Page 1 of 26BANKING LAWS GOVERNING LAW Banking Institution are governed by the following laws: A. General banking laws General Banking Law (R.A. No. 8791) . New Central Bank Act (R.A. No. 7653) B. Special banking laws New Rural Banks Act (R.A. No. 7353) Private Development Banks Act (R.A. No. 4093) Savings and Loan Association Act (R.A. No. 3779) . Thrift Banks Act (R.A. No. 7906) C. Other laws affecting banks Secrecy of Bank Deposits Law (R.A. No. 1405) Unclaimed Balances Law (Act No. 3936) Philippine Deposit Insurance Corporation Act (R.A. No. 3591) The general banking laws above mentioned are applicable to government banks like DBP and PNB. The Al- Amanah Islamic Bank is subject to all banking and pertinent laws. (Bar Review Materials Miravite, 2002 ed.) in Commercial Law, Jorge BAR QUESTION: JOINT ACCOUNT VS. PARTNERSHIP (2000) Distinguish joint account from partnership. (3%) SUGGESTED ANSWER The following are the distinctions between joint account and partnership: 1) A partnership has a firm name while a joint account has none and is conducted in the name of the ostensible partner. 2) WHILE A PARTNERSHIP HAS JURIDICAL PERSONALITY AND MAY SUE OR BE SUED UNDER ITS FIRM NAME, A JOINT ACCOUNT HAS NO JURIDICAL PERSONALITY AND CAN SUE OR BE SUED ONLY IN THE NAME OF THE OSTENSIBLE PARTNER. 3) While a partnership has a common fund, a joint account has none. 4) While in a partnership, all general partners have the right of management, in a joint account, the ostensible partner manages its business operations. 5) While liquidations of a partnership may, by agreement, be entrusted to a partner or partners, in joint account liquidation thereof can only be done by the ostensible partner. T HREE KINDS OF ENTITIES THAT INTRODUCE FUNDS INTO THE ECONOMY : 1. 2. 3. banks : entities that obtains funds from the public in the form of deposits and re-lend it to the public; quasi-banks : those that obtain funds in the form of deposit substitutes and re-lend the same and not from the public or depositors. Finance companies and other financial intermediaries: those that lend funds from their own assets. BAR QUESTION: Theory of Cognition vs. Theory of Manifestation (1997) The Civil Code adopts the theory of cognition, while the Code of Commerce generally recognizes the theory of manifestation, in the perfection of contracts. How do these two theories differ? SUGGESTED ANSWER: Under the theory of cognition, the acceptance is considered to effectively bind the offeror only from the time it came to his knowledge. Under the theory of manifestation, the contract is perfected at the moment when the acceptance is declared or made by the offeree. FIVE PERSONS PRIMARILY INTERESTED IN THE BUSINESS OF BANKING 1. 2. 3. 4. 5. Government Depositors Investors Creditors Borrowers Notes of hotjurist in foro conscientiae Page 2 of 26 GENERAL BANKING LAW OF 2000 (GBL) (RA No. 8791) The certificate of authority shall not be issued unless the Monetary Board is satisfied: 1. That all requirements of existing laws and regulations to engage in the business for which the applicant is proposed to be incorporated have been complied with; That the public interest and economic conditions, both general and local, justify the authorization; and That the amount of the capital, the financing, organization, direction and administration, as well as the integrity and responsibility of the organizers and administrators, reasonably assure the safety of deposits and the public interest (Sec. 14). Purpose: To promote and maintain a stable and efficient banking and financial system that is globally competitive, dynamic and responsive to the demands of a developing economy (Sec. 2). Scope of Application: The GBL primarily governs universal banks and commercial banks. It suppletorily governs thrift banks, rural banks and other banking institutions. 2. 3. GENERAL CONCEPTS BANKS Entities engaged in the lending of funds obtained in the form of deposits (Sec. 2) Entities duly authorized by the Monetary Board to engage in the business of regularly lending funds obtained regularly from the public through the receipt of deposits of any kind. An investment company that performs function as such is NOT a bank. Thus an investment company that is engage solely in investing, reinvesting or trading in securities is not engage in banking. ( Banas vs. Asia Pacific Finance Corp., Oct. 18, 2000). However, an investment company which loans out money of its customers, collects interest, and charges a commission to both lender or borrower is engage in banking (Republic vs. Security Credit and Acceptance Corp.) Organization of a Bank or Quasi-Bank Requirements: 1. The entity is a stock corporation; 2. Its funds are obtained from the public, i.e. 20 or more persons; and 3. The minimum capital requirements prescribed by the Monetary Board are satisfied (Sec. 8). Note: In Quasi banks, Deposit substitute are alternative forms of obtaining funds for the public, other than deposit, through the issuance, endorsement, or acceptance of debt instrument for the borrowers own account, for the purpose of relending or purchasing of receivables and other obligations.in banking or quasi-banking functions A person or entity cannot engage in banking or quasi-banking functions without a certificate of authority from the BSP (Sec. 6). The determination of whether a person or entity is performing banking or quasi-banking functions without BSP authority shall be decided by the Monetary Board. QUASI-BANKS Entities engaged in the borrowing of funds through the issuance, endorsement or assignment with recourse or acceptance of deposit substitutes (Sec. 95) Entities authorized to perform universal or commercial banking functions may also engage in quasi-banking functions. NATURE OF BANKING BUSINESS Impressed with public interest where the trust and confidence of the public in general is of paramount importance such that: 1. The appropriate standard of diligence must be very high, if not the highest, degree of diligence; highest degree of care (PCI Bank vs. CA, 350 SCRA 446, PBCom vs. CA, G.R. No. 121413, 29 Jan. 2001) This applies only to cases where banks are acting in their fiduciary capacity, that is, as depository of the deposits of their depositors (Reyes vs. CA, G.R. No. 118492, 15 Aug. 2001). Subject to reasonable regulation under the police power of the state. FINANCIAL INTERMEDIARIES Persons or entities whose principal functions include the lending, investing or placement of funds on evidences of indebtedness or equity deposited with them, acquired by them or otherwise coursed through them, either for their own account or for the account of others. ORGANIZATION AND OPERATION A. Authority to Register/Incorporate The SEC shall not register the articles of incorporation of any bank or any amendment thereto unless accompanied by a certificate of authority issued by the Monetary Board under its seal (Sec. 14). 2. While an innocent mortgagee is not expected to conduct an exhaustive investigation on the history of the mortgagor¶s title, in case of a banking Notes of hotjurist in foro conscientiae v. Commercial banks . Ramos. 2. if unsettled after 7 calendar days shall be reported by the BSP to the Sec. such as the Al Amanah Islamic Investment Bank of the Philippines which was created by RA 6848. of Labor who has 2 options: a. In case of merger or consolidation. November 11. 2003). In such case. 7. Due diligence required of banks extend even to persons. No. b) Stock savings and loan associations. It is required to exercise utmost diligence in the handling of deposits (Simex International Manila Inc.Page 3 of 26 institution. each of whom shall own at least one (1) share of the capital stock of the corporation. if any of the conditions set forth under Sec.R. Islamic banks ± Banks whose business dealings and activities are subject to the basic principles and rulings of Islamic Shari¶ a. J. It is expected to ascertain and verify the identities of the persons it transacts business with (UCPB vs.. It is subject to heavy and close supervision and/or regulation by the BSP (Central Bank of the Phils. May not declare dividends. No. Rural banks ± Mandated to make needed credit available and readily accessible in the rural areas on reasonable terms and which are primarily governed by the Rural Banks Act of 1992 (RA 7353). 208 SCRA 652). CA. 183 SCRA 361). May declare dividends out of its unrestricted retained earnings. representatives are sent to the premises offered as collaterals so as to investigate who the real owners are (DBP vs. 6. Cooperative banks ± Those banks organized whose majority shares are owned and controlled by May not purchase/ acquire its shares or accept them as security for a loan. or b. G. ORDINARY CORPORATION May be a stock or non-stock corporation May issue par value or no par value stocks. and cannot rely upon on what is or is not annotated on the title. 3. Special rules on strikes and lockouts: any strike or lockout involving banks. certify it to the NLRC for compulsory arbitration 1. can exercise the powers of an investment house and invest in nonallied enterprises and have the highest capitalization requirement. Thrift banks ± These are a) Savings and mortgage banks. cooperatives primarily to provide financial and credit services to cooperatives. CLASSIFICATION OF BANKS (SEC. 3) 1. it has unrestricted retained earnings in its books to cover the shares to be purchased/ acquired. c) Private development banks. It shall include cooperative rural banks. Other classification of banks as determined by the Monetary Board of the Bangko Sentral ng Pilipinas. Eduardo Santiago. 17).Primarily governed by the General Banking Law (GBL). May purchase/acquire its own shares for a legitimate corporate purpose.A.Ordinary banks governed by the GBL which have a lower capitalization requirement than universal banks and can neither exercise the powers of an investment house nor invest in non-allied enterprises. 7906).). 5. Also composed of 5 to 15 directors. 57 are present. or institutions like the GSIS. 2003. Universal banks . He may assume jurisdiction over and decide the dispute. Must be composed of 5 to 15 directors. 9). the number of directors shall not exceed 21 (Sec.R. Must secure a certificate of authority from the Monetary Board before it can register with SEC. BANKING CORPORATION Must generally be a stock corporation Shall issue par value stocks only (Sec. October 28. regularly engaged in the business of lending money secured by real estate mortgages (GSIS vs. 155206. Notes of hotjurist in foro conscientiae . the bank must sell or dispose of said shares within 6 months from the time of their acquisition (Sec. Except: when authorized by the Monetary Board. 147800. May be registered with the SEC without any certificate of authority issued by a government agency. CONSEQUENCES OF NATURE OF BUSINESS: 1. They are governed primarily by the Cooperative Code (RA 6938). The business of a bank is one affected by public interest for which reason the bank should guard against loss due to negligence and bad faith. which are primarily governed by the Thrift Banks Act (R. Callejo. G. Reason: Before a loan is approved. it must exercise due diligence before entering into said contract. 2. 4. The President may also intervene at any time and assume jurisdiction over such labor dispute in order to settle or terminate the same. 10). 331 SCRA 267). CA. provided that. d. b. 58. 2. Such powers as may be necessary to carry on the business of commercial banking: a. 24-28) COMM¶L BANK (Sec. Extending credit. Accepting or creating demand deposits. (Sec. General powers incident to corporations 2. receiving other types of deposits and deposit substitutes. whether financial or non-financial POINT OF DISTINCTION UNIVERSAL BANK (Sec. The powers of an investment house. Discounting and negotiating promissory notes. bills of exchange and other evidence of debt. Accepting drafts and issuing letter of credits. 33) Shall not exceed 35% of the total equity in that enterprise nor shall it exceed 35% of the voting stock in that enterprise N/A Equity investment Quasi-Banks in 40% 40% Notes of hotjurist in foro conscientiae . whether financial or non-financial. 31). EQUITY INVESTMENTS May only invest in equities of allied enterprises. 1. The power to invest in non-allied enterprises (Sec.Page 4 of 26 UNIVERSAL BANK Authority to exercise additional powers other than those authorized for commercial banks May invest in the equities of allied. 25). 25) A publicly-listed bank may own up to 100% of the voting stock of only one other UB / CB (Sec. 35% of net worth N/A Powers 1. c. 29) 100% of equity 100% of equity y In other financial allied enterprises. e. Equity investment in non-financial allied enterprises 100% of equity 100% of equity UNIVERSAL & COMMERCIAL BANK Authorized to engage in quasi-banking functions without need for approval May accept or create demand deposits without need for approval Demand deposits Liabilities of the BSP and of other banks which are denominated in Philippine currency and are subject to OTHER BANKS Not so authorized Equity investment in a single non-allied enterprise Must seek approval of Monetary Board before accepting or creating demand deposits. investment shall remain a minority holding (Sec. 23). NCBA). (Sec. 24) COMMERCIAL BANK No such powers additional payment in legal tender upon demand by the presentation of checks (Sec. 30-32) Total investment in allied enterprises Total investment in non-allied enterprises Equity investment in any one enterprise 50% of net worth 50% of net worth 25% of net worth 25% of net worth (Allied only) Equity investment in financial allied enterprise: thrift bank. and non-allied enterprises (Sec. drafts. and 3. The powers authorized for a commercial bank. Buying and selling foreign exchange and other debt securities. rural bank or any financial allied enterprise (Sec. A. Notes of hotjurist in foro conscientiae . consolidated bank. the MB may temporarily relieve the surviving bank. such ratio shall be applied uniformly to banks of the same category (Sec. adviser. d. CA. and e. March 5. Rules: 1. 53) RISK±BASED CAPITAL The minimum ratio prescribed by the Monetary Board which the net worth of a bank must bear to its total risk assets which may include contingent accounts. safety deposit boxes) NET WORTH The total of the unimpaired paid-in capital including paid-in surplus. Upon prior approval of the Monetary Board. evidences of indebtedness and types of securities. or constituent bank or corporations under rehabilitation from full compliance with the required capital ratio. in the absence of any stipulation prescribing the degree of diligence required. 3. EXCEPT: purchases of evidence of indebtedness guaranteed by the Government. securities and other effects which it receives duly separated from its own assets and liabilities. 219 SCRA 426. act as managing agent. In case of a bank merger or consolidation. FUNCTIONS OF BANKS BASIC FUNCTIONS: 1. negligence. A bank may demand from its applicants a statement of their assets and liabilities and of their income and expenditures and other information. that of a good father of the family is to be observed. Deposit Function OTHER FUNCTIONS Universal banks and commercial banks may also exercise any of the following functions: a. or constituent bank or corporations under rehabilitation from full compliance with the required capital ratio. Receive in custody funds. Note: The bank acting as depositary or as an agent shall keep the funds. 34). documents and valuable objects. Rent out safety deposit boxes. or when a bank is under rehabilitation under a program approved by BSP. Distribution of net profits may be limited or prohibited and MB may require that part or all of the net profits be used to increase the capital accounts of the bank until the minimum requirement has been met. by order of and for the account of their customer. LOAN FUNCTION Requirement for Grant of Loans Before granting a loan. net valuation reserves and other adjustments as may be required by the Bangko Sentral (Sec. Distribution of net profits may be limited or prohibited and MB may require that part or all of the net profits be used to increase the capital accounts of the bank until the minimum requirement has been met. PROVIDED that. Effect of non-compliance with the prescribed minimum ratio: 1. The depositary would be liable if in performing its obligation it is found guilty of fraud. Make collection and payments for the account of others and perform such other services for their customer as are not incompatible with banking business. consultant or administrator of investment management/ advisory/consultancy accounts. b. a bank must ascertain that the debtor is capable of fulfilling his commitments to the bank. c. consolidated bank. 3. the Monetary Board may require or suspend compliance with such ratio whenever necessary for a maximum period of one year. Should such statements prove to be false or incorrect. Loan Function 2. 24). or when a bank is under rehabilitation under a program approved by BSP. shares. Acquisition of major assets and making of new investments may be restricted. the MB may temporarily relieve the surviving bank. 34). In case of a bank merger or consolidation. (Sec. the bank may terminate any loan granted on the basis of said statements and shall have the right to demand immediate repayment or liquidation of obligation (Sec. 40). 2. Acquisition of major assets and making of new investments may be restricted. Any stipulation exempting the depositary from any liability arising from loss on account of fraud. or 2. Act as financial agent and buy and sell. Effects of non-compliance with the prescribed minimum ratio: 1. However. EXCEPT: purchases of evidence of indebtedness guaranteed by the Government (Sec.Page 5 of 26 Allied Enterprises ± those entities which enhance or complement banking Non-Financial Allied Enterprises ± pertains to activities that do not involve money matters (such as warehousing. retained earnings and undivided profit. or 2. negligence would be void for being contrary to public policy (CA-Agro Dev¶t vs. 1993). officer. partnerships of which a DOS or any of the foregoing is a general partner. The borrower is director. The total amount of loans may be increased by an additional 10% of the net worth of such bank provided the additional liabilities of any borrower are adequately secured by trust receipts. or relative by legal adoption. 3. Note: While R. assigned to secure the loans or credit accommodations. pledged. Directors ± Directors of the lending bank 2. and (e).A. individually and/or together with any of the following persons. Stockholders. 8791 provides for the rates of 20% and 10% respectively. Joint and Solidary Signature (JSS) Practice A common banking practice requiring as an additional security for a loan granted to a corporation the joint and Solidary signature of a major stockholder or corporate officer of the borrowing corporation (Security Bank vs. or relative mentioned above. 2. warehouse receipts or other similar documents transferring or securing title covering readily marketable. partnership. c. credit accommodations and guarantees (Sec. or relative by legal adoption of a DOS. Officers ± Either identified in the by-laws or are generally known as such Stockholders ± those whose stockholdings. Loans fully guaranteed by the government. b. His spouse or relative within the first degree of affinity/consanguinity or relative by legal adoption. pledge or assignment covers only said coowner¶s undivided interest. or wholly or majority owned or controlled by any related entity or a group of related entities in items (b). Classification of Loans UNCLASSIFIED LOANS Those that do not have a greater±than± normal risk and the borrower have apparent ability to satisfy it in full and no loss in ultimate collection is anticipated. and 5. Co-owner. The prevailing rates are 25% and 15% respectively. Loans covered by assignment of deposits maintained in the lending bank and held in the Philippines. and b. 4. Other loans or credit accommodations which the MB may specify as non-risk items. The loan or financial accommodation of the DOS. (d). Corporation with inter-locking directors or where 20% of the capital stock is owned by the DOS and/or their spouses or relatives mentioned above. singly or with that of his related interest. Related Interest ± a. c.Page 6 of 26 2. Cuenca. the Bangko Sentral has not yet implemented such rates. Who are covered (BSP Circular No. 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. Requisites (BSP Circular No. corporation or other entity shall at no time exceed 20% of the net worth of such bank. with the stockholder or the stockholder¶s spouse. b. b. and d. except when the mortgage. 170): a. Limit on loans. Loans. and Related Interests) Officers. Single Borrower¶s Limit (SBL) Rules The total amount of loans extended by a bank to any person. Exclusions (NON-RISK LOANS): 1. In case of default. creditor¶s recourse is not limited to corporate properties but extends to personal assets of the surety. pledge or assignment covers only said co-owner¶s undivided interest. amount to 2% or more of the total subscribed capital stock of the bank: a. CLASSIFIED LOANS Those that have extraordinary risks of loss in collection due to some defects such as bad debts or those under litigation. pledged or assigned to secure the loan or credit accommodations. 341 SCRA 781). Loans secured by obligations of the Bangko Sentral or the Philippine Government. A co-owner. or any stockholder of a bank and related interest. shipping documents. partnership wherein any of the foregoing is a general partner. (3) a 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. b. DOSRI Accounts (Directors. He contracts a loan or any form of financial accommodation c. with the DOS or his spouse or relative within the first degree of consanguinity or affinity. non-perishable goods which must be fully covered by insurance. Surety would be compelled to ensure that the loan would be used for the purpose intended. Reasons: a. credit accommodations and acceptances under letters of credit to the extent covered by margin deposits. of the property/interest/ right mortgaged. 4. 170): 1. 3. The loan or financial accommodation is from (1) his bank or (2) a bank that is a subsidiary of a bank holding company of which both his bank and lending bank are subsidiaries. relatives within first degree of consanguinity or affinity. Notes of hotjurist in foro conscientiae . except when the mortgage. association. of property/right/interest (mortgaged. 35) 1. Spouse. It cannot be considered as a contract of lease because the full possession and control of the safety deposit box is not given to the renters (Sia vs. d. The loan officer told her that her application will not be approved because the grant of loans to related interests of bank directors. No waiver is required if the related interests are the borrower. which makes him an officer. (5%) SUGGESTED ANSWER: 3. Savings b. As trustee-trustor a. In this case. The written approval shall not be required for loans granted to officers under a fringe benefit plan approved by the Bangko Sentral. a. Not preferred credits (Central Bank vs. 20 SCRA 507). borrow from such bank nor shall be guarantor. No director or officer of any bank shall. e. In the nature of irregular deposits (Serrano vs. Time c. December 8. CA. As lessor-lessee a. Central Bank's "Manual of Regulations for Banks and Other Financial Intermediaries. Those secured by chattels and intangible properties (such as patents. b. Contract of loan/mutuum with the depositor as creditor iii. and guarantees secured by assets considered as non-risk by the Monetary Board. The resolution approving the loan shall be entered in the records of the bank and transmitted to the BSP. directly or indirectly. His wife applied for a loan with the said bank to finance an internet cafe. 96 SCRA 96) ii. trademarks. and stockholders is prohibited by the General Banking Law. Waiver of secrecy of deposits of whatever nature in all banks in the Philippines by the borrower. credit accommodations.R. Rules on amount of secured loans Those secured by real estate shall not exceed 75% of the appraised value of the real estate security. excluding the director concerned. trade names and copyrights) shall not exceed 75% of the appraised value of the security (Sec. credit accommodations. COLLATERALS 1. Information obtained from examination is strictly confidential. Money deposited is commingled with the other money. A written approval of the majority vote of all the directors of the bank. Explain whether the loan officer is correct. Safety deposit boxes ± the relation between a bank renting out safety deposit boxes and its customer with respect to the contents of the box is that of a bailor and bailee ± the bailment for hire and mutual benefit has been adopted in this jurisdiction. GBL ) B. 4. officers. ii. Morfe. 117416. Loans. Cooperative banks with regard to their cooperative shareholders. b. from borrowing from the bank. Demand Characteristics: i. v. Furthermore. directly or indirectly. No. The General Banking Law provides for additional restrictions to the bank before it can lend to its directors or officers. Notes of hotjurist in foro conscientiae . except with the written approval of the majority of all the directors of the bank. As debtor-creditor a. 37 & 38. Except: i. 2. iii. Value of collaterals The loan shall not exceed 75% of the appraised value of the real property plus 60% of the appraised value of the improvements or 75% of the appraised value of the chattel ( Secs. 222 SCRA 24 [1993]). 2000). f. A violation of this provision will cause his or her position to be declared vacant and the erring director or officer subjected to the penal provisions of the New Central Bank Act. cited in Ranioso v. Pio is the president of Western Bank. or in any manner be an obligor or incur any contractual liability to the bank. such dealings must be upon terms not less favorable to the bank than those offered to others (Section 1326. Section 36 of the General Banking Law of 2000 does not entirely prohibit directors or officers of the bank. Bank acquires ownership of the thing deposited and the right to use and dispose iv. 38). DEPOSIT FUNCTION Kinds of Deposits between a Bank and its Depositor 1. CA. BAR QUESTION: BANKS. 37). director and stockholder of the said bank. Central Bank. Trust account As bailee-bailor 3. endorser or surety for loans from such bank to others. and advances to officers in the form of fringe benefits. Dealings of a bank with any of its DOSRI shall be upon terms not less favorable to the bank than those offered to others (ARMS LENGTH RULE). G. Loans. Loans extended to DOSRI shall be limited to an amount equivalent to their respective unencumbered deposits and book value of their paid-in capital contribution in the bank. c.Page 7 of 26 Restrictions under the GBL and NCBA: a. is required. RESTRICTIONS ON LOAN ACCOMMODATIONS (2006) Pio is the president of Western Bank. constituting a common fund. plus 60% of the appraised value of the insured improvements (Sec. excluding the director concerned. Deposit of check for collection b. A bank other than a universal bank or commercial bank CANNOT accept demand deposit SAVINGS ACCOUNT Evidenced passbook. the law requires that the necessary measures are undertaken by the bank to record and establish the true identity of the depositor. (BPI v. or interest to the minor of whom he is the guardian. Drawings against uncollected deposits (uncleared checks) are generally prohibited. 2. (Sec. able to read and write c. 251. 2000) exception: Foreign currency deposits may be a ³numbered account´. A bank is negligent if it allows the withdrawal without requiring the presentation of a passbook. A. then such payment shall be made to the guardian. Deposit for specific purpose c. Joint account may be the subject of a survivorship agreement whereby the co-depositor agree to permit either of them to withdraw the whole deposit during their lifetime and transferring the balance to the survivor upon the death of one of them ( Vitug vs.Page 8 of 26 a. by a Demand. 7192 Kinds of Deposits Note: DEMAND DEPOSITS Only a universal or commercial bank can accept or create demand deposits.1 PD No. dividends. 22. (Sec. Minors : a. Thrift Banks Act of 1995) Married Women are allowed to open bank accounts without assistance of their husbands (RA No. time deposits and deposit substitutes shall not be subject to interest ceilings. 5. ( R. TIME DEPOSITS Depositors: 1. 1990) Temporary overdrawing against current accounts shall not be allowed unless caused by normal bank charges and other fees incidental to handling such accounts. ³And´ account Co-ownership The signatures of both co-depositors are required for withdrawals. savings. 33) Banks are prohibited from issuing / accepting withdrawal slips or other similar instruments to effect withdrawals without the passbooks except for bank authorized by the BSP to adopt the no passbook withdrawal system. Viray. July 21.734) If the guardian shall give notice in writing to any thrift bank not to make payments of deposits.A. 1998 ed. However. Deposit strictly for safekeeping and for specific purposes As agent-principal: a. b. Deposit for safekeeping NOW ACCOUNTS (Negotiable Order of Withdrawal) Interest bearing deposit accounts that combine the payable on demand feature of checks and investment feature of savings account. BSP Circular No. it should only be savings or time deposits An account with fixed term Note: Parents may deposit for their minor children or wards (Sec. ³And/or´ account Notes of hotjurist in foro conscientiae . Types of deposit accounts (Handbook on Bank Deposits. at least seven years of age b. NOW accounts. March 29. CA) Anonymous accounts are prohibited.. A bank other than a universal or commercial bank must seek approval of Monetary Board before accepting or creating demand deposits. Individual Joint a. CA. not disqualified by any incapacity d. No 9160 as amended by RA 9194.) 1. or to defeat the legitime of a forced heir (Rivera vs. 2003). PNB. People¶s Bank and Trust Co. the survivor may withdraw the entire balance on deposit. DEPOSIT No security given to guarantee repayment. 519. The law simply imposes on the bank a higher standard of integrity and performance in complying with its obligations under the contract of simple loan. The account may be deemed a survivorship agreement depending on the intention of the parties.) Note: The bank shall act as depositary or as an agent shall keep the funds. 62 Phil. 2. DEPOSIT SUBSTITUTE Guaranteed by certificates and other instruments. OR AGENTS OF BANKS: 1. or in any manner suspends the payment of its deposit liabilities continuously for more than 30 days. This fiduciary relationship means that the bank¶s obligation to observe ³high standards of integrity and performance´ is deemed written into every deposit agreement between a bank and its depositor. The fiduciary nature of a bank-depositor relationship does not convert the contract between the bank and its depositors from a simple loan to a trust agreement. 73 Phil. endorsement. securities and other effects which it receives duly separated from its own assets and liabilities (Sec. 219 SCRA 426. Ibid. Any stipulation exempting the depositary from any liability arising from loss on account of fraud. Viray. beyond those required of non-bank debtors. And upon the death of one. OFFICERS. Notes of hotjurist in foro conscientiae . for the purpose of re-lending or purchasing of receivables and other obligations (Sec. 53). 55). b. 57). the depositor relies on the stability and reputation of the bank. 272 SCRA 291). or acceptance of debt instruments for the borrower¶s own account. Deposit substitutes An alternative form of obtaining funds from the public. Rationale: To prevent violation of Bank Secrecy Law. G. negligence.Page 9 of 26 Either one of the co-depositors may deposit and withdraw from the account without the knowledge. In case a bank or quasi-bank notifies the Bangko Sentral or publicly announces a bank holiday. 138569. To directly act as insurer (Sec. aleatory contract supported by a lawful consideration which is valid unless when made as a mere cloak to hide an inofficious donation.R. 1998 ed.. 95. September 11. the Monetary Board may summarily and without need for prior hearing close such banking institution and place it under receivership of the Philippine Deposit Insurance Corporation (Sec. 546 [1942]). Publication of capital stock (Sec. ON DIRECTORS. its clearing account with the Bangko Sentral is overdrawn. c. Suspension of Payment on its Deposit Liabilities B. 6. PNB vs. CA. (Handbook on Bank Deposits. 5. 56). 1993). Unauthorized advertisement representation (Sec. it does not comply with the liquidity standards/ratios prescribed by the Bangko Sentral for purposes of determining funds available for dividend declaration. CA. 64). EMPLOYEES. CA. CA. Failure by the bank to pay the depositor is failure to pay a simple loan and not a breach of trust. under a similar contract of simple loan (CBTC vs. other than deposits. or or business To employ casual or non-regular personnel or too lengthy probationary personnel in the conduct of its business involving bank deposits (Sec. if at the time of declaration: a. A. through the issuance. The fiduciary nature of banking requires banks to assume a degree of diligence higher than that of a good father of a family (CBTC vs. To conduct business in an unsafe or unsound manner (Sec. it is deficient in the required liquidity floor for government deposits for 5 or more consecutive days. 62). ON BANKS: 1. consent and signature of the other. whether express or implied. that of a good father of the family is to be observed. d. 3. The depositary would be liable if in performing its obligation it is found guilty of fraud. 54) For banks or quasi-banks to declare dividends. in the absence of any stipulation prescribing the degree of diligence required.). Make false entries in any bank report or statement or participate in any fraudulent transaction. to transfer property in fraud of creditors. A bank has the right to set-off the deposits in its hands for the payment of any outstanding indebtedness to it on the part of the depositor (Gullas vs. No. RA 7653). 53) PROHIBITIONS A. or It has committed a major violation as may be determined by the Bangko Sentral (Sec. 4. March 5. negligence would be void for being contrary to public policy (CA-Agro Dev¶t vs. A. or has given any unwarranted benefits. and stockholders or to the BSP or to the public in general. Foreign Foreign individuals and non-bank corporations may own or control up to an aggregate of 40% of the voting stock of a domestic bank. or any other form of compensation in order to influence such persons into approving a loan or other credit accommodation application. ON EXAMINERS.. 55 or aid in the commission of the same. b. or trust entities. commission. l. 3. fee. Other services as determined by the Monetary Board. creditors. The act or omission has resulted or may result in material loss or damage. i. Data imaging. Property management services. ASSIST OR RENDER TECHNICAL ASSISTANCE TO ANY BANK: Commit any of the acts enumerated in Sec. 4. c. Furnish false or make misrepresentations or suppression of material facts for the purpose of obtaining. courier and postal services. Notes of hotjurist in foro conscientiae . import and other trading transactions. OWNERSHIP OF STOCKS OF A DOMESTIC BANK Filipino In case of a Filipino individual or a domestic nonbank corporation. 56) In determining whether a particular act or omission. C. the bank has to do it by itself. which is not otherwise prohibited by law. bank forms and promotional materials. Viray. Janitorial services. h. upon prior approval of the Monetary Board the following functions: D. corporations. Messenger. or any other entity. 1998 ed. storage. or Outsource inherent banking functions ± a bank cannot engage the services of another entity to receive deposits on its behalf. m. ON BORROWERS: 1. Offer any director. d. g. Processing of export.Page 10 of 26 2. The making of false reports or misrepresentations or suppression of material facts by personnel of the BSP shall constitute fraud and shall be subject to administrative and criminal sanctions. 2. advantage or preference to the bank or any party in the discharge by the director or officer of his duties and responsibilities through manifest partiality. and other related systems. Accept gifts or any other form of remuneration in connection with the approval of a loan or other credit accommodation from said bank. The act or omission involves entering into any contract or transaction manifestly and grossly disadvantageous to the bank. 2. a bank may outsource. Transfer agent services for debt and equity services. officer. Printing of bank statements. 2. or abnormal risk to the institution¶s depositors. except for certain functions affecting the ability of the bank to ensure the fit of technology services deployed to meet its strategic and business objectives and comply with pertinent laws and regulations.). Overvalue or aid in overvaluing any security for the purpose of influencing in any way the actions of the bank or any bank. However. rule or regulation affecting banks. a. 3. or abnormal risk or danger to the safety. All information technology systems and processes. stability. Credit investigation and collection. Security guard services. or increasing a loan or extending the period thereof. or 1. liquidity or solvency of the institution. EXAMINE. n. quasi-bank or trust entity. the MB shall consider any of the following circumstances: 1. each may own up to 40% of the outstanding voting stock of a local bank. whether or not the director or officer profited or will profit thereby. may be deemed as conducting business in an unsafe or unsound manner. 5. f. p. Attempt to defraud the said bank in the event of a court action to recover a loan or other credit accommodation. Without order of a court of component jurisdiction. k. BSP OR GOVERNMENT OFFICERS AND EMPLOYEES ASSIGNED TO SUPERVISE. Property appraisal. j. disclose to any unauthorized person any information relative to the funds or properties in the custody of the bank belonging to private individuals. CONDUCTING BUSINESS IN AN UNSAFE OR UNSOUND MANNER (SEC. 4. Fraudulently overvalue property offered as security for a loan from the bank. employee or agent of a bank any gift. renewing. Clearing and processing of checks not included in the Philippine Clearing House System. evident bad faith or gross inexcusable negligence. Vehicle service contracts o. The act or omission has resulted or may result in material loss or damage. Printing of bank loan statements and other non-deposit records. quasi-banks. investors. 4. 3. Rationale: To prevent violation of Bank Secrecy Law (Handbook on Bank Deposits. The act or omission has caused any undue injury. Credit card services. e. conveyed to it in satisfaction of a debt previously contracted in the course of its dealings. 2. the 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. Entries under the second and third modes are restricted to banks which are among the top 150 foreign banks in the world or top 5 banks in their country of origin. banks must as much as possible retain only assets that are easily marketable. Entry: Governed by the provisions of the Foreign Bank Liberalization Act and the Offshore Banking System Decree (Sec. GBL). (Sec 12. 2). the nationality of the controlling shareholders of the non-bank corporations will be traced to determine the foreign ownership of the domestic bank (Sec. 2. However this should not be without prejudice to the 40% restriction imposed by Sec 11of the GBL. 1. provided: a. NO. If individuals: by the citizenship of the individuals b. GBL) Two or more corporations owned and controlled by the same family group or same group of person shall be considered related interest and must be fully disclosed in all transaction by such corporations or related group of person with the bank. 7721) The Monetary Board authorizes foreign banks to operate through any of the following modes of entry: 1. 3. 2. 72 78) As mortgaged to it in good faith by way of security for debts. irrespective of the place of incorporation (Sec. to S TOCKHOLDINGS OF F AMILY GROUPS OR R ELATED I NTEREST The law does not prohibit ownership of the stock by members of the same family or related interest.A. foreign banks may be allowed to own up to 100% equity of only one domestic bank as a mode of entry if authorized by the Monetary Board (Sec. EXCEPTIONS: 1. Also. If corporations: by the citizenship of the controlling stockholders of the corporation. MINIMUM CAPITALIZATION: OWNERSHIP OF REAL PROPERTY GENERAL RULE: A bank cannot acquire and own real property. unless otherwise provided by the Monetary Board (Sec. provided: a. foreign bank may avail itself of only one mode of entry. Foreign bank or Philippine corporation may own up to 60% of the voting stock of only one domestic bank or new banking subsidiary (Sec. Within seven years from effectivity of the GBL (June 13. 2000). legitimate or common law. banks must maintain liquidity at all times to enable it to perform its functions. ACT LIBERALIZING ENTRY OF FOREIGN BANKS (R. the GBL does NOT impose a limit on the number of shares that can be owned by the same family or related interest. By establishing branches with full banking authority.Page 11 of 26 The percentage of foreign-owned voting stocks in a bank shall be determined: (GRANDFATHER RULE) a. Thus. purchasing or owning up 60% of the voting stock of an existing bank. 73. Other foreign individuals and non-bank corporations may own up to 40% of the voting stock of a domestic bank. and such as it shall purchase at forced sales or to Notes of hotjurist in foro conscientiae . (Sec 13. 51). and b. 1. GBL). shall be considered family groups or related interest and must be fully disclosed in all transaction by such individual with the bank. However. 72) Revocation of license to do business in the Philippines: The Monetary Board may revoke such license on the grounds that the foreign bank is insolvent or in imminent danger thereof or that its continuance in business will involve probable loss to those transacting business with it (Sec. As shall be necessary for its own use in the conduct of its business. FOREIGN BANKS (SECS. For foreign bank branches ± not less than the US$ equivalent of P210M Amendments introduced by GBL 2000 1. By investing in up to 60% of the voting stock of a new banking subsidiary incorporated under laws of Philippines. GBL) Unlike the former law. The total investment in such real estate and improvements shall not exceed 50% of the combined capital accounts. For locally incorporated subsidiaries ± equal to that of domestic banks of the same category 2. 11. Rationale: Banks are not engaged in the business of acquiring and possessing real property. 11). 2. the law provides that stockholdings of individuals related to each other within the 4th degree of consanguinity or affinity. By acquiring. 78). and b. Where such service is incidental to financial assistance provided by the government-owned or controlled corporation to the bank 3. even though no benefit may accrue to the bank therefrom (10 Am Jur 2d. nor will it be permitted to shirk from its responsibility for such frauds. 1(3) SC Cir. A bank may be bound by an agreement providing for a longer redemption period (Ibaan Rural Bank TRUST OPERATIONS (SECS. or behalf of others (Sec. whether full-time or part-time. CA and Marcos. To enjoin or restrain the conduct of foreclosure proceedings. 52). G. 321 SCRA 83). GR 134068. A bank holding out its officers and agents as worthy of confidence will not be permitted to profit by the frauds they may thus be enabled to perpetrate in the apparent scope of their employment. 99-10-05) 2. in general. As otherwise provided under existing laws. To maintain the quality of bank management and afford better protection to depositors and the public. shall. in the particular case. Mortgagor is a natural person ± Within one year after the registration of sale with the Register of Deeds (Sec. 127469. 19).R. a banking corporation is liable to innocent third persons where the representation is made in the course of its business by an agent acting within the general scope of his authority even though. Prohibition on Public Officials GENERAL RULE: No appointive or elective official. AM No. at the same time. Mortgagor is a juridical person ± At any time before the registration of the certificate of foreclosure sale which in no case shall be more than 3 months after foreclosure. CA. benefit. January 15. 16) Independent Director A person other than an officer or employee of the bank. EXCEPTIONS: 1. whichever is earlier. 5 of the Rural Bank Act 2. Redemption price: Amount due under the mortgage deed + interest + all the cost and expenses incurred by the bank or institution from the sale and custody of the property less the derived income (Sec 78. June 25. the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other person. 79-93) Only a stock corporation or a person duly authorized by the Monetary Board shall act as a trustee or administer any trust or hold property in trust or on deposit for the use. CA. provided that the bank may after said period continue to hold the property for its own use. serve as an officer of any private bank (Sec. converting it to conventional redemption or by estoppel if the extension was unilaterally made. Accordingly. Union Bank vs. that property acquired under such circumstances shall be disposed of by the bank within a period of 5 years. provided. 2001) Right of purchaser to possess property: Immediately after the date of the confirmation of the auction sale. however. its subsidiaries or affiliates or related interests. the Monetary Board shall prescribe. p. As otherwise provided under Sec. the petitioner must file a bond conditioned that he will pay all the damages which the bank may suffer by the injunction (Sec. subject to (1) (Sec. 114). 47). 79) Notes of hotjurist in foro conscientiae . for his own ultimate benefit (Philippine Banking Corp. RULES ON FORECLOSURE OF A REAL ESTATE MORTGAGE BY A MORTGAGEE-BANK Application: Judicial or extrajudicial foreclosure JUDICIAL EXTRAJUDICIAL Fit and Proper Rule DIRECTORS & OFFICERS Right of redemption Within 1 year from registration of the foreclosure sale (exception to Rule 68) 1. pass upon and review the qualifications and disqualifications of individuals elected or appointed as bank directors or officers and disqualify those found unfit (Sec. thus. vs. 2004). vs.Page 12 of 26 secure debts. No. 3) 2. As provided by specific provisions 2. receiver or depositary shall be kept separate and distinct from the general business. To maintain price stability conducive to a balanced and sustainable growth of the economy. banking and credit. Act as the executor of any will when it is named the executor thereof 4.Page 13 of 26 4. or when there is no will 5. and similar institutions (Sec. The trust business and all funds. including all other funds. 64-66. 2. Act as administrator of the estate of any deceased person. No. properties or securities received by any trust entity as executor. guardian. P OWERS / FUNCTIONS : 1. 49-60) Custodian of reserves (Secs. 4. Act as trustee on any mortgage or bond issued by any municipality. holding. it is the government agency charged with the responsibility of administering the monetary. benefit. 103) Clearing channel or house. corporation or body politic and to accept and execute any trust consistent with law 2. GBL). banking. Notes of hotjurist in foro conscientiae . 80. Issuer of currency (Sec. or the related interests. or sell. 3. unless the transaction is specifically authorized by the trustor and the relationship of the trustee and the other party involved in the transaction is fully disclosed to the trustor or beneficiary of the trust prior to the transaction (Sec. administrator. 87. Sections 34-37 of RA 7653 (by excluding the bank from clearing) 3. including relatives within the 1st degree of consanguinity or affinity. purchase or acquire property from. and the rents. R ESPONSIBILITIES : 1. assign or lend money or property to. banking and credit system of the country and is granted the power of supervision and examination over bank and non-bank financial institutions performing quasi-banking functions. Establish and manage common trust funds (Sec. Prohibitions: 1. To provide policy directions in the areas of money. 3. 66) 1. 94. for account of the trustor or the beneficiary of the trust.any activity resulting from a trustortrustee relationship involving the appointment of a trustee by a trustor for the administration. trustee. 102) Banker of the government ± the BSP shall be the official depository of the Government and shall PENALTIES FOR VIOLATION OF THE GBL (SEC. CA. properties. and profits thereof 6. 151 SCRA 376 [1987]). issues. any of the departments. or depositary of the estate of any minor or incompetent person. especially where the PCHC does not operate (Sec. of such trust entity (Sec. advantage of trustor or others called beneficiaries. Suspension or removal of the director or officer 2. Trust Business. and credit To supervise bank operations To regulate the operations of finance companies and non-bank financial institutions performing quasi-banking functions. GBL). 3. trustee. management and administration of any estate. To promote and maintain monetary stability and the convertibility of the peso. management of funds and/or properties of the trustor by the trustee for the use. 7653) Purpose: To maintain a central monetary authority that shall function and operate as an independent and accountable body in the discharge of its responsibilities concerning money. transfer. officers and stockholders. of such directors. 83) BANGKO SENTRAL NG PILIPINAS (BSP) The state¶s central monetary authority.A. P RIMARY OBJECTIVES : 1. and as receiver and depositary of any money paid into court by parties to any legal proceedings (R. stockholders or employees of the trust entity. with the will annexed. including savings and loan associations (Busuego vs. Dissolution of the corporation by quo warranto proceedings THE NEW CENTRAL BANK ACT (NCBA) Powers of trust entities: 1. Accept and execute any trust for the holding. and assets. receiver. 2. officers. Act under the order or appointment of any court as guardian. real or personal. purchase debt from instruments of. No trust entity shall. directors. whether public or private. 4. 25) ± shall include the power to: a. 30) c. 117-122) Bangko Sentral.16. 4. must be natural-born citizens of the Philippines. S UPERVISION AND E XAMINATION OF B ANKS Q UALIFICATIONS OF MEMBERS OF THE MONETARY B OARD : 1. consultant. within one (1) year prior to his appointment (Sec. remunerated or ad honorem. 7.Page 14 of 26 represent it in all monetary fund dealings (Secs. 6.116) 5. 8. Accordingly. Note: The degree of diligence required of the members of the MB. by designation of the President. banking institutions and quasi-banks. all of whom shall serve full-time. 123124) ± Under Article VII. 2. RA 8791). 3. Initiate criminal prosecution of erring officers of banks Government agent (Secs. in which case such member shall resign from. 6. 2. 3. 9). of known probity and patriotism. Place a bank under receivership or liquidation (Sec. extending to enterprises wholly or majority-owned or controlled by the bank (Sec. Subsidiary ± a corporation more than 50% of the voting stock of which is owned by a bank or quasi-bank Affiliate ± a corporation the voting stock of which. Financial advisor of the government (Secs. 81-89. 7. in case any member of the Monetary Board with personal or pecuniary interest in any matter in the agenda of the Monetary Board shall disclose his interest to the Board and shall retire from the meeting when the matter is taken up (Sec. to the extent of 50% or less. agent or stockholder of any bank. 14). is owned by a bank or quasi-bank or which is related or linked to such institution or intermediary through common stockholders or other factors determined by the Monetary Board. and conduct periodic or special examinations of. 3. with the exception of the Governor who should at least be 40 years of age. Source of credit (Secs. employee. cannot be connected directly with any multilateral banking or financial institution or has a substantial interest in any private bank in the Philippines. unless there is convincing proof that the action of the Bangko Sentral is plainly arbitrary Notes of hotjurist in foro conscientiae . 109) Supervisor of the banking system (Sec. the President may contract or guarantee foreign loans but with the prior concurrence of the Monetary Board. lawyer. officer. and divest himself of any and all interests in such institution before assumption of office (Sec. C OMPOSITION : Seven members consisting of: 1. in social and The BSP shall have supervision over. with the exception of positions in eleemosynary. they may not accept any other employment. of unquestionable integrity. and with recognized competence economic disciplines. including their subsidiaries and affiliates engaged in allied activities. civic. Examine. cultural or religious organizations or whenever. of good moral character. 9). 110. D ISQUALIFICATIONS AND I NHIBITION ON GOVERNOR AND B OARD M EMBERS : NO RESTRAINING ORDER AGAINST BSP 1. 9). 20). MONETARY BOARD (MB) The body by which the powers and functions of the Bangko Sentral are exercised (Sec. this power may not be restrained by a writ of injunction unless there is convincing proof that the action of the BSP is plainly arbitrary (Sec. cannot be employed in any such institution within two (2) years after the expiration of his term except when he serves as an official representative of the Philippine Government to such institution (Sec. Sec. 9). disqualified from being a director. 2. at least 35 years of age. 61-63. quasi-bank or any other institution which is subject to supervision or examination by the No restraining order or injunction shall be issued by the court enjoining the Bangko Sentral from examining any institution subject to supervision or examination by the Bangko Sentral. those coming from the private sector shall not hold any other public office or public employment during their tenure (Sec. the Governor of the Bangko Sentral and the fulltime members of the Board shall limit their professional activities to those pertaining directly to their positions with the Bangko Sentral. 25) b. 5.6). officials and employees of the BSP in the performance of their functions is extraordinary diligence (Sec. NCBA). Chairman: Governor of the BSP A member of the cabinet to be designated by the President of the Philippines Five (5) members who shall come from the private sector. 20 of the 1987 Constitution. the Governor or the full-time member is tasked to represent the interest of the Government or other government agencies in matters connected with or affecting the economy or the financial system of the country (Sec. 27) 2. To lease. being required in writing by the Monetary Board or by the head of the supervising and examining department willfully refuses to file the required report or permit any lawful examination into the affairs of such institution shall be punished under the Act. owner. voidable. CA. 6. His authority would be only to bring actions to assail the same.The willful making of a false or misleading statement on a material fact to the Monetary Board or to the examiners of the Bangko Sentral shall be punished. information relating to the condition or business of any institution. (Sec. in an amount to be fixed by the court. Termination: 1. director or officerin-charge of any institution subject to the supervision or examination by the Bangko Sentral who. 4. being an officer.. directly or indirectly. 4.e. directly or indirectly requesting or receiving any gift. the Congress or any government office or agency authorized by law. DIRECTORS. . The conservator¶s power is not unilateral and he cannot simply repudiate valid obligations of the bank. 29). Collect all monies and debts due said bank. 35) PROHIBITIONS ON BANK OFFICERS. 5. unenforceable or rescissible (First Phil. employee. proceedings for receivership and liquidation shall be pursued (Sec. A conservator appointed by the BSP may take over without the need of first declaring the bank insolvent. with the power to overrule or rebuke the actions of the previous management and board of directors of the bank or quasi-bank. agent. present or pecuniary or material benefit for himself or another. director. fully disclosed to the Monetary Board. The power to revoke contracts only covers those that are deemed defective ± i. 2. from any institution subject to supervision or examination by the Bangko Sentral. 2. borrowing from any institution subject to supervision or examination by the Bangko Sentral shall be prohibited unless said borrowings are adequately secured. 34) False Statement. Duration: Not to exceed 1 year Effects: 1. When the MB is satisfied that the institution can continue to operate on its own and the conservatorship is no longer necessary. 252 SCRA 259). 3. CORPORATE POWERS OF THE BSP 1. and the management thereof. condone. alter and use a corporate seal which shall be judicially noticed To enter into contracts RECEIVERSHIP OF A BANK OR Notes of hotjurist in foro conscientiae . The powers must be related to preservation of assets. or settled liability to the BSP To do and perform such other necessary powers R EFUSAL TO M AKE R EPORTS E XAMINATION . except under orders of the court. 3. otherwise they would infringe the nonimpairment clause of the Constitution. Reorganize the management. 2. 4. To adopt. or release any claim of.Any officer. void. LAWYERS. 3. Such power to revoke cannot extend to post-facto repudiation of perfected transactions. To take charge of the assets. consultant or stockholder. Exception: non-stock savings and loan associations and provident funds organized exclusively for employees of the Bangko Sentral. Bank/quasi-bank retains juridical personality 2. OR PERMIT CONSERVATORSHIP OF A BANK OR QUASI-BANK Ground: State of continuing inability or unwillingness to maintain a condition of liquidity deemed adequate to protect the interest of depositors and creditors. and except as otherwise provided in this Act. manager. reorganization of management and the restoration of viability. liabilities. Not a precondition to the designation of a receiver Powers of conservator: 1.Page 15 of 26 and made in bad faith and the petitioner or plaintiff files with the clerk or judge of the court in which the action is pending a bond executed in favor of the Bangko Sentral. of any institution subject to supervision or examination by the Bangko Sentral. But if the continuance in business of the bank would involve probable loss to its depositors or creditors. own. and sell property To sue and be sued To acquire and hold such assets and incur such liabilities in connection with its operations or as are essential to the proper conduct of operation To compromise. 7. (Sec. and Exercise all powers necessary to restore its viability. revealing in any manner. (Sec. . lawyer or agent. Int¶l Bank vs. AGENTS Personnel of the Bangko Sentral are hereby prohibited from: 1. the Monetary Board issued a Resolution ordering the closure of TSB. stockholders and the general public. G. 76118. 220 SCRA 536). GBL) Facts: Based on the financial reports submitted to the Central Bank. 30. 56. placing it under receivership and appointing Ramon V. This ³close now and hear later´ scheme is grounded on practical and legal consideration to prevent the unwarranted dissipation of the bank¶s asset and as a valid exercise of the police power to protect the depositors. creditors. Quasi-banks ± Any person competence in banking or finance of recognized Functions: 1. GBL) 3. or 4. Suspension of payment of deposit liabilities continuously for more than 30 days (Sec. stockholders and general public (Central Bank vs. the appointment of a receiver operates to suspend the authority of the bank and of its directors and officers over its property and effects (Villanueva vs. Grounds: Under NCBA 1. 1993). 53. NCBA. 244 SCRA 395 [1995]). Receiver: 1. March 30. Note the distinctions between rehabilitation and liquidation. CA. Under GBL 1. The TSB filed a complaint assailing the resolution on the ground of lack of prior notice and hearing 3. Banks ± PDIC 2. 2. Insufficiency of realizable assets to meet its liabilities. Plainly. it is unmistakable that the assailed actions should precede the filing of the case. creditors. Inability to continue business without involving probable losses to its depositors or creditors. MANDATORY REQUIREMENTS FOR BANK CLOSURE Examination by the appropriate BSP department as to the condition of the bank Notes of hotjurist in foro conscientiae . Taiaoqi as receiver. but not including inability to pay those caused by extraordinary demands induced by financial panic in the banking community. No. GBL) review. When it provides for the filing of the case within 10 days after the receiver takes charge of the assets of the bank. Thus. Ruling: Section 29 of the Central Bank Act does not contemplate prior notice and hearing before a bank may be declared to stop operations and placed under receivership. Willful violation of a cease and desist order that has become final. Only stockholders representing the majority of the capital stock of a bank have the personality to file a petition for certiorari to be filed within 10 days from receipt by the board of directors of the institution of the order directing receivership. Immediate gathering and taking charge of all the assets and liabilities of the institution and administering them for the benefit of creditors 2. 220 SCRA 536 2. forbidding it from doing business in the Philippines. whether the institution should undergo rehabilitation or liquidation. Central Bank vs. Court of Appeals. Notification to the BSP or public announcement of a bank holiday (Sec. Determination ASAP but not later than 90 days. Inability to pay liabilities as they become due in the ordinary course of business. 29 of the Central Bank Act does not contemplate prior notice and hearing before a bank is placed under receivership. The purpose of the scheme is to protect the depositors.Page 16 of 26 QUASI-BANK/CLOSURE Receivership is equivalent to an injunction to restrain the bank in any way. CA. CLOSE NOW. Persistence in conducting business in an unsafe or unsound manner. CASE DIGEST Central Bank of the Philippines vs. which states that the Financial condition of The Triumph Savings Bank (TSB) is one of insolvency and its continuance in the business world involve probable loss to its depositors and creditors. the legislature could not have intended or authorize ³no prior notice and hearing´ in the closure of the bank and at the same time allow the suit to annul it on the basis of the absence thereof. HEAR LATER SCHEME Sec. liquidation or conservatorship. General powers of a receiver 3. (Sec. involving acts or transactions which amount to fraud or a dissipation of the assets of the institution (Sec. CA.R. It is enough that such action is made the subject of a subsequent judicial 1. 53. 30) Issue: Whether or not a Monetary Board Resolution be annulled on the ground of lack of prior notice and hearing. Reason: Stockholders owning a majority of the shares are expected to be more objective in determining whether the resolution is plainly arbitrary and issued in bad faith (Sec. Open Market Operations (Sec. 1-Peso. the MB shall determine and confirm if the bank is insolvent. and if public interest requires. if the volume of money is high. Within 60 days. 113 SCRA 778 [1982]) The corporation retains its legal personality (Teal Motor Co. 204 SCRA 519 [1991]). Regular courts have no jurisdiction over actions filed by claimants against an insolvent bank (Ong vs CA. 1. 4.00 25 centavo coin or less: In amounts not exceeding P100. 5. 2. 51 Phil. If BSP wants to decrease money supply. is at the option of the creditor. However. The condition of the bank is one of insolvency or that its continuance would involve probable loss to its depositors and creditors. After that period. Bank is not liable to pay interest on deposits during the period of suspension of operation (Overseas Bank vs. In case of quasi-banks. MB. 2. vs. shall order the liquidation of the bank. 20 SCRA 507 [1967]) 2. 3. After the expiration of this latter period. 57). 253 SCRA 105). BSP will raise reserve requirement Notes of hotjurist in foro conscientiae . 90) a. it closes the rediscount window or charges very high interest rates for rediscounted notes 4. Reserve Requirements (Sec. Examination shows that the condition of the bank is one of insolvency Director shall inform the MB in writing of such fact If the MB shall find the statement of the department to be true. 5. 30). Notes for any series or denomination ± More than 5 years old Coins ± More than 10 years old Rules: LIQUIDATION Grounds: 1. 94) . a petition for assistance in the liquidation of the institution pursuant to a liquidation plan adopted by the PDIC for general application to all closed banks. If BSP wants to increase money supply. 2006) BSP Authority to Replace 1. the notes and coins which have not been exchanged shall cease to be a liability of BSP and shall be demonetized (Sec. LEGAL TENDER All notes and coins issued by the Bangko Sentral are fully guaranteed by the Republic and shall be legal tender in the Philippines for all debts. it buys government securities b. If BSP wants to decrease money supply.00 (Circular No. 83) (Rediscounting) a. 3. Morfe. 3. CA. 537. both public and private. it opens the rediscount window by reducing interest on loans b. Procedure: 1. both public and private (Sec. 60). 52) Legal tender power of coins 3.000. a check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited to his account (Sec. 5-Peso and 10-Peso coins: In amounts not exceeding P1. Loans to Banks (Sec. Payment shall be in accordance with the rules on concurrence and preference of credits. CFI. 3. If BSP wants to increase money supply. The assets under receivership or liquidation shall be deemed in custodia legis in the hands of the receiver and shall be exempt from garnishment. 30). with the proper RTC. they shall cease to be legal tender during the following year or for such longer period as MB may determine. 2. it sells government securities 3 IMPORTANT TOOLS TO ACHIEVE PRICE STABILITY 1. it shall appoint a receiver of the assets and liabilities of the bank (Banco Filipino vs. levy. Receiver shall file ex parte. MONETARY STABILIZATION EFFECTS OF APPOINTMENT OF RECEIVER/ LIQUIDATION 1.Page 17 of 26 2. 549 [1928]) Deposits do not become preferred credits (CB vs. A determination by the MB that the bank cannot be rehabilitated. 1. the liquidation plan shall be adopted by the Monetary Board. Notes and coins called in for replacement shall remain legal tender for a period of one year from the date of call. 2.where a certain percentage of the deposit is set aside and cannot be lent out a. Checks representing demand deposits do not have legal tender power and their acceptance in the payment of debts. attachment or execution (Sec. Suspension of operation 2. 2. He shall convert the assets of the institution to money for the purpose of paying the debts of the institution (Sec. 2. 15 SCRA 91 [1965]). 1405 Upon written permission of the depositor. the Sheriff garnished P50. reserve requirement is reduced. GENERAL RULE: The deposits covered by law are considered as of an absolutely confidential nature and may not be examined.A. Upon service of the notice of garnishment on the bank where the defendant deposited funds. Execution is the goal of litigation as it is its fruit. To encourage people to deposit in banks 2. 49 SCRA 355 (1973) that peso deposits may be garnished and the depositary bank can comply with the order of garnishment without violating the Law on the Secrecy of Bank Deposits. To discourage private hoarding so that banks may lend such funds and assist in the economic development PROHIBITED ACTS: 1. EXCEPTIONS: A. Notes of hotjurist in foro conscientiae . CDC complained that the garnishment violated the Law on the Secrecy of Bank Deposits because the existence of his savings account was disclosed to the public. 2) Rules: 1. It was held in China Banking Corporation v. the Bangko Sentral shall not pay interests thereon (Sec. or office. NIRC). execution process. 3. 2. governmental bureau. Any disclosure by any official or employee of any bank to any unauthorized person of any information concerning the said deposits. 128). 1405) Purposes: 1. 1. CDC's complaint is not meritorious. 103). Deposits maintained with the Bangko Sentral as part of the reserve requirements shall be exempt from attachment. and It shall not engage in development banking and financing (Sec. 4. inquired or looked into by any person. to satisfy the judgment in favor of his creditor. Examination and inquiry or looking into all deposits. (Sec. MO. Garnishment (2004) CDC maintained a savings account with CBank. either directly or indirectly. with the banks in the Philippines including investments in bonds issued by the Government. 4. Garnishment is part of the Coverage: All deposits of whatever nature with banks or banking institutions in the Philippines. On orders of the MM Regional Trial Court. F ROM R. 3. SUGGESTED ANSWER No. No increase of more than 4% point within 30day period. 2. In cases where the money deposited or invested is the subject matter of the litigation. NIRC .000 of his account. 3019. including investments in bonds issued by the Government of the Philippines. No. The required reserves of each bank shall be proportional to the volume of its deposit liabilities. Upon order of a competent court in cases of bribery or dereliction of duty of public officials. He must file a written waiver of his privilege under RA 1405 or other general or special laws (Sec. Since the required reserves are imposed primarily to control the volume of money.A. 94). Ortega. of whatever nature. added by analogy in PNB vs. PROHIBITIONS ON THE BSP 1. Gancayco. 6[f].A. such funds become part of the subject matter of litigation. It shall not acquire shares of any kind or accept them as collateral. A decedent to determine his gross estate. BAR QUESTION: Banks: Secrecy of Bank Deposits.Inquiry by the Commissioner of Internal Revenue into bank deposits of: a. (5%) Is CDC's complaint meritorious or not? Reason briefly. Anti-Graft and Corrupt Practices Act cases (R. if the volume of money is low. 2. B. garnishment. b. From other laws 1. when it has been 2. SECRECY OF BANK DEPOSITS LAW (R. or any other order or process of any court or agency (Sec. its political subdivisions and its instrumentalities. No. In cases of impeachment.Page 18 of 26 b. and shall not participate in the ownership or management of any enterprise. Inquiry or examination by the Anti-Money Laundering Council (AMLC) of any particular deposit or investment with any banking institution or non-bank financial institution upon order of any competent court in cases of violation of the AntiMoney Laundering Law. A taxpayer who has filed an application for compromise of his tax liability by reason of financial incapacity to pay his tax liability. 3. N O . R. officer. 8 of RA 9194) 4. which is applicable to both peso and foreign currency deposits. including its punitive provisions. It has no application at all to accounts. Any disclosure is purely incidental to the execution process (China Banking Corporation vs.A. 25) E. Comprehensive Dangerous Drugs Act of 2002 (RA No. Foreign Currency Deposit Act (R. G. 55. except that no court order shall be required in the following unlawful activities: a. 49 SCRA 355). General Banking Law of 2000 (R. even when constituted locally. including the statutory exemptions provided therein.4). 1405). R. No. b. provided that with respect to bank deposits. relatives. a) Will the complaint filed against the directors of Hi Yielding Corporation prosper? Explain SUGGESTED ANSWER: No. and that they were grossly negligent in handling its affairs. ascendants. the officers filed a criminal complaint against the directors of Hi Yielding Corporation for violation of Republic Act No. employee. Hijacking and other violations under RA 6235. opened and constituted abroad b) Was there a violation of the Secrecy of Bank Deposits Law (Republic Act No. garnishment. or agent of any bank shall. the provisions of existing laws shall prevail (Sec. C. Illegally acquired property extends to cases where property is concealed by being held by or recorded in the name of respondent¶s spouse. Disclosure to the Treasurer of the Philippines of dormant deposits for at least 10 years under the Unclaimed Balances Act (Act No. 8791): 1. Including those perpetrated by terrorists against non-combatant persons and similar targets´ (Sec. descendants. 161 SCRA 576). c. are not applicable to FCDU accounts.Page 19 of 26 established that there is probable cause that the deposits or investments are related to an unlawful activity or a money laundering offense. destructive arson and murder under RPC.Boston Bank. 128996. The officers alleged that their bank deposits were illegally disclosed for want of a court order. because the punitive provisions of the Secrecy of Bank Deposits Law (R. otherwise known as the Foreign Currency Deposit Act of the Philippines. 9160) Provides for another exception to confidentiality. because the Foreign Currency Deposit Act (R. or any other persons (Banco Filipino Savings and Mortgage Bank vs. 267 RPC. only for purposes of REQUISITES FOR IN-CAMERA INSPECTION OF BANK DEPOSITS Notes of hotjurist in foro conscientiae . corporations. Bank of Switzerland.A. No. Purisima. 3.A. without court order. D. and Bank of New York. 9160 as amended by Sec. No. 55[b]). Aside from documents and contracts. 6426). New Central Bank Act (R. No. Court of Appeals. even though they are banks. refers to foreign currency deposits accounts constituted within the Philippines. BAR QUESTION: BANKS: APPLICABILITY: FOREIGN CURRENCY DEPOSIT ACT & SECRECY OF BANK DEPOSITS (2005) Hi Yielding Corporation filed a complaint against five of its officers for violation of Section 31 of the Corporation Code. 6426. For their part. Outsourcing of inherent bank functions Money-market placement is not covered by RA 1405 because it is not deposited in the bank. Periodic and special examinations by the BSP (Sec. Extends confidentiality to foreign currency deposits. No.A. 2002) 2. and that such deposits were not even the subject of the case against them. 7653): 1. (Intengan v. or any other entity. DOSRI loans 2. 6426): B. SUGGESTED ANSWER: No.A. 1405)? Explain. Garnishment of bank deposit of judgment debtor does not violate RA 1405. No bank shall employ casual or non-regular personnel or too lengthy probationary personnel in the conduct of its business involving bank deposits (Sec. OTHER LAWS RELATING TO SECRECY OF BANK DEPOSITS A.A. No director. Dollar deposits in several banks overseas .A. the corporation also submitted in evidence records of the officers· U. No. 9165). The corporation claimed that the said officers were guilty of advancing their personal interests to the prejudice of the corporation. It was not the intention of the legislature to place bank deposits beyond the reach of execution to satisfy a final judgment. 11. 3936). No. Ortega. but the law contains only one ground authorizing examination: upon written permission of the depositor. Its purpose is merely to secure information as to the name of the depositor and whether or not the defendant had a deposit in said bank.S. Anti-Money Laundering Act (R. Kidnapping for ransom under Art. disclose to any unauthorized person any information relative to the funds or properties in the custody of the bank belonging to private individuals. No. February 15. Basis for this ruling was that the inquiry would be made in the course of an impeachment proceeding. However.´ (PNB v. descendants and relatives. the information obtained from the examination remains confidential and may be used by BSP examiners only in legal action it may initiate involving the said deposits. Pending case before a court of competent jurisdiction Account must be clearly identified The inspection is limited to the subject of the pending litigation. during the impeachment proceedings against former President Estrada. (Section X315. 5. requires a director. if he applies for a DOSRI loan. the Court declared as proper the production by subpoena duces tecum of bank records of transactions by or in the names of the wife. W RITTEN P ERMISSION OF DEPOSITOR A bank may allow an inquiry into a deposit with the written consent of the depositor. Hon. officer or stockholder of a bank or their related interests to submit a written waiver of the secrecy of all his deposits of whatever nature in all banks of the Philippines in favor of the Bangko Sentral. the deposit remains confidential. This overturned an earlier case decided by the High Court where it held that a prosecution under the AntiGraft Law was not embraced within any of the exceptions to the Bank Secrecy Law that would allow disclosure by a bank of information concerning a deposit. The inspection must cover only the account identified in the pending case. the Supreme Court expanded the exception under the Anti-Graft Law. 25. Bank of PI. When personnel of the depositary bank testified on the bank deposits. The bank personnel and account holder must be present during the inspection. the consent is involuntary because the law requires it. the insurance company wanted to determine how the defendant had applied the proceeds of the check. series of 1998. Desierto. children and friends of a special agent of the Bureau of customs accused of having Notes of hotjurist in foro conscientiae . In another case. 1405 VIS-À-VIS POWER OF THE BSP TO CONDUCT PERIODIC AND/OR SPECIAL EXAMINATIONS (SEC. but rather a method by which Sun Life could trace the proceeds of the check that it paid to the petitioners. however. but also those of his spouse. Thus. NCBA) Prof. Hence. An oral or implied authorization does not suffice. Mellon Bank remitted $1 million rather that an intended $1. The Supreme Court allowed their testimonies to remain on the record. In another case. The only conclusion possible is that Section 8 of the Anti-Graft Law is intended to amend Section 2 of Republic Act No. Gancayco. 190 SCRA 633. the defense moved to strike out the testimonies of the depositary bank¶s witnesses. 7 SCRA 10 (1963). on the examination of a person whose property has been attached and person indebted to him or controlling his property. Thus.000 or both. Penalties Imprisonment of not more than 5 years or a fine not more than P20. Here. NO. (Tatalon Bario Council v.´ The Court added that the examination of bank records was not a fishing expedition. W HERE F UNDS D EPOSITED ARE S UBJECT OF L ITIGATION Case Digest Onate v Hon Zeus Abrogar.Page 20 of 26 Marquez vs.000 to the recipient. GBL & SEC. Chief Justice Davide ruled that Clarissa Ocampo could testify on the Jose Estrada/Jaime Dichaves accounts maintained with Equitable PCIB Bank. Section 26 of the New Central Bank Act as implemented by BSP Circular No. Magsino. The Court struck down the argument that the examination would violate the Bank Secrecy Law. R. 3. who deposited part of the remittance in a local bank. Manual of Regulations for Banks). 1405 by providing an additional exception to the rule against disclosure of band deposits. No. in the discretion of the court.A. The trial court allowed Sun Life to examine pertinent records of the bank in which the check was deposited. A waiver of the Bank Secrecy Law is also required in case of loans secured by a hold-out or an assignment of certificates of time deposits. the Supreme Court held that they should be included. Impeachment In impeachment proceedings. explaining that the examination fell within the exception ³in cases where the money deposited or invested is the subject matter of litigation. Viray believe that the general rule still applies. 161 SCRA 576 (1988). (Banco Filipino v. 135882. UNEXPLAINED WEALTH (RA3019) Although the Bank Secrecy Law did not include cases covered by the Anti-Graft Law among the exceptions. This consent may be given voluntarily. 230 SCRA 181 Facts: Sun Life brought a collection case to recover the proceeds of a check it had issued. In some cases. Aquino and Prof. Fidel Purisima. 15 SCRA 91 (1965). 2. 170. stating Section 2 of said law allows the disclosure of bank deposits in cases where the money deposited is the subject matter of the litigation. 4. over the objections of the defense that this would violate the Bank Secrecy Law.R. and other persons as well. when it allowed an examination not only of the accused¶s deposits. 4. (Mellon Bank v. the impeachment court may inquire into bank deposits. ascendant. 2001 1. June 27. Ruling: The Supreme Court held that the examination was authorized by Section 10 of Rule 57. G. 4. Secrecy of Bank Deposits (2000) GP is a suspected Jueteng lord who is rumored to be enjoying police and military protection.´ the Supreme court held that the Ombudsman could not inquire into bank deposits until there was a pending case in court involving the deposits.Page 21 of 26 allegedly acquired property manifestly out of proportion to his salary and lawful income. This is an absurdity that we will not ascribe to the lawmakers. BAR QUESTION: Banks. Desierto. No. GP was summoned to a hearing of the Committee on Racketeering and Other Syndicated SUSPICIOUS TRANSACTIONS: Transactions with covered institutions regardless of the amounts involved. even if ordered by the Court. ANTI-MONEY LAUNDERING ACT OF 2001 (R. The Court explained: To sustain the petitioner¶s theory. Indeed.A. 3936) requires each bank to file a sworn statement with the Treasurer of the Philippines stating the deposits that the bank holds in the names of persons known to be dead or who have not made deposits or withdrawals during the preceding ten years or more. Is the opposition of GP and the banks valid? Explain. Commercial & International Bank v. this is done only after the bank shall have first communicated with the depositor at his last known residence or post office address. 3. SUGGESTED ANSWER: Yes. that the prohibition against examination of or inquiry into a bank deposit under Republic Act No. and restrict the inquiry only to property held by or in the name of the government official or employee. Court of Appeals.´(Phil. is unwarranted in the light of the provisions of the statutes in question. in the illegal activities of suspected gambling and drug lords. Subpoenaed to attend the investigation were officers of certain identified banks with a directive to them to bring the records and documents of bank deposits of individuals mentioned in the subpoenas. The Committee conducting the investigation is not a competent court or the Ombudsman authorized under the law to issue a subpoena for the production of the bank record involving such disclosure. to ensure that the Philippines shall not be used as a site for unlawful money laundering activities. 9194) Purposes: 1. and To pursue State¶s foreign policy to extend cooperation in transnational investigations and prosecution on money laundering activities.000. where any of the following circumstances exists: 1. 2. as amended by R. GP and the banks opposed the production of the banks· records of deposits on the ground that no such inquiry is allowed under the Law on Secrecy of Bank Deposits (RA 1405 as amended). in cash or other equivalent monetary instrument in excess of P500. the disclosure to evade payment of their just debts. and if the existence of the deposit is disclosed. 93 SCRA 452 (1991).A. The investigation does not involve one of the exceptions to the prohibition against disclosure of any information concerning bank deposits under the Law on Secrecy of Bank Deposits. GP is not a public official. The opposition is valid. However. Said the court: ³It is clear from the discussion of the conference committee report on x x x Republic Act. It is also requires the bank to post a copy of the sworn statement in the bank premises. Such a disclosure of the deposits and the depositors. Covered Entities: 1. all they would have to do would be to simply place the property in the possession or name of persons other than their spouse and unmarried children. within one banking day.(Marquez v. there is no real inquiry in such a case. Court of Appeals. their subsidiaries and affiliates supervised or regulated by the BSP COVERED TRANSACTION: Transaction. which was conducting a congressional investigation ´in aid of legislationµ on the involvement of police and military personnel. The envy of many drug lords who had not escaped the dragnet of the law. and would make available to persons in government who illegally acquire property an easy and fool-proof means of evading investigation and prosecution. To protect and preserve the integrity and confidentiality of bank accounts. Upon Order of the Ombudsman Although Section 8 of the law that created the Office of the Ombudsman expressly granted the Ombudsman the power to ³administer oaths. (193 SCRA 452 (1991) the Supreme Court held that the garnishment of a bank deposit does not violate the Bank Secrecy Law. among them GP. There is no underlying legal or trade obligation Notes of hotjurist in foro conscientiae . issue subpoena and subpoena duces tecum and take testimony in any investigation or inquiry. or his spouse and unmarried children. 1405. Banks Non-banks Quasi-banks Trust entities All other institutions. 359 SCRA 772 (2001) Unclaimed Balances Law The Unclaimed Balances Law (Republic Act No. Crimes of the House of Representatives. 5. through the expedient of converting their assets into cash and depositing the same in a bank. Garnishment of Bank Deposit In China Banking Corporation v. 1405 does not preclude its being garnished to insure satisfaction of a judgment. 9160. including the power to examine and have access to bank accounts and records. No. does not violate the Bank Secrecy Law. and possibly even of local government officials. 2. All records of all transaction of covered institution shall be maintained and safely stored for 5 years from the dates of transaction. The Court of Appeals may issue a freeze order. MONEY LAUNDERING: A crime whereby the proceeds of an unlawful activity are transacted. With respect to closed accounts. Since he does not have any visible job. the company reported his purchases to the Anti-Money Laundering Council (AMLC). require a system of verifying their legal existence and organizational structure. unless extended by the court. Inc. b. s well as the authority and identification of all person purporting to act on their behalf. shall be preserved and safely stored for at least 5 years from the dates when they were closed. and requires no previous conviction for the unlawful activity (See also Sec." like Jueteng operations. It is committed by the following: 1. Can Rudy move to dismiss the case on the ground that he has no criminal record? (2. unless the Supervising Authority prescribes a longer period not exceeding 10 working days. are made to appear as having originated from legitimate sources. transacts or attempts to transact said monetary instrument or property. performs or fails to perform any act as a result of which he facilitates the offense referred to in number 1 above. which shall be effective immediately and for a period of 20 days. the bank disclosed to it Rudy's bank deposits amounting to P100 Million. account files and business correspondence.Page 22 of 26 2. Rudy would be guilty of a "money laundering crime" committed when the proceeds of an "unlawful activity. or relates to. and after determination that probable cause exists that any monetary instrument or property is in any way related to an unlawful activity. Under the Anti-Money Laundering Law.5%) 2. upon ex parte application of AMLC. Notes of hotjurist in foro conscientiae . Any person knowing that any monetary instrument or property represents. he was charged in court for violation of the Anti-Money Laundering Law. SECRECY OF BANK DEPOSIT. SUGGESTED ANSWER: No. Upon request of the AMLC. Any circumstance relating to the transaction which is observed to deviate from the profile and/or the client¶s past transactions with the covered institution Transaction is in any way related to an unlawful activity or offense under this Act that is about to be. They shall maintain a system of verifying their clients and in case of corporate client. Thereafter. AMLC charged him with violation of the Anti-Money Laundering Law. Customer Identification ± Covered institutions shall establish and record the true identity of its clients based on official documents. it may be perceived that the client¶s transaction is structured in order to avoid being the subject of reporting requirements under the Act J URISDICTION : All cases: RTC Public officers and private persons in conspiracy with them: Sandiganbayan 5. 3. BAR QUESTION: BANKS. AMLC (2006) Rudy is jobless but is reputed to be a Jueteng operator. is being or has been committed Analogous transactions to any of the foregoing P OWER TO F REEZE A CCOUNTS The power of the AMLC to freeze accounts has been deleted under RA 9194 6. 4. Anti-Money Laundering Act of 2001). 3. the proceeds of any unlawful activity. P REVENTION OF M ONEY L AUNDERING 1. thereby making them appear to have originated from legitimate sources. Client is not properly identified Amount involved is not commensurate with the business or financial capacity Taking into account all known circumstances. 3. involves. The money laundering crime is separate from the unlawful activity of being a Jueteng operator. Any person knowing that any monetary instrument or property is required under this Act to be disclosed and filed with the AMLC fails to do so. Any person knowing that any monetary instrument or property involves the proceeds of any unlawful activity. 1. Subsequently. ± Covered institution shall report to the AMLC all covered and suspicious transactions within 5 working days from the occurrence thereof. Reporting of Covered and Suspicious Transactions. He has never been charged or convicted of any crime. Record Keeping. the records on customer identification. He maintains several bank accounts and has purchased 5 houses and lots for his children from the Luansing Realty. only: a. 2. 7. 3. trust or investment funds. pre-need companies and other entities administering or otherwise dealing in currency.5%) SUGGESTED ANSWER: No. Inc. Notes of hotjurist in foro conscientiae . it has an obligation to deliver titles to Rudy. A. under investigation by the Commission. 3. Recommend Measures to Prevent the Occurrence of Similar Attempts At a Violent Seizure of Power and for Other Purposes. by a subsequent law. PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC) ACT (R. commodities or financial derivatives are covered institutions. or even repealed.. SECRECY OF BANK DEPOSITS (1991) The law (RA 6832) creating a Commission to conduct a Thorough Fact-Finding Investigation of the Failed Coup d·etat of Dec 1989. is a real estate company. the police power of the State is superior to the non. Inc. To raise funds for his defense.5%) authority to examine any bank deposits. Insurance The PDIC assesses and collects insurance assessments from member-banks to insure member-banks¶ deposit accounts. or banking transactions have been used in support or in furtherance of the objectives of the said coup d·etat. is it under obligation to deliver the titles to Rudy? (2. creating a commission to conduct an investigation of the failed 1989 coup d·etat and to recommend measures to prevent similar attempts to seize power is a valid exercise of police power. is not a covered institution under Section 3 of the Anti-Money Laundering Act. Bank Rehabilitation The PDIC may grant financial assistance to distressed banks if it is proven to be a less costly alternative than closure. The bank being specified as a "covered institution" under the AntiMoney Laundering Law. hence it is not a covered institution under Section 3 of the Anti-Money Laundering Act. when the Commission has reasonable ground to believe that said deposits. Inc. In case of bank closures. 9302) Purposes: 1. To insure the deposit liability of banks in an account up to P250. Can Luansing Realty. RA 6832. has been restored.000 per depositor. in any bank or banking institution in the Philippines. As Luansing Realty. Only banking institutions.Page 23 of 26 2. natural or juridical. Hence. Even if it did. Inc. with prior approval by the Monetary Board.5%) PHILIPPINE DEPOSIT INSURANCE CORPORATION F UNCTIONS : A. C. therefore. insurance companies. Bank Examination Under the new law. or amended (such as by providing further exceptions therefrom).impairment clause. PDIC's authority to examine its member banks. and it may. Supposing the titles of the houses and lots are in possession of the Luansing Realty. This is one of the exceptions to the Secrecy of Bank Deposit Act. 2. be modified. expressly or impliedly. the bank did not violate any law. Luansing Realty. BAR QUESTION: BANKS. is obliged to report to the AMLC covered and suspicious transactions. 4. be compelled to transfer to the buyer ownership of the houses and lots? (2. the PDIC. Inc. may not use the Anti-Money Laundering Act to refuse to transfer to the buyer ownership of the houses and lots. In disclosing Rudy's bank accounts to the AMLC.000 for every single depositor of each bank irrespective of the number of accounts therewith. SUGGESTED ANSWER: Yes. trust or investment funds. Deposits are insured up to a maximum coverage of P250. Rudy sold the houses and lots to a friend. securities dealers and brokers. SUGGESTED ANSWER: Luansing Realty. Does the above provision not violate the Law on Secrecy of Bank Deposits (RA 1405)? SUGGESTED ANSWER: The Law on Secrecy of Bank Deposits is itself merely a statutory enactment. it may not invoke this law to refuse delivery of the titles to Rudy. To create a government-owned entity. provides that the Commission may ask the Monetary Board to disclose information on and/or to grant B. or banking transactions in the name of and/or utilized by a person. the PDIC processes and services claim for insured deposits. without thereby violating any law. did the bank violate any law? (2. The Secrecy of Bank Deposits Act did not amount to a contract between the depositors and depository banks within the meaning of the non-impairment clause of the Constitution. the balance may still be recovered from the PDIC after the final liquidation of the remaining assets of the closed bank. the RSB issued 13 certificate of time deposit which was insured with the PDIC. The insurance premiums are to be paid by the insured bank. Cash b. G. after deducting offsets. PNB. INSURANCE FUNCTION 1.Page 24 of 26 D. Nature: Compulsory insurance on all bank deposits Coverage: ³Insured deposits´ . 62 Phil. CA. 519 and Republic vs. losses due to a bank robbery are not covered. After deducting offsets Consistent with the rulings in Gullas vs. 2. Specific risk insured against: Bank closure only. July 22. set-off takes place ipso jure with respect to the depositor¶s bank deposit and his matured loan with the bank. Subrogates the PDIC to all the rights of the depositor against the closed bank to the extent of such payment. Issue: Whether or not the PDIC is liable for the plaintiffs¶ claims.000. Transferred deposits A deposit in an insured bank made available to a depositor by the PDIC as payment of the insured deposit of the depositor in a closed bank and assumed by another insured bank. CA. 3. The bank failed to pay the corresponding amount of the time deposit on its maturity date due to insolvency and advised the plaintiffs to file a claim with the PDIC. Receivership is the stage within which the PDIC manages the affairs of the closed bank and preserves its assets for the benefit of creditors. 6. 15012. Trust funds and safety deposit boxes are not covered.A. Insured deposits The net amount due to any depositor for deposits in an insured bank. In no case shall insured deposit exceed P250. 283 SCRA 462 3. provided that they are maintained in the same capacity and the same right for his benefit either in his own name or in the name of others. SPECIAL RULES 1. after deducting unpaid loans and other obligations of the depositor to the closed bank.000 per depositor. joint ³and´ account. Liquidation of closed banks After it is determined that the closed bank can not be rehabilitated. 2. joint ³and/or´ account. Transferred deposit ± A deposit in an insured bank made available to a depositor by the PDIC as payment of the insured deposit of such depositor in a closed bank and assumed by another insured bank. 5.000. not the depositors.the net amount due to any depositor for deposits in an insured bank. The fact that a bank instrument provides that the certificate is insured by the PDIC does not ipso facto make the latter liable for the same. 3519 and statements in the certificate that the same are insured by PDIC are not binding upon the latter. No. Amount of insurance: Maximum of P250. Instead of paying the promissory notes and checks. are to be added together. But the PDIC refused to pay the claim for it is not included in the list of duly recorded liabilities of the RSB. In case the depositor¶s account is more than the insurance coverage. PDIC liability is on a per bank basis. 283 SCRA 462). E. 1975 recognizing the debtor-creditor relationship of the bank and the depositor. CA. less any part thereof which is in excess of P250. Accounts in a bank. Ruling: The fact that the certificate state that the certificates are insured by PDIC does not ipso facto make the latter liable for the same should the contingency insured against arise. 4. even though in several branches. Capacities: individual account. the deposit liability of the PDIC is determined by the provisions of RA 3519 (PDIC vs. Thus. Liquidation refers to the recovery and conversion of assets into cash for distribution to all creditors in accordance with the order of creditor preference pursuant to law The plaintiffs invested in the money market placement with the Premier Financing Corporation (PFC) but when they went to PFC to encashed the checks and promissory notes corresponding to their investment the PFC referred them to the Regent Savings Bank (RSB). The PDIC upon receipt of the MB resolution ordering the closure of a bank. 7. Case Digest PDIC vs. Discharges the PDIC from further liability b. Effect of payment by the PDIC to the depositor of his insured deposit: a. Facts: Notes of hotjurist in foro conscientiae . immediately physically takes over the closed bank. the PDIC is designated as statutory receiver. the PDIC shall recommend the liquidation of the assets of the closed bank.R.00 per deposit (RA 9302) Condition precedent for entitlement to payment: Filing of claim within twenty-four months from order of closure Manner of payment: a. The deposit liability of the PDIC is determined by the provisions of R. Receivership of closed banks Once a bank is ordered closed by the Monetary Board (MB) of the Bangko Sentral ng Pilipinas. depositors are entitled to receive payment in the same currency in which the insured deposit is denominated. garnishment. after proper publication and the depositors still do not lay claim to them. 79 of Central Bank (CB) Circular No.A. FNCB. That the aggregate of the interests of each co-owner over several joint accounts. 3 SCRA 851 [1961]). the SC allowed garnishment of such deposits of a transient American tourist arising out of a heinous crime committed against a Filipino minor since to hold otherwise would result to injustice to a citizen perpetrated by a foreigner Notes of hotjurist in foro conscientiae . it shall not apply to FCD¶s already made or existing at the time of the issuance of such new regulation or enactment. Under CB Circular No.000. No.Page 25 of 26 4. CB (278 SCRA 27) Sec. whether owned by the same or different combinations of individuals. shall likewise be subject to the maximum insured deposit of Two hundred fifty thousand pesos (P250. 1389. PESO DEPOSIT Governed by R. 3. 1993. 1034). the maximum insured deposit shall be presumed to belong entirely to such juridical person or entity: Provided. UN C L AI ME D BAL AN C E S L AW (R . unless a different sharing is stipulated in the document of deposit. as amended. b. 9160) GENERAL RULE: Exempt from attachment. 3. 6426 1 exception + 1 provided under AMLA (R. further. Foreign currency deposits are exempt from taxes except the interests OTHER FEATURES: 1.00). No. 6426) FOREIGN CURRENCY DEPOSIT Governed by R. If the account is held jointly by two or more natural persons. juridical persons or entities. No. Bullion. a. No. EXCEPTION: Salvacion vs. No. N O . In a sui generis case. dated August 13. 3 93 6) ELEMENTS OF UNCLAIMED BALANCES 1. and The credit or deposit is in favor of a person: a. Authority to terminate insured status 1. c.A.A. A. building and loan association. and for Other Purposes") and Sec. the maximum insured deposit shall be divided into as many equal shares as there are individuals. juridical persons or entities. b. If the account is held by a juridical person or entity jointly with one or more natural persons. or who has not made further deposits or withdrawals during the preceding 10 years or more.A. 1405) Note: The PDIC law is not applicable to Offshore Banking Units (P. Security. who is dead. LEGAL CONSEQUENCE The unclaimed balances may be subject of escheat proceedings. and other court order and processes.D. 9 of RA 6426 (µAn Act Instituting a Foreign Currency Deposit System in the Philippines. Authorized banks may adopt a numbered account system for recording and servicing deposits in nonchecking accounts The credit or deposit must be with a bank. 1405 4 exceptions + exceptions found in special laws May be garnished or attached (not a violation of R. mandate that foreign currency deposits shall be insured under the provisions of RA 3591. or trust corporation. There must be a claim or deposit of: a. b.A. In the event a new enactment or regulation is issued decreasing the rights granted under the law. Non-payment of insurance premiums Continued engagement in unsafe and unsound banking practices FOREIGN CURRENCY DEPOSIT ACT (R. 2. 2. Demand drafts cannot be escheated but telegraphic notes can be escheated (Republic vs. No. d. 1389. Money. or other evidence of indebtedness. 2. or by two or more juridical persons or entities. Has there been substantial compliance of the aforesaid Act? If your answer to the foregoing question is in the negative. and The 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. 3. et al. information required by the Truth in Lending Act (RA 3765). Nevertheless. the conditional deed of sale which the parties executed mentioned that the total amount indicated therein included such finance charges. b) A violation of the Truth in Lending Act will not adversely affect the validity of the contract itself. NO. The law provides that the creditor must make a full disclosure of the credit lost. TRUTH IN LENDING ACT ( RA 3765) The law assures full disclosure by requiring the lender to give the borrower all the details regarding the transaction. what remedies may be availed of by Dana? SUGGESTED ANSWER: a) There was no substantial compliance with the Truth in Lending Act. if any to be credited as down payment and/or trade-ins.. Note: This case does not constitute another exception. c) It would allow Dana to refuse payment of financial charges or. The difference between the amounts set forth under clauses 1 and 2. fees and service charges. The amounts.A. the SC only ruled as such due to the special circumstances of the said case. to recover the same. However. The cash price or delivered price of the property or service required.Page 26 of 26 (Salvacion. what is the effect of the violation on the contract? In the event of a violation of the Act. vs. the latter imposed finance charges consisting of interests. to the extent applicable and in accordance with rules and regulation prescribed by the Board the following informations: 1. 2. 4. Under Sec. submit to Dana a written statement setting forth therein the Notes of hotjurist in foro conscientiae . 278 SCRA 27). individually itemized. which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit. The charges. a clear statement in writing setting forth. if already paid. the parties may agree that the obligation or transaction shall be settled in any other currency at the time of payment (Sec. REPEALING LAW TO UNIFORM CURRENCY ACT (R. without specifying the amounts due on each portion thereof would be insufficient and unacceptable. The statement that the total amount due includes the principal and the financial charges. The finance charge expressed in terms of pesos and centavos. Dana may also initiate criminal charges against the creditor. It did not. any creditor shall furnish to each person to whom credit is extended. Central Bank et al. 7. 6. prior to the consummation of the transaction. The total amount to be financed. *** *2'63((' BAR QUESTION: TRUTH IN LENDING ACT (1991) Dana Gianina purchased on a 36 month installment basis the latest model of the Nissan Sentra Sedan car from the Jobel Cars Inc. 1). 4. however. 8183) All monetary obligations shall be settled in the Philippine currency which is legal tender in the Philippines. In addition to the advertised selling price. 5.