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Notes of

hotjurist
in foro conscientiae
GENERAL BANKING LAW OF 2000 (GBL)(RA No. 8791)
Purpose:
To promote and maintain a stable andefficient banking and financial system that is
globallycompetitive, dynamic and responsive to the demands of a developing economy (
S
ec. 2)
.
Scope of Application:
The GBL primarily governsuniversal banks and commercial banks. It suppletorilygoverns thrift
banks, rural banks and other bankinginstitutions.
GENERAL

CONCEPTS
BANKS

Entities engaged in the lending of funds obtained inthe form of deposits


(
S
ec. 2)

Entities duly authorized by the Monetary Board toengage in the business of regularly lending
fundsobtained regularly from the public through thereceipt of deposits of any kind.

An investment company that performs function assuch is NOT a bank. Thus an investment
companythat is engage solely in investing, reinvesting or trading in securities is not engage in banking.
( Banas vs. Asia Pacific Finance Corp., Oct. 18,2000).

However, an investment company which loans outmoney of its customers, collects interest, andcharges
a commission to both lender or borrower isengage in banking
(Republic vs.
S
ecurity Credit and Acceptance Corp.)

QU
ASI-BANKS

Entities engaged in the borrowing of funds throughthe issuance, endorsement or assignment


withrecourse or acceptance of deposit substitutes
(
S
ec.95)

Entities authorized to perform universal or commercial banking functions may also engage inquasi-
banking functions.
FINAN
C
IAL INTERMEDIARIES

Persons or entities whose principal functionsinclude the lending, investing or placement of fundson
evidences of indebtedness or equity depositedwith them, acquired by them or otherwise
coursedthrough them, either for their own account or for theaccount of others.
ORGANIZATION

AND
OPERATION
A. Authority to Register/Incorporate

The SEC shall not register the articles of incorporation of any bank or any amendmentthereto unless
accompanied by a certificate of authority issued by the Monetary Board under itsseal
(
S
ec. 14).

The certificate of authority shall not be issuedunless the Monetary Board is satisfied:
1
. That all requirements of existing laws andregulations to engage in the business for whichthe applicant
is proposed to be incorporatedhave been complied with;2. That the public interest and
economicconditions, both general and local, justify theauthorization; and3. That the amount of the
capital, the financing,organization, direction and administration, aswell as the integrity and
responsibility of theorganizers and administrators, reasonablyassure the safety of deposits and the
publicinterest
(
S
ec. 14).

Organization of a Bank or
Q
uasi-BankRequirements:
1
. The entity is a stock corporation;2. Its funds are obtained from the public,i.e. 20 or more persons;
and3. The minimum capital requirements prescribedby the Monetary Board are satisfied

(
S
ec. 8).

Note:
In Quasi banks,
Deposit substitute arealternative forms of obtaining funds for thepublic, other than deposit, through
theissuance, endorsement, or acceptance of debtinstrument for the borrowers own account, for the
purpose of relending or purchasing of receivables and other obligations.in banking or quasi-banking
functions

A person or entity cannot engage in banking or quasi-banking functions without a certificate


of authority from the BSP
(
S
ec. 6).

The determination of whether a person or entity isperforming banking or quasi-banking


functionswithout BSP authority shall be decided by theMonetary Board.
NATURE

OF

BANKING

BUSINESS

Impressed with public interest where the trust andconfidence of the public in general is of
paramountimportance such that:
1
. The appropriate standard of diligence must bevery high, if not the highest, degree of diligence;
h
ig
h
est degree of care

(PCI Bank vs.CA, 350


S
CRA 446, PBCom vs. CA, G.R. No.121413, 29 Jan. 2001)

This applies only to cases where banksare acting in their fiduciary capacity, thatis, as depository of the
deposits of their depositors
(Reyes vs. CA, G.R. No.118492, 15 Aug. 2001)
.2. Subject to reasonable regulation under thepolice power of the state.

While an innocent mortgagee is not expected toconduct an exhaustive investigation on the historyof the
mortgagor¶s title, in case of a banking

Notes of
hotjurist
in foro conscientiae
institution, it must exercise due diligence beforeentering into said contract, and cannot rely upon
onwhat is or is not annotated on the title.
Reason:
Before a loan is approved, representatives are sentto the premises offered as collaterals so as
toinvestigate who the real owners are
(DBP vs. CA,331
S
CRA 267).

The business of a bank is one affected by publicinterest for which reason the bank should guardagainst
loss due to negligence and bad faith. It isexpected to ascertain and verify the identities of thepersons it
transacts business with
(UCPB vs.Ramos, G.R. No. 147800, November 11, 2003,Callejo, J.).

Due diligence required of banks extend even topersons, or institutions like the GSIS, regularlyengaged
in the business of lending money securedby real estate mortgages
(G
S
I
S
vs. Eduardo
S
antiago, G.R. No. 155206. October 28, 2003).
C
ONSEQUENCES OF NATURE OF BUSINESS
:
1
. It is subject to heavy and close supervision and/or regulation by the BSP (
Central Bank of t
h
eP
h
ils. v.CA, 208
S
CRA 652
)
.
1
. It is required to exercise utmost diligence in thehandling of deposits (
S
imex International ManilaInc., 183
S
CRA 361
)
.2. Special rules on strikes and lockouts: any strike or lockout involving banks, if unsettled after
7calendar days shall be reported by the BSP to theSec. of Labor who has 2 options:a. He may assume
jurisdiction over and decidethe dispute; or b. certify it to the NLRC for compulsoryarbitrationThe
President may also intervene at any time andassume jurisdiction over such labor dispute in order
tosettle or terminate the same.
CLASSIFICATION

OF

BANKS

(S
EC
.

3)
1
.
U
niversal banks
- Primarily governed by theGeneral Banking Law (GBL
)
, can exercise thepowers of an investment house and invest in non-allied enterprises and have the
highestcapitalization requirement.2.
C
ommercial banks
- Ordinary banks governed bythe GBL which have a lower capitalizationrequirement than universal
banks and can neither exercise the powers of an investment house nor invest in non-allied enterprises.3.
Thrift banks ±
These are a
)
Savings and mortgagebanks; b
)
Stock savings and loan associations; c
)
Private development banks, which are primarilygoverned by the Thrift Banks Act
(R.A. 7906).
4.
Rural banks
± Mandated to make needed creditavailable and readily accessible in the rural areason reasonable
terms and which are primarilygoverned by the Rural Banks Act of
199
2
(RA7353).
5.
C
ooperative banks
± Those banks organizedwhose majority shares are owned and controlled bycooperatives primarily to
provide financial andcredit services to cooperatives. It shall includecooperative rural banks. They are
governedprimarily by the Cooperative Code
(RA 6938).

6
.
Islamic banks ±
Banks whose business dealingsand activities are subject to the basic principles andrulings of Islamic
Shari¶ a, such as the Al AmanahIslamic Investment Bank of the Philippines whichwas created by
RA 6848.

7.
Other classification of banks
as determined bythe Monetary Board of the Bangko Sentral ngPilipinas.
ORDINARY
C
ORPORATIONBANKING
C
ORPORATION
May be a stock or non-stockcorporationMust generally be astock corporationMay issue
par valueor no par valuestocks.Shall issue par valuestocks only
(
S
ec. 9).
May be registeredwith the SECwithout anycertificate of authority issued bya
governmentagency.Must secure acertificate of authorityfrom the MonetaryBoard before it
canregister with SEC.Maypurchase/acquireits own shares for alegitimate corporatepurpose;
providedthat, it hasunrestrictedretained earnings inits books to cover the shares to
bepurchased/acquired.May not purchase/acquire its shares or accept them assecurity for a
loan.
Except
: whenauthorized by theMonetary Board. Insuch case, the bankmust sell or disposeof said
shares within
6
months from thetime of their acquisition
(
S
ec. 10).
Must be composedof 5 to
1
5 directors,each of whom shallown at least one (
1)
share of the capitalstock of thecorporation. Also composed of 5to
1
5 directors. Incase of merger or consolidation, thenumber of directorsshall not exceed 2
1
(
S
ec. 17).
May declaredividends out of itsunrestrictedretained earnings.May not declaredividends, if
any of the conditions setforth under Sec. 57are present.