Banking Laws -Dizon

CHAPTER 1
I. DECLARED Policy of the State (Sec. 2, GBL) -The State recognizes the vital ro
le 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 pe
rformance. 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 dem
ands of a
developing economy.
II. Definition of Banks (Sec. 3.1, GBL) -"Banks" shall refer to entities engaged
in the lending of
funds obtained in the form of deposits. Note: Banks may engage in other activiti
es allowed by
law.
III. Nature of Banking Business
A.
The relationship existing between a depositor and
Debtor-Creditor Relationship
bank is that of a creditor and debtor.
B.
Fiduciary Duty
1.
Simex Intl., Inc. vs. CA: The State recognizes the fiduciary nature of
banking that requires high standards of integrity and performance. Banks
are required to treat the accounts of its depositors with meticulous care,
always having in mind the fiduciary nature of their relationship.
2.
This bank s obligation is deemed written into every deposit agreement
between a bank and its depositor.
C.
Not A Trust Agreement
1.
The fiduciary nature of bank-depositor relationship does NOT convert the
contract between the bank and its depositors FROM a SIMPLE LOAN TO a
TRUST AGREEMENT. This is because Banks do not accept deposits to
enrich depositors but to earn money for themselves.
2.
Failure by the bank to pay to pay the depositor is failure to pay a simple
loan, and NOT a breach of trust.
D.
Indispensable Institution
1.
Banks is an indispensable institution in the modern world and plays vital role
in the economic life of every citizen. People have come to regard them with
respect, gratitude, and confidence.
2.
Even a humble wage-earner does not hesitate to entrust his life savings
3.
An ordinary person usually maintains an account for security and
convenience in settling his bills
4.
As for business entities, the bank is trusted to help them in running their
affairs, not only in the form of loans, but in their day-to-day transactions lik
e

encashing a check.
E.
Impressed with Public Interest (Simex vs. CA) a depositor expects a bank to trea
t
his account with utmost fidelity, whether such account consists only of a few hu
ndred
pesos or millions.
F.
Degree of Diligence (Simex vs. CA)
Art. 1172 of NCC states that the degree of diligence required of an obligor is t
hat
prescribed by law or contract, and in the absence of such, that of a good father
to a
family
NOTE: Due diligence is required of banks extend even to persons or institutions,
regularly engaged in the business of lending money secured by real estate
mortgage.
G.
Treatment of Accounts with Meticulous Care
There is NO LAW mandating banks to
call up their clients whenever their representatives withdraw significant amount
s
from their accounts.
H.
Duty to Keep Records
1.
Banks shall have a true and accurate account, record, statement of their
daily transactions especially those of deposit liabilities.
2.
The making of a false entry or willful omission of entries is a ground for the
imposition of administrative sanctions and disqualification from office.
I.
Banks are NOT Gratuitous Bailees Banks solicit deposits in order that they can u
se
the money to gain.
J.
Banks are NOT Expected to be Infallible, but must bear the blame for NOT
discovering mistakes despite established procedures.
Q: Sps. A and V opened a joint current account in C Bank with an initial deposit
of P2,250.
Prior thereto, A had a personal account with the same bank. When the spouse open
ed their
joint current account, the New Accounts teller pulled out the old signature card o
f A and
placed the old personal account number of A in the deposit slip. V issued two ch
ecks and
one of these was dishonored for IF. They were deducted P20 from their account. T
he bank
tried to call the spouses, but they were in Pampanga. Is the bank liable for dam
ages?
A: Yes.
-a depositor expects a bank to treat his account with utmost fidelity, whether s
uch
account consists only of a few hundred pesos or millions.
Bank must record every transaction accurately

-A blunder on the part of the bank such as dishonor of check without good reason
can
cause the depositor embarrassment, financial loss, and perhaps civil and crimina
l
litigation
Note: Exemplary damages are awarded if there is malice and bad faith.
K.
Dealing with Registered Lands The rule that persons dealing with registered land
s
can rely solely on the certificate of title does NOT APPLY to banks. Banks shoul
d
exercise more care and prudence in dealing with registered lands that private
individuals, for their business is one affected by public interest.
Q: A sold is unregistered parcel of land to B. Subsequently, an Orig. Cert.Title
(OCT) was
issued. A surrendered it to X bank as a consequence of a mortgage. B died w/o kn
owing
that an OCT has been issued. Upon learning of his right, C (B s heir) confronted A
and
went to X bank. C asked to photocopy the owner s duplicate certificate outside the
bank s
premises. C then brought it to the Register of Deeds with the Deed of Sale and h
e was
issued a Transfer Cert of Title. Is the bank liable for damages to A?
A: Yes.
-Bank failed to foresee the risk of its act of entrusting C with the OCT without
notifying
A and verifying the veracity of C s claim and character.
This acts runs afoul of the bank s mandate to observe the highest diligence
-A has also the right to due process. Notice and hearing are indispensable eleme
nts of
this right which the bank ignored
Q: A bank accepted a property as mortgage despite existence of structures and oc
cupants
other than the mortgagor. Is the bank negligent?
A: Yes. Banks, being in the business of extending loans, are familiar with the r
ules on land
registration. They are expected to exercise more care and prudence in dealing wi
th
registered lands that private individuals, for their business is one affected by
public interest.
1 | Page

The bank should have conducted investigation since there occupants other than th
e owner
of the land mortgaged. This constitutes gross negligence amounting to bad faith.
L.
Banks may Exclude Persons in their Premises
No employees must be spared by
banks and their officers and employees to ensure and preserve the trust and
confidence of the general public.
IV. Liability For Acts and Employees Bank is LIABLE for the wrongful acts of its
officers
done WITHIN the scope of their authority.
A. Negligence of Manager
Bank is liable for the negligence or misdeed of the branch manager since confide
nce in the
banking system necessarily includes reliance on bank managers. (BPI vs. First Me
tro
Investment Corp.)
B.
Negligence of Officers if within the scope of authority, bank is liable
C.
Negligence of Tellers returning the passbook ONLY to the depositor or his
authorized representative. If given to the wrong person, bank is liable since th
ey would
be clothing that person presumptive ownership of the passbook.
Note: Appropriation of money by a bank teller is NOT ESTAFA. Such is only MATERI
AL
POSSESSION. The bank still has JURIDICAL POSSESSION. If for personal gain, THEFT
.
If the teller has possession of the money since he occupies a position of confid
ence,
QUALIFIED THEFT.
D.
Right to Recover from Employees
Banks may recover from their employees. (Art.
2181 of NCC)
E.
Liabilities other than Actual
1.
Exemplary by way of example. Malice and bad faith must be attendant
2.
Moral when the good reputation of the client was besmirched or his
financial credit
Note: Banks are NOT responsible for such damages in the ABSENCE of fraud, bad fa
ith,
malice, or wanton attitude.
F. Respondeat superior, Diligence in the Selection, and Supervision of Employees
-A bank is bound by negligence of its employees under the principle of Respondea
t
superior or command responsibility.
V. Classification of Banks (CUT RICO)
Sec. 3.2. Banks shall be classified into:
(a)
(b)
(c)
(i)

Universal banks;
Commercial banks;
Thrift banks, composed of:
Savings and mortgage banks;

(ii) Stock savings and loan associations; and

(iii) Private development banks, as defined in the Republic Act No. 7906 (hereaf
ter 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 "Cooper
ative
Code");
(f) Islamic banks as defined in Republic Act No. 6848, otherwise known as the Cha
rter of Al
Amanah Islamic Investment Bank of the Philippines ; and
(g) Other classifications of banks as determined by the Monetary Board of the Ba
ngko Sentral
ng Pilipinas.
A.
Business Name
-Only a bank that is granted universal/ commercial banking authority may represe
nt
itself to the public as such in connection with its business name
-Thrift Banks: allowed to use and adopt any name, provide the ff words are affix
ed: A
thrift bank, Saving bank, A Private Development Bank, or A stick Savings and Loa
n
Association
-Rural or Commercial Banks: allowed to use and adopt any name, provide the ff wo
rds
are affixed: Rural or Coop, A Cooperative Bank, or A Rural Bank.
o
The size of the letters of such phrase shall be at least of the size of the
business name when shown on letterheads, billboards, and other
advertising materials.
B.
Universal Banks
1.
powers authorized for a commercial bank
2.
powers of an investment house
3.
power to invest in non-allied enterprises
C.
Commercial Banks
1.
general powers incident to corporations
2.
powers of commercial banks: (A BREAD)
D. Rural Banks
-designed to make needed credit available and readily accessible in the rural ar
eas on
reasonable terms
primary purpose is to meet the normal credit needs of farmers, fishermen, or far
m
families

E.
Thrift Banks
include savings and mortgage banks, private devt. banks, and stock savings and
loans associations.
-Providing short-term working capital, medium and long term financing to busines
s
engaged in agriculture, services, industry, and housing
Powers of a Thrift Bank:
F. Cooperative Banks
-one organized by, the majority shares of which is owned and controlled by,
cooperatives primarily to provide financial and credit services to cooperatives
- cooperative bank shall include cooperative rural banks
-Membership shall include ONLY cooperatives and federations of cooperatives
-Functions of a Cooperative Bank
G. Islamic Banks (Al-Amanh Islamic Investment Bank of the Philippines)
-in Zamboanga City
-primary purpose shall be to promote and accelerate the socio-economic devt of t
he
Autonomous Region by performing banking and financing operations and to establis
h
and participate in the agricultural, commercial, and industrial ventures based o
n the
Islamic concept of banking.
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H. Other Banks
-Philippine Veterans Bank private commercial bank owned by veterans
-Land Bank of the Philippines
finance the acquisition and distribution of agricu
ltural
estates fro division and resale to small landholders as well as the purchase of
the
landholding by the agricultural lessee
-Development Bank of the Philippines
was created as Rehabilitation Finance Corp.
(RFC); took over the functions of Agricultural Industrial Bank
I.
Non-Stock Saving And Loan Associations mean a non-stock, non-profit corp
engaged in the business of accumulating the savings of its members and using suc
h
accumulations for loans to members for home building or personal finance
J.
Quasi-banks
refer to entities engaged in the borrowing of funds through the
issuance, endorsement or assignment with recourse or acceptance of deposit
substitutes for purposes of relending or purchasing of receivables and other
obligations
"deposit substitutes" is defined as an alternative form of obtaining funds from
the
public, other than deposits, through the issuance, endorsement, or acceptance of
debt
instruments for the borrower's own account, for the purpose of relending or purc
hasing
of receivables and other obligations.
VI. Authority to Engage in Banking and Quasi-Banking (QB) Functions
A. Authority from Bangko Sentral
-No person shall engage in banking operations or QB functions WITHOUT authority
from the Bangko Sentral
-No articles of incorporation or amendment to articles of incorporation of banks
,
banking and quasi-banking institutions, building and loan associations, trust
companies and other financial intermediaries, insurance companies, public utilit
ies,
educational institutions, and other corporations governed by special laws shall
be
accepted or approved by the Commission unless accompanied by a favorablerecommen
dation of the appropriate government agency to the effect that sucharticles or a
mendment is in accordance with law. (Sec. 17 of BP 68)
-The Securities and Exchange Commission shall not accept for filing the by-laws
or
any amendment thereto of any bank, banking institution, building and loan
association, trust company, insurance company, public utility, educational insti
tution or
other special corporations governed by special laws, unless accompanied by a
certificate of the appropriate government agency to the effect that such by-laws
or amendments are in accordance with law. (Sec. 46 of BP 68)
B.
Whether a person or entity is performing banking or quasi-banking functions W/O
the
BS authority shall be decided by the Monetary Board by examining and investigati
ng

the books and records of such person or entity. Upon issuance of authority, may
commence to engage in functions until authority is suspended, revoked or annulle
d by
BS.
C.
The dept head and the examiners of the supervising and examining dept shall:
1.
administer oath to any such person or entity
2.
compel presentation of books, records, and documents
a.
failure to do so would subject such to appropriate sanctions
D.
BS shall, when examining a bank, have the authority to examine an enterprise whi
ch
is wholly or majority-owned by the bank.
E.
Certificate of Authority to Register
-The SEC shall not register the articles of corp or any amendment unless
accompanied by a certificate of authority issued by the MB, under its seal. The
MB shall be satisfied from the evidence submitted to it: (RPC)
o
All requirements of law have been complied with
o
Public interest and economic conditions justify the authorization
o
The amount of capital as well as the integrity of the organizers reasonable
assure the safety of deposits and the public interest
-The SEC shall not register the by-laws of any bank or any amendment unless
accompanied by a certificate of authority issued by the MB, under its seal.
CHAPTER 2: ORGANIZATION, MANAGEMENT & ADMINISTRATION OF BANKS, QUASIBANKS
AND TRUST ENTITIES
I.
Organization of Banks
A.
Conditions
The MB may authorize the organization of a bank and quasi-bank:
1.
Entity is a stock corporation
2.
Funds are obtained from the public, 20 o more persons
3.
Minimum capital requirements by MB are satisfied
B.
Capabilities
The MB shall take into consideration their apability in terms of their financial
resources and technical expertise and integrity.
1.
Bank s ownership structure
2.
Director s and senior management
3.
Its operating plan
4.

Internal control
5.
Its projected financial condition and capital base
C.
Capital Requirements
1.
Banks shall comply with the required minimum capital by MB:
Universal Bank-4,950M
Commercial Bank-2,400M
Thrift Banks
w/n MM-325.0M
Outside MM-52.0M
Rural Banks
w/n MM-26.0M
Cities of Cebu and Davao-13.0M
In 1st, 2nd & 3rd class cities and 1st class minicipalities-6.5M
In 4th, 5th & 6th classcities and in the 2nd, 3rd & 4th class municipalities3.9M
In 5th & 6th class municipalities-2.6M
2.
At least 25% of the total authorized capital stock shall be subscribed by the
subscribers of the propsed bank, and at least 25% of such subscription shall be
paid-up that it must not be less than the minimum required capital.
3 | Page

D.
Incorporators/ Subscribers
1.
Must be persons of integrity and of good credit standing in the business
community. Subscribers must have adequate fonancial strength to pay for their
propsed subscriptions in the bank.
2.
Must not have been convicted of any crime involving moral turpitude unless
otherwise allowed.
3.
A bank may be organized with not less than 5 or more than 15 persons in
organizing or investing in the proposed bank.
*if there is excess, may be listed among the original subscribers in the Article
s of
Corp.
QUERY: MAY COOPERATIVES ORGANIZE A BANK?
Yes, established cooperatives and corporations may organize a bank and/or
subscribe to the shares of stock oa any rural bank. Provided, that it shall be s
ubject to special
examination and to such rules and regulations prescribed by the MB.
E.
Bank Branches
1.
UB & CB may open branches or other offices within or outside the Philppines
upon prior approval of the BS.
2.
A bank authorized to branch out shall be responsible for all business conducted
in such branches because a bank and its offices shall be treated as one unit.
II.
Stockholdings
A.
Treasury Stocks
1.
No bank shall
.
Purchase/ acquire shares of its own capital stock or
.
Accept its own shares as a security for a loan
EXCEPT: when authorized by the MB.
-stocks purchased shall be sold or disposed of at a public or
private sale.
2.
At common law, a coprpration has no lien upon the shares of stockholders for
any indebtedness of the corporation.
3.
Sec.35 of the US National Banking At of 1864, if banking corporations were given
a lien on their own stock for the indebtedness of the stockholders, the prohibit
ion
against granting loans or discounts upon the security of the stock would become
laregly ineffective.
B.
Foreign Stockholdings
1.

Foreign inividuals an non-bank corporations may own or control up to 40% of the

voting stock of a domestic bank. It shall apply t Filipinos and domestic non-ban
k
cprporations.
QUERY: PROVISION IS AMBIGUOUS. IF IT APPEARS THAT FPREIGN INDIVIDUALS AND
NON-BANK COPORATINS MAY ONLY CONTROL UP TO 40% OF THE VOTING STOCK.
ON THE OTHER HAND, FILIPINOS AND DOMESTIC NON-BANK CORPORATIONS MAY
ALSO CONTROL ONLY UP TO 40% OF THE VOTING STOCK. WHAT HAPPENS THEN TO
THE 20%?
-Foreign inividuals an non-bank corporations may own or control up to 40% of the
voting stock
of a domestic bank
Provided, that the aggregate foreign-voting stoks owned by th
em shall not
exceed 40% of the outstanding voting stock of the bank. The percentage of foreig
n-owned
voting stock shall be determined by the citizenship of the individual stockholde
rs in the bank.
-Filipino individual and domestic non-bank corporation may each own up to 40% o
the voting
stock of a domestic bank. There shall be no aggregate ceiling on the ownership b
y such
individuals and corporations in a domestic bank.
2.
The percentage of foreign-owned voting stock shall be determined by the
citizenship of the individual stockholders in the bank
shall follow the citizens
hip
of the controlling stockholders of the corporation, irrespective of the place of
incorporation.
*CONTROLLING STOCKHOLDER-refer to individuals holding more than 50% of
the voting stock of the corporate stockholders of the bank.
3.
At least 60% of voting stock of any commercial bank shall be owned by Filipino
citizens. For thrift banks, at least 40% of its voting stock shall be owned by
Filipinos. In rural banks,all of the capital stock.
NOTE: In determining the nationality of banks, the CONTROL TEST is applied. The
following
tests do not:
1.
War-time test
2.
Investment test
3.
Place of incorporation test
4.
Grandfather rule
5.
Principal place of usiness test
C.
Acquisition of Voting Stock in a Domestic Bank
1.
Within 7years from the effectivity of the GBL and subject to guidelines issued
pursuant to the Foreign Banks Libearlization Act, the MB may authorize a foreign

bank to acquire up to 100% of the voting stock of only one bank organized under
the laws of the Republic of the Philippines.
2.
Within the same period, MB may authorize any foreign bank, which prior to the
effectivity of the GBL availed itself of the privilege to acquire upto 60% of th
e
voting stock of a bank under the Foreign Banks Libearlization Act and the Thrift
Banks Act, to further acquire voting shares of such bank to the extent necessary
for it to own 100% of the voting stock thereof.
3.
MB shall adopt measures necessary to ensure that at all times the control of 70%
of the resources or assets of teh entire banking system is held by banks which
are at keast majority-owned by Filipinos.
D.
Family Grous or Related Interests
1.
Stockholdingsn of individuals related to each other within the fourth degree of
consanguinity or affinity, legitimater or common-law shall be considered family
groups or related interests and must be fullt disclosed in all transactions by
such an individual with the bank.
2.
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 fullly
disclosed in all transactions by such corporations or related groups of persons
with the bank.
III.
Board of Directors
4 | Page

A.
Number of Directors
1.
Shall be at least 5, an a maximum of 15 members of the board of directors of
bank, 2 shall be independent directors. (except)
-all be of legal age
-majority are residents of the Phil.
-form a private corporation for any lawful purpose
2.
INDEPENDENT DIRECTOR-mean a person other tha an officer or employee of
the bank, its subsidiaries or ffiliates or related interests.
*Non-Filipino citizens may become members of the bord of directors of a bank to
the extent of the foreign participation in the equity of said bank.
a. not or has not been an officer or employee of the bank/quasibank/trust entity
, its
subsidiaries and affiliates or related interests during the past 3 years conted
from the
date of his election
b. not a director of officer of related companies of the institution s majority st
okholder
c. not a majority shareholder of the institutions, any of its related ompanies o
r of its
majority shareholder
d. not a relative w/n 4th degree of consanguinity or affinity, legitimate or com
mon law
of any director,oficer or majority shareholder of the bank/quasibank/trust entit
y, its
subsidiaries and affiliates or related companies
e. not acting as a nominee or representatve of any director or substantial holde
r
f. free from any business or other relationship which could materially interfere
with the
exerise of his judgment
B.
Directors of Merged or Consolidated Banks
-The number of directors shall not excedd 21.
C.
Meetings
1.
May be conducted throuh modern technologies such as teleconferencing and
video-conferencing
*Banks shall include in theor bylaws a provision taht meetings of their board of
directors shall be held only within the Philippines.
2. Corporate officers, quorum:
-Immediately after election, directors must formally organize the election of th
e
a.
president who shall be thedirector
b.
treasurer, who may or may not be a director
c.
secretary who shall be a resident nd citizen of the Philippines
d.
other officers provided for in the by-laws
*Any 2 or more positions may be held concurrently by the same person EXCEPT that
no one shall act as a president and secretary or as president and treasurer at t

he
same time.
*Directors or trustees cannot attend ot vote by proy at board meetings.
D.
Compensation and other Benefits of Directors and Officers
1.
MB may regulate the payment by the bank to its deirectors and officers of
compensation, allowance, fees, bonuses, stock options, proit sharing and fringe
benefits only in the exceptional cases and when the circumstances warrant, such
as but not limited to the following:
a.
When a bank is under comptrollership or conservatorship
b.
When found by the MB to be conucting business in an unsafe or unsound
manner
c.
When found to be an unsatisfactory financial condition.
2.
REMEDY: Sec.30 of the Corporation Code
Directors shall not receive any compensation except for reasonable per
diems. Provided, taht any such compensation other than per diems maybe
granted to directors by the vote of the stockholers representing at least a
majority of the outstanding capitl stock at a regular or special stockholder s
meeting. It shall not exceed 10& of the net income before income tax of the
corporation durng the preceeding year.
IV.
Fit and Proper Rule
A.
Powers of the MB
1.
To maintain the quality of bank management and afford better protection to
depositors and the public in general.
-MB shall prescribe,pass upon and review the qualifications and disqualification
s
of individuals elected or appointed bank directors or officers and disqualify th
ose
found unfit.
2.
After due notice to the board of directors of the bank, the MB may disqualify,
suspend or remove any bank director or officer who commits or omits an act
which render himunfit for the position.
3.
If found fit and proper, shall be given to his integrity, experience, education,
training and competence.
B.
Disqualification
a.
Permanently Disqualified Directors
1.
Have been convicted by final judgment of a court for offenses involving
dishonesty or breach of trust (ex. Estafa, extortion, forgery, malversation,
swindling, BP22)
2.
Have been convicted by final judgment of a court sentecing them to serve a
maximum term of imprisonment of more than 6 years.
3.
Have been convicted by final judgment of a court for violation of banking

laws, rules and regulations

4.
Those who have been judicially declared insolvent, spendthrit or
incapacitated to contract
5.
Those directors, officers or emplyees of banks, quasi anks or trust entities
who were found to be culpable for such institution s closure
6.
Those directors, officers or emplyees of banks, quasi anks or trust entities
who were found by the MB as administratively liable for violation of banking
law, rules an regulaitons
7.
Those directors, officers or emplyees of banks, quasi anks or trust entities
who were found to be unfit for the position of directors nad officers
b.
Temporarily Disqualified Directors:
1.
Person who refuses to fully disclose the extent of their business interests to
the appropriate suoervising and examining department.
2.
Directors who have been absent or who have not participated in more than
50% of all meetings, both regular and special, and those who failed to
5 | Page

physically attend at east 25% of all meetings in an year except those with
notarized certification executed by the corporate secretary.
3. Persons who are deinquent in the payment of their obligations:
a.
DELINQUENT IN THE PAYMENT OF OBLIGATIONS-an
obligation of a person with a bank/quasibank/trust entity where he
is a director or officer, or at least 2 obligations with other
banks/financial institutions, underdifferent credit lines or loan
contracts, ar past due.
b.
Obligations shall include all borrowings from a bank/quasibank
obtained by:
1.
Director or officer for his own account or acts as guarantor,
indorser or surety of loans
2.
The spouse or child under the parental authority of the
director or officer
3.
Any person whose loan proceeds were credited to an acount
for the benefit of a director or officer.
4.
His spouse is the managing partner or a general partner
owning a controlling interest in the partnership
5.
A corporation, association or firm whollyowned by any group
of persons
4.
Have been convicted by final judgment of a court for offenses involving
dishonesty or breach of trust (ex. Estafa, extortion, forgery, malversation,
swindling, BP22)
5.
Directors of officers of closed banks/quasibanks/trust entities pending their
clearance by the MB
6.
Directors disqualified for failure to observe/discharge their duties &
responsibilities
7.
Directors who failed to attend the special seminar for board of directors
8.
Persons dismissed/terminated from employment for cause.
9.
Those under preventive suspension
10.
Persons with derogatory records as certified by, or on the official files of, th
e
judiciary, National Bureau of Investigation, Philippine National Police, quasi
judicial bodies.
11.
Those are administratively liable for violation of banking laws, rules and
regulations.
12.
Any person found by MB to be unfit for th position of directors or officers.
13.
When penalty is suspension from office or fine is imposed, such is found to
be administratively liable.
C.
Disqualification/ Prohibitions under the Corporation Code

Sec.27. No person convited by fianl judgment of an offense puishable by imprionm

ent
for a perios exceeding 6years or a violation of this Code within 5years prior to
date of
is electiom or appointment shall qualify as a director, trustee or officer of an
y
corporation.
D.
Disqualification? Prohibitions under NCBA
V.
Banking Days and Hours
A.
Number of Days and Hour
1.
Shall transact business on all working days for at least 6 hours a day, even
before 8am or after 8pm. May open for business on Sat, Sun or holidays for
at least 3 hours a day.
2.
If so, must repot to the Bangko Sentrl the additional days
3.
Working days mean Mon-Fri excpet holidays.
4.
Branches at international airport or major fish port are allowed to operate on
flexible banking hours provided hat wil inform BSP of the schedule of the
banking hours that is not less than 6 hrs a day.
VI.
Automated Teller Machines
A.
Off-ite Automated Teller Machines (ATMs)
1.
Must submit a report to the appropriate department of the BSP on
ATMs which they establish
2.
Shall be installed only in the centers of activity like shopping,
supermarkets, hospitals, university campuses. Provided, that adequate
internal control and security measures shall be adopted nd submitted
to BSP.
3.
Must comply with these, to all to open off site ATMS.
B.
Mobile ATMs
1.
Should allowed to visit only centers of activity and should confine their
itinerary to Metro Manila until futher notice.
2.
Shall secure insurance coverage or adopt a self-insurance scheme to
protect itself against losses of whatever nature in ita mobile ATM
oprations
3.
Banks hall notify the supervising and examining department of the BSP
of the tual date a mobile ATM become oprational and when terminated.
VII.
Independent Auditor
1.
MB shall require a bank etc. To engage the services of an independent
auditor to be chosen by a bank etc. From a list of certified public
accountants acceptable to the MB
2.
Term of engagement hall be prescribed by MB, whenther as continuing
basis or special engagements.

3.
Board of Directors shall also conduct an annual balance sheet audit of the
bank etc. To review the internal audit and control system of teh bank etc,
and to submit a report of such audit.
VIII. Financial Statements
-Every bank etc. Shall submit to the appropriate supervising and examining dept.
Of the BSP fianncial statements.
-It shall be of a specific date designated by BSP and shall show actual financia
l
conditions of the institution submitting the statements, and of its branhes, off
ices,
subsidiaries and affiliates,
-and shall contain such informations as required in the BSP regualtions.
PUBLICATION:
-In English or Filipino
-At least once every quarter in a newspaper of general circulation in the city o
r
province
-BSP msy prescibe where it shall be published
-Shall make available to the public an shall prescribe the complete set of its
audited financial statements
6 | Page

-If there is local emergency or imminent panic, the MB by vote of at least 5 of

its
members may allow to defer for a stated period of time the publication of the
statement of financial condition.
NOTES: page 54-55 (IMPORTANT)
IX.
Publication of Capital Stock
-It shll not publish the amount of its authorized or subscribed capital stock wi
thout
indicating at the same tme and with equal prominence, the amount o its capital
actually paid-up.
-No branch of any foreign bank doing business in the Phil shall in any way
announce the amount of the capital and surplus of its had office.
X.
Settlement of Disputes
-BSP shall be consulted by other gov. Agencies in actions and proceedings
brought before them involving controversies in banks etc. , as well as disputes
between any all or all of them which theya re the directors, officers or
stockholders.
XI.
Strikes and Lockouts
A. Unsettles Labor Disputes
-The banking industry is indispensable to the national interest.
-If unsettled afer 7 days shall be reported by the BSP to the Sec. Of Labor who
may assume jurisdiction over the dispute and decide it or certify the same.
-The President, may intervene and assume juridiction over suh labor dispute in
order to settle and terminate the same.
B.
Reports of Strikes and lockouts
The bank shal disclose pertinent info:
1.
Cause of the strike/lockout and bank management s position on its legality
2.
Bank oprations affected
XII.
Laws Governing other Types of Banks
-Thrift Banks Act, Rural Banks Act, Cooperative Code
-For Islamic banks-special laws
-For purposes of prescribing the minimum ration which the net worth of a thrift
bank must bear to its total risk assets, the provisions of the Gbl shall govern.
CHAPTER 3. DEPOSIT FUNCTIONS OF BANKS
Demand deposits
are all those liabilities of the BSP and other banks which are d
enominated
in Phil. Currency and are subject to payment in legal tender upon demand by pres
entation of
checks.
The followings are prohibited from maintaining demand deposits or current accoun
ts with

the bank office in which they are assigned;

a.
All officers;
b.
Employees of the bank s cash department/cash units
c.
Others employees who have direct and immediate responsibility in the handling of
transactions/records pertaining to demand deposits or current accounts.
Includes also;
The spouse, relatives within 2nd degree of consanguinity and affinity of the off
icers and
employee covered by the prohibition.
DUTY OF BANK TO HONOR CHECKS
Where the bank possesses funds of a depositor it is bound to honor his checks to
the
extent of the amount of his deposits. Failure of the bank to pay the check, enti
tles the drawer to
substantial damage without any proof of actual damages.
RESPONSIBILITY OF THE DRAWER
He must personally keep track of his available balance in the bank and not rely
on the
bank to notify him of the necessity to fund certain checks he previously issued.
DUTY OF BANKS TO KNOW SIGNATURES
A bank is bound to know the signatures of its customers.
NO OBLI. TO PAY PARTIAL PAYMENT
A bank is under no obligation to make part payment on the check up to only the
amount of the drawer s fund where the check is drawn for an amount larger than wha
t the
drawer has on deposit.
WITHDRAWALS
BAKS ARE PROHIBITED FROM ISSUING/ACCEPTING Withdrawals slips without
requiring the depositors to present their passbooks and accomplishing necessary
withdrawal
slips except for banks authorized by BSP to adopt the no passbook withdrawal sys
tem.
Negotiable order of withdrawal (NOW) are interest
bearing deposits of accounts
that combine the payable on demand feature of the checks and investment feature
of a savings
acct.
Time deposits one the payment of which cannot legally be required within such a
specified
number of days.
NEGOTIABLE CERTIFICATES OF TIME DEPOSITS (NCTD s)
a.

Universal banks / commercial banks may issue NCTDs without approval of BSP
b. Thrift banks/Rural banks/Cooperative banks need approval of BSP
NON
NEGOTIABLE CTD -Banks may issue long-term negotiable tax exempt certificates
of
time deposit without approval of the BSP.
QUASI BANKING FUNCTIONS:
Essential elements of quasi-banking are:
A.
borrowing of funds for the borrower s own account;
B.
20 or more lenders at any one time;
C.
Methods of borrowing are issuance, endorsement, or acceptance of debt instrument
s
of any kind, other than deposits
D.
The purpose of which is (1) relending, or (2) purchasing receivables or other
obligations
Any person, natural or juridical may deposit with such Phil. Bank in good standi
ng foreign
currencies which are acceptable as part of the international reserve except thos
e which are
required by the central bank to be surrendered.
7 | Page

Anonymous accounts or accounts under fictitious name should not be kept allowed.
II. Administration of deposits
All banking institutions are required to set a minimum of 3 specimens of their d
epositors
and to update the specimen of signatures every 5 years or sooner, at the discret
ion of the
bank.
Minors are vested with special capacity and power to make savings, and withdraw
the
same without the assistance of their parents or guardians, provided the f requir
ements are
met;
1.
at least 7 years of age;
2.
able to read and write;
3.
have sufficient discretion;
4.
not otherwise disqualified by any other incapacity;
Parents may nevertheless deposit for their minor children and guardians for thei
r wards.
Corporations
a.
Incorporation Stage
payment of subscription is in cash, the SEC requires a bank
certificate of deposit of paid-up capital notarized in place where signed.
b.
Post Incorporation in opening a bank account, the board of directors issues a
resolution authorizing the signatories and specifying the depository bank.
Clearing cut off time
General rule: all deposits and withdrawals during regular banking hours shall be
credited or
debited to deposit liability accounts on the date of receipt or payment thereof;
provided,
however, that a bank may set a clearing cut off time for its head office not earl
ier than 2
hours before the start of clearing at the BSP and not earlier than 3-1/2 hours b
efore the
start of clearing for all its branches, agencies, and extension office doing bus
iness in the
Philippines. Provided, further that banks are located in areas where there are n
o BSP
regional/clearing arrangement may set a clearing cut-off time not earlier than 2
hours
before the start of their local clearing after which time, deposits received sha
ll be booked
likewise.
III. Survivorship Agreement
Definition:
Joint owners of a deposit agree that either of them could withdraw any part or t
he whole of

said account during the lifetime of both, and the balance, if any, upon the deat
h of either,
belonged to the survivor.
Although survivorship agreement is per se not contrary to law, its operation or
effect may
be violative of the law.
IV. Duties of Banks
A.
METICULOUS CARE
A bank is required to take meticulous care of the deposits of its clients, who h
ave the
right to expect high standards of integrity and performance from it.
In every case the depositor expects the bank to treat his account with the utmos
t
fidelity, whether such account consists only of a few hundred pesos or of millio
ns.
B.
PAYMENT TO PROPER PARTY
C.
IN CASE OF DEATH OF DEPOSITOR
National revenue code provides:
If a bank has knowledge of the death of the depositor, it shall not allow any wi
thdrawal
from said deposit account unless the commissioner has certified that the taxes i
mposed
thereon by this title have been paid. Provided, however, that the administrator
of the estate
or any 1 of the heirs of the decent may upon authorization of the commissioner w
ithdraw an
amount not exceeding 20,000 without the said certification.
V. Secrecy of bank Deposits
Purposes
a.
to give encouragement to the people to deposit their money in banking
institutions;
b.
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.
R.A. 8367 Absolute Confidentiality
All deposits of whatever nature with an Association in the Philippines are herby
considered as of an absolutely confidential nature and may not be examined, inqu
ired
or looked into by any person, government official, bureau or office except upon;
1.
written permission of the depositor;
2.
in case of impeachment;
3.
upon order of a competent court in cases of bribery or dereliction of duty of pu
blic
officials;
4.

in cases, where the money deposited or invested is the subject matter of the
litigation.
Authority to inquire into bank deposits under the ANTI MONEY LAUNDERING ACT
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, when it has been established that;
a.
there is probable cause that the deposits or investments are related to an
unlawful activity;
b.
a money laundering offense.
Authority of the Commissioner of Internal Revenue to inquire into deposits
In cases;
a.
a decedent to determine his gross estate;
b.
any taxpayer who has filed an application for compromise of his tax liability by
reason of financial incapacity to pay his tax liability.
CHAPTER 4
Operations of a Universal Bank
a.
Powers of a commercial bank
b.
Powers of an inverstment house
c.
Power to invest in non-allied enterprises
II. Equity Investments of a Universal Bank
a.
Allied or non-allied
i.
Allied enterprises: financial or non-financial
ii.
Total investment shall not exceed 50% of the net worth of the
bank
8 | Page

iii.
Total investment in one enterprise shall not exceed 25% of the
net worth of the bank
iv.
Net worth-total of the unimpaired paid-in capital including paid-in
surplus, retained earnings and undivided profit, net of valuation,
reserves and other adjustments
b. Acquisition is subject to prior approval of the Monetary Board
III.
Equity investments of a Universal Bank in Financial Allied Enterprises
a.
Can own up to 100% of the equity in a thrift bank, a rural bank or others
within this category
b.
A publicly-listed universal or commercial bank can own only one other
universal or commercial bank
c.
Financial Allied: leasing companies, banks, investment houses, financing
companies, credit card companies, insurance companies, holding company,
etc.
IV. Equity Investments of a Universal Bank in Non-financial allied enterprises
a.
May own up to 100%
b.
Warehousing, storage, safe deposit box, management of mutual funds,
providing computer services, insurance agencies, home building and home
development
c.
Rural/Cooperative Banks may invest, as a non-financial allied undertaking
in the ff:
i.
Warehousing and postharvest facilities
ii.
Farm equipment distribution
iii.
Transportation of agricultural products
iv.
Marketing of agri products
v.
Leasing
V.
Investments in Non-Allied Enterprises
a.
Shall not exceed 35% of the total equity in that enterprise nor shall it exceed
35% of the voting stock
b.
Only universal banks can investment in non-allied enterprises:
i.
Industrial park projects, financial and commercial complex
projects, activities in agri, mining, manufacturing,etc.
VI.
Investments in Quasi-Banks
a. Shall not exceed 40% equity
Operations of Commercial Banks
I.
Powers
a.
Powers incident to corporations
b.

Such powers necessary to carry on the business of commercial banking:

i.
Accepting drafts and issuance of letters of credit
ii.
Accepting or creating demand deposits
iii.
Receiving deposit substitutes
iv.
Extending credit
v.
Buying and selling foreign exchange and gold or silver
vi.
Discounting negotiating promissory notes, etc.
II.
Letters of Credit
a.
3 relationships created: bank and buyer, bank and seller, buyer and seller
b.
Independence Principle-assures the seller of prompt payment even if buyer
has not yet reimbursed as long as the seller presents the necessary
documents
III.
Investments of a Commercial Bank
a.
Only equities in allied enterprises: either financial or non-financial
b.
Total investments in allied enterprises shall not exceed 35% of the net worth
of the bank
c.
Total investment in any one enterprise shall not exceed 25% of the net
worth of the bank.
IV.
Investments in Financial Allied
a.
100% of the equity of a thrift bank or a rural bank
b.
In other financial allied enterprises, investment shall only be a minority
holding
V.
Investments in non-financial allied
a.
May own up to 100%
Risk-Based Capital
I. Minimum Ratio-monetary board shall prescribe; ration of
bank to its total risk assets which may include contingent
a.
May be altered or suspended for a maximum of one year when
b.
Uniformly applied for banks in the same category
II.
Effect of Non-Compliance
a.
Limit or prohibit the distribution of net profits
b. Restrict or prohibit acquisition of major assets
Limits on Loans, Credit Accommodations and Guarantees
I. Single Borrower s Limit-shall not exceed 20% of the net
a.
Except:
i.

the net worth of the

accounts
necessary

worth of the bank

As provided by the monetary board for reasons of national

interest
ii.
Deposits of rural banks with GOC financial institutions
b.
The limit maybe increased by 10% provided the additional loans are
secured
II.
SBL should include:
a.
Direct liability of the maker of paper sold or discounted with the bank
b.
If the borrower owns ac majority interest in a corporation, the liabilities of
said corporation is included
c.
Liabilities of subsidiaries of a corporation who is borrowing from the bank
d.
In case of partnership or association, the liabilities of the members thereof
III.
SBL should exclude:
a.
Loans secured by the BSP or government
b.
Loans covered by assignment of deposits maintained in the bank
c.
Loans under letters of credit covered by margin deposits
d.
Loans specified as non-risk items
IV.
Bank Guarantee-irrevocable commitment of bank binding itself to pay in the
vent of non-performance by a third party; it shall also be subject to the limits
herein prescribed
V.
Contingent Accounts of borrowers may be included among those subject to the
limits
VI.
Assignment of Credit-agreement by virtue of which the owner of a credit, by a
legal cause, such as sales, dation in payment, donation, and without the need of
the consent of the debtor, transfers his credit to another who acquires the powe
r
to enforce it to the same extent as the creditor could have.
VII.
Pacto Commissorio-automatic appropriation of the pledged or mortgaged
property by the creditor in payment of the loan upon its maturity. It is not all
owed
in assignment of deposits.
DOSRI
I.
Prohibits the ff:
a.
Direct or indirectly borrow from the bank
b.
Become a guarantor or indorses or surety for loans from such bank to
others
c.
Be an obligor to the bank except with the written approval of the majority of
all the directors of the bank

II.
The approval shall entered on the records of the bank
9 | Page

III.
Arms Length Rule-Dealings with DOSRI shall be upon terms not less favorable to
the bank
IV.
Directors:
a.
Names in the articles of incorporation
b.
Elected in meetings of the stockholders
c.
Elected to fill vacancies
V.
Officers:
a.
Pres, VP, EVP, Sr. VP, GM, Secretary, Treasurer, Trust Officer
b.
Chairman, vice-chairman or any other position who performs functions of
management
VI.
Stockholder-stockholder or record in the books of the bank
a.
Includes:
i.
Spouse and/or relative within the 1st degree or consanguinity or
affinity
ii.
Corporation owned by the stockholder or his wife
VII.
Related Interests
a.
Spouse and/or relative within the 1st degree or consanguinity or affinity
b.
partnership where DOSRI of those in a) above are general partners
c.
co-owner with a DOSRI or those in a) of a property used as a security
d.
Corporation or association where the DOSRI or those in a) are is also a
director
e.
Corporation wholly or majority owned or owned by at least 20% by the
DOSRI or those in a)
VIII. Effect of Violation-after due notice, the office of the person violating s
hall be
declared vacant and shal be subject to the penal provisions of NCBA
Securities on Loans
I.
Secured by Real Estate
a.
Shall not exceed 75% of the appraised value plus 60% of the insured
improvements
II.
Secured by Chattels and Intangible Properties
a. Shall not exceed to 75%
Grant and Purpose of Loans
I.
Amount and Purpose
a.
Only in the amount and for the period of time essential for the completion of

the operations to be financed. This shall be done consistent with safe and
sound banking practice
b.
The purpose shall be stated in the application
c.
If the purpose stated was not followed, the bank may terminate the loan and
demand immediate repayment
II.
Requirements:
a.
Statement of assets and liabilities
b.
Statement of their income and expenditure
c.
Other information prescribed by law or by the Monetary Board
d.
Even in the absence of this provision, the bank may still demand immediate
repayment because the borrower has lost the benefit of the period under
Art. 1198 of the Civil Code
III.
Reason for Stringent Rules in Granting Loans-The bank invests the money it
holds in trust for the depositors. For this reason, a bank is expected to ascert
ain
the identities of the persons transacting with them to protect both the interest
of
the bank and the depositors.
IV.
Unsecured Loans or Other Credit Accommodations-The MB is authorized to
issue regulations with respect to unsecured loans
V.
Other Security Requirements-The MB may prescribe further security
requirements shall be subject to.
VI.
Authority to Prescribe Terms and Conditions of Loans
VII.
Amortization on Loans
a.
Shall be adapted to the nature o the operations to be financed
b.
With those whose maturities are more than 5 years-periodic amortization
but must be made annually
c.
Loans are used for purposes not initially producing revenue-amortization
may be deferred until such time as said revenues are sufficient but in no
case shall it be later than 5 years
d.
Microfinance-take into consideration the projected cash flow of the
borrower
e.
Escalation clause-raising of interest
i.
Only allowed when the monetary board has increased the rate of
interest provided that there is also a stipulation that interest will be
lowered if MB has lowered the rate of interest
ii.
Both instances should be present before escalation clause is
allowed
iii.
Exception: if the creditor unilaterally decreased the interest even if
it was not stipulated, esacalation will be allowed

f.
Unconscionable and exorbitant interests-SC: 5.5% per month or 66% per
annum. Will be considered as void. Hence, the court may reduce the
interest rate
VIII.
Prepayment of Loans-prior to the maturity date, borrower may pay subject to
such reasonable terms agreed upon with the bank
IX.
Development Assistance Incentive-BSP shall give incentives to banks who
extend loans to education, cooperatives, hospitals, low-cost housing, and LGUs
X.
Renewal of Exntension of Loans-maybe regulated by the MB and prescribe
conditions and limitations
XI.
Banks cannot extend peso loans to non-residents
XII.
Provisions for losses and write-off
a.
Bad debts-debts due to on which interest is past due and unpaid
b.
MB shall fix the amount of reserves for bad debts
Truth In Lending (RA 3765-Disclosure of Finance Charges)
I.
Policy-protect the citizens from a lack of awareness of the true cost of credit
by
assuring a full disclosure of such cost
II.
Disclosure shall include:
a.
The cash price of the property or service to be acquired
b.
Amounts for downpayment
c.
Charges which are paid in connection with the transaction
d.
Amount to be financed
e.
Finance charge
III.
Definitions:
a.
Crediti.
any loan, mortgage, deed of trust, advance or discount
ii.
Any conditional sales contract
iii.
Rental-purchase contract
b.
Finance Charge-interest and fees incident to the extension of credit
c.
Creditor: any person engaged in the business of extending credit who
requires as an incident to the extension of credit, the payment of a finance
charge
IV.
Penalty-either civil or criminal (1k-5k fine or imprisonment for 6-12 months, or
both)
V. Government is exempted from the punishment or penalty

Foreclosure of Real Estate

10 | P a g e

I.
The mortgagor or debtor has the right within one year after the sale of the real
estate, to redeem the property by paying the amount due in the mortgage w/
interest and all the cost and expenses
II.
However, the purchaser at the auction shall have the right to take possession
immediately after the date of the confirmation of the auction sale
III.
Any petition in court to restrain the auction shall only be given due course upo
n
the filing of a bond in an amount fixed by the court
IV.
Juridical Persons shall have the right to redeem the property until, but not aft
er,
the registration of the certificate of foreclosure with the Register of Deeds wi
thin 3
months
V.
Equity of Redemption v. Right of Redemption
a. Right of Redemption exists only in extrajudicial foreclosure sale
i.
In a judicial foreclosure sale where the mortgagee is the PNB or a
banking institution, right of redemption exits
ii.
Equity of Redemption-right of the mortgagor to extinguish the
mortgage and retain ownership by paying the secured debt within
a period not less than 90 days nor more than 120 days after the
judgment becomes final. (Rule 68, Rules of Court)
iii. Right of Redemption may be extended
Major Investments
I.
The MB shall establish a criteria for reviewing major acquisitions by a bank
II.
Ceiling on Investments
a.
Acquire real estate necessary for its own use in the conduct of its business
i.
Bank premises-land, buildings, construction, leasehold rights,
improvement, fixtures, furniture
ii.
Real property, quipmet, chattel purchased by the bank in its name
b.
Total investment in real estate including improvements shall not exceed
50% of combined capital accounts
c.
Investments by a bank in a real estate corporation shall be considered as
part of the total investment in real estate by the bank
III.
Acquisition of Real Estate by way of satisfaction of claims
a.
Notwithstanding the limitations given above, a bank may acquire real estate
under the ff circumstances:
i.
Shall be mortgaged to it in good faith by way of security of debts
ii.
Conveyed to it in satisfaction of debts previously contracted
iii.
Purchased at sales under judgments, decrees, mortgages, or

trust deeds held by it

b.
Real Property acquired under this provision shall be disposed by the bank
within a period of 5 years
c.
However, it may continue to hold such property beyond the period given if
the limitations given in the previous provision are not yet reached.
Other Banking Services
I.
Receive in custody funds, documents and other objects
II.
Act as financial agent and buy and sell for their customers
III.
Make collection and payments for the account of others
IV.
Act as managing agent, adviser, consultant or administrator of an investment
management with the approval of the MB
V.
Rent out safety deposit boxes
VI.
Safety Deposit Box-Special Kind of Deposit because it cannot be characterized
as a contract of lease since the guard key of the box remains with the bank.
VII.
If a box is rented by two persons, the agreement between them shall govern
VIII. The SC said that the rent of a safety deposit box is that of a bailor an b
ailee
Electronic Transactions
I.
BSP shall have full authority to regulate the use of electronic devices used in
connection with the operations of a bank including the delivery of services and
products to customers
II.
Outsourcing of IT systems-can be done with prior approval of the MB except:
a.
Strategic planning for the use of IT
b.
Determination of system functionalities
c.
Change management inclusive of quality assurance and testing
d.
Service level and contract management
e. Security policy and administration
Outsourcing of other functions
I.
With approval of the MB, banks may outsource the ff:
a.
Data imaging
b.
Clearing and processing of checks not in the Philippine Clearing House
system
c.
Printing of bank deposit statement, bank loan statements, bank forms and
promotional materials
d.
Credit card services
e.
Credit investigation
f.
Janitorial services

g.
Procurement services
h.
Legal services
Questions:
Whether or not an alien-owned bank can acquire ownership of a residential lot by
virtue of a
deed of transfer as settlement of a debt
No. for the purpose of the constitution is to place and keep in the hands of the
people
the ownership of private lands in order not to endanger the integrity of the nat
ion
Chapter 5
Sec. 54. Prohibition to Act as Insurer. -A bank shall not directly engage in ins
urance business
as the insurer.
*Includes:
a) making or proposing to make, as insurer, any insurance contract
b) making or proposing to make, as surety, any contract of suretyship as a vocat
ion and
not as merely incidental to any other legitimate business or activity of the sur
ety
c)
doing any kind of business, including a reinsurance business, specifically recog
nized
as constituting the doing of an insurance business within the meaning of the Ins
urance
Code
d)
doing or proposing to do any business in substance equivalent to any of the fore
going
in a manner designed to evade the provisions of the Insurance Code
Sec. 55. Prohibited Transactions.
55.1. No director, officer, employee, or agent of any bank shall
11 | P a g e

(a) Make false entries in any bank report or statement or participate in any fra
udulent transaction,
thereby affecting the financial interest of, or causing damage to, the bank or a
ny person;
(b) Without order of a court of competent jurisdiction, disclose to any unauthor
ized person any
information relative to the funds or properties in the custody of the bank belon
ging to
private individuals, corporations, or any other entity: Provided, That with resp
ect to bank
deposits, the provisions of existing laws shall prevail;
(c) Accept gifts, fees, or commissions or any other form of remuneration in conn
ection with the
approval of a loan or other credit accommodation from said bank;
(d)
Overvalue or aid in overvaluing any security for the purpose of influencing in a
ny way the
actions of the bank or any bank; or
(e) Outsource inherent banking functions.
.
refers to any contract between the bank and a service provider for the latter to
supply, or any act whereby the latter supplies, the manpower to service the depo
sit
transactions of the former
.
intended to ensure secrecy of bank deposits
55.2. No borrower of a bank shall (
a) Fraudulently overvalue property offered as security for a loan or other credi
t accommodation
from the bank;
(b) Furnish false or make misrepresentation or suppression of material facts for
the purpose of
obtaining, renewing, or increasing a loan or other credit accommodation or exten
ding
the period thereof;
(c) Attempt to defraud the said bank in the event of a court action to recover a
loan or other credit
accommodation; or
(d) Offer any director, officer, employee or agent of a bank any gift, fee, comm
ission, or any other
form of compensation in order to influence such persons into approving a loan or
other
credit accommodation application.
55.3.
No examiner, officer or employee of the Bangko Sentral or of any department, bur
eau, office,
branch or agency of the Government that is assigned to supervise, examine, assis
t or render
technical assistance to any bank shall commit any of the acts enumerated in this
Section or aid
in the commission of the same.
The making of false reports or misrepresentation or suppression of material fact
s by personnel
of the Bangko Sental ng Pilipinas shall be subject to the administrative and cri
minal sanctions
provided under the New Central Bank Act.
55.4. Consistent with the provisions of Republic Act No. 1405, otherwise known a

s the Banks Secrecy

Law, no bank shall employ casual or non regular personnel or too lengthy probati
onary
personnel in the conduct of its business involving bank deposits.
Sec. 56. Conducting Business in an Unsafe or Unsound Manner -In determining whet
her a
particular act or omission, which is not otherwise prohibited by any law, rule o
r regulation
affecting banks, quasi-banks or trust entities, may be deemed as conducting busi
ness in an
unsafe or unsound manner for purposes of this Section, the Monetary Board shall
consider any
of the following circumstances:
56.1.
The act or omission has resulted or may result in material loss or damage, or ab
normal
risk or danger to the safety, stability, liquidity or solvency of the institutio
n; .
56.2.
The act or omission has resulted or may result in material loss or damage or abn
ormal
risk to the institution's depositors, creditors, investors, stockholders or to t
he 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 t
he
director or officer of his duties and responsibilities through manifest partiali
ty, evident
bad faith or gross inexcusable negligence; or
56.4.The act or omission involves entering into any contract or transaction mani
festly and
grossly disadvantageous to the bank, quasi-bank or trust entity, whether or not
the
director or officer profited or will profit thereby.
Whenever 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.
Sec. 57. Prohibition on Dividend Declaration.
e dividends,
if at the time of declaration:

No bank or quasi-bank shall declar

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

57.4. It has committed a major violation as may be determined by the Bangko Sent
ral.
Sec. 64. Unauthorized Advertisement or Business Representation.
No person, assoc
iation, or
corporation unless duly authorized to engage in the business of a bank, quasi-ba
nk, trust entity,
or savings and loan association as defined in this Act, or other banking laws, s
hall advertise or
hold itself out as being engaged in the business of such bank, quasi-bank, trust
entity, or
association, or use in connection with its business title, the word or words bank
, banking,
banker, quasi-bank,
quasi-banking, quasi-banker,
savings and loan association,
corporation, trust company or words of similar import or transact in any manner the
business
of any such bank, corporation or association.
Sec. 67. 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 conser
vatorship
proceedings of quasi-banks.
*Grounds for appointment of conservator
Whenever, on the basis of a report submitted by the appropriate supervising or e
xamining
department, the Monetary Board finds that a bank or quasi-bank is in a state of:
12 | P a g e

tru

1.
continuing inability, or
2.
unwillingness to maintain a condition of liquidity deemed adequate to protect th
e
interests of depositors and creditors,
the Monetary Board may appoint a conservator with such powers as the Monetary Bo
ard 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 institutions, 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.
*Liquidity
any price
discount

the ability of an asset to be converted into cash quickly and without

*Solvency the condition that exists when liabilities amount to less than total a
ssets, thus
providing the ability to pay debts
*Qualifications of conservator:
1. competent
2. knowledgeable in bank operations and management
*Period of conservatorship
shall not exceed 1 year
*Termination of conservatorship:
1.
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 lon
ger
necessary.
2.
It should 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 bus
iness of
the institution would involve probable loss to its depositors or creditors, in w
hich case
the provisions on receivership and liquidation shall apply.
*Powers of conservator cannot impair the obligations of contracts the law merely
gives him the
power to revoke contracts that are, under existing law, deemed to be defective.
Sec. 68. Voluntary Liquidation.

In case of voluntary liquidation of any bank org

anized under
the laws of the Philippines, or of any branch or office in the Philippines of a
foreign bank, written
notice of such liquidation shall be sent to the Monetary Board before such liqui
dation shall be
sent to the Monetary Board before such liquidation is undertaken, and the Moneta
ry Board shall
have the right to intervene and take such steps as may be necessary to protect t
he interests of
creditors.
.
may be undertaken by the bank itself through its board of directors, by a truste
e appointed by
the bank, or by a receiver appointed by the bank
.
no voluntary dissolution shall be undertaken by a bank without prior approval of
the Monetary
Board, provided further, that it shall be accompanied by a liquidation plan and
written notice
*Grounds for receivership and liquidation:
The bank or quasi-bank:
1.
is unable to pay its liabilities as they become due in the ordinary course of bu
siness
2.
has insufficient realizable assets, as determined by the Bangko Sentral, to meet
its
liabilities
3.
cannot continue in business without involving probable losses to its depositors
or
creditors
4.
has willfully violated a cease-and-desist order that has become final, involving
acts or
transactions which amount to fraud or a dissipation of the assets of the institu
tion
*Powers of a receiver:
a.
to bring and defend, in such capacity, actions in his own name
b.
to take and keep possession of the property in controversy
c.
to receive rents
d.
to collect debts due to himself as receiver or to the fund, property, estate, pe
rson, or
corporation of which he is the receiver
e.
to compound for and compromise the same
f.
to make transfers
g.
to pay outstanding debts
h.

to divide the money and other property that shall remain among the persons legal
ly
entitled to receive the same
i.
generally to do such acts respecting the property as the court may authorize
*Prohibited acts:
Any director or officer of a bank declared insolvent or placed under receivershi
p by the
Monetary Board shall not commit any of the ff:
a.
refusing to turn over the bank s records and assets to the designated receiver
b.
tampering with bank records
c.
appropriating for himself or another party, or destroying or causing misappropri
ation
and destruction of the bank s assets
d.
receiving or permitting or causing to be received in said bank any deposit, coll
ection of
loans, and/or receivables
e.
paying out or permitting or causing to be paid out any funds of said bank
f.
transferring or permitting or causing to be transferred any securities or proper
ty of said
bank
* Close now hear later scheme
the law does not contemplate prior notice and hearing
before
a bank may be directed to stop operations and placed under receivership. This is
to prevent
unwarranted dissipation of the bank s assets and is a valid exercise of police pow
er to protect
the creditors, depositors, stockholders, and the general public. A hearing may b
e subsequent to
the closure.
*Effects of receivership and liquidation:
1.
retention of juridical personality
2.
not liable to pay interest
3.
assets are deemed under custodia legis
4.
stay of execution of judgment
5.
restriction of bank s capacity to act
6.
exclusive jurisdiction of liquidation court
13 | P a g e

Sec. 70. Penalty for Transactions After a Bank Becomes Insolvent. Any director o
r officer of
any bank declared insolvent or placed under receivership by the Monetary Board w
ho refuses to
turn over the bank s records and assets to the designated receivers, or who tamper
s 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 shal
l be subject to the
penal provisions of the New Central Bank Act.
**Problems**
The conservator of B bank revoked a contract previously entered into by the bank
on
the ground that the lands subject of said contract presently commanded a much hi
gher price
than when it was sold. Is the revocation valid?
.
No. Power of conservator cannot impair the obligations of contracts. A contract
of sale
entered into by a bank cannot be revoked if at the time of the transaction, the
price agreed upon
was reasonable.
A buyer offered to buy the property of a bank which the latter accepted. However
, the
bank became insolvent before the buyer learned of the acceptance. Was there a pe
rfected
contract?
.
None. The accepted offer became ineffective when the bank became insolvent befor
e the
bank s acceptance of said offer came to the offeror s knowledge.
C deposited money with O bank. Before said deposits could be withdrawn, the BSP
passed a resolution suspending the bank s operations. The SC, howver, annulled sai
d
resolution, for which reason O bank is ready to accept its liability for the pay
ment to C of the
balance of the principal amount deposited with it. Is O bank liable for interest
thereon during the
period it was closed?
.
No. What enables a bank to pay stipulated interest on money deposited with it is
that thru the
other aspects of its operation, it is able to generate funds to cover the paymen
t of such interest.
If it is closed, it cannot generate such funds, hence it cannot pay the interest
.

Chapter 6: Foreign Banks and Trust Operations

I. Foreign Banks
entry to Phils. thru establishments of branches governed by For
eign Bank
Liberazation Act.
Offshore Banking governed by Offshore Banking System Decree
-conduct of banking transactions in foreign currency involving receipt of funds
from external sources and its utilization.
Offshore banking unit branch, subsidiary, affiliate of a foreign banking corpora
tion authorized
to transact offshore banking business in Phil.
Notes: Corporation Code
Sec. 133. Doing business without a license
foreign corporation transacting busin
ess in Phil.
may maintain or intervene in any action, suit or proceeding in any court or adm.
Agency n Phil
but cannot sue before Phil. courts though on any valid cause.
If without license ,no access to our courts and cannot transact business in Phil.
-By securing a license, a foreign entity would be giving assurance that it wll a
bide
by the decisions of our courts, even if adverse to it.
-Primary purpose of Statute: to compel foreign corp. if it desires to do busines
s
here, to submit itself to the jurisdiction of courts of the Phils.
Consistent with Corporation Code ..
Sec. 128. Resident agent; service of process:
-SEC shall require foreign bank to file with SEC a written power of atty.
designating a resident of the Phil. whom summons must be served, before it
issues a license for it to transact business in Phil.
-Foreign bank shall execute and file with SEC an agreement.
-If summons be made with SEC, latter shall transmit it by mail to the head offic
e of
such bank, within 10 days.
-In case of change of address of resident agent, shall notify SEC in writing.
Acquisition of Voting Stock in a Domestic Bank:
1.
Wthin 7 yrs from effectivitiy of GBL, MB may authorize foreign bank to acquire u
p to
100% of voting stock of ONLY one bank organized under laws of RP.
2.
Within same period, MB may authorize those foreign bank which prior to effectivi
ty of
GBL availed itself of 60% of voting stock of a bank under FBLA and Thrift Banks
Act,
to further acquire voting shares to extent necessary for it to own up to 100%.
3.
MB shall adopt measures to the control of 70% of resources and assets of entire
banking system is held by banks which are majority owned by Filipinos.
4.

Any right or incentive granted to foreign bank shall be equally enjoyed by banks
organized under laws of RP.
NOTES:
-all branches of foreign bank shall be treated as one unit for purpose of GBL; a
nd
all reference to Phil. branches of foreign banks shall be held to refer to such
unit.
-To protect interests of depositors and creditors of Phil. branches of FB, their
head office shall fully guarantee prompt payment of all liabilities of its Phil.
branch.
-Residents and citizens of the Phil. who are creditors shall have preferential r
ights
to assets of such branch.
Summons and Legal Process:
If served on agent or head of foreign bank,
-our courts acquires jurisdiction over such bank.
-binds the bank which it represents.
If authority of agent or head revoked; or he became mentally incompetent,
-bank shall designate a new one.
-File with SEC a duly authenticated nomination of such agent.
In absence of agent or head; or no person authorized ,
-summons and legal process and notices be made upon Bangko Sentral Deputy
Governor In-Charge of the supervising and examining departments. The latter
upon receipt, shall transmit by mail to president or secretary of bank at its he
ad
or principal office a duly certified copy.
-Sending of copy is necessary part of services and shall complete service.
-Registry receipt is prima facie evidence of transmission.
14 | P a g e

-All costs incurred in transmission shall be paid in advance by the party whose
instance the service is made.
Revocation of license of Foreign Bank:
-By Monetay Board.
-If insolvent, in imminent danger, or its continuance will involve probable loss
to
those it transacts business with.
-After revocation, it cannot transact business unless license is renewed or
reissued.
-After revocation. BSP shall take action to protect creditors and public.
-New Central Bank Act provides the sanction and penalties.
II. Liberalized Entry of Foreign Banks:
Purpose:
1.
to create more competitive environment.
2.
to encourage greater foreign participation
Policies:
1.
develop self-reliant economy controlled by Filipinos.
2.
promote a competitive and stable banking system
3.
provide a wider variety of financial services
4.
enhance competitiveness in international market to promote industrialization.
Modes of Entry:
a.
acquiring up
b.
investing up
r
Phil. laws.
c.
Establishing
FB may avail

to 60% of voting stocks of an existing bank

to 60% of voting stocks of new banking subsidiary incorporated unde

branches with full banking authority.

only 1 mode

-Only those included in top 150 FB in the world or top 5 banks in their country
of
origin allowed to mode (b) and (c).
-To establish a branch or subsidiary, it must be widely-owned and publicly liste
d in
its country of origin, unless owned by govt. of its country.
-FB shall be allowed entry under 3rd mode within 5 yrs. From effectivity of RA
7721. 6 FB may be allowed by MB.
-Additional 4 may be allowed on recommendation by MB and approval of
President.
-FB may open 3 branches in location of their choice, 3 branches in locations
designated by MB to insure balanced economic development in all regions.

Guidance for Approval: MB shall

1.
ensure geographic representation.
2.
consider strategic trade and investment relationship between Phil. and country o
f FB.
3.
study capacity, global reputation and stability in competitive environment of ap
plicant.
4.
ensure reciprocity rights are enjoyed by Phil banks in applicant s country.
5.
consider willingness to fully share their technology.
Adoption of measures: MB adopt those which
1.
ensures that 70% of resources and assets is held by domestic bank majority owned
by Filipinos
2.
prevents dominant market position by one bank
3.
secures the listing in SEC of shares of stocks
Capital Requirements:
1.
Locally Incorporated Subsidiaries
-minimum capital equal to that prescribed by MB for domestic banks of same
category.
2.
Foreign Bank Branches (entry under the 3rd mode)
-not less than US dollar equal to P210,000,000 and shall be entitled to 3 branch
es
o
capital shall include those permanently assigned plus net due to head
office outside the Philippines, 15% of which shall be inwardly remitted
and converted into Philippine currency, provided that amounts invested
in productive or export activities shall not be subject to conversion.
Establishment of Additional Branches
1.
FB can open three additional branches by inwardly remitting and converting into
Philippine currency as permanently assigned capital, P35 Million per additional
branch.
Head Office Guarantee-shall guarantee prompt payment of all liabilities of its P
hilippine
branches
Board of Directors-aliens may become members of the Board of a bank to the exten
t of the
foreign participation in the equity of said bank.
Equal treatment-foreign banks shall also be subject to limitations imposed upon
a Philippine
bank such as the SBL, capital to risk asset ratio, development loans incentives
etc.
Trust Operations
I. Authority to engage

only a stock corporation or a person duly authorized by the MB shall act as a

trustee
-the cardinal principle is fidelity
-Trust business-refers to any activity resulting from a trustor-trustee relation
ship
involving the appointment of a trustee for the administration of funds and/or
properties of the trustor for the benefit of the latter.
II. Conduct of Trust business
-Administer with diligence that a prudent man would exercise in the conduct of a
n
enterprise
-No transaction within the same trust entity will be allowed except when the
transaction is authorized by the trustor and the relationship of the trustee and
the
other party involved is fully disclosed
III. Registration of Articles of incorporation and by-laws
-The SEC shall not register the same or any amendment thereto, unless
accompanied by a certificate of authority issued by the BSP
IV. Minimum Capital-trust entity shall comply with the minimum paid-in capital r
equirements
which will be determined by the MB.
V. Powers of a trust entity:
-Powers incident to a corporation
-Act as trustee on any mortgage or bond issued by any body politic and to accept
and execute ant trust consistent with law
-Act as an administrator of a minor or incompetent upon the order of a court
-Act as the executor of any will if named as the executor
-Act as the administrator of any deceased person
-Accept and execute and trust for the holding and administration of any estate
including the rents and profits thereof
-Establish and manage common trust funds
15 | P a g e

VI. Transactions requiring prior authority

-Lend, sell, transfer or assign money or property to those related to the truste
e
-Purchase or acquire property or debt instruments to those related to the truste
e
-Invest in equities I which the trustee owns 50% of the capital
-Sell transfer assign or lend from one trust account to another
VII. Deposit for faithful performance of trust duties
Before transacting any business, there shall be a deposit made with the BSP
cash or securities approved by the MB an amount not less that P500,000
-This deposit can be increased by the MB whenever it is necessary
-The paid-in capital and surplus of the entity should be at least equal to the
amount required to be deposited
-A trust entity has the right to collect the interest earned on such deposit
-All claims arising out of the trust business shall have priority over all other
claims
as regards the deposits.
Bond of certain person required for the faithful performance of duties
I.
Requirements
a.
Those appointed by the court shall file a bond in such sum as the court may
require
b.
Upon application in the court, the subject matter of the trust or any part
thereof be deposited with a trust entity
c.
Upon presentation of a proof that the subject matter has been deposited
with a trust entity, the court may order reduction in the amount of the bond
given
d.
The reduced bond shall be adequate to secure the proper administration of
the property
II.
Exemption from Bond Requirement
a.
Trust entities required by the court to be an administrator, etc are not
required to give a bond
Operations of Trust Entity
I. Separation of Trust Business from General Business
-Shall be kept physically separated and distinct from the accounts of the genera
l
business of the trust entity
II. Investment limitations of a trust entity
-Limited to those loans or investments prescribed by law, MB or any court of
competent jurisdiction, unless directed by the instrument creating the trust
III. Real Estate acquired by a trust entity
-Unless otherwise directed by the trustor or the nature of the trust, real estat
e

acquired by the trust entity shall be acquired, hold, or conveyed under the ff
circumstances:
o
Mortgaged to it in good faith by way of security for debts
o
Conveyed to it in satisfaction of debts previously contracted
o
Purchased at sales under judgments, decrees, mortgages, or trust deeds
-These properties shall be conveyed within 5 years
-However, it may continue to hold it beyond the period when:
o
It shall not exceed 50% of the combined capital accounts of the entity
o
The investment of a bank in another corporation engaged in real estate
shall be considered as part of the total investment
IV. Investment in non-trust funds
b.
Shall be governed by the GBL an other applicable laws
V. Sanctions and Penalties-those who violate the pertinent provisions of the GBL
shall be
subject to sanctions and penalties
VI. Exemption of Trust Assets from claims
Those assets held by a trust entity shall not be subject to any claims other tho
se of the
parties interested in the trusts
VI. Establishment of Branches
Shall be in the place of business stated in the articles of incorporation
Additional branches can be established with the approval of the MB
The trust entity and its branches should be considered as one unit
VII. Advertisement of Services
In a dignified manner
Ready and willing to give full disclosure of services being offered
Conduct its dealings with transparency
VIII. Money of Government
Banks may not receive or hold as trustee any money from the government
o
Except: government-owned banks with respect to the ff:
.
Funds of LGUs for long term investments in securities and other
evidences guaranteed by the national government.
.
Funds of the government which are authorized by special laws to
be placed in trust
Chapter 7
The Bangko Sentral ng Pilipinas
I.
Creation, Responsibilities and corporate Powers of the Banko Sentral
A.

Declared Policy of the state

The State shall maintain a central monetary authority that shall function and
operate as an independent and accountable body corporate in the
discharge of its mandated responsibilities concerning money, banking and
credit. In line with this policy, and considering its unique functions and
responsibilities, the central monetary authority established under the NCBA,
while being a government owned corporation, shall enjoy fiscal and
administrative autonomy. (Section 1, NCBA)
B.
Creation of the bangko Sentral ng Pilipinas
Section 2 & 4 of NCBA:
SECTION 2 Creation of the Bangko Sentral. There is hereby established
an independent central monetary authority, which shall be a body corporate
known as the Bangko SEntral ng Pilipinas.
16 | P a g e

The capital of the Bangko Sentral shall be Fifty Billion Pesos, to be fully
subscribed by the Government of the Republic,
Ten Billion of which shall be fully paid for by the government upon effectivity
of this act
In such manner and form as the Government, through the Secretary of
Finance and the Secretary of Budget and Management, may thereafter
determine.
SECTION 4 Place of Business.
The Bangko SEntral shall have its
principal place of business in Metro Manila, but may maintain branches,
agencies and correspondents in such other places as the proper conduct of
its business may require.
Mandate by the Constitution:
The Congress shall establish an independent central monetary authority,
the members of whose governing board must be natural-born Filipino
citizens, of known probity, integrity, and patriotism, the majority of whom
shall come from the private sector. They shall also be subject to such other
qualifications and disabilities as may be prescribed by law. The authority
shall provide policy direction in the areas of money, banking, and credit. It
shall have supervision over the operations of banks and exercise such
regulatory powers as may be provided by law over the operations of finance
companies and other institutions performing similar functions.
Until the congress otherwise provides, the Central bank of the Philippines
operating under existing laws, shall function as the central monetary
authority.
C.
Responsibility and Primary Objectives of the bangko Sentral
1.
Responsibility of BSP -provide policy directions in the areas of money,
banking, and credit.
2.
It shall have supervision over operations of banks.
3.
It shall also exercise regulatory powers over the operations of finance
companies and non-bank financial institutions performing quasi-banking
functions, and institutions performing similar functions.
4.
Primary objective of BSP
maintain price stability conducive to a balanced
and sustainable growth in the economy.
5.
It shall also promote and maintain monetary stability and the convertibility of
the peso.
D.
Corporate Powers of the Bngko Sentral
1.
Adopt, alter and use a corporate seal
2.
Enter into contracts
3.
Lease or own real and personal property, and to dispose of the same
4.
Sue and be sued
5.

Perform all things necessary to carry out the purposes of the NCBA
6.
Acquire and hold assets and incur liabilities in connection with its
as authorized by the NCBA, or a s essential to the proper conduct of
operations
7.
Compromise, condone, or release any claim of or settled liability to
Bangko Sentral , regardless of the amount involved, under such terms
conditions as maybe prescribed by the monetary board.
E.
Power to Prosecute

operation
such
the
and

BSP has no power to prosecute; it is a government corporation created

principally to administer the monetary and banking System of the
Philippines and not a prosecution authority like the fiscal s office. But BSP
and its officials have the duty to cause the prosecution of those who violate
the banking laws.
BSP is an artificial person limited to its statutory powers. The closest it can
get to prosecuting is its power to sue and be sued (civil cases only).
Prosecution of violation of banking laws is not exclusive to BSP, anyone can
denounce this to any prosecuting authority because said violations
constitute a public offense and is a matter of public interest.
F.
Estoppel
17 | P a g e

BSP is committed to maintain the stability of the country s foreign exchange

reserve position. Underlying this commitment however is the government s
strict and faithful adherence to basic principles of fairness and decency
under the Bill of Rights. Hence BSP circulars/ memoranda must be
implemented in a manner that would not only safeguard or harmonize them
with government programs designed to uplift or promote the country s level
of production and employment, but at the same time avoid irreparable or
grave prejudice to participants of said program.
Thus in case banks or banking institutions already faithfully complied with
BASP s directives, BSP is stopped from enforcing circulars that would deny
banks or banking institutions of their rights.
II. Authority of the Bangko Sentral
A.
Supervisory Powers of the bangko Sentral
Supervisory powers include the following:
I.
Issuance of rules of conduct or the establishment of standards of
operation for uniform application to all institutions and functions
covered.
II.
Conduct of examination to determine compliance with the laws and
regulations if the circumstances so warrant and determined by the
monetary board.
III.
Overseeing to ascertain that laws are complied with.
IV. Regular investigation which shall not be oftener than once a year
V.
Inquiry into the solvency and liquidity of the institution
VI. Enforcing prompt corrective action.
B. Phase out of Bangko Sentral Powers Over Building Loan and Association
Within 3 years form effectivity of GBl, the BSP shall phase out and transfer
its supervising and regulatory powers over building and loan associations to
the Home Insurance and Guarantee Corporation.
C.
Policy Direction; Ratios, Ceilings and Limitations
BSP shall provide policy direction in the areas of Money, Banking and Credit
Monetary Board may prescribe ratios, ceilings, and limitations or other forms
of regulation on the different types of accounts and practices of banks and
quasi-banks which shall conform to internationally accepted standards,
including those of the Bank of International Settlements.
Monetary Board may exempt particular categories of transactions from such
ratios, ceilings and limitations, but not limited to exceptional cases or to
enable a bank or quasi-bank under rehabilitation or during a merger or
consolidation to continue business with safety to its creditors, depositors
and the general public.
III. The Monetary Board
The powers and functions of the bangko Sentral may be exercised by the
BAngko SEntral Monetary Board.
A.
Composition

Composed of 7 members appointed by the president of the Philippines for a

term of 6 years. The members are:
Governor
o
Chairman of the monetary board
o
Appointment subject to confirmation of the Commission on
Appointments
o
If governor cannot attend a meeting of the board, he shall
designate a Deputy Governor to act as his alternate. In such
event, the Monetary Board shall designate one of its members as
acting chairman.
A member of the cabinet to be designated by the President.
o
Whenever such cabinet cannot attend a meeting of the board, he
shall designate a Undersecretary in his department to attend as
his alternate.
5 members shall come from the private sector, all of whom shall serve fulltime.
o
Of the members first appointed, 3 shall have a term of 6 years
and the other 2, 3 years.
18 | P a g e

B.
Vacancies
Cause of vacancy: death, resignation, removal
A new member shall be appointed who shall serve the unexpired term of the
member concerned.
C.
Qualifications of the Members of the monetary Board
i.
Natural born citizen
ii.
35 yrs old; chairman 40yrs old
iii.
Good moral character
iv.
Known probity and patriotism
v.
Unquestionable integrity
vi.
Recognized competence in social and economic disciplines.
D.
Disqualifications of Monetary board Members
i.
Disqualifications imposed by RA 6713
(An act establishing a code of conduct and ethical standards for public
officials and employees)
ii.
Being a director, officer, employee, consultant, lawyer., agent,
stockholder of any bank or any other institution under the supervision
of the bangko Sentral; he must resign first to assume office as member
of the monetary board
iii.
Holding public office or public employment during their tenure.
iv.
Person connected directly with any multilateral banking or financial
institution.
v.
Having a substantial interest in any private bank in the Philippines,
within 0ne year prior to his appointment
vi.
No member of the monetary board shall be employed in any such
institution within two years after expiration of his term except when he
serves as an official representative of the Government to such
Institution. (section 9 NCBA)
E.
Grounds for removal of Monetary Board members
The president may remove any member of the monetary board for these
reasons :
i.
Member is subsequently disqualified under section 9 of NCBA
ii.
Physically or mentally incapacitatedtaht he cannot properly discharge
his duties and responsibilities as such incapacity a\has lasted for more
than 6 months.
iii.

Guilty of fraudulent or illegal acts or which are manifestly opposed to

the aims and interests of the bangko sentral.
iv.
Member no longer possesses the qualifications.
F.
Meetings, Quorum, Decisions and Proceedings of the Monetary board
i.
The Monetary Bard shall meet at least once a week. The board may be
called to a meeting by the governor of the bangko sentral or by 2 other
members of the board
ii.
Presence of 4 members constitutes a quorum. Provided that the
governor is always among those 4
iii.
Decisions of MB shall require concurrence of 4 members.
i. Exceptions ( 5 votes are needed in these cases):
o
Sec 61 GBL -In allowing banks to delay publication of its
statements of financial condition in periods of national or local
emergency, or imminent panic which directly monetary and
banking stability, upon application of a bank.
19 | P a g e

o
Section 28 NCBA. Examination and Fees.
The supervising and
examining department head, personally or by deputy, shall
examine the books of every banking institution once in every
twelve (12) months, and at such other times as the Monetary
Board by an affirmative vote of five (5) members, may deem
expedient and to make a report on the same to the Monetary
Board: Provided, That there shall be an interval of at least twelve
(12) months between annual examinations.
o
Section 72 NCBA. -in the imminence of, or during an exchange
crisis, or in time of national emergency 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 temporarily suspend or restrict sales of
exchange by the Bangko Sentral, and may subject all transactions
in gold and foreign exchange to license by the Bangko Sentral,
and 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.
o
Section 84. Emergency Loans and Advances. In periods of
national and/or local emergency or of imminent financial panic
which directly threaten monetary and banking stability, 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: 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.
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 in a precarious financial condition or under
serious financial pressures brought by unforeseen events, or
events which, though foreseeable, could not be prevented by the
bank concerned: Provided, however, That the Monetary Board
has ascertained that the bank is not insolvent and has the assets
defined hereunder to secure the advances: Provided, further,
That a concurrent vote of at least five (5) members of the
Monetary Board is obtained.
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. The amount of the first tranche shall be
limited to twenty-five percent (25%) of the total deposit and
deposit substitutes of the institution and shall be secured by
government securities to the extent of their applicable loan values
and other unencumbered first class collaterals which the

Monetary Board may approve: Provided, That if as determined by

the Monetary Board, the circumstances surrounding the
emergency warrant a loan or advance greater than the amount
provided hereinabove, the amount of the first tranche may exceed
twenty-five percent (25%) of the bank's total deposit and deposit
substitutes if the same is adequately secured by applicable loan
values of government securities and unencumbered first class
collaterals approved by the Monetary Board, and the principal
stockholders of the institution furnish an acceptable undertaking
to indemnify and hold harmless from suit a conservator whose
appointment the Monetary Board may find necessary at any time.
Prior to the release of the first tranche, the banking institution
shall submit to the Bangko Sentral a resolution of its board of
directors authorizing the Bangko Sentral to evaluate other assets
of the banking institution certified by its external auditor to be
good and available for collateral purposes should the release of
the subsequent tranche be thereafter applied for.
The Monetary Board may, by a vote of at least five (5) of its
members, authorize the release of a subsequent tranche on
condition that the principal stockholders of the institution:
(a) furnish an acceptable undertaking to indemnify and
hold harmless from suit a conservator whose
appointment the Monetary Board may find necessary at
any time; and
(b) provide acceptable security which, in the judgment
of the Monetary Board, would be adequate to
supplement, where necessary, the assets tendered by
the banking institution to collateralize the subsequent
tranche.
In connection with the exercise of these powers, the prohibitions
in Section 128 of this Act shall not apply insofar as it refers to
acceptance as collateral of shares and their acquisition as a result
of foreclosure proceedings, including the exercise of voting rights
pertaining to said shares: Provided, however, That should the
Bangko Sentral acquire any of the shares it has accepted as
20 | P a g e

collateral as a result of foreclosure proceedings, the Bangko

Sentral shall dispose of said shares by public bidding within one
(1) year from the date of consolidation of title by the Bangko
Sentral
G.
Deputy Governors may Attend Meetings of the Monetary Board
He may attend with the right to be heard
H.
Salaries of the Governor and Members of the Monetary Board
Salaries shall be fixed by the president at an amount commensurate to the
importance and responsibility attached to the position.
I.
Personal or Pecuniary Interest
Any member of the MB with personal or pecuniary interest in any matter in
the agenda of the monetary board shall disclose his interest to the board
and shall retire from the meeting when the matter is taken up. The decision
taken on the matter shall be made public. The minutes shall reflect the
disclosure made and the retirement of the member concerned from the
meeting.
J.
Scope of the Authority of the Monetary Board
a.
Issue rules and regulations it considers necessary for the effective
discharge of the responsibilities and exercise of the powers vested upon the
Monetary Board and the Bangko Sentral.
b.
Direct the management, operations, and administration of the Bangko
Sentral, reorganize its personnel and issue such rules and regulations as it
may deem necessary or convenient for this purpose.
c. Establish a Human Resource management system which shall govern the
selection, hiring, or dismissal of all personnel. Such system shall aim to
establish professionalism and excellence in all levels of BSP in accordance
with the sound principles of management.
i.
A compensation structure, based on job evaluation studies and wage
surveys and subject to the Board's approval, shall be instituted as an
integral component of the Bangko Sentral's human resource
development program: Provided, That the Monetary Board shall make
its own system conform as closely as possible with the principles
provided for under Republic Act No. 6758: Provided, however, That
compensation and wage structure of employees whose positions fall
under salary grade 19 and below shall be in accordance with the rates
prescribed under Republic Act No. 6758.
ii.
On the recommendation of the Governor, appoint, fix the
remunerations and other emoluments, and remove personnel of the
Bangko Sentral, subject to pertinent civil service laws: Provided, That
the Monetary Board shall have exclusive and final authority to promote,
transfer, assign, or reassign personnel of the Bangko Sentral and
these personnel actions are deemed made in the interest of the service
and not disciplinary: Provided, further, That the Monetary Board may
delegate such authority to the Governor under such guidelines as it
may determine.
d.

adopt an annual budget for and authorize such expenditures by the Bangko
Sentral as are in the interest of the effective administration and operations
of the Bangko Sentral in accordance with applicable laws and regulations;
and
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.
i.
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
21 | P a g e

counsel that the person to be indemnified did not commit any

negligence or misconduct.
ii.
The costs and expenses incurred in defending the
aforementioned action, suit or proceeding may be paid by the
Bangko Sentral in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf
of the member, officer, or employee to repay the amount
advanced should it ultimately be determined by the Monetary
Board that he is not entitled to be indemnified as provided in this
subsection.
G.
Responsibilities of the Members of the Monetary Board, Officials, Examiners, and
Employees of the Bangko Sentral
a.
Members of the Monetary Board, officials, examiners, and employees
of the Bangko Sentral who willfully violate this Act or who are guilty of
negligence, abuses or acts of malfeasance or misfeasance or fail to
exercise extraordinary diligence in the performance of his duties shall
be held liable for any loss or injury suffered by the Bangko Sentral or
other banking institutions as a result of such violation, negligence,
abuse, malfeasance, misfeasance or failure to exercise extraordinary
diligence.
b.
Similar responsibility shall apply to members, officers, and employees of the
Bangko Sentral for:
i.
the disclosure of any information of a confidential nature, or
any information on the discussions or resolutions of the
Monetary Board, or about the confidential operations of the
Bangko Sentral, unless the disclosure is in connection with
the performance of official functions with the Bangko Sentral,
or is with prior authorization of the Monetary Board or the
Governor; or
ii.
the use of such information for personal gain or to the
detriment of the Government, the Bangko Sentral or third
parties: Provided, however, That any data or information
required to be submitted to the President and/or the
Congress, or to be published under the provisions of this Act
shall not be considered confidential.
A.
Powers and Duties of the Governor
a. prepare the agenda for the meetings of the monetary board and to
submit for the consideration of the monetary board the policies and
measures which he believes to be necessary to carry out the purposes
and provisions of this act
b.
execute and administer the policies and measures approved by
the Monetary Board;
c.
direct and supervise the operations and internal administration of
the Bangko Sentral. The Governor may delegate certain of his
administrative responsibilities to other officers or may assign specific
tasks or responsibilities to any full-time member of the Monetary Board
without additional remuneration or allowance whenever he may deem
fit or subject to such rules and regulations as the Monetary Board may

prescribe;
d.
appoint and fix the remunerations and other emoluments of
personnel below the rank of a department head in accordance with the
position and compensation plans approved by the Monetary Board, as
well as to impose disciplinary measures upon personnel of the Bangko
Sentral, subject to the provisions of Section 15(c) of this Act: Provided,
That removal of personnel shall be with the approval of the Monetary
Board;
e. render
opinions, decisions, or rulings, which shall be final and
executory until reversed or modified by the Monetary Board, on
matters regarding application or enforcement of laws pertaining to
institutions supervised by the Bangko Sentral and laws pertaining to
quasi-banks, as well as regulations, policies or instructions issued by
the Monetary Board, and the implementation thereof; and
IV. The Governor and Deputy Governors of the Bangko Sentral
Governor shall be chief executive officer of the Bangko Sentral ng Pilipinas.
22 | P a g e

f. exercise such other powers as may be vested in him by the Monetary

Board.
B.
Powers of the Governor as Representative of the Monetary Board and the
Bangko Sentral
The Governor of the Bangko Sentral shall be the principal representative of
the Monetary Board and of the Bangko Sentral and, in such capacity and in
accordance with the instructions of the Monetary Board, with the following
powers:
a. represent the Monetary Board and the Bangko Sentral in all dealings with
other offices, agencies and instrumentalities of the Government and all other
persons or entities, public or private, whether domestic, foreign or internation
al
b. sign contracts entered into by the Bangko Sentral, notes and securities
issued by the Bangko Sentral, all reports, balance sheets, profit and loss
statements, correspondence and other documents of the Bangko Sentral. The
signature of the Governor may be in facsimile whenever appropriate
c. represent the Bangko Sentral, either personally or through counsel,
including private counsel, as may be authorized by the Monetary Board, in any
legal proceedings, action or specialized legal studies
d. delegate his power to represent the Bangko Sentral, as provided in
subsections (a), (b) and (c) of this section, to other officers upon his own
responsibility: Provided, however, That in order to preserve the integrity and t
he
prestige of his office, the Governor of the Bangko Sentral may choose not to
participate in preliminary discussions with any multilateral banking or financia
l
institution on any negotiations for the Government within or outside the
Philippines. During the negotiations, he may instead be represented by a
permanent negotiator.
C. Emergencies
a.
In case of emergencies where time is sufficient to call a meeting of the
Monetary Board, the Governor of the Bangko Sentral, with the
concurrence of two (2) other members of the Monetary Board, may
decide any matter or take any action within the authority of the Board.
b.
The Governor shall submit a report to the President and Congress
within seventy-two (72) hours after the action has been taken.
c.
At the soonest possible time, the Governor shall call a meeting of the
Monetary Board to submit his action for ratification.
D.
Limitations on outside interests of the governor and the Full-time Members of th
e
Board
The governor of the Bangko Sentral and the full-time members of the Board
shall:
a.
limit their professional activities to those pertaining directly to their
positions with the Bangko Sentral.
b.
not accept any other employment, whether public or private,
remunerated or ad honorem, with the exception of positions in
eleemosynary, civic, cultural or religious organizations or whenever, by
designation of the President, the Governor or the full-time member is
tasked to represent the interest of the Government or other

government agencies in matters connected with or affecting the

economy or the financial system of the country.
E.
Number and Functions of Deputy Governors
a.
The Governor of the Bangko Sentral, with the approval of the Monetary
Board, shall appoint not more than three (3) Deputy Governors who
shall perform duties as may be assigned to them by the Governor and
the Board.
23 | P a g e

V.
b. In the absence of the Governor, a Deputy Governor designated by the
Governor shall act as chief executive of the Bangko Sentral and shall
exercise the powers and perform the duties of the Governor.
Whenever the Government is unable to attend meetings of government
boards or councils in which he is an ex officio member pursuant to
provisions of special laws, a Deputy Governor as may be designated
by the Governor shall be vested with authority to participate and
exercise the right to vote in such meetings.
Operations of the Bangko Sentral
C.
released to interested persons or entities: provided finally, theth the
case of data on banks, the provisions of section 27 shall apply.
Training of technical Personnel
The Bangko Sentral shall promote and sponsor the training of technical
personnel in the field of money and banking. Toward this end, the Bangko
A. Research and statistics of the bangko Sentral Sentral is hereby authorized to
defray the costs of study, at home or abroad,
of qualified employees of the Bangko Sentral, of promising university
The Bangko Sentral shall prepare data and conduct economic research for
the guidance of the Monetary Board in the formulation and implementation
of its policies. Such data shall include, among others, forecasts of the
graduates or of any other qualified persons who shall be determined by
proper competitive examinations. The Monetary Board shall prescribe rules
and regulations to govern the training program of the Bangko Sentral.
balance of payments of the Philippines, statistics on the monthly movement
of the monetary aggregates and of prices and other statistical series and
economic studies useful for the formulation and analysis of monetary,
banking, credit and exchange policies.
D. Scope of the Supervision and Examination by the bangko Sentral
a. The BSP shall have supervision over, and conduct periodic or special
examination of, banking institutions and quasi-banks, including their
B. Scope of authority of bangko Sentral to Obtain data and Information
subsidiaries and affiliates.
a. The Bangko Sentral shall have the authority to request from
government offices and instrumentalities, or government-owned or
i. Subsidiary more than 50% of the voting stock is owned by
a bank
controlled corporations, any data which it may require for the proper
discharge of its functions and responsibilities.
ii. Affiliate 50% or less, is owned by a 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 MB.
b.
The Bangko Sentral through the Governor or in his absence, a duly
authorized representative shall have the power to issue a subpoena for
the production of the books and records for the aforesaid purpose. b. The depart
ment heads and the examiners of the supervising and/or
Those supply the bank with data requested or required, shall be examining depart
ments are hereby authorized to
subject to punishment for contempt in accordance with the provisions
of the Rules of Court. i. administer oaths to any director, officer, or employee
of any
institution under their respective supervision or subject to
their examination and to
c. Data on individual firms, other htan banks, gathered by the Department ii. co
mpel the presentation of all books, documents, papers or
of Economic Research and other departments or units of the Bangko records necess

ary in their judgment to ascertain the facts

Sentral shall not be made available to any person or entity outside of relative
to the true condition of any institution as well as the
the Bangko Sentral whether public or private escept under order of the books and
records of persons and entities relative to or in
court or under such conditions as may be prescribed by the monetary connection w
ith the operations, activities or transactions of
board: Provided however, that the collected data on firms may be the institution
under examination, subject to the provision of
existing laws protecting or safeguarding the secrecy or
24 | P a g e

confidentiality of bank deposits as well as investments of

private persons, natural or juridical, in debt instruments
issued by the Government.
E.
Restraining Order or Injunction
a.
Court cannot order restraining order prohibiting the BSP from
examining any institution subject to the supervision and examination of
the BSP.
i.
Exception: there is convincing proof that the action of the
BSP is plainly arbitrary and made in bad faith and the
petitioner or plaintiff files with the clerk or judge of the court
in which the action is pending a bond is executed infavor of
the BSP in the amount fixed by court.
b.
Provisions of the Rules of court regarding Preliminary injunction, in so
far as they are applicable, and not inconsistent shall govern the
issuance and dissolution of the restraining order or injunction.
VI. Director, Officer or Stockholder and Related Interests
A.
Contracting Loans
a.
Any director, officer or stockholder who, together with his related
interest, contracts a loan or any form of financial accommodation from:
i.
his bank; or
ii.
from a bank
1.
which is a subsidiary of a bank holding company
of which both his bank and the lending bank are
subsidiaries or
2.
in which a controlling proportion of the shares is
owned by the same interest that owns a controlling
proportion of the shares of his bank, in excess of
five percent (5%) of the capital and surplus of the
bank, or in the maximum amount permitted by law,
whichever is lower,
shall be required by the lending bank to waive the secrecy of his deposits of
whatever nature in all banks in the Philippines.
b.
Any information obtained from an examination of his deposits shall be
held strictly confidential and may be used by the examiners only in
connection with their supervisory and examination responsibility or by
the Bangko Sentral in an appropriate legal action it has initiated
involving the deposit account.
B.
Prohibitions Against Personnel of the Bangko Sentral
(same as disqualifications of MB Member)
VII. Examination of Banking Institutions
A.
Frequency of Examination
The supervising and examining department head, personally or by deputy,

shall examine the books of every banking institution once in every twelve
(12) months, and at such other times as the Monetary Board by an
affirmative vote of five (5) members, may deem expedient and to make a
report on the same to the Monetary Board: Provided, That there shall be an
interval of at least twelve (12) months between annual examinations.
B.
Affording Opportunity to Examine
Bank concerned shall afford the head of the appropriate supervising and
examining departments full opportunity to examine
Books
Cash and available assets
General condition
Anytime during the banking hours when requested by BSP
The reports on the examinations will not be open to the public unless
incidental to any proceedings authorized or is necessary for the prosecution
of violations in connection with the business of such institutions.
C.
Service Fees
25 | P a g e

Banks and quasi-banks subject to examination of the BSP shall pay the
BSP within 30 days of each year, an annual fee.
Amount of fee is prescribed by the MB. It would be a percentage of its
average total assets during the preceding year as shown by its end of
month balance sheets, after deducting cash on hand and the amount due
from banks, including the bangko sentral and the banks abroad.
VIII. Administration
A.
Operating Departments of the Bangko Sentral
The Monetary Board shall, in accordance with its authority under this Act,
determine and provide for such operating departments and other offices,
including a public information office, of the Bangko Sentral as it deems
convenient for the proper and efficient conduct of the operations and the
accomplishment of the objectives of the Bangko Sentral. The functions and
duties of such operating departments and other offices shall be determined
by the Monetary Board.
B.
Required Reports and Publications of the Bangko Sentral
a.
The BSP shall publish a general balance sheet within 60 days after the
end of each month except December, which shall be submitted 90
days after end of month.
It shall contain the volume and compositions of its assets and liabilities
as of the last working day of the month.
b.
MB shall publish the ff reports and submit them to the President and to
congress.
i.
Analysis of economic and financial developments, including
the condition of net international reserves and monetary
aggregate. (90 days after end of each quarter)
ii.
Preceeding year s budget and profit and loss statement of
the bankgo sentral showing in reasonable detail the result of
its operations. (within 90 days after end of year)
iii.
Review of the state of the financial system ( 120 days after
end of semester)
iv.
Abnormal movements in monetary aggregates and the
general price level. (as soon as practicable), and remedial
measures in response to such abnormal movements (not
later than 27 hours)
C.
Annual Report of the Bangko Sentral
a.
Before the end of March of each year, the Bangko Sentral shall publish
and submit to the President and the Congress an annual report on the
condition of the Bangko Sentral including a review of the policies and
measures adopted by the Monetary Board during the past year and an
analysis of the economic and financial circumstances which gave rise
to said policies and measures.
b.
The annual report shall also include a statement of the financial
condition of the Bangko Sentral and a statistical appendix which shall

present, as a minimum, the following data:

i.
the monthly movement of monetary aggregates and their
components;
ii.
the monthly movement of purchases and sales of foreign
exchange and of the international reserves of the Bangko
Sentral;
iii.
the balance of payments of the Philippines;
iv.
monthly indices of consumer prices and of import and export
prices;
v.
the monthly movement, in summary form, of exports and
imports, by volume and value;
vi.
the monthly movement of the accounts of the Bangko
Sentral and of other banks;
vii.
the principal data on government receipts and expenditures
and on the status of the public debt, both domestic and
foreign; and
viii.
the texts of the major legal and administrative measures
adopted by the Government and the Monetary Board during
the year which relate to the functions or operations of the
Bangko Sentral or of the financial system.
c.
The Bangko Sentral shall publish another version of the annual report
in terms understandable to the layman.
d.
Failure to comply with the reportorial requirements pursuant to this
article without justifiable reason as may be determined by the
Monetary Board shall cause the withholding of the salary of the
personnel concerned until the requirements are complied with.
26 | P a g e

D.
Signatures on Statements
Balance sheets and statements shall be signed by the officers responsible for
their preparation.
IX. Profits, Losses, and Special accounts
A.
Fiscal Year
a.
Profits or losses arising from any revaluation of the Bangko Sentral's
net assets or liabilities in gold or foreign currencies with respect to the
Philippine peso shall not be included in the computation of the annual
profits and losses of the Bangko Sentral.
b.
Any profits or losses arising in this manner shall be offset by any
amounts which, as a consequence of such revaluations, are owed by
the Philippines to any international or regional intergovernmental
financial institution of which the Philippines is a member or are owed
by these institutions to the Philippines.
c.
Any remaining profit or loss shall be carried in a special frozen account
which shall be named "Revaluation of International Reserve" and the
net balance of which shall appear either among the liabilities or among
the assets of the Bangko Sentral, depending on whether the
revaluations have produced net profits or net losses.
The Revaluation of International Reserve account shall be neither credited nor
debited for any purposes other than those specifically authorized in this sectio
n.
B.
Computation of Profits and Losses
Within the first thirty (30) days following the end of each year, the Bangko Sen
tral
shall determine its net profits or losses. In the calculation of net profits, th
e
Bangko Sentral shall make adequate allowance or establish adequate reserves
for bad and doubtful accounts.
C.
Distribution of Net Profits
Within the first sixty (60) days following the end of each fiscal year, the
Monetary Board shall determine and carry out the distribution of the net
profits, in accordance with the following rule:
a.
Fifty percent (50%) of the net profits shall be carried to surplus
b.
the remaining fifty percent (50%) shall revert back to the National
Treasury, except as otherwise provided in the transitory provisions of
this Act.
D.
Revaluation of Profits and Losses
a.
Profits or losses arising from any revaluation of the Bangko Sentral's
net assets or liabilities in gold or foreign currencies with respect to the
Philippine peso shall not be included in the computation of the annual
profits and losses of the Bangko Sentral.
b.
Any profits or losses arising in this manner shall be offset by any

amounts which, as a consequence of such revaluations, are owed by

the Philippines to any international or regional intergovernmental
financial institution of which the Philippines is a member or are owed
by these institutions to the Philippines.
c.
Any remaining profit or loss shall be carried in a special frozen account
which shall be named "Revaluation of International Reserve" and the
net balance of which shall appear either among the liabilities or among
the assets of the Bangko Sentral, depending on whether the
revaluations have produced net profits or net losses.
The Revaluation of International Reserve account shall be neither credited nor
debited for any purposes other than those specifically authorized in this sectio
n.
E.
Suspense Accounts
Amounts outstanding as of the effective date of this Act based on these accounts
shall continue to be for the account of the Central Bank and shall be governed b
y
the transitory provisions of this Act.
The Revaluation of International Reserve (RIR) account as of the effective date
of this Act of the Central Bank shall continue to be for the account of the same
entity and shall be governed by the provisions of Section 44 of Republic Act No.
265, as amended, until otherwise provided for in accordance with the transitory
provisions of this Act.
F.
The Auditor
The Chairman of the Commission on Audit shall act as the ex officio auditor of
the Bangko Sentral and, as such, he is empowered and authorized to appoint a
representative who shall be the auditor of the Bangko Sentral and, in accordance
with law, fix his salary, and to appoint and fix salaries and number of personne
l to
assist said representative in his work. The salaries and other emoluments shall
be paid by the Commission. The auditor of the Bangko Sentral and personnel
under him may be removed only by the Chairman of the Commission.
The representative of the Chairman of the Commission must be a certified public
accountant with at least ten (10) years experience as such. No relative of any
27 | P a g e

member of the Monetary Board or the Chairman of the Commission within the
sixth degree of consanguinity or affinity shall be appointed such representative
.
implemented by the Bangko Sentral or any order, instruction, rule or
regulation issued by the Monetary Board, the person or persons responsible
for such violation shall unless otherwise provided in this Act be punished by
a fine of not less than Fifty thousand pesos (P50,000) nor more than Two
hundred thousand pesos (P200,000) or by imprisonment of not less than
X. Penalty for Violation two (2) years nor more than ten (10) years, or both, at
the discretion of the
court.
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 t
he
offender is a director or officer of a bank, quasi-bank or trust entity, the Mon
etary
Board may also suspend or remove such director or officer. If the violation is D
. Administrative Sanctions on Banks and Quasi Banks
committed by a corporation, such corporation may be dissolved by quo warranto
proceedings instituted by the Solicitor General. a. Administrative violation and
penalties:
Grounds for administrative sanctions imposable by the MB to any bank or
quasi-bank:
A. Penalty for Refusal to make Reports
i. Any willful violation of its charter or by-laws
Any officer, owner, agent, manager, director or officer-in-charge of any institu
tion
subject to the supervision or examination by the Bangko Sentral within the purvi
ew of
this Act who, being required in writing by the Monetary Board or by the head of
the
ii. Willful delay in the submission of required reports and
publications
supervising and examining department willfully refuses to file the required repo
rt or
permit any lawful examination into the affairs of such institution shall be puni
shed by a iii. Refusal to permit examination into the affairs of the institution
fine of not less than Fifty thousand pesos (P50,000) nor more than One hundred
thousand pesos (P100,000) or by imprisonment of not less than one (1) year nor m
ore
than five (5) years, or both, in the discretion of the court.
iv. Willful making of false or misleading statement to the board or the
appropriate supervising and examining department examiners.
v. Any willful failure or refusal to comply with, or violation of any
banking law or any rder, instruction or regualtin issued by the
B. Penalty for Willful Making of a False or Misleading Statement on a Material F
act Monetary Board, or any order, instruction or ruling by the
governor
punished by a fine of not less than One hundred thousand pesos
(P100,000) nor more than Two hundred thousand pesos (P200,000), or by
imprisonment of not more than (5) years, or both, at the discretion of the
vi. Conducting business in an unsafe or unsound manner as may be
determined by the MB.
court.
Imposable sanctions:
i. Fines not exceeding 30,000 for each day of violation. Mb
would take into consideration the attendant circumstances,

C. Proceedings Upon and Penalty for Violation of NCBA and Other banking laws. Ru
les
Regulations, Orders or Instructions
such as the nature and gravity of the violation or irregularity
and the size of the bank.
a. A bank, quasi-bank, person, or any entity who willfully the NCBA or other
banking laws implemented by BSP, or any order, instruction, rule or
ii. Suspension of rediscounting privileges or access to BSP
credit facilities
regulation issued by the monetary board, shall be punished by a fine not
less than 50, 000 and not more than 200,000 or imprisonment of not less
than 2 years. but not more than 10 years.
b. Whenever a bank or quasi-bank, or whenever any person or entity willfully
iii. suspension of lending or foreign exchange operations or
authority to accept new deposits or make new investments;
iv. suspension of interbank clearing privileges; and/or
v. revocation of quasi-banking license.
violates this Act or other pertinent banking laws being enforced or
28 | P a g e

b.
Whether or not there is an administrative proceeding, if the institution
and/or the directors and/or officers concerned continue with or
otherwise persist in the commission of the indicated practice or
violation, the Monetary Board may issue an order requiring the
institution and/or the directors and/or officers concerned to cease and
desist from the indicated practice or violation, and may further order
that immediate action be taken to correct the conditions resulting from
such practice or violation. The cease and desist order shall be
immediately effective upon service on the respondents.
c.
The respondents shall be afforded an opportunity to defend their action
in a hearing before the Monetary Board or any committee chaired by
any Monetary Board member created for the purpose, upon request
made by the respondents within five (5) days from their receipt of the
order. If no such hearing is requested within said period, the order shall
be final. If a hearing is conducted, all issues shall be determined on the
basis of records, after which the Monetary Board may either reconsider
or make final its order.
d.
The Governor is hereby authorized, at his discretion, to impose upon
banking institutions, for any failure to comply with the requirements of
law, Monetary Board regulations and policies, and/or instructions
issued by the Monetary Board or by the Governor, fines not in excess
of Ten thousand pesos (P10,000) a day for each violation, the
imposition of which shall be final and executory until reversed, modified
or lifted by the Monetary Board on appeal.
Chapter 8: Currency, Monetary Stabilization and Functions of the BSP
I.
The Unit of Monetary Value
A.
The Peso (P)
-unit of monetary value in the Philippines
-divided into 100 equal parts: centavos (c)
-legal tender; all monetary obligations shall be settled in Philippine currency
.
parties may agree to settle such obligation in any other
currency at the time of the payment.
B.
Currency, defined
-all Philippine notes and coins issued or circulating in accordance with the
NCBA.
C.
Value of Currency
-has value because people are willing to accept it in exchange of goods,
services or payment of debts.
II.
Issue of Means of Payment
A.
Exclusive Issue Power
(i)
Bangko Sentral-SOLE power to issue currency
(ii)
Monetary Board-may issue regulations to prevent circulation of
foreign currency, currency substitutes, or to prevent the

reproduction of facsimiles of Bangko Sentral notes.

(iii)
Bangko Sentral-has authority to investigate, arrest, search and
seize for the purpose of maintaining the integrity of the currency.
(iv)
Violation: imprisonment of not less than five years but not more
than ten years. In case the RPC provides for a greater penalty,
the latter shall prevail.
*An Exception to Territoriality of Penal Laws (RPC)
Art. 2. Application of its provisions.
Except as provided in the treaties and la
ws of
preferential application, the provisions of this Code shall be enforced not only
within
the Philippine Archipelago, including its atmosphere, its interior waters and ma
ritime
zone, but also outside of its jurisdiction, against those who:
1. Should commit an offense while on a Philippine ship or airship
2. Should forge or counterfeit any coin or currency note of the Philippine Islan
ds or
obligations and securities issued by the Government of the Philippine Islands;ch
an
robles virtual law library
3. Should be liable for acts connected with the introduction into these islands
of the
obligations and securities mentioned in the presiding number;
4. While being public officers or employees, should commit an offense in the exe
rcise
of their functions; or
5. Should commit any of the crimes against national security and the law of nati
ons,
defined in Title One of Book Two of this Code.
*Related Crimes under the RPC
1. Art. 163. Making and Importing and Uttering False Coins
2. Art. 164. Mutilation of Coins; Importation and Utterance of Mutilated Coins
3. Art. 165. Selling of Flase or Mutilated Coin, Without Connivance
4. Art. 166. Forging Treasury or Bank Notes on Other Documents Payable to Bearer
;
Importing, and Uttering Such False or Forged Notes and Documents
5. Art. 167. Counterfeiting, Importing and Uttering Instruments Not Payable to B
earer
6. Art. 168. Illegal Possession and Use of False Treasury or Bank Notes and Othe
r
Instruments of Credit
7. Art. 169. How forgery is committed. The forgery referred to in this section m
ay be
committed by any of the following means:
1. By giving to a treasury or bank note or any instrument, payable to bearer
or order mentioned therein, the appearance of a true genuine document.
2. By erasing, substituting, counterfeiting or altering by any means the
figures, letters, words or signs contained therein.
B.
Liability for Notes and Coins
(i)
Notes and coins issued by the BSP shall be liabilities of the BSP.
Such may be issued only against, and in amounts not exceeding,
the assets of the BSP. Such shall be a first and paramount lien on
all assets of the BSP.
(ii)

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 BSP.
C.
Legal Tender Power
-all notes and coins issued by the BSP= Legal Tender for all debts
*coins: a. 25c and above denominations shall not exceed P50.00
b. 10c or less denominations shall not exceed P20.00
29 | P a g e

-checks representing demand deposits do not have legal tender power: one
(ii) Such notes called in for replacement shall remain legal tender for
cannot be compelled to accept the same.
*a check cleared and credited to the account of the creditor =
delivery of cash to such creditor.
*Related Civil Code Provisions
Art. 1249. The payment of debts in money shall be made in the currency stipulate
d,
and if it is not possible to deliver such currency, then in the currency which i
s legal
tender in the Philippines.
The delivery of promissory notes payable to order, or bills of exchange or other
mercantile documents shall produce the effect of payment only when they have bee
n
cashed, or when through the fault of the creditor they have been impaired.
In the meantime, the action derived from the original obligation shall be held i
n the
abeyance.
Art. 1250. In case an extraordinary inflation or deflation of the currency stipu
lated
should supervene, the value of the currency at the time of the establishment of
the
obligation shall be the basis of payment, unless there is an agreement to the co
ntrary.
D.
Characteristics of the Currency
(i)
Monetary Board, with approval of the President, shall prescribe:
1.
Denominations
2.
Designs
3.
Inscriptions
4. Other characteristics of notes
Provided that: the notes state that they are liabilities of the BSP
and are guaranteed by the Government; also shall bear the
signatures of the President of the Philippines and the Governor of
the BSP.
(ii)
Monetary Board, with approval of the President, shall prescribe:
1.
Weight
2.
Fineness
3.
Designs
4.
Denominations
5. Other characteristics of the coins
The MB shall consider the availability and cost of materials
E.
Printing of Notes and Minting of Coins

(i)
The MB shall prescribe the amount and conditions of notes and
coins to be printed and minted. It shall also have the authority to
contract institutions, mints or firms for such operations.
(ii)
Expenses incurred for the operations shall be for the account of
the BSP.
F.
Interconvertibility of Currency
-BSP shall exchange, on demand and with no charge, Philippine currency of
any denomination to any other denomination of such currency. If BSP is
temporarily unable to do so, shall deliver the notes and coins of the
denominations which most nearly approximate those requested.
G.
Replacement of Currency Unfit for Circulation
-shall be withdrawn and demonitized by the BSP from circulation and
replace them with adequate ones.
.shall not replace: notes and coins, the identification of which is
impossible; filed, clipped, perforated coins; notes which have lost 2/5 of their
surface or all of the signatures therein. (mutilated conditions)
H.
Retirement of Old Notes and Coins
(i)
The BSP may call in for replacement: notes, 5 years old; coins, 10
years old
one year since the date of the call. Lapse of one year, may be
exchanged at par and without charge during the following year or
for a period determined by the MB. Lapse of such period, the
notes and coins shall cease to be a liability of the BSP and shall
be demonitized. The called in notes and coins shall likewise be
demonitized.
III.
Domestic Monetary Stabilization
A.
Guiding Principle on Monetary Stabilization
-the MB shall endeavour to control any expansion or contraction in
monetary aggregates which is prejudicial to the attainment or maintenance
of price stability.
B.
Power to Define Terms
-MB shall formulate definitions of monetary aggregates, credit and prices
and shall make public such definitions and any changes thereof.
C.
Action When Abnormal Movements Occur in the Monetary Aggregates,
Credit, or Price Level
(i)
Whenever abnormal movements in the monetary aggregates, in
credit, or in prices endanger the stability of the Philippine
economy or important sectors, the MB shall:
a) Take appropriate remedial measures
b) Submit a report to the President and the Congress (also
made public, a description and analysis:
1.
Causes of the rise or fall of such monetary aggregates;
2.
Extent to which such changes have been reflected in

the level of domestic output, employment, wages and

economic activity in general, and the nature and
significance of any such changes;
3.
Measures taken and measures proposed to be
adopted.
(ii)
Whenever:
a.
The monetary aggregates, or the level of credit, increases or
decreases by more than 15%,
b.
The cost of living index increases by more than 10%, or
c. When in its judgment, the circumstances warrant,
(With respect to a-c) the MB shall submit reports and state
whether such changes represent a threat to the stability of the
economy or of its important sectors.
(iii)
The MB shall continue to make periodic reports until the
disturbances have disappeared or have been controlled.
IV.
International Monetary Stabilization
A.
International Monetary Stabilization
-preserved by the BSP
-maintain convertibility into other currencies primarily for foreign trade and
invisibles.
B.
International Reserves
-Purpose: to maintain the international stability and convertibility of the
Philippine Peso (adequate to meet foreseeable net demands on the BSP for
foreign currencies.)
-MB shall judge such adequacy based on: prospective receipts and
payments of ForEx by the Philippines.
-MB shall pay special attention to the volume and maturity of:
1. BSP s own liabilities in foreign currencies
2. ForEx assets and liabilities of other banks operating in the
Philippines
30 | P a g e

3. ForEx assets and liabilities of all other persons and entities in

the Philippines
C.
Composition of the International Reserves (of the BSP):
(i)
May include, but not limited to:
a.
Gold
b.
Assets in foreign currencies in the form of:
1.
Documents and instruments customarily employed for
the international transfer of funds
2.
Demand and time deposits in central banks, treasuries
and commercial banks abroad
3.
Foreign government securities
4.
Foreign notes and coins
(ii)
The MB shall:
a.
Endeavour to hold the ForEx resources of the BSP
b.
Give particular consideration to the prospects of continued
strength and convertibility of the currencies
c.
Give particular consideration to the anticipated demands
(iii)
The MB shall issue regulations determining the other
qualifications which the ForEx must meet in order to be included
in the international reserves of the BSP.
(iv)
BSP is free to convert any asset in its international reserves into
other assets as described in a. and b.
D. Action when the international stability of the peso is threatened:
(i)
Whenever:
1) The international reserve falls to a level the MB considers
inadequate to meet prospective net demands, or
2) The international reserves appear to be imminent in falling to
such level, or
3)
The international reserve is falling as a result of payments or
remittances abroad which are contrary to the national
welfare
The MB shall:
a.
Take appropriate remedial measures
b.
Submit a report to the President and the Congress:
1.
Nature and causes of the existing or imminent decline
2.
Measures already taken or to be taken by the MB
3.

Measures proposed
4.
Cooperation required from other government agencies
for the execution of policies of the MB
(ii)
If such actions fail, the MB shall propose to the President, with
notice to the Congress, additional action it deems necessary to
restore international balance of payments in the Philippines
(iii)
The MB shall submit periodic reports until the threat to
international monetary stability has disappeared.
E.
Means of Action
-MB shall rely on its moral influence and the powers granted to it under the
NCBA.
V.
Operations in Gold and Foreign Exchange
A.
Purchases and Sales of Gold
-by the BSP subject to the regulations of MB
-made in the national currency at the prevailing international market price as
determined by the MB.
B.
Purchases and Sales of ForEx
-by the BSP
-with the following entities or persons only:
1. Banking institutions within the Philippines
2. Government and its subdivisions and instrumentalities
3. Foreign governments
4. International Financial Institutions
5. Others authorized by the MB
-the BSP may buy or sell any quantity of ForEx upon demand or request by
any banking institution in the Philippines. Provided, that such are freely
convertible into gold or US dollars. (not applicable to demands for foreign
notes and coins)
-exchange transactions shall be based on the NCBA.
C.
Foreign Asset Position of the Bangko Sentral
-BSP shall maintain NET POSITIVE FOREIGN ASSET POSITION (Gross
ForEx assets>Gross ForEx liabilities.
-If ForEx liabilities (in Pesos) > twice the ForEx assets (in Pesos), BSP shall
report to the Congress the origin of the liabilities and the manner it shall be
paid. (made within 60 days from the date of the occurrence.
D.
Emergency Restrictions on Exchange Operations
In order to:
(i)
Achieve the primary objective of the BSP
(ii)
Protect international reserves in the imminence or during and
exchange crisis
(iii)
Give time to the MB and the Government to take measures to
forestall or overcome such crisis
5 members of the MB and the President of the Philippines may:
1.
Temporarily suspend sales of exchange
2.

Subject all gold and ForEx transactions to license

3.
Require that any ForEx obtained by any person or entity in
the Philippines be delivered to the BSP at the exchange
rates. (Foreign currency deposits made under RA 6426,
exempt from this requirements)
E.
Acquisition of Inconvertible Currencies
-shall be avoided
-may acquire more than the minimum balance necessary to cover current
demands for such currencies only when considered by the MB to be in the
national interest.
-MB shall determine the procedure
F.
Exchange Rates
-determined by the MB
-MB shall determine the rates for buying and selling spot exchange and may
establish deviation limits from the exchange rates
-MB shall determine the rates for other types of ForEx transactions. But the
margins between the effective exchange rates and the rates established
may not exceed the margins for spot exchange by more than the additional
costs involved in each type of transactions
G.
Operations with Foreign Entities
-MB may authorize the BSP to transact with foreign banks or entities. The
BSP may also act as agent for such.
-MB may authorize the BSP to pledge any gold or other assets as securities
against loans which it receives from foreign entities.
VI.
Regulation of Foreign Exchange Operations Of the Banks
A.
Foreign Exchange Holdings of the Banks
-MB may require the banks to sell to the BSP or to other banks all or part of
their surplus holdings of ForEx to maintain international stability and
31 | P a g e

convertibility of the Peso. Such transfers shall be at the established rates

and may be required of certain currencies only.
-MB may determine the net assets and liabilities of banks and consider the
bank s networth, outstanding liabilities, or other ratios it may deem
appropriate. Such determination shall be applied in all banks uniformly.
B.
Requirement of Balanced Currency Position
-MB may require banks to maintain a balanced position between their
assets and liabilities. They shall be granted reasonable time to adjust.
-such powers shall be exercised only under special circumstances which
warrant the same
C.
Regulation of Non-spot Exchange Transaction
-MB may issue regulations on such transaction to restrain banks from
speculating future fluctuations in ForEx
D.
Othe Exchange Profits and Losses
-banks bear the risks of
1. Non-compliance with the terms of the ForEx documents and instruments
they buy and sell.
2. Other commercial or other banking risks
3. Exchange risks not assumed by the BSP regarding non-spot exchange
transaction
E.
Information on Exchange Operations:
a.
Banks shall report to the BSP the volume and composition of their
purchases and sales of gold and ForEx each day, and must furnish
requested additional info.
b.
The MB may also require other persons and entities to report to it all
transactions as stated above. It shall prescribe the form such
declarations must be made. The BSP may inspect such declarations
for verification.
VII.
Loans To Banking And Other Financial Institutions
A.
Guiding Priciples
-rediscounts, discounts, loans and advances which the BSP is authorized to
extend shall be used to influence the volume of credit consistent with the
objective of price stability.
B.
Authorized Types of Credit Operations
-carried on by the BSP with banks
a. Commercial Credits-BSP may rediscount, discount, buy and sell bills,
acceptances, promissory notes and other credit instruments with maturities
of not more than 180 days from the date of rediscount, discount or
acquisition and resulting from transactions related to:
1. The importation, exportation, purchase or sale of readily
saleable goods and products, or their transportation within the Philippines;
or
2. The storing of non-perishable goods and products, duly insured
and deposited.
b. Production Credits-*same* with maturities of not more than 360 days
*same* and resulting from transactions related to the production or
processing of agricultural, animal, mineral or industrial products.
Must be secured by:

1.
A pledge of the crops or products or
2.
A lien or mortgage on real prop, 70% of the
appraised value of which equals or exceeds the
amount of the loan granted.
c.
Other credits-credit instruments not rediscountable under a and b may
be rediscounted in accordance with BSP rules and regulations.
-when necessary, BSP may provide funds from non
inflationary sources; MB shall prescribes for additional
safeguards for the same.
d.
Advances-BSP may grant advances against the following for fixed
periods not exceeding 180 days except number 4 (360 days):
1.
Gold coins or bullions
2.
Securities representing obligations of the BSP or of other
domestic institutions of recognized solvency
3.
Commercial credits
4.
Production credits
5.
Utilized portions of advances in current amount covered by
regular overdraft agreements related to commercial and
production credits, and certified as to the amount and liquidity by
the institution soliciting the advance
6.
Negotiable treasury bills, cert of indebtedness, notes and other
negotiable obligations of the Govt maturing within 3 yrs from the
date of the advance
7.
Negotiable bonds issued by the Govt and its subdivisions and
instrumentalities having maturities of not more tan 10 years from
the date of the advance
Notes:
(i)
The rediscounts, discounts, loans and advances made in accordance with the above
provisions may not be renewed or extended unless extraordinary circumstances ful
ly
justify such renewal or extension.
(ii)
Advances made against the collateral in 6 and 7 may not exceed 80% of the curren
t
market value of the collateral
C. Loans for Liquidity Purposes
-BSP may extend loans and advances to banks for a period not exceeding 7
days without collateral to provide liquidity in times of need
VIII. Emergency Loans and Advances
A. Nature of Emergency Loans or Advances
-intended to assist a bank with serious liquidity problems arising from causes b
eyond

the control of the management.

-discretion of MB
-only a temporary remedial measure
-must be on a fully secured basis
B.
When Granted
a. Whole banking community is threatened with the financial crisis
-national/local emergency or imminent financial panic
-directly threatening the monetary and banking stability
The MB (vote of 5 members) authorize the BSP to grant the same.
While such loans are outstanding, the debtor cannot expand the total volume of i
ts
loan or investments without authorization from the MB
b. Bank with uncertain financial condition but is not insolvent
-MB may authorize the BSP to extend such loans even during normal times to assis
t a
bank in a precarious financial condition brought by unforeseen events or though
foreseeable, cannot be prevented.
-MB must first ascertain that the bank is not insolvent and has assets to secure
the
advances.
-5 votes of MB members must concur
C. Limits
-amount o loan must not exceed 50% of total deposits or deposit substitutes of a
bank
-shall be disbursed in 2 or more tranches
D.
First Tranche
1. Limited to 25% of the total deposits or deposit substitutes
32 | P a g e

-secured by govt securities and other unencumbered first class collaterals the M
B may
approve
2. If MB determined that the emergency warrant a greater loan, it may exceed 25%
-must be secured by govt securities and other unencumbered first class collatera
ls the
MB may approve.
-principal stockholders must furnish an acceptable undertaking to indemnify and
hold
harmless from suit a conservator appointed by MB
3. Prior to the release of the first tranche, the bank must submit to the BSP a
resolution by its board authorizing the BSP to evaluate their assets certified b
y an
external auditor to be good and available for collateral purposes.
E. Second Tranche
-vote of 5 MB members may authorize the release of a second tranche on condition
that the principal stockholders of the institution:
1. Furnish the undertaking the same as in number 2 above
2. Provide acceptable security adequate (in the opinion of the MB) to supplement
the
assets tendered by the bank to collateralize the subsequent tranche.
F. Shares as Collateral
Section 128. Prohibitions.
The Bangko Sentral shall not acquire shares of any ki
nd or accept
them as collateral, and shall not participate in the ownership or management of
any enterprise,
either directly or indirectly.
The Bangko Sentral shall not engage in development banking or financing: Provide
d, however,
That outstanding loans obtained or extended for development financing shall not
be affected by
the prohibition of this section.
-This provision shall not be applicable to acceptance as collateral of shares an
d their
acquisition as a result f foreclosure proceeding. If the BSP acquired any of suc
h shares, such
shall be disposed in a public bidding within one year from the date of consolida
tion of title by the
BSP.
G. Overdraft
-shall be eliminated within 5 consecutive banking days
IX.
Credit Terms
A.
Interest and Rediscount
-The BSP shall collect interest and other charges on loans it extends
notwithstanding the closure, receivership or liquidation of the bank. This
shall apply prospectively.
-The MB shall fix the interest and rediscount rates (applied uniformly to
banks of the same category)
B.
Endorsement
-the documents rediscounted, discounted, bought or accepted as collateral
by the BSP shall bear the endorsement of the bank.

C.
Repayment of Credits
a.
The collaterals must be withdrawn by the bank on maturity date or
upon the liquidation of the obligation which they represent
b.
Banks have the right to withdraw such collaterals upon payment of the
debt and its interest
D.
Other Requirements
-MB may prescribe additional requirements to obtain loan from the BSP.
E.
Provisional Advances to the National Government
-may be made with or without interest by the BSP to finance expenditures
authorized in its annual operations. Provided that the advances be:
1. repaid within 3 months (may be extended up to the same period if
allowed by the MB) from the date such advances are received by the
National Govt
2. shall not, aggregately, exceed 20 % of the average annual income of the
borrower for the last 3 preceding years.
F.
Prohibitions
Section 128, supra
X.
Open Market Operations For The Account Of The Bangko Sentral
A.
Principles of Open Market Operations
-made exclusively in accordance with the objective of achieving price
stability
B.
Purchases and Sales of Government Securities
-BSP may purchase and sell in open market:
a. evidences of indebtedness issued directly by the Govt and its
subdivisions
b. evidences of indebtedness issued by govt instrumentalities and
guaranteed by the Govt
-such evidences must be freely negotiable, regularly serviced, available to
the public in denominations of thousand pesos or more.
C.
Issue and Negotiation of the BSP Obligations
-BSP may issue, place, buy and sell freely negotiable evidences of
indebtedness of the Bangko Sentral
-issuance of such certificates of indebtedness shall be made only in cases
of extraordinary movement in price levels.
-MB may determine the interest rates, maturities and other characteristics of
said obligations of the BSP and may denominate the obligations in gold or
foreign currencies.
-acquired by the BSP through purchases or redemptions.
-shall not be included among its assets, and shall be immediately retired
and cancelled.
XI.
Composition of the BSP s Portfolio
Review of the BSP s Portfolio
-by the MB in relation to its future credit policy
-shall consider whether a sufficiently large part of the portfolio consists of a
ssets
with early maturities, in order that a contraction in BSP credit may be effected

promptly whenever the national monetary policy so requires

XII.
Bank Reserves
A.
Reserve Requirements
-banks are required to maintain reserves against their deposit liabilities
-MB may also require all banks and/or quasi-banks to maintain reserves against
funds held in trust and liabilities for deposit substitutes
-proportional to the volume of its deposit liabilities and shall ordinarily take
the
form of a deposit in the BSP
-Reserves against deposit substitutes shall be determined in the same manner
as provided for reserve requirements against regular bank deposits
-MB may exempt from the reserve requirements those with remaining maturities
of 2 yrs or more and interbank borrowings
-Maintenance of bank reserves is for the purpose of controlling the volume of
money
-BSP shall not pay interest unless required by the MB
B.
Definition of Deposit Substitutes
Section 95. Definition of Deposit Substitutes.
The term "deposit substitutes" is
defined as an alternative form of obtaining funds from the public, other than
deposits, through the issuance, endorsement, or acceptance of debt instruments
for the borrower's own account, 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, certificat
es
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
33 | P a g e

non-financial companies for the limited purpose of financing their own needs or
XIII. Selective Regulation of Bank Operations
the needs of their agents or dealers shall not be covered by the provisions of
C.
Section 94 of this Act.
Required Reserves Against Peso Deposit
[just for now]
-fixed by MB Section 104. Guiding Principle.
The Monetary Board shall use the po
wers granted to it under
D.
-may alter the minimum reserve ratios
Required Reserves Against Foreign Currency Deposits
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 purpo
ses prejudicial
-fixed by MB to the national interests. Regulations on bank operations shall be
applied to all banks of the
E. Reserves against Unused Balances of Overdraft Lines
-MB may establish minimum reserve requirements
same category uniformly and without discrimination.
Section 105. Margin Requirements Against Letters of Credit.
The Monetary Board m
ay at any
F. Increase in Reserve Requirements time prescribe minimum cash margins for the
opening of letters of credit, and may relate the size
-increase must be gradual
-shall not exceed four percentage points in any thirty-day period
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
-banks shall be notified in advance as to when it will take effect solvency of t
he banking system, the Monetary Board may issue such regulations as it may deem
G. Computation on Reserves
-calculated daily on the basis of the amount of the institution's reserves and t
he
necessary with respect to the maximum permissible maturities of the loans and in
vestments
which the banks may make, and the kind and amount of security to be required aga
inst the
amount of its liability accounts against which reserves are required to be vario
us types of credit operations of the banks.
maintained
-holidays or non-banking days: the reserve position of the day immediately
Section 107. Portfolio Ceilings. Whenever the Monetary Board considers it advisa
ble to
prevent or check an expansion of bank credit, the Board may place an upper limit
on the amount
preceding the same shall apply of loans and investments which the banks may hold
, or may place a limit on the rate of increase
H.
-principal office + branches + agencies =SINGLE UNIT
Reserve Deficiencies
of such assets within specified periods of time. The Monetary Board may apply su
ch limits to the
loans and investments of each bank or to specific categories thereof.
-if reserve position is below the minimum required: shall pay the Bangko Sentral
In no case shall the Monetary Board establish limits which are below the value
of the loans or
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,
investments of the banks on the date on which they are notified of such restrict
ions. The
restrictions shall be applied to all banks uniformly and without discrimination.
whichever is higher. Section 108. Minimum Capital Ratios. The Monetary Board may
prescribe minimum ratios
-excess may offset deficiencies (of the same week)
-MB may deny such privilege in case of abuse
which the capital and surplus of the banks must bear to the volume of their asse
ts, or to specific
categories thereof, and may alter said ratios whenever it deems necessary.
-if a bank chronically has a reserve deficiency, MB may limit or prohibit the
making of new loans or investments and may require the net profits be assigned
to surplus
ARTICLE IX
COORDINATION OF CREDIT POLICIES BY GOVERNMENT INSTITUTIONS
-MB 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 o
r a
quasi-bank or of a national emergency affecting operations of banks or quasiSection 109. Coordination of Credit Policies. Government-owned corporations whic
h perform
banking or credit functions shall coordinate their general credit policies with
those of the
banks. The MB may also modify or set aside reserved deficiency penalties for Mon
etary Board.
I.
rehabilitation program of a bank.
Interbank Settlement
Toward this end, the Monetary Board may, whenever it deems it expedient, make su
ggestions
or recommendations to such corporations for the more effective coordination of t
heir policies
-BSP shall establish facilities for interbank clearing under prescribed rules an
d with those of the Bangko Sentral.
regulations of the MB. BSP may charge fees.
-Deposit reserves-basis for check clearing and settlement of interbank balances
CHAPTER V
-any bank which incurs on overdrawing in its deposit account with the Bangko FUN
CTIONS AS BANKER AND FINANCIAL ADVISOR
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
OF THE GOVERNMENT
ninety-one-day treasury bill rate plus three percentage points, whichever is
higher, not later than the next clearing day.
-settlement of clearing balances shall not be effected for any account which
ARTICLE I -FUNCTIONS AS BANKER OF THE GOVERNMENT
continues to be overdrawn for five (5) consecutive banking days until such time
Section 110. Designation of Bangko Sentral as Banker of the Government.
The Bang
ko
as the overdrawing is fully covered or otherwise converted into an emergency
loan or advance.
Sentral shall act as a banker of the Government, its political subdivisions and
instrumentalities.
Section 111. Representation with the International Monetary Fund. The Bangko Sen
tral shall
-the appropriate clearing office shall be officially notified of banks with over
drawn represent the Government in all dealings, negotiations and transactions wi

th the International
J.
balances.
Exemption from attachment
Monetary Fund and shall carry such accounts as may result from Philippine member
ship in, or
operations with, said Fund.
-deposits maintained by banks with the BSP as part of their reserve requirements
Section 112. Representation with Other Financial Institutions.
The Bangko Sentr
al may be
shall be exempted to satisfy a claim of any party except the Government, its
subdivisions and instrumentalities.
authorized by the Government to represent it in dealings, negotiations or transa
ctions with the
International Bank for Reconstruction and Development and with other foreign or
international
34 | P a g e

financial institutions or agencies. The President may, however, designate any of

his other
financial advisors to jointly represent the Government in such dealings, negotia
tions or
transactions.
Section 113. Official Deposits.
The Bangko Sentral shall be the official deposit
ory of the
Government, its political subdivisions and instrumentalities as well as of gover
nment-owned or
controlled corporations and, as a general policy, their cash balances should be
deposited with
the Bangko Sentral, with only minimum working balances to be held by governmentowned
banks and such other banks incorporated in the Philippines as the Monetary Board
may
designate, subject to such rules and regulations as the Board may prescribe: Pro
vided, That
such banks may hold deposits of the political subdivisions and instrumentalities
of the
Government beyond their minimum working balances whenever such subdivisions or
instrumentalities have outstanding loans with said banks.
The Bangko Sentral may pay interest on deposits of the Government or of its poli
tical
subdivisions and instrumentalities, as well as on deposits of banks with the Ban
gko Sentral.
Section 114. Fiscal Operations. The Bangko Sentral shall open a general cash acc
ount for
the Treasurer of the Philippines, in which the liquid funds of the Government sh
all be deposited.
Transfers of funds from this account to other accounts shall be made only upon o
rder of the
Treasurer of the Philippines.
Section 115. Other Banks as Agents of the Bangko Sentral. In the performance of
its
functions as fiscal agent, the Bangko Sentral may engage the services of other g
overnmentowned and controlled banks and of other domestic banks for operations in localit
ies at home or
abroad in which the Bangko Sentral does not have offices or agencies adequately
equipped to
perform said operations: Provided, however, That for fiscal operations in foreig
n countries, the
Bangko Sentral may engage the services of foreign banking and financial institut
ions.
Section 116. Remuneration for Services.
The Bangko Sentral may charge equitable
rates,
commissions or fees for services which it renders to the Government, its politic
al subdivisions
and instrumentalities.
ARTICLE II
THE MARKETING AND STABILIZATION OF SECURITIES FOR THE ACCOUNT OF THE
GOVERNMENT
A. THE ISSUE AND PLACING OF GOVERNMENT SECURITIES
Section 117. Issue of Government Obligations. The issue of securities representi
ng
obligations of the Government, its political subdivisions or instrumentalities,

may be made
through the Bangko Sentral, which may act as agent of, and for the account of, t
he Government
or its respective subdivisions or instrumentality, as the case may be: Provided,
however, That
the Bangko Sentral shall not guarantee the placement of said securities, and sha
ll not subscribe
to their issue except to replace its maturing holdings of securities with the sa
me type as the
maturing securities.
Section 118. Methods of Placing Government Securities.
The Bangko Sentral may pl
ace the
securities to which the preceding section refers through direct sale to financia
l institutions and
the public.
The Bangko Sentral shall not be a member of any stock exchange or syndicate, but
may
intervene therein for the sole purpose of regulating their operations in the pla
cing of government
securities.
The Government, or its political subdivisions or instrumentalities, shall reimbu
rse the Bangko
Sentral for the expenses incurred in the placing of the aforesaid securities.
Section 119. Servicing and Redemption of the Public Debt. The servicing and rede
mption of
the public debt shall also be effected through the Bangko Sentral.
B. BANGKO SENTRAL SUPPORT OF THE GOVERNMENT SECURITIES MARKET
Section 120. The Securities Stabilization Fund.
There shall be established a "Se
curities
Stabilization Fund" which shall be administered by the Bangko Sentral for the ac
count of the
Government. chan robles virtual law library
The operations of the Securities Stabilization Fund shall consist of purchases a
nd sales, in the
open market, of bonds and other evidences of indebtedness issued or fully guaran
teed by the
Government. The purpose of these operations shall be to increase the liquidity a
nd stabilize the
value of said securities in order thereby to promote investment in government ob
ligations.
The Monetary Board shall use the resources of the Fund to prevent, or moderate,
sharp
fluctuations in the quotations of said government obligations, but shall not end
eavor to alter
movements of the market resulting from basic changes in the pattern or level of
interest rates.
The Monetary Board shall issue such regulations as may be necessary to implement
the
provisions of this section.
Section 121. Resources of the Securities Stabilization Fund. Subject to Section
132 of this
Act, the resources of the Securities Stabilization Fund shall come from the bala
nce of the fund
as held by the Central Bank under Republic Act No. 265 as of the effective date
of this Act.
Section 122. Profits and Losses of the Fund. The Securities Stabilization Fund s
hall retain
net profits which it may make on its operations, regardless of whether said prof

its arise from

capital gains or from interest earnings. The Fund shall correspondingly bear any
net losses
which it may incur.
ARTICLE III
FUNCTIONS AS FINANCIAL ADVISOR OF THE GOVERNMENT
Section 123. Financial Advice on Official Credit Operations.
Before undertaking
any credit
operation abroad, the Government, through the Secretary of Finance, shall reques
t the opinion,
in writing, of the Monetary Board on the monetary implications of the contemplat
ed action. Such
opinions must similarly be requested by all political subdivisions and instrumen
talities of the
Government before any credit operation abroad is undertaken by them.
The opinion of the Monetary Board shall be based on the gold and foreign exchang
e resources
and obligations of the nation and on the effects of the proposed operation on th
e balance of
payments and on monetary aggregates.
Whenever the Government, or any of its political subdivisions or instrumentaliti
es, contemplates
borrowing within the Philippines, the prior opinion of the Monetary Board shall
likewise be
requested in order that the Board may render an opinion on the probable effects
of the proposed
operation on monetary aggregates, the price level, and the balance of payments.
Section 124. Representation on the National Economic and Development Authority.
In order
to assure effective coordination between the economic, financial and fiscal poli
cies of the
Government and the monetary, credit and exchange policies of the Bangko Sentral,
the Deputy
Governor designated by the Governor of the Bangko Sentral shall be an ex officio
member of
the National Economic and Development Authority Board.
CHAPTER VI
PRIVILEGES AND PROHIBITIONS
ARTICLE I
PRIVILEGES
Section 125. Tax Exemptions. The Bangko Sentral shall be exempt for a period of
five (5)
years from the approval of this Act from all national, provincial, municipal and
city taxes, fees,
charges and assessments.
35 | P a g e

The exemption authorized in the preceding paragraph of this section shall apply
to all property of
the Bangko Sentral, to the resources, receipts, expenditures, profits and income
of the Bangko
Sentral, as well as to all contracts, deeds, documents and transactions related
to the conduct of
the business of the Bangko Sentral: Provided, however, That said exemptions shal
l apply only to
such taxes, fees, charges and assessments for which the Bangko Sentral itself wo
uld otherwise
be liable, and shall not apply to taxes, fees, charges, or assessments payable b
y persons or
other entities doing business with the Bangko Sentral: Provided, further, That f
oreign loans and
other obligations of the Bangko Sentral shall be exempt, both as to principal an
d interest, from
any and all taxes if the payment of such taxes has been assumed by the Bangko Se
ntral.
Section 126. Exemption from Customs Duties.
The provision of any general or spec
ial law to
the contrary notwithstanding, the importation and exportation by the Bangko Sent
ral of notes
and coins, and of gold and other metals to be used for purposes authorized under
this Act, and
the importation of all equipment needed for bank note production, minting of coi
ns, metal refining
and other security printing operations shall be fully exempt from all customs du
ties and consular
fees and from all other taxes, assessments and charges related to such importati
on or
exportation.
Section 127. Applicability of the Civil Service Law. Appointments in the Bangko
Sentral,
except as to those which are policy-determining, primarily confidential or highl
y technical in
nature, shall be made only according to the Civil Service Law and regulations: P
rovided, That no
qualification requirements for positions in the Bangko Sentral shall be imposed
other than those
set by the Monetary Board: Provided, further, That, the Monetary Board or Govern
or, in
accordance with Sections 15(c) and 17(d) of this Act, respectively, may without
need of
obtaining prior approval from any other government agency, appoint personnel in
the Bangko
Sentral whose services are deemed necessary in order not to unduly disrupt the o
perations of
the Bangko Sentral.
Officers and employees of the Bangko Sentral, including all members of the Monet
ary Board,
shall not engage directly or indirectly in partisan activities or take part in a
ny election except to
vote.
ARTICLE II
PROHIBITIONS
Section 128. Prohibitions.

The Bangko Sentral shall not acquire shares of any ki

nd or accept
them as collateral, and shall not participate in the ownership or management of
any enterprise,
either directly or indirectly.
The Bangko Sentral shall not engage in development banking or financing: Provide
d, however,
That outstanding loans obtained or extended for development financing shall not
be affected by
the prohibition of this section.
Chapter 9 (incomplete)
F. Rights of the Entruster
1.
The Entruster shall be entitled:
.
To the proceed of the sale of GDI
.
To the return of the GDI incase of non-sale\
.
To the enforcemet of all rights conferred on him in the trust receipt provided s
uch
are not contrary to law
2.
The Entruster may cancel the trust and take possession of the GDI OR of the
proceeds at any time upon default or failure to comply with the terms and condit
ions or
agreement, and
.
Give notice to the Entrustee on or after default of the intention to SELL and ma
y,
NOT LESS THAN 5 DAYS, after serving such, sell the GDI at a PUBLIC or
PRIVATE SALE. The Entruster may be the purchaser.
.
Notice of Sale shall be deemed sufficient if given in writing and either:

served personally to the entrustee, or

sent by post-paid ordinary mail to the the entrustee's last known

bsiness address
.
The proceeds of such sales shall be applied:

To the payment of the expenses thereof

To the payment of the expenses of re-taking, keeping and storing the

GDI

To the satisfaction of the entrustee's indebtedness to the entruster

.
The Entrustee shall receive any surpus but shall be liable for
any deficiency to the Entruster
G. Entruster NOT Responsible on Sale by EntrusteeThe Entruster, holding security
interest or has given the entrustee the liberty to sell or

dispose of the GDI, is NOT responsible as a principal or as a vendor in a sale o

r contract to sell
made by the entrustee.
H. Obligations of the Entrustee
The entrustee shall:
1.
Hold the GDI and shall dispose of them in accordance with the terms and conditio
ns
of the trust receipt;
2.
Receive the proceeds in trust for the entruster and turnover the same to the ent
ruster
to the extent of the amount owing the entruster or as appears on the trust recei
pt;
3.
Insure the GOODS for their total value against loss from fire, theft, pilferage,
or other
casualties;
4.
Keep said goods adn proceeds thereof whether in money or whatever form, separate
and capable of identification as property of the entruster; and
5.
Observe all other terms and conditions of the trust receipt not contrary to the
provisions of the law.
I. Liability of Entrustee for Loss
.
Risk of Loss shall be borne by the Entrustee.
.
The loss of the GDI pending their disposition, whether or not the entrustee is a
t fault or
negligent, it shall NOT extinguish his obligation to teh entruster for the value
thereof
J. Rights of the Purchaser for Value and Good Faith
.
If the entrustee has the right to sell then a purchaser of value and good faith
acquires
the GDI free from the entruster's security interest
K. Validity of Entruster's Security Interest as Against Creditors
.
The Entruster's security interest in GDI pursuant to the written terms of a trus
t receipt
shall be VALID against all creditors of the Entrustee for the duratioon fo the t
rust
receipt agreement
L. Violation of the Trust Receipts Law (Malum Prohibitum--intent is immaterial)
.
When the Entrustee fails to:
.
turn over the proceeds of the sale of the goods
36 | P a g e

.
return the goods covered by the trust receipt if the goods are not sold
.
Failure to account, upon demand, for the goods received in trust is evidence of
conversion or misappropriation--constitutes estafa.
.
The Trust Receipts Law punishes dishonesty and abuse of confidence in handling o
f
money or goods to the prejudice of pubic order.
.
Mere failure to deliver the proceeds or return the goods constitutes a criminal
offense
the causes prejudice not only to the creditors, but to the public interest.
M. Penalty
.
Punished under Art. 315 par. 1 (b) of the RPC or RA 3815
.
If vilaotion is committed by corporations, partnerships, associations, or other
juridical
entities, penalty shall be imposed on the directors, officers, employees,or othe
r
officials or persons therein responsible for the offense, w/o prejudice to the c
ivil
liabilities
.
Reason: Corporation and other juridical entities CANNOT be put into jail. But
they are LIABLE for the civil liabilities because of the clause, "w/o prejudice
to the
civil liabilities."
Chapter 10 (incomplete)
G. Duty to Indicate Insurance on Deposits
All banks shall indicate the coverage of the PDIC in each passbook, CTD and/or c
over
of checkbook for demand deposit/NOW accounts stating, inter alia, the maximum am
ount of
insurance.
VI. Assessment
A. Assessment Rate
shall be determined by the Board of Directors
-shall not exceed 1/5 of 1% per annum; semi-assessment rate for each insured ban
k
shall be in the amount of the product of the assessment rate multiplied by the
assessment base but in no case shall it be less than P250. the assessment base s
hall
be the amount of the liability of he bank for deposits without any deduction for
indebtedness of depositors.

B. Certified Statement of Assessment Base and Assessment Due

(i)
On or before July 31 of each year, each insured bank shall file with the Corp. a
certified statement showing for the 6 months ending on the preceding June 30
the amount of the assessment base and the amount of the semiannual
assessment due to PDIC for the period ending on the following Dec. 31,
determined in accordance with (a) above which shall contain or be verified by a
written declaration that it is made under the penalties of perjury.
(ii)
On or before Jan. 31 of each year, each insured bank shall file with the PDIC a
similar certified statement for the 6 months ending on the preceding Dec. 31 and
shall pay the amount of the semiannual assessment for the period ending in the
following June 30 which it is required to certify.
(iii)
Each bank which becomes an insured bank shall not be required to file any
certified statement for the semiannual period in which it becomes as insured
bank.
(iv)
On the expiration of such period, each such bank shall comply with (b) above
except that the semiannual assessment base for its first certified statement sha
ll
be the assessment base of the bank as of the close of business on the preceding
June 30 or Dec. 31, whichever is applicable, determined in accordance with (a)
above.
(v)
If such bank has assumed the liabilities for deposits of another bank or banks,
it
shall include such liabilities in its assessment base.
(vi)
The assessment payments required from the insured banks shall be made in
such manner as the Board shall prescribe, provided it shall not be later than 60
days after filing the certified statement setting forth the amount of assessment
.
(vii)
Any insured bank which fails to pay any certified statement may be compelled to
do so by mandatory injunction or other appropriate remedy .
C. Refund and Credit
PDIC may:
1.
refund to an IB any payment of assessment in excess of the amount due
2.
credit such excess toward the payment of the assessment next becoming due
from such bank and upon succeeding assessments until the credit is exhausted.
D. Termination
-PDIC shall not terminate the insured status of any bank which continues to oper
ate or
receive deposits
-Should any IB fail or refuse to pay any assessment required, and should not cor
rect
such failure of refusal within 30 days after written notice has been given to an
officer
of the bank, and stating that the bank has failed or refused to pay, PDIC may, a
t its
discretion, file a case for collection without prejudice to the imposition of ad
ministrative

sanctions
E. Trust Funds
-means funds held by an insured bank in a fiduciary capacity and includes, witho
ut
being limited to, funds held as trustee, executor, administrator, guardian, or a
gent
-shall be insured like other forms of deposits, in an amount not to exceed P10,0
00 for
each trust estate, and when deposited by the fiduciary bank in another IB, such
funds
shall be similarly insured to the FB according to the trust estates represented
-the amount so held by other IBs on deposit shall not for the purpose of any cer
tified
statement be considered to be a deposit liability of the FB, but shall be consid
ered to
be a deposit liability of the IB
F. Payment of Dividends and/or Interests
-no insured bank shall pay any dividend on its capital stock or interest on its
capital
notes or debentures or distribute any of its capital assets while it remains in
default in
the payment of any assessment due
-if such default is due to a dispute between the insured bank and PDIC over the
amount of such assessment, this rule shall not apply if such bank shall deposit
security satisfactory to PDIC for payment upon final determination of the issue
VII. Deposit Insurance Fund
-the permanent insurance fund shall be P3 billion
-the DIF shall be the capital account of PDIC and shall principally consist of t
he ff:
a.
the PIF
b.
assessment collections, subject to the charges
37 | P a g e

c.
reserves for insurance and financial assistance losses
d.
retained earnings
-PDIC may, within 2 years from the passage of the PDIC Law, and every 5 years
thereafter, conduct a study on the need to adjust the amount of the PIF, insuran
ce
cover, assessment rate and assessment base, and thereafter make the necessary
recommendation to Congress
All assessment collections and income from operations after expenses and charges
shall be added to the DIF. Such expenses and charges are:
a.
the operating costs and expenses of the Corp. for the calendar year
b.
additions to reserve to provide for insurance and financial assistance
losses, net of recoverable amounts from applicable assets and
collaterals, during the calendar year
c.
the net insurance and financial assistance losses sustained in said
calendar year
-In a suit, PDIC is entitled to recover from any insured bank the amount of any
unpaid
assessment lawfully payable by such insured bank, whether or not such bank shall
have filed any such certified statement and whether or not suit shall have been
brought to compel the bank to file any such statement
No action or proceeding shall be brought for recovery of any assessment due of f
or
the recovery of any amount paid in excess of the amount due, unless it has been
brought within 5 years after the right accrued for which the claim is made
VIII. Unsound Practice
In case of commission of unsafe or unsound practices by an IB or its officers, t
he
Board of Directors shall:
-submit the report of the examination to the MB to secure corrective action ther
eon
-if no such action is taken within 45 days from submission of the report, the Bo
D shall
motu proprio institute corrective action which it deems necessary (BoD may issue
a
cease-and-desist order, and require the bank or its directors or agents concerne
d to
correct the practices or violations within 45 days)
-if the practice or violation is likely to cause insolvency or substantial dissi
pation of
assets or earnings of the bank, or is likely to seriously weaken the condition o
f the
bank or otherwise seriously prejudice the interests of its depositors and the Co
rp., the
period to take corrective action shall not be more than 15 days. The order may a

lso
include the imposition of fines
What may be violated:
1.
any provision of the PDIC Law
2.
any order, rule or instruction issued by PDIC
3.
any written condition imposed in connection with any transaction with or granted
by
PDIC
IX. Reports by Insured Banks
-each IB shall make to PDIC reports of conditions in such form and at such times
as
the BoD may require such reports to be published in such manner not inconsistent
with any applicable law as it may direct
-PDIC shall have access to reports of examination made by, and report of conditi
ons
made to the BSP or its appropriate supervising dept., and the BSP shall also hav
e
access to such reports made by and to PDIC
-Each IB shall keep and maintain a true and accurate record or statement of its
daily
deposit transactions consistent with the standards set by the BSP and PDIC
X. Prohibitions on PDIC Personnel
-being an officer, director, consultant, employee or stockholder, directly or in
directly, of
any bank or banking institution except as otherwise provided by law
-receiving any gift or thing of value from any officer, director, or employee of
any bank
-revealing in any manner, except as provided by law or under court order, inform
ation
relating to the condition or business of any bank .
shall not apply to the giving of
information to the BoD, the President of the Corp., Congress, any agency of govt
.
authorized by law, or to any person authorized by either of them in writing to r
eceive
such information
XI. Legal Assistance
-PDIC shall underwrite or advance litigation costs and expenses, or provide lega
l
assistance to its directors, officers, employees, or agents in connection with a
ny civil,
criminal, administrative, or any other action to which such director etc. is mad
e a party
by reason of or in connection with the exercise of authority or performance of
functions and duties .
does not apply against actions initiated by PDIC against such
director etc.
-Applies also to those who resigned, retired, or transferred to another agency,

in
connection with acts done during their tenure or employment with PDIC
XII. Dealings by PDIC Personnel with Banks
A. Designation as Directors and Officers of Banks
Members of the BoD and personnel of PDIC may become directors and officers of an
y
bank or banking institution and of any entity related to such institution in con
nection with
financial assistance extended by PDIC to such institution and when, in the opini
on of the Board,
it is appropriate to make such designation to protect the interest of PDIC.
B. Borrowing from Banks
-shall be prohibited only with respect to the particular institution in which th
ey are
assigned, or are conducting an examination
-personnel are likewise prohibited from borrowing from any bank or banking insti
tution
during the time that a transaction of such institution with PDIC is being evalua
ted,
processed, or acted upon by such personnel
XIII. Receivership
A. Appointment
-whenever it shall be appropriate for the MB of the BSP to appoint a receiver of
any
banking institution pursuant to existing laws, the MB shall give prior notice an
d appoint
PDIC as receiver
- receiver includes a receiver, commission, person, or other agency charged by law
with the duty to take charge of the assets and liabilities of a bank which has b
een
forbidden fro doing business in the Phil, as well as the duty to gather, preserv
e and
administer such assets and liabilities for the benefit of the depositors and cre
ditors of
dais bank, and to continue into liquidation whenever authorized under the law, a
nd to
dispose of the assets and to wind up the affairs of such bank
B. Powers
38 | P a g e

As receiver, it shall control, manage and administer the affairs of the closed b
ank.
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 suspen
ded
-the relevant provisions of the Articles of Incorporation and By-laws of the clo
sed bank
are likewise suspended
-the assets shall be deemed in custodia legis in the hands of the receiver
-from the time the bank is placed under receivership, its assets shall not be su
bject to
attachment, garnishment, execution, levy or any other court processes
In addition to the powers of a receiver pursuant to existing laws, PDIC is empow
ered
to:
1.
bring suit to enforce liabilities to or recoveries of the closed bank
2.
appoint and hire persons and entities of recognized competence in banking or fin
ance
as its deputies and assistants, to perform such powers and functions of PDIC as
receiver and liquidator of the closed bank
3.
suspend or terminate the employment of officers and employees of the bank
.
payment of separation pay or benefits shall be made only after the bank has
been placed under liquidation
4.
pay accrued utilities, rentals and salaries of personnel of the bank for a perio
d not
exceeding 3 months from available funds of the bank
5.
collect loans and other claims of the bank, and for the purpose, modify, comprom
ise
or restructure the terms and conditions of such loans or claims as ma be deemed
advantageous to the interest of the creditors and claimants of the bank
6.
hire or retain private counsels as ma be necessary
7.
borrow or obtain a loan, or mortgage, pledge, or encumber any asset of the 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 an
d
creditors
8.
if the stipulated interest on deposits is unusually high compared with the preva
iling
applicable interest rate, PDIC as receiver may exercise such powers which may
include a reduction of the interest rate to a reasonable rate. Any modification

or
reduction shall apply only to unpaid interest
9.
exercise such other powers as are inherent and necessary for the effective disch
arge
of the duties of PDIC as receiver
C. Suits filed by PDIC
(i)
In all cases filed by PDIC as receiver for the recovery of or involving any asse
t of
the closed bank, payment of all docket and other court fees shall be deferred
until the action is terminated with finality.
(ii)
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
.
D. Distribution of Assets
1.
Before any distribution of assets of the closed bank, PDIC shall charge against
such assets:
Reasonable receivership expenses (subject to approval of court)
Reasonable liquidation expenses
2.
After payment of all liabilities and claims against closed bank, PDIC shall pay
any
surplus dividends at the legal rate of interest from the date of takeover to the
date
of distribution, to creditors and claimants in accordance with legal priority be
fore
distribution to the shareholders.
XIV. Payment of Insured Deposits
A.
Manner of Payment
1.
Whenever an insured bank shall have been closed by the Monetary Board,
payment of the insured deposits on such closed banks shall be made by
the PDIC by:
i. Cash
ii. Transferred deposit
2.
Transfer deposit
deposit in an insured bank made available to a depositor
by PDIC as payment of insured deposit of such depositor in a closed bank.
Not to exceed two hundred fifty thousand (250,000)
3.
A joint account shall be insured separately from any individually owned
deposit account.
4.
Maximum insured deposits of Joint accounts shall be divided into as many
equal shares as there are co-owners, unless a different sharing is stipulated
in the document of deposit.
5.
If an account is held by a juridical person jointly with an individual, it is
presumed that the maximum insured deposit belongs to the juridical person.
6.
The aggregate of the interests of each co-owner over several joint accounts
shall likewise not exceed 250,000
7.

No owner/holder of any negotiable certificate of deposit shall be recognized

as a depositor entitled to the rights provided unless his name is registered in
the books of the issuing bank.
B.
Proof of Claims
1.
PDIC may require proof of claims to be filed before paying the insured
deposits.
2.
It may require final determination by the courts if not satisfied to the viabili
ty
of the claim.
C.
Settlement Period and Penalties in Case of Failure to Settle
39 | P a g e

1.
Failure to settle claim within six months from the date of filing claim due to
grave abuse of discretion, gross negligence, bad faith, or malice shall
subject the directors, employees, or officers of PDIC Responsible for the
delay to imprisonment from six months to one year.
2.
Period shall not apply if the validity of the claim depends on resolution of
issues of fact or law by another office.
3.
Upon payment to such depositor, PDIC shall be subrogated to all of the
rights of the depositor to the extent of such payment.
4.
Such subrogation shall include the right to receive the same dividends from
the proceeds of the assets of the closed bank. But such depositor shall
retain his claim for any uninsured portion of his deposit.
D.
Notice
1.
PDIC shall commence the determination of insured deposits due to
depositors of the closed bank upon its actual takeover of the closed bank.
2.
PDIC shall publish the notice once a week for at least 3 consecutive weeks
in a newspaper of general circulation or newspaper circulated in the
community where the closed bank or its branches are located.
E.
Discharge
Payment of an insured deposit shall discharge PDIC. And payment of a
transferred deposit by the new bank in which a transferred deposit has been
made available shall discharge PDIC and the new bank.
F.
Recognition of Owner
PDIC cannot recognize as the owner any person, whose name or interest
as such owner is not disclosed on the records of a closed bank, as part
owner of any portion of a deposit appearing on the records of the closed
bank under a name other than that of the claimant.
G.
Withholding of Payment
PDIC may withhold payment of such portions 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 any
liability of such depositor to the closed bank or to 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 therefore.
H.
Prescription
All rights of a depositor with respect to the insured deposit shall be barred if
:
He fails to file a claim within two years from actual take-over of
the closed bank by the receiver.
Or does not enforce his claim within two years after the filing a
claim Unless otherwise waived by PDIC.
All rights of the depositor subrogated to PDIC shall thereupon revert back to
the depositor. PDIC shall be discharged from any liability.

XV. Investment by PDIC

A.
Money of the PDIC not otherwise employed shall be invested in obligations of the
Republic of the Philippines or by obligations guaranteed by it.
1.
It shall not sell or purchase any such obligation for its own account or in its
own right and interest in any one time aggregating in excess of 100,000
without approval of the Insurance Commissioner.
2.
Insurance Commissioner may waive the requirement of his approval as he
may determine.
B.
The banking or checking account of PDIC shall be kept in:
1.
BSP
2.
PNB
3.
Any bank designated as fiscal agent or depository of RP
XVI. Extension of Loans
A.
In order to prevent an insured bank from closing, PDCI may make loans, purchase
the
assets, assume liability, or make deposits in such insured bank, upon such condi
tions
as the Board of Directors may prescribe, the operations of such bank is essentia
l to
provide adequate banking service in the community or maintain financial stabilit
y in
the economy.
a.
Such power may also be exercised in case of a closed insured bank if:
i.
the resumption of the operations of said bank is vital to the
interest of the community
ii.
Severe financial climate exists
b.
Reopening of said bank is subject to the approval of the Monetary Board.
B.
PDIC may provide any corporation acquiring control of, merging or consolidating
with
or acquiring the assets of an insured bank in order to prevent such closing or o
f a
closed insured bank in order to restore it to normal operation
40 | P a g e

a.
Within 60 days from date
C.
PDIC shall determine the
nsive
than the exercise of its
D.
PDIC may grant financial

of assistance, PDIC shall submit a report to MB

actual payoff and liquidation thereof will be more expe
power prior to exercise of its powers.
assistance to insured banks, with systemic consequences

with a probable failure or closure, as may be necessary to prevent its failure o

r
closure.
subject to the approval of the Monetary Board.
a.
systemic risk
possibility that failure of one bank to settle net transactions
with other banks will trigger a chain reaction, depriving other banks of funds
leading to a general shutdown of normal clearing and settlement activity.
-Likelihood of a sudden unexpected collapse of
confidence in a significant portion of the banking or
financial system with potentially large real economic
effects.
E.
PDIC may not purchase the voting or common stock of an insured bank but it can
enter into or force agreements that it determines to be necessary to protect its
financial interests.
F.
Financial assistance may take the form of equity or quasi-equity of insured bank
s as
may be deemed necessary by the Board of Directors with concurrence by the MB.
The corporation shall dispose of such equity as soon as practicable.
XVII. Borrowings
A.
PDIC is authorized to borrow from the BSP on such terms as may be agreed by them
.
Such loans granted by the BSP shall be consistent with monetary policy, the inte
rest
rate thereon shall not exceed the treasury bill rate.
B.
When in the Judgment of the Board of Directors, the PDIC has insufficient funds
to
attain its purpose, PDIC shall be authorized to borrow money, obtain loans, or a
rrange
credit lines or other credit accommodations from any bank designated as deposito
ry
or fiscal agent by the RP.
XVII. Issuance of Bonds
With approval of the President of RP, PDIC is authorized to issue bonds, debentu
res,
and other obligations necessary fro the purpose of settlement of insured deposit
s in
closed banks as well as for financial assistance.
a.
BoD shall determine interest rate and other requirements of such obligation.
b.
PDIC shall provide appropriate reserves for the redemption of said
obligation.
XIX. Reports and Audit
A.

PDIC shall annually make a report of its operations to the Congress as soon s
practicable after Jan 1
B.
Financial transactions shall be audited by the COA in accordance with principles
and
processes and procedures applicable to commercial corporate transactions. Audit
shall be conducted in places where the accounts of the corporation are normally
kept.
C.
COA shall have access to all books, accounts, records, reports, files, and all o
ther
papers belonging to PDIC pertaining to its financial transactions. Except as to
matters
relating to the Function of the PDIC which shall be subject to visitorial audit
only.
XX. Miscellaneous
A.
Signs
a.
Insured banks shall place signs in all place of business and in its statements
that its deposits are insured by PDIC.
b.
BoD may exempt from this requirement advertisements not relating to
deposits.
B.
Merger or consolidation of insured banks
Upon consent of PDIC, banks may:
1.
Merge or consolidate with an uninsured bank
2.
Assume liability to pay any deposits made in noninsured bank
3.
Transfer assets to any noninsured bank
C.
Protection Against Losses
a.
PDIC may require an insured bank to provide protection and indemnity
against burglary, defalcation, losses arising from discharge of duties, by
particular acts of its directors, employees, officres
b.
BoD shall determine the bonding requirement referring to directors, officers,
anfd employees of an insured bank
c.
If insured bank refuse to comply with any such requirement, PDIC may add
the cost thereof to the assessment otherwise payable to such bank.
D.
Directors, Officers and employees of Insured banks
41 | P a g e

a.
No person shall be a director, officer, or employee of an insured bank who
has been convicted of any criminal offense involving dishonesty of breach of
trust.
b.
Penalty for violation of this prohibition: the bank will be subject to penalty o
f
not more than 100 for every day of violation.
XXI. Criminal Penalties
A.
Punishable by prision mayor or a fine of 50,000-2,000,000,000 or both, any direc
tor,
officer, employee or agent of bank who:
1.
Willful refusal to submit reports
2.
Unjustified refusal to permit examination and audit of records as required by
law, rules, and regulations
3.
Willful making of false statement or entry in any bank report or document
4.
Submission of false material information in connection with or in relation to
any financial assistance extended to the bank
5.
Splitting of deposits or creation of fictitious loans or deposit accounts
i.
deposit accounts with an outstanding balance
Splitting deposits
of more than the statutory maximum amount of insured
deposit maintained under the name of a person is broken down
and transferred into two or more accounts in the names of
persons who have no beneficial ownership on transferred
deposits in their names within 30 days preceding or during a bank
declared holiday, or preceding a closure order issued by the MB
for the purpose of availing of the maximum deposit insurance
coverage.
6.
Refusal to allow PDIC to takeover a closed bank placed under its
receivership
7.
Refusal to turnover or destroying or tampering bank records
8.
Fraudulent disposal , transfer or concealment of any asset, property, liability
of the closed bank under the receivership of the PDIC
9.
Violation, or causing a person to violate, the exemption of garnishment, levy
attachment, or execution provided under the PDIC Law and the NCBA
10.
Willful failure or refusal to comply with, or violation of any provision of eh
PDIC Law, or commission of any other irregularities and/or conducting
business in an unsafe or unsound manner.
XXII. FINES
A.
BOD is authorized to impose administrative fines for violation of any other inst
ruction,
rule, or regulation issued by PDIC, against a bank or any of its directors, offi
cers, or
agents responsible for such act, omission, or violation. In no case such fine ex
ceed
3times the amount of the damages or costs caused by the transaction for each day

that the violation subsist.

Chap 11
Anti-Money Laundering ( RA 9160)
I. CONCEPTS
A.
Policies
i.
To protect and preserve the integrity and confidentiality of bank accounts
ii.
Ensure that the Philippines shall not be used as a money laundering site for
the proceeds of any unlawful activity.
iii.
Cooperation in transnational investigation and prosecution of persons
involved in money laundering
B.
Covered Institutions
i.
Banks, non-banks, quasi-banks, trust entities ad all other institutions
regulated by the BSP
ii.
Insurance companies and all other institutions regulated by the insurance
commission
iii.
Securities, brokers, salesmen, investment house and other entities
managing securities or service as agent, advisor, consultant
iv.
Mutual funds, closed-end investment company, common trust fund and preneed companies
v.
Foreign exchange corporations, money changers, money payments,
remittance, and transfer companies
vi.
Those administering or dealing in currency, commodities, financial
derivatives or other monetary instruments or property supervised by the
SEC
C.
Covered and Suspicious transaction
i.
Transaction in cash or monetary instrument exceeding P500,000 in one
banking day
ii.
Suspicious transactions regardless of the amount
a.
No legal or trade obligation, purpose or economic justification
b.
Client is not properly identified
c.
Amount is not commensurate with the client s financial capacity
d.
Structured transactions to avoid being the subject of reporting
required under the act
e.
Those which deviate from the profile of the client or past
transactions
f.
Related to any unlawful activity or offense
g.
Any transaction that is similar to any of the foregoing
D.

Monetary instrument
i.
Coins/currency of legal tender of the Phil. Or any country
ii.
Drafts, checks and notes
iii.
Securities or negotiable instruments, bonds, commercial papers, deposit
certificates, trust certificates, custodial receipts, trading orders, transactio
n
tickets, confirmation of sale money market instruments
iv.
Other similar instruments when title passes to another by endorsement,
assignment or delivery
E.
Unlawful Activities
i.
Kidnapping for ransom under Art.267 of RPC
42 | P a g e

ii.
Secs. 4-6, 8-10, 12-16 of the Dangerous Drugs Act of 2002
iii.
Sec.3 par b, c, e, g, h, I of the Anti-Graft and Corrupt Practices Act
iv.
Plunder under RA 7080
v.
Robbery and extortion under Arts. 294-296, 299-302 of the RPC
vi.
Jueteng and Masiao under PD 1602
vii.
Piracy on high seas under RPC and PD 532
viii.
Qualified theft under Art.310 of RPC
ix.
Swindling under Art.315 of RPC
x.
Smuggling under RA 455 and 1937
xi.
Violations of Electronic Commerce Act of 2000
xii.
Hijacking and other violations of RA 6235
xiii.
Destructive arson and murder under RPC
xiv.
Fraudulent practices under Securities Regulation Code of 2000
xv.
Felonies or offenses of similar nature punishable under penal laws of other
countries
F.
Money Laundering Offense-is a crime whereby the proceeds of an unlawfulactivity
are transacted, thereby making them appear to have originated fromlegitimate sou
rces. It can be committed by the ff:
i.
Any person knowing that any monetary instrument or property represents,
involves, or relates to, the proceeds of any unlawful activity, transacts or
attempts to transact said monetary instrument or property
ii.
Any person knowing any monetary instrument or property represents,
involves, or relates to, the proceeds of any unlawful activity, performs or
fails to perform any act as a result of which he facilitates the offense of
money laundering referred to above
iii.
Any person knowing that any monetary instrument or property is required to
be disclosed and filed with the Anti-Money Laundering Council, fails to do so
II. Jurisdiction and Prosecution
A.
Jurisdiction
i.
Private persons-RTC
ii.
Public persons and private persons in conspiracy with the formerSandiganbayan
B.
Prosecution
i.
Any person may be charged of both money laundering and the unlawful
activity
ii.

Any proceeding relating to the unlawful activity shall be given precedence

over the prosecution of any offense or violation w/o prejudice to the
freezing and other remedies
III. Anti-Money Laundering Council
A.
Composition
i.
Governor of he BSP as chairman
ii.
Commissioner of the Insurance Commission
iii.
Chairman of the SEC
B.
Functions
i.
Require and receive covered or suspicious transaction reports from covered
institutions
ii.
Issue orders addressed to the supervising authority of the institution to
determine the true owner of a covered or suspicious transaction report or
request assistance on the basis of substantial evidence
iii.
Institute civil forfeiture proceedings through the OSG
iv.
Cause the filing of complaints with the DOJ or Ombudsman
v.
Investigate suspicious and covered transactions
vi.
Apply before the CA ex parte, for the freezing of any monetary instrument or
property
vii.
Implement measures as may be necessary to counteract money laundering
viii.
Receive and take action any request of assistance from foreign states in
their own anti-money laundering operations
ix.
Develop educational programs on the effects, methods, and means to
prevent money laundering
x.
Enlist assistance from government instrumentality for any anti-money
laundering operation
xi.
Impose administrative sanctions for violation of laws, rules, regulations and
orders issued pursuant thereto
xii.
Establish a secretariat
a.
Member of the Bar
b.
35 years of age
c.
GMC
d.
Unquestionable integrity and known probity
IV. Prevention of Money Laundering
A.
Customer Identification
i.
Institutions shall establish and record the true identity of its clients based o
n

office documents
ii.
Maintain a system of verifying the identity and legal existence of their
clients
iii.
Anonymous, fictitious an similar accounts are prohibited
iv.
Peso and foreign currency non-checking accounts shall be allowed which
will be subject to test by the BSP to determine the existence and identity of
the owners
B.
Record Keeping
i.
Records of transactions shall be maintained and stored from 5 years from
the date of transaction
ii.
For closed accounts, its records shall also be stored for 5 years from the
date it was closed
C.
Reporting of Covered and Suspicious Transaction
i.
Shall be reported to AMLC within 5 working days from the occurrence
thereof, unless supervising authority prescribes a longer period not
exceeding 10 days
ii.
Should a transaction be determined a a covered and suspicious transaction,
it shall be required to report the same
iii.
Such reporting shall not be considered as a violation of RA 1405, RA 6426,
RA 8791, but are prohibited to communicate to any other person
iv.
In case of violation of the prohibition above, they shall be criminally liable
v.
Reporting to the AMLC is also prohibited to be disclosed to the media or any
other person or entity
D.
Freezing of Monetary Instrument or Property
i.
To the CA, upon application ex parte by the AMLC and after determination
that probable cause exists, may issue a freeze order
ii.
Such order shall be for 20 days unless extended by the Court
E.
Authority to inquire into bank deposits
i.
The AMLC may inquire upon order of any competent court when it has been
established that:
a.
There is probable cause that the deposit or investment s related
to any unlawful activity; or
b.
A money laundering offense
43 | P a g e

ii. No court order shall be required in the following activities

a.
Kidnapping for ransom
b.
Violations of Dangerous Drug Act of 2002
c.
Hijacking and other violations of RA 6235
d.
Destructive arson and murder including those perpetrated by
terrorists
V. Forfeiture
A.
Civil forfeiture
a.
When there is a report made, and the Court, in a petition filed for the
purpose of seizure, the Rules of Court on civil forfeiture applies
B.
Claim on Forfeiture Assets
a.
Those claiming an interest may apply, by verified petition, for a declaration
that the seized instrument or property legitimately belongs to him and pray
for the segregation and exclusion
b.
It shall be filed with the court which rendered the judgment of forfeiture
within 15 days from the order of forfeiture
C.
Payment in lieu of forfeiture
a. Is allowed because forfeiture cannot be enforced due to the ff:
i.
With due diligence, it cannot be located
ii.
Substantially altered, destroyed, diminished in value or rendered
worthless by any act or omission attributable to the offender
iii.
Concealed, removed, converted or transferred to prevent from
being found or avoid forfeiture
iv.
Located outside the Philippine or outside the jurisdiction of the
court
v.
Commingled with other instrument or property rendering it difficult
to be identified or segregated
VI. Mutual assistance among states
A.
Request for assistance from a foreign state
a.
The AMLC may execute or refuse to execute such request and inform the
state of any valid reason for not executing such request
B.
Powers of the AMLC to act on a request for assistance
a.
May execute a request by:
i.
Tracking down, freezing, restraining and seizing assets
ii.
Give information needed
iii.
Apply for an order of forfeiture
b.

Court will issue such order only when accompanied by:

i.
Authenticated copy of the order of a court in the requesting state
ordering the forfeiture
ii.
Certification or affidavit of a competent officer of the requesting
stat that the conviction and order of forfeiture are final
C.
Obtaining assistance from foreign state
a.
Tracking down, freezing, restraining and seizing assets
b.
Obtain info that it needs relating to covered transaction and money
laundering offense
c.
Enter into the premises belonging to or in the possession of the persons
named in the request, to the extent allowed by the law of the foreign state
d.
Apply for an order of forfeiture and must be accompanied by the order of the
RTC and an affidavit of the Clerk of Court that the conviction and forfeiture
are final
D.
Limitations on request
a.
When it contravenes the constitution
b.
Prejudicial to the interest of the Philippines
i.
Except: if there is a treaty between the Phil. And the requesting
State relating to the provisions of assistance in money laundering
offense
E.
Requirement for request from a foreign state
a.
Confirm that an investigation or prosecution is being conducted
b.
State the grounds on which any person is being investigated or prosecuted
for
c.
Give sufficient particulars as to the identity of the person
d.
Give particulars sufficient to identify the institution believed to have any inf
o
e.
Ask from the institution for any info which may be of assistance to the
investigation or prosecution
f.
Specify the manner in which such info will be obtained or produced
g.
Give all the particulars necessary for the issuance by the court in the
requested state of the orders needed by th requesting state
h.
Contain other info as may assist in the execution of the request
F.
Authentication of documents
a.
Signed or certified by a judge or equivalent officer in or of the requesting
state
b.
Authenticated by the oath or affirmation of a witness or sealed with an

official seal of a minister or secretary of the government of the requesting

state
c.
By the secretary of embassy, consul general, consul or any officer in the
foreign service of the Philippines stationed in the foreign state
G.
Extradition
a.
Negotiate for the inclusion of money laundering offenses among
extraditable offenses
VII. Penalties
A.
Crime of money laundering
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 transact said monetary instrument or property
i.
Imprisonment of 7 to 14 years and a fine not less than P3M
b.
Any person knowing any monetary instrument or property represents,
involves, or relates to, the proceeds of any unlawful activity, performs or
fails to perform any act as a result of which he facilitates the offense of
money laundering referred to above
i.
4-7 years and fin not less than P1.5M not more than P3M
c.
Any person knowing that any monetary instrument or property is required to
be disclosed and filed with the Anti-Money Laundering Council, fails to do so
i.
6m-4years or fine not less than P100,000 not more than
P500,000, or both
B.
Failure to keep records
a.
6m-1year or fine not less than P100,000 not more than P500,000, or both
C.
Malicious reporting
a.
Any person who, with malice or bad faith, reports a completely unwarranted
or false info relative to money laundering
i.
6m-4years and a fine not less than P100,000 not more than
P500,000
ii.
If corporation-upon the responsible officers
iii.
Juridical person-suspend or revoke its license
iv.
Alien-deportation
44 | P a g e

v.
Public official-perpetual or temporary absolute disqualification
from office
vi.
Public official who refuses to testify-same penalties above
D.
Breach of Confidentiality
a.
3-8years and fine P500,000-P1M
b.
If disclosed to media-reporter, writer, publisher, manager, editor
VIII. Prohibitions against political harassment
A.
shall not be used for political persecution or harassment or as an instrument to
hamper competition in trade and commerce
B.
no case may be filed against and no assets shall be frozen or forfeited to the p
rejudice
of a candidate for electoral office during election period
IX. Implementing rules and Regulations
A.
The BSP, IC, and SEC shall promulgate rules to effectively implement this Act. T
hese
rules shall be submitted to the congressional oversight committee for approval.
B.
Covered institutions shall formulate their own prevention programs
X. Congressional Oversight Committee
A.
Composition
a.
7 members from the Senate and 7 members from the House of
Representatives
b.
Shall be appointed by the Senate President and the Speaker, respectively,
based on proportional representation of parties
B.
Powers
a.
Power to promulgate rules to overse the implementation of the law and to
review and revise the rules issued by the AMLC within 30 days from
promulgation
XI. Rules and Regulation for banks and non-financial institutions to combat mone
y
laundering
1. Take reasonable measures to establish and record the true identity and legal
existence of their clients
2. in case of doubt, obtain the true identity of the persons on whose behalf an
account is
opened
3.
anonymous or fictitious accounts should not be allowed
4.
identity of clients should be updated
5.
necessary records of transactions should be maintained
6. special attention should be given to complex, unusual large transactions and
all
unusual patterns of transaction

7.
other suspicious transactions not involving deposit should be reported
8.
Banks should avoid business with criminals
9. Programs against money laundering-employee training, audit function, developm
ent
of internal policies.
D. Distribution of Assets
3.
Before any distribution of assets of the closed bank, PDIC shall charge against
such assets:
Reasonable receivership expenses (subject to approval of court)
Reasonable liquidation expenses
4.
After payment of all liabilities and claims against closed bank, PDIC shall pay
any
surplus dividends at the legal rate of interest from the date of takeover to the
date
of distribution, to creditors and claimants in accordance with legal priority be
fore
distribution to the shareholders.
XIV. Payment of Insured Deposits
I.
Manner of Payment
1.
Whenever an insured bank shall have been closed by the Monetary Board,
payment of the insured deposits on such closed banks shall be made by
the PDIC by:
i.
Cash
ii.
Transferred deposit
2.
deposit in an insured bank made available to a depositor
Transfer deposit
by PDIC as payment of insured deposit of such depositor in a closed bank.
Not to exceed two hundred fifty thousand (250,000)
3.
A joint account shall be insured separately from any individually owned
deposit account.
4.
Maximum insured deposits of Joint accounts shall be divided into as many
equal shares as there are co-owners, unless a different sharing is stipulated
in the document of deposit.
5.
If an account is held by a juridical person jointly with an individual, it is
presumed that the maximum insured deposit belongs to the juridical person.
6.
The aggregate of the interests of each co-owner over several joint accounts
shall likewise not exceed 250,000
7.
No owner/holder of any negotiable certificate of deposit shall be recognized
as a depositor entitled to the rights provided unless his name is registered in
the books of the issuing bank.
J.
Proof of Claims
1.
PDIC may require proof of claims to be filed before paying the insured
deposits.

2.
It may require final determination by the courts if not satisfied to the viabili
ty
of the claim.
K.
Settlement Period and Penalties in Case of Failure to Settle
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1.
Failure to settle claim within six months from the date of filing claim due to
grave abuse of discretion, gross negligence, bad faith, or malice shall
subject the directors, employees, or officers of PDIC Responsible for the
delay to imprisonment from six months to one year.
2.
Period shall not apply if the validity of the claim depends on resolution of
issues of fact or law by another office.
3.
Upon payment to such depositor, PDIC shall be subrogated to all of the
rights of the depositor to the extent of such payment.
4.
Such subrogation shall include the right to receive the same dividends from
the proceeds of the assets of the closed bank. But such depositor shall
retain his claim for any uninsured portion of his deposit.
L.
Notice
1.
PDIC shall commence the determination of insured deposits due to
depositors of the closed bank upon its actual takeover of the closed bank.
2.
PDIC shall publish the notice once a week for at least 3 consecutive weeks
in a newspaper of general circulation or newspaper circulated in the
community where the closed bank or its branches are located.
M.
Discharge
Payment of an insured deposit shall discharge PDIC. And payment of a
transferred deposit by the new bank in which a transferred deposit has been
made available shall discharge PDIC and the new bank.
N.
Recognition of Owner
PDIC cannot recognize as the owner any person, whose name or interest
as such owner is not disclosed on the records of a closed bank, as part
owner of any portion of a deposit appearing on the records of the closed
bank under a name other than that of the claimant.
O.
Withholding of Payment
PDIC may withhold payment of such portions 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 any
liability of such depositor to the closed bank or to 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 therefore.
P.
Prescription
All rights of a depositor with respect to the insured deposit shall be barred if
:
He fails to file a claim within two years from actual take-over of
the closed bank by the receiver.
Or does not enforce his claim within two years after the filing a
claim Unless otherwise waived by PDIC.
All rights of the depositor subrogated to PDIC shall thereupon revert back to
the depositor. PDIC shall be discharged from any liability.

XV. Investment by PDIC

C.
Money of the PDIC not otherwise employed shall be invested in obligations of the
Republic of the Philippines or by obligations guaranteed by it.
1.
It shall not sell or purchase any such obligation for its own account or in its
own right and interest in any one time aggregating in excess of 100,000
without approval of the Insurance Commissioner.
2.
Insurance Commissioner may waive the requirement of his approval as he
may determine.
D.
The banking or checking account of PDIC shall be kept in:
1.
BSP
2.
PNB
3.
Any bank designated as fiscal agent or depository of RP
XVI. Extension of Loans
G.
In order to prevent an insured bank from closing, PDCI may make loans, purchase
the
assets, assume liability, or make deposits in such insured bank, upon such condi
tions
as the Board of Directors may prescribe, the operations of such bank is essentia
l to
provide adequate banking service in the community or maintain financial stabilit
y in
the economy.
a.
Such power may also be exercised in case of a closed insured bank if:
i.
the resumption of the operations of said bank is vital to the
interest of the community
ii.
Severe financial climate exists
b.
Reopening of said bank is subject to the approval of the Monetary Board.
H.
PDIC may provide any corporation acquiring control of, merging or consolidating
with
or acquiring the assets of an insured bank in order to prevent such closing or o
f a
closed insured bank in order to restore it to normal operation
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a.
Within 60 days from date
I.
PDIC shall determine the
nsive
than the exercise of its
J.
PDIC may grant financial

of assistance, PDIC shall submit a report to MB

actual payoff and liquidation thereof will be more expe
power prior to exercise of its powers.
assistance to insured banks, with systemic consequences

with a probable failure or closure, as may be necessary to prevent its failure o

r
closure.
subject to the approval of the Monetary Board.
a.
systemic risk
possibility that failure of one bank to settle net transactions
with other banks will trigger a chain reaction, depriving other banks of funds
leading to a general shutdown of normal clearing and settlement activity.
-Likelihood of a sudden unexpected collapse of
confidence in a significant portion of the banking or
financial system with potentially large real economic
effects.
K.
PDIC may not purchase the voting or common stock of an insured bank but it can
enter into or force agreements that it determines to be necessary to protect its
financial interests.
L.
Financial assistance may take the form of equity or quasi-equity of insured bank
s as
may be deemed necessary by the Board of Directors with concurrence by the MB.
The corporation shall dispose of such equity as soon as practicable.
XVII. Borrowings
C.
PDIC is authorized to borrow from the BSP on such terms as may be agreed by them
.
Such loans granted by the BSP shall be consistent with monetary policy, the inte
rest
rate thereon shall not exceed the treasury bill rate.
D.
When in the Judgment of the Board of Directors, the PDIC has insufficient funds
to
attain its purpose, PDIC shall be authorized to borrow money, obtain loans, or a
rrange
credit lines or other credit accommodations from any bank designated as deposito
ry
or fiscal agent by the RP.
XVII. Issuance of Bonds
With approval of the President of RP, PDIC is authorized to issue bonds, debentu
res,
and other obligations necessary fro the purpose of settlement of insured deposit
s in
closed banks as well as for financial assistance.
a.
BoD shall determine interest rate and other requirements of such obligation.
b.
PDIC shall provide appropriate reserves for the redemption of said
obligation.
XIX. Reports and Audit
D.

PDIC shall annually make a report of its operations to the Congress as soon s
practicable after Jan 1
E.
Financial transactions shall be audited by the COA in accordance with principles
and
processes and procedures applicable to commercial corporate transactions. Audit
shall be conducted in places where the accounts of the corporation are normally
kept.
F.
COA shall have access to all books, accounts, records, reports, files, and all o
ther
papers belonging to PDIC pertaining to its financial transactions. Except as to
matters
relating to the Function of the PDIC which shall be subject to visitorial audit
only.
XX. Miscellaneous
E.
Signs
a.
Insured banks shall place signs in all place of business and in its statements
that its deposits are insured by PDIC.
b.
BoD may exempt from this requirement advertisements not relating to
deposits.
F.
Merger or consolidation of insured banks
Upon consent of PDIC, banks may:
4.
Merge or consolidate with an uninsured bank
5.
Assume liability to pay any deposits made in noninsured bank
6.
Transfer assets to any noninsured bank
G.
Protection Against Losses
a.
PDIC may require an insured bank to provide protection and indemnity
against burglary, defalcation, losses arising from discharge of duties, by
particular acts of its directors, employees, officres
b.
BoD shall determine the bonding requirement referring to directors, officers,
anfd employees of an insured bank
c.
If insured bank refuse to comply with any such requirement, PDIC may add
the cost thereof to the assessment otherwise payable to such bank.
H.
Directors, Officers and employees of Insured banks
a.
No person shall be a director, officer, or employee of an insured bank who
has been convicted of any criminal offense involving dishonesty of breach of
trust.
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b.
Penalty for violation of this prohibition: the bank will be subject to penalty o
f
not more than 100 for every day of violation.
XXI. Criminal Penalties
B.
Punishable by prision mayor or a fine of 50,000-2,000,000,000 or both, any direc
tor,
officer, employee or agent of bank who:
1.
Willful refusal to submit reports
2.
Unjustified refusal to permit examination and audit of records as required by
law, rules, and regulations
3.
Willful making of false statement or entry in any bank report or document
4.
Submission of false material information in connection with or in relation to
any financial assistance extended to the bank
5.
Splitting of deposits or creation of fictitious loans or deposit accounts
i.
deposit accounts with an outstanding balance
Splitting deposits
of more than the statutory maximum amount of insured
deposit maintained under the name of a person is broken down
and transferred into two or more accounts in the names of
persons who have no beneficial ownership on transferred
deposits in their names within 30 days preceding or during a bank
declared holiday, or preceding a closure order issued by the MB
for the purpose of availing of the maximum deposit insurance
coverage.
6.
Refusal to allow PDIC to takeover a closed bank placed under its
receivership
7.
Refusal to turnover or destroying or tampering bank records
8.
Fraudulent disposal , transfer or concealment of any asset, property, liability
of the closed bank under the receivership of the PDIC
9.
Violation, or causing a person to violate, the exemption of garnishment, levy
attachment, or execution provided under the PDIC Law and the NCBA
10.
Willful failure or refusal to comply with, or violation of any provision of eh
PDIC Law, or commission of any other irregularities and/or conducting
business in an unsafe or unsound manner.
XXII. FINES
B.
BOD is authorized to impose administrative fines for violation of any other inst
ruction,
rule, or regulation issued by PDIC, against a bank or any of its directors, offi
cers, or
agents responsible for such act, omission, or violation. In no case such fine ex
ceed
3times the amount of the damages or costs caused by the transaction for each day
that the violation subsist.
Chap 11

Anti-Money Laundering ( RA 9160)

I. CONCEPTS
G.
Policies
i.
To protect and preserve the integrity and confidentiality of bank accounts
ii.
Ensure that the Philippines shall not be used as a money laundering site for
the proceeds of any unlawful activity.
iii.
Cooperation in transnational investigation and prosecution of persons
involved in money laundering
H.
Covered Institutions
i.
Banks, non-banks, quasi-banks, trust entities ad all other institutions
regulated by the BSP
ii.
Insurance companies and all other institutions regulated by the insurance
commission
iii.
Securities, brokers, salesmen, investment house and other entities
managing securities or service as agent, advisor, consultant
iv.
Mutual funds, closed-end investment company, common trust fund and preneed companies
v.
Foreign exchange corporations, money changers, money payments,
remittance, and transfer companies
vi.
Those administering or dealing in currency, commodities, financial
derivatives or other monetary instruments or property supervised by the
SEC
I.
Covered and Suspicious transaction
i.
Transaction in cash or monetary instrument exceeding P500,000 in one
banking day
ii.
Suspicious transactions regardless of the amount
a.
No legal or trade obligation, purpose or economic justification
b.
Client is not properly identified
c.
Amount is not commensurate with the client s financial capacity
d.
Structured transactions to avoid being the subject of reporting
required under the act
e.
Those which deviate from the profile of the client or past
transactions
f.
Related to any unlawful activity or offense
g.
Any transaction that is similar to any of the foregoing
J.
Monetary instrument
i.
Coins/currency of legal tender of the Phil. Or any country

ii.
Drafts, checks and notes
iii.
Securities or negotiable instruments, bonds, commercial papers, deposit
certificates, trust certificates, custodial receipts, trading orders, transactio
n
tickets, confirmation of sale money market instruments
iv.
Other similar instruments when title passes to another by endorsement,
assignment or delivery
K.
Unlawful Activities
i.
Kidnapping for ransom under Art.267 of RPC
ii.
Secs. 4-6, 8-10, 12-16 of the Dangerous Drugs Act of 2002
iii.
Sec.3 par b, c, e, g, h, I of the Anti-Graft and Corrupt Practices Act
iv.
Plunder under RA 7080
v.
Robbery and extortion under Arts. 294-296, 299-302 of the RPC
48 | P a g e

vi.
Jueteng and Masiao under PD 1602
vii.
Piracy on high seas under RPC and PD 532
viii.
Qualified theft under Art.310 of RPC
ix.
Swindling under Art.315 of RPC
x.
Smuggling under RA 455 and 1937
xi.
Violations of Electronic Commerce Act of 2000
xii.
Hijacking and other violations of RA 6235
xiii.
Destructive arson and murder under RPC
xiv.
Fraudulent practices under Securities Regulation Code of 2000
xv.
Felonies or offenses of similar nature punishable under penal laws of other
countries
L.
Money Laundering Offense-is a crime whereby the proceeds of an unlawfulactivity
are transacted, thereby making them appear to have originated fromlegitimate sou
rces. It can be committed by the ff:
i.
Any person knowing that any monetary instrument or property represents,
involves, or relates to, the proceeds of any unlawful activity, transacts or
attempts to transact said monetary instrument or property
ii.
Any person knowing any monetary instrument or property represents,
involves, or relates to, the proceeds of any unlawful activity, performs or
fails to perform any act as a result of which he facilitates the offense of
money laundering referred to above
iii.
Any person knowing that any monetary instrument or property is required to
be disclosed and filed with the Anti-Money Laundering Council, fails to do so
II. Jurisdiction and Prosecution
C.
Jurisdiction
i.
Private persons-RTC
ii.
Public persons and private persons in conspiracy with the formerSandiganbayan
D.
Prosecution
i.
Any person may be charged of both money laundering and the unlawful
activity
ii.
Any proceeding relating to the unlawful activity shall be given precedence
over the prosecution of any offense or violation w/o prejudice to the
freezing and other remedies
III. Anti-Money Laundering Council
C.
Composition
iv.
Governor of he BSP as chairman

v.
Commissioner of the Insurance Commission
vi.
Chairman of the SEC
D.
Functions
xiii.
Require and receive covered or suspicious transaction reports from covered
institutions
xiv.
Issue orders addressed to the supervising authority of the institution to
determine the true owner of a covered or suspicious transaction report or
request assistance on the basis of substantial evidence
xv.
Institute civil forfeiture proceedings through the OSG
xvi.
Cause the filing of complaints with the DOJ or Ombudsman
xvii.
Investigate suspicious and covered transactions
xviii.
Apply before the CA ex parte, for the freezing of any monetary instrument or
property
xix.
Implement measures as may be necessary to counteract money laundering
xx.
Receive and take action any request of assistance from foreign states in
their own anti-money laundering operations
xxi.
Develop educational programs on the effects, methods, and means to
prevent money laundering
xxii.
Enlist assistance from government instrumentality for any anti-money
laundering operation
xxiii.
Impose administrative sanctions for violation of laws, rules, regulations and
orders issued pursuant thereto
xxiv.
Establish a secretariat
a.
Member of the Bar
b.
35 years of age
c.
GMC
d.
Unquestionable integrity and known probity
IV. Prevention of Money Laundering
F.
Customer Identification
v.
Institutions shall establish and record the true identity of its clients based o
n
office documents
vi.
Maintain a system of verifying the identity and legal existence of their
clients
vii.
Anonymous, fictitious an similar accounts are prohibited
viii.
Peso and foreign currency non-checking accounts shall be allowed which

will be subject to test by the BSP to determine the existence and identity of
the owners
G.
Record Keeping
iii.
Records of transactions shall be maintained and stored from 5 years from
the date of transaction
iv.
For closed accounts, its records shall also be stored for 5 years from the
date it was closed
H.
Reporting of Covered and Suspicious Transaction
vi.
Shall be reported to AMLC within 5 working days from the occurrence
thereof, unless supervising authority prescribes a longer period not
exceeding 10 days
vii.
Should a transaction be determined a a covered and suspicious transaction,
it shall be required to report the same
viii.
Such reporting shall not be considered as a violation of RA 1405, RA 6426,
RA 8791, but are prohibited to communicate to any other person
ix.
In case of violation of the prohibition above, they shall be criminally liable
x.
Reporting to the AMLC is also prohibited to be disclosed to the media or any
other person or entity
I.
Freezing of Monetary Instrument or Property
iii.
To the CA, upon application ex parte by the AMLC and after determination
that probable cause exists, may issue a freeze order
iv.
Such order shall be for 20 days unless extended by the Court
J.
Authority to inquire into bank deposits
iii.
The AMLC may inquire upon order of any competent court when it has been
established that:
a.
There is probable cause that the deposit or investment s related
to any unlawful activity; or
b.
A money laundering offense
iv.
No court order shall be required in the following activities
a.
Kidnapping for ransom
b.
Violations of Dangerous Drug Act of 2002
c.
Hijacking and other violations of RA 6235
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d.
Destructive arson and murder including those perpetrated by
terrorists
V. Forfeiture
D.
Civil forfeiture
a.
When there is a report made, and the Court, in a petition filed for the
purpose of seizure, the Rules of Court on civil forfeiture applies
E.
Claim on Forfeiture Assets
a.
Those claiming an interest may apply, by verified petition, for a declaration
that the seized instrument or property legitimately belongs to him and pray
for the segregation and exclusion
b.
It shall be filed with the court which rendered the judgment of forfeiture
within 15 days from the order of forfeiture
F.
Payment in lieu of forfeiture
a. Is allowed because forfeiture cannot be enforced due to the ff:
i.
With due diligence, it cannot be located
ii.
Substantially altered, destroyed, diminished in value or rendered
worthless by any act or omission attributable to the offender
iii.
Concealed, removed, converted or transferred to prevent from
being found or avoid forfeiture
iv.
Located outside the Philippine or outside the jurisdiction of the
court
v.
Commingled with other instrument or property rendering it difficult
to be identified or segregated
VI. Mutual assistance among states
H.
Request for assistance from a foreign state
a.
The AMLC may execute or refuse to execute such request and inform the
state of any valid reason for not executing such request
I.
Powers of the AMLC to act on a request for assistance
a.
May execute a request by:
i.
Tracking down, freezing, restraining and seizing assets
ii.
Give information needed
iii.
Apply for an order of forfeiture
b.
Court will issue such order only when accompanied by:
i.
Authenticated copy of the order of a court in the requesting state
ordering the forfeiture
ii.
Certification or affidavit of a competent officer of the requesting
stat that the conviction and order of forfeiture are final

J.
Obtaining assistance from foreign state
a.
Tracking down, freezing, restraining and seizing assets
b.
Obtain info that it needs relating to covered transaction and money
laundering offense
c.
Enter into the premises belonging to or in the possession of the persons
named in the request, to the extent allowed by the law of the foreign state
d.
Apply for an order of forfeiture and must be accompanied by the order of the
RTC and an affidavit of the Clerk of Court that the conviction and forfeiture
are final
K.
Limitations on request
a.
When it contravenes the constitution
b.
Prejudicial to the interest of the Philippines
i.
Except: if there is a treaty between the Phil. And the requesting
State relating to the provisions of assistance in money laundering
offense
L.
Requirement for request from a foreign state
a.
Confirm that an investigation or prosecution is being conducted
b.
State the grounds on which any person is being investigated or prosecuted
for
c.
Give sufficient particulars as to the identity of the person
d.
Give particulars sufficient to identify the institution believed to have any inf
o
e.
Ask from the institution for any info which may be of assistance to the
investigation or prosecution
f.
Specify the manner in which such info will be obtained or produced
g.
Give all the particulars necessary for the issuance by the court in the
requested state of the orders needed by th requesting state
h.
Contain other info as may assist in the execution of the request
M.
Authentication of documents
a.
Signed or certified by a judge or equivalent officer in or of the requesting
state
b.
Authenticated by the oath or affirmation of a witness or sealed with an
official seal of a minister or secretary of the government of the requesting
state
c.
By the secretary of embassy, consul general, consul or any officer in the
foreign service of the Philippines stationed in the foreign state
N.
Extradition

a.
Negotiate for the inclusion of money laundering offenses among
extraditable offenses
VII. Penalties
E.
Crime of money laundering
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 transact said monetary instrument or property
i.
Imprisonment of 7 to 14 years and a fine not less than P3M
b.
Any person knowing any monetary instrument or property represents,
involves, or relates to, the proceeds of any unlawful activity, performs or
fails to perform any act as a result of which he facilitates the offense of
money laundering referred to above
i.
4-7 years and fin not less than P1.5M not more than P3M
c.
Any person knowing that any monetary instrument or property is required to
be disclosed and filed with the Anti-Money Laundering Council, fails to do so
i.
6m-4years or fine not less than P100,000 not more than
P500,000, or both
F.
Failure to keep records
a.
6m-1year or fine not less than P100,000 not more than P500,000, or both
G.
Malicious reporting
a.
Any person who, with malice or bad faith, reports a completely unwarranted
or false info relative to money laundering
i.
6m-4years and a fine not less than P100,000 not more than
P500,000
ii.
If corporation-upon the responsible officers
iii.
Juridical person-suspend or revoke its license
iv.
Alien-deportation
v.
Public official-perpetual or temporary absolute disqualification
from office
50 | P a g e

vi.
Public official who refuses to testify-same penalties above
H.
Breach of Confidentiality
a.
3-8years and fine P500,000-P1M
b.
If disclosed to media-reporter, writer, publisher, manager, editor
VIII. Prohibitions against political harassment
C.
shall not be used for political persecution or harassment or as an instrument to
hamper competition in trade and commerce
D.
no case may be filed against and no assets shall be frozen or forfeited to the p
rejudice
of a candidate for electoral office during election period
IX. Implementing rules and Regulations
A.
The BSP, IC, and SEC shall promulgate rules to effectively implement this Act. T
hese
rules shall be submitted to the congressional oversight committee for approval.
B.
Covered institutions shall formulate their own prevention programs
X. Congressional Oversight Committee
C.
Composition
a.
7 members from the Senate and 7 members from the House of
Representatives
b.
Shall be appointed by the Senate President and the Speaker, respectively,
based on proportional representation of parties
D.
Powers
a.
Power to promulgate rules to overse the implementation of the law and to
review and revise the rules issued by the AMLC within 30 days from
promulgation
XI. Rules and Regulation for banks and non-financial institutions to combat mone
ylaundering
1. Take reasonable measures to establish and record the true identity and legal
existence of their clients
2. in case of doubt, obtain the true identity of the persons on whose behalf an
account is
opened
3.
anonymous or fictitious accounts should not be allowed
4.
identity of clients should be updated
5.
necessary records of transactions should be maintained
6. special attention should be given to complex, unusual large transactions and
all
unusual patterns of transaction
7.
other suspicious transactions not involving deposit should be reported
8.
Banks should avoid business with criminals

9. Programs against money laundering-employee training, audit function, developm

ent
of internal policies.
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