Banking Laws

Final Examination

Instruction: Answer the questions clearly and concisely. Your answer should
demonstrate your ability to analyze the facts, apply the pertinent laws and
jurisprudence, and arrive at a sound or logical conclusion. Always support your
answer with the pertinent laws, rules, and/or jurisprudence.

1.The BSP, through the Monetary Board is granted the power and authority to prescribe
different maximum rates of interest which may be imposed for a loan or renewal thereof
or the forbearance of any money, goods or credits, provided that the changes are
effected gradually and announced in advance. Thus, it issued CB Circular No. 905,
removing all interest ceilings and suspended the usury law. Did the BSP commit grave
abuse of discretion in issuing CB Circular No. 905?

2.Can the exercise by the BSP Monetary Board of its power under Section 37 of RA No.
7653 and Section 66 of RA No. 8791, imposing, at its discretion, administrative sanctions,
upon any bank for violation of any banking law, be the subject of an action for
declaratory relief?

3. The Lims obtained a loan from DBP to finance their business. It was covered by a
promissory note wherein it was stipulated that the loan is subject to an interest rate of 9%
per annum and penalty charge of 11% per annum. They obtained another, covered by
another promissory note with an interest rate of 12% per annum and a penalty charge of
1/3% per month on the overdue amortization. The loans were covered by mortgages on
their properties. They failed to pay their loans as a result of the collapse of their business.
DBP thus sought to foreclose the mortgage and sell the properties, but the Lims asked for
an extension of the period within which they could pay. They were granted an extension,
subject to the condition that they will be liable for an additional interest of 18.5%, and
other additional penalties. Is the imposition of additional penalties and interests allowed
under the law?

4. The Spouses J obtained a loan from Chinabank covered by two promissory notes,
secured by a real estate mortgage over their property in White Plains. They failed to pay
their loan, thus the mortgage was foreclosed. Since the proceeds of the sale of the
mortgaged property did not cover the entire amount of the loan, Chinabank filed an
action against the Spouses J for collection of the remaining balance. During the trial it
was found that the interest rate on the loan changes every month based on the
prevailing market rate. Though no prior notice of the change would be given, DBP
alleged that they notified the spouses of the prevailing rate by calling them monthly
before their account became past due. DBP also alleged that the spouses agreed to a
changing interest rate by signing the promissory note, indicating that they agreed to pay
interest at the prevailing rate. Can DBP subject the loan of the spouses to a changing
rate of interest?

5. Are stipulations on floating interest rates the same as escalation clauses?

6. A is the estranged wife of B, who had several and/or time deposit accounts with a
bank. The bank allowed the time deposits to be pre-terminated and released the
proceeds without requiring the presentation of the requisite certificates of time deposit.
Should the bank be held liable?

7. Spouses C obtained a loan from TRB, secured by a real estate mortgage over their
property. They failed to pay their loan, thus, TRB foreclosed the mortgage. The property
was then sold at public auction to V, who immediately took possession thereof, and
started paying the real property taxes. The one year redemption period passed without
the spouses C redeeming the property. Thus, title was consolidated under the name of
V. Despite this, the Spouses C was able to buy back the property, and were issued a
certificate of redemption duly annotated on the title. V then filed an action to annul the
redemption, notice of which was duly annotated on the title. The court ruled in favor of
V and required the annulment of the redemption and ordered the transfer of the title
back to V. The then decision became final and executory, prompting V to have the
decision in his favor executed. However, the sheriff could not enforce the decision since
it was found that the spouses were again able to get a loan using the said property, this
time from PNB. The mortgage was annotated on the title a month before notice of V’s
action was annotated thereon. The spouses again defaulted on their loan, which resulted
in PNB obtaining title to the property as a result of being the highest bidder at the
foreclosure sale, and the spouses having failed to exercise their right to redeem the
property. V now files an action against PNB to recover the property and for payment of
damages. Can V hold PNB liable?

8. ECBI was a banking institution which underwent BSP’s general examination. It was
issued a cease and desist order and was enjoined from pursuing certain acts and
transactions that were considered as unsafe or unsound banking practices, and from
doing such other acts or transactions constituting fraud or might result in the dissipation
of its assets. This was the result of the continuing refusal of ECBI’s BOD to allow the
examination of the BSP. Thereafter, for defying the cease and desist order, BSP issued as
resolution placing it under receivership. Was the action of the BSP proper?

9. What is the nature of liquidation proceedings?

10. What is the effect of bank liquidation on interest payments?

11. Must the Monetary Board first make its own independent finding that a bank could
no longer be rehabilitated - instead of merely relying on the findings of the PDIC - before
ordering the liquidation of the said bank?

12. How do you determine the insured deposit amount of a depositor?

13. Can the account of a depositor be made the subject of a waiver of bank secrecy
laws, based on a mere provision in a compromise agreement involving parties other than
the depositor himself?

When can a trial court issue a bank inquiry order in favor of the AMLC?

14. The AMLC filed an Urgent Ex-Parte Application for the issuance of a freeze order with
the CA against certain monetary instruments and properties of the L et al., pursuant to
the Anti-Money Laundering Act of 2001. This application was based on the February 1,
2005 letter of the Office of the Ombudsman to the AMLC, recommending that the latter
conduct an investigation on L and his family for possible violation of the law. The CA
granted the application and issued the freeze order. Thereafter, an Urgent Motion for
Extension of Effectivity of Freeze Order was filed, arguing that if the bank accounts, web
accounts and vehicles of L not continuously frozen, they could be placed beyond the
reach of law enforcement authorities and the government’s efforts to recover the
proceeds of the L’s unlawful activities would be frustrated. In support of the motion, it was
alleged that various cases against L were presently being investigated by the
Ombudsman. The motion for extension was also granted by the CA. L sought to have the
extended freeze order lifted, arguing that there was no evidence to support the
extension of the freeze order, and that the extension not only deprived them of their
property without due process; it also punished them before their guilt could be proven.
The CA subsequently denied this motion. The Rules on Civil Forfeiture took effect and
stated that an extension of a freeze order was only for a maximum period of 6 months.
Thus, L asked the CA to reconsider its resolution denying his motion, insisting that the
freeze order should be lifted considering: (a) no predicate crime has been proven to
support the freeze order’s issuance; (b) the freeze order expired six months after it was
issued; and (c) the freeze order is provisional in character and not intended to supplant
a case for money laundering. Should L’s Motion for Reconsideration be granted?

15.Can a closed bank under receivership, file a Petition for Review without joining its
statutory receiver, the Philippine Deposit Insurance Corporation, as a party to the case?

16. What is the rule on strike or lockout involving banks?