Banking Laws

REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS [1]
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BANKING LAWS
1. General Banking Law (R.A. 8791)
1.1. Definition of Banks
1.2. Loans
1.3. SBL
1.4. DOSRI
2. The New Central Bank Act
2.1. Legal tender power over coins and note
2.2. Conservatorship
2.3. Receivership and Closures
3. PDIC Law
3.1. Insurable deposits
3.2. Maximum liability
3.3. Requirements for Claims
4. Secrecy of Bank Deposits (R.A. 1405) and Unclaimed Balances Law
5. AMLA Law
5.1. Covered transactions
5.2. Suspicious transactions
5.3. Reportorial Requirement
GENERAL BANKING LAW of 2000 (R.A. 8791)

POLICY
To promote and maintain a stable and efficient banking and financial system that is globally competitive, dynamic and
responsive to the demands of a developing economy. (Sec. 2)
DEFINITION AND CLASSIFICATION OF BANKS

Banks shall refer to entities engaged in the lending of funds obtained in the form of deposits. (Sec. 3.1, GBL)
- CORE BANKING FUNCTIONS
I. Taking of deposits from the public
II. Lending out these funds
- CLASSIFICATION OF BANKS
I. Universal Banks (UB) – These used to be called expanded commercial banks and their operations are
primarily governed by the GBL. They can exercise the powers of an investment house and invest in
non-allied enterprises. They have the highest capitalization requirement.
II. Commercial Banks (KB) – These are ordinary or regular commercial banks, as distinguished from a
universal bank. They have a lower capitalization requirement than a UB and cannot exercise the
powers of an investment house and invest in non-allied enterprises.
III. Thrift Banks – These are:
a. Savings and mortgage banks;
b. Stock savings and loan associations; and
c. Private development banks (Sec. 3.2)
Note: The term ‘thrift banks’ also refers to any banking corporation organized for the following
purposes:
(i) Accumulating the savings of depositors and investing them, together with capital loans secured by
bonds, mortgages in real estate and insured improvements thereon, chattel mortgage, bonds and other
forms of security or in loans for personal or household finance, whether secured or unsecured, or in
financing for homebuilding and home development; in readily marketable and debt securities; in
commercial papers and accounts receivables, drafts, bills of exchange, acceptances or notes arising
out of commercial transactions; and in such other investments and loans which the Monetary Board
may determine as necessary in the furtherance of national economic objectives;
(ii) Providing short-term working capital, medium- and long-term financing, to businesses engaged in
agriculture, services, industry and housing; and
(iii) Providing diversified financial and allied services for its chosen market and constituencies especially
for small and medium enterprises and individuals. (Sec.3(a), R.A. 7906)
IV. Cooperative Banks – These are banks organized primarily to make financial and credit services
available to cooperatives and their members. It may perform any or all of the services offered by a rural
bank, including the operation of an FCDU subject to certain conditions
Note: A cooperative bank is one organized for the primary purpose of providing a wide range of
financial services to cooperatives and their members. (Art. 23(i), R.A. 9520)
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V. Islamic Banks – These are banks the business dealings and activities of which are subject to the basic
principles and rulings of Islamic Shari’a. The Al Amanah Islamic Investment Bank of the Philippines,
which was created by RA 6848, is the only Islamic bank in the country at this time.
Note: Islamic Bank refers to the Al-Amanah Islamic Investment Bank of the Philippines, created under
R.A. 6848. (See Sec. 44(1) and Sec. 2, R.A. 6848)
VI. Rural Banks – Mandated to make needed credit available and readily accessible in the rural areas on
reasonable terms and which are primarily governed by the Rural Banks Act of 1992 (RA 7353)
VII. Other Classifications of Banks – As determined by the Monetary Board, i.e., Philippine Veterans Bank
(RA 3518), Landbank of the Philippines (RA 3844), Development Bank of the Philippines (RA 85)
DISTINCTIONS BETWEEN BANKS, QUASI-BANKS AND TRUST ENTITIES
AS OPPOSED TO QUASI-BANKS
 Quasi-banks (QB) refer to entities engaged in the borrowing of funds through the issuance, endorsement or
assignment with recourse or acceptance of deposit-substitute instruments, for purposes of relending the
funds so borrowed or using them to purchase receivables and other obligations. (last paragraph of Sec. 4)
 The term “deposit substitutes” is defined as funds obtained from the public, other than deposits, through the
issuance, endorsement, or acceptance of deposit-substitute instruments for the borrower's own account, for
the purpose of relending or purchasing of receivables and other obligations. It includes bankers
acceptances, promissory notes, participations, certificates of assignment and similar instruments with
recourse, and repurchase agreements.
AS OPPOSED TO TRUST ENTITIES

 A Trust Entity is a stock corporation or a person duly authorized by the Monetary Board to engage in trust
business.
 A Trust Business is any activity resulting from trusteeship involving the appointment of a trustee by a trustor
for the administration, holding, management of funds and/or properties of the trustor by the trustee for the
use, benefit or advantage of the trustor or of beneficiaries.
LOANS
“Know your customer” rule

- Before granting a loan or other credit accommodation, a bank must ascertain that the debtor is capable of
fulfilling its commitments to the bank.
- The bank may demand from its credit applicants a statement of their assets and liabilities and of their
income and expenditure and such information as may be prescribed by law or by rules and regulations of
MB to enable the bank to properly evaluate the credit application which includes the corresponding financial
statements submitted for taxation purposes to the BIR.
Credit enhancement
- If the borrower is less than creditworthy, third persons may enhance his credit by providing guarantees and
other security devices in favor of the bank.
NOTE: A bank cannot lend pesos to a nonresident (BSP Circular No. 22; Sec. 22, Manual of Regulations on Foreign
Exchange Transactions).
If there is material misrepresentation, the bank may:

(a) Terminate any loan or other credit accommodation granted on the basis of said statements; and
(b) Shall have the right to demand immediate repayment or liquidation of the obligation (Sec. 40)
Limit on Loans, Credit Accomodations and Guarantees

Real Estate General rule: Shall not exceed 75% of the appraised value of the respective real estate
security, plus 60% of the appraised value of the insured improvements, and such loans
may be made to the owner of the real estate or to his assignees
Exception: The Monetary Board otherwise prescribes (Sec. 37)
Security of chattels and General rule: Shall not exceed 75% of the appraised value of the security, and such
intangible properties loans and other credit accommodations may be made to the title-holder of the chattels
(patents, trademarks, and intangible properties or his assignees
trade names, and Exception: The Monetary Board otherwise prescribes (Sec. 38)
copyrights)
Grant of loans
(a) Only in amounts and for the periods of time essential for the effective completion of the operations to be financed;
and
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(b) Consistent with safe and sound banking practices. (Sec. 39)
Purpose of loans
- Purpose must be stated in the application and in the contract between the bank and the borrower. (Sec. 39)
Effect of usage of loan proceeds for purposes other than those agreed upon with the bank
- The bank shall have the right to terminate the loan or other credit accommodation and demand immediate
repayment of the obligation. (Sec. 39)
Amortization on loans and other credit accommodations

(a) In case of loans and other credit accommodations with maturities of more than 5 years, provisions must be made
for periodic amortization payments, but such payments must be made at least annually: Provided, however, That
when the borrowed funds are to be used for purposes which do not initially produce revenues adequate for regular
amortization payments therefrom, the bank may permit the initial amortization payment to be deferred until such time
as said revenues are sufficient for such purpose, but in no case shall the initial amortization date be later than 5
years from the date on which the loan or other credit accommodation is granted.
(b) In case of loans and other credit accommodations to microfinance sectors, the schedule of loan amortization shall
take into consideration the projected cash flow of the borrower and adopt this into the terms and conditions
formulated by banks. (Sec. 44)
All are subject to such rules as the Monetary Board may promulgate. (Sec. 29, GBL)
DILIGENCE REQUIRED OF BANKS

Banks should observe diligence that is higher than that expected from a good father of a family.
FIDUCIARY NATURE OF BANKS

(1) Failure on the part of the bank to satisfy the degree of diligence required of banks may warrant the award of
damages.
(2) Under Sec. 2, the degree of diligence is “high standards of integrity and performance” and no longer “highest
degree of diligence” as was decided prior to the effectivity of the General Banking Law of 2000 but also (mistakenly)
even thereafter.
SINGLE BORROWER’S LIMIT (SBL)
Purpose
To prevent the bank from making excessive loans and other credit accommodations to a single borrower or corporate
group, including guarantees for the account of such borrower or group. The bank is prohibited from… placing many
eggs in the basket of one client. [It] is a damage control mechanism [and] a device for risk amelioration.
General rule: The total loans, credit accommodations and guarantees that may be extended by a bank to any person,
partnership, association, or corporation or other entity shall at no time exceed 20% of the net worth of such bank.
(Sec. 35.1,GBL)
Exceptions:
(1) The Monetary Board otherwise prescribes for reasons of national interest. (Sec. 35.1, GBL) Now, the single
borrower’s limit is 25% of the net worth of the lending bank.
(2) Wholesale lending activities of government banks to participating institutions for relending to end-user borrowers:
separate limit of 35% net worth. (BSP Circular No. 425 dated March 25, 2004)
Increase of limit
The Monetary Board may increase the limit prescribed by an additional 10% of the net worth, when:
(1) The additional liabilities of any borrower are adequately secured by trust receipts, shipping documents,
warehouse receipts or other similar documents transferring or securing title;
(2) Covering readily marketable, non-perishable goods; and (3) Which must be fully covered by insurance (Sec. 35.2,
GBL)
Basis for determining compliance

The basis for determining compliance with the SBL is the total credit commitment of the bank to the borrower. (Sec.
35.1, GBL)
RESTRICTIONS ON INSIDER LENDING:

BANK EXPOSURE TO DIRECTORS, OFFICERS, STOCKHOLDERS AND THEIR RELATED INTERESTS (DOSRI)
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Purpose
The general policy behind DOSRI rules is to level the lending field between the “insiders” and the “outsiders”. The
objective is to prevent the bank from becoming a captive source of finance for DOSRI.
General rule: No director or officer of any bank:

(1) Shall, directly or indirectly, for himself or as the representative or agent of others, borrow from such bank, nor
(2) Shall he become a guarantor, endorser or surety for loans from such bank to others, or in any manner be an
obligor or incur any contractual liability to the bank
Exceptions:
(1) Valid insider lending (Sec. 36, GBL)
(2) Loans, credit accommodations and guarantees extended by a cooperative bank to its cooperative shareholders
(Sec. 36, GBL)
Requirements for valid insider lending

(1) In the regular course of business;
(2) Upon terms not less favorable to the bank than those offered to others;
(3) There is a written approval of the majority of all the directors of the bank, excluding the director concerned;
(Except: granted to officers under a fringe benefit plan approved by the BSP;
(4) The required approval shall be entered upon the record of the bank and a copy of such entry shall be transmitted
forthwith to the appropriate supervising and examining department of the BSP;
(5) Limited to an amount equivalent to the DOSRI borrower’s unencumbered deposits and book value of his paid-in
capital contribution in the bank (Sec. 36, GBL)
Exceptions:
(1) Non-risk items; and
(2) Loans in the form of fringe benefits.
A DOSRI borrower is required to waive the secrecy of his “deposits of whatever nature in all banks in the
Philippines.”
QUIZZER (GBL)
1. Shall refer to entities engaged in the lending of funds obtained in the form of deposits
a. Banks
b. Quasi-banks
c. Warehouse
d. Savings and Loan Association’s
2. Shall refer to entities engaged in the borrowing of funds through the issuance, endorsement or assignment with
recourse or acceptance of deposit substitutes for purposes of relending or purchasing of receivables and other
obligations.
a. Banks
b. Quasi-banks
c. Universal banks
d. Commercial banks
3. Banks that have the authority to exercise the powers of an investment house as provided in existing laws and
the power to invest in non-allied enterprises
a. Banks
b. Quasi-banks
c. Universal banks
d. Commercial banks
4. Banks that are given all such powers as may be necessary to carry on the business of commercial banking, such
as accepting drafts and issuing letters of credit; discounting and negotiating promissory notes, drafts, bills of
exchange, and other evidences of debt; accepting or creating demand deposits; receiving other types of deposits
and deposit substitutes; buying and selling foreign exchange and gold or silver bullion; acquiring marketable
bonds and other debt securities; and extending credit, subject to such rules as the Monetary Board may
promulgate.
a. Banks
b. Quasi-banks
c. Universal banks
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d. Commercial banks
5. Banks that are created to make needed credit available and readily accessible in the rural areas for the purpose
of promoting comprehensive rural development.
a. Rural banks
b. Cooperative banks
c. Thrift banks
d. Commercial banks
6. Include savings and mortgage banks, private development banks, and stock savings and loan associations.
a. Rural banks
c. Thrift banks
d. Commercial banks
7. Banks that primarily provide financial, banking and credit services to cooperative organization and their members
a. Rural banks
c. Islamic banks
d. Commercial banks
8. Are banks whose business dealings are subject to the basic rules of Islamic Shari’a
a. Rural banks
c. Islamic banks
d. Commercial banks
9. Statement I: Except as the Monetary Board may otherwise prescribe for reasons of national interest, the total
amount of loans, credit accommodations and guarantees as may be defined by the Monetary Board that may be
extended by a bank to any person, partnership, association, corporation or other entity shall at no time exceed
twenty percent (20%) of the net worth of such bank.
Statement II: The basis for determining compliance with single-borrower limit is the total credit commitment of
the bank to the borrower.
a. 1st statement is true
b. 2nd statement is true
c. Both statements are true
d. None of the statements are true
10. Statement I: No director or officer of any bank shall, directly or indirectly, for himself or as the representative or
agent of others, borrow from such bank nor shall he become a guarantor, indorser or surety for loans from such
bank to others, or in any manner be an obligor or incur any contractual liability to the bank except with the written
approval of the majority of all the directors of the bank, excluding the director concerned
Statement II: Dealings of a bank with any of its directors, officers or stockholders and their related interests shall
be upon terms not less favorable to the bank than those offered to others.
11. Statement I: The Monetary Board may regulate the amount of loans, credit accommodations and guarantees
that may be extended, directly or indirectly, by a bank to its directors, officers, stockholders and their related
interests, as well as investments of such bank in enterprises owned or controlled by said directors, officers,
stockholders and their related interests.
Statement II: The outstanding loans, credit accommodations and guarantees which a bank may extend to each
of its stockholders, directors, or officers and their related interests, shall be limited to an amount equivalent to
their respective unencumbered deposits and book value of their paid-in capital contribution in the bank.
END
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THE NEW CENTRAL BANK ACT (R.A. No. 7653)

STATE POLICIES
The State shall maintain a central monetary authority that shall function and operate as an independent and
accountable body corporate in the discharge of its mandated responsibilities concerning money, banking and credit.
(Sec. 1)
CREATION OF THE BANGKO SENTRAL NG PILIPINAS (BSP)

NATURE OF THE BSP
(1) A central monetary authority;
(2) An independent and accountable body; and
(3) A government-owned corporation but enjoys fiscal and administrative autonomy. (Secs. 1 & 2, NCBA)
The BSP shall have a capitalization of P50B to be fully subscribed by the Government. (Sec. 2)
RESPONSIBILITY AND PRIMARY OBJECTIVE

PRIMARY OBJECTIVES
(1) To maintain price stability conducive to a balanced and sustainable growth of the economy.
(2) To promote and maintain monetary stability and the convertibility of the peso.
OTHER RESPONSIBILITIES
(1) To provide policy directions in the areas of money, banking, and credit
(2) To supervise operations of banks (Sec. 3, NCBA)
MONETARY BOARD
The body through which the powers and functions of the Bangko Sentral are exercised (Sec 6, NCBA)
POWERS AND FUNCTIONS

(1) Issue rules and regulations it considers necessary for the effective discharge of the responsibilities and exercise
of the powers vested in it;
(2) Direct the management, operations, and administration of Bangko Sentral, organize its personnel and issue such
rules and regulations as it may deem necessary or desirable for this purpose;
(3) Establish a human resource management system which governs the selection, hiring, appointment, transfer,
promotion, or dismissal of all personnel;
(4) Adopt an annual budget for and authorize such expenditures by Bangko Sentral as are in the interest of the
effective administration and operations of Bangko Sentral in accordance with applicable laws and regulations; and
(5) Indemnify its members and other officials of Bangko Sentral, including personnel of the departments performing
supervision and examination functions, against all costs and expenses reasonably incurred by such persons in
connection with any civil or criminal action, suit or proceeding, to which any of them may be made a party by reason
of the performance of his functions or duties, unless such members or other officials is found to be liable for
negligence or misconduct. (Sec. 15, NCBA)
COMPOSITION
The MB shall be composed of 7 members appointed by the President with a 6-year term. (Sec. 6, NCBA)
MEMBERS
(1) The BSP Governor or his designated alternate (a deputy governor);
(2) A Cabinet member to be designated by the President or his designated alternate (an Undersecretary in his
department); and
(3) 5 members from the private sector (Sec. 6, NCBA)
No member of the MB may be reappointed more than once.
QUALIFICATIONS
(1) Natural-born citizens of the Philippines;
(2) At least 35 years old (the Governor must be at least 40 years old);
(3) Of good moral character;
(4) Of unquestionable integrity;
(5) Of known probity and patriotism; and
(6) With recognized competence in social and economic disciplines. (Sec. 8, NCBA)
DISQUALIFICATIONS
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In addition to the disqualifications under the Code of Conduct and Ethical Standards for Public Officials and
Employees (RA 6713), a member of the Monetary Board is disqualified:
(1) Direct connection with any multilateral banking or financial institution; or
(2) Substantial interest in any private bank in the Philippines, within 1 year prior to his appointment (Sec. 9, NCBA)
PROHIBITION ON MEMBERS OF THE MB

(1) To be a director, officer, employee, consultant, lawyer, agent or stockholder of any bank, quasi-bank, or any other
institution which is subject to supervision or examination by the BSP;
(2) To hold any other public office or public employment during their tenure; and
(3) To be employed in any multilateral banking or financial institution within 2 years after the expiration of his term.
Exception: When he serves as an official representative of the government to such institution. (Sec. 9, NCBA)
GROUNDS FOR REMOVAL OF ANY MEMBER OF THE MB

(1) If the member is subsequently disqualified under Sec. 8;
(2) If he is physically or mentally incapacitated that he cannot properly discharge his duties and responsibilities and
such incapacity has lasted for more than 6 months;
(3) If he is guilty of acts or operations which are of fraudulent or illegal character or which are manifestly opposed to
the aims and interests of the BSP; and
(4) If he no longer possesses the qualifications under Sec. 8. (Sec. 10, NCBA)
VACANCIES, HOW FILLED

Cause: death, resignation, or removal of any member
Effect: a new member will be appointed to complete the unexpired period of the term of the member concerned.
(Sec. 7, NCBA)
SALARIES
Fixed by the Phil. President at a sum commensurate to the importance and responsibility attached (Sec. 13, NCBA)
MEETINGS
(1) Held at least once a week;
(2) Called by the Governor or by 2 MB members;
(3) The complete records of the proceedings and deliberations of the MB including the tapes and transcripts of
stenographic notes are to be maintained and preserved;
(4) Four (4) members constitute a quorum; and
(5) All decisions by the MB shall require the concurrence of four (4) of its members unless otherwise provided by
the
NCBA (Sec. 11, NCBA);
(a) Deputy governors may attend (Sec. 12, NCBA).
(b) Any member with personal or pecuniary interest in any matter in the agenda shall disclose his interest
and shall retire from the meeting when the matter is taken up (Sec. 14, NCBA).
CIVIL LIABILITY OF MEMBERS OF THE MB

Members of the MB, officials, examiners, and employees of the BSP are liable when:
(1) They willfully violate the provisions of the NCBA;
(2) They are guilty of negligence, abuses or acts of malfeasance or misfeasance; or
(3) Fail to exercise extraordinary diligence in the performance of his duties. (Sec. 16, NCBA)
HOW THE BSP HANDLES BANKS IN DISTRESS

Liquidity – Ability of an asset to be converted into cash. An entity is liquid when it is able to pay its liabilities when
they fall due.
Solvency – When current assets are more than current liabilities, providing the ability to pay debts. An entity is
solvent when it is able to meet its long term obligations/liabilities.
Insolvency – When the actual market value of assets are insufficient to pay its liabilities, not considering capital stock
and surplus which are not liabilities for such purpose. An entity is insolvent when it is unable to meet current and
long-term obligations.
CONSERVATORSHIP
Applicability
(1) When a bank or a quasi-bank is in a state of continuing inability or unwillingness to maintain a condition of liquidity
deemed adequate to protect the interest of depositors and creditors (Sec. 29)
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(2) Determination is to be made by the MB on the basis of a report submitted by the appropriate supervising or
examining department (Sec. 29)
Period and termination

(1) Period: shall not exceed 1 year (Sec. 29)
(2) The expenses attendant to the conservatorship shall be borne by the bank or quasi-bank concerned (Sec. 29)
(3) Grounds for termination of conservatorship by MB:
(a) When it is satisfied that the institution can continue to operate on its own and the conservatorship is no
longer necessary
(b) When, on the basis of the report of the conservator or of its own findings, the MB determines that the
continuance in business of the institution would involve probable loss to its depositors or creditors (the bank
or quasi-bank would then be placed under receivership) (Sec. 29)
Effects of conservatorship
(1) Bank/Quasi-bank retains juridical personality
(2) Not a precondition to the designation of a receiver, and;
(3) Perfected transactions cannot be repudiated
Qualifications of a conservator
- The conservator should be competent and knowledgeable in bank operations and management. (Sec. 29)
- The appointment of a conservator shall be vested exclusively in the MB. (Sec. 30)
Powers and duties of a conservator

(1) To take charge of the assets, liabilities, and the management thereof
(2) To reorganize the management
(3) To collect all monies and debts due said institution, and
(4) To exercise all powers necessary to restore its viability
(5) To report and be responsible to the MB
(6) To overrule or revoke the actions of the previous management and board of directors of the bank or quasi-bank.
(Sec. 29)
Remunerations
General rule: The conservator shall receive remuneration in an amount not to exceed 2/3 of the salary of the
president of the institution in 1 year, payable in 12 equal monthly payments.
Exception: A conservator connected with the BSP, in which case said conservator shall not be entitled to receive any
remuneration or emolument. (Sec. 29, NCBA)
RECEIVERSHIP
Grounds
Whenever the MB finds that a bank or quasi-bank:
(1) Is unable to pay its liabilities as they become due in the ordinary course of business: Provided, That this shall not
include inability to pay caused by extraordinary demands induced by financial panic in the banking community;
(2) Has insufficient realizable assets, as determined by the BSP, to meet its liabilities; or
(3) Cannot continue in business without involving probable losses to its depositors or creditors; or
(4) Has willfully violated a cease-and-desist order under Sec. 37 that has become final, involving acts or transactions
which amount to fraud or a dissipation of the assets of the institution
Receiver
(1) If a banking institution: the PDIC
(2) If a quasi-bank: any person of recognized competence in banking or finance
The appointment of a receiver shall be vested exclusively in the MB. And the designation of a conservator is not
a precondition to the designation of a receiver.
Powers and duties of a receiver

(1) Immediately gather and take charge of all the assets and liabilities of the institution
(2) Administer the assets for the benefit of the creditors
(3) Exercise the general powers of a receiver under the Revised Rules of Court
(4) Not to pay or commit any act that will involve the transfer or disposition of any asset of the institution, except:
(a) Administrative expenditures
(b) Receiver may deposit or place funds in non-speculative investments
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(5) Subject to prior approval of the MB, determine, as soon as possible, but not later than 90 days from take-over,
whether the institution may be rehabilitated or otherwise placed in such a condition so that it may be permitted to
resume business with safety to its depositors and creditors and the general public.
NOTE: The assets of the institution under receivership and liquidation shall be deemed in custodia legis and shall be
exempt from any order of garnishment, levy, attachment, or execution.
Close now, hear later scheme

Sec. 29 of the Central Bank Act does NOT contemplate prior notice and hearing before a bank may be directed to
stop operations and placed under receivership. It is enough that such action is made subject of a subsequent judicial
review. When the law provides for the filing of a case within 10 days after the receiver takes charge of the assets of
the bank, it is unmistakable that the assailed actions should precede the filing of the case. The legislature could not
have intended to authorize “no prior notice and hearing” in the bank’s closure and at the same time allow a suit to
annul it on the basis of absence thereof (Central Bank vs. Cam GR No. 76118, March 30, 1993)
LIQUIDATION/CLOSURE
Should the determination be that the institution cannot be rehabilitated or permitted to resume business, the MB shall
notify in writing the board of directors of the institution of its findings and direct the receiver to proceed with the
liquidation of the institution.
Procedure
(1) The receiver shall file ex parte with the proper RTC, and without requirement of prior notice or any other action, a
petition for assistance in the liquidation of the institution pursuant to the liquidation plan adopted by the PDIC (if
quasi-bank, liquidation plan adopted by the MB)
(2) Upon acquiring jurisdiction, the court shall, upon motion by the receiver after due notice,
(a) Adjudicate disputed claims against the institution,
(b) Assist the enforcement of individual liabilities of the stockholders, directors, and officers, and
(c) Decide on other issues as may be material to implement the liquidation plan
(3) The receiver shall convert the assets of the institutions to money, dispose of the same to creditors and other
parties, for the purpose of paying the debts of such institution in accordance with the rules on concurrence and
preference of credit under the Civil Code.
Dispositions
In case of a liquidation of a bank or quasi-bank, after payment of the cost of proceedings, including reasonable
expenses and fees of the receiver to be allowed by the court, the receiver shall pay the debts of such institution,
under order of the court, in accordance with the rules on concurrence and preference of credit in the Civil Code. (Sec.
31, NCBA)
All revenues and earnings realized by the receiver in winding up the affairs and administering the assets of any bank
or quasi-bank shall be used to pay the costs of proceedings, salaries of such personnel whose employment is
rendered necessary in the discharge of the liquidation together with other additional expenses caused thereby. The
balance of revenues and earnings, after the payment of all said expenses, shall form part of the assets available to
creditors. (Sec. 32, NCBA)
Effects of Appointment of Receiver/Liquidation

(1) Retention of juridical personality
(2) Suspension of operations/ Stoppage of business
(3) Assets are deemed in custodial legis, i.e., exempt from garnishment, levy or execution
(4) Stay of execution of judgment to prevent depletion of bank assets
(5) Bank is not liable to pay interest on deposits which accrued during the period of suspension of operation
(6) Restriction of bank’s capacity to do new business (new loans, deposits) but with obligation to collect pre-existing
debts
HOW THE BSP HANDLES EXCHANGE CRISIS
LEGAL TENDER POWER

All notes and coins issued by the BSP shall be fully guaranteed by the Government of the Republic of the Philippines
and shall be legal tender in the Philippines for all debts, both public and private.
Limitation: Coins shall be legal tender in amounts not exceeding P50 for denominations of 25 centavos and above,
and in amounts not exceeding P20 for denominations of 10 centavos or less unless otherwise fixed by the MB.
The maximum amount of coins to be considered as legal tender is: [BSP Circular 537 (2006) ]
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1. P1,000.00 for denominations of 1-Piso, 5-Piso and 10-Piso coins; and

2. P100.00 for denominations of 1-sentimo, 5-sentimo, 10-sentimo, and 25-sentimo coins. (Sec. 52)
The BSP may call in for replacement:

Notes – more than 5 years
Coins – more than 10 years
RATE OF EXCHANGE
The MB shall:
(1) Determine the exchange rate policy of the country;
(2) Determine the rates at which the Bangko Sentral shall buy and sell spot exchange;
(3) Establish deviation limits from the effective exchange rate or rates as it may deem proper.
(4) Determine the rates for other types of foreign exchange transactions by the BSP, including purchases and sales
of foreign notes and coins.
Limitation: The margins between the effective exchange rates and the rates established by the MB may not exceed
the corresponding margins for spot exchange transactions by more than the additional costs or expenses involved in
each type of transactions. (Sec. 74)
QUIZZER (NCBA)
1. Statement I: The capital of the BSP shall be Forty Billion Pesos, to be fully subscribed by the Government of the
Republic.
Statement II: The BSP shall provide policy directions in the areas of money, banking and credit.
a. Only 1st statement is true
b. Only 2nd statement is true
c. Both are true
d. Both are false
2. Statement I: The powers and functions of the BSP shall be exercised by the Bangko Sentral Monetary Board.
Statement II: Any member of the monetary board may be reappointed more than once.
c. Both are true
d. Both are false
3. Statement I: Whenever the Monetary Board finds that a bank or a quasi-bank is in a state of continuing inability
or unwillingness to maintain a condition of liquidity deemed adequate to protect the interest of depositors and
creditors, the monetary board may appoint a conservator.
Statement II: The conservator shall report and be responsible and be responsible to the monetary board and
shall have the power to overrule or revoke the actions of the previous management and board of directors of the
bank or quasi-bank.
c. Both are true
d. Both are false
4. Statement I: The conservator should be competent and knowledgeable in bank operations and management.
Statement II: the conservatorship shall exceed one year.
c. Both are true
d. Both are false
5. Statement I: The conservator shall receive remuneration in an amount not to exceed 2/3 of the salary of the
president of the institution in 1 year, payable in 12 equal monthly payments.
Statement II: If at any time within 1 year period, the conservatorship is terminated on the ground that the
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.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
H.O.Q. 1
6. Statement I: The monetary board may appoint a conservator connected with the Bangko Sentral, in which case
he shall not be entitled to receive any remuneration or emolument from Bangko Sentral during the
conservatorship.
Statement II: The expenses attendant to the conservatorship shall be borne by the bank or quasi-bank
concerned.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
7. Statement I: The monetary board shall terminate the conservatorship when it is satisfied that the institution can
continue to operate on its own and the conservatorship is no longer necessary.
Statement II: The conservatorship shall likewise be terminated should the monetary board, on the basis of the
report of the conservator or its own findings, determine that the continuance in business of the institution would
involve probable loss to its depositors or creditors.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
8. Statement I: For a quasi-bank, any person of recognized competence in banking or finance may be designated
as receiver.
Statement II: If the receiver determines that the institution cannot be rehabilitated or permitted to resume
business, the Monetary board shall notify in writing the BOD of its findings and direct the receiver to proceed with
liquidation of the institution.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
9. Statement I: The designation of a conservator or the appointment of a receiver shall be vested exclusively with
the monetary board.
Statement II: The designation of a conservator is not a precondition to the designation of a receiver.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
END
H.O.Q. 1
PHILIPPINE DEPOSIT INSURANCE CORPORATION ACT (R.A.

10846)
BASIC POLICY
Promote and safeguard the interests of the depositing public by way of providing permanent and continuing
insurance coverage on all insured deposits (Sec. 1, as amended)
CONCEPT OF INSURED DEPOSITS

Insured deposit means the amount due to any bona fide depositor for legitimate deposits in an insured bank net of
any obligation of the depositor to the insured bank as of the date of closure, but not to exceed 500,000 or its
equivalent in foreign currency (Sec. 4(g), as amended)
LIABILITY OF DEPOSITORS
DEPOSIT LIABILITIES REQUIRED TO BE INSURED WITH PDIC

The deposit liabilities of any bank or banking institution, which is engaged in the business of receiving deposits on the
effective date of this Act, or which thereafter may engage in the business of receiving deposits, shall be insured with
the PDIC (Sec. 5)
Notes:
(1) ’Bank’ and ‘Banking Institution’ shall include banks, commercial banks, savings bank, mortgage banks, rural
banks, development banks, cooperative banks, stock savings and loan associations and branches and agencies in
the Philippines of foreign banks and all other corporations authorized to perform banking functions in the Philippines
(Sec. 4(b), as amended)
(2) ‘Deposit’ means the unpaid balance of money or its equivalent received by a bank in the usual course of business
and for which it has given or is obliged to give credit to a commercial, checking, savings, time or thrift account, or
issued in accordance with Bangko Sentral rules and regulations and other applicable laws, together with such other
obligations of a bank, which, consistent with banking usage and practices, the Board of Directors shall determine and
prescribe by regulations to be deposit liabilities of the bank (Sec. 4(f), as amended).
(3) What is not considered a deposit? Any obligation of a bank which is payable at the office of the bank located
outside of the Philippines (Sec. 4(f), as amended).
COMMENCEMENT OF LIABILITY
Liability commences upon the approval of application.
DEPOSIT ACCOUNT NOT ENTITLED TO PAYMENT

The PDIC shall not pay deposit insurance for the following accounts or transactions, whether denominated,
documented, recorded or booked as deposit by the bank:
(1) Investment products such as bonds and securities, trust accounts, and other similar instruments;
(2) Unfunded, fictitious or fraudulent deposit accounts or transactions;
(3) Deposits accounts or transactions constituting, and/or emanating from, unsafe and unsound banking practice/s,
as determined by the PDIC, in consultation with the BSP, after due notice and hearing, and publication of a cease
and desist order issued by the PDIC against such deposit accounts or transactions; and
(4) Deposits that are determined to be the proceeds of an unlawful activity as defined under Republic Act 9160, as
amended.
EXTENT OF LIABILITY
The liability of the Corporation is to the extent of the insured deposit (Sec.14).
DETERMINATION OF INSURED DEPOSIT

The determination of insured deposits shall commence upon the PDIC’s actual takeover of the closed bank (Sec.
16(a), as amended).
Note: The PDIC may require proof of claims to be filed before paying the insured deposits, and that in any case
where the PDIC is not satisfied as to the viability of a claim for an insured deposit, it may require final determination
of a court of competent jurisdiction before paying such claim (Sec. 14)
Notice and publication requirement

(1) The PDIC shall give notice to the depositors of the closed bank of the insured deposits due them by whatever
means deemed appropriate by the Board of Directors.
H.O.Q. 1
(2) The PDIC shall publish the notice once a week for at least three (3) consecutive weeks in a newspaper of general
circulation or, when appropriate, in a newspaper circulated in the community or communities where the closed bank
or its branches are located (Sec. 16(a), as amended).
CALCULATION OF LIABILITY
- Per depositor, per capacity rule
In determining the amount due to any depositor, there shall be added together all deposits in the bank
maintained in the same right and capacity for his benefits either in his own name or in the name of others
(Sec. 4(g), as amended)
- Joint accounts
A joint account regardless of whether the conjunction 'and,' 'or,' 'and/or' is used, shall be insured separately
from any individually-owned deposit account (Sec. 4(g), as amended).
- If the account is held by two or more natural persons or two or more juridical persons
General rule: The maximum insured deposit shall be divided into as many equal shares as there are
individuals or juridical persons (Sec. 4(g), as amended).
Exception: Unless a different sharing is stipulated in the document of deposit (Sec. 4(g), as amended).
- If the account is held by a juridical person or entity jointly with one or more natural persons
The maximum insured deposits shall be presumed to belong entirely to such juridical person or entity (Sec.
4(g), as amended).
Note: The aggregate of the interest of each co-owner over several joint accounts, whether owned by the same or
different combinations of individuals, juridical persons or entities, shall likewise be subject to the maximum insured
deposit of P500,000.00 (Sec. 4(g), as amended).
Mode of payment
Payment of the insured deposits on such closed bank shall be made by the PDIC as soon as possible either:
(1) by cash;
(2) by making available to each depositor a transferred deposit in another insured bank in an amount equal to insured
deposit of such depositor (Sec. 14)
Note: ‘Transfer Deposit’ means a deposit in an insured bank made available to a depositor by the PDIC as payment
of insured deposit of such depositor in a closed bank and assumed by another insured bank (Sec. 4(h), as
amended).
Effect of Payment of Insured Deposit

- Discharge from liability to the depositor
The PDIC shall be discharged from liability upon payment under Sec. 14, i.e.:
(1) Payment of an insured deposit to any person by thePDIC;
(2) Payment of a transferred deposit to any person by the new bank or by an insured bank in which
a transferred deposit has been made available (Sec.16(b), as amended)
- The PDIC, upon payment of any depositor as provided for in Section 14 shall be subrogated to all rights
of the depositor against the closed bank to the extent of such payment. Such subrogation shall include
the right on the part of the PDIC to receive the same dividends and payments from the proceeds of the
assets of such closed bank and recoveries on account of stockholders liability as would have been payable
to the depositor on a claim for the insured deposits. BUT the depositor shall retain his claim for any
uninsured portion of his deposit (Sec. 15).
- Payment of insured deposits as preferred credit under Art. 2244 of the Civil Code
All payments by the PDIC of insured deposits in closed banks partake of the nature of public funds, and as
such, must be considered a preferred credit similar to taxes due to the National Government in the order of
preference under Article 2244 of the New Civil Code (Sec. 15)
Failure to settle claim of insured depositor

General rule: Failure to settle the claim within six (6) months from the date of filing of claim for insured deposit shall,
upon conviction, subject the directors, officers or employees of the PDIC responsible for the delay to imprisonment
from six (6) months to one (1) year.
Exceptions:
(1) Such failure was not due to grave abuse of discretion, gross negligence, bad faith, or malice of the directors,
officers or employees; or
(2) The validity of the claim requires the resolution of issues of facts and or law by another office, body or agency
including the case mentioned in the first proviso or by PDIC together with such other office, body or agency.
Failure of depositor to claim insured deposits

All rights of the depositor against the PDIC with respect to the insured deposit shall be barred:
H.O.Q. 1
(1) If he fails to claim the insured deposits within two (2) years from actual takeover of the closed bank by the
receiver; or
(2) If he does not enforce his claim filed with the corporation within two (2) years after the two-year period to file a
claim.
BUT all rights of the depositor against the closed bank and its shareholders or the receivership estate to which the
PDIC may have become subrogated, shall thereupon revert to the depositor.
Thereafter, the PDIC shall be discharged from any liability on the insured deposit (Sec. 16(e), as amended)
QUIZZER (PDICA)
1. Statement 1: PDIC shall insure as herein provided, the deposits of all banks which are entitled to the benefits of
insurance.
Statement 2: PDIC promote and safeguard the interests of the depositing public by providing insurance coverage
on all insured deposits and helping maintain a sound and stable banking system.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
2. Means the unpaid balance of money or its equivalent received by a bank in the usual course of business and for
which it has given or is obliged to give credit to a commercial, checking, savings, time or thrift account,
evidenced by a passbook, certificate of deposit, or other evidence of deposit issued in accordance with Bangko
Sentral ng Pilipinas rules and regulations and other applicable laws, together with such other obligations of a
bank, which, consistent with banking usage and practices.
a. Insured Deposit
b. Insured Bank
c. Disputed Claim
d. Deposit
3. Means the amount due to any bonafide depositor for legitimate deposits in an insured bank as of the date of
closure but not to exceed Five hundred thousand pesos (P500,000.00).
a. Insured deposit
b. Insured bank
c. Disputed claim
d. Deposit
4. Statement I: A joint account regardless of whether the conjunction ‘and’, ‘or’, ‘and/or’ is used, shall be insured
separately from any individually-owned deposit account.
Statement II: That the aggregate of the interest of each co-owner over several joint accounts, whether owned by
the same or different combinations of individuals, juridical persons or entities, shall likewise be subject to the
maximum insured deposit of Five hundred thousand pesos (P500,000.00).
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
5. Statement I: If the account is held jointly by two or more natural persons, or by two or more juridical persons or
entities, the maximum insured deposit shall be divided into as many equal shares as there are individuals,
juridical persons or entities, unless a different sharing is stipulated in the document of deposit.
Statement II: If the account is held by a juridical person or entity jointly with one or more natural persons, the
maximum insured deposit shall be presumed to belong entirely to such juridical person or entity.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
6. Statement I: Whenever upon examination by the Corporation into the condition of any insured bank, it shall be
disclosed that an insured bank or its directors or agents have committed, are committing or about to commit
unsafe or unsound practices in conducting the business of the bank, or have violated, are violating or about to
violate any provisions of any law or regulation to which the insured bank is subject, the Board of Directors shall
submit the report of the examination to the Monetary Board to secure corrective action thereon.
H.O.Q. 1
Statement II: Each insured bank shall keep and maintain a true and accurate record or statement of its daily
deposit transactions consistent with the standards set by the Bangko Sentral ng Pilipinas and the Corporation.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
7. Statement I: Whenever a bank is ordered closed by the Monetary Board, the Corporation shall be designated as
receiver and it shall proceed with the takeover and liquidation of the closed bank.
Statement II: The receiver is authorized to adopt and implement, without need of consent of the stockholders,
board of directors, creditors or depositors of the closed bank, any or a combination of the following modes of
liquidation.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
8. The receiver is authorized to adopt and implement, without need of consent of the stockholders, board of
directors, creditors or depositors of the closed bank, any or a combination of the following modes of liquidation.
I. Conventional liquidation
II. Purchase of Assets and/or assumption of liabilities
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
9. In addition to the powers of a receiver provided under existing laws, the Corporation, as receiver of a closed
bank, is empowered to:
a. Represent and act for and on behalf of the closed bank
b. Gather and take charge of all the assets, records and affairs of the closed bank, and administer the same
for the benefit of its creditors
c. Convert the assets of the closed bank to cash or other forms of liquid assets, as far as practicable
d. All of the above
10. Statement I: After the payment of all liabilities and claims against the closed bank, the Corporation shall pay
surplus, if any, dividends at the legal rate of interest from date of takeover to date of distribution to creditors and
claimants of the closed bank.
Statement II: The officers, employees, deputies, assistants and agents of the receiver shall have no liability and
shall not be subject to any action, claim or demand in connection with any act done or omitted to be done by
them in good faith in connection with the exercise of their powers and functions.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
11. Statement I: Upon the designation of the Corporation as receiver of a closed bank, it shall serve a notice of
closure to the highest-ranking officer of the bank present in the bank premises, or in the absence of such officer,
post the notice of closure in the bank premises or on its main entrance.
Statement II: The receiver shall have authority to use reasonable force, including the authority to force open the
premises of the bank, and exercise such acts necessary to take actual physical possession and custody of the
bank and all its assets, records, documents, and take charge of its affairs upon the service of the notice of
closure.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
12. Statement I: The receiver shall have the authority to facilitate and implement the purchase of the assets of the
closed bank and the assumption of its liabilities by another insured bank, without need for approval of the
liquidation court.
Statement II: The assets gathered by the receiver shall be evaluated and verified as to their existence,
ownership, condition, and other factors to determine their realizable value.
H.O.Q. 1
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
13. In the management and/or conversion of the assets of the closed bank, the receiver shall have the authority to:
I. Conduct a physical or ocular inspection of the properties owned by, or mortgaged to, the closed bank,
to determine their existence and present condition.
II. Determine the disposal price of assets in accordance with generally accepted valuation principles,
standards and practices, subject to such guidelines as the receiver may determine.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
14. Statement I: The receiver shall have no authority to invest funds received from the conversion of the assets of
the closed bank in government securities, other government-guaranteed marketable securities or investment-
grade debt instruments.
Statement II: The proceeds of the sale of the bank and branch licenses shall be for the benefit of the creditors of
the closed bank.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
15. Statement I: The creditors shall have a period of 9 months from the date of publication of notice of the approval
by the court of the final asset distribution plan of the closed bank within which to claim payment of the principal
obligations and surplus dividends.
Statement II: The individual stockholders of record or their duly-authorized representative or the court-appointed
stockholders’ representative shall have a period of 9 months from publication of notice of the approval by the
court of the final asset distribution plan of the closed bank within which to claim the residual assets.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
16. Statement I: Whenever an insured bank shall have been closed by the Monetary Board or upon expiration or
revocation of a bank’s corporate term, payment of the insured deposits on such closed bank shall be made by
the Corporation as soon as possible either (1) by cash or (2) by making available to each depositor a transferred
deposit in another insured bank in an amount equal to insured deposit of such depositor.
Statement II: That the PDIC, in its discretion, may require proof of claims to be filed before paying the insured
deposits, and that in any case where the PDIC is not satisfied as to the validity of a claim for an insured deposit,
it may require final determination of a court of competent jurisdiction before paying such claim.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
17. Statement I: The Corporation, upon payment of any shall be subrogated to all rights of the depositor against the
closed bank to the extent of such payment.
Statement II: All payments by the PDIC of insured deposits in closed banks partake of the nature of public funds.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
END
H.O.Q. 1
SECRECY OF BANK DEPOSITS (R.A. 1405)

PURPOSE
(1) To give encouragement to the people to deposit their money in banking institutions and to discourage private
hoarding; and
(2) So that the people’s money may be properly utilized by banks in authorized loans to assist in the economic
development of the country. (Sec. 1)
The absolute confidentiality rule in R.A. No. 1405 actually aims at protection from unwarranted inquiry or investigation
if the purpose of such inquiry or investigation is merely to determine the existence and nature, as well as the amount
of the deposit in any given bank account.
PROHIBITED ACTS
(1) No person, government official, bureau or office may examine, inquire into or look into such deposits; and
(2) No official or employee of any banking institution may disclose to any unauthorized person any information
concerning said deposits. (Sec. 3)
DEPOSITS COVERED
- All peso-denominated deposits of whatever nature with banks or banking institutions in the Philippines are
hereby considered as of an absolutely confidential nature and may not be examined.
- Includes investments in bonds issued by the Philippine Government, its political subdivisions and its
instrumentalities, regardless of the currency of denomination. (Sec. 2)
EXCEPTIONS
(1) Upon written permission of the depositor;
(2) In cases of impeachment;
(3) Upon order of a competent court in cases of:
(a) Bribery;
(b) Dereliction of duty of public officials; or
(4) Where the money deposited or invested is the subject matter of the litigation. (Sec. 2)
Notwithstanding the exceptions enumerated by law, the prevailing policy on the matter is to preserve the absolute
confidentiality enjoyed by bank deposits.
CONFIDENTIALITY OF FOREIGN CURRENCY DEPOSITS

General rule: Foreign currency deposits are confidential.
Exceptions:
(1) Upon written permission of the depositor
(2) Upon order of a competent court in cases of violation of the Anti-Money Laundering Act of 2001
(3) During Bangko Sentral’s periodic or special examinations [as in the case of peso deposits, supra], and
(4) Disclosure of the Treasurer of the Philippines when the unclaimed balances law applies (Act 3936, as amended
by PD 679)
(5) BSP/PDIC inquiry if there is a finding of unsafe and unsound banking practice (as in the case of peso deposits,
supra)
PENALTIES FOR VIOLATION OF R.A. No. 1405

Imprisonment of not more than 5 years or a fine of not more than P20,000 or both, in the discretion of the court. (Sec.
5)
QUIZZER
1. It is hereby declared to be the policy of the Government to give encouragement to the people:
I. to deposit their money in banking institutions
II. to discourage private hoarding
a. I only
b. II only
c. Both
d. None
H.O.Q. 1
2. Statement I: All deposits of whatever nature with banks or banking institutions in the Philippines including
investments in bonds issued by the Government of the Philippines, its political subdivisions and its
instrumentalities, are hereby considered as of an absolutely confidential nature.
Statement II: All deposits of whatever nature with banks or banking institutions may not be examined, inquired or
looked into by any person, government official, bureau or office.
Which of the above statements is/are true?
a. I only
b. II only
c. Both
d. None
3. All deposits of whatever nature with banks or banking institutions may not be examined, inquired or looked into
by any person, government official, bureau or office except upon
a. written permission of the depositor
b. in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of
public officials
c. in cases where the money deposited or invested is the subject matter of the litigation
d. all of the above
4. Statement I: It shall be unlawful for any official or employee of a banking institution to disclose to any person
other than those mentioned in Section two hereof any information concerning said deposits.
Statement II: The Bank secrecy Law does not prohibit attachment or garnishment of bank accounts, which does
not involve revealing specific information of deposits.
Which of the above statements is/are true?
a. I only
b. II only
c. Both
d. None
END
H.O.Q. 1
UNCLAIMED BALANCES LAW (Act 3936 amended by P.D. No. 679)

Unclaimed balances shall include credits or deposits of money, bullion, security or other evidence of indebtedness
of any kind, and interest thereon with banks, buildings and loan associations, and trust corporations, as hereinafter
defined, 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. Such unclaimed balances, together with the increase and proceeds thereof, shall be
deposited with the Treasurer of the Philippines to the credit of the Government of the Republic of the Philippines to
be used as the National Assembly may direct.
INFORMATION AS TO EXISTENCE OF UNCLAIMED BALANCES

All banks, building and loan associations, and trust corporations shall forward to the Treasurer of the Philippines a
statement, under oath, of their respective managing officers, of 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, arranged in alphabetical order according to the names of creditors and depositors, and showing:
1) The names and last known place of residence or post office addresses of the persons in whose favor such
unclaimed balances stand;
2) The amount and the date of the outstanding unclaimed balance and whether the same is in money or in security,
and if the latter, the nature of the same;
3) The date when the person in whose favor the unclaimed balance stands died, if known, or the date when he
made his last deposit or withdrawal; and
4) The interest due on such unclaimed balance, if any, and the amount thereof.
A copy of the above sworn statement shall be posted in the premises of the bank, building and loan association, or
trust corporation concerned for at least sixty days from the date of filing thereof: Provided, That immediately
before filing the above sworn statement, the bank, building and loan association, and trust corporation shall
communicate with the person in whose favor the unclaimed balance stands at his last known place of residence or
post office address.
ACTION OF SOLICITOR GENERAL

It shall be the duty of the Treasurer of the Philippines to inform the Solicitor General from time to time the existence
of unclaimed balances held by banks, building and loan associations, and trust corporations.
Whenever the Solicitor General shall be informed of such unclaimed balances, he shall commence an action or
actions in the name of the People of the Republic of the Philippines in the Court of First Instance of the province or
city where the bank, building and loan association or trust corporation is located.
The service process will be made as follows:

- delivery of a copy of the complaint and summons to the president, cashier, or managing officer of each
defendant bank, building and loan association or trust corporation
- publication of a copy of such summons in a newspaper of general circulation, either in English, in Filipino, or in a
local dialect, published in the locality where the bank, building and loan association or trust corporation is
situated, if there be any, and in case there is none, in the City of Manila, at such time as the court may order.
o At the time of issuing summons in the action above provided for, the clerk of court shall also issue a notice
signed by him, giving the title and number of said action, and referring to the complaint therein, and directed
to all persons, other than those named as defendants therein, claiming any interest in any unclaimed
balance mentioned in said complaint, and requiring them to appear within sixty days after the publication
or first publication, if there are several, of such summons, and show cause, if they have any, why the
unclaimed balances involved in said action should not be deposited with the Treasurer of the Philippines as
in this Act provided and notifying them that if they do not appear and show cause, the Government of the
Republic of the Philippines will apply to the court for the relief demanded in the complaint.
o A copy of said notice shall be attached to, and published with the copy of, said summons required to be
published as above, and at the end of the copy of such notice so published, there shall be a statement of
the date of publication, or first publication, if there are several, of said summons and notice.
o Any person interested may appear in said action and become a party thereto.
o Upon the publication or the completion of the publication, if there are several, of the summons and notice,
and the service of the summons on the defendant banks, building and loan associations or trust
corporations, the court shall have full and complete jurisdiction in the Republic of the Philippines over the
said unclaimed balances and over the persons having or claiming any interest in the said unclaimed
balances, or any of them, and shall have full and complete jurisdiction to hear and determine the issues
herein, and render the appropriate judgment thereon.
Trial
H.O.Q. 1
- The court must hear all parties who have appeared therein, and if it be determined that such unclaimed balances
in any defendant bank, building and loan association or trust corporation are unclaimed
- The court shall render judgment in favor of the Government of the Republic of the Philippines, declaring that said
unclaimed balances have escheated to the Government of the Republic of the Philippines and commanding said
bank, building and loan association or trust corporation to forthwith deposit the same with the Treasurer of the
Philippines to credit of the Government of the Republic of the Philippines to be used as the National Assembly
may direct.
LIABILITY OF THE BANK AFTER DEPOSIT

Any bank, building and loan association or trust corporation which shall make any deposit with the Treasurer of the
Philippines in conformity with the provisions of this Act shall not thereafter be liable to any person for the same
and any action which may be brought by any person against in any bank, building and loan association, or trust
corporation for unclaimed balances so deposited with the Treasurer of the Philippines shall be defended by the
Solicitor General without cost to such bank, building and loan association or trust corporation.
PENALTY
If the president, cashier or managing officer of the bank, building and loan association, or trust corporation neglects
or refuses to make and file the sworn statement required by this action, such bank, building and loan association, or
trust corporation shall pay to the Government the sum of five hundred pesos a month for each month or fraction
thereof during which such default shall continue.
QUIZZER
1. Shall include credits or deposits of money, bullion, security or other evidence of indebtedness of any kind, and
interest thereon with banks, buildings and loan associations, and trust corporations, as hereinafter defined, 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.
a. Claimed balances
b. Unclaimed balances
c. Prescribed balances
d. Liquidated balances
2. Statement I: The unclaimed balances, together with the increase and proceeds thereof, shall be deposited with
the Treasurer of the Philippines to the credit of the Government of the Republic of the Philippines to be used as
the National Assembly may direct.
Statement II: All banks, building and loan associations, and trust corporations shall forward to the Treasurer of
the Philippines a statement, under oath, of their respective managing officers, of 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.
Which statements is/are true?
a. I only c. Both
b. II only d. None
3. Statement I: Whenever the Solicitor General shall be informed of such unclaimed balances, he shall commence
an action or actions in the name of the People of the Republic of the Philippines in the Court of First Instance of
the province or city where the bank, building and loan association or trust corporation is located, in which shall
be joined as parties the bank, building and loan association or trust corporation and all such creditors or
depositors.
Statement II: Upon the trial, the court must hear all parties who have appeared therein, and if it be determined
that such unclaimed balances in any defendant bank, building and loan association or trust corporation are
unclaimed as hereinbefore stated, then the court shall render judgment in favor of the Government of the
Republic of the Philippines, declaring that said unclaimed balances have escheated to the Government of the
Republic of the Philippines and commanding said bank, building and loan association or trust corporation to
forthwith deposit the same with the Treasurer of the Philippines to credit of the Government of the Republic of
the Philippines to be used as the National Assembly may direct.
Which statements is/are true?
a. I only c. Both
b. II only d. None
END
H.O.Q. 1
ANTI-MONEY LAUNDERING ACT (R.A. 10365)

DEFINITION
Money laundering is a crime whereby the proceeds of an unlawful activity are transacted, thereby making them
appear to have originated from legitimate sources.
COVERED INSTITUTIONS
1) Banks, non-banks, quasi-banks, trust entities, foreign exchange dealers, pawnshops, money changers,
remittance and transfer companies and other similar entities and all other persons and their subsidiaries and
affiliates supervised or regulated by the Bangko Sentral ng Pilipinas (BSP);
2) Insurance companies, pre-need companies and all other persons supervised or regulated by the Insurance
Commission (IC);
3) (i) Securities dealers, brokers, salesmen, investment houses and other similar persons managing securities or
rendering services as investment agent, advisor, or consultant, (ii) mutual funds, close-end investment
companies, common trust funds, and other similar persons, and (iii) other entities administering or otherwise
dealing in currency, commodities or financial derivatives based thereon, valuable objects, cash substitutes and
other similar monetary instruments or property supervised or regulated by the Securities and Exchange
Commission (SEC);
4) Jewelry dealers in precious metals, who, as a business, trade in precious metals, for transactions in excess of
One million pesos (P1,000,000.00);
‘Precious metals’ shall mean gold, silver, platinum, palladium, rhodium, ruthenium, iridium and osmium. These
include alloys of precious metals, solders and plating chemicals such as rhodium and palladium plating solutions
and potassium gold cyanide and potassium silver cyanide and silver cyanide in salt solution.
5) Jewelry dealers in precious stones, who, as a business, trade in precious stones, for transactions in excess of
‘Precious stones’ shall mean diamond, ruby, emerald, sapphire, opal, amethyst, beryl, topaz, and garnet that are
used in jewelry making, including those formerly classified as semi-precious stones.
6) Company service providers which, as a business, provide any of the following services to third parties:
(i) acting as a formation agent of juridical persons;
(ii) acting as (or arranging for another person to act as) a director or corporate secretary of a
company, a partner of a partnership, or a similar position in relation to other juridical persons;
(iii) providing a registered office, business address or accommodation, correspondence or
administrative address for a company, a partnership or any other legal person or arrangement; and
(iv) acting as (or arranging for another person to act as) a nominee shareholder for another person;
and
7) Persons who provide any of the following services:
(i) managing of client money, securities or other assets;
(ii) management of bank, savings or securities accounts;
(iii) organization of contributions for the creation, operation or management of companies; and
(iv) creation, operation or management of juridical persons or arrangements, and buying and selling
business entities.
Notwithstanding the foregoing, the term ‘covered persons’ shall exclude lawyers and accountants acting as
independent legal professionals in relation to information concerning their clients or where disclosure of information
would compromise client confidences or the attorney-client relationship: Provided, That these lawyers and
accountants are authorized to practice in the Philippines and shall continue to be subject to the provisions of their
respective codes of conduct and/or professional responsibility or any of its amendments."
OBLIGATIONS OF COVERED INSTITUTIONS
CUSTOMER IDENTIFICATION
Covered institutions shall establish and record the true identity of its clients based on official documents. They shall
maintain a system of verifying the true identity of their clients and, in case of corporate clients, require a system of
verifying their legal existence and organizational structure, as well as the authority and identification of all persons
purporting to act on their behalf.
RECORD KEEPING
All records of all transactions of covered institutions shall be maintained and safely stored for five (5) years from the
dates of transactions. With respect to closed accounts, the records on customer identification, account files and
business correspondence, shall be preserved and safely stored for at least five (5) years from the dates when they
were closed.
H.O.Q. 1
REPORTING OF COVERED AND SUSPICIOUS TRANSACTIONS

- Covered institutions shall report to the AMLC all covered transactions and suspicious transactions within five (5)
working days from occurrence thereof, unless the Supervising Authority prescribes a longer period not
exceeding ten (10) working days.
- Should a transaction be determined to be both a covered transaction and a suspicious transaction, the covered
institution shall be required to report the same as a suspicious transaction.
COVERED TRANSACTIONS
- Is any transaction in cash or other equivalent monetary instrument involving a total amount in excess of Five
hundred thousand pesos (P500,000.00) within one (1) banking day.
- Jewelry dealers in precious metals, who, as a business, trade in precious metals, for transactions in excess of
SUSPICIOUS TRANSACTIONS
'Suspicious transaction' are transactions with covered institutions, regardless of the amounts involved, where any of
the following circumstances exist:
(1) there is no underlying legal or trade obligation, purpose or economic justification;
(2) the client is not properly identified;
(3) the amount involved is not commensurate with the business or financial capacity of the client;
(4) taking into account all known circumstances, it may be perceived that the client’s transaction is structured in order
to avoid being the subject of reporting requirements under the Act;
(5) any circumstance relating to the transaction which is observed to deviate from the profile of the client and/or the
client’s past transactions with the covered institution;
(6) the transaction is in any way related to an unlawful activity or offense under this Act that is about to be, is being or
has been committed; or
(7) any transaction that is similar or analogous to any of the foregoing.
WHEN IS MONEY LAUNDERING COMMITTED

Money laundering is a crime whereby the proceeds of an unlawful activity are transacted, thereby making them
appear to have originated from legitimate sources. It is committed by the following:
(a) transacts said monetary instrument or property;
(b) converts, transfers, disposes of, moves, acquires, possesses or uses said monetary instrument or property;
(c) conceals or disguises the true nature, source, location, disposition, movement or ownership of or rights with
respect to said monetary instrument or property;
(d) attempts or conspires to commit money laundering offenses referred to in paragraphs (a), (b) or (c);
(e) aids, abets, assists in or counsels the commission of the money laundering offenses referred to in paragraphs (a),
(b) or (c) above; and
(f) performs or fails to perform any act as a result of which he facilitates the offense of money laundering referred to
in paragraphs (a), (b) or (c) above.
UNLAWFUL ACTIVITIES OR PREDICATE CRIMES

‘Unlawful activity’ refers to any act or omission or series or combination thereof involving or having direct relation to
the following:
"(1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the Revised Penal Code, as
amended;
"(2) Sections 4, 5, 6, 8, 9, 10, 11, 12, 13, 14, 15 and 16 of Republic Act No. 9165, otherwise known as the
Comprehensive Dangerous Drugs Act of 2002;
"(3) Section 3 paragraphs B, C, E, G, H and I of Republic Act No. 3019, as amended, otherwise known as the Anti-
Graft and Corrupt Practices Act;
"(4) Plunder under Republic Act No. 7080, as amended;
"(5) Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302 of the Revised Penal Code, as
amended;
"(6) Jueteng and Masiao punished as illegal gambling under Presidential Decree No. 1602;
"(7) Piracy on the high seas under the Revised Penal Code, as amended and Presidential Decree No. 532;
"(8) Qualified theft under Article 310 of the Revised Penal Code, as amended;
"(9) Swindling under Article 315 and Other Forms of Swindling under Article 316 of the Revised Penal Code, as
amended;
"(10) Smuggling under Republic Act Nos. 455 and 1937;
"(11) Violations of Republic Act No. 8792, otherwise known as the Electronic Commerce Act of 2000;
"(12) Hijacking and other violations under Republic Act No. 6235; destructive arson and murder, as defined under the
Revised Penal Code, as amended;
H.O.Q. 1
"(13) Terrorism and conspiracy to commit terrorism as defined and penalized under Sections 3 and 4 of Republic Act
No. 9372;
"(14) Financing of terrorism under Section 4 and offenses punishable under Sections 5, 6, 7 and 8 of Republic Act
No. 10168, otherwise known as the Terrorism Financing Prevention and Suppression Act of 2012:
"(15) Bribery under Articles 210, 211 and 211-A of the Revised Penal Code, as amended, and Corruption of Public
Officers under Article 212 of the Revised Penal Code, as amended;
"(16) Frauds and Illegal Exactions and Transactions under Articles 213, 214, 215 and 216 of the Revised Penal
Code, as amended;
"(17) Malversation of Public Funds and Property under Articles 217 and 222 of the Revised Penal Code, as
amended;
"(18) Forgeries and Counterfeiting under Articles 163, 166, 167, 168, 169 and 176 of the Revised Penal Code, as
amended;
"(19) Violations of Sections 4 to 6 of Republic Act No. 9208, otherwise known as the Anti-Trafficking in Persons Act
of 2003;
"(20) Violations of Sections 78 to 79 of Chapter IV, of Presidential Decree No. 705, otherwise known as the Revised
Forestry Code of the Philippines, as amended;
"(21) Violations of Sections 86 to 106 of Chapter VI, of Republic Act No. 8550, otherwise known as the Philippine
Fisheries Code of 1998;
"(22) Violations of Sections 101 to 107, and 110 of Republic Act No. 7942, otherwise known as the Philippine Mining
Act of 1995;
"(23) Violations of Section 27(c), (e), (f), (g) and (i), of Republic Act No. 9147, otherwise known as the Wildlife
Resources Conservation and Protection Act;
"(24) Violation of Section 7(b) of Republic Act No. 9072, otherwise known as the National Caves and Cave
Resources Management Protection Act;
"(25) Violation of Republic Act No. 6539, otherwise known as the Anti-Carnapping Act of 2002, as amended;
"(26) Violations of Sections 1, 3 and 5 of Presidential Decree No. 1866, as amended, otherwise known as the decree
Codifying the Laws on Illegal/Unlawful Possession, Manufacture, Dealing In, Acquisition or Disposition of Firearms,
Ammunition or Explosives;
"(27) Violation of Presidential Decree No. 1612, otherwise known as the Anti-Fencing Law;
"(28) Violation of Section 6 of Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas
Filipinos Act of 1995, as amended by Republic Act No. 10022;
"(29) Violation of Republic Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines;
"(30) Violation of Section 4 of Republic Act No. 9995, otherwise known as the Anti-Photo and Video Voyeurism Act of
2009;
"(31) Violation of Section 4 of Republic Act No. 9775, otherwise known as the Anti-Child Pornography Act of 2009;
"(32) Violations of Sections 5, 7, 8, 9, 10(c), (d) and (e), 11, 12 and 14 of Republic Act No. 7610, otherwise known as
the Special Protection of Children Against Abuse, Exploitation and Discrimination;
"(33) Fraudulent practices and other violations under Republic Act No. 8799, otherwise known as the Securities
Regulation Code of 2000; and
"(34) Felonies or offenses of a similar nature that are punishable under the penal laws of other countries."
END
H.O.Q. 1
QUIZZER (from previous BAR Exams)

1. The government agency granted with the power of supervision and examination over banks and nonbank
financial institutions performing quasi-banking functions, to ensure that the conduct of its business is on a sound
financial basis that will provide continued solvency and liquidity is—
A. The Philippine Deposit Insurance C. The Anti-Money Laundering Council;
Corporation; D. The Securities and Exchange Commission.
B. The Bangko Sentral ng Pilipinas;
2. A bank can be placed under receivership when, if allowed to continue in business, its depositors or creditors
would incur
A. Probable losses C. Possible losses
B. Inevitable losses D. A slight chance of losses
3. The Bank Secrecy Law (RA 1405) prohibits disclosing any information about deposit records of an individual
without court order except—
A. In an examination to determine gross estate of a decedent;
B. In an investigation for violation of Anti-Graft and Corrupt Practices;
C. In an investigation by the Ombudsman;
D. In an impeachment proceeding.
4. X is being charged for violation of Anti-Graft and Corrupt Practices because he is suspected of having
accumulated unexplained wealth. X maintains deposit accounts with ABC Bank. The Ombudsman filed criminal
cases against X before the Sandiganbayan. Can the court issue subpoena against ABC Bank to produce all
documents pertaining to all the deposit accounts of X?
A. Yes, because there is already a pending case and provided the subpoena must be specific as to
which account;
B. Yes, it is enough that the specific bank is identified;
C. No, because the issuance of the subpoena has no real legal basis;
D. Even without a subpoena, information about the deposit accounts of X can be submitted to the
Sandiganbayan because it will be used in a pending case.
5. Which of the following is an exception to the secrecy of bank deposits which are in the Philippine Pesos, but
NOT an exception to the secrecy of foreign currency deposits?
A. Upon BSP inquiry into or examination of deposits or investments with any bank, when the inquiry or
examination is made in the course of the BSP’s periodic special examination of said bank to ensure
compliance with the AMLA;
B. Upon PDIC and BSP inquiry into examination of deposit accounts in case there is a finding of unsafe or
unsound banking practice;
C. Upon inquiry in cases of impeachment;
D. Upon inquiry by the Commissioner of Internal Revenue in the event a taxpayer files an application to
compromise his tax liabilities on the ground of financial incapacity.
6. X, a private individual, maintains a dollar deposit with ABC Bank. X is suspected to be the leader of a Kidnap for
Ransom Gang and he is suspected of depositing all ransom money in said deposit account which are all in US
Dollars. The police want to open said account to know if there are really deposits in big amounts. Which
statement is most accurate?
A. The same rules under the Secrecy of Bank Deposit Act will apply;
B. An approval from the Monetary Board is necessary to open the account;
C. Because the deposit is in US Dollars, it is covered by the Foreign Currency Deposit Act which allows
disclosure only upon the written permission of the depositor;
D. Approval from the court is necessary to order disclosure of the account.
7. XYZ Corporation is engaged in lending funds to small vendors in various public markets. To fund the lending,
XYZ Corporation raised funds through borrowings from friends and investors. Which statement is most
accurate?
A. XYZ Corporation is a bank;
B. XYZ Corporation is a quasi-bank;
C. XYZ Corporation is an Investment Company;
D. XYZ is none of the above.

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Banking Laws

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REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS [1]

GENERAL BANKING LAW of 2000 (R.A. 8791)

DEFINITION AND CLASSIFICATION OF BANKS

DISTINCTIONS BETWEEN BANKS, QUASI-BANKS AND TRUST ENTITIES

AS OPPOSED TO TRUST ENTITIES

“Know your customer” rule

If there is material misrepresentation, the bank may:

Limit on Loans, Credit Accomodations and Guarantees

Amortization on loans and other credit accommodations

DILIGENCE REQUIRED OF BANKS

FIDUCIARY NATURE OF BANKS

SINGLE BORROWER’S LIMIT (SBL)

Basis for determining compliance

RESTRICTIONS ON INSIDER LENDING:

General rule: No director or officer of any bank:

Requirements for valid insider lending

THE NEW CENTRAL BANK ACT (R.A. No. 7653)

CREATION OF THE BANGKO SENTRAL NG PILIPINAS (BSP)

RESPONSIBILITY AND PRIMARY OBJECTIVE

POWERS AND FUNCTIONS

PROHIBITION ON MEMBERS OF THE MB

GROUNDS FOR REMOVAL OF ANY MEMBER OF THE MB

VACANCIES, HOW FILLED

CIVIL LIABILITY OF MEMBERS OF THE MB

HOW THE BSP HANDLES BANKS IN DISTRESS

Period and termination

Powers and duties of a conservator

Powers and duties of a receiver

Close now, hear later scheme

Effects of Appointment of Receiver/Liquidation

HOW THE BSP HANDLES EXCHANGE CRISIS

LEGAL TENDER POWER

1. P1,000.00 for denominations of 1-Piso, 5-Piso and 10-Piso coins; and

The BSP may call in for replacement:

PHILIPPINE DEPOSIT INSURANCE CORPORATION ACT (R.A.

CONCEPT OF INSURED DEPOSITS

DEPOSIT LIABILITIES REQUIRED TO BE INSURED WITH PDIC

DEPOSIT ACCOUNT NOT ENTITLED TO PAYMENT

DETERMINATION OF INSURED DEPOSIT

Notice and publication requirement

Effect of Payment of Insured Deposit

Failure to settle claim of insured depositor

Failure of depositor to claim insured deposits

SECRECY OF BANK DEPOSITS (R.A. 1405)

CONFIDENTIALITY OF FOREIGN CURRENCY DEPOSITS

PENALTIES FOR VIOLATION OF R.A. No. 1405

UNCLAIMED BALANCES LAW (Act 3936 amended by P.D. No. 679)

INFORMATION AS TO EXISTENCE OF UNCLAIMED BALANCES

ACTION OF SOLICITOR GENERAL

The service process will be made as follows:

LIABILITY OF THE BANK AFTER DEPOSIT

ANTI-MONEY LAUNDERING ACT (R.A. 10365)

OBLIGATIONS OF COVERED INSTITUTIONS

REPORTING OF COVERED AND SUSPICIOUS TRANSACTIONS

WHEN IS MONEY LAUNDERING COMMITTED

UNLAWFUL ACTIVITIES OR PREDICATE CRIMES

QUIZZER (from previous BAR Exams)

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