii. Transferred deposit 2. Transfer deposit – deposit in an insured bank made available to a depositor by PDIC as payment of insured deposit of such depositor in a closed bank. Not to exceed two hundred fifty thousand (250,000) 3. A joint account shall be insured separately from any individually owned deposit account. 4. Maximum insured deposits of Joint accounts shall be divided into as many equal shares as there are co-owners, unless a different sharing is stipulated in the document of deposit. 5. If an account is held by a juridical person jointly with an individual, it is presumed that the maximum insured deposit belongs to the juridical person. 6. The aggregate of the interests of each co-owner over several joint accounts shall likewise not exceed 250,000 7. No owner/holder of any negotiable certificate of deposit shall be recognized as a depositor entitled to the rights provided unless his name is registered in the books of the issuing bank. B. Proof of Claims 1. PDIC may require proof of claims to be filed before paying the insured deposits. 2. It may require final determination by the courts if not satisfied to the viability of the claim. C. Settlement Period and Penalties in Case of Failure to Settle 39 | P a g e

1. Failure to settle claim within six months from the date of filing claim due to grave abuse of discretion, gross negligence, bad faith, or malice shall subject the directors, employees, or officers of PDIC Responsible for the delay to imprisonment from six months to one year. 2. Period shall not apply if the validity of the claim depends on resolution of issues of fact or law by another office. 3. Upon payment to such depositor, PDIC shall be subrogated to all of the rights of the depositor to the extent of such payment. 4. Such subrogation shall include the right to receive the same dividends from the proceeds of the assets of the closed bank. But such depositor shall retain his claim for any uninsured portion of his deposit. D. Notice 1. PDIC shall commence the determination of insured deposits due to depositors of the closed bank upon its actual takeover of the closed bank. 2. PDIC shall publish the notice once a week for at least 3 consecutive weeks in a newspaper of general circulation or newspaper circulated in the community where the closed bank or its branches are located. E. Discharge Payment of an insured deposit shall discharge PDIC. And payment of a transferred deposit by the new bank in which a transferred deposit has been made available shall discharge PDIC and the new bank. F. Recognition of Owner PDIC cannot recognize as the owner any person, whose name or interest as such owner is not disclosed on the records of a closed bank, as part owner of any portion of a deposit appearing on the records of the closed bank under a name other than that of the claimant. G. Withholding of Payment PDIC may withhold payment of such portions of the insured deposit of any depositor in a closed bank as may be required to provide for the payment of any liability of such depositor as a stockholder of the closed bank, or any liability of such depositor to the closed bank or to its receiver, which is not offset against a claim due from such bank, pending the determination and payment of such liability by such depositor or any other liable therefore. H. Prescription All rights of a depositor with respect to the insured deposit shall be barred if: • He fails to file a claim within two years from actual take-over of the closed bank by the receiver. • Or does not enforce his claim within two years after the filing a claim Unless otherwise waived by PDIC. All rights of the depositor subrogated to PDIC shall thereupon revert back to the depositor. PDIC shall be discharged from any liability. XV. Investment by PDIC

A. Money of the PDIC not otherwise employed shall be invested in obligations of the Republic of the Philippines or by obligations guaranteed by it. 1. It shall not sell or purchase any such obligation for its own account or in its own right and interest in any one time aggregating in excess of 100,000 without approval of the Insurance Commissioner. 2. Insurance Commissioner may waive the requirement of his approval as he may determine. B. The banking or checking account of PDIC shall be kept in: 1. BSP 2. PNB 3. Any bank designated as fiscal agent or depository of RP XVI. Extension of Loans A. In order to prevent an insured bank from closing, PDCI may make loans, purchase the assets, assume liability, or make deposits in such insured bank, upon such conditions as the Board of Directors may prescribe, the operations of such bank is essential to provide adequate banking service in the community or maintain financial stability in the economy. a. Such power may also be exercised in case of a closed insured bank if: i. the resumption of the operations of said bank is vital to the interest of the community ii. Severe financial climate exists b. Reopening of said bank is subject to the approval of the Monetary Board. B. PDIC may provide any corporation acquiring control of, merging or consolidating with or acquiring the assets of an insured bank in order to prevent such closing or of a closed insured bank in order to restore it to normal operation 40 | P a g e

XIX. XX. Signs . with systemic consequences with a probable failure or closure. PDIC is authorized to borrow from the BSP on such terms as may be agreed by them. Borrowings A. as may be necessary to prevent its failure or closure. files. or arrange credit lines or other credit accommodations from any bank designated as depository or fiscal agent by the RP. Except as to matters relating to the Function of the PDIC which shall be subject to visitorial audit only. Within 60 days from date of assistance. Such loans granted by the BSP shall be consistent with monetary policy. – subject to the approval of the Monetary Board. PDIC shall determine the actual payoff and liquidation thereof will be more expensive than the exercise of its power prior to exercise of its powers. When in the Judgment of the Board of Directors. reports. PDIC may grant financial assistance to insured banks. C. depriving other banks of funds leading to a general shutdown of normal clearing and settlement activity. E. and all other papers belonging to PDIC pertaining to its financial transactions. The corporation shall dispose of such equity as soon as practicable. records. “systemic risk” – possibility that failure of one bank to settle net transactions with other banks will trigger a chain reaction. PDIC shall annually make a report of its operations to the Congress as soon s practicable after Jan 1 B. Financial assistance may take the form of equity or quasi-equity of insured banks as may be deemed necessary by the Board of Directors with concurrence by the MB.a. obtain loans. Audit shall be conducted in places where the accounts of the corporation are normally kept. Issuance of Bonds With approval of the President of RP. BoD shall determine interest rate and other requirements of such obligation. F. Miscellaneous A. accounts. and other obligations necessary fro the purpose of settlement of insured deposits in closed banks as well as for financial assistance. PDIC shall be authorized to borrow money. D. debentures. PDIC shall submit a report to MB C. XVII. COA shall have access to all books. the interest rate thereon shall not exceed the treasury bill rate. Financial transactions shall be audited by the COA in accordance with principles and processes and procedures applicable to commercial corporate transactions. PDIC shall provide appropriate reserves for the redemption of said obligation. PDIC is authorized to issue bonds. Reports and Audit A. XVII. PDIC may not purchase the voting or common stock of an insured bank but it can enter into or force agreements that it determines to be necessary to protect its financial interests. a. a. b. B. the PDIC has insufficient funds to attain its purpose. -Likelihood of a sudden unexpected collapse of confidence in a significant portion of the banking or financial system with potentially large real economic effects.

Assume liability to pay any deposits made in noninsured bank 3. PDIC may require an insured bank to provide protection and indemnity against burglary. Officers and employees of Insured banks 41 | P a g e . losses arising from discharge of duties. anfd employees of an insured bank c. employees. officers. Merger or consolidation of insured banks Upon consent of PDIC. Merge or consolidate with an uninsured bank 2. Protection Against Losses a. officres b. defalcation. by particular acts of its directors. Insured banks shall place signs in all place of business and in its statements that its deposits are insured by PDIC. If insured bank refuse to comply with any such requirement. Directors. B. BoD shall determine the bonding requirement referring to directors. banks may: 1. BoD may exempt from this requirement advertisements not relating to deposits. D.a. b. PDIC may add the cost thereof to the assessment otherwise payable to such bank. Transfer assets to any noninsured bank C.

or employee of an insured bank who has been convicted of any criminal offense involving dishonesty of breach of trust. Fraudulent disposal .000. XXII. Splitting of deposits or creation of fictitious loans or deposit accounts i. Criminal Penalties A. levy attachment. No person shall be a director. b.a. Submission of false material information in connection with or in relation to any financial assistance extended to the bank 5. rules. or execution provided under the PDIC Law and the NCBA 10. officer. any director.000. Splitting deposits – deposit accounts with an outstanding balance of more than the statutory maximum amount of insured deposit maintained under the name of a person is broken down and transferred into two or more accounts in the names of persons who have no beneficial ownership on transferred deposits in their names within 30 days preceding or during a bank declared holiday. or preceding a closure order issued by the MB for the purpose of availing of the maximum deposit insurance coverage. or causing a person to violate. Willful making of false statement or entry in any bank report or document 4. the exemption of garnishment. FINES A. Chap 11 – Anti-Money Laundering ( RA 9160) I. Refusal to allow PDIC to takeover a closed bank placed under its receivership 7. Violation. CONCEPTS A. officer. Unjustified refusal to permit examination and audit of records as required by law. Willful failure or refusal to comply with. omission. officers. transfer or concealment of any asset. 6. Refusal to turnover or destroying or tampering bank records 8.000 or both. against a bank or any of its directors. and regulations 3. In no case such fine exceed 3times the amount of the damages or costs caused by the transaction for each day that the violation subsist. liability of the closed bank under the receivership of the PDIC 9. or violation. or regulation issued by PDIC. BOD is authorized to impose administrative fines for violation of any other instruction. Penalty for violation of this prohibition: the bank will be subject to penalty of not more than 100 for every day of violation. property. employee or agent of bank who: 1. or agents responsible for such act. Punishable by prision mayor or a fine of 50. XXI. or commission of any other irregularities and/or conducting business in an unsafe or unsound manner. rule. Policies . or violation of any provision of eh PDIC Law.000-2. Willful refusal to submit reports 2.

Ensure that the Philippines shall not be used as a money laundering site for the proceeds of any unlawful activity. closed-end investment company.000 in one banking day ii. Suspicious transactions regardless of the amount a. trading orders. Those which deviate from the profile of the client or past transactions f.i. brokers. salesmen. investment house and other entities managing securities or service as agent. trust certificates. advisor. commercial papers. transaction . remittance. Drafts. Covered and Suspicious transaction i. Coins/currency of legal tender of the Phil. non-banks. checks and notes iii. bonds. Securities. Those administering or dealing in currency. Or any country ii. trust entities ad all other institutions regulated by the BSP ii. purpose or economic justification b. deposit certificates. custodial receipts. iii. Client is not properly identified c. Covered Institutions i. Any transaction that is similar to any of the foregoing D. Amount is not commensurate with the client’s financial capacity d. common trust fund and preneed companies v. Foreign exchange corporations. Related to any unlawful activity or offense g. To protect and preserve the integrity and confidentiality of bank accounts ii. consultant iv. Insurance companies and all other institutions regulated by the insurance commission iii. commodities. No legal or trade obligation. Mutual funds. money changers. quasi-banks. Cooperation in transnational investigation and prosecution of persons involved in money laundering B. Structured transactions to avoid being the subject of reporting required under the act e. and transfer companies vi. Banks. Transaction in cash or monetary instrument exceeding P500. Securities or negotiable instruments. money payments. financial derivatives or other monetary instruments or property supervised by the SEC C. Monetary instrument i.

Other similar instruments when title passes to another by endorsement. assignment or delivery E.267 of RPC 42 | P a g e . confirmation of sale money market instruments iv. Unlawful Activities i.tickets. Kidnapping for ransom under Art.

involves. fails to do so II. or relates to. Qualified theft under Art. Jurisdiction i. involves.3 par b. c. h. Prosecution i. g. transacts or attempts to transact said monetary instrument or property ii. Felonies or offenses of similar nature punishable under penal laws of other countries F. Violations of Electronic Commerce Act of 2000 xii. Swindling under Art. or relates to. performs or fails to perform any act as a result of which he facilitates the offense of money laundering referred to above iii. Destructive arson and murder under RPC xiv. 299-302 of the RPC vi. Smuggling under RA 455 and 1937 xi. the proceeds of any unlawful activity. Money Laundering Offense-is a crime whereby the proceeds of an unlawfulactivity are transacted. It can be committed by the ff: i. thereby making them appear to have originated fromlegitimate sources. Sec. Hijacking and other violations of RA 6235 xiii. Any proceeding relating to the unlawful activity shall be given precedence . Piracy on high seas under RPC and PD 532 viii.310 of RPC ix. Any person may be charged of both money laundering and the unlawful activity ii. Robbery and extortion under Arts. Jurisdiction and Prosecution A.ii. 8-10. I of the Anti-Graft and Corrupt Practices Act iv. Any person knowing that any monetary instrument or property is required to be disclosed and filed with the Anti-Money Laundering Council. Public persons and private persons in conspiracy with the formerSandiganbayan B. Fraudulent practices under Securities Regulation Code of 2000 xv. 294-296. Private persons-RTC ii. e. Any person knowing that any monetary instrument or property represents. 4-6. Plunder under RA 7080 v. 12-16 of the Dangerous Drugs Act of 2002 iii. the proceeds of any unlawful activity. Jueteng and Masiao under PD 1602 vii. Any person knowing any monetary instrument or property represents. Secs.315 of RPC x.

Cause the filing of complaints with the DOJ or Ombudsman v. Impose administrative sanctions for violation of laws. Prevention of Money Laundering A. Institutions shall establish and record the true identity of its clients based on office documents ii. Receive and take action any request of assistance from foreign states in their own anti-money laundering operations ix. regulations and orders issued pursuant thereto xii. Maintain a system of verifying the identity and legal existence of their . Issue orders addressed to the supervising authority of the institution to determine the true owner of a covered or suspicious transaction report or request assistance on the basis of substantial evidence iii. Member of the Bar b. Institute civil forfeiture proceedings through the OSG iv. Implement measures as may be necessary to counteract money laundering viii.over the prosecution of any offense or violation w/o prejudice to the freezing and other remedies III. Composition i. Chairman of the SEC B. Enlist assistance from government instrumentality for any anti-money laundering operation xi. Develop educational programs on the effects. Governor of he BSP as chairman ii. Investigate suspicious and covered transactions vi. Require and receive covered or suspicious transaction reports from covered institutions ii. rules. for the freezing of any monetary instrument or property vii. 35 years of age c. Apply before the CA ex parte. Customer Identification i. Anti-Money Laundering Council A. and means to prevent money laundering x. methods. GMC d. Unquestionable integrity and known probity IV. Establish a secretariat a. Functions i. Commissioner of the Insurance Commission iii.

Record Keeping i. Anonymous. they shall be criminally liable v. There is probable cause that the deposit or investment s related to any unlawful activity. but are prohibited to communicate to any other person iv. RA 8791. A money laundering offense 43 | P a g e . Records of transactions shall be maintained and stored from 5 years from the date of transaction ii. may issue a freeze order ii. The AMLC may inquire upon order of any competent court when it has been established that: a. Peso and foreign currency non-checking accounts shall be allowed which will be subject to test by the BSP to determine the existence and identity of the owners B. or b. Such order shall be for 20 days unless extended by the Court E. Reporting of Covered and Suspicious Transaction i. Authority to inquire into bank deposits i.clients iii. RA 6426. In case of violation of the prohibition above. Such reporting shall not be considered as a violation of RA 1405. fictitious an similar accounts are prohibited iv. Shall be reported to AMLC within 5 working days from the occurrence thereof. Freezing of Monetary Instrument or Property i. unless supervising authority prescribes a longer period not exceeding 10 days ii. it shall be required to report the same iii. Reporting to the AMLC is also prohibited to be disclosed to the media or any other person or entity D. For closed accounts. Should a transaction be determined a a covered and suspicious transaction. its records shall also be stored for 5 years from the date it was closed C. To the CA. upon application ex parte by the AMLC and after determination that probable cause exists.

it cannot be located ii. Mutual assistance among states A. Apply for an order of forfeiture b. Civil forfeiture a. freezing. Is allowed because forfeiture cannot be enforced due to the ff: i. removed. by verified petition. It shall be filed with the court which rendered the judgment of forfeiture within 15 days from the order of forfeiture C. Payment in lieu of forfeiture a. Destructive arson and murder including those perpetrated by terrorists V. Give information needed iii. Located outside the Philippine or outside the jurisdiction of the court v.ii. converted or transferred to prevent from being found or avoid forfeiture iv. Forfeiture A. destroyed. in a petition filed for the purpose of seizure. Those claiming an interest may apply. Hijacking and other violations of RA 6235 d. Tracking down. May execute a request by: i. The AMLC may execute or refuse to execute such request and inform the state of any valid reason for not executing such request B. Powers of the AMLC to act on a request for assistance a. restraining and seizing assets ii. Kidnapping for ransom b. Concealed. Claim on Forfeiture Assets a. Violations of Dangerous Drug Act of 2002 c. Substantially altered. for a declaration that the seized instrument or property legitimately belongs to him and pray for the segregation and exclusion b. Court will issue such order only when accompanied by: . Request for assistance from a foreign state a. With due diligence. diminished in value or rendered worthless by any act or omission attributable to the offender iii. When there is a report made. the Rules of Court on civil forfeiture applies B. Commingled with other instrument or property rendering it difficult to be identified or segregated VI. No court order shall be required in the following activities a. and the Court.

restraining and seizing assets b. Except: if there is a treaty between the Phil. Requirement for request from a foreign state a. . And the requesting State relating to the provisions of assistance in money laundering offense E. Authentication of documents a. Tracking down. Authenticated copy of the order of a court in the requesting state ordering the forfeiture ii. Contain other info as may assist in the execution of the request F. freezing. Apply for an order of forfeiture and must be accompanied by the order of the RTC and an affidavit of the Clerk of Court that the conviction and forfeiture are final D. Obtaining assistance from foreign state a. Obtain info that it needs relating to covered transaction and money laundering offense c. Signed or certified by a judge or equivalent officer in or of the requesting state b. Give sufficient particulars as to the identity of the person d. Ask from the institution for any info which may be of assistance to the investigation or prosecution f.i. Give all the particulars necessary for the issuance by the court in the requested state of the orders needed by th requesting state h. Give particulars sufficient to identify the institution believed to have any info e. Authenticated by the oath or affirmation of a witness or sealed with an official seal of a minister or secretary of the government of the requesting state c. Limitations on request a. Certification or affidavit of a competent officer of the requesting stat that the conviction and order of forfeiture are final C. to the extent allowed by the law of the foreign state d. When it contravenes the constitution b. Prejudicial to the interest of the Philippines i. Specify the manner in which such info will be obtained or produced g. Enter into the premises belonging to or in the possession of the persons named in the request. State the grounds on which any person is being investigated or prosecuted for c. Confirm that an investigation or prosecution is being conducted b.

the proceeds of any unlawful activity. or relates to. Any person knowing that any monetary instrument or property is required to be disclosed and filed with the Anti-Money Laundering Council. or relates to. involves.000.000 ii. or both C. Any person knowing any monetary instrument or property represents. 6m-1year or fine not less than P100.000 not more than P500. If corporation-upon the responsible officers iii.By the secretary of embassy. Any person knowing that any monetary instrument or property represents.000 not more than P500. Extradition a. 6m-4years or fine not less than P100. fails to do so i.000 not more than P500.000. Juridical person-suspend or revoke its license iv. with malice or bad faith.5M not more than P3M c. Imprisonment of 7 to 14 years and a fine not less than P3M b. Penalties A. reports a completely unwarranted or false info relative to money laundering i. performs or fails to perform any act as a result of which he facilitates the offense of money laundering referred to above i. 4-7 years and fin not less than P1. Negotiate for the inclusion of money laundering offenses among extraditable offenses VII. transacts or attempts to transact said monetary instrument or property i. consul or any officer in the foreign service of the Philippines stationed in the foreign state G. Alien-deportation 44 | P a g e . the proceeds of any unlawful activity. Crime of money laundering a. Malicious reporting a. involves. Any person who. 6m-4years and a fine not less than P100. Failure to keep records a. consul general. or both B.

v. no case may be filed against and no assets shall be frozen or forfeited to the prejudice of a candidate for electoral office during election period IX. unusual large transactions and all unusual patterns of transaction 7. respectively. Shall be appointed by the Senate President and the Speaker. IC. Public official-perpetual or temporary absolute disqualification from office vi. writer. D. Powers a. Programs against money laundering-employee training. publisher. Power to promulgate rules to overse the implementation of the law and to review and revise the rules issued by the AMLC within 30 days from promulgation XI. Distribution of Assets . in case of doubt. Take reasonable measures to establish and record the true identity and legal existence of their clients 2. development of internal policies.000-P1M b. Rules and Regulation for banks and non-financial institutions to combat money laundering 1. Implementing rules and Regulations A. Public official who refuses to testify-same penalties above D. audit function. obtain the true identity of the persons on whose behalf an account is opened 3. manager. Covered institutions shall formulate their own prevention programs X. anonymous or fictitious accounts should not be allowed 4. B. special attention should be given to complex. These rules shall be submitted to the congressional oversight committee for approval. based on proportional representation of parties B. other suspicious transactions not involving deposit should be reported 8. Prohibitions against political harassment A. editor VIII. Composition a. Banks should avoid business with criminals 9. Congressional Oversight Committee A. 3-8years and fine P500. Breach of Confidentiality a. identity of clients should be updated 5. shall not be used for political persecution or harassment or as an instrument to hamper competition in trade and commerce B. If disclosed to media-reporter. The BSP. necessary records of transactions should be maintained 6. 7 members from the Senate and 7 members from the House of Representatives b. and SEC shall promulgate rules to effectively implement this Act.

After payment of all liabilities and claims against closed bank. Transfer deposit – deposit in an insured bank made available to a depositor by PDIC as payment of insured deposit of such depositor in a closed bank. Proof of Claims 1. A joint account shall be insured separately from any individually owned deposit account.000) 3. No owner/holder of any negotiable certificate of deposit shall be recognized as a depositor entitled to the rights provided unless his name is registered in the books of the issuing bank. If an account is held by a juridical person jointly with an individual. PDIC may require proof of claims to be filed before paying the insured deposits. Transferred deposit 2. 6. to creditors and claimants in accordance with legal priority before distribution to the shareholders. J. 5. Manner of Payment 1. unless a different sharing is stipulated in the document of deposit. Payment of Insured Deposits I. Before any distribution of assets of the closed bank. it is presumed that the maximum insured deposit belongs to the juridical person. Cash ii. The aggregate of the interests of each co-owner over several joint accounts shall likewise not exceed 250. Maximum insured deposits of Joint accounts shall be divided into as many equal shares as there are co-owners. Not to exceed two hundred fifty thousand (250. It may require final determination by the courts if not satisfied to the viability of the claim.3. K. Settlement Period and Penalties in Case of Failure to Settle 45 | P a g e . XIV. PDIC shall pay any surplus dividends at the legal rate of interest from the date of takeover to the date of distribution. PDIC shall charge against such assets: • Reasonable receivership expenses (subject to approval of court) • Reasonable liquidation expenses 4. payment of the insured deposits on such closed banks shall be made by the PDIC by: i. Whenever an insured bank shall have been closed by the Monetary Board. 4. 2.000 7.

And payment of a transferred deposit by the new bank in which a transferred deposit has been made available shall discharge PDIC and the new bank. or malice shall subject the directors. All rights of the depositor subrogated to PDIC shall thereupon revert back to the depositor.1. employees. 4. • Or does not enforce his claim within two years after the filing a claim Unless otherwise waived by PDIC. 3. pending the determination and payment of such liability by such depositor or any other liable therefore. L. Recognition of Owner PDIC cannot recognize as the owner any person. as part owner of any portion of a deposit appearing on the records of the closed bank under a name other than that of the claimant. PDIC shall commence the determination of insured deposits due to depositors of the closed bank upon its actual takeover of the closed bank. PDIC shall publish the notice once a week for at least 3 consecutive weeks in a newspaper of general circulation or newspaper circulated in the community where the closed bank or its branches are located. N. Upon payment to such depositor. Discharge Payment of an insured deposit shall discharge PDIC. XV. O. whose name or interest as such owner is not disclosed on the records of a closed bank. 2. P. Failure to settle claim within six months from the date of filing claim due to grave abuse of discretion. Investment by PDIC . Withholding of Payment PDIC may withhold payment of such portions of the insured deposit of any depositor in a closed bank as may be required to provide for the payment of any liability of such depositor as a stockholder of the closed bank. bad faith. But such depositor shall retain his claim for any uninsured portion of his deposit. Prescription All rights of a depositor with respect to the insured deposit shall be barred if: • He fails to file a claim within two years from actual take-over of the closed bank by the receiver. Such subrogation shall include the right to receive the same dividends from the proceeds of the assets of the closed bank. 2. PDIC shall be subrogated to all of the rights of the depositor to the extent of such payment. M. gross negligence. Notice 1. PDIC shall be discharged from any liability. which is not offset against a claim due from such bank. or officers of PDIC Responsible for the delay to imprisonment from six months to one year. or any liability of such depositor to the closed bank or to its receiver. Period shall not apply if the validity of the claim depends on resolution of issues of fact or law by another office.

The banking or checking account of PDIC shall be kept in: 1. D. the operations of such bank is essential to provide adequate banking service in the community or maintain financial stability in the economy. the resumption of the operations of said bank is vital to the interest of the community ii. Reopening of said bank is subject to the approval of the Monetary Board. H. In order to prevent an insured bank from closing. merging or consolidating with or acquiring the assets of an insured bank in order to prevent such closing or of a closed insured bank in order to restore it to normal operation 46 | P a g e . purchase the assets. a.000 without approval of the Insurance Commissioner. or make deposits in such insured bank. BSP 2. Extension of Loans G. 1. assume liability.C. upon such conditions as the Board of Directors may prescribe. 2. PDCI may make loans. It shall not sell or purchase any such obligation for its own account or in its own right and interest in any one time aggregating in excess of 100. Such power may also be exercised in case of a closed insured bank if: i. Money of the PDIC not otherwise employed shall be invested in obligations of the Republic of the Philippines or by obligations guaranteed by it. Insurance Commissioner may waive the requirement of his approval as he may determine. Severe financial climate exists b. Any bank designated as fiscal agent or depository of RP XVI. PDIC may provide any corporation acquiring control of. PNB 3.

Within 60 days from date of assistance. records. a. accounts. the PDIC has insufficient funds to attain its purpose. obtain loans. The corporation shall dispose of such equity as soon as practicable. -Likelihood of a sudden unexpected collapse of confidence in a significant portion of the banking or financial system with potentially large real economic effects. PDIC shall determine the actual payoff and liquidation thereof will be more expensive than the exercise of its power prior to exercise of its powers. – subject to the approval of the Monetary Board. J. “systemic risk” – possibility that failure of one bank to settle net transactions with other banks will trigger a chain reaction. files. PDIC shall provide appropriate reserves for the redemption of said obligation. Financial transactions shall be audited by the COA in accordance with principles and processes and procedures applicable to commercial corporate transactions. D. PDIC is authorized to borrow from the BSP on such terms as may be agreed by them. XVII. PDIC is authorized to issue bonds. and other obligations necessary fro the purpose of settlement of insured deposits in closed banks as well as for financial assistance. BoD shall determine interest rate and other requirements of such obligation. PDIC shall be authorized to borrow money. as may be necessary to prevent its failure or closure. a. K. the interest rate thereon shall not exceed the treasury bill rate. Miscellaneous E. F. debentures. Signs . depriving other banks of funds leading to a general shutdown of normal clearing and settlement activity. Except as to matters relating to the Function of the PDIC which shall be subject to visitorial audit only. b. Financial assistance may take the form of equity or quasi-equity of insured banks as may be deemed necessary by the Board of Directors with concurrence by the MB. PDIC shall annually make a report of its operations to the Congress as soon s practicable after Jan 1 E. PDIC shall submit a report to MB I. XVII. L. Audit shall be conducted in places where the accounts of the corporation are normally kept. with systemic consequences with a probable failure or closure. COA shall have access to all books. Reports and Audit D. Borrowings C. or arrange credit lines or other credit accommodations from any bank designated as depository or fiscal agent by the RP. PDIC may grant financial assistance to insured banks. reports. and all other papers belonging to PDIC pertaining to its financial transactions. Issuance of Bonds With approval of the President of RP. XX. PDIC may not purchase the voting or common stock of an insured bank but it can enter into or force agreements that it determines to be necessary to protect its financial interests. Such loans granted by the BSP shall be consistent with monetary policy. XIX.a. When in the Judgment of the Board of Directors.

Assume liability to pay any deposits made in noninsured bank 6. If insured bank refuse to comply with any such requirement. BoD shall determine the bonding requirement referring to directors. PDIC may require an insured bank to provide protection and indemnity against burglary. PDIC may add the cost thereof to the assessment otherwise payable to such bank. Merger or consolidation of insured banks Upon consent of PDIC. losses arising from discharge of duties. F. officres b. H. Officers and employees of Insured banks a. 47 | P a g e . defalcation.a. Protection Against Losses a. employees. Transfer assets to any noninsured bank G. Insured banks shall place signs in all place of business and in its statements that its deposits are insured by PDIC. anfd employees of an insured bank c. b. banks may: 4. officer. Merge or consolidate with an uninsured bank 5. No person shall be a director. or employee of an insured bank who has been convicted of any criminal offense involving dishonesty of breach of trust. by particular acts of its directors. Directors. BoD may exempt from this requirement advertisements not relating to deposits. officers.

000. rule. Unjustified refusal to permit examination and audit of records as required by law. or regulation issued by PDIC. property.000-2. or violation. Splitting of deposits or creation of fictitious loans or deposit accounts i. . liability of the closed bank under the receivership of the PDIC 9. XXI. rules. against a bank or any of its directors. In no case such fine exceed 3times the amount of the damages or costs caused by the transaction for each day that the violation subsist. or causing a person to violate. Splitting deposits – deposit accounts with an outstanding balance of more than the statutory maximum amount of insured deposit maintained under the name of a person is broken down and transferred into two or more accounts in the names of persons who have no beneficial ownership on transferred deposits in their names within 30 days preceding or during a bank declared holiday. FINES B. levy attachment. or preceding a closure order issued by the MB for the purpose of availing of the maximum deposit insurance coverage. omission. Fraudulent disposal . officers. transfer or concealment of any asset.000. Refusal to turnover or destroying or tampering bank records 8. Punishable by prision mayor or a fine of 50. employee or agent of bank who: 1. and regulations 3. or agents responsible for such act. To protect and preserve the integrity and confidentiality of bank accounts ii. officer. Penalty for violation of this prohibition: the bank will be subject to penalty of not more than 100 for every day of violation. CONCEPTS G. Policies i. or violation of any provision of eh PDIC Law. Willful refusal to submit reports 2. BOD is authorized to impose administrative fines for violation of any other instruction. or execution provided under the PDIC Law and the NCBA 10. XXII. the exemption of garnishment. Violation. Chap 11 – Anti-Money Laundering ( RA 9160) I. Submission of false material information in connection with or in relation to any financial assistance extended to the bank 5. Criminal Penalties B.000 or both. 6. Willful failure or refusal to comply with. or commission of any other irregularities and/or conducting business in an unsafe or unsound manner.b. Willful making of false statement or entry in any bank report or document 4. Refusal to allow PDIC to takeover a closed bank placed under its receivership 7. any director.

Ensure that the Philippines shall not be used as a money laundering site for the proceeds of any unlawful activity. iii. Cooperation in transnational investigation and prosecution of persons involved in money laundering H. Covered Institutions i. Banks, non-banks, quasi-banks, trust entities ad all other institutions regulated by the BSP ii. Insurance companies and all other institutions regulated by the insurance commission iii. Securities, brokers, salesmen, investment house and other entities managing securities or service as agent, advisor, consultant iv. Mutual funds, closed-end investment company, common trust fund and preneed companies v. Foreign exchange corporations, money changers, money payments, remittance, and transfer companies vi. Those administering or dealing in currency, commodities, financial derivatives or other monetary instruments or property supervised by the SEC I. Covered and Suspicious transaction i. Transaction in cash or monetary instrument exceeding P500,000 in one banking day ii. Suspicious transactions regardless of the amount a. No legal or trade obligation, purpose or economic justification b. Client is not properly identified c. Amount is not commensurate with the client’s financial capacity d. Structured transactions to avoid being the subject of reporting required under the act e. Those which deviate from the profile of the client or past transactions f. Related to any unlawful activity or offense g. Any transaction that is similar to any of the foregoing J. Monetary instrument i. Coins/currency of legal tender of the Phil. Or any country ii. Drafts, checks and notes iii. Securities or negotiable instruments, bonds, commercial papers, deposit certificates, trust certificates, custodial receipts, trading orders, transaction tickets, confirmation of sale money market instruments iv. Other similar instruments when title passes to another by endorsement,

assignment or delivery K. Unlawful Activities i. Kidnapping for ransom under Art.267 of RPC ii. Secs. 4-6, 8-10, 12-16 of the Dangerous Drugs Act of 2002 iii. Sec.3 par b, c, e, g, h, I of the Anti-Graft and Corrupt Practices Act iv. Plunder under RA 7080 v. Robbery and extortion under Arts. 294-296, 299-302 of the RPC 48 | P a g e

vi. Jueteng and Masiao under PD 1602 vii. Piracy on high seas under RPC and PD 532 viii. Qualified theft under Art.310 of RPC ix. Swindling under Art.315 of RPC x. Smuggling under RA 455 and 1937 xi. Violations of Electronic Commerce Act of 2000 xii. Hijacking and other violations of RA 6235 xiii. Destructive arson and murder under RPC xiv. Fraudulent practices under Securities Regulation Code of 2000 xv. Felonies or offenses of similar nature punishable under penal laws of other countries L. Money Laundering Offense-is a crime whereby the proceeds of an unlawfulactivity are transacted, thereby making them appear to have originated fromlegitimate sources. It can be committed by the ff: i. Any person knowing that any monetary instrument or property represents, involves, or relates to, the proceeds of any unlawful activity, transacts or attempts to transact said monetary instrument or property ii. Any person knowing any monetary instrument or property represents, involves, or relates to, the proceeds of any unlawful activity, performs or fails to perform any act as a result of which he facilitates the offense of money laundering referred to above iii. Any person knowing that any monetary instrument or property is required to be disclosed and filed with the Anti-Money Laundering Council, fails to do so II. Jurisdiction and Prosecution C. Jurisdiction i. Private persons-RTC ii. Public persons and private persons in conspiracy with the formerSandiganbayan D. Prosecution i. Any person may be charged of both money laundering and the unlawful activity ii. Any proceeding relating to the unlawful activity shall be given precedence over the prosecution of any offense or violation w/o prejudice to the freezing and other remedies III. Anti-Money Laundering Council C. Composition iv. Governor of he BSP as chairman v.

rules. regulations and orders issued pursuant thereto xxiv. Receive and take action any request of assistance from foreign states in their own anti-money laundering operations xxi. Chairman of the SEC D. Impose administrative sanctions for violation of laws. Institutions shall establish and record the true identity of its clients based on office documents vi. Apply before the CA ex parte. Prevention of Money Laundering F. methods. Institute civil forfeiture proceedings through the OSG xvi. for the freezing of any monetary instrument or property xix. Peso and foreign currency non-checking accounts shall be allowed which will be subject to test by the BSP to determine the existence and identity of the owners G. Member of the Bar b. Require and receive covered or suspicious transaction reports from covered institutions xiv. Implement measures as may be necessary to counteract money laundering xx. Anonymous. and means to prevent money laundering xxii. 35 years of age c. Customer Identification v. fictitious an similar accounts are prohibited viii. Unquestionable integrity and known probity IV.Commissioner of the Insurance Commission vi. Investigate suspicious and covered transactions xviii. . Cause the filing of complaints with the DOJ or Ombudsman xvii. Functions xiii. GMC d. Enlist assistance from government instrumentality for any anti-money laundering operation xxiii. Issue orders addressed to the supervising authority of the institution to determine the true owner of a covered or suspicious transaction report or request assistance on the basis of substantial evidence xv. Establish a secretariat a. Develop educational programs on the effects. Maintain a system of verifying the identity and legal existence of their clients vii.

There is probable cause that the deposit or investment s related to any unlawful activity. Violations of Dangerous Drug Act of 2002 c. they shall be criminally liable x. To the CA. it shall be required to report the same viii. Authority to inquire into bank deposits iii. Reporting to the AMLC is also prohibited to be disclosed to the media or any other person or entity I. upon application ex parte by the AMLC and after determination that probable cause exists. Records of transactions shall be maintained and stored from 5 years from the date of transaction iv. No court order shall be required in the following activities a. Such reporting shall not be considered as a violation of RA 1405. The AMLC may inquire upon order of any competent court when it has been established that: a. or b. Freezing of Monetary Instrument or Property iii. For closed accounts. its records shall also be stored for 5 years from the date it was closed H. Hijacking and other violations of RA 6235 49 | P a g e . Kidnapping for ransom b. Such order shall be for 20 days unless extended by the Court J. Reporting of Covered and Suspicious Transaction vi. unless supervising authority prescribes a longer period not exceeding 10 days vii. A money laundering offense iv. may issue a freeze order iv. RA 6426. Shall be reported to AMLC within 5 working days from the occurrence thereof.Record Keeping iii. In case of violation of the prohibition above. Should a transaction be determined a a covered and suspicious transaction. but are prohibited to communicate to any other person ix. RA 8791.

Forfeiture D. Destructive arson and murder including those perpetrated by terrorists V. the Rules of Court on civil forfeiture applies E. Apply for an order of forfeiture b. Civil forfeiture a. for a declaration that the seized instrument or property legitimately belongs to him and pray for the segregation and exclusion b. Give information needed iii. Claim on Forfeiture Assets a. Concealed. restraining and seizing assets ii. It shall be filed with the court which rendered the judgment of forfeiture within 15 days from the order of forfeiture F. diminished in value or rendered worthless by any act or omission attributable to the offender iii. The AMLC may execute or refuse to execute such request and inform the state of any valid reason for not executing such request I. Mutual assistance among states H. Payment in lieu of forfeiture a. Tracking down. Certification or affidavit of a competent officer of the requesting stat that the conviction and order of forfeiture are final J. Located outside the Philippine or outside the jurisdiction of the court v. destroyed. Those claiming an interest may apply. it cannot be located ii.d. freezing. Court will issue such order only when accompanied by: i. May execute a request by: i. and the Court. . in a petition filed for the purpose of seizure. converted or transferred to prevent from being found or avoid forfeiture iv. Commingled with other instrument or property rendering it difficult to be identified or segregated VI. Substantially altered. When there is a report made. Authenticated copy of the order of a court in the requesting state ordering the forfeiture ii. Is allowed because forfeiture cannot be enforced due to the ff: i. Powers of the AMLC to act on a request for assistance a. Request for assistance from a foreign state a. removed. With due diligence. by verified petition.

When it contravenes the constitution b. Obtain info that it needs relating to covered transaction and money laundering offense c. Signed or certified by a judge or equivalent officer in or of the requesting state b. Negotiate for the inclusion of money laundering offenses among extraditable offenses . freezing. Give all the particulars necessary for the issuance by the court in the requested state of the orders needed by th requesting state h. Extradition a. Requirement for request from a foreign state a. Authenticated by the oath or affirmation of a witness or sealed with an official seal of a minister or secretary of the government of the requesting state c. Prejudicial to the interest of the Philippines i. consul general. Confirm that an investigation or prosecution is being conducted b. Contain other info as may assist in the execution of the request M. Specify the manner in which such info will be obtained or produced g. Tracking down. Enter into the premises belonging to or in the possession of the persons named in the request. to the extent allowed by the law of the foreign state d. Give sufficient particulars as to the identity of the person d. Ask from the institution for any info which may be of assistance to the investigation or prosecution f.Obtaining assistance from foreign state a. And the requesting State relating to the provisions of assistance in money laundering offense L. Limitations on request a. restraining and seizing assets b. State the grounds on which any person is being investigated or prosecuted for c. Apply for an order of forfeiture and must be accompanied by the order of the RTC and an affidavit of the Clerk of Court that the conviction and forfeiture are final K. By the secretary of embassy. Except: if there is a treaty between the Phil. consul or any officer in the foreign service of the Philippines stationed in the foreign state N. Authentication of documents a. Give particulars sufficient to identify the institution believed to have any info e.

6m-4years and a fine not less than P100. reports a completely unwarranted or false info relative to money laundering i. performs or fails to perform any act as a result of which he facilitates the offense of money laundering referred to above i. 6m-4years or fine not less than P100. Malicious reporting a. the proceeds of any unlawful activity. or relates to. 6m-1year or fine not less than P100.000. If corporation-upon the responsible officers iii. Penalties E. involves. or both G. the proceeds of any unlawful activity.000 ii. involves. Any person knowing any monetary instrument or property represents. fails to do so i.000 not more than P500. Any person knowing that any monetary instrument or property represents. Imprisonment of 7 to 14 years and a fine not less than P3M b. with malice or bad faith. 4-7 years and fin not less than P1. Any person knowing that any monetary instrument or property is required to be disclosed and filed with the Anti-Money Laundering Council.000. Failure to keep records a.5M not more than P3M c. Any person who. or relates to. Public official-perpetual or temporary absolute disqualification from office 50 | P a g e . Juridical person-suspend or revoke its license iv. Crime of money laundering a.VII.000 not more than P500. transacts or attempts to transact said monetary instrument or property i.000 not more than P500. Alien-deportation v. or both F.

Power to promulgate rules to overse the implementation of the law and to review and revise the rules issued by the AMLC within 30 days from promulgation XI. necessary records of transactions should be maintained 6. B. Congressional Oversight Committee C. 51 | P a g e . Rules and Regulation for banks and non-financial institutions to combat moneylaundering 1. Banks should avoid business with criminals 9. 7 members from the Senate and 7 members from the House of Representatives b. Covered institutions shall formulate their own prevention programs X. special attention should be given to complex. anonymous or fictitious accounts should not be allowed 4. The BSP. shall not be used for political persecution or harassment or as an instrument to hamper competition in trade and commerce D. based on proportional representation of parties D. development of internal policies. If disclosed to media-reporter. unusual large transactions and all unusual patterns of transaction 7. 3-8years and fine P500. Composition a.vi. Powers a. in case of doubt. respectively. audit function. These rules shall be submitted to the congressional oversight committee for approval. identity of clients should be updated 5. IC. Programs against money laundering-employee training. Breach of Confidentiality a. no case may be filed against and no assets shall be frozen or forfeited to the prejudice of a candidate for electoral office during election period IX. editor VIII. Prohibitions against political harassment C. manager. and SEC shall promulgate rules to effectively implement this Act. Public official who refuses to testify-same penalties above H. writer. publisher. obtain the true identity of the persons on whose behalf an account is opened 3.000-P1M b. Implementing rules and Regulations A. Take reasonable measures to establish and record the true identity and legal existence of their clients 2. other suspicious transactions not involving deposit should be reported 8. Shall be appointed by the Senate President and the Speaker.

52 | P a g e .

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