February 6, 2019
facilities at reasonable cost;
We’re just going to talk about the salient features of
the special laws kasi ang dami nila.
REPUBLIC ACT NO. 7906
THE THRIFT BANKS ACT OF 1995
Republic Act No. 7906 allowed the creation of thrift
banks.
Sec. 2. Declaration of Policy. — It is hereby declared
the policy of the State to:
(a) Recognize the indispensable role of the private
sector, to encourage private enterprise, and to
provide incentives to needed investments;
(b) Promote economic development pursuant to the
socioeconomic program of the government, to
expand industrial and agricultural growth, to
encourage the establishment of more private thrift
banks in order to meet the needs for capital, personal
and investment credit or medium- and long-term
loans for Filipino entrepreneurs;
(c) Encourage and assist the establishment of thrift
bank system which will promote agriculture and
industry and at the same time place within easy
reach of the people the medium-and long-term credit
facilities at reasonable cost;
(d) Encourage industry, frugality and the
accumulation of savings among the public, and the
members and stockholders of thrift banks; and
(e) Regulate and supervise the activities of thrift
banks in order to place their operations on a sound,
stable and efficient basis and to curtail or prevent
acts or practices which are prejudicial to the public
interest.
(a) Recognize the indispensable role of the private
sector, to encourage private enterprise, and to
provide incentives to needed investments;
(b) Promote economic development pursuant to the
socioeconomic program of the government, to
expand industrial and agricultural growth, to
encourage the establishment of more private thrift
banks in order to meet the needs for capital, personal
and investment credit or medium- and long-term
loans for Filipino entrepreneurs;
So this is actually catered to small and medium
business enterprises.
(c) Encourage and assist the establishment of thrift
bank system which will promote agriculture and
industry and at the same time place within easy
reach of the people the medium-and long-term credit
(d) Encourage industry, frugality and the
accumulation of savings among the public, and the
members and stockholders of thrift banks; and
(e) Regulate and supervise the activities of thrift
banks in order to place their operations on a sound,
stable and efficient basis and to curtail or prevent
acts or practices which are prejudicial to the public
interest.
Sec. 3. Definition of Terms. — For purposes of
implementing this Act, the following definitions shall
apply:
(a) "Thrift banks" shall include savings and mortgage
banks, private development banks, and stock savings
and loans associations organized under existing laws,
and any banking corporation that may be organized
for the following purposes:
(1) Accumulating the savings of depositors and
investing them, together with capital loans secured
by bonds, mortgages in real estate and insured
improvements thereon, chattel mortgage, bonds and
other forms of security or in loans for personal or
household finance, whether secured or unsecured, or
in financing for homebuilding and home
development; in readily marketable and debt
securities; in commercial papers and accounts
receivables, drafts, bills of exchange, acceptances or
notes arising out of commercial transactions; and in
such other investments and loans which the
Monetary Board may determine as necessary in the
furtherance of national economic objectives;
(2) Providing short-term working capital, medium-
and long-term financing, to businesses engaged in
agriculture, services, industry and housing; and
(3) Providing diversified financial and allied services
for its chosen market and constituencies specially for
small and medium enterprises and individuals.
(b) "Monetary Board" shall mean the Monetary Board
of the Bangko Sentral ng Pilipinas.
(c) "Bangko Sentral" shall refer to the Bangko Sentral
ng Pilipinas created under Republic Act No. 7653.
So what are thrift banks?
"Thrift banks" shall include savings and mortgage
banks, private development banks, and stock savings
and loans associations organized under existing laws,
and any banking corporation that may be organized
for the following purposes xxx
So as you can see, these specialized banks have
particular purposes. If your purpose is not among the
purposes enumerated in this particular law, then you
are not allowed to organize this type of bank.
What are the purposes of these thrift banks?
1) Accumulating the savings of depositors and
investing them, together with capital loans secured
by bonds, mortgages in real estate and insured
improvements thereon, chattel mortgage, bonds and
other forms of security or in loans for personal or
household finance, whether secured or unsecured, or
in financing for homebuilding and home
development; in readily marketable and debt
securities; in commercial papers and accounts
receivables, drafts, bills of exchange, acceptances or
notes arising out of commercial transactions; and in
such other investments and loans which the
Monetary Board may determine as necessary in the
furtherance of national economic objectives;
So this is actually for the madlang people – the
commoners, not for corporations.
(2) Providing short-term working capital, medium-
and long-term financing, to businesses engaged in
agriculture, services, industry and housing; and
So it’s limited to agriculture, services, industry and
housing.
(3) Providing diversified financial and allied services
for its chosen market and constituencies specially for
small and medium enterprises and individuals.
In other words, these are established to promote
entrepreneurship.
Sec. 4. Organization. — A thrift bank shall be
organized in the form of stock corporation. The
Monetary Board shall fix the minimum paid-up capital
of thrift banks in such amount as the Board may
consider necessary for the safe and sound operation
of thrift banks taking into account the development
thrusts of this Act and due protection of the general
public. No thrift bank shall be organized without a
certificate of authority from the Monetary Board.
So organization – it is again, organized in the form of
a stock corporation. There is no bank which is
organized as a non-stock corporation. So all banks
are organized as stock corporations.
What are stock corporations?
Yung mga nag-iissue ng shares. So pag sinabing
stock corporation, the ownership is divided into what
we call “shares of stock”. Pag non-stock corporation,
walang shares of stock na dinidistribute ang
corporation.
The Monetary Board shall fix the minimum paid-up
capital of thrift banks – these are the minimum
capital – ibig sabihin, you cannot establish a bank
without a minimum capital. For you to establish a
thrift bank, you have to have at least 500 million. So
it’s not easy to set-up a bank, you really need to have
money.
MINIMUM PAID-IN CAPITAL FOR THRIFT
BANKS:
HEAD OFFICE IN THE NCR:
 HEAD OFFICE ONLY 500 MILLION
 UP TO 10 BRANCHES 750 MILLION
 11 TO 50 BRANCHES 1 BILLION
 MORE THAN 50 2 BILLION
HEAD OFFICE OUTSIDE NCR:
 HEAD OFFICE ONLY 200 MILLION
 UP TO 10 BRANCHES 300 MILLION
 11 TO 50 BRANCHES 400 MILLION
 MORE THAN 50 800 MILLION
Sec. 6. Bank Management. — In order to maintain
the quality of bank management and afford better
protection to depositors and the public in general, the
Monetary Board may pass upon and review the
qualifications of persons who are elected or
appointed bank directors and officers and disqualify
those unfit. The Monetary Board shall prescribe the
qualifications of bank directors and officers for
purposes of this Section.
Again, the MB is still the one regulating these banks.
They may pass upon the qualifications of persons
who are elected or appointed bank directors and
officers and disqualify those unfit. So the “fit-and-
proper” rule is still applicable.
Sec. 7. Directors and Officers. — At least a majority
of the members of the board of directors of any thrift
bank which may be established after the effectivity
of this Act shall be citizens of the Philippines:
Provided, however, That no appointive or elective
official, whether full-time or part-time, shall at the
same time serve as officer of any thrift bank, except
in cases where such service is incident to financial
assistance provided by the government or a
government-owned or -controlled corporation to the
bank: Provided, further, That in the case of merger
or consolidation duly approved by the Monetary
Board, the limitation on the number of directors in a
corporation, as provided in Section 14 of the
Corporation Code of the Philippines, shall not be
applied so that membership in the new board may
include up to the total number of directors provided
for in the respective articles of incorporation of the
merging or consolidating banks.
So – majority of the members of the Board shall be
citizens.
We have this prohibition that no appointive or
elective official whether full-time or part-time, shall
at the same time serve as officer of any thrift bank.
What are the exceptions where an elective or
appointive official can sit or can be a member of the
board?
 If it is one of the covenants of financial
assistance; and
 In cases of rural banks.
So in rural banks, that’s the only time that an elective
or appointive official can sit as member of the board.
Please take note – even if the law allows them to sit
as members of the board, they have to have
permission from the Civil Service. It’s not automatic.
Sec. 8. Ownership. — At least forty percent (40%) of
the voting stock of a thrift bank which may be
established after the approval of this Act shall be
owned by citizens of the Philippines, except where a
new bank may be established as a result of a merger
or consolidation of existing thrift banks with foreign
holdings in which case, the resulting foreign holdings
shall not be increased but may be reduced and, once
reduced, shall not be increased thereafter beyond
sixty percent (60%) of the voting stock of thrift
banks. The percentage of the foreign-owned voting
stocks shall be determined by the citizenship of
individual stockholders and in case of corporations
owning shares, by the citizenship of each stockholder
in the said corporations.
Any provision of existing laws to the contrary
notwithstanding, stockholdings in a thrift bank shall
be exempt from any ownership ceiling for a period of
ten (10) years from the effectivity of this Act.
Ownership:
 At least 40% of the voting stock – shall be
owned by the citizens of the Philippines;
 The percentage of a foreign-owned stock
shall be determined by the citizenship of
individual stockholders;
 And in case of corporations, by the citizenship
of each stockholder in the said corporations.
So you have to layer it up as to the citizenship of an
individual.
Sec. 10. Powers of Thrift Banks. — In addition to
powers granted it by this Act and existing laws, any
thrift bank may:
(a) Accept savings and time deposits;
(b) Open current or checking accounts: Provided,
That the thrift bank has net assets of at least Twenty
million pesos (P20,000,000) subject to such
guidelines as may be established by the Monetary
Board; and shall be allowed to directly clear its
demand deposit operations with the Bangko Sentral
and the Philippine Clearing House Corporation;
(c) Act as correspondent for other financial
institutions;
(d) Act as collection agent for government entities,
including but not limited to, the Bureau of Internal
Revenue, Social Security System, and the Bureau of
Customs;
(e) Act as official depository of national agencies and
of municipal, city or provincial funds in the
municipality, city or province where the thrift bank is
located, subject to such guidelines as may be
established by the Monetary Board;
(f) Rediscount paper with the Philippine National
Bank, the Land Bank of the Philippines, the
Development Bank of the Philippines, and other
government-owned or -controlled corporations. Said
institutions shall specify the nature of paper deemed
acceptable for rediscount, as well as rediscounting
rate to be charged by any of these institutions; and
(g) Issue mortgage and chattel mortgage
certificates, buy and sell them for its own account or
for the account of others, or accept and receive them
in payment or as amortization of its loan.
Such mortgage and chattel mortgage certificates
shall be issued exclusively in national currency and
exclusively for the financing of equipment loans,
mortgage loans for the acquisition of machinery and
other fixed installations, conservation, enlargement
or improvement of productive properties and real
estate mortgage loans for:
(1) the construction, acquisition, expansion or
improvement of rural and urban properties;
(2) the refinancing of similar loans and mortgages;
and
(3) such other purposes as may be authorized by the
Monetary Board.
A thrift bank shall coordinate the amounts and
maturities of its certificates with those of its loans, so
as to ensure adequate cash receipts for the payment
of principal and interest at the time they become due.
The bank shall accept its own certificates at least at
the actual price of issue, in any prepayment of loans
which mortgage or chattel mortgage debtors may
wish to make: Provided, That the date of maturity of
the certificates is not later than the date on which the
payment would otherwise become due, in the
absence of the aforesaid prepayment;
(h) Purchase, hold and convey real estate under the
same conditions as those governing commercial
banks as specified under Section 25 of Republic Act
No. 337;
(i) Engage in quasi-banking and money market
operations;
(j) Open domestic letters of credit;
(k) Extend credit facilities to private and government
employees: Provided, That in the case of a borrower
who is a permanent employee or wage earner, the
treasurer, cashier or paymaster of the office
employing him is authorized, notwithstanding the
provisions of any existing law, rules and regulations
to the contrary, to make deductions from his salary,
wage or income pursuant to the terms of his loan, to
remit deductions to the thrift bank concerned, and
collect such reasonable fee for his services;
(l) Extend credit against the security of jewelry,
precious stones and articles of similar nature, subject
to such rules and regulations as the Monetary Board
may prescribe; and
(m) Offer other banking services as provided in
Section 72 of Republic Act No. 337 and Republic Act
No. 6426, as amended.
Thrift banks may perform the services under
subsections (b), (d), (e), (g) and (i) only upon prior
approval of the Monetary Board.
Nothing in this Section shall be construed as
precluding a thrift bank from performing, with prior
approval of the Monetary Board, commercial banking
services, or from operating under an expanded
banking authority, nor from exercising, whenever
applicable and not inconsistent with the provisions of
this Act and Bangko Sentral regulations, and such
other powers incident to a corporation.
(j) Open domestic letters of credit;
In fact, thrift banks can open their own letters of
credit. What are letters of credit? You already know
that. Remember the principles letters of credit?
 Independence principle
 Strict compliance principle
(m) Offer other banking services as provided in
Section 72 of Republic Act No. 337 and Republic Act
No. 6426, as amended.
So RA 6426 – Foreign Currency Deposits Act.
So you just have to familiarize the prohibitions,
organization, and the powers of a thrift bank,
because chances are, you might be asked “what kind
of bank has this particular power?”.
Sec. 14. Reserve Requirement Differential. —
Reserve requirement imposed on thrift banks by the
Monetary Board shall enjoy equitable preferential
terms over those imposed on commercial banks:
Provided, That the Monetary Board may change
reserve differentials for the purpose of stimulating
economic growth in the countryside, thereby
promoting national economic development.
This provision is very important, because, when it
comes to reserve requirements, the law gives
preference to thrift banks. Because again, they are
for the small and medium businesses. Because when
it comes to commercial banks, we are talking about
big banking institutions.
Sec. 17. Tax Exemptions. — All thrift banks, whether
created or organized under this Act or in operation as
of the date of effectivity of this Act, shall be exempt
from payment of all taxes, fees and charges of
whatever nature and description, except the
corporate income taxes and local taxes, fees and
charges for a period of five (5) years, counted from
the date of commencement of operations for thrift
banks created under this Act and from the date of the
effectivity of this Act for existing thrift banks.
The incentivized implication of thrift banks – there
are income tax holidays.
Sec. 21. Prohibited Acts. — Without prejudice to any
prosecution under any law which may have been
violated, a fine of not more than Ten thousand pesos
(P10,000) or imprisonment for not less than six (6)
months but not more than ten (10) years, or both, at
the discretion of the court, shall be imposed upon:
(a) Any officer, employee, or agent of a thrift
bank who shall:
(1) Make false entries in any bank report or
statement thereby affecting the financial interest of,
or causing damage to, the bank or any person; or
(2) Without order of a court of competent
jurisdiction, disclose any information relative to the
funds or properties in the custody of the bank
belonging to private individuals, corporations, or any
other entity; or
(3) Accept gifts, fees or commissions or any other
form of remuneration in connection with the approval
of a loan from said bank; or
(4) Overvalue or aid in the overvaluing any security
for the purpose of influencing in any way the action
of the bank on any loan; or
(5) Appear and sign as guarantor, indorser, or surety
for loans granted; or
(6) Violate any provision of this Act.
(b) Any applicant for a loan from, or borrower
of a thrift bank who shall:
(1) Misuse, misapply or divert the proceeds of the
loan obtained by him from its declared purpose; or
(2) Fraudulently overvalue property offered as
security for a loan from said bank; or
(3) Give out or furnish false or willful
misinterpretation of material facts for the purpose of
obtaining, renewing, or increasing a loan extending
the period thereof; or
(4) Attempt to defraud the said bank in the event of
court action to recover the loan; or
(5) Offer any officer, employee or agent of a thrift
bank a gift, fee, commission or other forms of
compensation in order to influence such bank
personnel into approving a loan application; or
Bank," or "Savings and Loan Association," as
part of the name or title of such bank or of such
person, association, or corporation, shall be
punished by a fine of not less than One hundred
pesos (P100), but in no case to exceed Thirty
thousand pesos (P30,000), for each day during which
the said words are so used.
As to prohibitions, technically, they are the same to
the banking prohibitions in the General Banking Law.
(e) Any bank not organized under this Act and any
person, association, or corporation doing the
business of banking, not authorized under this Act or
existing laws which shall use the words
"Development Bank," "Savings Bank," "Mortgage
Bank," "Savings and Mortgage Bank," or "Savings
and Loan Association," as part of the name or title of
such bank or of such person, association, or
corporation, shall be punished by a fine of not less
than One hundred pesos (P100), but in no case to
exceed Thirty thousand pesos (P30,000), for each
day during which the said words are so used.
So in other words, pag may nakikita kayong bank,
let’s say, Virgins Development Bank, Virgins Savings
and Mortgage Bank – the presumption is that that is
actually a thrift bank. So sila lang yung may
karapatang gumamit nitong mga words.

(6) Dispose or encumber the property offered as

security for the loan.

(c) Any examiner, or officer or employee of the

Bangko Sentral or of any department, bureau,
office, branch, or agency of the government
who is assigned to examine, supervise, assist
or render technical service to thrift banks and
who shall connive or aid in the commission of
the same.

(d) Any metropolitan, municipal, or municipal

circuit trial court judge or register of deeds who
shall demand or accept, directly or indirectly,
any gift, fee, commission, or any other form of
compensation in connection with the service, or
shall arbitrarily and without reasonable cause
delay the acknowledgment or administration of
oath or the registration of documents required
to be performed by said judge or by said
register of deeds shall be punished with a fine of
not more than One (1) thousand pesos (P1,000) or
by imprisonment of not more than one (1) year, or
both, at the discretion of the court.

(e) Any bank not organized under this Act and

any person, association, or corporation doing
the business of banking, not authorized under
this Act or existing laws which shall use the
words "Development Bank," "Savings Bank,"
"Mortgage Bank," "Savings and Mortgage

REPUBLIC ACT NO. 7353
RURAL BANK ACT OF 1992
Sec. 2. The State hereby recognizes the need to
promote comprehensive rural development with the
end in view of attaining acquitable distribution of
opportunities, income and wealth; a sustained
increase in the amount of goods and services
produced by the nation of the benefit of the people;
and in expanding productivity as a key raising the
quality of life for all, especially the underprivileged.
Towards these ends, the State hereby encourages
and assists in the establishment of rural banking
system designed to make needed credit available and
readily accessible in the rural areas on reasonable
terms.
Sec. 3. In furtherance of this policy, the Monetary
Board of the Central Bank of the Philippines shall
formulate the necessary rules and regulations
governing the establishment and operation of rural
banks for the purpose of providing adequate credit
facilities to farmers and merchants, or to
cooperatives of such farmers and merchants and in
general, the people of the rural communities, and to
supervise the operation of such banks.
So the Rural Bank Act was implemented to promote
comprehensive rural development with the end in
view of attaining acquitable distribution of
opportunities, income and wealth; a sustained
increase in the amount of goods and services
produced by the nation of the benefit of the people;
and in expanding productivity as a key raising the
quality of life for all, especially the underprivileged.
So this is actually designed to make credit readily
available and accessible in the rural areas.
When we talk about rural banks, we are referring to
the rural banks in the rural areas. So there will be
credit available for the farmers, for them to actually
use for their livelihood.
Sec. 4. No rural bank shall be operated without a
Certificate of Authority from the Monetary Board of
the Central Bank. Rural banks shall be organized in
the form of stock corporations.
Upon consultation with the rural banks in the area,
duly established cooperatives and corporations
primarily organize to hold equities in rural banks may
organize a rural bank and/or subscribe to the shares
of stock of any rural bank:
Provided, That a cooperative or corporation owning
or controlling the whole or majority of the voting
stock of the rural bank shall be subject to special
examination and to such rules and regulations as the
Monetary Board may prescribe.
With exception of shareholdings of corporations
organized primarily to hold equities in rural banks as
provided for under Section 12-C of Republic Act 337,
as amended, and of Filipino-controlled domestic
banks, the capital stock of any rural bank shall be
fully owned and held directly or indirectly by citizens
of the Philippines or corporations, associations or
cooperatives qualified under Philippine laws to own
and hold such capital stock: Provided, That any
provisions of existing laws to own and hold such
capital stock: Provided, That any provision of existing
laws to the contrary notwithstanding, stockholdings
in a rural bank shall be exempt from any ownership
ceiling for a period of ten (10) years from the
approval of this Act:
Provided, further, That any such exemption shall
require the approval of the Monetary Board. If
subscription of private shareholders to the capital
stock of rural cannot be secured or is not available,
or insufficient to meet the normal credit needs of the
locality, the Land Bank of the Philippines, the
Development Bank of the Philippines, or any
government-owned or controlled bank or financial
institution, on representation of the said private
shareholders but subject to the investment
guidelines, policies and procedures of the bank or
financial institution and upon approval of the
Monetary Board of the Central Bank, shall subscribe
to the capital stock of such rural bank, which shall be
paid in full at the time of subscription, in an amount
equal to the fully paid subscribe and unimpaired
capital of the private stockholders or such amount as
the Monetary Board may prescribed as may be
necessary to promote and expand rural economic
development:
Provided, however, That such shares of stock
subscribe by the Land Bank of the Philippines, the
Development Bank of the Philippines or any
government-owned or controlled bank or financial
institution may be sold at any time at market value
to private individuals who are citizens of the
Philippines:
Provided, finally, That in the sale of shares of stock
subscribed by the Land Bank of the Philippines, the
Development bank of the Philippines or any
government-owned or controlled bank or financial
institution, the registered stockholders shall have the
right of preemption within one (1) year from the date
of offer in proportion to their respective holdings, but
in the absence of such buyer, preference, however,
shall be given to residents of the locality or province
where the rural bank is located.
Again, they shall be organized as a corporation.
There is no bank in the Philippines that is not a stock
corporation.
Sec. 5. All members of the Board of Directors of the
rural bank shall be citizens of the Philippines at the
time of their assumption to office: Provided,
however, That nothing in this Act shall be construed
as prohibiting any appointive or elective public official
from serving as director, officer, consultant or in any
capacity in the bank.
No Director or officer of any rural bank shall, either
directly or indirectly, for himself or as the
representative or agent of another borrow any of the
deposits or funds of such banks, nor shall he become
a guarantor, indorser, or surety for loans from such
bank to others, or in any manner be an obligor for
money borrowed from the bank or loaned by it except
with the written approval of the majority of the
directors of the bank, excluding the director
concerned.
Any such approval shall be entered upon the records
of the corporation and a copy of such entry shall be
transmitted forthwith to the appropriate supervising
department. The director/officer of the bank who
violates the provisions of this section shall be
immediately dismissed from his office and shall be
penalized in accordance with Section 26 of this Act.
The Monetary Board may regulate the amount of
credit accommodations that may be extended
directly to the directors, officers or stockholders of
rural banks of banking institutions. However, the
outstanding credit accommodations which a rural
bank may extend to each of its stockholders owning
two percent (2%) or more of the subscribed capital
stock, its directors, or officers shall be limited to an
amount equivalent to the respective outstanding
deposits and book value of the paid-in capital
contributions in the bank.
Now, it’s only for rural banks that any appointive or
elective public official is authorized to serve as
director, officer or consultant, or in any capacity of
the bank.
Diba no other banks allow any appointive or elective
official to be an officer or director.
What are the exceptions?
You have:
 Rural banks; and
 If it is in relation to a financial assistance –
yung may mga covenants – yung may mga
loan tapos may stipulations and conditions.
Those are the only 2 exceptions wherein an elective
or appointive public official can render service to the
bank and be their directors, consultants or officers.
Sec. 6. Loans or advances extended by rural banks
organized and operated under this Act shall be
primarily for the purpose of meeting the normal
credit needs of farmers, fishermen or farm families
owning or cultivating land dedicated to agricultural
production as well as the normal credit needs of
cooperatives and merchants. In granting of loans,
the rural bank shall give preference to the application
of farmers and merchant whose cash requirements
are small.
Loans may be granted by rural banks on the security
of lands without Torrens Title where the owner of
private property can show five (5) years on more
peaceful, continuous and uninterrupted possession in
concept of owner;
or of portions of friar land estates or other lands
administered by the Bureau of Lands that are
covered by sales contracts and the purchase have
paid at least five (5) years installment thereon,
without the necessity of prior approval and consent
by the Director of lands;
or of portions of other estates under the
administration of the Department of Agrarian Reform
or other government agency which are likewise
covered by sales contracts and the purchasers have
paid at least five (5) years installment thereon,
without the necessity of prior approval and consent
of the Department of Agrarian Reform or
corresponding government agency;
or of homesteads or free patent lands pending the
issuance of titles but already approved, are issued,
the provisions of any law or regulations to the
contrary notwithstanding:
Provided, That when the corresponding titles are
issued, the same shall be delivered to the Register of
Deeds of the province where such lands are situated
to the annotation of the encumbrance:
Provided, further, That in the case of lands pending
homestead of free patent titles, copies of notices for
the presentation of the final proof shall also be
furnished the creditor rural bank and, if the borrower
applicants fail to present the final proof within thirty
(30) days from date of notice, the creditor rural bank
may do so for them at their expense:
Provided, furthermore, That the applicant for
homestead or free patent has already made
improvements on the land and the loan applied for is
to be used for further development of the same or
for other productive economic activities:
Provided, finally, That the appraisal and verification
of the status of a land is a full responsibility of the
rural bank and any loan granted on any land which
shall be found later to be within the forest zone shall
be for the sole account of the rural bank.
The foreclosure of mortgage covering loans granted
by rural banks and executions of judgment thereon
involving real properties levied upon by a sheriff shall
be exempt from the publications in newspaper now
required by law where the total amount of loan,
excluding interest due and unpaid, does not exceed
One hundred thousand pesos (P100,000) or such
amount as the Monetary Board may prescribe as may
be warranted by prevailing economic conditions.
It shall be sufficient publication in such cases if the
notices of foreclosure and execution of judgment are
posted in the most conspicuous area of the municipal
building, the municipal public market, the rural bank,
the barangay hall, the barangay public market, if
any, where the land mortgaged is situated during the
period of sixty (60) days immediately preceding the
public auction or execution of judgment. Proof of
publication as required herein shall be accomplished
by an affidavit of the sheriff or officer conducting the
foreclosure sale or execution of judgment and shall
be attached with the records of the case:
Provided, That when a homestead or free patent is
foreclosed, the homesteader or free patent holder, as
well as his heirs shall have the right to redeem the
same within one (1) year from the date of the
registration of the foreclosure in the case of land
covered by a Torrens Title: Provided, finally, That in
any case, borrowers, especially those who are mere
tenants, need only to secure their loans with the
procedure corresponding to their share.
A rural bank shall be allowed to foreclose lands
mortgaged to it: Provided, That said lands shall be
covered under Republic Act No. 6657.
So what are the loans granted to the farmers?
The loans shall be primarily for the purpose of
meeting the normal credit needs of farmers,
fishermen or farm families owning or cultivating land
dedicated to agricultural production as well as the
normal credit needs of cooperatives and merchants.
So, rural banks can just actually extend loans for
these particular purposes and no other. So hindi
pwedeng mag-aaply ka ng loan sa rural bank kasi
bibili ka ng car. Hindi pwede mag-aaply ka ng loan
kasi bibili ka ng condo. No.
In granting of loans, the rural bank shall give
preference to the application of farmers and
merchant whose cash requirements are small.
What is the policy of having to establish this
particular bank? Imagine kung walang ganitong
bank, saan pupunta yung ating mga farmer? Dun sila
pupunta sa mga bombay kung saan may “5-6”.
That’s why this is established for their benefit. Kasi it
would give them their readily needed credit lines for
them to support their livelihood.
Sec. 12. In addition to the operations especially
authorized in this Act, any rural bank may:
a. Accept saving and time deposit;
b. Open current or checking accounts, provided the
rural bank has net assets of at least Five million
(P5,000,000) subject to such guidelines as may be
established by the Monetary Board:
c. Act as correspondent for other financial
institutions;
d. Act as a collection agent;
e. Act as official depositary of municipal, city or
provincial funds in the municipality, city or province
where it is located, subject to such guidelines as may
be established by the Monetary Board;
f. Rediscount paper with the Philippine National Bank,
the Land Bank of the Philippines, the Development
Bank of the Philippines, or any other banking
institution, including its branches and agencies. Said
institution shall specify the nature of paper deemed
acceptable for rediscount, as well as the rediscount
rate to be charged by any of these institutions;
g. Offer other banking service as provided in Section
72 of Republic Act No. 337, as amended, and
h. Extend financial assistance to public and private
employees in accordance with the provisions of
Section 5 of Republic Act No. 3779, as amended.
With written permission of the Monetary Board of the
Central bank, any rural bank may act as trustee over
estates or properties of farmer and merchants.
Nothing in this section shall be construed as
precluding a rural bank from performing, with prior
approval of the Monetary Board, all the services
authorized and mortgage banks, of for commercial
banks, under an expanded banking authority as
provided in Section 21-B of the same Act.
Baka sabihin niyo “Sir, ang yaman naman ng mga
farmers and merchants, meron silang mga estate.”
Pwede ba yon? Pwede naman – baka na-bargain
through CARP.
Sec. 26. Without prejudice to any prosecution under
any law which may have been violated a fine of not
more than ten thousand pesos (P10,000) or
imprisonment of not less than six (6) months but not
more than ten (10) years, or both, at the discretion
of the court, shall imposed upon:
 25:10
a. Any officer, employee, or agent of a rural bank
who shall:

1. Make fake entries in any bank report or statement

thereby affecting the financial interest of or causing
damage to, the bank or any person;

2. Without order of a court of competent jurisdiction,

disclose any information relative to the funds or
properties in the custody of the bank belonging to
private individuals, corporations, or any other entity;

3. Accept gifts, fees or commission or any other form

of remuneration in connection with the approval of a
loan from said bank; or

4. Overvalue or aid in overvaluing any security for

the purpose of influencing in any way the action of
the bank on any loan; or

5. Appear and sign as guarantor, indorser, or surety

for loans granted; or

6. Violate any of the provisions of this Act.

b. Any applicant for a loan from, or borrower of a

rural bank who shall:

1. Misuse, misapply, or divert the proceeds of the

loan obtained by him from its declared purpose; or

2. Fraudulently overvalue property offered as

security for loan from said bank; or

3. Give out or furnish false misrepresentation of

material facts for the purpose of obtaining, renewing,
or increasing a loan or extending the period thereof;
or

4. Attempt to defraud the said bank in the event of

court action to recover a loan; or

5. Offer any officer, employee, or agent of a rural

bank as a gift, fee, commission, or other form of
compensation in order to influence such bank
personality in approving an application; or
6. Dispose or encumber the property or the crops
offered as security for the loan.

c. Any examiner, or officer or employee of the Central

Bank of the Philippines or other department, bureau,
office, branch or agency of the Government who is
assigned to examine, supervise, assist or render
technical services to rural banks and who shall
connive or aid in the commission of the same.

Prohibitions – similar to your thrift banks. Familiarize

yourself with these.

Let’s go to – Repubic Act No. 9520.


CHAPTER XII
COOPERATIVE BANKS
What is RA 6938? It is actually the Cooperative
Code which grants the power for the cooperative
bank to exist.
Please take note— that the cooperative bank is still
under the supervision of the Monetary Board— the
BSP through the Monetary Board.
RA 9520; ARTICLE 95 of RA 6938
ARTICLE 95. Governing Law. – The provisions of this
Chapter shall primarily govern cooperative banks
registered under this Code and the other provisions
of this Code shall apply to them only insofar as they
are not inconsistent with the provisions contained in
this Chapter.
DEFINITION
COOPERATIVE BANKS are organized for the
primary purpose providing a wide range of services
to cooperatives and their members.
The Cooperative Bank is mainly for the members of
a cooperative so there can be no cooperative bank if
there is no cooperative in the first place. Please take
note of that.
ARTICLE. 96. Supervision. – The cooperative banks
registered under this Code shall be under the
supervision of the BSP.
The BSP, upon consultation with the Authority and
the concerned cooperative sector, shall formulate
guidelines regarding the operations and the
governance of cooperative banks. These guidelines
shall give due recognition to the unique nature and
character of cooperative banks. To this end,
cooperative banks shall provide financial and banking
services to its members.
It is still the BSP that supervises the cooperative
bank.
ARTICLE 97. Organization, Membership and
Establishment of a Cooperative Bank. –
Cooperative organizations duly established and
registered under this Code may organize a
cooperative bank, which shall likewise be considered
a cooperative registrable under provisions of this
Code subject to the requirements and requisite
authorization from the BSP.
Only one cooperative bank may be established
in each province: Provided, That an additional
cooperative bank may be established in the
same province to cater to the needs in the same
province to cater to the needs of the locality
depending on the economic conditions of the
province as may be determined by the
BSP: Provided, further, That the additional
cooperative bank shall be located in the City or
municipality other that the city or municipality
where the first cooperative bank is located.
(2) Membership in a cooperative bank shall
either be regular or associate.
Regular membership shall be limited to
cooperative organizations which are holders of
common shares of the bank.
Associate members are those subscribing and
holding preferred shares of the bank, which may
include but are not limited to the following:
"(a) Individual members of the bank’s member-
primary cooperatives; and
"(b) Samahang Nayon and Municipal Katipunan ng
mga Samahang Nayon (MKSN) which held common
shares of cooperative banks prior to the effectivity of
this Act shall apply for conversion to full-pledged
cooperatives in order to maintain their status as
regular members of cooperative banks: Provided,
That they shall notify the cooperative bank concerned
their intention to convert within a period of ninety
(90) days from the effectivity of this Act.
Samahang Nayon and MKSN are hereby given a
period of one (1) year from the effectivity of this Act
to complete their conversion as cooperatives.
Cooperative bank shall exert reasonable efforts to
inform their member Samahang Nayon and MKSN to
finally convert or to give the notice of conversion
within the prescribed period. Upon the failure of the
Samahang Nayon and MKSN to finally convert to a
full-pledged cooperative within the maximum period
of one (1) year, the cooperative bank concerned may
convert the common shares held by such
associations to preferred shares.
"(3) The articles of cooperative and bylaws of a
cooperative bank, or any amendment thereto, shall
be registered with the Authority only when
accompanied by a certificate of authority issued by
the BSP, under its official seal.
GENERAL RULE – only (1) cooperative bank per
province but depending on the needs of the province,
there can be an addition.
the additional cooperative bank shall be located in
the City or municipality other that the city or
municipality where the first cooperative bank is
located – they can’t be in the same municipality or
city.
Membership in a cooperative bank shall either be—
1. Regular; or
2. associate
Regular membership shall be limited to cooperative
organizations which are holders of common shares of
the bank.
ARTICLE. 100. Powers, Functions and Allied
Undertakings of Cooperative Banks. –
A cooperative bank shall primarily provide
financial, banking and credit services to
cooperative organizations and their members.
However, the BSP may prescribe appropriate
guidelines, ceilings and conditions on borrowing of a
cooperative organization from a cooperative bank.
The powers and functions of a cooperative bank
shall be subject to such rules and regulations
as may be promulgated by the BSP.
In addition to the powers granted by this Code
and other existing laws, any cooperative bank
may perform any or all of the banking services
offered by other types of banks subject to the
prior approval of the BSP.
If you’re going to put it in a table—
Thrift bank towards small & medium
Rural bank The farmers, fisherman and their family
Cooperative bank Their cooperative organizations
Those are the distinctions.
The government actually incentivize the creation of a
cooperative bank.
ARTICLE 102. Privileges and Incentives of
Cooperative Banks. –
The cooperative banks registered under this Code
shall be given the same privileges and incentives
granted to the rural banks, private development
bank, commercial banks, and all other banks to
rediscount notes with the BSP, the Land Bank of the
Philippines, and other government banks without
affecting in any way the provisions of this Code.
They also have tax exemptions.
AN ACT PROVIDING FOR THE REGULATION OF
THE ORGANIZATION AND OPERATION OF
NON-STOCK SAVINGS AND LOAN
ASSOCIATIONS
RA 8367
SECTION 2. Declaration of policy. — It is hereby
declared the policy of the State to:
a) encourage industry, frugality and the
accumulation of savings, and judicious
utilization of credit among the members of non-
stock savings and loan associations;
b) regulate and supervise the activities of non-stock
savings and loan associations in order to place their
operations on a sound, stable, and efficient basis to
the end that they may be able to better provide for
the establishment of additional savings and credit
facilities in a fair manner to their members and to
curtail or prevent acts or practices of these
Associations which are prejudicial to their members'
interest;
c) lay down the minimum requirements and the
standards under which non-stock savings and
loan Associations may organize and operate;
and d) maximize the protection of members of
non-stock savings and loan associations
against misfeasance and malfeasance of the
trustees and officers thereof.
DEFINITION
businesses, individuals
NON-STOCK SAVINGS AND LOAN
ASSOCIATION shall mean a non-stock, non-profit
corporation engaged
and theirinmembers
the business of accumulating
the savings of its members and using such
accumulations for loans to members to service the
needs of the households by providing long term
financing for home building and development and for
personal finance.
[SECTION 3, (a)]
These nonstock saving and loan association, these
are actually catered to an association. Mostly these
are employees of the same company. It’s like a
provident fund. For those who have worked, it’s like
a provident fund wherein when one employee dies
the money goes to him. It’s similar to that.
These are catered to associations.
ORGANIZATION
At least (5) but not more than (15) members of a
well-defined group as provided herein may form an
Association under this Act. An Association, prior to
transacting any business, shall secure a license from
the Monetary Board and register with the Securities
and Exchange Commission (SEC).
The Association shall confine its membership to a
well-defined group of persons and shall not transact
business with the general public.
You have your thrift bank, small business
enterprises, you have your rural bank, the fisherman,
the fisher folk and their families, you have your
cooperatives, you have your non-stock savings loan
associations, these are for a well-defined group.
Please take note of the definition—
A "well-defined group" shall be defined by the
Monetary Board, and shall consist of, but not be
limited to, any of the following—
1) employees, officers, and directors of one
company, including member-retirees;
2) government employees belonging to the same
department/branch/office, including member-
retirees; and
3) immediate members of the families (up to second
degree of consanguinity or affinity) of those falling
under paragraphs 1 and 2 above.
As you can see, they are from the same group, either
same employees of a corporation, they are the same
employees of a government agency. These can be
related to provident fund, if you’ve tried working for
government, or worked for an institution that has
these following benefits, which are deducted, it’s not
mandatory. Actually, in labor, you cannot deduct it
unless it’s for tax, union dues under a collective
bargaining agreement, if there is prior consent, etc.
What a provident fund does is that you’re not
required to join the association but most of you join
because what happens is that there are officers, what
the employees contribute they invest it somewhere
else. And they’ll give you the right to know where the
particular money is if you need it, and if someone
dies then the hefty sum goes to him for the funeral
expenses this is what you call non-stock savings and
loan association.
Associations whose articles of incorporation and
bylaws were approved and registered prior to the
effectivity of this Act and which allow membership
coverage broader than the foregoing definition, shall
be allowed to continue as such, unless otherwise
required by the Monetary Board.
Please take note that when you talk about non-stock
savings and loan association it must be in reference
to a well-defined group.
SECTION 5. Tax exemption. —
An Association shall be exempt from payment of tax
in respect to income it receives, including interest on
its deposits with any bank:
Provided, however, That income derived from any of
its properties, real or personal, or any activity
conducted for profit, regardless of the disposition
thereof, is subject to the corresponding internal
revenue taxes imposed under the National Internal
Revenue Code.
Interest earnings on deposits of members with
Associations as well as the shares of its members
from the net income of the Associations shall be
exempt from income tax.
This is your Section 30 of the NIRC because an
association is one of those listed. There’s an
enumeration right?
Any activity conducted for profit is subject to income
tax.
POWERS
 The Association shall accept deposits from
and grant loans only to its members, subject
to such rules and regulations as the Monetary
Board may promulgate to ensure sound, stable
and efficient operation: Provided, That no
deposits shall be sourced or deducted from the
loans granted to a member without his or her
written consent.
Please take note – the Association shall accept
deposits from and grant loans only to its
members – only to its members.
Any Association may—
a) charge reasonable interest and collect such
necessary fees and charges incidental to the grant of
loans;
b) invest its funds in any sound non-speculative
enterprises as well as in bonds, security, and other
obligations issued by the Government of the
Philippines, or any of its political subdivisions,
instrumentalities, or corporations including
government-owned or -controlled corporations,
subject to the rules and regulations of the Monetary
Board;
c) allow members to participate in the profits of the
Association;
d) borrow money or incur such obligations not
exceeding twenty percent (20%) of the total assets
of the Association, from any lending institution. The
Monetary Board, may, in meritorious cases, raise the
ceiling on the borrowing capacity of an Association to
an amount not exceeding thirty percent (30%) of its
total assets: Provided, That any such Association
organized by employees of an entity or corporation
may borrow funds from said entity or corporation but
not viceversa: Provided, further, That the number of
the Association's creditors shall not exceed nineteen
(19) at any one time;
e) maintain deposits with banks: Provided, That the
amount of such deposits shall be subject to the loan
limit to a single borrower as prescribed herein or by
other special laws or regulations;
f) require the employer-entity or corporation to
provide it with adequate office space within which it
can conduct its business; and
PLEASE TAKE NOTE— it can demand
adequate office space, so they’re like a union.
g) engage in death benefit program meant
exclusively for the mutual benefit of its members.
This is what I’m talking about when
someone dies. Someone will email.
There will be a deduction again.
The officers are actually paid their compensation.
COMPENSATION of TRUSTEES, OFFICERS AND
EMPLOYEEES
No trustee, officer, or employee of an Association
shall receive from such Association, and no
Association shall pay to any trustee, officer, or
employee of such Association, any commission,
emolument, gratuity or reward based on the volume
or number of loans made, or based on the interest or
fees collected thereon.
Why? This might abuse this. They might
make a profit out of it. They’ll just
approve any loan since they have a
commission. Take note of the prohibition
Nothing in this section prohibits or limits any of
the following—
a) receipt or payment of salaries of trustees, officers
and employees;
b) receipt of payment of commissions to agents
whether or not based on the volume or number of
loans or on the interest or fees collected thereon; and
c) receipt or payment of bonuses to trustees, officers
or employees if such bonuses are based on the
performance and not on the volume or number of
loans made or on the interest or fees collected
thereon.
All increase in the compensation, in any form, of all
trustees and trustee-officers in excess of ten percent
(10%) thereof per annum shall require the approval
of the Bangko Sentral.
PROHIBITION
a) The provisions of Section 34 of Republic Act No.
7653 shall apply to any agent, manager, or other
officer-in-charge of any Association who willfully
refuses any lawful examination into the affairs of
such Association.
b) The willful making of a false statement or
misleading statement on a material fact to the
Monetary Board or to the director of the department
of the Bangko Sentral charged with the regulation of
Associations or to his examiners shall be punished in
accordance with Section 35 of Republic Act No. 7653.
c) Whenever any Association, person or entity
willfully violates this Act or any order, instruction,
rule or regulation issued by the Monetary Board
applicable to Associations, the persons responsible
for such violation shall be punished in accordance
with Section 36 of Republic Act No. 7653.
d) Whenever any officer, employee, or agent of an
Association accepts gifts, fees or commissions or any
other form of remuneration in connection with the
approval of a loan from said Association; or
overvalues or aids in overvaluing any security for the
purpose of influencing in any way the action of the
Association on any loan, such officer, employee or
agent shall be punished by a fine of not more than
Ten thousand pesos (P10,000) or three times the
loan amount involved, whichever is higher, or
imprisonment for not more than one (1) year, at the
discretion of the court.
e) Whenever any applicant for a loan, or borrower of
an Association fraudulently overvalues property
offered as security for loan from the said Association;
or furnishes false, or makes willful misrepresentation
of material facts for the purpose of obtaining,
renewing, or increasing a loan or extending the
period thereof; or attempts to defraud the said
Association in the event of a court action to recover
a loan; or offers any officer, of a court action to
recover a loan; or offers any officer, employee or
agent of an Association any gift, fee, commission, or
other form of compensation in order to influence such
Association personnel into approving a loan
application; such applicant or borrower shall be
punished by a fine of not more than Five thousand
pesos (P5,000) or three times the loan amount
involved, whichever is higher, or imprisonment for
not more than one (1) year, at the discretion of the
court. f) Whenever any examiner, officer or
employee of the Bangko Sentral, who is assigned to
examine, assist or render technical service to an
Association, overvalues or aids in overvaluing any
security for the purpose of influencing in any way the
action of the Association on any loan or connives or
aids in the commission of the same, he shall be
punished by a fine of not more than (P10,000) or
three times the loan amount involved, whichever is
higher, or imprisonment for not more than one (1)
year, at the discretion of the court.
REPUBLIC ACT 3591
AN ACT ESTABLISHING THE PHILIPPINE
DEPOSIT INSURANCE CORPORATION,
DEFINING ITS POWERS AND DUTIES AND FOR
OTHER PURPOSES
PDIC is government instrumentality created in 1953
by virtue of RA 3591 to insure the deposits of all
banks which are entitled to the benefits of insurance.
In case the bank closes, you can go to the
PDIC because your deposits are insured.
The latest amendments to RA 3591 are contained in
RA 10846 signed into law on May 23, 2016. RA 10846
empowered PDIC with stronger authorities to protect
the depositing public and promote financial stability.
The new law also includes important provisions to
ensure that the PDIC remains financially and
institutionally strong to fulfill its mandate under its
charter.
The PDIC now has the authority to help depositors
have quicker access to their insured deposits should
their bank close; resolve problem banks while still
open; hasten the liquidation process for closed
banks; and mete out stiffer sanctions and penalties
against those who engaged in unsafe and unsound
banking practices.
Remember, the MB (Monetary Board)
doesn’t have exclusive jurisdiction over the
bank, it is shared with the PDIC. PDIC is
given the power especially if it’s under
receivership.
The PDIC is an attached agency of the Department
of Finance.
Membership of banks to PDIC is mandatory hence
all operating banks are members of the PDIC.
Please take note— it is mandatory for
all banks to be a member of the PDIC.
STATE POLICY
 PDIC exists to provide deposit insurance
coverage for the depositing public to promote
public confidence and stability to the economy.
If you are a depositor and you deposit
money to the bank, what if closes? Who will
insure my money? To whom will I run to if
the bank mismanages it? There are
penalties, put the officers in jail. In the end
of the day, I will have no money. So where
will I go?
That’s why there’s PDIC to act as insurer of
the deposits. That’s basically the mandate
of PDIC.
 It ensures prompt payment of insured deposits,
exercises complementary supervision of banks,
adopts responsive resolution methods, and
applies efficient management of receivership and
liquidation functions.
In other words, the PDIC acts as a
deposit insurer. So, all deposits that are
in the bank are insured. They are a co-
regulator of banks. Again, the MB or the
BSP doesn’t have exclusive jurisdiction
as to banks.
FUNCTIONS OF THE PDIC
1. DEPOSIT INSURER
2. CO-REGULATOR OF BANKS
3. RECIEVER AND LIQUIDATOR OF CLOSED
BANKS
If you go to banks, there’s a maximum coverage of
insurance.
PDIC’S MAXIMUM DEPOSIT INSURANCE
COVERAGE
 EFFECTIVE JUNE 1, 2009 – the maximum
deposit insurance coverage is 500, 000 per
depositor.
PLEASE TAKE NOTE per depositor. Per person.

Let’s say I have 3M, maximum 500, 000 so I’ll make
6 bank accounts. No, because it’s per depositor. So
if you have 3M, you make 6 accounts and it gets
closed, you can only go after the PDIC for a
maximum of 500, 000 pesos. Please take note that.
All deposit accounts by a depositor in a close bank
maintained in the same right and capacity shall be
added together.
Those accounts must be in the same
right and capacity to be consolidated. If
you have one bank joint with the
husband/wife, it will not be consolidated
because you do not put those deposits in
the same right and capacity. It will only
be in the same right and capacity that it
will be consolidated as one.
Under RA 9576, PDIC may propose to adjust the
MDIC, subject to the approval of the President of the
Philippines, in case of a condition that threatens the
monetary and financial stability of the banking
system that may have systemic consequences.
This is also one of the monetary policies to ensure
that the public has the confidence of the banking
system of the Philippines.
What constitutes insured deposit?
INSURED DEPOSIT— means the amount due to
any bona fide depositor for legitimate deposits in an
insured bank net of any obligation of the depositor to
the insured bank as of the date of closure but not to
exceed P500, 000.
Please take note—if you have a deposit of
3M but you have a loan of 2M, you will net
it – net of any obligation of the depositor to
the insured bank as of the date of closure
but not to exceed P500, 000.
The maximum coverage is still 500, 000.
A joint account shall be insured separately from any
individually owned deposit.
-because you do not own this in the
same right and capacity.
RA 9576 stipulates that PDIC will not pay deposit
insurance for the ff. accounts or transactions—
 Investment products such as bonds, securities,
and trust accounts
 Deposit accounts which are unfunded, fictitious
or fraudulent
 Deposit products constituting or emanating from
insurance and unsound banking practices
 Deposits that are determine to be proceeds of an
unlawful activity as defined under the Anti-Money
Laundering Act.
Please take note when it comes to insured deposits,
we are talking about deposits only not other
investments, securities. We are just talking about
deposits, savings deposit, time deposit. It does not
talk about any other type of deposit.
What types of deposits are insured by PDIC?
 Except for the exclusions stipulated in RA 9576,
deposits of all commercial banks, savings and
mortgage banks, rural banks, private
development banks, cooperative banks, savings
and loan associations, as well as branches and
agencies in the Philippines of foreign banks and
all other corporations authorized to perform
banking functions in the Philippines, are insured
with PDIC.
As for Philippine banks with branches outside the
country, RA 9576 stipulates that subject to the
approval of the Board of Directors, any insured
bank with branch outside the Philippines may
elect to include for insurance its deposit
obligations payable at such branch.
Let’s say BDO opened in China.
It’s only optional for branches
outside the Philippines but it’s
mandatory within the Philippines.
 Foreign currency deposits are also insured by
PDIC pursuant to RA 6426 (“An act instituting a
foreign currency deposit system in the
Philippines, and for other purposes”) and Central
Bank (CB) Circular No. 1389. Depositors may
receive payment in the same currency in which
the insured deposit is denominated.
If you have dollar deposits, that’s also included in the
term insured deposits not only Philippine currency
deposits. There are also foreign currency deposits as
insured deposits.
Chanyee, Kathia Kierstin
FATCA OVERVIEW FROM INTERNET KAY
INAUDIBLE MOST PARTS
The Foreign Account Tax Compliance Act (FATCA)
is an important development in U.S. efforts to
combat tax evasion by U.S. persons holding
accounts and other financial assets offshore. The
Treasury Department and the IRS continue to
develop guidance concerning FATCA. For current
and more in-depth information, please visit FATCA.
 Under FATCA, certain U.S. taxpayers holding
financial assets outside the United States must
report those assets to the IRS on Form 8938,
Statement of Specified Foreign Financial Assets.
There are serious penalties for not reporting these
financial assets (as described below). This FATCA
requirement is in addition to the long-standing
requirement to report foreign financial accounts on
FinCEN Form 114, Report of Foreign Bank and
Financial Accounts (FBAR) (formerly TD F 90-
22.1).
FATCA will also require certain foreign financial
institutions to report directly to the IRS
information about financial accounts held by U.S.
taxpayers or by foreign entities in which U.S.
taxpayers hold a substantial ownership interest.
The reporting institutions will include not only
banks, but also other financial institutions, such as
investment entities, brokers, and certain insurance
companies. Some non-financial foreign entities will
also have to report certain of their U.S. owners.
Therefore, if you set up a new account with a
foreign financial institution, it may ask you for
information about your citizenship. FATCA
provides special (and lessened) reporting
requirements about the U.S. account holders of
certain financial institutions that do not solicit
business outside their country of organization and
that mainly service account holders resident within
it.
In order to qualify for this favorable treatment,
however, the local foreign financial institution
cannot discriminate by declining to open or
maintain accounts for U.S. citizens who reside in
the country where it is organized.
Maraming mayayaman noon na may accounts sa
British Virgin Islands, in the Bahamas, in Cayman
Islands, in Switzerland. Now these islands pumunta
ka dun, wala naman tong resources, wala naman
tong industry. Bat baa ng yaman2 because these
financial institutions na humahawak ng mga pera ng
mga mayayaman from US, from UK etc.
So these regulations is actually for purposes of
improving the (inaudible) of persons by _ from
outside the US FATCA which require that all foreign
financial institutions (FFIs) and other qualified
institutions to report their financial accounts held by
US persons to US IRS(the equivalent of our BIR).
So the policy behind this is to have access to
international investment opportunities and may take
part in their account. Reporting requirements of FFIs
ensure that US taxpayers who have access to
international investment opportunities and maintain
_ accounts are placed in equal footing with US
taxpayers who choose to invest in the US and hold
on short accounts and whose income is reported by
the US (inaudible) kasi kay inencourage yung nag
financial consultant/adviser kami, to set up an
offshoot account in the Bahamas or in the British
islands.
So now in this, the purpose of this is, walang
jurisdiction si IRS. That’s practically it. The purpose
nitong FATCA is to place them in equal footing dun
sa may mga offshore accounts; it gives jurisdiction
to the IRS pertaining to these particular accounts.
Who are affected by FATCA?
The reporting requirements of FATCA formally
applies to FFIs.
What are FFIs?
Foreign Financial Institutions
So yung Banko sa British Virgin Islands, sa Cayman
Islands, sila yung affected which includes banks,
investment companies, custodians which includes
even insurance companies.
Unless FFIs are deemed compliant whatsoever
(inadudible)
Question: O sige Sir, meron na syang jurisdiction.
Anong magagawa nya? Pwede nya bang ipakulong?
Pwede nya bang ipasara ang banko doon sa British
Virgin Islands? Eh wala naman syang jurisdiction
because criminal laws are territorial in nature, has no
jurisdiction.
So ano ang pwede niyang gawin?
Pag hindi ka nagcomply with the FATCA, all
remittances, syempre yung investor nasa US, you
remit dun sa Cayman island will be subject to 30%
withholding if you are not compliant.
So kung mag iinvest ako ng 100 million, iwiwithdraw
nila ang 30 so 70 million lang ang mapupunta don sa
British Virgin Island. So yun yong magiging
punishment kung hindi ka magcocomply.
So let’s define the FFI.
An FFI is a foreign entity that accepts deposits in
the ordinary course of banking or a similar
business such as banks and credit unions. Holds
financial assets for the account of others as a
substantial portion of its business such as
brokerages or custodians. (internet definition)
1. Non US entity(?) but accepts deposits in the
ordinary course of banking (inaudible) as a
substantial portion of its business
 2. Holds the financial assets of the company as
a trustee,
3. Conducts as a business one form of
(inaudible) So hindi kay manual iyang
operations, individual like yung portfolio
management, yung mga mutual fund
companies, otherwise investing in behalf of
other persons.
4. For an insurance company that issues or is
obligated to make payments with respect to
the cash value like yung mga insurance
contracts
So that is why when you try to apply for an insurance,
andaming mga questions, otherwise all remittance
coming from abroad is subject to withholding
accounts.
So what is its impact on individuals and
businesses?
On an annual basis, Banks and other Financial
Organisations will be required to report
information on financial accounts held directly or
indirectly by
US Persons.
So this was actually enacted in the US. Mejo
nagkagulo ang financial industry because it
destroyed the strategies they have made for the
previous years. I offshore, lahat i-offshore.
FFIs should be liable for reporting financial accounts
of held by these persons. As FATCA requires should
implement procedures that should allow them to
correct all departmental information and
documentation from their customers to identify these
persons, individual person may be subject to
additional monitoring procedure that is why si BDO
can be considered an FFI because it is a foreign
financial institution with respect to the US.
So that is why may mga new on board procedures.
Kung mag open ka ng account, you are required to
fill-out several forms for FATCA compliance.
So there’s a completion of verification forms for US
Tax Status.
So who are considered US persons?
1. A citizen of the US, including an individual
born in the US but resident in another
country (who has not given up their US
citizenship)
2. A person residing in the US, including US
green card holders
3. Certain persons who spend a significant
number of days in the US each year
4. US Corporations, US Partnerships, US
estates and US trusts
A citizen or lawful resident
So US green card holder. FATCA kana. So you are
subject to kana.
So who are US green card holders here? (lol green-
minded lang sir)
Alright partnerships or corporations organized under
the laws of the US xxx inaudible na kayo huhu (taas
kayo huhu but naa sa box ang internet nako na
research hai)
So ito yun, with this FATCA compliance, ang nag
operation are the FFIs, yung mga institution na
foreign. Let’s say BPI, BDO, Phil-am Life, insurance
companies, sila yung may direct obligation to
disclose directly to the IRS.
The problem here is that they have to have individual
agreements with the IRS. And ano pa bang ibang
problem. Kunwari data privacy, ito kaylangan ng
consent before you can have an account.
So those are the implications for these FFIs.
Now, because of this, pumasok si BIR. Nakialam xxx
nakinabang naman ako. In my end, kung ako si BIR.
Wait, if you have information of foreign accounts,
kung ako din I might get information from US
accounts which otherwise, I don’t have because I
don’t have jurisdiction. So baka pwede din akong
makinabang. So we have inter governmental
agreements (IGAs) that is within the xxx
An IGA is an agreement between the US and
specific countries to build FATCA compliance into
the country’s legal framework so that the country
can implement FATCA.
An IGA will require financial institutions to provide
the information on US accounts which they hold
either:
1. directly to the IRS
2. to the local tax authority of the resident
country
So previously by the Pinoy administration, so
nagchange ang administration, it was endorsed again
by President Duterte. So these are in effect treaties
which require concurrence of the Congress.
Now on July 15, 2013, xxx so under the
Intergovernmental agreement Picketing Financial
institutions or PFIs will report will report derivatives
or xxx accounts of US persons to the BIR.
So instead of directly reporting to the IRS, they will
report to the BIR. Now the IRS will either transmit to
the BIR relevant information on US accounts of
Philippine residents. So there is actually sharing of
information.
Okay, I will collate all information and give it to IRS
and in return the IRS will also give me information of
Philippine residents that have US accounts.
So how does these IGAs facilitate PFI compliance?
1. It eliminates the obligation of each PFI to
enter into ang FFI agreement with the IRS
2. It simplifies due diligence procedures
3. And there is what we call “deemed compliant”
So it eliminates the 30% withholding tax and
payments to PFIs. You are considered deemed
compliant when they submit data to the BIR xxx and
carving out from a significant number of PFIs.
So with this, some FFIs previously considered will be
carved(unsa daw, mao akong madunggan).
So you know this term “carving out” is common to
other jurisdictions. It means exceptions, parang
carve outs ang tawag nyan.
So what is a PFI? Registration of a PFI. We have this.
xxx banks, they are considered PFIs. So even if it is
only a branch of a foreign banking institution, but it
is located in the Philippines. They are also considered
PFIs.
So they are required to report to the BIR.
So please take note, what are the information that
may be reported to the BIR.
Under the Inter-govermental agreement:
1. Name
2. Address
3. US Tin
4. Account number
If you are a dual citizen, you need to have a TIN. So
kung wala kang work dun, SSS. May isa ka talaga
nyan.
5. The name and account number of the
reporting financial institution
6. Account Balance
Please take note, the account balance.
So my problem is that this will be another exception
to the bank secrecy law because in effect, in
complying with the IGA, you are violating the bank
secrecy law. So this is what happened in TRAIN law.
Have you seen the House Bill versus the Senate Bill
version?
The Senate bill had this provision that the CIR has
the authority to inquire into the deposits within any
written permission of the depositor. Kinopya ng
Senate Bill pero ultimately di sya lumabas sa final
kasi what will happen? That is an implied repeal of
the Bank Secrecy law.
But I think in the Package 2, the TRAIN law is 5
packages yan. Yung TRAIN I, that’s package 1.
So if you come to think of it, the TRAIN law, is it really
conducive for business, are we really inviting
investors to invest here if you provide those sunset
provisions. And diba, ano yung mga preferential rate,
tinanggal na nila because at the end of the day, ano
ba talaga ang gusto? Is it really to streamline or
collect money?
Are all financial accounts covered by FATCA?
NO. There are certain financial account which are
considered low risk. Bu then again you have to
report that. That is for that particular account.
So when does the PFI transmit their final
report?
Now up to this day, President Digong transmitted it
to the Senate, December 2016 pa lang. Pero up to
this day, it hasn’t been confirmed. So alams na.
So malamang ang mga legislators meron din sila
accounts somewhere else. So wala that’s not
effective. Ang ginagawa ngayon is the financial
institution directly reporting to the IRS.
So at this point, si BIR hindi pa nya alam talaga yung
mga financial accounts in the US.
So let’s discuss the Law on Secrecy of Bank Deposits.
Republic Act 1405. So we have to master 3 things:
1. Law on Secrecy of Bank Deposits
2. Foreign Currency Deposits Act
3. AMLA
So the trend now in the bar exam is andami talaga
nyan. Let’s check ha.
208, 2017, 2015, 2013 may tanong. 2012 may
tanong.
So that’s the trend now. Andami tanong on money
laundering.
So let’s discuss your law on foreign secrecy bank
deposit. The policy behind this to encourage the
people to deposit their money in the banking
institution and to discourage xxx so that these will be
properly utilized by the banks xxx. So basically, this
was enacted for the public to have confidence to have
confidence.
In fact if you try to read the general banking law,
what are the prohibitions?
It is for the officers or directors to disclose any
information regarding the depositors.
So what is the coverage of this particular law?
All deposits of whatever nature with banks and
banking institutions in the Philippines including
investments in banks which are absolutely
confidential in nature.
And may not be examined, inquired or looked into by
any person, government official, bureau, or office
except: xxx
Please memorize the exceptions.
1. Written permission of the depositor.
2. Cases of impeachment
3. upon order of a competent court in cases of
bribery or dereliction of duty of public officials
4. cases where the money deposited or invested
is the subject matter of the litigation
Section 3. It shall be unlawful for any official or
employee of a banking institution to disclose to any
person other than those mentioned in Section two
hereof any information concerning said deposits
So what are the penalties?
Section 5. Any violation of this law will subject
offender upon conviction, to an
1. imprisonment of not more than five years
or
2. a fine of not more than twenty thousand
pesos
3. or both, in the discretion of the court.
So the law is actually very brief. Sabi nila na it’s
absolutely confidential. And you have these carve
outs.
So what happened in Ejercito v Sandiganbayan?
EJERCITUO v. SANDIGANBAYAN
GR No. 157294-95
FACTS
Joseph Victor G. Ejercito (petitioner herein), in his
motion to quash the subpoenas duces tecum and ad
testificandum, argued that his trust accounts are
protected by the secrecy afforded by RA No. 1405.
Moreover, since plunder is neither bribery or
dereliction of duty, his accounts are not removed
from the protection of RA No. 1405. By these
reasons, the specific identification of documents
including details on dates and amounts, was a result
of the illegal disclosures by Export and Industry Bank
and the PDIC as receiver of Urban. The disclosure
being illegal, the prosecution cannot be allowed to
use the information
ISSUE
Whether or not plunder is similar to bribery, thus,
excepted from Absolute Confidentiality Rule under RA
No. 1405.
RULING
YES. The Supreme Court said, cases for plunder
involved unexplained wealth. Section 2 of RA No.
7080 defines plunder as one committed by a public
officer who, by himself or in connivance with
members of his family, amasses, accumulates or
acquires ill-gotten wealth through a combination or
series of overt or criminal acts.
Section 1(d)(2) of RA No. 7080 provides that “ill-
gotten wealth” shall mean any asset, property,
business enterprises or material possession of any
public officer acquired by him, directly or indirectly,
by any combination or series of schemes which
include, among other things, “receiving, directly or
indirectly, any commission, gift, share, percentage,
kickbacks or any other form of pecuniary benefit from
any person and/or entity in connection with any
government contract or project or by reason of the
office or position of the public officer concerned.
An examination of the overt or criminal acts as
described in Section 1(d) of RA No. 7080 would make
the similarity between plunder and bribery even
more pronounced since bribery is essentially included
among these criminal acts. Since plunder is
analogous to bribery, the exception to RA No. 1405
applicable to cases of bribery must also apply to
cases of plunder.
Therefore, plunder cases like bribery are not covered
by the secrecy afforded by RA No. 1405.
Is it trusts accounts? So sabi nila hindi daw siya
deposits under the Bank Secrecy Laws? Is it covered?
Answer: It is covered by RA 1405. Even if it is a trust
account, it is still considered as a deposit citing
Section 1 and 2 of RA 1405.
Section 1. It is hereby declared to be the policy of
the Government to give encouragement to the
people to deposit their money in banking
institutions and to discourage private hoarding so
that the same may be properly utilized by banks in
authorized loans to assist in the economic
development of the country.
Under Section 2, there is already a prescription since
it provides that:
Section 2. 1 All deposits of whatever nature with
banks or banking institutions in the Philippines
including investments in bonds issued by the
Government of the Philippines, its political
subdivisions and its instrumentalities, are hereby
considered as of an absolutely confidential nature
and may not be examined, inquired or looked into
by any person, government official, bureau or
office, except upon written permission of the
depositor, or in cases of impeachment, or upon
order of a competent court in cases of bribery or
dereliction of duty of public officials, or in cases
where the money deposited or invested is the
subject matter of the litigation.
Trust Accounts are included. The deposits mentioned
in the laws is broad enough to cover anything
deposited which the bank may use for authorized
persons only. So please take note of that.
How about the contention that plunder is not among
the exceptions?
Answer: (It is still covered by the exception. The
Court ruled that plunder is a and in fact, it is an
examination to their similarities and in)
So plunder is applied.
How about the applications of the Fruit of the
Poisonous Tree?
Answer: (The exclusionary rule does not apply in this
case since it is provided that RA 1405, nowhere does
it provide that, )
So hindi siya inapply. Please take note. This is very
peculiar. Hindi inapply ang fruit of the poisonous tree
sa RA 1405 because ang sabi ng Court…
Answer: It does not provide in RA 1405. In fact,
Section 5 provides that:
Section 5. Any violation of this law will subject
offender upon conviction, to an imprisonment of
not more than five years or a fine of not more than
twenty thousand pesos or both, in the discretion of
the court.
It’s very interesting. So parang in effect hindi na siya
applicable to special laws. It doesn’t provide that
particular provision. So hanggang doon lang siya.
Very interesting.
PNB vs. Gancayco:
PNB v. GANCAYCO
GR No. L-18343
FACTS
Here, defendants Emilio A. Gancayco and Florentino
Flor, as special prosecutors of the Department of
Justice, required the Philippine National Bank to
produce at a hearing the records of the bank deposits
of Ernesto T. Jimenez, former administrator of the
Agricultural Credit and Cooperative Administration,
who was then under investigation for unexplained
wealth.
Now, in declining to reveal its records, the PNB
invoked Republic Act No. 1405 which provides:
SEC. 2. All deposits of whatever nature with banks or
banking institutions in the Philippines including
investments in bonds issued by the Government of
the Philippines, its political subdivisions and its
instrumentalities, are hereby considered as of an
absolutely confidential nature and may not be
examined, inquired or looked into by any person,
government official, bureau or office, except upon
written permission of the depositor, or in cases of
impeachment, or upon order of a competent court in
cases of bribery or dereliction of duty of public
officials, or in cases where the money deposited or
invested is the subject matter of the litigation.
Further, in brief, PNB averred that section 8 of the
Anti-Graft Law "simply means that such bank
deposits may be included or added to the assets of
the Government official or employee for the purpose
of computing his unexplained wealth if and when the
same are discovered or revealed in the manner
authorized by Section 2 of Republic Act 1405, which
are (1) Upon written permission of the depositor; (2)
In cases of impeachment; (3) Upon order of a
competent court in cases of bribery or dereliction of
duty of public officials; and (4) In cases where the
money deposited or invested is the subject matter of
the litigation."
ISSUE
Whether or not PNB can be compelled to disclose the
records of accounts of Jimenez who is under
investigation for unexplained wealth.

RULING
YES. The Supreme Court said, cases of unexplained
wealth are similar to cases of bribery or dereliction of
duty and there is no reason to treat them differently
from bribery or dereliction of duty, which cases are
expected from the protection of confidentiality. The
policy as to one cannot be different from the policy
as to the other. These policies express the principle
that a public office is a public trust and any person
who enters upon its discharge does so with the full
knowledge that his life, so far as relevant to his duty,
is open to public scrutiny.
Therefore, PNB can be compelled to disclose the
records of accounts of Jimenez who is under
investigation for unexplained wealth, being that it is
not covered by the secrecy afforded by RA No 1405.
Take Note: RA No. 3019 and RA No. 1405 are so
repugnant to each other that no reconciliation is
possible. While RA 1405 provides that bank deposits
are “absolutely confidential and therefore may not be
examined, inquired or looked into, except in those
cases enumerated therein,” RA No. 3019, on the
other hand, directs in MANDATORY terms that bank
deposits “shall to be taken into consideration in the
enforcement of this section, notwithstanding any
provision of law to the contrary.” The only conclusion
possible is that Section 2 of RA No. 1405 has been
amended by Section 8 of RA No. 3019, by providing
an additional exception to the rule against the
disclosure of bank deposits.
Last 11 mins
FEBRUARY 6, 2019 – LAST 11 MINUTES
MELLON BANK v. MAGSINO
GR No. 71479
FACTS
Dolores Ventosa requested the transfer of $1,000.00
from first National Bank of Moundsville, West
Virginia, U.S.A. to Victoria Javier in Manila through
the Prudential Bank. Accordingly, First National Bank
requested Mellon Bank to effect the transfer.
Unfortunately, the wire sent by Mellon Bank to
Manufacturers Hanover Bank, a correspondent of
Prudential Bank, indicated the amount transferred as
“US $1,000,000.00” instead of $1,000,00. Hence,
Manufacturers Hanover Bank transferred to
Prudential Bank for the account of Victoria Javier one
million dollars, less bank charges of $6.30.
Upon receipt of the wrong amount, Javier opened a
new dollar account in Prudential Bank and deposited
$999,943.70. Immediately thereafter, Javier and her
husband made withdrawals from the account,
deposited them in several banks, and withdrew them
later in an apparent plan to conceal, launder and
dissipate the erroneously sent amount.
Mellon Bank filed a complaint against the Javier
spouses to recover the erroneously transferred
amount.
In due course, subpoenas were issued directing bank
personnel to disclose amounts deposited in several
banks, such as Philippine Veterans Bank and
Hongkong & Shanghai Banking Corporation, in
connection with the deposit trail of the Javier
spouses. The testimonies of the witnesses were
objected to on the ground of confidentiality of these
deposits.
ISSUE
Whether or not the testimonies of the
witnesses were not allowed on the ground of
Absolute Confidentiality Rule under RA No.
1405.
RULING
NO. The SC said, the testimonies of the
witnesses were allowed as these were needed
to establish the scheme to hide the erroneously
sent amount.
Section 2 of said law allows the disclosure of
bank deposits in cases where the money
deposited is the subject matter of litigation.
Here, since the present civil case is aimed at
recovering the amount converted by private
respondents for their own benefit, an inquiry into the
whereabouts of the illegality acquired amount is
necessary. The case clearly involves a situation
where the money deposited was the subject matter
of litigation since the money so deposited was the
very thing in dispute.
Take Note: To be excepted from the coverage of
absolute confidentiality, the money deposited
should be the very thing in dispute.
UNION BANK OF THE PHIL. v. CA
GR No. 134699
FACTS
A check for P1 Million was drawn against an Allied
Bank account. Payee deposited the check with Union
Bank which credited P1 Million to the payee’s
account. Upon clearing, the check was under-
encoded by a staff of Union Bank of P1,000.00 only.
A year later, Union Bank discovered the discrepancy
and notified Allied Bank by way of a charge slip in the
amount of P999,000.00 for automatic debiting. Allied
Bank refused to accept the charge slip claiming that
the transaction was completed according to Union
Bank’s original instruction was completed according
to Union Bank’s original instructions and that the
client’s account was already insufficiently funded.
Union Bank filed a petition for examination of the
Allied Bank account which was alleged to be
insufficiently funded, arguing that the money
deposited therein is the subject matter of the
litigation.
ISSUE
Whether or not the Absolute Confidentiality
Rule under RA No.1405 is applicable in this
case.
RULING
NO. The SC said, Union Bank’s complaint does not
state that the amount sought to be recovered is from
the said Allied Bank account. Rather, it speaks of
P999,000.00 only as an incident of its alleged
opportunity losses and interest resulting from its own
employee’s admitted error in encoding the check.
Accordingly, the subject matter of litigation is not
money deposited in the said account, but rather,
Allied Bank’s alleged violation of Philippine Clearing
House Corporation rules and regulations. Union Bank
is merely fishing for information so it can determine
the culpability of Allied Bank and the amount of
damages it can recover. It does not seek recovery of
the money contained in the deposit. The deposit is
not the subject matter of litigation.
Take Note: Money which is merely incidental to
the main action or collateral relief is not
covered by the exception. Thus, Absolute
Confidentiality Rule applies.
Sir Ong: In other words, the money is not
actually the subject matter of the litigation. The
exceptions do not apply.
BSB GROUP INC. v. GO
GR No. 168644
FACTS
BSB Group, Inc. charged its cashier Sally Go with
qualified theft. It offered the testimony of a Security
Bank representative and the documentary evidence
pertaining to the Security Bank account to prove that
Go deposited the proceeds of alleged stolen checks
to her deposit account I Security Bank.
Go sought to exclude the testimony on the ground of
confidentiality of deposits under RA No. 1405. On the
other hand, BSB argued that said deposit account
contains proceeds of checks that Go fraudulently
appropriated, and thus falls under the exception in
Section of RA No. 1405, meaning that the money
kept in said account is the subject matter of the
litigation.
ISSUE
Whether or not the rule on Absolute
confidentiality under RA No. 1405 is applicable
in this case.

RULING

YES. The SC said, for inquiry to be allowed, the

money deposited in the account must itself be the
subject matter of the action. The subject matter of
the action is determined from the indictment that
charges the offense, and not from the evidence
sought to be admitted by the prosecution.

In this case, in the information filed with the Court,

Go was charged with qualified theft. There was no
material factual allegation in the information
involving the subject checks. Moreover, there was no
mention in the information of the supposed bank
account. Thus, the testimony of the bank
representative on the account cannot be allowed
because it is not the subject matter of the case.