BM1808

NAME: Jacky L. Buscaya DATE: SCORE:

COLLABORATIVE TASK

Read and analyze the cases and answer the following questions. (2 items x 10 points)

1. Maharlikang Pilipino Banking Corporation (MPBC) operates several branches of Maharlikang Pilipino
Rural Bank in Eastern Visayas. Almost all the branch managers are close relatives of the corporation’s
board members. Many undeserving relatives of the branch managers were granted loans. In time, the
branches could not settle their obligations to depositors and creditors. Consequently, on June 4, 201A,
ABC Bank extrajudicially foreclosed the property. Being the highest bidder in the auction sale conducted,
ABC Bank was issued a Certificate of Sale which was registered on receiving reports of these
irregularities. The Supervising and Examining Department (SED) of the Monetary Board prepared a
detailed report (SED Report), specifying the facts and the chronology of events relative to the problems
that beset MPBC rural bank branches. The report concluded that the bank branches were unable to pay
their liabilities as they fall due and could not possibly continue in business without incurring substantial
losses to its depositors and creditors.
Issues:
a. May the Monetary Board order the closure of the MPBC rural banks relying only on the SED
Report without an examination? Explain.

According to the legal standard set by the Buhi Rural Financial Institution v. Court of Appeals case (162 SCRA
288), a banking institution may be placed into receivership without first undergoing an investigation. This means that the
Monetary Board has the power to act immediately upon receiving the Securities and Exchange Department's (SED)
dossier in line with Section 30 of Republic Act No. 7653, also known as the New Central Bank Act. Receivership or
liquidation of the institution may be part of this proceeding. This provision is justified by giving regulatory bodies the
authority to act quickly to restore an institution's financial stability without waiting for an investigation to be completed.
The Monetary Board uses the SED's dossier as a guide for deciding what steps to take and how well the organization is
financially managed. The law intends to safeguard the interests of depositors and the stability of the financial system
overall by giving the Monetary Board this discretionary authority. By enabling prompt responses to new threats or
abnormalities within financial institutions, this method helps to reduce possible risks and protects the integrity of the
banking industry.

b. If MPBC hires you as a lawyer because the Monetary Board has forbidden it from carrying on its
business due to its imminent insolvency, what action will you institute to question the Monetary
Board’s order? Explain.

A petition for appeal may be filed to contest the Monetary Board's decision in line with Section 30, paragraph
(2) of Republic Act No. 7653, popularly known as the New Central Bank Act. The grounds for filing this petition are that
the action conducted was beyond the scope of authority or entailed a flagrant misuse of discretion that amounted to an
overreach of jurisdiction. To file such a petition, however, one must be a stockholder of record representing the majority
of the capital stock. Within ten (10) days of obtaining the Monetary Board's order—which may entail receivership,
liquidation, or conservatorship—these stockholders must file the petition. This provision aims to guarantee that
disagreements with the Monetary Board's decisions are voiced as soon as possible and by individuals who have a big
interest in the affected institution. The legislation attempts to avoid pointless or speculative challenges that can slow down
the regulatory process by limiting the ability to petition to stockholders who own the majority of the capital stock. The
importance of shareholder responsibility and engagement in financial institution governance is emphasized by this
requirement. The ten-day period also highlights the necessity of acting quickly to correct any alleged mistakes or misuses
of regulatory authority. In general, this clause aims to maintain the integrity and efficacy of the regulatory framework
governing financial institutions while striking a balance between the interests of stakeholders.

11 Activity 3 *Property of STI

Page 1 of 2
 BM1808

2. Due to growing financial difficulties, Y Bank was unable to finish construction of its 20- story building on
a prime lot located in Makati City. Inevitably, the Bangko Sentral ordered the closure of Y Bank and
consequently placed it under receivership. In a bid to save the bank’s property investment, the president
of Y Bank entered into a financing agreement with a group of investors, for the completion of the
construction of the building in exchange for a ten-year lease and the exclusive option to purchase the
building.
Issue: Is the act of the president valid? Why or why not?
No, The appointment of a receiver suspends the bank's and its executives' jurisdiction over the assets, as established
in the Abacus Real Estate Development Center, Inc. v. Manila Banking Corporation case (455 SCRA 97, 2005). The recipient
receives this authority. As a result, the president of a financial institution might not always follow the law, particularly when
it comes to financial agreements. The receiver assumed responsibility for managing and protecting Z Bank's assets during
the receivership process when it was ordered to close and put under receivership. This underscores the receiver's critical role
in overseeing and protecting the institution's assets.

Rubric for scoring:

CRITERIA PERFORMANCE INDICATORS POINTS
Content Provided pieces of evidence, supporting details, and factual 7
scenarios
Grammar Used correct grammar, punctuation, spelling, and capitalization 1
Organization of ideas Expressed the points in clear and logical arrangement of ideas 2
in the paragraph
TOTAL 10

11 Activity 3 *Property of STI

Page 2 of 2