“SANCTIONS AGAINST UNSAFE AND pertaining to a deposit-related unsafe and/or unsound banking

UNSOUND BANKING PRACTICES practice.

“SEC. 8. (a) Whenever upon examination by the Corporation into the “Such termination shall be final and executory, and shall be effective
condition of any insured bank, it shall be disclosed that an insured upon publication of the notice of termination in a newspaper of
bank or its directors or agents have committed, are committing or general circulation.
about to commit unsafe or unsound practices in conducting the
business of the bank, or have violated, are violating or about to “The deposits of each depositor in the bank on the effective date of
violate any provisions of any law or regulation to which the insured the termination of insurance coverage, less all subsequent
bank is subject, the Board of Directors shall submit the report of the withdrawals, shall continue to be insured up to the maximum deposit
examination to the Monetary Board to secure corrective action insurance coverage for a period of one hundred eighty (180) days.
thereon. If no such corrective action is taken by the Monetary Board Additions to, or renewal of, existing deposits and new deposits in
within forty-five (45) days from the submission of the report, the such bank after the effective date of termination of insured status of
Board of Directors shall, motu proprio, institute corrective action the bank shall not be insured by the Corporation.
which it deems necessary. The Board of Directors may thereafter
issue a cease and desist order, and require the bank or its directors
“The bank shall not advertise or represent that additions to, or
or agents concerned to correct the practices or violations within forty-
renewal of, existing deposits and new deposits made after the
five (45) days. However, if the practice or violation is likely to cause
effective date of termination aye covered by deposit insurance.”
insolvency or substantial dissipation of assets or earnings of the
bank, or is likely to seriously weaken the condition of the bank or
otherwise seriously prejudice the interests of its depositors and the BANK RESOLUTION
Corporation, the period to take corrective action shall not be more
than fifteen (15) days. The order may also include the imposition of SEC. 11. (a) The Corporation, in coordination with the Bangko
fines provided in Section 26(g) hereof. The Board of Directors shall Sentral ng Pilipinas, may commence the resolution of a bank under
duly inform the Monetary Board of the Bangko Sentral ng Pilipinas of this section upon:
action it has taken under this subsection with respect to such
practices or violations. “(1) Failure of prompt corrective action as declared by the Monetary
Board; or
“(b) The actions and proceedings provided in the preceding
subsections may be undertaken by the Corporation if, in its opinion, “(2) Request by a bank to be placed under resolution.
an insured bank or its directors or agents have violated, are violating
or about to violate any provision of this Act or any order, rule or “The Corporation shall inform the hank of its eligibility for entry into
instruction issued by the Corporation or any written condition resolution.
imposed by the Corporation in connection with any transaction with
or grant by the Corporation.
“(b) The Bangko Sentral ng Pilipinas shall inform the Corporation of
the initiation of prompt corrective action on any bank and shall be
“(c) The Corporation may terminate the insured status of any bank authorized to share with the Corporation all information, agreements
that fails or refuses to comply, within thirty (30) days from notice, with or documents, including any order of the Monetary Board, in relation
any cease-and-desist order issued by the Corporation, or with any to the prompt corrective action. The Corporation shall have the
corrective action imposed by the Monetary Board, under this section

authority to inquire and monitor the status of banks under prompt “(4) Cooperate with the Corporation in the conduct or exercise of any
corrective action. or all of its authorities under this Act and honor in good faith its
commitment or undertaking with the Corporation on the resolution of
“(c) When there is a failure of prompt corrective action as declared by the bank.
the Monetary Board due to capital deficiency, the Corporation, its
duly authorized officers or employees, may examine, inquire or look “(e) Within a period of one hundred eighty (180) days from a bank’s
into the deposit records of a bank: Provided, That such authority may entry into resolution, the Corporation, through the affirmative vote of
not be exercised when the failure of prompt corrective action is due at least five (5) members of the PDIC Board, shall determine whether
to grounds other than capital deficiency. For this purpose, banks, the bank may be resolved through the purchase of all its assets and
their officers and employees are hereby mandated to disclose and assumption of all its liabilities, or merger or consolidation with, or its
report to the Corporation or its duly authorized officers and acquisition, by a qualified investor.
employees, deposit account information in said bank.
“For this purpose, the Corporation may:
“The Corporation, its duly authorized officers or employees are
prohibited from disclosing information obtained under this section to “(1) Determine a resolution package for the bank;
any person, government official, bureau or office. Any act done
pursuant to this section shall not be deemed as a violation of
“(2) Identify and, with the approval of the Monetary Board, pre-qualify
Republic Act No. 1405, as amended, Republic Act No. 6426, as
possible acquirers or investors;
amended, Republic Act No. 8791, and other similar laws protecting
or safeguarding the secrecy or confidentiality of bank
deposits: Provided, That any unauthorized disclosure of the “(3) Authorize pre-qualified acquirers or investors to conduct due
information under this section shall be subject to the same penalty diligence on the bank, for purposes of determining the valuation of a
under the foregoing laws protecting the secrecy or confidentiality of bank through an objective and thorough review and appraisal of its
bank deposits. assets and liabilities, and assessment of risks or events that may
affect its valuation; and
“(d) The stockholders, directors, officers or employees of the bank
shall have the following obligations: “(4) Conduct a bidding to determine the acquirer of the bank.

“(1) Ensure bank compliance with the terms and conditions “(f) In determining the appropriate resolution method for a bank, the
prescribed by the Corporation for the resolution of the bank; Corporation shall consider the:

“(2) Cause the engagement, with the consent of the Corporation, of “(1) Fair market value of the assets of the bank, its franchise, as well
an independent appraiser or auditor for the purpose of determining as the amount of its liabilities;
the valuation of the bank consistent with generally accepted
valuation standards; “(2) Availability of a qualified investor;

“(3) Ensure prudent management and administration of the bank’s “(3) Least cost to the DIF; and
assets, liabilities and records; and
“(4) Interest of the depositing public.
“(g) The Corporation may appoint or hire persons or entities of “(2) Purchase of assets and/or assumption of liabilities.
recognized competence in banking, finance, asset management or
remedial management, as its agents, to perform such powers and “(b) In addition to the powers of a receiver provided under existing
functions of the Corporation in the resolution of a bank, or assist in laws, the Corporation, as receiver of a closed bank, is empowered to:
the performance thereof.
“(1) Represent and act for and on behalf of the closed bank;
“(h) The PDIC Board shall prescribe the guidelines or criteria for a
bank to be placed under resolution. “(2) Gather and take charge of all the assets, records and affairs of
the closed bank, and administer the same for the benefit of its
“(i) Upon a determination by the Corporation that the bank may not creditors;
be resolved, the Monetary Board may act in accordance with Section
30 of Republic Act No. 7653 or the New Central Bank Act. “(3) Convert the assets of the closed bank to cash or other forms of
liquid assets, as far as practicable;
“(j) Bank resolution involving the purchase of all assets and
assumption of all liabilities of a bank shall be exempt from the
“(4) Bring suits to enforce liabilities of the directors, officers,
provisions of Act No. 3952, otherwise known as ‘The Bulk Sales
employees, agents of the closed bank and other entities related or
Law’. connected to the closed bank or to collect, recover, and preserve all
assets, including assets over which the bank has equitable interest;
“(k) The provisions of this section are without prejudice to any action
that the Monetary Board may take under existing laws.” “(5) Appoint or hire persons or entities of recognized competence in
banking, finance, asset management or remedial management, as
“LIQUIDATION OF A CLOSED BANK its deputies, assistants or agents, to perform such powers and
functions of the Corporation as receiver of the closed bank, or assist
“SEC. 12. (a) Whenever a bank is ordered closed by the Monetary in the performance thereof;
Board, the Corporation shall be designated as receiver and it shall
proceed with the takeover and liquidation of the closed bank in “(6) Appoint or hire persons or entities of recognized competence in
accordance with this Act. For this purpose, banks closed by the forensic and fraud investigations;
Monetary Board shall no longer be rehabilitated.”
“(7) Pay accrued utilities, rentals and salaries of personnel of the
“AUTHORITIES OF A RECEIVER AND EFFECTS OF closed bank for a period not exceeding three (3) months, from
PLACEMENT OF A BANK UNDER LIQUIDATION available funds of the closed bank;

“SEC. 13. (a) The receiver is authorized to adopt and implement, “(8) Collect loans and other claims of the closed bank and for this
without need of consent of the stockholders, board of directors, purpose, modify, compromise or restructure the terms and conditions
creditors or depositors of the closed bank, any or a combination of of such loans or claims as may be deemed advantageous to the
the following modes of liquidation: interests of the creditors of the closed bank;

“(1) Conventional liquidation; and “(9) Hire or retain private counsel as may be necessary;

“(10) Borrow or obtain a loan, or mortgage, pledge or encumber any “The Board of Directors shall adopt such policies and guidelines as
asset of the closed bank, when necessary to preserve or prevent may be necessary for the performance of the above powers by
dissipation of the assets, or to redeem foreclosed assets of the personnel, deputies, assistants and agents of the Corporation.
closed bank, or to minimize losses to its depositors and creditors;
“(c) After the payment of all liabilities and claims against the closed
“(11) If the stipulated interest rate on deposits is unusually high bank, the Corporation shall pay surplus, if any, dividends at the legal
compared with prevailing applicable interest rates, the Corporation rate of interest from date of takeover to date of distribution to
as receiver, may exercise such powers which may include a creditors and claimants of the closed bank in accordance with the
reduction of the interest rate to a reasonable rate: Provided, That any Rules on Concurrence and Preference of Credits under the Civil
modifications or reductions shall apply only to earned and unpaid Code or other laws before distribution to the shareholders of the
interest; closed bank.

“(12) Utilize available funds of the bank, including funds generated “(d) The officers, employees, deputies, assistants and agents of the
by the receiver from the conversion of assets to pay for reasonable receiver shall have no liability and shall not be subject to any action,
costs and expenses incurred for the preservation of the assets, and claim or demand in connection with any act done or omitted to be
liquidation of, the closed bank, without need for approval of the done by them in good faith in connection with the exercise of their
liquidation court; powers and functions under this Act and other applicable laws, or
other actions duly approved by the court.
“For banks with insufficient funds, the Corporation is authorized to
advance the foregoing costs and expenses, and collect payment, as “(e) The placement of a bank under liquidation shall have the
and when funds become available. following effects:

“(13) Charge reasonable fees for the liquidation of the bank from the “(1) On the corporate franchise or existence
assets of the bank: Provided, That payment of these fees, including
any unpaid advances under the immediately preceding paragraph, “Upon placement by the Monetary Board of a bank under liquidation,
shall be subject to approval by the liquidation court; it shall continue as a body corporate until the termination of the
winding-up period under Section 16 of this Act. Such continuation as
“(14) Distribute the available assets of the closed bank, in cash or in a body corporate shall only be for the purpose of liquidating, settling
kind, to its creditors in accordance with the Rules on Concurrence and closing its affairs and for the disposal, conveyance or distribution
and Preference of Credits under the Civil Code or other laws; of its assets pursuant to this Act. The receiver shall represent the
closed bank in all cases by or against the closed bank and prosecute
“(15) Dispose records of the closed bank that are no longer needed and defend suits by or against it. In no case shall the bank be
in the liquidation in accordance with guidelines set by the PDIC reopened and permitted to resume banking business after being
Board of Directors, notwithstanding the laws on archival period and placed under liquidation.
disposal of records; and
“(2) On the powers and functions of its directors, officers and
“(16) Exercise such other powers as are inherent and necessary for stockholders
the effective discharge of the duties of the Corporation as receiver.
“The powers, voting rights, functions and duties, as well as the benefits provided for by law shall be made from available assets of
allowances, remuneration and perquisites of the directors, officers, the bank in accordance with the Rules on Concurrence and
and stockholders of such bank are terminated upon its closure. Preference of Credits under the Civil Code or other laws.
Accordingly, the directors, officers, and stockholders shall be barred
from interfering in any way with the assets, records, and affairs of the ‘(5) Contractual obligations
bank.
“The receiver may cancel, terminate, rescind or repudiate any
“The receiver shall exercise all authorities as may be required to contract of the closed bank that is not necessary for the orderly
facilitate the liquidation of the closed bank for the benefit of all its liquidation of the bank, or is grossly disadvantageous to the closed
creditors. bank, or for any ground provided by law.

“(3) On the assets “(6) On interest payments

“Upon service of notice of closure as provided in Section 14 of this “The liability of a bank to pay interest on deposits and all other
Act, all the assets of the closed bank shall he deemed in custodia obligations as of closure shall cease upon its closure by the
legis in the hands of the receiver, and as such, these assets may not Monetary Board without prejudice to the first paragraph of Section 85
be subject to attachment, garnishment, execution, levy or any other of Republic Act No. 7653 (the New Central Bank Act): Provided, That
court processes. A’ judge, officer of the court or any person who shall the receiver shall have the authority, without need for approval of the
issue, order, process or cause the issuance or implementation of the liquidation court, to assign, as payment to secured creditors, the
garnishment order, levy, attachment or execution, shall be liable bank assets serving as collaterals to their respective loans up to the
under Section 27 of this Act: Provided, however, That collaterals extent of the outstanding obligations, including interest as of date of
securing the loans and advances granted by the Bangko Sentral ng closure of the hank, as validated by the receiver. The valuation of the
Pilipinas shall not be included in the assets of the closed bank for asset shall be based on the prevailing market value of the collaterals
distribution to other creditors: Provided, further, That the proceeds in as appraised by an independent appraiser on an ‘as is where is’
excess of the amount secured shall be returned by the Bangko basis.
Sentral ng Pilipinas to the receiver.
“(7) Liability for penalties and surcharges for late payment and
“Any preliminary attachment or garnishment on any of the assets of nonpayment of taxes
the closed bank existing at the time of closure shall not give any
preference to the attaching or garnishing party. Upon motion of the
“From the time of closure, the closed bank shall not be liable for the
receiver, the preliminary attachment or garnishment shall be lifted
payment of penalties and surcharges arising from the late payment
and/or discharged. or nonpayment of real property tax, capital gains tax, transfer tax and
similar charges.
“(4) On labor relations
“(8) Bank charges and fees on services
“Notwithstanding the provisions of the Labor Code, the employer-
employee relationship between the closed bank and its employees
“The receiver may impose, on behalf of the closed bank, charges
shall be deemed terminated upon service of the notice of closure of
and fees for services rendered after bank closure, such as, but not
the bank in accordance with this Act. Payment of separation pay or
limited to, the execution of pertinent deeds and certifications.

“(9) Actions pending for or against the closed bank to the exercise by the receiver of the functions under this Act shall be
subject to visitorial audit only by the Commission on Audit.”
“Except for actions pending before the Supreme Court, actions
pending for or against the closed bank in any court or quasi-judicial
body shall, upon motion of the receiver, be suspended for a period
not exceeding one hundred eighty (180) days and referred to
mandatory mediation. Upon termination of the mediation, the case
shall be referred back to the court or quasi-judicial body for further
proceedings.

“(10) Final decisions against the closed bank

“The execution and enforcement of a final decision of a court other

than the liquidation court against the assets of a closed bank shall be
stayed. The prevailing parly shall file the final decision as a claim
with the liquidation court and settled in accordance with the Rules on
Concurrence and Preference of Credits under the Civil Code or other
laws.

“(11) Docket and other court fees

“Payment of docket and other court fees relating to all cases or

actions filed by the receiver with any judicial or quasi-judicial bodies
shall be deferred until the action is terminated with finality. Any such
fees shall constitute as a first Hen on any judgment in favor of the
closed bank or in case of unfavorable judgment, such fees shall be
paid as liquidation costs and expenses during the distribution of the
assets of the closed bank.

“(12) All assets, records, and documents in the possession of the

closed bank at the time of its closure are presumed held by the bank
in the concept of an owner.

“(13) The exercise of authority, functions, and duties by the receiver

under this Act shall be presumed to have been performed in the
regular course of business.

“(14) Assets and documents of the closed bank shall retain their
private nature even if administered by the receiver. Matters relating