c



 


 


 
 

  

   



 

 
 

 
General Banking Law



.
New Central Bank Act

 




  

 

New Rural Banks Act


  

Private Development Banks Act 



 

Savings and Loan Association Act



  
. Thrift Banks Act





g   


Secrecy of Bank Deposits Law



 
Unclaimed Balances Law 
 


Philippine Deposit Insurance Corporation Act



  


The general banking laws above mentioned are
applicable to government banks like DBP and PNB.
The Al- Amanah Islamic Bank is subject to all banking
and pertinent laws.

 
    !"
 ## $


T HREE KINDS OF ENTITIES THAT INTRODUCE FUNDS

INTO THE ECONOMY :
|.
2.
3.


  entities that obtains funds from the public

in the form of deposits and re-lend it to the public; 
 
those that obtain funds in the form of
deposit substitutes and re-lend the same and not
from the public or depositors.


 




 

 

   those that lend funds from their
own assets.

FIVE PERSONS PRIMARILY INTERESTED IN THE

BUSINESS OF BANKING
|.
2.
3.
4.
5.

Government
Depositors
Investors
Creditors
Borrowers

BAR QUESTION:
JOINT ACCOUNT VS. PARTNERSHIP (2000)

 
 
  

 
SUGGESTED ANSWER
    
  
  
   

 


 

  

  


   
  
  

 

 

  
 



 
) WHILE A PARTNERSHIP HAS JURIDICAL
PERSONALITY AND MAY SUE OR BE SUED
UNDER ITS FIRM NAME, A JOINT ACCOUNT
HAS NO JURIDICAL PERSONALITY AND CAN
SUE OR BE SUED ONLY IN THE NAME OF THE
OSTENSIBLE PARTNER.
  
 

  


     
  

 

 
!   
 

  
 
 

 
"
   

  
  
   



 


 



 
 

#
   $ 
 
 
 

  
%  %

   
 


  

 
 
  $ 
   
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BAR QUESTION:
 %  &    "
  %  '
 

 
(()
& " & 
 
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 &   &   
%   *
 
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+  
  
  ,
SUGGESTED ANSWER: 
-    %       



 
   "%    % 
  
 
. -  %
 
 

     

  
 
 



 
%
  







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c







 
 





! 
 To promote and maintain a stable and
efficient banking and financial system that is globally
competitive, dynamic and responsive to the demands of
a developing economy ((
# .


  

 The GBL primarily governs
universal banks and commercial banks. It suppletorily
governs thrift banks, rural banks and other banking
institutions.


The certificate of authority shall not be issued

unless the Monetary Board is satisfied:
|.

That all requirements of existing laws and

regulations to engage in the business for which
the applicant is proposed to be incorporated
have been complied with;

2.

That the public interest and economic

conditions, both general and local, justify the
authorization; and

3.

That the amount of the capital, the financing,

organization, direction and administration, as
well as the integrity and responsibility of the
organizers and administrators, reasonably
assure the safety of deposits and the public
interest (


GENERAL CONCEPTS
"#

Entities engaged in the lending of funds obtained in
the form of deposits(
# 

Entities duly authorized by the Monetary Board to
engage in the business of regularly lending funds
obtained regularly from the public through the
receipt of deposits of any kind.

An investment company that performs function as

such is NOT a bank. Thus an investment company
that is engage solely in investing, reinvesting or
trading in securities is not engage in banking. 
 
  %& ' (
 )
  
#


However, an investment company which loans out

money of its customers, collects interest, and
charges a commission to both lender or borrower is
engage in banking (*+ 
 (*, $
$((

M "#

Entities engaged in the borrowing of funds through

the issuance, endorsement or assignment with
recourse or acceptance of deposit substitutes(

 
Entities authorized to perform universal or
commercial banking functions may also engage in
quasi-banking functions.



+ 


 

M 


'  

|. The entity is a stock corporation;
2. Its funds are obtained from the public,
i.e. 20 or more persons; and
3. The minimum capital requirements prescribed
by the Monetary Board are satisfied(



-

   )
   


  
 

 

 
 
 
 ,
 
 
, 
 

, 

 
,
 

 

 
 
  



 

, 

  

 


   


 


 






 







A person or entity cannot engage in banking or
quasi-banking functions without a certificate of
authority from the BSP(



The determination of whether a person or entity is
performing banking or quasi-banking functions
without BSP authority shall be decided by the
Monetary Board.

NATURE OF BANKING BUSINESS





""g$"%&'(&)'&

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

Impressed with public interest where the trust and

confidence of the public in general is of paramount
importance such that:
|.

The appropriate standard of diligence must be

very high, if not the highest, degree of
diligence; "$"& %./

  ( 
%
 0



# #!
#
 This applies only to cases where banks
are acting in their fiduciary capacity, that
is, as depository of the deposits of their
depositors , 
   0

 

# *"
# .

2.

Subject to reasonable regulation under the

police power of the state.

ORGANIZATION AND OPERATION

  

'*


 

The SEC shall not register the articles of
incorporation of any bank or any amendment
thereto unless accompanied by a certificate of
authority issued by the Monetary Board under its
seal(



While an innocent mortgagee is not expected to

conduct an exhaustive investigation on the history
of the mortgagors title, in case of a banking

s
 









 
 

c
 

institution, it must exercise due diligence before
entering into said contract, and cannot rely upon on
what is or is not annotated on the title. Before a loan is approved, representatives are sent
to the premises offered as collaterals so as to
investigate who the real owners are 1% 
  
( #




The business of a bank is one affected by public

interest for which reason the bank should guard
against loss due to negligence and bad faith. It is
expected to ascertain and verify the identities of the
persons it transacts business with 2% 

  0

 
   +   # 
3 !


Due diligence required of banks extend even to
persons, or institutions like the GSIS, regularly
engaged in the business of lending money secured
by real estate mortgages 0(.( 
 4$*$
(" 0


#

)+# #


CONSEQUENCES OF NATURE OF BUSINESS:

|.

It is subject to heavy and close supervision and/or

regulation by the BSP (/&%


 #( 
#P.

|.

It is required to exercise utmost diligence in the

handling of deposits ((5 . 
.
 ( 
P.
Special rules on strikes and lockouts: any strike or
lockout involving banks, if unsettled after 7
calendar days shall be reported by the BSP to the
Sec. of Labor who has 2 options:
a.
He may assume jurisdiction over and decide
the dispute; or
b.
certify it to the NLRC for compulsory
arbitration

2.

The President may also intervene at any time and

assume jurisdiction over such labor dispute in order to
settle or terminate the same.

CLASSIFICATION OF BANKS
|.



   
 - Primarily governed by the

General Banking Law (GBLP, can exercise the
powers of an investment house and invest in nonallied enterprises and have the highest
capitalization requirement.

2.

  
 - Ordinary banks governed by

the GBL which have a lower capitalization
requirement than universal banks and can neither
exercise the powers of an investment house nor
invest in non-allied enterprises.

3.

%
- These are aP Savings and mortgage

banks; bP Stock savings and loan associations; cP
Private development banks, which are primarily
governed by the Thrift Banks Act






4.


5.

'   
 Mandated to make needed credit

available and readily accessible in the rural areas
on reasonable terms and which are primarily
governed by the Rural Banks Act of | 2 
 

g

   
 Those banks organized

whose majority shares are owned and controlled by

cooperatives primarily to provide financial and

credit services to cooperatives. It shall include
cooperative rural banks. They are governed
primarily by the Cooperative Code 
 


V.


7.

  
 - Banks whose business dealings

and activities are subject to the basic principles and
rulings of Islamic Shari a, such as the Al Amanah
Islamic Investment Bank of the Philippines which
was created by 


   


 
 as determined by
the Monetary Board of the Bangko Sentral ng
Pilipinas.

')"'.
g'!'%"

"#"
g'!'%"

May be a stock or
non-stock
corporation

Must generally be a
stock corporation

May issue par value

or no par value
stocks.

Shall issue par value

stocks only(


May be registered
with
the
SEC
without
any
certificate
of
authority issued by
a
government
agency.

Must
secure
a
certificate of authority
from the Monetary
Board before it can
register with SEC.

May
purchase/acquire
its own shares for a
legitimate corporate
purpose; provided
that,
it
has
unrestricted
retained earnings in
its books to cover
the shares to be
purchased/
acquired.

May not purchase/

acquire its shares or
accept
them
as
security for a loan.
45(:
when
authorized by the
Monetary Board. In
such case, the bank
must sell or dispose
of said shares within
V months from the
time
of
their
acquisition(


Must be composed
of 5 to |5 directors,
each of whom shall
own at least one (|P
share of the capital
stock
of
the
corporation.

Also composed of 5
to |5 directors. In
case of merger or
consolidation,
the
number of directors
shall not exceed 2|
(


May
declare
dividends out of its
unrestricted
retained earnings.

May
not
declare
dividends, if any of
the conditions set
forth under Sec. 57
are present.










s
 









 
 

c




"/&'$"#

g((&'g$"#

Authority to exercise
additional
powers
other
than
those
authorized
for
commercial banks

No
such
powers

additional

May invest in the

equities
of
allied,
whether financial or
non-financial,
and
non-allied enterprises
((
#P

May only invest in

equities
of
allied
enterprises,
whether
financial or non-financial

payment in legal tender

upon demand by the
presentation of checks
(
 



&M %."/&%(&"%
!"%
)%"g%"

|. The
powers |. General powers
authorized for a
incident to
commercial bank;
corporations
2. The powers of an 2. Such powers as may
investment house;
be necessary to carry
and
on the business of
3. The power to invest
commercial banking:
in
non-allied
a. Accepting drafts
enterprises (

and issuing letter of
#

credits;
b. Discounting and
negotiating
promissory
notes,
drafts,
bills
of
exchange and other
evidence of debt;
c.
Accepting
or
creating
demand
deposits;
receiving
other
types
of
deposits and deposit
substitutes;
d. Buying and selling
foreign
exchange
and
other
debt
securities;
e. Extending credit.
((
#P


g((6$"#
78725

Total investment
in
allied
enterprises

!


M
  

23245

Total investment
in
non-allied
enterprises
Equity
investment in any
one enterprise

50%

35%

of net worth

of net worth

50%

N/A

of net worth
25%

25%

of net worth

of net worth
(Allied onlyP

Equity
investment
in
financial
allied
enterprise: thrift
bank, rural bank
or any financial
allied enterprise
(
# 

|00%

|00%

of equity

of equity

< In other
financial allied
enterprises,
investment shall
remain a
minority holding
(
 

A publicly-listed
bank may own up
to |00% of the
voting stock of
only one other
UB / CB (

#



Equity
investment
in
non-financial
allied enterprises





"/&'$0
g((&'g$"#

%1&'"#

Authorized to engage in
quasi-banking functions
without
need
for
approval

Not so authorized

May accept or create

demand
deposits
without
need
for
approval

Must seek approval of

Monetary
Board
before accepting or
creating
demand
deposits. ((
 P

)
 
 
Liabilities of the BSP
and of other banks
which are denominated
in Philippine currency
and are subject to

Equity
investment in a
single non-allied
enterprise

Equity
investment
Quasi-Banks

|00%

|00%

of equity

of equity

Shall not exceed

35% of the total
equity in that
enterprise nor
shall it exceed
35% of the
voting stock in
that enterprise

N/A

in
40%

40%

s
 









 
 

c




 &
 those entities which enhance or
complement banking

"



   &
 pertains to
activities that do not involve money matters (such as
warehousing, safety deposit boxesP

"&%9'%1
The total of the unimpaired paid-in capital including
paid-in surplus, retained earnings and undivided profit,
net valuation reserves and other adjustments as may be
required by the Bangko Sentral(
#

FUNCTIONS OF BANKS


g "g%"
|. Loan Function
2. Deposit Function

%1&' "g%"
Universal banks and commercial banks may also
exercise any of the following functions:
a.
Receive in custody funds, documents and
valuable objects;
b.
Act as financial agent and buy and sell, by
order of and for the account of their customer,
shares, evidences of indebtedness and types
of securities;
c.
Make collection and payments for the account
of others and perform such other services for
their customer as are not incompatible with
banking business;
d.
Upon prior approval of the Monetary Board, act
as managing agent, adviser, consultant or
administrator of investment management/
advisory/consultancy accounts; and
e.
Rent out safety deposit boxes.


'#-&) g!%$


The minimum ratio prescribed by the Monetary

Board which the net worth of a bank must bear to
its total risk assets which may include contingent
accounts.
However, the Monetary Board may require or
suspend compliance with such ratio whenever
necessary for a maximum period of one year;
PROVIDED that, such ratio shall be applied
uniformly to banks of the same category (
 

Effect of non-compliance with the prescribed
minimum ratio:
Distribution of net profits may be limited or
prohibited and MB may require that part or all
of the net profits be used to increase the
capital accounts of the bank until the minimum
requirement has been met; or
2. Acquisition of major assets and making of new
investments may be restricted. EXCEPT:
purchases of evidence of indebtedness
guaranteed by the Government (
 

3. In case of a bank merger or consolidation, or
when a bank is under rehabilitation under a
program approved by BSP, the MB may
temporarily relieve the surviving bank,
consolidated bank, or constituent bank or
corporations under rehabilitation from full
compliance with the required capital ratio.

|.

 The depositary would be liable if in performing its

obligation it is found guilty of fraud, negligence; in the
absence of any stipulation prescribing the degree of
diligence required, that of a good father of the family is
to be observed. Any stipulation exempting the
depositary from any liability arising from loss on account
of fraud, negligence would be void for being contrary to
public policy 6" 17 
   # (  #

 



"
 The bank acting as depositary or as an agent
shall keep the funds, securities and other effects which
it receives duly separated from its own assets and
liabilities. (Sec. 53P

 $"  "g%"


'  



$




Before granting a loan, a bank must ascertain that
the debtor is capable of fulfilling his commitments to the
bank.

&





   

  

|. Distribution of net profits may be limited or
prohibited and MB may require that part or all of the
net profits be used to increase the capital accounts
of the bank until the minimum requirement has
been met; or
2. Acquisition of major assets and making of new
investments may be restricted. EXCEPT:
purchases of evidence of indebtedness guaranteed
by the Government.
3. In case of a bank merger or consolidation, or when
a bank is under rehabilitation under a program
approved by BSP, the MB may temporarily relieve
the surviving bank, consolidated bank, or
constituent
bank
or
corporations
under
rehabilitation from full compliance with the required
capital ratio.

' 

|. A bank may demand from its applicants a
statement of their assets and liabilities and of their
income and expenditures and other information.
2.

(*$ *  (  + & 

, the bank may terminate any loan granted
on the basis of said statements and shall have the
right to demand immediate repayment or liquidation
of obligation(












s
 









 
 

c


2.




g  


$


"g$&)
$"
Those that do not
have a greaterthan
normal risk and the
borrower
have
apparent ability to
satisfy it in full and no
loss
in
ultimate
collection
is
anticipated.


g$&)$"
Those
that
have
extraordinary risks of
loss in collection due to
some defects such as
bad debts or those
under litigation.



 
   
  
 

 

| 


6$ $5' 

b. The total amount of loans extended by a bank to
any person, partnership, association, corporation or
other entity shall at no time exceed 20% of the net
worth of such bank.
c.

The total amount of loans may be increased by an

additional |0% of the net worth of such bank
provided the additional liabilities of any borrower
are adequately secured by trust receipts, shipping
documents, warehouse receipts or other similar
documents transferring or securing title covering
readily marketable, non-perishable goods which
must be fully covered by insurance;

2.

Officers Either identified in the by-laws or are

generally known as such

3.

Stockholders those whose stockholdings,

individually and/or together with any of the following
persons, amount to 2% or more of the total
subscribed capital stock of the bank:
a. His spouse or relative within the first degree of
affinity/consanguinity or relative by legal
adoption, partnership wherein any of the
foregoing is a general partner; and
b.

A co-owner, with the stockholder or the

stockholders spouse, or relative mentioned
above, of property/right/interest (mortgaged,
pledged or assigned to secure the loan or
credit accommodations, except when the
mortgage, pledge or assignment covers only
said co-owners undivided interest.

4. Related Interest
a. Spouse, relatives within first degree of
consanguinity or affinity, or relative by legal
adoption of a DOS, partnerships of which a
DOS or any of the foregoing is a general
partner.
b. Co-owner, with the DOS or his spouse or
relative within the first degree of consanguinity
or affinity, or relative by legal adoption, of the
property/interest/ right mortgaged, pledged,
assigned to secure the loans or credit
accommodations, except when the mortgage,
pledge or assignment covers only said coowners undivided interest.




A common banking practice requiring as an additional

security for a loan granted to a corporation the joint and
Solidary signature of a major stockholder or corporate
officer of the borrowing corporation (*, / 

*  ( 

' 


In case of default, creditors recourse is not limited
to corporate properties but extends to personal
assets of the surety;
b. Surety would be compelled to ensure that the loan
would be used for the purpose intended.
"
 While R.A. 87 | provides for the rates of 20%
and |0% respectively, the Bangko Sentral has not yet
implemented such rates. The  
   are 25%
and |5% respectively.


,


' (%*
5

a. The borrower is director, officer, or any
stockholder of a bank and related interest.
b. He contracts a loan or any form of financial
accommodation
c. The loan or financial accommodation is from
(|P his bank or (2P a bank that is a subsidiary of a
bank holding company of which both his bank and
lending bank are subsidiaries, (3P a bank
in
which a controlling proportion of the shares is
owned by the same interest
that
owns
a
controlling proportion of the shares of his bank;
and
d. The loan or financial accommodation
of
the DOS, singly or with that of his
related
interest, is in excess of 5% of the capital
and
surplus of the lending bank or in the maximum
amount
permitted by law, whichever is lower.

9
 
(%*
 
|. Directors Directors of the lending bank


&: 

""'#$"5
|. Loans secured by obligations of the Bangko Sentral
or the Philippine Government;
2. Loans fully guaranteed by the government;
3. Loans covered by assignment of deposits
maintained in the lending bank and held in the
Philippines;
4. Loans, credit accommodations and acceptances
under letters of credit to the extent covered by
margin deposits; and
5. Other loans or credit accommodations which the
MB may specify as non-risk items.



   


)'



)
,


,
' 
P


c.

a.

Corporation with inter-locking directors or

where 20% of the capital stock is owned by the
DOS and/or their spouses or relatives
mentioned above, or wholly or majority owned
or controlled by any related entity or a group of
related entities in items (bP, (dP, and (eP.







s
 









 
 

c









 
a. No director or officer of any bank shall, directly or
indirectly, borrow from such bank nor shall be
guarantor, endorser or surety for loans from such
bank to others, or in any manner be an obligor or
incur any contractual liability to the bank, except
with the written approval of the majority of all the
directors of the bank, excluding the director
concerned. The written approval shall not be
required for loans granted to officers under a fringe
benefit plan approved by the Bangko Sentral.
b. Dealings of a bank with any of its DOSRI shall be
upon terms not less favorable to the bank than
those offered to others '($&"%1' $&5.
c. Loans extended to DOSRI shall be limited to an
amount
equivalent
to
their
respective
unencumbered deposits and book value of their
paid-in capital contribution in the bank.
&:
i. Loans,
credit
accommodations,
and
guarantees secured by assets considered as
non-risk by the Monetary Board.
ii. Loans, credit accommodations, and advances
to officers in the form of fringe benefits.
iii.
Cooperative banks with regard to their
cooperative shareholders.
d. The resolution approving the loan shall be entered in
the records of the bank and transmitted to the BSP.
e. Waiver of secrecy of deposits of whatever nature in
all banks in the Philippines by the borrower. No
waiver is required if the related interests are the
borrower.
f.

Information obtained from examination is strictly

confidential.

7 ' 




 



a.

Those secured by real estate shall not exceed 75%

of the appraised value of the real estate security,
plus V0% of the appraised value of the insured
improvements(
 


b.

Those secured by chattels and intangible properties

(such as patents, trademarks, trade names and
copyrightsP shall not exceed 75% of the appraised
value of the security(
 


BAR QUESTION:
BANKS;
RESTRICTIONS
ON
LOAN
ACCOMMODATIONS (2006) 
/ 
   
  
  0
. +
  

   
 
   

 
.    


  
  
        
  

 
   
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.  

 


 . 

     % 
1
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.  2
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SUGGESTED ANSWER: 

5 6 1
0
. 2
 777 

   %      
   
  

.  %   %     

. 8 
 

  / 
   
  
 
0
.    
.
  
      


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.  1
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. 
2
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.
   
    
  
   
 
 
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.  4     
   
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.


    
5 6 &

0
.:
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  <
 
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 = 
9 

8 

  <

"& 1<
>  )!6    ?  777  " 
   

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"


         

 
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 >&
0
.

COLLATERALS
|/  

  


The loan shall not exceed 75% of the appraised

value of the real property plus V0% of the appraised
value of the improvements or 75% of the appraised
value of the chattel (
 8  0 


)&!%   "g%"


Kinds of Deposits between a Bank and its Depositor

|. 


a. Savings
b. Time
c. Demand

g  
i. In the nature of irregular deposits (

/ 
( 

ii. Contract of loan/mutuum with the
depositor as creditor
iii. Bank acquires ownership of the thing
deposited and the right to use and dispose
iv. Money deposited is commingled with the
other money, constituting a common fund.
v. Not preferred credits  / 

& #( 


2. 

a. Safety deposit boxes the relation between a
bank renting out safety deposit boxes and its
customer with respect to the contents of the
box is that of a bailor and bailee the bailment
for hire and mutual benefit has been adopted in
this jurisdiction. It cannot be considered as a
contract of lease because the full possession
and control of the safety deposit box is not
given to the renters(
 ###( #
9 :

7   

a. Trust account
3   


s
 









 
 

c
 


~

a.

Deposit strictly for safekeeping and for specific

purposes


a.
b.
c.



 :
Deposit of check for collection
Deposit for specific purpose
Deposit for safekeeping

Depositors:
|.

"9gg "%
%(&)&!%

"
 

9  5

Minors :
a. at least seven years of age
b. able to read and write
c. not disqualified by any incapacity
d. it should only be savings or time deposits

"
 Parents may deposit for their minor children
or wards (Sec.| PD No.734P

Interest bearing deposit

accounts that combine
the payable on demand
feature of checks and
investment feature of
savings account.

An account with fixed

term

If the guardian shall give notice in

writing to any thrift bank not to make payments
of deposits, dividends, or interest to the minor
of whom he is the guardian, then such
payment shall be made to the guardian. (Sec.
22, Thrift Banks Act of | 5P

Married Women are allowed to open

bank accounts without assistance of their
husbands (RA No. 7| 2



Kinds of Deposits

"

)&("))&!%

/"gg "%

Only a universal or
commercial bank can
accept or create demand
deposits.

Evidenced
passbook.

A bank other than a

universal
bank
or
commercial
bank
CANNOT
accept
demand deposit

Banks are prohibited

from issuing / accepting
withdrawal
slips
or
other
similar
instruments to effect
withdrawals without the
passbooks except for
bank authorized by the
BSP to adopt the no
passbook
withdrawal
system.

Temporary overdrawing
against current accounts
shall not be allowed
unless caused by normal
bank charges and other
fees
incidental
to
handling such accounts.
Drawings
against
uncollected
deposits
(uncleared checksP are
generally prohibited.

by

Demand, savings, NOW accounts, time deposits

and deposit substitutes shall not be subject to
interest ceilings.

A bank other than a universal or commercial bank

must seek approval of Monetary Board before
accepting or creating demand deposits. 775

A bank is negligent if it
allows the withdrawal
without requiring the
presentation
of
a
passbook. (BPI v. CAP


Anonymous accounts are prohibited. 

 

  $$ +,  ; (% * 
 # 
!*, #  #  :

 Foreign currency deposits
may be a numbered account. However, the law
requires that the necessary measures are undertaken
by the bank to record and establish the true identity of
the depositor.
Joint account may be the subject of a survivorship
agreement whereby the co-depositor agree to permit
either of them to withdraw the whole deposit during their
lifetime and transferring the balance to the survivor upon
the death of one of them ( <*"   
  # 
 


Types of deposit accounts

=$+//1( 
<, $


| 
  

2 ;


a. And account
Co-ownership
The signatures of both co-depositors are
required for withdrawals.
b.

And/or account

s
 









 
 

c



Either one of the co-depositors may

deposit and withdraw from the account
without the knowledge, consent and
signature of the other. And upon the death
of one, the survivor may withdraw the
entire balance on deposit.

The account may be deemed a

survivorship agreement depending on the
intention of the parties; aleatory contract
supported by a lawful consideration which
is valid unless when made as a mere
cloak to hide an inofficious donation, to
transfer property in fraud of creditors, or to
defeat the legitime of a forced heir 

 %(7 / $ >* 
   %


9#:


Deposit substitutes
An alternative form of obtaining funds from the public,
other
than
deposits,
through
the issuance,
endorsement, or acceptance of debt instruments for the
borrowers own account, for the purpose of re-lending or
purchasing of receivables and other obligations (

  



)&!%
No security given to
guarantee
repayment;
the
depositor relies on
the
stability
and
reputation
of
the
bank.



In case a bank or quasi-bank notifies the Bangko

Sentral or publicly announces a bank holiday, or in any
manner suspends the payment of its deposit liabilities
continuously for more than 30 days, the Monetary Board
may summarily and without need for prior hearing close
such banking institution and place it under receivership
of the Philippine Deposit Insurance Corporation(




The depositary would be liable if in performing
its obligation it is found guilty of fraud,
negligence; in the absence of any stipulation
prescribing the degree of diligence required,
that of a good father of the family is to be
observed. Any stipulation exempting the
depositary from any liability arising from loss
on account of fraud, negligence would be void
for being contrary to public policy 6"
17
 #( #
 



"
: The bank shall act as depositary or as an agent
shall keep the funds, securities and other effects which
it receives duly separated from its own assets and
liabilities(
 




PROHIBITIONS

)&!%
 %% %&

Guaranteed
by
certificates and other
instruments.
=$+/  /
1(  
 <, 
$

|.

2.

 ""# 


A bank has the right to set-off the deposits in its

hands for the payment of any outstanding
indebtedness to it on the part of the depositor
0* 
 % 
# %
  ; % 
   ##
( #

The fiduciary nature of a bank-depositor
relationship does not convert the contract between
the bank and its depositors from a simple loan to a
trust agreement, whether express or implied.
Failure by the bank to pay the depositor is failure to
pay a simple loan and not a breach of trust. The law
simply imposes on the bank a higher standard of
integrity and performance in complying with its
obligations under the contract of simple loan,
beyond those required of non-bank debtors, under
a similar contract of simple loan > 
  
0


 
 ((+ #

This fiduciary relationship means that the banks
obligation to observe high standards of integrity
and performance is deemed written into every
deposit agreement between a bank and its
depositor. The fiduciary nature of banking requires
banks to assume a degree of diligence higher than
that of a good father of a family > 
  
.+$



Suspension of Payment on its Deposit

Liabilities

To directly act as insurer (
 

For banks or quasi-banks to declare dividends, if at
the time of declaration:
a. its clearing account with the Bangko Sentral is
overdrawn;
b.

it is deficient in the required liquidity floor for

government deposits for 5 or more consecutive
days;

c.

it does not comply with the liquidity

standards/ratios prescribed by the Bangko
Sentral for purposes of determining funds
available for dividend declaration; or

d.

It has committed a major violation as may be

determined by the Bangko Sentral(
 .

3.

To conduct business in an unsafe or unsound

manner (

;

4.

Publication of capital stock (


# ;

5.

Unauthorized
advertisement
representation (

 ; or


V.

or

business

To employ casual or non-regular personnel or too

lengthy probationary personnel in the conduct of its
business involving bank deposits(
 .

' 

 To prevent violation of Bank Secrecy
Law.

 " )'&g%', g&', &(!$.&&,

'&"%"#

|.

Make false entries in any bank report or statement

or participate in any fraudulent transaction;

s
 









 
 

c



2.

Without order of a court of component

jurisdiction,
disclose to any
unauthorized
person any information relative to the funds
or
properties in the custody of the bank belonging to
private individuals,
corporations, or any other
entity;

3. Accept gifts or any other form of remuneration

in
connection with the
approval of a loan or other
credit
accommodation from said bank;
4.

Overvalue or aid in overvaluing any

security for
the purpose of influencing in
any way the actions
of the bank or any
bank; or

5.

Outsource inherent banking functions a

bank cannot engage the services of
another
entity to receive deposits on its behalf; the bank
has to do it by itself.

' 

 To prevent violation of Bank Secrecy
Law =$+/  / 1(  
 <,  
$



However  a bank may outsource, upon prior
approval of the Monetary Board the following
functions:
All information technology systems and
processes, except for certain functions
affecting the ability of the bank to ensure the fit
of technology services deployed to meet its
strategic and business objectives and comply
with pertinent laws and regulations;
b. Data imaging, storage, and other related
systems;
c. Clearing and processing of checks not included
in the Philippine Clearing House System;
d. Printing of bank statements;
e. Credit card services;
f. Printing of bank loan statements and other
non-deposit records, bank forms and
promotional materials;
g. Credit investigation and collection;
h. Processing of export, import and other trading
transactions;.
i. Transfer agent services for debt and equity
services;
j. Property appraisal;
k. Property management services;
l. Messenger, courier and postal services;
m. Security guard services;
n. Vehicle service contracts
o. Janitorial services;
p. Other services as determined by the Monetary
Board.

4.

Offer any director, officer, employee or agent of a

bank any gift, fee, commission, or any other form of
compensation in order to influence such persons
into approving a loan or other credit
accommodation application.


) " &<("&', ! ' /&'"(&"%
g&' ") &(!$.&& "&) %
 !&'/&,  &<("&,  % ' '&")&'
%&g1"g$%"g&%"."# 
Commit any of the acts enumerated in Sec. 55 or aid in
the commission of the same.

The
making
of
false
reports
or
misrepresentations or suppression of material
facts by personnel of the BSP shall constitute
fraud and shall be subject to administrative and
criminal sanctions.

CONDUCTING BUSINESS IN AN UNSAFE OR UNSOUND

MANNER
!

a.

g "''9&'
|.

Fraudulently overvalue property offered as security

for a loan from the bank;

2.

Furnish false or make misrepresentations or

suppression of material facts for the purpose of
obtaining, renewing, or increasing a loan or
extending the period thereof;

3.

Attempt to defraud the said bank in the event of a

court action to recover a loan or other credit
accommodation; or

In determining whether a particular act or omission,

which is not otherwise prohibited by law, rule or
regulation affecting banks, quasi-banks, or trust entities,
may be deemed as conducting business in an unsafe or
unsound manner, the MB shall consider any of the
following circumstances:
|. The act or omission has resulted or may result in
material loss or damage, or abnormal risk or danger
to the safety, stability, liquidity or solvency of the
institution;
2.

The act or omission has resulted or may result in

material loss or damage, or abnormal risk to the
institutions depositors, creditors, investors, and
stockholders or to the BSP or to the public in
general;

3.

The act or omission has caused any undue injury,

or has given any unwarranted benefits, advantage
or preference to the bank or any party in the
discharge by the director or officer of his duties and
responsibilities through manifest partiality, evident
bad faith or gross inexcusable negligence;

4.

The act or omission involves entering into any

contract or transaction manifestly and grossly
disadvantageous to the bank, quasi-bank or trust
entity, whether or not the director or officer profited
or will profit thereby.

OWNERSHIP OF STOCKS OF A DOMESTIC

BANK
| 


 In case of a Filipino individual or a domestic nonbank corporation,   may own up to 40% of the
outstanding voting stock of a local bank.
2 


 Foreign individuals and non-bank corporations may
own or control up to an   of 40% of the
voting stock of a domestic bank.

s
 









 
 

c





The percentage of foreign-owned voting stocks in a

bank shall be determined: '")%1&'
' $&5
a. If individuals: by the citizenship of the
individuals
b. If corporations: by the citizenship of the
controlling stockholders of the corporation,
irrespective of the place of incorporation(




|.

2.

" #
#$#
"% &' '&
# ( 

 & ))*+

% (

 
 
+ 

 
 


  


  








|. By ?*"  (*"  " up to
V0% of the voting stock of an existing bank;

2.

3.

By " in up to V0% of the voting stock of a

new banking subsidiary
incorporated under
laws of Philippines;

By +" + with full banking

authority, provided:
a. foreign bank may avail itself of only one
mode of entry; and
b. Foreign bank or Philippine corporation
may own up to V0% of the voting stock
of only one domestic bank or new
banking subsidiary (
#



Entries under the second and third modes are

restricted to banks which are among the top |50
foreign banks in the world or top 5 banks in their
country of origin.
MINIMUM CAPITALIZATION:


|.

For locally incorporated subsidiaries equal to that

of domestic banks of the same category

2.

For foreign bank branches not less than the US$

equivalent of P2|0M

Amendments introduced by GBL 2000

|. Within seven years from effectivity of the GBL
(June |3, 2000P, foreign banks may be allowed
to own up to |00% equity of only one domestic
bank as a mode of entry if authorized by the
Monetary Board(
 0


2. Other foreign individuals and non-bank
corporations may own up to 40% of the voting
stock of a domestic bank; the nationality of the
controlling shareholders of the




corporations will be traced to determine the
foreign ownership of the domestic bank (

 0


FOREIGN BANKS (SECS. 7278)

 &   $ +*  

%((- The Monetary Board may revoke such
license on the grounds that the foreign bank is
insolvent or in imminent danger thereof or that its
continuance in business will involve probable loss
to those transacting business with it(



S TOCKHOLDINGS OF F AMILY GROUPS OR R ELATED

I NTEREST

The law does not prohibit ownership of the stock by
members of the same family or related interest.
However, the law provides that stockholdings of
individuals related to each other within the 4th degree of
consanguinity or affinity, legitimate or common law, shall
be considered family groups or related interest and must
be fully disclosed in all transaction by such individual
with the bank. (Sec |2, GBLP
Two or more corporations owned and controlled by
the same family group or same group of person shall be
considered related interest and must be fully disclosed
in all transaction by such corporations or related group
of person with the bank. (Sec |3, GBLP
Unlike the former law, the GBL does NOT impose a
limit on the number of shares that can be owned by the
same family or related interest. However this should not
be without prejudice to the 40% restriction imposed by
Sec ||of the GBL.



OWNERSHIP OF REAL PROPERTY


&"&'$ ' $&A bank cannot acquire and own real
property.

: Banks are not engaged in the business of
acquiring and possessing real property. Also, banks
must maintain liquidity at all times to enable it to perform
its functions. Thus, banks must as much as possible
retain only assets that are easily marketable.

&<g&!%"
|. As shall be necessary for its own use in the conduct
of its business, provided:
a. The total investment in such real estate and
improvements shall not exceed 50% of the
combined capital accounts; and
b.

2.




4,- Governed by the provisions of the Foreign

Bank Liberalization Act and the Offshore Banking
System Decree(
# 

the equity investment of a bank in another

corporation engaged primarily in real estate
shall be considered as part of the bank's total
investment in real estate, unless otherwise
provided by the Monetary Board(






As mortgaged to it in good faith by way of security
for debts, conveyed to it in satisfaction of a debt
previously contracted in the course of its dealings,
and such as it shall purchase at forced sales or to

s
 









 
 

c



   # (   ; thus, converting it to
conventional redemption or by estoppel if the
extension was unilaterally made.

secure debts; provided, however, that property

acquired under such circumstances shall be
disposed of by the bank within a period of 5 years;
provided that the bank may after said period
continue to hold the property for its own use,
subject to (|P(
#









DIRECTORS & OFFICERS

,
 &  '&
& ,
 &'    
 
""


-&"
 %    -&"

.(

 

 Judicial or extrajudicial foreclosure
; )g$

&<%'; )g$

Right of redemption
Within | year from
registration
of
the
foreclosure
sale
(exception to Rule V8P

|. ""  
 
 


Within one year after

the registration of
sale
with
the
Register of Deeds
((
   ( 


66P
2. ""  

 
 At
any time before the
registration of the
certificate
of
foreclosure
sale
which in no case
shall be more than 3
months
after
foreclosure,
whichever is earlier.



!
' 
To maintain the quality of bank management and afford
better protection to depositors and the public, in general,
the Monetary Board shall prescribe, pass upon and
review the qualifications and disqualifications of
individuals elected or appointed as bank directors or
officers and disqualify those found unfit(






)

A person other than an officer or employee of the bank,
its subsidiaries or affiliates or related interests.

!




!  
&"&'$ ' $& No appointive or elective official,
whether full-time or part-time, shall, at the same time,
serve as an
 of any private bank(




&<g&!%"
|. As otherwise provided under Sec. 5 of the Rural
Bank Act
2. Where such service is incidental to financial
assistance provided by the government-owned or controlled corporation to the bank
3. As otherwise provided under existing laws.

Redemption price:
*$**$""$$ + interest
+ all the cost and expenses incurred by the
bank or institution from the sale and custody of
the property less the derived income ( ;
2 /  
   0   
  !* # 
#
Right of purchaser to possess property:
Immediately after the date of the confirmation of
the auction sale.

A bank holding out its officers and agents as

worthy of confidence will not be permitted to
profit by the frauds they may thus be enabled
to perpetrate in the apparent scope of their
employment; nor will it be permitted to shirk
from its responsibility for such frauds, even
though no benefit may accrue to the bank
therefrom !*#$ (
 . Accordingly,
a banking corporation is liable to innocent third
persons where the representation is made in
the course of its business by an agent acting
within the general scope of his authority even
though, in the particular case, the agent is
secretly abusing his authority and attempting to
perpetrate a fraud upon his principal or some
other person, for his own ultimate benefit
%(( /" (
 
 $ 
0


#

!*, #





To enjoin or restrain the conduct of foreclosure

proceedings, the petitioner must file a bond
conditioned that he will pay all the damages which
the bank may suffer by the injunction(


A bank may be bound by an agreement providing
for a longer redemption period .+ * /

TRUST OPERATIONS

 )/./

 Only a stock corporation or a person duly

authorized by the Monetary Board shall act as a trustee
or administer any trust or hold property in trust or on
deposit for the use, benefit, or behalf of others(
 

s
 









 
 

c
 


%  
 any activity resulting from a trustortrustee relationship involving the appointment of a
trustee by a trustor for the administration, holding,
management of funds and/or properties of the trustor by
the trustee for the use, benefit, advantage of trustor or
others called beneficiaries.

4.

Dissolution of the corporation by quo warranto

proceedings












6

!

 

|. Act as trustee on any mortgage or bond issued by
any municipality, corporation or body politic and to
accept and execute any trust consistent with law
2.

Act under the order or appointment of any court as

guardian, receiver, trustee, or depositary of the
estate of any minor or incompetent person, and as
receiver and depositary of any money paid into
court by parties to any legal proceedings

3. Act as the executor of any will when it is named the

executor thereof
4. Act as administrator of the estate of any deceased
person, with the will annexed, or when there is no
will
5. Accept and execute any trust for the holding,
management and administration of any estate, real
or personal, and the rents, issues, and profits
thereof
V.



6
6




! 
 To maintain a central monetary authority that
shall function and operate as an independent and
accountable body in the discharge of its responsibilities
concerning money, banking and credit.

BANGKO SENTRAL NG PILIPINAS (BSP)

The states central monetary authority; it is the
government agency charged with the responsibility of
administering the monetary, banking and credit system
of the country and is granted the power of supervision
and examination over bank and non-bank financial
institutions
performing
quasi-banking
functions,
including savings and loan associations **" 

 (  
9:


Establish and manage common trust funds (




!



|. No trust entity shall, for account of the trustor or the
beneficiary of the trust, purchase or acquire
property from, or sell, transfer, assign or lend
money or property to, purchase debt from
instruments of, any of the departments, directors,
officers, stockholders or employees of the trust
entity, including relatives within the |st degree of
consanguinity or affinity, or the related interests, of
such directors, officers and stockholders, unless the
transaction is specifically authorized by the trustor
and the relationship of the trustee and the other
party involved in the transaction is fully disclosed to
the trustor or beneficiary of the trust prior to the
transaction(
 0


2. The trust business and all funds, properties or
securities received by any trust entity as executor,
administrator, guardian, trustee, receiver or
depositary shall be kept separate and distinct from
the general business, including all other funds,
properties, and assets, of such trust entity(
 
0





PENALTIES FOR VIOLATION OF THE GBL


!!


|. As provided by specific provisions
2. Sections 34-37 of RA 7V53 (by excluding the bank
from clearingP
3. Suspension or removal of the director or officer

P RIMARY OBJECTIVES :
|.

To maintain price stability conducive to a balanced

and sustainable growth of the economy.

2.

To promote and maintain monetary stability and the

convertibility of the peso.

R ESPONSIBILITIES :
|.

To provide policy directions in the areas of money,

banking, and credit

2.

To supervise bank operations

3.

To regulate the operations of finance companies

and non-bank financial institutions performing
quasi-banking functions, and similar institutions
(
 

P OWERS / FUNCTIONS :
|.

Issuer of currency (
6

 

2.

Custodian of reserves (


6

  

3.

Clearing channel or house; especially where the

PCHC does not operate (
# 

4.

Banker of the government the BSP shall be the

official depository of the Government and shall

s
 









 
 

c



Bangko Sentral, in which case such member shall
resign from, and divest himself of any and all
interests in such institution before assumption of
office (Sec. P;

represent it in all monetary fund dealings (


6

5.

V.
7.

8.



Financial advisor of the government (
 # 6

# Under Article VII, Sec. 20 of the | 87
Constitution, the President may contract or
guarantee foreign loans but with the prior
concurrence of the Monetary Board.
Source of credit (

6
6 
Supervisor of the banking system (
#  shall
include the power to:
a. Examine, extending to enterprises wholly or
majority-owned or controlled by the bank (

   ; this power may not be restrained
by a writ of injunction unless there is
convincing proof that the action of the BSP is
plainly arbitrary (
# 
b. Place a bank under receivership or liquidation
(
 
c. Initiate criminal prosecution of erring officers of
banks
Government agent (
6## 

2.

those coming from the private sector shall not hold

any other public office or public employment during
their tenure (Sec. P;

3.

cannot be connected directly with any multilateral

banking or financial institution or has a substantial
interest in any private bank in the Philippines, within
one (|P year prior to his appointment (Sec. P;

4.

cannot be employed in any such institution within

two (2P years after the expiration of his term except
when he serves as an official representative of the
Philippine Government to such institution (Sec. P;

5.

the Governor of the Bangko Sentral and the fulltime members of the Board shall limit their
professional activities to those pertaining directly to
their positions with the Bangko Sentral.
Accordingly, they may not accept any other
employment,
whether
public
or
private,
remunerated or ad honorem, with the exception of
positions in eleemosynary, civic, cultural or religious
organizations or whenever, by designation of the
President, the Governor or the full-time member is
tasked to represent the interest of the Government
or other government agencies in matters connected
with or affecting the economy or the financial
system of the country (Sec. 20P;

V.

in case any member of the Monetary Board with

personal or pecuniary interest in any matter in the
agenda of the Monetary Board shall disclose his
interest to the Board and shall retire from the
meeting when the matter is taken up (Sec. |4P.

MONETARY BOARD (MB)

The body by which the powers and functions of the
Bangko Sentral are exercised(




C OMPOSITION :
 
members consisting of:

|. Chairman: Governor of the BSP
2. A member of the cabinet to be designated by the
President of the Philippines
3. Five (5P members who shall come from the private
sector, all of whom shall serve full-time.




"
 The degree of diligence required of the members
of the MB, officials and employees of the BSP in the
performance of their functions is extraordinary diligence
(





Q UALIFICATIONS OF MEMBERS OF THE MONETARY

B OARD :
|.

must be natural-born citizens of the Philippines,

2.

at least 35 years of age, with the exception of the

Governor who should at least be 40 years of age,

3.

4.

of good moral character, of unquestionable

integrity, of known probity and patriotism, and
with recognized competence
economic disciplines.

in

social

and

D ISQUALIFICATIONS AND I NHIBITION ON GOVERNOR

AND B OARD M EMBERS :

|.

disqualified from being a director, officer, employee,

consultant, lawyer, agent or stockholder of any
bank, quasi-bank or any other institution which is
subject to supervision or examination by the

S UPERVISION AND E XAMINATION OF B ANKS

The BSP shall have supervision over, and conduct

periodic or special examinations of, banking
institutions and quasi-banks, including their
subsidiaries and affiliates engaged in allied
activities.

   a corporation more than 50% of the

voting stock of which is owned by a bank or quasi-bank
  a corporation the voting stock of which, to the
extent of 50% or less, is owned by a bank or quasi-bank
or which is related or linked to such institution or
intermediary through common stockholders or other
factors determined by the Monetary Board.


&

"##&0
# "



No restraining order or injunction shall be issued by

the court enjoining the Bangko Sentral from examining
any institution subject to supervision or examination by
the Bangko Sentral, unless there is convincing proof
that the action of the Bangko Sentral is plainly arbitrary

s
 









 
 

c


and made in bad faith and the petitioner or plaintiff files
with the clerk or judge of the court in which the action is
pending a bond executed in favor of the Bangko Sentral,
in an amount to be fixed by the court.

3.
4.
5.
V.
7.

R EFUSAL TO M AKE R EPORTS

E XAMINATION .

OR

PERMIT

To lease, own, and sell property

To sue and be sued
To acquire and hold such assets and incur such
liabilities in connection with its operations or as are
essential to the proper conduct of operation
To compromise, condone, or release any claim of,
or settled liability to the BSP
To do and perform such other necessary powers

CONSERVATORSHIP OF A BANK OR
QUASI-BANK


- Any officer, owner, agent, manager, director or officerin-charge of any institution subject to the supervision or
examination by the Bangko Sentral who, being required
in writing by the Monetary Board or by the head of the
supervising and examining department willfully refuses
to file the required report or permit any lawful
examination into the affairs of such institution shall be
punished under the Act. (Sec. 34P
    
 - The willful making of a false or
misleading statement on a material fact to the Monetary
Board or to the examiners of the Bangko Sentral shall
be punished. (Sec. 35P

PROHIBITIONS ON BANK OFFICERS, DIRECTORS,

LAWYERS, AGENTS
Personnel of the Bangko Sentral are hereby
prohibited from:
|.

being an officer, director, lawyer or agent,

employee, consultant or stockholder, directly or
indirectly, of any institution subject to supervision or
examination by the Bangko Sentral;


&:

 non-stock
savings
and
loan
associations and provident funds organized
exclusively for employees of the Bangko Sentral,
and except as otherwise provided in this Act;

2.

directly or indirectly requesting or receiving any gift,

present or pecuniary or material benefit for himself
or another, from any institution subject to
supervision or examination by the Bangko Sentral;

3.

revealing in any manner, except under orders of the

court, the Congress or any government office or
agency authorized by law, information relating to
the condition or business of any institution;

4.

borrowing from any institution subject to supervision

or examination by the Bangko Sentral shall be
prohibited unless said borrowings are adequately
secured, fully disclosed to the Monetary Board.
(Sec. 27P



 State of continuing inability or unwillingness to
maintain a condition of liquidity deemed adequate to
protect the interest of depositors and creditors.
A conservator appointed by the BSP may take over
without the need of first declaring the bank
insolvent.

)  

 Not to exceed | year

&
|. Bank/quasi-bank retains juridical personality
2. Not a precondition to the designation of a receiver

!



 

|. To take charge of the assets, liabilities, and the
management thereof;

2.

Reorganize the management;

3.

Collect all monies and debts due said bank; and

4.

Exercise all powers necessary to restore its

viability, with the power to overrule or rebuke the
actions of the previous management and board of
directors of the bank or quasi-bank.

The powers must be related to preservation of

assets, reorganization of management and the
restoration of viability. Such power to revoke cannot
extend to post-facto repudiation of perfected
transactions, otherwise they would infringe the nonimpairment clause of the Constitution. The power
to revoke contracts only covers those that are
deemed defective 

, void, voidable,
unenforceable or rescissible ' %
 .7 /

   ## (  #
 The conservators power
is not unilateral and he cannot simply repudiate
valid obligations of the bank. His authority would be
only to bring actions to assail the same.

% 



|.

When the MB is satisfied that the institution can

continue to operate on its own and the
conservatorship is no longer necessary;

2.

But if the continuance in business of the bank

would involve probable loss to its depositors or
creditors, proceedings for  

  

shall be pursued (
#






CORPORATE POWERS OF THE BSP


|.
2.

To adopt, alter and use a corporate seal which shall

be judicially noticed
To enter into contracts

RECEIVERSHIP OF A BANK OR
s
 









 
 

c


review. The purpose of the scheme is to protect
the depositors, creditors, stockholders and general
public/
 ##( 



QUASI-BANK/CLOSURE
Receivership is equivalent to an injunction to restrain
the bank in any way. Thus, the appointment of a
receiver operates to suspend the authority of the bank
and of its directors and officers over its property and
effects<*
 #(  9:







"g

$

|. Inability
to
pay
liabilities as they become
due in the ordinary
course of business, but
not including inability to
pay those caused by
extraordinary demands
induced by financial
panic in the banking
community;

|. Notification to the
BSP
or
public
announcement of a
bank holiday (

 0

2. Insufficiency
of
realizable assets to meet
its liabilities;

2. Suspension of
payment of deposit
liabilities
continuously for more
than 30 days (

 0 

3. Inability to continue
business
without
involving probable losses
to its depositors or
creditors; or

3. Persistence
in
conducting business
in an unsafe or
unsound
manner.
(

0

Only stockholders representing the majority of the

capital stock of a bank have the personality to file a
petition for certiorari to be filed within |0 days from
receipt by the board of directors of the institution of
the order directing receivership, liquidation or
conservatorship.
' 

 Stockholders owning a majority of the
shares are expected to be more objective in
determining whether the resolution is plainly
arbitrary and issued in bad faith (
   ;
 / 
   0

 
 
    



g&)&%
g
 

!
 g


 ,228g'~7=

 

Based on the financial reports submitted to the
Central Bank, which states that the Financial condition
of The Triumph Savings Bank (TSBP is one of
insolvency and its continuance in the business world
involve probable loss to its depositors and creditors, the
Monetary Board issued a Resolution ordering the
closure of TSB, forbidding it from doing business in the
Philippines, placing it under receivership and appointing
Ramon V. Taiaoqi as receiver. The TSB filed a
complaint assailing the resolution on the ground of lack
of prior notice and hearing

4. Willful violation of a
cease and desist order
that has become final,
involving
acts
or
transactions
which
amount to fraud or a
dissipation of the assets
of the institution (





' 
|. Banks PDIC
2. Quasi-banks Any person
competence in banking or finance


Section 2 of the Central Bank Act does not
contemplate prior notice and hearing before a bank may
be declared to stop operations and placed under
receivership. When it provides for the filing of the case
within |0 days after the receiver takes charge of the
assets of the bank, it is unmistakable that the assailed
actions should precede the filing of the case. Plainly, the
legislature could not have intended or authorize no
prior notice and hearing in the closure of the bank and
at the same time allow the suit to annul it on the basis of
the absence thereof.

 

Whether or not a Monetary Board Resolution
be annulled on the ground of lack of prior notice and
hearing

' 


of

recognized





|. Immediate gathering and taking charge of all the
assets and liabilities of the institution and
administering them for the benefit of creditors
2. General powers of a receiver
3. Determination ASAP but not later than 0 days,
whether
the
institution
should
undergo

   or   .
Note the distinctions between rehabilitation and
liquidation.

This close now and hear later scheme is

grounded on practical and legal consideration to prevent
the unwarranted dissipation of the banks asset and as a
valid exercise of the police power to protect the
depositors, creditors, stockholders and the general
public.

CLOSE NOW, HEAR LATER SCHEME

Sec. 2 of the Central Bank Act does not

contemplate prior notice and hearing before a bank
is placed under receivership. It is enough that such
action is made the subject of a subsequent judicial

|.


(")%'.'&M '&(&"%'"#
g$ '&
Examination by the appropriate BSP department as
to the condition of the bank

s
 









 
 

c


2.
3.
4.

5.

Examination shows that the condition of the bank is

one of insolvency
Director shall inform the MB in writing of such fact
If the MB shall find the statement of the department
to be true, it shall appoint a receiver of the assets
and liabilities of the bank  '( 
  
#( 9:

Within V0 days, the MB shall determine and confirm
if the bank is insolvent, and if public interest
requires, shall order the liquidation of the bank.







A determination by the MB that the bank cannot be

rehabilitated.


!
 
|. Receiver shall file 5(, with the proper RTC, a
petition for assistance in the liquidation of the
institution pursuant to a liquidation plan adopted by
the PDIC for general application to all closed banks.
In case of quasi-banks, the liquidation plan shall be
adopted by the Monetary Board.


3.


#   - In amounts not exceeding

P|00.00 *
  #


! 

' 
|.

Notes for any series or denomination More than 5

years old

2.

Coins More than |0 years old

|.

Notes and coins called in for replacement shall

remain legal tender for a period of one year from
the date of call.

2. After that period, they shall cease to be legal tender

during the following year or for such longer period
as MB may determine.

3.

After the expiration of this latter period, the notes

and coins which have not been exchanged shall
cease to be a liability of BSP and shall be
demonetized (



Checks representing demand deposits do not

have legal tender power and their acceptance
in the payment of debts, both public and
private, is at the option of the creditor.

However, a check which has been cleared and

credited to the account of the creditor shall be
equivalent to a delivery to the creditor of cash
in an amount equal to the amount credited to
his account (




He shall convert the assets of the institution to

money for the purpose of paying the debts of the
institution(
 

Payment shall be in accordance with the rules on
concurrence and preference of credits.
Regular courts have no jurisdiction over actions
filed by claimants against an insolvent bank )"
 # ( 





&&g%  !!"%(&"%  '&g&/&'*
$M )%"
|. Suspension of operation
2. The assets under receivership or liquidation shall
be deemed  *$ " in the hands of the
receiver and shall be exempt from garnishment,
levy, attachment or execution (
 

3.

Bank is not liable to pay interest on deposits during

the period of suspension of operation )
/
  ( 9#: 

4.

The corporation retains its legal personality >



'. %
9#: 


5.

2.

' 




|. The condition of the bank is one of insolvency or
that its continuance would involve probable loss to
its depositors and creditors.

2.

6% 6%$6%- In amounts not

exceeding P|,000.00

LIQUIDATION

2.

|.

Deposits do not become preferred credits  


& #( 9
:  




MONETARY STABILIZATION


#-&"""&&

"&1#
2
#
 "##"%


|. $



 '


5
a. If BSP wants to increase money supply, it
opens the rediscount window by reducing
interest on loans
b. If BSP wants to decrease money supply, it
closes the rediscount window or charges very
high interest rates for rediscounted notes

2. Open Market Operations (
 

a. If BSP wants to increase money supply, it buys
government securities
b. If BSP wants to decrease money supply, it
sells government securities

LEGAL TENDER
All notes and coins issued by the Bangko Sentral are
fully guaranteed by the Republic and shall be legal
tender in the Philippines for all debts, both public and
private(
# 

$ 






3.

Reserve Requirements (
  - where a certain

percentage of the deposit is set aside and cannot
be lent out
a. if the volume of money is high, BSP will raise
reserve requirement

s
 









 
 

c
 

b.

if the volume of money is low, reserve

requirement is reduced.

|. The required reserves of each bank shall be

proportional to the volume of its deposit
liabilities.
2. Since the required reserves are imposed
primarily to control the volume of money, the
Bangko Sentral shall not pay interests thereon
(




4.

Deposits maintained with the Bangko Sentral

as part of the reserve requirements shall be
exempt from attachment, garnishment, or any
other order or process of any court or agency
(


No increase of more than 4% point within 30day period.

PROHIBITIONS ON THE BSP

|.

2.

It shall not acquire shares of any kind or accept

them as collateral, and shall not participate in the
ownership or management of any enterprise, either
directly or indirectly; and
It shall not engage in development banking and
financing (
#



  

 
6 

 

! 

|. To encourage people to deposit in banks
2. To discourage private hoarding so that banks may
lend such funds and assist in the economic
development

g
 
All deposits of whatever nature with banks or banking
institutions in the Philippines, including investments in
bonds issued by the Government of the Philippines, its
political subdivisions and its instrumentalities.


PROHIBITED ACTS:
|.

2.

Examination and inquiry or looking into all deposits,

of whatever nature, with the banks in the
Philippines including investments in bonds issued
by the Government.
Any disclosure by any official or employee of any
bank to any unauthorized person of any information
concerning the said deposits.





BAR QUESTION:
Banks: Secrecy of Bank Deposits; Garnishment
(2004)
&& 




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SUGGESTED ANSWER
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8

 
China Banking Corporation v. Ortega, 49 SCRA
355 (1973) 




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. 

 34 
  
 
  
 

 
 
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B. From other laws

|.


 
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: ;

2.

"'g - Inquiry by the Commissioner of Internal

Revenue into bank deposits of:


&"&'$ ' $& The deposits covered by law are
considered as of an +*, &$ * and
may not be examined, inquired or looked into by any
person, governmental bureau, or office.

&<g&!%"

A.

In cases where the money deposited or invested is

the subject matter of the litigation; (
# 

' 

3.

4.

F ROM R.A. N O . 1405

|.

Upon written permission of the depositor;

2.

In cases of impeachment;

3.

Upon order of a competent court in cases of bribery

or dereliction of duty of public officials;

3.

a. A decedent to determine his gross estate;

b. A taxpayer who has filed an application for
compromise of his tax liability by reason of
financial incapacity to pay his tax liability. He
must file a written waiver of his privilege under
RA |405 or other general or special laws (


9&: . 


Inquiry or examination by the 
(


$

 g

 ($g5 of any particular
deposit or investment with any banking institution or
non-bank financial institution upon order of any
competent court in cases of violation of the AntiMoney Laundering Law, when it has been

s
 









 
 

c


established that there is probable cause that the
deposits or investments are related to an unlawful
activity or a money laundering offense, : that
no court order shall be required in the following
unlawful activities:
a. Kidnapping for ransom under Art. 2V7 RPC;
b. Comprehensive Dangerous Drugs Act of 2002


 ;

garnishment. Any disclosure is purely

incidental to the execution process 
/" ( 
 )"   ( 




Illegally acquired property extends to cases

where property is concealed by being held by
or recorded in the name of respondents
spouse, ascendants, descendants, relatives, or
any other persons'(("$
""/
%* 
( 




Money-market placement is not covered by RA
|405 because it is not deposited in the bank.
BAR QUESTION:
BANKS: APPLICABILITY: FOREIGN CURRENCY
DEPOSIT ACT & SECRECY OF BANK DEPOSITS
(2005) 
+ @  & 
  
 



 "
 
  
   " 
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& 
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0
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. 

  
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a) Will the complaint filed against the directors of
Hi Yielding Corporation prosper? Explain

c. Hijacking and other violations under RA V235;

destructive arson and murder under RPC.
Including those perpetrated by terrorists against
non-combatant persons and similar targets
(
 



$$+,(

&  
4.

Disclosure to the Treasurer of the Philippines of

dormant deposits for at least |0 years under the

   

 






OTHER LAWS RELATING TO SECRECY OF BANK

DEPOSITS

 

g 
)




#

B. Extends confidentiality to foreign currency deposits,
but the law contains only one ground authorizing
examination: upon written permission of the
depositor.

g 
 

$ 
2888


 

|. No bank shall employ casual or non-regular
personnel or too lengthy probationary personnel in
the conduct of its business involving bank deposits
(



2. No director, officer, employee, or agent of any bank
shall, without court order, disclose to any
unauthorized person any information relative to the
funds or properties in the custody of the bank
belonging to private individuals, corporations, or
any other entity, provided that with respect to bank
deposits, the provisions of existing laws shall
prevail(
9+:

3. Outsourcing of inherent bank functions

) "g
 




 
|. DOSRI loans
2. Periodic and special examinations by the BSP
(Sec. 25P

& 
(

$





 

Provides
for
another
exception
to
confidentiality, which is applicable to both peso
and foreign currency deposits.

Garnishment of bank deposit of judgment
debtor does not violate RA |405. It was not the
intention of the legislature to place bank
deposits beyond the reach of execution to
satisfy a final judgment. Its purpose is merely
to secure information as to the name of the
depositor and whether or not the defendant
had a deposit in said bank, only for purposes of

SUGGESTED ANSWER: 
s 

9  & %
<
s 6!6    
  " "

 
 
    % 


 
  
 
  /   
 8

 
 
 

  

 
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.
 

 
 


b) Was there a violation of the Secrecy of Bank
Deposits Law (Republic Act No. 1405)? Explain.
SUGGESTED ANSWER: 
s  

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 0
. 

 2
 < s  !7#    


 % 4 
  "     
  

 
  9&-
 
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% Intengan v. Court of Appeals, G.R. No.
128996, February 15, 2002



REQUISITES FOR IN-CAMERA INSPECTION OF

BANK DEPOSITS
s
 









 
 

c


Marquez vs. Desierto, G.R. No. 135882,
June 27, 2001
|.
2.
3.
4.
5.

Pending case before a court of competent

jurisdiction
Account must be clearly identified
The inspection is limited to the subject of the
pending litigation.
The bank personnel and account holder must be
present during the inspection.
The inspection must cover only the account
identified in the pending case.





R.A. NO. 1405 VIS--VIS POWER OF THE BSP TO

CONDUCT PERIODIC AND/OR SPECIAL
EXAMINATIONS
34
*

Prof. Aquino and Prof. Viray believe that the

general rule still applies. Hence, the deposit
remains confidential.


!

Imprisonment of not more than 5 years or a fine not
more than P20,000 or both, in the discretion of the
court.

W HERE F UNDS D EPOSITED ARE S UBJECT OF

L ITIGATION
g )

 1

> 
 ,278g'|4|

 
Sun Life brought a collection case to recover
the proceeds of a check it had issued, the insurance
company wanted to determine how the defendant had
applied the proceeds of the check. The trial court
allowed Sun Life to examine pertinent records of the
bank in which the check was deposited.
' 

The Supreme Court held that the examination
was authorized by Section |0 of Rule 57, on the
examination of a person whose property has been
attached and person indebted to him or controlling his
property. The Court struck down the argument that the
examination would violate the Bank Secrecy Law,
explaining that the examination fell within the exception
in cases where the money deposited or invested is the
subject matter of litigation. The Court added that the
examination of bank records was not a fishing
expedition, but rather a method by which Sun Life could
trace the proceeds of the check that it paid to the
petitioners.

   

In impeachment proceedings, the impeachment
court may inquire into bank deposits. Thus, during the
impeachment proceedings against former President
Estrada, Chief Justice Davide ruled that Clarissa
Ocampo could testify on the Jose Estrada/Jaime
Dichaves accounts maintained with Equitable PCIB
Bank, over the objections of the defense that this would
violate the Bank Secrecy Law. Basis for this ruling was
that the inquiry would be made in the course of an
impeachment proceeding.

W RITTEN P ERMISSION OF DEPOSITOR 

A bank may allow an inquiry into a deposit with the
written consent of the depositor. An oral or implied
authorization does not suffice. This consent may be
given voluntarily. In some cases, however, the consent
is involuntary because the law requires it.
Thus, Section 2V of the New Central Bank Act as
implemented by BSP Circular No. |70, series of | 8,
requires a director, officer or stockholder of a bank or
their related interests to submit a written waiver of the
secrecy of all his deposits of whatever nature in all
banks of the Philippines in favor of the Bangko Sentral,
if he applies for a DOSRI loan.
However, the
information obtained from the examination remains
confidential and may be used by BSP examiners only in
legal action it may initiate involving the said deposits.
A waiver of the Bank Secrecy Law is also required
in case of loans secured by a hold-out or an assignment
of certificates of time deposits. (Section X3|5, Manual of
Regulations for BanksP.

In another case, Mellon Bank remitted $|

million rather that an intended $|,000 to the recipient,
who deposited part of the remittance in a local bank.
When personnel of the depositary bank testified on the
bank deposits, the defense moved to strike out the
testimonies of the depositary banks witnesses. The
Supreme Court allowed their testimonies to remain on
the record, stating Section 2 of said law allows the
disclosure of bank deposits in cases where the money
deposited is the subject matter of the litigation. 
/
" ( 





UNEXPLAINED WEALTH (RA3019)

Although the Bank Secrecy Law did not include
cases covered by the Anti-Graft Law among the
exceptions, the Supreme Court held that they should be
included. The only conclusion possible is that Section 8
of the Anti-Graft Law is intended to amend Section 2 of
Republic Act No. |405 by providing an additional
exception to the rule against disclosure of band
deposits. %
0, ( 


This overturned an earlier case decided by the High
Court where it held that a prosecution under the AntiGraft Law was not embraced within any of the
exceptions to the Bank Secrecy Law that would allow
disclosure by a bank of information concerning a
deposit
 >  * 
 / & %.   ( 



In another case, the Supreme Court expanded the
exception under the Anti-Graft Law, when it allowed an
examination not only of the accuseds deposits, but also
those of his spouse, ascendant, descendants and
relatives, and other persons as well. ( '( 

=
'$ %*  |V| SCRA 57V (| 88P. Here, the
Court declared as proper the production by subpoena
duces tecum of bank records of transactions by or in the
names of the wife, children and friends of a special
agent of the Bureau of customs accused of having

s
 









 
 

c


allegedly acquired property manifestly out of proportion
to his salary and lawful income. The Court explained:
To sustain the petitioners theory, and restrict the
inquiry only to property held by or in the name of the
government official or employee, or his spouse and
unmarried children, is unwarranted in the light of the
provisions of the statutes in question, and would make
available to persons in government who illegally acquire
property an easy and fool-proof means of evading
investigation and prosecution; all they would have to do
would be to simply place the property in the possession
or name of persons other than their spouse and
unmarried children. This is an absurdity that we will not
ascribe to the lawmakers.




  

Although Section 8 of the law that created the
Office of the Ombudsman expressly granted the
Ombudsman the power to administer oaths, issue
subpoena and subpoena duces tecum and take
testimony in any investigation or inquiry, including the
power to examine and have access to bank accounts
and records, the Supreme court held that the
Ombudsman could not inquire into bank deposits until
there was a pending case in court involving the
deposits
?*@
1  ( ## 


   
$ 
The Unclaimed Balances Law (Republic Act No.
3 3VP requires each bank to file a sworn statement with
the Treasurer of the Philippines stating the deposits that
the bank holds in the names of persons known to be
dead or who have not made deposits or withdrawals
during the preceding ten years or more. It is also
requires the bank to post a copy of the sworn statement
in the bank premises. However, this is done only after
the bank shall have first communicated with the
depositor at his last known residence or post office
address. Such a disclosure of the deposits and the
depositors, does not violate the Bank Secrecy Law.
 
 


)


In  /" ( 
 * & ((,
(| 3 SCRA 452 (| |P the Supreme Court held that the
garnishment of a bank deposit does not violate the Bank
Secrecy Law. Said the court:
  
 
     
 
  
 
   
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|.

To protect and preserve the integrity and

confidentiality of bank accounts, to ensure that the
Philippines shall not be used as a site for unlawful
money laundering activities; and

2.

To pursue States foreign policy to extend

cooperation in transnational investigations and
prosecution on money laundering activities.

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|.

Banks

2.

Non-banks

3.

Quasi-banks

4.

Trust entities

5.

All other institutions, their subsidiaries and affiliates

supervised or regulated by the BSP

COVERED TRANSACTION:

BAR QUESTION:
Banks; Secrecy of Bank Deposits (2000)

Transaction, in cash or other equivalent monetary

instrument in excess of P500,000, within one banking
day.

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SUSPICIOUS TRANSACTIONS:
Transactions with covered institutions regardless of the
amounts involved, where any of the following
circumstances exists:
|.

There is no underlying legal or trade obligation

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2.

Client is not properly identified

3.

Amount involved is not commensurate with the

business or financial capacity

4.

Taking into account all known circumstances, it

may be perceived that the clients transaction is
structured in order to avoid being the subject of
reporting requirements under the Act

J URISDICTION :


All cases: RTC

Public officers and private persons in conspiracy

with them: Sandiganbayan


5.

Any circumstance relating to the transaction which

is observed to deviate from the profile and/or the
clients past transactions with the covered institution

P OWER TO F REEZE A CCOUNTS

V.

Transaction is in any way related to an unlawful

activity or offense under this Act that is about to be,
is being or has been committed

The power of the AMLC to freeze accounts has

been deleted under RA | 4

7.

Analogous transactions to any of the foregoing

The Court of Appeals may issue a freeze order,

which shall be effective immediately and for a
period of 20 days, unless extended by the court,
only:

MONEY LAUNDERING:
A crime whereby the proceeds of an unlawful activity
are transacted, thereby making them appear to have
originated from legitimate sources. It is committed by
the following:
|.

Any person knowing that any monetary instrument

or property represents, involves, or relates to, the
proceeds of any unlawful activity, transacts or
attempts to transact said monetary instrument or
property.

2.

Any person knowing that any monetary instrument

or property involves the proceeds of any unlawful
activity, performs or fails to perform any act as a
result of which he facilitates the offense referred to
in number | above.

3.

Any person knowing that any monetary instrument

or property is required under this Act to be
disclosed and filed with the AMLC fails to do so.

P REVENTION OF M ONEY L AUNDERING

| g 

 

-Covered institutions
shall establish and record the true identity of its
clients based on official documents. They shall
maintain a system of verifying their clients and in
case of corporate client, require a system of
verifying their legal existence and organizational
structure, s well as the authority and identification of
all person purporting to act on their behalf.
2 '
#
- All records of all transaction of
covered institution shall be maintained and safely
stored for 5 years from the dates of transaction.
With respect to closed accounts, the records on
customer identification, account files and business
correspondence, shall be preserved and safely
stored for at least 5 years from the dates when they
were closed.
7 '


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. Covered institution shall report to
the AMLC all covered and suspicious transactions
within 5 working days from the occurrence thereof,
unless the Supervising Authority prescribes a
longer period not exceeding |0 working days.

a.

upon 5( application of AMLC; and

b.

after determination that probable cause exists

that any monetary instrument or property is in
any way related to an unlawful activity.

BAR QUESTION:
BANKS; SECRECY OF BANK DEPOSIT; AMLC
(2006)
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1. Can Rudy move to dismiss the case on the
ground that he has no criminal record? (2.5%)

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2. To raise funds for his defense, Rudy sold the
houses and lots to a friend. Can Luansing Realty,
Inc. be compelled to transfer to the buyer
ownership of the houses and lots? (2.5%)

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3. In disclosing Rudy's bank accounts to the

AMLC, did the bank violate any law? (2.5%)

 
 
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4. Supposing the titles of the houses and lots are

in possession of the Luansing Realty, Inc., is it
under obligation to deliver the titles to Rudy?
(2.5%)

! 

|.

To create a government-owned entity, the PDIC;

2.

To insure the deposit liability of banks in an account

up to P250,000 for every single depositor of each
bank irrespective of the number of accounts
therewith.

PHILIPPINE DEPOSIT INSURANCE CORPORATION

F UNCTIONS :
 
 

The PDIC assesses and collects insurance
assessments from member-banks to insure
member-banks deposit accounts. In case of bank
closures, the PDIC processes and services claim
for insured deposits. Deposits are insured up to a
maximum coverage of P250,000 per depositor.

SUGGESTED ANSWER: 
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BAR QUESTION:

Under the new law, PDIC's authority to examine its

member banks, with prior approval by the Monetary
Board, has been restored.

BANKS; SECRECY OF BANK DEPOSITS (1991)


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The PDIC may grant financial assistance to
distressed banks if it is proven to be a less costly
alternative than closure.


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Once a bank is ordered closed by the Monetary
Board (MBP of the Bangko Sentral ng Pilipinas, the
PDIC is designated as statutory receiver. The PDIC
upon receipt of the MB resolution ordering the
closure of a bank, immediately physically takes
over the closed bank. Receivership is the stage
within which the PDIC manages the affairs of the
closed bank and preserves its assets for the benefit
of creditors.

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After it is determined that the closed bank can not
be rehabilitated, the PDIC shall recommend the
liquidation of the assets of the closed bank.
Liquidation refers to the recovery and conversion of
assets into cash for distribution to all creditors in
accordance with the order of creditor preference
pursuant to law


INSURANCE FUNCTION
|. *-Compulsory insurance on all bank deposits
2. "-Insured deposits - the net amount due
to any depositor for deposits in an insured bank,
after deducting unpaid loans and other obligations
of the depositor to the closed bank. In no case shall
insured deposit exceed P250,000 per depositor.


The plaintiffs invested in the money market
placement with the Premier Financing Corporation
(PFCP but when they went to PFC to encashed the
checks and promissory notes corresponding to their
investment the PFC referred them to the Regent
Savings Bank (RSBP. Instead of paying the promissory
notes and checks, the RSB issued |3 certificate of time
deposit which was insured with the PDIC. The bank
failed to pay the corresponding amount of the time
deposit on its maturity date due to insolvency and
advised the plaintiffs to file a claim with the PDIC. But
the PDIC refused to pay the claim for it is not included in
the list of duly recorded liabilities of the RSB.
 

Whether or not the PDIC is liable for the
plaintiffs claims.
' 


The fact that the certificate state that the
certificates are insured by PDIC does not ipso facto
make the latter liable for the same should the
contingency insured against arise. The deposit liability
of the PDIC is determined by the provisions of R.A.
35| and statements in the certificate that the same are
insured by PDIC are not binding upon the latter.


 

The net amount due to any depositor for deposits in
an insured bank, & $$*" &&, less any part
thereof which is in excess of P250,000.

3. ((& / *$ "- Bank closure only.

Thus, losses due to a bank robbery are not
covered.

Trust funds and safety deposit boxes are not

covered.

4. *&*-Maximum of P250,000.00 per

deposit (RA 302P
5. $ ($ &   (,


    
 



 




 

V. &(,-
a. Cash
b. Transferred deposit A deposit in an insured
bank made available to a depositor by the
PDIC as payment of the insured deposit of
such depositor in a closed bank and assumed
by another insured bank.

Consistent with the rulings in 0* 
 % 

# %

 $ (*+ 
   0

 
 #  !*, ## 
 recognizing the debtor-creditor relationship of the
bank and the depositor, set-off takes place (3* with
respect to the depositors bank deposit and his matured
loan with the bank.

 



%


A deposit in an insured bank made available to a
depositor by the PDIC as payment of the insured
deposit of the depositor in a closed bank and assumed
by another insured bank.


7 4&& & (, +,  %1.   $( &

*$$(-
a. Discharges the PDIC from further liability
b. Subrogates the PDIC to all the rights of the
depositor against the closed bank to the extent
of such payment.


SPECIAL RULES
|.

The fact that a bank instrument provides that the

certificate is insured by the PDIC does not ipso facto
make the latter liable for the same; the deposit liability of
the PDIC is determined by the provisions of RA 35| 
%1.
 # ( 
#




 

Capacities: individual account, joint and

account, joint and/or account.

2.

The insurance premiums are to be paid by the

insured bank, not the depositors.

3.

In case the depositors account is more than the

insurance coverage, the balance may still be
recovered from the PDIC after the final liquidation
of the remaining assets of the closed bank.

g )
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PDIC liability is on a per bank basis. Accounts in a

bank, even though in several branches, are to be
added together, provided that they are maintained
in the same capacity and the same right for his
benefit either in his own name or in the name of
others.

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4. a.

If the account is held jointly by two or more

natural persons, or by two or more juridical
persons or entities, the maximum insured
deposit shall be divided into as many equal
shares as there are individuals, juridical
persons or entities, unless a different sharing is
stipulated in the document of deposit.

b. If the account is held by a juridical person or

entity jointly with one or more natural persons,
the maximum insured deposit shall be
presumed to belong entirely to such juridical
person or entity: %$$  &*, That the
aggregate of the interests of each co-owner
over several joint accounts, whether owned by
the same or different combinations of
individuals, juridical persons or entities, shall
likewise be subject to the maximum insured
deposit of Two hundred fifty thousand pesos
(P250,000.00P.


Demand drafts cannot be escheated but

telegraphic notes can be escheated (*+

'  ( 9
:


LEGAL CONSEQUENCE
The unclaimed balances may be subject of escheat
proceedings, after proper publication and the depositors
still do not lay claim to them.


 

 

   
|.

Non-payment of insurance premiums

2.

Continued engagement in unsafe and unsound

banking practices

Sec. of RA V42V (An Act Instituting a Foreign

Currency Deposit System in the Philippines,
and for Other Purposes"P and Sec. 7 of
Central Bank (CBP Circular No. |38 , dated
August |3, | 3, mandate that foreign
currency deposits shall be insured under the
provisions of RA 35 |, as amended. Under CB
Circular No. |38 , depositors are entitled to
receive payment in the same currency in which
the insured deposit is denominated.

"
 The PDIC law is not applicable to Offshore
Banking Units%
1

 



 
!
 
66



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)&!%

Governed by R.A.
No. |405

Governed by R.A. No.

V42V

4
exceptions
+
exceptions found in
special laws

| exception + | provided
under AMLA (R.A. No.
|V0P

May be garnished
or attached (not a
violation of R.A. No.
|405P

044  24- Exempt

from
attachment,
garnishment, and other
court
order
and
processes.
4A4%>.)- (

#( #

!
     
    
     

      

&LEMENTS OF UNCLAIMED BALANCES

|.

2.
3.



There must be a claim or deposit of:

a.

Money;

b.

Bullion;

c.

Security; or

d.

other evidence of indebtedness.

The credit or deposit must be with a bank, building

and loan association, or trust corporation; and
The credit or deposit is in favor of a person:
a.

who is dead, or

b.

who has not made further deposits or

withdrawals during the preceding |0 years or
more.

OTHER FEATURES:
|.

Authorized banks may adopt a numbered account

system for recording and servicing deposits in nonchecking accounts

2.

Foreign currency deposits are exempt from taxes

except the interests

3. In the event a new enactment or regulation is issued

decreasing the rights granted under the law, it shall
not apply to FCDs already made or existing at the
time of the issuance of such new regulation or
enactment.

In a * " case, the SC allowed garnishment

of such deposits of a transient American tourist
arising out of a heinous crime committed against a
Filipino minor since to hold otherwise would result
to injustice to a citizen perpetrated by a foreigner

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 This case does not constitute another
exception, the SC only ruled as such due to the
special circumstances of the said case.

 
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REPEALING LAW TO UNIFORM CURRENCY

ACT &5+5
All monetary obligations shall be settled in the Philippine
currency which is legal tender in the Philippines.
However, the parties may agree that the obligation or
transaction shall be settled in any other currency at the
time of payment(




6!6 


6


The law assures full disclosure by requiring the lender
to give the borrower all the details regarding the
transaction.
Under Sec. 4, any creditor shall furnish to each
person to whom credit is extended, prior to the
consummation of the transaction, a clear statement in
writing setting forth, to the extent applicable and in
accordance with rules and regulation prescribed by
the Board the following informations:


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|. The cash price or delivered price of the property or

service required;
2. The amounts, if any to be credited as down payment
and/or trade-ins;

[[[

3. The difference between the amounts set forth under

clauses | and 2;
4. The charges, individually itemized, which are paid or
to be paid by such person in connection with the
transaction but which are not incident to the extension
of credit.

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5. The total amount to be financed;

V.

The finance charge expressed in terms of pesos

and centavos; and

7.

The percentage that the finance bears to the total

amount to be financed expressed as a simple
annual rate on the outstanding unpaid balance of
the obligation.

BAR QUESTION:
TRUTH IN LENDING ACT (1991)


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