Bank Secrecy

BSP is the supervisor of quasi-banks, entities and other financial institutions

BSP has authority to examine bank subsidiaries.

Before a quasi-bank can engage in operation, they must get license from BSP.

Banks- entities engaged in in the lending of funds in the form of deposits from the public.

Law requires banks to be stock corporations (only par value share); funds from public, deposits of 20 or
more personsl must comply with the minimum capital

Quasi-banks – Toyota financial services Phils. Corp

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

Trust (Prudent man rule) Section 80 General Banking Law

 A trust entity shall administer the funds or property under its custody with the diligence that a
prudent man would exercise in the conduct of an enterprise of a like character and with similar aims.
No trust entity shall, for the account of the trustor or the beneficiary of the trust, purchase or acquire
property from, or sell, transfer, assign, or lend money or property to, or purchase debt instruments
of, any of the departments, directors, officers, stockholders, or employees of the trust entity, relatives
within the first degree of consanguinity or affinity, or the related interests, of such directors, officers
and stockholders, unless the transaction is specifically authorized by the trustor and the relationship
of the trustee and the other party involved in the transaction is fully disclosed to the trustor of
beneficiary of the trust prior to the transaction. The Monetary Board shall promulgate such rules and
regulations as may be necessary to prevent circumvention of this prohibition or the evasion of the
responsibility herein imposed on a trust entity. 

Trust services vs. Banking

Banking Transactions – involves creditor-debtor r

Diligence required:

Banking is fiduciary in nature: requires high standards of integrity and performance of highest degree.

Simex International vs. CA

Depositor expects the bank to treat his account with the utmost fidelity. Bank must record every single
transaction accurately. Bank took 23 days to release amount, thus, it violated the diligence required.

Solidbank – bank is bound by negligene of its employees.

Poole-Blunden vs. Union Bank – bank wrongly advertised that area of a property zcquired through
foreclosure. Gross negligence amounting to bad faith. Sale on account of this is voidable for causal
fraud.

Doctrine of Mortgagee in good faith – mortgagee can rely on what appears on the title.
In case of banks – a higher standard is equired.

Citibank vs Sps Cabamongan – cabamongan opened a foreign currency time deposit at Citibank. Before
maturity a person claiming to be cabamongan went and pre-terminated the deposit so that the money
was taken.

Signature verification procedure – Citibank failed to detect the forged signature.

Sps Carbonell vs. Metrobank -Metrobank observed due diligence as to the forged dollar bills which were
almost true.

Kinds of Banks

Universal Bank - Metrobank, BDO

Commercial Bank - Phil. Veterans, PBCOM, Citibank

Thrift Bank

Rural Bank

Cooperative Bank

As to purpose:

Some banks have specific purposes

As to powers/functions

Only universal and CBs can create and accept demand deposits w/o separate authority from the MB.

Function of bank

Deposit

Loan

Other

Prohibited transactions

Outsourcing of inherent banking functions prohibited

Directly engaging in insurance business

Deposity function

Mutuum – bank debtor, depositor creditor

Banks can use money deposited, said amount not being held in trust for the depositor not is it being
kept for safekeeping.

Banks cannot be sued for estafa

Banks has right to compensation

Banks can offset with deposit provided loan is due and demandable.

Guingona vs. City Fiscal – David deposited amounts with the nation savings and loan assoc.

He sued the officers. Held that failure to return shall give rise only to civil liabilities.

Failure to pay the depositor is failure to pay simple loan

Unclaimed Balances Act

10 years not touched deposit, bank report, publication, forfeited in favor of bank

Loan Function

Single Borrower’s limit- bank may loan a limited amount to a single person

DOSRI Rule

-restrictions on borrowing and security arrangements; not illegal per sa

Sec. 26 New CBA

Requirements:
director, officer or stockholder who, together with his related interest, contracts a loan or any form of financial
accommodation from: (1) his bank; or (2) from a bank (a) which is a subsidiary of a bank holding company of which
both his bank and the lending bank are subsidiaries or (b) in which a controlling proportion of the shares is owned by
the same interest that owns a controlling proportion of the shares of his bank, in excess of five percent (5%) of the
capital and surplus of the bank, or in the maximum amount permitted by law, whichever is lower, shall be required by
the lending bank to waive the secrecy of his deposits of whatever nature in all banks in the Philippines.

DOSRI (exposure limit)

Rules regarding stockholding:

Banks shall issue par value stocks only

Collateral: value of collateral shall not exceed 75% of the apprised value of real property plus 60% of the value of the
improvement.

Floating interest rates; escalation clauses

Floating interest rates – refer to variable interest rate stated on a market-based reference rate agreed upon by the
parties.

Escalation clause- stipulations which allowed for the increase (as well as the mandatory decrease) of original fixed
interest rate.

Any change must be agreed upon, otherwise it will violate mutuality rule

Dragnet/blanket mortgage clause:

Unconscionable interest rate

Villanueva vs. CA
Usury has been legally non-existent and that interest can now be charged as lender and borrower may agree upon. If
unconscionable, it may be stricken down.

Mortgage:

Redemption period – natural person – 1 year from the date certificate of sale is registered with the Registry of Deeds.

Juridical person – 3 months

Requirements:

Extrajudicial foreclosure: notice, publication

Mortgage with natural person –

Mortgage with Bank – after foreclosure sale, the buyer can immediately possess the property even though the
redemption period is not finished yet.

Loans to banks for liquidity purposes

BSP may grant emergency loans to bank

Conservatorship

Bank/quasi-bank is in a state of continuing inability to maintain a condition of liquidity. 1 year period. Conservatorship.

Receivership – PDIC as statutory receiver of a bank.

NO prior hearing required to appoint receiver and close bank; enough that judicial review provided [Rule 65 Petrev.

From closure to liquidation: a bank placed under liquidation shall in no case be reopened.

Liquidation -assets of bank will be monetized to pay the creditors.

New Central Bank Act (RA 7653 as amended by RA 11211)

Art. XII, Sec. 20 1987

Sec. 3. Responsibility and Primary Objective. - The Bangko Sentral shall provide
policy directions in the areas of money, banking, and credit. It shall have
supervision over the operations of banks and exercise such regulatory powers as
provided in this Act and other pertinent laws over the operations of finance
companies and non-bank financial institutions performing quasi-banking functions,
hereafter referred to as quasi-banks, and institutions performing similar functions.
Primary Objective

Sec. 3. 

"The primary objective of the Bangko Sentral is to maintain price stability conducive to a balanced
and sustainable growth of the economy and employment. It shall also promote and maintain
monetary stability and the convertibility of the peso.

"The Bangko Sentral shall promote financial stability and closely work with the National Government,
including, but not limited to, the Department of Finance, Securities and Exchange Commission, the
Insurance Commission, and the Philippine Deposit Insurance Corporation.

"The Bangko Sentral shall oversee the payment and settlement systems in the Philippines, including
critical financial market infrastructures, in order to promote sound and prudent practices consistent
with the maintenance of financial stability.

"In the attainment of its objectives, the Bangko Sentral shall promote broad and convenient access
to high quality financial services and consider the interest of the general public."

Function of BSP

Power of BSP

Corporate power

Supervision and examination

No restraining order or injunction shall be issued by the court enjoining the Bangko Sentral
from examining any institution subject to supervision or examination by the Bangko Sentral,
unless there is convincing proof that the action of the Bangko Sentral is plainly arbitrary and
made in bad faith and the petitioner or plaintiff files with the clerk or judge of the court in
which the action is pending a bond executed in favor of the Bangko Sentral, in an amount to
be fixed by the court. The provisions of Rule 58 of the New Rules of Court insofar as they
are applicable and not inconsistent with the provisions of this section shall govern the
issuance and dissolution of the restraining order or injunction contemplated in this section.

Monetary Stability

The monetary board shall endeavor to control

Instruents of BSP Action

Determination of Exchange rate policy.

Lender of Last Resort – BSP may extend help to address problems.

BSP banker of government

Prohibitions on BSP Personnel

Cannot be an offier, director, officer, lawyer of a bank on which they exercise authority
Examination and fees: examine the books of the banks cannot be made more than once a year unless there is a
need to do so.

Monetary Board – power and function of BSP shall be exercised by MB, 7

members appointed by the president for a term of 6 years.

Authority to approve share transfers:

Transfer or acquisition of at least 10% of voting shares of bank require prior
approval of BSP
Fit and proper rule – before an officer is appointed, the MB shall determine
whether they are capable
Injunctive relief vs BSP actions
Only CA and SC can issue injunctive relief

Foreign Bank Liberalization Act

MB may allow entry foreign banks to 100%
1) acquire, and purchase domestic banks

Foreign ind/non-bank acquire domestic bank – limited to 40%

Applies to Filipino individuals and non-bank corporations
BDO -------- A - a Filipino can acquire only 40%
SM – a non-bank can acquire only 40%