Sunteți pe pagina 1din 81

San Beda College of Law, Mendiola

BANKING LAWS AND JURISPRUDENCE


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

Topic Page

Chapter 1- Banks and Business of Banking 2


Chapter 2 - Organization, Management, Administration Of Banks 5
Chapter 3 - Deposit Functions Of Banks 8
Chapter 4 - Investments, Loans and Other Bank Functions 12
Chapter 5 - Prohibited Transactions and Cessation Of Banking Business 24
Chapter 6 - Foreign Banks and Trust Operations 29
MIDTERM COVERAGE: Chapter 1 - 6

Chapter 7 - The Banko Sentral ng Pilipinas 36


Chapter 8- Currency, Monetary Stabilization and Functions of BSP 44
Chapter 9 - Unclaimed Balances and Trust Receipts 56
Chapter 10 - Deposit Insurance 61
Chapter 11 - Anti-Money Laundering 69
Chapter 12 – Special Purpose Vehicle 75
FINALS COVERAGE: Chapter 7 - 12
San Beda College of Law !"
" Banking Laws

CHAPTER 1 – Banks and Business of Banking depositors with meticulous care and
always have in mind the fiduciary nature
• Declaration of the state with regards to banking – of banks
recognize vital role of the banks to provide • Not enough that he exerted reasonable
environment conducive to development of national diligence to ascertain the safety of his
economy clients
o It also states that banks need high • Such diligence is only required in its
standards of integrity and performance fiduciary relationship with its depositors
• Banks – entities engaged in the lending of funds and not to other transactions such as sale
obtained in the form of deposits (borrowing, of foreign exchange demand draft
lending, safe-keeping) • Sec 2 of GBL prescribes the statutory
• Banks may engage in other activities allowed by diligence required from banks – “high
the law other than lending standards of integrity and performance” in
serving its depositors.
Nature of Banking Business
• Diligence required of banks is more than
1. Debtor-Creditor Relationship that of a good father (PBCom vs. CA)
• It is a contract of loan and not deposit • Diligence extends to financial institutions
• Contract between bank and depositor is (e.g. GSIS)
governed by the provisions of the NCC on 7.
Treatment of accounts with meticulous care
simple loan (Consolidated Bank and Trust • Must treat every account with utmost
Corp vs. CA) fidelity regardless of amount
2. Fiduciary duty • There is no law mandating banks to call
• Fiduciary relationship – bank’s obligation up their clients whenever a significant
to observe high standard of integrity and amount shall be withdrawn from their
performance (Phil. Banking Corp. vs. CA) account
3. Not a trust agreement 8.
Duty to keep records
• It is not a trust agreement and failure to 9.
Banks are not gratuitous bailees
pay a loan is not a breach of trust 10.
Banks not expected to be infallible
• It is not a trust agreement because banks • However, they must bear the loss for not
do not accept deposits to enrich depositors discovering mistakes if there are
but to earn for themselves established procedures not followed
4. Indispensable Institution 11.
Dealing with registered lands
• Has a vital role in economic life • General Rule: mortgagee can rely on title
• Significance of banking institution to and does not need to investigate further
commercial transactions (Metropolitan • Exception: mortgagee cannot close his
Bank & Trust Co. vs. Cabilzo) eyes to facts which should put a
5. Impressed with public interest reasonable man on his guard, and yet
• Has public interest because people depend claim that he is in good faith
on the honesty and efficiency of banks • With banking institutions, mere reliance
• Stability of banks largely depends on the on the title is not enough as they need to
confidence of the people in the honesty investigate also
and efficiency of banks. • Doctrine of the “mortgagee in good faith”
6. Degree of diligence – all persons dealing with property
• Diligence higher than that of a good father. covered by the Torrens Certificates of
It must be extraordinary diligence Title are not required to go beyond what
• In Simex International vs. CA, the bank is appears on the face of the title. (Cavite
under obligation to treat the accounts of its Development Bank vs. Spouses Lim)
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

• The business o a bank is one affected with • Moral damages


public interest, for which reason the bank • Gen. Rule – a corporation is not entitled
should guard against loss due to to moral damages
negligence or bad faith (Sps. Omengan vs. • Exception – when its good reputation is
PNB) besmirched by breach of fiduciary duty.
• Where the mortgagee does not directly • In culpa contractual – recoverable if
deal with the registered owner of real there is fraud or bad faith
property, the law requires higher degree of • Depositor may recover even if bank’s
prudence be exercised by the mortgagee negligence not attended by bad faith if he
(Abad vs. Guimba) suffered mental anguish, serious anxiety,
12. Banks may exclude persons in their premises etc.
13. Charging interest for loans 6. Respondeat superior of employees
• It is considered the very core of the • Command responsibility
banking’s very existence • A bank is bound by the negligence of its
employees
Liability for Acts of Officers and Employees
Classification of Banks (CUT-RICO-NQU)
• A bank is liable for the wrongful acts of its
officers done in the interest of the bank or dealings 1. Universal Banks – large commercial banks that
as bank representatives but not for acts outside the can do both commercial and investment banking
scope of their authority. • They have the power of both commercial
bank and investment house
1. Negligence of Manager – employer is liable to the
• Have the power to invest in non-allied
acts of the manager
enterprises
2. Negligence of officer – general rule: tortious acts
2. Commercial banks – general powers incident of
of officers within their scope of employment shall
corporation and can perform commercial banking
make banks liable
3. Negligence of tellers – tellers must exercise high • Does not have the power to invest in non-
degree of diligence allied enterprises
3. Rural banks – banks that promote rural
• Teller should not give passbook to wrong
development
person as a person in possession of
passbook is presumed the owner • They can extend loan or advances to
primarily meet the normal credit needs of
• Appropriation of deposited money by the
farmers, fishermen and their families
teller is not estafa but considered as theft
as the client only had material possession • Can also deposit in private banks more
of it. Such deposit money are considered than the amount prescribed by Single
owned by the bank Borrower’s Limit in case there are no
4. Right to recover from employees government banks
5. Liability for damages • Rural Banks Act (RA 7353)
• Actual, exemplary, moral 4. Thrift banks – encourages the industry, frugality
and accumulation of savings of the public
• Actual and compensatory – the interest
due shall itself earn interest from the time • To make it within easy reach to the people
it is judicially demanded the credit facilities at reasonable cost
• 12% - legal interest when judgment • Includes: (1) savings and mortgage bank,
becomes final and executory (2) stock savings and loan associations
and (3) private development banks
• 6% - interest for obligations not
constituting a loan or forbearance of • Thrift Banks Act (RA 7906)
money
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

5. Cooperative banks – organized by cooperatives to • No person or entity shall engage in baking


provide financial and credit services to operations without authority from Bangko Sentral
cooperatives • Universal or commercials banks may engage in
• Cooperative Code (RA 6938) quasi-banking functions
• Membership of a cooperative bank shall • Under Corporation Code:
include ONLY cooperative and o No articles of incorporation or amendment
federations of cooperatives of banks shall be given unless
6. Islamic Banks – promote socio-economic accompanied by recommendation of
development in autonomous region by performing appropriate government agency (MB)
banking and investment function based on Islamic • The determination whether the person or entity is
concept of banking performing banking or quasi-banking functions
• Islamic Bank – RA 6848 without authority of BSP shall be determined by
• Subject to the principles and rulings of MB
Islamic Shari’a o MB may examine the books and records
7. Others banks: to achieve this purpose
• Philippine Veterans Bank – created to • The department head and examiners can
provide government depository to veterans administer oaths and compel presentation of books,
for appreciation of grateful nation (RA documents or records
3518) • BSP can examine a bank or an enterprise that is
• Land bank of the Philippines – finance wholly or majority-owned by the bank
distribution of estate to resale to small o This can only be done when BSP is
landholders (RA 3844) examining bank
• Development Bank of Philippines – • SEC shall not register articles of incorporation of
provide credit facilities for development in bank unless it is accompanied by authority of MB
agriculture, commerce and industry • SEC shall not register by-laws of bank unless
• DBP was previously named as accompanied by authority of BSP
Rehabilitation Finance Service of summons upon banks
Corporation (RFC) o May be made on the president, managing partner,
8. Non-stock savings and loan associations – non- general manager, corporate secretary, treasurer,
stock, non-profit corporation engage in in-house counsel (domestic)
accumulation of savings of its members and loans o Upon resident agent or BSP (foreign bank)
to meet its members’ needs • As long as institute loans out money to its
• Confines exclusive membership and customers and collect the interest and charges a
cannot transact business with the general commission to lender and banker, it is a bank
public • Investment company engages primarily in the
9. Quasi-banks – engaged in borrowing of funds investing or trading of securities and is not a bank
through issuance of deposit substitute for purpose
of relending or purchasing receivables and other Bank name
obligations
• Only universal and commercial banks may
10. Offshore Banks – deals with transaction with
represent itself to the public as such in connection
foreign currencies in receiving funds from external
with its business name
sources and utilization of such
• Thrift banks can be allowed to have a business
• Governed by PD 1034
name of its own provided that “A thrift bank,
Authority to Engage in Banking and Quasi-Banking savings bank or private development bank” shall
Functions be added
• Above rule is also available to Rural/Coop

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

CHAPTER 2 – Organization, Management, government agency or department charged with


Administration of Banks granting loans to banks
• Bank is organized 5-15 people (incorporators)
Organization of Banks
• Cooperatives may organized a rural bank upon
• MB can authorize the organization of a bank based consultation with the rural banks in the area
on the following conditions: • Bank and its branches shall be treated as one unit
1. Entity is a stock corporation (par value • Universal and commercial banks may open
stocks only) branches within or outside the Philippines upon
2. Funds are obtained from the public which prior approval of BSP
shall mean twenty persons or more • Other banks shall be governed by their pertinent
3. Minimum capital requirement prescribed laws
by MB shall be satisfied
Stockholdings
• MB shall take into consideration the capabilities of
the entity in terms of their financial resources, 1. Treasury Stocks
technical expertise and integrity • GBL provides that NO bank shall:
• Bank licensing process shall incorporate i. Purchase or acquire shares of its
assessment of: own capital stock
1. Banks’ ownership structure ii. accept own shares as security for
2. Director management loan
3. Operating plan 1. Except if it approved by
4. Internal controls MB and will be returned
5. Projected financial condition in 6 months
• Capital requirements: • Reason: if banks were allowed to have a
lien in their own stocks for indebtedness
Type of Bank Amount (M)
of stockholders, prohibition against
Universal 4,950
Commercial 2,400 granting loans or discounts upon security
Thrift banks would become ineffective
1. Head office in Manila 325 2. Foreign stockholdings:
2. Otherwise 52 • Foreign individuals and non-banks can
Rural Banks own 40% of voting stock of domestic
1. Within Manila 26 bank.(aggregate foreign voting stocks)
2. Cebu/Davao 13 • A Filipino individual and domestic non-
3. 1st-3rd class city and 1st class 6.5
bank may each own up to 40% of the
municipality
4. 4th-6th class city and 2-4th class 3.9 voting stock (no aggregate ceiling)
municipality • Citizenship of the corporation shall follow
5. 5th-6th class municipality 2.6 the citizenship of the controlling
• At least 25% of total authorized capital stock shall stockholders (>50%)
be subscribed by subscribers of proposed bank • The percentage of foreign-owned voting
• 25% of such subscription shall be paid-up. It shall stocks in a bank shall be determined by
not be less than the minimum capital requirement the citizenship of individual stockholders
• Incorporators/subscribers and proposed directors • At least 60% of voting stock in any
and officers must be (2) persons of integrity and commercial bank shall be owned by
(1) good credit standing Filipino citizens
• Such persons must (1) not be convicted of crime • In thrift banks, it shall be at least 40%
involving moral turpitude and (2) not officers of • Rural banks, 100% Filipinos

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

• In determining nationality of banks, a. Convicted of final judgment involving


control test is applied dishonesty or breach of trust
• Family groups or related interest must be b. Persons convicted of final judgment with a
fully disclosed in all transactions of the maximum imprisonment term of more
individual than 6 years
c. Convicts of banking laws
Board of Directors d. Persons judicially declared insolvent
e. Culpable of bank’s closure
• According to Corporation Code, there shall be at
f. Administratively liable for violation of
least five and maximum of 15 board of directors of
banking laws with penalty of removal
bank
from office
• Two of such shall be independent directors.
g. Found unfit for position
Independent director – person other than officer or
• There can be also temporary disqualifications and
employee of bank
shall exist until DQ is gone
• All must be of legal age and majority of them are
• Under CC (Corporation Code) disqualification is
residents of the Philippines
only with (1) imprisonment more than 6 years or
• Non-Filipino citizens may become members of
(2) violation of code committed within 5 years
board of directors of bank up to the extent of
• NCBA also provides DQ for members of MB that
allowed foreign participation
is connected with bank under supervision or
• Directors of merged or consolidated banks shall
examination of BSP
not exceed 21
• Public officials cannot also be an officer of any
• Election: President, Treasurer (director or not),
private bank unless position is incidental to office
Secretary (resident citizen). Not allowed position:
• Rural Banks Act – public official may be director
President/Secretary, President/Treasurer
(exception)
• Meetings may be conducted through modern
• PDIC – conviction of any criminal offenses
technologies
involving breach of trust
• A foreigner may be a member of the Board of
directors of a rural bank at the time of their Banking Days and Hours
assumption of office
• To protect funds of depositors and creditors, MB • At least 6 hours a day on working days (Mon-Fri
shall regulate payment of directors under certain except holidays)
circumstances: • May open in Saturdays, Sundays and holidays for
1. Comptrollership 3 hours (to report to BSP)
2. Business in unsafe or unsound manner • For purposes of deposits and withdrawals, bank
3. Bank is found to be in an unsatisfactory can extend beyond or early of 8AM and 8PM
financial condition • If it is for other purposes, they can exceed 6 hours
minimum but not extend beyond or early of 8AM
Fit and Proper Rule and 8PM
• Banks in airports or major fish ports can open
• Powers of MB against directors:
24hours
a. Review qualifications and DQs of
• Changes in banking days and hours can be made
directors
b. After due notice, may disqualify, suspend once every 30 days except during emergencies
or remove director ATMs
c. Fit and proper rule shall be determine by -
integrity, experience, education, training, • Classes: 1.) Offsite 2.) Mobile
competence of the director
• Banks may establish off-site ATMS provided that
• Disqualifications of directors:
there is report on BSP and adequate security
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

measures. They are installed only in centers of • Any unsettled strike or lockouts involving banks
activity after 7 days shall be reported by BSP to DOLE
• Mobile ATMS are allowed to visit places with who will assume jurisdiction
large crowds of people provided it has adequate • Banks, through their president, shall inform BSP
security of the cause of the strike and the operations
affected
Independent Auditor

• MB may require bank to engage services of


independent auditor from list of CPA acceptable to
MB

Financial Statements

• Every bank, quasi-bank or trust entity shall submit


to the BSP its financial statements
• Such statements must show the actual financial
condition of its institution, including its operations
• Must publish such in an understandable
knowledge once every quarter in a newspaper of
general circulation
• Consolidated financial statement – combined
statement of balance sheet and income expenses of
two or more corporate entity
• Subsidiary – corporation where more 50% of its
voting stock is owned by a bank
• Affiliate – linked directly/indirectly to the bank by
1.) 10% ownership or control 2.) interlocking
directorship 3.) common stockholders owning
10% of each intermediary 4.) management
contract 5.) permanent proxy or voting trust of
10%

Publication of Capital Stocks

• Bank, quasi-bank or trust entity shall not publish


the amount of its subscribed capital stock without
indicating the amount of its capital actually paid-
up

Settlement of Disputes

• BSP shall be consulted by (1) government


agencies in actions initiated or brought before
them by banks and (2) disputes between any of
them which they are directors, officers, or
stockholders

Strike and Lockouts

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

CHAPTER 3 – Deposit Functions of Banks • When bank sees that depositor’s account has
sufficient amount, then it shall honor such
I. Kinds of Deposits
• If there is sufficient amount but bank dishonored,
1. Demand deposits then bank is liable. Otherwise if there is no
sufficient amount
• All those liabilities of BSP and of other banks • Banks must ensure that the check is only paid to
which are denominated in Philippine currency and its designated payee
are subject to payment in legal tender upon • Drawer must remember every time he issues a
demand by presentation of checks check and a bank must know the former’s
• Only universal and commercial banks may accept signature
or create demand deposits without prior authority • A bank is under no obligation to make partial
from BSP payment on the check only upon the amount in the
• Other types of bank require such authority. This drawer’s funds
considered as the current account in the bank • The cannot also compensate the lack of money in
the deposit account to the savings account
1.a. Temporary over drawings and DAUD
• Cross-check must be: (1) may not be encashed but
• Temporary overdrawings are not allowed except only deposited (2) check negotiated only once – to
normal bank charges and other fees incidental to one who has an account with a bank and (3) serves
handling such accounts as warning to holder (State Investment House vs.
• Violations of temporary overdrawings will cause IAC)
(1/10 of 1%) fine per day computed on the basis of • Cashier’s check – bank’s own check and is treated
the amount of overdrawn but not to exceed as PN with the bank as maker
P30,000.00 per day • - deemed as cash (New Pacific Timber & Supply
• Drawings against uncollected deposits (DAUD) – Co. Inc. Cs. Señeris)
prohibited. Exception: made against uncollected
1.d. Set off Rule
deposits representing manager’s, cashier’s,
treasury warrants, postal money order and on us • A bank can set off or compensate by debiting a
check personal account of depositor for an amount
erroneously credits to the person’s proprietorship
1.b. Current accounts of officers
account
• All officers, employees of bank in cash
departments and other employees who have direct 1.e. Relationship of Payee or Holder and the Bank
responsibility in handling deposit transactions are • Principal and agent – relationship between payee
not allowed to maintain demand deposits or or holder of commercial paper and the bank to
current accounts which it is sent for collection (PCIB vs. CA)

1.c. Checks
2. Savings Deposits
• A written order addressed to a bank or person
carrying banking business, by a party having • Banks may be authorized by the BSP to solicit and
money in their hands, requesting them to pay on accept deposits outside their bank premises
presentment, to a person named therein or to
2.a. Individual and Joint Accounts
bearer or to order, a named sum of money (Moran
vs. CA) • If the joint account is “and”, both signatures of co-
depositors are required before withdrawals
1.d. Duty of bank to honor checks
• If “and/or” either their signature is sufficient

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

2.b. Withdrawals foreign currencies which are acceptable as part of


international reserve, except those which are
• There must always be a presentation of passbook required by BSP to be surrendered
and accomplishing necessary withdrawal slips • Such banks can accept deposits and accept foreign
before withdrawal except if authorized by BSP currencies in trust
1. Numbered accounts for recording and
3. Negotiable Order of Withdrawal Accounts
servicing of deposits are allowed
• NOW accounts are interest bearing deposit • The depository bank shall
accounts that combine the payable on demand 1. Maintain at all times a 100% foreign
feature of checks and investment feature of currency cover for their liabilities
savings account 2. 15% of such must be in the form of
• Universal and Commercial banks may offer NOW foreign currency deposit with BSP
accounts but other banks need prior approval of 3. The balance shall be in form of foreign
MB currency loans/securities which are short-
term maturities and readily marketable
4. Time Deposits 4. Such loans can be extended to domestic
enterprises to cover the 100% foreign
• Time deposits – one the payment of which cannot
currency cover
be legally required within such specified number
• Depository banks under the expanded foreign
of days
currency deposit system shall be exempt from the
• Special time deposits from the Agrarian Reform
15% requirement of deposit with BSP
Fund Commission with lower interest shall be
• There is no restriction on withdrawals by depositor
exempt from legal reserve requirements
of his deposit of the same abroad except does
• Certificated of Time Deposits can either be
arising from contract of depositor and bank
negotiable or non-negotiable. Only Universal or
commercial banks can issue negotiable CTDs 7. Anonymous and Numbered accounts
without prior approval of BSP
• Such accounts are not allowed. Numbered
5. Deposit Substitute (Quasi-Banking Function) accounts is only allowed in foreign currency
deposits
Essential Elements of quasi-banking are:
• However, banks/non-banks should ensure that the
1. Borrowing funds for the borrower’s account client is identified in an official document
2. Twenty or more lenders at any one time
II. Administration of Deposits
3. Methods of borrowing are issuance, endorsement
or acceptance of debt instruments 1. Specimen signature, ID photos
4. Purpose is for relending and purchasing
receivables • All banking institutions are required to set a
• Borrowing – all forms of obtaining or raising minimum of 3 specimen signature from their
funds depositors every 5 years or sooner
• For the borrower’s own account – assumption of • Banks may also require submission of ID photos
liability in one’s own capacity • First time depositors require the presentation of at
• Relending – refer to the extension of loans by an least 2 valid photo-bearing Ids
institution with antecedent borrowing transactions • Students who are beneficiaries of OFW are also
required to present 2 Ids
6. Foreign Currency Deposits • Submission is one-time basis only
• Any person, natural or juridical may deposit with 2. Minors and Corporations as Depositors
such any bank in good standing designated by BSP,
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

• Minors can have savings and time deposit may, at the option of the bank, be booked on the
accounts without assistance of parents day of receipt. Other non-cash deposits are treated
1. Must be at least 7 yrs old as contingent accounts on the day of receipt and
2. Able to read and write shall be booked as deposits the following day
3. Sufficient discretion
4. Not otherwise DQed by law
8. Booking Deposits after regular banking hours
• Parents can still deposit money to minor
• For deposits of minors in thrift banks, guardian • Deposits, whether cash or not, received after close
may make notice that payment (deposits, interest, of regular banking hours shall be treated as
dividends) be made to him and not to the minor contingent accounts and booked the following day
• Corporations may open bank accounts as follows:
(1) Incorporation stage and (2) Post incorporation 9. Average Daily Balance
stage
• Banks may impose and collect service charge or
3. Time of payment of interest in time deposits maintenance fee on savings and current accounts
that fall below minimum monthly average daily
• Interest on time deposit may be paid upon balance (ADB)
maturity, withdrawal or advance provided that the • must be properly disclosed in the terms of deposit
interest paid in advance shall not exceed interest • For dormant accounts: fall below 2 consecutive
for one year months
4. Treatment of matured time deposits III. Survivorship Agreement
• Time deposits not withdrawn or renewed on its • There is survivorship agreement when joint
due date shall be treated as a savings deposit and owners of a deposit agree that either of them could
shall earn interest until actual withdrawal with withdraw any part or whole of account during
rates of savings deposit lifetime of both and the balance upon death of
• Deposit substitute not withdrawn shall have a either belongs to the survivor
maturity rate applicable to a deposit substitute • It is an aleatory contract
5. Clearing Cut-off Time • Survivorship agreement is per se not contrary to
law but may be violative
• General rule: all deposits and withdrawals during • Agreement can be a mere cloak to hide in
regular banking hours shall be credited/debited to inofficious donation to transfer property in fraud
accounts on date of receipt or payment
• If there is BSP clearing arrangement, not earlier IV. Nature of Bank Deposits
than 2 hours before BSP clearing time in head 1. Deposits are considered simple loans and not
offices and 3.5 hours in branches preferred credits
• If there is no BSP clearing arrangement 2 hours 2. Bank deposits are in the nature of irregular
before local clearing time deposits as they are loans who earn interest (BPI
vs. CA)
6. Booking Cash Deposits
3. Relationship between depositor and Savings and
• Cash deposits received after clearing cut-off time Loan Association is that of creditor and debtor
shall be book as deposits on day of receipt 4. Contract between bank and its depositors are
governed by NCC
7. Booking Non-cash Deposits 5. Bank ultimately acquires ownership of deposits
but has obligation to pay back equal amount
• “on us” checks, manager’s/cashier’s checks,
6. Banks can set-off or compensate
demand drafts received after clearing cut-off time
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

V. Duties of Banks • BSP can also inquire in deposits for periodic and
special examinations
• Meticulous care with deposits of clients due to • Ombudsman has the In-Camera Inspection power
fiduciary relationship to look into deposits provided that there is a
• Banks must give payment to the proper party, thus pending case is court and 1.) the account must be
collecting bank has obligation to ascertain that the properly identified 2.) inspection limited to the
drawer truly intended that the depositor is the subject matter
payee • CIR can also look into deposits to determine gross
• In case of death of depositor and the bank knew of estate of a decedent or he has applied for
it, there shall be no further withdrawal compromise tax liability
• Administrators or heirs can withdraw up to 20k
without certification of CIR

VI. Secrecy of Bank Deposits

• Purpose is to (1) give encouragement to the people


to deposit their money in banking institution and
(2) discourage private hoarding of depositors so
that could be used in economic development
• All deposits of whatever nature with bas including
investment bonds are considered absolutely
confidential and may not be examined, inquired or
looked into even by government officials
• RA 8367 prohibits inquire or disclosure of
deposits
• Exception: (1) written permission of depositor, (2)
impeachment, (3) order of court in case of bribery
or dereliction or (4) subject matter of litigation
• It shall also apply to foreign currency deposits
with the only exception of written permission
• In Islamic banks that only exceptions are: (1)
inspection of bank auditor, (2) written permission
by depositor (3) subject matter of litigation

VII. Exceptions to Secrecy of Deposits

• They are already stated above


• Accounts can be garnished to insure satisfaction of
judgment as there is no real inquiry and some
disclosure are merely incidental
• Congress not intended for debtors to escape
• General exemption against garnishment shall not
apply to foreign transients
• Foreign currency deposits of a foreigner who was
convicted of crime of rape may be garnished to
satisfy judgment
• Under RA 1405 and Anti-Money Laundering Act,
the secrecy of deposits do not apply
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

CHAPTER 4 – Investments, Loans and Other Bank Equity investments of universal bank in non-financial
Functions allied enterprise

I. Universal Operation of Universal banks • Universal bank may own up to 100% of equity in
non-financial allied
Powers of Universal bank
• Examples are:
1. Commercial bank 1. Warehousing companies
2. Investment house 2. Storage
3. Invest in non-allied enterprises 3. Safe deposit box
4. Companies engaged in management of
Equity Investments of Universal bank mutual funds and not funds itself
5. Computer services
• Allied enterprises are those which enhance or 6. Home building and development
complement banking 7. Service bureaus
• If it is a financial allied enterprise, then it involves 8. PCHC
money matters. Otherwise it shall be non-financial • Rural and cooperative banks can invest in non-
• Total investments in equities of allied and non- financial allied enterprises such as:
allied enterprises shall not exceed 50% of the net 1. Warehousing
worth of the bank 2. Fertilize and agricultural chemical
• Equity investment in any one enterprise, whether 3. Farm equipments
allied or non, shall not exceed 25% 4. Trucking and transportation
• Net worth – total of the unimpaired paid in capital 5. Marketing agricultural products
including paid-in surplus, retained earnings and 6. Leasing
undivided profit
Equity investment of Universal Bank in Non-allied
Equity investments of Universal bank in Financial Allied enterprise
enterprise
• Equity investment in a single non-allied enterprise
• Universal bank can own 100% of the equity in a shall not exceed 35% in total equity or voting
thrift, rural bank or financial allied enterprise stock
• Publicly-listed universal or commercial bank may
own 100% of voting stock of another universal or Investments in non-allied enterprises
commercial bank
• Universal bank may invest in equity of enterprise
• If not publicly-list then only 49% own
of eligibles:
• Following are financial allied enterprises:
1. Enterprises engaged in agriculture, mining,
1. Leasing companies
quarrying, manufacturing, public utilities
2. Banks
2. Industrial parks
3. Investment houses
3. Commercial project with government
4. Financing companies
privatization program
5. Credit card companies
• Equity investment in Quasi-banks – universal bank
6. Financial institutions
can only invest up to 40% in equity of quasi-banks
7. Companies in stock brokerage and foreign
exchange dealership II. Operations of Commercial Banks
8. Insurance companies
9. Holding company provided that the Powers of Commercial banks
equities of the entity is confined under
1. General powers incident to corporations
universal bank BSP regulation
2. All power necessary to carry business of
commercial banking such as:
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

a. Accepting draft and issuing letters of Equity investment of commercial bank on financial allied
credit enterprises
b. Discounting
c. Creating demand deposits • Can own up to 100% in equity of thrift and rural
d. Buy and selling Forex bank
• However cannot own 100% of equity of financial
Issuance of Letters of Credit allied enterprise other than above banks

• Letter of credit – financial device developed by Equity investment in commercial bank on non-financial
merchants as convenient mode of dealing with allied enterprises
sales of goods
• The buyer will apply for a letter of credit in the • Can own 100% of said enterprises
issuing bank
III. Risk-Based Capital
• The seller will then send the goods to the carrier
and he will make a draft, called bill of exchange Minimum Ratio
• Seller will present the draft and the necessary
documents, such as bill of lading to issuing bank • MB shall prescribe minimum ratio
to receive the payment • It will be based on the net worth and risk assets of
• While the goods are in transit, it shall be owned by a banks well as its compositions
issuing bank • It may alter compliance with ratio for a max
• When the goods arrived at the port of the buyer, period of 1 year
the buyer will pay the corresponding payment and • Ratio shall be uniformly applied to banks of same
also gain the documents category
• Since the buyer gain the documents, he can now
Effect of Non-compliance
acquire the delivered goods
• Independence principle – bank determines • If a bank does not comply then the MB can:
compliance with letter of credit only by examining 1. Limit distribution of net profits and be
shipping documents presented and need not used to increase capital accounts until
examine the goods minimum requirement is met
• There are three contracts: 2. Restrict acquisition of major assets and
1. buyer-seller new investments except with purchase of
2. buyer-bank readily marketable evidence of
3. seller-bank indebtedness of RP BSP
• There can be other parties such as notifying bank • In case of merger, rehabilitation, MB may
(inform seller), confirming bank (lend credence to temporarily relieve such bank with compliance
letter of credit), paying bank and negotiating bank with capital ratio
(discounter)
IV. Limit on loans, credit accommodation and guarantees
Equity investments on commercial bank
Single Borrowers Limit
• Commercial bank may invest only in equities of
allied enterprises • Total amount of loans, credits accommodation and
• Total investment in equities of allied enterprises guarantees extended to any person, partnership or
shall not exceed 35% corporation shall not exceed 20% of net worth of
• Equity investment in one enterprise shall not bank
exceed 25% • In Circular 425 of 2004 of BSP, the SBL was
increased to 25%
• Exceptions to SBL:

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

1. MB may otherwise prescribe for reasons subsidiaries, more than half of voting power of
of national interest enterprise
2. Deposit of rural banks with GOC financial • Even if less than half of said voting power, it shall
institutions such as LB, DBP and PNB still have controlling interest if:
• Basis for determining SBL is the total credit 1. Agreement with investors
commitment of bank to borrower 2. Govern financial and operations
• Loans - to all accounts under loan portfolio 3. Can appoint majority of directors
• Credit accommodations - to credit and market risk 4. Cast majority vote on meetings
exposure of banks arising from accommodation • Subsidiary – corporation where more than 50% of
other than the loan the voting stock is owned by a parent corporation
• Total credit commitment - include loans, credit • Bill of exchange drawn in good faith against
accommodation, deferred letters of credit less actually existing values – drawn by a seller on the
margin deposits and guarantees purchase for the price of commodity sold
• Total credit commitment can be increased by 10% • Commercial paper owned by person negotiating
provided additional liabilities are secured by trust the same – paper arising from business transaction
receipts, shipping documents or readily marketable • Exclusion from SBL:
goods 1. Discount bills of exchange and discount
• Readily marketable goods – articles of commerce, commercial paper
agriculture or industry as constant dealings in 2. Credit accommodation to finance
ready market and price is easily ascertainable and importation of rice or corn up to 100% net
disposable worth of bank
• Parent corporation’s total credit commitment shall ! Must be approved by NEDA
also include its subsidiaries’ if it guarantees, 3. Loans and credit accommodation
accommodate or subsidiary is merely a department guaranteed by Industrial Guarantee and
of it Loan Fund
• Wholesale lending of government banks shall not 4. Liabilities of commercial paper issuer for
exceed 35% of net worth to participating financial commercial paper held by UB as firm
institutions underwriter. Only 180 days and not
• PFI – institutions for relending to end-user exceed 5% from normal SBL
borrowers 5. Loans and credit accommodations covered
• The end-user borrower shall be subject to the 25% by international or regional institutions
SBL where Philippines is shareholder such as
• In municipalities where there are no government ADB
banks, deposits of rural and coop banks in private 6. Loans and credit accommodations with
banks shall not be subject to SBL valuation reserves provided that bank has
no unbooked valuation reserves
• Deposit in private depository bank used by thrift,
rural and coop banks, with authority to accept 7. Loans and credit accommodations as a
result of underwriting agreement of debt
demand deposits, after being cleared, shall be
securities not exceeding 30 days
exempted from SBL
• Bank guarantee – irrevocable commitment of a Violations
bank binding to pay a sum of money in event of
non-performance of third party • Monetary penalties – 1/10 of 1% of excess over
• Credit Risk Transfer – arrangement that allows the the ceiling but not exceed 30k per day
bank to transfer the credit risk associated with its • If bank resource is less than 50M, then only a max
loan or other credit accommodation to a third party penalty of P500 shall be imposed
• Control of majority interest or controlling interest • There will also be reprimand to directors/officers
– parent owns, directly or indirectly through its
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

• In subsequent offense, a 1k fine shall be imposed • It is not allowed. Encashment of deposit


on the directors who approved it certificates is not pacto commissorio
• There can also be suspension of bank’s branching • It is intended to protect the obligor against being
privilege and rediscounting facility of BSP overreached by creditor

Inclusion to Limit V. Restriction on Bank Exposure to Directors, Officers,


Stockholder and related interests (DOSRI)
• The following shall be included
1. Maker, acceptor of paper discounted and • No DOSRI can directly or indirectly borrow from
general indorser, drawer or guarantor such bank or become a guarantor, indorser or
2. Individual who controls majority interest surety for loan
in corporation • Exception is when there is a written approval of
3. In case of corporation, all liabilities to the majority of all directors of the bank excluding
such bank of all subsidiaries it has the DOSRI concerned
majority interest • Such approval is not required if it is under a fringe
4. Partnership, liabilities of members benefit plan approved by BSP
• Also includes parent corporations with majority • Directors include those named in incorporations,
interest elected or filled
• Officers shall include any person who performs
Exclusion to limit
function of management
1. Loans and credit accommodations secured by • Stockholder – stockholder of record in the books
BSP or RP. State is always solvent of the bank
2. Loans and credit accommodations guaranteed by • Related interest includes souse or relative within
government 1st degree or by legal adoption. This includes
3. Loans and credit accommodations covered by partnership, co-ownership of DOSRIs
assigned of deposits by lending bank • Corporations where the above mentioned owns
4. Loans and credit accommodations under letters of 20% of subscribed capital, then the prohibition
credit covered by margin deposits shall apply
5. Loans and credit accommodations determined by • Can also be less than 50% if the DOS sits as
MB as non-risk items representative of the bank in the board of such
corporation
Assignment of Credits
Effect of violation
• It is the agreement where the owner of credit,
know as assignor, by legal cause, transfer his • The director or officer who violates may be
credit to another, known as assignee without need declared vacant and subject to penal provisions of
of consent of debtor NCBA
• Assignee acquires powers of assignor
Limit on loans
• There is no new obligation in assignment
• However, there must be a notice given to debtor so • MB can limit the valid loan given to DOSRI
that he will know whom to pay provided that it shall be based on their
• Consent is not necessary in order that assignment unencumbered deposits and book value of their
may fully produce legal effects (Sison & Sison vs. paid in capital contribution
Yap Tico and Avanceña)
Exclusion to the Limit
Pacto commisorio
• Loans and credit accommodations considered as
• Appropriating a thing given by pledge or non-risk
mortgage
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

• Loans and credit accommodations to officers in • If surety director is not anymore party of the board
for of fringe benefits then he cannot be held liable
• Limit on loans and credit accommodations shall • Surety cannot extend to more than what is
not apply on those extended by coop bank to its stipulated
coop shareholders • Joint and solidary signature of major stockholder
or officer constitutes as an additional security for
Applicability of DOSRI rules and regulation to loans granted to corporations (Security Bank &
government borrowing Trust Company vs. Cuenca)
• Circular 547 of 2006 provides that DOSRI rules • Joint and solidary agreement – agreement where
shall also apply to loans and credit the contracting parties consent to be jointly and
accommodations granted to RP, subdivisions, severally liable in a loan obligation
instrumentalities and GOCCs VII. Grant and purposes of loans and credit
• Exceptions would be: accommodations
1. Loans and credit accommodations that are
non-risk and not subject to ceiling Amount and purpose of loan
2. Those made by BSP
3. LGU due to full autonomy in their • Bank must grant loans and credit accommodations
propriety function only in amounts and for period of time essential
4. Director who acts as government for effective completion
representative • Must be consistent with safe and sound banking
practice
VI. Securities on Loans and credit accommodations • Purpose of loan shall be stated in application
• If bank finds that proceeds have been employed
Loans and credit accommodations against real estate
without its approval, the bank shall have the right
• Shall not exceed 75% of appraised value of to terminate the loan and demand immediate
respective real estate security plus 60% of the repayment
appraised value of the insure improvements
Requirement for grant of loan
Loans and credit accommodations on security of chattels
• Bank must first ascertain if debtor is capable of
and intangible properties
fulfilling his commitments to the bank. It must
• Shall also not exceed 75% of the appraised value consists of:
of the security 1. Statement of assets and liabilities
2. Statement of income and expenditure
Join and Solidary agreement 3. Prescribed by law and MB to evaluate
credit application
• JSA is surety and not guarantee. It is an agreement
• Even in the absence of such provision in GBL, Art
where parties consent to be solidarily liable
1198 of the NCC allows the creditor to demand
• As a contract of adhesion, JSA should be taken full payment when debtor is insolvent, fails to give
contra proferentum against the party who may guarantee, impaired guarantee, lost thing through
have caused any ambiguity therein. fortuitous event, violate undertaking or attempts to
Effect of Surety Agreement abscond
• MB shall recognize peculiar characteristic of
• Agreement is onerous and construed against micro financing such as cash flow-based lending
creditor • Microfinancing loans – small loans granted to
• Requires that creditor obtain consent of the surety basic sectors usually unsecured and given to small
before there can be material alteration to the loan businesses

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

Reason for stringent rule in granting loans • PROVIDED: such stipulation shall only be valid if
there is also a stipulation that the interest rate
• Banking corporation holds the money of the agreed upon shall be reduced in the even
depositors. Due to the nature that it is affected maximum interest rate is also reduced by MB
public interest, the bank must ensure that the loan • Escalation clause are not void per se
shall be repaid
• It is void when it grants creditor unbridled right to
Unsecured loans and other credit accommodation adjust interest independently, completely
depriving debtor of right to assent
• MB shall authorize regulations with respect to • Such clause violate the mutuality of contracts
such • In escalation clause there should be:
1. Increase in interest if increased by law or
Other security requirements for bank credits
MB (escalation clause)
• MB may prescribe security requirements to which 2. Include provision for reduction of
bank credits shall be subject and reduce or stipulated interest in the event maximum
increase maximum ratio interest is also reduced by law or MB (de-
escalation clause)
Authority to prescribe terms and condition of loans and • Purpose of including de-escalation clause –
other credit accommodations prevent one-sidedness in favour of lender an
repugnant to mutuality of contracts
• MB may prescribe maturities as well as related • Absence of de-escalation clause will render
conditions of various bank loans and credit escalation clause void
accommodations
• Any change in maximum maturity shall only apply
to those made after such action
Effect of annulment of escalation clause
Amortization on loans and other credit accommodations
• In case the escalation clause is annulled, principal
• Amortization schedule of bank loans and other amount of loan is subject to original interest rate
credit accommodations shall be adopted based on
Exception
nature of operation
• If loans and other credit accommodations has • If there is no de-escalation clause, the escalation
maturity of more than 5 years, must have periodic clause is still valid if the creditor unilaterally and
amortization payments and must be made annually actually decreased the interest charges whenever
• If borrowed funds are to be used for purposes the interest rate is reduced by law or MB (Llorin
which do not initially produce revenues for vs. CA)
payment of regular amortization, bank may defer
such time until revenues are sufficient. In no case Unilateral increase of rates
shall initial amortization date be later than 5 years
• Such violates the principle of mutuality of
• In case of loans and other credit accommodations
contracts in Art 1308 of NCC
to microfinance sectors, schedule shall consider
cash flow of borrowers • Any contract which appears to be heavily weighed
in favour of any one party that will lead to
Escalation Clause unconscionable result is void
• Escalation clause are valid to maintain fiscal
• Parties to an agreement pertaining to loan of may stability and retain the value of money on long-
agree upon an increase in the event that the term contracts
applicable maximum interest is increased by MB • However, other party there must be right to assent
to an important modification of contract
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

• Contract of adhesion – parties do not bargain on financial educational institutions, cooperatives,


equal footing, the weaker party’s participation hospitals
being reduced to a take or leave it
Banks cannot extend peso loans to non-resident
Iniquitous, unconscionable and exorbitant interests
• Reason for this:
• Though usury law is not inexistent, interest may 1. To curb undue speculation in foreign
be agreed upon by lender and borrower exchange market
• However, the same must be equitable reduced for 2. Further reinforce memorandum that peso
being iniquitous, unconscionable and exorbitant deposits should be funded inward foreign
• In Medel vs. CA, SC found that 66% interest rate exchange remittances
per anum is unconscionable • OFWs are residents and can avail peso loans
• In Cuaton vs. Salud, interest rate was 120% per
Provisions for losses and write-offs
annum interest rate is unconscionable and should
be lowered to 12% per annum interest rate • Bad debts - all debts due to any bank on which
• Dio vs. Virgilio, interest rate was 120% per annum interest is past due and unpaid
also, reduction of interest must be made
• Bacolor vs. Banco Filipino, a 24% interest rate per Extraordinary inflation or deflation
annum is not unconscionable or excessive
• Under Art 1250 of NCC, in case of extraordinary
Effect of void interest rate inflation or deflation of currency stipulated, value
of currency at time of establishment of contract
• If interest rate is void, it is as if no express contract shall be the basis of payment
thereon and court may reduce • For extraordinary inflation or deflation to affect
obligation, the following must be proven:
Prepayment of loans and other credit accommodations
1. There must first be official declaration
• A borrower may at any time prior to agreed from BSP
maturity date, prepay in whole or in part the 2. Obligation is contractual
unpaid balance subject to reasonable terms 3. Parties expressly agreed to considered
effects of extraordinary inflation or
Legal compensation deflation
• Extraordinary Inflation exist when there is an
• Under Art. 1278, compensation can take place
unusual decrease in the purchasing power of the
where the parties are creditors and debtors of each
currency and such decrease could not be
other
reasonably foreseen or was manifest beyond the
• A person who secures a loan of money acquires contemplation of the parties at the time of the
ownership and is bond to pay the creditor an equal obligation
amount
• Deposits in bank can be set-off against obligation Purpose of Attorney’s Fees
of depositor
• Subsidiary has an independent and separate • Attorney’s fees are not integral part of cost of
juridical personality from parent company and any borrow but arise when collecting upon the Notes
claim against the subsidiary is not a claim against becomes necessary
the parent VIII. Truth in Lending
Development assistance incentives Policy
• BSP shall provide incentives to banks, without
government guarantee, which extend loans to
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

• Protect citizen from lack of awareness of trust cost • Violation shall not affect the validity or
of credit to the user by assuring full disclosure of enforceability of any contract
such cost and prevent uninformed use of credit • In Consolidated Bank vs. CA, SC said that lender
cannot charge interests not stipulated in
Disclosure promissory note
• The creditor shall furnish the debtor a clear • In UCP vs. Beluso, interest rate provisions are
statement in writing setting forth the following: illegal due to violation of mutuality of contracts
1. Cash price or delivered price to be and also violate TILA
acquired Exemption of government
2. Amount to be credited as DP
3. Difference between 1 and 2 • TILA shall not apply to Philippine Government
4. Charges individually itemized
5. Total amount to be financed Required disclosure on consumer loans not under open-
6. Finance charge end credit plan
7. Percentage that finance bears to the total
• Any creditor extending consumer loan or
amount to the financed
transaction which neither consumer credit sale nor
• Rationale: protect users of credit from lack of
open-end consumer credit plan shall also need to
awareness of true cost
disclose information
Definition
Exempted transactions
• Credit – any loan, mortgage, deed of trust,
• Disclosure requirement on consumer credit
advance, conditional sale contract, rental
transactions shall not apply to those extension of
• Finance charge – interest, fees, service charges,
credits for business or commercial purpose or to
discounts and other charges incident to extension
government
of credit
• Creditor – any person engaged in business of IX. Foreclosure of real estate mortgage
extending credit who requires finance charge
Procedure
Penalties
• In the event of foreclosure of any mortgage, the
1. Civil – any creditor who fails to disclose shall be mortgagor has the right to redeem the property
liable for P100 or amount equal to twice of finance within one year after sale of real estate
charge required • Purchaser at auction sale shall have the right to
a. Whichever is higher enter upon and take possession of such after date
b. Liability shall not exceed 2k of confirmation of auction sale
c. Must be brought within 1 year from date • In GBL, if purchased y banks, they are not
of occurrence required to set up bond before they can enter the
2. Criminal – fine not less than 1k or not more than property immediately during redemption period
5k or imprisonment for not less than 6 mos nor • Writ of possession may also be issued after
more than 1 year or both consolidation of ownership of property in name of
• Both actions can be instituted independently of buyer
each other • Buyer becomes absolute owner of property if not
• But there can also be a joinder of cause redeemed during the 1 year after registration of
sale
• If the property extrajudicially foreclosed belong to
Effect of violation a juridical persons, right to redeem property shall

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

be counted until, not after, the registration of the • Right to redeem becomes functus officio on the
certificate of foreclosure date of its expiry
• It shall be no more than 3 months after foreclosure • Redemption is by force of law, the buyer is bound
whichever is earlier to accept redemption
• Accessory contract of real mortgage is used as • However, there can be right to repurchase
security for fulfilment of principal obligation depending on the will of buyer
• A loan value is only 70 percent of the appraised • The buyer is not bound to accept repurchase unlike
value so that a low bid price will be made and will in redemption
be easier to redeem • The buyer shall also not be bound by the bid price
• Real property may be mortgaged to aliens as it now belongs to him
• Redemption period is counted from date of • An alien-owned bank cannot acquire ownership of
registration of the certificate of sale with register residential lot by virtue of deed of transfer as
of deeds settlement of debt
• An action for annulment of mortgage does not stop • Transfer of ownership, even for a limited period or
the running of the period of redemption in foreclosure, cannot be made to alien
• Otherwise there shall be frivolous suits instigated
to give mortgagor more time to redeem Offer to repurchase not waiver to question sale
• The amount redeemable is the amount under the
• If there was an offer to repurchase, it shall not be
mortgage deed or the outstanding obligation plus
construed as waiver of right to question
interest and expense in Sec 47 of GBL
foreclosure sale
• No personal notice in required in extrajudicial • Mortgagee has no right to recover the deficiency
foreclosure of sale since it is action in rem
from the mortgagor of value of loan if foreclosure
Demand before foreclosure essential is invalid

• There must first be demand before there can be Preferred status of banks not impaired in case borrower
foreclosure as where demand was not made, the under rehabilitation
loan shall not become due and demandable • In case of rehabilitation of corporation debtor, the
Equity of redemption vs. Right of redemption right of a creditor bank is merely suspended

• Where foreclosure is judicially made, no right of Writ of possession


redemption exist in case the mortgagee is not a • After consolidation of title in buyer’s name due to
PNB or bank failure of mortgage to redeem, the writ of
• In such a case, the mortgagor is given the right to possession becomes a matter of right and its
extinguish the mortgage and retain ownership of issuance in a extra-judicial foreclosure is merely
property by paying debt within 90 days after ministerial
judgment • Injunction to prohibit issuance of writ of
Right of redemption may be extended by agreement possession is utterly out of place
• Proceeding in petition for writ of possession is ex-
Estoppel parte and summary in nature
• However, mortgagor still have right of recourse to
• Bank or any purchaser is deemed consented to petition to set aside foreclosure sale and cancel
extension of redemption if it had time to object but writ of possession in same proceeding
it did not
X. Major investments
Redemption after prescriptive period

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

• MB shall establish criteria for reviewing major 3. Make collection for accounts of other
acquisitions or investments of bank 4. Act as managing agent of investment
management accounts
Ceiling on investments in certain assets 5. Rent out safety deposit boxes
• Bank shall perform 1-4 as a depositary or as an
• Bank may acquire real estate as necessary for its
agent
conduct of business
• It shall be duly separated from bank’s own assets
• Total investment on such real estate shall not
and liabilities
exceed 50% of capital accounts
• Equity investment of a bank in another corporation Safety deposit box
engaged in real estate shall be considered part of
investment in real estate • It is considered as a special kind of deposit
• In determining compliance with the ceiling, the • It cannot be an ordinary contract of lease because
following shall apply the absolute control and possession of safety
o Investment shall include real estate and deposit box is not given to renters
equipment necessary for bank use such as • The guard key remains with bank and renters key
bank premises and real property of bank remain in customer
under its name • Where the renter keys are duplicated, the bank is
o The cost of real estate leased by bank from not liable to either renters in case of loss
corporation and amount of equity in lessor attributable to them
shall also be included • The SC said that it can be considered as a bailor
• In case of Tala vs. Banco Filipino, BF reached its and bailee relationship
maximum 50% capacity in real estate and Tala • Duties of the parties may be defined by them
was created by major stockholders to buy back • The company renting safe-deposit boxed cannot
sites of BF and leases it back to them. However, exempt itself from liability due to fault of its own
BF defaulted and Tala wants the payment of rents agents
• The court rules that Tala cannot be allowed to • In Sia vs. CA, a bank was held liable for not
collect rent as it clearly shows that the tried to immediately informing the customer that his safety
circumvent the real estate investment limit in GBL deposit box was flooded which caused damage to
the items of the customer
Acquisition of real estate by way of satisfaction of claims
XII. Electronic transactions
• Notwithstanding the limitations, bank may still
acquire the following property: • BSP shall have full authority to regulate use of
1. Mortgage to it in good faith for security electronic devices in connection with bank
2. Conveyed for satisfaction of debt operations
3. Purchase under judgement or mortgage
• Any real property held in such circumstance must XIII. Outsourcing of information technology
be disposed within 5 years
• Bank may outsource information technology
• After said period, those properties shall now be
systems and processes except inherent banking
included in the 50% limitation
functions
XI. Other Banking Services • Functions that are not outsourced:
1. Strategic planning for use of IT
• A bank may also perform the following services: 2. Determination of system functionalities
1. Receive custody of funds, documents and 3. Change management inclusive of quality
other valuable objects assurance
2. Act as financial agent to buy and sell for 4. Service level and contract management
their customers 5. Security policy and administration
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

XIV. Outsourcing of other functions • Interest accrued shall be reserved and no accrual
shall be allowed 90 days after credit card
• Subject to prior approval of MB, banks may receivable has become past due
outsource data imaging, storage, retrieval and
other related systems Finance charges – interest charged to cardholder
• Banks may outsource credit card services
Deferral charges
XV. Credit Card Transactions
• Parties can agree to a deferral of all or partly of
General policy unpaid instalments and will subsequently collect
deferral charge
• BSP shall develop consumer credit through
innovative products Late payment and penalty fees

Definition of terms • No late payment or penalty fee shall be collected


unless it is fully disclosed in the contract
• Credit card – any card, plate, coupon book or
other credit device for the purpose of obtaining Confidentiality if information
money, property, labor or credit
• Credit card receivables – total outstanding balance • Banks shall keep strictly confidential data on
of cardholders cardholder except when there is consent, exchange
of information with other credit card companies,
• Minimum amount due - minimum amount that
disclosure to collecting agent
cardholder needs to pay on due date
• Default – non-payment of minimum amount due Suspension, termination of effectivity and reactivation
within two cycle dates
• Acceleration clause – gives bank the right to • banks shall formulate parameters for such
demand obligation in full in case of default
Inspection of records covering credit card truncations
Risk management system
• banks shall make available for inspection credit
• System that shall safeguard interests, banks and card information to BSP
subsidiary credit card companies
Offset
Minimum requirements
• Banks can offset their obligations with cardholder
• Before issuing credit cards, banks must exercise with the latter’s debts provided there is notice
proper diligence by ascertaining applicant possess
Handling of complaints
good credit standing and are financially capable to
fulfil payments • bank shall give cardholder 20 days to examine
• All applications must go under strict credit risk charges and after 2 billing cycles, bank can correct
assessment process error
Information to be disclosed Unfair collection practices
• Banks shall disclose to each prospective • banks shall resort to legally permissible means to
cardholder non-financial charges, percentage of collect amount due under credit card agreement
interests, interest rate per annum, instalment • There shall be no use of threat or violence to
details, default fees, etc. coerce payment and no false representation
Accrual of interest earned Additional deposit does not increase credit limit

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

Contract of adhesion

• Contract between cardholders and credit card


companies are contract of adhesion becomes they
are prepared only by one party and the other party
only signifies

Blanket freedom from liability is invalid

• The credit card company cannot excuse itself from


liability completely as with blanket of freedom

XVI. Rules of Price tags

One price tag requirement

• Every retailer is required to display price tag to


indicate price of good or service
• Price tag must be written clearly indicating the
price including VAT. Service charge shall not be
included in price tag

Mode of payment

• It is necessary to consider business practices


relative to mode of payment under Price Tag Law
• When consumer pays in cash, he shall only pay the
price indicated
• When consumer pays through credit/ATM/debit
card, he shall only pay price indicated in tag
• When retailer offers consumer option to pay in
cash or card, the same is allowed provided that
options are disclosed by separate information but
not on the price tag
• Price that indicates separate cash price and regular
cash price is not allowed
• Price tag that indicates separate price tag and card
price is also not allowed

Prohibition against surcharging

• Retailers who honor credit/ATM/debit cards for


payment shall not require payment of surcharge
over and above the price tag

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

CHAPTER 5 – Prohibited Transactions and Cessation • Outsourcing inherent banking function shall
of Banking Business refer to any contract between the bank and
service provider for the latter to supply, or any
I. Prohibited Transactions act whereby the latter supplies, the manpower
Prohibited to act as insurer to service the deposit transaction of the former.

• Bank shall not directly engage in insurance


business as insurer II. Conducting business in an unsafe or unsound manner
• Insurance act shall include making insurance • To determine whether act or omission is
contract, surety contract, doing business of considered unsafe or unsound for banking, the
reinsurance following shall be considered:
• Fact that no profit is derived shall not be deemed 1. Resulted in material damage or abnormal
conclusive to show that there is no insurance risk to stability, solvency of bank
business 2. Resulted damage in depositors, creditors,
investor or public
Prohibited acts
3. Cause undue injury or unwarranted
• No director shall: benefits to any party
1. Make false entries in any bank report 4. Involves entering contract manifestly
2. Without order of court, disclose to an disadvantageous to bank regardless if DO
unauthorized persons an information will profit
relative to funds or properties in custody • MB can take action and exclude erring bank from
of customers clearing
3. Accept gifts, fees or commission in
connection for approval of loan
4. Overvalue a security for purpose of
influencing actions of bank
5. Outsource inherent banking functions
! This is to ensure secrecy of bank
deposits III. Prohibition on dividend declaration
• No borrow shall • No bank shall declare dividends greater than its
1. Fraudulently overvalue security for loan accumulated net profits on hand, deducting its
2. Furnish false material facts to obtain or losses and bad debts
increase loan • The bank shall also not declare dividends if at time
3. Attempt to defraud bank in event of court there is:
action to recover loan o Clearing account in BSP is overdrawn
4. Offer any DOE any gift, fee, commission
o Deficient in require liquidity floor for 5 or
to influence person to approve loan
more consecutive days
• No examiner, officer or employee of BSP assigned o Does not comply with liquidity standards
to supervise, examiner rendering technical o Committed major violation
assistance to bank shall commit the foregoing acts • Banks are entities exempted from improperly
• No bank shall employ causal or non-regular accumulated earnings tax (10% of said income) by
personnel or too lengthy probationary personnel in NIRC
business involving bank deposits
IV. Unauthorized advertisement or business representation
Prohibition against Outsourcing Certain Banking
Functions

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

• No persons or corporation shall engage in banking Remuneration


business shall advertise that it has a business of a
bank, quasi-bank or trust entity • Conservator shall receive remuneration to be fixed
by MB in an amount not to exceed 2/3 the salary
V. Placement under conservatorship of president of bank in 1 year, payable in 12 equal
instalments
Grounds for appointment of conservator • If within one year the conservatorship is
• Whenever the MB finds the bank in a state of: terminated on ground that institution can operate
1. Continuing inability or on its own, conservator shall receive balance
2. Unwillingness to maintain a condition of • But if it is terminated on some other ground,
liquidity deemed adequate to protect conservator shall not be entitled to remaining
depositors and creditors balance
• MB may appoint conservator with following • MB can appoint conservator connected to BSP in
powers: which case he shall not receive remuneration from
1. Take charge of assets, liabilities and BSP
management thereof Expenses of conservatorship
2. Reorganize management
3. Collect monies and debs due • It shall be borne by bank concerned
4. Exercise all powers necessary to restore
viability Terminations of conservatorship
• Conservator shall report to MB and shall have the
• MB shall terminate the conservatorship is it is
power to overrule or revoke actions of previous
satisfied that bank can continue operations
management
• Conservatorship can also be terminated on basis of
• Rehabilitation proceedings provide for equitable
report of conservator or its own findings would
distribution of insolvent debtor’s remaining assets
involve loss
to its creditors and give debtor a fresh start by
• In such as case, there shall be receivership or
relieving them of the weight of their debts
liquidation
• Liquidity – ability of an asset to be converted in
cash quickly and without discount Final and executory
• Solvency – liabilities amount to less than total
assets providing ability to pay debts • Action of MB shall be final except on petition for
• Test of insolvency – determining realizable assets certiorari in case of grave abuse of discretion
of bank is less than its liabilities • It shall be filed within 10 days from receipt of
• Insolvency of bank occurs when actual cash notice of board of directors of conservatorship,
market value of its asset is insufficient to pay its receivership or liquidation
liabilities
Exclusive power to appoint conservator shall lie in MB
• BSP is vested with exclusive authority to assess,
evaluate and determine condition of a bank Designation of conservator is not precondition to
whether it is insolvent or not. If insolvent, designation of receiver
receivership proceedings
Power of conservator cannot impair obligations of
Qualification of conservator contracts

• Conservator must be competent and • Conservator power to revoke contracts cannot


knowledgeable in bank operations and post-facto affect perfected transaction as it would
management infringe non-impairment clause
• Period of conservatorship shall not exceed 1 year

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

• Conservator is given power to revoke contracts 1. Current and complete examination not necessary
only those that are defect (void, voidable,
unenforceable, rescissible) • In Rural Bank of San Miguel vs. MB, the SC ruled
• Conservator merely takes place of board of that there is no need for complete examination
directors because it only needs a report
• Conservator cannot simply repudiate valid • A report is something that gives information while
obligations of the bank and must bring them to examination is a search, investigation or scrutiny
court actions • Absence of examination before closure of bank
• In FPIB vs. CA the court ruled that the conservator does not mean that there is no basis for closure
cannot revoke a previously valid contract entered 2. Procedure
by the bank even though the object of the contract
has a higher price • Receiver shall immediately:
• In conservatorship, the banking functions continue 1. Take charge of all assets and liabilities
unlike in receivership and liquidation 2. Administer the same for benefit of
creditors
VI. Cessation of banking business 3. Exercise general power of receiver under
Voluntary liquidation ROC
4. Shall not pay or any act that involves
• In voluntary liquidation, bank sends to MB notice transfer of asset of bank
of liquidation • Receiver may deposit or place funds of bank in
• No voluntary dissolution shall be undertaken by a non-speculative investments
bank without prior approval of MB. Request of • Receiver shall determine within 90 days from
voluntary dissolution shall be accompanied by takeover, whether institution may be rehabilitated
liquidation plan or otherwise
• Determination of resumption of business is subject
Receivership and liquidation to approval of MB
• The MB can summarily and without need of prior • In Teal Motor vs. CFI, receiver was defined as a
hearing forbid the institution from doing business indifferent person appoint by the court to preserve
and designate PDIC as receiver the funds of the in litigation pendent lite
• Grounds for receivership and liquidation: • He is not an agent or representative of any party
1. Unable to pay liabilities that are due. This 3. Prohibited acts
shall not include inability to pay cause by
extraordinarily demands by financial panic • Any director or officer declared insolvent or under
2. Insufficient realizable assets receivership shall not commit:
3. Cannot continue business without 1. Refuse to turn over bank records and
involving probable loss to depositors or assets to receiver
creditors 2. Tamper with bank records
4. Wilfully violated cease and desist order 3. Appropriate for himself or other party
involving transactions of fraud assets of bank
5. In case a bank notifies BSP or public 4. Receive bank deposits or collect loans
announces bank holiday where it suspends 5. Paying funds of bank
payment of its deposit liabilities 6. Transferring security of bank
continuously for more than 30 days
• For quasi-banks any persons recognize in 4. When institution cannot be rehabilitated
competence in banking may be designated as
receiver

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

• If receiver determines that bank cannot be Reasons behind receivership and involuntary liquidation
rehabilitated, MB shall notify the board of
directors that it shall proceed with liquidation 1. Banking business is subject to regulation under
police power and are affected with public interest
• The receiver shall file ex parte with RTC a petition
2. It is the government responsibility to see that
for assistance in the liquidation of the bank
financial interest of depositors and others are
pursuant to liquidation plan of PDIC
protected. Done through BSP
• Court shall adjudicate disputed claims, assist the
3. Public faith in banking system may deteriorate if
enforcement of liabilities
depositors, creditors are not protected. BSP shall
• Receiver shall pay cost of proceedings from assets
step in and salvage remaining resources of bank
of institution
4. Absence of notice and hearing is not a ground to
• Receiver shall convert assets of institution to
annul MB resolution
money and dispose the same to creditors and other
parties to pay bank debts Effects of receivership

5. Final and executory 1. Retention of juridical personality

• Just like in the case of conservatorship, the action • There shall be retention of judicial personality
of MB shall be final and executor unless there has even though it is ordered closed by MB
been certiorari • The suing must be done through the liquidator
• In Rural Bank of San Miguel vs. MB, closure of a
bank is an exercise of police power 2. Not liable to pay interest
• In only stockholders of bank can file action for
• Banks declared insolvent and ordered closed by
annulment of MB resolution of placing bank in
BSP cannot be held liable to pay interest
receivership
• When bank is closed, it cannot lend money,
Close Now Hear Later Scheme engage in transactions or any banking activities
where it can derive income from
• The law does not contemplate prior notice and • Thus there is no way the bank can pay the interest
hearing before bank may be directed to stop the accrues in favour of its depositors
operations and placed under receivership • However, there are two types of deposits that earn
• Previous hearing before closure is not required in interest. The first one, deposit that earn from the
the law and does not infringe due process existence until the bank cease to operate. This one
• However, bank can question the receivership must be paid. The second interest earned from the
within 10 days after receivership time the bank closed until payment of deposits.
• Close now hear later – practical consideration to The interest here must not be paid
prevent unwarranted dissipation of bank’s assets
and valid exercise of police power to protect 3. Assets deemed under Custodia Legis
depositors, creditors and public
• Assets if the bank becomes beyond its control.
• If otherwise, there mere filing of receivership by
Receiver operates to suspend the authority of the
BSP can trigger bank run and drain its assets in
bank to its properties
days or hour leading to insolvency
• Assets of bank shall be custodia legis in hands of
Effect of filing petition for review receiver and exempted from garnishment, levy,
attachment
• Pendency of case questioning receivership does • Liquidator – task is to dispose all assets of the
not diminish of receiver to administer bank’s bank and effect partial payments of banks
transactions pertaining to normal operations of the obligations
bank
4. Stay of execution
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

• Stay of execution is warrant if bank is placed Disposition of revenues and earnings


under receivership
• To execute a judgment against a bank under • All revenues and earning realized by receiver
receivership would unduly deplete its assets to the during receivership shall be used to pay costs of
prejudice of depositors and creditors proceedings
• The balance of revenues shall form part of assets
5. Restriction of bank’s capacity to Act available to payment of creditors

• Insolvency of bank restricts its capacity to act Disposition of banking franchise


• Bank cannot make new business such as accept
new deposits or grant loans. But receiver must • BSP, if public interest requires, award to another
collect debts in favour of the bank that will form institution the banking franchise under liquidation
part on bank asset • Whatever proceeds may be realized from award
• Foreclosure falls within board definition of “doing shall be subject to exclusive disposition of MB
business” Liabilities
• Doing business - continuity of commercial
dealings and arrangements incident to object of • Bank is bound by the acts or failure to act of
organization receiver
• However, it shall not be included in those act • Receiver is liable to bank for culpable and
prohibited from doing business negligent failure to collect and safeguard assets of
• Thus even if there is receivership or liquidation, such banks
the period of prescription to foreclose continues to
run
• In BF vs. Ybanez, the court ruled that receiver ca
still collect interest on loans during period of
closure

6. Exercise of jurisdiction of liquidation court

• All claims of bank must be filed in BSP


• It is to prevent multiplicity of against bank
• Exclusive jurisdiction of liquidation court pertains
only to adjudication claims against bank and does
not cover reverse situation
• Not necessary that claim is initially disputed
before it is filed
• In Ong vs. CA, if buyer bought a property from
the bank who is already declared insolvent, sale is
void

VII. Disposition and distribution of assets

• In case of liquidation, after payment of cost of


proceedings, receiver shall pay debts of institution
in accordance with preference of credit in NCC
• Current accounts and savings accounts are not
preferred credits in cases involving insolvency
where there are various creditors

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

CHAPTER 6 – Foreign Banks and Trust Operations • Residents and citizens of the Philippines that are
creditors of foreign banks shall have preferential
I. Foreign Banks right to assets of such banks
Transacting business in the Philippines • Under RA 7721, foreign banks have three modes
of entry in the country:
• RA 7721 – Foreign Banks Liberalization Act 1. Acquiring 60 of voting stock of existing
• PD 1034 – Conduct of offshore banking business bank
• Offshore banking – conduct of banking transaction 2. Investing 60% of voting stock of new
in foreign currencies banking subsidiary incorporated in
• Offshore banking unit – branch of a foreign baking Philippines
corporation authorized by BSP to transact offshore 3. Establishing branches with full baking
banking authority
• Foreign corporation doing business in the • A foreign bank may only avail only 1 mode of
Philippines are required to obtain a license entry
• However, even if foreign corporations do not have • GBL only stated that branches of foreign banks
a license, they can still be sued or be sued will be treated as one and shall have the head
• License is only necessary if it is for transacting or office guarantee to creditor Filipino citizens
doing business in the country • However, there is nothing in the law that states
that citizens that are debtors to foreign bank local
Acquisition of voting stock in domestic bank branches shall also be debtors to the head office
• There is also nothing in the law that the head
• Foreign banks are allowed entry in the Philippines
office and its local foreign branches shall be
subject to the following rules
treated as one
1. Within 7 years from effectivity of GBL,
• Thus, compensation with Philippine branches with
MB shall authorize foreign banks to
foreign branches cannot be effected as they cannot
acquire 100% voting stock of 1 domestic
be considered creditors and debtors of each other
bank
2. Within same period, MB may allow Summons and legal process
foreign bank which prior to GBL has
already acquired 60% voting stock can • Summons must be given to the Philippine agent or
now acquire 100% head of foreign bank to have jurisdiction
3. MB must ensure that 70% of resources of • If there is no agent, summons may be made upon
banking system are held by majority- BSP deputy governor in-charge
owned Filipinos • Once given, it shall be effect as if made upon bank
or agent
Local branches of foreign banks
• BSP deputy governor in-charge shall mail it to the
• Foreign banks which has more than 1 branch in bank and sending copy is a necessary part to
the Philippines, all such branches shall be treated complete service.
as 1 unit • In the corporation code, the service, in case of
absence of agent, shall be given to SEC

Laws applicable
Head office guarantee
• Foreign banks shall be governed by GBL and
• Head office shall fully guarantee prompt payment other applicable laws such as Corporation Code
of all liabilities of its Philippines branch
Revocation of license of foreign banks

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

• MB may revoke license if it find foreign bank • Existing local branches of foreign banks shall be
insolvent or imminent danger of insolvency and given 1.5 years to comply with minimum capital
will involve probable loss requirement
• After revocation, it shall be unlawful for foreign • RA 7721 was approved on May 18, 1994
bank to transact business in the Philippines

II. Entry of Foreign Banks


III. Trust Operations
• State shall devote self-reliant and independent
national economy Authority to engage in trust business
• Guidelines for approval: • Trust business – any activity resulting in trustor-
1. Ensure geographic representation trustee relationship involving appointment of a
2. Consider strategic trade relationships trustee by a trustor for the administration, holding,
3. Study demonstrated capacity management of funds or properties of trustor by
4. See reciprocity of right the trustee
5. Consider willingness to fully share • It is for the use, benefit or advantage of the trustor
technology or other beneficiaries
• Only those belonging to top 150 in the world or • Cardinal principle of trust and other fiduciary
top 5 banks in their country of origin shall be relationship is fidelity
allowed entry
• To establish a branch or subsidiary, foreign bank Conduct of trust business
must be widely-owned and publicly listed in its
country origin unless government owned • Trust entity shall administer the funds or property
• Capital requirement: under its custody with diligence that a prudent
1. For locally incorporated subsidiaries – man would exercise
same minimum capital with domestic • Trust entity – stock corporation or person
banks authorized by MB to engage in trust business shall
2. Foreign bank branches – US dollar act as trustee or administer any trust or hold
equivalent of P219M at exchange rate property in trust
during effectivity of Act. The foreign bank • No trust entity shall for the account of the trustor
shall be entitle to 3 or beneficiary,
3. Foreign banks may open 3 additional 1. purchase, acquire, sell, property
branches designated by MB – P35M per 2. transfer or purchase money or debt
additional branches instruments from/to DORSI of trust entity
• Foreign banks within 5 year from effectivity of and relatives of first civil degree
this act is only allowed 6 foreign bank to enter the 3. unless authorized by the trustor after prior
country full disclosure of transaction
• An additional 4 foreign banks may be allowed
Registration of articles of incorporation and by-laws of
entry by recommendation of MB
trust entity
• Non-Filipino citizens can be members of board of
directors up to the extent of the allowed foreign • SEC shall not register such unless accompanied by
participation certificate of authority from BSP
• Philippine corporations who have listed share of • A trust business shall start from the moment their
stock in PSE or long standing for 10 year shall articles of incorporations are registered
have right to own 60% voting stock of a domestic
bank Minimum capitalization

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

• A trust entity, before engage in trust business, • Paid-in capital and surplus of each entity must be
shall comply with minimum paid-in capital equal to the amount required to be deposited in
requirement by MB BSP
• In case it shall not meet the required paid-in
Powers of trust entity capital, the MB shall limit or prohibit distribution
1. Act as trustee on any mortgage or bond and accept of profits by trust entity until minimum
and execute any trust consistent with law requirement is met
2. Act under order of any court as guardian, receiver, • Trust entity, as long as solvent and comply with
trustee or depositary of estate of minor or laws, shall have the right to collect interest earned
incompetent person on security deposited to BSP
3. Act as executor of any will • If trust entity fails to comply with law, BSP shall
4. Act as executor of estate of any deceased person retain interest of securities for benefit of rightful
with a will or administrator without a will claimants
5. Accept and execute trust for holding, management, • All claims arising from trust business shall have
administration of estate and rents, issues, profits priority over all claims as regard to the security
thereof deposited
6. Establish and manage common trust funds
IV. Bond of Certain Persons for the Faithful Performance
Transactions requiring prior authority of Duties

• Trustee or trust entity shall not undertake any of Bond requirement


the following transactions for the account of the
1. Before executor, administrator, guardian, trustee,
client unless there is prior full disclosure and
receiver or depositary appointed by the court enter
authorization by client
upon execution of dues, court may order bond
1. Lend, sell, transfer or assign money or
2. Upon application of such persons, after notice and
property to DOSRI of trustee, relatives of
hearing, court shall order that subject matter of
trustee or related interest of such DOSRI
trust be deposited with trust entity
where trustee owns at least 50% of voting
3. Upon presentation of proof that subject matter
stock
have been deposited to trust entity, court may
2. Purchase and acquire property or debt
order that bond be given by such persons for
instrument in the same manner
faithful performance
3. Invest in equities or in securities
4. Reduce bond shall be sufficient to secure
underwritten by trustee in which trustee
adequately the proper administration of any
has interest
property
4. Sell, transfer, assign or lend money or
property from one trust account to another Exemption of trust entity from bond requirement
account
• No bond shall be required by court from trust
Deposit for the faithful performance of trust duties entity for faithful performance
• However court may order bond for the protection
• Before transacting trust business, they must
of funds or property confided
deposit to BSP for faithful performance of trust
duties an amount not less than 500k or higher as
may be fixed by BSP
• MB shall require trust entity to increase the V. Operations of Trust Entity
amount whenever the increase is necessary by
Separation of trust business from general business
reason of trust business

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

• The trust business shall be kept separate and 2. Equity investment of bank in another
distinct from the general business corporation engage in real estate shall be
• They shall be physically separated from assets of considered a part of 50%
its other business
Exemption of trust assets from claims
• They shall be under the joint custody of at least
two persons who are officers of the trust • No assets held by trust entity shall be subject to
department claims other than those parties interested in
specific trusts
Investment limitation of a trust entity
• Property held in trust by insolvent debtor shall be
• Unless otherwise directed by instrument creating excluded from insolvency proceedings
the trust, the lending or investment of funds by • Trust entity and its branches shall be treated as
trust entity shall be limited to loans and investment one unit
as prescribed by law, MB or court • Trust entities shall advertise services in a
• Assets received in trust shall be administered with dignified manner
terms of the instrument creating the trust
Money of government
• If trust entity is given discretionary powers to
invest, loans and investments shall be limited to: • Banks may not receive as trustee the funds of the
1. Evidence of indebtedness of RP and BSP government except GOCC banks
2. Loans guarantee by government
3. Loans fully secured by hold-out on,
assignment or pledge of deposits that are
maintained QUIZZES:
4. Loans fully secured by real estate or
True or False:
chattels
• The following shall be required to be given as 1. The fiduciary nature of the relationship of a
information depositor with the depositary bank imposes on the
1. Transaction to be entered latter the obligation to discharge the highest
standard of trust and integrity and a violation
2. Borrower’s name
thereof is considered a breach of trust. False
3. Amount involved
4. Collateral security 2. The humble wage-earner has not hesitated to
entrust his life’s savings to the bank knowing that
Real estate acquire by trust entity they will be safe in the custody of the banks. True

• Trust entity may acquire real property under 3. Banks are gratuitous bailees of the funds deposited
following circumstances: with them by their clients. False
1. Mortgage to it in good faith by way of 4. The public relies on the banks’ fiduciary duty to
security to debts observe the highest degree of diligence but any
2. Conveyed to it for satisfaction of debts violation of this duty by the bank is not a valid
previously contracted ground for the grant of exemplary damages to the
3. Purchase at sales under judgment, decrees, depositor. False
mortgages or trust deeds
5. Thrift banks may not act as correspondent for
• Any property acquire under circumstances shall be other financial institutions. False
disposed within 5 years
• After said period, bank can still continue to hold 6. A non-stock corporation may act as a trustee or
administer any trust or hold property in trust or on
property subject to limitations:
deposit for the benefit of others. False
1. Total investment in real estate shall not
exceed 50% of combined capital accounts

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

7. A bank cannot use any of its branches as outlets 6. The term Legal Compensation refers to that
for the sale of the financial products of its allied situation when two persons, in their own right, are
undertaking or its investment house units. True creditors and debtors of each other.
8. A bank may declare dividends greater than its
7. The contracts between cardholders and credit card
accumulated net profits then on hand, deducting
there from its losses and bad debts. False companies are called contracts of adhesion
because their terms are prepared by only one party
9. The appointment of a receiver is vested while the other merely affixes his signature
exclusively with the Monetary Board. True signifying his conformity thereto.
10. The MB cannot appoint a conservator connected 8. Net worth means the total unimpaired paid-in
with BSP. False
capital including paid-in surplus, retained earnings
11. In a judicial foreclosure of mortgage, there is an and undivided profit, net of valuation reserves and
equivalent right of redemption. False other adjustments as maybe required by BSP.
12. No late payment of penalty fee shall be collected 9. Letter of Credit refers to a financial device availed
from cardholders unless the collection thereof is of by businessmen as a convenient mode of
fully disclosed in the contract between the issuer
dealing with sales of goods to satisfy the
and the cardholder. True
seemingly irreconcilable interests of a seller who
13. A bank which had been ordered closed by the refuses to part with his goods before he is paid.
monetary board does not retain its juridical
personality which can sue and be sued through its 10. Survivorship agreement is the agreement that
liquidator. False allows joint depositors to withdraw the whole
deposit during their lifetime and transferring the
balance to the survivor upon the death of one of
them.

Fill in the blanks 11. In the case of Consolidated Bank and Trust Co.,
the SC ruled that the contract between the bank
1. The law governing the creation, organization and and its depositor is governed by the provisions of
operation of rural banks is Rural Banks Act. the Civil Code on simple loan/mutuum.
2. The total investment in equities of allied enterprise 12. In the case of Serrano vs. Central Bank of the Phil.,
shall not exceed 35 % of the net worth of the bank. the SC held that bank deposits are in the nature of
irregular deposits.
3. Subsidiary shall refer to a corporation or firm
more than 50% of the outstanding voting stock of 13. In Simex International Case, the SC said that the
which is directly or indirectly owned. banking system is an indispensable institution that
plays a vital role in the economic life of the nation.
4. The rule that the total amount of loans that may be
extended by a bank to any person or entity shall at 14. It is basic that after consolidation of title in the
no time exceed 20% of the net worth of such bank buyer’s name for failure of the mortgagor to
is called Single Borrower’s Limit. redeem, the writ of possession becomes a matter
of right and its issuance to a purchaser is merely a
5. Credit Risk Transfer shall refer to any agreement
ministerial function.
that allows the bank to transfer the credit risk
associated with its loan or other credit 15. Acceleration Clause means any provision in the
accommodation to a third party. contract between the bank and the cardholder that
gives the bank the right to demand the obligation

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

in full in case of default or non-payment for 25. Secrecy of Bank Deposit Act is the law that was
whatever reason. passed to give encouragement to people to deposit
their money in banking institutions.
16. The law that protects its citizens from a lack of
awareness of the true cost of credit to the user by 26. The Securities and Exchange Commission shall
assuring full disclosure of such cost is Truth in not register the articles of incorporation of any
Lending Act. bank unless accompanied by certificate of
authority issued by the monetary board.
17. The agreement between the parties in a loan
transaction which stipulate that the rate of interest 27. The equity investment of a universal bank or its
agreed upon may be increased in the event that the wholly or majority owned subsidiaries, in a single
applicable maximum rate of interest is increased non-allied enterprise shall not exceed 20% of the
by the MB is called escalation clause. total equity.

18. Joint and Solidary Agreement is an agreement 28. Demand deposit are all those liabilities of the
where the contracting parties consent to be jointly Banko Sentral and of the other banks which are
and severally liable in a loan obligation. denominated in the Philippine currency and are
subject to payment in legal tender upon demand
19. A bank guarantee is an irrevocable commitment of by presentation of depositor’s check.
a bank binding itself to pay sum of money in the
event of non-performance of a contract by a third 29. The rule intended to maintain the quality of bank
party. management and afford better protection to
depositors and the public in general is called fit
20. Assignment of credit is an agreement by virtue of and proper rule
which the owner of credit, known as the assignor,
by a legal cause, such as sale or dation in payment 30. Off shore banking units refer to a branch,
transfers his credit to another known as the subsidiary or affiliate of a foreign banking
assignee who acquires the power to enforce it. corporation which is duly authorized by the Banko
Sentral to transact offshore banking business in the
21. All foreign currency deposit are of absolute Philippines
confidential nature as a general rule and said
deposit shall be exempt from attachment pursuant 31. A bank is bound by the negligence of its
to RA No. 6426 otherwise known as Foreign employees under the principle of Respondeat
Currency Deposit Act of the Philippines. Superior

22. Negotiable Order of Withdrawal Accounts are 32. Quasi banks refer to entities engaged in the
interest bearing deposit accounts that combine the barrowing of funds through the issuance,
payable on demand feature of checks and endorsement or assignment with recourse or
investment feature of savings account. acceptance of deposit substitutes for the purpose
of relending or purchasing receivables and other
23. Independent Auditor means a person other than an obligation
officer or employee of the bank, its subsidiaries or
affiliates or related companies, or its majority 33. The business of banking is imbued with public
shareholders. interest in order to assure the stability of banks
which largely depends on the confidence of the
24. Interest Rate Differential refers to the difference or people in the honesty and efficiency of banks.
margin between interest rates such as the
difference between domestic and foreign interest
rates.
Summary of Laws

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

Chapter 1 RA 7721 Foreign Bank liberalization Act

RA 8791 General Banking Law of 2000

RA 7353 an act providing for the creation, organization


and operation of rural banks
------------GOD BLESS IN THE MIDTERMS!!!----------
RA 7906 an act providing for the regulation of the
organization and operations of the thrift banks

RA 6938 an act to ordain a cooperative code of the


Philippines

RA 6848 an act providing for the 1989 charter of the Al-


Amanah Islamic bank of the Phil

RA 6426 an act instituting a foreign currency deposit


system in the Philippines

BP 68 Corporation code

Chapter 2

RA 7653 The New Central Bank Act

Chapter 3

RA 1405 Secrecy of bank Deposit Act

RA 8367 an act providing for the organization and


operation of non stock savings and loan association

RA 9160 an act defining the crime money laundering

RA 6770 the ombudsman act of 1989

Chapter 4

RA 7394 Consumer Act

Act No 3135 an act to regulate the sale of property under


special powers inserted in or annexed to real estate
mortgages

Chapter 6

PD 1034 Offshore Banking System Decree


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

CHAPTER 7 – The Banko Sentral ng Pilipinas 1. Use corporate seal


2. Enter contracts
I. Creation, Responsibility and Corporate powers of BSP 3. Lease or own personal and real property and may
dispose the same
Declared policy of the state
4. Sue and be sued
• State shall maintain a central monetary authority 5. Perform any thing that may be necessary to carry
that shall function and operate as an independent out purpose of NCBA
and accountable body corporate in the discharge of 6. Acquire and hold assets and incur liabilities in
its mandated responsibility Concerning money, connection with NCBA
banking and credit 7. Comprise or release claim or settled liability to
• BSP is a GOCC but enjoys fiscal and BSP regardless of amount involved
administrative autonomy
Power to prosecute
Creation of the BSP
• BSP can cause prosecution of those who violate
• BSP – independent central monetary authority banking law
• Capital of BSP – P50B which shall be fully • However, nothing in the law gives the BSPN the
subscribed by the government specific duty to do the actual prosecution
• P10B shall be paid by the government upon • Thus, BSP is not a prosecution agency unlike the
effectivity of act fiscal office
• The balance shall be paid within 2 years • In Perez vs. Monetary Board, it was ruled that
• Place of business – principal place of business in being an artificial person, BSP is limited to its
Metro Manila or maintain other branches statutory powers
• Creation of central monetary authority is cited in • It nearest power to prosecute is its power to sue
Sec 20 Art XII of Constitution and be sued which refers to civil case only
• The authority shall prove policy direction in areas • BSP can only cause prosecution which is a public
of money, banking and credit and regulatory offense and anyone can denounce such
powers of such operations • Mandamus for the purpose of causing the BSP to
charge violation of bank laws is improper
Responsibility and primary objective of BSP • BSP and members of MB should not be impleaded
as parties to a case under Sec 6, Rule 43 of RoC
1. Responsibility of BSP – provide policy direction
in areas of money, banking and credit Estoppel
2. Shall have supervision over operation of banks
3. Exercise regulatory powers over operations of • BSP is committed to maintain the stability of the
finance companies and non-bank finance country foreign exchange reserve position
institutions performing quasi-banking • Must adhere to principles of fairness and decency
4. Primary objective of BSP – maintain price under Bill of Rights
stability conducive to a balance and sustainable • BSP circulars must be implemented to promote
growth of the economy country’s production and at the same time avoid
5. It shall promote and maintain monetary stability irreparable prejudice to participants
and convertibility of the peso • In CB vs. IAC, the court ruled that in case banks
• In Busuego vs. CA, the court ruled that the BSP already faithfully complied with BSP directives,
has responsibility of administering the monetary, BSP is estopped from enforcing circulars which
banking and credit system of the country and is deny banks of their rights
granted power supervision and examination over
banks II. Authority of BSP

Corporate powers of BSP (SCP-SPAL) Supervisory powers of BSP


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

• Operations and activities of banks shall be subject Composition


to supervision of BSP. Supervision shall include
the following: (REO-ISC) • MB shall be composed of 7 members appointed
1. Issuance of rules of conduct or SOP for by President with term of 6 years
uniform application to al institutions • The seven members are:
covered 1. The governor who shall be the chairman
2. Conduct examination to determine of MB. Governor shall be head of a
compliance with laws and regulation department and his appointment
3. Overseeing to ascertain law and confirmation of COApp
regulation are complied with ! Whenever unable to attend board
4. Regular investigation. Not oftener than meeting, deputy governor shall
once a year to determine whether there is act as alternate
business is conducted on a safe or sound ! MB shall designate one of its
basis. Deficiencies immediately addressed members as acting chair
5. Inquiring into solvency and liquidity 2. Member of cabinet designated by
6. Enforcing prompt corrective action President
• BSP shall have supervisions over operations of: ! Whenever cabinet member unable
1. Quasi-banks to attend meeting, Usec shall be
2. Trust entities alternate
3. Other financial institutions 3. 5 members who shall come from private
sector serving full-time
Phase out of BSP powers over building and loan ! In the first appointments from
associations effectivity of act, 3 serve 6 yrs
while the other 2 - 3 years
• Within period of 3 years, BSP shall phase out and
transfer supervising and regulatory power over Vacancies
building and loan associations to Home Insurance
and Guaranty Corporation • Any vacancy created by death, resignation or
removal shall be filled by new appointment to
Policy direction; rations, ceiling and limitations complete unexpired term

• BSP shall provide policy direction in areas of Qualification of members of MB


money, banking and credit
1. Natural born citizens
• MB shall prescribe ratios, ceilings, limitations in
2. At least 35 years of age, Governor must be 40
different accounts of banks to confirm to
years old
internationally accept standards including Bank
3. Good moral character
for International Settlement
4. Integrity
• MB may exempt particular categories of
5. Probity and patriotism
transactions from such rations, ceilings to:
6. Recognized competence in social and economic
o Exceptional cases
disciplines
o Enable a bank under rehabilitation or
during merger or consolidation to continue Disqualification of MB members
business with safety
1. Disqualification under RA 6713 (Code of Conduct
III. Monetary Board and ethical standards of public officer and
employees)
• Powers and functions of BSP shall be exercised
2. Disqualified from being a DOSRI of any bank
by Banko Sentral Monetary Board
subject to the supervision or examination of BSP

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

a. In which case, such member shall resign banking institution once every 12 months and at
before assumption of office such other time at the vote of 5 members of MB
3. Member of MB coming from private sector shall 3. Sec 72 NCBA – During exchange crisis or
not hold public office in tenure national emergency, with concurrence of 5
4. No person shall be member if he has been members of MB and approval of president, MB
connected directly with any multilateral banking may temporarily suspend sales of exchange by
institution or has substantial interest on any private BSP and may subject all transactions in gold and
bank 1 year prior appointment foreign exchange to license by BSP
5. No member shall be employed in any such 4. Sec 84 NCBA – in nation or local emergency or
institution within 2 year after expiration of term imminent financial panic, MB may, with 5 vote of
except when serving as representative of members, authorize BSP to grant extraordinary
government (sec 9) loans or advances to banks secured by assets

Grounds for removal MB members Deputy Governors may attend meetings of MB

1. Subsequently disqualified under Sec 9 during • They may attend meetings and have the right to be
tenure heard
2. Physically or mentally incapacitated and cannot
discharge duties and incapacity lasted more than 6 Salaries of governor and members of MB
months
• Salary shall be fixed y President at a sum
3. Guilty of acts or operation of fraudulent or illegal
commensurate to the importance and
character opposed to aim of BSP
responsibility attached to their position
4. Member no longer possess qualification under sec
8 Personal or Pecuniary interests
Meetings, quorum, decisions and proceedings MB • Members of MB with personal or pecuniary
interest in any matter in the agenda of MB shall
1. MB shall meet at least once a week. MB may be
disclose his interest and shall retire from the
called to meeting by governor or 2 other members
meeting when matter is taken
of board
• The decision made on matter shall be made public
2. Presence of 4 members constitute quorum
and the minutes shall reflect disclosure made and
provided that governor or his alternate is among
retirement of member
the 4
3. BSP shall maintain and preserve complete records Scope of authority of MB
of proceedings in their original form or in
microfilm 1. Issue rules and regulations it considers necessary
4. General Rule: All decisions of MB shall require for the discharge of its responsibilities and
concurrence of at least 4 members exercise of its powers
a. Rules and regulation issued shall be
Exception to general rule where at least 5 votes is required: reported to President and Congress within
15 days from date of issuance
1. Sec 61 GBL – publication of financial statements
2. Direct the management, operation and
is required once at least every quarter. In national
administration of BPS, reorganize its personal and
or local emergency or of imminent panic, MB by
issue rules and regulations
vote of 5, upon application of bank, may allow
a. Legal units of BSP shall be under
such bank to defer publication of financial
exclusive control and supervision of MB
statement
3. Establish human resource management system
2. Sec 28 NCBA – supervision and examining
which shall govern selection, hiring, appointment
department head shall examine books of every
or dismissal of personnel.
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

a. Compensation structure based on job a. Disclosure of information of a confidential


evaluation studies and wage surveys shall nature unless disclosure is in connection
be the integral component of the HR with performance of official function
program b. Use of such information for personal gain
b. MB shall make its own system which or detriment of the government, BSP or
conform closely to RA 6758 third parties. any data required to be
(Compensation and Position Classification submitted to President or Congress is not
Act of 1989) confidential
c. Those under salary grade 19 shall have 3. Legal obligation and good faith that BSP officer
rates under RA 6758 owe to public start with official acts of MB which
d. Upon recommendation of governor, are the cause of loss and injury and not any
appoint, fix remunerations and removal preparatory report or recommendation
personnel subject to civil service law
• In CB Employees Association vs. BSP, the IV The Governor and Deputy Governors
court ruled that the establishment of unfair Powers and Duties of the Governor (CEO:PEDARE)
human resource management is
unconstitutional. It shown that higher grades 1. Shall be the CEO of BSP
receive greater benefits withheld from lower 2. Prepare the agenda for meetings and submit, for
grades. consideration, policies and measures necessary
• Rank and file employees are limited to SSL 3. Execute and administer policy and measures
while employees in higher rank are given approved by MB
higher compensation to entice them to stay. It 4. Direct and supervise operation and internal
is the rank and file employees that are of need administration of BSP. Governor may delegate
for greater benefits certain administrative responsibilities to other
4. Adopt annual budget for and authorize expenditure officers
by BSP 5. Appoint and fix remuneration of personal below of
5. Indemnify its members against all costs and a department head. Removal of personal is with
expenses incurred in connection with civil or approval of MB
criminal suit by reason of performance of duty 6. Render opinions, decisions or rulings which is
unless liable for negligence or misconduct final and executor until reversed or modified by
a. In event of settlement or compromise, MB
indemnification are covered provided that 7. Exercise other powers vested by MB
there is no negligence
b. Costs and expenses incurred in defending Powers of Governor as representative of MB and BSP
may be paid in advance and repay the • Governor shall be the principal representative of
amount advanced should it be determined
MB and BSP with following powers:
that personnel is not entitled to indemnity
1. Represent MB and BSP in all dealings
Responsibility of Members of MB with other offices
2. Sign contracts entered into by BSP, notes
1. If anyone wilfully violate NCBA or guilty of and securities issued by BSP Signature
negligence, abuses or malfeasance or may be facsimile
misfeasance or fails to exercise extraordinary 3. Represent BSP in any legal proceeding
diligence in performance of duty, he shall be held 4. Delegate his power to represent to other
liable for loss or injury suffered by BSP or officers
banking institution (VNAMMFe) • In order to preserve integrity of office, governor
2. Similar responsibility shall apply to officer or may choose not to participate in preliminary
employees of BSP
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

discussions of multilateral banking institutions on 2. BSP, through governor or representative shall


negotiations for the government have the power to issue subpoena for production
• During such, he may be represented by permanent of books. Contempt if refused
negotiator 3. Data on individual firms other than banks gathered
by BSP Department of Economic Research shall
Emergencies (CRM) not be available outside BSP. Collective data can
be released to interested
1. In case of emergency, governor with concurrence
4. Personnel of BSP shall be prohibited from
of 2 other members, may decide matter or take
revealing in any manner, except under orders of
action within authority of the board
court, Congress or government office
2. Governor shall submit report to President and
Congress within 72 hours Training of Technical personnel
3. At soonest possible time, governor shall call
meeting of MB for ratification • BSP shall sponsor training of technical personnel
in field of money and banking
Limitation on outside interest of governor and members of
board Scope of supervision and examination by BSP

• They shall limit their professional activities 1. BSP shall have supervision over, and conduct
directly to their position in BSP periodic or special examinations of bank, quasi
• Shall not accept any other employment except banks including subsidiaries and affiliated
when position in eleemosynary, civic, cultural or engaged in allied activities
religious organization or by designation of a. Subsidiary – more than 50% voting stock
President to represent government is owned by bank or quasi-bank
b. Affiliate –50% or less is owned by bank or
Number and functions of deputy governors related or linked to institution through
common stock holders
1. Governor shall appoint not more than 3 deputy
2. Department heads and examiners are authorized to
Governors who shall perform duties as may be
a. Administer oaths to any directors, office
assigned to them
or employee of any institution
2. In absence of governor, deputy governors
b. Compel presentation of books, document
designated to act as CEO of BSP shall exercise
and records relative to true condition of
duties
institution
3. Whenever governor is unable to attend
government board or councils where he is ex Restraining order or injunction
officio member, deputy governor may be
designated vested with power to participate and • No restraining order or injunction shall be issued
vote enjoining (preventing) BSP from examining
institution under its supervision
V. Operations of BSP • Exception: there is convincing proof that action of
Research and Statistics of BSP BSP is plainly arbitrary and in bad faith and
petitioner files bond in favor of BSP
• BSP shall prepare data and conduct economic • Provisions of Rule 58 – Preliminary Injunction
research for guidance of MB shall apply not inconsistent

Scope of Authority of BSP to obtain data VI. Director, Officer or Stockholder and Related Interests

1. BSP shall have authority to require government Contracting Loans


office any data it may require

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

• Any DOSRI contract loans or any financial • None of the reports shall be open to inspections of
accommodation from his bank or a from a bank the public except when such is incidental in
(lending bank) that is: proceedings for violations
1. Subsidiary of bank holding company of
which both his bank and lending bank is Service Fees
subsidiaries
• Banking which are subject to examination of BSP
2. Controlling proportion of share is owned
shall pay BSP within first 30 days of each year an
by the same interest that owns a
annual fee as may be prescribed by MB
controlling proportion of share of his bank
• Sec 65 of GBL states that BSP may charge
in excess of 5% if capital and surplus of
equitable rates, commissions and fees fir
bank
supervision or examinations
• Such shall be required by lending bank to waive
the secrecy of his deposits in all banks VIII. Administration
• Any information obtained from examination shall
be strictly confidential. Used only by examiner Operating departments of BSP
only in connection with supervisory responsibility
• MB shall determine operating departments
or by BSP in legal action
including public information office
Prohibition against Personnel of BSP
Required reports and publication of BSP
• In additional to prohibition from RA 3019 and RA
1. General balance sheet showing volume and
7613, the BSP personnel prohibited from:
composition of its assets and liabilities – 60 days
1. Being DOSRI of institution under
after end of each month except December, 90 days
supervision of BSP except non-stock
if such
savings and loan associations
2. MB shall publish and submit to Congress and
2. Require or receive any gift from any
President the following reports:
institution subject to supervision
a. Analysis of economic and financial
3. Reveal in any manner, except under court
development – not later than 90 days after
order, Congress or government officer.
end of each quarter
Shall not apply to giving of information to
b. Preceding year’s budget and profit and
MB or governor of BSP
loss statement – within 90 days after end
4. Borrowing from any institution subject to
of year
supervision and examination unless
c. Review of the state of financial system –
borrowings are adequately secured
120 days after each semester
VII. Examination of Banking Institutions d. Abnormal movements in monetary
aggregate and general price movements –
Frequency of examination 72 hours after remedial measures was
taken
• Department head shall examine books of every
banking institution once every 12 months and at Annual Report of BSP
such other time at the vote of 5 members of MB.
Interval shall be at least 12 months 1. Annual report on the condition of BSP – before
end of March each year. Submit to President and
Afford opportunity to examine Congress and include review of policies and
economic analysis circumstances:
• Bank concerned shall afford the head full 2. Will also include statement of financial condition
opportunity to examine its books, cash and assets of BSP and statistical appendix include: (1)
during banking hours movement monetary aggregates, (2) movements of
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

foreign exchange, (3) balance of payments, (4) • Chairman of COA act as ex official auditor of BSP
consumer prices, (5) exports/imports, (6) accounts and authorized to appoint representative auditor to
of BSP, (7) data BSP. Can only be removed by COA
3. BSP shall publish another version of the annual • Representative shall be (1) CPA, (2) 10 years
report understandable in layman experience, (3) not relative to member of MB or
4. Failure to comply without justifiable reason shall COA to 6th civil degree
cause withholding of salary of personnel
X. Penalty for Violation
Signature of statements
• Sec 66 of GBL provides that if offender is director
• Balance sheet and other financial statements shall or officer, shall be suspended or removed from
be signed by (1) officer responsible for preparation, office. If offender is corporation, shall be
(2) governor, (3) BSP auditor dissolved by quo warranto instituted by SG

IX. Profits, losses and special accounts Penalty for refusal to make reports or permit examination

Fiscal Year • Person was required in writing by MB or


supervising department but refused to file or
• Starts on January first and ends on December 31st
permit examination. Penalty 50k-100k
of each year
Penalty for wilful making of a false or misleading
Computation of Profits and Losses
statement of material fact
• Within 30 days following end of each year, BSP
• Penalty 100k-200k
shall determine net profits and losses
Proceedings upon and penalty for violations of NCBA and
Distribution of net profits
banking laws
• Within 60 days following end of each fiscal year, 1. Bank, quasi bank or any person violates NCBA,
MB shall determine distribution of net profits penalty is 50-200k
according to the following: 2. Bank or quasi bank persists in carrying business in
1. 50% of net profits carried to surplus unlawful or unsafe manner same penalty
2. Remaining 50% shall revert back to
National Treasury Administrative violations on banks

Revaluation profits and losses • MB shall impose administrative penalty to bank,


quasi-bank, director or officer for:
1. Profits or losses from revaluation of gold or
1. Willful violation of charter
foreign currency shall not be included in
2. Willful delay in submitting report
computation of annual profits or losses
3. Refusal to permit examination
2. Any profit or losses from revaluation shall be
4. Willful making of false or misleading
offset by amounts owed by Philippines to
5. Willful failure to comply with bank laws
international financial institutions
6. Any commission of irregularity
3. Any remaining profit or loss shall be placed in the
7. Conduct business in unsafe manner
Revaluation of International Reserve and net
• Following are the sanctions:
balance shall appear as either liability or asset
1. Fines not exceed 30k per day per violation
depending whether profit or loss
2. Suspension of rediscounting privileges
The Auditor 3. Suspension of lending or FOREX
operations

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

4. Suspension of interbank clearing


privileges
5. Revocation of quasi-banking license
• Resignation shall not exempt criminal or
administrative sanctions
• MB may preventively suspend office under
investigation not exceed 120 days except when
delay is caused by him
• Administrative sanctions need not be applied in
order of severity

Administrative Proceedings on banks

1. WON there is administrative proceedings, if


officer continue to persist in practice or violation,
MB shall release cease and desist order effective
upon service to respondents
2. Respondents have opportunity to defend their
action in a hearing upon a request made within 5
days from receipt of order. If no hearing is
requested, order is final
3. Governor is authorized to impose to banks fines
not exceeding 10k per day per violation which can
be appealed to MB

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

CHAPTER 8 – Currency, Monetary Stabilization and 2. Art. 164 – Mutilation of coins


Functions of BSP 3. Art. 165 – Selling of false or mutilated coins
without connivance
I. The Unit of Monetary Value 4. Art. 166 – Forging treasure notes or other
The Peso documents payable to bearer
5. Art. 167 counterfeiting, importing or uttering
• Peso - unit of monetary value in the Philippines (P instruments not payable to bearer
sign) 6. Art. 168 - Illegal possession and use of false
• Peso divided into 100 equal parts called centavo (c treasury notes
sign) 7. Art. 169 – How forgery is committed
• All monetary obligation shall be settled in
Exception to territoriality of penal laws
Philippine currency in legal tender
• Parties may agree that obligation shall be settled in • Art. 2 of RPC provides that the territoriality rule
other currency does not apply :
1. Should forge or counterfeit any coin or
Definition of Currency
currency note the Philippines or
• Currency – all Philippine notes and coins issued obligations or securities of the
in accordance with NCBA Government
2. Liable for acts connected with
Value of Currency introduction of such into islands

• Currency has value because people are willing to Liability for notes and coins
accept it in exchange for goods or services or
payment of debt • Notes and coins issued by the BSP shall be
• Money has no value as a commodity but has value liability of BSP
as means of medium of exchange • It shall be issued in amounts not exceeding assets
• Value of goods and services are measured by of BSP
terms of medium • Notes and coins shall be a first and paramount lien
• Not applicable if no confidence in currency and on all assets of BSP
people would use foreign currency • BSP’s holding of its own notes and coins shall not
be considered a part of its currency issue and not
II. Issue of means of payment part of assets and liabilities

Exclusive issue power Legal tender power

1. BSP shall have the sole power to issue currency • All notes and coins issued by BSP shall be fully
within the Philippines guaranteed by the Government and shall be legal
2. MB may issue regulations to prevent circulation of tender in Philippines for all debts, public or private
foreign currency , currency substitute or facsimiles • Checks representing demand deposits do not have
of BSP notes legal tender and acceptance is at the option of the
3. BSP shall have authority to investigate, arrest and creditor
conduct searches to maintain integrity of currency • Check cleared and credited to account of creditor
4. Violation shall have imprisonment of 5-10 years shall be equivalent to delivery
unless RPC gives greater penalty • BSP Circ. 537 of 2006 – maximum amount of
coins to be considered as legal tender
Related Crimes under RPC
o 1,5,10 peso coins – 1k
1. Art. 163 – Making and importing and uttering o 1,5,10,25 centavos – 100
false coins
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

• Art 1249 of NCC states that all payments of debts • Mutilated condition: (1) identification is
shall be in currency stipulated and if not possible impossible, (2) signs of filing, clipping, (3) notes
currency in legal tender lost more than 2/5 of surface or all signatures
• It also states that when there is payment by PN, it
shall produce only effect when encashed or Retirement of old notes and coins
impaired through fault of creditor. Action derived • BSP may call for replacement of notes (more than
from obligation is held in abeyance 5 yrs old) and coins (more than 10 yrs old)
• Art. 1250 of NCC, where there is extraordinary • Notes and coins replaced shall remain legal tender
inflation or deflation, value of currency at time of for 1 year from date of call
establishment of obligation shall be basis of
• After period, such shall cease to be to be legal
payment
tender but can be exchanged at par and without
Characteristics of the currency charge in BSP during following year
• After said period, notes and coins not exchanged
• MB with approval of President shall prescribe shall cease to be a liability of BSP and shall be
denominations, dimensions, designs of notes. demonetize
• Notes shall state that they are liabilities of BSP
and fully guaranteed by government III. Domestic monetary stabilization
• Notes shall bear signature, in facsimile, of Guiding principle on monetary stabilization
President and BSP Governor
• MB with approval of President shall prescribe 1. MB shall endeavour to control any expansion or
weight, fitness, design and denomination of coins contract of monetary aggregates prejudicial to
• In minting of coins, availability of metals and its price stability
price shall be considered
Power to define terms
Printing of notes and mining of coins
2. MB shall define monetary aggregates, credit and
• MB shall prescribe amounts of notes and coins to prices and made public such definitions
be printed and minted. MB has authority to
Action when abnormal movements occur in monetary
contract institutions for such
aggregates, credit and prices
• All expenses incurred shall be for the accounts of
BSP • When such occurs that endanger stability of
economy, MB shall:
Interconvertibility of currency
1. Take remedial measures
• BSP shall exchange on demand and without 2. Submit to President and Congress of
charge Philippine currency in any other report containing the (1) cause, (2) extend
denomination requested of change and (3) measures taken by MB
• If BSP is temporarily unable to provide such, it • Whenever the following happen:
shall deliver denomination nearest 1. Monetary aggregates or level of credit
increases or decreases by more than 15%
Replacement of currency unfit for circulation 2. Cost of living index increases by more
than 10% in relation to level of month
• BSP shall withdraw from circulation and existing of preceding year
demonetize all notes and coins unfit for circulation 3. Other circumstances so warrant
and shall replace them
• The monetary board shall submit reports
• BSP shall not replace notes under mutilated and shall state whether these changes is a
condition and without compensation to bearer threat to stability

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

• MB shall continue to submit periodic report to 2. International reserve appears to be


President and Congress until monetary aggregates, imminent to fall on such level
credit and prices disturbances disappeared or 3. International reserve is falling as a result
controlled of remittance abroad
• The MB shall:
IV. International Monetary Stabilization 1. Take remedial actions
2. Submit to the President and Congress a
International Monetary Stabilization
report including:
• BSP shall exercise its powers under the NCBA to ! Nature and cause
preserve the international value of peso and ! Remedial measures taken
maintain its convertibility ! Monetary, fiscal and
administrative measures
International Reserves ! Character and extend of
cooperation required
• International reserves – must be maintained
3. If resultant actions fails, the MB shall
adequately to meet foreseeable net demands for
propose to the President with notice to
foreign currencies
Congress of additional action to restore
• Adequacy of international reserves – MB shall be
equilibrium
guided by prospective receipts and payments of
4. MB shall submit periodic reports to
foreign exchange
President and Congress until threat has
• MB shall give special attention to volume and disappeared
maturity of the following:
o Liability of BSP in foreign currency Means of Action
o Foreign exchange assets and liabilities of
other banks and all other persons • In order to achieve the primary objective of price
stability, MB shall rely on moral influence and
Composition of International Reserves powers granted by NCBA

• International reserve shall include but not limited V. Operations in Gold and FOREX
to:
• Gold Purchases and sales of gold
• Assets in foreign currencies • BSP may buy and sell gold
• Assets in foreign currencies include (1) documents • It shall be made in national currency at prevailing
of international transfer of funds, (2) demand and international market price
time deposits of banks abroad and (3) foreign
government securities and notes Purchase and sales of FOREX
• MB shall hold the FOREX resource of BSP in
freely convertible currencies • BSP may buy and sell foreign notes, coins and
• MB shall issue regulations that FOREX assets documents. They can also engage in future
must meet exchange operations
• BSP shall be free to convert any asset in • BSP shall engaged with FOREX transactions with
international reserves into other assets the following: (BIG-FO)
1. Baking institutions operating in the
Action when International Stability of Peso is Threatened Philippines
2. International financial institutions
• Whenever: 3. Government
1. International reserve falls to a level 4. Foreign governments
inadequate to meet prospective net 5. Other entities authorized by MB
demands for foreign currencies
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

• In order to maintain convertibility of peso, BSP • MB shall determine exchange rate policy of the
may buy those offered and sell any quantity country
demanded provided that FOREX is freely • MB shall determine rates at which BSP shall buy
convertible into gold or US dollars and sell spot exchange and establish deviation
• This requirement shall not apply to demand for limits for effective exchange rates
foreign notes and coins • BSP shall not collect any additional commissions
• BSP shall effect its exchange transactions at the other than actual telegraphic costs
rates determined by Sec. 74 • MB shall similarly determine rates for other types
of FOREX transactions including sales of foreign
Foreign Asset Position of BSP notes and coins
• BSP shall maintain a net positive foreign asset • The margins between effective exchange rates and
position so that gross FOREX assets will always rates established may not exceed the
exceed gross foreign liabilities corresponding margins for spot exchange
• If FOREX liabilities exceed twice the FOREX transactions more than additional costs involved in
assets, BSP shall within 60 days, submit report to each type of transactions
Congress stating origin of liabilities and manner Operations with Foreign Entities
which it will be paid
• MB may authorize BSP to grant and receive loans
Emergency Restriction on Exchange Operations from foreign banks and may engage in operations
• In order to: with such entities for national interest
1. Achieve primary objective (price stability) • BSP may also act as agent of such entities
2. Protect international reserves • BSP may pledge gold or other assets as security
3. And in time of national emergency, give against loans it received
MB time to takes constructive measures to
VI. Regulations of FOREX Operations
forestall or combat crisis
• The MB with concurrency of 5 members and with FOREX Holdings of Banks
approval of President may:
1. Temporary suspend or restrict sale of • BSP may at all times have FOREX resources
exchange sufficient to enable it to maintain international
2. Subject all transactions in gold and stability and covert ability
FOREX to license • MB may require banks to sell to BSP part of their
3. Require FOREX obtained by anyone be surplus holdings of FOREX to achieve this. Such
delivered to BSP at effective exchange transfers may be required to all foreign currencies
rate. Foreign currency deposits RA 6426 • MB may determine the net assets and liabilities of
(Foreign Currency Deposit System) shall banks
be exempted • To determine such, the following shall be taken
into consideration: (1) bank’s networth,
Acquisition of Inconvertible Currencies outstanding liabilities or other financial or
performance ratios
• BSP shall avoid acquisition of such currencies
• Such determination shall be applied to all banks
• It may require such currencies in an amount
uniformly and without discrimination
exceeding the minimum balance to cover current
demands for said currency only when acquisition Requirement of Balanced Currency Position
of such is considered of national interest
• MB may require the banks to maintain balance
Exchange Rates (Sec. 73) position of assets and liabilities in peso or other

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

currency. Banks shall be granted reasonable time 2. Production credits – credit where
for such maturities are not more than 360 days and
• Power above shall be exercised only under special resulting from production of agricultural,
circumstance and applied to all banks uniformly animal, mineral or industrial products
and without discrimination 1. Such must be secured by a pledge
of respective product except if
Regulation of Non-Spot Exchange Transactions loan is secured by lien on 70%
value of real estate property
• To restrain banks from taking speculative
3. Other credits – credits not under 1 and 2.
positions with respect to future fluctuation in
BSP can provide funds from
FOREX rates, MB shall issue regulations for sales
non0inflationary sources
in non-spot exchange
4. Advances – grant advances against the
Other exchange profits and losses following kinds of collateral for fixed
periods which shall not exceed 180 days,
• Banks shall bear risks of non-compliance with except #4: (GSC-CUNN)
terms of FOREX documents they buy and sell 1. Gold
• They shall also bear other risks including 2. Securities representing obligations
exchange risk not assumed by BSP of BSP
3. Credit instruments in no. 1
Information on Exchange Operations 4. Credit instrument in no. 2 for
period not exceed 360 days
• Banks shall report to BSP the volume and
5. Utilized portions of advances in
composition of the purchases and sales of gold and
current amount covered by regular
FOREX each day
overdraft
• MB may also require other persons to report such
6. Negotiable treasury bills maturity
purchases and sales of gold and FOREX.
within 3 years
Accuracy of declaration may be verified by BSP
7. Negotiable bonds by government
VII. Loans to Banking and Other Financial Institutions maturity not more than 10 years
• Rediscounting, discounts, loans and advances in
Guiding Principles above provision may not be renewed or extended
unless extraordinary circumstance justify it
• The rediscount, discount, loans and advances shall
• Advances in No. 6 and 7 may not exceed 80% of
be used to influence volume credit consistent with
current market value of collateral
object price stability
Loans for Liquidity Purposes
Authorized Types of Credit Operations
• BSP may extend loans and advances for a period
• BSP may perform the following credit operations
not more than 7 days without collateral for
in the Philippines: (CPOA)
purpose of providing liquidity in the bank in times
1. Commercial credits – credits where
of need
maturities are not more than 180 days and
resulting from: VIII. Emergency Loans and Advances
1. Purchase and sale of readily
saleable goods, exportation, Nature of Emergency Loans and Advances
importation and their
transportation (PESTI) • Emergency loan or advance – credit facility
2. Storing non-perishable goods with intended to assist a bank experiencing serious
are duly insured liquidity problems from causes beyond its control

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

• Grant of such is discretionary on MB and is a 1. Furnish an undertaking to indemnify and


temporary remedial measure. It must also be fully- hold harmless from suit a conservator
secured appointed by MB
2. Provide acceptable security adequate to
When Granted supplement the collateral assets
1. In period of national or local emergency or Shares Collateral
financial panic, MB may at 5 members vote,
authorize grant of extraordinary loans to banks • Prohibition in 128 shall not apply if it refers to
secured by assets acceptance as collateral of share and their
o Such loans shall not expand the bank’s acquisition due to foreclosure proceeding
total volume of loans or investments • BSP shall dispose of such share by public bidding
2. MB, at 5 members vote, grant emergency loans to within 1 year
banks even during normal period to assist bank in • Sec 128 – BSP shall not acquire or accept shares
precarious financial condition brought by as collateral and shall not participate in ownership
unforeseen events or foreseeable events though of enterprise.
inevitable • BSP shall not engage in development banking or
o Bank should not be insolvent and has financing except for outstanding loans obtained or
assets to secure advances extended for development financing
• No.1 contemplates emergency affects whole
banking community in financial crisis giving rise Overdraft
to widespread confusion in public
• Overdraft shall be eliminated within a period of 5
• No. 2 provides situation where BSP grants loan to
consecutive banking days
a bank with uncertain financial condition but not
insolvent IX. Credit Terms
Limits Interest and Rediscount

• Amount of emergency loan or advance shall not • BSP shall collect interest on all loans and
exceed 50% total deposits and deposit substitutes advances it extends notwithstanding closure,
of bank and is given in 2 tranches receivership or liquidations
• MB shall fix interest and rediscount rates after due
First Tranche
consideration has been given to credit needs of the
• Amount of 1st tranche shall be limited to 25% of market, composition of BSP portfolio and national
total deposit and deposit substitute of bank and monetary policy
secured by government securities • Interest rates shall be applied to all banks
• Amount of first tranche may exceed 25% if it is uniformly and without discrimination
adequately secured by government securities and
Endorsement
unencumbered first class collaterals
• Prior to release of first tranche, bank shall submit • Documents rediscounted, discounted, bought or
resolution of its board of directors authorizing accepted as collateral by BSP must bear
BSP to evaluate their assets to determine that it is endorsement of bank
good for collateral
Repayment of Credits
Second Tranche
• Documents rediscounted, discounted, bought or
• MB by vote of 5 members may release 2nd tranche accepted as collateral by BSP must be withdrawn
on the following conditions that the principal
stockholders shall:
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

on dates of maturity or upon liquidation of Issue and Negotiation of BSP Obligations


obligation
• Banks shall have the right at any time to withdraw • BSP may issue, place, buy and sell freely
documents presented as collateral upon payment negotiable evidence of indebtedness of BSP
of full debt including interests • The issuance of such shall only be made in cases
of extraordinary movements in price levels
Other Requirements • It may be issued directly against the international
reserves of BSP or issued without any relation to
• MB shall provide additional conditions which asset of BSP
borrowing institutions must satisfy
• MB shall determine interest rates, maturities and
Provisional Advances to the National Government may denominate the obligation in gold and foreign
currencies
• BSP may make direct provisional advances with • BSP may acquire the said evidence of
or without interest to national government to indebtedness before their maturity by:
finance expenditures in annual appropriations o Purchase in open market
provided that: o Or redemption if the BSP has reserved its
o It is repaid before end of 3 months, right to make such redemption
extendible for another 3 months • Such shall not be included among BSP assets and
o Shall not exceed 20% of average annual shall be immediately retired and cancelled
income of borrower for the last 3 (because there was discharge, maker acquired the
preceding fiscal year note he issued)

Prohibitions XI. Composition and Review of BSP Portfolio

• BSP shall not acquire or accept shares as collateral • At least once every month, MB shall review
and shall not participate in ownership of enterprise. portfolio of BSP for future credit policy
• BSP shall not engage in development banking or • MB shall consider if portfolio has a sufficiently
financing except for outstanding loans obtained or large part consists of assets with early maturities in
extended for development financing order to promptly contract BSP credit whenever
national monetary policy so requires
X. Open market Operations for the Account of BSP
XII. Bank Reserves
Principles of Open Market Operations
Reserve Requirement
• Open market purchases and sales of security shall
be made in accordance to primary objective of • In order to control volume of money created by
price stability credit operations, banks shall be require to
maintain reserves against their deposit liabilities
Purchases and Sales of Government Securities
• MB may at its discretion require banks to maintain
• BSP may buy and sell in open market for its reserves against funds held in trust and liabilities
account the following: for deposit substitutes
1. Evidence of indebtedness issued directly • Required reserves shall be proportional to volume
by Government of deposit liabilities and shall ordinarily take a
2. Evidence of indebtedness issued by form of a deposit in BSP
government instrumentality fully • Reserve requirement shall be applied to all banks
guaranteed by Government uniformly and without discrimination
• The above must be freely negotiable and available • Reserves against deposit substitutes shall be
to the general public in denomination of thousands determined like reserve requirement against
of pesos or more regular bank deposits
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

• MB may exempt from reserve requirement such • Reserve position shall be calculated daily on the
deposits with remaining maturities of 2 years or basis of the amount at the close of business for the
more and interbank borrowings day
• Requirement to maintain bank reserves is imposed • In holiday or non-banking days, the reserve
primarily to control volume of money and shall position is calculated at the close of the business
not pay interest on reserves maintained day immediately preceding such holiday
• For purpose of computing reserve position,
Definition of Deposit Substitutes principal office of the bank in the Philippines and
• Deposit substitutes – alternative form of obtaining all branches are considered as single unit
funds from the public through the issuance, Reserve Deficiencies
endorsement or acceptance of debt instruments for
borrower’s own accounts for the purpose of • When reserve position is below the required
relending receivables minimum, the bank shall pay:
• The following are some deposit substitutes: o 1/10 of 1% amount of deficiency or
1. Banker’s acceptance o The prevailing 91-day treasury bill rate
2. Promissory notes plus 3% points whichever is higher
3. Participations • Banks shall permitted to offset bank deficiency
4. Certification of assignment with any excess reserves which may have held
5. Repurchase agreements during other days of the week
• MB shall determine what instruments are • Banks shall be required to pay penalty only on the
considered as deposit substitutes average daily deficiency in the week
• Deposit substitutes of commercial, industrial and • In case of abuse, MB may deny any bank the
non-financial companies for the limited purpose of privilege of offsetting reserve deficiencies
financing their own needs shall not be considered • If bank chronically has reserve deficiency, MB
deposit substitutes may limit or prohibit the bank from making new
loans or investments
Required Reserves against Peso Deposits and foreign
• It may also require that part or all net profits be
currency deposits
assigned as surplus
• MB may fix minimum reserve ratios to peso and • MB may modify or set aside the reserve deficiency
foreign currency deposits that each bank shall penalty in a period of a strike or lockout of the
maintain and shall be applied to all banks bank or national emergency
uniformly and without discrimination
Interbank Settlement
Reserves against Unused Balances of Overdraft Lines
• BSP shall establish interbank clearing facilities.
• MB may establish minimum reserve requirements BSP may charge fees for such
for unused balance of overdraft • Deposit reserves maintained by banks in the BSP
shall serve as basis for the clearing of checks and
Increase in Reserve Requirement settlement of interbank balances
• Any bank that incurs an overdrawing in its deposit
• MB may increase reserve requirements against
account in BSP shall fully cover such overdraft
existing liabilities in a gradual manner and shall
and pay interest (1) at 1/10 of 1% per pay or (2)
not exceed 4% in any 30 day period. Banks shall
prevailing 91-day treasury bill rate plus 3% point
be notified reasonably in advance
whichever is higher
Computation of Reserves • Settlement of clearing balances shall not be effect
for accounts which continues to be overdrawn for

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

5 consecutive days until overdrawn is paid or has • MB may prescribe minimum ratios which capital
emergency loan and surplus of banks must bear to the volume of
• Banks with existing overdrafts with BSP at their assets
effectivity of NCBA may either convert such to
emergency loan or settle such immediately Coordination of Credit Policies

Exemption from Attachment • GOCCs which perform banking functions shall


coordinate their banking policy with MB
• Deposits in BSP as reserve requirement shall e
exempt from attachment, garnishment of court or XIV. Functions as Banker of the Government
government agency to satisfy claim of a party
Designation of BSP as Banker of Government
other than the government
• BSP shall act as baker of government, its political
XIII. Selective Regulation of Banking Operations
subdivisions and instrumentalities
Guiding Principle
Representation with IMF
• MB shall ensure supply, availability and cost of
• BSO shall represent government in IMF and shall
money are in accord with needs of Philippine
carry accounts as may result from Philippine
economy and that bank credit is not granted for
membership with such Fund
speculative purposes. Regulation on bank
operations shall be applied to all banks uniformly Representation to other Financial Institutions
and without discrimination
• BSP may be authorized by the Government to
Margin Requirement against Letters of Credit represent it in dealings with International Bank for
Reconstruction and Development and other
• MB may prescribe minimum cash margins for
international financial agencies
opening of letters of credit
• The president may designate any of his financial
Required Security against Bank Loans advisers to jointly represent the government with
BSP
• MB shall issue regulation with respect to
maximum permissible maturities of loans and Official Deposits
investments and amount of security
• BSP shall be the official depository of the
Portfolio Ceilings government
• As a general policy, government cash balance
• Whenever MB considers it advisable to prevent or should be deposited with BSP and only minimum
check an expansion of bank credit, MB may place working balances is to be held by government
upper limit on amount on loans and investment of banks
bank and its rate of increase • Government bank may hold deposits of political
• In no case shall MB establish limits below the subdivisions beyond minimum working balances
value of loans or investments of banks on the date when such subdivision have outstanding loans
on which they are notified by the restriction. with former
Restrictions shall be applied to all banks uniformly • BSP may pay interest n deposits of the
and without discrimination government as well on deposits of banks

Minimum Capital Ratios Fiscal operations

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

• BSP shall open a general cash account for the • Purpose of operations – increase liquidity and
Treasurer of the Philippines in which liquid funds stabilize value of said security in order to promote
shall be deposited investment in government obligation
• Transfers of funds from such account shall be • MB shall use the resources of the Fund to prevent
made only upon order of Treasurer or moderate sharp fluctuations in the quotations of
government obligation
Other Banks as Agent of BSP • However, it shall not endeavour to alter
• In performance as fiscal agent, BSP may engage movements of the market resulting from basic
services of other government and domestic banks changes in interest rates
for operations in localities or abroad where BSP Resources of Securities Stabilization Fund
does not have office
• Fiscal operations in foreign countries, BSP may • It shall come from balance of the fund held by the
engage in services of foreign banks Central Bank (RA 265)

Remuneration for Services Profits and Losses of the Funds

• BSP may charge equitable rates for services it • Securities Stabilization Fund shall retain net
renders to the government profits it may make on operations regardless if
said profits arisen from capital gains or interest
XV. Marketing and Stabilization of Securities for the earning. It shall also bear net loss.
Account of the Government
XVI. Functions as Financial Adviser
Issue of Government Obligations
Financial Adviser on Official Credit Operations
• Issue of securities representing obligations of
government may be made through BSP which may • Before undertaking credit operation abroad,
act as agent of government government, through Secretary of Finance, shall
• BSP shall not guarantee the place of said securities request the opinion of MB
and shall not subscribe to their issue except to • Opinion of MB shall be based on (1) gold and
replace its maturity holdings foreign exchange resources of the nation and (2)
effects of such operation in balance of payments
Method of Placing Government Securities and on monetary aggregates
• BSP may place securities in the such through • Whenever government contemplates borrowing
direct sale to financial institutions and public within the Philippines, the prior opinion of MB
should also be requested
• BSP shall not be a member of any stock exchange
• The constitution provides that foreign loans may
or syndicate but may interfere for the purpose of
placing government securities only be incurred in accordance with the law and
regulation of monetary authority
Servicing and Redemption of Public Debt shall be effected • Information on foreign loans by the government
through BSP shall be made public
• The President may contract foreign loans with
Securities Stabilization Fund prior concurrence of MB and subject to limitation
of the law. MB shall, within 30 days at end of
• Securities Stabilization Fund –made for the
quarter, submit to Congress a report of loans made
account of the government and its operation shall
consists of purchases and sales, in the open market, by government that would increase foreign debt
of bonds fully guaranteed by the Government Representation on the National Economic and
Development Authority (NEDA)

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

• The deputy governor shall be an ex officio Phase out of Regulatory Powers over Finance
member of NEDA in order to – assure effective Corporations
coordination between economic, financial and
fiscal policies of government • BSP shall within 5 years phase out its regulatory
powers over finance companies without quasi-
XVII. Privileges banking and transfer it to SEC

Tax Exemptions Implementing Details

• BSP shall be exempt for a 5 year from approval of • BSP shall be made operational by these acts: (1)
NCBA from all national, provincial, municipal and President appoint members of MB within 60 days
city taxes and (2) transfer of assets and liabilities of CB to
• Exemption shall apply to all property of the BSP BSP within 90 days
as well as to contracts and deed related to conduct • All incumbent personnel of CB shall continue to
of business exercise duties in BSP if they are necessary
• It shall not apply to those payable by persons
merely doing business to BSP Transfer of Asset and Liabilities
• Foreign loans shall be exempt from any taxes and • Upon effectivity of Act, (1) 3 members of MB
payment is assumed by BSP including Governor, (2) Sec. of Finance, (3) Sec.
Exemption from Customs Duties of DBM and (4) Chairmen of Committee on Banks
of Congress shall determine assets and liabilities
• The following are exempted from custom duties of CB to be transferred to BSP:
notwithstanding special laws: o MB and Sec. of Finance shall work out
1. Importation and exportation of BSP of creative monetary solution to retire CB of
notes, coins and other metals its liabilities at least cost
2. Importation of all equipment needed for o BSP shall remit 75% of net profits to a
bank notes and coin production special deposit account (sinking fund)
until net liabilities of CB is liquidated
Applicability of Civil Service Law o Assets and liabilities shall be limited to an
amount that will enable BSP to perform
• Appointment BSP, except policy determining,
on viable basis. Assets shall exceed
primarily confidential or highly technical in
liability, by COA, by P10B
nature, shall be in accordance with CSL
o Liabilities by BSP shall include liabilities
• No qualification requirement for position shall be
circulating notes and coins
imposed other than those set by MB
o Asset or liability of CB not transferred
• MB or Governor may, without need of further shall be retained and liquidated by CB
obtaining approval of government agency, appoint Board of Liquidators for a period not
personnel in BSP exceeding 25 years
• Officers of BSP shall not engage directly or • All actions shall be reported to Congress and the
indirectly in partisan political activities President within 30 days
XVIII. Transitory Provisions of NCBA Mandate to Organize
Phase-out of Fiscal Agency Functions
• BSP shall be organized irrespective of RA 7430
• BSP shall within 3 years but no longer than 5 (Optimum Utilization of Personnel Act)
years, phase out all fiscal agency functions and • There shall be no preferential or priority right to
shall transfer it to DOF be given to any personnel for appointment in new
staffing pattern

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

Separation Benefits

• MB shall authorize separation benefits in addition


to all gratuities under the law to those separated in
service due to reorganization

Repealing Clause: RA 265 and PD 1792 are repealed

Transfer of Powers

• All powers vested in CB not inconsistent with


NCBA is deemed transferred to BSP

Suspense Accounts

• Sec 46 - Monetary Adjustment Account and


Exchange Stabilization Adjustment Account are
repealed. Revaluation of International Reserve
Account shall continue for the account of the same
entity

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

CHAPTER 9 – Unclaimed Balances and Trust Receipts b. All creditors or depositors or bank may be
included in one action
I. Unclaimed Balances 5. Service of process in such action or actions shall
be made by delivery of copy to defendant bank
Definitions
and by public in a newspaper of general
• Unclaimed balances – includes credits or deposits circulation
of money, bullions, security and any evidence of 6. At time of issuance of summons, clerk of cert shall
indebtedness with banks, loan associations and also issue notice:
trust corporations in favor of any person (1) a. Signed by him
known to be dead or (2) who has not made further b. Directed to all persons other than
deposits or withdrawal during the preceding 10 defendants named therein
years or more c. Requiring them to appear within 60 days
• Governed by Act No. 3936 – Requiring Banks to after first publication
Transfer Unclaimed Balances to Insular Treasury d. Show cause why unclaimed balance
• Such unclaimed balances, together with crease and should not be deposited to Treasurer
proceeds shall be deposited to the Treasurer to the e. Notify them that if they do not appear, the
credit of the government court will grant relief to RP
• Demand drafts cannot be escheated but telegraphic 7. Copy of notice shall be attached to summons
notes can (Republic vs. FNCB) required
8. Any person interested may appear to become a
Procedure party. Upon completion of publication, court shall
have complete jurisdiction
1. Within month of January of every odd year, all 9. Court must hear all parties. If the such are
banks shall forward to Treasurer a statement under unclaimed, they shall be escheated to government
oath of all credits and deposits held by them of and court will order their deposit to the Treasurer
persons (1) known to be dead or (2) who has not
made further deposits or withdrawal showing: Penalties
a. Name and last known residence
b. Amount and date of outstanding • If president, cashier or managing office of the
unclaimed balance bank neglects or refuses to file sworn statement,
c. Date when person died or made his last bank shall pay to the government 500Php per
deposit or withdrawal month for each infraction
d. Interest due on unclaimed balance
Immunity from suit
2. Copy of sword statement shall be posted n
conspicuous place in premises of the bank at least • Any bank which has made a deposit to the
60 days from date of filing Treasurer shall not thereafter be liable to persons
3. Immediately before filing, bank shall who brought an action against the bank for such
communicate with person whose favor the unclaimed balances. The bank shall be defended
unclaimed balance stand of such by SG without costs
a. It is the duty of the Treasurer to inform the
SG the existence of unclaimed balances Disclosure of Service and Maintenance Fees on Dormant
4. When SG is informed of such, he shall commence Accounts
an action in the name of the People of the
Republic in the CFI (RTC) of the province or city • Banks may impose service or maintenance fees on
where the bank is located dormant or inactive accounts
a. It shall be joined as parties the bank and • Provided that before such fees are imposed, the
all such creditors and depositors period for dormancy and minimum balance is
properly disclosed
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

Reclassification • State has right over property of decedent under Art.


1101-1014 of NCC where state shall inherit
• All unclaimed balances already reported to decedent estate
Treasurer shall be transferred/reclassified from • Bank can be a defendant in an Unclaimed Balance
deposit liability/other credit accounts to liability petitioner in Act. 3986 because it is a real party as
account, “Due to the Treasurer of the Philippines” the judgment of the case would injure the bank
until deposited to Treasurer since it shall be deprived of its use of deposits
Escheats under Rules of Court (Republic vs. CFI)
• All defendant banks are not to be included in one
• Rule 91 of ROC applied in case a person died action alone if they are in different jurisdictions
intestate and left properties in the Philippines because the law state “actions”
• Sec 1 – when person died intestate, left properties • There will only be one action filed for all banks if
and has no heir, SG may file petition in CFI of they are under one jurisdiction (Republic vs. CFI)
province where deceased last resided or where he • Sec 2b of Rule 4 of ROC cannot govern escheat
had estate proceedings because Act. 3986 is an action in rem
• Sec 2 – court shall release order of hearing that while former is in persona
shall fix date and place of hearing not more than 6
months after entry of order and shall direct II. Trust Receipts Law (PD 115)
publication in newspaper once a week for 6 Policy of the State
consecutive weeks
• Sec 3 – upon arrival of date fixed and no sufficient 1. Encourage and promote use of trust receipts as aid
cause shown to the contrary, court shall adjudge to commerce
estate, after payment of just debts and charges, 2. Provide regulation of trust receipts to assure
escheated protection of rights of parties
o Personal estate assigned to city or 3. Declare the misuse and/or misappropriation of
municipality deceased last resided goods or proceeds as a criminal offense punished
o Real estate assigned to city or under Estafa
municipality property is situated
o If deceased never resided here, whole Definition of Terms
estate shall be assigned to city or
1. Document – written or printed evidence of title to
municipality where it is situated goods
o Such estate shall be for benefit of public 2. Entrustee – person taking possession of goods,
schools and charity documents or instruments under trust receipt and
• Sec 4 – if devisee, legatee, heir, widow, widower any successor in interest
or other person entitled to estate claim such within 3. Entruster – person holding title over the goods,
5 years from date of judgment, he shall have title documents or instruments and any successor in
of such interest (title here is security interest and not
o If already sold, municipality or city shall absolute ownership)
be accountable to proceeds 4. Goods – includes chattels and personal property
o If claim not made within said time, he other than money, things in action or things
shall forever be barred affixed in lands
• Sec 5 – actions for reversion or escheat of 5. Instrument – negotiable instruments under NIL;
properties in violation of constitution, shall be certificate of stock, certificate of deposit, credit or
governed by this Rule investment instrument where entrustee appears to
be the owner in its face. Instrument does not
The State as the Heir of a Decedent
include document

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

6. Purchase – taking by sale, conditional sale, lease, • There are two possible situation in trust receipt
mortgage or pledge transaction:
7. Purchaser – person taking by purchase 1. Refers to money received under the
8. Security interest – property interest in goods, obligation involving the duty to deliver it
documents or instruments to secure performance (entregarla) to owner of merchandise –
of some obligation by entrustee. It includes title this happens when entrustee sold the
whenever such title is in substance taken or goods and must return the proceeds to
retained for security only. entruster
9. Person – an individual, trustee, receiver or two 2. Refers to merchandize received under
more persons having joint interest obligation to return in (devolvera) to
10. Trust receipt – written of printed document signed owner – this happens when entrustee
by entrustee in favor of entruster comply with failed to sell the goods and must return
condition of TRL. No formality for execution is goods to entruster
necessary for validity • Trust receipt is a separate and independent
11. Value – any consideration sufficient to support a security transaction intended to aid in financing
simple contract importers whereby goods are held as security by
lending institution for loan
Trust Receipt Transaction
• In Sps. Vintola vs. Insular Bank of Asia and
• Trust receipt transaction – any transaction by and America, it stated the following:
between entruster and entrustee where entruster 1. Letter of credit-trust receipt is where a
hold absolute title or security interest over goods, bank extends a loan with a trust receipt for
documents or instruments, releases the same to the the loan. Transaction involved a loan
entrustee feature in the letter of credit and security
• The entrustee signs a trust receipt and binds feature for the trust receipt
himself to hols the goods for the entruster and to 2. Trust receipt is a security agreement
sell such with obligation to return the proceeds or which a bank acquires a security interest
return such in case of non-sale in the goods.
• In case of goods or documents: 3. It secures indebtedness and there can be
no such thing as security interest that
1. To sell the goods
2. To manufacture the goods with the secures no obligation
purpose of ultimate sale or 4. Trust receipt is a security transaction to
aid financing importers who do not have
3. To load, unload, ship or tranship them in
sufficient funds to finance importation and
manner necessary for their sale
who may not be able to acquire credit
• In case of instruments:
except utilization, as collateral of their
1. To sell or procure exchange
merchandise
2. Deliver them to principal
• It is a document where the lender (entruster),
3. Effect consummation involving delivery
to depository having no prior title or possession to the goods
lends money to the borrower (entrustee) on
4. Effect their presentation, collection or
security of the goods
renewal
• Sale of goods, documents or instruments by person Form of Trust Receipts
in business of selling such for profit who (1) has
general property rights in such goods over the • Trust receipt need not be in any particular form
buyer or (2) who sells the same to the buyer on but every trust receipt must contain:
credit, retaining title or interest as security for 1. Description of goods, documents or
payment does not constitute trust receipt instruments
transaction 2. Total invoice value
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

3. Undertaking of entrustee • In Philippine Blooming Mills vs. CA, it was stated


4. To hold in trust, sell or return for the that if the entruster took possession of the goods,
entruster the goods, documents or the entrustee is still liable for the whole amount
instruments • The entrustee shall only be released from his
• May contain other terms not contrary to TRL or liability if he pays the entruster his obligation or
laws the entruster sells the goods at a private or public
sale and appropriate the proceeds
Currencies in which Trust Receipt may be denominated
• Even if the thing is taken as a right of the entruster
• Trust receipt may be denominated in Philippine or but is not sold to a public/private sale yet, the debt
foreign currency of the entrustee still exists
• If it is denominate in foreign currency, payment Entruster not Responsible on sale by Entrustee
shall be made in its equivalent Philippine currency
at FOREX in turn over • Entruster shall not, merely by giving entrustee
liberty of sale, be responsible as principal/vendor
Rights of Entruster of sale made by entrustee
1. Entitled to proceeds to the extent of the amount Obligations of Entrustee
owing to the entruster or in case of non-sale return
of goods 1. Hold the goods and shall dispose them in
2. Entruster may cancel trust and take possession of accordance with conditions of trust receipts
goods, documents or instruments at any time upon 2. Receive proceeds in trust and turn over to entruster
default or failure of entrustee to comply with 3. Insure the goods against loss
obligation 4. Keep said goods or proceeds separate and capable
a. Entruster now in possession may give of identification
notice to entrustee of intention to sell 5. Return goods in event of non-sale or demand of
b. May, not less than 5 days after serving entruster
notice, sell such in public or private sale 6. Observe all other terms provided
c. Entruster in public sale can become a
purchaser Liability of Entrustee for Loss
3. Proceeds of sale shall be applied to:
• Risk of loss shall be borne by entrustee.
a. Payment of expenses thereof
• Loss of goods, documents or instruments
b. Payment of expenses of retaking, keeping
irrespective of WON it was due to the fault or
and storing goods, documents or
negligence of entrustee shall not extinguish his
instruments
obligation
c. Satisfaction entrustee’s indebtedness
4. The entrustee shall receive any surplus but shall be Rights of Purchaser for Value and in Good faith
liable t the entruster for deficiency
• Trust receipts partake nature of conditional sale • Any purchaser in good faith and for value of the
where importer becomes absolute owner of goods from entrustee acquires the goods free from
merchandise as soon as he paid purchase price or entruster’s security interest
loan (PNB vs. Vda de Hijos de Angel Jose and
Validity of Entruster’s Security Interest against Creditors
Colinares vs. CA)
• The law uses the word “may” in granting entruster • Entruster’s security interest in goods, documents
the right to cancel the trust and take possession of or instruments shall be valid against all creditors
the goods of entrustee for the duration of the trust receipt
• Entruster has discretion to avail of such right or agreement
seek alternative action such as third party claim of
ICA upon default of entrustee Violation of TRL
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

• TRL is violated whenever entrustee fails to: • In Colinares vs. CA, failure of entrustee to turn
1. Turn over proceeds over the proceeds or non-return constitute crime of
2. Return goods in non-sale estafa under Art. 315(1) of RPC without need of
• Mere failure to account or return gives rise to the proving intent to defraud
crime which is malum prohibitum • If violation is committed by a corporation, its
• There is no requirement to prove intent to defraud directors, officers or employees responsible for the
(Ong vs. CA and Colinares vs. CA) offense shall have criminal liability
• What the law punishes is the dishonest and abuse • Rationale for making such officers responsible:
of confidence in handling money they are vested with authority and responsibility to
• Intent to misuse or misappropriate goods should devise means to ensure compliance with the law
be proved (Metrobank vs. Go) and if they fail to do so, they shall be accountable
• Failure to account upon demand of funds or • Corporations cannot be put in jail. However, these
property is evidence of conversion or entities are made liable for civil liabilities arising
misappropriation from criminal offense
• Mere failure to account for goods constitute Par • Violation of trust receipt constitutes fraud under
1(b) of Estafa (Ong vs. CA) Art. 33 of NCC an ICA to enforce civil liability
• Failure to deliver proceeds cause prejudice not arising from criminal liability
only to the creditor but also to the public interest • In Sarmiento Jr. vs. CA, complaint based on
• In Sps. Vintola vs. Insular Bank of Asia and failure to comply with obligation in Trust Receipt
America, it is stated that the return of merchandize is separate from criminal liability under PD 115. It
does not amount to recover by the lending bank is an obligation ex contractu and may proceed
• This is because the lending bank (entruster) only independently regardless of result of criminal
acquires a security interest over the goods and not action
the absolute ownership • In People vs. Cuervo, TRL with its penal sanction
• If the lending bank acquires absolute ownership, it is in reality, merely confirmatory of situation
shall defeat the loan feature of a trust receipt and covered under Art. 315(1)(b) RPC
shall become a contract of sale where bank gained • In Colinares vs. CA, if the person who executed
ownership of goods upon giving a loan the trust receipt did not pass title to the bank,
• The title of the entruster is a mere artificial where there is security interest of the property, and
expedient, more of a legal fiction than fact person is not an importer, there is no trust receipt
• It was also stated that there was no double created
recovery because when shells were deposited in • It is unjust and inequitable for banks of making
the court, IBAA did not yet accept it. Thus, they borrowers sign trust receipt to facilitate collection
have not appropriate the shells and can recover the of loans under threat of criminal prosecution in
obligation from the petitioners case of non-payment

Application

• In Allied vs. Ordonez, TRL applies to items:


o Destined for sale
o Processed as component of product
ultimately sold
o Used to repair equipment of business

Penalty

• Failure of entrustee to turn over the proceeds or


non-return constitute crime of estafa
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

CHAPTER 10 – Deposit Insurance 3. President of PDIC – vice chairman


a. appointed by the President with term of
I. Roles of PDIC 6years
4. Two members from the private sector
1. Insure the deposits of all banks which are entitled
to benefits of insurance a. Term of 6 years without reappointment
2. As a basic policy, promote and safeguard interest b. Qualifications:
of depositing public by way of providing i. Good moral character
insurance coverage ii. Unquestionable integrity and
responsibility
• RA 3591 – Act establishing PDIC
iii. Recognized competence
• PDIC is entitled to free use of Philippine mail
iv. 35 years old
II. Powers of PDIC as Corporate Body
Disqualification of appointive members
1. Use corporate seal
• For duration of tenure and 1 year after, appointive
2. Have succession until dissolved
members of the board are disqualified from
3. Make contracts
holding office in any insured bank
4. Sue and be sued
a. All suits of civil nature is deemed to arise Quorum
from Philippine law
b. No attachment or execution against PDIC • 3 members shall constitute a quorum
before final judgment • Secretary of Finance and BSP Governor can
c. BOD designate agent of insured bank designate a representative with no lower rank than
5. Appoint its Board of Directors (BOD) U.Sec and Deputy Governor
6. Prescribe by-laws not inconsistent with law • If Secretary of Finance fails to attend, President of
7. Exercise all powers granted by law and incidental PDIC shall be chairman
thereto
8. Conduct examination of bank with prior approval Per Diem
of MB
• Secretary of Finance shall fix per diem
a. No examination conducted within 12 days
from last examination Authority of the Board
b. To avoid overlap examinations, maximize
use of reports 1. Prepare rules and regulations for effective
9. Act as receiver discharge of responsibilities
10.Prescribe rules deemed necessary to implement 2. Direct management of PDIC
PDIC law 3. Establish human resource management system
11.Establish provident fund for payment of benefits a. Compensation structure shall be based on
of employees job evaluation studies
12.Compromise, condone or release any claim to b. All positions shall be governed by
PDIC compensation position classification
system
III. Board of Directors c. Compensation plan comparable with
prevailing compensation
• BOD shall administer the affairs of PDIC fairly
d. Exempted from existing laws on
and impartially without discrimination
compensation
Composition 4. Appoint, establish rank and fix remuneration
5. Adopt annual budget
1. Secretary of Finance – ex-officio chairman 6. Approve methodology in insurance and finance
2. Governor of BSP – ex-officio member assistance
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

IV. Officers • Deposit liabilities of any bank engaged in business


of receiving deposit shall be insured with PDIC
President
• Factors considered by BOD
• Shall be Chief Executive of PDIC 1. Financial history and condition of bank
• Salary fixed by President of Philippines 2. Adequacy of capital structure
3. Future earnings prospects
• Total salary shall be ceiling of all other personnel
4. General character of management
• Powers and duties:
5. Convenience and needs of community
1. Prepare agenda for meeting
• Deposit – unpaid balance of money received by a
2. Execute and administer policies
bank and for which it has given credit to a:
3. Direct and supervise operations
1. Commercial
4. Represent PDIC
2. Checking
5. Authorize, with his signature and prior
3. Savings
approval of board, contracts, notes and
4. Time
securities issued
5. Thrift accounts
6. Represent PDIC in legal action
6. Those evidenced by passbooks
7. Delegate power to represent
• Any obligation of a bank payable outside of
8. Exercise other powers vested in him
Philippines shall not be a deposit under PDIC Law
Vice President • Insured bank that has branch outside the
Philippines may avail insurance for its deposit
• Shall assist President payable only in such branch
• During absence or temporary incapacity of
President, VP shall act as president pending the Statutory Liability of PDIC
appointment of new President
• PDIC primarily governed by special law
Bank Examiners • Liability of PDIC is statutory and rests upon
existence of a deposit with an insured bank and
• BOD shall appoint examiners to examine insured not the negotiability of the certificate evidencing
bank the deposit
• Each examiner has the power to make thorough • Fourth National Bank of Wichita vs. Wilson:
examinations negotiability of instrument has no dependence of
• They have the power to: existence of guaranty or insurance
o Administer oaths
o Examine and take testimony of officers Deposit must be in fact made
o Compel presentation of books
• Fact that certificates stated that they are insured by
Claim Agents PDIC does not ipso facto make the certificate
insured
• Claim agents – power to investigate and examine • Deposit liability is determined by RA 3519
all claims for insured deposits • To claim deposit insurance, law requires that a
deposit is placed in the insured bank
Investigators
• Deposit may be constituted only if money or its
• Investigators – power to conduct investigations on equivalent have been received by a bank
fraud, irregularities and anomalies committed in
banks Holder in due course not applicable

V. Deposit Insurance Coverage • Even if depositor is HDC, it does not mean that he
already has a claim against the insurance fund
Deposit Liabilities • The fund protects deposits only
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

Liability under negotiable instrument vs. Guarantee fund • PDIC may:


o Refund to an insured bank any payment of
• Liability of the make is different from liability of assessment that is excess of amount due
the guarantee fund. The latter is purely statutory o Credit such expense toward payment of
Deposit insurance of Foreign Currency Deposits assessment of next following period

Termination
• Foreign currency deposits – insured with PDIC
• Insurance payment shall be in same currency in • PDIC shall not terminate insured status of any
which deposit is denominated bank which continues to receive deposits
• PDIC Law is not applicable to Offshore Banking • Should insured bank fails to pay assessment dues
Units required, PDIC may file collection case and
administrative charges against bank officials
Duty to indicate insurance on Deposit
Trust Fund
• All banks must indicate that it is under the PDIC
and maximum insurance • Trust fund – funds held by insured bank in
fiduciary capacity
VI. Assessment
• Trust fund shall be insured in an amount not to
Assessment Rule exceed 10k for each trust estate
• Such insurance shall be separate from other
1. Assessment rate – not exceed 1/5 of 1% per deposits of owners of trust funds
annum • When fiduciary bank deposits any trust fund with
2. Semi-annual assessment rate – ½ of assessment other insured bank, such amount shall not be
rate. Not less than P250 considered as a deposit liability
3. Assessment base – amount of liability of bank for
deposits Payment of Dividends and/or Interests
4. Semi-assessment base for semi-annual period –
average of assessment base in close of business • No insured bank shall pay dividends on capital
stock or interest or distribute capital assets while
Certified Statement of Assessment Base and Assessment it remains in default in payment of assessment
Due dues
• If default in payment is due to dispute between
1. On or before July 31, each bank shall file in PDIC
bank and PDIC over amount of assessment, this
certified statement showing amount of assessment
rule shall not apply
based and semi-annual assessment due. On such
date, the bank shall pay the semi-annual Civil Penalties
assessment due
2. On or before January 31, each bank shall file • Any assessment payable by insured bank shall be
similar statement as above subject to payment of interest computed at legal
3. If insured bank assumed liabilities for deposits of rate for loan
another bank, it shall be included in assessment • There shall be an added penalty equivalent to
base twice the amount of interest payable for each day
4. Certified statements required shall be in such form • Penalty shall not be applicable if there is dispute
as BOD shall prescribe over amount of assessment
5. Any insured bank that fails to file certified
statement shall be compelled to file by mandatory VII. Deposit Insurance Fund
injunction
• Permanent insurance fund – P3B
Refund and Credit
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

• Deposit insurance fund shall be capital account of IX. Reports by Insured Bank
PDIC and shall consist of:
1. Permanent insurance fund • Each insured bank shall make reports to PDIC of
2. Assessment collections conditions required
3. Reserves for insurance • If bank fails to make such report within given time,
4. Retained earnings BOD may provide 100php penalty for each day of
• Reserves for insurance shall be maintained at a violation
reasonable level to ensure capital adequacy • PDIC shall have access to reports made to the BSP
• PDIC may, within 2 years from passage, conduct to the insured bank and BSP shall also have access
study to adjust amount of Permanent Insurance to reports of BSP
Fund • Each insured bank shall keep true and accurate
• Assessment collections and incomes shall be record of its daily deposit transactions.
added to Deposit Insurance Fund after deduction Compliance with such shall be duly certified by
from expenses and charges. Such expenses and bank president
charges consists of: • Refusal to issue such shall be a violation
1. Operating costs
X. Prohibitions on PDIC Personnel
2. Additions to reserve
3. Net insurance and financial assistance 1. Being an officer, director, consultant, employee or
losses stockholder directly or indirectly of any bank
• PDIC may recover from any insured bank any 2. Receiving gifts from any officer, director or
unpaid assessment employee of any bank
• No action shall be brought to recover assessment 3. Revealing in any manner, information relating to
unless such action shall have been brought within business of any bank except when required by
5 years after right accrued Congress or the President
• If insured bank filed a false certified statement
with intent to evade, such claim is not deemed to XI. Legal Assistance
accrue until PDIC discovers • PDIC shall advance litigation costs to its directors,
VIII. Unsound Practice officers or employees in connection with any
criminal, civil or administrative case where such
• Upon examination by PDIC, it shall be disclosed person acted within the performance of his duty
whether insured bank is committing unsound •Even if they resign, they shall still receive legal
practices assistance in connection with the act done during
• The BOD in such a case shall: tenure
1. Submit report of examination to MB •The amount advance shall be repaid by the officer
2. If no corrective action by MB, BOD shall if it is determined by the board that such officer
motu proprio institute such need not be indemnified
! BOD can issue cease and desist
order to the bank XII. Dealings by PDIC Personnel with Banks
3. If violation cause insolvency or
• Members of Board and personnel of PDIC may
dissipation of assets the period to take
become directors or officers of any bank if the
corrective action shall be done within 15
position is in connection with the financial
days and impose fines
assistance extended by the PDIC
• Actions and proceedings may be undertaken by
PDIC if insured bank have violated: Borrowing from Banks
1. Any provision of PDIC Law
2. Any order or rule of PDIC
3. Any written condition imposed by PDIC
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

• Borrowing from banks by examiners or other • Actions filed by PDIC as receiver, payment of all
personnel shall be prohibited with respect to docket and court fees shall be suspended until
particular bank to which they are assigned action is terminated
• Borrowing by personnel from any bank not • Such fees shall constitute first lien on judgment
included in the prohibition shall be secured and
disclosed to the BOD Distribution of Assets

XIII. Receivership • Before distribution of assets, PDIC shall charge


against the bank the receivership expenses
Appointment • After payment of all liabilities, PDIC shall pay
surplus dividends to creditors and claimants of
• MB shall appoint the PDIC as receiver bank
• Receiver – includes receiver, commission or other
agency charged by law with the duty to take XIV. Payment of Insured Deposits
charge of assets and liabilities of a bank prohibited
from doing business Manner of Payment
• It has the duty to gather preserve and administer • Payment of insured deposits shall be made in:
assets and liabilities of such banks for the benefit
1. Cash
of its depositors 2. By making available a transferred deposit
Effect of receivership in another insured bank
• Transfer deposit – deposit in an insured bank made
1. PDIC shall control, manage and administer affairs available to a depositor as payment of insured
of closed bank deposit from closed bank assumed by another
2. Powers, functions and duties of directors, officers insured bank
and stockholders are suspended • Insured deposit – amount due to any deposit for
3. Assets of closed bank is in custodia legis deposits in an insured bank
4. Assets of closed bank shall not be subject to 1. In PDIC Law, 250k. Now it’s 500k
attachment, execution or levy • Joint account shall be insured separately from any
individually-owned deposit account
Powers of PDIC in receivership
• If account s held jointly, maximum insured deposit
1. Bring suit to enforce liabilities of bank shall be divided into as many equal shares as to
2. Appoint persons to perform functions of PDIC as individuals
receiver or liquidator • If account is held by juridical person, maximum
3. Suspend or terminate employees of closed bank insured deposit shall be presumed to belong
a. Payment of separation pay shall be made entirely to such entity
after closed bank is in liquidation • Aggregate interests of each co-owner over several
4. Pay accrued utilities, rentals and salaries of closed joint accounts shall be subject also to maximum
bank insured deposit
5. Collect loans and other claims • No owner of an negotiable certificate of deposit
6. Hire private counsels if necessary shall be recognized as depositor unless his name is
7. Borrow loan when necessary to preserve assets of registered as owner in issuing bank
closed bank to minimize loss
8. If stipulated interest on deposits is unusually high, Proof of Claims
reduce interest rate
• PDIC may required proof of claims before paying
9. Exercise other powers inherent in receiver
insured deposit
Suits Filed by PDIC • Final determination if person is entitled to
insurance is the court
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

Settlement Period and Penalties in case of failure to settle • All right of depositor against closed bank which
PDIC may have been subrogated shall revert to
• Failure to settle claim within 6 months from date depositor again
of filing claim, where such failure by the officer
was due to GAOD, officer shall be imprisoned XV. Investment by PDIC
from 6 months – 1 year
• Period shall not apply if validity of claim is under • Money of PDIC not employed shall be invested in
resolution obligation of the Republic of the Philippines or
• Upon payment to any depositor, PDIC shall be guaranteed obligations
subrogated to all the rights of the depositor against o Not sell or purchase such obligations for
the closed bank its owner account in excess of 100k
o Insurance commissioner may waive
• Subrogation shall include right to receive same
requirement of approval in above
dividends from proceeds of assets
• Banking and checking accounts of PDIC shall be
• Depositor shall retain claim for any uninsured
kept in BSP, PNB or fiscal agent
portion of his deposit
XVI. Extension of Loans
Notice
• When insured bank is determined as in danger of
• PDIC shall commence determination of insured
closing, in order to prevent such, PDIC is
deposit upon actual takeover of closed bank
authorize to:
• PDIC shall public a notice once a week for 3
1. Make loans to such bank
consecutive weeks in newspaper of general
2. Purchase assets of such bank
circulation such closing of the bank
3. Assume liabilities of such bank
Discharge 4. Make deposits in insured bank
• The grant shall be made if bank is essential in
• Payment of insured deposit shall discharge community and for financial stability
• Such authority to extend financial assistance may
Recognition of Owner
also be exercised if PDIC finds that the resumption
• Neither PDIC or insured bank shall be required to of operations of the closed bank is vital to
recognize owner of a deposit appearing on the community
records under a name other than claimant • Reopening of such close bank is subject to prior
approval of MB
Withholding of Payment • PDIC may provide any corporation acquiring
assets of insured bank in danger of closing with
• PDIC may withhold payment of insured deposit if
financial assistance
payment of liability by such depositor as
• Prior to exercise of these above powers, PDIC
stockholder of closed bank not yet offset is
shall determine whether actual payoff will be more
pending determination
expensive than exercise of such
Prescription • When MB has determined systematic consequence
of closure of bank, PDIC may grant financial
• All rights of depositor shall be bared if: assistance in amount necessary to prevent its
o Depositor in closed bank fail to claim failure
insured deposit within 2 years from actual • Systematic risk – possibility that failure of one
take over bank to settle the transactions with other banks
o Depositor does not enforce his claim will trigger chain reaction and general shutdown
within 2 years after th2 year period to file of clearing activity
a claim

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

• Systematic risk also means the likelihood of a 1. Merge and consolidate with non-insured
sudden unexpected collapse in confidence with the bank or convert into non- insured bank
banking system 2. Assume liabilities of deposits by any non-
• PDIC may not use such powers to purchase stocks insured bank
of insured bank 3. Transfer assets to non-insured bank
• Financial assistance may take form of equity or
Protection against losses
quasi-entity
• PDIC may require insured bank to provide
XVII. Borrowings
protection against burglary, defalcation and losses
• PDIC is authorized to borrow from BSP from discharge of duties
• Any loan granted by BSP shall be consistent with • BOD shall determine bonding requirement as to its
monetary policy and interest rate shall not exceed directors, officer and employers
treasury bill rate • If insured bank refused to comply with such
• If funds of PDIC are not sufficient, it can borrow requirement, PDIC may contract such protection
money from any bank designated as fiscal agent of for them payable to such bank
RP
XXI. Criminal Penalties
• Such loans shall be short-term durations
• Prison mayor or fine 50k-2M
XVIII. Issuance of Bonds
o Willful refusal to submit report
• With approval of President of Philippines, PDIC is o Refusal to permit examination
authorized to issue bonds, debentured and other o Making false statement
obligations to settle insured deposits in closed o Submission of false materials
banks o Refusal to allow PDIC to takeover
• The BOD shall determine interest rate o Refusal to turn-over records
• PDIC shall provide reserves for redemption o Fraudulent disposal of assets
o Violation of exemption from garnishment
Reports and Audit o Willful failure to comply with PDIC and
conducting unsound business
• PDIC shall annual make report of its operations in o Splitting deposits
Congress • Splitting deposits - deposit account with
• Its financial transactions shall be audited by COA outstanding balance of more than maximum
• COA shall have access to all books, accounts, insured amount is broken down to two or more
records and reports accounts within 30 days preceding closure of bank
for purposes of availing maximum deposit
XX. Miscellaneous
XXII. Fines
Signs
• BOD is authorized to impose administrative fines
• Every insured bank shall display at each place of
but no more than 3 times amount of damages
business signs that deposits are insured by PDIC
caused
• Those which do not relate to deposits or are
impractical shall be exempted from this XXIII. TRO and Injunction
requirement
• Only CA can issue TRO, Preliminary Injunction
Merger or Consolidations of Insured Bank against PDIC. Prohibition shall apply to all cases
• SC can issue restraining order if of extreme
• Without prior written consent from PDIC, no
urgency
insured bank shall:
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

• Restraining order in violation of this shall be void


and judge who issued is suspended

Reorganization

• PDIC may be reorganized in new staffing pattern.


No preferential right shall be enjoyed
• Reorganization must be completed within 6
months from effectivity of PDIC law
• BOD shall provide separation incentives

PDIC vs. CA

• Even if the bank has knowledge that it shall be


under receivership, it does not ipso facto mean that
the depositors also has knowledge of such
• Thus, they can still engage in business transactions
in course of business as long as they acted in GF
and did not know such closure
• 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.
San Beda College of Law &)"
" Banking Laws

CHAPTER 11 – Anti-Money Laundering 1. Banks, non-banks, quasi-banks, trust entities and


subsidiaries and those regulated by BSP
• RA 9160 – Act defining Crime of Money 2. Insurance companies
Laundering and Providing Penalties and AMLL 3. Securities dealers, brokers, salesmen and
investment houses
I. Concepts
4. Mutual funds, closed-end-investment companies
• Money laundering – any act to conceal or disguise 5. Foreign exchange corporations, money chargers
the indemnity of illegally obtained proceeds so 6. Other entities dealing in currency, commodities or
that they appear to have originated from legitimate financial derivatives
sources
Covered and Suspicious transaction
• Even before AMLA, BSP issued various circulars
to avoid money laundering 1. Covered transactions: Any transaction in cash or
• Under AMLA, money laundering is a crime other monetary instrument involving amount of
whereby the proceeds of an unlawful activity are 500k within 1 banking day
transacted and making them appear to have 2. Suspicious transactions:
originated from legitimate sources a. No underlying legal or trade obligation or
economic justification
Three steps in Money Laundering (ML)
b. Client not properly indentified
1. Placement – launderer inserts dirty money into a c. Amount involved not commensurate to
legitimate financial institution financial capacity of client
a. Often in bank deposits d. Client’s transaction is structured to avoid
b. Most riskiest stage as there is large reporting requirements in AMLA
amounts and banks are required to report e. Circumstances relating to transaction
high-value transactions deviate from profile of client
2. Layering – sending money through various f. Transaction is relate to any unlawful
financial transactions to change its form and make activity
it difficult to follow g. Transaction is analogous to above
a. Consists of bank-to-bank transfers
Monetary Instrument
b. Change form of money
c. Most complex step as it makes dirty 1. Coins or currency of legal tender whether in
money hard to trace Philippines or other country
3. Integration – money re-enters in mainstream 2. Drafts, checks, notes
economy in legitimate looking form 3. Securities or NI, bonds, commercial papers or
a. It appears to come from legal transaction substitute instruments
b. Involve final bank transfer into the 4. Other similar instrument where title passes
account of the launderer through indorsement, assignment or delivery

Policies Unlawful Activity

1. Protect and preserve integrity and confidentiality 1. Kidnapping for ransom


of bank accounts 2. CDDA
2. Ensure that Philippines is not used as ML site 3. RA 3019
3. Consistent with foreign policy, extend 4. Plunder
cooperation in transnational investigations 5. Robbery and extortion
involving ML 6. Jueteng and masio
7. Piracy in the high seas
Covered Institutions
8. Qualified theft

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

9. Swindling/estafa 5. Cause filing of complaint in DOJ or OMB


10. Smuggling 6. Investigate suspicious and covered transactions
11. Violation of Electronic Commerce 7. Apply freeze order in CA ex parte
12. High-jacking and destructive arson perpetrated by 8. Implement measures necessary to counteract ML
terrorists 9. Receive and request from foreign states assistance
13. Fraudulent practise of Securities Regulation Code in AML operations
14. Felonies of similar nature in other countries 10. Develop education programs against ML
11. Enlist assistance of any branch of government to
How is ML committed promote AML operations
1. Any person knowing any monetary instrument 12. Impose administrative sanctions
involves proceeds of unlawful activity and 13. Establish secretariat head for term of 5 years
attempts or actually transacts such instrument IV. Prevention of Money Laundering
2. Any person knowing that monetary instrument
involves proceeds of unlawful activity and Customer Identification
performs or fails to perform any act as a result of
which he facilitates ML • Covered institutions shall establish true indemnity
3. Any person knowing monetary instrument is of clients based on official documents
required to be disclosed and filed with AMLC but • Maintain a system of verifying true identity of
fails to do so clients
• Anonymous accounts, those under fictitious names
II. Jurisdiction and Prosecution and similar accounts are prohibited
• Peso and foreign currency non-checking numbered
Jurisdiction of ML Cases
accounts are allowed
• RTC shall have jurisdiction of all ML o BSP may conduct annual testing of such
• Those committed by public officers are under accounts to determine identity
jurisdiction of SB
Record Keeping
Prosecution of ML
• Another way of preventing ML is this:
• Any person can be convicted with both offense of 1. All records of all transactions of covered
ML and the unlawful activity institution must be safely stored for 5
• Any proceeding relating to unlawful activity is years from date
given precedence without prejudice to freeze order 2. In closed accounts, records on customer
identification and correspondence shall be
III. Anti-Money laundering Council (AMLC) preserved for 5 years from date of closing

Composition Reporting Covered and Suspicious Transactions

1. Governor of BSP 1. Covered institutions shall report to AMLC all


2. Commissioner of Insurance Commission covered and suspicious transactions within 5 days
3. Chairman of Securities and Exchange Commission from occurrence therefore
a. There can be extension but not exceed 10
Functions working days
2. Transaction be determined to be both covered and
1. Must act unanimously in discharge of function
suspicious, report such as suspicious
2. Require and received covered and suspicious
3. When reporting, covered institution is deemed not
transactions
to have violated:
3. Issue orders to determine true indemnity of owner
a. RA 1405 – Act Prohibiting Disclosure of
4. Institute civil forfeiture proceedings
Deposits,
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

b. RA 6426 - Foreign Currency Deposits, Republic vs. Eugenio


c. RA 8791 – GBL
4. In case of violation, officer shall be criminally 1. Whether or not the phrase “in cases of” requires
liable except if in GF that there must be a pending trial in another court
5. When reporting covered or suspicious transactions, for an unlawful activity
covered institution is prohibited from 2. Whether or not the power to inquire in the bank
communicating to any person or media such fact deposit can be done ex parte
6. There can be no publication or airing of such First Issue
report by mass media, e-mail or other device
a. In violation, covered institution and media • No. The court ruled that there is no need that there
shall be criminally liable must be a pending trial for an unlawful activity in
another court before there can be a petition to
Freezing Monetary Instrument
inquire to bank deposits
• One way to prevent ML • Otherwise, it would render it a limited too in aid of
• CA can issue freeze order which shall be effective litigation and wholly inutile
immediately • In such situation, it will not anymore as a
• Requisites of freeze order: discovery tool
1. Filed in CA
Second Issue
2. Upon application ex parte by AMLC
3. After determination that probable cause • No. As a general rule, ex parte bank inquiry order
exists where money instrument is related is not allowed
to unlawful activity • The proviso does not have the same word “ex
• Freeze order shall be effective for a period of 20 parte” unlike in the freeze order
days unless extended by court • Silence of the law does not automatically construe
• In all instances of unlawful activity, there can be it to have such ex parte
an ex parte freeze order • Also, in IRR of AMLA, there is no ex parte bank
• There is no need for full-blown trial inquiry order
• However, bank inquiry order does not necessitate
Authority to Inquire into Bank Deposits
any physical seizure
• To complete legal measure to prevent ML, AMLC • The reason of court is that, even if the accused is
may examine deposits in any banking institution notified that there will be inquiry due to the full-
upon order of court blown trial, the accused cannot hide his fraudulent
• It must be established that there is probable cause records as it is maintained in the bank and cannot
that deposits relate to: be erased
1. Unlawful activity or • Thus, in such interpretation, bank inquiry order
2. Money laundering offense have no ex parte orders, it does not weaken the
• No court order shall be required in unlawful law
activities of: • Also Bank Inquiry Order (BIO) not analogous to
1. Kidnapping with ransom search warrant
2. Violation of CDDA • Moreover, the right to privacy must be upheld
3. High-jacking (RA 6235) under Bank Deposit Secrecy Act
4. Destructive arson in connection with • Thus, there shall be no ex parte orders. But if the
terrorism exceptional unlawful activity is present, there can
• BSP may make emanation of deposits when be BIO without need of court order
examination is made n course of period or special
V. Ex Post Facto Clause
examinations

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

• Under AMLA no person can be prosecuted under • When foreign state makes a request for
AMLA for acts committed prior to October 17, investigation or prosecution of ML, the AMLC
2001 may accept or refuse the same for valid reasons
• Also, BIO prior to October 17, 2001 is prohibited • Principles of mutuality and reciprocity shall at all
as it is an ex post facto times recognized
o It deprives a persons of some lawful
protection to which he has become entitled Powers of AMLC to act on request of foreign state
• However, those accounts created prior to October 1. AMLC may execute request for assistance by:
17, 2001 are still under the coverage of AMLA a. Tracking down, freezing proceeds of
• Otherwise, the offenders can mere circumvent by unlawful activity
laundering into an account created prior to b. Giving information
October 17, 2001 c. Apply order of forfeiture
2. Court will issue such order only if application is
VI. Forfeiture
accompanied by:
Civil Forfeiture a. Authenticated copy of order of court of
requesting state
• Where there is a covered transaction report made b. Certification by competent court of
and court ordered seizure or monetary instrument, requesting state that conviction or order is
rules of civil forfeiture applies final

Claim on Forfeiture Assets Obtaining assistance from foreign states

1. When court issued order of forfeiture, offender • AMLC may request assistance in:
may apply for a declaration that the same a. Tracking down, freezing, proceeds of
legitimately belongs to him unlawful activity
2. Verified petition filed in court which rendered b. Obtain information
judgment of conviction within 15 days from order c. Apply with proper foreign court an order
to enter premises or seize documents and
Payment in Lieu of Forfeiture
objects in request
• Instead of order of forfeiture, court may order d. Applying for order of forfeiture of any
offender to pay amount equal to value of monetary monetary instrument
instrument when said order cannot be imposed ! Must be accompanied by
because: authenticated copy of forfeiture by
1. Monetary instrument cannot be located RTC and affidavit of clerk of
with due diligence court
2. It was substantially altered or destroyed
Limitation on Request for Mutual Assistance
3. It has been concealed, removed or
converted from being found • AMLC may refuse to comply with request for
4. Located outside the Philippines or outside assistance if it contravenes the Constitution or
jurisdiction of court execution of require prejudicial to national interest
5. It has been commingled with other unless there is a treaty specifically provided
monetary instruments
Requirement for Request for Mutual Assistance from
VII. Mutual Assistance among States Foreign state
Request from Foreign State 1. Confirm investigation or prosecution being
conducted
2. State grounds which person is investigated
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

3. Give sufficient particulars to identity of person 1. AMLA shall not be used for political persecution
and covered institution or to hamper competition in trade
4. Ask from covered institution any information 2. No case of ML may be filed against any candidate
necessary during election period
5. Specify manner and to whom information is to be
produced X. Implementing Rules and Regulations (IRR)
6. Give all particulars necessary for issuance by the
• BSP, Insurance Commission and SEC shall
court of requesting State certain order
promulgate IRR of AMLA subject to approval of
7. Contain other information that may assist
Congressional Oversight Committee
execution of request
• Covered institutions shall formulate their
Authentication of Documents respective ML prevention programs

• A document is authenticated if: XI. Congressional Oversight Committee (COC)


a. Signed or certified by judge of requesting
Composition
state
b. Authenticated by oath of witness or sealed • 7 members from Senate and 7 members from HR
with official seal of state • Members of Senate shall be appointed by Senate
• Certificate of authentication may also be made by president in proportional representation
secretary of embassy • This shall also be done in HR
Extradition Powers of COC
• Philippines shall negotiate inclusion of ML • COC shall have power to promulgate own rules, to
offenses among extraditable offenses in future oversee implementation of AMLA and review IRR
treaties
XII. Rules and Regulations for Banks
VIII. Penalties
1. When establishing business relations in opening
1. In ML: 7 - 14 years imprisonment and 3M deposits accounts, banks should take reasonable
2. In Failure to Keep Records: 6 months – 1 year measure to establish identity of client. In corporate
imprisonment and 100k-500k entities, following shall be made:
3. In Malicious reporting: 6 months - 4 years a. Verification of legal existence of client
imprisonment and 100k-500k b. Verification of authority of person
a. If juridical person, officers shall be purporting to act on behalf of client
punished and revoke such license 2. In case of doubt as whether purported clients are
b. If an alien, deported after service acting for themselves, reasonable measures shall
c. In public official, shall have PAD or TAD be taken
d. If such public officials refuse to testify, 3. Anonymous or accounts under fictitious names are
same penalties not allowed. In case such is allowed, banks must
still ensure identity of client in some other
Breach of Confidentiality
document
• For breach under AMLA, penalty is 3-8 years with 4. Identity of existing clients should be renewed at
fine of 500k-1M least every other year
• Responsible reporter, writer, president or publisher 5. All necessary records should be maintained for at
shall be liable least 5 years
6. Special attention shall be given to complex,
IX. Prohibition against Political Harassment unusual large and all unusual patterned
transactions with no lawful purpose
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

7. Other suspicious transactions not involving


deposits should still be reported to proper
authorities
8. Banks should not or avoid transact with criminals
9. Programs against ML should be developed:
a. Development of internal policies and
hiring high standard employees
b. Ongoing employee training
c. Audit function to test system

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

CHAPTER 12 - Special Purpose Vehicle creditor, which could either be an FI or an SPV in


satisfaction of an NPL
A. Policies of the State • FIA - Foreign Investment Act, RA 7042
• Develop and maintain a sound financial sector for • FI or Financial Institutions - credit granting
the country institutions which shall be limited to the following
• Address the non-performing asset problems of the 1. the BSP
financial sector 2. a bank as defined under RA 8791, aka
• Encourage private sector investments in non- “The General Banking Law”
performing assets 3. a financing company as defined under RA
• Eliminate existing barriers in the acquisition of 8556 aka “The Financing Company Act of
non-performing assets 1998”
• Help in the rehabilitation of distressed business 4. an IH as defined in PD 129 aka “The
with the end in view of contributing to economic Investment Houses Law”
value added 5. Government Financial Institutions or GFIs,
• Improve the liquidity of the financial system shall be limited to the PDIC, LBP and
which can be harnessed to propel economic DBP
growth 6. GOCCs
7. other institutions licensed by the BSP to
B. Definitions perform QB
• Act - Special Purpose Vehicle Act of 2002 • Investment Unit Instruments or IUIs - participation
• Appropriate Regulatory Authority - certificates, debt instruments or similar
agency/authority having jurisdiction over the FI's instruments issued by the SPV and subscribed by
operations, which shall be the following the Permitted Investors
• Department of Finance (DOF) - in case of the o It shall not include the instruments to be
PDIC and GOCCs, in consultation with other issued by the SPV to the selling FIs
agencies that have primary jurisdiction over the o SPV shall not be considered as deposit
said FIs whenever deemed appropriate by the DOF substitutes and shall not form part of the
• Bangko Sentral ng Pilipinas (BSP) - in the case of capital stock of SPV
banks which include LBP and DBP, and trust and • Non-Bank Financial Institutions performing QB
QB functions of financing companies and functions or NBQBs - financing companies, IH,
investment houses licensed by the BSP and other institutions licensed by the BSP to
• Commission - in case of financing companies and perform QB functions
investment houses, except their trust and QB • Non-Performing Assets or NPA - consists of NPLs
functions or any qualified entity not under the and ROPOAs by the F.I.s, certified to be eligible
DOF or BSP as such ARA
• Audited Financial Statements - a set of financial • Non-Performing Loans or NPLs - loans and
reports consisting of balance sheet, income receivables such as mortgage loans, unsecured
statement, statement of changes in equity and cash loans, etc, whose principal and/or interest has
flow statement, audited by a Commission- remained unpaid for at least 180 days after they
accredited independent CPA have become past due or any of the events of
• Certificate of Eligibility or COE - certificate default under the loan agreement has occurred as
issued by the Appropriate Regulatory Authority as of June 30, 2002
to the eligibility of the NPL or ROPOA for • ROPOA - Real and other properties owned or
purposes of availing of the tax exemptions and acquitted by an FI in settlement of loans an
privileges receivables which have been acquired by way of
• Code - BP 68 aka the Corporation Code of the Dacion en pago or judicial or extra judicial
Philippines foreclosure or execution of judgment as of June 30
• Commission - Securities and Exchange 2002 PROVIDED, the property is deemed
Commission acquired
• Dation in Payment (dacion en pago) - a payment 1. on the date of notarization of the Deed of
whereby property, whether real or personal, Dacion
tangible or intangible, is alienated in favor of the
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

2. on the date of the entry of judgment in


case of judicial foreclosure E. Period for Filing Applications
3. on the date of notarization of the Sheriffs • 18 months from date of approval of the IRR by the
Cert in case of extra judicial foreclosure Congressional Oversight Committee created in
• True Sale - a sale wherein the selling FI transfers Sec 23 of the Act
or sells its NPAs without recourse for cash or Registration Requirements
property to an SPV with the ff results • An SPV shall submit to the SEC the ff docs for
o The transferor relinquishes effective incorporation:
control over the transferred NPAs 1. Name verification slip
o The transferred NPAs are legally isolated 2. Articles of Incorporation and By laws
and put beyond the reach of the transferor 3. Treasurer's affidavit/ authority to verify
and its creditors bank account
C. Organization 4. Bank Certificates or Deposits
• An SPV shall be organized as a stock corporation 5. Written undertaking to change corporate
in accordance with the Corporation Code and with name by any incorporator or director
these Rules 6. Registration Data Sheet
o Provided that if the SPV will acquire land,
at least sixty percent (60%) of its F. Authorized, Subscribed and Paid-Up Capital of the SPV
outstanding capital stock shall be owned • An SPV shall have:
by the Philippine Nationals pursuant to the 1. Minimum authorized capital stock of
FIA 500Mphp
2. Minimum subscribed capital stock of
D. Powers of an SPV 125Mphp
• An SPV shall be incorporated primarily to invest 3. Minimum paid-up capital of 31.25M
in, or acquire NPAs of F.I.s. • This shall be in form of cash
Secondary powers • If an SPV issue IUIs or offers other securities to
1. Engage in 3rd parties to manage, operate, collect the public, it shall maintain a net worth based on
and dispose of NPAs acquired from an FI its Audited Financial Statements in an amount
2. Rent lease, hire, pledge, mortgage, transfer, sell, equivalent to not less than its minimum paid-up
exchange, usufruct, secure, securitize, collect rents capital
and profits and other similar acts concerning its
NPAs acquired from FIs G. Submission of SPV Plan – Contents
3. In case of NPLs, to restructure debt, condone debt 1. Investment policies
and undertake other restructuring related activities 2. Contribution plan
4. Take, transfer shares or buy shares issued by the 3. Features of the IUIs
borrower for the purpose of business 4. Timetable of Issuance
reorganization or rehabilitation of the borrower 5. Rights of the holders of IUIs
5. Enter into dation in payment, foreclose judicially 6. Draft agreements for the appointment of trustees
or extrajudicially and other forms of debt and agents
settlement involving NPLs 7. Appointment or engagement of external auditor
6. Spend funds to renovate, improve, complete or 8. Roles and Responsibilities of the trustee, advisors,
alter its NPAs acquired from an FI loan servicers and property managers
7. Issue equity or participation certificates 9. Draft form of financial reports of the SPV
8. Borrow money and issue other instruments or 10. Details of the distribution policies
paying operational and administrative costs 11. Methods for the increase and decrease of future
9. Guarantee credit, accept or intervene for honor the fund contributions
bills of the borrowers 12. Methods for the alteration or modification of the
10. Advance funds to borrowers where required by an approved SPV plan
acquired asset or any debt 13. Methods for the liquidation and distribution of
11. Entrust to 3rd parties asset servicing company, the assets to the holders of IUIs
collection and receipt of debt payments for debts 14. Details of credit enhancements
under restructuring or business reorganization

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

15. such other documents or information as may be 6. SPV shall cause the publication of a notice
required by the SEC of filing of registration statement its
expense
H. Approval 7. The Commission may audit the financial
• Upon approval of the SPV Plan, the Commission statements, assets and other information of
shall issue an Approval Certificate stating that the an SPV applying for registration
application has been approved and the IUIs may 8. Upon the registration statement being
be issued declared effective by the Commission, the
sale of the securities subject thereto shall
I. Issuance of IUIs be commence within 2 business days and
• Registration Requirements be counted until the end of the offering
1. All IUIs proposed to be sold or distributed period or until the sale has been
within the Philippines shall be duly terminated by the action of the issuer
registered with the SEC 9. The SPV shall ensure wide dissemination
2. Registration statement including: of preliminary and final prospectuses
1. business of the issuer 10. Written notification shall be given to the
2. use of proceeds SEC within 3 business days from
3. risk factors completion or termination of the offering
4. legal proceedings by the issuer, including therein the number
5. market of securities of securities sold
6. management's discussion of
financial condition and results of Amendments or Rejection
operations • Within 45 days after the date of filing of the
7. directors and officers registration statement, or at such later date to
8. securities ownership which the issuer has consented, the SEC shall
9. certain related party transactions declare the registration statement effective or
10. audited and interim financial rejected
statements in accordance with • UNLESS the applicant is allowed to amend the
SRC rule 68 registration statement
3. In addition, the ff information shall be • After which, the SEC shall determine if it should
disclosed in the registration statements of be effective or rejected
an SPV • The SEC may reject an RS and refuse registration
a. details of the SPV plan thereunder or revoke the effectivity of an RS and
b. details of credit enhancements the registration of the security thereunder after due
c. detailed description of the assets notice and hearing by issuing an order to such
or loan constituting the pools of effect, setting forth its findings in respect thereto if
assets its finds that:
d. rights and obligations of the • The issuer:
selling FI assumed by the SPV 1. has been judicially declared insolvent
e. description of any relationship or 2. violated any provision of the Corporation
interest of the selling FI parent Code as well as orders of the SEC
f. Incentives and exemption 3. has been or engaged or is about to engage
privileges in fraudulent transactions
4. The SPV shall also submit a certification 4. he has made any false or misleading
from the FI that the affected borrowers of representation of material facts in any
the NPLs and all persons holding prior prospectus concerning the issuer or its
encumbrances upon the assets securities
5. SPV shall pay a registration fee of 1/10 of 5. has failed to comply with any requirement
1% of the aggregate offering price of the that the SEC ma impose as a condition for
IUIs subject to the diminishing fee set by registration of the security for which the
the Commission registration statement has been filed

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

• The RS is on its face incomplete or inaccurate in the voting power of an enterprise it may also exist
any material aspect or include any untrue when there is:
statement or other misleading statements 1. power over more than ½ of the voting
• The issuer, or any D, O, or controlling person of rights by virtue of an agreement with other
the issuer or a person performing a simple function investors
has been convicted by a competent judicial or 2. power to govern the financial and
administrative body, upon plea of guilty, or operating policies of the enterprise under a
otherwise, of an offense involving moral turpitude statute or an agreement
and/or fraud or is enjoined or restrained by the 3. power to appoint or remove the majority
SEC for violation of such of the members of the BoD or equivalent
• If the SEC deems it necessary, it may issue an governing body
order suspending the offer and sale of the 4. power to cast the majority of votes at
securities pending any investigation meetings of the BoD or equivalent
governing body
Issuance of Securities of the Public without prior 5. any other arrangement similar to any of
registration the above
• Any SPV that offers to sell or distribute its IUIs to • Parent - a juridical person who has control over
the public within the Phils without prior another juridical person directly or indirectly thru
registration shall be subject to the penalties one or more intermediaries
provided of the SRC • Related Interest:
• The imposition of the foregoing administrative 1. entities in which the amount of investment
sanctions shall be without prejudice to the filing of the selling FI is more than 20% but less
criminal charges against the individuals than 50% of the outstanding capital stock
responsible for the violation thereof
2. trusts for the benefit of employees such as
Tax Treatment of IUIs pension and profit sharing trusts that are
• Since IUIs are not considered as deposit managed by or under the trusteeship of the
substitutes under the Act, the interest or other selling FI
monetary benefit derived from IUIs is not subject 3. provident and other employees/officers'
to the 20% final withholding tax under the NIRC benefit funds of the selling FI
• However, the IUI and any income arising from the 4. principal owners of the selling FI
IUIs shall be subject to the normal tax and/or such 5. management of the selling FI
other applicable taxes, including but not limited to, 6. members of the immediate families of the
documentary stamp tax, imposed under the NIRC principal owners and management of the
and its implementing regulations selling FI
7. other parties with which the selling FI
J. Permitted Investors may deal with if one party controls or can
• May acquire or hold IUIs of an SPV in the significantly influence the management or
minimum amount of 10Mphp provided: operating policies of the other to an extent
1. that an SPV shall not be authorized to that one of the transacting parties might be
acquire the IUIs of another SPV prevented from fully pursuing its own
2. that the Parent, Subsidiaries, Affiliates or separate interests
DOSRI shall not acquire, hold, directly or • Subsidiary of a specified person is an affiliate
indirectly, the IUIs of the SPV that controlled by such person D/I thru one or more
acquired the NPAs of the FI intermediaries
• Affiliate - a juridical person, directly or indirectly,
thru one or more intermediaries, is controlled by K. Notice and Manner of Transfer of Assets
or is under common control with selling FI or its
affiliates Prior Notice
• Control - exists when the Parent owns directly or • No transfer of NPLs to an SOV shall take effect
indirectly thru subsidiaries more than one half of unless the FI concerned shall give prior notice to
the borrowers of the NPLs and all persons holding

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

prior encumbrances upon the assets mortgaged or Nature of Transfer


pledged • in the nature of True Sale
1. must be in writing by registered mail • any transfer of NPAs not in the nature of True Sale
2. the borrower and the FI shall be given a shall not qualify for tax exemptions and fee
period of at most 90 days upon receipt of privileges granted under the Act
notice to restructure or renegotiate the • The transfer by an FI of its NPAs to an SPV shall
loan under such terms and conditions as be considered NOT A TRUE SALE if the FI:
may be agreed upon by the borrower and 1. invests in or acquires, D/I, the IUIs issued
the FI concerned by the SPV that acquired its NPAs
Procedures on the Transfer of Assets to the SPV 2. has d/i management of the transferee SPV
• An FI who wants to apply must file an application 3. has any of its directors, officers,
shall be filed for each transfer of assets with the employees on the board of the transferee
Appropriate Regulatory Authority having SPV
jurisdiction. It must be accompanied with a 4. has obligated to repurchase or
certification of the FI that: substitute/exchange the NPA or any part
1. the assets to be sold/transferred are NPAs of the pool of NPAs at any time, except in
as defined under the SPV Act of 2002 cases of a breach of representation or
2. the proposed sale/transfer of said NPAs is warranty of the FI
under a True Sale 5. Has RI with the transferee SPV
3. the notification requirement to the 6. Possesses a claim of beneficial ownership
borrowers has been complied with of more than 5% of the transferee SPV
4. the maximum 90 days period for • Following shall NOT presumed to be a true sale if
renegotiation and restructuring has been the FI:
complied with 1. Purchases/invests in the IUIs of the SPV
• This must be signed by a senior officer with a rank that acquired its NPAs thru its trust
of at least Senior VP or equivalent provided such department including the trust department
officer is duly authorized by the FI BoD or the of its Subsidiaries/Affiliates, Parent bank
Country Head, in case of foreign banks and the trust department of the Parent
• the 3rd and 4th items shall not apply if the NPL bank's subsidiaries/affiliates
has become a ROPOA after June 30, 2002 2. Is made the beneficiary of a trust used as a
vehicle for purchasing and securitizing the
Issuance of the COE NPAs
• The ARA shall issue to the borrower a COE 3. Pays further expenses in relation to the
within 45 days from the date of application NPAs after said NPAs have been
• said COA shall always be required by the BIR for sold/transferred to the transferee SPV
purposes of availing the tax exemptions and other 4. Extends any credit facility, guaranty, or
privileges under the Activities any similar financial transaction to the
• The ARA shall furnish the SEC and the BIR a transferee SPV
duplicate copy of said COE. The ARA and BIR 5. Extends any credit facility, guaranty or
shall coordinate to ensure the integrity of the COE any similar financial transaction to any
party for the purpose of investing in the
Subsequent Notice equity or IUIs of the SPV, or for acquiring
• after the sale/transfer of the NPLs, the transferring the NPAs from the SPV
FI shall inform the borrower in writing at the last 6. Extends any CF, F, AST to any party for
known address of the fact of the sale/transfer of the purpose of acquiring the NPAs from
the NPLs the transferring FI
7. Acts as trustee (FIs trust dept) or if the
Subsequent Transfers Trust dept of any of the FIs
• Each COE shall be valid for only one transfer. All subsidiaries/affiliates, parent bank or
subsequent transfers shall require a separate COA parent banks, subsidiaries/affiliates acting
from the ARA as trustee in the securitization of NPAs
that it has transferred to the SPV

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

8. Accepts as collateral for a loan extended • Provided that these tax exemptions and reduction
by said FI the equity shares and IUIs of of fees shall apply only upon compliance with the
the SPV that acquired its NPAs following requirements
9. Enters into buy-back and other similar 1. NPA has been certified by the ARA as an
arrangements, or financial derivative NPL or ROPOA as of 06/30/02 provided
transactions with similar effect, involving that for tax purposes, a property shall be
the NPAs or the securities backed by such deemed acquired after the lapse of the
NPAs redemption period in cases where such
10. Enters into any other transaction where the period still exists
FI retains effective control over the
transferred NPAs or shares in the losses of 2. all transfer taxes and registration fees have
the SPV been paid or subsequently paid upon
• “Any party” includes proxies, nominees, and assessment on ROPOAs who redemption
voting trustees. The extension of credit to an period has lapsed as of 063002 where
individual for the purpose of acquiring a single legal title has not been transferred in the
family residential unit ROPOA or NPL secured by name of the FI
real estate mortgage on a residential unit shall be 3. The properties acquired by an SPV from
allowed. the GFIs or GOCCs which are devoted to
socialized or low-cost housing shall not be
Penalties converted to other uses
• prescribed under Sec 25 of the Act without • Tax exemption privileges
prejudice to other penalties that may be imposed 1. Documentary stamp tax
by the ARA of the transferring FI under applicable 2. Capital gains tax imposed on the transfer
laws of lands and other assets treated as capital
• The SPV shall assume all Rights and Obligations assets
of the FI over the transferred NPA 3. Credible withholding income taxes
imposed on the transfer of land and or
N. Tax Exemptions and Fee Privileges buildings treated as ordinary assets
• Transactions covered 4. the VAT or gross receipts
1. the transfer of the NPL by the FI to an • Reduction of Fees
SPV 1. 50% of the applicable mortgage
2. transfer of the ROPOA by the FI to an registration and transfer fees on the
SPV transfer or real estate mortgage and chattel
3. Dacion en pago (DEP) of the NPL by the mortgage registration to and the
borrower to the FI SPV/individual, imposed in accordance
4. DEP of the NPL by a 3rd party, on behalf with the existing circular of LRA
of the borrower, to the FI 2. 50% of the filing fees for any foreclosure
5. transfer of NPL by the FI to an individual initiated by the SPV/individual in relation
6. transfer of the ROPOA by the FI to an to any NPA acquired from an FI
individual 3. 50% of the registration fees prescribed
7. transfer of the NPL by the SPV to a • Manner of Claiming Tax Exemptions
3rd party o shall provide the BIR with the appropriate
8. transfer of the ROPOA by the SPV to a certificate of eligibility
3rd party o In case of the transfer of real property or
9. DEP of the NP by the borrower to the shares, the CIR or his duly authorized
SPV representative shall issue a Certificate
10. DEP of the NPL by a 3rd party on behalf (Cert Authorizing Registration/ Tax
of the borrower to the SPV Clearance Cert) that such transfer has been
11. transfer of the NPL by the individual to a reported and is tax-exempt
3rd party
12. transfer of ROPOA by the individual to a Q. Abuse of Tax Exemptions and Privileges
3rd party

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

• Any person, natural or juridical, who shall benefit ! Audited Financial Statements
from the said exemptions and privileges without within 120 days from the end of
being entitled thereto, shall be liable. the fiscal year
• In addition, he shall refund the Government 2. As Issuer of Securities to the Public
double the amount of he was exempted from a. Annual Report on SEC Form 17A
plus12% interest per annum b. Quarterly Report on SEC Form
17Q
R. Redemption Periods c. A current report on SEC Form
• provided by the following: Sec 47 of RA 897 or 17C
the GBL of 2000 and Rules of Court d. Monthly Reports on total
issuances and amounts of IUIs
S. Books of Accounts and Records 3. Audited Financial Statements - The filing
• Internal Record Keeping and Accounting Controls of SEC Form 17A shall suffice
1. An SPV must make and keep books, 4. Violations - any violation of the above
records and accounts which reflect the due to the failure of the SPV, it shall be
transactions and dispositions of its assets, subject to penalty provided by SRC, this
it minutes of meetings and other business Code, and their IRR
transactions • Reports to be submitted to the BIR by an SPV -
2. It shall advise and maintain a system of for purposes of implementing the tax provisions of
internal accounting controls sufficient to the Act
provide reasonable assurances that • Reports filed to the BSP
a. The transactions and access are o By SPV
pursuant to management 1. Report on any sale/transfer to any
authorization party of NPLs and ROPOAs
b. Financial statements are prepared acquired from banks and NQBQs
in conformity with the generally quarterly
accepted accounting principles 2. Report on the latest appraised/ fair
c. Recorded assets are compared market value of ROPOAs and real
with existing assets at reasonable estate properties/ chattels used as
intervals and differences collateral and NQBQs semi-
reconciled annually
• External Auditor - shall be appointed by SPV o By Selling Financial Institution - monthly
accredited by the Commission report regarding the actual sale/ transfer to
• Inspection of Books and Records – those who has an SPV
a right to inspect:
1. Stockholder of SPV or Holder of an IUI at U. Penalty in case of violation of the provisions of the Act
a reasonable hour of business • Fine: Not less than 50k not more than 1M, or
2. Authorized representatives of the • Imprisonment: not less than 6 years 1 day not
Commission, BIR or the BSP any time more than 12 years
3. Failure to comply with this right will be a • OR BOTH
ground for the suspension order on the • If the penalty was committed by a corporation,
offering of the IUIs association, partnership etc., the one responsible
would be those officers who participated in the
T. Reports commission of the crime or who shall have
• Reports to be submitted by SPV to the knowingly permitted or failed to prevent the
Commission commission
1. As Stock Corporation • If the offender is an alien, he shall, in addition to
! General Information Sheet (GIS) the prescribed penalties, be deported without
within 30 days from stockholder's further proceedings after serving the sentence
meeting date • If the offender if a public official, or employee, in
addition to the penalties above, the penalty of
absolute/temporary DQ shall apply

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.