San Beda College of Law, Mendiola

BANKING LAWS AND JURISPRUDENCE

By: Efren L. Dizon and Efren Vincent M. Dizon
This Reviewer is made by:
MANILA, ANTONIO CEASAR
BERNARDO, JANSEN
INTIG, JOY ESTELA
DE JESUS, TRACY ANN.
FROM SECTION 2S
AY 2011-2012

Topic

Page
2
5
8
12
24
29

Chapter1BanksandBusinessofBanking
Chapter2Organization,Management,AdministrationOfBanks
Chapter3DepositFunctionsOfBanks
Chapter4Investments,LoansandOtherBankFunctions
Chapter5 ProhibitedTransactionsandCessationOfBankingBusiness
Chapter6 ForeignBanksandTrustOperations
MIDTERMCOVERAGE:Chapter16

36
44
56
61
69
75

Chapter7 TheBankoSentralngPilipinas
Chapter8Currency,MonetaryStabilizationandFunctionsofBSP
Chapter9 UnclaimedBalancesandTrustReceipts
Chapter10DepositInsurance
Chapter11AntiMoneyLaundering
Chapter12SpecialPurposeVehicle
FINALSCOVERAGE:Chapter712

San Beda College of Law

Banking Laws
CHAPTER1Banksand
BusinessofBanking

1 Declarationofthestatewith
regards to banking
recognize vital role of the
banks to provide
environment conducive to
development of national

economy
o Italso
states
that
banks
need
high
stand
ards
of

inte
grit
y
and
per
for
ma
nce

2 Banks
entities

engaged in the lending of

funds obtained in the form
of deposits (borrowing,
lending,safekeeping)

3 Banksmayengageinother
activities allowed by the
lawotherthanlending
NatureofBankingBusiness

1. DebtorCreditor
Relationship

1 It is a contract of
loanandnotdeposit

2 Contract between
bank and depositor
is governed by the
provisions of the
NCC on simple
loan (Consolidated
Bank and Trust
Corpvs.CA)

2. Fiduciaryduty
1 Fiduciary
relationship
banksobligationto
observe high
standard

of
integrity
and
performance (Phil.
Banking Corp. vs.
CA)

3. Notatrustagreement
1 It is not a trust
agreement and
failuretopayaloan
is not a breach of
trust

2 It is not a trust
agreement because
banksdonotaccept
deposits to enrich
depositors but to
earnforthemselves

4. IndispensableInstitution
1 Has a vital role in
economiclife

2 Significanceof

b
a
n
k
i
n
g
i
n
st
it
u
ti
o
n
t
o
c
o
m
m
e
r
ci
al
tr
a
n
s
a
ct
i
o
n
s
(
M
e
t
r
o
p
o
li
t
a
n
B
a

nk
&
Tru
st
Co.
vs.
Ca
bilz
o)

5. Impressed

with public
interest

1 Has
pub
lic
inte
rest
bec
aus
e
peo
ple
dep
end
on
the
hon
est
y
and
effi
cie
ncy
of
ban
ks

2 Sta
bili
ty
of
ban
ks
larg
ely
dep
end
s
on
the

confidence of the
people in the
honesty

and
efficiencyofbanks.

6. Degreeofdiligence
1 Diligence higher
than that of a good
father. It must be
extraordinary
diligence

2 In

Simex
International vs.
CA, the bank is
under obligation to
treat the accounts
ofits

depositors
with
meticulou
scareand
always
have in
mind the
fiduciary
nature of
banks

1 Not
enough
that he
exerted
reasonable
diligence
to
ascertain
the safety
of his
clients

2 Such
diligence
is only
required
in its
fiduciary
relationshi
p with its
depositors
andnotto
other
transactio
nssuchas
sale of
foreign
exchange
demand
draft

3 Sec2of
GBL
prescribes
the
statutory
diligence
required

from
banks
high
standard
sof
integrity
and
perform
ancein
serving
its
deposito
rs.

4 Diligenc
e
required
ofbanks
is more
thanthat
of a
good
father
(PBCo
m vs.
CA)

5 Diligenc
e
extends
to
financia
l
instituti
ons(e.g.
GSIS)

7. Treatment of
accounts with
meticulouscare

1 Must
treat
every
account
with
utmost
fidelity
regardle
ss of
amount

2 There is
no law

mandatingbankstocall
up their clients
whenever a significant
amount shall be
withdrawn from their
account

8. Dutytokeeprecords
9. Banksarenotgratuitousbailees
10. Banks not expected to be
infallible

1 However, they must

bear the loss for not
discovering mistakes if
there are established
proceduresnotfollowed

11. Dealingwithregisteredlands
1 General

Rule:
mortgagee can rely on
title and does not need
toinvestigatefurther

2 Exception: mortgagee
cannotclosehiseyesto
factswhichshouldputa
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

;
B
E
R
N
A
R

reasonable
man on
his guard,
and yet
claim that
he is in
goodfaith

3 With
banking
institution
s, mere
reliance
onthetitle
is not
enough as
they need
to
investigat
ealso

4 Doctrine

of the
mortgage
e in good
faith
all

persons
dealing
with
property
covered
by the
Torrens
Certific
ates of
Titleare
not
required
to go
beyond
what
appears
on the
face of
the title.
(Cavite
Develop
ment
Bankvs.
Spouses
Lim)

DO
TIG, JOY ESTELA;
,
DE JESUS,
JA
TRACY ANN.
NS
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
EN
;2011-2012. REFERENCE: BANKING
LAWS & JURISPRUDENCE BY DIZON.
IN

San Beda College of Law

Banking Laws

1 The business o a
bankisoneaffected
with public interest,
for which reason
ghe bank should
guard against loss
duetonegligenceor
bad faith (Sps.
Omenganvs.PNB)

2 Where

the
mortgagee does not
directly deal with
theregisteredowner
ofrealproperty,the
law requires higher
degree of prudence
be exercised by the
mortgagee
(Abadvs.Guimba)

12. Banksmayexcludepersons
intheirpremises

13. Charginginterestforloans
1 It is considered the
very core of the
bankings very
existence
LiabilityforActsofOfficersand
Employees

1 A bank is liable for the

wrongfulactsofitsofficers
done in the interest of the
bank or dealings as bank
representatives but not for
acts outside the scope of
theirauthority.

1. Negligence of Manager
employerisliabletotheacts
ofthemanager

2. Negligence of officer
generalrule:tortiousactsof

officers within
their scope of
employment
shall make
banksliable

client
only
had
materi
al
posses
sionof
it.
Such
deposit
money
are
consid
ered
owned
by the
bank

3. Negligence of
tellerstellers
must exercise
highdegreeof
diligence

1 Teller
should
not
give
passbo
ok to
wrong
person
as a
person
in
posses
sionof
passbo
ok is
presu
med
the
owner

2 Appro
priatio
n of
deposit
ed
money
by the
teller
is not
estafa
but
consid
eredas
theftas
the

4. Right

to
recover from
employees

5. Liability for
damages

1 Actual,
exemp
lary,
moral

2 Actual
and
compe
nsator
ythe
interes
t due
shall
itself
earn
interes
t from
the
time it
is
judicia
lly
deman
ded

3 12% legalinterest
when judgment
becomes final and
executory

4 6% interest for
obligations not
constituting a loan
or forbearance of
money

1 Moral

damag
es

2 Gen.
Rule
a
corpor
ation
is not
entitle
d to
moral
dama
ges

3 Excep
tion
when
its
good
reputa
tionis
besmi
rched
by
breac
h of
fiduci
ary
duty.

4 In
culpa
contra
ctual

recov
erable
if
there
is
fraud
orbad
faith

5 Deposi
tor
may
recove
r even
if
banks

neglig
ence
not
attende
d by
bad
faith if
he
suffere
d
mental
anguis
h,
serious
anxiet
y,etc.

6. Respondeat

superior of
employees

1 Comm

and
respon
sibility

2 Abank
is
bound
by the
neglig
enceof
its
emplo
yees
ClassificationofBanks
(CUTRICONQU)

1. Universal
Banks large
commercial
banksthatcan
do both
commercial
and
investment
banking

1 They
have
the
power

of both commercial
bankandinvestment
house

case
there
are no
govern
ment
banks

2 Have the power to

invest in nonallied
enterprises

3 Rural

2. Commercial banks

Banks
Act
(RA
7353)

general powers incident of

corporation and can
perform

commercial
banking

4. Thriftbanks

1 Does not have the

encouragesthe
industry,
frugality and
accumulation
of savings of
thepublic

power to invest in
nonallied
enterprises

3. Rural banks banks that

promoteruraldevelopment

1 They can extend

1 To

loan or advances to
primarily meet the
normal credit needs
of

farmers,
fishermen and their
families

make
it
within
easy
reach
to the
people
the
credit
faciliti
es at

2 Can also deposit in

private banks more
than the amount
prescribedbySingle
BorrowersLimitin
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

;
B
E
R
N
A
R

reason
able
cost

2 Includ

es: (1)
saving
s and
mortga
ge
bank,

(2) st
ock
saving
s and
loan
associa
tions
and(3)
private
develo
pment
banks

3 Thrift
Banks
Act
(RA
7906)

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.

San Beda College of Law

Banking Laws

5. Cooperative banks
organizedbycooperativesto
provide financial and credit
servicestocooperatives

1 Cooperative Code
(RA6938)

2 Membership of a
cooperative bank
shallincludeONLY
cooperative and
federations of
cooperatives

6. Islamic Banks promote

socioeconomic
developmentinautonomous
region by performing
banking and investment
function based on Islamic
conceptofbanking

1 Islamic Bank RA
6848

2 Subject to the
principles and
rulings of Islamic
Sharia

7. Othersbanks:
1 Philippine Veterans
Bank created to
provide government
depository

to
veterans

for
appreciation of
grateful nation (RA
3518)

2 Land bank of the

Philippines

finance distribution
ofestatetoresaleto
small landholders
(RA3844)

3 Development Bank
of Philippines

provid
e
credit
faciliti
es for
develo
pment
in
agricul
ture,
comm
erce
and
industr
y

e
h
a
b
i
l
i
t
a
t
i
o
n

F
i
n
a
n
c
e
C
o
r
p
o
r
a
t
i
o
n

(
R
F
C
)

1
D
B
P

w
a
s

p
r
e
v
i
o
u
s
l
y

n
a
m
e
d

a
s

8. Nonstock
savings and
loan
associations
nonstock,non
profit
corporation

engage in accumulation of
savingsofits members and
loans to meet its members
needs

1 Confines exclusive
membership and
cannot transact
business with the
generalpublic

9. Quasibanks engaged in
borrowingoffundsthrough
issuance of deposit
substitute for purpose of
relending or purchasing
receivables and other
obligations

1 No person or
entity shall
engage in
baking
operations
without
authority from
Bangko
Sentral

2 Universal or
commercials
banks may
engage in
quasibanking
functions

entity is
performing
banking or
quasibanking
functions
without
authority of
BSP shall be
determined by
MB

15 MB
may
exami
ne the
books
and
record
s to
achiev
e this
purpos
e

3 Under

Corporation
Code:

10. OffshoreBanksdealswith

15 No

transaction with foreign

currenciesinreceivingfunds
from external sources and
utilizationofsuch

article
s of
incorp
oratio
n or
amend
ment
of
banks
shall
be
given
unless
accom
panied
by
recom
menda
tionof
appro
priate
gover
nment
agenc
y
(MB)

1 Governed by PD
1034

AuthoritytoEngageinBankingand
QuasiBankingFunctions

2 The
determination
whether the
person or

3 Thedepartment
head and
examiners can
administer
oaths and
compel
presentation of
books,
documents or
records

4 BSP

can
examine a
bank or an
enterprise that
is wholly or
majority
owned by the
bank

15 This
can
only
be
done
when
BSPis
exami
ning

bank

andcollectthe
interest and
charges a
commissionto
lender and
banker, it is a
bank

5 SEC shall not register

articles of incorporation of
bank unless it is
accompanied by authority
ofMB

6 SEC shall not register by

3 Investment

laws of bank unless

accompanied by authority
ofBSP
Serviceofsummonsuponbanks

company
engages
primarily in
the investing
or trading of
securities and
isnotabank

15 May be made on the

president, managing
partner, general manager,
corporate

secretary,
treasurer,
Bankname
inhousecounsel(domestic)
15 UponresidentagentorBSP
1 Only
(foreignbank)
universal and
2 As long as institute loans
commercial
outmoneytoitscustomers
banks may
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

;
B
E
R
N
A
R

representitself
to the public
as such in
connection
with its
businessname

2 Thirft banks
can

be
allowed to
have

a
businessname
of its own
provided that
Athriftbank,
savings bank
or private
development
bankshallbe
added

3 Above rule is
also available
toRural/Coop

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.

San Beda College of Law

Banking Laws
CHAPTER 2

Organization,
Management,
AdministrationofBanks
OrganizationofBanks

1 MB can authorize the

Commercial
Thriftbanks
1. HeadofficeinManila
2. Otherwise
RuralBanks
1. WithinManila
2. Cebu/Davao
3. 1
st

organization of a bank
based on the following
conditions:

1. Entity is a stock

c
l
a
s
s
c
it
y
a
n
d
1

corporation (par
valuestocksonly)

2. Fundsareobtained
from the public
which shall mean
twenty persons or
more

3. Minimum capital
requirement
prescribed by MB
shallbesatisfied

2 MB shall take into

consideration

the
capabilitiesoftheentityin
terms of their financial
resources,

technical
expertiseandintegrity

3 Bank licensing process

shall

incorporate
assessmentof:

1. Banks ownership
structure

2. Director

management

3. Operatingplan
4. Internalcontrols
5. Projected financial
condition

4 Capitalrequirements:
TypeofBank
Universal

st

c
l
a
s
s
6
.
5
m
u
n
i
c
i
p
a
li
t
y
4. 4
th

th

c
l
a
s
s
c
it
y
a

n
d

4
t

c
l
a
s
s
3
.
9

m
u
n
i
c
i
p
a
l
i
t
y

5.5th6thclassmunicipality
1 At least 25%
of total
authorized
capital stock
shall be
subscribed by
subscribersof
proposed
bank

2 25% of such
subscription
shallbepaid
up. It shall
not be less
than the
minimum
capital
requirement

3 Incorporators/
subscribers
and proposed
directors and

officers must be (2)

personsofintegrityand
(1)goodcreditstanding

4 Suchpersonsmust(1)not
be convicted of crime
involving moral turpitude
and(2)notofficersof

government
agencyor
department
chargedwith
grantingloans
tobanks

1 Bank

is
organized 515
people
(incorporators)

2 Cooperatives
may organized
a rural bank
upon
consultation
with the rural
banks in the
area

3 Bank and its

branches shall
be treated as
oneunit

4 Universal and
commercial
banks may
open branches
within or
outside the
Philippines
upon prior
approval of
BSP

5 Other banks
shall

be
governed by
their pertinent
laws
Stockholdings

1. Treasury
Stocks

1 GBL

provide
s that
NO
bank
shall:

1. Pu
rc

h
as
e
or
ac
q
ui
re
sh
ar
es
of
it
s
o
w
n
ca
pi
ta
l
st
o
c
k

2. ac
ce
pt
ow
n
sh
are
s
as
se
cu
rit
y
for
loa
n

1. E
x
c
e
p
t

if it
app
rov
ed
by
MB
and
will
be
retu
rne
din
6
mo
nth
s

may
each
ownup
to 40%
of the
voting
stock
(no
aggreg
ate
ceiling)

3 Citizen
ship of
the
corpora
tion
shall
follow
the
citizens
hip of
the
control
ling
stockh
olders
(>50%)

2 Reason: if banks
were allowed to
have a lien in their
own stocks for
indebtedness of
stockholders,
prohibition against
granting loans or
discounts upon
security would
becomeineffective

4 The

2. Foreignstockholdings:
1 Foreign individuals

percent
age of
foreign
owned
voting
stocks
in a
bank
shall
be

and nonbanks can

own40%ofvoting
stock of domestic
bank.(aggregate
foreign voting
stocks)

2 A

Filipino
individual and
domestic nonbank

AUTHO
RS:
MANILA,
ANTONI
O

C
E
A
S
A
R
;
B

determ
ined
by the
citizen
shipof
individ
ual
stockh
olders

5 At
least
60%
of
voting
stock
in any
comm
ercial
bank
shall
be
owned
by
Filipin
o
citizen
s

6 In
thrift
banks,
itshall
be at
least
40%

7 Rural

banks,
100%
Filipin
os

E
JANSEN; INTIG,
R
JOY ESTELA; DE
N
JESUS, TRACY
A
ANN.
R
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
D
2011-2012. REFERENCE: BANKING
O
,LAWS & JURISPRUDENCE BY DIZON.

San Beda College of Law

Banking Laws

Indeterminingnationalityofbanks,
controltestisapplied
Familygroupsorrelatedinterestmustbe
fullydisclosedinalltransactionsofthe
individual

a.

Convictedoffinaljudgment
dishonestyorbreachoftrust
b.Personsconvictedoffinaljudgm
maximumimprisonmentterm
than6years
c. Convictsofbankinglaws
d. Personsjudiciallydeclaredinsolv
e. Culpableofbanksclosure
f. Administratively liablefor v
withpenalty o
bankinglaws
fromoffice
g. Foundunfitforposition

BoardofDirectors
AccordingtoCorporationCode,thereshallbeat

leastfiveandmaximumof15boardofdirectorsof
bank
Two of suchshall beindependent
directors.

Independentdirectorpersonotherthanofficeror
employeeofbank
Allmustbeoflegalageandmajorityofthemare
residentsofthePhilippines

NonFilipinocitizens may become members of

board of directors of bank up to theextent of
allowedforeignparticipation
Directorsofmergedorconsolidatedbanksshall
notexceed21
Election:President, Treasurer (director ornot),
Secretary(residentcitizen).Notallowedposition:
President/Secretary,President/Treasurer
Meetings may be conducted through

modern

technologies
AforeignermaybeamemberoftheBoardof
directorsofaruralbankatthetimeoftheir
assumptionofoffice
Toprotectfundsofdepositorsandcreditors,MB
shallregulatepaymentofdirectorsundercertain
circumstances:
1. Comptrollership
2.Businessinunsafeorunsoundmanner
3.Bankisfoundtobeinanunsatisfactory
financialcondition
FitandProperRule
PowersofMBagainstdirectors:
a. Review

qualifications

and DQs

of

directors
b.Afterduenotice,maydisqualify,suspend

Therecanbealsotemporarydisqualifi

shallexistuntilDQisgone
UnderCC(CorporationCode)disqua
onlywith(1)imprisonmentmorethan
(2)violationofcodecommittedwithin5

NCBAalsoprovidesDQformembersofM
isconnectedwithbankundersupe
examinationofBSP

Publicofficialscannotalsobeanoff
privatebankunlesspositionisincidental

RuralBanksActpublicofficialmaybe
(exception)
PDIC conviction of
anycrimina
involvingbreachoftrust
BankingDaysandHours

Atleast6hoursadayonworkingday
exceptholidays)

MayopeninSaturdays,Sundaysandh
3hours(toreporttoBSP)
Forpurposesofdepositsandwithdra
canextendbeyondorearlyof8AMand
Ifitisforotherpurposes,theycanexce
minimumbutnotextendbeyondorear
and8PM
Banks in airportsor majorfishport
24hours
Changesinbankingdaysandhoursca

onceevery30daysexceptduringemerg

orremovedirector
c.Fitandproperruleshallbedetermineby

integrity, experience,education,
competenceofthedirector
Disqualificationsofdirectors:

training,

ATMs
Classes:1.)Offsite2.)Mobile

BanksmayestablishoffsiteATMSpr

thereisreportonBSPandadequatesecurity

AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY

ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING
LAWS & JURISPRUDENCE BY DIZON.

San Beda College of Law

Banking Laws
affected

measures.Theyareinstalled 1 Any unsettled

strike or lockouts
onlyincentersofactivity
involving banks
1 Mobile ATMS are allowed
after 7 days shall
to visit places with large
be reported by
crowdsofpeopleprovidedit
BSP to DOLE
hasadequatesecurity
who will assume
jurisdiction

2 Banks, through

IndependentAuditor

1 MB may require bank to

engage services of
independentauditorfromlist
ofCPAacceptabletoMB
FinancialStatements

1 E
v
e
r
y

b
a
n
k
,

q
u
a
s
i

a
n
k

o
r

t
r
u
s
t

e
n
t
i
t
y

their president,
shall inform BSP
ofthecauseofthe
strike and the
operations
h
a
l
l

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StrikeandLockouts
AUTHORS:
MANILA,
ANTONIO
CEASAR;
BERNARDO,
JANSEN; INTIG,
JOY ESTELA; DE
JESUS, TRACY
ANN.
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
2011-2012. REFERENCE: BANKING
LAWS & JURISPRUDENCE BY DIZON.

San Beda College of Law

Banking Laws
CHAPTER3DepositFunctions
ofBanks
I.KindsofDeposits

1. Demanddeposits

cashiers,
treasury
warrants,
postal money
orderandonus
check

named therein
or to bearer or
to order, a
named sum of
money (Moran
vs.CA)

1 All those liabilities of BSP

andofotherbankswhichare 1.b.Currentaccounts
denominated in Philippineofofficers
currency and are subject to
1 All officers,
paymentinlegaltenderupon
employees of
demand by presentation of
bank in cash
checks
departments
2 Only universal and
and other
commercial banks may
employeeswho
accept or create demand
have direct
deposits without prior
responsibility
authorityfromBSP
in handling
3 Othertypesofbankrequire
deposit
such authority. This
transactionsare
considered as the current
not allowed to
accountinthebank
maintain
demand
1.a.Temporaryoverdrawingsand
deposits or
DAUD
current
1 Temporaryoverdrawingsare
accounts
not allowed except normal
bankchargesandotherfees
incidental to handling such1.c.Checks
accounts
1 Awrittenorder
2 Violations of temporary
addressed to a
overdrawings will cause
bankorperson
(1/10 of 1%) fine per day
carrying
computedonthebasisofthe
banking
amountofoverdrawnbutnot
business, by a
to exceed P30,000.00 per
party having
day
money in their
3 Drawings

against
hands,
uncollected

deposits
requesting
(DAUD) prohibited.
themtopayon
Exception: made against
presentment,to
uncollected

deposits
a person
representing managers,

1.d.Dutyofbankto
honorchecks

1 When bank sees that

8 Cashiers

depositors account has

sufficient amount, then it
shallhonorsuch

check
banks own
check and is
treated as PN
withthebank
asmaker

2 Ifthereissufficientamount
but bank dishonored, then
bank is liable. Otherwise if
thereisnosufficientamount

9 deemed as
cash
(New
PacificTimber
& Supply Co.
Inc.

Cs.
Seeris)

3 Banks must ensure that the

check is only paid to its
designatedpayee

4 Drawer must remember

everytimeheissuesacheck
and a bank must know the 1.d.SetoffRule
formerssignature
1 Abankcanset
off

or
5 A bank is under no
compensate by
obligation to make partial
debiting a
payment on the check only
personal
upon the amount in the
account of
drawersfunds
depositor for
6 Thecannotalsocompensate
an amount
the lack of money in the
erroneously
deposit account to the
credits to the
savingsaccount
persons
7 Crosscheck must be: (1)
proprietorship
may not be encashed but
account
only deposited (2) check
negotiated only once to
onewhohasanaccountwith 1.e.Relationshipof
PayeeorHolderand
a bank and (3) serves as theBank
warning to holder (State
1 Principal and
InvestmentHousevs.IAC)
agent

AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

;
B
E
R
N
A
R

relationship
between payee
or holder of
commercial
paper and the
bank to which
it is sent for
collection
(PCIBvs.CA)

2. SavingsDeposits
1 Banks may be
authorized by
the BSP to
solicit and
acceptdeposits
outside their
bankpremises
2.a.Individualand
JointAccounts

1 If the joint
account is
and, both
signatures of c
odepositors
are required
before
withdrawals

2 If and/or

either their
signature is
sufficient

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.

San Beda College of Law

Banking Laws
2.b.Withdrawals

BankingFunction)

EssentialElementsof
1 There must always be a quasibankingare:
presentation of passbook
and

accomplishing
1. Borrowing
necessary withdrawal slips
funds for the
borrowers
beforewithdrawalexceptif
account
authorizedbyBSP

3. Negotiable Order of Withdrawal

Accounts

1 NOW accounts are interest

bearing deposit accounts
thatcombinethepayableon
demand feature of checks
and investment feature of
savingsaccount

2 Universal and Commercial

banks may offer NOW
accounts but other banks
needpriorapprovalofMB

4. TimeDeposits
1 Time deposits one the
paymentofwhichcannotbe
legallyrequiredwithinsuch
specifiednumberofdays

2. Twentyormore

lenders at any
onetime

3. Methods of
borrowing are
issuance,
endorsement
or acceptance
of

debt
instruments

4. Purpose is for
relending and
purchasing
receivables

1 Borrowing
all forms of
obtaining or
raisingfunds

2 For

the Agrarian Reform Fund

Commission with lower
interest shall be exempt
from legal reserve
requirements

the
borrowers
ownaccount
assumption of
liability in
ones own
capacity

3 Certificated of Time

3 Relending

Deposits can either be

negotiable or non
negotiable. Only Universal
or commercial banks can
issue negotiable CTDs
without prior approval of
BSP

refer to the
extension of
loans by an
institution
with
antecedent
borrowing
transactions

2 Special time deposits from

5. Deposit Substitute (Quasi

6. Foreign Currency
Deposits

1 Any person,
natural or
juridical may
deposit with
such any bank
in

good
standing
designated by
BSP,

foreigncurrencieswhichare
acceptable as part of
internationalreserve,except
thosewhicharerequiredby
BSPtobesurrendered

deposit system
shallbeexempt
from the 15%
requirement of
deposit with
BSP

1 Such banks can accept

4 There is no

deposits and accept foreign

currenciesintrust

restriction on
withdrawals by
depositorofhis
deposit of the
same abroad
except does
arising from
contract of
depositor and
bank

1. Numbered accounts
for recording and
servicingofdeposits
areallowed

2 Thedepositorybankshall
1. Maintainatalltimes
a 100% foreign
currency cover for
theirliabilities

2. 15% of such must7. Anonymous and

be in the form of Numberedaccounts

foreign currency
1 Such accounts
depositwithBSP
arenotallowed.
3. Thebalanceshallbe
Numbered
in form of foreign
accountsisonly
currency
allowed in
loans/securities
foreign
which are short
currency
term maturities and
deposits
readilymarketable

4. Such loans can be

2 However,

extended

to
domesticenterprises
to cover the 100%
foreign currency
cover

banks/non
banks should
ensure that the
client

is
identified inan
official
document

3 Depository banks under the

expanded foreign currency
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

;
B
E
R
N
A

II.Administrationof
Deposits

1. Specimen signature,
IDphotos

1 All banking
institutions are
required to set
a minimum of
3 specimen
signature from
theirdepositors
every 5 years
orsooner

2 Banksmayalso

require
submission of
IDphotos

3 First

time
depositors
require the
presentation of
atleast2valid
photbearing
Ids

4 Students who
are
beneficiariesof
OFW are also
required to
present2Ids

5 Submission is

onetime basis
only

2. Minors

Corporations
Depositors

and
as

R
SEN; INTIG, JOY
D
ESTELA; DE
O
JESUS, TRACY
,
ANN.
JFROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
A
2011-2012. REFERENCE: BANKING
N

LAWS & JURISPRUDENCE BY DIZON.

10

San Beda College of Law

Banking Laws
maturity rate
applicabletoa
deposit
substitute

1 Minorscanhavesavingsand
time deposit accounts
withoutassistanceofparents

1. Must be at least 7
yrsold

5. Clearing Cutoff

2. Able to read and Time

write

3. Sufficientdiscretion
4. NototherwiseDQed
bylaw

2 Parents can still deposit

moneytominor

3 For deposits of minors in

thrift banks, guardian may
make notice that payment
(deposits,

interest,
dividends) be made to him
andnottotheminor

4 Corporationsmayopenbank
accountsasfollows:

(1) Incorporation stage and

(2)Postincorporationstage

3. Time of payment of interest in

timedeposits

1 Interestontimedepositmay
be paid upon maturity,
withdrawal or advance
provided that the interest
paid in advance shall not
exceedinterestforoneyear

4. Treatment of matured time

deposits

1 General rule:
alldepositsand
withdrawals
during regular
banking hours
shall

be
credited/debite
d to accounts
on date of
receipt or
payment

2 IfthereisBSP
clearing
arrangement,
notearlierthan
2 hours before
BSP clearing
time in head
offices and3.5
hours

in
branches

3 If there is no
BSP clearing
arrangement 2
hours before
local clearing
time

6. Booking
1 Time deposits not Deposits
withdrawnorrenewedonits
duedateshallbetreatedasa
savings deposit and shall
earn interest until actual
withdrawal with rates of
savingsdeposit

2 Deposit substitute not

withdrawn shall have a

Cash

1 Cash deposits
received after
clearing cut
off time shall
be book as
deposits on
dayofreceipt

7. Booking Noncash
Deposits

1 onus
checks,
managers/cas
hierschecks,
demanddrafts
receivedafter
clearingcut
offtime

may, at the option of the

bank,bebookedontheday
of receipt. Other noncash
deposits are treated as
contingent accounts on the
dayofreceipt and shallbe
booked as deposits the
followingday

owners of a
deposit agree
that either of
them could
withdraw any
part or whole
of account
during lifetime
ofbothandthe
balance upon
death of either
belongs to the
survivor

8. Booking Deposits after regular

bankinghours

1 Deposits, whether cash or

2 Itisanaleatory

not, received after close of

regularbankinghoursshall
be treated as contingent
accounts and booked the
followingday

contract

3 Survivorship
agreement is
per se not
contrarytolaw
but may be
violative

9. AverageDailyBalance

4 Agreementcan

1 Banks may impose and

be a mere
cloaktohidein
inofficious
donation to
transfer
property in
fraud

collect service charge or

maintenancefeeonsavings
and current accounts that
fall below minimum
monthly average daily
balance(ADB)

2 must be properly disclosed

inthetermsofdeposit

IV.NatureofBank

3 For dormant accounts: fall Deposits

below2consecutivemonths

1. Deposits are

61. SurvivorshipAgreement

considered
simple loans
and

not
preferred

1 There is survivorship
agreement when joint
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

;
B
E
R
N
A
R

credits

2. Bank deposits
are in the
nature of
irregular
deposits as
they are loans
who earn
interest (BPI
vs.CA)

3. Relationship
between
depositor and
Savings and
Loan
Association is
thatofcreditor
anddebtor

4. Contract
between bank
and

its
depositors are
governed by
NCC

5. Bank
ultimately
acquires
ownership of
deposits but
has obligation
to pay back
equalamount

6. Bankscanset

off

or
compensate

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.

11

San Beda College of Law

Banking Laws

22.

into deposits to
determine gross
estate of a
decedent or he
has applied for
compromise tax
liability

1 BSP can also

DutiesofBanks

1 Meticulous care with

deposits of clients due to
fiduciaryrelationship

inquireindeposits
for periodic and
special
examinations

2 Banksmustgivepaymentto2 Ombudsman has

the proper party, thus
collecting bank has
obligation to ascertain that
the drawer truly intended
that the depositor is the
payee

3 Incaseofdeathofdepositor
and the bank knew of it,
there shall be no further
withdrawal

4 Administrators or heirs can

the InCamera
Inspection power
to look into
deposits provided
that there is a
pending case is
court and 1.) the
account must be
properly
identified 2.)
inspection limited
to the subject
matter

withdrawupto20kwithout
3 CIRcanalsolook
certificationofCIR
VI.SecrecyofBank
Deposits

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,

(
3
)

o
r
d
e
r

o
f

c
o
u
r
t

i
n

c
a
s
e

o
f

b
r
i
b
e
r
y

o
r

d
e
r
e
l
i
c
t
i
o
n

o
r

(
4
)

s
u
b
j
e
c
t

m
a
t
t
e
r

o
f

l
i
t
i
g
a
t
i

o
n

5 I
t

s
h
a
l
l

a
l
s
o

a
p
p
l
y

t
o

f
o
r
e
i
g
n

c
u
r
r
e
n
c
y

d
e
p
o
s
i
t

w
i
t
h

t
h
e

o
n
l
y

e
x
c
e
p
t
i
o
n

o
f

w
r
i
t
t
e
n

p
e
r
m
i
s
s
i
o
n

6 I
n


I
s
l
a
m
i
c

b
a
n
k
s

t
h
a
t

o
n
l
y

e
x
c
e
p
t
i
o
n
s

a
r
e
:

(
1
)

i
n
s
p

e
c
t
i
o
n

o
f

b
a
n
k

a
u
d
i
t
o
r
,

(
2
)

w
r
i
t
t
e
n

p
e
r
m
i
s
s
i
o
n

b
y

d
e
p
o
s
i
t
o
r

(
3
)

s
u
b
j
e
c
t

m
a
t
t
e
r

o
f

l
i
t
i
g
a
t
i
o
n

VII.
Exception
sto
Secrecy

ofDeposits

1 Theyarealreadystated
above

2 A
c
c
o
u
n
t
s

c
a
n

b
e

g
a
r
n
i
s
h
e
d

t
o

i
n
s
u
r
e

s
a
t
i
s
f
a
c
t

i
o
n

o
f

j
u
d
g
m
e
n
t

a
s

t
h
e
r
e

i
s

n
o

r
e
a
l

i
n
q
u
i
r
y

a
n
d

o
m
e

d
i
s
c
l
o
s
u
r
e

a
r
e

m
e
r
e
l
y

i
n
c
i
d
e
n
t
a
l

es
ca
pe

4 G

3 Co

ngr
ess
not
int
en
de
d
for
de
bto
rs
to

e
n
e
r
a
l

e
x
e
m
p
t
i
o
n

a
g
a
i
n
s
t

g
a
r
n
i
s
h
m
e
n
t

s
h
a
l
l

n
o
t

a
p
p
l
y

t
o

f
o
r
e
i
g
n

t
r
a
n
s
i
e
n
t
s

5 F
o
r
e
i
g
n

c
u
r
r
e
n
c
y

d
e
p

o
s
i
t
s

o
f

f
o
r
e
i
g
n
e
r

w
h
o

w
a
s

c
o
n
v
i
c
t
e
d

o
f

c
r
i
m
e

r
a
p
e

m
a
y

b
e

g
a
r
n
i
s
h
e
d

t
o

s
a
t
i
s
f
y

j
u
d
g
m
e
n
t

6 U
n
d
e

R
A

1
4
0
5

a
n
d

A
n
t
i

M
o
n
e
y

L
a
u
n
d
e
r
i
n
g

A
c
t
,

t
h
e

s
e
c
r
e

c
y

o
f

d
e
p
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s
i
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s

d
o

n
o
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a
p
p
l
y

AUTHORS:
MANILA,
ANTONIO
CEASAR;
BERNARDO,
JANSEN; INTIG,
JOY ESTELA; DE
JESUS, TRACY
ANN.
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
2011-2012. REFERENCE: BANKING
LAWS & JURISPRUDENCE BY DIZON.

12

San Beda College of Law

Banking Laws
CHAPTER4Investments,Loans
andOtherBank
Functions
I.UniversalOperationofUniversal
banks
PowersofUniversalbank

1. Commercialbank
2. Investmenthouse
3. Invest in nonallied
enterprises

universal or
commercial
bankmayown
100%ofvoting
stock

of
another
universal or
commercial
bank

3 Ifnotpublicly

list then only

49%own

4 Following are

EquityInvestmentsofUniversal
bank

financial allied
enterprises:

1 Allied enterprises are those

which enhance
complementbanking

2 Publiclylisted

or

2 If it is a financial allied
enterprise, then it involves
moneymatters.Otherwiseit
shallbenonfinancial

3 Totalinvestmentsinequities
of allied and nonallied
enterprises shall not exceed
50%ofthenetworthofthe
bank

4 Equity investment in any

one enterprise, whether
allied or non, shall not
exceed25%

5 Net worth total of the

unimpaired paid in capital
including paidin surplus,
retained earnings and
undividedprofit
EquityinvestmentsofUniversal
bankinFinancialAlliedenterprise

1 Universal bank can own

100% of the equity in a
thrift,ruralbankorfinancial
alliedenterprise

1. Leasin

g
compa
nies

2. Banks
3. Invest
ment
houses

4. Financ
ing
compa
nies

5. Credit

card
compa
nies

6. Financ

ial
institut
ions

7. Compa
nies in
stock
broker
age
and
foreign
exchan
ge
dealers

hip

8. Insuran
ce
compa
nies

9. Holdin
g
compa
ny
provid
ed that
the
equitie
softhe
entity
is
confine
d
under
univers
albank
BSP
regulat
ion

Equityinvestmentsofuniversal
bankinnonfinancialallied
enterprise

BankinNonallied
enterprise

2. Industr
ial
parks

1 Equity

1 Universalbankmayownup

investment in
a single non
allied
enterprise
shall not
exceed35%in
total equity or
votingstock

to 100% of equity in non

financialallied

2 Examplesare:
1. Warehousing
companies

2. Storage
3. Safedepositbox
4. Companiesengaged

in management of Investmentsinnon
mutual funds and alliedenterprises
notfundsitself
1 Universal
5. Computerservices
bank may
6. Home building and
invest in
development
equity of
7. Servicebureaus
enterprise of
8. PCHC
eligibles:
3 Ruralandcooperativebanks
1. Enterp
can invest in nonfinancial
rises
alliedenterprisessuchas:
engage
1. Warehousing
d in
2. Fertilize and
agricul
agricultural
ture,
chemical
mining
3. Farmequipments
,
4. Trucking and
quarry
transportation
ing,
5. Marketing
manuf
agricultural
acturin
products
g,
6. Leasing
public
utilitie
EquityinvestmentofUniversal
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR
;

B
E
R
N
A
R
D

3. Comm
ercial
project
with
govern
ment
privati
zation
progra
m

2 Equity
investment in
Quasibanks
universalbank
can only
invest up to
40%inequity
ofquasibanks

35.

Operations of
CommercialBanks

PowersofCommercial
banks

1. General
powers
incident to
corporations

2. All power
necessary to
carry business
ofcommercial
banking such
as:

O
N; INTIG, JOY
,
ESTELA; DE
J
JESUS, TRACY
A
ANN.
N
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
S
2011-2012. REFERENCE: BANKING
E

LAWS & JURISPRUDENCE BY DIZON.

13

San Beda College of Law

Banking Laws

1. Acceptingdraftand
issuing letters of
credit

documents
presented and
need not
examine the
goods

2. Discounting
3. Creating demand

9 Therearethree

4. Buy and selling

1. buyer

deposits
Forex

contracts:
seller

2. buyer
bank

IssuanceofLettersofCredit

1 Letter of credit financial

device developed by
merchants as convenient
mode of dealing with sales
ofgoods

2 The buyer will apply for a

letterofcreditintheissuing
bank

3 Thesellerwillthensendthe
goods to the carrier and he
willmakeadraft,calledbill
ofexchange

4 Seller will present the draft

3. seller
bank

10 There can be
other parties
such

as
notifying bank
(inform seller),
confirming
bank (lend
credence to
letterofcredit),
paying bank
andnegotiating
bank
(discounter)

and the necessary

documents, such as bill of
Equityinvestmentson
lading to issuing bank to
commercialbank
receivethepayment

5 While the goods are in

transit,itshallbeownedby
issuingbank

6 When the goods arrived at

the port of the buyer, the
buyer will pay the
corresponding payment and
alsogainthedocuments

7 Since the buyer gain the

documents, he can now
acquirethedeliveredgoods

8 Independence principle
bankdeterminescompliance
withletterofcreditonlyby
examining

shipping

1 Commercial
bank may
invest only in
equities of
allied
enterprises

2 Total
investment in
equities of
allied
enterprises
shall not
exceed35%

3 Equity
investment in

one enterprise
shall not
exceed25%

Equityinvestmentofcommercial
bankonfinancialalliedenterprises

distrib
ution
of net
profits
and be
usedto
increas
e
capital
accoun
tsuntil
minim
um
require
mentis
met

1 Can own up to 100% in

equity of thrift and rural
bank

2 Howevercannotown100%
of equity of financial allied
enterprise other than above
banks
Equityinvestmentincommercial
bankonnonfinancialallied
enterprises

1 Can own
100% of said
enterprises

2. Restric

III.

t
acquisi
tion of
major
assets
and
new
invest
ments
except
with
purcha
se of
readily
market
able
eviden
ce of
indebt
edness

RiskBasedCapital
MinimumRatio

1 MB shall prescribe
minimumratio

2 It will be based on the net

worth and risk assets of a
banks well as its
compositions

3 Itmayaltercompliancewith
ratiofor a max periodof1
year

4 Ratio shall be uniformly

applied to banks of same
category
EffectofNoncompliance

1 If a bank does not comply

thentheMBcan:
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

of RP
BSP

1. Limit

;
B
E
R
N
A
R

2 In case of
merger,
rehabilitation,
MB may
temporarily
relieve such
bank with
compliance
with capital
ratio
IV.Limitonloans,
creditaccommodation
andguarantees
SingleBorrowersLimit

1 Total amount
of loans,
credits
accommodatio
n

and
guarantees
extended to
any person,
partnership or
corporation
shall not
exceed20%of
net worth of
bank

2 InCircular425
of 2004 of
BSP, the SBL
was increased
to25%

3 Exceptions to
SBL:

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.

San Beda College of Law

Banking Laws

1. MB may otherwise11 The enduser

prescribe for reasons of
nationalinterest

2. Deposit of rural banks

3
4

borrower shall be
subjecttothe25%
SBL

with GOC financial12 In municipalities

wherethereareno
institutions such as LB,
government
DBPandPNB
banks,depositsof
BasisfordeterminingSBListhe
rural and coop
total credit commitment of bank
banks in private
toborrower
banksshallnotbe
Loanstoallaccountsunderloan
subjecttoSBL
portfolio
13 Depositinprivate
Credit accommodations to
depository bank
credit and market risk exposure
used by thrift,
of banks arising from
rural and coop
accommodation other than the
banks, with
loan
authority to
Totalcreditcommitmentinclude
accept demand
loans, credit accommodation,
deposits, after
deferred letters of credit less
being cleared,
margindepositsandguarantees
shallbeexempted
Total credit commitment can be
fromSBL
increased by 10% provided
14 Bankguarantee
additional liabilities are secured
irrevocable
by trust receipts, shipping
commitment of a
documentsorreadilymarketable
bank binding to
goods
pay a sum of
Readily marketable goods
moneyineventof
articlesofcommerce, agriculture
nonperformance
orindustryasconstantdealingsin
ofthirdparty
ready marketand priceis easily 15 Credit Risk
ascertainableanddisposable
Transfer

8 Parent corporations total credit

commitmentshallalsoincludeits
subsidiaries if it guarantees,
accommodate or subsidiary is
merelyadepartmentofit

9 Wholesalelendingofgovernment

arrangement that
allowsthebankto
transfer the credit
risk associated
with its loan or
other credit
accommodationto
athirdparty

banksshallnotexceed35%ofnet
worth to participating financial
16 Control of
institutions
majority interest
10 PFIinstitutionsforrelendingto
or controlling
enduserborrowers

14

interest
parent owns,
directly

or
indirectly through
its

subsidiaries,morethanhalf
ofvotingpowerofenterprise

1 Eveniflessthanhalfofsaid
voting power, it shall still
havecontrollinginterestif:

1. Agreement with
investors

2. Governfinancialand
operations

3. Canappointmajority
ofdirectors

4. Castmajorityvoteon
meetings

2 Subsidiary corporation
wheremorethan50%ofthe
voting stock is owned bya
parentcorporation

3 Bill of exchange drawn in

good faith against actually
existingvalues drawnbya
selleronthepurchaseforthe
priceofcommoditysold

4 Commercialpaperownedby
person negotiating the same
paperarisingfrombusiness
transaction

5 ExclusionfromSBL:
1. Discount bills of
exchange

and
discount commercial
paper

2. Credit
accommodation to
finance importation
ofriceorcornupto
100% net worth of
bank
Must

be
approved by
NEDA

3. Loans and credit

accommodation
guaranteed

by
Industrial Guarantee
andLoanFund

4. Liabilities

of
commercial paper

issuer
for
com
merci
al
paper
held
by
UB
as
firm
under
writer
.
Only
180
days
and
not
excee
d 5%
from
norm
al
SBL

shareho
lder
such as
ADB

6. Loans
and
credit
accom
modati
ons
with
valuati
on
reserve
s
provide
d that
bank
has no
unbook
ed
valuati
on
reserve
s

5. Loan
s and
credit
acco
mmo
datio
ns
cover
ed by
intern
ation
al or
regio
nal
instit
ution
s
wher
e
Philip
pines
is

7. Loans
and
credit
accom
modati
ons as
a result
of
underw
riting
agreem
ent of
debt
securiti
es not
exceedi
ng 30
days
Violations

1 Monetary
penalties

1/10 of 1% of excess over

the ceiling but not exceed
30kperday

2 Ifbankresourceislessthan
AUTHOR
S:
MANILA,
ANTONI
O
CEASAR
;

B
E
R
N
A
R
D

50M, then
only a max
penalty of
P500shallbe

imposed

3 There will also

bereprimandto
directors/officer
s

O
N; INTIG, JOY
,
ESTELA; DE
J
JESUS, TRACY
A
ANN.
N
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
S
2011-2012. REFERENCE: BANKING
E

LAWS & JURISPRUDENCE BY DIZON.

15

San Beda College of Law

Banking Laws

1 In subsequent offense, a 1k
fineshallbeimposedonthe
directorswhoapprovedit

2 There can also be

suspension of banks
branching privilege and
rediscounting facility of
BSP
InclusiontoLimit

1 The following shall be

included

1. Maker, acceptor of
paper discounted
and

general
indorser, drawer or
guarantor

2. Individual

who
controls majority
interest

in
corporation

3. In case of

2. Loans and
credit
accommodatio
ns guaranteed
bygovernment

3. Loans and
credit
accommodatio
ns covered by
assigned of
deposits by
lendingbank

4. Loans and
credit
accommodatio
ns under
lettersofcredit
covered by
margin
deposits

5. Loans and
credit
accommodatio
ns determined
byMBasnon
riskitems

corporation, all
liabilities to such
bank of all
subsidiaries it has
majorityinterest
AssignmentofCredits

4. Partnership,
liabilities
members

of

2 Also includes parent

coporations with majority
interest

Exclusiontolimit

1. Loans

and credit
accommodationssecuredby
BSPorRP.Stateisalways
solvent

1 It is the
agreement
where the
owner of
credit,knowas
assignor, by
legal cause,
transfer his
credit to
another,known
as assignee
without need
of consent of
debtor

2 Assignee

acquires
powers
assignor

of

3 There is no
new obligation
inassignment

4 However,there
must be a
noticegivento
debtor so that
he will know
whomtopay

5 Consent is not
necessary in
order that
assignment
may fully
produce legal
effects (Sison
& Sison vs.
Yap Tico and
Avancea)

Pactocommisorio

5 Officers shall
include any
person who
performs
function of
management

1 Appropriatingathinggiven
bypledgeormortgage

2 It is not allowed.
Encashment of deposit
certificates is not pacto
commissorio

6 Stockholder
stockholder of
record in the
books of the
bank

3 Itisintendedtoprotectthe
obligor against being
overreachedbycreditor

7 Related
interest
includes souse
or relative

22. RestrictiononBankExposureto
Directors,Officers,Stockholderand
relatedinterests(DOSRI)

within 1st
degree or by
legal adoption.
This includes
partnership,
coownership
ofDOSRIs

1 No DOSRI can directly or

indirectlyborrowfromsuch
bankorbecomeaguarantor,
indorserorsuretyforloan

2 Exceptioniswhenthereisa

8 Corporations

written approval of the

majority of all directors of
the bank excluding the
DOSRIconcerned

where the
above
mentioned
owns 20% of
subscribed
capital, then
the prohibition
shallapply

3 Such approval is not

required if it is under a
fringebenefitplanapproved
byBSP

4 Directors include those

9 Can also be

named in incorporations,
electedorfilled

AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

less than 50%

iftheDOSsits
;
B
E
R
N
A
R

as
representative
of the bank in
the board of
such
corporation
Effectofviolation

1 Thedirectoror
officer who
violates may
be declared
vacant and
subject to
penal
provisions of
NCBA
Limitonloans

1 MB can limit
the valid loan
given

to
DOSRI
providedthatit
shall be based
on

their
unencumbered
deposits and
book value of
their paid in
capital
contribution

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.

16

San Beda College of Law

Banking Laws
ExclusiontotheLimit

1 Loans

and credit
accommodations considered
asnonrisk

2 Loans

and credit
accommodations to officers
inforoffringebenefits

appraisedvalue
of respective
real estate
security plus
60% of the
appraisedvalue
of the insure
improvements

3 Limit on loans and creditLoansandcredit

accommodations shall notaccommodationson

applyonthoseextendedbysecurityofchattelsand
coop bank to its coopintangibleproperties
shareholders

ApplicabilityofDOSRIrulesand
regulationtogovernmentborrowing

1 Circular 547 of 2006

1 Shall also not

exceed75%of
the appraised
value of the
security

provides that DOSRI rules

shallalsoapplytoloansand JoinandSolidary
credit accommodationsagreement
grantedtoRP,subdivisions,
1 JSA is surety
instrumentalities

and
and

not
GOCCs
guarantee.Itis
2 Exceptionswouldbe:
an agreement
1. Loans and credit
where parties
accommodations
consent to be
thatarenonriskand
solidarilyliable
not subject to
2 As a contract
ceiling
of adhesion,
2. ThosemadebyBSP
JSA should be
3. LGU due to full
taken contra
autonomy in their
proferentum
proprietyfunction
against the
4. Directorwhoactsas
partywhomay
government
have caused
representative
any ambiguity
therein.
VI.SecuritiesonLoansandcredit
accommodations
EffectofSurety
Agreement
Loansandcreditaccommodations
againstrealestate

1 Shall not exceed 75% of

1 Agreement is
onerous and
construed
againstcredtor

2 Requires that
creditor obtain
consent of the
surety before
there can be
material
alteration to
theloan

3 If

surety
director is not
anymore party
of the board
then he cannot
beheldliable

4 Surety cannot
extendtomore
than what is
stipulated

5 Joint

and
solidary
signature of
major
stockholder or
officer
constitutes as
an additional
security for
loans granted
to corporations
(Security Bank
&
Trust
Company vs.
Cuenca)

6 Joint

and
solidary
agreement
agreement
where
the
contracting
parties consent

to be jointly and severally

liableinaloanobligation

debtor is
capable of
fulfilling his
commitments
to the bank. It
must consists
of:

VII.Grantandpurposesofloansand
creditaccommodations
Amountandpurposeofloan

1. Statem

1 Bank must grant loans and

ent of
assets
and
liabiliti
es

creditaccommodationsonly
inamountsandforperiodof
time essential for effective
completion

2 Mustbeconsistentwithsafe

2. Statem

andsoundbankingpractice

ent of
incom
e and
expend
iture

3 Purpose of loan shall be

statedinapplication

4 If bank finds that proceeds

havebeenemployedwithout
its approval, the bank shall
have the right to terminate
the loan and demand
immediaterepayment

3. Prescri
bed by
law
and
MB to
evaluat
e

Requirementforgrantofloan

credit
applica
tion

2 Even in the
absence of
such provision
in GBL, Art
1198 of the
NCC allows
the creditor to
demand full
payment when
debtor is
insolvent, fails
to

give
guarantee,
impaired
guarantee, lost
thing through
fortuitous
event, violate
undertaking or
attempts to
abscond

1 Bank must first ascertain if

AUTHO
RS:
MANILA,
ANTONI
O

C
E
A
S
A
R
;
B

E
JANSEN; INTIG,
R
JOY ESTELA; DE
N
JESUS, TRACY
A
ANN.
R
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
D
2011-2012. REFERENCE: BANKING
O
,LAWS & JURISPRUDENCE BY DIZON.

17

San Beda College of Law

Banking Laws

1 MBshallrecognizepeculiar
characteristic of micro
financingsuchascashflow
basedlending

2 Microfinancing loans

maturity shall
only apply to
those made
after such
action

smallloansgrantedto basicAmortizationonloans
sectors usually unsecuredandothercredit
and given to smallaccommodations
businesses
1 Amortization
schedule of
Reasonforstringentruleingranting
loans
bankloansand
other credit
1 Banking corporation holds
accommodatio
themoneyofthedepositors.
ns shall be
Due to the nature that it is
adopted based
affected public interest, the
on nature of
bank must ensure that the
operation
loanshallberepaid
2 If loans and
Unsecuredloansandothercredit
accommodation

1 MB shall authorize
regulations with respect to
such
Othersecurityrequirementsforbank
credits

1 MB may prescribe security

requirementsto whichbank
credits shall be subject and
reduceorincreasemaximum
ratio
Authoritytoprescribetermsand
conditionofloansandothercredit
accommodations

1 MBmayprescribematurities
aswellasrelatedconditions
of varios bank loans and
creditaccommodations

2 Any change in maximum

other credit
accommodatio
nshasmaturity
ofmorethan5
years, must
have periodic
amortization
payments and
must be made
annually

3 If borrowed
fundsaretobe
used

for
purposeswhich
do notinitially
produce
revenues for
payment of
regular
amortization,
bankmaydefer
suchtimeuntil
revenues are
sufficient. In
no case shall

initial
amortization
date be later
than5years

4 Incaseofloans
and other
credit
accommodatio
ns

to
microfinance
sectors,
schedule shall
consider cash
flow

of
borrowers

EscalationClause

reduce
d by
law or
MB
(de
escalat
ion
clause)

1 Parties to an agreement
pertaining to loan of may
agreeuponanincreaseinthe
event that the applicable
maximum interest is
increasedbyMB

2 PROVIDED:

such
stipulation shall only be
valid if there is also a
stipulation that the interest
rate agreed upon shall be
reduced in the even
maximum interest rate is
alsoreducedbyMB

7 Purpose of
including de
escalation
clause

prevent one
sidedness in
favour of
lender an
repugnant to
mutuality of
contracts

3 Escalation clause are not

voidperse

4 It is void when it grants

creditor unbridled right to
adjust

interest
independently, completely
depriving debtor of right to
assent

8 Absenceofde
escalation
clause will
render
escalation
clausevoid

5 Such clause violate the

mutualityofcontracts

6 In escalation clause there

shouldbe:

1. Increase in interestEffectofannulmentof
if increased by lawescalationclause

1 In case the

or MB (escalation
clause)

escalation
clause is
annulled,
principal
amountofloan
is subject to
original

2. Include provision
for reduction of
stipulatedinterestin
the event maximum
interest is also
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

;
B
E
R
N
A
R

interestrate
Exception

1 If there is no
deescalation
clause, the
escalation
clause is still
valid if the
creditor
unilaterallyand
actually
decreased the
interestcharges
whenever the
interest rate is
reducedbylaw
or MB (Llorin
vs.CA)
Unilateralincreaseof
rates

1 Such violates
theprincipleof
mutuality of
contractsinArt
1308ofNCC

2 Any contract
which appears
to be heavily
weighed in
favour of any
one party that
will lead to
unconscionable
resultisvoid

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.

18

San Beda College of Law

Banking Laws

1 Escalationclausearevalidto
maintain fiscal stability and
retainthevalueofmoneyon
longtermcontracts

2 However, other party there

1 If interest rate
isvoid,itisas
if no express
contract
thereon and
court may
reduce

mustberighttoassenttoan
important modification of
contract
Prepaymentofloans
3 Contract of adhesion andothercredit
parties do not bargain on accommodations
equal footing, the weaker
partys participation being
reducedtoatakeorleaveit
Iniquitous,unconscionableand
exorbitantinterests

1 Though usury law is not

inexistent, interest may be
agreed upon by lender and
borrower

2 However,thesamemustbe

1 A borrower
may at any
time prior to
agreed
maturity date,
prepay in
whole or in
parttheunpaid
balancesubject
to reasonable
terms

equitable reduced for being

iniquitious, unconscionableLegalcompensation
andexorbitant
1 Under Art.
3 In Medelvs.CA,SCfound
1278,
that 66% interest rate per
compensation
anumisunconscionable
can take place
4 InCuatonvs.Salud,interest
where the
rate was 120% per annum
parties are
interest

rate

is
creditors and
unconscionable and should
debtorsofeach
be lowered to 12% per
other
annuminterestrate
2 A person who
5 Diovs.Virgilio,interestrate
secures a loan
was 120% per annum also,
of money
reductionofinterestmustbe
acquires
made
ownership and
6 Bacolor vs. Banco Filipino,
is bond to pay
a 24% interest rate per
the creditor an
annumisnotunconscionable
equalamount
orexcessive
3 Deposits in
bank can be
Effectofvoidinterestrate
setoff against

obligation of
depositor

4 Subsidiary has
an independent
and separate
juridical
personality
from parent
company and
any

claimagainstthesubsidiary
isnotaclaimagainstthe
parent

1 Under Art
1250 of NCC,
in case of
extraordinary
inflation or
deflation of
currency
stipulated,
value

of
currency at
time

of
establishment
of contract
shall be the
basis

of
payment

Developmentassistanceincentives

1 BSPshallprovideincentives
to banks, without
government guarantee,
which extend loans to
financial

educational
institutions, cooperatives,
hospitals
Bankscannotextendpesoloansto
nonresident

1 Reasonforthis:
1. To curb undue

2 For

speculation in
foreign exchange
market

extraordinary
inflation or
deflation to
affect
obligation, the
followingmust
beproven:

2. Further reinforce
memorandum that
pesodepositsshould
be funded inward
foreign exchange
remittances

1. There
must
firstbe
official
declara
tion
from
BSP

2 OFWsareresidentsandcan
availpesoloans
Provisionsforlossesandwriteoffs

1 Baddebts alldebtsdueto
any bank on which interest
ispastdueandunpaid

2. Obliga

tion is
contra
ctual

Extraordinaryinflationordeflation

AUTHO
RS:
MANILA,
ANTONI
O

C
E
A
S
A
R
;
B

3. Parties
expres
sly
agreed
to
consid
ered
effects
of
extraor
dinary
inflatio
n or
deflati
on

3 Extraordinary
Inflation exist
when there is
an
unusual
decreaseinthe
purchasing
power of the
currency and
such decrease
could not be
reasonably
foreseen or
was manifest
beyond the
contemplation
ofthepartiesat
thetimeofthe
obligation
PurposeofAttorneys
Fees

E
JANSEN; INTIG,
R
JOY ESTELA; DE
N
JESUS, TRACY
A
ANN.
R
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
D
2011-2012. REFERENCE: BANKING
O
,LAWS & JURISPRUDENCE BY DIZON.

19

San Beda College of Law

Banking Laws

1 Attorneys fees are not

integral part of cost of
borrow but arise when
collecting upon the Notes
becomesnecessary
VIII.TruthinLending
Policy

1 Protectcitizenfromlackof
awareness of trust cost of
credittotheuserbyassuring
full disclosure of such cost
andpreventuninformeduse
ofcredit
Disclosure

1 Thecreditorshallfurnishthe
debtor a clear statement in
writing setting forth the
following:

1. Cash price or
deliveredpricetobe
acquired

2. Amount to be
creditedasDP

3. Difference between

loan,
mortgage,
deedoftrsust,
advance,
conditional
sale contract,
rental

2 Finance
charge

interest, fees,
service
charges,
discounts and
other charges
incident to
extension of
credit

3 Creditorany
person
engaged in
business of
extending
credit who
requires
financecharge
Penalties

1and2

1. Civil any

4. Charges

creditor who
failstodisclose
shall be liable
for P100 or
amount equal
to twice of
finance charge
required

individually
itemized

5. Total amount to be
financed

6. Financecharge
7. Percentage that
financebearsto the
total amount to the
financed

2 Rationale: protect users of

credit from lack of
awarenessoftruecost
Definition

2k

1 Credit any

1. Which
ever is
higher

2. Liabili

tyshall
not
exceed

3. Must
be
brough
t
within
1 year
from
dateof
occurr
ence

2. Criminalfine
notlessthan1k
or not more
than 5k or
imprisonment
for not less
than6mosnor
more than 1
yearorboth

which neither
consumer
credit sale nor
openend
consumer
credit plan
shallalso need
to disclose
information

1 Both actions can be

instituted independently of
eachother

2 But there can also be a

joinderofcause

Effectofviolation

1 Violationshallnotaffectthe
validity or enforceability of
anycontract

Exemptedtransactions

1 Disclosure

2 In Consolidated Bank vs.

requirementon
consumer
credit
transactions
shallnot apply
to

those
extension of
credits for
business or
commercial
purpose or to
government

CA, SC said that lender

cannot charge interests not
stipulatedinpromissorynote

3 In UCP vs. Beluso, interest

rate provisions are illegal
duetoviolationofmutuality
ofcontractsandalsoviolate
TILA
Exemptionofgovernment

1 TILA shall not apply to

PhilippineGovernment
Requireddisclosureonconsumer
loansnotunderopenendcreditplan

IX.Foreclosureofreal
estatemortgage
Procedure

1 Any creditor extending

1 Intheeventof

consumerloanortransaction
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR
;

B
E
R
N
A
R
D

foreclosure of
any mortgage,
the mortgagor
hastherightto
redeem the
propertywithin
one year after
sale of real
estate

2 Purchaser at
auction sale
shall have the
right to enter
upon and take
possession of
such after date
ofconfirmation
ofauctionsale

3 In GBL, if
purchased y
banks,theyare
not requiredto
set up bond
beforetheycan
enter the
property
immediately
during
redemption
period

O
N; INTIG, JOY
,
ESTELA; DE
J
JESUS, TRACY
A
ANN.
N
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
S
2011-2012. REFERENCE: BANKING
E

LAWS & JURISPRUDENCE BY DIZON.

20

San Beda College of Law

Banking Laws

1 Writofpossessionmayalso
beissuedafterconsolidation
ofownershipofpropertyin
nameofbuyer

2 Buyer becomes absolute

owner of property if not
redeemedduringthe1year
afterregistrationofsale

3 If

the property
extrajudicially foreclosed
belongtoajuridicalpersons,
right to redeem property
shall be counted until, not
after, the registration of the
certificateofforeclosure

the amount
under the
mortgage deed
or

the
outstanding
obligation plus
interest and
expenseinSec
47ofGBL

12 No personal
notice in
required in
extrajudicial
foreclosure of
sale since it is
actioninrem

4 It shall be no more than 3 Demandbefore

months after foreclosure
whicheverisearlier

5 Accessory contract of real

mortgageisusedassecurity
for fulfilment of principal
obligation

6 A loan value is only 70

percent of the appraised
valuesothatalowbidprice
will be made and will be
easiertoredeem

7 Real property may be

foreclosureessential

1 There must
firstbedemand
before there
can

be
foreclosure as
where demand
was not made,
the loan shall
not become
due

and
demandable

mortgagedtoaliens

8 Redemption period isEquityofredemption

counted from date of
registrationofthecertificate
ofsalewithregisterofdeeds

9 An action for annulment of

mortgage does not stop the
running of the period of
redemption

10 Otherwise there shall be

frivolous suits instigated to
givemortgagormoretimeto
redeem

11 The amount redeemable is

vs.Rightofredemption

1 Where
foreclosure is
judicially
made, no right
of redemption
exist in case
the mortgagee
isnotaPNBor
bank

2 Insuchacase,
the mortgagor

is given the
right

to
extinguish the
mortgage and
retain
ownership of
property by
paying debt
within90days
afterjudgment
Rightofredemption
maybeextendedby
agreement

Estoppel

Offertorepurchasenot
1 Bank or any purchaser iswaivertoquestionsale
deemed consented to
1 Iftherewasan
extensionofredemptionifit
offer

to
hadtimetoobjectbutitdid
repurchase, it
not
shall not be
construed as
Redemptionafterprescriptiveperiod
waiverofright
1 Right to redeem becomes
to question
functusofficioonthedateof
foreclosure
itsexpiry
sale

2 Redemption is by force of

2 Mortgagee has

law, the buyer is bound to

acceptredemption

no right to
recover the
deficiency
from the
mortgagor of
valueofloanif
foreclosure is
invalid

3 However,therecanberight
to repurchase depending on
thewillofbuyer

4 The buyer is not bound to

accept repurchase unlike in
redemption

5 ThebuyershallalsonotbePreferredstatusof

boundbythebidpriceasit
banksnotimpairedin
nowbelongstohim
caseborrowerunder
6 Analienownedbankcannotrehabilitation
acquire ownership of
residential lot by virtue of
1 In case of
deed of transfer as
rehabilitation
settlementofdebt
of corporation
debtor, the
7 Transferofownership,even
right of a
for a limited period or in
creditorbankis
foreclosure,cannotbemade
merely
toalien
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR
;

B
E
R
N
A
R
D

suspended
Writofpossession

1 After
consolidation
of title in
buyers name
due to failure
ofmortgageto
redeem, the
writ

of
possession
becomes a
matter of right
and

its
issuance in a
extrajudicial
foreclosure is
merely
ministerial

2 Injunction to
prohibit
issuance of
writ

of
possession is
utterly out of
place

3 Proceeding in
petition for
writ

of
possession is
exparte and
summary in
nature

O
N; INTIG, JOY
,
ESTELA; DE
J
JESUS, TRACY
A
ANN.
N
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
S
2011-2012. REFERENCE: BANKING
E

LAWS & JURISPRUDENCE BY DIZON.

21

San Beda College of Law

Banking Laws

1 However, mortgagor still

asnecessaryforitsconduct
ofbusiness

vs. Banco
Filipino, BF
reached its
maximum50%
capacityinreal
estateandTala
wascreatedby
major
stockholdersto
buyerbaksites
of BF and
leases it back
to
them.
However, BF
defaulted and
Tala wants the
payment of
rents

2 Total investment on such

6 Thecourtrules

real estate shall not exceed

50%ofcapitalaccounts

that Tala
cannot be
allowed to
collect rent as
it clearly
shows that the
tried

to
circumvent the
real estate
investment
limitinGBL

have right of recourse to

petition to set aside
foreclosure sale and cancel
writ of possession in same
proceeding

24.

Majorinvestments

1 MB shall establish criteria

for reviewing major
acquisitions or investments
ofbank
Ceilingoninvestmentsincertain
assets

1 Bankmayacquirerealestate

3 Equityinvestmentofabank
in another corporation
engaged in real estate shall
be considered part of
investmentinrealestate

4 In determining compliance

it in
good
faith
for
securit
y

5 IncaseofTala

with the ceiling, the

followingshallapply
o
Investment shall
include real estate
Acquisitionofreal
and
equipmentestatebywayof
necessary for banksatisfactionofclaims
use such as bank
premises and real
1 Notwithstandin
property of bank
g

the
underitsname
limitations,
o Thecostofrealestate
bank may still
leasedbybankfrom
acquire the
corporation and
following
amountofequityin
property:
lessor shall also be
1. Mortg
included
age to

2. Conve
yedfor
satisfa
ction
ofdebt

3. Purcha

se
under
judge
ment
or
mortga
ge

2 Any

real
property held
in

such
circumstance
must

be
disposed
within5years

3 After

said
period, those
propertiesshall
now

be
includedinthe
50%limitation

XI.OtherBanking
Services

duplicated, the
bank is not
liable to either
renters in case
of

loss
attributable to
them

1 Abankmayalsoperformthe
followingservices:

1. Receive custody of
funds, documents
and other valuable
objects

2. Act as financial

5 The SC said

agenttobuyandsell
fortheircustomers

that it can be
consideredasa
bailor and
bailee
relationship

3. Make collection for

accountsofother

4. Act as managing
agent of investment
management
accounts

6 Duties of the

5. Rent out safety

depositboxes

2 Bankshallperform14asa
3 It shall be duly separated
frombanksownassetsand
liabilities
Safetydepositbox

2 It cannot be an ordinary
contractofleasebecausethe
absolute control and
possessionofsafetydeposit
boxisnotgiventorenters

3 Theguardkeyremainswith
bankandrenterskeyremain
incustomer

4 Where the renter keys are

AUTHO
RS:
MANILA,
ANTONI
O
CEASAR
;

B
E
R
N
A
R
D

full authority
toregulateuse
of electronic
devices in
connection
with bank
operations

7 The company

1 Bank may

bank was held

liable for not
immediately
informing the
customer that
his safety
deposit box
was flooded
which caused
damage to the

kindofdeposit

1 BSPshallhave

XIII.Outsourcingof
informationtechnology

8 InSiavs.CA,a

1 Itisconsideredasaspecial

XII.Electronic
transactions

parties may be
defined by
them
renting safe
deposit boxed
cannot exempt
itself from
liability due to
faultofitsown
agents

depositaryorasanagent

items of the
customer

outsource
information
technology
systems and
processes
except
inherent
banking
functions

2 Functions that

are

not
outsourced:

1. Strate

gic
planni
ng for
use of
IT

O
N; INTIG, JOY
,
ESTELA; DE
J
JESUS, TRACY
A
ANN.
N
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
S
2011-2012. REFERENCE: BANKING
E

LAWS & JURISPRUDENCE BY DIZON.

22

San Beda College of Law

Banking Laws
to each prospective charges,
2. Determinationofsystemfunctionalities
percentageofperannum,instalment
3. Changemanagementinclusiveofquality
assurance
4. Servicelevelandcontractmanagement
5. Securitypolicyandadministration
XIV.Outsourcingof
otherfunctions

2 Credit card

cant
posses
sgood
credit
standi
ng
and
are
financ
ially
capabl
e to
fulfil
payme
nts

receivables 1 B
ef
total
outstanding
or
1 Subjecttoprior
balance
of
e
approval of
cardholders
iss
MB,banksmay
ui
3 Minimum
outsource data
ng
amount due
imaging,
cr
minimum
storage,
amount that
ed
retrieval and
cardholder
it
other related
needs to pay
ca
systems
onduedate
rd
2 Banks may 4 Defaultnon
s,
outsourcecredit
payment

of
ba
cardservices
minimum
nk
2 All
amount

due
s
XV.CreditCard
applic
within two
Transactions
m
ations
cycledates
us
must
Generalpolicy
t
go
5 Acceleration
under
clausegives
ex
1 BSP shall
strict
banktheright
er
develop
credit
to
demand
ci
consumercredit
risk
obligation in
se
through
assess
fullincaseof
pr
innovative
ment
default
op
products
proces
er
Riskmanagement
s
Definitionofterms
dil
system
ig Informationto
1 Credit card 1 System that
en bedisclosed
any card, plate,
ce
shallsafeguard
couponbookor
by
interests,
other credit
as
banks and
device for the
ce
subsidiary
purpose of
rta
credit card
obtaining
ini
companies
money,
ng
property, laborMinimum
ap
requirements
orcredit
pli

Accrualof
interestearned

1 Intere
st
accrue
dshall
be
reserv
edand
no
accrua
l shall
be
allowe
d 90
days
after
credit
card
receiv
able
has
becom
e past
due
Finance
charges
interest
chargedto
cardholder
Deferral
charges

1 Partie
s can
agree
to a
deferr

al of all or
partlyofunpaid
instalments and
will
subsequently
collect deferral
charge
Latepaymentand
penaltyfees

1 No

except when 2
there

is
consent,
exchange of
information
with other
credit card
companies,
disclosure to
collecting
agent

late
payment or
Suspension,
penalty feeterminationof
shall

beeffectivityand
collectedunlessreactivation
it is fully
disclosedinthe
1 banks
contract
shallformulate
Confidentialityif
parametersfor
information

1 Banks shallsuchInspection
keep strictlyofrecords
confidential
data

oncoveringcredit
cardholder
cardtruncations
AU
TH
O
RS

:
M
A
N
IL
A,

ation
ba
to
nk
BSP
s
sh
Offset
all
m
1 Banks
ak
can
e
offset
av
their
ail
obliga
ab
tions
le
with
fo
cardh
r
older
in
with
sp
the
ec
latter
tio
s
n
debts
cr
provid
ed
ed
it
there
ca
is
rd
notice
in
fo
Handlingof
r complaints
m

ANTONIO JOY
CEASAR; EST
BERNAR ELA;
DO,
DE
JANSEN; JES
INTIG,
US,

1 bank
shall
give
cardh
older
20
days
to
exami
ne
charge
s and
after2
billing
cycles
, bank
can
correc
terror
Unfair
collection
practices

TRA
FROM SECTION 2S - SAN
BEDA COLLEGE OF LAW,
CY
MENDIOLA: AY 2011-2012.
ANN
.REFERENCE: BANKING

LAWS & JURISPRUDENCE

BY DIZON.

23

San Beda College of Law

Banking Laws

surcharge over
and above the
pricetag

1 banks shall resort to legally1 Retailers who

permissible means to collect
amount due under credit card
agreement

2 Thereshallbenouseofthreator
violence to coerce payment and
nofalserepresentation
Additionaldeposit
doesnotincrease
creditlimit
Contractofadhesion

1 C
o
n
t
r
a
c
t

b
e
t
w
e
e
n

c
a
r
d
h
o
l
d
e
r
s

a
n

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i
t

c
a
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c
o
m
p
a
n
i
e
s

a
r
e

c
o
n
t
r
a
c
t

honor
credit/ATM/debi
t cards for
payment shall
not require
payment of
o
f

a
d
h
e
s
i
o
n

b
e
c
o
m
e
s

t
h
e
y

a
r
e

p
r
e
p
a
r
e
d

o
n
l
y

b
y

o
n
e

p
a
r
t
y

a
n
d

t
h
e

o
t
h
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r

p
a
r
t

o
n
l
y

s
i
g
n
i
f
i
e
s

Blanketfreedomfrom
liabilityisinvalid

1 T
h
e

c
r
e
d
i
t

c
a
r
d

c
o
m
p
a
n
y

c
a
n
n
o

e
x
c
u
s
e

i
t
s
e
l
f

f
r
o
m

l
i
a
b
i
l
i
t
y

c
o
m
p
l
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t
e
l
y

a
s

w
i
t
h

b
l
a
n
k
e
t

o
f

f
r
e
e
d
o
m

XVI.
Rulesof
Pricetags
Oneprice
tag
requireme
nt

1 E
v
e
r
y

r
e
t
a
i
l
e
r

i
s

r
e
q
u

i
r
e
d

t
o

d
i
s
p
l
a
y

p
r
i
c
e

t
a
g

t
o

i
n
d
i
c
a
t
e

p
r
i
c
e

o
f

g
o
o

o
r

s
e
r
v
i
c
e

2 P
r
i
c
e

t
a
g

m
u
s
t

b
e

w
r
i
t
t
e
n

c
l
e
a
r
l
y

i
n

d
i
c
a
t
i
n
g

t
h
e

p
r
i
c
e

i
n
c
l
u
d
i
n
g

V
A
T
.

S
e
r
v
i
c
e

c
h
a
r
g
e

s
h
a
l
l

n
o
t

b
e

i
n
c
l
u
d
e
d

i
n

p
r
i
c
e

t
a
g

Modeof
payment

1 I
t

i
s

n
e
c
e

s
s
a
r
y

t
o

c
o
n
s
i
d
e
r

b
u
s
i
n
e
s
s

p
r
a
c
t
i
c
e
s

r
e
l
a
t
i
v
e

t
o

o
d
e

o
f

p
a
y
m
e
n
t

u
n
d
e
r

P
r
i
c
e

T
a
g

L
a
w

2 W
h
e
n

c
o
n
s
u
m
e
r

a
y
s

i
n

c
a
s
h
,

h
e

s
h
a
l
l

o
n
l
y

p
a
y

t
h
e

p
r
i
c
e

i
n
d
i
c
a
t
e
d

3 W
h
e
n

c
o
n
s
u
m
e
r

p
a
y
s

t
h
r
o
u
g
h

c
r
e
d
i
t
/
A
T
M
/
d
e
b
i
t

c
a
r
d
,

h
e

s
h
a
l
l

o
n
l
y

p
a
y

p
r
i
c
e

i
n
d
i
c
a
t
e
d

i
n

t
a
g

4 W
h
e
n

r
e

t
a
i
l
e
r

o
f
f
e
r
s

c
o
n
s
u
m
e
r

o
p
t
i
o
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t
o

p
a
y

i
n

c
a
s
h

o
r

c
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d
,

t
h
e

s
a
m
e

i
s

a
l
l
o
w
e
d

p
r
o
v
i
d
e
d

t
h
a
t

o
p
t
i
o
n
s

a
r
e

d
i
s
c
l
o
s
e
d

b
y

s
e
p
a
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a
t
e

i
n
f
o
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m
a
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p
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a
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5 P
r
i
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t
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i
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s
e
p
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p
r
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a
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h

p
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s

n
o

a
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w
e
d

6 P
r
i
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e

t
a
g

t
h
a
t

i
n
d
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a
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s

s
e
p
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p
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c
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p
r
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i
s

a
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o

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a
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w
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d

Prohibitionagainstsurcharging

AUTHORS:
MANILA, ANTONIO
CEASAR;
BERNARDO,
JANSEN; INTIG,
JOY ESTELA; DE
JESUS, TRACY
ANN.
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
2011-2012. REFERENCE: BANKING
LAWS & JURISPRUDENCE BY DIZON.

24

San Beda College of Law

Banking Laws
T
h
i
s
i
s
t
o
e
n
s
u
r
e
s
e
c
r
e
c
y
o
f
b
a
n
k
d
e
p
o
s
it
s

CHAPTER5Prohibited
TransactionsandCessation
ofBankingBusiness
I.ProhibitedTransactions
Prohibitedtoactasinsurer

1 Bank shall not directly

engageininsurancebusiness
asinsurer

2 Insurance act shall include

making insurance contract,
surety contract, doing
businessofreinsurance

3 Factthatnoprofitisderived
shall not be deemed
conclusive to show that
there is no insurance
business
Prohibitedacts

1 Nodirectorshall:
1. Make false entries
inanybankreport

2. Without order of
court,disclosetoan
unauthorized
persons

an
information relative
to funds or
properties

in
custody

of
customers

3. Acceptgifts,feesor

2 No borrow

commission in
connection for
approvalofloan

1. Fraudu

4. Overvalueasecurity
for purpose of
influencing actions
ofbank

5. Outsource inherent
bankingfunctions

shall
lently
overva
lue
securit
y for
loan

2. Furnis
h false

materia
l facts
to
obtain
or
increas
eloan

3. Attemp
t to
defrau
d bank
in
event
of
court
action
to
recover
loan

4. Offer
any
DOE
any
gift,
fee,
commi
ssion
to
influen
ce
person
to
approv
eloan

3 No examiner,
officer or
employee of
BSP assigned
to supervise,
examiner
rendering
technical
assistance to
bank shall

committheforegoingacts

1 Outsourcin
g inherent
banking
function
shall refer
to any
contract
between
the bank
andservice
provider
for the
latter to
supply, or
any act
whereby
the latter
supplies,
the
manpower
to service
the deposit
transaction
of the
former.

4 Nobankshallemploycausal
or nonregular personnel or
too lengthy probationary
personnel in business
involvingbankdeposits
ProhibitionagainstOutsourcing
CertainBankingFunctions

35.

Conducting
business in an
unsafe or unsound
manner

1 To determine
whetheractor
omission is
considered
unsafe or
unsound for
banking, the
followingshall
beconsidered:

1. Result
ed in
materi
al
damag
e or
abnor

mal
risk to
stabilit
y,
solven
cy of
bank

2. Result
ed
damag
e in
deposi
tors,
credito
rs,
invest
or or
public

3. Cause
undue
injury
or
unwar
ranted
benefit
s to
any
party

4. Involv
es
enterin
g
contra
ct
manife
stly
disadv
antage
ous to
bank
regard
less if
DO
will
profit

2 MB can take
action and

exclude erring bank from

clearing

BSP is
overdrawn
o
Defici
ent in
requir
e
liquidi
ty
floor
for 5
or
more
conse
cutive
days
o Does
not
comply
with
liquidity

61. Prohibition on dividend

declaration

1 No bank shall declare

dividends greater than its
accumulated net profits on
hand, deducting its losses
andbaddebts

2 The bank shall also not

declaredividendsifattime
thereis:
o Clearingaccountin
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

;
B
E
R
N
A
R

standards
o
Committ
ed major
violation

3 Banks are
entities
exemptedfrom
improperly
accumulated
earnings tax
(10% of said
income) by
NIRC
IV.Unauthorized
advertisementor
businessrepresentation

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.

25

San Beda College of Law

Banking Laws

1 No persons or corporation
shall engage in banking
businessshalladvertisethat
ithasabusinessofabank,
quasibankortrustentity

22.

Placement
conservatorship

under

Groundsforappointmentof
conservator

1 WhenevertheMBfindsthe
bankinastateof:

1. Continuing inability
or

2. Unwillingness to
maintain

condition

of

liquidity

deemed

adequate to protect
depositors and
creditors

2 MBmayappointconservator
withfollowingpowers:

1. Take charge of
assets,liabilitiesand
managementthereof

2. Reorganize

management

3. Collect monies and

debsdue

4. Exercise all powers

necessary to restore
viability

3 Conservator shall report to

MB and shall have the
powertooverruleorrevoke
actions of previous
management

4 Rehabilitation proceedings
provide for equitable
distribution of insolvent
debtorsremainingassetsto

its creditors
andgivedebtor
afreshstartby
relieving them
of the weight
oftheirdebts

5 Liquidity
ability of an
asset to be
converted in
cash quickly
and without
discount

6 Solvency
liabilities
amounttoless
than total
assets
providing
ability to pay
debts

7 Test

of
insolvency
determining
realizable
assetsof bank
islessthanits
liabilities

8 Insolvency of
bank occurs
when actual
cash market
value of its
asset

is
insufficient to
pay

its
liabilities

9 BSP is vested
with exclusive
authority to
assess,
evaluate and
determine

condition of a
bankwhetherit
is insolvent or
not.

If
insolvent,
receivership
proceedings
Qualificationof
conservator

1 Conservator
must

be
competent and
knowledgeable
in

bank
operations and
management

2 Period

of
conservatorshi
p shall not
exceed1year

Remuneration

2 MB

shall
terminate the
conservatorshi
p is it is
satisfied that
bank can
continue
operations

1 Conservator shall receive

remunerationtobefixedby
MB in an amount not to
exceed 2/3 the salary of
presidentofbankin1year,
payable in 12 equal
instalments

3 Conservatorshi

2 If within one year the

p can also be
terminated on
basis of report
of conservator
or its own
findings would
involveloss

conservatorship

is
terminated on ground that
institutioncanoperateonits
own, conservator shall
receivebalance

3 But if it is terminated on

4 Insuchascase,

some other ground,

conservator shall not be
entitledtoremainingbalance

there shall be
receivership or
liquidation

4 MBcanappointconservator

connected to BSP in which

Finalandexecutory
case he shall not receive
remunerationfromBSP
1 Action of MB
shall be final
except on
petition for
certiorari in
case of grave
abuse of
discretion

Expensesofconservatorship

1 It shall be
borne by bank
concerned
Terminations

2 Itshallbefiled

of

fromreceiptof
noticeofboard
of directors of
conservatorshi
p, receivership
orliquidation
Exclusivepowerto
appointconservator
shalllieinMB
Designationof
conservatorisnot
preconditionto
designationofreceiver
Powerofconservator
cannotimpair
obligationsofcontracts

1 Conservator
power to
revoke
contracts
cannot post
facto affect
perfected
transaction as
it would
infringe non
impairment
clause

within10 days

conservatorship
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

;
B
E
R
N
A
R

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.

26

San Beda College of Law

Banking Laws

1 Conservator is given power

to revoke contracts only
those that are defect (void,
voidable, unenforceable,
rescissible)

2 Conservator merely takes

placeofboardofdirectors

3 Conservator cannot simply

repudiate valid obligations
of the bankand must bring
themtocourtactions

4 In FPIB vs. CA the court

ruled that the conservator
cannot revoke a previously
validcontractenteredbythe
bankeventhoughtheobject
ofthecontracthasahigher
price

5 In conservatorship, the
banking functions continue
unlike in receivership and
liquidation
VI.Cessationofbankingbusiness
Voluntaryliquidation

1 In voluntary liquidation,
banksendstoMBnoticeof
liquidation

2 No voluntary dissolution
shall be undertaken by a
bankwithoutpriorapproval
ofMB.Requestofvoluntary
dissolution shall be
accompanied by liquidation
plan
Receivershipandliquidation

1 TheMBcansummarilyand
without need of prior
hearingforbidtheinstitution
from doing business and
designatePDICasreceiver

2 Grounds for
receivership
and
liquidation:

1. Unable
to pay
liabiliti
es that
are
due.
This
shall
not
includ
e
inabilit
y to
pay
cause
by
extraor
dinaril
y
deman
ds by
financi
al
panic

2. Insuffi
cient
realiza
ble
assets

3. Cannot
contin
ue
busine
ss
withou
t
involvi
ng
probab
le loss

to
deposit
ors or
credito
rs

4. Wilfull
y
violate
dcease
and
desist
order
involvi
ng
transac
tions
of
fraud

5. Incase
a bank
notifie
s BSP
or
public
announ
ces
bank
holida
y
where
it
suspen
ds
payme
nt of
its
deposit
liabiliti
es
contin
uously
for
more
than

30days

3 Forquasibanksanypersons
recognize in competence in
banking may be designated
asreceiver

1. Current

complete
examination
necessary

and

not

1 In Rural Bank
of San Miguel
vs.MB,theSC
ruledthatthere
is no need for
complete
examination
becauseitonly
needsareport

2 A report is
something that
gives
information
while
examination is
a search,
investigation
orscrutiny

3 Absence of
examination
before closure
of bank does
not mean that
there is no
basis for
closure

2. Procedure
1 Receiver shall
immediately:

1. Take
charge
of all
assets
and
liabiliti
es

2. Admin
ister
the
same
for
benefit
of

credito
rs

3. Exerci
se
genera
l
power
of
receive
runder
ROC

4. Shall
not
pay or
anyact
that
involv
es
transfe
r of
asset
of
bank

2 Receiver may
deposit or
place funds of
bank in non
speculative
investments

3 Receiver shall
determine
within90days
from takeover,
whether
institution may
berehabilitated
orotherwise

4 Determination
of resumption
of business is
subject to
approval of
MB

5 In Teal Motor
vs.

CFI,
receiver was
defined as a
indifferent

personappointbythecourt
topreservethefundsofthe
inlitigationpendentlite

record
s

3. Appro

6 He is not an agent or

priate
for
himsel
f or
other
party
assets
of
bank

representativeofanyparty

3. Prohibitedacts
1 Any director or officer
declared insolvent or under
receivership shall not
commit:

1. Refuse to turn over

4. Receiv

bank records and

assetstoreceiver

e bank
deposit

2. Tamper with bank

AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

;
B
E
R
N
A
R

s or
collect
loans

5. Paying
funds
of
bank

6. Transf

erring
securit
y of
bank

4. When institution
cannot

rehabilitated

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

be

LAWS & JURISPRUDENCE BY DIZON.

27

San Beda College of Law

Banking Laws

1 If receiver determines that

bankcannotberehabilitated,
MBshallnotifytheboardof
directorsthatitshallproceed
withliquidation

2 The receiver shall file ex

partewithRTCapetitionfor
assistance in the liquidation
of the bank pursuant to
liquidationplanofPDIC

3 Court shall adjudicate

disputed claims, assist the
enforcementofliabilities

4 Receiver shall pay cost of

proceedings from assets of
institution

5 Receivershallconvertassets
of institution to money and
disposethesametocreditors
andotherpartiestopaybank
debts

5. Finalandexecutory
1 Just like in the case of
conservatorship, the action
of MB shall be final and
executor unless there has
beencertiorari

2 InRuralBankofSanMiguel
vs.MB,closureofabankis
anexerciseofpolicepower

3 Inonlystockholdersofbank
canfileactionforannulment
ofMBresolutionofplacing
bankinreceivership
CloseNowHearLaterScheme

1 The law does not

receivership

2 Previous
hearing before
closure is not
required in the
law and does
not infringe
dueprocess

3 However,bank
can question
the
receivership
within10 days
after
receivership

4 Closenowhear
laterpractical
consideration
to prevent
unwarranted
dissipation of
banks assets
and valid
exercise of
policepowerto
protect
depositors,
creditors and
public

5 If otherwise,
there mere
filing

of
receivershipby
BSP can
trigger bank
run and drain
its assets in
days or hour
leading to
insolvency

contemplatepriornoticeand
Effectoffilingpetition
hearingbeforebankmaybe
forreview
directed to stop operations
and placed under
1 Pendency of

case
questioning
receivership
does not
diminish of
receiver to
administer
banks
transactions
pertaining to
normal
operations of
thebank

Reasonsbehindreceivershipand
involuntaryliquidation

interest

2 When bank is
closed, it
cannot lend
money, engage
in transactions
oranybanking
activities
where it can
derive income
from

1. Banking business is subject

to regulation under police
powerandareaffectedwith
publicinterest

2. It is the government
responsibility to see that
financial interest of
depositors and others are
protected. Done through
BSP

3 Thus there is
no way the
bank can pay
theinterestthe
accrues in
favour of its
depositors

3. Public faith in banking

system may deteriorate if
depositors,creditorsarenot
protected.BSPshallstepin
and salvage remaining
resourcesofbank

4 However,there
are two types
ofdepositsthat
earn interest.
The first one,
deposit that
earn from the
existence until
the bank cease
to operate.
This one must
be paid. The
second interest
earned from
the time the
bank closed
until payment
of deposits.
The interest

4. Absence of notice and

hearing is not a groun to
annulMBresolution
Effectsofreceivership

1. Retentionofjuridicalpersonality
1 There shall be retention of
judicial personality even
though it is ordered closed
byMB

2 The suing must be done

throughtheliquidator

2. Notliabletopayinterest
1 Banks declared insolvent
and ordered closed by BSP
cannotbeheldliabletopay
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR
;

B
E
R
N
A
R
D

here must not

bepaid

3. Assetsdeemedunder
CustodiaLegis

1 Assets if the
bank becomes
beyond its
control.
Receiver
operates to
suspend the
authorityofthe
bank to its
properties

2 Assetsofbank
shall

be
custodia legis
in hands of
receiver and
exemptedfrom
garnishment,
levy,
attachment

3 Liquidator
task is to
dispose all
assets of the
bankandeffect
partial
payments of
banks
obligations

4. Stayofexecution

O
N; INTIG, JOY
,
ESTELA; DE
J
JESUS, TRACY
A
ANN.
N
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
S
2011-2012. REFERENCE: BANKING
E

LAWS & JURISPRUDENCE BY DIZON.

28

San Beda College of Law

Banking Laws

1 Stayofexecutioniswarrant
if bank is placed under
receivership

2 To execute a judgment
against a bank under
receivership would unduly
deplete its assets to the
prejudice of depositors and
creditors

5. Restriction of banks capacity to

Act

1 Insolvency of bank restricts

itscapacitytoact

2 Bank cannot make new

businesssuchasacceptnew
depositsorgrantloans.But
receiver must collect debts
in favour of the bank that
willformpartonbankasset

3 Foreclosure falls within

board definition of doing
business

4 Doing business continuity

of commercial dealings and
arrangements incident to
objectoforganization

5 However, it shall not be

included in those act
prohibited from doing
business

6 Thus even if there is

receivership or liquidation,
theperiodofprescriptionto
foreclosecontinuestorun

7 In BFvs.Ybanez,thecourt
ruled that receiver ca still
collect interest on loans
duringperiodofclosure

6. Exercise of jurisdiction of

liquidationcourt

1 All claims of
bank must be
filedinBSP

2 Itistoprevent

multiplicity of
againstbank

3 Exclusive
jurisdiction of
liquidation
court pertains
only

to
adjudication
claims against
bank and does
not cover
reverse
situation

4 Not necessary
that claim is
initially
disputedbefore
itisfiled

5 InOngvs.CA,
ifbuyerbought
a property
from the bank
who is already
declared
insolvent, sale
isvoid

Dispositionofrevenues
andearnings

1 All revenues
and earning
realized by
receiver during
receivership
shallbeusedto
pay costs of
proceedings

2 Thebalanceof
revenues shall
form part of
assetsavailable
to payment of
creditors
Dispositionofbanking
franchise

1 BSP, if public
interest
requires,award
to another
institution the
banking
franchiseunder
liquidation

2 Whatever
proceeds may
be realized
from award
shallbesubject
to exclusive
disposition of
MB
Liabilities

1 Bank is bound
by the acts or
failuretoactof
receiver

2 Receiver is
liable to bank

for culpable and negligent

failure to collect and
s
t
VII.Dispositionand

distributionofassets
o
f
1 I

n
p

r
c
o
a
c
s
e
e
e

d
o
i
f
n

g
l
s
i
,
q

u
r
i
e
d
c
a
e
t
i
i
v
o
e
n
r
,

s
a
h
f
a
t
l
e
l
r

p
p
a
a
y
y

m
d
e
e
n
b
t
t

s
o

f
o

f
c

safeguard
assets of such
i
e
n
d
s
i
t
t
i

t
i
u
n
t

i
N
o
C
n
C

i
2 C
n
u

r
a
r
c
e
c
n
o
t
r

d
a
a
c
n
c
c
o
e
u

n
w
t
i
s
t

h
a

n
p
d
r

e
s
f
a
e
v
r
i
e
n
n
g
c
s
e

a
o
c
f
c

o
c
u
r
n

banks

t
s

a
r
e

n
o
t

p
r
e
f
e
r
r
e
d

c
r
e
d
i
t
s

i
n

c
a
s
e
s

i
n
v
o
l
v
i
n
g

n
s
o
l
v
e
n
c
y

w
h
e
r
e

t
h
e
r
e

a
r
e

v
a
r
i
o
u
s

c
r
e
d
i
t
o
r
s

S
CY ANN.
:FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
M
2011-2012. REFERENCE: BANKING
A
LAWS & JURISPRUDENCE BY DIZON.
N
I
L
A
,
A
N
T
O
N
I
O
C
E
A
S
A
R
;
B
E
R
N
A
R
D
O
,
J
A
N
S
E
N
;
I
N
T
I
G
,
J
O
Y
E
S
T
E
L
A
;
D
E

A
U
T
H
O
R

J
E
S
U
S
,
T
R
A

29

San Beda College of Law

Banking Laws
CHAPTER6ForeignBanksand
TrustOperations
I.ForeignBanks
Transactingbusinessinthe
Philippines

1 RA 7721 Foreign Banks

LiberalizationAct

2 PD 1034 Conduct of
offshorebankingbusiness

3 Offshorebankingconduct
of banking transaction in
foreigncurrencies

4 Offshore banking unit

branch of a foreign baking
corporation authorized by
BSP to transact offshore
banking

5 Foreign corporation doing

business in the Philippines
are required to obtain a
license

6 However, even if foreign

corporations do not have a
license,theycanstillbesued
orbesued

7 Licenseisonlynecessaryif
itisfortransactingordoing
businessinthecountry
Acquisitionofvotingstockin
domesticbank

1 Foreign banks are allowed

entry in the Philippines
subjecttothefollowingrules

1. Within7yearsfrom
effectivity of GBL,
MB shall authorize
foreign banks to
acquire100%voting
stock of1domestic
bank

2. Within
same
period,
MB
may
allow
foreign
bank
which
prior
to
GBL
has
alread
y
acquir
ed
60%
voting
stock
can
now
acquir
e
100%

3. MB
must
ensure
that
70%of
resour
ces of
bankin
g
system
are
held
by
majorit
y
owned
Filipin
os

Localbranchesof
foreignbanks

1 Foreign banks
which has
more than 1
branch in the
Philippines, all
such branches
shallbetreated
as1unit

Headofficeguarantee

1 Head office
shall fully
guarantee
prompt
payment of all
liabilitiesofits
Philippines
branch

law that the

headofficeand
its

local
foreign
branches shall
be treated as
one

1 Residentsandcitizensofthe
Philippinesthatarecreditors
of foreign banks shall have
preferentialrighttoassetsof
suchbanks

2 Under RA 7721, foreign

banks have three modes of
entryinthecountry:

compensation
withPhilippine
branches with
foreign
branches
cannot be
effected as
they cannot be
considered
creditors and
debtorsofeach
other

voting stock of
existingbank

2. Investing 60% of
votingstockofnew
banking subsidiary
incorporated in
Philippines

3. Establishing
branches with full
bakingauthority

3 A foreign bank may only

availonly1modeofentry

4 GBL only stated thatSummonsandlegal

branches of foreign banksprocess

will be treated as one and
1 Summonsmust
shall have the head office
begiventothe
guaranteetocreditorFilipino
Philippine
citizens
agent or head
5 However,thereisnothingin
offoreignbank
the law that states that
to

have
citizens that are debtors to
jurisdiction
foreign bank local branches
2 If there is no
shall also be debtors to the
agent,
headoffice
summons may

6 Thereisalsonothinginthe

be made upon
O
;
Revocationoflicenseofforeignbanks

AUTHO
RS:
MANILA,
ANTONI

C
E
A
S
A
R

3 Once given, it
shall be effect
as if made
upon bank or
agent

4 BSP deputy

7 Thus,

1. Acquiring 60 of

BSP deputy
governor in
charge

governor in
charge shall
mail it to the
bank and
sendingcopyis
a necessary
part

to
complete
service.

5 In

the
corporation
code, the
service,incase
of absence of
agent, shall be
giventoSEC

Lawsapplicable

1 Foreign banks
shall

be
governed by
GBLandother
applicablelaws
such

as
Corporation
Code

O, JANSEN;
B
INTIG, JOY
E
ESTELA; DE
R
JESUS, TRACY
N
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
R
2011-2012. REFERENCE: BANKING
D

LAWS & JURISPRUDENCE BY DIZON.

30

San Beda College of Law

Banking Laws

1 MBmayrevokelicenseifit
find foreign bank insolvent
or imminent danger of
insolvency and will involve
probableloss

2 Afterrevocation,itshallbe
unlawfulforforeignbankto
transact business in the
Philippines

35.

EntryofForeignBanks

1 Stateshalldevoteselfreliant
and independent national
economy

2 Guidelinesforapproval:
1. Ensure geographic
representation

2. Consider strategic
traderelationships

3. Study demonstrated
capacity

4. See reciprocity of
right

5. Consider
willingness to fully
sharetechnology

3 Onlythosebelongingtotop
150 in the world or top 5
banks in their country of
originshallbeallowedentry

4 To establish a branch or
subsidiary, foreign bank
must be widelyowned and
publiclylistedinitscountry
origin unless government
owned

5 Capitalrequirement:
1. For

locally
incorporated
subsidiaries same
minimum capital
withdomesticbanks

2. Foreig
n bank
branch
es
US
dollar
equiva
lent of
P219
M at
exchan
ge rate
during
effecti
vity of
Act.
The
foreign
bank
shall
be
entitle
to3

3. Foreig
n
banks
may
open 3
additio
nal
branch
es
design
atedby
MB
P35M
per
additio
nal
branch
es

6 Foreign banks
within 5 year
from

effectivity of
thisactisonly
allowed 6
foreignbankto
enter the
country

7 Anadditional4
foreign banks
may

be
allowed entry
by
recommendatio
nofMB

8 NonFilipino
citizens can be
members of
board of
directors up to
the extent of
the allowed
foreign
participation

9 Philippine
corporations
whohavelisted
share of stock
inPSEorlong
standingfor10
yearshallhave
right to own
60% voting
stock of a
domesticbank

corporation or
person
authorized by
MB to engage
in

trust
business shall
actastrusteeor
administer any
trust or hold
property in
trust

1 Existing local branches of

foreignbanksshallbegiven
1.5 years to comply with
minimum

capital
requirement

2 RA 7721 was approved on

May18,1994

III.TrustOperations
Authoritytoengageintrustbusiness

3. unless
authori
zed by
the
trustor
after
prior
full
disclos
ure of
transac
tion

3 No trust entity
shall for the
account of the
trustor or
beneficiary,

1 Trustbusinessanyactivity
resulting in trustortrustee
relationship involving
appointmentofatrusteebya
trustor

for

the
administration, holding,
management of funds or
properties of trustor by the
trustee

1. purcha

2 It is for the use, benefit or

se,
acquir
e, sell,
propert
y

Registrationofarticles
ofincorporationand
bylawsoftrustentity

2. transfe

register such
unless
accompanied
by certificate
of authority
fromBSP

r or
purcha
se
money
ordebt
instru
ments
from/t
o
DORS
I of
trust
entity
and
relativ

advantage of the trustor or

otherbeneficiaries

3 Cardinal principle of trust

and other fiduciary
relationshipisfidelity
Conductoftrustbusiness

1 Trustentityshalladminister
thefundsor propertyunder
its custody with diligence
that a prudent man would
exercise

2 Trust entity stock

AUTHO
RS:
MANILA,
ANTONI
O

es of
first
civil
degree

C
E
A
S
A
R
;
B

1 SEC shall not

2 A

trust
business shall
start from the
moment their
articles of
incorporations
areregistered

Minimum
capitalization

E
JANSEN; INTIG,
R
JOY ESTELA; DE
N
JESUS, TRACY
A
ANN.
R
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
D
2011-2012. REFERENCE: BANKING
O
,LAWS & JURISPRUDENCE BY DIZON.

31

San Beda College of Law

Banking Laws

1 Atrustentity,beforeengage
in trust business, shall
complywithminimumpaid
in capital requirement by
MB
Powersoftrustentity

1. Act as trustee on any

mortgageorbondandaccept
and execute any trust
consistentwithlaw

2. Actunderorderofanycourt
asguardian,receiver,trustee
or depositary of estate of
minororincompetentperson

3. Actasexecutorofanywill
4. Actasexecutorofestateof
any deceasedpersonwitha
willoradministratorwithout
awill

5. Acceptandexecutetrustfor
holding, management,
administration of estate and
rents,issues,profitsthereof

6. Establish and manage

commontrustfunds

Transactionsrequiringprior
authority

1 Trustee or trust entity shall

not undertake any of the
following transactions for
the account of the client
unless there is prior full
disclosure and authorization
byclient

1. Lend, sell, transfer

or assign money or
property to DOSRI
of trustee, relatives
of trusteeorrelated
interest of such

DOSR
I
where
trustee
owns
atleast
50%of
voting
stock

money
or
propert
y from
one
trust
accoun
t to
anothe
r
accoun
t

2. Purcha
se and
acquir
e
propert
y or
debt
instru
ment
in the
same
manne
r

3. Invest
in
equitie
s or in
securit
ies
under
written
by
trustee
in
which
trustee
has
interes
t

4. Sell,
transfe
r,
assign
orlend

Depositforthefaithful
performanceoftrust
duties

1 Before
transacting
trust business,
they must
deposittoBSP
for faithful
performanceof
trust duties an
amountnotless
than 500k or
higher as may
be fixed by
BSP

2 MB

shall
require trust
entity to
increase the
amount
whenever the
increase is
necessary by
reason of trust
business

depositary
appointed by
the court enter
uponexecution
of dues, court
may order
bond

1 Paidin capital and surplus

ofeachentitymustbeequal
totheamountrequiredtobe
depositedinBSP

2 Incaseitshallnotmeetthe
required paidin capital, the
MB shall limit or prohibit
distribution of profits by
trust entity until minimum
requirementismet

2. Upon
application of
such persons,
afternoticeand
hearing, court
shallorderthat
subject matter
of trust be
deposited with
trustentity

3 Trust entity, as long as

solvent and comply with
laws,shallhavetherightto
collect interest earned on
securitydepositedtoBSP

4 Iftrustentityfailstocomply

Exemptionoftrust
entityfrombond
requirement

1 No bond shall
be required by
court from
trust entity for
faithful
performance

2 However court

3. Upon

with law, BSP shall retain

interest of securities for
benefitofrightfulclaimants

presentation of
proof that
subject matter
have been
deposited to
trust entity,
court may
orderthatbond
be given by
such persons
for faithful
performance

5 Allclaimsarisingfromtrust
business shall have priority
overallclaimsasregardto
thesecuritydeposited
IV.BondofCertainPersonsforthe
FaithfulPerformanceofDuties
Bondrequirement

1. Before

executor,
administrator, guardian,
trustee, receiver or
AUTHO
RS:
MANILA,
ANTONI
O

shall

be
sufficient to
secure
adequately the
proper
administration
ofanyproperty

4. Reduce bond
C
E
A
S
A
R
;
B

may order
bond for the
protection of
funds or
property
confided

22.

Operations of
TrustEntity

Separationoftrust
businessfromgeneral
business

E
JANSEN; INTIG,
R
JOY ESTELA; DE
N
JESUS, TRACY
A
ANN.
R
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
D
2011-2012. REFERENCE: BANKING
O
,LAWS & JURISPRUDENCE BY DIZON.

32

San Beda College of Law

Banking Laws

1 The trust business shall be

kept separate and distinct
fromthegeneralbusiness

2 They shall be physically

separated from assets of its
otherbusiness

3 Theyshallbeunderthejoint
custody of at least two
persons who are officers of
thetrustdepartment
Investmentlimitationofatrustentity

1 Unless
otherwise
directed by
instrument
creating the
trust, the
lending or
investment of
funds by trust
entity shall be
limited to
loans and
investment as
prescribed by
law, MB or
court

2 Assets
received in
trust shall be
administered
with terms of
the instrument
creating the
trust

3 Iftrustentityis
given
discretionary

powe
rs to
invest
,
loans
and
invest
ments
shall
be
limite
dto:

1. E

v
i
d
e
n
c
e
o
f
i
n
d
e
b
te
d
n

part of
50%

2. Equity
invest
ment
of
bank
in
anothe
r
corpor
ation
engage
in real
estate
shall
be
consid
ered a
e
s
s
o
f
R
P
a
n
d
B
S
P

2. L

o
a
n
s
g
u
a
r
a
n
te
e
b
y
g
o
v
e

Exemptionoftrust
assetsfromclaims

1 No assets held
by trust entity
shallbesubject
toclaimsother
than those
parties
interested in
specifictrusts

2 Property held

r
n
m
e
n
t

3. L
o
a
n
s
f
u
ll
y
s
e
c
u
r
e
d
b
y
h
o
l
d

in trust by
insolvent
debtorshallbe

o
u
t
o
n
,
a
s
si
g
n
m
e
n
t
o
r
p
le
d
g
e
o
f
d
e

posits
that
are
mainta
ined

4. Loans
fully
secure
d by
real
estate
or
chattel
s

4 The following
shall

be
required to be
given as
information

1. Transa

ction
to be
entere
d

2. Borro

wers
name

3. Amou

nt
involv
ed

4. Collat

eral
securit
y

Realestateacquireby
trustentity

1 Trust entity
may acquire
real property
under
following
circumstances:

1. Mortg
age to
it in
good
faith

b
y
w
a
y
o
f
s
e
c
u
ri
t
y
t
o
d
e
b
ts

2. C
o
n
v
e
y
e
d
t
o
it
f
o
r
s
at
is
f
a
ct
i
o
n
o
f
d
e
b

ts
p
r
e
v
i
o
u
sl
y
c
o
n
tr
a
ct
e
d

3. P
u
r
c
h
a
s
e
at
s
al
e
s
u
n
d
e
r
j
u
d
g
m
e
n
t,
d
e
c
r

e
e
s,
m
o
rt
g
a
g
e
s
o
r
tr
u
st
d
e
e
d
s

2 Any
prope
rty
acqui
re
under
circu
mstan
ces
shall
be
dispo
sed
withi
n 5
years

3 After
said
perio
d,
bank
can
still
conti
nue
to
hold
prope

rty
subje
ct to
limita
tions:

1. T
o
ta
l
i
n
v
e
st
m
e
n
t
i
n
r
e
al
e
st
at
e
s
h
al
l
n
o
t
e
x
c
e
e
d
5
0
%

o
f
c
o

mbine
d
capital
accou
nts

exclu
ded
from
insol
vency
proce
eding
s

1 Trust
entit
yand
its
branc
hes
shall
be
treate
d as
one
unit

2 Trust
entiti
es
shall
adver
tise
servi
ces
in a
digni
fied
mann
er
Moneyof
government

1 Bank
smay
not
recei
ve as
truste
e the
funds
ofthe
gover
nmen
t
excep
t

GOC
C
banks

breac
h of
trust.
False

2. The
QUIZZES:
TrueorFalse:

1. The
fiduci
ary
natur
e of
the
relati
onshi
pofa
depos
itor
with
the
depos
itary
bank
impo
ses
on
the
latter
the
oblig
ation
to
disch
arge
the
highe
st
stand
ardof
trust
and
integr
ity
and a
violat
ion
there
of is
consi
dered
a

humb
le
wage

earne
r has
not
hesita
tedto
entru
st his
lifes
savin
gs to
the
bank
know
ing
that
they
will
be
safe
inthe
custo
dy of
the
banks
.
True

3. Bank
s are
gratui
tous
bailee
s of
the
funds
depos
ited
with
them
by
their
client
s.
False

4. The
publi
c
relies
on
the
banks

fiduci
ary
duty
to
obser
vethe
highe
st
degre
e of
dilige
nce
but
any
violat
ionof
this
duty
by
the
bank
is not
a
valid
groun
d for
the
grant
of
exem
plary
dama
gesto
the
depos
itor.
False

5. Thrift
banks
may
not
actas
corre
spond
ent

for other
financial
institutions.
False

6. A nonstock
corporation
A
U
T
H
O

may
actas
a
truste
e or
admi
RS:
MANI
LA,
ANT
ONI
O

CEA
SAR;
BER
NAR
DO,
JAN

nister
any
trust
or
hold
prope

rty in
trust
or on
depos
it for
the

benef
it of
other
s.
False

SEN;
INTI
G,
JOY
EST
ELA;

DE
FROM SECTION 2S - SAN
BEDA COLLEGE OF LAW,
JES
MENDIOLA: AY 2011-2012.
US,
REFERENCE: BANKING
TRA
LAWS & JURISPRUDENCE
CY
BY DIZON.
ANN.

33

San Beda College of Law

Banking Laws

7. Abankcannotuseanyofits
branches as outlets for the
saleofthefinancialproducts
of its allied undertaking or
its investment house units.
True

8. A bank may declare

dividends greater than its
accumulatednetprofitsthen
on hand, deducting there
from its losses and bad
debts.False

9. The appointment of a
receiver is vested
exclusively with the
MonetaryBoard.True

10. The MB cannot appoint a

conservator connected with

BSP.False

11. In a judicial foreclosure of

mortgage, there is an
equivalent right of
redemption.False

12. Nolate paymentofpenalty

fee shall be collected from
cardholders unless the
collection thereof is fully
disclosed in the contract
between the issuer and the
cardholder.True

13. A bank which had been

ordered closed by the
monetary board does not
retain its juridical
personality which can sue
and be sued through its
liquidator.False

Fillintheblanks

1. The law governing the

creation,
organization
and operation
ofruralbanks
is Rural
BanksAct.

2. The total
investment in
equities of
allied
enterprise
shall not
exceed 35 %
of the net
worth of the
bank.

3. Subsidiary
shallrefertoa
corporationor
firm more
than 50% of
the
outstanding
voting stock
of which is
directly or
indirectly
owned.

4. The rule that

the total
amount of
loans that
may be
extendedbya
bank to any
person or
entityshallat
no time
exceed 20%
of the net
worthofsuch

bank is
called
Single
Borrowers
Limit.

5. Credit Risk
Transfer
shallreferto
any
agreement
that allows
the bank to
transfer the
credit risk
associated
withitsloan
or other
credit
accommodat
iontoathird
party.

6. The term Legal Compensation

referstothatsituationwhentwo
persons,intheirownright,are
creditors and debtors of each
other.

7. The contracts between

cardholders and credit card 11.
companies are called contracts
ofadhesionbecausetheirterms
arepreparedbyonlyoneparty
while the other merely affixes
his signature signifying his
conformitythereto.

8. Net worth means the total

lifetime and
transferring the
balance to the
survivoruponthe
death of one of
them.
In the case of
Consolidated
Bank and Trust
Co.,theSCruled
that the contract
betweenthebank
and its depositor
is governed by
the provisions of
theCivilCodeon
simple
loan/mutuum.

unimpaired paidin capital

including paidin surplus,
retainedearningsandundivided
profit,netofvaluationreserves
andotheradjustmentsasmaybe 12. In the case of
Serrano vs.
requiredbyBSP.
Central Bank of
9. Letter of Credit refers to a
the Phil., the SC
financial device availed of by
held that bank
businessmen as a convenient
depositsareinthe
mode of dealing with sales of
natureofirregular
goods to satisfy the seemingly
deposits.
irreconcilable interests of a

Simex
seller who refuses to part with 13. In
International
hisgoodsbeforeheispaid.
Case,theSCsaid
10. Survivorship agreement is the
that the banking
agreement that allows joint
system is an
depositors to withdraw the
indispensable
whole deposit during their

AUTHO
RS:
MANILA,
ANTONI
O

C
E
A
S
A
R;
B

institution that
plays a vital
role in the
economiclifeof
thenation.

14. It is basic that

after
consolidationof
title in the
buyers name
forfailureofthe
mortgagor to
redeem,thewrit
of possession
becomes a
matter of right
anditsissuance
toapurchaseris
merely

a
ministerial
function.

15. Acceleration
Clause means
anyprovisionin
the contract
between the
bank and the
cardholder that
gives the bank
the right to
demand the
obligation

ER
; INTIG, JOY
NA
ESTELA; DE
RD
JESUS, TRACY
O,
ANN.
JA
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
NS
2011-2012. REFERENCE: BANKING
EN

LAWS & JURISPRUDENCE BY DIZON.

34

San Beda College of Law

Banking Laws
infullincaseofdefaultornon
paymentforwhateverreason.

16. Thelawthatprotectsitscitizens

otherwise known
as

Foreign
Currency Deposit
Act of the
Philippines.

froma lackofawarenessof the

truecostofcredittotheuserby
assuring full disclosure of such22. Negotiable Order
of Withdrawal
costisTruthinLendingAct.
Accounts are
17. The agreement between the interest bearing
deposit accounts
parties in a loan transaction
that combine the
which stipulate that the rate of
payable

on
interest agreed upon may be
demandfeatureof
increased in the event that the
checks

and
applicable maximum rate of
investmentfeature
interestisincreasedbytheMBis
of

savings
calledescalationclause.
account.
18. Joint and Solidary Agreement is
an agreement where the23. Independent
Auditor means a
contractingpartiesconsentto be
person other than
jointly and severally liable in a
an officer or
loanobligation.
employee of the
19. A bank guarantee is an bank,

its
irrevocable commitment of a
subsidiaries or
bankbindingitselftopaysumof
affiliates or
money in the event of non
related
performance of a contract by a
companies, or its
thirdparty.
majority
shareholders.
20. Assignment of credit is an
agreementbyvirtueofwhichthe24. Interest Rate
owner of credit, known as the
Differential refers
assignor,byalegalcause,suchas
to the difference
sale or dation in payment
or

margin
transfers his credit to another
between interest
known as the assignee who
rates such as the
acquiresthepowertoenforceit.
difference

21. All foreign currency deposit are

ofabsoluteconfidentialnatureas
a general rule and said deposit
shallbeexemptfromattachment
pursuant to RA No. 6426

between domestic
and foreign
interestrates.

25. Secrecy of
Bank Deposit
Act is the law
thatwaspassed
to

give
encouragement
to people to
deposit their
money in
banking
institutions.

26. The Securities

and Exchange
Commission
shall

not
register the
articles of
incorporationof
anybankunless
accompanied
bycertificateof
authorityissued
by

the
monetary
board.

27. The equity

investmentofa
universal bank
oritswhollyor
majorityowned
subsidiaries, in
a single non
alliedenterprise
shallnotexceed
20%ofthetotal
equity.

28. Demand
deposit are all
those liabilities
of the Banko
Sentral and of

the other banks which are

denominated in the
Philippine currency and are
subject to payment in legal
tender upon demand by
presentation of depositors
check.

29. Theruleintendedtomaintain
the quality of bank
management and afford
betterprotectiontodepositors
and the public in general is
calledfitandproperrule

30. Offshorebankingunitsrefer
to a branch, subsidiary or
affiliateofaforeignbanking
corporation which is duly
authorized by the Banko
Sentral to transact offshore
banking business in the
Philippines

AUTHOR
S:
MANILA,
ANTONI
O

C
E
A
S
A
R
;

31. A bank is
bound by the
negligence of
its employees
under the
principle of
Respondeat
Superior
32. Quasi banks
refer to
entities
engaged in
thebarrowing
of funds
through the
issuance,
endorsement
orassignment
with recourse
or acceptance
of deposit
substitutesfor

the purpose of
relending or
purchasing
receivables and
otherobligation

33. Thebusinessof
banking is
imbued with
public interest
in order to
assure the
stability of
banks which
largelydepends
on

the
confidence of
the people in
thehonestyand
efficiency of
banks.

SummaryofLaws

B
O, JANSEN; INTIG,
E
JOY ESTELA; DE
R
JESUS, TRACY
N
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
R
2011-2012. REFERENCE: BANKING
D
LAWS & JURISPRUDENCE BY DIZON.

San Beda College of Law

Banking Laws
Chapter1

RA7721ForeignBankliberalizationAct

RA8791GeneralBankingLawof2000
RA7353anactprovidingforthecreation,organization
andoperationofruralbanks

RA 7906 an act
providing for the
regulation of the
organization and
operations of the thrift
banks
RA6938anacttoordainacooperativecodeofthe
Philippines
RA6848anactprovidingforthe1989charteroftheAl
AmanahIslamicbankofthePhil
RA 6426 an act
instituting a foreign
currency

deposit
system in the
Philippines
BP68Corporationcode

Chapter2
RA7653TheNewCentralBankAct

Chapter3
RA1405SecrecyofbankDepositAct
RA 8367 an act
providing for the
organization and
operation of non stock
savings and loan
association

GODBLESS
INTHE
MIDTERMS!!!

RA9160anactdefiningthecrimemoneylaundering
RA6770theombudsmanactof1989

Chapter4
RA7394ConsumerAct
ActNo3135anactto
regulate the sale of
property under special
powers inserted in or
annexed to real estate
mortgages

Chapter6
PD1034OffshoreBankingSystemDecree
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY
ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING
LAWS & JURISPRUDENCE BY DIZON.

36

San Beda College of Law

Banking Laws
CHAPTER7TheBankoSentral
CreationoftheBSP
ngPilipinas
I.Creation,Responsibilityand
CorporatepowersofBSP
Declaredpolicyofthestate

1 Stateshallmaintainacentral
monetaryauthoritythatshall
functionandoperateasan
independentandaccountable
bodycorporateinthe
dischargeofitsmandated
responsibilityConcerning
money,bankingandcredit

2 BSP is a
GOCC but
enjoys fiscal
and
administrative
autonomy

1 BSP

independent
central
monetary
authority

2 Capital
ofBSP

P50B
which
shall
be
fully
subscri
bed by
the
govern
ment

3 P10B
shall be

paid by
the
govern
ment
upon
effectiv
ity of
act

4 The balance
shall be paid
within2years

5 Place of
business
principal
place of
business in
Metro
Manila or
maintain
other
branches

6 Creation of

centralmonetaryauthority
iscitedinSec20ArtXII
ofConstitution

7 Theauthorityshallprove
policydirectioninareasof
money,bankingandcredit
andregulatorypowersof
suchoperations
Responsibilityandprimaryobjective
ofBSP

1. Use corporate
seal

2. Entercontracts
3. Leaseorown
personal and
real property
and may
dispose the
same

4. Sue and be
sued

1. Responsibility of BSP

5. Perform any

provide policy direction

in areas of money,
bankingandcredit

thing that
may be
necessary to
carry out
purpose of
NCBA

2. Shall have supervision over

operationofbanks

3. Exerciseregulatory
powersoveroperations
offinancecompanies
andnonbankfinance
institutionsperforming
quasibanking

4. PrimaryobjectiveofBSP
maintainpricestability
conducivetoabalance
andsustainablegrowth
oftheeconomy

5. It shall promote and

maintain

monetary
stabilityandconvertibility
ofthepeso

1 InBusuegovs.CA,the
courtruledthattheBSP
hasresponsibilityof
administeringthe
monetary,bankingand
creditsystemofthe
countryandisgranted
powersupervisionand
examinationoverbanks
CorporatepowersofBSP(SCP
SPAL)

6. Acquire
and hold
assets and
incur
liabilities
in
connectio
n with
NCBA

7. Comprise
or release
claim or
settled
liability to
BSP
regardless
of amount
involved
Powertoprosecute

1 BSP can
cause
prosecution
of those
who violate
bankinglaw

2 However,
nothing in
thelawgives

the BSPN
the specific
duty to do
the actual
prosecution

3 Thus,BSPis
not

a
prosecution
agency
unlike the
fiscaloffice

4 In Perez
vs.
Monetary
Board, it
was ruled
that being
an
artificial
person,
BSP is
limited to
its
statutory
powers

5 It nearest
power to
prosecuteis
itspowerto
sue and be
sued which
refers to
civil case
only

6 BSPcanonly
cause
prosecution
which is a
publicoffense
and anyone
can denounce
such

7 Mandamus
for the
purpose of
causing the
BSP to
charge
violation of

banklawsisimproper

countrys
production
and at the
same time
avoid
irreparable
prejudice to
participants

8 BSP and members of MB

should not be impleaded as
partiestoacaseunderSec6,
Rule43ofRoC
Estoppel

1 BSP is committed to

4 In CB vs.

maintain the stability of

the country foreign
exchangereserveposition

IAC, the
court ruled
that in case
banks
already
faithfully
complied

2 Must adhere to principles

of fairness and decency
underBillofRights

3 BSP circulars must be

implemented to promote
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR
;

with BSP
directives,
BSP is
estopped
from
enforcing
circulars
which deny
banks of
theirrights

B
E
R
N
A
R
D

35.
BSP

Authority of

Supervisorypowersof
BSP

O
N; INTIG, JOY
,
ESTELA; DE
J
JESUS, TRACY
A
ANN.
N
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
S
2011-2012. REFERENCE: BANKING
E

LAWS & JURISPRUDENCE BY DIZON.

37

San Beda College of Law

Banking Laws

1. Quasi

1 Operationsandactivitiesof

banks

banksshallbesubjectto
supervisionofBSP.
Supervisionshallinclude
thefollowing:(REOISC)

2. Trust

entitie
s

3. Other

1. Issuanceofrules
ofconductor
SOPforuniform
applicationtoal
institutions
covered

2. Conduct
examination
todetermine
compliance
withlawsand
regulation

3. Overseei
ng to
ascertain
law and
regulatio
n are
complied
with

4. Regular

financ
ial
institu
tions

Phaseoutof
BSPpowers
over
buildingand
loan
associations

1 Withinperiod
of3years,
BSPshall
phaseoutand
transfer
supervising
andregulatiry
powerover
buildingand
loan
associations
toHome
Insuranceand
Guaranty
Corporation

investigation.Not
oftenerthanoncea
yeartodetermine
whetherthereis
businessis
conductedonasafe
Policydirection;
orsoundbasis.
rations,ceilingand
Deficiencies
limitations
immediately
1 BSPshall
addressed
provide
5. Inquiring into
policy
solvency and
direction
liquidity
in areas
6. Enforcing prompt
of
correctiveaction
money,
2 BSPshallhavesupervisions
banking
overoperationsof:
andcredit

2 MBshall
prescribe
ratios,
ceilings,
limitations
indifferent
accountsof
banksto
confirmto
international
lyaccept
standards
including
Bankfor
International
Settlement

3 MB
may
exemp
t
partic
ular
catego
riesof
transa
ctions
from
such
ration
s,
ceilin
gsto:
o
Exceptiona
lcases
o Enable
abank
under
rehabil
itation
or
during
merger
or
consoli

dationtocontinue Composition
businesswithsafety
1 MBshallbe
61. MonetaryBoard
composed
of

7
1 Powers and functions of
members
BSP shall be exercised
appointed
by Banko Sentral
byPresident
MonetaryBoard
withtermof
6years

2 The seven
membersare:

1. The
gove
rnor
who
shall
be
the
chai
rma
nof
MB.
Gov
erno
r
shall
be
head
ofa
depa
rtme
nt
and
his
appo
intm
ent
conf
irma
tion
of
CO
App
W
h
e
n

e
v
er
u
n
a
bl
e
to
at
te
n
d
b
o
ar
d
m
e
et
in
g,
d
e
p
ut
y
g
o
v
er
n
or
s
h
al
l
a
ct
as
al
te
rn
at
e
M
B

shall
design
ate
one of
its
memb
ers as
acting
chair

2. Memberof
cabinet
designated
by
Vacancies
President
Whenever
1 Any
cabinet
vacancy
member
createdby
unableto
death,
attend
resignatio
meeting,
n or
Usecshall
removal
bealternate
shall be

3. 5 members who

th
e
ot
h
er
2

3
y
e
ar
s

filled by
shall come from
new
private sector
appointme
servingfulltime
nt to
In the
complete
first
unexpired
appoint
term
ments
Qualificationof
from
membersofMB
effectiv
ity of
1. Natural born
act, 3
citizens
serve 6
2. At least
yrs
35 years
while
of age,

AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

;
B
E
R
N
A
R

Governor
must be
40 years
old

3. Good moral
character

4. Integrity
5. Probity and
patriotism

6. Recognized
competence
in social
and
economic
disciplines
DisqualificationofMB
members

1. Disqualificatio
nunderRA
6713(Codeof
Conductand
ethical
standardsof
publicofficer
and
employees)

2. Disqualified
frombeinga
DOSRIof
anybank
subjecttothe
supervision
or
examination
ofBSP

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.

38

San Beda College of Law

Banking Laws

1. In which case,
such member
shallresignbefore
assumption of
office

3. Member of MB coming
from private sector shall
not hold public office in
tenure

4. Nopersonshallbemember
ifhehasbeenconnected
directlywithanymultilateral
bankinginstitutionorhas
substantialinterestonany
privatebank1yearprior
appointment

5. Nomembershallbe
employedinanysuch
institutionwithin2year
afterexpirationofterm
exceptwhenservingas
representativeof
government(sec9)
GroundsforremovalMBmembers

1. Subsequently
disqualified under Sec
9duringtenure

2. Physicallyormentally
incapacitatedandcannot
dischargedutiesand
incapacitylastedmorethan
6months

3. Guiltyofactsoroperation

1. MBshallmeet
atleastoncea
week.MB
maybecalled
tomeetingby
governoror2
other
membersof
board

2. Presenceof
4members
constitute
quorum
provided
that
governoror
hisalternate
isamong
the4

3. BSPshall
maintainand
preserve
complete
recordsof
proceedingsin
theiroriginal
formorin
microfilm

4. General
Rule: All
decisions of
MB shall
require
concurrence
ofatleast4
members

of fraudulent or illegal
character opposed to aim
Exceptiontogeneral
ofBSP
rulewhereatleast5
4. Member no longer possess votesisrequired:
qualificationundersec8
1. Sec61GBL
Meetings,quorum,decisionsand
publication
proceedingsMB
offinancial

statementsis
requiredonce
atleastevery
quarter.In
nationalor
local
emergencyor
ofimminent
panic,MBby
voteof5,
upon
applicationof
bank,may
allowsuch
banktodefer
publication
offinancial
statement

2. Sec28
NCBA
supervisio
nand
examining
departmen
thead
shall
examine
booksof
every

bankinginstitutiononce
every12monthsandat
suchothertimeatthevote
of5membersofMB

3. Sec72NCBADuring
exchangecrisisornational
emergency,with
concurrenceof5members
ofMBandapprovalof
president,MBmay
temporarilysuspendsales
ofexchangebyBSPand
maysubjectall
transactionsingoldand
foreignexchangeto
licensebyBSP

4. Sec84NCBAinnationor

theagenda
ofMBshall
disclosehis
interestand
shallretire
fromthe
meeting
whenmatter
istaken

2 Thedecision
madeon
mattershallbe
madepublic
andthe
minutesshall
reflect
disclosure
madeand
retirementof
member

localemergencyor
imminentfinancialpanic,
MBmay,with5voteof
members,authorizeBSPto Scopeofauthorityof
grantextraordinaryloansor MB
advancestobankssecured
1. Issuerules
byassets
and
DeputyGovernorsmayattend
regulationsit
meetingsofMB
considers
necessaryfor
1 They may attend meetings
thedischarge
and have the right to be
ofits
heard
responsibiliti
esand
Salariesofgovernorandmembersof
exerciseofits
MB
powers
1 Salaryshallbe
1. Rules
fixedyPresidentat
and
asum
regula
commensurateto
tion
theimportanceand
issued
responsibility
shall
attachedtotheir
be
position
report
edto
PersonalorPecuniaryinterests
Presid
1 MembersofMBwith
ent
personalorpecuniary
and
interestinanymatterin
Congr

ess
within
15
days
from
date
of
issuan
ce

2. Directthe
management,
operationand
administration
ofBPS,
reorganizeits
personaland
issuerulesand
regulations

1. Lega
l
units
of
BSP
shall
be
unde
r
excl
usive
contr
ol
and
supe
rvisi
onof
MB

3. Establish
human
resource
management
systemwhich
shallgovern
selection,
hiring,
appointment
ordismissal
ofpersonnel.

AUTHO
RS:
MANILA,
ANTONI
O
CEASAR
;

B
E
R
N
A
R
D

O
N; INTIG, JOY
,
ESTELA; DE
J
JESUS, TRACY
A
ANN.
N
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
S
2011-2012. REFERENCE: BANKING
E

LAWS & JURISPRUDENCE BY DIZON.

39

San Beda College of Law

Banking Laws

1. Compensation
structurebasedon
jobevaluation
studiesandwage
surveysshallbethe
integralcomponent
oftheHRprogram

2. MBshallmakeits
ownsystemwhich
conformcloselyto
RA6758
(Compensationand
Position
ClassificationActof
1989)

3. Those under
salary grade 19
shall have rates
underRA6758

4. Upon
recommendation
ofgovernor,
appoint,fix
remunerations
andremoval
personnel
subjecttocivil
servicelaw

2 InCBEmployees
Associationvs.BSP,
thecourtruledthat
theestablishmentof
unfairhumanresource
managementis
unconstitutional.It
shownthathigher
gradesreceivegreater
benefitswithheld
fromlowergrades.

3 Rankandfile
employeesarelimited
toSSLwhile
employeesinhigher

rankare
given
higher
compensa
tionto
entice
themto
stay.Itis
therank
andfile
employee
sthatare
ofneed
for
greater
benefits

4. Adopt annual
budget for and
authorize
expenditure by
BSP

5. Indemnify
its
members
againstall
costsand
expenses
incurredin
connection
withcivil
orcriminal
suitby
reasonof
performan
ceofduty
unless
liablefor
negligence
or
misconduc
t

1. In
event

of
settle
ment
or
comp
romis
e,
indem
nifica
tion
are
cover
ed
provi
ded
that
there
isno
neglig
ence

2. Costs
and
expen
ses
incurr
edin
defen
ding
may
be
paid
in
advan
ce
and
repay
the
amou
nt
advan
ced
shoul
dit

bedeterminedthat
personnelisnot
entitledto
indemnity
ResponsibilityofMembersofMB

1. Ifanyonewilfullyviolate
NCBAorguiltyof
negligence,abusesor
malfeasanceor
misfeasanceorfailsto
exerciseextraordinary
diligenceinperformanceof
duty,heshallbeheldliable
forlossorinjurysuffered
byBSPorbanking
institution(VNAMMFe)

2. Similar responsibility
shallapplytoofficeror
employeesofBSP

Presid
entor
Congr
essis
not
confi
dentia
l

1. Disclo
sureof
inform
ation
ofa
confid
ential
nature
unless
disclos
ureis
in
connec
tion
with
perfor
mance
of
official
functio
n

2. Use
of
such
infor
matio
nfor
perso
nal
gain
or
detri
ment
ofthe
gover
nment
,BSP
or
third
partie
s.any
data
requir
edto
be
submi
ttedto

3. Legal
obligationand
goodfaiththat
BSPofficer
owetopublic
startwith
officialactsof
MBwhichare
thecauseof
lossand
injuryandnot
any
preparatory
reportor
recommendati
on
IVTheGovernorand
DeputyGovernors
PowersandDutiesof
theGovernor
(CEO:PEDARE)

1. Shall be the
CEOofBSP

2. Prepare the
agenda for
meetings
and submit,
for
consideratio
n, policies
and
measures
necessary

3. Execute
and
administ
erpolicy

and

measures
approvedbyMB

ot
he
r
off
ice
s

4. Directandsupervise
operationandinternal
administrationofBSP.
Governormaydelegate
certainadministrative
responsibilitiestoother
officers

2. Sign
contr
acts
enter
ed
into
by
BSP,
notes
and
secur
ities
issue
dby
BSP
Signa
ture
may
be
facsi
mile

5. Appointandfix
remunerationofpersonal
belowofadepartmenthead.
Removalofpersonaliswith
approvalofMB

6. Renderopinions,
decisionsorrulings
whichisfinaland
executoruntilreversedor
modifiedbyMB

7. Exerciseotherpowersvested
byMB

PowersofGovernoras
representativeofMBandBSP

1 Governor shall be the

principalrepresentativeof
MB and BSP with
followingpowers:

4. Del
egat
e
his
pow
er
to
repr
ese
nt
to
othe
r
offi
cers

2 In order to
preserve
integrity of
office,
governor
may choose
not to
participate
in
preliminary

3. Repres

ent
BSPin
any

1. Represent MB
and BSP in all
dealings with
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR
;

legal
procee
ding

B
E
R
N
A
R
D

O
N; INTIG, JOY
,
ESTELA; DE
J
JESUS, TRACY
A
ANN.
N
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
S
2011-2012. REFERENCE: BANKING
E

LAWS & JURISPRUDENCE BY DIZON.

40

San Beda College of Law

Banking Laws
discussionsofmultilateral
bankinginstitutionson
negotiationsforthe
government

1 During such, he may be

represented by permanent
negotiator
Emergencies(CRM)

1. Incaseofemergency,
governorwithconcurrence
of2othermembers,may
decidematterortakeaction
withinauthorityoftheboard

2. Governor shall submit

report to President and
Congress within 72
hours

3. At soonest possible
time, governor shall
call meeting of MB
forratification
Limitationonoutsideinterestof
governorandmembersofboard

1 Theyshalllimittheir
professional activities
directly to their
positioninBSP

2 Shallnotacceptanyother

perform
duties as
may be
assignedto
them

2. Inabsence
of
governor,
deputy
governors
designated
toactas
CEOof
BSPshall
exercise
duties

3. Whenever
governoris
unableto
attend
government
boardor
councils
whereheis
exofficio
member,
deputy
governor
maybe
designated
vestedwith
powerto
participate
andvote

employmentexceptwhen
positionineleemosynary,
civic,culturalorreligious
organizationorby
22.
Operations of
designationofPresidentto
BSP
representgovernment
ResearchandStatistics
ofBSP
Numberandfunctionsofdeputy
governors
1 BSP shall
1. Governor shall appoint
prepare
not more than 3 deputy
data and
conduct
Governors who shall

economic
research
for
guidance
ofMB
ScopeofAuthorityof
BSPtoobtaindata

1. BSP shall
have
authority to
require
government
office any
data it may
require

throu
gh
comm
on
stock
holde
rs

2. BSP,throughgovernoror
representativeshallhave
thepowertoissue
subpoenaforproduction
ofbooks.Contemptif
refused

3. Dataonindividualfirms
otherthanbanksgatheredby
BSPDepartmentof
EconomicResearchshallnot
beavailableoutsideBSP.
Collectivedatacanbe
releasedtointerested

4. PersonnelofBSPshallbe
prohibitedfromrevealing
inanymanner,except
underordersofcourt,
Congressorgovernment
office
TrainingofTechnicalpersonnel

1 BSPshallsponsortraining
of technical personnel in
field of money and
banking
Scopeofsupervisionand
examinationbyBSP

1. BSPshallhave

2. Department

heads and
examiners are
authorizedto

1. Ad
min
ister
oath
s to
any
dire
ctor
s,
offi
ce
or
emp
loye
e of
any
insti
tuti
on

2. Com

supervisionover,and
conductperiodicor
specialexaminationsof
bank,quasibanks
includingsubsidiaries
andaffiliatedengagedin
alliedactivities

pel
pres
entat
ion
of
book
s,
docu
ment
and
recor
ds
relati
veto
true

1. Subsidiarymore
than 50% voting
stockisownedby
bank or quasi
bank

2. Affiliate50%or
lessisownedby
bankorrelatedor
linkedtoinstitution

cond
ition
of
instit
ution
Restrainingorderor
injunction

1 No
restraining
orderor
injunction
shallbe
issued
enjoining
(preventing)
BSPfrom
examining
institution
underits
supervision

2 Exception:
thereis
convincing
proofthat
actionofBSP
isplainly
arbitraryand
inbadfaith
andpetitioner
filesbondin
favorofBSP

3 Provisions
ofRule58

Preliminar
y
Injunction
shall
apply not
inconsiste
nt
VI.Director,Officeror
Stockholderand
RelatedInterests
ContractingLoans

THORS: MANILA,

ANTONI
O
CEASAR
;
BERNAR
DO,

J
A
N
S
E
N

;
, JOY ESTELA; DE
I
JESUS, TRACY
N
ANN.
TFROM SECTION 2S - SAN BEDA
ICOLLEGE OF LAW, MENDIOLA: AY
2011-2012. REFERENCE: BANKING
G
LAWS & JURISPRUDENCE BY DIZON.

41

San Beda College of Law

Banking Laws

lendingbanktowaivethe
secrecyofhisdepositsin
allbanks

s
a
v
i
n
g
s
a
n
d
l
o
a
n
a
s
s
o
c
i
a
ti
o
n
s

3 Anyinformationobtained

2. R

1 AnyDOSRIcontract
loansoranyfinancial
accommodationfromhis
bankorafromabank
(lendingbank)thatis:

1. Subsidiary of
bank holding
companyofwhich
bothhisbankand
lending bank is
subsidiaries

2. Controlling
proportionofshare
isownedbythe
sameinterestthat
ownsacontrolling
proportionofshare
ofhisbankinexcess
of5%ifcapitaland
surplusofbank

2 Suchshallberequiredby

fromexaminationshallbe
strictlyconfidential.Used
onlybyexamineronlyin
connectionwithsupervisory
responsibilityorbyBSPin
legalaction
ProhibitionagainstPersonnelofBSP

1 In additional to prohibition
fromRA3019andRA7613,
the BSP personnel
prohibitedfrom:

1. BeingDOSRI
ofinstitution
under
supervisionof
BSPexcept
nonstock

e
q
u
i
r
e

o
r
r
e
c
e
i
v
e

n
y

g
i
f
t
f
r
o
m

a
n
y

i
n
s
t
i
t
u
t
i
o
n

s
u
b
j
e
c
t
t
o

s
u
p
e
r
v

ision

3. Revealinany
manner,except
undercourtorder,
Congressor
governmentofficer.
Shallnotapplyto
givingof
informationtoMB
orgovernorofBSP

4. Borrowingfrom
anyinstitution
subjectto
supervisionand
examinationunless
borrowingsare
adequatelysecured
VII.ExaminationofBanking
Institutions
Frequencyofexamination

1 Departmentheadshall
examinebooksofevery
bankinginstitutiononce
every12monthsandat
suchothertimeatthevote
of5membersofMB.
Intervalshallbeatleast12
months
Affordopportunitytoexamine

1 Bankconcernedshall
affordtheheadfull
opportunitytoexamineits
books,cashandassets
duringbankinghours

1 Noneofthe
reportsshall
beopento
inspectionsof
thepublic
exceptwhen
suchis
incidentalin
proceedings
forviolations
ServiceFees

1 Banking
which are
subject to
examination
of BSP shall
pay BSP
withinfirst30
days of each
year an
annual fee as
may be
prescribed by
MB

2 Sec65
of
GBL
states
that
BSP
may
charge
equita
ble
rates,
commi
ssions
and
feesfir
superv
ision
or
exami
nation
s
VIII.Administration

Operatingdepartments
ofBSP

1 MB
shall
determ
ine
operati
ng
depart
ments
includi
ng
public
inform
ation
office
Requiredreportsand
publicationofBSP

1. General
balancesheet
showing
volumeand
compositionof
itsassetsand
liabilities60
daysafterend
ofeachmonth
except
December,90
daysifsuch

2. MB shall
publish
and
submit to
Congress
and
President
the
following
reports:

1. Anal
ysis
of
econ
omic

andfinancial
developmentnot
laterthan90days
afterendofeach
quarter

hour
s
after
reme
dial
mea
sure
s
was
take
n

2. Precedingyears
budgetandprofit
andloss
statement
within90days
afterendofyear

3. Review of the
state of financial
system 120
days after each
semester

AnnualReportofBSP

1. Annual
reportonthe
conditionof
BSP
beforeend
ofMarch
eachyear.
Submitto
President

4. Abnormal
movementsin
monetary
aggregateand
generalprice
movements72
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

;
B
E
R
N
A
R

and
Congress
andinclude
reviewof
policiesand
economic
analysis
circumstance
s:

2. Willalso
include
statementof
financial
conditionof
BSPand
statistical
appendix
include:(1)
movement
monetary
aggregates,(2)
movementsof

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.

42

San Beda College of Law

Banking Laws
foreignexchange,(3)
balanceofpayments,(4)
consumerprices,(5)
exports/imports,(6)
accountsofBSP,(7)data

3. BSP shall publish

another version of the
annual

report
understandable in
layman

4. Failuretocomplywithout
justifiable reason shall
cause withholding of
salaryofpersonnel
Signatureofstatements

1 Balancesheetandother
financialstatementsshallbe
signedby(1)officer
responsibleforpreparation,
(2) governor, (3) BSP
auditor
IX.Profits,lossesandspecial
accounts
FiscalYear

1 StartsonJanuaryfirstand

endsonDecember31st of
eachyear

ComputationofProfitsandLosses

1 Within30daysfollowing
end of each year, BSP
shall determine net
profitsandlosses
Distributionofnetprofits

1 Within60daysfollowing
endofeachfiscalyear,
MBshalldetermine
distributionofnetprofits
accordingtothe

following:

1. 50% of
net
profits
carried
to
surplus

2. R
e
m
a
i
n
i
n
g

5
0
%

s
h
a
l
l

r
e
v
e
r
t

b
a
c
k

t
o

N
a
t

ion
al
Tre
asu
ry
Revaluationprofitsand
losses

1. Profits
or
losses
from
revalua
tionof
goldor
foreign
currenc
yshall
notbe
include
din
comput
ation
of
annual
profits
or
losses

2. Any
profitor
losses
from
revaluati
onshall
beoffset
by
amounts
owedby
Philippin
esto
internati
onal
financial
institutio

ns

1 Chairman

3. Anyremainingprofitor

ofCOAact
asex
officion
auditorof
BSPand
authorized
toappoint
representati
veauditor
toBSP.
Canonlybe
removedby
COA

lossshallbeplacedinthe
Revaluationof
InternationalReserveand
netbalanceshallappearas
eitherliabilityorasset
dependingwhetherprofit
orloss
TheAuditor

2 Representative

shall be (1)
CPA, (2) 10
years
experience,
(3) not
relative to
member of
MB or COA
to 6th civil
degree

24.

Penalty
Violation

for

1 Sec66ofGBL
providesthatif
offenderis
directoror
officer,shallbe
suspendedor
removedfrom
office.If
offenderis
corporation,
shallbe
dissolvedby
quowarranto
institutedby
SG
Penaltyforrefusalto
makereportsorpermit
examination

1 Person

was
required
in
writing
byMB
or
supervisi
ng
departm
entbut
refused
tofileor
permit
examinat
ion.
Penalty
50k
100k
Penaltyfor
wilfulmaking
ofafalseor
misleading
statementof
materialfact

1 Penalty 100k
200k

Proceedingsuponand
penaltyforviolations
ofNCBAandbanking
laws

1. Bank, quasi
bank or any
person
violates
NCBA,
penalty is
50200k

2. Bank or quasi
bankpersistsin
carrying
business in
unlawful or
unsafe manner
samepenalty

Administrativeviolationsonbanks

unsafe
manner

1 MB shall impose

2 Following are

administrative penalty to
bank, quasibank, director
orofficerfor:

thesanctions:

1. Fines

not
exceed
30kper
dayper
violatio
n

1. Willful violation of
charter

2. Willful delay in
submittingreport

3. Refusal to permit

2. Suspen

examination

sion of
redisco
unting
privileg
es

4. Willful making of
falseormisleading

5. Willful failure to
comply with bank
laws

3. Su

6. Any commission of

sp
en

irregularity

7. Conductbusinessin
AUTHO
RS:
MANILA,
ANTONI
O

C
E
A
S
A
R
;

si
on
of
le
nd
in
g
or
F
O
R
E
X
op
er
ati
on
s

B
, JANSEN; INTIG,
E
JOY ESTELA; DE
R
JESUS, TRACY
N
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
R
2011-2012. REFERENCE: BANKING
D
LAWS & JURISPRUDENCE BY DIZON.
O

San Beda College of Law

Banking Laws

4. S
us
p
e
ns
io
n
of
in
te
rb
a
n
k
cl
ea
ri
n
g
pr
iv
il
e
g
es

5. Revocationofquasibakinglicense
2 Resig
nation
shall
not
exem
pt
crimi
nal or
admin
istrati
ve
sancti
ons

3 MBmay
preventively
suspend
officeunder
investigatio

nnotexceed
120days
exceptwhen
delayis
causedby
him

4 Administrati
ve sanctions
need not be
applied in
order of
severity
AdministrativeProceedingsonbanks

1. WONthereis
administrative
proceedings,if
officer
continueto
persistin
practiceor
violation,MB
shallrelease
ceaseand
desistorder
effectiveupon
serviceto
respondents

2. Respondents
have
opportunityto
defendtheir
actionina
hearingupon
arequest
madewithin5
daysfrom
receiptof
order.Ifno
hearingis
requested,
orderisfinal

3. Governoris
authorizedto
imposetobanks
finesnot
exceeding10k

perdayper
violationwhich
canbeappealed
toMB

AUTHORS: MANILA,
ANTONIO CEASAR;
BERNARDO, JANSEN; INTIG,
JOY ESTELA; DE JESUS,
TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW,
MENDIOLA: AY 2011-2012. REFERENCE: BANKING
LAWS & JURISPRUDENCE BY DIZON.

44

San Beda College of Law

Banking Laws
CHAPTER8Currency,
MonetaryStabilizationand
FunctionsofBSP
I.TheUnitofMonetaryValue
ThePeso

1 Peso unit of monetary

value in the Philippines (P
sign)

2 Pesodividedinto100equal
partscalledcentavo(csign)

3 All

monetary
obligation shall be
settledinPhilippine
currency in legal
tender

4 Parties may agree that

obligationshallbesettledin
othercurrency
DefinitionofCurrency

1 CurrencyallPhilippine
notesandcoinsissuedin
accordancewithNCBA
ValueofCurrency

1 Currencyhasvalue
becausepeoplearewilling
toacceptitinexchangefor
goodsorservicesor
paymentofdebt

2 Money has no value as a

commoditybuthasvalueas
means of medium of
exchange

3 Value of goods and

services are measured
bytermsofmedium

4 Not applicable if no
confidence in currency
and people would use

foreign
currency

1. Art. 163

35.

Issueofmeans
ofpayment

Exclusiveissuepower

1. BSP shall
have the
sole power
to issue
currency
within the
Philippines

2. MB may issue
regulations
prevent
circulation
foreign
currency
currency
substitute
facsimiles
BSPnotes

to
of
,
or
of

3. BSP shall
haveauthority
to investigate,
arrest and
conduct
searches to
maintain
integrity of
currency

4. Violation
shall have
imprisonme
nt of 510
years unless
RPC gives
greater
penalty
RelatedCrimesunder
RPC

Making
and
importin
g and
uttering
false
coins

2. Art. 164 Mutilation of

coins

3. Art.165Sellingof

Liabilityfornotesand
coins

false or mutilated
coins

without
connivance

1 Notes
and
coins
issued
by the
BSP
shall
be
liabilit
y of
BSP

4. Art.166Forging
treasure notes or
other documents
payabletobearer

5. Art.

167
counterfeiting,
importing or uttering
instruments

not
payabletobearer

issued in
amounts not
exceeding
assetsofBSP

possessionanduseof
falsetreasurynotes

7. Art. 169 How forgery is

3 Notes and

committed

coins shall be
a first and
paramountlien
onallassetsof
BSP

Exceptiontoterritorialityofpenal
laws

1 Art. 2 of RPC provides

that the territoriality rule
doesnotapply:

4 BSPsholding
ofitsown
notesand
coinsshallnot
beconsidered
apartofits
currencyissue
andnotpartof
assetsand
liabilities

1. Shouldforgeor
counterfeitany
coinorcurrency
notethe
Philippinesor
obligationsor
securitiesofthe
Government

2. Liablefor
acts
connected
with
introducti
onof
suchinto
islands
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

2 Checks

2 It shall be

6. Art. 168 Illegal

Legaltenderpower

1 Allnotesand
coinsissuedby
BSPshallbe
fully
guaranteedby
;
B
E
R
N
A
R

the
Government
andshallbe
legaltenderin
Philippinesfor
alldebts,
publicor
private
representing
demand
deposits do
nothavelegal
tender and
acceptance is
at the option
ofthecreditor

3 Check
cleared and
credited to
account of
creditor shall
be equivalent
todelivery

4 BSPCirc.
537 of
2006
maximu
m
amount
of coins
to be
considere
daslegal
tender
o 1,5,10
peso coins
1k
o
1,5,10,25
centavos
100

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.

45

San Beda College of Law

Banking Laws

1 Art1249ofNCCstatesthat

considered

allpaymentsofdebtsshall Printingofnotesand
be in currency stipulated miningofcoins
andifnotpossiblecurrency
1 MBshall
inlegaltender
prescribe
2 Italsostatesthatwhen
amountsof
thereispaymentbyPN,it
notesand
shallproduceonlyeffect
coinstobe
whenencashedorimpaired
printedand
throughfaultofcreditor.
minted.MB
Actionderivedfrom
hasauthority
obligationisheldin
tocontract
abeyance
institutions
3 Art.1250ofNCC,where
forsuch
thereisextraordinary
2 All expenses
inflationordeflation,value
incurred shall
ofcurrencyattimeof
be for the
establishmentofobligation
accounts of
shallbebasisofpayment
BSP
Characteristicsofthecurrency

1 MB with approval of
Presidentshallprescribe
denominations,
dimensions, designs of
notes.

2 Notes shall state that

they are liabilities of
BSP and fully
guaranteed

by
government

3 Notes shall bear

signature,

in
facsimile,

of
President and BSP
Governor

4 MBwithapprovalof
Presidentshallprescribe
weight,fitness,designand
denominationofcoins

5 In minting of coins,
availability of metals and
its price shall be

Interconvertibilityof
currency

1 BSP
shall
exchang
eon
demand
and
without
charge
Philippi
ne
currenc
yinany
other
denomi
nation
requeste
d

2 If BSP is
temporarily
unable to
provide

such, it
shall
deliver
denominati
onnearest
Replacementof
currencyunfitfor
circulation

1 BSPshall
withdrawfrom
circulationand
demonetizeall
notesand
coinsunfitfor
circulationand
shallreplace
them

2 BSPshall
not
replace
notes
under
mutilated
condition
and
without
compensa
tionto
bearer

1 Mutilatedcondition:(1)
identificationisimpossible,
(2)signsoffiling,clipping,
(3)noteslostmorethan2/5
ofsurfaceorallsignatures
Retirementofoldnotesandcoins

1 BSP may call for

replacement of notes (more
than 5 yrs old) and coins
(morethan10yrsold)

2 Notes and coins replaced

shallremainlegaltenderfor
1yearfromdateofcall

3 Afterperiod,suchshall
ceasetobetobelegal
tenderbutcanbe
exchangedatparand
withoutchargeinBSP
duringfollowingyear

4 Aftersaidperiod,notesand
coinsnotexchangedshall
ceasetobealiabilityof
BSPandshallbe
demonetize

61. Domesticmonetarystabilization
Guidingprincipleonmonetary
stabilization

1. MBshallendeavourto
controlanyexpansionor
contractofmonetary
aggregatesprejudicialto
pricestability
Powertodefineterms

2. MB shall define monetary

aggregates, credit and
prices and made public
suchdefinitions
Actionwhenabnormal
movementsoccurinmonetary
aggregates,creditandprices

1 Whensuchoccursthat

endange
r
stability
of
econom
y, MB
shall:

1. Take

remedi
al
measu
res

2. Submi
tto
Prresid
ent
and
Congr
essof
report
contai
ning
the(1)
cause,
(2)
extend
of
change
and(3)
measu
res
taken
byMB

2 Whenever the
following
happen:

1. Mone
tary
aggre
gates
or
level
of
credit
increa
sesor
decre
ases

by
more
than
15%

2. Co
st
of
livi
ng
ind
ex
inc
rea
ses
by
mo
re
tha
n
10
%
in
rel
ati
on
to
lev
el
of
mo
nth
exi
sti
ng
of
pre
ce
din
g
ye
ar

3. Other
circum
stance
s so
warran
t

1 The

monetary board
shallsubmitreports
and shall state
whether these
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

chang
esisa
threat
to
;
B
E
R
N
A
R

stabili
ty

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.

46

San Beda College of Law

Banking Laws

1 MBshallcontinuetosubmit
periodicreporttoPresident
andCongressuntilmonetary
aggregates,creditandprices
disturbancesdisappearedor
controlled
IV.InternationalMonetary
Stabilization
InternationalMonetaryStabilization

1 BSPshallexerciseits
powersundertheNCBAto
preservetheinternational
valueofpesoandmaintain
itsconvertibility
InternationalReserves

1 Internationalreserves
mustbemaintained
adequatelytomeet
foreseeablenetdemands
forforeigncurrencies

2 Adequacyofinternational
reservesMBshallbe
guidedbyprospective
receiptsandpaymentsof
foreignexchange

3 MB shall give special

attentiontovolumeand
maturity of the
following:
o LiabilityofBSPin
foreigncurrency
o Foreign exchange
assets

and
liabilities of other
banksandallother
persons
CompositionofInternational
Reserves

1 International reserve shall

include but
not limited
to:

1 Gold
2 Assets
in
foreign
curren
cies

2 Assetsin
foreign
currencies
include(1)
documentsof
international
transferof
funds,(2)
demandand
timedeposits
ofbanks
abroadand(3)
foreign
government
securitiesand
notes

3 MB shall
hold the
FOREX
resource
of BSP in
freely
convertibl
e
currencies

4 MB shall
issue
regulation
s that
FOREX
assets
mustmeet

5 BSP
shall
be
free

to
con
vert
any
asse
t in
inter
nati
onal
rese
rves
into
othe
r
asse
ts
Actionwhen
InternationalStability
ofPesoisThreatened

1 Whenever:
1. Int
ern
atio
nal
res
erv
e
fall
sto
a
lev
el
ina
deq
uat
eto
me
et
pro
spe
ctiv
e
net

demands for
foreign
currencies

ide
nt
and
Co
ngr
ess
a
rep
ort
incl
udi
ng:

2. Int
ern
ati
on
al
res
erv
e
ap
pea
rs
to
be
im
mi
ne
nt
to
fall
on
suc
h
lev
el

3. Inter
natio
nal
reser
ve is
fallin
gasa
result
of
remit
tance
abroa
d

2 TheMBshall:
1. Take
remedi
al
actions

2. Sub
mit
to
the
Pres

Na
tur
e
an
d
ca
us
e
R
e
m
e
d
ia
l
m
e
a
s
u
r
e
s
ta
k
e
n
M
o
n
et
a
r
y,
fi
s

cal
and
ad
mi
ni
str
ati
ve
m
ea
su
re
s
C
ha
ra
ct
er
an
d
ex
te
nd
of
cooperation
required

3. If

resultant
actions fails, the
MBshallpropose
to the President
with notice to
Congress of
additional action
to

restore
equilibrium

4. MBshallsubmit
periodicreports
toPresidentand
Congressuntil
threathas
disappeared
MeansofAction

1 Inordertoachievethe
primaryobjectiveofprice
stability,MBshallrelyon

moral
influenceand
powers
grantedby
NCBA

22.

Operations in
GoldandFOREX

Purchasesandsalesof
gold

1 BSP may buy

andsellgold

2 It shall be
made in
national
currency at
prevailing
international
marketprice
Purchaseandsalesof
FOREX

1 BSPmay
buyand
sellforeign
notes,
coinsand
documents.
Theycan
alsoengage
infuture
exchange
operations

2 BSP

shall
engaged with
FOREX
transactions
with the
following:
(BIGFO)

1. B
a
k
i
n
g

i
n
s
t
i
t
u
t
i
o
n
s

o
p
e
r
a
t
i
n
g

i
n

t
h
e

P
h
i
l
i
p
p
i
n
e
s

2. Intern
ational
financi
al
institut
ions

3. Government
4. Foreign

5. Other
entitie
s

governments
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR
;

B
E
R
N
A
R
D

author
ized
by
MB

O
N; INTIG, JOY
,
ESTELA; DE
J
JESUS, TRACY
A
ANN.
N
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
S
2011-2012. REFERENCE: BANKING
E

LAWS & JURISPRUDENCE BY DIZON.

47

San Beda College of Law

Banking Laws

1 Inordertomaintain
convertibilityofpeso,
BSPmaybuythose
offeredandsellany
quantitydemanded
providedthatFOREXis
freelyconvertibleinto
goldorUSdollars

2 This requirement shall

notapplytodemandfor
foreignnotesandcoins

3 BSP shall effect its

exchange transactions at
the rates determined by
Sec.74
ForeignAssetPositionofBSP

1 BSPshallmaintainanet
positiveforeignasset
positionsothatgross
FOREXassetswillalways
exceedgrossforeign
liabilities

2 IfFOREXliabilities
exceedtwicetheFOREX
assets,BSPshallwithin60
days,submitreportto
Congressstatingoriginof
liabilitiesandmanner
whichitwillbepaid
EmergencyRestrictiononExchange
Operations

1 Inorderto:
1. Achieve primary
objective
stability)

(price

2. Protect international
reserves

3. Andintimeof
nationalemergency,
giveMBtimeto
takesconstructive

measu
resto
foresta
llor
comba
tcrisis

x
c
h
a
n
g
e

2 The MB with
concurrency
of 5 members
and with
approval of
President
may:

1. T
e
m
p
o
r
a
r
y
s
u
s
p
e
n
d
o
r
r
e
st
ri
c
t
s
a
l
e
o
f
e

2. Su
bje
ct
all
tra
nsa
cti
on
s
in
gol
d
an
d
FO
RE
X
to
lic
ens
e

3. Requ
ire
FOR
EX
obtai
ned
by
anyo
nebe
deliv
ered
to
BSP
at
effec
tive

exchangerate.
Foreigncurrency
depositsRA6426
(ForeignCurrency
DepositSystem)
shallbeexempted
AcquisitionofInconvertible
Currencies

1 BSP shall avoid acquisition

ofsuchcurrencies

2 Itmayrequiresuch
currenciesinanamount
exceedingtheminimum
balancetocovercurrent
demandsforsaidcurrency
onlywhenacquisitionof
suchisconsideredof
nationalinterest
ExchangeRates(Sec.73)

1 MB shall
determine
exchange
rate policy
of the
country

2 MBshall
determine
ratesat
whichBSP
shallbuyand
sellspot
exchange
andestablish
deviation
limitsfor
effective
exchange
rates

3 BSPshallnot
collect any
additional
commissions
other than
actual
telegraphic
costs

4 MB shall
similarly
determine
ratesforother
types of
FOREX
transactions
including
sales of
foreign notes
andcoins

5 Themargins
between
effective
exchangerates
andrates
established
maynot
exceedthe
corresponding
marginsfor

spotexchange
transactions
morethan
additional
costsinvolved
ineachtypeof
transactions
Operationswith
ForeignEntities

1 MB

may
authorizeBSP
to grant and
receive loans
from foreign
banks and
mayengagein
operations
with such
entities for
national
interest

2 BSP may also

actasagentof
suchentities

3 BSP may
pledge gold
or other
assets as
security
against
loans it
received
VI.Regulationsof
FOREXOperations
FOREXHoldingsof
Banks

1 BSPmay
atall
timeshave
FOREX
resources
sufficient
toenable
itto
maintain

internationalstability
andcovertability

outstanding
liabilitiesor
other
financialor
performanc
eratios

2 MB may require banks to

sell to BSP part of their
surplusholdingsofFOREX
to achieve this. Such
transfersmayberequiredto
allforeigncurrencies

5 Such
determinati
on shall be
applied to
all banks
uniformly
and without
discriminati
on

3 MBmaydeterminethenet
assets and liabilities of
banks

4 Todeterminesuch,the
followingshallbetaken
intoconsideration:(1)
banksnetworth,
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

;
B
E
R
N
A
R

Requirementof
BalancedCurrency
Position

1 MB may
require the
banks to
maintain
balance
position of
assets and
liabilitiesin
peso or
other

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.

48

San Beda College of Law

Banking Laws
currency.Banksshallbe
grantedreasonabletime
forsuch

1 Poweraboveshallbe
exercisedonlyunderspecial
circumstanceandappliedto
allbanksuniformlyand
withoutdiscrimination
RegulationofNonSpotExchange
Transactions

1 Torestrainbanksfrom

VII.LoanstoBanking
andOtherFinancial
Institutions
GuidingPrinciples

1 The
rediscount,
discount,loans
and advances
shall be used
to influence
volume credit
consistentwith
object price
stability

takingspeculativepositions
withrespecttofuture
fluctuationinFOREXrates,
MBshallissueregulations AuthorizedTypesof
CreditOperations
forsalesinnonspot
exchange
1 BSP may
perform the
Otherexchangeprofitsandlosses
following
1 Banksshallbearrisksof
credit
noncompliance with
operations in
terms of FOREX
the
documentstheybuyand
Philippines:
sell
(CPOA)

2 They shall also

bear other risks
including
exchange risk not
assumedbyBSP
InformationonExchangeOperations

1 BanksshallreporttoBSP
thevolumeandcomposition
ofthepurchasesandsalesof
goldandFOREXeachday

2 MBmayalsorequireother
personstoreportsuch
purchasesandsalesofgold
andFOREX.Accuracyof
declarationmaybeverified
byBSP

1. Com
merci
al
credit
s
credit
s
where
matur
ities
are
not
more
than
180
days
and
resulti

ng
from:

1. P
u
r
c
h
a
s
e

a
n
d

s
a
l
e

o
f

r
e
a
d
i
l
y

s
a
l
e
a
b
l
e

g
o
o

ds,
expor
tation
,
impo
rtatio
nand
their
trans
portat
ion
(PES
TI)

2. Storingnon
perishable
goods with
are duly
insured

ge
of
re
sp
ec
ti
ve
pr
o
d
uc
t
ex
ce
pt
if
lo
an
is
se
cu
re
d
b
y
li
en
o
n
7
0
%
va
lu
e
of
re
al
es
ta
te
pr
o
pe
rt
y

2. Produ
ction
credit
s
credit
where
matur
ities
are
not
more
than
360
days
and
resulti
ng
from
produ
ction
of
agricu
ltural,
anima
l,
miner
alor
indust
rial
produ
cts

1. S
uc
h
m
us
t
be
se
cu
re
d
b
y
a
pl
ed

3. Oth

ercredits
creditsnotunder
1and2.BSPcan
providefunds
from
non0inflationary
sources

4. Advancesgrant
advancesagainst
thefollowing
kindsofcollateral
forfixedperiods
whichshallnot
exceed180days,
except#4:(GSC
CUNN)

1. Gold
2. Securities
representing
obligations
ofBSP

3. Credit

instruments
inno.1

4. Credit
instru
ment
in no.
2 for
period
not
exceed
360
days

5. Utilized
portionsof
advancesin
current
amount
coveredby
regular
overdraft

6. Negotiable
treasury
bills
maturity
within 3

y
e
ar
s

1
0
y
e
a
r
s

7. N
e
g
o
ti
a
b
l
e
b
o
n
d
s
b
y
g
o
v
e
r
n
m
e
n
t
m
a
t
u
ri
t
y
n
o
t
m
o
r
e
t
h
a
n

2 Rediscountin
g, discounts,
loans and
advances in
above
provision
may not be
renewed or
extended
unless
extraordinary
circumstance
justifyit

3 Advances in
No. 6 and 7
may not
exceed 80%
of current
market value
ofcollateral
LoansforLiquidity
Purposes

1 BSPmay
extendloans
andadvances
foraperiod
notmorethan
7dayswithout
collateralfor
purposeof
providing
liquidityinthe
bankintimes
ofneed
VIII.EmergencyLoans
andAdvances
NatureofEmergency

LoansandAdvances

assistabank
experiencing
serious
liquidity

1 Emergencyloanoradvance
creditfacilityintendedto
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

;
B
E
R
N
A
R

problems
fromcauses
beyondits
control

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.

49

San Beda College of Law

Banking Laws

1 Grantofsuchis
discretionaryonMBandisa
temporaryremedialmeasure.
Itmustalsobefullysecured
WhenGranted

1. Inperiodofnationalor
localemergencyor
financialpanic,MBmay
at5membersvote,
authorizegrantof
extraordinaryloansto
bankssecuredbyassets
o Such loans shall
not expand the
banks
total
volume of loans
orinvestments

2. MB,at5membersvote,
grantemergencyloansto
banksevenduringnormal
periodtoassistbankin
precariousfinancial
conditionbroughtby
unforeseeneventsor
foreseeableeventsthough
inevitable
o Bankshouldnot
be insolvent
andhas assets
to secure
advances

1 No.1contemplates
emergencyaffectswhole
bankingcommunityin
financialcrisisgivingrise
towidespreadconfusionin
public

2 No.2providessituation
whereBSPgrantsloantoa
bankwithuncertain
financialconditionbutnot
insolvent

Limits

1 Amountof
emergency
loanor
advanceshall
notexceed
50%total
depositsand
deposit
substitutesof
bankandis
givenin2
tranches
FirstTranche

1 Amountof
1sttranche
shallbe
limitedto
25%oftotal
depositand
deposit
substituteof
bankand
securedby
government
securities

2 Amountof
firsttranche
mayexceed
25%ifitis
adequately
securedby
government
securitiesand
unencumbere
dfirstclass
collaterals

3 Priorto
releaseof
firsttranche,
bankshall
submit

resolutionof
itsboardof
directors
authorizing
BSPto
evaluatetheir
assetsto
determine
thatitisgood
forcollateral
SecondTranche

1 MBbyvoteof
5members
mayrelease
2ndtrancheon
thefollowing
conditionsthat
theprincipal
stockholders
shall:

of

5
consecutive
bankingdays

1. Furnishan
undertakingto
indemnifyand
holdharmless
fromsuita
conservator
appointedbyMB

IX.CreditTerms
InterestandRediscount

1 BSP

2. Provide

shall
collect
interest
onall
loans
and
advances
it
extends
notwiths
tanding
closure,
receivers
hipor
liquidati
ons

acceptable
securityadequate
tosupplementthe
collateralassets
SharesCollateral

1 Prohibitionin128shall
notapplyifitrefersto
acceptanceascollateral
ofshareandtheir
acquisitiondueto
foreclosureproceeding

2 BSP shall dispose of such

share by public bidding
within1year

3 Sec128BSPshallnot

1 Documents

interest and
rediscount
rates after due
consideration
hasbeengiven
tocreditneeds
of the market,
compositionof
BSP portfolio
and national
monetary
policy

4 BSPshallnotengagein
developmentbankingor
financingexceptfor
outstandingloansobtained
orextendedfordevelopment
financing
Overdraft

3 Intere

1 Overdraft shall be

rediscounte
d,
discounted,
boughtor
acceptedas
collateral
byBSP
mustbear
endorsemen
tofbank
RepaymentofCredits

1 Documents
rediscounted,
discounted,
boughtor
acceptedas
collateralby
BSPmustbe
withdrawn

st

eliminated within a period

AUTHO
RS:
MANILA,
ANTONI
O
CEASAR
;

Endorsement

2 MB shall fix

acquireoracceptsharesas
collateralandshallnot
participateinownershipof
enterprise.

rates
shall
be
appli
ed to
all
banks
unifo
rmly
and
witho
ut
discri
minat
ion

B
E
R
N
A
R
D

O
N; INTIG, JOY
,
ESTELA; DE
J
JESUS, TRACY
A
ANN.
N
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
S
2011-2012. REFERENCE: BANKING
E

LAWS & JURISPRUDENCE BY DIZON.

50

San Beda College of Law

Banking Laws
ondatesofmaturity
oruponliquidation
ofobligation

1 Banksshallhavetherightat
anytimetowithdraw
documentspresentedas
collateraluponpaymentof
fulldebtincludinginterests
OtherRequirements

1 MB shall provide
additional conditions
which

borrowing
institutionsmustsatisfy
ProvisionalAdvancestotheNational
Government

1 BSPmaymakedirect
provisionaladvanceswith
orwithoutinterestto
nationalgovernmentto
financeexpendituresin
annualappropriations
providedthat:
o It is repaid
beforeendof
3 months,
extendible
for another3
months
o Shallnotexceed
20%ofaverage
annual incomeof
borrowerforthe
last3preceding
fiscalyear
Prohibitions

IssueandNegotiation
ofBSPObligations

1 BSP
may
issue,
place,
buyand
sell
freely
negotia
ble
evidenc
eof
indebte
dnessof
BSP

2 Theissuance
ofsuchshall
only be
made in
cases of
extraordinar
ymovements
in price
levels

3 It may be
issued
directly
against the
international
reserves of
BSP or
issued
without any
relation to
assetofBSP

4 MBshall
determine
interestrates,
maturitiesand
may
denominate
theobligation
ingoldand

foreign
currencies

5 B
S
P
m
a
y
ac
q
ui
re
th
e
sa
id
e
vi
d
e
n
ce
of
in
d
e
bt
e
d
n
es
s
b
ef
or
e
th
ei
r
m
at
ur
it
y
b
y:

o Purchasein
openmarket
o Orredemptionifthe
BSP has reserved
its right to make
suchredemption

6 Suchshallnotbeincluded
amongBSPassetsandshall
the
1 BSP shall not
Acco
acquire or
accept sharesunt
as collateral
of
and shall not
participate inBSP
ownership of
Princ
enterprise.
2 BSPshallnot iples
engagein
development
bankingor
financing
exceptfor
outstanding
loans
obtainedor
extendedfor
development
financing

24.

of
Open
Mark
et
Oper
ation
s

Open

market
Operations for

1 Open

Purchase
sand
Salesof
Governm
ent
Securitie
s

market
purchas
esand
salesof
security
shallbe
madein 1 B
accorda
S
nceto
P
primary

objectiv
m
eof
a
price
y

stability

b
u
y

a
n
d

s
e
l
l

i
n

be
immediately
retiredand
cancelled
(because
therewas
discharge,

1 At
le
as
t
on
ce
ev
er
y
m
on
th,
M
B
sh
all
re
vi
e
w
po
rtf
oli
o
of
B
o
p
e
n

m
a
r
k
e
t

f
o
r

maker
acquiredthe
notehe
issued)
XI.Compositionand
ReviewofBSP
Portfolio
SP
for
fut
ure
cre
dit
pol
icy

ities
in
order
to
prom
ptly
contra
ct
BSP
credit
when
ever
nation
al
monet
ary
policy
so
requir
es

2 MB
shall
consi
derif
portfo
lio
hasa
suffici
ently
large
part
consis
tsof
assets
with
early
matur
i
t
s

a
c
c
o
u
n
t

t
h
e

XII.Bank
Reserves

f
o
l
l
o
w
i
n
g
:

1. Ev
ide
nc
e

of
ind
ebt
ed
ne
ss
iss
ue
d
dir
ect
ly
by
Go
ver

n
m
en
t

2. E
v
i
d
e
n
c
e

o
f

i
n
d
e
b
t
e
d
n
e
s
s

i
s
s
u
e
d

b
y

g
o
v
e
r
n
m
e
n

t
ins
tru
me
nta
lity
full
y
gu
ara
nte
ed
by
Go
ver
nm
ent

2 T
h
e
a
b
o
v
e
m
u
s
t
b
e
f
r
e
e
l
y

n
e
g
o
t
i
a
b
l
e

a
n
d

a
v
a
i
l
a
b
l
e
t
o

t
h
e
g
e
n
e
r
a
l
p
u
b
l
i
c
i
n

d
e
n
o
m
i
n
a
t
i
o
n

f
th
o
u
s
a
n
d
s
o
f
p
e
s
o
s
o
r
m
o
re

Reserve
Requirem
ent

1 In
ord
er
to
co
ntr
ol
vol
um
e
of
mo
ne
y
cre
ate
d
by
cre
dit
op
era
tio
ns,
ba
nks
sha
ll
be
req
uir
e
to
ma
int
ain
res
erv
es
aga
ins
t
the
ir
de

po
sit
lia
bil
iti
es

2 M
B

m
a
y
a
t
it
s
d
i
s
c
r
e
ti
o
n
r
e
q
u
i
r
e
b
a
n
k
s
t
o
m
a
i
n
t
a
i
n
r

e
s
e
r
v
e
s
a
g
a
i
n
s
t
f
u
n
d
s
h
e
l
d
i
n
t
r
u
s
t
a
n
d
li
a
b
il
it
i
e
s
f
o
r
d
e
p
o
s

it
substitut
es

3 Require
d
reserve
sshall
be
proporti
onalto
volume
of
deposit
liabiliti
esand
shall
ordinari
lytake
aform
ofa
deposit
inBSP

4 Reserv
A
U
T
H
O

e
req
uir
em
ent
sha
ll
be
ap
pli
ed
to
all
ba
nks
uni
for
ml
y
an
d
wit
ho
ut
RS:
MANILA
,
ANTONI
O

dis
cri
mi
nat
ion

5 R
e
s
e
r
v
e
s

a
g
a
i
n
s
t

e
p
o
s
i
t

s
u
b
s
t
i
t
u
t
e
s

s
h
a
l
l

CEASA N;
R;
INTIG,
BERNA JOY
RDO, ESTEL
JANSE A; DE

b
e

d
e
t
e
r
m
i
n
e
d

l
i
k
e

r
e
s
e
JESUS,
FROM
TRACY
SECTIO
N 2S ANN.
SAN
BEDA

r
v
e

r
e
q
u
i
r
e
m
e
n
t

a
g
a
i
n
s
t

r
e
g
u
l
a
r

b
a
n
k

d
e
p
o
s
i
t
s

COLLE 2011-2012.
GE OF REFERENCE:
LAW,
BANKING LAWS &
MENDIO JURISPRUDENCE BY
LA: AY DIZON.

51

San Beda College of Law

Banking Laws
deposit
substitutes

1 MB may exempt from

reserve requirement such
deposits with remaining
maturities of 2 years or
more and interbank
borrowings

2 Requirementtomaintain
bankreservesisimposed
primarilytocontrolvolume
ofmoneyandshallnotpay
interestonreserves
maintained
DefinitionofDepositSubstitutes

1 Depositsubstitutes
alternativeformofobtaining
fundsfromthepublic
throughtheissuance,
endorsementoracceptance
ofdebtinstrumentsfor
borrowersownaccountsfor
thepurposeofrelending
receivables

2 The following are some

depositsubstitutes:

1.
2.
3.
4.

Bankersacceptance
Promissorynotes
Participations
Certification
assignment

5. Repurchase

agreements

3 MB

shall
determine what
instruments are
considered as
depositsubstitutes

4 Depositsubstitutesof

of

Required
Reservesagainst
PesoDeposits
andforeign
currencydeposits

1 MBmayfix
minimum
reserve
ratiosto
pesoand
foreign
currency
depositsthat
eachbank
shall
maintainand
shallbe
appliedtoall
banks
uniformly
andwithout
discriminati
on
Reservesagainst
UnusedBalancesof
OverdraftLines

1 MB

may
establish
minimum
reserve
requirements
for unused
balance of
overdraft

commercial,industrialand IncreaseinReserve
Requirement
nonfinancialcompaniesfor
thelimitedpurposeof
1 MBmay
financingtheirownneeds
increase
shallnotbeconsidered

reserve
requirements
against
existing
liabilitiesin
agradual
mannerand
shallnot
exceed4%
inany30
dayperiod.
Banksshall
benotified
reasonablyin
advance
Computationof
Reserves

the
privilege
of
offsettin
g
reserve
deficien
cies

1 Reservepositionshallbe
calculateddailyonthebasis
oftheamountatthecloseof
businessfortheday

2 Inholidayornonbanking
days,thereserveposition
iscalculatedattheclose
ofthebusinessday
immediatelypreceding
suchholiday

facilities.
BSP may
charge fees
forsuch

2 Deposit

5 Ifbank
chronically
hasreserve
deficiency,
MBmay
limitor
prohibitthe
bankfrom
makingnew
loansor
investments

3 Forpurposeofcomputing
reserveposition,principal
officeofthebankinthe
Philippinesandall
branchesareconsideredas
singleunit
ReserveDeficiencies

1 When

reserve
positionisbelowthe
required minimum,
thebankshallpay:
o 1/10of1%amount
ofdeficiencyor
o The prevailing
91day treasury
bill rate plus
3% points
whichever is
higher

6 Itmayalso
requirethat
part or all
net profits
beassigned
assurplus

7 MBmay
modifyorset
asidethe
reserve
deficiency
penaltyina
periodofa
strikeor
lockoutofthe
bankor
national
emergency

2 Banksshallpermittedto
offset bank deficiency
withanyexcessreserves
which may have held
duringotherdaysofthe
week

3 Banks shall be required to

pay penalty only on the InterbankSettlement

averagedailydeficiencyin
theweek
1 BSP shall
establish
4 Incaseofabuse,MB
interbank
may deny any bank
clearing
AUTHO
RS:
MANILA,
ANTONI
O

C
E
A
S
A
R
;

reserves
maintained
by banks in
theBSPshall
serve as bais
for the
clearing of
checks and
settlement of
interbank
balances

3 Anybankthat
incursan
overdrawing
initsdeposit
accountin
BSPshall
fullycover
suchoverdraft
andpay
interest(1)at
1/10of1%
perpayor(2)
prevailing91
daytreasury
billrateplus
3%point
whicheveris
higher

4 Settlement of
clearing
balancesshall
not be effect
for accounts
which
continues to
be overdrawn
for

B
O, JANSEN;
E
INTIG, JOY
R
ESTELA; DE
N
JESUS, TRACY
A
ANN.
R
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
D

2011-2012. REFERENCE:

BANKING LAWS

&

JURISPRUDENCE BY DIZON.

San Beda College of Law

Banking Laws

52

Loans

theyare
notifiedbythe
restriction.
Restrictions
shallbe
appliedtoall
banks
uniformlyand
without
discrimination

5consecutivedaysuntil
overdrawnispaidorhas
emergencyloan

1 Bankswithexisting
overdraftswithBSPat
effectivityofNCBAmay
eitherconvertsuchto
emergencyloanorsettle
suchimmediately
ExemptionfromAttachment

1 DepositsinBSPasreserve

1 MBshall
issue
regulation
with
respectto
maximum
permissib
le
maturities
ofloans
and
investme
ntsand
amount
of
security

requirementshalleexempt
fromattachment,
garnishmentofcourtor
governmentagencyto
satisfyclaimofaparty
otherthanthegovernment PortfolioCeilings
XIII.SelectiveRegulationof
BankingOperations
GuidingPrinciple

1 MBshallensuresupply,
availabilityandcostof
moneyareinaccordwith
needsofPhilippine
economyandthatbank
creditisnotgrantedfor
speculativepurposes.
Regulationonbank
operationsshallbeapplied
toallbanksuniformlyand
withoutdiscrimination
MarginRequirementagainstLetters
ofCredit

1 MB may prescribe
minimumcashmargins
foropeningoflettersof
credit
RequiredSecurityagainstBank

1 WheneverMB
considers it
advisable to
prevent or
check an
expansion of
bank credit,
MBmayplace
upperlimiton
amount on
loans and
investment of
bank and its
rate

of
increase

2 Innocaseshall
MBestablish
limitsbelow
thevalueof
loansor
investmentsof
banksonthe
dateonwhich

MinimumCapital
Ratios

Development
andother
international
financial
agencies

1 MBmayprescribe
minimumratioswhich
capitalandsurplusof
banksmustbeartothe
volumeoftheirassets

2 Thepresident

CoordinationofCreditPolicies

may
designateany
of

his
financial
advisers to
jointly
represent the
government
withBSP

1 GOCCs which perform

banking functions shall
coordinate their banking
policywithMB
XIV.FunctionsasBankerofthe
Government
DesignationofBSPasBankerof
Government

OfficialDeposits

1 BSP shall act as baker of

1 BSP

government, its political

subdivisions

and
instrumentalities

1 BSOshallrepresent
governmentinIMFand
shallcarryaccountsasmay
resultfromPhilippine
membershipwithsuch
Fund

2 Asageneral
policy,
government
cashbalance
shouldbe
deposited
withBSPand
only
minimum
working
balancesisto

RepresentationtootherFinancial
Institutions

1 BSPmaybeauthorizedby
theGovernmenttorepresent
itindealingswith
InternationalBankfor
Reconstructionand
O

AUTHO
RS:
MANILA,
ANTONI

C
E
A
S
A
R

3 Government
bankmay
holddeposits
ofpolitical
subdivisions
beyond
minimum
working
balances
whensuch
subdivision
have
outstanding
loanswith
former

4 BSP

shall
bethe
offici
al
depos
itory
of the
gover
nment

RepresentationwithIMF

beheldby
government
banks

may
pay
inter
estn
depo
sits
of
the
gove
rnm
ent
as
well
on
depo
sits
of
bank
s
Fiscaloperations

;
O, JANSEN;
B
INTIG, JOY
E
ESTELA; DE
R
JESUS, TRACY
N
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
R
2011-2012. REFERENCE: BANKING
D

LAWS & JURISPRUDENCE BY DIZON.

53

San Beda College of Law

Banking Laws

1 BSPshallopenageneral
cashaccountforthe
TreasurerofthePhilippines
inwhichliquidfundsshall
bedeposited

2 Transfersoffundsfrom
such account shall be
madeonlyuponorderof
Treasurer
OtherBanksasAgentofBSP

1 Inperformanceasfiscal
agent,BSPmayengage
servicesofother
governmentanddomestic
banksforoperationsin
localitiesorabroadwhere
BSPdoesnothaveoffice

2 Fiscal operations in
foreign countries, BSP
mayengageinservicesof
foreignbanks

g
o
v
e
r
n
m
e
n
t

1 BS
P
ma
y
cha
rge
equ
itab
le
rate
s
for
serv
ices
it
ren
ders
to
the

operations
increase
liquidityand
stabilizevalue
ofsaid
securityin
orderto
promote
investmentin
government
obligation

2 MB shall use
the resources
oftheFundto
prevent or
moderate
sharp
fluctuations in
the quotations
ofgovernment
obligation

X
V.
M
ar
ket
in
g
an

d
Sta
bil
iza
tio
n
of
Se
cur
itie
s
for
the
Ac
co
unt
of
the
Go

Resourcesof
SecuritiesStabilization
Fund

1 It shall come

from balance
of the fund
heldbythe
Central Bank
(RA265)

3 However,

Services

Remunerationfor

itshallnot
endeavour
toalter
movement
softhe
market
resulting
from
basic
changes
ininterest
rates

1 Purposeof

ProfitsandLossesoftheFunds
vernment
Issueof
Government
Obligations

1 Issueof
securities
representi
ng
obligation
sof
governme
ntmaybe
made
through
BSP
which
mayactas
agentof

g
o
v
er
n
m
e
nt

2 B
S
P
s
h
al
l
n
o
t
g

u
a
r
a
n
t
e
e
t
h
e
p
l
a
c
e
o
f
s
a

id
securitie
sand
shallnot
subscrib
etotheir
issue
exceptto
replace
its
maturity
holdings
Methodof
Placing
Government
Securities

1 BS
P
ma
y
pla
ce
sec
urit
ies
in
the
suc
h
thr
ou
gh
dir
ect
sal
e
to
fin
anc
ial
ins
titu
tio
ns
an
d
pu
bli
c

2 B
S
P

s
h
a
l
l

n
o
t

b
e

m
e
m
b
e
r

o
f

a
n
y

s
t
o
c
k

e
x
c
h
a
n
g
e

o
placing 1 Se
r
governm
cur

ent
itie
s
securities
s
y
Sta
n Servicingand
bili
d Redemptionof
zat
i PublicDebtshall
ion
c beeffected
Fu
a throughBSP
nd
t
sha
Securities
e
ll
StabilizationFund

ret
b
ain
1 Securitie
u
net
s
t
Stabiliza
pro

tion
fits
m
Fund
it
a
madefor
ma
y
the
y

account
ma
i
ofthe
ke
n
governm
on
t
entand
op
e
its
era
operatio
r
tio
nshall
f
ns
consists of
e
reg
r
purchases
ard
e
and sales,
les

intheopen
sif
f
market, of
sai
o
bondsfully
d
r
guaranteed
pro

by the
fits
t
Governme
ari
h
nt
sen
e
fro

m
p
cap
u
ital
r
gai
p
ns
o
or
s
int
e
ere

st
o
ear
f

nin
g.
It
sh
all
als
o
be
ar
net
los
s.
XVI.
Functions
as
Financial
Adviser
Financial
Adviser
onOfficial
Credit
Operations

1 B
e
f
o
r
e

u
n
d
e
r
t
a
k
i
n
g

c
r
e
d
i
t


operati
on
abroad,
govern
ment,
throug
h
Secreta
ryof
Financ
e,shall
request
the
opinio
nof
MB

2 Opinio
nof
MB
shallbe
based
on(1)
gold
and
foreign
exchan
ge
resourc
esof
the
nation
and(2)
effects
ofsuch
operati
onin
balance
of
payme
ntsand
on
moneta
ry
aggreg
ates

3 Whene
ver

go
ve
rn
m
en
t
co
nt
e
m
pl
at
es
bo
rr
o
wi
ng
wi
thi
n
th
e
Ph
ili
pp
in
es,
th
e
pri
or
op
ini
on
of
M
B
sh
ou
ld
als
o
be
re
qu
est
ed

4 Th

e
con
stit
uti
on
pro
vid
es
that
for
eig
n
loa
ns
ma
y
onl
y
be
inc
urr
ed
in
acc
ord
anc
e
wit
h
the
law
and
reg
ulat
ion
of
mo
net
ary
aut
hor
ity

5 Inf
or
ma
tio
n
on
for

eign
loans by
the
governm
ent shall
be made
public

i
t
y

(
N
E
6 The
D
President A
may
)
contract
foreign
loanswith
prior
concurrenc
eofMB
andsubject
to
limitation
ofthelaw.
MBshall,
within30
daysatend
ofquarter,
submitto
Congressa
reportof
loansmade
by
governmen
tthat
would
increase
foreign
debt
Repres
entatio
non
the
Nation
al
Econo
mic
and
Develo
pment
Author

A
U
T
H

ORS:
MANILA
,
ANTONI
O
CEASA

R;
BERNA
RDO,
JANSE
N;
INTIG,

J
O
Y
E
S

LAW, MENDIOLA: AY
TELA;
FROM
DE SECTION 2011-2012.
2S - SAN REFERENCE: BANKING
JESUS
LAWS &
BEDA
,
COLLEG JURISPRUDENCE BY
TRAC
DIZON.
E OF
Y ANN.

54

San Beda College of Law

Banking Laws
nee
ded
for
ban
k
note
s
and
coin
pro
duct
ion

1 Thedeputygovernor
shallbeanexofficio
memberofNEDAin
ordertoassure
effectivecoordination
betweeneconomic,
financialandfiscal
policiesofgovernment
XVII.Privileges
TaxExemptions

1 BSPshallbeexemptfora5ApplicabilityofCivil
year from approval ofServiceLaw
NCBA from all national,
1 Appointm
provincial, municipal and
entBSP,
citytaxes
except
2 Exemptionshallapplytoall
policy
propertyoftheBSPaswell
determini
astocontractsanddeed
ng,
relatedtoconductof
primarily
business
confidenti
3 It shall not apply to
alor
those payable by
highly
persons merely doing
technical
businesstoBSP
innature,
4 Foreign loans shall be
shallbein
exemptfromanytaxesand
accordanc
payment is assumed by
ewith
BSP
CSL
ExemptionfromCustomsDuties

1 The following are

exempted from custom
duties notwithstanding
speciallaws:

1. Importationand
exportation of
BSP of notes,
coins and other
metals

2. Importationofall
equipment

2 No
qualification
requirement
for position
shall be
imposedother
than those set
byMB

3 MBor
Governormay,
withoutneed
offurther
obtaining

approvalof
government
agency,
appoint
personnelin
BSP

4 Officers
of BSP
shall
not
engage
directly
or
indirect
ly in
partisan
political
activitie
s
XVIII.Transitory
ProvisionsofNCBA
PhaseoutofFiscal
AgencyFunctions

1 BSPshall
within3
yearsbut
nolonger
than5
years,
phaseout
allfiscal
agency
functions
andshall
transferit
toDOF

Phaseoutof
RegulatoryPowers
overFinance
Corporations

1 BSPshallwithin5years
phaseoutitsregulatory
powersoverfinance
companieswithoutquasi
bankingandtransferitto
SEC
ImplementingDetails

1 BSPshallbemade
operationalbytheseacts:
(1)Presidentappoint
membersofMBwithin60
daysand(2)transferof
assetsandliabilitiesofCB
toBSPwithin90days

2 All incumbent personnel

of CB shall continue to
exercise duties in BSP if
theyarenecessary
TransferofAssetandLiabilities

1 UponeffectivityofAct,(1)
3membersofMBincluding
Governor,(2)Sec.of
Finance,(3)Sec.ofDBM
and(4)Chairmenof
CommitteeonBanksof
Congressshalldetermine
assetsandliabilitiesofCBto
betransferredtoBSP:
o MBandSec.of
Financeshallwork
out creative
monetarysolution
toretireCBofits
liabilitiesatleast
cost
o BSP shall remit
75% of net
profits to a
special deposit
account(sinking

fu
nd
)
un
til
ne
t
lia
bil
iti
es
of
C
B
is
liq
ui
da
te
d
o Assets
and
liabilit
ies
shall
be
limite
dto
an
amou
ntthat
will
enable
BSP
to
perfor
mon
viable
basis.
Assets
shall
excee
d
liabilit
y,by
COA,
by
P10B
o
Liabi

lities
by
BSP
shall
inclu
de
liabili
ties
circul
ating
notes
and
coins
o
As
set
or
lia
bil
ity
of
C
B
no
t
tra
ns
fer
re
d
sh
all
be
ret
ai
ne
d
an
d
liq
ui
da
te
d
by
C
B
B
oa
rd

ofLiquidators
foraperiodnot
exceeding25
years

1 BSP shall
be
organized
irrespective
ofRA7430
(Optimum
Utilization
of
Personnel
Act)

2 All actions shall be

reported to Congres and
the President within 30
days
MandatetoOrganize

no
preferentialor
priorityright
tobegivento
anypersonnel
for
appointment
innew
staffing
pattern

2 Thereshallbe
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

;
B
E
R
N
A
R

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.

San Beda College of Law

Banking Laws
SeparationBenefits

1 MB

shall
authorize
separation
benefits in
addition to all
gratuitiesunder
thelawtothose
separated in
service due to
reorganization

RepealingClause:RA265andPD1792arerepealed
TransferofPowers

1 All powers
vested in
CB not
inconsisten
t with
NCBA is
deemed
transferred
toBSP
SuspenseAccounts

1 Sec46
Monetary
Adjustment
Accountand
Exchange
Stabilization
Adjustment
Accountare
repealed.
Revaluationof
International
Reserve
Accountshall
continueforthe
accountofthe
sameentity

AUTHORS: MANILA,
ANTONIO CEASAR;
BERNARDO, JANSEN; INTIG,
JOY ESTELA; DE JESUS,
TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW,
MENDIOLA: AY 2011-2012. REFERENCE: BANKING
LAWS & JURISPRUDENCE BY DIZON.

56

San Beda College of Law

Banking Laws
CHAPTER9Unclaimed
BalancesandTrustReceipts

1. Name

and
last
known
residen
ce

I.UnclaimedBalances
Definitions

1 Unclaimedbalances
includescreditsordeposits
ofmoney,bullions,security
andanyevidenceof
indebtednesswithbanks,
loanassociationsandtrust
corporationsinfavorofany
person(1)knowntobe
deador(2)whohasnot
madefurtherdepositsor
withdrawalduringthe
preceding10yearsormore

2 GovernedbyActNo.3936
Requiring Banks to
Transfer

Unclaimed
Balances to Insular
Treasury

3 Such unclaimed balances,

together with crease and
proceeds shall be deposited
totheTreasurertothecredit
ofthegovernment

4 Demand drafts cannot be

escheated but telegraphic
notes can (Republic vs.
FNCB)
Procedure

1. WithinmonthofJanuaryof
everyoddyear,allbanks
shallforwardtoTreasurera
statementunderoathofall
creditsanddepositsheldby
themofpersons(1)known
tobedeador(2)whohas
notmadefurtherdepositsor
withdrawalshowing:

2. A
m
o
u
n
t

a
n
d

d
a
t
e

o
f

o
u
t
s
t
a
n
d
i
n
g

u
n
c
l
a
i
m
e

b
a
l
a
n
c
e

3. Dat
e
wh
en
per
son
die
d
or
ma
de
his
last
dep
osit
or
wit
hdr
aw
al

4. Interes

t due
on
unclai
med
balanc
e

2. Copyof
sword
statement
shallbe
postedn
conspicuous
placein
premisesof

thebankatleast60days
fromdateoffiling

2. All
credit
ors or
deposi
torsor
bank
may
be
includ
ed in
one
action

3. Immediatelybefore
filing,bankshall
communicatewith
personwhosefavor
theunclaimed
balancestandof
such

1. Itisthedutyofthe
Treasurer to inform
theSGtheexistence
of

unclaimed
balances

4. WhenSGisinformedof
such,heshallcommencean
actioninthenameofthe
PeopleoftheRepublicin
theCFI(RTC)ofthe
provinceorcitywherethe
bankislocated

1. Itshallbejoined
as parties the
bankandallsuch
creditors and
depositors

5. Serviceof
processin
suchaction
oractions
shallbe
madeby
deliveryof
copyto
defendant
bankandby
publicina
newspaper
ofgeneral
circulation

6. At time of
issuance of
summons,
clerk of cert
shallalsoissue
notice:

1. Signed

byhim

2. D
ir
e
ct
e
d
t
o
al
l
p
e
rs

o
n
s
o
t
h
e
r
t
h
a
n
d
e
f
e
n
d
a
n
ts
n
a
m
e
d
t
h
e
r
e
i
n

3. Req
uirin
g
them
to
appe
ar
with
in60
days
after
first
publ
icati
on

bank
neglectsor
refusesto
filesworn
statement,
bankshall
paytothe
government
500Phpper
monthfor
each
infraction

4. Show cause
why
unclaimed
balance
should not be
deposited to
Treasurer

5. Notify them that if

theydonotappear,
thecourtwillgrant
relieftoRP

7. Copy of notice shall

be attached to
summonsrequired

Immunityfromsuit

1 Anybank

8. Anypersoninterestedmay

whichhas
madea
deposittothe
Treasurer
shallnot
thereafterbe
liableto
personswho
broughtan
action
againstthe
bankfor
such
unclaimed
balances.

appeartobecomeaparty.
Uponcompletionof
publication,courtshall
havecompletejurisdiction

9. Courtmusthearallparties.
Ifthesuchareunclaimed,
theyshallbeescheatedto
governmentandcourtwill
ordertheirdeposittothe
Treasurer
Penalties

1 Ifpresident,cashieror
managingofficeofthe
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

;
B
E
R
N
A
R

Thebank
shallbe
defendedby
SGwithout
costs
DisclosureofService
andMaintenance
FeesonDormant
Accounts

1 Banks may
imposeservice
or
maintenance
fees

on
dormant or
inactive
accounts

2 Provided
thatbefore
suchfees
are
imposed,
theperiod
for
dormancy
and
minimum
balanceis
properly
disclosed

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.

57

San Beda College of Law

Banking Laws
m
un
ici
pa
lit
y
de
ce
as
ed
la
st
re
si
de
d

Reclassification

1 Allunclaimedbalances
alreadyreportedto
Treasurershallbe
transferred/reclassified
fromdepositliability/other
creditaccountstoliability
account,Duetothe
Treasurerofthe
Philippinesuntil
depositedtoTreasurer
EscheatsunderRulesofCourt

1 Rule 91 of ROC
appliedincaseaperson
died intestate and left
properties in the
Philippines

2 Sec1whenpersondied
intestate,leftproperties
andhasnoheir,SGmay
filepetitioninCFIof
provincewheredeceased
lastresidedorwherehe
hadestate

3 Sec2courtshallrelease
orderofhearingthatshall
fixdateandplaceofhearing
notmorethan6months
afterentryoforderandshall
directpublicationin
newspaperonceaweekfor
6consecutiveweeks

4 Sec3uponarrivalofdate
fixedandnosufficient
causeshowntothecontrary,
courtshalladjudgeestate,
afterpaymentofjustdebts
andcharges,escheated
o
Personal
estate
assigned to
city or

o
R
e
a
l
e
s
t
a
t
e

a
s
s
i
g
n
e
d

t
o

c
i
t
y

o
r
m
u

n
i
c
i
p
a
l
i
t
y

p
r
o
p
e
r
t
y

i
s
s
i
t
u
a
t
e
d

o If
d
e
c
e
as
e
d
n
e
v
er
re
si
d
e
d
h

ere,whole
estateshallbe
assignedtocity
ormunicipality
whereitis
situated
o Such estate shall
be for benefit of
public
schools
andcharity

5 Sec4ifdevisee,legatee,
heir,widow,widoweror
otherpersonentitledto
estateclaimsuchwithin5
yearsfromdateof
judgment,heshallhavetitle
ofsuch
o If already sold,
municipality or
city shall
be
accountable to
proceeds
o If claim not
made within
said time, he
shallforeverbe
barred

6 Sec5actionsfor
reversionorescheatof
propertiesinviolation
ofconstitution,shallbe
governedbythisRule
TheStateastheHeirofaDecedent

CFI)

1 Statehasright
overproperty
ofdecedent
underArt.
11011014of
NCCwhere
stateshall
inherit
decedentestate

5 Sec2bof
Rule4of
ROCcannot
govern
escheat
proceedings
becauseAct.
3986isan
actioninrem
whileformer
isinpersonna

2 Bankcanbea
defendantin
anUnclaimed
Balance
petitionerin
Act.3986
becauseitisa
realpartyas
thejudgment
ofthecase
wouldinjure
thebank
sinceitshall
bedeprived
ofitsuseof
deposits
(Republicvs.
CFI)

3 All
defendant
banksare
nottobe
includedin
oneaction
aloneifthey
arein
different
jurisdictions
becausethe
lawstate
actions

4 There will
only be one
action filed
for all banks
if they are
under one
jurisdiction
(Republicvs.

35.

Trust Receipts
Law(PD115)

PolicyoftheState

1. Encourage
and promote
use of trust
receiptsasaid
tocommerce

2. Provide
regulati
on of
trust
receipts
to
assure
protecti
on of
rights
of
parties

3. Declarethe
misuse
and/or
misappropria
tionofgoods
orproceeds
asacriminal
offense
punished
underEstafa
DefinitionofTerms

1. Document

written or printed
evidenceoftitletogoods

4. Goods
includes
chattels
and
personal
property
otherthan
money,
thingsin
actionor
things
affixedin
lands

2. Entrusteepersontaking
possessionofgoods,
documentsorinstruments
undertrustreceiptand
anysuccessorininterest

3. Entrusterperson
holdingtitleoverthe
goods,documentsor
instrumentsandany
successorininterest
(titlehereissecurity
interestandnot
absoluteownership)

AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

5. Instrument
negotiable
instruments
;
B
E
R
N
A
R

underNIL;
certificateof
stock,
certificateof
deposit,credit
orinvestment
instrument
where
enstrustee
appearstobe
theownerin
itsface.
Instrument
doesnot
include
document

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.

58

San Beda College of Law

Banking Laws

6. Purchasetakingbysale,
conditional sale, lease,
mortgageorpledge

7. Purchaserpersontakingby
purchase

8. Securityinterest
propertyinterestingoods,
documentsorinstruments
tosecureperformanceof
someobligationby
entrustee.Itincludestitle
wheneversuchtitleisin
substancetakenor
retainedforsecurityonly.

entrusterand
tosellsuch
with
obligationto
returnthe
proceedsor
returnsuchin
caseofnon
sale

3 In case of
goods or
documents:

4 In case of

1. To sell

1. Tosell

the
goods

9. Personanindividual,

2. To

trustee,receiverortwo
more persons having
jointinterest

ma
nuf
act
ure
the
go
od
s
wit
h
the
pur
po
se
of
ulti
ma
te
sal
e
or

10. Trustreceiptwrittenof
printeddocumentsigned
byentrusteeinfavorof
entrustercomplywith
conditionofTRL.No
formalityforexecutionis
necessaryforvalidity

11. Value

any
considerationsufficientto
supportasimplecontract

TrustReceiptTransaction

1 Trustreceipttransaction
anytransactionbyand
betweenentrusterand
entrusteewhereentruster
holdabsolutetitleor
securityinterestovergoods,
documentsorinstruments,
releasesthesametothe
entrustee

2 Theentrusteesignsatrust
receiptandbindshimselfto
holsthegoodsforthe

hip
them
in
man
ner
nece
ssar
yfor
their
sale
instruments:

or
procur
e
exchan
ge

2. Delive
r them
to
princip
al

3. Effe

3. To
load,
unlo
ad,
ship
or
trans

ct
cons
um
mati
on
invo
lvin
g
deli
very
to
depo
sitor
y

4. E
ff
ec
t
th
ei
r

presentation,
collection or
renewal

5 Saleofgoods,documentsor
instrumentsbypersonin
businessofsellingsuchfor
profitwho(1)hasgeneral
propertyrightsinsuchgoods
overthebuyeror(2)who
sellsthesametothebuyer
oncredit,retainingtitleor
interestassecurityfor
paymentdoesnotconstitute
trustreceipttransaction

1 There are
two
possible
situation in
trust
receipt
transaction
:

1. Refer
sto
mone
y
recei
ved
unde
rthe
oblig
ation
invol
ving
the
duty
to
deliv
erit
(entr
egarl
a)to
owne
rof
merc
handi
se
this
happ
ens
when
entru
stee
sold
the
good
sand
must
retur
nthe
proce

eds
to
enstr
uster

2. Re
fer
s
to
me
rch
an
diz
e
rec
eiv
ed
un
der
obl
iga
tio
n
to
ret
urn
in
(de
vol
ver
a)
to
ow
ner

thi
s
ha
pp
ens
wh
en
ent
rus
tee
fail
ed
to

sellthegoods
andmustreturn
goodsto
entruster

acquir
e
credit
except
utilizat
ion,as
collate
ralof
their
merch
andise

2 Trustreceiptisaseparate
andindependentsecurity
transactionintendedtoaid
infinancingimporters
wherebygoodsareheldas
securitybylending
institutionforloan

3 In Sps. Vintola vs.

InsularBankofAsia
and America, it
statedthefollowing:

1. Letterofcredittrust
receiptiswherea
bankextendsaloan
withatrustreceipt
fortheloan.
Transaction
involvedaloan
featureintheletter
ofcreditand
securityfeaturefor
thetrustreceipt

2. Trustreceiptisa

4 Itisa
document
wherethe
lender
(entruster),
havingno
priortitle
or
possession
tothe
goods
lends
moneyto
the
borrower
(entrustee)
onsecurity
ofthe
goods

security
agreementwhich
abankacquiresa
securityinterestin FormofTrustReceipts
thegoods.

3. Itsecures
indebtednessand
therecanbeno
suchthingas
securityinterest
thatsecuresno
obligation

4. Trustreceiptisa
securitytransaction
toaidfinancing
importerswhodo
nothavesufficient
fundstofinance
importationandwho
maynotbeableto

1 Trust
receipt
neednotbe
in any
particular
form but
every trust
receipt
must
contain:

1. D
e
s
c
r

i
p
t
i
o
n

o
f

g
o
o
d
s
,

d
o
c
u
m
e
n
t
s

o
r

i
n
s
t
r
u
m
e
n
t
s

2. Total

invoic
e
value

AUTHO
RS:
MANILA,
ANTONI
O
CEASAR
;

B
E
R
N
A
R
D

O
N; INTIG, JOY
,
ESTELA; DE
J
JESUS, TRACY
A
ANN.
N
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
S
2011-2012. REFERENCE: BANKING
E

LAWS & JURISPRUDENCE BY DIZON.

59

San Beda College of Law

Banking Laws

is taken as a
right of the
BloomingMills
entrustee
entruster but is
vs.CA,itwas
4. Toholdin
not sold to a
statedthatifthe
trust,sellor
public/private
entrustertook
returnforthe
sale yet, the
possessionofthe
entrusterthe
debt of the
goods,the
goods,
entrustee still
entrusteeisstill
documentsor
exists
EntrusternotResponsibleonsalebyEntrustee
liableforthe
instruments
wholeamount
Entrustershallnot,merelybygivingentrusteeliberty
2 May contain other terms
2
Theentrustee
ofsale,beresponsibleasprincipal/vendorofsalemade
not contrary to TRL or
shallonlybe
byentrustee
laws
releasedfromhis
liabilityifhe
CurrenciesinwhichTrustReceipt
ObligationsofEntrustee
maybedenominated
paysthe
1.Holdthegoodsandshalldisposethemin
entrusterhis
accordancewithconditionsoftrustreceipts
1 Trust receipt may be
obligationorthe
denominated in Philippine
2.Receiveproceedsintrustandturnovertoentruster3.
entrustersells
Insurethegoodsagainstloss
orforeigncurrency
thegoodsata
4.Keepsaidgoodsorproceedsseparateandcapableof
2 Ifitisdenominateinforeign privateorpublic
identification
currency,paymentshallbe
saleand
5.Returngoodsineventofnonsaleordemandof
madeinitsequivalent
appropriatethe
entruster
Philippinecurrencyat
proceeds
6.Observeallothertermsprovided
FOREXinturnover
3 Even if the thing

3. Undertaking of1 InPhilippine

RightsofEntruster
1.
E
n
t
i
t
l
e
d

t
o

p
r
o

c
e
e
d
s

t
o

t
h
e

e
x
t
e
n
t

LiabilityofEntrusteeforLoss
o
t

f
o
Riskoflossshallbebornebyentrustee.

Lossofgoods,documentsorinstruments
t
t
irrespectiveofWONitwasduetothefaultor
h
h
negligenceofentrusteeshallnotextinguishhis
e
e
obligation

a
e
RightsofPurchaserforValueandinGoodfaith
m
n
o Anypurchaseringoodfaithandforvalueofthe
t
goodsfromentrusteeacquiresthegoodsfreefrom
u
r
entrusterssecurityinterest
n
u
t
s
ValidityofEntrustersSecurityInterestagainstCreditors

t
oEntrusterssecurityinterestingoods,documentsor
e
instrumentsshallbevalidagainstallcreditorsof
w
r
entrusteeforthedurationofthetrustreceipt
i

agreement
n
o
g
r
ViolationofTRL

i
n

c
a
s
e

o
f

n
o
n

s
a
l
e

r
e
t
u
r
n

o
f

g
o
o
d
s
2.
E
n
t
r
u
s
t
e
r

m
a
y

c
a
n
c
e
l

t
r
u
s
t

a
n
d

t
a
k
e

p
o
s
s
e
s
s
i
o
n

o
f

g
o
o
d
s
,

d
o
c
u
m
e
n
t
s

o
r

i
n
s
t
r
u
m
e
n
t
s

a
t

a
n
y

t
i
m
e

u
p
o
n

d
e
f
a
u

l
t

o
r

f
a
i
l
u
r
e

o
f

e
n
t
r
u
s
t
e
e

t
o

c
o
m
p
l
y

w
i
t
h

o
b
l
i
g

a
t
i
o
n
a
.

E
n
t
r
u
s
t
e
r

n
o
w

i
n

p
o
s
s
e
s
s
i
o
n

m
a
y

g
i
v
e

n
o
t

i
c
e
t
o
e
n
tr
u
s
t
e
e
o
f
i
n
t
e
n
ti
o
n
t
o
s
e
ll
b
.
M
a
y
,
n
o
t
l
e
s
s
t
h
a
n
5
d
a

3.

P
aft r
o
c
e
e
d
s
oti
ce o
,
f
se
ll s
su a
ch l
in e
pu
bli s
c
h
or a
pr
l
iv
l
at

e
b
sa
e
le

c.
a
E
p
nt
p
ru
l
st
i
er
e
in
d
pu
bli
t
c
sa o
le :
ca
n a
be .
co
m P
a
e
y
a
purchm
aser e
n

o
f

e
x
p
e
n
s
e
s

t
h
e
r
e
o
f
b.
P
a
y
m
e
n
t

o
f

e
x
p
e
n
s
e
s

o
f

e
t
a
k
i
n
g
,
k
e
e
p
i
n
g
a
n
d
s
t
o
ri
n
g
g
o
o
d
s
,
d
o
c
u
m
e
n
t
s
o
r
i
n
s
tr
u
m
e

nt
s
c.
Sa
tis
fa
cti
on
en
tr
us
te
e
s
in
de
bt
ed
ne
ss
4.
T
h
e

e
n
t
r
u
s
t
e
e

s
h
a
l
l

r
e
c
e
i
v
e

a
n
y

s
u
r
p
l
u
s

b
u
t

s
h
a
l
l

b
e

l
i
a
b
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AUTHORS:
MANILA,
ANTONIO
CEASAR;
BERNARDO,
JANSEN; INTIG,
JOY ESTELA; DE
JESUS, TRACY
ANN.
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
2011-2012. REFERENCE: BANKING
LAWS & JURISPRUDENCE BY DIZON.

60

San Beda College of Law

Banking Laws

1 TRL is violated whenever

entrusteefailsto:

1. Turnoverproceeds
2. Return goods in
nonsale

2 Merefailuretoaccountor
return gives rise to the
crime which is malum
prohibitum

3 There is no requirement to
prove intent to defraud
(Ongvs.CAandColinares
vs.CA)

4 What the law punishes is

thedishonestandabuseof
confidence in handling
money

5 Intent to misuse or
misappropriate goods
should be proved
(Metrobankvs.Go)

6 Failuretoaccount
upondemandof
fundsorpropertyis
evidenceof
conversionor
misappropriation

7 Mere failure to account

for goods constitute Par
1(b) of Estafa (Ong vs.
CA)

8 Failuretodeliverproceeds
causeprejudicenotonlyto
thecreditorbutalsotothe
publicinterest

9 InSps.Vintolavs.Insular
BankofAsiaandAmerica,
itistatedthatthereturnof
merchandizedoesnot
amounttorecoverbythe
lendingbank

10 Thisisbecausethelending
bank(entruster)only

acquiresa
security
interestover
thegoods
andnotthe
absolute
ownership

11 Ifthelending
bankacquires
absolute
ownership,it
shalldefeat
theloan
featureofa
trustreceipt
andshall
becomea
contractof
salewhere
bankgained
ownershipof
goodsupon
givingaloan

12 The
title
of the
entrus
ter is
a
mere
artific
ial
exped
ient,
more
of a
legal
fictio
nthan
fact

13 Itwasalso
statedthat
therewasno
double
recovery

because
whenshells
were
depositedin
thecourt,
IBAAdid
notyet
acceptit.
Thus,they
havenot
appropriate
theshells
andcan
recoverthe
obligation
fromthe
petitioners
Application
In
A
ll
i
e
d
v
s
.
O
r
d
o
n
e
z
,
T
R
L
a
p
p
li
e
s
t

oitems:o
Destinedforsale

15 Processed as
component
of product
ultimately
sold
o Usedtorepair
equipmentofbusiness
Penalty

1 Failure of entrustee to
turnovertheproceedsor
nonreturn constitute
crimeofestafa

1 InColinaresvs.
CA,failureof
entrusteetoturn
overtheproceeds
ornonreturn
constitutecrime
ofestafaunder
Art.315(1)of
RPCwithout
needofproving
intenttodefraud

2 Ifviolationis
committedbya
corporation,its
directors,officers
oremployees
responsiblefor
theoffenseshall
havecriminal
liability

3 Rationalefor
makingsuch
officers
responsible:they
arevestedwith
authorityand
responsibilityto
devisemeansto
ensure
compliancewith
thelawandif
theyfailtodoso,
theyshallbe
accountable

4 Corporations
cannotbeputin
jail.However,
theseentitiesare
madeliablefor
civilliabilities
arisingfrom
criminaloffense

5 Violation of
trust receipt
constitutes
fraud under
Art. 33 of

NCCanICA
to enforce
civil liability
arising from
criminal
liability

6 InSarmiento
Jr.vs.CA,
complaint
basedonfailure
tocomplywith
obligationin
TrustReceiptis
separatefrom
criminal
liabilityunder
PD115.Itisan
obligationex
contractuand
mayproceed
independently
regardlessof
resultof
criminalaction

7 InPeoplevs.
Cuervo,TRL
withitspenal
sanctionisin
reality,merely
confirmatory
ofsituation
coveredunder
Art.315(1)(b)
RPC

8 InColinaresvs.
CA,ifthe
personwho
executedthe
trustreceiptdid
notpasstitleto
thebank,where
thereissecurity
interestofthe
property,and
personisnotan
importer,there
isnotrust

receiptcreated

signtrustreceipt
tofacilitate
collectionof
loansunder
threatof

9 Itisunjustandinequitablefor
banksofmakingborrowers
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

;
B
E
R
N
A

criminal
prosecutionin
caseofnon
payment

RD
IG, JOY ESTELA;
O,
DE JESUS,
JA
TRACY ANN.
NS
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
EN;
2011-2012. REFERENCE: BANKING
INT
LAWS & JURISPRUDENCE BY DIZON.

61

San Beda College of Law

Banking Laws
CHAPTER10DepositInsurance

9.

RolesofPDIC

bank with
priorapproval
ofMB

1. No

1. Insure the deposits of all

exami
nation
condu
cted
within
12
days
from
last
exami
nation

bankswhichareentitledto
benefitsofinsurance

2. Asabasicpolicy,promote
andsafeguardinterestof
depositingpublicbywayof
providinginsurance
coverage

1 RA3591Actestablishing
PDIC

2 PDICisentitledtofree

2. To

useofPhilippinemailII.Powers

avoid
overla
p
exami
nation
s,
maxi
mize
use of
report
s

ofPDICasCorporateBody

1. Usecorporateseal
2. Have succession until
dissolved

3. Makecontracts
4. Sueandbesued
1. All suits of civil
natureisdeemedto
arise

from
Philippinelaw

2. No attachment or
execution against
PDIC before final
judgment

3. BOD designate
agent of insured
bank

5. Appoint its Board of

Directors(BOD)

6. Prescribe bylaws not

inconsistentwithlaw

7. Exerciseallpowersgranted
by law and incidental
thereto

8. Conduct examination of

9. Actasreceiver
10. Prescribe
rules
deemed
necessary
to
implement
PDIClaw

11. Establish
provident
fund for
payment of
benefits of
employees

12. Comprom
ise,

condone
or release
any claim
toPDIC

61. BoardofDirectors
1 BOD shall
administer
the affairs
of PDIC
fairly and
impartially
without
discriminati
on
Composition

1. Secretary of
Finance ex
officio
chairman

2. Governor of

BSP ex
officio
member

3. President of PDIC vice

chairman

1. appointed by the
President with
termof6years

4. Two members from the

privatesector

1. Term of 6 years
without
reappointment

2. Qualifications:
1. Good moral
character

2. Unque
stionab
le
integrit
y and
respon
sibility

3. Recognized

competence

4. 35yearsold
Disqualificationofappointive
members

1 Fordurationoftenureand1
yearafter,appointive
membersoftheboardare
disqualifiedfromholding
officeinanyinsuredbank
Quorum

1 3membersshallconstitutea
quorum

2 SecretaryofFinanceand
BSPGovernorcandesignate
arepresentativewithno
lowerrankthanU.Secand
DeputyGovernor

3 IfSecretaryofFinancefails
toattend,PresidentofPDIC
shallbechairman
PerDiem

SecretaryofFinanceshall

fixperdiem
AuthorityoftheBoard

1. Prepa
re
rules
and
regula
tions
for
effecti
ve
discha
rge of
respo
nsibili
ties

2. Direct

management
ofPDIC

3. Establish

human
resource
management
system

1. Comp
ensati
on
struct
ure
shall
be
based
on
job
evalu
ation
studie
s

2. A
l
l
p
o
s
i
t

i
o
n
s

s
h
a
l
l
b
e

g
o
v
e
r
n
e
d

b
y

c
o
m
p
e
n
s
a
t
i
o
n

p
o
s
i
t
i
o
n

classification
system

i
o
n

3. Compensation
plan
comparable
withprevailing
compensation

4. Appoint,

establish rank
and

fix
remuneration

4. Exempted

5. Adopt annual

from
existing
laws on
compensat
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR
;

in
insurance
and finance
assistance

budget

6. Approve
methodolog
B
E
R
N
A
R
D

O
N; INTIG, JOY
,
ESTELA; DE
J
JESUS, TRACY
A
ANN.
N
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
S
2011-2012. REFERENCE: BANKING
E

LAWS & JURISPRUDENCE BY DIZON.

62

San Beda College of Law

Banking Laws
examiners to
examine
insuredbank

IV.Officers
President

2 Each

1 ShallbeChiefExecutiveof

examiner
has the
power to
make
thorough
examination
s

PDIC

2 SalaryfixedbyPresidentof
Philippines

3 Totalsalaryshallbeceiling
ofallotherpersonnel

4 Powersandduties:
1. Prepare agenda for

3 Theyhavethe

meeting

2. Execute

and
administerpolicies

3. Directandsupervise
operations

4. RepresentPDIC
5. Authorize, with
his signature and
prior approval of
board, contracts,
notes

and
securitiesissued

6. Represent PDIC in
legalaction

7. Delegate power to
represent

8. Exercise

ClaimAgents

other
powers vested in
him

VicePresident

1 ShallassistPresident
2 Duringabsenceor
temporaryincapacityof
President,VPshallactas
presidentpendingthe
appointmentofnew
President
BankExaminers

1 BOD shall appoint

powerto:
o
Administ
eroaths
o
Examin
eand
take
testimo
nyof
officers
o
Compel
present
ationof
books

1 Claimagents
power to
investigate
and examine
allclaimsfor
insured
deposits

Investigators

1 Investigators
powerto
conduct
investigations
onfraud,
irregularities

andanomalies
committedin
banks

22.

Deposit
InsuranceCoverage

DepositLiabilities

1 Deposit liabilities of any

speciallaw

bankengagedinbusinessof
receiving deposit shall be
insuredwithPDIC

2 Liabilityof

2 FactorsconsideredbyBOD
1. Financial history
and condition of
bank

2. Adequacyofcapital
structure

3. Future earnings
prospects

4. Generalcharacterof
management

5. Convenience and
needsofcommunity

3 Deposit unpaid balance

of money received by a
bankandforwhichithas
givencredittoa:

1.
2.
3.
4.
5.
6.

3 Fourth
National
Bankof
Wichitavs.
Wilson:
negotiabilit
yof
instrument
hasno
dependence
ofexistence
ofguaranty
orinsurance

Commercial
Checking
Savings
Time
Thriftaccounts
Thoseevidencedby
passbooks

4 Anyobligationofabank
payableoutsideof
Philippinesshallnotbea
depositunderPDICLaw

Depositmustbein
factmade

5 Insuredbankthathas
branchoutsidethe
Philippinesmayavail
insuranceforitsdeposit
payableonlyinsuch
branch

1 Factthat

StatutoryLiabilityofPDIC

1 PDICprimarilygovernedby
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR
;

PDICis
statutory
andrests
upon
existenceof
adeposit
withan
insured
bankand
notthe
negotiabilit
yofthe
certificate
evidencing
thedeposit

B
E
R
N
A
R
D

certificates
statedthat
theyare
insuredby
PDICdoes
notipsofacto
makethe

certificate
insured

2 Deposit
liability is
determined by
RA3519

3 To claim
deposit
insurance,
law
requires
that a
deposit is
placed in
the
insured
bank

4 Deposit
may be
constituted
only if
money or
its
equivalent
have been
receivedby
abank
Holderinduecourse
notapplicable

1 Even

if
depositor is
HDC, it does
not mean that
healreadyhas
a claim
against the
insurance
fund

2 The

fund
protects
depositsonly

O
N; INTIG, JOY
,
ESTELA; DE
J
JESUS, TRACY
A
ANN.
N
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
S
2011-2012. REFERENCE: BANKING
E

LAWS & JURISPRUDENCE BY DIZON.

63

San Beda College of Law

Banking Laws
Liabilityundernegotiableinstrument CertifiedStatementof
AssessmentBaseand
vs.Guaranteefund
Assessment
1 Liability of the make is Due
different from liability of
the guarantee fund. The
latterispurelystatutory
DepositinsuranceofForeign
CurrencyDeposits

1 Foreign currency deposits

insuredwithPDIC

2 Insurance payment shall

be in same currency in
which deposit is
denominated

3 PDIC Law is not

applicable to Offshore
BankingUnits
Dutytoindicateinsuranceon
Deposit

1 All banks must indicate

that it is under the PDIC
andmaximuminsurance
VI.Assessment
AssessmentRule

1. Assessment rate
notexceed1/5of1%
perannum

2. Semiannual assessment
rate of assessment
rate.NotlessthanP250

3. Assessmentbaseamount
of liability of bank for
deposits

4. Semiassessmentbasefor
semiannual period
average of assessment
baseincloseofbusiness

1. Onorbefore
July31,each
bankshallfile
inPDIC
certified
statement
showing
amountof
assessment
basedand
semiannual
assessment
due.Onsuch
date,thebank
shallpaythe
semiannual
assessment
due

2. On or
before
January
31, each
bank
shall file
similar
statement
asabove

3. Ifinsured
bankassumed
liabilitiesfor
depositsof
anotherbank,
itshallbe
includedin
assessment
base

4. Certified
statements
required shall

be in such
form as BOD
shallprescribe

5. Anyinsured
bankthatfails
tofile
certified
statement
shallbe
compelledto
fileby
mandatory
injunction
RefundandCredit

owners
of trust
funds

1 PDICmay:
o

Refundtoaninsured
bankanypayment
ofassessmentthatis
excessofamount
due

4 When
fiduciary
bankdeposits
anytrustfund
withother
insuredbank,
suchamount
shallnotbe
consideredas
adeposit
liability

15 Credit

such
expense toward
payment of
assessment of
next following
period

Termination

1 PDIC shall not

terminate insured status
of any bank which
continues to receive
deposits

PaymentofDividends
and/orInterests

1 Noinsured
bankshall
pay
dividendson
capitalstock
orinterestor
distribute
capitalassets
whileit
remainsin
defaultin
paymentof
assessment
dues

2 Shouldinsuredbankfails
topayassessmentdues
required,PDICmayfile
collectioncaseand
administrativecharges
againstbankofficials
TrustFund

1 Trust fund funds

held by insured
bank in fiduciary
capacity

2 Ifdefaultin

2 Trust fund shall be

payment is
due to
dispute
between
bank and
PDIC over
amount of

insuredinanamountnot
to exceed 10k for each
trustestate

3 Such insurance shall

be separate from
other deposits of
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR
;

assessment,
this rule
shall not
apply

B
E
R
N
A
R
D

CivilPenalities

1 Any
assessment
payableby
insuredbank
shallbe
subjectto
paymentof
interest
computedat
legalratefor
loan

2 Thereshall
beanadded
penalty
equivalentto
twicethe
amountof
interest
payablefor
eachday

3 Penaltyshall
not be
applicable if
there is
dispute over
amount of
assessment
VII.DepositInsurance
Fund

1 Permanent
insurance fund
P3B

O
N; INTIG, JOY
,
ESTELA; DE
J
JESUS, TRACY
A
ANN.
N
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
S
2011-2012. REFERENCE: BANKING
E

LAWS & JURISPRUDENCE BY DIZON.

64

San Beda College of Law

Banking Laws

s
u
e
c
e
a
s
e
a
n
d
d
e
si
st
o
r
d
e
r
t
o
t
h
e
b
a
n
k

1 DepositinsurancefundshallVIII.Unsound
be capital account of PDICPractice
andshallconsistof:

1 Upon

1. Permanent
insurancefund

2. Assessment
collections

3. Reserves

for

insurance

4. Retainedearnings
2 Reserves for insurance
shall be maintained at a
reasonableleveltoensure
capitaladequacy

3 PDICmay,within2years
frompassage,conduct
studytoadjustamountof
PermanentInsuranceFund

4 Assessmentcollectionsand
incomesshallbeaddedto
DepositInsuranceFund
afterdeductionfrom
expensesandcharges.Such
expensesandcharges
consistsof:

1. Operatingcosts
2. Additionstoreserve
3. Net insurance
and financial
assistancelosses

5 PDICmayrecoverfrom
any insured bank any
unpaidassessment

6 No action shall be brought

torecoverassessmentunless
suchactionshallhavebeen
broughtwithin5yearsafter
rightaccrued

7 Ifinsuredbankfiledafalse
certifiedstatementwith
intenttoevade,suchclaim
isnotdeemedtoaccrue
untilPDICdiscovers

examination
byPDIC,it
shallbe
disclosed
whether
insuredbank
is
committing
unsound
practices

2 The BOD in
such a case
shall:

1. Subm

it
report
of
exami
nation
to
MB

2. If no
correc
tive
action
by
MB,
BOD
shall
motu
propri
o
institu
te
such
B
O
D
ca
n
is

3. If
violat
ion
cause
insolv
ency
or
dissip
ation
of
assets
mthe
perio
dto
take

correctiveaction IX.ReportsbyInsured
Bank
shallbedone
within15daysand
1 Each
imposefines
insured
3 Actions and proceedings
bank shall
may be undertaken by
make
PDICifinsuredbankhave
reports to
violated:
PDIC of
1. Any provision of
conditions
PDICLaw
required
2. Anyorderorruleof
2 Ifbankfailsto
PDIC
makesuch
3. Any

written
reportwithin
condition imposed
giventime,
byPDIC
BODmay
provide
100php
penaltyfor
eachdayof
violation

3 PDIC shall
have access
to reports
made to the
BSP to the
insured bank
andBSPshall
also have
access to
reports of
BSP

4 Each
insured
bankshall
keeptrue
and
accurate
recordof
itsdaily
deposit
transactio
ns.
Complian
cewith
suchshall
beduly
certified

bybank
president

5 Ref
usaltoissue
such shall
be

violation X.
Prohibitions
on PDIC
Personnel

1. Being an
officer,
director,
consultant,
employee or
stockholder
directly or
indirectly of
anybank

2. Receiv
ing
gifts
from
any
officer,
directo
r or
employ
ee of
any
bank

3. Revealing
inany
manner,
information
relatingto
businessof
anybank
exceptwhen
requiredby
Congressor
the

President

berepaidby
theofficerif
itis
determined
bytheboard
thatsuch
officerneed
notbe
indemnified

XI.LegalAssistance

1 PDICshalladvance

litigationcoststoits
directors,officersor
employeesinconnection
withanycriminal,civilor
administrativecasewhere
suchpersonactedwithin
XII.DealingsbyPDIC
theperformanceofhisduty PersonnelwithBanks

2 Eveniftheyresign,they

1 Members

shallstillreceivelegal
assistanceinconnection
withtheactdoneduring
tenure

ofBoard
and
personnel
ofPDIC

3 Theamountadvanceshall
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR
;

B
E
R
N
A
R
D

may
become
directors
orofficers
ofany
bankifthe
positionis
in
connection
withthe
financial
assistance
extended
bythe
PDIC
BorrowingfromBanks

O
N; INTIG, JOY
,
ESTELA; DE
J
JESUS, TRACY
A
ANN.
N
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
S
2011-2012. REFERENCE: BANKING
E

LAWS & JURISPRUDENCE BY DIZON.

65

San Beda College of Law

Banking Laws

1 Borrowingfrombanks
by examiners or other
personnel shall be
prohibitedwithrespect
to particular bank to
which they are
assigned

2 Borrowingbypersonnel
fromanybanknot
includedinthe
prohibitionshallbe
securedanddisclosedto
theBOD
XIII.Receivership
Appointment

1 MB shallappoint thePDIC
asreceiver

2 Receiverincludesreceiver,
commissionorotheragency
chargedbylawwiththeduty
totakechargeofassetsand
liabilitiesofabank
prohibitedfromdoing
business

3 It has the duty to gather

preserve and administer
assets and liabilities of
suchbanksforthebenefit
ofitsdepositors
Effectofreceivership

1. PDICshallcontrol,manage
and administer affairs of
closedbank

2. Powers, functions and

dutiesofdirectors,officers
and stockholders are
suspended

3. Assets of closed bank is in

custodialegis

4. Assetsofclosedbank

shallnot
be
subject
to
attachm
ent,
executio
n or
levy

4 Pay accrued
utilities,
rentals and
salaries of
closedbank

5 Collect loans
and
claims

6 Hire private

counsels if
necessary

PowersofPDICin
receivership

7 Borrow loan

1 Bring suit to

enforce
liabilities of
bank

2 Appoint
persons
perform
functions
PDIC
receiver
liquidator

other

to

when
necessary to
preserve
assets of
closedbankto
minimizeloss

8 If stipulated
of
as
or

3 Suspend or
terminate
employees of
closedbank

1. Pay
ment
of
separ
ation
pay
shall
be
made
after
close
d
bank
is in
liqui
datio
n

interest on
deposits is
unusually
high, reduce
interestrate

9 Exercise other
powers
inherent in
receiver

SuitsFiledbyPDIC

bank

1 ActionsfiledbyPDICas

1. In

receiver,paymentofall
docketandcourtfeesshall
besuspendeduntilactionis
terminated

PDIC
Law,
250k.
Now
its
500k

2 Such fees shall constitute

firstlienonjudgment

4 Joint account

DistributionofAssets

shall be
insured
separately
from any
individually
owneddeposit
account

1 Before distribution of
assets,PDICshallcharge
against the bank the
receivershipexpenses

2 After payment of all

liabilities, PDIC shall
paysurplusdividendsto
creditors and claimants
ofbank

5 Ifaccounts
heldjointly,
maximum
insureddeposit
shallbe
dividedintoas
manyequal
sharesasto
individuals

XIV.PaymentofInsuredDeposits
MannerofPayment

1 Paymentofinsureddeposits
shallbemadein:

6 Ifaccountis

1. Cash
2. By

heldby
juridical
person,
maximum
insured
depositshall
be
presumedto
belong
entirelyto
suchentity

making
available

a
transferred deposit
in another insured
bank

2 Transferdepositdepositin
aninsuredbankmade
availabletoadepositoras
paymentofinsureddeposit
fromclosedbankassumed
byanotherinsuredbank

7 Aggregate

3 Insureddepositamount

interestsof
eachco

due to any deposit for

deposits in an insured
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR
;

B
E
R
N
A
R
D

ownerover
severaljoint
accountsshall
besubject
alsoto
maximum
insured
deposit

8 Noownerof
annegotiable
certificateof
depositshall
berecognized
asdepositor
unlesshis
nameis
registeredas
ownerin
issuingbank
ProofofClaims

1 PDIC may
required
proof of
claims before
paying
insured
deposit

2 Final
deter
minati
on if
perso
n is
entitle
d to
insura
nce is
the
court

O
N; INTIG, JOY
,
ESTELA; DE
J
JESUS, TRACY
A
ANN.
N
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
S
2011-2012. REFERENCE: BANKING
E

LAWS & JURISPRUDENCE BY DIZON.

66

San Beda College of Law

Banking Laws
SettlementPeriodandPenaltiesin
caseoffailuretosettle

1 Failuretosettleclaim
within6monthsfromdate
offilingclaim,wheresuch
failurebytheofficerwas
duetoGAOD,iffucershall
beimprisonedfrom6
months1year

2 Period shall not apply if

validity of claim is under
resolution

3 Uponpaymenttoany
depositor,PDICshallbe
subrogatedtoalltherights
ofthedepositoragainstthe
closedbank

4 Subrogationshallinclude
right to receive same
dividendsfromproceeds
ofassets

5 Depositor shall retain

claimforanyuninsured
portionofhisdeposit
Notice

1 PDIC shall commence

determination of insured
deposit upon actual
takeoverofclosedbank

2 PDICshallpublica
noticeonceaweekfor
3consecutiveweeksin
newspaperofgeneral
circulationsuch
closingofthebank
Discharge

1 Payment of insured
deposit shall discharge
RecognitionofOwner

2 NeitherPDIC
orinsured
bankshallbe
requiredto
recognize
ownerofa
deposit
appearingon
therecords
underaname
otherthan
claimant
Withholdingof
Payment

1 PDICmay
withhold
paymentof
insured
depositif
paymentof
liabilityby
suchdepositor
asstockholder
ofclosedbank
notyetoffset
ispending
determination
Prescription

1 All rights of
depositor shall
bebaredif:
o
Depos
itorin
closed
bank
failto
claim
insure
d
depos

it
within
2
years
from
actual
take
over

15 Depos
itor
does
not
enforc
ehis
claim
within
2
years
after
th2
year
period
tofile
a
claim

made if
bank is
essential
in
communi
tyandfor
financial
stability

1 All right of depositor

against closed bank
which PDIC may have
been subrogated shall
reverttodepositoragain
XV.InvestmentbyPDIC

1 MoneyofPDICnot

3 Suchauthority

employedshallbeinvested
inobligationofthe
RepublicofthePhilippines
orguaranteedobligations
o
Not sell or
purchase such
obligations for
itsowneraccount
inexcessof100k
o
Insurance
commissione
r may waive
requirement
of approval
inabove

toextend
financial
assistancemay
alsobe
exercisedif
PDICfinds
thatthe
resumptionof
operationsof
theclosed
bankisvitalto
community

4 Reopening
of such
close bank
issubjectto
prior
approval of
MB

2 Banking and checking

accountsofPDICshallbe
keptinBSP,PNBorfiscal
agent
XVI.ExtensionofLoans

5 PDICmay

1 Wheninsuredbankis
determinedasindangerof
closing,inordertoprevent
such,PDICisauthorizeto:

1. Make loans to such

bank

2. Purchase assets of
suchbank

3. Assumeliabilitiesof
suchbank

4. Make deposits in
insuredbank

6 Priorto

2 The grant shall be

AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

provide
any
corporation
acquiring
assetsof
insured
bankin
dangerof
closing
with
financial
assistance

;
B
E
R
N
A
R

exerciseof
theseabove
powers,PDIC
shall
determine
whetheractual
payoffwillbe
more
expensivethan
exerciseof
such

7 WhenMBhas
determined
systematic
consequence
ofclosureof
bank,PDIC
maygrant
financial
assistancein
amount
necessaryto
preventits
failure

8 Systematic
risk
possibility
thatfailure
ofonebank
tosettlethe
transactions
withother
bankswill
trigger
chain
reactionand
general
shutdownof
clearing
activity

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.

67

San Beda College of Law

Banking Laws

1 Systematicriskalsomeans
thelikelihoodofasudden
unexpectedcollapsein
confidencewiththebanking
system

2 PDIC may not use such

powers to purchase stocks
ofinsuredbank

3 Financialassistancemay
take form of equity or
quasientity
XVII.Borrowings

1 PDIC is authorized to
borrowfromBSP

report of its
operations in
Congress

2 Its financial

transactions
shall

be
audited by
COA

3 COA
shallhave
access to
all books,
accounts,
records
and
reports

2 Any loan granted by BSP 50. Miscellaneous

shall be consistent with

monetary policy and Signs
interest rate shall not
1 Every
exceedtreasurybillrate
insured bank
3 IffundsofPDICarenot
shall display
sufficient,itcanborrow
ateachplace
moneyfromanybank
of business
designatedasfiscalagentof
signs that
RP
deposits are
4 Such loans shall be short
insured by
termdurations
PDIC
XVIII.IssuanceofBonds

1 WithapprovalofPresident
ofPhilippines,PDICis
authorizedtoissuebonds,
debenturedandother
obligationstosettleinsured
depositsinclosedbanks

2 The BOD shall determine

interestrate

3 PDICshallprovidereserves
forredemption
ReportsandAudit

2 Those
which
donot
relateto
deposit
sorare
impract
ical
shallbe
exempt
edfrom
this
require
ment

1 PDIC shall annual make Mergeror

Consolidationsof
InsuredBank

1 Without
prior
written
consent
from
PDIC,no
insured
bank
shall:

ov
er
re
co
rd
s
o
Fraudulent
disposalof
assets
o
Violation
of
exemption
from
garnishme
nt

1. Merge

and
consolidate with
noninsured bank
or convert into
noninsuredbank

2. Assume liabilities
of deposits by any
noninsuredbank

3. Transfer assets to
noninsuredbank
Protectionagainstlosses

1 PDICmayrequireinsured
banktoprovideprotection
againstburglary,
defalcationandlossesfrom
dischargeofduties

15 Will
ful
failu
re to
com
ply
with
PDI
C
and
cond
uctin
g
unso
und
busi
ness
15 Splitti
ng
deposi
ts

2 BOD shall determine

bondingrequirementastoits
directors, officer and
employers

3 Ifinsuredbankrefusedto
complywithsuch
requirement,PDICmay
contractsuchprotection
forthempayabletosuch
bank
XXI.CriminalPenalties

1 Prison mayor or fine 50k

2M
o
Willful
refusal to
submitreport
o Refusalto
permit
examination
o
Making
false
statement
o Submissionoffalse
materials
o Refusalto
allowPDICto
takeover o
Refusaltoturn
AUTHO
RS:

2 Splitting
deposits
deposit
accountwith
outstanding
balanceof
morethan
maximum
insured
amountis
brokendown
M
A

N
I

totwoormore
accounts
within30days
preceding
closureof
bankfor
purposesof
availing
maximum
deposit
XXII.Fines

1 BODis
authorizedto
impose
administrativ
efinesbutno
morethan3
timesamount
ofdamages
caused
XXIII.TROand
Injunction

1 OnlyCAcan
issue TRO,
Preliminary
Injunction
against
PDIC.
Prohibition
shallapplyto
allcases

2 SC can
issue
restrain
ing
order if
of
extrem
e
urgenc
y

LA, ANTONIO
CEASAR;

BERNAR
DO,
JANSEN
; INTIG,
JOY

E
S
T
E
L

A
JESUS, TRACY
;
ANN.
D
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
E

2011-2012. REFERENCE: BANKING

LAWS & JURISPRUDENCE BY DIZON.

San Beda College of Law

Banking Laws

1 Restraining
order

in
violation of
this shall be
voidandjudge
who issued is
suspended
Reorganization

1 PDIC may be
reorganized in
new staffing
pattern. No
preferential
right shall be
enjoyed

2 Reorgan
ization
must be
complet
ed
within 6
months
from
effectivit
y of
PDIC
law

3 BODshallprovideseparationincentives
PDICvs.CA

1 Evenifthebank
hasknowledge
thatitshallbe
under
receivership,it
doesnotipso
factomeanthat
thedepositors
alsohas
knowledgeof
such

2 Thus,theycan
stillengagein

business
transactionsin
courseof
businessaslong
astheyactedin
GFanddidnot
knowsuch
closure

3 Thus, such
deposits
made in the
period shall
be covered
by deposit
insurance

AUTHORS: MANILA,
ANTONIO CEASAR;
BERNARDO, JANSEN; INTIG,
JOY ESTELA; DE JESUS,
TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW,
MENDIOLA: AY 2011-2012. REFERENCE: BANKING
LAWS & JURISPRUDENCE BY DIZON.

69

San Beda College of Law

Banking Laws
CHAPTER11AntiMoney
Laundering

1 RA9160Actdefining
CrimeofMoney
LaunderingandProviding
PenaltiesandAMLL

9.

Concepts

1 Moneylaunderinganyact
toconcealordisguisethe
indemnityofillegally
obtainedproceedssothat
theyappeartohave
originatedfromlegitimate
sources

2 Even before AMLA, BSP

issued various circulars to
avoidmoneylaundering

3 UnderAMLA,money
launderingisacrime
wherebytheproceedsofan
unlawfulactivityare
transactedandmaking
themappeartohave
originatedfromlegitimate
sources
ThreestepsinMoneyLaundering
(ML)

1. Placement launderer
insertsdirtymoneyintoa
legitimate financial
institution

1. Often in bank
deposits

2. Mostriskieststage
asthereislarge
amountsandbanks
arerequiredto
reporthighvalue
transactions

2. Layeringsendingmoney

through
various
financial
transactionsto
changeits
formandmake
itdifficultto
follow

k
e
s

d
i
r
t
y

m
o
n
e
y

h
a
r
d

t
o

t
r
a
c
e

1. Consis

ts of
bank
to
bank
transfe
rs

2. Chang

e form
of
money

3. M
o
s
t

c
o
m
p
l
e
x

s
t
e
p

a
s

i
t

m
a

3. Integrat
ion
money
re
enters
in
mainstr
eam
econom
y in
legitima
te
looking
form

1. It appears to come
from

transaction

legal

2. Involvefinal
banktransfer
into the
account of
thelaunderer

1. Banks, non
banks, quasi
banks, trust
entities and
subsidiaries
and those
regulated by
BSP

2. Insurance

Policies

companies

1. Protect and preserve

integrity

and
confidentiality of bank
accounts

2. Ensure that Philippines is

notusedasMLsite

3. Consistentwith
foreignpolicy,
extendcooperation
intransnational
investigations
involvingML
CoveredInstitutions

3. Secur
ities
deale
rs,
broke
rs,
sales
men
and
inves
tment
house
s

4. Mutual funds,
closedend
investment
companies

5. Foreign
exchange
corporations,
money
chargers

6. Other entities
dealing in
currency,
commodities
or financial
derivatives
Coveredand
Suspicioustransaction

1. Covered
transactions:
Any
transactionin
cashorother
monetary
instrument

involving
amountof
500kwithin
1banking
day

2. Suspicious
transactions:

1. No
underl
ying
legal
or
trade
obliga
tionor
econo
mic
justifi
cation

2. Client
not
proper
ly
indent
ified

3. Am
oun
t
inv
olv
ed
not
co
mm
ens
urat
eto
fina
nci
al
cap
acit
yof
clie
nt

4. Clien
ts
trans

actionisstructured
to avoid reporting
requirements in
AMLA

Philippin
es or
other
country

2. Drafts, checks,

5. Circumstances

notes

relating to
transaction
deviate from
profileofclient

3. Securities

6. Transaction is
relate to any
unlawful
activity

7. Transaction

is
analogoustoabove

or NI,
bonds,
commercia
lpapersor
substitute
instrument
s

4. Other
similar
instrume
ntwhere
title
passes

MonetaryInstrument

1. Coins or currency of
legaltenderwhetherin

AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

through
indorsem
ent,
assignme
ntor
delivery

;
B
E
R
N
A
R

UnlawfulActivity

1. Kidnapping
forransom

2.
3.
4.
5.

CDDA
RA3019
Plunder
Robbery and
extortion

6. Jueteng and
masio

7. Piracy in the
highseas

8. Qualifiedtheft
D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.

70

San Beda College of Law

Banking Laws
ProsecutionofML
9. Swindling/estafa
10. Smuggling
1 Any person
11. Violation of Electronic
can

be

5. Causefilingof

convicted
with both
offenseofML
and the
unlawful
activity

suspicious and
covered
transactions

Commerce

12. Highjacking

and
destructive

arson
perpetratedbyterrorists

13. Fraudulent practise of

SecuritiesRegulationCode

14. Feloniesofsimilarnaturein
othercountries
HowisMLcommitted

1. Anypersonknowing
anymonetary
instrumentinvolves
proceedsofunlawful
activityandattemptsor
actuallytransactssuch
instrument

2. Anypersonknowingthat
monetaryinstrument
involvesproceedsof
unlawfulactivityand
performsorfailsto
performanyactasaresult
ofwhichhefacilitatesML

3. Anypersonknowing

35.

2 Any
proceeding
relatingto
unlawful
activityis
given
precedence
without
prejudiceto
freezeorder

61. AntiMoney

laundering Council
(AMLC)

complaint in
DOJorOMB

6. Investigate

7. Apply freeze
orderinCAex
parte

8. Implement
measures
necessary to
counteractML

9. Receive and
request from
foreign states
assistance in
AML
operations

10. Develop
education
programs
againstML

11. Enlist
assistanceof
any branch
of
government
to promote
AML
operations

monetaryinstrumentis
requiredtobedisclosedand
filedwithAMLCbutfails
todoso

12. Impose

JurisdictionandProsecution

13. Establish

JurisdictionofMLCases

1 RTC shall have jurisdiction

ofallML

2 Those committed by
public officers are
under jurisdiction of
SB

administrative
sanctions
secretariat
head for term
of5years
IV.Preventionof
MoneyLaundering
CustomerIdentification

1 Covered

institutions shall establish

true indemnity of clients
basedonofficialdocuments

trans
actio
nsof
cove
red
instit
ution
must
be
safel
y
store
dfor
5
years
from
date

2 Maintain a system of
verifying true identity
ofclients

3 Anonymous accounts, those

under fictitious names and
similar accounts are
prohibited

4 Peso and foreign currency

nonchecking numbered
accountsareallowed
o BSP may conduct
annual testing of
such accounts to
determineidentity

2. In

RecordKeeping

closed
accou
nts,

1 Another way of preventing

MListhis:

1. Allrecordsofall

LA, ANTONIO

Mustactunanimouslyindischargeoffunction
H
CEASAR;
O
BERNARDO,
Requireandreceivedcoveredandsuspicious
R
JANSEN; INTIG,
1. GovernorofBSP
transactions
S
JOY ESTELA; DE
:
JESUS, TRACY
2. CommissionerofInsuranceCommission
3. Issueorderstodeterminetrueindemnityofowner
M
ANN.
3. ChairmanofSecuritiesandExchangeCommission
4. Institutecivilforfeitureproceedings
A
FROM SECTION 2S - SAN BEDA
Deposits,
N
COLLEGE OF LAW, MENDIOLA: AY
A
Functions
I2011-2012. REFERENCE: BANKING

Composition

1.
2.

record
son
custo
mer
identif
icatio
nand
corres
ponde
nce
shall
be
preser
ved
for5
years
from
date
of
closin
g

LAWS & JURISPRUDENCE BY DIZON.

71

San Beda College of Law

Banking Laws

2. RA 6426 Foreign
CurrencyDeposits,

3. RA8791GBL
4. In case of violation,
officer shall be
criminallyliableexcept
ifinGF

5. Whenreportingcoveredor
suspicioustransactions,
coveredinstitutionis
prohibitedfrom
communicatingtoany
personormediasuchfact

6. There can be no
publication or airing
of such report by
massmedia,emailor
otherdevice

1. In

violation,
covered institution
andmediashallbe
criminallyliable

FreezingMonetaryInstrument

1 OnewaytopreventML
2 CA can issue freeze order
which shall be effective
immediately

3 Requisitesoffreezeorder:
1. FiledinCA
2. Uponapplicationex

bycourt

5 In

all
instances of
unlawful
activity,
there can be
an ex parte
freezeorder

6 There is no

need for full

blowntrial

AuthoritytoInquire
intoBankDeposits

1 Tocomplete
legalmeasure
toprevent
ML,AMLC
mayexamine
depositsinany
banking
institution
uponorderof
court

2 It must be
established
that there is
probable
cause that
deposits
relateto:

1. Unlawf
ul
activity
or

partebyAMLC

3. After
determinationthat
probablecause
existswhere
moneyinstrument
isrelatedto
unlawfulactivity

4 Freeze order shall be

effective fora period of
20 days unlessextended

2. Money

launder
ing
offense

3 No
court
order
shall be
required
in

unlawf
ul
activiti
esof:

1. Kidnap
ping
with
ransom

2. Violati

on of
CDDA

3. High

jacking
(RA
6235)

4. D
e
s
t
r
u
c
t
i
v
e

a
r
s
o
n

i
n

c
o
n
n
e
c
t
i
o

with
terrorism

4 BSPmaymakeemanation
ofdepositswhen
examinationismaden
courseofperiodorspecial
examinations

Republicvs.Eugenio

1. Whetheror
notthephrase
incasesof
requiresthat
theremustbe
apendingtrial
inanother
courtforan
unlawful
activity

2. Whether or
not the
power to
inquire in
the bank
deposit can
be done ex
parte
FirstIssue

1 No.Thecourt
ruledthatthere
isnoneedthat
theremustbea
pendingtrial
foranunlawful
activityin
anothercourt
beforethere
canbea
petitionto
inquiretobank
deposits

2 Otherwise, it
wouldrenderit
alimitedtooin
aidoflitigation
and wholly
inutile

3 In
such
situati
on, it
will
not

anym
oreas
a
disco
very
tool
SecondIssue

1 No. As a
general rule,
ex parte bank
inquiry order
isnotallowed

2 The
proviso
does not
have the
same
word ex
parte
unlike in
thefreeze
order

3 Silence of the
law does not
automatically
construe it to
have such ex
parte

4 Also, in IRR
of AMLA,
thereisnoex
parte bank
inquiryorder

5 However,
bank inquiry
orderdoesnot
necessitate
any physical
seizure

6 Thereasonof
courtisthat,
evenifthe
accusedis
notifiedthat
therewillbe
inquirydueto
thefullblown

trial,theaccusedcannot
hidehisfraudulentrecords
asitismaintainedinthe
bankandcannotbeerased

therightto
privacy
must be
upheld
under
Bank
Deposit
Secrecy
Act

7 Thus,

in such
interpretation, bank
inquiryorderhavenoex
parte orders, it does not
weakenthelaw

8 Also Bank Inquiry Order

10 Thus, there

(BIO) not analogous to

searchwarrant
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

parte orders.
But if the
exceptional
unlawful
activity is
present, there
can be BIO
without need
ofcourtorder

9 Moreover,

shallbenoex
;
B
E
R
N
A

22.

Ex Post Facto
Clause

R
SEN; INTIG, JOY
D
ESTELA; DE
O
JESUS, TRACY
,
ANN.
JFROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
A
2011-2012. REFERENCE: BANKING
N

LAWS & JURISPRUDENCE BY DIZON.

72

San Beda College of Law

Banking Laws

1 UnderAMLAnoperson
canbeprosecutedunder
AMLAforactscommitted
priortoOctober17,2001

2 Also,BIOpriortoOctober
17,2001isprohibitedasit
isanexpostfacto
o Itdeprivesapersons
ofsomelawful
protectiontowhich
hehasbecome
entitled

3 However, those accounts

createdpriortoOctober17,
2001 are still under the
coverageofAMLA

1 Insteadof
orderof
forfeiture,
courtmay
orderoffender
topayamount
equaltovalue
ofmonetary
instrument
whensaid
ordercannot
beimposed
because:

1. Mo
net
ary
ins
tru
me
nt
can
not
be
loc
ate
d
wit
h
du
e
dili
ge
nce

4 Otherwise,theoffenders
canmerecircumventby
launderingintoanaccount
createdpriortoOctober
17,2001
VI.Forfeiture
CivilForfeiture

1 Where there is a covered

transactionreportmadeand
court ordered seizure or
monetary instrument, rules
ofcivilforfeitureapplies
ClaimonForfeitureAssets

1. Whencourtissuedorder
offorfeiture,offender
mayapplyfora
declarationthatthesame
legitimatelybelongsto
him

PaymentinLieuofForfeiture

4. Locat
ed
outsid
e the
Philip
pines
or
outsid
e
jurisd
iction
of
court

2. It was
substa
ntially
altered
or
destro
yed

2. Verifiedpetitionfiledin
courtwhichrendered
judgmentofconviction
within15daysfromorder

en
co
nc
ea
le
d,
re
m
ov
ed
or
co
nv
ert
ed
fr
o
m
be
in
g
fo
un
d

3. It
ha
s
be

5. It
ha
s
be
en
co
m

mingled
with other
monetary
instruments
VII.MutualAssistanceamongStates
RequestfromForeignState

1 When
foreign
statemakes
arequest
for
investigatio
nor
prosecution
ofML,the
AMLC
mayaccept
orrefuse
thesame
forvalid
reasons

2 Principles of
mutualityand
reciprocity
shall at all
times
recognized
PowersofAMLCto
actonrequestof
foreignstate

1. AMLC may

executerequest
for assistance
by:

1. T
r
a
c
k
i
n
g

d
o
w
n
,
f
r
e
e
z

i
n
g

p
r
o
c
e
e
d
s
o
f
u
n
l
a
w
f
u
l
a
c
t
i
v
i
t
y

2. Giving
inform
ation

3. Apply
order
of
forfeit
ure

2. Court will
issue such
orderonlyif
application
is
accompanie
dby:

1. Au
the

nticatedcopy of
orderofcourtof
requestingstate

2. Certificationby
competentcourtof
requestingstate
thatconvictionor
orderisfinal
Obtainingassistancefromforeign
states

1 AMLC may request

assistancein:

1. Tracking
down,
freezing,
proceeds of
unlawful
activity

2. Obtaininformation
3. Applywithproper
foreign court an
order to enter
premises or seize
documents and
objectsinrequest

4. Applying for
order

of
forfeiture of
any monetary
instrument
LimitationonRequest
Mustbe
forMutualAssistance
accompanie
dby
1 AMLCmay
authenticate
refuseto
complywith
dcopyof
requestfor
forfeiture
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR
;

B
E
R
N
A
R
D

b
y
R
T
C

a
n
d
a
f
fi
d
a
v
it
o
f
c
l
e
r
k
o
f
c
o
u
rt

assistanceifit
contravenes
the
Constitutionor
executionof
require
prejudicialto
national
interestunless
thereisa
treaty
specifically
provided
Requirementfor
Requestfor
Mutual
Assistancefrom
Foreignstate

1. Confir
m
investi
gation
or
prosec
ution
being
conduc
ted

2. State grounds
which person
isinvestigated

O
N; INTIG, JOY
,
ESTELA; DE
J
JESUS, TRACY
A
ANN.
N
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
S
2011-2012. REFERENCE: BANKING
E

LAWS & JURISPRUDENCE BY DIZON.

73

San Beda College of Law

Banking Laws

3. Give

sufficient
particularstoidentityof
person and covered
institution

4. Ask from covered

institution

any
informationnecessary

5. Specify manner and to

whominformationistobe
produced

6. Give all particulars

necessary for issuance by
the court of requesting
Statecertainorder

7. Contain

other
information that
may

assist
execution of
request

AuthenticationofDocuments

1 Adocumentisauthenticated
if:

1. Signed or certified
by judge of
requestingstate

2. Authenticated by
oath of witness or
sealed with official
sealofstate

2 Certificateofauthentication
may also be made by
secretaryofembassy
Extradition

1 Philippinesshall
negotiateinclusionof
MLoffensesamong
extradutableoffensesin
futuretreaties
VIII.Penalties

1. In ML: 7 14
years
imprisonment
and3M

2. InFailure
to Keep
Records:
6 months
1 year
imprison
ment and
100k
500k

3. In
Malici
ous
reporti
ng: 6
months
4
years
impris
onmen
t and
100k
500k

ok
e
suc
h
lic
ens
e

2. If an
alien,
deport
ed
after
service

3. In

public
official
, shall
have
PAD
or
TAD

4. If
suc
h
pub
lic
offi
cial
s
ref
use
to
test
ify,
sa
me
pen
alti
es

1. If
juri
dic
al
per
son
,
offi
cer
s
sha
ll
be
pu
nis
hed
and
rev

Breachof
Confidentiality

1 For breach
under AMLA,
penalty is 38

yearswithfineof500k1M

1. AMLA shall
not be used
for political
persecution
or to hamper
competition
intrade

2 Responsiblereporter,writer,
president or publisher shall
beliable
IX.ProhibitionagainstPolitical
Harassment

2. No case of
ML may be
filed against
any candidate
during
election
period

24.

Implementing
Rules

and
Regulations(IRR)

XI.Congressional
OversightCommittee
(COC)
Composition

1 7 members
from Senate
and7members
fromHR

2 Members of
Senate shall
beappointed
by Senate
president in
proportional
representatio
n

3 This shall also

bedoneinHR

1 BSP,
Insurance
Commission
andSEC
shall
promulgate
IRRof
AMLA
subjectto
approvalof
Congressiona
lOversight
Committee

2 Cove
red
instit
ution
s
shall
form
ulate
their
respe
ctive
ML
preve
ntion
progr
ams

PowersofCOC

1 COC shall
have power to
promulgate
own rules, to
oversee
implementatio
n of AMLA
and review
IRR
XII.Rulesand
RegulationsforBanks

1. When
establishing
business
relationsin
opening
deposits
accounts,
banksshould
takereasonable
measureto
establish
identityof
client.In
corporate

entities,followingshallbe
made:

allowed,banks
muststill
ensureidentity
ofclientin
someother
document

1. Verificationoflegal
existenceofclient

2. Verification
ofauthority
ofperson
purportingto
actonbehalf
ofclient

4. Identity of
existing
clients
should be
renewed at
least every
otheryear

2. In case of doubt as
whether purported clients
areactingforthemselves,
reasonablemeasuresshall
betaken

5. All necessary
records
should be
maintained
for at least 5
years

3. Anonymousoraccounts
underfictitiousnamesare
notallowed.Incasesuchis
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR
;

B
E
R
N
A
R
D

6. Special
attentio
nshall
be
givento
comple
x,
unusual
large
andall
unusual
patterne
d
transact
ions
withno
lawful
purpose

O
N; INTIG, JOY
,
ESTELA; DE
J
JESUS, TRACY
A
ANN.
N
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
S
2011-2012. REFERENCE: BANKING
E

LAWS & JURISPRUDENCE BY DIZON.

San Beda College of Law

Banking Laws

7. Other
suspicious
transactions
not
involving
deposits
shouldstill
bereported
toproper
authorities

8. Banksshouldnotoravoidtransactwithcriminals
9. ProgramsagainstMLshouldbedeveloped:
1. Devel
opme
nt of
intern
al
polici
esand
hiring
high
standa
rd
emplo
yees

2. Ongoingemployeetraining
3. Auditfunctiontotestsystem

AUTHORS: MANILA,
ANTONIO CEASAR;
BERNARDO, JANSEN;
INTIG, JOY ESTELA; DE
JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW,
MENDIOLA: AY 2011-2012. REFERENCE: BANKING
LAWS & JURISPRUDENCE BY DIZON.

75

San Beda College of Law

Banking Laws
CHAPTER12SpecialPurpose
Vehicle

1. PoliciesoftheState
1 Develop and maintain a
2
3
4

sound financial sector for

thecountry
Address the non
performing asset problems
ofthefinancialsector
Encourage private
sector investments in
nonperformingassets
Eliminate existing
barriers in the
acquisition of non
performingassets
Helpintherehabilitation
ofdistressedbusinesswith
theendinviewof
contributingtoeconomic
valueadded
Improve the liquidity
of the financial
system which can be
harnessed to propel
economicgrowth

2. Definitions
1 Act Special Purpose
VehicleActof2002
2 AppropriateRegulatory
Authority
agency/authorityhaving
jurisdictionovertheFI's
operations,whichshallbe
thefollowing
3 DepartmentofFinance
(DOF)incaseofthePDIC
andGOCCs,inconsultation
withotheragenciesthat
haveprimaryjurisdiction
overthesaidFIswhenever
deemedappropriatebythe
DOF
4 BangkoSentralngPilipinas
(BSP)inthecaseofbanks
whichincludeLBPand

DBP,and
trustandQB
functionsof
financing
companies
and
investment
houses
licensedby
theBSP
5 Commission
incaseof
financing
companies
and
investment
houses,
excepttheir
trustandQB
functionsor
anyqualified
entitynot
underthe
DOForBSP
6 Audited
Financial
Statements
asetof
financial
reports
consistingof
balance
sheet,income
statement,
statementof
changesin
equityand
cashflow
statement,
auditedbya
Commission
accredited
independent
CPA
7 Certificateof
Eligibilityor
COE
certificate
issuedbythe

Appropriate
Regulatory
Authority
astothe
eligibility
oftheNPL
orROPOA
for
purposesof
availingof
thetax
exemptions
and
privileges

8 Code
BP 68
aka the
Corpor
ation
Codeof
the
Philippi
nes
9 C
o
m
m
i
s
s
i
o
n

S
e
c
u
r
i
t
i
e
s
a
n
d

xchange
Commission
10 DationinPayment
(dacionenpago)a
paymentwhereby
property,whetherrealor
personal,tangibleor
intangible,isalienatedin
favorofthe

creditor,which
couldeitherbe
anFIoranSPV
insatisfactionof
anNPL
1 FIA Foreign
Investment Act,
RA7042
2 FIorFinancial
Institutions
creditgranting
institutions
whichshallbe
limitedtothe
following
1. theBSP
2. a
ban
k as
defi
ned
und
er
RA
879
1,
aka
Th
e
Gen
eral
Ban
king
Law

3. a
financin
g
compan
y as
defined
under
RA
8556
aka
The
Financin
g
Compan
yActof
1998
4. an

I
H

a
s
d
e
f
i
n
e
d
i
n
P
D

1
2
9
a
k
a

T
h
e
I
n
v
e
s
t
m
e
n
t
H
o
u
s
e
s
L
a
w

5. Govern
ment
Financia
l
Instituti

onsorGFIs,shallbe
limitedtothePDIC,
LBPandDBP

ROPOAsbythe
F.I.s,certifiedto
beeligibleas
suchARA
6
Non
6. GOCCs
Performing
7. other institutions
LoansorNPLs
licensed by the BSP
loansand
toperformQB
receivables
3 InvestmentUnitInstrumentsor
suchas
IUIsparticipationcertificates,
mortgage
debtinstrumentsorsimilar
loans,
instrumentsissuedbytheSPV
unsecured
andsubscribedbythePermitted
loans,etc,
Investors
whose
o Itshallnotincludethe
principal
instruments to be
and/orinterest
issuedbytheSPVto
hasremained
thesellingFIs
unpaidforat
o SPVshallnotbe
consideredasdeposit
least180days
substitutesandshall
aftertheyhave
notformpartofthe
becomepast
capitalstockofSPV
dueoranyof
4 NonBankFinancial
theeventsof
InstitutionsperformingQB
defaultunder
functionsorNBQBs
theloan
financingcompanies,IH,and
agreementhas
otherinstitutionslicensedby
occurredasof
theBSPtoperformQB
June30,2002
functions
7 ROPOAReal
5 NonPerformingAssetsorNPA
andother
consistsofNPLsand
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

;
B
E
R
N
A
R

properties
ownedor
acquittedbyan
FIinsettlement
ofloansan
receivables
whichhave
beenacquired
bywayof
Dacionenpago
orjudicialor
extrajudicial
foreclosureor
executionof
judgmentasof
June302002
PROVIDED,
thepropertyis
deemed
acquired

1. onthe
date
of
notari
zation
of the
Deed
of
Dacio
n

DO
IG, JOY ESTELA;
,
DE JESUS,
JA
TRACY ANN.
NS
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
EN
;2011-2012. REFERENCE: BANKING
LAWS & JURISPRUDENCE BY DIZON.
INT

San Beda College of Law

Banking Laws
invest in, or
acquire
the entry of
NPAs of
judgment in
F.I.s.
case of judicial
Secondarypowers
foreclosure
1. Engage in
3. on the date of
3rdpartiesto
notarizationof the
manage,
Sheriffs Cert in
operate,
case of extra
collect and
judicial
dispose of
foreclosure
NPAs
2 TrueSaleasalewherein
acquired
thesellingFItransfersor
fromanFI
sellsitsNPAswithout
2. Rentlease,
recourseforcashor
hire,pledge,
propertytoanSPVwith
mortgage,
theffresults
transfer,sell,
o The transferor
exchange,
relinquishes
usufruct,
effective
secure,
control over
the
securitize,
transferred
collectrents
NPAs
andprofitsand
o
The transferred
othersimilar
NPAs are legally
acts
isolated and put
concerningits
beyondthereachof
NPAsacquired
the transferor and
fromFIs
itscreditors
3. In case of
3. Organization
NPLs, to
1 AnSPVshallbeorganized
restructure
as a stock corporation in
debt, condone
accordance with the
debt and
CorporationCodeandwith
undertake
theseRules
other
o Providedthatifthe
restructuring
SPVwillacquire
related
land, atleastsixty
activities
percent(60%)ofits
outstandingcapital
4. Take,
stockshallbeowned
transfer
bythePhilippine
sharesor
Nationalspursuant
buyshares
totheFIA
issuedbythe
borrowerfor
4. PowersofanSPV
thepurpose
ofbusiness
1 An SPV shall be
incorporated primarily to
reorganizati

2. on the date of

76

onor
rehabilitatio
nofthe
borrower
5. Enterinto
dationin
payment,
foreclose
judiciallyor
extrajudiciall
yandother
formsofdebt
settlement
involving
NPLs
6. Spend
funds to
renovate,
improve,
complete
or alter its
NPAs
acquired
fromanFI
7. Issueequityor
participation
certificates
8. Borrow
moneyand
issueother
instrument
s ofr
paying
operationa
l and
administra
tivecosts
9. Guarantee
credit, accept
or intervene
for honor the
bills of the
borrowers
10. Advance
funds to
borrowers
where
requiredbyan

acquiredassetoranydebt 5. Period for Filing

Applications
11. Entrustto3rdpartiesasset
servicingcompany,the
1 18 months
from date of
collectionandreceiptof
approvalofthe
debtpaymentsfordebts
IRRbythe
underrestructuringor
Congressio
businessreorganization
nal
Oversight
Committee
createdin
Sec23of
theAct
Registration
Requirements
1 An SPV
shall
submit to
the SEC
the ff docs
for
incorporati
on:
1. Name
verific
ation
slip
2. Article
s of
Incorp
oration
andBy
laws
3. Tre
asur
er's
affi
davi
t/
auth
orit
y to
veri
fy
ban
k
acc
oun
t
4. Bank
Certifi
cates
or

Deposi
ts
5. Writ
ten
unde
rtaki
ng
to
chan
ge
corp
orat
e
nam
e by
any
inco
rpor
ator
or
dire
ctor
6. Registr
ation
Data
Sheet

6. Authorized,
SubscribedandPaid
Up Capital of the
SPV
1 An SPV shall
have:
1. M
i
n
i
m
u
m

a
u
t
h
o
ri
z
e
d
c
a

pital stock of
500Mphp
2. Minimum
subscribed
capital stock
of125Mphp
3. Minimum paidup
capitalof31.25M
2 Thisshallbeinformofcash
3 IfanSPVissueIUIsor
offersothersecuritiesto
thepublic,itshall
maintainanetworth
basedonitsAudited
FinancialStatementsinan
amountequivalenttonot
lessthanitsminimum
paidupcapital

6. Draft
agreements
for the
appointment
of trustees
andagents
7. Appointment
or engagement
of external
auditor
8. Roles and
Responsibilitie
s of the
trustee,
advisors, loan
servicers and
property
managers
9. Draft form of
financial
reports of the
SPV
10. Details of the
distribution
policies
11. Methods

7. Submission of SPV Plan

Contents
1. Investmentpolicies
2. Contributionplan
3. FeaturesoftheIUIs
4. TimetableofIssuance
5. RightsoftheholdersofIUIs
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

;
B
E
R
N
A
R

for the
increase
and
decrease of
future fund
contributio
ns
12. Methods for
thealteration
or
modification
of the
approved
SPVplan
13. Methods
for the
liquidation
and
distributio
nofassets
to the
holders of
IUIs
14. Details of
credit
enhancements

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.

77

San Beda College of Law

Banking Laws

15. such other documents or

information as may be
requiredbytheSEC

8. Approval
1 UponapprovaloftheSPV
Plan,theCommissionshall
issueanApproval
Certificatestatingthatthe
applicationhasbeen
approvedandtheIUIsmay
beissued
I.IssuanceofIUIs
2 RegistrationRequirements
1. AllIUIsproposedto
besoldor
distributedwithin
thePhilippinesshall
bedulyregistered
withtheSEC
2. Registration
statementincluding:
1. business of
theissuer
2. use of
proceeds
3. riskfactors
4. legal
proceedings
5. market of
securities
6. manageme
nt's
discussion
of
financial
condition
andresults
of
operations
7. directors
andofficers
8. securities
ownership
9. certain
relatedparty

tra
ns
ac
tio
ns
10. a
u
d
i
t
e
d

a
n
d

i
n
t
e
r
i
m

f
i
n
a
n
c
i
a
l

s
t
a
t
e
m
e
n
t
s

i
n

a
c
c
o
r
d
a
n
c
e

w
i
t
h

S
R
C

r
u
l
e

6
8

3. In

additio
n, the
ff
inform
ation
shall
be
disclo
sedin
the
regist
ration
state
ments
ofan
SPV
1. de
tai
ls

of the SPV
plan
2. details of
credit
enhancemen
ts
3. detailed
descriptio
n of the
assets or
loan
constitutin
g the
pools of
assets
4. rights
and
obligatio
nsofthe
selling
FI
assumed
bythe
SPV
5. description
of any
relationshi
p or
interest of
the selling
FIparent
6. Inc
enti
ves
and
exe
mp
tio
n
pri
vile
ges
4. TheSPVshallalso
submita
certificationfrom
theFIthatthe
affectedborrowers
oftheNPLsandall
personsholding
priorencumbrances
upontheassets
5. SPVshallpaya

registr
ation
feeof
1/10
of1%
ofthe
aggre
gate
offeri
ng
price
ofthe
IUIs
subjec
tto
the
dimini
shing
feeset
bythe
Com
missio
n

6. SPV
shall
cause
the
public
ation
ofa
notice
of
filing
of
registr
ation
statem
entits
expens
e
7. The
Comm
ission
may
audit
the
financi
al
statem
ents,
assets
and
other
inform
ation
ofan
SPV
applyi
ngfor
registr
ation
8. Upon
the
registr
ation
statem
ent
being
declar
ed
effecti
veby
the
Com
missio

n,thesaleofthe
securitiessubject
theretoshallbe
commencewithin2
businessdaysand
becounteduntilthe
endoftheoffering
periodoruntilthe
salehasbeen
terminatedbythe
actionoftheissuer
9. The SPV shall
ensure

wide
dissemination of
preliminary and
finalprospectuses
10. Writtennotification
shallbegiventothe
SECwithin3
businessdaysfrom
completionor
terminationofthe
offeringbythe
issuer,including
thereinthenumber
ofsecuritiessold
AmendmentsorRejection
1 Within 45 days after
thedateoffilingofthe
registration statement,
oratsuchlaterdateto
which the issuer has
consented, the SEC
shall declare the
registration statement
effectiveorrejected
2 UNLESStheapplicantis
allowed to amend the
registrationstatement
3 Afterwhich,theSECshall
determine if it should be
effectiveorrejected
4 TheSECmayrejectanRS
andrefuseregistration
thereunderorrevokethe
effectivityofanRSandthe
registrationofthesecurity
thereunderafterduenotice
andhearingbyissuingan
ordertosucheffect,setting
forthitsfindingsinrespect

theretoifits
findsthat:
5 Theissuer:
1. has
been
judicia
lly
declar
ed
insolv
ent
2. viola
ted
any
provi
sion
of
the
Corp
orati
on
Code
as
well
as
order
s of
the
SEC
3. has
been
or
engag
ed or
is
about
to
engag
e in
fraud
ulent
transa
ctions
4. he
ha
s
m
ad
e
an
y
fa

ls
e
or
m
isl
ea
di
ng
re
pr
es
en
tat
io
n
of
m
at
er
ial
fa
ct
s
in
an
y
pr
os
pe
ct
us
co
nc
er
ni
ng
th
e
is
su
er
or
its
se
cu
rit
ie
s
5. has
failed
to
compl

ywithany
requirementthatthe
SECmaimposeas
aconditionfor
registrationofthe
securityforwhich
AUTHO
RS:
MANILA,
ANTONI
O

the
registr
ation
statem
ent
has
C
E
A
S
A
R
;
B

been
filed

E
JANSEN; INTIG,
R
JOY ESTELA; DE
N
JESUS, TRACY
A
ANN.
R
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
D
2011-2012. REFERENCE: BANKING
O
,LAWS & JURISPRUDENCE BY DIZON.

78

San Beda College of Law

Banking Laws

1 TheRSisonitsface
incompleteorinaccurate
inanymaterialaspector
includeanyuntrue
statementorother
misleadingstatements
2 Theissuer,oranyD,O,or
controllingpersonofthe
issueroraperson
performingasimplefunction
hasbeenconvictedbya
competentjudicialor
administrativebody,upon
pleaofguilty,orotherwise,
ofanoffenseinvolving
moralturpitudeand/orfraud
orisenjoinedorrestrained
bytheSECforviolationof
such
3 IftheSECdeemsit
necessary,itmayissue
anordersuspendingthe
offerandsaleofthe
securitiespendingany
investigation

substitutes
underthe
Act,the
interestor
other
monetary
benefit
derivedfrom
IUIsisnot
subjecttothe
20%final
withholding
taxunderthe
NIRC
2 However,the
IUIandany
incomearising
fromtheIUIs
shallbesubject
tothenormal
taxand/orsuch
other
applicable
taxes,
includingbut
notlimitedto,
documentary
stamptax,
imposedunder
theNIRCand
its
implementing
regulations

IssuanceofSecuritiesof
thePublicwithoutprior
registration
1 AnySPVthatofferstosell
ordistributeitsIUIstothe
publicwithinthePhils
withoutpriorregistration
shallbesubjecttothe
10.
Permitted
penaltiesprovidedofthe
Investors
SRC
1 May
2 Theimpositionofthe
acquir
foregoingadministrative
e or
sanctionsshallbewithout
hold
IUIs
prejudicetothefiling
of an
criminalchargesagainst
SPV
theindividuals
in the
responsibleforthe
minim
violation
um
amoun
TaxTreatmentofIUIs
t of
1 SinceIUIsarenot
10Mp
consideredasdeposit
hp

provid
ed:

1. th
at
a
n
S
P
V
s
h
al
l
n
ot
b
e
a
ut
h
or
iz
e
d
to
a
c
q
ui
re
th
e
I
U
Is
of
a
n
ot
h
er
S
P
V
2. that
the
Paren
t,

Subsidiaries,
Affiliatesor
DOSRIshallnot
acquire,hold,
directlyor
indirectly,theIUIs
oftheSPVthat
acquiredtheNPAs
oftheFI

2 Affiliateajuridicalperson,
directlyorindirectly,thru
oneormoreintermediaries,
iscontrolledbyorisunder
commoncontrolwith
sellingFIoritsaffiliates
3 Control exists when the
Parent owns directly or
indirectlythrusubsidiaries
morethanonehalfof

thevoting
powerofan
enterpriseit
mayalsoexist
whenthereis:
1. power
over
more
than
ofthe
voting
rights
by
virtue
ofan
agree
ment
with
other
investo
rs
2. power
to
govern
the
financi
aland
operati
ng
policie
sof
the
enterpr
ise
under
a
statute
oran
agree
ment
3. pow
er to
appo
intor
remo
ve
the
majo
rity
of
the
mem

bers
of
the
BoD
or
equi
vale
nt
gove
rning
body
4. p
o
w
e
r
t
o
c
a
s
t
t
h
e
m
a
j
o
ri
t
y
o
f
v
o
t
e
s
a
t
m
e
e
ti
n
g
s
o
f
t
h

eBoDor
equivalent
governing
body
5. any other
arrangement
similartoanyof
theabove
2 Parentajuridicalperson
whohascontrolover
anotherjuridicalperson
directlyorindirectlythru
oneormoreintermediaries
3 RelatedInterest:
1. entitiesinwhichthe
amountof
investmentofthe
sellingFIismore
than20%butless
than50%ofthe
outstandingcapital
stockthereof
2. trustsforthebenefit
ofemployeessuch
aspensionand
profitsharingtrusts
thataremanagedby
orunderthe
trusteeshipofthe
sellingFI
3. provident and
other
employees/officer
s'benefitfundsof
thesellingFI
4. principal owners of
thesellingFI
5. management of the
sellingFI
6. membersofthe
immediatefamilies
oftheprincipal
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

owner
sand
mana
geme
ntof
the
sellin
gFI
7. other
parties
with
which
the
selling
FImay
deal
withif
one
party
control
sor
can
signifi
cantly
influen
cethe
manag
ement
or
operati
ng
policie
sof
the
other
toan
extent
that
oneof
the
transac
ting
parties
;
B
E
R
N
A
R

might
be
preven
ted
from
fully
pursui
ngits
own
separat
e
interes
ts

4 Subsidiary
ofa
specified
personis
anaffiliate
controlled
bysuch
personD/I
thruoneor
more
intermediar
ies

11.

Notice and
Manner of Transfer
ofAssets

PriorNotice
1 Notransferof
NPLstoan
SOVshall
takeefect
unlesstheFI
concerned
shallgive
priornoticeto
theborrowers
oftheNPLs
andallpersons
holding

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.

79

San Beda College of Law

Banking Laws
priorencumbrancesupon
theassetsmortgagedor
pledged
1. must be in writing
byregisteredmail
2. theborrowerand
theFIshallbe
givenaperiodof
atmost90days
uponreceiptof
noticeto
restructureor
renegotiatethe
loanundersuch
termsand
conditionsas
maybeagreed
uponbythe
borrowerandthe
FIconcerned
ProceduresontheTransferofAssets
totheSPV
1 AnFIwhowantstoapply
mustfileanapplication
shallbefiledforeach
transferofassetswiththe
AppropriateRegulatory
Authorityhaving
jurisdiction.Itmustbe
accompaniedwitha
certificationoftheFIthat:
1. the assets to be
sold/transferred are
NPAs as defined
undertheSPVAct
of2002
2. the proposed
sale/transferofsaid
NPAs is under a
TrueSale
3. the
notification
requirement
to the
borrowers
has been
complied

wi
th

4. the
max
imu
m
90
day
s
peri
od
for
rene
goti
atio
n
and
restr
uctu
ring
has
bee
n
com
plie
d
with
2 Thismustbe
signedbya
seniorofficer
witharankof
atleastSenior
VPor
equivalent
providedsuch
officerisduly
authorizedby
theFIBoDor
theCountry
Head,incase
offoreign
banks
3 the3rdand
4th items
shall not
applyifthe
NPL has
become a
ROPOA

after June
30,2002
IssuanceoftheCOE
1 The
ARA
shall
issue to
the
borrowe
raCOE
within
45 days
fromthe
date of
applicati
on
2 said COA
shall always
berequiredby
the BIR for
purposes of
availing the
tax
exemptions
and other
privileges
under the
Activities
3 TheARA
shallfurnish
theSECand
theBIRa
duplicatecopy
ofsaidCOE.
TheARAand
BIRshall
coordinateto
ensurethe
integrityofthe
COE
SubsequentNotice
1 afterthe
sale/transferof
theNPLs,the
transferringFI
shallinform
theborrower

inwritingatthelastknown NatureofTransfer
addressofthefactofthe
1 inthenatureof
sale/transferoftheNPLs
TrueSale
2 anytransferof
SubsequentTransfers
NPAsnotin
1 EachCOEshallbevalidfor
thenatureof
only one transfer. All
TrueSaleshall
notqualifyfor
subsequent transfers shall
taxexemptions
require a separate COA
andfee
fromtheARA
privileges
grantedunder
theAct
3 The transfer
by an FI of
its NPAs to
anSPVshall
beconsidered
NOT A
TRUESALE
iftheFI:
1. invest
s in
or
acqui
res,
D/I,
the
IUIs
issue
d by
the
SPV
that
acqui
redits
NPAs
2. has d/i
manag
ement
of the
transfe
ree
SPV
3. has
any
of
its
dire
ctor
s,
offic
ers,

emp
loye
es
on
the
boar
dof
the
trans
fere
e
SPV
4. has
obliga
tedto
repurc
hase
or
substit
ute/ex
chang
ethe
NPA
orany
part
ofthe
pool
of
NPAs
atany
time,
except
in
cases
ofa
breac
hof
repres
entati
onor
warra
ntyof
theFI
5. HasRI
with
the
transfe
ree
SPV
6. Posse
ssesa
claim

of beneficial
ownershipofmore
than 5% of the
transfereeSPV
4 Following shall NOT
presumedtobeatruesaleif
theFI:
1. Purchases/invests
intheIUIsofthe
SPVthatacquired
itsNPAsthruits
trustdepartment
includingthetrust
departmentofits
Subsidiaries/Affilia
tes,Parentbank
andthetrust
departmentofthe
Parentbank's
subsidiaries/affiliat
es
2. Is made the
beneficiary of a
trust used as a
vehicle

for
purchasing and
securitizing the
NPAs
3. Paysfurther
expensesin
relationtothe
NPAsaftersaid
NPAshave
been
sold/transferred
tothetransferee
SPV
4. Extendsany
creditfacility,
guaranty,orany
similarfinancial
transactiontothe
transfereeSPV
5. Extendsanycredit
facility,guarantyor
anysimilar
financialtransaction
AUTHO
RS:
MANILA,
ANTONI
O

toany
party
forthe
purpo
seof
investi
ngin
the
equity
or
IUIs
ofthe
SPV,
orfor
acquir
ing
the
NPAs
from
the
SPV
6. Exte
nds
any
CF,
F,
AST
to
any
part
y
for
the
purp
ose
of
acqu
iring
the
NP
As
fro
m
the
tran
sferr
ing
C
E
A
S
A
R

FI
7. Acts
as
truste
e(FIs
trust
dept)
orif
the
Trust
dept
of
any
ofthe
FIs
subsi
diarie
s/affil
iates,
paren
t
bank
or
paren
t
banks
,
subsi
diarie
s/affil
iates
actin
gas
truste
ein
the
securi
tizati
onof
NPAs
thatit
has
transf
erred
tothe
SPV

;
RDO, JANSEN;
B
INTIG, JOY
E
ESTELA; DE
R
JESUS, TRACY
N
ANN.
A
FROM SECTION 2S - SAN BEDA

COLLEGE OF LAW,
MENDIOLA: AY 2011-2012.

REFERENCE:
BANKING LAWS

&
E BY DIZON.
JURISPRUDENC

San Beda College of Law

Banking Laws

8. Acceptsas

N.TaxExemptionsand
collateralfora
FeePrivileges
loanextendedby
3 Transactions
saidFItheequity
covered
sharesandIUIsof
1. th
theSPVthat
e
acquireditsNPAs
tr
9. Entersintobuy
an
backandother
sf
similar
er
arrangements,or
of
financialderivative
th
transactionswith
e
similareffect,
N
involvingtheNPAs
P
orthesecurities
L
backedbysuch
by
NPAs
th
10. Entersintoany
e
othertransaction
FI
wheretheFIretains
to
effectivecontrol
an
overthetransferred
S
NPAsorsharesin
P
thelossesofthe
V
SPV
2. transfe
2 Anypartyincludes
rofthe
proxies,nominees,and
ROPO
votingtrustees.The
A by
extensionofcredittoan
the fi
individualforthepurposeof
to an
SPV
acquiringasinglefamily
residentialunitROPOAor
3. Daci
NPLsecuredbyrealestate
onen
mortgageonaresidential
pago
unitshallbeallowed.
(DEP
) of
Penalties
the
NPL
1 prescribedunderSec25of
tehActwithoutprejudiceto
by
otherpenaltiesthatmaybe
the
imposedbytheARAofthe
borro
transferringFIunder
wer
applicablelaws
tothe
FI
2 TheSPVshallassumeall
Rights and Obligations of
4. DEP
theFIoverthetransferred
ofthe
NPA

80

NPL
by a
3rd
party,
on
behal
f of
the
borro
wer,
to the
FI
5. transfe
r of
NPL
by the
FI to
an
individ
ual
6. tr
an
sf
er
of
th
e
R
O
P
O
A
by
th
e
FI
to
an
in
di
vi
du
al
7. tran
sfer
of
the
NP
L

by the SPV
toa3rdparty
8. transfer of the
ROPOA by the
SPV to a 3rd
party
9. DEPoftheNP
by

the
borrowertothe
SPV
10. DEP of the NPL
by a3rd party on
behalf of the
borrower to the
SPV
11. transfer of the
NPL by the
individualtoa3rd
party
12. transfer

of
ROPOA by the
individualtoa3rd
party

1 Provided that
these tax
exemptions
and reduction
of fees shall
apply only
upon
compliance
with the
following
requirements
1. NPA
has
been
certif
ied
by
the
ARA
asan
NPL
or
ROP
OA
asof
06/30
/02
provi
ded
that
for
tax
purpo
ses,a
prope
rty
shall
be
deem
ed
acqui
red
after
the
lapse
ofthe
rede
mptio
n
perio
din
cases

wher
e
such
perio
dstill
exists

2. all
transfe
rtaxes
and
registr
ation
fees
have
been
paidor
subseq
uently
paid
upon
assess
ment
on
ROPO
As
who
redem
ption
period
has
lapsed
asof
06300
2
where
legal
title
has
not
been
transfe
rredin
the
name
ofthe
FI
3. The
proper
ties
acquir
edby

anSPVfromthe
GFIsorGOCCs
whicharedevoted
tosocializedorlow
costhousingshall
notbeconvertedto
otheruses
2 Taxexemptionprivileges
1. Documentary stamp
tax
2. Capital gains tax
imposed on the
transfer of lands
and other assets
treated as capital
assets
3. Credible
withholding
incometaxes
imposedonthe
transferofland
andor
buildings
treatedas
ordinaryassets
4. the VAT or gross
receipts
3 ReductionofFees
1. 50%ofthe
applicablemortgage
registrationand
transferfeesonthe
transferorreal
estatemortgageand
chattelmortgage
registrationtoand
theSPV/individual,
imposedin
accordancewiththe
existingcircularof
LRA
2. 50% of the filing
AUTHO
RS:
MANILA,
ANTONI
O

fees
for
any
forecl
osure
initiat
ed by
the
SPV/i
ndivi
dual
in
relati
on to
any
NPA
acqui
red
from
anFI
3. 50%
of the
registr
ation
fees
prescri
bed
4 Manner of
Claiming Tax
Exemptions
o shall
provid
ethe
BIR
with
the
appro
priate
certifi
cate
of
eligibi
lity
C
E
A
S
A
R
;
B

15 Incase
ofthe
transfe
rof
real
propert
yor
shares,
the
CIRor
his
duly
authori
zed
represe
ntative
shall
issuea
Certifi
cate
(Cert
Author
izing
Registr
ation/
Tax
Cleara
nce
Cert)
that
such
transfe
rhas
been
reporte
dand
istax
exemp
t

17.

Abuse of Tax
Exemptions and
Privileges

E
JANSEN; INTIG,
R
JOY ESTELA; DE
N
JESUS, TRACY
A
ANN.
R
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
D
2011-2012. REFERENCE: BANKING
O
,LAWS & JURISPRUDENCE BY DIZON.

81

San Beda College of Law

Banking Laws

1 Anyperson,naturalor
juridical,whoshallbenefit
fromthesaidexemptions
andprivilegeswithoutbeing
entitledthereto,shallbe
liable.
2 In addition, he shall
refundtheGovernment
double the amount of
hewasexemptedfrom
plus12% interest per
annum

18.

19.

RedemptionPeriods
1 provided by the
following: Sec 47 of RA
897 or the GBL of 2000
andRulesofCourt

Books of Accounts and

Records
1 InternalRecordKeepingand
AccountingControls
1. AnSPVmustmake
andkeepbooks,
recordsand
accountswhich
reflectthe
transactionsand
dispositionsofits
assets,itminutesof
meetingsandother
business
transactions
2. Itshalladviseand
maintainasystem
ofinternal
accounting
controlssufficient
toprovide
reasonable
assurancesthat
1. The
transactio
nsand
access
are
pursuant

t
o

m
a
n
a
g
e
m
e
n
t

a
u
t
h
o
r
i
z
a
t
i
o
n

2. Fi
n
a
n
ci
al
st
at
e
m
e
nt
s
ar
e
pr
e
p
ar
e

d
in
c
o
nf
or
m
it
y
w
it
h
th
e
g
e
n
er
al
ly
ac
ce
pt
e
d
ac
c
o
u
nt
in
g
pr
in
ci
pl
es
3. R
e
c
o
r
d
e
d
a
s
s

etsare
compared
with
existing
assetsat
reasonable
intervals
and
differences
reconciled

2 ExternalAuditorshall

be appointed by SPV
accredited by the
Commission
3 Inspection of Books and
Recordsthosewhohasa
righttoinspect:
1. Stockholder of SPV
orHolderofanIUI
atareasonablehour
ofbusiness
2. Authorized
representatives
ofthe
Commission,
BIRortheBSP
anytime
3. Failuretocomply
withthisrightwill
beagroundforthe
suspensionorderon
theofferingofthe
IUIs

20.

Reports
1 Reports to be
submitted by
SPV to the
Commission
1. As

Stock
Corporation
General
Information
Sheet(GIS)
within30
daysfrom
stockholder'
smeeting
date

A
u
d
it
e
d
F
i
n
a
n
ci
al
S
ta
te
m
e
n
ts
w
it
h
i
n
1
2
0
d
a
y
s
fr
o
m

t
h
e
e
n
d
o
f
t
h
e
fi
s
c
al
y

e
a
r

2. As
Issuer
of
Securit
ies to
the
Public
1. A
nn
ua
l
Re
po
rt
on
SE
C
Fo
rm
17
A
2. Q
u
a
r
t
e
r
l
y

R
e
p
o
r
t

o
n

S
E
C

F
o
r
m

17Q
3. A
current
report
on SEC
Form
17C
4. Monthl
y
Reports
ontotal
issuance
sand
amounts
ofIUIs
3. Audited Financial
Statements The
filingofSECForm
17Ashallsuffice
4. Violations any
violation of the
above due to the
failure of the
SPV, it shall be
subjecttopenalty
providedbySRC,
this Code, and
theirIRR
2 Reportstobesubmittedto
theBIRbyanSPVfor
purposesofimplementing
thetaxprovisionsoftheAct
3 ReportsfiledtotheBSP
15 BySPV
1. Reporton
any
sale/transfe
rtoany
partyof
NPLsand
ROPOAs
acquired
frombanks
and
NQBQs
quarterly
2. Reporton
thelatest
appraised/
fairmarket
valueof

R
O
P
O
As
an
d
re
al
est
at
e
pr
op
ert
ies
/
ch
att
els
us
ed
as
co
lla
ter
al
an
d
N
Q
B
Qs
se
mi

a
n
n
u
al
l
y

15 By
Sellin
g
Finan
cial
Institu
tion
month
ly
report

regard
ing
the
actual
sale/
transfe
rtoan
SPV

21.

Penaltyincase
of violation of the
provisions of the
Act
1 Fine: Not less
than 50k not
morethan1M,
or
2 Imprison
ment: not
less than
6 years1
day not
more
than 12
years
3 ORBOTH
4 Ifthe
penaltywas
committed
bya
corporation,
association,
partnership
etc.,theone
responsible
wouldbe
those
officerswho
participated
inthe
commission
ofthecrime
orwhoshall
have
knowingly
permittedor
failedto
preventthe
commission
5 Ifthe
offenderis
analien,he
shall,in

additiontotheprescribed
penalties,bedeported
withoutfurther
proceedingsafterserving
thesentence
AUTHO
RS:
MANILA,
ANTONI
O
CEASAR

6 Ifthe
offenderifa
public
official,or
employee,in
additionto
;
B
E
R
N
A
R

thepenalties
above,the
penaltyof
absolute/temp
oraryDQ
shallapply

D
EN; INTIG, JOY
O
ESTELA; DE
,
JESUS, TRACY
J
ANN.
A
FROM SECTION 2S - SAN BEDA
COLLEGE OF LAW, MENDIOLA: AY
N
2011-2012. REFERENCE: BANKING
S

LAWS & JURISPRUDENCE BY DIZON.