PHILIPPINE DEPOSIT INSURANCE CORPORATION LAW

I. Coverage

A. Deposits

1. One of these is not included in the definition of deposit as the unpaid

balance of money or its equivalent received by a bank in the usual
course of business and for which it has given or is obliged to give credit:

a. Commercial, checking, savings, time or thrift accounts, or issued

in accordance with the Bangko Sentral rules and regulations and
other applicable laws.
b. Other obligations of a bank which, consistent with banking usage
and practice, the Board of Directors of Philippine Deposit
Insurance Corporation shall determine to be deposit liabilities of
the bank.
c. Deposits of a branch of a domestic bank abroad insured with the
approval of the Board of Directors of Philippine Deposit
Insurance Corporation.
d. Deposits in a safety deposit box.

B. Exclusions

1. One of these is not exempted from coverage:

a. Investment products such as bonds, securities, trust accounts, and

other similar insurances.
b. Deposit accounts which are unfunded, fictitious or fraudulent.
c. Deposits from unsafe and unsound banking practice after notice
and hearing and publication of cease and desist order issued by
Philippine Deposit Insurance Corporation and deposits
determined to be proceeds of money laundering.
d. Deposits in foreign currency.

II. Insurance Coverage

A. Maximum Coverage

1. One of these statements is not correct:

a. The maximum coverage is P500,000 per depositor.

b. In determining such amount, all deposits in the same right and
capacity for the benefit of the depositor in his own name or in the
name of others shall be added together.
c. A joint account shall be insured separately from an individually
owned account.
d. Account in the name of the depositor shall be added together
with an account in his name in trust for another person.

2. One of these statements is not correct:

 a. If the account is held jointly by two or more persons, the
maximum deposit shall be divided equally among them unless a
different sharing is stipulated.
b. If the account is held jointly by a juridical entity and one or more
natural persons, the maximum deposit is presumed to belong
entirely to the juridical entity.
c. The aggregate of the interests of each co-owner over several joint
accounts, whether owned by the same or different combinations
of individual or juridical entities, shall be subject to the maximum
insurance coverage.
d. The maximum insurance coverage shall not be reduced by the
amount of any obligation of the depositor to the banks.

III. Determination of Maximum Coverage

1. One of these statements is not correct:

a. No owner or holder of a negotiable certificate of deposit shall be

entitled to payment unless his name is registered in the books of
the banks.
b. Any director, employee, or agent of the bank is criminally liable if
he creates fictitious deposit accounts or splits deposits with an
outstanding balance more than the maximum insurance coverage
and transfers it into two or more accounts in the name of persons
who have no beneficial ownership 120 days immediately before
or during a bank closure for the purpose of availing of the
maximum insurance coverage.
c. The determination of the Philippine Deposit Insurance
Corporation as to the insurance coverage shall be final and
executory unless set aside by the court on petition for certiorari
filed within 30 days from notice of denial of the claim.
d. If a depositor fails to file a claim within three years from the
actual takeover of the closed bank by the receiver or does not
enforce his claim within three years after the three-year period to
file a claim, all his rights against the Philippine Deposit Insurance
Corporation will be barred.

IV. Payment

1. One of these statements is not correct:

a. The payment may be made to a depositor in cash or a transferred

deposit in another insured bank.
b. Payment must be made within six months from the date of the
filing of the claim.
c. The six-month deadline will not apply if the Philippine Deposit
Insurance Corporation is not satisfied as to the validity of the
claim, and it may require final determination of the claim by a
court.
d. The Philippine Deposit Insurance Corporation may not withhold
a portion of the payment to provide for payment of any liability
of the depositor to the bank which is not offset against its claims.

V. Effect of Payment and Injunctions

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 1. One of these statements is not correct:

a. The Philippine Deposit Insurance Corporation shall be

subrogated to the rights of the insured depositors against the
closed bank.
b. The payments made to the insured depositor shall be considered
as a preferred credit similar to a mortgage credit.
c. No court, except the Court of Appeals, can issue a temporary
restraining order or preliminary injunction against the Philippine
Deposit Insurance Corporation for any action under this law.
d. The Supreme Court may issue a temporary restraining order or
preliminary injunction when the matter is of extreme urgency
involving a constitutional issue such that unless it is issued grave
and irreparable injury will follow.

CHATTEL MORTGAGE LAW

I. Requisites

1. One of these is not a requisite of a chattel mortgage:

a. It must be constituted to secure the payment of a principal

obligation.
b. The mortgagor must be the absolute owner of the property
mortgaged.
c. The mortgagor must have free disposal of his property and in the
absence of it, legal authorization.
d. The mortgagor must be the debtor under the principal obligation.

2. One of these is not a requisite of a chattel mortgage:

a. The property mortgaged is personal property.

b. The mortgage must be registered.
c. There must be an affidavit of good faith.
d. The property mortgaged must be delivered to the mortgagee.

3. One of these statements is not correct:

a. If the proceeds of the loan whose payment is being secured by

chattel mortgage were not released, the chattel mortgage is
unenforceable.
b. A chattel mortgage over a vessel registered in the name of the
mortgagor is valid even if he had not paid the seller and they had
an understanding that he would not register the vessel in his
name until the price had been fully paid.
c. A chattel mortgage executed over a jeepney by the buyer is valid
even if the jeepney had not yet been delivered to him.
d. An unemancipated minor cannot mortgage property he owns.

4. One of these cannot execute a chattel mortgage:

a. A demented person
b. A deaf-mute who can write

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 c. An entrustee under a trust receipt
d. A convict sentenced to suffer civil interdiction

5. One of these properties cannot be the subject of a chattel mortgage:

a. Machinery placed by the lessee of a building

b. Stocks in trade
c. Growing crops
d. Goods covered by a trust receipt.

6. One of these statements is not correct:

a. A chattel mortgage over a building is valid as between the parties

because of estoppel.
b. A chattel mortgage over shares of stock is required to be
registered with the register of deeds in the province or city where
the corporation who issued the stock certificate has its office if the
mortgagor resides in another place.
c. A chattel mortgage over a motor vehicle must be registered with
the register of deeds and the Land Transportation Office.
d. A chattel mortgage over a vessel must be registered with the
register of deeds and the Maritime Industry Authority.

7. One of these statements is not correct:

a. A chattel mortgage over an aircraft must be registered with the

register of deeds and the Civil Aviation Authority of the
Philippines.
b. A chattel mortgage over a patent must be registered with the
register of deeds and the Intellectual Property Office.
c. A chattel mortgage over a trademark must be registered with the
register of deeds and the Intellectual Property Office.
d. A chattel mortgage over a copyright must be registered with the
register of deeds but need not be registered with the National
Library.

8. One of these statements is not correct:

a. A chattel mortgage is valid between the parties even if there is no

affidavit of good faith.
b. A chattel mortgage is unenforceable against third parties if there
is no affidavit of good faith.
c. A chattel mortgage will be valid against third parties even if there
is no affidavit of good faith if the third party has actual notice of it
and the chattel mortgage was executed in good faith and for a
valid obligation.
d. A chattel mortgage over a building is binding upon third parties.

II. Scope of Effectivity

1. One of these statements is not correct:

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 a. A chattel mortgage does not cover property acquired by the
mortgagor afterwards as substituted property for the original
property.
b. If the properties covered by a chattel mortgage consists of the
stocks in trade being sold a by store, the chattel mortgage may
stipulate that it will cover properties acquired afterwards in
substitution of the original stocks in trade.
c. A chattel mortgage cannot secure the payment of future
obligations.
d. A chattel mortgage can secure a credit line granted by a bank.

III. Foreclosure

1. One of these statements is not correct:

a. If the debtor defaulted in paying the obligation which was

secured by the chattel mortgage, the chattel mortgage may be
foreclosed.
b. The parties may stipulate that the properties mortgaged will be
sold at a private sale instead of by public auction.
c. The sale shall be held in the city or municipality where the
mortgagor resides or where the properties are located.
d. The mortgagor and the mortgagee may not stipulate on the place
where the sale will be held.

2. One of these statements is not correct:

a. Notice of sale must be posted in two or more public places in the

city of municipality where the public auction will be held at least
ten days before the date of the sale.
b. Notice of the sale must be sent to the mortgagor or person
holding under him and subsequent mortgagees by notice in
writing directed to them or left at their residence or sent by mail if
they are not residents of the city or municipality at least ten days
before the sale.
c. There is no right of redemption in foreclosure of a chattel
mortgage.
d. A junior mortgagee has no equity of redemption in foreclosure of
a chattel mortgage.

3. One of these statements is not correct:

a. If the proceeds from the sale exceed the expenses and the amount
due the mortgagee, the balance shall be paid to junior mortgagees
in their order.
b. If the proceeds from the sale resulted in a deficiency, the
mortgagee shall be entitled to sue the debtor for the deficiency.
c. If the property was sold on installment basis and a chattel
mortgage over the property was constituted to secure the
payment of the price, the mortgagee will be barred from
recovering any deficiency in case of foreclosure.
d. Even if the property covered by a chattel mortgage is actually real
property, the foreclosure sale should be conducted in accordance
with the Chattel Mortgage Law rather than Act No. 3135.

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FORECLOSURE OF REAL ESTATE MORTGAGE

I. General Principles

1. One of these statements is not correct:

a. In case a real estate mortgage was executed to secure the payment

of an obligation for the payment of money, the mortgagee may:
(1) foreclose the mortgage judicially; (2) foreclose it
extrajudicially, or (3) file an action for payment of a sum of
money.
b. In order that the mortgagee may be authorized to foreclose a real
estate mortgage extrajudicially, the deed of mortgage must grant
the mortgagee a special power of attorney for the purpose.
c. The petition for extrajudicial foreclose of the real property shall be
filed with the Executive Judge through the Clerk of Court.
d. A petition for extrajudicial foreclosure of the real estate mortgage
need not be filed if the foreclosure sale will be conducted by a
notary public.

II. Foreclosure

1. One of these statements is not correct:

a. If the stipulated rate of interest is unconscionable, the foreclosure

is premature and void, because the mortgagor had no obligation
to pay the unconscionable interest.
b. The sale shall be held in the city or municipality where the
property is situated.
c. It may be stipulated that the sale will be held in a different city or
municipality.
d. In case it is stipulated that the sale will be made in a place outside
the city or municipality where the property is located, the sale
cannot be made in the place where the property is located.

2. One of these statements is not correct:

a. Notice of the sale shall be published once a week for three

consecutive in a newspaper of general circulation in the place
where the sale will be held.
b. The sale is not valid if notice of it was published in a newspaper
of general circulation but no notices of the sale were posted in
three public places.
c. The publication of a notice of sale is not valid if the newspaper is
not circulated in place of the sale.
d. No personal notice of sale to the mortgagor is required.

3. One of these statements is not correct:

a. If it is stipulated that personal notice of sale shall be given to the

mortgagor, the sale is void if the mortgagor was not given
personal notice.

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 b. If the sale was postponed, notice of sale must be republished in a
newspaper of general circulation.
c. It is void for the mortgagor to waive the republication of the
notice of sale in case the sale was postponed.
d. Typographical errors in the name of the mortgagor and the
technical description of the property in the notice of sale will
nullify the sale.

4. One of these statements is not correct:

a. If several parcels of land were mortgaged, they are not required to

be sold separately one at a time and they may be sold as a whole.
b. A second sale is required if only one bidder appeared at the sale.
c. If the proceeds of the sale result in a deficiency, the mortgagee can
sue the debtor for the deficiency.
d. If the proceeds of the sale exceed the amount due the mortgagor,
the excess should be turned over to the mortgagor.

III. Redemption

A. Right of Redemption and Duration

1. One of these statements is not correct:

a. The waiver of the right of redemption is void, because it is against

public policy.
b. As a rule, the mortgagor has the right to redeem the property
mortgaged within a year.
c. The redemption period is counted from the date of registration of
the certificate of sale.
d. A bank who did not object when the sheriff who conducted the
sale stated in the certificate of sale that the redemption period is
two years cannot be deemed to have agreed to it.

2. One of these statements is not correct:

a. If the mortgagor is a juridical person and the mortgagee is a bank,

the redemption period runs until the registration of the certificate
of sale or three months after the sale, whichever is earlier.
b. The filing of an action for redemption within the redemption
period is not sufficient unless the redemption price is tendered as
soon as it is determined.
c. The mortgagor and the mortgagee can agree to extend the
redemption period.
d. The acceptance by the buyer of the redemption place tendered
beyond the redemption period does not constitute a waiver of the
redemption period.

3. One of these statements is not correct:

a. If a real estate mortgage secured the payment of two loans which

were already due when the bank filed an application for
extrajuridical foreclosure of the real estate mortgage on the first

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 loan only, the payment for the second loan should not be
included in the redemption price.
b. If all the lots mortgaged were sold at a single foreclosure sale and
for a single price, the mortgagor cannot redeem some of them
only and must redeem all of them.
c. If the buyer at the foreclosure sale is not a bank, the redemption
price is the purchase price, with interest at rate of one per cent a
month up to the time of redemption, together with the amount of
any assessment and taxes which the buyer paid after the
purchase, with interest at the rate of one per cent a month.
d. If the buyer at the foreclose sale is the bank, the redemption price
is the purchase price, with interest at the rate specified in the
mortgage, and all the costs and expenses incurred by the bank
from the sale and custody of the property, less income derived
from it.

IV. Writ of Possession

1. One of these statements is not correct:

a. It is the ministerial duty of the court to issue a writ of possession

after the foreclosure sale.
b. The right to file a petition for a writ of possession is prescriptible.
c. The buyer is entitled to a writ of possession even if the mortgagor
filed an action for annulment of the real estate mortgage or of the
foreclosure sale.
d. The buyer at the sale cannot ask for a writ of possession if the
buyer leased the property to the mortgagor and the mortgagor
defaulted in paying rent, because the rights of the parties are
governed by the lease.

2. One of these statements is not correct:

a. The writ of possession can be enforced against third parties

whose rights are dependent upon those of the mortgagor.
b. The writ of possession can be enforced against a lessee of the
mortgagor.
c. The writ of possession cannot be enforced against a lessee of the
mortgagor if the lease has not yet expired and it is registered, the
buyer knew of its existence and duration, or it is covered by the
House Rental Law.
d. The writ of possession can be enforced against a third person
asserting rights of ownership adverse to the mortgagor.

V. Annulment of Foreclosure Sale

1. One of these statements is not correct:

a. The mortgagor may file a petition that the sale be set aside and
the writ of possession be cancelled on the ground that the real
estate mortgage was not violated or the sale was not made in
accordance with law.

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 b. The petition shall be filed in the proceedings in which possession
was requested not later than 30 days after the buyer was given
possession.
c. The court shall take cognizance of the petition in accordance with
Section 112 of the Property Registration Decree.
d. If no writ of possession has yet been issued, the mortgagor cannot
file a separate action for annulment of the foreclosure sale.

TRUTH IN LENDING ACT

1. One of these statements is not correct:

a. It is the policy of this law to protect consumers by assuring full

disclosure of the cost of the use of credit.
b. The law does not apply only to banks and non-banking financial
institutions but also to private individuals engaged in the
business of granting loans.
c. The requirement to disclose the cost of finance charges cannot be
complied with by making the disclosure in the promissory note
rather than a separate document.
d. A creditor cannot charge handling charges for loans or increase
the penalty if no disclosure was made to the debtor.

2. One of these statements is not correct:

a. The contract is valid and enforceable even if the creditor did not
comply with the law.
b. A creditor who does not comply with the law will be liable to the
debtor for an amount equal to double the finance charges but not
less than 100 pesos nor more than 2,000 pesos.
c. The creditor will be liable for attorneys fees and costs of suit in
the action fee recovery of finance charges.
d. There is no criminal penalty for violation of the law.

ANTI-MONEY LAUNDERING ACT

I. Covered Institutions

1. One of these institutions is not covered:

a. Banks, non-banks, quasi-banks, trust entities and all other

institutions and their subsidiaries and affiliates supervised by the
Bangko Sentral ng Pilipinas.
b. Insurance companies and all other institutions supervised by the
Insurance Commission.
c. Securities dealers, brokers, salesman, investment houses, and
other similar entities managing securities or rendering services as
investment agent, advisor or consultant.
d. Real estate dealers.

2. One of these institutions is not covered:

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 a. Mutual funds, close-end investment companies, common-trust
funds, pre-need companies and other similar entities.
b. Foreign exchange corporations, money changers, money
payment, remittance and transfer companies and other similar
entities.
c. Other entities dealing in currency, commodities or financial
derivatives, valuable objects, cash substitutes and other similar
monetary instruments or property regulated by the Securities and
Exchange Commission.
d. Car dealers.

II. Obligations of Covered Institutions

1. One of these is not an obligation of covered institutions:

a. To establish and record the true identities of their clients based on

official document.
b. To maintain and store safely all records of all their transactions for
five years from the dates of the transactions.
c. To report to the Anti-Money Laundering Council all covered
transactions and suspicious transactions.
d. To automatically furnish the Anti-Money Laundering Council
records of suspicious transactions.

III. Suspicious Transactions:

1. One of these transactions is not suspicious:

a. There is no underlying legal or trade obligations, purpose or

economic justification.
b. The client is not properly identified.
c. The amount involved is not commensurate with the business or
financial capacity of the client.
d. The client is rushing the transactions.

2. One of these transactions is not suspicious:

a. It may be perceived that the transaction is structured to avoid

being the subject of reporting requirements.
b. Any circumstance which deviates from the profile of the client or
the clients past transactions with the covered institution.
c. The transaction is related to an unlawful activity.
d. A document is lacking.

IV. Definition of Money Laundering

1. Money laundering is a crime whereby the proceeds of an unlawful

activity are transacted, thereby making them appear to have originated
from legitimate sources. One of these is not guilty of money laundering:
a. A person knowing that any monetary instrument or property
relates to the proceeds of any unlawful activity transacts it.
b. A person knowing that any monetary instrument or property
involves the proceeds of any unlawful activity performs or fails to
perform any act as a result of which he facilitates its transaction.

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 c. A 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.
d. A person who performs an operation to change the appearance of
a person suspected to be engaged in money laundering.

V. Predicate Crimes

1. One of these is not a predicate crime:

a. Kidnapping for ransom

b. Sections 3, 4, 5, 6, 7, 8, 9, 10, 12, 13, 14, 15 or 16 of the
Comprehensive Dangerous Drugs Act
c. Section 3, paragraphs B, C, D, E, G, H and I of the Anti-Graft and
Corrupt Practices Act
d. Theft of motor vehicles

2. One of these is not a predicate crime:

a. Plunder
b. Robbery and extortion
c. Jueteng and masiao
d. Sale of counterfeit digital video disks

3. One of these is not a predicate crime:

a. Piracy on the high seas

b. Qualified theft under Article 310 of the Revised Penal Code
c. Swindling under Article 315 of the Revised Penal Code
d. Anti-fencing

4. One of these is not a predicate crime:

a. Smuggling
b. Violation of the Electronic Commerce Act
c. Hijacking, destructive arson and murder
d. Counterfeiting bank notes

5. One of these is a predicate crime:

a. Fraudulent practices under the Securities Regulations Code

b. Tax evasion under the National Internal Revenue Code
c. Malversation
d. Destruction of official documents.

VI. Important Functions of Anti-Money Laundering Council

1. One of these statements is not correct:

a. To require and receive covered or suspicious transaction reports

from covered institutions.
b. To issue orders to the Supervising Authority or covered
institution to determine the true identity of the owner of any
monetary investment or property subject of a covered transaction

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 or suspicious transaction report or request for assistance from a
foreign state, or believed on the basis of substantial evidence to be
the proceeds of an unlawful activity.
c. To institute civil forfeiture proceedings and all other remedial
proceedings through the Office of the Solicitor General.
d. To order the closure of any establishment engaged in money
laundering.

2. One of these is not an important function of the Anti-Money Laundering

Council:

a. To cause the filing of complaints with the Department of Justice

or the Ombudsman for the prosecution of money laundering
offense.
b. To investigate suspicious transactions and covered transactions
deemed suspicious after an investigations by AMLC, money
laundering activities, and other violations of the law.
c. To apply before the Court of Appeals ex parte for the freezing of
any monetary instrument or property alleged to be proceeds of
any unlawful activity.
d. To conduct an administrative investigation of any public officer
for violation of the Anti-Money Laundering Act.

VII. Freezing of Property and Examination of Bank Deposit

1. One of these statements is not correct:

a. The Court of Appeals, upon application ex parte by the Anti-

Money Laundering Council, and after determination that
probable cause exists that any monetary instrument or property is
related to an unlawful acting may issue a freeze order for twenty
days unless extended by it.
b. The Anti-Money Laundering Council may inquire into any
deposit or investment with any bank or financial institution upon
order of a court in case of violation of this Act if there is probable
cause that it is related to an unlawful activity or a money
laundering activity but no court order is required in cases
involving unlawful activities in Section 3 (i) (1) (2) and (12), i.e.
kidnapping for ransom, violation of the Comprehensive
Dangerous Drugs Act, and hijacking, destructive arson and
murder.
c. The court order cannot be issued ex parte.
d. The Bangko Sentral ng Pilipinas may not inquire into any deposit
or investment with any bank or financial institution in the course
of a periodic or special examination.

FOREIGN INVESTMENTS ACT

1. One of these statements is not correct:

a. It is the policy of the Foreign Investments Act to attract, promote

and welcome productive foreign investors.

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 b. An export enterprise is an enterprise where a manufacturer,
processor, or service enterprise, including tourism, exports 60
percent or more of its output, or wherein a trader purchases
products domestically and exports 60 percent or more of such
purchases.
c. Domestic market enterprise is an enterprise which produces
goods for sale or renders services to the domestic market entirely
or if exporting a portion of its output fails to consistently export at
least 60 percent of it.
d. The law applies to non-bank financial institutions.

2. One of these statements is not true:

a. A citizen of the Philippines or a domestic partnership or

association wholly owned by citizens of the Philippines is a
Philippine national.
b. A corporation organized under the laws of the Philippines of
which at least 60 percent of the capital stock outstanding and
entitled to vote is owned and held by citizens of the Philippines is
a Philippine national.
c. A trustee of funds or pension or other employee retirement or
separation benefits, where the trustee is a Philippine national and
at least 60 percent of the funds will accrue to the benefit of
Philippine nationals is not a Philippine national.
d. Where a corporation and its non-Filipino stockholders own stocks
in a domestic corporation, at least 60 percent of the capital stock
outstanding and entitled to vote of each of both corporations are
owned and held by citizens of the Philippines and at least 60
percent of the members of the board of directors of both
corporations are citizens of the Philippines, is a Philippine
national.

3. One of these statements is not correct:

a. Foreign investment in export enterprise and domestic market

enterprise is allowed up to 100 percent if their products and
services do not fall within Lists A and B of the Foreign Investment
Negative List.
b. List A enumerates the areas of activities reserved to Philippine
nationals by mandate of the Constitution and specific laws.
c. List B contains the areas of activities and enterprises regulated by
law which are defense-related activities or which have
implications on public health and morals, such as the
manufacture and distribution of dangerous drugs, forms of
gambling, nightclubs, bars, beer houses, dance halls, sauna and
steam bathhouses and massage clinics.
d. Small and medium-sized domestic market enterprises with paid-
in equity capital less than the equivalent of US$200,000 are
reserved to Philippine nationals, but they shall be allowed to
foreigners if (1) they involve advanced technology; or (2) they
employ at least 50 direct employees with a minimum paid-in
capital of US$150,000.00.

INTELLECTUAL PROPERTY CODE

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I. Patents

A. Patentability

1. One of these cannot be patented:

a. A useful machine
b. A product
c. A process
d. Discoveries, scientific theories, and mathematical methods.

2. One of these cannot be patented:

a. An improvement of a machine, product, or process.

b. Micro-organisms
c. Non-biological and microbiological processes
d. The theory of relativity

3. One of these can be patented:

a. In the case of drugs and medicines, the mere discovery of new

form or new property of a known substance which does not result
in the enhancement of the known efficacy of that substance, or the
new discovery of any new property or new use for a known
substance.
b. Schemes, rules and methods of performing mental acts, playing
games or doing business, and computer programs.
c. Methods for treatment of the human body by surgery or therapy
and diagnostic methods practiced on the human or animal body.
d. The improved process for making pre-cast tiles which resulted in
durability of the tiles.

4. One of these cannot be patented:

a. Plant varieties or animal breeds or essentially biological process

for the production of plants or animals.
b. Aesthetic creations.
c. Anything which is contrary to public order or morality.
d. An improvement in mascots used in restaurants by the use of a
device to move the facial parts of the mascot.

B. Conditions of Patentability

1. One of these is not a condition of patentability:

a. Novelty, which means it does not form part of a prior art.

b. Involvement of inventive step, which means that it is not obvious
to a person skilled in the art.
c. Industrial applicability, which means that it can be produced and
used in an industry.

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 d. Durability

C. Ownership

1. One of these statements is not correct:

a. The patent belongs to the inventor, his heirs, or assigns.

b. When two or more persons jointly make an invention, the patent
belongs to them jointly.
c. The person who commissioned a work will own the patent.
d. Even if the contract provides otherwise, the person who
commissioned a work will own the patent.

2. One of these statements is not correct:

a. An employee who made an invention in the course of his

employment owns the patent, if that is not part of his regular
duties.
b. An employee owns the patent if he made an invention in the
course of employment if that is not part of his duties even if he
used the time, facilities and materials of the employer.
c. An employer owns the patent for an invention if an employee
made it as a result of the performance of his regularly assigned
duties.
d. The employer owns the patent for an invention if an employee
made it as a result of the performance of his regularly assigned
duties even if there is an agreement to the contrary.

3. One of these statements is not correct:

a. If two or more persons made an invention independently of each

other, the patent will belong to the one who applied for a patent.
b. If two or more applicants applied for a patent for the same
invention, the patent belongs to the applicant who has the earliest
filing date or the earliest priority date.
c. If two or more applications for the same invention have the same
filing date or the same priority date, the patent belongs to the
applicant who has the earliest filing time on the basis of minutes.
d. If a person who was deprived of a patent without his consent or
through fraud is declared by a final court decision to be the true
and actual inventor, the court shall order his substitution as
owner of the patent or cancel the patent, at his option, and award
him damages.

D. Priority

1. One of these statements regarding the condition for consideration of the

date of the previous filing of a foreign application as the date of filing in
the Philippines is not correct.

a. The local application need not expressly claim priority.

b. It is filed within 12 months from the date of filing of the earliest
foreign application.

15
 c. A certified true copy of the foreign application together with an
English translation is filed within six months from the date of
filing in the Philippines.
d. The foreign country affords the similar privileges to Filipino
citizens.

E. Grounds for Cancellation of a Patent

1. One of these statements regarding the grounds for cancellation of a

patent is not true:

a. A patent can be cancelled if the invention is not new or

patentable.
b. A patent can be cancelled if it does not disclose the invention in a
manner sufficiently clear and complete for it to be carried out by a
person skilled in the art.
c. A patent can be cancelled if it is contrary to law and morality.
d. A patent cannot be cancelled if it includes matters outside the
scope of the disclosure in the application.

F. Exclusive Rights of Owner of Patent:

1. One of these is not an exclusive right of the owner of a patent:

a. To restrain, prohibit and prevent any unauthorized person or

entity from making, using, offering for sale, selling or importing
the patented product.
b. To restrain, prevent or prohibit any unauthorized person or
offering for entity from using the process and from
manufacturing, dealing in, using, selling, or offering for sale, or
importing any products obtained directly or indirectly from the
patented process.
c. To assign or transfer by succession the patent and conclude
licensing agreements for it.
d. To have the invention attributed to him.

G. Limitation of Patent Rights

1. One of these statements is not correct:

a. The owner of a patent has no right to prevent the use of a

patented product which has been sold in the market in the
Philippines by the owner of the product.
b. The owner of a patent has no right to prevent the use of a
patented drug or medicine after it has been introduced in the
Philippines or anywhere else in the world by the owner of the
patent.
c. The owner of a patent has the right to prevent the use of a
patented drug or medicine after it has been put on the market in
the Philippines by any party authorized to use it.
d. Any government agency or any private third party has the right
to import drugs and medicines.

2. One of these statements is not correct:

16
 a. The owner of a patent can prevent an act done by third parties
privately on a non-commercial scale or for a non-commercial
purpose even if it does not significantly prejudice the economic
rights of the owner of the patent.
b. The owner of a patent has no right to prevent the making or using
of a patented process exclusively for experimental use of the
invention for scientific purposes or educational purposes and
such other activities directly related to the scientific or educational
experimental use.
c. The owner of a patent for drugs and medicines cannot prevent
the testing, using, making, or selling of the drug or medicine,
including data related to it, solely for the purposes of reasonably
related to the development and submission of information and
issuance of approvals by government regulatory agencies in the
Philippines or of another country.
d. The owner of a patent cannot prevent the preparation for
individual cases, in a pharmacy or by a medical professional, of a
medicine in accordance with a medical prescription or acts
concerning the medicines so prepared.

3. One of these is not a case which a government agency or a third person

authorized by the government may exploit an invention even without
the agreement of the owner of the patent:

a. Public interest, in particular, national security, health, or the

development of other sectors so required.
b. A judicial or administrative body has determined that the manner
of exploitation by the owner of the patent or license is
competitive.
c. There is a national emergency of other circumstances of extreme
urgency requiring the use of a patented drug or medicine.
d. The demand for a patented drug or medicine in the Philippines is
not being met to an adequate extent and on reasonable terms.

H. Infringement of Patent

1. One of these statements is not correct:

a. Infringement of a patent is the making, using, offering for sale,

selling, or importing of a patented product or a product obtained
directly or indirectly from a patented process or the use of a
patented process without the authorization of the owner of the
patent.
b. There can be infringement of patent even if no patent has been
granted.
c. In literal infringement, the challenged matter falls within the
literal meaning of the patent claims.
d. Imitating a patented process for curving walking sticks and
umbrella handles by exposing them to the flames coming from a
lamp fueled by oil is literal infringement.

2. One of these statements is not correct:

17
 a. According to the doctrine of equivalents, an infringement occurs
if despite some modifications, a device performs substantially the
same function in substantially the same way to achieve
substantially the same result.
b. The use of a patented process for curving walking sticks and
umbrella handles by exposing them to the flames of a lamp fueled
by oil by substituting the oil with alcohol is infringement of
patent.
c. A later model of a sing-along system which like a prior model is
equipped with two cassette tape decks so that one can be used to
play back a song while the other is being used to record the voice
of a singer does not infringe the patent of the earlier model.
d. A pharmaceutical compound which combats gastrointestinal
parasites in animals with the same result as a prior
pharmaceutical product does not infringe its patent unless it
performs the function in substantially the same way.

3. One of these statements is not correct:

a. A civil action for infringement of patent cannot be filed if there is

a pending petition for its cancellation.
b. A foreign national or entity may bring a civil action for
infringement of patent, despite the lack of license to do business
in the Philippines, if its country is a party to a convention, treaty
or agreement to which the Philippines is also a party or a law of
that country grants Filipino citizens similar rights.
c. A licensee of the infringer is not liable unless the license is
voluntary and he colluded with the infringer.
d. Aside from the infringer, anyone who actively induces the
infringement of patent or provides him with a component of the
product or of a product produced because of the patented
product knowing that it is especially adapted exclusively for
infringement is liable solidarily as contributing infringer.

4. One of these statements is not correct:

a. No damages can be recovered if the infringement was committed

more than four years before the filing of the civil action.
b. It is a defense that the invention is not new or patentable.
c. It is not a defense that the patent does not disclose the invention
in a manner sufficiently clear and complete for it to be carried out
by a person skilled in the arts.
d. It is a defense that the patent is contrary to public order or
morality.

5. One of these statements is not correct:

a. If the infringer repeats the infringement after finality of the

judgment of the court against him, he is criminally liable.
b. Anyone who connives with him is also criminally liable.
c. The criminal action prescribes in three years from the date of
commission of the case.

18
 d. The person if convicted is imprisoned for not less than one year
and not more than four years or a fine from P100,000 to 300,000
pesos, or both.

I. Voluntary License

1. One of these statements is not correct:

a. It is mandatory that licensing agreements be governed by

Philippine laws and in case of litigation the venue will be the
place of the principal office of the licensee.
b. It is not mandatory that continued access to improvements and
techniques and processes related to the technology be made
available during the period of the agreement.
c. If there is a provision for arbitration, the procedure of Philippine
arbitration law, the arbitration rules of UNCITRAL, or the rules of
the International Chamber of Commerce will apply and the venue
will be the Philippines or a neutral country.
d. It is mandatory that Philippines taxes on all payments under the
agreement shall be borne by the licensor.

2. One of these is not a prohibited provision in licensing agreements:

a. Those which require the licensee to acquire goods from a specific

source.
b. Those which reserve to the licensee the right to fix the selling
prices.
c. Those that restrict the volume of products.
d. Those that prohibit the use of competitive technology if the
licensing agreement is exclusive.

3. One of these is not a prohibited provision in licensing agreements:

a. Those that obligate the licensee to transfer to licensor for free

inventions or improvements on the licensed technology.
b. Those that require payment of royalties for unused patents.
c. Those which prohibit the licensee to export the licensed products
to countries where the licensor has granted an exclusive license.
d. Those that restrict the use of the technology supplied after
expiration of the agreement.

4. One of these is not a prohibited provision in licensing agreements:

a. Those which prohibit the licensee from contesting the validity of

the patent.
b. Those which restrict the research and development activities of
the licensee.
c. Those which do not prevent the licensee from adapting the
technology to local conditions.
d. Those which exempt the licensee from liability for non-fulfillment
of its liabilities or liability to a third party arising from use of the
licensed products.

J. Compulsory Licensing

19
 1. One of these is not a ground for granting a compulsory license:

a. A national emergency or other circumstances of extreme urgency

exist.
b. Public interest, in particular, national secrecy, nutrition, health, or
the development of other vital sectors of the national economy
requires it.
c. A judicial or administrative body has determined that the manner
of exploitation of the patent by the owner of his licensee is
competitive.
d. The owner of the patent has not devoted the invention to public
non-commercial use without satisfactory reason.

2. One of these statements is not correct:

a. A compulsory license cannot be granted if a voluntary licensee

has been granted.
b. The existence of one of the grounds for the grant of a compulsory
license is sufficient.
c. A petition for a compulsory licensee on the ground that the
invention is not being worked in the Philippines on a commercial
scale without satisfactory reason can be filed only after four years
from the date of filing of the application for the patent or three
years from the date of the patent, whichever is later.
d. A petition for a compulsory licensee on any of the other grounds
may be filed at anytime.

3. One of the statements is not correct:

a. The petitioner exerted efforts to obtain a license on reasonable

terms but has been unsuccessful.
b. The requirement of reasonable efforts does not apply if it seeks to
remedy a practice determined to be anti-competitive.
c. The requirement of reasonable efforts does not apply if there is a
national emergency.
d. The requirement of reasonable efforts applies if the invention has
not been devoted to public non-commercial use.

K. Assignment

1. One of these statements is not correct:

a. An assignment may be of the entire rights or for an individual

share of the entire patent.
b. An assignment may be limited to a specified territory.
c. A joint owner can assign his rights without the consent of the
other owners.
d. An assignment of a patent is void as against any subsequent
buyer or mortgagor for valuable consideration without notice
unless it is recorded in the Intellectual Property Office.

II. Trademarks

20
A. Definition and Registability

1. One of these statements is not correct:

a. A mark is any visible sign capable of distinguishing the goods

(trademark) or services (service mark) of an enterprise and shall
include a stamped or marked container of goods.
b. A collective mark is any visible sign designated as such in the
application for registration and capable of distinguishing the
origin or any other common characteristic, including the quality
of goods or services of different enterprises which use the sign
under the control of the registered owner of the collective mark.
c. A trade name is the name or description identifying or
distinguishing an enterprise.
d. Use in trade or commerce is not required to acquire ownership of
a trade name.

2. One of these statements is not correct:

a. Ownership of trademark is acquired by valid registration.

b. Prior use is not required to acquire ownership of a trademark.
c. A trademark cannot be registered if it consists of an immoral,
deceptive or scandalous matter or a matter which may disparage
or falsely suggest a connection with persons living or dead,
institutions, beliefs, or national symbols, or bring them into
contempt or disparage.
d. The name of the deceased wife of a President cannot be registered
as a trademark.

3. One of these trademarks cannot be registered:

a. It consists of the flag or coat of arms or other insignia of the

Philippines or any of its political subdivision, or of any foreign
nation, or any simulation of them.
b. A trademark cannot be registered if it is identical with a
registered trademark belonging to a different person or a prior
trademark if (1) they refer to the same goods or services; (2) they
refer to closely related goods or services; or (3) it resembles the
prior trademark so as to be likely to cause confusion.
c. A sign which is likely to mislead the public, particularly as to the
nature, quality, characteristics or geographical origin of goods or
services cannot be registered.
d. A trademark consisting exclusively of a generic sign can be
registered.

4. One of these statements is not correct:

a. Trademark consists exclusively of signs customary to designate

the goods or services in everyday language can be registered.
b. A trademark consisting exclusively of signs to designate the kind,
quality, intended purposes, value, geographical origin, time or
production of the goods or rendering services or other
characteristics of goods or services cannot be registered.

21
 c. A trademark that consists of shapes necessitated by technical
factors or by nature of the goods or factors that affect their
intrinsic value cannot be registered.
d. A color alone cannot be registered as a trademark, unless it is
defined by a given form.

5. One of these statements is not correct:

a. A trademark which is contrary to public order or morality cannot

be registered.
b. The suffix tussin when used as part of a cough syrup is merely
generic.
c. The phrase pale pilsen, which refers to a type of beer, is
generic.
d. The word Isabela can be registered as a trademark for cigars.

B. Confusing Similarity

1. One of these statements is not correct:

a. According to the holistic test of confusing similarity, the

trademarks in their entirety as they appeared in their respective
labels are considered in relation to the goods to which they are
attached.
b. According to the dominancy test of confusing similarity, if the
questioned trademark contains the main features of another
trademark by reason of which deception is likely to result,
infringement of trademark takes place.
c. The Intellectual Property Code has adopted both the holistic test
and the dominancy test.
d. Confusing similarity does not require exact identity. It is
sufficient if one trademark is a colorable imitation of another,
which means that such a resemblance to the alleged trademark as
to deceive an ordinary buyer giving the attention a buyer usually
gives.

2. One of these statements is not correct:

a. The likelihood of confusion is great when the goods being

purchased are cheap commodities which are consumed every day
like candies, soap and coffee.
b. The likelihood of confusion is remote when expensive articles are
being purchased like television sets, watches, and cars.
c. The likelihood of confusion is remote in the case of the purchase
of medicines which cannot be bought without a prescription.
d. To determine if two trademarks are confusingly similar, the two
products should be placed alongside and compared.

3. One of these set of trademarks are not confusingly similar:

a. Planters Cocktail Peanuts and Planters Cereal Peanuts

b. Gold Toe and Gold Top
c. Big Mac and Big Mak
d. Victorias and Valentino

22
 4. One of these statements is not correct:

a. There are two types of confusion, confusion of goods and

confusion of origin.
b. In confusion of goods, the buyer is induced to buy a product in
the belief that he is buying the other product he had in mind.
c. In confusion of origin, the goods are different but the public
might be deceived to believe that the challenged product came
from another manufacturer of another product, because the two
products are related.
d. The protection of a trademark does not extend to the market areas
that are the normal potential expansion of the business.

5. One of these sets of products are not closely related:

a. Petroleum products and cigarettes

b. Paint and sandals
c. Wines and cigarettes
d. Haberdashery goods and shoes.

C. Well-Known Trademarks

1. One of these statements is not correct:

a. A trademark which is identical with or confusingly similar to or is

a translation of an internationally well-known trademark cannot
be registered for identical or similar goods or services.
b. The internationally well-known trademark must be registered in
the Philippines to be protected.
c. In determining if a trademark is internationally well-known it is
the knowledge of the relevant sector of the public rather than of
the public at large that should be considered, including
knowledge in the Philippines obtained as a result of promotion of
the trademarks.
d. A trademark cannot be registered if it is identical with or
confusingly similar to or is a translation of an internationally well-
known trademark which is registered in the Philippines with
respect to goods or services which are similar to those applied for
registration but which would indicate a connection to those of the
owner of the internationally well-known trademark.

D. Rights Conferred by Registration of Trademark and Infringement of Trademark

1. One of these statements is not correct:

a. The owner of a registered trademark has the exclusive right to

prevent all third parties who do not have his consent from using
in the course of trade identical or similar signs or containers for
goods or services which are identical or similar in respect of
which the trademark is registered if use will result in a likelihood
of confusion.
b. The elements of infringement of trademark are (1) validity of the
trademark of the plaintiff; (2) ownership of the trademark of the

23
 plaintiff; and (3) likelihood of confusion as a result of the use of
the trademark or its colorable imitation by the defendant.
c. There can be an infringement of trademark even if it is not
registered.
d. Infringement of trademark takes place even if there is no actual
sale of the goods or services using the infringing trademark.

2. One of these is not available as a defense:

a. The plaintiff is not entitled to the registration of the trademark.

b. No damages may be recovered after four years from the time the
cause of action arose.
c. The claim is barred by laches, estoppel; and acquiescence.
d. There is a pending action for cancellation of the registration of the
trademark.

3. One of these statements is not correct:

a. The measure of the damages the owner of the registered

trademark may recover is the reasonable profits he would have
made had the defendant not infringed his rights or the profits the
defendants actually earned from the infringement.
b. If the damage cannot be readily ascertained, the court may award
a reasonable percentage of the gross sales of the defendant or the
value of the services in connection with which the trademark was
used in infringing the rights of the plaintiff.
c. If actual intent to mislead the public or to defraud the plaintiff is
shown, the court may treble the damages.
d. The plaintiff cannot recover damages unless the acts were
committed with knowledge that the imitation is likely to cause
confusion, to cause mistake, or to deceive. Such knowledge is
presumed if the plaintiff gave notice and his trademark is
registered by displaying with the trademark the words
Registered Mark or the letter R inside a circle, or actual notice of
the defendant of the registration.

E. Unfair Competition

1. One of these statements is not correct:

a. Any person who employs deception or any other means contrary

to good faith by which he shall pass off the goods he
manufactured or in which he deals, or his business, or services for
those of one having a established goodwill or who committed any
acts calculated to produce this result is guilty of unfair
competition.
b. The elements of unfair competition are: (1) confusing similarity in
the general appearance of the goods; and (2) intent to deceive the
public and defraud a competitor.
c. The distinctions between infringement trademark and unfair
competition are: (1) in infringement of trademark, its prior
registration is required; in unfair competition, it is not required;
(2) in infringement of trademark fraudulent intent is not
necessary; (3) infringement of trademark is the unauthorized use

24
 of a trademark; unfair competition is passing off ones goods for
the goods of another.
d. An action for unfair competition cannot be filed if the defendant
registered the trademark in his name.

III. Copyright

A. General Principles

1. One of these is not correct:

a. Literary and artistic works are protected from the moment of their
creation.
b. Literary and artistic works are protected, irrespective of their
mode or form of expression, content, quality, and purpose.
c. The delivery of copies of copyright works to the National Library
and the Supreme Court Library is for the protection of the rights
of the author.
d. For a work to be protected, it must be original. It must be an
independent creation of the author and was not copied totally or
substantially from another work.

B. Copyrightable Works

1. One of these cannot be copyrighted:

a. Books, pamphlets, articles and other writings.

b. Periodicals and newspapers
c. Lectures, seminars, addresses, dissertations prepared for oral
delivery.
d. A trademark

2. One of these cannot be copyrighted:

a. Letters
b. Dramatic or dramatico-musical compositions, choreographic
works or entertainment in dumb show.
c. Musical compositions
d. A bushing for motor vehicles

3. One of these cannot be copyrighted:

a. Works of drawing, painting, architecture, sculpture, engraving,

or other works of art.
b. Original ornamental designs or models for articles of
manufacture.
c. Illustrations, maps, plans, sketches, charts and three dimensional
works relative to geography, topography, architecture or science.
d. Sportswear

4. One of these cannot be copyrighted:

a. Drawings or plastic works of a scientific or technical character.

25
 b. Photographic works, including works produced by a process
analogous to photography.
c. Audiovisual works and cinematography works and works
produced by an analogous process.
d. Blank forms for recording information.

5. One of these cannot be copyrighted:

a. Pictorial illustrations and advertisements

b. Computer programs
c. Other literary, scholarly, scientific and artistic works.
d. Racing program.

C. Derivative Works

1. One of these is not a derivative work:

a. Dramatizations, translations, adaptations, abridgments,

arrangements, and other alterations of literary or artistic works.
b. Collections of literary, scholarly or artistic works which are
original by reason of their selection, coordination or arrangement
of their content.
c. Compilation of data and other materials which are original by
reason of the selection, coordination, or arrangement of their
contents.
d. Photograph of a statue.

D. Non-Copyrightable Works:

1. One of these can be copyrighted:

a. An idea, procedure, system, method or operation, concept,

principle, discovery or mere data as such.
b. News of the day and other miscellaneous facts which constitute
press information.
c. Official text of a legislative, administrative of legal nature, as well
as any official translation of them.
d. Collection of speeches delivered by a Senator in the Senate
compiled by him.

E. Rights of Owner of Copyright

1. One of these is not included in the exclusive economic rights of an owner

of a copyright:

a. Reproduction of the work or substantial party of the works.

b. Dramatization, translation, adaptation, abridgment, arrangement,
or other transformation of the work.
c. The first public distribution of the original and each copy of the
work by sale or other forms of transfer of ownership.
d. Reproduction of a chapter of a work for purposes of research.

2. One of these is not included in the exclusive economic rights of the

owner of a copyright:

26
 a. Rental of the original or a copy of an audiovisual or
cinematographic work, a work embodied as a sound recording, a
computer program, a compilation of data and other materials or a
musical work in graphic form.
b. Public display of the original or a copy of the work.
c. Public performance or other communication to the public of the
work.
d. Use of a book for judicial proceedings.

F. Ownership of Copyright

1. One of these is not correct:

a. The copyright to an original literary and artistic work belongs to

the author.
b. In case of works of joint authority, the co-authors shall be co-
owners of the copyright.
c. If a joint work consists of parts that can be used separately and
the author of each part can be identified, the author of each part
shall be the owner of the copyright in the part he created.
d. The copyright to the letters shall belong to the addressee.

2. One of these statements is not correct:

a. If the creator of work is not part of the regular duties of an

employee, the copyright shall belong to him, even if he used the
time, facilities and materials of the employer.
b. If the work is the result of a performance of the regular duties of
an employee, the copyright shall belong to the employer, unless
there is an agreement to the contrary.
c. In the case of commissioned work, the copyright shall belong to
the owner who commissioned it.
d. In the case of an audiovisual work, the copyright shall belong to
the producer, author of the scenario, composer of the music, film
director, and author of the work adapted.

G. Doctrine of Fair Use

1. One of these statements is not correct:

a. The fair use of a copyrighted work for criticism and comment is

not infringement of copyright.
b. The fair use of a copyrighted work for news reporting is not
infringement of a copyright.
c. The fair use of a copyrighted work for teaching, scholarship,
research, and similar purposes is not infringement of copyright.
d. Decompilation, the reproduction of the code and translation of
the forms of the computer program to achieve inter-operability of
an independently created computer program with other
programs is fair use.

2. One of these statements is not correct:

27
 a. In determining whether the use of a work is fair use, the following
factors should be considered: (1) the purpose and character of the
use; (2) the nature of the copyrighted work; (3) the amount and
substantiality of the portion used; and (4) the effect of the use
upon the potential market for or value of the copyrighted work.
b. A satirical version of a song is not fair use of the original song.
c. The photo-copying of a book which is out of stock made by a
library is allowable.
d. The public performance of a work by a charitable organization
where no admission fee is charged is allowable.

H. Infringement of Copyright

1. One of these statements is not correct:

a. Infringement consists in the doing by any person without the

consent of the owner of the copyright of anything the sole right to
do which is conferred by statute on the owner of the copyright.
b. A distributor of software who was authorized to produce only
one copy for each customer who made additional copies to be
used for other purposes is liable for infringement.
c. The copying of 88 percent of the words in dictionary of a previous
author is infringement.
d. A photographer who photographed the same scenic spots shown
in postcards and used a different arrangement and composition is
liable for infringement.

2. One of these is not a valid defense in an action for infringement of

copyright:

a. The use of the copyrighted work constitutes fair use.

b. The copyright of the format of a television is not valid, because
the format is just a concept.
c. The action is barred by prescription because of the lapse of four
years from the date of the infringement.
d. The defendant had no intention to infringe the copyright.

3. One of these statements is not correct:

a. An injunction may be issued restraining the infringement of

copyright.
b. The defendant may be ordered to pay actual damages to the
owner of the copyright.
c. The infringing copies of the work, devices and other means for
making infringing copies may be ordered to be delivered under
oath for destruction without compensation.
d. Moral and exemplary damages cannot be awarded.

4. One of these is not a criminal act:

a. Selling, letting for hire, or exposing for sale or hire the infringing
article.
b. Distributing the infringing article for purpose of trade.
c. Trade exhibit of the article in public.

28
 d. Lending the infringing article for free.

GENERAL BANKING LAW

I. General Concepts

1. One of these statements is not correct:

a. A bank is an entity engaged in the lending of funds obtained in

the form of deposits.
b. Banks are classified only into universal banks, commercial banks
and thrift banks.
c. A quasi-bank is an entity engaged in the borrowing 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.
d. A trust entity administers a trust or holds property in trust or on
deposit for the use, benefit, or behalf of others.

II. Powers and Liabilities

1. Banks cannot perform one of these:

a. Grant loans and credit accommodations

b. Own equity investment
c. Accept deposits
d. Act as insurer

2. A bank cannot perform one of these:

a. Receive in custody funds, documents and valuable objects

b. Act as financial agent and buy and sell by order and for the
account of customers, shares, evidence of indebtedness, and all
types of securities.
c. Make collections and payments for the account of others and
perform such other services for their customers or are not
incompatible with banking business.
d. Act as real estate broker.

3. A bank cannot perform one of these:

a. Act as managing agent, adviser, consultant or administrator of

investment management/advertising/consultancy accounts.
b. Rent out safety deposit boxes.
c. Engage in trust operations with authorization by the Monetary
Board.
d. Engage in warehousing.

4. One of these statements is not correct:

a. The relationship between a depositor and a bank is that of lender

and borrower.

29
 b. The relationship between a customer who rented a safety deposit
box and a bank is that of depositor and depository.
c. Banks must exercise extraordinary diligence in the care and
handling of the money of their customers, because their business
is imbued with public interest.
d. A stipulation in contract for the rent of a safety deposit box that
the liability of a bank is limited to exercising due diligence to see
to it that no unauthorized person is admitted to the safety deposit
box is valid.

III. Stipulations on Interest

1. One of these statements is not correct:

a. There is no regulatory ceiling imposed by the Monetary Board on

interest on loans.
b. A monthly interest of three percent or higher on a bank loan is
unconscionable.
c. A provision giving a bank authority to increase the interest on a
loan solely on the basis of its determination is valid.
d. A provision giving a bank authority to increase interest rates is
valid if there is a stipulated reference rate which will be the basis
for the increase.

IV. Loans

A. Risk-Based Capital

1. One of these statements is not correct:

a. The Monetary Board shall prescribe the minimum rate which the
net worth of a bank must bear to its total risk assets.
b. If a bank does not comply with the prescribed minimum rate, the
Monetary Board may prohibit the distribution of net profits until
the minimum requirement has been met.
c. If a bank does not comply with the prescribed minimum rate, the
Monetary Board may prohibit the acquisition of major assets and
the making of new investments by the bank.
d. The purchase of readily marketable evidence of indebtedness of
the Republic of the Philippines and of the Bangko Sentral and any
other evidence of indebtedness fully guaranteed by the Republic
of the Philippines is not exempt from the prohibition.

B. Single Borrowers Limit

1. One of these statements is not correct:

a. The total amount of loans that may be extended by a bank to a

single borrower shall not exceed twenty per cent of the net worth
of the bank.

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 b. The total amount of loans to a single borrower may be increased
by ten per cent if the additional loans are secured by trust
receipts, shipping documents, warehousing receipts or other
similar documents covering goods which are readily marketable,
non-perishable, and fully insured.
c. The Monetary Board may not prescribe a different limitation on
the total loans to a single borrower.
d. Loans secured by obligations of the Bangko Sentral or of the
Philippine Government are excluded in computing the total
amount of the loans.

2. One of these statements is not correct:

a. Loans fully guaranteed by the Philippine Government are

excluded in computing the total amount of the loan.
b. Loans covered by assignment of deposits in the lending bank and
held in the Philippines are excluded in computing the total
amount of the loan.
c. Letters of credit are excluded in computing the total amount of
loan to the extent they are covered by marginal deposits.
d. The Monetary Board may not exclude other loans in the
computation of the total amount of loan.

C. Loans to Directors, Officers, Stockholders, and Their Related Interests

1. One of these is not a procedural requirement for loans to directors or

officers of a bank:

a. There must be a written approval of majority of all the directors

excluding the directors concerned.
b. The approval shall be entered upon the records of the bank.
c. A copy of the entry shall be transmitted to the Bangko Sentral.
d. There must be a certificate signed by the corporate secretary.

2. One of these statements is not correct:

a. The terms shall not be less favorable to the bank than those
offered to others.
b. The loan shall be limited to an amount equal to their
unencumbered deposits and paid-in capital stocks.
c. Loans considered as non-risk by the Monetary Board shall be
excluded from the limit.
d. Loans in the form of fringe benefits are covered by the law.

3. One of these statements is not correct:

a. The mere act of the president of a bank of obtaining a loan from

the bank without the approval of the majority of the directors
constitutes a violation of the law.
b. The president of a bank who obtained a loan from the bank
without complying with the law and who falsely made it appear
that somebody else obtained the loan is liable for violation of the
law.

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c. The president who obtained a loan from a bank and falsely made
it appear that somebody else applied for the loan is liable for
estafa through falsification of a commercial document.
d. Since the contract is void, the borrower is not required to pay the
loan.

- END -

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