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Prohibited Transaction

1. Bank acting as insurer

2. Declare Dividends if at the time of declarations: overdrawn etc
3. conduct business in an unsafe and unsound manner: act or omission that may result to damage or
danger etc
4. unauthorized advertisement
5. employment causal or non-regular personnel in the conduct of its business involving bank deposits (in
line with bank secrecy law)
Ex: messengers who are contractual must not have access to the documents such as pouch or

Prohibitions on Directors Officers employees or agents

1. false entries / fraudulent transactions

2. overvaluing of any security
3. disclosure of info.
4. accepting gifts
5. outsourcing inherent banking functions (seven core banking functions that cannot be outsourced)
Ex: tellering duties cannot be outsourced while credit card services may be outsourced

How BSP handles banks in Distress

I. Conservatorship
II. Receivership
III. Liquidation

Conservatorship is an attempt to save the bank from bankruptcy. Receivership enclosure of bank by BSP
due to probable loss. Liquidation is when there is no hope of rehabilitating the bank then the bank shall
pay the creditors.

Inherent Banking Functions

1. Services normally associated placement of deposits and withdrawals based on recording of
Ex: analytics of data
2. Granting of loans and extension of credit exposure.
3. Position taking and marking risk taking activities.
4. managing risk exposures.
5. strategic decision making

How conservatorship different from receivership in 2 sentences?

The essential difference between the two is that conservator is not necessarily insolvent but only illiquid
meaning assets are still more than the liability. On the other hand, there is insolvency in the receivership
which means that the assets are lesser than the liability. Conservatorship is to keep the business running
but receivership is to avoid further damage to the depositors.
Distinguish conservator and receiver:
1 year conservator
Receiver will access if business shall continue or close down. Conservator’s duty is to make the business
liquid. More Discretion for receiver.

Liquidation: Stop Operation, discontinue the life of the corporation and distribute its assets to is

Deposits do not become preferred credits meaning because it does not comply with 2244 of the NCC
and it is not notarized. The law states that once notarized, credit will become preferred credits

SINGLE BORROWER’S LIMIT – One of the checklist whether to grant a loan or not.
You cannot put all your eggs in one basket because you will also be liable for the loss.

EXAMPLE: SAN MIGUEL GROUP has may companies. Hence, only one limit, as a general rule. However, if
there is guarantee by BSP or government then it may be exception. Less risky.

UPTO Currency monetary stabilization and functions of BSP Quiz for Wednesday..