G e n e ra l B a n k i n g L a w

of 2 0 0 0
R.A. 8 7 9 1
 Declaration of Policy
The State recognizes the vital role of banks in
providing an environment conducive to the sustained
development of the national economy and the
fiduciary nature of banking that requires high
standards of integrity and performance.

In furtherance thereof, the State shall promote and

maintain a stable and efficient banking and financial
system that is globally competitive, dynamic and
responsive to the demands of a developing economy
 Definition and Classification of Banks
Bank
A b a n k is an entity engaged in the lending of funds obtained in
the form of deposits.

Elements for an entity to be considered doing business as a

bank:
1. The entity is engaged in the lending of funds
2. Funds obtained from the public with at least 2 0
depositors
3. Funds are in the form of deposits

Note: A transaction involving not a loan but a purchase of receivables

at a discount within the purview of investing, reinvesting, or trading in
securities which an investment company m a y perform is not banking.
 Definition and Classification of Banks

Extent t o o w n e r s h i p of f o r e i g n indiv iduals a n d n o n - b a n k

corporation in a b a n k

Foreign individuals and non-bank corporations m a y own or

control up to forty percent ( 4 0 % ) of the voting stock of a
domestic bank. This rule shall apply to Filipinos and domestic
non-bank corporations. (GBL. Sec. 2)

Note: RA 1 0 6 4 1 allows the entry of more foreign banks in the

country. Moreover, this allows foreign banks to buy as much as 100
percent of a local bank, amending Section 2 of R.A. No, 7 7 2 1 (law
liberalizing operations of foreign banks in the Philippines)
 Definition and Classification of Banks

Extent t o o w n e r s h i p of n o n - b a n k corporation in a b a n k

General Rule: A corporation m a y only own forty percent ( 4 0 % )

of the bank.

XPNs:
1.A universal bank can own up to 1 0 0 % of a thrift bank;
2.A corporation whose shares are listed in the stock
exchange can own up to 6 0 % of the bank;
3.If the corporation is in existence for 1 0 years it can own up
to 6 0 % of the bank; and
4. Under Foreign Bank Liberalization Law (RA 7721), the
Monetary Board m a y authorize foreign banks to operate in the
Philippines.
 Definition and Classification of Banks

Classification of B a n k s

1.U n i v e r s a l B a n k s – Primarily governed by the GBL. They can

be exercise the powers of an investment house and invest in non-
allied enterprise and have the highest capitalization.
2.C o m m e r c i a l B a n k s – Ordinary banks governed by the
GBL which have a lower capitalization requirement than
universal banks and can neither exercise the powers of an
investment house nor invest in non-allied enterprises;
3.Thrift B a n k s – These are (a) savings and mortgage banks;
(b) stock savings and loan associations; and (c) private
development banks, which are primarily governed by the Thrift
Banks Act (RA 7906)
 Definition and Classification of Banks

Classification of B a n k s

4.R u ra l B a n k s – These are mandated to make needed credit

available and readily accessible in the rural areas on reasonable
terms and which are primarily governed by the Rural Banks Act
of 1 9 9 2 (RA 7353).

5.C o o pe rat i ve B a n k s – Banks whose majority shares

are owned and controlled by cooperatives primarily to
provide financial and credit services to cooperatives. It shall
include cooperative rural banks. They are governed
primarily by the Cooperative Code (RA 6938).
 Definition and Classification of Banks

Classification of B a n k s

6.I s l a m i c B a n k s – Banks whose business dealings and

activities are subject to the basic principles and ruling of Islamic
Shari’a, such as AL Amanah Islamic Investment Bank of the
Philippines which was created by RA 6 8 4 8

7.Other classification of banks as determined by the

Monetary Board of the BSP.
 UNIVERSAL vs. COMMERCIAL vs. THRIFT B AN K S
UNIVERSAL BANKS COMMERCIAL BANKS THRIFT A B N K S
Governing General Banking Law General Banking Law Thrift Banks Act (R.A.
Laws (GBL) 7906)
Powers 1. Has the authority to To engage in allied All powers od a
exercise the power of undertakings and, in commercial bank,
a commercial bank. addition to the general except:
2. To act as an powers incident to a 1.To issue
Investment house – a corporation, may imported LC.
corporation that sells exercise all such 2.To accept or
and guarantees sale powers a s m a y be open checking
of securities and necessary to carry on account
shares of stocks. the business of except with prior
3. To engage in a non- commercial banking. approval by the
allied under taking. Monetary Board (MB
*Allied undertakings are requires at least net
those activities of entities asset worth of 28M)
which enhance or
complement banking .
 UNIVERSAL vs. COMMERCIAL vs. THRIFT B AN K S
UNIVERSAL BANKS COMMERCIAL THRIFT A B N K S
BANKS
Capitalization 1. Head of office 1. Head of office H e a d office in N C R
only – 3 B only – 2 B 1. Head of office only – 5 0 0 M
2. Up to 10 2. Up to 1 0 2.Up to 1 0 branches
branches – 6B branches – 750MB
3. 1 1 – 100 – 4B 3. 1 1 – 5 0 branches –
branches – 3. 1 1 – 1 0 0 1B
1 5B branches 4.More than 5 0 branches
– 10B – 2B
4. More than 1 0 0 H e a d office out s i d e N C R
branches – 2 0 B 4. More than 100 5. Head of office only –
branches – 1 5 B 200M
6. Up to 1 0 branches –
(BSP Circular No. 300M
854, Oct. 9, 3.11 – 5 0 branches – 4 0 0 M
2014) 4.More than 5 0 branches –
800M
 UNIVERSAL vs. COMMERCIAL vs. THRIFT B AN K S
UNIVERSAL BANKS COMMERCIAL BANKS THRIFT A B N K S
Equity Can be a stock holder in Only allied undertaking Only allied
Investment both allied and non- undertaking
allied undertaking
Non-Allied Can invest but shall not Cannot invest Cannot invest
Transaction exceed 2 5 % of the
investee (receiving)
corporation.
Total Not to exceed 5 0 % of Not to exceed 3 5 % of Not to exceed 3 5 % of
Amount of the bank’s net worth. bank’s net worth. bank’s net worth.
Investment
Equity
Single Not to exceed 2 5 % of the bank’s net worth
Equity
Investment
 Distinction of banks from other forms

Quasi-bank
These are entities engaged in the assignment with recourse or
acceptance of deposit substitutes for purposes of relending or
purchasing of receivables borrowing of funds through the
issuance, endorsement or and other obligations (GBL, Sec. 4).
Unlike banks, quasi-banks do not accept deposits. Neither
are funds obtained insured with the PDIC.

Trust Entities
There are entities engaged in trust business that act as trustee
or administer any trust or hold property in trust or on deposit for
the use, benefit, or behalf of others. A bank does not act as a
trustee.
 Distinction of banks from other forms

Financial Intermediaries
Persons or entities whose principal functions include the
lending, investing or placement of funds on pieces of evidence
of indebtedness or equity deposited with them, acquired by
them or otherwise coursed through them, either for their own
account or for the account of others.

Deposit Substitutes
It is an alternative form of obtaining funds form the public,
other than deposits, through the issuance, endorsement or
acceptance of debt instruments, for the borrowers own account
of relending or purchasing of receivables and other
obligations.