BANKING LAWS

T ABLE
A.

OF

CONTENTS

The New Central Bank Act Republic Act No. 7653 The General Banking Act Republic Act No. 337 In General E tabli h!ent o" #o!e tic Bank $icen ing o" %oreign Bank Co!!ercial Banking Corporation Thri"t Bank Act o" )**6 Republic Act No. 7*+6 Buil&ing an& $oan A ociation Rural Bank Act o" )**, Republic Act No. 7353

B.

an& 'ni(er al Bank

C.

An Act $iberali-ing the Entr. o" %oreign Bank Republic Act No. 77,) /"" hore Banking 0. te! $aw 1re . #ecree No. )+32 %oreign Currenc. #epo it Act Republic Act No. 62,63 a a!en&e& An Act Creating the 1#IC Republic Act No. 353) The Truth in $en&ing Act Republic Act No. 3765 $aw on 0ecrec. o" Bank #epo it Republic Act No. )2+5 e(eral banking law which are not in the bar co(erage.

#.

E.

%.

G.

4.

Note 5 6e ha(e inclu&e&

2
B ANKING LAWS
$ikewi e3 we ha(e incorporate& e(eral law on non7 bank "inancial inter!e&iarie . 0ince the. are not co(ere& b. the bar e8a!3 the re(iewee ha the option o" not rea&ing the!.

B ANKING

AND

F INANCE

IN

G ENERAL

Two types of financing ). ,. e9uit. &ebt7 "inancing A cro 7 bree& o" the two !a. al o occur.

Inter m e di a r i es ). ,. 3. 2. Bank Non7 bank "inancial inter!e&iarie E8change /ther i.e. econ&ar. !arket

Function of inter m e di ar i es ). ,. 3. Brokering or !atching in(e tor with tho e in nee& o" "inancing

4elp in &i!ini hing ri k to in(e tor 1ro(i&e li9ui&it.

3
B ANKING LAWS

N EW CENTRAL B ANK A CT
Republic Act No. 7653 Appro(e& )2 :une )**3

I N G ENERAL
Manda t e The Bangko 0entral ng 1ilipina i the 0tate; central !onetar. authorit.3 !an&ate& in the )*<7 Con titution3 which hall "unction an& operate a an in&epen&ent an& accountable bo&. corporate in the &i charge o" it !an&ate& re pon ibilitie concerning !one.3 banking an& cre&it. =0ection )3 RA 7653> The Bangko 0entral =0ection )3 RA 7653> hall en?o. "i cal an& a&!ini trati(e autono!..

Objectives ). The pri!ar. ob?ecti(e o" the Bangko 0entral i to !aintain price con&uci(e to a balance& an& u tainable growth o" the econo!.. It hall al o pro!ote an& !aintain !onetar. the pe o. It hall al o pro(i&e polic. &irection cre&it. tabilit.

,.

tabilit. an& the con(ertibilit. o"

3.

in the area

o" !one.3 banking an&

2.

It ha uper(i ion o(er bank an& ha regulator. power o(er the operation o" "inance co!panie an& non7 bank "inancial inter!e&iarie per"or!ing 9ua i7 banking "unction . =0ection 33 RA 7653>

Typical functions of the Bangko Sentr al ). 0uper(i ion o(er bank an& regulation o" non7 bank "inancial inter!e&iarie engage& in 9ua i7 banking "unction Bank o" i ue5 a uch3 it ha the ole power an& authorit. to i re er(e o" "oreign currenc. ue currenc.

,. 3.

Cu to&ian o" the nation;

4
B ANKING LAWS
A currenc.. 2. uch3 it en ure con(ertibilit. o" the pe o an& back up 1hilippine

It ha control o" cre&it a. b. c. regulating !one. uppl. i.e. re er(e re9uire!ent i.e. Tbill "or bank

open !arket operation controlling intere t rate

5.

$en&er o" la t re ort It ha a "rediscounting window, allowing bank to it. to ell their pro!i or. note

6. 7. <.

Cu to&ian o" ca h re er(e

o" bank

Go(ern!ent banker3 agent an& a&(i or Central clearance an& ettle!ent agenc.

Fiscal policy v monet ar y policy %i cal polic. i concerne& with re(enue generation an& e8pen&iture while !onetar. polic. in(ol(e regulating !one. uppl. an& price tabilit.. The Bangko 0entral will now concentrate on !onetar. polic. an& he& o"" "i cal re pon ibilitie which in the pa t ha& &i tracte& it "ro! it pri!ar. "unction. =0ection ),*3 RA 7653>
AND

M ONETARY B OARD
Monet a r y Board

G OVERNOR

The power an& "unction @onetar. Boar&.

o" the Bangko 0entral are e8erci e& b. the

The Boar& i co!po e& o" e(en A7B !e!ber appointe& b. the 1re i&ent "or a ter! o" i8 A6B .ear . No !e!ber !a. be reappointe& !ore than once. The e(en !e!ber are5

5
B ANKING LAWS
). ,. 3. The Go(ernor a Chair!anC A !e!ber o" the Cabinet &e ignate& b. the 1re i&entC an& %i(e A5B !e!ber who hall er(e "ull7 ti!e. hall co!e "ro! the pri(ate ector3 all o" who!

!ualifications of the membe rs of the Monet a r y Board ). ,. @u t be natural born citi-en o" the 1hilippine

At lea t thirt. "i(e A35B .ear o" age3 with the e8ception o" the Go(ernor who houl& at lea t be "ort. A2+B .ear ol& Goo& !oral character /" un9ue tionable integrit. /" known probit. an& patrioti ! 6ith recogni-e& co!petence in ocial an& econo!ic &i cipline

3. 2. 5. 6.

"is#ualifications In a&&ition to the &i 9uali"ication i!po e& b. Republic Act No. 67)33 a !e!ber o" the @onetar. Boar& i &i 9uali"ie& "ro! being a &irector3 o""icer3 e!plo.ee3 con ultant3 law.er3 agent or tockhol&er o" an. bank3 9ua i7 bank or an. other in titution which i ub?ect to uper(i ion or e8a!ination b. the Bangko 0entral3 in which ca e uch !e!ber hall re ign "ro!3 an& &i(e t hi! el" o" an. an& all intere t in uch in titution be"ore a u!ption o" o""ice a !e!ber o" the @onetar. Boar&. The !e!ber o" the @onetar. Boar& co!ing "ro! the pri(ate ector hall not hol& an. other public o""ice or public e!plo.!ent &uring their tenure. No per on hall be a !e!ber o" the @onetar. Boar& i" he ha been connecte& with an. !ultilateral banking or "inancial in titution or ha a ub tantial intere t in an. pri(ate bank in the 1hilippine 3 within one A)B .ear prior to hi appoint!entC likewi e3 no !e!ber o" the @onetar. Boar& hall be e!plo.e& in an. uch in titution within two A,B .ear a"ter the e8piration o" hi ter! e8cept when he er(e a an o""icial repre entati(e o" the 1hilippine Go(ern!ent to uch in titution.

6
B ANKING LAWS
!uorum in the Monet a r y Board The pre ence o" "our A2B !e!ber hall con titute a 9uoru!. 4owe(er3 in all ca e 3 the Go(ernor or hi &ul. &e ignate& alternate hall be a!ong the "our.

7
B ANKING LAWS
$ithdr a w al of persons having a personal interest In a&&ition to the re9uire!ent o" Republic Act No. 67)33 an. !e!ber o" the @onetar. Boar& with per onal or pecuniar. intere t in an. !atter in the agen&a o" the @onetar. Boar& hall &i clo e hi intere t to the Boar& an& hall retire "ro! the !eeting when the !atter i taken up. The &eci ion taken on the !atter hall be !a&e public. The !inute hall re"lect the &i clo ure !a&e an& the retire!ent o" the !e!ber concerne& "ro! the !eeting.

%esponsibility and liability of the membe rs of the Monet a r y Board @e!ber o" the @onetar. Boar&3 o""icial 3 e8a!iner 3 an& e!plo.ee o" the Bangko 0entral who will"ull. (iolate RA 7653 or who are guilt. o" negligence3 abu e or act o" !al"ea ance or !i "ea ance or "ail to e8erci e e8traor&inar. &iligence in the per"or!ance o" hi &utie hall be hel& liable "or an. lo or in?ur. u""ere& b. the Bangko 0entral or other banking in titution a a re ult o" uch (iolation3 negligence3 abu e3 !al"ea ance3 !i "ea ance or "ailure to e8erci e e8traor&inar. &iligence. 0i!ilar re pon ibilit. Bangko 0entral "orC ). hall appl. to !e!ber 3 o""icer an& e!plo.ee o" the

The &i clo ure o" an. in"or!ation o" a con"i&ential nature3 or an. in"or!ation on the &i cu ion or re olution o" the @onetar. Boar&3 or about the con"i&ential operation o" the Bangko 0entral3 unle the &i clo ure i in connection with the per"or!ance o" o""icial "unction with the Bangko 0entral3 or i with prior authori-a.tion o" the @onetar. Boar& or the Go(ernorC or The u e o" uch in"or!ation "or per onal gain or to the &etri!ent o" the Go(ern!ent3 the Bangko 0entral or thir& partie .

,.

4owe(er3 an. &ata or in"or!ation re9uire& to be ub!itte& to the 1re i&ent an&Dor Congre 3 or to be publi he& un&er the pro(i ion o" RA 7653 hall not be con i&ere& con"i&ential.

&uthori t y of 'overnor to render opinions( decisions or rulings The Go(ernor o" the Bangko 0entral hall ha(e the power to ren&er opinion 3 &eci ion 3 or ruling which hall be "inal an& e8ecutor.3 until re(er e& or !o&i"ie& b. the @onetar. Boar&3 on !atter regar&ing application or en"orce!ent o" law pertaining to in titution uper(i e& b. the Bangko 0entral an& law pertaining to 9ua i7 bank 3 a well a regulation 3 policie or

8
B ANKING LAWS
in truction i ue& b. the @onetar. Boar&3 an& the i!ple!entation thereo". =0ection )7AeB3 RA 7653> &uthori t y of the 'overnor in emerge ncies In ca e o" e!ergencie where ti!e i in u""icient to call a !eeting o" the @onetar. Boar&3 the go(ernor with the concurrence o" two other !e!ber o" the Boar& !a. &eci&e an. !atter or take an action within the authorit. o" the Boar&. 4e hall therea"ter ub!it a report to the 1re i&ent an& Congre hour a"ter the action ha been taken. within 7,

At the oone t po ible ti!e3 the Go(ernor hall call a !eeting o" the @onetar. boar& to ub!it hi action "or rati"ication. =0ection )*3 RA 7653>

Outside inter ests of the 'overnor and the full) time membe rs of the Board The Go(ernor o" the Bangko 0entral an& the "ull7 ti!e !e!ber o" the Boar& hall li!it their pro"e ional acti(itie to tho e pertaining &irectl. to their po ition with the Bangko 0entral. The. !a. not accept an. other e!plo.!ent3 whether public or pri(ate3 re!unerate& or ad honorem . E8ception 5 ). ,. 1o ition in elee!o .nar.3 ci(ic3 cultural or religiou organi-ation

6hene(er3 b. &e ignation o" the 1re i&ent3 the Go(ernor or the "ull7 ti!e !e!ber i ta ke& to repre ent the intere t o" the Go(ern!ent or other go(ern!ent agencie in !atter connecte& with or a""ecting the econo!. or the "inancial . te! o" the countr.
OF T E

CERTAIN O PERATIONS

B ANGKO S ENTRAL

Supervision and e*amina t i on The Bangko 0entral hall ha(e uper(i ion o(er3 an& con&uct perio&ic or pecial e8a!ination o"3 banking in titution an& 9ua i7 bank 3 inclu&ing their ub i&iarie an& a""iliate engage& in allie& acti(itie . Thi power howe(er i ub?ect to the pro(i ion o" e8i ting law protecting or

!
B ANKING LAWS
a"eguar&ing the ecrec. or con"i&entialit. o" bank &epo it a well a in(e t!ent o" per on 3 natural or ?uri&ical3 in &ebt in tru!ent i ue& b. the Go(ern!ent. =0ection ,53 RA 7653> Subsidiary and affiliat e A ub i&iar. !ean a corporation !ore than "i"t. percent A5+EB o" the (oting tock o" which i owne& b. a bank or 9ua i7 bank an& an a""iliate !ean a corporation the (oting tock o" which3 to the e8tent o" "i"t. percent A5+EB or le 3 i owne& b. a bank or 9ua i7 bank or which i relate& or linke& to uch in titution or inter!e&iar. through co!!on tockhol&er or uch other "actor a !a. be &eter!ine& b. the @onetar. Boar&.

+o restraini ng order on power of e*amina t i on No re training or&er or in?unction hall be i ue& b. the court en?oining the Bangko 0entral "ro! e8a!ining an. in titution ub?ect to uper(i ion or e8a!ination b. the Bangko 0entral3 unle there i con(incing proo" that the action o" the Bangko 0entral i plainl. arbitrar. an& !a&e in ba& "aith an& the petitioner or plainti"" "ile with the clerk or ?u&ge o" the court in which the action i pen&ing a bon& e8ecute& in "a(or o" the Bangko 0entral3 in an a!ount to be "i8e& b. the court. =0ection ,53 RA 7653>

,rohibitions on personnel of the Bangko Sentr al In a&&ition to the prohibition "oun& in RA 3+)* an& 67)33 per onnel o" the Bangko 0entral are hereb. prohibite& "ro!5 ). Being an o""icer3 &irector3 law.er or agent3 e!plo.ee3 con ultant or tockhol&er3 &irectl. or in&irectl.3 o" an. in titution ub?ect to uper(i ion or e8a!ination b. the Bangko 0entral3 e8cept non7 tock a(ing an& loan a ociation an& pro(i&ent "un& organi-e& e8clu i(el. "or e!plo.ee o" the Bangko 0entral3 an& e8cept a otherwi e pro(i&e& in RA 7653C #irectl. or in&irectl. re9ue ting or recei(ing an. gi"t3 pre ent or pecuniar. or !aterial bene"it "or hi! el" or another3 "ro! an. in titution ub?ect to uper(i ion or e8a!ination b. the Bangko 0entralC Re(ealing in an. !anner3 e8cept upon or&er o" the court3 the Congre or an. go(ern!ent o""ice or agenc. authori-e& b. law3 or un&er uch con&ition a !a. be pre cribe& b. the @onetar. Boar&3

,.

3.

"#
B ANKING LAWS
in"or!ation relating to the con&ition or bu ine o" an. uch in titution. Thi prohibition hall not appl. to the gi(ing o" in"or!ation to the @onetar. Boar or the Go(ernor o" the Bangko 0entral3 or to an. per on authori-e& b. either o" the!3 in writing3 to recei(e uch in"or!ationC an& 2. Borrowing "ro! an. in titution ub?ect to uper(i ion or e8a!ination b. the Bangko 0entral unle ai& borrowing are a&e9uatel. ecure&3 "ull. &i clo e& to the @onetar. Boar3 an& hall be ub?ect to uch "urther rule an& regulation a the @onetar. Boar& !a. pre cribe.
IP V $

CONSERVATORS CONSERVATOR

R ECEIVERS

IP

'rounds for appoint m e n t of conservat or The @onetar. Boar& !a. appoint a con er(ator whene(er it "in& that a bank or a 9ua i7 bank i in a tate o" continuing inabilit. or unwillingne to !aintain a con&ition o" li9ui&it. &ee!e& a&e9uate to protect the intere t o" &epo itor an& cre&itor . =0ection ,*3 RA 7653> The con er(ator houl& be co!petent an& knowle&geable in bank operation an& !anage!ent. The con er(ator hip hall not e8cee& one A)B .ear.

,owers of conservat or ). Take charge o" the a bank et 3 liabilitie an& !anage!ent o" the bank or 9ua i7

,. 3. 2.

Reorgani-e the !anage!ent Collect all !onie E8erci e all power an& &ebt nece &ue ai& in titution

ar. to re tore it (iabilit.

-*tent of the power of the conservat o r The con er(ator ha the power to o(errule or re(oke the action o" the pre(iou !anage!ent an& boar& o" &irector o" the bank or 9ua i7 bank. 4owe(er3 the power cannot e8ten& to the post- facto repu&iation o" per"ecte& tran action 3 otherwi e the. woul& in"ringe again t the non7 i!pair!ent

""
B ANKING LAWS
clau e o" the Con titution. 0ection ,<7 A o" RA No. ,65 !erel. gi(e the con er(ator the power to re(oke contract that are &ee!e& to be &e"ecti(e un&er e8i ting law Ai.e.3 (oi&3 (oi&able3 unen"orceable3 or re ci ibleBC hence3 the con er(ator !erel. take the place o" a bank; boar& o" &irector . 6hat the boar& o" &irector cannot &o3 uch a repu&iating a contract (ali&l. entere& into un&er the &octrine o" i!plie& authorit.3 the con er(ator cannot &o either. [ First ,hilippine Intern a t i on al Bank v .& 3 ,5, 0CRA ,55 A)*<6B>

Termina t ion of conserva t orship The @onetar. Boar& hall ter!inate the con er(ator hip when it i ati "ie& that the in titution can continue to operate on it own an& the con er(ator hip i no longer nece ar.. The con er(ator hip hall likewi e be ter!inate& houl& the @onetar. Boar& &eter!ine that the continuance in bu ine o" the in titution woul& in(ol(e probable lo to it &epo itor or cre&itor 3 in which ca e procee&ing "or recei(er hip an& li9ui&ation hall be pur ue&. =0ection ,*3 RA 7653>
IN

P ROCEEDINGS

R ECEIVERS

IP AND

L I%&IDATION

'rounds for proceedings in receivership and li#uidat ion The @onetar. Boar& hall in titute procee&ing "in& that a bank or 9ua i7 bank5 ). "or recei(er hip whene(er it

I unable to pa. it liabilitie a the. beco!e &ue in the or&inar. cour e o" bu ine C pro(i&e& that thi hall not inclu&e inabilit. to pa. cau e& b. e8traor&inar. &e!an& in&uce& b. "inancial panic in the banking co!!unit.C 4a in u""icient reali-able a Cannot continue in bu ine &epo itor or cre&itor C or et to !eet it liabilitie C without in(ol(ing probable lo to it

,. 3.

2.

4a will"ull. (iolate& a cea e an& &e i t or&er that ha beco!e "inal3 in(ol(ing act or tran action which a!ount to "rau& or a &i ipation o" the a et o" the in titution.

+o need of prior notice and hearing

"2
B ANKING LAWS

In uch ca e 3 the @onetar. Boar& !a. u!!aril. an& without nee& "or prior hearing3 "orbi& the in titution "ro! &oing bu ine in the 1hilippine an& &e ignate the 1hilippine #epo it In urance Corporation a recei(er o" the banking in titution. =0ection 3+3 RA 7653>

$ho acts as receiver %or a bank3 the 1hilippine #epo it In urance Corporation hall er(e a recei(erC "or a 9ua i7 bank3 an. per on o" recogni-e& co!petence in banking or "inance !a. be &e ignate& a recei(er.

Tasks of the receiver The recei(er hall i!!e&iatel. A)B gather an& take charge o" all a et an& liabilitie o" the in titution3 A,B a&!ini ter the a!e "or the bene"it o" it cre&itor 3 an& A3B e8erci e the general power o" a recei(er. A2B The recei(er hall &eter!ine a oon a po ible3 but not later than ninet. A*+B &a. "ro! takeo(er3 whether the in titution !a. be rehabilitate& or otherwi e place& in uch a con&ition o that it !a. be per!itte& to re u!e bu ine with a"et. to it &epo itor an& cre&itor an& the general public.

%esumpt ion An. &eter!ination "or the re u!ption o" bu ine ub?ect to prior appro(al o" the @onetar. Boar&. o" the in titution hall be

/iguidation I" the recei(er &eter!ine that the in titution cannot be rehabilitate& or per!itte& to re u!e bu ine 3 the @onetar. Boar& hall noti". in writing the boar& o" &irector o" it "in&ing an& &irect the recei(er to procee& with the li9ui&ation o" the in titution.

,rocedur e for li#uidat ion The recei(er ). hall then5

%ile ex parte with the proper regional trial court3 an& without the re9uire!ent o" prior notice or an. other action3 a petition "or a i tance in the li9ui&ation o" the in titution pur uant to a li9ui&ation plan a&opte& b. the 1hilippine #epo it In urance Corporation in the ca e o" a bank or b. the @onetar. Boar& in the ca e o" a 9ua i7 bankC

"3
B ANKING LAWS

,.

'pon ac9uiring ?uri &iction3 the court hall3 upon !otion b. the in titution3 a i t the en"orce!ent o" in&i(i&ual liabilitie o" the tockhol&er 3 &irector an& o""icer 3 an& &eci&e on other i ue a !a. be !aterial to i!ple!ent the li9ui&ation plan a&opte&C an& Con(ert the a et o" the in titution to !one.3 &i po e o" the a!e to cre&itor an& other partie 3 "or the purpo e o" pa.ing the &ebt o" uch in titution in accor&ance with the rule on concurrence an& pre"erence o" cre&it un&er the Ci(il Co&e o" the 1hilippine an& he !a.3 in the na!e o" the in titution3 in titute uch action a !a. be nece ar. to collect an& reco(er account an& a et o"3 or &e"en& an. action again t3 the in titution.

3.

.ustodia legis and e*em p t ion from levy( attachm e n t or e*ecution The a et o" an in titution un&er recei(er hip or li9ui&ation hall be &ee!e& in custodia legis in the han& o" the recei(er an& hall3 "ro! the !o!ent the in titution wa place& un&er uch recei(er hip or li9ui&ation3 be e8e!pt "ro! an. or&er o" garni h!ent3 le(.3 attach!ent3 or e8ecution. =0ection 3+3 RA 7653>

&ctions of Monet a r y Board final and may be #uestioned only through certior ari The action o" the @onetar. Boar& taken regar&ing the &e ignation o" a con er(ator an& appoint!ent o" a recei(er hall be "inal an& e8ecutor. an& !a. not be re traine& or et a i&e b. the court e8cept on petition "or certiorari on the groun& that the action taken wa in e8ce o" ?uri &iction or with uch gra(e abu e o" &i cretion a to a!ount to lack or e8ce o" ?uri &iction. The petition "or certiorari !a. onl. be "ile& b. the tockhol&er o" recor& repre enting the !a?orit. o" the capital tock within ten A)+B &a. "ro! receipt b. the boar& o" &irector o" the in titution o" the or&er &irecting recei(er hip3 li9ui&ation or con er(ator hip.

"esigna tion of conservat o r not precondi tion to designat ion of receiver The &e ignation o" a con er(ator or the appoint!ent o" a recei(er (e te& e8clu i(el. with the @onetar. Boar&. hall be

The &e ignation o" a con er(ator i not a precon&ition to the &e ignation o" a

"4
B ANKING LAWS
recei(er.

B ANGKO S ENTRAL

AND T E

M EANS

OF

P AYMENT

0nit of monet ar y value The unit o" !onetar. (alue in the 1hilippine i the pe o.

.urrency The wor& "currency" i hereb. &e"ine& a !eaning all 1hilippine note coin i ue& or circulating in accor&ance with the pro(i ion o" RA 7653. an&

Bank of issue The Bangko 0entral ha the ole power an& authorit. to i the territor. o" the 1hilippine =0ection 5+3 RA 7653> ue currenc. within

Note an& coin i ue& b. the B01 hall be liabilitie o" the B01 an& !a. be i ue& onl. again t an& in a!ount not e8cee&ing3 the a et o" the B01. 0ai& note an& coin hall be a "ir t an& para!ount lien on all a et o" the B01 =0ection 5)3 RA 7653> All note an& coin i ue& b. the B01 are "ull. guarantee& b. the R1 an& hall be legal ten&er in the 1hilippine "or all &ebt 3 both public an& pri(ate. =0ection 5,3 RA 7653>

"emand deposits "Demand deposits" !ean all tho e liabilitie o" the Bangko 0entral an& o" other bank which are &eno!inate& in 1hilippine currenc. an& are ub?ect to pa.!ent in legal ten&er upon &e!an& b. the pre entation o" check .

Issue of demand deposits /nl. bank &ul. authori-e& to &o o !a. accept "un& or create liabilitie pa.able in pe o upon &e!an& b. the pre entation o" check 3 an& uch operation hall be ub?ect to the control o" the @onetar. Boar& in accor&ance with the power grante& it with re pect thereto un&er RA 7653.

/egal charact er of checks Check repre enting &e!an& &epo it &o not ha(e legal ten&er power an&

"5
B ANKING LAWS
their acceptance in the pa.!ent o" &ebt 3 both public an& pri(ate3 i option o" the cre&itor. =0ection 6+3 RA 7653> at the

4owe(er3 a check which ha been cleare& an& cre&ite& to the account o" the cre&itor hall be e9ui(alent to a &eli(er. to the cre&itor o" ca h in an a!ount e9ual to the a!ount cre&ite& to hi account. =0ection 6+3 RA 7653>

D OMESTIC M ONETARY S TABILI'ATION

'uiding principle The @onetar. Boar& hall en&ea(or to control an. e8pan ion or contraction in !onetar. aggregate which i pre?u&icial to the attain!ent or !aintenance o" price tabilit.. aggrega t es(

&ction when abnor m al movem e n ts occur in the monet a r y credit( or price level

6hene(er abnor!al !o(e!ent in the !onetar. aggregate 3 in cre&it3 or in price en&anger the tabilit. o" the 1hilippine econo!. or i!portant ector thereo"3 the @onetar. Boar& hall5 ). Take uch re!e&ial !ea ure a are appropriate an& within the power grante& to the @onetar. Boar& an& the Bangko 0entralC 0ub!it to the 1re i&ent o" the 1hilippine an& the Congre 3 an& !ake public3 a &etaile& report which hall inclu&e 3 a a !ini!u!3 a &e cription an& anal. i o"5 a. The cau e o" the ri e or "all o" the !onetar. aggregate 3 o" cre&it or o" price C The e8tent to which the change in the !onetar. aggregate 3 in cre&it3 or in price ha(e been re"lecte& in change in the le(el o" &o!e tic output3 e!plo.!ent3 wage 3 an& econo!ic acti(it. in general an& the nature an& igni"icance o" an. uch change C an& The !ea ure which the @onetar. Boar& ha taken an& the other !onetar.3 "i cal or a&!ini trati(e !ea ure which it reco!!en& to be a&opte&.

,.

b.

c.

I NTERNATIONAL M ONETARY S TABILI'ATION

"6
B ANKING LAWS

Intern a t i on al monet a r y stabili1ation The Bangko 0entral hall e8erci e it power to pre er(e the international (alue o" the pe o an& to !aintain it con(ertibilit. into other "reel. con(ertible currencie pri!aril. "or3 although not nece aril. li!ite& to3 current pa.!ent "or "oreign tra&e an& in(i ible . =0ection 623 RA 7653>

Intern a t i on al reserves In or&er to !aintain the international tabilit. an& con(ertibilit. o" the 1hilippine pe o3 the Bangko 0entral hall !aintain international re er(e a&e9uate to !eet an. "ore eeable net &e!an& on the Bangko 0entral "or "oreign currencie . =0ection 653 RA 7653>

.omposition of the interna t ion al reserves ). ,. Gol& A et in "oreign currencie

"7
B ANKING LAWS
&ction when inter na t i on al stability of the pesos is threa t e n e d 6hene(er the international re er(e o" the Bangko 0entral "all to a le(el which the @onetar. Boar& con i&er ina&e9uate to !eet the pro pecti(e net &e!an& on the Bangko "or "oreign currencie 3 or whene(er the international re er(e appear to be in i!!inent &anger o" "alling to uch a le(el3 or whene(er the international re er(e i "alling a a re ult o" pa.!ent or re!ittance abroa& which3 in the opinion o" the @onetar. Boar&3 are contrar. to the national wel"are3 the @onetar. Boar& hall5 ). Take uch re!e&ial !ea ure a are appropriate an& within the power grante& to the @onetar. Boar& an& the Bangko 0entralC 0ub!it to the 1re i&ent o" the 1hilippine an& the Congre 3 an& !ake public3 a &etaile& report which hall inclu&e 3 a a !ini!u!3 a &e cription an& anal. i o"5 a. b. The nature an& cau e o" the e8i ting or i!!inent &eclineC The re!e&ial !ea ure @onetar. Boar&C The !onetar.3 propo e&C an& "i cal alrea&. taken or to be taken b. the

,.

c.

or

a&!ini trati(e

!ea ure

"urther

&.

The character an& e8tent o" the cooperation re9uire& "ro! other go(ern!ent agencie "or the ucce "ul e8ecution o" the policie o" the @onetar. Boar&.
OF

I NSTR&MENTS

B ANGKO S ENTRAL A CTION

Means of action In or&er to achie(e the pri!ar. ob?ecti(e o" price Boar& hall rel. on it !oral in"luence an& the power 7653 "or the !anage!ent o" !onetar. aggregate . tabilit.3 the @onetar. grante& to it un&er RA

,urchases and sales of gold The Bangko 0entral !a. bu. an& ell gol& in an. "or!.

,urchases and sales of foreign e*change

"8
B ANKING LAWS
The Bangko entral !a. bu. an& ell "oreign note an& coin 3 an& &ocu!ent an& in tru!ent o" t.pe cu to!aril. e!plo.e& "or the international tran "e ro" "un& . The Bangko 0entral !a. engage in "uture e8change operation .

To whom can engage The Bangko 0entral !a. engage in "oreign tran action entitie or per on onl.5 ). ,. 3. 2. 5. Banking in titution operating in the 1hilippine C ub&i(i ion an& in tru!entalitie C with the "ollowing

The Go(ern!ent3 it political

%oreign or international "inancial in titution C %oreign go(ern!ent an& their in tru!entalitie C an& i hereb.

/ther entitie or per on which the @onetar. Boar& e!powere& to authori-e a "oreign e8change &ealer .

Foreign asset position of the Bangko Sentral The Bangko 0entral hall en&ea(or to !aintain at all ti!e a net po iti(e "oreign a et po ition o that it gro "oreign e8change a et will alwa. e8cee& it gro "oreign liabilitie .

-mergency restrictions on foreign e*change opera tions E!ergenc. re triction ). on "oreign e8change operation inclu&e5

Te!poraril. u pen&ing or re tricting Bangko 0entralC 0ub?ecting all tran action the Bangko 0entralC an&

ale o" "oreign e8change b. the

,.

in gol& an& "oreign e8change to licen e b.

3.

Re9uiring that an. "oreign e8change therea"ter obtaine& b. an. per on re i&ing or entit. operating in the 1hilippine be &eli(ere& to the Bangko 0entral or to an. bank or agent &e ignate& b. the Bangko 0entral "or the purpo e3 at the e""ecti(e e8change rate or rate . =0ection 7,3 RA 7653>

"!
B ANKING LAWS

E!ergenc. re triction ). ,.

!a. be i!po e& "or the "ollowing purpo e 5

In or&er to achie(e the pri!ar. ob?ecti(e o" the Bangko 0entralC To protect the international re er(e o" the Bangko 0entral in the i!!inence o"3 or &uring an e8change cri i 3 or in ti!e o" national e!ergenc.C an& To gi(e the @onetar. Boar& an& the Go(ern!ent ti!e in which to take con tructi(e !ea ure to "ore tall3 co!bat3 or o(erco!e uch a cri i or e!ergenc.. =0ection 7,3 RA 7653>

3.

0uch !ea ure !a. be a&opte& with the concurrence o" at lea t "i(e A5B !e!ber o" the @onetar. Boar& an& with the appro(al o" the 1re i&ent o" the 1hilippine . =0ection 7,3 RA 7653>

-*change rates The Bangko 0entral hall &eter!ine the e8change rate polic. o" the countr..

Foreign e*change holdings of the banks In or&er that the Bangko 0entral !a. at all ti!e ha(e "oreign e8change re ource u""icient to enable it to !aintain the international tabilit. an& con(ertibilit. o" the pe o3 or in or&er to pro!ote the &o!e tic in(e t!ent o" bank re ource 3 the @onetar. Boar& !a. re9uire the bank to ell to the Bangko 0entral or to other bank all or part o" their urplu hol&ing o" "oreign e8change. =0ection 763 RA 7653>
TO

L OANS

B ANKING

AND

OT

ER

F INANCIAL I NSTIT&TIONS

'uiding principles The re&i count 3 &i count 3 loan an& a&(ance 3 which the Bangko 0entral i authori-e& to e8ten& to banking in titution 3 hall be u e& to in"luence the (olu!e o" cre&it con i tent with the ob?ecti(e o" price tabilit..

Types of credit operat ions ). ,. Nor!al cre&it operation 0pecial cre&it operation

2#
B ANKING LAWS

3.

E!ergenc. cre&it operation

+ormal credit opera tions ). ,. 3. Co!!ercial cre&it 1ro&uction cre&it /ther cre&it

.ommercial credits The Bangko 0entral !a. re&i count3 &i count3 bu. an& ell bill 3 acceptance 3 pro!i or. note an& other cre&it in tru!ent with !aturitie o" not !ore than one hun&re& eight. A)<+B &a. "ro! the &ate o" their re&i count3 &i count or ac9ui ition b. the Bangko 0entral an& re ulting "ro! tran action relate& to5 ). The i!portation3 e8portation3 purcha e or ale o" rea&il. aleable goo& an& pro&uct 3 or their tran portation within the 1hilippine C or The toring o" non7 peri hable goo& an& pro&uct which are &ul. in ure& an& &epo ite&3 un&er con&ition a uring their pre er(ation in authori-e& bon&e& warehou e or in other place appro(e& b. the @onetar. Boar&.

,.

,roduction credits The Bangko 0entral !a. re&i count3 &i count3 bu. an& ell bill 3 acceptance 3 pro!i or. note an& other cre&it in tru!ent ha(ing !aturitie o" not !ore than three hun&re& i8t. A36+B &a. "ro! the &ate o" their re&i count3 &i count or ac9ui ition b. the Bangko 0entral an& re ulting "ro! tran action relate& to the pro&uction or proce ing o" agricultural3 ani!al3 !ineral3 or in&u trial pro&uct .

Other credits 0pecial cre&it in tru!ent not otherwi e re&i countable un&er co!!ercial an& pro&uction cre&it !a. be eligible "or re&i counting in accor&ance with the rule an& regulation which the Bangko 0entral hall pre cribe.

Special credit operation

2"
B ANKING LAWS

).

$oan "or li9ui&it. purpo e

/oans for li#uidity purposes The Bangko "or a perio& purpo e o" =0ection <33 0entral !a. e8ten& loan an& a&(ance to banking in titution o" not !ore than e(en A7B &a. without an. collateral "or the pro(i&ing li9ui&it. to the banking . te! in ti!e o" nee&. RA 7653>

-mergency loans and advances In perio& o" national an&Dor local e!ergenc. or o" i!!inent "inancial panic which &irectl. threaten !onetar. an& banking tabilit.3 the @onetar. Boar& !a.3 b. a (ote o" at lea t "i(e A5B o" it !e!ber 3 authori-e the Bangko 0entral to grant e8traor&inar. loan or a&(ance to banking in titution ecure& b. a et . =0ection <23 RA 7653> The @onetar. Boar& !a.3 at it &i cretion3 likewi e authori-e the Bangko 0entral to grant e!ergenc. loan or a&(ance to banking in titution 3 e(en &uring nor!al perio& 3 "or the purpo e o" a i ting a bank in a precariou "inancial con&ition or un&er eriou "inancial pre ure brought b. un"ore een e(ent 3 or e(ent which3 though "ore eeable3 coul& not be pre(ente& b. the bank concerne&. Thi re9uire that the @onetar. Boar& ha a certaine& that the bank i not in ol(ent an& ha the a et to ecure the a&(ance an& that the concurrent (ote o" at lea t "i(e A5B !e!ber o" the @onetar. Boar& i obtaine&. =0ection <23 RA 7653>
FOR T E

O PEN M ARKET O PERATIONS

A CCO&NT

OF T E

B ANGKO S ENTRAL

,rinciple of open marke t opera tions The open !arket purcha e an& ale o" ecuritie b. the Bangko 0entral hall be !a&e e8clu i(el. in accor&ance with it pri!ar. ob?ecti(e o" achie(ing price tabilit.. In pur uit o" thi principle3 the Bangko 0entral !a. engage in the purcha e an& ale o" go(ern!ent ecuritie a well a i ue an& negotiate obligation o" the Bangko 0entral.

B ANK R ESERVES
%eserve re#uire m e n t s

22
B ANKING LAWS

In or&er to control the (olu!e o" !one. create& b. the cre&it operation o" the banking . te!3 all bank operating in the 1hilippine hall be re9uire& to !aintain re er(e again t their &epo it liabilitie . The re9uire& re er(e o" each bank hall be proportional to the (olu!e o" it &epo it liabilitie an& hall or&inaril. take the "or! o" a &epo it in the Bangko 0entral. =0ection *23 RA 7653>

+o inter est on bank reserves 0ince the re9uire!ent to !aintain bank re er(e i i!po e& pri!aril. to control the (olu!e o" !one.3 the Bangko 0entral hall not pa. intere t on the re er(e !aintaine& with it unle the @onetar. Boar& &eci&e otherwi e a warrante& b. circu! tance . =0ection *23 RA 7653>

"eposit substit ut es The ter! "deposit substitutes" i &e"ine& a an alternati(e "or! o" obtaining "un& "ro! the public3 other than &epo it 3 through the i uance3 en&or e!ent3 or acceptance o" &ebt in tru!ent "or the borrowerF own account3 "or the purpo e o" re7 len&ing or purcha ing o" recei(able an& other obligation .

%e#uired reserves against foreign currency The @onetar. Boar& i !ini!u! re er(e ratio "oreign currencie . i!ilarl. authori-e& to pre cribe an& !o&i". the authori-e& applicable to &epo it &eno!inate& in

Increase in reserve re#uir e m e n t s 6hene(er in the opinion o" the @onetar. Boar& it beco!e nece ar. to increa e re er(e re9uire!ent again t e8i ting liabilitie 3 the increa e hall be !a&e in a gra&ual !anner an& hall not e8cee& "our percentage point in an. thirt.7 &a. perio&. Bank an& other a""ecte& "inancial in titution hall be noti"ie& rea onabl. in a&(ance o" the &ate on which uch increa e i to beco!e e""ecti(e.

-*emption from att achm e n t and other purposes of reserves #epo it !aintaine& b. bank with the Bangko 0entral a part o" their

23
B ANKING LAWS
re er(e re9uire!ent hall be e8e!pt "ro! attach!ent3 garni h!ent3 or an. other or&er or proce o" an. court3 go(ern!ent agenc. or an. other a&!ini trati(e bo&. i ue& to ati ". the clai! o" a part. other than the Go(ern!ent3 or it political ub&i(i ion or in tru!entalitie .

S ELECTIVE R EG&LATION
'uiding principle

OF

B ANK O PERATIONS

The @onetar. Boar& hall u e the power grante& to it un&er RA 7653 to en ure that the uppl.3 a(ailabilit. an& co t o" !one. are in accor& with the nee& o" the 1hilippine econo!. an& that bank cre&it i not grante& "or peculati(e purpo e pre?u&icial to the national intere t . Regulation on bank operation hall be applie& to all bank categor. uni"or!l. an& without &i cri!ination. o" the a!e

Margin re#uir e m e n t s against lett ers of credit The @onetar. Boar& !a. at an. ti!e pre cribe !ini!u! ca h !argin "or the opening o" letter o" cre&it3 an& !a. relate& the i-e o" the re9uire& !argin to the nature o" the tran action to be "inance&.
AS

F &NCTIONS

B ANKER

AND

F INANCIAL A DVISOR

OF T E

G OVERNMENT

"esigna tion of Bangko Sentral as banker of the govern m e n t The Bangko 0entral hall act a a banker o" the Go(ern!ent3 it ub&i(i ion an& in tru!entalitie . political

The Bangko 0entral hall repre ent the go(ern!ent with the International @onetar. %un& an& other "inancial in titution .

Official deposits The Bangko 0entral hall be the o""icial &epo itor. o" the Go(ern!ent3 it political ub&i(i ion an& in tru!entalitie a well a o" go(ern!ent7 owne& or controlle& corporation .
AND

T E M ARKETING G OVERNMENT

S TABILI'ATION

OF

S EC&RITIES

FOR T E

A CCO&NT

OF T E

Issue of govern m e n t obligations

24
B ANKING LAWS

The i ue o" ecuritie repre enting obligation o" the Go(ern!ent3 it political ub&i(i ion or in tru!entalitie !a. be !a&e through the Bangko 0entral3 which !a. act a agent o"3 an& "or the account o"3 the Go(ern!ent or it re pecti(e ub&i(i ion or in tru!entalit.3 a the ca e !a. be. The Bangko 0entral hall not be a !e!ber o" an. tock e8change or .n&icate3 but !a. inter(ene therein "or the ole purpo e o" regulating their operation in the placing o" go(ern!ent ecuritie . =0ection ))<3 RA 7653>

Servicing and rede m p t i on of public debt The er(icing an& re&e!ption o" the public &ebt through the Bangko 0entral. hall al o be e""ecte&

25
B ANKING LAWS
Financial advice on official credit operat ions Be"ore un&ertaking an. cre&it operation abroa&3 the Go(ern!ent3 through the 0ecretar. o" %inance3 hall re9ue t the opinion3 in writing3 o" the @onetar. Boar& on the !onetar. i!plication o" the conte!plate& action. 0uch opinion !u t i!ilarl. be re9ue te& b. all political ub&i(i ion an& in tru!entalitie o" the Go(ern!ent be"ore an. cre&it operation abroa& i un&ertaken b. the!. 6hene(er the Go(ern!ent3 or an. o" it political ub&i(i ion or in tru!entalitie 3 conte!plate borrowing within the 1hilippine 3 the prior opinion o" the @onetar. Boar& hall likewi e be re9ue te& in or&er that the Boar& !a. ren&er an opinion on the probable e""ect o" the propo e& operation on !onetar. aggregate 3 the price le(el3 an& the balance o" pa.!ent . In or&er to a ure e""ecti(e coor&ination between the econo!ic3 "inancial an& "i cal policie o" the go(ern!ent an& the !onetar.3 cre&it an& e8change policie o" the Bangko 0entral3 the #eput. Go(ernor &e ignate& b. the Go(ernor o" the Bangko 0entral hall be an ex officio !e!ber o" the National Econo!ic an& #e(elop!ent Authorit. Boar&.
IBITIONS

P RO

,rohibitions The Bangko 0entral hall not ac9uire hare o" an. kin& or accept the! a coolateral3 an& hall not participate in the owner hip or !anage!ent o" an. enterpri e3 either &irectl. or in&irectl.. The Bangko 0entral hall not engage in &e(elop!ent banking or "inancing.

T RANSITORY P ROVISIONS
,haseout of fiscal agency functions 'nle circu! tance warrant otherwi e an& appro(e& b. the Congre /(er ight Co!!ittee3 the Bangko 0entral hall within a perio& o" three A3B .ear but in no ca e longer than "i(e A5B .ear "ro! the appro(al o" RA 76533 pha e out all "i cal agenc. "unction 3 an& tran "er the a!e to the #epart!ent o" %inance. =0ection ),*3 RA 7653>

26
B ANKING LAWS
,haseout of regulat or y powers over the operations of corporat ions and other institut ions perfor m i ng similar functions finance

The Bangko 0entral hall within a perio& o" "i(e A5B .ear "ro! the e""ecti(it. o" RA 7653 pha e out it regulator. power o(er "inance co!panie without 9ua i7 banking "unction an& other in titution per"or!ing i!ilar "unction 3 the a!e to be a u!e& b. the 0ecuritie an& E8change Co!!i ion. =0ection )3+3 RA 7653>

G ENERAL B ANKING A CT
Republic Act No. 3373 a a!en&e& An act regulating bank an& banking in titution Appro(e& ,3 %ebruar. )**5 an& "or other purpo e

I N G ENERAL
%ule on bank operations /nl. entitie &ul. authori-e& b. the @onetar. Boar& o" the Bangko 0entral !a. engage in the len&ing o" "un& obtaine& "ro! the public through the receipt o" &epo it o" an. kin& an& all entitie regularl. con&ucting uch operation hall be con i&ere& a banking in titution .

Banks or banking institut ions Entitie engage& in the len&ing o" "un& obtaine& "ro! the public through the receipt o" &epo it o" an. kin&3 an& all entitie regularl. con&ucting uch operation. Bank or banking in titution o" the Central Bank. !u t be &ul. authori-e& b. the @onetar. Boar&

1ublic hall !ean twent. or !ore len&er .

!uasi) banking functions uasi- banking functions hall !ean borrowing "un& 3 "or the borrower; own account3 through the i uance3 en&or e!ent or acceptance o" &ebt in tru!ent o" an. kin& other than &epo it 3 or through the i uance o"

27
B ANKING LAWS
participation 3 certi"icate o" a ign!ent3 or i!ilar in tru!ent with recour e3 tru t certi"icate 3 or o" repurcha e agree!ent 3 "ro! twent. or !ore len&er at an. one ti!e3 "or purpo e o" re7 len&ing or purcha ing o" recei(able an& other obligation . 4owe(er3 co!!ercial3 in&u trial3 an& other non7 "inancial co!panie 3 which borrow "un& through an. o" the e !ean "or the li!ite& purpo e o" "inancing their own nee& or the nee& o" their agent or &ealer 3 hall not be con i&ere& a per"or!ing 9ua i7 banking "unction .

Financial inter m e di a r i es !inancial intermediaries hall !ean per on or entitie who e principal "unction inclu&e the len&ing3 in(e ting or place!ent o" "un& or e(i&ence o" in&ebte&ne or e9uit. &epo ite& with the!3 ac9uire& b. the! or otherwi e cour e& through the!3 either "or their own account or "or the account o" other .

+on) banking financial institu ti ons perfor mi n g #uasi) banking functions The "ollowing entitie hall not be con i&ere& a banking in titution be ub?ect to regulation b. the @onetar. Boar&5 ). but hall

Entitie regularl. engage& in the len&ing o" "un& or purcha ing o" recei(able or other obligation with "un& obtaine& "ro! the public through the i uance3 en&or e!ent or acceptance o" &ebt in tru!ent o" an. kin& "or their own account3 or through the i uance o" certi"icate o" a ign!ent or i!ilar in tru!ent with recour e3 tru t certi"icate 3 or o" repurcha e agree!ent 3 whether an. o" the e !ean o" obtaining "un& "ro! the public i &one on a regular ba i or occa ionall.. Entitie regularl. engage& in the len&ing o" "un& &epo it occa ionall.. Tru t co!panie 3 buil&ing an& loan a a(ing an& loan a ociation . which recei(e

,.

3.

ociation 3 an& non7 tock

The e entitie will be ub?ect to regulation b. the @onetar. Boar& which !a. inclu&e3 but nee& not be li!ite& to5 ). the i!po ition o" net worth to ri k a et ratio C

28
B ANKING LAWS
,. 3. 2. 5. 6. 7. re er(e re9uire!ent C intere t rate ceiling C !etho& o" co!putation thereo"C which !a. be collecte&C

pre cribing charge

!ini!u! capitali-ationC an& ub!i ion o" tati tical report .

+on) bank financial inter m e di ar i es The operation an& acti(itie o" non7 bank "inancial inter!e&iarie 3 e8cept in urance co!panie 3 hall be ub?ect to regulation b. the @onetar. Boar& which !a. inclu&e3 but nee& not be li!ite& to3 the i!po ition o" con traint co(ering the5 ). ,. 3. 2. !ini!u! !etho& ter! i-e o" "un& recei(e&C

o" !arketing an& &i tributionC o" "un& recei(e&C an&

an& !aturitie

u e o" "un& .

I" uch entitie are authori-e& b. the Central Bank to per"or! 9ua i7 banking "unction 3 the. !a. be "urther ub?ect to regulation a &i cu e& below. Note5 0ec. )3+ o" the CB Act pha ing out the regulation o" @B o(er NB%C not engage& in 9ua i7 banking "unction .

"eter m i na t i on of functions The &eter!ination o" whether a per on or an entit. i aB per"or!ing banking or 9ua i7 banking "unction C or bB engage& in other t.pe o" "inancial inter!e&iation hall be &eci&e& b. the @onetar. Boar&3 ub?ect to ?u&icial re(iew.

%egulation "egulation hall !ean the i uance o" rule o" con&uct or the e tabli h!ent o" !o&e or tan&ar& o" operation "or uni"or! application to

2!
B ANKING LAWS
all in titution or "unction co(ere&3 taking into con i&eration in &eter!ining uch co(erage the &i tincti(e character o" the operation o" in titution an& the ub tanti(e i!ilaritie o" peci"ic "unction to which uch rule 3 !o&e or tan&ar& are to be applie&. In o!e in tance 3 the e entitie !a. be ub?ect to pecial e8a!ination.

3#
B ANKING LAWS
Supervision #uper$ision hall inclu&e not onl. the i uance o" rule but al o the o(er eeing to a certain that regulation are co!plie& with3 in(e tigating or e8a!ining to &eter!ine whether an in titution i con&ucting it bu ine on a oun& "inancial ba i 3 an& in9uiring into the ol(enc. an& li9ui&it. o" the in titution.

%elationship bet w e e n bank and depositor %i8e& a(ing an& current &epo it o" !one. in bank an& i!ilar in titution hall be go(erne& b. the pro(i ion concerning i!ple loan. In other wor& 3 the relation hip between the bank an& the &epo itor i that o" a &ebtor an& cre&itor. In the ca e o" rent o" a"et. &epo it bo8. The contract i a pecial kin& o" &epo it an& cannot be characteri-e& a an or&inar. contract o" lea e becau e the "ull an& ab olute po e ion an& control o" the &epo it bo8 i not gi(en to the renter . The pre(ailing rule i that the relation between the bank renting out an& the renter i that o" bailer an& bailee the bail!ent being "or hire an& !utual bene"iit. = .& &gro) industrial "ev .orp v .& ( ,)* 0CRA 2,6 A)*<3B>

Types of deposits ). Ti!e #epo it7 Intere t rate tipulate& &epen&ing on the nu!ber o" &a. . #uring thi perio&3 the !one. &epo ite& cannot be with&rawn. The bank u e thi !one. to len& to other . That i wh. in the e account 3 the &epo itor i pai& higher rate o" intere t "or the u e o" the !one.. 0a(ing &epo it7 Intere t "i8e& un&er the "ine print 3 i" one &epo it to&a.3 he cannot with&raw the a!ount not until 6+ &a. later. The bank can len& out uch "un& C that i wh. it pa. intere t on uch &epo it . #e!an& &epo it or current account 7 No intere t i "i8e& b. the bank becau e the &epo itor can take out hi "un& an. ti!e. It i calle& &e!an& &epo it becau e the &epo itor can with&raw the !one. &epo ite& on the (er. a!e &a. when he &epo ite& it. Note5 A a general rule3 onl. co!!ercial bank can accept &e!an& &epo it on checking account . B. wa. o" e8ception3 a(ing bank an& e(en rural bank 3 are allowe& b. the CB to accept checking account becau e their capitali-aition !a. be large.

,.

3.

3"
B ANKING LAWS
Money marke t transactions @one. !arket i a !arket &ealing in tan&ar&i-e& hort7 ter! cre&it in tru!ent Ain(ol(ing large a!ount B where len&er an& borrower &o not &eal &irectl. with each other but through a !e&iator or &ealer in the open !arket. It in(ol(e commercial papers which are in tru!ent e$idencing indebtedness of any person or entity% which are issued, endorsed, sold or transferred or in any manner con$eyed to another person or entity, with or without recourse& The "un&a!ental "unction o" the !one. !arket &e(i e in it operation i to !atch an& bring together in a !o t i!per onal !anner both the fund users an& the fund suppliers& The !one. !arket i an Gi!per onal !arket H "ree "ro! per onal con i&eration . The !arket !echani ! i inten&e& to pro(i&e 9uick !obilit. o" !one. an& ecuritie .

The 'eneral Banking &ct discrimina t es against banks in two aspects ). 1erio&7 'n&er the Ci(il Co&e3 a perio& i pre u!e& to be "or the bene"it o" both partie . In o"ar a bank are concerne&3 the perio& i alwa. "or the bene"it o" the &ebtor i" the bank i the cre&itor. The &ebtor can co!pel the cre&itor bank to accept pa.!ent o" a &ebt be"ore it i &ue3 an& reco(er intere t &e&ucte& in a&(ance. %oreclo ure o" !ortgage7 The general rule i that there i no right o" re&e!ption in ?u&icial "oreclo ure o" !ortgage. There i onl. *+ &a. e9uit. re&e!ption perio&. The e8ception i with the bank a i&e "ro! the *+7 &a. e9uit. re&e!ption perio&3 bank are re9uire& to gi(e a one7 .ear re&e!ption perio&.

,.

&lien bank mortga g e An alien bank can bi& in a public auction o" !ortgage& propert. i" uch propert. wa !ortgage to it in the cour e o" an or&inar. banking tran action. I" the !ortgage wa not within the nor!al banking tran action3 it !u t be prohibite& "ro! bi&&ing.

32
B ANKING LAWS

Mort ga g e loans $oan again t real e tate ecurit. hall not e8cee& 7+E o" the apprai e& (alue o" the real e tate ecurit.3 plu 7+ Eo" the apprai e& (alue o" the i!pro(e!ent with title to the propert. being with the !ortgagor. $oan on the ecurit. o" chattel o" the ecurit.. hall not e8cee& 5+E o" the apprai e& (alue

.lassification of banks ). ,. Co!!ercial bank Thri"t bank a. b. c. 3. 0a(ing an& !ortgage bank an& loan a ociation

0tock a(ing

1ri(ate &e(elop!ent bank

Rural bank

Indispensable to the national interest The banking in&u tr. i hereb. &eclare& a in&i pen able to the national intere t an&3 notwith tan&ing the pro(i ion o" an. law to the contrar.3 an. trike or lockout in(ol(ing bank 3 i" un ettle& a"ter e(en A7B calen&ar &a. 3 hall be reporte& b. the Central Bank to the 1re i&e who hall i!!e&iatel. certi". the a!e to the appropriate court3 go(ern!ent agenc. or co!!i ion "or re olution.
MENT OF

ESTABLIS

D OMESTIC B ANKS

Form of organi1a ti on #o!e tic banking in titution 3 e8cept buil&ing an& loan a organi-e& in the "or! o" tock corporation . No banking in titution The 0ecuritie hall i ue no7 par (alue ion tock. o" ociation 3 hall be

an& E8change Co!!i

hall not regi ter the article

33
B ANKING LAWS
incorporation o" an. bank3 or an. a!en&!ent thereto3 unle acco!panie& b. a certi"icate o" authorit. i ue& b. the @onetar. Boar&3 un&er it o""icial eal. At lea t two thir& o" the !e!ber o" the boar& o" &irector o" an. bank or banking in titution which !a. be e tabli he& a"ter the appro(al o" thi Act hall be %ilipino citi-en .

%e#uisites for issuance of certificat e of authori t y 0uch certi"icate hall not i ue unle the e(i&ence ub!itte& to it5 ). the @onetar. Boar& i ati "ie& "ro!

that all the re9uire!ent o" e8i ting law an& regulation to engage in the bu ine "or which the applicant i propo e& to be incorporate& ha(e been co!plie& withC that the public intere t an& econo!ic con&ition 3 both general an& local3 ?u ti". the authori-ationC an& that the a!ount o" capital3 the "inancing organi-ation3 &irection an& a&!ini tration3 a well a the integrit. an& re pon ibilit. o" the organi-er an& a&!ini trator rea onabl. a ure the a"et. o" the intere t which the public !a. entru t to the!.

,.

3.

%eceipt and disposition of deposits No bank which !a. be e tabli he& an& licen e& to &o bu ine in the 1hilippine hall recei(e &epo it 3 unle incorporate& un&er the law o" the Republic o" the 1hilippine . Thi prohibition3 howe(er3 hall not appl. to branche an& agencie o" "oreign bank which3 at the ti!e o" appro(al o" the General Banking Act3 are actuall. recei(ing &epo it . A"ter appro(al o" the Act3 all &epo it o recei(e& b. uch branche an& agencie o" "oreign bank hall not be in(e te& in an. !anner out i&e the territorial li!it o" the Republic o" the 1hilippine .

2oting stock re#uir e m e n t s At lea t e(ent. percent A7+EB o" the (oting tock o" an. banking in titution which !a. be e tabli he& a"ter the appro(al o" the Act hall be owne& b.

34
B ANKING LAWS
citi-en o" the 1hilippine 3 e8cept where a new bank i e tabli he& a a re ult o"5 aB the local incorporation o" an. o" the e8i ting branche or agencie o" "oreign bank in the 1hilippine C or bB the con oli&ation o" e8i ting bank in an. o" which there are "oreign owne& (oting tock at the ti!e o" con oli&ation. The @onetar. Boar& !a.3 with the appro(al o" the 1re i&ent3 increa e the percentage o" "oreign7 owne& (oting tock in an. &o!e tic bank "ro! thirt. percent A3+EB to "ort. percent A2+EB. The percentage o" "oreign7 owne& (oting tock in a bank hall be &eter!ine& b. the citi-en hip o" the in&i(i&ual tockhol&er in that bank. In the ca e o" corporation owning bank hare 3 the citi-en hip o" each tockhol&er in that corporation hall be the ba i o" co!puting the percentage.

Ownership of stocks in banks by corpora ti ons The total (oting tock which an. corporation3 inclu&ing it wholl. or !a?orit. owne& ub i&iarie 3 !a. own in an. bank hall not e8cee& thirt. percent A3+EB o" the (oting tock o" that bank. In the ca e o" a corporation which i wholl. owne&3 or the !a?orit. o" the (oting tock o" which i owne&3 b. an. one per on or b. per on relate& to each other within the thir& &egree o" con anguinit. or a""init.3 that corporation !a. own not !ore than twent. percent A,+EB o" the (oting tock o" an. bank.
OF

L ICENSING

F OREIGN B ANKS

/icense to conduct business No "oreign bank or banking corporation "or!e&3 organi-e& or e8i ting un&er an. law other than tho e o" the 1hilippine hall be per!itte& to tran act bu ine in the 1hilippine 3 or !aintain b. it el" or a ignee an. uit "or the reco(er. o" an. &ebt3 clai! 3 or &e!an& what oe(er3 until a"ter it hall ha(e obtaine&3 upon or&er o" the @onetar. Boar&3 a licen e "or that purpo e "ro! the 0ecuritie an& E8change Co!!i ion. No "oreign buil&ing an& loan a ociation or buil&ing an& loan a "or!e&3 organi-e&3 or e8i ting un&er the law o" the 1hilippine per!itte& to tran act bu ine in the 1hilippine . ociation not hall be

%e#uisites for issuance of license

35
B ANKING LAWS

).

1ublic an& econo!ic con&ition 3 both general an& local3 ?u ti". the i o" uch or&er. The "oreign bank or banking corporation i con&ition. A &ul. appointe& agent in the 1hilippine u!!on an& legal proce e .

uance

,.

ol(ent an& in oun& "inancial

3.

ha been authori-e& to accept

36
B ANKING LAWS
Invest m e n t rights ). %oreign banking in titution without branche in the 1hilippine 3 inclu&ing their wholl. or !a?orit. owne& ub i&iarie an& their hol&ing co!panie ha(ing !a?orit. hol&ing in uch "oreign banking in titution 3 !a. in(e t3 with prior appro(al o" the @onetar. Boar&3 in e9uitie o" local co!panie engage& in "inancial allie& un&ertaking . 4owe(er3 the. hall !aintain !inorit. participation in uch enterpri e. 6ith prior appro(al o" the Central Bank3 the e "oreign entitie purcha e e9uitie in &o!e tic bank 3 ub?ect to re triction . !a. al o

,.

%evocation of license ). ,. The "oreign bank i in i!!inent &anger o" in ol(enc.. It continuance in bu ine bu ine with it.
OF

will in(ol(e probable lo

to tho e tran acting

CLASSIFICATION

P RIVATE B ANKS
AND

COMMERCIAL B ANKING CORPORATIONS

.ommercial bank

& NIVERSAL B ANKS

A co!!ercial banking corporation3 in a&&ition to the general power inci&ent to corporation 3 hall ha(e all uch power a hall be nece ar. to carr. on the bu ine o" co!!ercial banking5 ). b. accepting &ra"t an& i uing letter o" cre&it3 b. &i counting an& negotiating pro!i or. note 3 &ra"t 3 bill o" e8change3 an& other e(i&ence o" &ebt C b. recei(ing &epo it C b. bu.ing an& elling "oreign e8change an& gol& or il(er bullionC an& b. len&ing !one. again t per onal ecurit. or again t ecuritie con i ting o" per onal propert. o" !ortgage on i!pro(e& real e tate an& the in ure& i!pro(e!ent thereon. ub?ect to

,. 3. 2.

A co!!ercial bank !a. al o accept or create &e!an& &epo it with&rawal b. check.

37
B ANKING LAWS

A co!!ercial bank !a. o""er N/6 account A pecial t.pe o" a(ing &epo it which can be with&rawn b. !ean o" a Negotiable /r&er o" 6ith&rawal an& i o""ere& onl. to natural per on B. A co!!ercial bank !a. likewi e ac9uire rea&il. !arketable bon& an& other &ebt ecuritie ub?ect to uch rule a the @onetar. Boar& !a. pro!ulgate. A co!!ercial bank3 "inall.3 !a. in(e t to the e8tent allowe& un&er applicable law an& regulation in e9uitie o" allie& un&ertaking3 whether "inancial or non7 "inancial.

Invest m e n t in allied under t a ki ngs Co!!ercial bank 3 inclu&ing Go(ern!ent bank an& "oreign bank with e8i ting local branche 3 !a. in(e t in e9uitie o" allie& un&ertaking . E9uit. in(e t!ent $i!itation ). hall not be per!itte& in non7 relate& acti(itie . in allie& un&ertaking 5

on in(e t!ent

The total in(e t!ent in e9uitie hall not e8cee& twent. "i(e percent A,5EB o" the net worth o" the bank. The e9uit. in(e t!ent in an. one enterpri e percent A)5EB o" the net worth o" the bankC hall not e8cee& "i"teen

,.

3.

The total e9uit. in(e t!ent o" the bank in an. ingle enterpri e re!ain a !inorit. hol&ing in that enterpri eC an&

hall

2.

The e9uit. in(e t!ent in other bank hall be &e&ucte& "ro! the in(e ting bank; net worth "or purpo e o" co!puting the pre cribe& ratio o" net worth to ri k a et .

%inancial allie& un&ertaking ). ,. 3. 2. $ea ing co!panie Bank In(e t!ent hou e %inancing co!panie

38
B ANKING LAWS

5. 6.

Cre&it car& operation %inancial in titution catering to !all an& !e&iu! cale enterpri e

Non7 "inancial allie& un&ertaking ). ,. 3. 2. 6arehou ing co!panie 0torage co!panie 0a"e &epo it bo8 co!panie Co!panie engage& in the !anage!ent o" !utual "un& !utual "un& the! el(e but not in the

5.

@anage!ent corporation engage& or to be engage& in acti(it. to the engage!ent o" !utual "un& Co!panie engage& in the pro(i ion o" co!puter er(ice

i!ilar

6. 7. <. *.

In urance agencie Co!panie Co!panie crop engage& in ho!e buil&ing an& ho!e &e(elop!ent pro(i&ing &r.ing an&Dor !illing "acilitie "or agricultural

0niversal bank or e*panded commercial banking authori t y The @onetar. Boar& !a. authori-e 77 to "urther national &e(elop!ent ob?ecti(e or upport national priorit. pro?ect 77 a co!!ercial bank3 a bank authori-e& to pro(i&e co!!ercial banking er(ice 3 a well a a go(ern!ent owne& an& controlle& bank3 to operate un&er an e8pan&e& co!!ercial banking authorit.. B. (irtue o" uch e8pan&e& power3 the uni(er al bank !a.3 in a&&ition to power authori-e& "or co!!ercial bank 5 ). ,. e8erci e the power o" an In(e t!ent 4ou e a pro(i&e& in 1# ),*C in(e t in the e9uit. o" a non7 allie& un&ertakingC or

3!
B ANKING LAWS
3. own a !a?orit. or all o" the e9uit. in a "inancial inter!e&iar. other than a co!!ercial bank or a bank authori-e& to pro(i&e co!!ercial banking er(ice .

4#
B ANKING LAWS
/imitat ions on e*ercise of power as invest m e n t house 'ni(er al bank !a. per"or! the "unction o" an in(e t!ent hou e either &irectl. /R in&irectl. through a ub i&iar. in(e t!ent hou e Ait cannot per"or! uch "unction both &irectl. an& in&irectl.B. I" per"or!e& &irectl.3 uch "unction &i tinct &epart!ent in the bank. hall be un&ertaken b. a eparate an&

I" per"or!e& in&irectl. through an in(e t!ent hou e3 uni(er al bank !a. not &irectl. e8erci e uch power a are e8clu i(el. re er(e& to in(e t!ent hou e .

/imitat ions on e#uity invest m e n t of a universal bank ). The total in(e t!ent in e9uitie net worth o" the bank. hall not e8cee& "i"t. percent A5+EB o" the

,.

The e9uit. in(e t!ent in an. one enterpri e whether allie& or non7 allie& not e8cee& "i"teen percent A)5EB o" the net worth o" the bank. The e9uit. in(e t!ent o" the bank3 or o" it wholl.7 or ub i&iar.3 in a ingle non7 allie& un&ertaking hall not percent A35EB o" the total e9uit. in the enterpri e nor "i(e percent A35EB o" the (oting tock in that enterpri

hall

3.

!a?orit.7 owne& e8cee& thirt. "i(e hall it e8cee& thirt. e.

2.

The e9uit. in(e t!ent in other bank hall be &e&ucte& "ro! the in(e ting bank; net worth "or purpo e o" co!puting the pre cribe& ratio o" net worth to ri k a et .

.apitali1at ion Co!!ercial bank 'ni(er al bank 7 7 1 , billion 1 2.5 billion

Ownership in a thrif t bank or rural bank A co!!ercial bank or an. bank authori-e& to pro(i&e co!!ercial banking er(ice 3 or to operate un&er an e8pan&e& co!!ercial banking authorit. !a. own !ore than thirt. percent A3+EB o" the (oting tock o" a thri"t bank or a rural bank up to a !a?orit. or all o" the e9uit. thereo".

4"
B ANKING LAWS
0ub?ect to the prior appro(al o" the @onetar. Boar&.

.ombined capital accounts The co!bine& capital account o" each co!!ercial bank hall not be le than an a!ount e9ual to ten percent A)+EB o" it ri k a et Ri k a ). ,. 3. et i &e"ine& a it total a et !inu the "ollowing a et 5

Ca h on han&C A!ount &ue "ro! the Central BankC

E(i&ence o" in&ebte&ne o" the 1hilippine Go(ern!ent or Central Bank or an. other e(i&ence o" in&ebte&ne "ull. guarantee& b. the 1hilippine Go(ern!entC $oan to the e8ten& co(ere& b. hol&7 out on3 or a ign!ent o"3 &epo it !aintaine& in the len&ing bank an& hel& in the 1hilippine C $oan or acceptance un&er letter !arginal &epo it C an& o" cre&it to the e8ten& co(ere& b.

2.

5.

6.

/ther non7 ri k ite! which the @onetar. Boar& !a.3 "ro! ti!e to ti!e3 authori-e to be &e&ucte& "ro! total a et .

,urchase( holding or conveyance of real estat e An. co!!ercial bank !a. purcha e3 hol&3 an& con(e. real e tate "or the "ollowing purpo e 5 ). 0uch a hall be nece ar. "or it i!!e&iate acco!!o&ation in the tran action o" it bu ine C 0uch a &ebt C hall be !ortgage& to it in goo& "aith b. wa. o" ecurit. "or

,.

3.

0uch a hall be con(e.e& to it in ati "action o" &ebt contracte& in the cour e o" it &ealing C an&

pre(iou l.

2.

0uch a it hall purcha e at ale un&er ?u&g!ent 3 &ecree 3 !ortgage 3 or tru t &ee& hel& b. it an& uch a it hall purcha e to ecure &ebt &ue to it.

42
B ANKING LAWS

4owe(er3 no uch bank hall hol& the po e ion o" an. real e tate un&er !ortgage or tru t &ee&3 or the title an& po e ion o" an. real e tate purcha e& to ecure an. &ebt &ue to it3 "or a longer perio& than "i(e .ear .

-stablishm en t of branches An. co!!ercial bank organi-e& un&er 1hilippine law !a.3 with the prior appro(al o" the @onetar. Boar&3 e tabli h branche in the 1hilippine or branche an& agencie out i&e the 1hilippine 3 an& the bank hall be re pon ible "or all bu ine con&ucte& in uch branche to the a!e e8tent an& in the a!e !anner a though uch bu ine ha& all been con&ucte& in the hea& o""ice. A bank an& it branche
RIFT

hall be treate& a a unit.

B ANKS

Thrift banks G Thri"t bank H hall inclu&e a(ing an& !ortgage bank 3 pri(ate &e(elop!ent bank 3 an& tock a(ing an& loan a ociation organi-e& un&er e8i ting law an& an. banking corporation that !a. be organi-e& "or the "ollowing purpo e 5 ). Accu!ulating the a(ing o" &epo itor an& in(e ting the! together with capital loan ecure& b. bon& 3 !ortgage in real e tate an& in ure& i!pro(e!ent thereon3 chattel !ortgage3 bon& 3 an& other "or! o" ecurit. or in loan "or per onal an& hou ehol& "inance3 whether ecure& or un ecure&3 or in "inancing "or ho!e buil&ing an& ho!e &e(elop!ent3 in rea&il. !arketable an& &ebt ecuritie C in co!!ercial paper 3 an& account recei(able 3 &ra"t 3 bill o" e8change3 acceptance or note ari ing out o" co!!ercial tran action C an& in uch other in(e t!ent an& loan which the @onetar. Boar& will &eter!ine a nece ar. in the "urtherance o" national econo!ic ob?ecti(e C 1ro(i&ing hort ter! working capital3 or !e&iu!7 an& long7 ter! "inancing to bu ine e engage& in agriculture3 er(ice 3 in&u tr. an& hou ingC an& 1ro(i&ing &i(er i"ie& "inancial an& allie& er(ice "or it cho en !arket an& con tituencie e peciall. "or !all an& !e&iu! enterpri e an&

,.

3.

43
B ANKING LAWS
in&i(i&ual . Scope of authori t y Thri"t bank ). ,. 3. 2. 5. 6. !a.5 a(ing an& ti!e &epo it C

Accept

Act a corre pon&ent "or other "inancial in titution C 1urcha e3 hol& an& con(e. real e tateC /pen letter o" cre&itC to pri(ate an& go(ern!ent e!plo.ee C tone an&

e8ten& cre&it "acilitie

E8ten& cre&it again t the ecurit. o" ?ewelr.3 preciou i!ilar article C Accept "oreign currenc. &epo it C In(e t in e9uit. o" allie& un&ertaking C Re&i count paper I

7. <. *. )+. )). ),. )3.

with the 1NB3 $B13 #B13 an& other G/CC C o" cre&itC an& other &ebt ecure&C an& ecuritie C

ue &o!e tic letter

In(e t in !arketable bon& Grant loan 3 ecure& or not

6ith prior appro(al o" the @onetar. Boar&5 a. b. c. /pen current or checking account C Act a collection agent "or go(ern!ent entitie C Act a o""icial &epo itor. o" national agencie an& !unicipal3 cit. or pro(incial "un& where the bank i locate&C I ue !ortgage an& chattel certi"icate C

&. e.

Engage in 9ua i7 banking an& !one. !arket operation C an&

44
B ANKING LAWS

".

/""er N/6 account .

Thri"t bank !a. per"or! er(ice i!ilar to tho e o""ere& b. co!!ercial bank un&er an e8pan&e& authorit. when per!itte& b. the Bangko 0entral ng 1ilipina .

.apitali1at ion Capitali-ation !a. (ar. accor&ing to the location o" the hea& o""ice5 6ithin @etro @anila /ut i&e @etro @anila Incentives and e*em p t ions ). ,. 3. 2. 5. 6. 7. Re er(e re9uire!ent &i""erential $iberali-e& branching rule Notice o" tate!ent o" con&ition 7 7 1,5+ !illion 1 2+ !illion

Ta8 e8e!ption E8e!ption "ro! publication re9uire!ent E8e!ption "ro! notarial charge E8e!ption "ro! regi tration "ee

-#uity ownership At lea t 2+E o" the (oting citi-en . tock o" a thri"t bank hall be owne& b. %ilipino

E8ception5 In ca e o" !erger or con oli&ation o" e8i ting Thri"t Bank with "oreign hol&ing 3 the re ulting hol&ing hall not be increa e& but !a. be re&uce& an&3 once re&uce&3 hall not be increa e& therea"ter be.on& 6+E o" the (oting tock o" the Thri"t Bank.

Minors as depositors @inor in their own right an& in their own na!e !a. !ake &epo it an&

45
B ANKING LAWS
with&raw the a!e3 an& !a. recei(e &i(i&en& an& intere t .

I" the guar&ian hall gi(e notice in writing to an. thri"t bank not to !ake pa.!ent o" &epo it 3 &i(i&en& or intere t to the !inor o" who! he i the guar&ian3 then uch pa.!ent hall be !a&e onl. to the guar&ian.
AND

B &ILDING

LOAN A SSOCIATIONS

Building and loan associations Buil&ing an& loan a ociation are corporation who e capital tock i re9uire& or i per!itte& to be pai& in b. the tockhol&er in regular3 e9ual perio&ical pa.!ent an& who e purpo e i 5 ). ,. to accu!ulate the a(ing o" it tockhol&er C a(ing an& pro"it

to repa. to ai& tockhol&er their accu!ulate& upon urren&er o" their hare C

3.

to encourage in&u tr.3 "rugalit.3 an& ho!e buil&ing a!ong it tockhol&er C an& to loan it "un& 3 an& "un& borrowe& "or the purpo e3 to tockhol&er on the ecurit. o" unencu!bere& real e tate an& with the ple&ge o" hare o" the capital tock owne& b. uch tockhol&er a collateral ecurit..

2.

,rohibition It hall be unlaw"ul "or an. buil&ing an& loan a ociation to !ake an. loan upon propert. that i uitable "or u onl. a theatre3 public hall3 church3 con(ent3 chool3 club3 hotel3 garage3 or other public buil&ing. @onetar. Boar& !a. grant e8e!ption in ca e o" public hall3 chool3 hotel an& other public buil&ing to "acilitate the in(e t!ent o" i&le "un& .

Invest m e n t in bonds 6ith the appro(al o" the @onetar. Boar&3 a buil&ing an& loan a ociation !a. al o in(e t uch o" it "un& a !a. otherwi e re!ain i&le in bon& an& obligation o" the Republic o" the 1hilippine or an. o" it ub&i(i ion 3 or G/CC .

46
B ANKING LAWS
.apital stock The capital tock o" uch a ociation hall be pai& in b. the tockhol&er in regular3 e9ual3 perio&ical pa.!ent known a &ue 3 at uch ti!e an& in uch a!ount a hall be pro(i&e& in their b. law . The &ue on each hare o" tock ub cribe& "or b. a tockhol&er hall continue to be pai& b. the tockhol&er to the a ociation until the hare ha been &ul. with&rawn3 cancelle&3 or "or"eite& or until the hare ha reache& it !ature& (alue. @ature& (alue i when the &ue pai& on each hare an& the net earning thereo"3 in accor&ance with the b. law 3 hall a!ount to the !ature& o" the hare.

.ertificat es of stock Certi"icate o" tock hall be i ue& to each tockhol&er upon the pa.!ent o" the !e!ber hip "ee an& "ir t in tall!ent o" the &ue .

Install m e n t shares v paid) up shares 6hile till being pai&3 the hare are calle& in tall!ent "ull. pai&3 the. are calle& pai&7 up hare . /nce pai&7 up3 relation hip between the a change& into that o" &ebtor an& cre&itor. hare . A"ter the. are

ociation an& tockhol&er i

Free shares and pledged shares 0hare which ha(e not been ple&ge& a ecurit. "or the pa.!ent o" a loan hall be calle& free shares, an& hare which ha(e been o ple&ge& hall be calle& pledged shares&

Surrender of shares 0tockhol&er !a. urren&er their hare an& with&raw "ro! the a ociation a"ter pa.ing twel(e A),B !onthl. in tall!ent o" &ue upon gi(ing i8t. A6+B &a. ; notice in writing to the boar& o" &irector an& the with&rawal (alue hall be the total u! o" the &ue pai& thereon plu not le than ninet. percent A*+EB o" all &i(i&en& earne& b. uch hare up to the en& o" the la t prece&ing "i cal perio& plu uch intere t "or the ti!e elap e& ince the en& o" the perio& a hall be allowe& b. the boar& o" &irector .

47
B ANKING LAWS

0tockhol&er who ha(e not pai& twel(e A),B !onthl. in tall!ent o" &ue !a.3 a"ter gi(ing i8t. A6+B &a. ; notice to the boar&3 urren&er their hare an& with&raw "ro! the a ociation3 an& the with&rawal (alue hall be the total u! o" the &ue pai& thereon plu uch &i(i&en& or intere t a !a. be allowe& b. the boar& o" &irector .

R &RAL B ANKS
Scope of authori t y A rural bank !a. per"or! an. or all o" the "ollowing ). er(ice 5

E8ten& loan an& a&(ance pri!aril. "or the purpo e o" !eeting the nor!al an& cre&it nee& o" "ar!er 3 "i her!en3 or "ar! "a!ilie a well a cooperati(e 3 !erchant 3 pri(ate an& public e!plo.ee C Accept a(ing an& ti!e &epo it C

,. 3. 2.

Ac a corre pon&ent bank o" other "inancial in titution C Re&i count paper with the $B13 #B13 or an. other bank3 inclu&ing it branche an& agencie . Act a a collection agentC /""er other banking a!en&e&C er(ice a pro(i&e& in 0ection 77, o" RA 3373 a

5. 6.

7.

E8ten& "inancial a i tance to pri(ate an& public e!plo.ee accor&ance with RA 377*3 a a!en&e&C an& 6ith prior appro(al o" the @onetar. Boar&5 a. b. Accept current or checking account C Accept N/6 account C or propertie o" "ar!er

in

<.

c. Act a tru tee o(er e tate !erchant C &.

an&

Act a o""icial go(ern!ent &epo itor.C

48
B ANKING LAWS
e. ". %ationale The rationale behin& rural banking . te! i the nee& to pro!ote co!prehen i(e rural &e(elop!ent with the en& in (iew o" the "ollowing5 ). ,. A !ore e9uitable &i tribution o" opportunitie 3 inco!e an& wealthC A u taine& increa e o" goo& an& the bene"it o" the peopleC an& er(ice pro&uce& b. the nation "or 0ell &o!e tic &ra"t C an& In(e t in allie& un&ertaking .

3.

An e8pan&ing pro&ucti(it. a a ke. to rai ing the 9ualit. o" li"e "or all. ible in the

Thi can be achie(e& b. !aking cre&it a(ailable an& rea&il. acce rural area .

.apital stock 6ith the e8ception o" harehol&ing o" corporation organi-e& pri!aril. to hol& e9uitie in rural bank 3 an& o" %ilipino7 controlle& &o!e tic bank 3 the capital tock o" an. rural bank hall be "ull.7 owne& an& hel& b. 1hilippine citi-en or entitie 9uali"ie& un&er 1hil. law to own an& hol& uch capital tock.

Board All !e!ber o" the B/# hall be %ilipino citi-en .

4owe(er3 there i no prohibition again t an. appointi(e or electi(e public o""icial "ro! er(ing a &irector3 o""icer3 con ultant or in an. capacit. in the bank.

Incentives %oreclo ure o" !ortgage e8e!pt "ro! new paper publication re9uire!ent i" the loan3 e8clu&ing intere t &ue an& unpai&3 &oe not e8cee& 1)++3+++. E8e!pt "ro! pa.!ent o" all ta8e 3 "ee an& charge o" whate(er nautre an& &e cription3 e8cept corporate inco!e ta8e an& local ta8e 3 "ee an& charge "or aperio& o" "i(e .ear "ro! the &ate o" co!!ence!ent o"

4!
B ANKING LAWS
operation . %ree "ro! notari-ation "ee %ree "ro! regi tration "ee an& #0T in R#.

A CT LIBERALI'ING ENTRY

OF

F OREIGN BANKS
cope o" operation o" "oreign bank in the

Republic Act No. 77,) An act liberali-ing the entr. an& 1hilippine an& "or other purpo e "eclarat ion of policy The 0tate ). hall5

#e(elop a el"7 reliant an& in&epen&ent national econo!. e""ecti(el. controlle& b. %ilipino C an& Encourage3 pro!ote an& !aintain a table3 co!petiti(e3 e""icient an& &.na!ic banking an& "inancial . te!.

,.

1ur uant to thi polic.3 the 1hilippine banking an& "inancial . te! i hereb. liberali-e& to create a !ore co!petiti(e en(iron!ent an& encourage greater "oreign participation through increa e in owner hip in &o!e tic bank b. "oreign bank an& the entr. o" new "oreign bank branche . In allowing increa e& "oreign participation in the "inancial . te!3 it hall be the polic. o" the 0tate that the "inancial . te! hall re!ain e""ecti(el. controlle& b. %ilipino .

Three 345 modes of entry for foreign banks The @onetar. Boar& !a. authori-e "oreign bank to operate in the 1hilippine banking . te! through an. o" the "ollowing !o&e o" entr.5 ). b. ac9uiring3 purcha ing or owning up to (oting tock o" an e8i ting bankC i8t. percent A6+EB o" the

,.

b. in(e ting in up to i8t. percent A6+EB o" the (oting tock o" a new banking ub i&iar. incorporate& un&er 1hilippine law C or

5#
B ANKING LAWS

3.

b. e tabli hing branche

with "ull banking authorit..

A "oreign bank or a 1hilippine corporation3 howe(er3 !a. own up to i8t. percent A6+EB o" the (oting tock o" onl. one &o!e tic bank or new banking ub i&iar..

'uidelines for entry In appro(ing entr. application ). ,. o" "oreign bank 3 the @onetar. Boar& hall5

en ure geographic repre entation an& co!ple!entationC con i&er trategic tra&e an& in(e t!ent relation hip between the 1hilippine an& the countr. o" incorporation o" the "oreign bankC tu&. the inno(ation applicantC &e!on trate& capacit.3 global reputation "or "inancial an& tabilit. in a co!petiti(e en(iron!ent o" the

3.

2.

ee to it that reciprocit. right applicant; countr.C an& con i&er willingne to "ull.

are en?o.e& b. 1hilippine bank

in the

5.

hare their technolog..

/nl. tho e a!ong the top one hun&re& "i"t. A)5+B "oreign bank in the worl& or the top "i(e A5B bank in their countr. o" origin a o" the &ate o" application hall be allowe& entr. in AbB an& AcB o" !o&e o" entr.. In appro(ing entr.3 @onetar. Boar& nece ar.5 ). hall a&opt uch !ea ure a !a. be

to en ure that3 at all ti!e 3 the control o" e(ent. A7+EB o" the re ource or a et o" the entire banking . te! i hel& b. &o!e tic bank which are at lea t !a?orit.7 owne& b. %ilipino C pre(ent a &o!inant !arket po ition b. one bank or the concentration o" econo!ic power in one or !ore "inancial in titution 3 or in corporation 3 partner hip 3 group or in&i(i&ual with relate& intere t C an& ecure the li ting in the 1hilippine 0tock E8change o" the hare tock o" banking corporation e tabli he& un&er AaB an& AbB !o&e o" o"

,.

3.

5"
B ANKING LAWS
entr.. To 9uali". to e tabli h a branch or ub i&iar.3 the "oreign bank applicant !u t be wi&el.7 owne& an& publicl.7 li te& in it countr. o" origin3 unle the "oreign bank applicant i owne& b. the go(ern!ent o" it countr. o" origin.

.apital re#uire m e n t s $ocall. incorporate& ub i&iarie hall ha(e the a!e !ini!u! re9uire!ent a &o!e tic bank o" the a!e categor.. capital

%or "oreign bank branche 3 the. hall per!anentl. a ign capital o" not le than the '.0. &ollar e9ui(alent o" 1,)+3+++3+++.++ at the e8change rate on the &ate o" e""ecti(it. o" thi law. The per!anentl. a igne& capital into 1hilippine currenc.. hall be inwar&l. re!itte& an& con(erte&

Branches A "oreign bank hall be entitle& to three A3B branche !ini!u! capital re9uire!ent. A "oreign &e ignate& 1hilippine e9ui(alent the &ate o" upon re!ittance o"

bank !a. open three A3B a&&itional branche in location b. the @onetar. Boar& b. inwar&l. re!itting an& con(erting into currenc. a per!anentl. a igne& capital the '.0. &ollar o" 1353+++3+++.++ per a&&itional branch at the e8change rate on e""ecti(it. o" thi law. "or each new "oreign bank entrant hall not e8cee&

Total nu!ber o" branche i8 A6B.

52
B ANKING LAWS
6ead office guaran t e e The hea& o""ice o" "oreign bank branche all liabilitie o" it 1hilippine branche . hall guarantee pro!pt pa.!ent o"

-#ual treat m e n t %oreign bank authori-e& to operate un&er the law hall per"or! the a!e "unction 3 en?o. the a!e pri(ilege 3 an& be ub?ect to the a!e li!itation i!po e& upon a 1hilippine bank o" the a!e categor.. The e li!it ri k a et co!!ercial relate& law inclu&e3 a!ong other 3 the ingle borrower; li!it an& capital to ratio a well a the capitali-ation re9uire& "or e8pan&e& banking acti(itie un&er the General Banking Act an& other o" the 1hilippine .

O FFS

ORE

BANKING S YSTEM LAW

. te! in the 1hilippine

1re i&ential #ecree No. )+32 Authori-ing the e tabli h!ent o" an o"" hore banking Appro(e& 3+ 0epte!ber )*76 Offshore banking

/"" hore banking hall re"er to the con&uct o" banking tran action in "oreign currencie in(ol(ing the receipt o" "un& "ro! e8ternal ource an& the utili-ation o" uch "un& in tran action with non7 re i&ent or other o"" hore banking unit .

Offshore banking unit /"" hore banking unit hall !ean a branch3 ub i&iar. or a""iliate o" a "oreign banking corporation which i &ul. authori-e& b. the Central Bank to tran act o"" hore banking bu ine in the 1hilippine .

"eposits #epo it hall !ean "un& in "oreign currencie which are accepte& an& hel& b. an o"" hore banking unit in the regular cour e o" bu ine 3 with the obligation to return an e9ui(alent a!ount to the owner thereo"3 with or without intere t.

53
B ANKING LAWS

54
B ANKING LAWS
$ho are #ualified to opera t e an offshore banking unit7 /nl. bank which are organi-e& un&er an. law other than tho e o" the Republic o" the 1hilippine 3 their branche 3 ub i&iarie or a""iliate 3 hall be 9uali"ie& to operate o"" hore banking unit in the 1hilippine . $ocal branche o" "oreign bank alrea&. authori-e& to accept "oreign currenc. &epo it un&er RA 62,6 !a. opt to appl. "or authorit. to operate an o"" hore banking unit un&er 1# )+32. 4owe(er3 upon their receipt o" a corre pon&ing certi"icate o" authorit. to operate a an o"" hore banking unit3 the licen e to tran act bu ine un&er RA 62,6 hall be &ee!e& auto!aticall. with&rawn.

.ertificat e of authori t y to opera t e The @onetar. Boar& i authori-e& to i o"" hore banking unit . ue certi"icate o" authorit. to operate

In i uing uch certi"icate3 the @onetar. Boar& the applicant; 5 ). ,. 3. 2. 5. 6. li9ui&it. an& ol(enc. po itionC net worth an& re ource C !anage!entC international banking e8perti eC

hall take into con i&eration

contribution to the 1hilippine econo!.C an& other rele(ant "actor uch a participation in e9uit. o" co!!ercial bank an& appropriate geographic repre entation. local

The Central Bank i authori-e& to collect a "ee o" not le than '0 I,+3+++ upon i uing an. certi"icate o" authorit. to operate an& annuall. therea"ter on the anni(er ar. &ate o" uch certi"icate.

.orporat e under t a ki ng No application to operate a an o"" hore banking unit hall be con i&ere& unle the applicant hall ha(e "ir t ub!itte& to the Central Bank a worn un&ertaking o" it hea& o""ice or parent or hol&ing co!pan.3 &ul. upporte&

55
B ANKING LAWS
b. an appropriate re olution o" it thing 5 ). boar& o" &irector 3 that3 a!ong other

it will3 on &e!an&3 pro(i&e the nece ar. peci"ie& currencie li9ui&it. nee& that !a. ari e or other hort"all that it banking unit !a. incurC the operation o" it an& with pru&enceC o"" hore banking unit hall be !anage&

to co(er o"" hore

,.

oun&l.

3.

it will train an& continuall. e&ucate a peci"ic nu!ber o" %ilipino in international banking an& "oreign e8change tra&ing with a (iew to re&ucing the nu!ber o" e8patriate C it will pro(i&e an& !aintain in it o"" hore banking unit net o""ice "un& in the !ini!u! a!ount o" '0 I )3+++3+++C an& it will tart operation o" it o"" hore banking unit within )<+ &a. receipt o" it certi"icate o" authorit. to operate uch unit. "ro!

2.

5.

Transactions of offshore banking units Tran action o" o"" hore banking unit with non7 re i&ent or with other o"" hore banking unit hall be "reel. allowe&3 but a"eguar& will be e tabli he& to pre(ent circu!(ention o" "oreign e8change regulation . Tran action o" o"" hore banking unit with re i&ent o" the 1hilippine 3 inclu&ing tho e with local co!!ercial bank an& local branche o" "oreign bank authori-e& to recei(e "oreign currenc. &epo it un&er RA 62,63 hall be ub?ect to applicable law an& regulation .

Ta* and other incentives The pro(i ion o" an. law to the contrar. notwith tan&ing3 the tran action o" o"" hore banking unit with non7 re i&ent an& other o"" hore banking unit hall be ub?ect to a "i(e percent A5EB ta8 on the net inco!e "ro! uch tran action which hall be in lieu o" all ta8e on the ai& tran action . The tran action o" o"" hore banking unit with local co!!ercial bank 3 inclu&ing branche o" "oreign bank that !a. be authori-e& b. the Central Bank to tran act bu ine with o"" hore banking unit 3 hall likewi e be ub?ect to the a!e ta83 e8cept net inco!e "ro! uch tran action a !a. be peci"ie& b. the 0ecretar. o" %inance3 upon reco!!en&ation o" the

56
B ANKING LAWS
@onetar. Boar&3 to be ub?ect to the u ual inco!e ta8 pa.able b. bank . An. inco!e o" non7 re i&ent "ro! tran action unit hall be e8e!pt "ro! an. ta8. with ai& o"" hore banking

In the ca e o" tran action with re i&ent Aother than other o"" hore banking unit or local co!!ercial bank inclu&ing local branche o" "oreign bank that !a. be authori-e& b. the Central Bank to tran act bu ine with o"" hore banking unit B3 intere t inco!e "ro! loan grante& to uch re i&ent hall be ub?ect onl. to a ten percent A)+EB withhol&ing ta8 a "inal ta8.

-ffect of certain laws The ' ur. $aw3 'ni"or! Currenc. $aw3 an& 1#IC law hall not appl. to tran action an&Dor &epo it in o"" hore banking unit in the 1hilippine . The pro(i ion o" RA )2+5 or the $aw on 0ecrec. o" Bank #epo it to &epo it in o"" hore banking unit . hall appl.

F OREIGN C&RRENCY D EPOSIT A CT

Republic Act No. 62,63 a a!en&e& An act in tituting a "oreign currenc. &epo it purpo e Appro(e& +2 April )*72 &uthori t y to deposit foreign currencies An. per on3 natural or ?uri&ical3 !a. &epo it with uch 1hilippine bank in goo& tan&ing3 a !a. upon application be &e ignate& b. the Central Bank "or the purpo e3 "oreign currencie which are acceptable a part o" the international re er(e. . te! in the 1hilippine an& "or other

-*ception %oreign currencie which are re9uire& b. the Central Bank to be urren&ere& in accor&ance with the pro(i ion o" RA 7653 !a. not be &epo ite&.

&uthori t y of the banks to accept foreign currency deposits The bank &e ignate& b. the Central Bank hall ha(e the authorit.5

57
B ANKING LAWS

). ,. 3. 2.

To accept &epo it To i ue certi"icate

an& to accept "oreign currencie to e(i&ence uch &epo it C

in tru tC

To &i count

ai& certi"icate C

To accept ai& &epo it a collateral "or loan ub?ect to uch rule an& regulation a !a. be pro!ulgate& b. the Central BankC an& To pa. intere t in "oreign currenc. on uch &epo it .

5.

Foreign currency cover re#uire m e n t s #epo itar. bank hall !aintain at all ti!e a one hun&re& percent A)++EB "oreign currenc. co(er "or their liabilitie 3 e8cept a the @onetar. Boar& !a. otherwi e pre cribe or allow. At lea t "i"teen percent A)5EB o" uch co(er hall be in the "or! o" "oreign currenc. &epo it with the Central Bank an& the balance in the "or! o" "oreign currenc. loan or ecuritie 3 which loan or ecuritie hall be o" hort ter! !aturitie an& rea&il. !arketable. %oreign currenc. co(er hall be in the a!e currenc. a that o" the corre pon&ing "oreign currenc. &epo it liabilit.3 unle the @onetar. Boar& !a. otherwi e pre cribe or allow. The Central Bank !a. pa. intere t on the "oreign currenc. &epo it3 an& i" re9ue te&3 hall e8change the "oreign currenc. note an& coin into "oreign currenc. in tru!ent &rawn on it &epo itar. bank . Central Bank !a. e8e!pt "ro! the )5E "oreign currenc. co(er in the "or! o" "oreign currenc. &epo it with the Central Bank in ca e o" &epo itor. bank which3 on account o" their net worth3 re ource 3 pa t per"or!ance3 or other pertinent criteria3 ha(e been 9uali"ie& b. the @onetar. Boar& to "unction un&er an e8pan&e& "oreign currenc. &epo it . te!. 0ai& bank !a. al o be e8e!pt "ro! the li!itation on the !aturit. perio& "or loan an& ecuritie ub?ect to prior appro(al b. the Central Bank.

$ithdr a w a bi li t y and transfer a bili t y of deposits There hall be no re triction on the with&rawal b. the &epo itor o" hi &epo it

58
B ANKING LAWS
or on the tran "erabilit. o" the a!e abroa& e8cept tho e ari ing "ro! the contract between the &epo itor an& the bank.

5!
B ANKING LAWS
Ta* e*em p t ion All "oreign currenc. &epo it !a&e un&er RA 62,63 a a!en&e&3 a well a "oreign currenc. &epo it authori-e& un&er 1# )3+23 inclu&ing intere t an& all other inco!e or earning o" uch &epo it 3 are hereb. e8e!pte& "ro! an. an& all ta8e what oe(er irre pecti(e o" whether or not the e &epo it are !a&e b. re i&ent or non7 re i&ent o long a the &epo it are eligible or allowe& un&er the ai& law an&3 in the ca e o" non7 re i&ent 3 irre pecti(e o" whether or not the. are engage& in tra&e or bu ine in the 1hilippine .

Secrecy of foreign currency deposits All "oreign currenc. &epo it authori-e& un&er RA 62,63 a a!en&e& b. 1# )3+53 a well a "oreign currenc. &epo it authori-e& un&er 1# )+323 are hereb. &eclare& a an& con i&ere& o" an ab olutel. con"i&ential nature an&3 e8cept upon the written per!i ion o" the &epo itor3 in no in tance hall "oreign currenc. &epo it be e8a!ine&3 in9uire& or looke& into b. an. per on3 go(ern!ent o""icial3 bureau or entit. whether public or pri(ate. 'nlike the $aw on 0ecrec. o" Bank #epo it Act3 there i onl. one e8ception "or "oreign currenc. &epo it an& that i when there i a written per!i ion "ro! the &epo itor.

-*emption from att achm e n t ( garnishm e n t and other process %oreign currenc. &epo it hall be e8e!pt "ro! attach!ent3 garni h!ent3 or an. other or&er or proce o" an. court3 legi lati(e bo&.3 go(ern!ent agenc.3 or an. a&!ini trati(e bo&. what oe(er.

Salvacion v .entr al Bank of the ,hilippines

,7< 0CRA ,7 FACTS 5 Greg Bartelli3 an A!erican touri t3 wa arre te& "or co!!itting "our count o" rape an& eriou illegal &etention again t Jaren 0al(acion. 1olice reco(ere& "ro! hi! e(eral &ollar check an& a &ollar account in the China Banking Corp. 4e wa 3 howe(er3 able to e cape "ro! pri on. In a ci(il ca e "ile& again t hi!3 the trial court awar&e& 0al(acion !oral3 e8e!plar. an& attorne.; "ee a!ounting to al!o t 1)3+++3+++.++. 0al(acion trie& to e8ecute the ?u&g!ent on the &ollar &epo it o" Bartelli with the China Banking Corp. but the latter re"u e& arguing that 0ection )) o" Central Bank Circular No. *6+ e8e!pt "oreign currenc. &epo it "ro! attach!ent3 garni h!ent3 or an. other

6#
B ANKING LAWS

or&er or proce o" an. court3 legi lati(e bo&.3 go(ern!ent agenc. or an. a&!ini trati(e bo&. what oe(er. 0al(acion there"ore "ile& thi action "or &eclarator. relie" in the 0upre!e Court.

ISS&E 5 0houl& 0ection ))3 o" Central Bank Circular No. *6+ an& 0ection < o" Republic Act No. 62,63 a a!en&e& b. 1# ),263 otherwi e known a the %oreign Currenc. #epo it Act be !a&e applicable to a "oreign tran ientK ELD 5The pro(i ion o" 0ection ))3 o" Central Bank Circular No. *6+ an& 1# No. ),263 in o"ar a it a!en& 0ection < o" Republic Act No. 62,63 are hereb. hel& to be INA11$ICAB$E to thi ca e becau e o" it peculiar circu! tance . Re pon&ent are hereb. re9uire& to co!pl. with the writ o" e8ecution i ue& in the ci(il ca e an& to relea e to petitioner the &ollar &epo it o" Bartelli in uch a!ount a woul& ati ". the ?u&g!ent. RATIO 5 0upre!e Court rule& that the 9ue tione& law !ake "utile the "a(orable ?u&g!ent an& awar& o" &a!age that 0al(acion an& her parent "ull. &e er(e. It then procee&e& to how that the econo!ic ba i "or the enact!ent o" RA No. 62,6 i not an.!ore pre entC an& e(en i" it till e8i t 3 the 9ue tione& law till &enie tho e entitle& to &ue proce o" law "or being unrea onable an& oppre i(e. The intention o" the law !a. be goo& when enacte&. The law "aile& to anticipate the ini9uitou e""ect pro&ucing outright in?u tice an& ine9ualit. uch a the ca e be"ore u . The 0C a&opte& the co!!ent o" the 0olicitor General who argue& that the /"" hore Banking 0. te! an& the %oreign Currenc. #epo it 0. te! were &e igne& to &raw &epo it "ro! "oreign len&er an& in(e tor an&3 ub e9uentl.3 to gi(e the latter protection. 4owe(er3 the "oreign currenc. &epo it !a&e b. a tran ient or a touri t i not the kin& o" &epo it encourage& b. 1# No . )+32 an& )+35 an& gi(en incenti(e an& protection b. ai& law becau e uch &epo itor ta. onl. "or a "ew &a. in the countr. an&3 there"ore3 will !aintain hi &epo it in the bank onl. "or a hort ti!e. Con i&ering that Bartelli i ?u t a touri t or a tran ient3 he i not entitle& to the protection o" 0ection ))3 o" Central Bank Circular No. *6+ an& 1# No. ),26 again t attach!ent3 garni h!ent or other court proce e . %urther3 the 0C ai&5 GIn "ine3 the application o" the law &epen& on the e8tent o" it ?u tice. E(entuall.3 i" we rule that the 9ue tione& 0ection ))3 o" Central Bank Circular No. *6+ which e8e!pt "ro! attach!ent3 garni h!ent3 or an. other or&er or proce o" an. court3 legi lati(e bo&.3 go(ern!ent agenc. or an. a&!ini trati(e bo&. what oe(er3 i applicable to a "oreign tran ient3 in?u tice woul& re ult e peciall. to a citi-en aggrie(e& b. a "oreign gue t like accu e& Greg Bartelli. Thi woul& negate Article )+ o" the New Ci(il Co&e which pro(i&e that Gin ca e o" &oubt in the interpretation or application o" law 3 it i

6"
B ANKING LAWS

pre u!e& that the law!aking bo&. inten&e& right an& ?u tice to pre(ail.H H

"eposit insurance coverage The &epo it un&er RA 62,6 hall be in ure& un&er the pro(i ion o" RA 35*)3 a a!en&e&3 or the Charter o" the 1hilippine #epo it In urance Corporation. In urance pa.!ent hall be in the &epo it are &eno!inate&. a!e currenc. in which the in ure&

A CT CREATING

T E

ILIPPINE

D EPOSIT I NS&RANCE CORPORATION

Republic Act No. 35*) An act e tabli hing the 1hilippine #epo it In urance Corporation3 &e"ining it power an& &utie an& "or other purpo e ,, :une )*63 .reation of ,"I. There i hereb. create& a 1hilippine #epo it In urance 0. te! which hall in ure the &epo it o" all bank which are entitle& to the bene"it o" in urance un&er RA 35*). 1#IC !a. al o be appointe& a recei(er o" a banking in titution.

"eposit The ter! deposit !ean the unpai& balance o" !one. or it e9ui(alent recei(e& b. a bank in the u ual cour e o" bu ine an& "or which it ha gi(en or i oblige& to gi(e cre&it to a co!!ercial3 checking3 a(ing 3 ti!e or thri"t account or which i e(i&ence& b. a pa book3 check an&Dor certi"icate o" &epo it3 printe& or i ue in accor&ance with Central Bank rule an& regulation an& other applicable law 3 together with uch other obligation o" the bank which3 con i tent with banking u age an& practice 3 the Boar& o" #irector hall &eter!ine an& pre cribe b. regulation to be &epo it liabilitie o" the bank. 1ro(i&e& that an. obligation o" a bank which i pa.able at the o""ice o" the bank locate& out i&e o" the 1hilippine hall not be a &epo it "or an. o" the purpo e o" thi Act or inclu&e& a part o" the total &epo it or o" in ure&

62
B ANKING LAWS
&epo it . 1ro(i&e& "urther3 that3 ub?ect to the appro(al o" the Boar& o" #irector 3 an. in ure& bank which i incorporate& un&er the law o" the 1hilippine which !aintain a branch out i&e the 1hilippine !a. elect to inclu&e "or in urance it &epo it obligation pa.able onl. at uch branch.

63
B ANKING LAWS
Insured deposit The ter! insured deposit !ean the net a!ount &ue to an. &epo itor "or &epo it in an in ure& bank Aa"ter &e&ucting o"" et B le an. part thereo" which i in e8ce o" one hun&re& thou an& pe o A1)++3+++B. There"ore3 the !a8i!u! a!ount o" in ure& &epo it "or e(er. &epo itor i onl. 1)++3+++. All the e t.pe o" &epo it are co(ere&5 &e!an&3 a(ing an& ti!e &epo it C i" a &epo itor ha all three t.pe o" account 3 he can onl. reco(er up to 1)++3+++. 4e i con i&ere& a one &epo itor. In &eter!ining uch a!ount &ue to an. &epo itor3 there hall be a&&e& together all &epo it in the bank !aintaine& in the a!e capacit. an& the a!e right "or hi bene"it either in hi own na!e or in the na!e o" other . Bank an& it branche con i&ere& a one unit. The pro(i ion o" an. law to the contrar. notwith tan&ing3 an ownerDhol&er o" an. negotiable certi"icate o" &epo it hall be recogni-e& a a &epo itor entitle& to the right pro(i&e& in thi Act unle hi na!e i regi tere& a ownerDhol&er thereo" in the book o" the i uing bank.

Insurance of deposits in foreign currency #epo it obligation in ure&. in "oreign currenc. o" an. in ure& bank are likewi e

#epo it in urance co(erage an& pa.!ent "or in ure& &epo it !aintaine& in "oreign currencie in a clo e& in ure& bank hall be &eter!ine& in accor&ance with the "ollowing rule 5 ). The &epo it in "oreign currenc. hall be con(erte& into it e9ui(alent a!ount in 1hilippine pe o at the interbank rate obtaining on the &ate the bank wa clo e& or on in ol(enc.3 an& the in urance co(erage hall e8ten& to uch co!pute& a!ount3 but in no ca e to e8cee& 12+3+++ "or each &epo itorC an& The liabilit. o" 1#IC to each &epo itor hall be pa.able in 1hilippine pe o in the a!ount o" in urance co(erage a co!pute& abo(e.

,.

Trust funds The ter! !ean "un& hel& b. an in ure& bank in a "i&uciar. capacit. an& inclu&e3 without being li!ite& to3 "un& a tru tee3 e8ecutor3 a&!ini trator3

64
B ANKING LAWS
guar&ian or agent. Tru t "un& are not con i&ere& a in ure& &epo it .

"eposit insurance coverage The &epo it liabilitie o" an. bank or banking in titution3 which i engage& in the bu ine o" recei(ing &epo it 3 hall be in ure& with the 1#IC. Co(erage i co!pul or..

Termina t ion of insured status Two in tance 5 when it "ail or re"u e to pa. a beco!e in ol(ent. 0houl& an. bank "ail or re"u e to pa. an. a uch bank3 an& houl& the bank not correct &a. a"ter written notice ha been gi(en b. uch bank hall be ter!inate& b. the Boar& e !ent an& when it

e !ent re9uire& to be pai& b. uch "ailure or re"u al within 3+ the 1#IC3 the in ure& tatu o" o" #irector .

The bank hall gi(e written notice o" uch ter!ination to each o" the &epo itor an& the 1#IC hall publi h the notice o" the ter!ination o" the in ure& tatu o" the bank. A"ter the ter!ination o" the in ure& tatu o" the bank3 &epo it o" each &epo itor in the bank3 le all ub e9uent with&rawal "ro! an. &epo it o" uch &epo itor3 hall continue to be in ure& "or a perio& o" *+ &a. .

0nsafe or unsound practices The e re"er to an. action or lack o" action which i contrar. to generall. accepte& tan&ar& o" pru&ent operation3 the po ible con e9uence o" which3 i" continue&3 woul& re ult in abnor!al ri k o" lo or &a!age to a bank3 &epo itor an& it harehol&er or e(en the &epletion o" the In urance %un& a&!ini tere& b. the 1#IC.

.ease and desist order 3."O5 A cea e an& &e i t or&er hall re"er to the /r&er i ue& b. 1#IC3 through it Boar& o" #irector 3 to a !e!ber in ure& bank3 or it &irector or agent to correct AaB un a"e or un oun& practice in con&ucting the bu ine o" the bank3 AbB (iolation o" an. law or regulation to which the in ure& bank i

65
B ANKING LAWS
ub?ect3 or AcB (iolation o" the pro(i ion o" RA 35*)3 a a!en&e& or an. or&er3 rule or in truction i ue& b. the 1#IC or an. written con&ition i!po e& b. 1#IC in connection with an. tran action with or grant b. the 1#IC. The ob?ect o" the C#/ i to protect &epo itor an& the 1#IC again t e8i ting or potential ri k e8po ure "ro! ai& practice or (iolation .

,aymen t of insured deposit An in ure& bank hall be &ee!e& clo e& on account o" in ol(enc. when or&ere& clo e& b. the @onetar. Boar&. 6hene(er an in ure& bank hall ha(e been clo e& on account o" in ol(enc.3 pa.!ent o" in ure& &epo it in uch bank hall be !a&e b. 1#IC a oon a po ible either A)B b. ca h or A,B !aking a(ailable to each &epo itor a tran "erre& &epo it in another in ure& bank in an a!ount e9ual to the in ure& &epo it o" uch &epo itor. 1roo" o" clai! !a. be re9uire& b. 1#IC be"ore pa.!ent. I" it i not ati "ie&3 1#IC !a. re9uire the "inal &eter!ination o" a court o" co!petent ?uri &iction be"ore pa.ing uch clai!. #epo itor hall retain hi clai! again t the bank "or an. unin ure& portion o" hi &epo it.

Bar of claim by depositor I"3 a"ter the 1#IC hall ha(e gi(en at lea t three !onth ; notice to the &epo itor b. !ailing a cop. thereo" to hi la t known a&&re appearing on the recor& o" the clo e& bank3 the &epo itor in the clo e& bank hall "ail to "ile a clai! "or hi in ure& &epo it "ro! the 1#IC within eighteen A)<B !onth a"ter the @onetar. Boar& hall ha(e or&ere& the clo ure o" ai& bank3 all right o" the &epo itor again t the 1#IC with re pect to the in ure& &epo it hall be barre&3 an& all right o" the &epo itor again t the clo e& bank an& it harehol&er or the recei(er hip e tate to which the 1#IC !a. ha(e beco!e ubrogate&3 hall thereupon re(ert to the &epo itor. 1ro(i&e&3 that the clai!ant hall en"orce hi &ul. "ile& clai! again t the 1#IC within one .ear a"ter the eighteen7 !onth perio& hereto"ore !entione&.

Subrogat ion The 1#IC3 upon pa.!ent3 hall be ubrogate& to all right o" the &epo itor

66
B ANKING LAWS
again t the clo e& bank to the e8tent o" uch pa.!ent. 1a.!ent ta8e . !a&e b. 1#IC hall be con i&ere& a a pre"erre& cre&it i!ilar to

67
B ANKING LAWS
"ischarge of the ,"I. The 1#IC hall be &i charge& "ro! it obligation to a &epo itor upon pa.!ent o" an in ure& &epo it b. it el" or upon pa.!ent o" a tran "erre& &epo it to an. per on b. the new bank or b. an in ure& bank in which a tran "erre& &epo it ha been !a&e a(ailable.

Other powers of ,"I. ). ,. 1ro(i&e "inancial a i tance to an in ure& bank in &anger o" clo ing.

Borrow "ro! the Central Bank an& "ro! an. bank &e ignate& a &epo itor. or "i cal agent o" the 1hilippine Go(ern!ent. I ue bon& 3 &ebenture an& other obligation 1re i&ent o" the 1hilippine . Act a recei(er o" an. banking corporation. with the appro(al o" the

3.

2.

%eceiver Recei(er inclu&e a recei(er3 co!!i ion3 per on3 or other agenc. charge& b. law with the &ut. to take charge o" the a et an& liabilitie o" a bank which ha been "orbi&&en "ro! &oing bu ine in the 1hilippine 3 a well a the &ut. to gather3 pre er(e3 an& a&!ini ter uch a et an& liabilitie "or the bene"it o" the &epo itor an& cre&itor o" ai& bank3 an& to continue into li9ui&ation whene(er authori-e& un&er RA 35*)3 a a!en&e&3 or other law 3 an& to &i po e o" the a et an& to win& up the a""air o" uch bank.

T R&T

IN

LENDING A CT
in connection with e8ten ion o"

Republic Act No. 3765 An act to re9uire the &i clo ure o" "inance charge cre&it Appro(e& ,, :une )*63 "eclarat ion of policy

It i hereb. &eclare& to be the polic. o" the 0tate to protect it citi-en "ro! a lack o" awarene o" the true co t o" cre&it to the u er b. a uring a "ull &i clo ure o" uch co t with a (iew o" pre(enting the unin"or!e& u e o" cre&it to the &etri!ent o" the national econo!..

68
B ANKING LAWS

Finance charge !inance charge inclu&e intere t3 "ee 3 er(ice charge other charge inci&ent to the e8ten ion o" cre&it. &i count 3 an& uch

.redit 'redit !ean an. loan3 !ortgage3 &ee& o" tru t3 a&(ance3 or &i countC an. con&itional ale contractC an. contract to ell3 or ale or contract o" ale o" propert. or er(ice 3 either "or pre ent or "uture &eli(er.3 un&er which part or all o" the price i pa.able ub e9uent to the !aking o" uch ale or contractC an. rental purcha e contractC an. contract or arrange!ent "or the hire3 bail!ent3 or lea ing o" propert.C an. option3 &e!an&3 lien3 ple&ge o" other clai! again t3 or "or the &eli(er. o"3 propert. or !one.C an. purcha e3 or other ac9ui ition o"3 or an. cre&it upon the ecurit. o"3 an. obligation or clai! ari ing out o" an. o" the "oregoingC an& an. tran action or erie o" tran action ha(ing a i!ilar purpo e or e""ect.

.reditor 'reditor !ean an. per on engage& in the bu ine o" e8ten&ing cre&it Ainclu&ing an. per on who3 a a regular bu ine practice3 !ake loan or ell or rent propert. or er(ice on a ti!e3 cre&it3 or in tall!ent ba i 3 either a principal or a agentB who re9uire a an inci&ent to the e8ten ion o" cre&it the pa.!ent o" a "inance charge.

"isclosure of finance charges An. cre&itor hall "urni h to each per on to who! cre&it i e8ten&e&3 prior to the con u!!ation o" tran action3 a clear tate!ent in writing etting "orth the "ollowing in"or!ation5 ). the ca h price or &eli(ere& price o" the propert. or er(ice to be ac9uire&C the a!ount 3 i" an.3 to be cre&ite& a &ownpa.!ent an&Dor tra&e inC the &i""erence between the a!ount A,BC et "orth un&er clau e A)B an&

,. 3.

2.

the charge 3 in&i(i&uall. ite!i-e&3 which are pai& or to be pai& b. uch per on in connection with the tran action but which are not inci&ent to

6!
B ANKING LAWS
the e8ten ion o" cre&itC 5. 6. 7. the total a!ount to be "inance&C the "inance charge e8pre e& in ter! o" pe o an& centa(o C an&

the percentage that the "inance charge bear to the total a!ount to be "inance& e8pre e& a a i!ple annual rate on the out tan&ing unpai& balance o" the obligation.

,enalty for failure to disclose prescribed infor m a t i on An. cre&itor who3 in connection with an. cre&it tran action3 "ail to &i clo e to an. per on an. in"or!ation in (iolation o" Republic Act No. 3765 or an. regulation i ue& pur uant thereto hall be liable to uch per on in the a!ount o" 1)++ or in an a!ount e9ual to twice the "inance charge re9uire& b. uch cre&itor in connection with uch tran action3 whiche(er i greater3 e8cept that uch liabilit. hall not e8cee& 1,+++ on an. cre&it tran action.

&ction to recover such penal ty Action to reco(er uch penalt. !a. be brought b. uch per on within one .ear "ro! the &ate o" occurrence o" the (iolation in an. court o" co!petent ?uri &iction. In an. uch action in which an. per on i entitle& to a reco(er.3 the cre&itor hall be liable "or rea onable attorne.; "ee an& court co t a &eter!ine& b. the court.

-ffect of non) disclosure on contr act or transaction It hall not a""ect the (ali&it. or en"orceabilit. o" an. contract or tran action.

$illful violation of the law An. per on who will"ull. (iolate an. pro(i ion o" thi Act or an. regulation e8ten&e& thereto hall be "ine& b. not le than 1)+++ nor !ore than 15+++3 or i!pri on!ent "or not le than i8 A6B !onth nor !ore than one .ear3 or both.

.onsolidat e d Bank and Trust .orporat ion v .ourt of &ppeals G.R. No. *)2*23 )2 :ul. )**5

7#
B ANKING LAWS

Bank are allowe& to collect han&ling charge on loan o(er 15++3+++ with a !aturit. o" 73+ &a. or le . 4owe(er3 in the ca e at bar3 Con oli&ate& Bank wa not allowe& to collect "ro! the pri(ate re pon&ent han&ling charge becau e it "aile& to con"or! to the Truth in $en&ing Act. All bank an& non7 bank "inancial inter!e&iarie authori-e& to engage in 9ua i7 banking "unction are re9uire& to trictl. a&here to the pro(i ion o" Republic Act No. 37653 otherwi e known a the Truth in $en&ing Act3 an& hall !ake the true an& e""ecti(e co t o" borrowing an integral part o" e(er. loan contract. The pro!i or. note igne& b. pri(ate re pon&ent &o not contain an. tipulation on the pa.!ent o" han&ling charge . 1etitioner bank3 there"ore3 cannot charge pri(ate re pon&ent uch han&ling charge .

Intern a t i on al 6arvest e r Macleod( Inc v Medina G.R. No. 336,33 ,, @arch )**+
@ariano @e&ina3 :r. purcha e on in tall!ent ,2 truck engine "ro! International 4ar(e ter @acleo&3 Inc. AI4@IB. The latter i!po e& an& collecte& the total u! o" 13,535*6 a "inance charge on the in tall!ent ale a e(i&ence& b. a Retail Note Anal. i an& co(ering tran !ittal letter 3 which were prepare& b. I4@I3 &eli(ere& to3 an& igne& b. @e&ina. In the Retail Note Anal. i 3 I4@I u e& the work G%inance Inco!e 'nearne&3 H G%inance Rate3H GRate per .ear3H GTotal A!ount %inance3H an& G#ate %inance Begun3H to &enote certain entrie therein. The trial court rule& that I4@I i!po e& an& collecte& the a!ount o" 13,535*6 purel. a "inancing charge an& thi i conclu i(e o" the "act that it engage& in the bu ine o" a "inancing co!pan. without authorit. "ro! the 0ecuritie an& E8change Co!!i ion in gro (iolation o" Republic Act No. 5*<+ or the %inance Co!pan. Act. The 0upre!e Court re(er e&3 ruling that I4@I i not engage& in the bu ine "inancing co!pan.. o" a

E(i&entl.3 the "inancing tran action that i regulate& b. Republic Act No. 5*<+ in(ol(e the bu.ing3 &i counting or "actoring o" pro!i or. note an& ale on cre&it or in tall!ent. I4@I &i& not purcha e "ro! it el" the Retail Note Anal. i e8ecute& b. @e&ina. I4@I onl. e8ten&e& cre&it to @e&ina b. allowing hi! to pa. "or the ,2 truck engine in in tall!ent. 6hile the increa e& price o" the ale inclu&e& a G"inancing charge3H that charge wa i!pl. another na!e "or the intere t to be pai& b. the in tall!ent bu.er on the &e"erre& pa.!ent o" the purcha e price o" the (ehicle ol& an& &eli(ere& to hi! b. I4@I. The u e o" the wor& G"inance charge3H G"inancing3 H or G"inance operation H in the &ocu!ent prepare& an& letter ent b. I4@I to @e&ina wa in co!pliance with the Truth in $en&ing Act which re9uire a cre&itor Aor ellerB to "ull. &i clo e to the &ebtor Aor bu.erB the true co t o" cre&it Gwith a (iew o" pre(enting the unin"or!e& u e o" cre&it to the &etri!ent

7"
B ANKING LAWS

o" the national econo!.. H I4@I u e& the wor& G"inance charge H in tea& o" Gintere t H in the Retail Note which it &eli(ere& to @e&ina becau e that i the ter! u e& in the Truth in $en&ing

Anal. i Act.

I4@I correctl. pointe& out that it tran action with @e&ina &i""er "ro! a "inancing tran action un&er Republic Act No. 5*<+ in that there were onl. two partie in it tran action with @e&ina3 na!el.5 I4@I an& @e&inaC while in a "inancing tran action un&er Republic Act No. 5*<+3 there are three partie in(ol(e&3 na!el.5 A)B the in tall!ent bu.erC A,B the ellerC an& A3B the "inancing co!pan.. The bu.er e8ecute a note or note "or the unpai& balance o" the price o" the thing purcha e& b. hi! on in tall!ent. The eller a ign the note or &i count the! with a "inancing co!pan. which i ubrogate& in the place o" the eller a cre&itor o" the in tall!ent bu.er. The tran action between I4@I an& @e&ina &i& not in(ol(e an. &i counting3 "actoring or a ign!ent o" I4@I; cre&it again t @e&ina to a "inance co!pan.. The tran action wa bilateral3 not trilateral. No "inancing co!pan. teppe& into the hoe o" I4@I a a ignee or purcha er o" I4@I; cre&it again t @e&ina. @e&ina hi! el"3 not a "inancing co!pan.3 pai& I4@I "or the truck engine . @e&ina !a&e hi in tall!ent pa.!ent or a!orti-ation to I4@I an& not to a "inancing co!pan.. 0ince I4@I; bu ine o" elling truck in in tall!ent i not the bu ine o" a "inancing co!pan. un&er Republic Act No. 5*<+3 it &i& not nee& 0EC authori-ation to engage in it.

LAW

ON

S ECRECY

OF

B ANK D EPOSITS
with an. banking in titution

Republic Act No. )2+53 a a!en&e& An act prohibiting &i clo ure o" or in9uir. into3 &epo it an& pro(i&ing penalt. there"or ,olicy of the law

It i hereb. &eclare& to be the polic. o" the Go(ern!ent to gi(e encourage!ent to the people to &epo it their !one. in banking in titution an& to &i courage pri(ate hoar&ing o that the a!e !a. be properl. utili-e& b. bank in authori-e& loan to a i t in the econo!ic &e(elop!ent o" the countr.. =0ection )3 RA )2+5>

'ener al rule

72
B ANKING LAWS
All &epo it o" whate(er nature with bank or banking in titution in the 1hilippine inclu&ing in(e t!ent in bon& i ue& b. the Go(ern!ent o" the 1hilippine 3 it political ub&i(i ion an& it in tru!entalitie 3 are hereb. con i&ere& a o" an ab olutel. con"i&ential nature an& !a. not be e8a!ine&3 in9uire& or looke& into b. an. per on3 go(ern!ent o""icial3 bureau or o""ice. =0ection ,3 RA )2+5> It hall be unlaw"ul "or an. o""icial or e!plo.ee o" a bank to &i clo e to an. per on3 other than tho e !entione& in 0ection , hereo"3 an. in"or!ation concerning ai& &epo it . =0ection 33 RA )2+5> -*ceptions ). 'pon written per!i a. b. ,. 3. ion o" the &epo itor3 inclu&ing5

in &eter!ining e tate o" a &ece&entC an& ta8 co!pro!i e ca e C

In ca e o" i!peach!entC 'pon or&er o" a co!petent court in ca e public o""icial C o" briber. or &ereliction o" &ut. o"

2.

In ca e where the !one. &epo ite& or in(e te& i the litigationC an&

ub?ect !atter o" the

5.

Ca e o" une8plaine& wealth un&er Republic Act No. 3+)* or the Anti7 Gra"t an& Corrupt 1ractice Act.

,enalty for violation of law An. (iolation o" thi law will ub?ect o""en&er upon con(iction to an i!pri on!ent o" not !ore than "i(e A5B .ear or a "ine o" not !ore than twent. thou an& pe o A1,+3+++B or both3 in the &i cretion o" the court. =0ection 53 RA )2+5>

Tatalon Barrio .ouncil v .hief &ccount an t ( et al

GR No. )<36+3 3) :anuar. )*63 In thi ca e3 the 0upre!e Court rule& that a(ing an& current account are pri(ilege& &ocu!ent which "all within the protection o" Republic Act No. )2+53 an& their &i clo ure can onl. be ?u ti"ie& un&er an. o" the ca e enu!erate& in 0ection , o" the Act3 which &o

73
B ANKING LAWS

not inclu&e the pro ecution o" cri!inal action "or (iolation o" the pro(i ion o" the Anti7 Gra"t an& Corrupt 1ractice Act an& o" Article ,)6 o" the Re(i e& 1enal Co&e. Thi ha ince been o(erturne& b. the ca e o" ()B $& *ancayco&

,hilippine +ational Bank v 'ancayco

GR No. )<3233 3+ 0epte!ber )*65 FACTS 5 E!ilio Ganca.co an& %lorentino %lor3 a pecial pro ecutor o" the #epart!ent o" :u tice3 re9uire& the 1hilippine National Bank to pro&uce at a hearing the recor& o" the bank &epo it o" Erne to :i!ene-3 "or!er a&!ini trator o" the Agricultural Cre&it an& Cooperati(e A&!ini tration3 who wa then un&er in(e tigation "or une8plaine& wealth. 1NB re"u e& to &i clo e hi bank &epo it 3 in(oking 0ection , o" Republic Act No. )2+5. /n the other han&3 the pro ecutor cite& the Anti7 Gra"t an& Corrupt 1ractice Act3 particularl. 0ection < therewith3 to wit5 G 0ection <. #i !i al &ue to une8plaine& wealth. 7 I" in accor&ance with the pro(i ion o" RA )37*3 a public o""icial ha been "oun& to ha(e ac9uire& &uring hi incu!benc.3 whether in hi na!e or in the na!e o" other per on 3 an a!ount o" propert. an&Dor !one. !ani"e tl. out o" proportion to hi alar. an& to hi other law"ul inco!e3 that "act hall be a groun& "or &i !i al or re!o(al. 1ropertie in the na!e o" the pou e an& un!arrie& chil&ren o" uch public o""icial3 !a. be taken into con i&eration3 when their ac9ui ition through legiti!ate !ean cannot be ati "actoril. hown. Bank deposits shall be taken into consideration in the enforcement of this section, notwithstanding any pro$ision of law to the contrary& 1NB then "ile& an action "or &eclarator. ?u&g!ent in the C%I o" @anila which rule& that 0ection < o" the Anti7 Gra"t an& Corrupt 1ractice Act clearl. inten&e& to pro(i&e an a&&itional groun& "or the e8a!ination o" bank &epo it . 4ence3 thi appeal. ISS&E 5 6hether or not a bank can be co!pelle& to &i clo e the recor& &epo itor who i un&er in(e tigation "or une8plaine& wealthK o" account o" a

ELD 5 Le . Republic Act No. 3+)* pro(i&e& another e8ception to 0ection , o" Republic Act No. )2+5. RATIO 5 No reconciliation i po ible between Republic Act No. )2+5 an& Republic Act No. 3+)* a the two law are o repugnant to each other. Thu 3 while 0ection , o" Republic Act

74
B ANKING LAWS

No. )2+5 pro(i&e that bank &epo it are Gab olutel. con"i&ential M an&3 there"ore3 !a. not be e8a!ine&3 in9uire& or looke& into3H e8cept in tho e ca e enu!erate& therein3 0ection < o" Republic Act No. 3+)* AAnti7 gra"t lawB &irect in !an&ator. ter! that bank &epo it G hall be taken into con i&eration in the en"orce!ent o" thi ection3 notwith tan&ing an. pro(i ion o" law to the contrar.. H The onl. conclu ion po ible i that 0ection < o" the Anti7 Gra"t $aw i inten&e& to a!en& 0ection , o" Republic Act No. )2+5 b. pro(i&ing an a&&itional e8ception to the rule again t the &i clo ure o" bank &epo it . 6ith regar& to the clai! that &i clo ure woul& be contrar. to the polic. !aking bank &epo it con"i&ential3 it i enough to point out that while 0ection , o" Republic Act No. )2+5 &eclare bank &epo it to be Gab olutel. con"i&ential3H it ne(erthele allow uch &i clo ure in the "ollowing in tance 5 A)B 'pon written per!i ion o" the &epo itorC A,B In ca e o" i!peach!entC A3B 'pon or&er o" a co!petent court in ca e o" briber. or &ereliction o" &ut. o" public o""icial C A2B In ca e where the !one. &epo ite& i the ub?ect o" the litigation. Ca e o" une8plaine& wealth are i!ilar to ca e o" briber. or &ereliction o" &ut. an& no rea on i een wh. the e two cla e o" ca e cannot be e8cepte& "ro! the rule !aking bank &epo it con"i&ential. The polic. a to one cannot be &i""erent "ro! the polic. a to the other. Thi polic. e8pre e the notion that a public o""ice i a public tru t an& an. per on who enter upon it &i charge &oe o with the "ull knowle&ge that hi li"e3 o "ar a rele(ant to hi &ut.3 i open to public crutin..

Banco Filipino Savings and Mort ga g e Bank v ,urisima

GR No. 562,*3 ,< @a. )*<< The Bureau o" Internal Re(enue accu e& Cu to! pecial agent @anuel Caturla be"ore the Tano&ba.an o" ha(ing illegal ac9uire& propert. !ani"e tl. out o" proportion to hi alar. an& other law"ul inco!e. #uring the preli!inar. in(e tigation3 the Tano&ba.an i ue& a ubpoena &uce tecu! to the Banco %ilipino 0a(ing an& @ortgage Bank3 co!!an&ing it repre entati(e to appear at a peci"ie& ti!e at the /""ice o" the Tano&ba.an an& "urni h the latter with &ul. certi"ie& copie o" the recor& in all it branche an& e8ten ion o""ice o" the loan 3 a(ing an& ti!e &epo it an& other banking tran action 3 in the na!e o" Caturla3 hi wi"e3 1urita3 their chil&ren3 an&Dor 1e&ro E cu.o . Caturla !o(e& to 9ua h the ubpoena "or (iolating 0ection , an& 3 o" RA )2+5 which wa &enie& b. the Tano&ba.an. In "act3 the Tano&ba.an i ue& another ubpoena which e8pan&e& it cope inclu&ing the pro&uction o" bank recor& not onl. o" the per on enu!erate& abo(e but o" a&&itional per on an& entitie a well. The Banco %ilipino "ile& an action "or &eclarator. relie" with the C%I o" @anila which wa &enie& b. the lower court. Thu thi pecial ci(il action o" certiorari in the 0C.

75
B ANKING LAWS

The i ue here i whether or not the $aw on 0ecrec. o" Bank #epo it preclu&e pro&uction b. subpoena duces tecum o" bank recor& o" tran action b. or in the na!e o" the wi"e3 chil&ren an& "rien& o" a pecial agent o" the Bureau o" Cu to! accu e& be"ore the Tano&ba.an o" ha(ing allege&l. ac9uire& propert. !ani"e tl. out o" proportion to hi alar. an& other law"ul inco!e in (iolation o" RA 3+)*K The 0upre!e Court rule& in the negati(e. In ()B $& *ancayco 3 we rule& that5 while #ection + of "epublic ,ct )o& -./0 pro$ides that bank deposits are absolutely confidential % and, therefore, may not be examined, in1uired or looked into, except in those cases enumerated therein, #ection 2 of "epublic ,ct )o& 3/-4 5,nti- graft law6 directs in mandatory terms that bank deposits shall be taken into consideration in the enforcement of this section, notwithstanding any pro$ision of law to the contrary& 7he only conclusion possible is that #ection 2 of the ,nti*raft 8aw is intended to amend #ection + of "epublic ,ct )o& -./0 by pro$iding an additional exception to the rule against the disclosure of bank deposits& The in9uir. into illegall. ac9uire& propert. 7 or propert. not legiti!atel. ac9uire& 7 e8ten& to ca e where uch propert. i conceale& b. being hel& b. or recor&e& in the na!e o" other per on . Thi propo ition i !a&e clear b. RA 3+)* which 9uite categoricall. tate that the ter! Glegiti!atel. ac9uire& propert. o" a public o""icer or e!plo.ee hall not inclu&e M propert. unlaw"ull. ac9uire& b. the re pon&ent3 but it owner hip i conceale& b. it being recor&e& in the na!e o"3 o" hel& b.3 re pon&ent; pou e3 a cen&ant 3 &e cen&ant 3 relati(e or an. other per on . To u tain the petitioner; theor.3 an& re trict the in9uir. onl. to propert. hel& b. or in the na!e o" the go(ern!ent o""icial or e!plo.ee3 or hi pou e an& un!arrie& chil&ren i unwarrante& in the light o" the pro(i ion o" the tatute in 9ue tion3 an& woul& !ake a(ailable to per on in go(ern!ent who illegall. ac9uire propert. an ea . an& "ool7 proo" !ean o" e(a&ing in(e tigation an& pro ecutionC all the. ha(e to &o woul& be to i!pl. place the propert. in the po e ion or na!e o" per on other than their pou e an& un!arrie& chil&ren. Thi i an ab ur&it. that we will not a cribe to the law!aker .

,hilippine .ommercial 8 Industri al Bank( et al v .ourt of &ppeals( et al

GR no. <25,63 ,< :anuar. )**) A group o" laborer obtaine& a "a(orable ?u&g!ent again t the @arin&u9ue @ining an& In&u trial Corporation "or the pa.!ent o" backwage a!ounting to 1,+53<53 be"ore the National $abor Relation Co!!i ion. A writ o" e8ecution wa i ue& an& the #eput. 0heri"" er(e& the writ3 but it wa un ati "ie&. The heri"" prepare& on hi own a Notice o" Garni h!ent a&&re e& to i8 bank in Bacolo& Cit.3 inclu&ing petitioner 1CIB3 &irecting the bank concerne& to i ue a check in ati "action o" the ?u&g!ent.

76
B ANKING LAWS

6hile the in hou e law.er o" the Corporation warne& the 1CIB to withhol& an. relea e o" it &epo it with the bank3 the bank i ue& a !anager; check in the a!ount o" 1373266 which wa the e8act balance o" the pri(ate re pon&ent; account a o" that &a.. The ai& check wa al o enca he& b. the heri"" the ne8t &a.. @arin&u9ue @ining thu "ile& a co!plaint be"ore the RTC o" @anila again t 1CIB an& the &eput. heri""3 alleging that it current &epo it with the petitioner bank wa le(ie& upon3 garni he&3 an& with un&ue ha te unlaw"ull. allowe& to be with&rawn3 an& notwith tan&ing the allege& unauthori-e& &i clo ure o" the ai& current &epo it an& unlaw"ul relea e thereo"3 the latter ha(e "aile& an& re"u e& to re tore the a!ount o" 1373266 to the "or!er; account &e pite repeate& &e!an& . Trial court ren&ere& ?u&g!ent in "a(or o" @arin&u9ue @ining Corporation. /n appeal3 the Court o" Appeal initiall. re(er e& the trial court; or&er but later a""ir!e& it. Thu 3 thi petition to the 0C. The i ue i whether or not the petitioner (iolate& RA )2+53 otherwi e known a the 0ecrec. o" Bank #epo it Act3 when the. allowe& the heri"" to garni h the &epo it o" @arin&u9ue @ining CorporationK 0C hel& no. The 0C "ir t rule& that the relea e o" the &epo it b. the bank wa not &one in un&ue an& in&ecent ha te. 6e "in& the i!!e&iate relea e o" the "un& b. the petitioner bank on the trength o" the notice o" garni h!ent an& writ o" e8ecution3 who e i uance3 ab ent an. patent &e"ect3 en?o. the pre u!ption o" regularit.. The 0C likewi e &i& not "in& an. (iolation what oe(er b. the petitioner o" RA )2+53 otherwi e known a the 0ecrec. o" Bank #epo it Act. The Court3 in 'hina Banking 'orporation $& 9rtega 3 ha& the occa ion to &i po e o" thi i ue when it tate&3 to wit5 :t is clear from the discussion of the conference committee report on #enate Bill )o& 30- and ;ouse Bill )o& 34<<, which later became "epublic ,ct )o& -./0, that the prohibition against examination of or in1uiry into a bank deposit under "epublic ,ct )o& -./0 does not preclude its being garnished to insure satisfaction of a =udgment& :ndeed, there is no real in1uiry in such a case, and if existence of the deposit is disclosed, the disclosure is purely incidental to the execution process& :t is hard to concei$e that it was e$er within the intention of 'ongress to enable debtors to e$ade payment of their =ust debts, e$en if ordered by the 'ourt, through the expedient of con$erting their assets into cash and depositing the same in a bank& 0ince there i no e(i&ence that the petitioner the! el(e &i(ulge& the in"or!ation that the pri(ate re pon&ent ha& an account with the petitioner bank an& it i un&i pute& that the ai& account wa properl. the ob?ect o" the notice o" garni h!ent an& writ o"

77
B ANKING LAWS

e8ecution carrie& out b. the &eput. heri""3 a &ul. authori-e& o""icer o" the court3 we cannot there"ore hol& the petitioner liable un&er RA )2+5.

Mellon Bank v Magsino et al

GR No. 7)27*3 )< /ctober )**+ Thi ca e in(ol(e the erroneou tran "er o" '0 I)3+++3+++ to Nictoria :a(ier in tea& o" '0 I)3+++ onl.. #olore Nento a re9ue te& the tran "er o" I)+++ "ro! the %ir t National Bank o" 6e t Nirginia3 '0A to Nictoria :a(ier in @anila through the 1ru&ential Bank. Accor&ingl.3 the %ir t National Bank re9ue te& the petitioner3 @ellon Bank3 to e""ect the tran "er. 'n"ortunatel.3 the wire ent b. @ellon Bank to @anu"acturer 4ano(er Bank3 a corre pon&ent o" 1ru&ential Bank3 in&icate& the a!ount tran "erre& a G'0 I)3+++3+++.++ H in tea& o" '0 I)3+++.++. 4ence3 @anu"acturer 4ano(er Bank tran "erre& one !illion &ollar le bank charge o" I6.3+ to the 1ru&ential Bank "or the account o" Nictoria :a(ier. :a(ier opene& a new &ollar account in 1ru&ential Bank an& &epo ite& I***3*23. I!!e&iatel.3 therea"ter3 :a(ier an& her hu ban& !a&e with&rawal "ro! the account3 &epo ite& the! in e(eral bank onl. to with&raw the! later in an apparent plan to conceal3 laun&er an& &i ipate the erroneou l. ent a!ount. /ne o" the thing the. bought wa real propert. in Cali"ornia3 '0A which wa the ub?ect o" an action "or reco(er. b. @ellon Bank. $ater3 it "ile& a ca e in the 1hilippine "or the reco(er. o" the whole a!ount3 inclu&ing the purcha e price o" the real propert. locate& in the '0. A!ong other thing 3 pri(ate re pon&ent rai e& the i ue o" whether or not3 b. (irtue o" the principle o" election o" re!e&ie 3 an action "ile& in Cali"ornia3 '0A3 to reco(er real propert. locate& therein an& to con titute a con tructi(e tru t on ai& propert. preclu&e the "iling in our ?uri &iction o" an action to reco(er the purcha e price o" ai& real propert.. 0C rule& that the "iling o" a reco(er. uit in the '0 &oe not preclu&e the "iling o" an action in the 1hilippine "or the reco(er. o" the purcha e price. 6ith regar& to our ub?ect !atter3 Erlin&a Ba.lo i o" the 1hilippine Neteran; Bank an& 1ilologo Re&3 :r. o" 4ongkong an& 0hanghai Banking Corporation were re9uire& to gi(e te ti!onie with regar& to the &epo it an& check i ue& b. the pri(ate re pon&ent :a(ier3 et. al.. The e te ti!onie were 9ue tione& "or being i!!aterial an& irrele(ant a well a co(ere& b. RA )2+5 on con"i&entialit.. 0C ai&5 1ri(ate re pon&ent ; prote tation that to allow the 9ue tione& te ti!onie to re!ain on recor& woul& be in (iolation o" the pro(i ion o" RA )2+5 on the ecrec. o" bank &epo it i un"oun&e&. 0ection , o" ai& law allow the &i clo ure o" bank &epo it in ca e where the !one. &epo ite& i the ub?ect !atter o" the litigation. Ina !uch a the ci(il ca e i ai!e& at reco(ering the a!ount con(erte& b. the :a(ier "or their own bene"it3 nece aril.3 an in9uir. into the whereabout o" the illegall. ac9uire& a!ount e8ten& to whate(er i conceale& b. being hel& or recor&e& in the na!e o" per on other than the one

78
B ANKING LAWS

re pon ible "or the illegal ac9ui ition.

7!
B ANKING LAWS

N ON )BANK F INANCIAL I NTERMEDIARIES

N ON )B ANK F INANCIAL I NTERMEDIARIES
). The In(e t!ent 4ou e $aw 1re . #ecree ),* In(e t!ent Co!pan. Act Republic Act No. ,6,* %inancing Co!pan. Act Republic Act No. 55<+3 a a!en&e& 1awn hop 1re . #ecree No. ))2 Tru t Corporation Chapter NII3 General Banking Act

,.

3.

2.

5.

E I NVESTMENT

O&SES

LAW

1re i&ential #ecree No. ),* Go(erning the e tabli h!ent3 operation an& regulation o" In(e t!ent 4ou e )5 %ebruar. )*73 Invest m e n t houses An in(e t!ent hou e i an. enterpri e which engage ecuritie o" other corporation . in the un&erwriting o"

'n&er it Rule an& Regulation 3 an in(e t!ent hou e i &e"ine& an Gan. enterpri e which engage or purport to engage3 whether regularl. or on an i olate& ba i 3 in the un&erwriting o" ecuritie o" another per on or enterpri e3 inclu&ing ecuritie o" the Go(ern!ent an& it in tru!entalitie .

0nder w ri t i n g 'n&erwriting i the act or proce o" guaranteeing the &i tribution an& ale within the 1hilippine o" ecuritie o" an. kin& i ue& b. another corporation. The &i tribution an& ale !a. be on public or pri(ate place!ent ba i .

8#
B ANKING LAWS

,rivat e placem e n t Re"er to the un&erwritten enterpri e . ale o" ecuritie to le than ,+ per on or

,ublic placem e n t Re"er to the un&erwritten enterpri e . ale o" ecuritie to at lea t ,+ per on or

Organi1a ti on and citi1enship re#uire m e n t s In(e t!ent 4ou e hall be organi-e& in the "or! o" tock corporation .

At lea t "ort. percent A2+EB o" the (oting tock o" an. In(e t!ent 4ou e hall be owne& b. citi-en o" the 1hilippine . In &eter!ining the percentage o" "oreign7 owne& (oting tock in In(e t!ent 4ou e 3 the ba i "or the co!putation hall be the citi-en hip o" each tockhol&er3 an&3 i" the tockhol&er i a corporation3 the citi-en hip o" the in&i(i&ual tockhol&er hol&ing (oting right in that corporation. In appro(ing "oreign e9uit. application in In(e t!ent 4ou e 3 the 0EC hall appro(e uch application onl. i" the a!e or i!ilar right are en?o.e& b. 1hilippine national in the applicant; countr.. %oreign national !a. beco!e !e!ber o" the boar& o" &irector e8tent o" the "oreign participation in the e9uit. o" ai& enterpri e. to the

.apital re#uire m e n t s In the ca e o" newl.7 organi-e& In(e t!ent 4ou e 3 the !ini!u! pai&7 in capital hall be three hun&re& !illion pe o A13++3+++3+++B. The @onetar. Boar& !a. pre cribe a higher !ini!u! capitali-ation in or&er to pro!ote an& en ure the tabilit. o" the 1hilippine capital !arket an& the co!petiti(ene o" the in(e t!ent hou e in&u tr. in line with the national econo!ic goal .

%e#uirem e n t s for registr a t ion The 0ecuritie an& E8change Co!!i ion hall not regi ter the article o"

8"
B ANKING LAWS
incorporation o" an. In(e t!ent 4ou e3 or an. a!en&!ent thereto3 unle i ati "ie& "ro! the e(i&ence ub!itte& to it5 a. That all the re9uire!ent o" the 1# ),* an& o" e8i ting law regulation to engage in the bu ine ha(e been co!plie& withC it

or

b.

That the propo e& enterpri e will not be in con"lict with public intere t an& econo!ic growthC an& That the a!ount o" capital3 the propo e& organi-ation3 &irection an& a&!ini tration3 a well a the integrit.3 e8perience an& e8perti e o" the organi-er an& the propo e& !anagerial ta""3 pro(i&e rea onable a urance that the enterpri e will be con&ucte& with "inancial pru&ence.

c.

,rohibition No In(e t!ent 4ou e hall engage in banking operation 0ection , o" Republic Act No. 3373 a a!en&e&. a &e"ine& in

,owers of invest m e n t houses In a&&ition to the power grante& to corporation 4ou e i authori-e& to &o the "ollowing5 ). in general3 an In(e t!ent

Arrange to &i tribute on a guarantee& ba i ecuritie corporation an& o" the Go(ern!ent or it in tru!entalitie .

o" other

,.

1articipate in a .n&icate un&ertaking to purcha e an& ell3 &i tribute or arrange to &i tribute on a guarantee& ba i ecuritie o" other corporation an& o" the Go(ern!ent or it in tru!entalitie . Arrange to &i tribute or participate in a .n&icate un&ertaking to purcha e an& ell on a be t7 e""ort ba i ecuritie o" other corporation an& o" the Go(ern!ent or it in tru!entalitie . 1articipate a oliciting &ealer or elling group !e!ber in ten&er o""er 3 block ale 3 or e8change o""ering o" ecuritie C &eal in option 3 right or warrant relating to ecuritie an& uch other power which a &ealer !a. e8erci e un&er the 0ecuritie Act. 1ro!ote3 pon or3 or otherwi e a i t an& i!ple!ent (enture 3 pro?ect an& progra! that contribute to the econo!.; &e(elop!ent.

3.

2.

5.

82
B ANKING LAWS

6. 7. <.

Act a "inancial con ultant3 in(e t!ent a&(i er3 or broker. Act a port"olio !anager an&Dor "inancial agent. 0ub?ect to prior appro(al b. the @onetar. Boar&3 the pro(i ion o" Chapter IN o" the Central Bank Charter3 an& uch rule an& regulation a !a. be i ue& b. the @onetar. Boar&3 engage in "oreign e8change operation . Act a tru tee o" a tru t "un& or tru t propert.3 pro(i ion o" the General Banking Act. ub?ect to the

*.

.onversion into a commercial bank An In(e t!ent 4ou e !a. be con(erte& into a co!!ercial bank authori-e& to operate un&er an e8pan&e& co!!ercial banking authorit.3 ub?ect to applicable law an& regulation an& with prior appro(al o" the @onetar. Boar&.

.entral Bank regulat or y powers In(e t!ent 4ou e hall be ub?ect to uch regulation o" the Central Bank on non7 bank "inancial inter!e&iarie a !a. be pro!ulgate&. The regulation which !a. inclu&e3 but nee& not be li!ite& to aB !ini!u! i-e o" "un& acceptance or receipt3 bB !etho& o" !arketing an& &i tribution3 cB ter! o" place!ent an& !aturitie 3 an& &B u e o" "un& !a. be !o&i"ie& b. the @onetar. Boar& in o"ar a the. appl. to In(e t!ent 4ou e .

!uasi) banking powers The @onetar. Boar& !a.3 at it &i cretion3 &eter!ine whether In(e t!ent 4ou e !a. be per!itte& to per"or! 9ua i7 banking "unction . I" the @onetar. Boar& &eci&e to per!it In(e t!ent 4ou e to engage in 9ua i7 banking "unction 3 the Boar& !a. re9uire a a con&ition prece&ent the obtaining o" a certi"icate o" authorit. "or the purpo e "ro! the @onetar. Boar&. 6hene(er the @onetar. Boar& authori-e an In(e t!ent 4ou e to engage in 9ua i7 banking "unction 3 it !a. ub?ect ai& In(e t!ent 4ou e to "urther regulation 3 which !a. inclu&e but nee& not nece aril. be li!ite& to aB

83
B ANKING LAWS
li9ui&it. re er(e re9uire!ent C bB capital7 to7 ri k a et ratio C cB intere t rate ceiling C an& &B uch other con traint a the Boar& !a. &ee! nece ar.. "ealer or broker An In(e t!ent 4ou e !a. engage in the bu ine o" a &ealer or a broker un&er the 0ecuritie Act without obtaining a eparate licen e "or the purpo e.

0se of the ter m 9Invest m e n t 6ouse: No per on3 a ociation3 partner hip or corporation other than tho e &ul. licen e& a an In(e t!ent 4ou e hall a&(erti e or hol& it el" out a being engage& in the bu ine o" an In(e t!ent 4ou e.

I NVESTMENT COMPANY A CT
Republic Act No. ,6,* Appro(e& )< :une )*6+ Invest m e n t company An. i uer which i or hol& it el" out a being engage& pri!aril. in the bu ine o" in(e ting3 rein(e ting3 or tra&ing in ecuritie .

+atur e and purpose In(e t!ent co!panie are "inancial in titution that rai e "un& b. elling their own i ue o" ecuritie to in&i(i&ual in(e tor . The "un& obtaine& will be u e& to in(e t in ecuritie o" other enterpri e . The ob?ecti(e o" an in(e t!ent co!pan. i to pro(i&e in&i(i&ual in(e tor with a"e an& pro"itable u e o" their a(ing an& to relie(e the! o" the bur&en o" &irect re pon ibilit. o" !anaging their own a(ing .

Types of invest m e n t compani es ). ,. /pen7 en& co!pan. 7 al o calle& !utual "un& Clo e&7 en& co!pan.

,owers and functions

84
B ANKING LAWS
). /""er "or ale3 ell3 or &eli(er a"ter ale3 within the 1hilippine 3 an. ecurit. or an. intere t in an. ecurit.3 whether the i uer o" uch ecurit. i the in(e t!ent co!pan. or another per on. 1urcha e3 re&ee!3 retire3 or otherwi e ac9uire or atte!pt to ac9uire3 within the 1hilippine 3 an. ecurit.3 or an. intere t in an. ecurit.3 whether the i uer o" uch ecurit. i uch in(e t!ent co!pan. or another per on.

,.

Security An. note3 tock3 trea ur. tock3 bon&3 &ebenture3 e(i&ence o" in&ebte&ne 3 certi"icate o" intere t or participation in an. pro"it7 haring agree!ent3 collateral tru t certi"icate3 pre7 organi-ation certi"icate or ub cription3 in(e t!ent contract3 (oting tru t certi"icate3 certi"icate o" &epo it "or a ecurit.3 "ractional un&i(i&e& intere t in oil3 ga 3 or other !ineral right 3 or3 in general3 an. intere t or in tru!ent co!!onl. known a a security or an. certi"icate o" intere t or participation in3 te!porar. or interi! certi"icate "or3 receipt "or3 guarantee o"3 or warrant or right to ub cribe to or purcha e3 an. o" the "oregoing. A0ection 3AbbB3 RA ,6,*B. Note that there i an e8pan&e& &e"inition un&er the Re(i e& 0ecuritie Act.

Form

All hare o" it capital

tock

hall be co!!on an& (oting

hare .

.apitali1at ion No public o""ering !a. be !a&e unle the in(e t!ent co!pan. ha a pai& up capital o" at lea t 15++3+++ A0ection )3A)B3 RA ,6,*B. 4owe(er3 Rule ,.) pro(i&e that the !ini!u! ub cribe& an& pai& in capital houl& be at lea t 5+ !illion.

F INANCING COMPANY A CT
Republic Act No. 5*<+3 a a!en&e& An Act Regulating the /rgani-ation an& /peration o" %inancing Co!panie "eclarat ion of policy It i hereb. &eclare& to be the polic. o" the 0tate to regulate the acti(itie "inancing an& lea ing co!panie 5 o"

85
B ANKING LAWS

).

to place their operation on a oun&3 co!petiti(e3 ba i a other "inancial in titution C

table an& e""icient

,.

to recogni-e an& trengthen their critical role in pro(i&ing !e&iu! an& long7 ter! cre&it "or in(e t!ent in capital goo& an& e9uip!ent e peciall. b. !all an& !e&iu! enterpri e particularl. in the countr. i&eC an& to curtail an& pre(ent act intere t. or practice pre?u&icial to the public

3.

A uch3 the. !a. be in a better po ition to e8ten& e""icient er(ice in a "air !anner to the general public an& to in&u tr.3 co!!erce an& agriculture an& thereb. !ore "ull. contribute to the oun& &e(elop!ent o" the national econo!..

Financing companies %inancing co!panie are corporation 3 e8cept bank 3 in(e t!ent hou e 3 a(ing an& loan a ociation 3 in urance co!panie 3 cooperati(e 3 an& other "inancial in titution organi-e& or operating un&er pecial law 3 which are pri!aril. organi-e& "or the purpo e o" e8ten&ing cre&it "acilitie to con u!er an& to in&u trial3 co!!ercial3 or agricultural enterpri e . It !a. e8ten& ). ,. uch cre&it5

b. &irect len&ingC or b. &i counting or "actoring co!!ercial paper or or account recei(ableC

3.

b. bu.ing an& elling contract 3 lea e 3 chattel !ortgage 3 or other e(i&ence o" in&ebte&ne C or b. "inancial lea ing o" !o(able a well a i!!o(able propert..

2.

Financial leasing %inancial lea ing i a !o&e o" e8ten&ing cre&it through a non7 cancelable lea e contract un&er which the le or purcha e or ac9uire 3 at the in tance o" the le ee3 !achiner.3 e9uip!ent3 !otor (ehicle 3 appliance 3 bu ine an& o""ice !achine 3 an& other !o(able or i!!o(able propert. in

86
B ANKING LAWS
con i&eration o" the perio&ic pa.!ent b. the le ee o" a "i8e& a!ount o" !one. u""icient to a!orti-e at lea t e(ent. percent A7+EB o" the purcha e price or ac9ui ition co t3 inclu&ing an. inci&ental e8pen e an& a !argin o" pro"it o(er an obligator. perio& o" not le than two A,B .ear . #uring the two7 .ear perio&3 the le ee ha the right to hol& an& u e the lea e& propert. with the right to e8pen e the lea e rental pai& to the le or. $e ee al o bear the co t o" repair 3 !aintenance3 in urance an& pre er(ation o" the lea e& propert.. 4owe(er3 le ee ha no obligation or option to purcha e the lea e& propert. "ro! the owner7 le or at the en& o" the lea e contract.

87
B ANKING LAWS
/iability of lessors %inancing co!panie hall not be liable "or lo 3 &a!age or in?ur. cau e& b. a !otor (ehicle3 aircra"t3 (e el3 e9uip!ent3 !achiner. or other propert. lea e& to a thir& per on or entit. e8cept where the !otor (ehicle3 aircra"t3 (e el3 e9uip!ent3 !achiner. or other propert. i operate& b. the "inancing co!pan.3 it e!plo.ee or agent at the ti!e o" the lo 3 &a!age or in?ur..

%ights and powers of financing compani es %inancing co!panie hall ha(e the "ollowing power 3 in a&&ition to tho e grante& b. thi Act an& b. other law 5 ). Engage in 9ua i7 banking an& !one. !arket operation appro(al o" the Bangko 0entral. with the prior

,.

Engage in tru t operation ub?ect to the pro(i ion o" the General Banking Act upon prior appro(al o" the Bangko 0entral. I ue bon& an& other capital in tru!ent an& regulation o" the Bangko 0entral. ub?ect to pertinent rule

3.

2.

Re&i count their paper with go(ern!ental "inancial in titution to rele(ant law 3 rule an& regulation .

ub?ect

5.

1articipate in pecial loan or cre&it progra! pon ore& b. or !a&e a(ailable through go(ern!ental "inancial in titution . 1ro(i&e "oreign currenc. loan an& lea e to enterpri e who earn "oreign currenc. b. e8port or other !ean 3 ub?ect to e8i ting law an& rule an& regulation o" the Bangko 0entral.

6.

Form of organi1a ti on and capital re#uir e m e n t s %inancing co!panie hall be organi-e& in the "or! o" tock corporation lea t "ort. percent A2+EB o" the (oting tock o" which i owne& b. citi-en the 1hilippine . at o"

The. hall ha(e pai&7 up capital o" not le than ten !illion pe o A1)+3+++3+++B in ca e the "inancing co!pan. i locate& in @etro @anila an& "ir t cla citie 3 "i(e !illion pe o A153+++3+++B in other cla e o" citie 3 an& two !illion "i(e hun&re& thou an& pe o A1,35++3+++B in !unicipalitie .

88
B ANKING LAWS
No "oreign national !a. be allowe& to own tock in an. "inancing co!pan. unle the countr. o" which he i a national accor& the a!e reciprocal right to %ilipino in the owner hip o" "inancing co!panie or their counterpart entitie in uch countr..

%e#uirem e n t s for registr a t ion A i&e "ro! re9uiring co!pliance with the pro(i ion o" the Corporation Co&e3 the 0EC hall not regi ter the article o" incorporation o" an. "inancing co!pan. unle it o""ice i ati "ie& on the e(i&ence ub!itte& to it3 that5 ). All the re9uire!ent o" e8i ting law to engage in the bu ine "or which the applicant i propo e& to be incorporate& or organi-e& ha(e been co!plie& withC The organi-ation3 &irection an& a&!ini tration3 a well a the integrit. an& re pon ibilit. o" the organi-er an& a&!ini trator rea onabl. a ure the protection o" the intere t o" the general publicC an& All the re9uire!ent o" RA 5*<+ ha(e been co!plie& with.

,.

3.

%evocation and suspension of registra t i on ). ,. %inancing co!pan. i in ol(ent It (iolate& an. pro(i ion o" the law

Supervision and regula tion The 0EC i e!powere& to en"orce the pro(i ion o" RA 5*<+3 a a!en&e&3 an& i ue i!ple!enting regulation e8cept in o"ar a the Bangko 0entral !a. ha(e uper(i or. authorit. "or "inancing co!panie licen e& to per"or! 9ua i7 banking "unction 3 an& in o"ar a the @onetar. Boar& ha authorit. to pre cribe "inancing co!pan. rate an& charge .

,rohibit e d acts The Act i!po e a "ine o" not le than 1)+3+++ but not !ore than 1)++3+++3 or i!pri on!ent o" not !ore than i8A6B!onth or both3 at the &i cretion o" the court3 on Oper on 3 a ociation 3 partner hip or corporation 3 inclu&ing !anaging o""icer thereo"3O upon the "ollowing unlaw"ul act 5 ). Engaging in the bu ine o" "inance co!panie without authorit. "ro!

8!
B ANKING LAWS
the 0EC through a&(erti e!ent in whate(er "ro!3 or through other repre entation without authorit.. ,. ' ing tra&e or "ir! na!e containing the wor& O"inancing co!pan.O or Olea ing co!pan.O or O"inance an& lea ing co!pan.O or O"inance an& in(e t!ent co!pan.O or an. other &e ignation that woul& gi(e the public the i!pre ion that it i engage& in the bu ine o" a "inancing co!pan. or lea ing co!pan. without authorit.. 4ol&ing the! el(e "ro! the 0EC. out to be "inancing co!panie without authorit.

3.

2.

An. o""icer3 e!plo.ee3 or agent o" a "inancing co!pan. who hall knowingl. an& willingl. !ake an. tate!ent in an. application3 report or &ocu!ent re9uire& to be "ile& un&er the Act3 which i "al e or !i lea&ing with re pect to an. !aterial "act3 or o(er(alue or ai& in o(er(aluing an. ecuritie "or the purpo e o" in"luencing in an. wa. the action o" the co!pan. on an. loan3 or &i counting. An. o""icer3 e!plo.ee or e8a!iner o" the 0EC &irectl. charge& with the i!ple!entation o" the Act who hall co!!it3 conni(e3 ai& or a i t in the co!!i ion o" act enu!erate& abo(e.

5.

P AWNS

OPS

1re i&ential #ecree ))2 in relation to CB Circular No. 372 ,awnshop A pawn hop i a per on A ingle proprietor hipB or entit. AcorporationDpartner hipB engage& in the bu ine o" len&ing !one. on per onal propert. &eli(ere& a ecurit. "or loan .

,urpose of the law To regulate the e tabli he!ent o" pawn hop an. oun& an& table ba i 5 ). ,. To &eri(e !a8i!u! bene"it a an& to place their operation on

ource o" cre&it pre?u&icial to the publicC an&

To pre(ent an& !itigate practice

!#
B ANKING LAWS

3.

To pre cribe !ini!u! re9uire!ent

%e#uirem e n t s for establishing a pawnshop ). Regi tration a. b. c. &. ,. 3. 2. 6ith #TI i" ingle proprietor hip 6ith 0EC i" corporation or partner hip In all ca e 3 with the B01 6ith the Boar& o" In(e t!ent i" there i "oreign e9uit. participation

0ecure a licen e to operate "ro! the $G' concerne& @ini!u! pai& in capital o" 1)++3+++ Citi-en hip a. b. c. &. I" ingle proprietor3 !u t be a %ilipino I" partner hip3 7+E o" capital owne& b. %ilipino I" corporation3 7+E o" (oting capital I" no (oting tock3 7+E o" !e!ber houl& be owne& b. %ilipino entitle& to (ote houl& be %ilipino

'ener al re#uire m e n t s as to opera tion /wner who ha other bu ine e not &irectl. relate& or inci&ental to hi pawn hop bu ine !u t keep the latter eparate "ro! hi other bu ine e . @aintain a&e9uate ecurit. pawn Drecor& are kept. In ure place o" bu ine i.e. "ire an& burglar proo" a"e where

an& pawn

again t "ire an& burglar .

Accountable o""icer De!plo.ee Accounting recor&

hall be bon&e&.

!"
B ANKING LAWS
$oan cannot be le than 3+E o" the apprai e& (alue o" the per onal propert. unle the borrower tipulate& in writing that he i borrowing a le er a!ount. In a&&ition to intere t charge 3 pawn hop !a. i!po e a !a8i!u! charge o" 15.++ but in no ca e to e8cee& )E o" the principal loan. er(ice

No other charge 3 "ee 3 an& co!!i ion hall be collecte& b. pawn hop in connection with the loan tran action or pa.!ent thereo". Borrower hall not pa. in urance pre!iu! . .onduct of business ). ,. 3. 2. 5. 6. 7. <. Borrower o""er to ple&ge per onal propert. a ecurit. "or loan.

1ropert. i apprai e&. $oan agree!ent i entere& into. 1awn hop i ue receipt Apawn ticketB. !one. to pawner. not to e8cee& 15.++.

1awn hop len&

1awner pa. charge

1awne& propert. i place& in (aultD a"e. I" upon !aturit.3 borrower "ail to pa.3 pawn hop will wait "or *+ &a. !aturit. be"ore it can ell the thing ple&ge& at a public auction. 1awn hop ha to co!pl. with notice re9uire!ent 3 to wit5 a. Be"ore the *+7 &a. perio& e8pire 3 notice to the borrower that the pawn will be ol& i" not re&ee!e& within *+ &a. "ro! !aturit. peci".ing ti!e3 &ate3 an& place o" auction ale. I" there i no re&e!ption3 pawn hop will ell the pawn a"ter publi hing a notice o" ale in at lea t two new paper in the cit.D!unicipalit. o" operation i8 A6B &a. be"ore the &ate o" ale. In re!ote area where there i no new paper3 b. po ting at Cit. 4all or @unicipal Buil&ing an& two other con picuou public place where pawn hop operate . 0ale o" pawn b. auctioneerDnotar. public to higher bi&&er. a"ter

*.

b.

c.

!2
B ANKING LAWS

!3
B ANKING LAWS
Supervisory powers of the Bangko Sentr al B01 o""icial in charge o" non7 bank "inancial inter!e&iarie or authori-e& agent !a. in pect3 e8a!ine3 an& in(e tigate the recor& o" pawn hop to en ure co!pliance with 1# ))2. 0ai& o""icial or agent !ake I!po e penaltie reco!!en&ation to the @onetar. Boar&.

"or (iolation o" 1# ))2.

T R&ST CORPORATIONS
Chapter NII General Banking Act Trust corporat ion A tru t corporation i an. corporation "or!e& or organi-e& "or the purpo e o" acting a tru tee3 a&!ini tering an. tru t or hol&ing propert. in tru t or on &epo it "or the u e3 bene"it or behoo" o" other . A corporation or a bank !a. engage in the bu ine o" a tru t corporation.

Standar d of care A tru t co!pan. or an. bank authori-e& to engage& in the bu ine o" a tru t co!pan. hall a&!ini ter the "un& or propert. un&er it cu to&. with the kill3 care3 pru&ence an& &iligence nece ar. un&er the circu! tance then pre(ailing that a pru&ent !an3 acting un&er like capacit. an& "a!iliar with uch !atter 3 woul& e8erci e in the con&uct o" an enterpri e o" a like character an& with i!ilar ai! . No tru t co!pan. or bank engage& in the bu ine o" a tru t co!pan. hall3 "or the account o" the tru tor or the bene"iciar. o" the tru t3 purcha e or ac9uire propert. "ro!3 or ell3 tran "er3 a ign or len& !one. or propert. to3 or purcha e &ebt in tru!ent o" an. o" the &epart!ent 3 &irector 3 o""icer 3 tockhol&er 3 or e!plo.ee o" the tru t co!pan. or bank3 or relati(e within the "ir t &egree o" con anguinit. or a""init.3 or the relate& intere t 3 o" uch &irector3 o""icer 3 an& tockhol&er 3 unle the tran action i peci"icall. authori-e& b. the tru tor an& the relation hip o" the tru tee an& the other part. in(ol(e& in the tran action i "ull. &i clo e& to the tru tor or bene"iciar. o" the tru t prior to the tran action.

!4
B ANKING LAWS

!5
B ANKING LAWS
,owers 3in addition to gener al powers incident to corporat ions5 ). To act a tru tee on an. !ortgage or bon& i ue& b. an. !unicipalit.3 corporation3 or an. bo&. politic an& to accept an& e8ecute an. other !unicipal or corporate tru t not incon i tent with law. To act un&er the or&er or appoint!ent o" an. court o" recor& a guar&ian3 recei(er3 tru tee or &epo itor. o" the e tate o" an. !inor3 in ane per on3 i&iot3 habitual &runkar&3 or other inco!petent or irre pon ible per on3 an& a recei(er an& &epo itor. o" an. !one. pai& into court b. partie to an. legal procee&ing an& o" propert. o" an. kin& which !a. be brought un&er the ?uri &iction o" the court b. propert. legal procee&ing . To act a the e8ecutor o" an. la t will or te ta!ent when it i na!e& in the la t will an& te ta!ent a the e8ecutor thereo". To act un&er appoint!ent o" a court o" co!petent ?uri &iction a a&!ini trator o" the e tate o" an. &ecea e& per on3 with the will anne8e&3 or a a&!ini trator o" the e tate o" an. &ecea e& per on when there i no will3 an& when in either ca e there i no per on 9uali"ie&3 co!petent3 willing3 able an& entitle& to accept uch a&!ini tration. To accept an& e8ecute an. legal tru t con"i&e& to it b. an. court o" recor& or b. an. per on or corporation "or the hol&ing3 !anage!ent3 an& a&!ini tration o" an. e tate3 real or per onal3 an& the rent 3 i ue 3 an& pro"it thereo". To e tabli h an& !anage co!!on tru t "un& 3 ub?ect to regulation a !a. be pre cribe& b. the @onetar. Boar&. uch rule an&

,.

3.

2.

5.

6.

.ommercial banking activit y A tru t co!pan. !a.3 with the appro(al o" the @onetar. Boar&3 &o a co!!ercial banking bu ine 3 but uch bu ine !u t be kept eparate an& &i tinct "ro! it tru t bu ine . An. banking corporation !a.3 with the appro(al o" the @onetar. Boar&3 be authori-e& to engage in the bu ine o" a tru t co!pan.3 but it hall be ub?ect to the pro(i ion on tru t operation .

Bond;securit y re#uir e m e n t s and paid in capital E8cept a !a. otherwi e be pro(i&e& in thi Act3 no bon& or other ecurit.

!6
B ANKING LAWS
hall be re9uire& "ro! an. tru t co!pan. "or the "aith"ul per"or!ance o" it &utie a tru tee3 e8ecutor3 a&!ini trator3 guar&ian3 recei(er or &epo itar.. 4owe(er3 the court o""icer appointing uch co!pan. a tru tee3 e8ecutor3 a&!ini trator3 guar&ian3 recei(er or &epo itar. !a.3 upon proper application3 howing pecial cau e there"or3 re9uire an. corporation which hall eek to be or hall ha(e been o appointe& to gi(e a&e9uate ecurit. "or the protection o" the "un& or propert. con"i&e& to the corporation an&3 upon "ailure o" uch corporation to gi(e the ecurit. re9uire&3 it appoint!ent a tru tee3 e8ecutor3 a&!ini trator3 guar&ian3 recei(er or &epo itar. hall be re(oke&. 0ection 653 howe(er3 pro(i&e 5 GA ecurit. "or the "aith"ul per"or!ance o" it tru t &utie 3 e(er. tru t co!pan.3 be"ore tran acting tru t bu ine 3 hall carr. on &epo it with the Central Bank3 ca h or ecuritie appro(e& b. the @onetar. Boar& in an a!ount e9ual to not le than two hun&re& an& "i"t. thou an& pe o A1,5+3+++B. Thi !a. be increa e& b. the Central Bank. 1ai& in capital an& urplu o" the co!pan. !u t be at lea t e9ual to the a!ount re9uire& to be &epo ite& with the central Bank.

Separ at ion of trust funds and proper t y All !one. 3 propertie 3 or ecuritie recei(e& b. an. tru t co!pan. hall be kept eparate an& &i tinct "ro! all other "un& 3 propertie an& a et o" it general bu ine . The account o" all uch !one. 3 propertie or ecuritie hall likewi e be kept eparate an& &i tinct "ro! the account o" it general bu ine .

.apital stock may be invested The capital tock an& "un& o" a tru t co!pan. !a. be loane& or otherwi e in(e te& a it b. law pre cribeC i" it &oe a co!!ercial banking bu ine in a&&ition to it tru t bu ine 3 the in(e t!ent o" it "un& other than tru t "un& hall be go(erne& b. the rele(ant pro(i ion o" the General Banking Act.

Surplus and dividend E(er. tru t co!pan.3 be"ore the &i tribution o" a &i(i&en&3 hall carr. to urplu )+E o" it net pro"it accruing ince the la t prece&ing &i(i&en& until the urplu hall a!ount to ,+E o" it authori-e& capital tock an& no part o"

!7
B ANKING LAWS
the urplu hall at an. ti!e be pai& out in &i(i&en& 3 but lo e the cour e o" it bu ine !a. be charge& again t the urplu . accruing in