UNIVERSITY OF STO.

TOMAS – LEGAZPI
Legazpi City
COLLEGE OF LAW

QUIZ NO. 1
ELECTIVE: SPECIAL COMMERCIAL LAWS
1st semester, S.Y. 2020-2021

Answer the questions directly and concisely. Do not repeat the questions. Write
legibly. GOOD LUCK!

Republic Act 1405 or otherwise known as An Act Prohibiting Disclosure of or Inquiry

into, Deposits with any Banking Institution (bank secrecy law), was approved on September
9, 1955, to encourage individuals to deposit their money in bank instead of hoarding them. It
prohibits the disclosure of, or inquiry into, all deposits in banks and banking institutions in the
Philippines. Section 2 of the bank secrecy law provides that all deposits in whatever in
nature with banks or banking institutions are of an “absolute confidential in nature and may
not be examined, inquired or looked into by person, government official, bureau or office.”

Give at least five (5) instances when information of a bank deposit may be divulged
without violating the bank secrecy law. (10 points)

II

Whenever upon examination by the proper regulatory agencies into the condition of
the bank, it shall be disclosed that the bank or its directors or agents have committed, are
committing or about to commit unsafe or unsound practices in conducting the business of
the bank, or have violated, are violating or about to violate any provisions of the law or
regulations to which the bank is subject, the bank’s board of directors shall submit the report
of the examinations to the Monetary Board to secure corrective action/s thereon.

If the bank’s practice or violation is likely to cause insolvency or substantial

dissipation of assets or earnings of the bank, or is likely to seriously weaken the condition of
the bank or otherwise seriously prejudice the interests of its depositor and the bank itself,
the monetary board may require the board to take corrective actions within fifteen (15) days.
The Monetary Board, in its assessment of the operation of the bank, may appoint a
conservator or a receiver in running the affair of a distressed bank.

Distinguish the functions of a conservator from a receiver. (10 points)

III

The single borrowers limit (SBL) intends to put ceiling cap for loan exposure to a
single client to a maximum of 25% of bank’s net worth. The ceiling has been in place since
2004, and covers loans, as well as securities underwritten by universal banks and
investment houses unsold after 90 days.

SBL is governed by Section 35 of the General Banking Laws and by several BSP
implementing circulars. It covers loans, credit accommodations and guarantees. It has a
broad coverage which the Monetary Board may redefine from time to time. The basis for
determining compliance with the SBL is the total credit commitment of the bank to the
borrower, whether availed of fully or partially, and not the actual outstanding loan
accommodation of the borrower.

The current SBL is 25% of the net worth of a bank. The SBL may be increased to
additional 10% provided the additional liabilities are adequately secured by trust receipts,
shipping documents, warehouse receipts, and similar documents.

Explain the single borrower limit rule. What is its main purpose why the law put
ceiling on the amount that can be loaned to a single borrower? (10 points)

IV

Xander Ford, a private individual, is suspected to be the leader of a Kidnap for

Ransom Gang and he is suspected of depositing all ransom money in deposit account in
Quadro Singko (QS) Bank. The police want to open said account to know if there are really
deposits in big amounts.

He has a dollar deposit account with balance of $10M (with exchange rate of P50:
$1), and has additional three (3) peso deposit accounts all under her name. One, in
checking account, one in saving account and another one in time deposit account. Each
account has a balance of Php100,000. QS Bank became insolvent. Philippine Deposit
Insurance Corporation closed the Bank. Xander therefore is unable to withdraw from all of
the accounts. He then filed her claims with the Philippine Deposit Insurance Corporation.

Explain the role of PDIC in the settlement of deposit accounts in a closed bank. How
much can Xander recover from PDIC from his deposit? (10 points)

Discuss the following doctrine in banking laws:

a. Doctrine of promissory estoppel (5 points)

b. The fit and proper doctrine (5 points)

*** Nothing follows ****