Special Commercial Law: New Central Bank Act

Special Commercial Law 2016
New Central Bank Act

RA 7653: Establishment and Organization of the Bangko Senral ng Pilipinas
Salient Provisions of RA 7653 – BSP Charter

1. Capitalization of BSP
2. The Monetary Board and Powers
3. The Governor and Powers
4. The Deputy Governors and Powers
5. The Regulation of banks
6. The granting of loans to banks
7. The Liabilities of Banks
a. To the public
b. To the BSP
c. To PDIC
General Provisions
1. Capitalization – 50 Billion Pesos
2. The Monetary Board functions
3. The Composition of MB
a. Article 2 – 7 Members; 5 members must come from the private sector with a term
of 6 years
4. Powers of the Monetary Board – Section 15
a. To issue rules and regulations which must be reported to the president of the
Philippines and Congress within 15 days from promulgation
b. Direct the management and operations of BSP with legal units under the direct
supervision and regulation of the monetary board
 Price Stability – control of inflation
 Monetary Policy – availability of peso
 Monetary Stability – convertibility of the peso value in the international market so that
current payment abroad are assured
 Exercise sole supervision of all banks: DBP v. COA, GR No. 88435, January 16, 2012,
373 SCRA 356
 DBP v. COA, GR No. 88435, January 16, 2012, 373 SCRA 356
o Raises the issue of supremacy of the BSP circular for compliance by all banks I
the Philippines over the prohibitions of COA. This case involves the collision of 2
Constitutional provisions for the BSP as the Central Monetary authority of the
country tasked with supervision over all banks and the COA mandate as the
Constitutional Commission in Art. IX, Sec. 1 and 2 whereby the Commission on
Audit is the mandated constitutional bodu tasked with exclusive jurisdiction to
*define the scope of the audit and examination of all accounts pertaining to the
revenue receipts of and the argument that only COA is the external auditor of the
government. COA is not the internal auditor of DBP. When the matter was not
settled, DBP eventually appealed to the SC and filed the petition prohibiting COA
from disengaging the services of the private external auditing firm.
o RULING OF THE SC: The Constitution in Art. 12, Section 20 mandates authority
that Congress shall have exclusive jurisdiction to provide policy direction in the
areas of money, banking and credit. It shall also have supervision over the
operations of banks an exercise regulatory function. The Constitution also
designated the Central Bank to perform the function as the central monetary
authority. Accordingly, the Central Bank Act in RA 7653 was passed by Congress
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in 1994 which created the Bangko Sentral ng Pilipinas duly authorized to
exercise the powers granted by the Constitution in favor of the central monetary
authority now the BSP. Thus, DBP has no choice but to comply with the BSP
Circular.
o What provision of the law was relied upon by the SC in upholding the BSP
Circular paramount than that of COA for DBP to comply?
o Ans. : Section 15 of the BSP Charter (RA7653) provides that the Monetary Board
shall issue rules and regulations it considers necessary for the effective
discharge of the responsibilities and exercise of the powers vested upon the
Monetary Board and the BSP
o Note that the Governor of the BSP in Art. III, Section 15 of the Charter has also
the power to render opinions, decisions and rulings which are final and executor
until reversed or modified by the Monetary Board on matters regarding the
application or enforcement of laws pertaining to institutions supervised by BSP
and law pertaining to quasi-banks as well as regulations, policies or instructions
issued by the Monetary Board and its implementation.
Bangko Sentral Charter

Powers of the Monetary Board
Section 15 (E)
 Indemnify the members and other officials of BSP including personnel of the
departments performing supervision and examination functions against all costs and
expenses including law suits reasonably incurred while doing official functions;
 Any settlements shall be subject to external counsel’s advice
The Governor shall be the Chief Executive of the BSP with the following duties:
1. Prepare agenda of MB meeting
2. Execute and administer the policies and measures of the MB
3. Direct and supervise the operations and internal administration BSP
4. Render opinions, decisions and rulings of the BSP which are final an executor until
reversed or modified by the Monetary Board
5. Exercise such other functions vested on him by the MB
6. Represent the MB and the BSP either personally or thru counsel including private
counsel (Section 18 (C))
7. Authority in case of emergencies – Empowered to decide on any matter provided with
the concurrence of 2 members of the MB
8. To submit his report to the President of the Philippines and Congress within 72 hrs after
the actions has been taken (Section 19)
The Deputy Governor

 They shall be appointed by the governor with the approval of the Monetary Board
Deputy Governors not less than 3
 They shall perform duties assigned by the Governor (Section 21)
The Governor/Deputy Governor Powers:
1. Authority to obtain data or information
2. The Governor or in his absence a duly authorized representative has the power to issue
a subpoena for the production of books and records and to punish for contempt in case
of failure to comply with the subpoena (Art. 4, Section 23)
3. No TRO or injunction shall be issued against BSP from examining banking institutions
subject to supervision and examination of BSP
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XPN:
 Proof of action of BSP is arbitrary and in bad faith
 A bond is posted in favor of BSP approved by court
Sec. 35
 Wilful making of false statement or misleading information on a material fcat made to the
MB or to the examiners of BSP
 Subject to fine of 100,000 Pesos up to 200,000 by imprisonment of not more than 5
years or both at the discretion of the court
Sec. 36
 Whenever a bank or quasi bank or whoever any person or entity wilfully violates this act
or other pertinent baking laws being enforced or implemented by BSP or any order,
instruction, rule or regulation issued by the Monetary Board, such person or persons
shall be punished by imprisonment of not less than 2 years or more than 10 years, or
both at the discretion of the court
Sec. 37 Administrative Sanctions on Banks and Quasi Banks:
 Wilful refusal to comply with BSP directive issued by Monetary Board and the Governor
of BSP shall be punished with fine of 30,000 per day each violation
 Suspension of rediscounting facilities or access to BSP credit facilities
 Suspension of interbank clearing operations
 Suspension from bank for 120 days
 Resignation or termination from office shall not exempt such director or officer of the
bank from administrative and criminal sanctions
Article IV. Loans to Banking and Other Financial Institutions thru the DLC
Section 1 Guiding Principle
 The rediscounts, discounts, loans, and advances which the Bangko Sentral is authorized
to extend to banking institutions under this Act shall be used to influence the volume of
credit consistent with the objective of price stability
Normal Credit Operations

Section 82 Authorized Types of Operations:
 Commercial Credits – rediscounting, discount or buy or sell bills, acceptances,
promissory notes or other credit instruments with a maturity of 180 days from date of
their rediscount, discount or acquisitions resulting from such sale for transactions
relating to:
o Related to importation or exportation of readily available goods and products
within the Philippines
o The storing of non-perishable goods and products which are duly insured and
stored conditions that the Monetary Board may impose
o Production credits – not more than 360 days from date or rediscount, discounts,
or sale
o REM – 70% of appraised value of which equals or exceeds the amount of loan
granted
 Other Credits
o These are special credit instruments not otherwise rediscountable under
Commercial Credits and Production Credits which BSP may consider as non-
inflationary
 Advances – within 180 days
o Gold Coins or Bullions
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 Securities representing obligations of BSP or other solvent banks
 Credit instrument above
 Utilized portions of advances in current amounts covered by regular overdraft
agreements and certified as to amount of liquidity by borrowing bank
 Negotiable bonds issued by Philippines government with maturities of 10 years from the
date of advance
 Amount of Loan secured by above is 80% of current market value of collateral
 Special Credit Operations
o Section 83 Loans for liquidity purposes – may be granted for a period of 7 days
only without any collateral
 Emergency credit Operation
o Section 74 Emergency Loans and advances may be granted in period of national
and/or local emergency or of imminent panic directly threatening monetary and
banking stability by a vote of 5 members of Monetary Board
o Provided no expansion of loans is made by borrowing bank without MB approval
o Even during normal periods, emergency advances ay be granted to a bank under
precarious financial condition or under serious financial pressures due to
unforeseen could not be prevented by the borrowing banks subject to
 That the bank is not insolvent as found by Monetary Board
 With assets to secure such advances
 Vote of 5 members of the Monetary Board
 Amount of loan shall be released in 2 or any many tranches
 Amount of loan shall not exceed 25% of the total deposits and deposit
substitutes
 Amount of first tranche not to exceed 25% if clean
 Amount of loan be released can exceed 25% if collateralized
 Collateral are
o Government securities
o Unencumbered first class collaterals approved by monetary board
o Principal owners execute a deed of indemnity in favor of BSP, conservator or any
person appointed by MB
o There is a board resolution of the borrowing bank authorizing the BSP to
evaluate the assets of the bank certified by external auditor to be good and
available for collateral purposes
 Subsequent releases of emergency advance shall be subject to:

o Acceptable undertaking to indemnify the BSP and hold it free and harmless
o Provide acceptable security which in the judgment of Monetary Board is
adequate to supplement the assets tendered by the borrowing bank to
collateralize subsequent tranche
 BSP to dispose of the collaterals acquired from foreclosure within 1 year from date of
title consolidation in BSP name
 Any overdraft shall also be eliminated within 5 consecutive baking days until such
overdraft is fully converted into emergency loan or advance
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 Interest and other charges on loans of banks – the BSP shall collect all interest and
other charges, notwithstanding that the borrowing bank is into suspension closure,
receivership, or liquidation
 The Monetary Board shall fix the interest rate on the credit operations of BSP
Powers of the Monetary Board over a Bank

 If in a state of inability to maintain a continuing liquidity or unwillingness to maintain
liquidity deemed adequate to protect the interest of depositors and public – to appoint a
conservator who is any person experienced in banking to act within 12 months over the
bank ( Sec. 29 )
General Banking Act

 RA 8791 or the Erap Bank Act
 The General Banking Law was amended on April 12, 2000
 Radical amendment of the General Banking Act of 1949 as follows:
o Declaration of Policy on fiduciary nature of banking which requires high
standards of integrity and performance
o Role of State to promote a stable and efficient banking and financial system that
is globally competitive responsive
Classification of Banks:
Under the General Banking Act:
1. Universal Bank
2. Commercial Bank
3. Thrift Bank
4. Rural Bank
5. Cooperative Bank
6. Islamic Bank
7. Other Classification of Banks as determined by the Monetary Board
 Section 3 Supervision of banks shall be made by the Bangko Sentral

 Regular Examination of Banks to be done once a year to determine:
o If bank is conducting business in safe and sound anner
o To inquire on solvency and liquidity of the institution
o To enforce prompt corrective action
o Provides definition of quasi banks
 Refers to entities engaged in borrowing of funds, endorsement or
assignment thru issuance of deposit substitutes as defined in Section 95
of RA 7653 (PN’s, participations, certificates of assignment with or without
recourse etc)
 Total amount of loans to be granted by a bank is up to 20% of the net worth of the bank
 XPN: Additional 10% if the loan is collateralized by trust receipts, shipping documents,
warehouse receipts or any document transferring ownership to readily marketable or
perishable securities of insurance
 Restriction of loans to DOSRIs – arms length
 Loans to real estate – not to exceed 75% of the appraised value of the improvement
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 Loans secured by chattel mortgage – not to exceed 75% of the appraised value of
chattel
 Bank Loans shall state a purpose (Section 39)
 It should be consistent with safe and sound banking practice
 Bank must ascertain that the borrower has financial capacity from statement of assets
and liabilities, financial statements for tax purposes
 Maturities of Loans:
o For loans more than 5 years – must contain periodic amortization schedule with
payment annually except for businesses that do not produce immediate results,
periodic amortization may be deferred but not exceeding 5 years from date of
loan granting
o For loans to micro finance, amortization payments depend on projected cash flow
for the bank
 Universal Bank
a. Commercial bank
b. Investment house
c. With power to invest in non-allied enterprises
d. To own up to 100% of the equity of thrift banks, rural banks, financial allied
enterprises or financial non-allied institutions
e. In case of publicly listed Universal Banks; to own up to 100% of the voting stock
When a bank is deemed unfit:

Capital
Asset
Management
Enterprise
Liabilities
Superiority of Service
 Commercial Banks (KB)

 Accepting drafts and issuing letters of credits
 Check and PN negotiating
 Buying or selling gold or silver bullion
 Extending credit
 Rent out safety deposit boxes
 Ex. Bank of Commerce
 Thrift Bank – savings and time deposit – RA 7906

a. With power to grant loans – secured or clean
b. Invest in readily marketable bonds and other debt securities, CP’s, drafts, bill of
exchange
c. Issue domestic and foreign L/C
d. Extend credit to private and government employees
e. Extend credit secured by jewelry
f. Accept savings and time deposit local or forex
g. Open current or checking accounts
Differences between UB and KB
 UB – allowed to invest in non-allied enterprise without prior MB approval
 KB – allowed to invest only in allied enterprise
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- May invest in non-allied enterprise but with prior MB approval and with a limit of
ownership ( 2015 Bar )
 Rural Bank – RA 7353

- Rural Bank Act of 1994 organized to:
a. promote comprehensive rural development with the objective of attaining equitable
distribution of opportunities, income and wealth
b. Rural Banking system – to provide ready loans to farmers and fisher folks, credit
cooperatives and small merchants
 Cooperative Bank – Act 6938 Cooperative Code of the Philippines

a. Organized by members of coops
b. Aims to provide banking and credit services for the coops
c. Receives aid from BSP and national government
d. BSP has adopted means for coop banks to be strongly capitalized by allowing
mergers with rural and thrift banks
e. How this is achieved is thru grant of branch licenses and policy exemption:
i. Under Circular No. 728, a bank applying for a BRANCH LICENSING in
restricted areas shall be a licensing fee of 20M for KB or 15M for TB.
THIS WILL BE WAIVED;
ii. Waive rule versus director and officer interlock for both banks merging
 Islamic Bank – RA 6848

Al-Amanah Islamic Investment Bank of the Philippines
a. Principal place of business – Zamboanga
b. Organized to promote and accelerate socio-economic development of ARMM
c. Cannot perform functions prohibited by Islamic Sharia Principles
 Other Types of Banks
a. Philippine Veterans Bank – RA 3518 owned by veterans and aimed to assist
veterans and widows and orphans; capital of Php 100 Million by the government
- Organized as a private commercial bank owned by vets but acts as a government
depositary
b. Land Bank of the Philippines – RA 3844 Agricultural Land Reform Code
- Organized to finance acquisition and distribution of agri estates for division and
resale to small landholders and agricultural lessees;
c. Development Bank of the Philippines – Rehabilitation Finance Corp of 1947
tasked to undertake the rehab of the country ( RA 85 ) with DBP name, assumes
broader activities
d. Non Stock Savings and Loan Associations – RA 8367
- Organized as non stock and non-profit corporation engaged in the business of
getting savings of members and relending to the members for:
i. Home building and development
ii. For personal finance
- Association exist for the members alone and not allowed to transact with the public
- Ex. 1. Armed forces of the Philippines of the Philippine RSBS – active; AFP AMSLAI
(Military, Air Force, Navy and Other Military Personnel mostly for retired
e. Quasi-Banks – entities engaged thru borrowing of banks by the means of
acceptance with recourse and negotiation of deposit substitutes for relending.
Deposit substitutes refer to deposits other than money obtained from the public
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like bankers acceptances, commercial papers, repurchase agreements (REPO’s
) etc
f. Off-Shore Banks (OBU’s) PD 1034
- Offshore banking system of the Philippines
- Licensed as a branch of a foreign bank
- Allowed to operate provided funds are from resident foreign clients, and foreign
banks
- Must be licensed by BSP at fee of US$ 20, 000 and a net minimum capital account
of US$ 1 Million
- Finances loans for residents provided funds are coming from OFFSHORE
REMITTANCES
Examples: JP Morgan Stanley Finance LTD
BNP Paribas and
Taiwan Cooperative Bank
g. Foreign Banks allowed to do business (Section 72 GBL) shall be governed by
rules on RA 7721 or Foreign Banks Liberalization Act
- Allows foreign banks:
1. Subsidiary ( SEC REGD)
2. As a branch of a foreign bank
- Philippine citizens enjoy preference of credits for assets situated in the Philippines
- Must have head office guaranty
- 16 banks are branches: ANZ Bank; ING Bank; HSBC; Citibank; Deutsche; Stanchart;
Bank of America; Taiwan Bank; Bank of China; Sumitomo Bank; Korea
- As subsidiary – (2) Maybank Phil and CTBC – Phil
GBL 2000 – Organization of Banks

 Number of Directors – 5-15; 2 must be independent directors
 Citizenship: majority are Filipino citizens
 Foreigners: allowed sit as representative of foreign equity owner
 Independent Director – except officer, director or employee of a bank during the past 3
years counted from election
 Permanent disqualification of directors
 No conviction for dishonesty or breach of trust like estafa; bouncing check law; forgery
etc
 No conviction for crime sentence of > 5years imprisonment
 Not administratively found by MB to violate banking laws and circulars
 Permanent Disqualification:
a. Former directors of closed banks;
b. Found guilty of violation of laws by another agency of the government
 Temporary Disqualification (BSP MOR)
a. Refusal to disclose business interest
b. Delinquent in payment of loans etc
c. Absent from meetings of bank >50%
d. Persons with derogatory records from PNP, other government agencies
 Officers Disqualification: Fit and Proper rules like in Board of Directors
 Stockholders and related interest; relevant for determination of whether they will be
entitled to obtain loans and other benefits from the bank
 5 stockholders owning more than 10% equity of bank or can elect 1 Board seat
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 Related Interests – persons related to each other within the 4th degree of consanguinity
or affinity, legitimate or illegitimate or 2 or more corporations related or controlled by a
single person or by the same family group or persons
 Bank Premises
 Banking hours and days- open on working days for at least 6 hours;
 Saturdays or Sundays – only for 3 hours
 If on any day other than working days – must report to BSP additional days that will be
open
 Working days mean Monday to Friday except if such day is a holiday
 Right of Employees
 Bank employees may strike or lockout but if unsettled after 7 calendar days the BSP
shall report to the Secretary of Labor, who will assume jurisdiction or dismiss or refer to
NLRC for compulsory arbitration
 President of the Philippines can intervene at any time and assume jurisdiction to settle or
terminate the dispute
 What about TB’s, Rural Banks, SLA/S, Islamic Bank and other Chartered Banks? – Their
operations shall be as per their enabling laws or charters provided not inconsistent with
GBL
 Minimum ratios for net worth of each bank versus total risk assets must comply with GBL
prescribed ratios
GBL 2000 Investments

 Banks may invest in allied and non-allied activities
 Allied – refers to either financial or non-financial but refer to banking activities
 Non-allied – refers to business activities not related to banking business
 UB’s allowed to invest 100% to equity of allied financial institutions and 30% to non-
allied enterprises
 Examples of Financial Allied Businesses
o Banks, leasing companies, investment house, stock brokerage, securities,
dealership, credit card, forex, insurance and holding companies upon approval
by MB
 Financial Non-allied: storage companies, safe deposit, warehousing, home building and
home development, computer services, service bureaus to assist banks, PCHC, others
as approved by MB
GBL 2000 – Ratios
 UB’S – Total equity investment in both allied and non-allied activities <50% of the bank’s
net worth; but only 25% of bank’s net worth if only one single enterprise
o UB’S – must not exceed 35% of the total equity in that business nor shall it
exceed 35% of the total voting stock in that business
o Net worth: Total of unimpaired paid-in capital plus paid-in surplus, undivided
profit, net of valuation reserves and other adjustments as may be required by
BSP
 Commercial banks - cannot invest in non-allied enterprise
o Can invest only in allied – total investment not >35% of net worth of KB; but in
one single enterprise up to 25% of the net worth of the bank
o May own 100% of a Thrift Bank or Rural Bank or even in a non-financial allied
enterprise;
GBL 2000 Deposit Functions
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 Kinds:
o Demand – liabilities of BSP and banks for funds deposited by clients
denominated in Philippine currency and subject of withdrawal upon presentation
of depositor’s check
o Philippine Bank of Commerce v. CA GR No. 97626, March 14, 1997 – Manner of
making and withdrawing deposit
 Temporary overdrawing of checks drawn against uncollected deposits (DAUD) – not
allowed except if drawings are made against uncollected check issued to the depositor
like MC’s, on US Checks, treasury checks, cashier’s checks or postal money order still
for clearing
 Duties of Banks:
o To honor the checks and pay if account is funded
o To know the signature of the drawer of the check – San Carlos Milling v. BPI, 59
PHIL, Dec. 11, 1933
o No duty to make partial payment on the check if account is partially funded
o No duty to make deficiency from other accounts – Moran v. CA GR No. 195836,
March 7, 1994
o Cross check means that the check needs to be deposited but may be negotiated
only once to the one who has an account in the bank and a warning that the
check is for an intended purpose (State Investment v. IAC, GR No. 72762, July
13, 1989
 Rights of Set-off – right of the bank to debit personal account of the depositor for the
amount credited to the other account of the depositor solely. BPI v. CA, GR No. 136202,
January 25, 2007
 Legal relationship of payee of check and accepting bank for collection: Principal – Agent
where the banks acts as an agent to collect the proceeds of the check
 Rule on encashment of checks:
o The drawee bank relies on the duty of the bank where the check was deposited
to verify the authenticity of the payee and the right to hold the check for
encashment
o If check is encashed by a third party other than the payee, the presenting bank is
guilty of negligence and must reimburse to the drawee bank the proceed of the
check negligently paid to unauthorized party
 Saving Deposit
o Opening: Individual or joint account
o Joint account – owned by two or more persons and specified as either “and” or
“and/or” or just “or”
o Designation is used for authority to withdraw
 Time Deposit – issued for a specific period of term
 Special Time deposit – available to banks participating in specialized program like the
agrarian reform fund commission upon approval of MB
 Certificates of Time Deposit – consisting of negotiable CTD for UB’s And KB’s without
need of prior MB approval but for TB’s and RB’s need prior approval
 Non-negotiable CTD – tax exempt – all banks allowed to issue without prior MB approval
 Quasi-banking function involves borrowing from 20 or more lenders for the purpose of
relending or purchasing receivables or other obligations
 Method of borrowing is issuance or acceptance of debt instruments other than deposits
such as acceptances, PN, CP, trust certificates, repurchase agreements as may be
allowed by MB
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Foreign Currency Deposits
 RA 6426 Foreign Currency Deposit Act
 Numbered accounts allowed provided there is means of identifying clients
 Anonymous or fictitious accounts not allowed (RPC 178 Use of Fictitious Name to
Conceal True Identity – Aresto Mayor and/or fine of; Concealment of Name – Aresto
Menor and/or fine
Bank Deposits – Other Laws
 Art. 1980 Fixed savings and current deposits of money in banks and similar institutions
shall be governed by simple loan.
Legal Nature of Bank Deposits
 Nature of bank deposits:
o Under jurisprudence, deposits are in the nature of irregular deposits. They are
simple loans because they earn interests. (Serrano v. Central Bank of the
Philippines, 96 SCRA 102)
Legal Relationship of Depositor and Bank
 Art. 1978 NCC When the depositary has permission to use the thing deposited, the
contract is not a deposit by a commodatum
Kinds of Bank Deposits
 Fixed
 Savings
 Current or Demand deposits
 All are demandable on stated maturities

 Savings – upon withdrawal
 Current – upon check encashment/presentment
 Fixed – time deposits
What happens upon the death of depositor?
 If the bank has knowledge of death of depositor, or jointly with another, bank must not
allow to withdraw unless the BIR Commissioner certifies death taxes are paid if deposit
is in excess of 20,000 (Sec. 97, NIRC)
 Duties of Banks
-observe meticulous care (BPI v. Casa Montessori Internationale, GR NO. 149454 May 28,
2004)
-cannot pay to wrongful party (BPI v. CA, GR No. 1046112, May 10, 1994)
 Secrecy of Bank Deposits

Nature of Bank Deposits: SECRET
-why?
-under the Bill of Rights on Right to Privacy
-Art. III, Sec. 3 Right to Privacy of Communication and Correspondence
-Under the Civil Code, Chapter 2 Human Relations, Art. 26 – Every person shall respect the
dignity, personality, privacy, peace of mind of his neighbours and other persons
RA 1405 – Peso Deposits

-NOT absolutely secret
RA 6426 – Foreign Currency Deposit Act of the Philippines
-ABSOLUTELY secret
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 Bank Secrecy Laws
-General Banking Act of 2000 RA 8791
-Sec 55 – without order of court with competent jurisdiction, bank officers are prohibited to
disclose any information relative to funds or properties in the custody of the bank belonging to
private individuals, corporations or other entities. Provided, that with respect to bank deposits,
provisions of existing to apply
 Republic Act 1405

-passed on September 9, 1955
Purpose of the Law
-to give encouragement to people to save their money in banks
-to discourage private hoarding
-so funds can be utilized by banks to give loans to assist the economic development of the
country
 Nature of Bank Secrecy under RA 1405

-all deposits of whatever nature, with banks including investments in bonds issued by the
government and its agencies are absolutely confidential and may not be examined by any
person, government official bureau or office except upon:
1. Written permission of the depositor
2. In cases of impeachment;
3. Or upon order of a competent court in cases of bribery, dereliction of duty of public officials,
or where money deposited is the subject matter of the litigation
 Foreign Currency Deposit Law RA 6426

-all FCDU are ABSOLUTELY confidential and shall not be disclosed without written permission
of the depositor;
-exempt from garnishment or attachment by court
 Decisions of the Supreme Court

Mellon Bank v. Magsino, GR No. L-61011, October 18, 1980
China Bank v. Ortega, GR No. L-34964, January 31, 1973
Is bank secrecy available to foreigners?
Salvacion v. Central Bank, GR No. 94723, August 21, 1997 – RAPE
Estrada v. Desierto, GR No. 156160, December 9, 2004 (FCDU)
PNB v. Gancayco, 15 SCRA 91
Marquez v. Desierto GR No. 135882, June 27, 2001 – in camera examination (current account)
 Waiver of Bank Secrecy

-is this waivable?
-Art. 6. Rights may be waived, unless the waiver is contrary to law, public order, public policy,
morals, or good customs, or prejudicial to a third person with a right recognized by law
-Sec. 26, RA 7653, NCB ART.
-all bank directors and officers are mandated to waive bank secrecy in favor of BSP (DOSRI)
Problem Solving
-A and B are joint depositors of Bank X for 1 Million Pesos and $100,000 US dollars
-A and B are Filipinos
-A dies while B survives
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-BIR asks bank to submit list of deposits of A. You are the bank’s lawyer, what will you advise
your client?
What about CURRENT ACCOUNT?

-current account or checking account
-is this covered by bank secrecy?
-Nature of current account under Philippine Laws
-bank is not a debtor because funds are withdrawable anytime. How? By checks
-bank is a mere agent of the current account holder. Mere pass thru
-BPI Family Bank v. Franco, GR No. 123498, November 12, 2007 – No right of a bank to
freeze a current account
Problem Solving
-man and woman are married
-wife discovers husband having another woman and also beats her
-wife files for annulment of marriage for psychological incapacity
-husband has bank deposit with bank X
- wife asks annulment court to issue garnishment on husband’s bank account consisting of
pesos and fcdu deposits
-is the action tenable?
 Money Market Transactions

-are transactions with treasury department of banks covered by bank secrecy?
Guingona v. City Fiscal Manila, GR No. L-60033, April 4, 1984
Trust Accounts
-covered by bank secrecy
-they may be garnished
 Nature of Trust Account

Funds in Islamic Bank of the Philippines
-covered by the bank secrecy law
 Extenuating Circumstance when bank cannot be liable for breach

RCBC v. De Castro 168 SCRA 49 (1988)
-when a bank is not guilty of dereliction of duty or breach of trust to its depositor, it cannot be
liable to depositor if bank released money to a garnishing sheriff
Insurance Corporation
Onate v. Abrogar 241 SCRA 659 (1995)
-Examination of bank account where the money came from proceeds of sale of treasury bills by
an insurance company is prohibited if the subject matter of the action is not the bank deposit
account but the failure of the seller of the treasury bills to deliver the treasury bills.
 Additional Points on Bank Secrecy Laws

-Trust Funds are covered by “deposits” under the bank secrecy act whether in peso currency or
foreign currency.
-why? Money invested is a trust account hence not to remain in the bank but to be invested
elsewhere. Must enjoy protection to avoid private hoarding of funds
Ejercito v. Sandiganbayan, 509 SCRA 590, GR NO. 57294-95, November 30, 2006
13
Are bank issued trust receipts/letters of credits/bank drafts/promissory notes covered by bank
secrecy?
-Issues: DOJ Opinions No. 5, Series of 11982; No. 126 Series of 1989 – No. They are
documents
-General Banking Act of 200 – RA 8791, Section 55 – YES - without order of court with
competent jurisdiction, bank officers are prohibited to disclose any information relative to funds
or properties in the custody of the bank belonging to private individuals, corporations or other
entities. Provided, that with respect to bank deposits, provisions of existing to apply
What entities are allowed to examine bank deposits without written consent of depositor?
1. Impeachment court (Senate of the Phil.)
2. Ombudsman subject to the conditions of law
3. Sandiganbayan or any court in anti-graft cases, bribery or dereliction of duty
4. Bureau of Internal Revenue Commissioner only in the following cases:
a. Bank decedent’s estate for the purpose of determining amount of estate
b. To comply with request from foreign tax authority on information where Philippine
government is a party to a treaty or to an international convention; and
c. Upon compromise settlement with taxpayer
Entities allowed to lift bank secrecy

1. PDIC and BSP – if found to be engaged in unsafe and unsound banking practice
(Section, RA 3591 as amended
- RA 3591 – PDIC law Section 8, PDIC in coordination with BSP may into
or examine bank deposits or related information in case of finding of
unsafe and unsound practices of the bank notwithstanding RA 1405,
6426 and 8791
2. Ombudsman – in case of unexplained wealth under Sec. 8 of Anti-graft and corrupt
practices Act (RA 3019) Provided, there is a pending case filed in court where the bank
account is subject of the case, bank account is identified and the bank personnel and
account holder is duly notified to be present. If there is no pending case filed as yet, the
Ombudsman’s examination of bank account while in the course of his investigation is not
allowed for being premature.
Marquez v. Desierto, Ombudsman v. Ibay 364 CRA 281
3. The Anti-Money Laundering Council – without court order when deposit is related to:
a. Hi-jacking
b. Kidnapping
c. Murder
d. Arson
e. Dangerous Drugs Act offenses
f. Terrorist acts or violation of human security act
Bank Secrecy Jurisprudence

Van Twest v. CA, 230 SCRA 42 (1994) – Joint FCDU account withdrawn by co-depositor and
transferred to her personal fcdu account. Can aggrieved depositor run after the personal
account of co-depositor? – Bank secrecy law was invoked. Note: Same Parties
China Bank v. CA 511 SCRA 110 – A father sued daughter for illegal withdrawal of funds in his
fcdu account. Daughter 1 transferred the funds to daughter 2. Can the father open the account
of daughter 2? NB. Not same.
14
Unionbank v. CA 321 SCRA 563 (1999) – A collecting bank which sued a drawee bank (Allied
Bank) to recover a deficiency from the amount it obtained from the drawee bank due to
unrecoding of amount of check (1000 to 1M) is not allowed to examine the bank account of the
drawer of the check since money in the account of depositor is not the subject matter of the
case.
Mellon Bank v. Magsino – In an action filed by the bank transmitted by mistake, necessarily an
inquiry into the whereabout of the funds extends to whatever is concealed by persons other than
the depositor who was credited by mistake.
Republic v. Eugenio 545 SCRA 384 (2008) – No need for a pre-existing court case for AMLA
violation before a court may issue a bank inquiry order except that it cannot be availed ex parte.
Prior notice to the depositors is required.
Intengan v. CA 377 SCRA 63 (2002) – In a complaint filed by the bank versus 2 employees who
diverted funds of fcdu clients of the bank, the employee whi disclosed the accounts to the
prosecutor and the court where the criminal case is filed by the bank versus its employees is
liable for FCDU violation due to lack of written consent of the client whose accounts were
disclosed
Unclaimed Bank Deposit Balances

Act No. 3936, An Act Requiring Banks, Trust Companies, Savings and Mortgage Banks, Mutual
Building and Loan Associations and Banking Institutions of Every Kind to Transfer Unclaimed
Balances Held to Them to the Insular Treasury and Other Purposes
-Enacted on November 29, 1932
-abandoned deposits
- what must be done? – Unclaimed balances plus interest or earnings thereon shall be
deposited to the treasury of the Philippines
-How? Deposit made thru an escheat proceedings in RTC (Section 1, UBL)
-Why this mode? – To relieve the bank of the liability to the depositors over the duty to keep
safely the money of the depositor and to be defended by the solicitor general in case of future
claims
-RCBC v. Hi-Tri Dev. Corp. 672 SCRA June 13, 2012
-PD 679, issued on April 2, 1975, provided the ff. amendments of the law
-simplified escheat procedure by the removal of publication of each bank’s accounts
once a week for three consecutive weeks in a newspaper of general circulation in case of
escheated accounts
-removal of summons by publication of all escheated bank balances
-replaced by the procedure of affected banks
1. To submit to the treasurer the list of unclaimed accounts, addresses and last account
balances and interest income
2. To communicate in writing the depositors last address on the status of the accounts to
be escheated
3. Publication of list of accounts to be escheated
(RP v. PCIBank, CA, GR No. 95533, November 20, 2000; RCBC v. Hi-Tri Dev. Corp. 672 SCRA
514, Junw 2016, CJ Sereno)
Unclaimed Balances Law: Cases

RCBC v. Hi-Tri Devt. Corp., 672 SCRA 514; June 13, 2012
Facts:
15
Sps Bakunawa thru Hi-Tri Devt. Corp applied in 1991 a manager’s check from RCBC
Ermita for 1, 019, 514.29, payable to Rosmis Realty(Rosmil Fao Millan) representing refund of
the downpayment for the purchase of realty sold by Bakunawa to Millan which was rescinded.
Bakunawa just held on the MC pending rescission case in RTC QC.
In 2003, the amount of the MC was included by RTC for escheat to the treasurer,
Bakunawa discovered that the MC procees were included. Hence, this case.
Allegations of Complaint:
No prior notice from RCBC to Bakunawa of payee of the MC that the account will be
escheated;
No summons to individual depositors from RTC Manila that the account will be
escheated or to appear after publication in the newspaper hence no jurisdiction. RTC Manila
dismisses the; CA annulled the RTC decision.
Held:
The CA decision is wrong insofar as the finding of lack of jurisdiction of the court.
No personal service from clerk of court is required for unclaimed balances to be
escheated citing the clear provisions of Sec. 3. Escheat proceeding is an action Rem (on the
thing itself) and not on the person.
However, the MC is to e excluded because of the actions of Bakunawa – they did not
abandon their account. RCBC petition denied.
Are demand drafts?

G.R. No. 16106, Dec. 30, 1961 Republic v. PNB and FCNB (Citibank)
- Drafts are not covered by UBL because these are payments and not considered as “credits” or
“deposits”. However, demand drafts ad telegraphic payment orders are covered as deposits or
credits of the bank for debtor’s favor.
Distinction
 Demand drafts are not like cashier’s check because under Sec. 127 of the NIL the
drawer of the draft is liable only if and when there is acceptance
 Unless there is acceptance, the funds are not yet ripe as credit in favor of the account of
the drawee. In a cashier’s check, the drawer bank does not need to accept because it is
its own check.
 Telegraphic transfer is also like a cashier’s check hence subject of “credit” as defined by
UBL. A “deposit: also involved creditor-debtor relationship where the bank makes a
credit in favor of depositor.
LOANS
 Total amount of loans granted by a bank is up to 20% of the net worth of the bank
 XPN: Additional 10% if the loan is collateralized by trust receipts, shipping documents,
warehouse receipts or any document transferring ownership to readily marketable or
perishable securities subject of insurance.
 Restriction of loans to DOSRI’s – arms length
 Loans to real estate – not to exceed 75% of the appraised value plus 60% of the
appraised value of the improvement
 Loans secured by chattel mortgage – not to exceed 75% of the appraised value of the
chattel
 Bank loans shall state a purpose (Sec. 39)
 It should be consistent with safe and sound banking practice
 It should state a maturity date
 Bank must ascertain that the borrower has the financial capacity from statement of
assets and liabilities, financial statements for tax purposes
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 Maturities of Loans (Sec. 44)
o For loans more than 5 years – must contain periodic amortization schedule with
payment annually except for businesses that produce immediate results, periodic
amortization may be deferred but not exceeding 5 years from date of loan
granting
o For loans to micro finance, amortization payments depend on the projected cash
flow of the bank
 Grant of development assistance incentives (Sec. 46)
o BSP to provide incentives to banks which without government guarantee extend
loans to educational institutions, hospitals and other medical services,
cooperatives, socialized low cost housing, local government units and other
activities with social content
The Truth in Lending Act of the Philippines

 RA 3765
 An act requiring the disclosure of finance charges in connection with the extension of
credit.
 Policy of the law: to protect the people from lack of awareness of the true cost of credit
by assuring
1. Full disclosure of such cost
2. To prevent the uninformed use of credit to the detriment of the national economy
 Covered persons: any creditor
 Creditor – any person engaged in the business of extending credit either as a lender or a
seller on instalments
 Credit – any loan , mortgage, deed of trust, advance or discount; any conditional sales;
any contract to sell, or sale or contract of sale of property or services, either for present
or future delivery, under which part or all of the price is payable subsequent to the
making of such sale or contract, any rental-purchase contract; any contract or
arrangement for the hire, bailment, or leasing of property; any option, demand, lien,
pledge, or other claim, or for the delivery of, property or money, any purchase, or other
acquisition of, or any credit upon the security of, any obligation of claim arising out of any
of the foregoing; and transaction or series of transactions having a similar purpose of
effect.
 Object of the Law – CADICTOFINCHARP
 Creditors must furnish prior to consummation of transaction the ff items:
a. Cash Price of delivered property or service
b. Amounts to be credited as down payment or trade-in
c. Difference between a & b
d. Charges to be paid not incident to the credit
e. Total amount to be financed
f. Finance charge in absolute peso amounts
g. Percentage of finance versus total amount to be finances in annual rate on the
O/S unpaid balance
 Finance charges – include interests, fees, service charges, discounts, and such other
charges incident to the extension of credit as the Board may by regulation.
 Requirement of the law – Sec. 4
 Consequences of violations
 Agency to Implement : BSP MB
 Effects on PN for violation (Sec. ^)
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1. No effect on the validity or enforceability of the obligation but the undisclosed
charges or other credit terms will be subject to court action of deletion or reduction
per case law
2. Creditor suffers from personal liabilities
 Implementing Rules and Regulations
 BSP Circular 755 issued on July 1, 2012
a. Reiterated the policy of RA 3765
b. Goal : to ensure transparent pricing not to set limits on rates but to make these
rates known and understood by clients
c. Expands government agencies to implement
 SEC – lending companies and financing institutions;
 Insurance companies – grants loans secured by insurance policies;
 Cooperative Development Authority – for those multi-purpose
cooperatives granting loans and credit like savings and loan associations
 Why: To promote healthy competition among credit providers for clients to compare
products and services
 Penalties:
o Peso: 100 or double the amount of finance charge whichever is higher
o Fine up to 2000 – imprisonment of minimum of 6 months to maximum of 1 year
SC Decisions Interpreting Truth in Lending Act

1. DBP v. Arcilla, Jr. 462 SCRA 599 (2005)
- Non-disclosure of the terms of credit prior to the consummation of the
loan availment or drawdown, creditor will have no right to collect interest
and charges even if stated in the PN
- Query: What is the effect on the contract? Rescissible or still valid?
2. Consolidated Bank and Trust Co. v. Court of Appeals, 246 SRA 193 (1995)
- Bank did not indicate in the borrower’s promissory note handling
charges or fees. Bank requires the collection of handling fees per BSP
CIR 504 for banks with loans more than 500,000
- Ruling of the SC: is borrower liable?
3. New Sampaguita Builders v. PNB, G.R. No. 148753, July 30, 2004
- Borrower’s claim loan is bloated because bank collected excessive
interest rates and penalty fees not discloses in violation of RA 3765
- PNB contends increased rates are in accordance with the credit
agreement, PN’S AND disclosure statement
5. BPI v. Norman Yu and Tuason Builders, G.R. No. 184122, January 20, 2010
- Issue is summary judgment filed by the borrower claiming the
foreclosure of REM violates the truth in lending act for failure to indicate
the rate of penalty charges in the disclosure statement
- Invokes Sampaguita Builder’s case ruling where the loan balance was
ordered recomputed prior to REM
6. Spouses Eduardo Silos v. PNB, G.R. No. 181045, July 2, 2014 (J. Del Castillo)
- Reiterated ruling in Sampaguita Builder’s case
- Reiterated ruling in UCPB v. Beluso, 530 SCRA 567 (2007) – A PN
which grants unilateral right to the creditor to fix interest rate is illegal
not because it violates Civil Code on mutuality of contract but also
because it violate the truth in lending law.
Questions:
- Did the SC void the REM and the PN’s?
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- What happened to the foreclosure of mortgage?
- What was the ruling of SC insofar as the loan obligation of Silos?
- Is PNB allowed to consolidate its ownership over the property?
7. Jesinowski v. Bank of America
- This is a recent case decided by US Supreme Court allowing the
borrower to rescind the loan if the creditor failed to disclose the terms of
the loan in violation of the US Truth in Lending Law
- Congress passes the Truth in Lending Act 82 Stat. 146, as amended, to
help consumers avoid the uninformed use of credit and to protect the
consumers against inaccurate and unfair credit billing 15 U.S.C 1601(a),
1635(a) (2006 ed.)
- To this end, the Act grants borrowers the right to rescind a loan “until
midnight of the business day following the consummation of the
transaction or the delivery of the (disclosure required by the Act),
whichever is later, by notifying the creditor, in accordance with
regulations of the (Federal Reserve Board, of his intention to do
so.”1635(a) (2006 ed).
- But this conditional right to rescind does not last forever. Even if a
lender never makes the required disclosures, the “right of rescission
shall expire three years after the date of consummation of the transation
or upon the sale of the property, whichever comes first.”
- Nota Bene: Compare this ruling to the UCPB v. Belluso Case (2007)
8. UCPB v. Belluso, G.R. No. 159912, Aug. 17, 2007
- UCPB granted loans to Sps. Belluso for 1.2 Million which were renewed
several times under 4 promissory notes amounting to the total of
2Million as principal with interest rate ranging from 18-34% p.a. in 1997-
1998
- When the loans were not paid, penalty rates of 32% p.a. were also
imposed which by 2000, the total amount unpaid ballooned to 3.8
Million. Borrower had already paid 795,000.
History of Land Title

 In the early days, land was free for all who may want and get them. It was the prevailing
theory that all lands were owned by God who merely permitted the tillers to possess and
own them.
 In England, due to the Norman conquest, title to lands in England were vested in William
the Conqueror
 In the Philippines, it was also the same theory when the Spaniards came. It was the
government which gave lands to favoured few. The Spanish Mortgage law was
introduced
 When Americans came, they passed a land registration act
 On February, 16, 1976, President Marcos discontinued the Spanish Mortgage Law and
decreed that the Torrens system of registration in the country
 The Torrens System merely provides the priority in annotation of recorder liens on the
land title and therefore need not look prior to the transfer on the land.
Negotiable PN v. Non-negotiable
 A negotiable PN is transferred by indorsement plus delivery. The absence of “non-
negotiable” does mean it is not negotiable. Provided all the elements of negotiable PN
are complied.
19
 Transfer of non-negotiable PN is via deed of assignment
Advantages of a Negotiable PN
 In assignment a negotiable PN, the holder becomes a holder in due course, hence he
holds the instrument free from personal defences of the parties to the PN. Assignment is
by virtue of mere indorsement and delivery of the PN. It does not require a deed of
assignment for the PN to be transferred or negotiated.
 A non-negotiable PN is transferrable by Deed of Assignment which makes the assignee
subrogated to the liabilities of the drawee or creditor of the PN. Thus all the defesnses of
the parties to the PN are transferred to the assignee as he becomes subrogated to the
assignor.
GBL 2000 LOANS

 Single borrower’s limit – 20% of bank’s total networth
 Limit on DOSRI loans re restrictions to DOSRI’s rights to obtain funds from tha bank
violating will case removal of directors and officers in addiction to criminal prosecution
 Authority to prescribe terms – Sec. 45 – Monetary Board to prescribe terms of maturity
 Escalation clause in interest rate – allowed provided there descalation rate clause but
there must prior notice to borrower (Floirendo v. Metrobank, G.R. No. 148325,
September 3, 207)
 Unilateral increase of interest rate is not void per se if mutually agreed upon by the
borrower (EPCI Bank v. Ng Sheung Ngor, G.R. NO. 171545, Dec. 19, 2007)
 Can banks increase rate at any amount?
o No. Rate must not be iniquitous and unconscionable (Medel v. CA, G.R. No.
131622, November 27, 1998)
 Prepayment of loans – Yes, but subject to reasonable terms agreed upon (Sec. 45,
GBL)
 Banks cannot extend peso loans to non-residents – BSP Circular 222 (Dec. 24, 1999)
 What about for OFW’s – allowed provided that the funds are to be utilized in the
Philippines (BSP Circular Letter June 18, 2004)
 What about attorney’s fees? Yes, allowed provided not unreasonable and on quantum
meruit basis at the discretion of the court to reduce if excessive (Barach Garage Taxicab
et al v. Tamaraw Plantation Co. Phil. 513, February 28, 1925
Legal Aspects on Mortgage

 Mortgage – the conveyance of an estate or pledge of property as security for the
payment of money or the performance of some other act and conditioned to become
void upon such payment or performance.
 Art. 2092 A promise to constitute a pledge or mortgage gives rise only to a personal
action between the contarcting paties, without prejudice to the criminal responsibility
incurred by him who defrauds another, by offering in pledge or mortgage as
unencumbered, things which he knew were subject to some burden, or by
misrepresenting himself to be the owner of the same. (1862)
 Third person who ate not parties to the principal obligation may secure the latter by
pledging or mortgaging their own property. (1857)
Requisites of Valid Mortgage
1. Must secure the fulfilment of an obligation – loan
2. Mortgagor is the absolute owner of the mortgaged property
3. Mortgagor has the free disposal of the mortgaged property
20
4. Third persons not parties to the principal obligation may secure the mortgage. (Art. 2085
Civil Code)
Characteristics of a Valid Real Estate Mortgage
 A real right – registered
 Accessory contract – if principal is void, REM is void
 Indivisible – mortgage cannot be divided
o Example – A and B are owners of the land mortgaged to C. A files for partition of
the property and pays a portion of the debt. Answer: REM cannot be divided
o Inseparable – mortgage follows the property regardless of who the owner is.
 Foreclosure sale retroacts to date of REM – Limpin v. CA, involves adverse claim after
REM annotation
 Alienable to third person by mortgagee (Lopez v. Alvarez G.R. No. 3428 Oct. 12, 1907, 9
PHIL 28
 Right of innocent mortgagee for value must be respected
 Even if the title of the mortgagor is subsequently invalidated due to fraud under Art. 2068
Civil Code
 Under the Torrens system of registration of the public to rely on the title and not to look
beyond except when the parties have prior knowledge of facts and circumstances that a
reasonable man must inquire further before entering into the transaction (Rural Bank of
Sariaya v. Yacon, 175 SCRA 62)
 Innocent buyer for value must include mortgagee and lesses – under Sec. 32 of the
Property Registration Decree, PD 1529
 What about banks – duty must investigate possession and title prior to approving the
loan, Gonzales c. IAC G.R. No. 69622, January 29, 1988, 157 SCRA 187
 Effect of Lis pendens v. REM
o REM annotations is superior to a lis pendens annotation hence upon foreclosure,
lien is canselled (Gonzales case)
 Unrecorder sale v. Recorded REM, which is to be preferred? Reyes v. De Leon G.R. No.
22331, June 6, 1967
 Must be registered to bind third person
 Unregistered REM valid only to the parties and not binding to the public
 Must be a public document under the formalities of contract
 A real property itself – a mortgage may be foreclosed if executed in favor of a mortgagee
in good faith
 Caveat: banks must prove due diligence done before accepting the mortgage
 A limitation of ownership p a mortgage is an encumbrance on property but does not end
ownership hence foreclosable
 Must be registered to bind third persons
 Unregistered REM valid only to the parties and not binding to the public
 Must be a public document under the formalities of a contract
Foreclosure: Legal Aspects
 Sec. 47 of the Philippine General Banking Law provides: Foreclosure of real mortgage –
In the event of foreclosure, whether judicially or extrajudically, of any mortgage on real
estate which is security for a loan or other credit accommodation granted, the mortgagor
or debtor whose real property has been sold for the full or partial payment of his
obligation shall have the
1. Extrajudicial Foreclosure – Act 3135; where the right of redemption is for 2 months if
the mortgagor regardless of whether the mortgagee is a juridical or natural person
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XPN: if the mortgagee is a bank and the mortgagor is a corporation, the redemption
is ninety days from the date of execution of the certificate of sale or annotation of
COS whichever is earlier
2. Judicial Foreclosure of REM Rule 68
a. To be handled by the Sheriff
b. Right of redemption is 12 months from the date of sale regardless of whether the
mortgagor is a juridical or natural person and the mortgagee is a bank
Procedure on Judicial Foreclosure of REM
 Sec 63 of PD 1529
 Certified copy of final order of the court to be presented shall be filed with the register of
deeds confirming the sale
 Redemption – 1 year from registration
Foreclosure of REM (Sec. 47 – GBL)
 If Corporate Borrower – redemption allowed until but not after registration of the COS
with the Register of Deeds and shall not be more than 3 months after the foreclosure
whichever is earlier.
 If the mortgagor is a natural person – redemption right is not less than 12 months from
date of registration of COS
WOP – after consolidation of the title in mortgagee’s name is a matter of right ex-parte.
 Can an annulment of foreclosure filed simultaneously with the WOP? Yes.
 Can a petition for WOP be restrained or enjoined by the trial court? NO.
 Summary hearing, mandatory for court to issue
Bank Closure Process

1. BSP SES ROE issues
2. Monetary Board actions
3. Conservatorship
4. Other Remedies
5. Order to close bank
6. Receivership
7. Liquidation proceedings
 Triggers for Bank Closures:
o Regular examination by BSP SES once every 12 months and the interval for
every regular examination is 12 months (Section 28, NCBA)
o The GBL in Section 4.4 provides that the BSP shall conduct an investigation of
the bank not oftener than 12 months from the last investigation date to determine
if the bank is conducting its business on a safe and sound basis provided that the
deficiencies found by BSP shall be addressed
o Special exam allowed less than 12 months form last exam date upon vote of 5
members
 Only the Monetary Board can order the closure of abank
 Can court order the closure of a bank? NO.
 Can the court issue TRO or injunction vs. Monetary Board’s decision to close the bank?
o CA and SC – YES
 Requisites
a. A report on examination (ROE) is submitted to the SES
b. SES submits to MB which makes a finding based o the ROE that the bank or
quasi bank will undergo conservator status under the NCBA and GBL 2000.
Bank not to be given copy of ROE prior to MB report submission. (BSP v.
22
Valenzuala, GR No. 184778, Oct. 2, 2009) Where the CS reiterated the doctrine
of “close now, hear later” policy
c. The Board of Directors of the bank must be informed in writing of the order of the
MB placing the bank under conservatorship status
 When may a bank be closed?
 First Trigger: Section 29 Ban is in a state of continuing
o Inability or
o Unwillingness
To maintain a condition of liquidity deemed adequate to protect the interest of
depositors and creditors
 MB ay appoint a conservator to take charge of the assets and liabilities of the bank
 Powers of Conservator
o Manage the bank from previous management, collect all money debts,
reorganize the new management team of the bank
o Exercise all functions to restore bank
o Viability with power to revoke previous acts
o Report to Monetary Board
o Tenure: 1 year only
 The MB may terminate conservatorship status of the bank if the conservator reports that
the bank’s continuance of the business will involve probable loss to its depositors or
creditors in which case Section 30 shall apply – receivership and liquidation
 Note: The power to appoint conservator is not the only remedy; GBL 2000, Section 4.6
provide grant of emergency advantages to ailing banks and place it under prompt
corrective action framework (PCA status)
Proceeding on Receivership and Liquidation

 Section 30 NCBA Grounds to place the bank under receivership by the MB
 Report by SES that the bank is
o Unable to pay its liabilities as they fall due except those caused by extraordinary
demands due to panic in the financial system
o Banks has insufficient realizable assets as determined by BSP to meet its
liabilities (Balance Sheet Test)
o Bank cannot continue in business without involving probable losses to its
depositors and creditors (equity test)
o Banks has wilfully violated the cease and desist order (CDO) under Section 37
has become final, involving acts of fraud or dissipation of assets of the institution
Bank Closure
 Result: MB shall order the bank to be 1. Closed and 2. To appoint PDIC as receiver of
the assets of the bank, for a quasi bank, receiver is any person with recognized
competence in banking or finance.
 This is a new procedure from old Central Bank Act (RA 269) where there must prior
examination of the bank before the MB can order its receivership status (Rural Bank of
San Miguel v. MB, BSP, GR No. 150886, Feb. 16, 2007)
Receivership
 Mandate or receiver: Not later than 90 days from take-over to report to MB whether the
may be 1. Rehabilitated or 2. Otherwise places in such a condition that it may be
permitted to resume business with safety to its depositors and creditors and the general
public; or 3. Neither 1 or 2 is possible
23
 The MB will write the Board of Directors of the Bank of its findings and direct the receiver
to proceed with liquidation of the bank
Liquidation of the Bank
 Receiver to file ex parte application with RTC and without requirement of prior notice to
the bank a petition for assistance in the liquidation of the bank pursuant to a liquidation
plan of PDIC for closed banks
 No TRO or injunction can be issued by the court unless thru a petition for certiorari
against the MB
 Close Now, Hear later Doctrine – Rural Bank of Lucena v. Arca, GR No. L-21146,
September 20, 1965 and Rural Bank of Buhi v. CA, GR No. L-61689, June 20, 1988
Conservator v. Receivership
 Distinguish as to their function:
o Conservator – restores the bank’s viability if the grounds are in Sec. 29
o Receiver – administers the assets of the bank if the grounds are in Sec. 20
 As to period:
o Conservator – terms is for 12 months
o Receiver – for 90 days
Bangko Sentral Charter

 Preference of Credits
 General Rule: Debtor is liable for all his debts
 XPN: some debts are to be paid ahead of the others in the properties of the debtor in
case of insolvency of debtor only
 On specific movable:
o Taxes, customs duties
o Claim due to fraud or estafa
o Claims of unpaid seller of the movable
o Claims secured by pledge or mortgage
o Claims of depositors
 Order of preference on real property under Civil Code Art. 2242
o Taxes
o Unpaid seller’s lien on the property
o Unpaid labourers or masons wages
o Unpaid construction claims on the bldg or improvement on the land
o Real estate mortgage registered in the Register of Deeds in the order of priority
o Unpaid claims in the performance of preservation of the properties (e.g. guards,
insurance etc)
o Claims by virtue of the order of the court
Philippine Deposit Insurance Corporation Act

 Amended on June 11, 2016
 RA 10846
 An Act Establishing the Philippine Deposit Insurance Corporation, Defining its Powers
and Duties and Other Purposes (Republic Act No. 3591 as Amended on 6.11.16)
 Retained establishment of PDIC as a corporation organized to insure deposits of banks
 Deleted the words: “ permanent and continuing insurance coverage to all insured
deposits” and replaced
24
 “ Basic policy is to promote, safeguard and protect the interest of depositing public by
providing insurance coverage on all insured deposits and helping maintain a sound and
stable banking system”
 Section 2 State Policies which are new:
o State policy to provide mandatory insurance coverage on all deposits in the
Philippines with the end of strengthening the faith and confidence of the
depositing public to the Philippine banking system
o State policy for the government to extend to all means necessary for the PDIC to
fulfil functions to the depositing public by providing insurance coverage to bank
deposits to help develop a stable and sound banking system
 In view of its crucial role, PDIC shall enjoy fiscal and administrative autonomy
 Organization of PDIC : From 5 member NOW 7 members
 Composition:
o 7 Members composed od
o Secretary of Finance as ex-oficio but regular chairman
o Governor of Bangko Sentral in ex-oficio capacity
o President of PDIC who is appointed by the President of the Philippines from the
shortlist prepared by the governance
o Commission for government-owned and controlled corporation (CGOCC) – acts
as CEO and Vice Chair of the Board
o 4 Members from the private secrtor from the shortlist of CGOCC for a term of 6
year subject to only 1 reappointment. For the first appointed, the first two
appointees to serve for a period of 3 years. Reappointment is based if one
obtains a performance rating of above average or similar higher rating
o Person to be appointed as Board Member must be one who is of recognized
competence in economics, banking and finance, law, management
administration or insurance at least 35 years of age
o For a period of 1 year thereafter, the appointive members shall be disqualified
from working in a bank
o Secretary of Finance and BSP Governor may each designate an alternate with a
rank not lower than assistant secretary or its equivalent
o Quorum – 4 Board members and all decisions must be with vote of 4 members
o Board with personal or pecuniary interest in a transaction must disclose and
rescue himself at deliberations
 Definition of Terms ( Section 5)
o Asset – movable, immovable, tangible, intangible resources or properties
including sale proceeds of bank and branch licenses subject of BSP approval
(NEW)
o Asset Distribution Plan – plan of distribution of the assets of a close bank to its
creditors as of a certain cut-off based on estimated realizable value as of a
certain cut-off date, prepared in accordance with the Rules on Concurrence
Preference of Credits under the Civil Code or other laws
o Deposit Means – unpaid balance of the money or equivalent received by the
bank to give credit to a commercial, checking, savings or time or thrift account
evidenced by a passbook, deposit, certificate of deposit issued per BSPP Rules
like deposit substitutes (Section 5(G))
 Actions of PDIC final an unappealable except by way of certiorari due to grave abuse of
discretion
 Venue: Court of Appeals
 Time limit: 30 days from Notice of Claim denial
25
 2 Forms of Claims:
o Disputed claim vs. assets of closed bank after insurance payment of
o Insured deposit
 Value as of cut-off date prepared as per the rules on concurrence and preference of
credits under the Civil Code of the Philippines
 Asset distribution may be partial or final when it pertains to distribution of all the assets
of the closed bank (NEW)
 Closed bank - refers to bank placed under liquidation by the Monetary Board (NEW)
 No Insurance payment for these accounts whether documented, recorder, or booked as
deposits in the bank:
o Investment products like bonds, trust accounts, securities, and other similar
instruments
o Deposit accounts which are unfunded or fictitious
o Deposit accounts that are part of unsafe and unsound practices of the banks
o Deposits that are proceeds from unlawful activities under RA 9160 (AMLAC)
 Decision of PDIC Board is final and unrestrainable
 Amount of Insured Deposit – 500,000
 A joint account either as and/or and “or” shall be separately insured from any
individually-owned deposit account
 If the account is owned by a corporation with an individual, insured deposit shall be
presumed to be that of the corporation
 Liquidation – proceedings under Section 12 and 13 that banks ordered closed by
Monetary Board, PDIC to act as receiver, no bank ordered closed by BSP shall not be
rehabilitated (Section 12) (NEW)
 Section 13 Powers of receiver an effects of placement of bank under liquidation (NEW)
 Receiver without need of stockholder’s approval, creditors or closed bank, board of
directors is authorized to adopt or implement the following modes:
o Conventional liquidation
o Purchase of assets and assumption of liabilities of closed bank by another bank
o Represent or act for and I behalf of the closed bank to do any acts incident to its
objectives like prevent dissipation of assets of closed bank, to pay insured
deposits and other claims, to be represented by private counsel in court etc.
 Effects of placement of bank under liquidation status:
o Corporate franchise or existence retained until the termination of winding up
period
o Termination of the power of the Board of Directors of closed bank
o Upon service of notice of closure of bank, all assets are deemed in custodial egis
and cannot be attached or garnished, executed, levy or other court processes
except if these assets are secured as collaterals to BSP loans (Section 13 (3)
o On labor claims, employees are deemed terminated nd any claims will be
subjected to Civil Code rule on concurrence and preference of credits
o On contractual claims – receiver may cancel or terminate or rescind or repudiate
any contract not necessary for the orderly liquidation of the bank or grossly
disadvantageous to the closed bank or for any ground under the law
o From the time of closure, PDIC shall not be liable to pay penalties for delay in
taxes
 The assets of the closed bank under receivership shall be considered as in custodial
legis in the hands of a receiver
26
 It shall not be subject of attachment or garnishment or execution or levy of any other
kind (Section 10 (B))
 Payment of insured deposits by PDIC shall enjoy preference granted by the Civil Code
Art. 2244 for taxes due to the government (Section 15)
 No TRO or injunction shall be issued against PDIC except by the Court of Appeals or the
Supreme Court (Section 22)
 Financial assistance may be granted by PDIC to a bank in danger of closing or even to a
closed bank when in the opinion of the board the operation of such closed bank is
essential to provide adequate banking service in the community or maintain financial
stability in the economy. But the reopening of a closed bank is subject to Monetary
Board approval (Section 17 D) Note: Conflicts with Section 30 of BSP charter RA 7653
on 90 days
 Section 14 Notice of closure and take-over activities by PDIC
o Give notice of closure to the highest ranking officer present in bank premises
o Post notice of closure in bank premises
o Closure effective upon service of notice
o PDIC as receiver takes over the bank
o As receiver, PDIC has power to use reasonable force to enter, open the bank
premises and exercise all acts of possession and control of the bank
o All directors of closed bank an officers and employees must surrender all records
of bank to receiver
o LGU and law enforcement officers to provide assistance to PDIC on service of
notice of closure and occupancy of bank
 Section 15
o PDIC shall have authority to facilitate and implement the purchase of assets of
the closed bank and assumption of liabilities by an insured bank without need of
prior approval by liquidation court. (NEW) Except for disposition of branch license
which is subject to MB BSP approval
o Authority of PDIC to sell bank assets and liabilities to another bank is final and
executor (NEW)
 Section 16 Conventional Liquidation
a. Asset evaluation and valuation
b. Conversion of assets of closed bank
c. Conduct physical and ocular examination of assets
d. Dispose the assets without court order
e. Invest proceeds of sale in government securities and other hi-grade securities
 Section 16 B – Petition for court assistance in liquidation of closed bank
 Court powers only:
1. Exclusive jurisdiction to adjudicate disputed claims
2. Enforcement of liquidation plan
 Note: Securities regulation code (RA 8799) and SC Rules on Corporate Rehabilitation
(SC AM 00-8-10 SC) are not applicable to liquidation court proceedings
 Section 16 C. Winding up of closed banks
o 180 days or 6 months – creditors to file claim n court from publication of notice of
court approval of final liquidation
o 180 days or 6 months – the stockholders of closed bank to file claim from notice
of publication of court’s final liquidation plan
o If not filed within 6 months – all claims are barred
27
o Any asset unclaimed within the prescribed period shall be turned over to the
Bureau of Treasury
o Note: The law is silent if procedure is via court escheat proceedings or mere
letter of turn-over of assets
o Note further: Law refers to assets for turn-over and funds of the Bureau of
Treasure
 Section 17. Permanent Fund of PDIC shall be 3 Billion to come from insurance premium
assessment and reserves on insured banks a deposit insurance fund (DIF)
o Right to all dividends on stocks purchased
o Exempt from compliance with RA 7656 to remit dividends to national government
 Payment of Insured Deposits
o When: insured deposits covered by the 500,000 limit, PDIC to pay as soon as
possible either in cash or transferred deposit from another bank but not later than
6 months from date of filing of claim by insured depositor unless PDIC needs the
final determination of the liquidation court as to validity of payment before making
the payment (Section 19)
o Failure to settle claim within 6 months from filing of claim due to grave abuse of
discretion, gross negligence, bad faith or malice shall subject the officers and
employees of PDIC to imprisonment – 6 months to 1 year provided that the
period shall not apply if there is a need for further resolution of facts and/or law
by another office or body of government
 Section 20 PDIC subrogated to depositors claim
o Upon payment of deposits, PDIC shall be surrogated
o Without prejudice to other claims of the depositor in excess of the insured deposit
o Any payments by PDIC shall be a claim to enjoy preference in the order under
Art. 2244 of the Civil Code
o Deleted – preference effective upon liquidation court final payment plan
 Section 26 Imprisonment from 6 years to 12 years or fine of not less than 50 thousand –
10 million to any bank director or officer who
o Submits false information and records
o Refuses to submit the records for examination by PDIC
o Refuses to receive notice of closure
o Splits insured deposits
o Any violation of banking laws or acts inimical to the interest of bank or the
depositing public, conflict of interest, disloyalty to the corporation etc.
o Penalty of imprisonment not less than 10 years – 12 years or fine not less than
500,000 – 10 Million or both for
 Any depositor who filed fictitious or fraudulent claim for deposit insurance
 Any bank officer who certifies the validity of the deposit liabilities (NEW)
o Penalty of 12 years to 14 years imprisonment
 For any person who attempts to participate in a scheme to defraud the
bank
o If the person committing is a bank director or officer – imprisonment of not less
than 15years – 17 years
o If offense causes systematic risk as found by BSP, penalty in bank director or
officer – 18 years to 20 years imprisonment
 Section 27 No Court shall issue TRO or injunction against PDIC in all cases filed by the
private party, insured bank or any shareholder of the insured bank except the Court of
Appeals
28
o Supreme Court may issue TRO only on constitutional ground involving extreme
urgency and upon payment of injunction bond to be fixed by the SC
o Any TRO or Writ issued by any judge in violation of this Section is void of no
force and effect
o Judge to suffer penalty of suspension for not exceeding 60 days without pay
The Anti-money Laundering Act

 Overview of the law
 What is money laundering?
 How is this done?
 What are the steps to curb money laundering?
The AMLA Law provisions- RA 9160 passed on september 29, 2001, amended by RA 9194
(2003), 10167 (2012) and 10365 (Feb 15, 2013)
 In the Phil setting, it was addressed thru various bsp circulars but later on in 2001
onwards; the international community thru the financial action task force (FATCA)
directed all countries to pass legislation to prevent money laundering or else these
countries will be tagged as non-cooperator in the fight against money laundering.
Purposes of the law
1. To protect and preserve the integrity and confidentiality of bank accounts
2. To ensure that the Philippines shall not be used as a money laundering site for the
proceeds of any unlawful activity
3. The state shall extend cooperation in transnational investigations and prosecutions of
persons involved in money laundering activities (section 2)
 Money laundering offense
o a crime whereby the proceeds of an unlawful activity as defined in the law are
transacted thereby making them appear to have originated from legitimate
sources (section 4)
How is this manifested?
1. Transacting said money instrument or property
2. Conversion, transfer, disposal, acquisition, possession or use of said monetary
instrument or property
3. Concealment or disguise of the true nature, source, location, disposition, movement, or
ownership, of or rights with respect to said monetary instrument or property
4. Attempt to commit money laundering offense under 1,2 and 3 above
5. Aid, abet or advise the commission of the money laundering offense under 1,2, and 3
6. Performance or failure to perform any act which facilitates the crime of money laundering
7. Failure to report to theamlac by any covered person with knowledge that a covered or
suspicious transaction has to be reported (amended under RA 10365 – Feb 13, 2013)
Who are the persons tasked to report?
Both natural and artificial or juridical persons namely:
29
1. Banks, non-banks, quasi-banks, trust entities, fx dealers, pawnshops, money changers,
remittance and transfer companies and other similar entities, their subsidiaries and
affiliates supervised or regulated by Bangko Sentral;
2. Insurance companies, pre-need companies supervised or regulated by the insurance
commission;
a. Securities dealers, brokers, salesmen, investment houses or similar persons
managing securities or rendering services as investment agent, advisor,
consultant
b. Mutual funds, close end investment companies, common trust funds and similar
persons; and
c. Treasury brokers dealing in financial derivatives products, commodities brokers
etc
3. Jewelry dealers for amounts exceeding Php 1 million
4. Company services providers acting as agents partnership, lawyers handling formation of
companies;
a. corporate secretary, directors,
b. agents providing business addresses, correspondence or accommodation,
administrative offices
c. persons providing services as nominee shareholders of the corporation
d. Persons providing management services to handle client’s money, securities,
bank accounts, organization and buying of corporations
EXCEPT: Lawyers and accountants who render professional advice and who are bound by
client’s confidentiality relations provided he/she is allowed to practice in the Philippines (RA
10365, Feb 15, 2013)
What to report to AMLAC
 Section 3B, AMLA

1. Covered Transactions: Transaction in cash within one banking day involving a total
amount of Php 500,000.00 or more;
2. Suspicious transaction- any amount transacted with covered institutions where any of
the following is present:
a. No underlying legal or trade obligation, purpose or economic justification;
b. Client is not properly identified;
c. Amount involved is not commensurate to the financial capacity or business of the
client;
d. Taking into account all known circumstances, the client’s transaction appears
structured to avoid reporting;
e. Any circumstance which DEVIATES from client’s profile of transactions
f. Transaction is related to an unlawful activity which is about to be, is being, or has
been committed; or
g. Transaction is similar or analogous to any of the foregoing circumstance
 Define monetary instrument? Under Section 3, c. coins or currency of legal tender;
drafts; securities; notes; negotiable instruments
 Unlawful activities under AMLA
o Section 3 (l)
30
o RA 19365 Enumerates 34 kinds of felonies as unlawful activities reportable to
AMLAC
o Enumerate them.
 Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as
the Revised Penal Code, as amended;
 Sections 3, 4, 5, 7, 8 and 9 of Article Two of Republic Act No. 6425, as amended,
otherwise known as the Dangerous Drugs Act of 1972;
 Section 3 paragraphs B, C, E, G, H and I of Republic Act No. 3019, as amended;
otherwise known as the Anti-Graft and Corrupt Practices Act;
 Plunder under Republic Act No. 7080, as amended;
 Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302 of the
Revised Penal Code, as amended;
 Jueteng and Masiao punished as illegal gambling under Presidential Decree No.
1602;
 Piracy on the high seas under the Revised Penal Code, as amended and
Presidential Decree No. 532;
 Qualified theft under Article 310 of the Revised Penal Code, as amended;
 Swindling under Article 315 of the Revised Penal Code, as amended;
 Smuggling under Republic Act Nos. 455 and 1937;
 Violations under Republic Act No. 8792, otherwise known as the Electronic
Commerce Act of 2000;
 Hijacking and other violations under Republic Act No. 6235; destructive arson
and murder, as defined under the Revised Penal Code, as amended, including
those perpetrated by terrorists against non-combatant persons and similar
targets;
 Fraudulent practices and other violations under Republic Act No. 8799, otherwise
known as the Securities Regulation Code of 2000;
 Felonies or offenses of a similar nature that is punishable under the penal laws of
other countries.

The Anti Money Laundering Council
 Composition : 3 members
1. BSP Governor as Chairperson
2. Insurance Commissioner; and
3. The Chair of the SEC
 How will they act?

o Unanimous, not by majority rule
 Powers:
1. To require covered persons to report
2. To issue orders to comply
3. To institute civil forfeiture proceedings
4. To cause the filing of appropriate AMLA offense by the DOJ or the Ombudsman
5. To investigate suspicious and covered transactions deemed suspicious
6. To apply with CA for ex parte freeze order
31
7. To implement such measures as may be deemed necessary and justified to counter-act
money laundering
8. To receive any action from foreign states relative to requests
9. To impose admin sanctions on covered persons for violation of rules
10. To require the land registration commission to report realty transactions of Php
500,000.00 or more within 15 days from transfer of titles and for register of deeds to
submit documents or transfer (RA 10365)
 Secretariat: headed by an executive director for a term of 5 years; lawyer; 35 years old
or more
 All members must be with prior 5- year experience in SEC, BSP or Insurance
Commission
AMLA LAW
 FCDU Deposits: disputable if to be covered by AMLAC freeze order due to the enabling
acts of 6426 and Unclaimed Balances Act
Foreign Investment Act

RA 7042
1. Policy of the law- to encourage foreign investments in allowed businesses in the
Philippines
2. Definitions
- Foreign investments - equity investment made by a non-Philippine national in the form
of foreign exchange and/or other assets actually transferred to the Philippines and duly
registered with the Central Bank which shall assess and appraise the value of such
assets other than foreign exchange
- Philippine National - a citizen of the Philippines or a domestic partnership or association
wholly owned by citizens of the Philippines; or a corporation organized under the laws of
the Philippines of which at least sixty percent (60%) of the capital stock outstanding and
entitled to vote is owned and held by citizens of the Philippines; or a trustee of funds for
pension or other employee retirement or separation benefits, where the trustee is a
Philippine national and at least sixty (60%) of the fund will accrue to the benefit of the
Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders
own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at
least sixty percent (60%) of the capital stocks outstanding and entitled to vote of both
corporations must be owned and held by citizens of the Philippines and at least sixty
percent (60%) of the members of the Board of Directors of both corporations must be
citizens of the Philippines, in order that the corporations shall be considered a Philippine
national
- Doing business in the Philippines - shall include soliciting orders, service contracts,
opening offices, whether called "liaison" offices or branches; appointing representatives
or distributors domiciled in the Philippines or who in any calendar year stay in the country
for a period or periods totalling one hundred eighty (180) days or more; participating in
the management, supervision or control of any domestic business, firm, entity or
corporation in the Philippines; and any other act or acts that imply a continuity of
commercial dealings or arrangements, and contemplate to that extent the performance of
acts or works, or the exercise of some of the functions normally incident to, and in
progressive prosecution of, commercial gain or of the purpose and object of the business
organization: Provided, however, That the phrase "doing business: shall not be deemed
32
to include mere investment as a shareholder by a foreign entity in domestic corporations
duly registered to do business, and/or the exercise of rights as such investor; nor having
a nominee director or officer to represent its interests in such corporation; nor appointing
a representative or distributor domiciled in the Philippines which transacts business in its
own name and for its own account
3. Constitutional Prohibitions
 Foreign corporations
o Defined as one, which owes its existence to the laws of another state, and
generally has no legal existence within another state. Section 123 of the
Corporation Code as one formed, organized and existing under any laws other
than those of the Philippines and whose law allow Filipino citizens and
corporations to do business in the Philippines
 Can a Foreign company invest in the Philippines?
- The Foreign investment act (RA 7042, 1991 amended by RA 8179, 1996) liberalized
the entry of foreign investment into the Philippines. Under the FIA, foreign investors
are generally treated like their domestic counterparts and must register with the SEC
(in case of corporation or partnership) or with DTI’s Bureau of trade regulation and
consumer’s protection (in case of sole proprietorship)
- With the liberation of the foreign investment law, 100% foreign equity may be allowed
in all areas of investment except those reserved for Filipinos by mandate of the
Philippine Constitution and existing laws.
- Recite the Constitutional Restrictions. What article?
Negative List A
No foreign Equity
1. Mass Media except recording
2. Services involving the practice of licensed professions save in cases prescribed by law
No. 5181]
3. Retail Trade [Republic Act No. 1180]
4. Cooperatives [Chapter III, Article 26 of R. A. No. 6938]
5. Private Security Agencies [Section 4 of R. A. No. 5487]
6. Small-scale Mining [Section 3 of R. A. No. 7076]
7. Utilization of marine resources in archipelagic waters, territorial sea, and exclusive
economic zone [Article XII, Section 2 of the Constitution]
8. Ownership, operation and management of cockpits [Section 5 of Presidential Decree No.
449]
9. Manufacture, repair, stockpiling and/or distribution of nuclear weapons [Article II, Section
8 of the Constitution]
10. Manufacture, repair, stockpiling and/or distribution of biological, chemical and
radiological weapons [Various treaties to which the Philippines is a signatory and
conventions supported by the Philippines
11. Manufacture of firecrackers and other pyrotechnic devices
The government recognizes the pivotal role of private sector investments and thereby commits
to continuously enhance the business climate. Foreign investments are encouraged to fill in
capital gaps, help provide employment, increase production and provide a base for the overall
development of the economy.
33
Credit Information System Act

 RA 9510
 Passed into law on October 31, 2008
 Only for the basis purpose of determining credit worthiness of a borrower. Access of
credit data except on confidential deposits of bank depositors; release of information on
credit data shall not be released by the accessing entity only with prior
 Ileana Macalinaovs BPI GR no. 175490, September 17, 2009.
o Interest and penalty charges for credit card which is at 24%per annum.
34

Special Commercial Law: New Central Bank Act

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Special Commercial Law: New Central Bank Act

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Special Commercial Law 2016

New Central Bank Act

Salient Provisions of RA 7653 – BSP Charter

Bangko Sentral Charter

The Deputy Governor

Normal Credit Operations

 Subsequent releases of emergency advance shall be subject to:

Powers of the Monetary Board over a Bank

General Banking Act

 Section 3 Supervision of banks shall be made by the Bangko Sentral

When a bank is deemed unfit:

 Commercial Banks (KB)

 Thrift Bank – savings and time deposit – RA 7906

 Rural Bank – RA 7353

 Cooperative Bank – Act 6938 Cooperative Code of the Philippines

 Islamic Bank – RA 6848

GBL 2000 – Organization of Banks

GBL 2000 Investments

 All are demandable on stated maturities

 Secrecy of Bank Deposits

RA 1405 – Peso Deposits

 Republic Act 1405

 Nature of Bank Secrecy under RA 1405

 Foreign Currency Deposit Law RA 6426

 Decisions of the Supreme Court

 Waiver of Bank Secrecy

What about CURRENT ACCOUNT?

 Money Market Transactions

 Nature of Trust Account

 Extenuating Circumstance when bank cannot be liable for breach

 Additional Points on Bank Secrecy Laws

Entities allowed to lift bank secrecy

Bank Secrecy Jurisprudence

Unclaimed Bank Deposit Balances

Unclaimed Balances Law: Cases

Are demand drafts?

The Truth in Lending Act of the Philippines

SC Decisions Interpreting Truth in Lending Act

History of Land Title

GBL 2000 LOANS

Legal Aspects on Mortgage

Bank Closure Process

Proceeding on Receivership and Liquidation

Bangko Sentral Charter

Philippine Deposit Insurance Corporation Act

The Anti-money Laundering Act

 Section 3B, AMLA

 How will they act?

Foreign Investment Act

Credit Information System Act

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