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Banking Institution are governed by the following laws: A. General banking laws  General Banking Law (R.A. No. 8791) . New Central Bank Act (R.A. No. 7653) B. Special banking laws  New Rural Banks Act (R.A. No. 7353)  Private Development Banks Act (R.A. No. 4093)  Savings and Loan Association Act (R.A. No. 3779)  . Thrift Banks Act (R.A. No. 7906) C. Other laws affecting banks  Secrecy of Bank Deposits Law (R.A. No. 1405)  Unclaimed Balances Law (Act No. 3936)  Philippine Deposit Insurance Corporation Act (R.A. No. 3591)  The general banking laws above mentioned are applicable to government banks like DBP and PNB.  The Al- Amanah Islamic Bank is subject to all banking and pertinent laws. (Bar Review Materials Miravite, 2002 ed.) in Commercial Law, Jorge BAR QUESTION: JOINT ACCOUNT VS. PARTNERSHIP (2000) Distinguish joint account from partnership. (3%) SUGGESTED ANSWER The following are the distinctions between joint account and partnership: 1) A partnership has a firm name while a joint account has none and is conducted in the name of the ostensible partner. 2) WHILE A PARTNERSHIP HAS JURIDICAL PERSONALITY AND MAY SUE OR BE SUED UNDER ITS FIRM NAME, A JOINT ACCOUNT HAS NO JURIDICAL PERSONALITY AND CAN SUE OR BE SUED ONLY IN THE NAME OF THE OSTENSIBLE PARTNER. 3) While a partnership has a common fund, a joint account has none. 4) While in a partnership, all general partners have the right of management, in a joint account, the ostensible partner manages its business operations. 5) While liquidations of a partnership may, by agreement, be entrusted to a partner or partners, in joint account liquidation thereof can only be done by the ostensible partner.

1. 2. 3. banks : entities that obtains funds from the public in the form of deposits and re-lend it to the public; quasi-banks : those that obtain funds in the form of deposit substitutes and re-lend the same and not from the public or depositors. Finance companies and other financial intermediaries: those that lend funds from their own assets.

BAR QUESTION: Theory of Cognition vs. Theory of Manifestation (1997) The Civil Code adopts the theory of cognition, while the Code of Commerce generally recognizes the theory of manifestation, in the perfection of contracts. How do these two theories differ? SUGGESTED ANSWER: Under the theory of cognition, the acceptance is considered to effectively bind the offeror only from the time it came to his knowledge. Under the theory of manifestation, the contract is perfected at the moment when the acceptance is declared or made by the offeree.

1. 2. 3. 4. 5. Government Depositors Investors Creditors Borrowers

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The certificate of authority shall not be issued unless the Monetary Board is satisfied: 1. That all requirements of existing laws and regulations to engage in the business for which the applicant is proposed to be incorporated have been complied with; That the public interest and economic conditions, both general and local, justify the authorization; and That the amount of the capital, the financing, organization, direction and administration, as well as the integrity and responsibility of the organizers and administrators, reasonably assure the safety of deposits and the public interest (Sec. 14).

Purpose: To promote and maintain a stable and efficient banking and financial system that is globally competitive, dynamic and responsive to the demands of a developing economy (Sec. 2). Scope of Application: The GBL primarily governs universal banks and commercial banks. It suppletorily governs thrift banks, rural banks and other banking institutions.



BANKS   Entities engaged in the lending of funds obtained in the form of deposits (Sec. 2) Entities duly authorized by the Monetary Board to engage in the business of regularly lending funds obtained regularly from the public through the receipt of deposits of any kind. An investment company that performs function as such is NOT a bank. Thus an investment company that is engage solely in investing, reinvesting or trading in securities is not engage in banking. ( Banas vs. Asia Pacific Finance Corp., Oct. 18, 2000). However, an investment company which loans out money of its customers, collects interest, and charges a commission to both lender or borrower is engage in banking (Republic vs. Security Credit and Acceptance Corp.)

Organization of a Bank or Quasi-Bank Requirements: 1. The entity is a stock corporation; 2. Its funds are obtained from the public, i.e. 20 or more persons; and 3. The minimum capital requirements prescribed by the Monetary Board are satisfied (Sec. 8). Note: In Quasi banks, Deposit substitute are alternative forms of obtaining funds for the public, other than deposit, through the issuance, endorsement, or acceptance of debt instrument for the borrowers own account, for the purpose of relending or purchasing of receivables and other banking or quasi-banking functions   A person or entity cannot engage in banking or quasi-banking functions without a certificate of authority from the BSP (Sec. 6). The determination of whether a person or entity is performing banking or quasi-banking functions without BSP authority shall be decided by the Monetary Board.  

QUASI-BANKS  Entities engaged in the borrowing of funds through the issuance, endorsement or assignment with recourse or acceptance of deposit substitutes (Sec. 95) Entities authorized to perform universal or commercial banking functions may also engage in quasi-banking functions.

Impressed with public interest where the trust and confidence of the public in general is of paramount importance such that: 1. The appropriate standard of diligence must be very high, if not the highest, degree of diligence; highest degree of care (PCI Bank vs. CA, 350 SCRA 446, PBCom vs. CA, G.R. No. 121413, 29 Jan. 2001)  This applies only to cases where banks are acting in their fiduciary capacity, that is, as depository of the deposits of their depositors (Reyes vs. CA, G.R. No. 118492, 15 Aug. 2001). Subject to reasonable regulation under the police power of the state. 

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

A. Authority to Register/Incorporate  The SEC shall not register the articles of incorporation of any bank or any amendment thereto unless accompanied by a certificate of authority issued by the Monetary Board under its seal (Sec. 14). 2. 

While an innocent mortgagee is not expected to conduct an exhaustive investigation on the history of the mortgagor¶s title, in case of a banking

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it has unrestricted retained earnings in its books to cover the shares to be purchased/ acquired. representatives are sent to the premises offered as collaterals so as to investigate who the real owners are (DBP vs. 9). 17).). certify it to the NLRC for compulsory arbitration 1. CA.  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. May not declare dividends. BANKING CORPORATION Must generally be a stock corporation Shall issue par value stocks only (Sec. 57 are present. G. 4. 147800. Must be composed of 5 to 15 directors. Thrift banks ± These are a) Savings and mortgage banks. He may assume jurisdiction over and decide the dispute. Reason: Before a loan is approved. if unsettled after 7 calendar days shall be reported by the BSP to the Sec. Also composed of 5 to 15 directors. Universal banks . May purchase/acquire its own shares for a legitimate corporate purpose. CLASSIFICATION OF BANKS (SEC. May be registered with the SEC without any certificate of authority issued by a government agency. They are governed primarily by the Cooperative Code (RA 6938). if any of the conditions set forth under Sec.R. Islamic banks ± Banks whose business dealings and activities are subject to the basic principles and rulings of Islamic Shari¶ a. G. Ramos. Special rules on strikes and lockouts: any strike or lockout involving banks. CONSEQUENCES OF NATURE OF BUSINESS: 1. provided that.Page 3 of 26 institution.Primarily governed by the General Banking Law (GBL). or institutions like the GSIS.A. 2003). The President may also intervene at any time and assume jurisdiction over such labor dispute in order to settle or terminate the same. It is required to exercise utmost diligence in the handling of deposits (Simex International Manila Inc. Other classification of banks as determined by the Monetary Board of the Bangko Sentral ng Pilipinas. cooperatives primarily to provide financial and credit services to cooperatives. regularly engaged in the business of lending money secured by real estate mortgages (GSIS vs. 5. or b. Cooperative banks ± Those banks organized whose majority shares are owned and controlled by May not purchase/ acquire its shares or accept them as security for a loan. can exercise the powers of an investment house and invest in nonallied enterprises and have the highest capitalization requirement. October 28. It is subject to heavy and close supervision and/or regulation by the BSP (Central Bank of the Phils. It shall include cooperative rural banks. No. c) Private development banks. such as the Al Amanah Islamic Investment Bank of the Philippines which was created by RA 6848. 183 SCRA 361). and cannot rely upon on what is or is not annotated on the title. It is expected to ascertain and verify the identities of the persons it transacts business with (UCPB vs. 3) 1. In such case. of Labor who has 2 options: a. 7. which are primarily governed by the Thrift Banks Act (R. In case of merger or consolidation. the bank must sell or dispose of said shares within 6 months from the time of their acquisition (Sec. it must exercise due diligence before entering into said contract. November 11. Callejo. 155206. CA. 2003. Commercial banks . 7906).. Rural banks ± Mandated to make needed credit available and readily accessible in the rural areas on reasonable terms and which are primarily governed by the Rural Banks Act of 1992 (RA 7353). 2. v. 2. Must secure a certificate of authority from the Monetary Board before it can register with SEC. Except: when authorized by the Monetary Board. each of whom shall own at least one (1) share of the capital stock of the corporation. No. 331 SCRA 267). the number of directors shall not exceed 21 (Sec.  ORDINARY CORPORATION May be a stock or non-stock corporation May issue par value or no par value stocks. b) Stock savings and loan associations.R.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. May declare dividends out of its unrestricted retained earnings. 6. Due diligence required of banks extend even to persons. 3. 10). Eduardo Santiago. Notes of hotjurist in foro conscientiae . 208 SCRA 652). J.

bills of exchange and other evidence of debt. 23). General powers incident to corporations 2. 30-32) Total investment in allied enterprises Total investment in non-allied enterprises Equity investment in any one enterprise 50% of net worth 50% of net worth 25% of net worth 25% of net worth (Allied only) Equity investment in financial allied enterprise: thrift bank. 24) COMMERCIAL BANK No such powers additional payment in legal tender upon demand by the presentation of checks (Sec. 58. Equity investment in non-financial allied enterprises 100% of equity 100% of equity UNIVERSAL & COMMERCIAL BANK Authorized to engage in quasi-banking functions without need for approval May accept or create demand deposits without need for approval Demand deposits Liabilities of the BSP and of other banks which are denominated in Philippine currency and are subject to OTHER BANKS Not so authorized Equity investment in a single non-allied enterprise Must seek approval of Monetary Board before accepting or creating demand deposits. receiving other types of deposits and deposit substitutes. c. Buying and selling foreign exchange and other debt securities. and non-allied enterprises (Sec. investment shall remain a minority holding (Sec. Accepting or creating demand deposits. whether financial or non-financial. whether financial or non-financial POINT OF DISTINCTION UNIVERSAL BANK (Sec. rural bank or any financial allied enterprise (Sec. drafts. Such powers as may be necessary to carry on the business of commercial banking: a. The powers of an investment house. 33) Shall not exceed 35% of the total equity in that enterprise nor shall it exceed 35% of the voting stock in that enterprise N/A Equity investment Quasi-Banks in 40% 40% Notes of hotjurist in foro conscientiae . The powers authorized for a commercial bank. d. 25) A publicly-listed bank may own up to 100% of the voting stock of only one other UB / CB (Sec. and 3. 1. (Sec. b. 24-28) COMM¶L BANK (Sec. 35% of net worth N/A Powers 1. The power to invest in non-allied enterprises (Sec. NCBA). (Sec. Extending credit. Accepting drafts and issuing letter of credits. 31). Discounting and negotiating promissory notes. e. 2.Page 4 of 26 UNIVERSAL BANK Authority to exercise additional powers other than those authorized for commercial banks May invest in the equities of allied. 25). EQUITY INVESTMENTS May only invest in equities of allied enterprises. 29) 100% of equity 100% of equity y In other financial allied enterprises.

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. March 5. 2. or constituent bank or corporations under rehabilitation from full compliance with the required capital ratio. safety deposit boxes) NET WORTH The total of the unimpaired paid-in capital including paid-in surplus. LOAN FUNCTION Requirement for Grant of Loans Before granting a loan. Notes of hotjurist in foro conscientiae . Act as financial agent and buy and sell. act as managing agent.Page 5 of 26 Allied Enterprises ± those entities which enhance or complement banking Non-Financial Allied Enterprises ± pertains to activities that do not involve money matters (such as warehousing. or constituent bank or corporations under rehabilitation from full compliance with the required capital ratio. negligence would be void for being contrary to public policy (CA-Agro Dev¶t vs. or 2. EXCEPT: purchases of evidence of indebtedness guaranteed by the Government. or when a bank is under rehabilitation under a program approved by BSP. Loan Function 2. retained earnings and undivided profit. Should such statements prove to be false or incorrect. consolidated bank. PROVIDED that. Rent out safety deposit boxes. In case of a bank merger or consolidation. Upon prior approval of the Monetary Board. the MB may temporarily relieve the surviving bank. by order of and for the account of their customer. 219 SCRA 426. CA. FUNCTIONS OF BANKS BASIC FUNCTIONS: 1. Acquisition of major assets and making of new investments may be restricted. the Monetary Board may require or suspend compliance with such ratio whenever necessary for a maximum period of one year. Any stipulation exempting the depositary from any liability arising from loss on account of fraud. such ratio shall be applied uniformly to banks of the same category (Sec. However. evidences of indebtedness and types of securities. Deposit Function OTHER FUNCTIONS Universal banks and commercial banks may also exercise any of the following functions: a. d. consolidated 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. Rules: 1. 24). 3. documents and valuable objects. securities and other effects which it receives duly separated from its own assets and liabilities. shares. the bank may terminate any loan granted on the basis of said statements and shall have the right to demand immediate repayment or liquidation of obligation (Sec. in the absence of any stipulation prescribing the degree of diligence required. or when a bank is under rehabilitation under a program approved by BSP. EXCEPT: purchases of evidence of indebtedness guaranteed by the Government (Sec. adviser. 34). 40). b. consultant or administrator of investment management/ advisory/consultancy accounts.  The depositary would be liable if in performing its obligation it is found guilty of fraud. In case of a bank merger or consolidation. 53) RISK±BASED CAPITAL  The minimum ratio prescribed by the Monetary Board which the net worth of a bank must bear to its total risk assets which may include contingent accounts. negligence. Effects of non-compliance with the prescribed minimum ratio: 1. net valuation reserves and other adjustments as may be required by the Bangko Sentral (Sec. 3. Effect of non-compliance with the prescribed minimum ratio: 1. 1993). and e. 34). A bank may demand from its applicants a statement of their assets and liabilities and of their income and expenditures and other information. that of a good father of the family is to be observed. Receive in custody funds. a bank must ascertain that the debtor is capable of fulfilling his commitments to the bank.   A. Acquisition of major assets and making of new investments may be restricted. the MB may temporarily relieve the surviving bank. (Sec. 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. Note: The bank acting as depositary or as an agent shall keep the funds.

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

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

A bank other than a universal or commercial bank must seek approval of Monetary Board before accepting or creating demand deposits. A. the law requires that the necessary measures are undertaken by the bank to record and establish the true identity of the depositor. savings.. NOW accounts. Deposit for safekeeping NOW ACCOUNTS (Negotiable Order of Withdrawal) Interest bearing deposit accounts that combine the payable on demand feature of checks and investment feature of savings account. BSP Circular No. dividends. 33) Banks are prohibited from issuing / accepting withdrawal slips or other similar instruments to effect withdrawals without the passbooks except for bank authorized by the BSP to adopt the no passbook withdrawal system. then such payment shall be made to the guardian. Thrift Banks Act of 1995)  Married Women are allowed to open bank accounts without assistance of their husbands (RA No. 1998 ed. by a   Demand.  Joint account may be the subject of a survivorship agreement whereby the co-depositor agree to permit either of them to withdraw the whole deposit during their lifetime and transferring the balance to the survivor upon the death of one of them ( Vitug vs. Individual Joint a.734)  If the guardian shall give notice in writing to any thrift bank not to make payments of deposits. time deposits and deposit substitutes shall not be subject to interest ceilings. Deposit strictly for safekeeping and for specific purposes As agent-principal: a. Minors : a. 2. CA)  Anonymous accounts are prohibited. ³And´ account  Co-ownership  The signatures of both co-depositors are required for withdrawals. b. March 29.A.1 PD No.) 1. 7192 Kinds of Deposits Note: DEMAND DEPOSITS Only a universal or commercial bank can accept or create demand deposits. (BPI v. However. July 21. 5. (Sec. ³And/or´ account Notes of hotjurist in foro conscientiae . A bank other than a universal bank or commercial bank CANNOT accept demand deposit SAVINGS ACCOUNT Evidenced passbook. (Sec. Drawings against uncollected deposits (uncleared checks) are generally prohibited. Viray.Page 8 of 26 a. A bank is negligent if it allows the withdrawal without requiring the presentation of a passbook. not disqualified by any incapacity d. CA. it should only be savings or time deposits An account with fixed term Note: Parents may deposit for their minor children or wards (Sec. able to read and write c. 1990) Temporary overdrawing against current accounts shall not be allowed unless caused by normal bank charges and other fees incidental to handling such accounts. ( R. Types of deposit accounts (Handbook on Bank Deposits. Deposit of check for collection b. 251. or interest to the minor of whom he is the guardian. TIME DEPOSITS Depositors: 1. at least seven years of age b. Deposit for specific purpose c. No 9160 as amended by RA 9194. 2000) exception: Foreign currency deposits may be a ³numbered account´. 22.

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

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

73. foreign banks may be allowed to own up to 100% equity of only one domestic bank as a mode of entry if authorized by the Monetary Board (Sec. The total investment in such real estate and improvements shall not exceed 50% of the combined capital accounts. 72) Revocation of license to do business in the Philippines: The Monetary Board may revoke such license on the grounds that the foreign bank is insolvent or in imminent danger thereof or that its continuance in business will involve probable loss to those transacting business with it (Sec. foreign bank may avail itself of only one mode of entry. 78). As shall be necessary for its own use in the conduct of its business. MINIMUM CAPITALIZATION:  OWNERSHIP OF REAL PROPERTY GENERAL RULE: A bank cannot acquire and own real property. GBL)  Two or more corporations owned and controlled by the same family group or same group of person shall be considered related interest and must be fully disclosed in all transaction by such corporations or related group of person with the bank. Rationale: Banks are not engaged in the business of acquiring and possessing real property. and b. GBL). However.Page 11 of 26  The percentage of foreign-owned voting stocks in a bank shall be determined: (GRANDFATHER RULE) a. provided: a. 11). GBL). provided: a. By acquiring. and b. 2. 2). 2. (Sec 12. Also. For foreign bank branches ± not less than the US$ equivalent of P210M  Amendments introduced by GBL 2000 1. If individuals: by the citizenship of the individuals b. 2. 51). Entry: Governed by the provisions of the Foreign Bank Liberalization Act and the Offshore Banking System Decree (Sec. conveyed to it in satisfaction of a debt previously contracted in the course of its dealings. 1. Foreign bank or Philippine corporation may own up to 60% of the voting stock of only one domestic bank or new banking subsidiary (Sec. the law provides that stockholdings of individuals related to each other within the 4th degree of consanguinity or affinity. to S TOCKHOLDINGS OF F AMILY GROUPS OR R ELATED I NTEREST  The law does not prohibit ownership of the stock by members of the same family or related interest. GBL)  Unlike the former law. purchasing or owning up 60% of the voting stock of an existing bank. banks must as much as possible retain only assets that are easily marketable. Thus. NO. By establishing branches with full banking authority. Other foreign individuals and non-bank corporations may own up to 40% of the voting stock of a domestic bank. Within seven years from effectivity of the GBL (June 13. (Sec 13. If corporations: by the citizenship of the controlling stockholders of the corporation. unless otherwise provided by the Monetary Board (Sec. 3. 1. By investing in up to 60% of the voting stock of a new banking subsidiary incorporated under laws of Philippines. 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. EXCEPTIONS: 1. 11. and such as it shall purchase at forced sales or to Notes of hotjurist in foro conscientiae . FOREIGN BANKS (SECS. banks must maintain liquidity at all times to enable it to perform its functions. However this should not be without prejudice to the 40% restriction imposed by Sec 11of the GBL. ACT LIBERALIZING ENTRY OF FOREIGN BANKS (R. the nationality of the controlling shareholders of the non-bank corporations will be traced to determine the foreign ownership of the domestic bank (Sec. 2. 72 78) As mortgaged to it in good faith by way of security for debts. the GBL does NOT impose a limit on the number of shares that can be owned by the same family or related interest. legitimate or common law. For locally incorporated subsidiaries ± equal to that of domestic banks of the same category 2. shall be considered family groups or related interest and must be fully disclosed in all transaction by such individual with the bank.A. 7721) The Monetary Board authorizes foreign banks to operate through any of the following modes of entry: 1. Entries under the second and third modes are restricted to banks which are among the top 150 foreign banks in the world or top 5 banks in their country of origin. 2000). irrespective of the place of incorporation (Sec.

or behalf of others (Sec. EXCEPTIONS: 1. provided. Where such service is incidental to financial assistance provided by the government-owned or controlled corporation to the bank 3.Page 12 of 26 secure debts. A bank may be bound by an agreement providing for a longer redemption period (Ibaan Rural Bank TRUST OPERATIONS (SECS. AM No. As otherwise provided under existing laws. 5 of the Rural Bank Act 2. 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. 1(3) SC Cir. GR 134068. benefit. CA. however. RULES ON FORECLOSURE OF A REAL ESTATE MORTGAGE BY A MORTGAGEE-BANK Application: Judicial or extrajudicial foreclosure JUDICIAL EXTRAJUDICIAL Fit and Proper Rule DIRECTORS & OFFICERS Right of redemption Within 1 year from registration of the foreclosure sale (exception to Rule 68) 1. January 15. converting it to conventional redemption or by estoppel if the extension was unilaterally made. p. Union Bank vs.R. 321 SCRA 83).  To enjoin or restrain the conduct of foreclosure proceedings. provided that the bank may after said period continue to hold the property for its own use. 2001) Right of purchaser to possess property: Immediately after the date of the confirmation of the auction sale. whichever is earlier. at the same time. vs. To maintain the quality of bank management and afford better protection to depositors and the public. G. pass upon and review the qualifications and disqualifications of individuals elected or appointed as bank directors or officers and disqualify those found unfit (Sec. whether full-time or part-time. nor will it be permitted to shirk from its responsibility for such frauds. vs. Redemption price: Amount due under the mortgage deed + interest + all the cost and expenses incurred by the bank or institution from the sale and custody of the property less the derived income (Sec 78. 127469. 2004). even though no benefit may accrue to the bank therefrom (10 Am Jur 2d. 79)  Notes of hotjurist in foro conscientiae . the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other person. 114). subject to (1) (Sec. No. that property acquired under such circumstances shall be disposed of by the bank within a period of 5 years. 79-93)  Only a stock corporation or a person duly authorized by the Monetary Board shall act as a trustee or administer any trust or hold property in trust or on deposit for the use. As otherwise provided under Sec. CA. 16) Independent Director A person other than an officer or employee of the bank. 19). CA and Marcos. thus. Accordingly. June 25. shall. Mortgagor is a natural person ± Within one year after the registration of sale with the Register of Deeds (Sec. Mortgagor is a juridical person ± At any time before the registration of the certificate of foreclosure sale which in no case shall be more than 3 months after foreclosure. 47). Prohibition on Public Officials GENERAL RULE: No appointive or elective official. for his own ultimate benefit (Philippine Banking Corp. in general.  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. in the particular case. the Monetary Board shall prescribe. 52). 99-10-05) 2. serve as an officer of any private bank (Sec. the petitioner must file a bond conditioned that he will pay all the damages which the bank may suffer by the injunction (Sec. its subsidiaries or affiliates or related interests.

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

117-122) Bangko Sentral. lawyer. to the extent of 50% or less. 4. 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. of unquestionable integrity. 9). 25) b. disqualified from being a director. 7. MONETARY BOARD (MB) The body by which the powers and functions of the Bangko Sentral are exercised (Sec. and divest himself of any and all interests in such institution before assumption of office (Sec. of known probity and patriotism. extending to enterprises wholly or majority-owned or controlled by the bank (Sec. Accordingly. 7. 5. 110. with the exception of the Governor who should at least be 40 years of age. quasi-bank or any other institution which is subject to supervision or examination by the No restraining order or injunction shall be issued by the court enjoining the Bangko Sentral from examining any institution subject to supervision or examination by the Bangko Sentral. 2. cannot be connected directly with any multilateral banking or financial institution or has a substantial interest in any private bank in the Philippines. of good moral character. 61-63. 20 of the 1987 Constitution. and conduct periodic or special examinations of. 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. RA 8791). unless there is convincing proof that the action of the Bangko Sentral is plainly arbitrary Notes of hotjurist in foro conscientiae . Place a bank under receivership or liquidation (Sec. 14). 2. Initiate criminal prosecution of erring officers of banks Government agent (Secs. 6. NCBA). banking institutions and quasi-banks. Chairman: Governor of the BSP A member of the cabinet to be designated by the President of the Philippines Five (5) members who shall come from the private sector. agent or stockholder of any 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 (Sec. in social and The BSP shall have supervision over. those coming from the private sector shall not hold any other public office or public employment during their tenure (Sec. remunerated or ad honorem. 2. all of whom shall serve full-time. 123124) ± Under Article VII. officer. Financial advisor of the government (Secs. with the exception of positions in eleemosynary. C OMPOSITION : Seven members consisting of: 1. cultural or religious organizations or whenever. and with recognized competence economic disciplines. Sec. Note: The degree of diligence required of the members of the MB. including their subsidiaries and affiliates engaged in allied activities. employee. whether public or private. within one (1) year prior to his appointment (Sec. by designation of the President.16. officials and employees of the BSP in the performance of their functions is extraordinary diligence (Sec.  S UPERVISION AND E XAMINATION OF B ANKS Q UALIFICATIONS OF MEMBERS OF THE MONETARY B OARD : 1.116) 5. 9). 3. they may not accept any other employment.6). D ISQUALIFICATIONS AND I NHIBITION ON GOVERNOR AND B OARD M EMBERS : NO RESTRAINING ORDER AGAINST BSP 1. 3. in which case such member shall resign from. at least 35 years of age.Page 14 of 26 represent it in all monetary fund dealings (Secs. 20). consultant. 6. 9). Source of credit (Secs. civic. must be natural-born citizens of the Philippines. 9). 8. 25) ± shall include the power to: a. 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. cannot be employed in any such institution within two (2) years after the expiration of his term except when he serves as an official representative of the Philippine Government to such institution (Sec. Subsidiary ± a corporation more than 50% of the voting stock of which is owned by a bank or quasi-bank Affiliate ± a corporation the voting stock of which. 3. Examine. 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. 4. 30) c. 81-89. 109) Supervisor of the banking system (Sec. the President may contract or guarantee foreign loans but with the prior concurrence of the Monetary Board.

directly or indirectly requesting or receiving any gift. The conservator¶s power is not unilateral and he cannot simply repudiate valid obligations of the bank. being an officer. director. 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. 4. 3. director or officerin-charge of any institution subject to the supervision or examination by the Bangko Sentral who. lawyer or agent. own. proceedings for receivership and liquidation shall be pursued (Sec. . owner. directly or indirectly. To adopt. . (Sec. DIRECTORS.. 252 SCRA 259). employee. Such power to revoke cannot extend to post-facto repudiation of perfected transactions. and Exercise all powers necessary to restore its viability. But if the continuance in business of the bank would involve probable loss to its depositors or creditors. The power to revoke contracts only covers those that are deemed defective ± i.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. 29). 4. Not a precondition to the designation of a receiver Powers of conservator: 1. 3. and except as otherwise provided in this Act. Int¶l Bank vs. except under orders of the court. Bank/quasi-bank retains juridical personality 2. present or pecuniary or material benefit for himself or another. void. LAWYERS.Page 15 of 26 and made in bad faith and the petitioner or plaintiff files with the clerk or judge of the court in which the action is pending a bond executed in favor of the Bangko Sentral.e.Any officer. To take charge of the assets.  A conservator appointed by the BSP may take over without the need of first declaring the bank insolvent. and the management thereof. information relating to the condition or business of any institution. The powers must be related to preservation of assets. 35) PROHIBITIONS ON BANK OFFICERS. CORPORATE POWERS OF THE BSP 1. the Congress or any government office or agency authorized by law. or release any claim of. agent. or settled liability to the BSP To do and perform such other necessary powers R EFUSAL TO M AKE R EPORTS E XAMINATION . His authority would be only to bring actions to assail the same. with the power to overrule or rebuke the actions of the previous management and board of directors of the bank or quasi-bank.  3. OR PERMIT CONSERVATORSHIP OF A BANK OR QUASI-BANK Ground: State of continuing inability or unwillingness to maintain a condition of liquidity deemed adequate to protect the interest of depositors and creditors. Reorganize the management. otherwise they would infringe the nonimpairment clause of the Constitution. AGENTS Personnel of the Bangko Sentral are hereby prohibited from: 1. voidable. 34) False Statement. Duration: Not to exceed 1 year Effects: 1. from any institution subject to supervision or examination by the Bangko Sentral. of any institution subject to supervision or examination by the Bangko Sentral. 2. To lease. CA. When the MB is satisfied that the institution can continue to operate on its own and the conservatorship is no longer necessary. borrowing from any institution subject to supervision or examination by the Bangko Sentral shall be prohibited unless said borrowings are adequately secured. 5. Termination: 1. Exception: non-stock savings and loan associations and provident funds organized exclusively for employees of the Bangko Sentral. unenforceable or rescissible (First Phil. 7. (Sec. (Sec. 27) 2. 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. 2. Collect all monies and debts due said bank. 6. alter and use a corporate seal which shall be judicially noticed To enter into contracts RECEIVERSHIP OF A BANK OR Notes of hotjurist in foro conscientiae . revealing in any manner. 4. reorganization of management and the restoration of viability. condone. fully disclosed to the Monetary Board. 2. liabilities. in an amount to be fixed by the court. manager. consultant or stockholder.

Reason: Stockholders owning a majority of the shares are expected to be more objective in determining whether the resolution is plainly arbitrary and issued in bad faith (Sec. This ³close now and hear later´ scheme is grounded on practical and legal consideration to prevent the unwarranted dissipation of the bank¶s asset and as a valid exercise of the police power to protect the depositors. creditors. NCBA.  Note the distinctions between rehabilitation and liquidation. liquidation or conservatorship. whether the institution should undergo rehabilitation or liquidation. 29 of the Central Bank Act does not contemplate prior notice and hearing before a bank is placed under receivership.R. GBL) Facts: Based on the financial reports submitted to the Central Bank. Under GBL 1. involving acts or transactions which amount to fraud or a dissipation of the assets of the institution (Sec.Page 16 of 26 QUASI-BANK/CLOSURE Receivership is equivalent to an injunction to restrain the bank in any way. Grounds: Under NCBA 1. the appointment of a receiver operates to suspend the authority of the bank and of its directors and officers over its property and effects (Villanueva vs. General powers of a receiver 3. 220 SCRA 536). placing it under receivership and appointing Ramon V. 1993). forbidding it from doing business in the Philippines. GBL) 3. 76118. 30. creditors. Quasi-banks ± Any person competence in banking or finance of recognized Functions: 1. 53. When it provides for the filing of the case within 10 days after the receiver takes charge of the assets of the bank. CA. (Sec. March 30. Central Bank vs. the Monetary Board issued a Resolution ordering the closure of TSB. MANDATORY REQUIREMENTS FOR BANK CLOSURE Examination by the appropriate BSP department as to the condition of the bank Notes of hotjurist in foro conscientiae . Banks ± PDIC 2. Plainly. CA. or 4. Court of Appeals. stockholders and general public (Central Bank vs. No. stockholders and the general public. GBL)  review. Willful violation of a cease and desist order that has become final. Insufficiency of realizable assets to meet its liabilities. HEAR LATER SCHEME  Sec. Inability to pay liabilities as they become due in the ordinary course of business. Notification to the BSP or public announcement of a bank holiday (Sec. Persistence in conducting business in an unsafe or unsound manner. 220 SCRA 536 2. Immediate gathering and taking charge of all the assets and liabilities of the institution and administering them for the benefit of creditors 2. Determination ASAP but not later than 90 days. Suspension of payment of deposit liabilities continuously for more than 30 days (Sec. CA. but not including inability to pay those caused by extraordinary demands induced by financial panic in the banking community. It is enough that such action is made the subject of a subsequent judicial 1. 30) Issue: Whether or not a Monetary Board Resolution be annulled on the ground of lack of prior notice and hearing. Receiver: 1. Inability to continue business without involving probable losses to its depositors or creditors. G. which states that the Financial condition of The Triumph Savings Bank (TSB) is one of insolvency and its continuance in the business world involve probable loss to its depositors and creditors. CASE DIGEST Central Bank of the Philippines vs. The purpose of the scheme is to protect the depositors. 2. CLOSE NOW. Ruling: Section 29 of the Central Bank Act does not contemplate prior notice and hearing before a bank may be declared to stop operations and placed under receivership. 56. 244 SCRA 395 [1995]). 53. it is unmistakable that the assailed actions should precede the filing of the case. the legislature could not have intended or authorize ³no prior notice and hearing´ in the closure of the bank and at the same time allow the suit to annul it on the basis of the absence thereof. Taiaoqi as receiver. Thus. The TSB filed a complaint assailing the resolution on the ground of lack of prior notice and hearing 3. Only stockholders representing the majority of the capital stock of a bank have the personality to file a petition for certiorari to be filed within 10 days from receipt by the board of directors of the institution of the order directing receivership.

5. 2. 4. both public and private (Sec. 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. However. Notes for any series or denomination ± More than 5 years old Coins ± More than 10 years old Rules: LIQUIDATION Grounds: 1. Regular courts have no jurisdiction over actions filed by claimants against an insolvent bank (Ong vs CA. the liquidation plan shall be adopted by the Monetary Board. 90) a. 1-Peso. MB. 549 [1928]) Deposits do not become preferred credits (CB vs. 2. CFI.000. if the volume of money is high.00 (Circular No. 5-Peso and 10-Peso coins: In amounts not exceeding P1. and if public interest requires. it opens the rediscount window by reducing interest on loans b. BSP will raise reserve requirement Notes of hotjurist in foro conscientiae . both public and private. with the proper RTC. The assets under receivership or liquidation shall be deemed in custodia legis in the hands of the receiver and shall be exempt from garnishment. 537. 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. If BSP wants to increase money supply. vs. 2. After that period. levy. 3. A determination by the MB that the bank cannot be rehabilitated. the MB shall determine and confirm if the bank is insolvent. they shall cease to be legal tender during the following year or for such longer period as MB may determine. 60). 253 SCRA 105). Reserve Requirements (Sec.  3.  Payment shall be in accordance with the rules on concurrence and preference of credits. it buys government securities b. 51 Phil. Suspension of operation 2. Bank is not liable to pay interest on deposits during the period of suspension of operation (Overseas Bank vs. 30). 20 SCRA 507 [1967]) 2. it sells government securities 3 IMPORTANT TOOLS TO ACHIEVE PRICE STABILITY 1. attachment or execution (Sec. shall order the liquidation of the bank. 2. is at the option of the creditor. MONETARY STABILIZATION EFFECTS OF APPOINTMENT OF RECEIVER/ LIQUIDATION 1. Within 60 days. 2. CA. a check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited to his account (Sec. it shall appoint a receiver of the assets and liabilities of the bank (Banco Filipino vs. The condition of the bank is one of insolvency or that its continuance would involve probable loss to its depositors and creditors. Notes and coins called in for replacement shall remain legal tender for a period of one year from the date of call. the notes and coins which have not been exchanged shall cease to be a liability of BSP and shall be demonetized (Sec. Procedure: 1. In case of quasi-banks. If BSP wants to increase money supply. Loans to Banks (Sec. 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. 2006) BSP Authority to Replace 1. If BSP wants to decrease money supply. 94) . 113 SCRA 778 [1982]) The corporation retains its legal personality (Teal Motor Co. 3. Morfe. 3. 52) Legal tender power of coins 3. If BSP wants to decrease money supply.Page 17 of 26 2. Open Market Operations (Sec.  Checks representing demand deposits do not have legal tender power and their acceptance in the payment of debts. 57).00 25 centavo coin or less: In amounts not exceeding P100. After the expiration of this latter period. 1.where a certain percentage of the deposit is set aside and cannot be lent out a. 5. 83) (Rediscounting) a. He shall convert the assets of the institution to money for the purpose of paying the debts of the institution (Sec. 204 SCRA 519 [1991]). Receiver shall file ex parte. 30). it closes the rediscount window or charges very high interest rates for rediscounted notes 4. 1.

the Bangko Sentral shall not pay interests thereon (Sec. including investments in bonds issued by the Government of the Philippines. the Sheriff garnished P50. Any disclosure by any official or employee of any bank to any unauthorized person of any information concerning the said deposits. 3. of whatever nature. F ROM R.A. 1405 Upon written permission of the depositor. No increase of more than 4% point within 30day period. if the volume of money is low. 128). SECRECY OF BANK DEPOSITS LAW (R. such funds become part of the subject matter of litigation. 2. (5%) Is CDC's complaint meritorious or not? Reason briefly. B. The required reserves of each bank shall be proportional to the volume of its deposit liabilities.A. GENERAL RULE: The deposits covered by law are considered as of an absolutely confidential nature and may not be examined. inquired or looked into by any person. BAR QUESTION: Banks: Secrecy of Bank Deposits. Examination and inquiry or looking into all deposits. To encourage people to deposit in banks 2. or any other order or process of any court or agency (Sec.A. From other laws 1. 49 SCRA 355 (1973) that peso deposits may be garnished and the depositary bank can comply with the order of garnishment without violating the Law on the Secrecy of Bank Deposits. A taxpayer who has filed an application for compromise of his tax liability by reason of financial incapacity to pay his tax liability. SUGGESTED ANSWER No. On orders of the MM Regional Trial Court. In cases where the money deposited or invested is the subject matter of the litigation. It was held in China Banking Corporation v. its political subdivisions and its instrumentalities. Anti-Graft and Corrupt Practices Act cases (R. 2. execution process. PROHIBITIONS ON THE BSP 1. Garnishment (2004) CDC maintained a savings account with CBank. Upon order of a competent court in cases of bribery or dereliction of duty of public officials. Notes of hotjurist in foro conscientiae . MO. 2) Rules: 1. 2. when it has been 2. No. 4. It shall not acquire shares of any kind or accept them as collateral. In cases of impeachment. 103). 3. to satisfy the judgment in favor of his creditor. CDC's complaint is not meritorious. 4. 1. 1405) Purposes: 1. Inquiry or examination by the Anti-Money Laundering Council (AMLC) of any particular deposit or investment with any banking institution or non-bank financial institution upon order of any competent court in cases of violation of the AntiMoney Laundering Law. CDC complained that the garnishment violated the Law on the Secrecy of Bank Deposits because the existence of his savings account was disclosed to the public. Ortega. NIRC).Inquiry by the Commissioner of Internal Revenue into bank deposits of: a. Garnishment is part of the Coverage: All deposits of whatever nature with banks or banking institutions in the Philippines. Execution is the goal of litigation as it is its fruit. EXCEPTIONS: A. 3019. Since the required reserves are imposed primarily to control the volume of money.000 of his account. NIRC . 94). Deposits maintained with the Bangko Sentral as part of the reserve requirements shall be exempt from attachment. added by analogy in PNB vs. 15 SCRA 91 [1965]). reserve requirement is reduced. No. 3. He must file a written waiver of his privilege under RA 1405 or other general or special laws (Sec. 6[f]. Gancayco. garnishment. 2. N O . b. either directly or indirectly. Upon service of the notice of garnishment on the bank where the defendant deposited funds. with the banks in the Philippines including investments in bonds issued by the Government. A decedent to determine his gross estate. (Sec. and shall not participate in the ownership or management of any enterprise. governmental bureau.Page 18 of 26 b. To discourage private hoarding so that banks may lend such funds and assist in the economic development PROHIBITED ACTS: 1. or office. and It shall not engage in development banking and financing (Sec.

only for purposes of  REQUISITES FOR IN-CAMERA INSPECTION OF BANK DEPOSITS Notes of hotjurist in foro conscientiae . 9160)  Provides for another exception to confidentiality. 55. 267 RPC.A. Disclosure to the Treasurer of the Philippines of dormant deposits for at least 10 years under the Unclaimed Balances Act (Act No. 25) E. the provisions of existing laws shall prevail (Sec. opened and constituted abroad b) Was there a violation of the Secrecy of Bank Deposits Law (Republic Act No.Boston Bank. because the punitive provisions of the Secrecy of Bank Deposits Law (R. relatives. No. DOSRI loans 2. No director. 2002) 2. disclose to any unauthorized person any information relative to the funds or properties in the custody of the bank belonging to private individuals.A.A. The corporation claimed that the said officers were guilty of advancing their personal interests to the prejudice of the corporation. The officers alleged that their bank deposits were illegally disclosed for want of a court order. or any other persons (Banco Filipino Savings and Mortgage Bank vs. 1405). 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. 9165). No bank shall employ casual or non-regular personnel or too lengthy probationary personnel in the conduct of its business involving bank deposits (Sec. No. 9160 as amended by Sec. or agent of any bank shall. New Central Bank Act (R. 1405)? Explain. descendants. Including those perpetrated by terrorists against non-combatant persons and similar targets´ (Sec. which is applicable to both peso and foreign currency deposits. 8 of RA 9194) 4. No. Periodic and special examinations by the BSP (Sec. Ortega. 8791): 1. Anti-Money Laundering Act (R. 49 SCRA 355). 6426). Extends confidentiality to foreign currency deposits. No. including its punitive provisions. including the statutory exemptions provided therein. 7653): 1. G.S. BAR QUESTION: BANKS: APPLICABILITY: FOREIGN CURRENCY DEPOSIT ACT & SECRECY OF BANK DEPOSITS (2005) Hi Yielding Corporation filed a complaint against five of its officers for violation of Section 31 of the Corporation Code. C. No.A. ascendants. No. Dollar deposits in several banks overseas .R. officer. For their part. Hijacking and other violations under RA 6235. Aside from documents and contracts. b. Outsourcing of inherent bank functions Money-market placement is not covered by RA 1405 because it is not deposited in the bank. or any other entity. the officers filed a criminal complaint against the directors of Hi Yielding Corporation for violation of Republic Act No. and that such deposits were not even the subject of the case against them. otherwise known as the Foreign Currency Deposit Act of the Philippines. Any disclosure is purely incidental to the execution process (China Banking Corporation vs. even when constituted locally. garnishment. without court order. 128996. No. D. even though they are banks.Page 19 of 26 established that there is probable cause that the deposits or investments are related to an unlawful activity or a money laundering offense. 6426. corporations. but the law contains only one ground authorizing examination: upon written permission of the depositor. 6426): B. except that no court order shall be required in the following unlawful activities: a. because the Foreign Currency Deposit Act (R. Kidnapping for ransom under Art. 55[b]). and that they were grossly negligent in handling its affairs. Foreign Currency Deposit Act (R.4). c. a) Will the complaint filed against the directors of Hi Yielding Corporation prosper? Explain  SUGGESTED ANSWER: No. Comprehensive Dangerous Drugs Act of 2002 (RA No. destructive arson and murder under RPC. General Banking Law of 2000 (R. It has no application at all to accounts. 3. Bank of Switzerland. 3936).  Illegally acquired property extends to cases where property is concealed by being held by or recorded in the name of respondent¶s spouse. February 15. refers to foreign currency deposits accounts constituted within the Philippines. It was not the intention of the legislature to place bank deposits beyond the reach of execution to satisfy a final judgment.A. SUGGESTED ANSWER: No. employee. Court of Appeals. 11.A. Garnishment of bank deposit of judgment debtor does not violate RA 1405. No. 161 SCRA 576). R. (Intengan v. provided that with respect to bank deposits.A. and Bank of New York. Purisima. are not applicable to FCDU accounts. OTHER LAWS RELATING TO SECRECY OF BANK DEPOSITS A. the corporation also submitted in evidence records of the officers· U.

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

to ensure that the Philippines shall not be used as a site for unlawful money laundering activities.A. 359 SCRA 772 (2001) Unclaimed Balances Law The Unclaimed Balances Law (Republic Act No. This is an absurdity that we will not ascribe to the lawmakers. Said the court: ³It is clear from the discussion of the conference committee report on x x x Republic Act.Page 21 of 26 allegedly acquired property manifestly out of proportion to his salary and lawful income. there is no real inquiry in such a case. To protect and preserve the integrity and confidentiality of bank accounts. 93 SCRA 452 (1991). 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. Court of Appeals. No. (193 SCRA 452 (1991) the Supreme Court held that the garnishment of a bank deposit does not violate the Bank Secrecy Law. Covered Entities: 1. The opposition is valid.´ the Supreme court held that the Ombudsman could not inquire into bank deposits until there was a pending case in court involving the deposits. However. and To pursue State¶s foreign policy to extend cooperation in transnational investigations and prosecution on money laundering activities. The Court explained: To sustain the petitioner¶s theory. which was conducting a congressional investigation ´in aid of legislationµ on the involvement of police and military personnel. 4. 1405. within one banking day. is unwarranted in the light of the provisions of the statutes in question. as amended by R.A. The envy of many drug lords who had not escaped the dragnet of the law. in the illegal activities of suspected gambling and drug lords. does not violate the Bank Secrecy Law. Garnishment of Bank Deposit In China Banking Corporation v. Upon Order of the Ombudsman Although Section 8 of the law that created the Office of the Ombudsman expressly granted the Ombudsman the power to ³administer oaths. and restrict the inquiry only to property held by or in the name of the government official or employee.´(Phil.000. GP was summoned to a hearing of the Committee on Racketeering and Other Syndicated SUSPICIOUS TRANSACTIONS: Transactions with covered institutions regardless of the amounts involved. Secrecy of Bank Deposits (2000) GP is a suspected Jueteng lord who is rumored to be enjoying police and military protection. 3. 3936) requires each bank to file a sworn statement with the Treasurer of the Philippines stating the deposits that the bank holds in the names of persons known to be dead or who have not made deposits or withdrawals during the preceding ten years or more. among them GP. Desierto. including the power to examine and have access to bank accounts and records. that the prohibition against examination of or inquiry into a bank deposit under Republic Act No. 5. Court of Appeals. Subpoenaed to attend the investigation were officers of certain identified banks with a directive to them to bring the records and documents of bank deposits of individuals mentioned in the subpoenas. even if ordered by the Court. through the expedient of converting their assets into cash and depositing the same in a bank. and if the existence of the deposit is disclosed. 9160. 2. Banks Non-banks Quasi-banks Trust entities All other institutions. 1405 does not preclude its being garnished to insure satisfaction of a judgment. It is also requires the bank to post a copy of the sworn statement in the bank premises. Is the opposition of GP and the banks valid? Explain. Indeed. Commercial & International Bank v. No. The Committee conducting the investigation is not a competent court or the Ombudsman authorized under the law to issue a subpoena for the production of the bank record involving such disclosure. in cash or other equivalent monetary instrument in excess of P500. 2. There is no underlying legal or trade obligation Notes of hotjurist in foro conscientiae . 9194) Purposes: 1. The investigation does not involve one of the exceptions to the prohibition against disclosure of any information concerning bank deposits under the Law on Secrecy of Bank Deposits.(Marquez v. SUGGESTED ANSWER: Yes. GP and the banks opposed the production of the banks· records of deposits on the ground that no such inquiry is allowed under the Law on Secrecy of Bank Deposits (RA 1405 as amended). the disclosure to evade payment of their just debts. BAR QUESTION: Banks. GP is not a public official. Such a disclosure of the deposits and the depositors. or his spouse and unmarried children. ANTI-MONEY LAUNDERING ACT OF 2001 (R. Crimes of the House of Representatives. this is done only after the bank shall have first communicated with the depositor at his last known residence or post office address. and possibly even of local government officials. issue subpoena and subpoena duces tecum and take testimony in any investigation or inquiry. and would make available to persons in government who illegally acquire property an easy and fool-proof means of evading investigation and prosecution. where any of the following circumstances exists: 1. their subsidiaries and affiliates supervised or regulated by the BSP COVERED TRANSACTION: Transaction.

P REVENTION OF M ONEY L AUNDERING 1. Can Rudy move to dismiss the case on the ground that he has no criminal record? (2. SUGGESTED ANSWER: No. BAR QUESTION: BANKS. Since he does not have any visible job. the company reported his purchases to the Anti-Money Laundering Council (AMLC). They shall maintain a system of verifying their clients and in case of corporate client. shall be preserved and safely stored for at least 5 years from the dates when they were closed.  MONEY LAUNDERING: A crime whereby the proceeds of an unlawful activity are transacted. Notes of hotjurist in foro conscientiae . 3.5%) 2. involves. It is committed by the following: 1. transacts or attempts to transact said monetary instrument or property. The Court of Appeals may issue a freeze order. Rudy would be guilty of a "money laundering crime" committed when the proceeds of an "unlawful activity. account files and business correspondence. only: a. Thereafter. are made to appear as having originated from legitimate sources. is being or has been committed Analogous transactions to any of the foregoing P OWER TO F REEZE A CCOUNTS  The power of the AMLC to freeze accounts has been deleted under RA 9194 6. Reporting of Covered and Suspicious Transactions. 7. 4. unless the Supervising Authority prescribes a longer period not exceeding 10 working days. b. AMLC charged him with violation of the Anti-Money Laundering Law. performs or fails to perform any act as a result of which he facilitates the offense referred to in number 1 above. 3. Any circumstance relating to the transaction which is observed to deviate from the profile and/or the client¶s past transactions with the covered institution Transaction is in any way related to an unlawful activity or offense under this Act that is about to be. require a system of verifying their legal existence and organizational structure. the proceeds of any unlawful activity. upon ex parte application of AMLC. unless extended by the court. He has never been charged or convicted of any crime. SECRECY OF BANK DEPOSIT. Inc. Under the Anti-Money Laundering Law. AMLC (2006) Rudy is jobless but is reputed to be a Jueteng operator.All records of all transaction of covered institution shall be maintained and safely stored for 5 years from the dates of transaction. 1. ± Covered institution shall report to the AMLC all covered and suspicious transactions within 5 working days from the occurrence thereof. Client is not properly identified Amount involved is not commensurate with the business or financial capacity Taking into account all known circumstances. he was charged in court for violation of the Anti-Money Laundering Law. Customer Identification ± Covered institutions shall establish and record the true identity of its clients based on official documents. it may be perceived that the client¶s transaction is structured in order to avoid being the subject of reporting requirements under the Act J URISDICTION :   All cases: RTC Public officers and private persons in conspiracy with them: Sandiganbayan 5. 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. 2. the bank disclosed to it Rudy's bank deposits amounting to P100 Million. Upon request of the AMLC. Anti-Money Laundering Act of 2001). and requires no previous conviction for the unlawful activity (See also Sec. Subsequently. He maintains several bank accounts and has purchased 5 houses and lots for his children from the Luansing Realty.Page 22 of 26 2. Any person knowing that any monetary instrument or property represents. 3. With respect to closed accounts. Record Keeping. which shall be effective immediately and for a period of 20 days. Any person knowing that any monetary instrument or property involves the proceeds of any unlawful activity. or relates to." like Jueteng operations. 3. s well as the authority and identification of all person purporting to act on their behalf. the records on customer identification. and after determination that probable cause exists that any monetary instrument or property is in any way related to an unlawful activity. thereby making them appear to have originated from legitimate sources. The money laundering crime is separate from the unlawful activity of being a Jueteng operator.

commodities or financial derivatives are covered institutions. Does the above provision not violate the Law on Secrecy of Bank Deposits (RA 1405)? SUGGESTED ANSWER: The Law on Secrecy of Bank Deposits is itself merely a statutory enactment. 9302) Purposes: 1. 3. 2. trust or investment funds. or amended (such as by providing further exceptions therefrom). The Secrecy of Bank Deposits Act did not amount to a contract between the depositors and depository banks within the meaning of the non-impairment clause of the Constitution. PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC) ACT (R.000 per depositor. 4. be modified. To raise funds for his defense. Insurance The PDIC assesses and collects insurance assessments from member-banks to insure member-banks¶ deposit accounts. The bank being specified as a "covered institution" under the AntiMoney Laundering Law. pre-need companies and other entities administering or otherwise dealing in currency. Notes of hotjurist in foro conscientiae . is a real estate company. provides that the Commission may ask the Monetary Board to disclose information on and/or to grant B. and it may. C. expressly or impliedly. Inc. PDIC's authority to examine its member banks. or even repealed. by a subsequent law.5%) SUGGESTED ANSWER: No.impairment clause. the police power of the State is superior to the non. In disclosing Rudy's bank accounts to the AMLC. SUGGESTED ANSWER: Yes. Can Luansing Realty. As Luansing Realty. Hence. under investigation by the Commission. Bank Examination Under the new law. has been restored. Rudy sold the houses and lots to a friend. is it under obligation to deliver the titles to Rudy? (2. is not a covered institution under Section 3 of the Anti-Money Laundering Act. SECRECY OF BANK DEPOSITS (1991) The law (RA 6832) creating a Commission to conduct a Thorough Fact-Finding Investigation of the Failed Coup d·etat of Dec 1989.5%) PHILIPPINE DEPOSIT INSURANCE CORPORATION F UNCTIONS : A.Page 23 of 26 2. the PDIC. To insure the deposit liability of banks in an account up to P250. or banking transactions in the name of and/or utilized by a person. Even if it did. Luansing Realty. Inc. To create a government-owned entity. Recommend Measures to Prevent the Occurrence of Similar Attempts At a Violent Seizure of Power and for Other Purposes. RA 6832. SUGGESTED ANSWER: Luansing Realty.. trust or investment funds.000 for every single depositor of each bank irrespective of the number of accounts therewith. the bank did not violate any law. the PDIC processes and services claim for insured deposits. Deposits are insured up to a maximum coverage of P250. may not use the Anti-Money Laundering Act to refuse to transfer to the buyer ownership of the houses and lots. In case of bank closures. it has an obligation to deliver titles to Rudy. be compelled to transfer to the buyer ownership of the houses and lots? (2.5%) authority to examine any bank deposits. Inc. Inc. Supposing the titles of the houses and lots are in possession of the Luansing Realty. in any bank or banking institution in the Philippines. Inc. natural or juridical. A. or banking transactions have been used in support or in furtherance of the objectives of the said coup d·etat. Bank Rehabilitation The PDIC may grant financial assistance to distressed banks if it is proven to be a less costly alternative than closure. securities dealers and brokers. hence it is not a covered institution under Section 3 of the Anti-Money Laundering Act. with prior approval by the Monetary Board. when the Commission has reasonable ground to believe that said deposits. without thereby violating any law. BAR QUESTION: BANKS. Only banking institutions. is obliged to report to the AMLC covered and suspicious transactions. This is one of the exceptions to the Secrecy of Bank Deposit Act. it may not invoke this law to refuse delivery of the titles to Rudy. insurance companies. creating a commission to conduct an investigation of the failed 1989 coup d·etat and to recommend measures to prevent similar attempts to seize power is a valid exercise of police power. therefore. did the bank violate any law? (2.

3519 and statements in the certificate that the same are insured by PDIC are not binding upon the latter.A. The deposit liability of the PDIC is determined by the provisions of R. Nature: Compulsory insurance on all bank deposits Coverage: ³Insured deposits´ . are to be added together. 1975 recognizing the debtor-creditor relationship of the bank and the depositor. Cash b. less any part thereof which is in excess of P250.  The fact that a bank instrument provides that the certificate is insured by the PDIC does not ipso facto make the latter liable for the same. 4. immediately physically takes over the closed bank. In case the depositor¶s account is more than the insurance coverage.R. set-off takes place ipso jure with respect to the depositor¶s bank deposit and his matured loan with the bank. 6. Specific risk insured against: Bank closure only. Amount of insurance: Maximum of P250. the PDIC shall recommend the liquidation of the assets of the closed bank. No. Ruling: The fact that the certificate state that the certificates are insured by PDIC does not ipso facto make the latter liable for the same should the contingency insured against arise. July 22. losses due to a bank robbery are not covered. the PDIC is designated as statutory receiver. Liquidation refers to the recovery and conversion of assets into cash for distribution to all creditors in accordance with the order of creditor preference pursuant to law The plaintiffs invested in the money market placement with the Premier Financing Corporation (PFC) but when they went to PFC to encashed the checks and promissory notes corresponding to their investment the PFC referred them to the Regent Savings Bank (RSB). SPECIAL RULES 1. After deducting offsets Consistent with the rulings in Gullas vs. Receivership is the stage within which the PDIC manages the affairs of the closed bank and preserves its assets for the benefit of creditors. 2. Transferred deposits A deposit in an insured bank made available to a depositor by the PDIC as payment of the insured deposit of the depositor in a closed bank and assumed by another insured bank. 519 and Republic vs. after deducting unpaid loans and other obligations of the depositor to the closed bank. provided that they are maintained in the same capacity and the same right for his benefit either in his own name or in the name of others. INSURANCE FUNCTION 1. joint ³and/or´ account. 62 Phil. PDIC liability is on a per bank basis. In no case shall insured deposit exceed P250. not the depositors. after deducting offsets. 283 SCRA 462). The insurance premiums are to be paid by the insured bank. E. 2. the RSB issued 13 certificate of time deposit which was insured with the PDIC.the net amount due to any depositor for deposits in an insured bank. 5. But the PDIC refused to pay the claim for it is not included in the list of duly recorded liabilities of the RSB.Page 24 of 26 D. The PDIC upon receipt of the MB resolution ordering the closure of a bank. Receivership of closed banks Once a bank is ordered closed by the Monetary Board (MB) of the Bangko Sentral ng Pilipinas. CA. Thus. 3. 7. Insured deposits  The net amount due to any depositor for deposits in an insured bank. Effect of payment by the PDIC to the depositor of his insured deposit: a. 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.  Trust funds and safety deposit boxes are not covered. Discharges the PDIC from further liability b.000 per depositor. joint ³and´ account. Liquidation of closed banks After it is determined that the closed bank can not be rehabilitated. G. Facts: Notes of hotjurist in foro conscientiae . 283 SCRA 462 3. 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. Accounts in a bank.000.00 per deposit (RA 9302) Condition precedent for entitlement to payment: Filing of claim within twenty-four months from order of closure Manner of payment: a. the deposit liability of the PDIC is determined by the provisions of RA 3519 (PDIC vs. the balance may still be recovered from the PDIC after the final liquidation of the remaining assets of the closed bank. even though in several branches. Issue: Whether or not the PDIC is liable for the plaintiffs¶ claims. Subrogates the PDIC to all the rights of the depositor against the closed bank to the extent of such payment. PNB. Instead of paying the promissory notes and checks. 15012.  Capacities: individual account.000. CA. Case Digest PDIC vs. CA.

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

the conditional deed of sale which the parties executed mentioned that the total amount indicated therein included such finance charges.A. what remedies may be availed of by Dana? SUGGESTED ANSWER: a) There was no substantial compliance with the Truth in Lending Act. the parties may agree that the obligation or transaction shall be settled in any other currency at the time of payment (Sec. The finance charge expressed in terms of pesos and centavos. 5. 1). which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit. The law provides that the creditor must make a full disclosure of the credit lost. without specifying the amounts due on each portion thereof would be insufficient and unacceptable. any creditor shall furnish to each person to whom credit is extended. 7. Central Bank et al. Dana may also initiate criminal charges against the creditor. 4. information required by the Truth in Lending Act (RA 3765). to recover the same. 4. if any to be credited as down payment and/or trade-ins. what is the effect of the violation on the contract?  In the event of a violation of the Act. The statement that the total amount due includes the principal and the financial charges.  Under Sec. submit to Dana a written statement setting forth therein the Notes of hotjurist in foro conscientiae . The amounts. TRUTH IN LENDING ACT ( RA 3765)  The law assures full disclosure by requiring the lender to give the borrower all the details regarding the transaction. 278 SCRA 27). however. prior to the consummation of the transaction. to the extent applicable and in accordance with rules and regulation prescribed by the Board the following informations: 1. *** *2'63((' BAR QUESTION: TRUTH IN LENDING ACT (1991) Dana Gianina purchased on a 36 month installment basis the latest model of the Nissan Sentra Sedan car from the Jobel Cars Inc. Note: This case does not constitute another exception. 8183) All monetary obligations shall be settled in the Philippine currency which is legal tender in the Philippines. 2. The difference between the amounts set forth under clauses 1 and 2. However. individually itemized. if already paid. It did not. c) It would allow Dana to refuse payment of financial charges or. 6. the latter imposed finance charges consisting of interests. the SC only ruled as such due to the special circumstances of the said case. The total amount to be financed. Has there been substantial compliance of the aforesaid Act? If your answer to the foregoing question is in the negative.Page 26 of 26 (Salvacion. 3. et al.  REPEALING LAW TO UNIFORM CURRENCY ACT (R. NO. and The percentage that the finance bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation. b) A violation of the Truth in Lending Act will not adversely affect the validity of the contract itself. a clear statement in writing setting forth. fees and service charges. The charges. The cash price or delivered price of the property or service required.. In addition to the advertised selling price. vs. Nevertheless.

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