GENERAL BANKING LAW (R.A. NO.

8791), LAW ON SECRECY OF DEPOSITS AND RELATED

LAWS

BANKS - entities engaged in the lending of funds obtained in the form of deposits from the public
- Must be stock corporations and funds are obtained from the public (min. of 20 depositors)
- Banking is fiduciary in nature that requires high standards of integrity and performance
 Requirements after SEC Application: Certificate of Incorporation, Cert. of Authority fr. BSP

Investment Company
 If engaged solely in investing, reinvesting or trading in securities – not engaged in banking
 If loans out the money of its customers, collects interests and charges a commission to both
ender and borrower – engaged in banking

Quasi Banks – engaged in borrowing of funds through the issuance, endorsement or assignment
with recourse or acceptance of deposit substitutes for purpose of relending or purchasing of
receivables

Deposit Substitutes – alternative forms of obtaining funds from the public, other than deposits,
through the issuance, endorsement or acceptance of debt instruments for the borrower’s own
account for the purpose of relending or purchasing of receivables and other obligations

Consequences of nature of business:

1. Subject to heavy and close supervision and / or regulation by the Bangko Sentral ng Pilipinas
2. Required to exercise utmost diligence in handling of deposits
3. Any strike or lockout involving banks, if unsettled after 7 calendar days, shall be reported by
BSP to Sec. of Labor, 2 options
a. May assume jurisdiction over and decide the dispute
b. Certify to NLRC for compulsory arbitration
4. President may intervene and assume jurisdiction over such labor dispute

Authority to Incorporate and Operate - Articles of Incorporation filed with the Securities and
Exchange Commission accompanied by the favorable recommendation (certificate of
authority) of the BSP

Classification of Banks
1. Universal Banks - have authority to exercise, in addition to the powers and functions of
commercial banks, powers of an investment house and the power to invest in non-allied
enterprises.
2. Commercial Banks - banks that are given all such power necessary to engage in commercial
banking in addition to general corporate powers; commercial banking includes the power to
accept drafts, issue letters of credits, discounting and negotiation of negotiable instruments
and evidence of debt, accept and create demand deposits and the like.
3. Rural banks - banks that are created to make needed, credit available and readily
accessible/ in the rural areas for the purpose of promoting comprehensive rural development
o Public officers can be directors
4. Thrift banks - include savings and mortgage banks, private development banks, and stock
savings and loan associations
5. Cooperative banks - banks that primarily provide financial, banking and credit services to
cooperative organizations and their members
6. Islamic Banks
7. Banks determined by Monetary Board of the BSP

 Only universal bank and commercial banks can create and accept demand deposits without
separate authority from the Monetary Board while others must
 Only universal banks may act as an investment house
  Only universal banks and commercial banks may be involved in quasi-banking function
 Incorporators of banks are natural persons, exception: rural banks can be organized or
established by cooperatives and corporations primarily organized to hold equities
 Rural Banks must be wholly owned by Filipinos while other banks require 40% Filipino
ownership of voting stocks
 Public offering of shares is necessary for domestic banks seeking authority to act as universal
bank while there is no such requirement for other banks

Functions of Banks
 Basic Function: Deposit Function and Loan Function
 Universal banks and commercial banks (as well as other banks depending on the type of
bank and/or the corresponding authority given by the Monetary Board) may also exercise any
of the following functions:
 Receive in custody funds, documents and valuable objects;
 Act as financial agent and buy and sell, by order of and for the account of their
customers, shares, evidences of indebtedness and all types of securities;
 Make collections and payments other for the account of others and erform such other
services for their customers as are not incompatible with banking business
 Upon prior approval of MB, act as managing agent, adviser, consultant or
administrator of investment management/advisory/consultancy accounts
 Rent out safety deposit boxes

Prohibited Acts
 Banks are prohibited from engaging in insurance business.
 Outsourcing of functions are generally prohibited. Example: A bank cannot hire another
company to accept deposits. (to maintain utmost diligence)

DEPOSIT FUNCTION
- Simple Loan – fixed, savings and current deposits of money in banks (Bank is the debtor while
the depositor is the creditor)

Consequences:
1. Bank can make use as its own the money deposited
2. Third persons who may have a right to the money deposited cannot hold the bank responsible
unless there is a court order or garnishment.
3. No Liability for estafa even if the bank failed to return the amount deposited
4. Bank has the right to compensation, it can set off deposits with the indebtedness of the
depositor that are due and demandable

Depositors
1. Minors: can open bank accounts which should be savings or time deposits, at least seven
years of age, able to read and write and have sufficient discretion and not disqualified by
other capacity.
 Parents may nevertheless deposit for their minor children and guardians for their
wards

Kinds of Deposits
1. Demand Depositschecking account/current account – liabilities of banks which are denominated in
Philippine currency and are subject to payment in legal tender upon demand by presentation
of checks subject to:
a. Only universal or commercial bank can accept or create demand deposits, other banks
with prior approval of Monetary Board
 b. Temporary withdrawing against current accounts shall not be allowed unless caused
by normal bank charges and other fees incidental to handling such accounts
c. Drawings against uncollected deposits are generally prohibited
2. Savings Account – most common type evidenced by passbook
a. A bank is negligent if it allows the withdrawal without requiring the presentation of a
passbook
3. Negotiable Order of Withdrawal (NOW) Accounts – interest-bearing deposit accounts that
combine the payable on demand feature of checks and investment feature of savings
accounts, checking account with interest
4. Time Deposit – account with fixed term

Interests – demand, savings, NOW accounts, time deposits and deposit substitutes shall not be
subject to interest ceilings

 Anonymous Accounts are prohibited. Exception: Foreign currency deposits which may be
numbered account however, necessary measures should be undertaken by the bank to
record and establish the true identity of the depositor
 Joint Accounts may be the subject of a survivorship agreement (transferring the balance to
the survivor upon the death of one of them)

Secrecy of Bank Deposits

- All deposits including investments in bonds issued by the Phil. Gov’t are considered absolutely
confidential and may not be examined, inquired or looked into by any person, government
official, bureau or office.
Exceptions:
1. Written permission of the depositor or investor
2. Impeachment cases
3. Upon order of a competent court of:
a. Bribery or dereliction of duty of public officials
b. Money deposited or invested is the subject of litigation
c. Involving unexplained wealth under the Anti-Graft and Corrupt Practices Act
d. With probable cause of money laundering
 Court order is not even necessary when offense is:
i. Kidnapping for ransom
ii. Under Comprehensive Dangerous Drugs Act
iii. Hijacking, destructive arson and murder, those perpetrated by terrorists
against non-combatant persons and similar targets
4. Upon inquiry by the Comm. of Internal Revenue for determining the net estate of a
deceased depositor
5. Disclosure to the Phil. Treasurer for dormant deposits for at least 10 years under
Unclaimed Balances Act
6. Order of Court of Tax Appeals, examination by law enforcement officers in terrorism
cases under Human Security Act of 2007

Exception don’t apply to foreign currency deposits, exception for such are:
1. With written consent of depositor (Foreign Currency Deposits Act)
2. Section 11 of Anti-Money Laundering Act
3. Section 27 and 28 of Human Security Act

 Non-disclosure without court order of any information relative to the funds or properties of
its clients is also required
 Inquiry into bank deposits allowable and must be premised on the fact that the money
deposited in the account is itself the subject of the action.
 The admission of testimonial (ad testificandum) and documentary (duces tecum) evidence
relative to respondent’s security bank account served no other purpose than to establish
 the existence of such account, its nature, and the amount kept in it, hence an
impermissible inquiry.

GARNISHMENT – issued to all banks which is a technique used to recover money from people with
substantial outstanding debts
- Bank accounts may be garnished by the creditors of the depositor however, amount of deposit
is actually not disclosed
- Ask the manager of all banks of the accused has a sufficient amount to pay his debt and
withdraw such if it has deposited fund and the bank should respond to

 Deposits exempt from garnishment: Foreign Currency Deposits and those exempt under
the Rules of Civil Procedure

DEPOSIT INSURANCE - All deposits in banks are insured with the Philippine Deposit Insurance
Corporation or PDIC.

Deposit – unpaid balance of money or its quivalent received by a bank in the usual course of
business and for which it has given r is obliged to give credit to a commercial, checking, savings,
time or thrift account or issued in accordance with BSP rules and regulations
 In any negotiable certificate of deposit, owner or holder shall be recognized as a depositor
only if his name is registered as owner/holder thereof in the books of the issuing bank

Insured Deposit – mount due to any bona fide depositor for legitimate deposits in an insured bank
net of any obligation of the depositor to the insured bank as of the date of closure but not to exceed
P500,000.00
 Maximum deposit insurance may be adjusted provided that the
1. Monetary Board determined that there is a condition that threatens the monetary
and financial stability of the banking system that may have systemic consequences
2. Adjustments is proved by a unanimous vote of the Board of Directors of PDIC
chaired by Sec. of Finance
3. Approved by the President of the Phil.

Deposits not covered by insurance:

1. Amount in excess of insured deposit of P500,000.00
2. Deposit payable outside the Phil
3. Investment products such as bonds and securities, trust accounts
4. Deposit accounts or transaction which are unfounded or that are fictitious or fraudulent
5. Deposit accounts or transaction constituting, and/or emanating from, unsafe and
unsound banking practice
6. Proceeds of an unlawful activity as defined in Anti-Money Laundering Law
7. Resulted from splitting of deposit – deposited or balance of more than P500,000.00
under the name of persons is broken down and transferred to two or more accounts in
the name of persons or entities who have no beneficial ownership in the transferred
deposits in their names within 120 days immediately preceding or during a bank-
declared bank holiday or immediately preceding a closure order issued by the Monetary
Board for the purpose of availing the maximum deposit insurance coverage
8. Money placements by the head office of a foreign bank in its branch in the Phil. (only
one entity)

 A joint account shall be insured separately from any individually-owned deposit account
 Account held jointly by 2 or more natural persons or juridical persons, maximum insured shall
be divided into as many equal shares as there are individuals, juridical persons or entities,
unless been stipulated by them
 Account held by a juridical person/entity jointly with one or more natural persons, maximum
insured deposit shall be presumed to belong entirely to such juridical person/entity
  The aggregate (combination/collection) of the interest of each owner over several joint
accounts shall likewise be subject to the maximum insured deposit
 Proceeds of the insurance shall be paid by the PDIC whenever the insured bank is closed on
account of insolvency
 Liability of the PDIC for insured deposits rests upon the existence of deposits with insured
bank, not on the negotiability or non-negotiability of the certificates evidencing these deposits
 Claim must be filed within 2 years from actual takeover by the receiver

UNCLAIMED BALANCES
- Deposits that have become dormant for a period of 10 years may be escheated in favor of the
government
- Include credits or deposits of money, bullion(gold/silver bars), security or other evidence of
indebtedness of any kind and interest thereon with banks, buildings, and loan assoc. and
trust assoc.
- Notice to the depositor of the unclaimed balance must be done first, thereafter, the bank is
required to report (sworn statement) to the Phil. Treasurer its existence who will then inform
the SolGen who will then initiate the proper escheat (reversion of property to state)
proceedings in court. Phil. Treasurer shall then deposit such to the credit of the Gov’t to be
used as the Congress may direct.
- Publication of the list of unclaimed balances is required to safeguard the right of the depositors,
their heirs and successors in interest to due process

LOAN FUNCTION
Basic Rules/Restrictions:
1. Grant loans and other credit accommodations only in amounts and for the periods of time
essential for the effective completion of the operations to be financed
2. Consistent with safe and sound banking practices
3. Before granting, bank must ascertain that the debtor is capable of fulfilling his commitments
to the bank

Payments:
1. Amortization schedule shall be adapted to the nature of the operations to be financed
2. If with maturities of more than 5 years, provisions must be made for periodic amortization
payments, but such payments must be made at least annually
3. A borrower may at any time prior to the agreed maturity date prepay, in whole or in part,
the unpaid balance subject to such reasonable terms and conditions as may be agreed
upon between the bank and its borrower

SINGLE BORROWER’S LIMIT

Ceiling – total amount of loans, credit accommodations and guarantees that may be extended by a
bank shall at no time exceed 25% of the net worth of such bank
- Basis for determining is the total credit commitment of the bank to the borrower
- Total amount may be increased by an additional 10% of the net worth provided that additional
liabilities of any borrower are adequately secured by trust receipts, shipping documents,
warehouse receipts transferring or securing title covering readily marketable, non-perishable
goods which must be fully covered by insurance

DOSRI ACCOUNTS – restrictions (not total prohibition) are imposed on borrowings and security
arrangement by Directors, Officers, and Stockholders of the bank directors, officers, stockholders
and their Related Interest

Requisites: (NCBA)
1. Borrower is a DOSRI
 2. Contracts a loan or any form of financial accommodation guarantor
3. From:
a. his bank or
b. bank that is a subsidiary of a bank holding company of which both his bank and
lending bank are subsidiaries
c. bank in which a controlling proportion of the shares is owned by the same interest
that owns a controlling proportion of the shares of his bank
4. such is in excess of 5% of the capital and surplus of the lending bank or in the maximum
amount permitted by law, whichever is lower
Restrictions: (GBL)
1. account should be upon written approval of the majority of all the directors of the lending bank
excluding the director concerned
2. terms not less favorable to the bank than those offered to others
3. resolution approving the loan shall be entered in the records of the bank and a copy of the
entry shall be transmitted forthwith to the supervising and examination sector of the BSP
4. monetary board may regulate the amount that may be extended, as well as investments in
enterprises owned or controlled by DOSRI. The manual of Regulations for Banks provide that
the aggregate is 15% of the total loan portfolio of the bank or 100% of the combined capital
accounts whichever is lower
5. shall be limited to an amount equivalent to their respective unencumbered deposits and book
value of their paid-in capital contribution in the bank. Ceilings don’t apply to those secured by
assets considered by Monetary Board as non-risk items, under a fringe benefit plan approved
by the BSP and extended by cooperative banks to its cooperative stockholders.

Restrictions: (NCBA)
1. borrower is required by the lending bank to waive the secrecy of his deposits of whatever
nature in all banks
2. accounts are subject to examination but information obtained shall be held strictly confidential
and may be used by examiners only in connection with the supervisory and examination
responsibility or by the Bangko Sentral in an appropriate legal action it has initiated involving
the deposit account

Collaterals
- loan shall not exceed 75% of the appraised value of the real property plus 60% of the appraised
value of the improvement or 75% of the appraised value of the chattel

Foreclosure or Mortgage
- Redemption Period for Natural Persons – shall have the right within one year (from the date
of registration of the cert. of sale with the Register of Deeds) after the sale of the real estate,
to redeem the property
- Redemption Pd. For Juridical Persons – not after the registration of the registration of the
certificate of foreclosure sale with the proper Register of Deeds which in no case more than
3 months after foreclosure, whichever is earlier
- Redemption Price – amount due under the mortgage deed, with interest and all the costs and
expenses incurred from the sale and custody of said property less the income derived
therefrom
- Purchaser – have the right to enter upon and take possession of such property immediately
after the date of the confirmation of the auction sale and administer the same in accordance
with law
- Injunction and Bond – any petition shall be given due course only upon the filing by the
petitioner of a bond in an amount fized by the court conditioned that he will pay all the
damages which the bank may suffer by enjoining or the restraint of the foreclosure proceeding

Prohibited Acts of Borrowers:

1. Fraudulently overvalue property offered as security or a loan or other credit accommodation
from the bank
2. Furnish false or make misrepresentation or suppression of material facts for the purpose of
obtaining, renewing or increasing the loan or other credit accommodation or extending the
period thereof
3. Attempt to defraud the said bank in the event of a court action to recover a loan or other credit
accommodation
4. Offer any director, officer, employee or agent of a bank any gift, fee, commission or any other
form of compensation in order to influence such persns into approving a loan or other credit
accommodation application

OWNERSHIP OF BANKS

Foreign Ownership
a. Foreign individuals and non-bank corporations may own or control up to forty percent (40%)
of the voting stock of a domestic bank.
b. The percentage of foreign-owned voting: stocks in a bank shall be determined by the
citizenship of the individual stockholder in that bank. The citizenship of the corporation which
is a stockholder in a bank shall follow the citizenship of the controlling stockholders of the
corporation, irrespective of the place of incorporation. Controlling stockholders refer to
individuals holding more than fifty percent (50%) of voting stock of the corporate stockholder
of the bank

Foreign Banks - Foreign banks are not subject to the 40% limitation prescribed under Section 11
of GBL. The law prescribes 60% as the maximum foreign bank equity. GBL allows beyond 60% limit
within a period of 7 years with prior authority from the monetary Board. Foreign banks may acquire
100% of the voting stocks of an existing bank or invest in up to 100% of the voting stocks of a new
subsidiary.

FILIPINO STOCKHOLDINGS - 40% of voting stock -shall apply to Filipinos and domestic non-bank
corporations (individual equity participation)

STOCKHOLDINGS OF FAMILY GROUPS OR RELATED INTERESTS - stockholdings of

individuals related to each other within the fourth degree of consanguinity or affinity, legitimate or
common-law, shall be considered family groups or related interests and must be fully disclosed in
all transactions by such an individual with the bank.
- Two or more corporations owned or controlled by the same family considered related
interests and must be fully disclosed in all transactions by such

DIRECTORS AND OFFICERS

 Composition of Board: at least five (5), and a maximum of 15 members, two (2) of whom shall
be independent directors. However, in case of merged or consolidated banks, the maximum
number of directors is twenty-one (21).
 Independent Director - person other than an officer or employee of the bank, its subsidiaries or
affiliates or related interests, not related to DOSRI, a shareholder of the bank
 Non-Filipino citizens may become members to the extent of the foreign participation in the equity
of said bank.
 no appointive or elective public official, whether full-time or part-time, shall at the same time
serve as officer of any private bank, save in cases where such service is incident to financial
assistance provided by the government, exception: Rural Banks Act
 Qualifications: Fit and Proper Rule for economic stability of the state
- Monetary Board is authorized to pass rules providing for the qualifications and
disqualifications of in-dividuals elected or appointed bank directors or officers
 and to disqualify those found unfit after due notice. Regard shall be given to his
integrity, experience, education, training, and competence

REGULATIONS TO MAINTAIN LIQUIDITY AND SECURITY

1. The Monetary Board shall prescribe the mini-mum ratio which the net worth of a bank must bear
to its total risk assets which may include contingent accounts
2. The law imposes limits on loans, credit accom-modations and guarantees that may be extended
by banks.
3. Limitation is placed on the bank's exposure to directors, officers, stockholders and their related
interest
4. restrictions on the value of collaterals on loans
5. The Monetary Board may provide for restrictions on unsecured loans
6. Monetary Board may prescribe the maturities and other terms and conditions for various types
of loans and accommodations
7. Restrictions on dividend declarations

DIVIDENDS: Dividend declaration is prohibited in:

1. if it is greater than its accumulated net profits then on hand, deducting therefrom its losses and
bad debts
2. its clearing account with the Bangko Sentral is overdrawn
3. deficient in the required liquidity floor for government deposits for 5 or more consecutive days
4. does not comply with the liquidity standards/ratios prescribed by Bangko Sentral for purposes
of determining funds available for dividend declaration
5. committed a major violation as may be determined by the BSP

OWNERSHIP OF REAL PROPERTY

- any bank may acquire real estate however, total investment including bank equipment shall not
exceed 50% of combined capital accounts
- equity investment of a bank in another corporation engaged primarily in real estate shall be
considered as part of the bank's total investment in real estate
- However, a bank may acquire, hold or convey real property under the following circumstances:
1. mortgaged to it in good faith by way of security for debts
2. conveyed to it in satisfaction of debts previously contracted in the course of its dealings
3. purchase at sales under judg-ments, decrees, mortgages, or trust deeds held by it and
such as it shall purchase to secure debts due it.

 Any real property acquired or held under the circumstances enumerated in the above
para-graph shall be disposed of by the bank within a period of five (5) years or as may be
prescribed by the Monetary Board. After said period, the bank may continue to hold the
property for its own use, subject to the limitations mentioned earlier, that is, the investment
should not be more than 50% of the combined capital accounts

LOAN TO BANKS
 Emergency Loans - The BSP, upon the approval of at least 5 members of the Monetary
Board, may also grant emergency loans or advances in the amount not exceeding 50% of its
total deposits and deposit substitutes. The loans shall be released in two tranches

CONSERVATORSHIP
- once a bank is under conservatorship, garnishment is not allowable. Remedy is to intervene in
the liquidation to claim what is due to you
- closure, freeze assets but maintains its juridical personality until liquidation, rehabilitation
- GROUNDS: whenever the Monetary Board finds that a bank or a quasi-bank is in a state of
continuing inability or unwillingness to maintain a condition of liquidity deemed adequate to
protect the interest of depositors and creditors, the Monetary Board may appoint a
 conservator with such powers as the Monetary Board shall deem necessary. The
conservatorship shall not exceed one (1) year.
- POWERS OF CONSERVATOR
1. take charge of the assets, liabilities, and the management thereof
2. reorganize the management of the subject bank
3. collect all monies and debts due said institution
4. exercise all powers necessary to restore its viability

RECEIVERSHIP AND LIQUIDATION

- GROUNDS: The PDIC, as the statutory receiver, may be appointed whenever the Monetary
Board finds that: (MB can appoint other receivers)
1. Bank is unable to pay its liabilities, Provided, That this shall not include inability to pay
caused by extraordinary demands induced by financial panic in the banking community
2. bank has insufficient realizable assets, as determined by the Bangko Sentral, to meet its
liabilities;
3. bank cannot continue in business without involving probable losses to its depositors or
creditors
4. bank has willfully violated a cease and desist order under Section 37 that has become
final, involving acts or transactions which amount to fraud or a dissipation of the assets of
the institution

- DUTIES OF RECIEVER:
1. shall immediately gather and take charge of all the assets and liabilities of the insti-tution,
administer the same for the benefit of its creditors
2. exercise the general powers of a receiver under the Revised Rules of Court;
3. may deposit or place the funds of the institution in non-speculative investments;
4. determine as soon as possible, but not later than ninety (90) days from takeover, whether
the institution may be rehabilitated or otherwise placed in such a condition so that it may
be permitted to resume business with safety to its depositors and creditors and the general
public: Provided, That any determination for the resumption of business of the institution
shall be subject to prior approval of the Monetary Board
5. shall not, with the exception of administrative expenditures, pay or commit any act that
will involve the transfer or disposition of any asset of the institution

- CLOSE NOW-HEAR LATER SCHEME - No prior hearing is necessary in appointing a receiver

and in closing the bank. It is enough that subsequent judicial review is provided for.
o MB can close a bank as long as there is subsequent review

- EFFECT OF RECEIVERSHIP AND LIQUIDATION:

1. Garnishment, Levy, Attachment, or Execution
a. Assets shall be deemed in custodia legis in the hands of the receiver and shall,
from the moment the institution was placed under such receivership or liquidation,
be exempt from any order of garnishment, levy, attachment, or execution
b. no preference even if the ' claimant-depositor obtained a writ of preliminary
attachment. After the declaration of insolvency, the remedy of the depositors is to
intervene in the liquidation proceedings
2. Other Effects
a. appointment of a receiver does not solve the corporation nor does it inter with the
exercise of corporate rights. Banks under liquidation retain their legal personality.
Case should be initiated and prosecuted through the liquidator
b. BSP may also forbid the bank from doing business. However, when a bank is not
allowed to do business by the BSP, it can still foreclose mortgage and the
prescriptive period to foreclose is not tolled
c. An insolvent bank that was closed by the BSP is not liable to pay interests on
deposits, however, interests on loans extended by the BSP are still demandable
 - JUDICIAL REVIEW: actions of the Monetary Board shall be final except on petition for certiorari
on the ground that the action taken was in excess of jurisdiction and filed by the stockholders
of record representing the majority of the capital stock within ten (10) days from receipt by
the board of directors of the institution of the order directing receivership, liquidation or
conservatorship. Police Power may not be exercised arbitrarily or unreasonably if it is either
capricious, discriminatory, whimsical, arbitrary, unjust or is tantamount to a denial of due
process and equal protection clauses

TRUST OPERATIONS OF BANKS

- Made for specific purpose, cannot be used to other uses except has been stipulated
- Cannot be included in the liquidation of bank

- Prior Authority – bank may be authorized to engage in trust business and act as trustee or
administer any trust or hold property in trust or on deposit for the use, benefit, or behoof of
others. The Securities and Exchange Commission shall not register the articles of
incorporation and by-laws or any amendment thereto, of any trust entity, unless accompanied
by a certificate of authority issued by the BSP

- Trust Business – activity resulting from a trustor-trustee relationship for the administration,
holding, management of funds and/or properties for the use, benefit or advantage of the
trustor or of others called beneficiaries
o A trust-licensed bank involved in other fiduciary business which refer to any activity
resulting from a contract or agreement whereby a bank binds itself to render services
or to act in a representative capacity which don’t create or result in a trusteeship

- POWERS OF TRUST ENTITY:

1. Ast as trustee on any mortgage or bond issued by any body politic and to accept and
execute any trust consistent with law
2. Act under order or appointment as guardian, receiver, trustee or depositary of the estate
of any minor or other incompetent person and as receiver and depositary by parties to
any legal proceedings and of property of any kind which may be brought under the
jurisdiction of the court
3. As executor of any will when it is named the executor
4. As administrator of the estate of any deceased person, with the will annexed or as
administrator of the estate of any deceased persons when there is no will
5. Accept and execute any trust for the holding, management and administration of any
estate, real or personal and the rents, issues and profits thereof
6. Establish and manage common trust funds

- SEPARATION OF TRUST BUSINESS OF BANKS – law prohibits the integration of the

properties and funds of all other business of the banks with those of the trust business

BANGKO SENTRAL NG PILIPINAS – GOCC, central monetary authority maintained by the State
to function and operate as an independent and accountable body corporate in the discharge of its
mandated responsibilities concerning money, banking and credit

Primary Objective – maintain price stability conducive to a balanced and sustainable growth of the
economy. Promote and maintain monetary stability and the convertibility of the peso

Basic Functions:
1. Provide policy directions in areas of money, credit and banking
2. Supervision over the operations of banks
3. Regulatory powers over the operations of finance companies and non-bank financial
institutions performing quasi-banking functions
 4. Sole power and authority to issue currency within the territory
5. Issue regulations to prevent circulation of foreign currencies, or currency substitutes as well
as the reproduction of facsimile of BSP notes
6. Investigate, make arrests, conduct searched and seizures for the purpose of maintaining the
integrity of the currency;
7. Engage in foreign exchange transactions to maintain price stability
8. Rediscounts, discounts, loans ad advances to banking and other financial institutions to
influence the volume of credit consistent with the objectives of price stability
9. Engage in open market operations – purchase and sale of securities – exclusively in
accordance with its objective of achieving price stability
10. Banker of the government
11. Engage in marketing and stabilization of securities for the account of the government
12. Financial advisor of the government

Corporate Powers
1. Adopt, alter and use a corporate seal which shall be judicially noticed
2. Enter into contract
3. Lease or own real and personal property
4. Sell or otherwise dispose of its real and personal property
5. Sue and be sued
6. Perform any and all things that may be necessary or proper to carry out the purposes of the
New Central Bank Act
7. Compromise, condone or release, in whole or in part, any claim of or settled liability

Bank Supervision:
1. Issuance of rules of conduct or the establishment of standards of operation for uniform
application to all banking and financial institutions
2. conduct of examination of the bank and its wholly owned or controlled enterprise (Special
Examination without MB approval may be made by PDIC if there an impending bank closure)
3. Overseeing to ascertain that laws and regulations are complied with
4. Regular investigation which shall not be oftener than once a year from the last date of
execution to determine whether an institution is conducting its business on a safe or sound
basis
5. Inquiring into the solvency and liquidity of the institution
6. Enforcing prompt corrective action

BANKER AND FINANCIAL ADVISER OF GOVERNMENT

1. designated as the official depositary of the Government
2. authorized to engage the services of the other banking institutions to ad as its agent
3. authorized to act as agent of the Gov-ernment, its instrumentalities and subdivisions in the
issuance of securities representing the obligations of the Government

THE GOVERNOR – CEO of BSP

Powers and Duties:
1. prepare the agenda for the meetings of the Monetary Board and to submit for the
consideration of the Board the policies and measures to imple-ment the NCBA
2. execute and administer the policies and measures approved by the Monetary Board
3. direct and supervise the operations and internal administration of the Bangko Sentral
4. appoint and fix the remunerations and other emoluments of personnel below the rank of a
department head
5. render opinions, decisions, or rulings, which shall be final and executory on matters regarding
application or enforcement of laws pertaining to banks, quasi-banks and financial institutions
supervised by the BSP (Note: May be reversed or modified by the Monetary Board);
 OTHER RELATED LAWS

PHILIPPINE DEPOSIT INSURANCE CORPORATION

- Primary Functions:
1. Deposit insurer
2. Co-regulator of banks
3. Receiver and liquidator of closed banks
- Insurer of Deposit – PDIC shall, as a basic policy, promote and safeguard the interest of the
depositing public by way of providing permanent and continuing insurance coverage on all
insured
- Regulator – empowered to examine and investigate banks; processes:
1. Examination – evaluation of current status of a bank and determines its
compliance with the set standards regarding solvency, liquidity, asset valuation,
operations, systems, management and compliance with banking laws, rules and
regulations
2. Investigation – conducted based on specific findings of certain acts or omissions
which are subject of a complaint or a Final Report of Examination made by PDIC.
Does not involve a general evaluation of the status of a bank.
3. An examination of banks requires the prior consent of the MB whereas an
investigation does not require prior MB consent
4. Reason why prior consent of BSP not necessary for investigation: it is prudent to
expedite the proceedings, as an investigation is only as precise as the evidence
on which it is based; based on reports of examination and an examination is
conducted with prior MB approval; a lengthy process provide unscrupulous
individuals the opportunity to cover their tracks
- Rehabilitation Receiver of Banks: as receiver, shall control manage and administer the
affairs of the closed bank
- Suspension of Powers and Benefits and the relevant provisions of the Articles of
Incorporation and By-laws of the closed bank are likewise deemed suspended
- Properties in Custodia Legis – assets under receivership shall be deemed in custodial egis
in the hands of the receiver, shall not be subject to attachment, garnishment, execution, levy
or any other court processes
- PDIC as receiver:
1. Collect loans and other claims of the closed bank
2. If the stipulated interest on deposits is unusually high, PDIC may exercise which
may include a reduction of the interest rate to a reasonable rate; any modification
or reduction shall apply only to unpaid interest

ANTI-MONEY LAUNDERING ACT

- Money Laundering – crime committed by any person who knowing that any monetary
instrument or property represents, involved or relates to the proceeds of any unlawful activity
1. Transacts
2. Converts, transfers, disposes of, moves, acquires, possesses or uses
3. Conceals or disguises true nature, source, location, disposition, movement or
ownership of or rights
4. Attempts of conspires to commit money laundering offenses
5. Aids, abets, assists in or counsels the commission
6. Performs or fails to perform any act as a result of which he facilitates the offense
7. Failure to report to Anti-money Laundering Council knowing that a covered or
suspicious transaction is required to be reported
- Covered transactions – transaction in cash or other equivalent monetary instrument
involving a total amount in excess of P500,000.00 within 1 banking day
- Non-Bank financial Institutions (NBFI) – does not have a full banking license or is not
supervised by a national or international banking regulatory agency
- Lawyers and accountants acting as independent legal professionals are not covered to
privileged information covered by confidentiality
- Suspicious Transaction:
1. No underlying legal or trade obligation, purpose or economic justification
2. Client is not properly identified
3. Amount involved is not commensurate with the business or financial capacity of client
4. Taking into account all known circumstances, perceived that the client’s transaction is
structured in order to avoid being the subject of reporting requirements under the act
5. Circumstances observed to deviate from the profile of the client and/or the client’s past
transactions with the covered institution
6. Transaction related to an unlawful activity or offense that is about to be is being or has
been committed
7. Transaction that is similar or analogous to any of the belonging
- Unlawful Activity:
1. Kidnapping for ransom 20. Revised Forestry Code of the Phil
2. Comprehensive Dangerous Drugs 21. Philippine Fisheries Code of 1998
Act of 2002 22. Wildlife Resources Conservation
3. Anti-graft and Corrupt Practices Act and Protection Act
4. Plunder 23. National Caves and Cave
5. Robbery and extortion Resources Mng’t Protection act
6. Jueteng and Masiao 24. Anti-Carnapping Act of 2002
7. Piracy on the high seas 25. Codifying the laws on
8. Qualified theft Illegal/unlawful possession,
9. Swindling and other forms of manufacture, dealing in, acquisition
swindling or disposition of Firearms,
10. Smuggling ammunition or explosives
11. Violations of Electronic Commerce 26. Anti-Fencing Law
Act of 2000 27. Migrant workers and overseas
12. Hijacking, destructive arson and Filipinos act of 1995
murder 28. Intellectual Property code of the
13. Terrorism and conspiracy to commit Phil.
terrorism 29. Anti-Photo and Video Voyeurism
14. Terrorism Financing Prevention and Act of 2009
Suppression Act of 2012 30. Anti-child photography Act of 1009
15. Bribery and Corruption of Public 31. Special Protection of Children
Officers against abuse, exploitation and
16. Frauds and Illegal Exactions and discrimination
Transactions 32. Securities regulation code
17. Malversation of Public Funds and 33. Felonies or offenses of similar
Property nature punishable under penal laws
18. Forgeries and Counterfeiting of other countries
19. Anti-Trafficking in persons act of
2003

- Prevention of Money Laundering

1. Customer Identification – maintain a system of verifying the true identity of their clients,
for corporate existence, system of verifying their legal existence and organizational
structure, as well as the authority and identification of all persons purporting to act on their
behalf
 2. Record keeping – records of all transactions be maintained and safely stored for 5 years
from dates of transactions. To closed accounts, records shall be preserved and safely
stored for at least 5 years from dates when they were closed
3. Reporting of covered and suspicious transactions to AMLC suspicious transactions within
5 working days from occurrence unless AMLC prescribes a longer period not exceeding
15 days
- Freezing of Monetary Instrument or Property
Court Appeals may issues Freeze Order; conditions:
1. Verified Ex Parte Petition by AMLC (taken for the benefit of one party with no notice
being given to the person adversely interested)
2. CA determined a probable cause
3. Freeze order effective immediately
4. Period nor exceeding 6 months
a. CA act on the petition to freeze within 24 hours from filing of petition, shall
exclude nonworking days
b. Person may file a motion to lift freeze order and the court must resolve
motion before expiration of freeze order
c. No court shall issue a TRO or writ of injunction order to do/prohibit some act to maintain
certain status
against any freeze order, except the SC
- AMLC may inquire into or examine any particular deposit or investment, including related
accounts, either upon order of the court or even without court order in certain exceptional
cases
1. Court order required: Ex Parte Application – there is probable cause that the deposits or
investments, including related accounts involved, related to unlawful activity or money
laundering offense
 Related Accounts – accounts, funds and sources of which originated from
and/or are materially linked to the monetary instruments or properties subject
of freeze orders
2. No Court Order:
a. Kidnapping for ransom
b. Comprehensive Dangerous Drugs Act
c. Hijacking, destructive arson and murder
d. Similar nature punishable in other countries
e. Terrorism and conspiracy to commit terrorism
3. Inquiry into deposits does not require a pre-existing criminal case

TRUTH IN LENDING ACT

- Law assures full disclosure by requiring the lender to give the borrower all the details
regarding the transaction, statement in writing:
1. Cash price or delivered price to be acquired
2. Amount to be credited as downpayment and trade-in
3. Difference between amounts set
4. Charges individually itemized which are/to be paid
5. Total amount to be financed
6. Finance charge expressed in terms
7. Percentage that the finance bears to the total amount to be financed expressed as a
simple annual rate on the outstanding unpaid balance of the obligation
- Imposition of interest and finance charges is void if not disclosed in the disclosure statement
o Penalty charges in the promisory note constitutes substantial compliance with
disclosure requirement of the Act
o Even if disclosed, exorbitant interest rate may be declared unconscionable
- Rationale: protect users of credit from lack of awareness of the true cost
- Finance Charge – charges incident to the extension of credit as the Board may, by regulation,
prescribe
 - Creditor – engaged in the business of extending credit who requires as an incident to the
extension of credit, the payment of finance charge
- Escalation Clause – violation of agreement, allows for an increase in costs to another party
- Prescriptive period – 1 date from the date of demand

HUMAN SECURITY ACT OF 2007

- Allows examination and sequestration of deposits based on certain conditions
- CA as special court to handle anti-terrorism cases
1. Examine deposits, placements, trust accounts, assets and records in a bank
2. Gather or cause relevant information about such
- Grounds: CA may authorize examination after satisfying existence of probable cause:
1. Person charges with or suspected of the crime of terrorism
2. Judicially declared and outlawed terrorist organization, assoc., group of persons
3. Member of such
- Terrorism commits thereby sowing and creating a condition of widespread and extraordinary
fear and panic among the populace, in order to coerce the government to give in to an
unlawful demand
- Sequestration of deposits - Any person suspected for the crime of terrorism, shall be seized
sequestered, and frozen in order to prevent their use, transfer or conveyance for purposes
that are inimical to the safety and security of the people or injurious to interest of State
- Sequestration – deemed as property held in trust by the bank for such person and the
government during investigation of the person suspected and their use or disposition shall be
subject to the approval of the court before which the case/s pending

TERRORISM FINANCING AND PREVENTION AND SUPPRESSION ACT

- Financing of Terrorism – without lawful excuse, possesses, provides, collects or uses
property or funds or makes available property, funds or financial service or other related
services
1. Carry or facilitate commission of any terrorist act
2. Terrorist org., assoc, or group
3. Individual terrorist
- Also imposed organized or directs others to commit financing of terrorism
- AMLC is authorized to investigate:
1. Property or funds related to financing of terrorism
2. In relation to whom there is probable case to believe that such person/s committing
or attempting or conspiring to commit or participating in or facilitating the financing
- AMLC may inquire into or examine deposits without a court order
- AMLC, either upon its own initiative or at the request of the Anti-Terrorism Council (ATC), is
authorized to issue an ex parte order to freeze without delay
- Period of Effectivity of Freeze Order issued by AMLC – 20 days. Extendibly by CA up to a
period not exceeding 6 months upon petition by AMLC
- AMLC authorized to issue a freeze order, during effectivity, an aggrieved party may, within
20 days from issuance, file the CA a petition to determine the basis of the freeze order
according to the principle of effective judicial protection; if found related to financing of
terrorism, said property or funds shall be the subject of civil forfeiture proceedings