Banking Laws

RA No. 8791 “The General Banking Law of 2000”

An act providing for the regulation of the organization and operations of banks, quasi-banks, trust entities and for
other purposes.

Banks – entities that are engaged in the lending of funds in the form of deposits

Classification of Banks:
a. Universal banks
b. Commercial banks
c. Thrift banks (savings and mortgage banks, stock savings and loan associations, and private development
banks)
d. Rural banks
e. Cooperative banks
f. Islamic banks
g. Others

Supervisory Powers:

1. Issuance of rules of conduct or establishment of standards of operation for uniform application to all institutions
or functions covered
2. The conduct of examination to determine compliance with laws and regulations
3. Overseeing to ascertain that laws and regulations are complied with
4. Regular investigation to determine whether an institution is conducting its business on a safe or sound basis
5. Inquiring into the solvency and liquidity of the institution
6. Enforcing prompt corrective action

No person or entity shall engage in banking operations or quasi-banking functions without authority from the BSP.
The determination of whether a person or entity is performing banking or quasi-banking functions without Bangko
Sentral authority shall be decided by the Monetary Board.

Requirements for organization of quasi-banks:

1. The entity is a stock corporation

2. Funds are obtained from the public (10-20 pax)
3. Minimum capital requirements prescribed by the Monetary Board for each category of banks are satisfied

SEC shall not register the articles of incorporation of any bank, or any amendment thereto, unless accompanied by
a certificate of authority issued by the Monetary Board, under its seal. It will also not register the by-laws of any bank,
or any amendment thereto, unless accompanied by a certificate of authority from the Bangko Sentral.
The Board of Directors must have at least five (5), and a maximum of fifteen (15) members, and two (2) of whom
shall be independent directors. Non-filipino citizens may become members of the BOD of a bank to the extend of the
foreign participation in the equity of the bank. In case of a merger of consolidation, the number of directors shall not
exceed twenty-one (21).

Except as otherwise stated, no appointive or elective public official, whether full-time or part-time shall at the same
time serve as officer of any private bank, save in cases where such service is incident to financial assistance
provided by the government or a government-owned or controlled corporation to the bank or unless otherwise
provided under existing laws.

Universal or commercial banks may open branches or other offices within or outside the Philippines under prior
approval of the Bangko Sentral. A bank authorized to establish branches or other offices shall be responsible for all
business conducted in such branches and offices. They shall be treated as one unit. The banking business hours
must be at least six (6) a day and at least three (3) hours on Saturdays, Sundays or holidays.

Powers of a Commercial Bank:

1. Accept drafts and issuing letters of credit;

2. Discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt;
3. Accepting and creating demand deposits;
4. Receiving other types of deposits and deposit substitutes;
 5. Buying and selling foreign exchange and gold/silver bullion;
6. Acquiring marketable bonds and other debt securities;
7. Extending credit.

A bank other than a universal or commercial bank cannot accept or create demand deposits except upon prior
approval of, and subject to such conditions and rules as may be prescribed by the Monetary Board.

Loans and other credit accommodations against real estate shall not exceed 75% of the appraised value of the
respective real estate security, plus 60% of the appraised value of the insured improvements, and such loans may be
made to the owner of the real estate or to his assignees.

Loans and other credit accommodations on security of chattel and intangible properties shall not exceed 75%
of the appraised value of the security, and such loans and other credit accommodations may be made to the
titleholder of the chattels and intangible properties or his assignees.

A bank shall grant loans and other credit accommodations only in amounts and for the periods of time essential
for the effective completion of the operations to be financed. The purpose of all loans and other credit
accommodations shall be stated in the application and in the contract between the banks and the borrower. If the
bank finds that the proceeds of the loan or other credit accommodation have been employed, without its approval, for
purposes other than those agreed upon with the bank, it shall have the right to terminate the loan or other credit
accommodation and demand immediate repayment of the obligation.

Requirement for Grant of Loans or Other Credit Accommodations:

1. Statement of Financial Position

2. Statement of Comprehensive Income

A borrower may at any time prior to the agreed maturity date prepay, in whole or in part, the unpaid balance of any
bank loan and other credit accommodation, subject to such reasonable terms and conditions as may be agreed upon
between the banks and its borrower.
The Bangko Sentral shall provide incentives to banks which, without government guarantee, extend loans to finance
educational institutions, cooperatives, hospitals and other medical services, socialized or low-cost housing, local
government units and other activities with social content.
In the event of foreclosure, any mortgage on real estate which is security for any loan or other credit accommodation
granted, the mortgagor or debtor whose real property has been sold for the full or partial payment of his obligation
shall have the right within one year after the sale of the real estate, to redeem the property by paying the amount due
with interest and all costs and expenses incurred by the bank or institution from the sale and custody of said property
less the income derived from it.
Juridical persons whose property is being sold pursuant to an extrajudicial foreclosure, shall have the right to
redeem the property in accordance with this provision until, but not after, the registration of the certificate of
foreclosure sale with the applicable Register of Deeds which will not be more than 3 months after foreclosure,
whichever is earlier. Owners of property that has been sold in a foreclosure sale prior to the effectivity of this Act
shall retain their redemption rights until their expiration.

A bank may acquire real estate and improvements, including bank equipment necessary for its own use in the
conduct of business. Investments shall not exceed 50% of combined capital accounts.

The bank may acquire, hold or convey real property under the following circumstances:
1. Mortgaged to it in good faith by way of security for debts;
2. Conveyed to it in satisfaction of debts previously contracted in the course of its dealings; or
3. Purchase at sales under judgements, decrees, mortgages, or trust deeds held by it and such as it shall
purchase to secure debts due it.

Other Banking Services:

1. Receive in custody funds, documents and valuable objects;

2. Act as financial agent and buy and sell, by order of and for the account of their customers, shares,
evidences of indebtedness and all types of securities;
3. Make collections and payments for the account of orders of others and perform such other services for their
customers as are not incompatible with banking business;
4. Upon prior approval of the Monetary Board, act as managing agent, adviser, consultant or administrator of
investment management/advisory/consultancy accounts; and
 5. Rent out safety deposit boxes.

Foreign banks in the Philippines shall be governed by the provisions of the Foreign Banks Liberalization Act. The
Monetary Board may revoke the license to transact business in the Philippines of any foreign bank, if it finds that the
foreign bank is insolvent or in imminent danger thereof or that its continuance in business will involve probable loss to
those transacting business with it.

Only a stock corporation or a person duly authorized by the Monetary Board to engage in trust business and shall
be referred to as a trust entity shall act as a trustee or administer any trust or hold property in trust or on deposit for
the use, benefit, or behoof of others.

Powers of a Trust Entity:

1. Act as a trustee on any mortgage or bond issued;

2. Act under the order or appointment of any court as guardian, receiver, trustee, or depositary of the estate of
any minor or other incompetent person;
3. Act as the executor of any will;
4. Act as administrator of the estate of any deceased person, with or without the will annexed;
5. Accept and execute any trust for the holding, management, and administration of any estate, and the rents,
issues and profits thereof; and
6. Establish and manage common trust funds.