GENERAL BANKING LAW OF 2000
by the Monetary Board of the Bangko
RA 8791- An act providing for the regulation of the
organization and operations of banks, quasi-banks,
trust entities and for other purposes
Other laws governing other types of banks:
(Section 71)
 Thrift Banks Act
 Rural Banks Act
 Cooperative Code
POLICY (Section 2)
a. Provide an environment conducive to the
sustained development of the national
economy and the fiduciary nature of
banking that requires high standard of
performance.
b. Promote and maintain a stable and efficient
banking and financial system that is globally
competitive, dynamic and responsive to the
demands of a developing economy.1
DEFINITION OF TERMS
 Banks shall refer to entities engaged in the
lending of funds obtained in the form of
deposits.
 Quasi-banks shall refer to entities engaged in
the borrowing of funds through the issuance,
endorsement or assignment with recourse or
acceptance of deposit substitutes for purposes
of relending or purchasing of receivables and
other obligations.
INTERESTED IN THE BUSINESS OF BANKING
1. Government
2. Depositors
3. Investors
4. Creditors
5. Borrowers
CLASSIFICATION OF BANKS (Section 3)
 Universal banks- can exercise powers of an
investment house
 Commercial banks- have lower
capitalization requirement than universal
banks
 Thrift banks- primarily governed by Thrift
Banks Act, composed of:
(i) Savings and mortgage banks
(ii) Stock savings and loan associations
(iii) Private development banks
 Rural banks- mandated to make needed
credit available and readily accessible in
rural areas; governed by Rural Banks Act of
1992
 Cooperative banks- banks organized whose
majority shares are owned and controlled by
cooperatives primarily to provide financial
and credit services to cooperatives;
governed by Cooperative Code
 Islamic banks (Charter of Al Amanah
Islamic Investment Bank of the Philippines)-
activities are subject to the basic principles
and rules of Islamic Shari’a
 Other classifications of banks as determined
Sentral ng Pilipinas
AUTHORITY OF BSP (Chap. 2, Sections 4-7)
1. Supervisory Powers- operations and activities
of banks shall be subject to supervision of the
Bangko Sentral.
2. Policy Direction- BSP shall provide direction in
areas of money, banking and credit. (includes
electronic transactions)
3. Authority to Engage in Banking & Quasi-
Banking Functions- No person or entity shall
engage in banking operations or quasi-banking
functions without authority from the Bangko
Sentral.
4. Examination by Bangko Sentral- to examine
an enterprise which is wholly or majority-owned
or controlled by the bank.
DISTINCTION OF UNIVERSAL AND
COMMERCIAL BANKS (Chap. 4, Sections 23-32)
UNIVERSAL BANKS COMMERCIAL BANKS
Power Authority to exercise General power incident to
additional powers other than corporation
those authorized for
commercial banks
May invest in the equities of May only invest in equities of
allied, whether financial or allied enterprises, whether
non-financial, and non-allied financial or non-financial
enterprises
Total investment in shall not exceed 50% of the shall not exceed 35% of the
equities of allied net worth of the bank net worth of bank
enterprises (also non
allied for universal
banks)
Equity investment in any shall not exceed 25% of the same as universal banks
one enterprise (whether net worth of the bank
allied or nonallied for
universal banks)
Equity investment in can own 100% of the equity may own up to 100% of the
Financial Allied in a thrift, rural bank of equity of a thrift bank or a
Enterprises financial allied enterprises; If rural bank.
not publicly-list, then only
49% own
Equity investment in may own up to 100% of same as universal banks
Non-Financial Allied equity in non-financial allied
Enterprises
Equity investment in shall not exceed 35% of the Not applicable
Non-allied Enterprise total equity in that enterprise
nor shall it exceed 35% of
the voting stock of that
enterprise
THRIFT, RURAL AND COOPERATIVE BANKS
THRIFT BANKS RURAL BANKS COOPERATIVE
BANKS
composed of savings and mortgage Privately owned organized/owned
banks, private development banks, and managed by cooperatives
stocks savings and loan associations
and microfinance thrift banks.
accumulate savings of depositors and Promote and expand the rural
investing them, provide short-term economy in an orderly and effective
working capital and medium and long- manner by providing people in rural
term financing to businesses engaged communities with basic financial
in agriculture, services, industry and services
housing and diversified financial and
allied services
MONETARY BOARD (
May authorize the organization of a bank or quasi-
bank subject to the following conditions:
a. Entity is a stock corporation
b. Funds are obtained from the public (20
persons or more)
c. Minimum capital requirements satisfied
submitted to the BIR for taxation
purposes.
- The bank may terminate the loan or any
credit accommodation granted if the
statements proved to be false or
incorrect in any material detail.

FUNCTIONS OF BANKS OTHER BANKING SERVICES

a. Deposits  A bank may also perform the following
b. Loans services:
1. Receive custody of funds,
ACCEPTANCE OF DEMAND DEPOSITS (Sec. 33) documents and other valuable
According to Monetary Board, a bank other than objects
commercial bank cannot accept or create demand 2. Act as financial agent to buy and sell
deposits except upon prior approval of. for their customers
3. Make collection for accounts of other
RISK-BASED CAPITAL (Sec. 34) 4. Act as managing agent of
Monetary Board shall prescribe the minimum ratio
investment management accounts
which the net worth of a bank must bear to its total
5. Rent out safety deposit boxes
risk assets which may include contingent accounts.
In case a bank does not comply with the prescribed  Bank shall perform 1-4 as a depositary or as
minimum ratio: an agent
- The Monetary Board may limit or  It shall be duly separated from bank’s own
prohibit the distribution of net profits by assets and liabilities
such bank
LIMITATIONS
- require that part or all of the net profits
loans, credit shall not exceed
be used to increase the capital accounts
accommodations 20% of the net
of the bank until the minimum
and guarantees worth of such bank
requirement has been met.
against real shall not exceed
In case of a bank merger or consolidation or under estate loans 75% of the appraise
rehabilitation: dvalue of the estate
- Monetary Board may temporarily relieve
the surviving bank, consolidated bank,
plus 60% of the
or constituent bank or corporations
appraised value of
under rehabilitation from full compliance
the insured
with the required capital ratio under such
improvement
conditions as it may prescribe.
loans on security shall not exceed
GRANT AND PURPOSE OF LOANS AND OTHER of chattels and 75% of the
CREDIT ACCOMMODATIONS intangibles appraised value of
- A bank shall grant loans and other credit the security
accommodations only in amounts and
for the periods of time essential for the
effective of the completion of the
operations to be financed. Such loans PROHIBITIONS
shall be consistent with safe and sound
banking practices. A. ON BANKS:
1. To directly act as insurer (Sec. 54)
REQUIREMENT FOR GRANT OF LOANS OR 2. For banks or quasi-banks to declare
OTHER CREDIT ACCOMMODATIONS dividends, if at the time of declaration:
- A bank must ascertain that the debtor is a. its dearing account with the Bangko
capable of meeting his obligations to the Sentral is overdrawn;
bank before granting a loan or other b. it is deficient in the required liquidity
credit accommodation. floor for government deposits for 5
- A bank may demand from its credit or more consecutive days;
c. it does not comply with the liquidity
applicants a statement of their assets
standards/ratios prescribed by the
and liabilities and of their income and
Bangko Sentral for purposes of
expenditures as prescribed by the
determining funds available for
Monetary Board to properly evaluate the dividend declaration; or
credit application which includes the
corresponding financial statements
 d. It has committed a major violation as
may be determined by the Bangko
Sentral (Sec. 57).
3. To conduct business in an unsafe or
unsound manner (Sec. 56);
4. Publication of capital stock (Sec. 62); or
business
5. Unauthorized advertisement representation
(Sec. 64); or
6. To employ casual or non-regular personnel
or too lengthy probationary personnel in the
conduct of its business involving bank
deposits (Sec. 55).
Rationale: To prevent violation of Bank Secrecy
Law.
Commit any of the acts enumerated in Sec. 55 or
aid in the commission of the same.
The making of false reports or misrepresentations
or suppression of material facts by personnel of the
BSP shall constitute fraud and shall be subject to
administrative and criminal sanctions.
 The GBL also governs the foreign banks
and trust operations in the Philippines being
stated in the chapter 8 and chapter 9,
respectively.
 Violators will be penalized for such things
committed

B. ON DIRECTORS, OFFICERS, EMPLOYEES,

OR AGENTS OF BANKS:
1. Make false entries in any bank report or
statement or participate in any fraudulent
transaction;
2. Without order of a court of component
jurisdiction, disclose to any unauthorized
person any information relative to the funds
or properties in the custody of the bank
belonging to private individuals,
corporations, or any other entity;
3. Accept gifts or any other form of
remuneration in connection with the
approval of a loan or other credit
accommodation from said bank;
4. Overvalue or aid in overvaluing any security
for the purpose of influencing in any way the
actions of the bank or any bank; or
5. Outsource inherent banking functions – a
bank cannot engage the services of another
entity to receive deposits on its behalf; the
bank has to do it by itself.
Rationale: To prevent violation of Bank Secrecy
Law

C. ON BORROWERS:
1. Fraudulently overvalue property offered as
security for a loan from the bank;
2. Furnish false or make misrepresentations or
suppression of material facts for the
purpose of obtaining, renewing, or
increasing a loan or extending the period
thereof;
3. Attempt to defraud the said bank in the
event of a court action to recover a loan or
other credit accommodation; or
4. Offer any director, officer, employee or
agent of a bank any gift, fee, commission, or
any other form of compensation in order to
influence such persons into approving a
loan or other credit accommodation
application.

D. ON EXAMINERS, BSP OR GOVERNMENT

OFFICERS AND EMPLOYEES ASSIGNED TO
SUPERVISE, EXAMINE, ASSIST OR RENDER
TECHNICAL