BANKING LAWS

A. THE NEW CENTRAL BANK ACT

(R.A. NO. 7653)

1. State Policies:

 BSP as the Central Monetary Authority (1987 Const.)

 Functions and operates as independent and accountable body
corporate in the discharge of its mandated responsibilities
concerning money, banking and credit;
 Enjoys fiscal and administrative autonomy.

 Busego vs. CA, 204 SCRA 473: Through the MB,

o Administer monetary, banking, and credit system;
o Power of supervision and examination over banks and
non-bank financial institutions performing quasi-banking
functions;
o Have jurisdiction over savings and loan associations.

2. Creation of the Bangko Sentral ng Pilipinas (BSP): [Sec. 2]

 BSP established as independent central monetary authority,

which shall be a body corporate
 With capital P50 Billion, to be fully subscribed by the
Government of the Republic;
 P10 billion of which shall be fully paid for by the Government
of this Act and the balance to be paid for within a period of
two (2) years from the effectivity of this Act;
3. Responsibility and Primary Objective:

 provide policy directions in the areas of money, banking, and

credit;
 shall have supervision over the operations of banks and
exercise such regulatory powers as provided in this Act and
other pertinent laws over the operations of finance companies
and non-bank financial institutions performing quasi-banking
functions (quasi-banks) and institutions performing similar
functions.

 Primary Objective:
o to maintain price stability conducive to a balanced and
sustainable growth of the economy;
o to promote and maintain monetary stability and the
convertibility of the peso.

 may compromise, condone or release, in whole or in part, any

claim of or settled liability to the Bangko Sentral, regardless
of the amount involved, under such terms and conditions as
may be prescribed by the Monetary Board to protect the
interests of the Bangko Sentral.

 Role of the BSP:

o Banker of Government;
o Representation with the International Monetary Board;
o Representation with Other Financial Institutions (e.g.,
WB, etc.)
o Fiscal Operation – shall open cash account for the
Treasurer of the Phils.

4. Monetary Board—Powers and Functions:

 Section 6. The powers and functions of the BSP be exercised

by the BSP Monetary Board,
  composed of seven (7) members appointed by the President
for a term of six (6) years:

o Governor, as Chairman;
o A Cabinet Member designated by the President;
o Five Members, from the private sector.

5. How the BSP Handles Banks in Distress:

a. CONSERVATORSHIP: BSP may appoint a Conservator when a

bank or quasi-bank:

 Is in a state of continuing inability; or

 Is unwilling to maintain a condition of liquidity deemed
adequate to protect the interest of depositors and creditors;

 The Conservator shall:

o Take charge for a period not exceeding one year the

assets, liabilities and mgt;
o Reorganize the management;
o Collect monies and debts due the bank;
o Exercise powers necessary to resore its viability;
o May overrule or revoke actions of previous management
or BOD;
o But power does not extend to post-facto repudiation of
perfected transaction (would violate non-impairment
clause). He may however revoke contracts that are
defected (First Phil. Int’l. Bank vs. CA, 252 SCRA 196).

 Termination: MB may terminate conservatorship if it is

satisfied that the institution can continue to operate on its
own and the conservator is no longer necessary.
  Otherwise, if continuance of the business would involve
probable loss to depositors or creditors, MB may pursue
receivership or liquidation.


b. RECEIVERSHIP: The MB may summarily and without need for

prior hearing forbid the institution from doing business in the
Philippines and appoint PDIC as Receiver of a bank or quasi-bank
if:

 It is unable to pay its liabilities as they become due on

ordinary course of business;
 Has insufficient realizable assets to meet its liabilities;
 Cannot continue business without involving probable loss to
depositors or creditors,
 It has violated a final cease and desist order against
fraudulent acts.

 Functions of the Receiver:

o Immediately gather and take charge of the assets and

liabilities;
o Administer the assets and liabilities for the benefit of
creditors;
o Exercise general powers of a Receiver (see FRIA, RA
10142 and AM 12-12-11-SC.
o Determine ASAP but not later than 90 days whether the
institution may be rehabilitated or to resume operation
(subject to MB approval)

c. LIQUIDATION: If the Receiver determines that the institution

cannot be rehabilitated or permitted to resume operation, the MB
shall notify its BOD and direct the receiver to proceed with the
liquidation process.
  The Receiver shall then file with the RTC a petition for
assistance in the liquidation of the institution;
 RTC shall then assist the enforcement of individual liabilities;
 Convert the assets of the institution to money, to pay to
creditors;
 Institute actions to collect or recover accounts and assets
and defend any action against the institution.

d. CLOSURE

6. How the BSP Handles Exchange Crisis:

a. Legal Tender Power: Section 52. - All notes and coins issued by
the Bangko Sentral shall be fully guaranteed by the Government of
the Republic of the Philippines and shall be legal tender in the
Philippines for all debts, both public and private:

 Provided, however, That, unless otherwise fixed by the

Monetary Board, coins shall be legal tender:

o in amounts not exceeding Fifty pesos (P50.00) for

denominations of Twenty-five centavos and above, and

o in amounts not exceeding Twenty pesos (P20.00) for

denominations of Ten centavos or less.

Section 72. Emergency Restrictions on Exchange Operations. - In

the imminence of, or during an exchange crisis, or in time of national
emergency, the Monetary Board, with the concurrence of at least
five (5) of its members and with the approval of the President of the
Philippines, may:
  temporarily suspend or restrict sales of exchange by the
Bangko Sentral, and may subject all transactions in gold and
foreign exchange to license by the Bangko Sentral, and

 may require that any foreign exchange thereafter obtained by

any person residing or entity operating in the Philippines be
delivered to the Bangko Sentral or to any bank or agent
designated by the Bangko Sentral for the purpose, at the
effective exchange rate or rates:

 Provided, however, That foreign currency deposits made under

Republic Act No. 6426 shall be exempt from these
requirements.

b. Rate of Exchange:
 B. LAWS ON SECRECY
OF BANK DEPOSITS

1. (R.A. NO. 1405, AS AMENDED, 09 Sept. 1955)

 DECLARED POLICY:

 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,
 are considered as of an absolutely confidential nature
 and may not be examined, inquired or looked into by any
person, government official, bureau or office,

 EXCEPT:

 upon written permission of the depositor, or

 in cases of impeachment, or
 upon order of a competent court in cases of bribery or
dereliction of duty of public officials, or
 in cases where the money deposited or invested is the
subject matter of the litigation.

o (Added by PD 1792, 16 Jan. 1981):

 When examination is made in the course of a special or

general examination of a bank and is specifically
authorized by the Monetary Board after being satisfied
that there is reasonable ground to believe that a bank
fraud or serious irregularity has been or is being
 committed and that it is necessary to look into the
deposit to establish such fraud or irregularity, or

 Examination is made by an independent auditor hired by
the bank to conduct its regular audit provided that the
examination is for audit purposes only and the results
thereof shall be for the exclusive use of the bank, or

 PROHIBITED ACTS (Sec. 3, as amended by PD 1792):

 It shall be unlawful to disclose any information concerning

said deposits:

 For any official or employee of a bank to disclose to

any person other than those mentioned in Section Two
hereof, any information concerning said deposits or

 For an independent auditor hired by a bank to conduct
its regular audit to disclose to any person other than a
bank director, official or employee authorized by the
bank, any information concerning said deposits.

Sanctions for Violation:

 SEC. 5. Any violation of this law will subject offender upon

conviction, to an imprisonment of not more than five years or
a fine of not more than twenty thousand pesos or both, in the
discretion of the court.

NOTE: Absence of provision on exclusionary rule on evidence

under RA 1405.
2. RA 6426 (FOREIGN CURRENCY DEPOSITS ACT:

 FCDU deposits are absolutely confidential; and
 Shall not be examined, inquired or looked into:
 by any person, government official, bureau, or office,
whether judicial or administrative;
 or legal or any entity, whether public or private;

 EXCEPT: Upon written consent of the depositor.

Hence, if the subject funds or deposits are FCDU, RA 1405 will not
apply, but RA 6426. Note that the latter has only ONE exception.

3. ANTI-MONEY LAUNDERING LAW (RA 9160):

 Sec. 11 (as amended by RA 9194). Notwithstanding the

provisions of RA 1405, RA 6426, RA 8791, and other laws,

 1. The AMLC may:

 INQUIRE into or EXAMINE any particular deposit or

investment with any banking institution or non-bank
financial institution

 upon court order in cases of violation of this Act,

 when it has been established that there is probable

cause that the deposits or investments are related to an
unlawful activity as defined in Section 3(i) hereof or a
money laundering offense under Section 4 hereof;
  EXCEPT: that no court order shall be required in cases involving
unlawful activities defined in:

 Sec. 3(i)(1) – Kidnapping for Ransom;
 Sec. 3(i)(2) – Violations of RA 6425 (now RA 9165)
 Sec. 3(i)(12) – Hijacking (RA 6235), Destructive Arson,
Murder, including those committed by terrorists
against non-combatants, Other similar acts.


 2. The BSP may

 INQUIRE into or examine any deposit or investment with
any banking institution or nonbank financial institution

 when the examination is made in the course of a

periodic or special examination,
 in accordance with the rules of examination of the
BSP."

4. RA 8791, THE GENERAL BANKING ACT:

 Sec. 55.1(b). No director, officer, employee, or agent of any

bank shall DISCLOSE:

 DISCLOSE to any unauthorized person

 without order of a court of competent jurisdiction,

 any information relative to the funds or properties in the

custody of the bank belonging to private individuals,
corporations, or any other entity:

 Provided, That with respect to bank deposits, the provisions of

existing laws shall prevail;
  Sec. 55.4. Consistent with the provisions of RA 1405, no bank
shall employ casual or nonregular personnel or too lengthy
probationary personnel in the conduct of its business involving
bank deposits.

5. RA 9372, HUMAN SECURITY ACT:

SEC. 27. Judicial Authorization Required to Examine Bank

Deposits, Accounts, and Records.

 The provisions of RA 1405, to the contrary notwithstanding,

 The justices of CA designated as a special court to handle anti-
terrorism cases,
 After satisfying themselves of the existence of probable cause in
a hearing called for that purpose that:

(1) a person charged with or suspected of the crime of

terrorism or, conspiracy to commit terrorism,

(2) of a judicially declared and outlawed terrorist

organization, association, or group of persons; and

(3) of a member of such judicially declared and outlawed

organization, association, or group of persons,

 may authorize in writing

 any police or law enforcement officer and the members of his/her
team duly authorized in writing by the anti-terrorism council to:

(a) EXAMINE, or cause the examination of, the deposits,

placements, trust accounts, assets and records in a bank
or financial institution; and
 (b) GATHER or cause the gathering of any relevant
information about such deposits, placements, trust
accounts, assets, and records from a bank or financial
institution.

The bank or financial institution concerned, shall not refuse to

allow such examination or to provide the desired information, when
so, ordered by and served with the written order of the Court of
Appeals.

6. RA 3019. ANTI GRAFT AND CORRUPT PRACTICES ACT

Section 8.

 Section 8. Dismissal due to unexplained wealth. If in

accordance with the provisions of RA 1379, a public official
has been found to have acquired during his incumbency,
whether in his name or in the name of other persons, an
amount of property and/or money manifestly out of proportion
to his salary and to his other lawful income, that fact shall be
a ground for dismissal or removal.

 Properties in the name of the spouse and unmarried children

of such public official may be taken into consideration, when
their acquisition through legitimate means cannot be
satisfactorily shown. Bank deposits shall be taken into
consideration in the enforcement of this section,
notwithstanding any provision of law to the contrary.

READ:
 Marquez vs. Gancayco, 15 SCRA 91
 Marquez vs. Desierto, 359 SCRA 772:
 C. GENERAL BANKING LAW
OF 2000 (R.A. NO. 8791)

1. Definition and Classification of Banks

2. Distinction of Banks from Quasi-Banks and Trust Entities
3. Bank Powers and Liabilities
a. Corporate Powers
b. Banking and Incidental Powers
4. Diligence Required of Banks — Relevant Jurisprudence
5. Nature of Bank Funds and Bank Deposits
6. Stipulation on Interests
7. Grant of Loans and Security Requirements
a. Ratio of Net Worth to Total Risk Assets
b. Single Borrower’s Limit
c. Restrictions on Bank Exposure to DOSRI (Directors, Officers,
Stockholders
and their Related Interests)