New Central Bank Act (Republic Act 7653)
BSP officials, examiners, and
I. STATE DECLARED POLICY
Bangko Sentral ng Pilipinas (BSP) is the State’s
Central Monetary Authority mandated in the
1987 Philippine Constitution to function and
operate as an independent and accountable
body corporate in the discharge of its mandated
responsibilities concerning money, banking and
credit.
Case: Bank of Commerce v. Planters Dev. Bank
681 SCRA 521 (2012)
Changes brought about about RA 7653:
a) Assures BSP’s independence by
providing for the majority of the
members of its monetary board coming
from the private sector.
b) Allows BSP to concentrate on monetary
policy, by removing it of fiscal
responsibilities, which distracted it from
its primary function.
c) Provides safeguards to ensure that
unlike the old Central Bank, which
sustained huge losses, BSP would have
a positive net income position by the
following provisions:
 Capitalization of P50 Billion of which
P10 Billion paid upon affectivity of the
Act;
 Maintenance of positive net foreign
asset position;
 Charging interests of all loans and
advances to banks
 Authority to collect interests on loans
and advances to closed financial
institutions;
 Prohibition from development banking
and financing;
 Abolished “monetary adjustment” and
“exchange stabilization” accounts by
which the old CB sustained huge losses;
 All BSP expenses are now included in
computing BSP profits and losses;
d) Affirms absolute secrecy of banks
deposits by repealing Presidential
Decree 1792, and reverting back to the
original provisions of the Secrecy of
Bank Deposits Act;
e) Makes liable Monetary Board members,
employees, who willfully violate the Act
or who are guilty of negligence, abuses
or acts of malfeasance or misfeasance,
or fail to exercise extraordinary
diligence in the performance, or fail to
exercise extraordinary diligence in the
performance of their duties, for any loss
or injury suffered by BSP, or other
banking institutions.
II. BSP’S PRIMARY OBJECTIVES AND ROLES
1. Primary objectives of BSP:
a. To maintain price stability
conducive to a balanced
and sustainable growth of
the economy;
b. To promote and maintain
the monetary stability and
convertibility of the
Philippine Peso;
c. To provide policy directions
in areas of money, banking,
and credit, with supervision
over operations of banks,
and with regulatory powers
over operations of finance
companies, and non-bank
financial institutions
performing quasi-banking
functions.
2. Roles of BSP:
a. Banker of the government;
b. Representation with the
International Monetary
Fund (IMF);
c. Representation with other
financial institutions; and
d. Fiscal operations.
Case: Koruga v. Arcenas, Jr. 590 SCRA
49 (2009)
3. BSP privileges and prohibitions:
a. Tax exemption
b. Exemption from custom duties
c. Cannot acquire shares of any
kind, or accept them as
collateral, and shall not
participate in the ownership or
 management of any enterprise,
either directly or indirectly. It
cannot also engage in the
development of banking or
financing.
III. MONETARY BOARD
1. Composition: Seven (7) members appointed
by the President of the Philippines for a term of
6 years, namely:
a. Governor, as Chairman;
b. A Cabinet member designated by the
President;
c. Five (5) members who shall come from
the private sector, all of whom shall
serve full-time. No member of the
Board may be reappointed more than
once.
2. Qualifications:
 Must be natural-born Filipino citizens;
 At least 35 years of age, with the
exception of the Governor, who should
at least be 40 years of age;
 Of good moral character, of
unquestionable integrity, of known
probity and patriotism; and
 With recognized competence in social
and economic discipline.
3. BSP Governor should be:
 Head of department, and his
appointment should be subject to the
confirmation by the Commission of
Appointments;
 CEO of the BSP;
 Monetary Board’s and BSP’s principal
representative.
4. Disqualifications:
a. Disqualified from being director, officer,
employee, consultant, lawyer, agent or
stockholder of any bank, quasi-bank or
any other institution which is subject to
BSP supervision, in which case, such
member shall resign from, and divest
himself of any and all interests in such
institution before assumption of office;
b. Those coming from private sectors shall
not hold any other public or public
employment during tenure;
c. Cannot be connected with any
multilateral banking or financial
institution, or has a substantial interest
in any private bank in the Philippines,
within one (1) year prior to his
appointment;
d. Cannot be employed in any such
institution within two (2) years after
expiration of his term, except when he
serves as an official representative of
the Government in such institution;
e. Governor and full-time members shall
limit their professional activities to
those pertaining directly to their
position with the BSP. And may not
accept any other employment, whether
public or private, remunerated or ad
honorem, with the exception of
positions in eleemosynary, civil, cultural
or religious organizations or whenever,
by designation of the President, the
Governor of full-time member is tasked
to represent the interest of the
Government;
f. When any member with personal or
pecuniary interest in any matter in
Monetary Board agenda, he shall
disclose his interest and shall retire
from the meeting when the matter is
taken up.
4. Removal of Governor and Board
Members – the President may remove any
member of the Board for any of the
following reasons:
a. Subsequent disqualification;
b. Physical or mental incapacity that
he cannot properly discharge his
duties and responsibilities and such
incapacity n has lasted for more
than six (6) months;
c. Guilty of acts or operations, which
are of fraudulent or illegal
character, or which are manifestly
opposed to the aims and interests
of BSP; or
d. No longer possessing qualifications
specified in the Act.
5. Responsibilities/Liabilities of BSP Officers and
Employees:
a. Those who willfully violate the Act, or
who are guilty of negligence, abuses or
acts of malfeasance or misfeasance, or
failure to exercise extraordinary
diligence in the performance of their
duties, shall be held liable for any loss
or injury suffered by BSP, or other
banking institution as a result thereof.
b. Similar responsibility shall apply to
members, officers, and employees of
BSP for:
 Disclosure of any confidential
information unless the
disclosures are in the
connection to the performance
of official BSP functions, or is
with prior authorization of
Monetary Board or Governor;
 Use of such information for
personal gain, or to the
detriment of the Government,
BSP or third parties.
Case: Reyes v. Rural Bank of San Miguel
(Bulacan) 339 SCRA 226 (2003)
IV. SUPERVISION AND EXAMINATION OF
BANKS
BSP shall have supervision over, and conduct
periodic or special examinations of, banking
institutions and quasi-banks, including their
subsidiaries and affiliates engaged in allied
activities.
Subsidiary – a corporation more than 50% of
the voting stock of which is owned by a bank or
a quasi-bank.
Affiliate – a corporation, the voting stock of
which, to the extent of 50% or less, is owned by
a bank or a quasi-bank, or which is related or
linked, or such other factors determined by
Monetary Board.
Case: BSP Monetary Board v. Antonio-
Valenzuela 602 SCRA 698 (2009)
1. No restraining order against BSP – No
restraining order or injunction shall be issued by
the courts enjoining BSP from exempting any
institution subject to its supervision or
examination, unless there is convincing proof
that the action of BSP is plainly arbitrary and
made in bad faith and the petitioner or plaintiff
files a bond executed in favor of BSP, in a n
amount to be fixed by the court.
Case: BSP Monetary Board v. Antonio-
Valenzuela 602 SCRA 698 (2009)
V. PROHIBITIONS
BSP personnel are prohibited from:
a. Being an officer, director, lawyer or
agent, employee, consultant or
stockholder, directly or indirectly, of
any institution subject to BSP
supervision or examination; except,
non-stock savings and loan associations
or provident funds exclusively for BSP
employees;
b. Directly or indirectly requesting, or
receiving any gift, present or pecuniary
or material benefit for himself or
another, from any institution subject to
BSP supervision or examination;
c. Revealing in any manner, except under
orders of the courts, Congress or any
other government agency authorized by
law, information relating to the
condition or business of any such
institution;
d. Borrowing from any such institution,
unless: (i) inadequately secured, and (ii)
fully disclosed to Monetary Board.
VI. CONSERVATOR, RECEIVERSHIP AND
LIQUIDATION
1. Appointment of Conservator – Whenever
a bank or a quasi-bank is in:
 A state of continuing inability; or
 Unwillingness to maintain a
condition of liquidity deemed
adequate to protect the interest of
depositors and creditors, the
Monetary Board may:
a. Appoint a conservator to
take charge, for a period
not exceeding one (1) year,
 of the assets, liabilities, and
management thereof;
b. Reorganize the
management;
c. Collect all monies and debts
due the said bank; and
d. Exercise all powers
necessary to restore its
viability with power to
overrule or revoke the
actions of the previous
management and board of
directors of the bank or
quasi-bank.
Take the case of First Phil. Int’l Bank v. CA 252
SCRA 259 (1996)
A contract was entered into by bank’s
responsible officer. Subsequently, the bank
became insolvent, and a conservator was
appointed, who repudiated the contract on the
ground that it was entered into without proper
authority. Does the conservator have the power
to revoke or overrule actions of the
Management or Board of Directors of the bank,
pursuant to Sec. 28-A of old CBA?
Held: Sec. 28 merely gives the conservator the
power to revoke contracts that are, under
existing law, deemed to be defective – i.e., void,
voidable, unenforceable, or rescissible. The
conservator merely takes the place of a bank’s
BOD. What the said board cannot do – such as
repudiating a contract validly entered into
under the doctrine of implied authority, the
conservator cannot do either. Ineluctably, his
power is not unilateral, and he cannot simply
repudiate valid obligations of the bank.
2. When Conservatorship terminated (closure)
or changed to receivership:
a. When the Monetary Board is satisfied
that the institution can continue to
operate on its own and the
conservatorship is no longer necessary;
b. Should the Monetary Board determine
that the continuance in business of the
institution would involve probable loss
to its depositors or creditors, in which
case proceedings for receivership and
liquidation shall be pursued.
3. Receivership Proceedings – whenever the
Monetary Board finds that a bank or a quasi-
bank:
a. Is unable to pay its liabilities as they
become due in the ordinary course of
business; BUT: shall not include those
caused by extraordinary demands
induced by panic in the banking
community;
b. Has insufficient realizable assets to
meet its liabilities;
c. Cannot continue in business without
involving probable losses to its
depositors or creditors; or
d. Has willfully violated a cease and desist
order that has become final, involving
acts or transactions which amount to
fraud, or dissipation of the assets of
the institution;
The Monetary Board may summarily
and without need for prior hearing,
forbid the institution from doing
business in the Philippines, and
designate the PDIC as receiver of the
banking institution.
4. Functions of conservatorship:
a. Immediately gather and take charge of
all the assets and liabilities of the
institution, and administer the same for
the benefit of its creditors;
b. Exercise the general powers of a
receiver;
c. Determine as soon as possible, but not
later than 90 days from takeover,
whether the institution may be
rehabilitated or otherwise placed in
such a condition so that it may be
permitted to resume business with
safety to its depositors and creditors,
and the general public.
Note: Any determination for resumption of
business shall be subject to the prior approval
of the Monetary Board.
5. Effect of Appointment of a Receiver:
The appointment of a receiver operates to
suspend the authority of a bank and of its
directors and officers over its properties and
effects, such authority being reposed in the amount of bonuses to its employees.
receiver, and in this respect, the receivership is (Producers Bank v. NLRC, 355 SCRA 489)
equivalent to an injunction to restrain the bank
officers from intermeddling with the property Receiver is obliged to collect pre-existing debts
due to the bank, and, to foreclose mortgages
of the bank in any way. (Abacus Real Estate v.
Manila Banking Corp., 452 Scra 97, 2005) security of such debts. The principle is that bank
is bound by the acts, or failure to act, of its
5. liquidation – if the receiver determines that receiver. (Larrobis, Jr. v. Philippine Veterans
the institution cannot be rehabilitated or Bank)
permitted to resume busniness, the Monetary
Board shall notify in writing the BODs of its Pendency of a closure and receivership case in
findings, and direct the receiver to proceed with court does not diminish the authority of the
designated liquidator of a bank to administer
the liquidation of the institution.
and continue the bank’s transactions, to
The receiver shall then: continue receiving collectibles and receivables,
or paying off the creditor’s claims and other
a. File ex parte with the RTC, and without transactions pertaining to the normal
the requirement of prior notice, or any operations of a bank, which includes the
other action, a petition for assistance in prosecution of suits against debtors for
the liquidation of the institution collection. (Banco Filipino v. Ybanez,445 SCRA
pursuant to PDIC’s liquidation plan;
482)
b. Upon acquiring jurisdiction, RTC shall,
upon motion by the institution, assist
the enforcement of the individual
liabilities of the stockholders, directors
and officers, and decide on other issues
as may be material to implement the
liquidation plan adopted;
c. Receivers shall convert the assets of the
institution to money, dispose of the
same to the creditors and other parties
for the purpose of paying the debts of
such institution, in accordance with the
rules on concurrence and preference of
credit;
d. Receiver shall institute necessary
actions to collect and recover accounts
and assets of, or defend any action
against the institution.

Note: The assets of an institution under

receivership or liquidation shall be deemed in
custodial egis, in the hands of the receiver, and
shall, from the moment the institution was
placed under such receivership or liquidation,
be exempt from any order of garnishment, levy
attachment, or execution.

Cases:

A bank in a depressed financial condition,

reeling from tremendous losses, cannot be
legally compelled to continue paying the same