Martinez, Minella Kae P.

BS-LM

Republic Act No. 8791 or the General Banking Law of 2000

Banks are entities engaged in the lending of funds obtained in the form of deposits.
Under Section 3, banks are classified into the following: Universal banks, Commercial Banks,
Thrift Banks, Rural Banks, Cooperative Banks, Islamic Banks and other classifications
determined by the Monetary Board of the Bangko Sentral ng Pilipinas (BSP).

The BSP has authority over banks as stated in Chapter II. It ranges from the supervision
of operations and activities of the bank. Issuance of rules of conduct and operation standards,
conducting examinations to determine the bank’s compliance with the laws and regulations,
holding regular investigations to determine the conduct of the business along with its solvency
and liquidity, and enforcement of corrective action fall under the supervisory powers of the
BSP. They may also prescribe ratios, ceilings, limitations, and other forms of regulation on the
different types of accounts and practices of banks and quasi-banks (Sec. 5). The BSP must first
authorize any person or entity before they can engage in banking operations or quasi-banking
functions. If a person or entity is found to be performing such functions without authority from
the BSP, they shall be subject to appropriate sanctions embedded in the New central Bank Act
and other applicable laws.

Chapter III of the GBL tackles the matter of organization, management and
administration of banks, quasi-banks and trust entities. The organization of a bank or quasi-
bank are subject to certain conditions for the Monetary Board to authorize it. First, that the
entity is a stock corporation. Second, that the funds are obtained from the public which shall
mean twenty or more persons. Last, that the minimum capital requirements prescribed by the
Monetary Board for each category be satisfied (Sec. 8). Stockholdings are explained throughout
Sections 11, 12, and 13. Foreign individuals and non-bank corporations may own or control up
to forty percent of the voting stock of a domestic bank. The percentage of the aforementioned
voting stocks in a bank shall be determined by the citizenship of the individual stockholders in
that bank. Corporate stockholdings as mentioned in Section 13 are two or more corporations
owned or controlled by the same family group or the same group of persons and considered as
related interests which must be fully disclosed in all transactions by such corporations or
related group of persons related to the bank. This chapter also delves into the provisions for the
Board of Directors (with accordance to the Corporation Code), compensation and other
benefits of the directors and officers, bank branches, banking days and hours, and the matter of
strike and lockouts. It is important to note that under this chapter lies the Prohibition on Public
Officials in which no appointive or elective public official, whether full-time or part-time and at
the same time serve as an officer of any private bank.
 Deposits, loans and other operations are highlighted in Chapter IV. Starting with
operations of universal banks in Article I, it is stated that a universal bank possesses the
authority to exercise the powers of an investments house, the power to invest in non-allied
enterprises and the powers of a commercial bank under Section 29. A universal bank can own
up to one hundred percent of the equity in a thrift bank, a rural bank, or a financial allied
enterprise and also in the equity of non-financial allied enterprise. Equity investments in quasi-
banks are limited to forty percent and also applicable to the case of commercial banks. Article II
talks about the operations of commercial banks. A commercial bank has several powers
indicated in Section 29. To wit, accepting drafts and issuing letters of credit; discounting and
negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; accepting
or creating demand deposits; receiving other types of deposits and deposit substitutes; buying
and selling foreign exchange and gold or silver bullion; acquiring marketable bonds and other
debt securities; and extending credit. A commercial bank may own up to one hundred percent
of equity in the following: financial allied enterprises and non-financial allied enterprises. But in
the case of Section 30, the Monetary Board may prescribe that the total investment in equities
of allied enterprises shall not exceed thirty-five percent (35%) of the net worth of the bank and
that the equity investment in any one enterprise shall not exceed twenty-five percent (25%) of
tile net worth of the bank. One of the important provisions to remember is Section 55 which
pertains to the prohibited transactions. According to the provision, no director, employee, or
agent of any bank shall make false entries in any bank report or participate in any fraudulent
transaction, accept gifts, fees, commissions or any other form of remuneration for the purpose
of approving a loan or other credit accommodation, and etc. As for the borrower of the bank,
they shall not furnish false or make misrepresentation or suppression of material facts for the
purpose of obtaining, renewing or increasing a loan or other credit accommodation. Fraudulent
overvaluing of a property that is offered aa a security is also one of the prohibited acts.

Cessation of Banking Business is found at Chapter VI of the GBL. For voluntary

liquidation, a written notice of liquidation shall be sent to the Monetary Board before such
liquidation is undertaken (Sec. 68). As for the topic of receivership and involuntary liquidation in
Section 69, the grounds and procedures for placing a bank in such a status, along with the
powers and duties of the receiver and liquidator is governed by the provisions of Sections 30,
31, 32, and 33 of the New Central Bank Act. Transactions after a bank becomes insolvent, such
as refusing to turn over the bank's records and assets to the designated receivers or tampering
of bank records, are penalized with the penal provisions in the Central Bank Act.

There are also other laws that govern certain types of banks. Thrift banks, rural banks
and cooperative banks are governed by the provisions of the Thrift Banks Act, the Rural banks
Act, and the Cooperative Code respectively when it comes down to the details of organization,
ownership and capital requirements, powers, supervision, and general conduct of business.
Islamic banks, its organization, ownership and capital requirements, powers, supervision, and
general conduct of business, is governed by special laws.
Elements for an entity to be considered doing business as a bank
 Entity is engaged in lending funds
 Funds are obtained from the public with at least 20 persons
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