MODULE ACTIVITIES

PART I – DEFINITIONS. Define the following terms, as they are so defined by pertinent

laws and jurisprudence.

1. Bank – refer to the entities engaged in the lending of funds obtained in the form of

deposits

2. Bank deposit – these are in the nature of irregular deposit in which a money placed

in a bank against which the depositor can withdraw under prescribed conditions.

3. DOSRI Account – it is short for Directors, Officers, Stockholders, and their Related

Interest. It limits the loans and guarantees that can be granted by a bank to a single

director, officer, stockholder or related interest to an amount equivalent to his

unencumbered deposits or the book value of his paid-in capital.

4. Redemption period – the period within which the mortgagor, whose mortgaged

property has been sold in a foreclosure sale due to his non-payment, may redeem or

repurchase the property from the buyer in the foreclosure sale.

5. Insured deposit – the amount due to any bona fide depositor for legitimates in an

insured bank of the date of closure but not to exceed to P500, 000.00

6. Splitting of deposit – a deposit account with an outstanding balance of more than

the statutory minimum amount of insured deposit maintained under the name of natural

or juridical persons is broken down and transferred into two (2) or more accounts in the

name/s of natural or juridical persons or entities who have no beneficial ownership on

transferred deposits in their names or in other words it is the breaking down of deposits

into 2 or more accounts to be owned by 2 or more individuals.

7. Dormant account- it is an account that has had no financial activity for a long period

of time, except for the posting of interest.

PART II – DISCUSSIONS. Answer the following:

1. Explain the fiduciary nature of banks

Under section 2 of Republic Act No. 8791 declares that the State recognizes the

“fiduciary nature of banking that requires high standards of integrity and performance.

The fiduciary relationship means that the bank’s obligation to observe high standards of

integrity and performance is deemed written into every deposit agreement between a

bank and its depositor. The fiduciary nature of banking requires banks to assume a

degree of diligence higher than that of a good father of a family. The banks must

observe “high standards of integrity and performance” in servicing their depositors.

2. Give one real-life example of each classification of banks. Give a short background

for each bank.

Commercial bank

Bank of Commerce – it is one of the country’s progressive commercial banks. It

has been in operation since 1963. The bank offers a wide range of banking products

and services including deposit and cash management products, corporate banking,
consumer banking, credit and services, e-banking solutions, trade and remittances,

treasury and trust services.

Universal bank

Bank of the Philippine Island (BPI) – the bank was the first to be established in

the Philippines on August 1, 1851 and was originally known as El Banco Espanol

Felipino de Isabel II, and was responsible for starting the country’s banking and finance

industry. Playing a unique role in the early economic history of the Philippines, the bank

performed many functions that in effect made it the country’s Central Bank, including

providing credit to the National Treasury and printing and issuing currency in its own

name.

Thrift bank

Philippine Savings Bank (PSBank) – it is a subsidiary of Metrobank and is the

second largest savings bank in the Philippines. This fuelled the growth and sharpened

the focus of PSBank to offer products and services that championed its clients’ needs.

Rural bank

CARD Bank, Inc. (a MF RB) – Center for agriculture and Rural Development,

Inc, (CARD, Inc.), which was organized on December 10, 1986 by a group of 15 rural

development practitioners as a social development foundation through responsible

financial services. It is a microfinance-oriented rural bank.

Islamic bank
 Al Amanah Islamic Bank – in 1973, Presidential Decree No. 264 created the

Amanah Islamic Bank with an initial capitalization of 50 million pesos. Intended to

become a development bank, it invested 75% of its total loanable funds on providing,

among others, reasonable medium and long-term credit facilities for the people of the

Muslim-dominated provinces.

Cooperative bank

Metro South Cooperative Bank (MSCB) – it is the only cooperative bank in the

National Capital Region. It is a unique bank registered with the Cooperative

Development Authority (CDA) as a cooperative, and with the Bangko Sentral ng

Pilipinas, as a bank under the rural banking system. It started its commercial operation

in March 24, 1997.

3. Compare and contrast different types of bank deposits.

Demand Deposit Similarities Savings Account

1. Only universal banks can 1. All accounts are not 1. Most common type of

accept or create this kind of subject to interest ceiling. deposit.

deposit account. 2. All are bank deposit 2. Can be opened in all

2. Offer greater liquidity and accounts. types of banks.

ease of access. 3. Normally open for the

3. Let you withdraw money purpose of earning interest.

without notice. 4. Interest rate are fixed.

NOW Accounts Time Deposits

1. Are interest bearing 1. Are investment deposits

deposits that combine the made for a predetermined

payable on demand feature period, ranging from a few

of checks and investment months to several years.

feature of savings account. 2. Pay a higher rate of

2. At least seven days interest than saving

written notice. account.

4. State the effect of miscredit by the bank in a depositor’s account.

In this case a depositor is entitled to recover from the bank the amount that was

erroneously deducted from his account.

5. A partnership was organized and desires to open a bank account in its name. The

bank argues that it is not allowed and required the partners to make an and/or account

instead. Is the bank correct?

No. In this case the argument of the bank is not adequate. Article 1768 provides

that parnership has a juridical personality separate and distinct from that of each of the

partners. Thus, a partnership being a juridical person has the right to open such bank

account in its name, provided however, that what the partnership wants to open is a

current account where one deposits money in order to carry out a business transaction.

6. What is the difference between an “And/or” account versus an “and” account?

If the joint account is an “and/or” account, this implies that anyone of the

depositors may withdraw funds therefrom and the signature of 1 is enough to authorize

the bank to allow such withdrawal, while in the “and” account, the depositor are joint

creditors of the banks and the signatures of all depositors are necessary to allow the

withdrawal.

7. What are the exceptions from the Secrecy of Bank Deposits Law for Philippine

currency deposits? For foreign currency deposits?

Philippine Currency Deposit

 Impeachment cases;

 Upon the order of a competent court in cases of bribery or dereliction of

duty of public officials;

 Upon the order of a competent court in cases where the money deposited

or invested is the subject of litigation;

 Upon order of the competent court or tribunal in cases involving

unexplained wealth under the Anti-Graft and corrupt practices Act, R.A.

No. 3019

 Upon inquiry by the Commissioner of Internal Revenue for the purpose of

determining the net estate of a deceased depositor;

 Upon the order of a competent court, by the Anti-Money Laundering

Council where there is probable cause of money laundering.

 Disclosure to the Treasurer of the Philippines for dormant deposits for at

least ten years under the Unclaimed Balances Act;

 Report of banks to Anti-Money Laundering Council (AMLC) of covered

and/or suspicious transactions;

 Upon order of the Court of Appeals, examination by law enforcement

officers in terrorism cases under the Human Security Act of 2007;

 Investigation where the AMLC is authorized to look into or examine

deposits and investments with any banking institution or non-bank

financial institution and their subsidiaries and affiliates without a court

order;

 Philippine Deposit Insurance Corporation’s (PDIC) inquiry into and

examination of deposit accounts and all information related thereto in case

there is a finding of unsafe or unsound banking practice under the Eight

paragraph of section 8 of R. A. No.3591, as amended by R.A. 9576;

  Examination and inquiry into deposit records by PDIC when there is failure

of prompt corrective action as declared by the Monetary Board due to

capital deficiency;

 When there is a waiver in case of DOSRI loans;

 Disclosure to the BSP in the course of examination to ensure compliance

with the Anti-Money Laundering Act and testing of numbered accounts.

Foreign Currency Deposit

 When there is written consent of the depositor under Section 8 of the

Foreign Currency Deposit Act;

 When there is probable cause of money laundering as provided for under

Section 11 of the Anti-Money Laundering Act; and

 When there is probable cause of terrorism under the Human Security Act.

8. Are anonymous bank accounts allowed? Why or why not?

Anonymous bank accounts are not allowed. Under Section 9 (a) of Republic Act

No. 9160 and Circular No. 251 issued by the BSP prohibit anonymous account or

accounts under fictitious names.

However, the exception to the above rule is provided for in the Foreign Currency

Deposits Act, which allows the opening of “Numbered accounts” for foreign currency

deposits. However, it is still required that necessary measures are undertaken by the

bank to record and establish the true identity of the depositor.

9. Why is the unilateral freezing of bank accounts by banks prohibited?

 The unilateral freezing of bank accounts by banks is prohibited for the reason

that it allows the banks to open the floodgates of public distrust in the banking industry

even if its depositor on its mere suspicion that the funds therein were proceeda of

fradulent acts. Moreover, a person whose name appears as depositor in the passbook

and other document is presumed to be the owner of the money in the bank accoint and

the bank cannot preclude him from withdrawing his deposit despite whatever allegation

it may associated through fraud.

Under article 559 of the new Civil Code, one of the reason why banks cannot

just freeze the account of its depositor to honor the claim of 3rd person.

10. Can the bank be held liable for allowing the withdrawal of a bank account by a

trustee who later on misappropriates the said amount? Why or why not?

11. Can information obtained in violation of the Bank Secrecy Law be admitted in

evidence in a court proceeding? Why or why not?

Yes, any information obtained in violation of the Bank Secrecy Law is still

admissible in evidence. However, the person/s responsible for the violation shall be

subjected to a penalty of imprisonment of not more than five (5) years or a fine of not

more than twenty thousand pesos (P20,000), or both, in the discretion of the court.

12. Outline the procedure for the escheat of a dormant bank deposit.

Executive Order No. 268, Section 1. Escheat Procedures for Philippine Postal

Savings Bank Dormant Accounts. The escheat of dormant accounts of the Philippine

Postal Savings Bank shall be exempt from the procedures prescribed under Sections
2000 and 2000-A of the Revised Administrative Code and the same shall be effected in

accordance with the following procedures:

(a) A notice to all depositors of the dormant accounts of said bank shall be

published in a newspaper of general circulation once a week for three

consecutive weeks requiring them to withdraw the outstanding balances of

their deposits within six (6) months from the date of the last publication.

(b) Any and all such deposits remaining unclaimed after the expiration of the six-

month period from the last publication of the notice shall, without further act or

proceedings, be deemed escheated in favour of PNB as trustee of the assets

of PPSB and thereafter the same shall be disposed of in accordance with the

provisions of Presidential Decree No. 241 after all the expenses in connection

with the notice herein required shall have been paid.