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

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.

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 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
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

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 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:

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:

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 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.

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.

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 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.
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:

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 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 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.

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 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.
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.

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 2. One of these institutions is not covered:

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 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.

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 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.
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:

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 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

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:

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 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.
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.

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 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.
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.

14
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:

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

15
 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:

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:

16
 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.
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

17
 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

A. Definition and Registability

1. One of these statements is not correct:

18
 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.
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.

19
 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

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

20
 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 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

21
 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 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

22
 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.

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.

23
 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:

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:

24
 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:

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.

25
 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.
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.

26
 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.
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.

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 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.
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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