CHAPTER 6.

PROHIBITED TRANSACTIONS [enzo]

1. Prohibited transactions
a. Banks
i. Sec. 54. Prohibition to Act as Insurer. - A bank shall not directly engage in insurance business as the
insurer.
ii. Sec. 55.1 (e) - outsource inherent banking functions
iii. Banks cannot 1) engage in insurance business and 2) outsource banking functions (taking of deposits,
granting loans, trust operations)
b. Directors, officers, employees or agents
i. Sec. 55.1. No director, officer, employee, or agent of any bank shall
1. Make false entries in any bank report or statement or participate in any fraudulent transaction,
affecting the financial interest of, or causing damage to, the bank or any person
2. Disclosure of any information relative to the funds or properties of any person or entity in the
custody of the bank to an unauthorized person without a valid court order
3. Accept gifts, fees, commissions or any form of remuneration in approving loans or credit
accommodations from their employer-bank
4. Overvaluate or aiding the overvaluation of any security to influence the actions or decisions of
the bank or any bank
c. Special laws - Bank Secrecy Law
i. Bank officers or employees may not disclose to any person information on bank deposits
1. Marquez v. Desierto, G.R. No. 135882, June 27, 2001 - in camera inspection of bank deposit
records is not allowed because it is also in the nature of examination
ii. Banks cannot allow examination of deposits by any person or government officials (discussed in previous
chapters)
1. Exceptions:
a. With written permission of the depositor

i. shareholders cannot inspect the deposits of their corporation without the
latter’s consent (right to inspect as shareholder is subject to bank secrecy)
b. Impeachment cases

c. In cases of bribery or dereliction of duty of public officials
d. In cases where the money deposited is the subject of litigation

e. In cases involving unexplained wealth, even if placed in another person’s name
i. not all violations of Anti-graft and corruption law fall under this exception
f. Upon inquiry by the BIR to determine net estate of a deceased depositor

g. In cases of money laundering, kidnapping for ransom, violations of the anti-drugs law,
hijacking, destructive arson, murder, and those committed by terrorists against
non-combatant persons

h. Disclosure under the unclaimed balances act
i. Reports of banks to the AMLC of covered or suspicious transactions

j. Upon order of the CA, in terrorism cases

k. In case of financing of terrorist activities
l. PDIC inquiry in case of a finding of unsafe or unsound banking practice or in case of
failure of prompt corrective action as declared by the MB due to capital deficiency

m. Waiver in case of DOSRI loans

n. Disclosure to BSP in compliance with AMLA and testing of numbered accounts

2. Conducting business in an unsafe or unsound manner (Sec. 56)

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a. All relevant facts must be considered — analysis of the impact on the bank’s operations and financial conditions
must be undertaken, including evaluation of capital position, asset condition, management, earnings posture and
liquidity position
b. Sec. 56. Conducting Business in an Unsafe or Unsound Manner - In determining whether a particular act or
omission, which is not otherwise prohibited by any law, rule or regulation affecting banks, quasi-banks or trust
entities, may be deemed as conducting business in an unsafe or unsound manner for purposes of this Section, the
Monetary Board shall consider any of the following circumstances:
i. act or omission has resulted or may result in material loss or damage, or abnormal risk or danger to the
safety, stability, liquidity or solvency of the institution; or
ii. act or omission has resulted or may result in material loss or damage or abnormal risk to the institution's
depositors, creditors, investors, stockholders or to the Bangko Sentral or to the public in general; or
iii. act or omission has caused any undue injury, or has given any unwarranted benefits, advantage or
preference to the bank or any party in the discharge by the director or officer of his duties and
responsibilities through manifest partiality, evident bad faith or gross inexcusable negligence; or
iv. act or omission involves entering into any contract or transaction manifestly and grossly disadvantageous
to the bank, quasi-bank or trust entity, whether or not the director or officer profited or will profit
thereby.
c. MORB Appendix 49 (List of Unsafe and Unsound Practices)
i. Operating with management whose policies and practices are detrimental to the bank and jeopardizes the
safety of its deposits
ii. Operating with total adjusted capital and reserves that are inadequate in relation to the kind and quality
of the assets of the bank
iii. Operating in a way that produces a deficit in net operating income without adequate measures to ensure
a surplus in net operating income in the future
iv. Operating with a serious lack of liquidity, especially in view of the asset and deposit/liability structure of
the bank

v. Engaging in speculative and hazardous investment policies

vi. Paying excessive cash dividends in relation to the capital position, earnings capacity and asset quality of
the bank

vii. Excessive reliance on large, high-cost or volatile deposits/borrowings to fund aggressive growth that may
be unsustainable
* high-cost deposit/borrowings - effective interest rate paid on said deposits/ borrowings and/or non-cash
incentives is fifty percent (50%) over the prevailing comparable market median rate for similar bank
categories, maturities and currency denomination and accompanied by other circumstance/s such as
undue reliance on solicitation and acceptance of brokered deposits
* bank incurs large sum of deposit generation expenses in the form of commissions, referral and
solicitation fees and related expenses and/or payment of advance interest on deposits
* deferral of the above deposit generation expenses incurred to delay recording of expenses and/or
inaccurate amortization of advance interest paid on deposits
* deposit packages offered include non-cash incentives disproportionate to the amount of deposits sought
which give undue or unwarranted advantage or preference for the bank
* bank markets, solicits and accepts deposits outside the bank premises including branches, unless
otherwise authorized by the BSP
viii. Excessive reliance on letters of credit either issued by the bank or accepted as collateral to loans advanced

ix. Excessive amounts of loan participations sold
x. Paying interest on participations without advising participating institution that the source of interest was
not from the borrower
xi. Selling participations without disclosing to the purchasers of those participations material, non-public
information known to the bank
xii. Failure to limit, control and document contingent liabilities
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 xiii. Engaging in hazardous lending and tax collection policies and practices

xiv. Permitting officers to engage in lending practices beyond the scope of their positions

xv. Operating the bank with inadequate internal controls

xvi. Failure to keep accurate and updated books and records
xvii. Operating the bank with excessive volume of out-of-territory loans

xviii. Excessive volume of non-earning assets
xix. Failure to heed warnings and admonitions of the supervisory and regulatory authorities
xx. Continued and flagrant violation of any law, rule, regulation or written agreement between the institution
and the BSP
xxi. Any other action likely to cause insolvency or substantial dissipation of assets or earnings of the institution
or likely to seriously weaken its condition or otherwise seriously prejudice the interest of its depositors/
investors/clients

xxii. Non-observance of the principles and the requirements for managing and monitoring large exposures and
credit risk concentrations

xxiii. Improper or non-documentation of repurchase agreements covering government securities and
commercial papers and other negotiable and non-negotiable securities or instruments

3. Prohibition on dividend declaration (Sec. 57)

a. No bank or quasi-bank shall declare dividends, if at the time of declaration:
i. Dividends are greater than its accumulated net profits on hand, deducting losses and bad debts
ii. The clearing account with BSP is overdrawn
iii. It is deficient in the required liquidity floor for government deposits for 5 or more consecutive days
iv. It does not comply with the liquidity standards prescribed by BSP for determining funds available for
dividend declaration; or
v. It committed a major violation, as determined by BSP
b. Applies to banks and quasi-banks

4. Unauthorized advertisement of business representation

a. Sec. 64. Unauthorized Advertisement or Business Representation. - No person, association, or corporation unless
duly authorized to engage in the business of a bank, quasi-bank, trust entity, or savings and loan association as
defined in this Act, or other banking laws, shall advertise or hold itself out as being engaged in the business of such
bank, quasi-bank, trust entity, or association, or use in connection with its business title, the word or words "bank",
"banking", "banker", "quasi-bank", "quasi-banking", "quasi-banker", "savings and loan association", "trust
corporation", "trust company" or words of similar import or transact in any manner the business of any such bank,
corporation or association.
b. Unauthorized advertisement
i. advertising or holding out as engaged in the business of banking, quasi-banking, or trust
ii. using the words “bank”, "banking", "banker", "quasi-bank", "quasibanking", "quasi-banker", "savings and
loan association", "trust corporation", "trust company" or similar words in the business name
iii. transacting in any manner the business of banking

5. Liability of banks for acts of its officers and employees

a. Not merely vicarious but primary; bound by the negligence of its employees under the principle of respondeat
superior
b. Defense of exercise of due diligence in the selection and supervision of its employees IS OF NO MOMENT
c. Banks are expected to exercise the highest degree of diligence in the selection and supervision of their employees
d. Negligence of Manager - confidence in the banking system, which necessarily includes reliance on bank managers,
is vital in the economic life of our society (BPI Family Savings Bank vs. First Metro Investment Corp., GR. No.
132390, May 21, 2004)

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 e. Negligence of Officers - a bank will be held liable for the negligence of its officers or agents when acting within the
course and scope of their employment.
i. If a corporation knowingly permits its officer, or any other agent, to perform acts within the scope of an
apparent authority, holding him out to the public as possessing power to do those acts, the corporation
will be estopped from denying such authority. (BPI Family Savings Bank vs. First Metro Investment Corp.,
GR. No. 132390, May 21, 2004)
f. Negligence of Tellers - appropriation of money by a teller is NOT ESTAFA. Deposits received by a teller in behalf of a
bank is only material possession. Juridical possession remains with the bank. If the teller appropriates the money
for personal gain, and since the teller occupies a position of confidence, the felony committed is QUALIFIED THEFT
(Roque vs People, G.R. No. 138954, 25 November 2004).

6. Bar Questions
a. The Monetary Board of the BSP closed Urban Bank after it encountered crippling financial difficulties that resulted
in a bank run. X, one of the members of the BOD of the bank, attended and stayed throughout the entire meeting
of the Board that was held well in advance of the bank run and before news had begun to trickle to the business
community about the dire financial pit the bank had fallen into. Immediately after the meeting, X caused the
preparation and issuance of a manager’s check payable to himself in the sum of 5 million pesos equivalent to the
amount placed or invested in the bank by a business acquaintance. He now claims that he is keeping the funds in
trust for the owner and that he had committed no violation of the General Banking Act (RA 337, as amended) for
which he should be punished. Do you agree that there has been no violation of the statute? (2000 Bar)

ANS: No. Section 85 of RA 337 states that paying out or permitting to be paid out funds of the bank after the latter
becomes insolvent is a prohibited transaction penalised by fine of not less than P1000 nor more than P10,000 and
by imprisonment for not less than two years and not more than ten years. In this case, X violated Sec. 85 when he
caused the preparation and issuance of a manager’s check payable to himself. This is a clear violation of the
prohibition under Sec. 85.

b. GP is a suspected jueteng lord who is rumoured to be enjoying police and military protection. The envy of many
drug lords who had not escaped the dragnet of the law, GP was summoned to a hearing of the Committee on
Racketeering and Other Syndicated Crimes of the House of Representatives, which was conducting a congressional
investigation “in aid of legislation” on the the involvement of police and military personnel, and possibly even of
local government officials, in the illegal activities of suspected gambling and drug lords. Subpoenaed to attend the
investigation were officers of certain identified banks with a directive to them to bring the records and documents
of bank deposits of individuals mentioned in the subpoenas, among them GP. GP and the banks opposed the
production of the banks’ records of deposits on the ground that no such inquiry is allowed under the Law on
Secrecy of Bank Deposits (RA1405, as amended). Is the opposition of GP and the banks valid? Explain. (2000 Bar)

ANS: Yes. One of the exceptions to the prohibition against disclosure of any information concerning bank deposits
under the Law on Secrecy of Bank Deposits is upon order of a competent court or the Ombudsman authorized
under the law to issue a subpoena for the production of the bank record involving such disclosure in cases of
bribery or dereliction of duty of public officials. In this case, GP is not a public official. Nor is the Committee a
competent court. Thus, the opposition of GP and the banks is valid.

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 CHAPTER 7. CONSERVATORSHIP AND CESSATION OF BUSINESS [raya]

I. Placement Under Conservatorship (Sec. 67)

Section 67. Conservatorship. - The grounds and procedures for placing a bank under conservatorship, as well as, the powers
and duties of the conservator appointed for the bank shall be governed by the provisions of Section 29 and the last two
paragraphs of Section 30 of the New Central Bank Act: Provided, That this Section shall also apply to conservatorship
proceedings of quasi-banks.

A. Conservatorship - a tool in restoring the viability of banks and quasi-banks. It consists of carrying out a package of
administrative, organizational, financial and/or other measures to address the state of continuing inability or
unwillingness to maintain a condition of liquidity deemed adequate to protect the interest of depositors and
creditors.
B. Procedure
1. Report submitted by the appropriate supervising or examining department
2. Finding by the Monetary Board of the ground for conservatorship
C. Grounds
1. the bank is in a state of inability or unwillingness to maintain a condition of liquidity deemed adequate to
protect the interest of its depositors and creditors.
D. Duration - 1 year
E. Grounds for termination
1. When the monetary board is satisfied that the institution can continue to operate on its own and the
conservatorship is no longer necessary.
2. Should the Monetary Board, on the basis of the report of the conservator or of its own findings,
determine that the continuance in business of the institution would involve probable loss to its
depositors or creditors, in which case the bank will be placed under receivership or liquidation.
F. Qualifications of a conservator
1. The conservator should be competent and knowledgeable in bank operations and management.
2. Appointment shall be vested exclusively with the Monetary Board
G. Powers of the conservator
1. Take charge of assets, liabilities and management of the bank;
2. Reorganize the management of the bank;
3. Collect all monies and debts due to the bank/quasi-bank; and
4. Exercise all powers necessary to restore the viability of the bank/quasi-bank perfected.
H. Remuneration - fixed by the Monetary Board in an amount not to exceed two-thirds (2/3) of the salary of the
president of the institution in one (1) year, payable in twelve (12) equal monthly payments
1. If at any time within one-year period, the conservatorship is terminated on the ground that the
institution can operate on its own, the conservator shall receive the balance of the remuneration which
he would have received up to the end of the year;
2. If the conservatorship is terminated on other grounds, the conservator shall not be entitled to such
remaining balance.
3. If the conservator appointed is connected with the Bangko Sentral, in which case he shall not be
entitled to receive any remuneration or molument from the Bangko Sentral during the
conservatorship.
I. Effects of conservatorship
1. A bank still continues to operate as a banking institution
2. The conservator merely takes the place of the bank’s management and board of directors.
3. If found that the continuance in operation of the bank or quasi bank would involve probable loss to
depositors and creditors, conservatorship will be terminated and bank will be placed under receivership.

II. Voluntary Liquidation (Sec. 68)

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Section 68. Voluntary Liquidation. In case of voluntary liquidation of any bank organized under the laws of the Philippines,
or of any branch or office in the Philippines of a foreign bank, written notice of such liquidation shall be sent to the Monetary
Board before such liquidation shall be sent to the Monetary Board before such liquidation is undertaken, and the Monetary
Board shall have the right to intervene and take such steps as may be necessary to protect the interests of creditors.

A. Requisites
1. A liquidation plan shall first be approved by the Monetary Board
2. Written notice shall be sent to the Monetary Board before actual liquidation is undertaken in accordance
with the liquidation plan previously approved by the Monetary Board.
B. Liquidation plan - minimum requirements to be set forth in a liquidation plan are the following:
1. Inventory/Appraisal of assets and liabilities
2. Notice to creditors requirement
3. Conversion of assets into money
4. Final notice to claimants/creditors
5. Inventory of remaining claims against the bank
6. Plan for distribution of proceeds of sales and distribution of liquidating dividends
C. Modes
1. Where no creditors are affected (Sec 135 of the Corporation Code)
a) Requisites
(1) Majority vote of the board of directors or trustees
(2) A resolution adopted by the affirmative vote of the stockholders owning at least
majority of the outstanding capital stock OR majority of the members of a meeting to be
held upon the call of the directors or trustees
b) Procedure
(1) At least 20 days prior to the meeting, notice shall be given to each shareholder or
member of record and shall state that the purpose of the meeting is to vote on the
dissolution of the corporation
(2) Notice of the time, place, and object of the meeting shall be published once prior to the
date of the meeting in a newspaper published in the place where the principal office of
said corporation is located, or if none, in a newspaper of general circulation in the
Philippines.
(3) Verified request for dissolution shall be filed with the Commission
(4) The corporation shall submit the following to the Commission:
(a) copy of the resolution authorizing the dissolution
(b) proof of publication; and
(c) favorable recommendation from the BSP
(5) Within 15 days from receipt of the verified request for dissolution, and in the absence of
any withdrawal within said period, the Commission shall approve the request and issue
the certificate of dissolution.
2. Where creditors are affected (Sec 135 of the Corporation Code)
a) Procedure
(1) A verified petition for dissolution shall be filed with the Commission
(a) signed by a majority of the corporation’s board of directors or trustees,
(b) verified by its president or secretary or one of its directors or trustees, and
(c) set forth all claims and demands against it, and
(d) that its dissolution was resolved upon by the affirmative vote of the
stockholders representing at least 2/3 of the outstanding capital stock or at
least 2/3 of the members at a meeting of its stockholders or members called for
that purpose
(e) the reason for the dissolution
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 (f) the form, manner, and time when the notices were given
(g) the date, place, and time of the meeting in which the vote was made
(2) The corporation shall submit to the Commission —
(a) copy of the resolution authorizing the dissolution
(b) list of all its creditors
(3) The Commission shall fix a deadline for filing objections to the petition which shall not
be less than 30 days nor more than 60 days after the entry of the order
(4) A copy of the order shall be published
(5) 5 days after the expiration to file objections, the Commission shall proceed to hear the
petition and try any issue raised in the objections filed
(6) If no such objection is sufficient, and the material allegations of the petition are true, it
shall render judgment dissolving the corporation
3. Shortening of a corporate term by the amendment of the articles of incorporation (Sec 136 of the
Corporation Code)
a) A copy of the amended articles of incorporation shall be submitted to the Commission
b) Upon the expiration of the shortened term, as stated in the approved amended articles of
incorporation, the corporation shall be deemed dissolved without any further proceedings

III. Receivership and Involuntary Liquidation (Sec. 69, 70)

Section 69. Receivership and Involuntary Liquidation. The grounds and procedures for placing a bank under receivership or
liquidation, as well as the powers and duties of the receiver or liquidator appointed for the bank shall be governed by the
provisions of Sections 30, 31, 32, and 33 of the New Central Bank Act: Provided, That the petitioner or plaintiff files with the
clerk or judge of the court in which the action is pending a bond, executed in favor of the Bangko Sentral, in an amount to be
fixed by the court. This Section shall also apply to the extent possible to the receivership and liquidation proceedings of
quasi-banks.

A. Receivership - summary closure of the Bank by the Bangko Sentral without prior notice and hearing after a finding
that continuance in business will involve probable loss to its depositors and creditors.
1. Procedure
a) A report of the head of the supervising department involving the bank;
b) Finding by the Monetary Bank of the existence of the any of the grounds for receivership;
c) Decision of the Monetary Board to forbid the institution from doing business
d) Notice in writing to the Board of Directors informing the institution of the order of the Monetary
Board directing receivership.
2. Close now hear later scheme - no prior hearing is necessary in appointing a receiver and in closing the
bank. It is enough that subsequent judicial review is provided for.
3. Grounds
a) Unable to pay liabilities;
b) Insufficient realizable assets to meet its liabilities;
c) Cannot continue business without involving probable loss to depositors and creditors;
d) Willfully violated cease and desist order that has become final involving acts or transactions
which amount to fraud or dissipation of assets of institution; and
e) Notifies BSP or publicly announces Bank Holiday
4. Duration - 90 days
5. Requirements to be a receiver - PDIC as based on the PDIC law
6. Duties of the receiver
a) immediately gather and take charge of all assets and liabilities of the bank
b) administer the assets and liabilities of the bank for the benefit of creditors
c) exercise general powers of the receiver under Revised Rules of Court – preserve, administer and
dispose properties in litigation
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 d) deposit or place the funds of the institution in non-speculative investments
e) determine as soon as possible, but not later than 90 days, if the bank may be rehabilitated or
permitted to resume its business subject to the approval of the Monetary Board
f) Proceed with the liquidation of the institution if the receiver determines that the institution
cannot be rehabilitated

B. Liquidation - There is no hope in rehabilitating the bank. At this point, it determines and pays the claims of the
bank's creditors.
1. Procedure
a) The receiver determines that the institution cannot be rehabilitated or permitted to resume
business
b) The Monetary Board shall notify in writing the board of directors of its findings
2. Duties of the receiver
a) File ex parte with the RTC a petition for assistance in the liquidation of the institution;
b) Pay the cost of the proceedings from the assets of the institution
c) Convert the assets of the institutions to money
d) Dispose of the same to creditors and other parties, for the purpose of paying the debts of such
institution in accordance with the rules on concurrence and preference of credit
e) Institute such actions as may be necessary to collect and recover accounts and assets of, or
defend any action against, the institution
C. Actions of the court
1. adjudicate disputed claims against the institution
2. assist the enforcement of individual liabilities of the stockholders, directors and officers, and
3. decide on other issues as may be material to implement the liquidation plan adopted
D. Effect of receivership and liquidation
1. No rehabilitation — Sec. 12(a) of PDIC Law
2. On the corporate franchise or existence — continue as a body corporate until the termination of the
winding-up period
3. On the powers and functions of its directors, officers and stockholders — terminated
4. On the assets — deemed in custodia legis
5. On labor relations — terminated
6. Contractual obligations — terminated if not necessary for liquidation
7. On interest payments — terminated
8. Liability for penalties and surcharges for late payment and nonpayment — no liability
9. Bank charges and fees on services — may be imposed by the receiver
10. Actions pending for or against the closed bank —
E. Punishable acts after the bank becomes insolvent
1. Refusal to turn over the bank's records and assets to the designated receivers
2. Tampering with bank records
3. Appropriation for himself or another party or causing the misappropriation of the bank's assets
4. Destroying or causing the destruction of the bank's assets
5. Receiving any deposit, collection of loans and/or receivables
6. Paying out or permitting or causing any securities or property of said bank to be transferred
F. Penalty
1. Fine of not less than P50,000 nor more than P200,000; or
2. Imprisonment of not less than 2 years nor more than 10 years; or
3. Both
IV. Remedy
A. Effect of the actions of the MB
1. GENERAL RULE: Final and executory; may not be restrained or set aside by the court
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 2. EXCEPTION: PETITION FOR CERTIORARI based on excess of jurisdiction
B. Petition for certiorari
1. Ground: Grave abuse of discretion
2. Who may file: stockholders of record representing the majority of the capital stock

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 CHAPTER 8. THE BANGKO SENTRAL NG PILIPINAS (RA 7653, as amended by RA 11211) [nico]

I. Creation (Sec. 2)

The BSP is the State’s independent central money authority.

Characteristics

- Body Corporate
- Government-owned and controlled
- Enjoys fiscal and administrative autonomy

Its Creation

- capital shall be 2 billion pesos, sully subscribed by the Government.

- may be increased, but should be solely funded from declared dividends in favor of the Government.
- a special account in the General Fund is designated, where declared deposits in favor of the Government
are deposited – this is where increase of capitalization shall be paid from.
- payment shall be immediately released until fully paid.

Responsibilities and Corporate powers of the BSP (Sec. 3-5)

Responsibilities of BSP

1. Provide policy directions in the areas of money, banking and credit

2. Supervise the operations of banks
3. Regulate and examine the quasi-banking operations of non-bank financial institutions
4. Regulate and examine operation of money service businesses, credit granting businesses, payment system
operators, subject to determination of Monetary Board

Primary Objectives of the BSP

1. Maintain price stability

2. Promote monetary stability and convertibility of the peso
3. Oversee payment and settlement systems in the Philippines

Powers of the BSP as a Corporate Entity

1. Power to adopt, alter and use a corporate seal which shall be judicially noticed;
2. Enter into contracts;
3. Lease or own real and personal property;
4. To sell or dispose property;
5. To sue and be sued;
6. Do and perform any and all things necessary or proper to carry out the purposes of NCBA as amended;
7. Acquire and hold assets and incur liabilities arising from its operations;
8. Compromise, condone or release any claim of or settled liability to the BSP;

Authority of the BSP under the GBL (Sec. 4, GBL)

Supervisory Powers of the BSP of over the operations and activities of banks:

1. Issuance of rules of conduct or establishment of standards of operation for uniform application to all institutions
or functions covered
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 2. Conduct examination of banks to determine compliance with laws and regulations
3. Overseeing to ascertain if laws and regulations are complied with
4. Conduct regular investigation to determine if an institution is conducting its business on a safe and sound basis
5. Inquire into the solvency and liquidity of an institution
6. Enforce prompt corrective action

Also covered are “quasi-banks” or entities engaged in the borrowing of funds through the issuance,
endorsement or assignment with recourse or acceptance of “deposit substitutes”

Place of Business is in Metro Manila but may maintain branches in other places (Sec. 4, NCBA)

I. Operations of the BSP

A. Supervisory Powers of the BSP (Sec. 25, 25-A)

1. The BSP shall have supervision over banking institutions and quasi-banks, including their subsidiaries and affiliates
engaged in allied activities.
A Subsidiary is a corporation more than fifty percent (50%) of the voting stock of which is directly owned, controlled or held
with power to vote, by a bank or quasi-bank.

An Affiliate is a corporation the voting stock of which, to the extent of fifty percent (50%) or less, is owned by a bank or
quasi-bank or which is related or linked directly or indirectly to such institution or intermediary through common
stockholders or such other factors as may be determined by the MB.

2. The BSP shall have regulatory authority over and conduct regular or special examinations of entities subject to its
jurisdiction.

Authority of the BSP to Approve Transfer of Shares

Transfers, or acquisitions, or a series of transfers or acquisitions of at least ten percent (10%) of the voting shares
in banks or quasi banks shall require prior approval of the BSP.

Effects of transfers or acquisitions made without approval of BSP:

1. Such transfer or acquisition shall no have legal effect nor shall it be recognized in the books of the
institution or by any government agency;
2. Transferor-stockholders shall remain accountable and responsible for such.

● The selling or conveying stockholder shall submit such transfer or acquisition for approval within the
period prescribed by the MB.
● In approving transfers or acquisitions, the BSP shall give regard to the incoming stockholders as may be
indicated in their integrity, reputation and financial capacity.

The BSP may share any information that it may obtain pertaining to the transfer or acquisition of shares or
series thereof, with the Philippine Deposit Insurance Corporation.

Coordination with the Bangko Sentral

Suspension or revocation of any government license necessary for the operation of the Bangko Sentral-Supervised
Entity must be done with prior consultation with the BSP.

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III. The Monetary Board and Governors and Deputy Governors of the BSP

The Monetary Board

- or Bangko Sentral Monetary Board
- exercises the powers and functions of the BSP
COMPOSITION (Sec. 6)

• The Monetary Board is composed of seven (7) members appointed by the President of the Philippines for a term of six
(6) years.
The Monetary Board is composed of its:
a) One Chairman
b) One Member of Cabinet
c) Five Members of the Board

a) Chairman – he is the Governor of the BSP, shall be the head of a department and his appointment is subject to
confirmation of Commission on Appointments.
In his absence in a meeting of the Board, he shall designate a Deputy Governor to act as his alternate:
provided that the MB shall designate one of its members as Acting Chairman.

b) Member of Cabinet – designated by the President; in his inability to attend a meeting of the Board, he shall
designate an Undersecretary to attend as his alternate

c) Members of the Board – shall come from the private sector; all shall serve full-time; three of the first appointed
shall serve for six years; the other two, three years.

No member of the Board may be reappointed more than once.

VACANCIES IN THE BOARD (Sec. 7)

May be due to:

· Death · Resignation · Removal
How filled?
· Appointment by the President, to complete the unexpired term

QUALIFICATIONS OF MEMBERS OF THE BOARD (Sec. 8)

1. Must be natural-born citizens 4. Of unquestionable integrity

2.At least 30 years of age; 40 years of age for the Governor of BSP 5. Of known probity and patriotism
3. Of good moral character 6. With recognized competence in social and economic disciplines

DISQUALIFICATIONS (Sec. 9)
A member of the Monetary Board is disqualified from being a:

• Director • Consultant
• Officer • Lawyer
• Employee • Agent or stockholder

of any bank, quasi-bank or any other institution which is subject to supervision or examination by the Bangko Sentral.

● Person who has been directly connected with any multilateral banking or financing institution or has a substantial interest in
any private bank in the Philippines within One (1) year prior to his appointment. shall not become a Member of the Board

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 ● Member with expired term cannot be employed in any multilateral banking of financing institution or any private bank in
the Philippines where he or she has a substantial interest in after two (2) years

Except, when he serves as an official representative of the Government to such institution

Thus, the Member concerned shall resign from and divest himself of any and all interests in such institution before he may
assume office as Member of the Board.

Members from the private sector are prohibited from holding public office or employment during their tenure.

REMOVAL OF MEMBERS OF THE MONETARY BOARD (Sec. 10)

Who shall remove?

The President of the Philippines

On what grounds?

1. Member is subsequently disqualified;

2. Member is physically or mentally incapacitated that he cannot properly discharge his duties and responsibilities
and incapacity has lasted for more than six (6) months
3. Member is guilty of acts or operations which are:
a) of fraudulent or illegal character, or;
b) manifestly opposed to the aims of and interests of the Bangko Sentral
4. Member no longer possesses the qualifications.

AUTHORITY OF THE MONETARY BOARD (Sec. 15)

a. Issue rules and regulations for the discharge of its functions;
Such rules and regulations shall be reported to the President.
B. Direct the management, operations and administration of the BSP, reorganize its personnel and issue such
rules and regulations for this purpose;
C. Establish a human resource management system for its personnel
D. Adopt an annual budget for the BSP
E. Indemnify its members and other officials of the BSP for costs and expenses reasonably incurred in the
performance of their functions, unless they are adjudged to be liable for willful violation of the NCBA, duties
performed in bad faith or with gross negligence.

Governor and Deputy Governors of the Bangko Sentral

There shall be One (1) Governor of the BSP

He or she shall, with approval of the Monetary Board, appoint not more than five (5) Deputy Governors

Governor of the BSP

- Chief Executive Officer of the BSP, with powers and duties to: (Sec 17)
1. Prepare the agenda for Meetings and submit policies and measures for the consideration of the
MB;
2. Execute and administer the policies approved by the MB;
3. Direct and supervise the operations and internal administration of the BSP; subject to authority
to delegate to any member of the MB;
4. Appoint and fix the remunerations of personnel with rank lower than Department Head;

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 5. Render opinions, decisions, rulings, regarding the application or enforcement of laws pertaining
to institutions under the BSP and quasi-banks, as well as regulations, policies, or instructions
issued by the MB;
6. Exercise such other powers vested in him by the MB.

- Principal Representative of the BSP and the MB, with powers and duties to: (Sec. 18)
1. Represent the MB and BSP in all dealings with other offices;
2. Sign contracts entered into by the BSP, notes and securities issued by the BSP, and other
documents of the BSP;
3. Represent the BSP, personally or through counsel, in any legal proceedings; and
4. Delegate his power to represent to other officers
In the exercise of such authority to delegate, the
DEPUTY GOVERNORS (Sec. 21)
- not more than five (5) shall be appointed by the Governor
- Deputy Governors shall have the following powers and functions:
1. Perform duties as assigned to them by the Governor and the MB;
2. In the absence of the Governor, act as Chief Executive of the BSP and exercise the powers and perform
the duties of the Governor
3. Participate and exercise the right to vote in meetings of government boards or councils in which the
Governor is an ex officio member, whenever the Governor is unable to attend;
4. May also attend the meetings of the MB with the right to be heard. (Sec. 12)

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