1.

Classification of Banks Quasi-banks refer to entities engaged in the borrowing of

funds called “deposit substitutes” (i.e., “quasi-deposits”) as
Universal Bank (UB) defined in Section 95 of the “New Central Bank Act” for
purposes of relending those funds or purchasing of
As the name implies, a universal bank has the most
receivables and other obligations.
banking power, as it has the same powers as a  Unlike banks, quasi-banks do not accept deposits but take
commercial bank, plus the powers: deposit substitutes.
 To operate an investment house, whether as an  Deposit substitutes are not insured with the PDIC.
integral unit or as a subsidiary.
 In turn, an investment house underwrites securities Deposit-Substitute Taking or Quasi- Banking
either on firm underwriting (good as sold) or best Deposit-substitute taking or quasi-banking is an alternative
efforts (excess to be returned to the issuer) form of obtaining funds from the public, other than deposits,
through the issuance, endorsement, or acceptance of debt
 To invest in non-allied enterprises
instruments for the borrower's own account, for the purpose of
relending or purchasing of receivables and other obligations.
Commercial Bank (KB)
Has the powers defined in Secs. 29. and 53, infra. These instruments may include, but need not be limited to,
bankers’ acceptances, promissory notes, participations,
Thrift Bank certificates of assignment and similar instruments with
Thrift banks are banks that focus on basic banking recourse, and repurchase agreements.
services for their clients, with an emphasis on
individuals and small businesses. Thrift banks are Deposit substitute (like deposits) are with
recourse to the quasi-banks (just like deposits
primarily governed by RA 7906, the Thrift Banks Act. are with recourse to the banks).
Trust entities (Manual of Regulation for
Rural Banks Banks) are:
These are banks that are formed for the purpose of a. Trust departments of banks perform trust and other
providing adequate credit facilities to farmers and fiduciary functions; or
merchants, or to cooperatives of such farmers and b. Stand-alone trust corporations, authorized by the BSP to
merchants and in general, the people of the rural engage in trust and other fiduciary functions under the GBL.
communities. They are primarily governed by RA 7353
(Rural Banks Act). 3. RA 1405 & RA 6426

Cooperative Banks RA 1405- Law on Secrecy of Bank Deposits and

These are banks organized as cooperatives under RA Investments in Government Bonds.
6938, the Cooperative Code.
GR: All peso deposits of whatever nature with banks or
Islamic Banks banking institutions in the Philippines are considered as
There is currently only one Islamic Bank in the of an absolutely confidential nature. [Sec. 2]
Philippines, the Al-Amanah Islamic Bank, which aims to
provide banking under the Shari’a principles governing Also covered are investments in bonds issued by the
banking. Government of the Philippines, its political subdivisions
and its instrumentalities, whether denominated in
Other banks as classified by the BSP pesos or foreign currency.
This includes Land Bank of the Philippines, the Note that investments in bonds in foreign currency are
Philippine Veteran’s Bank, and Development Bank of still covered by RA 1405. The Foreign Currency Deposit
the Philippines Act does not cover those investments.

2. DISTINCTIONS i. Foreign currency deposits, which are governed by the

BANKS QUASI-BANKS TRUST ENTITIES Foreign Currency Deposit Act
Entities engaged Entities engaged Entities engaged ii. Funds placed in a bank not in the nature of a deposit
in taking deposits in taking deposit in trust business by private individuals or entities. These may also not be
and lending these Substitutes and that act as a disclosed
funds to their lending these trustee or
own borrowers. funds to their administer any The term "deposits" is to be understood broadly
own borrowers trust or hold and not limited to accounts giving rise to
or purchasing property in trust creditor-debtor relations between the bank and
receivables or on deposit for
(which makes the use, benefit,
depositor. trust accounts are also covered.
them the or behoof of
creditors of others [Sec. 79] Exceptions: Deposits:
the obligors of a. Upon written permission of the depositor;
the receivables) b. In cases of impeachment;
[Sec. 4] c. Upon order of competent court in cases of bribery and
dereliction of duty;
d. In cases where the money deposited or invested is the SBL is the total credit commitment of the bank
subject matter of litigation to the borrower. [Subsec. 35.1]

Garnishment DOSRI
General rule: The prohibition against examination of or
inquiry into a bank deposit under Republic Act 1405 General rule [Sec. 36]: No director or officer of
does not preclude its being garnished to insure any bank:
satisfaction of a judgment 1. Shall, directly or indirectly, for himself or as
the representative or agent of others,
In the garnishment of deposits to insure satisfaction of a borrow from such bank, nor
judgment, there is no real inquiry, and if the existence 2. Shall he become a guarantor, endorser or
of the deposit is disclosed, the disclosure is purely surety for loans from such bank to others,
incidental to the execution process. or in any manner be an obligor or incur any
contractual liability to the bank
Exception: Foreign Currency Deposits
The foreign currency deposits shall be exempt from Waiver of Bank Secrecy
attachment, garnishment, or any other order or process A DOSRI borrower is required to waive the
of any court, legislative body, government agency or any secrecy of his deposits of whatever nature in all
administrative body whatsoever banks in the Philippines. [Sec. 26, NCBA]

Single borrower’s limit SECTION 36. Restriction on Bank Exposure to

Directors, Officers, Stockholders and Their Related
General rule: The total loans, credit accommodations Interests. — No director or officer of any bank shall,
and guarantees that may be extended by a bank to any directly or indirectly, for himself or as the
person, partnership, association, or corporation or representative or agent of others, borrow from such
other entity shall at no time exceed 20% of the net bank nor shall he become a guarantor, indorser or
worth of such bank. [Subsec. 35.1] surety for loans from such bank to others, or in any
manner be an obligor or incur any contractual liability
Exceptions to the bank except with the written approval of the
1. The MB otherwise prescribes for reasons of national majority of all the directors of the bank, excluding the
interest. [Subsec. 35.1] Now, the single borrower’s limit director concerned: Provided, That such written
is 25% of the net worth of the lending bank. approval shall not be required for loans, other credit
accommodations and advances granted to officers
2. Wholesale lending activities of government banks to under a fringe benefit plan approved by the Bangko
participating institutions for relending to end-user Sentral. The required approval shall be entered upon
borrowers: separate limit of 35% net worth. [Sec. 362.f, the records of the bank and a copy of such entry shall be
Manual of Regulations for Banks] transmitted forthwith to the appropriate supervising
and examining department of the Bangko Sentral.
Increase of Limit
The MB may increase the limit prescribed by an
additional 10% of the net worth, when: FIT AND PROPER RULE — To maintain the quality of
bank management and afford better protection to
1. The additional liabilities of any borrower are depositors and the public in general, the Monetary
adequately secured by trust receipts, shipping Board shall prescribe, pass upon and review the
documents, warehouse receipts or other similar qualifications and disqualifications of individuals
documents transferring or securing title; elected or appointed bank directors or officers and
2. Covering readily marketable, nonperishable goods; disqualify those found unfit.
and
3. Which must be fully covered by insurance. After due notice to the board of directors of the bank,
the Monetary Board may disqualify, suspend or remove
Purpose any bank director or officer who commits or omits an
To prevent the bank from making excessive loans and act which render him unfit for the position.
other credit accommodations to a single borrower or
corporate group, including guarantees for the account of In determining whether an individual is fit and proper
such borrower or group. The bank is prohibited from… to hold the position of a director or officer of a bank,
placing many eggs in the basket of one client. [It] is a regard shall be given to his integrity, experience,
damage-control mechanism [and] a device for risk education, training, and competence. (9-Aa)
amelioration. [Morales (2017)]
Independent director- Board of Directors. — The
Basis for Determining Compliance provisions of the Corporation Code to the contrary
The basis for determining compliance with the notwithstanding, there shall be at least five (5), and a
maximum of fifteen (15) members of the board of Note: For a quasi-bank, any person of recognized
directors of a bank, two (2) of whom shall be competence in banking or finance may be designated as
independent directors. An "independent director" shall receiver. [Sec. 30, R.A. 7653, as amended]
mean a person other than an officer or employee of the Specific Powers of the PDIC as Receiver
bank, its subsidiaries or affiliates or related interests
Liquidation
SEC 29 AND 30 NCBA The receiver is authorized to adopt and implement,
without need of consent of the stockholders, board of
Conservatorship directors, creditors or depositors of the closed bank,
Grounds for Appointment of a Conservator any or a combination of the following modes of
Whenever, on the basis of a report submitted by the liquidation:
appropriate supervising or examining department, the (a) Conventional liquidation; and
Monetary Board finds that a bank or quasi-bank is: (h) Purchase of assets and/or assumption Of
a) In a state of continuing inability; or Liabilities
b) Unwilling to maintain a condition of liquidity deemed
adequate to protect the interest of depositors and SECTION 29. Appointment of Conservator. — Whenever,
creditors. [Sec. 29, R.A. 7653, as amended] on the basis of a report submitted by the appropriate
supervising or examining department, the Monetary Board
The designation of a conservator shall be vested finds that a bank or a quasi-bank is in a state of continuing
exclusively in the Monetary Board. [Sec. 30, R.A. 7653, inability or unwillingness to maintain a condition of
as amended] liquidity deemed adequate to protect the interest of
depositors and creditors, the Monetary Board may appoint
Qualifications of a Conservator a conservator with such powers as the Monetary Board
The conservator should be: shall deem necessary to take charge of the assets,
(1) Competent and knowledgeable in bank operations liabilities, and the management thereof, reorganize the
and management; management, collect all monies and debts due said
(2) A natural person to be appointed by the Monetary institution, and exercise all powers necessary to restore its
Board. In contrast, the receiver is generally the PDIC. viability. The conservator shall report and be responsible
[Sec. 29, R.A. 7653, as amended]
to the Monetary Board and shall have the power to
overrule or revoke the actions of the previous
Note: The designation of a conservator is not a
management and board of directors of the bank or quasi-
precondition to the designation of a receiver. [Sec. 30,
R.A. 7653, as amended] bank.

The conservator should be competent and knowledgeable

Receivership in bank operations and management. The conservatorship
Grounds shall not exceed one (1) year.
The Monetary Board may summarily, and without need
for prior hearing, forbid the institution from doing The conservator shall receive remuneration to be fixed by
business in the Philippines and designate the PDIC as the Monetary Board in an amount not to exceed two-
receiver of the banking institution whenever – Upon thirds (2/3) of the salary of the president of the institution
report of the head of the supervising or examining in one (1) year, payable in twelve (12) equal monthly
department, the Monetary Board finds that a bank or payments: Provided, That, if at any time within the one-
quasi-bank: year period, the conservatorship is terminated on the
(a) Is unable to pay its liabilities as they become due in ground that the institution can operate on its own, the
the ordinary course of business: Provided, That this conservator shall receive the balance of the remuneration
shall not include inability to pay caused by which he would have received up to the end of the year;
extraordinary demands induced by financial panic in but if the conservatorship is terminated on other grounds,
the banking community; the conservator shall not be entitled to such remaining
(b) Has insufficient realizable assets, as determined by balance. The Monetary Board may appoint a conservator
the BSP, to meet its liabilities; or connected with the Bangko Sentral, in which case he shall
(c) Cannot continue in business without involving
not be entitled to receive any remuneration or
probable losses to its depositors or creditors; or
emoluments from the Bangko Sentral during the
(d) Has willfully violated a cease and desist order under
conservatorship. The expenses attendant to the
Section 37 of the New Central Bank Act that has become
final, involving acts or transactions which amount to conservatorship shall be borne by the bank or quasi-bank
fraud or a dissipation of the assets of the institution; in concerned.
which cases,
The Monetary Board shall terminate the conservatorship
when it is satisfied that the institution can continue to
operate on its own and the conservatorship is no longer
necessary. The conservatorship shall likewise be receivership. Receivership is equivalent to an injunction
terminated should the Monetary Board, on the basis of the to restrain the bank in any way. Thus, the appointment
report of the conservator or of its own findings, determine of a receiver operates to suspend the authority of the
that the continuance in business of the institution would bank and of its directors and officers over its property
involve probable loss to its depositors or creditors, in and effects. [Villanueva v. CA, G.R. No. 114870 (1995)]
which case the provisions of Section 30 shall apply.
Receivership refers to the stage within which the PDIC
manages the affairs of the closed bank and preserves its
Closure assets for the benefit of creditors. [Sec. 10(a), (b), RA
Should the MB find that any of the grounds for 9302]
receivership is applicable to a bank or quasibank, the
Monetary Board may: LIQUIDATION

1. Forbid the institution from doing business in the Liquidation refers to the recovery and conversion of
Philippines; and assets into cash for distribution to all creditors in
2. Designate the PDIC as receiver of the banking accordance with the rules on concurrence and
institution. preference of credits.

Note: This is done summarily and without need for Supervision and Examination
prior hearing. [Sec\ The BSP shall have supervision over, and conduct
periodic or special examinations of:

Close Now, Hear Later Scheme i. Banking institutions

Sec. 30 of the NCBA does not contemplate prior ii. Quasi-banks
notice and hearing before a bank may be directed to iii. Their subsidiaries engaged in allied activities
stop operations and placed under receivership. - A subsidiary is a corporation more than 50% of the
a. It is enough that such action is made subject of voting stock of which is owned by a bank or quasi-bank
a subsequent judicial review. iv. Their affiliates engaged in allied activities
b. The rationale behind the scheme is to protect public - An affiliate is a corporation the voting stock of which:
interest. [Central Bank vs. CA and Triumph Savings ▪ To the extent of 50% or less, is owned by a bank or
Bank, G.R. No. 76118(1993)] quasi-bank; or
▪ Is related or linked to such institution or
In other words, when there is a ground for closure and intermediary through common stockholders or such
receivership, such closure may be effected without other factors as may be determined by the MB.
notice and hearing. The validity of closure may be
challenged afterwards. Restraining orders and injunctions
The provisions of Rule 58 (Preliminary Injunction) of
CONSERVATORSHIP the Rules of Court insofar as they are applicable and not
inconsistent with the provisions of this Section 25 of the
Powers and Duties of a Conservator NCBA shall govern the issuance and dissolution of the
a. To take charge of the assets, liabilities, and the restraining order or injunction.
management of the institution;
b. To reorganize the management; General Rule: No restraining order or injunction shall
c. To collect all monies and debts due said institution; be issued by the court enjoining the BSP from
d. To exercise all powers necessary to restore its examining any institution subject to supervision or
viability; examination by the BSP.
e. To report and be responsible to the MB; and
f. To overrule or revoke the actions of the previous Exception: There is convincing proof that the action of
management and board of directors of the bank or the BSP is plainly arbitrary and made in bad faith and
quasi-bank. [Sec. 29] the petitioner or plaintiff files with the clerk or judge of
Note: That the management of the bank is still with its the court in which the action is pending a bond executed
board of directors and management. However, the in favor of the BSP, in an amount to be fixed by the
conservator may revoke their actions. In contrast, in court.
receivership, the receiver takes over the management of
the bank. AMLA

RECEIVERSHIP Covered and Suspicious Transactions

General Rule: A covered transaction is a transaction
Concept in cash or other equivalent monetary instrument
The MB may summarily and without need for prior involving a total amount in excess of Php 500,000
hearing close a banking institution and place it under within one banking day. [Sec. 3(b)]
Exception: for Casinos or “covered persons under Effectivity
Section 3(a)(8),” a single casino transaction involving an The freeze order shall be effective immediately and
amount in excess of Php 5,000,000 or its equivalent in shall not exceed six (6) months depending upon the
any other currency. circumstances of the case.

Suspicious Transactions are transactions with On motion of the AMLC filed before the expiration of
covered institutions, regardless of the amount involved, the original period of the freeze order, the court may,
where any of the following circumstances exist: for good cause shown, extend its effectivity. Upon the
a. There is no underlying legal or trade obligation, timely filing of such motion and pending resolution by
purpose or economic justification; the Court of Appeals, the freeze order shall remain
b. The client is not properly identified; effective. [Rule 10(a)(3), Revised IRR]
c. The amount involved is not commensurate with the
business or financial capacity of the client; Duties of covered institutions
d. Taking into account all known circumstances, it may (1) Implement Freeze Order. - Upon receipt of the
be perceived that the client’s transaction is structured notice of the freeze order, the covered person and
to avoid being the subject of reporting requirements government agency concerned shall immediately
under this Act; freeze the monetary instrument or property subject
e. Any circumstance relating to the transaction which is thereof, and shall immediately desist from and not
observed to deviate from the profile of the client and/or allow any transaction, withdrawal, transfer,
the client’s past transactions with the covered removal, conversion, other movement or
institution; concealment thereof.
f. The transaction is in any way related to an unlawful
(2) Freeze Related Accounts. - Upon receipt of
activity or offense under this Act that is about to be, is
the freeze order and upon verification by the covered
being or has been committed. [Sec. 3(b-1)]
person that there are accounts related to the
monetary instrument or property subject of the freeze
Money laundering is a crime whereby the
order, the covered person shall immediately freeze
proceeds of an unlawful activity are transacted,
these related accounts wherever these may be found.
thereby making them appear to have originated
If the related accounts cannot be determined within 24
from legitimate sources. hours from receipt of the freeze order due to the
volume and/or complexity of the transactions, or any
Safe Harbor Provision other justifiable factors, the covered person shall
effect the freezing of the related accounts within a
The Safe Harbor Provision states that no reasonable period and shall submit a supplemental
administrative, criminal or civil proceedings shall return thereof to the Court of Appeals and the AMLC
lie against any person for having made a covered within 24 hours from the freezing of said related
transaction report in the regular performance of his accounts.
duties and in good faith, whether or not such reporting
results in any criminal prosecution under this (3) Furnish Copy of Freeze Order to Owner or
Holder. - The covered person and government agency
Act or any other Philippine law. [Sec. 9] Lawyers and concerned shall likewise immediately furnish a copy of
accountants acting as independent legal professionals the notice of the freeze order upon the owner or
are not subject to the reporting requirement if the holder of the monetary instrument or property or
relevant information was obtained in circumstances related accounts subject thereof.
subject to professional secrecy or legal professional
privilege. (4) Submit Detailed Return. - Within 24 hours from
receipt of the freeze order, the covered person and
Freeze Orders government agency concerned shall submit, by
personal delivery, to the Court of Appeals and to the
Application for Freeze Orders AMLC, a written detailed return on the
Who may apply freeze order.
Upon verified ex parte petition by the AMLC and after
determination that probable cause exists that any (5) The covered person shall also submit to the
monetary instrument or property is in any way related AMLC, through the internet, an electronic detailed
to an unlawful activity, the Court of Appeals may issue return in a format to be prescribed by
a freeze order, which shall be effective immediately,
directing the concerned covered persons and
EXAMINATION OF DEPOSIT BY AMLC
government agency to desist from allowing any
transaction, withdrawal, transfer, removal, conversion,
concealment, or other disposition of the subject Authority to Inquire into Bank
monetary instrument or property. [Rule 10(a), Revised Deposits
IRR]
General Rule: The AMLC may inquire into or examine any
particular deposit or investment, including related
accounts, with any banking institution or non-bank
financial institution upon order of any competent court in
cases of violation of this Act when it has been established
that there is probable cause that the deposits or
investments involved are related:

1) To an unlawful activity as defined in Sec. 3(i); or

2) To any money laundering offense under Sec.4

Exception: No court order shall be required in the

following cases –
a. Kidnapping for ransom under Article 267 of the RPC
b. Sections 4,5,7,8,9,10,12,13,14,15 and16 of RA No. 9615
c. Hijacking and other violations under RA No. 6235;
destructive arson and murder as defined under the RPC
d. Felonies or offenses of a nature similar to those
mentioned in Section 3(i) (1), (2), and (12) which are
punishable under the penal laws of other countries;
e. Terrorism and conspiracy to commit terrorism as
defined and penalized under RA No. 9372.