BANKING LAWS Commented [a1]:

GENERAL BANKING LAW OF 2000

(R.A 8791)

By: Atty. Cretchen B. Balbon

A. Banks entities engaged in the lending of funds obtained in the form of deposits from the
public (Sec 3.1, General Banking Law)

a. Must be stock corporations and funds are obtained from the public (Sec 8, GBL) Commented [a2]: Must be more than 20 persons

b. An investment company that performs functions as such is not a bank. (Baas v. Asia
Pacific Corp., G.R No 128703, 2000) But an investment company which loans out money of its
customers, collects the interests, and charges a commission to both lender and borrower is
engaged in banking (Rep v. Security Credit and Acceptance Corporation, G.R No. L-20583, Jan
23, 1967)

c. Quasi-Banks entities engaged in the borrowing of funds through the issuance,

endorsement or assignment with recourse or acceptance of deposit substitutes for purposes of
relending or purchasing of receivables and other obligations (Sec 4, GBL)

a. Deposit substitutes are alternative forms of obtaining funds from the public (Sec 95.
New Central Bank Act, NCBA for short)

1.01 Nature of Business

A bank has a vital role in providing an environment conducive to the sustained national
economy. Banking is fiduciary in nature that requires high standards of integrity and
performance (Sec 2, GBL)

Consequences:

a. Subject to heavy and close supervision and/or regulation by the Bangko

Sentral ng Pilipinas or BSP (Central Bank of the Phil v. CA. 208 SCRA 652)

RULE ON BANK OPERATIONS (Sec 6): - No person or entity shall

engage in banking operations or quasi-banking functions without authority
from the Bangko Sentral ng Pilipinas (BSP)

HOWEVER: An entity authorized by the BSP to perform universal or

commercial banking functions shall likewise have the authority to engage in
quasi-banking functions
 Note: No person, association, or cooperation unless duly authorized to
engage in the business of a bank quasi-bank, trust entity, or savings and loan
associations:
-> Shall advertise or hold itself out as being engaged in business as such;
-> Use in connection with its business title, the word or words bank
banking banker, etc or transact in any manner the business of any such
bank, corporation or association (Sec 64)

b. DEGREE OF DILIGENCE REQUIRED OF BANKS:

1. Required to exercise utmost diligence in the handling of deposits

cases:

* PCIBank v. CA (350 SCRA 446, 2001)

* Prudential Bank v. Court of Appeals (328 SCRA 264, 2000)

*BPI v. CA (122 SCAD 26,326 SCRA 641, 2000)

* Philippine Bank of Commerce v. CA (80 SCAD 616, 269 695)

*Simex Intl (Manila) v. CA (183 SCRA 408, 1992)

2. Required to exercise high degree of diligence as Mortgagees in

Good Faith

*Development Bank v. CA (125 SCA 727, 331 SCRA 267, 2000)

* Canlas v. CA (121 SCAD 752, 326 SCRA 415, 2000)

3. High degree of Diligence does not cover Transactions Outside of Bank

Deposits

* Reyes v. Court of Appeals (GR No. 118492, 15 August 2001)

c. Special rules of strikes and lockouts (Sec 22)

D. FIT AND PROPER RULE (Sec 16)

Monetary board shall pass the qualifications and disqualifications of

individuals elected or appointed as bank directors or officers and disqualify those found unfit.

Case: Busuego v. Court of Appeals (204 SCRA 473, 1999)

E. Liability of Banks for Tort Scheme of its Officers

Case: PCIBank v. Court of Appeals (350 SCRA 446, 2001)

F. Prohibition on Public Officials (Sec 19)

1.02 Authority to Incorporate and Operate

a. A banking or quasi-banking corporation cannot be incorporated without

authority from the BSP. (Sec 14, GBL)

b. An entity that is performing banking or quasi-banking function cannot operate

without a certificate of authority from the BSP (SEC 6, GBL)

2. CLASSIFICATION OF BANKS(6 stars BAR)

a. Universal Banks

b. Commercial Banks

c. Rural Banks

d. Thrift Banks

e. Cooperative Banks

f. Islamic Banks

g. Other classification of banks as determined by the MB of the BSP.

2.02 Distinctions

a. As to capitalization

b. As to purpose

c. As to powers and functions

d. As to who can be directors

e. As to incorporators

f. As to foreign equity

g. As to necessity of public offering

3. FUNCTIONS OF BANKS

3.01 BASIC FUNCTIONS

 a. Deposit Function

b. Loan Function

3.02 Other Functions

3.03 PROHIBITED ACTS

a. Banks are prohibited from engaging in insurance business ( Sec 54)

b. Outsourcing of functions are generally prohibited

-also prohibited to employ probationary employees/casual in

deposit division

4. DEPOSIT FUNCTION

4.01 RELATIONSHIP BETWEEN BANK AND DEPOSITOR

a. Simple Loan

Under Art 1980 of the Civil Code, the bank is a debtor while the depositor is the
creditor.

Cases:

Moran v. CA (49 SCAD 311, 20 SCRA 799, 1994)

Serrano v. Central bank (96 SCRA 96, 1980)
People vs. Ong (204 SCRA 942, 1991)
CA Agro-Industrial Dev. Corp v. CA (219 SCRA 426, 1993)

b. Obligation of Banks to Depositors

Cases:
Metropolitan Bank and Trust Co. v. CA (56 SCAD 368; 237 SCRA 726,
1994)
Firestone Tire v. CA (353 SCRA 601, 2001)
PCIBank v. CA (269 SCRA 695, 1997)
PNB v. CA (72 SCAD 39, 259 SCRA 174, 1996)

Consequences:

a. The bank can make use as its own the money deposited

b. Third persons who may have a right to money deposited cannot hold the bank
responsible unless there is a court order or garnishment (Fulton Iron Works vs. Chinabank, 55
Phil 208)
 c. The officers of the bank cannot be held liable for estafa if they authorized the
use of the money deposited by the depositor.

d. The bank has the right to compensation/set-off on deposit for outstanding loan

case: Bank of Philippine Islands v. CA (51 SCAD 188, 232 SCRA 302, 1994).

4.02 DEPOSITORS

A. Minors

B. Married Women

4.03 KINDS OF DEPOSITS

A. Demand deposits

B. Savings Account

C. Negotiable Order of Withdrawal Accounts (NOW)

D. Time Deposits

E. Interests

4.04 Other Accounts

a. Anonymous Accounts

b. Joint Accounts subject to survivorship agreement