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Banking Laws and Jurisprudence Reviewer Dizon
Banking Laws and Jurisprudence Reviewer Dizon
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CHAPTER 1 – Banks and Business of Banking depositors with meticulous care and
always have in mind the fiduciary nature
• Declaration of the state with regards to banking – of banks
recognize vital role of the banks to provide • Not enough that he exerted reasonable
environment conducive to development of national diligence to ascertain the safety of his
economy clients
o It also states that banks need high • Such diligence is only required in its
standards of integrity and performance fiduciary relationship with its depositors
• Banks – entities engaged in the lending of funds and not to other transactions such as sale
obtained in the form of deposits (borrowing, of foreign exchange demand draft
lending, safe-keeping) • Sec 2 of GBL prescribes the statutory
• Banks may engage in other activities allowed by diligence required from banks – “high
the law other than lending standards of integrity and performance” in
serving its depositors.
Nature of Banking Business
• Diligence required of banks is more than
1. Debtor-Creditor Relationship that of a good father (PBCom vs. CA)
• It is a contract of loan and not deposit • Diligence extends to financial institutions
• Contract between bank and depositor is (e.g. GSIS)
governed by the provisions of the NCC on 7.
Treatment of accounts with meticulous care
simple loan (Consolidated Bank and Trust • Must treat every account with utmost
Corp vs. CA) fidelity regardless of amount
2. Fiduciary duty • There is no law mandating banks to call
• Fiduciary relationship – bank’s obligation up their clients whenever a significant
to observe high standard of integrity and amount shall be withdrawn from their
performance (Phil. Banking Corp. vs. CA) account
3. Not a trust agreement 8.
Duty to keep records
• It is not a trust agreement and failure to 9.
Banks are not gratuitous bailees
pay a loan is not a breach of trust 10.
Banks not expected to be infallible
• It is not a trust agreement because banks • However, they must bear the loss for not
do not accept deposits to enrich depositors discovering mistakes if there are
but to earn for themselves established procedures not followed
4. Indispensable Institution 11.
Dealing with registered lands
• Has a vital role in economic life • General Rule: mortgagee can rely on title
• Significance of banking institution to and does not need to investigate further
commercial transactions (Metropolitan • Exception: mortgagee cannot close his
Bank & Trust Co. vs. Cabilzo) eyes to facts which should put a
5. Impressed with public interest reasonable man on his guard, and yet
• Has public interest because people depend claim that he is in good faith
on the honesty and efficiency of banks • With banking institutions, mere reliance
• Stability of banks largely depends on the on the title is not enough as they need to
confidence of the people in the honesty investigate also
and efficiency of banks. • Doctrine of the “mortgagee in good faith”
6. Degree of diligence – all persons dealing with property
• Diligence higher than that of a good father. covered by the Torrens Certificates of
It must be extraordinary diligence Title are not required to go beyond what
• In Simex International vs. CA, the bank is appears on the face of the title. (Cavite
under obligation to treat the accounts of its Development Bank vs. Spouses Lim)
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 3
Banking Laws
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 5
Banking Laws
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 6
Banking Laws
measures. They are installed only in centers of • Any unsettled strike or lockouts involving banks
activity after 7 days shall be reported by BSP to DOLE
• Mobile ATMS are allowed to visit places with who will assume jurisdiction
large crowds of people provided it has adequate • Banks, through their president, shall inform BSP
security of the cause of the strike and the operations
affected
Independent Auditor
Financial Statements
Settlement of Disputes
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 8
Banking Laws
CHAPTER 3 – Deposit Functions of Banks • When bank sees that depositor’s account has
sufficient amount, then it shall honor such
I. Kinds of Deposits
• If there is sufficient amount but bank dishonored,
1. Demand deposits then bank is liable. Otherwise if there is no
sufficient amount
• All those liabilities of BSP and of other banks • Banks must ensure that the check is only paid to
which are denominated in Philippine currency and its designated payee
are subject to payment in legal tender upon • Drawer must remember every time he issues a
demand by presentation of checks check and a bank must know the former’s
• Only universal and commercial banks may accept signature
or create demand deposits without prior authority • A bank is under no obligation to make partial
from BSP payment on the check only upon the amount in the
• Other types of bank require such authority. This drawer’s funds
considered as the current account in the bank • The cannot also compensate the lack of money in
the deposit account to the savings account
1.a. Temporary over drawings and DAUD
• Cross-check must be: (1) may not be encashed but
• Temporary overdrawings are not allowed except only deposited (2) check negotiated only once – to
normal bank charges and other fees incidental to one who has an account with a bank and (3) serves
handling such accounts as warning to holder (State Investment House vs.
• Violations of temporary overdrawings will cause IAC)
(1/10 of 1%) fine per day computed on the basis of • Cashier’s check – bank’s own check and is treated
the amount of overdrawn but not to exceed as PN with the bank as maker
P30,000.00 per day • - deemed as cash (New Pacific Timber & Supply
• Drawings against uncollected deposits (DAUD) – Co. Inc. Cs. Señeris)
prohibited. Exception: made against uncollected
1.d. Set off Rule
deposits representing manager’s, cashier’s,
treasury warrants, postal money order and on us • A bank can set off or compensate by debiting a
check personal account of depositor for an amount
erroneously credits to the person’s proprietorship
1.b. Current accounts of officers
account
• All officers, employees of bank in cash
departments and other employees who have direct 1.e. Relationship of Payee or Holder and the Bank
responsibility in handling deposit transactions are • Principal and agent – relationship between payee
not allowed to maintain demand deposits or or holder of commercial paper and the bank to
current accounts which it is sent for collection (PCIB vs. CA)
1.c. Checks
2. Savings Deposits
• A written order addressed to a bank or person
carrying banking business, by a party having • Banks may be authorized by the BSP to solicit and
money in their hands, requesting them to pay on accept deposits outside their bank premises
presentment, to a person named therein or to
2.a. Individual and Joint Accounts
bearer or to order, a named sum of money (Moran
vs. CA) • If the joint account is “and”, both signatures of co-
depositors are required before withdrawals
1.d. Duty of bank to honor checks
• If “and/or” either their signature is sufficient
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 9
Banking Laws
• Minors can have savings and time deposit may, at the option of the bank, be booked on the
accounts without assistance of parents day of receipt. Other non-cash deposits are treated
1. Must be at least 7 yrs old as contingent accounts on the day of receipt and
2. Able to read and write shall be booked as deposits the following day
3. Sufficient discretion
4. Not otherwise DQed by law
8. Booking Deposits after regular banking hours
• Parents can still deposit money to minor
• For deposits of minors in thrift banks, guardian • Deposits, whether cash or not, received after close
may make notice that payment (deposits, interest, of regular banking hours shall be treated as
dividends) be made to him and not to the minor contingent accounts and booked the following day
• Corporations may open bank accounts as follows:
(1) Incorporation stage and (2) Post incorporation 9. Average Daily Balance
stage
• Banks may impose and collect service charge or
3. Time of payment of interest in time deposits maintenance fee on savings and current accounts
that fall below minimum monthly average daily
• Interest on time deposit may be paid upon balance (ADB)
maturity, withdrawal or advance provided that the • must be properly disclosed in the terms of deposit
interest paid in advance shall not exceed interest • For dormant accounts: fall below 2 consecutive
for one year months
4. Treatment of matured time deposits III. Survivorship Agreement
• Time deposits not withdrawn or renewed on its • There is survivorship agreement when joint
due date shall be treated as a savings deposit and owners of a deposit agree that either of them could
shall earn interest until actual withdrawal with withdraw any part or whole of account during
rates of savings deposit lifetime of both and the balance upon death of
• Deposit substitute not withdrawn shall have a either belongs to the survivor
maturity rate applicable to a deposit substitute • It is an aleatory contract
5. Clearing Cut-off Time • Survivorship agreement is per se not contrary to
law but may be violative
• General rule: all deposits and withdrawals during • Agreement can be a mere cloak to hide in
regular banking hours shall be credited/debited to inofficious donation to transfer property in fraud
accounts on date of receipt or payment
• If there is BSP clearing arrangement, not earlier IV. Nature of Bank Deposits
than 2 hours before BSP clearing time in head 1. Deposits are considered simple loans and not
offices and 3.5 hours in branches preferred credits
• If there is no BSP clearing arrangement 2 hours 2. Bank deposits are in the nature of irregular
before local clearing time deposits as they are loans who earn interest (BPI
vs. CA)
6. Booking Cash Deposits
3. Relationship between depositor and Savings and
• Cash deposits received after clearing cut-off time Loan Association is that of creditor and debtor
shall be book as deposits on day of receipt 4. Contract between bank and its depositors are
governed by NCC
7. Booking Non-cash Deposits 5. Bank ultimately acquires ownership of deposits
but has obligation to pay back equal amount
• “on us” checks, manager’s/cashier’s checks,
6. Banks can set-off or compensate
demand drafts received after clearing cut-off time
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 11
Banking Laws
V. Duties of Banks • BSP can also inquire in deposits for periodic and
special examinations
• Meticulous care with deposits of clients due to • Ombudsman has the In-Camera Inspection power
fiduciary relationship to look into deposits provided that there is a
• Banks must give payment to the proper party, thus pending case is court and 1.) the account must be
collecting bank has obligation to ascertain that the properly identified 2.) inspection limited to the
drawer truly intended that the depositor is the subject matter
payee • CIR can also look into deposits to determine gross
• In case of death of depositor and the bank knew of estate of a decedent or he has applied for
it, there shall be no further withdrawal compromise tax liability
• Administrators or heirs can withdraw up to 20k
without certification of CIR
CHAPTER 4 – Investments, Loans and Other Bank Equity investments of universal bank in non-financial
Functions allied enterprise
I. Universal Operation of Universal banks • Universal bank may own up to 100% of equity in
non-financial allied
Powers of Universal bank
• Examples are:
1. Commercial bank 1. Warehousing companies
2. Investment house 2. Storage
3. Invest in non-allied enterprises 3. Safe deposit box
4. Companies engaged in management of
Equity Investments of Universal bank mutual funds and not funds itself
5. Computer services
• Allied enterprises are those which enhance or 6. Home building and development
complement banking 7. Service bureaus
• If it is a financial allied enterprise, then it involves 8. PCHC
money matters. Otherwise it shall be non-financial • Rural and cooperative banks can invest in non-
• Total investments in equities of allied and non- financial allied enterprises such as:
allied enterprises shall not exceed 50% of the net 1. Warehousing
worth of the bank 2. Fertilize and agricultural chemical
• Equity investment in any one enterprise, whether 3. Farm equipments
allied or non, shall not exceed 25% 4. Trucking and transportation
• Net worth – total of the unimpaired paid in capital 5. Marketing agricultural products
including paid-in surplus, retained earnings and 6. Leasing
undivided profit
Equity investment of Universal Bank in Non-allied
Equity investments of Universal bank in Financial Allied enterprise
enterprise
• Equity investment in a single non-allied enterprise
• Universal bank can own 100% of the equity in a shall not exceed 35% in total equity or voting
thrift, rural bank or financial allied enterprise stock
• Publicly-listed universal or commercial bank may
own 100% of voting stock of another universal or Investments in non-allied enterprises
commercial bank
• Universal bank may invest in equity of enterprise
• If not publicly-list then only 49% own
of eligibles:
• Following are financial allied enterprises:
1. Enterprises engaged in agriculture, mining,
1. Leasing companies
quarrying, manufacturing, public utilities
2. Banks
2. Industrial parks
3. Investment houses
3. Commercial project with government
4. Financing companies
privatization program
5. Credit card companies
• Equity investment in Quasi-banks – universal bank
6. Financial institutions
can only invest up to 40% in equity of quasi-banks
7. Companies in stock brokerage and foreign
exchange dealership II. Operations of Commercial Banks
8. Insurance companies
9. Holding company provided that the Powers of Commercial banks
equities of the entity is confined under
1. General powers incident to corporations
universal bank BSP regulation
2. All power necessary to carry business of
commercial banking such as:
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 13
Banking Laws
a. Accepting draft and issuing letters of Equity investment of commercial bank on financial allied
credit enterprises
b. Discounting
c. Creating demand deposits • Can own up to 100% in equity of thrift and rural
d. Buy and selling Forex bank
• However cannot own 100% of equity of financial
Issuance of Letters of Credit allied enterprise other than above banks
• Letter of credit – financial device developed by Equity investment in commercial bank on non-financial
merchants as convenient mode of dealing with allied enterprises
sales of goods
• The buyer will apply for a letter of credit in the • Can own 100% of said enterprises
issuing bank
III. Risk-Based Capital
• The seller will then send the goods to the carrier
and he will make a draft, called bill of exchange Minimum Ratio
• Seller will present the draft and the necessary
documents, such as bill of lading to issuing bank • MB shall prescribe minimum ratio
to receive the payment • It will be based on the net worth and risk assets of
• While the goods are in transit, it shall be owned by a banks well as its compositions
issuing bank • It may alter compliance with ratio for a max
• When the goods arrived at the port of the buyer, period of 1 year
the buyer will pay the corresponding payment and • Ratio shall be uniformly applied to banks of same
also gain the documents category
• Since the buyer gain the documents, he can now
Effect of Non-compliance
acquire the delivered goods
• Independence principle – bank determines • If a bank does not comply then the MB can:
compliance with letter of credit only by examining 1. Limit distribution of net profits and be
shipping documents presented and need not used to increase capital accounts until
examine the goods minimum requirement is met
• There are three contracts: 2. Restrict acquisition of major assets and
1. buyer-seller new investments except with purchase of
2. buyer-bank readily marketable evidence of
3. seller-bank indebtedness of RP BSP
• There can be other parties such as notifying bank • In case of merger, rehabilitation, MB may
(inform seller), confirming bank (lend credence to temporarily relieve such bank with compliance
letter of credit), paying bank and negotiating bank with capital ratio
(discounter)
IV. Limit on loans, credit accommodation and guarantees
Equity investments on commercial bank
Single Borrowers Limit
• Commercial bank may invest only in equities of
allied enterprises • Total amount of loans, credits accommodation and
• Total investment in equities of allied enterprises guarantees extended to any person, partnership or
shall not exceed 35% corporation shall not exceed 20% of net worth of
• Equity investment in one enterprise shall not bank
exceed 25% • In Circular 425 of 2004 of BSP, the SBL was
increased to 25%
• Exceptions to SBL:
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 14
Banking Laws
1. MB may otherwise prescribe for reasons subsidiaries, more than half of voting power of
of national interest enterprise
2. Deposit of rural banks with GOC financial • Even if less than half of said voting power, it shall
institutions such as LB, DBP and PNB still have controlling interest if:
• Basis for determining SBL is the total credit 1. Agreement with investors
commitment of bank to borrower 2. Govern financial and operations
• Loans - to all accounts under loan portfolio 3. Can appoint majority of directors
• Credit accommodations - to credit and market risk 4. Cast majority vote on meetings
exposure of banks arising from accommodation • Subsidiary – corporation where more than 50% of
other than the loan the voting stock is owned by a parent corporation
• Total credit commitment - include loans, credit • Bill of exchange drawn in good faith against
accommodation, deferred letters of credit less actually existing values – drawn by a seller on the
margin deposits and guarantees purchase for the price of commodity sold
• Total credit commitment can be increased by 10% • Commercial paper owned by person negotiating
provided additional liabilities are secured by trust the same – paper arising from business transaction
receipts, shipping documents or readily marketable • Exclusion from SBL:
goods 1. Discount bills of exchange and discount
• Readily marketable goods – articles of commerce, commercial paper
agriculture or industry as constant dealings in 2. Credit accommodation to finance
ready market and price is easily ascertainable and importation of rice or corn up to 100% net
disposable worth of bank
• Parent corporation’s total credit commitment shall Must be approved by NEDA
also include its subsidiaries’ if it guarantees, 3. Loans and credit accommodation
accommodate or subsidiary is merely a department guaranteed by Industrial Guarantee and
of it Loan Fund
• Wholesale lending of government banks shall not 4. Liabilities of commercial paper issuer for
exceed 35% of net worth to participating financial commercial paper held by UB as firm
institutions underwriter. Only 180 days and not
• PFI – institutions for relending to end-user exceed 5% from normal SBL
borrowers 5. Loans and credit accommodations covered
• The end-user borrower shall be subject to the 25% by international or regional institutions
SBL where Philippines is shareholder such as
• In municipalities where there are no government ADB
banks, deposits of rural and coop banks in private 6. Loans and credit accommodations with
banks shall not be subject to SBL valuation reserves provided that bank has
no unbooked valuation reserves
• Deposit in private depository bank used by thrift,
rural and coop banks, with authority to accept 7. Loans and credit accommodations as a
result of underwriting agreement of debt
demand deposits, after being cleared, shall be
securities not exceeding 30 days
exempted from SBL
• Bank guarantee – irrevocable commitment of a Violations
bank binding to pay a sum of money in event of
non-performance of third party • Monetary penalties – 1/10 of 1% of excess over
• Credit Risk Transfer – arrangement that allows the the ceiling but not exceed 30k per day
bank to transfer the credit risk associated with its • If bank resource is less than 50M, then only a max
loan or other credit accommodation to a third party penalty of P500 shall be imposed
• Control of majority interest or controlling interest • There will also be reprimand to directors/officers
– parent owns, directly or indirectly through its
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 15
Banking Laws
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 16
Banking Laws
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 17
Banking Laws
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 18
Banking Laws
• Escalation clause are valid to maintain fiscal claim against the subsidiary is not a claim against
stability and retain the value of money on long- the parent
term contracts
Development assistance incentives
• However, other party there must be right to assent
to an important modification of contract • BSP shall provide incentives to banks, without
• Contract of adhesion – parties do not bargain on government guarantee, which extend loans to
equal footing, the weaker party’s participation financial educational institutions, cooperatives,
being reduced to a take or leave it hospitals
Iniquitous, unconscionable and exorbitant interests Banks cannot extend peso loans to non-resident
• Though usury law is not inexistent, interest may • Reason for this:
be agreed upon by lender and borrower 1. To curb undue speculation in foreign
• However, the same must be equitable reduced for exchange market
being iniquitious, unconscionable and exorbitant 2. Further reinforce memorandum that peso
• In Medel vs. CA, SC found that 66% interest rate deposits should be funded inward foreign
per anum is unconscionable exchange remittances
• In Cuaton vs. Salud, interest rate was 120% per • OFWs are residents and can avail peso loans
annum interest rate is unconscionable and should
be lowered to 12% per annum interest rate Provisions for losses and write-offs
• Dio vs. Virgilio, interest rate was 120% per annum
• Bad debts - all debts due to any bank on which
also, reduction of interest must be made
interest is past due and unpaid
• Bacolor vs. Banco Filipino, a 24% interest rate per
annum is not unconscionable or excessive Extraordinary inflation or deflation
Effect of void interest rate • Under Art 1250 of NCC, in case of extraordinary
inflation or deflation of currency stipulated, value
• If interest rate is void, it is as if no express contract
of currency at time of establishment of contract
thereon and court may reduce
shall be the basis of payment
Prepayment of loans and other credit accommodations • For extraordinary inflation or deflation to affect
obligation, the following must be proven:
• A borrower may at any time prior to agreed 1. There must first be official declaration
maturity date, prepay in whole or in part the from BSP
unpaid balance subject to reasonable terms 2. Obligation is contractual
3. Parties expressly agreed to considered
Legal compensation
effects of extraordinary inflation or
• Under Art. 1278, compensation can take place deflation
where the parties are creditors and debtors of each • Extraordinary Inflation exist when there is an
other unusual decrease in the purchasing power of the
• A person who secures a loan of money acquires currency and such decrease could not be
ownership and is bond to pay the creditor an equal reasonably foreseen or was manifest beyond the
amount contemplation of the parties at the time of the
obligation
• Deposits in bank can be set-off against obligation
of depositor Purpose of Attorney’s Fees
• Subsidiary has an independent and separate
juridical personality from parent company and any
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 19
Banking Laws
• Attorney’s fees are not integral part of cost of • Both actions can be instituted independently of
borrow but arise when collecting upon the Notes each other
becomes necessary • But there can also be a joinder of cause
• Protect citizen from lack of awareness of trust cost • Violation shall not affect the validity or
of credit to the user by assuring full disclosure of enforceability of any contract
such cost and prevent uninformed use of credit • In Consolidated Bank vs. CA, SC said that lender
cannot charge interests not stipulated in
Disclosure
promissory note
• The creditor shall furnish the debtor a clear • In UCP vs. Beluso, interest rate provisions are
statement in writing setting forth the following: illegal due to violation of mutuality of contracts
1. Cash price or delivered price to be and also violate TILA
acquired
Exemption of government
2. Amount to be credited as DP
3. Difference between 1 and 2 • TILA shall not apply to Philippine Government
4. Charges individually itemized
5. Total amount to be financed Required disclosure on consumer loans not under open-
6. Finance charge end credit plan
7. Percentage that finance bears to the total
• Any creditor extending consumer loan or
amount to the financed
transaction which neither consumer credit sale nor
• Rationale: protect users of credit from lack of
open-end consumer credit plan shall also need to
awareness of true cost
disclose information
Definition
Exempted transactions
• Credit – any loan, mortgage, deed of trsust,
• Disclosure requirement on consumer credit
advance, conditional sale contract, rental
transactions shall not apply to those extension of
• Finance charge – interest, fees, service charges,
credits for business or commercial purpose or to
discounts and other charges incident to extension
government
of credit
• Creditor – any person engaged in business of IX. Foreclosure of real estate mortgage
extending credit who requires finance charge
Procedure
Penalties
• In the event of foreclosure of any mortgage, the
1. Civil – any creditor who fails to disclose shall be mortgagor has the right to redeem the property
liable for P100 or amount equal to twice of finance within one year after sale of real estate
charge required • Purchaser at auction sale shall have the right to
a. Whichever is higher enter upon and take possession of such after date
b. Liability shall not exceed 2k of confirmation of auction sale
c. Must be brought within 1 year from date • In GBL, if purchased y banks, they are not
of occurrence required to set up bond before they can enter the
2. Criminal – fine not less than 1k or not more than property immediately during redemption period
5k or imprisonment for not less than 6 mos nor
more than 1 year or both
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 20
Banking Laws
• However, mortgagor still have right of recourse to • A bank may also perform the following services:
petition to set aside foreclosure sale and cancel 1. Receive custody of funds, documents and
writ of possession in same proceeding other valuable objects
2. Act as financial agent to buy and sell for
X. Major investments their customers
3. Make collection for accounts of other
• MB shall establish criteria for reviewing major
4. Act as managing agent of investment
acquisitions or investments of bank
management accounts
Ceiling on investments in certain assets 5. Rent out safety deposit boxes
• Bank shall perform 1-4 as a depositary or as an
• Bank may acquire real estate as necessary for its agent
conduct of business • It shall be duly separated from bank’s own assets
• Total investment on such real estate shall not and liabilities
exceed 50% of capital accounts
• Equity investment of a bank in another corporation Safety deposit box
engaged in real estate shall be considered part of
• It is considered as a special kind of deposit
investment in real estate
• It cannot be an ordinary contract of lease because
• In determining compliance with the ceiling, the
the absolute control and possession of safety
following shall apply
deposit box is not given to renters
o Investment shall include real estate and
• The guard key remains with bank and renters key
equipment necessary for bank use such as
bank premises and real property of bank remain in customer
under its name • Where the renter keys are duplicated, the bank is
o The cost of real estate leased by bank from not liable to either renters in case of loss
corporation and amount of equity in lessor attributable to them
shall also be included • The SC said that it can be considered as a bailor
• In case of Tala vs. Banco Filipino, BF reached its and bailee relationship
maximum 50% capacity in real estate and Tala • Duties of the parties may be defined by them
was created by major stockholders to buyer bak • The company renting safe-deposit boxed cannot
sites of BF and leases it back to them. However, exempt itself from liability due to fault of its own
BF defaulted and Tala wants the payment of rents agents
• The court rules that Tala cannot be allowed to • In Sia vs. CA, a bank was held liable for not
collect rent as it clearly shows that the tried to immediately informing the customer that his safety
circumvent the real estate investment limit in GBL deposit box was flooded which caused damage to
the items of the customer
Acquisition of real estate by way of satisfaction of claims
XII. Electronic transactions
• Notwithstanding the limitations, bank may still
acquire the following property: • BSP shall have full authority to regulate use of
1. Mortgage to it in good faith for security electronic devices in connection with bank
2. Conveyed for satisfaction of debt operations
3. Purchase under judgement or mortgage
XIII. Outsourcing of information technology
• Any real property held in such circumstance must
be disposed within 5 years • Bank may outsource information technology
• After said period, those properties shall now be systems and processes except inherent banking
included in the 50% limitation functions
• Functions that are not outsourced:
XI. Other Banking Services
1. Strategic planning for use of IT
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 22
Banking Laws
• System that shall safeguard interests, banks and • banks shall make available for inspection credit
subsidiary credit card companies card information to BSP
• Before issuing credit cards, banks must exercise • Banks can offset their obligations with cardholder
proper diligence by ascertaining applicant possess with the latter’s debts provided there is notice
good credit standing and are financially capable to Handling of complaints
fulfil payments
• All applications must go under strict credit risk • bank shall give cardholder 20 days to examine
assessment process charges and after 2 billing cycles, bank can correct
error
Information to be disclosed
Unfair collection practices
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 23
Banking Laws
• banks shall resort to legally permissible means to • Retailers who honor credit/ATM/debit cards for
collect amount due under credit card agreement payment shall not require payment of surcharge
• There shall be no use of threat or violence to over and above the price tag
coerce payment and no false representation
Contract of adhesion
Mode of payment
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 24
Banking Laws
CHAPTER 5 – Prohibited Transactions and Cessation • Outsourcing inherent banking function shall
of Banking Business refer to any contract between the bank and
service provider for the latter to supply, or any
I. Prohibited Transactions act whereby the latter supplies, the manpower
Prohibited to act as insurer to service the deposit transaction of the former.
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 25
Banking Laws
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 26
Banking Laws
• Conservator is given power to revoke contracts 1. Current and complete examination not necessary
only those that are defect (void, voidable,
unenforceable, rescissible) • In Rural Bank of San Miguel vs. MB, the SC ruled
• Conservator merely takes place of board of that there is no need for complete examination
directors because it only needs a report
• Conservator cannot simply repudiate valid • A report is something that gives information while
obligations of the bank and must bring them to examination is a search, investigation or scrutiny
court actions • Absence of examination before closure of bank
• In FPIB vs. CA the court ruled that the conservator does not mean that there is no basis for closure
cannot revoke a previously valid contract entered 2. Procedure
by the bank even though the object of the contract
has a higher price • Receiver shall immediately:
• In conservatorship, the banking functions continue 1. Take charge of all assets and liabilities
unlike in receivership and liquidation 2. Administer the same for benefit of
creditors
VI. Cessation of banking business 3. Exercise general power of receiver under
Voluntary liquidation ROC
4. Shall not pay or any act that involves
• In voluntary liquidation, bank sends to MB notice transfer of asset of bank
of liquidation • Receiver may deposit or place funds of bank in
• No voluntary dissolution shall be undertaken by a non-speculative investments
bank without prior approval of MB. Request of • Receiver shall determine within 90 days from
voluntary dissolution shall be accompanied by takeover, whether institution may be rehabilitated
liquidation plan or otherwise
• Determination of resumption of business is subject
Receivership and liquidation to approval of MB
• The MB can summarily and without need of prior • In Teal Motor vs. CFI, receiver was defined as a
hearing forbid the institution from doing business indifferent person appoint by the court to preserve
and designate PDIC as receiver the funds of the in litigation pendent lite
• Grounds for receivership and liquidation: • He is not an agent or representative of any party
1. Unable to pay liabilities that are due. This 3. Prohibited acts
shall not include inability to pay cause by
extraordinarily demands by financial panic • Any director or officer declared insolvent or under
2. Insufficient realizable assets receivership shall not commit:
3. Cannot continue business without 1. Refuse to turn over bank records and
involving probable loss to depositors or assets to receiver
creditors 2. Tamper with bank records
4. Wilfully violated cease and desist order 3. Appropriate for himself or other party
involving transactions of fraud assets of bank
5. In case a bank notifies BSP or public 4. Receive bank deposits or collect loans
announces bank holiday where it suspends 5. Paying funds of bank
payment of its deposit liabilities 6. Transferring security of bank
continuously for more than 30 days
• For quasi-banks any persons recognize in 4. When institution cannot be rehabilitated
competence in banking may be designated as
receiver
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 27
Banking Laws
• If receiver determines that bank cannot be Reasons behind receivership and involuntary liquidation
rehabilitated, MB shall notify the board of
directors that it shall proceed with liquidation 1. Banking business is subject to regulation under
police power and are affected with public interest
• The receiver shall file ex parte with RTC a petition
2. It is the government responsibility to see that
for assistance in the liquidation of the bank
financial interest of depositors and others are
pursuant to liquidation plan of PDIC
protected. Done through BSP
• Court shall adjudicate disputed claims, assist the
3. Public faith in banking system may deteriorate if
enforcement of liabilities
depositors, creditors are not protected. BSP shall
• Receiver shall pay cost of proceedings from assets
step in and salvage remaining resources of bank
of institution
4. Absence of notice and hearing is not a groun to
• Receiver shall convert assets of institution to
annul MB resolution
money and dispose the same to creditors and other
parties to pay bank debts Effects of receivership
• Just like in the case of conservatorship, the action • There shall be retention of judicial personality
of MB shall be final and executor unless there has even though it is ordered closed by MB
been certiorari • The suing must be done through the liquidator
• In Rural Bank of San Miguel vs. MB, closure of a
bank is an exercise of police power 2. Not liable to pay interest
• In only stockholders of bank can file action for
• Banks declared insolvent and ordered closed by
annulment of MB resolution of placing bank in
BSP cannot be held liable to pay interest
receivership
• When bank is closed, it cannot lend money,
Close Now Hear Later Scheme engage in transactions or any banking activities
where it can derive income from
• The law does not contemplate prior notice and • Thus there is no way the bank can pay the interest
hearing before bank may be directed to stop the accrues in favour of its depositors
operations and placed under receivership • However, there are two types of deposits that earn
• Previous hearing before closure is not required in interest. The first one, deposit that earn from the
the law and does not infringe due process existence until the bank cease to operate. This one
• However, bank can question the receivership must be paid. The second interest earned from the
within 10 days after receivership time the bank closed until payment of deposits.
• Close now hear later – practical consideration to The interest here must not be paid
prevent unwarranted dissipation of bank’s assets
and valid exercise of police power to protect 3. Assets deemed under Custodia Legis
depositors, creditors and public
• Assets if the bank becomes beyond its control.
• If otherwise, there mere filing of receivership by
Receiver operates to suspend the authority of the
BSP can trigger bank run and drain its assets in
bank to its properties
days or hour leading to insolvency
• Assets of bank shall be custodia legis in hands of
Effect of filing petition for review receiver and exempted from garnishment, levy,
attachment
• Pendency of case questioning receivership does • Liquidator – task is to dispose all assets of the
not diminish of receiver to administer bank’s bank and effect partial payments of banks
transactions pertaining to normal operations of the obligations
bank
4. Stay of execution
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 28
Banking Laws
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 29
Banking Laws
CHAPTER 6 – Foreign Banks and Trust Operations • Residents and citizens of the Philippines that are
creditors of foreign banks shall have preferential
I. Foreign Banks right to assets of such banks
Transacting business in the Philippines • Under RA 7721, foreign banks have three modes
of entry in the country:
• RA 7721 – Foreign Banks Liberalization Act 1. Acquiring 60 of voting stock of existing
• PD 1034 – Conduct of offshore banking business bank
• Offshore banking – conduct of banking transaction 2. Investing 60% of voting stock of new
in foreign currencies banking subsidiary incorporated in
• Offshore banking unit – branch of a foreign baking Philippines
corporation authorized by BSP to transact offshore 3. Establishing branches with full baking
banking authority
• Foreign corporation doing business in the • A foreign bank may only avail only 1 mode of
Philippines are required to obtain a license entry
• However, even if foreign corporations do not have • GBL only stated that branches of foreign banks
a license, they can still be sued or be sued will be treated as one and shall have the head
• License is only necessary if it is for transacting or office guarantee to creditor Filipino citizens
doing business in the country • However, there is nothing in the law that states
that citizens that are debtors to foreign bank local
Acquisition of voting stock in domestic bank branches shall also be debtors to the head office
• There is also nothing in the law that the head
• Foreign banks are allowed entry in the Philippines
office and its local foreign branches shall be
subject to the following rules
treated as one
1. Within 7 years from effectivity of GBL,
• Thus, compensation with Philippine branches with
MB shall authorize foreign banks to
foreign branches cannot be effected as they cannot
acquire 100% voting stock of 1 domestic
be considered creditors and debtors of each other
bank
2. Within same period, MB may allow Summons and legal process
foreign bank which prior to GBL has
already acquired 60% voting stock can • Summons must be given to the Philippine agent or
now acquire 100% head of foreign bank to have jurisdiction
3. MB must ensure that 70% of resources of • If there is no agent, summons may be made upon
banking system are held by majority- BSP deputy governor in-charge
owned Filipinos • Once given, it shall be effect as if made upon bank
or agent
Local branches of foreign banks
• BSP deputy governor in-charge shall mail it to the
• Foreign banks which has more than 1 branch in bank and sending copy is a necessary part to
the Philippines, all such branches shall be treated complete service.
as 1 unit • In the corporation code, the service, in case of
absence of agent, shall be given to SEC
Laws applicable
Head office guarantee
• Foreign banks shall be governed by GBL and
• Head office shall fully guarantee prompt payment other applicable laws such as Corporation Code
of all liabilities of its Philippines branch
Revocation of license of foreign banks
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 30
Banking Laws
• MB may revoke license if it find foreign bank • Existing local branches of foreign banks shall be
insolvent or imminent danger of insolvency and given 1.5 years to comply with minimum capital
will involve probable loss requirement
• After revocation, it shall be unlawful for foreign • RA 7721 was approved on May 18, 1994
bank to transact business in the Philippines
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 31
Banking Laws
• A trust entity, before engage in trust business, • Paid-in capital and surplus of each entity must be
shall comply with minimum paid-in capital equal to the amount required to be deposited in
requirement by MB BSP
• In case it shall not meet the required paid-in
Powers of trust entity capital, the MB shall limit or prohibit distribution
1. Act as trustee on any mortgage or bond and accept of profits by trust entity until minimum
and execute any trust consistent with law requirement is met
2. Act under order of any court as guardian, receiver, • Trust entity, as long as solvent and comply with
trustee or depositary of estate of minor or laws, shall have the right to collect interest earned
incompetent person on security deposited to BSP
3. Act as executor of any will • If trust entity fails to comply with law, BSP shall
4. Act as executor of estate of any deceased person retain interest of securities for benefit of rightful
with a will or administrator without a will claimants
5. Accept and execute trust for holding, management, • All claims arising from trust business shall have
administration of estate and rents, issues, profits priority over all claims as regard to the security
thereof deposited
6. Establish and manage common trust funds
IV. Bond of Certain Persons for the Faithful Performance
Transactions requiring prior authority of Duties
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 32
Banking Laws
• The trust business shall be kept separate and 2. Equity investment of bank in another
distinct from the general business corporation engage in real estate shall be
• They shall be physically separated from assets of considered a part of 50%
its other business
Exemption of trust assets from claims
• They shall be under the joint custody of at least
two persons who are officers of the trust • No assets held by trust entity shall be subject to
department claims other than those parties interested in
specific trusts
Investment limitation of a trust entity
• Property held in trust by insolvent debtor shall be
• Unless otherwise directed by instrument creating excluded from insolvency proceedings
the trust, the lending or investment of funds by • Trust entity and its branches shall be treated as
trust entity shall be limited to loans and investment one unit
as prescribed by law, MB or court • Trust entities shall advertise services in a
• Assets received in trust shall be administered with dignified manner
terms of the instrument creating the trust
Money of government
• If trust entity is given discretionary powers to
invest, loans and investments shall be limited to: • Banks may not receive as trustee the funds of the
1. Evidence of indebtedness of RP and BSP government except GOCC banks
2. Loans guarantee by government
3. Loans fully secured by hold-out on,
assignment or pledge of deposits that are
maintained QUIZZES:
4. Loans fully secured by real estate or
True or False:
chattels
• The following shall be required to be given as 1. The fiduciary nature of the relationship of a
information depositor with the depositary bank imposes on the
1. Transaction to be entered latter the obligation to discharge the highest
standard of trust and integrity and a violation
2. Borrower’s name
thereof is considered a breach of trust. False
3. Amount involved
4. Collateral security 2. The humble wage-earner has not hesitated to
entrust his life’s savings to the bank knowing that
Real estate acquire by trust entity they will be safe in the custody of the banks. True
• Trust entity may acquire real property under 3. Banks are gratuitous bailees of the funds deposited
following circumstances: with them by their clients. False
1. Mortgage to it in good faith by way of 4. The public relies on the banks’ fiduciary duty to
security to debts observe the highest degree of diligence but any
2. Conveyed to it for satisfaction of debts violation of this duty by the bank is not a valid
previously contracted ground for the grant of exemplary damages to the
3. Purchase at sales under judgment, decrees, depositor. False
mortgages or trust deeds
5. Thrift banks may not act as correspondent for
• Any property acquire under circumstances shall be other financial institutions. False
disposed within 5 years
• After said period, bank can still continue to hold 6. A non-stock corporation may act as a trustee or
administer any trust or hold property in trust or on
property subject to limitations:
deposit for the benefit of others. False
1. Total investment in real estate shall not
exceed 50% of combined capital accounts
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 33
Banking Laws
7. A bank cannot use any of its branches as outlets 6. The term Legal Compensation refers to that
for the sale of the financial products of its allied situation when two persons, in their own right, are
undertaking or its investment house units. True creditors and debtors of each other.
8. A bank may declare dividends greater than its
7. The contracts between cardholders and credit card
accumulated net profits then on hand, deducting
there from its losses and bad debts. False companies are called contracts of adhesion
because their terms are prepared by only one party
9. The appointment of a receiver is vested while the other merely affixes his signature
exclusively with the Monetary Board. True signifying his conformity thereto.
10. The MB cannot appoint a conservator connected 8. Net worth means the total unimpaired paid-in
with BSP. False
capital including paid-in surplus, retained earnings
11. In a judicial foreclosure of mortgage, there is an and undivided profit, net of valuation reserves and
equivalent right of redemption. False other adjustments as maybe required by BSP.
12. No late payment of penalty fee shall be collected 9. Letter of Credit refers to a financial device availed
from cardholders unless the collection thereof is of by businessmen as a convenient mode of
fully disclosed in the contract between the issuer
dealing with sales of goods to satisfy the
and the cardholder. True
seemingly irreconcilable interests of a seller who
13. A bank which had been ordered closed by the refuses to part with his goods before he is paid.
monetary board does not retain its juridical
personality which can sue and be sued through its 10. Survivorship agreement is the agreement that
liquidator. False allows joint depositors to withdraw the whole
deposit during their lifetime and transferring the
balance to the survivor upon the death of one of
them.
Fill in the blanks 11. In the case of Consolidated Bank and Trust Co.,
the SC ruled that the contract between the bank
1. The law governing the creation, organization and and its depositor is governed by the provisions of
operation of rural banks is Rural Banks Act. the Civil Code on simple loan/mutuum.
2. The total investment in equities of allied enterprise 12. In the case of Serrano vs. Central Bank of the Phil.,
shall not exceed 35 % of the net worth of the bank. the SC held that bank deposits are in the nature of
irregular deposits.
3. Subsidiary shall refer to a corporation or firm
more than 50% of the outstanding voting stock of 13. In Simex International Case, the SC said that the
which is directly or indirectly owned. banking system is an indispensable institution that
plays a vital role in the economic life of the nation.
4. The rule that the total amount of loans that may be
extended by a bank to any person or entity shall at 14. It is basic that after consolidation of title in the
no time exceed 20% of the net worth of such bank buyer’s name for failure of the mortgagor to
is called Single Borrower’s Limit. redeem, the writ of possession becomes a matter
of right and its issuance to a purchaser is merely a
5. Credit Risk Transfer shall refer to any agreement
ministerial function.
that allows the bank to transfer the credit risk
associated with its loan or other credit 15. Acceleration Clause means any provision in the
accommodation to a third party. contract between the bank and the cardholder that
gives the bank the right to demand the obligation
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 34
Banking Laws
in full in case of default or non-payment for 25. Secrecy of Bank Deposit Act is the law that was
whatever reason. passed to give encouragement to people to deposit
their money in banking institutions.
16. The law that protects its citizens from a lack of
awareness of the true cost of credit to the user by 26. The Securities and Exchange Commission shall
assuring full disclosure of such cost is Truth in not register the articles of incorporation of any
Lending Act. bank unless accompanied by certificate of
authority issued by the monetary board.
17. The agreement between the parties in a loan
transaction which stipulate that the rate of interest 27. The equity investment of a universal bank or its
agreed upon may be increased in the event that the wholly or majority owned subsidiaries, in a single
applicable maximum rate of interest is increased non-allied enterprise shall not exceed 20% of the
by the MB is called escalation clause. total equity.
18. Joint and Solidary Agreement is an agreement 28. Demand deposit are all those liabilities of the
where the contracting parties consent to be jointly Banko Sentral and of the other banks which are
and severally liable in a loan obligation. denominated in the Philippine currency and are
subject to payment in legal tender upon demand
19. A bank guarantee is an irrevocable commitment of by presentation of depositor’s check.
a bank binding itself to pay sum of money in the
event of non-performance of a contract by a third 29. The rule intended to maintain the quality of bank
party. management and afford better protection to
depositors and the public in general is called fit
20. Assignment of credit is an agreement by virtue of and proper rule
which the owner of credit, known as the assignor,
by a legal cause, such as sale or dation in payment 30. Off shore banking units refer to a branch,
transfers his credit to another known as the subsidiary or affiliate of a foreign banking
assignee who acquires the power to enforce it. corporation which is duly authorized by the Banko
Sentral to transact offshore banking business in the
21. All foreign currency deposit are of absolute Philippines
confidential nature as a general rule and said
deposit shall be exempt from attachment pursuant 31. A bank is bound by the negligence of its
to RA No. 6426 otherwise known as Foreign employees under the principle of Respondeat
Currency Deposit Act of the Philippines. Superior
22. Negotiable Order of Withdrawal Accounts are 32. Quasi banks refer to entities engaged in the
interest bearing deposit accounts that combine the barrowing of funds through the issuance,
payable on demand feature of checks and endorsement or assignment with recourse or
investment feature of savings account. acceptance of deposit substitutes for the purpose
of relending or purchasing receivables and other
23. Independent Auditor means a person other than an obligation
officer or employee of the bank, its subsidiaries or
affiliates or related companies, or its majority 33. The business of banking is imbued with public
shareholders. interest in order to assure the stability of banks
which largely depends on the confidence of the
24. Interest Rate Differential refers to the difference or people in the honesty and efficiency of banks.
margin between interest rates such as the
difference between domestic and foreign interest
rates.
Summary of Laws
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 35
Banking Laws
BP 68 Corporation code
Chapter 2
Chapter 3
Chapter 4
Chapter 6
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 38
Banking Laws
a. In which case, such member shall resign banking institution once every 12 months and at
before assumption of office such other time at the vote of 5 members of MB
3. Member of MB coming from private sector shall 3. Sec 72 NCBA – During exchange crisis or
not hold public office in tenure national emergency, with concurrence of 5
4. No person shall be member if he has been members of MB and approval of president, MB
connected directly with any multilateral banking may temporarily suspend sales of exchange by
institution or has substantial interest on any private BSP and may subject all transactions in gold and
bank 1 year prior appointment foreign exchange to license by BSP
5. No member shall be employed in any such 4. Sec 84 NCBA – in nation or local emergency or
institution within 2 year after expiration of term imminent financial panic, MB may, with 5 vote of
except when serving as representative of members, authorize BSP to grant extraordinary
government (sec 9) loans or advances to banks secured by assets
1. Subsequently disqualified under Sec 9 during • They may attend meetings and have the right to be
tenure heard
2. Physically or mentally incapacitated and cannot
discharge duties and incapacity lasted more than 6 Salaries of governor and members of MB
months
• Salary shall be fixed y President at a sum
3. Guilty of acts or operation of fraudulent or illegal
commensurate to the importance and
character opposed to aim of BSP
responsibility attached to their position
4. Member no longer possess qualification under sec
8 Personal or Pecuniary interests
Meetings, quorum, decisions and proceedings MB • Members of MB with personal or pecuniary
interest in any matter in the agenda of MB shall
1. MB shall meet at least once a week. MB may be
disclose his interest and shall retire from the
called to meeting by governor or 2 other members
meeting when matter is taken
of board
• The decision made on matter shall be made public
2. Presence of 4 members constitute quorum
and the minutes shall reflect disclosure made and
provided that governor or his alternate is among
retirement of member
the 4
3. BSP shall maintain and preserve complete records Scope of authority of MB
of proceedings in their original form or in
microfilm 1. Issue rules and regulations it considers necessary
4. General Rule: All decisions of MB shall require for the discharge of its responsibilities and
concurrence of at least 4 members exercise of its powers
a. Rules and regulation issued shall be
Exception to general rule where at least 5 votes is required: reported to President and Congress within
15 days from date of issuance
1. Sec 61 GBL – publication of financial statements
2. Direct the management, operation and
is required once at least every quarter. In national
administration of BPS, reorganize its personal and
or local emergency or of imminent panic, MB by
issue rules and regulations
vote of 5, upon application of bank, may allow
a. Legal units of BSP shall be under
such bank to defer publication of financial
exclusive control and supervision of MB
statement
3. Establish human resource management system
2. Sec 28 NCBA – supervision and examining
which shall govern selection, hiring, appointment
department head shall examine books of every
or dismissal of personnel.
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
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• They shall limit their professional activities 1. BSP shall have supervision over, and conduct
directly to their position in BSP periodic or special examinations of bank, quasi
• Shall not accept any other employment except banks including subsidiaries and affiliated
when position in eleemosynary, civic, cultural or engaged in allied activities
religious organization or by designation of a. Subsidiary – more than 50% voting stock
President to represent government is owned by bank or quasi-bank
b. Affiliate –50% or less is owned by bank or
Number and functions of deputy governors related or linked to institution through
common stock holders
1. Governor shall appoint not more than 3 deputy
2. Department heads and examiners are authorized to
Governors who shall perform duties as may be
a. Administer oaths to any directors, office
assigned to them
or employee of any institution
2. In absence of governor, deputy governors
b. Compel presentation of books, document
designated to act as CEO of BSP shall exercise
and records relative to true condition of
duties
institution
3. Whenever governor is unable to attend
government board or councils where he is ex Restraining order or injunction
officio member, deputy governor may be
designated vested with power to participate and • No restraining order or injunction shall be issued
vote enjoining (preventing) BSP from examining
institution under its supervision
V. Operations of BSP • Exception: there is convincing proof that action of
Research and Statistics of BSP BSP is plainly arbitrary and in bad faith and
petitioner files bond in favor of BSP
• BSP shall prepare data and conduct economic • Provisions of Rule 58 – Preliminary Injunction
research for guidance of MB shall apply not inconsistent
Scope of Authority of BSP to obtain data VI. Director, Officer or Stockholder and Related Interests
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 41
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• Any DOSRI contract loans or any financial • None of the reports shall be open to inspections of
accommodation from his bank or a from a bank the public except when such is incidental in
(lending bank) that is: proceedings for violations
1. Subsidiary of bank holding company of
which both his bank and lending bank is Service Fees
subsidiaries
• Banking which are subject to examination of BSP
2. Controlling proportion of share is owned
shall pay BSP within first 30 days of each year an
by the same interest that owns a
annual fee as may be prescribed by MB
controlling proportion of share of his bank
• Sec 65 of GBL states that BSP may charge
in excess of 5% if capital and surplus of
equitable rates, commissions and fees fir
bank
supervision or examinations
• Such shall be required by lending bank to waive
the secrecy of his deposits in all banks VIII. Administration
• Any information obtained from examination shall
be strictly confidential. Used only by examiner Operating departments of BSP
only in connection with supervisory responsibility
• MB shall determine operating departments
or by BSP in legal action
including public information office
Prohibition against Personnel of BSP
Required reports and publication of BSP
• In additional to prohibition from RA 3019 and RA
1. General balance sheet showing volume and
7613, the BSP personnel prohibited from:
composition of its assets and liabilities – 60 days
1. Being DOSRI of institution under
after end of each month except December, 90 days
supervision of BSP except non-stock
if such
savings and loan associations
2. MB shall publish and submit to Congress and
2. Require or receive any gift from any
President the following reports:
institution subject to supervision
a. Analysis of economic and financial
3. Reveal in any manner, except under court
development – not later than 90 days after
order, Congress or government officer.
end of each quarter
Shall not apply to giving of information to
b. Preceding year’s budget and profit and
MB or governor of BSP
loss statement – within 90 days after end
4. Borrowing from any institution subject to
of year
supervision and examination unless
c. Review of the state of financial system –
borrowings are adequately secured
120 days after each semester
VII. Examination of Banking Institutions d. Abnormal movements in monetary
aggregate and general price movements –
Frequency of examination 72 hours after remedial measures was
taken
• Department head shall examine books of every
banking institution once every 12 months and at Annual Report of BSP
such other time at the vote of 5 members of MB.
Interval shall be at least 12 months 1. Annual report on the condition of BSP – before
end of March each year. Submit to President and
Afford opportunity to examine Congress and include review of policies and
economic analysis circumstances:
• Bank concerned shall afford the head full 2. Will also include statement of financial condition
opportunity to examine its books, cash and assets of BSP and statistical appendix include: (1)
during banking hours movement monetary aggregates, (2) movements of
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 42
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foreign exchange, (3) balance of payments, (4) • Chairman of COA act as ex officion auditor of
consumer prices, (5) exports/imports, (6) accounts BSP and authorized to appoint representative
of BSP, (7) data auditor to BSP. Can only be removed by COA
3. BSP shall publish another version of the annual • Representative shall be (1) CPA, (2) 10 years
report understandable in layman experience, (3) not relative to member of MB or
4. Failure to comply without justifiable reason shall COA to 6th civil degree
cause withholding of salary of personnel
X. Penalty for Violation
Signature of statements
• Sec 66 of GBL provides that if offender is director
• Balance sheet and other financial statements shall or officer, shall be suspended or removed from
be signed by (1) officer responsible for preparation, office. If offender is corporation, shall be
(2) governor, (3) BSP auditor dissolved by quo warranto instituted by SG
IX. Profits, losses and special accounts Penalty for refusal to make reports or permit examination
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
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AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 44
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• Currency has value because people are willing to Liability for notes and coins
accept it in exchange for goods or services or
payment of debt • Notes and coins issued by the BSP shall be
• Money has no value as a commodity but has value liability of BSP
as means of medium of exchange • It shall be issued in amounts not exceeding assets
• Value of goods and services are measured by of BSP
terms of medium • Notes and coins shall be a first and paramount lien
• Not applicable if no confidence in currency and on all assets of BSP
people would use foreign currency • BSP’s holding of its own notes and coins shall not
be considered a part of its currency issue and not
II. Issue of means of payment part of assets and liabilities
1. BSP shall have the sole power to issue currency • All notes and coins issued by BSP shall be fully
within the Philippines guaranteed by the Government and shall be legal
2. MB may issue regulations to prevent circulation of tender in Philippines for all debts, public or private
foreign currency , currency substitute or facsimiles • Checks representing demand deposits do not have
of BSP notes legal tender and acceptance is at the option of the
3. BSP shall have authority to investigate, arrest and creditor
conduct searches to maintain integrity of currency • Check cleared and credited to account of creditor
4. Violation shall have imprisonment of 5-10 years shall be equivalent to delivery
unless RPC gives greater penalty • BSP Circ. 537 of 2006 – maximum amount of
coins to be considered as legal tender
Related Crimes under RPC
o 1,5,10 peso coins – 1k
1. Art. 163 – Making and importing and uttering o 1,5,10,25 centavos – 100
false coins
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
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• Art 1249 of NCC states that all payments of debts • Mutilated condition: (1) identification is
shall be in currency stipulated and if not possible impossible, (2) signs of filing, clipping, (3) notes
currency in legal tender lost more than 2/5 of surface or all signatures
• It also states that when there is payment by PN, it
shall produce only effect when encashed or Retirement of old notes and coins
impaired through fault of creditor. Action derived • BSP may call for replacement of notes (more than
from obligation is held in abeyance 5 yrs old) and coins (more than 10 yrs old)
• Art. 1250 of NCC, where there is extraordinary • Notes and coins replaced shall remain legal tender
inflation or deflation, value of currency at time of for 1 year from date of call
establishment of obligation shall be basis of
• After period, such shall cease to be to be legal
payment
tender but can be exchanged at par and without
Characteristics of the currency charge in BSP during following year
• After said period, notes and coins not exchanged
• MB with approval of President shall prescribe shall cease to be a liability of BSP and shall be
denominations, dimensions, designs of notes. demonetize
• Notes shall state that they are liabilities of BSP
and fully guaranteed by government III. Domestic monetary stabilization
• Notes shall bear signature, in facsimile, of Guiding principle on monetary stabilization
President and BSP Governor
• MB with approval of President shall prescribe 1. MB shall endeavour to control any expansion or
weight, fitness, design and denomination of coins contract of monetary aggregates prejudicial to
• In minting of coins, availability of metals and its price stability
price shall be considered
Power to define terms
Printing of notes and mining of coins
2. MB shall define monetary aggregates, credit and
• MB shall prescribe amounts of notes and coins to prices and made public such definitions
be printed and minted. MB has authority to
Action when abnormal movements occur in monetary
contract institutions for such
aggregates, credit and prices
• All expenses incurred shall be for the accounts of
BSP • When such occurs that endanger stability of
economy, MB shall:
Interconvertibility of currency
1. Take remedial measures
• BSP shall exchange on demand and without 2. Submit to Prresident and Congress of
charge Philippine currency in any other report containing the (1) cause, (2) extend
denomination requested of change and (3) measures taken by MB
• If BSP is temporarily unable to provide such, it • Whenever the following happen:
shall deliver denomination nearest 1. Monetary aggregates or level of credit
increases or decreases by more than 15%
Replacement of currency unfit for circulation 2. Cost of living index increases by more
than 10% in relation to level of month
• BSP shall withdraw from circulation and existing of preceding year
demonetize all notes and coins unfit for circulation 3. Other circumstances so warrant
and shall replace them
• The monetary board shall submit reports
• BSP shall not replace notes under mutilated and shall state whether these changes is a
condition and without compensation to bearer threat to stability
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 46
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• International reserve shall include but not limited V. Operations in Gold and FOREX
to:
• Gold Purchases and sales of gold
• Assets in foreign currencies • BSP may buy and sell gold
• Assets in foreign currencies include (1) documents • It shall be made in national currency at prevailing
of international transfer of funds, (2) demand and international market price
time deposits of banks abroad and (3) foreign
government securities and notes Purchase and sales of FOREX
• MB shall hold the FOREX resource of BSP in
freely convertible currencies • BSP may buy and sell foreign notes, coins and
• MB shall issue regulations that FOREX assets documents. They can also engage in future
must meet exchange operations
• BSP shall be free to convert any asset in • BSP shall engaged with FOREX transactions with
international reserves into other assets the following: (BIG-FO)
1. Baking institutions operating in the
Action when International Stability of Peso is Threatened Philippines
2. International financial institutions
• Whenever: 3. Government
1. International reserve falls to a level 4. Foreign governments
inadequate to meet prospective net 5. Other entities authorized by MB
demands for foreign currencies
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
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• In order to maintain convertibility of peso, BSP • MB shall determine exchange rate policy of the
may buy those offered and sell any quantity country
demanded provided that FOREX is freely • MB shall determine rates at which BSP shall buy
convertible into gold or US dollars and sell spot exchange and establish deviation
• This requirement shall not apply to demand for limits for effective exchange rates
foreign notes and coins • BSP shall not collect any additional commissions
• BSP shall effect its exchange transactions at the other than actual telegraphic costs
rates determined by Sec. 74 • MB shall similarly determine rates for other types
of FOREX transactions including sales of foreign
Foreign Asset Position of BSP notes and coins
• BSP shall maintain a net positive foreign asset • The margins between effective exchange rates and
position so that gross FOREX assets will always rates established may not exceed the
exceed gross foreign liabilities corresponding margins for spot exchange
• If FOREX liabilities exceed twice the FOREX transactions more than additional costs involved in
assets, BSP shall within 60 days, submit report to each type of transactions
Congress stating origin of liabilities and manner Operations with Foreign Entities
which it will be paid
• MB may authorize BSP to grant and receive loans
Emergency Restriction on Exchange Operations from foreign banks and may engage in operations
• In order to: with such entities for national interest
1. Achieve primary objective (price stability) • BSP may also act as agent of such entities
2. Protect international reserves • BSP may pledge gold or other assets as security
3. And in time of national emergency, give against loans it received
MB time to takes constructive measures to
VI. Regulations of FOREX Operations
forestall or combat crisis
• The MB with concurrency of 5 members and with FOREX Holdings of Banks
approval of President may:
1. Temporary suspend or restrict sale of • BSP may at all times have FOREX resources
exchange sufficient to enable it to maintain international
2. Subject all transactions in gold and stability and covert ability
FOREX to license • MB may require banks to sell to BSP part of their
3. Require FOREX obtained by anyone be surplus holdings of FOREX to achieve this. Such
delivered to BSP at effective exchange transfers may be required to all foreign currencies
rate. Foreign currency deposits RA 6426 • MB may determine the net assets and liabilities of
(Foreign Currency Deposit System) shall banks
be exempted • To determine such, the following shall be taken
into consideration: (1) bank’s networth,
Acquisition of Inconvertible Currencies outstanding liabilities or other financial or
performance ratios
• BSP shall avoid acquisition of such currencies
• Such determination shall be applied to all banks
• It may require such currencies in an amount
uniformly and without discrimination
exceeding the minimum balance to cover current
demands for said currency only when acquisition Requirement of Balanced Currency Position
of such is considered of national interest
• MB may require the banks to maintain balance
Exchange Rates (Sec. 73) position of assets and liabilities in peso or other
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
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currency. Banks shall be granted reasonable time 2. Production credits – credit where
for such maturities are not more than 360 days and
• Power above shall be exercised only under special resulting from production of agricultural,
circumstance and applied to all banks uniformly animal, mineral or industrial products
and without discrimination 1. Such must be secured by a pledge
of respective product except if
Regulation of Non-Spot Exchange Transactions loan is secured by lien on 70%
value of real estate property
• To restrain banks from taking speculative
3. Other credits – credits not under 1 and 2.
positions with respect to future fluctuation in
BSP can provide funds from
FOREX rates, MB shall issue regulations for sales
non0inflationary sources
in non-spot exchange
4. Advances – grant advances against the
Other exchange profits and losses following kinds of collateral for fixed
periods which shall not exceed 180 days,
• Banks shall bear risks of non-compliance with except #4: (GSC-CUNN)
terms of FOREX documents they buy and sell 1. Gold
• They shall also bear other risks including 2. Securities representing obligations
exchange risk not assumed by BSP of BSP
3. Credit instruments in no. 1
Information on Exchange Operations 4. Credit instrument in no. 2 for
period not exceed 360 days
• Banks shall report to BSP the volume and
5. Utilized portions of advances in
composition of the purchases and sales of gold and
current amount covered by regular
FOREX each day
overdraft
• MB may also require other persons to report such
6. Negotiable treasury bills maturity
purchases and sales of gold and FOREX.
within 3 years
Accuracy of declaration may be verified by BSP
7. Negotiable bonds by government
VII. Loans to Banking and Other Financial Institutions maturity not more than 10 years
• Rediscounting, discounts, loans and advances in
Guiding Principles above provision may not be renewed or extended
unless extraordinary circumstance justify it
• The rediscount, discount, loans and advances shall
• Advances in No. 6 and 7 may not exceed 80% of
be used to influence volume credit consistent with
current market value of collateral
object price stability
Loans for Liquidity Purposes
Authorized Types of Credit Operations
• BSP may extend loans and advances for a period
• BSP may perform the following credit operations
not more than 7 days without collateral for
in the Philippines: (CPOA)
purpose of providing liquidity in the bank in times
1. Commercial credits – credits where
of need
maturities are not more than 180 days and
resulting from: VIII. Emergency Loans and Advances
1. Purchase and sale of readily
saleable goods, exportation, Nature of Emergency Loans and Advances
importation and their
transportation (PESTI) • Emergency loan or advance – credit facility
2. Storing non-perishable goods with intended to assist a bank experiencing serious
are duly insured liquidity problems from causes beyond its control
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 49
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• Amount of emergency loan or advance shall not • BSP shall collect interest on all loans and
exceed 50% total deposits and deposit substitutes advances it extends notwithstanding closure,
of bank and is given in 2 tranches receivership or liquidations
• MB shall fix interest and rediscount rates after due
First Tranche
consideration has been given to credit needs of the
• Amount of 1st tranche shall be limited to 25% of market, composition of BSP portfolio and national
total deposit and deposit substitute of bank and monetary policy
secured by government securities • Interest rates shall be applied to all banks
• Amount of first tranche may exceed 25% if it is uniformly and without discrimination
adequately secured by government securities and
Endorsement
unencumbered first class collaterals
• Prior to release of first tranche, bank shall submit • Documents rediscounted, discounted, bought or
resolution of its board of directors authorizing accepted as collateral by BSP must bear
BSP to evaluate their assets to determine that it is endorsement of bank
good for collateral
Repayment of Credits
Second Tranche
• Documents rediscounted, discounted, bought or
• MB by vote of 5 members may release 2nd tranche accepted as collateral by BSP must be withdrawn
on the following conditions that the principal
stockholders shall:
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
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• BSP shall not acquire or accept shares as collateral • At least once every month, MB shall review
and shall not participate in ownership of enterprise. portfolio of BSP for future credit policy
• BSP shall not engage in development banking or • MB shall consider if portfolio has a sufficiently
financing except for outstanding loans obtained or large part consists of assets with early maturities in
extended for development financing order to promptly contract BSP credit whenever
national monetary policy so requires
X. Open market Operations for the Account of BSP
XII. Bank Reserves
Principles of Open Market Operations
Reserve Requirement
• Open market purchases and sales of security shall
be made in accordance to primary objective of • In order to control volume of money created by
price stability credit operations, banks shall be require to
maintain reserves against their deposit liabilities
Purchases and Sales of Government Securities
• MB may at its discretion require banks to maintain
• BSP may buy and sell in open market for its reserves against funds held in trust and liabilities
account the following: for deposit substitutes
1. Evidence of indebtedness issued directly • Required reserves shall be proportional to volume
by Government of deposit liabilities and shall ordinarily take a
2. Evidence of indebtedness issued by form of a deposit in BSP
government instrumentality fully • Reserve requirement shall be applied to all banks
guaranteed by Government uniformly and without discrimination
• The above must be freely negotiable and available • Reserves against deposit substitutes shall be
to the general public in denomination of thousands determined like reserve requirement against
of pesos or more regular bank deposits
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
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• MB may exempt from reserve requirement such • Reserve position shall be calculated daily on the
deposits with remaining maturities of 2 years or basis of the amount at the close of business for the
more and interbank borrowings day
• Requirement to maintain bank reserves is imposed • In holiday or non-banking days, the reserve
primarily to control volume of money and shall position is calculated at the close of the business
not pay interest on reserves maintained day immediately preceding such holiday
• For purpose of computing reserve position,
Definition of Deposit Substitutes principal office of the bank in the Philippines and
• Deposit substitutes – alternative form of obtaining all branches are considered as single unit
funds from the public through the issuance, Reserve Deficiencies
endorsement or acceptance of debt instruments for
borrower’s own accounts for the purpose of • When reserve position is below the required
relending receivables minimum, the bank shall pay:
• The following are some deposit substitutes: o 1/10 of 1% amount of deficiency or
1. Banker’s acceptance o The prevailing 91-day treasury bill rate
2. Promissory notes plus 3% points whichever is higher
3. Participations • Banks shall permitted to offset bank deficiency
4. Certification of assignment with any excess reserves which may have held
5. Repurchase agreements during other days of the week
• MB shall determine what instruments are • Banks shall be required to pay penalty only on the
considered as deposit substitutes average daily deficiency in the week
• Deposit substitutes of commercial, industrial and • In case of abuse, MB may deny any bank the
non-financial companies for the limited purpose of privilege of offsetting reserve deficiencies
financing their own needs shall not be considered • If bank chronically has reserve deficiency, MB
deposit substitutes may limit or prohibit the bank from making new
loans or investments
Required Reserves against Peso Deposits and foreign
• It may also require that part or all net profits be
currency deposits
assigned as surplus
• MB may fix minimum reserve ratios to peso and • MB may modify or set aside the reserve deficiency
foreign currency deposits that each bank shall penalty in a period of a strike or lockout of the
maintain and shall be applied to all banks bank or national emergency
uniformly and without discrimination
Interbank Settlement
Reserves against Unused Balances of Overdraft Lines
• BSP shall establish interbank clearing facilities.
• MB may establish minimum reserve requirements BSP may charge fees for such
for unused balance of overdraft • Deposit reserves maintained by banks in the BSP
shall serve as bais for the clearing of checks and
Increase in Reserve Requirement settlement of interbank balances
• Any bank that incurs an overdrawing in its deposit
• MB may increase reserve requirements against
account in BSP shall fully cover such overdraft
existing liabilities in a gradual manner and shall
and pay interest (1) at 1/10 of 1% per pay or (2)
not exceed 4% in any 30 day period. Banks shall
prevailing 91-day treasury bill rate plus 3% point
be notified reasonably in advance
whichever is higher
Computation of Reserves • Settlement of clearing balances shall not be effect
for accounts which continues to be overdrawn for
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
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5 consecutive days until overdrawn is paid or has • MB may prescribe minimum ratios which capital
emergency loan and surplus of banks must bear to the volume of
• Banks with existing overdrafts with BSP at their assets
effectivity of NCBA may either convert such to
emergency loan or settle such immediately Coordination of Credit Policies
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
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• BSP shall open a general cash account for the • Purpose of operations – increase liquidity and
Treasurer of the Philippines in which liquid funds stabilize value of said security in order to promote
shall be deposited investment in government obligation
• Transfers of funds from such account shall be • MB shall use the resources of the Fund to prevent
made only upon order of Treasurer or moderate sharp fluctuations in the quotations of
government obligation
Other Banks as Agent of BSP • However, it shall not endeavour to alter
• In performance as fiscal agent, BSP may engage movements of the market resulting from basic
services of other government and domestic banks changes in interest rates
for operations in localities or abroad where BSP Resources of Securities Stabilization Fund
does not have office
• Fiscal operations in foreign countries, BSP may • It shall come from balance of the fund held by the
engage in services of foreign banks Central Bank (RA 265)
• BSP may charge equitable rates for services it • Securities Stabilization Fund shall retain net
renders to the government profits it may make on operations regardless if
said profits arisen from capital gains or interest
XV. Marketing and Stabilization of Securities for the earning. It shall also bear net loss.
Account of the Government
XVI. Functions as Financial Adviser
Issue of Government Obligations
Financial Adviser on Official Credit Operations
• Issue of securities representing obligations of
government may be made through BSP which may • Before undertaking credit operation abroad,
act as agent of government government, through Secretary of Finance, shall
• BSP shall not guarantee the place of said securities request the opinion of MB
and shall not subscribe to their issue except to • Opinion of MB shall be based on (1) gold and
replace its maturity holdings foreign exchange resources of the nation and (2)
effects of such operation in balance of payments
Method of Placing Government Securities and on monetary aggregates
• BSP may place securities in the such through • Whenever government contemplates borrowing
direct sale to financial institutions and public within the Philippines, the prior opinion of MB
should also be requested
• BSP shall not be a member of any stock exchange
• The constitution provides that foreign loans may
or syndicate but may interfere for the purpose of
placing government securities only be incurred in accordance with the law and
regulation of monetary authority
Servicing and Redemption of Public Debt shall be effected • Information on foreign loans by the government
through BSP shall be made public
• The President may contract foreign loans with
Securities Stabilization Fund prior concurrence of MB and subject to limitation
of the law. MB shall, within 30 days at end of
• Securities Stabilization Fund –made for the
quarter, submit to Congress a report of loans made
account of the government and its operation shall
consists of purchases and sales, in the open market, by government that would increase foreign debt
of bonds fully guaranteed by the Government Representation on the National Economic and
Development Authority (NEDA)
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 54
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• The deputy governor shall be an ex officio Phase out of Regulatory Powers over Finance
member of NEDA in order to – assure effective Corporations
coordination between economic, financial and
fiscal policies of government • BSP shall within 5 years phase out its regulatory
powers over finance companies without quasi-
XVII. Privileges banking and transfer it to SEC
• BSP shall be exempt for a 5 year from approval of • BSP shall be made operational by these acts: (1)
NCBA from all national, provincial, municipal and President appoint members of MB within 60 days
city taxes and (2) transfer of assets and liabilities of CB to
• Exemption shall apply to all property of the BSP BSP within 90 days
as well as to contracts and deed related to conduct • All incumbent personnel of CB shall continue to
of business exercise duties in BSP if they are necessary
• It shall not apply to those payable by persons
merely doing business to BSP Transfer of Asset and Liabilities
• Foreign loans shall be exempt from any taxes and • Upon effectivity of Act, (1) 3 members of MB
payment is assumed by BSP including Governor, (2) Sec. of Finance, (3) Sec.
Exemption from Customs Duties of DBM and (4) Chairmen of Committee on Banks
of Congress shall determine assets and liabilities
• The following are exempted from custom duties of CB to be transferred to BSP:
notwithstanding special laws: o MB and Sec. of Finance shall work out
1. Importation and exportation of BSP of creative monetary solution to retire CB of
notes, coins and other metals its liabilities at least cost
2. Importation of all equipment needed for o BSP shall remit 75% of net profits to a
bank notes and coin production special deposit account (sinking fund)
until net liabilities of CB is liquidated
Applicability of Civil Service Law o Assets and liabilities shall be limited to an
amount that will enable BSP to perform
• Appointment BSP, except policy determining,
on viable basis. Assets shall exceed
primarily confidential or highly technical in
liability, by COA, by P10B
nature, shall be in accordance with CSL
o Liabilities by BSP shall include liabilities
• No qualification requirement for position shall be
circulating notes and coins
imposed other than those set by MB
o Asset or liability of CB not transferred
• MB or Governor may, without need of further shall be retained and liquidated by CB
obtaining approval of government agency, appoint Board of Liquidators for a period not
personnel in BSP exceeding 25 years
• Officers of BSP shall not engage directly or • All actions shall be reported to Congres and the
indirectly in partisan political activities President within 30 days
XVIII. Transitory Provisions of NCBA Mandate to Organize
Phase-out of Fiscal Agency Functions
• BSP shall be organized irrespective of RA 7430
• BSP shall within 3 years but no longer than 5 (Optimum Utilization of Personnel Act)
years, phase out all fiscal agency functions and • There shall be no preferential or priority right to
shall transfer it to DOF be given to any personnel for appointment in new
staffing pattern
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 55
Banking Laws
Separation Benefits
Transfer of Powers
Suspense Accounts
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 56
Banking Laws
CHAPTER 9 – Unclaimed Balances and Trust Receipts b. All creditors or depositors or bank may be
included in one action
I. Unclaimed Balances 5. Service of process in such action or actions shall
be made by delivery of copy to defendant bank
Definitions
and by public in a newspaper of general
• Unclaimed balances – includes credits or deposits circulation
of money, bullions, security and any evidence of 6. At time of issuance of summons, clerk of cert shall
indebtedness with banks, loan associations and also issue notice:
trust corporations in favor of any person (1) a. Signed by him
known to be dead or (2) who has not made further b. Directed to all persons other than
deposits or withdrawal during the preceding 10 defendants named therein
years or more c. Requiring them to appear within 60 days
• Governed by Act No. 3936 – Requiring Banks to after first publication
Transfer Unclaimed Balances to Insular Treasury d. Show cause why unclaimed balance
• Such unclaimed balances, together with crease and should not be deposited to Treasurer
proceeds shall be deposited to the Treasurer to the e. Notify them that if they do not appear, the
credit of the government court will grant relief to RP
• Demand drafts cannot be escheated but telegraphic 7. Copy of notice shall be attached to summons
notes can (Republic vs. FNCB) required
8. Any person interested may appear to become a
Procedure party. Upon completion of publication, court shall
have complete jurisdiction
1. Within month of January of every odd year, all 9. Court must hear all parties. If the such are
banks shall forward to Treasurer a statement under unclaimed, they shall be escheated to government
oath of all credits and deposits held by them of and court will order their deposit to the Treasurer
persons (1) known to be dead or (2) who has not
made further deposits or withdrawal showing: Penalties
a. Name and last known residence
b. Amount and date of outstanding • If president, cashier or managing office of the
unclaimed balance bank neglects or refuses to file sworn statement,
c. Date when person died or made his last bank shall pay to the government 500Php per
deposit or withdrawal month for each infraction
d. Interest due on unclaimed balance
Immunity from suit
2. Copy of sword statement shall be posted n
conspicuous place in premises of the bank at least • Any bank which has made a deposit to the
60 days from date of filing Treasurer shall not thereafter be liable to persons
3. Immediately before filing, bank shall who brought an action against the bank for such
communicate with person whose favor the unclaimed balances. The bank shall be defended
unclaimed balance stand of such by SG without costs
a. It is the duty of the Treasurer to inform the
SG the existence of unclaimed balances Disclosure of Service and Maintenance Fees on Dormant
4. When SG is informed of such, he shall commence Accounts
an action in the name of the People of the
Republic in the CFI (RTC) of the province or city • Banks may impose service or maintenance fees on
where the bank is located dormant or inactive accounts
a. It shall be joined as parties the bank and • Provided that before such fees are imposed, the
all such creditors and depositors period for dormancy and minimum balance is
properly disclosed
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 57
Banking Laws
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 58
Banking Laws
6. Purchase – taking by sale, conditional sale, lease, • There are two possible situation in trust receipt
mortgage or pledge transaction:
7. Purchaser – person taking by purchase 1. Refers to money received under the
8. Security interest – property interest in goods, obligation involving the duty to deliver it
documents or instruments to secure performance (entregarla) to owner of merchandise –
of some obligation by entrustee. It includes title this happens when entrustee sold the
whenever such title is in substance taken or goods and must return the proceeds to
retained for security only. enstruster
9. Person – an individual, trustee, receiver or two 2. Refers to merchandize received under
more persons having joint interest obligation to return in (devolvera) to
10. Trust receipt – written of printed document signed owner – this happens when entrustee
by entrustee in favor of entruster comply with failed to sell the goods and must return
condition of TRL. No formality for execution is goods to entruster
necessary for validity • Trust receipt is a separate and independent
11. Value – any consideration sufficient to support a security transaction intended to aid in financing
simple contract importers whereby goods are held as security by
lending institution for loan
Trust Receipt Transaction
• In Sps. Vintola vs. Insular Bank of Asia and
• Trust receipt transaction – any transaction by and America, it stated the following:
between entruster and entrustee where entruster 1. Letter of credit-trust receipt is where a
hold absolute title or security interest over goods, bank extends a loan with a trust receipt for
documents or instruments, releases the same to the the loan. Transaction involved a loan
entrustee feature in the letter of credit and security
• The entrustee signs a trust receipt and binds feature for the trust receipt
himself to hols the goods for the entruster and to 2. Trust receipt is a security agreement
sell such with obligation to return the proceeds or which a bank acquires a security interest
return such in case of non-sale in the goods.
• In case of goods or documents: 3. It secures indebtedness and there can be
no such thing as security interest that
1. To sell the goods
2. To manufacture the goods with the secures no obligation
purpose of ultimate sale or 4. Trust receipt is a security transaction to
aid financing importers who do not have
3. To load, unload, ship or tranship them in
sufficient funds to finance importation and
manner necessary for their sale
who may not be able to acquire credit
• In case of instruments:
except utilization, as collateral of their
1. To sell or procure exchange
merchandise
2. Deliver them to principal
• It is a document where the lender (entruster),
3. Effect consummation involving delivery
to depository having no prior title or possession to the goods
lends money to the borrower (entrustee) on
4. Effect their presentation, collection or
security of the goods
renewal
• Sale of goods, documents or instruments by person Form of Trust Receipts
in business of selling such for profit who (1) has
general property rights in such goods over the • Trust receipt need not be in any particular form
buyer or (2) who sells the same to the buyer on but every trust receipt must contain:
credit, retaining title or interest as security for 1. Description of goods, documents or
payment does not constitute trust receipt instruments
transaction 2. Total invoice value
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 59
Banking Laws
• TRL is violated whenever entrustee fails to: • In Colinares vs. CA, failure of entrustee to turn
1. Turn over proceeds over the proceeds or non-return constitute crime of
2. Return goods in non-sale estafa under Art. 315(1) of RPC without need of
• Mere failure to account or return gives rise to the proving intent to defraud
crime which is malum prohibitum • If violation is committed by a corporation, its
• There is no requirement to prove intent to defraud directors, officers or employees responsible for the
(Ong vs. CA and Colinares vs. CA) offense shall have criminal liability
• What the law punishes is the dishonest and abuse • Rationale for making such officers responsible:
of confidence in handling money they are vested with authority and responsibility to
• Intent to misuse or misappropriate goods should devise means to ensure compliance with the law
be proved (Metrobank vs. Go) and if they fail to do so, they shall be accountable
• Failure to account upon demand of funds or • Corporations cannot be put in jail. However, these
property is evidence of conversion or entities are made liable for civil liabilities arising
misappropriation from criminal offense
• Mere failure to account for goods constitute Par • Violation of trust receipt constitutes fraud under
1(b) of Estafa (Ong vs. CA) Art. 33 of NCC an ICA to enforce civil liability
• Failure to deliver proceeds cause prejudice not arising from criminal liability
only to the creditor but also to the public interest • In Sarmiento Jr. vs. CA, complaint based on
• In Sps. Vintola vs. Insular Bank of Asia and failure to comply with obligation in Trust Receipt
America, it is tated that the return of merchandize is separate from criminal liability under PD 115. It
does not amount to recover by the lending bank is an obligation ex contractu and may proceed
• This is because the lending bank (entruster) only independently regardless of result of criminal
acquires a security interest over the goods and not action
the absolute ownership • In People vs. Cuervo, TRL with its penal sanction
• If the lending bank acquires absolute ownership, it is in reality, merely confirmatory of situation
shall defeat the loan feature of a trust receipt and covered under Art. 315(1)(b) RPC
shall become a contract of sale where bank gained • In Colinares vs. CA, if the person who executed
ownership of goods upon giving a loan the trust receipt did not pass title to the bank,
• The title of the entruster is a mere artificial where there is security interest of the property, and
expedient, more of a legal fiction than fact person is not an importer, there is no trust receipt
• It was also stated that there was no double created
recovery because when shells were deposited in • It is unjust and inequitable for banks of making
the court, IBAA did not yet accept it. Thus, they borrowers sign trust receipt to facilitate collection
have not appropriate the shells and can recover the of loans under threat of criminal prosecution in
obligation from the petitioners case of non-payment
Application
Penalty
V. Deposit Insurance Coverage • Even if depositor is HDC, it does not mean that he
already has a claim against the insurance fund
Deposit Liabilities • The fund protects deposits only
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 63
Banking Laws
Termination
• Foreign currency deposits – insured with PDIC
• Insurance payment shall be in same currency in • PDIC shall not terminate insured status of any
which deposit is denominated bank which continues to receive deposits
• PDIC Law is not applicable to Offshore Banking • Should insured bank fails to pay assessment dues
Units required, PDIC may file collection case and
administrative charges against bank officials
Duty to indicate insurance on Deposit
Trust Fund
• All banks must indicate that it is under the PDIC
and maximum insurance • Trust fund – funds held by insured bank in
fiduciary capacity
VI. Assessment
• Trust fund shall be insured in an amount not to
Assessment Rule exceed 10k for each trust estate
• Such insurance shall be separate from other
1. Assessment rate – not exceed 1/5 of 1% per deposits of owners of trust funds
annum • When fiduciary bank deposits any trust fund with
2. Semi-annual assessment rate – ½ of assessment other insured bank, such amount shall not be
rate. Not less than P250 considered as a deposit liability
3. Assessment base – amount of liability of bank for
deposits Payment of Dividends and/or Interests
4. Semi-assessment base for semi-annual period –
average of assessment base in close of business • No insured bank shall pay dividends on capital
stock or interest or distribute capital assets while
Certified Statement of Assessment Base and Assessment it remains in default in payment of assessment
Due dues
• If default in payment is due to dispute between
1. On or before July 31, each bank shall file in PDIC
bank and PDIC over amount of assessment, this
certified statement showing amount of assessment
rule shall not apply
based and semi-annual assessment due. On such
date, the bank shall pay the semi-annual Civil Penalities
assessment due
2. On or before January 31, each bank shall file • Any assessment payable by insured bank shall be
similar statement as above subject to payment of interest computed at legal
3. If insured bank assumed liabilities for deposits of rate for loan
another bank, it shall be included in assessment • There shall be an added penalty equivalent to
base twice the amount of interest payable for each day
4. Certified statements required shall be in such form • Penalty shall not be applicable if there is dispute
as BOD shall prescribe over amount of assessment
5. Any insured bank that fails to file certified
statement shall be compelled to file by mandatory VII. Deposit Insurance Fund
injunction
• Permanent insurance fund – P3B
Refund and Credit
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 64
Banking Laws
• Deposit insurance fund shall be capital account of IX. Reports by Insured Bank
PDIC and shall consist of:
1. Permanent insurance fund • Each insured bank shall make reports to PDIC of
2. Assessment collections conditions required
3. Reserves for insurance • If bank fails to make such report within given time,
4. Retained earnings BOD may provide 100php penalty for each day of
• Reserves for insurance shall be maintained at a violation
reasonable level to ensure capital adequacy • PDIC shall have access to reports made to the BSP
• PDIC may, within 2 years from passage, conduct to the insured bank and BSP shall also have access
study to adjust amount of Permanent Insurance to reports of BSP
Fund • Each insured bank shall keep true and accurate
• Assessment collections and incomes shall be record of its daily deposit transactions.
added to Deposit Insurance Fund after deduction Compliance with such shall be duly certified by
from expenses and charges. Such expenses and bank president
charges consists of: • Refusal to issue such shall be a violation
1. Operating costs
X. Prohibitions on PDIC Personnel
2. Additions to reserve
3. Net insurance and financial assistance 1. Being an officer, director, consultant, employee or
losses stockholder directly or indirectly of any bank
• PDIC may recover from any insured bank any 2. Receiving gifts from any officer, director or
unpaid assessment employee of any bank
• No action shall be brought to recover assessment 3. Revealing in any manner, information relating to
unless such action shall have been brought within business of any bank except when required by
5 years after right accrued Congress or the President
• If insured bank filed a false certified statement
with intent to evade, such claim is not deemed to XI. Legal Assistance
accrue until PDIC discovers • PDIC shall advance litigation costs to its directors,
VIII. Unsound Practice officers or employees in connection with any
criminal, civil or administrative case where such
• Upon examination by PDIC, it shall be disclosed person acted within the performance of his duty
whether insured bank is committing unsound •Even if they resign, they shall still receive legal
practices assistance in connection with the act done during
• The BOD in such a case shall: tenure
1. Submit report of examination to MB •The amount advance shall be repaid by the officer
2. If no corrective action by MB, BOD shall if it is determined by the board that such officer
motu proprio institute such need not be indemnified
BOD can issue cease and desist
order to the bank XII. Dealings by PDIC Personnel with Banks
3. If violation cause insolvency or
• Members of Board and personnel of PDIC may
dissipation of assetsm the period to take
become directors or officers of any bank if the
corrective action shall be done within 15
position is in connection with the financial
days and impose fines
assistance extended by the PDIC
• Actions and proceedings may be undertaken by
PDIC if insured bank have violated: Borrowing from Banks
1. Any provision of PDIC Law
2. Any order or rule of PDIC
3. Any written condition imposed by PDIC
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 65
Banking Laws
• Borrowing from banks by examiners or other • Actions filed by PDIC as receiver, payment of all
personnel shall be prohibited with respect to docket and court fees shall be suspended until
particular bank to which they are assigned action is terminated
• Borrowing by personnel from any bank not • Such fees shall constitute first lien on judgment
included in the prohibition shall be secured and
disclosed to the BOD Distribution of Assets
Settlement Period and Penalties in case of failure to settle • All right of depositor against closed bank which
PDIC may have been subrogated shall revert to
• Failure to settle claim within 6 months from date depositor again
of filing claim, where such failure by the officer
was due to GAOD, iffucer shall be imprisoned XV. Investment by PDIC
from 6 months – 1 year
• Period shall not apply if validity of claim is under • Money of PDIC not employed shall be invested in
resolution obligation of the Republic of the Philippines or
• Upon payment to any depositor, PDIC shall be guaranteed obligations
subrogated to all the rights of the depositor against o Not sell or purchase such obligations for
the closed bank its owner account in excess of 100k
o Insurance commissioner may waive
• Subrogation shall include right to receive same
requirement of approval in above
dividends from proceeds of assets
• Banking and checking accounts of PDIC shall be
• Depositor shall retain claim for any uninsured
kept in BSP, PNB or fiscal agent
portion of his deposit
XVI. Extension of Loans
Notice
• When insured bank is determined as in danger of
• PDIC shall commence determination of insured
closing, in order to prevent such, PDIC is
deposit upon actual takeover of closed bank
authorize to:
• PDIC shall public a notice once a week for 3
1. Make loans to such bank
consecutive weeks in newspaper of general
2. Purchase assets of such bank
circulation such closing of the bank
3. Assume liabilities of such bank
Discharge 4. Make deposits in insured bank
• The grant shall be made if bank is essential in
• Payment of insured deposit shall discharge community and for financial stability
• Such authority to extend financial assistance may
Recognition of Owner
also be exercised if PDIC finds that the resumption
• Neither PDIC or insured bank shall be required to of operations of the closed bank is vital to
recognize owner of a deposit appearing on the community
records under a name other than claimant • Reopening of such close bank is subject to prior
approval of MB
Withholding of Payment • PDIC may provide any corporation acquiring
assets of insured bank in danger of closing with
• PDIC may withhold payment of insured deposit if
financial assistance
payment of liability by such depositor as
• Prior to exercise of these above powers, PDIC
stockholder of closed bank not yet offset is
shall determine whether actual payoff will be more
pending determination
expensive than exercise of such
Prescription • When MB has determined systematic consequence
of closure of bank, PDIC may grant financial
• All rights of depositor shall be bared if: assistance in amount necessary to prevent its
o Depositor in closed bank fail to claim failure
insured deposit within 2 years from actual • Systematic risk – possibility that failure of one
take over bank to settle the transactions with other banks
o Depositor does not enforce his claim will trigger chain reaction and general shutdown
within 2 years after th2 year period to file of clearing activity
a claim
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 67
Banking Laws
• Systematic risk also means the likelihood of a 1. Merge and consolidate with non-insured
sudden unexpected collapse in confidence with the bank or convert into non- insured bank
banking system 2. Assume liabilities of deposits by any non-
• PDIC may not use such powers to purchase stocks insured bank
of insured bank 3. Transfer assets to non-insured bank
• Financial assistance may take form of equity or
Protection against losses
quasi-entity
• PDIC may require insured bank to provide
XVII. Borrowings
protection against burglary, defalcation and losses
• PDIC is authorized to borrow from BSP from discharge of duties
• Any loan granted by BSP shall be consistent with • BOD shall determine bonding requirement as to its
monetary policy and interest rate shall not exceed directors, officer and employers
treasury bill rate • If insured bank refused to comply with such
• If funds of PDIC are not sufficient, it can borrow requirement, PDIC may contract such protection
money from any bank designated as fiscal agent of for them payable to such bank
RP
XXI. Criminal Penalties
• Such loans shall be short-term durations
• Prison mayor or fine 50k-2M
XVIII. Issuance of Bonds
o Willful refusal to submit report
• With approval of President of Philippines, PDIC is o Refusal to permit examination
authorized to issue bonds, debentured and other o Making false statement
obligations to settle insured deposits in closed o Submission of false materials
banks o Refusal to allow PDIC to takeover
• The BOD shall determine interest rate o Refusal to turn-over records
• PDIC shall provide reserves for redemption o Fraudulent disposal of assets
o Violation of exemption from garnishment
Reports and Audit o Willful failure to comply with PDIC and
conducting unsound business
• PDIC shall annual make report of its operations in o Splitting deposits
Congress • Splitting deposits - deposit account with
• Its financial transactions shall be audited by COA outstanding balance of more than maximum
• COA shall have access to all books, accounts, insured amount is broken down to two or more
records and reports accounts within 30 days preceding closure of bank
for purposes of availing maximum deposit
XX. Miscellaneous
XXII. Fines
Signs
• BOD is authorized to impose administrative fines
• Every insured bank shall display at each place of
but no more than 3 times amount of damages
business signs that deposits are insured by PDIC
caused
• Those which do not relate to deposits or are
impractical shall be exempted from this XXIII. TRO and Injunction
requirement
• Only CA can issue TRO, Preliminary Injunction
Merger or Consolidations of Insured Bank against PDIC. Prohibition shall apply to all cases
• SC can issue restraining order if of extreme
• Without prior written consent from PDIC, no
urgency
insured bank shall:
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 68
Banking Laws
Reorganization
PDIC vs. CA
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 69
Banking Laws
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 70
Banking Laws
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 72
Banking Laws
• Under AMLA no person can be prosecuted under • When foreign state makes a request for
AMLA for acts committed prior to October 17, investigation or prosecution of ML, the AMLC
2001 may accept or refuse the same for valid reasons
• Also, BIO prior to October 17, 2001 is prohibited • Principles of mutuality and reciprocity shall at all
as it is an ex post facto times recognized
o It deprives a persons of some lawful
protection to which he has become entitled Powers of AMLC to act on request of foreign state
• However, those accounts created prior to October 1. AMLC may execute request for assistance by:
17, 2001 are still under the coverage of AMLA a. Tracking down, freezing proceeds of
• Otherwise, the offenders can mere circumvent by unlawful activity
laundering into an account created prior to b. Giving information
October 17, 2001 c. Apply order of forfeiture
2. Court will issue such order only if application is
VI. Forfeiture
accompanied by:
Civil Forfeiture a. Authenticated copy of order of court of
requesting state
• Where there is a covered transaction report made b. Certification by competent court of
and court ordered seizure or monetary instrument, requesting state that conviction or order is
rules of civil forfeiture applies final
1. When court issued order of forfeiture, offender • AMLC may request assistance in:
may apply for a declaration that the same a. Tracking down, freezing, proceeds of
legitimately belongs to him unlawful activity
2. Verified petition filed in court which rendered b. Obtain information
judgment of conviction within 15 days from order c. Apply with proper foreign court an order
to enter premises or seize documents and
Payment in Lieu of Forfeiture
objects in request
• Instead of order of forfeiture, court may order d. Applying for order of forfeiture of any
offender to pay amount equal to value of monetary monetary instrument
instrument when said order cannot be imposed Must be accompanied by
because: authenticated copy of forfeiture by
1. Monetary instrument cannot be located RTC and affidavit of clerk of
with due diligence court
2. It was substantially altered or destroyed
Limitation on Request for Mutual Assistance
3. It has been concealed, removed or
converted from being found • AMLC may refuse to comply with request for
4. Located outside the Philippines or outside assistance if it contravenes the Constitution or
jurisdiction of court execution of require prejudicial to national interest
5. It has been commingled with other unless there is a treaty specifically provided
monetary instruments
Requirement for Request for Mutual Assistance from
VII. Mutual Assistance among States Foreign state
Request from Foreign State 1. Confirm investigation or prosecution being
conducted
2. State grounds which person is investigated
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 73
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3. Give sufficient particulars to identity of person 1. AMLA shall not be used for political persecution
and covered institution or to hamper competition in trade
4. Ask from covered institution any information 2. No case of ML may be filed against any candidate
necessary during election period
5. Specify manner and to whom information is to be
produced X. Implementing Rules and Regulations (IRR)
6. Give all particulars necessary for issuance by the
• BSP, Insurance Commission and SEC shall
court of requesting State certain order
promulgate IRR of AMLA subject to approval of
7. Contain other information that may assist
Congressional Oversight Committee
execution of request
• Covered institutions shall formulate their
Authentication of Documents respective ML prevention programs
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 75
Banking Laws
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 77
Banking Laws
15. such other documents or information as may be 6. SPV shall cause the publication of a notice
required by the SEC of filing of registration statement its
expense
H. Approval 7. The Commission may audit the financial
• Upon approval of the SPV Plan, the Commission statements, assets and other information of
shall issue an Approval Certificate stating that the an SPV applying for registration
application has been approved and the IUIs may 8. Upon the registration statement being
be issued declared effective by the Commission, the
sale of the securities subject thereto shall
I. Issuance of IUIs be commence within 2 business days and
• Registration Requirements be counted until the end of the offering
1. All IUIs proposed to be sold or distributed period or until the sale has been
within the Philippines shall be duly terminated by the action of the issuer
registered with the SEC 9. The SPV shall ensure wide dissemination
2. Registration statement including: of preliminary and final prospectuses
1. business of the issuer 10. Written notification shall be given to the
2. use of proceeds SEC within 3 business days from
3. risk factors completion or termination of the offering
4. legal proceedings by the issuer, including therein the number
5. market of securities of securities sold
6. management's discussion of
financial condition and results of Amendments or Rejection
operations • Within 45 days after the date of filing of the
7. directors and officers registration statement, or at such later date to
8. securities ownership which the issuer has consented, the SEC shall
9. certain related party transactions declare the registration statement effective or
10. audited and interim financial rejected
statements in accordance with • UNLESS the applicant is allowed to amend the
SRC rule 68 registration statement
3. In addition, the ff information shall be • After which, the SEC shall determine if it should
disclosed in the registration statements of be effective or rejected
an SPV • The SEC may reject an RS and refuse registration
a. details of the SPV plan thereunder or revoke the effectivity of an RS and
b. details of credit enhancements the registration of the security thereunder after due
c. detailed description of the assets notice and hearing by issuing an order to such
or loan constituting the pools of effect, setting forth its findings in respect thereto if
assets its finds that:
d. rights and obligations of the • The issuer:
selling FI assumed by the SPV 1. has been judicially declared insolvent
e. description of any relationship or 2. violated any provision of the Corporation
interest of the selling FI parent Code as well as orders of the SEC
f. Incentives and exemption 3. has been or engaged or is about to engage
privileges in fraudulent transactions
4. The SPV shall also submit a certification 4. he has made any false or misleading
from the FI that the affected borrowers of representation of material facts in any
the NPLs and all persons holding prior prospectus concerning the issuer or its
encumbrances upon the assets securities
5. SPV shall pay a registration fee of 1/10 of 5. has failed to comply with any requirement
1% of the aggregate offering price of the that the SEC ma impose as a condition for
IUIs subject to the diminishing fee set by registration of the security for which the
the Commission registration statement has been filed
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 78
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• The RS is on its face incomplete or inaccurate in the voting power of an enterprise it may also exist
any material aspect or include any untrue when there is:
statement or other misleading statements 1. power over more than ½ of the voting
• The issuer, or any D, O, or controlling person of rights by virtue of an agreement with other
the issuer or a person performing a simple function investors
has been convicted by a competent judicial or 2. power to govern the financial and
administrative body, upon plea of guilty, or operating policies of the enterprise under a
otherwise, of an offense involving moral turpitude statute or an agreement
and/or fraud or is enjoined or restrained by the 3. power to appoint or remove the majority
SEC for violation of such of the members of the BoD or equivalent
• If the SEC deems it necessary, it may issue an governing body
order suspending the offer and sale of the 4. power to cast the majority of votes at
securities pending any investigation meetings of the BoD or equivalent
governing body
Issuance of Securities of the Public without prior 5. any other arrangement similar to any of
registration the above
• Any SPV that offers to sell or distribute its IUIs to • Parent - a juridical person who has control over
the public within the Phils without prior another juridical person directly or indirectly thru
registration shall be subject to the penalties one or more intermediaries
provided of the SRC • Related Interest:
• The imposition of the foregoing administrative 1. entities in which the amount of investment
sanctions shall be without prejudice to the filing of the selling FI is more than 20% but less
criminal charges against the individuals than 50% of the outstanding capital stock
responsible for the violation thereof
2. trusts for the benefit of employees such as
Tax Treatment of IUIs pension and profit sharing trusts that are
• Since IUIs are not considered as deposit managed by or under the trusteeship of the
substitutes under the Act, the interest or other selling FI
monetary benefit derived from IUIs is not subject 3. provident and other employees/officers'
to the 20% final withholding tax under the NIRC benefit funds of the selling FI
• However, the IUI and any income arising from the 4. principal owners of the selling FI
IUIs shall be subject to the normal tax and/or such 5. management of the selling FI
other applicable taxes, including but not limited to, 6. members of the immediate families of the
documentary stamp tax, imposed under the NIRC principal owners and management of the
and its implementing regulations selling FI
7. other parties with which the selling FI
J. Permitted Investors may deal with if one party controls or can
• May acquire or hold IUIs of an SPV in the significantly influence the management or
minimum amount of 10Mphp provided: operating policies of the other to an extent
1. that an SPV shall not be authorized to that one of the transacting parties might be
acquire the IUIs of another SPV prevented from fully pursuing its own
2. that the Parent, Subsidiaries, Affiliates or separate interests
DOSRI shall not acquire, hold, directly or • Subsidiary of a specified person is an affiliate
indirectly, the IUIs of the SPV that controlled by such person D/I thru one or more
acquired the NPAs of the FI intermediaries
• Affiliate - a juridical person, directly or indirectly,
thru one or more intermediaries, is controlled by K. Notice and Manner of Transfer of Assets
or is under common control with selling FI or its
affiliates Prior Notice
• Control - exists when the Parent owns directly or • No transfer of NPLs to an SOV shall take efect
indirectly thru subsidiaries more than one half of unless the FI concerned shall give prior notice to
the borrowers of the NPLs and all persons holding
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 79
Banking Laws
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 80
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8. Accepts as collateral for a loan extended • Provided that these tax exemptions and reduction
by said FI the equity shares and IUIs of of fees shall apply only upon compliance with the
the SPV that acquired its NPAs following requirements
9. Enters into buy-back and other similar 1. NPA has been certified by the ARA as an
arrangements, or financial derivative NPL or ROPOA as of 06/30/02 provided
transactions with similar effect, involving that for tax purposes, a property shall be
the NPAs or the securities backed by such deemed acquired after the lapse of the
NPAs redemption period in cases where such
10. Enters into any other transaction where the period still exists
FI retains effective control over the
transferred NPAs or shares in the losses of 2. all transfer taxes and registration fees have
the SPV been paid or subsequently paid upon
• “Any party” includes proxies, nominees, and assessment on ROPOAs who redemption
voting trustees. The extension of credit to an period has lapsed as of 063002 where
individual for the purpose of acquiring a single legal title has not been transferred in the
family residential unit ROPOA or NPL secured by name of the FI
real estate mortgage on a residential unit shall be 3. The properties acquired by an SPV from
allowed. the GFIs or GOCCs which are devoted to
socialized or low-cost housing shall not be
Penalties converted to other uses
• prescribed under Sec 25 of teh Act without • Tax exemption privileges
prejudice to other penalties that may be imposed 1. Documentary stamp tax
by the ARA of the transferring FI under applicable 2. Capital gains tax imposed on the transfer
laws of lands and other assets treated as capital
• The SPV shall assume all Rights and Obligations assets
of the FI over the transferred NPA 3. Credible withholding income taxes
imposed on the transfer of land and or
N. Tax Exemptions and Fee Privileges buildings treated as ordinary assets
• Transactions covered 4. the VAT or gross receipts
1. the transfer of the NPL by the FI to an • Reduction of Fees
SPV 1. 50% of the applicable mortgage
2. transfer of the ROPOA by the fi to an SPV registration and transfer fees on the
3. Dacion en pago (DEP) of the NPL by the transfer or real estate mortgage and chattel
borrower to the FI mortgage registration to and the
4. DEP of the NPL by a 3rd party, on behalf SPV/individual, imposed in accordance
of the borrower, to the FI with the existing circular of LRA
5. transfer of NPL by the FI to an individual 2. 50% of the filing fees for any foreclosure
6. transfer of the ROPOA by the FI to an initiated by the SPV/individual in relation
individual to any NPA acquired from an FI
7. transfer of the NPL by the SPV to a 3. 50% of the registration fees prescribed
3rd party • Manner of Claiming Tax Exemptions
8. transfer of the ROPOA by the SPV to a o shall provide the BIR with the appropriate
3rd party certificate of eligibility
9. DEP of the NP by the borrower to the o In case of the transfer of real property or
SPV shares, the CIR or his duly authorized
10. DEP of the NPL by a 3rd party on behalf representative shall issue a Certificate
of the borrower to the SPV (Cert Authorizing Registration/ Tax
11. transfer of the NPL by the individual to a Clearance Cert) that such transfer has been
3rd party reported and is tax-exempt
12. transfer of ROPOA by the individual to a
3rd party Q. Abuse of Tax Exemptions and Privileges
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law 81
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• Any person, natural or juridical, who shall benefit Audited Financial Statements
from the said exemptions and privileges without within 120 days from the end of
being entitled thereto, shall be liable. the fiscal year
• In addition, he shall refund the Government 2. As Issuer of Securities to the Public
double the amount of he was exempted from a. Annual Report on SEC Form 17A
plus12% interest per annum b. Quarterly Report on SEC Form
17Q
R. Redemption Periods c. A current report on SEC Form
• provided by the following: Sec 47 of RA 897 or 17C
the GBL of 2000 and Rules of Court d. Monthly Reports on total
issuances and amounts of IUIs
S. Books of Accounts and Records 3. Audited Financial Statements - The filing
• Internal Record Keeping and Accounting Controls of SEC Form 17A shall suffice
1. An SPV must make and keep books, 4. Violations - any violation of the above
records and accounts which reflect the due to the failure of the SPV, it shall be
transactions and dispositions of its assets, subject to penalty provided by SRC, this
it minutes of meetings and other business Code, and their IRR
transactions • Reports to be submitted to the BIR by an SPV -
2. It shall advise and maintain a system of for purposes of implementing the tax provisions of
internal accounting controls sufficient to the Act
provide reasonable assurances that • Reports filed to the BSP
a. The transactions and access are o By SPV
pursuant to management 1. Report on any sale/transfer to any
authorization party of NPLs and ROPOAs
b. Financial statements are prepared acquired from banks and NQBQs
in conformity with the generally quarterly
accepted accounting principles 2. Report on the latest appraised/ fair
c. Recorded assets are compared market value of ROPOAs and real
with existing assets at reasonable estate properties/ chattels used as
intervals and differences collateral and NQBQs semi-
reconciled annually
• External Auditor - shall be appointed by SPV o By Selling Financial Institution - monthly
accredited by the Commission report regarding the actual sale/ transfer to
• Inspection of Books and Records – those who has an SPV
a right to inspect:
1. Stockholder of SPV or Holder of an IUI at U. Penalty in case of violation of the provisions of the Act
a reasonable hour of business • Fine: Not less than 50k not more than 1M, or
2. Authorized representatives of the • Imprisonment: not less than 6 years 1 day not
Commission, BIR or the BSP any time more than 12 years
3. Failure to comply with this right will be a • OR BOTH
ground for the suspension order on the • If the penalty was committed by a corporation,
offering of the IUIs association, partnership etc., the one responsible
would be those officers who participated in the
T. Reports commission of the crime or who shall have
• Reports to be submitted by SPV to the knowingly permitted or failed to prevent the
Commission commission
1. As Stock Corporation • If the offender is an alien, he shall, in addition to
General Information Sheet (GIS) the prescribed penalties, be deported without
within 30 days from stockholder's further proceedings after serving the sentence
meeting date • If the offender if a public official, or employee, in
addition to the penalties above, the penalty of
absolute/temporary DQ shall apply
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.