BANKING LAW OUTLINE

I. GENERAL CONCEPTS

A. CONCEPT OF BANKING
1. Definition – Sec. 3.1, GBL1
2. Elements – Republic v. Security Credit and Acceptance Corporation,
19 SCRA 58 (1967); Central Bank v. Morfe, 20 SCRA 507 (1967); Bañas
v. Asia Pacific Finance Corporation, 343 SCRA 527 (2000)
a. Engaged in lending of funds
b. Obtained in the form of deposits
c. From the public, which shall mean 20 or more persons – Sec. 8.2,
GBL

B. BANKING DISTINGUISHED FROM QUASI-BANKING

1. Elements of Quasi-Banking – Sec. 4, par. 3, GBL; xSec. X234, MRB2
a. Borrowing of funds for borrower’s own account
b. From 20 or more lenders at any one time
c. Through issuance, endorsement or assignment with recourse or
acceptance of deposit substitutes – Sec. 95, NCBA3
d. For purposes of relending or purchasing of receivables and other
obligations
2. Requirement of Separate License – Sec. 6, par. 1, GBL

C. BANKS DISTINGUISHED FROM OTHER FINANCIAL INSTITUTIONS

1. Investment Houses – xSecs. 2 and 3, Investment Houses Law4
2. Financing Companies – xSec. 3(a), Financing Company Act5
3. Investment Companies – xSec. 4, Investment Company Act6
4. Non-Stock Savings and Loans Associations – xSec. 3, Revised Non-
Stock Savings and Loans Association Act of 19977

1
Republic Act No. 8791 (“General Banking Law of 2000”), which repealed Republic Act No. 337
(“General Banking Act”)
2
Manual for Regulation of Banks
3
Republic Act No. 7653 (“New Central Bank Act”), which repealed Republic Act No. 265 (“Central
Bank Act”)
4
Presidential Decree No. 129, as amended
5
Republic Act No. 59080, as amended by Republic Act No. 8556
6
Republic Act No. 2629
 2

5. Cooperatives – xArt. 3, Cooperative Code8; But See xArt. 100,

Cooperative Code
6. Insurance Companies – xSec. 2, Insurance Code9

D. NATURE OF BANKING BUSINESS – Sec. 2, GBL

1. Vital Role in Economy10 – Simex International (Manila) Inc. v. Court of
Appeals, 183 SCRA 360 (1990)
a. Subject to reasonable regulation by the State – Central Bank of the
Philippines v. Court of Appeals, 208 SCRA 652 (1992)
b. Strikes and Lockouts – Sec. 22, GBL; xBSP11 Circular No. 299 (Series
of 2001); Article 263(g), Labor Code
2. Fiduciary Nature of Banking Business
a. Degree of diligence required12 – Simex International (Manila) Inc. v.
Court of Appeals, 183 SCRA 360 (1990); Bank of the Philippine
Islands v. Intermediate Appellate Court, 206 SCRA 408 (1992)
b. When utmost diligence required
(i) In dealing with accounts of depositors13 – Philippine Banking
Corporation v. Court of Appeals, 419 SCRA 487 (2004); Bank
of the Philippine Islands v. Casa Montessori Internationale,
430 SCRA 261 (2004)
(ii) In selection and supervision of employees14 – Philippine
Commercial and International Bank v. Court of Appeals, 350
SCRA 446 (2001); Philippine National Bank v. Pike, 470 SCRA
328 (2005)
(iii) To be mortgagees in good faith15 – Cruz v. Bancom Finance
Corporation, 379 SCRA 490 (2002)

7
Republic Act No. 8367
8
Republic Act No. 6938
9
Presidential Decree No. 612, as amended
10
Prudential Bank v. Lim, 474 SCRA 485 (2005)
11
Bangko Sentral ng Pilipinas
12
Solidbank Corporation/Metropolitan Bank and Trust Company v. Tan, 520 SCRA123 (2007)
13
Simex International (Manila) Incorporated v. Court of Appeals, 183 SCRA 360 (1990); Bank of
the Philippine Islands v. Court of Appeals, 326 SCRA 641 (2000); Philippine Commercial
International Bank v. Court of Appeals, 350 SCRA 446 (2001); Firestone Tire & Rubber Company
of the Philippines v. Court of Appeals, 353 SCRA 601 (2001); Westmont Bank v. Ong, 375 SCRA
212 (2002); Traders Royal Bank v. Radio Philippines Network, Inc., 390 SCRA 608 (2002);
Consolidated Bank and Trust Corporation v. Court of Appeals, 410 SCRA 562 (2003)
14
Metropolitan Bank and Trust Company v. Cabilzo, 510 SCRA 259 (2006); But See Go v.
Intermediate Appellate Court, 197 SCRA 22 (1991)
15
Development Bank of the Philippines v. Court of Appeals, 331 SCRA 267 (2000); Canlas v.
Court of Appeals, 326 SCRA 425 (2000); Premiere Development Bank v. Court of Appeals, 453
SCRA 630 (2005); Private Development Corporation of the Philippines v. Court of Appeals, 475
 3

(iv) In the custody of documents; integrity of records16 – Heirs of

Eduardo Manlapat v. Court of Appeals, 459 SCRA 412 (2005)
(v) Exception: does not cover transactions outside bank deposits –
Reyes v. Court of Appeals, 363 SCRA 51 (2001)
c. Applicability to government financial institutions – xGovernment
Service Insurance System v. Santiago, 414 SCRA 563 (2003)
d. Liability for negligence
(i) Rules on determination of negligence – Philippine Bank of
Commerce v. Court of Appeals, 269 SCRA 695 (1997);
Consolidated Bank and Trust Corporation v. Court of
Appeals, 410 SCRA 562 (2003)
(ii) Award of actual, moral, compensatory or temperate damages –
Araneta v. Bank of America, 40 SCRA 144 (1970); Prudential
Bank v. Court of Appeals, 328 SCRA 264 (2000); Citytrust
Banking Corporation v. Villanueva, 361 SCRA 446 (2001)
(iii) Right to recover against erring employee – xPacific Banking
Corporation v. Court of Appeals, 173 SCRA 102 (1989)

E. AUTHORITY TO OPERATE
1. Incorporation – Secs. 17 and 46, Corporation Code; Sec. 14, GBL
2. Operation – Sec. 6, GBL
a. Authority required – Sec. 6, par. 1, GBL
b. MB17 determination – Sec. 6, par. 2, GBL
c. Unauthorized advertisement/ business representation – Sec. 64, GBL
d. Change in name – xP.C. Javier & Sons, Inc. v. Court of Appeals, 462
SCRA 36 (2005)
e. Sanctions for operating without authority – Sec. 6, par. 4, in rel. to
Sec. 66, GBL; Republic v. Security Credit and Acceptance
Corporation, 19 SCRA 58 (1967); Central Bank v. Morfe, 20 SCRA
507 (1967); xPerez v. Monetary Board, 20 SCRA 502 (1957)

II. CLASSIFICATION OF BANKS

A. UNIVERSAL BANKS (UB) – Sec. 3.2(a), GBL

SCRA 591 (2005); Citibank, N.A. v. Cabamongan, 488 SCRA 517 (2006); Metropolitan Bank and
Trust Company, Inc. v. SLGT Holdings, Inc., 536 SCRA 517 (2007); Omengan v. Philippine
National Bank, 512 SCRA 305 (2007)
16
See Also United Coconut Planters Bank v. Basco, 437 SCRA 325 (2004)
17
Monetary Board
 4

1. Governing Law – xGBL

2. Powers – Sec. 23, GBL; xSec. X101(b)(1), MRB
a. Commercial Bank (KB) powers – xSec. 29, GBL; xSec. X101(b)(2),
MRB
b. Investment House powers – xSec. 7, Investment Houses Law; xSEC
Omnibus Rules and Regulations for Investment Houses and Universal
Banks Registered as Underwriter of Securities
(i) Definition/function of investment house – any enterprise which
engages or purports to engage, whether regularly or on an
isolated basis, in the underwriting (i.e., guaranteeing distribution
and sale) of securities of any kind issued by another corporation –
xSec. 3, Investment Houses Law; xSec. 2(a), IRR of Investment
Houses Law18
(iI) Limitations on UB’s exercise of investment house powers – xSec.
101(b)(1), MRB:
(a) subject to pertinent laws and SEC regulations
(b) if investment house functions performed directly by UB, such
functions shall be undertaken by separate department/unit
(c) UB cannot perform functions of investment house both
directly (i.e., through a separate department/unit) and
indirectly (i.e., through a subsidiary)
c. To invest in equity of non-allied enterprises – xSec. 27, GBL; xSec.
1381, MRB

B. COMMERCIAL BANKS (KB) – Sec. 3.2(b), GBL

1. Governing Law – xGBL
2. Powers – xSec. X101(b)(2), MRB
a. KB powers – Sec. 29, GBL
(i) Accepting drafts
(ii) Issuing letters of credit (L/Cs)
(iii) Discounting and negotiating promissory notes (PNs), drafts, bills
of exchange, and other evidences of debt
(iv) Accepting or creating demand deposits
(i) Receiving other types of deposits and deposit substitutes
(ii) Buying and selling foreign exchange and gold or silver bullion
(iii) Acquiring marketable bonds and other debt securities
(iv) Extending credit
b. Engage in quasi-banking functions – xSec. 6, par. 1, GBL
18
Rules and Regulations to Implement the Provisions of Presidential Decree No. 129
 5

c. To invest in equity of allied enterprises – xSecs. 31 and 32, GBL

d. To purchase, hold and convey real estate – xSecs. 51 and 52, GBL
e. Other services – xSec. 53, GBL
(i) Receive in custody funds, documents and valuable objects
(ii) Act as financial agent and buy and sell, by order of and for the
account of customers, shares, evidences of indebtedness and all
types of securities
(iii) Make collections and payments for the account of others and
perform such other services for their customers as are not
incompatible with banking business
(iv) Upon prior MB approval, act as managing agent, adviser,
consultant or administrator of investment management/advisory/
consultancy accounts
(v) Rent out safety deposit boxes
f. To issue guarantees – See xSec. 74, General Banking Act

C. THRIFT BANKS (TB) – Secs. 3.2(c), GBL

1. Governing Law – Sec. 71, pars. 1 and 3, GBL
a. Organization, ownership, capital requirements, powers, supervision,
and general conduct of business – xThrift Banks Act19
b. Net worth to risk assets ratio – xSec. 71, par. 3, in rel. to Sec. 33, GBL
c. Other matters: GBL of suppletory application
2. Declaration of Policy – Sec. 2, Thrift Banks Act
3. Definition/Purpose – Sec. 3.2(c), GBL; Sec. 3(a), Thrift Banks Act
a. Composed of:
(i) Savings and mortgage banks
(ii) Stock savings and loans associations; and
(iii) Private development banks
b. For purposes of:
(i) Accumulating savings of depositors and investing them in
marketable bonds and other debt securities, commercial papers
and accounts receivable, drafts, bills of exchange, acceptances,
or notes arising out of commercial transactions
(ii) Providing short-term working capital, medium- and long-term
financing, to businesses engaged in agriculture, services, industry
and housing

19
Republic Act No. 7906
 6

(iii) Providing diversified financial and allied services for its chosen
market and constituencies specially for small and medium
enterprises and individuals
4. Powers – Sec. 10, Thrift Banks Act; xSec. X101(b)(3), MRB

D. RURAL BANKS (RB) – Sec. 3.2(d), GBL

1. Governing Law – Sec. 71, pars. 1 and 3, GBL;
a. Organization, ownership, capital requirements, powers, supervision,
and general conduct of business – xRural Banks Act20
b. Other matters: GBL of suppletory application
2. Declaration of Policy – Sec. 2, Rural Banks Act
3. Powers – Sec. 12, Rural Banks Act; xSec. X101(b)(4), MRB

E. COOPERATIVE BANKS (Coop Banks) – Sec. 3.2(e), GBL

1. Governing Law – Sec. 71, pars. 1 and 3, GBL; Art. 99, Cooperative
Code
a. Organization, ownership, capital requirements, powers, supervision,
and general conduct of business – xArts. 99 to 109, Cooperative Code
b. Other matters: GBL of suppletory application
2. Declaration of Policy – Art. 2, Cooperative Code
3. Definition/Functions – Art. 100, Cooperative Code
a. Definition: Organized by, the majority shares of which is owned and
controlled by, cooperatives primarily to provide financial and credit
services to cooperatives
b. Functions – xArt. 100 Cooperative Code
4. Powers: Same as RB – xSec. X101(b)(5), MRB

F. ISLAMIC BANKS (IB) – Sec. 3.2(f), GBL

1. Governing Law – Sec. 71, par. 2, GBL
a. Organization, ownership, capital requirements, powers, supervision,
and general conduct of business – xIslamic Bank Charter21
2. Purpose – Sec. 3, Islamic Bank Charter
3. Powers – Sec. 6, Islamic Bank Charter; xSec. X101(b)(6), MRB

20
Republic Act No. 7353
21
Republic Act No. 6848 (“Charter of Al Amanah Islamic Development Bank of the Philippines”)
 7

G. OTHER CLASSIFICATIONS OF BANKS – Sec. 3.2(g), GBL

1. Land Bank of the Philippines (Land Bank) – xSecs. 74 to 100-A, Code
of Agrarian Reform of the Philippines22
2. Development Bank of the Philippines (DBP) – xRevised Charter of
Development Bank of the Philippines23
3. Philippine Veterans Bank (PVB) – xPhilippine Veterans Bank Act24; xAn
Act to Rehabilitate the PVB25
4. Philippine National Bank (PNB) but now privatized – xRevised Charter
of Philippine National Bank26; xPhilippine National Bank v. Velasco, 564
SCRA 512 (2008)
5. Pawnshops? – First Planters Pawnshop, Inc. v. Commissioner of
Internal Revenue, 560 SCRA 606 (2008)

H. FOREIGN BANKS
1. Entry of Foreign Banks
a. Modes of entry – Sec. 2, Foreign Banks Liberalization Act27
(i) By acquiring, purchasing or owning up to 60% of the voting stock
of an existing domestic bank
(ii) By investing in up to 60% of a new banking subsidiary
incorporated under the laws of the Philippines
(iii) By establishing branches with full banking authority
b. Subject to MB approval, guidelines – Secs. 2 and 3, Foreign Banks
Liberalization Act
c. Foreign bank may avail of only 1 mode of entry – Sec. 2, Foreign
Banks Liberalization Act; But may change from one mode of entry to
another – xSubsec. 121.10, MRB
d. Control of 70% of resources or assets of entire banking system must
be held by banks which are at least majority-owned by Filipinos – Sec.
73, par. 3, GBL; Sec. 3, par. 3, Foreign Banks Liberalization Act
e. Equal treatment of local banks – Sec. 73, par. 4, GBL; Sec. 8,
Foreign Banks Liberalization Act
2. Rules on Acquisition of Voting Stock in Existing Domestic Bank

22
Republic Act No. 3844
23
Executive Order No. 81, Series of 1986
24
Republic Act No. 3518
25
Republic Act No. 7169
26
Executive Order No. 80 Series of 1986
27
Republic Act No. 7221
 8

a. May own up to 60% voting stock of only 1 domestic bank – Sec. 2,

Foreign Banks Liberalization Act
b. Within 7 years from GBL effectivity, MB may authorize foreign bank:
(i) To acquire up to 100% of voting stock of only 1 domestic bank –
Sec. 73, par. 1, GBL
(ii) Which acquired up to 60% of voting stock under the Foreign Banks
Liberalization Act and Thrift Banks Act, to further acquire up to
100% voting stock thereof – Sec. 73, par. 2, GBL
c. MB shall secure the listing in the PSE28 of shares of stocks of banks
established under this mode of entry – Sec. 3, par. 3, Foreign Banks
Liberalization Act
d. License to do business not required: Equity investment is not deemed
doing business – Sec. 3(d), Foreign Investments Act of 199129
3. Rules on Acquisition of Voting Stock in New Domestic Bank
a. May own up to 60% of the voting stock of only 1 new banking
subsidiary – Sec. 2, Foreign Banks Liberalization Act
b. Must be among top 150 foreign banks in the world or top 5 in their
country of origin as of application date – Sec. 3, par. 2, Foreign
Banks Liberalization Act
c. MB shall secure the listing in the PSE of shares of stocks of banks
established under this mode of entry – Sec. 3, par. 3, Foreign Banks
Liberalization Act
d. Must be widely-owned and publicly-listed in its country of origin, unless
applicant is owned by government thereof – Sec. 3, par. 4, Foreign
Banks Liberalization Act
e. Capitalization – Sec. 4(i), Foreign Banks Liberalization Act
f. License to do business not required: Equity investment is not deemed
doing business – Sec. 3(d), Foreign Investments Act of 1991
4. Rules on Establishing Branches
a. Governing Laws
(i) Creation, formation, organization or dissolution of corporations;
fixing of relations, liabilities, responsibilities, or duties of
stockholders, members, directors or officers of corporations to
each other and the corporation: Law of place where foreign bank
established – Sec. 77, GBL
(ii) Entry into the Philippines through establishment of branches:
xForeign Banks Liberalization Act – Sec. 72, par. 1, GBL

28
Philippine Stock Exchange
29
Republic Act No. 7042
 9

(iii) Conduct of offshore banking business: xOffshore Banking System

Decree30; xChapter 1, Part Three, BSP Circular No. 1389 – Sec.
72, par. 2, GBL
(iv) All other matters: GBL – Sec. 77, GBL
b. Must be among top 150 foreign banks in the world or top 5 in country
of origin – Sec. 3, par. 2, Foreign Banks Liberalization Act
c. Must be widely-owned and publicly-listed in country of origin, unless
government-owned – Sec. 3, par. 4, Foreign Banks Liberalization
Act
d. Time limitation on entry – Sec. 6, Foreign Banks Liberalization Act
e. Capitalization – Sec. 4(ii), Foreign Banks Liberalization Act
f. Treatment of multiple branches – Sec. 74, GBL; Citibank, N.A. v.
Sabeniano, 514 SCRA 441 (2007)
g. Head office guarantee – Sec. 75, GBL; Sec. 5, Foreign Banks
Liberalization Act
h. Must be licensed to transact business – Sec. 133, Corporation Code;
Hang Lung Bank, Ltd. v. Saulog, 201 SCRA 137 (1991)
i. Summons and legal processes – Sec. 76, GBL; Sec. 12, Rule 14,
1997 Rules of Civil Procedure
j. Revocation of license – Sec. 78, GBL
5. Offshore Banking Units (OBU) – Secs. 1(a) and 1(b), Offshore
Banking System Decree
a. Qualification – Sec. 2, Offshore Banking System Decree
b. Certificate of authority to operate – Sec. 3, Offshore Banking System
Decree
c. Head office guarantee – Sec. 4, Offshore Banking System Decree
d. Effects of certain laws – Sec. 8, Offshore Banking System Decree

30
Presidential Decree No. 1034, as amended
 10

III. DEPOSIT FUNCTION

A. NATURE OF DEPOSIT
1. Deposits as Simple Loans31 – Arts. 1953 and 1980, Civil Code;
Serrano v. Central Bank, 96 SCRA 96 (1980)
2. Bank as Debtor
a. Deposit is voluntary agreement; “Know Your Customer” standards –
xMemorandum dated 1 October 2002; xSec. X262.1, MRB
b. Bank acquires ownership of money deposited; obligation to pay
amount, but no obligation to return the same money32 – Guingona, Jr.
v. City Fiscal of Manila, 128 SCRA 577 (1984); BPI Family Bank v.
Franco, 538 SCRA 184 (2007)
c. Payment to proper party-depositor – Fulton Iron Works Co. v. China
Banking Corp., 58 Phil. 206 (1930); Bank of the Philippine Islands
v. Court of Appeals, 232 SCRA 302 (1994)
d. Deposits are not preferred credits – Central Bank v. Morfe, 63 SCRA
114 (1975)
e. Bank has right to compensation – Gullas v. Philippine National
Bank, 62 Phil. 519 (1935); Republic v. Court of Appeals, 65 SCRA
186 (1975); Bank of the Philippine Islands v. Court of Appeals, 512
SCRA 620 (2007)
f. No breach of trust; Mandamus not a remedy – xLucman v. Malawi, 511
SCRA 268 (2006)
3. Bank’s Duty of Utmost Care33 – Sec. 2, GBL

B. KINDS OF DEPOSIT
1. Demand Deposits – Secs. 58-60, NCBA; xSecs. X201 to X204, MRB
a. For UB and KB – Sec. 33, GBL
b. For TB – Sec. 10(b), Thrift Banks Act

31
San Carlos Milling Co., Ltd. v. Bank of the Philippine Islands, 59 Phil. 59 (1933); Hilado v. De la
Costa, 83 Phil. 471 (1949); People v. Ong, 204 SCRA 942 (1991); Moran v. Court of Appeals,
230 SCRA 799 (1994); Consolidated Bank and Trust Corporation v. Court of Appeals, 410 SCRA
562 (2003)
32
Serrano v. Central Bank, 96 SCRA 96 (1980); People v. Puig, 563 SCRA 564 (2008).
33
Simex International (Manila), Inc. v. Court of Appeals, 183 SCRA 360 (1990); Go v.
Intermediate Appellate Court, 197 SCRA 22 (1991); Bank of the Philippine Islands v. Intermediate
Appellate Court, 206 SCRA 408 (1992); Philippine Bank of Commerce v. Court of Appeals, 269
SCRA 695 (1997); Bank of the Philippine Islands v. Court of Appeals, 326 SCRA 641 (2000);
Firestone Tire & Rubber Company of the Philippines v. Court of Appeals, 353 SCRA 601 (2001)
 11

c. For RB/Coop Bank – Sec. 12(b), Rural Banks Act; xSubsec. X201.1,
MRB
d. For Islamic Banks – Sec. 6, par. (7)(a), Islamic Bank Charter
2. Savings Deposits – xSec. X213 and X214, MRB; International
Exchange Bank v. Commissioner of Internal Revenue, 520 SCRA 688
(2007)
3. Negotiable Order of Withdrawal (NOW) Accounts – xSecs. X223 to
X226, MRB; People v. Reyes, 454 SCRA 635 (2005)
4. Time Deposits – xSecs. X231, MRB; BPI Family Savings Bank v. First
Metro Investment Corporation, 429 SCRA 30 (2004)
5. Foreign Currency Deposits – Secs. 2 and 3, FCDA34
6. Money Market Placements? – Allied Banking Corporation v. Lim Sio
Wan, 549 SCRA 504 (2008)

C. CAPACITY OF DEPOSITORS
1. Minors – Sec. 1, Presidential Decree No. 734; Sec. 22, Thrift Banks
Act
2. Married Women – Sec. 5, Republic Act No. 7192
3. Corporations: Through signatories designated by Board of Directors –
Sec. 23, Corporation Code
4. Bank Officers and Employees: Prohibited from maintaining demand
deposits or current accounts in banking office where they are assigned –
xSec. X204, MRB

D. OPENING OF DEPOSIT ACCOUNTS

1. Know Your Customer Standards: At least 3 specimen signatures
updated every 5 years, ID optional – xSubsec. X262.1, MRB
2. Prohibitions:
a. Anonymous Accounts/Fictitious Names – Sec. 9(a), AMLA35
b. Pseudonyms – xArt. 178, Revised Penal Code; xCommonwealth Act
No. 142, as amended; xArts. 379-380, Civil Code
c. Exception: Numbered accounts – Sec. 9(a), AMLA; Sec. 3(1), FCDA
3. Joint Accounts – Arts. 485, 1207 and 1208, Civil Code

34
Republic Act No. 6426, as amended (“Foreign Currency Deposit Act”)
35
Republic Act No. 9160, as amended by Republic Act No. 9194 (“Anti-Money Laundering Act of
2001”)
 12

E. ADMINISTRATION OF DEPOSIT ACCOUNTS

1. Deposit of Funds
a. Delivery required – Art. 1934, Civil Code
b. Acceptability of withdrawal slips as deposits – Firestone Tire &
Rubber Co. of the Phil. v. Court of Appeals, 353 SCRA 601 (2001)
2. Withdrawal of Funds
a. From current accounts: Allowing withdrawal of value of check drawn:
(i) In case of insufficiency of funds – Moran v. Court of Appeals,
230 SCRA 799 (1994); Villanueva v. Nite, 496 SCRA 459 (2006)
(ii) Prior to clearing – Associated Bank v. Tan, 446 SCRA 282
(2004)
(iii) In favor of other persons when check crossed – Traders Royal
Bank v. Radio Philippines Network, Inc., 390 SCRA 608 (2002)
(iv) By issuing a manager’s check – Equitable PCI Bank v. Ong, 502
SCRA 119 (2006)
b. From savings accounts: Presentation of passbook and withdrawal slip
– Bank of the Philippine Islands v. Court of Appeals, 326 SCRA
641 (2000)
c. From time deposits: Surrender of certificate of deposit – Far East
Bank and Trust Company v. Querimit, 373 SCRA 665 (2002)
d. From foreign currency deposit accounts: Based on contract – Sec. 5,
FCDA
e. If deceased depositor:
(i) Tax clearance required – Sec. 97, NIRC; But See: xSec.
28(A)(1)(a) and (6), NIRC
(ii) Survivorship Agreements – Vitug v. Court of Appeals, 183
SCRA 755 (1990)
3. Booking of Deposits – xSec. X261, MRB
4. Interest on Deposits – Citibank, N.A. v. Cabamongan, 488 SCRA 517
(2006)
a. Not subject to interest ceilings – xSec. X242, MRB
b. Time of payment of interest on time deposits – xSubsec. X242.1, MRB
c. Matured time deposits – xSubsec. X242.2, MRB
d. Disclosure requirements – xSec. X243, MRB
5. Closing of Account – Far East Bank and Trust Company v. Pacilan,
Jr., 465 SCRA 372 (2005)
 13

F. SECRECY OF BANK DEPOSITS

1. General Rules
a. Rationale: right to privacy – Art. III, Secs. 2, 3, and 7 and Art. II, Sec.
28, 1987 Constitution; Republic v. Eugenio, 545 SCRA 384 (2008)
b. Applicable law – Intengan v. Court of Appeals, 377 SCRA 63 (2002)
c. Applicability of exclusionary rule – Art. III, Secs. 2 and 3, 1987
Constitution; Ejercito v. Sandiganbayan (Special Division), 509
SCRA190 (2006)
2. Rules for Peso Deposits
a. Coverage – Sec. 2, Law on Secrecy of Bank Deposits36; Ejercito v.
Sandiganbayan (Special Division), 509 SCRA190 (2006)
b. Prohibitions – Secs. 2 and 3, Law on Secrecy of Bank Deposits;
Secs. 55.1(b) and 55.4, GBL
c. Exceptions
(i) Under the Law on Secrecy of Bank Deposits – Sec. 2, Law on
Secrecy of Bank Deposits
(a) Upon written permission of the depositor or investor:
(1) DOSRI37 loans – Sec. 26, NCBA; xSec. X337, MRB
(2) For loans secured by hold-out or assignment of CTDs –
xSec. X315(f), MRB
(b) In cases of impeachment
(c) Upon the order of a competent court in cases of bribery or
dereliction of duty of public officials
(d) In cases where the money deposited or invested is the
subject of litigation
(ii) Under the Anti-Graft and Corrupt Practices Act38: In cases
involving unexplained wealth – Sec. 8, Anti-Graft and Corrupt
Practices Act; Philippine National Bank v. Gancayco, 15
SCRA 91 (1965); Banco Filipino Savings and Mortgage Bank
v. Purisima, 161 SCRA 576 (1988)
(iii) Under the Ombudsman Act39 – Sec. 15(8), Ombudsman Act;
Marquez v. Disierto, 359 SCRA 772 (2001); Ejercito v.
Sandiganbayan (Special Division), 509 SCRA190 (2006)

36
Republic Act No. 1405, as amended
37
Directors, Officers, Stockholders, Related Interests
38
Republic Act No. 3019, as amended
39
Republic Act No. 6770
 14

(iv) Under the Plunder Law40 – Secs. 1(d) and 4, Plunder Law;
Ejercito v. Sandiganbayan (Special Division), 509 SCRA190
(2006)
(v) Under the AMLA – Sec. 11, AMLA; Republic v. Eugenio, 545
SCRA 384 (2008)
(a) Upon order of a competent court in cases of violation of the
AMLA where there is probable cause of money laundering,
except that no court order is required in cases of:
(1) kidnapping for ransom
(2) drug trafficking
(3) hijacking, destructive arson and murder, including those
perpetrated by terrorists against non-combatants and
similar targets41
(b) BSP inquiry into or examination of deposits or investments
with any bank, when the inquiry or examination is made in
the course of the BSP’s periodic or special examination
(vi) Independent auditor hired by the bank to conduct its regular audit,
provided that the examination is for audit purposes only and the
results thereof shall be for the exclusive use of the bank – xDOJ
Opinion No. 243 (Series of 1957); xMarquez v. Disierto, 359
SCRA 772 (2001)
(vii) Under the PDIC42 Charter43 – Sec. 8, par. Eighth, PDIC Charter
(vii) Under the Human Security Act44 – Secs. 27-43, Human Security
Act
(viii) Under the NIRC – Sec. 6(F), NIRC
(a) Upon inquiry by the Commissioner of Internal Revenue for
the purpose of determining the net estate of a deceased
depositor
(b) In case a taxpayer files and application to compromise his
tax liabilities on the ground of financial incapacity (waiver
required)
(ix) Under the Unclaimed Balances Law45 – Disclosure to the
Treasurer of the Philippines for dormant deposits for at least ten
(10) years – Sec. 2, Unclaimed Balances Law; xDOJ Opinion
No. 104 (Series of 1975)

40
Republic Act No. 7080, as amended
41
As defined under Revised Penal Code
42
Philippine Deposit Insurance Corporation
43
Republic Act No. 3591, as amended by Republic Act No. 7400 and Republic Act No. 9576
44
Republic Act No. 9732
45
Act No. 3936, as amended by Presidential Decree No. 679
 15

(x) Under the Rules of Court

(a) Garnishment – Sec. 9(c), Rule 39, 1997 Revised Rules of
Civil Procedure; China Banking Corporation v. Ortega,
49 SCRA 356 (1973); xPhilippine Commercial and Industrial
Bank v. Court of Appeals, 193 SCRA 452 (1991)
(b) Preliminary attachment – Sec. 10, Rule 57, 1997 Revised
Rules of Civil Procedure;
d. Penalty for Violation – Sec. 5, Law on Secrecy of Bank Deposits
3. Rules for Foreign Currency Deposits
a. Coverage – Sec. 8, FCDA; Estrada v. Disierto, 445 SCRA 655
(2004); Salvacion v. Central Bank of the Philippines, 278 SCRA 27
(1997)
b. Prohibition – Sec. 8, FCDA
c. Exceptions
(i) Upon written consent of the depositor46 – Sec. 8, FCDA; China
Banking Corporation v. Court of Appeals, 511 SCRA 110
(2006)
(ii) Upon order of a competent court in cases of violation of the AMLA
where there is probable cause of money laundering, except that
no court order is required in specified cases – Sec. 11, AMLA
(iii) BSP inquiry into or examination of deposits or investments with
any bank, when the inquiry or examination is made in the course
of the BSP’s periodic of special examination of said bank – Sec.
11, AMLA
(iv) Under the PDIC47 Charter48 – Sec. 8, par. Eighth, PDIC Charter
d. Penalty for Violation – Sec. 10, FCDA
4. Rules for Deposits in Specific Banks and Financial Institutions
a. Under the GBL – Sec. 55.1(b), GBL
a. Islamic Banks – Secs. 33 and 45, Islamic Bank Charter
b. Rural Banks – Sec. 26(a)(2), Rural Banks Act
c. Thrift Banks – Sec. 21(a)(2), Thrift Banks Act
d. Non-Stock Savings and Loans Association – xSec. 6, Revised Non-
Stock Savings and Loans Association Act of 1997

46
Intengan v. Court of Appeals, 377 SCRA 63 (2002); Estrada v. Desierto, 445 SCRA 655 (2004)
47
Philippine Deposit Insurance Corporation
48
Republic Act No. 3591, as amended by Republic Act No. 7400 and Republic Act No. 9576
 16

G. GARNISHMENT
1. Procedure – Sec. 9(c), Rule 39, 1997 Rules of Civil Procedure
2. Exempt Deposits
a. Foreign currency deposits – Sec. 8, FCDA; But See xSalvacion v.
Central Bank of the Philippines, 278 SCRA 27 (1997)
b. Under the Rules of Court – Sec. 13, Rule 39, 1997 Rules of Civil
Procedure
3. No violation of Law on Secrecy of Bank Deposits – xChina Bank v.
Ortega, 49 SCRA 356 (1973); xPhilippine Commercial and Industrial Bank
v. Court of Appeals, 193 SCRA 452 (1991)
4. Liability for Release – Rizal Commercial Banking Corporation v. De
Castro, 168 SCRA 49 (1988); xPhilippine Commercial and Industrial Bank
v. Court of Appeals, 193 SCRA 452 (1991)

H. DEPOSIT INSURANCE
1. Coverage – Sec. 4, PDIC49 Charter50; Sec. 9, FCDA
2. Amount Insured: Maximum of P500,000.00 – Sec. 4(g), PDIC Charter51
3. Rules on Payment – Secs. 10(b) to (d), PDIC Charter
4. Liability of PDIC – Philippine Deposit Insurance Corp. v. Court of
Appeals, 283 SCRA 462 (1997)

I. UNCLAIMED BALANCES
1. Definition – Sec. 1, Unclaimed Balances Law
2. Report to Treasurer; Notice, Posting, Publication – Sec. 2, Unclaimed
Balances Law; Republic v. Court of Appeals, 345 SCRA 63 (2000)
3. Escheat Proceedings – Sec. 3, Unclaimed Balances Law
4. Effects of Compliance/Non-Compliance – Secs. 4 and 5, Unclaimed
Balances Law

49
Philippine Deposit Insurance Corporation
50
Republic Act No. 3591, as amended by Republic Act No. 7400 and Republic Act No. 9576
51
As further amended by Secs. 3 and 4, Republic Act No. 9576
 17

J. ANTI-MONEY LAUNDERING ACT

1. Declared Policy – Sec. 2, AMLA
2. Covered Transactions: Transaction, in cash or other equivalent
monetary instrument in excess of P500,000 within 1 banking day – Sec.
3(b), AMLA
3. Suspicious Transactions: Transaction with Covered Institution,
regardless of amount involved, where any of the enumerated suspicious
circumstances exist – Sec. 3(b-1), AMLA
4. Covered Institutions – Sec. 3(a), AMLA
a. Banks and other entities, their subsidiaries and affiliates,
supervised/regulated by BSP
b. Insurance companies and other entities supervised/regulated by
Insurance Commission
c. SEC supervised/regulated entities52
5. Obligations of Covered Institutions – Sec. 9, AMLA
a. Customer Identification: Establish and record, and maintain a system
of verifying true identities of clients, including legal existence and
organizational structure of corporate clients, and their representatives,
based on official documents
b. Record Keeping: Keep records for 5 years
c. Reporting of Covered and Suspicious Transactions: Report Covered
Transactions and Suspicious Transactions to AMLC53, within 5 working
days from occurrence, which shall not violate the Law on Secrecy of
Bank Deposits, FCDA, and GBL
6. Money-Laundering Crime: Committed when the proceeds of an Unlawful
Activity are transacted to make them appear to have originated from
legitimate sources, by the following acts: – Sec. 4, AMLA
a. Transacting or attempting to transact, with monetary instrument or
property, knowing it represents, involves, or relates to proceeds of any
Unlawful Activity
b. Facilitating money-laundering referred to in Item (a) above, by failing to
perform an act

52
(a) Securities dealers, brokers, salesmen, investment houses, and other entities managing
securities or rendering services as investment agents, advisor, or consultants; (b) Mutual funds,
closed-end investment companies, common trust funds, pre-need companies, and other similar
entities; (c) Foreign exchange corporations, money changers, money payment, remittance, and
transfer companies, and other similar entities; (d) Other entities administering or dealing in
currency, commodities or financial derivatives based thereon, valuable objects, cash substitutes
and other similar monetary instruments or property
53
Anti-Money Laundering Council
 18

c. Failing to disclose and file report with AMLC of any monetary

instrument or property as required under AMLA
7. Unlawful Activities: Act or omission or series or combination thereof,
involving or having relation to the crimes enumerated – Sec. 3(i), AMLA
8. Jurisdiction: Regional Trial Court/Sandiganbayan – Sec. 5, AMLA
9. Prosecution – Sec. 6, AMLA
10. Prohibition against Political Harassment – Sec. 16, AMLA
11. Penalties and Other Consequences
a. Penalties – Sec. 14, AMLA
(i) Money laundering
(ii) Failure to keep records
(iii) Malicious reporting
(iv) Breach of confidentiality
b. Forfeiture – Sec. 12, AMLA; xRules on Civil Forfeiture54; Republic v.
Glasgow Credit and Collection Services, Inc., 542 SCRA 95 (2008)
12. Freezing of Accounts: Issued by Court of Appeals upon ex-parte
application of AMLC after determination of probable cause that monetary
instrument or property is in any way related to Unlawful Activity, for 20
days unless extended – Sec. 10, AMLA; Republic v. Eugenio, 545
SCRA 384 (2008)
13. Examination of Accounts – Sec. 11, AMLA; xRepublic v. Eugenio, 545
SCRA 384 (2008)
a. Upon order of a competent court in cases of violation of the AMLA
where there is probable cause of money laundering, except that no
court order is required in cases of kidnapping for ransom, drug
trafficking, hijacking, destructive arson and murder, including those
perpetrated by terrorists against non-combatants and similar targets.
b. BSP inquiry into or examination of deposits or investments with any
bank, when the inquiry or examination is made in the course of the
BSP’s periodic of special examination of said bank to ensure
compliance with AMLA
14. AMLC; Composition and Powers – Sec. 7, AMLA
15. Mutual Assistance among States – Sec. 13, AMLA

54
SC Circular A.M. No. 05-11-04-SC