GENERAL BANKING LAW

1) Which of the following DOES NOT characterize a bank or banking institution?

a) Authorized to engage in lending of funds
b) Funds for lending are obtained mainly from private institutions
c) Funds are from receipt of deposits or sale of bonds
d) It conducts banking activities on a regular basis
2) Which of the following is EXCLUDED from the term “banking institution”?
a) Building and loan association
b) Money changer
c) Trust company
d) Savings bank
3) I - Insurance companies are included in the provisions of the General Banking Law.
II- Commercial banking institutions cannot engage in the business of a trust company.
a) False, True
b) True, False
c) False, False
d) True, True
4) Which of the following security CANNOT be issued by banks?
a) Preferred stock
b) Common stock
c) Bonded instrument
d) No-par value stock
5) At least what percent of the capital stock of any banking institution shall be owned by
citizens of the Philippines?
a) 50%
b) 60%
c) 75%
d) 90%
6) What type of banking institution is one which accepts or creates demand deposits subject
to withdrawal by check?
a) Trust company
b) Mortgage bank
c) Commercial bank
d) Building and loan association
7) Which of the following is not a purpose of a building and loan association?
a) to accumulate the savings of its stockholders
b) to repay to stockholders their accumulated savings and profits upon surrender of their
shares
c) to loan its funds to stockholders of the security of unencumbered real estate
d) to act as trustee or administer any trust or hold property in trust or on deposit for the
benefit of others
8) What does the D in DOSRI represent?
a) Dividends
b) Directors
c) Discounts
d) Depreciation
9) DOSRI should be in the regular course of business and the dealings should be upon which
terms?
a) Not more favorable to the bank than those offered to others
b) Not less favorable to the bank than those offered to others
 c) Exactly similar to those offered to others
d) Double those offered to others
10) A substantial stockholder shall mean a person, or group of persons whether natural or
juridical, owning such number of shares that will allow such person or group to elect at
least _______________ of the board of directors of a bank or who is directly or indirectly
the registered or beneficial owner of more than _______________ of any class of its equity
security.
a) 1 member; 20%
b) 2 members; 10%
c) 1 member; 10%
d) 2 members; 20%
11) What does SBL stand for?
a) Standard By-Laws
b) Secured Banking Legislation
c) Single Borrower’s Limit
d) See Bottom Line
12) Per BSP Circular No. 425, series of 2004, as amended, consistent with national interest, the
total amount of loans, credit accommodations and guarantees that may be extended by a
bank to any person, partnership, association, corporation or other entity shall at no time
exceed ______ of the net worth of such bank.
a) 10%
b) 20%
c) 25%
d) 40%
13) With certain requirements, SBL can be increased by what percent?
a) 5%
b) 10%
c) 15%
d) 20%
14) Banks CANNOT perform one of these. Which is it?
a) Grant loans and credit accommodation
b) Own equity investment
c) Act as insurer
d) Accept deposits
15) Which among the following is NOT a function of the BSP?
a) As official depositary of the Philippine government.
b) As financial adviser of the Philippine government.
c) As fiscal agent of the Philippine government.
d) As the watchdog of government funds.
16) One of these statements is NOT CORRECT. Which is it?
a) There is no regulatory ceiling imposed by the Monetary Board on interest on loans.
b) A monthly interest of three percent or higher on a bank loan is unconscionable.
c) A provision giving a bank authority to increase the interest on a loan solely on the basis
of its determination is valid.
d) A provision giving a bank authority to increase interest rates is valid if there is a
stipulated reference rate which will be the basis for the increase.
17) The Credit Foundation of the Philippines is a non-stock corporation, which handles deposit
of funds from its members and lends the same funds to the general public. It is composed
of at least 100 natural persons, each of whom has deposited some amount of money into
 the Foundation. It applied with the Bangko Sentral for authority to organize itself into a
bank. May the Foundation be granted the said authority?
a) Yes. It qualifies as a bank because its funds are obtained from more than 20 persons.
b) Yes. The Bangko Sentral has the full discretion and expertise to grant authorities to
register as banking institution.
c) No. Banks can only be incorporated or organized as stock corporations.
d) No. The word “Philippines” as part of a corporate name is reserved for government
owned or controlled corporations.
18) Bernie was asked to enumerate the classification of Banks in the Philippines. Upon
answering, she enumerated that Universal Bank, Commercial bank, Cooperative Bank Islamic
Bank, Thrift and Rural Banks are the different classifications of Banks. After she recited,
the professor called Ann and asked her the same question. Ann replied and said that banks
are classified as the Central Bank, Metro Bank, Banco de Oro, Bank of the Philippine Islands
and Banco Filipino. If you are called to recite too, will you support Bernie’s answer?
a) No. Bernie’s answer is incorrect as Ann correctly enumerated the classifications of Bank
in the Philippines.
b) Yes. Bernie correctly enumerated the classifications of Bank in the Philippines.
c) No. Bernie and Ann are incorrect.
d) No. Ann correctly enumerated the classifications of Bank in the Philippines.
19) Which of the following statement is NOT TRUE about the nature of Banking business?
a) Banking business is fiduciary in nature and requires high standard of integrity and
performance.
b) Bank must exercise utmost diligence or the highest degree of care in the handling of
deposits.
c) Banking business is fiduciary in nature and requires ordinary diligence.
d) Bank must exercise that degree of care like that of a good father of the family in the
handling of deposits.
e) Both A and B are correct while C and D are incorrect.
20) I. Universal banks exercise the powers of an investment house and may invest in non-allied
enterprises.
II. Commercial banks cannot exercise powers of an investment house and may not invest in
non-allied enterprises.
a) Only I is true
b) Only II is true
c) Both are true
d) Both are false
21) As part of the safeguards against imprudent banking, the General Banking Law imposes
limits or restrictions on loans and credit accommodations which may be extended by banks.
Which of the following are not considered limits and restriction on loans and credit
accommodation?
a) Single Borrower’s Rules
b) DOSRI Rules
c) Anti-Money Laundering Law
d) No commercial bank shall make any loan or discount on the security of shares of its
capital stocks.
22) A corporation generally can issue both par value stock and no-par value stock. These
are all fixed in the Articles of Incorporation of the corporation. Which of the following
corporations may not be allowed to issue no-par value shares?
a) Insurance companies
b) Banks
 c) Trust companies
d) All of the above
23) X maintains a savings deposit in the amount of P1 Million with ABC Bank Corporation. X also
has obtained a loan from ABC Bank Corporation in the amount of P1 Million. In case of
default,
a) ABC Bank can set-off the loan from the savings account being maintained by X with ABC
Bank.
b) Set-off is not possible because legal compensation is not allowed in banking transaction.
c) Deposit accounts are usually earmarked for specific purpose hence offsetting is not
legally possible.
d) Off-setting is not possible because the obligation of X is a "simple loan".
24) XYZ Corporation is engaged in lending funds to small vendors in various public markets. To
fund the lending, XYZ Corporation raised funds through borrowings from friends and
investors. Which statement is most accurate?
a) XYZ Corporation is a bank.
b) XYZ Corporation is a quasi-bank.
c) XYZ Corporation is an Investment Company.
d) XYZ is none of the above.
25) All senior officers of ABC Bank are entitled to obtain a housing loan. X is an Executive Vice
President for Operations of ABC Bank. She obtained a housing loan with the ABC Bank.
Which statement is most accurate?
a) The housing loan of X requires a guarantor from somebody who is not connected with
the bank.
b) The housing loan of X requires the approval of the Board of Directors of the bank.
c) The housing loan of X, being a benefit for employees, does not require (a) but will
require (b).
d) The housing loan of X, being a benefit for employees, will not require (a) and (b).
26) Which is NOT a necessary corporate power in carrying on the business of commercial
banking?
a) Accepting drafts and issuing letters of credit
b) Discounting and negotiating promissory notes, drafts, bills of exchange and other
instrument evidencing debt
c) Accepting or creating demand deposits, receiving other types of deposit and deposit
substitutes
d) Buying and selling FOREX and gold or silver bullion
e) None of the above
27) Which is NOT a necessary corporate power in carrying on the business of commercial
banking?
a) Acquiring marketable bonds and other debt securities
b) Extending credit
c) Determination of bonds and other debt securities eligible for investment including
maturities and aggregate amount of such investment, subject to such rules as the
Monetary Board may promulgate
d) Act as an investment house and ability to invest in non-allied enterprises
28) The diligence required of banks is not only with the diligence of a good father of a family
but with the highest degree of care considering the fiduciary nature of their relationship
with their depositors.
a) True
b) False
29) Banks are liable for damages because of their –
 a) Failure to honor/pay a check of a merchant/trader when the deposit is sufficient
b) When a bank teller validates an incomplete duplicate deposit slip
c) Amount not credited to the account of the depositor because of the omission of one
zero in the account number
d) Allowing an impostor to negotiate treasury checks
e) All of the above
30) The bank will be liable for damages if the new account teller erroneously used the old
account of a depositor instead of the newly opened joint account of the depositor and his
spouse, leading to the dishonor of two checks issued by the depositor.
a) True
b) False
31) All kinds of deposits are loans. The bank can make use as its own the money deposited and
said amount is not being held in trust for the depositor nor is it being kept for safekeeping.
a) True
b) False
32) I - Loans against real estate security shall not exceed seventy-five percent (75%) of the
appraised value of real estate plus sixty percent (60%) of appraised value of insured
improvements and such loans shall be made only to owner of the real estate or to his
assignees.
II – Loans and other credit accommodations on security of chattels and intangible properties
shall not exceed seventy-five percent (75%) of the appraised value of the security and such
loans may be made only to the title holder of chattels and intangible properties and their
assignees.
a) Only I is true
b) Only II is true
c) Both are true
d) Both are false
33) The total of the unimpaired paid-in capital including paid-in surplus, retained earnings and
undivided profit, net of valuation reserves and other adjustments.
a) Net worth
b) Capital
c) Risk-based capital
d) Any of the above
34) The minimum ration prescribed by the Monetary Board which the net worth of a bank must
bear to its total risk assets which may include contingent accounts.
a) Net worth
b) Capital
c) Risk-based capital
d) Any of the above
35) What is NOT an effect of non-compliance to the Risk-based capital?
a) The Monetary Board may limit or prohibit the distribution of net profits by such bank
b) The Monetary Board may require that part or all of the net profits be used to increase
the capital accounts of the bank until the minimum requirement has been met
c) All of the above
d) None of the above