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CHAPTER 1
I.
II.
C.
DEFINITION OF BANKS
Banks are entities engaged in the lending of funds obtained in the form
of deposits.
A moneyed institute founded to facilitate the borrowing, lending and
self-keeping of money and to deal, in notes, bills of exchange, and
credits.
An investment company which loans out the money of its
customers, collects the interest and charges a commission to both
lender and borrower, is a bank.
Any person engaged in the business carried on by banks of
deposit, of discount, or of circulation is doing a banking business,
although but one of these functions is exercised.
Fiduciary Duty
fiduciary nature of banking which requires high standards
of integrity and performance.
Treat the accounts of its depositors with meticulous care, always having
in mind the fiduciary nature of their relationship.
Requires banks to assume a degree of diligence higher than that of a
good father of a family
Higher level of accountability than that expected of a depositor.
Indispensable Institution
Plays a vital role in the economic life of every civilized
nation.
Banks have become an ubiquitous presence among the people, who
have come to regard them with respect and even gratitude, and most of
all, confidence.
E.
III.
of the money the depositor can dispose of as he sees fit, confident that
the bank will deliver it as and to whomever he directs.
F.
I.
J.
Degree of Diligence
The law imposes on banks high standards in view of the
fiduciary nature of banking.
The bank is under obligation to treat the accounts of its depositors with
meticulous care, always having in mind the fiduciary nature of their
relationship. (Simex Internationsl vs. Court of Appeals)
Degree of diligence higher than that of a good father of a family, as
prescribed by Section 2 of the GBL.
Same higher degree of diligence is not expected to be exerted by banks
in commercial transactions that do not involve their fiduciary relationship
with their depositors.
Diligence extends to financial institutions:
o A government financial institution, like banks, is expected to
exercise greater care and prudence in the dealings, including
those involving registered lands.
o Due diligence required of banks extend even to persons, or
institutions, regularly engaged in the business of lending
money secured by real estate mortgages.
G. Treatment of Accounts with Meticulous Care
In every case, the depositor expects the bank to treat his
account with the utmost fidelity, whether such account consist only
of a few hundred pesos or of millions.
A blunder on the part of the bank, such as the dishonor of a check
without good reason, can cause the depositor not a little embarrassment
if not also financial loss perhaps even civil and criminal litigation.
No law mandating banks to call up their clients whenever their
representatives withdraw significant amounts from their accounts.
H.
K.
A bank is liable for the wrongful acts of its officers done in the interest of
the bank or in their dealings as bank representatives but not for acts
outside the scope of their authority.
A.
2.
Exemplary Damages
Law allows the grant of exemplary damages by way of
example for the public good. The public relies on the banks
fiduciary duty to observe the highest degree of diligence.
Negligence of Manager
The bank, as an employer, is liable. Confidence in the
banking system, which necessarily includes reliance on bank
managers, is vital in the economic life of our society.
B.
Negligence of Officers
A bank will be held liable for the negligence of its officers
or agents when acting within the course and scope of their
employment.
If a corporation knowingly permits its officer, or any other agent, to
perform acts within the scope of an apparent authority, holding him out
to the public as possessing power to do those acts, the corporation will,
as against any person who has dealt in good faith with the corporation
through such agent, be stopped from denying such authority.
C.
Negligence of Tellers
Banks tellers must exercise a high degree of diligence in
insuring that they return the passbook only to the depositor or his
authorized representative. The tellers know, or should know, that
the rules on savings account provide that any person in possession
of the passbook is presumptively its owner.
Appropriation of money by a teller is not estafa. If the teller appropriates
the money for his personal gain, and since he occupies a position of
confidence, the felony of qualified theft would be committed.
D.
3.
Moral Damages
As a general rule, a corporation is not entitled to moral
damages, because it cannot experience physical suffering and
mental anguish. However, for the breach of fiduciary duty
required of a bank, a coporate client may claim such damages
when its good reputation is besmirched by such breach, and
social humiliation results therefrom.
In culpa contractual or breach of contract, moral damages are
recoverable only if the defendant has acted fraudulently or in bad faith,
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
b.
c.
d.
e.
Islamic (I)
-
3.
Offshore Banks
Refers to the conduct of banking transactions in foreign
currencies involving the receipt of funds from external sources
and the utilization of such funds.
D.
E.
a.
b.
c.
d.
e.
C.
Capital Requirements
1. Minimum capital prescribed by the Monetary Board
AMOUNTS
TYPE OF BANK
Universal Banks
4950.0
Commercial Banks
2400.0
Thrift banks
CHAPTER 2
Organization, Management and Administration of Banks,
Quasi-Banks and Trust Entities
325.0
52.0
Rural Banks
I.
A.
B.
Organization of Banks
Conditions
The Monetary Board may authorize the organization of a bank or
quasi-bank subject to the following conditions: (SPC)
1. That the entity is a stock corporation.
2. That its funds are obtained from the public, which shall mean
twenty (20) or more persons.
3. That the minimum capital requirements prescribed by the
Monetary Board for each category of banks are satisfied.
26.0
13.0
6.5
Capabilities
2.
3.9
6th
class
2.6
D.
*** A bank may be organized with not less than five (5) nor more thank (15)
incorporators. In excess of 15 may be listed among the original subscribers in the
Articled of Incorporation.
E.
Bank Branches
1.
2.
*** A bank may use any or all of its branches as outlets for the presentation and/or
sale of the financial products of its allied undertaking or of its investment house units.
*** A bank shall be responsible for all business conducted in such branches and
offices to the same extent and in the same manner as though business had all been
conducted in the head office.
*** A bank and its branches shall be treated as one unit.
II.
A.
C.
D.
Stockholdings
Treasury Stocks
The GBL provides that no bank shall:
Purchase or acquire shares of its own capital stock
Foreign Stockholdings
Section 11, GBL
III.
Board of Directors
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
Number of Directors
At least five (5), and a maximum of fifteen (15) members of the
board of directors of bank, two (2) or whom shall be independent directors.
Independent Director a person other than an officer or employee of the
bank, its subsidiaries or affiliates or related interests.
1. Is not or has not been an officer or employee of the bank/quasibank/trust entity, its subsidiaries or affiliates or related interests during
the past three years counted from the date of his election;
2. Is not a director or officer of the related companies of the institutions
majority stockholder;
3. Is not a majority shareholder of the institution, any of its related
companies, or of its majority shareholder;
4. Is not a relative within the fourth degree of consanguinity or affinity,
legitimate or common-law of any director, officer or majority shareholder
or the bank/quasi-bank/trust entity, or any of its related companies;
5. Is not acting as a nominee or representative of any director or
substantial shareholder or the bank/quasi-bank/ trust entity, any of its
related companies or any of its substantial shareholders; and
6. Is free from any business or other relations with the institution or
any of its major stockholders which could materially interfere with the
exercise of his judgment.
B.
C.
Meetings
May be conducted through:
Teleconferencing
Video-conferencing
*** Banks shall include in their bylaws a provision that meetings of board of
directors shall be held only within the Philippines.
D.
IV.
A.
B.
Disqualifications
a. Permanently disqualified from being directors:
1. Persons who have been convicted by final judgment of a court for
offenses involving dishonesty or breach of trust;
2. Persons who have been convicted by final judgment of a court
sentencing them to serve a maximum term of imprisonment of
more than six years;
3. Persons who have been convicted by final judgment of the court for
violation of banking laws, rules and regulations;
4. Persons who have been judicially declared insolvent, spendthrift, or
incapacitated to contract;
5. Directors, officers or employees of closed banks, quasi-banks/trust
entities who were found to be culpable for such institutions closure
as determined by the monetary board.
6. Directors and officers of banks, quasi-bank and trust entities found
by the monetary board as administratively liable for violation of
banking laws, rules and regulations where a penalty of removal
from office is imposed, and which finding of the monetary board has
become final and executory;
7. Directors and officers of banks, quasi-banks and trust entities or
any person found by the monetary board to be unfit for the position
of directors or officers because they were found administratively
liable by another government agency for violation of banking laws,
rules and regulations or any offense/violation involving dishonesty
or breach or trust and which finding of said government agency has
become final and executory.
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
10
12. Directors and officers of banks, quasi-banks and trust entities or any
person found by the monetary board to be unfit for the position of
directors or officers because they were found administratively liable by
another government agency for violation of banking laws, rules and
regulations or any offense/violation involving dishonesty or breach or
trust and which finding of said government agency is pending appeal
before the appellate court, unless execution is restrained by court.
13. Directors and officers of banks, quasi-bank and trust entities found by
the monetary board as administratively liable for violation of banking
laws, rules and regulations where a penalty of suspension from office or
fine is imposed, regardless whether the finding of the monetary board
final and executory or pending appeal before the appellate court,
unless execution is restrained by court. The disqualification is in effect
during the period of suspension or so long as the fine is not fully paid.
C.
D.
V.
A.
11
B.
2.
3.
4.
All banks shall observe for the conduct of their business a regular
banking week five days (Mondays Fridays), except when such days
are holidays.
a. For servicing deposits and withdrawals, banks may remain open
beyond the minimum six hours, even before 8:00am or after
8:00pm.
b. For purposes other than servicing deposits and withdrawals, banks
may open beyond the minimum six hours but in no case shall such
banking hours start earlier than 8:00am nor extend beyond 8:00
pm.
c. Branches of banks at any international airport or major fish port are
allowed on flexible baking hours within a twenty-four hour period
which shall in no case be less than six hours per day.
d. The banking days and hours selected for each of the offices of
banks shall be reported in writing to the appropriate supervising
and examining department of the BSP. Provided, that the change in
banking days and hours shall not be made oftener than once every
thirty days, except during emergencies.
e. Notice on changes in banking days and hours shall be given
through the fastest means of communication, at least seven days
before the intended effectivity in banking hours or days.
f. In case the bank has to pen outside or close during the banking
hours or days reported to the BSP due to an emergency, a written
report submitted within 24 hours from opening or closing will
suffice.
Subject to compliance with other relevant laws, banks may opt to
observe a banking week in excess of five days after reporting to the
BSP the additional days during which such banks or their branches or
offices shall transact business for at least three hours each day.
Without the need of approval from BSP, banks are allowed to close on
certain days in celebration of important historical and/or religious event
in the locality where the banks operate: Provided, that said closure has
the prior approval of the bankers association in the locality: Provided
further, that said closure will only be allowed in the municipality or city
where the festivities are centered.
Banks shall submit either individually or through their head offices, to
the appropriate supervising and examining department of the BSP a
prior notice of their intended closure on account of a special local
festivity, together with a copy of the resolution of the local bankers
VI.
A.
B.
association approving said closure, at least two days after the date of
said resolution.
The required notice shall be supported by certification that:
a. On the date of temporary closure, the bank and/or branch will
maintain a skeletal force to handle out-of-town clearing items
b. The notice of the banks closure and the reason thereof shall be
posted conspicuously in the banks premises
c. For branches of banks, the closure has the prior approval of their
respective head offices.
VII.
Independent Auditor
The following are the rules with respect to financial audit of banks:
1.
2.
12
3.
trust entitys board of directors. A copy of the report shall be furnished to the
Monetary Board.
The Monetary Board may also direct the board of directors of a bank, quasibank, trust entity and/or the individual members thereof, to conduct, either
personally or by a committee created by the board, an annual balance sheet
audit of the bank, quasi-bank or trust entity to review the internal audit and
control system of the bank, quasi-bank or trust entity and to submit a report
of such audit.
VIII.
A.
assume jurisdiction over such labor dispute in order to settle or terminate the
same.
B.
FINANCIAL STATEMENTS
Publication of Financial Statements:
The following are rules regarding publication of financial statements: Sec.
61, GBL
** Every bank, quasi-bank or trust entity, shall publish a statement of its
financial condition
XI.
** GBL shall likewise apply to thrift banks, rural banks and cooperative banks insofar
as they are not in conflict.
** GBL shall govern for purposes of prescribing the minimum ratio which the net worth
of a thrift bank must bear to its total risk assets.
A bank, quasi-bank or trust entity shall shot publish the amount of its authorized
or subscribed capital stock without indicating at the same time and with equal
prominence, the amount of its capital actually paid-up.
X.
A.
Settlement of Disputes
Unsettled Labor Disputes
Any strike or lockout involving banks, if unsettled after seven calendar days
shall be reported by the Bangko Sentral to the Secretary of Labor who may
assume jurisdiction over the dispute and decide it or certify the same to the
NLRC for compulsory arbitration. However, the President may intervene and
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
13
CHAPTER 3
Deposit Function of Banks
Kinds of Deposits
1) Demand Deposits all those liabilities of the Bangko Sentral and of other banks
which are denominated in Philippine currency and are subject to payment in legal
tender upon demand by the presentation of (depositors) checks.
14
Fine of one-tenth of one percent (1/10 of 1%) per day of violation, computed
on the basis of the amount of overdrawing or fines in amounts as may be
determined by the Monetary Board, but not to exceed P30,000 a day for
each violation whichever is lower.
Technical overdrawings arising from force posting in clearing checks shall
be debited banks under Returned Checks and Other Cash Items Not in Process of
Collection which is part of Other Assets in the Statement Condition. Items to be
lodged under this account shall consist only of in-clearing checks which may result in
technical overdrawn accounts and shall immediately reversed in the following day.
The checks lodged under Returned Checks etc. shall either be returned or honored
the following day before clearing. The items to be used as cover for honored checks
should only consist of any of the following:
Cash
Bank Drafts
Treasury Warrants
Fund transfers or credit memos within the same bank representing proceeds
of loans granted under existing regulations
NOTE:
Peso demand deposit accounts maintained by foreign correspondent banks with
commercial banks shall NOT be subject to the above-mentioned regulations
PROVIDED:
All officers
Banks are bound to honor checks to the extent of the amount of his (the
depositor) deposits.
Banks must ensure that the amount of the check should be paid only to its
designated payee. The fact that the drawee bank did not discover the
irregularity seasonably constitutes negligence.
Responsibility of Drawer
The drawer must personally keep track of his available balance in the bank.
Duty of Banks to Know Signatures
15
Banks are under no obligation to make part payment on a check, up to only the
amount of the drawers funds.
Banks are under no duty to make up deficiency from the savings account. If a
depositor has 2 accounts with a bank, an open account and a savings account, and
draws a check upon the open account for more money than the account contains.
Checks do not have legal tender power and their acceptance in the payment of debts
is at the option of the creditor.
Effects if a cross check
In State Investment House vs IAC, the SC enumerated the different effects
of crossing a check:
1. That the check may not be encashed but only deposited in the bank
2. That the check may be negotiated only once to one who has an account
with a bank
3. That the act of crossing the check serves as a warning to the holder that the
check has been issued for a definite purpose so that such holder must
inquire if the check has been received pursuant to that purpose.
Cashiers Check is really the banks own check and may be treated as a promissory
note with the bank as the maker.
In New Pacific Timber and supply Co. Inc. vs Seeris cashier check is
deemed as cash
Set-off
Encashment of checks
Banking business requires that the one who first cashes and negotiates the
check must take some precautions to learn whether or not it is genuine.
2) Savings Deposits
Servicing deposits
Banks may be authorized by the BSP to solicit and accept deposits outside
their bank premises, subject to ff: conditions:
1. The financial condition of the banks is sound and the operations
and the quality of the management thereof could reasonably assure
the safety of the funds which may be entrusted to its deposit
collectors and/or agents
2. Proposed area is clearly defined
3. Solicitation shall be only confined within a locality where there are
NO BANKS IN OPERATION or where it can be established that
the deposit potentials in the said locality are still untapped
4. Institute and maintain following minimum safeguards:
Date
Amount of deposit
16
And/or account either one of the co-depositors may deposit and withdraw
from the account without the knowledge, consent and signature of the other.
Withdrawals
Prior to or simultaneous with the opening of a NOW account, the bank shall
inform the depositor of its terms and conditions
Banks shall be responsible for the proper identification of its depositors and
require 2 specimen signatures and such other pertinent information
NOW accounts shall be kept and maintained separately from the regular
savings deposits
Blank NOW forms shall be prenumbered and shall be controlled as in the
case of unissued blank checks
A bank statement shall be sent to each depositor at the end of each month
for confirmation of balances
Banks must use the form prescribed by the present rules for NOW accounts.
4) Time Deposits one the payment of which cannot legally be required within such
a specified number of days.
17
Administration of Deposits
BSP Circular No. 564 Series of 2007 provides for a valid list of identification
cards
Students who are beneficiaries of an OFW and not on voting age shall be
required of 2 valid ID
The requirement on presenting 2 valid IDs shall on 1 time basis only or at
the commencement of business relationship.
Financial transactions may include remittances
Minors are vested with special capacity and power to make savings or time
deposits with and withdraw the same as well as receive interest thereon.
Requirements:
Sufficient discretion
18
The imposition of such charges is clearly stated among the terms and
conditions of the depositor
The rate or amount of such charges or fees is properly disclosed among the
terms and conditions of the deposit
The deposit account balances have fallen below the required minimum
monthly ADB for dormant account and for at least 2 consecutive months for
active accounts
when joint (and several) owners of a deposit agree that either of them could
withdraw any part or the whole of said account during the lifetime of both
and the balance, if any, upon the death of either, belonged to the survivor.
an ALEATORY CONTRACT (Art. 1790), by which the mutual agreement of
the joint depositors permitting either of them to withdraw the whole deposit
during their lifetime and transferring the balance to the survivor upon the
death of one of them.
Survivorship agreement not invalid per se but may be violative of law, such
instances:
- a mere cloak to hide an inofficious donation
- to transfer property in fraud of creditors
- to defeat the legitime of a forced heir
Nature
1.
2.
3.
19
4.
5.
B.
- Failure of the bank the amount deposited will not constitute estafa
through misappropriation but it will only give rise to civil liability.
The contract between the bank and its depositor is governed by the
provisions of the Civil Code on simple loan.
A bank ultimately acquires ownership of the deposits but such ownership is
coupled with a corresponding obligation to pay the depositor an equal
amount on demand.
- A bank does not have unilateral right to freeze the accounts of
depositor based on its mere suspicion, granting such rights would
open the floodgates of public distrust in banking industry. (BPI
Family Bank vs. Franco)
Purposes
1. To give encouragement to the people to deposit their money in banking
institutions.
2. To discourage private hoarding so that the same may be utilized by
banks in authorized loans to assist in the economic development of the
country.
B.
Privacy
- Civil Code provides that every person shall respect the dignity, personality,
privacy and peace of mind of his neighbors and the other persons and
punishes as actionable torts several acts for meddling and prying into the
privacy of another.
- It also holds public officer or employee or any private individual liable for
damages for any violation of the rights and liberties of another person, and
recognizes the privacy of letters and other private communications.
C.
Absolute Confidentiality
- All deposits of whatever nature with banks or banking institutions in the
Philippines are considered as of an absolutely confidential nature and may
not be examined, inquired or looked into by any person, government official,
bureau or office.
Set-Off
General Rule: When a depositor is indebted to a bank, and the debts are
mutual, the bank may apply the deposit or such portion thereof as may be
necessary to the payment of the debt due it by the depositor.
Exception:
- There is no express agreement.
- The deposit is not specifically applicable to some other particular
purpose.
V. Duties of Banks
A.
B.
C.
Meticulous Care
- Knowing the signatures of its clients.
- Depositors are not estopped from questioning wrongful withdrawals, even if
they failed to question those errors in the statements sent by the bank to
them for verification.
Payment to Proper Party
- The bank has no right to pay to persons other than those in whose favor
the obligation was constituted or whose right or authority to receive payment
is indisputable.
- Payment made by the debtor (bank) to the wrong party does not extinguish
the obligation as to the creditor (depositor) who is without fault or
negligence, even if the debtor acted in utmost good faith and by mistake as
to the person of the creditor or through error induced by fraud of a third
person.
In Case of Death of Depositor
National Internal Revenue Code provides:
If a bank has knowledge of death of a person, who
maintained a bank deposit account alone, it shall not
allow any withdrawal from the said deposit account,
1.
2.
20
9.
10.
11.
12.
13.
Salaries, wages or earnings within the four months preceding the levy
as are necessary for the support of his family.
Lettered gravestones.
Monies benefits, privileges or annuities accruing or in any manner
growing out of any life insurance.
The right to receive legal support or money or property obtained as such
support or any pension or gratuity from the Government.
Properties especially exempt by law.
C.
D.
E.
Authority to Inquire into Bank Deposits under the Anti-Money laundering Act
- AMLC may inquire into or examine any particular deposit r investment with
any banking institution or non-bank financial institution upon order of any
competent court in cases of violation, when it has established that:
a. there is probable cause that the deposits or investments are related
to an unlawful activity; or
b. a money laundering offense
F.
21
Preliminary Attachment
- Section 10, Rule 57 of the Rules of Court is compatible with the law on
secrecy of bank deposits because it provides an exception in cases where
the money deposited or invested is the subject matter of the litigation.
I.
J.
Waiver by DOSRI
Section 26 (NCBA). Bank Deposits and
Investments. Any director, officer or stockholder
who, together with his related interest, contracts
a loan or any form of financial accommodation
Chapter 4
Investments, Loans and Other Functions of Banks
I.
B.
C.
22
D.
E.
Warehousing companies
Storage companies
Insurance Agencies/brokerages
F.
Extending credit
B.
23
2
contract relationship between the
accounting party and the issuing bank.
Accounting party applies for LOC and agrees to
reimburse the bank for amounts paid by that
bank.
rd
III.
IV.
C.
D.
E.
Minimum Ratio minimum ratio which the net worth of a bank must
bear to its total risk assets shall be determined by the Monetary
Board
i. On the basis of the net worth and risk assets of a bank
and its subsidiaries
ii. Monetary Board shall conform to internationally accepted
standards in the exercise of such authority
iii. Alter or suspend compliance with such ratio for a
maximum period of 1 year
iv. Ratio shall be applied uniformly to banks of the same
category
B.
Effect of Non-Compliance
i. Monetary Board may limit r prohibit the distribution of net
profits by such bank and may require that all of the net
profits be used to increase the capital accounts of the
bank until minimum requirement is reached
ii. Restrict or prohibit the acquisition of major assets and the
making of new investments by the bank until the minimum
required ratio has been restored
24
Exceptions:
a. Reasons of national interest
b. Deposits
of
Rural
Banks
with
government-owned
or
controlled
financial institutions are exempted
c. May be increased by 10% provided the
additional liabilities of any borrower are
adequately secured by securing titles
F.
B.
C.
D.
B.
Directors
i. Named as such in the articles of incorporation
ii. Duly elected in subsequent meetings of stockholders
iii. Elected to fill the vacancies
C.
Officers
i. President, EVP, SVP, General Manager, Secretary,
treasurer, trust officer and others whose duties as such
are defined in the by-laws or are generally known to be
officers of the bank
ii. Chairman, Vice-chairman or any other position of the
boardwho also performs functions of management such as
those ordinarily performed by regular officers
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
25
D.
Stockholder
i. Any stockholder of record in the books acting personally or
through an attorney-in-fact
ii. Any other person duly authorized by him or through a
trustee
st
E.
Related Interests
st
i. Spouse/Relative within 1 degree of consanguinity or
affinity, relative by legal adoption of a director, officer or
stockholder of the bank
ii. Partnership of which a director, officer, or stockholder of a
st
bank or
Spouse/Relative within 1
degree of
consanguinity or affinity, relative by legal adoption
iii. Co-owner of the property or interest or right mortgaged
iv. Corporation, association, or firm of which a director or
officer of the bank, or his spouse is also a director or
officer of such corporation, association or firm, except:
G. Limits of Loans
i. Regulated by Monetary Board
ii. Outstanding loans shall be limited to an amount equivalent
to their respective unencumbered deposits and book value
of their paid-in capital contribution in the bank
H.
I.
26
VI.
C.
D.
VII.
B.
27
C.
D.
E.
F.
H. Escalation clause; stipulation that the rate of interest may increase (escalation)
AND decrease (de-escalation) if the applicable maximum interest rate is
increased/decreased by the Monetary Board (PD 1684: Amendment to the Usury
Law). Adjustment takes effect on or after MB increases/decreases rate.
Purpose of mandating de-escalation clause:
prevent one-sidedness in favor of the lender.
(Art 1308, NCC: contract must bind both parties; validity or compliance cannot be
left to the will of one.)
Exception: If there is no de-escalation clause, escalation clause is still valid if creditor
unilaterally and actually decreased the interest charges whenever the rate is
changed by MB. In this case, parties are on equal footing, thus preventing the evil
proscribed by PD 1684.
Cessante ratione legis cessat ipsa lex. (Llorin v. CA)
*Usury Law has since been lifted by Central Bank Circular 905
I. Unilateral Increase of Rates; even if the Usury Law was lifted, one-sided
impositions do not have the force of law bec. it violates the principle of mutuality of
contracts.
J. Iniquitous, Unconscionable and Exorbitant Interests; if the court finds a rate
iniquitous, unconscionable and exorbitant, it should be VOID bec. it is contrary to
morals (Art 1409 NCC: those contra bonus mores are inexistent and void from the
beginning). Rate shall be reduced by court.
Medel v. CA: 5.5% per month or 66% per annum is IUE
Cuaton v. Salud: 10% per month is IUE.
Reduction to 12% per annum is fair and reasonable.
Dio v. Virgilio: 120% per annum is IUE.
Reduction legally called for in rates of interest and penalty.
K. Effect of Void Interest Rate;
as if there was no express contract bet. parties
L. Prepayment of Loans and Other Credit Accommodations; sec. 45, GBL: borrower
may prepay unpaid balance of bank loans at any time prior to the agreed maturity
date, subject to reasonable terms and conditions agreed upon by bank and borrower.
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
28
E. Effect of Violation; violation shall NOT affect validity and enforceability of contract
F. Exemption of Government; no punishment sa Phil. Govt, agencies and political
subdivisions
G. Required Disclosures on Consumer Loans not under Open-End Credit Plan
1. amount of credit debtor will have actual use of
2. charges, individually itemized, not part of the finance charge
3. total amounts financed in 1 and 2
4. finance charge expressed in pesos and centavos
5. effective interest rate
6. simple annual rate (percentage of finance charge to the total amount to be
financed)
7. default or delinquency charges payable for late payments
8. descrip of security interest and a clear identification of property where security
interest relates
H. Exempted Transaction; extension of credits for business and commercial
purposes, and sa Govt, agencies and instrumentalities, juridical entities or to
GOCCs.
IX. Foreclosure of Real Estate Mortgage
A. Procedure
If property was foreclosed judicially or extrajudicially, the mortgagor may redeem the
real property sold for full/partial payment of his obligations within one year after the
sale by paying amount due in mortgage deed, with interest at the rate specified. All
costs and expenses incurred by the bank from sail is derived therefrom.
Purchaser at the auction sale has right to enter and take possession of that property
immediately after the date of confirmation of the auction sale. However, sec. 7 of Act
No 3135 (An Act to Regulate the Sale of Property under Special Powers Inserted in or
Annexed to Rent Estate Mortgages) provides that if property was registered under the
Mortgage Law, purchaser must first furnish a bond in an amount equivalent to the
use of property for 12mos. Such bond must be approved by court and court must
thereafter issue a writ of possession addressed to the sheriff where property is
situated.
If property was foreclosed by banks, purchaser is not required to set up a bond.
If property to be foreclosed is owned by juridical persons, right to redeem 3months
after foreclosure.
If real property is mortgaged to alien individuals or corporations, in no case shall
actual possession exceed 5years.
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
W/N alien-owned bank can acquire ownership of residential lot by deed of transfer as
settlement of debt.
NO. Its acquisition jeopardizes the purpose of the Constitution to keep in the
hands of the people the ownership over private lands.
HOWEVER, a lease of a parcel of land for 50 years in favor of an alien corp
is registerable. A lease, unlike a sale, does not involve the transfer of dominion over
the land.
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30
printing of bank loan statements and other non-deposit records, bank forms,
and promotional materials
property appraisal
janitorial services
procurement services
temporary staffing
31
Chapter 5
Prohibited
Business
A.
Transactions
Cessation
of
Banking
c.
d.
B.
and
Prohibited Acts
a. No Director, officer, employee, or agent of any bank shall- FOORD
2.
3.
4.
32
as well as, the powers and duties of the conservator appointed for the bank
shall be governed by the provisions Section 29 and the last two paragraphs
C. Qualifications of Conservator
of Section 30 of the New Central Bank Act: Provided, That this Section shall
also apply to conservatorship proceeding of quasi-banks. (Section 67 of the
GBL)
E. Remuneration
The conservator has the power to overrule or revoke the actions of the
previous management and board of directors of the bank or quasi-bank.
Section 28-A of RA No. 265 merely gives the conservator the power to
revoke contracts that are deemed to be defective under existing law (i.e.,
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 the Bangko Sentral during the conservatorship.
F. Expenses of Conservatorship
cannot do, such as repudiating a contract validly entered into under the
Shall be borne by the bank or quasi-bank concerned.
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
33
G. Termination of conservatorship
Powers must be related to the (preservation of) the assets of the bank, (the
reorganization of) the management thereof and (the restoration of) its
that the institution can continue to operate on its own and the
Law merely gives the conservator power to revoke contracts that are, under
existing law, deemed to be defective.
Actions of Monetary Board shall be final and executory, and may not be
restrained or set aside by the court except on petition for certiorari on the
ground that the action taken was in excess of jurisdiction or with such grave
A. Voluntary Liquidation
liquidation or conservatorship.
J. Not a Precondition
Grounds for Receivership and Liquidation
Designation of conservator is not a precondition to the designation of a
receiver.
The MB may, summarily & w/o prior hearing, FORBID institution from
doing business if the institution:
a. is unable to pay liabilities
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4. make transfers
A receiver is
The receiver shall file with the RTC a petition for assistance in the
liquidation.
Current and Complete Examination Not Necessary before the closure of a bank
1. Sec 29 of the Central Bank Act does NOT contemplate prior notice and
corporation is
hearing.
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
35
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, fees and expenses mentioned in Item A above 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 for payment to creditors.
C.
Liabilities
The bank is bound by the acts, or failure to act, of the receiver. At the same
time, the receiver is liable to the bank for culpable or negligent failure to collect the
assets of such bank and to safeguard said assets.
36
NOTE: Foreign Corp. doing business in the Philippines are required to obtain a
license. Sec. 133 of Corporation Code
Foreign Corp. doing business in the Philippines without license are barred
from accessing our courts. It is ipso facto incapacitated to bring an action.
A license is necessary if its transacting or doing business in the Philippines
By securing a license, the foreign entity would give an assurance that it will
abide by the decisions of our courts, even adverse to it.
Purpose of the statute is to compel a foreign corporation desiring to do
business within the state to submit itself to the jurisdiction of the courts of the
state.
Foreign Banks are allowed to entry in the Philippines subject to the ff: rules:
1. Within 7 years from the effectivity of GBL and subject to guidelines issued
pursuant to the RA 7721, the Monetary Board may authorize a foreign bank
to acquire up to a 100% of the voting stock of only 1 bank organized under
Phil. Laws.
2.
Within the same period, the Monetary Board may authorize any foreign
bank, which prior to the effectivity of GBL availed itself of the privilege to
acquire up to 60% of the voting stock of a bank under RA 7721 and the Thrift
Banks Act, to further acquire voting shares of such bank to the extent
necessary for it to own 100% of voting stock thereof.
3.
In the exercise of this authority, the Monetary Board shall adopt measures
as may be necessary to ensure that at all times the control of 70% of the
resources and assets of the entire banking system is held by banks which
are at least majority-owned by Filipinos.
4.
Offshore banking refers to the conduct of banking transactions in foreign currencies
involving the receipt of funds from external sources and utilization of such funds.
In case of a foreign bank which has more than 1 branch in the Phil, all such
branches shall be treated as on unit for the purpose of GBL and all references to the
Philippine branches of foreign banks shall be held to refer to such units.(Sec 74 GBL)
CHAPTER 6
Foreign Banks & Trust Operations
37
C.
D.
Minimum Capitalization
A trust entity, before it can change in trust or other fiduciary
business, shall comply with the minimum paid-in capital
requirement determined by the Monetary Board.
E.
F.
Residents and citizens of the Phil. who are creditors of a branch in the Phil. of a
foreign bank shall have preferential rights to the assets of such branch in accordance
with existing laws.
B.
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G.
A.
B.
Bond Requirements
Before an executor, administrator etc. appointed by the court enters
upon the execution of his duties, upon order of the court, file a bond
in such sum, as the court may direct.
Upon the application of any executor, administrator etc. the court
may, after notice and hearing, order that subject matter of the trust.
Upon presentation of the proof to the court that the subject matters
of the trust has been deposited with a trust entity.
The reduced bond shall be sufficient to secure adequately the
proper administration and care of any property remaining under the
control of such property.
B.
39
D.
E.
F.
G.
H.
Advertisement of Services
Trust entities shall advertise their services in a dignified manner
and enter such business only when demand for such service is
Money Government
Banks may receive or hold as trustee, agent, administrator,
financial manager or other similar capacity, any fund or money from
the government and government entities, provided, that
government-owned banks may received or hold as trustee the
following:
o Funds of local government units which are expected to be
available for investment purposes for a relatively long
period of time, provided, that the amounts held in trust or
otherwise managed/advised for and in behalf of LGU shall
be invested only in government.
o Funds of government and government entities which are
authorized by special laws to be placed in trust.
Chapter 7
BSP
I.
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II.
III.
D.
E.
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IV.
1.
Prepare the agenda for the meetings
and to submit for the consideration of the board
policies and measures which is necessary to
carry out the purpose of NCBA;
2.
Execute
and
administer
policies
approved by the board;
3.
Direct and supervise the operations and
internal administration of the BS.
4.
Appoint and fix the remunerations and
other emoluments of personnel below the rank of
dept. Head.
5.
Render opinions, decisions, or rulings,
which shall be final and executory until reversed
or modified by the MB.
6.
Exercise such other powers as may be
vested in him
B.
V.
Emergencies
a. In case of emergencies, the governor, with the
concurrence of 2 members of MB, may decide any matter
or take any action within the authority of the MB.
b. The governor shall submit a report to the president and
the congress within 72 hours after the action has been
taken.
c. Governor shall submit his action to the Mb for ratification.
C. Limitations on outside interests of the governor and the full time
members of the board
a. Limit their professional activities to those pertaining
directly to their position with the bangko sentral.
b. Not accept any other employment, whether public or
private, remunerated or ad honorem, with the exceptions
of the positions in eleemosynary, civic, cultural and
religious organizations or whenever by designation of the
president, the governor or the full time member is tasked
to represent the interest of the government.
Director, Officer or stockholder and Related Interest
A. Contracting loans
a. Any director, officer, or stockholder who together with his
related interest, contracts a loan or any other form of
financial accommodation from his bank or a bank, shall be
required by the lending bank to waive the secrecy of his
deposits
b. Any information obtained from an examination of his
deposits shall be held strictly confidential and may be
used by the examiners in connection with their supervisory
and examination responsibility.
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
42
III.
Chapter 8
Currency, Monetary stabilization and Functions of the BSP
I.
II.
IV.
BS shall replace notes which are more than 5 years old and
coins which are more than 10 years old.
b. Notes and coins which are called for replacement shall remain
legal tender within one year from the date of call.
Domestic Monetary Stabilization
A. Action when abnormal movements occur in the monetary aggregates,
credit or price level
a. MB shall take such remedial measures and submit to the
president and the congress and make public a detailed report
of the xxx.
b. Whenever:
i. The monetary aggregates, or the level of the credit,
increases or decreases by more than 15 percent.
ii. The cost of living index increases by more than 10
percent, in relation to the level existing at the end of
the corresponding month of the preceding year.
iii. Even though the circumstances have not been
reached when in its judgment the circumstances so
warrant.
International Monetary Stabilization
A. To preserve the international value of the peso and to maintain its
convertibility into other freely convertible currencies. BS shall maintain
international reserves adequate to meet any foreseeable demands on
the BS for foreign currencies.
B. The board shall give special attention to the volume and maturity of the
BS owns liabilities in foreign currencies, to the volume and maturity of
the foreign exchange assets and liabilities of other banks operating in
the country.
C. Action when the international stability of the peso is threatened:
a. Whenever:
i. The international reserves of the BS falls to a level
which the MB considers inadequate to meet
prospective net demands on the BS for foreign
currencies.
ii. The international reserve appears to be in danger of
falling to such a level
iii. The international reserve is falling as a result of
payment or remittances abroad, which in the opinion
of the MB is contrary to national welfare.
The monetary board shall:
43
V.
VI.
VII.
VIII.
IX.
44
X.
XI.
XII.
XIII.
45
XV.
XVI.
Unclaimed Balance
Credits or deposits or other evidence of indebtedness of an kind
with banks, loan associations and trust corporations (BLT) in favor of any
person known to be dead or who has not made further deposits or
withdrawals during the preceding ten years or more.
Unclaimed balance and increase in proceeds shall be deposited
with the Treasurer of the Philippines to be used as National Assembly may
direct.
Escheat
Reversion of land held under feudal tenure to the manor in the
absence of legal heirs or claimants
Procedure
1.
2.
3.
4.
5.
6.
7.
8.
9.
CHAPTER 9
UNCLAIMED BALANCES AND TRUST RECEIPTS
46
Art. 1013.
Such estate shall be for the benefit of public schools, and public
charitable institutions and centers, in such municipalities or cities.
The court shall distribute the estate as the respective needs of each
beneficiary may warrant.
2.
3.
4.
Trust Receipts
Policy
1.
47
3.
Definition
Entrustee any person having or taking possession of goods,
documents or instruments under a trust receipt transaction. Or any of his
successors in interest.
Entruster any person holding title over the goods, documents or
instruments subject of a trust receipt transaction. Or any of his successors in
interest.
Security Instrument property interest in goods, documents or
instruments to secure performance of some obligations or entrustee
Trust Receipt written or printed document signed by the entrustee
in favor of entruster containing terms and conditions substantially complying
with provisions of Trust Receipts Law
Trust Receipt Transaction
Any transaction by and between an entruster and an entrustee
whereby the entruster who owns or holds absolute title or security interests
over certain specified goods, documents or instruments releases the same
to the possession of the entrustee upon the latters execution and delivery to
the entruster of a signed document called a trust receipt.
A trust receipt binds the entrustee to hold the designated goods,
documents or instruments in trust for the entruster and to sell or otherwise
dispose of them with the obligation to turn over the proceeds to the entruster
to the extent of the amount owing to the entruster.
c.
d.
Effect consummation
Effect presentation and collection
Other purposes:
1.) Goods or documents
a. Sell the goods or procure their sale
b. Manufacture or process goods for sale
c. Load, unload, ship, transship
Currency
2.) Instruments
a. Sell or procure their sale or exchange
b. Deliver them to a principal
48
Rights of Entruster
1.
2.
3.
4.
Hold the goods in trust for the entruster and dispose of them
strictly in accordance with the terms of the rust receipt
Receive the proceeds in trust for the entruster and turn over
the same to the entruster
Insure the goods for their total value against loss and other
casualties
Keep goods separate and capable of identification as property
of entruster
Return the goods in the event of a non-sale or demand of the
entruster
Observe all other terms and conditions of the trust receipt
CHAPTER 10
DEPOSIT INSURANCE
Roles of PDIC
1) It shall ensure the deposits of all banks which are entitled to the benefits
of insurance and which shall have to powers granted by law
2) It shall promote and safeguard the interests of the depositing public by
way of providing permanent and continuing insurance coverage on all
insured deposits
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
49
ii) secretary of finance and governor of the banking sentral may each
designate a representative
iii) Chairman of the board unable to attend president shall act as
chairman
Per Diem Secretary of Finance shall fix the rate of per diem for every board meeting
Authority of the Board
1) to issue rules and regulations as it considers necessary for the effective
discharge of its responsibilities
2) to direct the management, operation and administration of PDIC
3) to establish human resources management
4) to appoint, establish the rank, fix the remuneration, approve local and
foreign training of, and remove any officer or employee for a cause, subject
to pertinent civil service laws.
5) to adopt an annual budget
6) to approval the methodology for determining the level and amount of
provisioning for insurance and financial assistance losses which shall
establish reasonable levels of deposit insurance reserves
Officers
1) President
2) VP
3) Bank Examiners
4) Claim agents
5) Investigators
Deposit insurance coverage
A) Deposit Liabilities
i) deposit liabilities of any bank or banking institution which is
engaged in the business of receiving shall be insured with the PDIC
.
ii) factors considered
Financial history and condition of the bank
Adequacy of its capital structure
Future earning prospects
General character of its management
Convenience and needs of the community to be
served by the bank and whether or not its corporate
powers are within the purposes of the PDIC
The term deposit, unpaid balance of money or its
equivalent received by a bank in its usual course of
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
50
B.
C.
D.
E.
F.
G.
51
H. Prescription
a. If the depositor in the closed bank shall fail to claim his
insured deposits within 2 years from actual takeover of the
closed bank by the receiver, or does not enforce his claim
within 2 years after the 2-year period to file a claim, all
rights of the depositor with respect to the insured deposit
shall be barred
XV. Investment By PDIC
A. Money of PDIC not otherwise employed shall be invested in
obligations of the Philippines
a. It shall not sell or purchase any such obligations for its own
account and in its own right and interest, at any one time
aggregating in excess of P100,000 without the approval of
the Insurance Commissioner
B. The banking or checking accounts of PDIC shall be kept with the
Central Bank of the Philippines, with the Philippine National Bank,
or with any other bank designated as depository or fiscal agent of
the Philippine Government
XVI. Extension Of Loans
A. If an insured bank is in danger of closing, PDIC is authorized to make
loans to, or purchase the assets of, or assume liabilities of, or make
deposits in, such insured bank, upon such terms and condition as
the Board of Directors may prescribe when it is essential to provide
the adequate banking service in the community or maintain
financial stability in the economy
a. Extend financial assistance to, assume liabilities of,
purchase the assets of an insured bank if PDIC finds that the
resumption of operations of such bank is vital to the
interests of the community OR severe financial climate
exists which threatens the stability of a number of banks
possessing significant resources
b. Reopening and resumption of operations of the closed bank
shall be subject to the prior approval of the Monetary Board
52
53
1.
2.
3.
Policies of AMLA
1.
2.
3.
Institutions Covered
1.
2.
3.
4.
5.
6.
Chapter 11
Anti-Money Laundering
Money Laundering - a crime whereby the proceeds of an unlawful activity are
transacted thereby making them appear to have originated from legitimate sources.
3 Steps of accomplishing:
Unlawful Activities
1.
2.
3.
4.
5.
54
Jueteng
Piracy
Qualified Theft
Swindling
Smuggling
Violations of Electronic Commerce Act
Hi-jacking
Violations of Securities Regulation Code
Other felonies of similar nature
2.
3.
4.
Institutions shall establish and record true identity of its clients based on
official documents
Maintain a system of verifying true identity of their clients
Anonymous accounts, accounts under fictitious names are prohibited
Peso and foreign currency non-checking numbered accounts shall be
allowed
Jurisdiction
Public Officers
Public Officers and private persons in conspiracy
AMLC Composition
1.
2.
3.
Functions of AMLC
1.
55
5.
1.
AMLC may execute a request for assistance from a foreign State by:
a. Tracking down, freezing, restraining and seizing assets to be
proceeds of any unlawful activity
b. Giving information needed by the foreign state
c. Applying for an order of forfeiture of such property
1.
Forfeiture
Civil Forfeiture
AMLC may make a request to any foreign State for assistance in:
a. Tracking down, freezing, restraining and seizing assets alleged
to be proceeds of any unlawful activity
b. Obtaining information that it needs relating to covered
transactions
c. Enter any premises belonging to persons named in said
request
d. Applying for order of forfeiture
Limitations
When there is a covered transaction report made, and the court has ordered
the seizure of any property related to said report, the Revised Rules of Court on civil
forfeiture applies.
Payment in Lieu of Forfeiture
Court may, instead of enforcing the order of forfeiture, order the convicted
offender to pay an amount equal to the value when order cannot be enforced
because:
1. Property cannot, with due diligence be located
2. Substantially altered, destroyed, diminished in value or otherwise
rendered worthless through an act attributable to the offender
3. Concealed, removed, converted or transferred to prevent from being
found
4. Located outside the Philippines or has been placed or brought outside
the jurisdiction of the court
May refuse to comply with any request for assistance where the action
sought by the request contravenes any provision of the Constitution or the execution
of a request is likely to prejudice the national interest of Philippines unless a treaty so
provides.
Requirements for Requests for Mutual Assistance from foreign States
1.
2.
3.
4.
56
5.
6.
7.
8.
9.
Authentication of Documents
Authenticated if:
1. Signed or certified by a judge, magistrate or equivalent officer
in or of the requesting State
2. Authenticated by the oath or affirmation of a witness or sealed
with official or public seal
CHAPTER 12
SPECIAL PURPOSE VEHICLE
Extradition
Philippines shall negotiate for the inclusion of money laundering offenses
among extraditable offenses in all future treaties.
Prohibitions Against Political Harassment
1.
2.
3.
4.
A.
57
16. TRUE SALE- a sale wherein the selling FI transfers or sells its NPAs without
recourse for cash or property to an SPV with the following results:
and
ii. The transferred NPAs are legally isolated and put beyond the reach of the
transferor and its creditors.
C. Organization
An SPV shall be organized as stock corporation in accordance with Batas Pambansa
Blg. 68, otherwise known as "The Corporation Code of the Philippines" and the rules
promulgated by the Commission for purposes of registering the SPV: Provided, That
if the SPV will acquire land, at least sixty percent (60%) of its outstanding capital
Balamban, Loyola, Machado, Menguito, Paniagua, Vibandor, Villareal
58
viii. To borrow money and issue other instruments of indebtedness for the
purpose of paying operational administrative costs;
D. Powers of an SPV
-incorporated primarily to invest in, or acquire NPAs of FIs.
-secondary powers shall be limited to the following:
i. To engage third parties to manage, operate, collect and dispose of NPAs
acquired from an FI;
ii. To rent, lease, hire, pledge, mortgage, transfer, sell, exchange, usufruct,
secure, securitize, collect rents and profits, and other similar acts concerning its NPAs
acquired from an FI;
iii. In case of NPLs, to restructure debt, condone debt and undertake other
structuring debt, the SPV may reduce the principal, interest, interest rates, and the
period for calculating the interest, extend the time for debt repayment or relax the
conditions for debt repayment, agree to the conversion of the borrowers debt to equity
in the borrower's business, agree to a transfer of assets or claims from the borrower t
repay the debtor dispose of some of the borrower's property or claims to third
persons;
ix. To guarantee credit, accept or intervene for honor the bills of borrowers;
x. To advance funds to borrowers where required by an acquired asset or
any debt restructuring agreement pursuant thereto, or under any court order or
rehabilitation plan; and
xi. To entrust to third parties asset servicing company, the collection and
receipt of the debt payments for debts under debt restructuring business
reorganization, management and disposition of assets of the SPV in accordance with
the rules, procedures and conditions prescribed by the Commission or by the courts.
Except in the case of ROPOAs whose redemption periods have already expired, the
SPV shall notify the borrower and all persons holding prior encumbrances upon the
properties or a part thereof or are actually holding the same adversely to the borrower
within fifteen (15) days from the date of the appointment of the said collection agent.
E. Period for Filing of Applications
iv. To take, transfer shares or buy shares issued by the borrower for the
purpose of business reorganization or rehabilitation of the borrower, subject to the
provisions of the Corporation Code in respect of the rights of the shareholders of the
borrower company, and apply any other measures or restructuring techniques with
the approval of the Commission;
v. To enter into dation in payment (dation en pago) arrangements, foreclose
judicially or extra-judicially and other forms of debt settlement involving NPLs;
vi. To spend funds to renovate, improve, complete or alter its NPAs acquired
from an FI;
vii. To issue equity or participation certificates or other forms of IUIs for the
purpose of acquiring, managing, improving and disposing of its NPAs acquired from
an FI;
The Articles of Incorporation of the SPV, its by-laws and other documentary
requirements shall be filed with the Commission not beyond eighteen (18)
months from the date of approval of the Implementing Rules and
Regulations (IRR) by the Congressional Oversight Committee (COC)
created in Section 23 of the Act.
only SPVs whose applications are filed not later than the 18-month
period and are subsequently approved by the Commission shall qualify
for the tax exemptions and privileges granted under the Act.
59
(h) Roles and responsibilities of the trustees, advisors, loan servicers and
property managers;
(m) Methods for the liquidation and distribution of assets to the holders of
IUIs;
(n) Details of credit enhancements like guarantees or standby letters of
credit or advances that may be extended to the SPV by an entity which shall
not be the selling FI, its parent, subsidiaries or affiliates; and
- Upon approval of the SPV Plan, the Commission shall issue an Approval certificate
stating that the application has been approved and that the IUIs may be issued.
I. Issuance of IUIs
(c) Features of the IUIs including the specific amounts issued and/or to be
issued;
(d) timetable of issuance;
(1) Any existing SRC rule or provision to the contrary notwithstanding, all
IUIs proposed to be sold or distributed within the Philippines shall be duly registered
with the Commission.
(f) Draft agreements for the appointment of trustees and agents with respect
to the IUIs and the NPLs acquired from an FI;
60
mortgaged or pledged have been notified by registered mail of the intended transfer
of NPLs to an SPV
(5) SPV shall pay registration fee of 1/10 of 1% of the aggregate offering
price of the IUIs subject to a diminishing fee set by the Commission.
(9) SPV shall ensure wide dissemination of the preliminary and final
prospectuses
(10) Written notification shall be given to the Commission within 3 business
days from completion or termination of the offering by the issuer, including therein the
number of securities sold.
(b) Amendments or Rejection
(1) Within 45 days after the date of filing of the registration statement, or at
such later date to which the issuer has consented, the Commission shall declare the
registration statement effective or rejected unless the applicant is allowed to amend
the registration statement.
61
Any person may acquire or hold IUIs in an SPV in the minimum amount of Ten million
pesos (P10, 000.000.00); Provided, That an SPV shall not be authorized to acquire
the IUIs of another SPV: Provided, further, That the parent, subsidiaries, affiliates or
stock-holders, directors, officers or any related interest of the selling FI or the parent's
subsidiaries, affiliates or stock-holders, directors, officers or any related interest shall
not acquire or hold, directly or indirectly, the IUIs of the SPV that acquired the NPAs
of the FI.
K. Notice and Manner Of Transfer of Assets
(a) Prior Notice
- No transfer of NPLs to an SPV shall take effect unless the FI concerned shall give
prior notice, pursuant to the Rules of Court, thereof to the borrowers of the NPLs and
all persons holding prior encumbrances upon the assets mortgaged or pledged. Such
notice shall be in writing to the borrower by registered mail at their last known address
on file with the FI. The borrower and the FI shall be given a period of at most ninety
(90) days upon receipt of notice, pursuant to the Rules of Court, to restructure or
renegotiate the loan under such terms and conditions as may be agreed upon by the
borrower and the FIs concerned.
(b) Procedures on the Transfer of Assets to the SPV
An FI that intends to transfer its NPAs to an SPV shall file an application for eligibility
of said NPAs, in the prescribed format, with the Appropriate Regulatory Authority
having jurisdiction over its operation. Said application shall be filed for each transfer
of asset/s.
(c ) Issuance of the COE
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The tax exemptions provided above shall be exempt from the payment of the
following taxes:
1. Documentary stamp tax as may be imposed under Title VII of the NIRC;
2. Capital gains tax imposed on the transfer of lands and/or other assets
treated as capital assets as defined under Section 39(A)(1) of the NIRC;
3. Creditable withholding income taxes imposed on the transfer of land
and or buildings treated as ordinary assets pursuant to Revenue
Regulation No. 2-98, as amended;
4. The value-added tax as may be imposed under Title IV of the NIRC, or
gross receipts tax under Title V of the same NIRC.
Penalties
1.
- Each COE shall be valid for only 1 transfer. All subsequent transfers shall require a
separate COE from the Appropriate Regulatory Authority.
L. Nature of Transfer True Sale
* Any transfer of NPAs not in the nature of True Sale as provided for in the
Act shall not qualify for tax exemptions and fee privileges granted under the Act.
Provided, That GFIs and GOCCs shall be subject to existing law on the disposition of
assets: Provided further, That in the transfer of the NPLs, the provisions on
subrogation and assignment of credits under the New Civil Code shall apply.
2.
3.
4.
5.
Any person who violates any of the provisions of this Act, or any person
who, in a registration statement, notice, certification or plan filed under
this Act, makes any untruthful statement of a material fact or omits to
state any material fact required to be stated therein, shall, upon
conviction, suffer a fine of not less than Fifty thousand pesos
(P50,000.00) nor more than One million pesos (P1,000,000.00) or
imprisonment of not less than six (6) years and one (1) day nor
more than twelve (12) years, or both, in the discretion of the court,
without prejudice to the penalties provided under Sec. 18 hereof and
other applicable laws.
If the offender is a corporation, association, partnership or any juridical
person, the penalty shall be imposed upon the responsible officers,
as the case may be, who participated in the commission of the crime or
who shall have knowingly permitted or failed to prevent its commission.
If the offender is a juridical person, the court may order the suspension
or revocation of license.
If the offender is an alien, he shall, in addition to the penalties herein
prescribed, be deported without further proceedings after serving the
penalties herein prescribed.
If the offender is a public official or employee, he shall, in addition to the
penalties prescribed herein, suffer absolute or temporary
disqualification from government or public office, as the case may be.