Professional Documents
Culture Documents
BANKING LAWS
BAR QUESTION:
BAR QUESTION:
T HREE KINDS OF ENTITIES THAT INTRODUCE FUNDS
Theory of Cognition vs. Theory of Manifestation
INTO THE ECONOMY :
(1997)
1. banks : entities that obtains funds from the public
in the form of deposits and re-lend it to the public;
The Civil Code adopts the theory of cognition, while
2. quasi-banks : those that obtain funds in the form of
deposit substitutes and re-lend the same and not the Code of Commerce generally recognizes the
from the public or depositors. theory of manifestation, in the perfection of
3. Finance companies and other financial contracts. How do these two theories differ?
intermediaries: those that lend funds from their SUGGESTED ANSWER:
own assets.
Under the theory of cognition, the acceptance is
considered to effectively bind the offeror only from
FIVE PERSONS PRIMARILY INTERESTED IN THE the time it came to his knowledge. Under the theory
of manifestation, the contract is perfected at the
BUSINESS OF BANKING moment when the acceptance is declared or made by
1. Government the offeree.
2. Depositors
3. Investors
4. Creditors
5. Borrowers
Notes of hotjurist
in foro conscientiae
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Scope of Application: The GBL primarily governs 3. That the amount of the capital, the financing,
universal banks and commercial banks. It suppletorily organization, direction and administration, as
governs thrift banks, rural banks and other banking well as the integrity and responsibility of the
institutions. organizers and administrators, reasonably
assure the safety of deposits and the public
GENERAL CONCEPTS interest (Sec. 14).
Notes of hotjurist
in foro conscientiae
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entering into said contract, and cannot rely upon on credit services to cooperatives. It shall include
what is or is not annotated on the title. Reason: cooperative rural banks. They are governed
Before a loan is approved, representatives are sent primarily by the Cooperative Code (RA 6938).
to the premises offered as collaterals so as to
investigate who the real owners are (DBP vs. CA, 6. Islamic banks – Banks whose business dealings
331 SCRA 267). and activities are subject to the basic principles and
rulings of Islamic Shari’ a, such as the Al Amanah
The business of a bank is one affected by public Islamic Investment Bank of the Philippines which
interest for which reason the bank should guard was created by RA 6848.
against loss due to negligence and bad faith. It is
expected to ascertain and verify the identities of the 7. Other classification of banks as determined by
persons it transacts business with (UCPB vs. the Monetary Board of the Bangko Sentral ng
Ramos, G.R. No. 147800, November 11, 2003, Pilipinas.
Callejo, J.).
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in foro conscientiae
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Requires a certificate Does not require a 100% of equity 100 % of equity of a thrift or
of tax clearance as certificate of tax A publicly-listed bank rural bank
prior requirement for clearance for BSP to may own up to 100% of In other financial allied
the voting stock of only enterprises including
the approval of the approve dissolution ( In
one other UB / CB another commercial bank
dissolution by the Re: Petition For (GBL, Sec.25) investment shall remain a
SEC (NIRC, Sec. Assistance in the minority holding (GBL,
52[c]) Liquidation Of Bokod Sec. 31)
(Benguet), Inc, G.R. No.
Equity Investment in a Single Non-allied Enterprise
158261, Dec. 18, 2006
Shall not exceed 35% of N/A
the total equity in that
enterprise nor shall it
UNIVERSAL BANK COMMERCIAL BANK exceed 35% of the
Additional Powers voting stock in that
enterprise
Authority to exercise No such additional powers
additional powers other
than those authorized
for commercial banks
UNIVERSAL & OTHER BANKS
Type Of Investment COMMERCIAL BANK
May invest in the May only invest in equities Quasi-banking Functions
equities of allied, of allied enterprises,
whether financial or whether financial or non- Authorized to engage in Not so authorized
non-financial, and non- financial quasi-banking functions
allied enterprises (Sec. without need for
24) approval
Demand Deposits
Powers
May accept or create Must seek approval of
1. The powers 1. General powers incident demand deposits Monetary Board
authorized for a to corporations without need for before accepting or
commercial bank; 2. Such powers as may be approval creating demand
2. The powers of an necessary to carry on the deposits. (Sec. 33)
investment house; business of commercial Demand deposits -
and banking: Liabilities of the BSP
3. The power to invest in a. Accepting drafts and and of other banks
non-allied issuing letter of credits; which are denominated
enterprises (Sec. b. Discounting and in Philippine currency
23). negotiating promissory and are subject to
notes, drafts, bills of payment in legal tender
exchange and other upon demand by the
evidence of debt; presentation of checks
c. Accepting or creating (Sec. 58, NCBA).
demand deposits;
receiving other types of
deposits and deposit
substitutes; EQUITY INVESTMENTS
d. Buying and selling POINT OF UNIVERSAL BANK COMM’L BANK
foreign exchange and DISTINCTION (Sec. 24-28)
other debt securities; (Sec. 30-32)
e. Extending credit.
(Sec. 29)
Total investment 50% 35%
Total Investment in Allied Enterprises in allied
enterprises of net worth of net worth
50% of net worth 35% of net worth
Total Investment in Non-allied Enterprises Total investment 50% N/A
in non-allied
50% of net worth N/A
enterprises of net worth
Equity Investment in any One Enterprises
Equity 25% 25%
25% of net worth 25% of net worth
investment in any
(Allied Only)
one enterprise of net worth of net worth
Equity Investment in Financial Allied Enterprise
(Allied only)
Equity
investment in
financial allied 100% 100%
enterprise: thrift
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bank, rural bank of equity of equity 1. Distribution of net profits may be limited or
or any financial prohibited and MB may require that part or all
allied enterprise of the net profits be used to increase the
(Sec. 25) capital accounts of the bank until the minimum
In other requirement has been met; or
A publicly- financial allied 2. Acquisition of major assets and making of new
listed bank may enterprises, investments may be restricted. EXCEPT:
own up to 100%
investment shall purchases of evidence of indebtedness
remain a guaranteed by the Government (Sec. 34).
of the voting minority holding
stock of only one
3. In case of a bank merger or consolidation, or
(Sec. 31). when a bank is under rehabilitation under a
other UB / CB
program approved by BSP, the MB may
(Sec. 25).
temporarily relieve the surviving bank,
consolidated bank, or constituent bank or
corporations under rehabilitation from full
compliance with the required capital ratio.
Equity
investment in Effects of non-compliance with the prescribed
non-financial 100% 100% minimum ratio:
allied enterprises 1. Distribution of net profits may be limited or
of equity of equity prohibited and MB may require that part or all of the
net profits be used to increase the capital accounts
of the bank until the minimum requirement has
Equity Shall not exceed
been met; or
investment in a 35% of the total
2. Acquisition of major assets and making of new
single non-allied equity in that
investments may be restricted. EXCEPT:
enterprise enterprise nor
purchases of evidence of indebtedness guaranteed
shall it exceed N/A
by the Government.
35% of the 3. In case of a bank merger or consolidation, or when
voting stock in a bank is under rehabilitation under a program
that enterprise approved by BSP, the MB may temporarily relieve
the surviving bank, consolidated bank, or
constituent bank or corporations under
rehabilitation from full compliance with the required
Equity capital ratio.
investment in
Quasi-Banks 40% 40%
Notes of hotjurist
in foro conscientiae
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diligence required, that of a good father of the family is documents, warehouse receipts or other similar
to be observed. Any stipulation exempting the documents transferring or securing title covering
depositary from any liability arising from loss on account readily marketable, non-perishable goods which
of fraud, negligence would be void for being contrary to must be fully covered by insurance;
public policy (CA-Agro Dev’t vs. CA, 219 SCRA 426,
March 5, 1993). Exclusions (NON-RISK LOANS):
1. Loans secured by obligations of the Bangko Sentral
or the Philippine Government;
Note: The bank acting as depositary or as an agent 2. Loans fully guaranteed by the government;
shall keep the funds, securities and other effects which 3. Loans covered by assignment of deposits
it receives duly separated from its own assets and maintained in the lending bank and held in the
liabilities. (Sec. 53) Philippines;
4. Loans, credit accommodations and acceptances
under letters of credit to the extent covered by
A. LOAN FUNCTION margin deposits; and
5. Other loans or credit accommodations which the
Requirement for Grant of Loans MB may specify as non-risk items.
c. The total amount of loans may be increased by an 3. Stockholders – those whose stockholdings,
additional 10% of the net worth of such bank individually and/or together with any of the following
provided the additional liabilities of any borrower persons, amount to 2% or more of the total
are adequately secured by trust receipts, shipping subscribed capital stock of the bank:
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in foro conscientiae
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a. His spouse or relative within the first degree of iii. Cooperative banks with regard to their
affinity/consanguinity or relative by legal cooperative shareholders.
adoption, partnership wherein any of the
foregoing is a general partner; and d. The resolution approving the loan shall be entered in
the records of the bank and transmitted to the BSP.
b. A co-owner, with the stockholder or the
stockholder’s spouse, or relative mentioned e. Waiver of secrecy of deposits of whatever nature in
above, of property/right/interest (mortgaged, all banks in the Philippines by the borrower. No
pledged or assigned to secure the loan or waiver is required if the related interests are the
credit accommodations, except when the borrower.
mortgage, pledge or assignment covers only
said co-owner’s undivided interest. f. Information obtained from examination is strictly
confidential.
4. Related Interest –
a. Spouse, relatives within first degree of
consanguinity or affinity, or relative by legal 3. Rules on amount of secured loans
adoption of a DOS, partnerships of which a
DOS or any of the foregoing is a general a. Those secured by real estate shall not exceed 75%
partner. of the appraised value of the real estate security,
b. Co-owner, with the DOS or his spouse or plus 60% of the appraised value of the insured
relative within the first degree of consanguinity
improvements (Sec. 37).
or affinity, or relative by legal adoption, of the
property/interest/ right mortgaged, pledged,
assigned to secure the loans or credit b. Those secured by chattels and intangible properties
accommodations, except when the mortgage, (such as patents, trademarks, trade names and
pledge or assignment covers only said co- copyrights) shall not exceed 75% of the appraised
owner’s undivided interest. value of the security (Sec. 38).
Notes of hotjurist
in foro conscientiae
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value of the improvements or 75% of the appraised DEMAND DEPOSITS SAVINGS ACCOUNT
value of the chattel ( Secs. 37 & 38, GBL )
4. As bailee-bailor
a. Deposit strictly for safekeeping and for specific
purposes
5. As agent-principal:
a. Deposit of check for collection
NOW ACCOUNTS
b. Deposit for specific purpose
c. Deposit for safekeeping TIME DEPOSITS
(Negotiable Order of
Depositors:
Withdrawal)
1. Minors :
a. at least seven years of age Interest bearing deposit An account with fixed
b. able to read and write accounts that combine term
c. not disqualified by any incapacity the payable on demand
d. it should only be savings or time deposits
feature of checks and
investment feature of
Note: Parents may deposit for their minor children savings account.
or wards (Sec.1 PD No.734)
Note:
Kinds of Deposits
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in foro conscientiae
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Notes of hotjurist
in foro conscientiae
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6. To employ casual or non-regular personnel or too 1. Fraudulently overvalue property offered as security
lengthy probationary personnel in the conduct of its for a loan from the bank;
business involving bank deposits (Sec. 55).
2. Furnish false or make misrepresentations or
Rationale: To prevent violation of Bank Secrecy suppression of material facts for the purpose of
Law. obtaining, renewing, or increasing a loan or
extending the period thereof;
B. ON DIRECTORS, OFFICERS, EMPLOYEES,
OR AGENTS OF BANKS : 3. Attempt to defraud the said bank in the event of a
court action to recover a loan or other credit
accommodation; or
1. Make false entries in any bank report or statement
or participate in any fraudulent transaction;
4. Offer any director, officer, employee or agent of a
bank any gift, fee, commission, or any other form of
2. Without order of a court of component
compensation in order to influence such persons
jurisdiction, disclose to any unauthorized
into approving a loan or other credit
person any information relative to the funds or
accommodation application.
properties in the custody of the bank belonging to
private individuals, corporations, or any other
entity;
However, a bank may outsource, upon prior CONDUCTING BUSINESS IN AN UNSAFE OR UNSOUND
approval of the Monetary Board the following
functions:
MANNER (SEC. 56)
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In determining whether a particular act or omission, a. foreign bank may avail itself of only one
which is not otherwise prohibited by law, rule or mode of entry; and
regulation affecting banks, quasi-banks, or trust entities, b. Foreign bank or Philippine corporation
may be deemed as conducting business in an unsafe or may own up to 60% of the voting stock
unsound manner, the MB shall consider any of the of only one domestic bank or new
following circumstances: banking subsidiary (Sec. 2).
1. The act or omission has resulted or may result in
material loss or damage, or abnormal risk or danger
to the safety, stability, liquidity or solvency of the Entries under the second and third modes are
institution; restricted to banks which are among the top 150
foreign banks in the world or top 5 banks in their
2. The act or omission has resulted or may result in country of origin.
material loss or damage, or abnormal risk to the MINIMUM CAPITALIZATION:
institution’s depositors, creditors, investors, and
stockholders or to the BSP or to the public in
general;
1. For locally incorporated subsidiaries – equal to that
3. The act or omission has caused any undue injury, of domestic banks of the same category
or has given any unwarranted benefits, advantage
or preference to the bank or any party in the
discharge by the director or officer of his duties and 2. For foreign bank branches – not less than the US$
responsibilities through manifest partiality, evident equivalent of P210M
bad faith or gross inexcusable negligence;
4. The act or omission involves entering into any Amendments introduced by GBL 2000
contract or transaction manifestly and grossly 1. Within seven years from effectivity of the GBL
disadvantageous to the bank, quasi-bank or trust (June 13, 2000), foreign banks may be allowed
entity, whether or not the director or officer profited to own up to 100% equity of only one domestic
or will profit thereby. bank as a mode of entry if authorized by the
Monetary Board (Sec. 73, GBL).
OWNERSHIP OF STOCKS OF A DOMESTIC
2. Other foreign individuals and non-bank
BANK corporations may own up to 40% of the voting
stock of a domestic bank; the nationality of the
1. Filipino controlling shareholders of the non-bank
In case of a Filipino individual or a domestic non- corporations will be traced to determine the
bank corporation, each may own up to 40% of the foreign ownership of the domestic bank (Sec.
outstanding voting stock of a local bank. 11, GBL).
2. Foreign
Foreign individuals and non-bank corporations may
own or control up to an aggregate of 40% of the FOREIGN BANKS (SECS. 72–78)
voting stock of a domestic bank.
Notes of hotjurist
in foro conscientiae
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in foro conscientiae
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GENERAL RULE: No appointive or elective official, or personal, and the rents, issues, and profits
whether full-time or part-time, shall, at the same time, thereof
serve as an officer of any private bank (Sec. 19).
6. Establish and manage common trust funds (Sec.
83)
EXCEPTIONS:
1. As otherwise provided under Sec. 5 of the Rural Prohibitions:
Bank Act 1. No trust entity shall, for account of the trustor or the
2. Where such service is incidental to financial beneficiary of the trust, purchase or acquire
assistance provided by the government-owned or - property from, or sell, transfer, assign or lend
controlled corporation to the bank money or property to, purchase debt from
3. As otherwise provided under existing laws. instruments of, any of the departments, directors,
officers, stockholders or employees of the trust
A bank holding out its officers and agents as entity, including relatives within the 1st degree of
worthy of confidence will not be permitted to consanguinity or affinity, or the related interests, of
profit by the frauds they may thus be enabled such directors, officers and stockholders, unless the
to perpetrate in the apparent scope of their transaction is specifically authorized by the trustor
employment; nor will it be permitted to shirk and the relationship of the trustee and the other
from its responsibility for such frauds, even party involved in the transaction is fully disclosed to
though no benefit may accrue to the bank the trustor or beneficiary of the trust prior to the
therefrom (10 Am Jur 2d, p. 114). Accordingly, transaction (Sec. 80, GBL).
a banking corporation is liable to innocent third
persons where the representation is made in 2. The trust business and all funds, properties or
the course of its business by an agent acting securities received by any trust entity as executor,
within the general scope of his authority even administrator, guardian, trustee, receiver or
though, in the particular case, the agent is depositary shall be kept separate and distinct from
secretly abusing his authority and attempting to the general business, including all other funds,
perpetrate a fraud upon his principal or some properties, and assets, of such trust entity (Sec. 87,
other person, for his own ultimate benefit GBL).
(Philippine Banking Corp. vs. CA and Marcos,
G.R. No. 127469. January 15, 2004).
2. Act under the order or appointment of any court as Purpose: To maintain a central monetary authority that
guardian, receiver, trustee, or depositary of the shall function and operate as an independent and
estate of any minor or incompetent person, and as accountable body in the discharge of its responsibilities
receiver and depositary of any money paid into concerning money, banking and credit.
court by parties to any legal proceedings
Notes of hotjurist
in foro conscientiae
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of the country and is granted the power of supervision Seven members consisting of:
and examination over bank and non-bank financial
institutions performing quasi-banking functions, 1. Chairman: Governor of the BSP
2. A member of the cabinet to be designated by the
including savings and loan associations (Busuego vs.
President of the Philippines
CA, 151 SCRA 376 [1987]). 3. Five (5) members who shall come from the private
sector, all of whom shall serve full-time.
P RIMARY OBJECTIVES :
1. To maintain price stability conducive to a balanced
and sustainable growth of the economy. Note: The degree of diligence required of the members
of the MB, officials and employees of the BSP in the
2. To promote and maintain monetary stability and the performance of their functions is extraordinary diligence
convertibility of the peso. (Sec.16, NCBA).
2. To supervise bank operations 2. at least 35 years of age, with the exception of the
Governor who should at least be 40 years of age,
3. To regulate the operations of finance companies
and non-bank financial institutions performing 3. of good moral character, of unquestionable
quasi-banking functions, and similar institutions integrity, of known probity and patriotism, and
(Sec. 3)
4. with recognized competence in social and
economic disciplines.
3. Clearing channel or house; especially where the 1. disqualified from being a director, officer, employee,
PCHC does not operate (Sec. 102) consultant, lawyer, agent or stockholder of any
bank, quasi-bank or any other institution which is
4. Banker of the government – the BSP shall be the subject to supervision or examination by the
official depository of the Government and shall Bangko Sentral, in which case such member shall
represent it in all monetary fund dealings (Secs. resign from, and divest himself of any and all
110- 116) interests in such institution before assumption of
office (Sec. 9);
5. Financial advisor of the government (Secs. 123-
124) – Under Article VII, Sec. 20 of the 1987 2. those coming from the private sector shall not hold
Constitution, the President may contract or
any other public office or public employment during
guarantee foreign loans but with the prior
concurrence of the Monetary Board. their tenure (Sec. 9);
6. Source of credit (Secs. 61-63, 81-89, 109)
7. Supervisor of the banking system (Sec. 25) – shall 3. cannot be connected directly with any multilateral
include the power to: banking or financial institution or has a substantial
a. Examine, extending to enterprises wholly or interest in any private bank in the Philippines, within
majority-owned or controlled by the bank (Sec. one (1) year prior to his appointment (Sec. 9);
7, RA 8791); this power may not be restrained
by a writ of injunction unless there is 4. cannot be employed in any such institution within
convincing proof that the action of the BSP is
two (2) years after the expiration of his term except
plainly arbitrary (Sec. 25)
b. Place a bank under receivership or liquidation when he serves as an official representative of the
(Sec. 30) Philippine Government to such institution (Sec. 9);
c. Initiate criminal prosecution of erring officers of
banks 5. the Governor of the Bangko Sentral and the full-
8. Government agent (Secs. 117-122) time members of the Board shall limit their
professional activities to those pertaining directly to
their positions with the Bangko Sentral.
MONETARY BOARD (MB) Accordingly, they may not accept any other
employment, whether public or private,
The body by which the powers and functions of the remunerated or ad honorem, with the exception of
Bangko Sentral are exercised (Sec.6). positions in eleemosynary, civic, cultural or religious
organizations or whenever, by designation of the
C OMPOSITION : President, the Governor or the full-time member is
Notes of hotjurist
in foro conscientiae
Page 15 of 27
tasked to represent the interest of the Government Personnel of the Bangko Sentral are hereby
or other government agencies in matters connected prohibited from:
with or affecting the economy or the financial
system of the country (Sec. 20); 1. being an officer, director, lawyer or agent,
employee, consultant or stockholder, directly or
6. in case any member of the Monetary Board with indirectly, of any institution subject to supervision or
examination by the Bangko Sentral;
personal or pecuniary interest in any matter in the
agenda of the Monetary Board shall disclose his
interest to the Board and shall retire from the Exception: non-stock savings and loan
meeting when the matter is taken up (Sec. 14). associations and provident funds organized
exclusively for employees of the Bangko Sentral,
and except as otherwise provided in this Act;
S UPERVISION AND E XAMINATION OF B ANKS
The BSP shall have supervision over, and conduct 2. directly or indirectly requesting or receiving any gift,
periodic or special examinations of, banking present or pecuniary or material benefit for himself
institutions and quasi-banks, including their or another, from any institution subject to
subsidiaries and affiliates engaged in allied supervision or examination by the Bangko Sentral;
activities.
- Any officer, owner, agent, manager, director or officer- Ground: State of continuing inability or unwillingness to
maintain a condition of liquidity deemed adequate to
in-charge of any institution subject to the supervision or
protect the interest of depositors and creditors.
examination by the Bangko Sentral who, being required A conservator appointed by the BSP may take over
in writing by the Monetary Board or by the head of the without the need of first declaring the bank
supervising and examining department willfully refuses insolvent.
to file the required report or permit any lawful
examination into the affairs of such institution shall be Duration: Not to exceed 1 year
punished under the Act. (Sec. 34)
Effects:
1. Bank/quasi-bank retains juridical personality
False Statement. - The willful making of a false or
2. Not a precondition to the designation of a receiver
misleading statement on a material fact to the Monetary
Board or to the examiners of the Bangko Sentral shall Powers of conservator:
be punished. (Sec. 35) 1. To take charge of the assets, liabilities, and the
management thereof;
PROHIBITIONS ON BANK OFFICERS, DIRECTORS,
LAWYERS, AGENTS
2. Reorganize the management;
Notes of hotjurist
in foro conscientiae
Page 16 of 27
3. Collect all monies and debts due said bank; and involving probable losses in an unsafe or
to its depositors or unsound manner.
4. Exercise all powers necessary to restore its creditors; or (Sec. 56, GBL)
viability, with the power to overrule or rebuke the
4. Willful violation of a
actions of the previous management and board of cease and desist order
directors of the bank or quasi-bank. that has become final,
involving acts or
The powers must be related to preservation of transactions which
assets, reorganization of management and the amount to fraud or a
restoration of viability. Such power to revoke cannot dissipation of the assets
extend to post-facto repudiation of perfected of the institution (Sec.
transactions, otherwise they would infringe the non- 30)
impairment clause of the Constitution. The power
to revoke contracts only covers those that are
deemed defective – i.e., void, voidable,
Receiver:
unenforceable or rescissible (First Phil. Int’l Bank
1. Banks – PDIC
vs. CA, 252 SCRA 259). The conservator’s power
2. Quasi-banks – Any person of recognized
is not unilateral and he cannot simply repudiate
competence in banking or finance
valid obligations of the bank. His authority would be
only to bring actions to assail the same.
Functions:
1. Immediate gathering and taking charge of all the
assets and liabilities of the institution and
Termination: administering them for the benefit of creditors
2. General powers of a receiver
1. When the MB is satisfied that the institution can 3. Determination ASAP but not later than 90 days,
continue to operate on its own and the whether the institution should undergo
conservatorship is no longer necessary; rehabilitation or liquidation.
Note the distinctions between rehabilitation and
2. But if the continuance in business of the bank liquidation.
would involve probable loss to its depositors or
creditors, proceedings for receivership and
liquidation shall be pursued (Sec. 29). “CLOSE NOW, HEAR LATER” SCHEME
Sec. 29 of the Central Bank Act does not
contemplate prior notice and hearing before a bank
is placed under receivership. It is enough that such
RECEIVERSHIP OF A BANK OR action is made the subject of a subsequent judicial
review. The purpose of the scheme is to protect
QUASI-BANK/CLOSURE the depositors, creditors, stockholders and general
public (Central Bank vs. CA, 220 SCRA 536).
Receivership is equivalent to an injunction to restrain
Only stockholders representing the majority of the
the bank in any way. Thus, the appointment of a
capital stock of a bank have the personality to file a
receiver operates to suspend the authority of the bank
and of its directors and officers over its property and petition for certiorari to be filed within 10 days from
effects (Villanueva vs. CA, 244 SCRA 395 [1995]). receipt by the board of directors of the institution of
the order directing receivership, liquidation or
conservatorship.
Grounds:
Reason: Stockholders owning a majority of the
shares are expected to be more objective in
Under NCBA Under GBL determining whether the resolution is plainly
1. Inability to pay 1. Notification to the arbitrary and issued in bad faith (Sec. 30, NCBA;
liabilities as they become BSP or public Central Bank vs. CA, G.R. No. 76118, March 30,
due in the ordinary announcement of a 1993).
course of business, but bank holiday (Sec.
not including inability to 53, GBL)
pay those caused by CASE DIGEST
extraordinary demands
induced by financial Central Bank of the Philippines vs. Court of
panic in the banking Appeals, 220 SCRA 536
community;
Facts:
2. Insufficiency of 2. Suspension of
realizable assets to meet payment of deposit Based on the financial reports submitted to the
its liabilities; liabilities Central Bank, which states that the Financial condition
continuously for more of The Triumph Savings Bank (TSB) is one of
than 30 days (Sec. insolvency and its continuance in the business world
53, GBL) involve probable loss to its depositors and creditors, the
Monetary Board issued a Resolution ordering the
closure of TSB, forbidding it from doing business in the
3. Inability to continue 3. Persistence in Philippines, placing it under receivership and appointing
business without conducting business Ramon V. Taiaoqi as receiver. The TSB filed a
Notes of hotjurist
in foro conscientiae
Page 17 of 27
complaint assailing the resolution on the ground of lack 3. Payment shall be in accordance with the rules on
of prior notice and hearing concurrence and preference of credits.
Regular courts have no jurisdiction over actions
filed by claimants against an insolvent bank (Ong
Issue: vs CA, 253 SCRA 105).
Rules:
LIQUIDATION 1. Notes and coins called in for replacement shall
remain legal tender for a period of one year from
Grounds: the date of call.
1. The condition of the bank is one of insolvency or
that its continuance would involve probable loss to
its depositors and creditors. 2. After that period, they shall cease to be legal tender
during the following year or for such longer period
2. A determination by the MB that the bank cannot be as MB may determine.
rehabilitated.
Notes of hotjurist
in foro conscientiae
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Coverage:
All deposits of whatever nature with banks or banking
MONETARY STABILIZATION institutions in the Philippines, including investments in
bonds issued by the Government of the Philippines, its
political subdivisions and its instrumentalities.
3 IMPORTANT TOOLS TO ACHIEVE PRICE STABILITY
PROHIBITED ACTS:
1. Loans to Banks (Sec. 83) (Rediscounting)
a. If BSP wants to increase money supply, it 1. Examination and inquiry or looking into all deposits,
opens the rediscount window by reducing of whatever nature, with the banks in the
interest on loans Philippines including investments in bonds issued
b. If BSP wants to decrease money supply, it by the Government.
closes the rediscount window or charges very 2. Any disclosure by any official or employee of any
high interest rates for rediscounted notes bank to any unauthorized person of any information
concerning the said deposits.
Rules:
SECRECY OF BANK DEPOSITS LAW No. CDC's complaint is not meritorious. It was held in
(R.A. No. 1405) China Banking Corporation v. Ortega, 49 SCRA
355 (1973) that peso deposits may be garnished and
Notes of hotjurist
in foro conscientiae
Page 19 of 27
the depositary bank can comply with the order of C. General Banking Law of 2000 (R.A. No. 8791):
garnishment without violating the Law on the
1. No bank shall employ casual or non-regular
Secrecy of Bank Deposits. Execution is the goal of personnel or too lengthy probationary personnel in
litigation as it is its fruit. Garnishment is part of the the conduct of its business involving bank deposits
(Sec. 55.4).
execution process. Upon service of the notice of 2. No director, officer, employee, or agent of any bank
garnishment on the bank where the defendant shall, without court order, disclose to any
unauthorized person any information relative to the
deposited funds, such funds become part of the
funds or properties in the custody of the bank
subject matter of litigation. belonging to private individuals, corporations, or
any other entity, provided that with respect to bank
B. From other laws deposits, the provisions of existing laws shall
prevail (Sec. 55[b]).
1. Anti-Graft and Corrupt Practices Act cases (R.A. 3. Outsourcing of inherent bank functions
No. 3019; added by analogy in PNB vs. Gancayco, D. New Central Bank Act (R.A. No. 7653):
15 SCRA 91 [1965]); 1. DOSRI loans
2. Periodic and special examinations by the BSP
2. NIRC - Inquiry by the Commissioner of Internal (Sec. 25)
Revenue into bank deposits of:
E. Anti-Money Laundering Act (R.A. No. 9160)
a. A decedent to determine his gross estate;
b. A taxpayer who has filed an application for Provides for another exception to
compromise of his tax liability by reason of confidentiality, which is applicable to both peso
financial incapacity to pay his tax liability. He and foreign currency deposits.
must file a written waiver of his privilege under
RA 1405 or other general or special laws (Sec. Garnishment of bank deposit of judgment
6[f], NIRC). debtor does not violate RA 1405. It was not the
intention of the legislature to place bank
3. Inquiry or examination by the Anti-Money deposits beyond the reach of execution to
Laundering Council (AMLC) of any particular satisfy a final judgment. Its purpose is merely
deposit or investment with any banking institution or to secure information as to the name of the
non-bank financial institution upon order of any depositor and whether or not the defendant
competent court in cases of violation of the Anti- had a deposit in said bank, only for purposes of
Money Laundering Law, when it has been garnishment. Any disclosure is purely
established that there is probable cause that the incidental to the execution process (China
deposits or investments are related to an unlawful Banking Corporation vs. Ortega, 49 SCRA
activity or a money laundering offense, except that 355).
no court order shall be required in the following
unlawful activities: Illegally acquired property extends to cases
a. Kidnapping for ransom under Art. 267 RPC; where property is concealed by being held by
b. Comprehensive Dangerous Drugs Act of 2002 or recorded in the name of respondent’s
(RA No. 9165); spouse, ascendants, descendants, relatives, or
any other persons (Banco Filipino Savings and
Mortgage Bank vs. Purisima, 161 SCRA 576).
Notes of hotjurist
in foro conscientiae
Page 20 of 27
not even the subject of the case against them. that the inquiry would be made in the course of an
a) Will the complaint filed against the directors of impeachment proceeding.
Hi Yielding Corporation prosper? Explain
W RITTEN P ERMISSION OF D EPOSITOR
SUGGESTED ANSWER:
A bank may allow an inquiry into a deposit with the
No, because the Foreign Currency Deposit Act (R.A. written consent of the depositor. An oral or implied
No. 6426), including its punitive provisions, refers to authorization does not suffice. This consent may be
foreign currency deposits accounts constituted given voluntarily. In some cases, however, the consent
within the Philippines. It has no application at all to is involuntary because the law requires it.
accounts, even though they are banks, opened and
constituted abroad Thus, Section 26 of the New Central Bank Act as
implemented by BSP Circular No. 170, series of 1998,
b) Was there a violation of the Secrecy of Bank requires a director, officer or stockholder of a bank or
Deposits Law (Republic Act No. 1405)? Explain. their related interests to submit a written waiver of the
secrecy of all his deposits of whatever nature in all
SUGGESTED ANSWER: banks of the Philippines in favor of the Bangko Sentral,
if he applies for a DOSRI loan. However, the
No, because the punitive provisions of the Secrecy
information obtained from the examination remains
of Bank Deposits Law (R.A. No. 1405), including the
confidential and may be used by BSP examiners only in
statutory exemptions provided therein, are not
legal action it may initiate involving the said deposits.
applicable to FCDU accounts, even when constituted
locally. (Intengan v. Court of Appeals, G.R. No. A waiver of the Bank Secrecy Law is also required
128996, February 15, 2002) in case of loans secured by a hold-out or an assignment
of certificates of time deposits. (Section X315, Manual of
Regulations for Banks).
Notes of hotjurist
in foro conscientiae
Page 21 of 27
Notes of hotjurist
in foro conscientiae
Page 22 of 27
Philippines shall not be used as a site for unlawful result of which he facilitates the offense referred to
money laundering activities; and in number 1 above.
2. To pursue State’s foreign policy to extend
cooperation in transnational investigations and
prosecution on money laundering activities. 3. Any person knowing that any monetary instrument
or property is required under this Act to be
disclosed and filed with the AMLC fails to do so.
Covered Entities:
1. Banks P REVENTION OF M ONEY L AUNDERING
2. Non-banks 1. Customer Identification – Covered institutions
shall establish and record the true identity of its
3. Quasi-banks
clients based on official documents. They shall
4. Trust entities maintain a system of verifying their clients and in
case of corporate client, require a system of
5. All other institutions, their subsidiaries and affiliates verifying their legal existence and organizational
supervised or regulated by the BSP structure, s well as the authority and identification of
all person purporting to act on their behalf.
2. Record Keeping- All records of all transaction of
covered institution shall be maintained and safely
COVERED TRANSACTION: stored for 5 years from the dates of transaction.
With respect to closed accounts, the records on
Transaction, in cash or other equivalent monetary customer identification, account files and business
instrument in excess of P500,000, within one banking correspondence, shall be preserved and safely
day. stored for at least 5 years from the dates when they
SUSPICIOUS TRANSACTIONS : were closed.
3. Reporting of Covered and Suspicious
Transactions with covered institutions regardless of the
Transactions. – Covered institution shall report to
amounts involved, where any of the following
the AMLC all covered and suspicious transactions
circumstances exists:
within 5 working days from the occurrence thereof,
1. There is no underlying legal or trade obligation unless the Supervising Authority prescribes a
longer period not exceeding 10 working days.
2. Client is not properly identified
3. Amount involved is not commensurate with the
business or financial capacity J URISDICTION :
4. Taking into account all known circumstances, it All cases: RTC
may be perceived that the client’s transaction is
structured in order to avoid being the subject of Public officers and private persons in conspiracy
reporting requirements under the Act with them: Sandiganbayan
A crime whereby the proceeds of an unlawful activity a. upon ex parte application of AMLC; and
are transacted, thereby making them appear to have b. after determination that probable cause exists
originated from legitimate sources. It is committed by that any monetary instrument or property is in
the following: any way related to an unlawful activity.
1. Any person knowing that any monetary instrument
or property represents, involves, or relates to, the
proceeds of any unlawful activity, transacts or
attempts to transact said monetary instrument or
property. BAR QUESTION:
Notes of hotjurist
in foro conscientiae
Page 23 of 27
any crime. He maintains several bank accounts and Money Laundering Law, is obliged to report to the
has purchased 5 houses and lots for his children AMLC covered and suspicious transactions, without
from the Luansing Realty, Inc. Since he does not thereby violating any law. This is one of the
have any visible job, the company reported his exceptions to the Secrecy of Bank Deposit Act.
purchases to the Anti-Money Laundering Council
(AMLC). Thereafter, AMLC charged him with
violation of the Anti-Money Laundering Law. Upon 4. Supposing the titles of the houses and lots are
request of the AMLC, the bank disclosed to it Rudy's in possession of the Luansing Realty, Inc., is it
bank deposits amounting to P100 Million. under obligation to deliver the titles to Rudy?
Subsequently, he was charged in court for violation (2.5%)
of the Anti-Money Laundering Law.
Luansing Realty, Inc. is a real estate company, hence The Law on Secrecy of Bank Deposits is itself merely
it is not a covered institution under Section 3 of the a statutory enactment, and it may, therefore, be
Anti-Money Laundering Act. Only banking modified, or amended (such as by providing further
institutions, insurance companies, securities dealers exceptions therefrom), or even repealed, expressly
and brokers, pre-need companies and other entities or impliedly, by a subsequent law. The Secrecy of
administering or otherwise dealing in currency, Bank Deposits Act did not amount to a contract
commodities or financial derivatives are covered between the depositors and depository banks within
institutions. Hence, Luansing Realty, Inc. may not use the meaning of the non-impairment clause of the
the Anti-Money Laundering Act to refuse to transfer Constitution. Even if it did, the police power of the
to the buyer ownership of the houses and lots. State is superior to the non- impairment clause. RA
6832, creating a commission to conduct an
investigation of the failed 1989 coup d’etat and to
3. In disclosing Rudy's bank accounts to the recommend measures to prevent similar attempts to
AMLC, did the bank violate any law? (2.5%) seize power is a valid exercise of police power.
Notes of hotjurist
in foro conscientiae
Page 24 of 27
(R. A. 9302)
4. Amount of insurance: Maximum of P250,000.00 per
Purposes: deposit (RA 9302)
5. Condition precedent for entitlement to payment:
1. To create a government-owned entity, the PDIC; Filing of claim within twenty-four months from
2. To insure the deposit liability of banks in an account order of closure
up to P250,000 for every single depositor of each
bank irrespective of the number of accounts 6. Manner of payment:
therewith. a. Cash
b. Transferred deposit – A deposit in an insured
bank made available to a depositor by the
PHILIPPINE DEPOSIT INSURANCE CORPORATION PDIC as payment of the insured deposit of
such depositor in a closed bank and assumed
F UNCTIONS : by another insured bank.
A. Insurance
7. Effect of payment by the PDIC to the depositor of
The PDIC assesses and collects insurance his insured deposit:
assessments from member-banks to insure a. Discharges the PDIC from further liability
member-banks’ deposit accounts. In case of bank b. Subrogates the PDIC to all the rights of the
closures, the PDIC processes and services claim depositor against the closed bank to the extent
for insured deposits. Deposits are insured up to a of such payment.
maximum coverage of P250,000 per depositor.
Case Digest
C. Bank Rehabilitation
PDIC vs. CA, 283 SCRA 462
The PDIC may grant financial assistance to
distressed banks if it is proven to be a less costly
alternative than closure.
Facts:
The plaintiffs invested in the money market
D. Receivership of closed banks placement with the Premier Financing Corporation
(PFC) but when they went to PFC to encashed the
Once a bank is ordered closed by the Monetary
checks and promissory notes corresponding to their
Board (MB) of the Bangko Sentral ng Pilipinas, the
investment the PFC referred them to the Regent
PDIC is designated as statutory receiver. The PDIC
Savings Bank (RSB). Instead of paying the promissory
upon receipt of the MB resolution ordering the
notes and checks, the RSB issued 13 certificate of time
closure of a bank, immediately physically takes
deposit which was insured with the PDIC. The bank
over the closed bank. Receivership is the stage
failed to pay the corresponding amount of the time
within which the PDIC manages the affairs of the
deposit on its maturity date due to insolvency and
closed bank and preserves its assets for the benefit
advised the plaintiffs to file a claim with the PDIC. But
of creditors.
the PDIC refused to pay the claim for it is not included in
the list of duly recorded liabilities of the RSB.
E. Liquidation of closed banks Issue:
After it is determined that the closed bank can not Whether or not the PDIC is liable for the
be rehabilitated, the PDIC shall recommend the plaintiffs’ claims.
liquidation of the assets of the closed bank.
Ruling:
Liquidation refers to the recovery and conversion of
assets into cash for distribution to all creditors in The fact that the certificate state that the
accordance with the order of creditor preference certificates are insured by PDIC does not ipso facto
pursuant to law make the latter liable for the same should the
contingency insured against arise. The deposit liability
of the PDIC is determined by the provisions of R.A.
3519 and statements in the certificate that the same are
INSURANCE FUNCTION insured by PDIC are not binding upon the latter.
1. Nature: Compulsory insurance on all bank deposits
Notes of hotjurist
in foro conscientiae
Page 25 of 27
Consistent with the rulings in Gullas vs. PNB, 62 Phil. receive payment in the same currency in which
519 and Republic vs. CA, G.R. No. 15012, July 22, the insured deposit is denominated.
1975 recognizing the debtor-creditor relationship of the
Note: The PDIC law is not applicable to Offshore
bank and the depositor, set-off takes place ipso jure with
respect to the depositor’s bank deposit and his matured Banking Units (P.D. No. 1034).
loan with the bank.
Transferred deposits
A deposit in an insured bank made available to a
depositor by the PDIC as payment of the insured
UNCLAIMED BAL ANCES L AW
deposit of the depositor in a closed bank and assumed
by another insured bank. (R.A. N O. 3936)
Notes of hotjurist
in foro conscientiae
Page 26 of 27
1. Authorized banks may adopt a numbered account 5. The total amount to be financed;
system for recording and servicing deposits in non- 6. The finance charge expressed in terms of pesos
checking accounts and centavos; and
7. The percentage that the finance bears to the total
2. Foreign currency deposits are exempt from taxes amount to be financed expressed as a simple
except the interests annual rate on the outstanding unpaid balance of
the obligation.
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Page 27 of 27
***
GOD SPEED!!!
Notes of hotjurist
in foro conscientiae