Dizon Banking Reviewer
Dizon Banking Reviewer
Dizon Banking Reviewer
Prepared by:
FROM SECTION 2S
AY 2011-2012
Topic Page
Chapter 24
Chapter 5
6 -- Foreign
Prohibited Transactions
Banks and Trustand Cessation Of Banking Business
Operations 29
Possible Questions 33
MIDTERM COVERAGE: Chapter 1 - 6
Banking Laws
CHAPTER 1 – Banks and Business of Banking depositors with meticulous care and
always have in mind the fiduciary nature
• Declaration of the state with regards to banking – of banks
recognize vital role of the banks to provide • Not enough that he exerted reasonable
environment conducive to development of national diligence to ascertain the safety of his
economy clients
o It also states that banks need high • Such diligence is only required in its
standards of integrity and performance fiduciary relationship with its depositors
• Banks – entities engaged in the lending of funds and not to other transactions such as sale
obtained in the form of deposits (borrowing, of foreign exchange demand draft
lending, safe-keeping) • Sec 2 of GBL prescribes the statutory
• Banks may engage in other activities allowed by diligence required from banks – “high
the law other than lending standards of integrity and performance” in
serving its depositors.
Nature of Banking Business
• Diligence required of banks is more than
1. Debtor-Creditor Relationship that of a good father (PBCom vs. CA)
• It is a contract of loan and not deposit • Diligence extends to financial institutions
• Contract between bank and depositor is (e.g. GSIS)
governed by the provisions of the NCC on 7. Treatment of accounts with meticulous care
simple loan (Consolidated Bank and Trust • Must treat every account with utmost
Corp vs. CA ) fidelity regardless of amount
2. Fiduciary duty • There is no law mandating banks to call
• Fiduciary relationship – bank’s obligation up their clients whenever a significant
to observe high standard of integrity and amount shall be withdrawn from their
performance (Phil. Banking Corp. vs. CA) account
3. Not a trust agreement 8. Duty to keep records
• It is not a trust agreement and failure to 9. Banks are not gratuitous bailees
pay a loan is not a breach of trust 10. Banks not expected to be infallible
• It is not a trust agreement because banks • However, they must bear the loss for not
do not accept deposits to enrich depositors discovering mistakes if there are
but to earn for themselves established procedures not followed
4. Indispensable Institution 11. Dealing with registered lands
• Has a vital role in economic life • General Rule: mortgagee can rely on title
• Significance of banking institution to and does not need to investigate further
commercial transactions (Metropolitan • Exception: mortgagee cannot close his
Bank & Trust Co. vs. Cabilzo) eyes to facts which should put a
5. Impressed with public interest reasonable man on his guard, and yet
• Has public interest because people depend claim that he is in good faith
on the honesty and efficiency of banks • With banking institutions, mere reliance
• Stability of banks largely depends on the on the title is not enough as they need to
confidence of the people in the honesty investigate also
and efficiency of banks. • Doctrine of the “mortgagee in good faith”
6. Degree of diligence – all persons dealing with property
• Diligence higher than that of a good father. covered by the Torrens Certificates of
It must be extraordinary diligence Title are not required to go beyond what
• In Simex International vs. CA, the bank is appears on the face of the title. (Cavite
under obligation to treat the accounts of its Development Bank vs. Spouses Lim)
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
Banking Laws
10. Offshore Banks – deals with transaction with Only universal and commercial banks may
represent itself to the public as such in connection
foreign currencies in receiving funds from external
with its business name
sources and utilization of such
• Thrift banks can be allowed to have a business
• Governed by PD 1034
name of its own provided that “A thrift bank,
Authority to Engage in Banking and Quasi-Banking savings bank or private development bank” shall
Functions be added
• Above rule is also available to Rural/Coop
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
Type of Bank Amount (M) lien in their own stocks for indebtedness
of stockholders, prohibition against
Universal 4,950
granting loans or discounts upon security
Commercial 2,400
Thrift banks would become ineffective
1. Head office in Manila 325 2. Foreign stockholdings:
2. Otherwise 52 • Foreign individuals and non-banks can
Rural Banks own 40% of voting stock of domestic
1. Within Manila 26 bank.(aggregate foreign voting stocks)
2. Cebu/Davao 13 • A Filipino individual and domestic non-
st rd st
3. 1 -3 class city and 1 class 6.5
bank may each own up to 40% of the
municipality
th th th voting stock (no aggregate ceiling)
4. 4 -6 class city and 2-4 class 3.9
municipality • Citizenship of the corporation shall follow
5. 5th-6th class municipality 2.6 the citizenship of the controlling
• At least 25% of total authorized capital stock shall stockholders (>50%)
be subscribed by subscribers of proposed bank • The percentage of foreign-owned voting
•
25% of such subscription shall be paid-up. It shall stocks in a bank shall be determined by
not be less than the minimum capital requirement the citizenship of individual stockholders
• Incorporators/subscribers and proposed directors • At least 60% of voting stock in any
and officers must be (2) persons of integrity and commercial bank shall be owned by
(1) good credit standing Filipino citizens
• Such persons must (1) not be convicted of crime • In thrift banks, it shall be at least 40%
involving moral turpitude and (2) not officers of • Rural banks, 100% Filipinos
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
Meetings may be conducted through modern • PDIC – conviction of any criminal offenses
technologies
involving breach of trust
• A foreigner may be a member of the Board of
directors of a rural bank at the time of their Banking Days and Hours
assumption of office
• To protect funds of depositors and creditors, MB • At least 6 hours a day on working days (Mon-Fri
shall regulate payment of directors under certain except holidays)
circumstances: • May open in Saturdays, Sundays and holidays for
1. Comptrollership 3 hours (to report to BSP)
2. Business in unsafe or unsound manner • For purposes of deposits and withdrawals, bank
3. Bank is found to be in an unsatisfactory can extend beyond or early of 8AM and 8PM
financial condition • If it is for other purposes, they can exceed 6 hours
minimum but not extend beyond or early of 8AM
Fit and Proper Rule and 8PM
• Banks in airports or major fish ports can open
• Powers of MB against directors:
a. Review qualifications and DQs of 24hours
• Changes in banking days and hours can be made
directors
once every 30 days except during emergencies
b. After due notice, may disqualify, suspend
or remove director ATMs
c. Fit and proper rule shall be determine by -
integrity, experience, education, training, • Classes: 1.) Offsite 2.) Mobile
competence of the director
• Banks may establish off-site ATMS provided that
• Disqualifications of directors:
there is report on BSP and adequate security
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
measures. They are installed only in centers of • Any unsettled strike or lockouts involving banks
activity after 7 days shall be reported by BSP to DOLE
• Mobile ATMS are allowed to visit places with who will assume jurisdiction
large crowds of people provided it has adequate • Banks, through their president, shall inform BSP
security of the cause of the strike and the operations
affected
Independent Auditor
independent
MB auditor from list of CPA acceptable to
Financial Statements
Settlement of Disputes
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
CHAPTER 3 – Deposit Functions of Banks • When bank sees that depositor’s account has
sufficient amount, then it shall honor such
I. Kinds of Deposits
• If there is sufficient amount but bank dishonored,
1. Demand deposits then bank is liable. Otherwise if there is no
sufficient amount
• All those liabilities of BSP and of other banks • Banks must ensure that the check is only paid to
which are denominated in Philippine currency and its designated payee
are subject to payment in legal tender upon • Drawer must remember every time he issues a
demand by presentation of checks check and a bank must know the former’s
• Only universal and commercial banks may accept signature
or create demand deposits without prior authority • A bank is under no obligation to make partial
from BSP payment on the check only upon the amount in the
• Other types of bank require such authority. This drawer’s funds
considered as the current account in the bank • The cannot also compensate the lack of money in
the deposit account to the savings account
1.a. Temporary over drawings and DAUD
• Cross-check must be: (1) may not be encashed but
• Temporary overdrawings are not allowed except only deposited (2) check negotiated only once – to
normal bank charges and other fees incidental to one who has an account with a bank and (3) serves
handling such accounts as warning to holder (State Investment House vs.
• Violations of temporary overdrawings will cause IAC)
(1/10 of 1%) fine per day computed on the basis of • Cashier’s check – bank’s own check and is treated
the amount of overdrawn but not to exceed as PN with the bank as maker
P30,000.00 per day • - deemed as cash (New Pacific Timber & Supply
•
Co. Inc. Cs. Señeris)
Drawings against uncollected deposits (DAUD) –
prohibited. Exception: made against uncollected
1.d. Set off Rule
deposits representing manager’s, cashier’s,
treasury warrants, postal money order and on us • A bank can set off or compensate by debiting a
check personal account of depositor for an amount
erroneously credits to the person’s proprietorship
1.b. Current accounts of officers
account
• All officers, employees of bank in cash
departments and other employees who have direct 1.e. Relationship of Payee or Holder and the Bank
responsibility in handling deposit transactions are • Principal and agent – relationship between payee
not allowed to maintain demand deposits or or holder of commercial paper and the bank to
current accounts which it is sent for collection (PCIB vs. CA)
1.c. Checks
2. Savings Deposits
• A written order addressed to a bank or person
•
carrying banking business, by a party having Banks may be authorized by the BSP to solicit and
money in their hands, requesting them to pay on accept deposits outside their bank premises
presentment, to a person named therein or to
2.a. Individual and Joint Accounts
bearer or to order, a named sum of money (Moran
vs. CA) • If the joint account is “and”, both signatures of co-
depositors are required before withdrawals
1.d. Duty of bank to honor checks
• If “and/or” either their signature is sufficient
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• Minors can have savings and time deposit may, at the option of the bank, be booked on the
accounts without assistance of parents day of receipt. Other non-cash deposits are treated
1. Must be at least 7 yrs old as contingent accounts on the day of receipt and
2. Able to read and write shall be booked as deposits the following day
3. Sufficient discretion
4. Not otherwise DQed by law
8. Booking Deposits after regular banking hours
• Parents can still deposit money to minor
• For deposits of minors in thrift banks, guardian • Deposits, whether cash or not, received after close
may make notice that payment (deposits, interest, of regular banking hours shall be treated as
dividends) be made to him and not to the minor contingent accounts and booked the following day
• Corporations may open bank accounts as follows:
(1) Incorporation stage and (2) Post incorporation 9. Average Daily Balance
stage
• Banks may impose and collect service charge or
3. Time of payment of interest in time deposits maintenance fee on savings and current accounts
that fall below minimum monthly average daily
• Interest on time deposit may be paid upon balance (ADB)
maturity, withdrawal or advance provided that the • must be properly disclosed in the terms of deposit
interest paid in advance shall not exceed interest • For dormant accounts: fall below 2 consecutive
for one year months
4. Treatment of matured time deposits
III. Survivorship Agreement
• Time deposits not withdrawn or renewed on its • There is survivorship agreement when joint
due date shall be treated as a savings deposit and owners of a deposit agree that either of them could
shall earn interest until actual withdrawal with withdraw any part or whole of account during
rates of savings deposit lifetime of both and the balance upon death of
• Deposit substitute not withdrawn shall have a either belongs to the survivor
maturity rate applicable to a deposit substitute • It is an aleatory contract
5. Clearing Cut-off Time • Survivorship agreement is per se not contrary to
law but may be violative
• General rule: all deposits and withdrawals during • Agreement can be a mere cloak to hide in
regular banking hours shall be credited/debited to inofficious donation to transfer property in fraud
accounts on date of receipt or payment
• If there is BSP clearing arrangement, not earlier IV. Nature of Bank Deposits
than 2 hours before BSP clearing time in head 1. Deposits are considered simple loans and not
offices and 3.5 hours in branches preferred credits
• If there is no BSP clearing arrangement 2 hours 2. Bank deposits are in the nature of irregular
before local clearing time deposits as they are loans who earn interest ( BPI
Banking Laws
V. Duties of Banks • BSP can also inquire in deposits for periodic and
special examinations
• Meticulous care with deposits of clients due to
• Ombudsman has the In-Camera Inspection power
fiduciary relationship
to look into deposits provided that there is a
• Banks must give payment to the proper party, thus pending case is court and 1.) the account must be
collecting bank has obligation to ascertain that the properly identified 2.) inspection limited to the
drawer truly intended that the depositor is the subject matter
payee
• CIR can also look into deposits to determine gross
• In case of death of depositor and the bank knew of estate of a decedent or he has applied for
it, there shall be no further withdrawal compromise tax liability
• Administrators or heirs can withdraw up to 20k
without certification of CIR
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
CHAPTER 4 – Investments, Loans and Other Bank Equity investments of universal bank in non-financial
Functions allied enterprise
I. Universal Operation of Universal banks • Universal bank may own up to 100% of equity in
non-financial allied
Powers of Universal bank
• Examples are:
1. Commercial bank 1. Warehousing companies
2. Investment house 2. Storage
3. Invest in non-allied enterprises 3. Safe deposit box
4. Companies engaged in management of
Equity Investments of Universal bank mutual funds and not funds itself
5. Computer services
• Allied enterprises are those which enhance or 6. Home building and development
complement banking 7. Service bureaus
• If it is a financial allied enterprise, then it involves 8. PCHC
money matters. Otherwise it shall be non-financial • Rural and cooperative banks can invest in non-
• Total investments in equities of allied and non- financial allied enterprises such as:
allied enterprises shall not exceed 50% of the net 1. Warehousing
worth of the bank 2. Fertilize and agricultural chemical
• Equity investment in any one enterprise, whether 3. Farm equipments
allied or non, shall not exceed 25% 4. Trucking and transportation
• Net worth – total of the unimpaired paid in capital 5. Marketing agricultural products
including paid-in surplus, retained earnings and 6. Leasing
undivided profit
Equity investment of Universal Bank in Non-allied
Equity investments of Universal bank in Financial Allied enterprise
enterprise
• Equity investment in a single non-allied enterprise
• Universal bank can own 100% of the equity in a shall not exceed 35% in total equity or voting
thrift, rural bank or financial allied enterprise stock
• Publicly-listed universal or commercial bank may
own 100% of voting stock of another universal or Investments in non-allied enterprises
commercial bank
• Universal bank may invest in equity of enterprise
• If not publicly-list then only 49% own
of eligibles:
• Following are financial allied enterprises:
1. Enterprises engaged in agriculture, mining,
1. Leasing companies
quarrying, manufacturing, public utilities
2. Banks
2. Industrial parks
3. Investment houses
3. Commercial project with government
4. Financing companies
privatization program
5. Credit card companies
• Equity investment in Quasi-banks – universal bank
6. Financial institutions can only invest up to 40% in equity of quasi-banks
7. Companies in stock brokerage and foreign
exchange dealership II. Operations of Commercial Banks
8. Insurance companies
9. Holding company provided that the Powers of Commercial banks
equities of the entity is confined under
1. General powers incident to corporations
universal bank BSP regulation
2. All power necessary to carry business of
commercial banking such as:
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
a. Accepting draft and issuing letters of Equity investment of commercial bank on financial allied
credit enterprises
b. Discounting
c. Creating demand deposits • Can own up to 100% in equity of thrift and rural
d. Buy and selling Forex bank
• However cannot own 100% of equity of financial
Issuance of Letters of Credit allied enterprise other than above banks
• Letter of credit – financial device developed by Equity investment in commercial bank on non-financial
merchants as convenient mode of dealing with
sales of goods allied enterprises
• The buyer will apply for a letter of credit in the • Can own 100% of said enterprises
issuing bank
III. Risk-Based Capital
• The seller will then send the goods to the carrier
and he will make a draft, called bill of exchange Minimum Ratio
• Seller will present the draft and the necessary
documents, such as bill of lading to issuing bank • MB shall prescribe minimum ratio
to receive the payment • It will be based on the net worth and risk assets of
• While the goods are in transit, it shall be owned by a banks well as its compositions
issuing bank • It may alter compliance with ratio for a max
• When the goods arrived at the port of the buyer, period of 1 year
the buyer will pay the corresponding payment and • Ratio shall be uniformly applied to banks of same
also gain the documents category
• Since the buyer gain the documents, he can now
Effect of Non-compliance
acquire the delivered goods
• Independence principle – bank determines • If a bank does not comply then the MB can:
compliance with letter of credit only by examining 1. Limit distribution of net profits and be
shipping documents presented and need not used to increase capital accounts until
examine the goods minimum requirement is met
• There are three contracts: 2. Restrict acquisition of major assets and
1. buyer-seller new investments except with purchase of
2. buyer-bank readily marketable evidence of
3. seller-bank indebtedness of RP BSP
• There can be other parties such as notifying bank • In case of merger, rehabilitation, MB may
(inform seller), confirming bank (lend credence to temporarily relieve such bank with compliance
letter of credit), paying bank and negotiating bank with capital ratio
(discounter)
IV. Limit on loans, credit accommodation and guarantees
Equity investments on commercial bank
Single Borrowers Limit
•
Commercial bank may invest only in equities of
allied enterprises • Total amount of loans, credits accommodation and
• Total investment in equities of allied enterprises guarantees extended to any person, partnership or
shall not exceed 35% corporation shall not exceed 20% of net worth of
• Equity investment in one enterprise shall not bank
exceed 25% • In Circular 425 of 2004 of BSP, the SBL was
increased to 25%
• Exceptions to SBL:
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
1. MB may otherwise prescribe for reasons subsidiaries, more than half of voting power of
of national interest enterprise
2. Deposit of rural banks with GOC financial • Even if less than half of said voting power, it shall
institutions such as LB, DBP and PNB still have controlling interest if:
• Basis for determining SBL is the total credit 1. Agreement with investors
commitment of bank to borrower 2. Govern financial and operations
• Loans - to all accounts under loan portfolio 3. Can appoint majority of directors
• Credit accommodations - to credit and market risk 4. Cast majority vote on meetings
exposure of banks arising from accommodation • Subsidiary – corporation where more than 50% of
other than the loan the voting stock is owned by a parent corporation
• Total credit commitment - include loans, credit • Bill of exchange drawn in good faith against
accommodation, deferred letters of credit less actually existing values – drawn by a seller on the
margin deposits and guarantees purchase for the price of commodity sold
• Total credit commitment can be increased by 10% • Commercial paper owned by person negotiating
provided additional liabilities are secured by trust the same – paper arising from business transaction
receipts, shipping documents or readily marketable • Exclusion from SBL:
goods 1. Discount bills of exchange and discount
• Readily marketable goods – articles of commerce, commercial paper
agriculture or industry as constant dealings in 2. Credit accommodation to finance
ready market and price is easily ascertainable and importation of rice or corn up to 100% net
disposable worth of bank
• Parent corporation’s total credit commitment shall Must be approved by NEDA
also include its subsidiaries’ if it guarantees, 3. Loans and credit accommodation
accommodate or subsidiary is merely a department guaranteed by Industrial Guarantee and
of it Loan Fund
• Wholesale lending of government banks shall not 4. Liabilities of commercial paper issued for
exceed 35% of net worth to participating financial commercial paper held by UB as firm
institutions underwriter. Only 180 days and not
• PFI – institutions for relending to end-user exceed 5% from normal SBL
borrowers 5. Loans and credit accommodations covered
• The end-user borrower shall be subject to the 25% by international or regional institutions
SBL where Philippines is shareholder such as
• In municipalities where there are no government ADB
banks, deposits of rural and coop banks in private 6. Loans and credit accommodations with
banks shall not be subject to SBL valuation reserves provided that bank has
no unbooked valuation reserves
• Deposit in private depository bank used by thrift,
7. Loans and credit accommodations as a
rural and coop banks, with authority to accept
result of underwriting agreement of debt
demand deposits, after being cleared, shall be
securities not exceeding 30 days
exempted from SBL
• Bank guarantee – irrevocable commitment of a Violations
bank binding to pay a sum of money in event of
non-performance of third party • Monetary penalties – 1/10 of 1% of excess over
• Credit Risk Transfer – arrangement that allows the the ceiling but not exceed 30k per day
bank to transfer the credit risk associated with its • If bank resource is less than 50M, then only a max
loan or other credit accommodation to a third party penalty of P500 shall be imposed
• Control of majority interest or controlling interest • There will also be reprimand to directors/officers
– parent owns, directly or indirectly through its
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
Banking Laws
• Loans and credit accommodations to officers in • If surety director is not anymore party of the board
for of fringe benefits then he cannot be held liable
• Limit on loans and credit accommodations shall • Surety cannot extend to more than what is
not apply on those extended by coop bank to its stipulated
coop shareholders • Joint and solidary signature of major stockholder
or officer constitutes as an additional security for
Applicability of DOSRI rules and regulation to
loans granted to corporations (Security Bank &
government borrowing
Trust Company vs. Cuenca)
•
• Joint and solidary agreement – agreement where
Circular 547 of 2006 provides that DOSRI rules the contracting parties consent to be jointly and
shall also apply to loans and credit
accommodations granted to RP, subdivisions, severally liable in a loan obligation
instrumentalities and GOCCs
VII. Grant and purposes of loans and credit
• Exceptions would be: accommodations
1. Loans and credit accommodations that are
non-risk and not subject to ceiling Amount and purpose of loan
2. Those made by BSP
3. LGU due to full autonomy in their • Bank must grant loans and credit accommodations
propriety function only in amounts and for period of time essential
4. Director who acts as government for effective completion
representative • Must be consistent with safe and sound banking
practice
VI. Securities on Loans and credit accommodations • Purpose of loan shall be stated in application
• If bank finds that proceeds have been employed
Loans and credit accommodations against real estate
without its approval, the bank shall have the right
• Shall not exceed 75% of appraised value of to terminate the loan and demand immediate
respective real estate security plus 60% of the repayment
appraised value of the insure improvements
Requirement for grant of loan
Loans and credit accommodations on security of chattels
• Bank must first ascertain if debtor is capable of
and intangible properties
fulfilling his commitments to the bank. It must
• Shall also not exceed 75% of the appraised value consists of:
of the security 1. Statement of assets and liabilities
2. Statement of income and expenditure
Join and Solidary agreement 3. Prescribed by law and MB to evaluate
credit application
• JSA is surety and not guarantee. It is an agreement
• Even in the absence of such provision in GBL, Art
where parties consent to be solidarily liable
1198 of the NCC allows the creditor to demand
• As a contract of adhesion, JSA should be taken
full payment when debtor is insolvent, fails to give
contra proferentum against the party who may
have caused any ambiguity therein. guarantee, impaired guarantee, lost thing through
fortuitous event, violate undertaking or attempts to
Effect of Surety Agreement abscond
• MB shall recognize peculiar characteristic of
• Agreement is onerous and construed against micro financing such as cash flow-based lending
creditor • Microfinancing loans – small loans granted to
• Requires that creditor obtain consent of the surety basic sectors usually unsecured and given to small
before there can be material alteration to the loan businesses
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
Reason for stringent rule in granting loans • PROVIDED: such stipulation shall only be valid if
there is also a stipulation that the interest rate
• Banking corporation holds the money of the agreed upon shall be reduced in the even
depositors. Due to the nature that it is affected maximum interest rate is also reduced by MB
public interest, the bank must ensure that the loan
• Escalation clause are not void per se
shall be repaid
• It is void when it grants creditor unbridled right to
Unsecured loans and other credit accommodation adjust interest independently, completely
depriving debtor of right to assent
• MB shall authorize regulations with respect to • Such clause violate the mutuality of contracts
such • In escalation clause there should be:
1. Increase in interest if increased by law or
Other security requirements for bank credits
MB (escalation clause)
• MB may prescribe security requirements to which 2. Include provision for reduction of
bank credits shall be subject and reduce or stipulated interest in the event maximum
increase maximum ratio interest is also reduced by law or MB (de-
escalation clause)
Authority to prescribe terms and condition of loans and • Purpose of including de-escalation clause –
other credit accommodations prevent one-sidedness in favour of lender an
repugnant to mutuality of contracts
• MB may prescribe maturities as well as related • Absence of de-escalation clause will render
conditions of various bank loans and credit
escalation clause void
accommodations
• Any change in maximum maturity shall only apply
to those made after such action
Effect of annulment of escalation clause
Amortization on loans and other credit accommodations
• In case the escalation clause is annulled, principal
• Amortization schedule of bank loans and other amount of loan is subject to srcinal interest rate
credit accommodations shall be adopted based on
Exception
nature of operation
• If loans and other credit accommodations has • If there is no de-escalation clause, the escalation
maturity of more than 5 years, must have periodic clause is still valid if the creditor unilaterally and
amortization payments and must be made annually actually decreased the interest charges whenever
• If borrowed funds are to be used for purposes the interest rate is reduced by law or MB (Llorin
which do not initially produce revenues for vs. CA)
payment of regular amortization, bank may defer
such time until revenues are sufficient. In no case Unilateral increase of rates
shall initial amortization date be later than 5 years
• Such violates the principle of mutuality of
• In case of loans and other credit accommodations
contracts in Art 1308 of NCC
to microfinance sectors, schedule shall consider
•
cash flow of borrowers Any contract which appears to be heavily weighed
in favour of any one party that will lead to
Escalation Clause unconscionable result is void
• Escalation clause are valid to maintain fiscal
• Parties to an agreement pertaining to loan of may stability and retain the value of money on long-
agree upon an increase in the event that the term contracts
applicable maximum interest is increased by MB
• However, other party there must be right to assent
to an important modification of contract
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
Banking Laws
• Protect citizen from lack of awareness of trust cost • Violation shall not affect the validity or
of credit to the user by assuring full disclosure of enforceability of any contract
such cost and prevent uninformed use of credit • In Consolidated Bank vs. CA, SC said that lender
cannot charge interests not stipulated in
Disclosure
promissory note
• The creditor shall furnish the debtor a clear • In UCP vs. Beluso, interest rate provisions are
statement in writing setting forth the following: illegal due to violation of mutuality of contracts
1. Cash price or delivered price to be and also violate TILA
2. acquired
Amount to be credited as DP Exemption of government
3. Difference between 1 and 2 • TILA shall not apply to Philippine Government
4. Charges individually itemized
5. Total amount to be financed Required disclosure on consumer loans not under open-
6. Finance charge end credit plan
7. Percentage that finance bears to the total
• Any creditor extending consumer loan or
amount to the financed
transaction which neither consumer credit sale nor
• Rationale: protect users of credit from lack of
open-end consumer credit plan shall also need to
awareness of true cost
disclose information
Definition
Exempted transactions
• Credit – any loan, mortgage, deed of trust,
• Disclosure requirement on consumer credit
advance, conditional sale contract, rental
transactions shall not apply to those extension of
• Finance charge – interest, fees, service charges,
credits for business or commercial purpose or to
discounts and other charges incident to extension government
of credit
• Creditor – any person engaged in business of IX. Foreclosure of real estate mortgage
extending credit who requires finance charge
Procedure
Penalties
• In the event of foreclosure of any mortgage, the
1. Civil – any creditor who fails to disclose shall be mortgagor has the right to redeem the property
liable for P100 or amount equal to twice of finance within one year after sale of real estate
charge required • Purchaser at auction sale shall have the right to
a. Whichever is higher enter upon and take possession of such after date
b. Liability shall not exceed 2k of confirmation of auction sale
c. Must be brought within 1 year from date • In GBL, if purchased y banks, they are not
of occurrence required to set up bond before they can enter the
2. Criminal – fine not less than 1k or not more than property immediately during redemption period
5k or imprisonment for not less than 6 mos nor • Writ of possession may also be issued after
more than 1 year or both consolidation of ownership of property in name of
• Both actions can be instituted independently of buyer
each other • Buyer becomes absolute owner of property if not
• But there can also be a joinder of cause redeemed during the 1 year after registration of
sale
• If the property extrajudicially foreclosed belong to
Effect of violation a juridical persons, right to redeem property shall
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
be counted until, not after, the registration of the • Right to redeem becomes functus officio on the
certificate of foreclosure date of its expiry
• It shall be no more than 3 months after foreclosure • Redemption is by force of law, the buyer is bound
whichever is earlier to accept redemption
• Accessory contract of real mortgage is used as • However, there can be right to repurchase
security for fulfilment of principal obligation depending on the will of buyer
• A loan value is only 70 percent of the appraised • The buyer is not bound to accept repurchase unlike
value so that a low bid price will be made and will in redemption
be easier to redeem • The buyer shall also not be bound by the bid price
• Real property may be mortgaged to aliens as it now belongs to him
• Redemption period is counted from date of • An alien-owned bank cannot acquire ownership of
registration of the certificate of sale with register residential lot by virtue of deed of transfer as
of deeds settlement of debt
• An action for annulment of mortgage does not stop • Transfer of ownership, even for a limited period or
the running of the period of redemption in foreclosure, cannot be made to alien
• Otherwise there shall be frivolous suits instigated
to give mortgagor more time to redeem Offer to repurchase not waiver to question sale
• The amount redeemable is the amount under the
• If there was an offer to repurchase, it shall not be
mortgage deed or the outstanding obligation plus
construed as waiver of right to question
interest and expense in Sec 47 of GBL
foreclosure sale
• No personal notice in required in extrajudicial
• Mortgagee has no right to recover the deficiency
foreclosure of sale since it is action in rem
from the mortgagor of value of loan if foreclosure
Demand before foreclosure essential is invalid
Writ of possession
• Where foreclosure is judicially made, no right of
redemption exist in case the mortgagee is not a
• After consolidation of title in buyer’s name due to
PNB or bank
failure of mortgage to redeem, the writ of
• In such a case, the mortgagor is given the right to possession becomes a matter of right and its
extinguish the mortgage and retain ownership of issuance in a extra-judicial foreclosure is merely
property by paying debt within 90 days after ministerial
judgment
• Injunction to prohibit issuance of writ of
Right of redemption may be extended by agreement possession is utterly out of place
• Proceeding in petition for writ of possession is ex-
Estoppel parte and summary in nature
• However, mortgagor still have right of recourse to
• Bank or any purchaser is deemed consented to
petition to set aside foreclosure sale and cancel
extension of redemption if it had time to object but
writ of possession in same proceeding
it did not
X. Major investments
Redemption after prescriptive period
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• MB shall establish criteria for reviewing major 3. Make collection for accounts of other
acquisitions or investments of bank 4. Act as managing agent of investment
management accounts
Ceiling on investments in certain assets 5. Rent out safety deposit boxes
• Bank shall perform 1-4 as a depositary or as an
• Bank may acquire real estate as necessary for its
agent
conduct of business
• It shall be duly separated from bank’s own assets
• Total investment on such real estate shall not
and liabilities
exceed 50% of capital accounts
•
sites of BF and
BF defaulted andleases it back
Tala wants thetopayment
them. However,
of rents exempt itself from liability due to fault of its own
agents
• The court rules that Tala cannot be allowed to • In Sia vs. CA, a bank was held liable for not
collect rent as it clearly shows that the tried to immediately informing the customer that his safety
circumvent the real estate investment limit in GBL deposit box was flooded which caused damage to
the items of the customer
Acquisition of real estate by way of satisfaction of claims
XII. Electronic transactions
• Notwithstanding the limitations, bank may still
acquire the following property: • BSP shall have full authority to regulate use of
1. Mortgage to it in good faith for security electronic devices in connection with bank
2. Conveyed for satisfaction of debt operations
3. Purchase under judgement or mortgage
• Any real property held in such circumstance must XIII. Outsourcing of information technology
be disposed within 5 years
• Bank may outsource information technology
• After said period, those properties shall now be
systems and processes except inherent banking
included in the 50% limitation functions
XI. Other Banking Services • Functions that are not outsourced:
1. Strategic planning for use of IT
• A bank may also perform the following services: 2. Determination of system functionalities
1. Receive custody of funds, documents and 3. Change management inclusive of quality
other valuable objects assurance
2. Act as financial agent to buy and sell for 4. Service level and contract management
their customers 5. Security policy and administration
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
XIV. Outsourcing of other functions • Interest accrued shall be reserved and no accrual
shall be allowed 90 days after credit card
• Subject to prior approval of MB, banks may receivable has become past due
outsource data imaging, storage, retrieval and
other related systems Finance charges – interest charged to cardholder
• Banks may outsource credit card services
Deferral charges
XV. Credit Card Transactions
• Parties can agree to a deferral of all or partly of
General policy unpaid instalments and will subsequently collect
deferral charge
• BSP shall develop consumer credit through
innovative products Late payment and penalty fees
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
Contract of adhesion
Mode of payment
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
CHAPTER 5 – Prohibited Transactions and Cessation • Outsourcing inherent banking function shall
of Banking Business refer to any contract between the bank and
service provider for the latter to supply, or any
I. Prohibited Transactions
act whereby the latter supplies, the manpower
Prohibited to act as insurer to service the deposit transaction of the former.
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• Whenever the MB finds the bank in a state of: • If within one year the conservatorship is
1. Continuing inability or terminated on ground that institution can operate
2. Unwillingness to maintain a condition of on its own, conservator shall receive balance
liquidity deemed adequate to protect • But if it is terminated on some other ground,
depositors and creditors conservator shall not be entitled to remaining
• MB may appoint conservator with following balance
powers: • MB can appoint conservator connected to BSP in
1. Take charge of assets, liabilities and which case he shall not receive remuneration from
management thereof BSP
2. Reorganize management
3. Collect monies and debs due Expenses of conservatorship
4. Exercise all powers necessary to restore
• It shall be borne by bank concerned
viability
• Conservator shall report to MB and shall have the Terminations of conservatorship
power to overrule or revoke actions of previous
management • MB shall terminate the conservatorship is it is
• Rehabilitation proceedings provide for equitable satisfied that bank can continue operations
distribution of insolvent debtor’s remaining assets • Conservatorship can also be terminated on basis of
to its creditors and give debtor a fresh start by report of conservator or its own findings would
relieving them of the weight of their debts involve loss
• Liquidity – ability of an asset to be converted in • In such as case, there shall be receivership or
cash quickly and without discount liquidation
• Solvency – liabilities amount to less than total
Final and executory
assets providing ability to pay debts
• Test of insolvency – determining realizable assets • Action of MB shall be final except on petition for
of bank is less than its liabilities certiorari in case of grave abuse of discretion
• Insolvency of bank occurs when actual cash • It shall be filed within 10 days from receipt of
market value of its asset is insufficient to pay its notice of board of directors of conservatorship,
liabilities receivership or liquidation
• BSP is vested with exclusive authority to assess,
evaluate and determine condition of a bank Exclusive power to appoint conservator shall lie in MB
whether it is insolvent or not. If insolvent,
Designation of conservator is not precondition to
receivership proceedings
designation of receiver
Qualification of conservator
Power of conservator cannot impair obligations of
• Conservator must be competent and contracts
knowledgeable in bank operations and
• Conservator power to revoke contracts cannot
management
post-facto affect perfected transaction as it would
•
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• Conservator cannot simply repudiate valid • A report is something that gives information while
obligations of the bank and must bring them to examination is a search, investigation or scrutiny
court actions • Absence of examination before closure of bank
• In FPIB vs. CA the court ruled that the conservator does not mean that there is no basis for closure
cannot revoke a previously valid contract entered
by the bank even though the object of the contract 2. Procedure
has a higher price
• Receiver shall immediately:
• In conservatorship, the banking functions continue
1. Take charge of all assets and liabilities
unlike in receivership and liquidation
2. Administer the same for benefit of
VI. Cessation of banking business creditors
3. Exercise general power of receiver under
Voluntary liquidation ROC
4. Shall not pay or any act that involves
• In voluntary liquidation, bank sends to MB notice transfer of asset of bank
of liquidation • Receiver may deposit or place funds of bank in
• No voluntary dissolution shall be undertaken by a non-speculative investments
bank without prior approval of MB. Request of • Receiver shall determine within 90 days from
voluntary dissolution shall be accompanied by takeover, whether institution may be rehabilitated
liquidation plan or otherwise
Receivership and liquidation • Determination of resumption of business is subject
to approval of MB
• The MB can summarily and without need of prior • In Teal Motor vs. CFI, receiver was defined as a
hearing forbid the institution from doing business indifferent person appoint by the court to preserve
and designate PDIC as receiver the funds of the in litigation pendent lite
• Grounds for receivership and liquidation: • He is not an agent or representative of any party
1. Unable to pay liabilities that are due. This
shall not include inability to pay cause by 3. Prohibited acts
extraordinarily demands by financial panic
• Any director or officer declared insolvent or under
2. Insufficient realizable assets
receivership shall not commit:
3. Cannot continue business without
1. Refuse to turn over bank records and
involving probable loss to depositors or
assets to receiver
creditors
2. Tamper with bank records
4. Wilfully violated cease and desist order
3. Appropriate for himself or other party
involving transactions of fraud
assets of bank
5. In case a bank notifies BSP or public
4. Receive bank deposits or collect loans
announces bank holiday where it suspends
5. Paying funds of bank
payment of its deposit liabilities
6. Transferring security of bank
continuously for more than 30 days
• For quasi-banks any persons recognize in
competence in banking may be designated as 4. When institution cannot be rehabilitated
receiver • If receiver determines that bank cannot be
rehabilitated, MB shall notify the board of
1. Current and complete examination not necessary directors that it shall proceed with liquidation
• The receiver shall file ex parte with RTC a petition
• In Rural Bank of San Miguel vs. MB, the SC ruled
for assistance in the liquidation of the bank
that there is no need for complete examination
pursuant to liquidation plan of PDIC
because it only needs a report
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• Court shall adjudicate disputed claims, assist the 2. It is the government responsibility to see that
enforcement of liabilities financial interest of depositors and others are
• Receiver shall pay cost of proceedings from assets protected. Done through BSP
of institution 3. Public faith in banking system may deteriorate if
• Receiver shall convert assets of institution to depositors, creditors are not protected. BSP shall
money and dispose the same to creditors and other step in and salvage remaining resources of bank
parties to pay bank debts 4. Absence of notice and hearing is not a ground to
annul MB resolution
5. Final and executory
Effects of receivership
• Just like in the case of conservatorship, the action
of MB shall be final and executor unless there has 1. Retention of juridical personality
been certiorari
• There shall be retention of judicial personality
• In Rural Bank of San Miguel vs. MB, closure of a
even though it is ordered closed by MB
bank is an exercise of police power
• The suing must be done through the liquidator
• In only stockholders of bank can file action for
annulment of MB resolution of placing bank in 2. Not liable to pay interest
receivership
• Banks declared insolvent and ordered closed by
Close Now Hear Later Scheme BSP cannot be held liable to pay interest
• When bank is closed, it cannot lend money,
• The law does not contemplate prior notice and
engage in transactions or any banking activities
hearing before bank may be directed to stop
where it can derive income from
operations and placed under receivership
• Thus there is no way the bank can pay the interest
• Previous hearing before closure is not required in
the law and does not infringe due process the accrues in favour of its depositors
• However, there are two types of deposits that earn
• However, bank can question the receivership
interest. The first one, deposit that earn from the
within 10 days after receivership
existence until the bank cease to operate. This one
• Close now hear later – practical consideration to
must be paid. The second interest earned from the
prevent unwarranted dissipation of bank’s assets
time the bank closed until payment of deposits.
and valid exercise of police power to protect
The interest here must not be paid
depositors, creditors and public
• If otherwise, there mere filing of receivership by 3. Assets deemed under Custodia Legis
BSP can trigger bank run and drain its assets in
days or hour leading to insolvency • Assets if the bank becomes beyond its control.
Receiver operates to suspend the authority of the
Effect of filing petition for review bank to its properties
• Assets of bank shall be custodia legis in hands of
• Pendency of case questioning receivership does
receiver and exempted from garnishment, levy,
not diminish of receiver to administer bank’s
attachment
transactions pertaining to normal operations of the
•
bank Liquidator – task is to dispose all assets of the
bank and effect partial payments of banks
Reasons behind receivership and involuntary liquidation obligations
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• To execute a judgment against a bank under • All revenues and earning realized by receiver
receivership would unduly deplete its assets to the during receivership shall be used to pay costs of
prejudice of depositors and creditors proceedings
• The balance of revenues shall form part of assets
5. Restriction of bank’s capacity to Act
available to payment of creditors
• Insolvency of bank restricts its capacity to act Disposition of banking franchise
• Bank cannot make new business such as accept
new deposits or grant loans. But receiver must • BSP, if public interest requires, award to another
collect debts in favour of the bank that will form institution the banking franchise under liquidation
part on bank asset • Whatever proceeds may be realized from award
• Foreclosure falls within board definition of “doing shall be subject to exclusive disposition of MB
business”
Liabilities
• Doing business - continuity of commercial
dealings and arrangements incident to object of
• Bank is bound by the acts or failure to act of
organization
receiver
• However, it shall not be included in those act
• Receiver is liable to bank for culpable and
prohibited from doing business
negligent failure to collect and safeguard assets of
• Thus even if there is receivership or liquidation, such banks
the period of prescription to foreclose continues to
run
• In BF vs. Ybanez, the court ruled that receiver ca
still collect interest on loans during period of
closure
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
CHAPTER 6 – Foreign Banks and Trust Operations • Under RA 7721, foreign banks have three modes
of entry in the country:
I. Foreign Banks
1. Acquiring 60 of voting stock of existing
Transacting business in the Philippines bank
2. Investing 60% of voting stock of new
• RA 7721 – Foreign Banks Liberalization Act banking subsidiary incorporated in
• PD 1034 – Conduct of offshore banking business Philippines
• Offshore banking – conduct of banking transaction 3. Establishing branches with full baking
in foreign currencies authority
• Offshore banking unit – branch of a foreign baking • A foreign bank may only avail only 1 mode of
corporation authorized by BSP to transact offshore entry
banking • GBL only stated that branches of foreign banks
• Foreign corporation doing business in the will be treated as one and shall have the head
Philippines are required to obtain a license office guarantee to creditor Filipino citizens
• However, even if foreign corporations do not have • However, there is nothing in the law that states
a license, they can still be sued or be sued that citizens that are debtors to foreign bank local
• License is only necessary if it is for transacting or branches shall also be debtors to the head office
doing business in the country • There is also nothing in the law that the head
office and its local foreign branches shall be
Acquisition of voting stock in domestic bank treated as one
• Thus, compensation with Philippine branches with
• Foreign banks are allowed entry in the Philippines
foreign branches cannot be effected as they cannot
subject to the following rules
be considered creditors and debtors of each other
1. Within 7 years from effectivity of GBL,
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
2. Foreign
equivalentbank branches
of P219M – US dollar
at exchange rate No trust entity shall for the account of the trustor
or beneficiary,
during effectivity of Act. The foreign bank 1. purchase, acquire, sell, property
shall be entitle to 3 2. transfer or purchase money or debt
3. Foreign banks may open 3 additional instruments from/to DORSI of trust entity
branches designated by MB – P35M per and relatives of first civil degree
additional branches 3. unless authorized by the trustor after prior
• Foreign banks within 5 year from effectivity of full disclosure of transaction
this act is only allowed 6 foreign bank to enter the
country Registration of articles of incorporation and by-laws of
trust entity
• An additional 4 foreign banks may be allowed
entry by recommendation of MB
• SEC shall not register such unless accompanied by
• Non-Filipino citizens can be members of board of certificate of authority from BSP
directors up to the extent of the allowed foreign
• A trust business shall start from the moment their
participation
articles of incorporations are registered
•
Philippine corporations
stock in PSE who haveforlisted
or long standing shareshall
10 year of
Minimum capitalization
have right to own 60% voting stock of a domestic
bank • A trust entity, before engage in trust business,
• Existing local branches of foreign banks shall be shall comply with minimum paid-in capital
given 1.5 years to comply with minimum capital requirement by MB
requirement
Powers of trust entity
• RA 7721 was approved on May 18, 1994
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
1. Act as trustee on any mortgage or bond and accept • Trust entity, as long as solvent and comply with
and execute any trust consistent with law laws, shall have the right to collect interest earned
2. Act under order of any court as guardian, receiver, on security deposited to BSP
trustee or depositary of estate of minor or • If trust entity fails to comply with law, BSP shall
incompetent person retain interest of securities for benefit of rightful
3. Act as executor of any will claimants
4. Act as executor of estate of any deceased person • All claims arising from trust business shall have
with a will or administrator without a will priority over all claims as regard to the security
5. Accept and execute trust for holding, management, deposited
administration of estate and rents, issues, profits
thereof IV. Bond of Certain Persons for the Faithful Performance
6. Establish and manage common trust funds of Duties
• Trustee or trust entity shall not undertake any of 1. Before executor, administrator, guardian, trustee,
the following transactions for the account of the receiver or depositary appointed by the court enter
client unless there is prior full disclosure and upon execution of dues, court may order bond
authorization by client 2. Upon application of such persons, after notice and
1. Lend, sell, transfer or assign money or hearing, court shall order that subject matter of
property to DOSRI of trustee, relatives of trust be deposited with trust entity
trustee or related interest of such DOSRI 3. Upon presentation of proof that subject matter
where trustee owns at least 50% of voting have been deposited to trust entity, court may
stock order that bond be given by such persons for
2. Purchase and acquire property or debt faithful performance
instrument in the same manner 4. Reduce bond shall be sufficient to secure
3. Invest in equities or in securities adequately the proper administration of any
underwritten by trustee in which trustee property
has interest
Exemption of trust entity from bond requirement
4. Sell, transfer, assign or lend money or
property from one trust account to another • No bond shall be required by court from trust
account entity for faithful performance
• However court may order bond for the protection
Deposit for the faithful performance of trust duties
of funds or property confided
• Before transacting trust business, they must
V. Operations of Trust Entity
deposit to BSP for faithful performance of trust
duties an amount not less than 500k or higher as Separation of trust business from general business
may be fixed by BSP
• MB shall require trust entity to increase the • The trust business shall be kept separate and
distinct from the general business
amount
reason ofwhenever the increase is necessary by
trust business • They shall be physically separated from assets of
• Paid-in capital and surplus of each entity must be its other business
equal to the amount required to be deposited in • They shall be under the joint custody of at least
BSP two persons who are officers of the trust
• In case it shall not meet the required paid-in department
capital, the MB shall limit or prohibit distribution
Investment limitation of a trust entity
of profits by trust entity until minimum
requirement is met
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• Unless otherwise directed by instrument creating • Property held in trust by insolvent debtor shall be
the trust, the lending or investment of funds by excluded from insolvency proceedings
trust entity shall be limited to loans and investment • Trust entity and its branches shall be treated as
as prescribed by law, MB or court one unit
• Assets received in trust shall be administered with • Trust entities shall advertise services in a
terms of the instrument creating the trust dignified manner
• If trust entity is given discretionary powers to
invest, loans and investments shall be limited to: Money of government
1. Evidence of indebtedness of RP and BSP
•
2. Loans guarantee by government Banks may not receive as trustee the funds of the
government except GOCC banks
3. Loans fully secured by hold-out on,
assignment or pledge of deposits that are
maintained
4. Loans fully secured by real estate or
chattels
• The following shall be required to be given as
information
1. Transaction to be entered
2. Borrower’s name
3. Amount involved
4. Collateral security
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
QUIZZES:
1. The fiduciary nature of the relationship of a 1. The law governing the creation, organization and
depositor with the depositary bank imposes on the operation of rural banks is Rural Banks Act.
latter the obligation to discharge the highest
standard of trust and integrity and a violation 2. The total investment in equities of allied enterprise
thereof is considered a breach of trust. False shall not exceed 35 % of the net worth of the bank.
2. The humble wage-earner has not hesitated to
entrust his life’s savings to the bank knowing that 3. Subsidiary shall refer to a corporation or firm
more than 50% of the outstanding voting stock of
they will be safe in the custody of the banks.True
which is directly or indirectly owned.
3. Banks are gratuitous bailees of the funds deposited
with them by their clients. False 4. The rule that the total amount of loans that may be
extended by a bank to any person or entity shall at
4. The public relies on the banks’ fiduciary duty to no time exceed 20% of the net worth of such bank
observe the highest degree of diligence but any
is called Single Borrower’s Limit.
violation of this duty by the bank is not a valid
ground for the grant of exemplary damages to the
5. Credit Risk Transfer shall refer to any agreement
depositor. False
that allows the bank to transfer the credit risk
5. Thrift banks may not act as correspondent for associated with its loan or other credit
other financial institutions. False accommodation to a third party.
6. A non-stock corporation may act as a trustee or 6. The term Legal Compensation refers to that
administer any trust or hold property in trust or on
situation when two persons, in their own right, are
deposit for the benefit of others. False
creditors and debtors of each other.
7. A bank cannot use any of its branches as outlets
for the sale of the financial products of its allied 7. The contracts between cardholders and credit card
undertaking or its investment house units. True companies are called contracts of adhesion
because their terms are prepared by only one party
8. A bank may declare dividends greater than its while the other merely affixes his signature
accumulated net profits then on hand, deducting
signifying his conformity thereto.
there from its losses and bad debts. False
9. The appointment of a receiver is vested 8. Net worth means the total unimpaired paid-in
exclusively with the Monetary Board. True capital including paid-in surplus, retained earnings
and undivided profit, net of valuation reserves and
10. The MB cannot appoint a conservator connected other adjustments as maybe required by BSP.
with BSP. False
9. Letter of Credit refers to a financial device availed
11. In a judicial foreclosure of mortgage, there is an
equivalent right of redemption. False of by businessmen as a convenient mode of
dealing with sales of goods to satisfy the
12. No late payment of penalty fee shall be collected seemingly irreconcilable interests of a seller who
from cardholders unless the collection thereof is refuses to part with his goods before he is paid.
fully disclosed in the contract between the issuer
and the cardholder. True 10. Survivorship agreement is the agreement that
allows joint depositors to withdraw the whole
13. A bank which had been ordered closed by the
monetary board does not retain its juridical deposit during their lifetime and transferring the
personality which can sue and be sued through its balance to the survivor upon the death of one of
liquidator. False them.
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
11. In the case of Consolidated Bank and Trust Co., 21. All foreign currency deposit are of absolute
the SC ruled that the contract between the bank confidential nature as a general rule and said
and its depositor is governed by the provisions of deposit shall be exempt from attachment pursuant
the Civil Code on simple loan/mutuum. to RA No. 6426 otherwise known as Foreign
Currency Deposit Act of the Philippines.
12. In the case of Serrano vs. Central Bank of the Phil.,
the SC held that bank deposits are in the nature of 22. Negotiable Order of Withdrawal Accounts are
irregular deposits. interest bearing deposit accounts that combine the
payable on demand feature of checks and
13. In Simex International Case, the SC said that the
banking system is an indispensable institution that investment feature of savings account.
plays a vital role in the economic life of the nation. 23. Independent Auditor means a person other than an
officer or employee of the bank, its subsidiaries or
14. It is basic that after consolidation of title in the affiliates or related companies, or its majority
buyer’s name for failure of the mortgagor to shareholders.
redeem, the writ of possession becomes a matter
of right and its issuance to a purchaser is merely a 24. Interest Rate Differential refers to the difference or
ministerial function. margin between interest rates such as the
difference between domestic and foreign interest
15. Acceleration Clause means any provision in the rates.
contract between the bank and the cardholder that
gives the bank the right to demand the obligation 25. Secrecy of Bank Deposit Act is the law that was
in full in case of default or non-payment for passed to give encouragement to people to deposit
whatever reason. their money in banking institutions.
16. The law that protects its citizens from a lack of 26. The Securities and Exchange Commission shall
awareness of the true cost of credit to the user by not register the articles of incorporation of any
assuring full disclosure of such cost is Truth in bank unless accompanied by certificate of
Lending Act. authority issued by the monetary board.
17. The agreement between the parties in a loan 27. The equity investment of a universal bank or its
transaction which stipulate that the rate of interest wholly or majority owned subsidiaries, in a single
agreed upon may be increased in the event that the non-allied enterprise shall not exceed 20% of the
applicable maximum rate of interest is increased total equity.
by the MB is called escalation clause.
28. Demand deposit are all those liabilities of the
18. Joint and Solidary Agreement is an agreement Banko Sentral and of the other banks which are
where the contracting parties consent to be jointly denominated in the Philippine currency and are
and severally liable in a loan obligation. subject to payment in legal tender upon demand
by presentation of depositor’s check.
19. A bank guarantee is an irrevocable commitment of
a bank binding itself to pay sum of money in the 29. The rule intended to maintain the quality of bank
event of non-performance of a contract by a third management and afford better protection to
party. depositors and the public in general is called fit
and proper rule
20. Assignment of credit is an agreement by virtue of
which the owner of credit, known as the assignor, 30. Off shore banking units refer to a branch,
by a legal cause, such as sale or dation in payment subsidiary or affiliate of a foreign banking
transfers his credit to another known as the corporation which is duly authorized by the Banko
assignee who acquires the power to enforce it.
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
Sentral to transact offshore banking business in the RA 1405 Secrecy of bank Deposit Act
Philippines
RA 8367 an act providing for the organization and
31. A bank is bound by the negligence of its operation of non stock savings and loan association
employees under the principle of Respondeat
Superior RA 9160 an act defining the crime money laundering
32. Quasi banks refer to entities engaged in the RA 6770 the ombudsman act of 1989
barrowing of funds through the issuance,
endorsement or assignment with recourse or
acceptance of deposit substitutes for the purpose Chapter 4
of relending or purchasing receivables and other
obligation RA 7394 Consumer Act
33. The business of banking is imbued with public Act No 3135 an act to regulate the sale of property under
interest in order to assure the stability of banks special powers inserted in or annexed to real estate
which largely depends on the confidence of the mortgages
people in the honesty and efficiency of banks.
Chapter 6
Summary of Laws
PD 1034 Offshore Banking System Decree
Chapter 1
RA 7721 Foreign Bank liberalization Act
RA 8791 General Banking Law of 2000
BP 68 Corporation code
Chapter 2
Chapter 3
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
Banking Laws
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
a. In which case, such member shall resign banking institution once every 12 months and at
before assumption of office such other time at the vote of 5 members of MB
3. Member of MB coming from private sector shall 3. Sec 72 NCBA – During exchange crisis or
not hold public office in tenure national emergency, with concurrence of 5
4. No person shall be member if he has been members of MB and approval of president, MB
connected directly with any multilateral banking may temporarily suspend sales of exchange by
institution or has substantial interest on any private BSP and may subject all transactions in gold and
bank 1 year prior appointment foreign exchange to license by BSP
5. No member shall be employed in any such 4. Sec 84 NCBA – in nation or local emergency or
institution within 2 year after expiration of term imminent financial panic, MB may, with 5 vote of
except when serving as representative of members, authorize BSP to grant extraordinary
government (sec 9) loans or advances to banks secured by assets
1. Subsequently disqualified under Sec 9 during • They may attend meetings and have the right to be
tenure heard
2. Physically or mentally incapacitated and cannot
discharge duties and incapacity lasted more than 6 Salaries of governor and members of MB
months
• Salary shall be fixed y President at a sum
3. Guilty of acts or operation of fraudulent or illegal
commensurate to the importance and
character opposed to aim of BSP
responsibility attached to their position
4. Member no longer possess qualification under sec
8 Personal or Pecuniary interests
Banking Laws
Banking Laws
• They shall limit their professional activities 1. BSP shall have supervision over, and conduct
directly to their position in BSP periodic or special examinations of bank, quasi
• Shall not accept any other employment except banks including subsidiaries and affiliated
when position in eleemosynary, civic, cultural or engaged in allied activities
religious organization or by designation of a. Subsidiary – more than 50% voting stock
President to represent government is owned by bank or quasi-bank
b. Affiliate –50% or less is owned by bank or
Number and functions of deputy governors
related or linked to institution through
common stock holders
1. Governor shall appoint not more than 3 deputy
2. Department heads and examiners are authorized to
Governors who shall perform duties as may be
a. Administer oaths to any directors, office
assigned to them
or employee of any institution
2. In absence of governor, deputy governors
b. Compel presentation of books, document
designated to act as CEO of BSP shall exercise
and records relative to true condition of
duties
institution
3. Whenever governor is unable to attend
government board or councils where he is ex Restraining order or injunction
officio member, deputy governor may be
designated vested with power to participate and • No restraining order or injunction shall be issued
vote enjoining (preventing) BSP from examining
institution under its supervision
V. Operations of BSP • Exception: there is convincing proof that action of
BSP is plainly arbitrary and in bad faith and
Research and Statistics of BSP
petitioner files bond in favor of BSP
• BSP shall prepare data and conduct economic • Provisions of Rule 58 – Preliminary Injunction
research for guidance of MB shall apply not inconsistent
Scope of Authority of BSP to obtain data VI. Director, Officer or Stockholder and Related Interests
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• Any DOSRI contract loans or any financial • None of the reports shall be open to inspections of
accommodation from his bank or a from a bank the public except when such is incidental in
(lending bank) that is: proceedings for violations
1. Subsidiary of bank holding company of
which both his bank and lending bank is Service Fees
subsidiaries
• Banking which are subject to examination of BSP
2. Controlling proportion of share is owned
shall pay BSP within first 30 days of each year an
by the same interest that owns a
annual fee as may be prescribed by MB
controlling proportion of share of his bank
•
in excess of 5% if capital and surplus of Sec 65 of GBL states that BSP may charge
equitable rates, commissions and fees fir
bank
supervision or examinations
• Such shall be required by lending bank to waive
the secrecy of his deposits in all banks VIII. Administration
• Any information obtained from examination shall
be strictly confidential. Used only by examiner Operating departments of BSP
only in connection with supervisory responsibility
• MB shall determine operating departments
or by BSP in legal action
including public information office
Prohibition against Personnel of BSP
Required reports and publication of BSP
• In additional to prohibition from RA 3019 and RA
1. General balance sheet showing volume and
7613, the BSP personnel prohibited from:
composition of its assets and liabilities – 60 days
1. Being DOSRI of institution under
after end of each month except December, 90 days
supervision of BSP except non-stock
if such
savings and loan associations
2. Require or receive any gift from any 2. MB shall publish and submit to Congress and
President the following reports:
institution subject to supervision
a. Analysis of economic and financial
3. Reveal in any manner, except under court
development – not later than 90 days after
order, Congress or government officer.
end of each quarter
Shall not apply to giving of information to
b. Preceding year’s budget and profit and
MB or governor of BSP
loss statement – within 90 days after end
4. Borrowing from any institution subject to
of year
supervision and examination unless
c. Review of the state of financial system –
borrowings are adequately secured
120 days after each semester
VII. Examination of Banking Institutions d. Abnormal movements in monetary
aggregate and general price movements –
Frequency of examination 72 hours after remedial measures was
taken
• Department head shall examine books of every
banking institution once every 12 months and at Annual Report of BSP
such other time at the vote of 5 members of MB.
Interval shall be at least 12 months 1. Annual report on the condition of BSP – before
end of March each year. Submit to President and
Afford opportunity to examine Congress and include review of policies and
economic analysis circumstances:
• Bank concerned shall afford the head full 2. Will also include statement of financial condition
opportunity to examine its books, cash and assets of BSP and statistical appendix include: (1)
during banking hours movement monetary aggregates, (2) movements of
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
foreign exchange, (3) balance of payments, (4) • Chairman of COA act as ex official auditor of BSP
consumer prices, (5) exports/imports, (6) accounts and authorized to appoint representative auditor to
of BSP, (7) data BSP. Can only be removed by COA
3. BSP shall publish another version of the annual • Representative shall be (1) CPA, (2) 10 years
report understandable in layman experience, (3) not relative to member of MB or
4. Failure to comply without justifiable reason shall COA to 6th civil degree
cause withholding of salary of personnel
X. Penalty for Violation
Signature of statements
•
Balance sheet and other financial statements shall Sec 66 of GBL provides that if offender is director
•
or officer, shall be suspended or removed from
be signed by (1) officer responsible for preparation, office. If offender is corporation, shall be
(2) governor, (3) BSP auditor dissolved by quo warranto instituted by SG
IX. Profits, losses and special accounts Penalty for refusal to make reports or permit examination
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• Currency has value because people are willing to Liability for notes and coins
accept it in exchange for goods or services or
payment of debt • Notes and coins issued by the BSP shall be
•
Money has no value as a commodity but has value liability of BSP
as means of medium of exchange • It shall be issued in amounts not exceeding assets
• Value of goods and services are measured by of BSP
terms of medium • Notes and coins shall be a first and paramount lien
• Not applicable if no confidence in currency and on all assets of BSP
people would use foreign currency • BSP’s holding of its own notes and coins shall not
be considered a part of its currency issue and not
II. Issue of means of payment part of assets and liabilities
1. BSP shall have the sole power to issue currency • All notes and coins issued by BSP shall be fully
within the Philippines guaranteed by the Government and shall be legal
2. MB may issue regulations to prevent circulation of tender in Philippines for all debts, public or private
foreign currency , currency substitute or facsimiles • Checks representing demand deposits do not have
of BSP notes legal tender and acceptance is at the option of the
3. BSP shall have authority to investigate, arrest and creditor
conduct searches to maintain integrity of currency • Check cleared and credited to account of creditor
4. Violation shall have imprisonment of 5-10 years shall be equivalent to delivery
unless RPC gives greater penalty • BSP Circ. 537 of 2006 – maximum amount of
coins to be considered as legal tender
Related Crimes under RPC
o 1,5,10 peso coins – 1k
1. Art. 163 – Making and importing and uttering o 1,5,10,25 centavos – 100
false coins
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• Art 1249 of NCC states that all payments of debts • Mutilated condition: (1) identification is
shall be in currency stipulated and if not possible impossible, (2) signs of filing, clipping, (3) notes
currency in legal tender lost more than 2/5 of surface or all signatures
• It also states that when there is payment by PN, it
Retirement of old notes and coins
shall produce only effect when encashed or
impaired through fault of creditor. Action derived
• BSP may call for replacement of notes (more than
from obligation is held in abeyance
5 yrs old) and coins (more than 10 yrs old)
• Art. 1250 of NCC, where there is extraordinary
• Notes and coins replaced shall remain legal tender
inflation or deflation, value of currency at time of
establishment of obligation shall be basis of for 1 year from date of call
• After period, such shall cease to be to be legal
payment
tender but can be exchanged at par and without
Characteristics of the currency charge in BSP during following year
• After said period, notes and coins not exchanged
• MB with approval of President shall prescribe shall cease to be a liability of BSP and shall be
denominations, dimensions, designs of notes. demonetize
• Notes shall state that they are liabilities of BSP
and fully guaranteed by government III. Domestic monetary stabilization
• Notes shall bear signature, in facsimile, of Guiding principle on monetary stabilization
President and BSP Governor
• MB with approval of President shall prescribe 1. MB shall endeavour to control any expansion or
weight, fitness, design and denomination of coins contract of monetary aggregates prejudicial to
• In minting of coins, availability of metals and its price stability
price shall be considered
Power to define terms
Printing of notes and mining of coins
2. MB shall define monetary aggregates, credit and
• MB shall prescribe amounts of notes and coins to prices and made public such definitions
be printed and minted. MB has authority to
Action when abnormal movements occur in monetary
contract institutions for such
aggregates, credit and prices
• All expenses incurred shall be for the accounts of
BSP • When such occurs that endanger stability of
economy, MB shall:
Interconvertibility of currency
1. Take remedial measures
• BSP shall exchange on demand and without 2. Submit to President and Congress of
charge Philippine currency in any other report containing the (1) cause, (2) extend
denomination requested of change and (3) measures taken by MB
• If BSP is temporarily unable to provide such, it • Whenever the following happen:
shall deliver denomination nearest 1. Monetary aggregates or level of credit
increases or decreases by more than 15%
Replacement of currency unfit for circulation 2. Cost of living index increases by more
than 10% in relation to level of month
• BSP shall withdraw from circulation and
existing of preceding year
demonetize all notes and coins unfit for circulation
3. Other circumstances so warrant
and shall replace them
• The monetary board shall submit reports
• BSP shall not replace notes under mutilated
and shall state whether these changes is a
condition and without compensation to bearer
threat to stability
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• International reserve shall include but not limited V. Operations in Gold and FOREX
to:
• Gold Purchases and sales of gold
• Assets in foreign currencies
• BSP may buy and sell gold
• Assets in foreign currencies include (1) documents
• It shall be made in national currency at prevailing
of international transfer of funds, (2) demand and
international market price
time deposits of banks abroad and (3) foreign
government securities and notes Purchase and sales of FOREX
• MB shall hold the FOREX resource of BSP in
freely convertible currencies • BSP may buy and sell foreign notes, coins and
• MB shall issue regulations that FOREX assets documents. They can also engage in future
must meet exchange operations
•
•
BSP shall be free to convert any asset in BSP shall engaged with FOREX transactions with
international reserves into other assets the following: (BIG-FO)
1. Baking institutions operating in the
Action when International Stability of Peso is Threatened Philippines
2. International financial institutions
• Whenever: 3. Government
1. International reserve falls to a level 4. Foreign governments
inadequate to meet prospective net 5. Other entities authorized by MB
demands for foreign currencies
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• In order to maintain convertibility of peso, BSP • MB shall determine exchange rate policy of the
may buy those offered and sell any quantity country
demanded provided that FOREX is freely • MB shall determine rates at which BSP shall buy
convertible into gold or US dollars and sell spot exchange and establish deviation
• This requirement shall not apply to demand for limits for effective exchange rates
foreign notes and coins • BSP shall not collect any additional commissions
• BSP shall effect its exchange transactions at the other than actual telegraphic costs
rates determined by Sec. 74 • MB shall similarly determine rates for other types
of FOREX transactions including sales of foreign
Foreign Asset Position of BSP notes and coins
• BSP shall maintain a net positive foreign asset • The margins between effective exchange rates and
position so that gross FOREX assets will always rates established may not exceed the
exceed gross foreign liabilities corresponding margins for spot exchange
transactions more than additional costs involved in
• If FOREX liabilities exceed twice the FOREX
each type of transactions
assets, BSP shall within 60 days, submit report to
Congress stating srcin of liabilities and manner Operations with Foreign Entities
which it will be paid
• MB may authorize BSP to grant and receive loans
Emergency Restriction on Exchange Operations
from foreign banks and may engage in operations
with such entities for national interest
• In order to:
1. Achieve primary objective (price stability) • BSP may also act as agent of such entities
2. Protect international reserves • BSP may pledge gold or other assets as security
3. And in time of national emergency, give against loans it received
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
currency. Banks shall be granted reasonable time 2. Production credits – credit where
for such maturities are not more than 360 days and
• Power above shall be exercised only under special resulting from production of agricultural,
circumstance and applied to all banks uniformly animal, mineral or industrial products
and without discrimination 1. Such must be secured by a pledge
of respective product except if
Regulation of Non-Spot Exchange Transactions loan is secured by lien on 70%
value of real estate property
• To restrain banks from taking speculative
3. Other credits – credits not under 1 and 2.
positions with respect
FOREX rates, MB shallto issue
futureregulations
fluctuationfor
in sales BSP can provide funds from
non0inflationary sources
in non-spot exchange
4. Advances – grant advances against the
Other exchange profits and losses following kinds of collateral for fixed
periods which shall not exceed 180 days,
• Banks shall bear risks of non-compliance with except #4: (GSC-CUNN)
terms of FOREX documents they buy and sell 1. Gold
• They shall also bear other risks including 2. Securities representing obligations
exchange risk not assumed by BSP of BSP
3. Credit instruments in no. 1
Information on Exchange Operations
4. Credit instrument in no. 2 for
period not exceed 360 days
• Banks shall report to BSP the volume and
5. Utilized portions of advances in
composition of the purchases and sales of gold and
current amount covered by regular
FOREX each day
overdraft
• MB may also require other persons to report such
purchases and sales of gold and FOREX. 6. Negotiable treasury bills maturity
within 3 years
Accuracy of declaration may be verified by BSP
7. Negotiable bonds by government
VII. Loans to Banking and Other Financial Institutions maturity not more than 10 years
• Rediscounting, discounts, loans and advances in
Guiding Principles above provision may not be renewed or extended
unless extraordinary circumstance justify it
• The rediscount, discount, loans and advances shall
• Advances in No. 6 and 7 may not exceed 80% of
be used to influence volume credit consistent with
current market value of collateral
object price stability
Loans for Liquidity Purposes
Authorized Types of Credit Operations
• BSP may extend loans and advances for a period
• BSP may perform the following credit operations
not more than 7 days without collateral for
in the Philippines: (CPOA)
purpose of providing liquidity in the bank in times
1. Commercial credits – credits where
of need
maturities are not more than 180 days and
resulting from: VIII. Emergency Loans and Advances
1. Purchase and sale of readily
saleable goods, exportation, Nature of Emergency Loans and Advances
importation and their
• Emergency loan or advance – credit facility
transportation (PESTI)
2. Storing non-perishable goods with intended to assist a bank experiencing serious
are duly insured liquidity problems from causes beyond its control
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• Amount of emergency loan or advance shall not • BSP shall collect interest on all loans and
exceed 50% total deposits and deposit substitutes advances it extends notwithstanding closure,
of bank and is given in 2 tranches receivership or liquidations
• MB shall fix interest and rediscount rates after due
First Tranche
consideration has been given to credit needs of the
• Amount of 1st tranche shall be limited to 25% of market, composition of BSP portfolio and national
total deposit and deposit substitute of bank and monetary policy
secured by government securities • Interest rates shall be applied to all banks
• Amount of first tranche may exceed 25% if it is uniformly and without discrimination
adequately secured by government securities and
Endorsement
unencumbered first class collaterals
• Prior to release of first tranche, bank shall submit • Documents rediscounted, discounted, bought or
resolution of its board of directors authorizing accepted as collateral by BSP must bear
BSP to evaluate their assets to determine that it is endorsement of bank
good for collateral
Repayment of Credits
Second Tranche
• Documents rediscounted, discounted, bought or
nd
• MB by vote of 5 members may release 2 tranche accepted as collateral by BSP must be withdrawn
on the following conditions that the principal
stockholders shall:
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• BSP shall not acquire or accept shares as collateral • At least once every month, MB shall review
and shall not participate in ownership of enterprise. portfolio of BSP for future credit policy
• BSP shall not engage in development banking or • MB shall consider if portfolio has a sufficiently
financing except for outstanding loans obtained or large part consists of assets with early maturities in
extended for development financing order to promptly contract BSP credit whenever
national monetary policy so requires
X. Open market Operations for the Account of BSP
XII. Bank Reserves
Principles of Open Market Operations
Reserve Requirement
• Open market purchases and sales of security shall
be made in accordance to primary objective of • In order to control volume of money created by
price stability credit operations, banks shall be require to
maintain reserves against their deposit liabilities
Purchases and Sales of Government Securities
• MB may at its discretion require banks to maintain
• BSP may buy and sell in open market for its reserves against funds held in trust and liabilities
for deposit substitutes
account the following: • Required reserves shall be proportional to volume
1. Evidence of indebtedness issued directly
by Government of deposit liabilities and shall ordinarily take a
2. Evidence of indebtedness issued by form of a deposit in BSP
government instrumentality fully • Reserve requirement shall be applied to all banks
guaranteed by Government uniformly and without discrimination
• The above must be freely negotiable and available • Reserves against deposit substitutes shall be
to the general public in denomination of thousands determined like reserve requirement against
of pesos or more regular bank deposits
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• MB may exempt from reserve requirement such • Reserve position shall be calculated daily on the
deposits with remaining maturities of 2 years or basis of the amount at the close of business for the
more and interbank borrowings day
• Requirement to maintain bank reserves is imposed • In holiday or non-banking days, the reserve
primarily to control volume of money and shall position is calculated at the close of the business
not pay interest on reserves maintained day immediately preceding such holiday
• For purpose of computing reserve position,
Definition of Deposit Substitutes
principal office of the bank in the Philippines and
all branches are considered as single unit
•
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
5 consecutive days until overdrawn is paid or has • MB may prescribe minimum ratios which capital
emergency loan and surplus of banks must bear to the volume of
• Banks with existing overdrafts with BSP at their assets
effectivity of NCBA may either convert such to
emergency loan or settle such immediately Coordination of Credit Policies
value of loans or investments of banks on the date when such subdivision have outstanding loans
on which they are notified by the restriction. with former
Restrictions shall be applied to all banks uniformly • BSP may pay interest n deposits of the
and without discrimination government as well on deposits of banks
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• BSP shall open a general cash account for the • Purpose of operations – increase liquidity and
Treasurer of the Philippines in which liquid funds stabilize value of said security in order to promote
shall be deposited investment in government obligation
• Transfers of funds from such account shall be • MB shall use the resources of the Fund to prevent
made only upon order of Treasurer or moderate sharp fluctuations in the quotations of
government obligation
Other Banks as Agent of BSP
• However, it shall not endeavour to alter
movements of the market resulting from basic
• In performance as fiscal agent, BSP may engage
changes in interest rates
services of other government and domestic banks
for operations in localities or abroad where BSP Resources of Securities Stabilization Fund
does not have office
• Fiscal operations in foreign countries, BSP may • It shall come from balance of the fund held by the
engage in services of foreign banks Central Bank (RA 265)
• BSP may charge equitable rates for services it • Securities Stabilization Fund shall retain net
renders to the government profits it may make on operations regardless if
said profits arisen from capital gains or interest
XV. Marketing and Stabilization of Securities for the earning. It shall also bear net loss.
Account of the Government
XVI. Functions as Financial Adviser
Issue of Government Obligations
Financial Adviser on Official Credit Operations
• Issue of securities representing obligations of
•
government may be made through BSP which may Before undertaking credit operation abroad,
act as agent of government government, through Secretary of Finance, shall
• BSP shall not guarantee the place of said securities request the opinion of MB
and shall not subscribe to their issue except to • Opinion of MB shall be based on (1) gold and
replace its maturity holdings foreign exchange resources of the nation and (2)
effects of such operation in balance of payments
Method of Placing Government Securities and on monetary aggregates
• Whenever government contemplates borrowing
• BSP may place securities in the such through
within the Philippines, the prior opinion of MB
direct sale to financial institutions and public
should also be requested
• BSP shall not be a member of any stock exchange
• The constitution provides that foreign loans may
or syndicate but may interfere for the purpose of
only be incurred in accordance with the law and
placing government securities
regulation of monetary authority
Servicing and Redemption of Public Debt shall be effected • Information on foreign loans by the government
through BSP shall be made public
•
The President may contract foreign loans with
Securities Stabilization Fund
prior concurrence of MB and subject to limitation
of the law. MB shall, within 30 days at end of
• Securities Stabilization Fund –made for the
quarter, submit to Congress a report of loans made
account of the government and its operation shall
by government that would increase foreign debt
consists of purchases and sales, in the open market,
of bonds fully guaranteed by the Government Representation on the National Economic and
Development Authority (NEDA)
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• The deputy governor shall be an ex officio Phase out of Regulatory Powers over Finance
member of NEDA in order to – assure effective Corporations
coordination between economic, financial and
fiscal policies of government • BSP shall within 5 years phase out its regulatory
powers over finance companies without quasi-
XVII. Privileges banking and transfer it to SEC
• BSP shall be exempt for a 5 year from approval of • BSP shall be made operational by these acts: (1)
NCBA from all national, provincial, municipal and President appoint members of MB within 60 days
city taxes and (2) transfer of assets and liabilities of CB to
• Exemption shall apply to all property of the BSP BSP within 90 days
as well as to contracts and deed related to conduct • All incumbent personnel of CB shall continue to
of business exercise duties in BSP if they are necessary
• It shall not apply to those payable by persons
Transfer of Asset and Liabilities
merely doing business to BSP
• Foreign loans shall be exempt from any taxes and • Upon effectivity of Act, (1) 3 members of MB
payment is assumed by BSP including Governor, (2) Sec. of Finance, (3) Sec.
of DBM and (4) Chairmen of Committee on Banks
Exemption from Customs Duties
of Congress shall determine assets and liabilities
• The following are exempted from custom duties of CB to be transferred to BSP:
notwithstanding special laws: o MB and Sec. of Finance shall work out
1. Importation and exportation of BSP of creative monetary solution to retire CB of
its liabilities at least cost
notes, coins and other metals BSP shall remit 75% of net profits to a
2. Importation of all equipment needed for o
bank notes and coin production special deposit account (sinking fund)
until net liabilities of CB is liquidated
Applicability of Civil Service Law o Assets and liabilities shall be limited to an
amount that will enable BSP to perform
• Appointment BSP, except policy determining,
on viable basis. Assets shall exceed
primarily confidential or highly technical in
liability, by COA, by P10B
nature, shall be in accordance with CSL
o Liabilities by BSP shall include liabilities
• No qualification requirement for position shall be
circulating notes and coins
imposed other than those set by MB
o Asset or liability of CB not transferred
• MB or Governor may, without need of further
shall be retained and liquidated by CB
obtaining approval of government agency, appoint
Board of Liquidators for a period not
personnel in BSP
exceeding 25 years
• Officers of BSP shall not engage directly or
• All actions shall be reported to Congress and the
indirectly in partisan political activities
President within 30 days
XVIII. Transitory Provisions of NCBA
Mandate to Organize
Phase-out of Fiscal Agency Functions
• BSP shall be organized irrespective of RA 7430
• BSP shall within 3 years but no longer than 5 (Optimum Utilization of Personnel Act)
years, phase out all fiscal agency functions and • There shall be no preferential or priority right to
shall transfer it to DOF be given to any personnel for appointment in new
staffing pattern
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
Separation Benefits
Transfer of Powers
•
All powers vested in CB not inconsistent with
NCBA is deemed transferred to BSP
Suspense Accounts
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
CHAPTER 9 – Unclaimed Balances and Trust Receipts b. All creditors or depositors or bank may be
included in one action
I. Unclaimed Balances 5. Service of process in such action or actions shall
be made by delivery of copy to defendant bank
Definitions
and by public in a newspaper of general
• Unclaimed balances – includes credits or deposits circulation
of money, bullions, security and any evidence of 6. At time of issuance of summons, clerk of cert shall
indebtedness with banks, loan associations and also issue notice:
trust corporations in favor of any person (1) a. Signed by him
known to be dead or (2) who has not made further b. Directed to all persons other than
deposits or withdrawal during the preceding 10 defendants named therein
years or more c. Requiring them to appear within 60 days
• Governed by Act No. 3936 – Requiring Banks to after first publication
Transfer Unclaimed Balances to Insular Treasury d. Show cause why unclaimed balance
• Such unclaimed balances, together with crease and should not be deposited to Treasurer
proceeds shall be deposited to the Treasurer to the e. Notify them that if they do not appear, the
credit of the government court will grant relief to RP
• Demand drafts cannot be escheated but telegraphic 7. Copy of notice shall be attached to summons
notes can (Republic vs. FNCB) required
8. Any person interested may appear to become a
Procedure party. Upon completion of publication, court shall
have complete jurisdiction
1. Within month of January of every odd year, all
9. Court must hear all parties. If the such are
banks shall forward to Treasurer a statement under unclaimed, they shall be escheated to government
oath of all credits and deposits held by them of
persons (1) known to be dead or (2) who has not and court will order their deposit to the Treasurer
made further deposits or withdrawal showing: Penalties
a. Name and last known residence
b. Amount and date of outstanding • If president, cashier or managing office of the
unclaimed balance bank neglects or refuses to file sworn statement,
c. Date when person died or made his last bank shall pay to the government 500Php per
deposit or withdrawal month for each infraction
d. Interest due on unclaimed balance
Immunity from suit
2. Copy of sword statement shall be posted n
conspicuous place in premises of the bank at least • Any bank which has made a deposit to the
60 days from date of filing Treasurer shall not thereafter be liable to persons
3. Immediately before filing, bank shall who brought an action against the bank for such
communicate with person whose favor the unclaimed balances. The bank shall be defended
unclaimed balance stand of such by SG without costs
a. It is the duty of the Treasurer to inform the
SG the existence of unclaimed balances Disclosure of Service and Maintenance Fees on Dormant
4. When SG is informed of such, he shall commence Accounts
an action in the name of the People of the
• Banks may impose service or maintenance fees on
Republic in the CFI (RTC) of the province or city
dormant or inactive accounts
where the bank is located
a. It shall be joined as parties the bank and • Provided that before such fees are imposed, the
all such creditors and depositors period for dormancy and minimum balance is
properly disclosed
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
6. Purchase – taking by sale, conditional sale, lease, • There are two possible situation in trust receipt
mortgage or pledge transaction:
7. Purchaser – person taking by purchase 1. Refers to money received under the
8. Security interest – property interest in goods, obligation involving the duty to deliver it
documents or instruments to secure performance (entregarla) to owner of merchandise –
of some obligation by entrustee. It includes title this happens when entrustee sold the
whenever such title is in substance taken or goods and must return the proceeds to
retained for security only. entruster
9. Person – an individual, trustee, receiver or two 2. Refers to merchandize received under
more persons having joint interest obligation to return in (devolvera) to
10. Trust receipt – written of printed document signed owner – this happens when entrustee
by entrustee in favor of entruster comply with failed to sell the goods and must return
condition of TRL. No formality for execution is goods to entruster
necessary for validity • Trust receipt is a separate and independent
11. Value – any consideration sufficient to support a security transaction intended to aid in financing
simple contract importers whereby goods are held as security by
lending institution for loan
Trust Receipt Transaction
• In Sps. Vintola vs. Insular Bank of Asia and
• Trust receipt transaction – any transaction by and America, it stated the following:
between entruster and entrustee where entruster 1. Letter of credit-trust receipt is where a
hold absolute title or security interest over goods, bank extends a loan with a trust receipt for
documents or instruments, releases the same to the the loan. Transaction involved a loan
entrustee feature in the letter of credit and security
• The entrustee signs a trust receipt and binds feature for the trust receipt
himself to hols the goods for the entruster and to 2. Trust receipt is a security agreement
sell such with obligation to return the proceeds or which a bank acquires a security interest
return such in case of non-sale in the goods.
3. It secures indebtedness and there can be
• In case of goods or documents:
no such thing as security interest that
1. To sell the goods
secures no obligation
2. To manufacture the goods with the
4. Trust receipt is a security transaction to
purpose of ultimate sale or
aid financing importers who do not have
3. To load, unload, ship or tranship them in
sufficient funds to finance importation and
manner necessary for their sale
who may not be able to acquire credit
• In case of instruments:
except utilization, as collateral of their
1. To sell or procure exchange
merchandise
2. Deliver them to principal
• It is a document where the lender (entruster),
3. Effect consummation involving delivery
having no prior title or possession to the goods
to depository
lends money to the borrower (entrustee) on
4. Effect their presentation, collection or
renewal security of the goods
• Sale of goods, documents or instruments by person Form of Trust Receipts
in business of selling such for profit who (1) has
general property rights in such goods over the • Trust receipt need not be in any particular form
buyer or (2) who sells the same to the buyer on but every trust receipt must contain:
credit, retaining title or interest as security for 1. Description of goods, documents or
payment does not constitute trust receipt instruments
transaction 2. Total invoice value
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
Banking Laws
• TRL is violated whenever entrustee fails to: • In Colinares vs. CA, failure of entrustee to turn
1. Turn over proceeds over the proceeds or non-return constitute crime of
2. Return goods in non-sale estafa under Art. 315(1) of RPC without need of
• Mere failure to account or return gives rise to the proving intent to defraud
crime which is malum prohibitum • If violation is committed by a corporation, its
• There is no requirement to prove intent to defraud directors, officers or employees responsible for the
(Ong vs. CA and Colinares vs. CA) offense shall have criminal liability
• What the law punishes is the dishonest and abuse • Rationale for making such officers responsible:
of confidence in handling money they are vested with authority and responsibility to
• Intent to misuse or misappropriate goods should devise means to ensure compliance with the law
be proved (Metrobank vs. Go) and if they fail to do so, they shall be accountable
• Failure to account upon demand of funds or • Corporations cannot be put in jail. However, these
property is evidence of conversion or entities are made liable for civil liabilities arising
misappropriation from criminal offense
• Mere failure to account for goods constitute Par • Violation of trust receipt constitutes fraud under
1(b) of Estafa (Ong vs. CA) Art. 33 of NCC an ICA to enforce civil liability
• Failure to deliver proceeds cause prejudice not arising from criminal liability
only to the creditor but also to the public interest • In Sarmiento Jr. vs. CA, complaint based on
• In Sps. Vintola vs. Insular Bank of Asia and failure to comply with obligation in Trust Receipt
America, it is stated that the return of merchandize is separate from criminal liability under PD 115. It
does not amount to recover by the lending bank is an obligation ex contractu and may proceed
• This is because the lending bank (entruster) only independently regardless of result of criminal
acquires a security interest over the goods and not action
the absolute ownership • In People vs. Cuervo, TRL with its penal sanction
• If the lending bank acquires absolute ownership, it is in reality, merely confirmatory of situation
shall defeat the loan feature of a trust receipt and covered under Art. 315(1)(b) RPC
shall become a contract of sale where bank gained • In Colinares vs. CA, if the person who executed
ownership of goods upon giving a loan the trust receipt did not pass title to the bank,
• The title of the entruster is a mere artificial where there is security interest of the property, and
expedient, more of a legal fiction than fact person is not an importer, there is no trust receipt
• It was also stated that there was no double created
recovery because when shells were deposited in • It is unjust and inequitable for banks of making
the court, IBAA did not yet accept it. Thus, they borrowers sign trust receipt to facilitate collection
have not appropriate the shells and can recover the of loans under threat of criminal prosecution in
obligation from the petitioners case of non-payment
Application
Penalty
Banking Laws
7. Exercise all powers granted by law and incidental PDIC shall be chairman
thereto
8. Conduct examination of bank with prior approval Per Diem
of MB
• Secretary of Finance shall fix per diem
a. No examination conducted within 12 days
from last examination Authority of the Board
b. To avoid overlap examinations, maximize
use of reports 1. Prepare rules and regulations for effective
9. Act as receiver discharge of responsibilities
10. Prescribe rules deemed necessary to implement 2. Direct management of PDIC
PDIC law 3. Establish human resource management system
11. Establish provident fund for payment of benefits a. Compensation structure shall be based on
of employees job evaluation studies
12. Compromise, condone or release any claim to b. All positions shall be governed by
PDIC compensation position classification
system
III. Board of Directors c. Compensation plan comparable with
prevailing compensation
• BOD shall administer the affairs of PDIC fairly
d. Exempted from existing laws on
and impartially without discrimination
compensation
Composition 4. Appoint, establish rank and fix remuneration
5. Adopt annual budget
1. Secretary of Finance – ex-officio chairman 6. Approve methodology in insurance and finance
2. Governor of BSP – ex-officio member assistance
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
V. Deposit Insurance Coverage • Even if depositor is HDC, it does not mean that he
already has a claim against the insurance fund
Deposit Liabilities • The fund protects deposits only
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
another bank, it shall be included in assessment There shall be an added penalty equivalent to
base twice the amount of interest payable for each day
4. Certified statements required shall be in such form • Penalty shall not be applicable if there is dispute
as BOD shall prescribe over amount of assessment
5. Any insured bank that fails to file certified
statement shall be compelled to file by mandatory VII. Deposit Insurance Fund
injunction
• Permanent insurance fund – P3B
Refund and Credit
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• Deposit insurance fund shall be capital account of IX. Reports by Insured Bank
PDIC and shall consist of:
1. Permanent insurance fund • Each insured bank shall make reports to PDIC of
2. Assessment collections conditions required
3. Reserves for insurance • If bank fails to make such report within given time,
4. Retained earnings BOD may provide 100php penalty for each day of
• Reserves for insurance shall be maintained at a violation
reasonable level to ensure capital adequacy • PDIC shall have access to reports made to the BSP
• PDIC may, within 2 years from passage, conduct to the insured bank and BSP shall also have access
study to adjust amount of Permanent Insurance to reports of BSP
Fund • Each insured bank shall keep true and accurate
• Assessment collections and incomes shall be record of its daily deposit transactions.
added to Deposit Insurance Fund after deduction Compliance with such shall be duly certified by
from expenses and charges. Such expenses and bank president
charges consists of: • Refusal to issue such shall be a violation
1. Operating costs
X. Prohibitions on PDIC Personnel
2. Additions to reserve
3. Net insurance and financial assistance 1. Being an officer, director, consultant, employee or
losses stockholder directly or indirectly of any bank
• PDIC may recover from any insured bank any 2. Receiving gifts from any officer, director or
unpaid assessment employee of any bank
• No action shall be brought to recover assessment 3. Revealing in any manner, information relating to
unless such action shall have been brought within business of any bank except when required by
5 years after right accrued Congress or the President
• If insured bank filed a false certified statement
XI. Legal Assistance
with intent to evade, such claim is not deemed to
accrue until PDIC discovers
• PDIC shall advance litigation costs to its directors,
VIII. Unsound Practice officers or employees in connection with any
criminal, civil or administrative case where such
• Upon examination by PDIC, it shall be disclosed person acted within the performance of his duty
whether insured bank is committing unsound • Even if they resign, they shall still receive legal
practices assistance in connection with the act done during
• The BOD in such a case shall: tenure
1. Submit report of examination to MB • The amount advance shall be repaid by the officer
2. If no corrective action by MB, BOD shall if it is determined by the board that such officer
motu proprio institute such need not be indemnified
BOD can issue cease and desist
order to the bank XII. Dealings by PDIC Personnel with Banks
3. If violation cause insolvency or
•
dissipation of assets the period to take Members of Board and personnel of PDIC may
become directors or officers of any bank if the
corrective action shall be done within 15
position is in connection with the financial
days and impose fines
assistance extended by the PDIC
• Actions and proceedings may be undertaken by
PDIC if insured bank have violated: Borrowing from Banks
1. Any provision of PDIC Law
2. Any order or rule of PDIC
3. Any written condition imposed by PDIC
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• Borrowing from banks by examiners or other • Actions filed by PDIC as receiver, payment of all
personnel shall be prohibited with respect to docket and court fees shall be suspended until
particular bank to which they are assigned action is terminated
• Borrowing by personnel from any bank not • Such fees shall constitute first lien on judgment
included in the prohibition shall be secured and
disclosed to the BOD Distribution of Assets
3. and
stockholders are suspended Insured deposit – amount due to any deposit for
Assets of closed bank is in custodia legis deposits in an insured bank
4. Assets of closed bank shall not be subject to 1. In PDIC Law, 250k. Now it’s 500k
attachment, execution or levy • Joint account shall be insured separately from any
individually-owned deposit account
Powers of PDIC in receivership
• If account s held jointly, maximum insured deposit
1. Bring suit to enforce liabilities of bank shall be divided into as many equal shares as to
2. Appoint persons to perform functions of PDIC as individuals
receiver or liquidator • If account is held by juridical person, maximum
3. Suspend or terminate employees of closed bank insured deposit shall be presumed to belong
a. Payment of separation pay shall be made entirely to such entity
after closed bank is in liquidation • Aggregate interests of each co-owner over several
4. Pay accrued utilities, rentals and salaries of closed joint accounts shall be subject also to maximum
bank insured deposit
5. Collect loans and other claims • No owner of an negotiable certificate of deposit
6. Hire private counsels if necessary shall be recognized as depositor unless his name is
7. Borrow loan when necessary to preserve assets of registered as owner in issuing bank
closed bank to minimize loss
8. If stipulated interest on deposits is unusually high, Proof of Claims
reduce interest rate
• PDIC may required proof of claims before paying
9. Exercise other powers inherent in receiver
insured deposit
Suits Filed by PDIC • Final determination if person is entitled to
insurance is the court
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
Settlement Period and Penalties in case of failure to settle • All right of depositor against closed bank which
PDIC may have been subrogated shall revert to
• Failure to settle claim within 6 months from date depositor again
of filing claim, where such failure by the officer
was due to GAOD, officer shall be imprisoned XV. Investment by PDIC
from 6 months – 1 year
• Period shall not apply if validity of claim is under • Money of PDIC not employed shall be invested in
resolution obligation of the Republic of the Philippines or
guaranteed obligations
• Upon payment to any depositor, PDIC shall be
o
subrogated to all the rights of the depositor against Not sell oraccount
its owner purchase
in such obligations
excess of 100k for
the closed bank
o Insurance commissioner may waive
• Subrogation shall include right to receive same
requirement of approval in above
dividends from proceeds of assets
• Banking and checking accounts of PDIC shall be
• Depositor shall retain claim for any uninsured
kept in BSP, PNB or fiscal agent
portion of his deposit
XVI. Extension of Loans
Notice
• When insured bank is determined as in danger of
• PDIC shall commence determination of insured
closing, in order to prevent such, PDIC is
deposit upon actual takeover of closed bank
authorize to:
• PDIC shall public a notice once a week for 3
1. Make loans to such bank
consecutive weeks in newspaper of general
2. Purchase assets of such bank
circulation such closing of the bank
3. Assume liabilities of such bank
Discharge 4. Make deposits in insured bank
•
The grant shall be made if bank is essential in
• Payment of insured deposit shall discharge community and for financial stability
• Such authority to extend financial assistance may
Recognition of Owner
also be exercised if PDIC finds that the resumption
• Neither PDIC or insured bank shall be required to of operations of the closed bank is vital to
recognize owner of a deposit appearing on the community
records under a name other than claimant • Reopening of such close bank is subject to prior
approval of MB
Withholding of Payment • PDIC may provide any corporation acquiring
assets of insured bank in danger of closing with
• PDIC may withhold payment of insured deposit if
financial assistance
payment of liability by such depositor as
• Prior to exercise of these above powers, PDIC
stockholder of closed bank not yet offset is
shall determine whether actual payoff will be more
pending determination
expensive than exercise of such
Prescription • When MB has determined systematic consequence
of closure of bank, PDIC may grant financial
• All rights of depositor shall be bared if: assistance in amount necessary to prevent its
o Depositor in closed bank fail to claim failure
insured deposit within 2 years from actual • Systematic risk – possibility that failure of one
take over bank to settle the transactions with other banks
o Depositor does not enforce his claim will trigger chain reaction and general shutdown
within 2 years after th2 year period to file of clearing activity
a claim
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• Systematic risk also means the likelihood of a 1. Merge and consolidate with non-insured
sudden unexpected collapse in confidence with the bank or convert into non- insured bank
banking system 2. Assume liabilities of deposits by any non-
• PDIC may not use such powers to purchase stocks insured bank
of insured bank 3. Transfer assets to non-insured bank
• Financial assistance may take form of equity or
Protection against losses
quasi-entity
• PDIC may require insured bank to provide
XVII. Borrowings
protection against burglary, defalcation and losses
• PDIC is authorized to borrow from BSP from discharge of duties
• Any loan granted by BSP shall be consistent with • BOD shall determine bonding requirement as to its
monetary policy and interest rate shall not exceed directors, officer and employers
treasury bill rate • If insured bank refused to comply with such
• If funds of PDIC are not sufficient, it can borrow requirement, PDIC may contract such protection
money from any bank designated as fiscal agent of for them payable to such bank
RP
XXI. Criminal Penalties
• Such loans shall be short-term durations
• Prison mayor or fine 50k-2M
XVIII. Issuance of Bonds
o Willful refusal to submit report
• With approval of President of Philippines, PDIC is o Refusal to permit examination
authorized to issue bonds, debentured and other o Making false statement
obligations to settle insured deposits in closed o Submission of false materials
banks o Refusal to allow PDIC to takeover
•
The BOD shall determine interest rate o Refusal to turn-over records
• PDIC shall provide reserves for redemption o Fraudulent disposal of assets
o Violation of exemption from garnishment
Reports and Audit o Willful failure to comply with PDIC and
conducting unsound business
• PDIC shall annual make report of its operations in o Splitting deposits
Congress • Splitting deposits - deposit account with
• Its financial transactions shall be audited by COA outstanding balance of more than maximum
• COA shall have access to all books, accounts, insured amount is broken down to two or more
records and reports accounts within 30 days preceding closure of bank
for purposes of availing maximum deposit
XX. Miscellaneous
XXII. Fines
Signs
• BOD is authorized to impose administrative fines
• Every insured bank shall display at each place of
but no more than 3 times amount of damages
business signs that deposits are insured by PDIC caused
• Those which do not relate to deposits or are
impractical shall be exempted from this XXIII. TRO and Injunction
requirement
• Only CA can issue TRO, Preliminary Injunction
Merger or Consolidations of Insured Bank against PDIC. Prohibition shall apply to all cases
• SC can issue restraining order if of extreme
• Without prior written consent from PDIC, no
urgency
insured bank shall:
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
Reorganization
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
Banking Laws
In all instances of unlawful activity, there can be Silence of the law does not automatically construe
•
it to have such ex parte
an ex parte freeze order • Also, in IRR of AMLA, there is no ex parte bank
• There is no need for full-blown trial inquiry order
• However, bank inquiry order does not necessitate
Authority to Inquire into Bank Deposits
any physical seizure
• To complete legal measure to prevent ML, AMLC • The reason of court is that, even if the accused is
may examine deposits in any banking institution notified that there will be inquiry due to the full-
upon order of court blown trial, the accused cannot hide his fraudulent
• It must be established that there is probable cause records as it is maintained in the bank and cannot
that deposits relate to: be erased
1. Unlawful activity or • Thus, in such interpretation, bank inquiry order
2. Money laundering offense have no ex parte orders, it does not weaken the
• No court order shall be required in unlawful law
activities of: • Also Bank Inquiry Order (BIO) not analogous to
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• Under AMLA no person can be prosecuted under • When foreign state makes a request for
AMLA for acts committed prior to October 17, investigation or prosecution of ML, the AMLC
2001 may accept or refuse the same for valid reasons
• Also, BIO prior to October 17, 2001 is prohibited • Principles of mutuality and reciprocity shall at all
as it is an ex post facto times recognized
o It deprives a persons of some lawful
protection to which he has become entitled Powers of AMLC to act on request of foreign state
• However, those accounts created prior to October 1. AMLC may execute request for assistance by:
17, 2001 are still under the coverage of AMLA
• Otherwise, the offenders can mere circumvent by a.Tracking down, freezing proceeds of
unlawful activity
laundering into an account created prior to b. Giving information
October 17, 2001 c. Apply order of forfeiture
2. Court will issue such order only if application is
VI. Forfeiture
accompanied by:
Civil Forfeiture a. Authenticated copy of order of court of
requesting state
• Where there is a covered transaction report made b. Certification by competent court of
and court ordered seizure or monetary instrument, requesting state that conviction or order is
rules of civil forfeiture applies final
1. When court issued order of forfeiture, offender • AMLC may request assistance in:
may apply for a declaration that the same a. Tracking down, freezing, proceeds of
2. legitimately
belongs
filedtoinhim
unlawful activity
Verified petition court which rendered b. Obtain information
judgment of conviction within 15 days from order c. Apply with proper foreign court an order
to enter premises or seize documents and
Payment in Lieu of Forfeiture
objects in request
• Instead of order of forfeiture, court may order d. Applying for order of forfeiture of any
offender to pay amount equal to value of monetary monetary instrument
instrument when said order cannot be imposed Must be accompanied by
because: authenticated copy of forfeiture by
1. Monetary instrument cannot be located RTC and affidavit of clerk of
with due diligence court
2. It was substantially altered or destroyed
Limitation on Request for Mutual Assistance
3. It has been concealed, removed or
converted from being found • AMLC may refuse to comply with request for
4. Located outside the Philippines or outside assistance if it contravenes the Constitution or
jurisdiction of court execution of require prejudicial to national interest
5. It has been commingled with other unless there is a treaty specifically provided
monetary instruments
Requirement for Request for Mutual Assistance from
VII. Mutual Assistance among States Foreign state
Banking Laws
3. Give sufficient particulars to identity of person 1. AMLA shall not be used for political persecution
and covered institution or to hamper competition in trade
4. Ask from covered institution any information 2. No case of ML may be filed against any candidate
necessary during election period
5. Specify manner and to whom information is to be
produced X. Implementing Rules and Regulations (IRR)
6. Give all particulars necessary for issuance by the
• BSP, Insurance Commission and SEC shall
court of requesting State certain order
promulgate IRR of AMLA subject to approval of
7. Contain other information that may assist
Congressional Oversight Committee
execution of request • Covered institutions shall formulate their
Authentication of Documents respective ML prevention programs
• Philippines shall negotiate inclusion of ML • COC shall have power to promulgate own rules, to
offenses among extraditable offenses in future oversee implementation of AMLA and review IRR
treaties
XII. Rules and Regulations for Banks
VIII. Penalties
1. When establishing business relations in opening
1. In ML: 7 - 14 years imprisonment and 3M deposits accounts, banks should take reasonable
2. In Failure to Keep Records: 6 months – 1 year measure to establish identity of client. In corporate
imprisonment and 100k-500k entities, following shall be made:
3. In Malicious reporting: 6 months - 4 years a. Verification of legal existence of client
imprisonment and 100k-500k b. Verification of authority of person
a. If juridical person, officers shall be purporting to act on behalf of client
punished and revoke such license 2. In case of doubt as whether purported clients are
b. If an alien, deported after service acting for themselves, reasonable measures shall
c. In public official, shall have PAD or TAD be taken
d. If such public officials refuse to testify, 3. Anonymous or accounts under fictitious names are
same penalties not allowed. In case such is allowed, banks must
still ensure identity of client in some other
Breach of Confidentiality document
• For breach under AMLA, penalty is 3-8 years with 4. Identity of existing clients should be renewed at
fine of 500k-1M least every other year
• Responsible reporter, writer, president or publisher 5. All necessary records should be maintained for at
shall be liable least 5 years
6. Special attention shall be given to complex,
IX. Prohibition against Political Harassment unusual large and all unusual patterned
transactions with no lawful purpose
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
Banking Laws
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
15. such other documents or information as may be 6. SPV shall cause the publication of a notice
required by the SEC of filing of registration statement its
expense
H. Approval 7. The Commission may audit the financial
• Upon approval of the SPV Plan, the Commission statements, assets and other information of
shall issue an Approval Certificate stating that the an SPV applying for registration
application has been approved and the IUIs may 8. Upon the registration statement being
be issued declared effective by the Commission, the
sale of the securities subject thereto shall
I. Issuance of IUIs be commence within 2 business days and
• Registration Requirements be counted until the end of the offering
1. All IUIs proposed to be sold or distributed period or until the sale has been
within the Philippines shall be duly terminated by the action of the issuer
registered with the SEC 9. The SPV shall ensure wide dissemination
2. Registration statement including: of preliminary and final prospectuses
1. business of the issuer 10. Written notification shall be given to the
2. use of proceeds SEC within 3 business days from
3. risk factors completion or termination of the offering
4. legal proceedings by the issuer, including therein the number
5. market of securities of securities sold
6. management's discussion of
financial condition and results of Amendments or Rejection
operations •Within 45 days after the date of filing of the
7. directors and officers registration statement, or at such later date to
8. securities ownership which the issuer has consented, the SEC shall
9. certain related party transactions declare the registration statement effective or
10. audited and interim financial rejected
statements in accordance with •UNLESS the applicant is allowed to amend the
SRC rule 68 registration statement
3. In addition, the ff information shall be •After which, the SEC shall determine if it should
disclosed in the registration statements of be effective or rejected
an SPV •The SEC may reject an RS and refuse registration
a. details of the SPV plan thereunder or revoke the effectivity of an RS and
b. details of credit enhancements the registration of the security thereunder after due
c. detailed description of the assets notice and hearing by issuing an order to such
or loan constituting the pools of effect, setting forth its findings in respect thereto if
assets its finds that:
d. rights and obligations of the •The issuer:
selling FI assumed by the SPV 1. has been judicially declared insolvent
e. description of any relationship or 2. violated any provision of the Corporation
interest of the selling FI parent Code as well as orders of the SEC
f. Incentives and exemption 3. has been or engaged or is about to engage
privileges in fraudulent transactions
4. The
fromSPV shall
the FI thatalso
the submit
affecteda borrowers
certification
of 4. he has made any
representation false or misleading
of material facts in any
the NPLs and all persons holding prior prospectus concerning the issuer or its
encumbrances upon the assets securities
5. SPV shall pay a registration fee of 1/10 of 5. has failed to comply with any requirement
1% of the aggregate offering price of the that the SEC ma impose as a condition for
IUIs subject to the diminishing fee set by registration of the security for which the
the Commission registration statement has been filed
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• The RS is on its face incomplete or inaccurate in the voting power of an enterprise it may also exist
any material aspect or include any untrue when there is:
statement or other misleading statements 1. power over more than ! of the voting
• The issuer, or any D, O, or controlling person of rights by virtue of an agreement with other
the issuer or a person performing a simple function investors
has been convicted by a competent judicial or 2. power to govern the financial and
administrative body, upon plea of guilty, or operating policies of the enterprise under a
otherwise, of an offense involving moral turpitude statute or an agreement
and/or fraud or is enjoined or restrained by the 3. power to appoint or remove the majority
SEC for violation of such of the members of the BoD or equivalent
• If the SEC deems it necessary, it may issue an governing body
order suspending the offer and sale of the 4. power to cast the majority of votes at
securities pending any investigation meetings of the BoD or equivalent
governing body
Issuance of Securities of the Public without prior 5. any other arrangement similar to any of
registration the above
• Any SPV that offers to sell or distribute its IUIs to • Parent - a juridical person who has control over
the public within the Phils without prior another juridical person directly or indirectly thru
registration shall be subject to the penalties one or more intermediaries
provided of the SRC • Related Interest:
• The imposition of the foregoing administrative 1. entities in which the amount of investment
sanctions shall be without prejudice to the filing of the selling FI is more than 20% but less
criminal charges against the individuals than 50% of the outstanding capital stock
responsible for the violation thereof
2. trusts for the benefit of employees such as
Tax Treatment of IUIs pension and profit sharing trusts that are
• Since IUIs are not considered as deposit managed by or under the trusteeship of the
substitutes under the Act, the interest or other selling FI
monetary benefit derived from IUIs is not subject 3. provident and other employees/officers'
to the 20% final withholding tax under the NIRC benefit funds of the selling FI
• However, the IUI and any income arising from the 4. principal owners of the selling FI
IUIs shall be subject to the normal tax and/or such 5. management of the selling FI
other applicable taxes, including but not limited to, 6. members of the immediate families of the
documentary stamp tax, imposed under the NIRC principal owners and management of the
and its implementing regulations selling FI
7. other parties with which the selling FI
J. Permitted Investors may deal with if one party controls or can
• May acquire or hold IUIs of an SPV in the significantly influence the management or
minimum amount of 10Mphp provided: operating policies of the other to an extent
1. that an SPV shall not be authorized to that one of the transacting parties might be
acquire the IUIs of another SPV prevented from fully pursuing its own
2. that the Parent, Subsidiaries, Affiliates or separate interests
DOSRI shall not acquire, hold, directly or • Subsidiary of a specified person is an affiliate
indirectly, the IUIs of the SPV that controlled by such person D/I thru one or more
intermediaries
acquired the NPAs of the FI
• Affiliate - a juridical person, directly or indirectly,
thru one or more intermediaries, is controlled by K. Notice and Manner of Transfer of Assets
or is under common control with selling FI or its
affiliates Prior Notice
• Control - exists when the Parent owns directly or • No transfer of NPLs to an SOV shall take effect
indirectly thru subsidiaries more than one half of unless the FI concerned shall give prior notice to
the borrowers of the NPLs and all persons holding
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
8. Accepts as collateral for a loan extended • Provided that these tax exemptions and reduction
by said FI the equity shares and IUIs of of fees shall apply only upon compliance with the
the SPV that acquired its NPAs following requirements
9. Enters into buy-back and other similar 1. NPA has been certified by the ARA as an
arrangements, or financial derivative NPL or ROPOA as of 06/30/02 provided
transactions with similar effect, involving that for tax purposes, a property shall be
the NPAs or the securities backed by such deemed acquired after the lapse of the
NPAs redemption period in cases where such
10. Enters into any other transaction where the period still exists
FI retains effective control over the
transferred NPAs or shares in the losses of 2. all transfer taxes and registration fees have
the SPV been paid or subsequently paid upon
• “Any party” includes proxies, nominees, and assessment on ROPOAs who redemption
voting trustees. The extension of credit to an period has lapsed as of 063002 where
individual for the purpose of acquiring a single legal title has not been transferred in the
family residential unit ROPOA or NPL secured by name of the FI
real estate mortgage on a residential unit shall be 3. The properties acquired by an SPV from
allowed. the GFIs or GOCCs which are devoted to
socialized or low-cost housing shall not be
Penalties converted to other uses
• prescribed under Sec 25 of the Act without • Tax exemption privileges
prejudice to other penalties that may be imposed 1. Documentary stamp tax
by the ARA of the transferring FI under applicable 2. Capital gains tax imposed on the transfer
laws of lands and other assets treated as capital
• The SPV shall assume all Rights and Obligations assets
of the FI over the transferred NPA 3. Credible withholding income taxes
imposed on the transfer of land and or
N. Tax Exemptions and Fee Privileges buildings treated as ordinary assets
• Transactions covered 4. the VAT or gross receipts
1. the transfer of the NPL by the FI to an • Reduction of Fees
SPV 1. 50% of the applicable mortgage
2. transfer of the ROPOA by the FI to an registration and transfer fees on the
SPV transfer or real estate mortgage and chattel
3. Dacion en pago (DEP) of the NPL by the mortgage registration to and the
borrower to the FI SPV/individual, imposed in accordance
4. DEP of the NPL by a 3rd party, on behalf with the existing circular of LRA
of the borrower, to the FI 2. 50% of the filing fees for any foreclosure
5. transfer of NPL by the FI to an individual initiated by the SPV/individual in relation
6. transfer of the ROPOA by the FI to an to any NPA acquired from an FI
individual 3. 50% of the registration fees prescribed
7. transfer of the NPL by the SPV to a • Manner of Claiming Tax Exemptions
3rd party o shall provide the BIR with the appropriate
8. transfer of the ROPOA by the SPV to a certificate of eligibility
o
3rd party
9. DEP of the NP by the borrower to the In case the
shares, of the
CIRtransfer of real
or his duly property or
authorized
SPV representative shall issue a Certificate
10. DEP of the NPL by a 3rd party on behalf (Cert Authorizing Registration/ Tax
of the borrower to the SPV Clearance Cert) that such transfer has been
11. transfer of the NPL by the individual to a reported and is tax-exempt
3rd party
12. transfer of ROPOA by the individual to a Q. Abuse of Tax Exemptions and Privileges
3rd party
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.
San Beda College of Law
Banking Laws
• Any person, natural or juridical, who shall benefit Audited Financial Statements
from the said exemptions and privileges without within 120 days from the end of
being entitled thereto, shall be liable. the fiscal year
• In addition, he shall refund the Government 2. As Issuer of Securities to the Public
double the amount of he was exempted from a. Annual Report on SEC Form 17A
plus12% interest per annum b. Quarterly Report on SEC Form
17Q
R. Redemption Periods c. A current report on SEC Form
• provided by the following: Sec 47 of RA 897 or 17C
the GBL of 2000 and Rules of Court d. Monthly Reports on total
issuances and amounts of IUIs
S. Books of Accounts and Records 3. Audited Financial Statements - The filing
• Internal Record Keeping and Accounting Controls of SEC Form 17A shall suffice
1. An SPV must make and keep books, 4. Violations - any violation of the above
records and accounts which reflect the due to the failure of the SPV, it shall be
transactions and dispositions of its assets, subject to penalty provided by SRC, this
it minutes of meetings and other business Code, and their IRR
transactions • Reports to be submitted to the BIR by an SPV -
2. It shall advise and maintain a system of for purposes of implementing the tax provisions of
internal accounting controls sufficient to the Act
provide reasonable assurances that • Reports filed to the BSP
a. The transactions and access are o By SPV
pursuant to management 1. Report on any sale/transfer to any
authorization party of NPLs and ROPOAs
b. Financial statements are prepared acquired from banks and NQBQs
in conformity with the generally quarterly
accepted accounting principles 2. Report on the latest appraised/ fair
c. Recorded assets are compared market value of ROPOAs and real
with existing assets at reasonable estate properties/ chattels used as
intervals and differences collateral and NQBQs semi-
reconciled annually
• External Auditor - shall be appointed by SPV o By Selling Financial Institution - monthly
accredited by the Commission report regarding the actual sale/ transfer to
• Inspection of Books and Records – those who has an SPV
a right to inspect:
1. Stockholder of SPV or Holder of an IUI at U. Penalty in case of violation of the provisions of the Act
a reasonable hour of business • Fine: Not less than 50k not more than 1M, or
2. Authorized representatives of the • Imprisonment: not less than 6 years 1 day not
Commission, BIR or the BSP any time more than 12 years
3. Failure to comply with this right will be a • OR BOTH
ground for the suspension order on the • If the penalty was committed by a corporation,
offering of the IUIs association, partnership etc., the one responsible
would be those officers who participated in the
AUTHORS: MANILA, ANTONIO CEASAR; BERNARDO, JANSEN; INTIG, JOY ESTELA; DE JESUS, TRACY ANN.
FROM SECTION 2S - SAN BEDA COLLEGE OF LAW, MENDIOLA: AY 2011-2012. REFERENCE: BANKING LAWS & JURISPRUDENCE BY DIZON.