Professional Documents
Culture Documents
Banking Law Quiz
Banking Law Quiz
Stage 1: Incorporation
During the incorporation of a bank, the Bangko Sentral ng Pilipinas has the
role to whether give authority or not to a person or entity who intends to
engage in banking operations or quasi-banking functions. Upon issuance of
this authority, such person or entity may commence to engage in banking
operations or quasi-banking functions and shall continue to do so unless such
authority is sooner surrendered, revoked, suspended or annulled by the
Bangko Sentral in accordance with the law.1
Page 1 of 18
In the exercise of its authority to organize a bank, the Monetary Board shall
take into consideration the applicant’s capability in terms of financial
resources and technical expertise and integrity. The bank licensing process
shall likewise incorporate an assessment of the bank’s ownership structure,
directors and senior management, its operating plan and internal controls as
well as its projected financial condition and capital base.3
The Bangko Sentral, through the Monetary Board, has the power to determine
whether a person or entity is performing banking or quasi-banking functions
without Bangko Sentral authority. To resolve such issue, the Monetary Board
may, through the appropriate supervising and examining department of the
Bangko Sentral, examine, inspect or investigate the books and records of such
person or entity.4
3
Banking Laws of the Philippines, The General Banking Law, Annotated, BSP, Page 72
4
Section 6 of R.A. No. 8791 (General Banking Law of 2000)
5
Ibid.
Page 2 of 18
In essence, the Bangko Sentral only grants the license to engage in the
fiduciary nature of banking to persons and entities which have the financial
and technical capability.
Stage 2: Operation
During the operation of a bank, the Bangko Sentral has the supervisory
authority to determine compliance with laws and regulations. It shall examine
an enterprise which is wholly or majority-owned or controlled by the bank. It
also includes the determination that the institution is conducting its business
on a safe and sound basis. The scope of Bangko Sentral’s supervisory powers,
may be grouped into three categories: (a) issuance of rules; (b) examination
and investigation; and (c) enforcement of Prompt Corrective Action (PCA).6
The Bangko Sentral prescribe rules and regulations governing the following
operations and other activities of banks: (a) Issuance of stocks; (b) Purchase
or acquisition of its own capital stocks as a security for a loan; (c) Ownership
and control of foreign stockholdings; (d) Stockholdings of family groups or
related interests; (e) Qualifications and disqualifications of individuals elected
or appointed bank directors or officers (Fit and PropeRule); (f) Merger and
consolidation; (g) Payment of compensation and other benefits of directors
and officers; (h) Opening of bank branches; (i) Banking days and hours; (j)
Microinsurance products; (k) Bank strikes or lockouts; (l) Risk-based capital;
(m) limit, amortization, renewal or extension of loans, credit accommodations
and guarantees (monetary, real property, unsecured or microfinance); (n)
6
Section 4 of R.A. No. 8791 (General Banking Law of 2000)
Page 3 of 18
DOSRI Transactions; (o) Foreclosure of real estate mortgage; (p) fixing of
bad debts and write-offs; (q) Major acquisitions or investment; (r) other
banking services as enumerated under Section 53 of the General Banking
Law; and (s) electronic transactions, processing and recording.
7
Section 68 of R.A. No. 8791 (General Banking Law of 2000)
Page 4 of 18
II.
The Prohibitions and Limitations of a Bank Examiner of the Bangko
Sentral ng Pilipinas
8
Section 55 of R.A. 8791 (The General Banking Law of 2000)
9
Ibid.
Page 5 of 18
III.
The Civil, Criminal, or Administrative Liabilities for Refusal of a Bank
to Permit the Examination of the Bangko Sentral ng Pilipinas
A bank that wilfully refuses to permit examination shall pay a fine of P30,000
per day from the day of the refusal and for as long as such refusal lasts, without
prejudice to the sanctions under Section 34 of R.A. No. 7653. The fine shall
be imposed starting on the day following the receipt by the concerned Head
of Department in the SES of the report from the Bangko Sentral examiner that
the bank continues to refuse to permit examination notwithstanding the
written demand made by the Department Head. Aside from the fine mentioned
above, the bank and/or its concerned directors and/ or officers may be subject
to non-monetary sanctions provided under Section 37 of R. A. No. 7653 (The
New Central Bank Act) and Sec. X009.10
10
Circular No. 957 dated 17 April 2017
Page 6 of 18
thousand pesos (P50,000) nor more than One hundred thousand
pesos (P100,000) or by imprisonment of not less than one (1) year
nor more than five (5) years, or both, in the discretion of the court.
[Emphasis supplied]
Page 7 of 18
Resignation or termination from office shall not exempt such
director or officer from administrative or criminal sanctions.
Page 8 of 18
The cease and desist order shall be immediately effective upon
service on the respondents.
xxx
The Governor is hereby authorized, at his discretion, to impose
upon banking institutions, for any failure to comply with the
requirements of law, Monetary Board regulations and policies,
and/or instructions issued by the Monetary Board or by the
Governor, fines not in excess of Ten thousand pesos (P10,000) a
day for each violation, the imposition of which shall be final and
executory until reversed, modified or lifted by the Monetary Board
on appeal. [Emphasis supplied]
IV.
A.
Difference of Bank, Quasi-bank, and Trust Entities
Banks shall refer to entities engaged in the lending of funds obtained in the
form of deposits.11 Banks are classified into: Universal Banks, Commercial
Banks, Thrift Banks, Rural Banks, Cooperative Banks, Islamic Banks, and
Government Banks. For an institution to be a bank, it must regularly engage
in the business of receiving funds from the public in the form of deposits of
any kind, and in the business of lending said funds.
11
Section 3.1 of R.A. 8791 (The General Banking Law of 2000)
Page 9 of 18
deposit substitute under R.A. 7653 (New Central Bank Act) for purposes of
relending or purchasing of receivables and other obligations. It functions refer
to borrowing of funds, for the borrower’s own account, through the issuance,
endorsement or acceptance of debt instruments of any kind other than
deposits, or through the issuance of participations, certificates of assignments,
or similar instrument with recourse, trust certificates, or of repurchase
agreements, from 20 or more lenders at any one time, for purposes of
relending or purchasing of receivables and other similar obligations.
Commercial, industrial and other non-financial companies, which borrow
funds through any of these means for the limited purpose of financing their
own needs or the needs of their agents or dealers, shall not be considered as
performing quasi-banking functions.12
A trust entity shall administer the funds and property under its custody with
the diligence that a prudent man would exercise in the conduct of an enterprise
of a like character and with similar aims. 13 It can act as trustee on any
mortgage or bond and accept and execute any trust consistent with law; act as
guardian, receiver, trustee, or depositary of the estate of any minor or other
incompetent person, and as receiver and depositary of any moneys paid into
court by parties to any legal proceedings and of property of any kind which
may be brought under the jurisdiction of the court; act as executor of any will;
act as administrator of the estate of any deceased person; accept ad execute
any trust for the holding, management and administration of any estate; and
establish and manage common trust funds.14
12
Banking Laws of the Philippines, The General Banking Law, Annotated, BSP, Page 74
13
Section 80 of R.A. 8791 (The General Banking Law of 2000)
14
Section 83 of R.A. 8791 (The General Banking Law of 2000)
Page 10 of 18
B.
15
Banking Laws of the Philippines, The General Banking Law, Annotated, BSP, Page 122
16
Abacus v. Manila, 455 SCRA 97
17
Vda. De Ballesteros v. Rural, 636 SCRA 119
Page 11 of 18
As to instances when placed under such:
In receivership, upon finding of the MB that the bank is: (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 under Sec. 37 of R.A. No. 7653
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.
As to its duration:
Page 12 of 18
In receivership, ninety (90) days, no extensions. After 90 day period and upon
determination that bank cannot be rehabilitated: (a) file ex-parte with RTC,
without need for prior notice or any other action, petition for assistance in the
liquidation of bank; (b) convert assets of bank to money, dispose to creditors
and other parties for the purpose of paying the debts of the bank; and (c)
Institute actions to collect and recover accounts and assets and defend any
action against the bank.
In liquidation, no period stated in the law. May take some time depending on
the determination and payment of claims to creditors.
Page 13 of 18
In receivership, a “receiver” has the power of: (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; (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. However, a receiver
may not dispose or sell any assets of the bank and is not allowed to pay or
commit any act that will involve the transfer or disposition of any asset of the
bank except the payment of administrative expenditures and the deposit or
placement of funds in non-speculative investments.
As to its effects:
In receivership, a bank’s assets pass beyond its control into the possession and
control of the receiver, and the appointment of the receiver operates to
suspend the authority of the bank and its directors and officers over its
Page 14 of 18
property and effects – equivalent to injunction to restrain the bank officers
from intermeddling with the property of the bank in any way. Officers are no
longer authorized to transact business in connection with the bank’s assets and
properties. It does not dissolve the bank as a corporation nor does it interfere
with the exercise of corporate rights. Instead, it retains their corporate
personality – can sue and be sued but any case should be initiated and
prosecuted through the liquidator. The assets of the bank deemed in custodia
legis in the hands of receiver and shall be exempt from any order of
garnishment, levy, attachment or execution. The bank is forbidden by Bangko
Sentral to continue doing business. It may not grant new loans or accept
deposits butis still obliged to collect debts owing to the bank and foreclose
mortgages. It will not pay interest on deposits but may still collect interest and
charge on all loans.
In liquidation, the bank ceases to exist and the assets of the bank deemed in
custodia legis in the hands of liquidator and shall be exempt from any order
of garnishment, levy, attachment or execution.
V.
Rules in the Charging of Interest and Awarding of Interest in the
Concept of Actual and Compensatory Damages
Articles 1956 and 2209 of the New Civil Code and The Usury Law
The general rule is enunciated in Article 1956 of the New Civil Code which
states that no interest shall be due unless it has been expressly stipulated in
Page 15 of 18
writing and is lawful. As to being lawful, such is not applicable for now
because the Usury Law has been legally suspended. Be that as it may, while
there can be no stipulated interest, there can be legal interest pursuant to
Article 2209 of the New Civil Code which provides that if the debtor incurs
default, in the absence of stipulation, the indemnity shall be the legal interest
which is 6% per annum.
In 1974, the Monetary Board issued Circular No. 416 increasing legal rate of
interest from six (6%) to twelve (12%). In 1982, the same rate of 12% was
reincorporated in Circular No. 905 issued by the Monetary Board. In 2013,
Section 1 of Circular No. 799 provides that the rate of interest for the loan or
forbearance of any money, goods or credits and the rate allowed in judgments,
in the absence of an express contract as to such rate of interest, shall be six
percent (6%) per annum.
18
G.R. No. 189871, 13 August 2013
Page 16 of 18
For monetary Obligations (e.g. Loans):
If stipulated in writing, the interest shall run from date of judicial demand
(filing of the case); and the rate of interest shall be that amount stipulated.
If not stipulated in writing, the interest shall run from date of default (either
failure to pay upon extra-judicial demand or upon judicial demand whichever
is appropriate and subject to the provisions of Article 1169 of the Civil Code)
and the rate of interest shall be 6% per annum.
19
G.R. No. 170139, 05 August 2014
Page 17 of 18
applying the rate of interest fixed therein. Circular No. 799 is applicable only
in loans and forbearance of money, goods, or credits, and in judgments when
there is no stipulation on the applicable interest rate. Further, it is only
applicable if the judgment did not become final and executory before July 1,
2013.
The Supreme Court stressed that Circular No. 799 is not applicable when there
is a law that states otherwise. While the Bangko Sentral ng Pilipinas has the
power to set or limit interest rates, these interest rates do not apply when the
law provides that a different interest rate shall be applied. "[A] Central Bank
Circular cannot repeal a law. Only a law can repeal another law."
In sum, if judgment did not become final and executory before July 1, 2013
and there was no stipulation in the contract providing for a different interest
rate, other money claims under Section 10 of Republic Act No. 8042 shall be
subject to the 6% interest per annum in accordance with Circular No. 799.
Page 18 of 18