GENERAL BANKING LAW (RA 8791) BOARD OF DIRECTORS

o 5-15 members with 2 of them: independent

ORGANIZATION OF A BANK director (other than bank official/employee)
 Is a stock corporation o Monetary board may disqualify, suspend or
 Funds are obtained from public remove any director (fit and proper rule)
(at least 20 persons)
 Minimum capital req’ts are met LOANS MADE BY BANK
- shall not apply to a cooperative bank to its
STOCKHOLDINGS IN A BANK cooperative shareholders
 - Individuals and corporations may own or 1) Risk-based capital
control up to 40% of bank’s stockholdings - Minimum ratio: net worth of a bank must bear to
its total risk assets
TYPES OF BANKS - 10% but 8% recommended internationally
1) Commercial bank – general 2) Single Borrower’s Limit (SBL)
2) Universal bank – general + powers of investment - Maximum limit to a single borrower
house; expanded commercial bank o Per law: ≤ 20% of net worth
3) Thrift bank – savings/mortgage/stock savings; under o Per circular: ≤ 25% of net worth
Thrift Bank Act - Additional limit (if adequately secured)
4) Rural bank – normal credit needs of farmers, o 10% of bank’s net worth
cooperatives; under Rural Bank Act
5) Cooperative Bank – under Cooperative Act RESTRICTIONS ON BANK EXPOSURE TO DOSRI
6) Islamic Bank – under Shariah Law G.R: No bank D/O shall borrow from such bank nor shall
7) Government-owned bank – for public purpose become a guarantor/indorser/surety for loans
Exception: Written approval of majority of BOD
BANKS QUASI-BANKS excluding D concerned
Function Lend funds Borrow funds
LOAN LIMIT TO DOSRI: limited to unencumbered
Sources BANK DEPOSIT
deposits and BV of Paid-In bank contribution
of funds DEPOSITS SUBSITUTES
 FOREIGN CURRENCY DEPOSIT ACT
LOAN LIMITS AGAINST REAL ESTATE (RA 6426)
< 75% of appraised value of RE
+ 60% of appraised value of insured improvements GENERAL RULE
- All FCDs are absolutely confidential and cannot be
LOAN LIMITS AGAINST SECURITY OF CHATTELS AND examined
INTANGIBLE PROPERTIES - All FCDs are exempt from attachment, garnishment or
< 75% of appraised value of the security any other order of Court

INVESTMENT IN REAL ESTATE/ASSET BY BANKS EXCEPTIONS

- Allowed if total investment < 50% of combined 1) Foreign Currency Deposit Act
capital accounts  Written permission of depositor
2) Jurisprudence on grounds of equity
MINIMUM DEPOSIT RESERVE RATIO OF A BANK TO  Account of NRA
THE BSP  Account of co-payee of a check
- At least 19% of its total deposit liabilities 3) Other Laws (same with Bank Secrecy)
 New Central Bank Act for DOSRI who contract
OTHER NOTES a loan
>> A bank shall not directly engage in insurance  CIR
business as the insurer  AMLC
>> DILIGENCE REQUIRED:  BSP
- Extra-ordinary for deposits (demand, savings  COA
and time deposit)  PCGG
- Ordinary for other services/contracts
>> LIMITATION OF FOREIGN OWNERSHIP PENALTY FOR VIOLATION
- Up to 40% of voting stock  Imprisonment for 1-5 years; or
 Fine > 5,000 but < 25,000; or both