NOTES ON SECERECY OF BANK DEPOSITS:

- Only bank officials and employees are covered by the NOTES ON FOREIGN CURRENCY BANK DEPOSITS (RA 6426)
prohibition to disclose information or allow examination or - all foreign currency deposits are declared as and considered
inquiry of bank deposits. of an absolutely confidential nature and in no instance shall
- A non-bank official is not covered by the prohibition. it be examined, inquired or looked into.
-Trust funds and any sum of money invested in the bank - XPNS:
which the bank may use for loans and similar transactions are a) Written permission of depositor
included in the term “deposits”. b) AMLC in case of accounts related to unlawful
activity or money laundering offense
c) Related to financing of terrorism or acts of
terrorism
d) Account holder is not the owner of the FCDA as
NOTES ON EXCEPTIONS TO SECRECY OF BANK DEPOSITS: when he holds the same in trust for another
e) If the person asking for the court relief is a co-
owner of the account
1. Order of competent court
f) If the FCD is made by a transient or tourist (p. 120)
- The Senate Blue Ribbon Committee is not a
- PENALTY: Imprisonment not less than 1 year nor more than
competent court.
5 years or a fine not less than P5,000 nor more than P25,000,
- A prosecutor who is conducting PI for estafa and/or
at the discretion of the court.
violation of BP 22 cannot validly subpoena the bank
deposit records of a person as part of the
clarificatory process of PI.
- Marquez v. Desierto: the Ombudsman can only
examine the bank deposit accounts upon
compliance with the following requirements:
a. There is a pending case before a
court of competent jurisdiction;
b. The account holder and the bank
official must be informed of the
examination;
c. The account to be examined
must be clearly identified; and
d. The examination must be limited
to the account specified.
2. Where the subject matter of litigation is the money
deposited
- The inquiry must be premised on the fact that the
money deposited itself in the account is the subject
of the action.
3. Garnishment of bank deposits
- The disclosure made by a bank in this case is only
incidental to the execution process.
- There is nothing in the records of Congress that
would show the intention of legislature to place
Philippine currency bank deposits beyond the reach
of the judgment creditor
- But, in foreign currency deposits, it is exempt from
attachment, garnishment or any other process of
any court, legislative body, government agency or
any administrative body whatsoever.
NOTES ON GENERAL BANKING LAW:
Requirements for the grant of banking license:
Elements of a bank:
1. It is engaged in the lending of funds; 1. The entity must be organized as a stock
2. The funds are obtained from the public which corporation.
means 20 or more lenders; and 2. Must have not less than 5 but not more than
3. The funds are obtained from the public in the 15 directors, two of whom are independent
form of deposits. directors. (In case of merger or consolidation,
the bank may have up to 21 directors)
3. That its funds are obtained from the public,
* Hence, when a corporation loans out the money
which shall mean 20 or more persons;
obtained from almost 60,000 savings account deposits
4. The minimum capital requirements
opened by the public with the said corporation, it is
prescribed by the MB for each category of
clear that these transactions partake the nature of
banks are complied with.
banking, as defined by law. (p. 127)
5. The SEC shall not register the AOI of any bank
or any amendment thereto, unless
accompanied by a certificate of authority
issued by the MB under its seal (p. 128)

GENERAL NOTES: (part 1)

 Foreign individuals and non-bank corporations
may own or control up to 40% of the voting
stock of a domestic bank. However, foreigners
can be ELECTED to the board ONLY in
proportion to the bank’s actual foreign equity.
Thus, if the foreign-held stocks amount to only
30% of the bank’s foreign equity, foreigners
can only have 3 seats in a 10-person BOD.
 Foreigners cannot be appointed as officers of a
domestic bank because it will violate the Anti-
Dummy Law.
 An entity authorized by the BSP to perform
universal or commercial banking functions
shall likewise have the authority to engage in
quasi-banking functions.
 Persons or entities found to be performing
banking or quasi-banking functions without
authority from BSP shall be subject to
appropriate sanctions.
 A commercial bank can only invest in the
equity of allied enterprises. It means that it
may own shares of stock in a corporation only
if the latter is engaged in a business related to
banking.
 The services that can be offered by a bank as
enumerated in Section 53 are not exclusive.
The bank may render other services for its
customers as long as they are not
incompatible with the banking business.
 QUASI-BANK TRUST ENTITIES
Entities engaged in the A legal entity that acts as a May a bank acquire real property?
borrowing of funds fiduciary, agent or trustee
through the issuance, on behalf of a person or A bank may acquire, hold or convey real property under
endorsement or business for a trust. A trust the following circumstances:
assignment with recourse company is typically a. When it is necessary for its own use or in the
or acceptance of deposit tasked with the conduct of its business;
substitutes for purposes of administration, b. Such as shall be mortgaged to it in good faith
re-lending or purchasing management and the by way of security for debts;
receivables and other eventual transfer of assets c. Such as shall be conveyed to it in satisfaction
obligations to beneficiaries. of debts previously contracted in the course of
its dealings; or
d. Such as shall purchase at sales under
Rule on Safety Deposit Boxes:
judgments, decrees, mortgages or trust deeds
held by it and such as it shall purchase to
A contract for the use of safety deposit boxes is a special secure debts due it.
kind of deposit. The relationship between a commercial * Limitations pp. 136-137; Secs 51-52
bank and its safety deposit box client is that of a bailee * A foreign bank cannot own real property even though
and bailor, the bailment being for hire and mutual it is allowed to operate under the Foreign Bank
benefit. As such, the bank has the obligation to exercise Liberalization law.
the diligence of a good father of a family as such
depositary.

A stipulation relieving the bank of any liability in

connection with the use of the safety deposit box is void GENERAL NOTES (part 2):
as it is against law and public policy.  The diligence required of banks is more than
that of a good father of a family. A banking
institution owes it to its clients to observe the
high standards of integrity and performance in
all its transactions because its business is
imbued with public interest.
 Bank deposits are governed by the law on
loans. A creditor and debtor relationship is
FORECLOSURE OF MORTGAGE BY BANKS: created between the bank and its depositors.
 Failure by the bank to pay the depositor is
RIGHT OF REDEMPTION failure to pay a simple loan and not a breach of
- The prerogative of the mortgagor to reacquire trust.
the mortgaged property after foreclosure sale  A bank shall not directly engage in insurance
conditioned on the payment of the redemption business as the insurer.
price within the period set by law.  Funds received by the bank for safekeeping are
- This right exists only in extra-judicial foreclosure not deposits as such, not covered by RA 1405,
of REM. BUT they still cannot be disclosed under
- In judicial foreclosure, there is only equity of Section 55 of GBL.
redemption  An escalation clause allowing increases in the
- If the mortgagee however is a bank, the interest rates is valid provided that there
mortgagor on top of the equity of redemption should be a corresponding de-escalation clause
has one year to redeem the property within one that authorizes a reduction in the interest
year from registration of the order confirming rates corresponding to downward changes
the sale of the real property. made by law or the MB.
- A contracting party’s assignees, although
seemingly a third party to the transaction remain
bound by the original party’s transaction under
the relativity principle because of the concept of
subrogation, which inheres in assignment. (p.
153)
LIMITATIONS ON THE POWER OF THE BANK TO GRANT LOANS:

1. SINGLE BORROWER’S LIMIT

- Except as the MB may otherwise prescribe for reasons of
national interest, the total amount of loans, credit
accommodations and guarantees that may be extended by
a bank shall at no time exceed 25% of the net worth of
such bank.
- The total amount of loans, credit accommodations and
guarantees may however be increased by an additional
10% of the net worth of such bank provided the additional
liabilities of any borrower are adequately secured by trust
receipts, shipping documents, warehouse receipts or other
similar documents transferring or securing title covering
readily marketable, non-perishable goods which must be
fully covered by insurance.
- Included and excluded in computation of SBL: Sec. 35 of
GBL.

2. DOSRI RULES AND REGULATIONS

- Approval requirement
- Reportorial requirement
- Ceiling requirement

3. Loans and other credit accommodations against real estate

shall not exceed 75% of appraised value of the real estate
security, plus 60% of the appraised value of the insured
improvements

4. Loans and other credit accommodations on security of

chattels and intangible properties shall not exceed 75% of
the appraised value of the security

5. A bank shall grant loans only in amounts and for periods of

time essential for the effective completion of the
operations financed.

6. The amortization schedule of bank loans and other credit

accommodations shall be adapted to the nature of the
operations to be financed.

NOTE: a loan that does not comply with SBL and DOSRI Rules is valid
but without prejudice to criminal prosecution against the erring
DOSRI.
GENERAL RULE: The period of redemption is one year from
registration of the certificate of foreclosure sale.

3 MONTHS AFTER ONE YEAR FROM DATE OF THE

FORECLOSURE SALE OR THE SALE
REGISTRATION OF CERT OF
FORECLOSURE SALE,
WHICHEVER IS EARLIER
1. The mortgagor is a 1. The mortgagor is a
juridical person; natural person;
2. The mode of and/or
foreclosure is extra- 2. The mortgagee is not
judicial; and a bank; and/or
3. The mortgagee is a 3. The mode of
bank. foreclosure is
judicial; provided
that the mortgagee
is a bank.

NOTES ON PDIC:
- PDIC’s overall mandate is to provide deposit insurance coverage
for the depositing public to help promote public confidence and
stability in the economy,
- Principal powers and functions of PDIC:
a) Deposit insurer;
b) Co-regulator of banks; and
c) Receiver and liquidator of closed banks.
- Membership of banks to PDIC is mandatory, hence all operating
banks are members of PDIC.
- The liability of PDIC is statutory. PDIC can only be liable if the
insured bank actually receives deposit and the bank is ordered
closed by BSP.
- PDIC only covers risk of closure of banks as ordered by BSP. It
does not cover bank losses due to theft, fire or closure by reason
of strike, existence of public disorder, revolution or civil war.
- Any obligation of a bank which is payable at the office of the
bank located outside of the Philippines shall not be a deposit for
any of the purposes of the PDIC Charter or included as part of the
total deposits or of insured deposit.. (Sec. 5(g), RA 3591)
-The change in the definition of deposit under RA 1405 does not
apply for insurance coverage purposes. A trust fund is not
insured with PDIC.
- PDIC shall commence the determination of insured deposits due
to the depositors of a closed bank upon its actual takeover of the
closed bank.
- Failure to settle the claim of the insured depositor by the PDIC
within 6 months from the date of filing the claim will subject the
directors, officers or employees of PDIC responsible for the delay
to imprisonment from 6 months to 1 year.
- Depositor must file his claim for his insured deposits with PDIC
within 2 years from the actual takeover of the closed bank by the
PDIC.
- Actions of PDIC shall be final end executory; may not be
restrained by court except on a petition for certiorari.

Splitting of deposits
- Occurs whenever a deposit account with an outstanding
balance of more than the statutory maximum amount of insured
deposit maintained under the name of natural or juridical
persons is broken down and transferred into two or more
accounts in the name/s of natural or juridical persons or entities
who have no beneficial ownership on transferred deposits in
their names within 120 days immediately preceding or during a
bank-declared holiday or immediately preceding a closure order
by the BSP for the purpose of availing of the maximum deposit
insurance coverage.
- Punishable by imprisonment and/or fine.