TABLE OF CONTENTS

SAN BEDA LAW CENTRALIZED BAR OPERATIONS ~ MEMORY AID 2019

E-COMMERCE ACT (R.A. NO. 8792) ......................... :... 334

Basic Definitions ......... ...................................... .................. 334
Legal Recognition of Electronic Media................................... 335
Communication Of Electronic Data Messages or Documents 337
Special Rules with Respect to Carnage of Goods 340
Penal Provisions of the ECA...... .......... ................. . 341
r •
•*
DATA PRIVACY ACT (R.A; NO. 10173) ............. . 341
Rights of A Data Subject...... ....................... .................. 344
Security Measures for The Protection of Personal Data 346 •
Prohibited Acts..,..... :........ 346

• •••• * •• «

FINANCIAL DISTRESS AND INSOLVENCY ................... 347

REHABILITATION IN GENERAL......................... .......... . 348
COURT-SUPERVISED REHABILITATION..................... 349
Appointment of Receiver or Management Committee 352
: Determination of Claims..... 7 ...... ... ■................. 355
Avoidance Proceedings............... ............................................... 355
Receiver’s Report.'............................ ...................... ........... ........ 356
Creditor’s Çomrnittee .............. ,............. ........ .............. . —.. 357
< , Draftingand Approval of Rehabilitation Plan '.................. : <.'...... 357
Termination
- of Rehabilitation * *• Proceedings........... ............ ,.... 360

PRE-NEGOTIATED REHABILITATION............ .................... i......... . 360 '

OUT-OF-COURT REHABILITATION............. ................ 7... . 362
CROSS-BORDER INSOLVENCY PROCEEDINGS............... ......... 363
SUSPENSION OF PAYMENTS;...........Z........ ..... ........ 364
• COMMENCEMENT OF LIQUIDATION PROCEEDINGS........^..... . 365
LIQUIDATION PROCEEDINGS...................................... ............ 368

BANKÍÑG LAWS '......5...¿..../. 371

• GENERAL BANKING. LAW (RÍA.; NO, 8791) 371
’;^General Concepts-.. 1..'....-.z....... P #

* e
t •

V
371
, • . *-• r t • 1
*•*. — • • *•
. ORGANIZATION OF BANKS..;...... ............. - A
. 374
^ownership of banks .... ....... -...7........ 377
. management of banks./.,,...;......:..-.;. • ' 378
DEPOSIT FUNCTION OF BANKS..Z...... 379
RISK BASED CAPITAL.;................... ?....... 382
INVESTMENTS OF BANKS..................... ' 383
LOAN FUNCTION OF BANKS........... . ' 383
DÓSRI RESTRICTIONS....... ............. 387
ACTS PROHIBITED.UNDER THE GENERAL BANKING LAW. ..... .................... ... 389
TRU ST GO M PAN IES <. ".......:........'. ................ ............. 390
STRIKES AND LOCKOUTS OF.BANK EMPLOYEES........................ . 391
SECRECY OF BANK DEPOSITS LAW (R.A. NO. 1405).......... ........ ................ 391
UNCLAIMED BALANCES LAW (ACT NO. 3936)...................... f. 394
NEW CENTRAL BANK ACT (R.A. NO. 7653 as amended by R.A. NO,. 11211).... 394 .
' •Currency, Monetary, and Stabilization Functions of the BSP...........i............ 396
Supervisory Function of the BSP........ ............... •.. ..;............. ............. ....... 399

X I 2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS

 TABLE OF CONTENTS
•
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019
9 . •

• * • *
• • «

BANKS IN DISTRESS................. .. ................................... .......... .......... .............

Conservatorship.... .......................................... .'
Closure............... A.-. ......; ............... ....... :..
Receivership........................... '................. ;........................................ .................. '.......... .............. 402
Liquidation of banks...................................... .............. ................ 403
• * * "•.***'

PHILIPPINE DEPOSIT INSURANCE CORPORATION ACT...... ............... ........................... 407

The Philippine Deposit Insurance Corporation (PDIC) .................................... .................. 407
Scope of Deposit Insurance. .......... ..................................... ............. 403
Settlement of Claims............................................... :........ ............. ’................. . ... 409
• • ■ . , ............ ' • *

TRUTH IN LENDING ACT (R A. NO. 3765) ................ 1................................. 410

RURAL BANKS ACT OF 1992 (RIA. NO. 7353).......... ............. 411
PRIVATE DEVELOPMENT BANKS ACT (R.A. NO. 4093):. ...... ,.:........... .................. 413
SAVINGS AND LOAN ASSOCIATION ACT (R.A. NO. 3779)......;...... .A........ .......................... 413
THRIFT BANKS ACT (R.A. Nd.7906).......'.;....J.......... 414 ?
ANTI-MONEY LAUNDERING ACT (R.A; NO. 9160, AS AMENDED)....... ......:............ .......... 415

1 t

2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS | xi

* • • •
 BANKING LAW
SAN BEDA
.
LAW
•
CENTRALIZED
••
BAR* OPERATIONS
• • •
- MEMORY
• • •
AIDI 2019

BANKING LAWS GENERAL BANKING LAW

(R.A. NO. 8791)
Governing Laws
1. General Banking Laws Scope of Application of the General Banking Law
a. General Banking Law 2000 (R.A. No. 8791); 1. ; Primarily governs universal ’ banks and
b. New Central Bank Act (R.A. No. 7653) as commercial banks.
amended by R.A. No. 11211. , ' 2, Suppletorily governs thrift banks, rural, banks,
V

■ and cooperative banks (R.A. No. 879.1, as

2. Special Banking Laws ■ amended, General Banking Law of 2000, Sec. ■
. a. New Rural Banks Act (R.A- No. 73.53); - ; . 71) [héreihafter, GBL]. ' : . . . • •.
bk Private Development Banks Act (R.A; No:
•. 4093); • - . ■■ . ■-
: GENERAL CONCEPTS \
Ci Savings and Loan Association Act (R.A. No ;• Banks' *■ ? ‘. ?. ' y ■
3779); and ... ’ • / Banks are entities engaged, in the lending of funds
d. . Thrift Banks Act (R.A. No. 7906). obtained in the form of deposits from the public (GBL,
Sec. 3.1). . -
3. Other Laws Expressly Affecting Banks
a. Secrecy of Bank Deposits. Law (R.A.. No.^^An investment company which loans out the money
1405); •' : . of its customers, collects^thelnterests, and charges a
b. Unclaimed Balances Law (Act No. 3936); : commission to both lender and borrower is a bank
. C- Philippine Deposit Insurance Corporation Act. / (Republic v/. Security . -Credit and ' Acceptance
. (R.A. No. 3591); . .. ’ . • M .p:; » - X Corporation^^ No. L 20583, January 23, 1967).
> d. Anti-Money Laundering Act (R.A.^N^.
10365). . ; ' • ' -. .’ v Quasi-banksCA .- .
e. . Civil Code of the Philippines (&,Ai No. 386)';'- Entities enga^^L in the borrowing of funds through
and . .... ■_.*■' .. •. ? the issuan^e^ endorsement^ or assignment with
f. . Corporation Code of the Pt^ltpjiinps^B. P. ^ recourse, dr acceptance of deposit substitutes for
- r Blg. 68). purposes/bf relenting or purchasing of receivables
® and c^h^p^atto^BL, Sec-.4};
Five Persons Primarily Interested'irf tlie Business 4 k ’ ’

' of Banking: (BIG-CD) *1 J FinanGiarintermediaries

,■ '1. Borrowers; f Persons or entities whose principal functions include
2. Investors;'. ' . - ’ j. .. ]&^e£^nding, investing'; or placement of funds on
3. Government;. , > .■ ^j'&^iciericesi^of indebtedness or equity''-deposited,
4. Creditors; and, ■ ‘ acquired, or coursed, through them,, either for their
5. Depositors. own account or for the account of others (General
Banking - Act, Section - 2-D(c); First Planters
Pawnshop, Inc. ' v.: Commissioner ' of Internal
*
Revenue, G.R. No. 174134, July 30, 2008).

EXECUTIVECOMMITTEE ; SÜBJEÇTCOMMITTEE / MEMBERS < : .ADVBERS\^\;'.é-

MARY CYR1ELL C. SUMANQUI
.Over-all Chairperson, ' ERICA
MAEt C. VISTA Chairperson for
• Academics, BEN \.REI
i BARBERO Chairperson for Hotel.
. Operations, JftELSEA LOUISE B.-_
DIMAANd Vice Chairperson for
DENTZEN.S. VILLEGAS Subject VYEL MARIE.,,. C: ' BRODIT, Justice JAPAR B. DIMAAMPAO,
Chair, URSULAINE GRACE C. CAMILLE. C, CAÇHO,'ANNA and Àtty. <MARIA\ ZARAH R.
PEJJCÏANO . AssistantSubject. ’ CARMELA• Ç. .DELA CRUZ, •. VILLANUEVA-CASTRO ' •
E.. PATRICIA ’
Chair, LOUISE SIGRID■' ,C. PATRICIAERIKA ERIKA ,? A. /
ANTONIO Subject Electronic EUSTAQUIO, AIRA MARTELLE .
Data. processing, JEREMY M. M. 1 GERONIMO, ; JEEN < V
MERCADER Banking Law, JAN KATHLEE B. LIM, PRISCILLA .I

Secretariat, EARL JUSTIN M.
YAMBAO Vice Chairperson: for
• J. Operations, ’ MA. ANGELICA.B.,
. DE LEON Vice Chairperson for
Finance, ' ARRA OLMAYA’J.’.
BADANGAN .Vice Chairperson
for Audit, JORDAN N.. CHAVEZ
Vice, Chairperson for .Electronic
WENZY W. CRUZ Corporation C.- UNGAN, MARC: RUSSEL ’.
Law,. DANIELLE LOISE B. ANN' P. LUBANGCO,' ANNA « ■
DELOS REYES’ tInsurance
... Law, DOMINIQUE G. . MARMOL,
GUIANINA SHIELA CAMILLE FATIMA MAE D: TUMBÀLI,
: A. SORIANO Law on Intellectual PAOLA CIARRÀ E?VALENCIA,1
Property,. ’MILANE ANNE C. JOANNE KRISTEEN C. WY .
.CUNANAN . ■: Negotiable
■Instruments Law, . FRANCES i

Data . Processing, . HANZ . ANGELA V. SALVÂCION £

DARRYL D. ITU -Vice Transportation. ■ Law,

’ Chairperson for Logistics, DON . URSULAINE GRACE C.
ALFRED E? AQUHJZAN Vice FELICIANO Other Commercial
Chairperson for Membersh ip • 'Papers, Consumer Protection
Laws and Law on Insolvency
 BANKINGLAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS -MEMORY AID. 2019

Non-stock Savings and Loan Associations interest rate to depositors while charging the
Non-stock, non-profit corporations engaged in the highest possible interest rates on their own
business of accumulating the savings of its members borrowers. ..The interest spread or differential
and using such accumulations for loans to members belongs to the bank and not the depositors who
to service the needs of households by providing long­ ■ are not beneficiaries of banks (Consolidated
term financing for home: building and development Bank and Trust Corporation v. CA, G.R. No.
and for personal finance (R.A. No. 8367, Sec. 3). 138569, September 11, 2003).
. ' • i •
• •

Primary Functions of Banks
1. Deposit Function '
The deposit function Of banks refers to those
functions which allow a bank to receive money
from the public with the obligation of returning an
equal amount of the same kind and quality
(VILLANUEVA-CASTRO, Recap: Commercial
Law Book 1, (2018), 'p. 160) . [hereinafter,
VILLANUEVA-CASTRO, Recap Book 1]. ...:
•
• 4
• •
Banks are not gratuitous bailees of the funds
deposited with them by their customers. Banks
are run for gain, and they solicit deposits in order
that they can use the money for that very purpose
< (San Carlos Milling Co., Ltd. v. BPI, G.R. Nd."
37467, December 11, 1933). , . 1
The charging of interest for loans forms a very
essential and fundamental element of the
• •
' .
banking business. In fact, it may be considered to
• '
•
* •

Fixed, savings, and current deposits of moneyjn-— ... . be the very essence of the banking’s existence or
shall 'be^gpyerried-ij
banks.and similar institutions shall " t y beingv(Sps. ^Anastacio-Calina v. DBP, G.R. No.
by the provisions concerning ~simpJ^ioa^(C/v//it^ J\p 5^748^July31, 2007).
Code, Art. 1980).
2. Indispensable Institution
2. Lending/Loan Function The^'' ^aqRing'^system is an indispensable
s The loan function of ban^^ir3er | institution In tKe modern world and plays a vital
functions which allow a bahk to extend b • JK role in the-.epbnorh.ip life of every civilized nation.
loans to persons in nfeed of/funds to fund * Whether ajsfm^re passive entities for the
. investments, expansiorj'o^busihess.i or cover safekeeping>^ndxx§eMng of money or as active
short term liquidity requirdrhen ' ^iristrdirrients pffbu^ess. and commerce, banks
s \• ' J? ’ 3 X1-’ ' ' •■ ■ •~
rci have/become
"J=^Tn have^become a-ubiquitous a ubiauitous presence amona
among the
3. Other Functions of a Bankx(/vR^MYfl\ -—
peopf§£?who
*♦* 1 •iu!
:> have
b*
1 lavc
*• . *
’ ¡Come
uumu to regard
,iv .ic
a
^jchu them, with
♦ .»
whii !• • ’ ■ .. ’ . .

a. Act as financial Agent ahdlbu^^ ' t’es^p^/3rid^ ¿gratitude and, most of all;
order of and- for ^the. ^aqcountDl ^"pbnfide'nce ^Simex/Jnternatiohal (Manila) Inc. v.
customer, shares, evidence of indi ffd. 8801,3, March 19, 1990).'.
and types of secu fitiestfGBL, Sgc. 53
b. Make collection; andXpayment^f ^Public Interest ;
• account of others n^s^bf banking is imbued with public
x '. services .for their _ ...^ — __ v— . restlThd stability of banks largely depends oh
incompatible with banking bu.sinbs^/ (as Is ft K Xtf bopfid'ence of the people in the honesty and
Agent), (GBL, Sec; 53.3); ; 'efficiency of banks • (Philippine Banking
c. Receive in custody funds, documents^fi^^ Corporation v. CA, G.R. No. 127469, January 15,
..valuable objects (as bailee or trustee) (GBL, 2004). '■
Sec. 53.1); ■ •. .. . . • . - f.
...
.
•
* J*
.z
* *
.

d. Rent out safety deposit boxes (GBL, Sec. Banks are affected with public interest because
53.5); and .■ •• : they receive funds from the general public in the .
e. Upon prior approval of the Monetary Board,. " - form of. deposits. Due to the nature of their '
act as Managing agent, adviser, consultant transactions and functions, . a , fiduciary -
or administrator of investment management/' relationship is created between the. banking
«
-. advisory/ consultancy .accounts (GBL, Sec. >
.• * , •• • • » I
institutions . and their- depositors (Simex
-r
53,4). ; \ \ International (Manila) Ipc. v. CA, G.R; No. 88013, .
Note: Where the bank shall, act as depositary or March 19, 1990)?- ; • '? ’C '
as<an' agent It shall keep the funds, securities
and other effects which it receives duly separated 4.. Special Fiduciary Duty J,
from its own assets and liabilities (GBL, Sec. 53); The State recognizes the vital role of banks in
providing an environment conducive to the
Nature of Banking Business sustained development of the national economy
1. A Business of Borrowing and Lending Money and the fiduciary nature of banking that requires
Banks’ do not accept deposits to enrich high standards of integrity arid performance
depositors but to earn money for themselves. (GBL, Sec. 2).\ ' ’ .. .. .
The law allows banks to offer the lowest possible

372 | 2019 SAN BEDA LAW-CENTRALIZED. BAR OPERATIONS

 1

BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 20'19

This fiduciary relationship means that the bank’s (Reyes v. CA, G.R. No. 118492, August 15,.
obligation to observe "high standards of integrity 2001).
and performance" is deemed written in every
banking contract. It requires banks to assume a Instances where banks exercised utmost
* • *

degree of diligence higher than that of a good diligence • • •

father of a family (Philippine Banking Corporation a. Where RCBC conducted ocular inspections
' ■ ■
v. CA, G. R. No. 127469, January 15, 2004)
' •’ -
. ., ■•
and investigations of the properties, to be
subjected to dación en pago, in accordance
- Banks must ;treat the accounts of its depositors with its credit policies. It confirmed that
■\ with meticulous care, always having in mind the LIPCO had possession over the lands, and
fiduciary nature of their relationship whether such that there was no other possessor or
account, consists; only a few hundred pesos or . occupant thereof (Hacienda Luisita, Inc. v.
millions (Simex International (Manila) Inc. v. CA, Presidential Agrarian Reform Council, G.R. ■
G.R. No. 88013,March 19, 1990).
V No. 171101, July5, 2011).' :
■ ‘ ■. ' •

-. Note: The fiduciary nature of a bank-depositor b PNB conducted a credit investigation on the
relationship however dôes not convert the • Gallicias as well as the land offered as
contract between the bank and its depositors collateral. Furthermore, PNB waited for the
from a simple loan, to a trust agreement, whether final and executory decision of the trial court
express or implied. Failure by the bank to pay the z regarding the controversy • over the
depositor is failure to pay a simple loan, andzn'Q|//_ ( ownership of the land and it was only after
a breach of trust (Consolidated Bank and Trust the Gallicias were able to secure á copy of
CorporationV. CA, G.R. No. 138569, September Si the TOT which was issued that the loan wasc
11, 2003). ' •
i ... : i

granted .(PNB v. Sia, G.R. No.;165836,

'February 18, 2009).> •. ..."
5. Requires Utmost Diligence . -■ . Z
The General Banking Law of 2000 requires.of Instances^where banks failed to exercise
banks the highest standards o£ Integrity and’ utmostrcJijigence : '
performance: Of paramount importance is the a. Negligence was committed by respondent
trust and confidence of the<public in^general to bank .[ in accepting for deposit the crossed
the banking industry. ConséqÇjentlÿ7the diligence* .1 checks without indorsement and ..in not
required of banks is'more^ihartriliRÔrnan '•< verifying lne^authenticity of the negotiation of
pater families or a good father of^^a'tomilyzThe theu-checks^ (GO v. Metrobank, G.R. No.
i
highest degree - of diiigen^^>4s'Xexpecjéd 168842, August 11,2010). ‘ '■ • -. ..
(Philippine Commercial Bank v.' Balmaceda, G.R. Jl a • a *

No. 1'5814.3, September 21 -, 2011)^^- ^ .. ; •

:

i. br-'^EaHure to -notify and verify absence of

■ - ■*,■.' .. '■ : '• f-’-y ■ ’* t *T * •*, • • r- —

i ; clearing stamps on the back of the swapped

The bank is expected to ascertaint'an.d verify the checks were clear violations of its duty to
identities of the persohs it transacts blisiness with exercise extraordinary diligence: The fact
(UCPB v. Ramop, G.R. No. 147800, November • that the drawee bank did not discover the *
V
11,2003):. . / . ■'
' ’ ** *
<• ?
• • • e , » • •
irregularity; seasonably constitutes
negligence in carrying out the bank’s duty to
Banks cannot merely rely on certificates of title in its depositors (PCIB v. CAi G.R. No. 121413,
ascertaining the status of‘mortgaged properties; \ . ' January 29, 2001). . ; ■■■' .'
as their business "is impressed with public
interest, they are expected to exercise more care 6. Liable•to for
Liable'for • Acts
. • • of Officers
• • and Employees
** •
and prudence in their dealings than private ■ Though its employees ? may be the ones
individuals. Indeed, the rule that persons dealing negligent, a bank’s, liability as an obligor is not •
. ’ with registered lands can rely ? solely on thé merely.. vicarious but primary, as banks are
certificate of title does not apply to banks (Ursal > • expected to exercise the highest degree of
v. CA, G.R. No. 142411, October 14, 2005). ’ diligence in the selection and supervisions of
their employees (Philippine National Bank v.
* • •"*%.« r . ...

' Note: However, the bank is not required to exert Norman Pike, G.R: No. 157.845, September 20,
the highest degree of diligence in regard to . 2005). ' • -.
transactions which dp not involve a fiduciary la % _ .
•.
BANKING LAW

relationship with a depositor such as in the sale Note: The Supreme Court seems to be applying
EMO RY A ID -

and issuance of foreign exchange demand drafts. the principle of law behind Article 1759 of the Civil
The transaction does not involve the handling of Code which .governs" another obligor required to
petitioner’s deposit with the respondent bank. exercise extraordinary diligence in the

ÉÔ19 SAN BEDA LAW CENTRALIZED BAR OPERATIONS ] 373

 BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019
V
a*íw?Kn.w.

performance of contractual obligations: Common

Carriers. ORGANIZATION OF BANKS
Under the said provision,, common carriers are
still liable even after showing ordinary diligence •
Ordinary Corporation v. Banking Corporation
'■ • ••

in the selection and supervision ' of their

employees. The implication being that Article ^Ordinanp<^j3öfatJört^^Bahklhg;Co^öratiöh^
2180 does not apply to.persons whose contracts
are imbued with public interest. Ergo, a bank, like
a. common carrier, is liable for culpa contractual Generally registered with Must secure a certificate
and not culpa aquiliana in respect to the the SEC without any of authority from the
negligence of its employees.- ’ certificate of authority Monetary Board before it
« • • . « * 'J - •
issued by a government can . register with SEC
‘ 7. Includes Duty to Keep True Records . agency. . • (GBL, Sec. 14). _.
A bank has a fiduciary duty to keep efficiently a
record of its transactions with, its depositors
(Philippine Banking Corporation v. CA, G.R. No. ■ Except for corporations The provisions Of the
■ 127469pJ^iiuaryi5,2004). sole, not less than five Corporation Code to the
but no more than .15 .contrary notwithstanding,
By the very nature of its business.^hebankrf T (Corporation Code, Sec. at least five and a
should have had in its possession^ the Original J maximum of 15, two of
copies of the disputed promissory-pote ahd^the--^^ whom shall be
records and ledgers evidencirig.-thé offsetting of y independent directors
the loan with .the time deppsifé>^^arcg$..>Thé^5*sw (GBL, Sec. 15).
bank inexplicably failed t(ÿ;prbdijcézthé'- original ‘tt
copies of these documentsf^i^arly, ¿the■ bank-. In case of merger or
failed to treat the account of Marcos with. consolidation, the
meticulous ciaré (PhilippIríeBahking CorporationIf"" number of directors shall
v. CA, G.R. No.. 12746$ilanu&y 15, 1 hot exceed 21. (GBL,
• ft
Sec.17).\
: ‘ ‘ -li 11 ‘ •j-

8. Regularly Deals with RegisteredCapdg As to Classification

J ud icià I not ice is tá ken -Vl tfiej. $ta ndé^practicí
for banks, before approving^ a loárijj^ cj< or vnph- Must generally be a stock
’ representatives to thé 'premises ofxthé' corporation --| corporation (GBL, Sec.
offered as collateral and t¿investigate wh
the real owners thereof. Banks, thêir^bus
being impressed with public. intpjnêst, As to Value of Stocks issued • *■_ .* ;• u
• • • **«■• * ■' * 1 - ft • • a . .•

expected to exercise more carè^.andMwdèneè^-^ ...........

than private . individuais in their déàlip léàîings/ even A.. A JtoQs^U^par value or Not permitted to issue
.. those involving registered lands (Development IVI... .no-DM^ value shares no-par value shares
Bank of the Philippines y. ÇA, G,R. No. 12947^~~~ (Corporation Code, Sec. (Corporation Code, Sec.
Ç April 28, 2000). : ■ . ; •. 6)' "• 6; GBL, Sec. 9). \
• \ • • / . ' t V * ’ .
• * • A * • *
Ás to Declaration of Dividends
• ■ • •

9. Employs Reasonable Security Measures

Banks may impose reasonable conditions or ... May declare . dividends May declare dividends,
limitations to access by ndn-employees to its provided it . / has in the absence of the
• premises and records, even absent any imminent unrestricted .. . retained conditions set forth under
. or actual unlawful aggression, provided that such . earnings • (Corporation Sec,-57 under GBL. ' '
limitations are not contrary to the law (UCPB v. Code, Sec. 43). • b * * » ’ • ■ r •___________ •_____
• i • • ’ . • J ’ . r. <

Basco, G R. No. 142668, August 31, 2004). ' , \ As to Acquisition of Own Shares
i

May purchase/acquire its May. not purchase/

own. .'‘shares '. Tor a acquire its own shares or
legitimate corporate -accept them as security
purpose; provided -that, it for a loan.
I
has unrestricted retained
earnings in .its books to Exception: When
cover the shares to be authorized •' by the
purchased/ acquired Monetary Board, and the
bank must sell or dispose

FÄ
374 I 2019SANBEDALAW.CENTRALIZEDBAR OPERATIONS
 BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019

í > O rd! nri ry, Ç o rp o r at i ph/ / B a n k i ri g C or pq rati Effect of Lack of Authority from the BSP
. • • •. • - I Persons or entities found to be performing banking or
(Corporation Code, Sec. of said shares within six quasi-banking functions without authority from the
41). . • months from the time of BSP shall be subject to appropriate sanctions under
■ »
acquisition , at a public or W
the NÇBA and other applicable laws (GBL, Sec. 6,
private sale (GBL, Sec. par. 4). ' • ' • /
10).-, .
The determination of whether a person or entity, is
performing banking or quasi-banking functions
Requires a certificate of Does not . require a without BSP authority shall be decided by the MB
tax clearance :as prior certificate ' óf tax (GBL, • 6,• par.• 2).
* • Sec. " • ••• • •
requirement for the clearance before BSP ■ {■’ ' ■ ■ ■

approval . . of •. the can approve dissolution Conditions for Corporate Organization of a ■

dissolution < by the SEC (InRe:\ , Petition For Domestic Bank or Quasi-Bank: (SPC)y
(NJRC, Sec. 52(c)). ... Assistance in . the 1. The entity is a Stock corporation;
• • » •
Liquidation Of. The Rural 2. • Its funds are obtained from the Public, which shall
Bank - Of •;' Bokod mean 20 or more persons; arid " '< . ’J
•

(Benguet), Inc., G.R. No. 3. The minimum Capital requirements prescribed by

9 •
•
158261, December 18, ' the MB are satisfied (GBL, Sec. 8),- / ■
V “ • _________ i-------------------
2Ó06): ■"> 7
Classification of Banks (CUTRICO) •’
. S')

Certificate of Authority tp Engage in Banking or \ 1. Commercial banks; '

Quasi-Banking Functions.from BSP ■ \y ' Si 2. Universal banks; • . ./ . ' ? ‘
A person or entity carinot engage in banking or quasi- •
i
z...3»--Thrift banks, composed of: , y.
âw t Stock savings and loan associations
banking functions without a certificate of authority .'
~ from the BSP (GBL, Sec. 6). " ><y' '. • b. Private, development banks (R.A. No. 7906)
‘ ’ VY S' ... . ¿.s'''"
c. Savidigkand mortgage banks■’
The SEC shall not register thé yÂhiçj^s /of 4 Rural banks-?(R.A. Np. 7353);'
. Incorporation of any bank; oçzény jamendmerit [ 5. jslarriip'Banks^R.A. No. 6848); '
thereto, unless accompanie<^by> a ^ certificate I 6; Cooperative banks (R/A. No. 6938); and
authority issued by the Monetary Boards under its ■I 7. Other classification of banks as determined by
seal (GBL, Sec. 14). • . XJ? •• the. MorietaS^Bqbfd (MB) of/the BSP. fGBL, Sec.

Upon issuance of the certificate 6f authority, such

_ person or entity may commence to engage inbanking yLl/Commercial Banks : ' • ••
operations ,or quasi-banking f.uncti,on//and /shall//t "Fhese - are banks that have all- the. powers
continue to do so unless such authority is -nécéssàry.to engage in commercial bahkirig, in
surrendered, revoked, suspended, or annulled¿GBL, addition to general corporate powers, such as:
.Sec.6, par. 2). : a. Accept drafts arid issue letters of credits/ '
••• .
1 b. Discounting, : and negotiating negotiable> - •
■ .. • , • •••

When Certificate of Authority is Issued Instruments and other evidences of debt'; ’.

. The certificate of authority shrill not be ¡¿sued : unless C. Accepting or creating demand deposits;
the Monetary Board is satisfied that: (RPC) ■’//,..•• • d. Receiving other' types • of deposits and/
Î . All Requirements of existing jaws and regulations deposit substitutes;/ •' J . / : •
to engage in the business for which the applicant e. Buying and selling foreign ëxchahgè, gold or
■ is proposed to be' 'incorporated have been. silver bullion;/marketable bonds, and other ’
. corpplied with; : .. . debt securities; '. ! ; '• ’ .’ '
. 2. The Pùbli.ç interest and economic conditions, f Extending credit fGBL, Sec. 29). <- ■ '■ .
•' ’ • •’ ’ • "'v '

both general: and local, justify the authorization;

■ and '• •• /’s-, >.■-< ‘ 2. Universal Banks , /■■■'•• ? ; •'
3. The amount of the Capital,- the financing, ’ Banks that have the authority to exercise the
organization, direction and administration, as well . powers of a commercial bank and ari investment
as the integrity andresponsibility of ’ the house, invest in non-àllièd enterprises (GBL,.
organizers- and administrators, reasonably Sec. 23). ; •' • I

: " assure the safety , of deposits and the public ; K

BANKING LAW

interest (GBL, Sec. 14). . . ; .-

\ . .
» • • • •

2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS I 375

 BANKING LAW
SAN BEDA LAW CENTRALIZED'BAR OPERATIONS - MEMORY AID 2019

Universal Bank v. Commercial Bank

' Universal Bank If Commercial Bank
A publicly-listed bank In other financial allied
may own up to 100% of enterprises _ including
the voting stock of only another commercial
one other UB/CB (GBL, bank, investment shall
1. General Corporate 1. General Corporate Sec. 25). remain a minority holding
Powers j(GBL, Sec.
•• •
powers (GBL, Sec. (GBL, Sec. 31). ’ • . < <
29);
2. Such powers as may 2. Such powers as may
be necessary to be necessary to
carry on the carry on .. the
Shall not exceed 35% of
’business of business of * -

• •• 4I ■ ■
the total equity' in that
commercial banking; commercial banking:
enterprise nor shall it
(GBL, Sec. 23); ■■ (GBL, Sec. 29);
exceed 35% of the voting
3. All powers of an 3. Power to invest in
stock in that enterprise;
investment house as ...the equities of allied
.may be provided enterprises; whether
under special laws financial or non- I. Thrift Banks
(GBL, Sec. 23); • financial (GB^Sec. ^Thrift banks are engaged in:
4. Power to invest in 1 p. I/tequmutating savings of depositors and
thé equities of allied
. 30>- K 'V / investing them; :
enterprises, whether ^^'ba^f^o^i^^shprt^teirm working capital and
financial or non- '■satt**'
errn ar^ long-term -financing/ to
financial (GBL, Sec. M ^**^bu^inesse^rigaged in agriculture, services,
I X “-WW*teg; ■■■•:< . _
24); and . . . . ;
5. Power to invest in c. Providing/ diversified financial and allied
if JQ i
irvices^ Vi • • meir
Tor 1 chosen
_ | markets
4 ’ 1 . and
non-allied - * i . - .. ■ .. .. . . .. ... .. -- - - . .

enterprises. (GBL, cpnstituep'cies^ especially small and me.dium

Sec. 23). '\ ^nterprisies^anci individuals (R.A. No. 7906,

— «.a ’• * • • .••• * * *•*.*". .

As to Type of Investments ;
\ Ó ..I’’* r 1 . • •. • •• • . '.:**•*• a-
! •- . * - • •*

^ucapBanksare designed to make needed credit

May invest in the equities available and readfly accessible ip the rural areas
of. allied, ' whether on reasonable terms (RA. No. 7353, Sec. 2).
financial or non-financial, enterprises, ¿''.whether
and / ' ■ non-allied financiabor noryfirfeh^al' ^x^Tslarnic^Bdpks
enterprises (GBL, Sec. (GBL, Se^^j^fl 7 purpose is to promote and
24): . k-accelerate the socio-economic development of
tfie Autonomous Region of Muslim Mindanao by
Asto Permitted T ota! Investment ih Equ i tie s of performing banking, financing, and investment
’ operations and to establish and participate in
■ "'’ All fed Enterprises I
agricultural, commercial and industrial ventures
50% of net worth (GBL, 35% of net worth (GBL, based on the Islamic concept of banking (R:A.
Sec/24)..
* ,
Sec. 30)
• * ,*>>* \ < t, *, , X« Â.r* * * ■ * • ’ ' *• * *
. Mb. 6848, Sea 3):; . • ' ’ ' ‘ ?

All business dealings and activities are subject to

the basic principles and rulings of Islamic Shari’a,
50% of het worth (GBL, such as the Al Amanah Islamic Investment Bank
N/A of the Philippines which was created by R.A. No.
Sec 24) : . ...
* »
■ .
* * * »_____ • *_____ '_______* *______ ________________________ *1

6848 (FLA. No: 6848; Sec.3).. . . ’ ‘ •

As to Equity Investment in any One Enterprise
r’ ’ a . . - *-**• • I a a * •

25% of net worth (GBL, 25%.of net worth (Allied 6. Cooperative Banks
Sec. 24) . "c only) /GBL, Sec. 30) ■ Those banks organized by cooperatives and the
majority shares of which are owned and
• • • • ■ •• • .... -................... ....

As to Equity Investment in Financial Allied controlled by cooperatives, primarily to provide

Enterprise financial and credit services to cooperatives. It
100% of equity; 100% of equity of a thrift shall include cooperative rural banks (R.A. No.-
or rural bank; 6938, Sec. 100). ' r

376 I 2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS

 BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID ¿019

. “Other” Banks AQUINO, Reviewer on Commercial Law (2017), p.

The following banks do not fall under any of the 342 [hereinafter, SUNDIANG & AQUINO, Reviewer];
A

common classifications of banks under Section k . • :

' 3.2 of the GBL: , • Foreign Shareholding in Domestic Banks

a. Philippine Veterans Bank (R.A. No. 3518, General Rule: Foreign individuals and foreign non­
as amended by R.A. No. 7169) - conceived bank corporations may own or control up to 40% of
and created as a private commercial bank the voting stock of a domestic bank. (GBL, Sec. 11).
owned by the Filipino veterans of,World War • •

II and deeply imbued and impressed with Exceptions: • • , ' -

• public interest. . ‘ 1. Thrift bank -r at least 40% of its voting*stock shall
b. Land Bank of the Philippines (R.A. No. be pwneçl by Filipino citizens - ...
3844, Sec. 74) - created to finance the 2. Rural bank - No less than 40% of the voting
-acquisition and distribution of agricultural stocks; shall be owned by Filipino citizens, while
estates for division and resale to small non-Filipino citizens may own up to 60% of thé
landlords as. well as the purchase of the . voting stocks (R.A. No. 10574, Sec. 4). ' •. :
• <- • • * •

landholding by the agricultural lessee. ’ '■. • • . * I - » •

c. Development Bank .of the ..Philippines Determination of Proportional Shareholding

(formerly Rehabilitation Finance. The percentage of foreign-owhed voting stocks in a .
Corporation) (E.O. 81, as amended by R.A. . bank shall be determined by the citizenship of the
No. 8523, Sec. 2) — its primary purpose is tp.A individual stockholders in that bank. (GBL, Sec. 11).
. provide banking services principally to cater/zi’
to the medium and long-term The citizenship pf a corporate shareholder in a bank ;• 1

agricultural and industrial - ehterprisesPwim; shall follow thé citizenship of the controlling
emphasis on small and '■ medium-sCale. ÿ^tockholders^ the holding corporation, irrespective
' enterprises. ■ • . - ’ • ’ ufL ^jLdW®^iac^bfincorporatiori (GBL, Sec. 11). ~ ’

The above banks may be distinguished from- . Controlling stockholders refer to individuals holding
ordinary commercial dr universal banks in that' \ more than 60^oApf the voting stock of the corporate
they are: ’ . ' - $ stockholders of tln’e bank (Circular No. 718, Section 2
a. . Created, by special law>Tfor specifie^puWic M (i),No. 2,^eti^2011), .
,' banking purposes; ■ < • ■' ffl’ • ’ ./l-J ¿A ' ■ - -
b. Must be expressly Wthp^ed?>^r Idv^xor
approval by the Monetary^ Board before ‘ Only estabïîshéor reputable, and financially sound
■ accepting dr. creating demai^d^pb^its; '■ foreign banks shall be allowed entry in the
i^^hilippine5. Furthermore, the. foreign bank applicant
and Publicly-listed in its
^^(Stintry’oroiigin, unless the foreign bank applicant is
OWNERSHIP OF BAT owned and controlled by the government of its
country of origin (R.A. No. 7721, as amended by R.A.
. ., , Nb.10641, Sec.2). t : \ ’ ’
Treasury Stock
General Rule: No bank shall purchase or acquire Modes of Entry of Foreign banks . ; ;
shares of its own capital stock or accept its own The MB may authorize foreign banks to operate in the
• ’ shares as security for a.loan. , . r .Philippines through any of. the following modes of ,
•• .. ■ ' • ■' ' ’ ■entry: . ?;
'entry: • >. .**•
/ •' ■.*'•
-,..; ' ;•? ■ • .'.T
Exception: When authorized by the MB and the 1. - By acquiring, purchasing, or owning up to 100%
Stock „so purchased or acquired. shall be sold or ■' ---- ' voting
of the ”
' stock of ah existing domestic *‘ bank;
A. disposed of at a public or private sale within 6 months 2. By investing in up to 100% of the voting stock of
from the time of its purchase or acquisition (GBL, a new banking subsidiary incorporated under, the
: Sec: 10): .
• • •
‘ : • .' laws of the Philippines; or " . .7.. *
»’ * 4 * ’
• I • * • • •
• * .«
*
.
•
• •
* ’*• •
3. By establishing branches with full banking
.•
•
. •
••• »
•
* *
.
•
• • •
***••

Filipino Stockholding in Domestic Banks . . \ authority (R.A. No. 10641, Sec. 1 amending R.A.
A Filipino individual and a domestic non-bank No. 7721, Sec. 2j. , \' . . ? ’
- corporation may each own up to 40% of the voting . *%•.*•••••• •' . •

stock of a bank (GBL, Sec. 11). / Capital Requirements for Foreign Banks Seeking
BANKING LAW

% . ’i •
to Operate in the Philippines
’* " S * 9 * • •
"
•
. - ...

While the restriction on foreign equity refers to the 1.. For locally incorporated subsidiaries - The
M EM O RY A ID

total equity participation, thé restriction on Filipinos
and domestic non-bank corporations. refer to
individual equity participation - (SUNDIANG &
minimum capital required.for locally incorporated
subsidiaries of foreign banks shall be equal to
that prescribed by the MB for domestic banks of
••,
•

2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS | 377

 BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019

the same category (R.A. No. 7721, as amended Reason: To maintain the quality of bank
by R.A. No. 10641, Sec. 4); .. management and afford better protection to
• % ** e • . depositors and the public, in general (GBL, Sec. 16).
2. For foreign bank branches T- The minimum ■ *

capital required for foreign banks authorized to Composition of Board of Directors

establish branches shall not be less than the There shall be at least -5, and a maximum of 15
capital required for domestic banks of the same members of the board of directors of a bank, 2 of
category (R.A. No. 7721, as amended by R.A. whom shall be independent directors. In case of
No. 10641, Sec. 3). , >•..? merged or consolidated banks, the maximum number
I % •
*
. ’• •• . .
\ •• •
: •
of directors is 21 (GBL, Sec. 15). '
Legal Status of Authorized Foreign Banks
• * • •

Foreign banks authorized to/ operate - in the
Philippines shall perform the same functions, enjoy
i the same privileges, and be subject to the same
limitations imposed upon a Philippine bank of the
same category (R.A. No. 7721, as amended by R.A.
No. 10641; Sec. 8). ?. • •/; . • • . . ‘\'
• I
Non-Filipinp citizens may become members of the
board of directors of a bank to the extent of the,foreign
participation in thé equity of said bank (GBL, Sec. 15).
Independent Director -
A person other than an ^officer of employee of the . .
• • < • I •

■. . ■’ •: . • • ._•• •• •’ ■ .■• ■ < . ■-.■■■ ~. bank, its subsidiaries or affiliates or related interests
Off-shore Banking Unit refers - to a : branch, Sec. 15). , ? ' .
subsidiary or affiliate of a foreign banking cgrpOrationri' J 4 . ■ -
duly authorized by BSP to transact offshore tanking / J A? ent director is a person who is: .(DOM-
business in the Philippines (P.D. N^^S^ ... ..
’ ' * T.'¿Nbt.a^Direptq^or officer of the related companies.
¡majority stockholder?.
Offshore Banking refers.to t 2^- Not
*qr hàs’nof been an Officer or employee of the
. transaction in foreign currencies ihiyp,....^ ___ .aVk. banktouasi^arík/tqjst entity, its subsidiaries or
of funds from external sources and/the utilization of affiliates o^rçl^tèd^ interests during the past 3
such banks (P.D. No: 1O34,i;Secti6ti 1(a)). a, "■ ■ ' ' ' ■ ® “years) counted'frqpi the date of his election;
- ... . ^-^Nbt:ai Majority Shareholder of the institution; •
Participation iri Foreclosure J^rôçeedmgô feiiV Npt p RelativeHegftij^hate pr common-law of any
Foreign banks shall be allow.ëâ'io.did aiiM&é part irf direétW/pfficíer or/stockhol.der holding shares of
*■■■
foreclosure sales of real property-mortgaged tp.thenfeiY.^ “ stoç&^ifficient-toré|ect one seat in the board of - :
(R.A. No. 7353, as■amen^eçt'^R'A^lo.i^^Sedè ÿfe^àr^i'or/àny of its related companies; >.
acting as a/Nominee or representative of
> ■apy . director or Substantial shareholder of thé
However,, ih no event shall title^to the propéit^^èïp^
transferred to spçh foreign bank f/gLA. Ng^73^::dis^i^ ^»free tf/qjp^any Business Or. other relationship
amended by R.A. No. 10574, Sec. or any bf its major stockholders
" coWd materially; interfere with his judgment
^(0rétííar 391, Séc. 1, Series of 2003).
*

MANAGEMENT OF BANKS Scppë; of - “Relatives” Not . Qualified as ’.

*
••••
*. J . 1 . * ’• • •• • •

• Independent Director /' . ~ ' / •'

• • 9 f 9

/ “Relatives” refer to spouse, parent, child, brother,

. . • . •. M .

•
DIRECTORS AND OFFICERS
* ’• *
’ *
' . sister, parent-in-law, son-/daughter-in-law, 'and
* J* * *. * ■* • «• •f » *

Fit and Proper Rule ./• brother-/s¡stér-in-law (BSP Circular No; 793; ' Series :
the Monetary Board shall prescribe, pass upon, and of 2013). ' .T .; ’ ‘ ,
review the qualifications and disqualifications Of
individuals elected or appointed as bank directors or Meetings : '• •-
Officers and disqualify those found unfit after due Mèetings?of the board of directors may be conducted
notice/GBL, Sec. 16). <= ' . . •
.’ . • •
Ÿ . through modern technologies such as, but not limited ‘ - • i

r '' ‘
•to, telèconferencing- and- video-conferencing (GBL,
‘ ' A • • • ’• : X ’

In determining whether an individual is fit and proper Sec. 15): ' ■■■' •••’ : . ’ •; '
to hold the position, of a director dr officer of a bank, /-». ■ ’• •: '■ •
regard shall be given, to his Çorripetence, Integrity, .Prohibition on Public Officials
Training, Experience, and Education (CITEE) (GBL, General Rule:.. No appointive or elective official,
Sec: 16). whether full-time dr part-time, shall, at the same time,
serve as art officer of any private bank (GBL, Sec.
19). .. ■ / •

378-1 2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS :

 BANKING LAW
SAN BEDALAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019

I • •

Exceptions: - The contract between the bank and its depositor

1. As otherwise provided under Sec. 5 of the Rural is governed by the provisions of the Civil Code on
Bank Act of .i 992;.'' simple loan (Consolidated Bank and Trust
2. Where such service . is incidental to financial
, • <• 4 • •
Corporation v. CA, G.R. No. 138569, September
assistance provided by the government or a & »
11, 2003): 1 ’’ • ’ ’ •' "
government-owned or -controlled corporation to
• the bank; and x There is a debtor-creditor relationship between
3. As otherwise provided under existing laws (GBL, the bank and its depositor. The bank is the debtor
Séa 19)i ’ ■.; while the depositor: is the creditor. The depositor
Note: Accordingly, a banking corporation is liable to. lends'money to this bank and the bank agrees to
innocent third persons where the representation is pay the depositor on demand. The savings
made in the course of its business by an agent acting deposit agreement between the bank and the
; within the general scope of his authority (Philippine . depositor is the contract that determines the
Banking Corporation v. CA, G.R.r~ No. 127469, rights and ■ obligations of ; the parties
January.15,2004).' . (Consolidated Bank and Trust Corporation v. CA,
G.R. No.. 138569, September 11,2003).
* •’ *
• •’ ’ Y- . • “ *
. • * .•

t • • J. • •
.*• . • • « . 1 . • • •• • . *
The bank has the right to compensation and can
DEPOSIT FUNCTION set-off the deposit accounts in" its hands for the
payment of any outstanding indebtedness of the
OF BANKS • I

depositor to it that are due and demandable from

• the» latter (Güilas v. PNB, G.R. No. L-43191,
■ 1. ' ’’

Deposit Function (p?

November 13, 1935).
• • ’ ’ " . • * • 4 ‘ *I. %• • •
The deposit function of banks refers'to tïÿo’se
functions which allow a bank to receive money'from / .-¿.Art." 1-28ZSof the.' Civil Code, which prohibits
the public with the obligation of returning, an equal compensation when one of the debts arises from
amount of the same kind and quality’¡(VfLLANÙEÿA-^ a depositum, does not' apply to bank; deposits
CASTRO, .Recap Book 1,p. 160). 7 (Gullasy. 'PNB, G.R. No. L-43191, November 13,
1Q3b)il I V.-: :
Deposits -j /•.. • -, .V’qx I
The unpaid balance of money.’ orequivalent I. Form part of the Generic Funds of Bank .
received by a bank in the 'usual' course of business Tvpersoní whp^eeeives a loan of money or any
and for which it has given, or is oblige'çi^ôjgive Credit r >. other'’ ftinqibie^icquires the-ownership thereof,
i 1

to a commercial, checking, savings^ timë;\or thrift It*I ■ and is bound to pay to the creditor an equal
account or issued in accordance with BSP rules and .. ..~^mount of the samé kind and quality (Civil Code,
regulations and Other Taws (SUNDIANGa&■ AQUINO, Aïtxi:95j) ' •
Reviewer, supra at 328). ’ _• $ ' /■ ' *
•
* •
•
*
•

'■ ■ —r:.--. <-.■■■. ■- ■■ ... • ,

The ownership of the amount deposited was
Characteristics of Bank Deposits transmitted to the Bank upon the perfection of the
? 1. Not Regular Deposit Contracts . •-*• ' contract and it can make use of the amount *" •
Bank deposits are. in the- nature, of irregular deposited for its banking operations, such as to
-. deposits; .They are really loans because they pay interests on deposits arid to pay.withdrawals..
' ■ ’ êarn interest (Sprrano v. Central Bank; G.R. No. While the Bahk; has the obligation to return the. ’ ,
.. L-3051^February 14; 1980). \ -.•• amount deposited it hàs, however, no obligation
. = ' \ X ' ■■ ■ ' . '■
to return or deliver the same money that was.
Note: The relation existing between a bank . deposited (GUirigona, JrF v: The City Fiscal of
* depositor, and a bank is not that of a depositor ■ Manila, G.R, No. L-60033, April 4,1984): .
• • • «• .• •* • • *• • •

and a depositary under the-Title XII, Book IV of • • • • . •’ • *4* '*Í**’* * * * V ’ ’ * * '

the Civil' Gode (DIZON, Banking Laws and Failure to Pay Amount Deposited Not Breach of
Jurisprudence, (2009), p. 2) [hereinafter, DIZON, Duty :. - . " ' \ ’.1 ■’ • 1 ? ' •
Banking Laws],: ' ' The failure of thé Bank to return the amount
• • , • • • • * •• « *

•
. • • • .
'■ •
• • • ' • • f. • • • 4 •
deposited will - not, constitute estafa through •.
2. Loans Made to the Bank >■': misappropriation punishable under Article 315, par.
All. kinds of bank deposits, > whether fixed, 1(b) of the Revised Penal Code, but it Will only give i
. sayings,1 or current are to be treated as loans and rise to civil liability for bréaóh of contract (Quingona, .
BANKING law

are to be covered by the law on loans. (Serrano Jr. v. The City Fiscal of Manila, G.R. No. L-60033, j
D

\ v. Central Bank, G.R. No. L-30511, February 14, April 4, 1984). ' : .. . • ■ .
Al

1980), I
Reason: The bank gains ownership of the money ’’
RY

given to it by thé bank depositor. It does riot receive '

-MEM 0

2019 SAN SEDA LAW CENTRALIZED BAR OPERATIONS I 379

 BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS
the money under an obligation to make delivery of, or
to return, the same.
Mandamus Does Not Lie to Compel Payment of
Amount Deposited
The relationship - being contractual in nature,
' mandamus is therefore not an available remedy since
mandamus does not lie to enforce the performance
of contractual obligations (Maclaring Lucman v.
Alimatar Malawi, G.R. No. 159794, December 19,
2006): ' accounts upon prior approval of the Monetary
Types of Deposit Accounts
1. As to Purpose ■ . 2. As to Demandability
a. Current Deposit Account
.. Deposiit accounts that are meant to facilitate
business and accommodate a higher rate or
frequency -, of transactions, between
businesses by imposing ..no restrictions , on _ J
withdrawal amouhts or * freqtfeqpy^
iiequenc-y. Inuh- y y- \5'^iphecks (R.A. No. 7653, or the New Central
exchange, no interest is ?^otMuch U TV
accounts.
• ? A*
b ou nt
It is the most com monotype ^pf deposit,,. Jt
encourages the publi£ t^ep^age ifi savi
by offering a . smpll interest for money ?
deposited in such acfepuntS. It is’Ea-pTirnary5"
component of puHjio^Cpance by* bfipjgjhg^-
presently unneede^ fyo’d^ (savings)
depositors to persojnsiwjliipg to^bprrow sychbj^
funds for economic à^tiv/tyij.
■ ■• . ' 1 k
The requirement Apf present^tjph^x^^ i
- passbooks is usually'included^in thpde$he^
■ - & ,A. _
and. conditions printed in the pàs^sbo^l-
bank is negligent if it allots the^rtppi
" without requiring the prësen^âtjoKC, Ôf ’* 8 <; .. . .
passbook (BPI v. ÔA, G.R^I^z^i
February 29, 2000). ' 7^? • *t
c, Trustaccount • _...
It is a savings account established under a •
trust agreement, ; containing funds
administered by the bank for the benefit of •'
the trustor or another person/s.
. A trust account shall refer to an account
where transactions arising from trusteeship •
■ are. kept and- recorded (BSP Manual
* Regulations for Banks, See. X403) -
-, [hereinafter MORB]. . 3. -As to Account Ownership
d. Negotiable Order of Withdrawal
Accounts (NOW-Accounts)
Interest-bearing deposit accounts that,,
combine the payable on demand feature of
checks (akin to current accounts) and the
investment feature Of savings accounts
(MORB, Sec. X223). : '
380 | 2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS-
r
MEMORY AID 2O1Ç
Requisites to Accept NOW Accounts:
i. The applicant must have complied with
the minimum capital required;, and
ii. It has neither unpaid assessment due ..
nor past due obligations with the PDIC
(MORB, Sec. X223).
Note:. Universal/Comrhercial Banks may
offer NOW accounts without prior authority of ‘
the Monetary Board. Thrift Bank/Rural Bank
Cooperative Bank . may accept NOW
- .Board (MORB, Sec. X223).
a. Demand Deposits .
All those liabilities of the BSP and of other
banks which are denominated in Philippine
currency and are subject to payment in legal
tender upon demand by the presentation of
as amended by RA 11211, Sec.
$^[fyr^inafterNCBA]).
r:j - General ¿Rule: Only universal and
Hr
comtrerci^ 'banks may accept or create
mand^deppsjts without prior authority from
aticfn: Other' banks may accept or
!-~- j d^rhancf deposits upon prior approval
7
d subject'to such conditions and rules
z J
Fixed/Time/Term Deposits
Alkthoise liabilities -iof. the BSP and of pther
. .xpayment
. .x o
°f which cannot be legally
'' <^feqpire,d'within such a specified number of
?' \ wfflsfBP! Family Savings Bank, Inc: v. First
^:.^lV!etro Investment Corporation, G.R. No: '
- ‘ 132390, May 21, 2004)." • ■ ..
’ * .. ’ • • ' • * . • * •. ... , '
Fixed or Time Deposits offer higher interest
rates on the amount deposited in exchange
for the fixed tenure of deposit where the.
depositor undertakes not to withdraw the
amount .deposited. The longer the term, the
higher the interest. In some cases, a bank
• may alibw..an early withdrawal although , a
penalty is imposed.
a. Individual or Single Account; or
« b. Joint Account
' i. “And” account
The depositors are joint creditors of the
• bank and the signatures of all depositors
are necessary to allow withdrawal (BSP,
Banking Laws of the Philippines, Vol. II,
 BANKING LAW i

SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 20>9

• ' r . . •

p. 39 [hereinafter, BSP, GBL a final judgment (Salvacion v. Central Bank, G.R.

Annotated]); No. 94723, August 21, 1997).
ii. “And/or* account Note: This case is a pro hac vice exception, the
Whenever two or more persons open an. SC only ruled as such due to the special
account, in which any of them, acting circumstances
• •• • case.
of the. < said a
separately, can , make deposits or
withdrawals at any time (BSP, GBL Other Features of FCDs:
Annotated, p. 40); or . 1. Authorized banks may adopt a . numbered
iii. Survivorship agreement. account system for recording and servicing'
An aleatory contract supported by law a • deposits (R.A. No. 6426, Sec. 3(1)).. . •
lawful consideration -
• • ’
the mutual \ •• • •
2. FCDs are exempt from taxes including interests,
agreement of the joint depositors income or earnings of deposit (R.A. No. 6426, ds
permitting either of them to withdraw the . amended by P.D. Nd. 1246, Sec. 6).
whole deposit during their lifetime, and 3. . Iri the event a new law or regulation is issued
transferring the balance to the survivor decreasing the rights previously granted, it shall-
upon the death of one of them (Rivera, v. .. not,apply to FCD's already made or existing at
People’s Bank and Trust Co , G.R. No. the time of the issuance of such new regulation
L-47757, April 7, 1942) ' or enactment (P.D. No. 1246, Sec. 1-2-A);
4. There is no restriction on the withdrawal by the
• 4. As to Currency Denomination depositor of his deposit or on the transferability of
a. Peso Denominated Deposits; and the same abroad. *
. I •• • %

b. Foreign Currency Deposits I *• X

• Exception: Those arising from the contract
*
Vi
<1 between the depositor and the bank (R.A: No.;
Foreign Currency Deposits I
6426, Sec. 5).
K’-a- ••
Any person, natural or juridical, may deposit'With - ! >.
e • ** j j
*• ...

such Philippine banks in good standing,,as may, upon- Anonymous' Accounts Generally Prohibited
application, be designated by • the/" pSi^ • for tiki­ Anonym ous accounts or those under fictitious names
purpose, foreign-currencies which àre-acceptable^as'' are prohibited* (R.A. No. 9160 as amended by R.A.
i
part Of the international, reserve, except those-which No. 9194;jBSR Circular No. 251, July 21, 2000). . .
are required by the BSP to bésurrendered'(RiA. Nq. Exceptiqn: Fpreig'p Currency Deposits .
6426, Sec. 2): '■'» r
Note: Banks,] and& non-bank financial institutions ,
shou I diepsuthat;•.thje'xl.ient is ide htified in a n official '
Authority of Banks to accept Foreign- Currency or other identifying document (R.A. No. 6426, Sec. 8).
• » • • ’ • • • •
Deposits ’ " • p .■
• V

The banks designated by the BSB shall liève the Special Rules bn Depositors
authority (ACI2D): . •. • . i
^‘^/Mirrprs^-they can open bank accounts in their !
1. To Accept deposits and to é^cept.'foreign*" right provided that:
currencies in trust; : - a. They afe at least seven years of age; •
2. To accept said deposits às Collàtè^ìypè loans, b. They are able to read and write arid have ?
subject to such rules and regulations as may be sufficient discretion; :•
promulgated by the BSP from time to time; c. They are not otherwise disqualified by any
3: to Issue certificates to:evidente such deposits;- ; other incapacity; and f •’ ' • •
4. To pay Interest in foreign; currency oh such : d It should only be savings or time deposits
deposits;.arid ‘ • (P.D. No. 734, Sec. 1). ■' .. '•‘ .
5. To Discount said certificates 7R
(R.A.A.6426,
6426, Sec. 3). • •
. ’ •
•
1 ‘
•
'
•••r*’
• • ’
•
• i•
Ï '
.
•
’ •
•
.
• •

,•
*
‘
f ••
‘ r
•**
•
•
•
f Jt
.
*
Parents may nevertheless deposit for their •>

Exemption from Attachment or Garnishment -, minor children and guardians for their wards
General Rule: Foreign currency deposits are exempt .
' (P.D. No. 734, Sec. 1.)'
• • . . ", ■■

;
from attachment, garnishmerit, and other dourt order
. and processes (R.À. No. 6426, as amended by P.D. With respect to thrift banks, if any guardian shall •. .
. ' No. 1246, Sec. 8).'- ' ’ • • give notice in writing to any thrift bank not to
make payhnents of deposits, dividends/ or
Exceptions: .. ; interest to the minor of whom he is the guardian,
1. Probable cause
fc * •J
e 9
has been established that
* 9 j •
the
* *
then such payment shall be made only'to the :-
deposits involved are in any way related to guardiari (R.A. No. 7906, Sec. 22). . j
BANKING LAW

money laundering (AMM,/Sec. 11); and • • * ’ ? * . * 9 • * ’

2. To ensure satisfaction of a judgment. It was not Note: For children younger than seven years old,
the intention of the lawmakers to place bank their , parents .can open an In-Trust-Fbr (ITF)
deposits beyond the reach of éxecution to satisfy ' account. •’

•'2019 SAN BEDA LAW CENTRALIZE^ BAR OPERATIONS I 381

 BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019

2. Married Women - allowed to open bank accounts kind of deposit (CA-Agro Industrial Dev’t Corp. v. CA,
without the assistance of their husbands (R.A. No. G.R. No. 90027, March 3, 1993).
■ 71.92, Sec. 5). * • •

The relation between a bank renting out safe-deposit

Corporations not Required to Open Deposit boxes and its customer with respect to the contents
Accounts Prior to Incorporation of the box is that of a bail or and bailee, the bailment
Consistent with the objectives of Republic Act No. being for hire and mutual benefit (CA-Agro Industrial
9485 (otherwise known as the Anti-Red Tape Act of Dev’t Corp. v. CA, G.R.No. 90027, March 3, 1993).
2007), the SEC has dispensed with the requirement
of a Certificate of Bank Deposit for the registration of i

the Articles of Incorporation of new corporations "

(SEC Memorandum Circular No. 11s. 2016). RISK BASED CAPITAL
• ■> - I. I •• .. • a/ •
Note: The requirement effectively required ■ the ---------------------------------------------------- , ' • - --------------------------

opening of a corporate bank account as a pre­

requisite to incorporation. This requirement has been Net Worth ;
further rendered naught with the enactment of the The: total of the unimpaired paid-in capital including
Revised Corporation Code which removed the paid-in surplus, retained earnings, and undivided
requirementJhat 25% of the subscribed capital be profit, net of valuation reserves and other
paid-up prior to incorporation. • •' .adjustments as may be required by the BSP (GBL,
• . - e *^*t£<**** .»*•> • **
■ ’ ‘ •-

Suspension of Payment on its Deposit Liabilities'

In _case
... bank or quasi-bank
___ a. ___ notifies:
__ _____ notifiesj/tfi^
publicly announces a bank holiday^or in an^.mahner Thé Ml3sha'll ^escribe the minimum ratio which the
suspends the payment of ¡Oepc>s^
continuously for more than Wd^gtKe^B n^y W*^^cM^cOntingent accounts (GBL, Sec.
summarily and without need/for prior hearing close’.M,. | v
such ‘ banking institution /and place (it under XX . X , f • - •

receivership of the ' Philippirie^Deposit insurance w| j ‘ The-MB may a H r.' suspend compliance with such
.Corporation (GBL, .Sec. 53)| ' -l^tlo>tivhehever. necessary for a maximum period of
I’ % ■ torj§ yean-J provfd|blftthat,Jsuch ratio shall be, applied
Substitutes ;
ueposn ouDsmutes
Deposit < j h CStV__ _ v ¿uhiformlyjl^banKs of the same category (GBL, Sec.
. An àltérnative form of obtaining funds frog. e. pùbli
other than deposits, ttirougn %the^<i n
endorsement, or acceptance-of debt' instrument) Non-compliance with the Prescribed
the borrower’s own account, fpr the pqrpos n Ratio of Capital to Risk
lending or purchasing of receivables *and<x lej^ry Board^may:
obligations (NCBA, Sec. 95). gji^ob
ii prphi^if the .distribution of net profits and
» • •
quire yÇa^part or al! of the net profits be used to
9

“Public" shall mean borrowing from fwe’rty.^p) or ore as^the capital accounts of the bank until the
. more lenders at anyone time j^Mirium requirement has-been met; or , ’ •
• » s .
•
• * *
•
f’
2:. • 'Ftestrict or prohibit the acquisition of major assets
«
%
« •
•• • • .

. Noté: Rather than opening an individual account with and..making of new investments by the bank . "
. •

each depositor, a bank may instead issue, endorse,
• or accept a, short-term debt instrument' (such as a
promissory note or banker’s acceptance) in favor of >
at-least 20 lenders. These instruments, being loans
from the ' “public” partake 'in the . nature of bank :
deposits but are not treated as ordinary deposit
accounts because the debt instruments can be traded
in the secondary financial markets. • .:
- * • • • • ’
.- ''.except purchases of readily marketable evidence ■
of indebtedness or obligations, the servicing, and
repayment of which are .guaranteed by the
Government, until the minimum required capital
ratio .has been restored (GBL, Sec. 34). , ■ •
Note: In -case; of à bankmerger or consolidation,
• .or when a bank, is under rehabilitation under a
>
program approved : by BSP, the /MB may
. ;

Safety Deposit Box temporarily relieve ; . the surviving bank, .

The contract for the rent of a safety deposit box is not consolidated bank, or. constituent bank or '
an ordinary contract of lease because full possession corporations under .. rehabilitation.: from full
of the box is. not given to the renters. Nor is it purely compliance with the required capital ratio (GBL,.
a contract of deposit because the parties may Sec 34). . 7 •
establish such stipulations, clauses, terms, and ,,
• conditions as they may. deem'convenient, provided
they are not contrary to law, morals, good customs, • • •
1

public order or public policy. The contract is a special

382 | 2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS’ -

1
 BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2OI9

3. Financial and commercial complex projects

INVESTMENTS OF BANKS arising from or in connection . with the
Government’s privatization program; and
4. ‘ Such other categories as the MB may declare as
Allied Enterprises ■ ... appropriate (MORB, Sec. 1381;1).
Allied enterprises may either be (a) financial or (b) « *

non-firiancial (GBL, Sec. 24).. . Ceiling on Investments in Real Estate .

1. Financial Allied Enterprises ■ 1. Any bank may acquire real estate as shall be
a. Leasing companies including leasing of stalls .necessary for its own use in the conduct of its
and spaces in a commercial establishment business (GBL, Sec. 51). ' 1 • . :
provided that bank investment in/acquisition 2. The total investment in- such real estate and
• • • , t Ì

of shares of such, leasing company, shall be • improvements thereof, including - bank

lirhited/applicable Only in cases of conversion '.
of outstanding loan obligations into equity;
b. Babies;
c. -, Investment.Houses;
d. Financing Companies
e Credit Card Companies; . \ • • k. .
Financial institutions catering to small and
medium scale industries including venture. z
capital corporation; •. .’ . •- •
g- Securities dealership/brokerage; and / ^•/■Z
Foreign exchange dealership/ brokerage •
(MORB, Sec. X377). ■ : \ Z :• ?
In addition, Universal Banks may ijpv^r in thez
■' ‘equipment, -shall not exceed 50% of combined
, ’ capital a cbounts (GBL,Sec. 51}T . •
3. < The equity investment of a bank in. another
%
\ corporation engaged primarily in real estáte shall
be considered as part of the-bank's total
’ • .investment in real estate, unless otherwise
•provided by the Monetary. Board (GBL, Sec. 51).
‘•Warehousing agreement” to circumvent GBL is
not allowed; ,‘ .
An agreement whereby one entity holds in trust the.
propertj^pf a bank, which is in excess of the ;
'dimi^^o^opiin^estments. on real estate at 50% of the
<
capital ‘assétëy; .is riot valid. This agreement is •
I

following as financial allied undertakings: / 4—

otherwise krioWn as a “warehousing agreement”
rJ-

a. ; Insurance companies; and ; L (Tala Realty vi GA, G.R. No. 130088, April 7, 2009).
b. Holding company (MORB, Seg^X37(7)^ ' LL J'T \ .'■/ ■ ■
• Í The Supreme Court ruled that Banco Filipino’s suit for
2. Non-Financial Allied Enterpfise^x^ „ reconveyances: caririOt, prosper because the trust
Activities that do not involye/rnoney^iatters^ch
* agreemejig^as^used to circumvent the general
K. . banking^latviiTh^ Bank and Tala, ,are in ...
................ pari delicto;
.. . .
a. Warehousing Companie.s^^^/*^!\ ’ r'7 thus, no affirmative relief should be given to one
* • ... ■ * • • * • ■ a -* •

. b. Storage Companies; h^.agaipst the other (Tala Realty V; CA, G.R. Nd.
c. Safety Deposit. Box CompanieS^^^r. -- ■ \ 2009/ •
d. Management corporations engaged o^tj^b^
engaged * in. an activity similar yW^fthe
• management of mutual funds;MmS- ...
e. Computer Services; ; •• i. •. : . LOAN FUNCTION OF BANKS
,f. Insurance,agencies/brokerages;.. '
g. Home Building and home development;.
h. Drying and/or milling facilities for agricultural Classitication$ of Loans .. .<
crops; .¿t " 1/ Unclassified Loans’ < 7
I.. Service, bureaus;. . . -J ' -. .J '■ Those that do not have a greaterrthan^’oftnal
Philippine Clearing; House Corporation risk , and the borrower has: apparent ability to
(PCHC), Philippine Central Depository, Inc. .satisfy it in full arid no loss in ultimate collection
and fixed Incorpe exchange; arid ’ is anticipated- (Circular No. 247, Series of 2000,
k Other similar activities as the MB may sec^(Aj)., ■_./ . •"; :• ...... ■ ■ ■

'declare (MORlB, Sec. X380). •

• r. • ’ . •* ' * z ’*"• • ’ •
*, * • • 9 ***••"•*" I •

• - . r • J X 2 ‘ Classified Loans
•

Non-Allied Enterprises Those that have extraordinary risk of Joss in

1. Agriculture, mining,;, quarrying,' manufacturing, collection due to some defects such as bad debts
public utilities, construction, wholesale trade and Orthose under litigation. They are divided into:.
community and social services, following the 1 a. Loans especially mentioned; • < .’/•
BANKING LAW

industrial groupings in the Philippine Standard b. Substandard; . 1 • .j

Industrial Glassification; • .. ; . c. ' Doubtful; and
M EM O R Y A ID

2 Industrial park projects bnd/or industrial estate d. Loss (Circular No. 247; Series of 2000, Sec.: .
r
developments; . ■ 2(B)). ... «.

2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS I 383

’
 >4

BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019
ï

Conditions for Grant of Loans by Bank (ABC-TP) Exception: If the MB prescribes otherwise (GBL,
1. A bank shall grant loans and other credit Sec. 37 & 38).
accommodations only in Amounts and for the *
periods of time essential for the effective Special Rules on Foreclosure of a Real Estate
completion of the operations to be financed Mortgage by a Mortgagee-bank
(GBL, Sec. 39); • 1. Right of Redemption '
2 It shall be consistent with safe and sound a. Judicial Foreclosures
Banking practices (GBL, Sec. 39); . . As a general rule, no right of redemption in
Before granting a loan • or other credit judicial foreclosures is recognized under
accommodation, a bank must-ascertain that the Rule 68 of thé Rules of Court? .
debtor is Capable of fulfilling, his commitments to
the bank (GBL, Sec. 40). . .. As an exception, a right of redemption is
Note: A bank may demand from its applicants a recognized when mortgagee is a. bank (GBL,
statement of their assets and liabilities and of Sec. 47). ’• X •.
their income and expenditures and other .
information to enable the bank to evaluate the The period of Redemption: One (1) year from
_ credit application (GBL, Sec. 40); . <i.- date of registration of sale - •
Should such statements prove to be false or
incorrect, the bank may {Terminate any. loatjkr^ b. Extrajudicial Foreclosure
granted on'the basis of said statements^riiTshalh i. General Rule: One (1) year from
have the right to demand immediate repayment ^registration of certificate of sale ■
or liquidation of obligation (GB^Séê?^ü,jSaricp.--S iij Exception: There is a right -of
De-Oro-EPCI, Inc. v. JAPRL D.ë. * ' tâorp., . y^fetfeniption when the following
G.R; No. 179901, April 1:4; «. • J
■
• .
* •

5 Payments ~ Amortization s f fbânkloa^p ‘jr »«, _ is a juridical person;

and other credit accommodations (shall Jbe 2i 2?X/he mortgagee is a bank; arid
adapted to the nature of the operations to be XX , 3.)’f^edejnption is made -, before the
financed (GBL, Sec. 44)1 r S ■ - i . I registration of the certificate of sale
Note: In case. of Idaris-^d'nd otn.er . J within three rrionths after the
accommodations with rtiaturities
__ _ of . more tha^ foreclosure sale, whichever is earlier
years, provisions must 'Êâ^rrjad^ „-.JtaW (’isBL.fefe.47). '
amortization payments, put pa
be made at least anniialFy^GBL^Se jssessipn
nas th dr right to enter upon and take
Pre-payments by the Borrow^ essjdn of the^property immediately after the
A borrower may at any time’prior to confirmation of the auction sale a nd to
maturity date pay, in whole or ïr%part the same Jn accordance with law ••
balancei of any bank loan arid
accommodation, subject to such réas
and conditions as maÿ be agreed upon b( ^junction Bond
bank and the borrower (GBL, Sep. 45). Any petition in court to enjoin, or restrain the
conduct of foreclosure' proceedings shall' be
Rules on Amount of Loahs Secured by Mortgage given due course only upon filing by the petitioner
*
•
• *
*
•••»
•
«• of a bond in an amount fixed by the court '.
, • «
•
9 «
f

Maximum Amount of conditioned that he will pay air the damages

. .Type of Security
•• Loan • • • • •‘. which, the bank may suffer by the enjoining or
restraint of the foreclosure proceedings (GBL,
**,••• **• • .¥ • •- • /

Real Estate •
. • *
Shall hot exceed 75% of
* ’ • • -
Sec, 47). -•
• .
’
• M
; •
‘ ' •
...

• • ’
the appraised value of the • /

real estate security, plus •

to

60% of the . appraised •

4. Redemption Price *
•

• •

value of the insured

• •
a. Amount due under the mortgage deed; and *

improvements (GBL, Sec. b. . Interest; and

•
- \. . •
$7J. ' <■' • * *
•
• -c. All the costs and expenses incurred by the
i
t •
■ ••• - •• 4
■. bank or institution from the sale and custody
• « • • 1

Chattels and intangible Shall hot exceed 75% of • of the property less the derived income
properties (such as the appraised value of the therefrom (GBL, Sec. 47; Union Bank y.CA,
patents, trademarks, security (GBL, Sec. 38). G.R. No. 134068, June 25, 2001). \ .
trade- names, and ' I
copyrights) _______ _ :----------------------

384 I 2019-SAN BEDA LAW CENTRALIZED BAR OPERATIONS

1
 LAWby;a third party (MORB, as amended by
BANKINGof, a.^contract -
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019
'J^B^Gircular No. 425, Sec. X303.1).

. Tender of Redemption Price Essential Limit applicable

on Loans^ Creditrate
maximum interest is increased
Accommodations, andby the '
The general rule is that the statement of intention Guarantees MB (MORB, (Si-JoDi) (GBL,2).Sec. 35);
Sec. X305.
must be accompanied by an actual and simultaneous The following are the limitations in granting Loans, • •

tender of payment This constitutes the exercise of Credit Unilateral increase of

Accommodations andinterest rates is not allowed in
Guarantees:
the right to repurchase. Otherwise, the offer to •: 1, ' Single: Borrower’sOtherwise,
this jurisdiction. Limit (SBL) it would
(GBL, be Sec. a violation
3.5); of
redeem is. ineffectual (BPI Family Savings Bank, 2. Joint the principle of mutuality
and Solidary Signatureof contracts ordained in
(JSS) Practice
Inc. v. Spouses Veloso, G.R. No. 141974. August 9, ■ Article 1308
(Security Bpnk the Civil
of and TrustCode (New Sampaguita
Company,.. Inc. v.
2004). Builders Cuenca,
\ ■ Rodolfo Construction
G.R. No. Corporation
138544, October y. Philippine
3,
National
. : 2000); andBank,; G.R.• . No, 148753, July 30, ’ 2004).
Bona fide tender of the redemption price within the 3. : Restrictions on Bank Exposure to Directors <
period of redemption is only necessary to preserve Requisite CounterrStipulatipns
Officers,Stockholders, and Related Interests to Make •
the right of redemption in a future action of Escalation
(DÔSRI) Clause(GBL,
Accounts ValidSec.36).
' . ’
, enforcement beyond the period of redemption 1. Prior Consent Clause • • • » • . • r • •• •

- (Tolentino v. CA, G. R: No.. 171354, March 7, 2007). The consent

Single Borrower of the(SBL)
’s Limit borrower ' shall be obtained for
1Ï Purpose: each and\ every , increase, or decrease,T in the rate
. .' The filing of judicial action within the 1-year period, of interest
a. * To prevent(Sps. Silosfrom
the' bank y. Philippine
making National
excessive Bank, '
even without tender of the redemption price, will G.R. Nò. 181045,Julyaccommodations
2, 2014)
A •- • * and
• * loans • ’ other , credit
• . • ’ • .. to a a z
preserve the right to redeem only when there is single borrower or corporate group including • * • 9 •

> disagreement over the redemption price and such De-escalation

2. guarantees for theclause
account of such borrower * * * ’• • • • • •

action was filed for the sole purpose of determining counter-stipulation that the rate . 'of
A group;
or • interest
the same. (Tolentino<v. CA, G:R. No. 171354, Mardh7'M b. • Itagreed upon the
safeguards shallbankbe reduced
from tooinlarge the event
a risk that
7,2007). . •■
■. ► ''‘ ! ' ’• .. •
the applicable
exposure to a single
’
maximum
*
client; and •
rate of interest is
¡•.-,3 SrS : ?

.... \ Jyf--. c. 1 Itreduced

is a damage or by the
by lawcontrol Monetaryof
mechanism sorts.(Banco
Board
A bank may be bound by ah agreement providing |or Filipino Savings v. Navarro, G.R. No. L-46591,
a longer redemption period; thus, converting^ it (to ^$$#1^87). ■ .
conventional redemption or by estoppel if the ' •fr
extension was unilaterally made (Ibaah Rural Bank v'^ 3 Effectivjt^Clause • ’ \
CA, G.R. No. 123817, December 17, >$991 „ That the adjustment shall take .effect on or after
the effectiyity>pf the increase or decrease in the
Note: When the mortgagee is.a^ank, th^mdunt.of maxir^um^catéìóf interest (MORB, Sec. X305.3).
redemption price is governed byvSec>47-:.qf the GBL?
and not Sec. 6 of Act 3135. Wf .. M Bank'QüjàràJft^
fôà An irrevo^çâlii^^înîhitmént of a bank binding itself to
Basic Rules on Interests and Penalties^ j/ ' j pay a sum of money in the event of non-performance.
1. .No interest. Shall be due. unless expressly
'e+int ilotoH in umfinn

2. Interest rates found to. \be ihigititqjfe^and

. • unconscionable are void,'for being>^n|r:ary to
' morals (Medel v. \CA,' GR. No. 131622,
'■ November 27, .1998), and thus deemed unwritten -
(New Sampaguita Builders Construction
Corporation v, Philippine National Bank, G.R. No. '
148753, July 30, 2004). . . .. '
»
3. If interest^ imposed as penalty, is iniquitous or
unconscionable, the,.court may equitably reduce
the same when the principal obligation has been
partly or irregularly complied with by the debtor
. (CIVIL CODE, Art. 1229). ■

4. The legal interest rates for loan and credit

agreements in the absence of an express
’ contract as to such rate of interest shall be 6%
. . per annum (BSP Circular 799, Series of 2013). r
BANKING LAW

« * I • • •** •• • • *
• • •

Escalation Clause
M EM O RY A ID

• v ; • • • | • r. . • •1 ,

Parties may stipulate that the rate of interest ;ag reed

upon may be increased in the event that the

2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS | 385

 tósa BAN KI NG LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019

2. Single Borrower’s Limit Threshold, Exclusions from SBL (Non-risk Loans):

The total amount ■■ of loans, - credit a Loans and other credit accommodations
accommodations and guarantees extended by a . secured by obligations of the BSP or the
bank to any person, partnership, association, Philippine Government; -
corporation or other entity shall at ho time exceed b.^S^nçtïôhSyfor
Loans and other Exceeding SBL: •
credit accommodations fully
25% of the net worth of such bank to eriSute that guaranteed by the government as to the
there are no excessive exposures to a borrower ‘^^^yEine^of
^payment 1.74 Q-of
of principal and1% of the excess oyer the
interest;
or a g rou p. (GBL, Sec. 35.1, as increased by BSP c.exceed Loans P30, 000 other
and for ' accommodations
a day credit
Circular No. 425, Series of 2004). , ..... Violation:
covered and . by assignment - i ■-
of deposits .
i * • r ips: maintained in the: lending '■ ■ bank and’ held in
Exceptions: , ;• • ’ • offense - ; Reprimand jor . the
th.e Philippines;
a. As the MB may otherwise prescribe for d. Loans, , credit accommodations and
reasons pf national interest; *>’. ;r . , • • ...
-•• 9
availment
' acceptance
• ■ • * .
resulted
whichunder
a »
in theof
letters
» a creditwith
excess -
a
to.thea. - .

b. Deposits :pf rural banks with government- • ?'. extent covered by margin deposits; and
owned or controlled financial institutions like e.subject,
Othertoloanmore credit sanctions.
orsevere accommodations which
? the LBP, DBP and PNB (RA. No. 7353, Sec.- Subsequent
the MB may specify- as non-risk
offenses ‘ items (GBL;
17; BSP Circular 425, Series .of 2004); andI . i.. Sec. of P1:. ,000 for directors/officers who
Fine35.5).
c.. IIn municipalities and cities where there are approved the credit .availment' which
* • .
%
• ? t
• .
‘
«
1
. ’

no government banks, the deposits Si

■ '■ resultedwith
Compliance in theSBLexcess; . v
RBs/Coop Banks in private baniks^iif saidj " ^^héiJbasis ii. Suspension of the bank
for determining ’s branching
compliance with the
areas shall not be subject tp^the fejhglett^ /\ JSBt i^'the Î
privilege access'.„oftothe bank
arid commitment
total .credit BSP .to
D i iz\r^ I
a /DCD rediscounting facilities until the excess is
. eliminated; '
IGr^it^ommitment
ill. Other penalties as the MB may impose T** • T.* ’ »

The total amount ,4:p0 tantjjng

: dépend ■àrìd
lôapsrariçj
ing onother credit accommodations,
the gravity:of the offense
.accommodations and guarantees prefer # (Circular
averred No. 'ÿettèiÿ
425,.discredit,
f*crê
Subsection less X303.5,
margin deposits and J * - . ., e . ’ I“ •• 7’

. GBL, Sec. 35.1 may ¿’ be increased by an guarante^/?---^

Series of2004). ptTas specifically provided, total
• • •
7) . •' 1
•

• additional 10% of the |$>P$h of such; bank;r^credit”corjpmitmënKsha^be reckoned on credit risk-

_______
provided the additional iiaBilitips of anyA 'borrbwè^ Rightedbasis goriiistept with existing regulations
are., adequately secu^ed^b^ trust:*Xrecei' A_______________________ 425^ Subsection X303.1, par. à, Series
shipping .documents, ^arehpuse^ri^ceipts, ^of'2004)
other similar documenti transfèrring^^ecui G
title covering readily mà?|*!etabiè\ non(pèrisfié
goods which must be fuify covered byitfsura;
(GBL, Sec. 35,2). ■ V. '
.. •*' xk * * ’*•

Exception: Unless otherwiséwrescnj

Monetary Board (GBL, Sec. 35-2)^
‘ > .......... » -
3. Inclusions to.the. SBL - ^diféçtors/officers who approved the credit
The prescribed ceilings shall include:
**
■ availment which resulted in the excess with a
a. The liability of:,,..... / •; -, \ warning that subsequent violations will be
, , L The maker, or acceptor ¿of a paper
discounted with òrsold.to such bank; and b
.. ij: A general indorser, drawer, or guarantor
• • • who obtains a loan or other credit
•j- accommodation, from òrdiscounts
. papers with or sells papers to such-bank;
b. In the case of an individual who owns or
controls a majority interest in a corporation,
' partnership, association, or. any other entity,
... the.liabilities of said entities to such bank;
c. in the case of a corporation, all ìiabijitiés to
such bank of all subsidiaries in which Such
corporation Owns or controls a majority
. interest; and . . ... .
d. . In the case of a partnership, association or Joint and Solidary Signature (JS?) Practice .. _
- - other entity, the liabilities. of thè members A common banking practice requires as an additional
thereof to such bank (GBL, Sec. 35.3). . security for a loan granted to a corporation, the joint
’
• ?
X.--* • . *
. -, • /
and solidary signature of a major stockholder or
a • / * •

386 I 2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS


. SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019
corporate officer of the borrowing corporation
(Security Bank v. Cuenca, G:R. No. 138544, October
3; 2000). ’ J
Purpose of JSS Practice
1. In case of default, creditor bank’s recourse is not
limited to corporate properties but extends to
personal assets of the surety; and
2; Surety Would be compelled to ensure that the
loan would be used for the purpose intended
. (Security Bank v. Cuenca, G.R. No. 138544,
October s, 2000).
• ’ z 1 • • *. . .• • • •1
DOSO RESTRICTIONS
«. F • •. ' •••
Elements: ■„ " ' ...
1. The borrower is a Director,- Officer, or any
Stockholder of a bank, or a Related Interest/ ■'
’ (D’ÔSRI); <. ; ... '
2. The borrower Contracts a loan, or any form. Of
financialaccommodation; * : . .
3. The loan or financial accommodation.is frôni: [
a. His bank; or ' ■"[ '.
b. A bank that is a subsidiary of ;a. bank holding [
company of which both his\Tfenk and tj^-r-j’
. lending bank are subsidiaries^
c. A bank in which a coritrçùih’d po^ÎQn^pf the
shares is owned by t^same^interest that, r
owns a controlling portion of ’tHB shares^of his
’ ” bahk (GBL, Sec. 36);
4. The loan or financial accomrrîqdatîomofthe DOS,
singly or With that of his relàt^œ interest? isMn
excess of 5%' of the capital and fsurpîüs of the
lending bank or in the ma^ifm^m1-. amourvt
-, permitted by law; whichever ¡sÿloweri/BSP
Circular No. 170, August 5, 1998;^NCBÂ,^Sec.
.■26)'^ - ' ': /- ;
• *. * f * * * • « •
Who are Covered by DOSRI Restrictions on Bank
Exposure ' ‘ *V
1. Directors - Directors of the lending bank;
'• 2. Officers - Either, identified in the by-laws or are
. generally known as_sü'ch;:j
■ 3. Stockholders -* any stockholder of record in the
books of the bank, acting personally, or through
an attorney-iri-fact, or any jother person duly .
authorized by him. It shall also refer to a juridical
. person such as corporation, association or firm ’
' . (BSP Circular.NoJ 423, Series of 2004).
Noté: Substantial 'Stockholder shall mean a * ..
person, pr group of persons whether natural Cr
juridical, owning such number of shares that will
• allow such person or group to elect at least 1 ‘
member of the board of directors of a bank or who
. is directly or indirectly the registered or beneficial
owner of more than-10% of any class of its equity
security (BSP Circular Ncx 423, Series of 2004).
4. Related Interest
BANKING LAW
Related Interest
Under Sec. X326.1, as amended by BSP Circular No.
423 s. 2004; “related interests" shall refer to any of
the following: • . ; . .. •
1. Spouse, relatives within first degree ■' of
consanguinity ór affinity,, or relative. by legal
. adoption of a DOS; - ••.-• .
2. Partnerships in which a DOS, órjà person
described under (a), is a general partner; - '•
3. A co-owner with the DOS or a person described
under (a), of the property, interest or right
mortgaged, pledged, Or assigned to. secure the
loans or other credit accommodations, except .-? •
when the mortgage, pledge or assignment covers !
only said co-owner’s undivided interest;•
•’ 4. Corporation, association, or firm of which a DO or
• • •
his spouse is also a director or officer, except:
a. Where the securities of $uch corporation are
listed and traded in the1 big Aboard or -
commercial .and industrial board of domestic
stock exchanges and less than 50% of the '
•voting stock is owned by one person or by
1 persons related to each other within-the first
C/ degree of consanguinity or affinity;
b. Wherei the DOS sits as a representative of
the^bapk in the board of directors of such
corporation; or - \ . •
c. .- Where the, corporation is at least ninetymine
percent (99%)-owned by : a. non-stock
corporation (BSP Circular No. 965);, .
Corporation, association,, or firm- ' ••;
5. L‘.
1 ■
a:
- or a group of DOS of the
iehding^bank and/, or their spouses or
relatives within the first, degree of
■> • consanguinity or affinity or relative by legal
^^ ^^f^^adpptiori, hold or own at least 20% of the
---•-^^"'“SÜbècribed capital of such corporation, or of • /
the equity of such association or firm; - • .
b. Wholly or majority-owned or controlled by
/
0. »
any related entity or. a group of . related • '
entities in items (2), (4), arid (5)(a); .
• c. Which owns or controls directly or indirectly
- whether singly or as part of a group of related
- - i nterest at least twe nty percent (20%) of, the
' subscribed capitals of a . substantial
stockholder of . the lending bank or which ”
controls majority interest of thè bank; and
d. In which the lending bank and/or its parent or
subsidiary holds, or owns-at least twenty
percent (20%) of the subscribed capital of.
such corporation,/or in .the .equity of sùch ?.
association or firm, or has an existing
managernent contract with the lending, bank
• or its parent/subsidiary. , i I
BANKING LAW
Transactions Covered by DOSRI Restrictions
A ID -
Exposure, includes loan or any security arrangement
like guaranty, suretyship, and the like.. It référé to
• • * •ORY
transactions which involve the grant, renewal or
extension or increase of any loan, discount, credit, or
M• EM
« * •
•.?:*.
•
2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS | 387
'
:
Transactions Not Covered
1. Advances against accrued compensation, or for
the purpose^ of providing payment of authorized
expenses or other transactions for the account of
the bank; - ■
2. The increase in the amount of outstanding credit
accommodations as a result of additional
charges or advances made by the bank to protect
its interests; , .. .
3: Thé discount of bills of exchange drawn in.good
faith against actually existing values, and the .
discount of : commercial or business paper
actually owned by the person negotiating the
same; and
4. Transactions' with a foreign bank which has
stockholdings in local bank where the foreign-“
bank acts as guarantor through the i&sudn'cè ofr¡[ ~t
s____
letters_of credit
_______ _____ kjj
or assignment /^Jja.^ty,
of a.^deposit in^transactions.
a\
currency eligible as part of thekfnterpatipnakte
reserves and held, in a bank ¡n^thePliili^piries to •
secure otheir credit accom^datw^^^jted^S^^"*“^1^
another person or entity (BSPyGir^blar^No. co­ a far Reportoriak
Series of 2004). / - F i
The DOSRI Restrictions S ■ f. •.. ~
1 : ■ Approval Requirement | I (
Except with the written approval ofthe majority <6f
all thé directors of thé^ôank, éxcf^ing- ther>^
bank shall: ' ‘ ' V 'V'WX.A 4
a. Directly or indirectlyXfor himself Wjas^the:
representative or agept of others
from such bank , -’'X ’ se,s owped or controlled by said DOSRI
b. Nor shall he become a gbaraptc^^nidorséÆJ^
or surety for loans from sucKbanl^àrôtherS^»^--
\ or ' X/Î
. c. ’In any manner be an obligor orlfrcyr^any IVI
contractual liability to the bank (GBL, SeT^“^
' . ’ . 36).'
Note: There can still be a charge for DOSRI
violation even where the accused bank officer did
not secure p loan in his own name* but used the ; 6. • Individual Ceilings. . •
' name of another person in order to indirectly
secure a loan from the bank. The DOSRI Rufe
under Section 36 is broad enough to cover
/ various modes of borrowing, whether direct or
indirect borrowing (Soriano v. People, G.R. No.
’ 162336, February 1, 2010). . -
• • • •
Exception: The written approval is not required
for loans-, credit accommodations, and advances
granted to officers under a fringe benefit plan
' approved by the.BSP (GBL, Sec. 36).
2. Waiver of Secrecy of Bank Deposits
. A DOSRI who contracts a loan or any form of
financial accommodation-with their bank or
388 | 2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS
I
The DOSRI’s deposit accounts are subject to
examination. However, any information obtained
from an examination of his deposits is strictly
confidential and may be used by examiners only
in connection with the supervisory and
examination responsibility or by the BSP in an
appropriate-legal action it has initiated involving
said account (NCBA, Sec. 26). • •
Arm’s. Length Rule
Dealings pf a bank with pny of its DOSRI shall be
upon terms not less favorable to the bank than
those offered to the general public (GBL, Sec.
36). * - . .
Note: The BSP recognizes that transactions
between related parties create financial,
^dmm^ercial and economic benefits.- Related
are generally allowed,
^h^’(BSP)Circular No., 895, Series of 2015).
Circular No.
* 4 * * *
rvepunui jar requirement
Ax The Required approval shall be entered in the
records of tWj^a^k|and a copy of the entry shall
~ be t7a ns mifted,..forthwith to the Supervising
4^xan|ination Rector pf the BSP (GBL, Sec. 36). '
♦
:e Veiling
J/mayVegtfhte the amount of loans, credit
fnod^tioris/ and guarantees that may be
4^ndedJqirectiAor indirectly, by a bank to its
?s^*-‘”,yas well as investments of such bank in
nüal of Regulations for. Banks provides
the aggregate • is > 15% of the total loan
portfolio of the bank or 100% of the combined
• capital accounts, whichever is lower (MORB,
Sec.X331): ' • Z-: ’
*• ’
The outstanding loans, credit accommodations,
•. and guarantees^ extended to DOSRI shall be
•limited to an amount equivalent ’ to their -
respective unencumbered deposits' and book
value of their paid-in capital contribution in the
bank (MORBi- Sec. X330, as amended by BSP
Circular No.423):
Exceptions:Loans, credit accommodations, and
/ guarantees:
a. Extended to officers under a fringe benefit
plan approved by the BSP;
b Secured by assets considered as noh-risk
items by the MB;
 BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019

c. Loans, credit accommodations, and 2. Of Directors, Officers, Employees, or Agents

advances to officers in form of fringe benefit
granted in accordance with rules as may be.
prescribed by MB; and
d. - Extended by Cooperative banks to its
cooperative stockholders (GBL, Sec. 36).
.. Ceiling on Unsecured Loans
7.. > actions of the bank or any bank; ,
MB may issue regulations as it may deem
necessary to-unsecured loans and pother credit
accommodations, to exercise proper caution
before granting those (GBL, Sec.;,4f). '
”■ * • ' . ; '.r • •
of Banks: (FOOD-A)
a. Make False entries in any bank report or
statement. or participate in any fraudulent
transaction; -, ■ '
■ b. Overvalue or aid in overvaluing any security
for the purpose of influencing in any way the
c. Outsource inherent banking functions; .
d . Without order of a court of competent
jurisdiction, Disclose to any unauthorized
person any information relative to the funds
• * ‘

or properties in the custody of the bank

8. Effect of Violation of DOSRl Rules belonging to private. individuals,
After due notice to the board of directors of the. corporations, or any other entity; and
bank, the office of any bank director or. officer who .... e . Accept - gifts• or any other ■■ form of
violates the DOSRI rules may be declared vacant remuneration in connection with the approval
and-the director or officer Shall be subject to the of a loan or other credit accommodation from
penal provisions provided in the. NCBA (BSP;. said bank (GBL, Sec. 55.1).
• • • « * • •

Circular 423, Series of 2004, March 3, 2004). * • • • • * * .

ACTS PROHIBITED S/
UNDER THE GENERA^ «
. BANKINO-LAWh^' . ,
__ ' : : %£> ■■' J
1. Of Banks <IDU-<?AP^L)
a. To directly act as Insu^rjGBL^.Sac. 54);
• b. For banks or quesijoadeclare
Dividends, if at the tirne of declaraiion:
i. Its clearing accouritrwvi
. . overdrawn; , - • •• ;
ii. . It is deficient Inthe requireg^ityfloor
for government deposits fo^^e
consecutive days; ’
iii. It does not comply .witl^^t(iKiu.idity
r standards/ ratios1 prescribed^b^tfie BSP
for ..purposes of determining'.¿funds
xavailable for dividend declaration; or
iv. It has committed a major violation as may.
3. Of Borrowers (AFOO)
a. Attempt to defraud the said bank in the event
of a court action to recover a loan or othér
credit-accommodation;
>
’ B^^FurHièh False or make misrepresentations or
~ süpp'réssibh of material facts for the purpose
Of draining, renewing, or increasing a loan
or pxtlçnciing the period thereof;.
c, Fraudulently:. Overvalue property offered as
: security fo^,a loan from the bank; or ‘ .
kg
: d, Offer any director, officer, employee or agent
.^^azBank^an^gift, fee, commission, or.any
othef^form^of compensation irr order to
influence such persons into approving a loan
or other credit accommodation application -■
Sea 55.2):
.
4. Of Examiner, Officer, or Employee of the BSP
or any office or agency assigned by the
• Government to supervise, examine,- assist, or .
. - render technical assistance to.any bank ‘
/
Making of false reports or misrepresentation or
suppression of.material facts by personnel of the I-

be determined by the BSP (GBL, Sec. '

' . . I BSP shall be subject to the .administrative and
criminal sanctions provided under .the New
• c.\ To conduct business in.- , an . Unsafe, or • Central Bank Act (GBL, Sec. 55.3). • • ' ' . ”
unsound manner (GBL, Sec. 56); /'... •• .

.*
. ■

• •
:

e
• • • ■

.
:

f
■ ’■

\ •
••

9 ••

d. Publication of Capital stock (GBL, Sec. 62); • •

Outsourcing of Inherent Banking Functions
e. Unauthorized Advertisement or ^business ’
Refers to any contractual arrangement between a
representation (GBL, Sec. 64);: t.
. bank and a qualified service provider for the latter to
f To employ casual or non-regular personnel
perform designated activities op a continuing basis
or too lengthy Probationary personnel in the
(BSP Circular No. 765, Series of 2012). ■
. ' : conduct of its business involving bank •
.
••••*.•
.. . •
••
•
• • •
.
•
’

• •• »
’
-
•• ••

-deposits(GBL, Sec: 55:4);; * • * •

A bank cannot engage the services of another entity ’

g. To Outsource inherent banking functions;
• to receive deposits on its behalf; the bank has to do it
h. To extend.peso Loans to non-residents.
BANKING LAW

itself (GBL, Sec. 55.1). ;

Reason: To curb undue speculation in the
M EM O R Y A ID

foreign exchange market and to enforce the

Reason: ¿To ensure secrecy of bank deposits
memorandum that peso deposits should be (DIZON, Banking Laws, supra at 220).
funded from inward foreign exchange .
remittance (BSP Circular 222 (1999)).

2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS | 389

 BANKINGLAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019

Activities or Operations That Can be Outsourced Trust Operations

A bank may outsource, uport prior approval of the MB
the following functions: (ID^CPC-PITT-PPMS-VJO)
1. , All ■information technology systems and
processes, except inherent banking functions;
2. Data imaging, storage, and other related
. systems; . 1 . . .
3. Clearing and processing of Checks not included
in the Philippine Clearing House System; .'
4. , Printing Of bank statements;/.
5. Credit card services; • ., •
6. Printing of bank loan statements and other non­
deposit records, bank forms and Promotional
' materials; . , . ’. • . .. . . .
7. Credit Investigation and collection;
8: Processing of export, import and other Trading
... transactions; ‘ amount equal to riot less than P500,000.00 or
9. Transfer agent, services for debt and equity
services; -••. , • ‘
10. Property appraisal;
11. Property management services;A
12. Messenger, courier and postal services-; £
13. Security guard services; ?.
14. "Vehicle service contracts; . /
Only a stock corporation or a person duly authorized
by the MB shall act as a trustee or administer any
trust or hold property in trust or on deposit for the use,
benefit, or on behalf of others - trust entity (GBL, Sec.
79). \ ’
Requirements for Trust Entities
1. -,A trust entity must register its articles of
incorporation and : by-laws together? with a
certificate of authority issued by the BSP (GBL,
Sec. 81); and ? • ' . ' '
2 Before transacting, trust business, every trust
• .' entity shall, deposit with the BSP as security for
the faithful performance of its trust duties, cash or
securities approved by the.Monetary Board in an 1
such higher amount as may be fixed by the MB
.. {GBL, Sec. 84). . . .. .
T[
as trustee on any .mortgage or bond issued
frybr^móhicipaíity; corporation, or-body politic
~^~*.aQdrto^açèept ^irid execute any trust consistent í

15. Janitorial services; and JXK Z /■ W' A “W. vv,u 1T

16. Other services as determined by the MB (MORB, 2$. Act under Ifiie order or appointment Of any court
Sec.X169.1) ' \ as gdardiafr; (repérer, trustée; or depositary of
I
^-«^TtRe;.ejstate of. any.minor or incompetent person, 9 • • r

Managing Outsourcing R^latedfRisk ’ AlV j ¿A®!áhd as. receiveran$ depositary of any money - •
No bank may outsource b a nj^^. activities^unless It ; ; ; -, -fiá paidjnto court by parties to any legal proceedings
has in its place thé âppropriatgpt-ç^ssë^Wpceduré^A ahdrfrf^bpertyof anV kind which may be brought
and information system .¿pt. und^fne jurisdiction of the court; •: •
monitor, and mitigate operational thatA.e?borneÂ
'risk thàtaîeCborh^
(dnâl'riâk executor? of any will when it is named
' by the bank as result of its outsi tsourcingractivïttes'(jB^Ph! ^^Xf^to-icecutor thereof;
, Circular No. 765, Series of 2ÇW2). A1.OV • . *x «Xx ^Act as^ádmiriistrator of the. estate - of any
^¡deceased person, with the will annexed, or when
Penalties for Violation of The (aBL.. is^pJwHK/
1; As provided by specific provisk^^'^MÍ#'“^*58’?’««^^
2 ■:; By-excluding the. bank from cléatípig
By- excluding the \(NÇBA, ' 4 A^rmaria^efnerit and administration of any estate,
clearing l(N£BA, •
■’Secs, 34-37); \
Secs. 34-37); '.?' / IVLA^^altor persohal,-and thé rents, fssüés,.and profits
3. Suspension or removal; of thp the director or-officerT^'^""
or - officer^5 23^ thereof; and \ /' ’
bytheMB;:and
by the MB;:and > •' \ - .” ’ >. . '. ■. ' 6. Establish and manage^ common'trust fupds, ;
Dissolution of thé corporation by quo warranto
• . “ • A A A a A A • A
,. ; subject to such rules and
■ * « < * ' 4 •
arid regulations as may .be
• V ’ • • . ' 1
be ft* *• - ’ ____ ___ _ *• • *_____ _____ •'1LL ___ _ 1 ' .1* 1 ___ A fl Z f V

proceedings; instituted by the Solicitor’•'General prescribed by the MB (GBL, Sec. 83). ;

(GBL, Sec. 66)-
■ _ Restricted Transactions ’ . .
A trustee shall not undertake any of the following
'’ transactions for thé account of the1 client unless prior
TRUST COMPANIES
F .- ft fe fe % * •
to its execution, such .transaction has been fully
* ■ • • • * • • ft 9 * A
.
djsclosed and Specifically authorized by the client,
beneficiary, • Other ’ party-i'minterest, .. court of
Trust Entity .... com pètent j ù risd iction, or other com peterit authority:
A bank or non-bank financial institution, through, 1. .Lend,
•• • . * or
sell, transfer, • . • assign money
• • _ , ........ 9 property
. a . •dr •* %• '
specifically designated business unit to perform trust to:
functions and trust corporation, authorized by the a. An/Of the departments,.; directors, officers,
BSP to engage in trust or other fiduciary business • stockholders, or employees of the trust entity.
' (BSP Circular 767, Series of 2012).
v •* • • *. •
or fiduciary, including relatives Within the, 1st
t * »

degree of consanguinity or affinity, or the

related interests, .of such directors, officers
■. and stockholders; dr " ' -

390 I 2019 SAN BEDA LAW CENTRALIZED BAR- OPERATIONS -

 BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019

- Any- corporation where the trustee or

b.
fiduciary owns at least 50% of the subscribed SECRECY OF BANK
capital or voting stock in its own right: DEPOSITSLAW
2. Purchase or acquire property or debt instruments
from: • ■' (R.A. NO. 1405)
(

a. Any of the departments, directors, officers,

- stockholders, or employees of the trust entity
Purposes.; .
. or fiduciary, including relatives within the first
degree of consanguinity or affinity, or thè- 1. To. encourage, people'to deposit in banking
institutions;, and '
related interests; of such directors, officers
2. To discourage private hoarding so that banks
‘ and stockholders; or
, may lend such funds and assist in the economic
• b. /Any corporation where the trustee or
development of the country (RA. No. 1405, Sec.
‘ fiduciary owns at least 50%'6Tthe subscribed
. ' ■ capital or voting stock in its own right: , ’
3. Invest in.equities of, or in securities underwritten
: •. by: ‘ ■' ; ; Coverage
All deposits'of whatever nature with banks or banking
' a. The trustee Or fiduciary; or s
institutions in the Philippines, including investments
b. Any corporation where thé trustee or
in bonds issued by the .Government of the
fiduciary owns at least 50% of thé subscribed
Philippines^ itspolitical subdivisions and its
. \ capital or voting stock in its own right:
4. Sell, transfer, assign, or lend money or 'property//( instrumentalities s ’• • ’ • •
(R.A.
*
No.
•• ’ ■
1405, Sec
••
2). ’
• •
from one trust or fiduciary account to another ; I
The phrase "of whatever nature" in Sec. 2 of R.A. No.
except where the investment is allowed tjy/thé »
1405 proscribes any restrictive interpretation of
‘ MB (MORB, Sec. 409.3; GBL, Sec. 80)* 7 L' ..fe^eposits. Rio No< 1405, applies not only to money
■■ .. ,• ■■■: ■ L/ J/de^isits.^ R0i^No<14Q5(
■■ . ■ " yÿ-

v^whicit/^jdbp^sited but also to those which are

Prohibition on Commingling of Trust Properties /
• The trust business and all funds/ properties, .or
securities received- by any trust entity;’aS\execut0r;*
administrator, guardian,- trustééi^r^pWer or
invested suci^as in . those placed under , a" trust
agreement^ffip/hold that a trust account is not
protected by R-A^No. .1405 wpuld encourage private
X.

hoarding of funds th at could otherwise be invested by

depositary shall be kept separatié"ànd distinct frqrp banks in^tliei|v.er)Uires, contrary to the policy behind
the genera! business, including allf/otfier funds; ■^^^¿^^F^ n^bayan’ GR NOS-
properties, and assets, of suchtirbsténtiiÿriGBL^Spc. 7-H
157294-9& Noyember 30; 2006). • .

. . . \ , ■. \ Notes:
1
tv.,-’
fact that trust accounts are covered by Ft A.
!Nc^T40.5 does, not make them “deposits” which
STRIKES AND LOCKOUTS OF a . .. are covered by the PDIC Law- They partake in
? < BANKEMPLOVEES /' ./ the.nature of a special investment account.
2. A money-market -placement however is not *
. . covered by R.A. No. 1405 because it is not
An industry Indispensable to the National interest . , deposited ip bank. .\ ’■. -f:
• • » ’

Any strike or lockout involving.banks, if unsettled after I

•. • • • • ,• • • •

7 calendar days, shall be reported by the BSP to the Absolute Confidentiality ’

Secretary of Labor who has two options: • / ' . Deposits >■ covered , by-; law ...are considered as
’ • - ■ over
■ ■ • • ■ . «Im A -
1. He\may assume jurisdiction
.1. b _ a * a * «. a
••j
and decide the absolutely confidential ih nature and may not be
' dispute; or examined, inquired, or looked into by any person,
2. Certify the same to the National Labor Relations' governmental.official, bureau, or office (R.A. No.
Commission for.compulsory arbitration. -
. - 1405, Sec. 2). ' -
I
I
' ./-„T-'.- V „■ • ■■■■■■
« ’ • • ? • • 4 *•" / • « * • *

Thè law also allows the President of the Philippines • K •

Prohibited Acts
• •

to,at-any time, intervene and assurne jurisdiction , 1. Examination and inquiry or looking into all
over such labor dispute in order to. settle or terminate •. ’ deposits, of whatever nature, with- the banks in
the same
» *
(G-BL,
••• •
Sec.
.*
22).
T •
’ ■_ • •• .• . • • .. the Philippines including investments in bonds
‘ ■. • • ■ 1 •
issued by the Government (R.A. No. 1405, Sec.
Note: Correlate with Article 263(g) of the Labor Code.
2); and . - -r • •
BANKING LAW

2. Any disclosure by any official or employee of any

M EM O RY A ID

banking institution to any unauthorized person of

1
ariy information concerning the said deposits
/ • (R.A. No. 1405, Sec. 3)?. •.
.•?.•

2019 SAN.BEDA LAW CENTRALIZED BAR OPERATIONS | 391

r
 BANKING LAW
SAN ÜEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019
Note: In camera inspection of the bank deposit
records is also not allowed and is also in the nature
of an examination (SUNDIANG & AQUINO,
Reviewer, supra at 322 citing Marquez v. Desierto,
G.R. No. 135882, June 27,2001).
Penalties for Violation of R.A. No. 1405
. Imprisonment of riot more than five years or a fine not
more than P20,000 or both, in the discretion of the
court (R.A. No. 1405, Sec. 5). ••
Exceptions to Confidentiality under R.A. 1405
(DIBS) . '
1. Upon written permission of the Depositor 1
2 In cases of Impeachment;
3 Upon order of a competent court in’ cases of
Bribery or dereliction of duty of public officials;
and • • , "
4. Upon the order of a competent court in easiest
inVestpd’is thej
losited or invested
where the money deposited
Subject matter of the litigation (R.A^Ñof)d405, J A^^Cases^óLunexplained wealth .áre similar to cases
Sec. 2).
Written Waiver
■ Mere silence is________
during the proceedings wherer aSbank depositliis
involved does not amount to waiver., jh the case of ahAA
insolvent . where a receiydr^isi appoi|itea7jtne J
conformity of the receiver isfneo ary for ^he wn^rj:1. j!|
af/cWfcgjtJiriquye_ into dr ___
fyestmefot (Development
Corporation, G.R. No. 201931f
The waiver of confidentiality’bf‘bàn^epò^fèsihq^t^
have been made voluntarily/ intelligently, an^^ths^, ^^tri vestments, including related accounts
sufficient awareness of the relevant cirdiwnsfe$^^________________ are k/any way related to a money
and likely consequences (Doña Ade.
International, Inc. v. Trade
Development Corporation, G.R, ' ^fà^&OÌOOl, \
" February 11, 2015). ^***t»¿t •._ Ju/
. • * ................ .< . • *
Subject Matter of Litigation . ‘
The account itself in which the money is the
deposited must be the subject of the action (Doña
. Adela Export International, Ind; y. Trade and
investment Development Corporation, G:R' No.
201931; February 11,2015). ’ ’ ' ? 7*.
In-Camera Inspection by the Ombudsman
Requisites: (PILNA)
Pending case before a court of competent
jurisdiction;.:/ . ' .•
2. AçcoünJ must be clearly Identified;
•
3. The irispéctioh is limited to the subject of the
r ,
pending Litigation; • . ’ .
The bank personnel and account holder must be
Notifièd.to be present during the inspection; and
5, The inspection must cover only the Account
identified in the pending case (Marquez y.
Desierto, G.R: No. 135882, June 27,2001).
’ 392 | 2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS
Note: Preliminary investigation by the Office of the
Ombudsman is not considered pending litigation
before any court of competent authority. Such
investigation would not warrant the opening of the
, bank account for inspection (Marquez v. Desierto,
G.R. No. 135882, June 27,2001).
Exceptions unden Other Laws . '
1. Anti-Graft and Corrupt Practices Act
Upon order of a competent court or tribunal in
cases involving unexplained wealth under the
Anti-Graft and Corrupt Practices Act (R.A. No.
301.9, Sec. 8). .
.. Section 8 of. the Anti-Graft Law is intended to •
amend Section 2 óf .RA 1405 by providing an
additional exception to the rule against the
'' discíosüré of bank deposits (PNB v. Gancayco,
¡a^¿G.R. No. L-18343, September 30, 1965). '
of£brij|ecy- sind dereliction of duty and there is no
onwh/ti^qse two classes of cases cannot be
ted^fronvithe rule making bank deposits .
dentiaL- (Ba rico Filipino v. Purísima, G. R: No,
L-56429,^a^28/:l988).
__ I AcpA
2. "AntFMoney/Laund^ring
------ — - Act
.• •
^nti-Mo^ey Laundering
lundering Council (AMLC) may
mme any
texamihe arV Patrt'CL,lar deposit or
' - invgs^tgSept y/ith anjg banking institution or rioh-
^EB^l^wanQiah-institution upon order of any
X^cOfWpten^ooUivwhen it has been established
•^X^^Mnere/ís probable cause that the deposits or
offense (R.A. No. 9160, as amended,
^Related accounts
he funds and sources of which originated from
• and/or are materially. linked to the monetary
< instruments or properties are subject of the
freeze order (R.A. No.10167, Sec. 2). .■
When Court Order Not Required for
’ ■ Examination ... ■ .
• No court order shall be required in; cases of
■ mdhey laundering offense involving the following
' unlawful activities: (KiD-HipeS-T) .■
a. Kidnapping for ransom under Art. 267 the
7 Revised Penal Code;
b. Violations of the Comprehensive Dangerous
Drugs Act of 2002 (R.A. No. 9165, Secs. 4,
’ , 5,6,8. 9, 10, 12, 13, 14, 15, and 16); :
c. Hijacking and other violations under R.A. No.
6235; • . ' ’ ’. '
d. Destructive arson arid murder under RPC,
including those perpetrated by terrorists
 BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2OÎ9

agaihst non-combatant persons and similar
targets; - -
e. Felonies or offenses of a nature Similar to
.those mentioned above, which are
punishable under the penal laws of other
; countries; arid’
,f. . Terrorism and conspiracy to commit
. terrorism as defined , and penalized under
RA. No. 9372 (R.A. No. 9160, as amended
. . byR.A. 10167, Sec. 11). - <
Noté: A bank, deposit rnày be inquired into in
cases of Report of Banks to the Anti-Money
Laundering Council of covered and/or suspicious
transactions (R.A. No. 9160, Sec. 9), -
...
Charter of the Al Amanah Islamic Investment
Bank: (APC)
a. Inspection by the bank’s Auditor;
b. Upon written Permission by the depositor;
and •• • 1 ‘ ...
c In cases where the money deposited or the
transaction concerned is the subject of a
Court order. (R.A. No. 6848, Sec. 17)
Other Exceptions established by Jurisprudence
1. Examination bf deposits of persons charged with •
the crime of plunder (Ejercito v. Sandiganbayan,
G.R. Nos. 157294-95, November 30, 2006); .. . .
2. Examination of deposits in Compliance with •
■■ ■ ' ■

orders of garnishment (China Banking

, 3. Unclaimed Balances Act
Disclosure to the Treasurer of the Philippines of
dormant deposits for at least 10 years (Act No.
3936, Sec. 2): ■. ’
• • •••• * • ► ..»,** 1 ••
4. New Central Bank Act (R.A, No. 7653)/
amendedR.A. No: 11211 ~‘
a. DQSRI loans; and ’ ’ ’ ' . .■
b. .Periodic and special examinations byithe :
• BSP (R.A, No. 7653, Sec. 25). ' ^7
c. .Examination made by an .independent
auditor hired by the bank /W^nduct jts-^
regular audit provided that théeXamination is
for audit purposes only , aéÜ j^Têsults
.< • thereof shall be for the^éxciusivê^ùsè^bf the
- bank (Union Bank o^theiPhili^iqes v. CA/*
Corporation v.- Ortega,. G. R, No. ‘ L-34964,
January 31, 1973); and • .
3. ' Court-ordered examination of deposits oh
• . grounds of equity (Salvación v. Central Bank,
GJR. No. 94723, August 21, 1997), '
4. Examination of Foreign Currency Deposit upon
I
written permission of depositor himself (Intengan
v; CA, G. R. No. 128996, February 75, 2002).-
• Note: A ço-payee in a check deposited in,a bank
z¿-
..^likewise a co-depositbr thereof. No written
consbrit^ofithe other co-payee is necessitated in
an inquirÿ^the deposits by the said co-depositor
. . (China# Banking Corporation v..‘ CA, G.R. •
No. 140687^December 18, 2006). .
u
■ ■ a r '• ."
Power of the ,Commissioner on lnternal Revenue
-■ . ••

. G.R. No. 134699, De^ber^^i^9^^ to Inquire'into.BankDeposits ..

■»

Note: Examination by^an ein ¿«auuiiyi ah yv The powertoLthëiCommissioner of Internal Revenue

àâïFditor âs *011
• v exception to the rule, can ?naMgèr^bë found y to inquire into bank deposits under Sec. 6(f) of. R.A.
in the statute books. Nevertheless, it can find ~ ¿¿42 (National internal. Revenue Code) was
basis ini the opinions of authopéf* banking ^ g^f^leWunder RÁ. No,. 10963 (TRAIN Law). No BIR
experts and practitioner^;^ Morej^yef;“’ ^^:rê*gWaïtoft^or Sqpreme Court décision .hás yet to
1 commoh sense woüld tell that^b.disclosure'' clarify the effect of the deletion as to the power of the
• is ' a .natural consequence 6f^exaMinafi°n B1R to inquire into bank deposits/ • ’ - J . • e I . • •’ •
(DIZ.ON, Banking Laws, supra at 115).' ‘ • r ’ • - . • • %*••%**• . • *

Garnishment and R.A; No. 1405 ■ —

5. Human Security Act , Bank accounts may be garnished by the creditors of
■ ■ Thé justices of the CA designated as a special
; court to ' handlé anti-terrorism cases. may
'. authorize the. examination of bank deposits of:
a? A person charged with or suspected of the
• / - crime of terrorism or. conspiracy to commit'
' terrorism; :• . ;
b. A judicially declared and outlawed terrorist
organization, association, or group of
? pérsôns; and .,
c. ’ A member of such judicially declared and
" ; • outlawed organization, association, or group
. the depositor. Garnishment is not a violation of the .
Law on Secrécÿ of Bank Deposits? it was not thé
intention of the. legislature: to place bank deposits,
beyond the. reach of execution to satisfy a final
judgment. Its purpose is merely to secure information
- as to the name of the’ depositor and whether or hot •
; ,the defendant had a deposit in said bank, only for
purposes of garnishment. Any disclosure is purely
' .• incidental to the execution process (China Banking
Corporation v. Ortega, G.R. No. L-34964, January 31,
1973). ' . ■7'. •

■ ;
* of persons (R.A. No. 6848, Sec. 17). <• •'
’ • . . : . * ’

The amount of deposit is actually not disclosed and

BANKING LAW

6. Philippine Deposit Insurance Corporation Act thé intent of the legislature • does not cover
Examination and inquiry into deposit records by garnishment (Philippine Cpmmercial and Industrial
A ID

PDIC when there is failure of prompt corrective Bank, v. CA, G.R. No. 84526, January 28, 1991).
‘ .M E M O R Y

action as declared by the MB due to capital

deficiency (PDIC LAW, Sec. 11(c)).
« — • •
. .

2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS, I 393

 BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019

performing - quaskbanking functions, including

UNCLAIMED BALANCES savings and loan associations (Busuego v. CA, G.R.
LAW No. 95326, March 11, 1999).
• " • • •
•- (ACT
* NO. 3936) BSP is a government-owned and -controlled
corporation (GOCC). It should'be noted, however,
that it still enjoys fiscal and administrative autonomy.
Elements of Unclaimed Balances
1. Include credits or deposits of: The authorized capital ' of the BSP has been
. a. Money; increased- to ..two ’.hundred billion pesos
b.' Bullion; .. . (P200,000,000,000), to be fully subscribed by the
c; Security; or _ Government of the Republic of the Philippines.
d. Other evidence of indebtedness. . (NCBA) Sec. 2).;■ .>• 'V
2. The credit or deposit must be with a. ... ■ . ’»* .• •• ' • ’ ■. -
.' a, ¿Bank; :■
Primary Objectives of BSP:
4
b. building and loan association; or ■ 1. To maintain price stability conducive to a
c. trust corporation; and - balanced and sustainable growth of the
3. The credit or deposit is in favor of a person: economy; and ’’ - *
a. Who is known to be dead; or To promote and maintain monetary stability and
b. Who ha.s not made further deposits7-Of' -v < jhé’convertibility of the peso (NCBA, Sec. 3).
withdrawals during the pfecedin^;10 ygOrs or
as ame^^^^S^^I^^tM^Functions " ? of
■ V• >.
theT-BSP
BSP
./ ' •

67S S0c. 1). : 1. 'lOnM^Ky^l^teincial Stability Functions; arid

2*‘^SupeiviS.ory Functions.
Obligation oyer Unclaimed Balances^-* -' . ■’ ■ ’ ‘ •
Ail banks, building and: loan ^ipc^tidns.^nd trjst
Corporate Powers of the BSP: (CLAPSOS)
corporations shall forward to/the National .Treasurer Enterjinto Cofitfa^ts;..
a: statement,, under oath, OLalkcrpdits and-depGSits-O04
held by them (Act No. 3936,Jas.amended P.f^^No. Compromised copdone, or release, in whole or in
? "^’:i!0art, any clai|rirbf; ,o|settled Liability to the BSP,
■ 679, Sec. 2).. I
rega/djess ofi the" amount involved; under such
J* R* •7 • term§Jan;d conditions as may be prescribed by
Legal Consequence u U
,
*
th
• *M4.»MHW» rilK Ilif • i avw r* -* —

The . unclaimed balances may/peui ■■K $uch Assets and incur such
escheat proceedings commenced by inq£
™ connection with its. operations or as
General after service of shmmonsK issu' r essential 4<y'the proper conduct of such
notice, and publidation and the depositor
• “ person ¿claiming interest in ‘f sr Leas^/^Wn ind sell or otherwise-dispose of its
. .balances stiirdo not lay claim to th’^ Property; .... . . ,
amended by P:D. No, 679, Sec. 3). . alter and use a corporate Sear which •
$afly noticedr .
*
and .perform such Other necessary or proper
powers to carry out purposes of the Act.(6); and .
NEW CENTRAL BANK ACT 7.. To Sue and be.sued\ (NCBA, Sec. 5) ■ '
** 1
(R.A. NO. 7653 as amended by
' - « • M *• * « « - **•*.'<
t • r > 1 • • . * * ’< ’****••* «« •

The-Monetary Board (MB) ;

The body-through whichzthe powers and functions of •
the
,
BSP.- sare
•
exercised
. • ..;/•■
(NCBA, Sec 6). . •
Declaration of Policy
To maintain a central monetary authority .that shall Composition of the MB .;
. function and. operate < as . an independent and ; Seven, members appointed by the President of the
accountable body corporate in the discharge Of its Philippines for a term of-six.years consisting of: •
'. mandated responsibilities . concerning money, ’1v :. A Chairmam governor of the BSP; '
banking and credit (NCBA, Sec. 1). A member of, the cabinet to be designated by the
■ President of the 'Philippines; and '■ ; : ’
Bangko Sentral ng Pilipinas (BSP) 3. Five (5) Deputy Governors (NCBA, Sec. 6 & 26).
The State’s central monetary authority is charged •Note: In the absence of the Governor, .a Deputy
with the responsibility of administering the monetary,, Governor shall act as chief executive of the BSP and
banking and credit system of the country and is shall exercise the powers and duties of the Governor
granted the power of supervision and ’examination arid whenever the Governor is• unable •• to-attend
•1 • •

over bank and non-bank financial institutions meetings, a Deputy Governor shall be Vested with the

> 394-i 2019 SAN BEDALAW CENTRALIZED BAR OPERATIONS

« • • .
 BAN KI NG LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS- MEMORY AID 2019

author to participate and exercise the right to vote in liable for loss or injury suffered by BSP or banking
such meeting. (NCBA, Sec. 26)^. institution (NCBA, Sec. 1 6[1])‘, . .
r • • • e ,
2..-Similar responsibility shall apply to members,,
Vacancies in the MB officer, or employees of the BSP:
Any vacancy in the MB created by death, resignation a. Disclosure of information of a confidential
or removal of any member shall be filled by the . nature or any information on the discussions
appointment of a new member.to.complete the or. resolutions. of the MB, or about the
unexpired period of , the termof the member - confidential operations of the BSP, unless
concerned (NCBA, Sec. 7). \ • .. the disclosure is (1) in connection with the
• *• • . * * «
performance of official functions with the BSP
Qualifications of MB Member (CA-C1PE) or (2) with prior authorization of.the MB or the
1. ■ Natural-born Citizens of the Philippines; Governor; or -~
2? At least 35 years of Age; •-..: ;■/; . . i ■ . b. Use of such information for personal gain or
; Exception: The Governor should be at least 40 to the detriment of the government, BSP or.
• years.ofage ■ ; .. • ‘ .- third parties,, provided, however; that any
3. Of good moral Character; .. . . I
data required, to be submitted.to President -
4. Of unquestionable Integrity; and/or Congress or to be published under the
5. Of known Probity and patriotism; and -. NCBA shall not be considered confidential
6. With recognized competence in social, and T (NCBA, Sec. 76/2/); and /•
Economic disciplines (NCBA, Sec. 8). • ... - • ' 3; The legal obligations of diligence and good faith
4
•• ■ * • that BSP officials owe to the public start with the
Disqualifications (CED2ES) official acts of the MB which, rightly pr wrong, are
1. Person who has been Connected with'- any the ca.use of loss or injury to third parties, not any.
multilateral banking orfinancial institution; -'jj ; ? i ^preparatory report or recommendation
2 Members coming from private sector shall r^pt.f zA (¿£Q(Borlongan v. Reyes, G.R. No. 161276, January'
hold any other public office or Employment during ' |
their tenure; ■ ■ . • . - . /ArrU-
3. Disqualification imposed by R.A. Nq,>6713;;. Removal of Members of the MB
4. Disqualified from being a Director^officer, The President! may remove any member of the MB
employee, consultant, :^wyer, .Jjàÿêht; ¿ar. for any o^me.’K>IJowing reasons; (Q-FID)
stockholder of any ban k, ¿juasi-banKjor any other- t. > -¿i 1. The/ member^ no longer possesses the
institution subject to supervision^iLexàminMion’ i Qualificatidns'£urider Sec. 8, NCBA; . -
by the BSP’, . ' '. 2. The membeiMs guilty of acts or operations which
5 No member shall be emplox^d^inS^y syifh . are Fraudulent dr illegal or which are manifestly I
-T
institution within1 two years aftebthp Expiration of ■ m opposed to the aims and interest of the BSP; ....
- his term except when He serves^jwan offiaal ^» .^/^The.^.member is ., physically or mentally
representative. ,6f - the Governrnçnt to^/â^r;"' and such incapacity lasted for
institution;arid . / \ • more than six months; or . i ... /
6. Person-who has Sübstantiarîhtët^fjn any . 4. The member is subsequently. Disqualified under
private bank in the Philippines, within one year ; . ;Sec, 8 of the NCBA (NCBA, Sec.10)..' -:;:' - '
- prior to his appointment (NCBA, Sec?9). " Note: A mere taxpayer, who does not claim to be
• • 1 .. « L. entitled to the position of the Governor?.cannot bring
? v ■■ > ».

Note: Jhe degree of;.diligence .required of the •• such quo warranto suit (Tarrosav. Singsop, G.R No. -
members of the MB and officials and employees Of 111243, May 25; 1994), ' .
the BSP in the performance of their ‘functionsids
extraordinary diligence (NCBA,^Sec. 1&), . ■. " ■ . - .. • Meetings”-. . • - '
The MB shall meet at least price a week.and the
*• ’• •• 1 \ ' »’*<•./*•* Z ’ >. »• . *: Î*- ’• *. * . '

• ’•••• • • 1 • É •

Thé legal obligations of djligeriçe and good faith that
BSP officials, owe to thé public start With thé official
acts of the.MB which, rightly or wrong, are the cause
of loss Or injury to third parties, not any preparatory
report or recommendation (Borlongan v, Reyes, G.R.
. No. 161276, January 31, 2005).
Responsibility of Members of the MB
presence of four- (4) members shall constitute a
quorum..in all cases the Governor of the BSP or his
duly designated alternative shall be among the 4
members present.(NCBA, Sec. 11). . ’
Note: The MB may be called to a meeting-by the
Governor or by two (2) other members of the Board.
Decisions of the MB shall, require the concurrence of
at least four.(4) members (NCBA, Sec. 11) . .
BANKING LAW

1. If anyone willfully violates NCBA or. is guilty of * .• • • • . • .

-■> négligence^ abusé, malfeasance,.. or," Powers of the MonetaryBoard .....

^ •-M E M O R Y -A ID

misfeasance, or fails to exercise extraordinary ’ 1. Issue rules and regulations necessary for the-
diligence in performance of duty, he shall be held effective discharge of responsibilities and powers
of the MB and BSP;

•
2019. SAN BEDA LAW CENTRALIZED BAR OPERATIONS I 395
* 4 ® •*
 BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019

2. Direct the management, operations, and Peso

administration of the BSP; Unit of monetary value in the Philippines represented
3. Establish a human resource management by the “P” sign. It is divided into 100 equal parts called
system in the BSP; . ' “centavos,” represented by the “0” sigh (NCBA, Sec.
Adopt an annual budget for and authorize such 48). . ■M

, expenditures by the BSP as are in the interest of

the effective administration and operations of
BSP;‘ '
5. Indemnify its members and other officials of the
BSP for expenses and’ costs incurred in
• connection with any civil or criminal action, suit or
proceedings to which he is a party by reason of
; ’
AH monetary obligations shall be settled in the
.’ Philippine currency which is the légal tender in the
Philippines. However, parties may agree to settle the
obligation or transaction in any other currency at the
time of payment (R.A. No. 8183, Sec. 1). ■
•• 4 a

performance ,pf official function,. except when Legal Tender Power

liable.for willful violation of law, or performed such All notes and coins issued by the BSP are fully
Junctions in evident bad faith or gross negligence guaranteed by the Republic ànd shall be legal tender ;
’ (NCBA,Sec. 15); /’ in the Philippines for all debts, both public and. private
> 6. : Authorize entities or persons to engage in money (NCBA, Sec. 52)., '
4 *
■ * •*» • _ • • *

service businesses (NCBA, Sec. 3); . 1 * *

• 7. Assess Price developments and outlook and^use^ Coins Considered as Legal Tender
its policy instruments to attain and maintairi'pnceT] ■ Maxirhum; amount of coins to be considered as legal
stability/A/CBA, Sec. 3); and ' ' .jZ/ K. .L
8. Issue subpoena, sue for conterrfpi adiiinfeteii^“ _
oaths, compel presentation of,bgoJcSi?i;egQrds'and
• •
-‘n6t:exceedln^P1,000.00; and
others, impose fines and or • less: In amounts not
cease and desist order, ¿xercjse of^ V "'
exc^edihg ’v.PxIodvOO
£ - (Circular
» 5,37, Series of
quasi-judicial functions (Ignited-Coconut Planters ./j/ X2006). Kt A ■
Bank v. E. Ganzon, Inc.j'G.R: No. 168859, JunerAJ-' vr 0*. ■ ’ ’ .. •. •’ .•
30,. 2009).
rn^ise representipg demand deposits which do not
*

C U RREN CY, M ON ETARY? AN D « STAB1 LIZ ATI© ’irgand their acceptance in the •:
FUNCTIONS OF THE BSP| ^s | rjVate debts is at the creditor’s
Money Function of the BSPy '•■t. •

The BSP shall have the sole, powei •1«

. issue currency, within the territory c ^e/A^chec^that has’ been cleared arid credited to
’No other person or entity, puoljc or “cciount^bf the creditor shall be equivalent to a
into circulation notes, coins oc or^ny other^obfedf(pf^^^ of Cash in an amount equal to
Ldocument which, in the opinion^rrf the
----- ------- r.T---------------------------------------------------------------------- jnigHthe^ to his account (NCBA, Sec. 60).
circulate as. as currency, nor reproduce reproduc ’ . " , ’
facsimiles of BSP notes without prior t^from "K peqiojpetization of Currency
the BSP (NCBA, Sec. 50). . \ 1 1/lt “Ts tbeprocess of removing the monetary value of a •
^egal tender currency by the’ issuing? authority.
1 .’i • • * ?* " * *■’

- « ) • • •- • •

Powers regarding money function . Demonetized currency shall no longer be accepted

1, The MB may issue such regulations as it may - for payment of goods and services (BSP, Bank Notes
deem advisable in order to:. . : and Coins, April 2018).. . •
; a. prevent the circulation of foreign currency or /.
'of currency substitutes; and ,7’ '?>/■' Replacement of Currency Unfit for Circulation
b. prevent the reproduction of facsimiles of BSP • The ■ BSP shall withdraw from circulation and
notes/ / 1 ' ■ ' demonetize all notes arid coins which for.any reason
2. The BSP. shall have the authority to investigate, are unfit for circulation and shall replace them by
' make arrests, conduct searches arid seizures in adequate notes and coins, provided however that
' accordance with * law, ' for the purpose of the BSP shall not replace:/ •< ./ '
maintaining the integrity of the currency (NCBA, 1. Notes arid coins the identification Of which is
■ ' s^c. 50). \;• ‘ .impossible; /■ . ' .
• • Z . •
•
l‘ •
. \
•
• *
•
•
.
2 Coins which show signs of filing,. clipping or
•

Currency . ' perforation; arid; • / = ‘

All Philippine notes and coins issued or; circulating in 3. Notes which have lost more than 2/5 of their
accordance with the provisions of the NCBA (NCBA, surface or ail of the signatures inscribed thereon
Sec. 49): •.. 5 ••, • /. (NCBA, Sec. 56): , -
• •
: •
.

>

396 I 2019 SAN BEDA LAW CENTRALIZED .BAROPERATIONS

 BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 201?

Notes and coins in such mutilated conditions shall be
withdrawn from circulation and demonetized without
compensation to the bearer (NCBA, Sec. 56).
• •
•
4
_ •
Retirement of Old Notes and Coins
BSP may call in for replacement of:
1. Notes of any series or denomination which are
more than five years old; and
2. -Coins which are more than 10 years old (NCBA,
Sec. 57). -
•*
Rules for Retirement of Old Currency:
1. Notes and coins called in for replacement shall
remain legal tender for a period of one year from
' ■ ; fhp date of call. '
2. After that period, they shall cease to be legal
tender, but during the following year or for such
longer period as MB may determine, they may be
exchanged at par and without charge in the BSP
and by agents duly authorized by the BSP for this .- '''L
■' purpose? - ■
3. After the expiration of this latter period, the notes-,
and coins which have not been exGhahgedlsba.il
cease to be a liability of BSP and shallj be;
demonetized. The BSP shall also demonetize alf
notes and coins which have been calljad .in and?
-replaced (NCBA, Sec. 57). ZAAI
■' ■’ . ■- A ■ :■ ' ■■■■ • . . -V.k.4' V-’
Domestic Monetary Stabilization^;.? ‘ J
b. If the BSP wants to decrease money supply,
it closes the rediscount window or charges
very high interest rates for rediscounted
• notes (NCBA, Sec, 85). '■
2. Open-Market-Operations (NCBA, Sec. 90)
The BSP may buy'and sell in the open market
evidence of indebtedness issued directly: (a) by
the Government or by its political subdivisions;
and (b) by government instrumentalities and fully
•
. guaranteed by the government:
a. If the BSP wants to increase money supply,
it buys government securities; and
b. If the BSP wants to decrease money supply,
it sells government securities (NCBA, Sec. .
3 Reserve Requirement
To control' the volume of money created by the
credit operations of the banking system, all banks
operating .in the Philippines shall be required to
maintain reserves against the deposit liabilities
(NCBA, Sec. 94).- . * ’ ’ • ■;
• •
Changes, in; reserve requirement .
1. If' the^oiiilrne of money is high, BSP will raise
" reserve requirement; and
2. - If the Voftimetofmoney is: low, the BSP will reduce
the reserve requirement. '•*<. ♦; i

. • The MB shall endeavor to conlrpfcahy expansion or

contraction in monetary .a^gregateSA^which: .is Actionwhen|AbnOrmal Movements occur, in the
prejudicial to the attainment or’ maintenance of price M •'Moneta^'Xgg.i^’ateS1, Credit, or Price Level
stability.(NCBA, Sec: 61).' •
¿AA •. L. Wheneversiicl^m’otZements endanger the stability of
■ ' - ''

■ ■ • •
the Philippine'economy or important sectors thereof,
' •

Note: The exercise of the monetary policy' involves CAe-MB shaH: (MR-CÉM)
altering .of the economy’s money supply^tO'Stabilize^^• remedial Measures as are appropriate
aggregate output, employment and price level; The i kl pOwers granted to the MB and thè BSP
policy may mean two things: HAk underthe NCBA; and
1. increasing money supply dufing-'r^e^sjon to - 2? Submit and make public a detailed Report to the
/./ stimulate spending; or ’ . < . : • ? , President and Congress containing a description
2. Restricting it during Inflation to curtail spending . and analysis, óf (CÉM): ■ :
(AQUINO, Essentials of Credit Transactions and . a. i The Causes .Of the rise and fall, of the
Banking Laws, (2015), p. 840). A • . monetary aggregates, or credit, or of prices;
b. -The Éxtèht in which the changes Of the
Three Important Tools to Achieve Price Stability -aforementioned have affected the level of '
(Dpâ) domestic output, employment, wages and.
-I." DiscountPolicy economic activity in general, and the nature
The BSP is empowered to extend loans and " ■ and significance of such changes; and
advances to banking institutions to influence the c. The Measures taken and other measures
volume of credit consistent with the price stability which the MB recommends to adopt (NCBA, .
objective (NCÉA, Sec. 81)\
te • *• « * •
■'-Sec. 63).
l •
■ -, •
‘ • •
• ■ ■ -■■■“■ • .... • :

The MB shall fix the interest and rediscount rates International Monetary Stabilization
to be charged by the BSP on its credit operations. The BSP shall exercise its powers undet the NCBA
Interests and rediscount rates shall be applied to to preserve the international value of the Peso and to
all banks of the same category, uniformly and maintain jts convertibility into other freely convertible
. . without discrimination: • . - currencies : primarily for, although not necessarily
M EM O R Y A ID

a; If the BSP wants to increase money supply, limited to, current payments for foreign trade and
it opens the rediscount -window by reducing^ invisibles (NCBA, Sec, 64).'
interest on loans; and

2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS | 397

 BANKING LAW
SAN BEDA LAW CENTRALIZEDBAR OPERATIONS - MEMORY AID 2019

International Reserves Emergency Restrictions on Exchange Operations

The BSP's International Reserve shall include but Purposes (NAP): '
shall not be limited to gold and assets in foreign 1.. Intime of National emergency and to give the MB
currencies (NCBA, Sec. 66). and the. government time in which to take
measures to forestall or overcome such crisis or
Exchange Rate Policy emergency; ,
MB shall, determine the exchange rate policy of the 2 Achieve the primary objective of the BSP; or
country. BSP is required to maintain adequate . Protect the international reserves of the BSP'in
international reserves to meet any foreseeable net the imminence of, or during an exchange crisis
' demands on the BSP for foreign currencies (NCBA, (NCBA, Sec. 72). a • • •

Sec. 65). ■: _ - .r, '

• • •* *• • The MB, with the concurrence of at least five of its
When international stability of peso is threatened members and with the approval of the President of
. WhOnevet: (In-lpirP) r - . the Philippines, may: ’ ■ „. . .’ ~ :
1. The international reserve of the BSP falls to a 1. Temporarily suspend or restrict sales of
level which the MB considers Inadequate to meet exchange by the BSP; : •-
prospective net demands On the BSP for foreign 2. Mby subject all transactions in gold and foreign
currencies; ‘‘ 7*" t » . • .V •
■ exchange: to license by the BSP; or
a • ? •- - *

2.. The international1 reserve, appears to ■ require that any foreign exchange thereafter -
Imminent danger of falling to such a leyelFxar ' y 7 Ipbtàjned ” by any .person residing or entity
3. The international, reserve is fallingresult.of . ) /•$ybp^ra^hg..in the Philippines be delivered to the
- Payments or remittances abroad^hi'Chj.-ir£tb# bank or agent designated by the
opinion of the MB, are contralto 'tbe7^UdnaI 'S'S^Tbr thKpprppsé, at the effective exchange
welfare (NCBA, Sec. 67). '^^^■«faJ^.^V^tes: ^provided, however, jhat; foreign
' Æ “W cMrrèp^^ép^ts>màd.e.':ùndèr
•1« R.A;Nb. 6426 (An
_____
In case _ _____ ___________
of threat, the MB sh . k' 2% Act \|nstitujirig ^Foreign’ Currency Deposit
1. Take such remedial Measures adzare appropriate ~
System .. ’’ Ri^lippines)
in the ■ . shall-be exempt from
withinthe powërs grantë.àl^th^MB ari.dTlioBS'P7 these; requirements %NCBA, Sec. 72).
under the.NCBA; ahd\ t ^“^7 A

2. Submit à detailed Report to>th.e President of(th^,-7^ ^hiergepcy Lpaiis and Advances by BSP
Philippines 7 and ••Ç<|ïgr1“J!i *•> ••'issà3aîws’‘'' - * —|ha.t; is jfintended to assist a bank
description and analysistof e J. seridus^lqpjdity problems arising from
va. The nature andGàüs< attributable/ito, or beyond the control of,
imminentdecline; _ A management (MORB, qs amended by
b. The remedial Measures^ alreac No.^17, X2^2:1). . •. . .
be taken; •... Thd gra'i^^f^sucj^facility is discretionary upon the
c. Character and extent o^the _
required from other: govern riteoVa ^Tfor^>»^MBr arickiskntended only as a temporary remedial
the successful execution of the po: f the 'K A ^^SHre7^^ernergency loan or advance may be
MonetaryBoard; and / except on a fully secured basis (MORB, as
d. " ’ _ " V\sca\, dr
The "monetary; amended by Circular No. 517, X272.1).
•; •• s.. > • \ . s. •
Measures further proposed (NCBA, Sec.
67). ; ’’ . When granted: .
• 7 \ : By a vote of at least five MB members, the BSP may
Foreign Asset Position of the Bangkp Sentral authorizean
authorize anextraord inarydoan:
extraordinary Joan: .
The BSP shall endeavor to maintain at all times a net 1.I. In periods of national and/or ’local emergency _ or •.
_ ____
positive foreign asset position so that its gross foreign of imminent financial panic which: directly
exchange assets will always exceed its gross foreign threaten monetary and. banking stability? . '
liabilities (NCBA, Sec, 71), - . ; -’•’u • . z,- 2., During :..nprmal. periods fpr: the purpose of .
... - assisting a:bank, not?insolvent, whicti js -
In the event that the equivalent amount in peso of the a. in a precarious financial condition;
foreign exchange liabilities of the BSP exceed twice b. under serious financial pressures brought by .
the equivalent amount jn pes.os of the foreign .unforeseen events, or events which, though
exchange assets of the bank, the BSP shall, within 60 foreseeable, could not be prevented by the
. days from the date the limit exceeded, submits report - bank (NCBA, Sed 84).. ' •
to the Congress stating the origin of these liabilities,
and, the manner in which they will: be paid. (NCBA Limits pf Emergency Loan ’• „
Sec.71). . ’ . ; • " I ’
, The amount shall not exceed 50% of total deposits
and deposit substitutes of the bank, and shall be
1 disbursed in two or more tranches (NCBA, Sec: 84).:,
• • * r •
* . . - i

398 | 2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS-

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 BANKING LAW
SAN BEDA LAW CENTRAUZED BAR OPERATIONS - MEMORY.AiD 2019

Unsecured Claims of BSP

•• • ♦ ' « • •
- '. Being an artificial person, the BSP is limited to its
All unsecured claims ofithe BSP shall be considered statutory powers and the nearest power to which •
preferred credits similar to taxes due to the National prosecution of violators of banking laws may be
Government in the order of" preference under Art. attributed is its power to sue and be sued. But this
2244 of the New Civil Code (NCSA, Sec. 88-D). corporate power of litigation evidently refers to civil
• • • I • * • • * , A • • • cases only. Moreover, it does not appear from the law
SUPERVISORY function of THE BSP that only the BSP or its respondent officials can cayse.
Supervisory Powers of the BSP the prosecution of alleged violations of banking: laws.
The.BSP shall have supervision over the operations Said violations constitute a . public offense, the
of banks .jand - exercise such regulatory and prosecution of which is a matter of public interest and
examination powers as. provided in this Act and other “. hence,’ anyone -R even private individuals — can *• - • Í. a • ft. -f ’ t

• pertinent,laws over the quasi-banking operations of edenounce

- • - • •*>**»«» ’ •• 'such
» violations
•• • i before ■- *’ prosecuting
* . • . . the • •_ —_ V • * «
non-bank financial institutions (NCBA, Sec. 3). authorities (Pèreï y. Monetary Board, G.R. No. L-
OQQÍD7- June
23307, Qf) ’ -/ÛP74-
h inn 30, 1967). v\ ‘ A • • • >' !
!■ -. -. .. . • _ t-. • • -V •f' • -> . • ■ ■ '• ' > •' ■■■. ' •>.- r'-. ’. • Y'- ‘ ■ . ■

' As may be determined by thé Monetary Board, it shall i % • . • • *

likewise exercise regulatory and examination powers Mandamus for the purpose of causing the BSP to
over money servicé businesses, credit granting charge violation of bank laws is improper The BSP
’• . ' businesses,- and payment system operators (NCBA, arid the members of MB should not be impleaded as
Sec 3). / . : parties to a-case pursuant to Sec. jS, Rule 43 of the
' ROC (BSP v. Rural Bank of San Miguel, G.R. No.
The Bdngko Sentral shallhave supervision over. and / I ■ 154356, April 11 „2007)::' . ’ \
conduct regular or special examinations of banking ;•
institutions, and ■quàsi-banks, including -their, 4 SEG, not BSP, has Jurisdiction over Complaint

subsidiaries and affiliates engaged in allied activities' : Jnyolving arïvL//tra Vires Corporate Act of a .Bank
(NCBA, Sec. 25). - ‘ i WÎÎë^he^pSÎât of a complaint is on the. ultra .vires act i

• -,
of a bahic'as ^corporation that is the complained act
.................. ■ . . ■'• •• jT

Note: The power of supervision inclqd.esthe power of a corporatiorijs contrary to its declared corporate
to examine and audit banks, as thé;.ÎJ^nkingJaws purposes, the' S‘EC has jurisdiction to entertain the
have always .recognized this ppwpri.ôf (he-Céntral complaint before “if and not the Central Bank (Pilipinas
Bank': The Commission on Audit*'and the'-G’entral Loan Company, Ine: v. SEC, G.R. No. 104720,- April April
Bank have concurrent junsdfctiorii to^xâmine aricï' 4,200i)J .1... -V ■' ' \
audit government banks (Dé^ldpmerûi/Bbnk.:bfcihp'
p- ■ ■ • • ' ■

Philippines v. Commission on Audit GRSNo- 88435, Issuance-ofixlrijunctive Relief against BSP in

January 16,2002).'
Authority fo Approve Transfer ôf
■„ Prior approval of the- BSP is required>fpr transferor 'J‘■:'x!reMrâîmrigrordèr-.issiied in violation of this rule is void.
acquisitions or a series thereof, of at-îeast^Ô^o of
voting, shares in banks or quaSi-bánks. ]ri¿|ipprbying
such transfer or acquisition,, regard shall be given to
• ' the fitness of the incoming stockholders as may be
... indicate. în;4hêfr--M^ri.tÿ^ réputation, • and:<financia'l
. capacity (NCBA, Sec 25-A).' -
’ Note: Without the approval of the BSP, the transfer
’■ j ; of acquisition shall haverno legal, effect nor shall the
samp be recognized in the books of the institution of
by any government agency, and the transferor^
' exercise of Supervisory Powers >
i^rrQnly the CA and SC can issue any injunctive- order
ÿ^a^^^tUiejBSP for. any action under the NCBA. Any
(NCBA, Sec38-A) ., t
’ Ng restraining order or injunction shall be issued
enjoining the examination by the BSP of. any
institution, unless (1) there is convincing .proof that
' the action of the BSP is plainly arbitrary and made in .
badfaith and (2) thé petitioner fileé a bond executed
in faVor or the BSP with the court in which, the action
is pending, in an amount to be fixed by Such court .
•. (NCBA, Sec 25):. 1‘ ■ • a a *

.- stockholder shall remain accountable and

responsible thereof (NCBA, Sec 25-A). «■ •

..."

' BSP.Has ho Prosecutorial Powers ' BANKS IN DISTRESS

Although the BSP may have the duty to cause the
prosecution of officials who violate the banking laws,
the law does not impose a clear duty on the BSP to Definition of Terms .
do the actual prosecution; The. BSP is a government 1. Solvency ;
BANKING LAW

corporation created principally to administer thé i. ■ A solvent person is one who is able to, pay all his
monetary arid banking system of the Republic, not a just debts in full out of his own present means [i.e. e
prosecution agency like the fiscal's office (Perez y. assets] (Black’s Law^^ Ed,)'. • ' - ‘ ,
Monetary Board, G.R. No. L-233Ô7, June 30, 1967).
••

2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS | 399

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 BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019

2. Liquidity the interest of 3. Can only continue

Ability to. meet immediate, short-term obligations depositors and business- at a loss
with cash, and the ability , to liquidate assets creditors (NCBA, (NCBA, Sec. 30(C))
quickly enough to do so (Black’s Law, 5th Ed.). Sec. 29). 4. " Has announced a
Note: A debtor may be solvent but not liquid. A continuous bank
solvent debtor is not liquid if there is an inability holiday for more than
to liquidate non-cash assets, such as real estate thirty (30) days (GBL,
9
or stocks, quickly enough to meet due debts.
* * • \ ■ Sec. 53)
5. Has, in any other
3. Insolvency
manner, suspended
a. Technical or Balance Sheet Insolvency
•’withdrawal of accounts
When the actual market value of assets is
(NCBA, Sec,. 30(a);
insufficient to pay one’s total liabilities (Banco
GBL; Sec. 53)
Filipino Savings and Mortgage Bank v.
6. Dormancy of at. least
Monetary Board, G.R. No. 70054, December
11, 1991). ■ ~ sixty (60) days (NCBA,
• • • Sec.. 30(a))'.'
b. Cash Flow Insolvency (Lack of Liquidity) , 7. Has commenced
Although realizable assets are considered unilateral' closure
’ sufficient as a whole, where such assets'are.-. ’ (NCBA; Sec. 30(a)).
immediately available to pay liabjlities^within h J. Cash flow Insolvency
a reasonable time, after they fail due (NCBA, " (NCBA, Sec, 30(b)).
Sec. 30(b)). 1 Technical Insolvency
except when caused by
Requisites in placing an/institution.-'under bank run (NCBA, Sec.
Conservatorship or Receiversnip?;(RFDN) ’ ,Jp 30(a)): ■
1. Report of the head of the* supervising Jlor
examining department invJoly.ihg‘the b^n.ku^--r. Purpose of Appointment
2. Finding of the MB of the.ex^te'nce of ^ny-pybe
grounds for.conservatiPn'oFredeivershi bank. To restore the bank or
sMo- q^uasi-bank’s' liquidity and
3. Decision Of the MB to: i ;te to- solvency or to recommend
a. place institution under "cdp^ervatjp'ncpr---
b. summarily and withqu^rtP ders^the liquidation of the bank;
forbid the institution'ltprer ^- .
place institution under receiVershipr^Vj; Qualification of Appointee
Note: This authority may also be e&ercis
On whc^'is For banksf.The PDIC (RA.
nori-stock savings and loan '^ssoci
and No.- 3591, as amended,
on same applicable grounds.
kriòwl in Sec. 12);.
4. Notice .in writing to the Boards
informing the institution of the orde management.
. • directing conservation or receivership ^A/eBA For quasi-banks: any
(NCBA, Sec. 29, par. person of recognized
Sec. 29 and 30). . ; v • —

competence in. the banking

Conservator v. Receiver or finance. (NCBA, Sec. 30,
par. 2),
.<•;' v Conservator;■■■. Receiver
■ ' (Sec. 29) ' ; (Sec. 30) :. Duration of Appointment
-4

»• j• .. • • • • e * ’* , •••••, •* ’• • . • • • « - . *—*. » I • ta*« F • Z- 1 * •’* •

< Grounds for Appointment One (Î) year As long as is necessary to

• ®!
V
rehabilitate a business:
When the MB finds, ■1,- Has. willfully violated a . * • * • A • •

(NCBA, Sec. 29, par.

based.' on the cease and desist order
Provided, that the receiver
appropriate report, for fraud or dissipation
determines,.^within 90 days
that the institution is of assets (NCBA, Sec. .
frdrh appointment, whether
in ■ p state of \ -30(d)). .
Continuing
: the ... Institution may be
2. Has persisted in
inability - or conducting its business
allowed • 7 ■ to
• •continue•
business, be rehabilitated;-
unwillingness to in an unsafe \ or
or be liquidated. (NCBA,
' • • • a condition
* maintain unsound manner (GBL, I
• Sec. 30, par. 3). . ■
of liquidity deemed ’ : Sec. 56).
adequate to protect •

400 I 2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS

 . r • LAW
BANKING
SAN BEDA LAW CENTRALÏZED BAR OPERATIONS - MEMORY AID 2019
•.
CONSERVATORSHIP nothing to perfected contractual' rights nor vested
Governing Law interests of third parties who had dealt with the bank
Sec. 29 and the last two paragraphs of Sec. 30 of the (First Philippine International Bank v. CA, G.R. No.
NCBÀ governs conservatorship. Also, the same rules 115849, January 24;1996). ‘
apply to Quasi-Banks (GBL, Sec. 67). ■ "
• • 7 • •
Termination of Conservatorship
Appointing Authority 1 Expiry of the 1-year term;
The MB ".has exclusive power to designate the • 2 When MB finds that thé institution can continue to
conservator (Koruga v. Arcenas, G.R. Nos. 168332, operate on its own and the conservatorship is no
169053, June 19, 2009). • .< longer necessary; and ' . . . -
3. When the continuance in business of the bank
Remedy from Order to Place in Conservation would involve , probable loss to its depositors, or ?''
Actions of the MB taken under Section;<29 and 30 creditors, in which case. receivership and
shall be final and executory, and way, not be ...- liquidation shall be pursued (NCBA, Sec. 29):
■ restrained or set aside. (NCBA, Sec. 29 and 30). '
CLOSURE ' . \
Only remedy is Petition for certiorari under -Rule 65 “Close Now, Hear Later” Scheme
on the ground that the action of the MB taken was in In cases of existence of the grounds for receivership
excess of jurisdiction, or with such grave abuse of and liquidation, the Monetary Board may summarily^
. .discretion as to amount to lack of.-excess . and without need for prior hearing forbid the
;
jurisdiction
’■
(NCBA,
■
Sec. 29 and" 30).
‘ ■ ■■ ■ - '• ••'■
’
< ■
V institution from doing business in the Philippines and
i ^ designate the person or entity authorized by law to
Grounds to Appoint Conservator ; act as receiver of-a banking institution (NCBA, Sec.
•___ A. A AS — A » • ■— —— * • A. - • _____ « . — —___ - _ _•

When the MB finds, based on the appropriate report^;^ii^^O(d); AlfeçhÿVivas v. Monetary Board, G.R.' No.
that thé institution is in a state-. 491^24rAÜgûçt" 7,.2013),' ' - .
inability; or unwillingness to maintain.^ conditio^ ' ||
of liquidity deemed adequate to protect th'é interest of^’ ' Prior notice ^rMhearing is not required before a bank
depositors and creditors (NCBA, Sec)■ ',t' may be directed to stop operations and placed under .
receivership. âviten the law provided for the filing of
H

Powers and Duties of a Conservator: (RAMCOE;)V a case within H 0 dpys after the receiver takes charge
1. To Report to the MB; .. of the assets of th&barik, it is unmistakable that the
2. To take charge of the Assets, liamties, anciiih® closur^sboufâîfirëiSédé the filing of the case. (Central
1 . .».53

• management of the institution^ Bank v. CA^R^Na76118, March 30, 1993).

<•4

3. - To reorganize the Managemènïi^s^'^ E

4. To Collect all monies and 'debts •.due said ^Rationale of “Close Now, Hear Later”
„.. institution; ' v >?X^Ml'ls?iTo'Pr.otect the General Public
’<
5. To Overrule or revoke the actions^ofThe pr;evj6us*%*»*• -^^Tcrprôfêct the public interest
J* ¿ii WfÆHT'zv^ÉFZx4rv<*♦ + kl«“» KVI ikslîz“» +
in preserving faith
management and board of directors of the’ bank and confidence in tip Philippine Banking
L or quasi-banks; and ' ■ r/-• system, swift action is called for on the part of .
6. To Exercise all powers necessary to restore the the BSP when it finds that a. bank is in dire
institution’s viability- (NCBA, Sec. 29). ’. straits (Philippine Veterans Bank Employees '
Ünion-NÙBE v: Philippine Veterans Bank, G.R.
Scope of Powers of Conservator ';?- , ’ ' - ( . No. 67125, August'24, 1990). >--
The exercise of conservatory powers must be related .■. • • ■ ■

to'(1) preservation of the. assets, (2) reorganization of 2. To protect the stakeholders of the institution .
management and (3) the restoration of viability. Such It prevents the unwarranted dissipation of the
power to revoke cannot extend to ppst-factO1 ' bank’s assets and is a valid exercise of police .
repudiation of perfected transactions; otherwise, they . power to protect the depositors, creditors,,
would infringe the non-impairment clause of the stockholders and gênerai public (Vivas v. The
Constitution (Producers Bank ofthè Philippines v: Monetary Board, G.R. No. 191424, August. 7,
NLRC, G.R. No. 1Ì8069, November 16, 1998)..' .
• **•**’• • - * • •
2013). .
• •
: .. •
• * >r • * b
• . -w * • • • ’• • • ,*
* I • ».

The conservator’s power is not unilateral and . he . .. 3 Practicality and Necessity

cannot simply repudiate valid obligations Of the bank; To require previous hearing would not only be
His authority would be to only bring court actions to impractical but would tend to defeat the very '•
BANKING LAW

assail such contracts. To rule Otherwise would enable purpose of the law (Rural Bank of Lucena; Inc.
a failing bank to become solvent, at the expense.of V. Area, G.R. NO. L-21146, September 20,'
third parties, by simply’ getting the conservator to '1965). ;■
unilaterally revoke all previous dealings which come
to be considered unfavorable to the bank, yielding .
•
••
•••

2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS ,| 401

 BANKING LAW
b

SANBEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID.2019

Current and Complete .Examination NOT
Necessary .» ■ .
The NCBA requires only “a report of the head of the
supervising or examining ¡department” before the
bank can be closed and placed under receivership.
An examination, as required in Sec. 29 of the Old law
(R.A. No. 265),: is no longer necessary (Rural Bank of
San Miguel Inc. v. MB, G.R. No. 150886, February
16,2007).
Remedy from Order of Closure
•
Actions: of the MB taken under Sec: 29 or 30 shall be
• •*’ ’ • w*»* • "
final and executory and may not be restrained or set
- aside. (NCBA;.Sec. 29 and.30)h .
Only remedy is Petition for certiorari under Rule 65
on the ground that the action of thè MB taken was in
excess of jurisdiction, or with such, grave abuse of
discretion as to amount to lack or ‘ excess ..of ; :
jurisdiction (NCSA, Sec. 29 and 30).■; J t
" :
3. to continue into liquidation whenever authorized
under the PDIC Act or other laws; and
4. to dispose of the assets and to wind up the affairs
of such closed bank (R.A. 3491,Sec. 4(c)). ■
Note: The designation of' a conservator is not a
precondition to the designation of a receiver (NCBA,
Sec. 30). '■ / . . ? • •'
Effect of Placement Under Receivership
Receivership is equivalent to an injunction to restrain
the bank to act in any way. Thus,.the appointment of
*
a receiver operates to suspend the authority of the
bank and of its directors and officers over its property
and effects (Villanueva V. CA, G.R. No. 114870, May
26, 19$5)> •• -J . -• •
• •• • •• ••
Generial Purposes of Receivership ;
1. To restore liquidity; t ; ‘ ..
To rehabilitate to'solvency; and ' - .
3^ -^d-Tpcommend liquidation. ;.

Legal Standing to Assail Closure Order"A jt

'A
LA? FjS.
.'.specific purposes of Receivership
’
Only stockholders of record representing^he^majority Whether^fdr p.urpfose of < rehabilitation -or liquidation,
of, the capital stock have the ni.irhnk'A'i^^irArfoivArRhib IS— • 7. •

, petition for certiorari to be filedLVvjthin^fO-; d^ys -frqçp iX> W To :’rr^çéK^^lfèctipléi

bceiVeWliectiblesp-. \
•• ft *. J W« /V****^/ • A « • * . . • • * M

receipt by the board of directors 'ÒMjie insmutionk.of 2&- To preserve$he banh nk’s assets in substitution of
the order . directing receivership/ liquidation or.?4/^ its former^^mariag^me: ent; and •
conservatorship (NCBA, Sec. . i ’prevent iU^rdissipation.,of its assets to the
¡1

"- •’. * **. n '

. j ^~^c^tririient of'jtfie. creditors of the bank (Banco
Reason: ' Stockholders owning*^ m . _x Zu<r i AA ^—■'^^-^Mortgage Bank v.-Monetary
shares are expected to I^Lippre v_ , ,. ktof the Philippines, G.R. No.
dòte rm ini ng whether the :re stjlutionTS plâj^ÿ^fbitrar;
•and issued in bad faith fCen^' - -
76118, March 3Ô, 1993).' J Banking Institution under * • • * *•

Effect of Filing Petition for Certiorari violated a final cease arid .desist
Thè pendency of the case doesH or transactions which amount to
authority of the liquidator to administer dissipation of the - assets < of the
the bank’s, transactions: He is „aHowed^to co
receiving collectibles and. receivables or^S^og. off IVL&.V^ai^persistejd: in conducting, its business in an
. ' creditor’s claims rand
.' pertainin^o^”r“ai
and other transactions pertainin^d^ aï'”^^^P" unsafe or unsound manrien.fGBL,
manrier; (GBL, Sec. 56); 56/-
normal operations of a bank .such asìthé prosecution
such asUhe " 3. Cannot~ continue in business without^ involving
of suits against debtors ’-for collectionand; for probable
a probable losses
losses to to
itsMts > depositors
■» deppsifbrs dr Or creditors;-
creditors;
foreclosure of. mortgages. The bank was'allowed to ' (NCBA, Sec. 30(d)); ; - < ■ ' ■• ’ ,
collect interest- on its. loans While under, liquidation, 4. Has announced a continuous .bank holiday for
providedythat the interests.were legal (Banco-Filipino more than thirty (30) dàys;(GfîL, Sec ;53);<. Ar ;
Savings and Mortgage Bank v. Ybanez, G.R. No. 5. ‘ Has, in- any, manriëç suspended withdrawals of
148163, December 6, 2004). ~ . deposit accounts (NCBA; -Sec. 3û(a); GBL, Sec. •'
* * s. * • •
-. L 53); . ; .*.•*</? st.: ; .‘..'A ...
RECEIVERSHIP \ - .6. Has been dormant for at least sixty (60) days;
• Receiver ' ." . . ; , (NCBA, Sec. 30(a)); ; ’ ’
u : •’ ' /
A commission, person, or other agency charged by 7. Has notified the BSP ór the public Of its unilateral
law with the following (duties- •/ closure;-(NCBA; $ec. 30(a)); ‘ ?. •
1. - to take charge of the assets and-liabilities of a 8. Cash Flow Insolvency (NCBA,:Sec. 30(b)); and
• bank which has been forbidden from doing 9. Technical Insolvency except When such inability
busiriess.in the Philippines; is caused .by a .bank run (NCSA, Sec. 30(a)).
2. to gather, preserve end administer, such assets
and liabilities for the benefit of the depositors and Bank Run. ’ \ ’■ i- . ’ -.j •
creditors of said bank; - ’ ? A sudden withdrawal of. depositors who no longer
trust-their bank.or economy (Black's Law, 6th edj. ...

402 I 2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS

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BANKING LAW ÄT

SAN BEDA LA W CENTRALIZED BAR OPERA TIONS - MEMORY AID 2019

• f • • •

Extraordinary demands induced by financial panic in LIQUIDATION OF BANKS

the banking community'f/VCBA,
* a. , •
Sec.
’•
30(a)).
* «
' • ‘
Commencement of Liquidation
.1. Voluntary Liquidation
Receivership of Banks and Quasi-banks . .. Liquidation is voluntary when it is commenced by
Banks closed by the Monetary Board shall no longer written hoticé to the Monetary Board. Monetary
be rehabilitated. They shall immediately be placed . ‘ Board shall have the right to intervene and take
under receivership of PDIC and subject to liquidation such steps as may be necessary to protect the .
proceedings ((RA. Nò. '3591, as amended, interest of creditors (GBL, Sec. 68): •
[hereinafterPDIC LAW]), Sec. 12). * .
.* • ■* •
• *
• • •'
i . • ,
•
• .
• r •

• ; • -• .... .• . i ’r “ .... ; ’ * •
2. InvoluntaryLiquidation (GBL, Sec. 69)
’• Quasi-banking institutions closed and placed under > Liquidation is involuntary when anÿ of the
receivership may be rehabilitated or liquidated. (BSP • grounds enumerated ih.Section 30 of the NGBA
Circular No. 719, s. 2011). - . >. - ; ■ iè present and the institution is ordered closed by
the Monetary" Board. r -
Scope of. the Powers of the PDIC as Receiver.’ ‘ ’ • y./- J ' ' . ''

The';receiver shall exercise all authorities to facilitate No Rehabilitation off à Çlqsed Bank
the liquidation-of the closed bank for the benefit of all Whenever a bank is ordered closed by the MB, the
- its creditors (PDIC LAW, Sec. 13(e)(2)): . -
/•’s' ’ •
PDIC shall be designated as .receiver and it shalh
• ’’ .. a • ’ • 9 ’

r”' ' *| Z*. * • proceed with the takeover and liquidation of the
’”**•.*.* * . * «

Fiduciary relationship between the PDIC and a,/^ closed.bank. (PPIQ LAW, Sec..12). /
Closed; Bank •. • ’* • • ’ * *■
Considering that the receiver has the power to take/ ■ '&À. Notice ofClosure . . .■ ?
charge of all the assets of the closed bank ahd,;tO;/r j .Upon the designation of the PDIC as receiver of a
institute for or defend any action against.it, onlylthé^ç/^..clQsed banl^i| shall serve a notice of closure to the
receiver, in its fiduciary capacity, may sUe<pitd §¿£2.hig'H^Urankin'g officer of-'the bank present in the bank
sued on behalf of the closed bank. The -inclusion q( 1. p.remises,*ôr}i^thé absence of such officer, post the
thé PDIC as a representative party iri"the case js> N notice-of closure.in the bank premises or on its main
therefore grounded on its statutory/role as the' ÎV entrance; •/1 V
fiduciary of thé closed bank which?ié-authorized to i »fr.■»! • ■ BL a. ■
/• _ - / u • in. • • « * • . ;•

conserve, the latter’s, property^fpirthe beneffttoi jts The closure ..snaii^ be deemed effective upon the
, ^creditors. (Banco Filipino ■payings . dfid^ Mortgage' service ¿of thb-notice of closure. Thereafter» the N

Bank- v. BSP, G.R. No; 2006Ï8$Ôufiër 04^2018)<^. receIvetf/sj)a ^takeover and; exercise the powers
provided^ride&R^3591 (PDIC LAW, Sec. 14(a)).
. • . “■ ?•... : : . . >. r • •
Takeover Activities ; / py • • • * ’ • "*■* • * / / ' * /

Ùpon thé proper service of the noticevof closbre, the r Dissolution and Liquidation of Ordinal
■ receiver shall have authority—
1. to use reasonable forcé, including the authority
_^^^s:Corporations vs. Banks , • <-/
t
forcé open the premises of the bahki; ^ r ■ . Ordinary Corporation Banking Corporation
• • •• • •••• ••

■2.?. to exercise such acts necessary toXt^^.actual

As to Governing Law
• r . physical possession and custodybf the bank and ,
. all-its assets, records, documents; and .... Corporation Còde’/ - NCBA and PDIC Act
3. to take chargé of its affairs (PDIC Law, Sec.
. 14(b)). : \ •- - As to Cessation of Business Operations • •• •• • • •••••••*" • • V • •

- .-/i. .
I
By order of dissolution Of- By order Of closure of
. All directors,r officers; employees, or agents of the- the SEC after .the .fil in g of the: MB summarily and,.
clòséd bank, shall have the duty to immediately . a verified complaint and without. need for prior
account for; surrender and turn over to the receiver, proper notice •; and hearing (NCBA,. Sed 30
and provide information .relative to, thé assets, . > hearing ; > par. 4)} .: ■ .’
• records, and affairs of the closed-bank in their (CORPORATION ' ' * : ..
possession, custody, administration, or management COÔE, Sec. 121)} f\. •. _______ \______________________ :_____________ •

(PDIÇLawvSec; 14(c)). / «
. X* • •*■’*•.*'*?•■ •', ■ /y
! As to Requirement
•• of Tax Clearance
• • • • . • i'. * J' I ’*..«••• • * • • ff • ' f • *

When the circumstances so warrant, the. local SEC - shall issue -final PDIC shall immediately
. ■ government... unit and law enforcement, agencies order of dissolution only gather and take charge
concerned shall, upon request, immediately provide after submission of the of al! its assets and
BANKING LAW

assistance to: thé receiver to ensure the orderly tax’ - clearance; (NIRC,' liabilities, upoh issuance
conduct of the takeover activities and the security arid
H EM O RY A ID

Sec, 52(c); « of order of closure

safety pf the personnel of the ¿receiver and the (NCBA, Sec 30, par.3)}
employees of the, closed bank, (PDIC Law, Sec. .
’ 14 (d)). • . • ’ '. . .
♦

£
2019 SAN BEDA UXW CENTRALIZED BAR OPERATIONS I 403 .
 BANKING LAW
SAN BEDA LAW CENTRALIZED
• • • OPERATIONS - MEMORY
BAR * AID
• •* 2019

As to Authority of the Corporation to may not be subject to attachment, garnishment,

Pursue Liquidation execution, levy or any other dourt processes.
t 4 •• » • • ••••« • • •__________ • • • »_________ » - • •______ *'
Note: Any preliminary . attachment or
At any time within three Bank is not given the garnishment existing at the time of closure shall
years . after its option to undertake its not give any preference to the attaching or
dissolution the. own liquidation. (NCBA garnishing party. Upop motion of the receiver, the
corporation is allowed to Sec'. 30, par. 2; ’ preliminary attachment or garnishment shall be
undertake its own Sundiang & Aquino lifted and/or discharged.
liquidation or convey its Reviewer supra at 348).
remaining assets to one •
•
•

•
1«
*
5 The employer-employee relationship between
on more trustees • 9 •• •
the closed bank and its employees shall be
(CORPORATION • • terminated upon service of the notice of closure , ,
-CODE, Sec. 122). of the bank., •' '
• .w

(Id Re: Petition for Assistance in the Liquidation of the

Rural Bank of BokOd Benguet, Inc., PDIC V: BIR, G.R. - Note: The forcible closure by operation of law
No. 158261, December 18, 2006). permanently severed the.- employer-employee
• * • « ’ , • ••
relationship between it and its employees when it
Legal Effects When a Bank, is Placed Under ceased operations. Such severance is not
Liquidation: • ■ • affected by the. bank’s subsequent rehabilitation
The placement of a bank under liquidation shalt have? i (Corpista-Domingo v. NLRC, G.R. Nb: 156761,
the following effects: ’ , ' pC ..LJ
1. The bank shall continue as a bodycorporate*- __
only for the purpose of Iiquid5tihg, s^ettlirfg and 6. The; liability’of a bank to pay interest"on
closing its affairs and
conveyance or distribution• Sny • K* shall cease/Q
’ / > A> V V- ..............
V W -A ' ' '
• Note: A bank retains its juridicalpersonality and AX Reas'on: A^b^nk'thqt does not operate cannot
can sue and be sued through’ its liquidator. The ' j'ga^ i^comehc^ |3a^ ^terest. it. should be deemed
only limitation being th<£f*rthli prdsecutioh^-oF; 3^ead|nto ey^ry"bon^acty of deposit with a bank
defense of the action musLbei'done Ihfpugh/th^ that the obligation^ pay interest on the deposit
liquidator (Hernandez ^RurahBadk __ , ___ ceaSes7the moment-the operation of the bank is.
Inc., G.R. No. L-29791;tle(nd'd^10^9^)i »-T7
yg? A cofnpletdly Suspended by the duly constituted
k z/he (Fidelity Savings and ■
2. Restriction of Bank’s Capaci ! j' ^T^.Mpngage /Bank ys Cenzon, G.R. No. L-46208,
The bank cannot do new pusir 5.jw'/ ■ ’ ■
new. loans or to accept nev^d«
the bank is obliged to collect earned prior to closure of bank
’ due to the bank which form pa «■^^shbuld be/d^id because such interest has been ‘
,. the’ . bank and in ‘ connection f Xbarneg>in the ordinary course „of the bank’s
foreclose mortgages securing debts. 7 _ LZ ^business before the declaration of insolvency.
Savings Bank; v. CA, G.R. Nd: 97218, May sss!7^(Tan Tiong Tick v. American Apothecaries Co.,
1993). ■
G.R. No: 43682, March 31,1938).
;.-w. ’ ,;
V •’1

Note: Foreclosure of mortgages in favor of bank. • • a •e .

should not be considered as one of the acts Exception: The BSP shall collect interest and '
■ prohibited during receivership and liquidation other appropriate charges on all loans \ahd.
; proceedings. Thus,’ ..the period - of prescription advances it. extended to the closed bank, the
continues to run even if the. bank is under closure, receivership, or liquidations; of the
receivership or liquidation (Larrobis v. Philippine debtor-institution notwithstanding (NCSA; Sec.
•
Veterans Bank, &R.. No. 135706, October T, • •
85). ■■ / ■;«»•••• • • “ «
7 .

. 2Q04).... . . . • ■ ■ ■

• ’• •
7. - The closed bank shall not be liable for the
* •

3- The powers arid functions of its directors,
officers and stockholders are terminated upon
its closure. Thus, they are barred from interfering
in any way with the assets, records, and affairs of
the bank. ' .
4. All the assets of the closed bank shall be in
Custodia leqis in the hands of the receiver upon
service of notice of closure, and these assets
payment of penalties and surcharges for late
. payment and nonpayment of taxes. ■' -
8. Actions pending for or against the closed bank
in any court or quasi-judicial body shall,, upon
motion of the receiver, be suspended for a
period not exceeding one hundred eighty (180)
days and referred to mandatory mediation.

404 I 2019 SAN BEDA LAWCENTRALIZED BAR OPÉRATIONS ■

 BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019

9. The execution and enforcement of a final 2. Petition for Assistance in the Liquidation of a
decision against a closed bank shall be stayed. Closed Bank; and . • •
3. Winding Up (PDIC LASec. 29). ‘ ■
Reason: To execute the judgment would unduly
deplete the, assets of bank ‘ (Lipana v. Guidelines in the Management and/or Conversion
Development Bank of Rizal, G.R. No. 73884, of Assets by the Receiver =
September 24, 1987). ' , The following rules shall apply to the management
and/or conversion by the receiver of the assets of the -
• i 10. Docket and other court fees relating to all cases closed bank: / " . .. ' ’ \
‘ or actions filed by receiver with any judicial or • The assets gathered shall be verified as to their
quasi-iudicial bodies shall be deferred until the existence, ownership, and other factors to
"•
- action is terminated with finality.
’ • 9 * a • ♦
determihe their realizable value. :
2. The conversion of the assets of the closed bank
. . 11; The Exercise of authority by the receiver shall shall be carried out in a fair and transparent
be presumed :to have been performed in the -manner - - .1 ■ • -X•
reqülar course of business. 3; The LRA, the Register of Deeds, the assessor’s
• • ’ ft * •/ • • 4 .•- .
1
• ,1
• %
’ •». 9 . • 1 9 •
’ .••• J ‘
-office or other appropriate office of the local
12. All assets, records, - and documents in the government unit shall not allow any transaction
Possession of the closed bank at thé time of its affecting the assets of the closed bank without .
closure are presumed held by the bank in the the consent of the receiver. -
concept of an owner. ■ aXs A- Any person in custody or possession of assets or
■. •
records of tha closed bank shall immediately turn
13. Assets and documents of the closed bank shall .1
over custody of said assets arid records to the
9

• retain their Private nature even if administered 'tf

receiver^ ,
by the receiver (PDIC LAW.
bv LA W, Sec. 13(e)). .
•/ • The persons^ entities in custody or possession of
14. Deposits do not become preferred credits ••fc such asset shall not allow, authorize dr cause the
• (Tâh Tiong Tick v. American Apothecaries. Çp:; I S withdrawal ¿transfer, or other transaction involving or
G.R. No. 43682, March 31, 1938);P ’ relating to7 the ‘Subject asset, unless otherwise
directed Uy thd receiver/PD/C LAW, Sec. 16).
Modes of Liquidation: by PDIQ:?> \ .... 'Ll Jljv. -; • <' •
1-: .Conventional .Liquidation
2. Purchase of assets and/or aSsiÎrriptioriSéf
*
.a Power^'-a^^^uti.es* of -the: Receiver in the
Management: and/or Conversion of the Assets of
' . liabilities. (PDIC LAW¡Sec. 26^3^'^ . a Closed Bank (ROD2^) ’
* .< iC-.?i%t^e
’
f’.il'V •*
management and/or conversion of the assets . .
' Purchase, of Assets ^o^th’^clps^l bank, the receiver-shall have authority
• .
The receiver’shall have the authority ^facilitate Wncf '
implement the purchase of the assets, of,the closed T. Represent the closed bank before the (LRA), the '•
_ ■ bank and the assumption of its; liabilities;^y/another Registe r of Deeds, LTO, the Assessor’s Office or
Insured bank,, without - heed for . approval <of a other appropriate office of the local government •
liquidation court. Thé exercise of this authority shall ? unit, or such other-similar government agencies •
be in accordance with the Rules on Concurrence and ■- « or private entities in:..••• \ .
Preference of Credits¿under the Civil Code or other a. ; Verifying the authenticity- of ownership.
laws, subject to such terms and conditions as the ' documents; ?
• _
Corporation may prescribe. . ’• * •• ‘ 11 ‘ • • • - -
b. . . Registering the interest of.the closed bank on
• • « • »♦f"tlr. " % • • • a specific property;' . .. -
' The disposition of the branch licenses and other bank c. Consolidating ownership over an asset of the.
licenses of the closed bank, shall be subject to the closed bank; .' ; •
approval of the BSP. _ ' . -d. Securing certified true copies of documents
• / .' held by the foregoing agencies/ehtities in
Such action of the receiver to determine whether a relation to an asset of the closed bank;
bank may bë thé subject of a .purchasé of assets and . e. Securing the- appropriate .certification from
assumption of liabilities transaction shall be final and the foregoing aigencies/ehtities in relation to
executory, and may not be set aside by any court. . T an asset ofthe closed bank; and
(PDIC LAW, Sec. 15). f. 'Performing other related activities.
BANKING LAW

• • ’ . • • ’ *•

.2. Conduct an Ocular, inspection of the properties

Conventional Liquidation . ' . owned by, or mortgaged to, the closed bank;
-...M E M O R Y A ID

The following steps shall be observed when a bank is 3. Determine the disposal price of assets;
placed Under conventional liquidation: • : i ... 4. Dispose real or personal properties of the closed
.1. Asset Management and Conversion; bank through bidding, negotiated sale or any .. . ]

•. 2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS | 405

 BANKING LAW
■SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019

• “ ••
other mode including lease with optioh to 3. When the Issue is the validity of contracts upon
purchase; and which a claim is based (Carandang v. CA, G.R.
5. Engage third parties to assist in the liquidation, No. L-44932, April 15, 1988).
•
manage and/or dispose the assets, handle cases
filed against or by the closed bank, subject to Note: Even if the case falls within the aforementioned
such guidelines as determined by the receiver exceptions, the claimant should still file the
((PDIC LAW, Sec. 16(c)). . • ' ' adjudicated claim with the liquidator or liquidation
court for processing of claims to determine the proper
Petition for Assistance in the Liquidation of a concurrence and preference of credit ampng the
Closed Bank differentcreditors and debtors of the bank (Cudiamat
A petition for assistance in the liquidation is à special v..Batangas Savings and Loan Bank, G.R. Nd.
proceeding in rem for the liquidation of a closed bank ■ 182403, March 9, 2010)., > ,
and includes the declaration of the concomitant right
• Venue 7 /
• of its creditors and the order of payment of their valid Ttie petition shall be filed in thé RTC which has
claims in the disposition of its assets (PDIC LAW, jurisdiction over the principal office of the closed bank
Sec. 16(g)).
* ’
■ s; 4 ..
• •
’ or the principal office of the receiver, afthe option of
• . * • / •• . * / •• • the latter (PDIG LAW, Sec. 16(j)). ' • ' •
Liquidation Court
A liquidation court refers to the RTC where _the^ a Liquidation Court /. J ‘ .
petition for assistance in-the liquidation jidation. ^àPclosedJ T^Trieiliqutd^fion' court shall:
bank is filed and given due course ;e (PDJÔLAWT.Sec. X^fAçijydfcatejXiisputed claims against the bank;
X % j^^“~^^^sis^hn^;Ænf6rçemént of individual liabilities
■ Jurisdiction over all persons /¿affecte the .. df^h^topKnotders, directors and off ice rs; and
proceeding shall be considere^as^dqpfred^pohT^g . ‘bedde^ri.alLother febues. as may be material'to
publication of the ordér sétti.pg^^ cáse¡¿for. ziz'” initial
!"ÎWo1 "jf "^7 implement the distribution plan (PDIC LAW, Sec.
hearing in any newspaper of general circulation itipn in the ifA ’ ' ••
Philippines (PDIC LA W, Se^^t&fg))^ « L__ ___
‘ Il 'll • 1 I *1 • General ‘Procedure Proceeding for Judicial
Exclusive jurisdiction of liquidation court <¿7 7- Assistance in tKe Liqyiciation ‘
All claims against the bank shdujd be jil^d
liquidation proceeding (In fi&~Petifloriñ>r A^sistanc^d ^.ÆiLe/^fiérteiipetitioq within a reasonable period
in the Liquidation of thé 'R^ral^anli^f^BOKOEhj y peipt^'ofi the ^Monetary Board Resolution
(Benguet), Inc. v. Bureau ofí/ntér the.pank Uncler liquidation; ’ .
ì.Hj
Nd: 158261, December 18, 2006). ■*../, . -^vKgrsons orentitiesfwith
hs or eniiues.<v claims against the assets
; ‘ f * «file
closed baptc 'shall • * • their• claims,
« •
...
with
* * the
A«
When the action involves a clainl^of the Bapk within^sixty (60) days from the date of
. another person or legal entity, it shall be^filed.j^ ^^^^T^^bKcaïibp-of’the notice Of çlosurë. /
J 'appropriate court (ManalovCA, ......
October 8, 2001). / /k \NQte¿5*.^laírhs íile<í. °utéide 'the foregoing
. 7 ' IVlf \íy-,es'críbed period shall be disallowed..
r Reason: To prevent.multiplicity of actions against thé' \ ¿ -, • -i
insolvent bank and designed to establish due process æ Uponfinahty.of theprdet.approving thefinal,asset
■ and orderliness, in thé ¿liquidation of the bank, , to ■ distribution plan, the petition for assistance in the
obviate the proliferation of litigation and to avoid liquidation pf à closed bank shall be considered
injustice and arbitrariness (Ong CA, G.R. No. ; , closed • arid ,terminated and the receiver,, its
112830, February 1, 1996).\ . officers, employees or agents, are forever
discharged from, arty and all claims and/or liability
Exceptions: (Fll) arising from or in connection with the-liquidation
» . 1.= When re-filing and re-litigating the pending case : of the closed bank. .
• • •• • • . •
. v .
t

before the liquidation court would be an exercise Note: In case thé validity of the.claim has not yet
Futility in view
in futility viewof of the number of years the case
the’numberof beenbeen determined, withfinality
determined at the
with finality attime of theof the
the time
has been nn
hoc hbon on Inor
trial arid
and thetho. additional
arinitmnal expenses tn to . •’
■submissiohof
•submission
i

tlie final
of tpe
r

finai asset distribution plan; the ;

S:/ Ai •
’ <*:'• / ••

the partywho is living in poverty. (Valenzuela v.. - ■: . claim shall be considered -as contingent clairti '
, CA,G,R. No. L-56168, December 22, 1988); shall hot be paid under the proposed final
and Shall
2. When moré Inconveniences would be caused to _• • • • -

asset distribution plan.;

_* • • _ . ’

:
• •• ’

the parties, entailing waste of more money and • ’ ’

ï 1 •

•
* • • .* I •*

. •••
%

precious time (Carandang v. CA, G.R. Nd. L-. ■ The receiver shalj submit à final report on the
’ 44932, April 15, 1988);.'and . implementation of the approved ’ final asset
distribution plan to the Monetary Board and the

406 | 2019 SAN -BEDALAW CENTRALIZED BAR OPERATIONS

 BANKING LAW
SÀN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 201?

SEC.after the expiration of the winding-up period a term of 6 years without reappointment (PDIC
(PDIC LAW, Sec: 16). -■ LAW, Sec. 3(a)).
A

Qualification Of Regular Members: (GIC-35): .'

1. Good moral character; \
PHILIPPINE DEPOSIT 2. Unquestionable Integrity and responsibility;
INSURANCE CORPORATION 3. Recognized Competence in economics, banking
^:ACT and finanpe, law, management administration or
insurance; and u ; .. E?
(R.A. NO. 3591, as amended) 4. At least 35 years old (PDIC LAW, Sec.. 3(a), par.
■' 2). . T? • • ' ' .
Note: For the. duration of their term and.for a period
Statutes Philippine
of 1 year, the non-ex officio members of the Board
Deposit Insurance• 7 \
' shall be disqualified from.holding any office, position,
1? R.A. No. 3591, or An Act Establishing . The;
or employment in any insured bank (PDIC LAW, Sec. >
Philippine Deposit Insurance 7 Corporation, -
■ 3(a), par. 2). . :}. •:
Defining Its Powers And Duties And: For Other
Purposes (JUne/2^, 1963); ;'. t
Functions of the PDIC:-(ELIAR2) '■
2. Acts amending RiA. No. 3591:
Bank Examination (PDIC. LAW, Sec. 7);
a.. R.A. No. 6307 (August4, 1969)
2 Liquidation of Closed Banks (PDIC LAW, Sec. -
b; P.D. No. 120 (January 29,1973); ’
P.D.'No. 653 (February i,.i975); io). ■.<>
3. Deposit Insurance (PDIC LA W, Sec. .1).
d P.D. No. 1094 (February 18, 1977); .1 A-«- 4
4. Assessment (PDIC LA W, Sec.6); ' .
e P.D/No. .145.1 (June 11,1978);
Bank Rehabilitation (PDIC LAW, Sec:6); and
P.D. No. 1897 (January 11,1984);
pM6— Receivership of Closed Banks (PDIC LAW, Sec.
I:

g- P.D. No. 1940 (June 27, 1984);

' h. .: P.D. No. 1985 (October 4, 1985^^
R.A. No. 7400 (April 13, 1992)^^ <
R.A. No. 9302 (JUly 27, 2004g>
R.A. No. 9576 ; (April 29, ¿Jp^)fahd^
k
R.A. No. 10846, AnTAct fert^anclrig The .
Resolution And Liquid^ibn^Sniework For
Banks, Amending For The Purpose-Republic
Act No. 3591, As Arft^nd^^Artd Other
Related Laws (May 23, 2016)r ••W V
PHILIPPINE 'DEPOSIT ^^RANCE.
THE PHILIPPINE
CORPORATION (PDIC)
Purpose of PDIC: 7 .
■; 1. Strengthen the mandatory deposit‘coverage
system;:..'/’...
2. Generate,' ' preserve,;:' maintain faith and
, confidence in the country’s banking system;' :
3. Protect the Philippine banking systém’from illegal
' ‘ scheme's and machinations; and;’. ••• ■ " ' . 7 . • ' • ’ closing (PDiCLAW, Sec.22(e)). j
4. Promote and safeguard the Interests of the •
. depositing public by way of providing permanent ' ■
arid continuing insurance coverage on all insured
\ deposits (PDIC LAW; Sec. 2). ‘ ''
r Composition of Board of Directors p '•
• •
.’ id)7~::::J:y^ .: . 7 -
1 Bank Examination •
■ Under the^neyv la^w,V PDIC
P • « ’s authority
• - to examine
a « its «
member^an^s, with prior approval by the MB, has
I been'.restoredlfPD/^ LA W, Sec. 7).
Power tb'Maka. EmergencyLoans \ •->
The PDIC is authorized to make loans to, or purchase
nr,assets of, or assume liabilities of, or make deposits
“‘^^^•■^A^b'ahlrin danger of closing, upon its acquisition
L ... ' :by a qualified investor; or •„ ’<«• l
2., A qualified investor, upon its purchase of ail
assets and assumption of all liabilities of a bank
in danger of closingi-or . '' •
3.:. A surviving or; consolidated institution that has
. -merged or consolidated with a bank in danger of
’.L .'
Such loan shall be upon such terms and condition ias .
the Board of Directors may prescribe, when in the ,
' opinion of the Board of Directors, such acquisition,
purchase of assets, assumption of liabilities, merger
/ ■ or consolidation,. is essential to provide adequate . :
* •

‘ 1. lSecretary
' of Financedex-officio Chairman of the banking service in the community or maintain '
Board without compensation; • .. - < financial stability in the* economy (PDIC LAW, Sec. . "
2 Governor of the B.SP, ex officio of the Board , ... - 22(e)). : '• ‘ J
*. •• • * • • • K
****•« •• % 9 . e 9 e • * * ^* * • •

■■ without compensation; •;
3. President of the PDIC, who shall be appointed by Note; .The BSP may. lend funds to the PDIC for »
BANKING LAW

the. President of the Philippines to serve on full- /.
time basis for a term of six years. He shall also
be the Vide Chairman of the Board; and >
4., 4 members from the private sector, to be
appointed by the President of the Philippines for
insurance purposes and in. cases of financial
assistance that the latter is authorized to extend:
under Sec. 22 (e) of R.A. No. No. 3591; as amended
(NCBA, Sec 8d-B).-.\ ■ .

2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS . | 407

 BANKING LAW
S4N BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019

Systemic Risk Note: Subject to the approval of the board of the

There is systemic risk when there is a possibility that
the failure of one bank to settle net transactions with
other bank will trigger a chain reaction, depriving
other banks of funds lending to a general shutdown
of normal clearing and settlement activity. It also
means the sudden, unexpected collapse of
confidence in a significant portion of the banking or
financial system with potentially large economic
effects (PDIC LA W, Sec. 22). - ,
SCOPE OF DEPOSIT INSURANCE
Nature ‘ •
Compulsory insurance on all bank deposits. (See
PDIC, any insured bank which maintains a
branch outside the Philippines may elect to
include for insurance its deposit obligations
payable only at such branch (PDIC LAW, Sec.
5(g))..
- Amount of Insurance Coverage,
1. General Rule
the compulsory insurance shall cover the net
amount of .a deposit account in an insured bank,
after deducting, any .offsets, not exceeding
P500,000.00 (PDIC LAW, Sec.5(j)).-,
r
•
• *
*
«

PDIC LAW, Sec. 6). . ■ ' 2.Multiple Accounts

* •* 4 *
* •
If a depositor has two or more accounts with the
All hanks shall indicate the coverage of the PDIC. in same bank, the maximum coverage pertains to
each passbook, certificate of time deposit and/or the sum of all such accounts maintained in the
cover of checkbook for demand deposit/NpWj- ;=~ _ same right and capacity,, even if placed in
accounts stating the maximum amount of insurance^ > different branches (PDIC LAW, Sec. 5(j)).
(MÓRB.X262.2). ' ' ‘ K

Specific Risk Insured Against . A^joiht account regardless of. whether the
The risk insured against by dep^it'ihs^^bej^bank^'’ '^ “ani “or“, “and/or" is used, shall be
.. . '■ I : P < X deposit acco.Snt^lC LAW. Sec. 4(g))-.
Assessment of Premium Æ . # .. I ÆA
The PDIC assesses and collect^fìBtórance:premiurns i ; Where an accept!^jointly owned, the maximum
I .

from member-banks to ^insure,membef-6aiB<s^ . ^Sfisurpd. deposit stjajl be divided into as many

deposit accounts (PDIC LAW, Seb|7/-. '1 - , • és| bsMh^re are individuals, juridical .
per entities, Unless a different sharing is
Extent of Insured Deposit^. ? J ‘sti irf .’the^ocument of deposit (PDIC
The unpaid balance of. mgney^p^ its^egUiyalenM â
received by a. bank in the usüal course ofi^jféïnesÿ
for which it is obliged to give credit to à^çomt ^Ndfe; lithe account is held by a juridical person
checking, savings, time or thrift account, 0^ isszuJ^i^5Ç:^^^$.i>éntity jointly ^th one or more natural persons,
. accordance with BSP rules and r^ùlation^^hd.^tner~£iS..^^t^e'maj^^rigi
v insured deposit shall be presumed,
applicable laws, together, with such ìòtheRÓ7bligatiòhs -^to;ttólong entirely to such juridical person or entity *
Of a bank (PDKÏ LAW, Sec. 5(g)). -. 7*%^C/J / SeC' 4®>: ' ;■

Exclusions from Term Deposit”: : . #r Foreign Currency Deposit Accounts ,r

PDIC shall not pay deposit.insurance for the following Foreign currency deposits are covered.under.the
accounts or transactions whether denominated, provisions of the PDIC Act ,and insurance
documented, recorded or booked as deposits by the payment shall be in the same currency in which
bank:1. the Jnsured deposits . are. denominated (BSP...
1. Investment , . products . * such as bonds and .CircularNo. 13&9; Sec. :79).:.i.
; securities- trust ' accounts, ■ and other similar Note: Thé PDIC. law is riot applicable to Offshore
1
instruments which do not fall under the definition Banking Units (PD. Nò. 1034, Sec. 8). '
. of a deposit; •- ■■■ '■
• • • • •• • • e

2. Deposit accounts, or transactions which are Requisites of Splitting of Deposits or Creation of

unfunded, or are fictitious or fraudulent;
3. Deposit accounts or transactions constituting/
and/or emanating from, unsafe and/or unsound
Banking Practice/s after due proceedings;
Deposits that are determined to be the proceeds
of an Unlawful.Activity as defined, under R;A.
7 9160; / '•
5. Obligations of a bank which is payable at the
office of the bank, located outside of the
Philippines (PDIC LAW, Seo. 5(g)).- •
Fictitious Loan or Deposit ■ ■ • '
1. There is a deposit account with ah outstanding
balance of. more than the statutory maximum
amount of insured deposit maintained under the
name of natural or juridical persons; .
2. - Such deposit account -is broken down and
.. transferred into two or more accounts; -
3. The transferee accounts are in the name/s of
’ persons or entities who have no beneficial '

408 | 2019 SAN- BEDA- LAW CENTRALIZED BAR OPERATIONS

•• •
 BANKING LAW
S/W BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019
SS
ownership on the transferred deposits placed in or record of the closed bank shall be conclusive
their names; evidence of ownership of such account (PDIC LAW,
4. The transfer is made— ■ Sec. 21(c)). ....
a. within 120 days immediately preceding a
bank-declared bank holiday; . The PDIC or the insured bank-cannot be required to
b. during a bank-declared bank holiday; or recognize a claimant whose name or interest is .not
c. , immediately preceding " a closure order disclosed by such authentic document or record as
issued by the Monetary Board of the BSP. owner óf a part or whole of the deposit account, if
5. The transfers were for the purpose of availing of such recognition would increase the - aggregate
the maximum deposit insurance coverage (PDIC amount of the insured deposits in such closed bank
- LAW, Sec., 26(f)(1)(e)). (PDIC LAW, Sec. 21(c)).
/ •
" - .• » ••
'S'. ?. . •

Penalty for Splitting Deposits ■ Na owner/holder. of any negotiable certificate of

The penalty of imprisonment of not less thansix (6)
years but not more than twelve (12) years or a fine of
not less than Fifty thousand pesos (P50,000.00) but
not.more-than Ten million pesos (P10,000,000.00), or
both, at the discretion of the court, shall be imposed
upon any director, officer, employee, dr agent of a
bank who shall.allow.a depositor to create fictitious
fraudulent loans or deposit accounts. (PDIC LAW,//%
r Sec. 26(f)(1)(e)): ■ . '
\ i
deposit shall be recognized as a depositor entitled to
the rights provided unless his name is registered as
owner/ holder thereof in the books Of the issuing bank •
(PDIC LAW, Sec. 5(g)). - • " •
Exceptions:.
1.. When otherwise prescribed by the PDIC Board of
Directors; or -
2. When the undisclosed claim or interest will not
. I

Note; Th© depositor or borrower hirnsotf C8H3l§0\b6;. ! increase the

.111^155.000 urc ayyicycnu amount ui
aggregate aniuuiit of.; the insured
mo iiiouiou
punished for “conspiring or willfully participating,Tri
punished, participatinjg^in^ closed bank (PDIC LAW, Sec..
any of the offenses enumerated in Paragraph
section” (PDIC LAW, Sec. 26(f)(1)(e)).
26(f)(1)(e)) ' A ’I' . . •/
- ■' ■. • • . (

. Remedy from!! penial of Claim

SETTLEMENT OF CLAIMS - - . ( The PDlC'sfaction to deny a deposit insurance claim,
Power to Deny Claims ‘ is final
___ — and- executory and may be reviewed only on
b --sr. ________ ■■■— _____________________

PDIC,- as a q.Uasi-judibiar-ag'enc^<exercj^s?jOdicial |’M the §rave abuse of discretion thru a petition

thio ground of §rave^abuse
discretion and judgrrient in determining^whether er t'S for certiorari - ..before
«r the CA (Peter. L. So v. PDIC, G.R. _
claimant is entitled to . a deposit'Trisur^pce claini; l||. No, 230020',^MaYc^^
which determination results froftijts Mvestigatidn?6f W. <
facts and weighing of evidence presented; hefpr^it Manner of Payment
(Peter L, So v. PDIC, G.R- No. 230020, Inarch 19, ^/t^Cashror
2018): . :■ 1 A deposit in an'insured
• ' - • • • • » . •
z^r, •
.„.muv available to a depositor by the PDIC
Period to Claim Insured Deposit ' ' as - payment of the insured deposit of such
• • «
The depositor , is barred from claiming vthe insured •- . depositor in a'closed bank and assumed by
deposit if he/she fails to----
• • • - •
— " / •<
*
\ ' • another insured bank(seePDICLAW, Sec. 19).
1. File the -'claim within two years, from actual 1 ; ’
takeover of the closed bank by PDIC; or . Effect of Payment by PDIC to the Depositor of His
2. Enforce, within two years after the expiry, of the Insured Deposit:
two-year period above, any unpaid claim filed 1. Discharges the PDIC from further liability (PDIC
within the two-year-period. (PDIC LAW, Sec. • LAW, Sec. 21 (b)): •. ' - . <• ,. ' .
. . 21(e))/..........................
i
2.1 Subrogates the PDIC to all the rights of the
depositor against the closed bank to the extent of
Proof of Claims such payment (PDIC LAW, Sec. 20).
1.. PDIC may require proof of claims to be filed • • • $• • • 4 . r e •’ • .

before paying the insured deposits; ; ■• '. . - - Claim of PDIC Against Closed Bank Deemed
211 In any case, where it is not satisfied as to the : Preferred Credit tinder Art. 2244 of the NCC-
. •• •. . . * - ; . 1 •• ' • •

viability of a claim for an insured deposit, it may' .¿ •Upon payment of the deposit insurance claims, the
require , final- .determination of a - court , of PDIC is subrogated to the rights of the insured
competent jurisdiction before paying- such claim depositor against the closed banks. The claims of the
■ (PDIC LAW, Sec. 19). PDIC against the closed bank partake of the nature .
BANKING LAW

of public funds, and as such, must be considered a

D

Recognition of Owner . preferred credit in .favor of the PDIC under Art. 2244
MEMO RY. A l

• The name of the owner/s disclosed on a passbook, of the Civil Code (PD/C-MIV, Sec. 20).’
• • •

certificate of deposit, or other evidence of deposit

determined * by• the• PDIC to• be an authentic_ • document
•

2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS I 409 '

 BANKING LAW
•
SAN BEDA LAW CENTRALIZED
e * *
BAR OPERATIONS
•
- MEMORY AID 201$)

Statutory Liability
The liability of the PDIC rests upon the existence of TRUTH IN LENDING ACT
deposits with the insured bank, not on the (R.A. NO. 3765)
negotiability or non-negotiability of certificates
evidencing these deposits. The fact that a bank
instrument provides that the certificate is insured by... Purposes of Truth in Lending Act (TLA): (PAA)
the PDIC does not ipso facto make the latter liable for 1. To Protect a debtor from the effects of
the same; the deposit liability of the . PDIC is misrepresentation and concealment;
determined by the provisions of R.A.NOi 3519 (PDIC 2. To Allow him to.fully appreciate and evaluate the
v. CA, G.R. No. 118917, December 22, 1997). . real cost of his borrowing; and ■ ' . .-
3. To Avoid circumvention of usury laws (TLA, Sec.
v ,•" . .•":■■■' ■
•..Even if the bank has knowledge that it shall be under
receivership, it does, not ipso facto mean that the • •
• • r»
•
’• V,
*
*,
•

z •
• »

depositors also has knowledge of such. Thus, they Implementing Authority.

can still, engage in business transactions in course of •' Monetary Board of the BSP (TLA, Sec. 5). h

business as long as they.acted in good faith-and did

not know such closure. Therefore, such deposits Applicability of TLA . " . ' K
made in the period shall • be covered by deposit The laSv applies to creditors who extend loans, sales
insurance (PDIC v. CA, G.R. No. 118917, Oecem^erL^^installments, and other credit transactions. It
22,1997). ..
’[ T âppyes^ojily to cases involving an extension of credit,
. VJ ^rt^/notto^thoSe in bash basis (TLA, Sec.3, par. (4)). ■
Recovery of Deposit Not Govered.by<lnsW§nc^^:7-s^-%-^ J <^^4. ? • ■
In case the depositors
depositor’s account^'j^
accouri moVp/thdii’ the — . ‘\Credit’7 as usecf>ih TLA, means: (C?A2ROL) .
insurance Coverage, the -•bal^ncë<^^^tUl^b^“^7^?';fciGbpdÎtLgnarsales contract;;
recovered from the PDIC afte^^final^liqui^ation^f Kr. ■ Cohlrac^tOçs'eÈoh contract of sale of property or
the remaininging assets of the cipsed'bapk (Pp'IC LAW, services;
Sec. 20) ■■ •; /’Ok 3. • Contract oLafrarigehient for the hire, bailment or
t i ii lai ayV 1
nm u n’ u'1 c
•HbwwHCw»----------- ** Vi ’ »
. teasing of property.; fl . ■ ■■■ 7.-'
/ • i

Prohibition against issuar ^.^■^cqujsifioh or purchase of any credit upon

No court, except the CA, shaHL ié any temporary secU^ty pf anVbbligation arising out Of any of the
restraining order, preliminary irïjùpqtipn ir^reliminar^i
• ) •

mandatory injunction agains^f îsacfiôm^/ith Similar purpose or effect

. - action under this Act. This.prql ufçndsé contract; •. "
cases, disputes, or control %« 1, demand,/lien, pledge, or other claim ..
private party, the insured bank^or any sharehob £oK, ^^^ J^’againstol for th^delivery of property or rnpriéy;
the insured bank (PDIC LAW, s'ec. 22). '■ • • • • ■
of trust, advance or
The Supreme>Gourt may issue a restrair déH3^^ (^LA) Séc. 3, par. (2)). ' < ? ./
injunction when . the matter is of extrè ■qéncv Æ ■■■■■'
involving, a constitutional issue, such thaCtinlje^s. a L
temporary’restraining order is issued, grave injustice^”'-' Any person engaged in the business of extending,
and irreparable injury will arise.Jthé party applying .for credit who requires as an incident to the extension of
the issuance of a restraining order conjunction shall credit, the payment of a finance Charge shall be
file a bond ,in an amount to be fixed by the Supreme deemed à creditor (TLA, Sec.3, par. (4)). ' < <
Court, which bond- shall accrue ; in . favor of the
Corporation if the court should finally decide that the Creditor shall include any person who, as a regular
applicant was pot entitled to the relief sought (PDIC business practice, makes loans, or sells or rents
: LAW, Sec. 27)i .•-</ . • '. property or services on a .time, crédit or installment
• ’ ’ . •• • • • \ *- L basis either as a principal or as an agent (TLA, Sec.3,
•J
I J 4

par. (4)). ■ A; •••/• ' / • '

\ r •«. , • M. . ' . / u *

K
Disclosure Requirement \
The creditor shall furnish the debtor, prior to the
consummation of the transaction, â written statement
containing: (D3-CAFP) - ,
1Caph price or Delivered price;
2. Amounts, if any, to be credited as Downpayment
• and/or trade-in;■ .- -,
3. Difference between the amounts in (1) and (2);

410 [ 2019 SAN BEDALAW CENTRALIZED BAR OPERATIONS

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BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019 ,

Charges which are paid or to be paid by the 4. The creditor is liable to the debtor for P100 or an
debtor not incident to the extension of credit; amount equal to twice the finance charge,
5 Total Amount to be financed; . whichever is greater, . plus attorney's fees,
6. Finance charge - amount to be paid by the debtor provided that liability shall not exceed P2,000 on
; incident to .-. the extension of credit such as any credit transaction TLA,. Sec. 6). ' ; . '
interest, fees, service charges; collection 5.. The creditor can be held criminally liable: The
charges, discounts; and such other charges seller/lender, if convicted, may be imposed a fine
incident to the extension of credit; and ranging from, P1,000 to P5,000; or imprisoned
from six months to one year or both. (TLA, Sec.
.; Note: - The imposition of interest and finance
charges is VOID if not disclosed in the disclosure 6. A final judgment.in any criminal proceeding under
statement (Heirs of Espiritu v: Landrito, G.R. No. the TLA shall be prima facie evidence against the
■' 169617, April 4, 2007): . , defendant in an action brought by any other party,
' " •• ■■■■■• '■ ' ' '■ ' ■ . '■ ■ ' Z • f
against such defendant under .the TLA as to all
; Although penalty charges are not stated in'the matters respecting which said judgmentwould be
disclosure statement, reference to the penalty an estoppel as between the parties thereto (TLA,
charges in the promissory note, constitutes Sec. 6).\
substantial compliance with the disclosure *
• J
’
••
‘
• * 4 **•
•; • - • \ • ( ■’
•
. «

requirement of the TLA (BPI v. Spouses Yu, G.R. Action to Collect Penalty ;
No. 184122, January 20,2010). ' ' The action to recover the penalty [mentioned in No. 4
■ '■ ’■ r ' ■ ;1 M above] must be brought within one year from the date
' ‘ Even if disclosed, exorbitant interest rate may be of violation (TLA, .Sec. 6). '. . .
...declared unconscionable (SUNDIANGi^>&
AQUINO, Commercial Law, supra at 369). • : f><-
>■
LThjs^action may be instituted by the aggrieved private
T
J ír/.t
I ¿¿pér^Qr^separately .and .independently from the
7.. Percentage of the .finance charge tp- amount criminal' cáse for the samé offense (UCPB v. Spouses
. financed (TLA, Sec. 4), ■' T'. z7, ‘ -z\- Beluso, G: R¿l¡/b. 159912, A ugust 17,2007).

'.. . Rationale of Disclosure Requirerpdnt
To protect users of credit from aTacti of awarenesS/Of
the true cost thereof, proceeding fromWe experience
that banks are able to conc^l ^Efcfi Tru^ cdst -by
hidden charges^ uncertainty ^of Jriterest r€fee,
deduction, of interests from the loarifedianidunt, arid .
the like (UCPB v;. Spouses Beluso, 'G.F^. No; )59912,
. August17, 2007). • ^TT^uirdhjpjpt cannot be., deemed , in.: substantial ■
The law thereby seeks to protectyj debtors by
permitting them to fully appreciate the trjjp’ jqost of
their loah, td; enable them to give full consent to the
contract, and to properly evaluate their' options in
arriving at business decisions (UCPB v. Spouses
. BelUso. G.R. No. 159912, August 17, 2007): . > •
4 Note: No.^unishrfjpnt or penalty provided, by the .TLA
¿4. '.shall? ápply to- th<^ Philippine Government or any
7 agency dr anyspolitiqal subdivision thereof (TLA, Sec.
7 Subsequent Compliance
^-Sub^equent compliance .vyith the. i disclosure
TLA (UCPB vi Spouses Beluso;
G.R. No. 159912, August17, 2007). ....
Note: There is noi compliance when bank gayé the
details only after the demand for payment was being
■ made;. (SUNDIA^G & '. AQUINO, ■ . Reviewer on
Commercial Law, supra at 371),; „.

Escalation Clause on Interest . j. .■ .

f

‘. TLA may. also be. violated if the agreement provides ..;

a
**• .* • * 1 \ ' * * * « . • .• ■ 9

*
r-
for an? escalation, clause- on interest which < is UÏTRJrIT AKnKTQ APT OÍ7 -f009 “
•

dependent solely Q.n the will of the bank (UCPB v. •

■
(R.A. NO. 7353)
Spousds Beluso, G.R. No. 159912, AugUst 17, 20Q7).
• • f .*’*

w•
« ,

■' ■■■ ‘ •.

Effects of; Non-disclosure .• ., .• Declaration of Policy . .,

1; > The. validity or enforceability of the contract or T. To promotei.a comprehensive rural development <•
. transaction is hot affected (DBP v.. Aucilla, Jr., with the-end in view of attaining a more equitable -
. G.R. No,161397, June 30, 2005). distribution of opportunities, income, and wealth
2, The- lender* will , have no right to collect the (RA. No::7353, Sec. 2);:: ‘ 7
BANKING LAW

charges or increases, even if stipulated in the 2, To formulate necessary rules and regulations I
^..promissory note (DBP v. Arcilla, Jr., G.R. No.
MEMORY AID

governing establishment and operation of j

161397, June 30,2005). ' farmers and. merchants, or to cooperatives of
'..3. Debtor may recover any interest payment made ; such farmers and merchants and in general, to •
. (TLA, Sec. 6). .' . the people of the > rural communities, and to •
.-...I

2Q19 SAN BEDA LAW CENTRALIZED BAR OPERATIONS I 411

 BANKING LAW
SAN BEDA LAW CENTRALIZED.BAR OPERATIONS - MEMORY AID 2019

supervise the operation of such banks (R.A. No. acquire, or purchase up to 60% of the voting
7353, Sec. 3).' stocks in a rural bank;
• , 4. If the subscribed capital stock of . private
•

Primary Function of Rural Banks shareholdersV'. kJ?cannot'A be .

secured, • is• unavailable,
• •"
iVNjOT. Prohibited
. 1. Credit and Loan Facility - or insufficient to meet the normal
j ^.Aq^appointive oFcredit needs
elective of official is NO
public
To meet normal credit needs of: ' , X.. the locality, , the Land Bank
§>seiting as of the Philippines
director, officer,
a. farmers, fishermen or farm families owning or .. (LBP), the any Developrrient
capacity inBank ofthe(R.A.
the bank Philippines
No.
cultivating land dedicated to agricultural (DBP), or any government-owned or controlled
I . *"• * •

production (R.A. 7353, as amended by R.A. bank or financial institution sh.all subscribe to the
No. 10574, Sec. 6); ' < • ’ capital stock and pay in full the unimpaired capital
b. cooperatives and merchants (R.A. 7353, as > ; or amount as the^MB may determine; and
amended by R.A; No. 10574, Sec. .6); and 5 Registered stockholders of rural bank shall have
c. small business enterprises in an amount not the right of preemption within one (1). year from
exceeding 15% of the net worth of a rural the date of offer in proportion to their respective
bank. (R.A. 7353, Sec.7). • . holdings, but in the absence of such buyer, -•
•2. Guaranty Unregistered Land . .preference, however, shall be given to residents
To provide security for: : of thelocality or province where the rural bank is
a. Private unregistered land where the owner located (R.A. No. 7353, as amended by R.A. No.
can show five years or more peaceful^: .^;1()574,Sec.4).: • ’
continuous and uninterrupted po's^ps^^in^ . „ ~
concept of owner; .' ¡X LJ• Board-of Directors
b. Portions of friar land estates^ o^ot^eÿ, la^s^-^^^o^èilipi^o^ciT itizens may become members ofthe
administered by the Bü.reau\.jM^Éi.dS ; Board-. o.f^irÉS irecti^ of a rural bank, provided their
covered by . sales i<is>limited, __ to the proportionate share of
purchaser has paid/a0leasF five yéare :V' foreign ^quity^ini<f^é^ural be bank (R.A. No. 7353, as
installment théreon; /f ./ K' «¿gk amended,by R^Noz40574, \0574, Sec. 5).
Portions of other?, estates .under the/O\ | ¡TVa
administration of the Department otf Agrarian 1i Public Officials U
Reform or other govefnmedt agenèy çôvêïèdà | s v ...
by sales contracts?Iand4^e purchaser ^prohibitè
paid at least five ÿèârsdri,stallrnéftkthereof^r^ecéonsùltr’
(R.A. 7353, as amet?
Sec. 6). o'
Transactions
Features of a rural bank (SI officejK’of any rural bank shall, either
1. A. Stock corporation (R.A Ifcr^birbipt^/ pr indirectly; for himself or as. the
by R.A. 10574, Sec. 4); .. ¿□reagent of another borrow any of the
2. Exempt from the payment of al^taxestfees^rid^ Sis of such banks, nor shall he become .
charges of whatever nature and^^eé'cr[ption, * aX^uarahtoi^indorser, or surety for loans from such
except thè corporate income tax .and lòcàkfàxes, Xa'nkl<to!Òth’érs, or in any manner be an obligor for
fees and charges, for,a period of 5 years from ^^"'’"^moneyborrowed from the bahk or loaned. •
: date of commencement of operations (R.A; No. • •• • • e •

7353, Sec. 15); arid ' / . ; ’••. • Upon written approval of the majority of the directors
3. Allowed to Foreclose lands mortgaged to it .• ofthe bank, excluding the director concerned (R.A
including lands covered by. the Comprehensive Nò. 7353, as amended by R.A. No. 10574, Sec. 5),
Agrarian Reform Lawor.R,A. No. 6657 (R.A, No.
7353, as amended byR.A. No. 10574, Sec. 6). Subsidy Loans to Rural Banks ..
• •* / • • • • * 4« • / • The Land Bank of the.Philippines, the Development
••••**•• ’ *

Special Rules Governing Rural Banks ’
1. Certificate of Authority shall be first indorsed by
MB before a rural bank can operate;
2. Duly established cooperatives and corporations
• primarily organized to hold équitiès ih rural banks
may organize a rural bank and/or subscribe to the
shares of stock of any rural bank only upon
, consultation with existing rural banks in the same
area. . 1. The MB is convinced that the resources of the
3. Nb less than 40% bf the voting stocks, shell be
owned by Filipino ; citizens, corporations, or
, ■- associations. Non-Filipino citizens may own,
Bank of the Philippines or any government-owned or
-controlled bank or financial institution shall, within 60
days of certification of the MB, which shall be final,
extend to a rural bank a loan or loans from time to .. .
time repayable in 10’years, with concessional rates
of interest,, against security which may be offered by
any stockholder or stockholders of the rural bank, ’
Provided: •
• rural bank are inadequate to meet the legitimate
credit requirements of The locality wherein the . ■
rural bank is established; .

412 | 2019 SAN BEDA LAW CENTRALIZED BAR OPÉRATIONS

 BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORYAID 2019

2. There is a dearth of private capital in the said 2. Accept savings and time deposits; and '
locality; and • . . 3. Rediscount paper with the BSP, PNB, or other
3. It is not possible for the stockholders of the rural Banks and their branches-or agencies (R.A. •
■ bank to increase the paid-up capital (R.A. No. 4093, Sec. 7), •
7353,.SCc. 14). ' *
• • Subsidy Loan to Private Development Bank
Emergency Loans to Rural Banks The Development Bank of the Philippines (DBP) shall
The BSP may also grant a loan to rural banks, during be permitted to extend to the private development
an emergency or when a financial crisis is imminent, banks a loan or loans from time to time repayable in
by a vote of at least 4 members of the MB (R.A. No. • ten (10) years with interest at the rate that may be
7353, Sec. 16). ' •’ . agreed upon against security, if any of the following
occur: ' • • - ■ ■■. :■’
1 The DBP is convinced that the resources of the *
private development bank are inadequate to
PRIVATE DEVELOPMENT meet the legitimate credit requirements of the
BANKS ACT ... locality wherein the private development bank is
established; ■. • ‘ •:
(R.A. NO. 4093) 2 There is a dearth of’private capital in the said
_______ : 2, - x t ' '______ • ________________
locality; •.
3.. It is not possible for the stockholders of the
Declaration of.Policy private development bank to increase the paid- ■
1.. To promote and expand the economy of.'the'" up capital (R.A. 4093, Sec. 8); or
country pursuant to the socio-economic program ■ ’ ' When a financial crisis is imminent (R.A. 4093,
of the Government;' . -• . . ' Zw-Sec.
2. To expand the industrial and Agricultural growth;
and'. ’
3. To encourage the establishment pPmore private II
development banks in, order to mëetThe needs- •J , SAVINGS and loan
for capital and demands for adequate;investment \ U' A ’ ' ~ . •• •

credit or medium-and long-term-loansjcj-^ilipino f A

- entrepreneurs (R.A. 4093jj&c. 2).^^ ■' ■
• zs . .. - vT .. ■ !•/$
Organization ... ZZT J:

1. A- / pri vate development ^bajgl^^shall ne.‘ * W Declaration of Policy

incorporated under the provisidris^of tbexGeneJfal 1. To regulate and supervise the activities of
Banking Act (GBA) for mortgage b^nkspind J^j^ings and loan associations; . .' . •
.2. It shall exercise ail the powers arid-assume a^t|).eii-h^ i^XldipiMde for an additional credit, and savings
obligations of a shortage bank. ‘ facilities in a fair mariner.to the consuming public
'.' and to industry, commerce, and agriculture;’.
Note: Certificatepf authority;from the MB'of the BSP 3. • To curtail or prevent acts or practices of these r-
shall first' be obtained before it can operate -(R.A. savings arid loan associations which are
4093, Sec. 3) Ì
prejudicial to the public interest;’,
?

4. To maximize thè protection Of thè public,, and of

* • •
• ’ .1

Features^ membèrs arid stockholders of savings and loan

i Stock Corporation (R.A. 4093, Sec. 4), ' . ’ ' associations against t misfeasance < and
2. . Paid-up capital shall not be less than: ?. malfeasance of the directors and officers’ ?
a. P 4,000,000.00 for. class Aj' ■ K ; •_ (R.A. 3779, Sec. 2). " •’ ‘ .
b. ’.P 2,000,000.00 for class B; ànd ; ... " . ” • z ’ • •• • •< . -
c. p 1,000,000.00 for Class C (R.A. 4093, SeC. Éléments’ for Entity to be Considered as
^/and.: , ... : ■■ . / Z. Savings.and Loan Association t • .
3. At least 60%. of the capital stock subscribed by 1. Accumulates the savings of its members or
the private sector shall be owned and held by stockholders; . . • ’ '
' citizen of the Philippines (R, A. 4093, Sec. 4). - : 2. Uses thè accumulations, together with' its capital
. in the Case of a stock qorporjat^
Powers of Private Development Bank (CAR) ' and/or for investment in the securities of
1. Act as Correspondent for other financial . productive enterprises ór the. Government; and
BANKING LAW

institution and as collection agent whenever there 3. Caters the needs of households by providing
A ID

is no rural or commercial bank existing in the personal,;finance and; long-term financing for
locality; .. home building and development (R.A. 3779, Sec.
S .«M EM ORY

■3); ■ ..

2019 SAN BEDA LAW. CENTRALIZED BAR OPERATIONS I 413

 BANKING LAW a .

SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019

Using the Word “Bank” cashier or paymaster of office (R.A. 3779, Sec.
General Rule: A stock savings and-loan association
may use the word “bank" in connection with its
business name only upon compliance with such Limitations On Investment of SLAs
requirements as may be imposed by, and prior 1. Investment in Bonds and Securities
approval of thé MB (R.A. 3779, Sec. 6(b)). No association at any one time shall have
invested in bonds and securities an aggregate
Exception: A non-stock savings loan association amount in excess of 10% of the total assets of
cannot advertise or represent itself to the public as a such association (P.D; No. 113, Section 21, [a]):
bank (R.A- 8367, Sec. 8 (b)).
Investment on Real Property
No non-stock association shall carry upon its books a. . Stock savings and loan association
for any person any demand, commercial or checking At any one time, it shall NOT invest in. real ’.
account, or qny credit , to be withdrawn upon the estate and improvements thereon^ including
presentation of any negotiable, check or draft (R.A. equipments in an aggregate amount in
■3779, Sec.6(a)): ' excess of 50% of its-net worth (R.A. 3779,
• • • Sec.2lj. ‘ ’ -7 .-
. • • • : ». • ? ,-i ■ • / s’ y ’ '

Exceptions to Secrecy Of Bank Deposits (EWOIC) * • ■

1. Examination by MB or official of BSP;
2. Written permission of depositor; ' y v
3.. - Order of com petent .Court in cases;vwhere [money ' J.
deposited is the subject matter of¡•’thelitig^tio^.-i^—
4. In case of Impeachment; and^^/*- „ __
5. Upon order of a competent Cddf#i pleases-• ^*^*«*^
bribery or dereliction of dut^of /- «-•=
(R.A. 3779, as amended tiyR-A^fy
. Conditions for Granting a Loan (ÉB Ml
1. ILoans qannot;b£ granted in'gxcess of thelotal'bf 1
the following amounts: ■■ |
_. • . -• - » *•
Rea I estate used for th e stock savings and
^d^ap association's purposes owned by
/Vapjither. corporation in ’ yvhich that
associations owns equity shall be included in
ihé7 as^dfciatiori's total investment in real
Sec:21)- "? \ .
M. b. Non-stock sayings loan and association
Itì shair'.NpT Jnyést in any one time in real
pppertwan^aggregate amount in excess of
y.-i.'x 10% of tfie’TotalSasSets of such association.
m- (R.A. 3^79^S^ aniended by P.D^ 113,
r I —9

a.- Cash available for. loa^pUrposes^ | ¿r

bt Cash which can bejreadilyvrealizeH upon thes± ' \ 7---”
' ■ sale or..; redem^or^^VioL yy^rmissibl.^ A
investments':made by the/asipc.iauopi^and /^^ithe^shalpiV invest in furniture, fixture,
;.c.t Qredit available for^ioan ^urpo^^S^qm"’ . <^7furnishings, ¿equipment and leasehold
■' government or privatMnanbi^4ristit^^^Xv^ VTimprpvements for its offices, more than 10% '
. <R.A 3779, Sec. iflj J V ■ . 7); qj^its; aggregate paid-up capital (R.A. 3779,
^as^mebd^dbvPD.IlS.Sea
2. Loans cannot be granted jn excess ofHorrower
sayings and time deposits, plus' nfe^ur^prith n
salary or regular income whetndr^ ^frpm IV]
employment or froH.his own business or 70%’ofiC'3=xc* THRIFT BANKS ACT
FMV of property offered as security. (R.A. 3779, (R.A. NO. 7906)
. ' • : Sec:5): . ••
‘ \ ’
• . : ' ■
.’I..-’’,’. . ’

•’ ’ .... ... 1 .

3. - Maturity of loan should not exceed 1 year (R.A. Declaration of Policy . .. = ;

3779, as amended by R.A. 4378, She. 5);: . •. 1. To encourage and : assist, the establishment of
• • f e . • . * *’ • • thrift bank system which will promote agriculture
Exception: Maturity of loan should riot exceed and industry and at the same time place within
10 years in the . base ofa ioan . for home ; easy reach of thé people the.medium-term/and
1 building/home develbpitient - ’ secured by long-terrn credit facilities at reasonable cost;
unencumbered real estate (R.A. 3779, as 2. To encourage industry, . frugality and the
■ ' ••
amended by R.A. 4378, Sec. 5).
. * . •• •• ’ . • • * -
accumulation.of savings amprig the public, and : .
..the members and stockholders , of thrift banks
4. A rate of interest in a written' note ' br other (R.A. 7906, Sec. 2), ,. '
obligation must be executed by the Borrower
*
(R.A. 3779, Sec. 19); and ’ '
* *
- .’ • * *• ‘ *4 *
Thrift banks shall include: . >
1. Savings arid mortgage banks;
5. In case the borrower is a permanent Employee or 2.. Private development banks;
wage earner, a deduction should be made fgr .the 3. Stock savings and loan associations organized
service rendered by the authorized treasurer, under existing laws; and

414 | 2019 SAN BEDA LAW CENTRALIZED-BAR OPERATIONS -

 BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019

4. Any banking organization organized for the

following purposes: : > ■ ANTI-MONEY
a: Accumulating the savings of depositors and LAUNDERING ACT
investing them, together with capital loans • r ’ • •

secured by bonds, mortgages in real, estate

and insured improvements thereon, chattel AMENDED)
• mortgage, bonds and other forms of security;
and in such other investments and loans
which the Monetary Board may determine as Background ■
necessary in the furtherance of national - Before the AMLA, the BSP issued various circulars to,
economic.objectives; . prohibit and curb money laundering. Under AMLA,
b. Providing short-term . working .capital, . money laundering has.been criminalized;
medium- .-and•and long-term financing, to -
businesses engaged in agriculturei services, Purposes: (PEE) r • . '
. industry arid-housing; and • « 1. To .¿Protect and preserve the integrity and
c: Providing diversified financial and allied ,. . confidentiality of bank accounts; ’ ?
services -xfor r? its - chosen , market ' and’ 2. To Ensure that the Philippines shall hot be used
/ - constituencies specially for . srriall and • as a money laundering site for the proceeds of
medium enterprises and individuals fRA. \ any unlawful activity; and ‘ ’ .• ?
7906, Sec. 3 (a)). . ,3. To Extend cooperation in’, transnational
investigations and prosecutions of persons
• • • • • ’ »

Limitations on Lending --j

involved in money laundering activities Whenever
Exceptas the MB may otherwise prescribe, the direct- committed (R.A. No. 9160, as amended by R.A.
indebtedness to thrift banks of any person, company, comp^nyg--^ —No. 9194^10167, and 10365) [hereinafter AMLA]..
corporation, or firm, including the indebtedridsslpl./te
members of a partnership and association, association,Jor Tor money
money ' $ Money Laundering
borrowed, shall in no time exceed 15% ofunimpaired ^.1 ’ A crime whereby the proceeds of an.unlawful activity
• capital and surplus of the bank. 'in n are transacted, thereby making them appear to have
' • ... originated ^from legitimate sources (AMLA, Sec. 4).
Indebtedness excluded from 15%;Ceiling;/-q. S' -3 u ‘ ‘
1.,,' Loans secured by obligati6hs;0f the;BSP; r< '•A Money Lauhderer \\
2. - Loans fully guaranteed bydthe govern me nt I
to Money^^nd^^gjfe^pbrformed "by^.
thé payment of principal and, jnteresî^’^, . .7*/ 1/-; Any W&^&^hjD,' knowing that any monetary
3. Loans to the extent covered by‘the; HolU/ogt pn,-_ instrument or property represents, involves, or
or assignment of; .deposits mairrtaineg iii thé EV^r^di „..relates
elates t0 the proceeds or
to tne of any unjawîui
unlawful activity: ,
lending bank and held in the Phili^inés^and/’ ■hWsw ?■ .h . •• ' ; •••
4. .- Other loans or credits as the MBrriaÿ, Tromf^e^* ^-»^^ar^Transacts said monetary instrument or
■. to time, specify as non-risk assets^ which?//?.A. property; :■
. \7906,Secji1). . \ ? ’• b. Converts, transfers, disposes of, moves,
: acquires, possesses or uses said monetary <
The total indebtedness of any borrower to the bank , > instrument or property; •'
may amount to . a further 15% of the unimpaired z c. Conceals or disguises the true nature, •
capital and surplus of. such bank provided the source, location, disposition, movement , or
‘additional indebtedness is ' for? the ¡ purpose of ownership of or rights with respect to said
financing subdivision 'or housing‘ development, monetary instrument or property; :
medium- and low-income borrowers and agricultural^ d. Attempts.- or Conspires to commit money
on a fully secured basis (R.A. 7906, Sec. 11(2)). • ■ ' 'laundering offenses referred to.iri;(1), (2), or '
..e *. il ! •
........ .
A! . v . ;
, r >••• .
. JI. •
‘
•(
, .(3) above;?':•?
Indebtedness •:.*■. . / "I. Aids, abets, assists in, or counsels the
Direct liability of the maker or acceptor discounted commission of • the. .money -.launder Ing'
with or sold to such bank'and liability of the indorser, . offensés referred to in. (1 ), (2), or (3) above;
. drawer or guarantor, who obtains a-loan from or ;• .Performs or fails to perform any act as à
discounts paper with or sells paper under, his -; ¿ result of which he facilitates the offense of
_• guaranty to such bank. In case of liabilities of a • money laundering referred to in (.1 ), (2), or (3)
partnership or association, it shall include liabilities of • above; or •'. •
BANKING LAW

the• several., •••*’* members.

*.*•*
In case • of s liabilities
• • • »
of a 2. Any covered person who, knowing that a covered
corporation, it shall include all liabilities of the • or suspicious transaction .is required to be
subsidiaries thereof in which such corporation owns reported, fails to do so (AMLA, Sec. 4) ■■■
•
or controls a majority interest (R.A. 7906, Sec. 11 (3)). ; ’
. - - '•»

. r
2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS I 415
 shall notbe deemed to-be qnbjpymous'------- 1 * ' • ■*-,J!--
(AMLA, Sea 9(a)). .
Covered institutionsshalL--
BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019
a. . Establish and reco.rdnruL .. >
-based on officialdoctlments\
Threeb. Basic Steps
Maintain in Money
a system Laundering
of verifying. Covered Entities/Persons: (BIS-D)
Placement
1. True this Stage,
identify 4ofAtclients who*^ethe launderer inserts Linder Sec. 3(a) of the AMLA, as amended, the
the dirty money into a legitimate financial
persons; • following are covered entities or persons who. are
institution
Legal usually and\o
: existence in the ___form of cash bank obligated to report covered and suspicious
deposits;
structure of a corporate .client; o transactions: .
• 2. Layering - Involves sending money through 1. Persons supervised or regulated by the BSP,
various financial transactions to change its form such as:
and make it more difficult to follow. It may consist a. Banks •.
of bank-to-bank transfers, changing'currency, or b. Non-Banks . .
purchasing high value , items. This is the most Quasi-banks
complex step. . j ' • . r d. Trust entities; ‘ .
3. Integration - The money re-enters mainstream Pawnshops ' .
economy in legitimate-looking form, appearing to Non-stock savings and loan associations:
have come from some legitimate transaction. It g. Electronic money, issuers
may involve à final bank transfer into the account h. IForeign.exchange
' dealers/'
of a local business in which the launderer is -moneychangers,
“investing” in exchange for a cut of the profits or remittance and transfer companies; and
the sale of high value items bought during the k. All other perSons and their subsidiaries and
' layering stage (DIZON, Banking Laws, supra^f^-^ affiliates supervised or regulated by the BSP.'
431-432)
fSops^. supervised. or regulated by the
Ways to Prevent of Money Laun iundpring'(CRR)t >uran^)3pm mission, such as: •
1. Customer Identification
• • •• ^Jn^urajiq^cqmpanies;-
'■ Âé^fiçtitioüSjÜ
Anonymous accounts, those WPantes;
names and similar acccfijrite^a Insurance'^gynts; -
(AMLA, Sec. 9(a)).J Insurance broiters; . . '
_J; • R’ofessiohal Reinsurers;
However, Peso and ¿ToreigrT currency non-^ . “T’^'T^einsurdhce ...___ brokers; '•
1/ . .. h - ft ’
checking numbered accounts? are allo wed-;qrid' / j! Holding (¿ompgjdi.es; • •
cin. folding do’mpan^ systems; -
‘W— jW
C'. • i. benefitassociations; arid "
ops and their subsidiaries and
iryised or regulated by the IC.

rson^supervised or regulated , by SEC; such .

ecurjties*7 d ea lerS, . brokers,S- sa Idsmen,
ti <iAvyjstpreht houses, .and other similar
^.jp^sons managing securities or rendering
t nt. Authority and identmcation or’pexsons ^T'Wyices, such as.’investment agents,
purporting to act on behalf of a corporaFê^3*/' ' advisors, or consultants;^ f'i.. \ '
clieht (AMLA, Sec. 9(a)). b. _ Mutual funds or, ~ open-end investment
• • • • *• ' •’ • • s . **. • companies, - close-end investment
2. ‘ Record Keeping companies or' issuers, .and other similar'
a. All records of ail transactions of covered ,. entities; and. >' .. . . . •
institution must be safely stored for five years c. Other entities, administering or otherwise .
- from date; or , ' : • ' . . \ dealing in commodities, '..or financial
4 b, In closed accounts, records on customer derivatives based thereon, valuable objects,
.. identification arid correspondency. shall be • cash substitutes, and other simildr monetary :
p reserved for five years from date of closi ng instruments or properties, supervised 'or
(AMLA, Sec. 9 (b)). • . * regulated by the SEC:
.; • • ■' . • L ■_ •••< , . ••• ‘ .

3. Reporting of -Covered and : Suspicious Designated Non-Financial Businesses and

, Transactions Professions: • . . \ /
Covered institutions shall report to. AMLC all a. Jewelry dealers, dealers in precious metals,
covered and suspicious transactions within five and dealers - in prècious. stones / when
days from occurrence therefore. There can be transaction is in excess of PI M
extension but not exceeding 15 working days b Company service providers which, as a-
(AMLA, Sec. 9 (c)). business, provide > services under Section
3(a)(6) to third parties;

416 | 2Ö19 SAN BEDA LAW CENTRALIZED BAR- OPERATIONS

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 BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2OÏ9
* * *

c. Persons who, subject to the exception under 5. Any circumstance relating to the transaction
Section 3(a), par. 2: which is observed to Deviate from the profile of
i. manage the money, securities, or assets the-client and/or the client’s past transactions ,
of clients; with the covered person;
. ii. manage bank, savings, or securities 6.. The transaction is any way related to an Unlawful
accounts; , activity or any money laundering activity or
lit.. organize contributions for the creation, offense that is about to be committed, is being or
- operation^, or . management of . has been committed; or \- -
• ’. companies; ' 7. Any transaction that is Similar,. analogous or
, . iv. create, operate,, or manage juridical identical to any of the foregoing (Revised IRR of
•persons or arrangements; and • ' • .•
R.A. No. 9160, Rule III (H),
. ■ :-L -
/.
as amended}.
'■k< .- •
V. buy end sell juridical entities..
• . •
Prohibited Acts During Reporting of Covered or
5. The Land Registration Authority (LRÀ) arid all its Suspicious Transactions ’ . \ ?
Registries of. Deeds with respect to covered real When reporting covered or suspicious transactions,
•'•••••estate transactions (AMLA, •* Sec.. * 7(12)).
• • • • ; covered institution and its officers and employees are
prohibited from:
Professionals Excluded from “Covered Persons” 1. Communicating to any person or media of such
: Thé term-‘covered persons' shall exclude lawyers .. fact; arid ‘
and .accountants ' acting as independent legal 2. Publish or air such report by the mass media, e-
professionals in relation to-'information. concemirig/M’ ' mail, or other device. (AMLA, Sec. 9(c));
their clients or where disclosure of information would/ • Hy- a 4 •
J'«/»;
compromise client confidences or the attorney-client ’ .- ‘ Immunity from Other Laws
relationship. These lawyers and accountants/. .Vyhqn reporting covered or suspicious transactions,
Î .. . . . .. - Sine cc^fediinstitution is deemed not to have violated:
however, • must be authorized to practice.- jrf trie/?'^
Philippines (AMLA.
-- PhilioDines (AMLA, Sec. 3(a). oar. 2)....
3(a), par. 2). • ir LI 1. R.'AANcy^4.05 — Act Prohibiting Disclosure of
Deposits?^
Lawyers and Accountants acting aS;.ipclepepdeht*: y 2. R.A. N& ^426 - Foreign Currency Deposits; and
legal professionals are not required.tgirèpôrt^covered T .3-. R.A. no.'BJ - General Banking Law (AMLA,
and suspicious transactions^- if’ th'ëZ Relevant >
Sec.^9(c))l
information was obtained in cifcurnstaricbsxwhen they p V • e • r * * •

>a ré. subject to professional^' secrecy /or "’legal . to Money Laundering

professional privilege (AMLA, Sec. 9(0)) (“Unlawful*Activities”): -
r.f
< f/ 1;, Kidnapping for Ransom under Art. 267 of Act
Covered Transaction (CPR) • *4 à . 3815 (RPC), as amended;
amended;' •
1. ' . À transaction', in Cash or qthép/équivalent Robbery and Extortion under Arts. 294, 295
monetary instrument exceeding P^po.OOOjWithrh^ ^^^29^2!99, 300, 301 and 302 of the RPC, c: as
• • One (1) banking day; amended;
2. Transactions by dealers of jewelry^pygcious ■ 3. Piracy on. the High Seas under the ^PC as
' metals, and Precious stones in excess of P1M; amended, arid P.D. No. 532; ■ ‘ „
(AMLA, Sec. 3(a)(4)) /..-■/■/. 4. Qualified Theft under Art. 310 of the RPC as
3. Real estate transactions involving an amount in amended;
>' -’./■■ excess of P500,000 within 15 days from the date 5. Swindling under Art. 315 and Other Forms of .
< . -of registration of thé transaction (AMLA, Sec. Swindling under Art: 316 of the RPC, as •
■ y: : .C / - •• ’ ■' yy '• ■ amended;.: ‘ ’ -
• ’• •• w ' e . -a .
.. • 4 . ’ - ’. . r • 6. Secs. 4, 5, 6; 8, 9; 10/11, 12,-13^ 14,15 and 16
i Suspicious Transaction (No-CASt-DUS) ' ' of R.A. No. 9165*: otherwise known as the •
A transaction,'regardless of amount, where any of the . . Comprehensive Dangerous Drugs Act of
following circumstances exists: ..‘ 2002; .I/ ;:7;' ’’
: 1. . There is No underlying legal or trade obligation; Sec. 3, pars. b, c, e, g, h and ¡ of R.A: No. 3019,
. purpose, dr economic justification; ' ; . as amended, otherwise known as the Anti-Graft
The Client is not properly identified; . and Corrupt Practices Act; -
3. The Amount involved is not commensurate With . 8 ; Plunder under R.A. No. 7080, as amended;
the business or financial capacity of the client; - . Jueteng and Masiao punished as/illegal
.4: Taking into account all known circumstances,-it • gambling under P.p. No. T602; ’’ ’ ’ ■
BANKING LAV.

may be perceived that all client’s transaction is 10. Smuggling under R.A. No. 455, and R.A. No.
- • . Structured in order to Avoid being subject of 1937, as amended, otherwise known as the Tariff
M EM O RY A ID

reporting requirements under the AMLA; and Customs Code of the Philippines; / ’ J
. • • •• > •

2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS | 417

 BANKINGLAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019

11. Violations under R.A: No. 8792, otherwise known 30. Violation of Sec. 4 of R.A. No. 9995, otherwise
as the Electronic Commerce Act of 2000; known as the Anti-Photo and Video Voyeurism
12. Hijacking and other violations under R.A. No. Act of 2009;
6235, otherwise known, as the Anti-Hijacking' 31. Violation of. Sec. 4 of R.A. No. 9775, otherwise
Law; Destructive Arson; and Murder, as known as the Anti-Child Pornography Act of
defined under the RPC, as amended; • 2009;
13. Terrorism and Conspiracy to Commit 32. Violations of Secs. 5, 7, 8, 9, 10 (c), (d) and (e),
Terrorism as defined and penalized under Secs. 11,12 and 14 of R.A. No. 7610, otherwise known
.3 and 4 of RA. No? 9372; '. < as the Special Protection of Children Against
14. Financing of Terrorism under Sec. 4 and Abuse, Exploitation and Discrimination;
offenses punishable under Secs. 5, 6, 7 and 8 of 33. Fraudulent practices and other violations under
RIA: No. 10168, otherwise known as. the . R.A. No.' 8799, otherwise known as the
Terrorism Financing? Prevention . . and Securities Regulation Code of 2000; and
Suppression Act of 2012; 34. Feloniés or offenses of
**•.**• • a nature • •• similar
•• to thé .
15. Bribery under Arts. 210, 211 and 211-A of the thé aforementioned unlawful activities
aforementioned unlawful activities thatthat are
are
RPC, as amended, and Corruption of Public punishable
punishable under
under the penal laws
the penal laws of of other
other
Officers under. Art. 212 of the RPC, as açnéndèd; - countries (AMLA, Sec. 3(i)). ‘:
16. Frauds and Illegal : Exactions . • and Note: In determining whether. or not a felony or
Transactions under Arts. 213, 214,-215 and 21J§^— -^offense punishable under the penal' laws of other
Ofthe
of RPC, as
the RPC, amended; ’ ’•■•••
as amended; ■ .< J T countries.js‘‘Of a.similar nature,” as to constitute an
17. Malversation of Public Funds ancT Property J ^rilawfyl activity under the AMLA, the nomenclature
'
under ‘ ‘
Arts. 217 and 222 of^ the 'R^G.^s^ ---- ■ ‘ Qf^aiqfélÔny'Ôr-spffense need not be identical to any
amended;’ -s. of-the unlawful àçtiy¡ties listed above (Revised IRR of
18. Forgeries and Counterfeiting^u%
166, 167, 168, 169 and/l^otj
amended; . • -■ .fl —
19. Violations, of Secs. 4 to 6 of '¿RJ VK No administrative^ cnVinal or civil proceedings shall
otherwise known as- theAnti-Traffickirig^’iri • lie against any person for having made a covered
Persons Act of 2003,. as^amended;: | ^fahsaction repoijpin th^J regular performance of his
20. Violations of Secs. 78 to 79.pf |bhapter IV* or' "* ^^Uties anci in good •M» faith! whether or not such reporting
No.' 705, otherwise KnWn^s !eviseax^ _ ’H^results ift Sn^criminai prosecution under the AMLA or
Forestry Code of the P^ijippihes ended;? I, ;Jiny oBeKRjlilippiriedaw/ (BSP Circular 706, X807.7,
ehcieE
21. Violations of Secs. 86 to 136' c'~ A ’ : ^^ecQ^ffary ^ 20li)§
^m.AA •• . l.
No. 8550, otherwise knbw
ion^of Money Laundering Cases '.
22. Violations of Secs. 101 to 1^7, andrl^P. Krp^^^^^^ecution- of/money laundering and unlawful
No., 7942, otherwise known'as the^Philippine-independently. Any person may
Mining Act of 1995; ’ and : convicted of both money
23. Violations of Sec 27 (cAfe); ^ IburJd^nn^ancl the' predicate crime (Revised IRR of
No. 9147, otherwise . known> as the”? ‘R^_Nc^^i60, Rule VI,: as amended).
Resources.Conservation andtProtection’-Act; ■
24. Violations of Sec. 7- (b) of R.A:; - No. 9072, Rationale: The elements of money, laundering are
otherwise known as the National Caves; and separate and .distinct from the elements of the
Cave Resources Management Protection Act; unlawful activity. The latter need not be established
25. Violation of R.A. No. 6539,’otherwise known as by proof beyond reasonable doubt io the case for
the Anti-Carnapping Act of 2002, as amended; money laundering (Revised IRR of R.A. No. 9160,
26; Violation of Secs. 1;<3; and 5 of P.D. Np< 1866,. / Rule VI, as amended). ’
as amended, otherwise known as. the decree \ • • •.;'■ - •_ ■
Codifying the Laws on , Iliegal/Unlawful Policy against Political Harassment
~ ■ Possession, > Manufacture,. ’ Dealing • In, ’ Anti-Money Laundering,Law shall not be used for
’ The
Acquisition or Disposition of Firearms, political prosecution dr harassment or as an
Ammunition or Explosives*^ ? instrument to hamper competition in trade and -
27. Violation of P.D. No. 1612, otherwise known as commerce (R,A. No. 9160, Sec. 16).- \ .
• ••••• ’w • • < •

the Anti-Fencing Law;{. . 7 ?y- • ' *

••
•
• •• •<’
*. '
'
"• •• -• .**•’ *
s *
••

28. Violation of Sec; 6 of R.A. No. 3042, otherwise
known as the Migrant Workers and Overseas
. Filipinos Act of 1995, as amended;
29. Violation of R.A: No. 8293, otherwise known as
the Intellectual Property Code of the
Philippines, as amended;
- r **
No case for money laundering may be filed against
and no assets shall be frozen, attached or forfeited to
; the prejudice of a candidate for an electoral office
during an. election period (R.A; No. 9160, Sec. 16).
•

A*
... -418 | 2019 SAN BEDA-LAW CENTRALIZED BAR OPERATIONS
 BANKING LAW
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019 ■

Jurisdiction of Money Laundering Cases The primary objective of a freeze order is to

The RTC shall have jurisdiction to try all cases on temporarily preserve monetary instruments or
money laundering (AMLA, Sec. 5) property that are in any way related to an unlawful
, ••
r
•
.
J
• • •
•
•
activity or money laundering, by preventing the owner
However, those committed by public officers and from utilizing them during the duration of the freeze
private persons who areJn conspiracy with such .order (Ligot v. Republic of the Philippines, G.R. No.
public officers shall be under thé jurisdiction of the 176944, March 6, 2013). .-.
Sandiganbayan (AMLA, Sec. 5);' \ • • • •• •

■ . ■/ ‘• ■ Remedy Against Freeze Order <1

Anti-Money Laundering Council (AMLC) A person whose account has been frozen may file a
The financial intelligence unit of the Republic of the motion to lift the freeze order and the court must
Philippines which the is government agency is tasked resolve this motion before the expiration of the order.
to implement the'Ah/ILA (Revised IRR of R.A. No: (Ligot v. Republic of the Philippines; G:R...Noi-
9160, Rule III (B), aS amended). ■ ■ '176944, March. 6, 2013). ■ ■ ; ’ k •

... ... ...

The AMLC is composed of; ’ • • , . . No court shall issue a temporary restraining order or
*1/ The Governor of the BSP as Chairperson; asnd a writ of injunction against any freeze order, except
2.. The . Commissioner ? of the Insurance the Supreme Court (Ligot v. Republic of the
Commission and the Chairperson of the SEC, as Philippines, G.R. No. 176944, March 6, 2013). :
members. \ ' . ' • • * • • * • •
• Authority of AMLC to Inquire into and Examine
ï The AMLC shall act unanimously in the discharge of Bank Deposits .
its fu notions (Revised IRR of R.A. No. 9160, Rule; VII,- • The AMLC may inquire to or examine particular
as amended). • • .M/'t- M.
deposit or investment, including related accounts, '
With^Xoy^ institution or non-bank financial
Power to Freeze Accounts . • a f jnstltutioiV;Thjs can be. either upon order of the court
The power of thé AMLC to freeze accounts has been’ or even without order in certain exceptional cases
deleted under R.A. No. 9194. > > 2^ 4 ' ' S T • • ••
However, the CA may issue a Freeze Order under the A -. When Co^rtprder Required ...
■ -A‘ In cases-'of yiolatidns of AMLA, when it has been
J

following conditions: (EP1-6) ¿Elx' ■

1.. There must be a verified E^ pâ'rtë'¡setitton bÿjhe established^upqrFoxijSanfe application that there is
" . AMLC; . -¿5?). ' r. M probabie-caO$gL that the deposits or investments,
2. CA must determine ?thatProbable.'.'Cause exists [ 7 including related accounts involved, are related to: , .
" thiat any monetary lnstrümenKofAprop^|ty is in Unlawful Activity; or . . • . .
any way. related to ;ariy unlavi/(üUàctivity aë v 15 ’5^ • ’ '*• ,
2^::S^Mpney-laundering
I W’ V **••*• ••*-'
offense (AMLA, Sec. it).
<5 x- ’ • ’ -VCz * : % r. 2. • A .
defined in the AMLA .
3. The-freèze order shall be effectivpJrQmedlately; When No Court Order Required (KD-HATTS) .
4. The freeze order shall be for a\<periQd not; •1. Kidnapping;
/, .exceeding 6months (AMLA; Sec, 10);' , 2. . Violations of tpe Comprehensive .Dangerous
Note: Thé CA'should act on the petition to freeze , Drugs Act; .;. S

.within 24 hours from filing. If the application is filed 3. Highjacking; ' ■ J ’

a day before a nonworking day, the computation of 4. Destructive Arson and-murder.; . ? .
the 24-hour period, shall exclude such day (AMLÀ, ■■■ . 5. Terrorism; “ ” '. ' - ' . .'
sec. io)?'- :■ ?• 6. Conspiracy to commit Terrorism; and
/ X ' •*y-- . .• t. 7. Felonies or; offenses of’a; Similar nature as
Nature of Freeze Order ‘ " •’ numbers (1) to (4) which are punishable under .
A freeze ord é r is. a n, extraordinary and interim relief ’’penal laws of other countries (AMLA, Sec. 11).
issued by the CA to prevent the dissipation, removal, Note: The authority, of AMLC tp inquire into or
or disposal of properties that are suspected to be the examine the main and related accounts shall comply
- proceeds of, or related to; unlawful activities, as . .with the requirements of Article III, Sections 2 and 3
. enumerated under Section 3 of AMLA (Ligot y. ’ of the Constitution (SUNDIAN& & AQUINO,
Republic of-the Philippines', G.R. No. 176944, March Reviewer bn Commercial Law, supra at 368). ■'

6, 2013). • ’ ■ . • v. •
• •
. • •
•
. • •
t/r**
J • ••
• |

Pre-Existing Case Not Required / < •

BANKING LAW

inquiry, into deposits under Section 11 does not •

. • . require a..pre-existing- criminal Case (Republic v.
M EM ORY A ID

Eugenio, G.R. No.• 174629, • February 14,• 2008).

• -• ’■
■■T.-

2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS | 419

• • . ■ •