Professional Documents
Culture Documents
ã ã BAR QUESTION:
JOINT ACCOUNT VS. PARTNERSHIP (2000)
Ú
Æ General Banking Law ô SUGGESTED ANSWER
Æ. New Central Bank Act ô
Æ New Rural Banks Act ô
Æ Private Development Banks Act
ô
Æ Savings and Loan Association Act
ô
) WHILE A PARTNERSHIP HAS JURIDICAL
Æ . Thrift Banks Act ô
PERSONALITY AND MAY SUE OR BE SUED
UNDER ITS FIRM NAME, A JOINT ACCOUNT
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Æ Secrecy of Bank Deposits Law HAS NO JURIDICAL PERSONALITY AND CAN
ô SUE OR BE SUED ONLY IN THE NAME OF THE
Æ Unclaimed Balances Law ô
OSTENSIBLE PARTNER.
Æ Philippine Deposit Insurance Corporation Act
ô
Æ The general banking laws above mentioned are !
"
applicable to government banks like DBP and PNB.
Æ The Al- Amanah Islamic Bank is subject to all banking
and pertinent laws.
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T HREE KINDS OF ENTITIES THAT INTRODUCE FUNDS
INTO THE ECONOMY : BAR QUESTION:
|. entities that obtains funds from the public
% & "
% '
in the form of deposits and re-lend it to the public;
(()
2. those that obtain funds in the form of
deposit substitutes and re-lend the same and not
from the public or depositors. & " &
%
3.
& &
%
*
those that lend funds from their
%
own assets.
+
,
SUGGESTED ANSWER:
FIVE PERSONS PRIMARILY INTERESTED IN THE -
%
"%
%
BUSINESS OF BANKING
. -
%
|. Government
2. Depositors
3. Investors
%
4. Creditors
5. Borrowers
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Æ The certificate of authority shall not be issued
ã ã
ã unless the Monetary Board is satisfied:
|. That all requirements of existing laws and
regulations to engage in the business for which
the applicant is proposed to be incorporated
!
To promote and maintain a stable and have been complied with;
efficient banking and financial system that is globally
competitive, dynamic and responsive to the demands of 2. That the public interest and economic
a developing economy ((# . conditions, both general and local, justify the
authorization; and
The GBL primarily governs
universal banks and commercial banks. It suppletorily 3. That the amount of the capital, the financing,
governs thrift banks, rural banks and other banking organization, direction and administration, as
institutions. well as the integrity and responsibility of the
organizers and administrators, reasonably
assure the safety of deposits and the public
GENERAL CONCEPTS interest ô(
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Æ Entities engaged in the lending of funds obtained in |. The entity is a stock corporation;
the form of depositsô(# 2. Its funds are obtained from the public,
i.e. 20 or more persons; and
Æ Entities duly authorized by the Monetary Board to 3. The minimum capital requirements prescribed
engage in the business of regularly lending funds by the Monetary Board are satisfiedô(
obtained regularly from the public through the
receipt of deposits of any kind. -
Ì )
Æ An investment company that performs function as
such is NOT a bank. Thus an investment company ,
,
that is engage solely in investing, reinvesting or ,
,
trading in securities is not engage in banking. ô
,
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#
Æ However, an investment company which loans out
money of its customers, collects interest, and
charges a commission to both lender or borrower is Æ A person or entity cannot engage in banking or
engage in banking ô (*+ (*, $ quasi-banking functions without a certificate of
$(( authority from the BSPô(
Æ The determination of whether a person or entity is
M "# performing banking or quasi-banking functions
without BSP authority shall be decided by the
Æ Entities engaged in the borrowing of funds through Monetary Board.
the issuance, endorsement or assignment with
recourse or acceptance of deposit substitutesô( NATURE OF BANKING BUSINESS
Æ Entities authorized to perform universal or Æ Impressed with public interest where the trust and
commercial banking functions may also engage in confidence of the public in general is of paramount
quasi-banking functions. importance such that:
""g$"%&'(&)'& |. The appropriate standard of diligence must be
very high, if not the highest, degree of
Æ Persons or entities whose principal functions diligence; ¸"¸$"& ô%./
include the lending, investing or placement of funds
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on evidences of indebtedness or equity deposited #
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with them, acquired by them or otherwise coursed This applies only to cases where banks
through them, either for their own account or for the are acting in their fiduciary capacity, that
account of others. is, as depository of the deposits of their
depositors ô , 0
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ORGANIZATION AND OPERATION
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2. Subject to reasonable regulation under the
police power of the state.
Æ The SEC shall not register the articles of
incorporation of any bank or any amendment
thereto unless accompanied by a certificate of Æ While an innocent mortgagee is not expected to
authority issued by the Monetary Board under its conduct an exhaustive investigation on the history
sealô( of the mortgagor¶s title, in case of a banking
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institution, it must exercise due diligence before cooperatives primarily to provide financial and
entering into said contract, and cannot rely upon on credit services to cooperatives. It shall include
what is or is not annotated on the title. - cooperative rural banks. They are governed
Before a loan is approved, representatives are sent primarily by the Cooperative Code ô
to the premises offered as collaterals so as to
investigate who the real owners are ô1% V. - Banks whose business dealings
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and activities are subject to the basic principles and
rulings of Islamic Shari¶ a, such as the Al Amanah
Æ The business of a bank is one affected by public Islamic Investment Bank of the Philippines which
interest for which reason the bank should guard was created by
against loss due to negligence and bad faith. It is
expected to ascertain and verify the identities of the 7.
as determined by
persons it transacts business with ô2% the Monetary Board of the Bangko Sentral ng
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Pilipinas.
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Æ Due diligence required of banks extend even to
persons, or institutions like the GSIS, regularly
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engaged in the business of lending money secured g'!'%" g'!'%"
by real estate mortgages ô0(.( 4$*$
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May be a stock or Must generally be a
CONSEQUENCES OF NATURE OF BUSINESS: non-stock stock corporation
corporation
|. It is subject to heavy and close supervision and/or
regulation by the BSP (/&¸%¸ May issue par value Shall issue par value
#(
#P. or no par value stocks onlyô(
stocks.
|. It is required to exercise utmost diligence in the May be registered Must secure a
handling of deposits ((5 .
with the SEC certificate of authority
.
(
P.
2. Special rules on strikes and lockouts: any strike or without any from the Monetary
lockout involving banks, if unsettled after 7 certificate of Board before it can
calendar days shall be reported by the BSP to the authority issued by register with SEC.
Sec. of Labor who has 2 options: a government
a. He may assume jurisdiction over and decide agency.
the dispute; or
b. certify it to the NLRC for compulsory May May not purchase/
arbitration purchase/acquire acquire its shares or
its own shares for a accept them as
legitimate corporate security for a loan.
The President may also intervene at any time and purpose; provided 45(: when
assume jurisdiction over such labor dispute in order to that, it has authorized by the
settle or terminate the same. unrestricted Monetary Board. In
retained earnings in such case, the bank
its books to cover must sell or dispose
CLASSIFICATION OF BANKS ô
the shares to be of said shares within
purchased/ V months from the
|.
- Primarily governed by the acquired. time of their
General Banking Law (GBLP, can exercise the acquisitionô(
powers of an investment house and invest in non-
allied enterprises and have the highest Must be composed Also composed of 5
capitalization requirement. of 5 to |5 directors, to |5 directors. In
each of whom shall case of merger or
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- Ordinary banks governed by own at least one (|P consolidation, the
the GBL which have a lower capitalization share of the capital number of directors
requirement than universal banks and can neither stock of the shall not exceed 2|
exercise the powers of an investment house nor corporation. ô(
invest in non-allied enterprises.
May declare May not declare
3. % - These are aP Savings and mortgage dividends out of its dividends, if any of
banks; bP Stock savings and loan associations; cP unrestricted the conditions set
Private development banks, which are primarily retained earnings. forth under Sec. 57
governed by the Thrift Banks Act ô
are present.
4. ' ± Mandated to make needed credit
available and readily accessible in the rural areas
on reasonable terms and which are primarily
governed by the Rural Banks Act of | 2 ô
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Equity
investment in
non-financial |00% |00%
allied enterprises
of equity of equity
Equity Shall not exceed
"/&'$0 %1&'"#
investment in a 35% of the total
g((&'g$"#
single non-allied equity in that
Authorized to engage in Not so authorized enterprise enterprise nor
quasi-banking functions shall it exceed N/A
without need for 35% of the
approval voting stock in
that enterprise
May accept or create Must seek approval of
demand deposits Monetary Board
without need for before accepting or
approval creating demand
deposits. ((
P Equity
)
investment in
Liabilities of the BSP Quasi-Banks 40% 40%
and of other banks
which are denominated
in Philippine currency
and are subject to
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& ± those entities which enhance or
complement banking FUNCTIONS OF BANKS
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& ± pertains to
activities that do not involve money matters (such as g "g%"
warehousing, safety deposit boxesP |. Loan Function
2. Deposit Function
"&%9'%1
The total of the unimpaired paid-in capital including %1&' "g%"
paid-in surplus, retained earnings and undivided profit, Universal banks and commercial banks may also
net valuation reserves and other adjustments as may be exercise any of the following functions:
required by the Bangko Sentralô(# a. Receive in custody funds, documents and
valuable objects;
'#-&) g!%$ b. Act as financial agent and buy and sell, by
order of and for the account of their customer,
Æ The minimum ratio prescribed by the Monetary shares, evidences of indebtedness and types
Board which the net worth of a bank must bear to of securities;
its total risk assets which may include contingent c. Make collection and payments for the account
accounts. of others and perform such other services for
their customer as are not incompatible with
Æ However, the Monetary Board may require or banking business;
suspend compliance with such ratio whenever d. Upon prior approval of the Monetary Board, act
necessary for a maximum period of one year; as managing agent, adviser, consultant or
PROVIDED that, such ratio shall be applied administrator of investment management/
uniformly to banks of the same category ô(
advisory/consultancy accounts; and
e. Rent out safety deposit boxes.
Æ Effect of non-compliance with the prescribed
minimum ratio: The depositary would be liable if in performing its
obligation it is found guilty of fraud, negligence; in the
|. Distribution of net profits may be limited or absence of any stipulation prescribing the degree of
prohibited and MB may require that part or all diligence required, that of a good father of the family is
of the net profits be used to increase the to be observed. Any stipulation exempting the
capital accounts of the bank until the minimum depositary from any liability arising from loss on account
requirement has been met; or of fraud, negligence would be void for being contrary to
2. Acquisition of major assets and making of new public policy ô6" 17 # ( #
investments may be restricted. EXCEPT: ¸
purchases of evidence of indebtedness
guaranteed by the Government ô(
3. In case of a bank merger or consolidation, or "
The bank acting as depositary or as an agent
when a bank is under rehabilitation under a shall keep the funds, securities and other effects which
program approved by BSP, the MB may it receives duly separated from its own assets and
temporarily relieve the surviving bank, liabilities. (Sec. 53P
consolidated bank, or constituent bank or
corporations under rehabilitation from full
compliance with the required capital ratio. $" "g%"
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|. Distribution of net profits may be limited or Before granting a loan, a bank must ascertain that
prohibited and MB may require that part or all of the the debtor is capable of fulfilling his commitments to the
net profits be used to increase the capital accounts bank.
of the bank until the minimum requirement has
been met; or '
2. Acquisition of major assets and making of new
investments may be restricted. EXCEPT: |. A bank may demand from its applicants a
purchases of evidence of indebtedness guaranteed statement of their assets and liabilities and of their
by the Government. income and expenditures and other information.
3. In case of a bank merger or consolidation, or when
a bank is under rehabilitation under a program 2. (¸*$ *¸ ( + &
approved by BSP, the MB may temporarily relieve , the bank may terminate any loan granted
the surviving bank, consolidated bank, or on the basis of said statements and shall have the
constituent bank or corporations under right to demand immediate repayment or liquidation
rehabilitation from full compliance with the required of obligationô(
capital ratio.
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a. The borrower is director, officer, or any
Those that do not Those that have stockholder of a bank and related interest.
have a greater±than± extraordinary risks of b. He contracts a loan or any form of financial
normal risk and the loss in collection due to accommodation
borrower have some defects such as c. The loan or financial accommodation is from
apparent ability to bad debts or those (|P his bank or (2P a bank that is a subsidiary of a
satisfy it in full and no under litigation. bank holding company of which both his bank and
loss in ultimate lending bank are subsidiaries, (3P a bank in
collection is which a controlling proportion of the shares is
anticipated. owned by the same interest that owns a
controlling proportion of the shares of his bank;
and
d. The loan or financial accommodation of
the DOS, singly or with that of his related
ô interest, is in excess of 5% of the capital and
surplus of the lending bank or in the maximum
|
6$ ô$5' amount permitted by law, whichever is lower.
b. The total amount of loans extended by a bank to 9
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any person, partnership, association, corporation or |. Directors ± Directors of the lending bank
other entity shall at no time exceed 20% of the net
worth of such bank. 2. Officers ± Either identified in the by-laws or are
generally known as such
c. The total amount of loans may be increased by an
additional |0% of the net worth of such bank 3. Stockholders ± those whose stockholdings,
provided the additional liabilities of any borrower individually and/or together with any of the following
are adequately secured by trust receipts, shipping persons, amount to 2% or more of the total
documents, warehouse receipts or other similar subscribed capital stock of the bank:
documents transferring or securing title covering a. His spouse or relative within the first degree of
readily marketable, non-perishable goods which affinity/consanguinity or relative by legal
must be fully covered by insurance; adoption, partnership wherein any of the
foregoing is a general partner; and
&:
ô""'#$"5
|. Loans secured by obligations of the Bangko Sentral b. A co-owner, with the stockholder or the
or the Philippine Government; stockholder¶s spouse, or relative mentioned
2. Loans fully guaranteed by the government; above, of property/right/interest (mortgaged,
3. Loans covered by assignment of deposits pledged or assigned to secure the loan or
maintained in the lending bank and held in the credit accommodations, except when the
Philippines; mortgage, pledge or assignment covers only
4. Loans, credit accommodations and acceptances said co-owner¶s undivided interest.
under letters of credit to the extent covered by
margin deposits; and 4. Related Interest ±
5. Other loans or credit accommodations which the a. Spouse, relatives within first degree of
MB may specify as non-risk items. consanguinity or affinity, or relative by legal
adoption of a DOS, partnerships of which a
DOS or any of the foregoing is a general
©
ô©
partner.
b. Co-owner, with the DOS or his spouse or
A common banking practice requiring as an additional relative within the first degree of consanguinity
or affinity, or relative by legal adoption, of the
security for a loan granted to a corporation the joint and property/interest/ right mortgaged, pledged,
Solidary signature of a major stockholder or corporate assigned to secure the loans or credit
officer of the borrowing corporation ô(*, / accommodations, except when the mortgage,
*
( pledge or assignment covers only said co-
owner¶s undivided interest.
'
c. Corporation with inter-locking directors or
a. In case of default, creditor¶s recourse is not limited where 20% of the capital stock is owned by the
to corporate properties but extends to personal DOS and/or their spouses or relatives
assets of the surety; mentioned above, or wholly or majority owned
b. Surety would be compelled to ensure that the loan or controlled by any related entity or a group of
would be used for the purpose intended. related entities in items (bP, (dP, and (eP.
"
While R.A. 87 | provides for the rates of 20%
and |0% respectively, the Bangko Sentral has not yet
implemented such rates. The
are 25%
and |5% respectively.
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a. No director or officer of any bank shall, directly or .
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indirectly, borrow from such bank nor shall be
2
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guarantor, endorser or surety for loans from such
bank to others, or in any manner be an obligor or
incur any contractual liability to the bank, except
"
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with the written approval of the majority of all the
. 4
directors of the bank, excluding the director
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concerned. The written approval shall not be
required for loans granted to officers under a fringe
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benefit plan approved by the Bangko Sentral.
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b. Dealings of a bank with any of its DOSRI shall be 9
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upon terms not less favorable to the bank than
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those offered to others ô'($&"%1' $&5.
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c. Loans extended to DOSRI shall be limited to an "
amount equivalent to their respective
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.
unencumbered deposits and book value of their
paid-in capital contribution in the bank.
&:
i. Loans, credit accommodations, and COLLATERALS
guarantees secured by assets considered as
non-risk by the Monetary Board. |/
ii. Loans, credit accommodations, and advances
to officers in the form of fringe benefits. The loan shall not exceed 75% of the appraised
iii. Cooperative banks with regard to their value of the real property plus V0% of the appraised
cooperative shareholders. value of the improvements or 75% of the appraised
value of the chattel ô(
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d. The resolution approving the loan shall be entered in
the records of the bank and transmitted to the BSP.
)&!% "g%"
e. Waiver of secrecy of deposits of whatever nature in
all banks in the Philippines by the borrower. No Kinds of Deposits between a Bank and its Depositor
waiver is required if the related interests are the
borrower. |.
a. Savings
f. Information obtained from examination is strictly b. Time
confidential. c. Demand
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i. In the nature of irregular deposits ô(
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ii. Contract of loan/mutuum with the
a. Those secured by real estate shall not exceed 75% depositor as creditor
of the appraised value of the real estate security, iii. Bank acquires ownership of the thing
plus V0% of the appraised value of the insured deposited and the right to use and dispose
improvementsô(
iv. Money deposited is commingled with the
other money, constituting a common fund.
b. Those secured by chattels and intangible properties v. Not preferred credits ô /
(such as patents, trademarks, trade names and & #(
copyrightsP shall not exceed 75% of the appraised
2.
value of the securityô(
a. Safety deposit boxes ± the relation between a
bank renting out safety deposit boxes and its
BAR QUESTION: customer with respect to the contents of the
BANKS; RESTRICTIONS ON LOAN box is that of a bailor and bailee ± the bailment
ACCOMMODATIONS (2006) for hire and mutual benefit has been adopted in
this jurisdiction. It cannot be considered as a
/
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. + contract of lease because the full possession
.
and control of the safety deposit box is not
given to the rentersô( ###( #
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% a. Trust account
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SUGGESTED ANSWER:
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Æ Either one of the co-depositors may In case a bank or quasi-bank notifies the Bangko
deposit and withdraw from the account Sentral or publicly announces a bank holiday, or in any
without the knowledge, consent and manner suspends the payment of its deposit liabilities
signature of the other. And upon the death continuously for more than 30 days, the Monetary Board
of one, the survivor may withdraw the may summarily and without need for prior hearing close
entire balance on deposit. such banking institution and place it under receivership
of the Philippine Deposit Insurance Corporationô(
Æ The account may be deemed a
survivorship agreement depending on the Æ The depositary would be liable if in performing
intention of the parties; aleatory contract its obligation it is found guilty of fraud,
supported by a lawful consideration which negligence; in the absence of any stipulation
is valid unless when made as a mere prescribing the degree of diligence required,
cloak to hide an inofficious donation, to that of a good father of the family is to be
transfer property in fraud of creditors, or to observed. Any stipulation exempting the
defeat the legitime of a forced heirô depositary from any liability arising from loss
%(7 / $ >*
%¸ on account of fraud, negligence would be void
9#: for being contrary to public policy ô6"
17 #( #
¸
Deposit substitutes "
: The bank shall act as depositary or as an agent
shall keep the funds, securities and other effects which
An alternative form of obtaining funds from the public, it receives duly separated from its own assets and
other than deposits, through the issuance, liabilitiesô(
endorsement, or acceptance of debt instruments for the
borrower¶s own account, for the purpose of re-lending or
purchasing of receivables and other obligations ô(
PROHIBITIONS
)&!%
)&!%
%% %&
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No security given to Guaranteed by
guarantee certificates and other |. To directly act as insurer ô(
repayment; the instruments.
depositor relies on ô=$+/ / 2. For banks or quasi-banks to declare dividends, if at
the stability and 1( <, the time of declaration:
reputation of the $ a. its clearing account with the Bangko Sentral is
bank. overdrawn;
b. it is deficient in the required liquidity floor for
Æ A bank has the right to set-off the deposits in its government deposits for 5 or more consecutive
hands for the payment of any outstanding days;
indebtedness to it on the part of the depositor
ô0* %
# %¸ ; % ## c. it does not comply with the liquidity
( # standards/ratios prescribed by the Bangko
Sentral for purposes of determining funds
Æ The fiduciary nature of a bank-depositor available for dividend declaration; or
relationship does not convert the contract between
the bank and its depositors from a simple loan to a d. It has committed a major violation as may be
trust agreement, whether express or implied. determined by the Bangko Sentralô( .
Failure by the bank to pay the depositor is failure to
pay a simple loan and not a breach of trust. The law 3. To conduct business in an unsafe or unsound
simply imposes on the bank a higher standard of manner ô(
;
integrity and performance in complying with its
obligations under the contract of simple loan, 4. Publication of capital stock ô(
# ;
beyond those required of non-bank debtors, under
a similar contract of simple loan ô> 5. Unauthorized advertisement or business
0
((+ #
representation ô(
; or
Æ This fiduciary relationship means that the bank¶s V. To employ casual or non-regular personnel or too
obligation to observe ³high standards of integrity lengthy probationary personnel in the conduct of its
and performance´ is deemed written into every business involving bank depositsô( .
deposit agreement between a bank and its
depositor. The fiduciary nature of banking requires '
To prevent violation of Bank Secrecy
banks to assume a degree of diligence higher than Law.
that of a good father of a family ô>
.+$ " )'&g%', g&', &(!$.&&,
'&"%"#
Suspension of Payment on its Deposit
Liabilities |. Make false entries in any bank report or statement
or participate in any fraudulent transaction;
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2. Without order of a court of component 4. Offer any director, officer, employee or agent of a
jurisdiction, disclose to any unauthorized bank any gift, fee, commission, or any other form of
person any information relative to the funds or compensation in order to influence such persons
properties in the custody of the bank belonging to into approving a loan or other credit
private individuals, corporations, or any other accommodation application.
entity;
3. Accept gifts or any other form of remuneration in
connection with the approval of a loan or other ) " &<("&', ! ' /&'"(&"%
credit accommodation from said bank;
g&' ") &(!$.&& "&) %
4. Overvalue or aid in overvaluing any security for !&'/&, &<("&, % ' '&")&'
the purpose of influencing in any way the actions %&g1"g$%"g&%"."#
of the bank or any bank; or
Commit any of the acts enumerated in Sec. 55 or aid in
5. Outsource inherent banking functions ± a the commission of the same.
bank cannot engage the services of another
entity to receive deposits on its behalf; the bank Æ The making of false reports or
has to do it by itself. misrepresentations or suppression of material
facts by personnel of the BSP shall constitute
'
To prevent violation of Bank Secrecy fraud and shall be subject to administrative and
Law ô=$+/ / 1( <, criminal sanctions.
$
Æ However a bank may outsource, upon prior
approval of the Monetary Board the following
functions: CONDUCTING BUSINESS IN AN UNSAFE OR UNSOUND
MANNER ô !
a. All information technology systems and
processes, except for certain functions In determining whether a particular act or omission,
affecting the ability of the bank to ensure the fit which is not otherwise prohibited by law, rule or
of technology services deployed to meet its regulation affecting banks, quasi-banks, or trust entities,
strategic and business objectives and comply may be deemed as conducting business in an unsafe or
with pertinent laws and regulations; unsound manner, the MB shall consider any of the
b. Data imaging, storage, and other related following circumstances:
systems; |. The act or omission has resulted or may result in
c. Clearing and processing of checks not included material loss or damage, or abnormal risk or danger
in the Philippine Clearing House System; to the safety, stability, liquidity or solvency of the
d. Printing of bank statements; institution;
e. Credit card services;
f. Printing of bank loan statements and other 2. The act or omission has resulted or may result in
non-deposit records, bank forms and material loss or damage, or abnormal risk to the
promotional materials; institution¶s depositors, creditors, investors, and
g. Credit investigation and collection; stockholders or to the BSP or to the public in
h. Processing of export, import and other trading general;
transactions;.
i. Transfer agent services for debt and equity 3. The act or omission has caused any undue injury,
services; or has given any unwarranted benefits, advantage
j. Property appraisal; or preference to the bank or any party in the
k. Property management services; discharge by the director or officer of his duties and
l. Messenger, courier and postal services; responsibilities through manifest partiality, evident
m. Security guard services; bad faith or gross inexcusable negligence;
n. Vehicle service contracts
o. Janitorial services; 4. The act or omission involves entering into any
p. Other services as determined by the Monetary contract or transaction manifestly and grossly
Board. disadvantageous to the bank, quasi-bank or trust
entity, whether or not the director or officer profited
or will profit thereby.
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OWNERSHIP OF STOCKS OF A DOMESTIC
|. Fraudulently overvalue property offered as security BANK
for a loan from the bank;
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2. Furnish false or make misrepresentations or In case of a Filipino individual or a domestic non-
suppression of material facts for the purpose of bank corporation, may own up to 40% of the
obtaining, renewing, or increasing a loan or outstanding voting stock of a local bank.
extending the period thereof;
2
3. Attempt to defraud the said bank in the event of a Foreign individuals and non-bank corporations may
court action to recover a loan or other credit own or control up to an of 40% of the
accommodation; or voting stock of a domestic bank.
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The percentage of foreign-owned voting stocks in a
bank shall be determined: ô'")%1&' |. 4,- Governed by the provisions of the Foreign
' $&5 Bank Liberalization Act and the Offshore Banking
a. If individuals: by the citizenship of the System Decreeô(#
individuals
b. If corporations: by the citizenship of the 2. & $ +* ¸
controlling stockholders of the corporation, %¸((- The Monetary Board may revoke such
irrespective of the place of incorporationô( license on the grounds that the foreign bank is
insolvent or in imminent danger thereof or that its
continuance in business will involve probable loss
to those transacting business with itô(
" ##$# "% &' '&# ( S TOCKHOLDINGS OF F AMILY GROUPS OR R ELATED
ô & ))*+ I NTEREST
% (
+
Æ The law does not prohibit ownership of the stock by
members of the same family or related interest.
|. By ?*" (*¸" " up to However, the law provides that stockholdings of
V0% of the voting stock of an existing bank; individuals related to each other within the 4th degree of
consanguinity or affinity, legitimate or common law, shall
be considered family groups or related interest and must
2. By " in up to V0% of the voting stock of a be fully disclosed in all transaction by such individual
new banking subsidiary incorporated under with the bank. (Sec |2, GBLP
laws of Philippines;
Æ Two or more corporations owned and controlled by
3. By +¸" +¸ with full banking the same family group or same group of person shall be
authority, provided: considered related interest and must be fully disclosed
a. foreign bank may avail itself of only one in all transaction by such corporations or related group
mode of entry; and of person with the bank. (Sec |3, GBLP
b. Foreign bank or Philippine corporation
may own up to V0% of the voting stock
of only one domestic bank or new Æ Unlike the former law, the GBL does NOT impose a
limit on the number of shares that can be owned by the
banking subsidiary ô(#
same family or related interest. However this should not
be without prejudice to the 40% restriction imposed by
Sec ||of the GBL.
Æ Entries under the second and third modes are
restricted to banks which are among the top |50
foreign banks in the world or top 5 banks in their
country of origin. OWNERSHIP OF REAL PROPERTY
MINIMUM CAPITALIZATION:
&"&'$ ' $&A bank cannot acquire and own real
property.
|. For locally incorporated subsidiaries ± equal to that
of domestic banks of the same category : Banks are not engaged in the business of
acquiring and possessing real property. Also, banks
must maintain liquidity at all times to enable it to perform
2. For foreign bank branches ± not less than the US$ its functions. Thus, banks must as much as possible
equivalent of P2|0M retain only assets that are easily marketable.
&<g&!%"
Æ Amendments introduced by GBL 2000 |. As shall be necessary for its own use in the conduct
|. Within seven years from effectivity of the GBL of its business, provided:
(June |3, 2000P, foreign banks may be allowed a. The total investment in such real estate and
to own up to |00% equity of only one domestic improvements shall not exceed 50% of the
bank as a mode of entry if authorized by the combined capital accounts; and
Monetary Boardô(
0
b. the equity investment of a bank in another
2. Other foreign individuals and non-bank corporation engaged primarily in real estate
corporations may own up to 40% of the voting shall be considered as part of the bank's total
stock of a domestic bank; the nationality of the investment in real estate, unless otherwise
controlling shareholders of the
provided by the Monetary Boardô(
corporations will be traced to determine the
foreign ownership of the domestic bank ô(
0
2. As mortgaged to it in good faith by way of security
for debts, conveyed to it in satisfaction of a debt
previously contracted in the course of its dealings,
FOREIGN BANKS (SECS. 72ʹ78) and such as it shall purchase at forced sales or to
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TRUST OPERATIONS ô )/./
Æ To enjoin or restrain the conduct of foreclosure
proceedings, the petitioner must file a bond
conditioned that he will pay all the damages which Only a stock corporation or a person duly
the bank may suffer by the injunctionô( authorized by the Monetary Board shall act as a trustee
or administer any trust or hold property in trust or on
A bank may be bound by an agreement providing deposit for the use, benefit, or behalf of othersô(
for a longer redemption period ô.+ * /
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3. Act as the executor of any will when it is named the BANGKO SENTRAL NG PILIPINAS (BSP)
executor thereof
4. Act as administrator of the estate of any deceased The state¶s central monetary authority; it is the
person, with the will annexed, or when there is no government agency charged with the responsibility of
will administering the monetary, banking and credit system
of the country and is granted the power of supervision
5. Accept and execute any trust for the holding, and examination over bank and non-bank financial
management and administration of any estate, real
institutions performing quasi-banking functions,
or personal, and the rents, issues, and profits
thereof including savings and loan associations ô**"
(
9:
V. Establish and manage common trust funds ô(
!
P RIMARY OBJECTIVES :
|. No trust entity shall, for account of the trustor or the |. To maintain price stability conducive to a balanced
beneficiary of the trust, purchase or acquire and sustainable growth of the economy.
property from, or sell, transfer, assign or lend
money or property to, purchase debt from
2. To promote and maintain monetary stability and the
instruments of, any of the departments, directors,
officers, stockholders or employees of the trust convertibility of the peso.
entity, including relatives within the |st degree of
consanguinity or affinity, or the related interests, of
such directors, officers and stockholders, unless the
R ESPONSIBILITIES :
transaction is specifically authorized by the trustor
and the relationship of the trustee and the other |. To provide policy directions in the areas of money,
party involved in the transaction is fully disclosed to banking, and credit
the trustor or beneficiary of the trust prior to the
transactionô( 0 2. To supervise bank operations
2. The trust business and all funds, properties or 3. To regulate the operations of finance companies
securities received by any trust entity as executor, and non-bank financial institutions performing
administrator, guardian, trustee, receiver or quasi-banking functions, and similar institutions
depositary shall be kept separate and distinct from
ô(
the general business, including all other funds,
properties, and assets, of such trust entityô(
0
P OWERS / FUNCTIONS :
|. Issuer of currency ô(6
!!
3. Clearing channel or house; especially where the
PCHC does not operate ô(#
|. As provided by specific provisions
2. Sections 34-37 of RA 7V53 (by excluding the bank 4. Banker of the government ± the BSP shall be the
from clearingP official depository of the Government and shall
3. Suspension or removal of the director or officer
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represent it in all monetary fund dealings ô( Bangko Sentral, in which case such member shall
6
resign from, and divest himself of any and all
interests in such institution before assumption of
5. Financial advisor of the government ô( #
6 office (Sec. P;
# ± Under Article VII, Sec. 20 of the | 87
Constitution, the President may contract or 2. those coming from the private sector shall not hold
guarantee foreign loans but with the prior
any other public office or public employment during
concurrence of the Monetary Board.
V. Source of credit ô(
6
6 their tenure (Sec. P;
7. Supervisor of the banking system ô(# ± shall
include the power to: 3. cannot be connected directly with any multilateral
a. Examine, extending to enterprises wholly or banking or financial institution or has a substantial
majority-owned or controlled by the bank ô( interest in any private bank in the Philippines, within
; this power may not be restrained one (|P year prior to his appointment (Sec. P;
by a writ of injunction unless there is
convincing proof that the action of the BSP is 4. cannot be employed in any such institution within
plainly arbitrary ô(#
two (2P years after the expiration of his term except
b. Place a bank under receivership or liquidation
ô(
when he serves as an official representative of the
c. Initiate criminal prosecution of erring officers of Philippine Government to such institution (Sec. P;
banks
8. Government agent ô(6## 5. the Governor of the Bangko Sentral and the full-
time members of the Board shall limit their
professional activities to those pertaining directly to
MONETARY BOARD (MB) their positions with the Bangko Sentral.
Accordingly, they may not accept any other
The body by which the powers and functions of the employment, whether public or private,
Bangko Sentral are exercisedô(
remunerated or ad honorem, with the exception of
positions in eleemosynary, civic, cultural or religious
C OMPOSITION : organizations or whenever, by designation of the
members consisting of: President, the Governor or the full-time member is
tasked to represent the interest of the Government
|. Chairman: Governor of the BSP
2. A member of the cabinet to be designated by the or other government agencies in matters connected
President of the Philippines with or affecting the economy or the financial
3. Five (5P members who shall come from the private system of the country (Sec. 20P;
sector, all of whom shall serve full-time.
V. in case any member of the Monetary Board with
personal or pecuniary interest in any matter in the
agenda of the Monetary Board shall disclose his
interest to the Board and shall retire from the
"
The degree of diligence required of the members
of the MB, officials and employees of the BSP in the meeting when the matter is taken up (Sec. |4P.
performance of their functions is extraordinary diligence
ô(
S UPERVISION AND E XAMINATION OF B ANKS
Æ The BSP shall have supervision over, and conduct
Q UALIFICATIONS OF MEMBERS OF THE MONETARY periodic or special examinations of, banking
institutions and quasi-banks, including their
B OARD : subsidiaries and affiliates engaged in allied
|. must be natural-born citizens of the Philippines, activities.
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and made in bad faith and the petitioner or plaintiff files 3. To lease, own, and sell property
with the clerk or judge of the court in which the action is 4. To sue and be sued
pending a bond executed in favor of the Bangko Sentral, 5. To acquire and hold such assets and incur such
liabilities in connection with its operations or as are
in an amount to be fixed by the court.
essential to the proper conduct of operation
V. To compromise, condone, or release any claim of,
or settled liability to the BSP
7. To do and perform such other necessary powers
R EFUSAL TO M AKE R EPORTS OR PERMIT
CONSERVATORSHIP OF A BANK OR
E XAMINATION . QUASI-BANK
- Any officer, owner, agent, manager, director or officer-
State of continuing inability or unwillingness to
in-charge of any institution subject to the supervision or maintain a condition of liquidity deemed adequate to
examination by the Bangko Sentral who, being required protect the interest of depositors and creditors.
in writing by the Monetary Board or by the head of the Æ A conservator appointed by the BSP may take over
without the need of first declaring the bank
supervising and examining department willfully refuses
insolvent.
to file the required report or permit any lawful
examination into the affairs of such institution shall be )
Not to exceed | year
punished under the Act. (Sec. 34P
&
- The willful making of a false or |. Bank/quasi-bank retains juridical personality
misleading statement on a material fact to the Monetary 2. Not a precondition to the designation of a receiver
Board or to the examiners of the Bangko Sentral shall
!
be punished. (Sec. 35P
|. To take charge of the assets, liabilities, and the
management thereof;
PROHIBITIONS ON BANK OFFICERS, DIRECTORS,
LAWYERS, AGENTS
Personnel of the Bangko Sentral are hereby 2. Reorganize the management;
prohibited from:
3. Collect all monies and debts due said bank; and
|. being an officer, director, lawyer or agent,
employee, consultant or stockholder, directly or 4. Exercise all powers necessary to restore its
indirectly, of any institution subject to supervision or viability, with the power to overrule or rebuke the
examination by the Bangko Sentral; actions of the previous management and board of
directors of the bank or quasi-bank.
&:
non-stock savings and loan Æ The powers must be related to preservation of
associations and provident funds organized assets, reorganization of management and the
exclusively for employees of the Bangko Sentral, restoration of viability. Such power to revoke cannot
and except as otherwise provided in this Act; extend to post-facto repudiation of perfected
transactions, otherwise they would infringe the non-
impairment clause of the Constitution. The power
2. directly or indirectly requesting or receiving any gift,
to revoke contracts only covers those that are
present or pecuniary or material benefit for himself
deemed defective ± , void, voidable,
or another, from any institution subject to
unenforceable or rescissible ô' %¸ .7 /
supervision or examination by the Bangko Sentral;
## ( # The conservator¶s power
is not unilateral and he cannot simply repudiate
valid obligations of the bank. His authority would be
3. revealing in any manner, except under orders of the only to bring actions to assail the same.
court, the Congress or any government office or
agency authorized by law, information relating to
the condition or business of any institution;
%
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4. Willful violation of a
cease and desist order
that has become final,
involving acts or Whether or not a Monetary Board Resolution
transactions which be annulled on the ground of lack of prior notice and
amount to fraud or a hearing
dissipation of the assets
of the institution ô(
'
Section 2 of the Central Bank Act does not
contemplate prior notice and hearing before a bank may
'
be declared to stop operations and placed under
|. Banks ± PDIC receivership. When it provides for the filing of the case
2. Quasi-banks ± Any person of recognized within |0 days after the receiver takes charge of the
competence in banking or finance assets of the bank, it is unmistakable that the assailed
actions should precede the filing of the case. Plainly, the
legislature could not have intended or authorize ³no
|. Immediate gathering and taking charge of all the prior notice and hearing´ in the closure of the bank and
assets and liabilities of the institution and at the same time allow the suit to annul it on the basis of
administering them for the benefit of creditors the absence thereof.
2. General powers of a receiver
3. Determination ASAP but not later than 0 days, This ³close now and hear later´ scheme is
whether the institution should undergo grounded on practical and legal consideration to prevent
or . the unwarranted dissipation of the bank¶s asset and as a
Æ Note the distinctions between rehabilitation and valid exercise of the police power to protect the
liquidation. depositors, creditors, stockholders and the general
public.
ºCLOSE NOW, HEAR LATER͟ SCHEME
(")%'.'&M '&(&"%'"#
Æ Sec. 2 of the Central Bank Act does not g$ '&
contemplate prior notice and hearing before a bank |. Examination by the appropriate BSP department as
is placed under receivership. It is enough that such to the condition of the bank
action is made the subject of a subsequent judicial
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2. Examination shows that the condition of the bank is |. 6% 6%$6%- In amounts not
one of insolvency exceeding P|,000.00
3. Director shall inform the MB in writing of such fact
4. If the MB shall find the statement of the department 2. # - In amounts not exceeding
to be true, it shall appoint a receiver of the assets P|00.00 ô*
#
and liabilities of the bank ô '(
#( 9:
5. Within V0 days, the MB shall determine and confirm !
'
if the bank is insolvent, and if public interest |. Notes for any series or denomination ± More than 5
requires, shall order the liquidation of the bank. years old
2. Coins ± More than |0 years old
'
LIQUIDATION |. Notes and coins called in for replacement shall
remain legal tender for a period of one year from
the date of call.
|. The condition of the bank is one of insolvency or
that its continuance would involve probable loss to
its depositors and creditors. 2. After that period, they shall cease to be legal tender
during the following year or for such longer period
2. A determination by the MB that the bank cannot be as MB may determine.
rehabilitated.
!
3. After the expiration of this latter period, the notes
|. Receiver shall file 5(, with the proper RTC, a and coins which have not been exchanged shall
petition for assistance in the liquidation of the cease to be a liability of BSP and shall be
institution pursuant to a liquidation plan adopted by demonetized ô(
the PDIC for general application to all closed banks.
In case of quasi-banks, the liquidation plan shall be
adopted by the Monetary Board. Æ Checks representing demand deposits do not
have legal tender power and their acceptance
2. He shall convert the assets of the institution to in the payment of debts, both public and
money for the purpose of paying the debts of the private, is at the option of the creditor.
institutionô(
Æ However, a check which has been cleared and
3. Payment shall be in accordance with the rules on credited to the account of the creditor shall be
concurrence and preference of credits. equivalent to a delivery to the creditor of cash
Regular courts have no jurisdiction over actions in an amount equal to the amount credited to
filed by claimants against an insolvent bank ô)" his account ô(
#
(
MONETARY STABILIZATION
&&g% !!"%(&"% '&g&/&'*
$M )%"
|. Suspension of operation #-&"""&& "&1#2# "##"%
2. The assets under receivership or liquidation shall
be deemed *$ " in the hands of the |. $
ô ô'
5
receiver and shall be exempt from garnishment, a. If BSP wants to increase money supply, it
levy, attachment or execution ô(
opens the rediscount window by reducing
interest on loans
3. Bank is not liable to pay interest on deposits during b. If BSP wants to decrease money supply, it
the period of suspension of operation ô) closes the rediscount window or charges very
/
( 9#: high interest rates for rediscounted notes
4. The corporation retains its legal personality ô>
'. %¸9#:
2. Open Market Operations ô(
5. Deposits do not become preferred credits ô a. If BSP wants to increase money supply, it buys
& #( 9
: government securities
b. If BSP wants to decrease money supply, it
sells government securities
LEGAL TENDER
All notes and coins issued by the Bangko Sentral are 3. Reserve Requirements ô( - where a certain
fully guaranteed by the Republic and shall be legal percentage of the deposit is set aside and cannot
tender in the Philippines for all debts, both public and be lent out
privateô(# a. if the volume of money is high, BSP will raise
reserve requirement
$
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b. if the volume of money is low, reserve 4. In cases where the money deposited or invested is
requirement is reduced. the subject matter of the litigation; ô(#
'
|. ҏ The required reserves of each bank shall be
proportional to the volume of its deposit
liabilities.
2. Since the required reserves are imposed
primarily to control the volume of money, the
Bangko Sentral shall not pay interests thereon
ô(
3. Deposits maintained with the Bangko Sentral BAR QUESTION:
as part of the reserve requirements shall be Banks: Secrecy of Bank Deposits; Garnishment
exempt from attachment, garnishment, or any
(2004)
other order or process of any court or agency
ô(
4. No increase of more than 4% point within 30- &Ú&
"
&0
. =
day period.
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5
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PROHIBITIONS ON THE BSP 5
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|. It shall not acquire shares of any kind or accept
them as collateral, and shall not participate in the #8 &Ú&:
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ownership or management of any enterprise, either
%
directly or indirectly; and
2. It shall not engage in development banking and
SUGGESTED ANSWER
financing ô(#
6 s &Ú&:
8
China Banking Corporation v. Ortega, 49 SCRA
355 (1973)
%
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|. To encourage people to deposit in banks
%
.
%
2. To discourage private hoarding so that banks may
"
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lend such funds and assist in the economic
5
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development
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-
"
All deposits of whatever nature with banks or banking
institutions in the Philippines, including investments in
.
bonds issued by the Government of the Philippines, its
political subdivisions and its instrumentalities.
PROHIBITED ACTS: B. From other laws
|. Examination and inquiry or looking into all deposits, |. g
! ô
of whatever nature, with the banks in the
;$$$+,",%0,
Philippines including investments in bonds issued
by the Government. ( 9
: ;
2. Any disclosure by any official or employee of any
bank to any unauthorized person of any information 2. "'g - Inquiry by the Commissioner of Internal
concerning the said deposits. Revenue into bank deposits of:
&"&'$ ' $& The deposits covered by law are a. A decedent to determine his gross estate;
considered as of an +*, &$ * and b. A taxpayer who has filed an application for
may not be examined, inquired or looked into by any compromise of his tax liability by reason of
person, governmental bureau, or office. financial incapacity to pay his tax liability. He
must file a written waiver of his privilege under
&<g&!%" RA |405 or other general or special laws ô(
A. F ROM R.A. N O . 1405
9&: .
|. Upon written permission of the depositor;
3. Inquiry or examination by the (
2. In cases of impeachment; $ g
ô($g5 of any particular
deposit or investment with any banking institution or
non-bank financial institution upon order of any
3. Upon order of a competent court in cases of bribery
competent court in cases of violation of the Anti-
or dereliction of duty of public officials; Money Laundering Law, when it has been
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established that there is probable cause that the garnishment. Any disclosure is purely
deposits or investments are related to an unlawful incidental to the execution process ô¸
activity or a money laundering offense, : that /" ( )" (
no court order shall be required in the following
unlawful activities:
a. Kidnapping for ransom under Art. 2V7 RPC; Æ Illegally acquired property extends to cases
b. Comprehensive Dangerous Drugs Act of 2002 where property is concealed by being held by
ô
; or recorded in the name of respondent¶s
spouse, ascendants, descendants, relatives, or
any other personsô'(("$
""/%*
(
Æ Money-market placement is not covered by RA
|405 because it is not deposited in the bank.
c. Hijacking and other violations under RA V235;
BAR QUESTION:
destructive arson and murder under RPC.
Including those perpetrated by terrorists against BANKS: APPLICABILITY: FOREIGN CURRENCY
non-combatant persons and similar targets´ DEPOSIT ACT & SECRECY OF BANK DEPOSITS
ô(
$$+,( (2005)
& + @ &
"
"
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4. Disclosure to the Treasurer of the Philippines of &
&
dormant deposits for at least |0 years under the
%
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OTHER LAWS RELATING TO SECRECY OF BANK
"
DEPOSITS
A -5 Ú
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B. Extends confidentiality to foreign currency deposits, @ &
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but the law contains only one ground authorizing 6!6
.
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examination: upon written permission of the Ú /
depositor.
.
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2888ô
"
|. No bank shall employ casual or non-regular a) Will the complaint filed against the directors of
personnel or too lengthy probationary personnel in Hi Yielding Corporation prosper? Explain
the conduct of its business involving bank deposits
ô(
2. No director, officer, employee, or agent of any bank SUGGESTED ANSWER:
shall, without court order, disclose to any s
9
&
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unauthorized person any information relative to the s 6!6 "
"
funds or properties in the custody of the bank
%
belonging to private individuals, corporations, or
any other entity, provided that with respect to bank / 8
deposits, the provisions of existing laws shall
" %
.
prevailô(9+:
3. Outsourcing of inherent bank functions
b) Was there a violation of the Secrecy of Bank
) "g ô
|. DOSRI loans Deposits Law (Republic Act No. 1405)? Explain.
2. Periodic and special examinations by the BSP
(Sec. 25P SUGGESTED ANSWER:
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$ ô
0
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Æ Provides for another exception to
% 4
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confidentiality, which is applicable to both peso
9&Ú-
"
and foreign currency deposits.
% Intengan v. Court of Appeals, G.R. No.
128996, February 15, 2002
Æ Garnishment of bank deposit of judgment
debtor does not violate RA |405. It was not the
intention of the legislature to place bank
deposits beyond the reach of execution to
satisfy a final judgment. Its purpose is merely REQUISITES FOR IN-CAMERA INSPECTION OF
to secure information as to the name of the
depositor and whether or not the defendant
BANK DEPOSITS
had a deposit in said bank, only for purposes of
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Marquez vs. Desierto, G.R. No. 135882, W HERE F UNDS D EPOSITED ARE S UBJECT OF
June 27, 2001 L ITIGATION
|. Pending case before a court of competent
jurisdiction g )
2. Account must be clearly identified
1
>
,278g'|4|
3. The inspection is limited to the subject of the
pending litigation.
4. The bank personnel and account holder must be Sun Life brought a collection case to recover
present during the inspection. the proceeds of a check it had issued, the insurance
5. The inspection must cover only the account company wanted to determine how the defendant had
identified in the pending case. applied the proceeds of the check. The trial court
allowed Sun Life to examine pertinent records of the
bank in which the check was deposited.
'
The Supreme Court held that the examination
R.A. NO. 1405 VIS-À-VIS POWER OF THE BSP TO was authorized by Section |0 of Rule 57, on the
CONDUCT PERIODIC AND/OR SPECIAL examination of a person whose property has been
attached and person indebted to him or controlling his
EXAMINATIONS ô 34 * property. The Court struck down the argument that the
examination would violate the Bank Secrecy Law,
Æ Prof. Aquino and Prof. Viray believe that the explaining that the examination fell within the exception
general rule still applies. Hence, the deposit ³in cases where the money deposited or invested is the
remains confidential. subject matter of litigation.´ The Court added that the
examination of bank records was not a fishing
! expedition, but rather a method by which Sun Life could
Imprisonment of not more than 5 years or a fine not trace the proceeds of the check that it paid to the
more than P20,000 or both, in the discretion of the petitioners.
court.
Æ In another case, Mellon Bank remitted $|
In impeachment proceedings, the impeachment million rather that an intended $|,000 to the recipient,
court may inquire into bank deposits. Thus, during the who deposited part of the remittance in a local bank.
impeachment proceedings against former President When personnel of the depositary bank testified on the
Estrada, Chief Justice Davide ruled that Clarissa bank deposits, the defense moved to strike out the
Ocampo could testify on the Jose Estrada/Jaime testimonies of the depositary bank¶s witnesses. The
Dichaves accounts maintained with Equitable PCIB Supreme Court allowed their testimonies to remain on
Bank, over the objections of the defense that this would the record, stating Section 2 of said law allows the
violate the Bank Secrecy Law. Basis for this ruling was disclosure of bank deposits in cases where the money
that the inquiry would be made in the course of an deposited is the subject matter of the litigation. ô
impeachment proceeding. /" (
W RITTEN P ERMISSION OF DEPOSITOR
A bank may allow an inquiry into a deposit with the UNEXPLAINED WEALTH (RA3019)
written consent of the depositor. An oral or implied
Although the Bank Secrecy Law did not include
authorization does not suffice. This consent may be cases covered by the Anti-Graft Law among the
given voluntarily. In some cases, however, the consent exceptions, the Supreme Court held that they should be
is involuntary because the law requires it. included. The only conclusion possible is that Section 8
of the Anti-Graft Law is intended to amend Section 2 of
Thus, Section 2V of the New Central Bank Act as Republic Act No. |405 by providing an additional
implemented by BSP Circular No. |70, series of | 8, exception to the rule against disclosure of band
requires a director, officer or stockholder of a bank or deposits.´ ô%0, ( ô
This overturned an earlier case decided by the High
their related interests to submit a written waiver of the Court where it held that a prosecution under the Anti-
secrecy of all his deposits of whatever nature in all Graft Law was not embraced within any of the
banks of the Philippines in favor of the Bangko Sentral, exceptions to the Bank Secrecy Law that would allow
if he applies for a DOSRI loan. However, the disclosure by a bank of information concerning a
information obtained from the examination remains deposit ô> * / & %. (
confidential and may be used by BSP examiners only in ô
legal action it may initiate involving the said deposits. In another case, the Supreme Court expanded the
exception under the Anti-Graft Law, when it allowed an
A waiver of the Bank Secrecy Law is also required examination not only of the accused¶s deposits, but also
in case of loans secured by a hold-out or an assignment those of his spouse, ascendant, descendants and
of certificates of time deposits. (Section X3|5, Manual of relatives, and other persons as well. ( '(
Regulations for BanksP. ='$ %* |V| SCRA 57V (| 88P. Here, the
Court declared as proper the production by subpoena
duces tecum of bank records of transactions by or in the
names of the wife, children and friends of a special
agent of the Bureau of customs accused of having
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allegedly acquired property manifestly out of proportion &
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"
to his salary and lawful income. The Court explained:
"
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To sustain the petitioner¶s theory, and restrict the
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inquiry only to property held by or in the name of the
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government official or employee, or his spouse and
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unmarried children, is unwarranted in the light of the
provisions of the statutes in question, and would make
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available to persons in government who illegally acquire "
property an easy and fool-proof means of evading
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investigation and prosecution; all they would have to do
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would be to simply place the property in the possession
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or name of persons other than their spouse and
unmarried children. This is an absurdity that we will not
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ascribe to the lawmakers.
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Although Section 8 of the law that created the
Office of the Ombudsman expressly granted the SUGGESTED ANSWER:
Ombudsman the power to ³administer oaths, issue @ "
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subpoena and subpoena duces tecum and take "
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testimony in any investigation or inquiry, including the 4
power to examine and have access to bank accounts
and records,´ the Supreme court held that the
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Ombudsman could not inquire into bank deposits until 2
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there was a pending case in court involving the "
depositsô?*@1
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The Unclaimed Balances Law (Republic Act No. " "
3 3VP requires each bank to file a sworn statement with
the Treasurer of the Philippines stating the deposits that
the bank holds in the names of persons known to be 6
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dead or who have not made deposits or withdrawals
during the preceding ten years or more. It is also
"#$#%&'(&()*
requires the bank to post a copy of the sworn statement
in the bank premises. However, this is done only after !
the bank shall have first communicated with the
depositor at his last known residence or post office |. To protect and preserve the integrity and
address. Such a disclosure of the deposits and the confidentiality of bank accounts, to ensure that the
depositors, does not violate the Bank Secrecy Law. Philippines shall not be used as a site for unlawful
money laundering activities; and
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2. To pursue State¶s foreign policy to extend
cooperation in transnational investigations and
In ¸ /" ( * & ((,
prosecution on money laundering activities.
(| 3 SCRA 452 (| |P the Supreme Court held that the
garnishment of a bank deposit does not violate the Bank
Secrecy Law. Said the court:
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2. Non-banks
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3. Quasi-banks
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supervised or regulated by the BSP
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COVERED TRANSACTION:
BAR QUESTION: Transaction, in cash or other equivalent monetary
Banks; Secrecy of Bank Deposits (2000) instrument in excess of P500,000, within one banking
day.
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SUSPICIOUS TRANSACTIONS:
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Transactions with covered institutions regardless of the
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amounts involved, where any of the following
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circumstances exists:
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|. There is no underlying legal or trade obligation
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5. Any circumstance relating to the transaction which
is observed to deviate from the profile and/or the
client¶s past transactions with the covered institution P OWER TO F REEZE A CCOUNTS
The power of the AMLC to freeze accounts has
V. Transaction is in any way related to an unlawful
been deleted under RA | 4
activity or offense under this Act that is about to be,
is being or has been committed
7. Analogous transactions to any of the foregoing The Court of Appeals may issue a freeze order,
which shall be effective immediately and for a
period of 20 days, unless extended by the court,
only:
MONEY LAUNDERING:
a. upon 5( application of AMLC; and
A crime whereby the proceeds of an unlawful activity
b. after determination that probable cause exists
are transacted, thereby making them appear to have
that any monetary instrument or property is in
originated from legitimate sources. It is committed by
any way related to an unlawful activity.
the following:
|. Any person knowing that any monetary instrument
or property represents, involves, or relates to, the
proceeds of any unlawful activity, transacts or
attempts to transact said monetary instrument or BAR QUESTION:
property.
BANKS; SECRECY OF BANK DEPOSIT; AMLC
(2006)
2. Any person knowing that any monetary instrument
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or property involves the proceeds of any unlawful
activity, performs or fails to perform any act as a
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result of which he facilitates the offense referred to
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in number | above.
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3. Any person knowing that any monetary instrument
or property is required under this Act to be
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disclosed and filed with the AMLC fails to do so. '2&
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P REVENTION OF M ONEY L AUNDERING
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-Covered institutions 5$%
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shall establish and record the true identity of its B' %2
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clients based on official documents. They shall
maintain a system of verifying their clients and in 1. Can Rudy move to dismiss the case on the
case of corporate client, require a system of ground that he has no criminal record? (2.5%)
verifying their legal existence and organizational
structure, s well as the authority and identification of
all person purporting to act on their behalf.
SUGGESTED ANSWER:
2 '
#- All records of all transaction of
covered institution shall be maintained and safely s -
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stored for 5 years from the dates of transaction. %
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With respect to closed accounts, the records on
;
customer identification, account files and business
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correspondence, shall be preserved and safely
stored for at least 5 years from the dates when they
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were closed. %
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. ± Covered institution shall report to
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the AMLC all covered and suspicious transactions
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within 5 working days from the occurrence thereof, 77
unless the Supervising Authority prescribes a
longer period not exceeding |0 working days.
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The PDIC may grant financial assistance to
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distressed banks if it is proven to be a less costly
alternative than closure.
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4. a. If the account is held jointly by two or more Æ Demand drafts cannot be escheated but
natural persons, or by two or more juridical telegraphic notes can be escheated ô (*+
persons or entities, the maximum insured '
( 9
:
deposit shall be divided into as many equal
shares as there are individuals, juridical
persons or entities, unless a different sharing is
stipulated in the document of deposit.
b. If the account is held by a juridical person or
entity jointly with one or more natural persons,
the maximum insured deposit shall be
presumed to belong entirely to such juridical
person or entity: %$$ &*¸, That the
aggregate of the interests of each co-owner
over several joint accounts, whether owned by
the same or different combinations of
individuals, juridical persons or entities, shall LEGAL CONSEQUENCE
likewise be subject to the maximum insured
deposit of Two hundred fifty thousand pesos The unclaimed balances may be subject of escheat
(P250,000.00P. proceedings, after proper publication and the depositors
still do not lay claim to them.
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66
|. Non-payment of insurance premiums
2. Continued engagement in unsafe and unsound
banking practices
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Æ Sec. of RA V42V (µAn Act Instituting a Foreign )&!%
Currency Deposit System in the Philippines,
and for Other Purposes"P and Sec. 7 of Governed by R.A. Governed by R.A. No.
Central Bank (CBP Circular No. |38 , dated No. |405 V42V
August |3, | 3, mandate that foreign
currency deposits shall be insured under the 4 exceptions + | exception + | provided
provisions of RA 35 |, as amended. Under CB exceptions found in under AMLA (R.A. No.
Circular No. |38 , depositors are entitled to special laws |V0P
receive payment in the same currency in which
the insured deposit is denominated. May be garnished 044 24- Exempt
or attached (not a from attachment,
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The PDIC law is not applicable to Offshore violation of R.A. No. garnishment, and other
Banking Unitsô%1
|405P court order and
processes.
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|. There must be a claim or deposit of: |. Authorized banks may adopt a numbered account
system for recording and servicing deposits in non-
a. Money; checking accounts
b. Bullion;
c. Security; or 2. Foreign currency deposits are exempt from taxes
except the interests
d. other evidence of indebtedness.
2. The credit or deposit must be with a bank, building
and loan association, or trust corporation; and 3. In the event a new enactment or regulation is issued
decreasing the rights granted under the law, it shall
3. The credit or deposit is in favor of a person: not apply to FCD¶s already made or existing at the
a. who is dead, or time of the issuance of such new regulation or
enactment.
b. who has not made further deposits or
withdrawals during the preceding |0 years or
more. In a * " case, the SC allowed garnishment
of such deposits of a transient American tourist
arising out of a heinous crime committed against a
Filipino minor since to hold otherwise would result
to injustice to a citizen perpetrated by a foreigner
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