Page 1 of 26 BANKING LAWS GOVERNING LAW Banking Institution are governed by the following laws: A.

General banking laws General Banking Law (R.A. No. 8791) . New Central Bank Act (R.A. No. 7653) B. Spe cial banking laws New Rural Banks Act (R.A. No. 7353) Private Development Banks Act (R.A. No. 4093) Savings and Loan Association Act (R.A. No. 3779) . Thrift Ba nks Act (R.A. No. 7906) C. Other laws affecting banks Secrecy of Bank Deposits L aw (R.A. No. 1405) Unclaimed Balances Law (Act No. 3936) Philippine Deposit Insu rance Corporation Act (R.A. No. 3591) The general banking laws above mentioned a re applicable to government banks like DBP and PNB. The Al- Amanah Islamic Bank is subject to all banking and pertinent laws. (Bar Review Materials Miravite, 20 02 ed.) in Commercial Law, Jorge BAR QUESTION: JOINT ACCOUNT VS. PARTNERSHIP (20 00) Distinguish joint account from partnership. (3%) SUGGESTED ANSWER The follow ing are the distinctions between joint account and partnership: 1) A partnership has a firm name while a joint account has none and is conducted in the name of the ostensible partner. 2) WHILE A PARTNERSHIP HAS JURIDICAL PERSONALITY AND MAY SUE OR BE SUED UNDER ITS FIRM NAME, A JOINT ACCOUNT HAS NO JURIDICAL PERSONALIT Y AND CAN SUE OR BE SUED ONLY IN THE NAME OF THE OSTENSIBLE PARTNER. 3) While a partnership has a common fund, a joint account has none. 4) While in a partnersh ip, all general partners have the right of management, in a joint account, the o stensible partner manages its business operations. 5) While liquidations of a pa rtnership may, by agreement, be entrusted to a partner or partners, in joint acc ount liquidation thereof can only be done by the ostensible partner. T HREE KINDS OF ENTITIES THAT INTRODUCE FUNDS INTO THE ECONOMY : 1. 2. 3. banks : entities that obtains funds from the public in the form sits and re-lend it to the public; quasi-banks : those that obtain funds form of deposit substitutes and re-lend the same and not from the public sitors. Finance companies and other financial intermediaries: those that nds from their own assets. of depo in the or depo lend fu

BAR QUESTION: Theory of Cognition vs. Theory of Manifestation (1997) The Civil C ode adopts the theory of cognition, while the Code of Commerce generally recogni zes the theory of manifestation, in the perfection of contracts. How do these tw o theories differ? SUGGESTED ANSWER: Under the theory of cognition, the acceptan ce is considered to effectively bind the offeror only from the time it came to h is knowledge. Under the theory of manifestation, the contract is perfected at th e moment when the acceptance is declared or made by the offeree. FIVE PERSONS PRIMARILY INTERESTED IN THE BUSINESS OF BANKING 1. 2. 3. 4. 5. Government Depositors Investors Creditors Borrowers Notes of hotjurist in foro conscientiae

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GENERAL BANKING LAW OF 2000 (GBL) (RA No. 8791) The certificate of authority shall not be issued unless the Monetary Board is sa tisfied: 1. That all requirements of existing laws and regulations to engage in the business for which the applicant is proposed to be incorporated have been co mplied with; That the public interest and economic conditions, both general and local, justify the authorization; and That the amount of the capital, the financ ing, organization, direction and administration, as well as the integrity and re sponsibility of the organizers and administrators, reasonably assure the safety of deposits and the public interest (Sec. 14). Purpose: To promote and maintain a stable and efficient banking and financial sy stem that is globally competitive, dynamic and responsive to the demands of a de veloping economy (Sec. 2). Scope of Application: The GBL primarily governs unive rsal banks and commercial banks. It suppletorily governs thrift banks, rural ban ks and other banking institutions. 2. 3. GENERAL CONCEPTS BANKS Entities engaged in the lending of funds obtained in the form of deposits (Sec. 2) Entities duly authorized by the Monetary Board to engage in the busines s of regularly lending funds obtained regularly from the public through the rece ipt of deposits of any kind. An investment company that performs function as suc h is NOT a bank. Thus an investment company that is engage solely in investing, reinvesting or trading in securities is not engage in banking. ( Banas vs. Asia Pacific Finance Corp., Oct. 18, 2000). However, an investment company which loan s out money of its customers, collects interest, and charges a commission to bot h lender or borrower is engage in banking (Republic vs. Security Credit and Acce ptance Corp.) Organization of a Bank or Quasi-Bank Requirements: 1. The entity is a stock corp oration; 2. Its funds are obtained from the public, i.e. 20 or more persons; and 3. The minimum capital requirements prescribed by the Monetary Board are satisf ied (Sec. 8). Note: In Quasi banks, Deposit substitute are alternative forms of obtaining funds for the public, other than deposit, through the issuance, endors ement, or acceptance of debt instrument for the borrowers own account, for the p urpose of relending or purchasing of receivables and other bankin g or quasi-banking functions A person or entity cannot engage in banking or quas i-banking functions without a certificate of authority from the BSP (Sec. 6). Th e determination of whether a person or entity is performing banking or quasi-ban king functions without BSP authority shall be decided by the Monetary Board.

QUASI-BANKS Entities engaged in the borrowing of funds through the issuance, end orsement or assignment with recourse or acceptance of deposit substitutes (Sec. 95) Entities authorized to perform universal or commercial banking functions may also engage in quasi-banking functions. NATURE OF BANKING BUSINESS Impressed with public interest where the trust and confidence of the public in g

eneral is of paramount importance such that: 1. The appropriate standard of dili gence must be very high, if not the highest, degree of diligence; highest degree of care (PCI Bank vs. CA, 350 SCRA 446, PBCom vs. CA, G.R. No. 121413, 29 Jan. 2001) This applies only to cases where banks are acting in their fiduciary capac ity, that is, as depository of the deposits of their depositors (Reyes vs. CA, G .R. No. 118492, 15 Aug. 2001). Subject to reasonable regulation under the police power of the state.

FINANCIAL INTERMEDIARIES Persons or entities whose principal functions include t he lending, investing or placement of funds on evidences of indebtedness or equi ty deposited with them, acquired by them or otherwise coursed through them, eith er for their own account or for the account of others. ORGANIZATION AND OPERATION A. Authority to Register/Incorporate The SEC shall not register the articles of incorporation of any bank or any amendment thereto unless accompanied by a certi ficate of authority issued by the Monetary Board under its seal (Sec. 14). 2.

While an innocent mortgagee is not expected to conduct an exhaustive investigati on on the history of the mortgagor¶s title, in case of a banking Notes of hotjurist in foro conscientiae

Page 3 of 26 institution, it must exercise due diligence before entering into said contract, and cannot rely upon on what is or is not annotated on the title. Reason: Before a loan is approved, representatives are sent to the premises offered as collate rals so as to investigate who the real owners are (DBP vs. CA, 331 SCRA 267). Th e business of a bank is one affected by public interest for which reason the ban k should guard against loss due to negligence and bad faith. It is expected to a scertain and verify the identities of the persons it transacts business with (UC PB vs. Ramos, G.R. No. 147800, November 11, 2003, Callejo, J.). Due diligence re quired of banks extend even to persons, or institutions like the GSIS, regularly engaged in the business of lending money secured by real estate mortgages (GSIS vs. Eduardo Santiago, G.R. No. 155206. October 28, 2003). cooperatives primarily to provide financial and credit services to cooperatives. It shall include cooperative rural banks. They are governed primarily by the Co operative Code (RA 6938). 6. Islamic banks ± Banks whose business dealings and act ivities are subject to the basic principles and rulings of Islamic Shari¶ a, such as the Al Amanah Islamic Investment Bank of the Philippines which was created by RA 6848. Other classification of banks as determined by the Monetary Board of t he Bangko Sentral ng Pilipinas. 7.

ORDINARY CORPORATION May be a stock or non-stock corporation May issue par value or no par value stocks. May be registered with the SEC without any certificate of authority issued by a government agency. May purchase/acquire its own shares for a legitimate corporate purpose; provided that, it has unrestricted retained earnings in its books to cover the shares to be purchased/ acquired. Must be com posed of 5 to 15 directors, each of whom shall own at least one (1) share of the capital stock of the corporation. May declare dividends out of its unrestricted retained earnings. BANKING CORPORATION Must generally be a stock corporation Shall issue par value stocks only (Sec. 9). Must secure a certificate of authority from the Monetary B oard before it can register with SEC. CONSEQUENCES OF NATURE OF BUSINESS: 1. It is subject to heavy and close supervision and/or regulation by the BSP (Ce ntral Bank of the Phils. v. CA, 208 SCRA 652). It is required to exercise utmost diligence in the handling of deposits (Simex International Manila Inc., 183 SCR A 361). Special rules on strikes and lockouts: any strike or lockout involving b anks, if unsettled after 7 calendar days shall be reported by the BSP to the Sec . of Labor who has 2 options: a. He may assume jurisdiction over and decide the dispute; or b. certify it to the NLRC for compulsory arbitration 1. 2. The President may also intervene at any time and assume jurisdiction over such l abor dispute in order to settle or terminate the same. CLASSIFICATION OF BANKS (SEC. 3) 1. Universal banks - Primarily governed by the General Banking Law (GBL), can ex ercise the powers of an investment house and invest in nonallied enterprises and have the highest capitalization requirement. Commercial banks - Ordinary banks governed by the GBL which have a lower capitalization requirement than universal banks and can neither exercise the powers of an investment house nor invest in non-allied enterprises. Thrift banks ± These are a) Savings and mortgage banks; b)

Stock savings and loan associations; c) Private development banks, which are pr imarily governed by the Thrift Banks Act (R.A. 7906). Rural banks ± Mandated to ma ke needed credit available and readily accessible in the rural areas on reasonab le terms and which are primarily governed by the Rural Banks Act of 1992 (RA 735 3). Cooperative banks ± Those banks organized whose majority shares are owned and controlled by May not purchase/ acquire its shares or accept them as security for a loan. Exce pt: when authorized by the Monetary Board. In such case, the bank must sell or d ispose of said shares within 6 months from the time of their acquisition (Sec. 1 0). Also composed of 5 to 15 directors. In case of merger or consolidation, the number of directors shall not exceed 21 (Sec. 17). May not declare dividends, if any of the conditions set forth under Sec. 57 are present. 2. 3. 4. 5. Notes of hotjurist in foro conscientiae

investment shall remain a minority hold ing (Sec. 24-28) COMM¶L BANK (Sec. d. e. 29) 100% of equity 100% of equity y In other financial allied enterprises. Extending credit. bills of exchange and other evidence of debt. 24) COMMERCIAL BANK No such powers additional payment in legal tender upon demand by the presentation of checks (Sec. rural bank or any financial allied enterprise (Sec. 33) Shall not exceed 35% of the total equity in that enterprise nor shall it exceed 35% of the voting stock in that enterprise N/A . Accepting drafts and issuing lette r of credits. and 3. c. b. 25) A pub licly-listed bank may own up to 100% of the voting stock of only one other UB / CB (Sec. EQUITY INVESTMENTS May only invest in equities of allied enterprises. whether financial or non-financial. Such powers as may be necessary to ca rry on the business of commercial banking: a. 23). (Sec. Accepting or creating demand deposits. and non-allied enterprises (Sec. drafts.Page 4 of 26 UNIVERSAL BANK Authority to exercise additional powers other than those authoriz ed for commercial banks May invest in the equities of allied. 1. Buying and selling foreign exchange and other debt securities. r eceiving other types of deposits and deposit substitutes. 31). 35% of net worth N/A Powers 1. General powers incident to corporations 2. 25). The power to invest in non-allied enterprises (Sec. whether fi nancial or non-financial POINT OF DISTINCTION UNIVERSAL BANK (Sec. 2. NCBA ). 30-32) Total in vestment in allied enterprises Total investment in non-allied enterprises Equity investment in any one enterprise 50% of net worth 50% of net worth 25% of net w orth 25% of net worth (Allied only) Equity investment in financial allied enterp rise: thrift bank. The powers authorized for a commercial bank. The powers of an inves tment house. Discounting and negotiating promissory notes. (Sec. 58. Equity investment in non-financial allied enterprises 100% of equity 100% of equity UNIVERSAL & COMMERCIAL BANK Authorized to engage in quasi-banking functions with out need for approval May accept or create demand deposits without need for appr oval Demand deposits Liabilities of the BSP and of other banks which are denomin ated in Philippine currency and are subject to OTHER BANKS Not so authorized Equity investment in a single non-allied enterprise Must seek approval of Monetary Board before accepting or creating demand deposit s.

Equity investment Quasi-Banks in 40% 40% Notes of hotjurist in foro conscientiae .

LOAN FUNCTION Requirement for Grant of Loans Before granting a loan. consolidated bank. Should such statement s prove to be false or incorrect. retained earnings and undivided pro fit.Page 5 of 26 Allied Enterprises ± those entities which enhance or complement banking Non-Financ ial Allied Enterprises ± pertains to activities that do not involve money matters (such as warehousing. 34). In case of a bank merger or consolidation. in the absence of any stipulation pre scribing the degree of diligence required. d. 40). or when a ban k is under rehabilitation under a program approved by BSP. negligence would be void for being contrary to public policy (CA-Agro Dev¶t vs. a bank must ascertain tha t the debtor is capable of fulfilling his commitments to the bank. b. Acquisition of major assets and making of new investments may be restricted. Upon prior approval of the Monetary Board. The depositary would be liable if in performing its obligatio n it is found guilty of fraud. safety deposit boxes) NET WORTH The total of the unimpaire d paid-in capital including paid-in surplus. 24). A b ank may demand from its applicants a statement of their assets and liabilities a nd of their income and expenditures and other information. c. Receive in custody funds. by order of and for the account of their custome r. the Monetary Board may require or suspend compliance with such ratio wheneve r necessary for a maximum period of one year. consultant or administra tor of investment management/ advisory/consultancy accounts. documents and valuable objects. (Sec. 219 SCRA 426. evidences of indebtedness and types of securities. securities and oth er effects which it receives duly separated from its own assets and liabilities. Act as fi nancial agent and buy and sell. Deposit Function OTHER FUNCTIONS Universal banks and commercial banks may also exercise any of the following func tions: a. A. EXCEPT: purchases of evidence of indebtedness guaranteed by the G overnment (Sec. Make collection and payments for the account of others and perform such other services for thei r customer as are not incompatible with banking business. negligence. Distribution of net profits may be li mited or prohibited and MB may require that part or all of the net profits be us ed to increase the capital accounts of the bank until the minimum requirement ha s been met. the MB may temporaril y relieve the surviving bank. 1993). Rules: 1. PROVIDED that. that of a good father of the family i s to be observed. FUNCTIONS OF BANKS BASIC FUNCTIONS: 1. Note: The b ank acting as depositary or as an agent shall keep the funds. act as managing agent. adviser. 34). Any stipulation exempting the depositary from any liability ar ising from loss on account of fraud. Loan Function 2. 3. shares. the bank may terminate any loan granted on the basis of said statements and shall have the right to demand immediate repayment or liquidation of obligation (Sec. CA. . Howev er. 53) RISK±BASED CAPITAL The minimum ratio prescribed by the Monetary Board which the net worth of a bank must bear to its total risk assets which may include contingent accounts. Effect of non-compli ance with the prescribed minimum ratio: 1. and e. March 5. or 2. such ratio shall be applied uniformly to banks of the same category (Sec. or constituent bank or corporat ions under rehabilitation from full compliance with the required capital ratio. Rent out saf ety deposit boxes. net valuation reserves and other adjustments as may be required by the Bang ko Sentral (Sec.

or when a bank is under rehabilitation under a program approved by BSP. 3. EXCEPT: purchases of evidence of indebtednes s guaranteed by the Government.Effects of non-compliance with the prescribed minimum ratio: 1. consolidated bank. or constituent bank or corporations under rehabilitation from full compliance with the required capi tal ratio. or 2. the MB may temporarily relieve the surviving bank. Notes of hotjurist in foro conscientiae . 2. Distribution of net profits may be limited or prohibited and MB may require that part or all of the net profits be used to increase the capital accounts of the bank until the m inimum requirement has been met. In case of a bank merger or consolidation. Acquisition of major assets and making of new investments may be restricted.

or relative mentioned above. The loan or financial accommodation is from (1) his bank or (2) a bank that is a subsidiary of a bank holding company of which both his bank and lending bank are subsidiaries. Joint and Solidary Signature (JSS) Practice A common banking practice requiring as an additional security for a loan granted to a corporation the joint and Solidary signature of a major stockholder or cor porate officer of the borrowing corporation (Security Bank vs. credit accommodations and guarantees (Sec. except when the mortgage. association. partnershi p wherein any of the foregoing is a general partner. corporation or other entity shall at no time exceed 20% of the net worth of such bank. partnership. amount to 2% or more of the t otal subscribed capital stock of the bank: a. CLASSIFIED LOANS Those that have ex traordinary risks of loss in collection due to some defects such as bad debts or those under litigation. b. and Related Interests) Officers. credit accommodations and acceptances under lette rs of credit to the extent covered by margin deposits. Loans. The borrower is director. Single Borrower¶s Limit (SBL) Rules The total amount of loans extended by a bank to any person.A. DOSRI Accounts (Directors. warehouse receipts or other similar documents transferring or securing title covering readily marketable. Classification of Loans UNCLASSIFIED LOANS Those that do not have a greater±tha n± normal risk and the borrower have apparent ability to satisfy it in full and no loss in ultimate collection is anticipated. Loans secured by obligations of the Bangko Sentr al or the Philippine Government. Who are covered (BSP Circular No. Loans covered by assignment of deposits maintained in the lending bank and held in the Philippines. Exclusions (NON-RISK LOANS): 1. b. 35) 1. (3) a bank in which a controlling p roportion of the shares is owned by the same interest that owns a controlling pr oportion of the shares of his bank. whichever is lower. 4. b. Reasons: a. The total amount of loans m ay be increased by an additional 10% of the net worth of such bank provided the additional liabilities of any borrower are adequately secured by trust receipts. The loan or financial accommodation o f the DOS. Officers ± Either identified in the by-laws or a re generally known as such Stockholders ± those whose stockholdings. 3. pledge or assignment covers only said coowner¶s undivided interest. Directors ± Di rectors of the lending bank 2. Surety would be compelled to ensure that the loan would be used for the purpose intended. shipping documents. 170): 1. His spouse or relative within the first degree of affinity/consanguinity or relative by legal adoption. Other loans or cre dit accommodations which the MB may specify as non-risk items. Requisites (BSP Circular No. Limit on loans.Page 6 of 26 2. 8791 provides for the rates of 20% and 10% respectively. pledged or assigned to secure the loan or credit acc ommodations. 170): a. creditor¶s recourse is not limited to corpor ate properties but extends to personal assets of the surety. officer. Stockholders. Loans fully guaranteed by the government. or any stockholder of a bank and related interest. non-perishable goods which must b e fully covered by insurance. Note: While R. 3. and d. is in excess of 5% of th e capital and surplus of the lending bank or in the maximum amount permitted by law. singly or with that of his related interest. c. individually and/or together with any of the following persons. Cuenca. with the stockholder or the stockholder¶s spouse. A co-owner. and 5. and b. of property /right/interest (mortgaged. 2. 341 SCRA 781). He contracts a loan or any form o f financial accommodation c. In case of default. the Bangko S .

Co-owner. and (e). except when the mortgage. or relative by legal adoption of a DOS. of the property/interest/ right mortgaged.entral has not yet implemented such rates. Corporation with inter-locking directors or where 20% of the capital stock is owned by the DOS a nd/or their spouses or relatives mentioned above. Related Interest ± a. relatives within first degree of consanguinity or affinity. Notes of hotjurist in foro conscientiae . partnerships of which a DOS o r any of the foregoing is a general partner. with the DOS or his sp ouse or relative within the first degree of consanguinity or affinity. or wholly or majority owned or controlled by any related entity or a group of related entities in items (b). The prevailing rates are 25% and 15% respectively. pledged. Spouse. ( d). 4. b. or relati ve by legal adoption. c. pledg e or assignment covers only said coowner¶s undivided interest. assign ed to secure the loans or credit accommodations.

Safety deposit boxes ± t he relation between a bank renting out safety deposit boxes and its customer wit h respect to the contents of the box is that of a bailor and bailee ± the bailment for hire and mutual benefit has been adopted in this jurisdiction. No waiver is required if the related interests are the borrower. or in any manner be an obligor or incur any contractual liability to t he bank. v. and advances to officers in the form of fringe benefits. Loans. GBL ) B. Value of collaterals The loan shall not exceed 75% of the appraised value of the real property plus 60% of the appraised value of the improvements or 75% of the appraised value of the chattel ( Secs. trade names and copyrights) sh all not exceed 75% of the appraised value of the security (Sec. Demand Characteristics: i. Information obtained from examination is strictly confidential . trademarks. ii. Central Bank's "Manual of Regulations for Banks and Other Financial Int ermediaries. COLLATERALS 1. cited in Ranioso v. 117416. Coope rative banks with regard to their cooperative shareholders. The General Banking Law provides fo r additional restrictions to the bank before it can lend to its directors or off icers. d. Loans extended to DOSRI shall be limited to an amount equivalent to their respective unencumbered deposits and book value of their paid-in capital contrib ution in the bank. Dealings of a bank with any of its DOSRI shall be upon ter ms not less favorable to the bank than those offered to others (ARMS LENGTH RULE ). Furthermore. directly or indirectly. In the na ture of irregular deposits (Serrano vs. from borrowing from the bank . Except: i. Money deposited is comming led with the other money. Not preferred credits ( Central Bank vs. Those secured by chattels and in tangible properties (such as patents. 37 & 38. borrow from such bank nor shall be guarantor. Bank acquires ownership of the thing deposited and the right to use and dispose iv. DEPOSIT FUNCTION Kinds of Deposits between a Bank and its Depositor 1. except with the written approval of the majority of all the directors o f the bank. credit acc ommodations. such dealings must be upon terms not less favorable to the bank than those offered to others (Secti on 1326. endorser or surety for loans from such bank t o others. excluding the director concerned. Contract o f loan/mutuum with the depositor as creditor iii. As debtor-creditor a. plus 60% of the apprais ed value of the insured improvements (Sec. CA. Rules on amount of secured loans Those secured by real estate shall not exceed 75% of the appraised value of the real estate security. Section 36 of the General Banking Law of 2000 does not entirely prohibit directo rs or officers of the bank. As trustee-trustor a. excluding the director concerned. Savings b. 38). G. is required. e. No director or officer of any bank shall. iii. No.Page 7 of 26 Restrictions under the GBL and NCBA: a. 37). 96 SCRA 96) ii. As lessor-lessee a. It cannot be considered as a contract of lease because the full possession and control of th e safety deposit box is not given to the renters (Sia vs. A viola tion of this provision will cause his or her position to be declared vacant and the erring director or officer subjected to the penal provisions of the New Cent ral Bank Act. b. December 8. constituting a common fund. Time c. The resolution ap proving the loan shall be entered in the records of the bank and transmitted to the BSP. which makes him an officer . 20 SCRA 507). The written approval shall not be required for loans granted to officers under a fringe benefit plan approved by t he Bangko Sentral. Trust account As bailee-bailor . credit accommodations. In this case. 2000). directly or indirectly. Central Bank. Loans. and guarantees secur ed by assets considered as non-risk by the Monetary Board. Waiver of secrecy of deposits of whatever nature in all banks in the Philippines by the borrower. 222 SCRA 24 [1993] ). Pio is the president of Western Bank.R. Morfe. director and stockholder of the said bank. c. A written approval of the majority vote of all the directors of the bank. f. CA.

RESTRICTIONS ON LOAN ACCOMMODATIONS (2006) Pio is the presi dent of Western Bank. a. b. Explain whether th e loan officer is correct. and stockholders is prohibited by the General Banking Law. (5%) SUGGESTED ANSWER: 3. officer s. Notes of hotjurist in foro conscientiae . 4. 2. His wife applied for a loan with the said bank to finance an internet cafe.3. The loan officer told her that her application will not be app roved because the grant of loans to related interests of bank directors. BAR QUESTION: BANKS.

2. NOW accounts. 7192 Kinds of Deposits Note: DEMAND DEPOSITS Only a universal or commercial bank can accept or create d emand deposits. 1998 ed. Deposit strictly for safekeeping and for specific purposes As agent-principal: a. then such payment shall be made to the guardian.1 PD No. CA) Anonymous accounts are prohibited. CA. July 21. by a Demand. A bank is negligent if it allows the withdrawal without requiring the presentation of a passbook. No 9160 as amended by RA 9194. 33) Banks are prohibited from issuing / accepting withdrawal slips or other similar instruments to effect withdrawals without the passbooks except for bank authoriz ed by the BSP to adopt the no passbook withdrawal system. dividends. Deposit for specific p urpose c. able to read and write c. A bank other than a universal bank or commercial bank CANNOT acc ept demand deposit SAVINGS ACCOUNT Evidenced passbook. March 29.A. 22. Joint a ccount may be the subject of a survivorship agreement whereby the co-depositor a gree to permit either of them to withdraw the whole deposit during their lifetim e and transferring the balance to the survivor upon the death of one of them ( V itug vs. ³And/or´ account Notes of hotjurist in foro conscientiae . (BPI v. BSP Cir cular No. Viray. b. the law requires that the necessary measures are undertaken by the bank to record and establish the true identity of the depositor. 251. 1990) Temporary overdrawing against current accounts shall not be allowed unless cause d by normal bank charges and other fees incidental to handling such accounts. Thrift Banks Act of 1 995) Married Women are allowed to open bank accounts without assistance of their husbands (RA No..734) If the guardian shall give notice in writing to any thrift bank not to make paymen ts of deposits. TIME DEPOSITS Depositors: 1. time deposits and deposit substitutes shall not be subject to interes t ceilings. it should only be savings or time deposits An account with fixed term Note: Parents may deposit for their minor children or wards (Sec. savings. Deposit for safekeeping NOW ACCOUNTS (Negotiable Order of Withdrawal) Interest bearing deposit accounts that combine the payable on demand feature of checks and investment feature of savings account. ³And´ acco unt Co-ownership The signatures of both co-depositors are required for withdrawa ls. 2000) exception: Foreign currency deposits may be a ³numbe red account´. ( R. (Sec. Minors : a. 5. However. at least seven years of age b. A. (Sec. Deposit of check for collection b. not disq ualified by any incapacity d. Individual Joint a. or interest to the minor of whom he is the guardian. Types of deposit accounts (Handbook on Bank Deposits. A bank other than a universal or commercial bank must seek approval of Monetary Board before accepting or creating demand deposits.Page 8 of 26 a.) 1. Dr awings against uncollected deposits (uncleared checks) are generally prohibited.


secu rities and other effects which it receives duly separated from its own assets an d liabilities (Sec. Failure by t he bank to pay the depositor is failure to pay a simple loan and not a breach of trust. or to defeat the legitime of a forced heir (Rivera vs. endorsement. (Handbook on Bank Deposits. PNB vs. negligence would be void for being contrary to public policy (CA-Agro Dev¶t vs . Viray. To directly act as insurer (Sec. ON BANKS: 1. Deposit substitutes An alternative form of obtaining funds from the public. 53) PROHIBITIONS A. ne gligence. 519. it is deficient in the required liquidity floor for go vernment deposits for 5 or more consecutive days. CA. 95. the depositor relies on the stability and reputation of the bank. consent and signature of the other. whether express or implied. CA. RA 7653). the survivor may withdraw the entire balance on deposit. if at the time of declaration: a. 1993). to transfer property in fraud of c reditors. 62 Phil. thr ough the issuance. 219 SCRA 426. aleatory contract supported by a lawful consideration which is valid unless when made as a mere cloak to hide an inofficious donation. b . that of a good father of the family is to be observed. 73 Phil. or acceptance of debt instruments for the borrow er¶s own account. People¶s Bank and Trust Co. the Monetary Board may summarily and without need for prior hearing close such banking institution and place it under receiv ership of the Philippine Deposit Insurance Corporation (Sec. DEPOSIT No security given to guarantee repa yment. its clearing account with the Bangko Sentral is overdrawn. In case a bank or quasi-bank notifies the Bangko Sentral or publicly announces a bank holiday. for the purpose of re-lending or purchasing of receivables and o ther obligations (Sec.Page 9 of 26 Either one of the co-depositors may deposit and withdraw from the account withou t the knowledge. DEPOSIT SUBSTITUTE Guaranteed by certificates and other instruments. The depositary would be liable if in performing its obligation it is found guilty of fraud.) Note: The bank shall act as depositary or as an agent shall keep the funds. or in any manner suspends the payment of its deposit liabilities continuously for more than 30 days. March 5. 2. b. A. other than deposits. it does not comply with the li quidity standards/ratios prescribed by the Bangko Sentral for purposes of determ ining funds available for dividend declaration. 1998 ed. 272 SCRA 291). PNB.. 57). And upon the death of one. The fiduciary nature of a bank-depositor relationship does not convert the contract between the bank and its depositors f rom a simple loan to a trust agreement. 546 [1942]). Any stipulation exempting the depositary from any liability arising from loss on account of fra ud. or It has committed a major viol ation as may be determined by the Bangko Sentral (Sec. The account may be deem ed a survivorship agreement depending on the intention of the parties. 54) For banks or quasi-banks to declare d ividends. 53). in the absence of any stipulation prescribing the degree of diligence required. A bank has the right to set-off the deposits in its hands for the payment of any outstanding indebtedness to it on the part of the depositor (Gullas vs. The law simply imposes on the bank a higher standard of integrity and pe rformance in complying with its obligations under the contract of simple loan.

2003). 138569. 55). Make false entries in any bank report or statement or participate in any frau dulent transaction. No. 6. Notes of hotjurist in foro conscientiae . Rationale: To prevent violation of Bank Secrecy Law. CA. 62). 5. or or business To employ casual or non-regular personnel or too lengthy probationary personnel in the conduct of its business involving bank deposits (Sec. OFFICERS. c. The fiduciary nature of banking requires banks to assume a degree of dili gence higher than that of a good father of a family (CBTC vs. CA. OR AGENTS OF BANKS: 1. Suspension of Payment on its Deposit Liabilities B. To conduct business in an unsafe or unsound manner (Sec. ON DIRECTORS. EMPLOYEES.R. d. September 11. Ibid. 4.). under a similar contract of simple loa n (CBTC vs. 3. Unauthorized advertisement representation (Sec.eyond those required of non-bank debtors. This fiduciary relationshi p means that the bank¶s obligation to observe ³high standards of integrity and perfo rmance´ is deemed written into every deposit agreement between a bank and its depo sitor. 56). Publication of cap ital stock (Sec. 64). G.

Offer any director. g. 5. ON EXAMINERS. i. or trust entitie s. storage. Credit investigation and collection. ASSIST OR RENDER TECHNICA L ASSISTANCE TO ANY BANK: Commit any of the acts enumerated in Sec. which is not otherwise proh ibited by law. e. A.). the MB s hall consider any of the following circumstances: 1. the bank has to do it by itself. wh ether or not the director or officer profited or will profit thereby. EXAMINE. commissi on. bank forms and promotional material s. a. The making of false reports or misrepresentations o r suppression of material facts by personnel of the BSP shall constitute fraud a nd shall be subject to administrative and criminal sanctions. However. or any other entity. or abnormal risk to the institution¶s depositors. Rationale: To prevent violation of Bank Secrecy Law (Ha ndbook on Bank Deposits. Viray. creditors. rule or regulation affecting banks. quasi-banks. 55 or aid in the commission of the same. d. liquidity or solvency of the institution. Printing of bank statements. Processing of export. 56) In determining whether a particular act or omission. quasi-bank or trust entity. BSP OR GOVERNMENT OFFICERS AND EMPLOYEES ASSIGNED TO SUPERVISE. The act or omi ssion has resulted or may result in material loss or damage. The act or omission has res ulted or may result in material loss or damage. import and o ther trading transactions. 2. or has given any unwarranted benefits. All information technology systems and processes. or abnormal risk or danger to th e safety. investors. may be deemed as conducting business in an unsafe or unsound manner. evident bad faith or gross inexcusable negli gence. and stockholders or to the BS P or to the public in general. h. Credit card services. or Outsource inherent banking functions ± a bank cannot e ngage the services of another entity to receive deposits on its behalf. f. The act or omission involves entering into any contract or transaction ma nifestly and grossly disadvantageous to the bank. employee or agent of a bank any gift. Accept gifts or any other form of remuneration in connection with the approva l of a loan or other credit accommodation from said bank. Without order of a court of component jurisdiction. or any other form of compensation in order to influence such persons into ap proving a loan or other credit accommodation application. a bank may outsource.Page 10 of 26 2. except for certain functions a ffecting the ability of the bank to ensure the fit of technology services deploy ed to meet its strategic and business objectives and comply with pertinent laws and regulations. upo n prior approval of the Monetary Board the following functions: D. disclose to any unauthorized person any information relative to the funds or properties in the custody of th e bank belonging to private individuals. Printing of bank lo an statements and other non-deposit records. c. officer. Overvalue or aid in overvaluing any security for the purpose of influencing in any way the actions of the bank or any bank. Transfer agent services for debt and equity servi . 3. Clearin g and processing of checks not included in the Philippine Clearing House System. The act or omission has caused any undue injury.. Data imaging. stability. 4. 4. and other related systems. fee. advantage or preference to the bank or an y party in the discharge by the director or officer of his duties and responsibi lities through manifest partiality. CONDUCTING BUSINESS IN AN UNSAFE OR UNSOUND MANNER (SEC. 1998 ed. b. corporations.

Messenger. Notes of hotjurist in foro conscientiae . Janitorial services. renewing. Security guard services. Fraudulently overvalue property offered as security for a loan from the ba nk. or 1. m. 4. Property appraisal. 3. Foreign For eign individuals and non-bank corporations may own or control up to an aggregate of 40% of the voting stock of a domestic bank. couri er and postal services. 2. Other services as determined by the Monetary Board. OWNERSHIP OF STOCKS OF A DOMESTIC BANK Filipino In case of a Filipino individual or a domestic nonbank corporation. j. Furnish false or make misrepresentations or suppression of material facts fo r the purpose of obtaining. 2. p. Attempt to defraud the said bank in the event of a court action to r ecover a loan or other credit accommodation. l. Vehicle service contracts o. 3. ON BORROWERS: 1. eac h may own up to 40% of the outstanding voting stock of a local bank. C. or increasing a loan or extending the peri od thereof. Property management services. n.ces. k.

legiti mate or common law. Entries under the second and third modes are restricted to banks which are among the top 150 foreign banks in the world or top 5 banks in their country of origi n. If individuals: by the citizenship of the individuals b. shall be considered family groups or related interest and mu st be fully disclosed in all transaction by such individual with the bank. banks must as much as possible retain only assets that are easily marketabl . Rationale: Banks are not engaged in the business of acquiring and possessing real property. ACT LIBERALIZING ENTRY OF FOREIGN BANKS (R. If c orporations: by the citizenship of the controlling stockholders of the corporati on. 78). ban ks must maintain liquidity at all times to enable it to perform its functions.Page 11 of 26 The percentage of foreign-owned voting stocks in a bank shall be determined: (GR ANDFATHER RULE) a. purchasing or owning up 60% of the voting s tock of an existing bank. the GBL does NOT impose a limit on the number of shares that can be owned by the same family or related interest . provided: a. (Sec 13. By investing in up to 60% of the voting stock of a new banking subsidiary incorp orated under laws of Philippines. Entry: Governed by the provisions of the Foreign Bank Liberalization Act and the Offshore Banking System Decree (Sec. 7721) The Monetary Board authorizes foreign banks to operate through any of the follow ing modes of entry: 1. GBL) Unlike the former law. Also. irrespective of the place of incorporation (Sec. the law provides that stockholdings of individuals related to each other within the 4th degree of consanguinity or affinity. By acquiring. and b. 2). 11). T hus. However this should not be without prejudice to the 40% restriction imposed by Sec 11of the GBL. 1.A. NO. 72) Revocation of license to do business i n the Philippines: The Monetary Board may revoke such license on the grounds tha t the foreign bank is insolvent or in imminent danger thereof or that its contin uance in business will involve probable loss to those transacting business with it (Sec. GBL) Two or more corporations owned and controlled by the same family group or same group of person shall be considered related interest and must be fully d isclosed in all transaction by such corporations or related group of person with the bank. By establishing branches with full banking authority. foreign bank may avail itself of only one mode of entry. MINIMUM CAPITALIZATION: OWNERSHIP OF REAL PROPERTY GENERAL RULE: A bank cannot acquire and own real property. 2. to S TOCKHOLDINGS OF F AMILY GROUPS OR R ELATED I NTEREST The law does not prohibit ownership of the stock by members of the same family o r related interest. However. (Sec 12. 2. 3. Foreign bank or Philippine co rporation may own up to 60% of the voting stock of only one domestic bank or new banking subsidiary (Sec.

2. For foreign bank branches ± not less than the US$ equivalent of P210M Amendments introduced by GBL 2000 1. 51). foreign banks may be allowed to own up to 100% equity of on ly one domestic bank as a mode of entry if authorized by the Monetary Board (Sec . conveyed to it in satisfaction of a debt previously contracted in the course of its dealings. Other foreign individuals and non-bank corporations may own up to 40% of the voting stock of a domestic bank. provided: a. As shall be necessary for its own use in the conduct of its bu siness. the equity investme nt of a bank in another corporation engaged primarily in real estate shall be co nsidered as part of the bank's total investment in real estate. 72 78) As mortgaged to it in good faith by way of security for debts. Within seven years from effectivity of the GBL (June 13. 1. 2. 73. unless otherwise provided by the Monetary Board (Sec. 2000).e. the nationality of the controlling shareholders of the non-bank corporations will be traced to determine the foreig n ownership of the domestic bank (Sec. GBL). EXCEPTIONS: 1. FOREIGN BANKS (SECS. and such as it shall purchase at forced sales or to Notes of hotjurist in foro conscientiae . 11. and b. For locally incorporated subsidiaries ± equal to that of domestic banks of the sam e category 2. GBL). The total investment in such real estate and improvements s hall not exceed 50% of the combined capital accounts.

subjec t to (1) (Sec. converting it to conventional redemption or by estop pel if the extension was unilaterally made. 19). however. at the same time. As otherwise provided under exist ing laws. that property acquired under such circumstances shall be disposed of by the bank within a period of 5 years. To enjoin or restrain the conduct of foreclosure proceedings. the petitioner mus t file a bond conditioned that he will pay all the damages which the bank may su ffer by the injunction (Sec.R. whether full-time or part-t ime. 2004). 127 469. G. nor will it be permitted to shirk f rom its responsibility for such frauds. June 25. EXCEPTIONS: 1. for hi s own ultimate benefit (Philippine Banking Corp. To maintain the quality of bank management and afford better protection to depos itors and the public. 5 of the Rural Bank Act 2. AM No. Union Bank vs. 16) Independent Director A person other than an officer or employee of the bank. Wher e such service is incidental to financial assistance provided by the governmentowned or controlled corporation to the bank 3. provided that the bank may after said period continue to hold the property for its own use. 79-93) Only a stock corporation or a person duly authorized by the Monetary Board shall act as a trustee or administer any trust or hold property in trust or on deposi . Accordingly. 47). RULES ON FORECLOSURE OF A REAL ESTATE MORTGAGE BY A MORTGAGEE-BANK Application: Judicial or extrajudicial foreclosure JUDICIAL EXTRAJUDICIAL Fit an d Proper Rule DIRECTORS & OFFICERS Right of redemption Within 1 year from registration of the foreclosure sale (exc eption to Rule 68) 1. thus. vs. 99-10-05 ) 2. No. 2001) Right of purchaser to possess prop erty: Immediately after the date of the confirmation of the auction sale. vs. pass upon and review the qualifications and disqualifications of individuals elected or ap pointed as bank directors or officers and disqualify those found unfit (Sec. CA and Marcos. CA. a banking corporation is li able to innocent third persons where the representation is made in the course of its business by an agent acting within the general scope of his authority even though. CA. in the particular case. it s subsidiaries or affiliates or related interests. shall. whichever is earlier. 321 SCRA 83). Mortgagor is a juridical person ± At any time before the registration of the certificate of foreclosure sale which in no case shall be more than 3 months aft er foreclosure. As otherwise provided under Sec.Page 12 of 26 secure debts. provided. Prohibition on Public Officia ls GENERAL RULE: No appointive or elective official. 52). January 15. p. GR 134068. the Monetary Board shall prescribe. 114). even though no benefit may accrue to the bank therefrom (10 Am Jur 2d. serve as an officer of any private bank (Sec. A bank may be bound by an agreement providing for a longer redemption period (Ibaan Rural Bank TRUST OPERATIONS (SECS. 1(3) SC Cir. the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other person. A bank holding out its officers and agents as worthy of confidence wil l not be permitted to profit by the frauds they may thus be enabled to perpetrat e in the apparent scope of their employment. in general. Mortgagor is a natural person ± Within one year after the re gistration of sale with the Register of Deeds (Sec. Redemption price: Amount due under the mor tgage deed + interest + all the cost and expenses incurred by the bank or instit ution from the sale and custody of the property less the derived income (Sec 78.

benefit. 79) Notes of hotjurist in foro conscientiae . or behalf of others (Sec.t for the use.

officers and stockholders. Prohibitions: 1. stockholders or employees of the trust entity. 7653) Purpose: To maintain a central monetary authority that shall function and operat e as an independent and accountable body in the discharge of its responsibilitie s concerning money. benefit. with the will annexed. or when there is no will 5. unless the transac tion is specifically authorized by the trustor and the relationship of the trust ee and the other party involved in the transaction is fully disclosed to the tru stor or beneficiary of the trust prior to the transaction (Sec. manageme nt and administration of any estate. issues. any of the dep artments. banking. or the rel ated interests. of such directors. To provide policy directions in the areas of money. Trust Business. an d profits thereof 6. holding . properties. Act under the order or appointment of any court as guardi an. receiver. Accept and execute any trust for the holding. properties or securities received by any trust en tity as executor. 151 SCRA 376 [1987]). for account of the trustor or the benefi ciary of the trust. transfer. management of funds and/or properties of the trustor by the trustee for the us e. it is the government agency charged with t he responsibility of administering the monetary. corporation or body politic and to accept and execute any trust consistent with law 2. R ESPONSIBILITIES : 1. Act as trustee on any mortgage or bond issued by an y municipality. Establish and manage common trust funds (Sec. No trust entity shall. and assets.any activity resulting from a trustortrustee relationship inv olving the appointment of a trustee by a trustor for the administration. advantage of trustor or others called beneficiaries. To maintain price stability conducive to a balanced and sustainable growth of the economy. and similar inst . The trust business and all funds. and credit To su pervise bank operations To regulate the operations of finance companies and nonbank financial institutions performing quasi-banking functions. Dissolution of the corporation by quo warranto proceedings THE NEW CENTRAL BANK ACT (NCBA) Powers of trust entities: 1.Page 13 of 26 4. GBL). of such trust entity (Sec. GBL). directors. real or personal. purchase debt from instruments of. and the rents. 3. banking and credit system of th e country and is granted the power of supervision and examination over bank and non-bank financial institutions performing quasi-banking functions. 87.A. or sell. CA. administrator. including all other fu nds. officers. guardian. including sa vings and loan associations (Busuego vs. or depositary of the estate of any minor or incompetent p erson. 80. receiver or depositary shall be kept separate and distinct from the general business. and as receiver and depositary of any money paid into court by parties to any legal proceedings (R. Act as the executor of any will when it is named the executor thereof 4. assign or lend money or property to. 83) BANGKO SENTRAL NG PILIPINAS (BSP) The state¶s central monetary authority. P RIMARY OBJECTIVES : 1. To promote and maintain monetary stability and the convertibility of the peso. in cluding relatives within the 1st degree of consanguinity or affinity. No. banking and credit. 2. trustee. trustee. 2. purchase or acquire property from. Act as administrator of the estate of any deceased person.

64-66. Suspension or removal of the director or officer 2. 3) 2. 4. P OWERS / FUNCTIONS : 1. Issuer of currency (Sec. Notes of hotjurist in foro conscientiae . especially where the PCHC does not operate (Sec. 103) Clearing channel or house. 66) 1. As provided by specific provisions 2. 49-60) Custodian of reserves (Secs. 102) Banker of the government ± the BSP shall be the official depository of the Govern ment and shall PENALTIES FOR VIOLATION OF THE GBL (SEC. 94. Sections 34-37 of RA 7653 (by excluding the bank from clearing) 3. 3. 3.itutions (Sec.

all of whom shall serve full-time. 109) Su pervisor of the banking system (Sec. Sec. those coming from the private sector shall not hold any other public offic e or public employment during their tenure (Sec. 3. cultural or religious organizations or whenever. 7. 5. 30) c.16. 20). Accordingly. 81-89. 20 of the 1987 Constit ution. 7. C OMPOSITION : Seven members consisting of: 1. Chairman: Governor of the BSP A member of the cabinet to be designated by the President of the Philippines Five (5) members who shall come from the pri vate sector.Page 14 of 26 represent it in all monetary fund dealings (Secs. 9). 117-122) Bangko Sentral. 61-63. MONETARY BOARD (MB) The body by which the powers and functions of the Bangko Sentral are exercised ( Sec. extending to enterprises wholly or majority-owned or controlled by the bank (Se c. 8. in case any member of the Monetary Board with personal or pecuniary intere st in any matter in the agenda of the Monetary Board shall disclose his interest to the Board and shall retire from the meeting when the matter is taken up (Sec . 14). Source of credit (Secs. 6. 3. 2.6). they may not accept any other employment. by desig nation of the President. the Govern or of the Bangko Sentral and the fulltime members of the Board shall limit their professional activities to those pertaining directly to their positions with th e Bangko Sentral. Financial advisor of the government (Secs. Initiate crim inal prosecution of erring officers of banks Government agent (Secs. in which case such member shall resign from. Examine. remunerated or ad honorem. 123124) ± Under Article VII. with the exception of positions i n eleemosynary. 25) ± shall include the power to: a. 4. S UPERVISION AND E XAMINATION OF B ANKS Q UALIFICATIONS OF MEMBERS OF THE MONETA RY B OARD : .116) 5. civic. RA 8791). whether public or private. 2. NCBA). 9 ). 25) b. and divest himself of any and all interests in such institution before assumption of office (Sec. officials and e mployees of the BSP in the performance of their functions is extraordinary dilig ence (Sec. cannot be connected directl y with any multilateral banking or financial institution or has a substantial in terest in any private bank in the Philippines. this power may not be restrained by a writ of injunction unless there is convincing proof that the action of the BSP is plainly arbitrary (Sec. within one (1) year prior to his appointment (Sec. the Governor or the full-time member is tasked to repre sent the interest of the Government or other government agencies in matters conn ected with or affecting the economy or the financial system of the country (Sec. 9). 110. Place a bank under receivership or liquidation (Sec. the President may contract or guarantee foreign loans but with the prior concurrence of the Monetary Board. 6. Note: The degree of diligence required of the members of the MB. cannot be employed in any such institution within two (2) years after the expiration of his term except when he serves as an official repr esentative of the Philippine Government to such institution (Sec. 9).

ban king institutions and quasi-banks. to the e xtent of 50% or less. employee. must be natural-born citizens of the Philippines. of unquestionable integrity. consultant. 4. Subsidiary ± a corporation more than 50% of the voting stock of which is owned by a bank or quasi-bank Affiliate ± a corporation the voting stock of which. is owned by a bank or quasi-bank or which is related or li nked to such institution or intermediary through common stockholders or other fa ctors determined by the Monetary Board. officer. at least 35 years of age . ag ent or stockholder of any bank. of known probity and patrioti sm. and with recognized competence economic disciplines. and conduct periodic or special examinations of. of good moral character. quasi-bank or any other institution which is sub ject to supervision or examination by the No restraining order or injunction sha ll be issued by the court enjoining the Bangko Sentral from examining any instit ution subject to supervision or examination by the Bangko Sentral. 2. in social and The BSP s hall have supervision over. 3. D ISQUALIFICATIONS AND I NHIBITION ON GOVERNOR AND B OARD M EMBERS : NO RESTRAINING ORDER AGAINST BSP 1. lawyer.1. unless there is convincing proof that the action of the Bangko Sentral is plainly arbitrary Notes of hotjurist in foro conscientiae . with the exception of the Governor who should at least be 40 years of age. including their subsidiaries and affiliates e ngaged in allied activities. disqualified from being a director.

employee. 2. Reorganize the management. of any institution subject to supervision or examination by the Bangko Sentral. reorganiz ation of management and the restoration of viability. or release any c laim of. Int¶l Bank vs.. Exception: non-stock savings and loan associations and provident funds organized exclusively for employees of the Bangko Sentral. 4. lawyer or agent. being required in writing by the Monetary Board or by the head of the supervising and examining department willfully refuses to file the required report or permit an y lawful examination into the affairs of such institution shall be punished unde r the Act. . DIRECTORS. a nd the management thereof. The conserva tor¶s power is not unilateral and he cannot simply repudiate valid obligations of the bank. Duration: Not to exceed 1 year Effects: 1. manager. 35) PROHIBITIONS ON BANK OFFICERS. 7. and sell property To sue and be sued To acquire and hold such ass ets and incur such liabilities in connection with its operations or as are essen tial to the proper conduct of operation To compromise. owner. 6. 3. AGENTS Personnel of the Bangko Sentral are hereby prohibited from: 1. The powers must be related to preservation of assets. directly or ind irectly. director or officerin-charge of any instit ution subject to the supervision or examination by the Bangko Sentral who. 3. Not a precondition to the designation of a receiver Powers of conservator: 1. The power to revoke co ntracts only covers those that are deemed defective ± i. otherwise they wou ld infringe the nonimpairment clause of the Constitution. with the power to overrule or rebuke the actions of the previous management and board of directors of the ban k or quasi-bank.e. unenfo rceable or rescissible (First Phil. being an officer.The willful making of a false or mislead ing statement on a material fact to the Monetary Board or to the examiners of th e Bangko Sentral shall be punished. His authority would be only to bring actions to assail the same. (Sec. A conservator appointed by the BSP may take over without the need of first decl aring the bank insolvent. or settled liability to the BSP To do and perform such other necessary powers R EFUSAL TO M AKE R EPORTS E XAMINATION . voidable. own. Collect all monies and debts due said bank. condone. 252 SCRA 259). liabilities. To lease. agent. . 5. and Exerc ise all powers necessary to restore its viability. and except as otherwise provid . (Sec. consultant or stockholder. Bank/quasibank retains juridical personality 2. in an amount to be fixed by the court. Such power to revoke canno t extend to post-facto repudiation of perfected transactions. 34) False Statement. 4. CA. void.Page 15 of 26 and made in bad faith and the petitioner or plaintiff files with the clerk or ju dge of the court in which the action is pending a bond executed in favor of the Bangko Sentral.Any officer. OR PERMIT CONSERVATORSHIP OF A BANK OR QUASI-BANK Ground: State of continuing inability or unwillingness to maintain a condition o f liquidity deemed adequate to protect the interest of depositors and creditors. director. To take charge of the assets. LAWYERS.

fu lly disclosed to the Monetary Board. 2. But if the cont inuance in business of the bank would involve probable loss to its depositors or creditors. pres ent or pecuniary or material benefit for himself or another. 4. proceedings for receivership and liquidation shall be pursued (Sec. borrowing from any institution subject to supervision or examination by the Bang ko Sentral shall be prohibited unless said borrowings are adequately secured. 29). directly or indirectly requesting or receiving any gift. the Congress or any g overnment office or agency authorized by law. To adopt. When the MB is satisfied that the institution can continue to op erate on its own and the conservatorship is no longer necessary. from any institutio n subject to supervision or examination by the Bangko Sentral. information relating to the condit ion or business of any institution. revealing in any manner.ed in this Act. alter and use a corporate seal which shall be judicially noticed To enter into contracts RECEIVERSHIP OF A BANK OR Notes of hotjurist in foro conscientiae . 27) 2. 2. (Sec. CORPORATE POWERS OF THE BSP 1. Termination: 1. 3. except under orders of the court.

creditors. Willful violation of a cease and desist order that has become final. The purpose of the scheme is to protect the depositors. Inability to continue business without involving probable losses to its depos itors or creditors. 1993). Grounds: Under NCBA 1. the Monetary Board issued a Resolution ordering the closu re of TSB. Plainly. GBL) review. Insufficiency of realizable assets to meet its liabilities. Reason: Stockholders owning a majority of the shares are expected to be more objective in determining whether the resolution is plai nly arbitrary and issued in bad faith (Sec. No. GBL) Facts: Based on the financial reports submitted to the Central Bank. Thu s. stock holders and general public (Central Bank vs. Banks ± PDIC 2. 2. which state s that the Financial condition of The Triumph Savings Bank (TSB) is one of insol vency and its continuance in the business world involve probable loss to its dep ositors and creditors. This ³close now and hear later´ scheme is grounded on practical and legal consideration to prevent the unwarranted dissipation of the bank¶s asset and as a valid exercise of the police power to protect the depositors. Receiver: 1. the legislature coul d not have intended or authorize ³no prior notice and hearing´ in the closure of the bank and at the same time allow the suit to annul it on the basis of the absenc e thereof. CA. or 4. Under GBL 1. but not including inability to pay those caused by extraordinary demands induced by financial panic in the b anking community. NCBA. Suspension of payment of deposit liabilities continuously for more than 30 da ys (Sec. Only stockholder s representing the majority of the capital stock of a bank have the personality to file a petition for certiorari to be filed within 10 days from receipt by the board of directors of the institution of the order directing receivership. GBL) 3. Inability to pay liabilities as they become due in the ordinary course of business. 244 SCRA 395 [1995]). CA. Court of Appeals. Notification to the BSP or public announcement of a bank holiday ( Sec.R. 53. liqu idation or conservatorship. G. 53. placing it unde r receivership and appointing Ramon V. forbidding it from doing business in the Philippines. Taiaoqi as receiver. The TSB filed a comp laint assailing the resolution on the ground of lack of prior notice and hearing 3. (Sec. stockh olders and the general public. it is unmistakable that the assai led actions should precede the filing of the case. 56. CASE DIGEST Central Bank of the Philippines vs.Page 16 of 26 QUASI-BANK/CLOSURE Receivership is equivalent to an injunction to restrain the bank in any way. Quasi-banks ± Any person competence in banking or finan ce . Central Bank vs. 30. 30) Issue: Whether or not a Monetary Board Resolution be annulled on the ground of l ack of prior notice and hearing. March 30. involving acts or transactions which amount to fraud or a dissipa tion of the assets of the institution (Sec. 220 SCRA 536 2. C A. 76118. the appointment of a receiver operates to suspend the authority of the bank a nd of its directors and officers over its property and effects (Villanueva vs. creditors. Persistence in conducting business in an unsafe or unsound manner. When it provides for the filing of the case within 10 days after the re ceiver takes charge of the assets of the bank. Ruling: Section 29 of the Central Bank Act does not contemplate prior notice and hearing before a bank may be declared to stop operations and placed under recei vership. 220 SCRA 536).

Note the di stinctions between rehabilitation and liquidation.of recognized Functions: 1. General powers of a receiver 3. Determination ASAP but not later than 90 days. Immediate gathering and taking charge of all the assets and liabil ities of the institution and administering them for the benefit of creditors 2. 29 of the Central Bank Act does not contemplate prior notice and hearing be fore a bank is placed under receivership. MANDATORY REQUIREMENTS FOR BANK CLOSURE Examination by the appropriate BSP department as to the condition of the bank Notes of hotjurist in foro conscientiae . HEAR LATER SCHEME Sec. It is enough that such action is made the subject of a subsequent judicial 1. w hether the institution should undergo rehabilitation or liquidation. CLOSE NOW.

the liquidation plan shall be adopted by the Monetary Board. 3. However. 3. Payment shall be in accordance with the rules on concurrence and preference o f credits. The condition of the bank is one of insolvency or that its continuan ce would involve probable loss to its depositors and creditors. Checks representing demand deposits do not have legal tender power and th eir acceptance in the payment of debts. 4.Page 17 of 26 2. 1-Peso. 2. Notes and coins called in for replacement shall remain legal tender for a period of one year from the date of call. Th e assets under receivership or liquidation shall be deemed in custodia legis in . 2. Examination shows that the condition of the bank is one of insolvency Director s hall inform the MB in writing of such fact If the MB shall find the statement of the department to be true. 30). they shall cease to be legal tender during the following y ear or for such longer period as MB may determine. with the proper RTC. 2. After the expiration of this latter period. 2006) BSP Authority to Replace 1. After that period. He shal l convert the assets of the institution to money for the purpose of paying the d ebts of the institution (Sec. Procedure: 1. a check which has been cleared and credited to the a ccount of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited to his account (Sec. MB. 2. is at the optio n of the creditor.00 (Circular No. the MB shall determine and confirm if the bank is insolvent. A determinati on by the MB that the bank cannot be rehabilitated. Notes for any series or denomination ± More than 5 years old Coins ± More than 10 years old Rules: LIQUIDATION Grounds: 1. MONETARY STABILIZATION EFFECTS OF APPOINTMENT OF RECEIVER/ LIQUIDATION 1. a petition for assistance in the liquidation of the institution pursuant to a liquidation plan adopted by the PDIC for general application to all closed banks. 537. shall order the liquidation of the bank. 57). 60). 3. it shall appoint a receiver of the assets and liabil ities of the bank (Banco Filipino vs. 5. and if public inter est requires. In case of quas i-banks.000. Regular courts have no jurisdiction over actions filed by claimants a gainst an insolvent bank (Ong vs CA. both public and private. 204 SCRA 519 [1991]). 1. Suspension of operation 2. Receiver shall file ex parte. the notes and coins which have not b een exchanged shall cease to be a liability of BSP and shall be demonetized (Sec . 253 SCRA 105). 2. Within 60 days. 5-Peso and 10-Peso coins: In amounts not exceeding P1. 1.00 25 centavo coin or less: In amounts not exceeding P100.

If BSP wants to decrease money supply . Bank is not liable to pay interest on deposits durin g the period of suspension of operation (Overseas Bank vs. If BSP wants to increase mone y supply. Open Market Operations (Sec. vs. BSP will raise reserve requirement Notes of hotjurist in foro conscientiae . 549 [1928]) Deposits do not become preferred credits (CB vs. If BSP wants to increase money su pply. 94 ) . attachment or execution (Sec. 83) (Rediscounting) a. 5. CA. 90) a. levy. Morfe. it opens the rediscount window by reducing interest on loans b. it sells government securities 3 IMPORTANT TOOLS TO ACHIEVE PRICE STABILITY 1. 3. it buys government securities b. both public an d private (Sec. if the volume of money is high.the hands of the receiver and shall be exempt from garnishment. 30). Loans to Banks (Sec. If BSP wan ts to decrease money supply. Reserve Requirements (Sec. CFI.where a certain percentage of the deposit is set aside and cannot be lent ou t a. 52) Legal tender power of coins 3. it closes the rediscount window or charges very hig h interest rates for rediscounted notes 4. 113 SCRA 778 [198 2]) The corporation retains its legal personality (Teal Motor Co. 20 SCRA 507 [1967]) 2. 51 Ph il. LEGAL TENDER All notes and coins issued by the Bangko Sentral are fully guaranteed by the Rep ublic and shall be legal tender in the Philippines for all debts.

Garnishment is part of the Coverage: All d eposits of whatever nature with banks or banking institutions in the Philippines . Since the required reserves are imposed primaril y to control the volume of money.A. SECRECY OF BANK DEPOSITS LAW (R. On orders of the MM Regiona l Trial Court. Garnishment (2004) CDC maintained a savings account with CBank. BAR QUESTION: Banks: Secrecy of Bank Deposits. added by analogy i n PNB vs. PROHIBITIONS ON THE BSP 1. 3. CDC's complaint is not meritorious. 2) Rules: 1. the Sheriff garnished P50. or any other order or process of any court or agency (Sec. either dire ctly or indirectly. 3019. 2. SUGGESTED ANSWER No. No. 1405) Purposes: 1. the Bangko Sentral shall not pay interests the reon (Sec. MO. To discourage private ho arding so that banks may lend such funds and assist in the economic development PROHIBITED ACTS: 1. 49 SCRA 355 (1973) that peso deposits may be garnished and the depositary bank can comply with the order of garnishme nt without violating the Law on the Secrecy of Bank Deposits. execution process. of whatever nature. NIRC . garnishment. wit h the banks in the Philippines including investments in bonds issued by the Gove rnment. B. Examination and inquiry or looking into all deposits. Execution is the g oal of litigation as it is its fruit.Page 18 of 26 b. including investments in bonds issued by the Government of the Philippines. if the volume of money is low. To encourage people to deposit in banks 2. and It shall not engage in development banking and financing (Sec. and sha ll not participate in the ownership or management of any enterprise. Upon serv ice of the notice of garnishment on the bank where the defendant deposited funds . Deposits maintained with the Bangko Sentral as part of the reser ve requirements shall be exempt from attachment. it s political subdivisions and its instrumentalities. to satisfy the judg ment in favor of his creditor.A. such funds become part of the subject matter of litigation. It was he ld in China Banking Corporation v. Gancayco.000 of his account. (5%) Is CDC's complaint meritorious or not? Re ason briefly. 103). In cases where the money deposited or invested is the subject matter of the liti gation. 94). A decedent to determine his gross estat . The required reserves of each bank shall be proportional to the vol ume of its deposit liabilities. No increase of more than 4% point within 30day period. From other laws 1. 4. It shall not acquire shares of any kind or accept them as collateral. 128). No. 2. 15 SCRA 91 [1965]). 4. Anti-Graft and Corrupt Practices Act cases (R. reserve requirement is reduced. Ortega. (Sec. CDC complained that the garnishment violated the Law on the Secrecy of Bank Deposits because the existence of his savings acc ount was disclosed to the public.Inquiry by the Commissioner of In ternal Revenue into bank deposits of: a. Any disclosure by any official or employee of any bank to any unauthoriz ed person of any information concerning the said deposits.

6[f]. NIRC). EXCEPTIONS: A. when it has been 2. or office. Upon order of a competent court in cases of bribery or dereliction of duty of public official s. He must file a wri tten waiver of his privilege under RA 1405 or other general or special laws (Sec . N O . 3. governmental bureau. 2. A taxpayer who has filed an application for compromise of his tax liabilit y by reason of financial incapacity to pay his tax liability. inquired or looked into by any person.e. 1405 Upon written permission of the depositor.A. GENERAL RULE: The deposits covered by law are considered as of an absolutely con fidential nature and may not be examined. F ROM R. 2. In cases of impeachment. Notes of hotjurist in foro conscientiae . Inquiry or examination by the Anti-Money Laundering Council (A MLC) of any particular deposit or investment with any banking institution or non -bank financial institution upon order of any competent court in cases of violat ion of the AntiMoney Laundering Law. 3. b. 1.

267 RPC. opened and constituted abroad b) Was there a violation of the Secrecy of Bank Deposits Law (Republic Act No. Court of Appeals. and Bank of New York.A.A. (Intengan v. 1405). Ortega. because the punitive provisions of the Secrecy of Bank Deposits Law (R. Disclosure to the Treasurer of the Philippines of dormant deposits for at least 10 years under the Unclaimed Balances Act (Act No.A. descendants.Boston Bank.Page 19 of 26 established that there is probable cause that the deposits or investments are re lated to an unlawful activity or a money laundering offense. No bank shall employ casual or non-regular personnel or too lengthy probationary personnel in the conduct of its business involving bank de posits (Sec. It has no application at all to accounts. a) Will the co mplaint filed against the directors of Hi Yielding Corporation prosper? Explain SUGGESTED ANSWER: No. disclose to any unauthorized person any information relativ e to the funds or properties in the custody of the bank belonging to private ind ividuals. except that no cour t order shall be required in the following unlawful activities: a. or any other persons (Banco Filipino Savings and Mortgage Bank vs. 6426): B. relatives. destructive arson and murder un der RPC. ev en though they are banks. SUGGESTED ANSWER: No. officer. 3936). or agent of any bank shall. 6426. OTHER LAWS RELATING TO SECRECY OF BANK DEPOSITS A. 2002) 2. 11. Purisima. garnishment. No.4). Illegally acquired property exten ds to cases where property is concealed by being held by or recorded in the name of respondent¶s spouse. 8791): 1. Dollar deposits in sever al banks overseas . The cor poration claimed that the said officers were guilty of advancing their personal interests to the prejudice of the corporation. 6426). c.S. For their part. The officers alleged that t heir bank deposits were illegally disclosed for want of a court order. No. February 15. are not a pplicable to FCDU accounts. Comprehensive Dangerous Drugs Act of 2002 (RA No . . b. the officers filed a criminal complaint against the directors of Hi Yielding Corporation for violation of Republic Act No. including the statutory exemptions provided therein.R. No. Hijacking and other violations under RA 6235. No. BAR QUESTION: BANKS: APPLICABILITY: FOREIGN CURRENCY DEPOSIT ACT & SEC RECY OF BANK DEPOSITS (2005) Hi Yielding Corporation filed a complaint against f ive of its officers for violation of Section 31 of the Corporation Code. 55. 8 of RA 9194) 4. Extends confidentiality to f oreign currency deposits. No. Aside from documents and contracts. including its punitive provisions. 9160 as amended by Sec. R. the corporation also submitted in evidence records of the officers· U. refers to foreign currency deposits accounts constituted within the Philippines. 55[b]). 161 SCRA 576). the provisions of existing laws shall prevail (Sec. or any other entity. 49 SCRA 355). Including those perpetrated by terrorists against non-combatant persons and similar targets´ (Sec. ascendants. Kidnapping fo r ransom under Art. C. even when constituted locally. but the law contains only one ground authorizing exami nation: upon written permission of the depositor.A. without court order. Any disclosure is purely incidental to the execution process (China Banking Corporation vs. employee. corporations. Outsourcin g of inherent bank functions Money-market placement is not covered by RA 1405 because it is not deposited in the bank. otherwise known as the Foreign Currency Deposit Act of the Philippines. 1405)? Explain. and that such deposits were not even the subject of the case against them. 9165). Foreign Currency Deposit Act (R. and that they were grossly neglig ent in handling its affairs.A. 128996. No director. Bank of Switzerland. General Banking Law of 2000 (R. provided that with respect to bank deposits. because the Foreign Currency Deposit Act (R. No. G.

3.A. New Central Bank Act (R. No. 25) E. Its pur pose is merely to secure information as to the name of the depositor and whether or not the defendant had a deposit in said bank. 9160) P rovides for another exception to confidentiality. 7653): 1. Periodic and special examinations by the BSP (Sec. Garnishment of bank deposit of judgment debtor does not violate RA 1405. only for purposes of REQUISITES FOR IN-CAMERA INSPECTION OF BANK DEPOSITS Notes of hotjurist in foro conscientiae . It was not the intention of the legislature to place bank deposits beyond the reach of execution to satisfy a final judgment. No. DOSRI loans 2. which is applicable to both pe so and foreign currency deposits.A. Anti-Money Laundering Act (R. D.

An oral or implied authorization does not suffice. the insurance com pany wanted to determine how the defendant had applied the proceeds of the check . 3. Basis for this ruling was that the inquiry wou ld be made in the course of an impeachment proceeding. Section 26 of the New Central Bank Act as implemented by B SP Circular No. Pending case before a court of competent jurisdiction Account mus t be clearly identified The inspection is limited to the subject of the pending litigation. 5. The trial court allowed Sun Life to examine pertinent records of the bank in w hich the check was deposited. In some cases. series of 1998. 2. Chief Justice Davide ruled tha t Clarissa Ocampo could testify on the Jose Estrada/Jaime Dichaves accounts main tained with Equitable PCIB Bank. requires a director. Desierto. the information obtained from the examination remains confidential and may be used by BSP examin ers only in legal action it may initiate involving the said deposits. W HERE F UNDS D EPOSITED ARE S UBJECT OF L ITIGATION Case Digest Onate v Hon Zeus Abrogar. officer or stockholder of a bank or their related interests to submit a written waiver of the secrecy of all his deposits of whatever nature in all banks of the Philippines in favor of the Bangko Sentral. In another case. Thus. 230 SCRA 181 Facts: Sun Life brought a col lection case to recover the proceeds of a check it had issued. the consent is involuntary because the l aw requires it. who deposited part of the remittance in a local bank. The Court struck down the argument that the examination would violate the Ban k Secrecy Law. Magsino.A. Hence. 4.Page 20 of 26 Marquez vs.R. the deposit remains confidential. 170. explaining that the examination fell within the exception ³in cases where the money deposited or invested is the subject matter of litigation. stating Section 2 of said l aw allows the disclosure of bank deposits in cases where the money deposited is the subject matter of the litigation. Impeachment In impeachment proceedings. (Mellon Bank v. Penalties Imprisonment of not more than 5 years or a fine not more than P20. A waiver o f the Bank Secrecy Law is also required in case of loans secured by a hold-out o r an assignment of certificates of time deposits. 1405 VIS-À-VIS POWER OF THE BSP TO CONDUCT PERIODIC AND/OR SPECIAL EXAMIN ATIONS (SEC. June 27. However. Mellon Bank remitted $1 million rather that an intended $1.000 or both. No. The inspection must cover only the account identified in the pending ca se. in the discretion of the court. on the examination of a person whose property has been attached and person indebted to him or controlling his propert y. Thus. bu t rather a method by which Sun Life could trace the proceeds of the check that i t paid to the petitioners. . Manual of Regul ations for Banks). GBL & SEC. NO. Viray believe that the general rule still applies. Aquino and Prof. 2001 1. 190 SCRA 633. The bank personnel and account holder must be present during the ins pection. When per sonnel of the depositary bank testified on the bank deposits. (Section X315. over the objections of the defense that this wo uld violate the Bank Secrecy Law. the defense moved to strike out the testimonies of the depositary bank¶s witnesses. The Supreme Cour t allowed their testimonies to remain on the record. This consent may be giv en voluntarily. R. if he applies for a DOSRI loan. Ruling: The Supreme Court held that the examinatio n was authorized by Section 10 of Rule 57. 4.´ The C ourt added that the examination of bank records was not a fishing expedition. NCBA) Prof.000 to the recipient. W RITTEN P ERMISSION OF DEPOSITOR A bank may allow an inquiry into a deposit with the written consent of the depos itor. G. however. 135882. 25. the impeachment court may inquire into bank deposits. during the impeachm ent proceedings against former President Estrada.

children and friends of a special age nt of the Bureau of customs accused of having Notes of hotjurist in foro conscientiae . and other persons as we ll. 1405 by providing an additional exception t o the rule against disclosure of band deposits. In another case. 7 SCRA 10 (1963). ascendant. (Banco Filipino v. the Supreme Court expanded the exception under the Anti-Graft L aw. Gancayco. The only conclusion possible is that Section 8 of the Anti-Graft Law is intended to amend Section 2 of Republic Act No. the Court declared as proper the production by subpoena duces tecum of bank records of tr ansactions by or in the names of the wife. Bank of PI. descendants and relatives. Hon. This overturned an earlier case decided by the High Court where it held that a prosecution under the AntiGraft Law was not embraced within any of the except ions to the Bank Secrecy Law that would allow disclosure by a bank of informatio n concerning a deposit. 161 SCRA 576 (1988).´ (PNB v. when it allowed an examination not only of the accused¶s deposits. Here.UNEXPLAINED WEALTH (RA3019) Although the Bank Secrecy Law did not include cases covered by the Anti-Graft La w among the exceptions. the Supreme Court held that they should be included. but also th ose of his spouse. Fidel Purisima. (Tatalon Bario Council v. 15 SCRA 91 (196 5).

Desierto. Is the opposition of GP and the banks valid? Explain. is unwarranted in the light of t he provisions of the statutes in question. Indeed. and if the existence of the deposit is disclose d. GP is not a public offi cial. 1405 does not pre clude its being garnished to insure satisfaction of a judgment. Crimes of the House of Representatives. . Subpoenaed to attend the investigation were officers of certain identified banks with a directive to them to bring the reco rds and documents of bank deposits of individuals mentioned in the subpoenas. Garnishment of Bank Deposit In China Banking Corporation v. does not violate the Bank Secrecy Law. as amended by R. there is no real inquiry in such a case. 93 SCRA 452 (1991). 359 SCRA 772 (2001) Unclaimed Balances Law The Unclaimed Ba lances Law (Republic Act No.A. including the power to examine and have access to bank acco unts and records. It is also requires the bank to pos t a copy of the sworn statement in the bank premises. Court of Appeals. that the prohibition against examin ation of or inquiry into a bank deposit under Republic Act No. and To pursue State¶s foreign policy to extend coope ration in transnational investigations and prosecution on money laundering activ ities. this is done only after the bank shall have first communicated with the depositor at his last kno wn residence or post office address. the disclosure to evade payment of their just debts. through the expedient of converting their assets into cash and depositing the same in a bank. issue subpoena and subpoena duces tecum and take testimony in any inves tigation or inquiry. or his spouse and unmarried children. ANTI-MONEY LAUNDERING ACT OF 2001 (R. To protect and preserve the integrity and confidentiality of bank a ccounts. SUGGESTED ANSWER: Yes.´(Phil. The opposition is valid. to ensure that the Philippines shall not be used as a site for unlawful money laundering activities. However. in the illegal activities o f suspected gambling and drug lords. even if ordered by the C ourt. and would make available to persons i n government who illegally acquire property an easy and fool-proof means of evad ing investigation and prosecution. Upon Order of the Ombudsman Although Section 8 of the law that created t he Office of the Ombudsman expressly granted the Ombudsman the power to ³administe r oaths.( Marquez v. all they would have to do would be to simply place the property in the possession or name of persons other than their spouse and unmarried children.´ the Supreme court held that the Ombudsman could not inquire int o bank deposits until there was a pending case in court involving the deposits. The investigation does not involve one of the exceptions to the prohibitio n against disclosure of any information concerning bank deposits under the Law o n Secrecy of Bank Deposits. Court of Appeals. This is an absurdity that we will not ascribe to the law makers.Page 21 of 26 allegedly acquired property manifestly out of proportion to his salary and lawfu l income. 9194) Purposes: 1. No. am ong them GP. which was conducting a congressional inv estigation ´in aid of legislationµ on the involvement of police and military personn el. 3936) requires each bank to file a sworn statement with the Treasurer of the Philippines stating the deposits that the bank holds i n the names of persons known to be dead or who have not made deposits or withdra wals during the preceding ten years or more. Said the court: ³It is clear from the discussion of the conference commi ttee report on x x x Republic Act. 1405. and possibly even of local government officials. The Court explained: To sustain the petitioner¶s theory. and restrict th e inquiry only to property held by or in the name of the government official or employee. 9160. Such a disclosure of the deposits and the d epositors. The Committee conducting the investigation is not a competent court or the Ombudsman authorized under the law to issue a subpoena fo r the production of the bank record involving such disclosure. (193 SCRA 452 (1991) the Supreme Court held that the garnishment of a bank deposit does not violate the Bank Sec recy Law. GP and the banks opposed the production of the banks· records of depo sits on the ground that no such inquiry is allowed under the Law on Secrecy of B ank Deposits (RA 1405 as amended). Commercial & International Bank v. No.A.

There is no underlying legal or t rade obligation Notes of hotjurist in foro conscientiae . Secrecy of Bank Deposits (2000) GP is a suspected Jueteng l ord who is rumored to be enjoying police and military protection.2. where any of the following circumstances exists: 1. Banks Non-banks Quasi-banks Trust entities All other institutions. within one banking day. Covered Entities: 1. The envy of ma ny drug lords who had not escaped the dragnet of the law. 3.0 00. BAR QUESTION: Banks. 4. GP was summoned to a h earing of the Committee on Racketeering and Other Syndicated SUSPICIOUS TRANSACTIONS: Transactions with covered institutions regardless of the amounts involved. 5. 2. their subsidiaries and affiliates supervised or regulated by the BSP COVERED TRANSACTION: Transaction. in cash or other equivalent monetary instrument in excess of P500.

Subsequently. 1. BAR QUESTION: BANKS. Any circumstance relating to the transaction which is observed to deviate from t he profile and/or the client¶s past transactions with the covered institution Tran saction is in any way related to an unlawful activity or offense under this Act that is about to be.Page 22 of 26 2. Inc. AMLC charged him with violation of the Anti-Money Laundering Law. He has never been charged or convicted of any crime. AMLC (2006) Rudy is jobless but is reputed to be a Jueteng operator. unless extended by the court. the company reported his purchases to the Anti-Money Laundering Council ( AMLC). 7. he was charged in court for violation of t he Anti-Money Laundering Law. performs or fails to perform any act as a result of which he facilitates the offense referred to in number 1 above. Client is not properly identified Amount involved is not commensurate with the b usiness or financial capacity Taking into account all known circumstances. 3. b. Upon request of the AMLC. or relates to. SECRECY OF BANK DEPOSIT. Any person knowing that any monetary instrument or property rep resents. transac ts or attempts to transact said monetary instrument or property. Can Rudy move to dismiss the case on the ground that he has no criminal record? (2. Since he does not have any visibl e job. Any person knowing that any monetary instrument or property involves the proceed s of any unlawful activity. involves. 4. only: a. The Court of Appeals may issue a freeze order. . upon ex parte application of AMLC. the proceeds of any unlawful activity. thereby mak ing them appear to have originated from legitimate sources. Thereafter. It is committed by t he following: 1. it ma y be perceived that the client¶s transaction is structured in order to avoid being the subject of reporting requirements under the Act J URISDICTION : All cases: RTC Public officers and private persons in conspiracy with them: Sand iganbayan 5. which shall be effective immediat ely and for a period of 20 days. He maintains several bank accounts and has purchased 5 houses and lots f or his children from the Luansing Realty. and after determination that probable cause exists that any monetary instrument or property is in any way related to an unlawful a ctivity. the bank disclosed to it Rudy's bank deposits amo unting to P100 Million. MONEY LAUNDERING: A crime whereby the proceeds of an unlawful activity are transacted.5%) 2. is being or has been committed Analogous transactions to an y of the foregoing P OWER TO F REEZE A CCOUNTS The power of the AMLC to freeze accounts has been deleted under RA 9194 6.

± Covered institution shall report to the AMLC all covered and suspic ious transactions within 5 working days from the occurrence thereof. 3. Customer Identification ± Covered institutions shall establish and record the t rue identity of its clients based on official documents. are made to appear as having originated from legit imate sources. and requires no previous conviction for the unlawf ul activity (See also Sec. Under the Anti-Money Laundering Law. The money laundering crime is separate from the unlawful activity of being a Jueteng operator. Rudy would be guilty of a "money laundering crime" committed when the proceeds of an "unlawful activi ty. With resp ect to closed accounts. Any person knowing that any monetary instrument or property is required under th is Act to be disclosed and filed with the AMLC fails to do so. 2. require a syst em of verifying their legal existence and organizational structure.3.All records of all transaction of covered institution shall be m aintained and safely stored for 5 years from the dates of transaction. s well as th e authority and identification of all person purporting to act on their behalf. Anti-Money Laundering Act of 2001). shall be preserved and safely stored for at least 5 y ears from the dates when they were closed. 3. SUGGESTED ANSWER: No. P REVENTION OF M ONEY L AUNDERING 1." like Jueteng operations. Notes of hotjurist in foro conscientiae . unless the Supervising Authority prescribes a longer period not exceeding 10 working days. Reporting of Covered and Suspicious T ransactions. account files an d business correspondence. the records on customer identification. Record Keeping. They shall maintain a s ystem of verifying their clients and in case of corporate client.

Hence. SUGGESTED ANSWER: Yes. As Luansi ng Realty.impairment clause. PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC) ACT (R.5%) authority to examine any bank deposits. Ca n Luansing Realty. Recommend Measures to Prevent the Occurrence of Similar A ttempts At a Violent Seizure of Power and for Other Purposes. To create a government-owned entity. pre-ne ed companies and other entities administering or otherwise dealing in currency. Inc. hence it is no t a covered institution under Section 3 of the Anti-Money Laundering Act. und er investigation by the Commission. Inc. 9302) Purposes: 1. it has an obligation to deliver titles to Rudy. This is one of the exceptions to the Secrecy of Bank Deposit Act. The bank being specified as a "covered institution" under the AntiMoney Laundering Law. 4. expressly or impliedly. 3. securities dealers and brokers.000 per depositor. commodities or financial derivatives are covered institutions. In case of bank closures. Inc. provides that the . may not use the Anti-Money Laundering Act to refuse to transfer to t he buyer ownership of the houses and lots. Rudy sold the houses and lots to a friend. when the Commission has reasonable ground to believe that said deposi ts. To raise funds for his defense.Page 23 of 26 2. by a subsequent law. To insure the dep osit liability of banks in an account up to P250. trust or investment funds. or even repealed. Inc. or banking tr ansactions in the name of and/or utilized by a person. did the bank violate any law? (2. insurance companies. or amended (such as by providing further excep tions therefrom). in any bank or banking institution in the Ph ilippines. therefore. Luansing R ealty. is a real estate company.5%) PHILIPPINE DEPOSIT INSURANCE CORPORATION F UNCTIONS : A. Does the above provi sion not violate the Law on Secrecy of Bank Deposits (RA 1405)? SUGGESTED ANSWER : The Law on Secrecy of Bank Deposits is itself merely a statutory enactment. SECRECY OF BANK DEPOSITS (1991) The law (RA 6832) creat ing a Commission to conduct a Thorough Fact-Finding Investigation of the Failed Coup d·etat of Dec 1989. A. the PDIC. the bank did not violate any law. BAR QUESTION: BANKS. trust or investment funds. Deposits are insured up to a m aximum coverage of P250. Inc. natural or juridical. it may not invoke this law to refuse delivery of the titles to Ru dy. 2. the police power of the State is superior to the non. Only b anking institutions.5%) SUGGESTED ANSWER: No. RA 6832. creating a commission to conduct an investigat ion of the failed 1989 coup d·etat and to recommend measures to prevent similar at tempts to seize power is a valid exercise of police power. In disclosing Rudy's bank accounts to the AMLC.. is not a covered institution under Section 3 of the Anti-Money L aundering Act. Supposing the titles of the houses and lots are in possession of the Luansing Realty. an d it may. Even if it did. the PDIC p rocesses and services claim for insured deposits. without thereby violating any law. is obliged to re port to the AMLC covered and suspicious transactions. is it under obligation to deliver the titles to Rudy? (2. Insurance The PDIC assesses and collects insurance assessments from member-ba nks to insure member-banks¶ deposit accounts. or banking transactions have been used in support or in furtherance of the objectives of the said coup d·etat. SUGGESTED ANSWER: Luansing Realty. be compelled to transfer to the buyer ownership of the h ouses and lots? (2. be modified.000 for every single depositor of each bank irrespective of the number of accounts therewith. The Secrecy of Bank Deposits Act did not amount to a contract between the depos itors and depository banks within the meaning of the non-impairment clause of th e Constitution.

has been restored. Bank Rehabilitation The PDIC may grant financial assistance to distressed ban ks if it is proven to be a less costly alternative than closure. C. with prior approval by the Monetary Board. Notes of hotjurist in foro conscientiae . Bank Examination Under the new law.Commission may ask the Monetary Board to disclose information on and/or to grant B. PDIC's authority to examine its member ba nks.

the net amount due to any depositor for deposits in an insured bank. Trust funds and safety deposit boxes are not covered.000 per depositor. the RSB is sued 13 certificate of time deposit which was insured with the PDIC. Cash b. 15012. Transferred deposit ± A depo sit in an insured bank made available to a depositor by the PDIC as payment of t he insured deposit of such depositor in a closed bank and assumed by another ins ured bank. No. The bank fa iled to pay the corresponding amount of the time deposit on its maturity date du e to insolvency and advised the plaintiffs to file a claim with the PDIC. Insured deposits The net amount due to any depositor for deposits in an insured bank. immediately physically takes over the closed bank. 62 Phil. less any part thereof which is in excess of P250. Receivership of closed banks Once a bank is ordered closed by the Monetary Bo ard (MB) of the Bangko Sentral ng Pilipinas.00 per deposit (RA 9302) Conditio n precedent for entitlement to payment: Filing of claim within twenty-four month s from order of closure Manner of payment: a. Instead of paying the promissory notes and checks. Liquidation of closed banks After it is determined that the closed bank can not be rehabilitated. 000. But th e PDIC refused to pay the claim for it is not included in the list of duly recor ded liabilities of the RSB. 3519 and statements in the certificate that the same are insured by PDIC are not binding upon the latter. E. Receivership is the sta ge within which the PDIC manages the affairs of the closed bank and preserves it s assets for the benefit of creditors. Thus. Transferred deposits A deposit in an insured bank made available to a depositor by the PDIC as paymen t of the insured deposit of the depositor in a closed bank and assumed by anothe r insured bank. 2. Issue: Whether or not the PDIC is liable for the pla intiffs¶ claims. Effect of payment by the PDIC to the depositor of his insured deposit : a. After deducting offse ts Consistent with the rulings in Gullas vs. In no case shall insured deposit exceed P250. July 22. Discharges the PDIC from further liability b. G. . Ruling: The fact that the certificate state that the certificates are insured by PDIC does not ipso facto make the latter liable for the same sho uld the contingency insured against arise. after de ducting unpaid loans and other obligations of the depositor to the closed bank. 519 and Republic vs.000. INSURANCE FUNCTION 1. losses due to a bank robbery are not cov ered. Subrogates the PDIC to all th e rights of the depositor against the closed bank to the extent of such payment. the PDIC is designated as statutory receiver. Liquidation refers to the recovery and conversion of assets into ca sh for distribution to all creditors in accordance with the order of creditor pr eference pursuant to law The plaintiffs invested in the money market placement with the Premier Financing Corporation (PFC) but when they went to PFC to encashed the checks and promisso ry notes corresponding to their investment the PFC referred them to the Regent S avings Bank (RSB). The deposit liability of the PDIC is determined by the provisions of R. Nature: Compulsory insurance on all bank deposits Coverage: ³Insured deposit s´ . CA. after deducting offsets.A.Page 24 of 26 D. PNB. Amount of insurance: Maximum of P250. Specific risk in sured against: Bank closure only. The PDIC upon receipt of the MB resolution ordering the closure of a bank.R. 1975 recognizing the debtor-creditor relationship o f the bank and the depositor. set-off takes place ipso jure with respect to the depositor¶s bank deposit and his matured loan with the bank. the PDIC shall recommend the liquidation of the assets of the closed bank. 3.

the deposit liabil ity of the PDIC is determined by the provisions of RA 3519 (PDIC vs. Facts: Notes of hotjurist in foro conscientiae .4. 5. 283 SCRA 462 3. the balance ma y still be recovered from the PDIC after the final liquidation of the remaining assets of the closed bank. 6. CA. SPECIAL RULES 1. 283 SCR A 462). Capacities: individual account. not the depositors. The insurance premiums are to be paid by the insured bank. even though in sev eral branches. joint ³and´ account. CA. 2. are to be added together. provided that they are maintained in th e same capacity and the same right for his benefit either in his own name or in the name of others. Accounts in a bank. Case Digest PDIC vs. PDIC liability is on a per bank basis. I n case the depositor¶s account is more than the insurance coverage. joint ³and/or´ account. 7. The fact that a bank instrument provides that the certificate is insured by the PDIC does not ipso facto make the latter liable for the same.

6426) FOREIGN CURRENCY DEPOSIT Governed by R. 1389. 3 SCRA 851 [1961]). c. No. the maximum insured deposit shall be divided int o as many equal shares as there are individuals. PESO DEPOSIT Governed by R. Money. UN C L AI ME D BAL AN C E S L AW (R . EXCEPTION: Salvacion vs. b. Demand drafts cannot be escheated but telegraphic notes can be escheated (Republ ic vs.A. Securi ty. 9 of RA 6426 (µAn Act Instituting a Foreign Currency Deposit System in the Ph ilippines. as amended. If the account is held by a juridical person or entity jointly with one or mo re natural persons. 3.000.D. 2. juridical persons or entities. No. Under CB Circular No. No. No. b. No. 1405) Note: The PDIC law is not applicable to Offshore Banking Units (P. If the account is held jointly by two or more natural persons. or tru st corporation.A.A. LEGAL CONSEQUENCE The unclaimed balances may be subject of escheat proceedings. There must be a claim or deposit of: a. who is . depositors are entitled to receive payment in the same currency in which the ins ured deposit is denominated. shall likewise be subject to the maximum insured deposit of Two hundred fifty t housand pesos (P250. b. 1034). Bullion. garnishment. CB (278 SCRA 27) Sec. after proper publi cation and the depositors still do not lay claim to them.Page 25 of 26 4. and The credit or deposit is in favor of a person: a. Foreign currency deposits are exempt f rom taxes except the interests OTHER FEATURES: 1. or by two or more juridical persons or entities. and ot her court order and processes. mandate that foreign currency deposits shall be i nsured under the provisions of RA 3591. N O . 6426 1 exception + 1 provided unde r AMLA (R. unless a different sharing is stipulated in the document of deposit. the maximum insured deposit shall be presumed to belong enti rely to such juridical person or entity: Provided. 1389. juridical persons or entities. Non-payment of insurance premiums Co ntinued engagement in unsafe and unsound banking practices FOREIGN CURRENCY DEPOSIT ACT (R. A. Authorized banks may adopt a numbered account system for recording and servic ing deposits in nonchecking accounts The credit or deposit must be with a bank. 9160) GENERAL RULE: Exempt from attachment. 1993. and for Other Purposes") and Sec. 2. FNCB. dated August 13.A. building and loan association. 3 93 6) ELEMENTS OF UNCLAIMED BAL ANCES 1. a. 2. No.00). or other evidence of indebtedness. whether owned by t he same or different combinations of individuals. 1405 4 exceptions + exceptions found in specia l laws May be garnished or attached (not a violation of R. 79 of Central Bank (CB) Circular No . Authority to terminate insured status 1.A. That the aggregate o f the interests of each co-owner over several joint accounts. d. further.

it shall not apply to FCD¶s already made or existing at the t ime of the issuance of such new regulation or enactment. the SC allowed garnishment of such deposits of a transien t American tourist arising out of a heinous crime committed against a Filipino m inor since to hold otherwise would result to injustice to a citizen perpetrated by a foreigner Notes of hotjurist in foro conscientiae . or who has not made further deposits or withdrawals during the preceding 1 0 years or more. In a sui generis case. In the event a new enactment or regulation is issued decreasing the rights gr anted under the law.dead. 3.

NO. The differe nce between the amounts set forth under clauses 1 and 2. fees and service charges. 4. Under Sec. 8183) All monetary obligations shall be settled in the Philippine currency which is le gal tender in the Philippines. without specifying the amounts due on each portion thereof would be insufficient and unacceptable. 5. 4. if already paid. vs. The finance charge expressed in terms of pesos a nd centavos. what is the effect of the violation on the contract? In the event of a violation of the Act. and The percentage that the finance bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation. any creditor shall furnish to each person to whom credit is extended. 3. the co nditional deed of sale which the parties executed mentioned that the total amoun t indicated therein included such finance charges. a clear statement in writing setting forth. Central Bank et al. prior to the consummation of the tra nsaction.. submit to Dana a written statement setting forth therein the . to recover the same. REPEALING LAW TO UNIFORM CURRENCY ACT (R. Nevertheless. however . et al. if any to be credited as down payment and/or trade-ins. information required by the Truth in Lending Act (RA 3765). The cash price or delivered price of the property or service required. The charges.A. The amounts. 6. 7. the latter imposed financ e charges consisting of interests. TRUTH IN LENDING ACT ( RA 3765) The law assures full disclosure by requiring the lender to give the borrower all the details regarding the transaction. 1). c) It would al low Dana to refuse payment of financial charges or. However. Dana may also initiate criminal charges against the creditor. which are paid or to be paid by such person in connection with t he transaction but which are not incident to the extension of credit.Page 26 of 26 (Salvacion. It did not. Has there been substantial compliance of the aforesaid Act? If your answer to the foregoing question is in the negative. In addition to the advertised selling price. to the extent applicable a nd in accordance with rules and regulation prescribed by the Board the following informations: 1. Note: This case does not constitute another exception. the parties may agree that the obligatio n or transaction shall be settled in any other currency at the time of payment ( Sec. *** *2'63((' BAR QUESTION: TRUTH IN LENDING ACT (1991) Dana Gianina purchased on a 36 month i nstallment basis the latest model of the Nissan Sentra Sedan car from the Jobel Cars Inc. 278 SCRA 27). b) A violation of the Truth in Lending A ct will not adversely affect the validity of the contract itself. The tot al amount to be financed. 2. The law provides that the creditor must make a full disclosure of the cr edit lost. individ ually itemized. the SC only ruled as such due to the special circumstances of the said case. what r emedies may be availed of by Dana? SUGGESTED ANSWER: a) There was no substantial compliance with the Truth in Lendi ng Act. The statement that the total amount due includes the principal and th e financial charges.

Notes of hotjurist in foro conscientiae .

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