The Absence of State Immunity and

the Issue of Legal Protection for

Bank Examiners

Author

Reinier Paul R. Yebra

Atty. Reinier Paul R. Yebra is a Bank Officer V at the Treasury Department of the Bangko
Sentral ng Pilipinas (BSP). He has been a professorial and pre-bar lecturer at the San Beda
College of Law and the Center for Global Best Practices since passing the bar in 2010. Before
joining the BSP in 2011, he was an associate at the Angara Abello Concepcion Regala & Cruz
(ACCRA) Law Offices. He received his Bachelor of Laws degree from the San Beda College of
Law and his Master of Laws degree from Columbia University in New York. He was a Fulbright
scholar for graduate studies in the U.S. and was named Mark G. Appel Fellow at Columbia Law
School. He was class valedictorian at the San Beda College of Law, editor-in-chief of the San
Beda Law Journal, and Bar topnotcher in 2009.
 Introduction

The 1987 Philippine Constitution decrees that the central monetary

authority should be independent.1 That independence means that it
should be free from all forms of undue control, influence or interference,
whether it be from local capital interest or foreign interest, or even from
the State or the government. The intention of the framers of the 1987
Constitution was to prevent a situation where the executive branch of
the government is in control of monetary policy, or one where monetary
policies are adopted not on the basis of long-term financial stability but
on political expediency and other considerations. The independence of
the central monetary authority was also envisioned to ensure that it is
able to anticipate and respond to the challenges of a more globalized
economy (The Office of the General Counsel and Legal Services: Bangko
Sentral ng Pilipinas, 2010). Corollarily, the Bangko Sentral ng Pilipinas
(BSP) was bestowed with fiscal and administrative autonomy under
its charter. The Supreme Court decreed that BSP officials, under its
charter, are granted a certain degree of flexibility in the performance
of their duties, and unnecessary interference in their functions should
not be allowed to counterfoil the exercise of their regulatory mandate
(Reyes v. Rural Bank of San Miguel, 2004).

Despite the autonomy bequeathed to BSP and its insulation from interference by other
branches of the government, experience has shown that officers and examiners of BSP
are nonetheless exposed to court litigation for actions they take to carry out their duties
(The Office of the General Counsel and Legal Services: Bangko Sentral ng Pilipinas,
2010). These duties and functions, however, are critical in BSP’s effective performance
of its unique role as agency of monetary policy and financial stability. To begin with, BSP
officers and personnel, in performing their mandate, are already faced with the challenge
of maintaining a delicate balance between the interests of several sectors, such as
the government, the financial sector, the depositing public, the individual banks, and
other stakeholders in the financial system. Having to contend with suits instituted by
private parties involving unfounded claims will only complicate or impede the effective
performance of their vital functions. This legal chasm may not have been foreseen by
the constitutional framers, but if the original intent and vision of the 1987 Constitution
Bangko Sentral Review 2014

are to be fulfilled, the constitutional independence granted to BSP and its personnel
should be complemented by, if not a grant of immunity, then at the minimum, enhanced
statutory protection against any liability for lawful acts carried out in good faith while
in the diligent performance of official duties.

1
SEC. 20. The Congress shall establish an independent central monetary authority (1987 Constitution,
Art. XII).
32
Immunity of States and Central Banks
The royal privilege of dishonesty. This is how the doctrine of state immunity is often
adversely unfavorably referred to because of the privilege it grants the State to defeat
any legitimate claim against it by simply raising non-suability. This is hardly fair, at
least in democratic societies, for the State is not a cruel tyrant unaffected by the valid
claims of its citizens (U.S. v. Guinto, 1990). Within its own territory, the doctrine of state
immunity is based on the explanation given by Justice Oliver Wendell Holmes, Jr. that
“there can be no legal right against the authority which makes the law on which said
right depends (Kawanakoa v. Polyblank, 1907).” There are, however, other practical
reasons for the enforcement of the doctrine. In case of foreign states sought to be
sued in local jurisdiction, the restriction is expressed in the Latin maxim par in parem,
non habet imperium.2 All states are sovereign equals and cannot assert authority over
one another. An opposite rule would, in the language of a well-known case, “unduly vex
the peace of nations (De Haber v. Queen, 1851).”

State immunity is used interchangeably with sovereign immunity. Although rigidly

strictly speaking, state immunity is the privilege by which a state may not be sued
in the jurisdiction of another state based on the international customary principle of
sovereign equality (De Haber v. Queen, 1851), while sovereign immunity is the privilege
by which a government may not be sued in its own jurisdiction without its consent (U.S.
v. Mitchell, 1980).

The United States was the first nation to codify the law on foreign sovereign immunity
when it enacted the Foreign Sovereign Immunities Act of 1976 (FSIA).3 The FSIA provides
that, as a general rule, sovereigns receive immunity when exercising the unique powers
of a state (Argentina v. Weltover, 1992). More importantly, the FSIA offers added
protection for traditionally significant sovereign assets such as foreign central banks.
FSIA provides that the property of the central bank is immune from attachment or
execution unless the bank or its parent government has explicitly waived its immunity.4
This is mainly because central banks are viewed as performing critical functions in the
global economy, ensuring that currency markets are stable and providing emergency
assistance in times of financial crisis (Harvard Law Review, 2010).

The English approach, on the other hand, is found in the UK State Immunity Act5 which
states that a central bank’s property shall not be considered as property in use or
intended for use for commercial purposes,6 and therefore, exempted from attachment
or execution.

The European Central Bank (ECB) is another entity enjoying similar immunity. The ECB
is a multinational organization created by the treaty which established the European
Communities and enjoys certain privileges and immunities vis-à-vis European Union
(EU) Member States. The ECB is partly exempt from national laws of its host country
while national authorities are prevented from enforcing laws by means of constraint.
The policy in granting ECB such immunity is to prevent a member state from exerting
undue influence on the organization’s activities, thereby allowing it to perform its tasks
independently and objectively (Gruber & Benisch, 2007).
Bangko Sentral Review 2014

2
Lit. An equal has no power over an equal.
3
Foreign Sovereign Immunities Act of 1976, 28 USCS §§1602-1611.
4
28 USCS §1611(b)(1).
5
State Immunity Act 1978, 17 ILM 1123, Chapter 33.
6
Chapter 33 §14(4).

33
 Unlike in the U.S. where sovereign immunity is derived not from the terms of the Eleventh
Amendment7 but from the overall structure and history of the U.S. Constitution (Alden
v. Maine, 1999), the doctrine of state immunity is specifically found in Article XVI,
Section 3 of the 1987 Philippine Constitution8 and is one of the generally accepted
principles of international law adopted as part of the law of our land.9 This doctrine is
applicable to complaints filed against government officials for acts performed in the
performance of their duties (Shauf v. Court of Appeals, 1990). The doctrine, however, is
not absolute and does not say that the state may not be sued under all circumstances.
To be sure, the rule says that the state may not be sued without its consent, clearly
indicating that it may be sued if the state consents. The consent of the state is given
impliedly or expressly.

Broadly speaking, consent is implied when the state itself initiates litigation or enters
into a contract. This is because when the state sues a private party, it goes down to the
level of a private individual and opens itself to whatever counterclaims or defenses the
latter may have against it (Republic v. Sandiganbayan, 2006). Furthermore, when the
government engages in business, it generally renounces part of its sovereign privileges
and descends to the level of a citizen.10 In case of foreign obligations authorized by law,
the government may even contractually agree to waive its sovereign immunity and be
sued in the appropriate jurisdiction.11

On the other hand, express consent is embodied in a general law or a special law
(Deutsche et al. v. Court of Appeals, 2009). An example of a general law waiving
the immunity of the state from suit is found in Act No. 3083, wherein the Philippine
government “consents to be sued upon any moneyed claim involving liability arising
from contract (US v. Guinto, 1990).” In contrast, consent through a special law can take
the form of the original charter of an incorporated government agency. If the charter
says that the government agency is suable, then this is true regardless of the functions
it is performing. Municipal corporations, for example, like provinces and cities, are
agencies of the state when they are performing governmental functions and should
enjoy the sovereign immunity from suit. Nonetheless, they are subject to suit even in
the performance of such functions because the Local Government Code of 1991 and
their charter say that they can sue and be sued (Deutsche et al. v. Court of Appeals,
2009).

At this point, it should be stressed that BSP falls within the latter category and does
not enjoy immunity from suit. Republic Act No. 765312 forthrightly states that BSP has
the power to sue and be sued13 while the BSP Governor, as the principal representative
of the Monetary Board (MB), is empowered to represent BSP, either personally or
through counsel, in any legal proceedings.14 In the case of Olizon v. Central Bank of the
Philippines (1964), the Philippine Supreme Court ruled that an action against the then
Central Bank (CB) is not considered a suit against the state without its consent. The

7
AMENDMENT XI. The Judicial power of the United States shall not be construed to extend to any suit in
law or equity, commenced or prosecuted against one of the United States by Citizens of another State,
or by Citizens or Subjects of any Foreign State.
8
SEC. 3. The state may not be sued without its consent.
9
SEC. 2. The Philippines renounces war as an instrument of national policy, adopts the generally accepted
principles of international law as part of the law of the land and adheres to the policy of peace, equality,
justice, freedom, cooperation, and amity with all nations (1987 Constitution, Art. II).
Bangko Sentral Review 2014

10
However, the increasing need of sovereign states to enter into purely commercial activities remotely
connected with the discharge of their governmental functions modified this rule so that immunity of the
sovereign is now recognized with regard to public acts or acts jure imperii, but not with regard to private
acts or acts jure gestionis (Republic of Indonesia, et al. v. Vinzon, 405 SCRA 126 [2003]).
11
Sec. 1, Pres. Dec. No.P.D. 1807 (1981), §1 (1981).
12
The New Central Bank Act.
13
The New Central Bank Act, R.A. 7653, §5 (1993).
14
Ibid., §18.
34
Court explained that CB is an entity authorized by its charter to sue and be sued.15 The
consent of the state to be sued, therefore, has already been given. Similarly, Arcega v.
Court of Appeals et al. (1975) echoed the rule that a suit against CB for refund of foreign
exchange tax earlier collected is not a suit against the state. The Court restated that
CB can be sued because the consent of the state had already been granted under its
charter authorizing CB to sue and be sued.

Susceptibility to Suits and Effect on Legal Mandate

As a result of the abovementioned legislative and judicial orders, it is clear that BSP is
not immune to court actions. While there are efforts to amend Republic Act No. 7653
to grant BSP or its officers the privilege of immunity from suit, there are questions on
possible violations of the constitutional provision and public policy on equal protection.
In essence, the doctrine of equal protection envisions equality in the enjoyment of legal
rights and forbids undue favor or class privilege (Ceniza v. COMELEC, 1980). Thus, it
can be argued that the BSP and its officers should be treated in the same manner as
other government officials who do not enjoy immunity from suit. On the other hand, iIt
has been submitted that the rule and exception on civil liability of public officers under
the Revised Administrative Code16 should also apply to the BSP and its officers.17

At present, officers and employees of BSP face numerous cases in their official
capacities in the absence of immunity from suit. These cases are often commenced
under the belief that they committed illegal acts which are not considered acts of state;
and that an action against government officials by an aggrieved party is not a suit against
the state within the mantle of state immunity. Central bankers in the Philippines are
thus confronted with criminal, civil and administrative cases before the Office of the
Ombudsman, Department of Justice (DOJ) and other quasi-judicial or judicial bodies
without the privilege of invoking state immunity.

Unfortunately, the vulnerability of BSP and its personnel to court actions tends to hinder
the efficient performance of official functions. To be sure, the law granted the BSP the
authority to supervise the operations of banks and to exercise regulatory powers over
the operations of finance companies and non-bank financial institutions performing
quasi-banking functions.18 Said power of supervision includes, among others, conducting
examination to determine and oversee compliance with laws and regulations, inquiring
into the institution’s insolvency or liquidity, and enforcing prompt corrective action.19

The current absence of state immunity, however, coupled with fear of being harassed
or sued in court, can impede BSP personnel from effectively performing their functions
as supervisor and regulator since they may be compelled to litigate while carrying out
15
An Act Establishing the Central Bank of the Philippines, R.A. 265, §4 (1948).
16
Administrative Code of 1987, Exec. Ord. No.E.O. 292 (1987).
17
SEC. 38. Liability of Superior Officers. — (1) A public officer shall not be civilly liable for acts done in
the performance of his official duties, unless there is a clear showing of bad faith, malice or gross
negligence.
(2) Any public officer who, without just cause, neglects to perform a duty within a period fixed by law or
regulation, or within a reasonable period if none is fixed, shall be liable for damages to the private party
concerned without prejudice to such other liability as may be prescribed by law.
Bangko Sentral Review 2014

(3) A head of a department or a superior officer shall not be civilly liable for the wrongful acts, omissions
of duty, negligence, or misfeasance of his subordinates, unless he has actually authorized by written
order the specific act or misconduct complained of.
SEC. 39. Liability of Subordinate Officers. — No subordinate officer or employee shall be civilly liable for
acts done by him in good faith in the performance of his duties. However, he shall be liable for willful or
negligent acts done by him which are contrary to law, morals, public policy and good customs even if he
acted under orders or instructions of his superiors.
18
R.A. 7653, §3.
19
The General Banking Law of 2000, R.A. 8791, §4.
35
 their duties. The lack of adequate statutory protection from prosecution can also hinder
the willingness of central bankers to undertake timely action for fear of reprisal by
supervised entities. For the litigants, any perceived shortcomings, whether unfounded or
not, in the performance of official functions may provide additional frivolous grounds for
bank directors and officers to bring suits against BSP officials as further leverage. The
prospect of a vicious cycle of suits and countersuits can serve to hamper examiners’
performance of their duties, and in turn, BSP’s aim of promoting financial stability and
preventing systemic failures of financial institutions will be reduced to sheer rhetoric.
Moreover, the BSP’s goal of fostering smooth and orderly functioning of key players
in the financial system and offering adequate protection to depositors will be merely
illusory (The Office of the General Counsel and Legal Services: Bangko Sentral ng
Pilipinas, 2010).20 To break this vicious circle and enable BSP to effectively fulfill its
legal mandate, it is essential for BSP and its personnel to be informed about their rights
and to be statutorily protected from any liability for lawful acts carried out in good faith
while in the diligent performance of official duties.

Adequate Protection through Legal Indemnification

At this juncture, it should be pointed out that while BSP personnel presently do not
have immunity from suit, central bankers are not completely helpless and may not be
indiscriminately sued or charged with impunity. To begin with, the law authorizes the
MB to protect officials and employees of BSP, especially those performing supervision
and examination functions, against costs and expenses incurred in any civil or criminal
action to which they may be a party due to performance of official functions or duties.21
Hence, BSP officials who become defendants, respondents or the accused in any civil,
administrative or criminal actions due to performance of official functions have the right
to be indemnified for legal expenses incurred in defending themselves. This is intended
to give BSP personnel adequate instruments and legal remedies in defending themselves
if they are sued pursuant to actions required by their duty,22 with the ultimate aim of
removing fears of litigation and ensuring undaunted performance of official functions.

In contrast, the provision on legal indemnification was not found under Section 14 of
Republic Act No. 265;23 as a result, personnel of the then CB who were sued on acts
done in the performance of duties would have to defend their cases by personally
obtaining the services of a lawyer.24 To solve this predicament, the present law granted
legal indemnification so that BSP personnel can now engage the services of an external
counsel or private law firm to represent them and be generally indemnified for the cost
of litigation.25

In BSP’s case, indemnification for legal expenses is provided under the Directors and
Officers Liability Insurance (DOLI) wherein the Government Service Insurance System
(GSIS) is mandated to pay, as insurer, litigation costs incurred due to acts committed
in good faith by the insured in their capacities as directors or officers of government

20
The Bangko Sentral promotes financial stability through supervision of banks and regulation of finance
companies, quasi-banks and other institutions performing similar functions.
21
The exception is when the BSP official or employee is finally adjudged in such action or proceeding to be
liable for negligence or misconduct (R.A. 7653, §15). The charter of the Philippine Deposit Insurance
Bangko Sentral Review 2014

Corporation (PDIC) similarly provides that PDIC’s officials and employees shall be indemnified for costs
and expenses that may arise in connection with the lawful performance of official functions in good faith.
Moreover, PDIC’s officials and employees are held free and harmless to the fullest extent permitted by
law from any liability arising therefrom (Sec. 9(h), Rep. Act No.R.A. 9576, §9(h) [2009]).
22
S. 1235, 9th Cong. (1993).
23
An Act Establishing the Central Bank of the Philippines.
24
H.R. 7037, 9th Cong. (1993); S. 1235, 9th Cong. (1993).
25
Should BSP personnel, however, be adjudged liable for negligence or misconduct, they will be obliged to
reimburse the payments made to them by BSP (S. 1235, 9th Cong. [1993]).
36
corporations and financial institutions.26 DOLI is essentially indemnity coverage for
directors, trustees or officers of government-owned or -controlled corporations who are
sued or included as parties to any action brought against the government agency by
reason of their being directors, trustees or officers.27

The foregoing indemnification is taken from foreign jurisprudence and corporate practice,
whereby a director of a corporation is given assistance when he is sued for action
pursuant to duty.28 Indemnification of legal expenses is based on the principle that a
public agency may compensate public officials acting in good faith for legal expenses
incurred in suits brought against them as a result of acts committed in the discharge
of duties (Messmore v. Kracht, 1912).29 This is because a public officer should not be
held personally liable for an act performed within the scope of his official authority and
in line with his official duty (Moore v. Rose, 1933).

Possible Countersuits against Erring Litigants

In addition to legal indemnification, officers and employees of BSP also have other
weapons in their legal arsenal to discourage unscrupulous suits by party-litigants who
are usually under BSP’s supervisory and regulatory powers.

First, a civil action for damages arising from malicious prosecution may be filed by
aggrieved officers. There is malicious prosecution when a person directly insinuates or
imputes to an innocent person the commission of a crime and the maliciously accused
is forced to defend himself in court (Bayani v. Panay Electric, 2000). While malicious
prosecution generally refers to baseless criminal actions, it has been expanded to also
include groundless civil suits just to annoy and humiliate the defendant despite the
absence of a cause of action (Ponce v. Legaspi, 1992). An action for damages arising
from malicious prosecution is anchored on the provisions of Articles 21, 2217 and
2219 [8] of the Civil Code.30

In order, however, for a case of malicious prosecution to prosper, the plaintiff must
prove: (a) malice; and (b) absence of probable cause. There must be proof that the
prosecution was driven by an evil design to vex and humiliate a person; and that it was
initiated intentionally, knowing that the charge was false and baseless (Premiere Dev’t
Bank v. Central Surety, 2009). In other words, malice and want of probable cause must
both exist in order to justify the action (Lao v. Court of Appeals, 1991).

Second, a party injured by the filing of a court case against him, if he is later on absolved,
may file a case for damages based on the principle of abuse of rights under Article 19
of the Civil Code (Albenson v. Court of Appeals, 1993).

To be liable under the abuse of rights principle, three elements must be present, to
wit: (a) that there is a legal right or duty; (b) which is exercised in bad faith; and (c) for
the sole intent of prejudicing or injuring another (HSBC v. Catalan, 2004). Thus, a right,
26
http://www.gsis.gov.ph/ (last accessed on 05 May 2014).
27
Governance Commission for Government-Owned or -Controlled Corporations (GCG) Memorandum Circular
No. 2012-10 re: Directors’ & Officers’ Liability Insurance, Par. III(5) (2012).
28
S. 1235, 9th Cong. (1993).
Bangko Sentral Review 2014

29
Cited in 63 Am Jur 2d, §548.
ARTICLE 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to
30

morals, good customs or public policy shall compensate the latter for damages.
ARTICLE 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation and similar injury. Though
incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of
the defendant’s wrongful act or omission.
ARTICLE 2219. Moral damages may be recovered in the following and analogous cases: xxx
(8) Malicious prosecution.
37
 though by itself is legally recognized or granted, may nevertheless become the source
of some illegality. When a right is exercised in a manner which does not conform with
the standards found in Article 19 and results in damage to another, a legal wrong is
committed for which the wrongdoer must be held responsible. The absence of good
faith, however, is essential to abuse of right (Albenson, supra).

Third, complainants who are required to execute and to file sworn affidavits before the
Office of the Ombudsman, DOJ or other quasi-judicial and judicial bodies may also be
prosecuted for perjury under Art. 183 of the Revised Penal Code31 since it is doctrinal
that an affidavit to a complaint may give rise to perjury (Union Bank v. People, 1934).

The elements of perjury are: (a) the accused made a statement under oath or executed
an affidavit upon a material matter; (b) the statement or affidavit was made before a
competent officer authorized to receive and administer oath; (c) in that statement or
affidavit, the accused made a willful and deliberate declaration of a falsehood; and
(d) the sworn statement or affidavit containing the false statement is required by law
or made for a legal purpose (Villanueva v. Secretary of Justice, 2005).

A conviction for perjury, however, cannot be sustained upon mere conflicting statements
of the accused. The prosecution must prove which statements are false and must show
the statement to be false by other evidence (Villanueva, supra). If it can be independently
shown that complainants made willful and deliberate assertion of a falsehood in their
affidavits, then they may be prosecuted for perjury.

Lastly, complainants in unfounded suits may also be liable for unjust vexation under Art.
287 of the Revised Penal Code.32 Unjust vexation is broad enough to include any human
conduct that, although not resulting in physical or material harm, could unreasonably
annoy or vex an innocent person. The important question to be considered is whether
the offender’s act caused annoyance, irritation, torment, distress, or disturbance to the
mind of the person to whom it was directed (People v. Sumingwa, 2009).

Accordingly, if it can be proven that the act of instituting cases against public officers
was merely intended to annoy, irritate, vex or torment the latter, then the complainants
may be held liable for unjust vexation.

Limitation on BSP’s Power to Sue

At this point, it should be noted that while BSP has the power to sue and be sued under
its charter,33 the action must be in the name of Bangko Sentral as required under Section
18 of Rep. Act No. 7653. The said power is generally limited to actions instituted in the
name of BSP and not in representation of its officers or employees (Olizon, supra).

To be sure, the power of BSP is limited to enforcement of banking laws and regulations,
and ascertainment of compliance by institutions and persons subject to its supervisory
powers.34 Thus, BSP is only authorized to investigate and prepare the appropriate charges
against those who violated the provisions of the New Central Bank Act, General Banking
Bangko Sentral Review 2014

31
ARTICLE 183. False Testimony in Other Cases and Perjury in Solemn Affirmation. — The penalty of
arresto mayor in its maximum period to prisión correccional in its minimum period shall be imposed upon
any person who, knowingly making untruthful statements and not being included in the provisions of the
next preceding articles, shall testify under oath, or make an affidavit, upon any material matter before a
competent person authorized to administer an oath in cases in which the law so requires.
32
ARTICLE 287. Light Coercions. — xxx
Any other coercions or unjust vexations shall be punished by arresto menor or a fine ranging from 5 to
200 pesos, or both.
33
R.A. 7653, §5.
38 34
R.A. 8791, §§4 & 66; R.A. 7653, §§34-37.
Act and other banking laws, rules and regulations.35 In addition, BSP can transmit to
DOJ the affidavits of witnesses who had personal knowledge on acts constituting the
crimes of perjury or unjust vexation. In the case of Soriano v. Casanova et al. (2006),
the Supreme Court said that BSP can validly transmit to DOJ the affidavits of witnesses
who had personal knowledge of petitioner’s acts constituting the crime of estafa for the
purpose of conducting preliminary investigation. In this case, however, BSP will have to
attach the affidavits of its individual officers in support of the complaint.

Indeed, BSP’s legal authority is limited to the investigation and prosecution of violators
of banking laws and regulations. The persons liable are those responsible for violation of
banking laws being implemented by BSP, as well as any order, rule or regulation issued by
the MB, and includes persons or entities not supervised or regulated by BSP (The Office
of the General Counsel and Legal Services: Bangko Sentral ng Pilipinas, 2010).

The following acts, among others, are in violation of Philippine banking laws, to wit:
(i) making false entries in the bank report or statement, unauthorized disclosure of
funds or properties in the bank’s custody, acceptance of gifts or commission for approval
of loan or credit accommodation, overvaluing of security, or outsourcing of inherent
banking functions by bank officers or agents;36 (ii) fraudulent overvaluing of property,
false misrepresentation of material facts, offering any gift, fee or commission for
approval of loan or credit accommodation by borrowers;37 (iii) conducting business in an
unsafe and unsound manner;38 (iv) unauthorized dividend declaration;39 (v) unauthorized
advertisement or business representation;40 (vi) refusal to make reports or to permit
examination;41 and (vii) making false or misleading statement on a material fact.42

Lastly, BSP’s supervisory power to impose administrative sanctions on directors,

trustees and officers of covered institutions is limited to willful violation of charter or
by-laws, willful making of false or misleading statement to the MB, or willful violation of
banking laws, orders, instruction, or regulation issued by the MB or the BSP Governor,
among others.43

Concluding Remarks
In sum, the BSP currently does not have adequate statutory protection from suit; it
is also not authorized to institute civil cases or criminal actions for perjury and unjust
vexation against complainants who filed unfounded suits against BSP officers. However,
it only is authorized to provide legal indemnification for its officers and employees, and if
warranted, exercise its authority and investigate or prosecute aforesaid complainants for
violation of banking laws and regulations, and impose administrative sanctions against
them if they are found to be erring directors, trustees and officers of covered institutions.
Nonetheless, to fully and effectively carry out its mandate of promoting financial stability
and preventing systemic failures of financial institutions, it remains essential for the
BSP and its personnel to be statutorily protected from any liability for lawful acts carried
out in good faith while in the diligent performance of official duties.

35
BSP Service Manual, Chap. 302.05(a)(3) (2008).
36
R.A. 8791, §55.1.
Bangko Sentral Review 2014

37
Ibid., §55.2.
38
Ibid., §56.
39
Ibid., §57.
40
Ibid., §64.
41
R.A. 7653, §34.
42
Ibid, §35.
43
R.A. 7653, §37. 39
 At the same time, the Supreme Court’s historic proclamation that public officers should
be tolerant of criticism and should not be onion-skinned inevitably becomes more
significant (US v. Bustos, 1918). While there may be some reservations on the strength
of the country’s legal system, it goes without saying that criticism does not authorize
defamation and that a public officer is not barred from recovering damages for acts
exceeding legal bounds (Flor v. People, 2005). More importantly, and with the proposed
enhanced statutory protection to BSP, the Latin phrase nemo me impune lacessit 44 is
a fitting credo in removing the misconception that central bankers are vulnerable and
can be improperly sued with absolute impunity.

References
Books
Gruber, G. & Benisch, M. (2007). Privileges and Immunities of the European Central Bank. Legal Working Papers
Series No. 4. European Central Bank.
The Office of the General Counsel and Legal Services (2010). The New Central Bank Act Annotated. Manila: Bangko
Sentral ng Pilipinas. p.13, 22, 60, 176
The Office of the General Counsel and Legal Services (2011). The General Banking Law Annotated. Manila: Bangko
Sentral ng Pilipinas. p.57

Journal Article
Harvard Law Review (2010). Too Sovereign to be Sued: Immunity of Central Banks in Times of Financial Crisis. Vol.
124:550 p.550-553

Jurisprudence
Albenson Enterprises Corp. v. Court of Appeals, 217 SCRA 16 ( 1993).
Alden v. Maine, 527 U.S. 706 (23 June 1999)
Bayani v. Panay Electric Co., 330 SCRA 759 (2000).
Ceniza et al. v. COMELEC, 95 SCRA 763 (1980).
De Haber v. Queen of Portugal, 17 Q.B. 171 (1851).
Deutsche Gesellschaft Für Technische Zusammenarbeit et al. v. Court of Appeals et al., 585 SCRA 150 (2009).
Flor v. People of the Philippines, 454 SCRA 440 (2005).
George Moore Ice Cream Co. v. Rose, 289 U.S. 373 (1933)
HSBC v. Catalan, 440 SCRA 498 (2004).
Kawanakoa v. Polybank, 205 U.S. 349. (1907)
Messmore v. Kracht, 172 Mich. 120 (1912)
Lao v. Court of Appeals, 199 SCRA 58 (1991).
Olizon v. Central Bank, 11 SCRA 357 ( 1964).
People vs. Sumingwa, 603 SCRA 638 (2009).
Ponce v. Legaspi, 208 SCRA 377 (1992).
Premiere Dev’t. Bank v. Central Surety & Insurance Co., Inc., 579 SCRA 359 (2009).
Republic of Argentina v. Weltover, Inc., 504 U.S. 607 (1992).
Republic of the Philippines et al. v. Sandiganbayan, 484 SCRA 119 (2006).
Reyes v. Rural Bank of San Miguel (Bulacan), Inc., 424 SCRA 135 (2004).
Shauf et al. v. Court of Appeals, 191 SCRA 713 (1990).
Soriano v. Casanova, 486 SCRA 431 (2006).
Union Bank of the Phils. v. People, 667 SCRA 113 (2012).
United States of America et al. v. Guinto et al., 182 SCRA 644 (1990).
United States v. Bustos, 37 Phil. 731 (1918).
United States v. Mitchell, 445 U.S. 535 (15 April 1980)
Villanueva v. Secretary of Justice, 475 SCRA 495 (2005).

Legal Sources
1987 Const., Arts. II, XII & XVI.
Administrative Code of 1987, E.O. 292.
An Act Amending the PDIC Charter, R.A. 9576 (2009).
An Act Establishing the Central Bank of the Philippines, R.A. 265 (1948).
Bangko Sentral ng Pilipinas Service Manual (2008)
Civil Code of the Philippines, R.A. 386 (1950).
Foreign Sovereign Immunities Act of 1976, 28 USCS §§1602-1611.
Governance Commission for GCG Memorandum Circular No. 2012-10 re: Directors’ & Officers’ Liability Insurance
(2012).
H.R. 7037, 9th Cong. (1993).
Manual of Regulations for Banks (2010).
Presidential Decree 1807 (1981).
Bangko Sentral Review 2014

S.1235, 9th Cong. (1993).

State Immunity Act 1978, 17 ILM 1123, Chapter 33.
The General Banking Law of 2000, R.A. 8791.
The New Central Bank Act, R.A. 7653 (1993).
The Revised Penal Code, Act No. 3815 (1930).
U.S. Const., Amend. XI.

Online Sources
FAQs Directors’ and Officers’ Liability Insurance Policy, available at http://www.gsis.gov.ph/ (last accessed on 05
May 2014).

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Lit. No one insults me with impunity; Poe, E (1864).The Cask of Amontillado.