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BANKING LAWS

BANKS ARE ENTITIES

Definition of a bank: An entity engaged in the lending of


funds obtained in the form of deposits (S3.1 General
Banking Law).
- LEGAL REQUIREMENT
-

STOCK CORPORATION

BANKS SPECIALLY NEEDED TO BE REGISTERED IN THE SEC


LIKE COMMON CARRIERS THE DEGREE OF DILIGENCE OF BANKING
CORPORATION IS THAT OF - HIGHEST DEGREE OF DILIGENCE IN THE
CONDUCT OF ITS BUSINESS
ENTITY FOR SAFEKEEPING AND ACTIVE INSTRUMENT FOR BUSINESS
AND COMMERCE
URSALVS. CA- BANKS CANNOT MERELY RELY ON THE CERTIFICATE OF
TITLE OF THE STATUS OF THE MORTGAGE PROPRTTY AS THE BUSINESS
IS IMPRESSED OR IMBUED WITH PUBLIC INTEREST.
Banking institution is required to entir3e greater care before entering into contract
The rule that persons dealing with titled land is emphasized in this case
China Banking vs. Lagon a certain Mr. Hao applied for a loan with China
Banking Corp and to secure the loan, nag present xa ng titulo ng lupa and the
property was registered in the name of respondent loan- hindi xa ang may-ari.
Nag pakita sya ng SPA purportedly signed by Lagon. Apparently si borrower
The bank relied upon the SPA, approved the loan and released to Mr Hao but Mr
hao defaulted in paying so the bank foreclosed the property of Mr lagon. So when
respondent learned about this, respondent opposed (I did not sign an SPA). So
on this question on the authenticity of SPA spurious and cannot be a basis for
mortgage.
Bank good faith- rely on the face on the SPA, etc.
Whose contention was sustained by the SC? Dba pag public document enjoys
the presumption of regularity.

SC- not persuaded by the argument of the China Bank that it could rely on what
appears in the SPA. The Bank has knowledge that respondent was in US when
SPA was signed yet it did not question. Bank did not exhaust
Banks are expected to exercise greater care for their business is impressed with
public interest.

G.R. No. 146918

May 2, 2006

CITIBANK, N.A., Petitioner,


vs.
SPS. LUIS and CARMELITA CABAMONGAN and their sons LUISCABAMONGAN, JR.
and LITO CABAMONGAN, Respondents.

Luis and Carmelita opened a Joined, and/or foreign time deposit Luis Jr and
Lito at Citi Bank Makati Branch for a term of 155 days
Passport
Bank of America card
Mabuhay
To show that she is the real Carmelita
So the account officer attended her request
She was also asked to sign a quitclaim
Yeye accepted the quitclaim without being notarized
So Carmelita got the proceeds.
After the alleged Carmelita Left.
so Carmelita left her ID and she called the number
an identified person broke into the house of Carmelita in amerce and took the
jewelry box. Sosyal na magnanakaw galling pa America
so Carmelita impostor was paid.
Settle the innocent parties left behind the depositor, spouses cababongan, and
drawee bank where the deposits are being maintained.
This is the issue which the SC is tasked to resolved? Who will suffer the loss?
The SC ruled against the BANK. The court has emphasized- since banking is
imbued with public interest, HIGHEST DEGREE OF DILIGENCE IS EXPECTED
and HIGHEST STANDARD

Treat the account of its depositors with meticulous care . in this case, the
signatures are forgery
Baba kayo sa facts its not enough for you to sa Yes/No.
Bababa kayo sa facts.
Sabi ng SC the Bank is under obligagtion to treat the account of its depositors
with meticulous care fiduciary care
The Court has repeatedly emphasized that, since the banking business is
impressed with public interest, of paramount importance thereto is the trust and
confidence of the public in general. Consequently, the highest degree of diligence
is expected, and high standards of integrity and performance are even required,
of it. By the nature of its functions, a bank is "under obligation to treat the
accounts of its depositors with meticulous care, always having in mind the
fiduciary nature of their relationship.
In this case, it has been sufficiently shown that the signatures of Carmelita in the
forms for pretermination of deposits are forgeries. Citibank, with its signature
verification procedure, failed to detect the forgery. Its negligence consisted in the
omission of that degree of diligence required of banks. The Court has held that a
bank is "bound to know the signatures of its customers; and if it pays a forged
check, it must be considered as making the payment out of its own funds, and
cannot ordinarily charge the amount so paid to the account of the depositor
whose name was forged." Such principle equally applies here.
For not observing the degree of diligence required of banking institutions, whose
business is impressed with public interest, Citibank is liable for damages.
PNB vs. Pike 20 september 2005
Wag na wag niyo kakalimutan yung KEYWORDS the examiner will only
The busness of a bank is imbued with public interest.

since the banking business is impressed with public interest, of


paramount importance thereto is the trust and confidence of the
public in general.

- SECTION 17 OF THE CORPORATION CODE basic


requirement
- Favorable recommendation from the BSP with regards to the
proposed AOI
- When you incorporate a Bank do not go directly to SEC but to
BSP so the BSP can see to it that AOI are consistent with law,
otherwise SEC will not approve it
- Daan ka sa main regulator- BSP
- Under the CC, banks should be openly held cannot be a closed
corporation
- Under 64 of the BL the used of the word Bank is forbidden
- DIFFERENT KINDS OF BANK
- CLASSIFICATION OF BANKS
- THEY VARY FROM UNIVERSAL, COMMERCIAL, THRIFT,
RURAL, ISLAMIC and other classifications as determined by
the Monetary Board
- They differ in terms of many factors in terms of capitalization
- As to the purpose- they also differ
- Rural banks are created in order to extend Loans and credit
facilities and meet the credit needs of fishermen and farmers
- Cooperative banks for federation and cooperatives
- They also differ in terms of equity
- Foreign equity 40%
2 basic functions
1. deposit function
2. loan function
- when money is deposited in a bank, a relationship is inevitably
created its one of creditor and debtor relationship
- creditor- one depositing the money

debtor- bank
allows the bank to borrow so borrower xa, debtor xa
so there are different types of deposits
regardless of the type of deposit, the relationship is the same.
Banks is fiduciary
In case of deposit, the amount delivered to the bank
When the money is delivered to the bank, the money is now
owned by the bank. If the bank will use the money, there can no
be liability of estafa because title has already passed to the
bank
- Special capacity accorded to MINORS PD 734
- THEY HAVE REACHED age of 7 years
- Able to read and write
- Expression unios es exclussio alterius
- Vitug vs. ca the validity of the survivorship agreement is in
question. Mag-asawa ang nag sign but the respondents were
questioning because it is in violation of the civi code provisionspouses donating from each other
- The SC sustained the survivorship agreement the one that is
contemplated by the FC is a donation that will takes place
during the marriage but here only after the dissolution of the
marriage , it is mortis causa and not the one contemplated in
the FC and the SC further explained that if there is a question if
one is donation,
The donation occurs only after the marriage- so the survivorship
agreement is valid
- BANK SECRECY LAW RA 1405 FAVORITE SOURCE OF
BAR QUESTION
- Section 2, RA 1405 all deposits of whatever nature with banks
including investments in bond issued by the government of the
Philippines,etc are considered absolutely confidential therefore
they may not be EXAMINED, look into
-

Rule is: CONFIDENTIALITY (its an old old statute noh) so we have


long list of exceptions
SECRECY IS MORE OF AN EXCEPTION THAN THE RULE
Absultely confidential no inquiry by govt official, any person, any
private individual. The prohibition against examination applies also to
PRIVATE INDIVIDUAL! The rule is in place to encourage investment
by way of deposit. However there are exceptions.- are found in RA
1405
1. written permission emanating from the depositor
2. impeachment case upon the order of a competent court
3. order of competenet if the money is a subject of litigation
4. Anti graft and corrupt practices act
5. Unclaimed balances act involves disclosure to the
TREASURER OF THE PHILIPPINES dormant accounts
6. Human security act
7.

Is it bawal for the DOS to borrow? The answer is no. they just have to
go thru stringent requirement .they have to go thru board approval
There should be a WRITTEN APPROVAL of all the directors of the
LENDING BANK with the exclusion of the director concerned. Now
another procedural requirement is the entry of such approval in the
records of the bank and a COPY of the entry to be transmitted
forthwith to the BSP. The terms to be offered to the DOSRI shall not
be less favorable to the bank- arms length rule. Not less favorable to
the bank than be offered with the others. The monetary board has the
authority to regulate the amount given to DOSRI. Basic premise- we
are trying to guard possible abuse by DOSRI

The general banking law and the new central bank act does not
defined who related interests are but just to give u an idea- Circular
423 series of 2004- follows section 36 of the GBLIn one BAR question
It was the spouse of the president of the Bank who applied for a
LOAN
Few scenarios that would make a person related interest
1. asawa/ spouse/relative up to 1st degree whether by
consanguinity or affinity but the relationship also includes
adoption asawa ng DOS of the lending bank 1 st degreeparents, children
2. borrower is Mister
3.
TRUTH IN LENDING ACT
- READ
- EAT PEANUTS
- Take note of the information to be disclosed under the TLA
section 4
- Charges which are to be paid by the borrower in connection
with the transaction
- The amount to be financed charge
- By finance charge section 3, paragraph 3 contemplates
interests, fees, service charges which are incident to the