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ã ã BAR QUESTION:

‡   
  
     


JOINT ACCOUNT VS. PARTNERSHIP (2000)
 
 Ú    
 
  
     
Æ General Banking Law ô    SUGGESTED ANSWER
Æ. New Central Bank Act ô      
         





  

‡      
Æ New Rural Banks Act ô      
   

  
  
  
Æ Private Development Banks Act

 
    
 
ô     
 
Æ Savings and Loan Association Act
ô    ) WHILE A PARTNERSHIP HAS JURIDICAL
Æ . Thrift Banks Act ô   
PERSONALITY AND MAY SUE OR BE SUED
UNDER ITS FIRM NAME, A JOINT ACCOUNT
g      
Æ Secrecy of Bank Deposits Law HAS NO JURIDICAL PERSONALITY AND CAN
ô    SUE OR BE SUED ONLY IN THE NAME OF THE
Æ Unclaimed Balances Law ô  

OSTENSIBLE PARTNER.
Æ Philippine Deposit Insurance Corporation Act
ô   
  
 
   

    
  


 
Æ The general banking laws above mentioned are !   
 
   
 
 
  
"
applicable to government banks like DBP and PNB.
   

  
  
  
Æ The Al- Amanah Islamic Bank is subject to all banking
and pertinent laws.  
 

   
 
#    $ 
  
 
   
%  %
ô      !"
    

  
   
 ## $  
 $ 
   
 % %
  
 


T HREE KINDS OF ENTITIES THAT INTRODUCE FUNDS 
INTO THE ECONOMY : BAR QUESTION:
|.    entities that obtains funds from the public  %  &    "  %  '
 
 
in the form of deposits and re-lend it to the public; 
(()
2.   those that obtain funds in the form of
deposit substitutes and re-lend the same and not
from the public or depositors. & " & 
  %      
3.    
   
      &   &   
%   * 
    those that lend funds from their  %  
 
         
own assets.

+      ,
SUGGESTED ANSWER: 
FIVE PERSONS PRIMARILY INTERESTED IN THE -    %      

  
      "%    % 
BUSINESS OF BANKING   
  . -  %
|. Government  
 
    
    
 
2. Depositors
3. Investors  

   
 
%
4. Creditors   
5. Borrowers 







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 Æ The certificate of authority shall not be issued
ã  ã 
 ã unless the Monetary Board is satisfied:

 |. That all requirements of existing laws and
 regulations to engage in the business for which
 the applicant is proposed to be incorporated
! 
  To promote and maintain a stable and have been complied with;
efficient banking and financial system that is globally
competitive, dynamic and responsive to the demands of 2. That the public interest and economic
a developing economy (( # . conditions, both general and local, justify the
authorization; and

 
  
 The GBL primarily governs
universal banks and commercial banks. It suppletorily 3. That the amount of the capital, the financing,
governs thrift banks, rural banks and other banking organization, direction and administration, as
institutions. well as the integrity and responsibility of the
 organizers and administrators, reasonably
assure the safety of deposits and the public
GENERAL CONCEPTS interest ô(  

‡"#   + 

 ‡ 
M ‡ 
  '   
Æ Entities engaged in the lending of funds obtained in |. The entity is a stock corporation;
the form of deposits ô( # 2. Its funds are obtained from the public,
i.e. 20 or more persons; and
Æ Entities duly authorized by the Monetary Board to 3. The minimum capital requirements prescribed
engage in the business of regularly lending funds by the Monetary Board are satisfied ô(  
obtained regularly from the public through the
receipt of deposits of any kind. -
Ì    ) 
     
Æ An investment company that performs function as     


    
  
such is NOT a bank. Thus an investment company  ,
     
, 
  
that is engage solely in investing, reinvesting or   , 
 ,
    
  
trading in securities is not engage in banking. ô   
   

 
 
, 

   %& ' ( )     
 
  
   

#      
 
 
 

   

Æ However, an investment company which loans out
money of its customers, collects interest, and 
charges a commission to both lender or borrower is Æ A person or entity cannot engage in banking or
engage in banking ô (*+  (*, $ quasi-banking functions without a certificate of
$ ( ( authority from the BSP ô(

Æ The determination of whether a person or entity is
M ‡"# performing banking or quasi-banking functions
without BSP authority shall be decided by the
Æ Entities engaged in the borrowing of funds through Monetary Board.
the issuance, endorsement or assignment with
recourse or acceptance of deposit substitutes ô( NATURE OF BANKING BUSINESS


Æ Entities authorized to perform universal or Æ Impressed with public interest where the trust and
commercial banking functions may also engage in confidence of the public in general is of paramount
quasi-banking functions. importance such that:


""g$"%&'(&)'& |. The appropriate standard of diligence must be
 very high, if not the highest, degree of
Æ Persons or entities whose principal functions diligence; ¸"¸ $" &  ô%. / 
include the lending, investing or placement of funds   (  
%   0  
on evidences of indebtedness or equity deposited # # ! #
with them, acquired by them or otherwise coursed  This applies only to cases where banks
through them, either for their own account or for the are acting in their fiduciary capacity, that
account of others. is, as depository of the deposits of their
depositors ô ,   0  
#  *" # .
ORGANIZATION AND OPERATION
  

'  *

  2. Subject to reasonable regulation under the
police power of the state.
Æ The SEC shall not register the articles of
incorporation of any bank or any amendment
thereto unless accompanied by a certificate of Æ While an innocent mortgagee is not expected to
authority issued by the Monetary Board under its conduct an exhaustive investigation on the history
seal ô(   of the mortgagor¶s title, in case of a banking

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institution, it must exercise due diligence before cooperatives primarily to provide financial and
entering into said contract, and cannot rely upon on credit services to cooperatives. It shall include
what is or is not annotated on the title. - cooperative rural banks. They are governed
Before a loan is approved, representatives are sent primarily by the Cooperative Code ô 
  
to the premises offered as collaterals so as to
investigate who the real owners are ô1%   V.     - Banks whose business dealings
 (  #
  and activities are subject to the basic principles and
rulings of Islamic Shari¶ a, such as the Al Amanah
Æ The business of a bank is one affected by public Islamic Investment Bank of the Philippines which
interest for which reason the bank should guard was created by 

against loss due to negligence and bad faith. It is
expected to ascertain and verify the identities of the 7.     

   as determined by
persons it transacts business with ô2%  the Monetary Board of the Bangko Sentral ng
 0    +  # Pilipinas.
3 ! 

Æ Due diligence required of banks extend even to
persons, or institutions like the GSIS, regularly
')"'. ‡"#"
engaged in the business of lending money secured g'!'%" g'!'%"
by real estate mortgages ô0(.(  4$*$
(" 0    #
 )+ # # 
May be a stock or Must generally be a
CONSEQUENCES OF NATURE OF BUSINESS: non-stock stock corporation
corporation
|. It is subject to heavy and close supervision and/or
regulation by the BSP ( / & ¸ %¸  May issue par value Shall issue par value
 # ( 
#P. or no par value stocks only ô(  
stocks.
|. It is required to exercise utmost diligence in the May be registered Must secure a
handling of deposits ((5 . 
with the SEC certificate of authority
.  ( 
P.
2. Special rules on strikes and lockouts: any strike or without any from the Monetary
lockout involving banks, if unsettled after 7 certificate of Board before it can
calendar days shall be reported by the BSP to the authority issued by register with SEC.
Sec. of Labor who has 2 options: a government
a. He may assume jurisdiction over and decide agency.
the dispute; or
b. certify it to the NLRC for compulsory May May not purchase/
arbitration purchase/acquire acquire its shares or
its own shares for a accept them as
legitimate corporate security for a loan.
The President may also intervene at any time and purpose; provided 45(: when
assume jurisdiction over such labor dispute in order to that, it has authorized by the
settle or terminate the same. unrestricted Monetary Board. In
retained earnings in such case, the bank
its books to cover must sell or dispose
CLASSIFICATION OF BANKS ô 
the shares to be of said shares within
purchased/ V months from the
|.      - Primarily governed by the acquired. time of their
General Banking Law (GBLP, can exercise the acquisition ô(  
powers of an investment house and invest in non-
allied enterprises and have the highest Must be composed Also composed of 5
capitalization requirement. of 5 to |5 directors, to |5 directors. In
each of whom shall case of merger or
2. g
    - Ordinary banks governed by own at least one (|P consolidation, the
the GBL which have a lower capitalization share of the capital number of directors
requirement than universal banks and can neither stock of the shall not exceed 2|
exercise the powers of an investment house nor corporation. ô(  
invest in non-allied enterprises.
May declare May not declare
3. %  - These are aP Savings and mortgage dividends out of its dividends, if any of
banks; bP Stock savings and loan associations; cP unrestricted the conditions set
Private development banks, which are primarily retained earnings. forth under Sec. 57
governed by the Thrift Banks Act ô  
 are present.

4. '    ± 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 | 2 ô  
  

5. g

     ± Those banks organized 


whose majority shares are owned and controlled by 

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 payment in legal tender


"/&'$‡"# g((&'g$‡"# upon demand by the
presentation of checks
Authority to exercise No such additional ô(   
additional powers powers
other than those 
authorized for 
commercial banks &M %."/&%(&"%
!"% M   
 g((6$‡"#
May invest in the May only invest in
equities of allied, equities of allied )%"g%" ô 23245
ô 78725
whether financial or enterprises, whether
non-financial, and financial or non-financial
non-allied enterprises Total investment 50% 35%
(( #P in allied
enterprises of net worth of net worth
!
 
|. The powers |. General powers Total investment 50% N/A
authorized for a incident to in non-allied
commercial bank; corporations enterprises of net worth
2. The powers of an 2. Such powers as may
investment house; be necessary to carry
and on the business of Equity 25% 25%
3. The power to invest commercial banking: investment in any
in non-allied a. Accepting drafts one enterprise of net worth of net worth
enterprises ô( and issuing letter of
#  credits; (Allied onlyP
b. Discounting and
negotiating Equity
promissory notes, investment in
drafts, bills of financial allied |00% |00%
exchange and other enterprise: thrift
evidence of debt; of equity of equity
bank, rural bank
c. Accepting or
or any financial
creating demand
allied enterprise
deposits; receiving
ô( #
other types of < In other
deposits and deposit financial allied
¦A publicly-listed
substitutes; enterprises,
bank may own up
d. Buying and selling investment shall
to |00% of the remain a
foreign exchange
voting stock of minority holding
and other debt
only one other ô(  
securities;
UB / CB ô(
e. Extending credit.
# 
(( #P


Equity
 investment in
non-financial |00% |00%
allied enterprises
 of equity of equity


Equity Shall not exceed
"/&'$0 %1&'‡"#
investment in a 35% of the total
g((&'g$‡"#
single non-allied equity in that
Authorized to engage in Not so authorized enterprise enterprise nor
quasi-banking functions shall it exceed N/A
without need for 35% of the
approval voting stock in
that enterprise
May accept or create Must seek approval of
demand deposits Monetary Board
without need for before accepting or
approval creating demand
deposits. (( P Equity
)   
  investment in
Liabilities of the BSP Quasi-Banks 40% 40%
and of other banks
which are denominated
in Philippine currency
and are subject to


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  &    ± those entities which enhance or
complement banking FUNCTIONS OF BANKS

"
     &    ± pertains to 
activities that do not involve money matters (such as ‡g "g%"
warehousing, safety deposit boxesP |. Loan Function
 2. Deposit Function
"&%9'%1
The total of the unimpaired paid-in capital including %1&' "g%"
paid-in surplus, retained earnings and undivided profit, Universal banks and commercial banks may also
net valuation reserves and other adjustments as may be exercise any of the following functions:
required by the Bangko Sentral ô( #  a. Receive in custody funds, documents and
 valuable objects;
'#-‡&) g!%$ b. Act as financial agent and buy and sell, by
 order of and for the account of their customer,
Æ The minimum ratio prescribed by the Monetary shares, evidences of indebtedness and types
Board which the net worth of a bank must bear to of securities;
its total risk assets which may include contingent c. Make collection and payments for the account
accounts. of others and perform such other services for
their customer as are not incompatible with
Æ However, the Monetary Board may require or banking business;
suspend compliance with such ratio whenever d. Upon prior approval of the Monetary Board, act
necessary for a maximum period of one year; as managing agent, adviser, consultant or
PROVIDED that, such ratio shall be applied administrator of investment management/
uniformly to banks of the same category ô(   advisory/consultancy accounts; and
e. Rent out safety deposit boxes.
Æ Effect of non-compliance with the prescribed
minimum ratio:  The depositary would be liable if in performing its
obligation it is found guilty of fraud, negligence; in the
|. Distribution of net profits may be limited or absence of any stipulation prescribing the degree of
prohibited and MB may require that part or all diligence required, that of a good father of the family is
of the net profits be used to increase the to be observed. Any stipulation exempting the
capital accounts of the bank until the minimum depositary from any liability arising from loss on account
requirement has been met; or of fraud, negligence would be void for being contrary to
2. Acquisition of major assets and making of new public policy ô6" 17   # (  #

investments may be restricted. EXCEPT: ¸  
purchases of evidence of indebtedness 
guaranteed by the Government ô(   
3. In case of a bank merger or consolidation, or "
  The bank acting as depositary or as an agent
when a bank is under rehabilitation under a shall keep the funds, securities and other effects which
program approved by BSP, the MB may it receives duly separated from its own assets and
temporarily relieve the surviving bank, liabilities. (Sec. 53P
consolidated bank, or constituent bank or
corporations under rehabilitation from full
compliance with the required capital ratio.  $"  "g%"

& 
 

          '   
 
$

  
 
|. Distribution of net profits may be limited or  Before granting a loan, a bank must ascertain that
prohibited and MB may require that part or all of the the debtor is capable of fulfilling his commitments to the
net profits be used to increase the capital accounts bank.
of the bank until the minimum requirement has
been met; or '  
2. Acquisition of major assets and making of new 
investments may be restricted. EXCEPT: |. A bank may demand from its applicants a
purchases of evidence of indebtedness guaranteed statement of their assets and liabilities and of their
by the Government. income and expenditures and other information.
3. In case of a bank merger or consolidation, or when
a bank is under rehabilitation under a program 2. (¸*$ *¸  (  + & 
approved by BSP, the MB may temporarily relieve , the bank may terminate any loan granted
the surviving bank, consolidated bank, or on the basis of said statements and shall have the
constituent bank or corporations under right to demand immediate repayment or liquidation
rehabilitation from full compliance with the required of obligation ô(  
capital ratio. 








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 2. )' 
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a. The borrower is director, officer, or any
Those that do not Those that have stockholder of a bank and related interest.
have a greater±than± extraordinary risks of b. He contracts a loan or any form of financial
normal risk and the loss in collection due to accommodation
borrower have some defects such as c. The loan or financial accommodation is from
apparent ability to bad debts or those (|P his bank or (2P a bank that is a subsidiary of a
satisfy it in full and no under litigation. bank holding company of which both his bank and
loss in ultimate  lending bank are subsidiaries, (3P a bank in
collection is which a controlling proportion of the shares is
anticipated. owned by the same interest that owns a
 controlling proportion of the shares of his bank;
and
 d. The loan or financial accommodation of
 
    
  
    the DOS, singly or with that of his related

ô  interest, is in excess of 5% of the capital and
surplus of the lending bank or in the maximum
|  ‡

 6$ ô‡$5'   amount permitted by law, whichever is lower.
 
b. The total amount of loans extended by a bank to 9
 
ô(% *   
any person, partnership, association, corporation or |. Directors ± Directors of the lending bank
other entity shall at no time exceed 20% of the net
worth of such bank. 2. Officers ± Either identified in the by-laws or are
generally known as such
c. The total amount of loans may be increased by an
additional |0% of the net worth of such bank 3. Stockholders ± those whose stockholdings,
provided the additional liabilities of any borrower individually and/or together with any of the following
are adequately secured by trust receipts, shipping persons, amount to 2% or more of the total
documents, warehouse receipts or other similar subscribed capital stock of the bank:
documents transferring or securing title covering a. His spouse or relative within the first degree of
readily marketable, non-perishable goods which affinity/consanguinity or relative by legal
must be fully covered by insurance; adoption, partnership wherein any of the
 foregoing is a general partner; and
&: 
ô""'#$"5
|. Loans secured by obligations of the Bangko Sentral b. A co-owner, with the stockholder or the
or the Philippine Government; stockholder¶s spouse, or relative mentioned
2. Loans fully guaranteed by the government; above, of property/right/interest (mortgaged,
3. Loans covered by assignment of deposits pledged or assigned to secure the loan or
maintained in the lending bank and held in the credit accommodations, except when the
Philippines; mortgage, pledge or assignment covers only
4. Loans, credit accommodations and acceptances said co-owner¶s undivided interest.
under letters of credit to the extent covered by
margin deposits; and 4. Related Interest ±
5. Other loans or credit accommodations which the a. Spouse, relatives within first degree of
MB may specify as non-risk items. consanguinity or affinity, or relative by legal
 adoption of a DOS, partnerships of which a
DOS or any of the foregoing is a general
© 
    
ô© 
 partner.
b. Co-owner, with the DOS or his spouse or
A common banking practice requiring as an additional relative within the first degree of consanguinity
or affinity, or relative by legal adoption, of the
security for a loan granted to a corporation the joint and property/interest/ right mortgaged, pledged,
Solidary signature of a major stockholder or corporate assigned to secure the loans or credit
officer of the borrowing corporation ô(*, /  accommodations, except when the mortgage,
*  (    pledge or assignment covers only said co-
owner¶s undivided interest.
' 

c. Corporation with inter-locking directors or
a. In case of default, creditor¶s recourse is not limited where 20% of the capital stock is owned by the
to corporate properties but extends to personal DOS and/or their spouses or relatives
assets of the surety; mentioned above, or wholly or majority owned
b. Surety would be compelled to ensure that the loan or controlled by any related entity or a group of
would be used for the purpose intended. related entities in items (bP, (dP, and (eP.
"
  While R.A. 87 | provides for the rates of 20% 
and |0% respectively, the Bangko Sentral has not yet 
implemented such rates. The     are 25% 
and |5% respectively. 



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 5  6 1
0
. 2
 777 
    %             
 
.   %    %     
 
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.    
.  
      

a. No director or officer of any bank shall, directly or  .     
 
.  1
 0
. 
indirectly, borrow from such bank nor shall be
2
  "  
  
      
.
guarantor, endorser or surety for loans from such
bank to others, or in any manner be an obligor or   
            
incur any contractual liability to the bank, except  
 "
   
 % "  
 
with the written approval of the majority of all the       
.  4       
directors of the bank, excluding the director      $  9       
 
concerned. The written approval shall not be
required for loans granted to officers under a fringe         
"
    
.
benefit plan approved by the Bangko Sentral. 
      5  6 &

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   0
.
 = 
b. Dealings of a bank with any of its DOSRI shall be 9 

8 
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  "& 1<
upon terms not less favorable to the bank than
>  )!6  Ú   ?  777  " 
    
those offered to others ô'($&"%1' $&5.
 "   
        

c. Loans extended to DOSRI shall be limited to an "


           
amount equivalent to their respective  
 "   >&
0
. 
unencumbered deposits and book value of their
paid-in capital contribution in the bank.
&: 
i. Loans, credit accommodations, and COLLATERALS
guarantees secured by assets considered as
non-risk by the Monetary Board. |/  

  
ii. Loans, credit accommodations, and advances
to officers in the form of fringe benefits.  The loan shall not exceed 75% of the appraised
iii. Cooperative banks with regard to their value of the real property plus V0% of the appraised
cooperative shareholders. value of the improvements or 75% of the appraised
value of the chattel ô (  8  0  
d. The resolution approving the loan shall be entered in
the records of the bank and transmitted to the BSP.
‡)&!%   "g%"
e. Waiver of secrecy of deposits of whatever nature in 
all banks in the Philippines by the borrower. No Kinds of Deposits between a Bank and its Depositor
waiver is required if the related interests are the
borrower. |.  
 

a. Savings
f. Information obtained from examination is strictly b. Time
confidential. c. Demand
 g  
i. In the nature of irregular deposits ô(
7 '  


  
   / 
(  

ii. Contract of loan/mutuum with the
a. Those secured by real estate shall not exceed 75% depositor as creditor
of the appraised value of the real estate security, iii. Bank acquires ownership of the thing
plus V0% of the appraised value of the insured deposited and the right to use and dispose
improvements ô(   iv. Money deposited is commingled with the
other money, constituting a common fund.
b. Those secured by chattels and intangible properties v. Not preferred credits ô / 
(such as patents, trademarks, trade names and & # (   

copyrightsP shall not exceed 75% of the appraised
2.  
  
value of the security ô(   a. Safety deposit boxes ± the relation between a
bank renting out safety deposit boxes and its
BAR QUESTION: customer with respect to the contents of the
BANKS; RESTRICTIONS ON LOAN box is that of a bailor and bailee ± the bailment
ACCOMMODATIONS (2006)  for hire and mutual benefit has been adopted in
this jurisdiction. It cannot be considered as a
/          0
. +    contract of lease because the full possession

  
 
    
 
.   
 
 and control of the safety deposit box is not
 
  
       
   given to the renters ô(   ### (  #


   
 "

  9 : 

   
    
.     
7    

  
  .        %  a. Trust account
1
 0
.  2
 34
    

    # 3    

SUGGESTED ANSWER: 

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a. Deposit strictly for safekeeping and for specific


purposes

~     :


a. Deposit of check for collection
b. Deposit for specific purpose
c. Deposit for safekeeping
Depositors: "9gg "%
%(&)&!%
|. Minors : ô" 
    

a. at least seven years of age 9  5
b. able to read and write
c. not disqualified by any incapacity
d. it should only be savings or time deposits Interest bearing deposit An account with fixed
accounts that combine term
the payable on demand
"
  Parents may deposit for their minor children feature of checks and
or wards (Sec.| PD No.734P investment feature of
savings account.
Æ If the guardian shall give notice in
writing to any thrift bank not to make payments
of deposits, dividends, or interest to the minor
of whom he is the guardian, then such
payment shall be made to the guardian. (Sec.
22, Thrift Banks Act of | 5P

Æ Married Women are allowed to open


bank accounts without assistance of their
husbands (RA No. 7| 2


Kinds of Deposits
"
 
)&("))&!% /"gg "%
Æ Demand, savings, NOW accounts, time deposits
and deposit substitutes shall not be subject to
Only a universal or Evidenced by a
interest ceilings.
commercial bank can passbook.
accept or create demand Æ A bank other than a universal or commercial bank
deposits. must seek approval of Monetary Board before
accepting or creating demand deposits. ô 775
A bank other than a Banks are prohibited 
Æ Anonymous accounts are prohibited. ô  
universal bank or from issuing / accepting

  $$ +,  ; (% *  # 
commercial bank withdrawal slips or !*, # # : 
 Foreign currency deposits
CANNOT accept other similar may be a ³numbered account´. However, the law
demand deposit instruments to effect requires that the necessary measures are undertaken
withdrawals without the by the bank to record and establish the true identity of
passbooks except for the depositor.
bank authorized by the
Æ Joint account may be the subject of a survivorship
BSP to adopt the no agreement whereby the co-depositor agree to permit
passbook withdrawal either of them to withdraw the whole deposit during their
system. lifetime and transferring the balance to the survivor upon
the death of one of them ( <*"   ¸ #

Temporary overdrawing A bank is negligent if it

against current accounts allows the withdrawal
shall not be allowed without requiring the
unless caused by normal presentation of a Types of deposit accounts
bank charges and other passbook. (BPI v. CAP ô=$+/  / 1(  <,  $
fees incidental to
|   
handling such accounts.

2 ;

Drawings against a. ³And´ account
uncollected deposits Æ Co-ownership
(uncleared checksP are Æ The signatures of both co-depositors are
required for withdrawals.
generally prohibited.
b. ³And/or´ account

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Æ Either one of the co-depositors may In case a bank or quasi-bank notifies the Bangko
deposit and withdraw from the account Sentral or publicly announces a bank holiday, or in any
without the knowledge, consent and manner suspends the payment of its deposit liabilities
signature of the other. And upon the death continuously for more than 30 days, the Monetary Board
of one, the survivor may withdraw the may summarily and without need for prior hearing close
entire balance on deposit. such banking institution and place it under receivership
of the Philippine Deposit Insurance Corporation ô(

Æ The account may be deemed a 
survivorship agreement depending on the Æ The depositary would be liable if in performing
intention of the parties; aleatory contract its obligation it is found guilty of fraud,
supported by a lawful consideration which negligence; in the absence of any stipulation
is valid unless when made as a mere prescribing the degree of diligence required,
cloak to hide an inofficious donation, to that of a good father of the family is to be
transfer property in fraud of creditors, or to observed. Any stipulation exempting the
defeat the legitime of a forced heir ô  depositary from any liability arising from loss
 %(7 / $ >*   %¸ on account of fraud, negligence would be void

9#:  for being contrary to public policy ô6"
17   # (  #
¸  


Deposit substitutes "
 : The bank shall act as depositary or as an agent
shall keep the funds, securities and other effects which
An alternative form of obtaining funds from the public, it receives duly separated from its own assets and
other than deposits, through the issuance, liabilities ô(
endorsement, or acceptance of debt instruments for the 
borrower¶s own account, for the purpose of re-lending or 
purchasing of receivables and other obligations ô( 
  

 PROHIBITIONS
)&!%
)&!%
 ‡%% %&
 "‡"# 
No security given to Guaranteed by 
guarantee certificates and other |. To directly act as insurer ô( 
repayment; the instruments.
depositor relies on ô=$+/  / 2. For banks or quasi-banks to declare dividends, if at
the stability and 1(  <, the time of declaration:
reputation of the  $ a. its clearing account with the Bangko Sentral is
bank. overdrawn;

 b. it is deficient in the required liquidity floor for
Æ A bank has the right to set-off the deposits in its government deposits for 5 or more consecutive
hands for the payment of any outstanding days;
indebtedness to it on the part of the depositor
ô0*  %
# %¸ ; %   ## c. it does not comply with the liquidity
(  #  standards/ratios prescribed by the Bangko
Sentral for purposes of determining funds
Æ The fiduciary nature of a bank-depositor available for dividend declaration; or
relationship does not convert the contract between
the bank and its depositors from a simple loan to a d. It has committed a major violation as may be
trust agreement, whether express or implied. determined by the Bangko Sentral ô(  .
Failure by the bank to pay the depositor is failure to
pay a simple loan and not a breach of trust. The law 3. To conduct business in an unsafe or unsound
simply imposes on the bank a higher standard of manner ô(
;
integrity and performance in complying with its
obligations under the contract of simple loan, 4. Publication of capital stock ô(
# ;
beyond those required of non-bank debtors, under
a similar contract of simple loan ô>   5. Unauthorized advertisement or business
0    
 ((+  #  representation ô(
 ; or

Æ This fiduciary relationship means that the bank¶s V. To employ casual or non-regular personnel or too
obligation to observe ³high standards of integrity lengthy probationary personnel in the conduct of its
and performance´ is deemed written into every business involving bank deposits ô( .
deposit agreement between a bank and its 
depositor. The fiduciary nature of banking requires ' 
   To prevent violation of Bank Secrecy
banks to assume a degree of diligence higher than Law.
that of a good father of a family ô>  
.+$  ‡ " )'&g%', g&', &(!$.&&,
'&"%‡"#
Suspension of Payment on its Deposit 
Liabilities |. Make false entries in any bank report or statement
or participate in any fraudulent transaction;

s    

 
  





c 

2. Without order of a court of component 4. Offer any director, officer, employee or agent of a
jurisdiction, disclose to any unauthorized bank any gift, fee, commission, or any other form of
person any information relative to the funds or compensation in order to influence such persons
properties in the custody of the bank belonging to into approving a loan or other credit
private individuals, corporations, or any other accommodation application.
entity;

3. Accept gifts or any other form of remuneration in 
connection with the approval of a loan or other ) " &<("&', ‡! ' /&'"(&"%
credit accommodation from said bank;
g&' ") &(!$.&& "&) %
4. Overvalue or aid in overvaluing any security for  !&'/&,  &<("&,  % ' '&")&'
the purpose of influencing in any way the actions %&g1"g$%"g&%".‡"# 
of the bank or any bank; or
Commit any of the acts enumerated in Sec. 55 or aid in
5. Outsource inherent banking functions ± a the commission of the same.
bank cannot engage the services of another
entity to receive deposits on its behalf; the bank Æ The making of false reports or
has to do it by itself. misrepresentations or suppression of material
 facts by personnel of the BSP shall constitute
' 
   To prevent violation of Bank Secrecy fraud and shall be subject to administrative and
Law ô=$+/  / 1(  <,  criminal sanctions.
$ 

Æ However a bank may outsource, upon prior 
approval of the Monetary Board the following
functions: CONDUCTING BUSINESS IN AN UNSAFE OR UNSOUND
MANNER ô !
a. All information technology systems and
processes, except for certain functions In determining whether a particular act or omission,
affecting the ability of the bank to ensure the fit which is not otherwise prohibited by law, rule or
of technology services deployed to meet its regulation affecting banks, quasi-banks, or trust entities,
strategic and business objectives and comply may be deemed as conducting business in an unsafe or
with pertinent laws and regulations; unsound manner, the MB shall consider any of the
b. Data imaging, storage, and other related following circumstances:
systems; |. The act or omission has resulted or may result in
c. Clearing and processing of checks not included material loss or damage, or abnormal risk or danger
in the Philippine Clearing House System; to the safety, stability, liquidity or solvency of the
d. Printing of bank statements; institution;
e. Credit card services;
f. Printing of bank loan statements and other 2. The act or omission has resulted or may result in
non-deposit records, bank forms and material loss or damage, or abnormal risk to the
promotional materials; institution¶s depositors, creditors, investors, and
g. Credit investigation and collection; stockholders or to the BSP or to the public in
h. Processing of export, import and other trading general;
transactions;.
i. Transfer agent services for debt and equity 3. The act or omission has caused any undue injury,
services; or has given any unwarranted benefits, advantage
j. Property appraisal; or preference to the bank or any party in the
k. Property management services; discharge by the director or officer of his duties and
l. Messenger, courier and postal services; responsibilities through manifest partiality, evident
m. Security guard services; bad faith or gross inexcusable negligence;
n. Vehicle service contracts
o. Janitorial services; 4. The act or omission involves entering into any
p. Other services as determined by the Monetary contract or transaction manifestly and grossly
Board. disadvantageous to the bank, quasi-bank or trust
entity, whether or not the director or officer profited
or will profit thereby.
g "‡''9&' 
OWNERSHIP OF STOCKS OF A DOMESTIC
|. Fraudulently overvalue property offered as security BANK
for a loan from the bank;
| 

2. Furnish false or make misrepresentations or  In case of a Filipino individual or a domestic non-
suppression of material facts for the purpose of bank corporation,  may own up to 40% of the
obtaining, renewing, or increasing a loan or outstanding voting stock of a local bank.
extending the period thereof;
2 

3. Attempt to defraud the said bank in the event of a  Foreign individuals and non-bank corporations may
court action to recover a loan or other credit own or control up to an    of 40% of the
accommodation; or voting stock of a domestic bank.

s    

 
  





c 


 The percentage of foreign-owned voting stocks in a
bank shall be determined: ô'")%1&' |. 4,- Governed by the provisions of the Foreign
' $&5 Bank Liberalization Act and the Offshore Banking
a. If individuals: by the citizenship of the System Decree ô( #
individuals
b. If corporations: by the citizenship of the 2.  &   $ +*  ¸
controlling stockholders of the corporation, %¸((- The Monetary Board may revoke such
irrespective of the place of incorporation ô( license on the grounds that the foreign bank is
  insolvent or in imminent danger thereof or that its
 continuance in business will involve probable loss
to those transacting business with it ô(  
" ##$# "% &' '&# (  S TOCKHOLDINGS OF F AMILY GROUPS OR R ELATED
ô & ))*+ I NTEREST

%  (
   ‡
 
+  
   
 

   
 
   


 

  Æ The law does not prohibit ownership of the stock by
 members of the same family or related interest.
|. By ?*" (*¸"  " up to However, the law provides that stockholdings of
V0% of the voting stock of an existing bank; individuals related to each other within the 4th degree of
consanguinity or affinity, legitimate or common law, shall
be considered family groups or related interest and must
2. By " in up to V0% of the voting stock of a be fully disclosed in all transaction by such individual
new banking subsidiary incorporated under with the bank. (Sec |2, GBLP
laws of Philippines;
Æ Two or more corporations owned and controlled by
3. By +¸" +¸ with full banking the same family group or same group of person shall be
authority, provided: considered related interest and must be fully disclosed
a. foreign bank may avail itself of only one in all transaction by such corporations or related group
mode of entry; and of person with the bank. (Sec |3, GBLP
b. Foreign bank or Philippine corporation
may own up to V0% of the voting stock
of only one domestic bank or new Æ Unlike the former law, the GBL does NOT impose a
limit on the number of shares that can be owned by the
banking subsidiary ô( # 
same family or related interest. However this should not

be without prejudice to the 40% restriction imposed by
Sec ||of the GBL.
Æ Entries under the second and third modes are

restricted to banks which are among the top |50

foreign banks in the world or top 5 banks in their
country of origin. OWNERSHIP OF REAL PROPERTY
MINIMUM CAPITALIZATION:

 &"&'$ ' $& A bank cannot acquire and own real
property.
|. For locally incorporated subsidiaries ± equal to that
of domestic banks of the same category : Banks are not engaged in the business of
acquiring and possessing real property. Also, banks
must maintain liquidity at all times to enable it to perform
2. For foreign bank branches ± not less than the US$ its functions. Thus, banks must as much as possible
equivalent of P2|0M retain only assets that are easily marketable.

&<g&!%"
Æ Amendments introduced by GBL 2000 |. As shall be necessary for its own use in the conduct
|. Within seven years from effectivity of the GBL of its business, provided:
(June |3, 2000P, foreign banks may be allowed a. The total investment in such real estate and
to own up to |00% equity of only one domestic improvements shall not exceed 50% of the
bank as a mode of entry if authorized by the combined capital accounts; and
Monetary Board ô(  0 
b. the equity investment of a bank in another
2. Other foreign individuals and non-bank corporation engaged primarily in real estate
corporations may own up to 40% of the voting shall be considered as part of the bank's total
stock of a domestic bank; the nationality of the investment in real estate, unless otherwise
controlling shareholders of the 
  provided by the Monetary Board ô(  
corporations will be traced to determine the
foreign ownership of the domestic bank ô(
 0 
 2. As mortgaged to it in good faith by way of security
 for debts, conveyed to it in satisfaction of a debt
previously contracted in the course of its dealings,
FOREIGN BANKS (SECS. 72ʹ78) and such as it shall purchase at forced sales or to

s    

 
  





c 

secure debts; provided, however, that property   # (   ; thus, converting it to


acquired under such circumstances shall be conventional redemption or by estoppel if the
disposed of by the bank within a period of 5 years; extension was unilaterally made.
provided that the bank may after said period
continue to hold the property for its own use,
subject to (|P ô( # 






,  &  '&& ,  &'       ""  DIRECTORS & OFFICERS
-&"  %    -&".(
 
 
 Judicial or extrajudicial foreclosure  !
 '  

To maintain the quality of bank management and afford


; )g$ &<%'; )g$ better protection to depositors and the public, in general,
Right of redemption the Monetary Board shall prescribe, pass upon and
review the qualifications and disqualifications of
individuals elected or appointed as bank directors or
Within | year from |. ""   officers and disqualify those found unfit ô( 

registration of the  
 
 ± 
foreclosure sale Within one year after    ) 

(exception to Rule V8P the registration of A person other than an officer or employee of the bank,
its subsidiaries or affiliates or related interests.
sale with the
Register of Deeds 
(( ô (  !


!  
  66 P &"&'$ ' $& No appointive or elective official,
whether full-time or part-time, shall, at the same time,
2. ""   serve as an
 of any private bank ô(  
Ï
 
 ± At 
any time before the 
&<g&!%"
registration of the
|. As otherwise provided under Sec. 5 of the Rural
certificate of Bank Act
foreclosure sale 2. Where such service is incidental to financial
which in no case assistance provided by the government-owned or -
shall be more than 3 controlled corporation to the bank
months after 3. As otherwise provided under existing laws.
foreclosure,
Æ A bank holding out its officers and agents as
whichever is earlier.
worthy of confidence will not be permitted to
profit by the frauds they may thus be enabled
Redemption price: to perpetrate in the apparent scope of their
employment; nor will it be permitted to shirk
* $* *$ ¸ "" $$ + interest from its responsibility for such frauds, even
+ all the cost and expenses incurred by the though no benefit may accrue to the bank
therefrom ô  !* #$ (  . Accordingly,
bank or institution from the sale and custody of
a banking corporation is liable to innocent third
the property less the derived income ô( ; persons where the representation is made in
2 /   0  
 !* # the course of its business by an agent acting
# within the general scope of his authority even
though, in the particular case, the agent is
secretly abusing his authority and attempting to
Right of purchaser to possess property: perpetrate a fraud upon his principal or some
other person, for his own ultimate benefit
Immediately after the date of the confirmation of ô%¸(( /" (   $ 
the auction sale. 0   #
 !*,  # 



TRUST OPERATIONS ô  )/./
Æ To enjoin or restrain the conduct of foreclosure
proceedings, the petitioner must file a bond
conditioned that he will pay all the damages which  Only a stock corporation or a person duly
the bank may suffer by the injunction ô(   authorized by the Monetary Board shall act as a trustee
or administer any trust or hold property in trust or on
 A bank may be bound by an agreement providing deposit for the use, benefit, or behalf of others ô( 
for a longer redemption period ô.+ * /

s    

 
  





c  

4. Dissolution of the corporation by quo warranto


%  ‡   any activity resulting from a trustor- proceedings
trustee relationship involving the appointment of a 
trustee by a trustor for the administration, holding, 
management of funds and/or properties of the trustor by 
the trustee for the use, benefit, advantage of trustor or 
others called beneficiaries. 





6   66

!
 
    
|. Act as trustee on any mortgage or bond issued by
any municipality, corporation or body politic and to
! 
  To maintain a central monetary authority that
accept and execute any trust consistent with law
shall function and operate as an independent and
2. Act under the order or appointment of any court as accountable body in the discharge of its responsibilities
guardian, receiver, trustee, or depositary of the concerning money, banking and credit.
estate of any minor or incompetent person, and as
receiver and depositary of any money paid into
court by parties to any legal proceedings

3. Act as the executor of any will when it is named the BANGKO SENTRAL NG PILIPINAS (BSP)
executor thereof
4. Act as administrator of the estate of any deceased The state¶s central monetary authority; it is the
person, with the will annexed, or when there is no government agency charged with the responsibility of
will administering the monetary, banking and credit system
of the country and is granted the power of supervision
5. Accept and execute any trust for the holding, and examination over bank and non-bank financial
management and administration of any estate, real
institutions performing quasi-banking functions,
or personal, and the rents, issues, and profits
thereof including savings and loan associations ô**" 
   (  
9: 
V. Establish and manage common trust funds ô(


!

 P RIMARY OBJECTIVES :
|. No trust entity shall, for account of the trustor or the |. To maintain price stability conducive to a balanced
beneficiary of the trust, purchase or acquire and sustainable growth of the economy.
property from, or sell, transfer, assign or lend
money or property to, purchase debt from
2. To promote and maintain monetary stability and the
instruments of, any of the departments, directors,
officers, stockholders or employees of the trust convertibility of the peso.
entity, including relatives within the |st degree of
consanguinity or affinity, or the related interests, of
such directors, officers and stockholders, unless the
R ESPONSIBILITIES :
transaction is specifically authorized by the trustor
and the relationship of the trustee and the other |. To provide policy directions in the areas of money,
party involved in the transaction is fully disclosed to banking, and credit
the trustor or beneficiary of the trust prior to the
transaction ô(  0  2. To supervise bank operations

2. The trust business and all funds, properties or 3. To regulate the operations of finance companies
securities received by any trust entity as executor, and non-bank financial institutions performing
administrator, guardian, trustee, receiver or quasi-banking functions, and similar institutions
depositary shall be kept separate and distinct from
ô(
the general business, including all other funds,
properties, and assets, of such trust entity ô( 
0 
 P OWERS / FUNCTIONS :

 |. Issuer of currency ô( 6


PENALTIES FOR VIOLATION OF THE GBL ô  2. Custodian of reserves ô(


6

 
!!
3. Clearing channel or house; especially where the
 PCHC does not operate ô( #
|. As provided by specific provisions
2. Sections 34-37 of RA 7V53 (by excluding the bank 4. Banker of the government ± the BSP shall be the
from clearingP official depository of the Government and shall
3. Suspension or removal of the director or officer

s    

 
  





c 


represent it in all monetary fund dealings ô( Bangko Sentral, in which case such member shall
6 
resign from, and divest himself of any and all
interests in such institution before assumption of
5. Financial advisor of the government ô( # 6 office (Sec. P;
# ± Under Article VII, Sec. 20 of the | 87
Constitution, the President may contract or 2. those coming from the private sector shall not hold
guarantee foreign loans but with the prior
any other public office or public employment during
concurrence of the Monetary Board.
V. Source of credit ô(
6
6  their tenure (Sec. P;
7. Supervisor of the banking system ô( # ± shall
include the power to: 3. cannot be connected directly with any multilateral
a. Examine, extending to enterprises wholly or banking or financial institution or has a substantial
majority-owned or controlled by the bank ô( interest in any private bank in the Philippines, within
   ; this power may not be restrained one (|P year prior to his appointment (Sec. P;
by a writ of injunction unless there is
convincing proof that the action of the BSP is 4. cannot be employed in any such institution within
plainly arbitrary ô( #
two (2P years after the expiration of his term except
b. Place a bank under receivership or liquidation
ô(  when he serves as an official representative of the
c. Initiate criminal prosecution of erring officers of Philippine Government to such institution (Sec. P;
banks
8. Government agent ô( 6## 5. the Governor of the Bangko Sentral and the full-
 time members of the Board shall limit their
 professional activities to those pertaining directly to
MONETARY BOARD (MB) their positions with the Bangko Sentral.
Accordingly, they may not accept any other
The body by which the powers and functions of the employment, whether public or private,
Bangko Sentral are exercised ô(
 remunerated or ad honorem, with the exception of
 positions in eleemosynary, civic, cultural or religious
C OMPOSITION : organizations or whenever, by designation of the
  members consisting of: President, the Governor or the full-time member is
 tasked to represent the interest of the Government
|. Chairman: Governor of the BSP
2. A member of the cabinet to be designated by the or other government agencies in matters connected
President of the Philippines with or affecting the economy or the financial
3. Five (5P members who shall come from the private system of the country (Sec. 20P;
sector, all of whom shall serve full-time.
 V. in case any member of the Monetary Board with
 personal or pecuniary interest in any matter in the
 agenda of the Monetary Board shall disclose his

interest to the Board and shall retire from the
"
  The degree of diligence required of the members
of the MB, officials and employees of the BSP in the meeting when the matter is taken up (Sec. |4P.
performance of their functions is extraordinary diligence
ô(
 
S UPERVISION AND E XAMINATION OF B ANKS
Æ The BSP shall have supervision over, and conduct
Q UALIFICATIONS OF MEMBERS OF THE MONETARY periodic or special examinations of, banking
institutions and quasi-banks, including their
B OARD : subsidiaries and affiliates engaged in allied
|. must be natural-born citizens of the Philippines, activities.

2. at least 35 years of age, with the exception of the


Governor who should at least be 40 years of age,    ± a corporation more than 50% of the
voting stock of which is owned by a bank or quasi-bank
3. of good moral character, of unquestionable
integrity, of known probity and patriotism, and   ± a corporation the voting stock of which, to the
extent of 50% or less, is owned by a bank or quasi-bank
4. with recognized competence in social and or which is related or linked to such institution or
economic disciplines. intermediary through common stockholders or other
factors determined by the Monetary Board.
D ISQUALIFICATIONS AND I NHIBITION ON GOVERNOR
AND B OARD M EMBERS : 
 & "##&0# " 
No restraining order or injunction shall be issued by
|. disqualified from being a director, officer, employee, the court enjoining the Bangko Sentral from examining
consultant, lawyer, agent or stockholder of any any institution subject to supervision or examination by
bank, quasi-bank or any other institution which is the Bangko Sentral, unless there is convincing proof
subject to supervision or examination by the that the action of the Bangko Sentral is plainly arbitrary

s    

 
  





c  

and made in bad faith and the petitioner or plaintiff files 3. To lease, own, and sell property
with the clerk or judge of the court in which the action is 4. To sue and be sued
pending a bond executed in favor of the Bangko Sentral, 5. To acquire and hold such assets and incur such
liabilities in connection with its operations or as are
in an amount to be fixed by the court.
essential to the proper conduct of operation
V. To compromise, condone, or release any claim of,
or settled liability to the BSP
7. To do and perform such other necessary powers
R EFUSAL TO M AKE R EPORTS OR PERMIT
CONSERVATORSHIP OF A BANK OR
E XAMINATION . QUASI-BANK

- Any officer, owner, agent, manager, director or officer- 
 State of continuing inability or unwillingness to
in-charge of any institution subject to the supervision or maintain a condition of liquidity deemed adequate to
examination by the Bangko Sentral who, being required protect the interest of depositors and creditors.
in writing by the Monetary Board or by the head of the Æ A conservator appointed by the BSP may take over
without the need of first declaring the bank
supervising and examining department willfully refuses
insolvent.
to file the required report or permit any lawful 
examination into the affairs of such institution shall be ) 
 Not to exceed | year
punished under the Act. (Sec. 34P 
& 
      - The willful making of a false or |. Bank/quasi-bank retains juridical personality
misleading statement on a material fact to the Monetary 2. Not a precondition to the designation of a receiver
Board or to the examiners of the Bangko Sentral shall 
!
 

 

be punished. (Sec. 35P
|. To take charge of the assets, liabilities, and the
management thereof;
PROHIBITIONS ON BANK OFFICERS, DIRECTORS,
LAWYERS, AGENTS
Personnel of the Bangko Sentral are hereby 2. Reorganize the management;
prohibited from:
3. Collect all monies and debts due said bank; and
|. being an officer, director, lawyer or agent,
employee, consultant or stockholder, directly or 4. Exercise all powers necessary to restore its
indirectly, of any institution subject to supervision or viability, with the power to overrule or rebuke the
examination by the Bangko Sentral; actions of the previous management and board of
directors of the bank or quasi-bank.

&: 
 non-stock savings and loan Æ The powers must be related to preservation of
associations and provident funds organized assets, reorganization of management and the
exclusively for employees of the Bangko Sentral, restoration of viability. Such power to revoke cannot
and except as otherwise provided in this Act; extend to post-facto repudiation of perfected
transactions, otherwise they would infringe the non-
impairment clause of the Constitution. The power
2. directly or indirectly requesting or receiving any gift,
to revoke contracts only covers those that are
present or pecuniary or material benefit for himself
deemed defective ± , void, voidable,
or another, from any institution subject to
unenforceable or rescissible ô' %¸ .7 /
supervision or examination by the Bangko Sentral;
  # # (  #   The conservator¶s power
is not unilateral and he cannot simply repudiate
valid obligations of the bank. His authority would be
3. revealing in any manner, except under orders of the only to bring actions to assail the same.
court, the Congress or any government office or
agency authorized by law, information relating to
the condition or business of any institution;
%  


|. When the MB is satisfied that the institution can


4. borrowing from any institution subject to supervision
or examination by the Bangko Sentral shall be continue to operate on its own and the
prohibited unless said borrowings are adequately conservatorship is no longer necessary;
secured, fully disclosed to the Monetary Board.
(Sec. 27P 2. But if the continuance in business of the bank
 would involve probable loss to its depositors or
 creditors, proceedings for    
   
 shall be pursued ô( # 
CORPORATE POWERS OF THE BSP

|. To adopt, alter and use a corporate seal which shall
be judicially noticed
2. To enter into contracts
RECEIVERSHIP OF A BANK OR

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c 

review. The purpose of the scheme is to protect


QUASI-BANK/CLOSURE the depositors, creditors, stockholders and general
public ô /   ## ( 

Receivership is equivalent to an injunction to restrain
the bank in any way. Thus, the appointment of a Æ Only stockholders representing the majority of the
receiver operates to suspend the authority of the bank capital stock of a bank have the personality to file a
and of its directors and officers over its property and petition for certiorari to be filed within |0 days from
effects ô<*   # (   9 :  receipt by the board of directors of the institution of
 the order directing receivership, liquidation or
 conservatorship.


 ' 
 Stockholders owning a majority of the
shares are expected to be more objective in
 "g‡  ‡$ determining whether the resolution is plainly
|. Inability to pay |. Notification to the arbitrary and issued in bad faith ô(  ;
liabilities as they become BSP or public  /   0   
 ¸ 
due in the ordinary announcement of a  
course of business, but bank holiday ô(
not including inability to 0
pay those caused by g&)&%
extraordinary demands
induced by financial g  ‡ 
 !  g


panic in the banking  ,228g'~7=
community; 
 
2. Insufficiency of 2. Suspension of
realizable assets to meet payment of deposit  Based on the financial reports submitted to the
its liabilities; liabilities Central Bank, which states that the Financial condition
continuously for more of The Triumph Savings Bank (TSBP is one of
than 30 days ô( insolvency and its continuance in the business world
0 involve probable loss to its depositors and creditors, the
Monetary Board issued a Resolution ordering the
3. Inability to continue 3. Persistence in closure of TSB, forbidding it from doing business in the
business without conducting business Philippines, placing it under receivership and appointing
involving probable losses in an unsafe or Ramon V. Taiaoqi as receiver. The TSB filed a
to its depositors or unsound manner. complaint assailing the resolution on the ground of lack
creditors; or ô(
0 of prior notice and hearing

4. Willful violation of a 
cease and desist order  
that has become final,
involving acts or  Whether or not a Monetary Board Resolution
transactions which be annulled on the ground of lack of prior notice and
amount to fraud or a hearing
dissipation of the assets 
of the institution ô(
 ' 
  Section 2 of the Central Bank Act does not
 contemplate prior notice and hearing before a bank may
'    be declared to stop operations and placed under
|. Banks ± PDIC receivership. When it provides for the filing of the case
2. Quasi-banks ± Any person of recognized within |0 days after the receiver takes charge of the
competence in banking or finance assets of the bank, it is unmistakable that the assailed
actions should precede the filing of the case. Plainly, the
 
 legislature could not have intended or authorize ³no
|. Immediate gathering and taking charge of all the prior notice and hearing´ in the closure of the bank and
assets and liabilities of the institution and at the same time allow the suit to annul it on the basis of
administering them for the benefit of creditors the absence thereof.
2. General powers of a receiver
3. Determination ASAP but not later than 0 days, This ³close now and hear later´ scheme is
whether the institution should undergo grounded on practical and legal consideration to prevent

    or   . the unwarranted dissipation of the bank¶s asset and as a
Æ Note the distinctions between rehabilitation and valid exercise of the police power to protect the
liquidation. depositors, creditors, stockholders and the general
public.

ºCLOSE NOW, HEAR LATER͟ SCHEME 
(")%'.'&M '&(&"%'‡"#
Æ Sec. 2 of the Central Bank Act does not g$ '&
contemplate prior notice and hearing before a bank |. Examination by the appropriate BSP department as
is placed under receivership. It is enough that such to the condition of the bank
action is made the subject of a subsequent judicial

s    

 
  





c  

2. Examination shows that the condition of the bank is |. 6% 6% $ 6% - In amounts not
one of insolvency exceeding P|,000.00
3. Director shall inform the MB in writing of such fact
4. If the MB shall find the statement of the department 2. #    - In amounts not exceeding
to be true, it shall appoint a receiver of the assets P|00.00 ô*   #

and liabilities of the bank ô '(  
# (   9: 
5. Within V0 days, the MB shall determine and confirm ‡! 

'   
if the bank is insolvent, and if public interest |. Notes for any series or denomination ± More than 5
requires, shall order the liquidation of the bank. years old

 2. Coins ± More than |0 years old



 '  
LIQUIDATION |. Notes and coins called in for replacement shall
remain legal tender for a period of one year from

 the date of call.
|. The condition of the bank is one of insolvency or
that its continuance would involve probable loss to
its depositors and creditors. 2. After that period, they shall cease to be legal tender
during the following year or for such longer period
2. A determination by the MB that the bank cannot be as MB may determine.
rehabilitated.

!
   3. After the expiration of this latter period, the notes
|. Receiver shall file 5 (, with the proper RTC, a and coins which have not been exchanged shall
petition for assistance in the liquidation of the cease to be a liability of BSP and shall be
institution pursuant to a liquidation plan adopted by demonetized ô(  
the PDIC for general application to all closed banks.
In case of quasi-banks, the liquidation plan shall be
adopted by the Monetary Board. Æ Checks representing demand deposits do not
have legal tender power and their acceptance
2. He shall convert the assets of the institution to in the payment of debts, both public and
money for the purpose of paying the debts of the private, is at the option of the creditor.
institution ô(  
Æ However, a check which has been cleared and
3. Payment shall be in accordance with the rules on credited to the account of the creditor shall be
concurrence and preference of credits. equivalent to a delivery to the creditor of cash
 Regular courts have no jurisdiction over actions in an amount equal to the amount credited to
filed by claimants against an insolvent bank ô)" his account ô(
 
  # (    
 


MONETARY STABILIZATION
&&g%  !!"%(&"%  '&g&/&'*

$M )%"
|. Suspension of operation #-&"""&& "&1#2# "##"%
2. The assets under receivership or liquidation shall 
be deemed  *$ " in the hands of the |. $

‡ ô  ô' 
5
receiver and shall be exempt from garnishment, a. If BSP wants to increase money supply, it
levy, attachment or execution ô(   opens the rediscount window by reducing
interest on loans
3. Bank is not liable to pay interest on deposits during b. If BSP wants to decrease money supply, it
the period of suspension of operation ô) closes the rediscount window or charges very
/    (   9#: high interest rates for rediscounted notes
4. The corporation retains its legal personality ô>
   '.  %¸  9#:
2. Open Market Operations ô( 
5. Deposits do not become preferred credits ô  a. If BSP wants to increase money supply, it buys
& # (   9
: government securities
 b. If BSP wants to decrease money supply, it
sells government securities
LEGAL TENDER
All notes and coins issued by the Bangko Sentral are 3. Reserve Requirements ô(  - where a certain
fully guaranteed by the Republic and shall be legal percentage of the deposit is set aside and cannot
tender in the Philippines for all debts, both public and be lent out
private ô( # a. if the volume of money is high, BSP will raise
reserve requirement
$    
 



s    

 
  





c  

b. if the volume of money is low, reserve 4. In cases where the money deposited or invested is
requirement is reduced. the subject matter of the litigation; ô( #


'  

|. ҏ The required reserves of each bank shall be
proportional to the volume of its deposit
liabilities.
2. Since the required reserves are imposed

primarily to control the volume of money, the
Bangko Sentral shall not pay interests thereon
ô(  

3. Deposits maintained with the Bangko Sentral BAR QUESTION:
as part of the reserve requirements shall be Banks: Secrecy of Bank Deposits; Garnishment
exempt from attachment, garnishment, or any
(2004)
other order or process of any court or agency
ô(  
4. No increase of more than 4% point within 30- &Ú& 


 
" 
   &0
. =
day period.     '' < 

 &    5 

  /#7 777   
    
  % 
 
"        '= &Ú&



 " 
2
 
PROHIBITIONS ON THE BSP 5  % 0
.Ú  
4  
   
" 
 
         
|. It shall not acquire shares of any kind or accept
them as collateral, and shall not participate in the #8 &Ú&: 
     , <
 
ownership or management of any enterprise, either   %
directly or indirectly; and
2. It shall not engage in development banking and
SUGGESTED ANSWER
financing ô( # 

  
 
6  s &Ú&: 
    8
 
  China Banking Corporation v. Ortega, 49 SCRA
 355 (1973) 
   
%
 

! 
 
|. To encourage people to deposit in banks    
% 
.
 %      
2. To discourage private hoarding so that banks may 
     " 
   2
  
lend such funds and assist in the economic
5  %  0
. Ú   34     
 
development
   
 
     1
  
 
g
  4     -   "       
All deposits of whatever nature with banks or banking
institutions in the Philippines, including investments in 
    
.     

bonds issued by the Government of the Philippines, its           
  
political subdivisions and its instrumentalities.
 
    
 

PROHIBITED ACTS: B. From other laws
|. Examination and inquiry or looking into all deposits, |.   g
!     ô 
of whatever nature, with the banks in the
 ; $$$ +, ",  %  0,
Philippines including investments in bonds issued
by the Government.  (   9
: ;
2. Any disclosure by any official or employee of any
bank to any unauthorized person of any information 2. "'g - Inquiry by the Commissioner of Internal
concerning the said deposits. Revenue into bank deposits of:

&"&'$ ' $& The deposits covered by law are a. A decedent to determine his gross estate;
considered as of an +*, &$ * and b. A taxpayer who has filed an application for
may not be examined, inquired or looked into by any compromise of his tax liability by reason of
person, governmental bureau, or office. financial incapacity to pay his tax liability. He
 must file a written waiver of his privilege under
&<g&!%" RA |405 or other general or special laws ô(
A. F ROM R.A. N O . 1405
9&: .  
|. Upon written permission of the depositor;
3. Inquiry or examination by the (
 
2. In cases of impeachment; $   g
 ô($g5 of any particular
deposit or investment with any banking institution or
non-bank financial institution upon order of any
3. Upon order of a competent court in cases of bribery
competent court in cases of violation of the Anti-
or dereliction of duty of public officials; Money Laundering Law, when it has been

s    

 
  





c 

established that there is probable cause that the garnishment. Any disclosure is purely
deposits or investments are related to an unlawful incidental to the execution process ô¸
activity or a money laundering offense, :  that /" (  )"  ( 
no court order shall be required in the following 
unlawful activities:
a. Kidnapping for ransom under Art. 2V7 RPC; Æ Illegally acquired property extends to cases
b. Comprehensive Dangerous Drugs Act of 2002 where property is concealed by being held by
ô   
; or recorded in the name of respondent¶s
spouse, ascendants, descendants, relatives, or
any other persons ô '( (" $
"" /  %* 
 (  


Æ Money-market placement is not covered by RA
|405 because it is not deposited in the bank.
c. Hijacking and other violations under RA V235;
BAR QUESTION:
destructive arson and murder under RPC.
Including those perpetrated by terrorists against BANKS: APPLICABILITY: FOREIGN CURRENCY
non-combatant persons and similar targets´ DEPOSIT ACT & SECRECY OF BANK DEPOSITS
ô(    
  $$ +, (  (2005) 
&   + @  & 
  
 


 "
     " 
   5     
4. Disclosure to the Treasurer of the Philippines of & 
  &   
  
 
 
dormant deposits for at least |0 years under the 
    % 
"
    

  ‡   ô  

          
  


 
 %    %    
  


     
 
  
OTHER LAWS RELATING TO SECRECY OF BANK

 
     "     
DEPOSITS   A -5 Ú 
     "
 
.
" 
 B 0   0
.  0
.  5 * 
 


0
. s@ .9  
    
 
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 ô  
#

  
 


       + 
B. Extends confidentiality to foreign currency deposits, @  & 
  " 
  <  s 
but the law contains only one ground authorizing 6!6     . 
  9   &  %
examination: upon written permission of the Ú       /      

depositor.

   
.     
%     

g   ‡ $ 
2888ô     
 
    
 
       
  "  



|. No bank shall employ casual or non-regular a) Will the complaint filed against the directors of
personnel or too lengthy probationary personnel in Hi Yielding Corporation prosper? Explain
the conduct of its business involving bank deposits
ô(  
2. No director, officer, employee, or agent of any bank SUGGESTED ANSWER: 
shall, without court order, disclose to any s 
9  &  %Ú   <
unauthorized person any information relative to the s 6!6       " "       
funds or properties in the custody of the bank     %   
  
belonging to private individuals, corporations, or
any other entity, provided that with respect to bank   /    8
 

 

  
deposits, the provisions of existing laws shall
  "   %
 
.  

prevail ô( 9+:   


3. Outsourcing of inherent bank functions
 b) Was there a violation of the Secrecy of Bank
) " g  ‡ ô   

|. DOSRI loans Deposits Law (Republic Act No. 1405)? Explain.
2. Periodic and special examinations by the BSP
(Sec. 25P SUGGESTED ANSWER: 
 s  
    "  "     5  %
& (
 $  ô   
 
 0
. Ú   2
 < s  !7#     

Æ Provides for another exception to 
 % 4   "     
  
confidentiality, which is applicable to both peso

  9&Ú-
  "   
and foreign currency deposits. 
% Intengan v. Court of Appeals, G.R. No.
 128996, February 15, 2002
Æ Garnishment of bank deposit of judgment
debtor does not violate RA |405. It was not the
intention of the legislature to place bank

deposits beyond the reach of execution to
satisfy a final judgment. Its purpose is merely REQUISITES FOR IN-CAMERA INSPECTION OF
to secure information as to the name of the
depositor and whether or not the defendant
BANK DEPOSITS
had a deposit in said bank, only for purposes of

s    

 
  





c 

Marquez vs. Desierto, G.R. No. 135882, W HERE F UNDS D EPOSITED ARE S UBJECT OF
June 27, 2001 L ITIGATION
|. Pending case before a court of competent
jurisdiction g  ) 
2. Account must be clearly identified    1
> 
 ,278g'|4|
3. The inspection is limited to the subject of the 
pending litigation.  
4. The bank personnel and account holder must be Sun Life brought a collection case to recover
present during the inspection. the proceeds of a check it had issued, the insurance
5. The inspection must cover only the account company wanted to determine how the defendant had
identified in the pending case. applied the proceeds of the check. The trial court
 allowed Sun Life to examine pertinent records of the
 bank in which the check was deposited.

 ' 
The Supreme Court held that the examination
R.A. NO. 1405 VIS-À-VIS POWER OF THE BSP TO was authorized by Section |0 of Rule 57, on the
CONDUCT PERIODIC AND/OR SPECIAL examination of a person whose property has been
attached and person indebted to him or controlling his
EXAMINATIONS ô 34 * property. The Court struck down the argument that the
examination would violate the Bank Secrecy Law,
Æ Prof. Aquino and Prof. Viray believe that the explaining that the examination fell within the exception
general rule still applies. Hence, the deposit ³in cases where the money deposited or invested is the
remains confidential. subject matter of litigation.´ The Court added that the
 examination of bank records was not a fishing
!    expedition, but rather a method by which Sun Life could
Imprisonment of not more than 5 years or a fine not trace the proceeds of the check that it paid to the
more than P20,000 or both, in the discretion of the petitioners.
court.

   
Æ In another case, Mellon Bank remitted $|
In impeachment proceedings, the impeachment million rather that an intended $|,000 to the recipient,
court may inquire into bank deposits. Thus, during the who deposited part of the remittance in a local bank.
impeachment proceedings against former President When personnel of the depositary bank testified on the
Estrada, Chief Justice Davide ruled that Clarissa bank deposits, the defense moved to strike out the
Ocampo could testify on the Jose Estrada/Jaime testimonies of the depositary bank¶s witnesses. The
Dichaves accounts maintained with Equitable PCIB Supreme Court allowed their testimonies to remain on
Bank, over the objections of the defense that this would the record, stating Section 2 of said law allows the
violate the Bank Secrecy Law. Basis for this ruling was disclosure of bank deposits in cases where the money
that the inquiry would be made in the course of an deposited is the subject matter of the litigation. ô
impeachment proceeding. /  "  ( 



W RITTEN P ERMISSION OF DEPOSITOR 
A bank may allow an inquiry into a deposit with the UNEXPLAINED WEALTH (RA3019)
written consent of the depositor. An oral or implied
Although the Bank Secrecy Law did not include
authorization does not suffice. This consent may be cases covered by the Anti-Graft Law among the
given voluntarily. In some cases, however, the consent exceptions, the Supreme Court held that they should be
is involuntary because the law requires it. included. The only conclusion possible is that Section 8
of the Anti-Graft Law is intended to amend Section 2 of
Thus, Section 2V of the New Central Bank Act as Republic Act No. |405 by providing an additional
implemented by BSP Circular No. |70, series of | 8, exception to the rule against disclosure of band
requires a director, officer or stockholder of a bank or deposits.´ ô%  0,  (   ô

This overturned an earlier case decided by the High
their related interests to submit a written waiver of the Court where it held that a prosecution under the Anti-
secrecy of all his deposits of whatever nature in all Graft Law was not embraced within any of the
banks of the Philippines in favor of the Bangko Sentral, exceptions to the Bank Secrecy Law that would allow
if he applies for a DOSRI loan. However, the disclosure by a bank of information concerning a
information obtained from the examination remains deposit ô>  *  / & %.  ( 
confidential and may be used by BSP examiners only in  ô

legal action it may initiate involving the said deposits. In another case, the Supreme Court expanded the
exception under the Anti-Graft Law, when it allowed an
A waiver of the Bank Secrecy Law is also required examination not only of the accused¶s deposits, but also
in case of loans secured by a hold-out or an assignment those of his spouse, ascendant, descendants and
of certificates of time deposits. (Section X3|5, Manual of relatives, and other persons as well. ( '( 
Regulations for BanksP. = '$ %* |V| SCRA 57V (| 88P. Here, the
 Court declared as proper the production by subpoena
duces tecum of bank records of transactions by or in the
names of the wife, children and friends of a special
agent of the Bureau of customs accused of having

s    

 
  





c 

allegedly acquired property manifestly out of proportion &    +   < 
 "    

to his salary and lawful income. The Court explained:   
   
 " 
  D 
 
To sustain the petitioner¶s theory, and restrict the  
 E  " "   
  
%
inquiry only to property held by or in the name of the    
   % "  
  " 
government official or employee, or his spouse and
    

 "     
unmarried children, is unwarranted in the light of the
provisions of the statutes in question, and would make 
 
     5 
  
 
available to persons in government who illegally acquire " 
        
  
property an easy and fool-proof means of evading 
. 
   "     
investigation and prosecution; all they would have to do
    
.      " 

would be to simply place the property in the possession
   
 
 1/1/

or name of persons other than their spouse and
unmarried children. This is an absurdity that we will not  
.          
.A
ascribe to the lawmakers.           
    
$ % 
  2
 5  % 0
.
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8     

  
    
1/

."
 ,34

Although Section 8 of the law that created the
Office of the Ombudsman expressly granted the SUGGESTED ANSWER: 
Ombudsman the power to ³administer oaths, issue @     "
 1/  
 

subpoena and subpoena duces tecum and take  " 
      " "   
testimony in any investigation or inquiry, including the 4          

      
power to examine and have access to bank accounts
and records,´ the Supreme court held that the
%  
      
.      
Ombudsman could not inquire into bank deposits until 2
  5  %  0
. Ú    &  
there was a pending case in court involving the    " 
   
   
depositsô?*@  1  (  # ô# =

 * 
  


  
         
.  
  ‡   $ 
The Unclaimed Balances Law (Republic Act No. " "      
3 3VP requires each bank to file a sworn statement with 
the Treasurer of the Philippines stating the deposits that
the bank holds in the names of persons known to be 6
 ! ã6
 
dead or who have not made deposits or withdrawals
during the preceding ten years or more. It is also  "#$#%&'(&()*
requires the bank to post a copy of the sworn statement
in the bank premises. However, this is done only after ! 
 
the bank shall have first communicated with the
depositor at his last known residence or post office |. To protect and preserve the integrity and
address. Such a disclosure of the deposits and the confidentiality of bank accounts, to ensure that the
depositors, does not violate the Bank Secrecy Law. Philippines shall not be used as a site for unlawful
money laundering activities; and
  
‡ ) 

2. To pursue State¶s foreign policy to extend

cooperation in transnational investigations and
In ¸ /" (  * & ((,
prosecution on money laundering activities.
(| 3 SCRA 452 (| |P the Supreme Court held that the
garnishment of a bank deposit does not violate the Bank
Secrecy Law. Said the court:
³Ì   

     g
& 
 
   
 
         |. Banks
  !  
  "     

 
#         
    2. Non-banks
  !  
     " "
 
3. Quasi-banks
 
      Ï"  Ì  
 

  
#            4. Trust entities
         
  $
#  
Ï   $  

 #  5. All other institutions, their subsidiaries and affiliates
%
 
"      $
 " 
supervised or regulated by the BSP
          "     
 &ô  %
 ' Ì 
   (  $
%
    ) % !* ô))
COVERED TRANSACTION:
BAR QUESTION: Transaction, in cash or other equivalent monetary
Banks; Secrecy of Bank Deposits (2000) instrument in excess of P500,000, within one banking
day.
1/ 
 C       SUSPICIOUS TRANSACTIONS:
 %    
   
%      "% 
Transactions with covered institutions regardless of the

%   
 

 
amounts involved, where any of the following
 
  1/ 
    
 
   circumstances exists:
&    <
. 
 =  5%

|. There is no underlying legal or trade obligation

s    

 
  





c 

2. Client is not properly identified 


3. Amount involved is not commensurate with the J URISDICTION :
business or financial capacity
 All cases: RTC
4. Taking into account all known circumstances, it
may be perceived that the client¶s transaction is  Public officers and private persons in conspiracy
structured in order to avoid being the subject of with them: Sandiganbayan
reporting requirements under the Act


5. Any circumstance relating to the transaction which
is observed to deviate from the profile and/or the
client¶s past transactions with the covered institution P OWER TO F REEZE A CCOUNTS
 The power of the AMLC to freeze accounts has
V. Transaction is in any way related to an unlawful
been deleted under RA | 4
activity or offense under this Act that is about to be,
is being or has been committed
7. Analogous transactions to any of the foregoing  The Court of Appeals may issue a freeze order,
which shall be effective immediately and for a
period of 20 days, unless extended by the court,
only:
MONEY LAUNDERING:
a. upon 5 ( application of AMLC; and
A crime whereby the proceeds of an unlawful activity
b. after determination that probable cause exists
are transacted, thereby making them appear to have
that any monetary instrument or property is in
originated from legitimate sources. It is committed by
any way related to an unlawful activity.
the following:
|. Any person knowing that any monetary instrument
or property represents, involves, or relates to, the
proceeds of any unlawful activity, transacts or
attempts to transact said monetary instrument or BAR QUESTION:
property.
BANKS; SECRECY OF BANK DEPOSIT; AMLC
(2006)
2. Any person knowing that any monetary instrument
<%         
 C
or property involves the proceeds of any unlawful
activity, performs or fails to perform any act as a 
 +
"  
  "  
result of which he facilitates the offense referred to
%  + 

 "
 
.


in number | above. 
  
 #  
        
  2
  <
%  8  5       

"
% "       
%    
3. Any person knowing that any monetary instrument
or property is required under this Act to be  
     B' % 2
  &  
disclosed and filed with the AMLC fails to do so. '2&  
  '2& 
    
" 
     B' % 2
  2
 - 
$ '2& 
.     <%:
P REVENTION OF M ONEY L AUNDERING 
.   
     /77 '  
| g 
  
-Covered institutions 5$%   
 
     " 
 
shall establish and record the true identity of its  B' %2
 2

clients based on official documents. They shall
maintain a system of verifying their clients and in 1. Can Rudy move to dismiss the case on the
case of corporate client, require a system of ground that he has no criminal record? (2.5%)
verifying their legal existence and organizational
structure, s well as the authority and identification of
all person purporting to act on their behalf.
SUGGESTED ANSWER: 
2 ' 
# - All records of all transaction of
covered institution shall be maintained and safely s  -    B' % 2
  2
  <%
stored for 5 years from the dates of transaction.     % 
 ; % 
  ;
With respect to closed accounts, the records on       
 ;
 
customer identification, account files and business
 " % ;  . C 
  
 
  
correspondence, shall be preserved and safely
stored for at least 5 years from the dates when they



"   
   
  
were closed.   % 
    

  

 
 " %   
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7 ' 

g
  

%  
. ± Covered institution shall report to $     "  "     
 
the AMLC all covered and suspicious transactions
 " %5
 5   B' %2
  
within 5 working days from the occurrence thereof, 77
unless the Supervising Authority prescribes a
longer period not exceeding |0 working days.

s    

 
  





c  

2. To raise funds for his defense, Rudy sold the


 %   4
 
% 
.       
houses and lots to a friend. Can Luansing Realty, "    
.  

   
Inc. be compelled to transfer to the buyer 
 
G    * %
     

 
ownership of the houses and lots? (2.5%)  
    " 
  %  &     

% 
.  
.       /    
  &    
 
 
    
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      "  

. 

 
"   
  
      "   
 
A
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  2

5  % 0
.Ú  <!7#,
SUGGESTED ANSWER:  SUGGESTED ANSWER: 
2
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% 8  
 

 
%   2
 5  % 0
.Ú      %
  
 "     5   
 
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%      
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    =% 
.      
  
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        %  %
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3. In disclosing Rudy's bank accounts to the  
   "  

 
AMLC, did the bank violate any law? (2.5%)  *   
"
 4      


SUGGESTED ANSWER:     


6! 


6
6
s 
.  " 

%

. 
 

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' % 2
  2
            ! 
 
'2& " 
   

      |. To create a government-owned entity, the PDIC;
 % " 
 
% 
      
2. To insure the deposit liability of banks in an account
4   5  % 0
.Ú   
up to P250,000 for every single depositor of each
bank irrespective of the number of accounts
therewith.
4. Supposing the titles of the houses and lots are
in possession of the Luansing Realty, Inc., is it PHILIPPINE DEPOSIT INSURANCE CORPORATION
under obligation to deliver the titles to Rudy?
(2.5%) F UNCTIONS :
   
The PDIC assesses and collects insurance
SUGGESTED ANSWER:  assessments from member-banks to insure
member-banks¶ deposit accounts. In case of bank
@  

  
   "   <% closures, the PDIC processes and services claim
2
  <
%  8    
 "     for insured deposits. Deposits are insured up to a
  5       B' % 2
     maximum coverage of P250,000 per depositor.

%   " .   
      " %   
  <%
‡ ‡ &:  

BAR QUESTION: Under the new law, PDIC's authority to examine its
BANKS; SECRECY OF BANK DEPOSITS (1991) member banks, with prior approval by the Monetary
Board, has been restored.

<6? 
 
&       

   9
B9  8" 
    9

g ‡ '   

&  A
  Ú  (?(  <  '
   
/ "  =     5  
  
 The PDIC may grant financial assistance to
F  5 *   /  
  =  /    distressed banks if it is proven to be a less costly
alternative than closure.
 " 
&   
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.' 
%
0
        
  
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) '   



    The plaintiffs invested in the money market
Once a bank is ordered closed by the Monetary placement with the Premier Financing Corporation
Board (MBP of the Bangko Sentral ng Pilipinas, the (PFCP but when they went to PFC to encashed the
PDIC is designated as statutory receiver. The PDIC checks and promissory notes corresponding to their
upon receipt of the MB resolution ordering the investment the PFC referred them to the Regent
closure of a bank, immediately physically takes Savings Bank (RSBP. Instead of paying the promissory
over the closed bank. Receivership is the stage notes and checks, the RSB issued |3 certificate of time
within which the PDIC manages the affairs of the deposit which was insured with the PDIC. The bank
closed bank and preserves its assets for the benefit failed to pay the corresponding amount of the time
of creditors. deposit on its maturity date due to insolvency and
advised the plaintiffs to file a claim with the PDIC. But
 the PDIC refused to pay the claim for it is not included in
& $  


   the list of duly recorded liabilities of the RSB.
 
After it is determined that the closed bank can not
be rehabilitated, the PDIC shall recommend the  Whether or not the PDIC is liable for the
liquidation of the assets of the closed bank. plaintiffs¶ claims.
Liquidation refers to the recovery and conversion of ' 
assets into cash for distribution to all creditors in
accordance with the order of creditor preference  The fact that the certificate state that the
pursuant to law certificates are insured by PDIC does not ipso facto
make the latter liable for the same should the
 contingency insured against arise. The deposit liability
of the PDIC is determined by the provisions of R.A.
INSURANCE FUNCTION 35| and statements in the certificate that the same are
insured by PDIC are not binding upon the latter.
|. *-Compulsory insurance on all bank deposits

2. "-³Insured deposits´ - the net amount due


to any depositor for deposits in an insured bank,   

after deducting unpaid loans and other obligations Æ The net amount due to any depositor for deposits in
of the depositor to the closed bank. In no case shall an insured bank, & $$*" &&, less any part
insured deposit exceed P250,000 per depositor. thereof which is in excess of P250,000.
3. ((& / *$ "- Bank closure only. Æ Trust funds and safety deposit boxes are not
Thus, losses due to a bank robbery are not covered.
covered.
   
 
4. * & *-Maximum of P250,000.00 per Consistent with the rulings in 0*  %
# %¸
deposit (RA 302P  $ (*+   0    # !*, ##
5. $ ($ &   (,  recognizing the debtor-creditor relationship of the

      

 
 bank and the depositor, set-off takes place ( 3* with

 

  respect to the depositor¶s bank deposit and his matured
 loan with the bank.
V.  & (,-
a. Cash %   

b. Transferred deposit ± A deposit in an insured A deposit in an insured bank made available to a
bank made available to a depositor by the depositor by the PDIC as payment of the insured
PDIC as payment of the insured deposit of deposit of the depositor in a closed bank and assumed
such depositor in a closed bank and assumed by another insured bank.
by another insured bank.

7 4&& & (, +, ¸ %1.  ¸ $( &
¸ *$ $(- SPECIAL RULES
a. Discharges the PDIC from further liability
b. Subrogates the PDIC to all the rights of the |. PDIC liability is on a per bank basis. Accounts in a
depositor against the closed bank to the extent bank, even though in several branches, are to be
of such payment. added together, provided that they are maintained
 in the same capacity and the same right for his
benefit either in his own name or in the name of
Æ The fact that a bank instrument provides that the others.
certificate is insured by the PDIC does not ipso facto
make the latter liable for the same; the deposit liability of  Capacities: individual account, joint ³and´
the PDIC is determined by the provisions of RA 35| account, joint ³and/or´ account.
ô%1.   # (  
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2. The insurance premiums are to be paid by the
g  )  insured bank, not the depositors.

!)g g,247g'3=2 3. In case the depositor¶s account is more than the


insurance coverage, the balance may still be
 recovered from the PDIC after the final liquidation
of the remaining assets of the closed bank.
 

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4. a. If the account is held jointly by two or more Æ Demand drafts cannot be escheated but
natural persons, or by two or more juridical telegraphic notes can be escheated ô (*+
persons or entities, the maximum insured  ' (    9
: 
deposit shall be divided into as many equal
shares as there are individuals, juridical
persons or entities, unless a different sharing is
stipulated in the document of deposit.

b. If the account is held by a juridical person or
entity jointly with one or more natural persons,
the maximum insured deposit shall be
presumed to belong entirely to such juridical
person or entity: %$$ &*¸, That the
aggregate of the interests of each co-owner

over several joint accounts, whether owned by
the same or different combinations of
individuals, juridical persons or entities, shall LEGAL CONSEQUENCE
likewise be subject to the maximum insured
deposit of Two hundred fifty thousand pesos The unclaimed balances may be subject of escheat
(P250,000.00P. proceedings, after proper publication and the depositors
still do not lay claim to them.


 

      

 ã!  
66
|. Non-payment of insurance premiums
 
2. Continued engagement in unsafe and unsound
banking practices 

'&"g ''&"g.
!&)&!%
Æ Sec. of RA V42V (µAn Act Instituting a Foreign )&!%
Currency Deposit System in the Philippines,
and for Other Purposes"P and Sec. 7 of Governed by R.A. Governed by R.A. No.
Central Bank (CBP Circular No. |38 , dated No. |405 V42V
August |3, | 3, mandate that foreign
currency deposits shall be insured under the 4 exceptions + | exception + | provided
provisions of RA 35 |, as amended. Under CB exceptions found in under AMLA (R.A. No.
Circular No. |38 , depositors are entitled to special laws |V0P
receive payment in the same currency in which
the insured deposit is denominated. May be garnished 044  24- Exempt
or attached (not a from attachment,
"
  The PDIC law is not applicable to Offshore violation of R.A. No. garnishment, and other
Banking Units ô%1     |405P court order and
processes.
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&LEMENTS OF UNCLAIMED BALANCES OTHER FEATURES:

|. There must be a claim or deposit of: |. Authorized banks may adopt a numbered account
system for recording and servicing deposits in non-
a. Money; checking accounts
b. Bullion;
c. Security; or 2. Foreign currency deposits are exempt from taxes
except the interests
d. other evidence of indebtedness.
2. The credit or deposit must be with a bank, building
and loan association, or trust corporation; and 3. In the event a new enactment or regulation is issued
decreasing the rights granted under the law, it shall
3. The credit or deposit is in favor of a person: not apply to FCD¶s already made or existing at the
a. who is dead, or time of the issuance of such new regulation or
enactment.
b. who has not made further deposits or
withdrawals during the preceding |0 years or
more.  In a * " case, the SC allowed garnishment
of such deposits of a transient American tourist
arising out of a heinous crime committed against a
Filipino minor since to hold otherwise would result
to injustice to a citizen perpetrated by a foreigner

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  This case does not constitute another
  
        
 
exception, the SC only ruled as such due to the 

special circumstances of the said case.


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REPEALING LAW TO UNIFORM CURRENCY
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ACT ô&5+5 
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All monetary obligations shall be settled in the Philippine 
,
currency which is legal tender in the Philippines.  8  " 
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However, the parties may agree that the obligation or
transaction shall be settled in any other currency at the  
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,
time of payment ô(   SUGGESTED ANSWER: 


   
   

 
   
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Æ The law assures full disclosure by requiring the lender     %  
    
   
to give the borrower all the details regarding the      



transaction.
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Æ Under Sec. 4, any creditor shall furnish to each
person to whom credit is extended, prior to the  
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consummation of the transaction, a clear statement in  
writing setting forth, to the extent applicable and in
accordance with rules and regulation prescribed by  8  
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the Board the following informations: 

 
  
 
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|. The cash price or delivered price of the property or
service required;
2. The amounts, if any to be credited as down payment
and/or trade-ins; [[[
3. The difference between the amounts set forth under
clauses | and 2;
[ 
4. The charges, individually itemized, which are paid or
to be paid by such person in connection with the

transaction but which are not incident to the extension
of credit.

5. The total amount to be financed;
V. The finance charge expressed in terms of pesos
and centavos; and
7. The percentage that the finance bears to the total
amount to be financed expressed as a simple
annual rate on the outstanding unpaid balance of
the obligation.

BAR QUESTION:

TRUTH IN LENDING ACT (1991)

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