Professional Documents
Culture Documents
CHAPTER 1
I.
II.
DEFINITION OF BANKS
Banks are entities engaged in the lending of funds obtained in the form of deposits.
A moneyed institute founded to facilitate the borrowing, lending and self-keeping of
money and to deal, in notes, bills of exchange, and credits.
An investment company which loans out the money of its customers, collects the
interest and charges a commission to both lender and borrower, is a bank.
Any person engaged in the business carried on by banks of deposit, of discount, or of
circulation is doing a banking business, although but one of these functions is
exercised.
III.
C.
B.
Fiduciary Duty
Indispensable Institution
Plays a vital role in the economic life of every civilized nation.
Banks have become an ubiquitous presence among the people, who have come to regard
them with respect and even gratitude, and most of all, confidence.
E.
A.
Degree of Diligence
The law imposes on banks high standards in view of the fiduciary nature of
banking.
The bank is under obligation to treat the accounts of its depositors with meticulous care,
always having in mind the fiduciary nature of their relationship. (Simex Internationsl vs.
Court of Appeals)
Degree of diligence higher than that of a good father of a family, as prescribed by Section
2 of the GBL.
Same higher degree of diligence is not expected to be exerted by banks in commercial
transactions that do not involve their fiduciary relationship with their depositors.
Diligence extends to financial institutions:
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
Any investigation previously conducted on the property offered as collateral does not
preclude a bank from considering information on the same property as security for a
subsequent loan. (Sps. Omengan vs. Philippine National Bank)
L.
H.
I.
J.
IV.
A bank is liable for the wrongful acts of its officers done in the interest of the bank or in
their dealings as bank representatives but not for acts outside the scope of their authority.
A.
Negligence of Manager
The bank, as an employer, is liable. Confidence in the banking system,
which necessarily includes reliance on bank managers, is vital in the economic life of
our society.
B.
K.
Negligence of Officers
A bank will be held liable for the negligence of its officers or agents when
acting within the course and scope of their employment.
If a corporation knowingly permits its officer, or any other agent, to perform acts within the
scope of an apparent authority, holding him out to the public as possessing power to do
those acts, the corporation will, as against any person who has dealt in good faith with the
corporation through such agent, be stopped from denying such authority.
C.
Negligence of Tellers
Banks tellers must exercise a high degree of diligence in insuring that they
return the passbook only to the depositor or his authorized representative. The tellers
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
know, or should know, that the rules on savings account provide that any person in
possession of the passbook is presumptively its owner.
Appropriation of money by a teller is not estafa. If the teller appropriates the money for his
personal gain, and since he occupies a position of confidence, the felony of qualified theft
would be committed.
D.
F.
2.
a.
3.
Exemplary Damages
Law allows the grant of exemplary damages by way of example for the
public good. The public relies on the banks fiduciary duty to observe the highest
degree of diligence.
Moral Damages
As a general rule, a corporation is not entitled to moral damages, because it
cannot experience physical suffering and mental anguish. However, for the
breach of fiduciary duty required of a bank, a coporate client may claim such
damages when its good reputation is besmirched by such breach, and social
humiliation results therefrom.
In culpa contractual or breach of contract, moral damages are recoverable only if the
defendant has acted fraudulently or in bad faith, or is found guilty of gross negligence
amounting to bad faith, or in wanton (reckless) disregard of his contractual obligations.
Banks may not be held responsible in the absence of bad faith, malice, or wanton attitude.
The law affords no remedy for damages resulting from an act which does not amount to a
legal injury or wrong. (DAMNUM ABSQUE INJURIA)
DAMAGE- the loss, hurt, or harm which results from the injury
Depositor may recover moral damages even if the banks negligence may not have been
attended with bad faith, if the former suffered mental anguish, serious anxiety,
embarrassment and humiliation. Moral damages are not meant to enrich a complainant at
the expense of the defendant. It is only intended to alleviate the moral suffering she has
undergone.
b.
d.
e.
f.
C.
D.
E.
a.
B.
Sec 12, Rule 14 of Rules of Court: Service upon a private juridical entity. When
the defendant is a foreign private juridical entity, service may be on its resident
agent designated in accordance with law.
Strict Compliance is Necessary
Basic is the rule that a strict compliance with the mode of service is necessary to
confer jurisdiction of the court over a corporation.
The officer upon who services is made must be one who is named in the statute
otherwise service is insufficient.
The purpose is to render it reasonably certain that the corporation will receive
prompt and proper notice in action against it.
Serving of summons on a branch manager is invalid, as stated in the case of BPI
vs. Spouses Santiago, the service of summons on BPIs Branch Manager did not
bind the corporation for the branch manager is not included in the enumeration of
the statute of the persons whom service of summons can be validly be made in
behalf of corporation. Such service is void.
B.
Capabilities
The Monetary Board shall take into consideration their capability in terms of their
financial resources and technical expertise and integrity. (FTI)
a.
b.
c.
d.
e.
C.
Capital Requirements
1. Minimum capital prescribed by the Monetary Board
AMOUNTS
TYPE OF BANK
Universal Banks
4950.0
Commercial Banks
2400.0
Thrift banks
- With head office within
Metro Manila
CHAPTER 2
Organization, Management and Administration of Banks, Quasi-Banks
and Trust Entities
A.
Organization of Banks
Conditions
The Monetary Board may authorize the organization of a bank or quasi-bank subject
to the following conditions: (SPC)
1. That the entity is a stock corporation.
2. That its funds are obtained from the public, which shall mean twenty (20) or
more persons.
3. That the minimum capital requirements prescribed by the Monetary Board for
each category of banks are satisfied.
52.0
Rural Banks
- within Metro Manila
I.
325.0
26.0
13.0
6.5
3.9
2.6
D.
At least 25% of the total authorized capital stock shall be subscribed by the subscribers
of the proposed bank, and at least 25% of such subscription shall be paid-up, provided
that in no case shall be the paid-up capital be less than the minimum required capital
stated above. (25% subscribed and 25% of the subscribed shall be paid and shall not be
less than the minimum)
*** A bank may be organized with not less than five (5) nor more thank (15) incorporators. In excess of
15 may be listed among the original subscribers in the Articled of Incorporation.
E.
Bank Branches
1.
Universal or Commercial banks may open branches or other offices within or outside the
Philippines prior approval of the Bangko Sentral.
Branching by all other banks shall be governed by pertinent laws.
2.
*** A bank may use any or all of its branches as outlets for the presentation and/or sale of the financial
products of its allied undertaking or of its investment house units.
*** A bank shall be responsible for all business conducted in such branches and offices to the same
extent and in the same manner as though business had all been conducted in the head office.
*** A bank and its branches shall be treated as one unit.
II.
A.
D.
Two or more corporations owned and controlled by the same family or same group of
persons.
Stockholdings
Treasury Stocks
The GBL provides that no bank shall:
Purchase or acquire shares of its own capital stock
Foreign Stockholdings
Section 11, GBL
Foreign individuals and non-bank corporations may own or control up to 40% of the
voting stocks of a domestic bank. This rule shall apply to Filipinos and domestic nonbank corporations.
The citizenship of the corporation which is a stockholder in a bank shall follow the
citizenship of the controlling stockholders of the corporation, irrespective of the place
of incorporation.
controlling stockholders individuals holding more that
50% of the voting stock of the corporate stockholders of the bank.
Commercial bank at least 60% of voting stock shall be owned by Filipino citizens.
Any thrift bank at least 40% of voting stock shall be owned by Filipino citizens.
Rural bank 100% shall be owned and held, directly or indirectly, by Filipino citizens
or corporations, associations or cooperatives qualified under the Philippine laws to
own and hold such capital stock.
*** such situations must be fully disclosed in all transactions by such corporations or
related groups of persons with bank.
III.
A.
Board of Directors
Number of Directors
At least five (5), and a maximum of fifteen (15) members of the board of directors of
bank, two (2) or whom shall be independent directors.
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
Independent Director a person other than an officer or employee of the bank, its
subsidiaries or affiliates or related interests.
1. Is not or has not been an officer or employee of the bank/quasi-bank/trust entity, its
subsidiaries or affiliates or related interests during the past three years counted from the
date of his election;
2. Is not a director or officer of the related companies of the institutions majority
stockholder;
3. Is not a majority shareholder of the institution, any of its related companies, or of its
majority shareholder;
4. Is not a relative within the fourth degree of consanguinity or affinity, legitimate or
common-law of any director, officer or majority shareholder or the bank/quasi-bank/trust
entity, or any of its related companies;
5. Is not acting as a nominee or representative of any director or substantial shareholder
or the bank/quasi-bank/ trust entity, any of its related companies or any of its substantial
shareholders; and
6. Is free from any business or other relations with the institution or any of its major
stockholders which could materially interfere with the exercise of his judgment.
B.
C.
Meetings
May be conducted through:
Teleconferencing
Video-conferencing
*** Banks shall include in their bylaws a provision that meetings of board of directors shall be
held only within the Philippines.
D.
IV.
A.
B.
Disqualifications
a. Permanently disqualified from being directors:
1. Persons who have been convicted by final judgment of a court for offenses involving
dishonesty or breach of trust;
2. Persons who have been convicted by final judgment of a court sentencing them to
serve a maximum term of imprisonment of more than six years;
3. Persons who have been convicted by final judgment of the court for violation of
banking laws, rules and regulations;
4. Persons who have been judicially declared insolvent, spendthrift, or incapacitated to
contract;
5. Directors, officers or employees of closed banks, quasi-banks/trust entities who were
found to be culpable for such institutions closure as determined by the monetary
board.
6. Directors and officers of banks, quasi-bank and trust entities found by the monetary
board as administratively liable for violation of banking laws, rules and regulations
where a penalty of removal from office is imposed, and which finding of the monetary
board has become final and executory;
7. Directors and officers of banks, quasi-banks and trust entities or any person found by
the monetary board to be unfit for the position of directors or officers because they
were found administratively liable by another government agency for violation of
banking laws, rules and regulations or any offense/violation involving dishonesty or
breach or trust and which finding of said government agency has become final and
executory.
b.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
C.
given the agenda materials prior to the meeting and that their decisions thereon were
submitted for deliberations and were taken up in actual board meeting, said directors shall
be present in the board meeting. This disqualification applies only for purposes of the
immediately succeeding election;
Persons who are delinquent in the payment of their obligations.
** one past due obligation to the bank where he/she is a director or office; at least two
obligation with other banks or financial institution)
*** obligations shall include all borrowings obtained by: a director, spouse or child of the
director, any person person whose loan proceeds were used for the benefit of a director or
office, a partnership where a director or his spouse is the managing or general partner, a
corporation, association or firms wholly owned or majority of the capital stocks are owned
by the director or his spouse.
Persons who have been convicted by a court for offenses involving dishonesty or breach
of trust.
Directors and officers of closed banks/quasi-banks/trust entities pending their clearance
by the Monetary Board
Directors disqualified for failure to observe their duties and responsibilities prescribed
under existing regulations.
Directors who failed to attend the special seminar for board of directors. This
disqualification applies until the director concerned has attended such seminar;
Persons dismissed from employment for cause, until they have cleared themselves of
involvement in the alleged irregularity.
Those under preventive suspension
Persons with derogatory records as certified by the judiciary, NBI, PNP, etc. for
irregularities that would adversely affect the integrity of director/officer, until they have
cleared themselves or after the lapse of five years from the time of the complaint.
Directors and officers of banks, quasi-bank and trust entities found by the monetary board
as administratively liable for violation of banking laws, rules and regulations where a
penalty of removal from office is imposed, and which finding of the monetary board is
pending appeal before the appellate court, unless execution is restrained by court.
Directors and officers of banks, quasi-banks and trust entities or any person found by the
monetary board to be unfit for the position of directors or officers because they were found
administratively liable by another government agency for violation of banking laws, rules
and regulations or any offense/violation involving dishonesty or breach or trust and which
finding of said government agency is pending appeal before the appellate court, unless
execution is restrained by court.
Directors and officers of banks, quasi-bank and trust entities found by the monetary board
as administratively liable for violation of banking laws, rules and regulations where a
penalty of suspension from office or fine is imposed, regardless whether the finding of the
monetary board final and executory or pending appeal before the appellate court, unless
execution is restrained by court. The disqualification is in effect during the period of
suspension or so long as the fine is not fully paid.
D.
V.
A.
B.
All banks shall observe for the conduct of their business a regular banking week five days
(Mondays Fridays), except when such days are holidays.
a. For servicing deposits and withdrawals, banks may remain open beyond the minimum
six hours, even before 8:00am or after 8:00pm.
b. For purposes other than servicing deposits and withdrawals, banks may open beyond
the minimum six hours but in no case shall such banking hours start earlier than
8:00am nor extend beyond 8:00 pm.
c. Branches of banks at any international airport or major fish port are allowed on
flexible baking hours within a twenty-four hour period which shall in no case be less
than six hours per day.
d. The banking days and hours selected for each of the offices of banks shall be
reported in writing to the appropriate supervising and examining department of the
BSP. Provided, that the change in banking days and hours shall not be made oftener
than once every thirty days, except during emergencies.
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
10
2.
3.
4.
5.
VI.
A.
B.
Notice on changes in banking days and hours shall be given through the fastest
means of communication, at least seven days before the intended effectivity in
banking hours or days.
In case the bank has to pen outside or close during the banking hours or days
reported to the BSP due to an emergency, a written report submitted within 24 hours
from opening or closing will suffice.
Subject to compliance with other relevant laws, banks may opt to observe a banking week
in excess of five days after reporting to the BSP the additional days during which such
banks or their branches or offices shall transact business for at least three hours each day.
Without the need of approval from BSP, banks are allowed to close on certain days in
celebration of important historical and/or religious event in the locality where the banks
operate: Provided, that said closure has the prior approval of the bankers association in
the locality: Provided further, that said closure will only be allowed in the municipality or
city where the festivities are centered.
Banks shall submit either individually or through their head offices, to the appropriate
supervising and examining department of the BSP a prior notice of their intended closure
on account of a special local festivity, together with a copy of the resolution of the local
bankers association approving said closure, at least two days after the date of said
resolution.
The required notice shall be supported by certification that:
a. On the date of temporary closure, the bank and/or branch will maintain a skeletal
force to handle out-of-town clearing items
b. The notice of the banks closure and the reason thereof shall be posted
conspicuously in the banks premises
c. For branches of banks, the closure has the prior approval of their respective head
offices.
3.
VII.
Independent Auditor
The following are the rules with respect to financial audit of banks:
1.
2.
3.
The Monetary Board may require a bank, quasi-bank or trust entity to engage the services of
an independent auditor to be chosen by the bank, quasi-bank or trust entity concerned from a
list of certified public accountants acceptable to the Monetary Board.
The term of the engagement shall be prescribed by the Monetary Board which may either be
on a continuing basis where the auditor shall act as resident examiner, or on the basis of
special engagements, but in any case, the independent auditor shall be responsible to the
banks, quasi-banks or trust entitys board of directors. A copy of the report shall be furnished
to the Monetary Board.
The Monetary Board may also direct the board of directors of a bank, quasi-bank, trust entity
and/or the individual members thereof, to conduct, either personally or by a committee created
by the board, an annual balance sheet audit of the bank, quasi-bank or trust entity to review
the internal audit and control system of the bank, quasi-bank or trust entity and to submit a
report of such audit.
VIII.
A.
FINANCIAL STATEMENTS
Publication of Financial Statements:
The following are rules regarding publication of financial statements: Sec. 61, GBL
** Every bank, quasi-bank or trust entity, shall publish a statement of its financial condition
The bank shall notify the supervising and examining department of the BSP of the actual
date a mobile ATM becomes operational and when no longer in operation.
** In periods of national and/or local emergency or of imminent panic which directly threaten monetary
and banking stability, the Monetary Board, by a vote of at least five of its members, in special cases and
upon application of the bank, quasi-bank or trust entity, may allow such bank, quasi-bank or trust entity
to defer for a stated period of time the publication of the statement of financial condition required herein.
IX.
A bank, quasi-bank or trust entity shall shot publish the amount of its authorized or subscribed
capital stock without indicating at the same time and with equal prominence, the amount of its
capital actually paid-up.
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
X.
11
Settlement of Disputes
A.
B.
XI.
** GBL shall likewise apply to thrift banks, rural banks and cooperative banks insofar as they are not in
conflict.
** GBL shall govern for purposes of prescribing the minimum ratio which the net worth of a thrift bank
must bear to its total risk assets.
12
In the ordinary and usual course of banking operations, current account deposits are accepted
by the bank on the basis of deposit slips prepared and signed by the depositor, or the latters agent or
representative, who indicates therein the current account number to which the deposit is to be credited,
the name of the depositor or current account holder, the name of the deposit and the amount of the
deposit either in cash or checks. The deposit slip has an upper portion or stub, which is detached and
given to the depositor or his agent; the lower portion is retained by the bank. In some instances
however, the deposit slips are prepared in duplicate by the depositor. The original of the deposit slip is
retained by the bank, while the duplicate copy is returned or given to the depositor.
Regulations on Temporary Overdrawings and Drawings against Uncollected Deposits (DAUD)
TEMPORARY OVERDRAWINGS against current account SHALL NOT BE ALLOWED,
UNLESS caused by normal bank charges and other fees incidental to handling such accounts.
Violation:
Fine of one-tenth of one percent (1/10 of 1%) per day of violation, computed on the basis of
the amount of overdrawing or fines in amounts as may be determined by the Monetary Board,
but not to exceed P30,000 a day for each violation whichever is lower.
CHAPTER 3
Deposit Function of Banks
Kinds of Deposits
1) Demand Deposits all those liabilities of the Bangko Sentral and of other banks which are
denominated in Philippine currency and are subject to payment in legal tender upon demand by the
presentation of (depositors) checks.
Universal and Commercial banks may create or accept demand deposits subject to withdrawal
by check WITHOUT prior authority from BSP.
Thrift Bank, Rural Bank, Cooperative Bank may create or accept demand deposits subject to
withdrawal by check WITH prior authority from BSP.
Technical overdrawings arising from force posting in clearing checks shall be debited banks
under Returned Checks and Other Cash Items Not in Process of Collection which is part of Other
Assets in the Statement Condition. Items to be lodged under this account shall consist only of inclearing checks which may result in technical overdrawn accounts and shall immediately reversed in
the following day. The checks lodged under Returned Checks etc. shall either be returned or honored
the following day before clearing. The items to be used as cover for honored checks should only consist
of any of the following:
Cash
Bank Drafts
Treasury Warrants
Fund transfers or credit memos within the same bank representing proceeds of loans granted
under existing regulations
NOTE:
Peso demand deposit accounts maintained by foreign correspondent banks with commercial banks
shall NOT be subject to the above-mentioned regulations PROVIDED:
Temporary overdrawings are covered within 15 days from the date overdrawings are incurred
Such accounts are credited only through foreign exchange inward remittance
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
13
Checks do not have legal tender power and their acceptance in the payment of debts is at the option of
the creditor.
Effects if a cross check
In State Investment House vs IAC, the SC enumerated the different effects of crossing a
All officers
Other employees who have direct and immediate responsibility in the handling of transactions
and/or records pertaining to demand deposits or current accounts.
Includes spouses and relatives within second degree of consanguinity and affinity
Check is a bill of exchange drawn on a bank payable on demand.
Fixed savings and current deposits of money shall be governed by the provision so simple loan
Duty of Banks to honor checks
Banks are bound to honor checks to the extent of the amount of his (the depositor) deposits.
Failure of the bank to honor entitles the drawer to substantial damages without any proof of
actual damages
Banks must ensure that the amount of the check should be paid only to its designated payee.
The fact that the drawee bank did not discover the irregularity seasonably constitutes
negligence.
check:
1.
2.
3.
That the check may not be encashed but only deposited in the bank
That the check may be negotiated only once to one who has an account with a bank
That the act of crossing the check serves as a warning to the holder that the check has been
issued for a definite purpose so that such holder must inquire if the check has been received
pursuant to that purpose.
Cashiers Check is really the banks own check and may be treated as a promissory note with the
bank as the maker.
In New Pacific Timber and supply Co. Inc. vs Seeris cashier check is deemed as cash
Set-off
A bank may debit the personal account of a depositor for an amount erroneously credited to
the depositors sole proprietorship account because the latter being a sole proprietorship has
no separate and distinct personality from the depositor.
Art. 1980 and Art. 1278 of the Civil Code
The law imposes a duty of diligence on the collecting bank to scrutinize checks deposited with
it, for the purpose of determining their genuineness and regularity.
Crossing of the check with the phrase Payees Account Only is a warning that the check
should be deposited only in the account of the payee. It is the duty of the bank to ascertain it.
Responsibility of Drawer
The drawer must personally keep track of his available balance in the bank.
The bank which receives such paper for collection is the agent of the payee or holder.
If it pays a forged check, it must be considered as making the payment out of its own funds
and cannot ordinarily charge the amount so paid to the account of the depositor whose name
was forged.
Encashment of checks
Banking business requires that the one who first cashes and negotiates the check must take
some precautions to learn whether or not it is genuine.
Banks are under no obligation to make part payment on a check, up to only the amount of the drawers
funds.
Banks are under no duty to make up deficiency from the savings account. If a depositor has 2 accounts
with a bank, an open account and a savings account, and draws a check upon the open account for
more money than the account contains.
2) Savings Deposits
Servicing deposits
Banks may be authorized by the BSP to solicit and accept deposits outside their bank
premises, subject to ff: conditions:
1. The financial condition of the banks is sound and the operations and the quality of the
management thereof could reasonably assure the safety of the funds which may be
entrusted to its deposit collectors and/or agents
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
14
Deposit solicitors shall be initially bonded for at least P1,000 subject to the
increase thereof to approximate their daily collections
All collections shall be turned over to the cashier at the end of each day
accompanied by a COLLECTION SUMMARY REPORT which shall contain
the following information.
Date
Amount of deposit
And/or account either one of the co-depositors may deposit and withdraw from the account
without the knowledge, consent and signature of the other.
Withdrawals
Banks are prohibited from issuing or accepting withdrawal slips without requiring depositors
concerned to present their passbooks except for banks authorized by BSP.
NOTE: There is now law mandating banks to call up their clients whenever their representatives
withdraw significant amounts from their accounts.
3) Negotiable Order of Withdrawal (NOW) Accounts
NOW accounts interest bearing accounts that combine the payable on demand feature of checks and
investment feature of savings account.
Universal/Commercial Bank may offer NOW accounts WITHOUT prior authority of the
monetary board
Thrift/Rural/Cooperative Bank may offer UPON prior approval of the monetary board.
Rules on servicing NOW accounts
Prior to or simultaneous with the opening of a NOW account, the bank shall inform the
depositor of its terms and conditions
Banks shall be responsible for the proper identification of its depositors and require 2
specimen signatures and such other pertinent information
Deposit shall be covered by deposit slips in duplicate duly validated and initialed by the teller
received the deposit
NOW accounts shall be kept and maintained separately from the regular savings deposits
Blank NOW forms shall be prenumbered and shall be controlled as in the case of unissued
blank checks
A bank statement shall be sent to each depositor at the end of each month for confirmation of
balances
Banks must use the form prescribed by the present rules for NOW accounts.
4) Time Deposits one the payment of which cannot legally be required within such a specified
number of days.
15
NOTE:
1. Borrowing shall refer to all forms of obtaining or raising funds through any of the methods and
for any purposes provided in no.4 above
2. Purchasing receivables or other obligations shall refer to the acquisition of claims collectible in
money
3. Relending shall refer to the extension of loans by an institution with antecedent borrowing
transactions. Relending is presumed when the institution is regularly engaged in lending
4. Regularly engaged in lending shall refer to the practice of extending loans, advances,
discounts or rediscounts as a matter of business
6) Foreign Currency Deposits
Authority to deposit foreign currencies
- Any person may deposit with such Phil. Banks in good standing.
Authority of Banks to accept foreign currency deposits:
Depository banks on account of networth, resources, past performance or other pertinent criteria, have
been qualified by the Monetary board to function under an expanded foreign currency deposit system
shall be exempt in no.2 above.
There is no restriction on the withdrawal by the depositor of his deposit or on the transferability of the
same abroad EXCEPT those arising from the contract bet. the depositor and the bank.
7) Anonymous and Numbered Accounts should not be allowed
In case where numbered accounts are allowed, banks or financial institutions should ensure
that the client is identified in an official or other identifying documents.
Related Laws:
Administration of Deposits
BSP Circular No. 564 Series of 2007 provides for a valid list of identification cards
Students who are beneficiaries of an OFW and not on voting age shall be required of 2 valid ID
The requirement on presenting 2 valid IDs shall on 1 time basis only or at the commencement
of business relationship.
Financial transactions may include remittances
Minors are vested with special capacity and power to make savings or time deposits with and
withdraw the same as well as receive interest thereon.
Requirements:
Sufficient discretion
16
Incorporation Stage
Post Incorporation
Interest or yield on time deposit/deposit substitute may be paid at the maturity or upon withdrawal
or in advance PROVIDED, it shall not exceed the interest in 1 year.
A time deposit not withdrawn or renewed on its due date shall be treated as a savings deposit and
shall earn interest from maturity to the date of actual withdrawal or renewal at a rate applicable to
savings deposits.
Deposit substitute instrument not withdrawn or renewed on its maturity date shall from said date
become payable on demand and shall earn an interest or yield from maturity to actual withdrawal or
renewal at a rate applicable to a deposit substitute with a maturity of 15 days.
All deposits and withdrawals during regular banking hours shall be credited or debited to deposit
liability accounts on the day receipt or payment thereof.
Provided:
That a bank may set clearing cut-off time for its head office not earlier than 2 hours before the start
of clearing at BSP and not earlier than 3 hours before the start of clearing of all its branches,
agencies and extension offices
Provided further:
That banks which are located in areas where there are no BSP regional/clearing arrangements
may set a clearing cut-off time not earlier than 2 hours before the start of their local clearing after which
time deposits received shall be booked likewise as hereinafter provided.
Cash deposits received after the selected clearing cut-off time shall be booked s deposits on the
day of receipt.
Any change in the terms and conditions for the imposition of service charges and/or
maintenance fees shall take effect only after due notice to the depositor.
PROVIDED
Information by regular mail, electronic mail, statement of account messages or alternative
modes of communication on the depositors last known address at least 60 days prior to
implementation shall be considered sufficient notice.
PROVIDED FURTHER
Failure of the depositor to manifest or register his objection to the new service within 30 days
from receipt shall be deemed acceptance of such changes
Banks shall likewise post said information on their respective websites, ATM on-screen
messages and in conspicuous places within the bank premises at least 60 days prior to
implementation.
III. Survivorship Agreement
-
Deposits on checks including on us checks etc. may be booked as deposits on the day of receipt.
Deposits received after the close of the regular banking hours shall be booked as deposits the
following banking day.
Banks impose and collect service charges on savings and demands deposits that fall below the
required minimum monthly average daily balance (ADB) subject to ff: conditions:
The imposition of such charges is clearly stated among the terms and conditions of the
depositor
The rate or amount of such charges or fees is properly disclosed among the terms and
conditions of the deposit
The deposit account balances have fallen below the required minimum monthly ADB for
dormant account and for at least 2 consecutive months for active accounts
The required minimum monthly ADB of deposits are properly disclosed among the terms and
conditions of the deposit.
when joint (and several) owners of a deposit agree that either of them could withdraw any part
or the whole of said account during the lifetime of both and the balance, if any, upon the death
of either, belonged to the survivor.
an ALEATORY CONTRACT (Art. 1790), by which the mutual agreement of the joint depositors
permitting either of them to withdraw the whole deposit during their lifetime and transferring the
balance to the survivor upon the death of one of them.
Survivorship agreement not invalid per se but may be violative of law, such instances:
- a mere cloak to hide an inofficious donation
- to transfer property in fraud of creditors
- to defeat the legitime of a forced heir
Nature
1.
Fixed, savings and current deposits of money in banks and similar institutions are the true
deposits and are considered simple loans.
Irregular deposits in nature for they are really loans because they earn interest.
- In reality: depositor is the creditor while bank is the debtor.
- Failure of the bank to honor the time deposit is failure to pay its obligation as a
debtor
and not a breach of trust arising from a depositorys failure to return the
subject matter of the deposit.
The relationship between the depositor and the Savings and Loan Association is that of
creditor and debtor.
- Bank has the obligation to return the amount deposited, however, it has no
obligation to return or deliver the same money that was deposited. (Principle of NonFungible)
2.
3.
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4.
5.
B.
- Failure of the bank the amount deposited will not constitute estafa through
misappropriation but it will only give rise to civil liability.
The contract between the bank and its depositor is governed by the provisions of the Civil
Code on simple loan.
A bank ultimately acquires ownership of the deposits but such ownership is coupled with a
corresponding obligation to pay the depositor an equal amount on demand.
- A bank does not have unilateral right to freeze the accounts of depositor based on
its mere suspicion, granting such rights would open the floodgates of public distrust in
banking industry. (BPI Family Bank vs. Franco)
Purposes
1. To give encouragement to the people to deposit their money in banking institutions.
2. To discourage private hoarding so that the same may be utilized by banks in authorized
loans to assist in the economic development of the country.
B.
Privacy
- Civil Code provides that every person shall respect the dignity, personality, privacy and
peace of mind of his neighbors and the other persons and punishes as actionable torts
several acts for meddling and prying into the privacy of another.
- It also holds public officer or employee or any private individual liable for damages for any
violation of the rights and liberties of another person, and recognizes the privacy of letters and
other private communications.
C.
Absolute Confidentiality
- All deposits of whatever nature with banks or banking institutions in the Philippines are
considered as of an absolutely confidential nature and may not be examined, inquired or
looked into by any person, government official, bureau or office.
Set-Off
General Rule: When a depositor is indebted to a bank, and the debts are mutual, the bank may
apply the deposit or such portion thereof as may be necessary to the payment of the debt due
it by the depositor.
Exception:
- There is no express agreement.
- The deposit is not specifically applicable to some other particular purpose.
V. Duties of Banks
A.
Meticulous Care
- Knowing the signatures of its clients.
- Depositors are not estopped from questioning wrongful withdrawals, even if they failed to
question those errors in the statements sent by the bank to them for verification.
B.
C.
A.
1.
Prohibition against inquiry into or disclosure of deposits under republic Act No. 8367 (An
Act Providing for the Regulation of the Organization and Operation of Non-Stock Savings
and Loan Associations) all deposits of whatever nature are considered absolutely
confidential in nature EXCEPT, (1) upon written permission of the depositor; (2) in cases
of impeachment; (3) upon order of a competent court in cases of bribery or dereliction of
duty of public officials; and (4) in cases where the money deposited or invested is the
subject matter of litigation.
2.
3.
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B.
4. In cases where the money deposited or invested is the subject matter of litigation
Garnishment
- A legal proceeding by which the officer may levy on debts due the judgment obligor and other
credits, including bank deposits, financial interests, royalties, commissions and other personal
property not capable of manual delivery in the possession or control of third parties.
- Levy shall be made by serving NOTICE upon the person owing such debts or having in his
possession or control such credits to which the judgment obligor is entitled.
- The garnishment shall cover only such amount as will satisfy the judgment and all lawful fees.
Property exempt from execution/garnishment:
1. Family home or the homestead in which he resides.
2. Ordinary tools and implements personally used in his trade, employment or livelihood.
3. Three horses, or (3) cows, or (3) carabaos, or there beasts of burden necessarily used by
him in his ordinary occupation.
4. Necessary clothing and articles for ordinary personal use, excluding jewelry.
5. Household furnitures and utensils used for housekeeping not exceeding P100,000.
6. Provisions for individual or family use sufficient for four months.
7. Professional libraries and equipment not exceeding P300,000 in value.
8. One fishing boat and accessories not exceeding the total value of P100,000 and by the
lawful use of which he earns his livelihood as fisherman.
9. Salaries, wages or earnings within the four months preceding the levy as are necessary
for the support of his family.
10. Lettered gravestones.
11. Monies benefits, privileges or annuities accruing or in any manner growing out of any life
insurance.
12. The right to receive legal support or money or property obtained as such support or any
pension or gratuity from the Government.
13. Properties especially exempt by law.
C.
Secrecy and Exemption from Attachment and Garnishment of Foreign Currency Deposits
cannot be used as Device for Wrongdoing
D.
E.
Authority to Inquire into Bank Deposits under the Anti-Money laundering Act
- AMLC may inquire into or examine any particular deposit r investment with any banking
institution or non-bank financial institution upon order of any competent court in cases of
violation, when it has established that:
a. there is probable cause that the deposits or investments are related to an unlawful
activity; or
b. a money laundering offense
F.
- BSP may inquire into or examine any deposit or investment with any banking institutions or
non-bank financial institution when the examination is made in the course of a periodic or
special examination, in accordance with the rules of examination of BSP.
- If authorized by the Monetary Board to satisfy a reasonable ground to believe that a bank
fraud or serious irregularity has been or is being committed and that it is necessary to look into
the deposit to establish such fraud or irregularity.
- Examination made by an independent auditor hired by the bank to conduct its regular audit
provide that the examination is for audit purposes only and the results thereof shall be for the
exclusive use of the bank.
G. In Camera Inspection by the Ombudsman
- Section 15(8) of republic Act No. 6770 (The Ombudsman Act of 1989) provides as one of the
powers of the Ombudsman:
(8) Administer oaths, issue subpoena and subpoena duces tecum, and
take
testimony in any investigation or inquiry, including the power to
examine and have access to bank accounts and records.
- Before in camera inspection may be allowed, there must be a pending case before a court of
competent jurisdiction. The account must clearly be identified. The bank personnel and the
account holder must be notified to be present during the inspection and such inspection may
cover only the account identified in the pending case.
H.
Preliminary Attachment
- Section 10, Rule 57 of the Rules of Court is compatible with the law on secrecy of bank
deposits because it provides an exception in cases where the money deposited or invested is
the subject matter of the litigation.
I.
J.
19
ii.
Waiver by DOSRI
Section 26 (NCBA). Bank Deposits and Investments. Any
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 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.
Chapter 4
Investments, Loans and Other Functions of Banks
I.
D.
Warehousing companies
Storage companies
Insurance Agencies/brokerages
E.
B.
C.
20
i.
ii.
1st contract relationship links the party applying for LOC and the
party for whose benefit LOC is issued
Bank issuing LOC and undertakes to pay the seller upon receipt
of the draft and proper documents of titles and to surrender the
documents to the buyer upon reimbursement
B.
Extending credit
Issuance of Letters of Credit
i. Nature - developed by merchants as a convenient and relatively safe mode
of dealing with sales of goods to satisfy the seemingly irreconcilable
interests of a seller, who refuses to part with his goods before he is paid and
a buyer who wants to have control of the goods before paying
III.
C.
Equity Investments of a Commercial Bank may invest only in the equities of allied
enterprise (financial or non-financial) as may be determined by the Monetary Board
i. Total investment in equities shall not exceed 35% of the net worth
ii. Equity investment in any one enterprise shall not 25% net worth
D.
E.
Minimum Ratio minimum ratio which the net worth of a bank must bear to its total
risk assets shall be determined by the Monetary Board
i. On the basis of the net worth and risk assets of a bank and its subsidiaries
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
21
IV.
C.
Effect of Non-Compliance
i. Monetary Board may limit r prohibit the distribution of net profits by such
bank and may require that all of the net profits be used to increase the
capital accounts of the bank until minimum requirement is reached
ii. Restrict or prohibit the acquisition of major assets and the making of new
investments by the bank until the minimum required ratio has been restored
Exceptions:
a. Reasons of national interest
b. Deposits of Rural Banks with government-owned or
controlled financial institutions are exempted
c. May be increased by 10% provided the additional liabilities
of any borrower are adequately secured by securing titles
B.
ii.
iii.
As amended by Circular no. 425, SBL must not exceed 23%, still
subject to such exceptions
D.
E.
F.
B.
Directors
i. Named as such in the articles of incorporation
ii. Duly elected in subsequent meetings of stockholders
iii. Elected to fill the vacancies
C.
Officers
i. President, EVP, SVP, General Manager, Secretary, treasurer, trust officer
and others whose duties as such are defined in the by-laws or are generally
known to be officers of the bank
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
22
D.
E.
vii.
Stockholder
i. Any stockholder of record in the books acting personally or through an
attorney-in-fact
ii. Any other person duly authorized by him or through a trustee
viii.
Related Interests
i. Spouse/Relative within 1st degree of consanguinity or affinity, relative by
legal adoption of a director, officer or stockholder of the bank
ii. Partnership of which a director, officer, or stockholder of a bank or
Spouse/Relative within 1st degree of consanguinity or affinity, relative by
legal adoption
iii. Co-owner of the property or interest or right mortgaged
iv. Corporation, association, or firm of which a director or officer of the bank, or
his spouse is also a director or officer of such corporation, association or
firm, except:
Securities are listed and traded in the big board of domestic stock
exchange and less than 50% of voting stock is owned by 1 person
or by persons related to each other within 1 st degree of
consanguinity or affinity
F.
Effect of Violation After due notice of the board of directors the office of the violator
may be declared vacant and subject to penal provisions in the New Central Bank Act
G. Limits of Loans
i.
ii.
H.
I.
23
VI.
VII.
B.
Requirement for Grant of Loans or Other Accomodations before granting a loan, the
bank must ascertain that the debtor is capable of fulfilling his commitments through:
i. Statement of assets and liabilities
ii. Statemement of income and expenditure
iii. Other information prescribed by Monetary Board
B.
C.
D.
Loans and Other Credit Accomodations against Real Estate shall not exceed 75%
of the appraised value of the respective real estate security, plus 60% of the
appraised value of the insured improvements, such loans be made to the owner of
the real estate or to his assignees
i. Exception: As otherwise prescribed by the Monetary Board
Loans and Other Credit Accommodations on Security of Chattels and Intangible
Properties shall not exceed 75% of the appraised value of the security and the
same may be made to the title holder or his assignment
i. Exception: As otherwise pescribed by the Monetary Board
Joint and Solidary Agreement JSA is indubitably a surety not a guaranty. An
agreement where parties consent to be jointly and severally liable. Should be taken
contra proferentum against the party who may have cause any ambiguity therein.
Effect of Surety Agreement strictly construed against the creditor, every doubt is
resolved in favor of the solidary debtor.
i.
A Bank cannot hold a surety liable for loans obtained in excess of the
amount or beyond the period stipulated in the original agreement, absent
any clear stipulation that he has waived his right to be notified or to give
consent.
C.
D.
E.
Other Security Requirements for Bank Credits Monetary Board may prescribe
security requirements to which the various types of bank credits shall be subject, the
same may reduce and increase maximum ratios
F.
Sec. 43 of GBL Monetary Board has the authority granted in Sec 106 of
the new Central Bank Act to prescribe the maturities and conditions for
various types of bank loans and other credit accommodations
Sec. 106 of NCBA Monetary Board may issue such regulation necessary
with respect to maximum permissible maturities maturities of loans and
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
24
25
Private lands may only be transferred to individuals, corporations, or associations qualified to acquire or
hold land of public domain. Exception: thru hereditary succession.
E. Effect of Violation; violation shall NOT affect validity and enforceability of contract
Limpin v. IAC: Right of Redemption exists only in the case of the extrajudicial foreclosure of the
mortgage. No such right is recognized in a judicial foreclosure except only where the mortgagee in the
PNB or other bank. Right may be exercised within a period of 1 year, counted from the date of
registration.
Equity of Redemption is the right of the mortgagor to extinguish the mortgage and retain ownership of
the property by paying the secured debt within the 90-day period after the judgment becomes final (Rule
68, CivPro).
C. Right of Redemption may be Extended by Agreement; the right to redemption must be exercised
within specified time limits but if agreed upon by the parties, it may be extended.
D. Estoppel; if a bank had time to object and did not, its silence can be construed as having consented
to the extension of the redemption period. Estoppel arises when one, by his own silence when he ought
to speak out, intentionally or thru culpable negligence, induces another to believe that certain facts
exist.
E. Redemption of foreclosed property after the Prescriptive Period;
Right to redeem becomes functus officio on the date of its expiry.
Exercise after this period in not redemption but repurchase.
Redemption is by force of law and the purchaser is bound to accept redemption.
Repurchase imposes no such obligation. He may or may not re-sell the property after expiration, and he
is not bound by bid price bec after all, the property already belongs to him as owner.
Purchaser at the auction sale has right to enter and take possession of that property immediately after
the date of confirmation of the auction sale. However, sec. 7 of Act No 3135 (An Act to Regulate the
Sale of Property under Special Powers Inserted in or Annexed to Rent Estate Mortgages) provides that
if property was registered under the Mortgage Law, purchaser must first furnish a bond in an amount
equivalent to the use of property for 12mos. Such bond must be approved by court and court must
thereafter issue a writ of possession addressed to the sheriff where property is situated.
W/N alien-owned bank can acquire ownership of residential lot by deed of transfer as settlement of
debt.
NO. Its acquisition jeopardizes the purpose of the Constitution to keep in the hands of the
people the ownership over private lands.
HOWEVER, a lease of a parcel of land for 50 years in favor of an alien corp is registerable. A
lease, unlike a sale, does not involve the transfer of dominion over the land.
26
those affecting the ability of of the bank to ensure the fit of tech services deployed to meet its strategic
and business objectives;
strategic planning for the use of IT;
determination of system formalities;
change mgmt inclusive of quality assurance and testing;
service level and contract mgmt
security policy and administration
XIII. Outsourcing Of Other Functions
Subject to prior approval of the MB, banks may outsource data imaging, storage, retrieval and other
related systems, clearing and processing of checks, printing of bank deposit statements, other activities
det by the MB.
Banks may outsource:
printing of bank loan statements and other non-deposit records, bank forms, and promotional
materials
property appraisal
janitorial services
procurement services
temporary staffing
Provided, that they do not include servicing/handling bank deposits or other inherent banking
functions.
27
Chapter 5
Prohibited Transactions and Cessation of Banking Business
A.
B.
Prohibited Acts
a. No Director, officer, employee, or agent of any bank shall- FOORD
c.
d.
Consistent with the Banks Secrecy Law, no bank shall employ casual or nonregular
personnel or lengthy probationary personnel in the conduct of it business involving
bank deposits
C.
It is deficient in the required liquidity floor for government deposits for 5 or more consecutive
days; or
3.
It does not comply with the liquidity standards/ratios prescribed by the Bangko Sentral for
purposes of determining funds available for dividend declaration; or
4.
28
The Monetary Board may appoint a conservator whenever it finds that a bank or a quasi-bank
E. Remuneration
The conservator shall receive remuneration to be fixed by the Monetary Board in an amount
not to exceed two-thirds of the salary of the president of the institution in 1 year, payable in 12
deemed adequate to protect the interest of depositors and creditors. [Section 29, RA 7653]
institution can operate on its own, the conservator shall receive the balance of the
remuneration which he would have received up to the end of the year; but if the
conservatorship is terminated on other grounds, the conservator shall not be entitled to such
remaining balance.
The Monetary Board may appoint a conservator connected with the Bangko Sentral, in which
The conservator has the power to overrule or revoke the actions of the previous management
case he shall not be entitled to receive any remuneration or emolument from the Bangko
Sentral during the conservatorship.
F. Expenses of Conservatorship
rescissible); hence, the conservator merely takes the place of a banks board of directors.
What the board of directors cannot do, such as repudiating a contract validly entered into
under the doctrine of implied authority, the conservator cannot do either. [First Philippine
International Bank v. CA, 252 SCRA 255 (1986)]
G. Termination of conservatorship
The Monetary Board shall terminate the conservatorship when it is satisfied that the institution can
*LIQUIDITY- the ability of an asset to be converted into cash quickly and without any price discount. A
corporation is liquid if it has ready access to cash.
*SOLVENCY- the condition that exists when liabilities amount to less than total assets, thus providing
creditors, in which case proceedings for receivership and liquidation shall be pursued. [Section
the ability to pay debts. The test of insolvency is measured by determining whether the realizable assets
29, RA 7653]
management.
D. Period of Conservatorship
The conservatorship shall not exceed one (1) year.
Actions of Monetary Board shall be final and executory, and may not be restrained or set aside
by the court except on petition for certiorari on the ground that the action taken was in excess
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
29
A. Voluntary Liquidation
jurisdiction.
Petition for certiorari may only be filed by the stockholders of record presenting the majority of
the capital stock within 10 days from receipt by the board of directors of the institution of the
The MB may, summarily & w/o prior hearing, FORBID institution from
doing business if the institution:
Powers must be related to the (preservation of) the assets of the bank, (the reorganization of)
the management thereof and (the restoration of) its viability. Such power cannot extend to the
post-facto repudiation of perfected transactions, otherwise they would infringe against the non-
deemed to be defective.
A. Voluntary Liquidation
30
Current and Complete Examination Not Necessary before the closure of a bank
1. Sec 29 of the Central Bank Act does NOT contemplate prior notice and hearing.
The assailed actions should precede the filing of the case.
for the closure order. The purpose of RA 7653 is to make the closure
4. make transfers
Effects of Receivership and Liquidation (p. 214, MemAid)
A receiver is
Prohibited Acts
Any director or officer of a bank declared insolvent or placed under
receivership by the MB shall not
31
The Bangko Sentral may, if public interest so requires, award to an institution, upon such terms
and conditions as the Monetary Board may approve, the banking franchise of a bank under liquidation
to operate in the area where said bank or its branches were previously operating; Provided, That
whatever proceeds may be realized from such award shall be subject to the appropriate exclusive
disposition of the Monetary Board.
D.
Liabilities
The bank is bound by the acts, or failure to act, of the receiver. At the same time, the receiver
is liable to the bank for culpable or negligent failure to collect the assets of such bank and to safeguard
said assets.
32
CHAPTER 6
Foreign Banks & Trust Operations
Offshore banking refers to the conduct of banking transactions in foreign currencies involving the
receipt of funds from external sources and utilization of such funds.
Offshore banking unit means a branch, subsidiary or affiliate of a foreign banking corporation which is
a duly authorized by the BSP to transact offshore banking business in the Philippines.
Entry of foreign banks in the Philippines are governed by Foreign Banks Liberalization Act (RA
7721)
The conduct of offshore banking shall be governed by Offshore Banking System Decree (PD
1034)
NOTE: Foreign Corp. doing business in the Philippines are required to obtain a license. Sec. 133 of
Corporation Code
Foreign Corp. doing business in the Philippines without license are barred from accessing our
courts. It is ipso facto incapacitated to bring an action.
A license is necessary if its transacting or doing business in the Philippines
By securing a license, the foreign entity would give an assurance that it will abide by the
decisions of our courts, even adverse to it.
Purpose of the statute is to compel a foreign corporation desiring to do business within the
state to submit itself to the jurisdiction of the courts of the state.
In case of a foreign bank which has more than 1 branch in the Phil, all such branches shall be
treated as on unit for the purpose of GBL and all references to the Philippine branches of foreign banks
shall be held to refer to such units.(Sec 74 GBL)
The head office of the foreign bank shall fully guarantee the prompt payment of all the liabilities of
its Phil. Banks. (Sec 75 GBL)
Residents and citizens of the Phil. who are creditors of a branch in the Phil. of a foreign bank shall
have preferential rights to the assets of such branch in accordance with existing laws.
3.
Within the same period, the Monetary Board may authorize any foreign bank, which prior to the
effectivity of GBL availed itself of the privilege to acquire up to 60% of the voting stock of a
bank under RA 7721 and the Thrift Banks Act, to further acquire voting shares of such bank to
the extent necessary for it to own 100% of voting stock thereof.
In the exercise of this authority, the Monetary Board shall adopt measures as may be
necessary to ensure that at all times the control of 70% of the resources and assets of the
entire banking system is held by banks which are at least majority-owned by Filipinos.
Sec 20 of GBL applies to a universal or commercial bank duly established and organized as a
Phil. corporation in accordance with Sec 8 of GBL and authorized to establish branches within
or outside the Phil.
Home Office Guarantee is clearly for protection of the interests of the depositors and other
creditors of local branches of a foreign bank.
The foreign bank cannot use the principle for a reserve purpose, to extend the liability of a
client to the foreign banks Phil. branch to its head office.
Off-setting or compensation of loans with Phil. branch using dollar accounts with a foreign
bank cannot be effected unless otherwise stated in the contract.
B.
Foreign Banks are allowed to entry in the Philippines subject to the ff: rules:
1. Within 7 years from the effectivity of GBL and subject to guidelines issued pursuant to the RA
7721, the Monetary Board may authorize a foreign bank to acquire up to a 100% of the voting
stock of only 1 bank organized under Phil. Laws.
2.
Any of the foregoing right, privilege or incentive granted to a foreign bank shall be equally
enjoyed by and extended under the same conditions to banks organized under the Phil. laws.
33
C.
D.
E.
F.
G.
trustee and the other party involved in the transaction is fully disclosed to the trustor
or beneficiary.
Minimum Capitalization
A trust entity, before it can change in trust or other fiduciary business, shall comply
with the minimum paid-in capital requirement determined by the Monetary Board.
Powers of Trust Entity
1. Act as trustee on any mortgage or bond issued by any municipality, corporation or
any bodily politic and to accept and execute any trust consistent with law;
2. Act under the order or appointment of any court as guardian, receiver or trustee or
depositary of the estate of any minor and as receiver and depositary of any moneys
paid into court by parties and legal proceedings and of property.
3. Act as the executor of any will when it is named the executor.
4. Act as administrator of the estate of any deceased person with the will annexed or as
administrator of the estate of any deceased person when there is no will.
5. Accept and execute any trust for the holding, management and administration of any
estate, real or personal and the rents, issues and profits.
6. Establish and manage common trust funds, subject to such rules and regulations as
may be prescribed by the Monetary Board.
Transactions Requiring Prior Authority
A trustee or fiduciary shall not undertake any of the following transactions for the
account of a client, unless prior to its execution.
o Lend, sell, transfer or assign money or property to any of the departments,
directors, officers, stockholders, or employees of the trustee or fiduciary or to
any corporation where the trustee owns at least 50% of the subscribed or
voting stock.
o Purchase or acquire property or debt instruments from any the DOSRI or to
any corporation where the trustee or fiduciary owns at least 50% of the
subscribed capital or voting stock.
o Invest in equities or in securities underwritten by the trustee or fiduciary or a
corporation in which the trustee or fiduciary owns at least 50% of the
subscribed capital or voting stock.
o Sell, transfer, assign or lend money or property from one trust or fiduciary
account to another trust or fiduciary account except where the investment is
allowed by Monetary Board.
Deposit for the Faithful Performance of Trust Duties
Before transacting trust business, every trust entity shall deposit with the BSP as
security for the faithful performance of its trust duties approved by the Monetary
Board in an amount equal to not less than Php500, 000.00.
Monetary Board shall require every trust entity to increase the amount of its cash or
securities on deposit with BSP.
The paid-in capital and surplus of such entity must be at least equal to the amount
required to be deposited with the BSP in accordance with the above provisions.
A trust entity so long as it shall continue to be solvent and comply with laws or
regulations shall have the rights to collect the interest earned on such securities
deposited with BSP and to exchange the securities for others.
All claims arising out of the trust business of a trust entity shall have priority over all
other claims as regards the cash or securities deposited as above provided.
Bond Requirements
Before an executor, administrator etc. appointed by the court enters upon the
execution of his duties, upon order of the court, file a bond in such sum, as the court
may direct.
Upon the application of any executor, administrator etc. the court may, after notice
and hearing, order that subject matter of the trust.
Upon presentation of the proof to the court that the subject matters of the trust has
been deposited with a trust entity.
The reduced bond shall be sufficient to secure adequately the proper administration
and care of any property remaining under the control of such property.
B.
B.
34
loans or investments as may be prescribed by laws, the Monetary Board or any court
of competent jurisdiction.
Assets received in trust or in other fiduciary capacity shall be administered in
accordance with the terms of the instrument creating the trust or other fiduciary
relationship.
Limitations:
Evidence of indebtedness of the RP and of the BSO and any other evidence of
indebtedness or obligations the servicing and repayment of which are fully
guaranteed by the RP.
Loans fully guaranteed by the RP as to the payment of principal and interest.
Loans fully secured by a holdout on, assignment or pledge of deposits maintained
either with the bank proper or other banks.
Loans fully secured by real estate or chattels in accordance with pertinent laws.
Required Specific Derivatives:
Transaction to be entered in to
Borrowers name
Amount Involved
Collateral security/ies
C.
D.
Any real property acquired or held under the circumstances enumerated above
shall be disposed of by the bank within a period of 5 years provided, that the
bank continue to hold the property for its own use, subject to the following
limitations:
o The total investment in such real estate and improvements including
equipment shall not exceed 50% of combined capital accounts
o The equity investment of a bank in another corporation engaged
primarily in real estate shall be considered as part of the total
investment in real estate, unless otherwise provided by the Monetary
Board.
Investments of funds other than trust funds of a trust entity which is a bank, financing
company or an investment house shall be governed by the relevant provisions of the
GBL and other applicable laws.
E.
F.
G.
H.
Advertisement of Services
Trust entities shall advertise their services in a dignified manner and enter such
business only when demand for such service is evident, when specially equipped to
render such service and upon full appreciation to the responsibilities involved.
I.
Money Government
Banks may receive or hold as trustee, agent, administrator, financial manager or other
similar capacity, any fund or money from the government and government entities,
provided, that government-owned banks may received or hold as trustee the
following:
o Funds of local government units which are expected to be available for
investment purposes for a relatively long period of time, provided, that the
amounts held in trust or otherwise managed/advised for and in behalf of
LGU shall be invested only in government.
o Funds of government and government entities which are authorized by
special laws to be placed in trust.
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III.
Chapter 7
BSP
I.
II.
It has regulatory powers over the operations of banks, finance companies, quasibanks.
36
IV.
A.
V.
The governor shall be the Chief executive officer of the BS with the following powers
and duties:
1.
Prepare the agenda for the meetings and to submit for the
consideration of the board policies and measures which is
necessary to carry out the purpose of NCBA;
2.
Execute and administer policies approved by the board;
3.
Direct and supervise the operations and internal
administration of the BS.
4.
Appoint and fix the remunerations and other emoluments
of personnel below the rank of dept. Head.
5.
Render opinions, decisions, or rulings, which shall be final
and executory until reversed or modified by the MB.
6.
Exercise such other powers as may be vested in him
B. Emergencies
a. In case of emergencies, the governor, with the concurrence of 2 members of
MB, may decide any matter or take any action within the authority of the MB.
b. The governor shall submit a report to the president and the congress within
72 hours after the action has been taken.
c. Governor shall submit his action to the Mb for ratification.
C. Limitations on outside interests of the governor and the full time members of the
board
a. Limit their professional activities to those pertaining directly to their position
with the bangko sentral.
b. Not accept any other employment, whether public or private, remunerated or
ad honorem, with the exceptions of the positions in eleemosynary, civic,
cultural and religious organizations or whenever by designation of the
president, the governor or the full time member is tasked to represent the
interest of the government.
Director, Officer or stockholder and Related Interest
A. Contracting loans
a. Any director, officer, or stockholder who together with his related interest,
contracts a loan or any other form of financial accommodation from his bank
or a bank, shall be required by the lending bank to waive the secrecy of his
deposits
b. Any information obtained from an examination of his deposits shall be held
strictly confidential and may be used by the examiners in connection with
their supervisory and examination responsibility.
Chapter 8
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II.
III.
V.
VI.
Even though the circumstances have not been reached when in its
judgment the circumstances so warrant.
International Monetary Stabilization
A. To preserve the international value of the peso and to maintain its convertibility into other
freely convertible currencies. BS shall maintain international reserves adequate to meet
any foreseeable demands on the BS for foreign currencies.
B. The board shall give special attention to the volume and maturity of the BS owns liabilities
in foreign currencies, to the volume and maturity of the foreign exchange assets and
liabilities of other banks operating in the country.
C. Action when the international stability of the peso is threatened:
a. Whenever:
i. The international reserves of the BS falls to a level which the MB
considers inadequate to meet prospective net demands on the BS for
foreign currencies.
ii. The international reserve appears to be in danger of falling to such a
level
iii. The international reserve is falling as a result of payment or remittances
abroad, which in the opinion of the MB is contrary to national welfare.
The monetary board shall:
38
VIII.
IX.
A.
X.
XI.
XII.
Interest and rediscount. BSP has the power to charge interests and rediscounts on all
loans and advances it extends.
B. MB may prescribe, within the general powers granted to it under the NCBA, additional
conditions which the institution must satisfy.
C. Provisional advances to the National Government. The BS may make provisional interests
to the government with or without interest, provided that:
a. It must be repaid before the end of 3 months and extendible by another 3 months
as the MB may allow.
b. Shall not in their aggregate, exceed the 20 % of the average annual income of
the borrower for the last three preceding fiscal years.
Open Market Operations for the Account of the BS
A. Purchases and sales of government securities. The BS may buy and sell in the open
market for its own account:
a. Evidence of indebtedness issued by the government
b. Same; issued by government instrumentalities fully guaranteed by the
government
c. The evidence of indebtedness must be freely negotiable and regularly serviced
and must be available to the general public.
Composition of BSs portfolio
A. At least once every month the MB shall review the portfolio of the BS in relation to its
future credit policy. In reviewing the portfolio, MB shall take into consideration whether a
sufficiently large part of the portfolio consists of assets with early maturities, in order that a
contraction in BS credit may be effected promptly whenever the national monetary policy
so requires.
Bank reserves
A. Reserve requirements
a. In order to control the volume of money created by the credit operations of the
banking system, banks are required to maintain reserves against their deposit
liabilities. The required reserves of each bank shall be proportional to the volume
of its deposit liabilities and shall ordinarily take the form of a deposit in the BS.
Reserve requirements shall be applied to all banks of the same category
uniformly and w/o discrimination.
b. The MB may exempt from reserve requirements deposit and deposit substitutes
with remaining maturities of two years or more, as well as interbank borrowings.
c. BS shall not pay interest on the reserves maintained with it, unless the MB
decides otherwise as warranted by the circumstances.
B. Deposit substitutes are alternative form of obtaining funds from the public, other than
deposits, through the issuance, endorsement, or acceptance of debt instruments for the
borrowers own account, for the purpose of relending or purchasing of receivables and
other obligations. Provided that, commercial, industrial and non-financial companies for
the limited purpose of financing their own needs shall not be covered by this provision.
C. Required reserves against peso deposits. The MB may fix and alter the minimum reserve
ratios to peso deposits, as well as to deposit substitutes, which each bank and quasi bank
may maintain.
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
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XIII.
XIV.
XV.
XVI.
The purpose of these operations shall be to increase the liquidity and stabilize the value of
the said securities in order thereby to promote investment in government obligations.
Functions as financial advisor of the government
A. Before undertaking any credit operation abroad, the government must secure the advice
of the MB on the monetary implications of the contemplated action.
B. The opinion of the MB shall be based on the gold and foreign exchange resources and
obligations of the nation and on the effects of the proposed operation on the balance of
payments and on monetary aggregates.
Privileges
A. The BS shall be exempt for a period of 5 years from the approval of the NCBA from all
taxes.
B. The exemption shall apply to all property of the BS, to the resources, receipts,
expenditures, profits and income of the BS, as well as to all contracts, deed, documents
and transactions related to the conduct of the business of the BS.
C. The BS shall also be exempted from custom duties, a) the importation and exportation by
the BS of notes and coins, and of gold and other metals to be used for purposes
authorized under the NCBA, b) importation of equipment needed for bank note production,
minting of coins, metal refining and other security printing operations.
D. The civil service law shall also apply to the appointments in the BS except those which are
policy-determining, primarily confidential, and highly technical. Provided that no
qualification requirements for positions in the BS shall be imposed other than those set by
the MB. Officers and employees shall not engage directly or indirectly in partisan activities
or take part in any election except to vote.
CHAPTER 9
UNCLAIMED BALANCES AND TRUST RECEIPTS
Unclaimed Balance
Credits or deposits or other evidence of indebtedness of an kind with banks, loan
associations and trust corporations (BLT) in favor of any person known to be dead or who has
not made further deposits or withdrawals during the preceding ten years or more.
Unclaimed balance and increase in proceeds shall be deposited with the Treasurer of
the Philippines to be used as National Assembly may direct.
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Reclassification
Reversion of land held under feudal tenure to the manor in the absence of legal heirs
or claimants
Procedure
1.
2.
3.
4.
5.
6.
7.
8.
9.
Every January of every odd year, all BLT shall forward to Treasurer a statement
under oath of managing officers af all credits and deposits held by them in favor
of persons known to be dead, or who have not made further deposits or
withdrawals during the preceding ten years or more. It shall include:
a. Names and addresses of persons with unclaimed balance
b. Amount and date
c. Date of Death
d. Interest due
Copy of sworn statement shall be posted in a conspicuous place in said
establishments
BLT shall immediately before filing statement, communicate with person with
unclaimed balance.
Sol-Gen shall commence action in behalf of People of the Philippines in the RTC
where BLT is located.
Summons shall be made to president, cashier or managing officer of defendant
BLT
Clerk of Court shall also issue a notice
Notice shall be published
Any interested person may become a party
Hearing
a. Unclaimed court shall render judgment in favor of government
declaring unclaimed balances escheated to Government, to be
deposited to Treasure to the credit of the Government
Penalties
Refusal to make and file a sworn statement, 500 pesos a month for each month or
fraction upon continuance of default.
Immunity from suit
1. BLT which shall make any deposit of unclaimed balances with the Treasurer of the
Philippines.
2. Defended by the Sol-Gen without cost
Service and Maintenance Fees on Dormant Accounts
Banks may impose service or maintenance fees on dormant or inactive accounts
provided that period of dormancy must first be properly disclosed among the terms and
conditions of the deposit.
All unclaimed balances reported to the Treasurer of the Philippines must first be
reclassified or transferred from the deposit/liability to the liability account due to the Treasurer
of the Philippines before being turned over. Unclaimed deposit liabilities shall no longer be
covered by reserves required of deposit liabilities.
Escheats Under the Rules of Court
1.
2.
3.
4.
When a person dies intestate with no heir, Sol-Gen in behalf of Philippines may
file with RTC of province of residence praying that estate of deceased by
declared escheated.
Order for hearing shall not be more than 6 months after entry of order, copy of
order be published in news paper of General circulation for 6 successive weeks.
Hearing the person died intestate, seized real or personal property in the
Philippines leaving no heir and no cause to show contrary, court shall adjudge
the estate of deceased after paying debts and charges shall escheat.
Claim to estate People entitled to such estate claims within 5 years from the
date of the judgment
Art. 1013.
After the payment of debts and charges, the personal property shall be assigned to
the municipality or city where the deceased last resided in the Philippines, and the
real estate to the municipalities or cities, respectively, in which the same is situated.
If the deceased never resided in the Philippines, the whole estate shall be assigned to
the respective municipalities or cities where the same is located.
Such estate shall be for the benefit of public schools, and public charitable institutions
and centers, in such municipalities or cities. The court shall distribute the estate as
the respective needs of each beneficiary may warrant.
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A trust receipt binds the entrustee to hold the designated goods, documents or
instruments in trust for the entruster and to sell or otherwise dispose of them with the obligation
to turn over the proceeds to the entruster to the extent of the amount owing to the entruster.
Art. 1014.
If a person legally entitled to the estate of the deceased appears and files a claim
thereto with the court within five years from the date the property was delivered to the
State, such person shall be entitled to the possession of the same, or if sold the
municipality or city shall be accountable to him for such part of the proceeds as may
not have been lawfully spent.
Trust Receipts
Policy
1.
2.
3.
or instruments releases the same to the possession of the entrustee upon the latters
execution and delivery to the entruster of a signed document called a trust receipt.
Definition
Entrustee any person having or taking possession of goods, documents or
instruments under a trust receipt transaction. Or any of his successors in interest.
Entruster any person holding title over the goods, documents or instruments subject
of a trust receipt transaction. Or any of his successors in interest.
Security Instrument property interest in goods, documents or instruments to secure
performance of some obligations or entrustee
Trust Receipt written or printed document signed by the entrustee in favor of
entruster containing terms and conditions substantially complying with provisions of Trust
Receipts Law
Trust Receipt Transaction
Any transaction by and between an entruster and an entrustee whereby the entruster
who owns or holds absolute title or security interests over certain specified goods, documents
Other purposes:
1.) Goods or documents
a. Sell the goods or procure their sale
b. Manufacture or process goods for sale
c. Load, unload, ship, transship
2.) Instruments
a. Sell or procure their sale or exchange
b. Deliver them to a principal
c. Effect consummation
d. Effect presentation and collection
There are two situations in a trust receipt transaction:
1. Money received under obligation to deliver it (entregarla)
2. Merchandise received under the obligation to return it
(devolvera)
Trust receipt is a separate and independent security transaction intended to aid in
financing importers whereby the imported goods are held as security by the lending institution
for the loan obligation.
Spouses Vintola vs. Insular Bank of Asia and America explained the nature and
usage.
Transaction involves a loan feature represented by the Letter of Credit and
security feature which is in the covering trust receipt.
* Trust Receipt document in which is expressed a security transaction where the
lender having no prior title to the goods and not having possession lends his money to the
borrower who has possession on security of the goods which the borrower is privileged to sell
with an agreement to pay all or part of the proceeds to the lender.
Form of Trust Receipts
Need not be in a particular form. But must contain:
1. Description of the goods, document or instrument subject to trust receipt
2. Total invoice value of the goods and amount of the draft
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42
Currency
Rights of Entruster
2.
3.
4.
2.
3.
4.
5.
6.
Innocent purchaser for value acquires goods free from entrusters security interest.
Violation of Trust Receipts Law
Although is it malum prohibitum, the intent to misuse or misappropriate the goods
should be proved. Because the Law punishes the dishonesty and abuse of confidence.
Entitled to proceeds from the sale released under a trust receipt to the entrustee
to the extent of the amount owing to the entruster or as appears in the trust
receipt or return of the goods incase of a non-sale
May cancel the trust and take possession of the goods subject of the trust receipt
upon default or failure of entrustee to comply with any of the terms and
conditions of the trust receipt.
Proceeds shall be applied
a. To the payment of the expenses
b. To the payment of expenses of re-taking, keeping and storing of goods
c. Satisfaction of entrustees indebtedness
Entrustee shall receive any surplus but shall be liable to entruster for any
deficiency
The risk of Loss shall be borne by the entrustee, irrespective of whether or not it was
due to the fault of the entrustee.
Rights of Purchaser for Value and Good Faith
Trust receipt may be denominated in any foreign currency acceptable provided that in
the case denominated in foreign currency, payment shall be made in Philippine currency
equivalent to it.
1.
Hold the goods in trust for the entruster and dispose of them strictly in
accordance with the terms of the rust receipt
Receive the proceeds in trust for the entruster and turn over the same to the
entruster
Insure the goods for their total value against loss and other casualties
Keep goods separate and capable of identification as property of entruster
Return the goods in the event of a non-sale or demand of the entruster
Observe all other terms and conditions of the trust receipt
Application
Applies to items:
1. Destined for sale
2. Processed as a component of a product ultimately sold
3. Used to repair and maintain equipment in business
Penalty
Failure of Entrustee to turn over proceeds of the sale of goods covered by the trust
receipt shall constitute the crime of ESTAFA.
CHAPTER 10
DEPOSIT INSURANCE
Roles of PDIC
1) It shall ensure the deposits of all banks which are entitled to the benefits of insurance and
which shall have to powers granted by law
2) It shall promote and safeguard the interests of the depositing public by way of providing
permanent and continuing insurance coverage on all insured deposits
3) PDIC shall be entitled to the free use of Philippine mail in the same manner as the other
offices of the national government
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
43
1) to issue rules and regulations as it considers necessary for the effective discharge of its
responsibilities
2) to direct the management, operation and administration of PDIC
3) to establish human resources management
4) to appoint, establish the rank, fix the remuneration, approve local and foreign training of,
and remove any officer or employee for a cause, subject to pertinent civil service laws.
5) to adopt an annual budget
6) to approval the methodology for determining the level and amount of provisioning for
insurance and financial assistance losses which shall establish reasonable levels of deposit
insurance reserves
Officers
1) President
2) VP
3) Bank Examiners
4) Claim agents
5) Investigators
Deposit insurance coverage
A) Deposit Liabilities
i) deposit liabilities of any bank or banking institution which is engaged in the business
of receiving shall be insured with the PDIC .
ii) factors considered
Financial history and condition of the bank
Adequacy of its capital structure
Future earning prospects
General character of its management
Convenience and needs of the community to be served by the bank and
whether or not its corporate powers are within the purposes of the PDIC
The term deposit, unpaid balance of money or its equivalent received by
a bank in its usual course of business and for which it has given or its
obliged to give credit
B) Statutory Liability of PDIC
PDIC governed primarily by the provisions of the special law creating it. The liability of the PDIC for
insured deposits therefore is statutory and such liability rests upon the existence of deposits with the
insured bank.
44
45
46
47
Unlawful Activities
Chapter 11
Anti-Money Laundering
Money Laundering - a crime whereby the proceeds of an unlawful activity are transacted thereby
making them appear to have originated from legitimate sources.
3 Steps of accomplishing:
1.
2.
3.
Policies of AMLA
1.
2.
3.
Institutions Covered
1.
2.
3.
4.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Jurisdiction
RTC private persons
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
48
Public Officers
Public Officers and private persons in conspiracy
AMLC Composition
1.
2.
3.
Functions of AMLC
1.
2.
To complete legal measures to prevent money laundering, the AMLC may inquire into or
examine any particular deposit or investment with any banking institution or non-bank financial
institution upon order of any competent court incases of violation, it must be established that:
1. There is probable cause that deposits are related to unlawful activity or Money laundering
offense
No court order:
1. Kidnapping for Ransom
2. DDA
3. Hi-Jacking
4. Destructive Arson and murder
BSP may inquire into or examine any deposit when examination is made in the course of a
periodic or special examination.
Republic vs. Eugenio
Sec. 11 of RA 9194 allows AMLC to inquire into bank accounts without having to obtain
a judicial order in cases where there is probable cause that deposits or investments are
related to:
1.
2.
3.
4.
Institutions shall establish and record true identity of its clients based on official
documents
Maintain a system of verifying true identity of their clients
Anonymous accounts, accounts under fictitious names are prohibited
Peso and foreign currency non-checking numbered accounts shall be allowed
When court order is required, there is no provision which provides that specifically authorizes
such court may be issues ex parte, this silence does not preclude the ex parte issuance of the
bank inquiry order as it is not prohibited.
A Bank inquiry is not a search warrant or warrant of arrest as it contemplates a direct object
but not the seizure of persons or property.
Because of Bank Secrecy Act, the confidentiality of bank deposits remains a basic state policy
in the Philippines. Subsequent laws such as AMLA may have added exceptions to the Bank
Secrecy Act yet the secrecy of Bank deposits still lies as the general rule.
49
2.
Court may, instead of enforcing the order of forfeiture, order the convicted offender to pay an
amount equal to the value when order cannot be enforced because:
1. Property cannot, with due diligence be located
2. Substantially altered, destroyed, diminished in value or otherwise rendered worthless
through an act attributable to the offender
3. Concealed, removed, converted or transferred to prevent from being found
4. Located outside the Philippines or has been placed or brought outside the jurisdiction of
the court
5. Commingled with other monetary instruments or property belonging to offender or third
persons rendering the same difficult to identifyor segregated for purposes of forfeiture
3.
4.
5.
6.
7.
8.
State the grounds on which any person is being investigated or prosecuted for money
laundering or details of his conviction
Give sufficient particulars as to identity of said person
Give particulars sufficient to identify any covered institution believed to have information
Ask from covered institution any information of assistance
Specify manner in which material is to be produced
Give particulars n issuance of writs, or orders needed by the requesting State
Contain information as may assist in execution of request
Authentication of Documents
Authenticated if:
1. Signed or certified by a judge, magistrate or equivalent officer in or of the
requesting State
2. Authenticated by the oath or affirmation of a witness or sealed with official or
public seal
AMLC may execute a request for assistance from a foreign State by:
a. Tracking down, freezing, restraining and seizing assets to be proceeds of any
unlawful activity
b. Giving information needed by the foreign state
c. Applying for an order of forfeiture of such property
Extradition
Philippines shall negotiate for the inclusion of money laundering offenses among extraditable
offenses in all future treaties.
Prohibitions Against Political Harassment
1.
AMLC may make a request to any foreign State for assistance in:
a. Tracking down, freezing, restraining and seizing assets alleged to be proceeds of
any unlawful activity
b. Obtaining information that it needs relating to covered transactions
c. Enter any premises belonging to persons named in said request
d. Applying for order of forfeiture
Limitations
May refuse to comply with any request for assistance where the action sought by the request
contravenes any provision of the Constitution or the execution of a request is likely to prejudice the
national interest of Philippines unless a treaty so provides.
3.
Should take reasonable measures to establish and record the true identity of their clients.
In case of doubt as to whether their purported clients or customers are acting for
themselves or for another, reasonable measures should be taken to obtain the true
identity of the persons on whose behalf an account is opened
Anonymous accounts or accounts under fictitious names should not be kept or allowed,
unless provided by law
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
50
CHAPTER 12
SPECIAL PURPOSE VEHICLE
A.
iii. a financing company as defined under Republic Act No. 8556, also known as "The
Financing Company Act of 1998";
iv. an investment house as defined in Presidential Decree No. 129, also known as "The
Investment Houses Law";
v. government financial institutions (GFIs), which for purposes of this Act, shall be limited to the
Philippine Deposit Insurance Corporation (PDIC), Land Bank of the Philippines (LBP), and Development
Bank of the Philippines (DBP);
vi. government-owned-or-controlled-corporations (GOCCs),which for purposes of this Act, shall
be limited to the National Home Mortgage Finance Corporation (NHMFC), Home Guarantee
Corporation (HGC), Home Development Mutual Fund (HDMF), Social Security System (SSS),
Government Service Insurance System (GSIS), Trade and Investment Development Corporation
(TIDCORP), Small Business Guarantee and Finance Corporation (SBGFC), Technology and Livelihood
Resource Center (TLRC), Livelihood Corporation (LIVECOR), National Development Corporation
(NDC), Quedan and Rural Credit Guarantee Corporation (QUEDANCOR), National Housing Authority
(NHA), and Armed Forces of the Philippines- Retirement and Separation Benefits System (AFP(RSBS); and
vii. other institutions licensed by the BSP to perform quasi-banking functions.
10. INVESTMENT UNITS (IUIs)- participation certificates, debt instruments or similar instruments
issued by the SPV and subscribed by Permitted Investors as provided in Section 11 hereof, pursuant to
an Approved Plan: Provided, That these shall not include the instruments to be issued by the SPV to the
selling FIs as full or partial settlement of the non-performing assets transferred to the said SPV:
Provided, further, That such issuances of the SPV shall not be considered as deposit substitutes:
Provided, finally, That these shall not form part of the capital stock of the SPV.
11. NIRC- the National Internal Revenue Code of 1997, as amended.
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51
ii. To rent, lease, hire, pledge, mortgage, transfer, sell, exchange, usufruct, secure, securitize,
collect rents and profits, and other similar acts concerning its NPAs acquired from an FI;
iii. In case of NPLs, to restructure debt, condone debt and undertake other structuring debt, the
SPV may reduce the principal, interest, interest rates, and the period for calculating the interest, extend
the time for debt repayment or relax the conditions for debt repayment, agree to the conversion of the
borrowers debt to equity in the borrower's business, agree to a transfer of assets or claims from the
borrower t repay the debtor dispose of some of the borrower's property or claims to third persons;
iv. To take, transfer shares or buy shares issued by the borrower for the purpose of business
reorganization or rehabilitation of the borrower, subject to the provisions of the Corporation Code in
respect of the rights of the shareholders of the borrower company, and apply any other measures or
restructuring techniques with the approval of the Commission;
v. To enter into dation in payment (dation en pago) arrangements, foreclose judicially or extrajudicially and other forms of debt settlement involving NPLs;
vi. To spend funds to renovate, improve, complete or alter its NPAs acquired from an FI;
i. The transferor relinquishes effective control over the transferred NPAs; and
ii. The transferred NPAs are legally isolated and put beyond the reach of the transferor and its
creditors.
C. Organization
An SPV shall be organized as stock corporation in accordance with Batas Pambansa Blg. 68, otherwise
known as "The Corporation Code of the Philippines" and the rules promulgated by the Commission for
purposes of registering the SPV: Provided, That if the SPV will acquire land, at least sixty percent (60%)
of its outstanding capital stock shall be owned by Philippines nationals pursuant to Republic Act
No7042, as amended, otherwise known as "The Foreign Investment Act".
D. Powers of an SPV
-incorporated primarily to invest in, or acquire NPAs of FIs.
-secondary powers shall be limited to the following:
i. To engage third parties to manage, operate, collect and dispose of NPAs acquired from an
FI;
vii. To issue equity or participation certificates or other forms of IUIs for the purpose of
acquiring, managing, improving and disposing of its NPAs acquired from an FI;
viii. To borrow money and issue other instruments of indebtedness for the purpose of paying
operational administrative costs;
ix. To guarantee credit, accept or intervene for honor the bills of borrowers;
x. To advance funds to borrowers where required by an acquired asset or any debt
restructuring agreement pursuant thereto, or under any court order or rehabilitation plan; and
xi. To entrust to third parties asset servicing company, the collection and receipt of the debt
payments for debts under debt restructuring business reorganization, management and disposition of
assets of the SPV in accordance with the rules, procedures and conditions prescribed by the
Commission or by the courts. Except in the case of ROPOAs whose redemption periods have already
expired, the SPV shall notify the borrower and all persons holding prior encumbrances upon the
properties or a part thereof or are actually holding the same adversely to the borrower within fifteen (15)
days from the date of the appointment of the said collection agent.
E. Period for Filing of Applications
52
The Articles of Incorporation of the SPV, its by-laws and other documentary requirements shall
be filed with the Commission not beyond eighteen (18) months from the date of approval of the
Implementing Rules and Regulations (IRR) by the Congressional Oversight Committee (COC)
created in Section 23 of the Act.
(b) Contribution plan including the amounts and draft of subscription documents;
(c) Features of the IUIs including the specific amounts issued and/or to be issued;
(d) timetable of issuance;
only SPVs whose applications are filed not later than the 18-month period and are
subsequently approved by the Commission shall qualify for the tax exemptions and
privileges granted under the Act.
Registration Requirements- shall submit to the Commission the ff. documents for
incorporation:
(1) Name Verification Slip, showing its proposed name which shall always include the acronym
SPV-AMC (Asset Management Company) appended thereto;
(h) Roles and responsibilities of the trustees, advisors, loan servicers and property managers;
(4) Bank Certificates of Deposits (notarized in the place where the bank is located)
(k) Methods for the increase and decrease of future fund contribution;
(l) Methods for the alteration or modification of the approved SPV Plan;
(m) Methods for the liquidation and distribution of assets to the holders of IUIs;
An SPV shall have a minimum authorized capital stock of Five hundred million pesos
(P500, 000,000.00), with a minimum subscribed capital stock of One hundred twenty five
million pesos (P125, 000.000.00), and a minimum paid-up capital of Thirty-one million two
hundred fifty thousand pesos (P31, 250.00). Paid-up capital must be in the form of cash.
(n) Details of credit enhancements like guarantees or standby letters of credit or advances that
may be extended to the SPV by an entity which shall not be the selling FI, its parent,
subsidiaries or affiliates; and
(o) Such other documents or information as may be required by the Commission.
H. Approval
- Upon approval of the SPV Plan, the Commission shall issue an Approval certificate stating that the
application has been approved and that the IUIs may be issued.
I. Issuance of IUIs
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(5) SPV shall pay registration fee of 1/10 of 1% of the aggregate offering price of the IUIs
subject to a diminishing fee set by the Commission.
(6) SPV shall cause the publication of a notice of filing of registration statement at its expense
v. Market of Securities
- 2 newspapers of gen. circulation in the Philippines, once a week for two consecutive weeks
(7) Commission may audit the financial statements, assets and other information of an SPV
applying for registration of an IUIs
(8) Upon registration statement being declared effective by the Commission, the sale of
securities subject thereto shall be commenced within two business days and be continued until the end
of the offering period or until the sale has been terminated by action of the issuer.
(9) SPV shall ensure wide dissemination of the preliminary and final prospectuses
(10) Written notification shall be given to the Commission within 3 business days from
completion or termination of the offering by the issuer, including therein the number of securities sold.
(3) The ff. information shall be disclosed in the registration statements of an SPV:
(b) Amendments or Rejection
i. Details of SPV Plan
ii. Details of credit enhancements like guarantees or standby letters of credit
iii. Detailed description of the assets or loan constituting the pool of assets; or the assets or
loan intended to form part of the pool of assets
iv. Rights and obligations of the selling financial institution/s assumed by the SPV
v. Description of any relationship or interest of the selling financial institutions Parent,
Subsidiaries, Affiliates or stockholders, directors or officers, with the SPV.
(1) Within 45 days after the date of filing of the registration statement, or at such later date to
which the issuer has consented, the Commission shall declare the registration statement effective or
rejected unless the applicant is allowed to amend the registration statement.
(2) Commission may reject a registration statement and refuse registration of the security
therunder, or revoke the effectivity of a registration statement and the registration of the security after
due notice and hearing by issuing an order to such effect, setting forth its findings in respect thereto, if it
finds that:
i. The issuer:
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
54
J. Permitted Investors
Any person may acquire or hold IUIs in an SPV in the minimum amount of Ten million pesos (P10,
000.000.00); Provided, That an SPV shall not be authorized to acquire the IUIs of another SPV:
Provided, further, That the parent, subsidiaries, affiliates or stock-holders, directors, officers or any
related interest of the selling FI or the parent's subsidiaries, affiliates or stock-holders, directors, officers
or any related interest shall not acquire or hold, directly or indirectly, the IUIs of the SPV that acquired
the NPAs of the FI.
K. Notice and Manner Of Transfer of Assets
(a) Prior Notice
- No transfer of NPLs to an SPV shall take effect unless the FI concerned shall give prior notice,
pursuant to the Rules of Court, thereof to the borrowers of the NPLs and all persons holding prior
encumbrances upon the assets mortgaged or pledged. Such notice shall be in writing to the borrower
by registered mail at their last known address on file with the FI. The borrower and the FI shall be given
a period of at most ninety (90) days upon receipt of notice, pursuant to the Rules of Court, to restructure
or renegotiate the loan under such terms and conditions as may be agreed upon by the borrower and
the FIs concerned.
(b) Procedures on the Transfer of Assets to the SPV
An FI that intends to transfer its NPAs to an SPV shall file an application for eligibility of said NPAs, in
the prescribed format, with the Appropriate Regulatory Authority having jurisdiction over its operation.
Said application shall be filed for each transfer of asset/s.
(c ) Issuance of the COE
- The transfer of NPAs from an FI to an SPV shall be subject to prior certification of eligibility as NPA by
the appropriate regulatory authority having jurisdiction over its operations, which shall issue its ruling
within forty-five (45) days from the date of application by the FI for eligibility.
(d) Subsequent Notice
- After the sale or transfer of the NPLs, the transferring FI shall inform the borrower in writing at the last
known address of the fact of the sale or transfer of the NPLs.
(e) Subsequent Transfers
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2.
3.
If the offender is a juridical person, the court may order the suspension or revocation of
license.
If the offender is an alien, he shall, in addition to the penalties herein prescribed, be
deported without further proceedings after serving the penalties herein prescribed.
If the offender is a public official or employee, he shall, in addition to the penalties
prescribed herein, suffer absolute or temporary disqualification from government or
public office, as the case may be.
4.
5.
Any person who violates any of the provisions of this Act, or any person who, in a
registration statement, notice, certification or plan filed under this Act, makes any
untruthful statement of a material fact or omits to state any material fact required to be
stated therein, shall, upon conviction, suffer a fine of not less than Fifty thousand
pesos (P50,000.00) nor more than One million pesos (P1,000,000.00) or
imprisonment of not less than six (6) years and one (1) day nor more than twelve
(12) years, or both, in the discretion of the court, without prejudice to the penalties
provided under Sec. 18 hereof and other applicable laws.
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal