Professional Documents
Culture Documents
A: A:
1. The State shall maintain a central 1. To maintain price stability conducive to
monetary authority that shall function a balanced and sustainable growth of
and operate as an independent and the economy.
accountable body corporate in the 2. To promote and maintain monetary
discharge of its mandated stability and the convertibility of the
responsibilities concerning money, peso. (Sec. 3)
banking and credit.
Q: What are the function of BSP
2. In line with this policy, and considering 1. Issuer of currency. (Sec. 49‐60)
its unique functions and responsibilities, 2. Custodian of reserves. (Secs. 64‐66, 94,
the central monetary authority 103)
established under this Act, while being a 3. Clearing channel or house; especially
government‐owned corporation, shall where the PCHC does not operate .(Sec.
enjoy fiscal and administrative 102)
autonomy (Sec. 1.) 4. Banker of the government – the BSP
shall be the official depository of the
B. CREATION OF THE BANGKO SENTRAL NG Government and shall represent it in all
PILIPINAS monetary fund dealings (Secs. 110‐ 116)
5. Financial advisor of the government
Q: What are the salient considerations on the (Secs. 123‐124) – Under Article VII, Sec.
creation of BSP? 20 of the 1987 Constitution, the
President may contract or guarantee
A: foreign loans but with the prior
1. It is established as an independent concurrence of the Monetary Board.
central monetary authority. 6. Source of credit (Secs. 61‐63, 81‐89,
109)
2. Its capital shall be P50,000,000,000, to 7. Supervisor of the banking system (Sec.
be fully subscribed by the Philippine 25
Government. – shall include the power to:
a. Examine, extending to enterprises
3. The P10,000,000,000 of the capital shall wholly or majority‐owned or
be fully paid for by the Government controlled by the bank (Sec. 7, RA
upon the effectivity of this Act and the 8791); this power may not be
balance to be paid for within a period of restrained by a writ of injunction
2 years from the effectivity of this Act in unless there is convincing proof
such manner and form as the
A: The body through which the powers and E. HOW BSP HANDLES BANKS IN DISTRESS
functions of the Bangko Sentral are exercised.
(Sec 6) Q: What is the function of the BSP on a
distressed bank?
Q: What are the powers and functions of the
Monetary Board? A: Appointment of a conservator or receiver or
closure of the bank.
A:
1. Issue rules and regulations it considers Q: Distinguish between the grounds for
necessary for the effective discharge of conservatorship, receivership and liquidation
the responsibilities and exercise of its and their effects.
powers
A: See Appendix F
2. Direct the management, operations,
and administration of the Bangko (1) CONSERVATORSHIP
Sentral, reorganize its personnel, and
issue such rules and regulations as it Q: Who is a conservator?
may deem necessary or convenient for
this purpose A: One appointed if the bank is in the state of
illiquidity or the bank fails or refuses to maintain
3. Establish a human resource a state of liquidity adequate to protect its
management system depositors and creditors. The bank still has more
assets than its liabilities but its assets are not
4. Adopt an annual budget for and liquid or not in cash thus it cannot pay its
authorize such expenditures by the obligation when it falls due. The bank, not the
Bangko Sentral as are in the interest of Central Bank, pays for fees.
the effective administration and
Q: What are the powers of a conservator?
operations of the Bangko Sentral in
accordance with applicable laws and
A:
regulations
5. Indemnify its members and other 1. To take charge of the assets, liabilities,
officials of the Bangko Sentral, including and the management thereof
personnel of the departments 2. Recognize the management
performing supervision and 3. collect all monies and debts due said
examination functions against all costs bank
and expenses reasonably incurred by 4. Exercise all powers necessary to restore
such persons in connection with any its viability with the power to overrule
civil or criminal action. (Sec 15) or revoke the actions of the previous
management and board of directors of
Note: In the event of a settlement or
the bank or quasi‐bank (First Philippine
compromise, indemnification shall be provided International Bank vs. CA, G.R. No.
only in connection with such matters covered 115849, Jan. 24, 1996).
by the settlement as to which the Bangko
Sentral is advised by external counsel that the Note: Such powers cannot extend to post
person to be indemnified did not commit any facto repudiation of perfected
3. Shall not, with the exception of insolvency. Even if the bank is questioning the
administrative expenditures, pay or
commit any act that will involve the
transfer or disposition of any asset of
the institution: Provided that the
receiver may deposit or place the funds
of the institution in non‐speculative
investments (Sec 30, NCBA).
(4) LIQUIDATION
Q: What is liquidation?
One cannot obtain an advantage or preference 1. Notes for any series or denomination –
over another by attachment, execution or More than 5 years old
otherwise. The final judgment against the bank 2. Coins – More than 10 years old
should be stayed as to execute the judgment
would unduly deplete the assets of the banks to Q: How is the Power to determine Rates of
the obvious prejudice of other depositors and Exchange exercised?
creditors. (Lipana v. Development Bank of Rizal,
G.R. No. L‐73884, Sept. 24, 1987) A:
1. The Monetary Board shall determine
F. HOW BSP HANDLES EXCHANGE CRISIS the rates at which the Bangko Sentral
shall buy and sell spot exchange, and
Q: What is Legal Tender? shall establish deviation limits from the
effective exchange rate or rates as it
A: All notes and coins issued by the Bangko may deem proper.
Sentral are fully guaranteed by the Republic and 2. The Monetary Board shall similarly
shall be legal tender in the Philippines for all determine the rates for other types of
debts, both public and private (Sec. 52) foreign exchange transactions by the
Bangko Sentral, including purchases and
sales of foreign notes and coins, but the
Q: What is the legal tender power of coins?
margins between the effective
A: exchange rates and the rates thus
1. 1‐Peso, 5‐Peso and 10‐Peso coins: In established may not exceed the
amounts not exceeding P1,000.00 corresponding margins for spot
2. 25 centavo coin or less: In amounts not exchange transactions by more than the
exceeding P100.00 (Circular No. 537, additional costs or expenses involved in
2006) each type of transactions.
Q: What are the rules on BSP’s Authority to Q: What actions does the Bangko Sentral take
replace legal tender? when international stability of Peso is
threatened?
A:
1. Notes and coins called in for A: Whenever the international reserve of the
replacement shall remain legal tender Bangko Sentral falls to a level which the Monetary
for a period of one year from the date Board considers inadequate to meet the
of call. prospective demands on the Bangko Sentral for
2. After that period, they shall cease to be foreign currencies, or whenever the international
legal tender during the following year or reserve appears to be in imminent danger of
for such longer period as MB may falling to such a level, or whenever the
determine. international reserve is falling as a result of
3. After the expiration of this latter period, payments or remittances abroad which , in the
the notes and coins which have not opinion of the Monetary Board, are contrary to
been exchanged shall cease to be a the national welfare, the Monetary Board shall:
liability of BSP and shall be 1. Take such remedial measures as are
demonetized. (Sec. 57) appropriate and within the powers
granted to the Monetary Board, and the
Note: Checks representing demand deposits do Bangko Sentral
not have legal tender power and their
acceptance in the payment of debts, both 2. Submit to the President of the
public and private, is at the option of the Philippines and the Congress, and make
creditor. However, a check which has been public a detailed report which shall
cleared and credited to the account of the includes, as a minimum, a description
creditor shall be equivalent to a delivery to the and analysis of:
creditor of cash in an amount equal to the
a. The nature and causes of the
amount credited to his account (Sec. 60).
existing or imminent decline;
b. The remedial measures already
Q: What is the period of replacement? taken or to be taken by the
Monetary Board
A:
II. SECRECY IN BANK DEPOSITS (R.A. 1405) Q: Are foreign currency deposits covered by the
Secrecy in Bank Deposits (R.A. 1405)?
A. PURPOSE
B. PROHIBITED ACTS
A:
MERCANTILE LAW TEAM:
8 ADVISER: ATTY. AMADO E. TAYAG; SUBJECT HEAD: EARL M. LOUIE MASACAYAN;
ASST. SUBJECT HEADS: KIMVERLY A. ONG & JOANNA MAY D.G. PEÑADA; MEMBERS: MA. ELISA JONALYN A. BARQUEZ, ANGELI R.
CARPIO, ANTONETTE T. COMIA, ALBAN ROBERT LORENZO F. DE ALBAN, JOEBEN T. DE JESUS, CHRIS JARK ACE M. MAÑO, ANNA MARIE P.
OBIETA, RUBY ANNE B. PASCUA, FLOR ANGELA T. SABAUPAN, GIAN FRANCES NICOLE C. VILCHES
BANKING LAWS
6. Upon the order of the Commissioner of Q: Can a bank be compelled to disclose the
Internal Revenue in respect of bank records of the accounts of a depositor under the
deposits of a taxpayer who has filed an investigation for unexplained wealth?
application for compromise of his tax
liability by reason of financial incapacity A: Since cases of unexplained wealth are similar
to pay his tax liability. (Sec. 6[f][1],NIRC) to cases of bribery, dereliction of duty, no reason
is seen why it cannot be excepted from the rule
7. In case of dormant accounts/deposits making bank deposits confidential. In this
for at least 10 years under the connection, inquiry into illegally acquired
Unclaimed Balances Act. (Sec. 2, Act No. property in anti‐graft cases extends to cases
3936). where such property is concealed by being held
or recorded in the name of other persons. This is
8. When the examination is made by the also because the Anti‐Graft and Corrupt Practices
BSP to insure compliance with the AML Act, bank deposits shall be taken into
Law in the course of a periodic or consideration in determining whether or not a
special examination public officer has acquired property manifestly
out of proportion with his lawful income. (PNB v.
9. With court order: Gancayco, G.R. No. L‐18343, Sept. 30, 1965)
a. In cases of unexplained wealth
under Sec. 8 of the Anti‐Graft and Q: In an action filed by the bank to recover the
Corrupt Practices Act (PNB v. money transmitted by mistake, can the bank be
Gancayco, L‐18343, Sept. 30, 1965) allowed to present the accounts which it
b. In cases filed by the Ombudsman believed were responsible for the acquisition of
and upon the latter’s authority to the money?
examine and have access to bank
accounts and records (Marquez v. A: Yes, R.A. 1405 allows the disclosure of bank
Desierto, GR 138569, Sept. 11, deposits in cases where the money deposited is
2003) the subject matter of litigation. In an action filed
by the bank to recover the money transmitted by
10. Without court order: If the AMLC mistake, necessarily, an inquiry into the
determines that a particular deposit or whereabouts of the amount extends to whatever
is concealed by being held or recorded in the
name of the persons other than the one
ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II
VICE CHAIRS FOR ACADEMICS: KAREN JOY G. SABUGO & JOHN HENRY C.
U NIVERSITY OFS ANTOT OMA S 9
MENDOZA F a c u l ta d d e D e r e c h o
VICE CHAIRS FORALDMINISTRATION
HAIR FOR AND F:INANCE
AY‐OUT AND DESIGN EARL L:OUIE
JEANELLE
M. MC.ASACAYAN
LEE & THEENA C. Civ i l
MARTINEZ
UST GOLDEN NOTES
2011
responsible for the illegal acquisition. (Mellon Q: How about foreign currency deposits, can
Bank, N.A. v. Magsino, G.R. No. 71479, Oct. 18, they be subject to garnishment?
1990)
A:
Q: The Law on Secrecy of Bank Deposits provides GR: Foreign currency deposits shall be
that all deposits of whatever nature with banks exempt from attachment, garnishment, or
or banking institutions are absolutely any other order or process of any court,
confidential in nature and may not be examined, legislative body, government agency or any
inquired or looked into by any person, administrative body whatsoever. (Sec 8. R.A.
governmental official, bureau or office. However, 6426)
the law provides exceptions in certain instances.
Which of the following may not be among the XPN: The application of Section 8 of R.A. 6426
exceptions? depends on the extent of its justice. The
1. in cases of impeachment garnishment of a foreign currency deposit
2. in cases involving bribery should be allowed to prevent injustice and for
3. in cases involving BIR inquiry equitable grounds, otherwise, it would negate
4. in cases of anti‐graft and corrupt Article 10 of the New Civil Code which
practices provides that “in case of doubt in the
5. in cases where the money involved is the interpretation or application of laws, it is
subject of litigation presumed that the lawmaking body intended
right and justice to prevail. (Salvacion vs.
A: Under Section 6(F) of the National Internal Central Bank of the Philippines, G.R. 94723,
Revenue Code, the Commissioner of Internal August 21, 1997)
Revenue can inquire into the deposits of a
decedent for the purpose of determining the Q: Can the foreign currency deposit of a
gross estate of such decedent. Apart from this transient foreigner who illegally detained and
case, a BIR inquiry into bank deposits cannot be raped a minor Filipina, be garnished to satisfy
made. the award for damages to the victim?
Thus, exception 3 may not always be applicable. A: The exemption from garnishment of foreign
Turning to exception 4, an inquiry into bank currency deposits under R.A. 6426 cannot be
deposits is possible only in prosecutions for invoked to escape liability for the damages to the
unexplained wealth under the Anti‐graft and victim. The garnishment of the transient
Corrupt Practices Act. However, all other cases of foreigner’s foreign currency deposit should be
anti‐graft and corrupt practices will not warrant allowed to prevent injustice and for equitable
an inquiry into bank deposits. Thus, exception 4 grounds. The law was enacted to encourage
may not always be applicable. Like any other foreign currency deposit and not to benefit a
exception, it must be interpreted strictly. wrongdoer. (Salvacion vs. Central Bank of the
Philippines, G.R. 94723, August 21, 1997)
Exceptions 1, 2, and 5 on the other hand, are
provided expressly in the Law on Secrecy of Bank F. PENALTIES FOR VIOLATION
Deposits. They are available to depositors at all
times. (2004 Bar Question) Q: What are the penalties for violation of R.A.
1405?
E. GARNISHMENT OF DEPOSITS, INCLUDING
FOREIGN DEPOSITS A: The penalty of imprisonment of not more than
5 years or a fine of not more than 20,000pesos or
Q: Does garnishment of a bank deposit violate both, in the discretion of the court shall be
the law? imposed upon any official or employee of a
banking institution who, upon conviction, was
A: No, the prohibition against examination does found to have violated R.A. 1405.
not preclude its being garnished for satisfaction
of judgment. The disclosure is purely incidental to
the execution process and it was not the
intention of the legislature to place bank deposits
beyond the reach of judgment creditor. (PCIB v.
CA, G.R. No. 84526, Jan. 28, 1991)
III. GENERAL BANKING ACT (R.A. 8791) a, such as the Al Amanah Islamic Investment
Bank of the Philippines which was created by
A. DEFINITION AND CLASSIFICATION OF BANKS RA 6848.
2. Commercial banks ‐ Ordinary banks A: These are entities engaged in trust business
governed by the GBL which have a lower that act as a trustee or administer any trust or
capitalization requirement than universal hold property in trust or on deposit for the use,
banks and can neither exercise the powers of benefit, or behoof of others (Sec. 79). A bank
an investment house nor invest in non‐allied does not act as a trustee.
enterprises.
Q: What are financial intermediaries?
3. Thrift banks – These are a) Savings and
mortgage banks; b) Stock savings and loan A: Persons or entities whose principal functions
associations; c) Private development banks, include the lending, investing, or placement of
which are primarily governed by the Thrift funds on pieces of evidence of indebtedness or
Banks Act (R.A. 7906). equity deposited with them, acquired by them or
otherwise coursed through them, either for their
4. Rural banks – Mandated to make needed own account or for the account of others.
credit available and readily accessible in the
rural areas on reasonable terms and which Q: What are deposit substitutes?
are primarily governed by the Rural Banks
Act of 1992 (RA 7353). A: It is an alternative form of obtaining funds
from the public, other than deposits, through the
5. Cooperative banks – Those banks organized issuance, endorsement, or acceptance of debt
whose majority shares are owned and instruments, for the borrower's own account, for
controlled by cooperatives primarily to the purpose of relending or purchasing of
provide financial and credit services to receivables and other obligations. These
cooperatives. It shall include cooperative instruments may include, but need not be limited
rural banks. They are governed primarily by to, banker’s acceptances, promissory notes,
the Cooperative Code (RA 6938). participations, certificates of assignment and
similar instruments with recourse, and
6. Islamic banks – Banks whose business repurchase agreements.
dealings and activities are subject to the
basic principles and rulings of Islamic Shari’
A: A common banking practice requiring as an Q: What are the acts that may be penalized of
additional security for a loan granted to a fine and imprisonment as provided in the New
corporation the joint and solidary signature of a Central Bank Act (NCBA)?
major stockholder or corporate officer of the A:
borrowing corporation. (Security Bank v. Cuenca, 1. Refusal to Make Reports or Permit
G.R. No. 138544, Oct. 3, 2000) Examination (Sec. 34 NCBA)
2. False Statement (Sec. 35. NCBA)
Q: In case of DOSRI accounts, what are the 3. Other acts that violates any banking
requirements that must be complied with? laws (Sec. 36, NCBA)
A: Deposit obligations in foreign currency of any A: The amount due to any depositor for deposits
insured bank are likewise insured. in an insured bank net of any obligation of the
depositor to the insured bank as of the date of
Note: Foreign currency deposits are covered under closure, but not to exceed P500,00.00 per
the provisions of RA 3591, as amended, and depositor.
insurance payment shall be in the same currency in
which the insured deposits are denominated (Sec.9, (5) DETERMINATION OF INSURED DEPOSITS
RA 6426; Circular No. 1389, 1993).
Q: When and how shall PDIC commence the
(2) COMMENCEMENT OF LIABILITY determination of insured deposits?
Q: When will the liability by the Corporation to A: PDIC shall commence the determination of
pay insured deposits commence? insured deposits due the depositors of a closed
bank upon its actual takeover of the closed bank.
A: Whenever an insured bank shall have been PDIC shall give notice to the depositors of the
closed by the Monetary Board pursuant to closed bank of the insured deposits due them by
Section 30 (Proceedings in Receivership and whatever means deemed appropriated by the
Liquidation) of R.A. 7653, otherwise known as the Board of Directors. PDIC shall publish the notice
New Central Bank Act, payment of the insured once a week for at least 3 consecutive weeks in a
deposits on such closed bank shall be made by newspaper of general circulation or, when
the Corporation as soon as possible. (Sec 14 appropriate, in a newspaper circulated in the
R.A.3591, as amended) community or communities where the closed
bank or its branches are located. (Sec 16 R.A.
(3) DEPOSIT ACCOUNTS NOT ENTITLED TO 3591, as amended)
PAYMENT
(6) CALCULATION OF LIABILITY
Q: What are the deposits which are excluded
from PDIC coverage? (a) PER DEPOSITOR, PER CAPACITY RULE
(f) FAILURE TO SETTLE CLAIM OF INSURED 2. PDIC, may, in coordination with the
DEPOSITOR Bangko Sentral, conduct a special
examination as the Board of Directors,
Q: What is the period by which PDIC shall settle by an affirmative vote of a majority of
a claim of insured depositor? all its members, if there is a threatened
or impending closure of a bank. (Sec
A: PDIC has 6 months from the date of filing of 8
claim for insured deposit. R.A. 3591, as amended)
Q: What is the effect of failure to settle a claim Note: Prior approval of the Monetary Board is not
of insured depositor within the 6‐month period? necessary when PDIC conducts an investigation of
banks. "Investigation" and "examination" are distinct
A: procedures under the charter of the PDIC and the BSP.
GR: Failure to settle the claim. Within 6 The power of investigation covers all fact‐finding
months from the date of filing of claim for investigations on fraud, irregularities and/or anomalies
insured deposit, where such failure was due committed in banks that are conducted by PDIC based
to grave abuse of discretion, gross negligence, on complaints from depositors or other government
bad faith, or malice, shall, upon conviction, agencies and/or final reports of examinations of banks
subject the directors, officers or employees of conducted by the Bangko Sentral ng Pilipinas and/or
PDIC responsible for the delay, to PDIC. (PDIC vs. Philippine Countryside Rural Bank, Inc.,
imprisonment from 6 months to one year. G.R. No. 176438, January 24, 2011)
XPN: The period shall not apply if the validity Q: When may PDIC exercise its power to inquire
of the claim requires the resolution of issues or examine deposit accounts?
of facts and or law by another office, body or
agency. (Sec 14 R.A. 3591, as amended) A: PDIC may inquired into or examine deposit
accounts and all information related thereto in
(g) FAILURE OF DEPOSITOR TO CLAIM INSURED case there is a finding of unsafe or unsound
DEPOSITS banking practice. (Sec 8 R.A. 3591, as amended)
Q: What is the period by which a depositor of Q: What are unsafe or unsound banking
insured deposits may file his claim? practices?
A: 2 years from the closure of the bank by the A: They refer to actions or lack of actions which
Central Bank. are contrary to generally accepted standards of
prudent operation.
Q: What is the effect of the failure by a depositor
to claim insured deposit/s within the period Q: Does PDIC’s inquiry or examination of deposit
accounts violate the laws regarding secrecy of
bank deposits?
prescribed by law?
A: No. Notwithstanding the provisions of Secrecy
A: It constitutes a waiver of his (depositor) right of Bank Deposits, Foreign Currency Act, General
to claim if he fails to claim his insured deposits Banking Law, and other laws, PDIC and/or the
with the PDIC within 2 years from actual takeover Bangko Sentral, may inquire into or examine
of the closed bank by the receiver, unless deposit accounts in case there is a finding of
otherwise waived by PDIC. (Sec. 16(e) R.A. 3591, unsafe or unsound banking practice. (Section 8
as amended) R.A. 3591, as amended)
Q: When may PDIC exercise its power to Q: When does splitting of deposits occur?
examine banks?
A: Whenever a depositor’s deposit account
A: exceeds P500,000.00 is broken down and
1. PDIC may conduct examination of transferred into 2 or more accounts in the
banks with prior approval of the name/s of natural or juridical persons who have
Monetary Board. However, no
ACADEMICS CHAIR: LESTER JAY ALAN E. FLORES II
VICE CHAIRS FOR ACADEMICS: KAREN JOY G. SABUGO & JOHN HENRY C.
U NIVERSITY OFS ANTOT OMA S 21
MENDOZA F a c u l ta d d e D e r e c h o
VICE CHAIRS FORALDMINISTRATION
HAIR FOR AND F:INANCE
AY‐OUT AND DESIGN EARL L:OUIE
JEANELLE
M. MC.ASACAYAN
LEE & THEENA C. Civ i l
MARTINEZ
UST GOLDEN NOTES
2011
no beneficial ownership on
transferred deposits
A:
GR: No court, except the Court of Appeals,
shall issue any temporary restraining order,
preliminary injunction or preliminary
mandatory injunction against PDIC for any
action under R.A. 3591, as amended. Such
prohibition applies in all cases, disputes or
controversies instituted by a private party,
the insured bank, or any shareholder of the
insured bank.