BANKING LAW (R.A. 8791)
Bank must be an open corporation
General Banking Law:
Sec. 3 of the General Banking Law provides that: "Banks" shall refer to entities engaged in
the lending of funds obtained in the form of deposits.”
Sec. 8 of the General Banking Law provides that: “The Monetary Board may authorize the
organization of a bank or quasi-bank subject to the following conditions:
8.1   That the entity is a stock corporation;
8.2   That its funds are obtained from the public, which shall mean twenty (20) or more
persons; and
8.3  That the minimum capital requirements prescribed by the Monetary Board for each
category of banks are satisfied.
No new commercial bank shall be established within three (3) years from the effectivity of
this Act.  In the exercise of the authority granted herein, the Monetary Board shall take into
consideration their capability in terms of their financial resources and technical expertise
and integrity.  The bank licensing process shall incorporate an assessment of the bank’s
ownership structure, directors and senior management, its operating plan and internal
controls as well as its projected financial condition and capital base.”
*To be registered as bank, it must be a stock corporation.
*Banks must obtain funds from the public. Minimum number of depositor is 20 persons.
Nature of Business:
Sec. 2 of the General Banking Law states that: “The State recognizes the vital role of banks
providing an environment conducive to the sustained development of the national economy
and the fiduciary nature of banking that requires high standards of integrity and
performance. In furtherance thereof, the State shall promote and maintain a stable and
efficient banking and financial system that is globally competitive, dynamic and responsive
to the demands of a developing economy.”
Consequences:
1. Sec. 9 of the General Banking Law provides that: “The Monetary Board may
prescribe rules and regulations on the types of stock a bank may issue, including the
terms thereof and rights appurtenant thereto to determine compliance with laws
and regulations governing capital and equity structure of banks; Provided, That
banks shall issue par value stocks only.”
2.
Reason: Vital to industry
3. The word “bank” cannot be used if such person or entity is not engaged in banking
business.
4. It is subject to heavy and close supervision and/or regulation by the Bangko Sentral
ng Pilipinas.
5. Banks must observe highest degree of diligence.
6. Sec. 22 of the General Banking Law states that: “The banking industry is hereby
declared as indispensable to the national interest and, notwithstanding the
provisions of any law to the contrary, any strike or lockout involving banks, if
unsettled after seven (7) calendar days shall be reported by the Bangko Sentral to
the Secretary of Labor who may assume jurisdiction over the dispute or decide it or
certify the same to the National Labor Relations Commission for compulsory
arbitration. However, the President of the Philippines may at any time intervene and
assume jurisdiction over such labor dispute in order to settle or terminate the
same.”
*In DBP v CA, the SC held that while an innocent mortgagee is not expected to conduct
an exhaustive investigation on the history of the mortgagor’s title, in case of a banking
institution, it must exercise due diligence before entering into said contract, and cannot
rely upon on what is or is not annotated on the title.
Cases: China Banking v Lagon; Citibank v Cabangongan
Authority to incorporate and operate:
Sec. 14 of the General Banking Law states that: “The Securities and Exchange Commission
shall not register the articles of incorporation of any bank, or any amendment thereto,
unless accompanied by a certificate of authority issued by the Monetary Board, under its
seal.  Such certificate shall not be issued unless the Monetary Board is satisfied from the
evidence submitted to it:
14.1. That all requirements of existing laws and regulations to engage in the business for
which the applicant is proposed to be incorporated have been complied with;
14.2. That the public interest and economic conditions, both general and local, justify the
authorization; and
14.3. That the amount of capital, the financing, organization, direction and administration,
as well as the integrity and responsibility of the organizers and administrators reasonably
assure the safety of deposits and the public interest.
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The Securities and Exchange Commission shall not register the by-laws of any bank, or any
amendment thereto, unless accompanied by a certificate of authority from the Bangko
Sentral.”
*The articles of incorporation must be accompanied by the favorable recommendation of
the BSP.
Sec. 6 of the General Banking Law provides that: “No person or entity shall engage in
banking operations or quasi-banking functions without authority from the Bangko Sentral:
Provided, however, That an entity authorized by the Bangko Sentral to perform universal or
commercial banking functions shall likewise have the authority to engage in quasi-banking
functions.
The determination of whether a person or entity is performing banking or quasi-banking
functions without Bangko Sentral authority shall be decided by the Monetary Board.  To
resolve such issue, the Monetary Board may; through the appropriate supervising and
examining department of the Bangko Sentral, examine, inspect or investigate the books and
records of such person or entity.  Upon issuance of this authority, such person or entity may
commence to engage in banking operations or quasi-banking function and shall continue to
do so unless such authority is sooner surrendered, revoked, suspended or annulled by the
Bangko Sentral in accordance with this Act or other special laws.
The department head and the examiners of the appropriate supervising and examining
department are hereby authorized to administer oaths to any such person, employee,
officer, or director of any such entity and to compel the presentation or production of such
books, documents, papers or records that are reasonably necessary to ascertain the facts
relative to the true functions and operations of such person or entity.  Failure or refusal to
comply with the required presentation or production of such books, documents, papers or
records within a reasonable time shall subject the persons responsible therefore to the
penal sanctions provided under the New Central Bank Act.
Persons or entities found to be performing banking or quasi-banking functions without
authority from the Bangko Sentral shall be subject to appropriate sanctions under the New
Central Bank Act and other applicable laws.”
Classification of banks:
Sec. 3.2 of the General Banking Law provides that: “Banks shall be classified into:
(a)  Universal banks;
(b)  Commercial banks;
(c)  Thrift banks, composed of:
(i) Savings and mortgage banks;
(ii) Stock savings and loan associations; and
(iii) Private development banks, as defined in the Republic Act No. 7906 (hereafter
the “Thrift Banks Act”);
(d)    Rural banks, as defined in Republic Act No. 73S3 (hereafter the "Rural Banks Act");
(e)     Cooperative banks, as defined in Republic Act No 6938 (hereafter the "Cooperative
Code");
(f)      Islamic banks as defined in Republic Act No. 6848, otherwise known as the “Charter
of Al Amanah Islamic Investment Bank of the Philippines”; and
(g)    Other classifications of banks as determined by the Monetary Board of the Bangko
Sentral ng Pilipinas.”
Distinctions between different kinds of banks:
a. As to Capitalization: They have different minimum capitalization requirements.
b. As to Purpose: Some of the banks have specific purposes and social functions.
c. As to Powers or Functions: There are functions and powers that are not exercised
by one that are exercised by others. Some banks may exercise certain powers only
upon prior approval of the Monetary Board.
*Universal banks can engage into non-allied enterprises. It can also act as an
investment house, thus, it can enter into underwriting commitments and do
underwriting securities.
d. As to who can be directors: Public officers can be directors of Rural Banks while
such officers are prohibited from being directors or officers of other types of banks.
e. As to Incorporators: General Rule: Incorporators must be natural persons.
Exception: In rural banks, it can be organized or established by cooperatives and
corporations primarily organized to hold equities in rural banks.
f. As to Foreign Equity: A rural bank must be wholly owned by Filipinos while other
banks require only 40% Filipino ownership of their voting stocks.
*In RA 6938, majority of the shares must be owned by cooperatives.
g. As to necessity of public offering: Public offering of shares is necessary for domestic
banks seeking authority to act as universal bank while there is no such requirement
for other banks.
Functions of the bank:
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 1. Deposit Functions General Rule: Sec. 2 of Republic Act No. 1405 provides that: “All deposits of whatever
2. Loan Functions 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
Deposit Function: instrumentalities, are hereby considered as of an absolutely confidential nature and may not
be examined, inquired or looked into by any person, governmental official, bureau or
*The relationship created is one of creditor-debtor relation.
office.”
*There is passing of ownership to the bank.
Exceptions:
*The bank can appropriate the deposits without the consent of the depositor.
1. When there is written permission of the depositor or investor;
*Legal compensation can take place because they are mutually creditor-debtor of each
2. Impeachment cases;
other.
3. Upon the order of a competent court in cases of bribery or dereliction of duty of
*Prior to incorporation, the deposits can be named to corporate treasurer. He will held it in
public officials;
trust for the corporation.
4. Upon the order of a competent court in cases where the money deposited or
Depositors:
invested is the subject of litigation;
1. Minors:
5. Upon order of the competent court or tribunal in cases involving unexplained
- They can open bank accounts in their own right provided that they are at least 7
wealth under Sec. 8 of the Anti-Graft and Corrupt Practices Act (R.A. 3019);
years of age; they are able to read and write and have sufficient discretion; they are
6. Upon inquiry by the Commissioner of Internal Revenue for the purpose of
not otherwise disqualified by any other incapacity; and it should only be savings or
determining the net estate of a deceased depositor;
time deposits.
*In case the taxpayer compromised his tax liability by reason of financial incapacity.
* They cannot open checking account nor demand deposits.
7. General Rule: Upon the order of a competent court or in proper cases by the Anti-
2. Married Women:
Money Laundering Council where there is probable cause of money laundering.
- They are allowed to open bank accounts without the assistance of their
Exception: In some instances even without court order.
husbands.
8. Disclosure of the Treasurer of the Philippines for dormant deposits for at least 10
Reason: equality in capacity
years under the Unclaimed Balances Act (R.A. 3936)
*Bank account may be opened by one individual or two or more persons. Whenever two or
*Escheat proceedings
more persons open an account, the same may be an “and/or account” or an “and account”.
General Rule: Fictitious accounts or anonymous accounts are prohibited.
Foreign Currency deposits:
Exception: Foreign currency deposits which may be a numbered account.
*The law requires that necessary measures are undertaken by the bank to record and *Subsequent to secrecy law.
establish the true identity of the depositor. Under the Foreign Currency Deposit Act, there is only one exception and that is: When there
*Joint accounts may be the subject of survivorship agreement whereby the co-depositors is a written consent of depositor.
agree to permit either of them to withdraw the whole deposit during their lifetime and
transferring the balance to the survivor upon the death of one of them. Secrecy of Deposits under the Anti-Money Laundering Law:
Basis: Trust and Confidence
*What is prohibited under the Family Code is donation inter vivos and not donation mortis General Rule: The Anti-Money Laundering Council may inquire into deposits upon order of
causa. the court when there is probable cause that the deposits are related to the crime of
unlawful activities defined in Sec. 3(1) and Sec. 4 of R.A. 9160 as amended by R.A. 9194.
Secrecy of Bank Deposits: Exception: A court order is not even necessary when the offense or unlawful activity
involved is any of the following: 1. Kidnapping for ransom under Article 267 of the Revised
Peso deposits:
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Penal Code; 2. Sections 4, 5, 7, 8, 9, 10, 12, 13, 14, 15, and 16 of the Comprehensive
Dangerous Drugs Act of 2002; and Hi-jacking and other violations under R.A. 6235;
destructive arson and murder, as defined under the Revised Penal Code, as amended,
including those perpetrated by terrorists against non-combatant persons and similar targets.
Garnishment:
General Rule: Bank accounts may be garnished by the creditors of the depositor.
Reason: Not deposits for investment, thus, law on secrecy is not applicable.
Exceptions:
1. Foreign Currency Deposits
*In Salvacion v Central Bank of the Philippines, the SC held that foreign currency
deposits of an American tourist who was found guilty of repeatedly raping a twelve
years old child is subject to garnishment.
2. Those exempt under the Rules of Civil Procedure like provision for the family for
four months
Deposit Insurance:
*All deposits of any bank are insured with the PDIC.
*Obligation to pay the premium lies on the bank.
Risk insured against: closure of banks due to liquidity problems.
*Insured deposit under the law means the net amount due to any depositor for deposits in
an insured bank but should not exceed P250,000. If the depositor has two or more accounts
with the same bank, the maximum coverage of P250,000 pertains to the sum of all such
accounts maintained in the same right and capacity.
*A joint account shall be insured separately from any individual-owned account.
*A joint account held by a juridical person or entity jointly with natural person/s shall be
presumed to belong to the juridical person.
*The aggregate share in all joint accounts is subject to P250,000 threshold.
Loan Function of the Banks:
*A bank shall grant loans and other credit accommodations only in amounts and for the
periods of time essential for the effective completion of the operations to be financed.
Single Borrower’s Limit:
Sec. 35.1 of the General Banking Law provides that: “Except as the Monetary Board may
otherwise prescribe for reasons of national interest, the total amount of loans, credit
accommodations and guarantees as may be defined by the Monetary Board that may be
extended by a bank to any person, partnership, association, corporation or other entity
shall at no time exceed twenty-five percent (25%) of the net worth of such bank. The
basis for determining compliance with single borrower limit is the total credit
commitment of the bank to the borrower.
Sec. 35.2 of the General Banking Law states that: “Unless the Monetary Board prescribes
otherwise, the total amount of loans, credit accommodations and guarantees prescribed in
the preceding paragraph may be increased by an additional ten percent (10%) of the
net worth of such bank provided the additional liabilities of any borrower are adequately
secured by trust receipts, shipping documents, warehouse receipts or other similar
documents transferring or securing title covering readily marketable, non-perishable
goods which must be fully covered by insurance.”
DOSRI ACCOUNTS:
Sec. 36 of the General Banking Law states that: “No director or officer of any bank shall,
directly or indirectly, for himself or as the representative or agent of others, borrow
from such bank nor shall he become a guarantor, endorser or surety for loans from such
bank to others, or in any manner be an obligor or incur any contractual liability to the bank
except with the written approval of the majority of all the directors of the bank, excluding
the director concerned: Provided, That such written approval shall not be required for
loans, other credit accommodations and advances granted to officers under a fringe
benefit plan approved by the Bangko Sentral. The required approval shall be entered upon
the records of the bank and a copy of such entry shall be transmitted forthwith to the
appropriate supervising and examining department of the Bangko Sentral.
Dealings of a bank with any of its directors, officers or stockholders and their related
interests shall be upon terms not less favorable to the bank than those offered to others.
After due notice to the board of directors of the bank, the office of any bank director or
officer who violates the provisions of this Section may be declared vacant and the
director or officer shall be
subject to the penal provisions of the New Central Bank Act.
The Monetary Board may regulate the amount of loans, credit accommodations and
guarantees that may be extended, directly or indirectly, by a bank to its directors,
officers, stockholders and their related interests, as well as investments of such bank in
enterprises owned or controlled by said directors, officers, stockholders and their related
interests. However, the outstanding loans, credit accommodations and guarantees which a
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bank may extend to each of its stockholders, directors, or officers and their related
interests, shall be limited to an amount equivalent to their respective unencumbered
deposits and book value of their paid-in capital contribution in the bank: Provided,
however, That loans, credit accommodations and guarantees secured by assets
considered as non-risk by the Monetary Board shall be excluded from such limit:
Provided, further, That loans, credit accommodations and advances to officers in the form
of fringe benefits granted in accordance with rules as may be prescribed by the
Monetary Board shall not be subject to the individual limit.
The Monetary Board shall define the term “related interests.”
The limit on loans, credit accommodations and guarantees prescribed herein shall not
apply to loans, credit accommodations and guarantees extended by a cooperative
bank to its cooperative shareholders.”
Purpose: To protect the general public from the abuse of the directors, officers,
stockholders and related interests of the bank.
Requisites:
1. The borrower is a director, officer or any stockholder of a bank;
2. He contract a loan or any form of financial accommodation;
3. The loan or financial accommodation is from: a. his bank, or b. a bank that is a
subsidiary of a bank holding company of which both his bank and lending bank are
subsidiaries, c. a bank in which a controlling proportion of the shares is owned by
the same interest that owns a controlling proportion of the shares of his bank; and
4. The loan or financial accommodation of the director, officer or stockholder, singly or
with that of his related interest, is in excess of 5% of the capital and surplus of the
lending bank or in the maximum amount permitted by law, whichever is lower.
Examples:
1. If there is interlocking directors – subject to DOSRI restrictions
2. General partner is either a director, officer, stockholder or related interest of a
lending bank – subject to DOSRI restrictions
3. Stranger applied for a loan and a property was collateral: a. if the property is owned
by stranger alone – not subject to DOSRI restrictions; b. if the property is co-owned
by a director, officer, stockholder or related interest of the bank – subject to DOSRI
restrictions
4. A director, officer, stockholder, or related interests owned more than 20% share in a
corporation (borrower) – subject to DOSRI restriction.
Restrictions:
1. Procedural requirement: The account should be upon written approval of all the
director of the lending bank excluding the director concerned.
2. Arms Length Rule: The account should be upon terms not less favorable to the bank
than those offered to others.
3. Reportorial requirement: The resolution approving the loan shall be entered in the
records of the bank and a copy of the entry shall be transmitted forthwith to the
Supervising and Examination Sector of the BSP.
Foreclosure of Mortgage
Sec. 47 of the General Banking Law provides that: “In the event of foreclosure, whether
judicially or extra-judicially, of any mortgage on real estate which is security for any loan
or other credit accommodation granted, the mortgagor or debtor whose real property
has been sold for the full or partial payment of his obligation shall have the right
within one year after the sale of the real estate, to redeem the property by paying the
amount due under the mortgage deed, with interest thereon at rate specified in the
mortgage, and all the costs and expenses incurred by the bank or institution from the
sale and custody of said property less the income derived there from. However, the
purchaser at the auction sale concerned whether in a judicial or extra-judicial foreclosure
shall have the right to enter upon and take possession of such property immediately
after the date of the confirmation of the auction sale and administer the same in
accordance with law. Any petition in court to enjoin or restrain the conduct of
foreclosure proceedings instituted pursuant to this provision shall be given due course
only upon the filing by the petitioner of a bond in an amount fixed by the court
conditioned that he will pay all the damages which the bank may suffer by the
enjoining or the restraint of the foreclosure proceeding.
Notwithstanding Act 3135,juridical persons whose property is being sold pursuant to
an extra judicial foreclosure, shall have the right to redeem the property in
accordance with this provision until, but not after, the registration of the certificate of
foreclosure sale with the applicable Register of Deeds which in no case shall be more than
three (3) months after foreclosure, whichever is earlier. Owners of property that has
been sold in a foreclosure sale prior to the effectivity of this Act shall retain their
redemption rights until their expiration.”
Prohibited acts of Borrowers:
Sec. 55.2 of the General Banking Law states that: “No borrower of a bank shall -
(a) Fraudulently overvalue property offered as security for a loan or other credit
accommodation from the bank;
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(b) Furnish false or make misrepresentation or suppression of material facts for the purpose
of obtaining, renewing, or increasing a loan or other credit accommodation or extending the
period thereof;
(c) Attempt to defraud the said bank in the event of a court action to recover a loan or
other credit accommodation; or
(d) Offer any director, officer, employee or agent of a bank any gift, fee, commission, or
any other form of compensation in order to influence such persons into approving a loan
or other credit accommodation application.”
Ownership of Banks:
Sec. 11 of the General Banking Law provides that: “Foreign individuals and non-bank
corporations may own or control up to forty percent (40%) of the voting stock of a domestic
bank. This rule shall apply to Filipinos and domestic non-bank corporations.
The percentage of foreign-owned voting stocks in a bank shall be determined by the
citizenship of the individual stockholders in that bank. The citizenship of the corporation
which is a stockholder in a bank shall follow the citizenship of the controlling stockholders of
the corporation, irrespective of the place of incorporation.”
General Rule: Banks are partly nationalized
*The 60% minimum threshold must be satisfied by the bank.
*Filipino ownership – voting stocks owned by Filipinos
Examples:
X bank has 1M voting stocks: 600,000 owned by Filipinos and 400,000 owned by foreigners.
The bank complied with the 60% requirement.
X bank has 1M voting shares: 400,000 owned by Filipinos; 400,000 owned by foreigners and
200,000 owned by Y Corporation.
Q: Does the 60% requirement satisfied?
A: IT DEPENDS. Depending on the citizenship of Y Corporation. If the majority controlling
stockholders are Filipino thus Y Corporation is a Filipino citizen hence the 60% is complied
with. If Y corporation is controlled by a foreigners there is non-compliance of the 60%
requirement.
*The 40% requirement is applicable not only to foreigners but also to individual Filipino
shareholders and domestic non-bank corporation.
*If the corporation acquiring is a bank the 40% threshold is not applicable.
Examples:
600,000 owned by Filipinos; 400,000 owned by foreigners
A – owned 500,000 shares
*A single Filipino stockholders can only own upto 40% of the voting stock of the bank.
A Corporation which is not a banking institution – 500,000 shares
*A domestic non-bank corporation can only own upto 40% of the voting stock of the bank.
800,000 owned by Filipinos; 200,000 owned by foreigners
In the 800,000 owned by Filipinos; 400,000 of which is owned by A and the 200,000 is
owned by A Corporation
In A Corporation, A is a stockholder owning 50% of the controlling stock of A Corporation.
Q: Is this allowed?
A: NO. 50% of 200,000 is indirectly owned by a Filipino individual, the 40% threshold is
violated.
*The 40% threshold includes both direct and indirect ownership of shares of the bank.
Act Liberalizing Entry of Foreign Banks:
Sec. 2 of Republic Act No. 7721 provides that: “The Monetary Board may authorize foreign
banks to operate in the Philippine banking system through any of the following modes of
entry: (i) by acquiring, purchasing or owning up to sixty percent (60%) of the voting stock of
an existing bank; (ii) by investing in up to sixty percent (60%) of the voting stock of a new
banking subsidiary incorporated under the laws of the Philippines; or (iii) by establishing
branches with full banking authority: Provided, That a foreign bank may avail itself of only
one (1) mode of entry: Provided, further, That a foreign bank or a Philippine corporation
may own up to a sixty percent (60%) of the voting stock of only one (1) domestic bank or
new banking subsidiary.”
Sec. 3 of Republic Act No. 7721 states that: “In approving entry applications of foreign
banks, the Monetary Board shall: (i) ensure geographic representation and
complementation; (ii) consider strategic trade and investment relationships between the
Philippines and the country of incorporation of the foreign bank; (iii) study the
demonstrated capacity, global reputation for financial innovations and stability in a
competitive environment of the applicant; (iv) see to it that reciprocity rights are enjoyed by
Philippine banks in the applicant's country; and (v) consider willingness to fully share their
technology. 
Only those among the top one hundred fifty (150) foreign banks in the world or the top five
(5) banks in their country of origin as of the date of application shall be allowed entry in
accordance with Section 2 (ii) and (iii) hereof. 
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In the exercise of this authority, the Monetary Board shall adopt such measures as may be
necessary to: (i) ensure that at all times the control of seventy percent (70%) of the
resources or assets of the entire banking system is held by domestic banks which are at least
majority-owned by Filipinos; (ii) prevent a dominant market position by one bank or the
concentration of economic power in one or more financial institutions, or in corporations,
participations, partnerships, groups or individuals with related interests; and (iii) secure the
listing in the Philippine Stock Exchange of the shares of stocks of banking corporations
established under Section 2(i) and (ii) of this Act: Provided, That said banking corporations
shall establish stock option plans for their officers and employees as the resources or assets
of these corporations may allow in the best business judgment of their respective boards of
directors, pursuant to the Corporation Code of the Philippines.
To qualify to establish a branch or a subsidiary, the foreign bank applicant must be widely-
owned and publicly-listed in its country of origin, unless the foreign bank applicant is owned
by the government of its country of origin.”
General Rule: Foreigners must own only upto 40% of the voting shares of a bank.
Exception: Foreign bank can own upto 60% of the voting shares of a bank.
Directors and Officers:
Composition:
Sec. 15 of the General Banking Law states that: “The provisions of the Corporation Code to
the contrary notwithstanding, there shall be at least five (5), and a maximum of fifteen (15)
members of the board or directors of a bank, two (2) of whom shall be independent
directors. An "independent director" shall mean a person other than an officer or employee
of the bank, its subsidiaries or affiliates or related interests.
Non-Filipino citizens may become members of the board of directors of a bank to the
extent of the foreign participation in the equity of said bank.
The meetings of the board of directors may be conducted through modern technologies
such as, but not limited to, teleconferencing and video-conferencing.”
Sec. 19 of the General Banking Law states that: “Except as otherwise provided in the Rural
Banks Act, no appointive or elective public official whether full-time or part-time shall at
the same time serve as officer of any private bank, save in cases where such service is
incident to financial assistance provided by the government or a government owned
or controlled corporation to the bank or unless otherwise provided under existing laws.”
General Rule: The Board of Directors is composed of 5 to 15 members only.
Exception: In case of merger
Sec. 16 of the General Banking Law provides that: “To maintain the quality of bank
management and afford better protection to depositors and the public in general the
Monetary Board shall prescribe, pass upon and review the qualifications and
disqualifications of individuals elected or appointed bank directors or officers and disqualify
those found unfit.
After due notice to the board of directors of the bank, the Monetary Board may
disqualify, suspend or remove any bank director or officer who commits or omits an act
which render him unfit for the position.
In determining whether an individual is fit and proper to hold the position of a director or
officer of a bank, regard shall be given to his integrity, experience, education, training, and
competence.”
Justification: Police power
Reason: Banking institution is imbued with public interest.
Regulations to maintain liquidity and security:
1. Sec. 34 of the General Banking Law provides that: “The Monetary Board shall
prescribe the minimum ratio which the net worth of a bank must bear to its total
risk assets which may include contingent accounts.
For purposes of this Section, the Monetary Board may require such ratio be
determined on the basis of the net worth and risk assets of a bank and its
subsidiaries, financial or otherwise, as well as prescribe the composition and
the manner of determining the net worth and total risk assets of banks and their
subsidiaries: Provided, That in the exercise of this authority, the Monetary Board
shall, to the extent feasible conform to internationally accepted standards,
including those of the Bank for International Settlements (BIS), relating to risk-
based capital requirements: Provided further, That it may alter or suspend
compliance with such ratio whenever necessary for a maximum period of one (1)
year: Provided, finally, That such ratio shall be applied uniformly to banks of the
same category. In case a bank does not comply with the prescribed minimum ratio,
the Monetary Board may limit or prohibit the distribution of net profits by such
bank and may require that part or all of the net profits be used to increase the
capital accounts of the bank until the minimum requirement has been met The
Monetary Board may, furthermore, restrict or prohibit the acquisition of major
assets and the making of new investments by the bank, with the exception of
purchases of readily marketable evidences of indebtedness of the Republic of
the Philippines and of the Bangko Sentral and any other evidences of indebtedness
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 or obligations the servicing and repayment of which are fully guaranteed by
the Republic of the Philippines, until the minimum required capital ratio has
been restored. In case of a bank merger or consolidation, or when a bank is
under rehabilitation under a program approved by the Bangko Sentral, Monetary
Board may temporarily relieve the surviving bank, consolidated bank, or
constituent bank or corporations under rehabilitation from full compliance with
the required capital ratio under such conditions as it may prescribe. Before the
effectivity of rules which the Monetary Board is authorized to prescribe under
this provision, Section 22 of the General Banking Act, as amended, Section 9 of
the Thrift Banks Act, and all pertinent rules issued pursuant thereto, shall continue
to be in force.”
2. The law imposes limits on loans, credit accommodations and guarantees that may
be extended by banks.
3. Sec. 36 of the General Banking Law states that: “No director or officer of any bank
shall, directly or indirectly, for himself or as the representative or agent of
others, borrow from such bank nor shall he become a guarantor, endorser or surety
for loans from such bank to others, or in any manner be an obligor or incur any
contractual liability to the bank except with the written approval of the majority of
all the directors of the bank, excluding the director concerned: Provided, That
such written approval shall not be required for loans, other credit accommodations
and advances granted to officers under a fringe benefit plan approved by the
Bangko Sentral. The required approval shall be entered upon the records of the
bank and a copy of such entry shall be transmitted forthwith to the appropriate
supervising and examining department of the Bangko Sentral.
Dealings of a bank with any of its directors, officers or stockholders and their
related interests shall be upon terms not less favorable to the bank than those
offered to others.
After due notice to the board of directors of the bank, the office of any bank
director or officer who violates the provisions of this Section may be declared
vacant and the director or officer shall be subject to the penal provisions of the
New Central Bank Act.
The Monetary Board may regulate the amount of loans, credit accommodations
and guarantees that may be extended, directly or indirectly, by a bank to its
directors, officers, stockholders and their related interests, as well as investments
of such bank in enterprises owned or controlled by said directors, officers,
stockholders and their related interests. However, the outstanding loans, credit
accommodations and guarantees which a bank may extend to each of its
stockholders, directors, or officers and their related interests, shall be limited to
an amount equivalent to their respective unencumbered deposits and book
value of their paid-in capital contribution in the bank: Provided, however, That
loans, credit accommodations and guarantees secured by assets considered as
non-risk by the Monetary Board shall be excluded from such limit: Provided,
further, That loans, credit accommodations and advances to officers in the form
of fringe benefits granted in accordance with rules as may be prescribed by
the Monetary Board shall not be subject to the individual limit.
The Monetary Board shall define the term “related interests.”
The limit on loans, credit accommodations and guarantees prescribed herein
shall not apply to loans, credit accommodations and guarantees extended by a
cooperative bank to its cooperative shareholders.”
4. The law imposes restrictions on the value of collaterals on loans.
5. Sec. 41 of the General Banking Law provides that: “The Monetary Board is hereby
authorized to issue such regulations as it may deem necessary with respect to
unsecured loans or other credit accommodations that may be granted by banks.”
6. Sec. 43 of the General Banking Law provides that: “The Monetary Board, may,
similarly in accordance with the authority granted to it in Section 106 of the New
Central Bank Act, and taking into account the requirements of the economy for
the effective utilization of long-term funds, prescribe the maturities, as well as
related terms and conditions for various types of bank loans and other credit
accommodations. Any change by the Board in the maximum maturities, as well
as related terms and conditions for various types of bank loans and other credit
accommodations. Any change by the Board in the maximum maturities shall apply
only to loans and other credit accommodations made after the date of such action.
The Monetary Board shall regulate the interest imposed on micro finance
borrowers by lending investors and similar lenders such as, but not limited to, the
unconscionable rates of interest collected on salary loans and similar credit
accommodations.”
7. Sec. 57 of the General Banking Law states that: “No bank or quasi-bank shall
declare dividends, if at the time of declaration:
57.1 Its clearing account with the Bangko Sentral is overdrawn; or
57.2 It is deficient in the required liquidity floor for government deposits for
five (5) or more consecutive days, or
57.3 It does not comply with the liquidity standards/ratios prescribed by the
Bangko Sentral for purposes of determining funds available for dividend declaration;
or
57.4 It has committed a major violation as may be determined by the Bangko
Sentral.”
8

Other functions of the Bangko Sentral:
A. Emergency Loan
Sec. 84 of the New Central Bank Act states that: “In periods of national and/or
local emergency or of imminent financial panic which directly threaten
monetary and banking stability, the Monetary Board may, by a vote of at least
five (5) of its members, authorize the Bangko Sentral to grant extraordinary
loans or advances to banking institutions secured by assets as defined
hereunder: Provided, That while such loans or advances are outstanding, the
debtor institution shall not, except upon prior authorization by the Monetary
Board, expand the total volume of its loans or investments.
The Monetary Board may, at its discretion, likewise authorize the Bangko
Sentral to grant emergency loans or advances to banking institutions, even
during normal periods, for the purpose of assisting a bank in a precarious
financial condition or under serious financial pressures brought by unforeseen
events, or events which, though foreseeable, could not be prevented by the
bank concerned: Provided, however, That the Monetary Board has ascertained
that the bank is not insolvent and has the assets defined hereunder to secure
the advances: Provided, further, That a concurrent vote of at least five (5)
members of the Monetary Board is obtained.
The amount of any emergency loan or advance shall not exceed the sum of fifty
percent (50%) of total deposits and deposit substitutes of the banking
institution and shall be disbursed in two (2) or more tranches. The amount of
the first tranche shall be limited to twenty-five percent (25%) of the total
deposit and deposit substitutes of the institution and shall be secured by
government securities to the extent of their applicable loan values and other
unencumbered first class collaterals which the Monetary Board may approve:
Provided, That if as determined by the Monetary Board, the circumstances
surrounding the emergency warrant a loan or advance greater than the amount
provided hereinabove, the amount of the first tranche may exceed twenty-five
percent (25%) of the bank's total deposit and deposit substitutes if the same is
adequately secured by applicable loan values of government securities and
unencumbered first class collaterals approved by the Monetary Board, and the
principal stockholders of the institution furnish an acceptable undertaking to
indemnify and hold harmless from suit a conservator whose appointment the
Monetary Board may find necessary at any time.
Prior to the release of the first tranche, the banking institution shall submit to
the Bangko Sentral a resolution of its board of directors authorizing the Bangko
Sentral to evaluate other assets of the banking institution certified by its
external auditor to be good and available for collateral purposes should the
release of the subsequent tranche be thereafter applied for.
The Monetary Board may, by a vote of at least five (5) of its members, authorize
the release of a subsequent tranche on condition that the principal stockholders
of the institution:
(a) furnish an acceptable undertaking to indemnify and hold harmless from suit
a conservator whose appointment the Monetary Board may find necessary at
any time; and
(b) provide acceptable security which, in the judgment of the Monetary Board,
would be adequate to supplement, where necessary, the assets tendered by the
banking institution to collateralize the subsequent tranche.
In connection with the exercise of these powers, the prohibitions in Section 128
of this Act shall not apply insofar as it refers to acceptance as collateral of shares
and their acquisition as a result of foreclosure proceedings, including the
exercise of voting rights pertaining to said shares: Provided, however, That
should the Bangko Sentral acquire any of the shares it has accepted as collateral
as a result of foreclosure proceedings, the Bangko Sentral shall dispose of said
shares by public bidding within one (1) year from the date of consolidation of
title by the Bangko Sentral.
Whenever a financial institution incurs an overdraft in its account with the
Bangko Sentral, the same shall be eliminated within the period prescribed in
Section 102 of this Act.”
B. Appointment of Conservator
Sec. 29 of the New Central Bank Act states that: “Whenever, on the basis of a
report submitted by the appropriate supervising or examining department, the
Monetary Board finds that a bank or a quasi-bank is in a state of continuing
inability or unwillingness to maintain a condition of liquidity deemed adequate
to protect the interest of depositors and creditors, the Monetary Board may
appoint a conservator with such powers as the Monetary Board shall deem
necessary to take charge of the assets, liabilities, and the management thereof,
reorganize the management, collect all monies and debts due said institution,
and exercise all powers necessary to restore its viability. The conservator shall
report and be responsible to the Monetary Board and shall have the power to
overrule or revoke the actions of the previous management and board of
directors of the bank or quasi-bank.
9
 The conservator should be competent and knowledgeable in bank operations
and management. The conservatorship shall not exceed one (1) year.
The conservator shall receive remuneration to be fixed by the Monetary Board
in an amount not to exceed two-thirds (2/3) of the salary of the president of the
institution in one (1) year, payable in twelve (12) equal monthly payments:
Provided, That, if at any time within one-year period, the conservatorship is
terminated on the ground that the institution can operate on its own, the
conservator shall receive the balance of the remuneration which he would have
received up to the end of the year; but if the conservatorship is terminated on
other grounds, the conservator shall not be entitled to such remaining balance.
The Monetary Board may appoint a conservator connected with the Bangko
Sentral, in which case he shall not be entitled to receive any remuneration or
emolument from the Bangko Sentral during the conservatorship. The expenses
attendant to the conservatorship shall be borne by the bank or quasi-bank
concerned.
The Monetary Board shall terminate the conservatorship when it is satisfied that
the institution can continue to operate on its own and the conservatorship is no
longer necessary. The conservatorship shall likewise be terminated should the
Monetary Board, on the basis of the report of the conservator or of its own
findings, determine that the continuance in business of the institution would
involve probable loss to its depositors or creditors, in which case the provisions
of Section 30 shall apply.”
*Experiencing liquidity problems only.
Powers of Conservator:
1. To take charge of the assets, liabilities, and the management thereof;
2. To reorganize the management of the subject bank;
3. To collect all monies and debts due said institutions; and
4. To exercise all powers necessary to restore its viability
Except: Those already perfected
C. Appointment of Receiver
Sec. 30 of the New Central Bank Act provides that: “Whenever, upon report of
the head of the supervising or examining department, the Monetary Board finds
that a bank or quasi-bank:
(a)  is unable to pay its liabilities as they become due in the ordinary course of
business: Provided, That this shall not include inability to pay caused by
extraordinary demands induced by financial panic in the banking community;
(b)  has insufficient realizable assets, as determined by the Bangko Sentral, to
meet its liabilities; or
(c)  cannot continue in business without involving probable losses to its
depositors or creditors; or
(d)  has willfully violated a cease and desist order under Section 37 that has
become final, involving acts or transactions which amount to fraud or a
dissipation of the assets of the institution; in which cases, the Monetary Board
may summarily and without need for prior hearing forbid the institution from
doing business in the Philippines and designate the Philippine Deposit Insurance
Corporation as receiver of the banking institution.
For a quasi-bank, any person of recognized competence in banking or finance
may be designed as receiver.
The receiver shall immediately gather and take charge of all the assets and
liabilities of the institution, administer the same for the benefit of its creditors,
and exercise the general powers of a receiver under the Revised Rules of Court
but shall not, with the exception of administrative expenditures, pay or commit
any act that will involve the transfer or disposition of any asset of the
institution: Provided, That the receiver may deposit or place the funds of the
institution in non-speculative investments. The receiver shall determine as soon
as possible, but not later than ninety (90) days from takeover, whether the
institution may be rehabilitated or otherwise placed in such a condition so that
it may be permitted to resume business with safety to its depositors and
creditors and the general public: Provided, That any determination for the
resumption of business of the institution shall be subject to prior approval of the
Monetary Board.
If the receiver determines that the institution cannot be rehabilitated or
permitted to resume business in accordance with the next preceding paragraph,
the Monetary Board shall notify in writing the board of directors of its findings
and direct the receiver to proceed with the liquidation of the institution. The
receiver shall:
(1) file ex parte with the proper regional trial court, and without requirement of
prior notice or any other action, a petition for assistance in the liquidation of the
institution pursuant to a liquidation plan adopted by the Philippine Deposit
Insurance Corporation for general application to all closed banks. In case of
quasi-banks, the liquidation plan shall be adopted by the Monetary Board. Upon
acquiring jurisdiction, the court shall, upon motion by the receiver after due
notice, adjudicate disputed claims against the institution, assist the enforcement
of individual liabilities of the stockholders, directors and officers, and decide on
other issues as may be material to implement the liquidation plan adopted. The
receiver shall pay the cost of the proceedings from the assets of the institution.
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 (2) convert the assets of the institutions to money, dispose of the same to
creditors and other parties, for the purpose of paying the debts of such
institution in accordance with the rules on concurrence and preference of credit
under the Civil Code of the Philippines and he may, in the name of the
institution, and with the assistance of counsel as he may retain, institute such
actions as may be necessary to collect and recover accounts and assets of, or
defend any action against, the institution. The assets of an institution under
receivership or liquidation shall be deemed in custodia legis in the hands of the
receiver and shall, from the moment the institution was placed under such
receivership or liquidation, be exempt from any order of garnishment, levy,
attachment, or execution.
The actions of the Monetary Board taken under this section or under Section 29
of this Act shall be final and executory, and may not be restrained or set aside
by the court except on petition for certiorari on the ground that the action taken
was in excess of jurisdiction or with such grave abuse of discretion as to amount
to lack or excess of jurisdiction. The petition for certiorari may only be filed by
the stockholders of record representing the majority of the capital stock within
ten (10) days from receipt by the board of directors of the institution of the
order directing receivership, liquidation or conservatorship. The designation of a
conservator under Section 29 of this Act or the appointment of a receiver under
this section shall be vested exclusively with the Monetary Board. Furthermore,
the designation of a conservator is not a precondition to the designation of a
receiver.”
*There is a bank closure.
“Close Now, Hear Later” Scheme:
Sec. 29 of the New Central Bank Act states that: “Whenever, on the basis of a report
submitted by the appropriate supervising or examining department, the Monetary Board
finds that a bank or a quasi-bank is in a state of continuing inability or unwillingness to
maintain a condition of liquidity deemed adequate to protect the interest of depositors and
creditors, the Monetary Board may appoint a conservator with such powers as the
Monetary Board shall deem necessary to take charge of the assets, liabilities, and the
management thereof, reorganize the management, collect all monies and debts due said
institution, and exercise all powers necessary to restore its viability. The conservator shall
report and be responsible to the Monetary Board and shall have the power to overrule or
revoke the actions of the previous management and board of directors of the bank or quasi-
bank.
The conservator should be competent and knowledgeable in bank operations and
management. The conservatorship shall not exceed one (1) year.
The conservator shall receive remuneration to be fixed by the Monetary Board in an amount
not to exceed two-thirds (2/3) of the salary of the president of the institution in one (1)
year, payable in twelve (12) equal monthly payments: Provided, That, if at any time within
one-year period, the conservatorship is terminated on the ground that the institution can
operate on its own, the conservator shall receive the balance of the remuneration which he
would have received up to the end of the year; but if the conservatorship is terminated on
other grounds, the conservator shall not be entitled to such remaining balance. The
Monetary Board may appoint a conservator connected with the Bangko Sentral, in which
case he shall not be entitled to receive any remuneration or emolument from the Bangko
Sentral during the conservatorship. The expenses attendant to the conservatorship shall be
borne by the bank or quasi-bank concerned.
The Monetary Board shall terminate the conservatorship when it is satisfied that the
institution can continue to operate on its own and the conservatorship is no longer
necessary. The conservatorship shall likewise be terminated should the Monetary Board, on
the basis of the report of the conservator or of its own findings, determine that the
continuance in business of the institution would involve probable loss to its depositors or
creditors, in which case the provisions of Section 30 shall apply.”
*No prior hearing is necessary in appointing a receiver and in closing the bank. It is enough
that subsequent judicial review is provided for. Indeed, to require such previous hearing
would not only be impractical but would tend to defeat the very purpose of the law when it
invested the Monetary Board with such authority.
Purpose: To avoid creation of panic from the depositors or public.
Reason: The government has responsibility to see to it that the person dealing with the
bank is protected.
Effects of receivership and liquidation:
1. Suspension of operation
2. The assets under receivership or liquidation shall be deemed in custodia legis in the
hands of the receiver and shall be exempt from garnishment, levy, attachment or
execution
3. Bank is not liable to pay interest on deposits during the period of suspension of
operation
Reason: There is no source of income
4. Banks under liquidation retain their legal personality
*The bank can sue and be sued but any case should be initiated and prosecuted
through the liquidator.
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 5. There will be no preference even if the claimant-depositor obtained a writ of
preliminary attachment.
Supervision of Banks:
Sec. 4 of the General Banking Law states that: “The operations and activities of banks shall
be subject to supervision of the Bangko Sentral. “ Supervision” shall include the
following:
4.1. The issuance of rules of, conduct or the establishment standards of operation for
uniform application to all institutions or functions covered, taking into consideration the
distinctive character of the operations of institutions and the substantive similarities of
specific functions to which such rules, modes or standards are to be applied;
4.2 The conduct of examination to determine compliance with laws and regulations if the
circumstances so warrant as determined by the
Monetary Board;
4.3 Overseeing to ascertain that laws and regulations are complied with;
4.4 Regular investigation which shall not be oftener than once a year from the last date
of examination to determine whether an institution is conducting its business on a
safe or sound basis: Provided, That the deficiencies/irregularities found by or
discovered by an audit shall be immediately addressed;
4.5 Inquiring into the solvency and liquidity of the institution; or
4.6 Enforcing prompt corrective action.
The Bangko Sentral shall also have supervision over the operations of and exercise
regulatory powers over quasi-banks, trust entities and other financial institutions which
under special laws are subject to Bangko Sentral supervision.
For the purposes of this Act, “ quasi-banks” shall refer to entities engaged in the
borrowing of funds through the issuance, endorsement or assignment with recourse or
acceptance of deposit substitutes as defined in Section 95 of Republic Act No. 7653
(hereafter the “New Central Bank Act”) for purposes of re-lending or purchasing of
receivables and other obligations.”
Money Function:
Sec. 50 of the New Central Bank Act states that: “The Bangko Sentral shall have the sole
power and authority to issue currency, within the territory of the Philippines. No other
person or entity, public or private, may put into circulation notes, coins or any other object
or document which, in the opinion of the Monetary Board, might circulate as currency, nor
reproduce or imitate the facsimiles of Bangko Sentral notes without prior authority from the
Bangko Sentral.
The Monetary Board may issue such regulations as it may deem advisable in order to
prevent the circulation of foreign currency or of currency substitutes as well as to prevent
the reproduction of facsimiles of Bangko Sentral notes.
The Bangko Sentral shall have the authority to investigate, make arrests, conduct searches
and seizures in accordance with law, for the purpose of maintaining the integrity of the
currency.
Violation of this provision or any regulation issued by the Bangko Sentral pursuant thereto
shall constitute an offense punishable by imprisonment of not less than five (5) years but
not more than ten (10) years. In case the Revised Penal Code provides for a greater penalty,
then that penalty shall be imposed.”
Anti-Money Laundering Act:
Sec. 4.1 of Republic Act 9160 states that: “Money laundering is a crime whereby the
proceeds of an unlawful activity AS HEREIN DEFINED are transacted, thereby making them
appear to have originated from legitimate sources. It is committed by the following:
a) Any person knowing that any monetary instrument or property represents, involves, or
relates to, the proceeds of any unlawful activity, transacts or attempts to transact said
monetary instrument or property.
b) Any person knowing that any monetary instrument or property involves the proceeds of
any unlawful activity, performs or fails to perform any act as a result of which he facilitates
the offense of money laundering referred to in paragraph (a) above.
c) Any person knowing that any monetary instrument or property is required under this Act
to be disclosed and filed with the Anti-Money Laundering
Council (AMLC), fails to do so.”
Definitions:
Covered Transaction is a transaction in cash or other equivalent monetary instrument
involving total amount in excess of P500,000 within one banking day.
*P500,000 is the threshold/controlling
Suspicious Transaction are transactions, regardless of amount, where any of the following
circumstances exists:
1. There is no underlying legal or trade obligation, purpose or economic justification;
2. The client is not properly identified;
12
 3. The amount involved is not commensurate with the business or financial capacity of
the client;
4. Taking into account all known circumstances, it may be perceived that the client’s
transaction is structured in order to avoid being the subject of reporting
requirements under the ACT;
5. Any circumstance relating to the transaction which is observed to deviate from the
profile of the client and/or the client’s past transactions with the covered
institution;
6. The transaction is in any way related to an unlawful activity or any money
laundering activity or offense under this ACT that is about to be, is being or has been
committed; or
7. Any transaction that is similar, analogous or identical to any of the foregoing.
Sec. 3.i. of Republic Act 9160 states that: “Unlawful activity" refers to any act or omission or
series or combination thereof involving or having relation, to the following:
(A) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the
Revised Penal Code, as amended; (14) Kidnapping for ransom
(B) Sections 4, 5, 6, 8, 9, 10, 12,13, 14, 15 and 16 of Republic Act No.9165, otherwise known
as the COMPREHENSIVE Dangerous Drugs Act of 2002;
(14) Importation of prohibited drugs;
(15) Sale of prohibited drugs;
(16) Administration of prohibited drugs;
(17) Delivery of prohibited drugs
(18) Distribution of prohibited drugs
(19) Transportation of prohibited drugs
(20) Maintenance of a Den, Dive or Resort for prohibited users
(21) Manufacture of prohibited drugs
(22) Possession of prohibited drugs
(23) Use of prohibited drugs
(24) Cultivation of plants which are sources of prohibited drugs
(25) Culture of plants which are sources of prohibited drugs
(C) Section 3 paragraphs b, c, e, g, h and i of Republic Act No. 3019, as amended, otherwise
known as the Anti-Graft and Corrupt Practices Act;
(14) Directly or indirectly requesting or receiving any gift, present, share, percentage or
benefit for himself or for any other person in connection with any contract or transaction
between the Government and any party, wherein the public officer in his official capacity
has to intervene under the law;
(15) Directly or indirectly requesting or receiving any gift, present or other pecuniary or
material benefit, for himself or for another, from any person for whom the public officer, in
any manner or capacity, has secured or obtained, or will secure or obtain, any government
permit or license, in consideration for the help given or to be given, without prejudice to
Section 13 of R.A. 3019;
(16) Causing any undue injury to any party, including the government, or giving any private
party any unwarranted benefits, advantage or preference in the discharge of his official,
administrative or judicial functions through manifest partiality, evident bad faith or gross
inexcusable negligence;
(17) Entering, on behalf of the government, into any contract or transaction manifestly and
grossly disadvantageous to the same, whether or not the public officer profited or will profit
thereby;
(18) Directly or indirectly having financial or pecuniary interest in any business contract or
transaction in connection with which he intervenes or takes part in his official capacity, or in
which he is prohibited by the Constitution or by any law from having any interest;
(19) Directly or indirectly becoming interested, for personal gain, or having material interest
in any transaction or act requiring the approval of a board, panel or group of which he is a
member, and which exercise of discretion in such approval, even if he votes against the
same or he does not participate in the action of the board, committee, panel or group.
(D) Plunder under Republic Act No. 7080, as amended;
(20) Plunder through misappropriation, conversion, misuse or malversation of public funds
or raids upon the public treasury;
(21) Plunder by 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;
(22) Plunder by the illegal or fraudulent conveyance or disposition of assets belonging to the
National Government or any of its subdivisions, agencies, instrumentalities or government-
owned or controlled corporations or their subsidiaries;
(23) Plunder by obtaining, receiving or accepting, directly or indirectly, any shares of stock,
equity or any other form of interest or participation including the promise of future
employment in any business enterprise or undertaking;
(24) Plunder by establishing agricultural, industrial or commercial monopolies or other
combinations and/or implementation of decrees and orders intended to benefit particular
persons or special interests;
(25) Plunder by taking undue advantage of official position, authority, relationship,
connection or influence to unjustly enrich himself or themselves at the expense and to the
damage and prejudice of the Filipino people and the Republic of the Philippines
13
(E) Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302 of the Revised
Penal Code, as amended;
(26) Robbery with violence or intimidation of persons;
(27) Robbery with physical injuries, committed in an uninhabited place and by a band, or
with use of firearms on a street, road or alley;
(28) Robbery in an uninhabited house or public building or edifice devoted to worship.
(F) Jueteng and Masiao punished as illegal gambling under Presidential Decree No. 1602;
(29) Jueteng;
(30) Masiao.
(G) Piracy on the high seas under the Revised Penal Code, as amended and Presidential
Decree No. 532;
(31) Piracy on the high seas;
(32) Piracy in inland Philippine waters;
(33) Aiding and abetting pirates and brigands.
(H) Qualified theft under Article 310 of the Revised Penal Code, as amended;
(34) Qualified theft.
(I) Swindling 'under Article 315 of the Revised Penal Code, as amended;
(35) Estafa with unfaithfulness or abuse of confidence by altering the substance, quality or
quantity of anything of value which the offender shall deliver by virtue of an obligation to do
so, even though such obligation be based on an immoral or illegal consideration;
(36) Estafa with unfaithfulness or abuse of confidence by misappropriating or converting, to
the prejudice of another, money, goods or any other personal property received by the
offender in trust or on commission, or for administration, or under any other obligation
involving the duty to make delivery or to return the same, even though such obligation be
totally or partially guaranteed by a bond; or by denying having received such money, goods,
or other property;
(37) Estafa with unfaithfulness or abuse of confidence by taking undue advantage of the
signature of the offended party in blank, and by writing any document above such signature
in blank, to the prejudice of the offended party or any third person;
(38) Estafa by using a fictitious name, or falsely pretending to possess power, influence,
qualifications, property, credit, agency, business or imaginary transactions, or by means of
other similar deceits;
(39) Estafa by altering the quality, fineness or weight of anything pertaining to his art or
business;
(40) Estafa by pretending to have bribed any government employee;
(41) Estafa by postdating a check, or issuing a check in payment of an obligation when the
offender has no funds in the bank, or his funds deposited therein were not sufficient to
cover the amount of the check;
(42) Estafa by inducing another, by means of deceit, to sign any document;
(43) Estafa by resorting to some fraudulent practice to ensure success in a gambling game;
(44) Estafa by removing, concealing or destroying, in whole or in part, any court record,
office files, document or any other papers.
(J) Smuggling under Republic Act Nos. 455 and 1937;
(45) Fraudulent importation of any vehicle;
(46) Fraudulent exportation of any vehicle;
(47) Assisting in any fraudulent importation;
(48) Assisting in any fraudulent exportation;
(49) Receiving smuggled article after fraudulent importation;
(50) Concealing smuggled article after fraudulent importation;
(51) Buying smuggled article after fraudulent importation;
(52) Selling smuggled article after fraudulent importation;
(53) Transportation of smuggled article after fraudulent importation;
(54) Fraudulent practices against customs revenue.
(K) Violations under Republic Act No. 8792, otherwise known as the Electronic Commerce
Act of 2000;
K.1. Hacking or cracking, which refers to:
(55) unauthorized access into or interference in a computer system/server or information
and communication system; or
(56) any access in order to corrupt, alter, steal, or destroy using a computer or other similar
information and communication devices, without the knowledge and consent of the owner
of the computer or information and communications system, including
(57) the introduction of computer viruses and the like, resulting in the corruption,
destruction, alteration, theft or loss of electronic data messages or electronic document;
K.2. Piracy, which refers to:
(58) the unauthorized copying, reproduction,
(59) the unauthorized dissemination, distribution,
(60) the unauthorized importation,
(61) the unauthorized use, removal, alteration, substitution, modification,
(62) the unauthorized storage, uploading, downloading, communication, making available to
the public, or
(63) the unauthorized broadcasting, of protected material, electronic signature or
copyrighted works including legally protected sound recordings or phonograms or
information material on protected works, through the use of telecommunication networks,
such but not limited to, the internet, in a manner that infringes intellectual property rights;
14
K.3. Violations of the Consumer Act or Republic Act No. 7394 and other relevant or pertinent
laws through transactions covered by or using electronic data messages or electronic
documents:
(64) Sale of any consumer product that is not in conformity with standards under the
Consumer Act;
(65) Sale of any product that has been banned by a rule under the Consumer Act; ,
(66) Sale of any adulterated or mislabeled product using electronic documents;
(67) Adulteration or misbranding of any consumer product;
(68) Forging, counterfeiting or simulating any mark, stamp, tag, label or other identification
device;
(69) Revealing trade secrets;
(70) Alteration or removal of the labeling of any drug or device held for sale;
(71) Sale of any drug or device not registered in accordance with the provisions of the E-
Commerce Act;
(72) Sale of any drug or device by any person not licensed in accordance with the provisions
of the E-Commerce Act;
(73) Sale of any drug or device beyond its expiration date;
(74) Introduction into commerce of any mislabeled or banned hazardous substance;
(75) Alteration or removal of the labeling of a hazardous substance;
(76) Deceptive sales acts and practices;
(77) Unfair or unconscionable sales acts and practices;
(78) Fraudulent practices relative to weights and measures;
(79) False representations in advertisements as the existence of a warranty or guarantee;
(80) Violation of price tag requirements;
(81) Mislabeling consumer products;
(82) False, deceptive or misleading advertisements;
(83) Violation of required disclosures on consumer loans;
(84) Other violations of the provisions of the E-Commerce Act;
(L) Hijacking and other violations under Republic Act No. 6235; destructive arson and
murder, as defined under the Revised Penal Code, as amended, including those perpetrated
by terrorists against non-combatant persons and similar targets;
(85) Hijacking;
(86) Destructive arson;
(87) Murder;
(88) Hijacking, destructive arson or murder perpetrated by terrorists against non-combatant
persons and similar targets;
(M) Fraudulent practices and other violations under Republic Act No. 8799, otherwise
known as the Securities Regulation Code of 2000;
(89) Sale, offer or distribution of securities within the Philippines without a registration
statement duly filed with and approved by the SEC;
(90) Sale or offer to the public of any pre-need plan not in accordance with the rules and
regulations which the SEC shall prescribe;
(91) Violation of reportorial requirements imposed upon issuers of securities;
(92) Manipulation of security prices by creating a false or misleading appearance of active
trading in any listed security traded in an Exchange or any other trading market;
(93) Manipulation of security prices by effecting, alone or with others, a series of
transactions in securities that raises their prices to induce the purchase of a security,
whether of the same or different class, of the same issuer or of a controlling, controlled or
commonly controlled company by others;
(94) Manipulation of security prices by effecting, alone or with others, series of transactions
in securities that depresses their price to induce the sale of a security, whether of the same
or different class, of the same issuer or of a controlling, controlled or commonly controlled
company by others;
(95) Manipulation of security prices by effecting, alone or with others, a series of
transactions in securities that creates active trading to induce such a purchase or sale
though manipulative devices such as marking the close, painting the tape, squeezing the
float, hype and dump, boiler room operations and such other similar devices;
(96) Manipulation of security prices by circulating or disseminating' information that the
price of any security listed in an Exchange will or is likely to rise or fall because of
manipulative market operations of anyone or more persons conducted for the purpose of
raising or depressing the price of the security for the purpose of inducing the purchase or
sale of such security;
(97) Manipulation of security prices by making false or misleading statements with respect
to any material fact; which he knew or had reasonable ground to believe was so false and
misleading, for the purpose of inducing the purchase or sale of any security listed or traded
in an Exchange;
(98) Manipulation of security prices by effecting, alone or with others, any series of
transactions for the purchase and/or sale of any security traded in an Exchange for the
purpose of pegging, fixing or stabilizing the price of such security, unless otherwise allowed
by the Securities Regulation Code or by the rules of the SEC;
(99) Sale or purchase of any security using any manipulative deceptive device or
contrivance;
(100) Execution of short sales or stop-loss order in connection with the purchase or sale of
any security not in accordance with such rules and regulations as the SEC may prescribe as
necessary and appropriate in the public interest or the protection of the investors;
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(101) Employment of any device, scheme or artifice to defraud in connection with the such reporting results in any criminal prosecution under this Act or any other Philippine
purchase and sale of any securities; law.”
(102) Obtaining money or property in connection with the purchase and sale of any security
by means of any untrue statement of a material fact or any omission to state a material fact Truth in Lending Act:
necessary in order to make the statements made, in the light of the circumstances under
Sec. 4 of Republic Act No. 3765 states that: “Any creditor shall furnish to each person to
which they were made, not misleading;
whom credit is extended, prior to the consummation of the transaction, a clear statement in
(103) Engaging in any act, transaction, practice or course of action in the sale and purchase
writing setting forth, to the extent applicable and in accordance with rules and regulations
of any security which operates or would operate as a fraud or deceit upon any person;
prescribed by the Board, the following information:
(104) Insider trading;
(1) the cash price or delivered price of the property or service to be acquired;
(105) Engaging in the business of buying and selling securities in the Philippines as a broker
(2) the amounts, if any, to be credited as down payment and/or trade-in;
or dealer, or acting as a salesman, or an associated person of any broker or dealer without
(3) the difference between the amounts set forth under clauses (1) and (2);
any registration from the Commission;
(4) the charges, individually itemized, which are paid or to be paid by such person in
(106) Employment by a broker or dealer of any salesman or associated person or by an
connection with the transaction but which are not incident to the extension of credit;
issuer of any salesman, not registered with the SEC; ,
(5) the total amount to be financed;
(107) Effecting any transaction in any security, or reporting such transaction, in an Exchange
(6) the finance charge expressed in terms of pesos and centavos; and
or using the facility of an Exchange which is not registered with the SEC;
(7) the percentage that the finance bears to the total amount to be financed expressed as a
(108) Making use of the facility of a clearing agency which is not registered with the SEC;
simple annual rate on the outstanding unpaid balance of the obligation.”
(109) Violations of margin requirements;
*Failure to comply with the Truth in Lending Act, the contract of loan is still valid however,
(110) Violations on the restrictions on borrowings by members, brokers and dealers;
the bank cannot recover finance charges.
(111) Aiding and Abetting in any violations of the Securities Regulation Code;
Purpose: To avoid hidden charges; to know the actual amount borrowed.
(112) Hindering, obstructing or delaying the filing of any document required under the
Securities Regulation Code or the rules and regulations of the SEC;
(113) Violations of any of the provisions of the implementing rules and regulations of the
SEC;
(114) Any other violations of any of the provisions of the Securities Regulation Code.
(N) Felonies or offenses of a similar nature to the afore-mentioned unlawful activities that
are punishable under the penal laws of other countries.
In determining whether or not a felony or offense punishable under the penal laws of other
countries, is "of a similar nature", as to constitute the same as an unlawful activity under the
AMLA, the nomenclature of said felony or offense need not be identical to any of the
predicate crimes listed under Rule 3.i.”

Safe Harbor Provisions:

Sec. 9.3.e of Republic Act 9160 states that: “No administrative, criminal or civil proceedings,
shall lie against any person for having made a covered transaction report or a suspicious
transaction report in the regular performance of his duties and in good faith, whether or not

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