Commercial Law Reviewer

STUDY GUIDE ON BANKING AND RELATED LAWS*
I
BANGKO SENTRAL NG PILIPINAS LAW
RA 7653 (1993).
1.1
Topics
State policies (Sec. 1)
SECTION 1. DECLARATION OF POLICY. - THE STATE SHALL MAINTAIN A CENTRAL
MONETARY AUTHORITY THAT SHALL
A. FUNCTION AND OPERATE AS AN INDEPENDENT AND ACCOUNTABLE BODY
CORPORATE IN THE DISCHARGE OF ITS MANDATED RESPONSIBILITIES
CONCERNING MONEY, BANKING AND CREDIT.
B. IN LINE WITH THIS POLICY, AND CONSIDERING ITS UNIQUE FUNCTIONS AND
RESPONSIBILITIES, THE CENTRAL MONETARY AUTHORITY ESTABLISHED
UNDER THIS ACT, WHILE BEING A GOVERNMENT-OWNED CORPORATION,
ENJOY FISCAL AND ADMINISTRATIVE AUTONOMY.
How State policies are to be achieved (compare, e.g., Secs. 2, 6, 9, 11, 15, 16,
18 and 47 of RA 7653 with similar provisions in RA 265) [SEE PAGE 2 OF BOOK]
A. Capital [Sec. 2]
SECTION 2. CREATION OF THE BANGKO SENTRAL. - THE CAPITAL OF THE BANGKO
SENTRAL SHALL BE FIFTY BILLION PESOS (P50,000,000,000.
B. MB Composition [Sec. 6]
SECTION 6. COMPOSITION OF THE MONETARY BOARD. - (C) FIVE (5) MEMBERS
WHO SHALL COME FROM THE PRIVATE SECTOR, ALL OF WHOM SHALL SERVE FULLTIME: PROVIDED, HOWEVER, THAT OF THE MEMBERS FIRST APPOINTED UNDER
THE PROVISIONS OF THIS SUBSECTION, THREE (3) SHALL HAVE A TERM OF SIX (6)
YEARS, AND THE OTHER TWO (2), THREE (3) YEARS.
C. Reappointment of MB Members [Sec. 6]
SECTION 6. COMPOSITION OF THE MONETARY BOARD. - NO MEMBER OF THE
MONETARY BOARD MAY BE REAPPOINTED MORE THAN ONCE.
Expanded Outline (based on Banking Study Guide by Prof. Tristan A. Catindig)
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D. Additional disqualifications for MB Members [Sec. 9]; Divestment requirement

[Sec. 9]; Post-BSP restriction [Sec. 9]
SECTION 9. DISQUALIFICATIONS. - IN ADDITION TO THE DISQUALIFICATIONS
IMPOSED BY REPUBLIC ACT NO. 6713, A MEMBER OF THE MONETARY BOARD IS
DISQUALIFIED FROM BEING A DIRECTOR, OFFICER, EMPLOYEE, CONSULTANT,
LAWYER, AGENT OR STOCKHOLDER OF ANY BANK, QUASI-BANK OR ANY OTHER
INSTITUTION WHICH IS SUBJECT TO SUPERVISION OR EXAMINATION BY THE

BANGKO SENTRAL, IN WHICH CASE SUCH MEMBER SHALL RESIGN FROM, AND
DIVEST HIMSELF OF ANY AND ALL INTERESTS IN SUCH INSTITUTION BEFORE
ASSUMPTION OF OFFICE AS MEMBER OF THE MONETARY BOARD.
THE MEMBERS OF THE MONETARY BOARD COMING FROM THE PRIVATE SECTOR
SHALL NOT HOLD ANY OTHER PUBLIC OFFICE OR PUBLIC EMPLOYMENT DURING
THEIR TENURE.
NO PERSON SHALL BE A MEMBER OF THE MONETARY BOARD IF HE HAS BEEN

CONNECTED DIRECTLY WITH ANY MULTILATERAL BANKING OR FINANCIAL
INSTITUTION OR HAS A SUBSTANTIAL INTEREST IN ANY PRIVATE BANK IN THE
PHILIPPINES, WITHIN ONE (1) YEAR PRIOR TO HIS APPOINTMENT; LIKEWISE, NO
MEMBER OF THE MONETARY BOARD SHALL 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.
E. Who can call meetings [Sec. 11]

SECTION 11. MEETINGS. - THE MONETARY BOARD SHALL MEET AT LEAST ONCE A
WEEK. THE BOARD MAY BE CALLED TO A MEETING BY THE GOVERNOR OF THE
BANGKO SENTRAL OR BY TWO (2) OTHER MEMBERS OF THE BOARD.
F. Reorganization of personnel [Sec. 15]
G. Indemnification [Sec. 15(e)]
SECTION 15. EXERCISE OF AUTHORITY. - IN THE EXERCISE OF ITS AUTHORITY,
THE MONETARY BOARD SHALL:
(E) INDEMNIFY ITS MEMBERS AND OTHER
OFFICIALS OF THE BANGKO SENTRAL, INCLUDING PERSONNEL OF THE
DEPARTMENTS PERFORMING SUPERVISION AND EXAMINATION FUNCTIONS AGAINST
ALL COSTS AND EXPENSES REASONABLY INCURRED BY SUCH PERSONS IN
CONNECTION WITH ANY CIVIL OR CRIMINAL ACTION, SUIT OR PROCEEDINGS TO
WHICH HE MAY BE, OR IS, MADE A PARTY BY REASON OF THE PERFORMANCE OF
HIS FUNCTIONS OR DUTIES, UNLESS HE IS FINALLY ADJUDGED IN SUCH ACTION OR
PROCEEDING TO BE LIABLE FOR NEGLIGENCE OR MISCONDUCT.
IN THE EVENT OF A SETTLEMENT OR COMPROMISE, INDEMNIFICATION SHALL BE

PROVIDED ONLY IN CONNECTION WITH SUCH MATTERS COVERED BY THE
SETTLEMENT AS TO WHICH THE BANGKO SENTRAL IS ADVISED BY EXTERNAL
COUNSEL THAT THE PERSON TO BE INDEMNIFIED DID NOT COMMIT ANY
NEGLIGENCE OR MISCONDUCT.
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H. Greater responsibility [Sec. 16]

I. Transparency [Sec. 16]
How the BSP handles banks in distress
Emergency loans and advances (Sec. 84)
SECTION 84. EMERGENCY LOANS AND ADVANCES. THE MONETARY BOARD
MAY, BY A VOTE OF AT LEAST FIVE (5) OF ITS MEMBERS, AUTHORIZE THE
BANGKO SENTRAL TO GRANT EXTRAORDINARY LOANS OR ADVANCES TO
BANKING INSTITUTIONS SECURED BY ASSETS AS DEFINED HEREUNDER
1. IN PERIODS OF NATIONAL AND/OR LOCAL EMERGENCY OR
2. OF IMMINENT FINANCIAL PANIC WHICH DIRECTLY THREATEN MONETARY
AND BANKING STABILITY
PROVIDED, THAT WHILE SUCH LOANS OR ADVANCES ARE OUTSTANDING, THE

DEBTOR INSTITUTION SHALL NOT, EXCEPT UPON PRIOR AUTHORIZATION BY
THE MONETARY BOARD, EXPAND THE TOTAL VOLUME OF ITS LOANS OR
INVESTMENTS.
SECTION 84. EMERGENCY LOANS AND ADVANCES. THE MONETARY BOARD
MAY, AT ITS DISCRETION, LIKEWISE AUTHORIZE THE BANGKO SENTRAL TO
GRANT EMERGENCY LOANS OR ADVANCES TO BANKING INSTITUTIONS, EVEN
DURING NORMAL PERIODS, FOR THE PURPOSE OF ASSISTING A BANK
1. IN A PRECARIOUS FINANCIAL CONDITION OR
2. UNDER SERIOUS FINANCIAL PRESSURES BROUGHT BY UNFORESEEN
EVENTS, OR
3. EVENTS WHICH, THOUGH FORESEEABLE, COULD NOT BE PREVENTED
BY THE BANK CONCERNED:
PROVIDED, HOWEVER
1. THAT A CONCURRENT VOTE OF AT LEAST FIVE (5) MEMBERS OF THE
MONETARY BOARD IS OBTAINED.
2. THAT THE MONETARY BOARD HAS ASCERTAINED THAT THE BANK IS
NOT INSOLVENT AND HAS THE ASSETS DEFINED HEREUNDER TO
SECURE THE ADVANCES.
SECTION 84. EMERGENCY LOANS AND ADVANCES. THE AMOUNT OF ANY

EMERGENCY LOAN OR ADVANCE SHALL NOT EXCEED THE SUM OF FIFTY
PERCENT (50%) OF TOTAL DEPOSITS AND DEPOSIT SUBSTITUTES OF THE
BANKING INSTITUTION AND SHALL BE DISBURSED IN TWO (2) OR MORE
TRANCHES. XXX.
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Conservatorship (Sec. 29; Sec, 67, RA 8791)

SECTION 29. APPOINTMENT OF CONSERVATOR. - WHENEVER, ON THE BASIS
OF A REPORT SUBMITTED BY THE APPROPRIATE SUPERVISING OR EXAMINING
DEPARTMENT, THE MONETARY BOARD FINDS THAT A BANK OR A QUASI-BANK
IS IN A STATE OF CONTINUING INABILITY OR UNWILLINGNESS TO MAINTAIN A
CONDITION OF LIQUIDITY DEEMED ADEQUATE TO PROTECT THE INTEREST OF
DEPOSITORS AND CREDITORS, THE MONETARY BOARD MAY APPOINT A
CONSERVATOR WITH SUCH POWERS AS THE MONETARY BOARD SHALL DEEM
NECESSARY TO:
1. TAKE CHARGE OF THE ASSETS, LIABILITIES, AND THE MANAGEMENT

THEREOF,
2. REORGANIZE THE MANAGEMENT,
3. COLLECT ALL MONIES AND DEBTS DUE SAID INSTITUTION, AND
4. EXERCISE ALL POWERS NECESSARY TO RESTORE ITS VIABILITY.
THE CONSERVATOR SHALL REPORT AND BE RESPONSIBLE TO THE MONETARY
BOARD AND SHALL HAVE THE POWER TO OVERRULE OR REVOKE THE ACTIONS
OF THE PREVIOUS MANAGEMENT AND BOARD OF DIRECTORS OF THE BANK OR
QUASI-BANK.
THE CONSERVATOR SHOULD BE COMPETENT AND KNOWLEDGEABLE IN BANK

OPERATIONS AND MANAGEMENT. THE CONSERVATORSHIP SHALL NOT EXCEED
ONE (1) YEAR. XXX.
THE MONETARY BOARD SHALL TERMINATE THE CONSERVATORSHIP WHEN IT IS
SATISFIED THAT THE INSTITUTION CAN CONTINUE TO OPERATE ON ITS OWN
AND
THE
CONSERVATORSHIP
IS
NO
LONGER
NECESSARY.
THE
CONSERVATORSHIP SHALL LIKEWISE BE TERMINATED SHOULD THE MONETARY
BOARD, ON THE BASIS OF THE REPORT OF THE CONSERVATOR OR OF ITS OWN
FINDINGS, DETERMINE THAT THE CONTINUANCE IN BUSINESS OF THE
INSTITUTION WOULD INVOLVE PROBABLE LOSS TO ITS DEPOSITORS OR
CREDITORS, IN WHICH CASE THE PROVISIONS OF SECTION 30 SHALL APPLY.
SECTION
67, R.A.8791 CONSERVATORSHIP. - THE GROUNDS AND

PROCEDURES FOR PLACING A BANK UNDER CONSERVATORSHIP, AS WELL AS,
THE POWERS AND DUTIES OF THE CONSERVATOR APPOINTED FOR THE BANK
SHALL BE GOVERNED BY THE PROVISIONS OF SECTION 29 AND THE LAST TWO
PARAGRAPHS OF SECTION 30 OF THE NEW CENTRAL BANK ACT: PROVIDED,
THAT THIS SECTION SHALL ALSO APPLY TO CONSERVATORSHIP PROCEEDINGS
OF QUASI-BANKS. (N)
SECTION 30. PROCEEDINGS IN RECEIVERSHIP AND LIQUIDATION. THE
ACTIONS OF THE MONETARY BOARD TAKEN UNDER THIS SECTION OR UNDER
SECTION 29 OF THIS ACT SHALL BE FINAL AND EXECUTORY, AND MAY NOT BE
RESTRAINED OR SET ASIDE BY THE COURT EXCEPT ON PETITION FOR
CERTIORARI ON THE GROUND THAT THE ACTION TAKEN WAS IN EXCESS OF
JURISDICTION OR WITH SUCH GRAVE ABUSE OF DISCRETION AS TO AMOUNT TO
LACK OR EXCESS OF JURISDICTION. THE PETITION FOR CERTIORARI MAY ONLY
BE FILED BY THE STOCKHOLDERS OF RECORD REPRESENTING THE MAJORITY
OF THE CAPITAL STOCK WITHIN TEN (10) DAYS FROM RECEIPT BY THE BOARD
OF DIRECTORS OF THE INSTITUTION OF THE ORDER DIRECTING RECEIVERSHIP,
LIQUIDATION OR CONSERVATORSHIP.
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Comment [WU2]: Section 28-A merely gives

the conservator power to revoke contracts that
are, under existing law, deemed to be defective
i.e., void, voidable, unenforceable or
rescissible. Hence, the conservator merely
takes the place of a bank's board of directors.
What the said board cannot do such as
repudiating a contract validly entered into under
the doctrine of implied authority the
conservator cannot do either. Ineluctably, his
power is not unilateral and he cannot simply
repudiate valid obligations of the Bank. His
authority would be only to bring court actions to
assail such contracts as he has already done
so in the instant case. [First Bank v. CA, 1996]
THE DESIGNATION OF A CONSERVATOR UNDER SECTION 29 OF THIS ACT OR

THE APPOINTMENT OF A RECEIVER UNDER THIS SECTION SHALL BE VESTED
EXCLUSIVELY WITH THE MONETARY BOARD. FURTHERMORE, THE
DESIGNATION OF A CONSERVATOR IS NOT A PRECONDITION TO THE
DESIGNATION OF A RECEIVER.
Closure (Sec. 30; Secs. 53 and 56.4, RA 8791)

Receivership (Sec. 30; Secs. 69-70, RA 8791)
SECTION 30. PROCEEDINGS IN RECEIVERSHIP AND LIQUIDATION.
THE MONETARY BOARD MAY SUMMARILY AND WITHOUT NEED FOR PRIOR
HEARING FORBID THE INSTITUTION FROM DOING BUSINESS IN THE PHILIPPINES
AND DESIGNATE THE PHILIPPINE DEPOSIT INSURANCE CORPORATION AS
RECEIVER OF THE BANKING INSTITUTION. [FOR A QUASI-BANK, ANY PERSON OF
RECOGNIZED COMPETENCE IN BANKING OR FINANCE MAY BE DESIGNED AS
RECEIVER.] WHENEVER, UPON REPORT OF THE HEAD OF THE SUPERVISING OR
EXAMINING DEPARTMENT, THE MONETARY BOARD FINDS THAT A BANK OR
QUASI-BANK:
(A) IS UNABLE TO PAY ITS LIABILITIES AS THEY BECOME DUE IN THE

ORDINARY COURSE OF BUSINESS: PROVIDED, THAT THIS SHALL NOT
INCLUDE INABILITY TO PAY CAUSED BY EXTRAORDINARY DEMANDS
INDUCED BY FINANCIAL PANIC IN THE BANKING COMMUNITY;
(B) HAS INSUFFICIENT REALIZABLE ASSETS, AS DETERMINED BY THE

BANGKO SENTRAL, TO MEET ITS LIABILITIES; OR
(C) CANNOT CONTINUE IN BUSINESS WITHOUT INVOLVING PROBABLE
LOSSES TO ITS DEPOSITORS OR CREDITORS; OR
(D) HAS WILLFULLY VIOLATED A CEASE AND DESIST ORDER UNDER
SECTION 37 THAT HAS BECOME FINAL, INVOLVING ACTS OR TRANSACTIONS
WHICH AMOUNT TO FRAUD OR A DISSIPATION OF THE ASSETS OF THE
INSTITUTION;
SECTION 53. RA 8791. OTHER BANKING SERVICES. - IN CASE A BANK OR

QUASI-BARK NOTIFIES THE BANGKO SENTRAL OR PUBLICLY ANNOUNCES A
BANK HOLIDAY, OR IN ANY MANNER SUSPENDS THE PAYMENT OF ITS DEPOSIT
LIABILITIES CONTINUOUSLY FOR MORE THAN THIRTY (30) DAYS, THE
MONETARY BOARD MAY SUMMARILY AND WITHOUT NEED FOR PRIOR HEARING
CLOSE SUCH BANKING INSTITUTION AND PLACE IT UNDER RECEIVERSHIP OF
THE PHILIPPINE DEPOSIT INSURANCE CORPORATION. (72A)
SECTION 56. RA 8791. CONDUCTING BUSINESS IN AN UNSAFE OR UNSOUND

MANNER - W HENEVER A BANK, QUASI-BANK OR TRUST ENTITY PERSISTS IN
CONDUCTING ITS BUSINESS IN AN UNSAFE OR UNSOUND MANNER, THE
MONETARY BOARD MAY, WITHOUT PREJUDICE TO THE ADMINISTRATIVE
SANCTIONS PROVIDED IN SECTION 37 OF THE NEW CENTRAL BANK ACT, TAKE
ACTION UNDER SECTION 30 OF THE SAME ACT AND/OR IMMEDIATELY EXCLUDE
THE ERRING BANK FROM CLEARING, THE PROVISIONS OF LAW TO THE
CONTRARY NOTWITHSTANDING.
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Comment [WU3]: In RA 7653, only a "report

of the head of the supervising or examining
department" is necessary. It is an established
rule in statutory construction that where the
words of a statute are clear, plain and free from
ambiguity, it must be given its literal meaning
and applied without attempted
interpretation.Laying down the requisites for the
closure of a bank under the law is the
prerogative of the legislature and what its
wisdom dictates. The lawmakers could have
easily retained the word "examination" (and in
the process also preserved the jurisprudence
attached to it) but they did not and instead
opted to use the word "report." The insistence
on an examination is not sanctioned by RA
7653 and we would be guilty of judicial
legislation were we to make it a requirement
when such is not supported by the language of
the law.
Comment [O4]: 56.1 The act or omission has

resulted or may result in material loss or
damage, or abnormal risk or danger to the
safety, stability, liquidity or solvency of the
institution;
56.2 The act or omission has resulted or may
result in material loss or damage or abnormal
risk to the institution's depositors, creditors,
investors, stockholders or to the Bangko Sentral
or to the public in general;
56.3 The act or omission has caused any undue
injury, or has given any unwarranted benefits,
advantage or preference to the bank or any
party in the discharge by the director or officer
of his duties and responsibilities through
manifest partiality, evident bad faith or gross
inexcusable negligence; or
56.4 The act or omission involves entering into
any contract or transaction manifestly and
grossly disadvantageous to the bank, quasibank or trust entity, whether or not the director
or officer profited or will profit thereby.
SECTION 30. PROCEEDINGS IN RECEIVERSHIP AND LIQUIDATION. - THE

RECEIVER SHALL :
1. IMMEDIATELY GATHER AND TAKE CHARGE OF ALL THE ASSETS AND
LIABILITIES OF THE INSTITUTION,
2. ADMINISTER THE SAME FOR THE BENEFIT OF ITS CREDITORS,
3. AND EXERCISE THE GENERAL POWERS OF A RECEIVER UNDER THE
REVISED RULES OF COURT
4. BUT SHALL NOT, WITH THE EXCEPTION OF ADMINISTRATIVE
EXPENDITURES, PAY OR COMMIT ANY ACT THAT WILL INVOLVE THE
TRANSFER OR DISPOSITION OF ANY ASSET OF THE INSTITUTION:
PROVIDED, THAT THE RECEIVER MAY DEPOSIT OR PLACE THE FUNDS OF THE
INSTITUTION IN NON-SPECULATIVE INVESTMENTS. THE RECEIVER SHALL
DETERMINE AS SOON AS POSSIBLE, BUT NOT LATER THAN NINETY (90) DAYS
FROM TAKE OVER, WHETHER THE INSTITUTION MAY BE REHABILITATED OR
OTHERWISE PLACED IN SUCH A CONDITION SO THAT IT MAY BE PERMITTED TO
RESUME BUSINESS WITH SAFETY TO ITS DEPOSITORS AND CREDITORS AND
THE GENERAL PUBLIC: PROVIDED, THAT ANY DETERMINATION FOR THE
RESUMPTION OF BUSINESS OF THE INSTITUTION SHALL BE SUBJECT TO PRIOR
APPROVAL OF THE MONETARY BOARD.
SECTION 30. PROCEEDINGS IN RECEIVERSHIP AND LIQUIDATION. THE

ACTIONS OF THE MONETARY BOARD TAKEN UNDER THIS SECTION OR UNDER
RESTRAINED OR SET ASIDE BY THE COURT EXCEPT ON PETITION FOR
THE DESIGNATION OF A CONSERVATOR UNDER SECTION 29 OF THIS ACT OR

THE APPOINTMENT OF A RECEIVER UNDER THIS SECTION SHALL BE VESTED
EXCLUSIVELY WITH THE MONETARY BOARD. FURTHERMORE, THE
DESIGNATION OF A CONSERVATOR IS NOT A PRECONDITION TO THE
DESIGNATION OF A RECEIVER.
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BAR Q [2009]: TRUE OF FALSEA BANK UNDER RECEIVERSHIP CAN STILL

GRANT NEW LOANS AND ACCEPT NEW DEPOSITS.
SUGGESTED ANSWER: FALSE. During the receivership, the assets and
properties of the corporation into cash in preparation for distribution to
creditors. Granting new loans and accepting new deposits would
constitute doing business for the bank in the ordinary course of business
which is contrary to the nature and purpose of a receivership proceeding.
BAR Q [2009]: MAHARLIKANG PILIPINO BANKING CORPORATION [MPBC]
OPERATES SEVERAL BRANCHES OF MAHARLIKANG PILIPINO RURAL BANK IN
EASTERN VISAYAS. ALMOST ALL THE BRANCH MANAGERS ARE CLOSE RELATIVES
OF THE MEMBERS OF THE BOARD OF DIRECTORS OF THE CORPORATION. MANY
UNDESERVING RELATIVES OF THE BRANCH MANAGERS WERE GRANTED LOANS. IN
TIME, THE BRANCHES COULD NOT SETTLE THEIR OBLIGATIONS TO DEPOSITORS
AND CREDITORS.
RECEIVING REPORTS OF THESE IRREGULARITIES, THE SUPERVISING AND
EXAMINING DEPARTMENT [SED] OF THE MONETARY BOARD PREPARED A
DETAILED REPORT SPECIFYING THE FACTS AND THE CHRONOLOGY OF EVENTS
RELATIVE TO THE PROBLEMS THAT BESET MPBC RURAL BANK BRANCHES. THE
REPORT CONCLUDED THAT THE BANK BRANCHES WERE UNABLE TO PAY THEIR
LIABILITIES AS THEY FELL DUE, AND COULD NOT POSSIBLY CONTINUE IN BUSINESS
WITHOUT INCURRING SUBSTANTIAL LOSSES TO ITS DEPOSITORS.
A. MAY THE MONETARY BOARD ORDER THE CLOSURE OF THE MPBC RURAL
BANKS RELYING ONLY ON THE SED REPORT, WITHOUT NEED OF AN
EXAMINATION?
B. IF MPBC HIRES YOU AS A LAWYER BECAUSE THE MONETARY BOARD HAS
FORBIDDEN IT FROM CARRYING ON ITS BUSINESS DUE TO ITS IMMINENT
INSOLVENCY, WHAT ACTION WILL YOU INSTITUTE TO QUESTION THE
MONETARY BOARDS ORDER?
SUGGESTED ANSWER:
A. Yes. Upon receipt of the report of the SED, the Monetary Board is
authorized to take any of the actions enumerated under the Sec. 30,
RA 7653, otherwise known as the New Central Bank Act, leading to
the receivership and liquidation of a bank or quasi-bank. There is no
requirement that an examination be first conducted before a banking
institution may be placed under receivership. [RURAL BANK OF SAN
MIGUEL V. MONETARY BOARD, 2007]
B. The order of the Monetary Board may be questioned on a petition for
certiorari on the ground that the action taken was in excess of
jurisdiction or with grave abuse of discretion amounting to lack or
excess of jurisdiction. The petition of certiorari may only be filed by the
stockholders representing the majority of the capital stock within 10
days from receipt by the board of directors of MPBC of the order
directing receivership, liquidation or conservatorship. [SEC. 30, PAR.
[2], RA 7653]
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BAR Q [2002]: DISTINGUISH BETWEEN THE ROLE OF A CONSERVATOR AND THAT

OF A RECEIVER OF A BANK.
SUGESTED ANSWER: The Conservator is appointed for a period not
exceeding one (1) year, to take charge of the assets, liabilities, and
the management of a bank or a quasi-bank in a state of continuing
inability, or unwillingness to maintain a condition of liquidity deemed
adequate to protect the interest of depositors and creditors.
On the other hand, the Receiver is appointed to manage a bank or
quasi-bank that is unable to pay its liabilities in the ordinary course of
business, or has insufficient realizable assets to meet its liabilities, or
cannot continue in business without probable losses to its depositors
or creditors; or has willfully violated a final cease and desist order,
involving acts or transactions amounting to fraud or a dissipation of
the assets of the institution. The main purpose of the Receiver is to
recommend the rehabilitation or liquidation of the bank.
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Liquidation (Sec. 30; Sec. 69, RA 8791)

SECTION 30. PROCEEDINGS IN RECEIVERSHIP AND LIQUIDATION. -IF THE
RECEIVER DETERMINES THAT THE INSTITUTION CANNOT BE REHABILITATED OR
PERMITTED TO RESUME BUSINESS IN ACCORDANCE WITH THE NEXT
PRECEDING PARAGRAPH, THE MONETARY BOARD SHALL NOTIFY IN WRITING
THE BOARD OF DIRECTORS OF ITS FINDINGS AND DIRECT THE RECEIVER TO
PROCEED WITH THE LIQUIDATION OF THE INSTITUTION. THE RECEIVER SHALL:
(1) FILE EX PARTE WITH THE PROPER REGIONAL TRIAL COURT, AND
WITHOUT REQUIREMENT OF PRIOR NOTICE OR ANY OTHER ACTION, A
PETITION FOR ASSISTANCE IN THE LIQUIDATION OF THE INSTITUTION
PURSUANT TO A LIQUIDATION PLAN ADOPTED BY THE PHILIPPINE DEPOSIT
INSURANCE CORPORATION FOR GENERAL APPLICATION TO ALL CLOSED
BANKS. IN CASE OF QUASI-BANKS, THE LIQUIDATION PLAN SHALL BE
ADOPTED BY THE MONETARY BOARD. UPON ACQUIRING JURISDICTION,
THE COURT SHALL, UPON MOTION BY THE RECEIVER AFTER DUE NOTICE,
ADJUDICATE DISPUTED CLAIMS AGAINST THE INSTITUTION, ASSIST THE
ENFORCEMENT OF INDIVIDUAL LIABILITIES OF THE STOCKHOLDERS,
DIRECTORS AND OFFICERS, AND DECIDE ON OTHER ISSUES AS MAY BE
MATERIAL TO IMPLEMENT THE LIQUIDATION PLAN ADOPTED. THE RECEIVER
SHALL PAY THE COST OF THE PROCEEDINGS FROM THE ASSETS OF THE
INSTITUTION.
(2) CONVERT THE ASSETS OF THE INSTITUTIONS TO MONEY, DISPOSE OF

THE SAME TO CREDITORS AND OTHER PARTIES, FOR THE PURPOSE OF
PAYING THE DEBTS OF SUCH INSTITUTION IN ACCORDANCE WITH THE
RULES ON CONCURRENCE AND PREFERENCE OF CREDIT UNDER THE CIVIL
CODE OF THE PHILIPPINES AND HE MAY, IN THE NAME OF THE INSTITUTION,
AND WITH THE ASSISTANCE OF COUNSEL AS HE MAY RETAIN, INSTITUTE
SUCH ACTIONS AS MAY BE NECESSARY TO COLLECT AND RECOVER
ACCOUNTS AND ASSETS OF, OR DEFEND ANY ACTION AGAINST, THE
INSTITUTION. THE ASSETS OF AN INSTITUTION UNDER RECEIVERSHIP OR
LIQUIDATION SHALL BE DEEMED IN CUSTODIA LEGIS IN THE HANDS OF THE
RECEIVER AND SHALL, FROM THE MOMENT THE INSTITUTION WAS PLACED
UNDER SUCH RECEIVERSHIP OR LIQUIDATION, BE EXEMPT FROM ANY
ORDER OF GARNISHMENT, LEVY, ATTACHMENT, OR EXECUTION.
THE ACTIONS OF THE MONETARY BOARD TAKEN UNDER THIS SECTION OR

UNDER SECTION 29 OF THIS ACT SHALL BE FINAL AND EXECUTORY, AND MAY
NOT BE RESTRAINED OR SET ASIDE BY THE COURT EXCEPT ON PETITION FOR
SECTION 69. RA 8791. RECEIVERSHIP AND INVOLUNTARY LIQUIDATION. - THE

GROUNDS AND PROCEDURES FOR PLACING A BANK UNDER RECEIVERSHIP OR
LIQUIDATION, AS WELL AS THE POWERS AND DUTIES OF THE RECEIVER OR
LIQUIDATOR APPOINTED FOR THE BANK SHALL BE GOVERNED BY THE
PROVISIONS OF SECTIONS 30, 31, 32, AND 33 OF THE NEW CENTRAL BANK
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ACT: PROVIDED, THAT THE PETITIONER OR PLAINTIFF FILES WITH THE CLERK
OR JUDGE OF THE COURT IN WHICH THE ACTION IS PENDING A BOND,
EXECUTED IN FAVOR OF THE BANGKO SENTRAL, IN AN AMOUNT TO BE FIXED
BY THE COURT. THIS SECTION SHALL ALSO APPLY TO THE EXTENT POSSIBLE
TO THE RECEIVERSHIP AND LIQUIDATION PROCEEDINGS OF QUASI-BANKS. (N)
SECTION 70. RA 8791. PENALTY FOR TRANSACTIONS AFTER A BANK
BECOMES INSOLVENT. - ANY DIRECTOR OR OFFICER OF ANY BANK DECLARED
INSOLVENT OR PLACED UNDER RECEIVERSHIP BY THE MONETARY BOARD WHO
REFUSES TO TURN OVER THE BANK'S RECORDS AND ASSETS TO THE
DESIGNATED RECEIVERS, OR WHO TAMPERS WITH BANKS RECORDS, OR WHO
APPROPRIATES FOR HIMSELF FOR ANOTHER PARTY OR DESTROYS OR CAUSES
THE MISAPPROPRIATION AND DESTRUCTION OF THE BANK'S ASSETS, OR WHO
RECEIVES OR PERMITS OR CAUSES TO BE RECEIVED IN SAID BANK ANY
DEPOSIT, COLLECTION OF LOANS AND/OR RECEIVABLES, OR WHO PAYS OUT
OR PERMITS OR CAUSES TO BE TRANSFERRED ANY SECURITIES OR PROPERTY
OF SAID BANK SHALL BE SUBJECT TO THE PENAL PROVISIONS OF THE NEW
CENTRAL BANK ACT. (85A)
How the BSP handles exchange crises (Sec. 72)

SECTION 72. EMERGENCY RESTRICTIONS ON EXCHANGE OPERATIONS. - IN ORDER
TO ACHIEVE THE PRIMARY OBJECTIVE OF THE BANGKO SENTRAL AS SET FORTH IN
SECTION 3 OF THIS ACT, OR PROTECT THE INTERNATIONAL RESERVES OF THE
BANGKO SENTRAL IN THE IMMINENCE OF, OR DURING AN EXCHANGE CRISIS, OR IN
TIME OF NATIONAL EMERGENCY AND TO GIVE THE MONETARY BOARD AND THE
GOVERNMENT TIME IN WHICH TO TAKE CONSTRUCTIVE MEASURES TO FORESTALL,
COMBAT, OR OVERCOME SUCH A CRISIS OR EMERGENCY, THE MONETARY BOARD,
WITH THE CONCURRENCE OF AT LEAST FIVE (5) OF ITS MEMBERS AND WITH THE
APPROVAL OF THE PRESIDENT OF THE PHILIPPINES, MAY
1. TEMPORARILY SUSPEND OR RESTRICT SALES OF EXCHANGE BY THE
BANGKO SENTRAL, AND
2. MAY SUBJECT ALL TRANSACTIONS IN GOLD AND FOREIGN EXCHANGE TO
LICENSE BY THE BANGKO SENTRAL, AND
3. MAY REQUIRE THAT ANY FOREIGN EXCHANGE THEREAFTER OBTAINED BY
ANY PERSON RESIDING OR ENTITY OPERATING IN THE PHILIPPINES BE
DELIVERED TO THE BANGKO SENTRAL OR TO ANY BANK OR AGENT
DESIGNATED BY THE BANGKO SENTRAL FOR THE PURPOSE, AT THE
EFFECTIVE EXCHANGE RATE OR RATES:
PROVIDED, HOWEVER, THAT FOREIGN CURRENCY DEPOSITS MADE UNDER
REPUBLIC ACT NO. 6426 SHALL BE EXEMPT FROM THESE REQUIREMENTS.
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Functions of the BSP (e.g., Secs. 49-60; 61-63, 81-89, 109; 64-66; 82-84; 94 and
103; 102; 110-116; 117-122; 123-124)
Exclusive issue power (Sec. 50); liability for notes and coins (Sec. 51); legal
tender power (Sec. 53)
SECTION 50. EXCLUSIVE ISSUE POWER. - THE BANGKO SENTRAL SHALL HAVE
THE SOLE POWER AND AUTHORITY TO ISSUE CURRENCY, WITHIN THE
TERRITORY OF THE PHILIPPINES. NO OTHER PERSON OR ENTITY, PUBLIC OR
PRIVATE, MAY PUT INTO CIRCULATION NOTES, COINS OR ANY OTHER OBJECT
OR DOCUMENT WHICH, IN THE OPINION OF THE MONETARY BOARD, MIGHT
CIRCULATE AS CURRENCY, NOR REPRODUCE OR IMITATE THE FACSIMILES OF
BANGKO SENTRAL NOTES WITHOUT PRIOR AUTHORITY FROM THE BANGKO
SENTRAL. XXX.
SECTION 51. LIABILITY FOR NOTES AND COINS. - NOTES AND COINS ISSUED
BY THE BANGKO SENTRAL SHALL BE LIABILITIES OF THE BANGKO SENTRAL
AND MAY BE ISSUED ONLY AGAINST, AND IN AMOUNTS NOT EXCEEDING, THE
ASSETS OF THE BANGKO SENTRAL. SAID NOTES AND COINS SHALL BE A FIRST
AND PARAMOUNT LIEN ON ALL ASSETS OF THE BANGKO SENTRAL.
THE BANGKO SENTRAL'S HOLDINGS OF ITS OWN NOTES AND COINS SHALL NOT
BE CONSIDERED AS PART OF ITS CURRENCY ISSUE AND, ACCORDINGLY, SHALL
NOT FORM PART OF THE ASSETS OR LIABILITIES OF THE BANGKO SENTRAL.
SECTION 52. LEGAL TENDER POWER. - ALL NOTES AND COINS ISSUED BY THE
BANGKO SENTRAL SHALL BE FULLY GUARANTEED BY THE GOVERNMENT OF
THE REPUBLIC OF THE PHILIPPINES AND SHALL BE LEGAL TENDER IN THE
PHILIPPINES FOR ALL DEBTS, BOTH PUBLIC AND PRIVATE: PROVIDED,
HOWEVER, THAT, UNLESS OTHERWISE FIXED BY THE MONETARY BOARD,
COINS SHALL BE LEGAL TENDER IN AMOUNTS NOT EXCEEDING FIFTY PESOS
(P50.00) FOR DENOMINATIONS OF TWENTY-FIVE CENTAVOS AND ABOVE, AND
IN AMOUNTS NOT EXCEEDING TWENTY PESOS (P20.00) FOR DENOMINATIONS
OF TEN CENTAVOS OR LESS.
DTC SUPPLEMENT TO PARAGRAPH 1.17 (A), PP. 12-13
On account of the issuance by the BSP of new coins in higher
denominations after the affectivity of the BSP Law in 1993, the BSP,
pursuant to Section 52 of the BSP Law and Monetary Board
Resolution No. 862, dated July 6, 2006, issued Circular No. 537,
dated July 18, 2006, which adjusted the maximum amount of coins to
be considered as legal tender as follows:
1.
(P1,000) for denominations of 1-Piso, 5-Piso and 10-Piso coins;

and
2.
(P100) for denominations of 1-sentimo, 5-sentimo, 10-sentimo,

and 25-sentimo
Instruments of action (e.g., Secs. 68; 69-79; 81-89, 93; 90-92; 94-103; 104-108)
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Setting of bank reserve requirements (Secs. 94-103)

SECTION 94. RESERVE REQUIREMENTS. - IN ORDER TO CONTROL THE VOLUME
OF MONEY CREATED BY THE CREDIT OPERATIONS OF THE BANKING SYSTEM,
ALL BANKS OPERATING IN THE PHILIPPINES SHALL BE REQUIRED TO MAINTAIN
RESERVES AGAINST THEIR DEPOSIT LIABILITIES: PROVIDED, THAT THE
MONETARY BOARD MAY, AT ITS DISCRETION, ALSO REQUIRE ALL BANKS
AND/OR QUASI-BANKS TO MAINTAIN RESERVES AGAINST FUNDS HELD IN TRUST
AND LIABILITIES FOR DEPOSIT SUBSTITUTES AS DEFINED IN THIS ACT. THE
REQUIRED RESERVES OF EACH BANK SHALL BE PROPORTIONAL TO THE
VOLUME OF ITS DEPOSIT LIABILITIES AND SHALL ORDINARILY TAKE THE FORM
OF A DEPOSIT IN THE BANGKO SENTRAL. RESERVE REQUIREMENTS SHALL BE
APPLIED TO ALL BANKS OF THE SAME CATEGORY UNIFORMLY AND WITHOUT
DISCRIMINATION.
RESERVES AGAINST DEPOSIT SUBSTITUTES, IF IMPOSED, SHALL BE

DETERMINED IN THE SAME MANNER AS PROVIDED FOR RESERVE
REQUIREMENTS AGAINST REGULAR BANK DEPOSITS, WITH RESPECT TO THE
IMPOSITION, INCREASE, AND COMPUTATION OF RESERVES.
THE MONETARY BOARD MAY EXEMPT FROM RESERVE REQUIREMENTS

DEPOSITS AND DEPOSIT SUBSTITUTES WITH REMAINING MATURITIES OF TWO
(2) YEARS OR MORE, AS WELL AS INTERBANK BORROWINGS.
SINCE THE REQUIREMENT TO MAINTAIN BANK RESERVES IS IMPOSED

PRIMARILY TO CONTROL THE VOLUME OF MONEY, THE BANGKO SENTRAL
SHALL NOT PAY INTEREST ON THE RESERVES MAINTAINED WITH IT UNLESS THE
MONETARY BOARD DECIDES OTHERWISE AS WARRANTED BY
CIRCUMSTANCES.
SECTION 95. DEFINITION OF DEPOSIT SUBSTITUTES. - THE TERM "DEPOSIT

SUBSTITUTES" IS DEFINED AS
1. AN ALTERNATIVE FORM OF OBTAINING FUNDS FROM THE PUBLIC,
OTHER THAN DEPOSITS,
2. THROUGH THE ISSUANCE, ENDORSEMENT, OR ACCEPTANCE OF DEBT
INSTRUMENTS
3. FOR THE BORROWER'S OWN ACCOUNT,

4. FOR THE PURPOSE OF RELENDING OR PURCHASING OF RECEIVABLES
AND OTHER OBLIGATIONS.
THESE INSTRUMENTS MAY INCLUDE, BUT NEED NOT BE LIMITED TO, BANKERS
ACCEPTANCES, PROMISSORY NOTES, PARTICIPATIONS, CERTIFICATES OF
ASSIGNMENT AND SIMILAR INSTRUMENTS WITH RECOURSE, AND REPURCHASE
AGREEMENTS. THE MONETARY BOARD SHALL DETERMINE WHAT SPECIFIC
INSTRUMENTS SHALL BE CONSIDERED AS DEPOSIT SUBSTITUTES FOR THE
PURPOSES OF SECTION 94 OF THIS ACT: PROVIDED, HOWEVER, THAT
DEPOSIT SUBSTITUTES OF COMMERCIAL, INDUSTRIAL AND OTHER NONFINANCIAL COMPANIES FOR THE LIMITED PURPOSE OF FINANCING THEIR OWN
NEEDS OR THE NEEDS OF THEIR AGENTS OR DEALERS SHALL NOT BE COVERED
BY THE PROVISIONS OF SECTION 94 OF THIS ACT.
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SECTION 96. REQUIRED RESERVES AGAINST PESO DEPOSITS. - THE

MONETARY BOARD MAY FIX AND, WHEN IT DEEMS NECESSARY, ALTER THE
MINIMUM RESERVE RATIOS TO PESO DEPOSITS, AS WELL AS TO DEPOSIT
SUBSTITUTES, WHICH EACH BANK AND/OR QUASI-BANK MAY MAINTAIN, AND
SUCH RATIO SHALL BE APPLIED UNIFORMLY TO ALL BANKS OF THE SAME
CATEGORY AS WELL AS TO QUASI-BANKS.
SECTION 97. REQUIRED RESERVES AGAINST FOREIGN CURRENCY DEPOSITS. THE MONETARY BOARD IS SIMILARLY AUTHORIZED TO PRESCRIBE AND MODIFY
THE MINIMUM RESERVE RATIOS APPLICABLE TO DEPOSITS DENOMINATED IN
FOREIGN CURRENCIES.
SECTION 98. RESERVES AGAINST UNUSED BALANCES OF OVERDRAFT LINES. IN ORDER TO FACILITATE BANGKO SENTRAL CONTROL OVER THE VOLUME OF
BANK CREDIT, THE MONETARY BOARD MAY ESTABLISH MINIMUM RESERVE
REQUIREMENTS FOR UNUSED BALANCES OF OVERDRAFT LINES.
THE POWERS OF THE MONETARY BOARD TO PRESCRIBE AND MODIFY
RESERVE REQUIREMENTS AGAINST UNUSED BALANCES OF OVERDRAFT LINES
SHALL BE THE SAME AS ITS POWERS WITH RESPECT TO RESERVE
REQUIREMENTS AGAINST DEMAND DEPOSITS.
SECTION 99. INCREASE IN RESERVE REQUIREMENTS. - WHENEVER IN THE

OPINION OF THE MONETARY BOARD IT BECOMES NECESSARY TO INCREASE
RESERVE REQUIREMENTS AGAINST EXISTING LIABILITIES, THE INCREASE SHALL
BE MADE IN A GRADUAL MANNER AND SHALL NOT EXCEED FOUR PERCENTAGE
POINTS IN ANY THIRTY-DAY PERIOD. BANKS AND OTHER AFFECTED FINANCIAL
INSTITUTIONS SHALL BE NOTIFIED REASONABLY IN ADVANCE OF THE DATE ON
WHICH SUCH INCREASE IS TO BECOME EFFECTIVE.
SECTION 100. COMPUTATION ON RESERVES. - THE RESERVE POSITION OF

EACH BANK OR QUASI-BANK SHALL BE CALCULATED DAILY ON THE BASIS OF
THE AMOUNT, AT THE CLOSE OF BUSINESS FOR THE DAY, OF THE
INSTITUTION'S RESERVES AND THE AMOUNT OF ITS LIABILITY ACCOUNTS
AGAINST WHICH RESERVES ARE REQUIRED TO BE MAINTAINED: PROVIDED,
THAT WITH REFERENCE TO HOLIDAYS OR NON-BANKING DAYS, THE RESERVE
POSITION AS CALCULATED AT THE CLOSE OF THE BUSINESS DAY IMMEDIATELY
PRECEDING SUCH HOLIDAYS AND NON-BANKING DAYS SHALL APPLY ON SUCH
DAYS.
FOR THE PURPOSE OF COMPUTING THE RESERVE POSITION OF EACH BANK OR

QUASI-BANK, ITS PRINCIPAL OFFICE IN THE PHILIPPINES AND ALL ITS
BRANCHES AND AGENCIES LOCATED THEREIN SHALL BE CONSIDERED AS A
SINGLE UNIT.
SECTION 101. RESERVE DEFICIENCIES. - WHENEVER THE RESERVE POSITION

OF ANY BANK OR QUASI-BANK, COMPUTED IN THE MANNER SPECIFIED IN THE
PRECEDING SECTION OF THIS ACT, IS BELOW THE REQUIRED MINIMUM, THE
BANK OR QUASI-BANK SHALL PAY THE BANGKO SENTRAL ONE-TENTH OF ONE
PERCENT (1/10 OF 1%) PER DAY ON THE AMOUNT OF THE DEFICIENCY OR THE
PREVAILING NINETY-ONE-DAY TREASURY BILL RATE PLUS THREE PERCENTAGE
POINTS, WHICHEVER IS HIGHER: PROVIDED, HOWEVER, THAT BANKS AND
QUASI-BANKS SHALL ORDINARILY BE PERMITTED TO OFFSET ANY RESERVE
DEFICIENCY OCCURRING ON ONE OR MORE DAYS OF THE WEEK WITH ANY
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EXCESS RESERVES WHICH THEY MAY HOLD ON OTHER DAYS OF THE SAME
WEEK AND SHALL BE REQUIRED TO PAY THE PENALTY ONLY ON THE AVERAGE
DAILY DEFICIENCY DURING THE WEEK. IN CASES OF ABUSE, THE MONETARY
BOARD MAY DENY ANY BANK OR QUASI-BANK THE PRIVILEGE OF OFFSETTING
RESERVE DEFICIENCIES IN THE AFORESAID MANNER.
IF A BANK OR QUASI-BANK CHRONICALLY HAS A RESERVE DEFICIENCY, THE

MONETARY BOARD MAY LIMIT OR PROHIBIT THE MAKING OF NEW LOANS OR
INVESTMENTS BY THE INSTITUTION AND MAY REQUIRE THAT PART OR ALL OF
THE NET PROFITS OF THE INSTITUTION BE ASSIGNED TO SURPLUS.
THE MONETARY BOARD MAY MODIFY OR SET ASIDE THE RESERVE DEFICIENCY
PENALTIES PROVIDED IN THIS SECTION, FOR PART OR THE ENTIRE PERIOD OF A
STRIKE OR LOCKOUT AFFECTING A BANK OR A QUASI-BANK AS DEFINED IN THE
LABOR CODE, OR OF A NATIONAL EMERGENCY AFFECTING OPERATIONS OF
BANKS OR QUASI-BANKS. THE MONETARY BOARD MAY ALSO MODIFY OR SET
ASIDE RESERVED DEFICIENCY PENALTIES FOR REHABILITATION PROGRAM OF A
BANK.
SECTION 102. INTERBANK SETTLEMENT. - THE BANGKO SENTRAL SHALL

ESTABLISH FACILITIES FOR INTERBANK CLEARING UNDER SUCH RULES AND
REGULATIONS AS THE MONETARY BOARD MAY PRESCRIBE: PROVIDED, THAT
THE BANGKO SENTRAL MAY CHARGE ADMINISTRATIVE AND OTHER FEES FOR
THE MAINTENANCE OF SUCH FACILITIES.
THE DEPOSIT RESERVES MAINTAINED BY THE BANKS IN THE BANGKO SENTRAL

IN ACCORDANCE WITH THE PROVISIONS OF SECTION 94 OF THIS ACT SHALL
SERVE AS BASIS FOR THE CLEARING OF CHECKS AND THE SETTLEMENT OF
INTERBANK BALANCES, SUBJECT TO SUCH RULES AND REGULATIONS AS THE
MONETARY BOARD MAY ISSUE WITH RESPECT TO SUCH OPERATIONS:
PROVIDED, THAT ANY BANK WHICH INCURS ON OVERDRAWING IN ITS DEPOSIT
ACCOUNT WITH THE BANGKO SENTRAL SHALL FULLY COVER SAID OVERDRAFT,
INCLUDING INTEREST THEREON AT A RATE EQUIVALENT TO ONE-TENTH OF ONE
PERCENT (1/10 OF 1%) PER DAY OR THE PREVAILING NINETY-ONE-DAY
TREASURY BILL RATE PLUS THREE PERCENTAGE POINTS, WHICHEVER IS
HIGHER, NOT LATER THAN THE NEXT CLEARING DAY: PROVIDED, FURTHER,
THAT SETTLEMENT OF CLEARING BALANCES SHALL NOT BE EFFECTED FOR ANY
ACCOUNT WHICH CONTINUES TO BE OVERDRAWN FOR FIVE (5) CONSECUTIVE
BANKING DAYS UNTIL SUCH TIME AS THE OVERDRAWING IS FULLY COVERED OR
OTHERWISE CONVERTED INTO AN EMERGENCY LOAN OR ADVANCE PURSUANT
TO THE PROVISIONS OF SECTION 84 OF THIS ACT: PROVIDED, FINALLY, THAT
THE APPROPRIATE CLEARING OFFICE SHALL BE OFFICIALLY NOTIFIED OF BANKS
WITH OVERDRAWN BALANCES. BANKS WITH EXISTING OVERDRAFTS WITH THE
BANGKO SENTRAL AS OF THE EFFECTIVITY OF THIS ACT SHALL, WITHIN SUCH
PERIOD AS MAY BE PRESCRIBED BY THE MONETARY BOARD, EITHER CONVERT
THE OVERDRAFT INTO AN EMERGENCY LOAN OR ADVANCE WITH A PLAN OF
PAYMENT, OR SETTLE SUCH OVERDRAFTS, AND THAT, UPON FAILURE TO SO
COMPLY HEREWITH, THE BANGKO SENTRAL SHALL TAKE SUCH ACTION
AGAINST THE BANK AS MAY BE WARRANTED UNDER THIS ACT.
SECTION 103. EXEMPTION FROM ATTACHMENT AND OTHER PURPOSES. DEPOSITS MAINTAINED BY BANKS WITH THE BANGKO SENTRAL AS PART OF
THEIR RESERVE REQUIREMENTS SHALL BE EXEMPT FROM ATTACHMENT,
GARNISHMENTS, OR ANY OTHER ORDER OR PROCESS OF ANY COURT,
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GOVERNMENT AGENCY OR ANY OTHER ADMINISTRATIVE BODY ISSUED TO

SATISFY THE CLAIM OF A PARTY OTHER THAN THE GOVERNMENT, OR ITS
POLITICAL SUBDIVISIONS OR INSTRUMENTALITIES.
Control of bank credit (Secs. 104-108; Secs. 37-38 and 43, RA 8791)
SECTION 104. GUIDING PRINCIPLE. - THE MONETARY BOARD SHALL USE THE
POWERS GRANTED TO IT UNDER THIS ACT TO ENSURE THAT THE SUPPLY,
AVAILABILITY AND COST OF MONEY ARE IN ACCORD WITH THE NEEDS OF THE
PHILIPPINE ECONOMY AND THAT BANK CREDIT IS NOT GRANTED FOR
SPECULATIVE PURPOSES PREJUDICIAL TO THE NATIONAL INTERESTS.
REGULATIONS ON BANK OPERATIONS SHALL BE APPLIED TO ALL BANKS OF THE
SAME CATEGORY UNIFORMLY AND WITHOUT DISCRIMINATION.
SECTION 105. MARGIN REQUIREMENTS AGAINST LETTERS OF CREDIT. - THE

MONETARY BOARD MAY AT ANY TIME PRESCRIBE MINIMUM CASH MARGINS FOR
THE OPENING OF LETTERS OF CREDIT, AND MAY RELATE THE SIZE OF THE
REQUIRED MARGIN TO THE NATURE OF THE TRANSACTION TO BE FINANCED.
SECTION 106. REQUIRED SECURITY AGAINST BANK LOANS. - IN ORDER TO
PROMOTE LIQUIDITY AND SOLVENCY OF THE BANKING SYSTEM, THE
MONETARY BOARD MAY ISSUE SUCH REGULATIONS AS IT MAY DEEM
NECESSARY WITH RESPECT TO THE MAXIMUM PERMISSIBLE MATURITIES OF
THE LOANS AND INVESTMENTS WHICH THE BANKS MAY MAKE, AND THE KIND
AND AMOUNT OF SECURITY TO BE REQUIRED AGAINST THE VARIOUS TYPES OF
CREDIT OPERATIONS OF THE BANKS.
SECTION 107. PORTFOLIO CEILINGS. - WHENEVER THE MONETARY BOARD

CONSIDERS IT ADVISABLE TO PREVENT OR CHECK AN EXPANSION OF BANK
CREDIT, THE BOARD MAY PLACE AN UPPER LIMIT ON THE AMOUNT OF LOANS
AND INVESTMENTS WHICH THE BANKS MAY HOLD, OR MAY PLACE A LIMIT ON
THE RATE OF INCREASE OF SUCH ASSETS WITHIN SPECIFIED PERIODS OF TIME.
THE MONETARY BOARD MAY APPLY SUCH LIMITS TO THE LOANS AND
INVESTMENTS OF EACH BANK OR TO SPECIFIC CATEGORIES THEREOF.
IN NO CASE SHALL THE MONETARY BOARD ESTABLISH LIMITS WHICH ARE

BELOW THE VALUE OF THE LOANS OR INVESTMENTS OF THE BANKS ON THE
DATE ON WHICH THEY ARE NOTIFIED OF SUCH RESTRICTIONS. THE
RESTRICTIONS SHALL BE APPLIED TO ALL BANKS UNIFORMLY AND WITHOUT
DISCRIMINATION.
SECTION 108. MINIMUM CAPITAL RATIOS. - THE MONETARY BOARD MAY

PRESCRIBE MINIMUM RATIOS WHICH THE CAPITAL AND SURPLUS OF THE BANKS
MUST BEAR TO THE VOLUME OF THEIR ASSETS, OR TO SPECIFIC CATEGORIES
THEREOF, AND MAY ALTER SAID RATIOS WHENEVER IT DEEMS NECESSARY.
Moral influence (Sec. 68)

SECTION 68. MEANS OF ACTION. - IN ORDER TO ACHIEVE THE PRIMARY
OBJECTIVE OF PRICE STABILITY, THE MONETARY BOARD SHALL RELY ON ITS
MORAL INFLUENCE AND THE POWERS GRANTED TO IT UNDER THIS ACT FOR
THE MANAGEMENT OF MONETARY AGGREGATES.
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1.2
Cases
Authority of conservator to revoke contracts

FIRST PHILIPPINE INTERNATIONAL BANK VS. CA, ET AL.,
G.R. 115849, JANUARY 24, 1996.
FACTS: First Bank is refusing the tender of payment being made by the private respondents
for an alleged perfected sale of certain parcels of land owned by First Bank.
To justify its refusal, First Bank brought forth the argument that the person whom the private
respondents have been negotiating with had no authority to represent First Bank; that at the
time the negotiations between First Bank and the private respondents took place, its
appointed conservator [First Bank has been placed by the Central Bank under
conservatorship] had already repudiated the authority of said person.
ISSUE: Was the repudiation valid?
HELD: NO. It is not disputed that the petitioner Bank was under a conservator placed by the
Central Bank of the Philippines during the time that the negotiation and perfection of the
contract of sale took place. Petitioners energetically contended that the conservator has the
power to revoke or overrule actions of the management or the board of directors of a bank,
under Section 28-A of Republic Act No. 265 (otherwise known as the Central Bank Act).
While admittedly, the Central Bank law gives vast and far-reaching powers to the
conservator of a bank, it must be pointed out that such powers must be related to the
"(preservation of) the assets of the bank, (the reorganization of) the management thereof
and (the restoration of) its viability." Such powers, enormous and extensive as they are,
cannot extend to the post-facto repudiation of perfected transactions, otherwise they would
infringe against the non-impairment clause of the Constitution. If the legislature itself cannot
revoke an existing valid contract, how can it delegate such non-existent powers to the
conservator under Section 28-A of said law?
Obviously, therefore, Section 28-A merely gives the conservator power to revoke
contracts that are, under existing law, deemed to be defective i.e., void, voidable,
unenforceable or rescissible. Hence, the conservator merely takes the place of a bank's
board of directors. What the said board cannot do such as repudiating a contract validly
entered into under the doctrine of implied authority the conservator cannot do either.
Ineluctably, his power is not unilateral and he cannot simply repudiate valid obligations of the
Bank. His authority would be only to bring court actions to assail such contracts as he has
already done so in the instant case.
16 of 89
No need for prior hearing

RURAL BANK OF BUHI VS. CA,
G.R. L-61689, JUNE 20, 1988
FACTS: On January 10, 1980, a general examination of the bank's affairs and operations was
conducted and there were found by the Rural Banks and Savings and Loan Association
[DRBSLA] represented byConsolacion V. Odra, Director of DRBSLA, among others,
massive irregularities in its operations consisting of loans to unknown and fictitious
borrowers, where the sum of P 1,704,782.00 was past due and another sum
of P1,130,000.00 was also past due in favor of the Central Bank. The promissory notes
evidencing these loans were rediscounted with the Central Bank for cash. As a result
thereof, the bank became insolvent and prejudiced its depositors and creditors.
Consolacion V. Odra, submitted a report recommending to the Monetary Board of the
Central Bank the placing of Buhi under receivership in accordance with Section 29 of
Republic Act No. 265, as amended, the designation of the Director, DRBSLA, as receiver
thereof. On March 28, 1980, the Monetary Board, finding the report to be true, adopted
Resolution No. 583 placing Buhi, petitioner herein, under receivership and designated
respondent, Consolacion V. Odra, as Receiver, pursuant to the provisions of Section 29 of
Republic Act No. 265 as amended.
ssue: Petitioner Rural Bank's position is to the effect that due process was not observed by
the Monetary Board before said bank was placed under receivership. Said Rural Bank
claimed that it was not given the chance to deny and disprove such claim of insolvency
and/or any other ground which the Monetary Board used in justification of its action.
HELD: Prior hearing not required under the law.
It will be observed from the foregoing provision of law, that there is no requirement whether
express or implied, that a hearing be first conducted before a banking institution may be
placed under receivership. On the contrary, the law is explicit as to the conditions
prerequisite to the action of the Monetary Board to forbid the institution to do business in the
Philippines and to appoint a receiver to immediately take charge of the bank's assets and
liabilities. They are: (a) an examination made by the examining department of the Central
Bank; (b) report by said department to the Monetary Board; and (c) prima facie showing that
the bank is in a condition of insolvency or so situated that its continuance in business would
involve probable loss to its depositors or creditors.
Due process does not necessarily require a prior hearing; a hearing or an opportunity to be
heard may be subsequent to the closure. One can just imagine the dire consequences of a
prior hearing: bank runs would be the order of the day, resulting in panic and hysteria. In the
process, fortunes may be wiped out, and disillusionment will run the gamut of the entire
banking community.
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Section 30 of the BSP Law merely requires a report, not an examination, by the head of the
supervising or examining department before a bank could be closed
RURAL BANK OF SAN MIGUEL, ET AL. VS. MONETARY BOARD, ET AL.,
G.R. 150886, FEBRUARY 16, 2007.
FACTS: On the basis of the comptrollership/monitoring report as of October 31, 1999 as
reported by Mr. Wilfredo B. Domo-ong, Director, Department of Rural Banks, in his
memorandum dated January 20, 2000, which report showed that [RBSM] (a) is unable to
pay its liabilities as they become due in the ordinary course of business; (b) cannot continue
in business without involving probable losses to its depositors and creditors; that the
management of the bank had been accordingly informed of the need to infuse additional
capital to place the bank in a solvent financial condition and was given adequate time within
which to make the required infusion and that no infusion of adequate fresh capital was
made, Monetary Board (MB), the governing board of respondent Bangko Sentral ng Pilipinas
(BSP), issued Resolution No. 105 prohibiting RBSM from doing business in the Philippines,
placing it under receivership and designating respondent Philippine Deposit Insurance
Corporation (PDIC) as receiver.
ISSUE: Petitioners argue that Resolution No. 105 was bereft of any basis considering that no
complete examination had been conducted before it was issued. This case essentially boils
down to one core issue: whether Section 30 of RA 7653 (also known as the New Central
Bank Act) and applicable jurisprudence require a current and complete examination of the
bank before it can be closed and placed under receivership.
HELD: In RA 7653, only a "report of the head of the supervising or examining department"
is necessary. It is an established rule in statutory construction that where the words of a
statute are clear, plain and free from ambiguity, it must be given its literal meaning and
applied without attempted interpretation.
Laying down the requisites for the closure of a bank under the law is the prerogative of the
legislature and what its wisdom dictates. The lawmakers could have easily retained the word
"examination" (and in the process also preserved the jurisprudence attached to it) but they
did not and instead opted to use the word "report." The insistence on an examination is not
sanctioned by RA 7653 and we would be guilty of judicial legislation were we to make it a
requirement when such is not supported by the language of the law.
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BSP, not RTC, has jurisdiction over acts complained of that pertain to banks
business
KORUGA VS. ARCENAS, ET AL.,
G.R. 168332, JUNE 19, 2009.
FACTS: Korugas Complaint charged defendants with violation of Sections 31 to 34 of the
Corporation Code, prohibiting self-dealing and conflict of interest of directors and officers;
invoked her right to inspect the corporations records under Sections 74 and 75 of the
Corporation Code; and prayed for Receivership and Creation of a Management Committee,
pursuant to Rule 59 of the Rules of Civil Procedure, the Securities Regulation Code, the
Interim Rules of Procedure Governing Intra-Corporate Controversies, the General Banking
Law of 2000, and the New Central Bank Act.
ISSUE: Who has jurisdiction over the complaint [BSP or RTC]?
HELD: Whether the loans referred to in Korugas complaint are covered by the prohibition
on self-dealing or not is a matter for the BSP to determine [not the RTC]. These are not
ordinary intra-corporate matters. The acts complained of pertain to the conduct of Banco
Filipinos banking business. A bank, as defined in the General Banking Law, refers to an
entity engaged in the lending of funds obtained in the form of deposits. The law vests in the
BSP the supervision over operations and activities of banks.
Also, it is the BSP [and not the RTC] which has jurisdiction to hear and decide the suit that
seeks to place Banco Filipino under receivership. Following the principle of generalia
specialibus non derogant, is not the Interim Rules of Procedure on Intra-Corporate
Controversies nor Rule 59 of the Rules of Civil Procedure on Receivership, that would apply
to this case. Instead, Sections 29 and 30 of the New Central Bank Act should be followed.
Crystal clear in Section 30 is the provision that says the "appointment of a receiver under
this section shall be vested exclusively with the Monetary Board." The term "exclusively"
connotes that only the Monetary Board can resolve the issue of whether a bank is to be
placed under receivership and, upon an affirmative finding, it also has authority to appoint a
receiver. This is further affirmed by the fact that the law allows the Monetary Board to take
action "summarily and without need for prior hearing." And, as a clincher, the law explicitly
provides that "actions of the Monetary Board taken under this section or under Section 29 of
this Act shall be final and executory, and may not be restrained or set aside by the court
except on a petition for certiorari on the ground that the action taken was in excess of
jurisdiction or with such grave abuse of discretion as to amount to lack or excess of
jurisdiction."
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Close now, hear later doctrine

BANGKO SENTRAL, ET AL. VS. VALENZUELA, ET AL.,
G.R. 184778, OCTOBER 2, 2009.
FACTS: Acting on a BSP Report of Examination [on the books of the private respondents],
the BSP required the private respondents to undertake certain remedial measures. Private
respondents are asking for the nullification of a BSP Report of Examination (ROE) and the
issuance of a writ of preliminary investigation on the ground that they were not furnished
copies of the ROE, despite the fact that theyve been requesting for copies of the said report.
The lower court nevertheless granted the request.
ISSUE: Was the issuance of the writ valid?
HELD: NO.
The respondent banks have shown no necessity for the writ of preliminary injunction to
prevent serious damage. The serious damage contemplated by the trial court was the
possibility of the imposition of sanctions upon respondent banks, even the sanction of
closure. Under the law, the sanction of closure could be imposed upon a bank by the BSP
even without notice and hearing. The apparent lack of procedural due process would not
result in the invalidity of action by the MB. This "close now, hear later" scheme is grounded
on practical and legal considerations to prevent unwarranted dissipation of the banks assets
and as a valid exercise of police power to protect the depositors, creditors, stockholders, and
the general public. The writ of preliminary injunction cannot, thus, prevent the MB from
taking action, by preventing the submission of the ROEs and worse, by preventing the MB
from acting on such ROEs.
The "close now, hear later" doctrine has already been justified as a measure for the
protection of the public interest. Swift action is called for on the part of the BSP when it finds
that a bank is in dire straits. Unless adequate and determined efforts are taken by the
government against distressed and mismanaged banks, public faith in the banking system is
certain to deteriorate to the prejudice of the national economy itself, not to mention the
losses suffered by the bank depositors, creditors, and stockholders, who all deserve the
protection of the government.
1.3
Additional Materials
BSP Circular No. 537, dated July 18, 2006, re adjustment of maximum amount of
coins to be considered as legal tender.
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II
THE GENERAL BANKING LAW OF 2000
RA 8791 (2000).
2.1
Topics
State policy
SECTION 2. DECLARATION OF POLICY. - THE STATE RECOGNIZES THE VITAL ROLE
OF BANKS PROVIDING AN ENVIRONMENT CONDUCIVE TO THE SUSTAINED
DEVELOPMENT OF THE NATIONAL ECONOMY AND THE FIDUCIARY NATURE OF
BANKING THAT REQUIRES HIGH STANDARDS OF INTEGRITY AND PERFORMANCE. IN
FURTHERANCE THEREOF, THE STATE SHALL PROMOTE AND MAINTAIN A STABLE
AND EFFICIENT BANKING AND FINANCIAL SYSTEM THAT IS GLOBALLY COMPETITIVE,
DYNAMIC AND RESPONSIVE TO THE DEMANDS OF A DEVELOPING ECONOMY. (N)
Concept of intermediation
Distinction between banks (Sec. 3) and quasi-banks (Sec. 4)
SECTION 3.1. "BANKS" SHALL REFER TO ENTITIES ENGAGED IN THE LENDING OF
FUNDS OBTAINED IN THE FORM OF DEPOSITS. (2A)
SECTION 4. FOR THE PURPOSES OF THIS ACT, "QUASI-BANKS" SHALL REFER TO
ENTITIES ENGAGED IN THE BORROWING OF FUNDS THROUGH THE ISSUANCE,
ENDORSEMENT OR ASSIGNMENT WITH RECOURSE OR ACCEPTANCE OF DEPOSIT
SUBSTITUTES AS DEFINED IN SECTION 95 OF REPUBLIC ACT NO. 7653
(HEREAFTER THE "NEW CENTRAL BANK ACT") FOR PURPOSES OF RE-LENDING OR
PURCHASING OF RECEIVABLES AND OTHER OBLIGATIONS. (2-DA)
SECTION 95. RA 7653. DEFINITION OF DEPOSIT SUBSTITUTES. - THE TERM

"DEPOSIT SUBSTITUTES" IS DEFINED AS
1. AN ALTERNATIVE FORM OF OBTAINING FUNDS FROM THE PUBLIC, OTHER
THAN DEPOSITS,
2. THROUGH THE ISSUANCE, ENDORSEMENT, OR ACCEPTANCE OF DEBT
INSTRUMENTS
3. FOR THE BORROWER'S OWN ACCOUNT,

4. FOR THE PURPOSE OF RELENDING OR PURCHASING OF RECEIVABLES AND
OTHER OBLIGATIONS.
21 of 89
Classification of banks (Secs. 3.2 and 71)

SECTION. 3.2. BANKS SHALL BE CLASSIFIED INTO:
(A) UNIVERSAL BANKS;
(B) COMMERCIAL BANKS;
(C) THRIFT BANKS, COMPOSED OF: (I) SAVINGS AND MORTGAGE BANKS, (II)
STOCK SAVINGS AND LOAN ASSOCIATIONS, AND (III) PRIVATE DEVELOPMENT
BANKS, AS DEFINED IN THE REPUBLIC ACT NO. 7906 (HEREAFTER THE
"THRIFT BANKS ACT");
(D) RURAL BANKS, AS DEFINED IN REPUBLIC ACT NO. 73S3 (HEREAFTER THE
"RURAL BANKS ACT");
(E) COOPERATIVE BANKS, AS DEFINED IN REPUBLIC ACT NO 6938
(HEREAFTER THE "COOPERATIVE CODE");
(F) ISLAMIC BANKS AS DEFINED IN REPUBLIC ACT NO. 6848, OTHERWISE
KNOWN AS THE "CHARTER OF AL AMANAH ISLAMIC INVESTMENT BANK OF THE
PHILIPPINES"; AND
(G) OTHER CLASSIFICATIONS OF BANKS AS DETERMINED BY THE MONETARY
BOARD OF THE BANGKO SENTRAL NG PILIPINAS. (6-AA)
SECTION 71. OTHER BANKING LAWS. - THE ORGANIZATION, THE OWNERSHIP AND
CAPITAL REQUIREMENTS, POWERS, SUPERVISION AND GENERAL CONDUCT OF
BUSINESS OF THRIFT BANKS, RURAL BANKS AND COOPERATIVE BANKS SHALL BE
GOVERNED BY THE PROVISIONS OF THE THRIFT BANKS ACT, THE RURAL BANKS
ACT, AND THE COOPERATIVE CODE, RESPECTIVELY. THE ORGANIZATION,
OWNERSHIP AND CAPITAL REQUIREMENTS, POWERS, SUPERVISION AND GENERAL
CONDUCT OF BUSINESS OF ISLAMIC BANKS SHALL BE GOVERNED BY SPECIAL
LAWS. THE PROVISIONS OF THIS ACT, HOWEVER, INSOFAR AS THEY ARE NOT IN
CONFLICT WITH THE PROVISIONS OF THE THRIFT BANKS ACT, THE RURAL BANKS
ACT, AND THE COOPERATIVE CODE SHALL LIKEWISE APPLY TO THRIFT BANKS,
RURAL BANKS, AND COOPERATIVE BANKS, RESPECTIVELY. HOWEVER, FOR
PURPOSES OF PRESCRIBING THE MINIMUM RATIO WHICH THE NET WORTH OF A
THRIFT BANK MUST BEAR TO ITS TOTAL RISK ASSETS, THE PROVISIONS OF
SECTION 33 OF THIS ACT SHALL GOVERN. (N)
22 of 89
Distinction between universal banks and commercial banks (Secs. 23, 24 and 30)
SECTION 23. POWERS OF A UNIVERSAL BANK - A UNIVERSAL BANK SHALL HAVE
THE AUTHORITY TO EXERCISE, IN ADDITION TO THE POWERS AUTHORIZED FOR A
COMMERCIAL BANK IN SECTION 29,
1. THE POWERS OF AN INVESTMENT HOUSE AS PROVIDED IN EXISTING LAWS
AND
2. THE POWER TO INVEST IN NON-ALLIED ENTERPRISES AS PROVIDED IN THIS

ACT. (21-B)
SECTION 30. EQUITY INVESTMENTS OF A COMMERCIAL BANK. - A COMMERCIAL
BANK MAY, SUBJECT TO THE CONDITIONS STATED IN THE SUCCEEDING
PARAGRAPHS, INVEST ONLY IN THE EQUITIES OF ALLIED ENTERPRISES AS MAY BE
DETERMINED BY THE MONETARY BOARD.
SECTION 24. EQUITY INVESTMENTS OF A UNIVERSAL BANK. - A UNIVERSAL BANK
MAY, SUBJECT TO THE CONDITIONS STATED IN THE SUCCEEDING PARAGRAPH,
INVEST IN THE EQUITIES OF ALLIED AND NON-ALLIED ENTERPRISES AS MAY BE
DETERMINED BY THE MONETARY BOARD.
SECTION 24. EQUITY INVESTMENTS OF A
UNIVERSAL BANK. - EXCEPT AS THE MONETARY
BOARD MAY OTHERWISE PRESCRIBE:
SECTION 30. EQUITY INVESTMENTS OF A

COMMERCIAL BANK. - EXCEPT AS THE
MONETARY BOARD MAY OTHERWISE PRESCRIBE:
24.1. THE TOTAL INVESTMENT IN EQUITIES OF

ALLIED AND NON-ALLIED ENTERPRISES SHALL
NOT EXCEED FIFTY PERCENT (50%) OF THE
NET WORTH OF THE BANK; AND
30.1. THE TOTAL INVESTMENT IN EQUITIES OF
24.2. THE EQUITY INVESTMENT IN ANY ONE

ENTERPRISE, WHETHER ALLIED OR NONALLIED, SHALL NOT EXCEED TWENTY-FIVE
PERCENT (25%) OF THE NET WORTH OF THE
BANK.
30.2. THE EQUITY INVESTMENT IN ANY ONE

ENTERPRISE SHALL NOT EXCEED TWENTYFIVE PERCENT (25%) OF TILE NET WORTH OF
THE BANK.
THE ACQUISITION OF SUCH EQUITY OR EQUITIES
THE ACQUISITION OF SUCH EQUITY OR EQUITIES
IS SUBJECT TO THE PRIOR APPROVAL OF THE

MONETARY BOARD WHICH SHALL PROMULGATE
APPROPRIATE GUIDELINES TO GOVERN SUCH
INVESTMENTS. (21-BA)
IS SUBJECT TO THE PRIOR APPROVAL OF THE

MONETARY BOARD WHICH SHALL PROMULGATE
APPROPRIATE GUIDELINES TO GOVERN SUCH
INVESTMENT.(2LA-A; 21-CA)
ALLIED ENTERPRISES SHALL NOT EXCEED

THIRTY-FIVE PERCENT (35%) OF THE NET
WORTH OF THE BANK; AND
AS USED IN THIS ACT, "NET WORTH" SHALL MEAN

THE TOTAL OF THE UNIMPAIRED PAID-IN CAPITAL
INCLUDING
1. PAID-IN SURPLUS,
2. RETAINED EARNINGS AND
3. UNDIVIDED PROFIT,
NET OF VALUATION RESERVES AND OTHER
ADJUSTMENTS AS MAY BE REQUIRED BY THE
BANGKO SENTRAL.
23 of 89
Distinction between universal or commercial banks and other banks (Sec. 33)
SECTION 33. ACCEPTANCE OF DEMAND DEPOSITS. - A BANK OTHER THAN A
UNIVERSAL OR COMMERCIAL BANK CANNOT ACCEPT OR CREATE DEMAND
DEPOSITS EXCEPT UPON PRIOR APPROVAL OF, AND SUBJECT TO SUCH
CONDITIONS AND RULES AS MAY BE PRESCRIBED BY THE MONETARY BOARD. (72AA)
SECTION 59. RA 7653 ISSUE OF DEMAND DEPOSITS. - ONLY BANKS DULY

AUTHORIZED TO DO SO MAY ACCEPT FUNDS OR CREATE LIABILITIES PAYABLE IN
PESOS UPON DEMAND BY THE PRESENTATION OF CHECKS, AND SUCH OPERATIONS
SHALL BE SUBJECT TO THE CONTROL OF THE MONETARY BOARD IN ACCORDANCE
WITH THE POWERS GRANTED IT WITH RESPECT THERETO UNDER THIS ACT.
SECTION 58, RA 7653. DEFINITION. - FOR PURPOSES OF THIS ACT, THE TERM
"DEMAND DEPOSITS" MEANS ALL THOSE LIABILITIES OF THE BANGKO SENTRAL AND
OF OTHER BANKS WHICH ARE DENOMINATED IN PHILIPPINE CURRENCY AND ARE
SUBJECT TO PAYMENT IN LEGAL TENDER UPON DEMAND BY THE PRESENTATION OF
CHECKS.
SECTION 60. RA 7653. LEGAL CHARACTER. - CHECKS REPRESENTING DEMAND

DEPOSITS DO NOT HAVE LEGAL TENDER POWER AND THEIR ACCEPTANCE IN THE
PAYMENT OF DEBTS, BOTH PUBLIC AND PRIVATE, IS AT THE OPTION OF THE
CREDITOR: PROVIDED, HOWEVER, THAT 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.
Distinction between allied and non-allied enterprises (Secs. 23, et seq.)

SECTION 25. EQUITY INVESTMENTS OF A UNIVERSAL BANK IN FINANCIAL ALLIED
ENTERPRISES. - A UNIVERSAL BANK CAN OWN UP TO ONE HUNDRED PERCENT
(100%) OF THE EQUITY IN A THRIFT BANK, A RURAL BANK OR A FINANCIAL ALLIED
ENTERPRISE. A PUBLICLY-LISTED UNIVERSAL OR COMMERCIAL BANK MAY OWN UP
TO ONE HUNDRED PERCENT (100%) OF THE VOTING STOCK OF ONLY ONE OTHER
UNIVERSAL OR COMMERCIAL BANK. (21-B; 21-CA)
SECTION 26. EQUITY INVESTMENTS OF A UNIVERSAL BANK IN NON-FINANCIAL
ALLIED ENTERPRISES. - A UNIVERSAL BANK MAY OWN UP TO ONE HUNDRED
PERCENT (100%) OF THE EQUITY IN A NON-FINANCIAL ALLIED ENTERPRISE. (21BA)
SECTION 27. EQUITY INVESTMENTS OF A UNIVERSAL BANK IN NON-ALLIED
ENTERPRISES. - THE EQUITY INVESTMENT OF A UNIVERSAL BANK, OR OF ITS
WHOLLY OR MAJORITY-OWNED SUBSIDIARIES, IN A SINGLE NON-ALLIED
ENTERPRISE SHALL NOT EXCEED THIRTY-FIVE PERCENT (35%) OF THE TOTAL
EQUITY IN THAT ENTERPRISE NOR SHALL IT EXCEED THIRTY-FIVE PERCENT (35%)
OF THE VOTING STOCK IN THAT ENTERPRISE. (21-B)
SECTION
28. EQUITY INVESTMENTS IN QUASI-BANKS. - TO PROMOTE

COMPETITIVE CONDITIONS IN FINANCIAL MARKETS, THE MONETARY BOARD MAY
24 of 89
FURTHER LIMIT TO FORTY PERCENT (40%) EQUITY INVESTMENTS OF UNIVERSAL

BANKS IN QUASI-BANKS. THIS RULE SHALL ALSO APPLY IN THE CASE OF
COMMERCIAL BANKS. (12-E) ARTICLE II. OPERATIONS OF COMMERCIAL BANKS
Institutions subject to BSP supervisory and regulatory powers (Sec. 4; see Sec. 25,
RA 7653)
SECTION 4. SUPERVISORY POWERS. THE OPERATIONS AND ACTIVITIES OF BANKS
SHALL BE SUBJECT TO SUPERVISION OF THE BANGKO SENTRAL.
THE BANGKO SENTRAL SHALL ALSO HAVE SUPERVISION OVER THE OPERATIONS
OF AND EXERCISE REGULATORY POWERS OVER QUASI-BANKS, TRUST ENTITIES
AND OTHER FINANCIAL INSTITUTIONS WHICH UNDER SPECIAL LAWS ARE SUBJECT
TO BANGKO SENTRAL SUPERVISION. (2-CA)
SECTION 25, RA 7653. SUPERVISION AND EXAMINATION. - THE BANGKO SENTRAL

SHALL HAVE SUPERVISION OVER, AND CONDUCT PERIODIC OR SPECIAL
EXAMINATIONS OF, BANKING INSTITUTIONS AND QUASI-BANKS, INCLUDING THEIR
SUBSIDIARIES AND AFFILIATES ENGAGED IN ALLIED ACTIVITIES.
FOR PURPOSES OF THIS SECTION, A SUBSIDIARY MEANS A CORPORATION MORE
THAN FIFTY PERCENT (50%) OF THE VOTING STOCK OF WHICH IS OWNED BY A
BANK OR QUASI-BANK AND AN AFFILIATE MEANS A CORPORATION THE VOTING
STOCK OF WHICH, TO THE EXTENT OF FIFTY PERCENT (50%) OR LESS, IS OWNED
BY A BANK OR QUASI-BANK OR WHICH IS RELATED OR LINKED TO SUCH
INSTITUTION OR INTERMEDIARY THROUGH COMMON STOCKHOLDERS OR SUCH
OTHER FACTORS AS MAY BE DETERMINED BY THE MONETARY BOARD.
SECTION 25, RA 7653. SUPERVISION AND EXAMINATION. - NO RESTRAINING

ORDER OR INJUNCTION SHALL BE ISSUED BY THE COURT ENJOINING THE BANGKO
SENTRAL FROM EXAMINING ANY INSTITUTION SUBJECT TO SUPERVISION OR
EXAMINATION BY THE BANGKO SENTRAL, UNLESS
1. THERE IS CONVINCING PROOF THAT THE ACTION OF THE BANGKO SENTRAL
IS PLAINLY ARBITRARY AND MADE IN BAD FAITH AND
2. THE PETITIONER OR PLAINTIFF FILES WITH THE CLERK OR JUDGE OF THE

COURT IN WHICH THE ACTION IS PENDING A BOND EXECUTED IN FAVOR OF
THE BANGKO SENTRAL, IN AN AMOUNT TO BE FIXED BY THE COURT.
THE PROVISIONS OF RULE 58 OF THE NEW RULES OF COURT INSOFAR AS THEY

ARE APPLICABLE AND NOT INCONSISTENT WITH THE PROVISIONS OF THIS SECTION
SHALL GOVERN THE ISSUANCE AND DISSOLUTION OF THE RESTRAINING ORDER OR
INJUNCTION CONTEMPLATED IN THIS SECTION.
25 of 89
Authority to engage in banking functions (Sec. 6)

SECTION 6. AUTHORITY TO ENGAGE IN BANKING AND QUASI-BANKING
FUNCTIONS. - NO PERSON OR ENTITY SHALL ENGAGE IN BANKING OPERATIONS OR
QUASI-BANKING FUNCTIONS WITHOUT AUTHORITY FROM THE BANGKO SENTRAL:
PROVIDED, HOWEVER, THAT AN ENTITY AUTHORIZED BY THE BANGKO SENTRAL TO
PERFORM UNIVERSAL OR COMMERCIAL BANKING FUNCTIONS SHALL LIKEWISE
HAVE THE AUTHORITY TO ENGAGE IN QUASI-BANKING FUNCTIONS.
THE DETERMINATION OF WHETHER A PERSON OR ENTITY IS PERFORMING BANKING

OR QUASI-BANKING FUNCTIONS WITHOUT BANGKO SENTRAL AUTHORITY SHALL BE
DECIDED BY THE MONETARY BOARD. TO RESOLVE SUCH ISSUE, THE MONETARY
BOARD MAY; THROUGH THE APPROPRIATE SUPERVISING AND EXAMINING
DEPARTMENT OF THE BANGKO SENTRAL, EXAMINE, INSPECT OR INVESTIGATE THE
BOOKS AND RECORDS OF SUCH PERSON OR ENTITY. UPON ISSUANCE OF THIS
AUTHORITY, SUCH PERSON OR ENTITY MAY COMMENCE TO ENGAGE IN BANKING
OPERATIONS OR QUASI-BANKING FUNCTION AND SHALL CONTINUE TO DO SO
UNLESS SUCH AUTHORITY IS SOONER SURRENDERED, REVOKED, SUSPENDED OR
ANNULLED BY THE BANGKO SENTRAL IN ACCORDANCE WITH THIS ACT OR OTHER
SPECIAL LAWS. XXX.
PERSONS OR ENTITIES FOUND TO BE PERFORMING BANKING OR QUASI-BANKING
FUNCTIONS WITHOUT AUTHORITY FROM THE BANGKO SENTRAL SHALL BE SUBJECT
TO APPROPRIATE SANCTIONS UNDER THE NEW CENTRAL BANK ACT AND OTHER
APPLICABLE LAWS. (4A)
Stock corporation (Sec. 8)
SECTION 8. ORGANIZATION. - THE MONETARY BOARD MAY AUTHORIZE THE
ORGANIZATION OF A BANK OR QUASI-BANK SUBJECT TO THE FOLLOWING
CONDITIONS:
8.1 THAT THE ENTITY IS A STOCK CORPORATION (7);
8.2 THAT ITS FUNDS ARE OBTAINED FROM THE PUBLIC, WHICH SHALL MEAN
TWENTY (20) OR MORE PERSONS (2-DA); AND
8.3 THAT THE MINIMUM CAPITAL REQUIREMENTS PRESCRIBED BY THE
MONETARY BOARD FOR EACH CATEGORY OF BANKS ARE SATISFIED. (N)
NO NEW COMMERCIAL BANK SHALL BE ESTABLISHED WITHIN THREE (3) YEARS
FROM THE EFFECTIVITY OF THIS ACT. IN THE EXERCISE OF THE AUTHORITY
GRANTED HEREIN, THE MONETARY BOARD SHALL TAKE INTO CONSIDERATION
THEIR CAPABILITY IN TERMS OF THEIR FINANCIAL RESOURCES AND TECHNICAL
EXPERTISE AND INTEGRITY. THE BANK LICENSING PROCESS SHALL
INCORPORATE AN ASSESSMENT OF THE BANK'S OWNERSHIP STRUCTURE,
DIRECTORS AND SENIOR MANAGEMENT, ITS OPERATING PLAN AND INTERNAL
CONTROLS AS WELL AS ITS PROJECTED FINANCIAL CONDITION AND CAPITAL
BASE.
26 of 89
Not a close corporation (Sec. 96, Corporation Code)

SECTION 96. DEFINITION AND APPLICABILITY OF TITLE. - ANY CORPORATION
MAY BE INCORPORATED AS A CLOSE CORPORATION, EXCEPT MINING OR OIL
COMPANIES, STOCK EXCHANGES, BANKS, INSURANCE COMPANIES, PUBLIC
UTILITIES, EDUCATIONAL INSTITUTIONS AND CORPORATIONS DECLARED TO BE
VESTED WITH PUBLIC INTEREST IN ACCORDANCE WITH THE PROVISIONS OF
THIS CODE.
Par value stock (Sec. 9)

SECTION 9. ISSUANCE OF STOCKS. - THE MONETARY BOARD MAY PRESCRIBE
RULES AND REGULATIONS ON THE TYPES OF STOCK A BANK MAY ISSUE,
INCLUDING THE TERMS THEREOF AND RIGHTS APPURTENANT THERETO TO
DETERMINE COMPLIANCE WITH LAWS AND REGULATIONS GOVERNING CAPITAL
AND EQUITY STRUCTURE OF BANKS; PROVIDED, THAT BANKS SHALL ISSUE PAR
VALUE STOCKS ONLY.
Ownership of shares (Sec. 11)

SECTION 11. FOREIGN STOCKHOLDINGS. - FOREIGN INDIVIDUALS AND NONBANK CORPORATIONS MAY OWN OR CONTROL UP TO FORTY PERCENT (40%)
OF THE VOTING STOCK OF A DOMESTIC BANK. THIS RULE SHALL APPLY TO
FILIPINOS AND DOMESTIC NON-BANK CORPORATIONS. (12A; 12-AA) THE
PERCENTAGE OF FOREIGN-OWNED VOTING STOCKS IN A BANK SHALL BE
DETERMINED BY THE CITIZENSHIP OF THE INDIVIDUAL STOCKHOLDERS IN THAT
BANK. THE CITIZENSHIP OF THE CORPORATION WHICH IS A STOCKHOLDER IN A
BANK SHALL FOLLOW THE CITIZENSHIP OF THE CONTROLLING STOCKHOLDERS
OF THE CORPORATION, IRRESPECTIVE OF THE PLACE OF INCORPORATION.
MB certificate of authority
27 of 89
Powers of a universal bank (Secs. 23-29, 53)

SECTION 23. POWERS OF A UNIVERSAL BANK - A UNIVERSAL BANK SHALL HAVE
THE AUTHORITY TO EXERCISE THE POWERS OF AN INVESTMENT HOUSE AS
PROVIDED IN EXISTING LAWS; AND
POWERS
AUTHORIZED
FOR
A
COMMERCIAL BANK IN SECTION 29,
POWER TO INVEST
ENTERPRISES
SECTION 29. POWERS OF

COMMERCIAL
BANK. -
SECTION 25. UP TO 100% OF THE

EQUITY IN A THRIFT BANK, A RURAL
COMMERCIAL BANK SHALL HAVE, IN

ADDITION TO THE GENERAL POWERS
INCIDENT TO CORPORATIONS, ALL
SUCH
POWERS
AS
MAY
BE
NECESSARY TO CARRY ON THE
BUSINESS OF COMMERCIAL BANKING
SUCH AS
1. ACCEPTING DRAFTS AND ISSUING

LETTERS OF CREDIT;
2. DISCOUNTING AND NEGOTIATING
PROMISSORY NOTES, DRAFTS,
BILLS OF EXCHANGE, AND OTHER
EVIDENCES OF DEBT;
3. ACCEPTING
OR
DEMAND DEPOSITS;
CREATING
4. RECEIVING OTHER
TYPES OF
DEPOSIT
DEPOSITS
AND
SUBSTITUTES;
5. BUYING AND SELLING FOREIGN

EXCHANGE AND GOLD OR SILVER
BULLION;
6. ACQUIRING MARKETABLE BONDS

AND OTHER DEBT SECURITIES;
7. EXTENDING CREDIT, SUBJECT TO
SUCH RULES AS THE MONETARY
BOARD
MAY
PROMULGATE.
THESE RULES MAY INCLUDE THE
DETERMINATION OF BONDS AND
OTHER
DEBT
SECURITIES
ELIGIBLE FOR INVESTMENT, THE
MATURITIES AND AGGREGATE
AMOUNT OF SUCH INVESTMENT.
BANK OR A
ENTERPRISE.
IN
FINANCIAL
ALLIED
ALLIED
A PUBLICLY-LISTED UNIVERSAL OR
COMMERCIAL BANK MAY OWN UP
TO 100% OF THE VOTING STOCK
OF ONLY ONE OTHER UNIVERSAL
OR COMMERCIAL BANK.
POWER TO INVEST IN NON-ALLIED

ENTERPRISES
SECTION
27.
THE EQUITY
INVESTMENT OF A UNIVERSAL
BANK, OR OF ITS WHOLLY OR
MAJORITY-OWNED SUBSIDIARIES,
IN
A
SINGLE
NON-ALLIED
ENTERPRISE SHALL NOT EXCEED
35% OF THE TOTAL EQUITY IN
THAT ENTERPRISE NOR SHALL IT
EXCEED 35% OF THE VOTING
STOCK IN THAT ENTERPRISE. (21B)
SECTION 26. UP TO 100% OF THE

EQUITY IN A NON-FINANCIAL ALLIED
ENTERPRISE. (21-BA)
SECTION
28. THE
MONETARY
BOARD MAY FURTHER LIMIT TO
40% EQUITY INVESTMENTS OF
UNIVERSAL BANKS IN QUASI-BANKS.
THIS RULE SHALL ALSO APPLY IN
THE CASE OF COMMERCIAL BANKS.
SECTION 24. EQUITY INVESTMENTS OF A UNIVERSAL BANK.
24.1. THE TOTAL INVESTMENT IN EQUITIES OF ALLIED AND NON-ALLIED
ENTERPRISES SHALL NOT EXCEED FIFTY PERCENT (50%) OF THE NET
WORTH OF THE BANK; AND
24.2. THE EQUITY INVESTMENT IN ANY ONE ENTERPRISE, WHETHER
ALLIED OR NON-ALLIED, SHALL NOT EXCEED TWENTY-FIVE PERCENT
(25%) OF THE NET WORTH OF THE BANK.
AS USED IN THIS ACT, "NET WORTH" SHALL MEAN THE TOTAL OF THE
UNIMPAIRED PAID-IN CAPITAL INCLUDING PAID-IN SURPLUS, RETAINED
EARNINGS AND UNDIVIDED PROFIT, NET OF VALUATION RESERVES AND
OTHER ADJUSTMENTS AS MAY BE REQUIRED BY THE BANGKO SENTRAL.
THE ACQUISITION OF SUCH EQUITY OR EQUITIES IS SUBJECT TO THE
PRIOR APPROVAL OF THE MONETARY BOARD WHICH SHALL PROMULGATE
APPROPRIATE GUIDELINES TO GOVERN SUCH INVESTMENTS. (21-BA)
28 of 89
SECTION 53. OTHER BANKING SERVICES. - IN ADDITION TO THE OPERATIONS

SPECIFICALLY AUTHORIZED IN THIS ACT, A BANK MAY PERFORM THE FOLLOWING
SERVICES:
53.1. RECEIVE IN CUSTODY FUNDS, DOCUMENTS AND VALUABLE OBJECTS;
53.2. ACT AS FINANCIAL AGENT AND BUY AND SELL, BY ORDER OF AND FOR
THE ACCOUNT OF THEIR CUSTOMERS, SHARES, EVIDENCES OF INDEBTEDNESS
AND ALL TYPES OF SECURITIES;
53.3. MAKE COLLECTIONS AND PAYMENTS FOR THE ACCOUNT OF OTHERS AND
PERFORM SUCH OTHER SERVICES FOR THEIR CUSTOMERS AS ARE NOT

INCOMPATIBLE WITH BANKING BUSINESS;
53.4 UPON PRIOR APPROVAL OF THE MONETARY BOARD, ACT AS MANAGING

AGENT, ADVISER, CONSULTANT OR ADMINISTRATOR OF INVESTMENT
MANAGEMENT/ADVISORY/CONSULTANCY ACCOUNTS; AND
53.5. RENT OUT SAFETY DEPOSIT BOXES.
29 of 89
Powers of a commercial bank (Secs. 29-32, 53)

SECTION 29. POWERS OF A COMMERCIAL BANK. - A COMMERCIAL BANK SHALL
HAVE, IN ADDITION TO THE GENERAL POWERS INCIDENT TO CORPORATIONS, ALL
SUCH POWERS AS MAY BE NECESSARY TO CARRY ON THE BUSINESS OF
COMMERCIAL BANKING SUCH AS
1. ACCEPTING DRAFTS AND ISSUING LETTERS OF CREDIT;

2. DISCOUNTING AND NEGOTIATING PROMISSORY NOTES, DRAFTS, BILLS OF
EXCHANGE, AND OTHER EVIDENCES OF DEBT;
3. ACCEPTING OR CREATING DEMAND DEPOSITS;
4. RECEIVING OTHER TYPES OF DEPOSITS AND DEPOSIT SUBSTITUTES;
5. BUYING AND SELLING FOREIGN EXCHANGE AND GOLD OR SILVER BULLION;
6. ACQUIRING MARKETABLE BONDS AND OTHER DEBT SECURITIES; AND
7. EXTENDING CREDIT, SUBJECT TO SUCH RULES AS THE MONETARY BOARD
MAY PROMULGATE. THESE RULES MAY INCLUDE THE DETERMINATION OF
BONDS AND OTHER DEBT SECURITIES ELIGIBLE FOR INVESTMENT, THE
MATURITIES AND AGGREGATE AMOUNT OF SUCH INVESTMENT.
SECTION 30. EQUITY INVESTMENTS OF A COMMERCIAL BANK. - A COMMERCIAL
BANK MAY, SUBJECT TO THE CONDITIONS STATED IN THE SUCCEEDING
PARAGRAPHS, INVEST ONLY IN THE EQUITIES OF ALLIED ENTERPRISES AS MAY BE
DETERMINED BY THE MONETARY BOARD. ALLIED ENTERPRISES MAY EITHER BE
FINANCIAL OR NON-FINANCIAL. EXCEPT AS THE MONETARY BOARD MAY
OTHERWISE PRESCRIBE:
30.1. THE TOTAL INVESTMENT IN EQUITIES OF ALLIED ENTERPRISES SHALL
NOT EXCEED THIRTY-FIVE PERCENT (35%) OF THE NET WORTH OF THE BANK;
AND
30.2. THE EQUITY INVESTMENT IN ANY ONE ENTERPRISE SHALL NOT EXCEED
TWENTY-FIVE PERCENT (25%) OF TILE NET WORTH OF THE BANK. THE
ACQUISITION OF SUCH EQUITY OR EQUITIES IS SUBJECT TO THE PRIOR
APPROVAL OF THE MONETARY BOARD WHICH SHALL PROMULGATE
APPROPRIATE GUIDELINES TO GOVERN SUCH INVESTMENT.(2LA-A; 21-CA)
SECTION 31. EQUITY INVESTMENTS OF A COMMERCIAL BANK IN FINANCIAL ALLIED

ENTERPRISES. - A COMMERCIAL BANK MAY OWN UP TO ONE HUNDRED PERCENT
(100%) OF THE EQUITY OF A THRIFT BANK OR A RURAL BANK. W HERE THE EQUITY
INVESTMENT OF A COMMERCIAL BANK IS IN OTHER FINANCIAL ALLIED
ENTERPRISES, INCLUDING ANOTHER COMMERCIAL BANK, SUCH INVESTMENT SHALL
REMAIN A MINORITY HOLDING IN THAT ENTERPRISE. (21-AA; 21-CA)
SECTION 32. EQUITY INVESTMENTS OF A COMMERCIAL BANK IN NON-FINANCIAL

ALLIED ENTERPRISES. A COMMERCIAL BANK MAY OWN UP TO ONE HUNDRED
PERCENT (100%) OF THE EQUITY IN A NON-FINANCIAL ALLIED ENTERPRISE. (21AA) ARTICLE III. PROVISIONS APPLICABLE TO ALL BANKS, QUASI-BANKS, AND
TRUST ENTITIES
30 of 89
SECTION 53. OTHER BANKING SERVICES. - IN ADDITION TO THE OPERATIONS

SPECIFICALLY AUTHORIZED IN THIS ACT, A BANK MAY PERFORM THE FOLLOWING
SERVICES:
53.1. RECEIVE IN CUSTODY FUNDS, DOCUMENTS AND VALUABLE OBJECTS;
53.2. ACT AS FINANCIAL AGENT AND BUY AND SELL, BY ORDER OF AND FOR
THE ACCOUNT OF THEIR CUSTOMERS, SHARES, EVIDENCES OF INDEBTEDNESS
AND ALL TYPES OF SECURITIES;
53.3. MAKE COLLECTIONS AND PAYMENTS FOR THE ACCOUNT OF OTHERS AND
PERFORM SUCH OTHER SERVICES FOR THEIR CUSTOMERS AS ARE NOT

INCOMPATIBLE WITH BANKING BUSINESS;
53.4 UPON PRIOR APPROVAL OF THE MONETARY BOARD, ACT AS MANAGING

AGENT, ADVISER, CONSULTANT OR ADMINISTRATOR OF INVESTMENT
MANAGEMENT/ADVISORY/CONSULTANCY ACCOUNTS; AND
53.5. RENT OUT SAFETY DEPOSIT BOXES.
Areas of supervision and regulation of banks
Acquisition by bank of own shares (Sec. 10)
SECTION 10. TREASURY STOCKS. - NO BANK SHALL PURCHASE OR ACQUIRE
SHARES OF ITS OWN CAPITAL STOCK OR ACCEPT ITS OWN SHARES AS A SECURITY
FOR A LOAN, EXCEPT WHEN AUTHORIZED BY THE MONETARY BOARD: PROVIDED,
THAT IN EVERY CASE THE STOCK SO PURCHASED OR ACQUIRED SHALL, WITHIN SIX
(6) MONTHS FROM THE TIME OF ITS PURCHASE OR ACQUISITION, BE SOLD OR
DISPOSED OF AT A PUBLIC OR PRIVATE SALE. (24A)
Stockholdings of family groups and related interests (Secs. 12-13)

SECTION 12. STOCKHOLDINGS OF FAMILY GROUPS OF RELATED INTERESTS. STOCKHOLDINGS OF INDIVIDUALS RELATED TO EACH OTHER WITHIN THE FOURTH
DEGREE OF CONSANGUINITY OR AFFINITY, LEGITIMATE OR COMMON-LAW , SHALL
BE CONSIDERED FAMILY GROUPS OR RELATED INTERESTS AND MUST BE FULLY
DISCLOSED IN ALL TRANSACTIONS BY SUCH CORPORATIONS OR RELATED GROUPS
OF PERSONS WITH THE BANK. (12-BA)
SECTION 13. CORPORATE STOCKHOLDINGS. - TWO OR MORE CORPORATIONS
OWNED OR CONTROLLED BY THE SAME FAMILY GROUP OR SAME GROUP OF

PERSONS SHALL BE CONSIDERED RELATED INTERESTS AND MUST BE FULLY
DISCLOSED IN ALL TRANSACTIONS BY SUCH CORPORATIONS OR RELATED GROUP
OF PERSONS WITH THE BANK. (12-BA)
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Independent directors (Sec. 15)

SECTION 15. BOARD OF DIRECTORS. - THE PROVISIONS OF THE CORPORATION
CODE TO THE CONTRARY NOTWITHSTANDING, THERE SHALL BE AT LEAST FIVE (5),
AND A MAXIMUM OF FIFTEEN (15) MEMBERS OF THE BOARD OR DIRECTORS OF A
BANK, TWO (2) OF WHOM SHALL BE INDEPENDENT DIRECTORS. AN "INDEPENDENT
DIRECTOR" SHALL MEAN A PERSON OTHER THAN AN OFFICER OR EMPLOYEE OF
THE BANK, ITS SUBSIDIARIES OR AFFILIATES OR RELATED INTERESTS. (N) NONFILIPINO CITIZENS MAY BECOME MEMBERS OF THE BOARD OF DIRECTORS OF A
BANK TO THE EXTENT OF THE FOREIGN PARTICIPATION IN THE EQUITY OF SAID
BANK. (SEC. 7, RA 7721) THE MEETINGS OF THE BOARD OF DIRECTORS MAY BE
CONDUCTED THROUGH MODERN TECHNOLOGIES SUCH AS, BUT NOT LIMITED TO,
TELECONFERENCING AND VIDEO-CONFERENCING. (N)
Qualifications of directors and officers: the fit and proper rule (Sec. 16)
SECTION 16. FIT AND PROPER RULE. - TO MAINTAIN THE QUALITY OF BANK
MANAGEMENT AND AFFORD BETTER PROTECTION TO DEPOSITORS AND THE PUBLIC

IN GENERAL THE MONETARY BOARD SHALL PRESCRIBE, PASS UPON AND REVIEW
THE QUALIFICATIONS AND DISQUALIFICATIONS OF INDIVIDUALS ELECTED OR
APPOINTED BANK DIRECTORS OR OFFICERS AND DISQUALIFY THOSE FOUND UNFIT.
AFTER DUE NOTICE TO THE BOARD OF DIRECTORS OF THE BANK, THE MONETARY
BOARD MAY DISQUALIFY, SUSPEND OR REMOVE ANY BANK DIRECTOR OR OFFICER
WHO COMMITS OR OMITS AN ACT WHICH RENDER HIM UNFIT FOR THE POSITION. IN
DETERMINING WHETHER AN INDIVIDUAL IS FIT AND PROPER TO HOLD THE POSITION
OF A DIRECTOR OR OFFICER OF A BANK, REGARD SHALL BE GIVEN TO HIS
INTEGRITY, EXPERIENCE, EDUCATION, TRAINING, AND COMPETENCE. (9-AA)
Prohibition on public officials (Sec. 19)

SECTION 19. PROHIBITION ON PUBLIC OFFICIALS. - EXCEPT AS OTHERWISE
PROVIDED IN THE RURAL BANKS ACT, NO APPOINTIVE OR ELECTIVE PUBLIC
OFFICIAL WHETHER FULL-TIME OR PART-TIME SHALL AT THE SAME TIME SERVE AS
OFFICER OF ANY PRIVATE BANK, SAVE IN CASES WHERE SUCH SERVICE IS
INCIDENT TO FINANCIAL ASSISTANCE PROVIDED BY THE GOVERNMENT OR A

GOVERNMENT OWNED OR CONTROLLED CORPORATION TO THE BANK OR UNLESS
OTHERWISE PROVIDED UNDER EXISTING LAWS. (13)
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Compensation and other benefits of directors and officers (Sec. 18)

SECTION 18. COMPENSATION AND OTHER BENEFITS OF DIRECTORS AND
OFFICERS. TO PROTECT THE FINDS OF DEPOSITORS AND CREDITORS THE
MONETARY BOARD MAY REGULATE THE PAYMENT BY THE BARK TO ITS DIRECTORS
AND OFFICERS OF COMPENSATION, ALLOWANCE, FEES, BONUSES, STOCK
OPTIONS, PROFIT SHARING AND FRINGE BENEFITS ONLY IN EXCEPTIONAL CASES
AND WHEN THE CIRCUMSTANCES WARRANT, SUCH AS BUT NOT LIMITED TO THE
FOLLOWING:
18.1. W HEN A BANK IS UNDER COMPTROLLERSHIP OR CONSERVATORSHIP; OR
18.2. W HEN A BANK IS FOUND BY THE MONETARY BOARD TO BE CONDUCTING
BUSINESS IN AN UNSAFE OR UNSOUND MANNER; OR
18.3. W HEN A BANK IS FOUND BY THE MONETARY BOARD TO BE IN AN
UNSATISFACTORY FINANCIAL CONDITION. (N)
Ratio of net worth to total risk assets (Sec. 34); the Basle Accord
SECTION 34. RISK-BASED CAPITAL. - THE MONETARY BOARD SHALL PRESCRIBE
THE MINIMUM RATIO WHICH THE NET WORTH OF A BANK MUST BEAR TO ITS TOTAL
RISK ASSETS WHICH MAY INCLUDE CONTINGENT ACCOUNTS. FOR PURPOSES OF
THIS SECTION, THE MONETARY BOARD MAY REQUIRE SUCH RATIO BE DETERMINED
ON THE BASIS OF THE NET WORTH AND RISK ASSETS OF A BANK AND ITS
SUBSIDIARIES, FINANCIAL OR OTHERWISE, AS WELL AS PRESCRIBE THE
COMPOSITION AND THE MANNER OF DETERMINING THE NET WORTH AND TOTAL
RISK ASSETS OF BANKS AND THEIR SUBSIDIARIES:
PROVIDED, THAT IN THE EXERCISE OF THIS AUTHORITY, THE MONETARY BOARD

SHALL, TO THE EXTENT FEASIBLE CONFORM TO INTERNATIONALLY ACCEPTED
STANDARDS, INCLUDING THOSE OF THE BANK FOR INTERNATIONAL
SETTLEMENTS(BIS), RELATING TO RISK-BASED CAPITAL REQUIREMENTS:
PROVIDED FURTHER, THAT IT MAY ALTER OR SUSPEND COMPLIANCE WITH SUCH
RATIO WHENEVER NECESSARY FOR A MAXIMUM PERIOD OF ONE (1) YEAR:
PROVIDED, FINALLY, THAT SUCH RATIO SHALL BE APPLIED UNIFORMLY TO BANKS
OF THE SAME CATEGORY. IN CASE A BANK DOES NOT COMPLY WITH THE
PRESCRIBED MINIMUM RATIO, THE MONETARY BOARD MAY LIMIT OR PROHIBIT THE
DISTRIBUTION OF NET PROFITS BY SUCH BANK AND 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.
THE MONETARY BOARD MAY, FURTHERMORE, RESTRICT OR PROHIBIT THE

ACQUISITION OF MAJOR ASSETS AND THE MAKING OF NEW INVESTMENTS BY THE
BANK, WITH THE EXCEPTION OF PURCHASES OF READILY MARKETABLE EVIDENCES
OF INDEBTEDNESS OF THE REPUBLIC OF THE PHILIPPINES AND OF THE BANGKO
SENTRAL AND ANY OTHER EVIDENCES OF INDEBTEDNESS OR OBLIGATIONS THE
SERVICING AND REPAYMENT OF WHICH ARE FULLY GUARANTEED BY THE REPUBLIC
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OF THE PHILIPPINES, UNTIL THE MINIMUM REQUIRED CAPITAL RATIO HAS BEEN
RESTORED.
IN CASE OF A BANK MERGER OR CONSOLIDATION, OR WHEN A BANK IS UNDER

REHABILITATION UNDER A PROGRAM APPROVED BY THE BANGKO SENTRAL,
MONETARY BOARD MAY TEMPORARILY RELIEVE THE SURVIVING BANK,
CONSOLIDATED BANK, OR CONSTITUENT BANK OR CORPORATIONS UNDER
REHABILITATION FROM FULL COMPLIANCE WITH THE REQUIRED CAPITAL RATIO
UNDER SUCH CONDITIONS AS IT MAY PRESCRIBE.
BEFORE THE EFFECTIVITY OF RULES WHICH THE MONETARY BOARD IS

AUTHORIZED TO PRESCRIBE UNDER THIS PROVISION, SECTION 22 OF THE
GENERAL BANKING ACT, AS AMENDED, SECTION 9 OF THE THRIFT BANKS ACT,
AND ALL PERTINENT RULES ISSUED PURSUANT THERETO, SHALL CONTINUE TO BE
IN FORCE. (22A)
Limits on loans: the SBL rules (Sec. 35)
SECTION 35. LIMIT ON LOANS, CREDIT ACCOMMODATIONS AND GUARANTEES
35.1 EXCEPT AS THE MONETARY BOARD MAY OTHERWISE PRESCRIBE FOR
REASONS OF NATIONAL INTEREST, THE TOTAL AMOUNT OF LOANS, CREDIT
ACCOMMODATIONS AND GUARANTEES AS MAY BE DEFINED BY THE MONETARY
BOARD THAT MAY BE EXTENDED BY A BANK TO ANY PERSON, PARTNERSHIP,
ASSOCIATION, CORPORATION OR OTHER ENTITY SHALL AT NO TIME EXCEED
TWENTY PERCENT (20%) OF THE NET WORTH OF SUCH BANK. THE BASIS FOR
DETERMINING COMPLIANCE WITH SINGLE BORROWER LIMIT IS THE TOTAL CREDIT
COMMITMENT OF THE BANK TO THE BORROWER.
35.2. UNLESS THE MONETARY BOARD PRESCRIBES OTHERWISE, THE TOTAL

AMOUNT OF LOANS, CREDIT ACCOMMODATIONS AND GUARANTEES PRESCRIBED IN
THE PRECEDING PARAGRAPH MAY BE INCREASED BY AN ADDITIONAL TEN PERCENT
(10%) OF THE NET WORTH OF SUCH BANK PROVIDED THE ADDITIONAL LIABILITIES
OF ANY BORROWER ARE ADEQUATELY SECURED BY TRUST RECEIPTS, SHIPPING
DOCUMENTS, WAREHOUSE RECEIPTS OR OTHER SIMILAR DOCUMENTS
TRANSFERRING OR SECURING TITLE COVERING READILY MARKETABLE, NONPERISHABLE GOODS WHICH MUST BE FULLY COVERED BY INSURANCE.
35.3 THE ABOVE PRESCRIBED CEILINGS SHALL INCLUDE

1. THE DIRECT LIABILITY OF THE MAKER OR ACCEPTOR OF PAPER
2.
3.
4.
DISCOUNTED WITH OR SOLD TO SUCH BANK AND THE LIABILITY OF A

GENERAL ENDORSER, DRAWER OR GUARANTOR WHO OBTAINS A LOAN OR
OTHER CREDIT ACCOMMODATION FROM OR DISCOUNTS PAPER WITH OR
SELLS PAPERS TO SUCH BANK;
IN THE CASE OF AN INDIVIDUAL WHO OWNS OR CONTROLS A MAJORITY
INTEREST IN A CORPORATION, PARTNERSHIP, ASSOCIATION OR ANY OTHER
ENTITY, THE LIABILITIES OF SAID ENTITIES TO SUCH BANK;
IN THE CASE OF A CORPORATION, ALL LIABILITIES TO SUCH BANK OF ALL
SUBSIDIARIES IN WHICH SUCH CORPORATION OWNS OR CONTROLS A
MAJORITY INTEREST; AND
IN THE CASE OF A PARTNERSHIP, ASSOCIATION OR OTHER ENTITY, THE
LIABILITIES OF THE MEMBERS THEREOF TO SUCH BANK.
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35.4. EVEN IF A PARENT CORPORATION, PARTNERSHIP, ASSOCIATION, ENTITY OR
AN INDIVIDUAL WHO OWNS OR CONTROLS A MAJORITY INTEREST IN SUCH ENTITIES

HAS NO LIABILITY TO THE BANK, THE MONETARY BOARD MAY PRESCRIBE THE
COMBINATION OF THE LIABILITIES OF SUBSIDIARY CORPORATIONS OR MEMBERS OF
THE PARTNERSHIP, ASSOCIATION, ENTITY OR SUCH INDIVIDUAL UNDER CERTAIN
CIRCUMSTANCES, INCLUDING BUT NOT LIMITED TO ANY OF THE FOLLOWING
SITUATIONS
1. THE PARENT CORPORATION, PARTNERSHIP, ASSOCIATION, ENTITY OR

INDIVIDUAL GUARANTEES THE REPAYMENT OF THE LIABILITIES;
2. THE LIABILITIES WERE INCURRED FOR THE ACCOMMODATION OF THE
3.
35.5.
PARENT CORPORATION OR ANOTHER SUBSIDIARY OR OF THE

PARTNERSHIP OR ASSOCIATION OR ENTITY OR SUCH INDIVIDUAL; OR
THE SUBSIDIARIES THOUGH SEPARATE ENTITIES OPERATE MERELY AS
DEPARTMENTS OR DIVISIONS OF A SINGLE ENTITY.
FOR PURPOSES OF THIS SECTION, LOANS,

ACCOMMODATIONS AND GUARANTEES SHALL EXCLUDE
OTHER
CREDIT
1. LOANS AND OTHER CREDIT ACCOMMODATIONS SECURED BY OBLIGATIONS

OF THE BANGKO SENTRAL OR OF THE PHILIPPINE GOVERNMENT:
2. LOANS AND OTHER CREDIT ACCOMMODATIONS FULLY GUARANTEED BY
THE GOVERNMENT AS TO THE PAYMENT OF PRINCIPAL AND INTEREST;
3. LOANS AND OTHER CREDIT ACCOMMODATIONS COVERED BY ASSIGNMENT
4.
5.
OF DEPOSITS MAINTAINED IN THE LENDING BANK AND HELD IN THE

PHILIPPINES;
LOANS, CREDIT ACCOMMODATIONS AND ACCEPTANCES UNDER LETTERS
OF CREDIT TO THE EXTENT COVERED BY MARGIN DEPOSITS; AND
OTHER LOANS OR CREDIT ACCOMMODATIONS WHICH THE MONETARY
BOARD MAY FROM TIME TO TIME, SPECIFY AS NON-RISK ITEMS.
35.6. LOANS AND OTHER CREDIT ACCOMMODATIONS, DEPOSITS MAINTAINED WITH,

AND USUAL GUARANTEES BY A BANK TO ANY OTHER BANK OR NON-BANK ENTITY,
WHETHER LOCALLY OR ABROAD, SHALL BE SUBJECT TO THE LIMITS AS HEREIN
PRESCRIBED.
35.7. CERTAIN TYPES OF CONTINGENT ACCOUNTS OF BORROWERS MAY BE
INCLUDED AMONG THOSE SUBJECT TO THESE PRESCRIBED LIMITS AS MAY BE

DETERMINED BY THE MONETARY BOARD.(23A)
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Restrictions on bank exposure: the DOSRI rules (Sec. 36)

SECTION 36. RESTRICTION ON BANK EXPOSURE TO DIRECTORS, OFFICERS,
STOCKHOLDERS AND THEIR RELATED INTERESTS. - NO DIRECTOR OR OFFICER OF
ANY BANK SHALL, DIRECTLY OR INDIRECTLY, FOR HIMSELF OR AS THE
REPRESENTATIVE OR AGENT OF OTHERS
1. BORROW FROM SUCH BANK
2. NOR SHALL HE BECOME A GUARANTOR, ENDORSER OR SURETY FOR LOANS
FROM SUCH BANK TO OTHERS, OR
3. IN ANY MANNER BE AN OBLIGOR OR INCUR ANY CONTRACTUAL LIABILITY TO
THE BANK
EXCEPT WITH THE WRITTEN APPROVAL OF THE MAJORITY OF ALL THE DIRECTORS
OF THE BANK, EXCLUDING THE DIRECTOR CONCERNED: PROVIDED, THAT SUCH
WRITTEN APPROVAL SHALL NOT BE REQUIRED FOR LOANS, OTHER CREDIT
ACCOMMODATIONS AND ADVANCES GRANTED TO OFFICERS UNDER A FRINGE
BENEFIT PLAN APPROVED BY THE BANGKO SENTRAL. THE REQUIRED APPROVAL
SHALL BE ENTERED UPON THE RECORDS OF THE BANK AND A COPY OF SUCH
ENTRY SHALL BE TRANSMITTED FORTHWITH TO THE APPROPRIATE SUPERVISING
AND EXAMINING DEPARTMENT OF THE BANGKO SENTRAL.
DEALINGS OF A BANK WITH ANY OF ITS DIRECTORS, OFFICERS OR STOCKHOLDERS
AND THEIR RELATED INTERESTS SHALL BE UPON TERMS NOT LESS FAVORABLE TO
THE BANK THAN THOSE OFFERED TO OTHERS.
AFTER DUE NOTICE TO THE BOARD OF DIRECTORS OF THE BANK, THE OFFICE OF
ANY BANK DIRECTOR OR OFFICER WHO VIOLATES THE PROVISIONS OF THIS

SECTION MAY BE DECLARED VACANT AND THE DIRECTOR OR OFFICER SHALL BE
SUBJECT TO THE PENAL PROVISIONS OF THE NEW CENTRAL BANK ACT.
THE MONETARY BOARD MAY REGULATE THE AMOUNT OF LOANS, CREDIT

ACCOMMODATIONS AND GUARANTEES THAT MAY BE EXTENDED, DIRECTLY OR
INDIRECTLY, BY A BANK TO ITS DIRECTORS, OFFICERS, STOCKHOLDERS AND THEIR
RELATED INTERESTS, AS WELL AS INVESTMENTS OF SUCH BANK IN ENTERPRISES
OWNED OR CONTROLLED BY SAID DIRECTORS, OFFICERS, STOCKHOLDERS AND
THEIR RELATED INTERESTS.
HOWEVER,
THE OUTSTANDING LOANS, CREDIT ACCOMMODATIONS AND

GUARANTEES WHICH A BANK MAY EXTEND TO EACH OF ITS STOCKHOLDERS,
DIRECTORS, OR OFFICERS AND THEIR RELATED INTERESTS, SHALL BE LIMITED TO
AN AMOUNT EQUIVALENT TO THEIR RESPECTIVE UNENCUMBERED DEPOSITS AND
BOOK VALUE OF THEIR PAID-IN CAPITAL CONTRIBUTION IN THE BANK:
1. PROVIDED, HOWEVER, THAT LOANS, CREDIT ACCOMMODATIONS AND

GUARANTEES SECURED BY ASSETS CONSIDERED AS NON-RISK BY THE
MONETARY BOARD SHALL BE EXCLUDED FROM SUCH LIMIT:
2. PROVIDED, FURTHER, THAT LOANS, CREDIT ACCOMMODATIONS AND
ADVANCES TO OFFICERS IN THE FORM OF FRINGE BENEFITS GRANTED IN
ACCORDANCE WITH RULES AS MAY BE PRESCRIBED BY THE MONETARY
BOARD SHALL NOT BE SUBJECT TO THE INDIVIDUAL LIMIT.
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THE MONETARY BOARD SHALL DEFINE THE TERM "RELATED INTERESTS." THE
LIMIT ON LOANS, CREDIT ACCOMMODATIONS AND GUARANTEES PRESCRIBED
HEREIN SHALL NOT APPLY TO LOANS, CREDIT ACCOMMODATIONS AND
GUARANTEES EXTENDED BY A COOPERATIVE BANK TO ITS COOPERATIVE
SHAREHOLDERS. (83A)
BAR Q [2006]: PIO IS THE PRESIDENST OF WESTERN BANK. HIS WIFE APPLIED
FOR A LOAN WITH THE SAID BANK TO FINANCE AN INTERNET CAFE. THE LOAN
OFFICER TOLD HER THAT HER APPLICATION WILL NOT BE APPROVED BECAUSE
THE GRANT OF LOANS TO RELATED INTERESTS OF BANK DIRECTORS, OFFICERS,
AND STOCKHOLDERS IS PROHIBITED BY THE GENERAL BANKING LAW. EXPLAIN
WHETHER THE LOAN OFFICER IS CORRECT. (5%)
SUGGESTED ANSWER: Section 36 of the General Banking Law of 2000

does not entirely prohibit directors or officers of the bank, directly or
indirectly, from borrowing from the bank. In this case, Pio is the
president of Western Bank, which makes him an officer, director and
stockholder of the said bank. The General Banking Law provides for
additional restrictions to the bank before it can lend to its directors or
officers. A written approval of the majority vote of all the directors of
the bank, excluding the director concerned, is required. Furthermore,
such dealings must be upon terms not less favorable to the bank than
those offered to others (Section 1326, Central Bank's "Manual of
Regulations for Banks and Other Financial Intermediaries, cited in
Ranioso v. CA, G.R. No. 117416, December 8, 2000).
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.
Microfinancing (Secs. 40, 43-44)
SECTION 40. REQUIREMENT FOR GRANT OF LOANS OR 0THER CREDIT
ACCOMMODATIONS. - BEFORE GRANTING A LOAN OR OTHER CREDIT
ACCOMMODATION, A BANK MUST ASCERTAIN THAT THE DEBTOR IS CAPABLE OF
FULFILLING HIS COMMITMENTS TO THE BANK.
TOWARD THIS END, A BANK MAY DEMAND FROM ITS CREDIT APPLICANTS A
STATEMENT OF THEIR ASSETS AND LIABILITIES AND OF THEIR INCOME AND

EXPENDITURES AND SUCH INFORMATION AS MAY BE PRESCRIBED BY LAW OR BY
RULES AND REGULATIONS OF THE MONETARY BOARD TO ENABLE THE BANK TO
PROPERLY EVALUATE THE CREDIT APPLICATION WHICH INCLUDES THE
CORRESPONDING FINANCIAL STATEMENTS SUBMITTED FOR TAXATION PURPOSES
TO THE BUREAU OF INTERNAL REVENUE. SHOULD SUCH STATEMENTS PROVE TO
BE FALSE OR INCORRECT IN ANY MATERIAL DETAIL, THE BANK MAY TERMINATE ANY
LOAN OR OTHER CREDIT ACCOMMODATION GRANTED ON THE BASIS OF SAID
STATEMENTS AND SHALL HAVE THE RIGHT TO DEMAND IMMEDIATE REPAYMENT OR
LIQUIDATION OF THE OBLIGATION. IN FORMULATING RULES AND REGULATIONS
UNDER THIS SECTION, THE MONETARY BOARD SHALL RECOGNIZE THE PECULIAR
CHARACTERISTICS OF MICRO FINANCING, SUCH AS CASH FLOW -BASED LENDING TO
THE BASIC SECTORS THAT ARE NOT COVERED BY TRADITIONAL COLLATERAL. (76A)
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SECTION 43. AUTHORITY TO PRESCRIBE TERMS AND CONDITIONS OF LOANS AND

OTHER CREDIT ACCOMMODATIONS. - THE MONETARY BOARD, MAY, SIMILARLY IN
ACCORDANCE WITH THE AUTHORITY GRANTED TO IT IN SECTION 106 OF THE NEW
CENTRAL BANK ACT, AND TAKING INTO ACCOUNT THE REQUIREMENTS OF THE
ECONOMY FOR THE EFFECTIVE UTILIZATION OF LONG-TERM FUNDS, PRESCRIBE
THE MATURITIES, AS WELL AS RELATED TERMS AND CONDITIONS FOR VARIOUS
TYPES OF BANK LOANS AND OTHER CREDIT ACCOMMODATIONS. ANY CHANGE BY
THE BOARD IN THE MAXIMUM MATURITIES, AS WELL AS RELATED TERMS AND
CONDITIONS FOR VARIOUS TYPES OF BANK LOANS AND OTHER CREDIT

ACCOMMODATIONS. ANY CHANGE BY THE BOARD IN THE MAXIMUM MATURITIES
SHALL APPLY ONLY TO LOANS AND OTHER CREDIT ACCOMMODATIONS MADE AFTER
THE DATE OF SUCH ACTION. THE MONETARY BOARD SHALL REGULATE THE
INTEREST IMPOSED ON MICRO FINANCE BORROWERS BY LENDING INVESTORS AND
SIMILAR LENDERS SUCH AS, BUT NOT LIMITED TO, THE UNCONSCIONABLE RATES
OF INTEREST COLLECTED ON SALARY LOANS AND SIMILAR CREDIT
ACCOMMODATIONS. (78A)
SECTION 44. AMORTIZATION ON LOANS AND OTHER CREDIT ACCOMMODATIONS. THE AMORTIZATION SCHEDULE OF BANK LOANS AND OTHER CREDIT
ACCOMMODATIONS SHALL BE ADAPTED TO THE NATURE OF THE OPERATIONS TO

BE FINANCED. IN CASE OF LOANS AND OTHER CREDIT ACCOMMODATIONS WITH
MATURITIES OF MORE THAN FIVE (5) YEARS, PROVISIONS MUST BE MADE FOR
PERIODIC AMORTIZATION PAYMENTS, BUT SUCH PAYMENTS MUST BE MADE AT
LEAST ANNUALLY: PROVIDED, HOWEVER, THAT WHEN THE BORROWED FUNDS ARE
TO BE USED FOR PURPOSES WHICH DO NOT INITIALLY PRODUCE REVENUES
ADEQUATE FOR REGULAR AMORTIZATION PAYMENTS THEREFROM, THE BANK MAY
PERMIT THE INITIAL AMORTIZATION PAYMENT TO BE DEFERRED UNTIL SUCH TIME
AS SAID REVENUES ARE SUFFICIENT FOR SUCH PURPOSE, BUT IN NO CASE SHALL
THE INITIAL AMORTIZATION DATE BE LATER THAN FIVE (5) YEARS FROM THE DATE
ON WHICH THE LOAN OR OTHER CREDIT ACCOMMODATION IS GRANTED. (79A) IN
CASE OF LOANS AND OTHER CREDIT ACCOMMODATIONS TO MICRO FINANCE
SECTORS, THE SCHEDULE OF LOAN AMORTIZATION SHALL TAKE INTO
CONSIDERATION THE PROJECTED CASH FLOW OF THE BORROWER AND ADOPT THIS
INTO THE TERMS AND CONDITIONS FORMULATED BY BANKS. (N)
Prepayment of loans (Sec. 45)

SECTION 45. PREPAYMENT OF LOANS AND OTHER CREDIT ACCOMMODATIONS. A BORROWER MAY AT ANY TIME PRIOR TO THE AGREED MATURITY DATE PREPAY,
IN WHOLE OR IN PART , THE UNPAID BALANCE OF ANY BANK LOAN AND OTHER
CREDIT ACCOMMODATION, SUBJECT TO SUCH REASONABLE TERMS AND
CONDITIONS AS MAY BE AGREED UPON BETWEEN THE BANK AND ITS BORROWER.
(80A)
Real estate investments and acquisitions (Secs. 51-52)
SECTION 51. CEILING ON INVESTMENTS IN CERTAIN ASSETS. - ANY BANK MAY
ACQUIRE REAL ESTATE AS SHALL BE NECESSARY FOR ITS OWN USE IN THE
CONDUCT OF ITS BUSINESS: PROVIDED, HOWEVER, THAT THE TOTAL INVESTMENT
IN SUCH REAL ESTATE AND IMPROVEMENTS THEREOF INCLUDING BANK
EQUIPMENT, SHALL NOT EXCEED FIFTY PERCENT (50%) OF COMBINED CAPITAL
ACCOUNTS: PROVIDED, FURTHER, THAT THE EQUITY INVESTMENT OF A BANK IN
ANOTHER CORPORATION ENGAGED PRIMARILY IN REAL ESTATE SHALL BE
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CONSIDERED AS PART OF THE BANK'S TOTAL INVESTMENT IN REAL ESTATE,

UNLESS OTHERWISE PROVIDED BY THE MONETARY BOARD. (25A)
SECTION 52. ACQUISITION OF REAL ESTATE BY WAY OF SATISFACTION OF

CLAIMS. - NOTWITHSTANDING THE LIMITATIONS OF THE PRECEDING SECTION, A
BANK MAY ACQUIRE, HOLD OR CONVEY REAL PROPERTY UNDER THE FOLLOWING
CIRCUMSTANCES:
52.1. SUCH AS SHALL BE MORTGAGED TO IT IN GOOD FAITH BY WAY OF
SECURITY FOR DEBTS;
52.2. SUCH AS SHALL BE CONVEYED TO IT IN SATISFACTION OF DEBTS
PREVIOUSLY CONTRACTED IN THE COURSE OF ITS DEALINGS, OR
52.3. SUCH AS IT SHALL PURCHASE AT SALES UNDER JUDGMENTS, DECREES,
MORTGAGES, OR TRUST DEEDS HELD BY IT AND SUCH AS IT SHALL PURCHASE
TO SECURE DEBTS DUE IT.
ANY REAL PROPERTY ACQUIRED OR HELD UNDER THE CIRCUMSTANCES
ENUMERATED IN THE ABOVE PARAGRAPH SHALL BE DISPOSED OF BY THE BANK

WITHIN A PERIOD OF FIVE (5) YEARS OR AS MAY BE PRESCRIBED BY THE
MONETARY BOARD: PROVIDED, HOWEVER, THAT THE BANK MAY, AFTER SAID
PERIOD, CONTINUE TO HOLD THE PROPERTY FOR ITS OWN USE, SUBJECT TO THE
LIMITATIONS OF THE PRECEDING SECTION. (25A)
Outsourcing of bank functions (Sec. 55.1[e])

SECTION 55. PROHIBITED TRANSACTIONS. 55.1. NO DIRECTOR, OFFICER,
EMPLOYEE, OR AGENT OF ANY BANK SHALL - (E) OUTSOURCE INHERENT BANKING
FUNCTIONS
Employment of casual and probationary personnel (Sec. 55.4)

Section 55. Prohibited Transactions. 55.4. Consistent with the provisions of
Republic Act No. 1405, otherwise known as the Banks Secrecy Law, no bank
shall employ casual or non regular personnel or too lengthy probationary
personnel in the conduct of its business involving bank deposits.
Declaration of dividends (Sec. 57)
SECTION 57. PROHIBITION ON DIVIDEND DECLARATION. - NO BANK OR QUASIBANK SHALL DECLARE DIVIDENDS, IF AT THE TIME OF DECLARATION:
57.1 ITS CLEARING ACCOUNT WITH THE BANGKO SENTRAL IS OVERDRAWN; OR
57.2 IT IS DEFICIENT IN THE REQUIRED LIQUIDITY FLOOR FOR GOVERNMENT
DEPOSITS FOR FIVE (5) OR MORE CONSECUTIVE DAYS, OR
57.3 IT DOES NOT COMPLY WITH THE LIQUIDITY STANDARDS/RATIOS
PRESCRIBED BY THE BANGKO SENTRAL FOR PURPOSES OF DETERMINING
FUNDS AVAILABLE FOR DIVIDEND DECLARATION; OR
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57.4 IT HAS COMMITTED A MAJOR VIOLATION AS MAY BE DETERMINED BY THE

BANGKO SENTRAL (84A)
Authority to engage in trust business (Sec. 79, et seq.)
Trust entity (Sec. 79)
SECTION 79. AUTHORITY TO ENGAGE IN TRUST BUSINESS. - ONLY A STOCK
CORPORATION OR A PERSON DULY AUTHORIZED BY THE MONETARY BOARD TO
ENGAGE IN TRUST BUSINESS SHALL ACT AS A TRUSTEE OR ADMINISTER ANY TRUST
OR HOLD PROPERTY IN TRUST OR ON DEPOSIT FOR THE USE, BENEFIT, OR BEHOOF
OF OTHERS. FOR PURPOSES OF THIS ACT, SUCH A CORPORATION SHALL BE
REFERRED TO AS A TRUST ENTITY. (56A; 57A)
Diligence required (Sec. 80)

SECTION 80. CONDUCT OF TRUST BUSINESS. - A TRUST ENTITY SHALL
ADMINISTER THE FUNDS OR PROPERTY UNDER ITS CUSTODY WITH THE DILIGENCE
THAT A PRUDENT MAN WOULD EXERCISE IN THE CONDUCT OF AN ENTERPRISE OF A
LIKE CHARACTER AND WITH SIMILAR AIMS. NO TRUST ENTITY SHALL, FOR THE
ACCOUNT OF THE TRUSTOR OR THE BENEFICIARY OF THE TRUST, PURCHASE OR
ACQUIRE PROPERTY FROM, OR SELL, TRANSFER, ASSIGN, OR LEND MONEY OR
PROPERTY TO, OR PURCHASE DEBT INSTRUMENTS OF, ANY OF THE DEPARTMENTS,
DIRECTORS, OFFICERS, STOCKHOLDERS, OR EMPLOYEES OF THE TRUST ENTITY,
RELATIVES WITHIN THE FIRST DEGREE OF CONSANGUINITY OR AFFINITY, OR THE
RELATED INTERESTS, OF SUCH DIRECTORS, OFFICERS AND STOCKHOLDERS,
UNLESS THE TRANSACTION IS SPECIFICALLY AUTHORIZED BY THE TRUSTOR AND
THE RELATIONSHIP OF THE TRUSTEE AND THE OTHER PARTY INVOLVED IN THE
TRANSACTION IS FULLY DISCLOSED TO THE TRUSTOR OF BENEFICIARY OF THE
TRUST PRIOR TO THE TRANSACTION. THE MONETARY BOARD SHALL PROMULGATE
SUCH RULES AND REGULATIONS AS MAY BE NECESSARY TO PREVENT
CIRCUMVENTION OF THIS PROHIBITION OR THE EVASION OF THE RESPONSIBILITY
HEREIN IMPOSED ON A TRUST ENTITY. (56)
Deposit required as security for faithful performance of trust duties (Sec. 84)
SECTION 84. DEPOSIT FOR THE FAITHFUL PERFORMANCE OF TRUST DUTIES. BEFORE TRANSACTING TRUST BUSINESS, EVERY TRUST ENTITY SHALL DEPOSIT
WITH THE BANGKO SENTRAL, AS SECURITY FOR THE FAITHFUL PERFORMANCE OF
ITS TRUST DUTIES, CASH OR SECURITIES APPROVED BY THE MONETARY BOARD IN
AN AMOUNT EQUAL TO OR NOT LESS THAN FIVE HUNDRED THOUSAND PESOS
(P500,000.00) OR SUCH HIGHER AMOUNT AS MAY FIXED BY THE MONETARY
BOARD: PROVIDED, HOWEVER, THAT THE MONETARY BOARD SHALL REQUIRE
EVERY TRUST ENTITY TO INCREASE THE AMOUNT OF ITS CASH OR SECURITIES ON

DEPOSIT WITH THE BANGKO SENTRAL IN ACCORDANCE WITH THE PROVISIONS OF
THIS PARAGRAPH. SHOULD THE CAPITAL AND SURPLUS FALL BELOW SAID AMOUNT,
THE MONETARY BOARD SHALL HAVE THE SAME AUTHORITY AS THAT GRANTED TO
IT UNDER THE PROVISIONS OF THE FIFTH PARAGRAPH OF SECTION 34 OF THIS
ACT. A TRUST ENTITY SO LONG AS IT SHALL CONTINUE TO BE SOLVENT AND
COMPLY WITH LAWS OR REGULATIONS SHALL HAVE THE RIGHT TO COLLECT THE
INTEREST EARNED ON SUCH SECURITIES DEPOSITED WITH THE BANGKO SENTRAL
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AND, FROM TIME TO TIME, WITH THE APPROVAL OF THE BANGKO SENTRAL, TO
EXCHANGE THE SECURITIES FOR OTHERS. IF THE TRUST ENTITY FAILS TO COMPLY
WITH ANY LAW OR REGULATION, THE BANGKO SENTRAL SHALL RETAIN SUCH
INTEREST ON THE SECURITIES DEPOSITED WITH IT FOR THE BENEFIT OF RIGHTFUL
CLAIMANTS. AL CLAIMS RISING OUT OF THE TRUST BUSINESS OF A TRUST ENTITY
SHALL HAVE PRIORITY OVER ALL OTHER CLAIMS AS REGARDS THE CASH OR
SECURITIES DEPOSITED AS ABOVE PROVIDED. THE MONETARY BOARD MAY NOT
PERMIT THE CASH OR SECURITIES DEPOSITED IN ACCORDANCE WITH THE
PROVISIONS OF THIS SECTION TO BE REDUCED BELOW THE PRESCRIBED MINIMUM
AMOUNT UNTIL THE DEPOSITING ENTITY SHALL DISCONTINUE ITS TRUST BUSINESS
AND SHALL SATISFY THE MONETARY BOARD THAT IT HAS COMPLIED WITH ALL ITS
OBLIGATIONS IN CONNECTION WITH SUCH BUSINESS. (65A)
Separation of trust business from general business (Sec. 87)

SECTION 87. SEPARATION OF TRUST BUSINESS FROM GENERAL BUSINESS. - THE
TRUST BUSINESS AND ALL FUNDS, PROPERTIES OR SECURITIES RECEIVED BY ANY
TRUST ENTITY AS EXECUTOR, ADMINISTRATOR, GUARDIAN, TRUSTEE, RECEIVER,
OR DEPOSITARY SHALL BE KEPT SEPARATE AND DISTINCT FROM THE GENERAL
BUSINESS INCLUDING ALL OTHER FUNDS, PROPERTIES, AND ASSETS OF SUCH
TRUST ENTITY. THE ACCOUNTS OF ALL SUCH FUNDS, PROPERTIES, OR SECURITIES
SHALL LIKEWISE BE KEPT SEPARATE AND DISTINCT FROM THE ACCOUNTS OF THE
GENERAL BUSINESS OF THE TRUST ENTITY. (61)
Exemption of trust assets from claims (Sec. 92)

SECTION 92. EXEMPTION OF TRUST ASSETS FROM CLAIMS. - NO ASSETS HELD BY
A TRUST ENTITY IN ITS CAPACITY AS TRUSTEE SHALL BE SUBJECT TO ANY CLAIMS
OTHER THAN THOSE OF THE PARTIES INTERESTED IN THE SPECIFIC TRUSTS. (65)
Penalties for violations

Fine, imprisonment, etc. (Secs. 34-37, RA 7653)
Suspension or removal of director or officer (Sec. 66)
Dissolution of bank (Sec. 66)
SECTION 66. PENALTY FOR VIOLATION OF THIS ACT. - UNLESS OTHERWISE
HEREIN PROVIDED, THE VIOLATION OF ANY OF THE PROVISIONS OF THIS ACT SHALL
BE SUBJECT TO SECTIONS 34, 35, 36 AND 37 OF THE NEW CENTRAL BANK ACT. IF
THE OFFENDER IS A DIRECTOR OR OFFICER OF A BANK, QUASI-BANK OR TRUST
ENTITY, THE MONETARY BOARD MAY ALSO SUSPEND OR REMOVE SUCH DIRECTOR
OR OFFICER. IF THE VIOLATION IS COMMITTED BY A CORPORATION, SUCH
CORPORATION MAY BE DISSOLVED BY QUO WARRANTO PROCEEDINGS INSTITUTED
BY THE SOLICITOR GENERAL. (87)
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2.2
Cases
Fiduciary nature of banking requires high standards of integrity and performance
Philippine Banking Corporation vs. CA,
G.R. 127469, January 15, 2004.
The BANK is liable to Marcos for offsetting his time deposits with a fictitious promissory note.
The BANKs failure to explain the absence of the original documents and to maintain a
record of the offsetting of this loan with the time deposits bring to fore the BANKs dismal
failure to fulfill its fiduciary duty to Marcos.
Section 2 of Republic Act No. 8791 (General Banking Law of 2000) expressly imposes this
fiduciary duty on banks when it declares that the State recognizes the "fiduciary nature of
banking that requires high standards of integrity and performance." This statutory
declaration merely echoes the earlier pronouncement of the Supreme Court in Simex
International (Manila) Inc. v. Court of Appeals requiring banks to "treat the accounts of its
depositors with meticulous care, always having in mind the fiduciary nature of their
relationship." The Court reiterated this fiduciary duty of banks in subsequent cases.
The fiduciary nature of banking requires banks to assume a degree of diligence
higher than that of a good father of a family.
Thus, the BANKs fiduciary duty imposes upon it a higher level of accountability than that
expected of Marcos, a businessman, who negligently signed blank forms and entrusted his
certificates of time deposits to Pagsaligan without retaining copies of the certificates. As the
BANKs depositor, Marcos had the right to expect that the BANK was accurately recording
his transactions with it. Upon the maturity of his time deposits, Marcos also had the right to
withdraw the amount due him after the BANK had correctly debited his outstanding
obligations from his time deposits.
By the very nature of its business, the BANK should have had in its possession the original
copies of the disputed promissory note and the records and ledgers evidencing the offsetting
of the loan with the time deposits of Marcos. The BANK inexplicably failed to produce the
original copies of these documents. Clearly, the BANK failed to treat the account of Marcos
with meticulous care.
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Banks have the duty to exercise the highest degree of diligence when transacting
with the public
Solidbank Corporation, et al. vs. Spouses Tan,
G.R. 167346, April 2, 2007.
FACTS: The private respondents are accusing Solidbank Corp. of negligence as the latter
allegedly lost one of 10 checks they were trying to deposit with the bank. [Private
respondents delivered 10 checks; but only 9 checks were credited to their account.] The lost
check was later on discovered to have been deposited by a certain Dolores Lagsac in
Premier Bank in San Pedro, Laguna.
The lower court found Solidbank negligent; it awarded exemplary damages to the Spouses
Tan, among others. Petitioner argues the award of exemplary damages was without basis.
According to it, such award is justified only when the act complained of was done in a
wanton, fraudulent and oppressive manner.
ISSUE: W/N THE SPOUSES TAN ARE ENTITLED TO EXEMPLARY DAMAGES?
HELD:
As to the award of exemplary damages, the law allows it by way of example for the public
good. The business of banking is impressed with public interest and great reliance is
made on the banks sworn profession of diligence and meticulousness in giving
irreproachable service. For petitioners failure to carry out its responsibility and to account
for respondents lost check, we hold that the lower courts did not err in awarding exemplary
damages to the latter.
Interpretation of Section 83 of RA 337 (now Sec. 36 of RA 8791)
Go vs. Bangko Sentral,
G.R. 178429, October 23, 2009.
FACTS: Go, President and CEO of Oriental Bank] was charged with violating Section 83 of
RA 337 [for being a borrower and/or a guarantor for loans borrowed from Oriental Bank
without Board approval].
He filed a motion to quash on the ground that the facts allged do not constitute a crime.
According to him, Sec. 83 of RA 337 penalized only directors and officers of banking
institutions who acted either as borrower or as guarantor, but not as both.
Go further pointed out that the Information failed to state that his alleged act of
borrowing and/or guarantying was not among the exceptions provided for in the law.
According to Go, the second paragraph of Section 83 allowed banks to extend credit
accommodations to their directors, officers, and stockholders, provided it is "limited to an
amount equivalent to the respective outstanding deposits and book value of the paid-in
capital contribution in the bank." Extending credit accommodations to bank directors,
officers, and stockholders is not per se prohibited, unless the amount exceeds the legal limit.
Since the Information failed to state that the amount he purportedly borrowed and/or
guarantied was beyond the limit set by law, Go insisted that the acts so charged did not
constitute an offense.
HELD: MOTION TO QUASH WITHOUT MERIT.
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Under Section 83, RA 337, the following elements must be present to constitute a violation
of its first paragraph:
1. the offender is a director or officer of any banking institution;
2. the offender, either directly or indirectly, for himself or as representative or agent
of another, performs any of the following acts:
a. he borrows any of the deposits or funds of such bank; or
b. he becomes a guarantor, indorser, or surety for loans from such bank to
others, or
c. he becomes in any manner an obligor for money borrowed from bank or
loaned by it
3. the offender has performed any of such acts without the written approval of the
majority of the directors of the bank, excluding the offender, as the director
concerned.
A simple reading of the above elements easily rejects Gos contention that the law penalizes
a bank director or officer only either for borrowing the banks deposits or funds or for
guarantying loans by the bank, but not for acting in both capacities. The essence of the
crime is becoming an obligor of the bank without securing the necessary written approval of
the majority of the banks directors. The second element merely lists down the various
modes of committing the offense. The third mode, by declaring that "[no director or officer of
any banking institution shall xxx] in any manner be an obligor for money borrowed from the
bank or loaned by it," in fact serves a catch-all phrase that covers any situation when a
director or officer of the bank becomes its obligor. The prohibition is directed against a bank
director or officer who becomes in any manner an obligor for money borrowed from or
loaned by the bank without the written approval of the majority of the banks board of
directors. To make a distinction between the act of borrowing and guarantying is
therefore unnecessary because in either situation, the director or officer concerned
becomes an obligor of the bank against whom the obligation is juridically
demandable. The language of the law is broad enough to encompass either act of
borrowing or guaranteeing, or both.
The approval requirement (found in the first sentence of the first paragraph of the law)
refers to the written approval of the majority of the banks board of directors required before
bank directors and officers can in any manner be an obligor for money borrowed from or
loaned by the bank. Failure to secure the approval renders the bank director or officer
concerned liable for prosecution and, upon conviction, subjects him to the penalty provided
in the third sentence of first paragraph of Section 83.
As to his second ground for the quashal: Credit accommodation limit is not an exception nor
is it an element of the offense. Contrary to Gos claims, the second paragraph of Section 83,
RA 337 does not provide for an exception to a violation of the first paragraph thereof, nor
does it constitute as an element of the offense charged. Section 83 of RA 337 actually
imposes three restrictions: approval, reportorial, and ceiling requirements.
The reportorial requirement, on the other hand, mandates that any such approval should
be entered upon the records of the corporation, and a copy of the entry be transmitted to the
appropriate supervising department. The reportorial requirement is addressed to the bank
itself, which, upon its failure to do so, subjects it to quo warranto proceedings under Section
87 of RA 337.
The ceiling requirement under the second paragraph of Section 83 regulates the amount of
credit accommodations that banks may extend to their directors or officers by limiting these
to an amount equivalent to the respective outstanding deposits and book value of the paid-in
44 of 89
capital contribution in the bank. Again, this is a requirement directed at the bank. In this light,
a prosecution for violation of the first paragraph of Section 83, such as the one involved
here, does not require an allegation that the loan exceeded the legal limit. Even if the loan
involved is below the legal limit, a written approval by the majority of the banks directors is
still required; otherwise, the bank director or officer who becomes an obligor of the bank is
liable. Compliance with the ceiling requirement does not dispense with the approval
requirement.
Evidently, the failure to observe the three requirements under Section 83 paves the way for
the prosecution of three different offenses, each with its own set of elements.
PNB not a mortgagee in good faith for failure to conduct exhaustive investigation of
mortgagors title before extending a loan
PNB vs. Corpuz,
G.R. 180945, February 12, 2010.
ISSUE: The sole issue presented in this case is whether or not petitioner PNB is a mortgagee
in good faith, entitling it to its lien on the title to the property in dispute. Petitioner PNB points
out that, since it did a credit investigation, inspected the property, and verified the clean
status of the title before giving out the loan to the Songcuans, it should be regarded as a
mortgagee in good faith. PNB claims that the precautions it took constitute sufficient
compliance with the due diligence required of banks when dealing with registered lands.
HELD: As a rule, the Court would not expect a mortgagee to conduct an exhaustive
investigation of the history of the mortgagors title before he extends a loan. But petitioner
PNB is not an ordinary mortgagee; it is a bank. Banks are expected to be more cautious
than ordinary individuals in dealing with lands, even registered ones, since the business of
banks is imbued with public interest. It is of judicial notice that the standard practice for
banks before approving a loan is to send a staff to the property offered as collateral and
verify the genuineness of the title to determine the real owner or owners.
One of the CAs findings in this case is that in the course of its verification, petitioner PNB
was informed of the previous TCTs covering the subject property. And the PNB has not
categorically contested this finding. It is evident from the faces of those titles that the
ownership of the land changed from Corpuz to Bondoc, from Bondoc to the Palaganases,
and from the Palaganases to the Songcuans in less than three months and mortgaged to
PNB within four months of the last transfer. The above information in turn should have driven
the PNB to look at the deeds of sale involved. It would have then discovered that the
property was sold for ridiculously low prices: Corpuz supposedly sold it to Bondoc for
justP50,000.00; Bondoc to the Palaganases for just P15,000.00; and the Palaganases to the
Songcuans also for justP50,000.00. Yet the PNB gave the property an appraised value
of P781,760.00. Anyone who deliberately ignores a significant fact that would create
suspicion in an otherwise reasonable person cannot be considered as an innocent
mortgagee for value.
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2.3
Additional Materials
(a) BSP Circulars Nos. 488 (issued June 21, 2005), 493 (issued September 16,
2005), 543 (issued September 8, 2006), 548 (issued September 25, 2006), and
642 (issued January 30, 2009) re functions that banks could outsource;
(b) BSP Circular No. 341 (issued August 6, 2002) and 640 (issued January 16,
2009) re unsafe and unsound banking practices;
(c) BSP Circular No. 650 (issued March 9, 2009) re authority of thrift banks to issue
foreign letters of credit, etc.
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III
PHILIPPINE DEPOSIT INSURANCE CORPORATION ACT
RA 3591 (1963), as amended by RA 6037 (1969), PD 120 (1973), PD 1094 (1977), PD 1451 (1978),
PD 1935 (1984), RA 7400 (1992), RA 8791 (2000), RA 9302 (2004), and RA 9576 (2009).
3.1
Topics
Basic policy (Sec. 1)
SECTION 1. THERE IS HEREBY CREATED A PHILIPPINE DEPOSIT INSURANCE
CORPORATION HEREINAFTER REFERRED TO AS THE CORPORATION WHICH SHALL
INSURE, AS HEREIN PROVIDED, THE DEPOSITS OF ALL BANKS WHICH ARE ENTITLED
TO THE BENEFITS OF INSURANCE UNDER THIS ACT, AND WHICH SHALL HAVE THE
POWERS HEREINAFTER GRANTED.
Comment [WU5]: The purpose of the law is

to create a government-owned and controlled
entity, the Philippine Deposit Insurance
Corporation, which shall insure the deposit
liabilities of all banks entitled to the benefits of
insurance under the Act. Such insurance is
intended to protect depositors from situations
that prevent banks from paying out deposits, as
in bank failures or closures, and to encourage
people to deposit in banks.
THE CORPORATION SHALL, AS A BASIC POLICY, PROMOTE AND SAFEGUARD THE

INTERESTS OF THE DEPOSITING PUBLIC BY WAY OF PROVIDING PERMANENT AND
CONTINUING INSURANCE COVERAGE ON ALL INSURED DEPOSITS.
Main functions
Insurance of banks (Sec. 5, et seq.)
SECTION 5. THE DEPOSIT LIABILITIES OF ANY BANK OR BANKING INSTITUTION,
WHICH IS ENGAGED IN THE BUSINESS OF RECEIVING DEPOSITS AS HEREIN DEFINED

ON THE EFFECTIVE DATE OF THIS ACT, OR WHICH THEREAFTER MAY ENGAGE IN
THE BUSINESS OF RECEIVING DEPOSITS, SHALL BE INSURED WITH THE
CORPORATION. (AS AMENDED BY R.A. 6037, 04 AUGUST 1969; RENUMBERED
FROM SEC. 4 BY R.A. 9302, 12 AUGUST 2004)
Examination of banks (Secs. 8 and 9)

SECTION 8.THE CORPORATION AS A CORPORATE BODY SHALL HAVE THE POWER
- EIGHTH TO CONDUCT EXAMINATION OF BANKS WITH PRIOR APPROVAL OF THE
MONETARY BOARD: PROVIDED, THAT NO EXAMINATION CAN BE CONDUCTED
WITHIN TWELVE (12) MONTHS FROM THE LAST EXAMINATION DATE: PROVIDED,
HOWEVER, THAT THE CORPORATION MAY, IN COORDINATION WITH THE BANGKO
SENTRAL, CONDUCT A SPECIAL EXAMINATION AS THE BOARD OF DIRECTORS, BY
AN AFFIRMATIVE VOTE OF A MAJORITY OF ALL OF ITS MEMBERS, IF THERE IS A
THREATENED OR IMPENDING CLOSURE OF A BANK; PROVIDED, FURTHER, THAT,
NOTWITHSTANDING THE PROVISIONS OF REPUBLIC ACT NO. 1405, AS AMENDED,
REPUBLIC ACT NO. 6426, AS AMENDED, REPUBLIC ACT NO. 8791, AND OTHER
LAWS, THE CORPORATION AND/OR THE BANGKO SENTRAL, MAY INQUIRE INTO OR
EXAMINE DEPOSIT ACCOUNTS AND ALL INFORMATION RELATED THERETO IN CASE
THERE IS A FINDING OF UNSAFE OR UNSOUND BANKING PRACTICE; PROVIDED,
FINALLY, THAT TO AVOID OVERLAPPING OF EFFORTS, THE EXAMINATION SHALL
MAXIMIZE THE EFFICIENT USE OF THE RELEVANT REPORTS, INFORMATION, AND
FINDINGS OF THE BANGKO SENTRAL, WHICH IT SHALL MAKE AVAILABLE TO THE
CORPORATION;
Rehabilitation of banks (Sec. 17)

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Comment [WU6]: Insurance of banks (Sec. 5,

et seq.) The PDIC insures the deposit
liabilities of banks. For this purpose, it assesses
and collects insurance assessments from
member-banks. Whenever an insured bank is
closed, the PDIC processes and services claims
of insured deposits.
Comment [WU7]: The PDIC may examine a

bank with the prior approval of the Monetary
Board of the Bangko Sentral ng Pilipinas. Such
examination may extend to all the affairs of the
bank and includes the authority to investigate
frauds, irregularities and anomalies committed
in the bank.
Comment [WU8]: Upon determination by

the PDIC that (i) a bank is in danger of closing,
(ii) the continued operation of such bank is
essential to provide adequate banking service in
the community or maintain financial stability in
the economy, and (iii) the actual liquidation and
payoff of the bank will be more expensive than
the extension of financial assistance to the
bank, it may make loans to, purchase the
assets or assume the liabilities of, or make
deposits in, said bank to prevent its closing.
Authority may also be exercised by the PDIC
over a closed bank.
Receivership of closed banks (Secs. 8 and 10; see also Sec. 30, RA 7653)
SECTION 8.THE CORPORATION AS A CORPORATE BODY SHALL HAVE THE POWER
-NINTH - TO ACT AS RECEIVER;
SECTION 10.
a. THE PROVISIONS OF OTHER LAWS, GENERAL OR SPECIAL, TO THE CONTRARY
OTWITHSTANDING, WHENEVER IT SHALL BE APPROPRIATE FOR THE MONETARY
BOARD OF THE BANGKO SENTRAL NG PILIPINAS TO APPOINT A RECEIVER OF
ANY BANKING INSTITUTION PURSUANT TO EXISTING LAWS, THE MONETARY
BOARD SHALL GIVE PRIOR NOTICE AND APPOINT THE CORPORATION AS
RECEIVER. (AS AMENDED/RENUMBERED FROM SEC. 9-A BY R.A. 9302, 12
AUGUST 2004)
b. THE CORPORATION AS RECEIVER SHALL CONTROL, MANAGE AND ADMINISTER
THE AFFAIRS OF THE CLOSED BANK. EFFECTIVE IMMEDIATELY UPON TAKEOVER
AS RECEIVER OF SUCH BANK, THE POWERS, FUNCTIONS AND DUTIES, AS WELL
AS ALL ALLOWANCES, REMUNERATIONS AND PERQUISITES OF THE DIRECTORS,
OFFICERS, AND STOCKHOLDERS OF SUCH BANK ARE SUSPENDED, AND THE
RELEVANT PROVISIONS OF THE ARTICLES OF INCORPORATION AND BY-LAWS
OF THE CLOSED BANK ARE LIKEWISE DEEMED SUSPENDED. (AS ADDED BY R.A.
9302, 12 AUGUST 2004)
THE ASSETS OF THE CLOSED BANK UNDER RECEIVERSHIP SHALL BE DEEMED
IN CUSTODIA LEGIS IN THE HANDS OF THE RECEIVER. FROM THE TIME THE
CLOSED BANK IS PLACED UNDER SUCH RECEIVERSHIP, ITS ASSETS SHALL NOT
BE SUBJECT TO ATTACHMENT, GARNISHMENT, EXECUTION, LEVY OR ANY
OTHER COURT PROCESSES. THEREFORE, A JUDGE, OFFICER OF THE COURT
OR ANY PERSON WHO SHALL ISSUE, ORDER, PROCESS OR CAUSE THE
ISSUANCE OR IMPLEMENTATION OF THE WRIT OF GARNISHMENT, LEVY,
ATTACHMENT OR EXECUTION SHALL BE LIABLE UNDER SECTION 21
HEREOF. (AS
ADDED
BY R.A. 9302, 12 AUGUST 2004)
c. IN ADDITION TO THE POWERS OF A RECEIVER PURSUANT TO EXISTING LAWS,
THE CORPORATION IS EMPOWERED TO:
1. BRING SUITS TO ENFORCE LIABILITIES TO OR RECOVERIES OF THE
CLOSED BANK; (AS AMENDED BY R.A. 9302, 12 AUGUST 2004)
2. APPOINT AND HIRE PERSONS OR ENTITIES OF RECOGNIZED
3.
4.
COMPETENCE IN BANKING OR FINANCE AS ITS DEPUTIES AND

ASSISTANTS, TO PERFORM SUCH POWERS AND FUNCTIONS OF THE
CORPORATION AS RECEIVER OR LIQUIDATOR OF THE CLOSED
BANK; (AS AMENDED BY R.A. 9302, 12 AUGUST 2004)
SUSPEND OR TERMINATE THE EMPLOYMENT OF OFFICERS AND
EMPLOYEES OF THE CLOSED BANK:PROVIDED, THAT PAYMENT OF
SEPARATION PAY OR BENEFITS SHALL BE MADE ONLY AFTER THE
CLOSED BANK HAS BEEN PLACED UNDER LIQUIDATION PURSUANT TO
THE ORDER OF THE MONETARY BOARD UNDER SECTION 30 OF R.A.
7653, AND THAT SUCH PAYMENT SHALL BE MADE FROM AVAILABLE
FUNDS OF THE BANK AFTER DEDUCTING REASONABLE EXPENSES FOR
RECEIVERSHIP AND LIQUIDATION; (AS ADDED BY R.A. 9302, 12
AUGUST 2004)
PAY ACCRUED UTILITIES, RENTALS AND SALARIES OF PERSONNEL OF
THE CLOSED BANK, FOR A PERIOD NOT EXCEEDING THREE (3)
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Comment [WU9]: (Secs. 8 and 10; see also

Sec. 30, RA 7653) As receiver, the PDIC shall
control, manage and administer the affairs of
the closed bank for the purpose of preserving its
assets for the benefit of bank creditors .
5.
6.
7.
8.
9.
MONTHS, FROM AVAILABLE FUNDS OF THE CLOSED BANK; (AS ADDED

BY
R.A.
9302,
12 AUGUST 2004)
COLLECT LOANS AND OTHER CLAIMS OF THE CLOSED BANK, AND FOR
THE PURPOSE, MODIFY, COMPROMISE OR RESTRUCTURE THE TERMS
AND CONDITIONS OF SUCH LOANS OR CLAIMS AS MAY BE DEEMED
ADVANTAGEOUS TO THE INTEREST OF THE CREDITORS AND CLAIMANTS
OF THE CLOSED BANK; (AS ADDED BY. R.A. 9302,12 AUGUST 2004)
HIRE OR RETAIN PRIVATE COUNSELS AS MAY BE NECESSARY; (AS
ADDED BY R.A. 9302, 12 AUGUST 2004)
BORROW OR OBTAIN A LOAN, OR MORTGAGE, PLEDGE OR ENCUMBER
ANY ASSET OF THE CLOSED BANK, WHEN NECESSARY TO PRESERVE
OR PREVENT DISSIPATION OF THE ASSETS, OR TO REDEEM
FORECLOSED ASSETS OF THE CLOSED BANK, OR TO MINIMIZE LOSSES
TO THE DEPOSITORS AND CREDITORS; (AS ADDED BY R.A. 9302, 12
AUGUST 2004)
IF THE STIPULATED INTEREST ON DEPOSITS IS UNUSUALLY HIGH
COMPARED WITH THE PREVAILING APPLICABLE INTEREST RATE, THE
CORPORATION AS RECEIVER MAY EXERCISE SUCH POWERS WHICH
MAY INCLUDE A REDUCTION OF THE INTEREST RATE TO A REASONABLE
RATE: PROVIDED, THAT ANY MODIFICATION OR REDUCTION SHALL
APPLY ONLY TO UNPAID INTEREST; (AS ADDED BY R.A. 9302, 12
AUGUST 2004) AND
EXERCISE SUCH OTHER POWERS AS ARE INHERENT AND NECESSARY
FOR THE EFFECTIVE DISCHARGE OF THE DUTIES OF THE
CORPORATION AS A RECEIVER. (AS ADDED BY R.A. 9302, 12 AUGUST
2004)
THE BOARD OF DIRECTORS SHALL ADOPT SUCH POLICIES AND GUIDELINES AS
MAY BE NECESSARY FOR THE PERFORMANCE OF THE ABOVE POWERS BY

PERSONNEL, DEPUTIES AND AGENTS OF THE CORPORATION. (AS ADDED BY
R.A. 9302, 12 AUGUST 2004)
Liquidation of closed banks (Sec. 30, RA 7653)

SECTION 30. PROCEEDINGS IN RECEIVERSHIP AND LIQUIDATION. - W HENEVER,
UPON REPORT OF THE HEAD OF THE SUPERVISING OR EXAMINING DEPARTMENT,
THE MONETARY BOARD FINDS THAT A BANK OR QUASI-BANK:
(A) IS UNABLE TO PAY ITS LIABILITIES AS THEY BECOME DUE IN THE ORDINARY
COURSE OF BUSINESS: PROVIDED, THAT THIS SHALL NOT INCLUDE INABILITY
TO PAY CAUSED BY EXTRAORDINARY DEMANDS INDUCED BY FINANCIAL PANIC
IN THE BANKING COMMUNITY;
(B) HAS INSUFFICIENT REALIZABLE ASSETS, AS DETERMINED BY THE BANGKO

SENTRAL, TO MEET ITS LIABILITIES; OR
(C) CANNOT CONTINUE IN BUSINESS WITHOUT INVOLVING PROBABLE LOSSES
TO ITS DEPOSITORS OR CREDITORS; OR
(D) HAS WILLFULLY VIOLATED A CEASE AND DESIST ORDER UNDER SECTION 37
THAT HAS BECOME FINAL, INVOLVING ACTS OR TRANSACTIONS WHICH AMOUNT
TO FRAUD OR A DISSIPATION OF THE ASSETS OF THE INSTITUTION; IN WHICH
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Comment [WU10]: If the closed bank cannot

be rehabilitated, the PDIC would proceed with
its liquidation. This would involve the conversion
of the assets of the bank into cash for
distribution to the creditors in accordance with
the provisions of the NCC on concurrence and
preference of credits.
CASES, THE MONETARY BOARD MAY SUMMARILY AND WITHOUT NEED FOR
PRIOR HEARING FORBID THE INSTITUTION FROM DOING BUSINESS IN THE
PHILIPPINES AND DESIGNATE THE PHILIPPINE DEPOSIT INSURANCE
CORPORATION AS RECEIVER OF THE BANKING INSTITUTION.
FOR A QUASI-BANK, ANY PERSON OF RECOGNIZED COMPETENCE IN BANKING OR

FINANCE MAY BE DESIGNED AS RECEIVER.
THE RECEIVER SHALL IMMEDIATELY GATHER AND TAKE CHARGE OF ALL THE
ASSETS AND LIABILITIES OF THE INSTITUTION, ADMINISTER THE SAME FOR THE
BENEFIT OF ITS CREDITORS, AND EXERCISE THE GENERAL POWERS OF A RECEIVER
UNDER THE REVISED RULES OF COURT BUT SHALL NOT, WITH THE EXCEPTION OF
ADMINISTRATIVE EXPENDITURES, PAY OR COMMIT ANY ACT THAT WILL INVOLVE
THE TRANSFER OR DISPOSITION OF ANY ASSET OF THE INSTITUTION: PROVIDED,
THAT THE RECEIVER MAY DEPOSIT OR PLACE THE FUNDS OF THE INSTITUTION IN
NON-SPECULATIVE INVESTMENTS. THE RECEIVER SHALL DETERMINE AS SOON AS
POSSIBLE, BUT NOT LATER THAN NINETY (90) DAYS FROM TAKE OVER, WHETHER
THE INSTITUTION MAY BE REHABILITATED OR OTHERWISE PLACED IN SUCH A
CONDITION SO THAT IT MAY BE PERMITTED TO RESUME BUSINESS WITH SAFETY TO
ITS DEPOSITORS AND CREDITORS AND THE GENERAL PUBLIC: PROVIDED, THAT
ANY DETERMINATION FOR THE RESUMPTION OF BUSINESS OF THE INSTITUTION
SHALL BE SUBJECT TO PRIOR APPROVAL OF THE MONETARY BOARD.
IF THE RECEIVER DETERMINES THAT THE INSTITUTION CANNOT BE REHABILITATED

OR PERMITTED TO RESUME BUSINESS IN ACCORDANCE WITH THE NEXT PRECEDING
PARAGRAPH, THE MONETARY BOARD SHALL NOTIFY IN WRITING THE BOARD OF
DIRECTORS OF ITS FINDINGS AND DIRECT THE RECEIVER TO PROCEED WITH THE
LIQUIDATION OF THE INSTITUTION. THE RECEIVER SHALL:
(1) FILE EX PARTE WITH THE PROPER REGIONAL TRIAL COURT, AND WITHOUT
REQUIREMENT OF PRIOR NOTICE OR ANY OTHER ACTION, A PETITION FOR
ASSISTANCE IN THE LIQUIDATION OF THE INSTITUTION PURSUANT TO A
LIQUIDATION PLAN ADOPTED BY THE PHILIPPINE DEPOSIT INSURANCE
CORPORATION FOR GENERAL APPLICATION TO ALL CLOSED BANKS. IN CASE OF
QUASI-BANKS, THE LIQUIDATION PLAN SHALL BE ADOPTED BY THE MONETARY
BOARD. UPON ACQUIRING JURISDICTION, THE COURT SHALL, UPON MOTION BY
THE RECEIVER AFTER DUE NOTICE, ADJUDICATE DISPUTED CLAIMS AGAINST
THE INSTITUTION, ASSIST THE ENFORCEMENT OF INDIVIDUAL LIABILITIES OF
THE STOCKHOLDERS, DIRECTORS AND OFFICERS, AND DECIDE ON OTHER
ISSUES AS MAY BE MATERIAL TO IMPLEMENT THE LIQUIDATION PLAN ADOPTED.
THE RECEIVER SHALL PAY THE COST OF THE PROCEEDINGS FROM THE ASSETS
OF THE INSTITUTION.
(2) CONVERT THE ASSETS OF THE INSTITUTIONS TO MONEY, DISPOSE OF THE

SAME TO CREDITORS AND OTHER PARTIES, FOR THE PURPOSE OF PAYING THE
DEBTS OF SUCH INSTITUTION IN ACCORDANCE WITH THE RULES ON
CONCURRENCE AND PREFERENCE OF CREDIT UNDER THE CIVIL CODE OF THE
PHILIPPINES AND HE MAY, IN THE NAME OF THE INSTITUTION, AND WITH THE
ASSISTANCE OF COUNSEL AS HE MAY RETAIN, INSTITUTE SUCH ACTIONS AS
MAY BE NECESSARY TO COLLECT AND RECOVER ACCOUNTS AND ASSETS OF,
OR DEFEND ANY ACTION AGAINST, THE INSTITUTION. THE ASSETS OF AN
INSTITUTION UNDER RECEIVERSHIP OR LIQUIDATION SHALL BE DEEMED IN
CUSTODIA LEGIS IN THE HANDS OF THE RECEIVER AND SHALL, FROM THE
MOMENT THE INSTITUTION WAS PLACED UNDER SUCH RECEIVERSHIP OR
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LIQUIDATION, BE EXEMPT FROM ANY ORDER OF GARNISHMENT , LEVY,

ATTACHMENT, OR EXECUTION.
THE ACTIONS OF THE MONETARY BOARD TAKEN UNDER THIS SECTION OR UNDER
RESTRAINED OR SET ASIDE BY THE COURT EXCEPT ON PETITION FOR CERTIORARI

ON THE GROUND THAT THE ACTION TAKEN WAS IN EXCESS OF JURISDICTION OR
WITH SUCH GRAVE ABUSE OF DISCRETION AS TO AMOUNT TO LACK OR EXCESS OF
JURISDICTION. THE PETITION FOR CERTIORARI MAY ONLY BE FILED BY THE
STOCKHOLDERS OF RECORD REPRESENTING THE MAJORITY OF THE CAPITAL
STOCK WITHIN TEN (10) DAYS FROM RECEIPT BY THE BOARD OF DIRECTORS OF
THE INSTITUTION OF THE ORDER DIRECTING RECEIVERSHIP, LIQUIDATION OR
CONSERVATORSHIP.
THE DESIGNATION OF A CONSERVATOR UNDER SECTION 29 OF THIS ACT OR THE

APPOINTMENT OF A RECEIVER UNDER THIS SECTION SHALL BE VESTED
EXCLUSIVELY WITH THE MONETARY BOARD. FURTHERMORE, THE DESIGNATION OF
A CONSERVATOR IS NOT A PRECONDITION TO THE DESIGNATION OF A RECEIVER.
Concept of insured deposits (Sec. 4[g])

SECTION 4. AS USED IN THIS ACT - (RENUMBERED FROM SEC. 3 BY R.A. 9302,
12 AUGUST 2004) [G] THE TERM INSURED DEPOSIT MEANS THE AMOUNT DUE TO
ANY BONA FIDE DEPOSITOR FOR LEGITIMATE DEPOSITS IN AN INSURED BANK NET
OF ANY OBLIGATION OF THE DEPOSITOR TO THE INSURED BANK AS OF THE DATE
OF CLOSURE, BUT NOT TO EXCEED FIVE HUNDRED THOUSAND PESOS
(P500,000.00).2 SUCH NET AMOUNT SHALL BE DETERMINED ACCORDING TO SUCH
REGULATIONS AS THE BOARD OF DIRECTORS MAY PRESCRIBE. IN DETERMINING
SUCH AMOUNT DUE TO ANY DEPOSITOR, THERE SHALL BE ADDED TOGETHER ALL
DEPOSITS IN THE BANK MAINTAINED IN THE SAME RIGHT AND CAPACITY FOR HIS
BENEFIT EITHER IN HIS OWN NAME OR IN THE NAME OF OTHERS. A JOINT ACCOUNT
REGARDLESS OF WHETHER THE CONJUNCTION "AND," "OR," "AND/OR" IS USED,
SHALL BE INSURED SEPARATELY FROM ANY INDIVIDUALLY-OWNED DEPOSIT
ACCOUNT: PROVIDED, THAT (1) IF THE ACCOUNT IS HELD JOINTLY BY TWO OR
MORE NATURAL PERSONS, OR BY TWO OR MORE JURIDICAL PERSONS OR ENTITIES,
THE MAXIMUM INSURED DEPOSIT SHALL BE DIVIDED INTO AS MANY EQUAL SHARES
AS THERE ARE INDIVIDUALS, JURIDICAL PERSONS OR ENTITIES, UNLESS A
DIFFERENT SHARING IS STIPULATED IN THE DOCUMENT OF DEPOSIT , AND (2) IF THE
ACCOUNT IS HELD BY A JURIDICAL PERSON OR ENTITY JOINTLY WITH ONE OR MORE
NATURAL PERSONS, THE MAXIMUM INSURED DEPOSIT SHALL BE PRESUMED TO
BELONG ENTIRELY TO SUCH JURIDICAL PERSON OR ENTITY: PROVIDED, FURTHER,
THAT THE AGGREGATE OF THE INTEREST OF EACH CO-OWNER OVER SEVERAL
JOINT ACCOUNTS, WHETHER OWNED BY THE SAME OR DIFFERENT COMBINATIONS
OF INDIVIDUALS, JURIDICAL PERSONS OR ENTITIES, SHALL LIKEWISE BE SUBJECT
TO THE MAXIMUM INSURED DEPOSIT OF FIVE HUNDRED THOUSAND PESOS
(P500,000.00): PROVIDED, FURTHERMORE, THAT THE PROVISIONS OF ANY LAW
TO THE CONTRARY NOTWITHSTANDING, NO OWNER/HOLDER OF ANY NEGOTIABLE
CERTIFICATE OF DEPOSIT SHALL BE RECOGNIZED AS A DEPOSITOR ENTITLED TO
THE RIGHTS PROVIDED IN THIS ACT UNLESS HIS NAME IS REGISTERED AS
OWNER/HOLDER THEREOF IN THE BOOKS OF THE ISSUING BANK: PROVIDED,
FINALLY, THAT, IN CASE OF A CONDITION THAT THREATENS THE MONETARY AND
FINANCIAL STABILITY OF THE BANKING SYSTEM THAT MAY HAVE SYSTEMIC
51 of 89
Comment [WU11]: An insured deposit is the

amount due any depositor for deposits in an
insured bank net of any matured or unmatured
obligation of the depositor to the insured bank
as of the date of closure but not to exceed
P250,000. In determining s depositors insured
deposit, the PDIC shall add together all deposits
in the bank maintained by the depositor in the
same right and capacity for his benefit either in
his own name or in the name of others. The
outstanding balance of each account would also
be adjusted to take into account any interest
earned by the account as of the date of closure
of the bank less any withholding tax due on
such interest.
CONSEQUENCES, AS DEFINED IN SECTION 17 HEREOF, AS DETERMINED BY THE

MONETARY BOARD, THE MAXIMUM DEPOSIT INSURANCE COVER MAY BE ADJUSTED
IN SUCH AMOUNT, FOR SUCH A PERIOD, AND/OR FOR SUCH DEPOSIT PRODUCTS,
AS MAY BE DETERMINED BY A UNANIMOUS VOTE OF THE BOARD OF DIRECTORS IN
A MEETING CALLED FOR THE PURPOSE AND CHAIRED BY THE SECRETARY OF
FINANCE, SUBJECT TO THE APPROVAL OF THE PRESIDENT OF THE
PHILIPPINES. (AS AMENDED BY R.A. 9302, 12 AUGUST 2004; R.A. 9576, 2009)
Liability to depositors
Deposit liabilities required to be insured with PDIC (Sec. 5)
SECTION 5. THE DEPOSIT LIABILITIES OF ANY BANK OR BANKING INSTITUTION,
WHICH IS ENGAGED IN THE BUSINESS OF RECEIVING DEPOSITS AS HEREIN DEFINED

ON THE EFFECTIVE DATE OF THIS ACT, OR WHICH THEREAFTER MAY ENGAGE IN
THE BUSINESS OF RECEIVING DEPOSITS, SHALL BE INSURED WITH THE
CORPORATION. (AS AMENDED BY R.A. 6037, 04 AUGUST 1969; RENUMBERED
FROM SEC. 4 BY R.A. 9302, 12 AUGUST 2004)
Commencement of liability (Sec. 14)

SECTION 14. W HENEVER AN INSURED BANK SHALL HAVE BEEN CLOSED BY THE
MONETARY BOARD PURSUANT TO SECTION 30 OF R.A. 7653, PAYMENT OF THE
INSURED DEPOSITS ON SUCH CLOSED BANK SHALL BE MADE BY THE
CORPORATION AS SOON AS POSSIBLE EITHER (1) BY CASH OR (2) BY MAKING
AVAILABLE TO EACH DEPOSITOR A TRANSFERRED DEPOSIT IN ANOTHER INSURED
BANK
IN
AN
AMOUNT
EQUAL
TO
INSURED
DEPOSIT
OF
SUCH
DEPOSITOR: PROVIDED, HOWEVER, THAT THE CORPORATION, IN ITS DISCRETION,
MAY REQUIRE PROOF OF CLAIMS TO BE FILED BEFORE PAYING THE INSURED
DEPOSITS, AND THAT IN ANY CASE WHERE THE CORPORATION IS NOT SATISFIED
AS TO THE VIABILITY OF A CLAIM FOR AN INSURED DEPOSIT , IT MAY REQUIRE FINAL
DETERMINATION OF A COURT OF COMPETENT JURISDICTION BEFORE PAYING SUCH
CLAIM: PROVIDED, FURTHER, THAT FAILURE TO SETTLE THE CLAIM, WITHIN SIX (6)
MONTHS FROM THE DATE OF FILING OF CLAIM FOR INSURED DEPOSIT, WHERE
SUCH FAILURE WAS DUE TO GRAVE ABUSE OF DISCRETION, GROSS NEGLIGENCE,
BAD FAITH, OR MALICE, SHALL, UPON CONVICTION, SUBJECT THE DIRECTORS,
OFFICERS OR EMPLOYEES OF THE CORPORATION RESPONSIBLE FOR THE DELAY,
TO IMPRISONMENT FROM SIX (6) MONTHS TO ONE (1) YEAR: PROVIDED,
FURTHERMORE, THAT THE PERIOD SHALL NOT APPLY IF THE VALIDITY OF THE
CLAIM REQUIRES THE RESOLUTION OF ISSUES OF FACTS AND OR LAW BY ANOTHER
OFFICE, BODY OR AGENCY INCLUDING THE CASE MENTIONED IN THE FIRST
PROVISO OR BY THE CORPORATION TOGETHER WITH SUCH OTHER OFFICE, BODY
OR AGENCY. (AS AMENDED BY R.A. 9302, 12 AUGUST 2004)
52 of 89
Comment [WU12]: When an insured bank

is closed, how will payment of the insured
deposits in such bank be made by the PDIC?
(Sec. 14)
The PDIC shall pay either (i) in cash or (ii) by
making available to each depositor a transferred
deposit in another insured bank in an amount
equal to the insured deposit
Comment [WU13]: When PDIC required to

settle a claim for an insured deposit? (Sec.
14)
The PDIC is required to settle the claim within 6
months from the date of filing thereof provided
that the claim was filed within 2 years from
actual takeover of the closed bank by PDIC.
The 6-month period shall not apply if the
documents of the claimant are incomplete or the
validity of the claim requires the resolution of
issues of facts or law by another office, body or
agency, independently or in coordination with
the PDIC.
Deposit accounts not entitled to payment (Sec. 4[f], as amended by Sec. 2, RA

9576)
SECTION 4. [F] THE TERM DEPOSIT MEANS THE UNPAID BALANCE OF MONEY OR
ITS EQUIVALENT RECEIVED BY A BANK IN THE USUAL COURSE OF BUSINESS AND

FOR WHICH IT HAS GIVEN OR IS OBLIGED TO GIVE CREDIT TO A COMMERCIAL,
CHECKING, SAVINGS, TIME OR THRIFT ACCOUNT, OR ISSUED IN ACCORDANCE
WITH BANGKO SENTRAL RULES AND REGULATIONS AND OTHER APPLICABLE LAWS,
TOGETHER WITH SUCH OTHER OBLIGATIONS OF A BANK, WHICH, CONSISTENT WITH
BANKING USAGE AND PRACTICES, THE BOARD OF DIRECTORS SHALL DETERMINE
AND PRESCRIBE BY REGULATIONS TO BE DEPOSIT LIABILITIES OF THE BANK:
PROVIDED, THAT ANY OBLIGATION OF A BANK WHICH IS PAYABLE AT THE OFFICE
OF THE BANK LOCATED OUTSIDE OF THE PHILIPPINES SHALL NOT BE A DEPOSIT
FOR ANY OF THE PURPOSES OF THIS ACT OR INCLUDED AS PART OF THE TOTAL
DEPOSITS OR OF INSURED DEPOSIT: PROVIDED, FURTHER, THAT, SUBJECT TO THE
APPROVAL OF THE BOARD OF DIRECTORS, ANY INSURED BANK WHICH IS
INCORPORATED UNDER THE LAWS OF THE PHILIPPINES WHICH MAINTAINS A
BRANCH OUTSIDE THE PHILIPPINES MAY ELECT TO INCLUDE FOR INSURANCE ITS
DEPOSIT OBLIGATIONS PAYABLE ONLY AT SUCH BRANCH.
THE CORPORATION SHALL NOT PAY DEPOSIT INSURANCE FOR THE FOLLOWING
ACCOUNTS OR TRANSACTIONS, WHETHER DENOMINATED, DOCUMENTED,
RECORDED OR BOOKED AS DEPOSIT BY THE BANK:
1. INVESTMENT PRODUCTS SUCH AS BONDS AND SECURITIES, TRUST
ACCOUNTS, AND OTHER SIMILAR INSTRUMENTS;
2. DEPOSIT ACCOUNTS OR TRANSACTIONS WHICH ARE UNFUNDED, OR THAT
ARE FICTITIOUS OR FRAUDULENT;
3. DEPOSIT ACCOUNTS OR TRANSACTIONS CONSTITUTING, AND/OR
EMANATING FROM, UNSAFE AND UNSOUND BANKING PRACTICE/S, AS
DETERMINED BY THE CORPORATION, IN CONSULTATION WITH THE BSP,
AFTER DUE NOTICE AND HEARING, AND PUBLICATION OF A CEASE AND
DESIST ORDER ISSUED BY THE CORPORATION AGAINST SUCH DEPOSIT
ACCOUNTS OR TRANSACTIONS; AND
4. DEPOSITS THAT ARE DETERMINED TO BE THE PROCEEDS OF AN UNLAWFUL
ACTIVITY AS DEFINED UNDER REPUBLIC ACT 9160, AS AMENDED.
THE ACTIONS OF THE CORPORATION TAKEN UNDER THIS SECTION SHALL BE FINAL
AND EXECUTORY, AND MAY NOT BE RESTRAINED OR SET ASIDE BY THE COURT,
EXCEPT ON APPROPRIATE PETITION FOR CERTIORARI ON THE GROUND THAT THE

ACTION WAS TAKEN IN EXCESS OF JURISDICTION OR WITH SUCH GRAVE ABUSE OF
DISCRETION AS TO AMOUNT TO A LACK OR EXCESS OF JURISDICTION. THE
PETITION FOR CERTIORARI MAY ONLY BE FILED WITHIN THIRTY (30) DAYS FROM
NOTICE OF DENIAL OF CLAIM FOR DEPOSIT INSURANCE. (AS AMENDED BY P.D.
1940, 27 JUNE 1984; R.A. 7400, 13 APRIL 1992; R.A. 9302, 12 AUGUST 2004;
R.A. 9576, 29 APRIL 2009)
53 of 89
Extent of liability (Sec. 4[g], as amended by Sec. 3, RA 9576)

Liability for contents of safety deposit box
Determination of insured deposits (Sec. 16)
Comment [WU14]: Is the PDIC required to

notify the depositors of a closed bank of the
fact of such closure and the need to file their
claims? (Sec. 16)
SECTION 16.
a. THE CORPORATION SHALL COMMENCE THE DETERMINATION OF INSURED
DEPOSITS DUE THE DEPOSITORS OF A CLOSED BANK UPON ITS ACTUAL
TAKEOVER OF THE CLOSED BANK. THE CORPORATION SHALL GIVE NOTICE TO
THE DEPOSITORS OF THE CLOSED BANK OF THE INSURED DEPOSITS DUE THEM
BY WHATEVER MEANS DEEMED APPROPRIATE BY THE BOARD OF DIRECTORS:
PROVIDED, THAT THE CORPORATION SHALL PUBLISH THE NOTICE ONCE A
WEEK FOR AT LEAST THREE (3) CONSECUTIVE WEEKS IN A NEWSPAPER OF
GENERAL CIRCULATION OR, WHEN APPROPRIATE, IN A NEWSPAPER
CIRCULATED IN THE COMMUNITY OR COMMUNITIES WHERE THE CLOSED BANK
OR ITS BRANCHES ARE LOCATED. (AS ADDED BY R.A. 9302, 12 AUGUST 2004)
b. PAYMENT OF AN INSURED DEPOSIT TO ANY PERSON BY THE CORPORATION

SHALL DISCHARGE THE CORPORATION, AND PAYMENT OF TRANSFERRED
DEPOSIT TO ANY PERSON BY THE NEW BANK OR BY AN INSURED BANK IN
WHICH A TRANSFERRED DEPOSIT HAS BEEN MADE AVAILABLE SHALL
DISCHARGE THE CORPORATION AND SUCH NEW BANK OR OTHER INSURED
BANK, TO THE SAME EXTENT THAT PAYMENT TO SUCH PERSON BY THE CLOSED
BANK WOULD HAVE DISCHARGED IT FROM LIABILITY FOR THE INSURED
DEPOSIT. (RENUMBERED FROM SEC. 11 (A) BY R.A. 9302, 12 AUGUST 2004)
Yes, The PDIC shall publish the notice to

depositors once a week for (3) consecutive
weeks in a newspaper of general circulation or,
in a newspaper circulated in the community or
communities where the closed bank or its
branches are located.
Comment [WU15]: Effect of payment to the

depositor of his insured deposit? (Sec. 16[b])
It (i) discharges the PDIC from any further
liability to the depositor, and (ii) subrogates the
PDIC to all the rights of the depositor against
the closed bank to the extent of such payment.
c. EXCEPT AS OTHERWISE PRESCRIBED BY THE BOARD OF DIRECTORS, NEITHER

THE CORPORATION NOR SUCH OTHER INSURED BANK SHALL BE REQUIRED TO
RECOGNIZE AS THE OWNER OF ANY PORTION OF A DEPOSIT APPEARING ON

THE RECORDS OF THE CLOSED BANK UNDER A NAME OTHER THAN THAT OF
THE CLAIMANT, ANY PERSON WHOSE NAME OR INTEREST AS SUCH OWNER IS
NOT DISCLOSED ON THE RECORDS OF SUCH CLOSED BANK AS PART OWNER OF
SAID DEPOSIT, IF SUCH RECOGNITION WOULD INCREASE THE AGGREGATE
AMOUNT OF THE INSURED DEPOSITS IN SUCH CLOSED BANK. (RENUMBERED
FROM SEC. 11 (B) BY R.A. 9302, 12 AUGUST 2004)
d. THE CORPORATION MAY WITHHOLD PAYMENT OF SUCH PORTION OF THE

INSURED DEPOSIT OF ANY DEPOSITOR IN A CLOSED BANK AS MAY BE
REQUIRED TO PROVIDE FOR THE PAYMENT OF ANY LIABILITY OF SUCH
DEPOSITOR AS A STOCKHOLDER OF THE CLOSED BANK, OR OF ANY LIABILITY
OF SUCH DEPOSITOR TO THE CLOSED BANK OR ITS RECEIVER, WHICH IS NOT
OFFSET AGAINST A CLAIM DUE FROM SUCH BANK, PENDING THE
DETERMINATION AND PAYMENT OF SUCH LIABILITY BY SUCH DEPOSITOR OR
ANY OTHER LIABLE THEREFOR. (RENUMBERED FROM SEC. 11 (C) BY R.A.
9302, 12 AUGUST 2004)
e. UNLESS OTHERWISE WAIVED BY THE CORPORATION, IF THE DEPOSITOR IN THE
CLOSED BANK SHALL FAIL TO CLAIM HIS INSURED DEPOSITS WITH THE
CORPORATION WITHIN TWO (2) YEARS FROM ACTUAL TAKEOVER OF THE
CLOSED BANK BY THE RECEIVER, OR DOES NOT ENFORCE HIS CLAIM FILED
WITH THE CORPORATION WITHIN TWO (2) YEARS AFTER THE TWO-YEAR
PERIOD TO FILE A CLAIM AS MENTIONED HEREINABOVE, ALL RIGHTS OF THE
54 of 89
Comment [WU16]: Is there a prescriptive

period for the filing of claims with the PDIC
by the depositors of a closed bank? (Sec.
16[e])
Yes. A depositor of a closed bank must file his
claim with the PDIC within 2 years from actual
takeover of the closed bank by PDIC. If he does
not, all his rights against the PDIC in respect of
the insured deposits shall be barred. However,
all the rights of the depositor against the closed
bank and its shareholders or the receivership
estate to which PDIC may have become
subrogated shall thereupon revert to the
depositor
DEPOSITOR AGAINST THE CORPORATION WITH RESPECT TO THE INSURED

DEPOSIT SHALL BE BARRED; HOWEVER, ALL RIGHTS OF THE DEPOSITOR
AGAINST THE CLOSED BANK AND ITS SHAREHOLDERS OR THE RECEIVERSHIP
ESTATE TO WHICH THE CORPORATION MAY HAVE BECOME SUBROGATED,
SHALL THEREUPON REVERT TO THE DEPOSITOR. THEREAFTER, THE
CORPORATION SHALL BE DISCHARGED FROM ANY LIABILITY ON THE INSURED
DEPOSIT. (AS AMENDED BY R.A. 9302, 12 AUGUST 2004)
Calculation of liability (Sec. 4[g]; see also PDIC Bulletin No. 2004-04, dated
August 12, 2004)
Per depositor, per capacity rule
Joint accounts
A JOINT ACCOUNT, REGARDLESS OF WHETHER THE CONJUNCTION AND, OR,
OR AND/OR IS USED, SHALL BE INSURED SEPARATELY FROM ANY
INDIVIDUALLY-OWNED DEPOSIT ACCOUNT. THE MAXIMUM INSURED DEPOSIT OF
P250,000 SHALL BE DIVIDED INTO AS MANY EQUAL SHARES AS THERE ARE
DEPOSITORS UNLESS A DIFFERENT SHARING IS STIPULATED IN THE DOCUMENT
OF DEPOSIT.
Example: Pedro and Mario have P400,000 in a joint savings account with
ABC Bank. Pedro also has P300,000 in another savings account that he
maintains with the same bank solely in his name. Marios total deposit is
P200,000 while that of Pedro is P500,000. If ABC Bank were closed,
Mario could claim P125,000 from PDIC (representing his 50% share of
the maximum insured deposit of the joint account with Pedro) while Pedro
could claim a total of P250,000 (P125,000, representing his 50% share of
the maximum insured deposit of the joint account with Mario), plus
P125,000 out of the savings account solely in his name.
IF THE ACCOUNT WERE HELD BY A JURIDICAL PERSON JOINTLY WITH ONE OR
MORE NATURAL PERSONS, THE MAXIMUM INSURED DEPOSIT SHALL BE
PRESUMED TO BELONG ENTIRELY TO SUCH JURIDICAL PERSON OR ENTITY.
Example: XYZ Corporation and Pedro have P250,000 in a joint savings
account with ABC Bank. Pedro also has P250,000 in another savings
account that he maintains with the same bank solely in his name. If ABC
Bank were closed, XYZ Corporation could claim P250,000 from PDIC.
The P250,000 in the joint account would be presumed to belong entirely
to XYZ Corporation.
IN CASE ONE OF THE CO-DEPOSITORS IN A JOINT AND/OR OR OR ACCOUNT
HAS AN OBLIGATION TO THE CLOSED BANK COVERED BY A HOLD-OUT
AGREEMENT (I.E., A SECURITY ARRANGEMENT WHEREBY THE OBLIGATION IS
SECURED BY THE ACCOUNT), THE OBLIGATION SECURED BY THE AGREEMENT
SHALL BE DEDUCTED FROM THE BALANCE OF THE JOINT ACCOUNT
REGARDLESS OF THE FACT THAT ONLY ONE OF THE CO-DEPOSITORS IS
INDEBTED TO THE BANK.
55 of 89
Example: Pedro and Mario have P200,000 in a joint and/or savings

account with ABC Bank. Pedro borrowed P50,000 from the bank and
secured it with a hold-out on the joint and/or savings account. If ABC
Bank were closed, Pedro and Mario could each claim only P75,000 from
the PDIC.
IN CASE THE DEPOSIT IS A JOINT AND ACCOUNT, THE OBLIGATION SHALL BE
DEDUCTED ONLY FROM THE SHARE OF THE INDEBTED CO-DEPOSITOR UNLESS
THE OTHER CO-DEPOSITOR IS HIMSELF A CO-SIGNATORY TO THE HOLD-OUT
AGREEMENT.
Example: If the account in the immediately preceding problem were a
joint and account, Pedro could claim only P50,000 from the PDIC. Mario
could claim P100,000.
(e) Where the deposit is not covered by a hold-out agreement, the
obligation shall be deducted only from the share of the indebted codepositor regardless of whether the deposit is a joint and, or, or
and/or account.
Mode of payment (Sec. 14)
Concept of transferred deposit (Sec. 4[h])
SECTION 4 [H] THE TERM TRANSFER DEPOSIT MEANS A DEPOSIT IN AN
INSURED BANK MADE AVAILABLE TO A DEPOSITOR BY THE CORPORATION AS
PAYMENT OF INSURED DEPOSIT OF SUCH DEPOSITOR IN A CLOSED BANK AND
ASSUMED BY ANOTHER INSURED BANK.
Effect of payment of insured deposit (Secs. 15 and 16[b])

It (i) discharges the PDIC from any further liability to the depositor, and (ii)
subrogates the PDIC to all the rights of the depositor against the closed
bank to the extent of such payment.
Payments of insured deposits as preferred credit under Art. 2244, Civil Code
(Sec. 15)
All payments by the PDIC of insured deposits in closed banks partake of
the nature of public funds, as such, must be considered a preferred credit
similar to taxes due to the National Government in the order of preference
under Article 2244 of the NCC.
Failure of depositor to claim insured deposit (Sec. 16[e]); Is there a prescriptive
period for the filing of claims with the PDIC by the depositors of a closed
bank? (Sec. 16[e])
Yes. A depositor of a closed bank must file his claim with the PDIC within
2 years from actual takeover of the closed bank by PDIC. If he does not,
all his rights against the PDIC in respect of the insured deposits shall be
barred. However, all the rights of the depositor against the closed bank
56 of 89
Comment [WU17]: It is 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.
By paying its liabilities to depositors in this manner,
the PDIC hopes to persuade these depositors to keep
their savings in banks where such funds could be lent
out, rather than hoarded and kept out of the banking
system
and its shareholders or the receivership estate to which PDIC may have
become subrogated shall thereupon revert to the depositor
Examination of banks and deposit accounts (Sec. 8, Paragraph 8, as amended by
Sec. 5, RA 9576)
SECTION 8.THE CORPORATION AS A CORPORATE BODY SHALL HAVE THE
POWER - EIGHTH TO CONDUCT EXAMINATION OF BANKS WITH PRIOR
APPROVAL OF THE MONETARY BOARD: PROVIDED, THAT NO EXAMINATION CAN
BE CONDUCTED WITHIN TWELVE (12) MONTHS FROM THE LAST EXAMINATION
DATE: PROVIDED, HOWEVER, THAT THE CORPORATION MAY, IN COORDINATION
WITH THE BANGKO SENTRAL, CONDUCT A SPECIAL EXAMINATION AS THE
BOARD OF DIRECTORS, BY AN AFFIRMATIVE VOTE OF A MAJORITY OF ALL OF
ITS MEMBERS, IF THERE IS A THREATENED OR IMPENDING CLOSURE OF A
BANK; PROVIDED, FURTHER, THAT, NOTWITHSTANDING THE PROVISIONS OF
REPUBLIC ACT NO. 1405, AS AMENDED, REPUBLIC ACT NO. 6426, AS
AMENDED, REPUBLIC ACT NO. 8791, AND OTHER LAWS, THE CORPORATION
AND/OR THE BANGKO SENTRAL, MAY INQUIRE INTO OR EXAMINE DEPOSIT
ACCOUNTS AND ALL INFORMATION RELATED THERETO IN CASE THERE IS A
FINDING OF UNSAFE OR UNSOUND BANKING PRACTICE; PROVIDED, FINALLY,
THAT TO AVOID OVERLAPPING OF EFFORTS, THE EXAMINATION SHALL
MAXIMIZE THE EFFICIENT USE OF THE RELEVANT REPORTS, INFORMATION, AND
FINDINGS OF THE BANGKO SENTRAL, WHICH IT SHALL MAKE AVAILABLE TO THE
CORPORATION; (AS AMENDED BY R.A. 9302, 12 AUGUST 2004, R.A. 9576,29
APRIL 2009)
Other powers of PDIC (Secs. 8, 9[f], 10[b] and 11)

SECTION 9[F]. THE CORPORATION SHALL UNDERWRITE OR ADVANCE
LITIGATION COSTS AND EXPENSES, INCLUDING LEGAL FEES AND OTHER
EXPENSES OF EXTERNAL COUNSEL, OR PROVIDE LEGAL ASSISTANCE TO,
DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS OF THE CORPORATION IN
CONNECTION WITH ANY CIVIL, CRIMINAL, ADMINISTRATIVE OR ANY OTHER
ACTION OR PROCEEDING, TO WHICH SUCH DIRECTOR, OFFICER, EMPLOYEE OR
AGENT IS MADE A PARTY BY REASON OF, OR IN CONNECTION WITH, THE
EXERCISE OF AUTHORITY OR PERFORMANCE OF FUNCTIONS AND DUTIES
UNDER THIS ACT: PROVIDED, THAT SUCH LEGAL PROTECTION SHALL NOT
APPLY TO ANY CIVIL, CRIMINAL, ADMINISTRATIVE OR ANY ACTION OR
PROCEEDING THAT MAY BE INITIATED BY THE CORPORATION, IN WHATEVER
CAPACITY,
AGAINST
SUCH
DIRECTOR,
OFFICER,
EMPLOYEE
OR
AGENT:PROVIDED, FURTHER, THAT DIRECTORS, OFFICERS, EMPLOYEES OR
AGENTS WHO SHALL RESIGN, RETIRE, TRANSFER TO ANOTHER AGENCY OR BE
SEPARATED FROM THE SERVICE, SHALL CONTINUE TO BE PROVIDED WITH
SUCH LEGAL PROTECTION IN CONNECTION WITH ANY ACT DONE OR OMITTED
TO BE DONE BY THEM IN GOOD FAITH DURING THEIR TENURE OR EMPLOYMENT
WITH THE CORPORATION: PROVIDED, FINALLY, THAT IN THE EVENT OF A
SETTLEMENT OR COMPROMISE, INDEMNIFICATION SHALL BE PROVIDED ONLY IN
CONNECTION WITH SUCH MATTERS COVERED BY THE SETTLEMENT AS TO
WHICH THE CORPORATION IS ADVISED BY COUNSEL THAT THE PERSONS TO BE
INDEMNIFIED DID NOT COMMIT ANY NEGLIGENCE OR MISCONDUCT. (AS ADDED
BY R.A. 9302, 12 AUGUST 2004)
57 of 89
SECTION 10[B]. HE CORPORATION AS RECEIVER SHALL CONTROL, MANAGE

AND ADMINISTER THE AFFAIRS OF THE CLOSED BANK. EFFECTIVE IMMEDIATELY
UPON TAKEOVER AS RECEIVER OF SUCH BANK, THE POWERS, FUNCTIONS AND
DUTIES, AS WELL AS ALL ALLOWANCES, REMUNERATIONS AND PERQUISITES OF
THE DIRECTORS, OFFICERS, AND STOCKHOLDERS OF SUCH BANK ARE
SUSPENDED, AND THE RELEVANT PROVISIONS OF THE ARTICLES OF
INCORPORATION AND BY-LAWS OF THE CLOSED BANK ARE LIKEWISE DEEMED
SUSPENDED. (AS ADDED BY R.A. 9302, 12 AUGUST 2004)
THE ASSETS OF THE CLOSED BANK UNDER RECEIVERSHIP SHALL BE DEEMED
IN CUSTODIA LEGIS IN THE HANDS OF THE RECEIVER. FROM THE TIME THE
CLOSED BANK IS PLACED UNDER SUCH RECEIVERSHIP, ITS ASSETS SHALL NOT
BE SUBJECT TO ATTACHMENT, GARNISHMENT, EXECUTION, LEVY OR ANY
OTHER COURT PROCESSES. THEREFORE, A JUDGE, OFFICER OF THE COURT
OR ANY PERSON WHO SHALL ISSUE, ORDER, PROCESS OR CAUSE THE
ISSUANCE OR IMPLEMENTATION OF THE WRIT OF GARNISHMENT, LEVY,
ATTACHMENT OR EXECUTION SHALL BE LIABLE UNDER SECTION 21
HEREOF. (AS ADDED BY R.A. 9302, 12 AUGUST 2004)
SECTION 11. IN ALL CASES OR ACTIONS FILED BY THE CORPORATION AS
RECEIVER FOR THE RECOVERY OF, OR INVOLVING ANY ASSET OF THE CLOSED
BANK, PAYMENT OF ALL DOCKET AND OTHER COURT FEES SHALL BE DEFERRED
UNTIL THE ACTION IS TERMINATED WITH FINALITY. ANY SUCH FEES SHALL
CONSTITUTE AS A FIRST LIEN ON ANY JUDGMENT IN FAVOR OF THE CLOSED
BANK OR IN CASE OF UNFAVORABLE JUDGMENT, SUCH FEES SHALL BE PAID AS
ADMINISTRATIVE EXPENSES DURING THE DISTRIBUTION OF THE ASSETS OF THE
CLOSED BANK. (AS ADDED BY R.A. 9302, 12 AUGUST 2004)
Prohibition against splitting of deposits (Sec. 21[f][5], as amended by Sec. 11, RA

9576)
SECTION 21. [F][5]. THE PENALTY OF PRISION MAYOR OR A FINE OF NOT

LESS THAN FIFTY THOUSAND PESOS (P50,000.00) BUT NOT MORE THAN TWO
MILLION PESOS (P2,000,000.00), OR BOTH, AT THE DISCRETION OF THE
COURT, SHALL BE IMPOSED UPON ANY DIRECTOR, OFFICER, EMPLOYEE OR
AGENT OF A BANK: (AS AMENDED BY R.A. 9302, 12 AUGUST 2004) SPLITTING
OF DEPOSITS OR CREATION OF FICTITIOUS LOANS OR DEPOSIT ACCOUNTS. (AS
ADDED BY R.A. 9302, 12 AUGUST 2004)
SPLITTING OF DEPOSITS OCCURS WHENEVER A DEPOSIT ACCOUNT WITH AN
OUTSTANDING BALANCE OF MORE THAN THE STATUTORY MAXIMUM AMOUNT
OF INSURED DEPOSIT MAINTAINED UNDER THE NAME OF NATURAL OR
JURIDICAL PERSONS IS BROKEN DOWN AND TRANSFERRED INTO TWO (2) OR
MORE ACCOUNTS IN THE NAME/S OF NATURAL OR JURIDICAL PERSONS OR
ENTITIES WHO HAVE NO BENEFICIAL OWNERSHIP ON TRANSFERRED DEPOSITS
IN THEIR NAMES WITHIN ONE HUNDRED TWENTY (120) DAYS IMMEDIATELY
PRECEDING OR DURING A BANKDECLARED BANK HOLIDAY, OR IMMEDIATELY
PRECEDING A CLOSURE ORDER ISSUED BY THE MONETARY BOARD OF THE
BANGKO SENTRAL NG PILIPINAS FOR THE PURPOSE OF AVAILING OF THE
MAXIMUM DEPOSIT INSURANCE COVERAGE; (AS ADDED BY R.A. 9302, 12
AUGUST 2004; AS AMENDED BY R.A. 9576, 29 APRIL 2009)
58 of 89
Prohibition against issuance of TROs, etc. (Sec. 22)
SECTION 22. NO COURT, EXCEPT THE COURT OF APPEALS, SHALL ISSUE

ANY TEMPORARY RESTRAINING ORDER, PRELIMINARY INJUNCTION OR
PRELIMINARY MANDATORY INJUNCTION AGAINST THE CORPORATION FOR ANY
ACTION UNDER THIS ACT. (AS ADDED BY R.A. 9302, 12 AUGUST 2004)
THIS PROHIBITION SHALL APPLY IN ALL CASES, DISPUTES OR CONTROVERSIES
INSTITUTED BY A PRIVATE PARTY, THE INSURED BANK, OR ANY SHAREHOLDER
OF THE INSURED BANK. (AS ADDED BY R.A. 9302, 12 AUGUST 2004)
THE SUPREME COURT MAY ISSUE A RESTRAINING ORDER OR INJUNCTION
WHEN THE MATTER IS OF EXTREME URGENCY INVOLVING A CONSTITUTIONAL
ISSUE, SUCH THAT UNLESS A TEMPORARY RESTRAINING ORDER IS ISSUED,
GRAVE INJUSTICE AND IRREPARABLE INJURY WILL ARISE. THE PARTY APPLYING
FOR THE ISSUANCE OF A RESTRAINING ORDER OR INJUNCTION SHALL FILE A
BOND IN AN AMOUNT TO BE FIXED BY THE SUPREME COURT, WHICH BOND
SHALL ACCRUE IN FAVOR OF THE CORPORATION IF THE COURT SHOULD
FINALLY DECIDE THAT THE APPLICANT WAS NOT ENTITLED TO THE RELIEF
SOUGHT.
(AS ADDED BY R.A. 9302, 12 AUGUST 2004)
ANY RESTRAINING ORDER OR INJUNCTION ISSUED IN VIOLATION OF THIS

SECTION IS VOID AND OF NO FORCE AND EFFECT AND ANY JUDGE WHO HAS
ISSUED THE SAME SHALL SUFFER THE PENALTY OF SUSPENSION OF AT LEAST
SIXTY (60) DAYS WITHOUT PAY. (AS ADDED BY R.A. 9302, 12 AUGUST 2004)
3.2
Case
Nature of liquidation proceedings
Pacific Banking Corporation Employees Organization, et al. vs. CA, et al.,
G.R. 109373, March 20, 1995.
ISSUE: The principal question involved is the same: whether a petition for liquidation under
29 of Rep. Act No. 265, otherwise known as the Central Bank Act, is a special proceeding
or an ordinary civil action.
[This is relevant to determine the proper period to be followed in making an appeal.] If it
were a special proceeding, the period for appealing from any decision or final order rendered
therein is 30 days [and the party appealing must, in addition to a notice of appeal, file with
the trial court a record on appeal in order to perfect his appeal]. If it were a liquidation
proceeding, the period for appealing from any decision or final order rendered therein is 15
days since a liquidation proceeding is an ordinary action.
HELD: Considering this distinction, a petition for liquidation of an insolvent corporation should
be classified a special proceeding and not an ordinary action. Such petition does not seek
59 of 89
the enforcement or protection of a right nor the prevention or redress of a wrong against a
party. It does not pray for affirmative relief for injury arising from a party's wrongful act or
omission nor state a cause of action that can be enforced against any person.
What it seeks is merely a declaration by the trial court of the corporation's insolvency so that
its creditors may be able to file their claims in the settlement of the corporation's debts and
obligations. Put in another way, the petition only seeks a declaration of the corporation's
debts and obligations. Put in another way, the petition only seeks a declaration of the
corporation's state of insolvency and the concomitant right of creditors and the order of
payment of their claims in the disposition of the corporation's assets.
Contrary to the rulings of the Fourteenth Division, liquidation proceedings do not resemble
petitions for interpleader. Rather, a liquidation proceeding resembles the proceeding for the
settlement of state of deceased persons under Rules 73 to 91 of the Rules of Court.
The two have a common purpose: the determination of all the assets and the payment of all
the debts and liabilities of the insolvent corporation or the estate. The Liquidator and the
administrator or executor are both charged with the assets for the benefit of the claimants. In
both instances, the liability of the corporation and the estate is not disputed. The court's
concern is with the declaration of creditors and their rights and the determination of their
order of payment
As in the settlement of estates, multiple appeals are allowed in proceedings for liquidation of
an insolvent corporation. As the Fifth Division of the Court of Appeals, quoting the Liquidator,
correctly noted:
A liquidation proceeding is a single proceeding which consists of a number of cases
properly classified as "claims." It is basically a two-phased proceeding. The first
phase is concerned with the approval and disapproval of claims. Upon the approval
of the petition seeking the assistance of the proper court in the liquidation of a close
entity, all money claims against the bank are required to be filed with the liquidation
court. This phase may end with the declaration by the liquidation court that the claim
is not proper or without basis. On the other hand, it may also end with the liquidation
court allowing the claim. In the latter case, the claim shall be classified whether it is
ordinary or preferred, and thereafter included Liquidator. In either case, the order
allowing or disallowing a particular claim is final order, and may be appealed by the
party aggrieved thereby.
The second phase involves the approval by the Court of the distribution plan
prepared by the duly appointed liquidator. The distribution plan specifies in detail the
total amount available for distribution to creditors whose claim were earlier allowed.
The Order finally disposes of the issue of how much property is available for
disposal. Moreover, it ushers in the final phase of the liquidation proceeding
payment of all allowed claims in accordance with the order of legal priority and the
approved distribution plan.
Verily, the import of the final character of an Order of allowance or disallowance of a
particular claim cannot be overemphasized. It is the operative fact that constitutes a
liquidation proceeding a "case where multiple appeals are allowed by law." The
issuance of an Order which, by its nature, affects only the particular claims involved,
and which may assume finality if no appeal is made therefrom, ipso facto creates a
situation where multiple appeals are allowed.
60 of 89
A liquidation proceeding is commenced by the filing of a single petition by the

Solicitor General with a court of competent jurisdiction entitled, "Petition for
Assistance in the Liquidation of e.g., Pacific Banking Corporation. All claims against
the insolvent are required to be filed with the liquidation court. Although the claims
are litigated in the same proceeding, the treatment is individual. Each claim is heard
separately. And the Order issued relative to a particular claim applies only to said
claim, leaving the other claims unaffected, as each claim is considered separate and
distinct from the others. Obviously, in the event that an appeal from an Order
allowing or disallowing a particular claim is made, only said claim is affected, leaving
the others to proceed with their ordinary course. In such case, the original records of
the proceeding are not elevated to the appellate court. They remain with the
liquidation court. In lieu of the original record, a record of appeal is instead required
to be prepared and transmitted to the appellate court.
Inevitably, multiple appeals are allowed in liquidation proceedings. Consequently, a
record on appeal is necessary in each and every appeal made. Hence, the period to
appeal therefrom should be thirty (30) days, a record on appeal being required.
(Record pp. 162-164).
61 of 89
IV
LAW ON SECRECY OF BANK DEPOSITS
RA 1405 (1955), as amended by PD 1792 (1981), RA 6832 (1990) and RA 7653 (1993);
see also Sec. 6 (f), NIRC, and Sec. 15 (8), RA 6770 (Ombudsman Act of 1989);
Sec. 11, RA 9160 (Anti-Money Laundering Act of 2001), as amended by
Sec. 8 of RA 9194 (2003); and RA 9576 (2009).
4.1
Topics
Purpose
SECTION 1. IT IS HEREBY DECLARED TO BE THE POLICY OF THE GOVERNMENT TO
GIVE ENCOURAGEMENT TO THE PEOPLE TO DEPOSIT THEIR MONEY IN BANKING
INSTITUTIONS AND TO DISCOURAGE PRIVATE HOARDING SO THAT THE SAME MAY
BE PROPERLY UTILIZED BY BANKS IN AUTHORIZED LOANS TO ASSIST IN THE
ECONOMIC DEVELOPMENT OF THE COUNTRY.
Prohibited acts
SECTION 2. ALL DEPOSITS OF WHATEVER NATURE WITH BANKS OR BANKING
INSTITUTIONS IN THE PHILIPPINES INCLUDING INVESTMENTS IN BONDS ISSUED BY
THE GOVERNMENT OF THE PHILIPPINES, ITS POLITICAL SUBDIVISIONS AND ITS
INSTRUMENTALITIES, ARE HEREBY CONSIDERED AS OF AN ABSOLUTELY
CONFIDENTIAL NATURE AND MAY NOT BE EXAMINED, INQUIRED OR LOOKED INTO BY
ANY PERSON, GOVERNMENT OFFICIAL, BUREAU OR OFFICE, EXCEPT UPON
WRITTEN PERMISSION OF THE DEPOSITOR, OR IN CASES OF IMPEACHMENT, OR
UPON ORDER OF A COMPETENT COURT IN CASES OF BRIBERY OR DERELICTION OF
DUTY OF PUBLIC OFFICIALS, OR IN CASES WHERE THE MONEY DEPOSITED OR
INVESTED IS THE SUBJECT MATTER OF THE LITIGATION.
SECTION 3. IT SHALL BE UNLAWFUL FOR ANY OFFICIAL OR EMPLOYEE OF A

BANKING INSTITUTION TO DISCLOSE TO ANY PERSON OTHER THAN THOSE
MENTIONED IN SECTION TWO HEREOF ANY INFORMATION CONCERNING SAID
DEPOSITS.
Exceptions
SECTION 2. XXX EXCEPT UPON
1. WRITTEN PERMISSION OF THE DEPOSITOR, OR
2. IN CASES OF IMPEACHMENT, OR
3. UPON ORDER OF A COMPETENT COURT IN CASES OF BRIBERY OR
DERELICTION OF DUTY OF PUBLIC OFFICIALS, OR
4. IN CASES WHERE THE MONEY DEPOSITED OR INVESTED IS THE SUBJECT
MATTER OF THE LITIGATION.
SEC. 6, NIRC. (F) AUTHORITY OF THE COMMISSIONER TO INQUIRE INTO BANK
DEPOSIT ACCOUNTS. - NOTWITHSTANDING ANY CONTRARY PROVISION OF
REPUBLIC ACT NO. 1405 AND OTHER GENERAL OR SPECIAL LAWS, THE
COMMISSIONER IS HEREBY AUTHORIZED TO INQUIRE INTO THE BANK DEPOSITS
OF:(1) A DECEDENT TO DETERMINE HIS GROSS ESTATE; AND(2) ANY TAXPAYER
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WHO HAS FILED AN APPLICATION FOR COMPROMISE OF HIS TAX LIABILITY UNDER
SEC. 204 (A) (2) OF THIS CODE BY REASON OF FINANCIAL INCAPACITY TO PAY HIS
TAX LIABILITY.IN CASE A TAXPAYER FILES AN APPLICATION TO COMPROMISE THE
PAYMENT OF HIS TAX LIABILITIES ON HIS CLAIM THAT HIS FINANCIAL POSITION
DEMONSTRATES A CLEAR INABILITY TO PAY THE TAX ASSESSED, HIS APPLICATION
SHALL NOT BE CONSIDERED UNLESS AND UNTIL HE WAIVES IN WRITING HIS
PRIVILEGE UNDER REPUBLIC ACT NO. 1405 OR UNDER OTHER GENERAL OR
SPECIAL LAWS, AND SUCH WAIVER SHALL CONSTITUTE THE AUTHORITY OF THE
COMMISSIONER TO INQUIRE INTO THE BANK DEPOSITS OF THE TAXPAYER.
SECTION 15, RA 6770. POWERS, FUNCTIONS AND DUTIES. THE OFFICE OF THE
OMBUDSMAN SHALL HAVE THE FOLLOWING POWERS, FUNCTIONS AND DUTIES: (8)
ADMINISTER OATHS, ISSUE SUBPOENA AND SUBPOENA DUCES TECUM, AND TAKE
TESTIMONY IN ANY INVESTIGATION OR INQUIRY, INCLUDING THE POWER TO
EXAMINE AND HAVE ACCESS TO BANK ACCOUNTS AND RECORDS;
SEC. 11, RA 9160. AUTHORITY TO INQUIRE INTO BANK DEPOSITS. -NOTWITHSTANDING THE PROVISIONS OF REPUBLIC ACT NO. 1405, AS AMENDED,
REPUBLIC ACT NO. 6426, AS AMENDED, REPUBLIC ACT NO. 8791, AND OTHER
LAWS, THE AMLC MAY INQUIRE INTO OR EXAMINE ANY PARTICULAR DEPOSIT OR
INVESTMENT WITH ANY BANKING INSTITUTION OR NON-BANK FINANCIAL
INSTITUTION UPON ORDER OF ANY COMPETENT COURT IN CASES OF VIOLATION OF
THIS ACT, WHEN IT HAS BEEN ESTABLISHED THAT THERE IS PROBABLE CAUSE
THAT THE DEPOSITS OR INVESTMENTS ARE RELATED TO AN UNLAWFUL ACTIVITIES
AS DEFINED IN SECTION 3(I) HEREOF OR A MONEY LAUNDERING OFFENSE UNDER
SECTION 4 HEREOF, EXCEPT THAT NO COURT ORDER SHALL BE REQUIRED IN
CASES INVOLVING UNLAWFUL ACTIVITIES DEFINED IN SECTIONS 3(I)1, (2) AND
(12).
TO ENSURE COMPLIANCE WITH THIS ACT, THE BANGKO SENTRAL NG PILIPINAS

(BSP) MAY INQUIRE INTO OR EXAMINE ANY DEPOSIT OF INVESTMENT WITH ANY
BANKING INSTITUTION OR NON-BANK FINANCIAL INSTITUTION WHEN THE
EXAMINATION IS MADE IN THE COURSE OF A PERIODIC OR SPECIAL EXAMINATION,
IN ACCORDANCE WITH THE RULES OF EXAMINATION OF THE BSP.
SEC. 8 (8), RA 3591. EIGHTH - TO CONDUCT EXAMINATION OF BANKS WITH
PRIOR APPROVAL OF THE MONETARY BOARD: PROVIDED, THAT NO EXAMINATION
CAN BE CONDUCTED WITHIN TWELVE (12) MONTHS FROM THE LAST EXAMINATION
DATE: PROVIDED, HOWEVER, THAT THE CORPORATION MAY, IN COORDINATION
WITH THE BANGKO SENTRAL, CONDUCT A SPECIAL EXAMINATION AS THE BOARD
OF DIRECTORS, BY AN AFFIRMATIVE VOTE OF A MAJORITY OF ALL OF ITS MEMBERS,
IF
THERE
IS
A
THREATENED
OR
IMPENDING
CLOSURE
OF
A
BANK: PROVIDED, FURTHER, THAT NOTWITHSTANDING THE PROVISIONS OF
REPUBLIC ACT NO. 1405, AS AMENDED, REPUBLIC ACT NO. 6426, AS AMENDED,
REPUBLIC ACT NO. 8791, AND OTHER LAWS, THE CORPORATION AND/OR BANGKO
SENTRAL MAY INQUIRE INTO OR EXAMINE DEPOSIT ACCOUNTS AND ALL
INFORMATION RELATED THERETO IN CASE THERE IS A FINDING OF UNSAFE OR
UNSOUND BANKING PRACTICE: PROVIDED, FINALLY, THAT TO AVOID OVERLAPPING
OF EFFORTS, THE EXAMINATION SHALL MAXIMIZE THE EFFICIENT USE OF THE
RELEVANT REPORTS, INFORMATION, AND FINDINGS OF THE BANGKO SENTRAL,
WHICH IT SHALL MAKE AVAILABLE TO THE CORPORATION.
63 of 89
Garnishment of deposits
Safety deposit box
4.2
Cases
Unexplained wealth exception
PNB vs. Gancayco,
G.R. No. L-18343, September 30, 1965
ISSUE: The principal question presented in this case is whether a bank can be compelled to
disclose the records of accounts of a depositor who is under investigation for unexplained
wealth.
Defendants cite the Anti-Graft and Corrupt Practices Act (Republic Act No. 3019) in support
of their claim of authority
SEC. 8. Dismissal due to unexplained wealth. If in accordance with the provisions
of RA 1379, a public official has been found to have acquired during his incumbency,
whether in his name or in the name of other persons, an amount of property and/or
money manifestly out of proportion to his salary and to his other lawful income, that
fact shall be a ground for dismissal or removal. Properties in the name of the spouse
and unmarried children of such public official may be taken into consideration, when
their acquisition through legitimate means cannot be satisfactorily shown. Bank
deposits shall be taken into consideration in the enforcement of this section,
notwithstanding any provision of law to the contrary.
HELD: YES; THE BANK MAY BE COMPELLED TO DISCLOSE SUCH BANK RECORDS.
RA 1405 and RA 3019 [with respect to secrecy of bank accounts] are so repugnant to each
other than no reconciliation is possible. Thus, while Republic Act No. 1405 provides that
bank deposits are "absolutely confidential ... and [therefore] may not be examined, inquired
or looked into," except in those cases enumerated therein, the Anti-Graft Law directs in
mandatory terms that bank deposits "shall be taken into consideration in the enforcement of
this section, notwithstanding any provision of law to the contrary." The only conclusion
possible is that section 8 of the Anti-Graft Law is intended to amend section 2 of
Republic Act No. 1405 by providing additional exception to the rule against the
disclosure of bank deposits.
With regard to the claim that disclosure would be contrary to the policy making bank
deposits confidential, it is enough to point out that while section 2 of Republic Act 1405
declares bank deposits to be "absolutely confidential," it nevertheless allows such disclosure
in the following instances: (1) Upon written permission of the depositor; (2) In cases of
impeachment; (3) Upon order of a competent court in cases of bribery or dereliction of duty
of public officials; (4) In cases where the money deposited is the subject matter of the
litigation. Cases of unexplained wealth are similar to cases of bribery or dereliction of
duty and no reason is seen why these two classes of cases cannot be excepted from
the rule making bank deposits confidential.
64 of 89
Garnishment of deposit
China Banking vs. Ortega,
G.R. L-34964, January 31, 1973
ISSUE: Whether or not a banking institution may validly refuse to comply with a court process
garnishing the bank deposit of a judgment debtor, by invoking the provisions of Republic Act
No. 1405.
The petitioners argue that the disclosure of the information required by the court does not fall
within any of the four (4) exceptions enumerated in Section 2, and that if the questioned
orders are complied with Tan Kim Liong may be criminally liable under Section 5 and the
bank exposed to a possible damage suit by B & B Forest Development Corporation.
Specifically referring to this case, the position of the petitioners is that the bank
deposit of judgment debtor B & B Forest Development Corporation cannot be subject
to garnishment to satisfy a final judgment against it in view of the aforequoted
provisions of law.
HELD: A BANK MAY NOT REFUSE TO COMPLY WITH ORDER OF GARNISHMENT SIMPLY BY INVOKING
THE SECRECY OF BANK ACCOUNTS UNDER RA 1405.
The lower court, in issuing an order of garnishment, did not order an examination of or
inquiry into the deposit of B & B Forest Development Corporation, as contemplated in
the law. It merely required Tan Kim Liong to inform the court whether or not the defendant B
& B Forest Development Corporation had a deposit in the China Banking Corporation only
for purposes of the garnishment issued by it, so that the bank would hold the same intact
and not allow any withdrawal until further order. Indeed there is no real inquiry in such a
case, and if the existence of the deposit is disclosed the disclosure is purely incidental to the
execution process.
It will be noted from the discussion of the conference committee report on Senate Bill No.
351 and House Bill No. 3977, which later became Republic Act 1405, that it was not the
intention of the lawmakers to place bank deposits beyond the reach of execution to satisfy a
final judgment. It is hard to conceive that it was ever within the intention of Congress to
enable debtors to evade payment of their just debts, even if ordered by the Court, through
the expedient of converting their assets into cash and depositing the same in a bank.
65 of 89
G.R. 84526, January 28, 1991.

ISSUE: Whether or not a bank violates Republic Act No. 1405, otherwise known as the
Secrecy of Bank Deposits Act, when it allowes the sheriff to garnish the deposit of one of its
depositors.
HELD: NO VIOLATION
The Court in China Banking Corporation vs. Ortega had the occasion to dispose of this
issue when it stated, thus: t is clear from the discussion of the conference committee report
on Senate Bill No. 351 and House Bill No. 3977, which later became Republic Act 1405, that
the prohibition against examination of or inquiry into a bank deposit under Republic Act 1405
does not preclude its being garnished to insure satisfaction of a judgment. Indeed there is no
real inquiry in such a case, and if existence of the deposit is disclosed the disclosure is
purely incidental to the execution process. It is hard to conceive that it was ever within the
intention of Congress to enable debtors to evade payment of their just debts, even if ordered
by the Court, through the expedient of converting their assets into cash and depositing the
same in a bank.
Since there is no evidence that the petitioners themselves divulged the information that the
private respondent had an account with the petitioner bank and it is undisputed that the said
account was properly the object of the notice of garnishment and writ of execution carried
out by the deputy sheriff, a duly authorized officer of the court, we can not therefore hold the
petitioners liable under R.A. 1405.
Concealment of illegally acquired property
Banco Filipino vs. Purisima,
G.R. No. L-56429, May 28, 1988
ISSUE: WHETHER OR NOT INQUIRY MAY BE MADE WITH RESPECT TO THE BANK ACCOUNTS OF
PERSONS OTHER THAN THE PERSON UNDER INVESTIGATION UNDER THE ANTI-GRAFT AND
CORRUPT PRACTICES ACT?
HELD: INQUIRY MAY EXTEND TO BANK ACCOUNTS OF PEOPLE OTHER THAN PERSON BEING
INVESTIGATED; ACCOUNTS OF RESPONDENTS SPOUSE, ASCENDANTS, DESCENDANTS, RELATIVES,
OR ANY OTHER PERSONS MAY BE INQUIRED INTO.
The inquiry into illegally acquired property or property NOT "legitimately acquired"
extends to cases where such property is concealed by being held by or recorded in the
name of other persons. This proposition is made clear by R.A. No. 3019 which quite
categorically states that the term, "legitimately acquired property of a public officer or
employee shall not include property unlawfully acquired by the respondent, but its ownership
is concealed by its being recorded in the name of, or held by, respondent's spouse,
ascendants, descendants, relatives or any other persons."
To sustain the petitioner's theory, and restrict the inquiry only to property held by or in the
name of the government official or employee, or his spouse and unmarried children is
66 of 89
unwarranted in the light of the provisions of the statutes in question, and would make
available to persons in government who illegally acquire property an easy and fool-proof
means of evading investigation and prosecution; all they would have to do would be to
simply place the property in the possession or name of persons other than their spouse and
unmarried children. This is an absurdity that we will not ascribe to the lawmakers.
Mellon Bank vs. Magsino, et al.,
G.R. No. 71479, October 18, 1990
FACTS: MELLON bank inadvertently caused the transfer of US$1,000,000.00 [instead of only
US$1,000.00] into Victoria Javiers account. Victoria Javier, transferred the wrongfully
transferred amount into several new accounts. Eventually, the amount was converted into
several cashiers checks, which Javier used to pay several of her obliglations. Mellon Bank
now wants to inquire into the bank accounts of the people who transacted with Javier [and
who deposited the cashiers checks received from her]; it filed Civil Case No. 26899.
ISSUE: WOULD THE INQUIRY INTO THE BANKS ACCOUNTS OF PEOPLE WHO WERE NOT
RESPONSIBLE FOR THE ILLEGAL ACQUISITION VIOLATE THE BANK SECRECY LAW?
HELD: NO.
Section 2 of RA 1405 allows the disclosure of bank deposits in cases where the money
deposited is the subject matter of the litigation. Inasmuch as Civil Case No. 26899 is aimed
at recovering the amount converted by the Javiers for their own benefit, necessarily, an
inquiry into the whereabouts of the illegally acquired amount extends to whatever is
concealed by being held or recorded in the name of persons other than the one responsible
for the illegal acquisition.
Case pending in court required before Ombudsman can examine bank accounts
Marquez vs. Desierto, et al.,
G.R. 135882, June 27, 2001.
The order of the Ombudsman to produce for in camera inspection the subject accounts with
the Union Bank of the Philippines, Julia Vargas Branch, is based on a pending investigation
at the Office of the Ombudsman against Amado Lagdameo, et. al. for violation of R.A. No.
3019, Sec. 3 (e) and (g) relative to the Joint Venture Agreement between the Public Estates
Authority and AMARI.
We rule that before an in camera inspection may be allowed, there must be a pending case
before a court of competent jurisdiction. Further, the account must be clearly identified, the
inspection limited to the subject matter of the pending case before the court of competent
jurisdiction. The bank personnel and the account holder must be notified to be present
during the inspection, and such inspection may cover only the account identified in the
pending case.
In the case at bar, there is yet no pending litigation before any court of competent authority.
What is existing is an investigation by the Office of the Ombudsman. In short, what the office
of the ombudsman would wish to do is to fish for additional evidence to formally charge
67 of 89
Amado Lagdameo, et. al., with the Sandiganbayan. Clearly, there was no pending case in
court which would warrant the opening of the bank account for inspection.
Zone of privacy are recognized and protected in our laws. The Civil Code provides that"
[e]very person shall respect the dignity, personality, privacy and peace of mind of his
neighbors and other persons" and punishes as actionable torts several acts for meddling
and prying into the privacy of another. It also holds public officer or employee or any private
individual liable for damages for any violation of the rights and liberties of another person,
and recognizes the privacy of letters and other private communications. The Revised Penal
Code makes a crime of the violation of secrets by an officer, revelation of trade and
industrial secrets, and trespass to dwelling. Invasion of privacy is an offense in special laws
like the Anti-Wiretapping Law, the Secrecy of Bank Deposits Act, and the Intellectual
Property Code.
68 of 89
4.3
Related statutes
(a) Foreign Currency Deposit Act - RA 6426 (1972), as amended by PD 1035 (1976),
PD 1246 (1977), PD 1453 (1978), and Sec. 11, RA 9160, as amended by Sec. 8
of RA 9194 (2003);
SECTION 8, FCDA. SECRECY OF FOREIGN CURRENCY DEPOSITS. ALL FOREIGN
CURRENCY DEPOSITS AUTHORIZED UNDER THIS ACT, AS AMENDED BY PD NO.
1035, AS WELL AS FOREIGN CURRENCY DEPOSITS AUTHORIZED UNDER PD NO.
1034, ARE HEREBY DECLARED AS AND CONSIDERED OF AN ABSOLUTELY
CONFIDENTIAL NATURE AND, EXCEPT UPON THE WRITTEN PERMISSION OF THE
DEPOSITOR, IN NO INSTANCE SHALL FOREIGN CURRENCY DEPOSITS BE EXAMINED,
INQUIRED OR LOOKED INTO BY ANY PERSON, GOVERNMENT OFFICIAL, BUREAU OR
OFFICE WHETHER JUDICIAL OR ADMINISTRATIVE OR LEGISLATIVE, OR ANY OTHER
ENTITY WHETHER PUBLIC OR PRIVATE; PROVIDED, HOWEVER, THAT SAID FOREIGN
CURRENCY DEPOSITS SHALL BE EXEMPT FROM ATTACHMENT, GARNISHMENT, OR
ANY OTHER ORDER OR PROCESS OF ANY COURT, LEGISLATIVE BODY,
GOVERNMENT AGENCY OR ANY ADMINISTRATIVE BODY WHATSOEVER. (AS
AMENDED BY PD NO. 1035, AND FURTHER AMENDED BY PD NO. 1246, PROM.
NOV. 21, 1977.)
SEC. 11. AUTHORITY TO INQUIRE INTO BANK DEPOSITS. -- NOTWITHSTANDING THE

PROVISIONS OF REPUBLIC ACT NO. 1405, AS AMENDED, REPUBLIC ACT NO. 6426,
AS AMENDED, REPUBLIC ACT NO. 8791, AND OTHER LAWS, THE AMLC MAY
INQUIRE INTO OR EXAMINE ANY PARTICULAR DEPOSIT OR INVESTMENT WITH ANY
BANKING INSTITUTION OR NON-BANK FINANCIAL INSTITUTION UPON ORDER OF ANY
COMPETENT COURT IN CASES OF VIOLATION OF THIS ACT, WHEN IT HAS BEEN
ESTABLISHED THAT THERE IS PROBABLE CAUSE THAT THE DEPOSITS OR
INVESTMENTS ARE RELATED TO AN UNLAWFUL ACTIVITIES AS DEFINED IN SECTION
3(I) HEREOF OR A MONEY LAUNDERING OFFENSE UNDER SECTION 4 HEREOF,
EXCEPT THAT NO COURT ORDER SHALL BE REQUIRED IN CASES INVOLVING
UNLAWFUL ACTIVITIES DEFINED IN SECTIONS 3(I)1, (2) AND (12).

69 of 89
Salvacion, et al. vs. Central Bank, et al.,

G.R. 94723, August 21, 1997.
FACTS: Salvacion is trying to garnish the dollar accounts of Greg Bartelli to satisfy the
judgment for damages rendered by the RTC of Makati against the latter. [Damages were
sought for because Greg Bartelli raped and illegally detained Salvacion]
Issue: China Bank refuses to comply with the writ of execution issued by the RTC of Makati
arguing that Section 11 of Central Bank Circular No. 960 exempts foreign currency deposits
from attachment, garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever.
HELD: China Bank must comply with the writ of execution.
If Karen's sad fate had happened to anybody's own kin, it would be difficult for him to fathom
how the incentive for foreign currency deposit could be more important than his child's rights
to said award of damages; in this case, the victim's claim for damages from this alien who
had the gall to wrong a child of tender years of a country where he is a mere visitor. This
further illustrates the flaw in the questioned provisions.
It is worth mentioning that R.A. No. 6426 was enacted in 1983 or at a time when the
country's economy was in a shambles; when foreign investments were minimal and
presumably, this was the reason why said statute was enacted. But the realities of the
present times show that the country has recovered economically; and even if not, the
questioned law still denies those entitled to due process of law for being unreasonable and
oppressive. The intention of the questioned law may be good when enacted. The law failed
to anticipate the iniquitous effects producing outright injustice and inequality such as
the case before us.
In fine, the application of the law depends on the extent of its justice. Eventually, if we
rule that the questioned Section 113 of Central Bank Circular No. 960 which exempts from
attachment, garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever, is applicable to a foreign
transient, injustice would result especially to a citizen aggrieved by a foreign guest like
accused Greg Bartelli. This would negate Article 10 of the New Civil Code which provides
that "in case of doubt in the interpretation or application of laws, it is presumed that the
lawmaking body intended right and justice to prevail. "Ninguno non deue enriquecerse
tortizeramente con dano de otro." Simply stated, when the statute is silent or ambiguous,
this is one of those fundamental solutions that would respond to the vehement urge of
conscience. (Padilla vs. Padilla, 74 Phil. 377).
It would be unthinkable, that the questioned Section 113 of Central Bank No. 960 would be
used as a device by accused Greg Bartelli for wrongdoing, and in so doing, acquitting the
guilty at the expense of the innocent.
Call it what it may but is there no conflict of legal policy here? Dollar against Peso?
Upholding the final and executory judgment of the lower court against the Central Bank
Circular protecting the foreign depositor? Shielding or protecting the dollar deposit of a
transient alien depositor against injustice to a national and victim of a crime? This situation
calls for fairness against legal tyranny.
We definitely cannot have both ways and rest in the belief that we have served the ends of
justice
70 of 89
(b) Human Security Act RA 9372 (2007)

(i)
Judicial authorization to examine bank deposits, accounts, and records
(Sec. 27)
SEC. 27. JUDICIAL AUTHORIZATION REQUIRED TO EXAMINE BANK DEPOSITS,
ACCOUNTS, AND RECORDS. - THE PROVISIONS OF REPUBLIC ACT NO. 1405
AS AMENDED, TO THE CONTRARY NOTWITHSTANDING, THE JUSTICES OF THE
COURT OF APPEALS DESIGNATED AS A SPECIAL COURT TO HANDLE ANTITERRORISM CASES AFTER SATISFYING THEMSELVES OF THE EXISTENCE OF
PROBABLE CAUSE IN A HEARING CALLED FOR THAT PURPOSE THAT:
1. A PERSON CHARGED WITH OR SUSPECTED OF THE CRIME OF TERRORISM

OR, CONSPIRACY TO COMMIT TERRORISM,
2. OF A JUDICIALLY DECLARED AND OUTLAWED TERRORIST ORGANIZATION,
ASSOCIATION, OR GROUP OF PERSONS; AND
3. OF A MEMBER OF SUCH JUDICIALLY DECLARED AND OUTLAWED
ORGANIZATION, ASSOCIATION, OR GROUP OF PERSONS, MAY AUTHORIZE IN
WRITING ANY POLICE OR LAW ENFORCEMENT OFFICER AND THE MEMBERS
OF HIS/HER TEAM DULY AUTHORIZED IN WRITING BY THE ANTI-TERRORISM
COUNCIL TO:
A. EXAMINE, OR CAUSE THE EXAMINATION OF, THE DEPOSITS,

PLACEMENTS, TRUST ACCOUNTS, ASSETS AND RECORDS IN A BANK OR
FINANCIAL INSTITUTION; AND
B. GATHER OR CAUSE THE GATHERING OF ANY RELEVANT INFORMATION
ABOUT SUCH DEPOSITS, PLACEMENTS, TRUST ACCOUNTS, ASSETS,
AND RECORDS FROM A BANK OR FINANCIAL INSTITUTION.
THE BANK OR FINANCIAL INSTITUTION CONCERNED, SHALL NOT REFUSE TO
ALLOW SUCH EXAMINATION OR TO PROVIDE THE DESIRED INFORMATION, WHEN
SO, ORDERED BY AND SERVED WITH THE WRITTEN ORDER OF THE COURT OF
APPEALS.
(ii)
Application to examine bank deposits, accounts, and records (Sec. 28)
SEC. 28. APPLICATION TO EXAMINE BANK DEPOSITS, ACCOUNTS,

AND RECORDS. - THE WRITTEN ORDER OF THE COURT OF APPEALS
AUTHORIZING THE EXAMINATION OF BANK DEPOSITS, PLACEMENTS,
TRUST ACCOUNTS, ASSETS, AND RECORDS:
1. OF A PERSON CHARGED WITH OR SUSPECTED OF THE CRIME OF
TERRORISM OR CONSPIRACY TO COMMIT TERRORISM;
2. OF ANY JUDICIALLY DECLARED AND OUTLAWED TERRORIST
ORGANIZATION, ASSOCIATION, OR GROUP OF PERSONS,
3. OF ANY MEMBER OF SUCH ORGANIZATION, ASSOCIATION, OR
GROUP OF PERSONS IN A BANK OR FINANCIAL INSTITUTION,
AND THE GATHERING OF ANY RELEVANT INFORMATION ABOUT THE
SAME FROM SAID BANK OR FINANCIAL INSTITUTION, SHALL ONLY BE
GRANTED BY THE AUTHORIZING DIVISION OF THE COURT OF APPEALS
UPON AN EX PARTE APPLICATION TO THAT EFFECT OF A POLICE OR OF
A LAW ENFORCEMENT OFFICIAL WHO HAS BEEN DULY AUTHORIZED IN
71 of 89
WRITING TO FILE SUCH EX PARTE APPLICATION BY THE ANTITERRORISM COUNCIL CREATED IN SECTION 53 OF THIS ACT TO FILE
SUCH EX PARTE APPLICATION, AND UPON EXAMINATION UNDER OATH
OR AFFIRMATION OF THE APPLICANT AND, THE WITNESSES HE MAY
PRODUCE TO ESTABLISH THE FACTS THAT WILL JUSTIFY THE NEED AND
URGENCY OF EXAMINING AND FREEZING THE BANK DEPOSITS,
PLACEMENTS, TRUST ACCOUNTS, ASSETS, AND RECORDS: (1) OF THE
PERSON CHARGED WITH OR SUSPECTED OF THE CRIME OF TERRORISM
OR CONSPIRACY TO COMMIT TERRORISM; (2) OF A JUDICIALLY
DECLARED AND OUTLAWED TERRORIST ORGANIZATION, ASSOCIATION
OR GROUP OF PERSONS; OR (3) OF ANY MEMBER OF SUCH
ORGANIZATION, ASSOCIATION, OR GROUP OF PERSONS.
(iii)
Effective period of court authorization to examine and obtain information on

bank deposits, accounts, and records (Sec. 30)
SEC. 30. EFFECTIVE PERIOD OF COURT AUTHORIZATION TO

EXAMINE AND OBTAIN INFORMATION ON BANK DEPOSITS,
ACCOUNTS, AND RECORDS. - THE AUTHORIZATION ISSUED OR
GRANTED BY THE AUTHORIZING DIVISION OF THE COURT OF APPEALS
TO EXAMINE OR CAUSE THE EXAMINATION OF AND TO FREEZE BANK
DEPOSITS, PLACEMENTS, TRUST ACCOUNTS, ASSETS, AND RECORDS,
OR TO GATHER INFORMATION ABOUT THE SAME, SHALL BE EFFECTIVE
FOR THE LENGTH OF TIME SPECIFIED IN THE WRITTEN ORDER OF THE
AUTHORIZING DIVISION OF THE COURT OF APPEALS, WHICH SHALL NOT
EXCEED A PERIOD OF THIRTY (30) DAYS FROM THE DATE OF RECEIPT
OF THE WRITTEN ORDER OF THE AUTHORIZING DIVISION OF THE
COURT OF APPEALS BY THE APPLICANT POLICE OR LAW
ENFORCEMENT OFFICIAL.
THE AUTHORIZING DIVISION OF THE COURT
OF APPEALS MAY EXTEND

OR RENEW THE SAID AUTHORIZATION FOR ANOTHER PERIOD, WHICH
SHALL NOT EXCEED THIRTY (30) DAYS RENEWABLE TO ANOTHER
THIRTY (30) DAYS FROM THE EXPIRATION OF THE ORIGINAL PERIOD:
PROVIDED, THAT THE AUTHORIZING DIVISION OF THE COURT OF
APPEALS IS SATISFIED THAT SUCH EXTENSION OR RENEWAL IS IN THE
PUBLIC INTEREST : AND, PROVIDED, FURTHER, THAT THE APPLICATION
FOR EXTENSION OR RENEWAL, WHICH MUST BE FILED BY THE ORIGINAL
APPLICANT , HAS BEEN DULY AUTHORIZED IN WRITING BY THE ANTITERRORISM COUNCIL.
IN
CASE OF DEATH OF THE ORIGINAL APPLICANT OR IN CASE HE IS

PHYSICALLY DISABLED TO FILE THE APPLICATION FOR EXTENSION OR
RENEWAL, THE ONE NEXT IN RANK TO THE ORIGINAL APPLICANT
AMONG THE MEMBERS OF THE REAM NAMED IN THE ORIGINAL WRITTEN
ORDER OF THE AUTHORIZING DIVISION OF THE COURT OF APPEALS
SHALL FILE THE APPLICATION FOR EXTENSION OR RENEWAL:
72 of 89
PROVIDED, THAT,
WITHOUT PREJUDICE TO THE LIABILITY OF THE

POLICE OR LAW ENFORCEMENT PERSONNEL UNDER SECTION 19
HEREOF, THE APPLICANT POLICE OR LAW ENFORCEMENT OFFICIAL
SHALL HAVE THIRTY (30) DAYS AFTER THE TERMINATION OF THE
PERIOD GRANTED BY THE COURT OF APPEALS AS PROVIDED IN THE
PRECEDING PARAGRAPHS WITHIN WHICH TO FILE THE APPROPRIATE
CASE BEFORE THE PUBLIC PROSECUTOR'S OFFICE FOR ANY
VIOLATION OF THIS ACT.
IF
NO CASE IS FILED WITHIN THE THIRTY (30)-DAY PERIOD, THE

APPLICANT POLICE OR LAW ENFORCEMENT OFFICIAL SHALL
IMMEDIATELY NOTIFY IN WRITING THE PERSON SUBJECT OF THE BANK
EXAMINATION AND FREEZING OF BANK DEPOSITS, PLACEMENTS, TRUST
ACCOUNTS, ASSETS AND RECORDS. THE PENALTY OF TEN (10) YEARS
AND ONE DAY TO TWELVE (12) YEARS OF IMPRISONMENT SHALL BE
IMPOSED UPON THE APPLICANT POLICE OR LAW ENFORCEMENT
OFFICIAL WHO FAILS TO NOTIFY IN WRITING THE PERSON SUBJECT OF
THE BANK EXAMINATION AND FREEZING OF BANK DEPOSITS,
PLACEMENTS, TRUST ACCOUNTS, ASSETS AND RECORDS.
ANY
PERSON, LAW ENFORCEMENT OFFICIAL OR JUDICIAL AUTHORITY

WHO VIOLATES HIS DUTY TO NOTIFY IN WRITING AS DEFINED ABOVE
SHALL SUFFER THE PENALTY OF SIX YEARS AND ONE DAY TO EIGHT
YEARS OF IMPRISONMENT.
73 of 89
V
TRUTH IN LENDING ACT
RA 3765 (1963).
5.1
Topics
Purpose
SECTION 2. DECLARATION OF POLICY. IT IS HEREBY DECLARED TO BE THE POLICY
OF THE STATE TO PROTECT ITS CITIZENS FROM A LACK OF AWARENESS OF THE
TRUE COST OF CREDIT TO THE USER BY ASSURING A FULL DISCLOSURE OF SUCH
COST WITH A VIEW OF PREVENTING THE UNINFORMED USE OF CREDIT TO THE
DETRIMENT OF THE NATIONAL ECONOMY.
Obligation of creditors
SEC. 4. ANY CREDITOR SHALL FURNISH TO EACH PERSON TO WHOM CREDIT IS
EXTENDED, PRIOR TO THE CONSUMMATION OF THE TRANSACTION, A CLEAR
STATEMENT IN WRITING SETTING FORTH, TO THE EXTENT APPLICABLE AND IN
ACCORDANCE WITH RULES AND REGULATIONS PRESCRIBED BY THE BOARD, THE
FOLLOWING INFORMATION:
1. THE CASH PRICE OR DELIVERED PRICE OF THE PROPERTY OR SERVICE TO
BE ACQUIRED;
2. THE AMOUNTS, IF ANY, TO BE CREDITED AS DOWN PAYMENT AND/OR

TRADE-IN;
3. THE DIFFERENCE BETWEEN THE AMOUNTS SET FORTH UNDER CLAUSES (1)
AND (2);
4. THE CHARGES, INDIVIDUALLY ITEMIZED, WHICH ARE PAID OR TO BE PAID BY
5.
6.
7.
SUCH PERSON IN CONNECTION WITH THE TRANSACTION BUT WHICH ARE

NOT INCIDENT TO THE EXTENSION OF CREDIT;
THE TOTAL AMOUNT TO BE FINANCED;
THE FINANCE CHARGE EXPRESSED IN TERMS OF PESOS AND CENTAVOS;
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.
Covered and excluded transactions

SECTION 3. AS USED IN THIS ACT, THE TERM: (2) "CREDIT" MEANS ANY LOAN,
MORTGAGE, DEED OF TRUST, ADVANCE, OR DISCOUNT; ANY CONDITIONAL SALES
CONTRACT; ANY CONTRACT TO SELL, OR SALE OR CONTRACT OF SALE OF
PROPERTY OR SERVICES, EITHER FOR PRESENT OR FUTURE DELIVERY, UNDER
WHICH PART OR ALL OF THE PRICE IS PAYABLE SUBSEQUENT TO THE MAKING OF

SUCH SALE OR CONTRACT; ANY RENTAL-PURCHASE CONTRACT; ANY CONTRACT
OR ARRANGEMENT FOR THE HIRE, BAILMENT, OR LEASING OF PROPERTY; ANY
OPTION, DEMAND, LIEN, PLEDGE, OR OTHER CLAIM AGAINST, OR FOR THE
DELIVERY OF, PROPERTY OR MONEY; ANY PURCHASE, OR OTHER ACQUISITION OF,
OR ANY CREDIT UPON THE SECURITY OF, ANY OBLIGATION OF CLAIM ARISING OUT
OF ANY OF THE FOREGOING; AND ANY TRANSACTION OR SERIES OF TRANSACTIONS
HAVING A SIMILAR PURPOSE OR EFFECT .
74 of 89
Comment [WU18]: Penalty charge, which is

liquidated damages resulting from a breach,
falls under item (6) or finance charge. A finance
charge represents the amount to be paid by the
debtor incident to the extension of credit. The
lender may provide for a penalty clause so long
as the amount or rate of the charge and the
conditions under which it is to be paid are
disclosed to the borrower before he enters into
the credit agreement.
Finance and non-finance charges

SECTION 3. AS USED IN THIS ACT, THE TERM: (3) "FINANCE CHARGE" INCLUDES
INTEREST, FEES, SERVICE CHARGES, DISCOUNTS, AND SUCH OTHER CHARGES
INCIDENT TO THE EXTENSION OF CREDIT AS THE BOARD MAY BE REGULATION
PRESCRIBE.
Consequences of non-compliance with obligation
SECTION 6. (A) ANY CREDITOR WHO IN CONNECTION WITH ANY CREDIT
TRANSACTION FAILS TO DISCLOSE TO ANY PERSON ANY INFORMATION IN

VIOLATION OF THIS ACT OR ANY REGULATION ISSUED THEREUNDER SHALL BE
LIABLE TO SUCH PERSON IN THE AMOUNT OF P100 OR IN AN AMOUNT EQUAL TO
TWICE THE FINANCE CHARGED REQUIRED BY SUCH CREDITOR IN CONNECTION
WITH SUCH TRANSACTION, WHICHEVER IS THE GREATER, EXCEPT THAT SUCH
LIABILITY SHALL NOT EXCEED P2,000 ON ANY CREDIT TRANSACTION. ACTION TO
RECOVER SUCH PENALTY MAY BE BROUGHT BY SUCH PERSON WITHIN ONE YEAR
FROM THE DATE OF THE OCCURRENCE OF THE VIOLATION, IN ANY COURT OF
COMPETENT JURISDICTION. IN ANY ACTION UNDER THIS SUBSECTION IN WHICH ANY
PERSON IS ENTITLED TO A RECOVERY, THE CREDITOR SHALL BE LIABLE FOR
REASONABLE ATTORNEY'S FEES AND COURT COSTS AS DETERMINED BY THE
COURT.
(B) EXCEPT AS SPECIFIED IN SUBSECTION (A) OF THIS SECTION, NOTHING

CONTAINED IN THIS ACT OR ANY REGULATION CONTAINED IN THIS ACT OR ANY
REGULATION THEREUNDER SHALL AFFECT THE VALIDITY OR ENFORCEABILITY OF
ANY CONTRACT OR TRANSACTIONS.
(C) ANY PERSON WHO WILLFULLY VIOLATES ANY PROVISION OF THIS ACT OR ANY
REGULATION ISSUED THEREUNDER SHALL BE FINED BY NOT LESS THAN P1,00 OR
MORE THAN P5,000 OR IMPRISONMENT FOR NOT LESS THAN 6 MONTHS, NOR
MORE THAN ONE YEAR OR BOTH.
(D) NO PUNISHMENT OR PENALTY PROVIDED BY THIS ACT SHALL APPLY TO THE
PHILIPPINE GOVERNMENT OR ANY AGENCY OR ANY POLITICAL SUBDIVISION
THEREOF.
(E) A FINAL JUDGMENT HEREAFTER RENDERED IN ANY CRIMINAL PROCEEDING
UNDER THIS ACT TO THE EFFECT THAT A DEFENDANT HAS WILLFULLY VIOLATED
THIS ACT SHALL BE PRIMA FACIE EVIDENCE AGAINST SUCH DEFENDANT IN AN
ACTION OR PROCEEDING BROUGHT BY ANY OTHER PARTY AGAINST SUCH
DEFENDANT UNDER THIS ACT AS TO ALL MATTERS RESPECTING WHICH SAID
JUDGMENT WOULD BE AN ESTOPPEL AS BETWEEN THE PARTIES THERETO.
75 of 89
5.2
Cases
Excessive interests, penalties and other charges not revealed in disclosure
statements issued by banks, even if stipulated in the promissory notes, cannot be
given effect under the Truth in Lending Act
NEW SAMPAGUITA BUILDERS CONSTRUCTION, INC., ET AL.
VS. PNB, G.R. 148753, JULY 30, 2004.
ISSUE: Whether or not PNB may collect penalty charges contained in the Promissory Notes,
but not in the Disclosure Statements issued prior to the execution of the notes.
HELD: No penalty charges or increases thereof appear either in the Disclosure Statements or
in any of the clauses in the second and the third Credit Agreements earlier discussed. While
a standard penalty charge of 6 percent per annum has been imposed on the amounts stated
in all three Promissory Notes still remaining unpaid or unrenewed when they fell due, there
is no stipulation therein that would justify any increase in that charges. The effect, therefore,
when the borrower is not clearly informed of the Disclosure Statements -- prior to the
consummation of the availment or drawdown -- is that the lender will have no right to
collect upon such charge or increases thereof, even if stipulated in the Notes.
Although the first Disclosure Statement was furnished Petitioner NSBCI prior to the
execution of the transaction, it is not a contract that can be modified by the related
Promissory Note, but a mere statement in writing that reflects the true and effective cost of
loans from respondent. Novation can never be presumed, and the animus novandi must
appear by express agreement of the parties, or by their acts that are too clear and
unequivocal to be mistaken. To allow novation will surely flout the policy of the State
to protect its citizens from a lack of awareness of the true cost of credit.
76 of 89
Failure to disclose required information in disclosure statement cured by disclosure

thereof in loan transaction documents
DBP vs. Arcilla,
G.R. 161397 and G.R. 161426, June 30, 2005.
FACTS: Arcilla availed of of a loan under the Individual Housing Project of DBP. The
Disclosure Statement made by DBP did not include some of the required items under R.A.
No. 3765 and CB Circular No. 158. These infromation were, however, indicated in the other
documents that were executed pursuant to the Individual Housing Project [Deed of
Conditional Sale, Promissory Notes, etc.]
ISSUE: Arcilla avers that the disclosure of the details of the loan contained in the deed of
conditional sale and the supplement thereto, the promissory notes and release sheet, do not
constitute substantial compliance with the law and the CB Circular.
HELD: Under Circular 158 of the Central Bank, the lender is required to include the
information required by R.A. 3765 in the contract covering the credit transaction or any
other document to be acknowledged and signed by the borrower. In the present case,
DBP failed to disclose the requisite information in the disclosure statement form authorized
by the Central Bank, but did so in the loan transaction documents between it and Arcilla.
Furthermore, the Court is convinced that Arcillas claim of not having been furnished the
data/information required by R.A. No. 3765 and CB Circular No. 158 was but an
afterthought.
The appellee had been sufficiently informed of the terms and the requisite charges
necessarily included in the subject loan. It must be stressed that the Truth in Lending Act
(R.A. No. 3765), was enacted primarily to protect its citizens from a lack of awareness of
the true cost of credit to the user by using a full disclosure of such cost with a view of
preventing the uninformed use of credit to the detriment of the national economy
Contrary to appellees claim that he was not sufficiently informed of the details of the loan,
the records disclose that the required information were readily available in the 3 promissory
notes he executed. Precisely, the said promissory notes were executed to apprise appellee
of the remaining balance on his loan when the same was converted into a regular housing
loan. And on its face, the promissory notes signed by no less than the appellee readily
shows all the data required by the Truth in Lending Act (R.A. No. 3765).
Appellee, a lawyer, would not be so gullible or negligent as to sign documents without
knowing fully well the legal implications and consequences of his actions, and that appellee
was a former employee of appellant. As such employee, he is as well presumed
knowledgeable with matters relating to appellants business and fully cognizant of the terms
of the loan he applied for, including the charges that had to be paid.
It might have been different if the borrower was, say, an ordinary employee eager to buy his
first house and is easily lured into accepting onerous terms so long as the same is payable
on installments. In such cases, the Court would be disposed to be stricter in the application
of the Truth in Lending Act, insisting that the borrower be fully informed of what he is
entering into. But in the case at bar, considering appellees education and training, We must
hold, in the light of the evidence at hand, that he was duly informed of the necessary
charges and fully understood their implications and effects. Consequently, the trial courts
annulment of the rescission anchored on this ground was unjustified.
77 of 89
Arcilla decision followed

BPI v. Spouses Yu,
G.R. No. 184122, January 20, 2010
FACTS: BPI failed to state the penalty charges in the disclosure statement, the promissory
note that the Yus signed, on the same date as the disclosure statement, however, contained
a penalty clause that said: I/We jointly and severally, promise to further pay a late payment
charge on any overdue amount herein at the rate of 3% per month.
ISSUE: Whether or not the reference to the penalty charges in the promissory note
constitutes substantial compliance with the disclosure requirement of the Truth in Lending
Act.
HELD: The Court has affirmed that financial charges are amply disclosed if stated in the
promissory note in the case of Development Bank of the Philippines v. Arcilla, Jr. The Court
there said, Under Circular 158 of the Central Bank, the lender is required to include the
information required by R.A. 3765 in the contract covering the credit transaction or any other
document to be acknowledged and signed by the borrower. In addition, the contract or
document shall specify additional charges, if any, which will be collected in case certain
stipulations in the contract are not met by the debtor. In this case, the promissory notes
signed by the Yus contained data, including penalty charges, required by the Truth in
Lending Act. They cannot avoid liability based on a rigid interpretation of the Truth in
Lending Act that contravenes its goal.
NOTE: The court said that the New Samaguita case [first TILA case in the outline] is not
applicable to the facts of the case: What New Sampaguita disallowed, because it was not
mentioned either in the disclosure statement or in the promissory note, was the unilateral
increase in the rates of penalty charges that the creditor imposed on the borrower. But if I
read the case correctly, the penalty charges being contested in that case were contained in
the Promissory Notes, though not in the Disclosure Statements issued prior to the
execution of the notes.
78 of 89
5.3
Additional materials
(a) Implementing Rules: CB Circular No. 158-63, dated October 29, 1963;
(b) Additional Implementing Rules: CB Circular No. 431-74, dated September 2,
1974.
5.4
Related statute
Access Devices Regulation Act of 1998 (RA 8484)
(a) Disclosure required upon application or solicitation (Sec. 4);
SECTION 4. CREDIT CARD APPLICATION AND SOLICITATION. ANY APPLICATION
TO OPEN A CREDIT CARD ACCOUNT FOR ANY PERSON UNDER AN OPEN-END
CREDIT PLAN OR A SOLICITATION TO OPEN SUCH AN ACCOUNT, EITHER BY MAIL,
TELEPHONE OR OTHER MEANS, SHALL DISCLOSE IN WRITING OR ORALLY, AS THE
CASE MAY BE, THE FOLLOWING INFORMATION:
(A) ANNUAL PERCENTAGE RATE
1) EACH ANNUAL PERCENTAGE RATE OF INTEREST ON THE AMOUNT
2)
OF CREDIT OBTAINED BY THE CREDIT CARD HOLDER UNDER SUCH

CREDIT PLAN. WHERE AN EXTENSION OF CREDIT IS SUBJECT TO A
VARIABLE RATE, THE FACT THAT THE RATE IS VARIABLE, AND THE
ANNUAL PERCENTAGE RATE IN EFFECT AT THE TIME OF THE
MAILING.
WHERE MORE THAN ONE RATE APPLIES, THE RANGE OF BALANCES
TO WHICH EACH RATE APPLIES.
(B) ANNUAL AND OTHER FEES

1) ANY ANNUAL FEE, OTHER PERIODIC FEE, OR MEMBERSHIP FEE
IMPOSED FOR THE ISSUANCE OR AVAILABILITY OF A CREDIT CARD,
2)
3)
4)
INCLUDING ANY ACCOUNT MAINTENANCE FEE OR ANY OTHER

CHARGE IMPOSED BASED ON ACTIVITY OR INACTIVITY FOR THE
ACCOUNT DURING THE BILLING CYCLE.
ANY MINIMUM FINANCE CHARGE IMPOSED FOR EACH PERIOD
DURING WHICH ANY EXTENSION OF CREDIT WHICH IS SUBJECT TO A
FINANCE CHARGE IS OUTSTANDING.
ANY TRANSACTION CHARGE IMPOSED IN CONNECTION WITH USE
OF THE CARD TO PURCHASE GOODS OR SERVICES.
ANY FEE, PENALTY OR SURCHARGE IMPOSED FOR THE DELAY IN
PAYMENT OF AN ACCOUNT.
(C) BALANCE CALCULATION METHOD THE NAME OR A DETAILED

EXPLANATION OF THE BALANCE CALCULATION METHOD USED IN
DETERMINING THE BALANCE UPON WHICH THE FINANCE CHARGE IS
COMPUTED.
(D) CASH ADVANCE FEE ANY FEE IMPOSED FOR AN EXTENSION OF

CREDIT IN THE FORM OF CASH.
79 of 89
(E) OVER-THE-LIMIT-FEE ANY FEE IMPOSED IN CONNECTION WITH AN

EXTENSION OF CREDIT IN EXCESS OF THE AMOUNT OF CREDIT AUTHORIZED
TO BE EXTENDED WITH RESPECT TO SUCH AMOUNT: PROVIDED, HOWEVER,
THAT IN CASE THE APPLICATION OR SOLICITATION TO OPEN A CREDIT CARD
ACCOUNT FOR ANY PERSON UNDER AN OPEN-END CONSUMER CREDIT
PLAN BE MADE THROUGH CATALOGS, MAGAZINES, OR OTHER
PUBLICATIONS, THE FOLLOWING ADDITIONAL INFORMATION SHALL BE
DISCLOSED:
1) A STATEMENT, IN A CONSPICUOUS AND PROMINENT LOCATION ON

THE APPLICATION OR SOLICITATION, THAT:
I) THE INFORMATION IS ACCURATE AS OF THE DATE THE
APPLICATION OR SOLICITATION WAS PRINTED;
II) THE INFORMATION CONTAINED IN THE APPLICATION OR
SOLICITATION IS SUBJECT TO CHANGE AFTER SUCH DATE;
III) THE APPLICANT SHOULD CONTACT THE CREDITOR FOR
INFORMATION ON ANY CHANGE IN THE INFORMATION
CONTAINED IN THE APPLICATION OR SOLICITATION SINCE IT
WAS PRINTED;
2) THE DATE THE APPLICATION OR SOLICITATION WAS PRINTED; AND

3) IN A CONSPICUOUS AND PROMINENT LOCATION ON THE
APPLICATION OR SOLICITATION, A TOLL FREE TELEPHONE NUMBER
OR MAILING ADDRESS WHICH THE APPLICANT MAY CONTACT TO
OBTAIN ANY CHANGE IN THE INFORMATION PROVIDED IN THE
APPLICATION OR SOLICITATION SINCE IT WAS PRINTED.
(b) Detailed explanation and clear illustration of computation of charges and fees
(Sec. 5);
SECTION 5. COMPUTATIONS. IN ADDITION TO THE FOREGOING, A CREDIT CARD
ISSUER MUST, TO THE EXTENT PRACTICABLE, PROVIDE A DETAILED EXPLANATION
AND A CLEAR ILLUSTRATION OF THE MANNER BY WHICH ALL CHARGES AND FEES
ARE COMPUTED.
(c) Exceptions to the disclosure requirement (Sec. 6);
SECTION 6. EXCEPTIONS. THE DISCLOSURES REQUIRED UNDER SECTION 4 OF

THIS ACT MAY BE OMITTED IN ANY TELEPHONE SOLICITATION OR APPLICATION IF
THE CREDIT CARD ISSUER:
(A) DOES NOT IMPOSE ANY FEE IN CONNECTION WITH PARAGRAPH (B)(1),
SECTION 4 OF THIS ACT;
(B) DOES NOT IMPOSE ANY FEE IN CONNECTION WITH TELEPHONE
SOLICITATION UNLESS THE CONSUMER SIGNIFIES ACCEPTANCE BY USING
THE CARD;
80 of 89
(C) DISCLOSES CLEARLY THE INFORMATION DESCRIBED IN SECTION 4 OF

THIS ACT IN WRITING WITHIN THIRTY (30) DAYS AFTER THE CONSUMER
REQUESTS THE CARD, BUT IN NO EVENT LATER THAN THE DATE OF
DELIVERY OF THE CARD; AND
(D) DISCLOSES CLEARLY THAT THE CONSUMER IS NOT OBLIGATED TO
ACCEPT THE CARD OR ACCOUNT AND THE CONSUMER WILL NOT BE
OBLIGATED TO PAY ANY FEES OR CHARGES DISCLOSED UNLESS THE
CONSUMER ELECTS TO ACCEPT THE CARD OR ACCOUNT BY USING THE
CARD.
(d) Disclosure required prior to renewal (Sec. 7);

SECTION 7. DISCLOSURE PRIOR TO RENEWAL. EXCEPT IN TELEPHONE
SOLICITATIONS A CARD ISSUER THAT IMPOSES ANY FEE DESCRIBED IN SECTION 4
SHALL TRANSMIT TO A CONSUMER'S CREDIT CARD ACCOUNT A CLEAR AND
CONSPICUOUS DISCLOSURE OF:
(A) THE DATE BY WHICH, THE MONTH BY WHICH, OR THE BILLING PERIOD AT
THE CLOSE OF WHICH, THE ACCOUNT WILL EXPIRE IF NOT RENEWED;
(B) THE INFORMATION DESCRIBED IN SECTION 4 WHICH SHALL BE
TRANSMITTED TO A CONSUMER AT LEAST THIRTY (30) DAYS PRIOR TO THE
SCHEDULED RENEWAL DATE OF THE CONSUMER'S CREDIT CARD ACCOUNT;
(C) THE INFORMATION DESCRIBED IN SECTION 4 (A) (1) WHICH SHALL BE
TRANSMITTED TO A CONSUMER'S CREDIT CARD ACCOUNT; AND
(D) THE METHOD BY WHICH THE CONSUMER MAY TERMINATE CONTINUED
CREDIT AVAILABILITY UNDER THE ACCOUNT: PROVIDED, THAT THE
DISCLOSURES REQUIRED BY THIS SECTION MUST BE MADE PRIOR TO
POSTING A FEE DESCRIBED IN SECTION 4 (B) (1) TO THE ACCOUNT, OR
WITH THE PERIODIC BILLING STATEMENT FIRST DISCLOSING THAT THE FEE
HAS BEEN POSTED TO THE ACCOUNT SUBJECT TO THE CONDITION THAT
THE CONSUMER IS GIVEN THIRTY (30) DAY PERIOD TO AVOID PAYMENT OF
THE FEE OR TO HAVE THE FEE RECREDITED TO THE ACCOUNT IN ANY CASE
WHERE THE CONSUMER DOES NOT WISH TO CONTINUE THE AVAILABILITY
OF THE CREDIT.
(e) Penalty for failure to disclose (Sec. 8).

SECTION 8. FAILURE TO DISCLOSE. CREDIT CARD COMPANIES WHICH
SHALL FAIL TO DISCLOSE THE INFORMATION REQUIRED UNDER SECTIONS
4, 5 AND 7 OF THIS ACT, AFTER DUE NOTICE AND HEARING, SHALL BE
SUBJECT TO SUSPENSION OR CANCELLATION OF THEIR AUTHORITY TO
ISSUE CREDIT CARDS BY THE BANGKO SENTRAL NG PILIPINAS,
SECURITIES AND EXCHANGE COMMISSION AND SUCH OTHER
GOVERNMENT AGENCIES.
81 of 89
VI
ANTI-MONEY LAUNDERING ACT
RA 9160 (2001), as amended by RA 9194 (2003).
6.1
Topics
Background on money laundering and RAs 9160 and 9194;
Common stages of money laundering (i.e., placement, layering, and integration);
Covered institutions (Sec. 3[a]);
SECTION 3. DEFINITIONS. FOR PURPOSES OF THIS ACT, THE FOLLOWING TERMS
ARE HEREBY DEFINED AS FOLLOWS: (A) "COVERED INSTITUTION" REFERS TO:
1. BANKS, NON-BANKS, QUASI-BANKS, TRUST ENTITIES, AND ALL OTHER
INSTITUTIONS AND THEIR SUBSIDIARIES AND AFFILIATES SUPERVISED OR
REGULATED BY THE BANGKO SENTRAL NG PILIPINAS (BSP);
2. INSURANCE COMPANIES AND ALL OTHER INSTITUTIONS SUPERVISED OR

REGULATED BY THE INSURANCE COMMISSION; AND
3. (I) SECURITIES DEALERS, BROKERS, SALESMEN, INVESTMENT HOUSES AND
OTHER SIMILAR ENTITIES MANAGING SECURITIES OR RENDERING SERVICES
AS INVESTMENT AGENT , ADVISOR, OR CONSULTANT, (II) MUTUAL FUNDS,
CLOSE AND INVESTMENT COMPANIES, COMMON TRUST FUNDS, PRE-NEED
COMPANIES AND OTHER SIMILAR ENTITIES, (III) FOREIGN EXCHANGE
CORPORATIONS, MONEY CHANGERS, MONEY PAYMENT, REMITTANCE, AND
TRANSFER COMPANIES AND OTHER SIMILAR ENTITIES, AND (IV) OTHER
ENTITIES ADMINISTERING OR OTHERWISE DEALING IN CURRENCY,
COMMODITIES OR FINANCIAL DERIVATIVES BASED THEREON, VALUABLE
OBJECTS, CASH SUBSTITUTES AND OTHER SIMILAR MONETARY
INSTRUMENTS OR PROPERTY SUPERVISED OR REGULATED BY SECURITIES
AND EXCHANGE COMMISSION.
Covered transactions (Sec. 3[b]);

SECTION 3. DEFINITIONS. (B) 'COVERED TRANSACTION' IS A TRANSACTION IN
CASH OR OTHER EQUIVALENT MONETARY INSTRUMENT INVOLVING A TOTAL

AMOUNT IN EXCESS OF FIVE HUNDRED THOUSAND PESOS (PHP 500,000.00)
WITHIN ONE (1) BANKING DAY.
82 of 89
Suspicious transactions (Sec. 3[b-1]);

SECTION
3. DEFINITIONS. (B) "(B-1) 'SUSPICIOUS TRANSACTION' ARE

TRANSACTIONS WITH COVERED INSTITUTIONS, REGARDLESS OF THE AMOUNTS
INVOLVED, WHERE ANY OF THE FOLLOWING CIRCUMSTANCES EXIST:
1. THERE IS NO UNDERLYING LEGAL OR TRADE OBLIGATION, PURPOSE OR
ECONOMIC JUSTIFICATION;
2. THE CLIENT IS NOT PROPERLY IDENTIFIED;
3. THE AMOUNT INVOLVED IS NOT COMMENSURATE WITH THE BUSINESS OR
FINANCIAL CAPACITY OF THE CLIENT;
4. TAKING INTO ACCOUNT ALL KNOWN CIRCUMSTANCES, IT MAY BE
PERCEIVED THAT THE CLIENT'S TRANSACTION IS STRUCTURED IN ORDER
5.
6.
7.
TO AVOID BEING THE SUBJECT OF REPORTING REQUIREMENTS UNDER THE

ACT;
ANY CIRCUMSTANCES RELATING TO THE TRANSACTION WHICH IS
OBSERVED TO DEVIATE FROM THE PROFILE OF THE CLIENT AND/OR THE
CLIENT'S PAST TRANSACTIONS WITH THE COVERED INSTITUTION;
THE TRANSACTIONS IS IN A WAY RELATED TO AN UNLAWFUL ACTIVITY OR
OFFENSE UNDER THIS ACT THAT IS ABOUT TO BE, IS BEING OR HAS BEEN
COMMITTED; OR
ANY TRANSACTIONS THAT IS SIMILAR OR ANALOGOUS TO ANY OF THE
FOREGOING."
Unlawful activities or predicate crimes (Sec. 3[i]);
SECTION 3. DEFINITIONS. "(I) 'UNLAWFUL ACTIVITY' REFERS TO ANY ACT OR

OMISSION OR SERIES OR COMBINATION THEREOF INVOLVING OR HAVING DIRECT
RELATION TO FOLLOWING:
1. KIDNAPPING FOR RANSOM UNDER ARTICLE 267 OF ACT NO. 3815,

OTHERWISE KNOWN AS THE REVISED PENAL CODE, AS AMENDED;
2. SECTIONS 4, 5, 6, 8, 9, 10, 12, 13, 14, 15, AND 16 OF REPUBLIC ACT NO.
9165, OTHERWISE KNOWN AS THE COMPREHENSIVE DANGEROUS ACT OF
2002;
3. SECTION 3 PARAGRAPHS B, C, E, G, H AND I OF REPUBLIC ACT NO. 3019,
AS AMENDED, OTHERWISE KNOWN AS THE ANTI-GRAFT AND CORRUPT
PRACTICES ACT;
4. PLUNDER UNDER REPUBLIC ACT NO. 7080, AS AMENDED;
5. ROBBERY AND EXTORTION UNDER ARTICLES 294, 295, 296, 299, 300,
301 AND 302 OF THE REVISED PENAL CODE, AS AMENDED;
6. JUETENG AND MASIAO PUNISHED AS ILLEGAL GAMBLING UNDER
PRESIDENTIAL DECREE NO. 1602;
7. PIRACY ON THE HIGH SEAS UNDER THE REVISED PENAL CODE, AS
AMENDED AND PRESIDENTIAL UNDER THE REVISED PENAL CODE, AS
AMENDED AND PRESIDENTIAL DECREE NO. 532;
8. QUALIFIED THEFT UNDER ARTICLE 310 OF THE REVISED PENAL CODE, AS
AMENDED;
9. SWINDLING UNDER ARTICLE 315 OF THE REVISED PENAL CODE, AS
AMENDED;
10. SMUGGLING UNDER REPUBLIC ACT NOS. 455 AND 1937;
83 of 89
11. VIOLATIONS UNDER REPUBLIC ACT NO. 8792, OTHERWISE KNOWN AS THE
ELECTRINIC COMMERCE ACT OF 2000;
12. HIJACKING AND OTHER VIOLATIONS UNDER REPUBLIC ACT NO. 6235;
DESTRUCTIVE ARSON AND MURDER, AS DEFINED UNDER THE REVISED
PENAL CODE, AS AMENDED, INCLUDING THOSE PERPETRATED BY
TERRORISTS AGAINST NON-COMBATANT PERSONS AND SIMILAR TARGETS;
13. FRAUDULENT PRACTICES AND OTHER VIOLATIONS UNDER REPUBLIC ACT
NO. 8799, OTHERWISE KNOWN AS THE SECURITIES REGULATION CODE OF
2000;
14. FELONIES OR OFFENSES OF A SIMILAR NATURE THAT ARE PUNISHABLE
UNDER THE PENAL LAWS OF OTHER COUNTRIES."
Money laundering offenses (Sec. 4);
SEC. 4. MONEY LAUNDERING OFFENSE. -- MONEY LAUNDERING IS A CRIME

WHEREBY THE PROCEEDS OF AN UNLAWFUL ACTIVITY AS HEREIN DEFINED ARE
TRANSACTED, THEEBY MAKING THEM APPEAR TO HAVE ORIGINATED FROM
LEGITIMATE SOURCES. IT IS COMMITTED BY THE FOLLOWING:
a. ANY PERSON KNOWING THAT ANY MONETARY INSTRUMENT OR PROPERTY

REPRESENTS, INVOLVES, OR RELATES TO, THE PROCEEDS OF ANY
UNLAWFUL ACTIVITY, TRANSACTS OR ATTEMPTS TO TRANSACTS SAID
MONETARY INSTRUMENT OR PROPERTY.
b. ANY PERSON KNOWING THAT ANY MONETARY INSTRUMENT OR PROPERTY
INVOLVES THE PROCEEDS OF ANY UNLAWFUL ACTIVITY, PERFORMS OR
c.
FAILS TO PERFORM ANY ACT AS A RESULT OF WHICH HE FALICITATES THE

OFFENSE OF MONEY LAUNDERING REFERRED TO IN PARAGRAPH (A)
ABOVE.
ANY PERSON KNOWING THAT ANY MONETARY INSTRUMENT OR PROPERTY
IS REQUIRED UNDER THIS ACT TO BE DISCLOSED AND FILED WITH THE
ANTI-MONEY LAUNDERING COUNCIL (AMLC), FAILS TO DO SO.
Anti-Money Laundering Council (Sec. 7);

SEC.7. CREATION OF ANTI-MONEY LAUNDERING COUNCIL (AMLC). -- THE ANTIMONEY LAUNDERING COUNCIL IS HEREBY CREATED AND SHALL BE COMPOSED OF
THE GOVERNOR OF THE BANGKO SENTRAL NG PILIPINAS AS CHAIRMAN, THE
COMMISSIONER OF THE INSURANCE COMMISSION AND THE CHAIRMAN OF THE
SECURITIES AND EXCHANGE COMMISSION AS MEMBER. THE AMLC SHALL SHALL
ACT UNANIMOUSLY
HEREUNDER:
IN
THE
DISCHARGE
OF
ITS
FUNCTIONS
AS
DEFINED
"(1) TO REQUIRE AND RECEIVE COVERED OR SUSPICIOUS TRANSACTION

REPORTS FROM COVERED INSTITUTIONS;
"(2) TO ISSUE ORDERS ADDRESSED TO THE APPROPRIATE SUPERVISING
AUTHORITY OR THE COVERED INSTITUTIONS TO DETERMINE THE TRUE
IDENTITY OF THE OWNER OF ANY MONETARY INSTRUMENT OR PREPERTY
SUBJECT OF A COVERED TRANSACTION OR SUSPICIOUS TRANSACTION
REPORT OR REQUEST FOR ASSISTANCE FROM A FOREIGN STATE, OR
84 of 89
BELIEVED BY THE COUNCIL, ON THE BASIS FO SUBSTANTIAL EVIDENCE, TO

BE, IN WHOLE OR IN PART, WHEREVER LOCATED, REPRESENTING,
INVOLVING, OR RELATED TO DIRECTLY OR INDIRECTLY, IN ANY MANNER OR
BY ANY MEANS, THE PROCEEDS OF AN UNLAWFUL ACTIVITITY.
"(3) TO INSTITUTE CIVIL FORFEITURE PROCEEDINGS AND ALL OTHER

REMEDIAL PROCEEDINGS THROUGH THE OFFICE OF TH SOLICITOR
GENERAL;
"(4) TO CAUSE THE FILING OF COMPLAINTS WITH THE DEPARTMENT OF
JUSTICE OR THE OMBUDSMAN FOR THE PROSECUTION OF MONEY
LAUNDERING OFFENSES;
"(5) TO INVESTIGATE SUSPICIOUS TRANSACTIONS AND COVERED
TRANSACTIONS DEEMED SUSPICIOUS AFTER AN INVESTIGATION BY AMLC,
MONEY LAUNDERING ACTIVITIES AND OTHER VIOLATIONS OF THIS ACT;
"(6) TO APPLY BEFORE THE COURT OF APPEALS, EX PARTE, FOR THE
FREEZING OF ANY MONETARY INSTRUMENT OR PROPERTY ALLEGED TO BE
THE PROCEEDS OF ANY UNLAWFUL ACTIVITY AS DEFINED IN SECTION 3(I)
HEREOF;
"(7) TO IMPLEMENT SUCH MEASURES AS MAY BE NECESSARY AND

JUSTIFIED UNDER THIS ACT TO COUNTERACT MONEY LAUNDERING;
"(8) TO RECEIVE AND TAKE ACTION IN RESPECT OF, ANY REQUEST FROM
FOREIGN STATES FOR ASSISTANCE IN THEIR OWN ANTI-MONEY
LAUNDERING OPERATIONS PROVIDED IN THIS ACT;
"(9) TO DEVELOP EDUCATIONAL PROGRAMS ON THE PERNICIOUS EFFECTS
OF MONEY LAUNDERING, THE METHODS AND TECHNIQUES USED IN THE
MONEY LAUNDERING, THE VIABLE MEANS OF PREVENTING MONEY
LAUNDERING AND THE EFFECTIVE WAYS OF PROSECUTING AND PUNISHING
OFFENDERS;
"(10) TO ENLIST THE ASSISTANCE OF ANY BRANCH, DEPARTMENT, BUREAU,

OFFICE, AGENCY, OR INSTRUMENTALITY OF THE GOVERNMENT, INCLUDING
GOVERNMENT-OWNED
AND
-CONTROLLED
CORPORATIONS,
IN
UNDERTAKING ANY AND ALL ANTI-MONEY LAUNDERING OPERATIONS,
WHICH MAY INCLUDE THE USE OF ITS PERSONNEL, FACILITIES AND
RESOURCES FOR THE MORE RESOLUTE PREVENTION, DETECTION, AND
INVESTIGATION OF MONEY LAUNDERING OFFENSES AND PROSECUTION OF
OFFENDERS; AND
"(11) TO IMPOSE ADMINISTRATIVE SANCTIONS FOR THE VIOLATION OF

LAWS, RULES, REGULATIONS, AND ORDERS AND RESOLUTIONS ISSUED
PURSUANT THERETO."
85 of 89
Basic activities required of covered institutions to prevent money laundering (Sec. 9);
SECTION 9. PREVENTION OF MONEY LAUNDERING; CUSTOMER IDENTIFICATION

REQUIREMENTS AND RECORD KEEPING.
a. CUSTOMER IDENTIFICATION, - COVERED INSTITUTIONS SHALL ESTABLISH
AND RECORD THE TRUE IDENTITY OF ITS CLIENTS BASED ON OFFICIAL
DOCUMENTS. THEY SHALL MAINTAIN A SYSTEM OF VERIFYING THE TRUE
IDENTITY OF THEIR CLIENTS AND, IN CASE OF CORPORATE CLIENTS,
REQUIRE A SYSTEM OF VERIFYING THEIR LEGAL EXISTENCE AND
ORGANIZATIONAL STRUCTURE, AS WELL AS THE AUTHORITY AND
IDENTIFICATION OF ALL PERSONS PURPORTING TO ACT ON THEIR BEHALF.
THE
PROVISIONS
OF
EXISTING
LAWS
TO
THE
CONTRARY
NOTWITHSTANDING,
ANONYMOUS
ACCOUNTS,
ACCOUNTS
UNDER
FICTITIOUS NAMES, AND ALL OTHER SIMILAR ACCOUNTS SHALL BE
ABSOLUTELY PROHIBITED. PESO AND FOREIGN CURRENCY NON-CHECKING
NUMBERED ACCOUNTS SHALL BE ALLOWED. THE BSP MAY CONDUCT
ANNUAL TESTING SOLELY LIMITED TO THE DETERMINATION OF THE
EXISTENCE AND TRUE IDENTITY OF THE OWNERS OF SUCH ACCOUNTS.
b. RECORD KEEPING ALL RECORDS OF ALL TRANSACTIONS OF COVERED

INSTITUTIONS SHALL BE MAINTAINED AND SAFELY STORED FOR FIVE (5)
YEARS FROM THE DATE OF TRANSACTIONS. WITH RESPECT TO CLOSED
ACCOUNTS, THE RECORDS ON CUSTOMER IDENTIFICATION, ACCOUNT
FILES AND BUSINESS CORRESPONDENCE, SHALL BE PRESERVED AND
SAFETY STORED FOR AT LEAST FIVE (5) YEARS FROM THE DATES WHEN
THEY WERE CLOSED.
c. REPORTING OF COVERED AND SUSPICIOUS TRANSACTIONS. -- COVERED
INSTITUTIONS SHALL REPORT TO THE AMLC ALL COVERED TRANSACTIONS
AND SUSPICIOUS TRANSACTIONS WITHIN FIVE(5) WORKING DAYS FROM
OCCURRENCES THEREOF, UNLESS THE SUPERVISING AUTHORITY
PRESCRIBES A LONGER PERIOD NOT EXCEEDING TEN (10) WORKING DAYS.
SHOULD A TRANSACTION BE DETERMINED TO BE BOTH A COVERED
TRANSACTION AND A SUSPICIOUS TRANSACTION, THE COVERED
INSTITUTION SHALL BE REQUIRED TO REPORT THE SAME AS A SUSPICIOUS
TRANSACTION.
WHEN REPORTING COVERED OR SUSPICIOUS TRANSACTIONS TO THE

AMLC, COVERED INSTITUTIONS AND THEIR OFFICERS AND EMPLOYEES
SHALL NOT BE DEEMED TO HAVE VIOLATED REPUBLIC ACT NO. 1405, AS
AMENDED, REPUBLIC ACT NO. 6426, AS AMENDED, REPUBLIC ACT NO.
8791 AND OTHER SIMILAR LAWS, BUT ARE PROHIBITED FROM
COMMUNICATING, DIRECTLY OR INDIRECTLY, IN ANY MANNER OR BY AN
MEANS, TO ANY PERSON, THE FACT THAT A COVERED OR SUSPICIOUS
TRANSACTION REPORT WAS MADE, THE CONTENTS THEREOF, OR ANY
OTHER INFORMATION IN RELATION THERETO. IN CASE OF VIOLATION
THEREOF, THE CONCERNED OFFICER AND EMPLOYEE OF THE COVERED
INSTITUTION
SHALL
BE
CRIMINALLY
LIABLE.
HOWEVER, NO
ADMINISTRATIVE, CRIMINAL OR CIVIL PROCEEDINGS, SHALL LIE AGAINST
ANY PERSON FOR HAVING MADE A COVERED OR SUSPICIOUS TRANSACTION
86 of 89
REPORT IN THE REGULAR PERFORMANCE OF HIS DUTIES IN GOOD FAITH,

WHETHER OR NOT SUCH REPORTING RESULTS IN ANY CRIMINAL
PROSECUTION UNDER THIS ACT OF ANY OTHER LAW.
WHEN REPORTING COVERED OR SUSPICIOUS TRANSACTIONS TO THE

AMLC, COVERED INSTITUTING AND THEIR OFFICERS AND EMPLOYEES ARE
PROHIBITED FROM COMMUNICATING DIRECTLY OR INDIRECTLY, IN ANY
MANNER OR BY ANY MEANS, TO ANY PERSON OR ENTITY, THE MEDIA, THE
FACT THAT A COVERED OR SUSPICIOUS TRANSACTION REPORT WAS MADE,
THE CONTENTS THEREOF, OR ANY OTHER INFORMATION IN RELATION
THERETO. NEITHER MAY SUCH REPORTING BE PUBLISHED OR AIRED IN ANY
MANNER OR FORM BY THE MASS MEDIA, ELECTRONIC MAIL, OR OTHER
SIMILAR DEVICES. IN CASE OF VIOLATION THEREOF, THE CONCERNED
OFFICER AND EMPLOYEE OF THE COVERED INSTITUTION AND MEDIA SHALL
BE HELD CRIMINALLY LIABLE.
Freezing of monetary instrument or property (Sec. 10);
SEC 10. FREEZING OF MONETARY INSTRUMENT OR PROPERTY. -- THE COURT

OF APPEALS, UPON APPLICATION EX PARTE BY THE AMLC AND AFTER
DETERMINATION THAT PROBABLE CAUSE EXISTS THAT ANY MONETARY
INSTRUMENT OR PROPERTY IS IN ANY WAY RELATED TO AN UNLAWFUL ACTIVITY AS
DEFINED IN SECTION 3(I) HEREOF, MAY ISSUE A FREEZE ORDER WHICH SHALL BE
EFFECTIVE IMMEDIATELY. THE FREEZE ORDER SHALL BE FOR A PERIOD OF
TWENTY (20) DAYS UNLESS EXTENDED BY THE COURT.
Authority to inquire into bank deposits (Sec. 11);
SEC. 11. AUTHORITY TO INQUIRE INTO BANK DEPOSITS. -- NOTWITHSTANDING THE

PROVISIONS OF REPUBLIC ACT NO. 1405, AS AMENDED, REPUBLIC ACT NO. 6426,
AS AMENDED, REPUBLIC ACT NO. 8791, AND OTHER LAWS, THE AMLC MAY
INQUIRE INTO OR EXAMINE ANY PARTICULAR DEPOSIT OR INVESTMENT WITH ANY
BANKING INSTITUTION OR NON-BANK FINANCIAL INSTITUTION UPON ORDER OF ANY
COMPETENT COURT IN CASES OF VIOLATION OF THIS ACT, WHEN IT HAS BEEN
ESTABLISHED THAT THERE IS PROBABLE CAUSE THAT THE DEPOSITS OR
INVESTMENTS ARE RELATED TO AN UNLAWFUL ACTIVITIES AS DEFINED IN SECTION
3(I) HEREOF OR A MONEY LAUNDERING OFFENSE UNDER SECTION 4 HEREOF,
EXCEPT THAT NO COURT ORDER SHALL BE REQUIRED IN CASES INVOLVING
UNLAWFUL ACTIVITIES DEFINED IN SECTIONS 3(I)1, (2) AND (12).

87 of 89
Penal provisions (Sec. 14);

Prohibitions against political harassment (Sec. 16).
SECTION 16. PROHIBITIONS AGAINST POLITICAL HARASSMENT. THIS ACT SHALL
NOT BE USED FOR POLITICAL PROSECUTION OR HARASSMENT OR AS AN
INSTRUMENT TO HAMPER COMPETITION IN TRADE AND COMMERCE.
NO CASE FOR MONEY LAUNDERING MAY BE FILED AGAINST AND NO ASSETS SHALL
BE FROZEN, ATTACHED OR FORFEITED TO THE PREJUDICE OF A CANDIDATE FOR AN
ELECTORAL OFFICE DURING AN ELECTION PERIOD.
6.2
Case:
Bank inquiry order under Section 11 cannot be made ex parte
Republic vs. Eugenio, et al.,
G.R. 174269, February 14, 2008
ISSUE1: Respondents posit that a bank inquiry order under Section 11 may be obtained only
upon the pre-existence of a money laundering offense case already filed before the
courts. The conclusion is based on the phrase upon order of any competent court in cases
of violation of this Act, the word cases generally understood as referring to actual cases
pending with the courts.
HELD1: We are unconvinced by this proposition, and agree instead with the then Solicitor
General who conceded that the use of the phrase in cases of was unfortunate, yet
submitted that it should be interpreted to mean in the event there are violations of the
AMLA, and not that there are already cases pending in court concerning such
violations. If the contrary position is adopted, then the bank inquiry order would be limited in
purpose as a tool in aid of litigation of live cases, and wholly inutile as a means for the
government to ascertain whether there is sufficient evidence to sustain an intended
prosecution of the account holder for violation of the AMLA. Should that be the situation, in
all likelihood the AMLC would be virtually deprived of its character as a discovery tool, and
thus would become less circumspect in filing complaints against suspect account holders.
After all, under such set-up the preferred strategy would be to allow or even encourage the
indiscriminate filing of complaints under the AMLA with the hope or expectation that the
evidence of money laundering would somehow surface during the trial. Since the AMLC
could not make use of the bank inquiry order to determine whether there is evidentiary basis
to prosecute the suspected malefactors, not filing any case at all would not be an
alternative. Such unwholesome set-up should not come to pass. Thus Section 11 cannot be
interpreted in a way that would emasculate the remedy it has established and encourage the
unfounded initiation of complaints for money laundering.
ISSUE2: Petitioner argues that a bank inquiry order necessitates a finding of probable cause,
a characteristic similar to a search warrant which is applied to and heard ex parte.
HELD2: Still, even if the bank inquiry order may be availed of without need of a preexisting case under the AMLA, it does not follow that such order may be availed of ex
parte. Such orders cannot be issued unless notice is given to the owners of the account,
allowing them the opportunity to contest the issuance of the order. Without such a
consequence, the legislated distinction between ex parte proceedings under Section 10 and
those which are not ex parte under Section 11 would be lost and rendered useless.
88 of 89
Furthermore, the Court is unconvinced by the supposed analogy between a search warrant
and a bank inquiry forwarded by petitioner. The Constitution and the Rules of Court
prescribe particular requirements attaching to search warrants that are not imposed by the
AMLA with respect to bank inquiry orders. A constitutional warrant requires that the judge
personally examine under oath or affirmation the complainant and the witnesses he may
produce such examination being in the form of searching questions and answers. Those are
impositions which the legislative did not specifically prescribe as to the bank inquiry order
under the AMLA, and we cannot find sufficient legal basis to apply them to Section 11 of the
AMLA. Simply put, a bank inquiry order is not a search warrant or warrant of arrest as it
contemplates a direct object but not the seizure of persons or property.
Even as the Constitution and the Rules of Court impose a high procedural standard for the
determination of probable cause for the issuance of search warrants which Congress chose
not to prescribe for the bank inquiry order under the AMLA, Congress nonetheless
disallowed ex parte applications for the inquiry order. We can discern that in exchange for
these procedural standards normally applied to search warrants, Congress chose instead to
legislate a right to notice and a right to be heard characteristics of judicial proceedings
which are not ex parte. Absent any demonstrable constitutional infirmity, there is no reason
for us to dispute such legislative policy choices.
89 of 89

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STUDY GUIDE ON BANKING AND RELATED LAWS*

Expanded Outline (based on Banking Study Guide by Prof. Tristan A. Catindig)

D. Additional disqualifications for MB Members [Sec. 9]; Divestment requirement

INSTITUTION WHICH IS SUBJECT TO SUPERVISION OR EXAMINATION BY THE

NO PERSON SHALL BE A MEMBER OF THE MONETARY BOARD IF HE HAS BEEN

E. Who can call meetings [Sec. 11]

IN THE EVENT OF A SETTLEMENT OR COMPROMISE, INDEMNIFICATION SHALL BE

H. Greater responsibility [Sec. 16]

PROVIDED, THAT WHILE SUCH LOANS OR ADVANCES ARE OUTSTANDING, THE

SECTION 84. EMERGENCY LOANS AND ADVANCES. THE AMOUNT OF ANY

Conservatorship (Sec. 29; Sec, 67, RA 8791)

1. TAKE CHARGE OF THE ASSETS, LIABILITIES, AND THE MANAGEMENT

THE CONSERVATOR SHOULD BE COMPETENT AND KNOWLEDGEABLE IN BANK

67, R.A.8791 CONSERVATORSHIP. - THE GROUNDS AND

Comment [WU2]: Section 28-A merely gives

THE DESIGNATION OF A CONSERVATOR UNDER SECTION 29 OF THIS ACT OR

Closure (Sec. 30; Secs. 53 and 56.4, RA 8791)

(A) IS UNABLE TO PAY ITS LIABILITIES AS THEY BECOME DUE IN THE

(B) HAS INSUFFICIENT REALIZABLE ASSETS, AS DETERMINED BY THE

SECTION 53. RA 8791. OTHER BANKING SERVICES. - IN CASE A BANK OR

SECTION 56. RA 8791. CONDUCTING BUSINESS IN AN UNSAFE OR UNSOUND

Comment [WU3]: In RA 7653, only a "report

Comment [O4]: 56.1 The act or omission has

SECTION 30. PROCEEDINGS IN RECEIVERSHIP AND LIQUIDATION. - THE

SECTION 30. PROCEEDINGS IN RECEIVERSHIP AND LIQUIDATION. THE

THE DESIGNATION OF A CONSERVATOR UNDER SECTION 29 OF THIS ACT OR

BAR Q [2009]: TRUE OF FALSEA BANK UNDER RECEIVERSHIP CAN STILL

BAR Q [2002]: DISTINGUISH BETWEEN THE ROLE OF A CONSERVATOR AND THAT

Liquidation (Sec. 30; Sec. 69, RA 8791)

(2) CONVERT THE ASSETS OF THE INSTITUTIONS TO MONEY, DISPOSE OF

THE ACTIONS OF THE MONETARY BOARD TAKEN UNDER THIS SECTION OR

SECTION 69. RA 8791. RECEIVERSHIP AND INVOLUNTARY LIQUIDATION. - THE

How the BSP handles exchange crises (Sec. 72)

(P1,000) for denominations of 1-Piso, 5-Piso and 10-Piso coins;

(P100) for denominations of 1-sentimo, 5-sentimo, 10-sentimo,

Setting of bank reserve requirements (Secs. 94-103)

RESERVES AGAINST DEPOSIT SUBSTITUTES, IF IMPOSED, SHALL BE

THE MONETARY BOARD MAY EXEMPT FROM RESERVE REQUIREMENTS

SINCE THE REQUIREMENT TO MAINTAIN BANK RESERVES IS IMPOSED

SECTION 95. DEFINITION OF DEPOSIT SUBSTITUTES. - THE TERM "DEPOSIT

3. FOR THE BORROWER'S OWN ACCOUNT,

SECTION 96. REQUIRED RESERVES AGAINST PESO DEPOSITS. - THE

SECTION 99. INCREASE IN RESERVE REQUIREMENTS. - WHENEVER IN THE

SECTION 100. COMPUTATION ON RESERVES. - THE RESERVE POSITION OF

FOR THE PURPOSE OF COMPUTING THE RESERVE POSITION OF EACH BANK OR

SECTION 101. RESERVE DEFICIENCIES. - WHENEVER THE RESERVE POSITION

IF A BANK OR QUASI-BANK CHRONICALLY HAS A RESERVE DEFICIENCY, THE

SECTION 102. INTERBANK SETTLEMENT. - THE BANGKO SENTRAL SHALL

THE DEPOSIT RESERVES MAINTAINED BY THE BANKS IN THE BANGKO SENTRAL

GOVERNMENT AGENCY OR ANY OTHER ADMINISTRATIVE BODY ISSUED TO

SECTION 105. MARGIN REQUIREMENTS AGAINST LETTERS OF CREDIT. - THE

SECTION 107. PORTFOLIO CEILINGS. - WHENEVER THE MONETARY BOARD

IN NO CASE SHALL THE MONETARY BOARD ESTABLISH LIMITS WHICH ARE

SECTION 108. MINIMUM CAPITAL RATIOS. - THE MONETARY BOARD MAY

Moral influence (Sec. 68)

Authority of conservator to revoke contracts

No need for prior hearing

Close now, hear later doctrine

SECTION 95. RA 7653. DEFINITION OF DEPOSIT SUBSTITUTES. - THE TERM

3. FOR THE BORROWER'S OWN ACCOUNT,

Classification of banks (Secs. 3.2 and 71)

2. THE POWER TO INVEST IN NON-ALLIED ENTERPRISES AS PROVIDED IN THIS

SECTION 30. EQUITY INVESTMENTS OF A

24.1. THE TOTAL INVESTMENT IN EQUITIES OF