PART IV independent appraiser on as “is where

is” basis.
INTERESTS ON DEPOSITS – Under the
AUTHORITY OF RECEIVER OVER
PDIC law, the liability to pay interest on
ASSETS – The assets of the bank pass
deposit and all other obligations as of
beyond its control when a receiver has been
closure shall cease upon its closure by the
appointed. The appointment of the receiver
Monetary Board.
suspends authority of the bank and its
officers over its properties and effects. The Note: In Fidelity Savings and Mortgage
appointment of a receiver is equivalent to an Bank v Cenzon, a banking institution which
injunction to restrain the bank officers from has been declared insolvent and
intermeddling with the bank’s properties in subsequently ordered closed by the CB of
any way. the Philippines cannot be held liable to pay
interest on bank deposit which accrued
Note: Bank under receivership – officers
during the period when the bank is actually
can no longer transact business in
closed and non-operational.
connection with the bank’s assets and
property. In the Overseas Bank of Manila v
CA and Tony Topia, what enables a bank to
a. The receiver cannot also person an
pay stipulated interest on money deposited
act of strict ownership over the
with it is that thru the other aspects of its
property of the bank under
operation it is able to generate funds to
receivership, the receiver is limited
cover the payment of such interest. Unless
to administration of the bank’s
a bank can lend money, engage in
properties.
international transactions, acquire
b. Transfer or disposition made by the
foreclosed mortgage properties or their
officer of any interest/real right over
proceeds and generally engage in other
a property of the bank under
banking and financing activities from which
receivership is invalid. The detect
it can derive income, it is inconceivable how
cannot be remedied by
it can carry on as a depositary obligated to
approval/ratification of the
pay stipulated interest. Conventional
administrator. The receiver cannot
wisdom dictated this inexorable fair and just
ratify/approve an act over which he
conclusion. And it can be said that all who
himself is bereft of authority.
deposited money in banks are aware of
ASSIGNMENT OF ASSETS – The receiver such a simple economic proposition.
shall have the authority, without need for
SUSPESION OF ACTIONS – Under the
approval of the liquidation court, to assign,
PDIC law, “except for actions pending
as payment to secured creditors, the bank
before SC, actions pending for/against the
assets serving as collaterals to their
closed bank in any court/quasi-judicial body
respective loans up to the extent of the
shall, upon motion of the receiver, be
outstanding obligations, including their
suspended for a period of not exceeding
interest as of date of closure of the bank, as
180 days and referred to mandatory
validated by the receiver.
mediation. Upon termination of mediation,
Note: The valuation of the asset shall be the case shall be referred back to the
based on the prevailing market value of court/quasi-judicial body for further
the collateral as appraised by an proceedings.
Note: If there is already a final decision
against the closed bank – the execution
and enforcement of a final decision of a
court other than the liquidation court against
the assets of a closed bank shall be stayed.
The prevailing party shall file the final
decision as a clam with the liquidation court
and settled in accordance with the Rules on
Concurrence and Preference of Credits
under the CC and other laws.
NOTICE OF CLOSURE AND TAKEOVER
ACTIVITIES – Section 14 of PDIC Law
provides for the rules on the takeover of a
bank.
Note: Under Section 14, “the closure of
the bank shall be deemed effective upon
the service of the notice of closure.” It is
also upon the service of notice of closure
that the liability of the PDIC for the insured
deposit accrues.
Section 14.
a. Upon the designation of the
Corporation as receiver of a closed
bank, it shall serve a notice of
closure to the highest-ranking officer
of the bank present in the premises,
or in the absence of such officer,
post the notice of closure in the bank
premises or on its main entrance.
The closure of the bank shall be
deemed effective upon the service of
the notice of closure. Thereafter, the
receiver shall takeover the bank and
exercise the powers of the receiver
as provided in this Act.
b. The receiver shall have authority to
use reasonable force, including the
authority to force open the premises
of a bank, and exercise such acts
necessary to take actual physical
possession and custody of the bank
and all its assets, records,
documents and take charge of its
affairs upon the service of the notice
of closure.
c. Directors, officers, employers or
agents of a bank hold money and
other assets of the bank in trust or
under administration or management
by them for the bank in their
fiduciary capacity. Upon service of
the notice of closure to the bank, all
directors, officers, employees or
agents of the closed bank shall have
the duty to immediately account for,
surrender and turn over to the
receiver, and provide information
relative to, the assets, records, and
affairs of the closed bank in their
possession, custody, administration
or management.
d. When the circumstances so warrant,
the local government unit and law
enforcement agencies concerned
shall, upon request, immediately
provide assistance to the receiver
during the service of notice of
closure and actual takeover
operations to ensure the orderly
conduct thereof and the security and
safety of the personnel of the
receiver and the employees of the
closed bank.
FINANCIAL ASSISTANCE - Banks that
are in danger of being closed may be
subject to Resolution under Sec 11 of
PDIC law. Law provides that when the
Monetary Board has determined that
there are systematic consequences of a
probable failure or closure of an insured
bank, the Corporation may grant
financial assistance to such insured
bank in such amount as may be
necessary to prevent its failure or
closure and/or restore the insured bank
to viable operations under such terms
and conditions as may be deemed
necessary by the MB subject to
concurrence by the MB and without
additional cost to Deposit Insurance
Fund.
SYSTEMATIC RISK – refers to the
possibility that failure of one bank to
settle net transactions with other banks
will trigger a chain reaction, depriving
other banks of funds leading to a
general shutdown of normal clearing
and settlement activity.
Note: Also means likelihood of a
sudden, unexpected collapse of
confidence in a significant portion of the
banking or financial system with
potentially large economic effects.
CLOSE NOW-HEAR LATER SCHEME
– Designation of a receiver, as well as
conservator, is vested exclusively with
the MB. The designation of a
conservator is not a precondition to the
designation of a receiver.
a. No prior hearing is necessary in
appointing a receiver. The MB may
summarily and without need for prior
hearing forbid the institution from
doing business in the Philippines
and designated PDIC as receiver.
b. It is enough that subsequent judicial
review is provided for.
c. The MB can immediately implement
its resolution prohibiting a banking
institution to do business in the
Philippines and thereafter, appoint
the PDIC as receiver. The procedure
for the involuntary closure of a bank
is summary and expeditious in
nature. Such action of the MB shall
be final and executory but may be
later subjected to a judicial scrutiny
via petition for certiorari to be filed by
the stockholders of record of the
bank representing a majority of the
capital stock.
d. There is no violation of the due
process under the present rule
requiring no prior hearing.
In the case of Central Bank of the
Philippines vs CA, under Sec 29 of
RA 265, the CB through the MB is
vested with exclusive authority to
assess, evaluate and determine the
condition of any bank, and finding
such condition to be one of
insolvency, or that its continuance in
business would involve probable
loss to its depositors or creditors,
forbid the bank or non-bank financial
institution to do business in the
Philippines and shall designated an
official of the CB or other competent
person as receiver to immediately
take charge of its assets and
liabilities.
In the case of Rural Bank of Lucena,
Inc. vs Area, a previous hearing is
nowhere required in Sec. 29 nor
does the constitutional requirement
of due process demand that the
correctness of the MB’s resolution to
stop operation and proceed to
liquidation of first adjudged before
making the resolution effective. It is
enough that a subsequent judicial
review be provided.
Note: Sec 29 does not altogether
divest a bank or a non-bank financial
institution placed under receivership
of the opportunity to be heard and
present evidence on arbitrariness
and bad faith because within 10
days from the date the receiver
takes charge of the assets of the
bank, resort to judicial review may
be had by filing an appropriate
pleading with the court.
The close now and hear later
scheme is grounded on practical and
legal consideration to prevent
unwarranted disposition of the
bank’s assets and as valid exercise
of police power to protect the
depositor, creditors, stockholder and
the general public.